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Monday, February 11, 2013

European press on the EU budget deal: Behold the birth of the Anglo-German axis


The agreement on the next long-term EU budget (which we analysed here) has been extensively commented on by newspapers across Europe. The main political story was clearly German Chancellor Angela Merkel siding with David Cameron, rather than French President François Hollande - which ultimately made the balance swing towards the group of member states calling for further cuts to EU spending. 

We have written about the need to cultivate the Anglo-German axis (particularly in light of Hollande's election as French President) several times in the past - see our recent analysis of David Cameron's EU speech, this letter we wrote to the FT, several articles in the Telegraph - and many other places. While Merkel's decision to side with London shouldn't be overstated - this is a pendulum after all - it was interesting to note the reaction in the European press.  

Let's start from Germany.
Die Welt's Foreign Editor Clemens Wergin says that even though the EU budget has been reduced for the first time in history, the big chunk of money earmarked for farm subsidies "remains the symbol of the backwardness" of EU spending. He also notes, "The UK does not stand on the margin of the EU anymore, but proved to be an important ally of the Germans."   

Süddeutsche Zeitung's Brussels correspondent Martin Winter points out that the fact that other EU leaders made an effort to satisfy Cameron's demands show that "the EU wants to keep the British at its centre."

FAZ's Brussels correspondent Hendrik Kafsack argues that the new EU budget "does not deserve the attribute 'modern'", as most of it's still spent on agriculture and structural funds in Southern member states.

Die Welt's Brussels correspondent Florian Eder and Silke Mülherr note that together "Cameron and Merkel were able to enforce an austerity budget [on the EU]", while the paper's London correspondent Thomas Kielinger says that "Angela Merkel is the trump card in the British hands."

Der Spiegel Online's Carsten Volkery describes the deal as "a triumph for the budget hawks" noting that "the [German] Chancellor backed Cameron and covered him against attacks" from Hollande and other leaders.
A very interesting comment from the Netherlands. Dutch journalist Fokke Obbema writes in De Volkskrant,
"French President Hollande explicitly positioned himself as the leader of Southern Europe [at the EU summit]. That makes it even clearer why it would be undesirable for the Netherlands if this other historic event - the exit of an EU country - were to happen. Without Great Britain, the balance of power between North and South within the EU would be disturbed."
From a French perspective, Cameron and Merkel fighting side-by-side in Brussels is far from good news - as it means that the Franco-German axis is under pressure. Le Figaro's Brussels correspondent Jean-Jacques Mével says David Cameron hit a "master stroke" at last week's summit. He writes,
"A man can take credit [for the cut in the next long-term EU budget]: David Cameron, whom many saw as already marginalised within the EU, following his decision to ask the British by 2017 whether they want to stay in the [European] Union or not. On the contrary, he goes back to 10, Downing Street, as a winner – for the frustration of French and Italians."
Interestingly, he also notes that the talks have confirmed the "paralysis" of the Franco-German axis. 

An editorial in French business daily Les Echos argues,
"Budget talks have been held hostage by a country, the United Kingdom, which is not sure that it will still be part of the [European] Union tomorrow. David Cameron had come to sabotage Europe’s general interest – and he managed to do so. Noted. But, in this case, let’s get to the bottom of things: given that the club at 27 is doomed to powerlessness, strategic reflections need to happen at the eurozone level. Yet, one would need to repair [France’s] relations with Germany for that. Because this is the other lesson from the Brussels drama: the Paris-Berlin axis is not responding anymore." 
The Anglo-German couple didn't go unnoticed in other Mediterranean countries either. Italian Professor Mario Deaglio writes in La Stampa,
"The pro-rigour Germans, in agreement with the British for once – the Berlin-London axis has in fact replaced, at least on this occasion, the traditional Berlin-Paris axis – and with the help of some Nordic countries, have pushed through the principle that the EU budget can be cut too. The word 'austerity', so far unknown, will start hovering over Brussels [EU] buildings."
Claudi Pérez, Brussels correspondent for El País, writes,
"The EU seems distracted. It walks between the old and the new regime…In the midst of this paralysis, Berlin (with London’s support) accumulates power, and a withdrawal towards the national or the intergovernmental [level] is noticed. And austerity policies remain firmly installed in the driving seat."  
And now a voice from Poland. According to Dziennik Gazeta Prawna, the outcome of the EU budget summit is proof of "a substantial shift in the balance of power in Europe", with France, once the most influential country of the Union, "finding itself on the defensive". Interestingly, the paper argues,
"The Union will head towards the free trade zone dreamed of by the British and supported by the Germans rather than the 'solidarity-driven federal structure' wanted by Paris...There is no doubt that, by imposing cuts, Germany has shown its economic strength. Berlin's dictate will be even harsher, while abundant transfers from Brussels may turn out to be only a nice memory if the Franco-Spanish-Italian-Polish club fails to improve its competitiveness."

8 comments:

jon livesey said...

An enormous amount of discussion has taken place in the past week over the exact numbers, but I don't see much discussion of the basic idea behind the EU budget.

Something like 95% of it consists of subsidies for agriculture and regions, but the evidence is that although subsidies can benefit individuals, they don't make industries any more efficient or competitive.

