Cameron on UK Economic Success

Usually when my regular workload intensifies I find it hard to get time to put meaningful content up on this blog. However, recently that has not been the case. Instead, my predictions from the past two years – and especially from my book Industrial Poverty – are now cashing in, yielding bundles and barrels of content material. What I have been saying since 2012 is now dawning on political leader after political leader in Europe, namely that the continent simply is not going to recover.

Yesterday, British Prime Minister David Cameron joined the chorus of alarmed, baffled, concerned and desperate European political leaders who, with rising anxiety in their voices, try to determine why their continent’s economy is going nowhere. Cameron got plenty of room in The Guardian:

Six years on from the financial crash that brought the world to its knees, red warning lights are once again flashing on the dashboard of the global economy.

For the zillionth time – it was not a financial crisis. There. I had to make that point again. Back to Prime Minister Cameron:

As I met world leaders at the G20 in Brisbane, the problems were plain to see. The eurozone is teetering on the brink of a possible third recession, with high unemployment, falling growth and the real risk of falling prices too. Emerging markets, which were the driver of growth in the early stages of the recovery, are now slowing down. … The British economy, by contrast, is growing. After the difficult decisions of recent years we are the fastest growing in the G7, with record numbers of new businesses, the largest ever annual fall in unemployment, and employment up 1.75 million in four years: more than in the rest of the EU put together.

Back in August I noted that the U.S. and U.K. economies were outgrowing the rest of Europe. We will soon have the definitive numbers for the third quarter, but until then we can basically take Cameron’s word for it that Britain is way ahead of the rest of Europe.

Cameron then turns to the dark clouds on the global economic horizon, pointing out that the economic stagnation in the euro zone is showing up in Britain’s foreign trade statistics. And then he makes an interesting observation:

As the global economy faces greater uncertainty, it is more important than ever that we send a clear message to the world that Britain is not going to waver on dealing with its debts. This stability is vital in attracting the business and international investment that delivers growth and jobs, and which keeps long-term interest rates low. So we will stick to our plan on the deficit and continue to use monetary policy to support growth without adding to borrowing or debt.

This sounds like a generic political statement, formulated to put out specific words in a specific order to appeal to the subconscious mind of the voter. But it is more than that: this is a poke in the side of Germany and other euro-zone countries who cannot get their economies going. Cameron’s point is, plainly, that Britain has been successful in separating its fiscal and monetary policies from the European mainstream – and that Britain will continue to pursue its own, independent economic policies.

No doubt, this is an attempt at appealing to UKIP supporters, but it is also an acknowledgment of a reality where the EU is stuck in the ditch of economic stagnation and Britain will not – and cannot – let itself be held back by that same organization.

In fact, as Cameron continues, he carves out an even sharper independent profile for himself and his country:

Our long-term plan is backing business by scrapping red tape, cutting taxes, building world-class skills and supporting exports to emerging markets. Underpinning all of this is our radical programme of investment in infrastructure. … We are making the biggest investment in roads since the 1970s and the biggest in rail since Victorian times, connecting 40,000 premises to superfast broadband every week, and starting an energy revolution with the first new nuclear plant in a generation, the world’s first green investment bank and the largest production of offshore wind on the planet.

We’ll see how that energy policy works in the end. American energy prices are falling, thanks in part to an expansion of oil and natural gas production on private land. But again – Cameron’s point is that Britain stands out among European countries, that the leading euro-zone economies are in permanent stagnation and that Britain is not going to fold into the ranks of European mediocrity.

David Cameron is not the best option for Britain. He is, fundamentally, a traditional British Europhile. But the fact that he talks so forcefully about the uniqueness of British economic policies and economic performance is a clear indication of which way Britain is heading, and why. His article simply confirms how strong the euroskeptics are in Britain and thereby the high probability that Nigel Farage of the UKIP will be their next Prime Minister.

