Category Archives: Europe

Italy’s dying elite is dragging the Eurozone ever closer towards the abyss

Venice—The great German novelist Thomas Mann once rightly described this bejewelled city as one of ‘flattering and suspect beauty, half fairy tale and half tourist trap’. The same can be said for the country of Italy as a whole, where things are rarely as they seem.

For the problem with political soap operas is when they become suddenly deadly serious, as is presently happening in a country where political schisms are as common as great food and peerless scenery. The wounded ruling Democratic Party (PD) has split, with the rebels forming a new party called (confusingly enough) the DP, The Progressive and Democratic Movement.

It seems as if we are all trapped in the unbeatable scene from the great Monty Python movie, Life of Brian, where the Pythons sketch out in hilarious detail the infinitesimal differences that have led the anti-Roman movement to splinter into a thousand pieces.

Yet lurking just beneath the obvious hilarity of the endless splits in the Italian left—founded at least as much on personal jealousies and vendettas as real political disagreements—something terribly serious is going on here. As this column predicted, the defeat of former Prime Minister (and present beleaguered head of the PD) Matteo Renzi leaves Italy just two moves away from bolting from the euro-zone, dooming the whole flawed project to its final reckoning.

If the radical populist Five Star movement of comedian Beppe Grillo were to win the next election (which must be called by February 2018 at the latest), that arch euro-sceptic has vowed to call a referendum on euro-membership itself. Present opinion polls place such a pivotal vote as too close to call.

Formerly staunch euro-federalists, Italians have grown ever more sceptical as their economy has moved backwards since the Lehman crisis of 2008. In February 2017, the European Commission warned Rome it must reduce its Everest-like debt mountain of 133% of GDP. Presently, youth unemployment hovers at 36%, a Depression-era level by any measure. Worse, Germany (and its EU henchmen) are seen increasingly by Italians as the villain of the piece, forcing the country into endless rounds of austerity without delivering the economic growth which is the only thing to make such a sacrifice politically palatable.

With Renzi’s PD split, an Ipsos poll of February 2017 had the Five Star movement pull into the lead for the first time, with 30.9% of the projected coming vote. The PD was down to 30.1%, with Silvio Berlusconi’s discredited Forza Italia movement at 13%, and the rising populist, anti-immigrant Northern League on 12.8%. As the PD is all that is left of the Italian political elite, its recent schism makes the odds on Five Star coming to power more and more favourable.

And there is no one waiting in the wings to save the Italian elite from itself. Renzi was discredited by his December 2016 overwhelming referendum defeat over electoral reform. Berlusconi was discredited by his many wasted years in power, where Italy failed to undertake the desperately needed structural reforms to make its economy fit for purpose in the post-Great Recession era. Both the established left and the right in Italy have taken to falling apart internally, making their failures seem both comical and contemptible.

It is as if we are in a late scene in Lampedusa’s grand, tragic masterpiece, The Leopard, where Don Fabrizio, the Prince of Salina, entirely comprehends both that his world is falling apart, and that he will do absolutely nothing to stop it. Last week, in a dinner with influential Italian friends of 20 years, the ghost of Don Fabrizio was explicitly conjured up, in order to explain to me what is presently going on in Italian politics.

For my wise and kind hosts were explaining that the Italian established order as it has been known here is dying, and more importantly why no one is doing much of anything to halt this slide into the abyss. But there are bigger beasts about to be slain here. For Italy–unlike its equally ailing fellow euro-zone member Greece—is simply too big to fail. Neither Brussels nor Berlin can hope to bail it out. As such, the coming populist rejection of the euro by Italy would definitively spell the currency’s end in its present form.

The organic political scene in Italy suits its nature, part comic, part tragic, and very human. However, this time the consequences of Italian political failure could well prove incalculable for Europe as a whole.

Published in City AM London, March 6, 2017.

Trump’s surprisingly positive foreign policy–and some unanswered questions

Despite a surprisingly upbeat and coherent first address to Congress on February 28th, given these polarised times it is highly unlikely Donald Trump changed anyone’s mind. Those who rather fanatically support him will have found nothing particularly objectionable with what he said. Those who rather fanatically oppose him will have heard nothing to alter their opinion, either. This is both the political strength and the weakness of the man who first sensed—and then supremely capitalised on—the canyon-like divisions lying submerged just beneath the surface of American life.

