Der frühere britische Europaminister Denis MacShane warnt die SPD-Fraktion davor, mit ihrer Ablehnungskampagne gegen von der Leyen ein Eigentor zu schießen. Sollte sie nicht gewählt werden, hätte das einschneidende Folgen für Brüssel. Ein Gastkommentar.
Die 16 Europaabgeordneten der SPD tun sich selbst und der demokratischen Linken in Europa keinen Gefallen, wenn sie es mit allen Mitteln bis hin zur Diffamierung versuchen, Ursula von der Leyen als erste Präsidentin der Europäischen Kommission zu verhindern. Es gab undemokratische Zeiten, da konnte jeder nationale Regierungschef ein Veto gegen einen Kandidaten für die Kommissionsspitze einlegen, wie dies etwa John Major und Tony Blair 1994 beziehungsweise 2004 taten. In den Augen von Downing Street wurden beide damaligen Kandidaten als zu europafreundlich angesehen.
Das Nettoresultat dieses „Wegschießens“ war beide Male ein Eigentor: Die EU musste sich mit Jacques Santer und José Manuel Barroso abfinden, zwei relativ schwachen, unterdurchschnittlich talentierten Kommissionspräsidenten. Santer musste sogar mitsamt seiner gesamten Kommission seinen Rücktritt einreichen.
Eine fundamentale Fehleinschätzung der Linken
Der simple Fakt ist, und ich sage das als ehemaliger Labour-Minister, dass deutsche SPD-Abgeordnete Ursula von der Leyen nicht mögen, weil sie nicht in ihrer Partei ist. Aber kein Kommissionspräsident „gehört“ einer nationalen oder politischen Delegation an oder sollte zumindest nicht als Eigentum irgendeiner Partei, Fraktion oder Nation angesehen werden, sobald er oder sie gewählt wurde.
Vor allem sollte die SPD-Störerfraktion an die Ära von Jacques Delors als Kommissionspräsident von 1985 bis 1995 zurückdenken. Er wird heute als der beste Präsident der Europäischen Kommission aller Zeiten betrachtet.
Aber die französische Linke war Jacques Delors gegenüber sehr feindlich eingestellt, als er 1984 als Kandidat vorgeschlagen wurde. In Frankreich wurde Delors zu dieser Zeit von der Linken als ultrakatholischer, unzulässig zwischen den sozialen Klassen kollaborierender, wirtschaftlich orthodoxer Finanzminister angesehen.
In letzterer Eigenschaft hatte Delors die Kampagne zur Aufhebung der protektionistischen Maßnahmen angeführt, die die Frühperiode der 1981 gewählten sozialistischen Regierung von François Mitterrand prägten. Die französische Linke sah Delors daher als ihren Hauptgegner an, obwohl er der eigenen Partei angehörte. Die französischen Sozialisten glaubten damals ernsthaft daran, dass mit genügend Willen und Entschlossenheit der Sozialismus in einem Land (Frankreich) erreicht werden könnte.
WAHL ZUR EU-KOMMISSIONSCHEFIN
Warum eigentlich nicht von der Leyen?
Im Zusammenhang mit der bevorstehenden Abstimmung über Frau von der Leyen sollten wir uns an just diese Episode einer fundamentalen Fehleinschätzung erinnern. Heutzutage wird Jacques Delors im Rückblick von den europäischen Sozialdemokraten als erfolgreichster Präsident der Europäischen Kommission aller Zeiten geradezu kanonisiert. Aber das war definitiv nicht die Art und Weise, wie ihn die Linke damals sah, als er zum Kandidaten gekürt wurde.
Die deutschen Europaabgeordneten sind dabei, den gleichen Fehler in Bezug auf von der Leyen zu machen. Sie ist keine Superstar-Ministerin (wer ist das schon?), hat aber eine beeindruckende analytische Auffassungsgabe und kann komplexe Themen nicht nur erfassen und managen, sondern auch kommunizieren. Sie war zum Beispiel eine sehr effektive, unideologische (und damals von der SPD sehr geschätzte) Arbeitsministerin.
Ein hoch personalisiertes Angriffsdossier
Die SPD-Abgeordneten haben sich sogar dazu verstiegen, ein hoch personalisiertes Angriffsdossier gegen Frau von der Leyen in Umlauf zu bringen. Es enthält Aufgüsse alter Anfeindungen bis hin zur Infragestellung ihrer Qualifikation als Ärztin.
Die SPD sollte auf diesem Feld schon aus Eigeninteresse sehr vorsichtig agieren. Denn es gibt manch einen bedeutenden sozialistischen Politiker in Europa, zum Teil in höchsten Ämtern, der sich ernsthaften – und nicht nur wie bei von der Leyen leichtfertig dahergesagten – Beschuldigungen mit Blick auf die Erlangung akademischer Grade ausgesetzt sieht.
Eine weitere merkwürdige Behauptung ist, von der Leyen als Kandidatin von Viktor Orbán zu präsentieren. Natürlich freute sich Orbán, als er den sozialdemokratischen Spitzenkandidaten, den Niederländer Frans Timmermans, als Kommissionspräsidenten verhindern konnte. Aber Orbáns Prahlerei, dass er nicht nur Timmermans verhindert hat, sondern auch eine Kernfigur im Findungsprozess von von der Leyen war, ist einfach nur bombastisch.
Vor allem aber bleibt eine Tatsache unumstößlich: Es gibt nur wenige deutsche Politiker mit einem so starken europäischen Profil und einer so klaren persönlichen Identifikation mit europäischen Werten wie Ursula von der Leyen. Das gilt unabhängig davon, was Experten der deutschen Politik gleich welcher Provenienz und Qualität von ihrer innenpolitischen Bilanz halten.
Wenn von der Leyen mithilfe der SPD-Abgeordneten nicht gewählt wird, dann wird das Europäische Parlament global als Lachnummer erscheinen. Donald Trump wird natürlich enorm erfreut sein und all jene beglückwünschen, die von der Leyen besiegt haben. Zu den Profiteuren zählen auch Nigel Farage und alle anderen Europahasser.
