Europe will referenda itself to death

From Budapest to Paris to Cleveland, the West‘s blind idolatry of direct democracy will be its own undoing. 

"The referendum is a device of dictators and demagogues," declared UK prime minister Clement Attlee in 1949. No surprise, then, that Europe’s next anti-EU referendum following Brexit has been called by Hungary’s Viktor Orban.

The Hungarian prime minister’s absolute control over the political, judicial and media institutions in his country have been likened by many to the power of a dictator, including by European Commission President Jean-Claude Juncker. 

Hungary has attracted particularly negative international attention because of its brutal treatment of Syrian refugees trying to cross through the country to Germany. It is the latter issue that has prompted the referendum, scheduled for 2 October. 

Is this the Élysée or Melrose Place?

The French papers can hardly contain their excitement this morning over the catty details of the first scandal to come out of the Élysée Palace since the election of Socialist François Hollande – the self-styled “Mr. Normal”.

Journalist Valerie Trierweiler, Hollande’s partner (Americans – ‘partner’ is French for ‘unmarried fornicator’) made the faux pas of endorsing a rebel challenger to Socialist party standardbearer Segolene Royal in this Sunday’s elections for the French Parliament. This might seem fairly uninteresting, until you add the fact that Royale, herself the 2007 presidential candidate for the Socialists, is the former partner of Hollande and they have four children together.

The offending endorsement of challenger Olivier Falorni from the French first lady was made in a tweet posted by Trierweiler yesterday. The reaction from Hollande’s fellow Socialists has been furious. They have pointed out that not only has the tweet exacerbated the inter-party tensions and in a way that could cost the Socialists seats on Sunday, it also seems grotesque on a personal level. For the first lady to go out of her way to publicly insult and humiliate the mother of her partner’s four children seems exceptionally cruel, French politician Daniel Cohn Bennett said. But it seems entirely consistent with her previous behaviour toward Royal (more on that later).

Angela vs. the growth

As predicted, Socialist Francois Hollande ousted the centre-right Nicolas Sarkozy in French elections on Sunday after a campaign in which he railed against the German-led austerity drive in Europe. He has insisted that Europe needs to end its obsession with austerity to dig its way out of the debt crisis, and instead focus on growth.

Coming as it did on the same day that anti-austerity parties in Greece took a majority of the vote, Sunday has been interpreted as a Europe-wide rejection of German Chancellor Angela Merkel and her insistence on austerity and budget cuts. The markets have certainly interpreted it as such. Stock exchanges across the world have taken a dive the last three days, particularly in Europe, over fears that the delicately crafted ‘fiscal union pact’ worked out over the past several months is now about to fall apart.

Whether that actually comes to pass may depend less on Hollande than on how his victory is interpreted in other European capitals. All eyes will be on the new French president’s first meeting with Merkel next week, a day after he is sworn in on 15 May. It is in both of their interests that the meeting goes well. Hollande needs to walk away with something to say that he “renegotiated” the fiscal compact, while Angela needs to reassure the German people that Eurozone countries will still have to adhere to strict budgetary rule while at the same time reassuring the markets that there will be no Franco-German rift.

What will likely be worked out is the addition of a paragraph about stimulating the economy into the compact – something that wouldn’t require new ratifications by national parliaments.

Sarko presents a Latin/Germanic choice to France

Someone tuning in to last night’s presidential debate in France might have thought Nicolas Sarkozy was running for president of Germany. Praising the economic model of France’s eastern neighbour, he continually stressed that Germany is more competitive and an easier place to do business.

Even his Socialist challenger Francois Hollande had to agree with him. “Germany in all fields is better than us,” Hollande conceded, with a tone that seemed to imply, ‘if you love it so much, why don’t you go there.’

Germany and its chancellor Angela Merkel loomed large over this debate, although she was never mentioned by name. Sarkozy continually returned to a theme of defending his close partnership with the chancellor and her austerity regime for Europe. He has been accused, both in Germany and France, of being Merkel’s poodle. “We avoided the implosion of the euro,” he spat at Hollande incredulously after he questioned the austerity strategy. “It was hard work, which was founded on the Franco-German partnership. It is irresponsible to want to question it.”

