Sweden Sliding

31 maj 2005

Sweden — 2005 IMF Article IV Consultation, Concluding Statement

Last week, the Swedish media noted that the country’s economic policy had been praised by the IMF.

Well, I wonder if the person who wrote that had read the Concluding Statement coming out of the so-called Article IV Consultations. This is an annual thing. Well Prepared. Carefully Drafted.

It’s true that the IMF starts by speaking of ”large gains in productivity, continued low inflation and a comfortable competitive position.” 2004 was also a year of ”strong economic expansion.”

But that’s really the end of the praise. And probably as far as the journalists read.

The rest is a rather damming indictment of the government for presiding over ”gradual drift” towards higher and higher public deficits. The central government finances are already in deficit, and the overall public sector is heading there fast.

It might not be as bad as in some other countries – but certainly worse than most people are aware of.

But it’s not only that. IMF speaks of an ”institutional setup that discourages work effort”, and notes that figures on how many people work in Sweden should be treated with a large grain of salt.

Taking account of the large number of employees on sick leave, social assistance, labor market programs, and measures such as mid-life sabbaticals, effective employment is significantly lower. The marked rise in disability pensioners, especially among yonger workers, is particularly worrisome.”

And it goes on by calling for redudce income taxes and says that ”the pace of structural reforms needs to be accelerated.”

Sweden is certainly a country well placed to benefit from the acceleration of European integration and globalization that we are now seeing.

But it requires more forward-looking policies. IMF is worth listening to – in everything it has to say in this report.

Force for Freedom

31 maj 2005

EUbusiness – EU court rules Swedish state monopoly on medicines is illegal

In these days of eurogloom it’s nice to see that the institutions of the European Union continue their work in promoting and protecting the free and open economy that is the foundation for the prosperity of the member countries.

Today, the European Court of Justice ruled that Sweden’s state monopoly on medical preparations is illegal. This has been a controversial issue for years in Sweden, with the present monopoly-happy government doing whatever it can to preserve the old-fashioned state of affairs.

It has clearly been an arrangement to the detriment of the consumer – with the state instead taking the side of the public monopoly producer.

Now, it’s the end. Great! It didn’t prevent the responsible minister in the government to state that they will do whatever, in spite of the European Court, to preserve the monopoly.

Good luck! Those that always insist on fighting losing battles normally end up on the wrong side of history.

Downing Street Decides

31 maj 2005


With another resounding No in the referendum in the Netherlands tomorrow highly likely, the focus of attention is rapidly shifting to London.

It’s unlikly in the extreme that the Blair government will proceed with plans to hold a referendum on the Constitutional Treaty.

It is more likely to postpone everything indefinitely, perhaps saying that they eventually are ready to have a referendum after the French have had another one or ratified it in some otherway.

This, of course, is little more than pushing the buck around. Nothing of this will happen in the foreseeable future. And if this is the line from London, it is safe to expect that it will be the line coming out of additional capitals, although frenetic efforts are underway to stop the leaks from the ship.

It’s far more constructive to note that this Constitutional Treaty will not come into effect in the foreseeable future, and start the real discussion on what really needs to be done.

Two things need to be in focus in that debate. Issues of peace, and issues of prosperity. What really needs to be done.

A debate with substance first and institutions second. Not the other way around. That might make it possible to getthe required support throughout Europe.

Monday – when the British government will show its cards – will be the really crucial day. I’ll watch it from the perspective of Moscow.

Why No?

30 maj 2005

TNS Sofres – Sondages, opinion, etudes : Le r�f�rendum du 29 mai 2005

Why did those that voted No in the French refererendum did so? Did they really object to the one or other part of the Constitutional Treaty?

Not really. A quick poll by the TNS-Sofres opinion polling agency tries to answer why the No’s noted No.

The number one reason (46 %) is the issue of unemployment and a fear that it will rise further. This is, in its essence, the question on whether globalization is a threat or a promise.

The number two reason (40 %) is the situation in the country in more general terms. It’s difficult to see that this has anything to do with the Constitutional Treaty.

The number three reason (35 %) is the alleged possibility of re-negotiating the treaty. Unclear, however, what this re-negotiation should be about.

And the two reasons sharing the number four position (34 %) is that the treaty is difficult to understand and that it is too liberal.

That most constitutional text are rather far from being immediate crowd-pleasers seems to be a point lost, or that the ultimate in being liberal in terms of an open market is really the Treaty of Rome that France signed in 1957 and has been – well, more or less – implementing since then.

I guess that there will be more refined polling and analysis eventually, but these first results are not without their interest.

In the meantime, we are all waiting for the Nethetlands.

Europe will survive a French Non

30 maj 2005

Europe will survive a French Non

It was not a total surprise that France was going to vote No, and accordingly there have been some debates about the possible consequences.

As I have already indicated, I find the official line that everything should just go on in terms of ratification less than credible, in particular if there is a No in the referendum in the Netherlands on Wednesday as well.

