EU: Austerity, Brie, Merci

Okay, let’s first deal with the boring but important bit — money.

It’s Budget Time in Europe, and governments from London to Lisbon, from Rome to Riga are in a tizz over their commitment to the ailing European Union. On Thursday, a summit begins in Brussels at which Eurocrats — more than 50,000 of them —get to salivate over how much of the proposed €138 billion annual kitty they can get their mitts on. Importantly, these are not the funds used to bail out stricken members, as has become the Eurofashion, but the basic bucks for keeping the bureaucracy oiled, amounting to €1 trillion over seven years.

Some German diplomats have likened London to Statler and Waldorf, those two old duffers from The Muppets, snarking from the sidelines.

Of course, there are frictions, and serious ones, too. As winter looms, Europe is broadly split between the rich and chilly Calvinist north and the steamy, profligate, mostly Catholic south and east.

Britain, Germany, Sweden and The Netherlands want Brussels to keep its head for money, insisting on cuts in keeping with the recent EU mantra of austerity. Just about every other member country, including the Brussels bureaucracy, wants more cash to press its snout into.

Britain seems most vexed by its European membership. Conservative Prime Minister David Cameron wants cuts to the EU budget and better oversight on how it’s spent. That idea seems popular among Brits, most of whom don’t want to be in the EU anyway.

<p>Dan Kitwood-WPA Pool/Getty Images</p>

Dan Kitwood-WPA Pool/Getty Images

British PM David Cameron and German Chancellor Angela Merkel both want to force the EU to tighten its purse-strings, in keeping with the austerity mantra coming out of London and Berlin.

But Cameron’s Tories are also the party of Big Business which likes that Britain is in Europe.

And Cameron needs votes — he’s 7 to 10 points behind Labour in the polls. That’s about as many points as have leaked to the UK Independence Party, led by Eurosceptic Nigel Farage, a former Tory who left the party in 1992 when John Major endorsed the Maastricht Treaty that created the EU. After copping a bloody nose in Parliament last month when 53 Eurosceptic Tory rebels broke with him after a debate about the EU budget, Cameron can’t afford to soften.

Britain and Germany seem to be in broad budgetary agreement, but the Germans articulate Europe-wide exasperation at Whitehall’s constant sniping on Europe, saying it risks the entire European project, which is primarily financed by Berlin anyway. Some German diplomats have likened London to Statler and Waldorf, those two old duffers from The Muppets, snarking from the sidelines.

And let’s not forget propping up the lifestyles of grumpy French farmers — about a third of the EU budget goes on the Common Agricultural Policy.

What does the EU budget actually pay for?

The European Union’s main purpose is to equalise the bloc’s economies, a process which it calls cohesion. Funds are provided by member states, primarily the rich northern ones, and then dispersed by the EU to raise up the lesser regions, most often found in the continent’s east and south.

There are also countless civil society aid programs to support around the world, and myriad EU agencies to fund. And let’s not forget propping up the lifestyles of grumpy French farmers — about a third of the EU budget goes on the Common Agricultural Policy of huge subsidises that keeps European farmers tending their land — and woe betide the domestic political fortunes of any summit-going French president, particularly hero of la gauche François Hollande, who ventures to Brussels with plans to cut any more of the CAP.

Meanwhile, honest hard-working tax-paying Europeans in places like The Netherlands reckon the Brussels bureaucrats are just Moet-swilling papershufflers. Sacre bleu, claim these Eurocrats now agitating for a 5 to 6 per cent budget increase — and this,  remarkably, in the time of extreme austerity.

The fatcats insist there are some important projects to finance — such as the €50 million required to fund their own House of European History in Brussels, and the €300 million needed to build a new home for the European Council, the EU’s paramount secretariat.

Among the European national leaders — Merkels and Montis, Klauses and Kennys — in Brussels this weekend will be Thorbjørn Jagland from non-EU Norway. Jagland is a lifelong Norwegian Labour Party hack who heads the Council of Europe, which claims as its purpose the promotion of cultural co-operation, the rule of law and other noble undertakings — all of which are also done by the EU.

<p>Heiko Junge/AFP/GettyImages</p>

It’s not entirely clear what the Council of Europe is actually for, but it exists, a bureaucracy to be kept afloat for people like, well, like Thorbjørn Jagland, once briefly Norway’s PM, to slide into when the voters kick them out at home.

Though the Council of Europe, which costs €354.34 million annually to run, is strictly speaking not an EU institution, Jagland’s €261,570.48 annual salary and those of the CoE’s 2,139 employees are around 80 per cent funded by the EU and its member states.

