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Tuesday, December 30, 2008

The hard sell: EU spends €2.4bn a year on propaganda

If anyone fancies a bit of light (!) reading over the festive period, check out our new publication:

"The hard sell: EU communication policy and the campaign for hearts and minds" covered in the Sunday Times this week, as well as Saturday's Telegraph and Mail

Happy reading; post your comments here!

Wednesday, December 17, 2008

Caroline loves the EU’s “common sense”


In slightly less important news, the European Parliament has also voted to 'allow' Britain to keep its imperial measures and abandoned its battle to standardise metric measurements. UK Europe Minister Caroline Flint got straight in there and declared it a “victory for common sense”.

We wonder what she'll make of the EP's other momentous decision today? Another victory? Or maybe an admission the European Parliament is shockingly out of touch… who knows.

Maybe Caroline will declare there is no "common sense" in preventing workers from adapting their working hours as they see fit.
Or maybe she'll just go on drinking the European Parliament's kool-aid.

Who killed the opt-out?

Well, it’s not dead quite yet, it's just that MEPs have beaten it to a pulp. The UK Government could in theory still save it during the so-called ‘conciliation’ stage, but without a veto, that's gonna be difficult.

It's helpful to see which MEPs joined in the assault by adopting amendments from Socialist Spanish MEP Alejandro Cercas. A list can be found here:
http://www.openeurope.org.uk/research/meps.doc

UK MEPs are in red. Interesting to note the number of EPP members (the Conservatives' 'friends' in Europe) voting with Cercas...

Tuesday, December 16, 2008

Will they, won't they?

Tomorrow a very important vote takes place in the European Parliament. MEPs are due to take a decision on whether or not Britain keeps its opt-out from the EU's 48-hour working week.


It could be immensly embarrasing for the Government. Earlier this year, it ended years of opposition to the Agency Workers Directive - which restricts flexible working arrangments in the UK - apparently in return for retaining the opt-out on working time.


But MEPs - in particular Labours' - are now threatening to bulldoze that and vote to end the opt-out. If that happens, then the Government really is in a corner - since the issue will then be voted on in the Council... by a qualified majority.

Apart from the obvious and extremely far-reaching impact of the vote on the economy (as we've quantified today) this is also a classic example of how political agreements and backroom 'deals' in the corridors of Brussels are often not worth the paper they're written on.


As David Yeandle, Head of Employment Policy at the Engineering Employers Federation, told an Open Europe event last week: “With Europe, you think you’ve won, but then you haven’t".


A vote against the retaining of the opt-out tomorrow will send a clear warning to the Irish as they digest the 'political commitments' agreed last week on the Lisbon Treaty: they're not a guarantee - far from it.

Friday, December 12, 2008

No change

The Irish Times reports that the conclusions from the Council meeting on the 'Irish situation' have been finalised. The conclusions are meant to give the Irish assurances on retaining a Commissioner, on neutrality, abortion and taxation. The draft conclusions made clear that EU leaders want the Treaty to come into force by January 2010, with a referendum likely to be held in autumn 2009 - after the European elections.

Speaking at a press conference in Brussels at lunchtime Taoiseach Brian Cowen said: "On the basis of today's agreement ... I am prepared to go back to the Irish people next year." Nicolas Sarkozy celebrated the fact that “The Irish will be consulted again".

A leader in today's Times hits the nail on the head:
Europe's - and Mr Cowen's - impatience with Ireland's voters have revealed a basic misunderstanding of democracy next to which the EU's other problems pale. Europe can and must thrive as a coalition of the willing. That is not what the Lisbon treaty promises to build.
A re-run vote on the already rejected Treaty is hardly a surprising outcome. But, equally expected, these 'assurances' are riddled with uncertainties. The exact legal nature of the assurances now needs to be sorted out, which will take us well into 2009.

What EU leaders absolutely want to avoid is having to re-ratify the Treaty in each member state, which would need to happen if anything in the Treaty changes. Adding a legally binding protocol to the Lisbon Treaty, for instance, changes the content of the Treaty, effectively making it a new Treaty requiring re-ratification in all 27 member states. At the same time, the Irish obviously cannot be seen as voting again on the exact same text as in June. The solution must lay elsewehere. So how do you change a Treaty without changing the actual Treaty? That is an equation that should not add up, at least according to all known laws of logic.

But this is EU politics, remember.

According to EUobserver, Nicolas Sarkozy said today that a protocol will be added to the Croation accession treaty. Sarkozy said:

"To give a legal value to the engagements made to Ireland by the 26 other member states, we have committed that at the time of the next EU enlargement – whether that will be in 2010 or in 2011, when probably Croatia will join us ... we will use that to add a protocol [on Ireland] to Croatia's accession treaty,"
If this was to happen, the Irish would hold a referendum next year based on future concessions.
Still, the details are very unclear - on Ireland retaining the Commissioner, for instance. As pointed out by former EP President Pat Cox in today's Irish Times:

A key concession is the European Council's unanimous agreement to allow each member state to nominate a commissioner in perpetuity. This concession does not require a change to the Lisbon Treaty, which already provides the European Council with the right to decide the number of commissioners, subject to unanimity.
The Council could simply agree on this by means of unanimity - but how such an agreement would be 'legally guaranteed' is unclear. For the other issues, the precise formulation and legal implications of the "guarantees" remain anyone's guess. There is, of course, a general issue with protocols and EU treaties. As the House of Commons EU Scrutiny Committee has pointed out in regards to the UK's proposed protocols on the Lisbon Treaty - they're far from watertight. And unlike the Danes in 1992, the Irish will not get opt-outs per se, but rather 'clarifications' that their laws will not be affected by some presumptive future EU decisions in general policy areas.

Tony Barber points out, that there's also a risk for EU leaders here. The move would be perceived - rightly in our minds - as EU leaders trying to sneak changes to the Treaty through the backdoor. There's a possible scenario, of course, that EU leaders in fear of a second No vote in Ireland, will find ways to insert the institutional changes of the Lisbon Treaty into the accession treaty.

And let's not forget, in 2010 the Tories could well be in power in the UK with everything that that implies.

It's important to keep in mind, adding such protocols to the Croation accession treaty would not be the same changing-the-treaty-without-changing-it solution that the Danes got in 92/93 after their rejection of the Maastricht Treaty. The solution then was the so-called Edinburgh Agreement which laid down the Danish opt-outs in the areas of defense policy, justice and home affairs, the euro and union citizenship. However - bizarrely - this agreement between Denmark and the then 11 other EU member states was not formally a text either of the EU nor of the European Council - as pointed out by Cox in today's Irish Times.

The text was actually lodged with the UN in New York and was legally binding by virtue of being international law. It was then essentially codified by protocols in the Nice Treaty a few years later. The Edinburgh Agreement stated that the Danish opt-outs "are compatible with the Treaty and do not call its objectives into question." In other words, it did not change the content of the Maastricht Treaty. A few months ago the Irish reportedly consulted Danish legal experts on such a solution.

To a large extent, all of this is academic. The prevailing point is that the Irish are going to be asked to vote again on the entirety of the Lisbon Treaty - with all the loss of power and influence that entails. There is far more in there to object to than any of these 'guarantees' - legal or not - have a hope of covering. Technical and complicated discussion about protocols and declarations and opt-outs is an elite-flavoured distraction from the fact that Cowen, Brown, Sarkozy, Merkel and the rest of them simply will not take no for an answer. Depressing and predictable, but true.

