Todays Financial Times has an interesting comment piece from Bill Clinton’s former Treasury Secretary, Lawrence Summers.  Here is a small extract.

 ….no country can be expected to generate huge primary surpluses for long periods  for the benefit of foreign creditors. Meeting debt burdens at rates currently  charged by the official sector for credit – let alone the private sector – would  involve burdens on Greece, Ireland and Portugal comparable to the reparations’ burdens Keynes warned about in The Economic Consequences of the Peace ….  The twin realities that Greece, Italy and Ireland need debt relief and that the  creditors have only limited capacity to take immediate losses, mean that all  approaches require increased efforts from the European centre.

Given the comparison used by Summers, it’s ironic that it is the Germans that are in the vanguard of attempts to avoid sensible burden-sharing among the wealthier Eurozone nations.  Current ECB policy is trying to impose a “Carthaginian Peace” on the Eurozone, which will have severe consequences for all, not just the bailed-out countries.

As an aside, I wonder does German Chancellor Angela Merkel (a highly-qualified physicist) agree with Summers’ controversial remarks in a 2005 speech where he suggested that the under-representation of women in science and engineering could be due to a “different availability of aptitude at the high end,” and less to patterns of discrimination and socialization?  His remarks are believed to have contributed to his resigning his position as president of Harvard University the following year.

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Now here’s a story to give you a warm glow, especially if you are a taxpayer in the European Union.

The European Union’s highest court officially reprimanded France on Thursday (9 June) for not doing enough to care for hamsters.

Ruling on a case brought by the European Commission three years ago, the  European Court of Justice determined that the French republic had shown a lack  of due care towards its dwindling population of the black-bellied rodents.

Wild European hamsters, which can live for four years and grow to more than  20 cm in length, are considered farmland pests, but are threatened with  extinction in their small habitat in Alsace, eastern France.

The court found France had allowed harmful crops and unchecked urbanisation  to destroy nearly 1,000 hamster burrows between 2001 and 2007.

“The court holds that the measures to protect the  European hamster in Alsace, implemented by France, were not adequate” to protect  the species, it said a statement,  adding that France needed to address the situation immediately.

Under the ruling, France must adjust its agriculture and urbanisation  practices or face daily fines from the European Union. As the European Court of  Justice is the EU’s highest court, France has no further right of appeal.

There are an estimated 800 wild European hamsters left in France, although  there are plentiful populations elsewhere on the continent.

Hamsters are protected under the EU Habitats Directive, which requires  countries to protect animal species “of Community interest,” including the  European hamster, the court recalled.

The mind boggles at the cost of this exercise, involving highly-paid Commission officials and armies of lawyers and officials.  No wonder that the European Union’s annual budget for administering its institutions, including the Commission and the European Court of Justice, is €8 billion (out of a total EU budget of about €140 billion) and rising.

I concede that there is some price that we should be willing to pay for biodiversity, and I acknowledge that the Commission has a mandate to take action against a Member State which has failed to comply with its obligations under European Union law.  But surely, when it comes to allocating resources to this role, there are greater priorities for the Commission than looking after a few hamsters?

From The Economist:

Italians, unlike the British, French and, increasingly, the Germans, do not see the EU as an arena for the resolution of conflicting national interests. Instead, “Europe”, always referred to as if it were somewhere else, is a supplement to—and maybe, one day, a replacement for—their own government, which is axiomatically bad. The EU is like one of those benign but stern creators that reach out of the clouds in Renaissance masterpieces.

To successive Italian governments, “Europe” has been a convenient excuse for imposing unpopular measures. It is why Italians must sort their rubbish, give up their farmland and let in foreign goods. “Europe” is also the reason why certain things cannot be done—in the bureaucratic slang of Rome, it is the vincolo esterno (external constraint).

I have commented before (for instance here, and here) on how the EU pays lip service to the principle of subsidiarity, while in practice it seeks to expand continuously the range of areas over which it takes action.  Almost every month there are fresh examples of matters that should be dealt with at national level, but on which the EU sees fit to initiate legislation.  A good example surfaced today.

Belgium wants to use its EU presidency to underline the key societal role played by companion animals like dogs and cats, Belgian Deputy Prime Minister for Health and Social Affairs Laurette Onkelinx announced yesterday (9 September)…… “During our country’s presidency of the Council, we are underlining the important role of companion animals in civil society,” said Onkelinx, speaking at the launch of a website on dog welfare in Brussels.  “Dog and cat overpopulation creates a lot of suffering for unwanted animals,” she added, explaining that “sharing information and experience is the basis for every development in animal welfare, and here, for a Europe-wide solution and strategy to create an appropriate and responsible attitude by us humans towards animals”.  Onkelinx pointed to the Treaty of Lisbon, Article 13 of which reads “the [European] Union and the member states shall, since animals are sentient beings, pay full regard to the welfare requirements of animals,” as a possible basis for further EU action in this area.

It’s no wonder that EU citizens have to stump up €8 billion a year (out of a total EU budget of €130 billion) to pay for the cost of administration – it must take a lot of Commission officials to look after Fido’s welfare.

Disclaimer follows …..  In citing the above example, I am making no statement as to whether or not I think the effect of any proposed legislation is good or bad (it would presumably be good, on balance); only that I think national legislatures should be responsible for enacting it (or not enacting it).   So please don’t attack me, dog-lovers and cat-lovers!

