The moral implications of bail outs and austerity

Morally bankrupt.

Bankrupt?

How little we have seen of the human impact of the ongoing financial crisis in the Europe.

Of course we have seen reportage of the human reaction, be they stern faced Ministers assembling around large oak tables, shooing away the clucking throngs of news journalists awaiting any shred of carrion to be tossed from the wreckage, or the gathering crowds of unhappy protestors, waving banners before being strewn with rubber bullets by an equally unhappy, yet duty bound police.

And yet then, when we read on, we learn that Greece has asked for that, despite being reprehensible for having committed such and such an oversight, while doom laden Spain is sure to encounter this in their fate leaving it to Germany to propose that, and so forth.

As such the anthropomorphic labelling of whole countries is enabling both journalist and reader to be removed from what should be the real news story of the unfolding Eurozone disaster, the true cost to the everyday citizen. The people angle.

But it has suited the European Union to convey this image and the largely national-leaning print press to extenuate it. Define the problem as an entire country’s fiscal profligacy and then the only tool for debt solution is the EU's favoured austerity that must be shouldered by all. In Brussels it allows for a convenient bypass of democratic wont in order to transact further powers within their scope, while for national governments and newspapers, it conjures a sense of national unity  by lauding an "all-in-this-together" sermon that allows the weakest in society to be most heavily burdened, despite being the furthest removed from the causes of the crisis. What is so ironic is that while in Brussels, Barroso readily condemns the very notion of nationalistic, populist barriers to deepening European integration, he relies upon it implicitly to sell the Troika imposed programme of cuts to a nation. Everyone must do their bit.

Mr Barroso, it was your fiscal policy and foolhardy adherence to a single currency, placing political will before economic sense, that both caused the problem and continues to prolong it, so why must Senor Garcia be forced to work until his joints are ground to dust while his children will be taxed for the ills committed by their predecessors? I am sure when the concept of a single currency without unified fiscal policy was being drawn up he wasn't consulted.

Every country that found itself in the same position as the Eurozone after the credit crunch in 2008 was able to find a solution. In Iceland, the economy hit such a wall that the country defaulted and devalued the Krona. Iceland is now recovering very quickly and is borrowing again on the world markets as a creditworthy entity.

You see the debate that has raged in newspapers across Europe about what to do with a problem like Greece depends heavily on viewing each and every man, woman and child on an Athenian controlled island as both part of the problem and therefore responsible for its solution.

If a person borrows money, they receive the amount directly and must pay it back according to the terms and conditions. If a country borrows money, the citizens are unlikely to be informed of the loan, its purpose and certainly not its terms and conditions. How then does central government, let alone the government of a third country, morally justify imposed austerity?

Yet the personification of Greece as the naughty member of the Eurozone allows the EU to paint the picture of the reckless neighbour who, finding themselves unable to pay for their mortgage, appeals to the bank for help to keep their house. They are relucantly granted a reprieve on condition of some very stern, and of course wholly warranted, terms and conditions. Therefore if Greece gets a bail out at the cost of imposed spending cuts and strict austerity measures, then Spain would have to subscribe to the same punitive conditions if their economy is also to be rescued. Of course Senor Garcia cannot see why his benefits are being stripped when he has done nothing but work hard all his life. Meanwhile Germany, who does not find herself in such a financial mess, can bang the fist on the table and make demands which will affect the retirement age of Kirios Papadopoulos. Of course when I say Germany I mean Merkel and her cronies and their Brussels-based counterparts.

In 1995 Germany strongly opposed an IMF bail out of Mexico arguing moral hazard in giving a €17.8 billion loan as it essentially worked out as a rescue package for the American investors who had shored up so much Mexican short-term debt. Now the boot is on the other foot and it is German banks facing losses if Greece is allowed to go under, with as much as €22 billion of Greek public debt held by German investors. Suddenly Frau Merkel repeats the tune of solidarity for Greek and EU ears, but will happily pour scorn on Athens as and when it will placate her own people.

It may suit Brussels, political leaders, newspapers and ministers to talk about Greece, Spain, Germany, Portugal and Ireland as if they are characters in philosophical problem. But the real moral debate is not who should be paying the debt, but how.

