Guest article by Mark Hudson: The Immigration Myth

Arguably, voting on June 23rd for most people will be dominated by fear. Either fear about the economy or fear about immigration. One of these will trump the other.

Of course there are lots of other issues, but when they are alone at the booth, faced with putting an ‘X’ in one space or another, most voters will fall back on what they fear most. Most people are not passionate about this issue one way or the other.

It is in this context that it is worth stressing that the real immigration issue in Britainif one is worried about immigration (which is not a major issue for me) – is immigration into the UK from non-EU countries. This key point has not been picked up by the Vote Remain camp.

These are the facts, sourced from government and anti-migration sources (see below).

1. Non-EU immigration accounts for more than half of immigration into the UK - which is entirely within the control of the UK Parliament, subject to national opinion.

The anti-migration website Migration Watch shows that even today more than half of immigrants into the UK still come from outside the EU (177,000 from non-EU in calendar 2015 against 170,000 from the EU.)

Between the 2001 and 2011 censuses the UK population grew from 58.8 million to 61.7 million. Over this time the non-EU born population grew by 1.5 million to 4.9 million (8% of the total) while the EU-born (excluding UK-born) population in the UK grew by 1.1 million to 2.6 million (4% of the population). So while immigration from the EU grew over this decade, the majority or 56% of the growth in the foreign-born UK population was due to the 1.5 million extra non-EU immigrants.

According to the Office for National Statistics (ONS) Labour Force Survey estimates for 2015, there are 3.3 million EU citizens in the UK – 1.6 million from the EU14, 1.3 million from the EU8, 300,000 from Romania and Bulgaria and the remainder from the other EU countries of Malta, Cyprus and Croatia[1]. There are 2.1 million UK citizens living in other EU countries (http://www.migrationwatchuk.org/briefing-paper/354) so the net effect of EU migration is to increase the UK population by only 1.2 million.

 

2. The real cultural challenge is in integrating non-EU peoples.

I would argue that what is sparking most concern in the UK regarding immigration is the recent wave of Muslim immigrants into Europe (from Syria, Afghanistan and Africa), their relative lack of integration and the connection in many people’s minds with fanatic terrorism. This is allied to ongoing worries about the relative isolation of the large Pakistani, Bangladeshi, Somali and other Muslim communities in the UK.

There are now 3 million Muslims in the UK (5% of the total population), around half of whom were born in the UK. This is a fact which we cannot ignore or wish away, even if we were so inclined. The real challenge for the UK is how to welcome and facilitate the deeper integration of Muslims into UK life, involving compromise on both sides, and including full acceptance of key European values of tolerance, equal treatment of women and LGBTs, the paramountcy of secular law and respect for human rights.

However, this is completely irrelevant as far as the EU Referendum is concerned, since immigrants from the EU are from a European cultural and Christian heritage. There are no EU rules about non-EU migration and virtually no Muslim migrants from within the EU.

 

3. EU immigrants are not generally competing for housing

The majority of immigrants from EU countries do not compete with UK national for council accommodation, but go for private rented accommodation. This is because:

- they stay generally for less than 5 years (though of course others stay longer or permanently), and so it is not worth applying for council housing. Studies show that one third of EU immigrants return home after less than a year (typically, farm-workers, students, bar-istas) and more than half return home before they get to pension age.

- many are wealthier and/or get better paid jobs.

 

4. The NHS, schools and welfare would be worse off without EU immigrants

A persistent scare story is that EU immigrants are straining the UK’s health, welfare and education services.

This is simply wrong:

-       Study after study has shown that EU immigrants contribute much more in taxes than they take in benefits, and proportionately more so than UK citizens. The UK is a net gainer in budgetary terms. EU citizens come here overwhelmingly to work, not to scrounge or get healthcare.

-       EU immigrants help support the NHS since they contribute more taxes; and two thirds are in work and so use the NHS less, proportionately, than the UK-born or non-EU born populations. It should be  added that the NHS would also be much worse off without non-EU immigrants, who make up a big chunk of the workforce

-       EU immigrants arrive having left school and often are university-educated, so they are not using the education system. EU students are of course paying their way (through the nose).

-       EU immigrants are for the most part better educated than the UK average and therefore have a broadly positive impact on the quality of the UK workforce.

 

Sources: https://en.wikipedia.org/wiki/Foreign-born_population_of_the_United_Kingdom; various FT articles; http://www.migrationwatchuk.org/statistics-net-migration-statistics; the ONS.



[1] The ONS Labour market statistics estimate that of the EU born migrants in the UK, 2.1 million were working.

