Italy’s Growing Debt Looms Over European, and Global, Economies
By IAN TALLEY
Sep 18, 2014
Looking at Italy’s ballooning debt, Germany’s reluctance to allow the European Central Bank free rein on the cash lever makes some sense.
The International Monetary Fund on Thursday cut its outlook for the Belpaese again, forecasting a 0.1% contraction instead of 0.3% growth this year. That means a third consecutive year of economic shrinkage.
Absent Teutonic market pressures that ECB action relieves, Rome may keep on its current path. (The failure of the government to move ahead with needed policy adjustments has led to a short term for Carlo Cottarelli, the IMF’s former Fiscal Affairs chief, as Italy’s budget watchdog. He’s announced an October departure.)
Perhaps like others in Europe, the IMF has consistently been optimistic about Rome’s ability to make the tough economic changes necessary to spur growth and cut debt levels. As a result, the fund’s also been consistently wrong. Its median forecast error for the past eight years is 1.6 percentage points above actual gross domestic product growth.
“While growth outcomes in Italy have sometimes tended to be worse than projected, the current growth projections are in line with consensus but below the authorities’ forecasts,” the IMF said in its latest annual economic review of the country.
At least for now. But the fund is honest about the risks. Deep structural changes—such as simplifying labor contracts and a more efficient judicial system—are urgently needed to secure a recovery and spur growth, the fund warns.
“The risks are tilted to the downside,” it adds. “Italy’s high public debt, large public financing needs and elevated [nonperforming loans] leave the economy vulnerable to financial contagion and/or low growth and inflation.”
Three years of Europe’s third-largest economy shrinking has pushed debt levels dangerously ever higher. It’s not a negligible risk for the rest of the continent, or for the global economy.
The IMF has had to repeatedly push its forecasts of peak debt higher and farther into the calendar, a mountain of obligations that risk overwhelming the country’s ability to pay in the years ahead, especially if the government can’t generate the political momentum for a raft of economic policy reforms.
Without structural changes to the economy, the fund projects Italy’s debt will continue to rise:
And so will the country’s need to raise more cash:
Italy has been somewhat insulated. First, by Europe’s bailout facilities and the ECB’s vows to “do whatever it takes.” Secondly, Italy’s debt has a long-term structure, meaning there aren’t immediate financing needs.
But, the IMF warns, the country remains vulnerable to a loss in market confidence given the size of its refinaning needs, which would push up borrowing costs. As the past several years have shown, it’s also exposed to growth shocks such as those that could come from the Ukraine/Russia crisis.
“In addition to being a drag on economic growth for the region and beyond, further unrest could also trigger large spillovers on activity in other parts of the world through a renewed bout of increased risk aversion in global financial markets, higher public spending or revenue losses, or disruptions to commodity markets, trade, and finance,” the IMF told global finance leaders Wednesday.
In stress tests, the IMF estimated that Rome’s debt trajectory could hit nearly 150%—up 15 percentage points from current levels—if Italy’s economy were to contract by an average of 1.3% over the next couple of years or if a banking crisis forced the government to bail out the financial industry.
Given that such a scenario would likely send shockwaves around the world, Italy’s sluggish efforts to restructure its economy are likely to be a topic at the Group of 20 meeting this weekend in Australia.
A senior U.S. Treasury official recently told reporters Europe’s lackluster growth would be a top priority at the meeting. “We’ve emphasized the need to boost domestic demand in Europe, and we’ve underscored that it will require implementation of more accommodative measures across the full range of macroeconomic policies,” the official said.
David Cameron promises to withdraw Britain from the European Union (yes – I mean it)
By Andrew Lilico
Politics and society
Last updated: October 5th, 2014
In his speech to Conservative Party Conference, David Cameron said this:
But we know the bigger issue today is migration from within the EU.
Immediate access to our welfare system. Paying benefits to families back home.
Employment agencies signing people up from overseas and not recruiting here.
Numbers that have increased faster than we in this country wanted … at a level that was too much for our communities, for our labour markets.
All of this has to change – and it will be at the very heart of my renegotiation strategy for Europe.
Britain, I know you want this sorted so I will go to Brussels, I will not take no for an answer and when it comes to free movement – I will get what Britain needs.
