Thursday, April 25, 2019

European and national elections in Belgium: is new political gridlock on the horizon?

Published on Open Europe's blog

On Sunday 26 May, Belgium will not only be holding European Parliament (EP) elections but also federal elections for the lower house of the national parliament, and for the parliaments of the so-called “federated entities” – regional and community assemblies that are co-sovereign with the federal level. The complex structure of the Belgian system requires permanent coordination, but can also cause political gridlock.

The European Parliament elections will reflect Belgium’s splintered political landscape

A relatively small country, Belgium only elects 21 MEPs. Belgian political parties are not only divided along ideological but also along linguistic-cultural lines. There are two liberal parties, for example: one for the Dutch-speaking North (Flanders) and one for the French-speaking South of the country (Wallonia), with both parties active in the bi-lingual capital of Brussels. It is fair to say the country really has two political classes – a Dutch-speaking and a French-speaking one.
As a result of these linguistic differences, the country sends MEPs from a plethora of different parties to the European Parliament. Politico currently forecasts that 12 different parties will win seats:
·         Flemish parties:
·         New Flemish Alliance (ECR): 4 seats
·         Flemish Christian Democrats (EPP): 2 seats
·         Flemish Greens (G/EFA): 2 seats
·         Flemish Liberals and Democrats (ALDE): 2 seats
·         Flemish Social Democrats (S&D): 1 seat
·         Flemish Interest (ENF): 1 seat
·         Francophone parties:
·         Francophone Socialists (S&D): 2 seats
·         Francophone Greens (G/EFA): 2 seats
·         Francophone Reformist Movement (ALDE): 2 seats
·         Francophone Workers’ Party (GUE-NGL): 1 seat
·         Francophone Christian Democrats (EPP): 1 seat
·         Other parties:
·         German-speaking Christian Social Party (EPP): 1 seat

Partly because the country hosts the European Council, the European Commission and most other European institutions, it has always been more open than most towards EU integration, with recent polls suggesting 86 percent of the population are in favour of EU membership. But even in Belgium, something has changed in the last decade or so.
The political party forecast to win the highest number of seats, the centre-right Flemish nationalist N-VA, currently sits in the European Conservatives and Reformists (ECR) group with the British Conservatives in the European Parliament, and supports a looser, ‘confederal’ EU. Meanwhile, the second most popular political party, the Francophone Socialist Party (PS), has been sending out Eurosceptic signals of a different nature. It has been protesting against European Commission supervision of national budgets, and also attempted to obstruct the EU-Canada trade deal (CETA) and the recent opening of negotiations for a limited EU-US trade deal.
According to opinion polls, the N-VA would obtain between 25 and 30% in Flanders, about the same as 5 years ago, whereas Christian democrats, greens, socialists and liberals are likely to receive between 10 to 17% each, without any major changes compared to 2014.
More interesting than the actual results of the EP vote will be to see whether the N-VA stays in the ECR group in the European Parliament, especially if the British Conservatives are set to depart soon. Parties opposed to regional nationalism, such as the Belgian Christian Democrats and the Spanish Partido Popular, are likely to veto the N-VA entering the leading centre-right European People’s Party (EPP); the party could instead join the liberal ALDE faction.
The personal electoral performance of former Belgian PM and ALDE leader, Guy Verhofstadt, will also be watched closely. Verhofstadt is now one of the most well-known EU politicians – can he repeat his massive personal vote tally of more than 500,000 in 2014? Another question is how Verhofstadt, the rest of ALDE, and French President Emmanuel Macron will relate to one another after the election. The Dutch, German and Scandinavian ALDE parties are wary of Macron aligning with their group, given his support for a Eurozone budget and apparent demands to scrap the name “ALDE” altogether. ALDE is already a broad church, comprising both centre-left EU-federalists and centre-right opponents of a Eurozone transfer union. If N-VA entered the group, it would mean yet more internal ALDE opposition to Macron’s plans. However, given the likely participation of the UK in EP elections, N-VA may well stay in the ECR for now.
The performance of the far-right Vlaams Belang will also be watched, particularly since this will be the first time Belgians have cast a national vote following the devastating Brussels terrorist attacks of 2016.
In the Francophone part of the country, bigger changes are underway. Following corruption scandals, the PS, once the undisputed leading political force, have lost support to the Francophone Greens and the far-left PTB. Like the Vlaams Belang, these insurgent parties will hope to do well in the EP elections, where voters tend to be more likely to opt for radical parties.

