No deal is often better than a bad deal. Not with Brexit


August 6, 2018

No deal is often better than a bad deal. Not with Brexit–Soft BREXIT,says The Economist

Britain’s dangerous bluff betrays a misunderstanding of its negotiation with Brussels

 Print edition | Leaders

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IN MOST negotiations, the maxim that “no deal is better than a bad deal” makes perfect sense. If you are buying a car, you must be ready to walk away or the seller has you over a barrel. The way to drive a hard bargain is to persuade him that he must offer you a good deal or there will be no deal at all.

Theresa May has made this commonsense principle the foundation of her talks with Brussels over Britain’s exit from the European Union. “No deal for Britain is better than a bad deal for Britain,” she said in January last year, setting out her red lines. With less than eight months until Britain is due to leave the EU, and only about four months left to reach an agreement on the terms of its exit, her government is still stressing its readiness to depart with no deal in place.

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It is time to drop the pretence. Leaving without a deal was never a wise option. The government ought to have spent the past two years steering the public through the painful trade-offs of leaving the EU. As we have argued, Britain’s interests are best served by a “soft Brexit” that preserves markets and security. Instead, big-mouth ministers have kept expectations sky high, claiming that the deal “will be one of the easiest in human history” and that “there will be no downside to Brexit”.–The Economist

 

The trouble is that Brexit is nothing like buying a car. In most negotiations “no deal” means sticking to the status quo. If you are not prepared to pay the asking price, you can walk away none the worse and try somewhere else. The Brexit talks are different. If no deal is reached Britain will not maintain the status quo of its EU membership, but find its links to the continent abruptly and acrimoniously broken off. The metaphor is not buying a car, it is buying a parachute—having already leapt out of the aeroplane. “Walking away” would land Britain in a situation so calamitous that it should not even be on the table.

A no-deal outcome would be bad for the EU, too, particularly Ireland, whose small, open economy is closely linked to Britain’s. But Britain would be hurt most by a hard landing. Trading with the EU on the terms of the World Trade Organisation, which would raise both tariffs and regulatory barriers, would reduce Britain’s GDP by 4% within five to ten years, according to the IMF. The EU’s GDP would fall by about 1.5%. Worse still—again, for everyone, but chiefly for Britain—would be the turmoil from leaving without agreements in place over everything from airline safety to the transfer of radioactive material. The supply of such essentials as food and medicine could be disrupted, too (see article).

A hard landing

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Boris Johnson–The Ambitious Tory Iago

For this reason, the EU has never taken seriously Mrs May’s claim that Britain is ready to walk away from the negotiating table. It sees her threat as a bluff—and it is right, judging by the lack of preparation in Britain for a no-deal outcome. Even with extensive (and expensive) planning, leaving the EU without a deal would have been difficult. As things stand, almost no work has been done to prepare for such an eventuality. Lately, Britain has taken to outlining desperate-sounding plans to stockpile medicine and set up electricity generators. Chaos would be hard to avoid.

Yet, although the EU’s negotiators in Brussels do not buy it, Mrs May’s slogan that “no deal is better than a bad deal” has struck a chord with the voting public. As the talks have dragged on and the EU has extracted concessions, such as a promise by Britain to pay a large exit bill, the desire to walk away has only grown. Polls show that nearly twice as many Britons would leave the EU with no deal as would support a compromise along the lines Mrs May proposed last month. By this logic, her eventual settlement with Brussels, if she reaches one, will look even more like a bad deal because Britain will have to give more ground. Many voters will thus quote the prime minister’s own slogan back to her, and argue to crash out.

The government is trapped by its own rhetoric. The louder it shouts in Brussels that it is ready for no deal, the more it emboldens voters and Brexiteer MPs to call for just such an outcome. Yet the more the government argues at home that Brexiteers should avoid the miseries of crashing out by embracing Mrs May’s compromise, the more it convinces Brussels that, except as a disastrous accident, “no deal” is not credible.

It is time to drop the pretence. Leaving without a deal was never a wise option. The government ought to have spent the past two years steering the public through the painful trade-offs of leaving the EU. As we have argued, Britain’s interests are best served by a “soft Brexit” that preserves markets and security. Instead, big-mouth ministers have kept expectations sky high, claiming that the deal “will be one of the easiest in human history” and that “there will be no downside to Brexit”.

Mrs May has belatedly come to accept the need for compromise—to the fury of a small coterie of hardline Brexiteers who would sooner crash out of Europe, kamikaze-style, than maintain any kind of obligation to the EU. The prime minister’s continued claims that Britain can simply walk away play into their hands. She must cease such talk. With a bit more compromise on both sides, a deal is reachable. Britain must seize that parachute before it is too late.