Free movement of people within the European Union flows directly from the concept of EU Citizenship. Indeed, more than that – prior to 1993 Europe was called the "European Community" and the switch to the name "European Union" was connected to the establishment of EU citizenship. We are citzens, with those red EU passports, of what the EU's official website refers to as a "political union" – hence "European Union" not simply "European Community".
The most fundamental feature of being a citizen is that one can move freely within the political union of which one is a citizen. A British citizen can move freely within the UK; a US citizen can move freely within the US; an EU citizen can move freely within the EU. EU citizenship has many other aspects, also – including rights to vote in certain elections, access to some benefits entitlement and the Charter of Fundamental Rights.
To restrict the rights of EU citizens to move freely to the UK would be to withdraw the UK from the EU citizenship area – i.e. from the European Union (for that is precisely, both in fact and in origin of the name, what the "European Union" is). Perhaps, if someone agreed to this, the UK could continue to be part of a "European Community" (though free movement of persons was largely in place even before EU citizenship – for those with a taste for such expressions, EU citizenship is a "sufficient condition" for free movement but not a "necessary condition" for it) despite being outside the "European Union", but there is no doubt that Britain would not be in the European Union if free movement were abandoned and hence EU citizenship withdrawn for UK citizens.
Now this may all seem rather semantic – so, the Prime Minister would negotiate that Britain would be in a European Community, and being in that would be the "In" option in an "In/Out" referendum? So what? Isn't that just word games?
It is not just word games, for three reasons. First, the substantive point is absolutely clear. One of the "Four Freedoms" of the Single Market is free movement of persons – along with free movement of capital, goods and services. Having a Single Market means having free movement of products (goods and services) and factors of production (capital and labour). Saying the UK wants to restrict free movement of persons but stay in the Single Market makes precisely as much/little sense (and for precisely the same reasons) as would saying "The UK wants to impose tariffs on imports from Germany and France but remain in the Single Market" or "The UK wants to impose capital controls on investment into Italy but remain in the Single Market". Restricting free movement would, in substance, be withdrawing from the Single Market and hence in substance withdrawing from the EU. The substantive question is unambiguous. The only thing left to consider is the semantic question – whether withdrawing from free movement would be called "withdrawing from the EU" or not. Since the EU is the zone of EU citizenship and EU citizenship means free movement, the answer must be "Yes – the UK would not be in the EU", though we might perhaps still be in some other form of "Europe".
The second reason it is not mere word games is that many schemes for "withdrawing from the European Union" involve continuing to participate in some other form of "Europe" – e.g. the "Norway option" of continuing to be in the European Economic Area. "Out" hasn't normally meant "no Europe", merely "exiting the European Union". But exiting the European Union is precisely what any form of restriction on the free movement of persons entails, by definition.
The third reason is that there are many folk to whom it will matter what it's called – on both sides. Many folk that would find an arrangement with our European friends perfectly amenable if its details were described would vote against it, if it were called "Being in the EU" and many other folk who would like that same arrangement would vote against it if it were called "Out". So let's be clear: whether one called the UK's arrangement that restricted free movement of persons "Being in Europe" or not, it certainly cannot be called "Being in the European Union". Cameron's promise to restrict the free movement of persons decides that point unambiguously.
Andrew Lilico is an Economist with Europe Economics, and Chairman of the IEA Shadow Monetary Policy Committee. He's also been a mathematical chemist, an opera singer, a philosopher, and a computer programmer.
Blinded EU can learn from one-eyed US
If you listen to German officials, their philosophy is hard to distinguish from Tea Party Republicans
By Edward LuceAuthor alerts
October 5, 2014xj
That noted economist, Groucho Marx, once said: “These are my principles. If you don’t like them, I have others.” Alas, Marx’s pragmatic sense of humour never crossed the Atlantic. Following years of “whatever it takes” firefighting by the Federal Reserve, the US economy is on the cusp of reasonable growth. Europe, on the other hand, is in danger of sinking beneath the waves. The cause of growing US-eurozone divergence is Marxian. Confronted by the failure of its principles, Europe insists it has no others. The US, on the other hand, has invented new ones as it goes along. Even the partially sighted can see the difference.
Europe’s deepest problem is institutional. Mario Draghi, head of the European Central Bank, views the crisis in much the same way as Ben Bernanke or Janet Yellen, his successor at the Fed.
