Archive for category EU

The austerity axe is falling across Europe. The only place it won’t fall is here in Brussels, the capital of overpaid, overprotected and underworked officialdom.

Klaus "does my grade look big enough in this" Welle

But first of all, I’m very sorry about the unscheduled break. I’ve had one of those months when I just can’t see the point – don’t worry, I won’t go there.

For my day job, I’ve been looking at the cohorts of officials who earn more than David Cameron, the British Prime Minister – read it here.

I guess the point of the piece is: Why should the EU be given a reprieve from the austerity axe?

Is Herman Van Rompuy really worth it? Or Baroness Ashton? – This couple, recently described by Helmut Schmidt as “Mr and Miss Nobody”,  were among the best paid politicians in the Western world until the euro slipped against the dollar in recent months.

Is the European Economic and Social Committee worth a penny? Or the CoR for that matter? Would anyone notice if they were axed?

How many of the 34,000 eurocrats in the Commission are really worth the very generous pay and perks?

During my research, I came across the interesting case of Klaus Welle, pictured above. If you didn’t know it already this great man is the secretary-general of the European Parliament.

Welle is an AD16 grade European civil servant, his gross salary is €216,301.08 a year, not counting all the perks that he is entitled to by droit d’eurocrat.

He commands the real power in the fake EU parliament – not over the 736 elected MEPs but as the chief of the unelected 6,166 civil servants who outnumber the deputies by over eight to one and who really run the place. (BTW, this figure does not include the 1,510 accredited parliamentary assistants, of whom more later).

Obviously, Herr Welle is very important indeed. Quite how important, or self-important, he is emerged when I was looking at parliament’s payroll to count the number of officials on the EU’s three highest paid, AD14, AD15 and AD16, grades.

The numbers are 16 x AD16, 26 x AD15 and 106 x AD14. All very straightforward but I was struck by the listing of one solitary official, a German, who was listed as AD99 – a salary grade that does not exist. “What was this about, is it Welle?,” I asked the parliament’s excellent press service.

Here’s the answer:

“You were right that the post labelled “AD99” refers to the secretary general. There isn’t really a grade called “AD99” – that is a shorthand for the fact that the post of secretary general is regarded as outside the main framework of staff grades, being formally more senior than everyone else. However, I am informed that the salary of the EP secretary general is the same as that of a director general (ie an official of grade AD16).”

What are we to make of this? Awarding yourself a special grade to show how important you are is the mark of a mandarin, a member of a caste, who is alive to the tiny sensitivities of privilege. Vanity and bureaucratic status not merit or ability are the measures of such a man.

What is his purpose, his mission? Welle, speaking to some newly recruited parliament officials in March, made it all clear.

“He said – our job is not a common one, and we have the responsibility to try to make “things move forward”, and “hopefully in the right direction”.
[...]
We should ‘push the limits’ to make the parliament gain power and weight in the institutional architecture. Help MEPs to use ‘the grey zones’, even of the Lisbon Treaty, to extend the sphere of influence of our institution.” Read the full account here.

It says it all really.

Naturally, Welle has played a leading role in the parliament’s obscene cash grab to increase the staff allowance for MEPs by €3,000 per month by next year. The surreal justification being that after the Lisbon Treaty our striving euro-deputies are completely overstretched and swamped by the pressure of work. If you believe that then you’ll believe anything.

As my research showed, there are already 19 assistants, or researchers to MEPs, who earn €91,136 a year, 12 pocket €84,508, there are another 21 who trouser €77,529 and so on.

The staff allowances need to be increased? Is this really needed? Does anyone else think so outside the Brussels bubble and Welle’s warped AD99 worldview?

Oh, Welle has also overseen spending decisions that will provide chauffeured limousines for the 24 chairmen of committees as well as a luxury courtesy car for Hans-Gert Poettering, the former parliament president.

We don’t need these people or the drain they represent on stretched resources. If national budgets are to be slashed then it is time to take the axe to the EU too.

Before you ask, I do not support austerity as an economic strategy. It’s little more than recycling and the current cuts binge is not future or growth orientated – more here.

However, that doesn’t mean I support state spending as it is presently constituted. For example, as a libertarian leftie type I have never welcomed the billions of public spending squandered on the security and anti-terrorism agenda that makes us less free.

A significant part of the so-called “welfare” state in Britain today is concentrated on policing people, hectoring claimants, nagging parents, pestering the “obese”, stigamatising unruly children or anyone else unlucky enough to fall into officialdom’s clutches.

I would gleefully relish and raucously cheer the sackings of the increasing legions of the securocrats, inspectors, police, petty officials and other “community” officers whose job it is intervene in our lives on the basis that we are too feckless or dangerous to be left to our own devices.

Get rid of them all, much of the 21^st century’s state is downright anti-social – and that includes the EU.

Austerity is not the answer to the crisis. It is an approach that is based on trying to cannibalise the present by trying to save or recycle existing resources.

