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What Hollande’s Election Means

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Hollande’s at Presidential program can significantly slow down recovery of the European economy and worsen economic positions of France

Win of François Hollande at presidential election in France can significantly slow down recovery of the European economy form recession and worsen economic positions of the country thus facilitating lag of the French economy from German.

France has lower competitiveness than Germany. This is facilitated by high taxes, high budget deficit and high level of public debt. In 2012 public debt to GDP rate will be about 89% comparing to 85.8% in 2011. Similar dynamics requires strict measures for budget balancing which in fact is absent in Hollande’s program. That is why the new Head of State is unlikely to succeed in lowering public debt to 46.8% GDP by 2015 as indicated in his presidential election program.

According to the President’s election program budget deficit should be lowered to 3% GDP in 2013 and financial balance should be recovered by the end of term. For this purpose return to tax benefits is planned. However, dominating experience in applying tax benefits during 2008-2009 crisis shows that, in many cases, budget income losses due to their use are not compensated by advantages of such benefits. Administration of tax benefits leads to decrease of tax payment simplicity rates, thus, lowering country’s competitiveness. Benefit bet will obviously lead to substitution of labour with capital which will reduce employment and increase costs of creating new workplaces. In addition, they contribute to growth of abuse in tax system and lower project efficiency. Applying of tax benefit causes tax loss and, as result, the projects which should not be implemented in the absence of preferences become more economically advantageous provided actual subsidy on the part of the state. Thus, there are well-grounded opinions that such measures of stimulating economic growth will have long-term effect and compensate losses of budget revenues. That is, they can lead to the budget balancing, in particular, under conditions of active social policies. Here cancellation of the planned VAT increase should be added, which will cause revenues decrease. That is to say, the policy of stake at actions having unconfirmed future effect is extremely dangerous for current state of European economy.

It is obvious that implementing of the President’s program will already in 1 or 2 years make François Hollande to resort to foreign loans which will be more expensive for Paris than for Berlin. Necessary financial provision of social programs in 2013-2014 prospects will make the country’s government change its priority to budget balancing. As a result current roll to social policies is unlikely to receive support from Berlin what will obviously cause adjustments in Hollande’s future plans.

François Hollande’s plans concerning review of the European Budget Discipline Treaty formed by the former French president Nicolas Sarkozy and Chancellor of Germany Angela Merkel, will become significant problem for Eurozone. There are doubts that Europe will succeed in redirecting fiscal efforts of the European Union from austerity measures to growth. Instead of that France can obviously head movement of fringe nations relating to mitigation of austerity measures in Europe.

François Hollande’s policy provides evidence of an attempt to place bets on soft protectionism under conditions of severe competition. This is witnessed by the French President’s plans to adopt Directive on protection of public services in EU, protection of presence of local public services in rural areas, protection of marine economy and a new trade policy preventing all forms of unfair competition.

Significant doubts concerning effectiveness of the stated policy are caused by Hollande’s plans for with restrictions in bank sector with the view to eliminate toxic financial products, introduce tax for all financial operations and lower bank charges to restrict service costs charged by banks. Similar initiative will, provided its adoption by all EU Member States, change the existing system of financial flows in favour of countries which did not support it. At the G20 Summit only seven states of 20 agreed to introduce the “Tobin tax” while the rest of participants pointed at possible capital runoff to countries with more liberal tax legislation. Herewith, according to the European Commission’s forecast, introduction of the tax may slow down economic growth in alliance over a long period within 0.53%-1.76% range of GDP. At the same time positions of French banking establishments will worsen and their competitiveness will decrease having sharpened all their current problems.

An initiative relating to introduction of 75% tax for all incomes exceeding € 1 million and increasing the second in size tax to 45% comparing to the current 41%. Such approach to budget filling has already failed in Great Britain where it became reason for reducing foreign investments and significant capital runoff from the country.

Basic structural shortcomings of the French economy are high payroll taxes and labour market regulations. However, Hollande’s program does not solve neither of them while, on the contrary, offering to open series of consultations with trade unions.