It’s worth noting that the government in London is not lining up with the official line from Brussels at the moment. From his vacation in Italy, Tony Blair is talking about a period of reflection, evidently wants to wait for the Dutch before he goes any further and announces that the Foreign Secretary will make a more official declaration on the possible road ahead next Monday.

The likelihood of them then saying that they wil go ahead with a referendum in the UK in spite of a double No in France and the Netherlands is virtually zero. And then we will have a situation where the UK de facto will withdraw ratification from this constitutional treaty.

And then it is less likely that the European Council on June 16-17 will just repeat the present official line. But we’ll see.

The European Union will now be governed by the Treaty of Nice. That’s perfectly OK for the time being. But at the same time one should start looking into ways in which some of the policy changes in the Constitutional Treaty could be implemented without any treaty changes.

In the linked OpEd piece in the Financial Times from last week, Charles Grant discusses certain of these options.

Particularly in the field of the Common Foreign and Security Policy, it is both desirable and possible to start to move in this direction.

The world needs a stronger European role.

Revolt of the Rural

30 maj 2005

Le Monde.fr : Les r�sultats d�partement par d�partement

As always, the pattern in election results is revealing, and the pattern in the French referendum result did not deviate from the pattern we have seen in other similar cases.

It’s to a very large extent – in the middle of everything else – the revolt of the rural against the urban.

José Bové, who is the leader of the militant anti-globalisation movement in France and somewhat of a celebrity, was obviously right in calling it ”a protest vote”.

The large and outward-oriented urban areas of France voted yes. In the region of Paris with impressive 66,5 % and in the second biggest city Lyon with 61,4 %. Toulouse with its Airbus and space industries voted 51,3 % yes and Bordeaux did the same with 57,9 %. In Strasbourg, with its particular European history and experience, the Yes vote was 62,9 %.

But the cities were swamped by the rural areas that – with only part of western France as the exception – voted massively no. And they were joined not the least by problem-filled areas in the declining industrial north-east and in the politically polarized areas down by the Mediterranean. The city of Marseille voted no with 61,2 %.

In essence, this is not too dissimilar from the results that we had in the different referendums on European issues in the Nordic region.

The urban versus the rural, and the modernizers versus the protesters.

Europe – What Now?

29 maj 2005

Lefigaro.fr, l’actualit�francophone au quotidien

With exit polls giving the No side 54,5 % of the vote in France the fate of the Constitutional Treaty is de facto sealed.

We have missed a possibility to create a better functioning European Union with the possibility of a stronger voice in the world and better possibilities of fighting crime in Europe itself.

That is, needless to say, bad. But it’s not the end of neither the European Union nor of Europe. When some prominent voices claim that a No would mean ”the end of the future of Europe” – in this case it was Romano Prodi – it is of course unmitigated rubbish.

Europe goes on. The question is how. There will be the need for a new leadership in a new situation.

The majority in France gave their no because they were dissatisfied with the present and fearful of the future. A substantial part of that clearly had to do with the domestic affairs of France, but a substantial part was also related to Europe as a whole.

They feel lost in a Europe where globalisation and integration is making change the necessity of the day. They evidently feared that their – in my view hopelessly outdated – view of France would be a loser in that Europe. In that sense, they might not have been that wrong.

The immediate result of the vote is obviously a crisis for France. It’s a failure for both President Chirac and for the Socialist Party. There will have to be a serious soul-searching in the political forces of France before they can start to approach these issues again.

In itself, this might not be a bad thing.

In the capitals of Europe, and not the least in Brussels, the question is of course how to proceed with the issue that the French have now voted on – and the Dutch will vote on this Wednesday.

Prime Minister Jean-Claude Juncker of Luxembourg – holding the European Union presidence at the moment – have said that everything should go on and every country should take its decision on the treaty. A referendum should be held in Luxembourg on July 10.

But this doesn’t make any sense whatsoever.

First there is the very obvious risk that it will be just an accumulation of further negative decisions. Even Luxembourg might well vote No if France and the Netherlands have already done it.

Then it is now clear that this particular text will never enter into any force. The decision of France must be respected. To continue with ratification in different countries is just to prolong the agony.

When the European Council meets in Brussels on June 16 they should close down the process officially. But they should also stick to their previous agreement to meet in November of next year to consider the situation and discuss what to do.

Then the period until then will be a period of further reflection and debate. In the meantime, everything will work in accordance with all the treaties in force.

In the meantime we might see changes in the political landscape of Europe. There will in all probability be a new government in Berlin by this autumn. There might well be a new Prime Minister in London within this period. And shortly thereafter – in March 2007 – there will be a new President in France.

Clearly, the Europe of today can provide the leadership that inspires. But after a debate across the borders in the coming years, there is at the least the possibility that we will get it.

We are entering a new and not uninteresting phase in the evolution of the European Union.