Bring back the future

What is needed is a future orientated strategy which is based on productivity and growth. That is the only way out of this crisis.

Scrimping and saving to preserve, or bailout, failed institutions of Western societies, whether banks or states, is not going to work and has so far compounded the problems.

It is time to think about some creative destruction, away with the old and in with the new.

Europe’s sovereign debt crisis might well be manifested through irrational markets spasming in response to equally irrational political institutions but it does represent an objective problem.

European economies, long hobbled by low productivity and growth, are hit by recession and have been over burdened by non-productive activity, especially in the banking and financial sectors.

To put it bluntly, European economies are risk averse, in the red, over-valued and low growth – there is a objective risk for investors, especially when comparing Europe to other more dynamic parts of the world.

Wolfgang Munchau, writing for the FT, unpicks some of the destructive practices that have enmeshed European states with dodgy banks (also see my footnote on contingent debt here).

Like the “dodgy subprime collateralised debt obligations” that caused the banking crisis, he notes, the secretive Luxembourg based euro “SPV” bailout of two weeks ago has “substantive parallels” to the “notorious financial structures that brought us the subprime crisis”.

European states are using the same questionable and destructive financial practices that caused the crisis in desperate, and doomed, attempts to get out of a disaster of their own making.

It is not going to work. Like a “double or quits” loser each successive gamble just increases the debt burden and brings collapse closer.

The real strength of Munchau’s analysis is his appreciation that productivity and growth, not debt, is the real problem for European economies.

“Even a 150 per cent debt-to-GDP ratio would be feasible if the eurozone had an intelligent growth strategy. But it never did, and it still does not,” he writes.

Productive societies that create new wealth through high growth rates (creating exponential gains in resources) can carry and service debt (this is not to argue that high levels of borrowing on the sovereign bond markets or through expensive PFI schemes is a good idea).

Societies that have learned to live with sluggish growth, made a fetish out of stability and an ideology (environmentalism) out of the myth of finite resources are not able to meet their obligations. Europe needs something of a culture war to turn this around.

If the economy grows debt repayments are much less of a burden. It is simple: someone whose income rises finds paying back their loans easier.

More importantly, growth brings benefits (austerity only debits) such as rising living standards and innovation.

History has shown us that people will rally around a collective endeavour, even if it involves some sacrifice in the short term, if it means a growing economy and greater prosperity for the mass of the population.

Moreover, dynamic economies are marked by scientific development and technological innovation. Europe’s societies, tellingly, are marked by fear and hostility to scientific progress and new technology.

Led by Germany, but with Britain and the rest in train, Europe’s response to the crisis has been dominated by austerity, how to cut debt.

There have been no concrete proposals on how to promote long-term economic growth or innovation.

Two approaches – just two! – dominate the policy response, usually in a toxic combination for democracy.

The first is to squeeze consumption by increasing taxes, something that will lead to cuts in real incomes for most Europeans.

The second is to reduce public spending, especially on old social obligations (even if already paid for), again these type of measures tend to hurt the majority.

The EU’s discussion to date means that most people will suffer the effects of austerity for a crisis of financial and state institutions that was not of their making.

Europe’s elites are well aware of this and along with austerity will come measures to further insulate decision making and the state from popular accountability.

Decent holiday allowances, good childcare, proper health provision, rising living standards (consumption), a secular decline in pensionable age and a diminishing length to the working week will, our rulers tell us, be early casualties of austerity. These are things that generations of Europeans have worked (and paid) for.

Most of us regard such benefits, or aspiration to them, as a mark of civilisation. Should we roll over to allow decades of progress to be rolled back? Should our societies become less civilised because of this crisis?

We should reject austerity measures that compromise progress, while supporting public spending that is refocused on investment in reserach and infrastructure. Over on his excellent blog, Robert Killick has set out an interesting approach, which has pan-European relevance.

“The most effective way of opposing public spending cuts is to argue for policies which encourage faster economic growth,” he writes.
“A key element of pursuing faster economic growth is for the state to invest more public money in science and technology education, in the encouragement of research and innovation and in new infrastructure. This approach would involve some reorganisation and reprioritisation of public spending, away from consumption and towards investment. Most importantly, the government must generate enthusiasm for a more dynamic economy and society. This would mean challenging the risk averse, pessimistic and therapeutic aspects of British culture. It would mean rejecting the view that economic growth should be green and sustainable, all code words for slow. It would mean restoring the pursuit of excellence as a goal of society and it would aim to bring out the best in people.”

A big part of the problem across Europe right now is the ideology (across what calls itself left and right) that sees the crisis of capitalism as caused by excessive risk taking, consumption and growth.

To the degree that consumption growth in European societies ran ahead of rising output, it was only because growth was sluggish and there was not investment in the real economy and innovation.

Creative principles, allowing the old to be challenged because there are new things and possibilities coming into the world, are completely absent from discussion of the crisis among European elites.