The federal and regional elections may bring further political gridlock
Just like with the EP elections, Belgium has a system of proportional representation for federal and regional elections. Differences between North and South make it even harder to agree a federal coalition than in other European countries with a “splintered” political landscape.
Political tensions between the language communities in Belgium have always been resolved in a peaceful manner, but in the past this has led to speculation about a possible break-up of the country, especially as it took about six months in 2007 and a year and a half in 2010-11 to agree a federal coalition. In 2014, after five months, a centre-right federal government coalition was formed between the centre-right Flemish nationalist N-VA, the Flemish and Francophone liberals, and the Flemish Christian Democrats.
At the moment, the federal government is in fact a caretaker government lacking a majority in Parliament, following the N-VA’s exit from the coalition in December 2018, when the party refused to continue to back the government over its support for the “Global Compact for Migration.” This followed the example of the Austrian government’s opposition to the migration compact, perhaps indicating how national politics in EU member states is becoming more “European.”
There are broadly 3 potential outcomes of the federal elections:
Scenario 1: A second centre-right government including the N-VA
Unlike the Vlaams Belang, the Flemish nationalist N-VA does not demand an immediate split-up of Belgium. Instead, it prefers to turn Belgium into a confederation first. It has recently said it wants to secure the post of Prime Minister if there is a majority for another centre-right coalition. Between 2014 and 2019, that job was given to Francophone liberal Charles Michel, in return for being the only Francophone party to join the coalition.
Although Belgian prime ministers are constrained by their coalition partners and by regional governments, they also retain considerable personal leeway. Charles Michel has been taking a strongly integrationist stance, often aligning himself with French President Macron. In contrast, the N-VA candidate to become Prime Minister, former Interior Minister Jan Jambon, would most likely try to bring Belgium closer to the camp of Dutch PM Mark Rutte and his so-called “Hanseatic” cooperation league of Northern EU member states more sympathetic to free trade, which also includes Ireland and the Scandinavian and Baltic countries. So far, Belgium has only rarely allied with the Hanseatic League.
As mentioned, the success of the Greens and the PTB in French-speaking Belgium may complicate matters, as considerable losses are expected for PM Charles Michel’s governing Francophone liberals.
Scenario 2: A “confederal” government, reflecting the majorities in the regions, accompanied with major institutional negotiations
The N-VA has pledged that if there is no majority for a second centre-right coalition, it will only enter a government if Belgium is turned into a “confederation.” This is by no means impossible – the leader of the Francophone socialists, former PM Elio Di Rupo, has said the current arrangements on how much money is attributed to either the federal and decentralized policy levels should be renegotiated.
It is entirely possible that coalitions at regional government level will be formed relatively quickly. If after long negotiations no federal coalition would appear possible, these regional governments would then attempt to negotiate a new Belgian settlement, which the N-VA would try to steer towards confederalism.
Any further decentralisation of powers to the regions will be complicated by the question of whether it will need to be accompanied with additional money for the federated entities, which are widely seen as overfunded.
Although the Flemish N-VA are currently the driving force in support of confederalism, the idea has traditionally been supported in Wallonia too, arising from fears that the current settlement might allow the Flemish to exploit their numerical majority. Former PM and French-speaking socialist party leader Elio Di Rupo expressed support for confederalism in his maiden speech as an MP in 1988, while Belgium’s only EU Commission President ever, Francophone liberal Jean Rey, once was a proponent of the idea as well, back in 1947.
Scenario 3: A federal government without the N-VA
However, as the N-VA is unlikely to secure more than 30 percent of the Flemish vote, other Flemish parties may attempt to form a government without them, perhaps taking the Greens on board, hoping that this may make any upcoming negotiation with the Francophone parties easier. It will be politically difficult to exclude N-VA from the Flemish government, however – in Flanders, polls suggest it will win twice as many votes as the second-placed party.
With so many permutations, relatively small differences in the number of parliamentary seats may determine whether Belgium is headed for major institutional negotiations or for five more years of “business as usual.”

