Osborne the surprise Euro-federalist

This article was published by the Yorkshire Post 

Why the future of Europe is the issue that won't go away 

23 August 2011 

ORDER has been restored. The streets are calm. An inquiry will be held. New initiatives launched. The normal inter-party bickering resurfaces.

But lurking behind the post-mortems on the three days when the state lost control of the streets is another much graver political question. Just as Ireland was the issue that divided British politics in the 19th century, Europe is emerging as the 21st century issue which is causing a maximum headache for all political leaders.

For 10 years, successive Conservative opposition leaders promised their activists, and the nation, a Eurosceptic future if ever the Tories won power. But the iron truth is that Euroscepticism works in opposition but Ministers have to be Eurorealists when they accept the seals of office.

None more so than David Cameron. He has told unhappy Tory MPs that there is no question of an in-out referendum on the EU. He has also had to point out that Britain does more trade with Ireland than with China and India. Thus shipping billions of taxpayers’ money via the EU or the IMF to stop economic collapse in Britain’s trade partners is a painful necessity.

Far from the emerging economies being the saviour of an offshore Britain, all that China, India, Brazil, Russia and Turkey want to do is increase their exports to us while decreasing imports of made-in-Britain goods and services. The first victim of the eurozone crisis has been the City. Nine out of 10 banks in the City are foreign-owned and owe no loyalty to the UK. The British Stock Exchange has suffered bigger losses than EU bourses.

In the past, anaemic European growth was offset by stronger US performance. But the Alan Greenspan era is over. While European politicians were criticised for all being on holiday, American politicians were all present in Washington and made such a disastrous hash of squabbling among themselves that perhaps it would have been better had they been on vacation.

The Chinese could hardly believe their eyes and promptly lectured the Americans on the need to return to coherent capitalism and slash spending and debt. Karl Marx is turning in his Highgate Cemetery grave as the last great nominally Communist power on earth gives the United States lessons on economics. However, the Chinese should be careful about what they wish for. If the US does go in for British-style cuts and austerity, who will buy all the made-in-China goods waiting in containers in Shanghai and Shenzhen for export to the US? US debt pays for China’s export boom. In fact, the absence of a co-ordinated world response to this crisis has made it worse. Leadership in Europe or on Capitol Hill has been utterly absent.

Even the most fervent of pro-Europeans has to admit that the EU institutions have failed utterly to rise to the needs of the crisis. Instead, there is a question mark over the future of the euro. But, if the single currency goes, it will take the single market down with it.

“Adieu to the EU” may be a welcome slogan in some quarters but it will plunge Britain and the western liberal free trade democracies into as big as crisis as the 1930s.

One British politician, however, has announced what needs to be done. The Chancellor George Osborne has called for eurozone fiscal co-ordination and supra-national economic governance for nations using the euro.

This is an historic moment. Osborne is seeking to reverse centuries of British policy which has always opposed the creation of a single, hegemonic continental block with one ideology, one religion, or one economic and trade policy. Now, in the biggest move by a Conservative since Robert Peel embraced free trade or Harold Macmillan promoted the welfare state, Mr Osborne has become a Euro-federalist as far as the continent is concerned.

He believes that as long as the pound exists, Britain can live with a fiscal union eurozone. But 75 per cent of the £12,000 trillion EU economy – the world’s biggest – uses the euro. Non-EU states like Switzerland and Norway have to abide by EU rules. If Mr Osborne’s advice is taken, a single continental eurozone with common budget rules will dictate to every other EU member state and set the rules for banking and financial transactions, including those of the City. President Sarkozy of France and Germany’s Chancellor Merkel met yesterday to begin preparing for a single continental economy.

Is that what Mr Osborne has in mind? If so, can he take Tory Eurosceptic MPs with him? And what does Labour have to say? For 15 months since the election, all party leaders have preferred to say, see and hear as little about Europe as possible. That period is over. Europe is about to re-enter British politics big-time and devour those politicians who do not have convincing answers to the question: what is to be done with the EU?

The Crisis of the Spanish Socialists: Another Sign of the Decline of the European Left

This article was published by Progress

Can the Socialists pull through in Spain?

3 August 2011

The early elections called in Spain for November will further reduce the profile of the left in Europe as a serious governing force. Unlike Jim Callaghan or Gordon Brown who clung limpetlike to office until the last possible days of their terms, the Socialist leadership in Spain have seized the initiative.

They are going for a November election five months ahead of the normal election date of March next year.

The Spanish socialist prime minister, José Luis Rodríguez Zapatero, is standing down. Instead the Socialists will be led into the election by 60-year-old Alfredo Pérez Rubalcaba, a veteran from the Felipe Gonzalez era. Will some of the old Gonzalez magic rub on Rubalcaba? Zapatero is presenting himself as the pilot who has weathered the economic storm since 2008 and saved Spain from the humiliation of Greece.

