The Bundesbank vs. The ECB: what’s at stake in Euro court case?

By Joshua Butt

Even before Mario Draghi finally introduced a market pleasing policy to match his political rhetoric to save the Euro at all costs, concerns were raised over the direction his “non-standard measures” were taking the European Central Bank (ECB).

Outright Monetary Transactions (OMT’s) were introduced with a promise to buy unlimited amounts of government bonds, with the aim to stabilise floundering Eurozone bond markets, particularly Spain and Italy, where borrowing has reached what economists labelled unsustainable levels.

The Deutsche Bundesbank (DB) has however refuted the legality of OMT’s.

Jens Weidmann, President of the DB, protested at the time of their introduction that OMT’s were no more than an attempt to allow states to print off the money needed to cover national debts, a policy falling well outside ECB’s mandate. Appearing in the German Constitutional Court recently, he reiterated that the ECB’s credibility was on the line if it failed to adhere to the strict mandate set out in the Maastricht Treaty.

The question must be however, why is it that the DB is so strongly opposed to OMT’s? After all, despite the policy being introduced last year, it has not been employed once and Spanish and Italian bond yields have remained relatively low compared to pre-OMT forecasts, leading Mr. Draghi to conclude in March that “It’s really very hard not to state that the OMT has been probably the most successful monetary policy measure undertaken in recent time.”

What is more, the OMT’s are not guaranteed without conditions attached: All bond-buying will be measured by the DB’s favoured response to the crisis, a healthy does of spending cuts and austerity. It certainly appears that the policy is working and is underpinned by a German endorsed solution to the crisis, so why introduce this court case?

For many residing within the ECB the message that this legal challenge sends to the European public and markets is that the Euro does not have Germany’s undying support, a message that will fundamentally unsettle any attempt to revive the economic health of the Eurozone.

The skeptics – and some holders of European government debt will certainly be hearing alarm bells loud and clear – jump to the conclusion that Germany will only back the Euro as long as it does not expose Germans to the cost. There may be an element of truth to this narrative and it is certainly one sure to resonate with the impoverished southern Europeans who have watched a decades worth of big-spending progress dismantled by ‘Troika’ (EU, ECB and IMF) enforced austerity, but for the DB this is in fact a matter of principle and it must stay firm in its challenge to the ECB.

The DB for many years has been the model of central banking, encouraging stability and fighting inflation as its primary goals. Its success convinced the founders of the ECB that this was the model that ought to be followed: A sober, steady, long-sighted bank, politically insolated, that could face the challenges of a unique experiment in monetary union. It is the banking system that balances the changing priorities of volatile politics. OMT’s reflect none of these profoundly sensible insights learned from German central banking. They are short-term, they are political and they are inflationary. OMT’s and similar schemes are not the realm of central banking, but it seems fall squarely into fiscal policy and is the responsibility of the political establishment.

The punch-line is of course that no such European body exists that can take such decisions, and certainly the political fall-out of national governments, asking taxpayers to guarantee the debt of another nation is unthinkable. The legal challenge of the DB on the ECB only serves to highlight the incompleteness of the European project. And that is what is at stake; while the court ruling (which is not anticipated for some months yet) will probably not recommend the end of German association with Europe, it will potentially define along what lines integration the Euro-project can continue. OMT’s may yet prove to be at least part of the answer that solves the economic woes of the Eurozone, however the direction the ECB is taking does not bode well for the political future of the EU, and it lies with the DB and the German Courts to halt their progress. Unfortunately by jumping into monetary union too soon it seems less and less likely that the project will ever be completed.

 

The Sochi boycott won’t happen, but we still need to reunite politics and sport

By Alex Bryan

Stephen Fry’s heartfelt and powerful open letter to David Cameron arguing that Britain should boycott the 2014 Sochi winter Olympics in light of Russia’s restrictive and prejudiced new anti-LGBT laws has provoked a debate about the relative merits of a boycott. David Cameron and Sebastian Coe were unequivocal in their response; both stated that they did not support boycotts, and that dialogue rather than isolation was the road to social change. Supporters of Fry point to increased violence against gay people in Russia, and argue that to participate is essential to collaborate with Putin’s government.