Thursday, December 11, 2008

Open Europe depicts EU leaders campaigning to "ignore the Irish"

Open Europe and friends from around Europe staged a protest in Brussels today against the ratification of the Lisbon Treaty. Nicolas Sarkozy seemed particularly keen to ignore the Irish...

Monday, December 08, 2008

Does Danny the Red need help?


Cohn Bendit... losing his mind?


A transcript of the meeting between Czech President Vaclav Klaus and senior MEPs at Prague Castle on Friday is reproduced on EUreferendum.


The exchange speaks for itself, but Bruno Waterfield correctly diagnoses the "staggering arrogance of MEPs who were, we must remember, guests in the official residence of the Czech head of state."


We've blogged on Peter Pan revolutionary Green MEP Daniel Cohn Bendit before, in particular regarding his swivel-eyed conspiracy theories on the supposed links between anti-Lisbon group Libertas and the US industrial-military complex. 'Danny the Red' remained true to this increasingly insane form during his exchange with Klaus on Friday:

I brought you a flag, which - as we heard - you have everywhere here at the Prague Castle. It is the flag of the European Union, so I will place it here in front of you.

Lisbon Treaty: I don't care about your opinions on it. I want to know what you are going to do if the Czech Chamber of Deputies and the Senate approve it. Will you respect the will of the representatives of the people? You will have to sign it.

I want you to explain to me what is the level of your friendship with Mr Ganley from Ireland. How can you meet a person whose funding is unclear? You are not supposed to meet him in your function. It is a man whose finances come from problematic sources and he wants to use them to be funding his election campaign into the European Parliament.



On basketball, Obama and EU employment rules


Saturday's Times had a rather interesting feature on US President elect Barack Obama and specifically his passion for basketball. The article offers a contrast to Britian's political leaders, and rightly notes that "it is hard to imagine Gordon Brown or David Cameron on the sports pitch, even in their youth." Attention is also drawn to the fact that Obama actually manages to "do a high-five on the court and not look as though he was a middle-aged geek trying to be cool." Again, a contrast is drawn to certain British politicans.

Slightly more relevant to the general theme of this blog, the article notes that American National Baskeball Association, the NBA, is hoping that Obama's victory will give the league a world-wide boost, including in the UK (where basketball enjoys very limited popularity - to put it mildly). The NBA hopes to set up a European division with teams in London, Barcelona and Berlin. But, the NBA's yearly 'draft' of young players - a set scheme under which the clubs recruit their players, usually from college teams - may violate the EU's employment laws. Although no further details are given in the article, this is said to represent an obstacle to the plans of establishing an NBA franchise in Europe.

So, do we here see a future trade row with basketball-loving Obama accusing the EU of enacting non-tariff barriers to prevent American companies (the NBA) to invest in Europe? Hardly. But, as ever, EU regulations work in mysterious ways.

On a seperate note, Obama actually has some decent skills. Open Europe's scouting report shows that he has a good left-hand jump-shot and a nice touch around the basket. However, he seems slightly one-handed (the equivalent of a footballer being one-footed, for those of you not familiar with basketball jargon). Neither does his 'hops' (jumping ability) seem to be what it once was. Still not bad for a 47 year old, also considering that he can 'bench' 200 lbs. In any case, he far outscores most European leaders on athleticism. Sarkozy's jogging rounds are just not quite the same, are they..?

Laying the blame with politicians

The Irish Independent on Sunday carried a comment piece from Dublin Professor Colum Kenny, which criticised Irish politicians who have sought to lay the blame for the failure of the referendum on the Lisbon Treaty at the feet of the media, rather than accept their own failures to engage the public in a dialogue.

He writes, “The Committee on the Constitution seems to be angling to find a way to discourage broadcasters from giving equal time to both sides during referendum campaigns.”

But, as he points out, the media debate can be outweighed by symbolic messages, such as, “When the Taoiseach and the Irish EU commissioner both indicated that they had not fully read the Lisbon Treaty, they sent a symbolic signal of immense force to the electorate… voters were immediately freed to reject the document when even two highly-paid and highly-placed public figures -- who have access to highly qualified advisors -- appeared to find it incomprehensible.”

“The extent to which the legislative agenda of national parliaments is now largely set by EU initiatives and directives is not generally acknowledged by politicians. Voters might treat EU proposals with greater interest and respect if it were.”

He goes on to argue, “What is crucial from a communications perspective is a commitment by elected representatives to earn their considerable incomes and perks by working harder to convince the public of the benefits of Lisbon and the relevance of the EU. Don't blame the media, please, for a political failure.”

How refreshing to hear an argument for apportioning blame where it belongs, rather than attempt to scapegoat the media for failing to fall in line with a political agenda.

Friday, December 05, 2008

Lessons from Spain and Portugal

While the European Central Bank was busy cutting interest rates by 75 basis points on Thursday - its biggest move ever - our man in Brussels attended a roundtable discussing ten years living with the euro , with particular focus on the experiences of Spain and Portugal.

European Commission economist Carlos Martínez Mongay noted that both Spain and Portugal enjoyed boosts in their GDP before entering the Eurozone in 1999. However Portugal’s substantial growth stopped in 2000, while Spain's continued until last year.

He explained this by pointing to the better fiscal policies (budget surpluses) of Spain - in contrast to Portugal where reforms have been lagging behind for years. Also differences in labour market reforms played an important role. As Mongay showed, after 1999, the Real Effective Exchange Rate of Spain and Portugal was more or less the same.

Both countries experienced an increase of around 10%, but the reasons for the increase were much different. In Spain it was stronger productivity. In Portugal, on the other hand, the increase had its roots in the soaring cost of labour, meaning that the more profound labour market reforms in Spain explain discrepencies in the two otherwise rather similar countries.

What can we learn from this? Well, the obvious: that eurozone membership is by no means a paneca. A county's growth much depends on structural reforms. Or the lack thereof, such as in the case of Portugal. One can therefore not use the economic growth of Spain as an example of the blessings of the Euro.

And one must also look at the disadvantages of sharing a currency and central bank with 15 - soon to be 16 - other countries, some with fundamentally different economic circumstances to one's own. It has been reported, of course, that in Spain and Ireland, the European Central Bank's low interest rates fueled American-style housing bubbles, which now have burst. Spain is currently suffering from a shrinking economy and exponentially rising unemployment. Having your national interest rate set by others is a tricky business indeed.

Wednesday, December 03, 2008

Read this and choke (on your bog standard coffee)

The front page of the IHT this morning informs us that a row over dangerous levels of nickel and lead found in coffee has revealed that the European Commission has doled out a whopping €100,000 on luxury coffee machines for the upper floors of the Berlaymont building - so that top Commission officials don't have to queue with the plebs to get their morning fix.

Tuesday, December 02, 2008

Someone was going to say it

It's often said that EU federalists have a habit of using any crisis as a wake-up call for the perceived need for 'more Europe' (think 9/11, the London and Madrid bombings, war in Georgia).

Perhaps it was only a matter of time before this logic was somehow applied even to the Mumbai terror attacks. The last sentence of the following quote says everything about this mentality.

According to El Pais, Spanish MEP Ignasi Guardans, returning from Mumbai yesterday, lamented the “lack of coordination” of the EU during the terror attacks in the city.

“Being a European citizen hasn’t been any use at all in Bombay, each member state helped its citizens in an independent way.”

He added, “There has to be a profound revision of Europe’s role in crisis situations. There are moments when Europe should prove it exists”.

Monitoring MEPs

This useful website (which is unfortunately on the verge of shutting down) keeps track of the voting behaviour of the Members of the European Parliament.

They can be ranked on several issues. One is the loyalty they show to their political group, found here. It shows that around 75% of MEPs vote with their group at least 90% of the time.