What do the polls for national elections say?

Seats projections based on opinion polls and the results in provincial elections last autumn currently suggest three potential coalitions:
·         Scenario 1: N-VA + two Christian Democrat parties (the Flemish CD&V and the Francophone cdH) and two Liberal parties (the Flemish Open VLD, and Prime Minister Charles Michel’s Francophone MR). This would involve the cdH, currently an opposition party, supporting the coalition that was in charge between 2014 and 2018. In this scenario, the N-VA would once again drop demands for more decentralisation in return for competitiveness reforms. February’s polling would give this coalition 73 seats in the Lower House.
·         Scenario 2: N-VA + the two socialist parties (the Flemish sp.a, and the Francophone PS) and the two liberal parties (Open VLD, MR). This would reflect the likely majorities in regional governments, but would only be feasible if combined with major institutional negotiations. February’s polling would give this coalition 81 seats in the Lower House.
·         Scenario 3: The socialists (sp.a and PS) and the two Green parties (the Flemish Groen, and the Francophone Ecolo), supplemented with either the liberals (Open VLD and MR) or the Christian Democrat parties (CD&V and cdH). With the N-VA outside the government, major institutional negotiations would not be required. February’s polling would give a socialist-Green-liberal coalition 82 seats, and a socialist-Green-Christian Democrat coalition 75 seats.

In the context of Brexit and slowing Eurozone growth, another Belgian deadlock would be poorly timed
In sum, another Belgian institutional deadlock should not be ruled out. Although the country’s institutional structure hasn’t been functioning smoothly to date, a deadlock would be ill-timed, with growth in the Eurozone economy slowing. On top of that, there is the underlying possibility of a No Deal Brexit. Belgium’s central bank estimates that No Deal could cause up to 40,000 job losses in Belgium, and the country is notsufficiently prepared for such a scenario. Belgian liberal Deputy PM Alexander De Croo is aware of this risk, having stated, “I prefer the uncertainty that we have now over the certainty of chaos… a hard Brexit is guaranteed chaos.” Therefore, given the context of Brexit and a slowing economy, Flemish and Francophone parties alike may be inclined towards yet another Belgian fudge.

Monday, April 15, 2019

A history of Brexit

Published on the website of The Conservative as well as 1828.

Auf Deutsch: und Teil 2

In 1988, British Prime Minister Margaret Thatcher was invited to the West-Flemish city of Bruges, home to the world’s first stock exchange, which emerged to facilitate trade between England and the European mainland. She was there to deliver a speech for the College of Europe, a university which has been training many of the European Union’s top officials. In that speech, she warned: “We have not successfully rolled back the frontiers of the state in Britain, only to see them re-imposed at a European level with a European super-state exercising a new dominance from Brussels.”
She praised the “Treaty of Rome” as “intended as a Charter for Economic Liberty”, however adding: “but that it is not how it has always been read, still less applied.”, explaining that “the lesson of the economic history of Europe in the 70's and 80's is that central planning and detailed control do not work and that personal endeavour and initiative do.”
This British warning was ignored.
EU Commission President Jacques Delors simply continued his efforts for the creation of a common European currency. Its creation would be the first big step for the UK to leave the EU project, so this deserves to be studied in more detail.
The euro’s creation was mainly the result of longstanding French frustration with the supremacy of Germany’s Central Bank, the Bundesbank, which had been conducting monetary policies that can be considered pretty hawkish, to central banking standards, originating in Germany’s hyperinflation trauma earlier in the 20th century.
During the 1980s, France, Belgium and other European countries had no other option than to peg with Germany’s currency, so these countries had to follow whatever the Bundesbank decided in terms of loosening or tightening monetary conditions. The French establishment, which included Jean-Claude Trichet, a future ECB President, was simply horrified that the presence of a hard currency in Europe limited the room for artificially boosting the French economy through devaluation of the national currency. Thanks to the D-Mark, savers and investors had a stable alternative to the French franc, in case the French establishment would go too far.
French strategic thinking then was to create a common European currency, so to eliminate Germany’s monetary sovereignty. Compare that to today’s complaints in Southern Europe how the euro has supposedly benefited Germany. In my view, it hasn’t. Instead, it has impoverished German savers, at the expense of exporters who have been lacking incentives to innovate, as for example Germany’s car industry. Then it’s true that the euro has strengthened Germany politically, as the German economy is the bedrock upon which the credibility of the common currency rests. When bailouts are needed to kick the can once again down the road, the voice of the German Bundesbank is key. When expansionist monetary policies are needed for the same purpose, the tacit support of the German Chancellor to debase German savings is needed. The French establishment was correct to assume that the creation of the euro would enable looser monetary policies, which help to avoid reforms to the welfare state, but it was wrong to assume it would weaken Germany politically.

