Tuesday, January 31, 2012 ... /////

Britain, Czechia resist euro cartel treaty

The eurozone has agreed to establish a fiscal union and all other EU countries except for Britain and Czechia have joined this ill-conceived plan. The countries essentially agreed to pay a fine, 0.1% of the GDP, if they fail to have an essentially balanced budget (less than 0.5% of GDP). The fine will be "enforced" by the European Court of Justice; I am not sure whether they have a sufficient number of cops and soldiers to guarantee such an "enforcement" because billions of dollars in fines are still lots of money.

An older draft also planned to force the countries with the debt-to-GDP ratio over 60% to reduce the excess above 60% at least by 1/5 every year, by running big surpluses, but this rule was removed for unspecified reasons in the final version. So countries with a negligible debt are now subjects to the same severe constraints as countries with a giant debt with is crazy and unfair by itself. It was one of the "essential points" whose deletion helped to decide that Czechia would stay away from the pact.

You know that I may in principle agree with the legally binding law requiring budgets to be balanced – although I am no "fanatical" supporter of this principle (the balance has to manifest itself in the long run but short-term balancing is an unnatural prohibition of some borrowing and lending: in particular, the one-year time scale is totally artificial and arguably too short). But I find the legislation they agreed upon scary and stupid, for many reasons.

First, the "fines" that are paid to an EU stability fund are negligible relatively to the typical debts of individual countries. 0.1% of the GDP is 100 times less than 10%, a typical budget deficit run by the most irresponsible European governments (or governments of economically devastated countries). So if the budget deficit grows by 1% of itself, no one really notices or cares. Moreover, it's clear that the stability fund will be used to save those fiscally weak countries, anyway. So the money will flow back to these bad economies at the end.

Unless there is a clear desire to impose some natural justice – which means that the countries that should go bankrupt will go bankrupt so the living standards will fall dramatically (I surely don't mean a generous forgiving of all the debt by "bankruptcy") – games with fines and fees etc. can't play any constructive role. They may only increase the feeling that a part of the problems is due to the "evil European officials who steal our money" which will increase the perceived (and also real) dependency of whole nations on the international institutions (a typical slogan in Athens would be and maybe already is: "Now, when they're stealing additional 0.1% of our GDP, they must surely pay for all our lives and for the fancy German cars that we must be allowed to possess according to the basic human rights!").

If we want Europe to behave in a fiscally sustainable way in the future, the atmosphere must produce advantages for those who are doing things well and disadvantages for those who don't behave responsibly. If these disadvantages don't or won't really exist, nations will naturally converge closer to Hell. But if or once these disadvantages do exist, nations don't need any pan-European supervision or precisely dictated rules how their should spend the money; freedom that also acknowledges the natural fear of Hell is enough (and better) than a dictate.

An approximate map of the fiscal compact. Note that Great Britain and Switzerland are out. Sorry, ignore the labels: I didn't find a better map. ;-)

While a balanced budget is a good thing, I disagree that it is an absolute condition at any situation. Countries with a very low level of debt deserve the freedom to occasionally run budget deficits. They may afford it. They may have politicians who try some Keynesian policies. I don't like them but I think it's just wrong to take this freedom from the whole European nations. A greater fiscal freedom is one of the gifts for more responsible budgets in the past; and vice versa, people and nations that have been wasting money must be ready to lose some options now or in the future. It's very dangerous to try to liquidate this natural link between the past responsibility and the future well-being and availability of options.

The pact on budgetary "fines" is just one thing that the leaders have agreed upon. They have also agreed to pour extra money to Greece so that no budgetary constraints ever apply to this parasitic socialist country. Finally, they have said lots of wishful thinking about the increased EU GDP growth by standardization, higher energy efficiency, usage of EU patents, and all this irrelevant garbage. It sounds pretty much identical to the buzzwords used by the communists who were planning to overtake the evil imperialists. But the growth isn't actually produced by similar meaningless clichés about efficiency, forced standardization, or clever patents. The growth arises if capitalism is allowed to work and incompetent people detached from reality – e.g. the EU politicians – manage to close their mouth.

Cartels inside the EU

Various laws of the EU were written – and had to be written - in such a way that the opinions of all nations matter to an appropriate extent so that a clique of several larger countries can't systematically overrule the people from smaller nations, and so on. These policies are being destroyed by the new legislation.

You may see signs of a disappearing democracy in Europe even if you look very superficially. Although 10 non-eurozone EU countries participate in this scheme, they have absolutely no impact on the timing when the treaty enter into force. It will enter into force when it's ratified by 12 eurozone countries. What the 10 non-eurozone signatories do makes absolutely no impact! And this is not just some effective interpretation of the agreement; this shameful rule is explicitly stated in it. Also, the non-eurozone signatories – even though they're influenced – may only participate at one eurozone meeting a year: they're second-class citizens. During these "generous meetings", non-eurozone prime ministers are allowed up to 2 hamburgers and 1 pint of Coke a year but the precise numbers may be adjusted by the votes approved by a majority of the eurozone. Aside from the hamburgers and Coke, the non-eurozone prime ministers have the glorious right to contribute billions of euros to the eurozone funds.

But it gets much worse when you study the actual legislation. Within the eurozone, the treaty creates a "forced group think". Under various, rather general circumstances, e.g. during discussions about ways to punish fiscal "violators", the eurozone countries are obliged to adopt the eurozone's majority opinion and fight for it during all votes, including the votes in the whole European Union!