Unlike the latter, however, Mr Draghi’s ECB lacks de facto independence. The Fed confronts as many critics in the US as Mr Draghi does in Europe. But it has a clear mandate to ignore them. For the past six years, US monetary hawks have warned of the coming tsunami of big inflation. Those jeremiads have redoubled after Friday’s strong US payroll numbers.
Thankfully, Mr Bernanke was able to get on with his job. If he had listened to the scaremongers, America would not now be in recovery. But the battle is never won. Ms Yellen now faces a renewed chorus.
Europe would be in a much worse state than it already is without Mr Draghi’s heroic efforts. Two years ago, he arguably saved the eurozone from breaking up by issuing his “whatever it takes” pledge to keep pumping liquidity into the markets. But the ECB’s actions came later, and were less aggressive, than they could have been. Mr Draghi is hemmed in by much the same constraints today. Surveying a Europe paralysed between a periphery that would reflate and a core that would restructure – when it should be both at the same time – the ECB remains the only game in town. Mr Draghi is once again trying whatever he can. If it is allowed to go ahead, the ECB’s plan to buy up to $1tn of private asset-backed securities ought to be enough to keep the eurozone’s head above water. But it will still be too little.
The second is political. At the key moment in the financial crisis, Capitol Hill squeaked through a majority in favour of an $847bn fiscal stimulus. The result was less than perfect.
Economists are still debating whether the boost was enough – it passed in January 2009 after the US had contracted by almost 8 per cent on an annualised basis in the previous quarter.
It was also poorly designed. Too much was frittered on thinly spread tax cuts and too little on game-changing infrastructure. With hindsight, it was also too small. But it was enough to turn a recession into an anaemic recovery. It is astonishing that Europe is still unable to follow suit.
The US political edge was shortlived. It is America’s good fortune that the Tea Party had not yet gained a veto over the purse strings in 2009. US fiscal policy has hit an impasse since Republicans gained control of the House of Representatives in 2010. It is Europe’s misfortune that Germany, which is Europe’s equivalent to the Tea Party, has wielded a veto over eurozone budgetary rules since the start. It appears none the wiser today. If you listen to German officials, and their counterparts in other core eurozone economies, their philosophy is hard to distinguish from Tea Party Republicans. The Great Recession was a morality tale that we brought upon ourselves. We must pay for our sins by tightening our belts now. If you don’t like our principles, you can shove it.
What will it take for Europe to heed America’s lessons? The circumstances are hard to picture. Europe is too politically divided, and too institutionally hidebound, to be able to duplicate the Fed’s rule book. The danger, in fact, is that the inspiration might be going the other way.
Friday’s US jobs report has renewed calls for Ms Yellen to raise interest rates early next year. There are no signs of real wage growth and median incomes are still almost 10 per cent lower than before the recession.
The US has caught Europe’s disease of declining labour force participation. Much of the drop in US joblessness is a result of people ceasing to look for work altogether. Though there is no evidence of inflation, the hawks want action to pre-empt it. Early tightening could stop America’s recovery in its tracks – and deal a further blow to Europe’s recovery prospects.
Things being relative, Mr Draghi would swap his problems for Ms Yellen’s in a second. Viewed from outside of the west, however, the US and Europe share deep-seated problems posed by the rise of the rest of the world and a populist backlash against democratic norms.
The US, at least, has clawed its way to a point where it can consider structural reforms, even if they are politically unrealistic. Europe is not even close to that. At a minimum, it should look across the Atlantic for how to restore growth. As that other noted economist, Albert Einstein, pointed out: the definition of insanity is to keep trying the same thing over and over and expect a different outcome.
Kirkhill said:
French 'mess' threatens real civil strife
To grasp the extent of the shambles that is French politics today, take the story of the "eco-tax".
By Hugh Schofield
BBC News, Paris
November 4, 2014
It could be a case study in how to induce paroxysms of voter fury.
The eco-tax was a levy, agreed on by all France's main parties, which would charge goods vehicles for using the roads. The money raised would help fund infrastructure and encourage other, cleaner, means of transport.
But some French people decided they didn't like it. They tore down the metal bridges where cameras for road-monitoring had been installed. They threatened to march on Paris.
The Socialist government, whose ministers had previously extolled its virtues, suspended the eco-tax. Then they binned it for good.
