Now this is curious . . . “Brexit would have ‘consequences’ for the migrant question, [France President] Hollande warns.” This comes right when French authorities have just wiped out about a quarter of the infamous “Jungle” camp of migrants at Calais trying to get into the UK – and just as British Premier David Cameron went to the northern French city of Amiens yesterday to visit with President Hollande, Premier Valls and other officials.

What “consequences” could President Hollande have meant? Unfortunately, the Le Huffington Post story is not exactly clear. Here is what Hollande said standing next to Cameron at their joint press conference:

One should not raise fears, but speak the truth. There will be consequences if the United Kingdom quits the EU . . . including the manner of managing situations in the matter of migrations.

And here is Premier Manuel Valls:

The day that this relation [that between the UK and the EU] is broken, the migrants will be no more at Calais.

HuffPoFR reporter Alexandre Boudet then helpfully adds, “In plaintext, the doors will be thrown wide open for them rejoining the United Kingdom.” (Wait: RE-joining?)

And then Harlem Désir, French Secretary of State for European Affairs:

There is no blackmail, nor threat, but it’s true that we cooperate more easily as members of the EU than if the United Kingdom wasn’t that anymore, because for example we also work with common European tools such as Europol or the Schengen information system. Even though Great Britain is not a member of Schengen, it cooperates through this system and other means of exchanging information.

Still not very clear. And there still seems to be some element of threat, despite M. Désir’s denials. Luckily, this piece also references an article in the Financial Times (EN-language; but paywall) which helps to clear things up:

Mr. Macron [that’s the French economy minister] said that Brexit could scupper a bilateral deal with France, known as the Le Touquet [A]greement, that allows Britain to carry out border controls – and keep unwanted migrants – on the French side of the Channel.

Finally the picture comes clear as to how, as David Cameron has also been warning his constituents, that “Jungle” over in Calais could potentially move across the Channel if Brexit were to occur – despite the best efforts of UK authorities. For when their officials can no longer first check travelers’ papers on the far side of the English Channel, then they have to do it once they are already in England – and what can you do then with those who you discover don’t belong there, who immediately claim asylum? According to the 1951 Convention Relating to the Status of Refugees, you have to deal with them in a humane way, which includes not just sending them back somewhere, at least not at first.*

Still, this key “Le Touquet Agreement” is a bilateral agreement, i.e. not something within the legal framework of the EU. Therefore, it does not logically follow that it should necessarily fall by the wayside should the UK no longer be an EU member-state. Rather, if that does happen, then that will amount to the French government canceling it after Brexit out of sheer vengeance. If this really is being contemplated, it could set a pattern, by which I mean: If the French will be vengeful after a Brexit, then why won’t the EU be so as a whole? How can those who advocate Brexit really be so sanguine that the UK will be able to re-negotiate basically the same terms for trade, etc. that it had as an EU member once it is out?

One can look at the matter that way, or one can employ another perspective: That, starting here with President Holland and his top officials at this UK-France summit, a campaign has begun of threats and intimidation to try to head off a Brexit. Here at EuroSavant we view the UK remaining an EU member-state as a no-brainer – there’s little doubt future blogposts in the run-up to 23 June will faithfully reflect that – yet one can doubt whether this sort of tough approach is really best calculated to aid the British electorate to make that correct choice when they are called upon to cast their votes.

Anyway, that HuffPoFR piece also reported that President Hollande made special mention of the problem of reuniting the many refugee children stuck at the Jungle who have relatives already in the UK with those relatives. David Cameron was said to be accommodating on that. Further, Cameron announced a supplemental payment to France of €20 million to help out with those refugees still stuck at the Jungle – mainly, however, for encouraging them to be dispersed and moved away to other parts of France.

* Note that the “Le Touquet Agreement” has to do with people arriving to the UK via the cross-Channel ferries. There are analogous agreements (which are also bilateral), under different names, covering train (Eurostar) and aircraft travel, which also could be abrogated by the French/Belgians (train) or those and other EU member-states (aircraft) in the event of Brexit.

Free movement of goods; free movement of ideas; free movement of money; free movement of people: these all used to be points of pride for the European Union, milestone-accomplishments as it succeeded in bridging national differences to create unprecedented levels of cooperation between European states. And along with that, unprecedented levels of trust; all of those freedoms required each participant state to have confidence that the others would not let them down and cause them to regret such openness.

Now “freedom of movement” once again seems to be under peril, as can be seen in today’s Süddeutsche Zeitung exclusive article Berlin and Paris want to bring back border controls. This is all about the EU’s Schengen Agreement, begun in 1985 and expanded since then to include most, if not all, member-states in a regime where travellers are not checked at “internal” EU borders between member-states but, on the other hand, “external” borders between member-states and non-member-states are policed ever more carefully, since someone getting past those then has free access to other states party to the Agreement.