In the post-war period, both right and left have become totally orientated around defending the status quo rather than looking to the future, something new.

Consequently, all mainstream political parties have embraced elements of environmental thinking, which regard growth as bad, resources as fixed and humanity’s innovativeness as primarily destructive.

To have innovation, old institutions and established ways of doing things must be allowed to fail, to be swept away by the new.

There are ideas out there. I am very taken with this Big Potatoes manifesto.

As its authors conclude: “It’s a moment to catch one’s breath, soberly reflect on what has been achieved by innovators in the past, and uphold what innovation could do in the future.”

European societies do need a shock. Not the negative impact of austerity measures to prop up the old but the creative shock of the new.

The bailout being negotiated in Brussels on Sunday is based on a lie, deceit and the worst kind of dishonesty.

A union of liars

It is bad enough, hysterical enough and irrational enough to change the way the EU works in a mad weekend scramble to make a deadline of when markets open on Monday.

But it is truly shocking that sweeping changes, which have huge implications for public finances, are built on a fiction which serves as a convenient alibi, a mechanism for the political class to evade accountability.

The legal basis for the new EU “stabilisation mechanism” will be the “exceptional occurrences” clause contained within Article 122 of the Lisbon Treaty – note my emphasis below.

“Where a member state is in difficulties or is seriously threatened with difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council, on a proposal from the Commission, may grant, under certain conditions, Union financial assistance to the member state,” states the clause.

“Exceptional occurrences beyond control”? This is a lie. A whopping, howling lie told to us by Europe’s political class.

This crisis is a product of human agency, the choices and decisions taken by people facing circumstances that are man-made and, thus, susceptible to political intervention.

To use a legal clause designed for earthquakes or potentially extreme unforeseen circumstances that threaten the existence of one member state to save the skins of the EU’s political class is profoundly deceitful – quite aside from being legally dodgy.

The huge liabilities created for public budgets by this decision – on top of the vast existing contingency liability of bank bailouts – were not inevitable.

The crisis is not an act of nature or forces beyond control. That is a TINA (There is No Alternative) lie that naturalises political decisions to reintroduce fate and fatalism into human affairs.

If this crisis caused by “exceptional occurrences beyond control” we cannot hold our leaders to account for their decisions, can we? It is not their fault. What a convenient alibi this is, after the bankers, a bailout for politicians.

There is an alternative. Governments can restructure debt. Governments do not have to borrow from private investors. Governments did not have to overstretch themselves, creating trillions in contingent liabilities (see footnote) to bail out banks. These are choices that the market “contagion” is reacting to.

Governments, in form of the EU do not have create a fiscal black hole to save the euro. There are choices, there are alternatives.

As with the bailouts we will hear a lot about the increased need for fiscal austerity, “pain” that we the citizen will feel. But this “pain” is not like the flu, some disease “beyond control”, it is the consequences that the public pays for overloading public finances to save banks and, now, EU institutions.

Europe needs a Marshall Plan, not bailouts. It needs collective endeavour to rebuild a European economy for the 21^st century. Let the financial institutions fail and let’s invest the trillions in making European infrastructure, transport, energy, IT and industry the best in the world. Let’s think about the future, not saving the skins of Merkels, Sarkozys, Browns, and the all the repugnant others, in the present.

Let’s have more Europe. Now is the time to talk about greater political and economic union. But let’s be honest, let there be leadership not the lies and evasions of the current Union of liars.

The use of Art. 122 means the euro bailout is based on the lie (like banks being too big to fail) that our politicians didn’t create this mess, it is, they tell us, an “exceptional occurrence beyond control”. What a snivelling pathetic lie.

FOOTNOTE

Three years ago the “contingent liabilities” resulting from government support to financial institutions amounted to 0.3 per cent of the EU’s total GDP.

In 2009, according to the latest Eurostat figures, these obligations, which depend “on whether some uncertain future event occurs”, had risen to 10.1 per cent of the EU’s GDP.

The uncertainty surrounding these bailouts to banks, which last year stood at an astonishing €1,192,271,000,000, is playing a major role in fuelling the present sovereign debt crisis.

In Britain, where debt is forecast to be 88 per cent of GDP next year, the extra risk associated with, as yet undisclosed, toxic assets amounts to £343,000,000,000.

The true figure is larger by a two-fold, at least, magnitude.

Here’s a sobering footnote from last week’s spring economic forecast: “Public money amounting to about 2 per cent of EU GDP has been injected into the financial sector in the form of recapitalisation. These measures affect government debt, but not the deficit. Moreover, guarantees to the financial sector of around 24.5 per cent of EU GDP have been approved by the European Commission, of which almost 8 per cent of GDP has actually been granted so far. Impaired asset relief and liquidity support to the banking sector, similar in nature to guarantees, amount to almost 4% of GDP (approved).”

Now the EU is creating even greater liabilities.