Die SPD und andere proeuropäische EP-Abgeordnete links der politischen Mitte Europas haben die Wahl. Frau von der Leyen ist nicht die perfekte Kandidatin. Wer ist das schon? Aber man sollte das irreale Streben nach dem vermeintlich „Besten“ nicht zum Feind des Guten machen. Die erste Frau, die vorgeschlagen wurde, Europa zu leiten, kann in Zusammenarbeit mit dem Parlament gewiss einen guten Job machen. Dies ist kein Moment für nachtretenssüchtige politische Kleingeister.
Whatever comes of Theresa May’s footsie with Jeremy Corbyn, it is hard to see how she avoids asking the EU for an extension of the Article 50 in the hope that one day, over the rainbow, a majority will appear for her thrice-rejected deal.
The EU has made it clear that any extension means Britain taking part in the European Parliament elections. It is legally impossible for the EU27 and the Commission to do otherwise.
So here local authorities have been instructed to prepare. Parties have started choosing candidates. Labour has emailed all its members asking anyone to nominate themselves for the 54 MEP candidate vacancies Labour needs to fill –and fast.
The switch to proportional representation for these EP elections in 1999 was the moment when Ukip and Nigel Farage entered UK political history, taking just 15 years to emerge as the biggest party in the European Parliament in 2014.
But the paradox of Brexit is that the same PR system can help to deliver a breakthrough for a new post-Brexit politics. EP elections will be the first moment when the TIG breakaway MPs headed by Heidi Allen, Chuka Umunna and Anna Soubry – now rebadged Change UK – can put up a nationwide slate of candidates and see what support they have.
* We were taken by surprise last week by the scale of the downgrade to the OECD’s latest forecast for German growth. The OECD now thinks that German economy will grow by just 0.7% in 2019. This is a big reversal of fortune; a year ago the thinking among economists was that Germany would grow by around 2.0%. At 0.7% German growth would be slower than the euro area as a whole (1.0%) and even the Brexit-embattled UK (0.8%).
* The slowdown in Germany and the euro area has come faster than expected, with activity slowing in the second half of 2018 and Germany narrowly avoiding a technical recession. The OECD expects the euro area as a whole to grow at the slowest rate since the euro crisis in 2012-13, with the Italian economy dipping into recession.
* Alarms bells are going off in Europe – and there could be no clearer sign of this than last week’s dramatic reversal of policy by the European Central Bank. In December the Bank ended its quantitative easing programme of monetary stimulus. The message was that it was ‘mission accomplished’ for its eight-year campaign to boost growth. Last week the Bank executed a volte face, announcing more stimulus in the form of cheap loans to banks and a pledge to keep interests at zero through this year.
* In recent years the German economy has boomed. Its export success, the quality of its vocational education system and its “Mittelstand” companies, are the envy of the world. So why has Germany seen such an abrupt change in its fortunes?
* Part of the problem is that after years of strong growth Germany no longer has the people or the capacity to maintain growth. Unemployment is at the lowest level since the 1970s and 800,000 jobs are unfilled. A recent survey showed that almost half of businesses are turning down new orders. Unlike France or Italy, where unemployment is high and there is plenty of slack in the economy, Germany has simply run out of capacity.
* Outsiders look at Germany’s export success and its huge current account surplus with admiration. As an export-focussed economy Germany has been able to lock into fast-growth emerging markets and benefit from the global upswing. But in a world of rising protectionism and slowing demand export-dependence acts as a drag on growth. Last year German exports of goods and services grew by only 0.3%, far slower than the growth of the wider economy.
* The pressures on Germany’s world-beating auto sector are particularly acute. The emissions scandal, and bans on older diesel vehicles in a number of German cities, led to a sharp fall in the output of diesel cars last year. Meanwhile a decline in Chinese car sales last year, the first in a quarter of a century, was a blow for German car makers who are heavily-dependent on the Chinese market.
* A lack of spare capacity, a slowing global economy, protectionism and the emissions scandal – these are, one hopes, temporary challenges. But lurking beneath them is a much more profound change of a shrinking working age population, which is predicted to shrink 8.8% by 2040.
* The German economy has immense strength and its recent performance has been outstanding. Its people are enjoying rising living standards and near record low unemployment. Germany has the distinction among major European nations of having run a surplus on its public finances for the last five years. Germany has indeed repaired its roof while the sun has shone.
* Germany’s scale, its strength and its solvency mean that others see it as Europe’s spender of last resort as growth slows. Last week the OECD argued that Germany is well-placed to boost demand at home and across the euro area by easing fiscal policy.
* This argument has force given that monetary policy is, on some measures, looking close to exhausted. With rates at record lows there is little scope for further cuts. Additional quantitative easing is limited by rules which prevent the ECB from becoming a dominant lender to any country or from lending too much to highly indebted countries.
* Certainly there are lots of useful ways in which Germany might spend its budget surplus. Germany’s legendary infrastructure, particularly roads and bridges, are in need of fresh investment. The country spends less as a share of GDP on education than France and the UK. Against a backdrop of a growing threat from Russia Germany’s armed forces look distinctly underpowered.
* Yet Germany seems as averse to running budget deficits as it is to inflation. The political culture in Germany is one of prudence, not Keynesian-style deficit-financing. As finance minister Olaf Schulz said last month, “The clear precondition of all government budgetary planning is that we achieve a balanced budget, without new debts.”
* If the euro area downturn gathers pace the clamour for Germany to spend more, and act as an engine for growth, is likely to increase. As the euro crisis showed, it is at such times that the preferences of different member states conflict.
PS: Last week we wrote about how bubbles in asset markets form and the fact that financial crises tend to be proceeded by credit booms. One such boom has been in leveraged lending which is now a significant source of capital for less creditworthy companies. Last Thursday the Financial Stability Board, a global regulator, launched an investigation into parts of the $1.4 trillion global leveraged loan market, citing potential financial stability risks.
