Banker-hatred expresses a longer, deeper crisis

Financiers' immunity from justice mirrors their insulation from recession.

Why are we so outraged by the Barclays-Libor affair? Silly question really. It is scandalous that traders appear to have manipulated a fundamental market-making interest rate in pursuit of a quick profit. It is emblematic of habits and ethics that steered the British economy onto the rocks in 2007-08. The detail of the story – the brazen emails that lay bare the scam – exude the arrogant sense of entitlement that presents the protagonists in a repulsive light. And it reminds us, when we see Bob Diamond, conspicuously unburdened by judicial investigation or conscience, that the caste of people with the strongest claim to have caused the financial crisis are the same ones who seem least afflicted by its consequences. That provokes our natural sense of injustice.

But there is another layer to public feeling about this issue. It was the subject of an event I attended this morning at the Resolution Foundation, the consistently excellent think tank that dedicates a lot of thought to the problems facing low-to-middle income households. They are famously squeezed (the low-to-middle income households, that is; Resolution are hardly even cramped in their lovely spacious West End office and, outside of Westminster, are not all that famous).

The key observation contained in Resolution analysis – available on their website – is that wages and earnings for most people in Britain stopped growing some time in the middle of the last decade. As the cost of basic goods and services has risen, a process accelerated by some painful bursts of inflation in the last couple of years, people are struggling to keep their heads above the water. Crucially, this process started before the crash and before the recession. It is also a phenomenon recorded in many other developed economies and is especially pronounced and protracted in the US. (For a brilliant account of how wage stagnation is hollowing out the American middle class, read this essay by Ed Luce in the Financial Times. Behind a paywall, sadly.)

In the UK, the trend for decline in wages and the attendant slide in living standards was held back by the growth of tax credits. Shadow Chief Secretary Rachel Reeves spoke at this morning’s event and mounted a vigorous defence of tax credits – generally scorned by the coalition as a tool of deranged Brownian micro-management and first in line for cuts. The other way Britons topped up stagnant wages was private sector borrowing: credit cards, store cards, re-mortgaging, high street lending etc. That, needless to say, was not a terribly sustainable route to prosperity.

An important point that Resolution make (and that Reeves touched on but with characteristic caution) is that, when growth returns to the UK economy, there is no reason why it should do so in a way that solves the longer term structural squeeze on incomes. This is not some abstract question of economic balances. It is probably the issue that will decide the next election. On current trajectories, the overwhelming portion of British voters will reach 2015 feeling poorer, less secure in their jobs - if they have one - and less hopeful for the future than they did in 2010. And that is true even if the economy is growing.

Downing Street are alert to the problem. One reason why fuel duty rises were scrapped this week is that David Cameron and George Osborne badly need to find ways to signal that they have noticed how hard many people are finding it to make ends meet.

One Number 10 advisor told me recently of his conviction that politics for the next decade will come to be dominated by the decline in living standards for ordinary households and the question “so what are you going to about it?” I think he is probably right.

And it is against that backdrop that the Barclays scandal has to be seen. It is not just offensive in some abstract judicial way. It isn’t just scandalous as a case of bad regulation and wickedness unpunished. Seeing what bankers have been up to and suspecting that they might get away with it, when they have escaped the financial consequences of their actions and preserved their rising incomes, is a vicious, sneering affront to the British people. Politics itself will be devalued - more than it already is - if it fails to offer an effective response to their anger.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

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Who is the EU's chief Brexit negotiator Michel Barnier?

The former French foreign minister has shown signs that he will play hardball in negotiations.

The European Commission’s chief Brexit negotiator today set an October 2018 deadline for the terms of Britain’s divorce from the European Union to be agreed. Michel Barnier gave his first press conference since being appointed to head up what will be tough talks between the EU and UK.

Speaking in Brussels, he warned that UK-EU relations had entered “uncharted waters”. He used the conference to effectively shorten the time period for negotiations under Article 50 of the Lisbon Treaty, the legal process to take Britain out of the EU. The article sets out a two year period for a country to leave the bloc.

But Barnier, 65, warned that the period of actual negotiations would be shorter than two years and there would be less than 18 months to agree Brexit.  If the terms were set in October 2018, there would be five months for the European Parliament, European Council and UK Parliament to approve the deal before a March 2019 Brexit.