And thus the lines were drawn in precisely the way Sarkozy wanted them. “For me, the example to follow, it is that of Germany rather than that of Greece or Spain,” said the president. He stressed that it was the Socialists who have been in power in Spain during the economic crisis, and today Spain’s economy is on the verge of collapse. Contrast that, he said, with Germany where his fellow conservatives have been in power. Germany has the most successful economy in the EU. Hollande, he warned, would make France like Spain.

The battle for the May Day voter

The first of May is always a big deal in France. This year it’s taken on an even more politically charged tone, with groups of far-left and far-right demonstrators possibly coming into conflict during the course of today. But it might be hard today to differentiate between the two groups based on their rhetoric alone.

May Day, originally a pagan spring festival, became an international workers day in the late 19th century. Ironically this Socialist holiday is unknown in the United States, despite the fact that it actually commemorates the 1886 Haymarket Massacre in Chicago. An American ‘Labor Day’ was instead set in September so that it wouldn’t coincide with international workers demonstrations. The day has long since lost any association with workers rights in the US.

But in continental Europe, the 1st of May is still a public workers holiday during which labour unions and activists demonstrate in the streets. It is also known for anti-capitalist violence, particularly in Southern Europe.

In recent years, the increasingly mainstream far right in Europe has challenged the idea that May Day is the sole domain of the left. The National Front party in France has begun to stage May day marches to the Place de l’Opera in Paris. There they hold a rally in front of a statue of Joan of Arc, who they have adopted as a symbol. This year, following the record 18% showing of National Front leader Marine Le Pen in last Sunday’s first round of presidential elections, it is predicted that they will garner the largest turnout ever.

Are Europe's conservatives now dependent on the far right?

Yesterday’s news that the government of Dutch Prime Minister Mark Rutte had collapsed sent almost immediate shock waves through the world’s financial markets.

Investors, who were already feeling skittish about the first-round victory of French Socialist presidential candidate Francois Hollande on Sunday, found themselves with something much more serious to worry about. The government of the Netherlands, one of the core austerity-pushing states of the Eurozone, couldn’t even pass the tough medicine they helped design for Europe.

Holland and the three other euro-using countries that still have triple A ratings (Germany, Finland and Austria) have pushed for every eurozone country to make massive cuts by the end of the month. But yesterday Rutte was forced to tender his resignation after it became clear he could not get his own parliament to approve the tough medicine he had helped design for all of Europe.

But perhaps more interesting from a political perspective is who it was that precipitated this crisis – the infamous far right leader GeertWilders. Rutte was only able to form his governing coalition in 2010 by relying on the backing of Wilders and his far right Party of Freedom group, which had polled at 15.5% in that year's election. Wilders has been tried in the Netherlands for hate speech against Muslims, and has been banned from entering the UK in the past.

Is Europe set for a Socialist comeback?

Yesterday’s first round of presidential elections in France delivered a humiliating defeat for president Nicolas Sarkozy, who trailed over one percentage point below his Socialist Party challenger Francois Hollande - the ex-partner of Sarkozy's 2007 rival for the presidency Segolene Royal. It is the first time in the history of the fifth republic that a sitting president has not won the first round of elections.

Public polling had predicted a Sarkozy win in the first round, in which all candidates compete, followed by a Hollande victory in the final round on 6 May, where the two leading candidates face off against each other. The low showing for Sarkozy already has papers predicting that, barring a miracle, Sarkozy is finished.

Much of Sarkozy’s trouble has come from Marine Le Pen, the leader of the far right National Front party. She came in at 18%, far higher than the previous leader of the party, her father Jean-Marie Le Pen, scored in 2002 when a split Left meant he came in second in the first round. Sarkozy has been desperately trying to win over the far right vote in France, telling French television that the country has “too many immigrants,” joining a crusade against halal meat, and saying the EU’s passport-free Schengen Area should be renegotiated. But it apparently wasn’t enough to convince the far right voters to vote for him.