The end result is this. The private company contracted to organise the tax is claiming 1bn euros in damages from the state. It has built a nationwide grid of electronic monitors - destined now to rust - and employs hundreds of people.
At the same time, the money that would have been gathered from the tax - some 400m euros a year - is missing from the budget.
To replace it, the government has ruled that the price of diesel will go up - for all drivers. In other words, ordinary householders will foot part of a bill that was intended for the big polluters.
As for the rest of the shortfall, the government is casting about for ideas. One day, Ecology Minister Segolene Royal calls for a tax on all foreign lorries that drive through France. The next, Finance Minister Michel Sapin scotches her proposal because it is against European law.
So there you have it - all the ingredients of a modern French mess.
A "noble" cause taken up by the Paris establishment, which then buckles with fear when confronted by the "street", reneges on its commitments and plumps yet another tax on ordinary folk - all the while publicly disagreeing about what on Earth to do next and invoking Brussels as a higher authority.
Widespread pessimism
As the Hollande presidency stumbles past its half-way point, it is hard to overstate the depths of pessimism in the country.
For the eco-tax fiasco was not an unlucky one-off. It typifies perfectly the melange of incompetence, powerlessness, timidity and indecision to which the country's government has fallen prey.
To be fair, just about every French government of the past 30 years could be accused of similar shortcomings. L'immobilisme - basically a pride in the French model and a resulting failure to react to the world outside - began under Francois Mitterrand.
But now the crisis is deeper. The public accounts are close to ruin and yet state spending is still not coming down in any significant way. Unemployment is at 11% and yet the labour market is still not being put through serious reform. The young and the ambitious continue to look abroad.
And to cap it all, France has in Francois Hollande a leader who is about as far as is possible from being the man-of-the-hour.
The president makes a boast of being "normal", when the times require exception. He invites ridicule, when France needs someone of stature. He vacillates, when France looks for steel.
President Hollande said he loathed finance, when that was the expedient thing to do. Afterwards, he discovered the virtues of business, and appointed a former Rotchschild banker to run the economy.
Foolhardy indeed to conjecture what the president actually believes in.
Writing recently, veteran political commentator Alain Duhamel described the crisis confronting France today as "the worst since World War Two". He is not the only one to feel that the country is heading for something very bad.
For Jean-Sebastien Ferjou, editor of the right-wing news website Atlantico: "The political situation today is completely unpredictable. Anything could happen."
On the left, Liberation newspaper's Daniel Schneidermann says: "The volatility means we cannot rule out trouble on the streets."
All scenarios, of course, centre round the far-right Front National (FN) - the party that has been by far the greatest beneficiary of both the economic crisis and the popular turning-away from establishment politics.
For Alain Duhamel, the possibility of FN leader Marine Le Pen actually being elected president - totally unthinkable a year ago - is now not beyond the realms of possibility.
His "devil's scenario" consists of President Hollande dissolving parliament early - next year some time - because of the economy's continuing slide. The centre-right Union for a Popular Movement (UMP) wins a majority in the assembly but predictably fails to make much difference.
With mainstream left and right "in it together", Ms Le Pen romps home in 2017.
An alternative version has Ms Le Pen facing up against the returned Nicolas Sarkozy in the decisive second round of the 2017 vote. Then some new judicial scandal - saved up for this moment by his many enemies - engulfs Mr Sarkozy, and he falls.
What would happen in the event of a Le Pen government is for most commentators too awful to contemplate. "The saying goes that in France you need 500 people to run the country," says Jean-Sebastien Ferjou.
"In other words every incoming government needs 500 loyal and competent place-men and -women to take over at the top of the administration. The FN has about 20."
But even if the country avoids this scenario, the omens are grim.
The reforms, which nearly everyone agrees are essential, will no doubt continue to come - but at the rhythm of a drip-feed and never enough to halt the economic slide.
Then what everyone fears is some external event - an interest rate hike that makes the national debt unpayable, an act of terrorism - and such has been the collapse of faith in politics, the country could be on the edge of genuine civil strife.
With or without Britain, there will always be an EU
ERIC REGULY - EUROPEAN BUREAU CHIEF
ROME — The Globe and Mail
Last updated Saturday, Nov. 08 2014
A couple of years ago, it was little Greece that posed the greatest existential threat to the euro zone and, by extension, the greater European Union. Today, that dubious role goes to David Cameron’s mighty Britain. An EU shorn of Britain is no longer a fantasy and it’s an open question whether the EU could survive without a country that will soon displace France as its second-biggest economy.
