The Bear’s Lair: French election offers best chance for EU reform

In a column last month “Europe needs an Anti-Maastricht Treaty” I outlined the kinds of reform that would make the EU beneficial for its member states and their inhabitants. I did not however at that stage see much chance for such a reform occurring. Now with the French election on April 23 and May 7, I see potential for a genuine opening that might push the EU in the right direction. I will explain why.

The establishment, in the form of the FT and the Economist, but I suspect also the mandarins of Brussels, is pushing hard the candidacy of Emmanuel Macron. They have figured out that the French electorate will not stand for another official socialist after the dismal performance of Francois Hollande, and they were preparing to put up with another center-right term in office for Alain Juppe or, if necessary Nicolas Sarkozy. However, much to their horror both those candidates were eliminated in the Republican (the party’s name of the week) primary by a genuine Thatcherite, Francois Fillon.

Fillon is unacceptable to the center-left establishment, on both economic policy and foreign policy grounds. Accordingly, as well as encouraging leftist magistrates to investigate Fillon, they have rejoiced as the socialists have moved leftwards by nominating Benoit Hamon, because it has allowed them to promote the candidacy of another socialist, Emmanuel Macron, whose policies are altogether to their taste.

Macron is referred to as a “centrist” or even “center-right” candidate, but don’t believe a word of it. He was a member of the socialist party from 2006 and until last August was Minister of the Economy in the socialist government of Manuel Valls. Fortunately, the French electorate appear to be rumbling Macron’s true position, and he is dropping in the polls. In any case, he very definitely does NOT represent a new hope for France, Europe or anywhere else.

Fillon and the National Front candidate, Marine le Pen on the other hand both represent something new, at least since the death of Georges Pompidou in 1974. Fillon is a true free marketer, something the overtaxed and over-governmented France very badly needs, while Le Pen is a genuine nationalist, with a determination to reform France’s relationship with the EU, probably taking it out of the Euro, for example. Both will form additional counterweights to the globalist-socialist mentality that has dominated the EU since the Presidency of Jacques Delors (1985-1995), and that has made it so damaging to the interests of its members.

Thus, we must hope for a Fillon-Le Pen run-off on May 7, in deciding between which if I were a French voter I would be torn. Fillon is closer to my own views overall and is likely to do more good for France in the short term, especially on the economic side, but Le Pen is likely to do more good for the European Union as a whole.

As I discussed in my January piece, a reversal of the Maastricht Treaty, together with an abolition of the European Parliament, would be especially attractive to the smaller countries in the EU, who have few alternatives in a world where protectionism is an increasingly strong force. However, for a large country like France, as for Britain, it is always possible to leave the EU altogether; such countries are large enough and have a well-enough diversified economy, that they are attractive trade treaty partners in themselves, and hence would not lose badly by a “velvet divorce” from the EU.

However much the smaller EU members may wish for a restructuring of the EU, however, they are unable to get one on their own, since they do not have sufficient voting power either in the European Parliament or in the Commission (unless a wish for national autonomy became more or less unanimous among them, which given the vagaries of electoral politics is unlikely.) Hence, they need one or more of the EU’s largest and most influential members to join them in demanding change.

The three largest members of the EU are all likely to have elections this year. However, the probability of useful change in Germany’s election due in September is minimal. If the statist globalist Angela Merkel loses, she will be replaced by the statist globalist Martin Schulz. Only a combination of a massive upsurge by the Allianz fur Deutschland with a breaking of the alliance between the CSU and the CDU, with the Bavarian CSU joining the AfD, seems likely to break the logjam in German politics, and that will probably take two elections to achieve, thus being impossible before 2021.

In Italy, an election is likely this year, but the prospects for real change seem equally hopeless. The moderate socialist Matteo Renzi has been replaced by another moderate socialist, but the opposition force is the populist 5-Star Movement of Beppe Grillo, which is left-populist not right-populist. It might take Italy out of the euro (which, given Italy’s debt, may be inevitable) but seems otherwise likely to fall in generally with the Brussels consensus. Like the Greek Syriza, it may make a show of opposition, but it will prove eminently purchasable by a diversion of German and Scandinavian taxpayers’ money. The more hopeful forces in Italian politics, Silvio Berlusconi’s Forza Italia and the Lega Nord, both languish barely out of single digits in opinion polls.

Thus France’s election is the only real shot reformers have of gaining a seat in the inner councils of the European Union. Should Le Pen or Fillon win, they would find support from Poland (itself a very substantial force in the EU) as well as Hungary and importantly, the Netherlands if Geert Wilders does well in the Dutch election on March 15, as well as a measure of support from several other smaller members. In addition, any program of EU reform on Anti-Maastricht lines would gain the support of the current British government, though this is likely to be irrelevant if Brexit goes through.

There are three things a nationalist coalition of EU members might accomplish. First, and most likely, it could break up the euro. Marine Le Pen already has this ambition, as does Italy’s Beppe Grillo. There is no question that for its less disciplined members, the euro has been a thoroughly bad experiment, first inflating their economies artificially, especially in real estate, and then turning their governments into endless moochers off northern European taxpayers as “reforms” proposed by the EU fail to be imposed properly. For Italy, and still more for Greece, it appears that the fiscal discipline necessary for healthy Euro membership is simply not there. For France, the decision is a closer-run one, but several years of socialism have certainly made the case for euro membership weaker.

Having said that, kicking several less disciplined members out of the euro does not kill the euro, nor is the death of the euro a necessary step to turn the EU into a healthy polity. It would be perfectly possible for a customs union between fiscally well-disciplined countries like Germany, the Netherlands, Scandinavia and probably Slovakia to include a common currency. If the political systems were agreed on a few sensible rules of self-discipline, there would be no need for additional meddling or “harmonization.” There are considerable efficiencies, especially for small countries, in having a common currency that is one of the world’s major capital market denominators; it removes all artificial exchange rate questions from economic decision-making in the countries concerned. Thus a “trimmed” northern-focused Euro may well survive, and would deserve to do so.

The next most likely change that can be produced by a powerful nationalist bloc within the EU is a revised EU treaty, taking the union back towards its pre-Maastricht form. Above all, such a treaty needs to kill stone-dead the fantasy of “ever-closer union” which animates the worst initiatives of the EU bureaucrats and the European Parliament. Because of its remoteness from voters, exacerbated by the multiplicity of languages and culture within it, a fully centralized EU is to most Europeans a nightmare, not a dream, subordinating their individual and national identities in an alien bureaucratized politically-correct globalist whole. Even to the euro-fanatics, it must be obvious that an “ever-closer union” that included a bunch of nationalists of other countries is a bad and dangerous idea.

This EU reform will however be incomplete if the European Parliament is left in place. By its nature, the Parliament represents only centralizers, and incessantly attempts to expand its powers at the expense of national governments and, more important, at the expense of individual freedoms. Because its voters have little in common, and represent a multiplicity of political traditions, it has no democratic legitimacy, and the nationalists among euro-MPs, being (by definition) divided, are unable to assert themselves against the drag of the centralizing sludge vote. Until the European Parliament is abolished, the EU cannot be truly free, but abolishing it appears beyond the capability of even a newly elected, substantial and energetic nationalist bloc (which will find it hard to cohere except on this one issue.)

The election of Le Pen or Fillon will thus at best bring only partial reform of the EU. But even partial reform, with the abolition of “ever-closer union” is worth having. It’s what David Cameron should have obtained from his “renegotiation” before the Brexit referendum, and even an EU without Britain should still welcome it wholeheartedly.

(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)