 

 

 

To remain or leave: the case to stay taking account of arguments to leave

One argument of leave campaign is not true

A letter which I have recently received from Leave.EU, and has presumably been sent to millions of other potential voters, starts with a statement which is not true, namely that “in 1975 we voted for a Free Trade Area known then as the Common Market”. Although the sub-clause that it was informally called the Common Market is true, the reality is that the UK had previously been a member of the European Free Trade Area (EFTA) which consisted of six countries, the UK, Denmark, Sweden, Norway, Finland and Iceland, before it joined what was then  the European Economic Community. The EFTA countries including the UK had Free Trade arrangements with the EEC so in effect the UK was already part of a wider free trade area. It specifically decided to leave the free trade area in order to join the EEC because the EEC had moved to a deeper degree of economic integration, which was underpinned by profound political commitment aimed at making war between its member states impossible. One motivation in the UK for joining was that the deeper level of economic integration was perceived as a reason for the much faster growth—at the time—of the six original EEC member states that that of the UK. But many supporters of entry in the UK also believed in the political purpose of the EEC, not least the prime minister of the time Ted Heath who had experienced war between European countries first hand. If the UK was merely entering a slightly different form of Free Trade Area than the one of which it was already a member, how could it have inspired the passionate opposition of prominent politicians like Enoch Powell and Tony Benn?

But complete honesty is not easy for either side in this campaign

It is not just important  that this Leave.EU statement is untrue but also that it takes a leading role in their campaign. Regrettably the long campaign with proponents of each side scraping around for something new to motivate potential voters is likely to lead to more and more assertions whose truth is at least tendentious and at worst completely absent.  Although this post is passionately committed to the UK remaining part of the EU, it will attempt to respect the truth and separate opinion from fact.

EU membership does have its costs

There are three main arguments used by opponents of EU membership. These are the budgetary cost, the inability to reduce immigration from other EU member states and the loss of sovereignty. They are all valid ones. EU membership is not a free lunch. However, all three are being routinely exaggerated by many on the Leave side.

The budgetary cost in net terms is about £7bn a year, 0.5% of GDP or 1.2% of public expenditure. It is normally presented in gross terms by EU opponents which is about double the figure but the absence of EU expenditure in the UK would have consequences if not replaced which and these consequences are not spelled out by the Leave campaign. For example would the UK government decide that farmers who have received substantial public funding since well before the UK joined the EEC, be left to sink or swim with EU funding not replaced at all? Would scientific and technological research funding (the UK receives more such funding than in other EU member state) be slashed?

According to official figures which are based on samples and so not precise net immigration to the UK is running at around at around 325,000 a year, of which about 175,000 comes from the EU, which is a reasonable concern given we are already quite densely populated. About 190,000 come from outside the EU and therefore would not be affected directly by leaving the EU. Given that there is substantial net inward immigration from outside the EU due to such factors as family reunions and business needs for highly skilled personnel, it is reasonable to suppose that unless there was a deliberate policy of discrimination against the EU, there would be substantial inward net migration from the EU even if the UK left as long as the relative job-creating dynamic of the British economy continued. Nevertheless leaving the EU would make it possible to reduce net inward EI migration by 50-100,000 a year. This would not be likely to reduce pressure on the health and care sectors since some of the people excluded would be likely to include those coming to work as doctors, nurses, other hospital workers or carers. Nor would it relieve pressure on housing since many workers from eastern Europe work in the building sector. It would however help a little to reduce pressure on school places and also a little on the need to build on green spaces.

The third argument about sovereignty is a valid one in terms of principle but much less so in terms of its practical impact. The theoretical underpinning of the EU, and its predecessors, since 1951, has been based on the idea of a pooling of national sovereignty to make war between member states impossible. Those who believe that national sovereignty is a principle that overrides other policy aims could never have supported UK membership in the 1970s and could not have done so whatever David Cameron had been able to achieve in renegotiating the terms of membership. However, the practical impact of EU legislation on individuals and businesses is hugely exaggerated. In most areas of health and safety legislation the UK goes further than required by EU law. On environmental legislation few people are calling for dirtier bathing or drinking water or more air pollution. There is a long list of supposed regulations interfering with daily life from children playing with balloons to women’s institutes recycling jam jars, but most on close examination turns out to be either a complete invention or an addition to EU requirements made by British lawmakers or officials. Indeed I am not aware of any such complaint that has real substance, though some probably do exist since the EU is certainly not perfect.

Political arguments are more important for those with strongest views, but economic ones may sway more voters

Given that there are costs to membership, what are the arguments for paying those costs? They are both economic and political. In my opinion, the political arguments are the more important, but the economic arguments may sway more voters. Attempts have been made by various studies to quantify the economic impact on output and jobs of leaving, in contrast to remaining. However, there are so many variables involved that any such estimate is really little more that an informed guess. It is better to try to analyse the impact and let the reader draw his or her conclusions. Opponents of EU membership assert that it will be possible to negotiate a free trade area. This may be true as affects goods trade. There is no very good reason why the EU should impose tariffs on UK exports if the UK does not do so on EU exports to the UK. However, if the possibility of anti-dumping duties was to be avoided there would have to be rules on state aids. There would also be a risk that some of the non-tariff barriers due to discriminatory regulation which existed before 1986 could re-emerge.