But who is the urbane Frenchman who was handpicked by Commission President Jean-Claude Juncker to steer the talks?

A centre-right career politician, Barnier is a member of the pan-EU European People’s Party, like Juncker and German Chancellor Angela Merkel.

A committed European and architect of closer eurozone banking integration, Barnier rose to prominence after being elected aged just 27 to the French National Assembly.  He is notorious in Brussels for his repeated references to the 1992 Winter Olympics he organised in Albertville with triple Olympic ski champion Jean-Claude Killy.

He first joined the French cabinet in 1993 as minister of the environment. In 1995, Jacques Chirac made him Secretary of State for European Affairs, teeing up a long and close relationship with Brussels.

Barnier has twice served as France’s European Commissioner, under the administrations of Romano Prodi and José Manuel BarrosoMost recently he was serving as an unpaid special advisor on European Defence Policy to Juncker until the former prime minister of Luxembourg made him Brexit boss.“I wanted an experienced politician for this difficult job,” Juncker said at the time of Barnier, who has supported moves towards an EU army.

 

Barnier and the Brits

Barnier’s appointment was controversial. Under Barroso, he was Internal Market commissioner. Responsible for financial services legislation at the height of the crisis, he clashed with the City of London.

During this period he was memorably described as a man who, in a hall of mirrors, would stop and check his reflection in every one.

Although his battles with London’s bankers were often exaggerated, the choice of Barnier was described as an “act of war” by some British journalists and was greeted with undisguised glee by Brussels europhiles.

Barnier moved to calm those fears today. At the press conference, he said, “I was 20 years old, a very long time ago, when I voted for the first time and it was in the French referendum on the accession of the UK to the EU.

“That time I campaigned for a yes vote. And I still think today that I made right choice.”

But Barnier, seen by some as aloof and arrogant, also showed a mischievous side.  It was reported during Theresa May’s first visit to Brussels as prime minister that he was demanding that all the Brexit talks be conducted in French.

While Barnier does speak English, he is far more comfortable talking in his native French. But the story, since denied, was seen as a snub to the notoriously monolingual Brits.

The long lens photo of a British Brexit strategy note that warned the EU team was “very French” may also have been on his mind as he took the podium in Brussels today.

Barnier asked, “In French or in English?” to laughter from the press.

He switched between English and French in his opening remarks but only answered questions in French, using translation to ensure he understood the questions.

Since his appointment Barnier has posted a series of tweets which could be seen as poking fun at Brexit. On a tour of Croatia to discuss the negotiations, he posed outside Zagreb’s Museum of Broken Relationships asking, “Guess where we are today?”

 

 

He also tweeted a picture of himself drinking prosecco after Boris Johnson sparked ridicule by telling an Italian economics minister his country would have to offer the UK tariff-free trade to sell the drink in Britain.

But Barnier can also be tough. He forced through laws to regulate every financial sector, 40 pieces of legislation in four years, when he was internal market commissioner, in the face of sustained opposition from industry and some governments.

He warned today, "Being a member of the EU comes with rights and benefits. Third countries [the UK] can never have the same rights and benefits since they are not subject to same obligations.”

On the possibility of Britain curbing free movement of EU citizens and keeping access to the single market, he was unequivocal.

“The single market and four freedoms are indivisible. Cherry-picking is not an option,” he said.

He stressed that his priority in the Brexit negotiations would be the interests of the remaining 27 member states of the European Union, not Britain.

“Unity is the strength of the EU and President Juncker and I are determined to preserve the unity and interest of the EU-27 in the Brexit negotiations.”

In a thinly veiled swipe at the British, again greeted with laughter in the press room, he told reporters, “It is much better to show solidarity than stand alone. I repeat, it is much better to show solidarity than stand alone”.

Referring to the iconic British poster that urged Brits to "Keep Calm and Carry On” during World War Two, he today told reporters, “We are ready. Keep calm and negotiate.”

But Barnier’s calm in the face of the unprecedented challenge to the EU posed by Brexit masks a cold determination to defend the European project at any cost.

James Crisp is the news editor at EurActiv, an online EU news service.