Give or take an EU treaty, Mr. Cameron has been in favour of EU membership even if Britain would sooner adopt Greek as its official language than junk the pound and join the euro. But, in recent months, the prime minister has become increasingly shrill about the EU, to the point German chancellor Angela Merkel, the high priestess of EU integration, reportedly said Britain was near “a point of no return” in its relations with Europe.
Translation: If you’re going to be a knucklehead and insist on leaving, your loss.
While Mr. Cameron and his Conservatives have never been table-thumping supporters of the EU’s every treaty and regulation churned out in the Brussels sausage factory, they have, for the most part, recognized that membership in the world’s biggest trading bloc has certain advantages. Among other goodies, it has reinforced London’s status as the continent’s premier and unassailable financial centre, a status that Frankfurt and Paris can only dream about.
Lately, he has become the EU’s biggest critic and for that Jekyll and Hyde transformation, you can thank the perennially grinning Nigel Farage, leader of the UK Independence Party (UKIP). Mr. Farage’s stridently anti-EU and anti-immigrant bellows have captured the imagination of more voters than the Conservatives ever imagined. Britain goes to the polls next spring and UKIP could deprive Cameron & Co. of the reward they cherish – a majority in recognition that Britain is now the fastest growing European, and Group of Seven, economy with plunging unemployment to go with it.
UKIP won the EU elections in May. Last month, a Tory defector handily won a by-election to become UKIP’s first elected MP. On Nov. 20, another Tory defector is expected to hand UKIP its second by-election victory. Last week’s YouGov poll gave UKIP 15 per cent electoral support, against 32 to 33 per cent each for the Conservatives and Labour.
Now you know why Mr. Farage is beaming like a Cheshire cat.
If we had some clever software, we probably could precisely chart UKIP’s popularity rise against Mr. Cameron’s anti-EU rants. After the EU election, Mr. Cameron launched an all-out war to prevent former Luxembourg premier Jean-Claude Juncker from becoming president of the European Commission. He said Mr. Juncker was “the wrong person” for the job because he “has been at the heart of the project to increase the power of Brussels and reduce the power of nation states.”
Ms. Merkel appeared to support Mr. Cameron, then turned on him, handing him a very public defeat (Mr. Juncker is now EC president). Mr. Cameron’s next anti-EU eruption came when he made it clear that his government is “making every effort to control immigration.” That pretty much turned Ms. Merkel into a frenemy. Germany cherishes the EU “four freedoms” – the free movement of people, goods, services and capital. Take away the first through, say, immigrations caps, and Ms. Merkel loses her patience with Britain.
The last anti-EU eruption came when the EC, much to Mr. Cameron’s genuine surprise, handed Britain a bill for €2.1-billion or $2.9-billion (Mr. Juncker’s sweet revenge?). The amount represented back payment for a calculation based on Britain’s relatively high economic growth. Mr. Cameron fumed that the bill was “completely unacceptable” and refused to pay.
That was a smart move politically; if he had agreed to write the cheque, UKIP would have been handed a gift tied with a bow. But his refusal to stump up does not sit well with the rest of Europe. It hardly opened the door to a compromise with the EU – and compromise is the only way a motley collection of 28 countries can operate. If Britain won’t budge, why would Brussels?
Mr. Cameron has allowed UKIP to back him into a corner. As UKIP becomes more popular, the Conservatives will become more jarringly anti-EU, to the point, inevitably, that they will be incapable of defending Britain’s membership in the EU. If re-elected next year, Mr. Cameron has promised to hold an in-or-out referendum on EU membership, similar to the Yes-or-No vote he backed, and narrowly won, in September’s Scottish sovereignty referendum.
Mr. Cameron, a former PR man, has always been excessively influenced by the polls. How can he go from hammering the EU before the EU referendum to declaring the EU the greatest thing since Kate Moss during the referendum. He would get slaughtered for hypocrisy.
Britain, like most other EU countries, used to be known for its sense of moderation in tweaking the institutions and policies that govern the world’s most complicated union. No longer. No wonder Ms. Merkel may consider him, and Britain, a lost cause. There are no winners here, aside from UKIP. Britain’s exit from the EU would leave both as vastly diminished forces.