2) The possibility of a Commons rejection is now serious. The government is briefing that if MPs rejects the deal this will actually be helpful if it creates a sense of crisis with the pound and markets falling dramatically and the fears of endless frontier queues and problems with travel between the UK and continent creating waves of panic and fear that force MPs into a U-turn. This politique du pire – the worse the better – is unprecedented in British parliamentary history. It may work. The hardline pro-Brexit politicians and press fear that such a crisis could lead to a new referendum or a new election. Both could be fateful to their obessions with a Brexit that fully amputates the UK from Europe.
3) There is no sense in the declaration that the Government wants to stay with today’s access to the Single Market. It is implied that detailed arrangements will be negotiated as in similar free trade agreements between the EU and third countries. These can take years. Every single one of the 27 member states will want to see their interests protected, and their national industrial, agricultural, and other economic lobbies looked after. There is no mention of space, satellites or Galileo for example. Either Britain goes it alone in massive government expenditure to create a national space industry or Britain is out of space exploration and economic activity.
4) Until now, the EU27 have been content to leave the Commission in charge of the relations with the Brexit UK. From 1 April 2019, the interests of the 27 national governments and their economic actors and public opinion forces will come to the fore. We can see an inkling of this in the reports in El Paishttps://elpais.com/internacional/2018/11/22/actualidad/1542891796_421870.htmlon Gibraltar. The declaration does not mention Gibraltar. This despite the insistence by Spain’s socialist prime minister, Pedro Sanchez, who heads a minority government and cannot afford for domestic political reasons to make concessions to the UK, that he would seek to veto the Withdrawal Agreement unless the earlier pledge to make clear that Gibraltar’s future would be a matter to be solved bi-laterally between Madrid and London with no involvement by the Gibraltarians themselves was part of the EU-UK Brexit deal.
Most probably a form of words will be found before Sunday which mentions Gibraltar. But anything that satisfies Madrid will provoke fury in the strong cross-party Gibraltar lobby of MPs in the House of Commons. Along with fishing rights which are of high symbolic priority for Scottish MPs, the issue of Gibraltar is symbolic of the scores of small issues – small in the overall EU list of priorities but very BIG for British MPs, press and public opinion – which can explode into major differences and make impossible any final agreement going into the 2020s.
5) The Political Declaration has added a further 19 pages to the 7 pages published last week. It is like a Christmas Tree on which the parents have to add ever more candles and decorations and presents in order to excite the children. But the EU-UK tree is now being asked to carry too much weight. It implies nothing short of a total, 360 degree all-round recasting of a relationship which has taken decades to create. Mrs May earlier this week described EU citizens who work and live in the UK as “queue jumpers.” Her psychological obsession with Europeans working and living in Britain is a matter for a Freudian analysis not practical politics. But if she stays as prime minister negotiating just this aspect of a new relationship will be fraught with pain, emotion and the deeper xenophobia of identity politics and nativism.
6) There is no clear end date. There is a vague reference to extending the 20 month transition period initially laid down to finish negotiating a final EU-UK new relationship treaty by 31 December 2020 for a further two years. Given the up to 10 years it can take much simpler free trade deals this is absurdly optimistic. Even extending the negotiations to December 2022 means that the future UK general election scheduled for spring 2022 will be utterly dominated by Brexit. The EU-UK relationship will completely dominate British politics, government, and business for years to come. My concept of #brexeternity seems more and more valid as we face an eternity of bad-tempered argument over negotiating any future relationship.
7) So far business has tried to be cheerful and find reasons to praise Mrs May and the initial withdrawal agreement and first political declaration. But the new text says that both the EU’s four freedoms of movement (good, services, capital and people) remain “indivisible” and at the same “freedom of movement” will end. It does not require a Ph D in Brexitology to appreciate that one cannot have simultaneously an end to freedom of movement while maintaining the 4 indivisible freedoms! It like being a Protestant and Catholic at one and same time. One can sense that both Michel Barnier’s T 50 team and the UK negotiators just gave up and kept hanging all their preferred options on the Christmas Tree. Gouverner c’est choisir – to govern is to choose. This latest text refuses all choice and puts off all difficult decisions to the years that lie ahead.
8) Mrs May remains unwilling to tell the British people that leaving the EU means a monumental largely negative change in the nation’s economy and future prospects. The Labour and other opposition parties simply want to gain political advantage from her internal party difficulties. They have no alternative vision or policy. There may be new words between now and the final seal-off on Sunday in Brussels. But they cannot bridge the gap between Britain’s Brexit ideologues and the need to maintain EU coherence, rule of law and modus operandi.
This is just the end of the first Chapter in the Brexit saga. It is not even the end of the beginning let alone the beginning of the end. Brexit will continue to devour British politics, governance, business, universities and make life miserable for millions of European Union citizens in the UK and British expats in EU countries.
This is an article originally published in German in Handelsblatt – “Muss London Deutsch lernen”?
One of the knottiest problems for British politicians struggling with Brexit is their insistence as much by Labour as the Conservatives that Britain has to set up a giant new immigration bureaucracy to issue work and residence permits for any European citizen who is offered a job in Britain.
Undoubtedly the main factor in swinging the Brexit vote was it gave the chance to white English men and women their chance to vote against immigrants. 50 years ago, a racist but very senior Tory politician, Enoch Powell, said Britain was “mad, literally mad, as a nation” to allow immigrants into the country.
Powellism sunk deep roots very fast even if it was repudiated by the party leaders of the day. He was also hostile to Britain joining the European Community. That fusion of two English phobias – against immigration and against Europe – never went away. After 2000 as the Conservatives sought to undermine the pro-European Tony Blair they unleashed with the help of other anti-immigrant, anti-EU parties like UKIP and the British National Party forces that culminated in Brexit when a majority of white middle-class as much as working-class people living in England voted to finally to stop immigration.
It is modish to blame Mrs Merkel’s decision in 2015 to let in one million refugees fleeing murderous conflicts, oppression and poverty in the Middle East and North Africa for Brexit and the rise of Europe new nationalist, anti-immigrant right represented by Viktor Orban in Hungary or Jarosław Kaczysnki in Poland.