This article appeared in the Leaders section of the print edition under the headline “No ordinary deal”

The British History of Brexit


August 1, 2018

The British History of Brexit

by
My main worry is the loss of the chance for Britain to help shape the political future of Europe. The organization Britain will be leaving is far from marching confidently ahead to political union. It is riven with conflict. German Chancellor Angela Merkel is almost as powerless as May; neo-fascists are in, sharing, or close to power in several European countries. Almost the entire weight of the European project rests on the shoulders of French President Emmanuel Macron. It would have been good to have Britain by his side, rather than drifting out to the Atlantic.”–

It is now all but certain that Britain will leave the EU in March 2019 without a workable divorce settlement. The only question is whether this outcome will be the economic catastrophe that most observers fear.

 

LONDON – Since June 23, 2016, when 52% of British voters backed withdrawing from the European Union, the “Brexit” debate has been tearing British politics apart. Although the Brexit referendum was non-binding, then-Prime Minister David Cameron’s government, expecting a vote in favor of “Remain,” had promised to honor the result. Britain, late to join the EU, will be the first member state to leave it, with the exit date set for March 2019.

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Remainers alternate between blaming Cameron for his recklessness in holding the referendum and his incompetence in managing it, and castigating the Brexiteers for swamping the voters with lies. At a deeper level, the Brexit vote can be seen as part of a transatlantic peasants’ revolt, making itself felt in France, Hungary, Italy, Poland, Austria, and of course the United States. Both explanations have merit, but both ignore the specifically British roots of Brexit.

Britain had stood alone against a Hitler-dominated continental Europe in 1940, the moment of recent history recalled with most pride. Years later, Margaret Thatcher voiced a common British sentiment in her usual emphatic manner. “You see,” she once said to me, “we visit, and they’re there.” Despite former Prime Minister Tony Blair’s stated intention, Britain was never “at the heart” of Europe: it was. In their 42 years in the EU, the British have always been an awkward, Euroskeptical partner. Approval of membership has only briefly been above 50%, and by 2010 was dipping below 30%. A referendum back then most likely would have resulted in an even bigger majority for leaving.

The United Kingdom did not sign the 1957 Treaty of Rome, which joined the EU’s six original members – Germany, France, Italy, the Netherlands, Belgium, and Luxembourg – in the European Economic Community. True to its traditional policy of divide and rule, it organized the seven-member European Free Trade Association as a counterweight in 1960.

But the UK stagnated, while the EEC prospered, and Britain applied for entry in 1963. Britain’s motive was mainly economic – to escape the EEC’s external tariff against British goods, by joining a more dynamic free-trade area. But the motive of preventing the formation of a political bloc was never absent, and ran counter to the European founding fathers’ dream of a political union. In the end, French President Charles de Gaulle vetoed the UK’s membership bid, viewing Britain as an American Trojan Horse.

Remainers conveniently forget that when Britain voted in 1975 to remain a member of the EEC – after joining in 1973 – the referendum was based on the lie that membership had no political implications. In fact, the EU’s founders, especially Jean Monnet, saw ever-deeper economic union as a way to forge ever-deeper political union. In 1986, Thatcher signed the Single European Act (which set the objective of establishing a single market), apparently believing that it was only an extension of free trade in goods to services, capital, and labor.

But Britain’s semi-detached status was confirmed by the Maastricht Treaty of 1992, under which Thatcher’s successor, John Major, obtained (together with Denmark) an exemption from the requirement to join the euro. More obviously than anything preceding it, the single currency was a touchstone of willingness to proceed toward political union. After all, as the events of 2008-9 showed, a common currency without a common government cannot be made to work.

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In the wake of the Brexit decision, Cameron’s hapless successor, Theresa May, has been caught between the demands of Brexiteers like her erstwhile Foreign Secretary, Boris Johnson, for “control of our borders” and the fears of the Remainers concerning the economic and political consequences of leaving. She hopes for an exit from the EU whereby Britain would retain the benefits, but avoid the costs, of membership.

This hope is embodied in the government’s just-published White Paper, “The Future Relationship between the United Kingdom and the European Union.” In it, the government seeks an “Association” that would leave Britain within the EU’s external tariff area for all trade in goods made in Britain and the EU, but free to conclude its own free-trade agreements with everyone else.

