Thursday, December 29, 2011

Downtime- Happy New Year

The period between Christmas and New Year always seems rather slow. The year is not yet finished, but I always feel rather reluctant to start something new, when I know it will be interrupted by yet another holiday- and also in my case, my return home to Tallinn.

It has already been the longest trip to the UK this year, albeit that I have been here only 9 days. I find that I do not feel particularly alien- why would I? Yet I can not say that I am still in touch with the zeitgeist in Britain now. There is a comfortable familiarity in returning to old haunts and seeing friends and family. Yet I am more convinced than ever that Britain as we have known it is fading away. The country I grew up in - still reflexively thinking in post-Imperial ways- has given way to a shrill, sharper and more fearful place. Whereas the price of decline in the seventies was the final loss of empire, now it seems to be the loss of ourselves. The alienation of Scotland and England seems increasingly irrevocable.

I was thinking about how the subjects of His Imperial and Royal Majesty Franz Josef might have viewed their future in 1911. At that time, Vienna was a prosperous, intellectually vibrant capital, and Budapest was a boom town, rather like Dubai today. I cannot believe that many would have thought that Serbia would be the cause of the dissolution of 700 years of Habsburg dominion. Yet within four years, Franz Josef was dead, and two years after that, so was his Empire.

London in 2011 is looking forward to Queen Elizabeth II's diamond jubilee, and also, of course hosting the XXX modern Olympic Games. 2012, despite fears of austerity, seems set to be quite a party- and of course the SNP will not make their move on the referendum, until the party is safely over, and something of a hangover has set in. By 2014, which will be the 700th anniversary of the Battle of Bannockburn, the Separatists will be preparing to bring down the curtain on over 400 years of Great Britain. As the Habsburgs have proven, longevity and success are not guarantees of survival. I will continue to advocate maintaining the common state, yet in 2012, I will also turn my attention to my country of residence. 

Estonia has had a good two decades of renewed freedom. Economically, despite the impact of the global recession, the country remains economically dynamic, flexible and increasingly prosperous. Yet still, there remains the fear that judgement on the country has not been made, but only reserved. The fear of a repeat of the invasion of 1940 remains strong. Yet, over the course of the next few years, I hope that Estonians can begin to relax a little. The growing protests in Russia against the venal, incompetent and increasingly brutal regime of the Putinistas, shows that there is hope that Russia can build a civic society and a democratic government. A liberated Russia would be a happier partner for Estonia- and indeed the whole world- but the release of Russian economic dynamism that would come from the fall of a deeply hidebound and corrupt regime could transform the economic face, not just of Russia, but Europe as a whole.

So as I look back on 2011 with generally positive feelings, I also look forward to 2012 with more hope than fear. The year of Arab liberation in 2011 may be followed by greater strides towards liberalism and further moves towards democracy across the whole planet. After years in the doldrums, I begin to think that the markets may stabilise in 2012: I certainly think there is more risk now on the upside than on the down side.

So, I look forward to seeing more friends and more places in 2012.

Happy New Year
bliadhna mhath ur
Head Uut aastat
laimingų Naujųjų Metų
Bonne année
Szczęśliwego nowego roku
sretna nova godina 
З новым годам
laimīgu Jauno gadu
srečno novo leto
la mulţi ani
šťastný nový rok
С Новым Годом
ath bhliain faoi mhaise
Щасливого Нового Року

Saturday, December 24, 2011

New steps

So thousands on the streets in Moscow... of course the health of a ninety year old Danish-Greek Prince may have drowned that out in the news in Austria-Hungary the UK.

I have nothing against the Emperor Queen. However, the tide is changing. Nothing will happen while they still live.

I wish all of us a merry Christmas, and I think 2012 may be a far better year, economically and politically than we fear now, yet I also believe that that we all need to think about what happens next.

For that we need to think... but I see little evidence that we are.    

Friday, December 23, 2011

Disunited Kingdom

As London journalists contemplate the year ahead, a great number of them have finally begun to understand the high probability that now exists that the United Kingdom will not long survive.

Few commentators, on either side of the border, seem prepared to make a principled case for continuing the common British state. Many, are increasingly inclined to welcome the idea that Scotland and the rest of the UK should part company.

However, even if you accepted the inevitability of the break up, there is little thought being given to what happens afterwards. From the Scottish perspective, the advent of independence is currently being seen as a relatively small step. However, it would not be. The economic adjustment that wold be required to stabilize the economy of newly independent Scotland would be of the same kind of order as the adjustment that was forced on the post-Communist economies of Eastern and Central Europe. The banking sector alone would need significant changes, and will be a major sticking point in the negotiations- even without taking on the full liabilities of the bankrupt Scottish banks, the Scottish government would still need to run significant deficits for at least the first decade of independence. Yet in order to maintain a currency union with the Euro, which as a new member of the EU, Scotland would be pledged to join, then deficits would need to be strictly limited. The cost would be drastic austerity. Even the alternative of maintaining a currency union with Sterling would still require significant fiscal discipline, since the Bank of England would insist that the new state would not undermine its own monetary policies. The third alternative- a fully independent Scottish Pound - implies, at least in the short term, a significant devaluation. All options are unattractive. All carry real risks for the prosperity of Scotland and the rest of the UK

If Scotland faces significant economic adjustments, the rest of the former Kingdom would face major political challenges as well. The relationship of the three remaining participants would need to be completely recast. Though people casually argue that Northern Ireland could join with the Republic, that is to ignore the bitter bloodshed that has been taking place over the past 40 years to prevent exactly such a thing from happening. The integration of Wales into the UK is closer than Scotland, but the initial  break-up would probably lead to the independence of Wales too. The result would be the end of nearly 1000 years of the gathering of the nations of Britain- the end of the British State. Internationally that removes a country that is a major support of NATO. Though people seem calm about the prospect of such a diminution of global power and influence at the moment, they may become much less so, when the reality of the end of the state leads to ends that they did not foresee and find hard to accept. The British state is woven into the ways we do things at a fundamental everyday level. Things we take for granted, the BBC, the armed forces, even the flag- all will be totally recast.

