Publications

Kremlin in Frankfurt

As a student in Amsterdam I once took Russian studies to become an expert in Kremlinology: the study of the balance of power in the Soviet Union. I particularly remember the musty smell of piles of Russian newspapers in the Eastern Europe Institute. The Soviet Union collapsed and I had little use for Kremlinology, until as an MEP I got a little insight into the European Central Bank (ECB). The ECB doesn't publish minutes, doesn't really explain itself, doesn't give access to internal affairs and forces us to read between the lines. The Italian ECB president, Mario Draghi, speaks in a code language which - having been educated by Jesuits - he masters like no other.

The ECB is based on the model of the German central bank, the Bundesbank. Its main task was the taming of inflation. The first president, Wim Duisenberg , did just that; and at first, so did his successor, the Frenchman Jean-Claude Trichet did. This changed after 2008. The EU didn't see the euro crisis coming. In 2010, José Manuel Barroso, President of the European Commission, called the euro the 'protective shield' against the crisis, while the euro had fuelled the debt crisis with low interest rates. By the end of 2011, the euro stood on the brink of collapse, so the ECB injected €1.1 trillion into the banking sector. When that proved insufficient, Draghi stated in mid-2012 that he would do "whatever it takes" to save the euro. He became the monetary James Bond, albeit with a 'license to print'.

The ECB is no longer the brainchild of the Bundesbank and is going beyond its statutory mandate. That provoked a struggle within the Governing Council of the ECB, which consists of a Board of six people along with the governors of central banks of the euro zone. The majority advocated an expansionary monetary policy. A minority, led by the Bundesbank, is critical of such action. Draghi stands on the side of the majority, but the ECB is nothing without the Bundesbank, the main shareholder of the ECB.

All Roads Lead To Moscow

Recently, I had the pleasure of sitting next to Herman Van Rompuy, President of the European Council. I asked him why European foreign policy is so 'naive', like the misplaced courtship with Libyan leader Gaddafi and deposed Egyptian President Morsi. Van Rompuy reacted irritably and praised soft power: being nice, starting up dialogue and financing under certain conditions. This approach runs upon its limits in the Ukrainian crisis. The Kremlin only knows hard power.

The difference between the EU and Russia is that the first can make vague, often unattainable promises such as EU membership, while the second has instant, tangible coercive measures. Ukraine has to (re)pay 24 billion euro of loans and unpaid gas bills to Russia this year. Ukraine is on the verge of bankruptcy. According to Dutch Minister Timmermans it will take at least another 30 years before Ukraine joins the EU. Ukrainian EU membership in 2044 versus Putin who has the fate of the Ukrainian economy in his hands: who is the strongest?

A bankruptcy of Ukraine returns to roost in the face of the EU; who will need to pay the 35 billion euro to keep the country on its feet? The EU is struggling with low growth and high unemployment. Citizens need to tighten their belts and are not keen on financing Ukraine - a sort of Great Greece. European leaders are calling for help from the International Monetary Fund (IMF) that only comes up with loans under strict conditions. These will lead to a deeper recession at the expense of heavy industry and mining in the Russian-speaking part of Ukraine. This reinforces the divergent forces in the country.

Do not put our exports at risk

 

Last year I was invited to a dinner with Roger Bootle. He was presented to me as a 'respected voice' in British financial circles. I was looking forward to it. During the meal, Bootle held a fanatical plea for British withdrawal from the EU. I confronted him with counter-arguments, such as the impact on British exports to the EU. Bootle got irritated and became increasingly angry. The dinner turned unpleasant and I left early, which rarely happens, so as to avoid a fight.

Roger Bootle is managing director of Capital Economics, which published a report on the Netherlands and the EU. In the same way as Bootle wants a British withdrawal (Brexit), he advises the PVV to pursue a Dutch exit from the EU, the so-called NEXIT. Instead of sounding like a 'respected voice', Bootle actually sounds like chief economist for the UK Independence Party UKIP, led by Nigel Farage, which preaches Brexit. The recipe is more drastic for the Netherlands than for Britain. By exiting, the Netherlands would not only leave the single market, but also the Eurozone and the Schengen zone for free movement of people.