Empty Promises
Why France Won't Deliver for the Palestinians
By Rory Miller
NOVEMBER 30, 2014
Tomorrow, the French National Assembly is set to vote on a resolution recognizing a Palestinian state, a step already taken by the Swedish government, the British and Spanish parliaments, and the Irish Senate. Yet even with several other European countries looking to do the same, a “yes” vote would have little practical effect: it would be nonbinding, dismissed by the United States, and rejected by Israel. If such formalities really did matter, then a Palestinian state, which 134 countries have recognized, would already exist.
How the National Assembly votes and how the government of French President François Hollande responds does matter in other way—although not so much for Israel or Palestine as for France. The country is home to the largest Jewish population in Europe and the third largest in the world after Israel and the United States. Anti-Semitic attacks almost doubled in the first half of 2014 compared with the same period in 2013, and Jews are leaving the country for Israel in record numbers. This year, more new immigrants have arrived in Israel from France than from any other country in the world.
France also has Europe’s largest Muslim population, which is feeling increasingly restless and marginalized as well. The far-right National Front party, with its program of tough anti-immigrant measures, has made sizable gains in local elections across the country. Anger over such policies has only compounded a sense of injustice when it comes to Palestine.
Last summer, at the height of the Gaza crisis, tensions reached a fever pitch when thousands took to the streets of Paris and several other French cities. France’s ban on anti-Israeli marches and the violent clashes that ensued between the police and demonstrators recalled the infamous street fights of the early 1960s, in which hundreds of North African immigrants died protesting for Algerian independence. As one organizer of the recent demonstrations explained, “The Arab, the Muslim, and the black [are] going to public and expressing solidarity with a people under siege—and there’s a continuation of colonial policies of repression.”
Beyond such domestic considerations, the vote matters also because France, a permanent member of the UN Security Council, has demonstrated a long-standing ambition—bordering on a psychological need—to be taken seriously as a player in the Middle East. It is, in the final account, a referendum on whether France really is the West’s truest champion of the Palestinian cause.
DOG AND PONY SHOW
During the 1950s and 1960s, France was in a rather different position. As a major Israeli ally, Paris supplied the Jewish state with guns, intelligence, and nuclear know-how. But following the outbreak of the 1967 Six-Day War, French President Charles de Gaulle realigned France’s Middle East policy in favor of the Arabs as a way of rebuilding regional influence in the wake of the Algerian crisis. Since then, every subsequent French government has prioritized the Palestinian cause. And all have gone to great lengths to brandish their pro-Palestinian credentials.
De Gaulle’s immediate successor, Georges Pompidou, used France’s dominant position inside the European Community in the early 1970s to pressure his partners on the issue. Later, President Valéry Giscard d’Estaing allowed the Palestine Liberation Organization (PLO) to open an office in Paris, championed Palestinian national rights at the United Nations, and backed Palestinian self-determination during a visit to Kuwait in March 1980.
President François Mitterrand entered the Élysée Palace with a reputation for being an old-school pro-Israeli socialist. But when Israel invaded Lebanon in 1982, he fought for the survival of PLO leader Yasir Arafat and his organization. French soldiers participated in the PLO’s evacuation of Beirut in the summer of 1982 and its flight from Tripoli in December 1983. The media-savvy Arafat had little trouble summing up the French role in a crisp sound bite: “From the rank of a friend,” he told journalists, “France has now become a brother.”
A decade later, in Jerusalem in 1996, President Jacques Chirac refused to speak with Israeli parliamentarians and rejected the protection of Israeli security personnel on a visit to the Arab part of the city. He also became the first Western head of state to meet Arafat in Ramallah. This gesture resonated so deeply that during the 2002 French presidential elections, Muslim audiences chanted, “Chirac to Ramallah, Chirac to Ramallah,” recalling the landmark meeting.
By the early years of this century, the Oslo peace process was dead and Chirac was one of many world leaders criticizing Israel for its aggressive response to the second intifada. In 2004, the same year that Chirac cancelled a planned visit from Israeli Prime Minister Ariel Sharon, a terminally ill Arafat chose to spend his last dying months in a French hospital. Following his death, French soldiers loaded his coffin, draped with the Palestinian flag, onto a French military plane while an army band played the French and Palestinian national anthems. His remains were flown to Cairo. French Foreign Minister Michel Barnier followed close behind.