Orban was first prime minister in 1998 and Kaczynski in 2006 long before recent waves of immigrant. The anti-immigrant Jean Marie Le Pen defeated the French socialist Lionel Jospin in 2002 to go into the second round of the French presidential election.
Xenophobic politics, including in part the Brexit result, is caused by xenophobic politicians. The Federation of Poles of Great Britain in 2008 published a dossier of 50 hate front pages by the Daily Mail. The pro-Brexit paper depicted Poles in much the same way as the ame paper described Jews in the 1930 – unwanted crooks and scroungers who had no place in Britain.
Xenophobic anti-immigrant votes piled up well before 2015. In a book published in January 2015 I predicted Britain would vote for Brexit as anyone who spent five minutes outside the liberal, bien-pensant, Europhile salons of London or Oxford knew the success of populist politicians in creating hostility against immigrants.
Some blame the UK government decision of 2004 not to impose tough restrictions on workers from the 8 new EU member states of Eastern Europe. Joachen Bittner, political editor of Die Zeit, the German weekly recently argued in the New York Times that Mrs Merkel was to blame for Brexit following her decision to let in refugees to Germany in 2015. https://www.nytimes.com/2018/09/26/opinion/is-merkel-to-blame-for-brexit.html
The images of refugee queues did not help for sure but the passions that led to Brexit were in place long before 2015. But there were already hundreds of thousands of Poles and other citizens from ex-communist countries working in Britain. It seemed more sensible to let them work legally rather than was as the case in Germany having them work in the unofficial cash-in-hand labour market. In fact, Germany’s 2004 Zuwanderungsgesetz (Immigration Law) allowed exemptions for employers to hire in EU workers.
For Britain accepting EU citizens worked in the sense that the European immigrant worker made a massive net contribution to Britain fiscal receipts with £25 billion annually coming into government finances. A study just published shows that the European immigrant worker pays £440 more in taxes than his English equivalent.
Today Germany has 1.7 million Poles living and working and a total 6.1 million EU citizens. These are twice the figures of Poles and other EU citizens living and working in Britain so the argument that Germany slowed down arrivals from Europe in comparison to more liberal Britan after 2004 doesn’t hold up.
Where Britain did go wrong was not to copy Germany and other EU member states in managing these new arrivals. When David Cameron pleaded with Angela Merkel to stop the arrival of Europeans in Britain because they were putting pressure on housing, schools and health services she asked him to send a list of how many EU citizens there were and where these problems could be examined.
Berlin is still waiting because Cameron nor his successor knows how many EU citizens are in Britain. Mrs May in 2010 abolished am embryonic Identity Card system and then the EU worker registration system that allows all other EU member states to count the numbers accurately.
The EU’s so called freedom of movement rules do not apply to state employment. Yet the biggest employer of EU citizens in Britain is the state run National Health Service. Britain could train its own doctors and nurses but prefers to import them from abroad.
Britain has the worst apprenticeship schemes in Europe so employers who need skilled craft workers like electricians, IT specialists, plumbers, heating engineers, even bricklayers and carpenters had to recruit from Europe as there were no such skilled workers coming into the labour market from within Britain.
Employment agencies acted as gang masters brought in East European workers and renting them out to local British employers at extremely low wage rates. This was illegal under EU law but British government officials turned a blind eye to these practices in order to maintain a flow of docile, low-pay workers for British firms.
Other European countries like Germany had much tougher internal labour market rules, gave trade unions a voice with employers on hiring workers from outside Germany, had proper apprenticeship training systems, educated more nationals to be health service workers, and insisted every European worker was registered with an identity card.
Mrs Merkel might have suggested to Tony Blair, Gordon Brown, David Cameron and now Theresa May that if Britain copied much stricter management of internal labour markets and promoted training and jobs for local workers the kind of anti-immigrant tensions that culminated in Brexit might have been avoided.
But it was not up to Mrs Merkel to teach and British prime minister refused to learn from best practice on the continent in terms of labour market rules and support for local workers.
It is not too late. London could take the best measures from other EU member states and show that labour mobility adds value and there is nothing to be feared from immigration. After all in Europe’s richest nation, Switzerland 26 per cent of the population is foreign born.
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Denis MacShane is the UK’s former Europe minister. Before becoming an MP in 1994 he worked in Switzerland, France and German on labour market issues. In January 2015 he published Brexit: How Britain Will Leave Europe highlighted anti-immigrant populism as leading to the Brexit referendum result.
The upcoming Brexit causes unrest on the executive boards of companies, and international corporations like BASF are also changing the subject. The German chemical giant has been doing business on the island since 1880, and now has 10 factories and thousands of employees, who among other things produce paints, fertilizers and pesticides. Their boss, the Briton Richard Carter, is harshly criticising the actions of the UK government.
Mr Carter, how much does the upcoming Brexit make you nervous?
19 months after the referendum there is still uncertainty about where we will eventually arrive. We are ready to make changes if we know what is needed. But the lack of certainty limits us to what we can do on a practical level now.
So how do you prepare for Brexit? What is your so-called emergency plan?
We look at tariffs and barriers to trade, talk with customs experts and our customers about the possible consequences. We’ve formed teams with members from the, Brussels and our headquarters in Germany, which deal with five different topics, most notably the impact on trade and regulation. For example, it would be important for us to know if the EU regulatory requirements under REACH are still valid for us.
How likely do you consider the option of “hard Brexit”?
Although the UK and the EU have now started the second phase of negotiations, this seems the most likely option right now. It is regrettable – but the companies simply have no planning certainty at the moment.
How do you rate the position of the UK Government?
We would like to see the UK Government clearly positioned, clearly demonstrating what it wants and what it will do if it does not achieve that. We are in close contact with the government, but we can not make the necessary arrangements for the day-to-day business unless the basic parameters are clear.
Have you calculated what the costs of a Brexit for BASF are?