According to out assessments high probability of continuing crisis phenomena in French economy and ineffectiveness of economic part in Hollande’s election program may, in the mid-term period, lead to strengthening of the ultra-right forces in the country.

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Italy’s Last Unexpected Eurosceptic Friend: Edi Rama and his “Lesson to Europe”

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On March 29, Italian and Albanian media reported the news of the arrival in Italy of a team of 10 physicians and 20 nurses from Tirana to fight the Coronavirus epidemic that has hit the country since the end of February. The medical professionals will work in Italy for one month with their expenses being covered by the Albanian government. Albanian Prime Minister Edi Rama accompanied the team of experts at the Airport “Nënë Tereza” where he read a speech in Italian that was warmly received by the media and public opinion in the neighbouring country. To many Italians, the words of the Albanian premier sounded as a sincere act of friendship given in return of the assistance provided by Italy to Albania in the last decades and especially in the aftermath of the recent earthquake of last November. Italian Prime Minister Giuseppe Conte, leader of the opposition Matteo Salvini and chief of the Protezione Civile (Civil defence Corps)Angelo Borrelli expressed their gratitude to Albania through their Social Media and public declarations. The parts of the speech that gained more media attention are those in which he underscores the selfish attitude of the other countries in the Covid-19 crisis:

“(…) It is true that all are closed within their borders and also very rich countries have turned their backs from the others. And maybe it is because we are not rich and [we are not] without memory that we cannot afford not to show Italy that Albanians and Albania will never abandon their friend in a moment of difficulty.”

In the course of last week, the Italian public opinion was strained by Germany’s and Holland’s refusal to share the economic weight of the Coronavirus crisis among EU countries through the emission of the Eurobonds. Some Italian newspapers have defined Edi Rama’s speech as a “lesson” of solidarity that a small country like Albania is giving to rich and big EU countries that cannot put aside individual interests for their collective good. The leading opposition organ Il Giornale which usually promotes anti-immigrant (including anti-Albanian) content, published on March 30th an article by the title “The great lesson of the Albanian premier to the bureaucrats of the UE” in which the author criticizes the attitude of the president of the European Commission Ursula von der Leyen for refusing to back Italy’s demands. The author declared that “the words of Edi Rama are above all a lesson of style to a class of eurocrats that (…) have shown their cynicism and their inadequacy. Italy will certainly not forget the solidarity of Tirana and the egoism of the European Union.” On March 29, the Left-oriented newspaper Open commented the news witha similar heading: “The lesson to the rich Europe from small Albania (…)”. The journalist remarked that the “Albanian premier Edi Rama, with his little big gesture has taught European leaders what it means to be part of Europe”. The same day Il Tempo presented Edi Rama’s speech as a “Lesson from Albania to Europe” stressing that while the EU is trying to find an agreement, Italy applauds Albania. The Italian edition of the Huffington Post in the article “The Albanian Lesson” emphasised the symbolic character of the Albanian assistance to Italy.

Beside the undisputable value that the Albanian medical staff will bring to Italy’s ability to curb the epidemic, the speech pronounced by Edi Rama has above all contributed to bring his and Albania’s popularity to a level that has never been so high in Italy. Edi Rama’s speech momentarily recalibrated the set of ideas through which the majority of Italians are accustomed to look at Albanians. It is hard to imagine that Edi Rama did not foresee the possibility that his words were going to be used in the Italian “internal” debate concerning the attitude of the EU toward their country. Edi Rama’s relation with Brussels has not been so keen after EU’s refusal to open membership negotiations with Albania last October. Put in front of the fact that Albania was not going to access the EU anytime soon, in the last months of 2019 Rama pushed for the constitution of a so-called mini-Schengen with Serbia and Northern Macedonia. On March 24, EU retrieved its decision to keep Albania (and Northern Macedonia) out of membership talks. However, Edi Rama probably did not want to miss the occasion for a little reprisal against the attitude of some EU member states that had damaged his internal and external credibility after turning down Albania from accession talks in October. His words certainly improved his own and Albania’s image in the neighbouring country, but at the same time he endorsed and alimented the endemic anti-EU Italian trends.

