To Veto, or not to Veto?

Radoslav Sikorski, the Polish foreign minister, says two important things. He fears German inactivity more than more conventional threats because it would lead to a Eurozone collapse. He also says it must be possible to govern Europe and suggests that the veto right of individual countries should be removed. This would mean that Germany, which Sikorski calls an indispensible nation in Europe, could form coalitions and vote through their decisions, ie govern. Other powerful members could do the same later if things would change. If it becomes possible to govern Europe, markets would be pleased and interest rates would go down to alleviate the debt crisis.

I did not find the information that Europe should be governable through the removal of the veto in Sikorski’s recent Financial Times paper but in today’s editorial, he might have said it at his talk on Monday. It would of course be a fundamental change where more influence would be ascribed to the countries in Europe which do well rather than to all countries equally. More function, less solidarity. An “economic government” could be formed with such a 17 or 27 “party” system. Majority coalitions would form and be subject to revision according to country performance.

I submitted a post in January this year on my blog that discussed a theoretical construct of “influence points” in the EU that would give incentives to participate in a transfer union, ie you get “paid” for contributing money to the EU. It would perhaps be easier to remove the veto function for members? In practice the veto function was removed already for Greece and Italy which just had to do what they were told in order for the Eurozone to survive. Right now it does not seem like a transfer union is possible, Germany does not have that much money anyhow, but rather a pact where fiscal control and austerity was enforced harder. One thing is clear, it is difficult to find solutions with the current set-up of the Union. It is rather like it is constructed not to work and the markets don’t believe in it anymore.

If I have understood the concept of an “economic government” of the type proposed by Nicolas Sarkozy in 2008, it would be superimposed onto EU in the Eurozone. That means it would be independent of the Commission, The Council and the Parliament. The question is then how many countries of the original 17 that will remain there after the smoke clears. Spain has gotten the good word lately. Italy is on/off and Greece is likely to disappear.

A system for the Eurozone where you get something extra for good performance would create a national goal that would help motivate people more than just doing well for their own country. Participation would be more serious and competitive. Paying large sums of money without getting anything for it does not seems to work, although people are speaking for solidarity in times of crisis.

Niall Ferguson's Take on Europe?

Niall Ferguson has written a ten year projection on Europe, The Saturday Essay, on wsj.com. I guess this is the kind of thing he dishes out to students at Harvard for comments. Therefore I can’t resist the temptation to comment myself, albeit on a more humble level.

Ferguson thinks Norway will pop the question about a Nordic Union with Norway, Sweden, Denmark, Iceland, and Finland but he does not think they would be in close contact with Britain. This idea was up for discussion in the Swedish press not long ago. They even speculated on how to fuse the different royal houses into one. At the time I thought this was irrelevant because of the presence of the European Union. Why one more? The foreign minister of Sweden, Carl Bildt, thought the same way. The Nordic countries are actually quite different, especially Finland, which is already a member of the Eurozone. Ferguson thinks they would change allegiance, apparently. This is perhaps not so likely. There is a movement in Finland right now in the other direction. They want to remove Swedish from their schools. Finland was taken from Sweden 1809 by Russia after having been together for 700 years. This legacy means many Finns speak Swedish. Being close to Russia after years of Finlandization they rather cuddle up to Germany and the Eurozone for independence of a sort they prefer.

Sweden might also be in the mood of joining the Eurozone according to the politicians and the industry. It makes sense both economically and security wise. It is interesting that very little of current discussions on Europe involves NATO and security issues. America has vanished from the equation. It seems like Germany and the zone has supplanted it. People giving opinions on the matter in the Swedish press thinks Sweden, Denmark, and Britain will be forced to join the zone and support countries in trouble. Only the independently wealthy Norwegians seems to be able to do as they please. If politicians and industry in Sweden want to join Germany, it still might be difficult to convince the populace which watches British and American TV every day and don’t want to pay for the profligate Greeks. However, if the US can’t fix their gridlock in Congress soon and start working on their debt, people will lose their sense of security from the US and turn to Germany for comfort.