Sarkozy now has two weeks to convince Le Pen’s followers to support him in the final round, but it will be a difficult task. National Front voters, aside from being xenophobic, racist and anti-EU, also have a strong anti-establishment impulse. This was reflected in Le Pen’s ecstatic victory speech last night, as she declared with a clenched fist in the air, “We have blown apart the monopoly of the two parties of banking, finance and multinationals. Nothing will ever be the same.”

This isn’t about the UK any more

The markets have returned to panic mode today as their confidence in national governments to approve the new Eurozone financial consolidation treaty wavered. Ratification has hit some bumps in the road, with Finland’s prime minister expressing dissatisfaction with the transfer of authority over national budgets to the EU on Tuesday. In Ireland, the opposition parties seem keen to force a referendum on the issue even if the country’s legal services rule that one is not required.

The euro fell below $1.30 today, its lowest point in a year. Yields on Italian bonds widened to new highs. It’s a familiar pattern we’ve seen repeated several times now: markets rally upon news of a new European Council agreement, but then crash a few days later when they look at the details and realise it’s not as strong as they’d hoped. The UK's abandonment of Europe may have been the big story on Friday, but now the more important story sets in - the markets have not been satisfied.

But there seems to be some confusion in the British media though about what this all means vis-à-vis the UK’s decision to veto the attempt at treaty change on Friday. The Spectator has run a column from the Eurosceptic think tank Open Europe scolding the British media for describing the UK as isolated as a result of the 26 vs. 1 outcome last week. There isn’t really any such divide, Open Europe insists, because many other member states support the UK’s reticence. As evidence that all is not what it seems, they run through the list of objections to the new treaty being expressed in national capitals this week.

9 December 2011: The day Britain left Europe

David Cameron emerged as the villain of the hour in the early hours of this morning as news broke that after tense all-night discussions, the UK has vetoed treaty change to save the faltering euro. The meeting then went to plan B, forging ahead on a new treaty with just the 17 countries of the eurozone. But nine non-eurozone countries then said they would also sign the new treaty, leaving the UK as the lone one out. This may sound like a small detail, but in reality it is huge. As the world press is reporting this morning, this effectively means the UK has begun the process of leaving Europe. And even the UK’s usual allies in the American media were aghast.

“UK Threatens Eurozone” headlined ABC News this morning. “UK to Euro nations: We’re out, good luck” heralded CBS News this morning. The reason for Cameron’s veto is bound to make him even more unpopular globally. In order to give his assent to the treaty change, which would not have affected Britain but only the countries using the euro, he demanded that the UK be given an opt-out from proposed increased regulation on banks and financial traders. That financial transaction tax (or 'banker tax') proposed by the EU earlier this year had nothing to do with last night's negotiations.

France and Germany balked, and Cameron walked. As one journalist friend noted last night, "The UK has refused to help solve the crisis because it wants to help the banks who started the crisis." Because the other 26 members walked away and went ahead without Britain, it means the financial transaction tax is still on the table, and the situation on that issue is unchanged from what it was before the summit. Cameron walks away with nothing.

Putting the global economy at risk in order to protect London City traders may not be the most popular stance given the current economic crisis. And Sarkozy emerged from the meeting this morning eager to exploit this. “You cannot have an opt-out and then ask to participate in all the discussion about the euro that you did not want to have, and which you also criticised,” Sarkozy declared to the press after emerging from the meeting at 5:30 this morning. It took Cameron a full half-hour after Sarkozy spoke to comport himself and figure out what he was going to say in his own press conference.

Cameron's choice tonight: will UK be inside or outside the room?

The degree to which the Left has become irrelevant in Europe was in evidence today as the European People’s Party (EPP), the EU grouping of Europe’s centre-right conservative parties, met in Marseille. The annual meeting of centre-right leaders, which coincidentally is this year a day before the final European Council, has toda become a first round in the treaty change talks. US Treasury Secretary Timothy Geithner has been there meeting with Europe's Conservative leaders, helping them to devise a strategy to save the Euro. Every leader who is important in this process was there today.

But it is not only the Left that is noticeable in their absence today in Marseille. Despite being a centre-right conservative leader, David Cameron is not there either. That’s because in 2009 Cameron took the decision to take his Tory party out of the EPP group and create a new, europsceptic grouping called ‘European Conservatives and Reformists’. That group is essentially just the British Conservatives, with a few hard right parties from Eastern Europe thrown in for good measure.

