Almost unnoticed, phaps bc it’s done with an English rather than a Hungarian accent, our populist, nationalist PM is setting out to weaken institutions that define a liberal democracy: he’s moving, Orbán style, to make it harder for his Govt to lose power theguardian.com/commentisfree/…
There is a pattern here, if we’re only willing to see it. A populist government hobbling those bodies that exist to keep it in check, trampling on democratic conventions and long-held rights, all to tighten its own grip on power.
We need to recognise it, even when it wears a smile and tousled hair, and speaks in the soothing cadences of Eton College
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Germany now faces weeks - if not months - of political uncertainty which creates all sorts of policy risk for Europe. A real danger in the months ahead is a lengthy period without a new voice of any kind in Berlin, just as France plunges into an uncertain election of its own 1/
Because EU faces three extremely big, complex policy questions in the third & fourth quarter this year - over Rule of Law issues with Pol & Hungary; the EU's fiscal orientation in 2023 & how to manage UK escalation over NI Protocol - which are crying out for a political steer 2/
But with a lame-duck Govt now in Berlin, soon to be followed by same in Paris, no major EU policy decisions are likely under either. This risk is the problems fester, escalate & subsequently become harder to resolve 3/
Covid has been good for the EU.
It is now both more cohesive and resilient as a result of the pandemic, compared to before it. But are EU policymakers on the verge of committing another historic fiscal mistake? Thread 1/
Two reasons explain EU’s greater resilience post-Covid
1) The creation of Recovery Fund (RF), which has enabled significant EU-wide borrowing, subsequently transferred to member states as grants. This is facilitating their economic recovery, without increasing their debts 2/
2) Populism has had a bad crisis. This is partly because of RF. Take Italy's case: It's hard to argue against €180bn (10.5% of GDP). Hence the nationalist far-right League led by @matteosalvinimi has largely shut up & entered into reform-oriented coalition led by Mario Draghi 3/
The review to reform EU fiscal rules begins soon. 3 key points: 1/ Process brings risks; 2/ There's an emerging consensus on debt, not investments; 3/ COM is toying with completely overhauling governance - empowering members states to determine their own fiscal trajectories 1/
Process is key - & brings risks. Member states must submit Stability & Convergence Programs to Bxl by mid-Apr. For this they'll need an idea of what fiscal rules in 2023 will be. But we'll only have a new Govt in Berlin in.. Dec? Maybe Jan? That leaves Q1 next yr to do a deal 2/
Absent consensus, COM may be forced to issue a Communique - instead of concrete legislative proposals - pointing to what new rules will likely be. It's here when fiscal hawks (@VDombrovskis is key) will likely urge old rules & EDPs to apply - despite tightening they imply 3/
So it's good there's a compromise over social care. But the bigger picture has been totally lost in the details of today's debate - namely that the UK is already aiming at tighter fiscal policy, while ROW & certainly the EU remains very focussed on supporting the econ recovery 1/
This is largely borne out of differences between @BorisJohnson and @RishiSunak. The PM wants to spend on levelling up, subsidising net-zero, new manifesto commitments and much more besides. He has his eye on the Red Wall 2/
Sunak thinks spending was ALREADY too high pre ~£400bn Govt has spent on Covid relief & is worried about debt servicing costs (given BoE projections of 4% inflation). He also wants to (re)build the party's credibility on fiscal policy vs Labour & is channeling Tory members 3/
On achievements. I think Merkel’s main one is fact she stands for reassuring stability - domestically & internationally. She has been unimaginative about reforming EU, BUT her attention to detail & emotional intelligence have helped EU weather countless crises over past 16 yrs
2/
She has also competently managed Germany's prosperity after her predecessor pushed through important supply side reforms that made the economy more competitive. BUT it's quite difficult to think of flagship domestic reforms which have taken place during the Merkel era
3/