Let us hope that Cameron continues with his moderately successful fiscal policies. If he can make an example out of Britain to the rest of Europe, he can embolden Euroskeptics elsewhere in the EU. Eventually, their strength – given that they are of the UKIP kind and not aggressive nationalists – will bring an end to the stifling statism that has become endemic in austerity-ridden eurozone welfare states.

European Democracy in Peril

As the dust settles on the elections to the European Parliament, a somewhat schizophrenic conclusion is emerging:

  • on the one hand voters expressed their skepticism toward the EU project and rejected, overall, the notion of a continuous, business-as-usual expansion of the EU into a new, gigantic government bureaucracy;
  • on the other hand the rejection of even bigger government was partly expressed in a form that, absurdly enough, may very well pave the way for another, even uglier form of government expansion.

The outcome of the election is more dramatic than most media outlets have yet realized. Put bluntly, this election was a loss for European parliamentary democracy and a gain for authoritarianism of a kind Europe has not suffered from for a quarter century now. But as painful as it is to acknowledge, the real winners of this election were communists and aggressive nationalists – also known as fascists.

There is no mistaking the outcome: voters spoke, and numbers changed in the European Parliament. Political parties with a traditional commitment to parliamentary democracy lost dramatically, with conservatives and liberals losing more than one fifth of their seats. At the same time, communists and radical socialists of assorted flavors increased their parliamentary presence by one third.

Add to those gains the big inroads made by aggressive nationalists and fascists.

Europe’s political elite may want to ignore this, but the most dangerous reaction to this election would be to turn a blind eye to what voters did: they passed power out from the democratic center to the outer rim of the political spectrum. There, communists and fascists stood ready to scoop up voters who are deeply dissatisfied with, well, just about everything from unemployment and economic stagnation to immigration and “inequality”.

Europe is now at a fork in the road, one that will decide the fate of a continent that is home to half-a-billion people. But before we get there, let us take a look at what actually happened in the election.

Communist parties did well, especially in southern Europe where the Great Recession has done its biggest damage. In Greece, the radical leftist party Syriza, which sees Hugo Chavez’ Venezuela as a political role model, took 26 percent of the vote and became the largest Greek party in the EU Parliament. In Italy, incumbent prime minister Renzi’s leftist Democratic Party got 40 percent of the vote. Portugal’s old communist party, rebranded as socialists, came in first with 31.5 percent of the vote. In Spain, a radical socialist coalition took ten percent of the votes, placing them third in the election.

But it was not just in southern Europe that communists, old or new, did well. Ireland’s scary-left and historically terrorist-affiliated Sinn Fein got a frighteningly large 17 percent of the votes.

Sweden is an example of how refurbished communists have shown remarkable resiliency in the past two decades. Their radical left is split among three parties, which taken together is more than the country’s traditionally dominant social democrats got. The three radical leftist parties are: the Greens (15.3 percent of the vote), the renovated-communist Leftist Party (6.3) and the new, aggressively socialist Feminist Initiative (5.3).

Altogether, the entire leftist spectrum – from vanilla-favored social democrats to hardline Chavista leftists – held their lines in the European Parliament, in the face of stiff competition. But as indicated by the above mentioned examples, the radical flank within the leftist block made big advancements. Their European Parliament group, called GUE/NGL, increased its number of seats by one third. This number could increase even more when some small, new parties from across the EU choose affiliation.

The underlying message in the shift toward the hard left is that Europe’s voters – already living under the biggest governments in the free world – have forgotten what happens when government grows beyond the boundaries traditionally respected in Western Europe. Perhaps the most conspicuous signal of Europe’s communist amnesia is embedded in the seven percent voter share that Die Linke got in Germany. They are the old Socialist Unity Party, in other words the party that ruled East Germany with an iron fist and back-up from Soviet tanks throughout the Cold War. Die Linke is fiercely anti-capitalist and shares Syriza’s adoration for what Hugo Chavez did to Venezuela.

The fact that Die Linke only got 7.4 percent should be considered in the context of the fact that Germany’s Green Party captured 10.7 percent of the votes. This puts the radical left in Germany at 18.1 percent, a share that grows even more in view of the fact that the SPD, the social democrats, are now parked at a lowly 27 percent voter share. If the social democrats in Germany continue to decline, the combined voter share of the Green Party and the old East German communists could easily exceed 25 percent in the next German national elections.

