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November 01, 2016

German Greens threaten to block Ceta ratification

There is more trouble ahead for the EU/Canada trade agreement, as we predicted, this time not from Belgium but from Germany. The Greens say they will block ratification in the Bundesrat, the upper chamber, and they have a majority to do precisely this.

The provisional application of Ceta has been signed, and this means that maple syrup will get a tad cheaper from next year onwards - a life-changing event for the European economy. The most substantive bits in the treaty - especially the investor tribunals - will not be implemented until the actual treaty is ratified. The Walloons have extracted a commitment by Belgium's federal government that Ceta itself will need to be changed in order to reflect the assurances they received on the investor tribunals, which should turn into ordinary law courts staffed by professional senior judges who apply existing legal principles, and which are open to small and large companies without discrimination. This is not what Canada had in mind. And Canada has so far refused readiness to change the existing agreement.

The German Greens are saying that they will probably reject Ceta, unless the concerns of the Walloons are reflected in the actual treaty - which would necessitate the aforementioned treaty change. FAZ leads this morning with this story, quoting the head of the party, Simone Peter, as saying that she expects the Greens to vote against ratification in the Bundesrat, the upper house. Since the coalitions of which the Greens are part form a blocking majority, this constitutes a real threat to the deal.

The open legal question is whether the German ratification law needs a Bundesrat vote, or whether it can be waved through the Bundestag, the lower house. FAZ quotes Angela Merkel's spokesman as saying that this question was currently being investigated. The paper also quotes interior ministry experts as saying that they are leaning towards subjecting the law to a Bundesrat vote. At the moment, coalitions involving the Greens and the Left, which also rejects Ceta, have 53 votes out 69 in the Bundesrat. It is customary in Germany that senior partners respect the view of junior partners in Bundesrat votes, for otherwise they would sacrifice their coalitions.

The German government estimates that it could take between 2 and 5 years for Ceta to be ratified. But a single no Vote would end this process. 

Gunter Bannas, the FAZ's seasoned political commentator, explains in a separate article that there are two types of laws that involve the Bundesrat: those the Bundesrat has to approve with a simple majority of at least 35 votes, and those the Bundesrat can object to a procedure that would trigger an arbitration process. The latter procedure would favour Ceta. But it gets technically more complicated than that. It is possible that Bundesrat and Bundestag disagree on the nature of the legal basis, in which case the whole procedure ends up on the desk of the German president. If Joachim Gauck then signed the law, the decision would undoubtedly be challenged in the constitutional court, which would have another dimension of the Ceta case to consider: whether the Bundesrat can block it. 

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November 01, 2016

Rutte gambles on Ukraine

The self-imposed Dutch deadline for resolving the situation created by April's 'no' vote in the referendum on the EU-Ukraine association agreement will come and go today with the situation still unresolved. The Dutch parliament had already voted to ratify the treaty but, since the referendum was called, the Netherlands cannot actually ratify unless the parliament votes again. The governing coalition by itself does not have a majority for ratification in either house of the parliament. In the lower house, the coalition parties VVD (right-liberal) and PvdA (Labour) have a majority of one seat, but Labour MP Jacques Monash is expected to vote against ratification. It now seems like the left-liberal opposition party D66 will support ratification in the lower house. In the upper house, however, even with D66 the coalition doesn't have a majority. Mark Rutte hopes for the eventual support of the CDA (Christian Democrat), which had originally voted to ratify the treaty but has since taken the position that the referendum result must be respected. The Dutch government has been caught between a rock and a hard place, because the opposition is demanding a binding agreement from the EU before ratifying the treaty, while the EU wants a prior commitment that the Dutch parliament would accept what is agreed.

Despite the lack of any public statements from opposition parties, or from the EU, Rutte and his foreign minister Bert Koenders now believe they have support in principle for attaching a declaration to the Ukraine agreement to the effect that: the association agreement is not a prelude to Ukrainian EU membership; the EU will not provide military assistance to Ukraine, or additional money; and there will be no free movement of workers between Ukraine and the EU. Ukraine's government has indicated that they will not oppose such a declaration. In addition to the likely support of D66, the CDA has said it wants to vote separately on the additional declaration and on the agreement as a whole. But Rutte freely admits that he has no deal yet with the opposition.

So, in a letter to the Dutch parliament, the government now proposes to take such a declaration to the European Council for approval at the next summit in December, after which the Dutch parliament could vote on ratification. This will mean a delay of about six weeks from today when the issue will be debated in the Dutch upper house. Opponents of the association agreement, notably the Socialist party leader Emile Roemer and the "for the Netherlands" VNL breakaway faction from Geert Wilders' PVV party, have reacted to the government's plans with claims that democracy is being ignored or betrayed. We also note that the single PvdA rebel against the Ukraine agreement in the lower house, Jacques Monasch, is running an anti-establishment campaign for the PvdA leadership contest now under way.

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November 01, 2016

On the failure of modern macro

Ann Pettifor has a brave essay in which she harshly criticises the economics profession over its failure to adjust its models after the global financial crisis. That fateful omission has triggered the decline of a profession whose advice is now regularly ignored by politicians and the public, as the Brexit vote has shown.

She noted that the Economists' deflationary, liberal finance bias, and the failure to include money, debt and banking in its models, has made it impossible for the profession to understand what's going on, let alone provide correct policy responses. As a result, the world is struggling to stabilise an unbalanced system. 

"With the historic Brexit vote, the British people rejected this flawed brand of economics—and in particular the dominant liberal finance narrative. And they did so because the hardship they are experiencing—repressed wages, diminished public services, rising housing costs and shortages, and insecure employment—is indirectly a consequence of the theories and policies of the mainstream economics profession. Economists led the way to the [d]e-regulation and ‘liberalization’ of the finance sector over the past 40 years and to soaring levels of debt, crises, and financial ruin. Economists dictated the terms for austerity that has so harmed the British economy and society over the past ten years."

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