(But it’s Jagland’s other job that has made him a very popular figure in the salons of Brussels. He’s also the chair of Norway’s five-strong Nobel Prize Committee, the crowd that hands out the annual Peace prize. Jagland is a career-long advocate of Norway joining the EU. He’s written books and campaigned in Oslo on the topic, but failed to make it happen. There is barely a more eloquent advocate of EU membership for Oslo than the 62-year-old Jagland. The high-minded Nobel committee that he chairs, as it never tires of reminding the world, is supposed to be above petty politics, or acting as a vehicle for Norwegian concerns. So where did the Jagland-chaired committee bestow its Nobel Peace prize this year? Why, it awarded it to the EU, the very same European Union that pays the bulk of Jagland’s salary. Perish the thought there may have been a conflict of interest — that would be very un-Scandinavian, very ig-Nobel.)

Spain’s troubled mortgages now equal a staggering 17.4 per cent of the national GDP. In 2007 it was less than two per cent.


How’s Spain doing? It was the dodgy one when we last looked.

It still is, although, Spain’s PM Mariano Rajoy this week declared the worst is over — becoming another voice in the chorus of Euroleaders to claim so. But his big credibility problem is that just as he made his claim, the central Banco de España revealed that the suspect property debts burdening Spain’s stricken banking system had hit new historically high levels.

Spain’s troubled mortgages now equal a staggering 17.4 per cent of the national GDP. In 2007, the last year in which the sun shone on the Spanish economy, it was less than two per cent. Rajoy is now in direct conflict with the Eurocrats keeping his country afloat. After years of recession, he says things ‘will be better’ next year, without offering specifics. But Brussels says Spain will be in recession at least until 2014, no laughing matter for the Tahrir Square-inspired indignados staging rolling protests across a land where one in four are unemployed.

To add to Rajoy’s woes, next Sunday, part of the country might vote to secede. Just as Europe’s bureaucrats are scheduled to conclude their budget summit, comes a regional election for Catalans that will effectively be a vote for Catalonian secession; a strong showing by the pro-independent parties will likely prompt a referendum to split this wealthy region from the rest of Spain, which it has been subsidising for some time. Brussels and other EU capitals fear that Catalonian secession could cause a ripple effect elsewhere in the EU — pushing Scotland, Wales, the Basque region, even ethnically divided Belgium itself to make the big leap.

Catalonian secession could cause a ripple effect — pushing Scotland, Wales, the Basque region, even ethnically divided Belgium itself to make the big leap.

Plus, Spain still has a huge property headache. As many as a million homes are surplus in Spain’s property market, so Rajoy has come up with a cunning plan — to rent out his country into China. Rajoy has directly propositioned Chinese mainlanders, asking them to invest just €160,000 for a house, with permanent residency of Spain thrown in as part of the deal.

At this price, selling a modest 150-square-metre apartment in China’s coastal Qingdao, Bilbao’s sister city, would do it. So would some average digs in the Sichuan capital Chengdu, which is officially chummy with Valencia. In Chinese terms, these are not expensive glamour cities like Beijing and Shanghai, where property prices are some of the world’s highest. Even flogging a tiny duplex in an unremarkable complex in industrial Shenzhen, near Hong Kong would yield permanent Spanish residency — aka a house — and €200,000 in change, for a tapa or two.

And what horrors to come?

Well, if you’d asked the venerable Economist magazine this week, the dramas engulfing Spain, Italy, Ireland, Portugal and Greece are nothing compared to what the ‘time bomb’ of France’s recent credit downgrade might have in store for the world.Mon Dieu!

And Greece? Where’s it at now?

Who could forget. Certainly not the Greeks, now turning in droves to the anti-immigrant, anti-EU, neo-Nazi party Golden Dawn. Germany has installed bureaucrats in various Greek regions to teach local mandarins how to run a budget, (Germany’s in the main, given that Berlin is largely funding the Greek bailout).For their trouble, Golden Dawn supporters have shown up calling the Germans Nazis and demanding they leave.

In the meantime, Eurozone finance ministers meetings in Brussels this week, failed to reach agreement with Athens over the terms of a second bailout. That failure prompted more hand-wringing and doomsaying, as is also the fashion among Euroleaders. As he grappled with a polity he doesn’t control, Greek Prime Minister Antonis Samaras noted that “it’s not only the future of our country, but the stability of the entire Eurozone that is at stake”.