Although Chirac may have provided Arafat with an impressive sendoff, neither he nor any of his predecessors ever gave Arafat the one thing that he really wanted when he was alive: recognition of a Palestinian state. Despite their demonstrations of solidarity, none wanted to act alone and none had the requisite influence to carry their European partners with them. And little has changed since. French President Nicolas Sarkozy repeatedly promised to help bring about international recognition of a Palestinian state while in office. At the same time, he worked hard to repair relations with Israel, which had hit an all-time low under Chirac. As the two-year deadline for announcing a unilateral declaration of statehood drew near, Palestinian officials openly predicted that France would recognize their proposed state by the end of 2011.
But they were sorely mistaken. At the annual UN meeting of world leaders in New York in September 2011, with a U.S. veto looming and other EU nations still undecided on how to act, Sarkozy used his General Assembly speech to put forward his own proposal for Palestinian “observer status” as an alternative to a unilateral declaration of statehood.
Hollande has merely picked up where Sarkozy left off, further consolidating economic ties to Israel while openly expressing a general commitment to the Palestinian cause. That’s a far cry from his pledge, during the 2012 campaign, to bring about full international recognition of a Palestinian state. In response to criticism about Hollande’s inaction, his foreign minister, Laurent Fabius, has tried to explain what that promise actually entails. The “government’s responsibility,” he has stated, “is not just to recognize a state—a Palestinian state. It’s to make sure that it’s recognized on an international scale.” Fabius has also said the French government will “not shirk its responsibilities” if peace talks fail to progress.
With the latest round of failed peace talks unlikely to resume anytime soon, Hollande is under pressure to follow through with that promise. He has expressed deep frustration with the situation, bemoaning the fact that negotiations have been going nowhere for “too long.” Yet in his most recent meeting with Palestinian Authority President Mahmoud Abbas, in Paris last September, Hollande would not formally commit to recognizing Palestine. He was only willing to submit a draft resolution setting out a solution to the conflict before the UN Security Council.
The National Assembly vote is a response to Hollande’s failure to deliver on his pledge. But it is also a direct acknowledgment of the fact that, for decades now, French leaders have set self-imposed limits on their support for Palestinian statehood. In the mid-1970s, Giscard declared the Palestinians “an entity, a reality, a people” and expressed support for a Palestinian homeland but was unwilling to consider the logical outcome of those claims: a PLO-led state with juridical rights and duties under international law. It wasn’t for another six years, until March 1980, that he called publicly for Palestinian self-determination—widely understood as a euphemism for statehood.
French officials hailed this as an unprecedented move that cemented France’s role at the forefront of the European fight for Palestinian national rights. In reality, it was nothing of the sort. In the previous year, the foreign ministers of West Germany and Belgium had made the same call. Ireland had gone a step further, explicitly using the word “state” in relation to Palestinian aspirations a month before Giscard’s declaration.
France was also hesitant at another key moment, in November 1988, when the PLO’s leadership declared an independent Palestinian state without defined borders but with Jerusalem as its capital. The Mitterrand government had spent much of the first half of the decade fighting to save the PLO from Israel in Lebanon. But it still couldn’t bring itself to join the 55 Muslim, Third World, and nonaligned countries that recognized the PLO’s largely symbolic proclamation of statehood. Foreign Minister Roland Dumas explained that his government had “no difficulty” recognizing a Palestinian state “in principle” but that it was impossible to recognize a state that “does not dispose of a defined territory.” As a consolation prize, Mitterrand invited Arafat on his first official visit to Paris.
PRIORITY PROBLEM
There are two ways to explain the gap between French rhetoric and actions. The first is that France has been constrained by the hesitancy of its allies and by its long-standing commitment to a joint EU foreign policy. In 2002, during the lead-up to Palestinian elections, French Foreign Minister Hubert Védrine put forward a novel and controversial peace proposal. It began with what was long considered an endpoint—the establishment of a Palestinian state in the West Bank, the recognition of Gaza as Palestinian territory, and the negotiation of a final status agreement between Israel and the Palestinians.