The break up of Britain will be a wrenching and often bad tempered affair, and the price will be very real. Some in Scotland argue the case that independence will genuinely liberate the country, and unlock stifled creativity. I can see no reason why it would- Scottish health will remain worse than south of the new border posts, the impact of poor diet and exercise regimes are not wished away so easily, as the spreading waistline of Alex Salmond eloquently testifies. The temptation to cock a snook at the former partners in the Kingdom will not be resisted either- and that could quickly undermine the initial goodwill.

So, Scottish Liberal Democrats should continue to make the case that the common state serves all of the peoples of the Kingdom better than a break up would. We should not be afraid to point out the reckless and unnecessary economic damage that we could do to ourselves. We should work to create a federal Kingdom that we can all respect and trust.

The coming years are going to be difficult, because selling independence is a much easier prospect that the complications of the common state. Yet even with the portly first minister at his triumphant-  rather smug- best, the majority of Scots do not want to forget the opportunities that the common state offers us. There are millions of people who are waiting to be reminded that our multi-national state remains a tolerant, open minded and - yes- even prosperous place. Though we are no longer the most powerful military, political and economic force in the world, yet our example delivers an enviable society. We are not perfect, and we should redouble our efforts to recast our society in a better and fairer way, but what we lose if the kingdom is lost is precious- it would be a profound tragedy if we have to wait until it is irrevocably gone for us to understand that.  

Thursday, December 22, 2011

Ed Balls remembered

The Shadow Chancellor of the Exchequer, the Rt Hon. Edward "Ed" Balls is a strange man. He, it is said, cries during Antiques Roadshow. Perhaps he should be more upset when he contemplates the political and economic legacy that Labour has bequeathed to the nation. Despite this slightly bizarre tendency towards the lachrymose, his reputation is uncompromising, even brutal.

Not just his reputation.

His latest journey into folie de grandeur is his invitation to Liberal Democrats- without, of course, their leader, Nick Clegg- to leave the coalition and join with Labour. 

This would be the same Ed Balls who dismissed the Liberal Democrat negotiation team in 2010 with words of one syllable. 

I think the response of the Liberal Democrats to his- hardly self-interested- invitation will be more or less the same words that he gave to David Laws in May 2010.

Just so all Labourites know, it was Ed Balls who told the Liberal Democrats that they should support a coalition with the Conservatives. It was Ed Balls who told us that there was no way that Labour would or could work with the Liberal Democrats in the national interest. It was Ed Balls who ensured that Labour would go into opposition.

As far as the Liberal Democrats are concerned, Ed Balls should stay in opposition indefinitely. 

Piers "Morgan" Moron

Private Eye is well known as a satirical magazine, equally well known is their detestation of the pudgy former editor of the Daily Mirror, Piers Morgan. Morgan, for all his later appearances on television, is a pretty discount celebrity. He was, after all, heavily implicated in the "City Slickers" scandal at the Mirror. Although he was able to escape gaol at that time, he was not able to prevent his reputation being permanently tarnished. As a result- and rightly- ever since, he has been a figure of ridicule and contempt, at least on the pages of Private Eye.

His turn as a judge on "talent" contest has been followed by another as an interviewer for CNN. always though, the results of his highly questionable activity as a British newspaper editor have been out there, waiting to trip him up.

His testimony to the Leveson inquiry was as mendacious and partial as we have come to expect from  this pustulous figure. Essentially he gave evasive half truths ( =whole lies, c. My Grandmother) and flim-flam answers to the commission. Exactly what you would expect, if you were a liar and a cheat.

This man has delighted us long enough. When, as seems inevitable, he is proven to have lied, he should face the full consequences. 

Send Morgan to gaol: he should have been there years ago.


Monday, December 19, 2011

Vaclav Havel: Pravda Vitezi

The motto of the Czechs- the truth shall prevail- has been used since the time of Jan Hus

Yet for much of that time, the ancient lands of Bohemia, Moravia and Silesia have been subjugated to other Crowns. The Czech sensibility- cynical, non conformist and intellectual- is well captured in the English word "Bohemian" and is shaped by resistance to authority. 

Since the fall of the Winter King after the battle of the White Mountain in 1620, Czech leaders have often combined these rebellious qualities. Hus himself had previously embodied some of them, and so did the nineteenth century Czech nationalist, Frantisek Palacky. The writer, Jaroslav Hasek, completely captures the Czech sensibility in his immortal character, the Good Soldier Svejk

All of which is a very roundabout way of saying that most international mourners of Vaclav Havel have not mentioned just how Czech he was. From his gruff, slightly woodwind voice with its strong Prague accent, to his complete determination to use peaceful means to speak to his enemies, Vaclav Havel was in the rich tradition of his Czech predecessors, and especially Tomas Masaryk, the beloved founder of Czechoslovakia.

As a teenager, at the bitter height of the cold war, I read his essays and letters that were smuggled past the Czechoslovak secret police- the StB- with a growing personal awareness that the Communist system was a totalitarian obscenity, if it denied such humane and wise voices. The Power of the Powerless remains a powerful testament to the moral force of the individual, both in totalitarian and democratic systems. Not for the last time, it pointed out the failings of his fellow citizens, as they mouthed the empty ritual of Communist propaganda. For Havel, feted as he later became, was not a comfortable hero. His vision of "the truth shall prevail" was rooted in an uncompromising political morality. 

As the Czechs and Slovaks bent the knee to the system, in the terrible years of "normalisation", after the crushing of the reformer Alexander Dubcek's attempts to lead the country into a more open direction during the Prague Spring, those who chose to dissent from the totalitarian norms- including Dubcek himself- were severely punished. After 1977, those who signed the Charter 77 dissident manifesto, were subjected to the full panoply of informers, harassment, imprisonment and torture. Havel, for all his international fame, was no exception. Only a few hundred signed the document, and dissidents were small in number and isolated by the full weight of Communist oppression. Havel and his friends got to know the inside of Czech prisons all too well. His letters from prison to his first wife Olga, published as Letters to Olga, are a testament to the strength of an extraordinary man- and an extraordinary woman. During his increasingly long and harsh stays in prison, he was regularly beaten, and developed TB, which was untreated for some time- a source of much of the lung problems that beset his later life, of course not mitigated by his Bohemian smoking habit. Others, with whom he was in contact, such as the journalist Ervin Motl, were treated even more harshly, and their lives were shortened even more by the torture they endured..

