RealClearWorld Newsletters: Europe Memo

UK to the World: It's All About the Money

UK to the World: It's All About the Money
X
Story Stream
recent articles

October has been a month for central bankers.

Last week, Poland's central bank governor intervened in his country's election, commenting on an incipient populist political turn that seems to clash with the country's economic growth and its slow but steady movement toward the pinnacle of the European and global stages.

Yesterday, it was Mark Carney's turn. The Bank of England's governor, in an address that accompanied the release of a report on the topic, did what Prime Minister David Cameron has largely failed to do since his electoral victory on May 7: He spelled out to a domestic audience why a British exit from the European Union would be bad for the United Kingdom, while stressing again the deep-seated British belief that the European Union is in dire need of reform, and the fear that Union's future integration will favor eurozone members to the exclusion of countries sitting outside the currency area. The Guardian:

"Speaking in Oxford's ornate Sheldonian theatre, Carney said that, ever since the repeal of the corn laws almost two centuries ago, the UK economy had ‘bet on openness', opting for free trade over protectionism, and EU membership had enhanced that.

"‘Although the UK's dynamism is the product of many factors including deep human capital, well-developed physical infrastructure, a competitive fiscal regime and the rule of law, the EU has arguably bolstered it by establishing the world's largest since market with free movement of goods, services, capital and labour.'"

As it ponders its ties to Europe, Britain's foreign policy is at sea. Nothing illustrates this better than the juxtaposition of Carney's speech with the fanfare bestowed upon visiting Chinese President Xi Jinping. While in the country, Xi has already sealed a number of deals with Cameron and cohorts. China will indeed play a major role in the construction of the United Kingdom's nuclear power plant at Hinkley Point, and Britain is looking for Chinese money to finance a raft of projects meant to shore up the country's lagging infrastructure, and spur economic dynamism outside its dominant capital. Deals sealed so far involve everything from a theme park in Kent to Aston Martin sports cars.

The United Kingdom's rapprochement with China has come in for plenty of scrutiny in the last few weeks. It locks into a broader European dynamic, one analysed in greater depth by Chatham House's Paola Subacchi in The World Today. China and Europe are are reviving their historic relationship, and while the financial allure is great, the benefits are surest for China:

"In June, Hungary became the first EU member to sign a memorandum of understanding with China on integrating the ‘belt and road' initiative with Hungary's ‘opening to the east' and ‘opening to the south' initiatives. Poland is also considered a pivotal country for the OBOR project. Plans have been made for building a railway connecting the Chinese province of Sichuan with the Polish city of Lodz as well as for developing several Polish harbours such as Gdansk -- all financed by soft loans from China.

"Other EU members have integrated China's OBOR project with their own investment strategies or are in the process of doing so. For instance, in June China and France signed an agreement for prioritizing cooperation in third-party markets, including joint ventures and project financing.

"By focusing on infrastructure projects, China seeks to build better connectivity as well as acquire political influence in the areas interested by the ‘belt and road' project. From a geostrategic perspective, the OBOR is China's response to the US ‘pivot to Asia."

London is helping Beijing pivot. Britain's move to join the China-led Asian Infrastructure Investment Bank over Washington's protestations -- a move then followed by an eager flock of EU member states -- marked a key turning point in this Sino-European revival. Indeed, whether in its dealings with Europe or its own growing relationship with China, the United Kingdom's foreign policy has assumed a distinct transactional approach. For now, the message from London to the world is clear enough: It's all about the money.

All of which makes it an interesting time to be a central banker.

Around the Continent

Merkel's humble pie: The United Kingdom is not the only European power whose foreign policy is adrift; nor even the most important. The refugee crisis has undermined Berlin just as Germany was settling into its role as Europe's leading power, if not its hegemon. So much so that Chancellor Angela Merkel had to endure being used as a prop in the election efforts of Turkish President Recep Tayyip Erdogan. RealClearWorld's Kaj Leers:

"Not two months after Germany's Angela Merkel courageously said ‘Wir Schaffen Das' ("we will make it") to Germans to assuage concerns about the influx of refugees, she is now forced to admit that perhaps Germany and the European Union cannot make it after all.

"In her own country, there are tell-tale signs that the mood is changing. Cities are hardly able to cope with the streams of refugees pouring in. Local, regional, and federal institutions are overwhelmed. In Berlin, hundreds of refugees are camped out at administrative agencies where immigration officers decide who gets refugee status. It takes on average 50 days before a case is handled. Riots have ensued in asylum centers, and cities have to rely on volunteers to help out with aid logistics.

"In the meantime, on the domestic political front, the Alternativ für Deutschland party (AfD), which rose to prominence on a platform opposing the euro and aid to Greece, and which has switched its focus now to anti-refugee rhetoric, in one recent poll rose to 7 percent of the vote."

Hungary Games: Hungarian Prime Minister Viktor Orban took his latest shot at the European Union's migration policies, in the run-up to an Oct. 25 mini-summit on the matter in Brussels. The summit will take in non-EU members Serbia and Macedonia, who have been greatly affected by the crisis, and by the reaction of member states to it. Euractiv:

"Orbán told the state television channel m1 that European leaders had no mandate to let hundreds of thousands of migrants enter the EU with little or no control.

"‘This destabilises European democracies,' he said. ‘We need to start the debate about the future of our continent honestly, without the muzzle of "political correctness", without pretence, talking straight.'

"‘We need to listen to the people and incorporate their views in our politics. If we can't do that, we'll have a political crisis on top of our migrant crisis.'

"He said Hungary's border fence had been meant to turn migrants back from Europe, not divert them along a different path to Germany, and that he had asked Hungary's Balkan neighbours to help send the migrants back."

Tiny Slovenia is the latest state to issue a cry for help. From the same Euractiv piece:

"Migrants began streaming into Slovenia last Friday (16 October), when Hungary closed its border with Croatia. Before then, they were heading for Hungary, and then north and west to Austria and Germany. Sealing the border diverted them to Slovenia, which is also a member of the Schengen zone."

Meanwhile, Hungary is supporting Ankara's demand that Turkey's accession to the European Union be accelerated. B92, citing Tanjug:

"In a telephone interview with MTI from Ankara after his meeting with Turkish Prime Minister Ahmet Davutoglu and Foreign Minister Feridun Hadi Sinirlioglu on migration issues, Szijjarto said that Turkey took the largest number of refugees in the world and that it was ‘a key country in addressing the migration crisis in Europe'."

Poland votes this weekend. Suffragio's Kevin Lees breaks the elections down effectively. All indications are, as Lees writes, that Conservatives will return to power in Warsaw:

"Duda's outsider status matched a growing sense that Poland's strong economic performance hasn't necessarily filtered through to the entire population, especially in Poland's east, where traditionally conservative voters have missed the boom that's developed in the country's west and in urban centers like Warsaw. Moreover, Duda campaigned hard against Poland's future accession as a eurozone member. Though Poland is notable for achieving the highest growth rate in the European Union since the 2010-11 eurozone sovereign debt crisis -- GDP growth peaked at 4.8% in 2011 and achieved an impressive (by European standards) 3.3% growth rate last year -- voters are nevertheless in a mood for change."

Feedback

Questions, comments, contributions? Feel free to send us an email, or reach out on Twitter @JoelWeickgenant.

Comment
Show commentsHide Comments

Related Articles