It follows that in such votes – and their composition may broaden arbitrarily in the future – only the majority of the eurozone matters for the decisions about the whole European Union. If I translate it to the number of citizens, 166 million people in the eurozone have the capability to determine the attitudes of the whole eurozone with its 332 million people and because the eurozone has a majority in the European Union, it is guaranteed that this opinion held by the 166 million people determines the outcome that influences all 502 million citizens of the European Union. Less than one third of the EU citizens are enough to control everything! Of course, the reality is much worse than that because the eurozone isn't democratic, either.

I've read legal analyses of the draft treaty that was written down by top Czech law experts for the Czech government and it was pretty scary. For Czech readers, the URLs are:

Parliamentary Letters (intro)

Proposed treaty (a December version)

Scary analysis (for the government: Word)
If this treaty is tolerated and approved, a precedent is established and similar pathological methods to decide may propagate to all other decisions made by the EU. This surely violates the spirit of the underlying legislation of the European Union. In this case, even the European Parliament (a majority of it) has complained that the treaty violates democratic principles in the EU. If this treaty is declared constitutionally OK, many other weird things will become OK as well. For example, several eurozone member states may sign a treaty that forces them to establish a minority large enough to block proposals in the Council of Europe.

While I agree with my prime minister's ultimate decision and probably his reasoning as well, I dislike the cowardly way how he justifies the conclusion: by red herrings.

Those constitutional mutations of the EU countries really open insane possibilities because this eurozone treaty is standing outside the EU – so that it may circumvent the ratification procedures that are required for the EU legislation – but it may still severely influence the procedures underlying the decision making in the whole EU. In fact, some powers of the EU may be hijacked and transferred to a body that operates outside the EU! You may try to invent new methods how this giant "loophole" might be abused. We have entered dangerous waters in which various pan-European treaties are no longer considered "pure international treaties" and various forces start their attempts to abuse the chaos – chaos concerning what the EU may guarantee, what the individual countries may do, what the eurozone and its treaties (and other international treaties) may change and what they can't, and so on. It's a complete mess, a dangerous legal minefield.

You must also also understand that the eurozone countries will de facto lose their right to veto various decisions even in extreme situations where they have had it so far (often for good reasons), according to the EU laws. At the level of the EU, they may freely decide in any way they want and they have the right to veto things; however, these additional laws of the eurozone built upon them prevent them from expressing their opinion if it violates the majority opinion in the eurozone! It reminds me of the joke about the difference between Communist Czechoslovakia and Switzerland. In Communist Czechoslovakia, you enjoyed the freedom of speech. In Switzerland, you also enjoyed freedom after the speech. ;-)

The opinions about similar tendencies to concentrate the power in the hands of a few people in a few countries of the continental Europe are starting to split Europe along similar lines that were dividing the continent in 1940 or so. More precisely, it is the United Kingdom and the Czech Republic that are opposing the scheme. (Czechoslovakia had a government-in-exile in London and the rest of the continent was pretty much controlled by the Third Reich.) Our president and prime minister hate the pact. However, some other people - mainly those from TOP09 (ministers of foreign affairs and finance in particular) – would like to join the pact. That's why the official negative answer of the Czech Republic was explained by "expected difficulties in the ratification process".

Czech pilots in RAF service; 10-minute colorful movie from 1942-43. See Part II, too. As these scenes remind us, today is not the first time when Czechia is an ally of Great Britain. 70 years ago, just like today, Germany and its extended provinces failed to be our ally, too. Three years later, however, when the Chancellor committed suicide in Berlin, Germany did become our friend, too. More precisely, West Germany became Britain's ally and East Germany became Czechia's fellow warrior for socialism. ;-)

This includes the near-certainty that President Klaus would never sign such a pact; we don't know what his successor (in the office since March 2013 or so) will think mostly because we don't know who he or she is. But it's true that Prof Klaus is extremely far from being the only major Czech political power that considers the pact unacceptable.

I've been gradually changing my opinion on whether or not our membership in the EU is still a net positive. This pact, if approved, would cross a red line according to my books and I would prefer if my country left the EU – even if we are allowed not to participate in the scheme. The problem is that the scheme would still make our opinions politically irrelevant.

Prime ministers Nečas and Cameron

It's my feeling that most people in Czechia don't speak English. Still, I think that some closer coordination with the U.K. could be appropriate. It's really bad if someone tries to create the impression that the U.K. is an "odd kid on the block". Well, I actually think that it would be fun if Czechia tried to merge with the U.K. into some entity that would be trying to balance the contemporary EU and its pathological evolution. It could even be a good idea if we were converging to our currency union in the future. ;-)

And that's the memo.

A country for the gypsies

Another hot story from the Czech politics that could have international implications.

The most politically correct minister of the current Czech government, the Czech-German aristocrat Karl Schwarzenberg, who is also the only candidate for the Czech president after Václav Klaus (from March 2013) at this moment made a surprising statement on TV. In a TV discussion with host Ms Barbora Tachecí, who is of Jewish ancestry, he was asked what he thinks about the opinion about another potential presidential candidate, the half-Czech half-Japanese Tomio Okamura, an owner of a travel agency. Okamura proposed a final solution to the gypsy problem: to create a new gypsy country somewhere in the world, in analogy with Liberia where America was exporting its bad consciousness concerning slavery.

What did Schwarzenberg reply? He said it was a nice idea: it was just hard to find the appropriate territory and realize it! ;-) Tachecí tried three times to push him into a criticism of this idea (also by comparing the idea with some Nazi policies): but he clearly didn't want to criticize it at all. Needless to say, he simply stunned lots of people, mostly including your humble correspondent as well. But of course you may find some pretty ordinary politicians who kind of agreed with him. It's a matter of taboos. It's more likely that he's offering similar answers because he's getting really senile: but it may be because he's courageous and original, too. Who knows! ;-)