Even at the beginning of 1989, Vasek remained in gaol, and Olga was under the close surveillance of the StB. Yet the miracle of 1989 saw the revolution, which although nicknamed "velvet" was no less complete for all that. I had stayed in touch with support groups for Charter 77, and it still seemed, that for all the gathering tumult in Hungary and Poland that Czechoslovakia would still remain firmly under the control of the apparat. The reality, as we now know, was far sweeter.

As the demonstrations in East Germany, moved from wir sind das volk -we are the people- to wir sind EIN volk -we are ONE people- the missteps of the StB began to undermine the hated regime of Gustav Husak. The Charter 77 dissidents transmuted themselves into the Civic Forum- an echo, perhaps, of the East German New Forum- and set themselves up in the Laterna Magika theatre, a stone's throw from Vaclavske namesti- Wenceslas Square. In the course of an astonishing couple weeks, Dubcek and Havel appeared on a balcony in the square, the crowds grew beyond the capacity of the square to hold them, and finally the Communist government collapsed. Through it all came the call "Havel na Hrad"- Havel to the castle- a call for him to assume power in Prague Castle as the free leader of a free people.

It was at this time that many chose to view Havel as a kind of secular saint- an attitude which irritated him. At that time, in the inevitable cloud of tobacco smoke, he still preferred to seek out the company of those he knew he could trust, and that remained a fairly small number of people. I met him at the house of one of the Chartists in 1990, where we celebrated in beer and songs- and the inevitable cigarettes- a party that was truly Bohemian. Marta Kubisova, a singer who had been banned under normalisation, sang the song she was best known for in 1968- the prayer for Marta- with its quote from the Czech philosopher Komensky. Havel's eyes were as bright as mine as the timeless words of Czech national yearning held us spellbound in the small room.

Olga Havlova became an unconventional first lady, her office full of her throaty laughter, and she and Vasek sought to place the rapidly changing politics of Czechoslovakia within a broader moral context- not always successfully. Neither could Havel or Dubcek resist the growing divorce between the political lives of Czechs and Slovaks within the increasingly fractious Czecho-Slovak Federation. The illness and death of Olga isolated him, and though he had never wanted for female company, the Czechs were mildly shocked when he remarried relatively soon after Olga's death- and Dagmar, the actress who become his second wife, was forced to endure considerable misunderstanding and even abuse. Despite the break up of the Federation, Havel was offered and accepted the Presidency of the Czech Republic, yet to many Czechs by then his virtues were more symbolic than practically political. His own health, from this time was never sure- cancer of the lung was diagnosed, and he was forced into unpleasant and radical surgery. 

A connoisseur of "Absurdistan", Havel's humour was part of his qualities of endurance and as a writer he appreciated the absurd situations that his position and sudden fame had catapulted him into. He continued to write, and his memoirs - To the Castle and Back- contain many dryly humourous vignettes. For some years, he traveled between his homes in Bohemia and Portugal, and his large and airy flat in Prague,though this year he was clearly increasingly unwell.

In office he revelled in taking dignitaries to the various Czech pivnice which he liked in Prague- and the sense of puckish rebellion which that implied, was not the least of his Bohemian qualities. He appointed Frank Zappa as a cultural ambassador, and continued to be scornful of those who were conformist and narrow minded. For Vaclav Havel, bourgeois appearance was not necessarily the truth, and he had no need for pretence or pretension.

For, whether punished as a dissident or feted as a President, he remained entirely a writer and thinker committed to living in truth- for him, as the quintessential Czech, that ultimately the truth would indeed prevail was not a matter for debate: it was simply a question of what kind of truth it would be.

Friday, December 16, 2011

'Bye Hitch

Christopher Hitchens has died.

A brilliant polemicist, an extraordinary speaker, a thoughtful and determined contrarian. I did not agree with all he said, but the fact of his saying it was always interesting, challenging and valuable.

He stoical attitude to the approach of painful illness and death marked him out as uncompromising and even- though he would have hated the word- courageous.

He was a sparkling mind and a superb conversationalist and a determined seeker after truth, no matter what the implications of that truth.

It seems pointless to say anything further to such a determined atheist, but his idiosyncratic views will be much missed, and perhaps that is praise and recognition enough.

Sarkozy: the bunny boiler

Well, of course the British press will respond to the gale of nonsense being pushed around by the Sarkozyites. The noise of discredited British "journalists", however, is nothing serious.

What this drivel from Paris means though, is that France under Sarkozy has indeed decided that the French national interest is best served by there being not a rival to France for the affections of Berlin. The problem is that the obviously conflicted nature of the British relationship with Europe is more attractive to Berlin than Sarkozy's obsessive lurve-fest for Germany.

Germany does not want a Federal Europe.

Germany has therefore not delivered what Paris wanted, but instead of hating the thing which you love, the French have decided that "if only Britain was not around, then Germany would love us and deliver a Federal Europe": hence this absurd "declaration of dislike" against the UK. Of course the UK is financially weak, and almost all the French say is true but... the UK doesn't have to function within the dysfunctional and unfunded Eurozone and France does. So, as France faces the loss of its AAA and the UK does not, there is an inevitable annoyance. Germany needs to stand up to the plate for France but won't, but meanwhile the UK can survive without German help, at least for a while.

I think the response from everyone across the Channel is... Tough.

Sarkozy will lose power in six months. His behaviour towards the UK has been outrageous, but never mind. France usually takes a while to recognise the  value of a relationship across the Channel. So does Germany.

Anyhow the back pedaling on all sides after the inept British veto is already sidestepping the tantrum of the priapic and foolish French President. After his seeming triumph, he is discovering that every playground fight diminishes BOTH partners. So if the UK is weakened, which it is, then so is Sarkozy.

I am sure the French voters may have noticed.

Adieu Nicolas!

Thursday, December 15, 2011

What Britain could start to do next

The problem with British government policy is that the civil servants are still working to the New Labour Playbook. "Eye-catching" announcements are made, usually with recycled, rather than new money which are supposed to give the impression that the government is purposefully shaping the agenda rather than simply waiting on events. Almost always these announcements involve spending, and whenever any idea of restructuring is mentioned, the necessary retrenchment is typically ignored.

Except, of course, that Britain needs retrenchment.

The reason why so many voters now believe the welfare system needs reducing, is because they have seen that it doesn't work. Often it has created a skivers charter, and placed innumerable bureaucratic obstacles in the way of those who actually wish to get work. Huge amounts of money have been wasted.

