Macroleon’s EU strategy marches on !

On the evening of Tuesday 21st July 2020 President Macron was interviewed during the main evening news bulletin on TF1 – the principal commercial television channel in France. Mr Macron looked happy, relaxed and relieved. He had that morning finished a crucial marathon EU summit called to determine the Budget plan for 2021-2027, including a significant financing to relaunch the European economy following the Covid 19 crisis.

He was keen to point out to French viewers that the “historic” decisions taken were a direct result of his EU policy as presented when he was elected in 2017 and pursued systematically ever since.

President Macron emphasized that the agreement reached represented the substance of the Franco- German project announced on 18th May this year to relaunch Europe. That Franco-German co-operation and initiative was the only way to take the EU project forward. Without agreement on that axis, the EU could not advance [note the strategic reality in play here].

France will benefit from 40 billion euros of the 750 billion relaunch package agreed, ranking third in the order of biggest beneficiaries after Spain and Italy. Mr Macron explained that the cost of this was not going to be borne by the French at all, but by

  • a totally new EU level facility to borrow money
  • the introduction of EU level taxes on American tech giants like Google, Apple, Facebook, and Amazon
  • by taxing failure to comply with regulatory norms for the environment

Ergo the EU is wonderful because now that the EU is becoming even more integrated, the French taxpayer benefits without having to pay out !  A win-win scenario.

Macron is right, however, to claim credit for himself.

Having watched his meteoric rise from nowhere in terms of public profile, I can say that his plans for the EU are indeed working out as he intends. Previous blogs have covered his other projects along the way. This latest EU agreement represents an historic first in giving the EU as an institution the ability to raise money independently of its member states, both by direct taxes [gently introduced on big business – not the average European] and by direct borrowing on the international markets.

Note that this completely contradicts the assertions of Remain campaigners both during and after the Brexit campaign. They flatly denied that the EU was a Super State, federalist project despite all the emerging evidence both before June 2016 and in the years since. 

With the good fortune characteristic of his life and career, he has had an aging and waning German Chancellor to charm and out manoeuvre in order to get what he wants. Circumstances like that are a great help. But it is not all circumstance as critical as those are – remember MacMillan’s pertinent comment “events, dear boy, events“.

Macron has all the attributes of the successful politician. He has endless and effortless charm; he is extremely intelligent and highly educated; he has a pertinent grasp of the strategic and how to play it; he is eternally optimistic and this optimism helps him spin all he says to make his ideas and plans look like the only game in town worth watching and playing.

He is the consummate politician, make no mistake. And this agreement bears all the hallmarks of his political handling which includes:

  • taking and keeping the initiative
  • setting out the plans and procedures on his own terms, not opponents
  • obliging everyone to work within the terms and parameters he has set
  • persuading the media to represent opponents in a negative light [the sensible and cautious so-called “Frugal Four” – sometimes Five countries –  were designated as responsible for holding up the Salvation of Europe !]

But the reality is that this means the inevitable introduction of EU level taxes on European citizens, going into EU level coffers, for EU level projects regardless of the individual nation states. This is the same EU which for two decades has failed to have its financial accounts approved by its own auditors.

The reality is that this all important supranational level which dictates to member governments their laws and their policies, will now be subject to the vagaries of international lending and any associated conditions.

The reality is that the EU must resort to borrowing to finance the deficit left by UK exit as well as to carry forward the precious Federal State project of EU level Security and Military forces. This becomes even more significant because in order to get this Budget agreed, Macron had to buy off the Frugals by reducing their de facto EU contributions [via the Rebate mechanism which brought such opprobrium on the UK]. In other words, the people who are net payers into the EU pot, are now to have their contributions reduced – how then is the resulting revenue deficit to be off-set ?

As the Op-Ed piece for RT cited on the link below points out [perhaps a little too jaundiced-ly] this historic Budget agreement  does nothing to actually solve the underlying issues in the EU, either financial or social.

The truth is also that this agreement between heads of government remains a proposal until it passes the EU parliament and until it also wins approval from each of the 27 individual member States. A major hurdle, especially with the Green lobby voicing concerns.

But the truth is also that Macron being the clever politician he is, his Project represents the only option available. His Project was the only initiative taken in the first place, and that project has set all the terms on which the whole matter is being discussed. His project and no other has been agreed against considerable opposition – how could any other proposal stand any chance at all ?