That decision, which was the fulfilment of a promise he made to the Eurosceptic wing of the Tory party in 2005 in order to be appointed party leader, may well be weighing heavily on the British leader’s mind today. He has already been locked out of the discussions amongst Eurozone leaders to devise a strategy to end the euro crisis. Now he is also locked out of the pre-summit meeting today in Marseille where so much of the strategy is being formulated. The later is a self-inflicted wound, and must be particularly hard to take considering it’s hard to see how creating a new EU group has benefitted the Tories in any way.

Kicking them while they’re down

It wouldn’t have taken much to make the US-based ratings agencies less popular in Europe. But Standard & Poor’s decision last night to put all 17 countries that use the euro on review for a possible downgrade has left European leaders seething with anger. Just two days before the make-or-break European Summit that was supposed to save the euro, the markets seem to have decided that whatever the European heads of government decide will not be enough.

Just hours before the S&P news broke, German Chancellor Angela Merkel and French President Nicolas Sarkozy had emerged from an emergency meeting in Paris outlining a plan for rapid and fundamental treaty change in order to stem the crisis – to be agreed on Friday. That, combined with Italy’s unveiling of drastic austerity cuts over the weekend, caused European markets to rally and Italy’s long-term borrowing rate to fall below 6% on Monday afternoon – the lowest it’s been since October. But S&P soon put an end to the party by announcing that the AAA ratings of the FANG countries (Finland, Austria, Netherlands and Germany) are in jeopardy. Without that AAA rating these countries can’t hope to bail out the collapsed economies of the PIGS (Portugal, Italy, Greece and Spain).

It’s not hard to see what influenced S&P's decision. Merkozy - I mean, Merkel and Sarkozy - had emerged from their meeting at the Elysee Palace in almost lock step. Sarkozy, who has been pleading with his German counterpart for months to embrace the idea of ‘Eurobonds’ that would collectivise European debt, suddenly did an about-face.

Who is the villain in the eurocrisis movie?

Cannes has seen its fair share of cinematic flops over the years. But this red carpet-laden city on France's south coast has never seen a political flop like the one it witnessed over the past two days. It had all the elements of an edge-of-your-seat political thriller: high stakes, sudden plot twists, personal rivalries and looming global disaster. But who is the villain in this particular script? Today there was plenty of finger-pointing to go around.

The leaders of the world's 20 richest countries intended to come to Cannes to come up with a solution to global economic crisis which is quickly spiraling out of control. But a shock announcement Tuesday from the Greek prime minister that he would hold a referendum on Greece's acceptance of the bailout package worked out last week changed all that. The resulting outcry threw the Greek government into disarray, putting it near collapse - which could have precipitated a global emergency. The leaders of the 20 richest countries in the world ended up working out nothing, spending the entire summit glued to their blackberries waiting for news from a tiny country in the Mediterranean.

The leaders left Cannes tonight with nothing to show for their meeting. No plan to save the eurozone, no funding, and no consensus. Indeed the G20 summit has ended with the world in a worse state than it was in when it started. Europe, and the world, could be just days away from economic collapse if the Greek government collapses tonight in a no-confidence vote scheduled for midnight.

Was it all for nought?

Greek Prime Minister George Papandreou is getting an earful today at the G20 summit in Cannes from world leaders furious at his shocking and sudden call for a referendum on the Greek bailout on Tuesday. The surprise announcement sent markets into a tailspin and seemed to, in an instant, eviscerate the deal painstakingly crafted last week by European leaders to save the euro. Now for the first time EU leaders are today openly talking about Greece leaving the Euro. Was last week's all-night negotiating session all for nothing?

Papandreou is facing the same level of fury at home, much of it coming from within his own party. His own finance minister broke ranks shortly after the announcement and reacted with incredulity to the idea of calling a referendum. Papandreou's Socialist government is now hanging by a thread as it looks like he will have to step down or face an imminent vote of no confidence.

Reports coming out of the G20 meeting this afternoon indicate that Papandreou may have been convinced to cancel his call for a referendum. But whether he cancels the referendum or his soon-to-come replacement does, it will only serve to enrage the Greek public further. Promising them a referendum and then snatching it away is undoubtedly worse than having never promised a referendum at all.