Another ranking, to be found here, shows the rate of attendance. 173 MEPs don’t manage to be there 75 percent of the time.

Thursday, November 27, 2008

L'argent de l'Europe jeté par les fenêtres!

Open Europe's recent report, '100 examples of EU fraud and waste' got a great showing on French TV last night.

France 2 explored a number of the best ones - including "une urne géante dans l'espace!", and, bien sûr, "la toilette publique en Hull".

See here (27 minutes in)
http://programmes.france2.fr/service-maximum/?page=emissions&date=2008-11-26

Wednesday, November 26, 2008

Cobbled together

So the EU Commission has come up with its very own economic stimulus package. The only snag being that its not really its very own at all, as doesn't look like much more than the sum of its parts - the efforts already undertaken by individual member state governments.

It's basically the Commission sticking an EU label on national efforts and making lots of noise about coordination, so that it doesn't look as though it's been left out in the cold.

As PA writes:

Mr Barroso said national plans unveiled so far - including UK Prime Minister Gordon Brown's VAT-cutting package this week... would be considered as a contribution to the EU-wide effort being called for today.

Thanks for that.

Still, there are a few things in there to be welcomed - for example, a proposal to spend €5 billion of unspent EU funds on energy infrastructure and broadband communications. There's also a proposed drop in VAT rates, with the Commission urging member states to agree EU-wide proposals lowering rates for "green" products and services in the building sector. Another one is giving national capitals "permission" to temporarily break budget deficit ceilings if needed.

But rather than actually doing very much, the Commission's plan seems mostly about "allowing" member states to act more independently on issues where they probably ought to have more freedom anyway.

I've just been asked whether the EU is a help or a hindrance for the UK's efforts to get out of the recession. It seems a bit like it can be a help, but only by undoing the things which currently make it a hindrance - i.e. by giving member states back some freedom to do what they have to do. The only other thing it can do that involves actually using its powers instead of letting them go a bit, is to regulate. And we all know what a hindrance that can turn out to be.

Tuesday, November 25, 2008

Really odd

Just come across the "Children's corner" on the ECB website, which includes activites such as the "spot the euro coin's country of origin" game.

It's pretty weird in itself, but begs the obvious question: what sort of kids would be browsing on the ECB site? Is there really that much of a demand for this?

Of banking and photosynthesis

EU Communication Commissioner Margot Wallstrom’s blog is occasionally worth a read. Yesterday’s entry, ostensibly about the financial crisis, has some rather strange musings:

Can’t help thinking that the root causes of the economic crisis and the climate change crisis are very much the same : need, greed and feed.

Poor peoples’ need for housing in the US, speculators greed for quick money, bonuses and wealth in Wall Street and similar places, the willingness from the rest of the world to “feed” the American economy with loans/cheap money.

The short-range approach, the unwillingness to realise that – as with banknotes- nature can not just be endlessly reprinted or copied, the overexploitation of natural resources has led to a situation where we lose biodiversity at a scary speed – and at a very high cost. And even the golden boys working with “blanking” (speculation in ups and downs on the stock market) depend on photosynthesis to stay alive on this amazing little globe…

Monday, November 24, 2008

La la la la I can't hear you

On Friday I went to Paris for what was billed a "very special birthday party" - the 35th anniversary of the Eurobarometer (what, you missed it?)

Well it was worth it. Not in a fun way - more in the sense that it was an invaluable insight into the Commission's attitude to the latest 'no' vote.

When I walked in I was handed a nice canvas briefcase (full of stationary) which would otherwise prove useful in future were it not for the '35th Eurobarometer anniversary' logo on the front. Good to see the Commission is still rolling out the expensive taxpayer-funded propaganda in these times of recession...

Despite expecting it to a certain extent, the message of the whole thing was still alarmingly patronising. The dominant theme was that the Irish did not know what they were doing. In 8 hours of conference and 23 speakers, plus comments from the floor, there was not a single suggestion that anyone at all had voted no out of dissatisfaction with the EU's policies or its direction.

Everything was blamed on the EU's "communication problem."

The Commission and its supporters truly believe that no voter in their right mind has any valid reason whatsoever to want to question EU integration. Those who have voted no simply don't know anything about it, and clearly thought they had some kind of right to upset things in Brussels without consequence.

MEP and former EP President Nicole Fontaine said: "We have a communications problem... We haven't explained enough the benefits of European construction... We have been too modest."

French Europe Minister Jean-Pierre Jouyet confidently stated that "The Irish are very much in favour of Europe, but think they are badly informed." He said that "Europe's main problem" is that although Europeans share "common values", this has not lead to a "European consciousness" and "European citizenship."

Communications Commissioner Margot Wallstrom observed that "You cannot impose citizenship on people - it must come from democratic legitimacy". Er, isn't that what we've been saying all along? Isn't that exactly what the EU is now doing, by pressing ahead with the Lisbon Treaty, in spite of the no votes?

She said that in order to "build a feeling of belonging to the EU" we need to "engage and involve citizens in a much more democratic way." More referendums, then? No. According to Walstrom "Referendums... have built-in problems" for subjects as complex as treaties. Jouyet said: "Referenda... allow a populist demagological exploitation of people in a given setting."

According to Former EU Commission President Jacques Santer: "A referendum is good for democracy; it is not always good for a country. We need to make a distinction between democracy and what is good for the country."

Jacques-René Rabier, Founder of Eurobarometer and a former Director-General of the press and communication department, said that people needed to be made more aware of the EU's "common symbols" - the flag, the 9th May 'Europe Day' etc. Jouyet agreed, saying: "Symbols are necessary for Europe... they are the way to reach full European consciousness for the people. There is no identity without symbols."

At least Irish Europe Minister Dick Roche admitted that: "If any other member state had held a referendum on the Treaty, the same issues would have been raised and in many cases the same result." He said the Treaty was "mind-bogglying complex" and pointed out - quite rightly - that the EU must learn to speak to citizens in a language they understand. He joked, "The first thing to learn about referendums - is to avoid them."

He talked a lot about the "europhobic" side of the argument, and blamed the no vote on the fact that "42% of the Irish print media is now British-based" He said, "The British-based europhobic media came to exploit the referendum."

Claus Sorenson, Director General of the Commission's Communication department asked of the Irish: "Did people believe that voting no would be cost-free? Has it only just dawned on them that it is not cost free?" Wallstrom concurred: "They thought it would do them no harm."


Silly, silly voters.

No mention of people's feeling that the EU is undemocratic. No mention of the fraud, the waste, the lack of transparency. No mention of the problematic trade policy and unpopular CAP. No, the only thing wrong with the EU in the eyes of the Commission is that the people of Europe know nothing about the EU, and are therefore ungrateful for it.

Friday, November 21, 2008

Europe's Smoot-Hawley?

Negotiations on the EU climate package may or may not be completed by the end of this year. Even if a political deal is done, the hugely important issue of which industrial sectors will receive 'preferential treatment' will still need to be resolved - this could take up to 2011, according to the terms of the directive.

This might sound like an arcane subject, but it will have profound implications for the very existence of certain heavy industries in Europe after the reformed Emissions Trading Scheme begins in 2013 - and by extension, the structure of global trade.

To say businesses are concerned is an understatement. For energy-intensive industries subject to high levels of international competition, this really is a matter of life and death. They will not be able to remain in Europe if they need to pay for carbon permits or shoulder significantly higher energy costs.

With the stakes this high, there will be a huge fight over which industries are given special protection by the EU.