By not having the initiative, the Parliament is – as usual – faced with accept the Deal Done or be responsible for the mess which results otherwise: we have to do something and something now because the economic consequences of the Covid 19 Crisis won’t wait for us to debate endlessly. 

Ditto the problem faced by the individual member States.

That’s why Macron set the Agenda.

Ray Catlin

Below are several links reference the EU Budget Summit outcome. They make interesting reading, as much for what they don’t point out as what they do actually mention.

For the official Elysee Palace statement on the Budget agreement, see

https://www.elysee.fr/emmanuel-macron/2020/07/21/jour-historique-pour-leurope

In each of the following 3 links there is no mention of the historic and landmark nature of the new Budget Proposal as claimed [correctly] by President Macron: –

https://www.france24.com/en/20200721-eu-leaders-edge-closer-to-striking-deal-on-covid-19-recovery-plan

https://euobserver.com/economic/148997

https://www.reuters.com/article/us-eu-summit/eu-reaches-truly-historic-deal-on-pandemic-recovery-after-fractious-summit-idUSKCN24M0DF

The distinctive RT Op-Ed piece [ attributing too much to German hegemonic claims and not enough to French] is at https://www.rt.com/op-ed/495499-eu-covid-19-bailout-ponzi/

And the inevitably polarised views of the UK Daily Telegraph and the UK Guardian are respectively at

https://www.telegraph.co.uk/business/2020/07/22/eu-leaders-sacrificed-ideals-tainted-accord-makes-little-economic1/

https://www.theguardian.com/world/2020/jul/21/eu-summit-deal-what-has-been-agreed-and-why-was-it-so-difficult

Lastly a revealing showcase Remain piece from the Guardian by a former adviser to Macron before he became President at

https://www.theguardian.com/commentisfree/2020/jul/22/recovery-deal-eu-unifying-economic-boost-integration

? ? ? EU watchdog to investigate German watchdog ! ! !

The European Securities and Markets Authority [ESMA] is to investigate the German finance watchdog [BaFin] over the collapse last week of German internet payments company Wirecard.

Wirecard collapsed on Thursday 25th June 2020 owing $4 Billion,  Reuters reports. Personally I am not aware of any other agency reporting this either in UK or France, despite today being day 3 or 4 of the news breaking.

Wirecard’s auditors for the last 10 years, EY [ie big 4 auditor Ernst and Young] said the hole in the company’s books was the result of a sophisticated global fraud, according to Reuters.

Reuters also states that allegations of financial impropriety have been linked to Wirecard “for years”.

Wirecard is the first company listed on Germany’s prestigious DAX index ever to go bust. Reuters reports that a report co-authored by Fraser Perring in 2016 alleged fraud. A source is cited by Reuters as saying that two-thirds of sales in its accounts were “faked”.

The ascent of Wirecard, which was founded in 1999 and is based in a Munich suburb, was dogged by allegations from whistleblowers, reporters and speculators that its revenue and profits had been pumped up through fake transactions states a Reuters report dated 25th June 2020 [see links below].

EY failed to identify this and act, despite the $ millions such firms are paid. Bafin failed to deal with this, despite being the German national authority charged to do so, and presumably funded by the taxpayer, either directly or indirectly.

The European agency tasked in this very area does nothing until its too late. How many EU regulations do they have at their disposal ? How much does their existence cost the European Taxpayer ?

Who on earth thinks that an organisation whose auditors have refused to sign off its accounts for two decades because of financial inconsistencies comes anywhere close to being credible to conduct an investigation  ?

How is it that all these expensively funded Corporate bodies tasked to ensure such scandals don’t happen totally failed in their mission ?

You need only one healthy brain cell and a normal sense of right and wrong to know the answer to that question.

Ray Catlin

https://uk.reuters.com/article/us-wirecard-accounts/wirecard-files-for-insolvency-becoming-first-dax-member-to-fail-idUKKBN23W176

https://uk.reuters.com/article/us-wirecard-accounts/eu-investigating-german-watchdog-over-wirecard-collapse-idUKKBN23X184

https://europa.eu/european-union/about-eu/agencies/esma_en

Latest EU projects mask French pretensions in Europe

Only children believe in Father Christmas – yet when it comes to politics, millions still want to believe in the political equivalent. There are the communists, of course. And then there are EUtopians – people who buy into the propaganda about unity and harmony in Europe.