The plan was dismissed in Washington, watered down in Berlin, and blocked by London, where the government of British Prime Minister Tony Blair vetoed every French attempt to build support within the EU. German Foreign Minister Joschka Fischer eventually sidelined Védrine and pushed a less ambitious version of the French proposal that dropped the French call for the immediate establishment of a Palestinian state and instead provided a timetable to establish an emergency government, elections, and a provisional state. It wasn’t so much the content of the original French proposal that was problematic. In fact, in late 2004, soon after Arafat’s death, Blair even considered putting forward a similar plan himself. The real problem was that the proposal came from France.
This leads to the second explanation: successive French governments have failed to gain traction for their efforts because they have been unwilling to work with the United States, hostile to Israel, and indifferent to the views of European allies. Instead, they have opted to push ahead with unilateral plans in the service of their own agendas and as a way of consolidating France’s status as the leading independent European actor in the Middle East.
This pattern began with de Gaulle, who didn’t bother to consult his European counterparts before he abandoned France’s pro-Israel policy in 1967. Giscard likewise didn’t inform French allies before calling for a Palestinian homeland in 1974, nor did Mitterrand before he publicly linked the Palestine problem to a peaceful end to the Iraqi occupation of Kuwait in 1991. Chirac, for his part, made surprise moves in other areas, resuming nuclear testing and reneging on past French commitments to European border rules. And he did the same in the Middle East, despite presenting his government’s activism in the region as an expression of the EU role there.
As Chirac told an audience at Cairo University in April 1996, his ultimate goal was to improve Franco-Arab ties, making Arab policy as central to French policy as it had been in earlier times. Less than a month later, Chirac sent Foreign Minister Hervé de Charette on a round of shuttle diplomacy between Jerusalem, Damascus, and Beirut to promote a French peace plan. Distrustful of French intentions, U.S. Secretary of State Warren Christopher followed de Charette to the region. When the two held a joint press conference in Beirut, de Charette made sure it was conducted in French, leaving Christopher oblivious to the proceedings until a quick-thinking French-speaking State Department official bounded onto the stage and started translating in his boss’s ear.
Although the French peace proposal ultimately came to naught, this brief linguistic victory meant that France could claim, at least momentarily, to be the key Western power in the Middle East. Washington wasn’t happy, of course, and Israel accused France of sowing “confusion.” But the real anger came from Europe; the Chirac government had not only launched a Middle East peace plan without going through the proper EU channels but had not even informed its closest partners about its plans.
More recently, Sarkozy’s September 2011 UN speech stirred a different kind of resentment on the continent. European leaders accused him of going public with a peace proposal based on ideas he had lifted from confidential and ongoing EU discussions with the Palestinians—all to improve France’s image abroad and his own political fortunes in upcoming presidential elections at home. Sarkozy, like Chirac before him, would later justify his own commitment to Middle East peacemaking in European terms. “I want Europe to take back ownership of important political dossiers such as this,” he said.
Hollande doesn’t share Chirac’s or Sarkozy’s flare for the dramatic. But he, too, has characterized French action on Palestine as a European imperative. In a recent speech to French diplomats, he acknowledged the “decisive” role that Washington had to play in finding peace but also urged the EU to action. “Europe’s role is as important,” he said. “It must act more.”
Ever since de Gaulle, the Palestinians have also hoped that Europe, with France in the lead, would act more boldly and that French recognition of a Palestinian state would be a “first step” toward Europe-wide recognition, as the Palestinian Ma’an News Agency put it recently. But having watched from the sidelines for years as Paris pursued national interests in the Middle East under the cover of promoting a coordinated European policy, European leaders have been unwilling to follow France’s lead.
In turn, no French government has been willing to go it alone and meet the key Palestinian demand—full recognition of a Palestinian state without defined borders but with Jerusalem as its capital. The upshot has been paralysis in French policy on Palestine completely at odds with the narrative successive French governments have spun. As the chances for further direct peace talks between Israel and the Palestinians fade quickly, as more and more of France’s European partners take action on the issue of Palestinian statehood at a national level, and as French parliamentarians prepare to vote, this reality is finally clear for all to see.
) and a few (several) other Euro members who be encouraged to put their fiscal houses in order.
E.R. Campbell said:I'm reading suggestions, in the newspapers I read, that Germany has decided that the Euro can withstand a Grexit and it may, perhaps, be about to happen. Greece would be pushed out of the Euro and would have to re-float its own currency (the gods alone know how :