Though the suggestion to boycott Sochi is relatively new, sporting boycotts themselves are not, and the merits of boycotts as a method of achieving anything are at the heart of this debate. Coe claimed that he is ‘against boycotts’ as they do not ‘achieve what they set out to do’. This seems quite an extreme position; surely the success of a boycott in some way depends on the numerous variables at hand, such as the aim of the boycott, how extensive it is, how it is implemented etc. Some boycotts do seem to work, such as the sporting boycott of apartheid South Africa, so to take an absolute anti-boycott position seems extreme.

Regardless of whether it would be successful, given the position of Coe and Cameron and the necessity of mollifying the strategically important and volatile Russia, a boycott seems highly unlikely. In any case, a boycott of Russia would expose activists to accusations of hypocrisy; why boycott Olympics in Russia but attend in China? However, that does not mean we should ignore the suggestion, as the statements made by those opposing a boycott betray an underlying falsehood which is important to refute; that sport and politics should not mix. This supposed divorce between the two is fallacious, doing nothing to protect sport and everything to protect the oppressive regimes and the international sporting authorities who aid them from proper scrutiny.

A preliminary point to make, regardless of what one thinks of the suggestion of a boycott, is that governing sporting bodies, such as the IOC and FIFA, are responsible for choosing where their events are to take place. It is clear, from the IOC’s decision to stage the Olympics in China and Russia in two of the last three events, and FIFA’s decision to host in Russia in 2018 and Qatar in 2022 that oppressive laws are of little concern to these organisations, with potential economic rewards taking precedence. This is both sad and necessary; international sport cannot be a contest between liberal western democracies. The major emerging global powers (India, China, Nigeria and Brazil) all have sketchy human rights records, but will no doubt host global sporting events in the coming decades.

But maintaining the global nature of sporting events and incorporating countries with disgraceful human rights records is a different thing to separating sport from politics. The ancient Greeks realised this; the Olympic Truce may have suspended wars for the duration of the Games, but it was acknowledge that politics cannot be suspended, and the Games were often used for political purposes. By acknowledging that sport is not immune from political influence, that it is political, we take nothing away from the sporting event. Instead, we accept that it is a part of, rather than an exception to, regular human activity.

Rather than focussing our efforts on boycotting Sochi then, we should adopt a tactic which would be both more realistic and have more of a long-term effect, and focus on ensuring that politics and sport are no longer seen as distinct arenas. Politics is a part of sport; attempts to deny this are usually insidious, driven either by naked economic greed or ideological zeal. By ensuring the two are seen as united, or at least linked, we would in the process be ensuring that the rights of oppressed groups around the world are not ignored when commissioning events such as the Olympics. We would also be doing a service to the thousands of athletes who compete in countries where they would usually be given no chance for success on the basis of their gender, race or sexuality.

The state of British electoral politics

By Alex Bryan

In the Observer today the ever-excellent Andrew Rawnsley has written an article exploring the north-south divide in Britain. He demonstrates that the divide transcends class, that it is entrenched in British politics and, most importantly, that the party which manages to bridge the divide (or at least best identifies ways in which to diminish it) will reap the rewards of doing so. Though Rawnsley is on the whole correct in identifying the nature of the problem, I think there are a few aspects to it which he does not mention but which are important to bear in mind.

Firstly, Rawnsley notes that ‘The divide has become self-fuelling. A Tory in Bradford who fancies being an MP has a choice: find another ambition or leave Bradford. That is why Eric Pickles represents a seat in Essex.’ This only tells half the story, and leaves out a key component; the party machine. Candidate selection for both Labour and the Conservatives revolves around maintaining the seats of existing MPs (especially cabinet or shadow cabinet members) and planting those in the ascendency in safe seats to ensure a swift route into Parliament. The seemingly interminable procession of Downing Street advisors moving into Parliament demonstrates this. David Miliband, for example, had little connection to South Shields before being parachuted into the constituency.