Or at least those external borders are supposed to be carefully policed. In reality, doubts have arisen as to whether this really is the case, particularly when it comes to asylum-seekers making their way from North Africa across the Mediterranean, usually to Italy. When the pressure got turned up last year due to the Libyan civil war and many thousands more attempted this boat trip than usual, French confidence that the Italians were performing their proper border-control duties disappeared, to the point that border controls were reimposed for a few days on those countries’ “internal” common EU border – in violation of the Schengen agreement, of course. Denmark last year also chose unilaterally to reimpose controls on its border with Germany for a while. (more…)

The scoop ultimately belonged to the Financial Times, but that article is ensconced behind their semi-porous paywall. So here at €S we had to get the news from Lidové noviny, from the Twitter alert by @cznews (Oh no! Not Rozpočtoví hříšnici!):

Rozpočtoví hříšnici v eurozóně zaplatí pokutu ve výši 0,2 % HDP: Země eurozóny, které v budoucnosti po... http://bit.ly/9X8tCn #czech #news

September 24, 2010 9:09 am via twitterfeedReplyRetweetFavorite

@cznews

Czech Business News

And a scoop it truly is, for the FT journalists (Peter Spiegel and Joshua Chaffin) have unearthed proposed “legislation” set to be officially unveiled by Economic and Monetary Affairs Commissioner Olli Rehn next Wednesday, which their article terms “the EU’s most ambitious attempt to reorder its economic governance since this spring’s debt crisis that nearly destroyed the single currency.” Basically, the Commission would step up to take up a role in examining the national budgets of the 16 Eurozone member-states in a big way, with the authority to impose fines of 0.2% of GDP on governments which “consistently fail to bring down their public debt levels” – or “fail to control their annual spending,” or “fail to reform their economies to improve their competitiveness.” Once having decided to fine a member-state, the Commission under the proposal could only be stopped by a qualified majority vote from the European Council within 10 days of the decision. (Similar rules for member-states still outside the Eurozone will apparently be forthcoming later.)

Even just ignoring recommendations about how to improve national competitiveness (from the Commission presumably; and so how can they really be described as “recommendations”?) could make a government liable to a 0.1% of GDP fine. And, somewhat ludicrously, the Commission would also maintain a productivity data “scoreboard,” sort of like the running list of grades on an elementary school classroom wall.

Pretty amazing – especially when those of us with any sort of historical memory (it need not go back any further than ten years or so) recall the Stability and Growth Pact that was a key component to the introduction of the euro at the end of the 1990s. That also prescribed monitoring of (Eurozone) member-states’ public finances by the Commission; and it also prescribed “sanctions” (initially fines) for those governments who continued to violate the fiscal rules (budget deficit less than 3% of GDP, national debt less than 60% of GDP or getting there) after repeated warnings.

But it didn’t work: among the first to break these rules were the giants making up the EU’s “axis,” namely Germany and France, and no one ever dared to try to punish them in any way. Besides, there was always the fundamental bit of illogic in such arrangements of trying to punish by means of a monetary fine a government which has gotten into trouble because it doesn’t have enough money available.

So Why Now?

What’s the difference this time, that makes Commission staff think that these sorts of proposals will be accepted, and that they even will work if enacted to influence member-state government behavior? Obviously it’s the big Greek/Spanish/Portuguese/Irish/etc. debt crisis of 2010, which in May prompted the panicked assembling of a €700 billion+ support fund for states in trouble with their sovereign debt. It’s by no means clear that that will be enough to head off trouble; it’s by no means clear, for example, that Greece will in fact be able to avoid default (or, probably, the same thing camouflaged as debt “restructuring”).

Neither is it clear that member-states will be at all receptive to these latest Commission proposals as they are formally presented next week (together with similar ones from Council President Herman van Rompuy). It’s hard to avoid the thought that this sort of supervision of their budget processes from an external, super-national body of experts, backed up by sanctions with financial teeth, was not what most if not all of them thought they were getting into when they joined the EU and then the Eurozone. That historical process of European integration is likely about to face a decisive “gut check” moment, coming up next week.

Today is “Stress Day” – the day when the results of the “stress test” exercises performed on all major European banks will be released after the end of the European business day (but right in the middle of the American business day!). The Financial Times column Alphaville has a handy round-up of articles on the subject, compiled by Gwen Robinson. The most comprehensive guide – perfect if you’re still unsure of what these “stress tests” are all about and have some time – is by far the contribution from Anne Seith of Der Spiegel. (Rest assured: it’s in English. As for Alphaville itself, better enjoy that while it’s still free and available to all!)

Then there is the report by Anne Michel in Le Monde, also cited in the FT Alphaville round-up. Why is everyone so stressed about these “stress tests”? Mainly because banks can only “pass” them or “fail” them, and failure could carry a high price in terms of loss of investor confidence, for starters. Indeed, the impact is likely to be even greater than it was for the ten banks (out of nineteen tested) which “failed” during the American “stress test” exercise carried out back in May, 2009, for banks that fail by definition need recapitalization and there is a dwindling number of European governments still able to provide that. It’s notable, as Mme. Michel points out, that European authorities have staged such “stress tests” twice before, namely dry runs in August of 2009 and April of this year with a more limited selection of banks, whose results have never been made public.

