We use cookies to help improve and maintain our site. More information.

10 March 2023

Turkey's carrot of Nato accession

Expectations are a big game in politics. Governments peddle expectations all the time, for example preparing the public for a low outcome in negotiations just to surprise everyone positively when the outcome exceeds those. The opposite is also possible too. Central bank interest rates policies has erred on the optimistic side for quite some time now. Goalposts can be changed on the way even if the underlying dynamics has not.

One of the masters in this kind of deception is Recep Tayyip Erdogan. The tripartite meeting between Turkey, Sweden and Finland in Brussels yesterday was perceived as positive simply for the fact that it happened and that new meetings have been scheduled. The underlying issue, that Turkey accepts what Sweden and Finland have done in return for its backing for their Nato membership, has not been achieved.

This process could drag on for a while, kicking the can down the road with more positive messages without any commitment to a final resolution. Even the Hungarians realised the value of this strategy. Several Fidesz MPs went to visit Stockholm to complain about derogative treatment of Hungary. This is still a side show, but could be used for a bigger show if needed.

We do not expect any green light from Turkey before the elections in May. What will come after is still uncertain. Polls currently suggest that Kemal Kilicdaroglu, the main candidate of the opposition is ahead of Erdogan. The earthquakes have caused an avalanche of public anger directed against Erdogan and the administration for past failures in building more earthquake resistant buildings. If Kilicdaroglu were to win those elections, the diplomatic task to get Sweden and Finland into Nato is likely to be easier. If Erdogan wins the elections, it will depend on the price he may want to extract backed by a renewal of his powers at home.

9 March 2023

500 pounds of C4

The German defence minister said something revealing, warning of the kind of debate we are going to get as the investigation into the Nord Stream explosion reveals more details.

Boris Pistorius said yesterday that we don’t yet know whether this was a Ukrainian commando that acted with the knowledge of the Ukrainian government, a pro-Ukrainian group that acted without their knowledge, or whether it might have been a false flag operation. Until we know, we can’t speculate on the consequences.

What we find interesting in this comment is that he includes the notion of official Ukrainian involvement in the list of possibilities. From the information that has now been uncovered by the German public prosecutor, leaked to German media, is that this is was without a doubt a professional job. When people use professionally forged passports, and use 500 pounds of C4 explosives, you can pretty much rule out climate change protesters, who normally rely on super-glue as their weapon of choice, or hobby terrorists who watched too many James Bond or Die Hard films. What still baffles us about the information is that prosecutors were able to trace the rented yacht to Ukrainian owners. There are no shortages of yachts to rent in the German and Polish waters of the Baltic Sea. Why leave such an obvious clue?

There is still a lot we don't know. In addition to the possibilities mentioned by Pistorius, there is also the possibility of a no-fingerprints operation: government agents that act on outside the direct line of command. But politically that would not make much difference. In other words, if this attack was not carried out by Russia, then it is very bad news for the western alliance. 

We see intelligence agencies keep pushing the nothing-to-do-with-governments line, trying to pass blame to some unidentified pro-Ukrainian groups. With our knowledge of the German political systems, we doubt that it is possible to influence the investigation of the public prosecutor, in the way that this is possible in the US or the UK. It also makes us wonder why this information was leaked to the press. This is not something German prosecutors usually do.

No matter what conclusions we get, it will have significant political consequences. We have been reporting that German public opinion is relatively fickle on the issue of weapons deliveries. That nervousness is reflected in Olaf Scholz's hestitation and even obstruction of arms deliveries in the early phase of the war. If it became known that a Ukrainian commando, or a US unit, were responsible for this, the political implication would be massive. Public pressure would grow to stop supplying arms to Ukraine. If the US was responsible, it would endanger the recent renaissance of transatlantic relations. Europeans, even at the highest levels of government, have tendency to be naive about American politics. Many drew the wrong conclusions about Donald Trump’s electoral defeat. They misread the mood in Congress on trade. Even if the Democrats were to stay in power for the next 20 years, it won’t remain like this. Transatlanticism is not the defining characteristic of that party, though it has been the defining characteristic of the president.

In Germany, nobody defends the Nord Stream project any longer. A senior SPD politician is now under fire, even from her own party, for her role in setting up a foundation with the explicit purpose to evade US sanctions against Nord Stream. But it is one thing to oppose Nord Stream, and another to condone what qualifies as an act of war. We recall Jens Stoltenberg, Nato secretary general, describing a hypothetical Russian attack on Norwegian gas or oil pipeline infrastructure as a legitimate trigger for Nato Art. 5.