A surging radical left in the European Parliament will have profound consequences for European politics, but it will also affect Europe’s relations to the United States. More on that in a moment. First, let us take a look at the other flank of the authoritarian lowland.

Known under its less sophisticated label “fascism”, authoritarian nationalists made frightening advancements in the election. Most notorious, of course, is the victory in France for Front National under Marine Le Pen’s stewardship. Her polished version of the party her father founded won a stunning 25.4 percent of the vote, putting them decisively ahead of the nearest competition.

Ten years ago, Front National was little more than a punch line in a political joke. Yes, Jean-Marie Le Pen technically came in second in a presidential run-off against incumbent Jacques Chirac, but the entire campaign was of the same kind as if the Democrats had put up Ralph Nader against George W Bush in 2004. (No other comparison intended between Nader and Le Pen, of course.) Today, Front National is at a point where their leader can confidently demand that President Hollande dissolve the national parliament for new elections. That is not going to happen, but the demand sent shivers through the French political establishment.

It should. Marine Le Pen is no longer just a French political contender – she is in fact not just the leader of what is currently the largest political party in France. She is emerging as the leader of a new, bold, aggressive nationalist movement in Europe. Her party group in the European Parliament will incorporate outspoken fascists such as Hungarian Jobbik (which came in second in Hungary and apparently has its own uniformed party corps). Some media reports state that Front National and Jobbik are already in talks with each other on how to cooperate in the European Parliament.

Another of Le Pen’s new friends is Golden Dawn, which in the European election confirmed its position as Greece’s third largest party. Despite extensive legal challenges and elected officials of the party currently being incarcerated, Golden Dawn refuses to go away. More than likely, their strong support among police and the military will be enough to let them return, emboldened and empowered, to both the Greek and the European political scene.

With Front National, Jobbik and Golden Dawn as their pillars, the aggressive nationalist party group in the European Parliament could indeed turn out to be a vehicle for the rebirth of European fascism. The deciding factor will be where Europe’s rapidly rising patriotic parties will land. This is a different breed than the aggressive nationalists, consisting of Euro-skeptic parties, best exemplified by Britain’s UKIP. There is now a whole range of parties in Europe that fall into this category, such as PVV in the Netherlands, Danish People’s Party, Swedish Democrats, True Finns, Alternative for Germany and Austria’s People’s Party.

Some of these parties did remarkably well: both UKIP and the Danish People’s Party won their countries’ respective European Parliament elections. The Swedish Democrats scored almost ten percent of the votes, double what they got in the national elections in 2010. Alternative for Germany surprised many by capturing as much as seven percent of the votes, while there was disappointment among PVV supporters in the Netherlands as their party only got 13 percent and a third place.

It is not an exaggeration to say that this new group of patriotic parties holds Europe’s fate in their hands. Their ideological foundation spans from “basically libertarian” as Nigel Farage once called UKIP to welfare-statist Swedish Democrats. But they all have in common that they are committed to traditional, European parliamentary principles. This sets them apart from the aggressive nationalists whose political visions do not exclude a new full-scale fascist experiment.

If some of the patriotic parties are lured into cooperation with Front National, Jobbik and Syriza, there is a significant risk that Europe, within the next five years, will see a continent-wide fascist movement. There are other aggressive nationalist parties lurking in the political backwoods, ready to capitalize on voter disgruntlement with existing political options. Among those, Germany’s National Democratic Party, NDP, actually captured on seat in the European Parliament this time around.

With the history of Front National in mind, only imagination sets boundaries to what the NPD can accomplish.

Another example is the Party of the Swedes. Originally called the National Socialist Front and merged with violence-prone Swedish Resistance Movement, the Party of the Swedes is waiting for the patriotic, parliamentarian Swedish Democrats to fail to deliver on their voters’ Euro-skepticism. While waiting, Party of the Swedes is gaining parliamentary skills at the local level around Sweden. That experience can then be used in a run for national office – and eventually to reach for the European Parliament.