Lack of single market would most affect services exports

The clearest change would be that there would no longer be a single market in the provision of services. The legal provisions needed to enable free trade in financial, legal, accounting, engineering, IT, architecture and other services have proven substantial and 24 years after the supposed completion of the single market programme, many barriers have been removed but there is much still to be done. What can be said is that leaving the single market would mean that the process of removing barriers to services trade between the UK and the rest of the EU would be reversed instead of continuing if the UK remained in the single market. It is possible to leave the EU while still being in the single market as is the case with Norway and to a large extent with Switzerland, but in order to remain in the single market, these countries must implement EU legislation, allow free movement of people and pay into the EU budget. Since the absence of these are the main arguments for leaving the EU, it would make little sense to leave the EU but remain in the single market. Services trade would therefore be adversely affected, also because British citizens would no longer be free to work in the EU.

The view of businesses

That is the broad picture. In detail the experience of EU membership is different for every different type of business dealing with conditions and regulations relevant to it. There does appear to be a very large majority of businesses which want to stay in the EU. From the CBI 80% favour staying in and 5% want to leave. Admittedly the CBI is an overtly pro-EU organization. The Federation of Small Businesses (FSB) is more neutral. Even so its policy director, Mike Cherry states on the FSB website that : “Small firms seek measures to boost cross-border trade and economic growth – the completion of the single market, simplification of VAT, a smarter approach to regulation and protection of the opt-out under the Working Time Directive”. The completion of the single market would not be possible outside the EU and it is hard to see how cross-border trade could be boosted. The opt-out from the Working Time Directive is protected and inside the UK has had success in pushing for smarter regulation (the volume of new legislation being proposed by the present Commission has been greatly reduced compared to previous ones) and can work to simplify VAT. The latest survey of members by the British Chambers of Commerce, which is also neutral as an organisation, shows 59.5% intend to vote to remain while 30.1% intend to vote to leave.

Ultimately, it is the ability of the UK to influence the political future of Europe that is in question

The political argument in favour of staying in the EU is the most important one. For those whose ideal is a theoretically sovereign UK acting on its own to protect its interests in a globalised world, economic costs are worth paying. The case in favour of EU membership is that we will have an ongoing role in an endeavour that has achieved 70 years of peace and a fair degree of prosperity. Whether a member or not, what happens in countries across the Channel is bound to matter for the UK. NATO, which is mentioned by EU membership opponents as an alternative, is an alliance designed to defend its members against potential outside threats but it is not able to make a significant contribution to stable and harmonious relations between its own members. In addition, the UK can exercise more influence on the world beyond the EU’s frontiers by working with neighbours than trying to act on its own. It is true that the influence that the EU has been able to exert to spread peace and stability beyond its borders towards the east and south has recently been a failure. But to start to unravel the EU’s own structure would risk undermining any chance of coherent policies.

With the EU in crisis Commission and other member states should show more solidarity with Greece

 Asylum crisis threatens to weaken EU 

In an interview with the BBC, Manuel Valls, the French prime minister, said that the EU itself was under threat from the crisis posed by pressure of refugee seekers. This on the face of it would seem exaggerated. If some member states are more generous than others in accepting refugees why should that undermine their capacity to work together within the framework of the EU treaties? The Schengen system of borderless travel across most EU member states has already partially broken and could completely break down as member states try to stop or regulate the flows of external migrants. This is a serious blow given the impact of the Schengen agreement on everyday life and symbolism in breaking down barriers. It does not mean that end of the EU, but the fact that people like Mr Valls are talking in these terms is evidence of a deep crisis.

 

At a time of several other difficulties 

The challenge of the asylum seekers is highlighting the differences between and within EU countries and comes on top of several other problems. One of these is the forthcoming UK referendum on whether to stay in the EU, with UK opinion polls suggesting that those likely to vote to stay in or leave are quite evenly divided. A vote to leave would deprive the EU of a major player, which has made a particularly important contribution to the development of the EU’s single market. Furthermore its departure would set a precedent, which would give impetus to anti-EU sentiment on other countries where it is already strong including France, Italy and Poland.

Another major problem is posed by the fact that some of the countries that acceded to the EU in 2004, notably Poland and Hungary have weakened their compliance with political criteria under which they were allowed to join, such as the impartial rule of law, as for example in the packing of Poland’s constitutional court with its own sympathisers by the newly elected Law and Justice government. The attempt by the European Commission to monitor such measures has provoked increased hostility to the EU in Poland and Hungary, and this has become meshed up in hostility to the EU’s strongest country, Germany.