During the UK's thirty year dalliance with Socialism after 1945, the Government nationalised industries and the taxpayer subsidised them, but they did not become more efficient, instead becoming bywords for inefficiency and over-manning.

This isn't even unexpected. If a manager has the choice between earning money from running his business efficiently, or getting a cheque from the Government, which is easier?

In fact, in the UK, it was the non-nationalised companies, the ones who paid extra taxes to fund the subsidies for the nationalised ones, that remained efficient. Again, no surprises, since they had to be efficient to pay both their investors and the extra taxes.

And in the EU we see much the same thing. The net contributor countries tend to grow and to have GDP/head above the EU average, the net recipients the reverse.

Meanwhile, after half a century of subsidies, the recipient countries continue to have low GDP/head, mediocre education, wasteful investment in under-used infrastructure, and periodic bubble caused by cheap capital. The continued divergence between euro-zone economies has also led to record trade surpluses and deficits, which are only gradually closing, and in a bad way due to collapsing domestic demand in the importing countries.

it's time to stop arguing over ten billion here or there and start asking what the system can ever achieve.

IDRIS FRANCIS said...

"Behold the birth of the Anglo-German axis"

For once, words (almost) fail me. "Peace in our time" all over again

christina speight said...

It was bound to happen that the worm would turn in Germany. For that country is propping up the whole eurozone and with an election coming up the steadying of the budget {"cuttting" is wishful thinking but that's trhe way Merkel and Cameron will 'spin' it.

Cameron was pushing at an Open Door and Merkel was delighted to take the opportunity presented. For remember, the 27 countries have a substantial majority of net beneficiaries (as we will be reminded by the MEPs] So both Cameron and Merkel were supreme opportunists on this issue and they have both acquired handy platforms for electoral campaigning.

Anonymous said...

There are only two "sides" here:

1. The self-appointed political elite who want to force a one-world government via the EUSSR.

2. The other 500 million people in the EUSSR "member" nations who don't want this.

Anglo-GErman. Franco-German, Franco-Anglo ... Blah. Blah. Blah.

They are all just different shades of tyranny.

Anonymous said...

Don't get too excited. I am sure the German leaders have a strategy -they will use us like they did the French and then drop us when they no longer need us.

Sorry to be so cynical but I really don't think it is helpful for any particular alliances to be formed within a political union. Who are we to push for governance of others?

Rik said...

Germany needs the UK they have taken way too many basketcases (from the East) in on top of those already there from the South.

If the UK leaves, the EU is stuck with 3/4 dysfunctional economies. Possibly some in the North-East will catch up, but the South and South East will almost certainly remain a disaster. With an Euro that moves indirectly or directly more and more to a transfer union imho that would be totally unsustainable.
As at the same time Northern voters get desillusioned with the EU and will face zero growth in real income. Plus the EU is on top of the political (also voter) agenda.
Lethal combination for the organisation as a whole.
While for the UK freetrade brings the bacon the rest is probably from an economic pov loss making. And the UK hasnot like Germany climbed on top of the anthill that is the EuroZone.

And simply mismanagement. If you bring the organisation in a situation that it lacks support you know that if something serious happens like the financial crisis you come in (existential) trouble like now.
And the latter was likley to happen signs were only to miss by a blind horse or apparently a European politician. Unsustainable overborrowing, lack of competitiveness in the whole Latin-Europe; Real Estate bubbles; financial systems so linked that if one part goes wrong the whole thing would be affected and a few more. Next to a lot of not direct economic policies like on immigration. Again a blind horse could see that that would cause problems.

Fortunately Hollande is very helpful by doing and suggesting all sorts of stuff that will not be bought up North. The Norths simply have to look for alternatives. Germans are very loyal usually but they are left with effectively no choice.

In this respect I am not buying that Merkel will go as long as the measures fit in with German interests. Germany's main strategic interest is keeping the UK aboard, not winning the battle over some specific measures.
And it looks pretty clear that at the end of the day like with Greece she will have to give in even if she would see the UKs demand as blackmail.
Looks very safe to call that bluff, in the present situation if necessary. Somebody like Merkel is not playing hardball she goes for sure/safe and low risk options. it is simply part of her personality. So may be the Germans donot know it yet but they will give in at the end (as Greece shows). What she would have to give away costs no money and can be sold as democracy. The otherside of the bet is the whole thing falling apart or becoming highly unstable. Looks clear which bet she will take. Odds are simply (much more than Greece) against it.

Gosporttory said...

Fully agree with jon livesey and cristina speight. It saves me typing my response as both have saved me the trouble!

John L D said...

Whether the budget cut proves to be the high water mark of the transfer of power from democratically accountable national governments to the undemocratic institutions of the EU remains to be seen.

The European Parliament may yet vote to reverse the cuts. MEPs pay scant regard to their electorates as can be seen by the scandalous proposal to hold a secret ballot. Most have little to fear from the electoral process as voters do not understand how they exercise power or what they stand for. Besides, in terms of European policies, there has been little to choose between the major parties. Even in the UK, opposition to the general consensus on ever closer union has resulted in UKIP winning less than one sixth of the seats in the European Parliament.