Mr Barroso, you can stick your £6.4 billion where the sun don't shine (probably in a Swiss bank vault)

Today's press has largely revolved around the #CamDineWithMe thread.

Just who has the Prime Minister had to dinner?

One wonders whether Mr Cameron has had Jose Manuel Barroso over for fish and chips and a pot of tea, judging by the astonishing offer the President of the European Commission put on the table last week.

In a bid to push through the controversial Financial Transactions Tax, or Tobin Tax, which would see a levy placed on all international transactions that would go straight to EU coffers, Mr Barroso waved a tantalizing metaphorical wad of cash under our Prime Minister's nose.

He proposed cutting the UK's contributions to the EU by €7.7 billion, or £6.4 billion.

So far the UK has stood steadfast against the proposals which would see the City of London shoulder the bulk of the charges (around 80%) when similar levies are not applied in other countries. Fears that this would drive the Financial Services industry out of the UK have far from been assuaged by the Commission President's offer.

The tax would in effect allow national contributions by the EU to be cut in half, essentially moving towards the EU becoming a self-funded, and thus federal, set up. One imagines that the long term goal would be to steer all taxation towards Brussels, essentially subsuming the last bastion of sovereignty into the realm of the EU.

However the FTT would, in effect, be the City of London funding their federal dreams.

It is estimated membership fees could be cut by €54 billion, while countries could keep a third of the proceeds they levy themselves.

The idea, originally the brain child of French President and 'Anglo-Saxon'- hating Nicholas Sarkozy, couldn't work unless the choice was made unanimously and universally ensuring that such a system would operate around the world and that banks in London wouldn't simply up sticks and leave. It's hardly surprising that Sarkozy would want to make the City of London the EU's cash cow and has even gone as far as leading a pact of nine EU countries that want to see the proposed levy pushed through. Without the City, Britain's might would be significantly lessened, silencing the often most stubborn and uncooperative member state of Europe and making her more subservient to the EU dream, enabling France and Germany to step up and take greater control. For decades our Financial Services have been the envy of our European neighbours, putting us on an equal footing with other great cities like New York. Imagine being able to not only take that away, but use it to fund what was primarily a French conception of European supranationalism, and you can see why Sarkozy is going around with his clip board trying to extract the signatures of the other European leaders.

It's estimated the Financial Transactions tax would be worth some €54 billion, which suddenly makes the €7.7 billion sweetener look a little sour.

It's not hard to see why the City of London is so valuable to the UK.

Financial Services in the City of London employ 349,200 in London alone, and a staggering 1,111,500 across the UK.

The City of London contributes 2.4% to the national income, while financial services represent 19.5% of total national income in the whole of London.

The financial services sector accounts for 10% of the total national income of Great Britain. Staggering figures when you think that this is just one industry we are talking about.

The financial services sector as a whole made a total tax contribution of £63bn in the tax year to March 2011, representing 12% of total government tax receipts.

As the largest international banking centre in the world, with banks in the UK accounting for over 20% of global cross-border banking business, the City is an important attribute to the UK as a global player.

Total banking assets in the UK, at around £8 billion, are equivalent to more than five times the country’s total GDP.

Most of the world’s largest banks have their international business activities in London, including many foreign banks. In fact foreign banks in the UK currently employ around 124,000 people. By whacking an almighty tax on these banks, what is to stop them simply moving elsewhere?

Stamp duty is already paid on almost all financial transactions made already in Britain and is rightly under the onus of the UK Government.

Essentially the FTT is more than just a big earner. Politically it is a pivotal and schismatic blow that if pushed through could change the course of the EU forever.

It's hard to understand why we don't just follow the Swiss model and stay well away from the European Union. Last year Switzerland was ranked the wealthiest country in the world per capita. Its ranked 8th in the world in terms of GDP per capita, according to the World Bank and IMF and last year the Swiss Franc is one of the world's strongest currencies with the lowest inflation rate of 0.7%

It has one of the lowest rates of taxation in the developing world and an extremely felxible job market with one of the lowest unemployment rates in the world. Switzerland has free trade agreements worldwide and is home to some of the world's biggest companies. She continues to trade with the EU freely yet has resolutely blocked EU membership every time Brussels comes crawling.