Minister for Finance Brian Lenihan was quoted this week as saying that “….. there is nothing in the Lisbon Treaty that diminishes our sovereignty in fiscal matters….. the government secured a protocol confirming this position in advance of the second Lisbon referendum.  To suggest ….. that our corporation tax rate is threatened by proposals announced today is highly irresponsible and certainly not in the interests of this economy which depends so much on foreign direct investment.   As I said in my Budget speech: ‘The 12.5% Corporation Tax rate will not change. It is here to stay.'”

I think he is whistling in the graveyard.  He is right in saying that the Corporation Tax rate in Ireland will remain at 12.5%.  But that’s not going to matter, because what’s really going to happen is that the EU, or a large subset of its member states,  will introduce a new tax system allowing them to tax companies, irrespective of where they are incorporated or are resident, largely on the basis of the proportion of sales made in each country.   That system is part of proposals for what’s known as a Common Consolidated Corporate Tax Base (CCCTB).

So if you have a company resident and managed in Ireland, the current system means that all its profits are taxed in Ireland at 12.5%.  But let’s say that 40% of that company’s sales in the EU are made into France.  What’s likely to happen when CCCTB comes into force is that France will levy Corporation Tax (at their, higher, rate) on 40% of the Irish company’s EU-wide profits.  That’s a bit simplified, and of course credit will be given for Irish tax already paid on those profits, to avoid double taxation, but it indicates the nature of the problem.

Since Ireland is a very small country, most sales by multinational companies are made outside the country.  The danger of CCCTB is therefore very real and very large.

But doesn’t Ireland have a veto on changes such as this?  Well, we have a veto on any direct challenge to the actual rate at which we charge Corporation tax, but we may not be able to stop other EU member states from pressing ahead and changing their tax systems to one based on CCCTB.   The responsible EU Commissioner (who has the cumbersome title of Commissioner for Taxation and Customs Union, Audit and Anti-Fraud) is of a mind that CCCTB should be implemented by means of the “enhanced cooperation procedure”  of the EU Treaty.  This procedure would only require that one-third of all EU member states agree to implement CCCTB in their territories, and they could go ahead.  

The enhanced cooperation procedure is the means by which the concept of a “two-speed Europe” will come into being, and Ireland’s corporation tax advantage could be its first victim.

OK, so I’m not a professional economist, or a qualified lawyer, but fools rush in …..

Firstly, do the EU Treaties, and Article 125 in particular, really prevent a bailout of Greece, as we see/hear said frequently?  I don’t think so, but it depends what you mean by bailout.

Article 125 of the TFEU (post-Lisbon Treaty) states: “The Union shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project. A Member State shall not be liable for or assume …… etc etc”.

So, despite what some commentators have said, there is no prohibition on lending money to Greece; what can’t happen is for the EU or any Member State to take over its loans, or give it “free money”  And I would think that, as long as the interest rate charged is not unreasonably low, there would be no problem.

Secondly, almost regardless of what interest rate the Eurozone members charge Greece , I expect to see a challenge brought in the German Constitutional Court to the German participation in the loan facility.  I have already commented on that Court’s robust attitude to all EU matters, and the way it jealously guards what it considers is its ultimate right to decide if Union activities are ultra viressee this post

In a famous case in 1993, a Eurosceptic member of the FDP Liberal party took the Maastricht treaty to the German Constitutional Court in Karlsruhe, claiming that the abolition of the deutsche mark (as part of the creation of the Euro)  was unconstitutional. The court only agreed to permit the ratification of the treaty by Germany on the basis that currency stability would be as well protected by the European Central Bank as it had been by the Bundesbank.  There has, in effect, been a threat hanging over the ECB and the Eurosystem that at any time the good judges in Karlsruhe might seek to trump their actions; this would bring to a head the unresolved issue (at least in the minds of the German judges) as to who, in law, gets to make the final determination as to whether an action of the EU is ultra vires, and goes beyond the legal authority conferred by Member States in the various EU treaties.

Thirdly, a question: why is the Euro being hit so badly by the fiscal woes of Greece and other delinquent states, when the value of the dollar is apparently not affected by the budget deficit and debt problems being experienced by (for instance) California?

Fourthly, if Greece defaults (and some observers believe this is very likely), might the resulting grief suffered by that country’s citizens be a help to the Irish government in its battle with our public service unions?  Maybe Greece needs to be the sacrificial victim, pour encourager les autres?

Here we go again.   The placebo-pushers are on the move.  And unfortunately I read here that an Irish MEP is to the fore in promoting this nonsense:

“The third EU Homeopathy Day will be hosted by Marian Harkin MEP in the European Parliament on 23 March. Organised by the European associations of patients, practitioners, doctors and pharmacists of homeopathy and the European homeopathic and anthroposophic medicine industry association, the event will focus on the need to respect the choices and preferences of the 100 million users of homeopathy and anthroposophic medicine in Europe and to act on their request for the integration of homeopathy and complementary medicine into health care policy.”

It appears that the European Commission plans to launch a review of EU pharmaceutical laws, so the homeopathy quacks feel that it’s a good time to launch a lobbying push in Brussels.  They want  the EU to require all member states to provide access to their worthless products  from publicly-funded health systems.  That’s your taxes, dear reader, that will be used to promote products that have never been shown to have any beneficial effect, except possibly at the level of a placebo, other than in dodgy and biased tests. 

What next? Free witchcraft services for medical card holders? Read the rest of this entry »