The single market in services would be replaced by a special agreement allowing EU clients unrestricted access to London’s financial services, while avoiding a common regulatory system. A new “framework for mobility” would aim to continue to “attract the brightest and the best, from the EU and elsewhere,” while curtailing (in unspecified ways) EU citizens’ freedom to work in Britain.

Nothing is more certain than that the White Paper’s jejune attempt to have it both ways will fail to survive serious scrutiny on either side of the Channel. And that means that Britain will leave the EU in March 2019 without a workable divorce settlement. The only question is whether this outcome will be the disaster most observers fear.

I am unpersuaded by the Remain argument that leaving the EU would be economically catastrophic for Britain. The loss of settled EU arrangements would be balanced by the chance for Britain to rediscover its own way, not least in fiscal and industrial policy. Experience suggests that the British are most resilient, most inventive, and happiest when they feel in control of their own future. They are not ready to give up their independence.

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My main worry is the loss of the chance for Britain to help shape the political future of Europe. The organization Britain will be leaving is far from marching confidently ahead to political union. It is riven with conflict. German Chancellor Angela Merkel is almost as powerless as May; neo-fascists are in, sharing, or close to power in several European countries. Almost the entire weight of the European project rests on the shoulders of French President Emmanuel Macron. It would have been good to have Britain by his side, rather than drifting out to the Atlantic.

*Robert Skidelsky, Professor Emeritus of Political Economy at Warwick University and a fellow of the British Academy in history and economics, is a member of the British House of Lords. The author of a three-volume biography of John Maynard Keynes, he began his political career in the Labour party, became the Conservative Party’s spokesman for Treasury affairs in the House of Lords, and was eventually forced out of the Conservative Party for his opposition to NATO’s intervention in Kosovo in 1999.

Trump–The Demolition Man and an Upscale Archie Bunker


June 12, 2018

Trump–The Demolition Man and an Upscale Archie Bunker

by John Cassidy@www.newyorker.com

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Donald Trump hasn’t changed. The many biases and misconceptions that he has about the United States and its place in the world go back as far as 1990, when an interviewer from Playboy asked him about the first thing he would do if he were elected President. “Many things,” Trump replied. “A toughness of attitude would prevail. I’d throw a tax on every Mercedes-Benz rolling into this country and on all Japanese products, and we’d have wonderful allies again.” A President Trump, he went on, “wouldn’t trust our allies; he’d have a huge military arsenal, perfect it, understand it. Part of the problem is that we’re defending some of the wealthiest countries in the world for nothing . . . . We’re being laughed at around the world.”

This clearly wasn’t a man who had studied much history, beyond perhaps the volume of Hitler’s speeches that his former wife Ivana once claimed that he kept by his bed. He seemed blissfully unaware of how, after the Second World War, the U.S. used its military and economic power to create an open international economic system in which American multinational companies such as Ford, General Motors, and I.B.M. were guaranteed a growing and prosperous market. And he seemed similarly clueless about the role that multilateral institutions like NATO, the G-7, and the International Monetary Fund played in extending and perpetuating American power.

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If Trump’s worldview has any consistency, it is as the ideology of a certain type of parochial, embittered, outer-borough New Yorker, an upscale Archie Bunker. The first great misfortune that befell the U.S. and its allies came in November of 2016, when this small-minded parvenu was elected President. The second came earlier this year, when Trump belatedly realized that he didn’t have to surround himself with wiser and more knowledgeable people who could restrain his impulses. He replaced H. R. McMaster, the national-security adviser, and Gary Cohn, the head of the National Economic Council, with John Bolton and Larry Kudlow, two wizened conservative talking heads who both know their role, which is to parrot whatever nonsense Trump comes up with on any given day.

On Saturday, Trump once again made a stunning display of his ignorance. Before departing early from the G-7 summit in La Malbaie, Quebec, to fly to Singapore, he issued a preposterous threat to cut off all U.S.-Canadian trade if the Canadians responded to his imposition of tariffs on Canadian steel and aluminum goods entering the United States by levying similar duties on some American goods entering Canada. At a press conference that Justin Trudeau, the Canadian Prime Minister, held to close the summit, he was inevitably asked whether his government would go ahead with the retaliatory tariffs despite Trump’s barking. “I have made it very clear to the President that it is not something we relish doing, but it is something that we absolutely will do,” Trudeau said. “Because Canadians, we’re polite, we’re reasonable, but we also will not be pushed around.”

In diplomatese, Trudeau’s statement was polite but firm. (He also said that he stood ready to resolve the trade dispute in consultation with Trump.) But when Trump watched, or got wind of, the press conference on Air Force One as he flew to Singapore, he flipped out and fired up his Twitter account, describing Trudeau as, “Very dishonest & weak,” and adding, “Our Tariffs are in response to his of 270% on dairy!” He also said that he had ordered the U.S. representatives on the ground to not endorse the G-7 communique that they had previously agreed on.