In its quest for the euro, German unification provided an opportunity for France. A few years ago, Der Spiegel unearthed secret papers showing that Germany was strong-armed by France into swapping its Deutschmark for the euro as the price of reunification. French President “Mitterrand did not want a reunification without progress with European integration and the acceptance of the euro,” former Mitterand adviser and later minister of foreign affairs Hubert Védrine has confirmed. Also Karl Otto Pöhl, who was Bundesbank President at the time, has said the story is accurate.
Ironically, Margaret Thatcher herself was an opponent of German unification, which should be considered a strategic error, as it gave the French more leverage to force Germany into accepting the euro. A stronger Anglo-German bond could have been a force for good.
According to some, an important reason France was holding up the United Kingdom’s accession to the European Economic Community (EEC) in the 1906’s was to extract more concessions from Germany on agriculture. The French were apparently afraid Germany would link up with the free market loving British in obstructing what would end up as an epic failure of central economic planning: the EU’s morally and financially corrupt “Common Agricultural Policy”.  
Despite the fact that Britain and other countries were forced to leave the euro’s predecessor, the “European Exchange Rate Mechanism (ERM)”, in the autumn of 1992, the common currency was created anyway. The Treaty of Maastricht, which had been signed in February 1992, provided the legal basis for this. During the negotiations, the UK had secured an “opt-out”, which can be considered the first big British deviation from the EU project.
The same year, the Danish poplation rejected the Maastricht Treaty in a referendum, resulting in a Danish euro opt-out, and in France only 51.1 percent of the public voted in favour. Many prominent economists had warned against creating the common currency, something that wasdocumented by the EU Commission itself, just before the start of eurocrisis at the end of 2009, in a bid to mock them. In the early 1990s, Delors and his companions wouldn’t listen. The project had to be realised.
The decision to create the euro was ultimately taken at the Madrid Summit on 16 December 1995, when Spanish Prime Minister Felipe Gonzalezmanaged to dismiss French President Jacques Chirac's demand for national referendums on the euro. Even doubts coming from the French President himself couldn’t stop it. Kohl had been sold on it. German officials warned him in 1997, 1998 and 1999 that Italy posed “a special risk” to the euro because of its refusal to reduce its huge debts and its accounting tricks. Joachim Bitterlich, Mr Kohl’s former foreign policy adviser, wrote in a memo in January 1998 that Italy’s deficit reduction was based mainly on a dubious “tax for Europe” and on unusually low market interest rates. In 2012, Bitterlich revealed that everyone knew Italy would be included from the start, for political reasons, as he described the mood at the time: “Not without the Italians, please. That was the political motto.
The desire of Helmut Kohl alone to continue with it wasn’t sufficient. After the fateful decision in December 1995 to actually introduce the euro, Italy saw its 10 year borrowing rates drop under 12% again. Markets had rationally concluded that despite Italy’s massive debt burden, the country would be more sustainable as a member of the Eurozone, despite the so-called “no bailout” pledge.
This truly was the first European bailout of Italy, which was going straight to default levels at the time. from 1996 on, due to the political decision to create the common currency.  Also BelgiumPortugal and Spain experienced a similar rapid decline in their borrowing cost from 1996 on until 1999, when the euro was formally introduced.  
In short, Britain’s first schism from the European project was due to the German concession to France to give up its D-Mark, combined with the incentive for European governments to create a common currency, so to help finance their welfare states, with the greater capacity for unsustainable debt creation enabled by the common currency.
A final attempt to lodge Britain into the euro was prevented, partly thanks to the efforts of “Business for Sterling”, an influential group of British business people led by Rodney Leach, the late Chairman of Open Europe. As a businessman he was one of the most influential figures from the City of London. With his exceptional experience in finance, he understood the profound implications of Britain giving up its own currency. The group managed to convince the Confederation of British Industry (CBI) to abandon their support for the euro, taking a neutral stance instead. It was a great victory in preventing British accession to the euro, which would have made Brexit much more complicated, but also enormously more painful, as it would have entailed the break-up of a monetary union, something that is hard to do in an orderly fashion. British discontent with EU membership would have been much harder to channel. Few in the EU realise the service done to the EU by Britain declining to join the euro.  