The German Environment ministry has produced a very helpful graph on the subject (click to enlarge). Basically, the higher the 'trade intensity', the less potential for the sector in question to pass through a higher carbon price to consumers (because of the effects of steep international competition). When high trade intensity is combined with a high carbon cost (as a percentage of gross value added), this spells big trouble for the industy sector concerned.


Chemicals, paper, aluminium, steel, glass and fertilisers look particularly exposed, but many sectors will be affected.

What measures can be taken to stop industries going offshore? Handing out free carbon permits for these sectors is the preferred solution for the UK government. However, this poses problems for industries (such as aluminium and chemicals) for whom the main cost burden of carbon pricing is indirect - ie. as a result of higher electricity prices. Furthermore, this solution could just provide industry with an incentive not to produce in Europe. By scaling down production here, and shifting it overseas, companies would be able to sell off their freely acquired permits for a profit.

Working on the assumption that European governments do want to keep heavy industrial jobs in Europe, this makes it very likely that we are heading for 'border tax adjustments': new tariff barriers in plain English.

The possibility of introducing these 'green tariffs' is indeed very clearly written into the draft Directive, and is a solution favoured by a protectionist camp of countries led by France. As the German graph illustrates, there is a very wide range of industries which will want to stake their claim to EU 'protection'.

Green tariffs would of course need to be applied to all imported finished goods assembled from the basic industrial products in question.

There would be the hellish task of trying to work out the relative carbon value of cars, electronic equipment or toys manufactured from a number of different components, often in a number of countries with differing environmental standards... There will be a feeding-frenzy for lobbyists in Brussels, seeking to fill this 'information gap' and secure special treatment for their industry.

If there is one lesson we can take away from the 1930s, increasing tariff barriers and slowing down international trade a surefire way to turn recession into global depression.

The EU climate package is a driver of protectionism. It risks creating major economic distortions, new barriers to international trade and possible retaliatory tariffs from other trade blocs.

Could this be Europe's Smoot-Hawley Act?

Emissions trading isn't working



Sorry to keep coming back to the subject, but it is becoming increasingly apparent that the EU's Emissions Trading Scheme really is in trouble.

Heavy industry, especially steel, is slashing production, meaning lower emissions, less scarcity of carbon permits, and hence lower carbon prices.

Point Carbon reports that prices for carbon permits within the EU ETS slumped 8 per cent yesterday, falling to 16 euros a tonne. The price will hit a floor between 12 and 14 euros per tonne, according to "several traders". This is less than half what the price of carbon was just five months ago.

It is probably true that carbon prices will not totally crash in the current phase of the ETS, as they did during the first phase of the scheme when a huge oversupply of permits meant they became worthless. But that is not really the issue any more. As we've argued again and again and again, price volatility such as what we're seeing now undermines incentives to channel long-term investment towards large-scale (often very capital-intensive) carbon saving projects and technologies.

Especially in the current climate, there is no way that the Chief Financial Officer of a large emitter can approach a bank asking for credit lines to fund new low carbon investment with any realistic expectation of what the price of carbon will be when the investment comes to be realised in 3, 5 or 10 years time.

Speaking to industry practitioners, this is the major structural failure in the EU Emissions Trading Scheme. It won't get any better in the next phase of the scheme (running from 2013 to 2020), even if all the political issues surrounding the basic structure of that trading phase are resolved soon (very unlikely).

As we've learned over the past few months, EU policymakers did not (and could not) predict economic slowdown and slumping carbon prices. And economic trends are only one element amongst many others (weather, politics, technological change) which drive carbon prices. The managing authorities of cap and trade schemes like the ETS will never have the knowledge to be able to allocate the right number of permits in order to create a stable carbon price. So there's no telling what could be happening in carbon markets in ten years time - and that is the fundamental problem.

Thursday, November 20, 2008

Taxpayers to help EU sell the Lisbon Treaty

Labour and Lib Dem MPs last night backed a proposal to spend 88 million euros of taxpayer’s money on information campaigns, including support for the Lisbon Treaty.

'Communicating Europe in Partnership', includes the proposal to:

“launch a follow-up communication Plan D, as well as a new set of Plan D civil society projects, with the overall objective of supporting the ratification process for the Reform Treaty and the increasing participation in the 2009 European Parliament elections.”

It even suggests the "identification of aspects of school education where joint action at EU level could support Member States".

The Commission earnestly declares that "We need to empower citizens" in order to "promote active European citizenship".

It then goes on to make the astonishing assertion that:

"There is an underlying conviction amongst European citizens that our societies can only tackle today's challenges by working on a European scale. This shift in the purpose and focus of the EU thus fits well with the aspirations of citizens."

This notion is presumably derived from the notoriously skewed Eurobarometer polls - which invariably return exactly the 'right' result for the Commission (for more, see the Economist's excellent critique on Eurobarometer).

No surprise then that the Commission's document notes the imporance of "strategic" use of these surveys:

"The Commission will introduce innovations in the methods used by the Eurobarometer in response to the White Paper consultation to increase its ability to listen and respond to public opinion. The goal is to use surveys more strategically in relevant phases of the policy process"

The Commission apparently thinks it's acceptable to assign legitimacy to awarding itself more power on the basis of its own private polling. But if the transfer of powers to Brussels is rejected in a direct public vote which cannot be managed or controlled (as in Ireland, France or Holland), the result is apparently illegitimate.

Just a thought: instead of spending taxpayers' money trying to construct artificial legitimacy for its actions, perhaps the EU would 'engage with citizens' far better by ceasing to legislate in secret, publishing minutes of meetings, or perhaps paying attention to occassions when people actually get the chance to vote against further transfer of powers to unaccountable, distant institutions?

This won't cost a penny. But something tells us it won't be happening any time soon...

Wednesday, November 19, 2008

Piling on the pressure

As if bullying Ireland into reversing its democratically stated position on the Lisbon Treaty wasn't enough, out of touch MEPs have now upped the pressure on the Irish government to hurry the whole process up - entirely for their own benefit, of course.

According to European Report, the European Parliament's Constitutional Affairs Committee has adopted a resolution stating "the need for member states to ratify the text as soon as possible". It insists that "all efforts be undertaken to ensure the treaty's entry into force before the European elections of June 2009".

The motion will be voted on by the plenary on 3 December, just in time for the EU summit on 11 and 12, when Irish PM Brian Cowen is due to present his "solution" to the Irish no vote.

Thursday, November 13, 2008

Decision time

There have been widespread fears for some time that the Large Combustion Plants Directive, which will force the shutdown of nine oil and coal-fired power plants by 2015, will raise the possibility of blackouts in Britain.

A survey of energy experts by the BBC has reconfirmed this fear. Although the shutdown of such a large amount of coal capacity obviously does raise the risk of the lights going out, what is most likely to happen is the rapid construction of new gas plants (which can be brought online in just a few years) to fill the generation gap. But even higher gas dependency is in itself bad news for energy security and the availability of cheap power.

Whatever happens, it is pretty clear that this Directive is a huge problem for the UK's already strained energy infrastructure.

At a conference yesterday organised in Brussels by the Major Energy Users Council, many participants were deeply concerned over the Large Combustion Plant Directive, raising the question of whether the British government should refuse to comply with the directive, or perhaps negotiate a special dispensation.

One important point that arose was that, although the Directive works towards a 2015 deadline, the British Government will have to make a decision very soon indeed if it wants to try and go down this route.

This is because, as a result of the LCPD, power generation companies are unlikely to invest to maintain the plants in the run-up to 2015, and may even begin to 'cannibalise' parts of the equipment. This means that the damage to UK coal plants may already have been done within a few years, meaning that they will not be able to stay open in any scenario - even if the Government attempted to withdraw from the LCPD in three or four years time.