While fundamentally anti-democratic movements gained ground, the surge of democratic, patriotic parties is the only silver lining in this European Parliament election. This group is still small compared to the traditional center-right parties known under their acronyms EPP (center-right) and ALDE (center-liberal). But these democratic, patriotic parties hold the map in their hands to Europe’s future. If the EPP and ALDE choose to cooperate with them, then Europe will choose the stable, democratic road to the future.

If, on the other hand, the Europhiles in EPP and ALDE continue to ignore the growing, sound, democratic version of Euro-skepticism, and instead charge ahead with their project of a grand European Super-Union, the voter reaction will be fierce and potentially catastrophic. At that point, voters will seek other, much less palatable outlets for their skepticism or outright resistance to the European project.

If leaders of Europe’s conservatives, liberals and social democrats do not pay attention to what actually happened in this European election, they will do Golden Dawn, Jobbik, NPD and Front National a service they will regret for the rest of their lives.

It does not matter if Marine Le Pen is a fascist or an aggressive nationalist. Her surge to pan-European prominence has uncorked a bottle where black-shirted genies have been locked away for decades. History has shown how relentlessly those genies can intoxicate cadres of voters and how viciously they can tear down the institutions of parliamentary democracy.

Europe is playing with fire. The only thing that stands between the torch of fascism, lit up in this election, and a pan-European bonfire is the skill and insightfulness of a small group of Europhile politicians and bureaucrats in the hallways of power in Brussels. So far the leaders of EPP and ALDE, as well as the European Commission, have thoroughly ignored the rise of Euro-skepticism around the continent. So far they have been completely tone deaf to widespread popular frustration with the EU project.

Hopefully, they will come around and start listening to their critics. Hopefully they will let Nigel Farage be the recognized voice of Euro-criticism. But time is running out. If nothing decisively happens soon, the same trend that was set in this election will begin to show up in national elections.

In 2017, the Palais de l’Elysee could have a new tenant – Marine Le Pen.

Europe’s Authoritarian Future

Are you Europeans ready to give Brussels even more power over your lives? Well, that’s what is coming down the pike, according to a story in British quality newspaper The Telegraph:

A campaign for the European Union to become a “United States of Europe” will be the “best weapon against the Eurosceptics”, one of   Brussels’ most senior officials has said. Viviane Reding, vice president of the European Commission and the longest serving Brussels commissioner, has called for “a true political union” to be put on the agenda for EU elections this spring. “We need to build a United States of Europe with the Commission as government and two chambers – the European Parliament and a “Senate” of Member States,” she said last night.

That is not a “United States of Europe”. The EU Commission, which Reding carelessly refers to as the “government” of her envisioned USE, is already the executive branch, and would continue to be so. But it is not an elected body: by the U.S. Constitution, in case Commissioner Reding had missed it, the chief of the executive branch – the President of the United States – is elected every four years. (He is also banned from serving more than two terms, a restriction I doubt any EY Commissioner would ever accept…)

There are two ways to copy this into the EU: by having direct elections in each country for one Commissioner, or by replacing the Commission with one person, i.e., a president.

As for the two chambers – the legislature – the “Senate of Member States” could actually be modeled after the erstwhile U.S. Senate, where members were appointed by the states. But even if that is what she has in mind, the two-chamber legislative body would only resemble U.S. Congress if it held the exclusive legislative power for the EU government.

The only exception to the executive-legislative dichotomy in the U.S. Constitution is the power of executive orders that Congress granted the presidency a long time ago. It has been abused from time to time, and it is likely that there will be revisions to that power once the Obama era is finally over. Nevertheless, even with the executive order exception the U.S. Constitution is comparatively firm in its emphasis on separation of powers.