A third problem is the euro zone crisis. Although the threatened departure of Greece from the euro zone was averted last year there are still considerable tensions between countries of the south with high debts and northern countries. Recently there has been an increase in tensions between Italy on the one hand and Germany and the European Commission on the other.

Differences over how to tackle the refugee influx is exacerbating the other differences. There is no simple answer: one policy extreme would mean that the EU abandons any pretence to stand up for human rights of those not already EU residents; the opposite of free entry for all genuine refugees would create unsupportable social and political tensions even in countries like Germany with an initially welcoming attitude. A muddled middle way is the only one that can hope to avoid one or other such consequence.

 

Commission takes wrong approach to Greece

But there are ways in which the EU could do better. In particular the key role of Greece in the crisis should be acknowledged. On January 27th the Commission published a report highly critical of Greece, threatening to expel in from the Schengen zone if it did not do better. This followed a proposal to help Macedonia man its frontier with Greece without consulting the Greek government. Even if the Greek economy were not experiencing the most severe economic crisis any member state has experienced since the early days of the EU, it or any other country would struggle to cope in a humane manner with the huge numbers crossing the sea onto Greek islands. In contrast to the Commission’s attitude a group of academics have put forward islanders that have rescued and helped refugees forward has a candidate for the Nobel Peace Prize.

 

Greece should be praised for what it has done rather than rebuked for what it has not done, and given far more funding to help it manage camps and processing centres to separate refugees from economic migrants and provide migrants in Greece with basic needs in the meantime. It may be that it is will be no longer practical to keep fully open frontiers with Greece given the amount of migrants arriving there, but this should not be portrayed as a punishment but rather as an unavoidable necessity in which Greece needs far more support from its partners.

 

 

Can Spain’s new parties bring new vigour to Spanish politics or will there be deadlock?

 

On January 13th, the new Spanish Parliament, the Cortes, met for the first time following the election of December 20th which gave significant numbers of seats to two completely new parties formed since the previous election, the left wing Podemos (“We can”) and the centre-right anti-corruption Ciudadanos (“Citizens”). The emergence of one, let alone two, new nationwide parties winning substantial numbers of members of parliament, is a rare event in Europe (or outside Europe). The only other example in a large European country this century is the Movimento 5 Stelle (M5S) in Italy. The formation of new parties, despite making government formation more difficult is in the opinion of InsightEU, a positive development which has the potential to re-invigorate democracy. The ability of the two parties to continue to flourish is therefore important for Spain and indeed for the EU as a whole. To do so they have to steer a difficult passage between being simply a protest party determined not to sully itself with real life compromise and treating the pilloried establishment parties with the modicum of respect needed for any negotations and being sucked into coalitions where they have to share responsibility for government and its inevitable failures and in a worst case scenario come to be seen as complicit in a system which they have been able to do little to change. M5S has avoided the latter but at the cost of remaining essentially a protest movement. But the Italian electoral system has meant that M5S is in any case an opposition party. In Spain the electoral result on December 20th and the refusal of the leader of the established Socialist Party (PSOE) to form a coalition with the party governing Spain until the December 2015 election (and still the provisional government) the right-of-centre Popular Party (PP), mean that the two new parties’ choices will be key to determining whether a government can be formed and win a vote of confidence or whether as must happen if no government is formed within two months of parliament reconvening, another election is called. In the latter event it would be likely that voters would move towards the PP as the largest party and therefore the one most likely to provide a majority government.

 

Sub-plot in Catalonia could prevent progress in Madrid

Pedro Sanchez came back from an early Janurary visit to Portugal extolling the recently formed coalition there between the Portuguese Socialist Party and two parties further to the left including the Portuguese Community Party. Sanchez has called for a left wing coalition in Spain, as was suggested as a likely outcome in our post of December 24th, but this now looks very difficult. The Catalan nationalist parties, which have just formed a new regional government, are set on their demands for a referendum on outright independence. Podemos favours such a referendum but the PSOE has promised to oppose it. Thus a coalition including the PSOE and the Catalan parties is impossible, while one including both the PSOE and Podemos looks very difficult. Not only is there the inevitable mistrust between two parties competing for the left wing vote, but there is also the whole issue of the future survival of Spain as a nation. Moroever, without the Catalan parties, Ciudadanos would have to be included to make a majority in the Cortes.

 

Can Podemos compromise enough to allow for new government?