In reality,  the EU is a utopian Dream with an expensive Brussels bureaucracy cloaking the hegemonic pretensions of the French government.

The failure of the EU is manifest every time a significant crisis arises in any domain for which Europe could be the appropriate scale on which to bring a resolution. The immigration crisis has gone on for decades with no clear resolution in sight. Today we have the Covid 19 crisis and the total failure of a unified response from the members of the European Union. The agreement on free movement in the Schengen area fell apart almost overnight as the rhetoric gave way to reality.

But the response to EU failure is the same every time: not reformation in order to become more effective in solving problems; but more powers and influence for an unreformed EU to carry on in the same useless manner. More powers, more money, more bureaucracy. Every crisis is seized on, not to solve the problem but to press for the implementation of the European Dream.

Why ?

Because in reality the European Dream is a propaganda front for French pretensions in Europe. France is, after all, the cradle of  La Declaration des droits de l’homme et du citoyen. 

Take the current Brexit negotiations. Yes I did say Brexit. There will be no real Brexit unless the UK leaves on 31st December 2020 either without a Trade Deal or else with the a Deal in accordance with the principles laid out by Boris Johnson.

The French EU negotiator Michel Barnier, however,  continues to press for the most outrageous subjection of the UK to the EU. [see HMG letter 19/5/2020 link below]. The EU refuses to give the UK the same terms they have already negotiated with other non member states [called Third Countries]. They seek in reality a perpetuation of Britain’s obligations to the EU without any representation in EU decision making processes. They seek to cancel out the repeated decisions to Leave taken by the British people in the 2016 Referendum and in the subsequent General Elections of 2017 and 2019.

And which country persistently takes the initiative to set the EU agenda, and to call for more European Union ?

FRANCE

This week witnessed another blatant example. In the news clip I saw about the Franco- German conference on 18th May 2020, Emmanuel Macron actually said that without an agreement beforehand between the French and German governments, there could be no viable plan agreed by the EU to get Europe over the Covid 19 crisis.

If you read the title of the link below to the Elysee Palace report of the video conference, it sums this up: a Franco-German initiative for relaunching Europe in response to the coronavirus crisis. 

And what is in this proposal ? President Macron wants the EU to take the unprecedented step of raising funds on the international money markets to the tune of half a Trillion euro. Yes, TRILLION. The EU is to become one State with all the trappings of statehood, including a national Debt. At present the EU has no debt; all its funds are derived from member states.

This step is proposed despite the fact that the EU’s own auditors have not approved their accounts for the last TWO DECADES !

Linked to that comes what appears to be a proposal for a European tax. The words in the report on the Elysee Palace site [link below] state:

L’amélioration du cadre européen pour atteindre une fiscalité équitable dans l’UE demeure une priorité, notamment en introduisant une taxation minimale effective et une taxation équitable de l’économie numérique au sein de l’Union …”

With the loss of the British contribution, the EU must find funds from somewhere. Many states who joined up for the handout are now faced with the obligation to fork out for the privilege of belonging to the Dream club. This proposal from the French and Germans comes ahead of the major summits to set the next 7 year Budget for the EU – a budget without the UK’s  £10 BILLION net contribution every year for 7 years.

The French are perhaps beginning to realise that post Brexit it will be almost impossible to get an EU Budget deal through on the basis of existing arrangements where member states finance the EU budget entirely themselves. The economic impact of Covid 19 makes this situation yet more dire.

In case you think I am being jaundiced, unfair or just plain wrong consider the record. The French and Germans meet ahead of every EU meeting. They have done so since the Elysee Palace Treaty of January 1963 ! Note the name of the Treaty – it’s not the Berlin Treaty, or the Chancellery Treaty. It’s the Elysee Palace Treaty agreed in Paris.

Why are these fundamental EU initiatives not coming from the appropriate and responsible forums  of the EU institutions, like the Council of the European Union or from the current 6 month presidency held by Croatia ? Or from the president of the European council ? Or from the European Parliament ? Or even from the EU Commission, the bureaucracy responsible for initiating legislation ?