We expect 40 to 60 million euros in extra costs per year – only through possible tariffs and tariffs, their conversion and delays in the supply chain.
Do you have advantages as a daughter of a German company?
Brexit is not just a problem for the British. A tough break with the EU will affect imports to Britain more than exports from the UK. Trade goes both ways. And the supply chains are now so complex that goods sometimes even cross the borders several times.
What would be the highest priority for BASF at Brexit?
Of course, we would like to change as little as possible. It is important for us that trade with the EU continues to run smoothly and that there will be no diverging regulatory requirements.
As a chemical company, BASF is involved in the supply chains of many companies in other industries …
Absolutely. We supply the aerospace, automotive and agricultural industries – just to name a few examples. Some of our employees are even involved in the production process directly on site. For example, we have a team of people responsible for paints at car maker Nissan in Sunderland. That’s why the Brexit is so complex. The boundaries between the sectors are blurred.
There is currently talk of a transitional phase. What do you make of it? Is it useful?
In any case. We think that the “about two years” that the British government is talking about are rather short. We would prefer up to five years. The time is running out. We need certainty.
However, the future relationship between Britain and the EU will not be discussed until October.
That’s just six months before Brexit! From a political point of view, that may be a lot of time, but it’s too short for companies. Some companies will already implement their contingency plans by then. The Brexit has an incredible amount of impact to prepare for, and that takes time.
Can you give examples of that?
Introducing customs duties could have a significant impact on supply chains, for example, if goods are no longer efficiently handled at Dover port and there are congestion and delays. The same applies of course to the ports on the other side of the canal, in Calais or Antwerp. And from the transportation industry, it is likely that there will probably be a shortage of truck drivers in the UK soon. Many of them came from other EU countries – which now offer them better opportunities.
BASF currently generates three to four per cent of group sales in the UK market, with 10 production sites and 1,400 employees. Where do you stand in five years?
I can not give you an answer to that. That is the answer. And it says a lot when an entrepreneur can not tell you how his business will look in five years. The uncertainty is just too big. We hope that will change in the coming weeks.
Will the British market lose importance as a result of Brexit?
At BASF we have to remain competitive, not only in the industry, but also within the Group. If we decide on investments internally, the plant must meet certain conditions – and that could include access to the European single market. The connection to the EU is important for multinational corporate investors like us. But wherever Brexit will lead, the UK market is important to us, and we will continue to explore new opportunities. But we hope that Britain will clarify its intentions.
The full Handelsblatt article is available to Handlesblatt subscribers here: https://www.handelsblatt.com/unternehmen/industrie/uk-chef-carter-im-interview-brexit-kostet-basf-bis-zu-60-millionen-euro-pro-jahr/20977914.html
The car industry is perhaps manufacturing sector facing the biggest effects of Brexit. Patricia Godfrey, partner at CMS and vice-president of the GBF, provides a legal perspective.
• The media is awash with news of concern, decline and uncertainty in the automotive sector. Falling domestic demand and lack of clarity around Brexit are two key factors.
• Confusion over diesel taxation and wider air quality plans are impacting domestic demand at a time when unprecedented technological advances are leading to growth in demand for electrically operated vehicles with driverless cars on the domestic horizon.
• The lack of clarity surrounding Brexit could have a profound impact on the sector where much of the legal and regulatory framework derives from EU Regulations and Directives.
• Decreasing domestic demand and the prospect of exports faltering if a cohesive Brexit plan does not emerge imminently means Banks, OEMs (Original Equipment Manufacturers), Tier 1 and 2 suppliers and a range of distributors need to be increasingly alert and ready to deal with distress and at worst failures in the sector.
The once buoyant automotive sector is facing some challenges. The sector has recently hit the headlines and the news has often been gloomy:
• The Society for Manufacturers and Traders (SMMT) and other trade bodies including the European Automotive Manufacturers Association (ACEA) have voiced their concerns in recent months about the impact of Brexit and other factors affecting financial performance, growth and stability in the sector. The SMMT’s commentary has been widely disseminated in the UK media. This culminated in the SMMT’s January figures showing overall demand for new cars fell by 5.7% in 2017 with December representing the 9th consecutive month of decline when new registrations fell by 14.4%. On a positive note, demand for electric cars in 2017 reached a record high with approximately 120,000 Alternatively Fuelled Vehicles (AFVs) registered representing a 34.8% increase. Nonetheless, AFVs remain a small segment of the sector where by contrast sales of diesel vehicles, a longstanding feature of the UK market, fell by 17.1%, notwithstanding advances in clean diesel and reduced CO2 emissions.
• The accelerated dip in domestic demand for new vehicles coupled with a plunge in diesel sales is creating widespread concern in the industry. Performance in the automotive sector is regarded as a key indicator for the economy’s health. Statistics vary but it is estimated that approximately 170,000 workers are employed in car factories or their supply chains in the UK with estimates of 800,000 jobs dependent on the automotive sector as a whole. These figures will not include the impact of distress or failure in the wider business community where key plants are situated.
• Much of the recent press coverage focuses on the fall in domestic demand for new cars, but does not flag the huge variable in percentage terms between cars manufactured in the UK destined for export (approximately 80%) and the number produced for the domestic market (approximately 20%). Whilst the export figures have largely held up, the impact of continued uncertainty surrounding Brexit must not be overlooked. As about 50% of new cars exports are to the EU, the lack of a cohesive Brexit plan raises questions over how long the current EU export figures can be sustained.
• Britain is the fourth largest producer of cars in Europe behind Germany, France and Spain. Jaguar Land Rover is Britain’s largest car maker followed by Nissan (Sunderland) and BMW (which assembles the Mini in Cowley). Collectively these three manufacturers account for nearly ¾ of all British car production. Jaguar Land Rover invested (with significant Government support and taxpayer funding) in new diesel technology leading it to build a £500m engine factory near Wolverhampton. Notwithstanding this huge investment, ongoing anti-diesel messages from the Government coupled with increased tax on diesel vehicles has been blamed for a 30% collapse in demand.