Far from trying to talk Trump around, or clear up the mess that the President had created, Bolton and Kudlow made matters worse. On Saturday afternoon, Bolton tweeted out the most talked-about image from the G-7 meeting, in which a seated Trump is being confronted by Angela Merkel, the Chancellor of Germany, and Emmanuel Macron, the President of France. “Just another #G7 where other countries expect America will always be their bank. The President made it clear today. No more,” he wrote.

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On Sunday, Kudlow said on CNN’s “State of the Union” that Trudeau “kind of stabbed us in the back,” and added, “It was a betrayal.” Another Trump aide, Peter Navarro, who is a self-styled trade hawk, told Fox News, “There’s a special place in hell for any foreign leader that engages in bad-faith diplomacy with President Donald J. Trump and then tries to stab him in the back on the way out the door.”

The invocation of Weimaresque rhetoric to describe a trade dispute with America’s closest neighbor was something to behold. But in geopolitical terms, it wasn’t even the most provocative thing that Team Trump did over the weekend. Before, during, and after the G-7 summit, the U.S. President called for Vladimir Putin’s Russia to be allowed to rejoin the group, and sought to downplay the reason that the country got kicked out in the first place—Putin’s decision, in 2014, to invade Crimea and destabilize eastern Ukraine.

“Something happened a while ago where Russia is no longer in,” Trump said, at a press conference on Saturday. “I think it would be an asset to have Russia back in.” He didn’t dwell on Putin’s aggression further, other than to say that questions about it should be addressed to Barack Obama, who “allowed Russia to take Crimea. I may have a much different attitude.”

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Really? At this stage, Trump’s bromance with Putin is so obvious that it has turned into something of a joke. Guy Verhofstadt, the former Prime Minister of Belgium who is now a powerbroker in the European Parliament, tweeted out the viral G-7 photo, and suggested a caption for what Merkel was saying to Trump: “Just tell us what Vladimir has on you. Maybe we can help.” Putin, for his part, said he would welcome a summit meeting with Trump in the Oval Office.

It is possible, of course, that Putin doesn’t have anything on Trump, and that Trump has simply had a lifelong affection for ruthless, authoritarian figures that overwhelms any actual knowledge he may have picked up in the past seventeen months about the benefits of Atlanticism, a liberal trading order, or anything else. Back in that 1990 Playboy interview, in addition to expressing his protectionist beliefs about the economy, he criticized Mikhail Gorbachev for allowing the Soviet Union to break up and praised the leaders of China for putting down the Tiananmen Square demonstrations “with strength.”

This side of Trump—the wannabe strongman—has always been there. But the truly alarming thing is how few restraining influences it now faces. Defense Secretary James Mattis, who has maintained a steadfast support for NATO and the Atlantic alliance more generally, appears to be about the only one left. The Vice-President, the Secretary of State, and the Secretary of the Treasury are all Trump toadies. John Kelly, the White House chief of staff, seems to be a busted flush. The Republican leadership on Capitol Hill is AWOL. And Fox News, which is Trump’s main source of information, is a Trump echo chamber.

And so we go to Sentosa Island, in Singapore, where the North Korean boy autocrat awaits. After Trump’s behavior in the past few days, the world will be watching nervously.

  • John Cassidy has been a staff writer at The New Yorker since 1995. He also writes a column about politics, economics, and more for newyorker.com.

  • Here’s a who’s who of the people pictured (pic above), and where they stand on the trade row that defined the summit.

    1. Donald Trump, US President

    Mr Trump shocked America’s allies – namely the EU, Mexico and Canada – when he recently announced a 25% tariff on imports of steel and 10% on aluminium from these countries. They are all threatening retaliatory measures and the rift overshadowed the summit, leaving the American president isolated at times. Mr Trump departed before the other leaders, and complained that America was “like the piggy bank that everybody is robbing”.

    He then tore into Canadian Prime Minister Justin Trudeau in a pair of tweets, calling him “very dishonest and weak” and attacking his “false statements” after Mr Trudeau reasserted his strong opposition to the US tariffs in a news conference.

    2. John Bolton, US National Security Adviser

    It’s been just three months since he was appointed President Trump’s top security adviser but John Bolton has already made an impact. One of the President’s arguments for the tariffs is on “national security grounds” – a view Mr Bolton has stridently backed.

