The business argument is with the EU

Even if the politics are a disaster zone.

Ever since the financial crisis, a previously buoyant eurozone has turned into a disaster zone. The single currency has lurched from crisis to catastrophe as the finances of member states have come under pressure. Bailouts that appear to be funded in large part from northern Europe are keeping several countries in southern Europe afloat. The next crisis is potentially lurking at the tail end of summer, with Cyprus due to get its next tranche of cash from the unofficial troika of the EU, ECB and IMF in early September. That is dependent on the country meeting stringent financial and budgetary targets and there is little evidence so far that they will be met.

With a German election by then just around the corner, it is unlikely that German chancellor Angela Merkel will be in the mood for leniency. The upshot could be that Cyprus is allowed to exit the single currency – the last six months having bought enough time to make it potentially a more orderly exit, and the economy is small enough for the ramifications to be less seismic than if a country such as Greece had fallen out.

Regardless of what happens in September (and it is as easy to paint a picture in which Cyprus gets the cash and everything carries on as it is), the eurozone’s troubles at least partly explain why the subject of the EU and the UK’s role within it is so high on the political agenda. As leader of the Conservative Party, David Cameron set out his stall clearly. He said he didn’t want the party to keep “banging on about Europe”. But the growth of anti-EU sentiment and the seemingly unstoppable rise of UKIP in particular has meant that, as prime minister, Cameron has had to bang on about it quite a lot.

UK politicians and the media are having to regularly discuss details (and not the possibility) of previously abstract ideas such as a referendum, renegotiation of the country’s relationship with the EU, or even complete withdrawal. The trouble is that all these discussions happen at a volume and intensity that rarely allow for sensible debate. Economic arguments are formed and numbers and statistics thrown around with little heed for anything other than scoring points and winning the argument.

It was somewhat sobering this month then to get a snapshot of what the UK’s exporters (clearly the key to UK economic recovery) think about Europe. The most often repeated story when it comes to discussions about where the UK recovery will come from is that exporters will have to seek out sales in high-growth emerging markets in far-flung corners of the world. So-called BRIC economies (Brazil, Russia, China and India) are cited above all as the key for our future success. Well, this didn’t chime with recent research conducted by economia. We asked the leaders of 500 businesses (a mix of those already exporting and those not currently doing so but with plans to do so in the next three to five years) to rate different markets around the world for their importance.

While it was no surprise to see Western Europe rated as important or very important this year by more respondents than any other market (71 per cent compared to the next most popular market, Asia at 55 per cent), what was less expected was the pattern when respondents were asked to rate the importance of markets in three to five years’ time. Here again Western Europe dominated by a similar margin. Even more unlikely was the rise of North America in the future (up by 5 per cent), knocking Asia back into third place.

Part of the explanation for the continued preference for Europe is the geography. Cost of exports was cited as a concern for and a factor in choosing markets by almost all respondents regardless of size or sector. And while the short distances help, some of the ease of doing business in Europe is driven by the standardisation of market rules and regulations and the lack of need to comply with different country guidelines or indeed to pay any import duties.

It appears from this that when asked about Europe on a purely business basis, without any of the political or emotive overlay, there is overwhelming support for the simplification benefits that arise from EU membership. More detailed analysis of the findings of this research needs to be conducted, but initial findings suggest there is also a worrying reluctance on the part of UK exporters to tap into the phenomenal growth of the emerging economies. In the mid-term at least, the ease of doing business in Europe appears to be winning over the potential returns from more long-term investments in places such as China, India, Russia or Brazil.

That would suggest that keeping close to Europe may be economically beneficial regardless of the politics.

This story first appeared on economia

Photograph: Getty Images

Richard Cree is the Editor of Economia.

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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.