Just Lips service?

So the Euro is saved, for now. At 4am European leaders finally emerged from their talks to tell the fatigued journalists that after hours of very difficult negotiations, they had come to an agreement that will give the markets what they are demanding.

Perhaps it was the late hour, or the fact that the Polish presidency had closed the press bar at 11pm, but the journalists covering the summit initially greeted the announcement with scepticism. Many questioned whether the "bazooka" just unveiled really had the firepower to shield Spain and Italy from collapse. After all, this was not the first time the press had been held captive until late into the night in the Justus Lipsius building - or 'Just Lips' as I like to call it - to be told at the break of dawn that the euro would be saved. So in the end, was this just lip service? Or was this the decisive action the markets needed to see?

The agreement has three prongs:

• Private banks holding Greek debt will accept a loss of 50% on their Greek bonds
• The eurozone's main bailout fund (the European financial stability facility or EFSF) will be leveraged to €1 trillion.
• Italy will implement reforms to bring down the country's staggering debt, including a lowering of the retirement age.

Will Europe be saved tonight?

I'm here at the big EU summit in Brussels, the D-day event that is being billed as the last chance to save the Euro and prevent a collapse of the European economy. Even if the leaders emerge from those fortified doors having done everything the markets are asking, there will still be a long road ahead in this crisis. But this could be the moment they were finally able to turn the tide and appear in control.

Or it could be remembered as the moment where the entire European project collapsed. The tension in the press room is palpable. It's hard to say if it's coming from the stressed-out journalists or seeping in from the inner chambers where the European leaders are meeting. Either way, I would venture to say the Justus Lipsius building (or 'Just Lips' as I like to call it) is one of the most tense places on earth at the moment.

The markets need the leaders to come out of those doors and tell the press room two things: First, that they have amassed a trillion euro war chest to protect all of the Southern European economies, including Italy and Spain, from collapse. Second, that Italy has agreed to put in place a drastic austerity plan in line with what is being imposed on Greece.

UK sidelined as Cameron faces attack from Sarko and his own MPs

David Cameron's quest for influence at this week's Eurozone crisis meetings is meeting headwinds, to say the least. First French president Nicolas Sarkozy tells him to 'shut up' at yesterday's summit, and now he is facing a rebellion his back-bench Eurosceptic MPs.

Tonight the rebels will try to force a vote in the parliament to set a public referendum in the UK on its EU membership. Cameron opposes such a referendum and has instructed his party to vote against it, as have the leaders of his coalition partners the Liberal Democrats and the opposition Labour. But 70 Conservative MPs are expected to defy him and vote for a referendum.

Of course, the measure has no hope of passing. But commentators and the markets,will be focused on the message that the rebellion will send at this precarious and sensitive time. British foreign secretary William Hague, who is himself quite eurosceptic, told the BBC that the vote being forced by the back-benchers is "the wrong question at the wrong time" and has likened it to "a piece of graffiti". The vote will "create additional economic uncertainty in this country at a difficult economic time," he said.

Cameron has imposed a 'three-line whip' on his party to vote against the measure, which is the most serious whip a party can issue. Any MPs who disobey will be expected to resign from government jobs. Cameron has said the preceding Labour Party should have held a public referendum on the ratification of the Lisbon Treaty, and he has pledged to hold a referendum on any future treaty changes. But he says an 'in-out' referendum would be counter-productive. This is likely because he knows such a referendum could easily yield an 'out' result, plunging the UK into a diplomatic and economic crisis.

Indignant occupiers and the EU’s ‘sink or swim’ moment

The past few weeks have witnessed a remarkable coalescence between the months-old ‘Indignados’ movement that started in Spain and spread to other European capitals with the ‘Occupy Wall Street’ movement that started in New York and spread to other American cities. Coordinated demonstrations and unrest took place this weekend in from London and Paris to Brussels and Frankfurt.

I was in Italy on Saturday when Rome saw the worst of the violence outside Greece, and the news coverage was clearly unnerved in tone. Everyone is now wondering – where is this all going?