The core of British bureaucracy, ironically enough, lies not with the spending departments but with the Treasury. As I have noted before, the over 11,000 pages of the British tax code is five times larger than the German code. It is also a make work project for tax inspectors and accountants- with billions now at stake in vested interests. Yet the cost of tax collection is nearly as bloated as the tax code itself. Over £18 billion is spent on simply collecting tax. That represents about 8% of revenue, and does not account for the roughly the same amount spent on benefits and tax credits. Essentially 15% of our taxes are squandered on the spectacularly inefficient way we collect and distribute them. This cost does not count the cost of compliance for individual tax payers and companies and the army of accountants that they need to hire.

Meanwhile the regulatory burden on small businesses is decimating our spirit of entrepreneurship. People who can not find work find it even more difficult to set up on their own.

This has got to stop.

If the coalition does one thing, it must break out of the New Labour mindset so beloved of civil servants. The tax code must be radically reformed: tax simplification would be a start, but if the UK is genuinely going to restore its competitiveness, it should seek a tax code that can be understood and complied with by simple individuals. Supply side reform is now a critical part of stimulating recovery.

In my view, the British people are increasingly cynical of government programmes that do more for the civil servants administering them than for the supposed targets of those programmes.

A radical tax overhaul will show people that they can take back control in their lives.

That is the message that Liberal Democrats should be putting across in coalition and in public.

Wednesday, December 14, 2011

Football needs a longer spoon for these particular devils

Alisher Usmanov is a pretty "controversial figure". In fact the Russo-Uzbek tycoon initially made his money through acquiring control of large parts of the Russian metal industry at a time when that industry was one of the most murderous in the gangster world of 1990s Russia. He has gone on to acquire a very diverse set of holdings in Russia and increasingly outside Russia. In the UK he recently acquired Sutton Place, the former home of JP Getty. He has also acquired a large stake in Arsenal football club.

Usmanov has been extremely close to the regime of Vladimir Putin, and although his Kommersant newspaper has not been entirely slavish to that regime, it has -in general- fully served the interests of both Putin and United Russia. Indeed earlier this week, Kommersant fired two editorial staff who has allowed the publication of stories that were highly critical towards the conduct of the disputed elections and the statements of the regime. Usmanov is and remains a loyal ally of the Kleptocracy.

Usmanov, like other Russians, has sought to use the positive publicity of being involved in football in the Premiership, or the Scottish Premier league in order to provide a certain amount of international influence and potential protection.

The fact that the British authorities still see fit to deem these individuals "fit and proper" is increasingly controversial. Mr. Usmanov's clear alliance with Putin marks him out as being no friend of Britain. In fact it also marks him out as being no friend of Russia either.

Tuesday, December 13, 2011

I don't often agree with George Monbiot, but...

The press reaction to the events of the past few days has been to smear, to misrepresent and to outright lie. As George Monbiot points out in The Guardian today, journalists are now a lickspittle bunch of toadies for their society friends. The circle of journalists is so narrow that any independent thought is being crushed by an isolationist, very right wing groupthink.

As the Daily Mail comes out with some variation on Lib Dems support for Europe taxing your granny to give you cancer shock horror and the Daily Express continue to find some spurious excuse to print a picture of Diana, it is hard not to feel a burning anger at the injustice that allows these poltroons to get away with their schtick.

Of course the Lib Dems are right to feel that Cameron played to his Eurosceptic gallery rather than the national interest when he wielded a veto that could be ignored. However we also know, as does David Cameron, that if the UK is going to recover, then the Eurozone must recover- and restructure- too. How it does this is of critical importance to Britain, and refusing to even participate in the process is an abdication of responsibility that is not only unworthy, it is positively dangerous to the UK national interest.

However that does not leave "Merkozy" in the right. The fact is that Sarkozy may have overplayed his hand too, and yet he still has no guarantees that the Germans will yet do what is now necessary to free up the ECB to act directly and to provide funding for the EFSF. Germany may have claimed European oversight over member country's finances, but it is by no means clear that they are yet ready to sanction the release of liquidity that would persuade the market that the Euro can recover. So although the Brussels summit veto has served notice of the parting of the ways, in fact there remain many potential outcomes still in play.

The fact that Nick Clegg absented himself from the yah-boo fest of the House of Commons was probably wise, and the relatively measured way that David Cameron made his statement, "more in sorrow than in anger" has clearly helped to cool tempers. His insistence on continued European Union membership will have reassured the Liberal Democats, after the more rabid Europhobes launched their maximalist- and totally irresponsible- demands for withdrawal.

In Germany, the press too has wondered aloud whether the UK should not just leave the EU, but in today''s press there is a far more measured tone, and many German politicians are growing irritated with the grandstanding of "Merkozy"- especially the Sarkozy part- and reminding themselves that a German-British alliance would be more congenial in many ways.

So we are not where we were a week ago, but Nick Clegg has made his point- albeit to the universal derision of the gutter press. They may remain loud, but David Cameron has been forced to take more notice of his coalition partner than a bunch of Yah-Hoos in the press... even if they did go to the same schools as many of his friends.

Monday, December 12, 2011

Getting what you want in a negotiation

Interesting to note that David Cameron went to Brussels and has returned with no agreement and the dangerous fiasco of his ineptly wielded veto. Chris Huhne went to Durban and despite long odds, has returned with an unexpectedly strong agreement on climate change.

I suppose the message is that if you want an agreement, eventually you can find one.

Sunday, December 11, 2011

Nick Clegg steadies the ship

David Cameron went to Brussels but his use of the veto, which could have been justified in certain circumstances was bad from the point of view of strategy and pretty appalling from the point of view of tactics.

His position was so last minute that he had not briefed even a single potential ally. The result was that we had no allies.

Sarkozy laid an ambush which the UK walked straight into. The result was a catastrophic defeat for British diplomacy, which puts at risk not only our wider diplomatic reach, but undermines respect in Washington and Beijing. Neither has the veto stopped anything the EU26 now wish to agree among themselves without reference to the UK, so the defeat is total.

In the UK the Europhobes' references to the Second World War have come thicker and faster than ever. Complete withdrawal is now seen as possible, even likely.

