Westminster's deficits

Dear reader, please don't be too worried and immediately look elsewhere - this posting won't feature too heavily on the monetary deficit or debt that is affecting the UK.

Rather this is about the other two deficits that are plaguing the UK.

When the so called 'expenses' scandal broke, many people expected the politicians that had their noses so deep into the public purse and were claiming expenses that, if not criminally wrong were at least ethically so, would be severely punished at the ballot box.  Some of them were but maybe not enough.  Some went to prison but again, not enough.

In two recent by-elections - Heywood and Clacton - much has been made of the the results.  In Heywood, Labour clung onto a supposedly safe seat with a much reduced majority of 617 votes, from a concerted challenge by UKIP.   The UKIP leaders crow that if just 20% of the Tory vote had come their way, instead of being 'split' (in their view) then they would have had a remarkable night.

These same UKIP leaders also shout about the victory of their candidate, Douglas Carswell, in Claction, where he actually increased the majority with which he previously won, when he did so as a Conservative candidate at the 2010 General Election.

Look a little closer though and these results seem less spectacular and actually quite worrying.

In Clacton, the winner, Douglas Carswell was a very active local MP for the Conservative party.  His wider activism around European issues, also assured him of media air-time as a prominent Euro-sceptic Tory.  His defection to UKIP was not a complete surprise and neither was his decision to stand down and force a by-election.  That decision speaks to an integrity that is all too lacking among so many of the Westminster elite.

It is a bit rich though for Nigel Farage, the leader of UKIP, to claim that the election of that party's first MP was about a tide of anti-establishment voting which was ready to sweep away the 'out of touch 'Westminster' parties.  The electoral turn-out in Claction was just over 51%.  So when you consider Farage's comments it seems that people were so disgusted with the Westminster elite that barely half of them could be bothered to vote.  The Clacton turn-out at the General Election was 64% so whatever the message was it can't be said to be a ringing endorsement of Farage's policies.

Again,at Heywood we see a much diminished turn-out - down from 57.5% at the General Election to 36.2% in the by election.  So barely one in three voters could be bothered to vote.  Some might say that this apathetic response is the voting equivalent of the old 'a pox on all your houses' epithet.  Labour talk about how the voters of Heywood voted against a 'viciously cruel and austerity driven Tory government' but don't mention the far from ringing mandate that their candidate gained.  UKIP talk about breaking the mould etc., but the reality is that they too couldn't engage with or mobilise the voters.

For the Tories, Heywood does support their contention that a vote for UKIP gets Ed Miliband into Downing Street and power.  The message from Clacton was always going to be hard for the Conservatives - Carswell was a very good and involved local MP and his integrity shone through.  It will be interesting to see how he works alongside Farage in the coming weeks and months.

Clearly Carswell has depth and his views on Europe and the uncontrolled immigration that the EU and the Labour Party unleashed on the UK, resonate with voters and are aligned with Farage.  However, can the same be said for the social and economic policies put forward by UKIP?  I may be wrong but I always thought that Carswell was 'sound' on the economy and understood the critical need for deficit and debt reduction and smaller government - that isn't entirely in accord with UKIP's policies.  Details on these policies are scant but suggest that UKIP follow a much more interventionist, some might say socialist, approach towards the economy - certainly if their 'spend whatever you like' pledge to the NHS is anything to go by.  

I come back though to the turn-out.  In both cases significantly below the General Election levels.

We all know that the European Project has a major democratic deficit.  In the UK, barely 34.7% of those eligible bothered to vote in the 2014 MEP elections.  The UK wasn't alone in recording such poor rates of participation.  As you can see in the below table, barely 13% in Slovakia bothered to vote!