Now he steps down and allows Spaniards to make a choice on who heads the government over the next period. Rubalcaba faces one of the lowest profile, greyist rightwingers in European politics. Mariano Rajoy, like Rubacalba, has a beard and is also a long-serving leader of the conservative Partido Popular. He lost the 2004 and 2008 elections but plods on at the head of a party whose dominant figure remains José Maria Aznar – George W Bush’s second best friend in Europe (whisper not who was GWB’s amigo Numero Uno).

The PP is divided and lacks clear policies. Many of the economic problems that helped cripple Spain’s economy like an uncontrolled housing boom, provincial governments allowed to borrow money as if it would never have to be repaid, or city and regional savings banks which were used as private cash chests for social projects to boost the profile of left and right politicians, stem from the Aznar years.

Zapatero won power in 2004 in a surge of anger against the Iraq war and the disgraceful way the PP government tried to blame the March 2004 Madrid bombing where 191 were murdered and 1858 wounded by Islamist terror on ETA, the extreme rightwing Basque separatist movement.

The incoming government focused on social policy – especially women’s rights and reducing the power of the ultra-conservative church. The economy fuelled by three million immigrants between 1996 and 2006 – mainly from Latin America and east and south-east Europe – seemed to be booming. But, as in the US, Britain, Ireland, Greece and other countries where the spirit of Alan Greenspan ruled no-one paid attention to unsustainable levels of government, banking and personal debt building up.

When the reckoning came it was savage. one million houses or flats were built or partly built but unsold. Unemployment, especially in the construction sector, soared. Students graduated with degrees but no jobs (Does Sr Osborne have Spanish blood, by chance?) The main Spanish banks are toughly inspected and controlled by Spain’s central bank. Unlike the Treasury’s, Bank of England’s and FSA’s lax financial supervision which led to the run on Northern Rock and the Labour government having to spend billions to keep British banks from closing the Spanish banks came out of the 2008 financial crisis seemingly in good shape. But with billions of euros of unsold property on their books, even their balance sheets now look dodgy and the constant hedge fund speculation against Spain remains a worry.

Spanish workers and public servants paid a price with job losses, a direct cut of all state employees’ pay and other reductions in public expenditure. The revolt of los indignados ( The Indignant Ones) who occupied the centre of Madrid this summer like the Paris students of 1968 was the final rupture of confidence between young people and the socialist government. Antielitism is now big politics across the Euro-Atlantic community. Whoever is in power suffers. Street protests, however, cannot replace convincing policies for government.

The Socialists will go, yet there is no appetite for a PP government. Read El Pais or El Mundo and almost every week there are reports of a grisly scandal of deep corruption between PP mayors and regional bosses and local business. Socialists are also tempted as planning permission for windmills seems to require oiling local political machines. But the PP politicians have been helping themselves to public money on a scale not seen elsewhere in Europe.

Yet so unpopular are the Socialists that although the early election call and the change of leader has boosted the left a little in the polls there is no one in Spain who foresees anything other than a change of government in November. Rubalcaba promises to increase taxes on the rich, big companies and the banks. But discovering leftism at the end of a long period of left government has not in the past or anywhere else paved the way to staying in power.

The PP is unlikely to win an outright majority. To please its regional allies it will have to temper its ultra-centralism and contempt of devolved government in Spain. There is an ugly rightism at work with threats to repeal laws on gay marriages, make healthcare more expensive and abortion more difficult. Diplomats fear that a PP government may play the Gibraltar card provoking the pointless squabbles with London that were a feature of the Aznar government.

Spain has had a long 30-year run of stable governments after the death of Franco. The pragmatic, reformist, pro-US and pro-globalisation social democracy represented by the long Felipe Gonzalez years set the tone. EU funding helped greatly initially but Spain is now an EU net contributor. Spain finally turned its back on both its Franco past but also the previous three centuries of decline and isolation once the gold and silver of Latin America ran out. What emerged after 1980 was a mature, confident, democratic Spain with a growing economy as well as providing great footballers, great movies, great architecture and a home for 900,000 Brits who, unlike immigrants into the UK, were not required to learn Spanish or adapt to their new home.

Is it Adios to that happy Spain? Like other European countries and the US, Spain is now in a transition era. The Spanish socialists suffer from the same deficit as the rest of the European left. Plenty of rhetorical criticism of the existing order but a crushing voter deficit as the left parties of Europe are downgraded by electorates who want a new story. Yet the right in Spain has a looming policy and personality deficit. The November election will produce a new government. But not a new Spain.