Thursday, February 15, 2018
Is Europe "Dismembering" Itself? Trouble at the Greece-Turkey Border, in Spain, Corsica, and Germany, the Sick Elephant in the EU Room
THE REAL NEWS TODAY IS IN EUROPE. In the Middle East political differences are settled with rockets and suicide bombs. In Europe they are settled with words and money. And there are a lot of words and money threats flying around in Europe right now. • GREECE AND TURKEY USE FIGHTING WORDS OVER TERRITORY. Prime Minister Alexis Tsipras said on Thrusday that Greece would not tolerate any move from Turkey after Turkish and Greek coastguard vessels collided close to disputed islets in the Aegean Sea. Tsipras said : "Our message, now, tomorrow and always, is clear...Greece will not allow, accept or tolerate any challenge to its territorial integrity and its sovereign rights. Greece is not a country which plays games." The collision involving the two vessels occurred on Monday evening off Imia, known as Kardak in Turkish. Each side blamed the other for the incident. Turkey and Greece, NATO allies, have been at odds in the past over a host of issues from ethnically split Cyprus to sovereignty over airspace and overflights. They came to the brink of war in 1996 in a sovereignty dispute over these same islets, but tensions had eased since -- until Turkish president Tayyip Erdogan increased his anti-Greek rhetoric. On Wednesday, Erdogan's chief advisor said Greece was "like a fly picking a fight with a giant." The advisor told Turkey’s TRT channel that he is “in no doubt” that the US has a plan to make Greece attack Turkey while its military is engaged in Syria. But, advisor Yigit Bulut said Turkey's response will be tough, adding that Greece is no match for Turkey’s might and warned that terrible consequences would follow for Greece. Bulut made similar comments earlier in February, referring to Imia over which Greece and Turkey came close to war in 1996 : "We will break the arms and legs of any officers, of the prime minister or of any minister who dares to step onto Imia in the Aegean," Bulut said. • Meanwhile Tsipras reminded the world that Greece's eastern border is also that of the European Union. Tsipras said : "Challenges and aggressive rhetoric against the sovereign rights of an EU member state are against the EU in its entirety." Tensions between Turkey and Greece have been on the rise since a Greek court blocked the extradition of eight Turkish soldiers whom Ankara accuses of involvement in a failed coup against President Tayyip Erdogan in 2016. • • • US INVESTORS FLEEING SPAIN. It is not ships but money that is causing waves in Spain. US investment giant Goldman Sachs warned on Thursday that Catalonia is still a risk to the Spanish economy and risks sparking an economic crisis. Goldman Sachs said “the political events related to Catalonia continue to be an important risk” for Spain’s recovery in a report analysing the Spanish banking system. The report said : "We continue to see the political events related to Catalonia as an important risk for the recovery of Spain.” • Despite the worrying claims, Goldman Sachs believes the overall "threat" for the economy in the short term has been reduced. The capital cost projections for the whole of Spanish banking are currently above their levels prior to the ‘illegal’ Catalonian referendum held on October 1. And, in January, Spain’s credit rating was moved back up to "A" by Fitch, the first time it has had an "A" rating since the Eurozone debt crisis. Last week, Prime Minister Mariano Rajoy raised Spain's growth forecast for 2018 to "at least 2.5%" just months after it was downgraded over the secession crisis in Catalonia. And, official data show that the Spanish economy grew more than 3% in 2017 in a record year for tourism and booming exports, containing the impact of the Catalan crisis. Spain suffered an almost five year recession until the second half of 2013 when the economy began a long, slow turn around boosted by strong exports and rising domestic demand. • But, stilll high unemployment and political unrest are causing headwinds for the future of Spain as a united country and Goldman Sachs must have had that in mind when it gave its commentary. • • • FRANCE HOLDS ON TO CORSICA. Last week, French President Emmanuel Macron spent two days in Corsica, listening to its local political leaders' claims that Corsica is a special case, but making the point that Corsica is part of the French Republic. And, conservative opposition party leader Laurent Wauquiez commented on the future of Corsica after Corsican leaders said they wanted their language to be officially recognized, as well as for jailed militants to be returned home and for foreigners to be banned from buying holiday homes on the island. Wauqiez said : “There is a red line that cannot be crossed: Corsica is and will always be French...We’ve seen what happened in Catalonia, and so we know full well that the issue [of greater autonomy] is one we need to follow closely....This means that there is no such thing as a Corsican citizenship and that the Corsican language cannot be put on equal footing with the French language. We need to respect the attachment to Corsican identity, but Corsica’s integration in the French Republic cannot be questioned.” • Corsican separatist sentiment intensified in December after the nationalist alliance Pè a Corsica (For Corsica) won two-thirds of the seats in regional elections. However, unlike their Catalan counterparts, Corsican nationalists have steered clear of seeking outright independence from France, asking instead for “more autonomy.” This is because Catalonia is wealthy and self-sufficient, while Corsica is one of the poorest regions in France and relies heavily on funding from Paris. • Corsican nationalists have issued