So what Nick Clegg has started to do today is sensible. He has understood the fury amongst the Liberal Democrats at a defeat which is on the same scale as the AV humiliation that the Tories inflicted on us.

He learned a lot from that.

I suspect that the Brussels veto is not the last word on this matter, and that from now on, the Europhobic attack dogs will get far less of what they want than their gleeful triumphalism will have them believe today.

I judge that the mood among Lib Dems is now grimly determined. 

We have been successful in putting forward the liberal agenda in government. The price of the Brussels debacle will be that the Lib Dems will start to dig in their heels a lot more- and that includes starting to reach out to our EU allies and rebuilding the relationship that has been so badly damaged by Tory scorn and ineptitude.

My father has one line that he uses from time to time: "Never ever trust the ******* Tories", he should know, he once was one. Liberal Democrats must trust less and verify more: this coalition is a business relationship, not a marriage. It is time we got more from this, including real constitutional reform. That must now be the determined goal for Mr. Clegg. and all the Lib Dems.

Saturday, December 10, 2011

Should the Liberal Democrats now leave the coalition?

As the scale of the disaster of the Brussels summit for Britain becomes clear, it is now an open question as to whether the Liberal Democrats should continue to be members of a government that has so spectacularly undermined the British interest.

We have been openly derided, not just from the left, notably and effectively by John Kampfner, but also mocked by the Europhobic Conservatives in a more infantile and insulting way.

We serve two purposes in coalition: firstly to put forward and enact as much of the Liberal agenda as possible and secondly to save the Conservative Party from itself.

The failure in Brussels shows that we can not prevent the Conservatives acting on their basest anti-European instincts. The damage that this will do to our country is severe and permanent.

I understand that if we go to the country in a general election now, our party will be severely damaged. However I would far rather go now on a point of principle that is central to the Liberal Democrat cause, than linger on, derided and ineffectual to the same result- but greater damage to our country- in three years time.

David Cameron must be put on notice that the Liberal Democrats will not see the interests of our country undermined by his party political sectionalism. We do not and must not claim ownership of this fiasco. Cameron's bet on the failure of the Euro is a bad mistake, and we should say so, out loud, now.

I do not expect the coalition to fall, but unless Nick Clegg can recover the situation over the next two quarters, I -for one- will be advocating a further vote by the party on the coalition at the Autumn conference in Brighton next year.

Cameron's veto: what next?

The thunder of the Brussels Summit is only just fading, and it is still by no means clear what happens now. In many ways the summit has created more questions than it has answered. 

However, there is no doubt that the relationship of Britain with the rest of the European Union has reached a point of fracture that places the UK outside the core of the organisation. David Cameron has, as he threatened, wielded the British veto, but the consequences were not what he intended. Instead of forcing the other 26 states to address British concerns, they have instead created a separate agreement without the participation of the UK. Although the British have- rather childishly- insisted that this group of 26 not use the facilities, even the offices of the European Union, the fact is that the Franco-German entente has de facto expelled the United Kingdom from the new direction of the European Union.

The miscalculation that David Cameron has made was not to think beyond the veto. The UK did not have any alternative plan. Neither had the British engaged with anyone else to put forward any other solutions. Intransigently, the British position was simply that the role of the City of London had to be taken separately from the rest of the financial crisis. This was not a position that could be taken seriously by any of the other member states, most of which believe quite strongly that "financial speculation" has been a major cause of the crisis in the first place.

If Mr. Cameron's strategy was flawed, he was also outplayed tactically by the Franco-German entente. They were fully prepared for the British veto and had made contingency plans accordingly. The result was the effective reconstruction of the European Union without British participation.

However the result of the Brussels summit is still set to be tested. The Germans may have achieved their goal of deeper fiscal integration, but it remains to be seen whether the agreement delivers the "big bazooka" that can soothe the fretful markets. The fact is that only now does Berlin recognise the twin nature of the threat they face. The first is the obvious sovereign debt crisis which can only be solved by major macro-economic reconstruction. The second is the deep crisis in the European banking market. Over the course of the past three weeks, several of the largest banks in Europe have come close to collapse, and they are still on life support. Without further emergency capital, we will still see a major European bank failure within coming weeks or even days, unless immediate remedial action is taken.

The determination of the new EU-26 will be tested to the utmost in the next few weeks. The liquidity- never mind the solvency- position remains dependent on significant policy changes by both the ECB and the EFSF- and that the EU-26 governments all fully support these with their own full faith and credit. It is in order to attract German support that the summit sought the binding commitments that David Cameron vetoed. If that German support remains partial or grudging, then the outlook for the Euro will still be in the emergency room. However, if the EU-26 follows through on the declarations that they have made, and they acquire greater market credibility, then there is a breathing space for the new macro-economic restructuring to begin.

As for the UK, David Cameron has essentially made a bet that the Euro will not survive as a single currency. Certainly, from the perspective of the British political discourse, that is a reasonable position to take. However, by walking away from the crisis, he has earned the contempt of the rest of the EU. If the UK was not willing to help in the depths of the crisis, then it will be excluded from the share of the recovery.

Britain is not a member of the Schengen zone, not a member of the Eurozone, it opts out of large parts of the European treaties, it has vetoed greater defence cooperation. For a long time other members have regarded the UK as a semi-detached member of the bloc. Now that status is institutionalised not just by British opt-outs but by exclusion. For the first time Britain has been told that it may not participate in a significant areas of EU debate. Unfortunately for Britain, that now means that critical areas of economic and financial policy will no longer have input from London.

That is a major change. It is also likely to be a permanent change. It is also a huge diplomatic defeat for London. After years proclaiming that they would not accept a two-speed Europe, after supporting enlargement in order to weaken the centralising policies of France and Germany and staying at the "heart of Europe", Britain has ended up in a minority of one. The stunned faces of the British delegation said it all- decades of work and engagement with the European project have ended in the worst possible result: a Europe united against us.

The Eurosceptics have had their victory. Perhaps, they may yet still seek a formal withdrawal from the EU, after all most of them would be quite happy to end all the EU arrangements, no matter how beneficial they may be to us as individuals. For those of us who have supported the benefits of closer Union, this has been a profoundly disappointing time, and it is something that many Liberals will not forgive, that the Liberal Democrats in the coalition could not construct a more practical alternative to the ineptly wielded Cameron veto. Yet perhaps it is too soon to consider the political consequences, while the economic consequences remain unresolved.