The speech isn’t the problem

The power of persuasion–already dying when the supposedly great orator Barack Obama failed to bring a single congressional Republican with him over his signature Health Care initiative—is dangerously just not a part of American politics anymore. Battle lines are drawn and compromise in any form is out, a dolorous development which would have horrified the country’s founders, wise men who crafted a wondrously enduring system based precisely on the notion of political give and take.

This is perhaps America’s great secret to success, constitutional stability (having one republic to France’s five) allowing for the great economic prosperity that has followed. Watching the Democrats studiously not clap for a trillion-dollar infrastructure initiative that the left of their party has been calling for over many years is a striking example of the death of policy discourse in American life, and the dangerous rise of tribalism. It simply does not matter what Trump says; the Democrats will fanatically oppose it (and vice-versa). This is the whirlwind Trump’s revolution is reaping.

People are foreign policy

However, contrary to all our fears, there has been a lot to commend the first moves of the Trump White House over foreign policy. As I know well from my many days in Washington, actual people make policy and to some extent are policy. In selecting the highly-capable General James Mattis to run the Defence Department and in picking the innovative General H.R. McMaster to run the National Security Council (after the brief, but disastrous General Michael Flynn detour), President Trump has put in place a creative, realist national security team that George H.W. Bush would be comfortable with. The huge question remains whether the highly mercurial and intellectually unformed president will actually heed their advice.

Worse, he might actually grow weary of the real-world restraints they make clear to him in conducting American foreign policy and fire them. There is no better analytical canary in the coal mine for the future of American foreign policy than this; what is the bureaucratic fate of the undeniably able national security team Trump has assembled? Following their personal fates will go a long way in tracing the new trajectory of American foreign policy itself.

So far, so good

Yet on his own over this past month, President Trump has managed to succeed in doing two seemingly contradictorily but useful big things; he has questioned the tired, old shibboleths of American foreign policy, even as he re-affirmed of number of their basic precepts. This has finally moved the intellectual clock, as it has been stuck for two decades, a desperately needed innovation, as the Cold War has long been over and it is well past time for intellectual thinking over foreign policy to catch up.

For whatever the policy conclusions, it is well past time both foreign policy opinion-formers and decision-makers treat their craft as more than a dreary recitation of a policy catechism that made great sense in the far-away Cold War, but—following the elite being discredited over both Iraq and the Lehman global recession—makes far less natural sense now.

Does the One-China policy actually serve American interests today? Is NATO obsolete, and what can possibly explain the European allies’ shameful strategic free riding to the detriment of the hard-pressed American public? Does the two-state solution, after all these many years of failure, actually stand any hope at all of success? I must admit (and I am no friend of the president) that before Donald Trump came on the scene, when I raised these very points I was rather arrogantly waived away by a sclerotic, discredited (though amazingly they don’t seem to know it) foreign policy elite in favour of the received wisdom of a bygone age. To put it mildly, that is no longer the case.

Yet the new foreign policy team also seems to have so far constrained the mercurial president from throwing the policy baby out with the bathwater. During his speech to Congress (and in earlier addresses to European leaders by Vice President Mike Pence and Secretary of Defence Mattis) Trump made it clear he still is committed to NATO, but it is past time the allies meet the long-agreed two percent of GDP spending target for the common defence.

Trump and Mattis are merely repeating the truism I have long argued for, that continued failure to do so is a European choice, which will ultimately signal the end of the most successful military alliance in history. Trump is not wrong to bring this up; it is the European allies who are wrong to continue to free-ride on the backs of the American people.

Likewise, in his call to Chinese leader Xi Jinping, President Trump reaffirmed the American commitment to the One China policy, which he had previously flirted with doing away with. But while the American horse is back in the stable, in questioning this long-held shibboleth, Trump has made it crystal clear to a surging Beijing that a tougher, less predictable America awaits it.

Given the advances in Chinese adventurism during the time of Barack Obama, in constructing and militarising islands in the South China Sea, such an approach has a lot to commend it, perhaps leading to Beijing’s resumption of its earlier, less reckless foreign policy, inaugurated by Deng Xiaoping.

And finally, if ever there was a policy that needed a creative update it must be efforts to successfully conclude the endless Palestinian-Israeli standoff. By calling the never-achieved two-state solution into question, the Trump White House makes is clear that in terms of geo-strategy this stalemate has eaten up vast amounts of American time and effort over the past decades, while frankly more important issues (such as the rise of China and India and the advent of the multipolar world itself) have been fecklessly neglected.

And yet….