Handelsblatt argues that these investigation play politically into the hands of the far-left and the far-right, which are capitalising on formidable opposition to arms deliveries. As we reported yesterday, this issue is of sufficient strength, like nuclear power in the 1970s and immigration in the last decade, to create political parties dedicated primarily to this cause. We note conflicting opinion polls about public support for weapons deliveries. The conflict is mostly related to the way questions are asked. We interpret the sum total of these polls as a majority with varying degrees of enthusiasm in support of Scholz's hesitant pro-Ukrainian position. But all these data are very soft. If Ukraine is implicated in these attacks, the politics could swing quickly.

8 March 2023

Watch out for Sahra Wagenknecht

Germany’s system of proportional representation has ensured centrist governments for decades, but also allowed new parties to form, which would not have been possible in first-past-the-post systems. The Greens were the first of those that made it, the far-right AfD the second. Now we are hearing the Sahra Wagenknecht, probably the best-known politician of the Left Party, is considering setting up a pro-peace party, which translates as a party that will not support Ukraine. Weapon deliveries have become so important in the German debate, like nuclear power in the 1970s, that you can build a successful political party on the back of it.

Wagenknecht has not announced anything yet. She was the co-organiser of a much-noted peace rally a little over a week ago, which attracted support from the left and the right. She has since announced that she would no longer be a candidate for the Left Party, which is in any case on the brink of political extinction. Der Spiegel has commissioned an opinion poll that shows that such a party has an electoral potential of around 25%, which is similar to that of the AfD. There is some cannibalisation, of course. The current voters that proclaim that they could support such a party are more strongly associated with the far left and the far right, but there are also voters from centrist parties that support her.

Wagenknecht has straddled the left-right divide before. For example, she is firmly anti-immigration, a position that is similar to that of the AfD. East Germany has a greater tendency to vote for the far left and the far right than west Germany, with voters often switching between the far left and the far right.

We think that Wagenknecht could not knock out the Left Party, but could end up producing more votes and MPs for the political fringes than the current duo of AfD and Left Party. There are voters in Germany who oppose weapons deliveries, and yet who would never dream of voting for a party of the far-right or the far-left. Wagenknecht is in many respects ideally suited to attract such voters.

Wagenknecht is married to Oskar Lafontaine, a former leader of the SPD and German finance minister, who left the SPD and later became leader of the Left Party. While he, too, is clearly of the left, he also took anti-immigrant positions during his time at the SPD, when he called for reduction in the influx of German-speaking east Europeans and of asylum seekers.

A Wagenknecht party would also position Germany against the US, Nato and the EU, and would strive for closer relations with both Russia and China. While pro-Russian and pro-Chinese positions were common in German politics until recently, all the centrist parties have swung firmly away from the fence-sitting positions of previous German governments. We don’t think a Wagenknecht party would ever gain a political majority, but it would exercise more political influence than either the AfD or Left Party.

7 March 2023

Greek train crash and its repercussions

In politics and life, events intrude. The tragic train crash in Greece last Wednesday, where 57 lost their lives when a passenger and a cargo train collided heads-on was one of those events. The immediate reaction of Kyriakos Mitsoutakis was to blame human error, in other words the station master at Larissa, who apparently failed to switch the tracks to prevent the collision. But later, after a wave of public outrage and protests, he apologised in his Sunday Facebook message on behalf of himself and all those who governed before him for not putting the right signalling and safety systems in place to prevent such a crash. He concluded by stating that they can't, won't and shouldn't hide behind human error.

Looking at this event from a wider angle, the absence of signalling systems that could have prevented the crash is a symbol of underinvestment in critical infrastructure. The immediate political reaction was to heap blame on someone else rather than to assume responsibility in that disaster. Assuming responsibility is what New Democracy needs to do now if they want to be consistent with their past positions, especially when they blamed Alexis Tsipras when he was prime minister for the deaths resulting from the Mandra floods or the Mati fires, so Macropolis.

And this comes as Greece is preparing for elections in spring. Mitsoutakis promised to get help from the EU and other member states. He installed a committee to investigate the crash.

But already the appointment procedure raised eyebrows. Opposition parties were not consulted and one of the experts has been accused of conflict of interest and resigned. There is also a suspicion that the committee was installed to allow the government to control the narrative, while the judiciary and the railway company each one are conducting their own probe.