When 26 countries are prepared to make an agreement and one is not, then that is a problem. Many Eurosceptic bloggers this week have linked to the David Low cartoon of Dunkirk, "Very Well, Alone", as usual, they draw on the well of imagery of the Second Word War- one Tory MP told Cameron on Wednesday that a bring back "piece of paper" would be simple appeasement.  This is not 1938, and Brussels was not Munich, and our failure to move out from the past is what lies at the root of our dysfunctional relationship with the EU.

I don't know if the Brussels agreement will stick, still less whether it can begin to solve the crisis. My hunch is that it will take many summits, many meetings, and much more anguish to solve. However, that process will be long and involved, new alliances will emerge, new ideas will be developed. Meanwhile Britain will not be part of any of it,

The arrogant isolationism of the Eurosceptics, with their dogmatic bravado and insulting contempt for people who support the European ideal has now made a lasting impact on the relationship between Britain and the rest of Europe. Yet we have been here before. Britain barely participated in the Messina conference and we did not sign the treaty of Rome in 1957.  In the end, we recognised, too late, that we needed to be part of the emerging EU. 

It is quite possible that the Euro survives intact and ultimately begins to prosper. But then it will be too late for the UK to join: we would not be permitted to do so by the other EU members, who will long remember our failure to acknowledge what we had to do in order to solve the financial crisis. "Saving the Pound" might be the last thing we want to do in twenty years, but of course it is possible that by that time the UK itself, in its current form may not exist. It is not just the EU that faces an existential risk. The difference is that 26 governments decided to confront that risk head-on and one did not. 

Friday, December 09, 2011

Why the UK has lost the Euro argument

The Euro debate in Britain takes place in a vacuum. The Euro-sceptics are not challenged, even when they start to resort to absurd national stereotypes and mentioning the war ("I think I mentioned it 73 times, but may have got away with it") in the most inappropriate contexts.

The fact is that the image of Britain is so rooted in the Second World War, that we have become imprisoned in a national myth which insists on our unique righteousness and moral certainty. No one is allowed to mention the equivocation that created a culture of appeasement, the rise of the Blackshirts, or the real possibility that instead of "fighting alone" in 1940, a Britain under Halifax would have probably come to terms. 

The problem is that the generation that actually took part in the war has more or less passed, and it is the post-war generation that mostly were not even alive at the end of the war that has created this pristine national myth. In the face of inexorable national decline, the country clings ever more tightly to "the finest hour", but it has little to do with the historical right and wrongs of the 1930s and 1940s, and even less to do with the present day.

The problem is that the latest generation now still thinks in terms of the stereotypes shaped by this national fetish. The French are cowardly "surrender monkeys", the Italians even more cowardly and probably mafiosi, and the Germans? 

Well the Germans are literally unspeakable. Sinister, brutal, efficient. Still planning global domination and undermining democracy everywhere. Yet its shows how little people in Britain actually know of Germany that this stereotype has grown and morphed into a profound but irrational fear and hatred of our Teutonic cousins. 

Few people speak German, fewer still have ever visited Germany. The gap in comprehension is yawning. Britain has learnt to hate Germany without ever understanding what Germany is. Whereas many Germans speak English and visit Britain, British lack of interest amounts to a kind of contempt. Even when our former allies ("the plucky Poles") engage with Germany, they are treated as though this is the blackest ingratitude.

The problem is that this fear and hatred of Germany has become bound up into British ambiguities about the entire European project. Whereas Germany and France reached out to each other in the post war generation, with Mitterrand and Kohl hand in hand making their peace with the past, Britain remains unreconciled to the idea of our diminished place in the world and bitter and envious about the growth of Germany, which was the evil protagonist of the Second World War, versus her own eclipse, when Britain was the noble victor of the great crusade. We can not get over ourselves nearly three quarters of a century after 1945.

Yet it is a view that carries little weight- in Eastern Europe the Second World War brought the  further catastrophe of Stalinist Communism- a system which was Britain's ally and which only ended in 1989/91. Even if the result of the war was an unalloyed good- which is itself debatable- it was not brought about largely by Britain. If D-day was not, as claimed by the French, "a primarily Franco-American affair", then neither was the Second World War largely won by the British. It was won by American generals and Soviet troops, and after 1942, Britain was clearly the junior partner. 

In fact it is the Cold War where Britain fought for an unalloyed moral good, but of course that carries less resonance, it involved making alliances and partnerships, which is somewhat at variance with the myth of "standing alone".

The bitter irony is that the generation that fought the Second World War wanted to build and be part of the European project. They understood the ambiguities and did not swallow the myth of British purity. Indeed it is the patron saint of the myth of the Second World War, Winston Churchill himself, who first argued, not for a community or a Union, but a full "United States of Europe". 

I don't like the sceptics, I freely admit that. I see Dan Hannam as a puffed up pustule of ego, and seriously doubt Bill Cash's sanity. Yet I must concede that they have won the argument for now: not because they are right, but because they have persuaded the British people that they might be. But the consequences of their victory is that Britain has been pushed into deep isolation through its own myth making and intransigence. 

So invincible in the certainty they are right, the Euro sceptics are making Britain into a lesser country -and a weaker one. 

Thursday, December 08, 2011

Mr. Cameron goes to Brussels

The weekly Parliamentary riot that is the British Prime Minister's Question time must have reminded Mr. Cameron how fractious his own party is, when it comes to the European Union. The problem is that the freedom of action that the government has on the issue is pretty limited. The Franco-German diktat, organised my "Merkozy" is pretty much the only game in town, since any proposal has to have the support of the German treasury. From the point of view of the UK, we have been outplayed and outgunned by the slippery French President. 

That is... for now.

Britain has been isolated for two reasons, one real, one a matter of perception. The first is that the UK did not an will join the Eurozone. The second is that British comments, however well intended usually sound like existential criticism of the Eurozone itself.

However ignoring and isolating Britain on such subjects as the financial transactions tax may let backfire on "Merkozy", because they are not just ignoring a British position, they are failing to understand the likely market reactions to their own policies. The Germans have made a critical mistake in trying to tackle the sovereign crisis in isolation. The near collapse of international funding for Eurozone banks has been the result. The crisis has two aspects: the risk of Sovereign default and the risk of banking collapse, and "Merkozy's" ideas were only looking at the problem of sovereign default. The transaction tax proposal is lunacy in the context of European banks that are on the brink of collapse because they can not access market funding- one can only think that it is being put forward simply to be a "concession to the UK", when it withdrawn.