When it comes to critical initiatives and the true agenda, none of the proper institutions are the source or inspiration.  The critical EU agenda for all 27 members is set elsewhere by the two economic and political heavy weights, France and Germany. And within that relationship, Germany is constantly obliged to respond to French initiatives; if she disagrees, Germany always risks being seen not just as a bad European,  but refusing to make up for its atrocious conduct in the last World War.

The French, however, have no such psychological inhibitions. They idolise Napoleonic Leaders; their Intelligentsia regard the Rights of Man as their Mandate and evangelising the world as their Manifest Destiny.

And their President believes Europe needs a new Napoleon.

Ray Catlin

https://www.elysee.fr/emmanuel-macron/2020/05/18/initiative-franco-allemande-pour-la-relance-europeenne-face-a-la-crise-du-coronavirus

The revealing contents of HMG’s letter of 19th May 2020 to Michel Barnier were:

1O DOWNING STREET   LONDON SW1A 2AA 020 7930 4433 http://www.gov.uk/number10

19 May 2020  

M. Michel Barnier
UK Task Force Secretariat General European Commission

(by email)

Dear Michel  

UK DRAFT LEGAL TEXTS   As I indicated during the last negotiating Round on 15 May, the Government has decided to make public the various draft legal texts we have sent you in recent weeks.  The texts are available at

https://www.gov.uk/government/publications/our-approach-to-the-future-relationshipwith-the-eu

and you may of course now share them, and this letter, direct with Member States.      We are making the texts public as a constructive contribution to the negotiations, and in particular as a response to your suggestions in the last two Rounds that it would help you explain our proposals in more detail to Member States.  We are very clear that we are not seeking to negotiate directly with Member States and that it is for you, as the EU’s negotiator, to manage any differences of perspective that may emerge. I hope that today’s publication will facilitate that work and clear up any misunderstandings about the purpose and effect of what we have put to you.     I would like to make three specific points that may help in that process.    First, we have tried to be clear consistently that we are looking for a suite of agreements with a Free Trade Agreement at the core.  We do not seek to remain part of the Single Market or Customs Union, as we do not believe this is in the UK’s interest.  Accordingly, as you know, our legal texts draw on precedent where relevant precedent exists (and we have made pragmatic proposals where it does not, for example on road transport or energy cooperation).  So, for example, our draft FTA approximates very closely those the EU has agreed with Canada or Japan.  Our draft fisheries agreement is

 – 2 –

very close to the EU / Norway Agreement.  Our aviation proposals are similar to those the EU has agreed with other third countries.  Our draft civil nuclear agreement is very close to similar cooperation agreements that Euratom (and indeed the UK) has concluded with other third countries.  And so on.

Given this reality, we find it perplexing that the EU, instead of seeking to settle rapidly a high-quality set of agreements with a close economic partner, is instead insisting on additional, unbalanced, and unprecedented provisions in a range of areas, as a precondition for agreement between us.    Second, we find it surprising that the EU not only insists on additional provisions, but is also not willing even to replicate provisions in previous FTAs.  For example, your proposals to us contain no provision for mutual recognition of conformity assessment (which the EU agreed with or proposed to Canada, Australia, New Zealand and the US); no sector-specific provisions for key industries with particular technical barriers such as motor vehicles, medicinal products , organics and chemicals (agreed with or proposed to one or more of Canada, South Korea, Chile and the US, among others); and no equivalence mechanism for SPS measures (agreed with or proposed to Canada, Japan, New Zealand, Australia, Mexico and Mercosur).

In services, the EU is resisting the inclusion of provisions on regulatory cooperation for financial services, though it agreed them in the EU-Japan EPA.  The EU’s offer on lengths of stay for short-term business visitors (Mode 4) is less generous than CETA, and does not include the non-discrimination commitment found in EU-Mexico.  The EU has also not proposed anything on services which reflects the specific nature of our relationship: indeed your team has told us that the EU’s market access offer on services might be less than that tabled with Australia and New Zealand.