Ferguson is bullish on Britain and wishes it will stay out of the Eurozone which is my feeling also. He thinks Ireland would rejoin the English kingdom which I would also believe on cultural vibes. The Brits would not ever join the Eurozone and I have earlier suggested that they would form not Taiwan but Japan outside a Chinese equivalent Continent. He thinks Britain would be preferred for banking by China rather than Brussels although he envisions some sale of assets to the Chinese to go with that. When the ten Euro-countries fall to the Germans, that Ferguson suggests, there will be a new phase in European development built on German language and culture. Maybe Brussels will be moved to Berlin rather than to Vienna that Ferguson suggests. When France, Spain, Italy and seven other countries fall, people would flee to the security of a joined Eurozone that keeps the Russians at bay.

Ferguson seems to have an idea that the SPD would gain momentum is Germany. Angela Merkel, raised in East Germany, does have a streak of Social Democrat over her politics so maybe he is right and that the Eurozone will become something to the clear left of the US and Britain, even if the Democrats rule. Sweden’s center-right is also moving leftwards. What happens in China will probably also be important in terms of foreign investments. If China becomes socialist rather than robber baron capitalist they might favor the Eurozone preferentially over the new English kingdom. Personally I have this naïve idea that the US and Europe would start investing in jobs in their own hemispheres rather than in Asia, despite short sighted growth aspects and then Britain could count on support from this angle as well.

In 2012, Ferguson believes, Israel will attack Iranian nuclear facilities with all problems thus induced, like a blockage of the Strait of Hormuz. I don’t think this is likely. According to The Economist the Israeli military is against such a move which is going to be too problematic. My feeling is that the Arab Spring is slowly going to make the region Islamist/socialist. That would make the Israeli position continuously worsening as the US seems to leave the area for South East Asia in their Pacific Century. The response to the Muslim world is then going to be focused on the relationship with Europe which differs between The New English Kingdom and the Eurozone, or The United States of Europe, as Ferguson calls it. Israel does not have a good relationship with Europe, unfortunately, and might be forced into accepting to give up it Jewish state for something similar to South Africa, since Europe is so heavily on the side of the Palestinians, which I’m personally not. The fact The Arab Union went against Assad, sort of, is though a positive sign for the area, that could speak for a relative future stability.

Wolfgang Münchau at the Financial Times the other day claimed that saving the Euro would destroy the EU. Ferguson is on the same track. It is very likely that Germany with its “not now but later” approach have worked the situation into a two pronged result. Either they become rulers of the Eurozone with a weakened France or the whole thing falls apart with them still standing on the remnants to mind their own business with Russia.

The Moderates and the Social Democrats in Sweden moves in the German direction

Muddling through seems less and less an objective for the elites in Europe. The cost of borrowing threatens to strangulate the Euro zone and the independence of the ECBs printing press is at risk at the peril of future inflation. However, according to World Weekly at the Financial Times edited by Gideon Rachman, 80% of Germans think the Euro zone will survive.

Former EMU propagator Göran Persson, the former Swedish Prime Minister and a Social Democrat, now says that Sweden should join. So says another former Swedish Prime Minister Carl Bildt, who is the current Foreign Minister and a Moderate. The Swedish people is not there yet though. There is not a majority for EMU membership at the polls.

Bildt and Persson talks like there is no risk for the Euro but David Cameron would rather see a networked Europe of independent states fearing that a fortified Euro zone would start to dominate the peripheral countries in the EU. According to the latest news, however, he agrees with Angela Merkel concerning the need for Lisbon Treaty change, as long as the cash cow, The City of London, which supplies 30% of British GDP, is not made less globally competitive by enemy legislation or taxation.

In other words, Merkel is beginning to have an effect on northern Europe as the British press is increasingly doubting the viability of the Euro, to the irritation of Berlin who claims media has been against it all along. Detailing how an economic program for saving the Euro is beyond most people but deciding whether or not they are British or German should be more feasible and my earlier request for the official Swedish position on this question seems to have been answered. Not only the Swedish business community, which trades preferably with Germany, but also the two main parties are now for Germany.

My one or the other kind of argument is not shared by David Miliband or the Labor party in Britain who wrote the other day that Britain needed Germany and who argued for a fortified EU. He calls being “outside” the EU a disaster for Britain. Cameron, on the other hand, is pressured by at least 100 MPs in this direction. It is understandable that many Brits would not mind that the Euro zone, as a future potential adversary, would disintegrate. It is a straight forward balance of power argument. A multipolar Europe rather than a divisive block construction.