But this time it’s serious, and all results will be released publicly. Naturally, everyone would love to jump the gun and get word of at least some of the results before they’re released to the unwashed masses (there’s potentially money to be made, for one thing). Mme. Michel does her best to oblige. It looks like all the French banks involved – namely BNP Paribas, Société générale, Crédit agricole and BPCE – have passed the test. Indeed, the failures are expected to come only from the usual suspect nations: Spain, Greece, and Portugal. Oh, and Germany, too – but the one German laggard is likely to be the Hypo Real Estate Bank, which already got into so much trouble back in 2008 that the German government fully nationalized it. (Note that this last bit does not come from Mme. Michel’s article, but from another of my on-line sources.)

Going back to the star banking pupils from France, such seeming across-the-board success inevitably raises questions as to the stress tests’ legitimacy. The article does go into some detail about how the tests’ parameters have been toughened up to include some degree of sovereign debt default, placed on top of a posited recession of 3% negative economic growth lasting over a year-and-a-half. But will this go far enough to convince the markets that all this has been a worthwhile, bona fide exercise? That is probably what most EU officials and bank executives are stressed-out about most of all.

I’d like to take up again the subject of the rather unconventional German governmental response – so far – to the surging economic troubles to be found in Germany as well as more widely, prompted as I am to do so by the reader response I’ve received. You might recall that we can summarize that response as “Times might be tough, but there’s no need for this government or any other to spend huge sums, go way into debt, or otherwise endanger the EU’s Stability Pact that is supposed to underpin the euro.” (But also remember that this unorthodox position seems to be held only at the German government’s top levels, with plenty of insistent calls to start spending coming from elsewhere, including lower-down in that same government.)

This whole question in its broader sense – which could be phrased, ¡¿Caramba!, what can we do to stop the onrushing Great Depression? – is put into sharp relief by a commentary from Thursday in the Financial Times by the historian Niall Ferguson* (in English of course: The age of obligation, h/t to Naked Capitalism). (more…)

Back to the subject of Iceland, which holds the doubtful distinction of occupying the current financial crisis’ leading-edge of economic suffering. As the FT recently reported, that country’s monetary authorities have now had to raise interest rates for the Icelandic krona to a record 18% as one condition for receiving what is still a “proposed” $2 billion loan from the International Monetary Fund. The future will seemingly bring a 10% contraction of the economy there, with simultaneous 8% unemployment and 20%-plus inflation.

I’m afraid I do not possess the skills in Icelandic to start investigating that country’s on-line press to look deeper into this mess that way. But there’s at least some interesting coverage from the Czech Republic’s leading general-interest quality daily, Mladá fronta dnes, in the form of an article Alarmed by the crisis, a third of Icelanders consider moving out of the country. (more…)

Why are Russian forces presently still occupying big swathes of vital Georgian territory, seemingly in defiance of the cease-fire brokered by EU president Nicolas Sarkozy and signed by both the Russian and Georgian governments? (I say “seemingly,” because I’ve read reports that, in the negotiations leading up to that cease-fire agreement, the Russian side managed to have language inserted that gave them some leeway to keep hold of some of that territory if in their judgment it was necessary for use as a buffer for their defense of South Ossetia.) One possible reason, that Gazeta Wyborcza raises today (Russian Army not completely subordinate?), is that the Red Army might not have been completely under the control of its political masters during its incursion into Georgia.

This specter of a renegade Red Army is a scary one, particularly for Poles, although the Polish daily does not claim any original research here. Rather, the article is devoted to recasting into Polish a report on this subject from yesterday’s Financial Times – to which, if you’re interested, I’ll just let you switch over here since it’s written in good Queen’s (business) English. Highlights are the way the Russian troops kept going even after the cease-fire was signed (with the military brass ticked off that their leaders in the Kremlin would not let them finish the job, i.e. destroy the Georgian army), and how they even set about establishing a police force for the occupied Georgian city of Gori – not really a military force’s task, quite apart from it’s being a clear sign of intent to stay there for a while – before that political yank-on-the-leash finally came down and they were ordered to evacuate Gori (but only to positions just outside).

The Dutch daily Het Parool has word of the current military struggle between Russia and Georgia spreading beyond land conflict (Russian Fleet Sinks Georgian Boat). Quoting Russian press bureaus, who in turn gained their information from the Ministry of Defense in Moscow, the paper reports that yesterday (Sunday) two Georgian patrol boats in the Black Sea fired rockets at Russian warships, who returned fire and sunk one of the boats. Spokesmen for the Georgian government were not available for comment. (more…)

This will do nothing for the attempts by the Barack Obama presidential campaign to knock back the charges of “elitism” raised – only by the media and the Clinton and McCain campaigns, admittedly – in the recent storm over his “bitter small town” remarks at what was supposed to be a private fund-raiser in San Francisco. But anyway: yesterday the leading world business newspaper the Financial Times endorsed him for the Democratic Party nomination (Democrats must choose Obama). Of course, who in Pennsylvania reads the FT anyway, outside of some universities and financial houses in Philadelphia – or do I sound bitter? (more…)