Sector Features and Challenges
• Aside from being a sector in the grips of profound change, the underlying characteristics of the automotive sector create a significant interdependency between the key players. In the early days, OEMs produced virtually everything necessary for the finished vehicle. As the complexity and number of parts increased, key components started being produced by independent suppliers or wholly owned subsidiaries of the OEMs. Over time those independent suppliers grew and subsidiaries were also sold off leading to the emergence of the current industry structure of OEMs, Tier 1 and Tier 2 suppliers and vehicle distributors.
• The importance of the supply chain and the interdependence of key players on one another cannot be over-estimated, not least when the sector faces unprecedented challenge and change. An ACEA publication in May 2017 estimated that most cars now have about 30,000 parts, around 30 components and undergo over 100 process steps to become a finished product. In the course of its material journey a car may pass through 15 countries and cross borders multiple times. Ongoing disruption in the sector together with Brexit heightens the need to guard against supply chain breakdown.
• Technology presents both challenge and opportunity in the sector. OEMs are competing to produce energy-efficient vehicles that will meet the demands of tomorrow’s consumers. Old methods and products face the challenge of remaining relevant and competitive if they are to survive, meaning that the labour force must also be agile and open to change.
• Domestic economic factors remain important. Whereas a drop in the value of sterling helps keep automotive exports levels up, the flip side of the coin is margin erosion arising from the need to import increasingly expensive components to manufacture the finished product.
Brexit uncertainty continues to impact domestic demand for new cars and with it production output. With overseas demand remaining the driving force for UK car production, clarity on the nature of our future EU trading relationship and any transitional arrangements is vital for growth and productivity. The EU takes more than 50% of UK car production and multinationals such as Honda, Nissan and Toyota have specifically located in Britain to produce cars for mainland Europe with the benefit of customs-free access to the Single Market. Confirmation that the current trading relationship will not be substantially disturbed is of particular significance to businesses operating in the transnational value chain. Any reduction in tariff-free trade not only impacts price and competitiveness, but also raises the prospect of disruption leading to supply chain breakdown.
The voice of business has been championed from various corners including the CBI, European Chambers of Commerce and prominent trade bodies. Consistent and repeated messages include:
• The need for a regulatory framework which enables growth and keeps the administrative burden to a necessary minimum. In practice this would mean a framework which closely aligns or retains the principal features of the current regime to enable the UK to stay competitive.
• Free movement which allows continued access to the right talent so that the UK can source from abroad when the necessary skills set and expertise are not available here (and vice versa).
• Tariff-free trade with the EU and other countries around the world. This is vital for the automotive sector given the significance and interdependency of the transnational value chain.
• Continued participation in European research & development projects, initiatives and programmes. This is regarded as vital for the industrial and manufacturing sectors, not least the automotive sector where new technology continues to disrupt and challenge old ways and products.
Viewed from a legal perspective the messages from business raise a number of important legal issues where clarity on the post-Brexit position is vital – open issues include:
• The regulatory framework for vehicle type approval is EU governed. How will any changes impact our significant car exports to Europe?
• EU Directives and Regulations cover important aspects including vehicle emissions, technical standards, product safety and compliance. How this will be dealt with or replicated in the post-Brexit era is vital for OEMs.
• Distribution systems are governed by EU competition rules with substantial case law on price collusion and anti-competitive behaviour – what will this look like in the post-Brexit era?
• With the current web of EU legislation, how will barriers to trade in the form of tariffs be avoided and free access to the right talent be enabled in the future?
Sector specific issues to consider
A chain is only as strong as its weakest link
• OEMs and suppliers tend to enter into long-term relationships, not least because of the interdependence and complex nature of the relationship. Just-in-time stock delivery arrangements mean smooth running is essential. Any delay or failure to deliver crucial parts is likely to leave the OEM or Tier 1 supplier with little or no time to source elsewhere. In a worst-case scenario it can lead to supply chain failure and substantial losses being incurred.
• Litigation in the aftermath may feel like rearranging the deck chairs on the Titanic when the ship is already sinking. Preserving an open and transparent relationship with appropriate contractual back up is essential and should assist in spotting problems early and dealing with them in a timely manner.
• OEMs may be willing to support suppliers with difficulties on terms. For example, by having the ability to monitor, access and if necessary intervene should delivery be in jeopardy. In a worst-case scenario an OEM may be prepared to support a supplier in administration providing suitable terms are agreed with the administrator, which may include the ability to pierce the moratorium in order to access and take finished parts in appropriate cases. A similar position may be adopted between a supplier and a sub-supplier in financial difficulties. Liability to deliver to the OEM typically sits with the Tier 1 supplier so it may be necessary for them to also offer concessions and support to the Tier 2 supplier on appropriate terms to ensure the Tier 1 supplier meets their own contractual obligations.
Warning signs and a pattern of events which may spell trouble
Signs of stress may include some or all of the following:
• Defaults under finance documents and other covenant breaches.
• A transfer from the bank’s good book to their impaired loans team.
• Requests to fund additional working capital requirements.
• Increased bad debt levels.
• Late payments leading to litigation or Statutory Demands being served.
• Inability to respond to technological changes, losing market share & relevance.
• Inability to respond to changes in consumer buying habits.
• Worsening relationship between suppliers and OEMs.
• Over-reliance on one product which loses market share.
• Too many competitors in a marketplace where only the fittest will survive.
Stakeholders who may influence a sequence of events
Typically, one or a combination of the following will impact on the outcome:
• Banks and other key trading partners – are they willing to support and exercise forbearance?
• Employees & unions – job losses will often loom so the attitude of employees and the impact of union intervention may be crucial.
• Government – in large-scale situations there will be public pressure to support the struggling business. How might the government respond in specific cases and more widely? For example, in the past a scrappage scheme was introduced to incentivise and stimulate new car sales whilst getting older vehicles with higher emissions off the road.
• Pension Fund Deficits – many large businesses in the sector will have numerous employees. Are there pension fund deficits and if so what is the plan for addressing them?