The protests on both sides of the Atlantic are expressing the same frustration: people feel powerless and confused by a North Atlantic economic crisis where solutions seem to be dictated by the all-powerful 'markets'. It's reminiscient of how the Pope in Rome excersised ultimate authority over kings and queens in midieval Europe. Now European and American leaders follow the dictates of 'the markets'. In 2008 following the Lehman Brothers collapse, the US congress was told that it must immediately pass a rescue package for the banks or 'the markets' would panic, causing economic catastrophe. Now European leaders are being told that they must immediately inject an enormous amount of cash into the struggling Southern European economies to prevent 'the markets' from panicing.

What would the world look like without the EU?

They used to say that when America sneezes, Europe catches a cold. That’s certainly what they (and I) were saying during the 2008 economic crisis, when misadventures on Wall Street and the subsequent collapse of Lehman Brothers created a disaster that quickly spread to Europe. How the tables have turned. Now the US is waiting helplessly to see if Europe can avoid a disaster that would eclipse Lehman Brothers in scale and could throw the US back into recession.

It’s a testament to just how important Europe has become to the global economy that it is now Europe’s sneeze that can give the world a cold. The EU is now a larger market than the United States, and over the past twenty years it has literally become the world’s regulator. Is it conceivable that this entire project could now collapse?

This is the question that is now being asked in the United States. When I was home last weekend I was asked by friends, “Is the EU going to fall apart?” Trying to show a bit of false confidence, I assured them that it is not. Germany is in the end going to suck it up and do what needs to be done to save the euro, I insisted, because the alternative is complete economic meltdown. The vote for the increased bailout fund today in the German parliament seems to go some way in justifying that optimism. The truth is that Europe’s problems are not insurmountable.

Sakozy loses French Senate to the Left

Small signs of hopes for the European left continue to mount. In a vote over the weekend the French Senate changed hands from Nicolas Sarkozy's centre-right UMP party to the Socialists. It is the first time that the Senate has ever been out of the centre-right's control since the creation of the current French state in 1958, and it is a stunning setback for the French president just seven months ahead of France's general election.

So is this outcome a harbinger of a wider reascendance to power for the left, not only in France but also in Europe as a whole? Like the recent centre-left victories in Latvia and Denmark, this news comes with some important caveats. For starters, French Senators are not directly elected by the French people. They are instead chosen by 150,000 local officials throughout the country. These include mayors, city councelors and regional councelors as well as members of the lower house, the National Assembly.

In terms of power the French senate is much more similiar to its British cousin the House of Lords than to its American counterpart. The real power in France, after the presidency, lies with the National Assembly. The Senate can propose law and it must sign off on law, but like in the UK with the House of Lords, they can be easily overridden by the lower house and the president. Like with the House of Lords the French senate is often considered a refuge for people who used to be important, such as former assembly members or cabinet officials.

Will Europe federate, or separate?

People here in Brussels have cautiously started to use the F word again. Though it has long been banned from people's vocabulary after the traumatic experience of trying to ratify the EU constitution and Lisbon Treaty, ‘federalism’ is again being heard in the corridors of power. The federalist idea – to create a "United States of Europe" – back.

European Commission President Jose Manuel Barroso signalled as much in an impassioned speech to the European Parliament this week in Strasbourg. "What we need now is a new, unifying impulse – a new federalist moment," he told MEPs. "Let’s not be afraid of the word – a federalist moment is indispensable.” Federalist parliamentarians rejoiced. The people may have rejected the idea of a European superstate, but now the markets are stepping in and demanding one. Could it be that the fulfilment of the 'European dream' could be triggered not by Europeans themselves, but by the markets they've created?

The federalist rejoicing may be premature. All that is clear right now is that the EU cannot continue operating the way it has. Europe is at a crossroads, and it is being pulled in two different directions. On one hand, the public has grown weary of the European project and the mood of the day is calling for more local control. There is an increasingly vocal minority in Europe who want to see the EU project walked back or for the institutions Brussels has built up to be dismantled. On the other hand, the economic circumstances and the euro crisis are pushing Europe toward greater federalisation in order to avert a catastrophe. The markets are calling for more integration, and European leaders agree with them.