According to Bootle there would be some 'transitional problems', but the Netherlands would then have more advantages than disadvantages from 2035 on. Britain and The Netherlands wouldn't pay any more money to the EU budget, abolish unnecessary EU legislation, conduct their own immigration policy, re-introduce the Dutch guilder, and the EU would offer both countries a favourable trade agreement. The Netherlands would then turn into a Switzerland at the North Sea.

Baudet is off the mark

Historian and legal philosopher Thierry Baudet deserves a prize for his efforts in the EU debate, but he is off the mark. After collecting 63,000 signatures, he presented his citizen's initiative to the Dutch House of Representatives demanding a referendum on any future transfer of Dutch sovereignty to the EU. This is a variant of the British law of 2011: "any future treaty change transferring powers to the EU is automatically subject to a referendum." The British have many exceptions. They are neither in the euro zone nor in the borderless Schengen Area. The Netherlands are. Virtually every ministry is affected by Brussels. Most policies are in one way or another part of the European treaties. More is hardly possible, which means a referendum remains a distant vision. Baudet should turn the question around. What powers can be retrieved from Brussels and how can Parliament be a watchdog against unnecessary EU legislation?

Europe's elite and anti-elite

Rachida Dati, the French former Justice Minister and MEP with the European Christian Democrats group (EPP), threw the cat among the pigeons. At a conference in London organised by the think tank Open Europe, she launched an attack on the 'European elite', of which the EPP is the flag ship. "There is the world of technocrats who want more Europe with a federal myth before their eyes." She accuses the Christian Democrat leaders of forming 'Un Club' and calls herself a euro-sceptic. Dati called for a reality check: une révolution réaliste.

Dati's speech is striking. Her leader Joseph Daul, a farmer from the Alsace region of France, has only one mantra: more Europe. His group is by far the largest in the European Parliament and the EPP sees itself as the naturally dominant force. Over the past five years, Christian Democrats have been the leading faction in Europe, with Commission President Jose Manuel Barroso, European President Herman Van Rompuy and former Eurogroup chairman Jean-Claude Juncker.

This dominance is the life work of former Belgian Prime Minister Wilfried Martens, who recently passed away. Martens, an affable person, followed a very important rule when he was President of the Christian Democrat family: the EPP had to be the largest group in the European Parliament under all circumstances. Each party was welcome, Christian or not. He took the party of Silvio Berlusconi in, as well as the party of the Hungarian authoritarian leader Victor Orban. Parties were lured by all the temptations of human existence. Group formation was not about Christ, but about money, power and jobs. "We have become a ruling class over the people we represent", said Dati.

Saving banks with your savings

This is the year of the European Banking Union. The European Union designed a surveillance mechanism of big banks and, if need be, their resolution. Banks should be able to fail and to be wound up. The Finance Ministers have agreed, and the European Parliament should approve the plan before the European election. If so, a European Resolution Board will have the competence to put a major bank into liquidation starting on 1 January 2015. In the US banks can be declared bankrupt. Will it be equally possible in Europe? In reality, it is unlikely. The ultimate consequence of the European Banking Union is not bankruptcy but recapitalizing big banks, taking the savings of ordinary citizens as collateral.

In Europe, so-called systemic banks are inextricably interwoven with the financing of public authorities – in particular welfare states - living beyond their means. Since 2011, the European Central Bank (ECB) called upon public authorities and banks to reduce their mutual dependency, but then launched measures that generated precisely the opposite effect. To save the euro and to unclog the financial transmission system the ECB injected 1,1 trillion euro in the European banking sector. Banks were entitled to borrow substantial amounts of money at low interest rates and in return for soft collateral. However, the flow of cheap money did not enhance the granting of credit to companies but instead enabled banks to acquire big amounts of public debts, in particular in Spain, Italy and France. Currently, Spanish banks own 41% of Spanish public debt. ‘We have brought these consequences upon ourselves’, said Jens Weidmann, President of the German Central Bank, openly criticizing official ECB policy.

The Real Madrid ´Bale Out´ - Question to the Commission

 

Since I asked the question in September, it seems that the Commission has finally decided to launch an investigation! The BBC reports "Real Madrid and Barcelona are among seven Spanish clubs to be investigated over alleged illegal state aid".