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Covid-19: Macron’s conflicting crisis communication

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2020 started in France with a strike from the SNCF national railway workers who were massively protesting against the ongoing reforms of their special pension system. This crisis shortly spread out to an important proportion of the french population, who rallied to this cause and challenged an executive power considered as elitist. Two months later, France is confronted to an unprecedented health crisis of a virus, the covid-19, that originated in china and quickly affected the whole world. Macron is therefore facing a major challenge : bring out of a crisis a country already in crisis, which no longer believes in its president.

First it is to be noted that the government was clearly walking on eggshells since the beginning of the crisis. The 4th march, the government spokesperson, Sibeth Ndiaye , wrongly stated that drastic measures such as closing schools in France was not necessary and that “French citizens should continue to live normally”.  A few days later, Emmanuel Macron went with his wife to the theatre, in order to encourage the French ” to continue to go out despite the coronavirus pandemic”. He even claimed : “Life goes on. There is no reason, except for the vulnerable populations, to change our habits of going out.”

One week later, the 12th march, the Head of State, spoke to the French for the first time since the beginning of the health crisis, in a completely different tone. “France is facing the most serious health crisis in a century”. It is with these words that Emmanuel Macron positioned himself as the leader of a war of another kind. Among other things, he announced the closure of schools (which was in complete contradiction with the most recent government communication). He also praised the welfare state, words that have hardly been heard in his voice since his election. Then the 14th march Edouard Philippe, the Prime Minister, faced with the accelerated spread of the virus and the number of people hospitalized in intensive care units, announced a reinforcement of the barrier measures of “social distancing”, with the  closure  at  midnight  of all places receiving non-essential public: restaurants, cafés, cinemas, nightclubs. The strict travel restriction for at least 15 days was announced by Macron the 16th march. A fortnight postponed by a fortnight, a concept french citizens quickly understood.

In this context, how can the French population not criticize the executive for not having anticipated this crisis? How can one feel safe when the government itself seems to be lost? In fact, quickly the public opinion stressed that public expectations during this period focused more on “masks, tests and post-crisis concerns” than on any need to see a Head of State play “Georges Clemenceau visiting the trenches”. Regarding the masks, the stocks were soon  empty  and  adding  to  the  government’s  mistake,  the French were lied to at the beginning of the crisis by saying that the masks were useless if we were not sick. Another political absurdity, is the fact that the government has allowed the first round of municipal elections, even though it has repeatedly ordered french people to “stay home.” An executive branch weakened by the former Minister of Health, Agnès Buzyn, who claimed to have warned Édouard Philippe and Emmanuel Macron as early as January of the impossibility of holding municipal elections because of the epidemic.

Today, the Head of State undertook to draw “all the consequences” of the crisis. Consequences that will probably be heavy considering all of the above. A crisis that calls into  question  globalisation,  the  European  Union,  the  welfare  state,  public  services, production chains and much more. It is clear that some things are going to change, that the president is going to have to govern as an economic crisis will severely hit the world.

That being said, if the government will manage to transform a crisis into an opportunity it is probably too early to tell. What’s certain is that he’s going to be held accountable for a faltering communication at a time where the population needs to know precisely what is going on and where are we going.

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Coronavirus Reveals Cracks in European Unity

Christian Wollny

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The European unity and solidarity stand at the precipice now: how can the members trust in each other in times of a greater peril when even during a global epidemic help is forsaken? How to convince Spain to commit to Poland’s protection from Russia, or prevent Italy from deepening its ties with China via the Belt and Road Initiative? The EU appears to be a house divided; the European unity must mean more than just travelling around visa-free. Failing to get their act together, Europeans will fall under approaches of the USA, Russia, and China, all vying for a slice of the European Cake.

