Surprising Flat Tax Support

30 augusti 2005

Wahlkampf: SPD konzentriert sich auf Kirchhof – Politik – SPIEGEL ONLINE – Nachrichten

It’s astonishing how the flat tax concept has become a central issue in the German election campaign.

The SPD are now training all the guns they have on Professor Kirchhof and his 25 % flat tax idea.

But so far it does not seem to be working. Representatives of the so called social wing of the CDU have now said that they find a 25 % tax paid equally by all better than the present system where all sorts of deductions means that the better off at the end of the day probably pay less.

And an opinion poll by the Der Spiegel magazine revealed that while 39 % opposed the idea, it was supported by no less than 48 %.

Big Iraqi Battle Coming

29 augusti 2005

UK EU Presidency 2005 Foreign Policy Statements

Like everyone else, the European Union has officially welcomed the publication of the draft for the new constitution of the new Iraq today.

But beneath the official statements there is a deep uneasiness over what will happen next. The constitution undoubtedly represents great progress for both Iraq and the region, but it’s essence seems to be a deal between the Shiites and the Kurds at the expense of the Sunnis.

This is not really what the United States sought. One gets the impression that even the high-level interventions by President Bush fail to achieve a more balanced outcome.

Now, this draft constitution should be the subject of a referendum in all of Iraq in October.

That will be a critical and in all probability fiercely contested battle.

Accordig to the Transitional Administrative Law, the constitution can be defeated by a two-thirds majority in three of the provinces of the country.

This was a provision written originally to defend the Kurds by giving them the de facto power to defeat any Iraqi constitution they did not like.

But now it’s the Sunnis that will be in focus. Sunnis make up a sizeable majority in two provinces, Anbar and Salahuddin, and a slim one in Nineveh, which also has a large Kurdish population.

So we should expect the critical battle to be played out in the province of Nineveh, centered around the city of Mosul.

Flat Tax Debate Continues…

29 augusti 2005

CDU Deutschlands

In the German election campaign, the flat tax issue has suddenly become one of the most discussed questions. I’m sure it wasn’t planned that way, but that’s the way it has turned out.

When the CDU meet in Dortmund yesterday for their election campaign congress, it was obvious that the selection of tax expert Paul Kirchhof for the Merkel team had very strong support from the CDU grassroots.

Different grandees – notably Bavaria’s Edmund Stoiber – have made clear that they have no love lost for the Kirchhof idea of a 25 % flat income tax for Germany. But this hasn’t stopped the debate.

In Dortmund, Angela Merkel praised Kirchhof as a man of courage without going into any details on the tax issue. But the message was clear enough.

And Kirchhof notes that the announced CDU/CSU plan for tax cuts in the years ahead will be his priority, and what he is discussing is what would be desirable thereafter. CDU financial expert Friedrich Merz has joined in and said that it should certainly be both possible and desirable to move in that direction, although the timing will be a difficult issue.

For Paul Kirchhof it is the tax competition coming from the Baltic countries, Slovakia and others and the success these countries have had that makes it imperative for Germany to move forward more radically.

The CDU/CSU plans already foresees lowering the top tax from 42 to 39 %, but that’s clearly not enough in the present sitiuation. Europe is changing fast.

It will take time for Germany to change, but the Kirchhof debate has certainly injected a new urgency in the debate.

In the meantime we might well see Poland taking a big jump in the same direction after its September election…

A Changing Baltic World

28 augusti 2005

The other day I was in Helsinki discussing business developments in our rapidly changing part of the world.

Little more than a decade and a half ago I remember how there was an empty and drab Soviet vessel going from Helsinki harbour to neighbouring Tallinn in the then Soviet Estonian Republic three times a week or something of that order.

Contacts were nearly non-existent. Business did not exist. Controls were extremely strict.

Now things are – mildly speaking – somewhat different.

Any given day there are now in the order of forty (40) departures by different forms of ships from Helsinki to Tallinn.

Add to that the helicopter service several times every hour between the city centres. The journey itself takes 17 minutes. And then there is of course the regular air services for those interested in connecting primarily with Helsinki Airport and the route network there.

Business of all sorts is booming. Just one example of interest.

The Finnish air carrier Finnair has put all its turboprop domestic traffic in a separate company which it has registred in Estonia and based in Tallinn. Not only are the costs significantly lower, but I was told that the work ethic has also improved markedly.

It must be unique for a flag carrier of this sort to offshore its domestic operations to a nearby country.

But this is the new Europe emerging in the Baltic world. At the end of the day, we are all the winners.