    3. Kazuyuki Yamazaki, Japanese Senior Deputy Minister for Foreign Affairs

    Promoted to the post in July 2017, he recently led a Japanese delegation to Pakistan and took part in joint talks between Japan, China and South Korea in Seoul about a proposed free trade agreement.

  • 4. Shinzo Abe, Japan’s Prime Minister

    He has come under increased pressure to join retaliatory measures against America’s tariffs. This puts him in a difficult position – he has tried hard to cultivate a warm relationship with President Trump and the two are said to have met at least 10 times since he was elected to the White House.

    5. Yasutoshi Nishimura, Japanese Deputy Chief Cabinet Secretary

    The MP from Japan’s governing party once worked in the ministry of international trade and industry.

    6. Angela Merkel, German Chancellor

    She has been at the forefront of talks to try to resolve differences at the summit, as is clear in this photo. Mrs Merkel apparently floated an idea to set up a mechanism to resolve trade disputes between the US and its allies on Friday. Asked during the summit about her relationship with President Trump, Mrs Merkel said the two leaders did not always agree but could talk to each other: “I can say that I maintain a very open and direct relationship with the American president.”

    7. Emmanuel Macron, French President

    He engaged in a Twitter spat with President Trump over the tariffs hours before the summit – leading some to question whether the blossoming “bromance” between the two was over. Despite this, they were seen to be on good terms, and President Macron’s team said his talks with Trump were “frank and robust”. However, following Mr Trump’s online outburst against Mr Trudeau, the French president issued a statement that “international co-operation cannot be dictated by fits of anger and throwaway remarks”.

    8. Theresa May, UK Prime Minister

    In a telephone call last week, she told President Trump she found the US tariffs “unjustified and deeply disappointing”. But she also struck a more conciliatory tone at the summit, urging fellow leaders to step back from the brink of a possible trade war.

    9. Larry Kudlow, Director of the US National Economic Council

    Mr Trump’s top economic adviser has defended the new tariffs and said his boss should not be blamed for trade tensions. After the summit, Mr Kudlow told CNN that the president and his team had gone to the summit “in good faith” but that Mr Trudeau had “stabbed us in the back” in his news conference.

 

 

 

Kant Goes to Berlin


January 7, 2018

Kant Goes to Berlin

https://www.project-syndicate.org/blog/kant-goes-to-berlin

by Michael G. Heller

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I can slip into this unique meeting of a group of European policymakers with Immanuel Kant only because I am an intern with training in stenography who is discreet and presentable and good at making tea and arranging chairs.

My boss at the Ministry (who is not allowed entry and will be so jealous of me!!) was asked at short notice to organize the reunion which will explore in the broadest possible terms an outline of the country’s philosophical stance on Fiscal Union. Someone at the European Commission is insisting we find a historical defence of the institutions and procedures of the new macro surveillance mechanism to deploy against “cheap criticism” of the democratic legitimacy of EU institutions.

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The world’s leading thinkers and policymakers examine what’s come apart in the past year, and anticipate what will define the year ahead.

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Mario Draghi is here. So is Jens Weidmann. Guido Westerwelle has at the last minute invited Radoslaw Sikorsky who happens to be visiting Berlin today.

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Chancellor of Germany–Angela Merkel–An Intellectual in her own right

Schäuble is in a hurry. He whispered to Chancellor Merkel that time is short, they should push on. Merkel would have liked to wait for an agreeable atmosphere to settle upon the room. She changed her mind, however, when she overheard Immanuel Kant muttering that “progress in time determines everything and is not itself determined, and every transition in perception to something that follows in time is a determination of time”. Kant arrived punctually, and has finished his tea. It would be advisable to begin discussion while the caffeine still circulates through whatever remains of his veins.

Merkel:  Ladies and Gentleman…

Wow! She is talking directly to *me*. I am the only other lady in the room! Wow!

Merkel:  The German government has always made it clear that the European debt crisis is not to be solved with a single blow. There is no such single blow…

Schäuble:  All quick solutions, like printing money or collectivizing our liabilities without a common finance policy, are the wrong solution…

Merkel:  Thank you Wolfgang. As I was saying, I hope our partners understand we are not willing to trade concessions such as bond-buying, joint debt-issuance and sovereign bail outs. This is not about give and take. The precondition of continuation with the single currency is that sovereignty in fiscal policy be delegated to European institutions. So, where today we have only loose agreements we need in future to have legally binding regulations.