Whether or not the UK would be like Switzerland if we were to leave the EU is unclear. But one thing is for certain. We would be a lot better off out.

Cloaks and Daggers

Another month, another Parliament in Strasbourg and another mass migration from Belgium to Eastern France of MEPs, assistants, lawyers, journalists and trunks and trunks of paperwork.
On the agenda for June is the Working Time Directive, this time manifesting itself in the sector of self employed drivers. The controversial 48 hour working week posited by the Commission has been kept out of UK law for the last decade due to a veto in the area of social affairs and employment. Yet following the accession of a new Commissioner for Social Affairs last year, there is pressure, particularly from the member states who have adopted the EU’s stringent policy on working time, to force the UK to kowtow to Brussels.
Extending the working time directive to cover self employed people is nonsensical. The policy is sold on the premise of protecting employee’s rights and therefore has no place in a self-employed framework. Yet the Committee would have you believe it was a matter of safety, disregarding regulation 561 which already covers driving time and is applicable to both large companies, small businesses and the self employed. This is instead a matter of advancing this unpopular legislation sector by sector.

Everything directly related to the business would be considered part of Working Time, for example, paperwork, maintenance and general administration. In large firms people are employed to do this, therefore administration time has no impact on driving time. Self employed drivers however must do their own administration and would find under the directive’s conditions little time left to do the driving itself.
I raised this issue in Parliament and will most certainly be voting to maintain the directive as it currently stands, and continue to fight against the expansion of the Working Time Directive, which acts more as a stranglehold on independent firms and arguably the right for people to choose the hours that they wish to work.



Also on the agenda this month is a discussion about the Schengen Information System. The Schengen Agreement was signed in 1985 between five of the ten member states of the then European Community: Belgium, France, Luxembourg, the Netherlands and West Germany. It allowed passport free travel between those countries involved and to date consists of 25 European countries, covering a population of over 400 million people and an area of more than one and a half square million miles. The UK as well as Ireland opted out of the agreement yet we do however participate in the Schengen Information System, which is a network of some half a million computers across the EU which share data on people, their movements and so forth in a bid to tackle the heightened possibility for crime that naturally come with border –free travel.

Currently Romania and Bulgaria are gearing up to ascend to the Schengen information system. Yet the question is whether adding more computers and more countries to the pack would jeopardise security further. Around a half of all computers at some point are victims of hacking. The booty for a computer criminal wishing to access such sensitive data is of course of immense value, and the more systems linked in, the greater the chance of access. Similarly, the passport free flow of people is not only convenient for businessmen and tourists traveling across the continent, but equally serves a growing population of traffickers and international crime lords. In order to combat this risk, the amount our everyday lives can be policed would most certainly have to deepen. Can we really be sure these countries are ready to adhere to the sort of technical standards demanded by such a sensitive system? Who will afford the development of their own networks? The current Schengen Information System relies heavily on the efficacy of each member state in monitoring and then sharing vital information. There is a great deal of trust involved, not only to do the job properly in each country, but to handle the data collected with respect and care.
Even though we never agreed to be part of Schengen, the necessity to cooperate with the information system due to visa free movement across the EU, means your data, as well as the data of people in 26 other countries, is accessible to people from Norway, to Greece and soon to Bulgaria and Romania.




Add to that a rather slimy rumour circulating the continental blogosphere about links between Jose Manuel Barroso, Commission President and EFG, Greece's No. 3 bank controlled by Greek billionaire Spiros Latsis on whose yacht Mr Barroso holidayed in recent times, a sin that saw even that nine-lived Mandelson lose his job, prior to another resurrection. This bank has been seemingly profiting from the Greek bail out
and Greece´s richest private banker, one Mr Latsis, who holds a 40 per cent stake in the Greece- Eurobank EFG Group.

And so I proposed during question hour a very reasonable question, that of whether this friendship could cause a conflict of interest. But just like a year 7 pupil trying to chastise the Headmaster, I was strictly informed that my question's insinuation was out of order and didn't warrant any sort of reply. A very cunning, and simple way to avoid sharing the true facts, one might assume.