The scope of the investigation may also change. Mitsoutakis mentioned previous governments in his mea culpa, to work through this takes time. Also, it would not be surprising if the decade of austerity Greece experienced under the bailout programmes would not become part of this investigation.

There have been protests and clashes with the police already. Trains stopped. This could go on for a while. What this means for the elections will emerge eventually. What is clear already is that Mitsoutakis is no longer in control of the narrative.

6 March 2023

From brioche back to bread

French supermarkets decided to take anti-inflation measures into their own hands rather having the government decide for them. The government’s idea was to define a basket of essential products common for all. Instead supermarkets each do their own thing. Carrefour and Intermarché are those megastores which will cap prices for essential and nutritious products until mid-June. What does this mean for inflation? Is this a purely distributional move or will we see inflation shooting up once the cap is lifted in the summer?

Carrefour defined 100 daily products like washing powder, nappies, flour, bread, vegetables, and eggs that are to be promoted under this new anti-inflation campaign. Intermarché identified 500 products, mostly from its own brand, and some 30 fresh produce products on top. Super U and Lidl also have their ant-inflation baskets ready.

What does it mean for inflation? Let’s pretend Carrefour is the micro-cosmos for inflation, and all products measured are available for purchase there. Anti-inflation measures until mid-June will help households cope, but what about after that? If it works like a promotion, the price cap will eventually stop and prices would increase. It would buy time but ultimately not solve the problem of high inflation on essential goods that has been recorded for the past months.

Only if prices can be expected to relax eventually, such a promotion could help ease the pressure through a price hike that is temporary in nature. This is far from certain. The Ukraine grain deal still has to be renewed, and droughts and crazy weather conditions are expected to impact the harvest at home, while the geopolitical outlook is far from stable for imports. Trade unions are demanding compensation for inflation they have incurred. This is the famous wage-price spiral.

The other way to look at this would be that supermarkets aim for a distributional shift, taking the burden away from essential to non-essential products to keep their profit margins healthy. So, for example, if the price for bread is capped, the price for brioche may go up to compensate to keep overall profits stable. Will people then turn to buy bread or keep buying brioche, as the ultimate luxury good? One of the stories from the French revolution is that Marie Antoinette, when informed that people have no bread to eat, responded that they should eat brioche instead. It would be the irony of history if those who can afford brioche opt for bread instead.

The other distributional motion would be from small retailers to big supermarkets. Those mega-supermarkets, which can afford to run promotions amongst their large basket of products, could win customers from small shops with limited products that are forced to pass on price increases directly. It has been a decade long feud between small and big suppliers. The same logic appears here. Will customers who could afford the price increases stay with their local independent shop for the ulterior reason to make them stay? The more one looks into this chain reaction, the more one finds that it is not all level-effects in the aggregate, but also a lot of changes in relative price-setting power.

3 March 2023

Zelensky's role in peacetime

Winston Churchill was probably the most popular British prime minister of all time. But as successful as he was during the war, he failed to win the 1945 elections. Some experts say this is because he completed his task and thus made himself redundant. A more benign reading is that people wanted to turn the page of war and with it their leaders. Peacetime politics is different to wartime politics.

Will Volodymyr Zelensky face the same fate? Emerging from a comedian to a hero of the war in Ukraine, Zelensky personifies like no other the Ukrainian war spirit. But can he survive the transition to politics once peace has descended?

While the war is still our main focus at the moment, one should not forget that Europe’s role in the peace process will outweigh its efforts to support Ukraine during war times. It is in the European Union's DNA to link economic reconstruction to integration. And it will take an extra-ordinary effort to do so after all the destruction in Ukraine. It will also change the nature of politics from emergency to long term development. Will Zelensky be able to switch and negotiate boring details in post-war Ukraine? Because this is what it will take to get Ukraine into the EU. Gate-crashing the EU is not an option, no matter how strong the urge or the impatience may feel.

Politico looked at Zelensky’s record before the war that may come to eventually haunt him. It was Zelensky who refused to strategically prepare for war with Russia as requested by opposition parties weeks before the invasion as he considered the invasion unlikely. This may be dust from the past. The war united the country and played to Zelensky’s strengths as a communicator. His daily addresses to the Ukrainians strengthened their morale and mobilised volunteers to support the war efforts. He personsifies the David versus Goliath story. But this role suits him only as long as Ukraine is united in its identity and its purpose. It is a black and white world.