Tuesday, November 11, 2008

Charming MEPs


Extraordinary story from Danish MEP Hanne Dahl. On a recent trip to Prague with a delegation from the European Parliament's constitutional affairs committee, ahead of the Czechs taking over the EU Presidency in January 2009, Dahl got to experience the more unpleasant side of the Lisbon Treaty fanatics. Hanne explains:

Naively I thought that it would be a courtesy visit. But no! I was really mistaken. The underlying agenda of my co-travellers turned out to be to try to threaten/scare/demean the Czech Republic into ratifying the Lisbon Treaty, before taking over the presidency. Now I also thought that one would follow certain rules for polite behaviour, while travelling as a representative of the EU. I was convinced that people would see themselves as some sort of diplomatic envoys, and thereby constrain themselves somewhat. I assumed so much, but I got wiser.
She goes on:
During the meeting with representatives from the Czech Parliament a Liberal British MEP started out by saying that he did not think that the Czech Republic could take over the presidency, if they had not ratified the Treaty...I thought it was quite rude that an MEP seemed to consider himself qualified to criticize a legitimate democratic process as a problem, and at the same time challenge the fundamental principle that all EU countries are equal. Who does he think that he is?
As we have noted before, the Czech ratification process is becoming increaingly more uncomfortable for the EU establishment.

Anyway, Hanne goes on. Having moved on to the Senate, the rather obnoxious delegation ran in to some resistence, as the Senate's European Affairs Committee began to to bite back. Dahl herself also joined the debate, and gave a speech highlighting six points which are central in the debate on the Lisbon Treaty in the Czech Republic, including the impact of the Charter of Fundamental Rights. She also noted, quite rightly, that the Czechs should be "proud to have such a self-conscious democracy".

This proved too much to bear for some of the delgates. Hanne describes:
This triggered a rage from the German conservative (EPP-ED) Elmar Brok. Not only could he not constrain himself from coming with outbursts during my speech – he also followed me around shouting terms of abuse at me, while we were supposed to have a tour of the castle. I politely but firmly said that he had by far crossed the line and ought to constrain himself.
And while all of this happened I had reporter on the phone, who wanted to speak to me about this week’s huge victory in the protection of groundwater.

Try to picture this: A snorting, sweating and shouting German following a very pregnant woman around the Senate in Prague during an official visit. It was so embarrassing! Well not to me, but for the EU that thought that it had to lecture the Czech Republic on them not having the strength or the dignity to take over the presidency. Yes some even said that it would be best if they would just leave the presidency to the French for another term. They even threatened that it was just this kind of problems from a small country that could lead to the abolishing of the rotating presidency and the introduction of a permanent presidency, consisting of the six largest countries. I think it was a German who said it.

How charming. And what a way to convince people of the benefits of the Lisbon Treaty.



Wednesday, November 05, 2008

A huge test of character for Brown

Set against the epoch-making events in America today, it may seem curiously mundane to focus our attention on EU employment regulation - specifically, the decision of a European Parliament Committee to push for the abolition of the British opt-out from the working time directive.

But this really is a huge, huge deal. It will be a major test of Gordon Brown's character, and his oft-repeated claim to be 'on the side' of British business and working families at a time of economic stress.

The Directive caps working time at 48 hours a week, but the British Government has made all sorts of horse-trading concessions over the past years to defend the UK’s partial exemption from these rules. The Government estimates that this arrangement is worth £9bn a year to the UK.

The opt-out remains to be voted on by all MEPs in December in the European Parliament plenary session, but this first vote in the Committee signals the way that vote is likely to go. After that happens, the issue will be passed on to the EU Council, where we will be in a majority voting situation. Sources familiar with the negotiations tell us that its difficult to see what leverage the UK will have in these negotiations. If Britain wants to keep the opt out, there will need to be some pretty serious horsetrading, either on this issue or on others.

If the MEPs get their way, it is absolutely clear that employees in Britain will suffer in a very direct way. As the Government has rightly pointed out, it is essential - particularly in a time of recession - that we maintain flexible labour markets.

If one earner in a family is made redundant, surely it is right that his or her partner can work extra hours in order to pay the bills? And when those bills are increasing, why shouldn't people try and work harder to help pay them? As for employers, already fighting against incredibly tough conditions, a cap on working time could literally be a matter of survival for their business.

The Government will be hugely embarrased by this: it had previously claimed that the right for UK workers to choose to work longer than 48 hours a week had been permanently secured as part of a ‘package’ deal on Agency Workers in June.

They shouldn't have given ground on either issue, particularly since both measures will have a massively disproportionate (and almost exclusive) impact on the UK. But having chosen to negotiate this package deal in the Council, making a huge concession in the process, the Government now finds itself being thrown back into negotiations - and probably having to make even more concessions. All because some MEPs didn't like the Council deal.

Why do MEPs think they have a right to do something like this? Who do these people claim to represent? It says a great deal about the European Parliament's distance from reality that only one in ten MEPs has any business experience whatsoever.

On a more fundamental level, the fact that the European Parliament is allowed to do something like this should make us think hard about the real value-added of the institution.

It should also make us reflect further on the failure of this Government's 'conciliatory'/ 'go with the flow' strategy towards EU negotiations.

As the jobless toll rises, Britain simply cannot afford to have tighter labour market controls forced upon it - a radically different approach is needed.

Tuesday, November 04, 2008

One to add to the collection

A subtle but telling sentence we just stumbled across in one of the EU Commission's glossy promotional pamphlets:

"The institutional process of updating the rules governing the relations between the member countries and the EU and between the EU and its citizens will continue. The issue of the Constitutional Treaty will be at the forefront of discussions in the years to come, regardless of the form and content of any text that will eventually be adopted."

Bear in mind that this was written in 2006, after the French and Dutch 'no' votes to the EU Constitution.

Another to add to the list of official admissions that the Lisbon Treaty is just a badly disguised version of the original Constitution.

Czechs increasingly opposed to Lisbon Treaty

A new poll in the Czech Republic released today shows that 55% of voters are against ratification of the Lisbon Treaty, which is expected to take place in Parliament in the first few months of next yer.

Not only that, but more Czechs are opposed to it now than at the beginning of the year.

Deluded

European Parliament President Hans-Gert Pottering seems more than a little out of touch in his piece in the Guardian this morning:

It would be wonderful to think that the intense interest with which Europeans are following today's US presidential election might be matched by Americans watching the European parliamentary elections in June 2009.

Ha ha.

Monday, November 03, 2008

Planning underway to integrate Lisbon into Croatian accession treaty

On the blog of Belgian daily De Standaard, its EU correspondent Bernard Bulcke has some inside information on the plans to get the Lisbon Treaty passed.

It reports that a “very reliable source” has confirmed that “if the Lisbon Treaty hasn’t been ratified by the end of 2009, the Treaty will be integrated into the accession treaty for Croatia”.

It adds that “the probability of this scenario increases as the chances of Lisbon just being ratified through a second Irish referendum diminish”. This means that “the Irish would have to block the accession of Croatia in order to remain able to block Lisbon.”

And not only the Irish, because, as the article says, it is a “happy coincidence” that “the countries that aren’t that excited about the new treaty are exactly the greatest proponents of further enlargement of the European Union”, citing Poland and the Czech Republic, neither of which has ratified Lisbon.