This relates to the north-south divide at a basic level, in that the desire to ensure the best candidates being fielded by the party in an election get elected means the party apparatus places the best candidates (or at least those most likely to go on to high profile posts) in safe seats. This leaves the swathes of seats where the party had little chance of winning anyway contested by first-time candidates, former councillors and those ultimately seeking to do well enough to be allowed to run in a more winnable constituency next time. This clearly reflects the reality of the north-south divide, but it also exacerbates it.

Rawnsley, as I mentioned earlier, also noted that whichever party makes the nation ‘whole again’ awaits a great prize, presumably a streak of electoral success. However, it seems to me far more likely that this effect be achieved through the fragmentation of the nation rather than a process of political reunification, whatever that might involve. The referendum on Scottish independence will be more significant for long term British electoral politics than any other election in the next 20 years. If Alex Salmond gets his way, the departure of Scotland from the United Kingdom will be the ultimate gift for the Conservative Party. The Conservatives only hold one seat in Scotland, whereas England is a sea of blue dotted with island nations of red or yellow. For Labour, Scottish cessation would be a disaster, and could feasibly mark the beginning of the end for the party as a genuine force in British politics. The north-south divide will linger, but the north will be considerably smaller. Elections, hence, would no longer be fought in the midlands, but in the south.

Scottish independence would essentially relegate the north-south divide from being a genuine division across the middle of the nation into a regional anomaly, a patch of red over an overwhelmingly blue backdrop. It is difficult to imagine how Labour could end up with a similar sort of advantage, though Conservatives have a point when they say the current  constituency map already favours Labour.

Rather than such structural chance, it seems the most likely way in which the divide might be bridged, at least temporarily, is through individual politicians who can appeal to the Other Half of the divide. As Blair reached out to southerners and Thatcher embodied the social mobility and no-nonsense attitude of the north, individual politicians are in general more capable of uniting the north and south into a workable electoral coalition than parties as a whole. Parties reflect their demographic base, whereas individuals can disguise theirs. From this, it seems unfortunately clear that, barring Scottish independence, the north-south divide is here to stay. 

Ed Miliband’s Clause IV moment

By Phil Lewis

Nineteen years ago Tony Blair shook the Labour Party by scrapping Clause IV of its constitution, signalling the start of a new era of progressive politics.  The old left that had seen the Party lose four elections in a row was fading fast.  And in terms of electoral results, it was an incredibly effective strategy.  The demands for nationalisation that Clause IV carried belonged to a by-gone era.  If Tony Blair hadn’t done it, someone else would have.

And now, after two years of skirting around the subject, Ed Miliband finally has to confront his Clause IV – the Labour Party’s relationship with the trade unions.  After they overstepped the mark in Falkirk last week, the Labour leader was forced into addressing the most significant remaining remnants of the old, now wholly unelectable face of Labour. 

By announcing that union members will have to actively choose to pay their dues to the Labour Party rather than (as it is currently) having to actively opt out, Miliband has continued the process of modernisation that Blair kick starting nearly twenty years ago.      

But it’s a difficult balancing act for Miliband.  After all, he built his reputation as a Brownite, and only pipped his brother for the leadership via the union vote.  His father was a famous Marxist academic, and he even interned for Tony Benn.  Blair on the other hand had little trace of real left-wing politics in his make-up (ex public school boy with a Tory father).  It was far easier for Blair to set himself apart from the old left of the unions.  He was a moderniser, a Third Way progressive, and a social democrat who believed in the market economy, take it or leave it.  Luckily for Blair, the public took it.  For Miliband it is far more difficult.

Yet, as his bold statements this week show, Miliband hasn’t shied away from doing what is necessary.  He branded the events in Falkirk as “the death-throes of the old politics“, saying that it was “rightly hated”.  He toed a fine line between the old and the new, stressing the importance of keeping working people at the heart of the Party as well as the need to reform union law.  In moving the focus from the collective to the individual he has made a self-consciously progressive move.                          

It seems Miliband wants to create a sort of sieve like relationship with the unions.  The more politically proactive union members will join up and become fully fledged members of the Party, while those who were paying their dues out of duty to the union will be filtered out.  Labour will increase membership and potentially gain many a useful activist, but lose a significant portion of its income. 