Peacetime is different. It will require sampling opinions different from one’s own, a transition in governance style from top down towards a more inclusive approach with parliament and other oversight institutions. Zelensky was true to himself during the war, an actor by profession, who rose to this historic occasion. He came to power with no experience in politics and yet turned every parliament and government in the West around to rally behind him. He speaks with leaders from the western world, more so than with his own opposition parties. During war time, power has been centralised and procedures shortened. After the war ends, the nature of politics will change. This will be a challenge for everyone, and for an impatient Zelensky in particular. 

2 March 2023

Stormont brake - revisited

The Stormont brake was celebrated as the big breakthrough surprise of the revised Northern Ireland Protocol. But a closer look reveals that not all is as shiny as it was sold in the press.

Here is the process in some detail, suggesting that the UK's veto power is smaller than it initially seemed, though the possibility of regulatory divergence remains:

  • The current rules foresees that all new EU regulation or amendments would be immediately applicable in Northern Ireland. Under the Windsor Framework, the Stormont brake would allow the 90-seat Stormont assembly in Northern Ireland to raise objections if it thinks these changes to EU law have a significant and lasting impact on the everyday lives of Northern Ireland residents.
  • It needs at least 30 members of Northern Ireland's legislative assembly from two different parties to sign this petition, and present solid arguments to prove that the damage to Northern Irish lives is liable to persist. Once the petition is ready, London could trigger the brake which would suspend the respective EU law without delay.
  • Then EU and UK officials will meet in a joint committee to discuss the impact of the brake on the protocol and the invisible border between Northern Ireland and the Republic of Ireland.
  • If no solution is found in the committee, it will go to arbitration by an independent panel, appointed by both sides. The panel will examine the merits of the brake. It will look into whether the effect of the EU law would indeed have had a significant and lasting effect on the everyday lives of Northern Irish residents. What this means will be subject to their interpretation. If it concludes that the conditions were not met, it could disable the brake and thus return to the status quo ex ante. Or, if it confirms the brake, the law would be suspended in Northern Ireland. This would lead to regulatory divergence with the EU, for which the latter is to offer remedial measures. So even if the UK has the unique power to trigger the brake, the EU has made sure it has the power to retaliate.
  • One feature celebrated in London was that the brake excludes the European Court of Justice and leaves it to an independent arbitration panel instead. But the mandate for the panel only covers the procedure for triggering the brake, while the ECJ would still be responsible for overseeing the content of the EU law itself, so Euronews.

1 March 2023

New hurdles for Nato accession

The saga over the Finland's and Sweden’s Nato accession continues, as Hungary is now raising concerns and delaying the two countries' ratification process yet again. Turkey and Hungary are the only two countries that still have to ratify the two Nordic countries' bid to join Nato. Turkey imposed its conditions and signed off on an agreement with Sweden and Finland that made them change their laws on counter-terrorism and arms embargoes. Is it now Hungary’s turn to impose conditions?

Viktor Orban so far has supported their bid, but last week he expressed his concern about the two Nordic countries’ Nato membership for the first time. Among other criticisms, he has accused both countries of spreading outright lies about the health of democracy and the rule of law in Hungary. Some of his MPs bemoan the two Nordic countries insulting Hungary. A delegation will now travel to Sweden and Finland. It is not clear yet how many Fidesz MPs could oppose the ratification, or how serious this threat is.

The official narrative is still that Nato accession will go ahead, it is only a question of timing. It is also a question of what price the two countries are willing to pay. Sweden’s parliament already modified its constitution to strengthen counterterrorism laws to meet Turkey’s demands. Turkey’s government upped the ante late last year, demanding the extradition of over 100 individuals, amongst them activists and journalists, something that the Swedish government said it cannot do.

Turkey’s tone may have softened after the 6 February earthquake, as Al-Monitor observes. But they are still working on the scenario in which Finland could join separately, keeping Sweden in limbo. Giving up its neutrality for this is quite a high price to pay. And Hungary is just discovering its own power to twist circumstances to their own advantage.

28 February 2023

Europe's young vs old divide

Looking at European politics can feel like a case of plus ça change. Political parties have, for the most part, stayed the same, and political debates frequently seem to have an infinite loop-like quality as we try to solve the last crisis when we should be preparing for the next. But there has been a tectonic shift in European politics.