In fact David Cameron, to the chagrin of his backbenchers, is going to Brussels in a fairly pragmatic and open minded mood. However, he should not underestimate the cards he has in his hand, even if he is greeted with a certain froideur or even contempt by "Merkozy". 

Firstly, the Nordic bloc of solvent states remain closer in thinking to London than to Berlin/Paris- and although Spain and Portugal are supplicants to "Merkozy", there is a certain resentment as to the way the Franco-German motor has become a Franco-German directory. The UK is not as isolated as Merkozy would like. This means that simply not imposing a transaction tax will not be sufficient bone to offer David Cameron.

It means that Mr. Cameron can impose conditions on a treaty of 17 as well as on a treaty of 27. The provisions of the single market must not be weakened, and if they are and what "Merkozy" means by a 2-speed Europe is an inclusive and exclusive market, then Cameron must veto.

In fact Mr. Cameron now has the opportunity to remind the other 26 states that the UK is not to be treated like Spain, Italy or Greece, the actions of the coalition government are bringing our financial house into order: it is not the British AAA that is under threat. The issue is how to present this declaration of British power. So far Britain has appeared arrogant and patronising. Now Mr. Cameron should put on a new attitude. 

Merkozy has been preceding on the basis of Caligula's motto: 

Oderint dum metuant: Let them hate me, as long as they fear me.

It is time to put Merkozy in their place: the undermining of democracy and the outrageous contempt displayed to the other sovereign states must stop. David Cameron has some sharp teeth: he should not be afraid to show them to the French and Germans who have brought the European financial system to the brink of collapse. By being determined and forceful, Mr. Cameron could return from Brussels not just with a few token concessions to sell to his backbenchers, but with a whole new working relationship.

More on the Russian "election"

The background noise of protest in Moscow and St. Petersburg has continued, despite the severe clampdown. Over 1000 people have been arrested, which implies that the size of the protests is much larger than the few thousand that has been admitted by the regime. Significant figures amongst the opposition, such as the blogger Andrei Navalny, remain under arrest.

The problem for the regime is that evidence is growing that the declared results are so far out of line with the real tallies as to be utterly at variance. This is not just a matter of the vote stuffing in Chechnya helping United Russia over the line- it seems that even the results in the major cities, which were thought to be more accurate because they showed such a large fall in the United Russia vote- are false too. In some areas it is clear that United Russia was well behind Yabloko, the Liberal party that the official tally says polled so few votes that they did not qualify for the Duma.

While the state run television continues to ignore the protest on the utterly spurious grounds that "a protest of 10,000 is nothing in a population of 142 million", the chat rooms in Russia are extremely excitable. There is a groundswell of protest online and in the press, which is not under such strict control.

Obviously the Kleptocrats have all the guns and it is difficult to see how the protesters can force an early change, but it is now very clear that the Putin regime has lost its legitimacy, and that the "Prime Minister" will face increasing difficulties over the coming weeks.

Wednesday, December 07, 2011

Russia starts to reap the whirlwind

The blunt political reality is that Vladimir Putin needed to cheat, even just to get the "sharply reduced majority" that is the official result of the Russian Parliamentary election. When we blow away the fog of the 99.9% results in some parts of the country, it is quite clear that United Russia lost the election.

The problem now is, what comes next?

There have been the largest street protests for many years in Moscow and St. Petersburg, and - as usual, these have been broken up by the thuggish internal security service. The future of Russia is not likely, in the short term, to be determined on the snowy streets of Moscow. However, there is no doubt that the weakness of United Russia opens up some serious future problems for Vladimir Putin' s bid for the Presidency.

In classic authoritarian style, Putin is likely to try to prevent any credible opposition leader from standing against him, yet the weakness of United Russia may entice a few of the opposition leaders to stand regardless. In which case, Putin will seek to divide the opposition by encouraging many more candidates. Yet Putin may be losing his sure political touch. His tin ear on the job swap between President and Prime Minister is a significant part of what has got him into serious trouble in the first place. His instincts remain firmly authoritarian, at a point in his regime where he needs to be more flexible in order to avoid real political challenges.

Putin can now expect little from the West. His failure to engage with the US after they publicly sought to "reset" relations with Moscow now means that he is internationally isolated. He has lost such Western leaders as Berlusconi, Chirac or Schroder from the previous generation who were prepared to intercede in his interest. Although Russia has often voted with China on such subjects as support for the Libyan or Syrian uprisings (against both), all he ended up doing was making an ineffectual protest and being ignored.

The global economic and financial crisis has hurt Russia too, and although it has become customary to talk of BRIC states as the rising future, Russia has been losing political influence and economic cohesion over the past few years. Adding political instability into the mix makes the Putin regime a pretty unappealing partner- and the Chinese already barely bother to hide their lack of respect for Moscow.

In the short run it seems that Putin can hold power, at least until he is formally returned to the Presidency. Then, however, his problems may seriously begin. Another obviously fraudulent election will severely weaken his political legitimacy, and although history shows authoritarianism can survive on force alone for some time, the examples of the Arab rebellions are being widely discussed in Russian chat rooms. Putin and Mubarak, and their countries, have much in common, and continuing to impose his rule without consent could easily lead to the violent collapse that Russians most fear.

The bigger problem for Putin is that he rides a tiger already, in the shape of the various contending "bizness" groups which comprise his regime. Without the legitimacy of a popular mandate, he will find it far more difficult to control disputes as they arise. The implication is that the foundations of the regime, resting on the criminal theft of billions of state assets could be undermined from within as well as by popular pressure.

From the point of view of the West, there is ever less point in engaging with Moscow, and while tens or even hundreds of thousands of the Russian middle class now prepare to leave, we can not avoid the increasingly high probability that Putin's shelf life could be down to far less than the period of his next Presidential term.  A backlash is already brewing. The crushing corruption, brutality and criminality that have become the hallmarks of the Putin era may now, finally be sowing the seeds of popular rebellion.

The problem is that the future may be even less stable, and could be far more difficult to cope with than the cantankerous Putinistas.    