It is to be hoped that Podemos is willing to modify its position on a referendum in the near term. It would be very unfortunate if a new party formed to combat the injustices of a 21st century economy were to be diverted onto the path of supporting nationalism of a kind little different in essence from the 19th century nationalist movements. There is some right and wrong on both sides of the referendum argument. On the one hand, the Spanish establishment needs to understand that if the majority of Catalans feel over a long period that they are not respected in Spain and are thwarted from fulfilling reasonable expectations as resulted from the constitutional court’s overruling of an agreement with the previous PSOE government for increased devolution, this will undermine the legitimacy of Spain. On the other hand, where pro and anti independence opinion is quite evenly divided and also volatile, a referendum which gave a little over 50% to a pro-independence question on one day but could be different if held a few years earlier or later, is a very flimsy basis on which to overturn the 524 years of unity since the merger of the Kingdoms of Aragon and Castile in 1492.

Whatever the pros and cons of the argument for Catalan independence it is almost irrelevant to the issues of inequality and lack of opportunity which affect all parts of Spain (as indeed many other countries).

Ciudadanos appears more willing to take the risks of entering a coalition government than Podemos. A possible way forward, though not one likely to guarantee a government to last the four-year parliamentary term, would be a minority coalition between the PSOE and Ciudadanos backed from outside government by Podemos, in return for meeting the two immediate demands that Podemos has made: a halt to banks repossessing homes from those unable to meet mortgage servicing commitments and free medicines for the elderly. Such demands should be possible to meet without endangering the credibility of Spain’s fiscal policy.

Spain’s Christmas election: what does it mean?

The results of the Spanish election on December 20th are not clear-cut. Four parties, two old –the centre-right Popular Party and centre-left Socialists (PSOE)—and two new, the left wing Podemos (We can) a movement of local groups which grew out of the 2011 street protests by the Indignados at the time that government cutbacks, and the centrist Ciudadanos (Citizens). The new parties have mounted a significant challenge to the old parties, but unlike Greece failed to dislodge them.

 A fragile lefty-wing coalition may emerge

There does appear, however, to be the possibility of a narrow margin in favour of those who want a change of from the PP, a party whose government in the last four years has succeeded, at considerable social cost, in turning round the economy, but whose moral authority has been weakened by the revelation that the party had for a long time ran a dual bookkeeping system, one above board and one for illegal contributions and illegal payouts. The PSOE is also tainted by corruption but mainly in its regional stronghold, Andalusia. Moreover the PSOE leader, Pedro Sanchez, is relatively new and not seen as tainted by past malpractice. The PP leader, Mariano Rajoy, has by contrast been party leader since 2004 and cannot convincingly claim that he new nothing about what was happening, unless by deliberately turning a blind eye.

The election of 69 MPs to Podemos and 40 to Ciudadanos (out of 350 deputies in the lower house) from none in the previous national election in 2011 are major breakthroughs but ones that were fully expected. Indeed the result for Ciudadanos was in comparison with opinion polls during the campaign the most disappointing of all four main national parties. One reason may be that polls seemed to be pointing towards a centre-right coalition of Ciudadanos and the PP. Some potential Ciudadanos supporters may have moved to other parties on the left because they did not want to prop up the PP.

As it is neither the two national parties of the centre-right nor the two national parties of the left, the PSOE and Podemos, can quite muster the 176 seats needed to hold a majority. The other parties are mainly regional ones, some of whom are on the left, others in the centre. However, because the PSOE and Podemos are more sympathetic to the ambitions of the regional parties (though not as far as wanting to concede outright independence to Catalonia or the Basque Country) they will probably support a left wing government enabling it to have a fragile majority.

 

Meeting the hopes of its voters will be an uphill struggle

Such an alliance might be portrayed as an anti-austerity coalition but if it tries to live up to such a name it will be wasting precious time. Investors in Spanish government paper have to be kept happy that the government will keep the deb from rising rapidly, otherwise they will charge higher interest rates leaving less available for other government expenditure or in extremis force the government to seek a full scale bail-out (they at present have limited support to help prop up illiquid savings banks) from the European Stability Fund (ESM), thus leading them from the frying pan of the need to keep investors happy to the fire of being told what to do by the Quadriga (the old Troika of IMF, European Central Bank and European Commission plus the ESM).

What the government may be able to do is to distribute the burden of austerity more fairly between the privileged on the one hand and the less privileged and public services on the other. That means higher taxes, and crucially a drive against tax avoidance and evasion. An exception should be made to the relatively small proportion of private wealth going into small and medium businesses. To successfully make significant moves to a more equal society while also promoting continued economic recovery, will require single-minded determination, skill, patience and the willingness of competing parties to work together. At the time of writing this looks a tall order, and the left can be sure that the PP will exploit any weakness or failures.