Dubious Letter on Turkey

26 augusti 2005

05_08_26_Brief_Tuerkei.pdf (application/pdf Object)

With the German election now officially set for September 18, the battle is starting to heat up.

Opinion polls continue to show that it will be extremely tight between a majority for a centre-right coalition between CDU/CSU and liberal FDP and a situation in which a great coalition with the SPD would be the only viable option.

Suddenly, CDU/CSU has decided to insert the issue of Turkey in the campaign.

In a letter today to the centre-rights heads of government in the European Union, Angela Merkel and Edmund Stoiber argue that the mandate for negotiations with Turkey should include also the option of what they call a priviliged partnership. In their opinion, the inclusion of Turkey in the Union would overburden it in political, economic and social terms.

You can look at this letter in different ways.

One is obvious. It could be seen as a blatant attempt to play on the anti-Turkish and anti-Muslim sentiments that are undoubtedly there in significant parts of the German electorate. The nuances in the letter are certain to be lost in the more simplistic debates around the ”stammtisch” in the local hang-outs around the country.

Another is to look at these nuances. The letter does not oppose the opening of accession negotiations with Turkey on October 3rd. Its key demand is that in addition to the aim of membership of these talks there should be another option included.

The one way or the other there is likely to be some reference of some sort to some such other option. The informal meeting of EU foreign ministers in Britain at the end of next week is likely to discuss some phrases along those lines.

But what it will mean remains unclear in the extreme.

While membership is well defined by the different articles of the different treaties as well as the commitment in all the so called aquis communitaire, no one really knows what the so called privilgied partnership means.

It can be argued that this is what Turkey already has. It is part of the customs union of the Union, and is thus more closely integrated than Switzerland, although less than Norway. Through the so called Berlin Plus arrangement between the EU and NATO, it is closely affiliated with much of the operations of the common security and defence policy.

The more priviligied a partnership becomes, the more complex will it be to sort out all the issues of co-decisionmaking. As the example of Norway shows, these issues are nearly impossible to sort out, and one tends to end up in a situation where the country in question is far more of a satellite than a partner.

A negotiation has to be between two parties. It remains to be seen if Turkey is interested in negotiating something that no one really seems able to define and which seems designed more to keep them out than to help them in.

I consider that less than likely.

In addition, the letter suddenly raises the Cyprus issue in a way that is just uninformed and wrong. Again, one gets the impression that its authors are just searching for ways to keep Turkey out.

I belong to those that hope that there will be a clear majority for a new government in Berlin. As Chancellor Schröder explained himself as he asked the Bundestag to vote his government out, the red-green majority has lost the ability to reform and to govern.

But I say this with the great reservation that there is a clear risk that such a new government in Berlin will mess up a most important part of the European efforts to create peace, stability and prosperity in our part of the world.

After the Boer War…

26 augusti 2005

Guardian Unlimited | Guardian daily comment | Stagger on, weary Titan

Timothy Garton Ash sees the Washington of today in the perspective of London in the aftermath of the Boer war a century ago – and the powers of the United States in the world today in the perspective of the powers of Britain in the world then.

Iraq is America’s Boer war, in his perspective. A war that turned out to be more complicated than anticipated, and drain the resources also of the global superpower of the day.

And if Britain then saw the gradual emergence of a Germany that was preparing to challenge its global supremacy, there is the feeling in Washington that the rising Asian power of China will change the equation in an equally fundamental way.

But Timothy Garton Ash has words of warning and caution:

If you are, by any chance, of that persuasion that would instinctly find this a cause for rejoicing, pause for a moment to consider two things: first, that major shifts of power between rising and falling great powers have usually been accompanied by major wars; and second, that the next top dog could be a lot worse.

This, then, is the time for critical solidarity.

Dangereous Constitution?

25 augusti 2005

Constitution Sparks Debate on Viability

Opinions are distinctly mixed on the draft for a new constitution for Iraq that seems to be emerging.

Apart from the issue of the role of Islam in Iraq – where the constitution seems to be along the lines that we previously saw emerging in Afghanistan – it is the division of powers between the centre and the different parts of the country in the emerging federal structure that leads to debate.

Anthony Cordesmann, who has been following Middle East issues closely for decades, says that ”rather than an inclusive document, it is more a recipe for separation based on Shiite and Kurdish privilege.”

If that is the case, there are clearly dangers ahead. A Sunni-based insurgency might accelerate rather than gradually die down. And any such insurgency risks triggering moves by the Shiites and Kurds that further endanger the unity of the country and brings it closer to a bloody civil war of disintegration and chaos.

The only long-term winners in such a situation would be Iran as well as the Islamic terrorists.