Schäuble:  It does not make any economic sense to start endlessly pumping money into stability funds, nor starting up the ECB printing press. This would create disincentives for countries to carry on consolidating and reforming. Piling on more debt now will stunt rather than stimulate growth. We need to take big steps to get Fiscal Union done. It was not possible politically in the 1990s but the crisis shows we need it now. That is why crises are also opportunities. We can get things done that we could not do without the crisis. Do you agree Prof Kant?

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Immanuel Kant

Kant:  The only way for the philosopher, since he cannot assume that mankind follows a rational purpose of its own in its collective actions, is for him to attempt to discover a purpose in nature behind this senseless course of human events. An organ which is not meant for use or an arrangement which does not fulfill its purpose is a contradiction in the teleological theory of nature. This purpose of nature can be fulfilled only in a society which has not only the greatest freedom, and therefore a continual *antagonism* among its members, but also the most precise specification and preservation of the limits of this freedom. The highest task which nature has set for mankind must therefore be that of establishing a society in which freedom under external laws would be combined to the greatest possible extent with irresistible force. It requires a perfectly just civil constitution. Man is forced to enter this state of restriction by sheer necessity.

Draghi:  Yes. And the sequencing matters… For example, it is first and foremost important to get a commonly shared fiscal compact right. Confidence works backwards. If there is an anchor in the long term, it is easier to maintain trust in the short term… It is time to adapt the euro area design with a set of institutions, rules and processes that is commensurate with the requirements of monetary union.

Kant:  Europe’s citizens should be informed, so that they may comprehend the flow of history, that the fiscal union is but the most immediate feasible step in the direction of a federation of peoples in which every state, even the smallest, could expect to derive its security and rights not from its own power or its own legal judgement, but solely from this Great Federation. However wild and fanciful this idea may appear, it has been ridiculed as such only because they thought that its realization was presented as imminent. It is the crisis, not the Germans, that have made it imminent and feasible. This crisis is the signal that nature sends to man about the current dysfunction of his institutional organs.

Sikorski:  But it is a crisis of apocalyptic proportions!!! I demand of Germany that, for your own sake and for ours, you help the eurozone survive and prosper. You know full well that nobody else can do it. I will probably be the first Polish foreign minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity. You have become Europe’s indispensable nation.

Merkel:  Radoslaw, let me assure you that is exactly why we are meeting today. I fear we are not winning the philosophical argument. It is bizarre that some people think we wish to dominate Europe. In order to win back trust, we need to do more. What is the fundamental historical argument we must make for Fiscal Union?

Westerwelle:  Sound budgeting is not a German idée fixe based on our historical experience of hyperinflation. It is in the interest of Europe as a whole. There is no time to lose. It is vital to send a clear message to markets that the eurozone is determined to end the policies of debt-making.

Schäuble:  When things get really difficult, suddenly solutions which seemed impossible become possible. The crisis represents an opportunity. I’m not saying that I enjoy being in a crisis, but I’m not worried. Europe always moved forward in times of crisis. Sometimes you need a little pressure for certain decisions to be taken. We can only achieve a political union if we have a crisis.

Kant:  This crisis opportunity is not a lucky accident arrived at by random collisions but rather reveals that nature is purposive in its parts. As in war or any systemic catastrophe, the aftermath is felt by the state in the shape of a constantly increasing *national debt* whose repayment becomes interminable. And in addition, the effects which an upheaval in any state produces upon all the others in our continent, where all are so closely linked by trade, are so perceptible that these other states — Germany and France — are forced by their own insecurity to offer themselves as arbiters, albeit without legal authority, so that they indirectly prepare the way for a great political body of the future, without precedent in the past.

Schäuble:  This is true. We achieved monetary union, in the short term we want fiscal union, and in a larger context naturally we need a political union… Yet the Mediterranean countries will not become German, and Europe will not be speaking German.

Kant:  Although this political body exists for the present only in the roughest of outlines, it nonetheless seems as if a feeling is beginning to stir in all its members, each of which has an interest in maintaining the whole. And this encourages the hope that the highest purpose of nature, a universal *cosmopolitan* existence, will at last be realized. If we trace the influence of the Greeks upon the shaping and mis-shaping of the body politic… we shall discover a regular process of improvement in the political constitutions of our continent. We must always concentrate our attention on civil constitutions, their laws, and the mutual relations among states, and will then notice that a germ of enlightenment always survived, developing further with each revolution.