 

 

 

 

VW emissions scandal suggests EU regulation is weak, but Commission shows no sign of wanting to do anything to strengthen it

The fact that Europe’s leading auto manufacturer had been brazenly undermining the purpose of regulations designed to limit poisonous emissions from its diesel cars has made a fool of the EU’s regulations to limit air pollution.  The fact that VW’s ploy was discovered in the US where only 3% of cars are diesel compared with 50% in the EU, adds to the reasons why the EU and its member states should be embarrassed. Because emissions testing is in the hands of national agencies who are close to the manufacturers themselves rather than independent bodies nationally or EU-wide means that it is unlikely that the ploy would have ever been uncovered in the EU. The cheating carried out by VW and more broadly the fact that, for all cars, there are major differences between emissions in laboratory tests and what is actually emitted in normal driving conditions are a major factor why member states are flouting EU legislation on air pollution but unable to comply short of drastic measures such as driving bans.

Given these facts, it might be expected that the Commission would be highly concerned and be proposing measures to require vehicles to be recalled and adjusted to comply with the law after the removal of defeat devices. In fact, it has almost completely ignored the scandal, apart from a Fact Sheet released on September 25th. A search on the Commission’s website for VW produces its latest result in 2013 (which boasts that VW was then the global company with the highest spending on research). The environment commissioner, Karmenu Vella, has not mentioned the subject in recent speeches. By contrast, the transport, internal market, industry and environment committees of the European Parliament and even the UK transport minister, Patrick Mcloughlin, have called on the Commission to investigate. If anyone in the Commission is doing so, it is being kept very quiet. From its lack of response so far, it can be surmised that Jean-Claude Juncker, the Commission and his fellow commissioners do not want to do anything that might upset the largest member state, Germany, or to give the impression that it is throwing its weight around. The commissioner for better regulation, Frans Timmermans, has not seemed concerned about the failure of EU regulation to achieve its aims, which suggests that for him better regulation means less regulation. We can conclude that the UK government’s campaign for a less interventionist Commission, helped by business lobbying and similar if less strongly expressed views on the part of other member states, is proving highly successful at least in the field of environment legislation.

 

 

Will Tsipiras seize the day?

Despite having abandoned most of the policies on which it been first elected in January and in August agreed with creditors to a programme roundly rejected in a referendum on July 5th, the left wing Syriza emerged as the victor of the September 20th election and is again able to form a governing majority coalition with the centrist Independent Greeks. The traditional centre right New Democracy seemed neck and neck in opinion polls a week earlier but was decisively put into second place. Most surprising a dissident group from Syyriza that rejected the agreement with creditors and called for Greece to leave the euro so that it could run it’s own economic policy did not even achieve the 3% threshold required to be represented in parliament.

The leader of Syriza Alexis Tsipiras, performed his u-turn with grace and has managed to make the Greeks feel better about themselves. Has he achieved anything other than to be re-elected. The answer is no. Will he be able to achieve anything? The answer is that he still might and has a better chance as the head of what is still a new team than the old parties New Democracy and Pasok just because his ministers have had less time to learn bad habits and still have a degree of freshness. Nevertheless all power corrupts and if progress is not quickly made old ways may reassert themselves.

Although the agreement with creditors imposes severe constraints on the new government’s freedom of action it still leaves plenty it can do. It should in no way limit Tsipiras’ ability to tackle corruption and reduce the power of vested interests which he has declared as his priorities. Nor will it prevent him from what must be an ambitious reform of the public administration so that civil servants know their job is to serve the public’s interest not their own and to minimise rather than maximise the burden of bureaucratic procedures on individuals and businesses.

There is however one overriding priority: to make Greeks pay their taxes. Unless they do public services will collapse through lack of funding and the better off will retain their privileges at the expense of the large numbers of unemployed or on very low incomes. Tax receipts have probably fallen during recent months when lack of trust in bank deposits have made Greece into a mainly cash economy. The travails of Greece have still not led to any sense that  paying taxes is one of the obligations of citizenship.

A difficulty is caused by the position e of the richest Greeks are shipping magnates. They were given a particularly favourable tax deal by previous governments in order to attract them to live in Greece and spend money there. This a rational reason but it is still wrong. If rich shipping families are seen to get away with paying little tax other wealthy Greeks will ask way they should and if wealthy Greeks pay little middle range businesses and self employed will ask the same question. Addressing the issue is not easy. The shipping companies have to be treated favourably or they will noticeable to compete with those registered in other countries. This does not prevent fair taxation of the income and wealth of individuals. The individuals of course as to whether they live in Greece or not and even if they do they may try to hide their wealth in tax havens. But international cooperation in tracking down this wealth in places like Switzerland has made considerable progress should seek the advice of countries like the US and Germany which have acted