Here is the link:   http://www.bbc.com/sport/0/football/25410320

 

This is the finalised text of the question I submitted to the Commission:

 

On the first of September 2013, the Spanish Real Madrid Football Club made public its acquisition of Gareth Bale, for a record price of 100 million euro. Real Madrid has built up a considerable amount of debt in recent years. The acquisition of Bale is in large part financed by Caja Madrid, a regional bank which is now part of  Bankia. Recently, Bankia has been bailed out by the ESM for no less than 18 billion euro. So in reality, European funds are being used as a backstop for unsustainable practices in the Spanish football competition.

1. Does the Commission regard these financial arrangements as a distortion of competition between clubs competing on a Europe-wide level?

2. Does the Commission approve of an ESM-backed bank being involved in an extravagant record deal, with the European taxpayer as its ultimate backstop?

 

The seven deadly sins of EU 'top job' candidates

In Brussels, the power struggle for the four top-jobs has begun: President of the European Commission, President of the European Council, High Representative for Foreign Affairs and Secretary-General of NATO. Some candidates are waiting in the corridors, others are shouting from the rooftops. Many candidates are thereby tempted by the seven deadly sins that lead them straight to the abyss:

1. Whoever asks, does not receive. In 1994, the Dutch Prime Minister Lubbers launched his candidacy for the presidency of the European Commission. He knew that the German Chancellor, Helmut Kohl, didn't want him, so he travelled throughout the EU to lobby. As did the Belgian prime minister Guy Verhofstadt in 2004. Neither got the EU job. They pushed too much: the louder the lobbying, the greater the resistance.

2. Hoping for a coalition of small countries. There's no such thing. Lubbers was trying to get smaller countries behind him, but failed completely. His rival was the Belgian prime minister Jean-Luc Dehaene, also from a small country. Kohl supported Dehaene but his candidacy was killed by a British veto. Eventually, the Prime Minister of Luxembourg, Jacques Santer, won the bid. Larger countries can easily tear apart a coalition of small countries.

The European Nightmare

The official dogma in Brussels is: ´Citizens will feel closer to Europe, if European politics is about domestic politics´. This goal has been reached now, but it is not clear whether voters will show their love for Europe at the upcoming elections next year. Perhaps Europe is getting too close. Martin Sommer, a columnist with the Volkskrant, foresees a coup by the federalists in the European Parliament. Unfortunately that is the dream of many MEP's, with their answer to everything being: ´we need more Europe.´ Is Mr Sommer's nightmare justifiable?

It´s too early to predict how the European Parliament will look like next year with 751 members, but some trends in the Member States can give us an indication:

1. The European Christian-Democrats, who won the elections in 2009, will take a big hit as a result of the economic crisis. They became the ruling political family in 2009, but they didn’t see the crisis coming and so were overtaken by events. The Centre-Right in France, Italy, Spain, Portugal, Greece and other countries is being punished because of the crisis. The European Socialists can recover. The French Socialist will lose, but the British Labour Party - that lost the election in 2009 - will be resurrected. Christian-Democrats and Socialists will compete to be the biggest group at around 220 seats.

The Know Nothing President

President Obama is in a digital two-front war. The computers of the National Security Agency (NSA) are so modern that they can spy on the citizens of the world, including their leaders. The computers of Obamacare, the federal program for a universal health insurance, are so dysfunctional that the software blocked at the start. As things stand, there are more Americans who lost their insurance than Americans who managed to get new insurance. But the President of Hope and Change knows nothing. He is utterly unaware.

Obama claimed to know nothing about the NSA spying on foreign - especially allied - leaders. The German weekly Der Spiegel shows this week how the NSA is spying on Germany, starting with the mobile phone of Chancellor Merkel. This is a sensitive issue in a country that has both the Gestapo and the Stasi in its collective memory. Bild am Sonntag argues that NSA Director Keith Alexander informed Obama in 2010 about the spying on Merkel. Obama would want to know everything and would have asked to make a 'file'. The NSA said Monday, at the insistence of the White House, that Obama 'knew nothing'.

This isn't very credible. On 1 September it turned out that the NSA was overhearing calls of Brazilian President Dilma Rousseff. Obama tried to soothe the incident and claimed 'to know nothing', but the Brazilians were so angry that Rousseff canceled a state visit to the U.S. If Obama had been more alert, he would have stopped spying on allies at that point. But he did not and stayed vague ('others do it too') until it appeared that 35 state leaders are on the NSA radar.
 

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