Europe must come together politically – now, not after the crisis has passed. Politicians from Warsaw, Berlin, Paris, Madrid to Lisbon must unite as quickly as possible, coordinate, show the European people: we stand as one, nobody gets left behind, no one in our common European home. Remember the good of the united Europe, common values, and the most powerful have to move forward together in unison: Angela Merkel and Emmanuel Macron have to do more than just emotional appeals or the war rhetoric against the enemy named Corona. Europe must fight the virus with its common strength. This rich, diverse continent with its educated, diverse people must now prove that it is more than an economic community. Political leaders have to lead by example, or else risk losing everything that generations of statesmen and the society have so painstakingly erected: peace, stability, and friendship across a historically war-torn continent. Maybe the real pandemic is friends having been breaking apart along the way?

The EU has long not stepped forward during the ongoing Corona Crisis. While the EU usually maintains supremacy on virtually every other issue, in the case of the Corona Crisis it has been shamefully silent. Surely, health is a national issue; however, one can expect more from the entity that regulates the shape of cucumbers and the lamination of light bulbs.

Yet, in the event of a global pandemic, the EU relegates responsibility to local or regional administrations. While federal states such as Germany have been just as slow to react, leaving the organizational responsibility with local governments (and only recently nationalizing the purchase of medical equipment), other more unitary states such as France have been quicker to react.

Even the Commission President Ursula von der Leyen has admitted that the coronavirus has been underestimated by politicians. Besides appeals to member states to not shut down their borders and calls for solidarity, the EU leadership has once again showed its powerlessness during a crisis.

The Emergency Response Coordination Centre (ERCC), founded in 2013 precisely for managing a situation like the ongoing pandemic, has failed to provide Italy the help and supplies it urgently requested. European member states can utilize the ERCC to request assistance from other members, but Italy’s latest call in this crisis has remained largely unanswered by its neighbours.

It’s a free-for-all out there. Yet before we conclude the loss of European unity, let’s examine some examples of cracks in the said unity.

Everyone for Themselves?

On March 17, 2020, the EU leadership finally decided to shut down borders, effectively banning entry into the EU for foreigners — a half eternity after nine individual member states had already unilaterally decided to shut down their respective national borders. Among these member states are the Visegrád States (Poland, Hungary, Czech Republic, and Slovakia), as well as Austria. These states previously had taken unilateral action during the Migrant Crisis of 2015. In reality, this directive facilitates the reintroduction of border controls with ID checks, but implications are far more severe. The free movement of people in Europe is one of the four tenets of the EU, and it has been rendered moot during the Corona Crisis, all under the pretense of fighting the viral epidemic.

The next concern has been how member states interact with each other in handling the crisis, or rather the lack of interaction thereof. France has unilaterally announced an export ban on medical equipment, such as masks and respirators, with Germany following suit. The rationale behind these decisions was to keep medical equipment in the country and prevent opportunists from selling them abroad at unethical prices. For smaller and severely impacted countries, though, this spells a death sentence. While Italy has called upon its European allies for aid in this dark hour, the response has been meager. China, on the other hand, answered the call by sending medical equipment via shipping to Rotterdam, to be transported to Italy through Germany. Germany initially blocked the export of these masks under the guise of its new emergency law, and only after the immense pressure from the European community did it relax the law and let the shipment pass. At the same time, Austria banned entry for Italian nationals unless they prove they are corona-free with a doctor’s note.

Italy is feeling left alone, but Italians have learned to get used to this already during the Migrant Crisis of 2015 and the Financial Crisis of 2009. Yet the Chinese gesture of supplying crucial equipment has left the EU stand in the rain, and it continues to compound this feeling, with ECB’s Christine Lagarde implying that it isn’t the ECB’s responsibility to help Italy. Her comment on how it was not her job to “close the spreads” between 10-year German and Italian bonds caused the largest daily increase on record. The FTSE MIB, the Milanese stock index, dropped significantly. Solidarity may be many things, but not that. In times of crisis, Europe’s bureaucratic machinery is painfully slow.

These three examples are only the latest to prove that the European Union does not stand as united as it likes to believe. Czech Prime Minister Andrej Babis said, “We didn’t need to wait for Brussels to give us any advice,” when he announced the Czech Republic would effectively shut down public life. These cracks in unity are really showing now during a global pandemic, but, truthfully, they have been there from the start and have been widening since then.