Union officials are predictably scathing about the plans, with Unite general secretary Len McCluskey dismissing the financial cost as too great a burden for the plans to be workable. 

But this goes beyond financial sacrifice.  This is an important step in a series of reforms that has made the Labour Party a credible electoral force.  Before Kinnock’s initial efforts and Blair’s subsequent and more substantial ones, the Labour Party simply was not electable.  They had become the party of perennial opposition, and a party who is forever in opposition slowly loses its credibility as a real alternative.  And so with the left hopelessly split, Thatcher never really faced a credible electoral challenge. (The fact that her own party had to throw her out in the end shows just how useless the left were).     

I’m not suggesting that a failure to follow through with these proposals would see the Labour Party return to 1980s levels of ineffectiveness.  I am suggesting however that modernisation of Labour’s relationship with the unions has been on the cards for some time, and, like Blair’s scrapping of Clause IV, was bound to happen eventually.  Falkirk was merely the tipping point.  The straw that broke the camel’s back.  

And if Miliband successfully follows through he will have proved once and for all that he is not merely a union puppet, and that he may just have the necessary backbone to be PM.    

The Coalition: the imperfect solution to times of great uncertainty

By Sebastian Whale

Okay, they have been a mixed bag. Hastily formed at a time of great political uncertainty, contravening all natural barriers between the right and left, the Conservatives and Liberal Democrats formed an allegiance that seemed as unnatural as it did unlikely. Despite manifesto pledges being overturned and public humiliation orchestrated through tuition fee increases, EU referendum pledges, perversions of the course of justice and exposed penchants for expensive burger chains, this most unattractive of arranged marriages has put two fingers to the face of cynics who stated they could never peacefully co-exist. ‘Peacefully’, admittedly, may be a redundant term, given last minute vetoing of a “snooper’s” charter, the split positions on the AV and the conspicuous handling of news internationals bid for BSkyB. “It will never last”, the cynics contentedly stated, but for the good or detriment of the country, depending what side of the coalition fence one finds themselves, the coalition seem set on completing their pledge of serving a full term of office.

And I for one applaud this. Not because they have been a benchmark for excellent government policy, absent of controversy and bent political ambition, altruistic in their intentions and perfect in their execution. No, they have been far from it. From the initial years of withdrawing any policy that faced public scrutiny like an over-sensitive teenager, to blatant stubbornness at the thought of changing course on an “excel-error” based economic policy, the coalition’s inconsistency has been the only constant during their tenure. Sure, some positive signs have appeared recently, following the meaty bone being thrown to them by the ONS overturning the double-dip to the single, extensively deep recession only experienced under Labour. Finally realising the need for capital spending, the inherent opportunity of the development and production of shale gas and the renewal of investment needed in North Sea oil have been essential to this mini revival.

However, it would be too narrow minded to judge the coalition and their governmental output solely on the controversies and inter party struggles. The fact is, whilst there are seismic shifts in the composition of the global political landscape, illustrated by the Arab spring uprising, the emergence of extreme parties across European elections, anti-government protests seen from Turkey to Brazil, the need for compromise and calm has never been greater. During times of oppression, depression or even a convoluted state of affairs, the extremes can emerge and danger arises. Germany in the 1920s experienced hyperinflation and an extreme period of economic hardship, leading to the formation and election of the NSDAP – the Nazi party.

All across Europe, from France to Greece, far right and far left parties are gaining traction, as electorates seek to absolve the status quo associated with the plight they are currently facing. Rebels fighting against tyrannical governments such as in Syria, Libya and Egypt have been armed by allies in decisions that assuage some of the abhorrence the public hold with the actions by the Governments of these countries. However these actions echo an all too familiar tale of western governments arming rebels, leading to the inherent concern of “who are we arming?” such as with Afghanistan and the Russian invaders during the 1980s, which ultimately led to weapons and capabilities being handed over to what would eventually become the enemy of the Western world and the antithesis to freedom and democracy, the Taliban.

