What Hollande should do now

How the new French president can oblige the Germans to play their part in Europe's growth strategy.

Francois Hollande comes to power at an interesting conjuncture, with Europe in crisis and the political mood on the move. It is a shift of mood not just amongst the electorate - most of whom have long been opposed to austerity (all we saw last Sunday was their chance to express their views in elections) - but amongst the political class and the technocratic elites. Voices arguing that Europe needs a growth strategy as well as a fiscal consolidation strategy are finally emerging from the IMF, from the Presidents of the European Council and the European Commission, as well as from a growing number of European leaders.  Angela Merkel swept everyone before her when she demanded a new European Fiscal Compact only months ago, but today is beginning to look surprisingly isolated with calls for a re-think coming not just from Greece and France, but also from Belgium, Spain and Italy.

Politically, Hollande therefore has more potential clout than might initially appear. Despite this the reality remains that, financially, virtually all the economic power in Europe lies in German hands and, hardly surprisingly, the German Chancellor has rapidly stated that as far as she is concerned, austerity rules. At the same time Hollande can hardly go off on a spending spree of his own. The markets would pulverise him. 

What then can Hollande do?  Pre-election, he was hardly a radical on curbing the calls for deficit reduction, merely saying that France should go slower and have a further year to consolidate. But there is one significant other possibility. In consultation with like-minded colleagues, he should turn the discussion on its head and say to Germany: we fully support the need for fiscal consolidation, but, as good Europeans, we all expect equality of treatment. In particular, you will understand that 2+2 must equal 4 and so if there are to be no deficits there must be no surpluses either.

More precisely, he should direct attention to the current text of the Fiscal Pact. Title III, Article 3, sub-clause 1 (a) reads as follows:

the budgetary position of the general government of the Contracting Parties shall be balanced or in surplus*

*[emphasis added]

The removal of these last three words would make a fundamental difference. Not only is it the case that, economically, the removal of deficits will in any case require the removal of surpluses - but more importantly, it would place on Germany the obligation to play its part in financing the growth strategy without which such fiscal consolidation is impossible.

To underline his point, Hollande might add some history. The error in the current European Fiscal compact is identical to that made at Bretton Woods in 1944. That discussion was about balance of payments surpluses and deficits, but apart from this shift of focus, the problem is identical. Those at Bretton Woods insisted on countries acting to correct deficits but without placing a reciprocal obligation on surplus countries. There is still the widespread view that Bretton Woods worked smoothly from the start. It did not. It was massively breached by the UK in 1947, when as the Bretton Woods arrangements required, we liberalised capital flows - but then, against the rules, had to re-impose them virtually straight away to prevent a forced devaluation. The system was only saved when in 1948 the US launched Marshall Aid, a stimulus of a kind not even contemplated by the Bretton Woods agreement.

Reminding Germany of this history would be salutary; at least some of their current prosperity stems from how their post-war recovery was financed. And Hollande’s pressure in this direction can hardly be too uncomfortable for the German Chancellor. Asking for less taxation and more spending is not the most difficult of messages to deliver to a politician – even in Germany.

 

Photo: Getty Images

 

Andrew Graham is the former Master of Balliol College, Oxford, and from 1988 to 1994 was Economic Adviser to the shadow Chancellor and Labour leader, John Smith.

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How the Standing Rock fight will continue

Bureaucratic ability to hold corporate interest account will be more necessary now than ever.

Fireworks lit up the sky in rural North Dakota on Sunday night, as protestors celebrated at what is being widely hailed as a major victory for rights activism.

After months spent encamped in tee-pees and tents on the banks of the Canonball river, supporters of the Standing Rock Sioux Tribe finally received the news they’d been waiting for: the US Army Corps has not issued the Dakota Access pipeline with the permit it requires to drill under Lake Oahe.

“We […] commend with the utmost gratitude the courage it took on the part of President Obama, the Army Corps, the Department of Justice and the Department of the Interior to take steps to correct the course of history and to do the right thing" said a statement released by the Standing Rock Sioux tribe’s chairman, Dave Archambault II.

With the camp’s epic setting, social-media fame, and echoes of wider injustice towards Native Americans, the movement has already earned a place in the history books. You can almost hear the Hollywood scriptwriters tapping away.

But as the smoke settles and the snow thickens around the thinning campsite, what will be Standing Rock’s lasting legacy?

I’ve written before about the solidarity, social justice and environmental awareness that I think make this anti-pipeline movement such an important symbol for the world today.

But perhaps its most influential consequence may also be its least glamorous: an insistence on a fully-functioning and accountable bureaucratic process.

According to a statement from the US Army’s Assistant Secretary of Civil Words, the Dakota Access project must “explore alternate routes”, through the aid of “an Environmental Impact Statement with full public input and analysis”.

This emphasis on consultation and review is not big-statement politics from the Obama administration. In fact it is a far cry from his outright rejection of the Keystone Pipeline project in 2015. Yet it may set an even more enduring example.

The use of presidential power to reject Keystone, was justified on the grounds that America needed to maintain its reputation as a “global leader” on climate change. This certainly sent a clear message to the world that support from Canadian tar-sands oil deposits was environmentally unacceptable.

But it also failed to close the issue. TransCanada, the company behind Keystone, has remained “committed” to the project and has embroiled the government in a lengthy legal challenge. Unsurprisingly, they now hope to “convince” Donald Trump to overturn Obama’s position.

In contrast, the apparently modest nature of the government’s response to Dakota Access Pipeline may yet prove environmental justice’s biggest boon. It may even help Trump-proof the environment.

“Although we have had continuing discussion and exchanges of new information with the Standing Rock Sioux and Dakota Access, it’s clear that there’s more work to do”, said the Jo-Ellen Darcy, the Army’s Assistant Secretary for Civil Works.

Back in July, the same Army Corps of Engineers (which has jurisdiction over domestic pipelines crossing major waterways) waved through an environmental assessment prepared by the pipeline’s developer and approved the project. The Standing Rock Sioux Tribe subsequently complained that the threat to its water supply and cultural heritage had not been duly considered. This month’s about-turn is thus vital recognition of the importance of careful and extensive public consultation. And if ever such recognition was needed it is now.

Not only does Donald Trump have a financial tie to the Energy Transfer Partners but the wider oil and gas industry also invested millions into other Republican candidate nominees. On top of this, Trump has already announced that Myron Ebell, a well known climate sceptic, will be in charge of leading the transition team for the Environmental Protection Agency.

Maintaining the level of scrutiny finally granted for Standing Rock may not be easy under the new administration. Jennifer Baker, an attorney who has worked with tribes in South Dakota on pipeline issues for several years, fears that the ground gained may not last long. But while the camp at Standing Rock may be disbanding, the movement is not.

This Friday, the three tribes who have sued the Corps (the Yankont, Cheyenne River, and Standing Rock Sioux Tribes) will head to a hearing before the Inter-American Commission on Human Rights, seeking to increase pressure on the government to comply with both domestic and international law as it pertains to human rights and indigenous soveriegnty. 

What the anti-pipeline struggle has shown - and will continue to show - is that a fully accountable and transparent bureaucratic process could yet become the environment's best line of defence. That – and hope.

India Bourke is an environment writer and editorial assistant at the New Statesman.