This is not going to happen in Europe. On the contrary, what Commissioner Reding seems to have in mind – and you can be a nice steak dinner that the rest of the Commission is behind her “vision” – is something entirely different than a constitutional republic. The Telegraph again:

Mrs Reding’s vision, which is shared by many in the European institutions, would transform the EU into superstate relegating national governments and parliaments to a minor political role equivalent to that played by local councils in Britain.

That alone is a violation of the U.S. Constitution. The federal government’s powers are enumerated, and even though Congress and the President sometimes behave as though there was no enumeration, court battles and state legislation constantly keep the enumeration principle alive. Two recent examples: states have started rolling back or exiting Obamacare, and a growing number of states say completely no to the new, idiotic federal attempt at creating a national school curriculum (known as “Common Core”).

But wait – there’s more:

Under [Commissioner Reding’s] plan, the commission would have supremacy over governments and MEPs in the European Parliament would supersede the sovereignty of MPs in the   House of Commons. National leaders, meeting as the European Council, would be reduced to consultative, second chamber role similar to the House of Lords.

Fat chance this would work in the United States. Ask any governor of any U.S. state if he has just a “consultative” function vs. the federal government, and you will get a long, passionate lecture about how he is elected by the people of his state and how he is accountable to them alone. And again – the lawmakers in Congress make federal laws, but state legislators make state laws, and the distinction is vigorously maintained. And fought over, which keeps the constitution of this great country alive and well.

While Commissioner Reding’s vision comes nowhere close to resembling a United States of Europe, it does serve another, for Europe more healthy purpose:

Nigel Farage, the leader of Ukip, said that Mrs Reding had revealed the true choice for British voters to make at polling stations. “For people in power in Brussels that is the only choice on offer, no reform just a United States of Europe. On 22 May the British people must ask themselves if they want this and vote accordingly,” he said. “I am sure people will say no to this centralist fanaticism.”

The only point of disagreement between me and Mr. Farage – whose political mission I respect and strongly support – would be, again, that whe Commissioner Reding is creating is something far more centralized than it is presented as. By letting the Commission supersede national governments and the MEPs supersede national legislators, Commissioner Reding is de facto envisioning a traditional European nation state, elevated to govern half-a-billion people.

It was the traditional nation state that American pilgrims left behind, and European emigrants to America sought to get away from. Even as Europe’s nation states created national parliaments, they never got very far with democratizing their governments. Legislative and fiscal powers have remained heavily centralized, and with very few exceptions – Britain being one – the European standard is the unhealthy proportionate, entirely party-ruled election system.

What is truly frightening about Commissioner Reding’s vision is that actually would create an even more un-democratic Europe: more laws would be made, and more executive power would be concentrated, to fewer hands, farther away from voters. Especially frightening is the vision of a Commission that would supersede national governments – without even being elected!

To make this vision even more nightmarish, consider the fact that there are no rigorous boundaries between legislative and executive powers in the EU. During the current economic crisis the Commission has effectively served as a legislative body for the national budgets in austerity-hit member states such as Greece, Italy and Spain. With more powers, and an even stronger formalized role as the supreme institution of the EU, the Commission would effectively be the unelected dictatorial power over 500 million people.

Luckily, there are brave freedom fighters like Nigel Farage out there trying to stop the Monster State of Europe from happening. But we must not forget that others are also capitalizing on the reckless pursuit of that same monster state, such as Golden Dawn in Greece, fascists in Spain and half-baked nationalists like Front National in France.

Those parties send echoes from history into our time. As if to amplify those echoes, The Telegraph reports:

In the run up to the springtime pan-European vote, the EU is gearing up to mount an unprecedented campaign for the hearts and minds of voters. Speaking in Athens, José Manuel Barroso, the commission president, signalled that the EU would use the centenary of World War One to warn that Euroscepticism, far-Right and populist anti-European parties could bring war back to Europe.

And the answer to that risk – if it even exists – is, according to Barrosso and his Commissioner buddies, to put even more faith, trust and power in an un-elected body of bureaucrats:

“No other political construction to date has proven to be a better way of organising life to lessen the barbarity in this world,” he said. “It is especially important to recall this as we will commemorate this year the start of the First World War. We must never take peace, democracy or freedom for granted. It is also especially important to remind this as in   May the peoples of Europe will be called to participate in European elections.”