These are uncertain and perplexing times, not just confined to other continents. Nigel Farage and his merry UKIP men have seemingly put their mark on British politics as a right wing party that have become the voice of discontented middle England during times of economic deluge and high levels of income inequality, with no hint of irony or acknowledgement of this anomaly. The right have become more vocal, exacerbated by Boris Johnson worshipping and EU membership postulating. The left, through the appointment of Ed Milliband, have taken a diversion from the centre-ground hugging days of Blair and Brown back to its more core left leaning roots, as the unions may or may not be calling the shots and having influence over potential candidates. The centre ground would have dissipated, but for a coalition formed of polar opposite parties, naturally balancing the highly sprung seesaw of modern politics.

The fact remains, two polar opposite political parties by ideology, are attempting to naturally hug the centre ground and keep parliamentary procedure in check by forming an alliance I’m sure not anyone within would call a win-win situation. But while others all around are losing their heads, the coalition are achieving something many have forgotten the importance of during times of great upheaval, the skill of compromise. It’s miles from perfect; frankly it often isn’t pretty, but by demonstrating that parties on opposing ends of the political spectrum during periods of hardship can co-exist, however fraught and discombobulating, is an important signal going forward.

So here’s to the coalition. The frustrating, infuriating, imperfect solution, to what Britain needs to have now. History is not likely to capture their tenure as one of the great, policy rich governments but should, in my opinion, encapsulate it as an important statement of continuity and compromise, when all those around are seeking radical change that, as the annals of history has proven, can do more harm than good.

Gap years: A new form of colonialism?

By Phil Lewis

Gap years.  The not-so-new rite of passage for liberal-minded middle class students.  A year full of life changing experiences, life affirming moments and tearful yet financially motivated phone calls home.  A time where, like true saints, parents will shell out £1000 of travel expenses so that Timothy can build a new toilet in a Peruvian village.

Gap years are now seriously big business.  Companies such as Real Gap Experience offer the chance to build a house in Costa Rica for £479 (1 week), to “experience” Botswana for £2522 (4 weeks) and to “assist” in a Malaysian zoo for a bargain £799 (4 weeks).  Previous experience doesn’t seem to matter.  As long as you can stump up the cash they are happy to have you.  Whether the staff at the Malaysian zoo have any say in who is thrust upon them is not mentioned.  Presumably they are expected to take whoever is thrown at them, even if it is an incompetent halfwit with a debilitating allergy to all forms of animal.  You may say that such a person would be unlikely to apply for an animal based experience, but you see my point.

And there is certainly something rather colonial about the whole operation.  The idea that a developing country is incredibly lucky to have a British student assist in their community for four weeks smacks alarmingly of old-school Western arrogance.  Who are we to thrust these (let’s face it) relatively unskilled and inexperienced youngsters at a community that has most likely been functioning perfectly well for centuries?  The use of these poorer countries for the development of our wealthy youngsters can fill you with a sense of unease.

In a 2011 report from think-tank Demos, one in five people said they did not think their presence in the place they visited made any positive difference to the lives of those around them.  And there is one good reason for this – they did not offer any discernible skill or service that the community needed.  The fact that this basic supply and demand concept of capitalism has been removed in the gap year trade is worrying.  You now buy your experiences rather than earning them.  It does not matter if a community needs a volunteer.  It does not matter that they may need a certain skill set.  They are getting what they are given because the young person in question has paid his deposit.

This is not to say that the gap year as a concept is discredited.  A friend of mine is currently on a gap year placement, working for six months as a concierge in a Chinese hotel.  He accessed the scheme through his school, and to my knowledge is unpaid.  But in return for this he gets full bed and board for six months in a rather nice hotel, a free intensive language course in Chinese and a proper job that quite frankly looks excellent on his CV.  The hotel in question gets a charming and hard working concierge for very little expense.  Both sides benefit.

I also know of two people in particular who have been on an organised gap year trip to the developing world and got an awful lot out of it.  But in both cases they went for a purpose – one to help with a building project, and one to teach English.  They felt needed.  And while they may not have been skilled workers as such, by all accounts they were put to good use.