three core demands : equal recognition for the Corsican language, the return of jailed political prisoners to Corsica from mainland France and the recognition of a special residency status for Corsica to stop foreigners from buying holiday homes on the island. • French President Macron arrived in Corsica for a two-day visit last week and first paid tribute to the late prefect Claude Erignac, a top judicial official who was shot dead by pro-independence activists in Corsica 20 years ago, and then promptly angered Corsica's nationalist leaders further by refusing several of their demands, including official status for the Corsican language. Regional parliament speaker Jean-Guy Talamoni said : “Our goodwill has been taken for weakness by Paris, but we are not weak, we are strong...Corsicans want to be recognized as a nation.” France has always been reluctant to give much freedom to its regions, despite some decentralization in the 1980s. President Macron did say on Wednesday that he was open to adding a symbolic specific mention of Corsica in the French Constitution but rejected the other demands for autonomy made by Corsica’s nationalist leaders. Macron said mentioning Corsica in France’s Constitution would both recognize its identity and anchor it within the French Republic. “Corsica is at the heart of the Republic,” Macron said. He added that further talks would determine what the plan to mention it in the Constitution would entail. This will be part of a broader reform of French institutions Macron said he would put to parliament in the spring. Macron told Corsica's leaders : “I want us to open a new chapter of our history. I want everyone in the Republic to be able to claim their identity, their specificity. But if this specificity is to be the Republic’s enemy, then it’s an error and I cannot accept it.” • Corsica’s relationship with mainland France has long troubled French presidents. For 40 years, separatists waged a militant campaign, blowing up police stations and homes owned by mainlanders and carrying out assassinations, before laying down their arms in 2014. The head of the regional government, Gilles Simeoni, said that Macron had “missed an opportunity” to forge a new relationship with the island. The mountainous Mediterranean island of Corsica, called the Beautiful Island by the French, is the birthplace of Napoleon and became part of France in the 18th century after being ruled for centuries by the Republic of Genoa in what is now Italy. Its local culture has Italian elements and the local language is similar to Italian. With 330,000 inhabitants, it accounts for just 0.5% of the French economy. • In an hour-long speech -- on a podium flanked by French and EU flags but no Corsican flag, Macron talked about problems of everyday life for Corsicans -- including high real estate prices and security -- and said the island’s regional leaders should not focus so much on institutional matters and should first use the powers they already have to fix problems. Simeoni has warned in the past that violence could flare up again on the island if it did not obtain the autonomy it was seeking. • • • JUNCKER TALKS MONEY. With the looming prospect of Britain leaving the EU, the EU Commission president Jean-Claude Juncker is planning a huge raid on EU member states’ tax revenues in a desperate bid to plug a £11.5 billion gap in the EU budget after Britain exits. EU leaders face a big challenge in the next budget as they try to find money for investment in border control and joint defense while coping with the loss of Britain and its payments into the EU -- the UK is the third biggest net contributor to EU coffers, leaving a blackhole in the bloc’s finances after 2019 when Brexit becomes official. So, Juncker called for member states to cough up more cash for Brussels’ big spending plans. The proposals to raise more money include siphoning off a percentage of corporate tax receipts from the member states’ own treasuries, the Financial Times reported. Apparently Brussels hopes the charge could bring in up to €140 billion over the course of the 2019-2026 budget. Another levy could be placed on money countries raise from selling carbon emission permits. Juncker warns : “I think the member states are going to have to rethink things. Some member states don’t want to pay more but they want to do more. Other member states want to receive more.” • But, Sebastian Kurz says Austria does not want to pay more, nor does The Netherlands, Sweden or most of the eastern EU group of member states, including Poland. A final proposal will be presented before the EU executive presents a final proposal on May 2. European Budget Commissioner Günther Oettinger insisted yesterday these countries would have no choice but to pay up : “Now, I am no magician, ladies and gentlemen. We will only be able to square the circle with more. We won’t be able to with what we currently have. And that is why I believe that no matter what the starting position is, the end position of a given government can be different.” • • • BUT THE SICK ELEPHANT IN THE EU ROOM IS GERMANY. Angela Merkel’s hopes of finally stitching together a coalition government in Germany were thrown into chaos after civil war broke out in her Social Democrat (SPD) allies following the resignation of their leader Martin Schulz. Fresh national elections for Germany are moving closer to reality with the SPD deeply divided over its support for backing Merkel throughout a fourth term in office. • Schulz’s decision to resign was made after he lost the confidence of the party membership but a row immediately broke out over attempts to install Andrea Nahles as new leader without an election. And the latest row threatens renewed and greater instability for Merkel, who is desperately trying to cling