Member States	1979	1984	1989	1994	1999	2004	2009	2014
Belgium	91.36	92.09	90.73	90.66	91.05	90.81	90.39	90
Denmark	47.82	52.38	46.17	52.92	50.46	47.89	59.54	56.4
Germany	65.73	56.76	62.28	60.02	45.19	43	43.27	47.9
Ireland	63.61	47.56	68.28	43.98	50.21	58.58	58.64	51.6
France	60.71	56.72	48.8	52.71	46.76	42.76	40.63	43.5
Italy	85.65	82.47	81.07	73.6	69.76	71.72	65.05	60
Luxembourg	88.91	88.79	87.39	88.55	87.27	91.35	90.76	90
Netherlands	58.12	50.88	47.48	35.69	30.02	39.26	36.75	37
United Kingdom	32.35	32.57	36.37	36.43	24	38.52	34.7	34.19
Greece		80.59	80.03	73.18	70.25	63.22	52.61	58.2
Spain			54.71	59.14	63.05	45.14	44.87	45.90
Portugal			51.1	35.54	39.93	38.6	36.77	34.50
Sweden					38.84	37.85	45.53	48.8
Austria					49.4	42.43	45.97	45.7
Finland					30.14	39.43	38.6	40.9
Czech Republic						28.3	28.2	19.5
Estonia						26.83	43.9	36.44
Cyprus						72.5	59.4	43.97
Lithuania						48.38	20.98	44.91
Latvia						41.34	53.7	30.04
Hungary						38.5	36.31	28.92
Malta						82.39	78.79	74.81
Poland						20.87	24.53	22.7
Slovenia						28.35	28.37	20.96
Slovakia						16.97	19.64	13
Bulgaria							38.99	35.50
Romania							27.67	32.16
Croatia								25.06
Average EU turnout	61.99	58.98	58.41	56.67	49.51	45.47	43	43.09

Now though we see  that just prior to a General Election, voter apathy for the UK parliament remains. The political parties are said to be out of touch - and that includes UKIP!  The same source of the previous table (http://www.ukpolitical.info) also provides the below table on turn-out in UK General Elections, since 1945  We all need to hope that the increases seen in 2010 are built upon and we get back to the turn-out levels seen in the late 1970s through to the 1990s.

Year	UK	England	Wales	Scotland	N.Ireland
2010	65.1	65.5	64.7	63.8	57.6
2005	61.4	61.3	62.6	60.8	62.9
2001	59.4	59.2	61.6	58.2	68
1997	71.4	71.4	73.5	71.3	67.1
1992	77.7	78	79.7	75.5	69.8
1987	75.3	75.4	78.9	75.1	67
1983	72.7	72.5	76.1	72.7	72.9
1979	76	75.9	79.4	76.8	67.7
1974 Oct	72.8	72.6	76.6	74.8	67.7
1974 Feb	78.8	79	80	79	69.9
1970	72	71.4	77.4	74.1	76.6
1966	75.8	75.9	79	76	66.1
1964	77.1	77	80.1	77.6	71.7
1959	78.7	78.9	82.6	78.1	65.9
1955	76.8	76.9	79.6	75.1	74.1
1951	82.6	82.7	84.4	81.2	79.9
1950	83.9	84.4	84.8	80.9	77.4
1945	72.8	73.4	75.7	69	67.4

Perhaps there is a message for David Cameron in the above table?  Maybe it is, that when Margaret Thatcher pursued unpopular but many believe absolutely necessary policies, she brought many voters out to vote.  Indeed, they voted for her and her successor, John Major, in significant numbers and brought large parliamentary success for the Conservatives.  Yes they also voted against her and her policies but the majority voted for the Conservative party.

Strange that!  Give people the hard choice or the soft irresponsible one that Labour pushed and the people chose the tough one on four separate occasions and in large numbers.  Who would have thought it?

While Cameron and his pollsters are thinking about the upcoming General Election, they should also maybe think about these things.

People, other than self-interested public sector union members, haven't taken to the streets in protest about austerity.  I believe that this demonstrates that 'the people' understand the need to rein in public spending.  The need for a welfare cap seems to now be universally accepted.  People can see that those in the public sector have had it too easy and have been cossetted from the realities of life  that 'they' have had to face - redundancy, under-performing and uncertain pensions, real wage cuts and belt-tightening - at home and at work.