The “Gap” experience then is inevitably subjective.  You may find yourself at the heart of a community in desperate need of an extra helping hand, or you may find yourself feeling unwanted and with an awful lot of free time (in a Malaysian zoo, for instance).

Many young people are still choosing more traditional routes of experiencing the world – seeing their little darlings embark on a month-long Inter-railing trip round Europe may still make parents go misty-eyed with nostalgia.  There’s the Camp America route, where one becomes a Camp Counsellor for a summer and sings the American national anthem with increasingly forced gusto at six every morning.  And for the unimaginative gapper there is still the fallback of going aimlessly to Australia in the hope of getting some bar work and meeting an attractive blond.

But the worrying trend of “packaged experiences” still makes up the bulk of the gap year market.  And the potential gapper would do well to examine such an experience closely before parting with any cash.  He could, with a stroke of luck, get all the positive character-building experiences a gap year can provide.  Or he could end up paying £799 to spend four weeks feeding a despondent chimp in a rather desolate Malaysian zoo.

We can’t have it both ways on MPs pay

By Alex Bryan

In Britain, the popularity of politicians has been declining for a number of years. Since the expenses scandal though, it has become a sadly consistent fact of political life that voters have little but contempt for those who ostensibly run the country. A general election has happened and a significant amount of time has passed since the scandal, but the idea has very much become entrenched. The public hates politicians.

IPSA, then, must have known what the reaction to their findings that MPs should be given a pay rise from the current £66,000 to £70,000 would be. They will have predicted the indignant Middle-England howls of the Mail, the oppressed screeches of the Mirror and the mass disapproval of the public, handily surveyed by the Sun.

The more astute members of IPSA may even have foreseen the stampede of MPs desperate to be seen disapproving of the rise. All sides of the house lines up in front of TV cameras and microphones to assure the public that they didn’t deserve or want a pay rise. From Nick Clegg saying he wouldn’t take the rise to David Davis calling it ‘barking mad’, MPs across the board have rushed to ensure that they are not seen endorsing IPSA’s decision.

Given the overwhelming volley of abuse that has been directed IPSA’s way this week, one might have begun to wonder why this body even exists. IPSA, of course, was given the responsibility to set MPs pay after the expenses scandal, before which MPs themselves set their pay rate. Since IPSA was given responsibility to set this rate, it has not changed once, due to a wage freeze for MPS after the election.

Despite the fact that MPs have in no way been responsible for this announcement, they have still been subject to the standard anti-politician objections and corruption allegations they used to face. Why? Partly due to the media, which knows that an anti-MP line will be popular with readers, and partly because of a readership and electorate which assumes the worst of politicians before it has heard the facts.

If the public and MPs are not going to accept IPSA’s findings, then in its function as a pay-setting body, IPSA essentially becomes toothless. Its recommendations must be made to stick, regardless of how unpopular they are. The whole point of having an independent body making these decisions is to make them more likely to be good decisions.

Most people, and all politicians, if queried, will agree that MPs pay should be set by an independent regulatory body. The public, then, should face up to the consequences of their beliefs and decisions. To support the creation of a body such as IPSA and then to scoff at its findings because you don’t agree with them is clearly inconsistent. Either one must support the body, and its findings, or neither. We place trust in independent bodies to perform their tasks well. There is no evidence IPSA has not. Its crime had not been to be inaccurate, but to be too honest.

The public and the press cannot have their cake and eat it. They need to make up their minds. It is clear that MPs should not set their own salaries. We should give IPSA a chance to do its job properly, and the catcalls of a prejudiced public do nothing to aid this. The truth is, the uproar over IPSA has nothing to do with the body itself and everything to do with a nationwide hatred of our chosen representatives. Some of them took advantage of an expenses system, so now we allow nothing to pass without outrage.

This must stop. IPSA should be allowed to continue its job. Given the pay freeze, it is certainly not unreasonable to suggest MPs should be given a pay increase now. The press, the public, and indeed politicians, need to stop flaying the name of Westminster as an easy target and instead take the medicine which was administered in response to the expenses scandal. If not, it is the public that will suffer in the long run.

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