to a fourth term in power. • Nahles, the 47-year-old former employment minister, remains the favorite to succeed Schulz and become the first woman to lead the SPD, but Simone Lang, the relatively unknown mayor of Flensburg, a small city near the Danish border, has announced she will stand and force a vote. Three powerful SPD regional associations have also declared they will block any attempts to appoint Nahles as interim leader until an election can be held. • The newest crisis for Merkel comes just a week before the start of a postal vote by the SPD’s 460,000 members on whether to join a new coalition under her leadership. The postal ballot on whether the party should go ahead with the agreement its leaders made last week to renew their power sharing alliance with Merkel's conservative bloc opens on February 20. The coalition deal includes favoring a stronger Franco-German cooperation, allocating budget funds for economic stabilization in Europe, increased German contributions to the EU budget, and transforming the ESM bailout fund into a European Monetary Fund. • EU reform has moved up in the agenda because of Britain's Brexit from the EU next year, but it is an issue that fails to resonate with many SPD members who are more concerned with jobs and working conditions. Many in the SPD are wary of sharing power with Merkel, believing the party should rebuild in opposition after suffering its worst result in last September's election since Germany became a federal republic in 1949. The SPD postal vote results are due on March 4 and a "No" vote from the badly splintered SPD would almost certainly mean new elections and yet more uncertainty in Germany. • • • WHAT HAPPENED TO MERKEL? Handelsblatt wrote on Monday that even Merkel's own conservative allies are abandoning her : "For 12 years, Angela Merkel was everybody's darling. Then the Chancellor stumbled over the refugee crisis. Now, after a weak coalition deal, rebellious conservatives are demanding a wide-sweeping party renewal....These days, Chancellor Angela Merkel, the “Mutti” of the nation, is discovering just how challenging motherhood can be when the house is full of rancorous kids. Germany’s most popular leader since post-war reconstruction architect Konrad Adenauer is facing stinging criticism from loyal senior members of her Christian Democratic Union (CDU) and others who feel she made too many concessions to the rival Social Democratic Party (SPD) to renew their coalition and stay in power.' • Handelsblatt says that such public dissent over her leadership "is surprising in a party of otherwise true-blue conservative loyalists. A revolt is simmering." • But, whether planned by Merkel or accidental, there is no immediate successor to Merkel in sight, although "her authority is clearly being questioned by her party’s fiscal and social conservatives, young activists and opponents of her open-door refugee policy, which helped propel the Alternative for Germany (AfD), a populist party on the far right, into parliament," says Handelsblatt. EU Budget Commissioner Günther Oettinger, a CDU member, told public radio broadcaster Deutschland Funk : “It’s clear to everyone that the Chancellor is facing her final stint.” • Merkel says : “I understand the disappointment.” Of course she does. But, there’s no possibility that the 63-year-old Merkel could resign before her fourth term ends. She defiantly brushed that aside in an interview on Sunday with the public broadcaster ZDF : “I promised four years, and I’m someone who keeps promises.” • While Merkel faces criticism for handing top cabinet posts to veterans and lacking representation from the east, much of the CDU angst revolves around the political cost of Merkel's deal with the SPD to renew their alliance, which has ruled Germany since 2013. She succeeded, says Handelsblatt, "only after making huge concessions on Europe and fiscal policy, and especially on ceding the finance ministry, which is considered second only to the chancellorship in importance. Merkel said : “I, myself, felt it was very painful.” The decision, the Chancellor stressed, was essential to reach a deal with the SPD and get a government back to work in Berlin. Others in her party disagree. They accuse her of putting her personal future ahead of good policy and risking the CDU’s future as a dominant force in German politics. Friedrich Merz, a former chairman of the CDU-CSU parliamentary group, said : “If the CDU accepts this humiliation, it has abandoned itself.” Even more draconian in his assessment was Carsten Linnemann, a parliamentarian from the CDU’s pro-business wing : “This could be the beginning of the end of the mainstream CDU party.” • One younger CDU politician to watch is Jens Spahn, a deputy minister in the finance ministry, who is being touted as a possible successor to Merkel as party chairman and potential chancellor candidate. In an interview last weekend with an Austrian newspaper, Spahn said young CDU leaders need to step up and compete. And in a shot at the Chancellor, he said : “We’re not a monarchy where one organizes one’s own successor.” Supporters would like to see Spahn, who has publicly criticized the party’s refugee stance, take over as its “general secretary.” It’s a role where he would serve both as party administrator and spokesperson (below Merkel). Supporters feel he could use the role to help push the CDU further to the right and away from the centrist position taken by Merkel, who was weakened in the September election in which her conservative block bled support to the far-right AfD. Critical of an SPD-stamped agenda, they worry the new government would stray from the strict fiscal discipline of former finance minister Wolfgang Schäuble, spending a record budget surplus on expansive European and social