This has been one away from a traditional left-right divide, towards one in Europe’s ageing societies between the young and the old, between people agitating for change and those who are comfortable with moving slowly, if at all. It is this debate, not only over what to do but whether to do anything, that will increasingly and more obviously come to shape Europe’s political direction in the future.

The shift is probably most obvious in the UK. In a now widely-cited piece, John-Ben Murdoch has explored how in the English-speaking world, the migration of voters from left to right as they get older has stopped with the millennial generation. The biggest, most important debates in the UK, such as over housing and the British relationship with the EU, have a distinctly age-related component. When Sir Keir Starmer recently, and belatedly, promised planning reform, he was simply saying what you’d expect from the leader of a party that’s become the default option for anyone under 40.

We’ve even noticed a shift amongst more committed devotees of the centre-right. The furore over the concept of 15-minute cities was one recent example. After one Conservative MP claimed it was an international socialist plot, there was a lot of pushback from mostly younger, conservative-leaning commentators. They pointed out that the traditional communities which conservatives claim to support were basically 15-minute cities. Increasingly, younger Britons on both the left and right are united by wanting somewhere to live, and wanting it to be nice.

The most UK-like manifestation of this divide elsewhere in Europe has been in Italy, though this is a bit more complicated. Elly Schlein’s recent election to the PD’s leadership felt like a generational torch-passing moment, but there is a fine distinction in Italian politics between those in their 20s and in their 30s. In the last election, Five Star did disproportionately well amongst the latter group, whilst the former gravitated towards the PD, the Greens and pro-European parties of various stripes. This is likely to be reflective of how the euro sovereign debt crisis shaped peoples socio-economic fortunes, and more specifically who they thought was responsible for their problems.

In France and Germany, voter splits between young and old have manifested themselves in very different ways, but have a similar underlying cause: a desire for something different. Despite Emmanuel Macron’s relative youth and energy, he draws his support disproportionately from older French people. In last year’s presidential elections, Marine Le Pen and Jean-Luc Mélenchon were the big beneficiaries of the younger vote. At one point, it seemed possible that the left-wing Nupes alliance could unseat Clément Beaune, one of the younger and more left-leaning members of Macron’s cabinet, in what would have been a highly symbolic result.

Younger Germans have gravitated towards the Greens and FDP, two parties that have almost irreconcilable policy goals but who share a reformist outlook. Both parties represent an alternative to the traditional centre-right and centre-left parties of German politics. One possible explainer for the FDP’s subsequently terrible electoral performances is how little they realised that an appeal to individual freedom and modernisation is what drove their popularity amongst younger voters. Instead, they have doubled down on old totems like the debt brake and the diesel engine.

27 February 2023

Cutting cords to Putin - Le Pen edition

The pro-Putin era is clearly over. Yet, what should recently-reformed pro-Putinists do with the past? This question is already coming up in politics, as new narratives are formed. Will a pro-Putin past become a theme in politics? The SPD is already writing a new story that starts after Gerhard Schröder. Marine Le Pen’s Rassemblement National is split over fast or slow disengagement. Could it decide her chances to win France's presidential elections in 2027?

A pro-Putin history may be a dividing line already in Germany, but it is less so in France, at least for now. Photos of Le Pen shaking hands with Vladimir Putin went viral for a while last year, but politically only Eric Zemmour had to pay for his unabashed pro-Russian rhetoric. Le Pen was lucky and avoided the debate all together. So far this worked. But this will not work forever, and the party will have to come to terms with how to tell this story moving forwards, writes l’Opinion.

The party is split between two strategies. There are those inside the party advocating a slow path, starting with the first step of repaying a Russian loan to the party as quickly as possible. The second step is demonstrating that RN was not subject to any Russian pressure in the parliamentary commission on foreign interference. Finally, it is about minimising relations between Marine Le Pen and Vladimir Putin. The second path is faster and includes more visible support for the victim country, a line defended by Jordan Bardella, the 27-year-old party leader. When he was born, the USSR had already vanished. Bardella is for a change in alignment. He defied his own MPs and showed up when Volodymyr Zelensky came to the National Assembly. He made his stance clear in an interview with l’Opinion saying that there has been a collective naivety about Vladimir Putin's ambitions and intentions. For him, being patriotic and a sovereignist implies defending the full and complete territorial integrity of Ukraine. The Le Pen clan has had various links with Putin’s Russia in the past. Could this risk Le Pen’s chances of getting elected in 2027?