Gideon Rachman argued for an orderly dismantlement but was told that this might lead to such disorder that extremist parties might get power in Europe again. I’m not convinced this would happen, though, we are not far enough from the war yet. But the problem of how to organize Europe still does not have a clear answer that can be formulated in the press for the people to take in.

Someone wrote today that politics is still at the top despite global finance. It has its own politics and as the Occupy movement has demonstrated, as has reactions in Europe of other kinds, some people don’ t like this politics. The politics of global finance is today nation-building in Asia and nation deconstruction and austerity in the West. No doubt there is a reaction. It is also funny to see how it is assumed that the economy in Asia is more powerful that in the West when it is immature and cannot really be compared with the economy in the West.

Following what has been written about the possibilities for Italy to get out of its predicament is not particularly hopeful. The press is against Italy but evidently seasoned politicians in Sweden and also Britain is for Italy. The math, which is simple enough, is clearly against. Politicians must therefore factor in a change of heart that has taken place in southern Europe for reform.

The Next Trend?

Samuel P Huntington wrote the following in his 1996 book Clash of Civilizations:

“In the early 1990s, Chinese made up 1% of the Philippine population but were responsible for 35% of the sales of domestically owned firms. In Indonesia in the mid-1980s, the Chinese were 2-3% of the population but owned roughly 70% of the private domestic capital. Seventeen of the twenty-five largest businesses were Chinese-controlled, and one Chinese conglomerate was responsible for 5% of Indonesia’s GDP. In the early 1990s, the Chinese were 10% of Thailand’s population but owned 9 of the 10 largest business groups and were responsible for 50% of its GDP. Chinese are about one third of the population in Malaysia but completely dominate the economy.”

The US is going Pacific and the UK is pondering Europe. David Cameron is talking about a “networked Europe” rather than a block Europe. The Germans, however, wants “more Europe” which probably means a more German Europe, if Angela Merkel is going to get full support from the Germans. Thus the new trend is that the US is facing stiff competition from the Chinese in East Asia and the Pacific and the UK in Continental Europe.

Another new trend might be the language question. Mandarin Chinese might take over much of the English dominance in East Asia and German might have a renaissance on the Continent. Culture follows power! Before World War II Swedish children learned German as their first foreign language.

Anglo-Americans and also other Europeans might though find comfort in the following statistic:

“If demographic trends continue, well over 50% of the world’s Christians will be in Africa, Latin America, and parts of Asia within 25 years—a clear shift from Christianity’s traditional home in Europe and North America.”

It is from the 2010 book Religion and Politics in America: Faith, Culture, and Strategic Choices by Robert Booth Fowler et al. Perhaps we should let the Chinese dominate East Asia and focus on South America and Africa which even lies in our time zones and where we are more likely to find hearts and minds than in the assertive Asia.

This book also tries to explain how a religious America works compared to a secular China. The religious pluralism observed in America functions as a vent for freedom making possible a streamlined collective approach in the economy. People will feel free with maintained integrity as long as they can exercise their faith.

The last 20 or so years in the US feature what could be called the Fifth Great Awakening with an increase especially in evangelical Protestantism. The First Great Awakening in American came before the Revolution in the 18^th century. Periodically America turns spiritual and looks for the next political reform. We have yet to see what lies in stock this time.

The problem is that you can't talk about the problem?

Yesterday Italy ended up in real trouble. Some said its economy is dead other meant that it still has a chance. After all it a country based on knowledge and it has significant assets to back it debt. But it seems like this was the straw that broke the camel's back. There is talk today on Huffington Post of a two-speed Europe solution. There is talk about a budget czar for the Eurozone in the Financial Times.

A budget czar that takes control over the budgets of member states would mean that it is clear that they can’t do this on their own. Greece, Italy, Spain, and Portugal have failed to match expenses with income and can’t sustain welfare states on the same level as states in northern Europe. We have technocracy delegitimizing democracy in such states and would need a panel of judges to decide which countries are in and which are out.