'The people' will vote for a party that addresses the first deficit - that of integrity.  A party that does what is right for the UK.  The Conservatives deserve credit for having the courage to push forward with reforms but they have been too timid.  I accept that much of that lack of backbone was because of the compromises that were forced upon them by their coalition partners - the fast-fading Liberal Democrats - but when they come before the electorate again, they must stress their economic competence and emphasize the incompetence and economic mal-administration of the Labour Party.  The electorate know who got us into this mess!

'The people' will also vote for a party that addresses the second deficit - that of democracy.  Again, a party that does what is right for the UK.  One that allows the people of the UK a say on the UK's continued participation in the European Union and one that addresses the democracy needs within the UK.  The so-called 'West Lothian' question has never gone away but the recent Scottish Referendum has brought a much greater focus onto this and to the democratic deficit that is suffered by the English.  I don't advocate an 'English parliament' but English MPs for 'English' votes seems entirely reasonable.

Cameron and Co. need to openly push the message about how they can and will address these two deficits and in the process the other deficit and debt reduction and they now need to do so, unfettered by their Coalition partners.  So it is time to ditch the Lib Dems.  It shan't be too difficult to find an excuse and it allows for a decent period of time - for both parties - to put some clear water between themselves and allow their policy differences to be evident.

I will come back later on what those Conservative policies, should look like.

The 100 Billion Euro gamble

The Spanish economy ministry spokesperson was saying on Friday, that she had no knowledge that Spain would be seeking a bailout or loan or whatever is the current terminology.  There's being out of the loop and then there's ......   No matter.  I don't think anyone took her seriously.

So, now Spain has taken the plunge and gone to its Euro-zone partners for money.  It's not clear who will provide this or how.  Will the European Central Bank simply print yet more money? Will funds be transferred (surreptitiously, of course) from Germany via some new stability mechanism that joins the growing lexicon of acronyms beginning with E for Euro and containing S for stability (I kid not) and F for fund? 

At what point does this drip feed of very large amounts come to be seen as undermining the currency itself?  We are already seeing a devaluation in the Euro (coincidentally, this helps the strong German manufacturing sector a lot!!) but what happens when the financiers (bankers, by another name but don't frighten the children!) look at the sustainability of all this?  Italy will be lining up next and I keep wondering if 100 Billion is enough for Spain.  They could maybe come back for more?

Who knows how they will handle this 100 Billion?  Re-capitalise their over-extended banking system?  Does that mean the Spanish state takes stakes?  So we end up with largely nationalised banks?  Including all those local 'cajas'?  That will go down well with all those crazy autonomists in the regions.  These are the same crazies that build airports that no one needs and no planes land at and build arts centres that no one visits.  We have seen such craziness of large vanity projects in Africa for years, maybe the geographic proximity caused the disease to spread?

Why a gamble?
Well what if it isn't enough?  The 'independent audit' of the Spanish banks is not yet complete.  As said earlier, how much is slated to bail out the Regions?  Benefits for the more than 25% unemployment place an increasing burden on the Spanish budget.  If it isn't enough, and Spain comes back to the market to borrow again (maybe just to roll-over existing debt) - look out - Financiers (see you're getting the hang of this) can smell blood better than any shark!

We can expect to see some temporary respite from the recent market turmoils but this 'deal' is very light on details and those pesky financiers just love small print!  They will want to know where the money is coming from and how and for what is it being used.

Oh, and ask yourself again, who, among those poor taxpayers that will be contributing the 100 Billion have been consulted?  Democratic deficit doesn't really come close.  I just hope this is funded by the Eurozone and the UK can keep out and not get dragged in as part of some IMF 'contribution'. 

Watch this space!

Greece and Spain - Opportunity or risk?

How do you feel about Greece maybe exiting the Euro?  Are you relaxed about the implications for the economy of the EU and maybe the World?