This is a clear case of self-gratulatory political delusion. When did Mr. Barrosso last visit the street level of the Europe he so eagerly tries to govern? When did he witness the barbarity of youth unemployment across the EU? When was the last time he bothered to notice the 20 countries with more than 20 percent youth unemployment under his jurisdiction? When was the last time he even cast a glancing eye at the barbarian austerity disaster in Greece?

If the EU Commission gets its new nation-state monstrosity, the people of Europe can wave democracy and liberty farewell for decades to come. The Commission has already proven, during the current economic crisis, that it is ready to rule Europe with dictatorial powers. While those powers have thus far only been put to work on a limited scale, the fiscal dictates from Brussels to Athens, Rome, Lisbon, Madrid and Paris have shown that the Commission has nothing but disrespect for parliamentary democracy.

The only reforms to the EU that the Commission would accept are those that gives it more power. That is why they will ask for those reforms.

Whenever a politician asks you for more power to defend “peace, democracy and freedom”, you should run the other way.

And take your freedom with you.

German Anti-EU Party: “Euro Is Dead”

Germany now has its own anti-EU party, a counterpart to Britain’s increasingly influential United Kingdom Independence Party. Before we learn more about them, though, let us first listen briefly to UKIP chairman Nigel Farage as he tells it as it is to EU Commissioner Olli Rehn:

And now for a report from Russia Today on the new Alternative fur Deutschland, Germany’s anti-EU party that could present the established Europhiles with a real challenge:


A Comment on the British Budget

UKIP leader Nigel Farage comments on the British budget. Take note of his very brief but right-to-the-point recipe for what to do about the British economy:


Mr. Farage understands that a roll-back of government spending works best when combined with spending cuts. For a systematic combination of these two instruments, check out my book Ending the Welfare State: A Path to Limited Government That Won’t Leave the Poor Behind.

Eurocrats Accelerate Super-State Project

The outcome of the Dutch election was, as I predicted, an affirmation of the country’s commitment to austerity and continued EU bailouts. This will reinforce the politicians and Eurocrats who are pushing for a more centralized – and politically more unaccountable – Europe. It was becoming clear already yesterday that this was going to be the result, and therefore it comes as no surprise that Eurocrats who are eager to continue to build a European super-state are capitalizing on the Dutch election as quickly as they can. The chief of the EU Council (think of him as the president of the EU), Mr. van Rompuy, is no exception. Yesterday he put forward a paper that pushes for an even stronger centralized government in Europe. The EU Observer has the story:

EU Council chief Van Rompuy on Wednesday (12 September) tabled an ‘issues paper’ on how to further integrate the eurozone, including a common budget, limited debt mutualisation and a parliamentary assembly. … This is supposed to “get member states out of the closet on the most sensitive issues,” one EU official told this website. Drafted with the heads of the EU commission, European Central Bank and Eurogroup of finance ministers, the paper proposes “a central budget for the euro area” in order to “deal with asymmetric shocks and help prevent contagion.”

Never mind their illogical motives for a centralized budget. The real story here is that once the EU becomes a formal government with the right to tax and spend, it will do exactly that:  tax and spend. And when it taxes and spends, it will claim full jurisdiction over the parameters that guide its spending. Since most of government spending in the EU – like in the United States – is for entitlements, the EU will automatically centralize jurisdiction over all the variables that determine entitlement spending. This means:

  • a centralized unemployment system with centralized reimbursement rates and equally centralized workforce participaton requirements;
  • a centralized health care system where Brussels dictates how many doctors a country, or a part of a country, should have, where the EU tells doctors what reimbursement rates they should be getting, and where the EU controls what medical procedures you can or cannot have;
  • common euro-denominated treasury bonds issued on the good credit of Germany to fund bad credit for Greece; and, of course,
  • a centralized tax system where the EU imposes its own taxes either in replacement of, or more likely on top of, those already levied by national governments.