Nicolas Sarkozy has been advocating for a two speed Europe whereas Angela Merkel has spoken for a more homogenous variety. Merkel is of course right as far as the EU motto is concerned but if technocracy with economic steering, a Eurozone economic government, will make countries like Greece balk at this prospect, they will have to split the Eurozone somehow. A solution with debt redemption over 20-25 years via a fund is a more probable proposition which is also discussed in the Financial Times today.

So, what people are beginning to talk about is that democracy does not work everywhere. Still you have politicians who stand tall and say they wish democracy for Libya’s people soon, when there are problems in southern Europe already. The question today is whether or not southern Europe will accept technocracy or if they will cut themselves loose and stay democracies. Greece is an interesting example because 70% poll favorably for the Euro at the same time as they poll 60% against the bail-out from the Eurozone.

The Eurozone needs opposition in Europe?

It is a little embarrassing for Germany that all other members of the Eurozone will default, so let’s argue that they will solve this somehow. Fredrik Reinfeldt, the prime minister of Sweden has invited other peripheral countries, like Denmark and the UK, to a tête-à-tête in Stockholm Northern Future Forum in February 2012 according to Svenska Dagbladet. It is a follow-up from last year in London. Sir John Major reminded us the other day in the Financial Times that EFTA still exists: Norway, Switzerland, Liechtenstein, and Island. How about forming an opposition team if it is impossible to get all countries under one flag?

The benefit of such a scheme would be that people know who should support who. Italy, Spain, Portugal and Greece belong to team Germany. Although Arnold Toynbee said in his famous tome A Study of History that civilizations are OK as long as they expand. Then the barbarians come back, Toynbee said. People are still talking about expanding the EU which to me seems doubtful considering the circumstances. As I blogged about once before, Samuel P Huntington suggested you leave countries with distinct other culture out and the diversity of the present EU has been shown to be too large. The Catholic Croatia is probably going to work whereas the Orthodox Serbia should remain outside.

It should be noted that the fault line between the Eurozone and its hypothetical opposition is Catholic/Protestant to a large extent. We have Poland, Germany and France on the one hand and the UK and the Nordic countries on the other. Assuming that Poland joins the Euro. It is at the same time a fault line between more devout and secular. It will work better language wise also since the Nordic countries are well versed in English and France and Germany prefers their own. In other words, forget the EU. The EU was a peace project but with Poland, Germany and France in the same boat peace is assured.

Europe?

Germany is the current power house in Europe and it seems like there are wishes that Sweden should help Greece to help Germany out in the Eurozone. How about investing this money in Britain instead? They are a little short right now.

Europe does not seem to be a "house"?

China and even Australia has said that Europe should “restore its house”. This was the apparent conclusion from the G20 meeting in Cannes last week. The problem seems to be that Europe is not a house even if it needs to be. Wolfgang Münchau, at the Financial Times, wrote that if Europe saves the Euro, EU will fall. You will get Euroland and some peripheral countries. According to David Rennie at The Economist, British tabloids already write about “The Fourth Reich”. One of the peripheral countries is Sweden which does not have a majority for the Euro. I am particularly curious about Poland. Last time they chose Britain they ended up in Russia for a while. I’m asking this because people that write about such things tend to group Sweden, Norway, Poland and Britain together.

There is so much writings about Greece, a country with only 2% of the EU budget, that I have gotten the feeling it is to gloss over the fact that global governance via G20 is dead. Anne Marie Slaughter, in her book A New World Order from 2004, wrote about the globalization paradox. Global governance is not possible, even if needed, it is a threat to individual liberty, and should and have been replaced by networks of specialists like presidents, ministers of finance, and regulators that interact outside of the state function, even if the state and regular diplomacy is still important. The EU has been used as the ultimate example of such networks but if it now breaks up this is yet another proof of the difficulties with global governance.

A while ago The Economist wrote that there are the Chinese economy, the US economy and the European economy now. If you add the Indian and the Japanese, that seems to be just right. My question is if not the globalization phenomenon is being followed by a regionalization? There is going to be more and more focus on saving jobs locally even if you can save a few dollars by sourcing the job. The East Asian assertiveness depends on globalization and might be combated by regionalization. The French and the Germans saved their car industries for example. The race for education, to out-educate, to out-compete, will also lead to regionalization. There will be emphasis on preventing brain-drain, which is a means of eviscerating the US who depend on highly skilled immigration.