• Opportunity Funds often feature where a larger business is in financial difficulties. They will be looking to either acquire bank debt and control the future destiny of the business or to acquire its business and assets potentially through an administration free of debt and liabilities.
The challenges facing the automotive sector show no sign of abating. Businesses need a level of certainty and predictability which is sorely lacking on Brexit. Many will have contingency plans in place which could have adverse implications for future productivity in the UK if implemented. Those plans may well include timelines for execution. Wider challenges and disruption in the sector seem set to continue as domestic demand tumbles month on month and consumers increasingly look to energy-efficient vehicles using new technology.
The speech by Thomas Kielinger OBE, journalist, author and political commentator, given at the AHK London summer dinner on Thursday 8th June, 2017. Since 1998 Thomas has been the London correspondent of Die Welt.
Thanks for the generous introduction, Nigel. But you left something out, you did not explain to the audience what OBE really, really means for a media person like myself. Let me make amends to that omission and tell you exactly what it means: Overtaken by events. That’s how I read OBE.
We live in the age of the wise-cracking Yogi Berra who famously opined: “Predictions are very difficult, especially about the future.” How relieved Greg Hands must be to have been able to cancel his appearance tonight with so many uncertainties hanging over our heads.
How the news agenda changes from one day to the next! How little inkling we had of a Donald Trump becoming the President of the United States. Actually how little we foresaw 27 years ago the fall of the Berlin Wall and two years later that of the old Soviet Union. . . And, dare I say, in a few hours’ time of Jeremy Corbyn as Britain’s next Prime Minster?
Don’t worry I’m not going to give you the low-down on the election. That would be foolhardy in the extreme for someone like myself with the accolade of so often having been overtaken by events. Instead I am going to try to give you a little food for thought with a longer sell-by date than a couple of hours. . . Although – sorry, I can’t leave politicians alone – I am tickled to wonder how Theresa May will explain to her husband the “Honey I shrunk the polls” dilemma…
Enough of that. I recently came across the first article I wrote about Great Britain and how I tried to understand what makes the people of the sceptred isle tick. I still after almost a lifetime of trying haven’t quite come to the end of it. In the summer of 1970, a cool forty six years ago, I applied for a job with the German Service of the BBC and later summarized my impression of that visit to London in a German magazine. There were strikes, there was the British keep-calm-an-carry-on spirit, there was Edward Heath in the House of Commons who had announced he was going to take his country into the Common Market – and there was the very last line in my essay which ran thus:
“The British measure by different yardsticks from the continent” (or sing from different hymn sheets, if you like) “and are fearful about the planned-for entry into Europe, a step against which their historical instinct rebels.”
Actually, 1970 wasn’t my first contact with Britain, I had had four previous years of experience in Wales, at Cardiff University, first as a student, then as Lektor at the German Department there, so a certain degree of familiarity with British thinking I already had under my belt, so to speak. And yet I’m astonished that at the age of 30, still a greenhorn in the wider world, I was already convinced that the British “historical instinct” rebelled against entry into a European framework called the Common Market.
It took me a long time to learn more about what gave substance to this judgement which all but seems to have anticipated Brexit. . . Amongst other sources I came across Churchill’s famous essay in the “Saturday Evening Post” of 1930 about “The United States of Europe” where Churchill muses about how different are the dreams of the British from those of the continent, only to go on writing with supreme confidence of judgement:
„We are with Europe but not of it. We are linked but not comprised; we are interested and associated, but not absorbed. We belong to no single continent, but to all.”
Little by little, insight by insight, I began to understand more about the differences in mentality between an island nation and continental nations, between seafarers and landlubbers, as it were. A see faring nation, I have found, is more attuned to the heaving and hoeing of the waves, and how flexibly one has to react to the unpredictability of the weather, both in its literal as well as in its political sense, whereas we in our German philosophical mind sets swear more by abstract concepts, “Gesamtkonzept”, which we tend to follow like some eternal truth.
By contrast, it was George Orwell who wrote about the ”anti-theoretical, anti-dogmatic, anti-abstract elements in English empiricism.” But my favourite quotation in this context comes from Lord Nelson and what he advised his captains on the eve of the battle of Trafalgar, October 1805:
“There is no certainty in a sea fight. Something has to be left to chance.” Look at the word “chance” and what it could mean: luck, opportunity – and gamble. On the high seas you cannot but develop an open mind and become a liberal, an optimist – and a risk-taker. That’s it: a risk-taker. The English are “inveterate gamblers” is another one of George Orwell’s succinct insights.
Well, forgive me, but from Nelson’s “something has to be left to chance” and Orwell’s dictum about the English as “inveterate gamblers” is only one short step to – well, you guessed it: Brexit.
Modern Germany, if she was confronted with such an overwhelming question mark like Brexit, would suffer a nervous breakdown. A seafaring nation, on the other hand, is less inclined to recoil from the unknown, it embraces it like an adventure to be conquered. The national fibre wants to be tested in adversity and so it takes the measure of what lies ahead.
Does anyone know what lies ahead with Brexit? may I ask. I don’t think so. To me and many others it is – to quote Churchill’s word about the old Soviet Union – “a riddle inside an enigma wrapped in a mystery.” I would actually like someone to write a steamy novel about “Fifty shades of Brexit”. Oh what Jeremy might want to do to Theresa in that context. . .
Seriously though, 48 percent of the risk-taking British did not want to go that far, did not want to go along with leaving the EU. So how do you address yourself, as a political leader, to a national crisis which Brexit is, a national emergency? You know how Churchill coped with the challenge of 1940: He took the course of statesmanship and said it as it was: “Blood, tears, toil and sweat.”
I’m not saying that Brexit is in any way comparable to the challenge Britain faced in 1940, but a more realistic appraisal of the slings and arrows of Brexit, outrageous or otherwise, should, I think, prevail. At least I hope it will. I am an optimist myself at heart, always have been, but about Brexit I think too much unfounded optimism has been spread around by the converted, too much un-secured triumphalism. Les stridency is, I think, required.