Refugees replace Greece in the headlines

Angela Merkel changes image of Germany

How much has changed in a month! The headlines are no longer about the struggle of the Greek government and people to find a way forward for their becalmed economy but the more traumatic sufferings of the Syrian people fleeing their civil war. The latter is not new: the war has lasted four years and the numbers coming to Europe have been steadily increasing over the last twelve months. Germany was already committed to accepting large numbers of the refugees and local authorities an voluntary organisations were busy preparing to facilitate their arrival. But the numbers have increased, particularly coming through Turkey and the Balkans overland or via Greek islands. Most important Angela Merkel decided that the issue could no longer be treated as a subsidiary problem but had become the greatest challenge facing the European Union this year and perhaps for years to come. Not only the courage and humanity of her decision to prepare to accept up to 800,000 refugees this year and 500,000 a year subsequently, but the extent to which it is endorsed by large numbers of ordinary German people who have openly even enthusiastically welcomed the arrival of refugees, for example at Munich’s main railway station, have been remarkable. Opposition has so far been muted and mainly concentrated in former eastern Germany.

The image of Germany as rigid and hard-hearted particularly in Greece and other southern European countries but also more widely across the EU by its insistence on harsh fiscal austerity and its refusal to countenance debt forgiveness has been overturned. The Greek drama has not come to an end. A second general election this year is to take place on September 20th. However, for better or worse, the wings of the radicals are likely to be clipped. The main contest is between the traditional centre-right party New Democracy and a Syriza separated from its most leftwing component, and committed to implementing a programme of pragmatic reforms agreed with its creditors, not least the hardline German finance minister, Wolfgang Schauble. It has become clear that a dramatically different economic policy would only be possible if Greece were to leave the euro, a choice supported by a significant but minority section of the Greek population. The dramatic decline in living standards since 2009 and the 50% level of young people’s unemployment in Greece have had devastating consequences that are more comparable to the conditions of the 30s than anything in western Europe since the 1950. Nevertheless it is evident to Greece, which has received many desperate refugees on its easternmost islands, as well as the rest of Europe, that the plight of the Syrian people and other refugees is far worse.

 

Differences between east and west Europe

The refugee crisis has thus done a little to ease divisions between northern Europe and southern Europe, but has opened divisions between west Europe and countries in central and eastern Europe which feel that the refugee problem is not theirs. There are some differences between these former communist countries. The Hungarian government has made it clear that it feels little but hostility to the refugees coming through, even though it knows that they are all heading onwards, mostly to Germany. At least the Polish government has agreed in principle to take 2,000 refugees while putting forward the argument , up to a point valid, that Poland’s demography and economy make it much less suitable to taking large numbers of refugees than Germany. Donald Tusk, the former Polish prime minister, now president of the European Council, has shown the statesmanship to take a wider view of the issue than he probably would have if still prime minster of Poland.

The new president of Poland, Andrzej Duda, has pointed out that the situation in its neighbour Ukraine remains of concern to Poland, much more so than to countries further away from Ukraine. There are substantial numbers of Ukrainians in Poland. Although only a minority of those there at present come from eastern Ukraine and so are refugees rather than migrants in search of employment the numbers of both could rise if the situation deteriorated. In recent months Ukraine has not been very much in the news and to an extent no news is good news even if the low level war in the east continues to cause loss of life. The government is trying to put a bill through parliament to give very substantial powers to the provinces of Donetsk and Luhansk including control over the police forces and courts while allowing Ukraine to regain control of its eastern border, as agreed with Russia at Minsk. Such an eventuality looks theoretical at present but the bill shows that the government is rightly willing to make sacrifices in  the search for peace and stability. In doing so it provoked a violent response from the far-right Svoboda group which killed a policeman outside parliament and the loss of support in parliament from the nationalist Radical Party.

 

Quotas may not work but sharing is essential

The refugee crisis is seen differently across the 28-member EU, as is the case with other issues like the troubles of southern members of the euro zone. No one is suggesting that other countries should open the doors to the extent that Germany is doing. The 160,000 for the rest of the Schengen area proposed by the European Commission is several times lower than the number Germany is prepared to take. In the end rigid quotas probably will not work since it is hard to say how Syrian or other Muslim refugees could be settled in a country as hostile to them as Hungary even if its government agreed. Nevertheless a degree of sharing is required if the EU is to hold together.

Anti-system parties adapt to opposing forces

The agreement reached between the Greek government, led by the leftwing Syriza coalition, and representatives of Greece’s creditors on August 11th for a third loan to avoid default, following those in 2010 and 2012, increases the chances that Greece will stay in the euro zone, despite uncertainties over whether the government will be able to implement what it has agreed to and as to whether the creditor governments from the rest of the euro zone will be willing at some point to make the debt manageable.