And yet for all this good news, there remains deep unease for many of us who have been pleasantly surprised in terms of foreign policy by the first month of the new, startling era of Donald Trump. First, there is the grave damage he may still do domestically and to the American constitutional system more broadly. Second, as a man who seems to decide things more by untutored instinct than deep thought, even when President Trump is right, there should be deep concern about how set in stone his new foreign policy actually is.

It is this fear of the erratic behaviour of the United States, that the world’s ordering power will lapse into incoherence, that rightly worries all those of us who wish America well. In both his opening speech to Congress and in his first month in office over foreign policy, President Trump has surprised for the better. But there remains an awfully long way to go.

Published in Aspenia online, March 1, 2017.

Blame France’s incompetent and corrupt elite for the rise of Marine Le Pen

“Apres moi, le deluge.” (After me comes the flood)

–Louis XV

Say what you will, Francois Fillon, the disgraced former frontrunner in the upcoming French presidential elections, is no Professor Moriarty. As the investigative journal Canard Enchaine reports, Fillon paid his wife Penelope over 800,000 euros for work as a political assistant it is unclear whether she preformed. Far from being a master criminal, it seems he gave two of his children legal jobs despite the highly relevant fact that they were not yet lawyers. France is ripe for another revolution to rectify such excesses.

This is the problem with the rise of populism in Europe. The demagogues—horribly wrong as they are in policy terms over peddling impossible dreams as solutions–have all the best lines. And they are entirely correct in that Europe’s lazily corrupt, highly incompetent elite have driven the people they represent into a ditch.

There is no doubting that Marine Le Pen, the charismatic, firebrand leader of the xenophobic Front National (FN) has a great story to tell about both French elite corruption and incompetence.

The corruption portion of the populist narrative is beyond dispute. Beyond Fillon, former President Jacques Chirac and former Prime Minister Alain Juppe were given suspended sentences for corruption. Former Finance Minister and current IMF chief Christine Lagarde was found guilty of negligence for approving a massive payout of taxpayer money to a controversial French businessman. Former President Nicolas Sarkozy is presently under investigation for alleged illegal campaign funding. In reading this doleful list, sometimes I truly wonder if there is anyone left in power in France who has behaved honourably.

The other side of the coin, incompetence, is epitomised by hapless outgoing current President Francois Hollande, a leader so gormless that in November 2016 he had a personal approval rating of just 4%, a subterranean low unequalled in the history of the Fifth Republic. Bowing to electoral reality, in December 2016 Hollande surrendered, not even bothering to try to run for a re-election he stood absolutely no chance of winning.

The main reason for this was his pathetic failure to even begin to substantially reform the sclerotic French economy. During his tenure, France has lost a further 600,000 jobs. In 2016, France grew at an anaemic 1.1% of GDP, in line with its lacklustre 1.2% in 2015. Stunningly, as of January 2017, more than one in four workers under 25 is jobless. The world is simply passing the French economy by.

As a result of this dual headed monster of corruption and incompetence, Fillon has fallen in the polls, making maverick centrist Emmanuel Macron the new frontrunner to be President of France. The latest early February 2017 polls have Le Pen at 25%, Macron at 22%, and Fillon at 19% in the first round of voting. In a second round, Macron would win decisively over Le Pen with a 66-34% advantage. But while the competent Macron is now likely to win, such a victory should not be seen as a repudiation of Le Pen. Rather it is part of her long-term game plan.

For Macron is France’s last, best chance to save itself in its present form. However, if he cannot reform the heretofore unreformable French economy, France as we know it is on its last legs. Le Pen is set to take one third of the vote in the second round of this year’s presidential elections on May 7th, almost double her father’s total of 18% as the FN candidate in the second presidential round of voting in 2002. So the flood waters for the French elite are definitely rising.

All Le Pen needs are five more years of economic failure, and then she has all the chance in the world to win the presidency next time, especially as her narrative of elite incompetence and corruption hardens into certainty for the French electorate. Le Pen is merely betting on is things staying as they are, with the talented, youthful Macron (he is only 39) unable to drag his country into the twenty-first century. Given France’s recent past history, that is more than a reasonable bet to make.

And yet in Macron there is hope. A former Rothschild banker, he comes from the real world pro-business wing of the Socialist Party, serving as a marginally successful economy minister under Hollande, after the French president made his belated policy pivot back to economic reality. If anyone can reform France, Macron is the man.

However, Le Pen’s long-term bet on French elite incompetence and corruption has so far been borne out by the historical facts. It will take real French reform to stave off the terribly destructive prospect of French populism. For the main problem in French politics at present is that only Le Pen seems to have a real long-term political game plan.

Published in City AM London, February 13, 2017.