Thursday 27 October 2016

'State rights' is the rallying cry in battle for new Europe

Published 05/06/2014 | 02:30

State rights is new battle cry for Europe.
State rights is new battle cry for Europe.

YEE-HAH! The Confederate flag has been raised; not over Richmond, Virginia, but in Strasbourg, France. "State rights!" was the cry as the triumphant Europhobic parties, led by Marine Le Pen's National Front, celebrated their victories in the European Parliament elections. The closet confederates among us could scarce forbear to cheer.

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But forbear we did. The US Confederates may have claimed sovereign state rights but every school child knows that the civil war was really about the abolition of slavery. Historians are not so sure. In the present European context, we can all be pretty sure that the state right which most of these parties care about is the right to keep out, and kick out, immigrants.

People who take the role of EU member states seriously are in danger of being lumped in with the anti-immigrant brigade. No doubt many liberal, thoughtful American Confederates suffered the same fate when it came to slavery.

It is not as if immigration is even primarily a matter for the EU. France, on the same day the Parliament assembled, exercised its state right to send police into the camps at Calais that house people trying desperately, and quite illegally, to enter Britain.

The truth that rarely dares to speak its name is that the immigration debate is primarily a matter of colour. It is about the poor wretches in Calais, not EU citizens. The wily Nigel Farage, leader of the UK Independence Party, makes sure none of that kind of racism is allowed in party pronouncements. That leaves the European Union as the favoured target.

It is not, however, just the extreme fringes which dissemble. President Hollande also blamed Europe for his party's failures, just as Ms Le Pen was blaming it for her success. The FN wants to scrap the euro and return powers to the nation state. But what does Mr Hollande want?

Not an end to the single currency, we may assume. But he gave the clear impression that Europe was to blame for much of France's economic and political difficulties. The subtext, as in other countries, is that, if only the euro was managed a bit more loosely, all would be well.

Much of this is shadow boxing. The Hollande administration has been unable to exercise its national freedoms by way of even limited labour market reform, de-regulation and the abolition of expensive entitlements and business hugger-mugger.

The dishonesty at the heart of the debate is that, increasingly, the citizens of Europe do not know how to fund the living standards and social systems they want from the income they generate, and are encouraged to blame outside forces rather than looking closer to home.

Across most of the EU, growth is insufficient to reduce unemployment and increase incomes and the latest data show little sign of that improving. There are those who say that sufficient growth will never return. Even if they are right, there are lots of obvious, but politically difficult, things that could be done to improve on the present performance.

Large numbers of voters opted for parties that tell them these things do not need to be done. There is an easier way to bring back the 1990s. Elect us, set the national governments free (to do what is never quite clear) and all will be well. As a bonus there'll be less immigration too.

We can be proud of ourselves that immigration was not a feature of the Irish election. But the rest of the trend was very similar. Not surprisingly perhaps, since the Irish situation, and that of the other indebted countries, is more extreme than in the EU generally.

There has been a cruel fall in living standards, although there is every chance that the fall has come to an end. However, there is no prospect of a significant increase in real incomes. There is little Europe, or anyone else, can do about that, but what it can do, it should.

It could lead us to the Shangri-La of a return of the bank rescue money. The €400m a year that would save on interest payments would be very helpful, but would still only cover the scrapping of the water charges. More helpful would be an ECB decision to "do whatever it takes" until eurozone money supply and credit growth return to levels that even the Bundesbank in its heyday would have regarded as reasonable.

But it has to be eurozone money supply, not German. Alongside eurozone inflation, deficits and balance of payments as well, not national ones. There are too many unofficial state rights holding sway in this area and they tend to be the rights of the biggest states.

The rest of the necessary increase in European productivity and cost containment must come from the member states themselves: not from the ponderings of the Commission, the horse-trading of governments or the shape-throwing of the parliament. But states must be given the rights and freedoms to do so.

This is where I can find some common ground with the motley crew that assembled on the steps at Strasbourg. The rights in question do not include the right to fund living standards with borrowed money.

Europeans will have to earn future improvements in living standards from the sweat of their brows – or rather their brains; not from the largesse of the bond markets.

But they do include rights that Europe has whittled away, and which it will find almost impossible to restore. These are the rights of states to decide their own labour, social and tax regimes and to compete with each other freely for both investment and markets.

There would be minimum regulations set in Brussels, but these would be based on what is deemed reasonable for the poorest states, such as Portugal; not what can be afforded in Finland.

This would indeed be a new Europe but the motley Strasbourg crew is right about one thing – the old one cannot stand.

The EU began as an exercise, not in regulation, but in harmonisation. That was the only way to begin. Now, much of it is a monetary union. It is meant to be a fiscal union and plans to be a banking union. Such a union, if combined with traditional state harmonisation, will condemn the less productive states to permanent stagnation.

Which means the whole thing, unlike the USA, would eventually cease to be permanent.

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