A word to Tim Farron's therapist

As a life-long Liberal I can not say that I share Tim Farron's professed need for therapy about the coalition. I am not a Conservative, I have never been a Conservative and I am not going to become a Conservative because of the coalition. Yet it is precisely because I am not a Conservative that I don't need therapy.

For the first time in my life time, and indeed my parents lifetimes, Liberalism has a leading place in government. We have senior Liberal Democrat ministers who are leading the debate in this country, and more to the point are enacting Liberal policies

Our ministers, with no little political courage, are enacting policies, such as the steady increase in the tax threshold to £10,000 which would not be enacted at all without our leadership.

Sure government is not easy, and we have on occasion been outmanoeuvred - particularly in the early days, and notably on tuition fees, which cost us dearly. However, I see several announcements every week that show, while the Tories worry about the future of the EU, over which they currently have little or no control, our ministers are making changes now that are having a practical and positive impact to everyone's daily lives.

At least half, and arguably a greater majority, of the policies that the Liberal Democrats are backing in the coalition are Liberal Democrat policies.

If I was Tim Farron's therapist, I would tell him, in his own interest, to pull his socks up, straighten his tie and go back out to proclaim the success of the Liberal Democrats in government.

Comparing this coalition with the supposed virtues of a single party government- say, under Gordon Brown- and I will take the harmonious policy splits, the lack of personal rancour and the discipline shown by the MPs of both parties every day of the week.

There is no point in being half-hearted: the coalition government under truly appalling economic circumstances is making progress, and we should be certainly not be ashamed of the Liberal Democrat ministers who are making this happen.

We don't know if the electorate will recognize this work in 2015, but there is still a chance that they may.

If, of course Mr. Farron was just seeking to put a marker down for a leadership bid in the event of defeat, I guarantee that these kind of comments will not endear him to his Parliamentary colleagues or even more than a small group of the membership.

Tuesday, December 06, 2011

Red Alert from the Bank of England

The Bank of England made the following statement this morning:
In light of the continuing exceptional stresses in financial markets, the Bank of England is today announcing the introduction of a new contingency liquidity facility, the Extended Collateral Term Repo (ECTR) Facility.
This Facility is designed to mitigate risks to financial stability arising from a market-wide shortage of short-term sterling liquidity. There is currently no shortage of short-term sterling liquidity in the market. But should that position change, the new Facility gives the Bank additional flexibility to offer sterling liquidity in an auction format against the widest range of collateral.
Obviously this follows on from the coordinated action last week, but it underlines that the liquidity crunch that nearly took place carries risks for all non-US$ holders.
The rumour that suggests that we came within a few hours of the total collapse of the short term funding market can only be reinforced by today's statement.
Very Scary Indeed.

What nearly happened in the markets last week makes my blood run cold

In the middle of last week, exceptional measures were announced by a coordinated group of six central banks: the Fed, the ECB, the Bank of England, the Bank of Canada, the Bank of Japan and the Swiss National Bank. In effect they agreed to supply virtually unlimited Dollar liquidity to the market. The result has been a sustained market rally over the past few days. However it is only now beginning to sink in what lay behind the central banks' decision and how close the financial system just came to collapse.

It is now clear that the funding cycle, even for the best credits in Europe was getting dangerously short. Whereas a major industrial, like Unilever, could expect to fund US Dollar exposure for at least 30 days, by the beginning of last week, this was down to three days. If it was bad for industrials, it was becoming impossible for banks. US Dollar holders were not prepared to provide funds to several major Euro-zone banks at virtually any price.

They were simply unable to gain access to the US Dollar market.

Although this still has the status of market gossip, it seems all too likely that a significant number of the largest Eurozone banks would have collapsed last week unless the central banks had done what they did. Just to repeat, last week, the Eurozone came close to a multiple collapse of some of its largest brand name banks because they were not able to access funding in Dollars.

So clearly the action of the central banks was critical, but while necessary, it is not sufficient to address the crisis of funding. It is clear that several major houses do not have an independent future. A major banking restructuring is now very much on the cards.

The German government has refused to address the private sector until the Eurozone fiscal/sovereign crisis is stabilized. Last week's near disaster shows how short sighted that policy has been. The fact is that the debt crisis can only be solved by coordinating debt write-downs and restructuring across both public and private  credits.

We had a very close shave last week, but while the liquidity issue is addressed, at least for the foreseeable future, the solvency issue is not. I do not think it is a coincidence that Commerzbank is being forced to take immediate remedial action to boost its capital ratios. 

Others will follow very shortly. Further retrenchment will follow. So in addition to a major fiscal contraction, the Eurozone must now deal with a large-scale contraction in bank funding. 

It is hardly a surprise that S&P has put all of the Eurozone countries on credit watch for immediate down grade

In the face of the determination of Berlin to impose fiscal control without actually providing credit support, it is a moot point as to whether the price for the Euro is actually worth paying. Even if the Eurozone governments believe it is, the years of recession ahead, amounting, lets face it, to a second Great Depression may see the voters changing their minds rather quickly.

So far the politicians are betting that closer fiscal union will work in the medium term.

Given the odds, that is not a bet I would be taking.

Monday, December 05, 2011

The devil in the detail of the Russian election shows Putin LOST

Now that we can see the final regional breakdown in the Russian election results, it is much worse for Putin that it initially seemed. The 49% vote for United Russia includes the tallies for non Russian republics, such as Chechnya, where the 99.9% support for United Russia is clearly false.

Given that several districts in Moscow and St. Petersburg returned tallies of less than 25% for United Russia, then it seems like a reasonable working assumption that the majority of Russians in European Russia voted substantially against Putin.

When we consider that the election was not certified free and fair, amid widespread intimidation and pressure on independent observers, it seems more likely than not that Putin actually lost this election. 

This creates a crisis of legitimacy.

Far from serving another two terms as President, it could actually be that this clearly fraudulent and stolen election marks the beginning of the end of the Putin era, even if not for the Kleptocracy that he has created and presided over. 

This is totally unexpected. The belief was that Putin has sufficient popularity that he would be able to hold power more or less legitimately. It now seems quite clear that he needed the fraudulent votes in order to maintain a majority: without them he would have lost the election.

The press reaction is that he has "suffered a setback": it is much worse than that: he actually lost the election.