programs. • Cabinet positions are among the many issues to be discussed at a CDU party convention on February 26. Merkel can expect confrontation. Paul Ziemiak, head of the party’s youth organization, said he expects to hear from the party leadership a “commitment to renewal” and a lively debate on “fresh faces” for the government. That was echoed by Christian Haase, a CDU member representing community issues, who said the party needs to “begin an internal party process of renewal, parallel to governing.” The CDU convention comes just a few days before the SPD’s 464,000 members vote on the coalition agreement reached last week. The SPD is expected to announce the results on March 4. In a final dig at the Acting Chancellor, Handelsblatt said : "Lucky for Ms. Merkel, her party’s members don’t have a vote." • • • EUROPE IS IN A QUIET BUT REAL CRISIS. Europe is under enormous pressure. Brexit is far from being resolved. The Eurozone currency union is not fully equipped to deal with future financial problems. Fighting over any obligatory refugee quota could turn nasty again. And Poland and Hungary are busily reshaping fundamental democratic values while the Russia harasses Europe and Russian President Putin supports anti-EU populist groups like France’s National Front inside the EU, while at the same time -- like China -- casting a Russian net over countries in close proximity to the EU, such as Albania and Serbia. This is forcing the EU to consider, again, if or how they should offer those countries the possibility of some kind of EU membership, an extremely unpopular idea in most of the EU. When EU leaders meet late in February to discuss EU finance over the next decade, there will be huge and never really resolved issues on the table -- agricultural subsidiaries, spending on exterior borders, and defense. Another hot button is the question whether the Eurozone get its own budget. And, the EU must decide if funding to Hungary and Poland will be cut out of the budget because they are refusing to take refugees, and because they are seen as undermining the separation of powers that the EU regards as essential to a democracy. • • • DEAR READERS, all this puts some perspective into Jean-Claude Juncker's demand that EU member states pony up to replace the money lost when Britain exits the EU. French President Macron seems to be playing his own power politics game as he watches Germany falter in the fading Merkel era. Macron has already put his stake in the ground when it comes to agriculture. In September, he suggested reforming the very expensive policies around agriculture, breaking a longstanding French political taboo. Merkel isn’t bringing anything nearly as radical. In fact, as we now see, it is unclear what, if anything, she will bring to the table because her "new government" may still be non-existant in late February. If that should be the case, issues that the EU hoped to take up in June -- how the Eurozone currency union should be reformed, including conditions of a deposit guarantee scheme, and how asylum rights in the EU can be brought up to date -- could simply not be addressed. If Germany, the biggest country in the EU, doesn’t get a real government soon, then all those plans look precarious. For all his positioning, Macron, a former French finance minister, knows full well that France cannot even consider the financial burden of taking Germany's place as the economic and fiscal engine of the EU. As Handelsblatt put it : "Germany, Europe is waiting." • Sahra Wagenknecht, who has been praised as a leading member of Germany's next generation of politicians, used a key speech to rail against the state of the European project. Wagenknecht, who serves as Die Linke chairwoman, took aim at Merkel, Macron and Schulz for leading Europe towards its own destruction. The young leader ripped into the EU leadership for destroying the livelihood of Europeans for the sake of "big Europe." [NOTE : Martin Schulz called for a "United States of Europe by 2025" before starting coalition talks with Merkel in January, angering the entire populist movement in Germany.] • Die Linke, commonly referred to as the Left Party is a democratic socialist and left-wing populist political party in Germany. Die Linke was founded in 2007 as the merger of the Party of Democratic Socialism (PDS) and the Electoral Alternative for Labour and Social Justice, and its name is used in other European countries for leftist-populist parties. In her speech, Wagenknecht blamed the three leaders for pushing ahead with the European project, while poverty grew to record-high and unemployment skyrocketed. Wagenknecht told Die Linke party members : "I wonder where the Europe of Schulz, Merkel, Macron and others is leading to. In Europe, the distribution of dividends amounts to 323 billion Euros. That's a number we've never seen before." Wagenknecht continued her attack on Angela Merkel's European record : "323 billion Euros are going to stockholders in individual European countries, and at the same time we have a situation where poverty in Europe is at an all-time high, where so many young people are facing a life that offers them no chances, where education no longer functions, where public institutions are decaying, where hospitals are completely underequipped, where countries are pressured to privatise and cut back on social benefits. • Wagenknecht's closer was a gut punch to the EU : "This Europe is not a Europe that supports the continuity of its people. This is a Europe that is dismembering itself." • If Wagenknecht sounds Trumpian, despite being a leftist, you are correct. The populist movement in Europe, both left and right, sees Trump as the wave of the future and wholeheartedly agrees with his programs to shrink government and turn power back to the people.