It means that – apart from a significant dissenting minority—the formerly anti-system Syriza has succumbed to the rules of the euro zone. This development can be looked at negatively as the denial of democratic hopes of the Greek people but there is still the chance that the new government can prove to be radical in the Greek context.  It can remodel the administration to work for the public rather than in its own interests or those of privileged clients as has often been the case; it can reform the tax system to enforce payment of taxes, but for this to be possible it will have to ensure that payment of taxes is compatible with Greece’s large number of small businesses thriving and expanding. Despite this proviso it cannot act to reduce inequality. There is still scope to hope that a government not formed of one of the two that have governed Greece since the end of military rule in 1974 will be able to do what the others failed to do, namely transforming the enduring Greek view of the state as opponent of the individual citizen to one of a state serving the citizen.

 

Spain’s Podemos likely to make gains but will also have to compromise

In Spain two new parties, Podemos (We Can) and Ciudadanos (Citizens), will at the end-November elections in similar manner challenge the longstanding hold on power over 30 years of two established parties of centre-right and centre-left.  While Ciudadonos is a centrist party, Podemos is very similar to Syriza, except that Syriza is a coalition of formerly existing small parties, while Podemos has emerged as completely new since the 2008-09 crisis. It achieved considerable breakthroughs when local groups supported by Podemos won sufficient seats on the town councils of Madrid, Barcelona and some other cities, to appoint mayors. The new mayor of Barcelona, the 41-year-old Ana Colau was previously running a campaign group against evictions of families unable to pay mortgages while the new mayor of Madrid, the 71-year-old Manuela Carmena, had in the past been a leading member of a law firm focusing on employment law, who had seem some of her colleagues in the firm assassinated by right wing extremists soon after the restoration of democracy in 1975.

Creditor institutions are now claiming that a Greek recovery was beginning at the time of Syriza’s election victory in January 2015, but any such recovery was highly tentative and had not had any impact on the great majority of the Greek public. The Spanish government of Mariano Rajoy (Popular Party) can point to expected 3% growth this year and half a million extra jobs in the year to mid-2015. The opposition, which includes the traditional socialist party (PSOE) as well as the two new parties, can point to major corruption cases implicating the PP and continuing near 50% youth unemployment. Despite Podemos’ success in major cities, the two new parties, alone or together, are not likely to win the election. But they should become a significant presence at national level and could be part of a coalition of the centre-left.

 

Portugal prepares for a traditional two party contest

Portugal is holding general elections in early October. Remarkably, despite the severe austerity the country has experienced, there is no sign of any increase in support for non-traditional or existing far-left or far-right parties. The elections will be a close contest between the governing parties –the Social Democrats  and  Christian Democrats – which have recently united to fight the election– and the opposition Socialist Party. One reason may be that, despite government cuts and high taxation reducing living standards unemployment at 11% is much lower than the rates of 23% and 25% in Spain and Greece. Another could be that an active and independent judiciary has gone so far as detain the former Socialist prime minister, Jose Socrates, in prison since November 2014 awaiting trial for corruption and Ricardo Salgado, the head of the country’s largest failed bank, Espirito Santo was put under precautionary house arrest in July pending trial on a range of charges connected with his leadership of the bank. The public may therefore not feel the establishment is able to act with impunity.

 

Real change may still be possible

In Greece and Spain, anti-system parties have made gains and are likely to do so again in the November general elections in Spain. But they have been and will continue to have to compromise with internal and external forces they oppose. Even so they bring new energy and challenge vested interests. Some real change could be achieved, although it will fall well short of their ambitions.

At last IMF says the king has no clothes

It has been known for some time that the IMF considers Greek debt unsustainable and that any credible programme requires writing off a substantial proportion. But it is only on the eve of the Greek parliament voting on a brutally severe package of measures that it has said so openly and formally. Now, the creditors must be ready if the Greeks are to be expected to adopt measures which pile more pain on its already strained social fabric, to do what they are telling the Greeks to do: to face up to reality and admit that they have also made huge mistakes in the handling of Greek membership of the euro rate back to its flawed admission in 2002 and that by lending to Greece irresponsibly they did far more harm than good to the Greek people, acting little better than a backstreet loan shark.

It is pointed out that Greece’s votes for the Syriza government in January and in the July 5th referendum have to be balanced against the democratic wishes of the other 18 euro zone member states. But it should also be pointed out that whereas every Greek man, woman and child (except for a tiny minority with wealth held abroad) has had their lives drastically altered for the worse over the last six years, the impact on the lives of German or Dutch workers of writing off half of Greece’s debt would hardly be noticeable. Indeed actually it would just amount to acknowledging the reality that the money was lost when it was recklessly lent in the 2000s. Politicians in such countries would suffer scorn by the popular press but if the issue was tackled there would then be a reasonable possibility that Greece could recover and so no longer dominate the politics and newspaper headlines of the euro zone.