The article reports that by 2009 all negotiations with Croatia should be concluded, but that this doesn't automatically guarantee Croatian entry. French President Sarkozy and German Chancellor Merkel have already indicated that the approval of Lisbon will be made a condition for enlarging the EU, effectively blocking the accession of Croatia until this happens.

Sarkozy’s claim that it would be impossible to enlarge without Lisbon is dismissed as “legal nonsense” by the piece, given that accession treaties always adapt the EU institutions to take account of new members. However, as the article points out, the claim nonetheless serves as a “political threat” directed at Ireland, Poland and the Czech Republic.

Integrating the Lisbon Treaty into the Croatian accession treaty certainly would make this 'blackmail' strategy against future enlargement carry more weight in terms of persuading more reluctant member states to ratify it.

And as we've argued before, opting for this plan will also mean that supporters of the Lisbon Treaty may be able to circumvent the Irish electorate. The "Croatian Accession Treaty plus Lisbon" could be ratified through the Irish Parliament, with a referendum held on various opt-outs. Even if the Irish referendum on the opt outs returns a no vote, the Constitution / Lisbon Treaty will still come into effect for everyone else.

On the other hand, the Croatian option would mean effectively re-ratifying Lisbon in other member states. This would be particularly unwelcome for a weakened Gordon Brown, especially if it happens in early 2010 - just before a General Election.

Cowen gets ready to give in

It's official. In December, the Irish government plans to tell its EU friends it will make the Irish hold a second referendum on the Lisbon Treaty next autumn.

From the Sunday Business Post:

According to political and official sources in Dublin and Brussels, Cowen is likely to indicate to his fellow heads of government that the government will hold a second referendum next autumn, but only if it believes that such a vote can be passed.

EU zombies react to credit crunch


Sainsbury's is challenging the EU to ditch its strict rules on the shape and size of fruit and veg, after it was told that a plan to sell Halloween 'zombie brains' cauliflowers, 'witches fingers' carrots and 'ogres toenails' cucumbers, as alternatives to sweets and chocolate, could result in individual employees being prosecuted under EU regulations.


A Sainsbury's spokesperson said:


"We have been struggling to fit a square peg in a round hole for too long now when it comes to conforming to the more controversial elements of the EU regulations. We're not allowed to use up to 20 per cent of what's produced in this country and in the current crunch climate, we cannot continue to waste this much food before it even leaves the farms. Buying wonky veg would have saved cash-strapped Britons up to 40 per cent on some items such as carrots. It not only saves money, it also reduces waste and supports our British farmers."


But don't worry - according to the Observer "The clamour for cheaper vegetables during the credit crunch has forced the EU to re-examine the regulations".


Except that, they only want to change the rules for 26 varieties. Oh, and the changes won't come into effect until July next year, by which time we could all be growing our own.



Scandi euro fever?

In Saturday's Independent, Vanessa Mock was quite excited about the "euro fever" that apparently is sweeping through Scandinavia in the wake of the financial crisis. There are anxieties, we are told, that the small Scandinavian currencies are "dangerously over-exposed to market vagaries."

Danish PM Anders Fogh Rasmussen is quoted saying that Denmark should be joining the eurozone "as soon as possible", complaining about high interest rates and Danes feeling left out. Swedish Europe Minister Cecilia Malmstrom echoes Rasmussen's remarks: "It makes no sense whatsoever for us to stay out and if we could hold a referendum tomorrow, we would."

These can no doubt serve as powerful political arguments against the backdrop of turbulent times, but euro fever? Hardly.

Rasmussen and Malmstrom are saying what they've always said. Certainly, the Danish government was talking about a eurozone referendum long before the financial crisis hit.

Meanwhile, the Swedish opinion poll that, according to the Independent, marks "a major turn-around in public opinion", shows that 47% of Swedes would vote against the euro, 42% in favour, and 11% are uncertain. In other words, of those who do know, 53% would vote No, compared to 56% in the 2003 referendum. This is a shift, but not "a major turn-around".

And, crucially, Swedish PM Fredrik Reinfeldt has said that he has no plans of bringing up the issue in the near future. According to Svenska Dagbladet he said recently that "We have to remember that we asked the Swedish people - they heard the arguments for and against [euro membership] and voted No".

Having said all that, however, it's of course close to a universal truth that when it comes to EU-related referendums, politicans have a curious habit of going back on their word. And if Denmark calls a referendum, the pressure on Sweden will certainly grow. A number of factors - most of them having something to do with the Social Democrats - will determine both whether a referendum is called and the outcome.

Until then, let's not get overly excited.




Friday, October 31, 2008

What on earth

Thanks to Bruno Waterfield's Telegraph blog we learn that “Brussels spin doctors are planning to put a ballot box into orbit” in an attempt to raise the profile of next June’s European elections.

The stunt forms part of a £21million PR contract to come up with a "campaign concept and visual identity" for the European Parliament.

Hmm. We can't quite see how this is going to improve the EP's image, but blasting the ballot box into outer space certainly seems an appropriate symbol of the giant abyss between voters and the EU, no?

Thursday, October 30, 2008

No controversy here please, this is the European Parliament

British MEP Glenis Willmott paints a very worrying picture of the European Parliament's attitude to democracy in the Parliament Magazine.

She accuses the EP authorities of undermining MEPs' efforts to promote a debate on the £200m monthly jaunt to Strasbourg.

She said she is

“dismayed by what not only appears to be the unjust treatment of those of us campaigning for a one-seat solution, but also a lack of respect for those one and a quarter million EU citizens who have so far signed the petition at www.oneseat.eu for parliament to have a single seat in Brussels. So far, requests for a serious debate on this issue in plenary have been ignored and the recently launched written declaration 75 on holding all parliament plenary sessions in Brussels has faced seemingly discriminatory measures against its promotion to MEPs.”

She continues:

"[Last month], a poster promoting the written declaration was removed by parliament’s authorities under the pretence that MEPs ‘should avoid activities on parliament’s premises which might be regarded as controversial’. I find this wholly ridiculous. Most dictionaries define controversial as ‘causing disagreement or discussion’. Should a modern parliament such as ours really be seeking to restrict disagreement or discussion? Yet unless I have grossly misunderstood the situation surrounding the removal of the poster, that is precisely what has happened."

“I do not wish to go over all the well-rehearsed arguments surrounding cost, pollution and wasted time yet again, but would merely like to appeal once more on behalf of my colleagues and on behalf of the EU’s citizens for a solution to be found to this ludicrous and embarrassing state of affairs.”

Going backwards

Finnish MEP and former prime minister Anneli Jäätteenmäki is tackling the EU Commission over a proposal to make the EU's transparency problem even worse.

Current rules state that any “content…concerning a matter relating to the policies, activities and decisions falling within the institution’s sphere of responsibility” is open to the possibility of public scrutiny. But the new rules would mean that only the final, transmitted version of documents will be listed on the public register, which, Jäätteenmäki says, "will encourage policymakers to share information informally so that it will not be subject to public scrutiny."

She said:

“In all European countries the legislative procedure is open, but not here in the EU... European citizens must know what is behind the decisions that are made and what the opinions of the different nations are in the council. I could understand it if we lived maybe 50 years ago, but now that the EU is an internal market and we have common values, why don’t we release the different opinions of the member states on legislation?”

Good question.

Wednesday, October 29, 2008

China's $300bn request

According to the FT, China has just "raised the price of its cooperation in the world's climate change talks" by demanding that developed countries spend 1% of GDP on transfer funds to poorer nations to help them reduce emissions. For the EU, this would equate to $160bn, and for the US, $130bn. The Chinese conceded that even such large funds "might not be enough".