Lest we forget, Theresa May is a Johnny-come-lately to Brexit, having been a Remainer during the referendum campaign. In a way, converting to Brexitism was her first major U-turn, of which there were many more to follow.
Don’t get me wrong: I am not against people changing course and their minds. The great John Henry Newman, who converted from Anglicanism to Catholicism and became a cardinal of the Roman Catholic Church (Pope Benedict XVI. beatified him in 2010) famously wrote in his autobiography of 1864:
“To live is to change. And to be perfect is to have changed often.”
By that definition, Theresa May is the perfect politician. . . Great Britain, too, has made change its hallmark. But let me remind you of what we also think is another typical British characteristic: “trial and error”.
Let me throw a little bit of what some people might call unreason at you: What if the decision taken in June last year should prove over time and economic decline to have been an error? Do you think it possible that Britain might reverse from an error like that? The smart money tells me: Forget it, absolutely forget it. Well, history is a subversive power, of that I am sure, and nobody knows what lies ahead.
For now, however, I am more certain. I can finish with the three words of advice the Metropolitan Police gave out during the tragedy on London Bridge last weekend: Run, hide, tell. Run from a Labour government; hide from the effects of a Tory victory, then tell it to the marines that things will get any better. Because they won’t.
But in Britain I am also reminded of the time-hallowed words of Pericles, the great statesman of ancient Greece: “The secret of happiness is freedom, but the secret of freedom is courage.” I very much hope that the courage of wisdom during the coming years will descend on Great Britain and the European Union.
As Germany’s main political parties struggle to find a formula for a new coalition agreement under Angela Merkel’s leadership, the rest of Europe is testing the waters.
Some argue nothing in Europe can move forward with a Germany occupied with itself. Others relish German paralysis. Yet again others fear German dominance no matter what. That is quite a spectrum of opinion.
Where should the future European journey go?
The majority of Europe’s political elites are trying to determine the proper pathway. Should there be further integration towards a United States of Europe?
Is such a move not mandated as a proper global counterweight in a world marked by the incessant rise of China, the hard-to- calculate Russians and the demise of the United States under Trump as the leader of the free world?
France’s President Emmanuel Macron has definitely defined such a response as his main aim. He needs Germany to come on board, not least to guard against the centrifugal powers of populism that are rising throughout most of Europe and keen to destroy his dream.
Spreading ominous thinking
But where does Germany stand? Is it really tearing apart at the fringes? That’s the suggestion of many who see the German elections in the dark light, on account of the success of the extreme left and right parties. Sections of the British press compared the right-wing AfD‘s march into the Bundestag to events in 1930.
Fortunately, this is far from the reality. Germany’s centrist parties scored an overwhelming 78% of the vote.
Still, one cannot deny or underestimate the disruptive danger of populism. In Poland and Hungary, for example, populists are making hay out of old fears and tribal aspirations.
One underlying thread that united much political analysis throughout Europe is the fomenting of fears that is associated with the talk of a new German hegemony. In my view, that is just alarmist talk, designed to whip up the forces of populism in whatever country whose leaders think in those terms.
Others present a milder suggestion. For example, David Marsh in a recent article on The Globalist talks about a rerun of the Holy Roman Empire of German Nations in the Middle Ages.
That, too, sounds ominous. However, any student of history knows that Germany‘s neighbors would have nothing to fear.
That Empire was never dominated from the center. In fact, the center was kept deliberately weak. Power resided in the leaders of the constituent parts of that empire, who elected whoever the new emperor would become. It was thus anything but an effective political entity.
If anything, that Holy Roman Empire – transferred to our era – actually resembles quite closely the European model which the UK always has in mind.
If one wants to compare the European present with the past, the first German reunification in 1871 is a more fitting example. Driven by the onset of the industrial revolution (today’s equivalent of globalization in terms of its transformative powers), first a customs union was created. Then, under strong leadership by Prussia, came monetary and political union.
But even that parallel doesn’t really fit for various reasons. Anybody looking for a clearer understanding of Germany’s multi-layered historic, social and cultural role in Europe should read Stephen Green‘s excellent book “Germany the Reluctant Meister.“ He hits the nail on the head.
What about Angela Merkel?
Frau Merkel‘s Germany needs France much more than the French need the Germans. Herself long on desire, but short on actual vision, she would like nothing better than Monsieur Macron driving the European project forward. To her delight, he has taken the initiative. He is her “vision king.”
True, unlike the SPD – her potential governing partner – Merkel will only be a reluctant follower when it comes to German taxpayers shouldering too much of the cost of futher European integration.
But I am sure Merkel believes it is a reasonable price to pay, all the more so as she can rely on the Social Democrats to provide her sufficient political cover. They will allow her to convince most of her voters, who want the CDU to govern, that this is worth the cost.
Which leads to one big question in the European context: Will the SPD jump aboard the Merkel bandwagon once again?
The reason why I feel confident about a rerun of the last coalition is that the Social Democrats need not to fear playing second fiddle to her and falling further back in the next election. This is definitely Merkel’s last term in power. In fact, it would be a surprise if she stayed the full term.
Dr Rebecca Harding of Equant Analytics, board member of the German British Forum, has published a new book on trade as a tool of coercion. The synopsis follows.
The Weaponisation of Trade: The Great Unbalancing of Politics and Economics
World trade and globalisation are at a crossroads. The UK and the US, through Brexit and the election of Donald Trump, are exhibiting all the signs of isolationism. In contrast, Germany, and indeed China, are still championing globalisation. The populism that has brought us to this historical juncture is evident across the world but the consequences of a decision to harness that with economic nationalism through trade are dangerous.
The book explores how the UK and the US are using trade as a tool of foreign policy, and indeed, as a tool of coercion. The US has linked trade with China to its policy on the Korean peninsula while the UK has explicitly lined trade agreements and European security in Brexit negotiations.
Germany’s role, indeed responsibility, is as the focus for economic stability and multilateralism in a reformed Europe with a stronger sense of global identity. These are challenging times for the world and the wrong political choices will be dangerous.