None of this will solve the fundamental problem underlying the European economic crisis: the welfare state. All it will do is to elevate the crisis to the EU level and thereby force taxpayers in more wealthy countries to fund the welfare state in less wealthy EU states – but fund it on a permanent basis through taxes, and not through a bailout as is done today.

Back to the EU Observer story, which makes clear that this new, formalized EU government is not a pie-in-the-sky idea. On the contrary, the tracks have already been laid out for this new super-government:

An EU summit on 18-19 October is set to endorse the parts of the paper which are doable without changing the EU treaties, while the more long-term goals of political union needing a convention, new treaty and referendums will be left for the December summit. An attempt to deal with the German taboo of debt mutualisation and France’s no-go area of further sovereignty transfers to Brussels was made in June when Van Rompuy first tabled a plan for deeper eurozone integration. The only possible compromise at the time was to endorse common banking supervision in return for the German concession of granting troubled banks direct access to the eurozone bailout fund (ESM), a deal ultimately meant to help Spain lower its debt. But as the crisis continues and markets doubt the results of each EU summit, more steps are needed towards further eurozone integration.

In other words, the bank crisis – not caused, but seriously aggravated, by the welfare state crisis – is being used as an accelerator for the process toward a formal, full-fledged EU government.

Every time politicians want to expand government, and to it fast, we are well advised to put a foot down and ask ourselves:  what is really going on here? I know of no one better suited at answering that question than Mr. Nigel Farage, MEP for the United Kingdom Independence Party: 

A fiscal crisis is being used as a door opener for a European super-state – a super-state that won’t solve, but will deepen, the fiscal crisis; that won’t expand, but will contract democracy; and that will increase, not decrease, tensions between member states.

Europe’s Fiscal Crisis Escalates to Democracy Crisis

One of the most urgent questions of our time is: what will become of the European Union? Its currency union is in deep trouble, an increasing number of its member states are in dire fiscal straits with urgently unsustainable debt, and its form of government suffers from a democracy deficit as bad as the Greek budget deficit. Having emerged from a truly optimistic effort at bringing former political and military adversaries together, the EU has lost its roots as a project of international cooperation. Instead, it has morphed into a political project with its own life and ambitions where democracy is being sacrificed on the altar of super-statism.

Few people have been as outspoken about this problem as Nigel Farage, Member of the European Parliament for the UK Independence Party:

It is a bit of a stretch to say that the EU is intentionally anti-democratic, but there is absolutely no doubt that Farage is right in that the EU is effectively anti-democratic. He makes a very good point that when the EU evolves as an organization, it does so in a way that further increases its democratic deficit.

And there is more to come. In fact, the current fiscal crisis is beginning to merge with Europe’s democracy crisis, in a way that is causing open tensions even between politicians in different EU countries. An article in Bloomberg.com makes the point well:

Disagreements within the 17-nation euro area are undermining the future of the European Union, said Italy’s Prime Minister Mario Monti as the stand-off on European Central Bank support for Italian and Spanish debt hardened. “The tensions that have accompanied the euro zone in the past years are already showing signs of a psychological dissolution of Europe,” he told Germany’s Spiegel magazine in an interview published yesterday.

The solution to the fiscal crisis in each of the troubled euro countries lies at the national level, where the decision can – and should – be made on how to reform, or preferably dissolve, the welfare state (the root cause of Europe’s fiscal crisis). Instead, the mindset among Europe’s politicians is increasingly that they need to save the euro and the EU even if the price is national economic, constitutional and political sovereignty.

This tension between democratic national governments and the EU is put on full display further down in the Bloomberg.com article:

[Italian Prime Minister] Monti also appealed for European governments not to be overly bound by their parliaments. “Of course every government has to follow its parliament’s decisions,” he told Spiegel. “But every government also has the duty to educate the parliament” or risk making a euro-area breakup more likely.