China has done more than just raise the price for its cooperation - unless this is some kind of ruse, it has thrown a spanner in the works of climate change diplomacy. It is supremely unlikely that the US or Europe would be at all in the mood right now to pledge such enormous sums.

Some transfers will occur through the continuation of the Clean Development Mechanism (CDM) - which allows western governemnts and companies to offset their emissions by buying in permits for apparently 'green' projects in developing countries. But leaving aside the fact that these projects are usually useless or harmful, CDM transfers won't put much of a dent in the amount the Chinese are asking for. If we go with the Commission's estimate that between 2013 and 2020 EU industries in the Emissions Trading Scheme will be allowed to offset around a third of their reduction commmitments through the CDM, this would mean 100-150 million tonnes worth of 'reductions' could be 'imported' in this manner.

Even assuming a relatively high CDM price of $25 per tonne, this would only equate to transfers of just under $4bn. Even if ALL of the reduction commitment under the ETS was to be met through offset credits (which will probably actually happen in the current trading phase), this would imply transfers of about $10bn. There'll be some demand from the non-ETS sectors and national governments, but that won't raise the transfers by more than a few billion dollars worth of permits. It's a long way off $160bn.

In short, what the Chinese are asking for goes way, way beyond the existing mechanisms for transferring (pretty substantial) funds to developing countries to fight climate change. The amount of money being requested is ludicrous and unrealistic and will probably be scaled down, but the principle of asking for large financial transfers is likely to be maintained during negotiations. India has been less brazen, but will probably row in behind the Chinese on this.

As Prof. Dieter Helm (who advises the UK government on energy matters) has pointed out, the rest of the world doesn't regard the EU 20-20 by 2020 targets as realistic or credible (and neither it seems do many EU member states). The EU position is mere “political rhetoric” he says. Bearing in mind this lack of seriousness/ realism on the part of the EU, it's not hard to see why the Chinese want to secure huge sums of cash as a kind of insurance policy before making any binding pledge on carbon reductions.

Second referendum in Ireland - would a general election help the 'Yes' side?

An interesting piece from Hugo Brady at the Centre for European Reform, a close observer of Irish politics. He believes that an election in Ireland next year could help clear the decks for a second referendum.

Noting that a general election was held between the first Nice Treaty vote and the second (successful) referendum on the Treaty, he argues that:

"Though the Nice treaty issue was not prominent in the campaign, the change of government wiped the political slate clean and provided some legitimacy for the previous decision to be re-visited.

The chances of this happening in the case of the Lisbon treaty have suddenly increased. If the present government falls, there will be three options. There may be a general election. Or Fianna Fáil may form a new coalition with new partners. More probable is the formation of an alternative government, led by the largest opposition party, Fine Gael, backed up by the Irish Labour party and others."


He argues that a series of guarantees on abortion, neutrality, tax etc should be consolidated into a single protocol on ‘Ireland in Europe’ to make them more visible to the public. Being able to focus attention on a single document, rather than the unintelligible mass of legalese of the Lisbon Treaty, would certainly make life easier for the Irish government in a re-vote.

Although Brady thinks that other EU member states would be reluctant to make concessions on letting Ireland keep its Commissioner, we're less sure. There would probably be another fake EU row, allowing the Irish government to return home from negotiations claiming 'victory' against apparently staunch opposition from the large member states. This would certainly strengthen their case in any referendum.

Such a scenario could align neatly with the plan (already mooted in Dublin) that a 'legal solution' could be used to the push most of the Treaty through parliament, with a 'limited referendum' on those parts of the Treaty that do require a popular vote under the Irish case law (possibly just the Charter of Fundamental Rights, foreign policy and defence). Again, this would make it easier for the Irish Government to focus its campaign on the newly 'won' protocol on 'Ireland in Europe', which could deal with many of these issues.

But winning a second referendum would still be an uphill battle, heavy with risk even for a newly elected government in Dublin. As research conducted for the Irish government notes:

“the general consensus at the time, was that if presented unchanged it could result in an even more negative result. No voters in particular often expressed offence at the idea that their decision would not be respected.”

The Irish government will therefore be keen to present the Treaty as new and the changes (whether material or presentational) as hard won - a change of government, followed by negotiations in the EU and an easy to read protocol could help achieve this.

Still, as we've argued before, the biggest problem for them is that the Irish people have been watching politicians scheming in public ever since the no vote, and are well aware that a con is underway. The shape which this con will take is gradually becoming clearer.

Upside down

Private Eye highlights one of the EU's many contradictions:

Under the rules of the EU's grandly named 3rd Anti-Money Laundering and Counter Financing of Terrorism Directive (directive 2005/60/EC), the UK's Financial Services Authority is now obliged to examine the personal details of those connected to religious and charitable organisations on the pretext that they may be plotting terrorist activities, and has sent a demand for the information, warning that "non-compliance of regulatory obligations" would be "serious".

Meanwhile, EU bosses have offered €11bn in aid to the Bulgarian government - despite widespread reports of corruption and money laundering in the country, and despite Bulgaria's failure to identify the source of crime when it joined the EU last year.

Criminal gangs are now so rife that the Bulgarian MP Atanas Atanasov, a former counter-intelligence chief, has commentedL "Other countries have the mafia. In Bulgaria, the mafia has the country."

Monday, October 27, 2008

Are bond traders pricing in an EMU break-up?

Tony Barber on the FT's Brussels blog urges readers to "watch the yield spread" when it comes to the debt of eurozone governments.

This is an issue Ambrose Evans-Pritchard at the Telegraph has been writing about for a while, and is certainly an interesting proxy for the market's faith in European monetary union. Barber singles out the spread between German and Italian 10-year government bonds: 25.8 basis points one year ago, 69.6 one month ago, 72.3 one week ago and 95.6 today. He summarises the relevance of the issue for EMU:

"[widening bond yield spreads] hint at a degree of uncertainty among investors about the cohesion of the 15-nation eurozone itself - namely, whether Greece and Italy are economically strong and fiscally disciplined enough to share the same currency with Germany over the long term.

This would not be an issue, of course, if the eurozone were like the US and had a central fiscal authority to transfer revenues between flourishing states and states suffering an economic shock. But you cannot have a central fiscal authority without a much greater shift in the direction of European political union than most politicians, taxpayers and voters appear ready to contemplate."

One comment on Barber's blog complains that his argument is focussing too closely on a recent timeframe, citing an enornous yield spread in the mid-90s. But although the yield spread between Italy and Germany by today's standards may have been extremely big at that time, it is also hugely significant what happened to spreads after the launch of the euro.

We had a look back over the data, and as the graph below shows (referring to the differential between the average of non-German eurozone members' bond yields and German bunds), the spread did narrow after the launch of the euro in 1999 (ie. it comes closer to zero, the German baseline), but around midway through last year this trend was sharply reversed, reflected in the upward slope away from zero:




The above graph is a simplification, and will be slightly skewed as a result of the effect of Greece - a relatively small economy with a very high yield on its debt - on the average. But even when we look in detail at the individual national spreads relative to German bunds, this trend is corroborated (apologies for the haziness of our graph - click on it to view in detail):



SOURCE: Eurostat

A Warsaw-Beijing pact on climate change?

According to Reuters, the Poles are calling in some heavyweight support in their bid to outflank the EU on tough new conditions for coal burning industries.

Polish Prime Minister Donald Tusk told a press conference in Beijing Thursday:

"I expect that in China we will find an ally for the global climate talks. We are in a similar situation due to our coal-based economies. We cannot allow fighting climate change to destroy them."