Overall, we find it hard to see what makes the UK, uniquely among your trading partners, so unworthy of being offered the kind of well-precedented arrangements commonplace in modern FTAs.    Third, on the “level playing field”.  We agreed in good faith a set of commitments in the Political Declaration in this area.  Although it continues to be suggested that we are not willing to deliver on these commitments, as you know, our text sets out a comprehensive set of proposals designed specifically (as the Political Declaration puts it) to “prevent distortions of trade and unfair competitive advantages”.  Our proposals are closely modelled on similar arrangements already agreed by the EU with similar countries, notably in the Canada FTA.  Commissioner Hogan described the Canada provisions in March as “solid and anchored in a vast network of underlying international conventions and agreements”, and no doubt this is why the EU has found it possible to come very close to zero-tariff, zero-quota access in this and other agreements (some eliminating tariffs on over 99% of tariff lines) without finding it necessary to go beyond such standard “level playing field” provisions.  

 – 3 –

The EU is now asking the UK to commit to much more than that.  Your text contains novel and unbalanced proposals which would bind this country to EU law or standards, and would prescribe the institutions which we would need to establish to deliver on these provisions. To take a particularly egregious example, your text would require the UK simply to accept EU state aid rules; would enable the EU, and only the EU, to put tariffs on trade with the UK if we breached those rules; and would require us to accept an enforcement mechanism which gives a specific role to the European Court of Justice.  You must see that this is simply not a provision any democratic country could sign, since it would mean that the British people could not decide our own rules to support our own industries in our own Parliament.  Similar issues manifest themselves across labour, environment, climate change and taxation. We have been clear that the UK will have high standards and, in many cases, higher standards than those in the EU. However, we cannot accept any alignment with EU rules, the appearance of EU law concepts, or commitments around internal monitoring and enforcement that are inappropriate for an FTA.   The EU has used various arguments to justify its proposals:     – You claim that we are being offered a future relationship of unprecedented depth.  As I have set out, this is not obvious on the basis of the evidence we have so far.  We have nevertheless suggested that, if it is the mutual commitment to zero tariffs that makes these provisions necessary in your eyes, then we would be willing to discuss a relationship that was based on less than that, as in other FTAs.  You have said that you are not willing to have such discussions.   – You claim that it is the level of economic integration between the UK and the EU which justifies such provisions.  In fact, as a share of our economy, the UK is already less integrated in trade terms with the EU than Switzerland, Norway, or Ukraine.  Alternatively, you justify it in terms of trade flows: yet the EU did not insist that the US made any “level playing field” commitments in the TTIP negotiations beyond those typical to an FTA, although US and UK trade flows with the EU are roughly similar.   – You claim that the provisions are required on grounds of “proximity”.  This is a novel argument in trade agreements and is hard to justify from precedents elsewhere. The US and Canada, for example, trade together through a trade agreement without provisions of the kind the EU would like to see.  This proximity argument amounts to saying that a country in Europe cannot expect to determine its own rules, simply on the grounds of geography, and that it must bend to EU norms.  That is not an argument that can hope to be accepted in the 21st century.     I could set out similar concerns about the EU’s approach in other areas:  

 – 4 –

– on fisheries, where the EU’s position that access to our waters after the end of this year should be the same as now is clearly not realistic;

– on governance arrangements, where you propose a structure that is not replicated in other EU agreements with third countries except those which aspire to join the EU;

– on law enforcement, where you describe EU proposals as providing for an unprecedentedly close relationship, but in fact they do not go beyond agreements you have made with other third countries, many of whom have far less data to offer the EU and are less closely involved in the mutual fight against crime.  We do not agree that the simple fact of putting a set of standard measures into a single agreement can itself justify the exceptional and intrusive safeguards you are seeking in this area.
Overall, at this moment in negotiations, what is on offer is not a fair free trade relationship between close economic partners, but a relatively low-quality trade agreement coming with unprecedented EU oversight of our laws and institutions.

It does not have to be like this.  I remain convinced that it would be very straightforward for us to agree a modern and high-quality FTA and other separate agreements, like those you have agreed with other close partners around the world, and that we could do so quickly.  I do hope that in the weeks to come the EU will think again about its proposals in a way that will enable us to then find a rapid and constructive alternative way forward.     I am copying this letter to Jeppe Tranholm-Mikkelsen, Secretary General of the Council, and David McAllister at the European Parliament.

With best wishes

DAVID FROST Sherpa and EU Adviser