This provoked comments from German politicians echoing the strong points made by Nigel Farage:

Hans Michelbach, a lawmaker representing the coalition Christian Social Union, said in an e-mailed statement that elements of Monti’s comments are “anti-democratic” and incompatible with European principles. Michael Meister, the deputy leader in parliament of Merkel’s Christian Democratic Union, called for “not less, but more democracy in Europe,” Tagesspiegel newspaper reported after Monti’s remarks.

In other words, in the wake of the fiscal crisis and the tensions it has put on Europe’s super-state institutions, there are now tensions emerging at an even higher level, namely between the need for the super-state institutions to move ahead regardless of what the people say, and the demand among the European peoples to maintain democratic governments. Democracy is no doubt at risk, if Europe tries to solve its fiscal crisis with more statism instead of less. As the EU Observer reports, this risk seems to be of no consequence to the Eurocrats pushing for yet more power to the EU and the ECB:

EU officials have drawn up a far-reaching plan that would eventually turn the eurozone into an outright fiscal union, but acceptance by EU leaders – whose powers it reduces – will require a major leap of political faith. The seven-page document suggest that ultimately the 17-nation single currency area will need a treasury office and a central budget. Among the short-term changes required is the de facto handing over of budget power and economic policies to the EU level. … Budgets that breach fiscal rules would have to be altered.

This means a centralized welfare state, run from Brussels under fiscal rules that will force all euro countries to do what Greece is trying to do, namely balance a budget by raising taxes and cutting spending. But so long as the massive entitlement programs remain in place it is economically impossible for the EU to do at the super-state level what individual countries have failed to do at the national level.

The paper – drawn up by the presidents of the European Commission, European Council, Eurozone and European Central Bank – moots giving the European Central Bank the ultimate authority. In the medium term, so long as a “robust framework for budgetary discipline and competitiveness is in place, some form of debt mutualisation “could be explored.” Meanwhile, labour policies and tax polices – until now a no-go area for the European Commission – will no longer be exempt. An integrated economic eurozone will need “co-ordination and convergence in different domains of policy” says the paper explicitly mentioning “labour mobility” and “tax coordination.” “Let me tell you here that fiscal union is about much more than just euro bonds. It also means more co-ordination in taxation policy and a much stronger European approach to budgetary matters,” said commission President Jose Manuel Barroso at the European Policy Centre in Brussels on Tuesday (26 June). “Faced with this stark reality, standing still is not an option. A big leap forward is now needed.”

This is extremely dangerous. The Eurocrats are trying to cure lead poisoning by injecting the patient with lead. And just to make this entire process toward more super-statism more bizarre, an opinion piece in the EU Observer makes the case for yet another super-state project in Europe:

Apart from the cynicism of a public relations exercise talking about a “banking union” after tens of thousands have protested against bailing out banks with taxpayers’ money, leaders have also missed an opportunity to tell citizens what they are most worried about: will their pensions and savings be guaranteed if a country goes bust? A ‘social union’ might have been a better response. … Spain, Italy, Portugal, Ireland, Greece – all have to cut back drastically on their social spending to meet the fiscal targets and convince markets they will not go bust. Meanwhile, public anger is growing and the support for such measures is zero. … On the other hand, public support for a eurozone-wide social security scheme may also be hard to achieve. Social spending is still considered a purely national, non-EU matter. But the reality is that eurozone deficit and debt rules make cutbacks mandatory which in the end affect wages, pensions, hospital bills, subsidised cancer treatments, schools, science programmes. The most sensible thing to do would be to tell citizens that transferring some of these schemes at eurozone level may actually be a safer bet. That in the end people would get their pensions no matter what and that research programmes will not be cut overnight to meet deficit targets. But in order to do that, EU leaders would need something they have not shown in a long time: honesty and courage.

There you have it: a European welfare state. More of what caused the crisis, less of what can solve it. The losers at the end of the day are Europe’s taxpayers who will be paying more taxes for less government – just as they do now at the national level – and Europe’s voters who will have even less influence over the policies that set the terms for their personal finances, their access to health care and education, their retirement security… in the end their very lives.