Any global deal on climate change will be close to useless without Chinese backing, meaning Poland's position would be considerably strengthened by any alliance with Beijing on this issue. This follows earlier endorsement for Warsaw from fellow ex-communist EU members and a big western European power in Italy.

As we argued before, the potential for European consensus on climate change policy has undoubtedly been damaged by the overly interventionist and centralised approach adopted by the Commission.

This bodes ill for any EU agreement by the end of the year, and more importantly, any global deal.

Friday, October 24, 2008

McCain, on ne vous aime pas ici

Blimey. According to a new France 24/Harris poll for the IHT and reported on PA:

The 5 largest European countries are unanimous in their desire to see Barack Obama elected whilst John McCain's rating is extremely low. If they could vote, only 1% of French, 5% of German and 8% of Spanish respondents would elect John McCain. In the United States, the Republican candidate is behind by 10 points.

Also:

Whilst Europeans declare themselves to be fascinated by this election, nearly one in two British respondents (47%) say that they are not at all interested in the vote. Conversely, Germans are the most enthusiastic Europeans with 85% of those interviewed interested in the election.

Will EU climate policy cripple German business?



German Environment Minister Matthias Machnig and chambers of commerce boss Martin Wansleben have an interesting exchange which highlights the sharp divisions opening up towards the EU climate change plans in Europe's biggest emitter and industrial powerhouse.

Both the heavy industry and green lobbies in Germany are powerful, and the outcome of their rivalry will have a decisive effect on negotiations over the EU's climate package, with profound implications for the rest of Europe.

Machnig: We want emissions certificates in the energy sector to be auctioned 100%.

Wansleben: That’s fatal! It will lead to higher electricity costs for everyone. Business and consumers will never accept that.. It is inefficient and too expensive for Germany as a business location… We must set in motion policy that also incorporates large-scale emitters such as the USA, India and China.

M: Of course we want a global emissions trading system..the industrial countries will have to take the first steps. Our industry will have the advantage of becoming more competitive.

W: You’re mistaken. Many companies here in Germany will not survive that.

Looking back

Chris Huhne looks at why we need a re-think of some of the detail of the European Arrest Warrant in the Inde today. He notes that:

"When the legislation was considered, the Commons committee warned about the inclusion of racism and xenophobia in the list of offences where it was unnecessary to prove it was against the host and issuing country's law, precisely because of differences in interpretation from one EU country to another."

Unfortunately, it seems the often very sensible recommendations of the experts in the EU Scrutiny Committee are overlooked far too often. The repeated warnings about the weaknesses, among other things, of the UK's so-called 'safeguards' on the Lisbon Treaty spring to mind. I wonder if Chris Huhne and his colleagues will one day be lamenting the failure to heed that advice, too.

Thursday, October 23, 2008

On a different planet



This is from an interview with former '68 student revolutionary leader and MEP Daniel Cohn-Bendit.

It's a good insight into the incredibly stubborn and arrogant mentality of many within the European Parliament towards Europe's industrial base, and in particular the automotive industry (one area of heavy industry in which Europe still has a clear comparative advantage):

Q: If you were in Angela Merkel's shoes, how would you respond to German industries that are seeking to put the brakes on the adoption of ambitious objectives?

A: I would tell them: "Listen, too much is too much. We have been telling you for fifteen years now that you have to reduce the CO2 emissions of cars and you still haven't done so. Now you will do it, because regulation will oblige you to do so."

It's a Conspiracy! (part III)

EU funded 'news' site Euractiv has an interview with Fine Gael MEP Colm Burke. It doesn't take much leading questioning from the interviewer to get Burke to reveal his sympathy for the growing number of conspiracy theorists linking the Irish No campaign with the US industrial-military complex:

Talk to us about Libertas, the group that was arguably the most vocal and high-profile anti-Lisbon force in the Irish referendum. Questions are emerging not just in Ireland but throughout the EU as to where this group received their substantial funding. What is your opinion?

I can't comment on where they're receiving their funding, but I can say this: I would say to you, based on my own involvement here in the European Parliament, that the pro-NATO lobby* is not happy with the idea of Europe becoming involved in peacekeeping operations. I had clear evidence of that, for instance when EU troops were assigned to Chad, and I would certainly not be surprised by the arms trade in America becoming involved in trying to destabilise the development of a common European defence.

The idea of arms trade lobbyists funding 1.2 million euro towards ensuring a 'no' to Lisbon in Ireland is certainly not beyond the bounds of possibility.

As with many conspiracy theories, this one is clearly irrational and contradictory on a number of counts. The US Government has consistently supported the Lisbon Treaty and its predecessor, the EU Constitution. And why would shadowy arms trade lobbyists oppose greater European spending on defence, and a more activist role for European armed forces (an argument the UK has made to support the Treaty)?

But rationality or pursuit of the truth was never behind speculation of the links between Libertas and the Pentagon: these rumours are designed to discredit and smear opponents of the Treaty in the run up to a second referendum.

When the Irish are made to vote again, the stakes will be extremely high, and supporters of the treaty are prepared to fight dirty. As we reported previously, the Commission has already hired a firm of American 'PR hitmen' to set up a "crisis communications" unit to promote the EU - these are not the sort of people who are hired by their clients for friendly, softly-softly publicity.

The second Lisbon referendum campaign has already started, and this steady drip of unsubstantiated rumour and speculation over the No campaign's funding is only the beginning.



*On a different note, it is interesting to hear Burke refer to tensions in Brussels between the "pro-NATO lobby" and those who want to see a greater role for the EU in defence/ peacekeeping. If this is true, it goes against the UK Government's line that the Lisbon Treaty is designed to complement and reenforce, but not challenge NATO.



Carbon price hits eight month low


According to Point Carbon, carbon prices for permits traded within the EU Emissions Trading Scheme (EUAs) have "crashed", and are now priced at less than €20/tonne. The chart below illustrates how far the price has come down over the course of just one month.



We have made the point repeatedly that price volatility is a major flaw in carbon markets, and acts as a serious disincentive to large-scale capital investments designed to cut carbon emissions. Decisions on this scale of investment take place over a timeframe of years, possibly decades, making it very difficult for big polluters to make plans on the basis of an erratic carbon price signal.

Carbon prices are driven by scarcity in carbon permits, which in turn is determined by a number of complex and unpredictable factors - including weather patterns, fossil fuel prices and expected economic growth. The latter two factors in particular are behind the current slump in prices in Europe.

The judgement of bureaucracies (in this case the Commission) - who need to determine the final number of permits to be issued - is of course a key driver of carbon value in cap-and-trade schemes such as the ETS. And it is apparent that these officials were unable to predict a big slump in oil prices and recession in Europe. If winter turns out to be unusually warm, this could push prices down even further...

This illustrates the intrinsic problem of the ETS and systems like it: bureaucrats cannot predict the future, and can never have the knowledge or resources to be able to set the allocation of carbon permits at the "right" level for a five or seven year trading period.

When things don't go the way the officials expected, the result is volatility in the price of carbon. That's why we think it's time for emissions trading to be replaced with a solid, long-term carbon price mechanism such as a tax.

Drivel

An FCO press release this morning confirms our new Europe Minister Caroline Flint intends to carry on in a long line of politicians telling us we should accept the EU institutions and all their problems because... we have European friends, take European holidays and eat European food.

She told an audience at the University of Leeds:

"Britain is an island nation, but our instinct is international - we shop at European fashion shops, we eat at pizzerias, we holiday on the Mediterranean. So why do people distrust the European Union and feel distant from its institutions?"

"If the EU didn't exist, in the last few weeks we would have wanted to create it."

Genius.