A History of Discord

A more historic example of discrepancy in unity was the preferential treatment of the United Kingdom in terms of their financial contributions to the EU budget. The so-called “UK Rebate,” active from 1985 to 2020, ensured that the UK retained the majority of its financial contributions. Many EU member states have repeatedly sought to right this wrong, but to no avail. While certainly not the first injustice to sow discord among the member states, it was a particularly significant issue, showing the duality of treatment between larger and smaller economies in the EU.

The Greek government debt crisis demonstrated that the reversal of the previous example could be true. Greece, with seemingly criminal energy, forged its financial data to gain entry to the EU and its unlimited coffers. Only the impact of the 2009 Global Financial Crisis revealed the scam. The EU with Germany and Merkel at its helm fought tooth and nail to keep Greece solvent and in the union, much to the chagrin of hard-working Northern and Eastern members. When the UK would later declare its desire to leave the EU, it at least seemed like the EU (and again, Germany) felt personally insulted and could not wait for the UK to leave, as a form of punishment or vindication. The result is, however, a higher financial burden for the net paying members as the EU would not be expected to decrease its budget after all.

In 2015, another crisis would once again show the failure of the EU to stand united. As a myriad of migrants entered Greece and Italy illegally, unequivocally claiming asylum and short-circuiting the Dublin II Treaty, the EU remained silent for too long until Germany unilaterally decided to issue an “invitation” and really kick off the crisis. While indeed most of these migrants would (illegally) continue their paths on to Germany and Sweden, Italy and Greece had to deal with the impact of their arrival on their shores. As Germany took in more and more migrants, calls for Eastern European member states to take in their “fair” shares became louder from the very same German officials claiming this Willkommenskultur.

Even in the current time, the strife is evident. The ongoing Turkey-Greece 2020 Refugee Crisis showcases this yet again. Greece is expected to uphold the European law and protect the EU-borders, whilst German commentators decry her actions as “racist” and fascist.” Instead of shaming Erdogan, who unilaterally broke the EU-Turkey refugee deal, the European public hounds Greece. Against what next? Greeks have been very tolerant and welcoming over the years, but the situation on the Greek Isles has reached a tipping point, and again a member state is left alone. The ongoing crisis has been pushed back from the spotlight.

The Breaking of the Fellowship?

These historic examples, combined with the previously mentioned failures to aid during the ongoing epidemic, paint a less than favourable picture of the European Unity. There will be a time after Corona. But what will it look like? How can the EU turn from such distrust and egoism? Surely, national governments own primary allegiance to their electorates, their own citizens, and most governments are steering through this crisis by heavily relying on virologists and immunologists, who often quarrel with differentiating viewpoints. This explanation would work for other alliances, but the EU aims to be more than just an alliance, more than just a union of states. With everyone on the lookout only for themselves, it’s easy to forget these European ideals. Nevertheless, the appeal must now be made: Don’t Forget Europe!

The European unity and solidarity stand at the precipice now: how can the members trust in each other in times of a greater peril when even during a global epidemic help is forsaken? How to convince Spain to commit to Poland’s protection from Russia, or prevent Italy from deepening its ties with China via the Belt and Road Initiative? The EU appears to be a house divided; the European unity must mean more than just travelling around visa-free. Failing to get their act together, Europeans will fall under approaches of the USA, Russia, and China, all vying for a slice of the European Cake.

Europe must come together politically – now, not after the crisis has passed. Politicians from Warsaw, Berlin, Paris, Madrid to Lisbon must unite as quickly as possible, coordinate, show the European people: we stand as one, nobody gets left behind, no one in our common European home. Remember the good of the united Europe, common values, and the most powerful have to move forward together in unison: Angela Merkel and Emmanuel Macron have to do more than just emotional appeals or the war rhetoric against the enemy named Corona. Europe must fight the virus with its common strength. This rich, diverse continent with its educated, diverse people must now prove that it is more than an economic community. Political leaders have to lead by example, or else risk losing everything that generations of statesmen and the society have so painstakingly erected: peace, stability, and friendship across a historically war-torn continent. Maybe the real pandemic is friends having been breaking apart along the way?

From our partner RIAC

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