Weidmann:  I’m with you Prof Kant. Right now we’re talking about the EU treaty and I don’t see how you can build trust in a system that violates laws. I am president of an institution which is bound by a legal framework. We should respect the division of labour in a democracy. This has nothing to do with pragmatism or dogmatism. You won’t solve the crisis by reducing incentives for the debtor governments to act. It’s really an absurd debate in which we are telling institutions: ‘don’t care about the law’. In any model you must penalize rule violations. In the Maastricht model, the rules would be the stability and growth pact, with automatic sanctions for violations and the no bail-out clause. In the fiscal union model you also need strict rules for deficit and debt. If you breached those rules you would need to delegate your national sovereignty on fiscal policy to a supranational level. I think the true question at the heart of this is: are governments, parliaments, and *people* ready to accept a supranational level, a European level that assumes the ultimate responsibility for fiscal policy, at least in case of a breach of the rules?

Kant:  If the law is such that a *whole people* could not possibly agree to it (for example if it stated that a certain class of subjects must be privileged as a ruling class) it is unjust; but if it is at least possible that a people could agree to it, it is our duty to consider the law as just, even if the people is at present in such a position or attitude of mind that it would probably refuse its consent if it were consulted… in a referendum, for example.

Weidmann:  And, furthermore, it’s not about being more German or not being German. Fiscal solidity is not only a German issue, and the crisis has clearly revealed its importance as the basis of financial stability and political stability.

Draghi:  I agree. On my appointment as ECB president a British newspaper worried “the euro could be felled by an Italian trying too hard to be a German.” I mean it’s just absurd…

Kant:  Take no notice, Mario. They probably meant another country whose name begins with ‘G’. Germany is a successful country. All this fuss about budget sovereignty! In times past we lost our cities not just our deficits. Because I’m forced to live in Russia I can see things as an outsider. I see that, after wisely moving away from corporatism, Germany and like-minded northern European countries have consolidated as the world’s sustainably strongest and most competitive economies. The BRICS will at some stage inevitably crash against or only slowly clamber over internal institutional roadblocks. Germany already has good institutions *and* the right economy. If the Great Federation is modeled on impersonal non-discriminatory legal-procedural process then it can also be sold to the German people as their victory to be proud of. The voters are bound to like it.

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Max Weber

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Jurgen Habermas

Merkel:  Since we’ve drifted to the question of democracy I would like to mention that we are planning another meeting, this time with Max Weber and Jurgen Habermas, who have opposing views on the present democracy debate in Europe.

Weidmann:  I think Habermas disagrees with our idea for taking away the budgetary privileges of national parliaments.

Kant:  It sounds like the makings of a first-rate quarrel. Can I come too?

The meeting finishes. As intern, I busy myself helping everyone to find their way out of the room without mishap. I give them each my card — discreetly — and tell them what a pleasure it has been. Angela says to me “see you at the next meeting then”, which means I can truthfully tell my boss I will be expected to attend. The Chancellor expects it.

Italic Credits:  Kant: Political Writings, The Guardian, New York Times, Der Spiegel, Financial Times, The Economist, Reuters, Google

Unfinished business in Berlin: Why Angela Merkel deserves to win Germany’s election


September 10, 2017

Unfinished business in Berlin

And why she must become bolder in her (almost inevitable) fourth term

https://www.economist.com/news/leaders/21728618-and-why-she-must-become-bolder-her-almost-inevitable-fourth-term-why-angela-merkel-deserves

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Angela Merkel; Germany’s Great Liberator and Towering European–She deserves to win a Fourth Term

Success will partly depend on Mrs Merkel picking the right partners in government. A continuation of the present grand coalition with the SPD threatens yet more sleepy stasis. Instead she should team up with the free-market Free Democratic Party and the Greens—who are wise on Europe and tougher on Russia. Such a coalition would stand a chance of shaking the country up. As its leader, the hesitant Mrs Merkel might even become the chancellor who surprised everybody.–The Economist’s editorial

TO HER many fans, Angela Merkel is the hero who stands up to Donald Trump and Vladimir Putin, and who generously opened her country to refugees. To others, she is the villain whose ill-thought-out gamble on immigration is “ruining Germany”, as Mr Trump once put it, and whose austerity policies laid waste to southern Europe.

The fans are closer to the truth. Her country has indeed done well under her leadership and the world been better for her steady hand. But during three terms in office, Mrs Merkel has not done enough to prepare Germany for the future. If her many years at the top are to be viewed as more than merely sufficient, she must use her fourth term to bring about change.

A steady hand in a turbulent world

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Germany’s Chancellor with Canada’s Favorite Son, Canadian Prime Minister Justin Trudeau

There is little doubt that Mrs Merkel and her Christian Democratic Union are coasting towards victory when Germany votes on September 24th. That is partly owing to the lacklustre Martin Schulz, her Social Democratic Party (SPD) rival. His party’s domestic policy is undistinctive and his foreign policy barely credible. He has also failed to put the chancellor on the spot. Their debate on September 3rd was more like the negotiation of a new “grand coalition” than a clash of ideas.