Nevertheless, it didn’t stop there.
Consecutive EU Treaties, signed in Amsterdam, Nice and Lisbon involved ever greater transfers of power and money to the EU level, either in the form of scrapping vetoes or in the form of the development of new supranational bureaucracies, such as an “EU Foreign Ministry” or “EU Council Presidency”.
Referendums were held on the Nice Treaty, rejected by the Irish in 2001, the “European Constitution”, rejected by the French and the Dutch in 2005, and its reworked version, the Lisbon Treaty, rejected again by the Irish in 2008, who were asked to vote a second time on both Nice and Lisbon.
It must be said all of these Treaties had been agreed by consecutive British – Labour – governments as well. Tony Blair had first promised a referendum on the “European Constitution”, but then when this project had been killed by French and Dutch voters, his successor Gordon Brown didn’t submit the Lisbon Treaty to a popular vote, even if he made up an excuse to miss the signing ceremony in December 2007.
As Conservative opposition leader, David Cameron told Czech President Klaus, the last leader needed to sign the Lisbon Treaty in 2009, to hold on and not to sign, but by the time Cameron entered office as British PM in May 2010, Klaus had folded for the pressure.
The financial crisis, the eurocrisis and the chaos of the migration crisis would further embolden Eurosceptic sentiment, not only in the UK, but across Europe, with referendums going against the EU’s preferred outcome in Denmark, Greece, the Netherlands and Hungary.
Britain’s eurosceptics had been craving for a referendum on anything EU-related, so to stem the rise of UKIP, Cameron offered a referendum on EU-membership in January 2013. The rest is history.
People criticizing Cameron for submitting such an important decision to a referendum should understand the following. It’s fair to be against direct democracy – Thatcher was opposed, for one – but also without a referendum, Brexit may well have emerged as official Conservative policy in its election manifesto, at one point. Many in British society simply had enough of the ever greater concentration of power and money in Brussels and Cameron was simply listening to voters, as any democrat should do. In a similar way, he managed to become Conservative leader by promising to pull the Conservatives out of the European People’s Party, where the likes of Angela Merkel were firmly sold on EU-federalism. 
Cameron should have been more ambitious in his attempts to reform the EU, however. As former Open Europe Director Mats Persson wrote about his experience as advisor to Cameron on the failed renegotiation of EU membership, ahead of the 2016 referendum: “We under-bid. (…) Cameron’s brilliant 2013 Bloomberg speech – envisioning sweeping EU reform (…)– was incrementally distilled down to a less ambitious opening bid in the renegotiation. Even some European leaders suggested more ambition. As one diplomat put it, “In Europe, we ask for 10 things in order to get 6, you ask for 4 things to get 4. Why?””
Then also European leaders deserve blame. German Chancellor Angela Merkel ruling out Treaty change early on, after Cameron announce his intent to renegotiate Britain’s relationship. This made big reforms impossible. She also largely left the initiative to the European Commission. Also other countries that have a great interest in trade with Britain, like Belgium and the Netherlands, did not go out of their way to help Cameron. Perhaps the biggest effort was made by Central and Eastern European countries, as they did concede to modest restrictions on EU migrants’ access to welfare.
We also shouldn’t forget how in June 2014, the UK was outvoted, together with Hungary, during the decision to appoint Jean-Claude Juncker to EU Commission President. Juncker, an avid federalist then pledged his Commission would be “political”, thereby going directly against the UK’s preference of the Commission as an administrative body responsible to open up trade. Juncker did start a “better regulation” initative but that didn’t deliver much. Crocodile tears were shed after the UK public voted to leave, but many in Brussels should realise they carry a responsibility for the divorce too.