What about Spain?  While exit from the Euro may be a little further away (or did I speak too soon!!) broadly the same economic conditions prevail and, like Greece, can austerity piled upon austerity work here?

Note also how the spotlight has moved from Greece to Spain and Ireland and Portugal have, for the time being, been skipped over.  I think though that they will come back to haunt the Euro and EU, again.

I guess I am conflicted about the whole thing. 

Part of  me expects that the Euro must collapse under the weight of its inherent contradictions and I would look forward to that as it would, I believe, lead to a much required re-evaluation of the whole EU project and may, just may, give the people of Europe a say in what they want.  I do not believe that anyone who knows anything about Europe and the EU, can say that the current set-up has any democratic legitimacy.

On the other hand, I worry about what would be the knock-on consequences of a major default or banks collapsing, in Spain.  I think that Greece is essentially 'priced in' for the financial markets (even if the non-austerity parties eventually form a coalition).

Spain though is another and much bigger 'kettle of fish'.  The ripples from a banking sector collapse, in Spain will have much more impact and France will not be unaffected, by any means.  Latin America will also not escape unscathed, is my belief.

So what a choice -

Hope that people can accept that 'living within your means' (that is what austerity really means!) and will undertake the hardships to travel that journey

or

Hope that the weaknesses of the Euro project lead to its demise and a complete re-assessment of the EU - its purpose and its legislative reach and equally importantly, its lack of democratic accountability.

Any thoughts?

Euro Fraud and Danger - Germans and Dutch beware!

The European Central Bank (honestly, that's what they arrogantly call it!) is flooding the wholesale money market with loans at low rates.  So much so that, given the favourable rates, British banks have waded in and are having a slice of the pie.  The British banks seem to be using these funds to prop-up their subsidiaries in the troubled Southern European economies.

This money is, in some ways, akin to the Quantitative Easing practised by the Bank of England and the US Federal Reserve.

In some ways.  One key way in which it isn't the same is that the people whose pockets and wallets stand behind this largesse, are not being told about it.  When does financial sleight of hand become fraud?  You decide!

National Central Banks in the EuroZone  countries ultimately provide the funding for the ECB.  There is no way that the Eurocrats have the courage to directly ask the governments of Germany, Netherlands Finland etc., to fund this folly.  So they are doing it by the back-door.  They are creating a situation where the ECB, will at some point, have to go to those national governments for funding and the hope is that the national governments will conclude that they have no choice, will dress this up as unrelated to the actual Eurozone crisis and will pay-up.  Good news is that the citizens of those countries won't be asked to vote on the process - just to pay up!

Most of these ECB loans are being used to buy-up government bonds from the failing economies of Southern Europe.  In doing so, the cost of this government paper comes down - because, it is suddenly so popular!  However, in order to get the loans, the European banks must lodge, as collateral their highest quality assets.  In doing so, they weaken their own balance sheets and make the likelihood of a need for a government bailout, shortly down the road,  that much more probable.  Spanish and Italian banks are heavily tied into their own country's fate but German and particularly French banks also have heavy exposure here.

 Rumour has it that there is a proposal doing the rounds of the European governments to change the alphabet.  The proposal is to drop the letter D.  The proposers suggest that without this letter we wouldn't have a deficit, there would be no debt, the actual depression in Southern Europe wouldn't exist and that pesky old Greek word democracy, wouldn't be bothering us (not that it does too much, anyway!!) 

By the way, other than giving us the word democracy, what have the Greeks done for us (Life of Brian followers, only please!).

Seems that, not for the first time, the Germans are proving to be a barrier to this necessary reform on the pathway to a federal European utopia.  Seems that a country that is less than 200 years old, has grown accustomed and has invested a lot of its national prestige in being called Deutschland!  Hopefully a way can be found to eliminate the letter D without the German parliament or Constitutional Court being called into the discussion.  The problem with the Dutch is easily solved, we just call them Hollanders.  The Danes can be Vikings.