But her imminent victory also reflects how Germany has prospered since 2005, when Mrs Merkel took office (see Briefing). Unemployment has fallen from 11.2% to 3.8%; wages are rising; consumer confidence is at a high. The chancellor has stood by the labour-market reforms introduced by Gerhard Schröder, her SPD predecessor—though she has not extended them. She has provided stable and unideological political leadership. German society has become more open and relaxed on her watch; she allowed, for instance, a vote on gay marriage even though she personally opposed it.

And in trying to cope with the euro crisis and the influx of refugees from the Middle East and north Africa, Mrs Merkel has proved to be the indispensable European. Beyond that, she persuaded Germans that their country should take on more of the responsibilities its size demands but its history makes difficult. At summits she is a calm, well-informed presence, helping to broker European sanctions against Russia over its invasion of Ukraine, and the Paris climate accord. Germany is also taking on international burdens, with troops in Afghanistan, Mali and Lithuania, a scale of deployment unthinkable a decade ago. Her commitment to NATO’s target for defence spending of 2% of GDP speaks of a country growing up in the world.

Yet, for all this, Mrs Merkel has often governed on the “easy” setting, especially in her policies at home. She has enjoyed a host of advantages. Mr Schröder’s reforms made German workers competitive. The euro, raw materials and borrowing have all been cheap for much of her chancellorship, too. Emerging economies such as China cannot yet make the things Germany does (like luxury cars), so they import them. Germany has the second-oldest population in the world, but its baby-boomer bulge is largely still of working age. The country has been living through a golden age.

Image result for angela merkel standing up to Donald Trump and Vladimir Putin

She is a Giant among Men–with Guts and Strong Convictions

The trouble is that none of the factors that brought this about is permanent. Mrs Merkel had a chance to prepare the country for the future. She has squandered it. Her government’s obsession with balanced books has led it to invest too little. The net value of German infrastructure has fallen since 2012. Since 2010 the country’s broadband speed has fallen from 12th to 29th in the world. New industries like the internet of things and electric cars are underdeveloped. The mighty German automotive industry took a bad gamble on diesel engines, and is now mired in allegations of faked emissions tests.

Little has been done to prepare Germany for its demographic crunch. Mrs Merkel’s outgoing government not only reversed a raise in the retirement age, but cut it to 63 for some workers and introduced a “mothers’ pension” for women who took time off to care for children before 1992, benefiting a generation that was already well-catered for. At the same time she did little for those Germans left behind. Inequality and the use of food-banks have both risen on her watch.

When she does take big decisions, Mrs Merkel has a habit of ducking the consequences. The switch to renewable energy is proving so slow and expensive that Germany’s coal usage and carbon emissions are rising—her sudden decision to shut the country’s nuclear plants after a meltdown in Japan only made the transition harder. Having helped to hold the euro zone together through a series of weekend crises, Mrs Merkel (along with Wolfgang Schäuble, her finance minister) has stood in the way of reforms that would mitigate the next crisis. The task of integrating legions of refugees has been left primarily to cash-strapped state governments and citizens. The chancellor barely talks about them these days, having reduced arrival numbers using a murky repatriation deal with Turkey.

In the election campaign Mrs Merkel has said little to confront her compatriots with the need to reform governance of the euro, to raise investment and to prepare the economy for a revolution in the nature of work. Instead, her manifesto is vague, and her public appearances have been banal.

Action needed in Act IV

And yet Mrs Merkel could accomplish a lot in her next—and possibly last—term. She could use Germany’s budget surplus, of €26bn ($31bn) last year and rising, to invest more in human and physical capital. She could look to Emmanuel Macron of France for ideas to strengthen institutions that govern the euro and for a sense of urgency about high-tech. She could cement Germany’s foreign-policy credentials, by pressing on towards NATO’s 2% goal. Her legacy depends on it.

Success will partly depend on Mrs Merkel picking the right partners in government. A continuation of the present grand coalition with the SPD threatens yet more sleepy stasis. Instead she should team up with the free-market Free Democratic Party and the Greens—who are wise on Europe and tougher on Russia. Such a coalition would stand a chance of shaking the country up. As its leader, the hesitant Mrs Merkel might even become the chancellor who surprised everybody.

This article appeared in the Leaders section of the print edition under the headline “Angela’s unfinished business”