March 29, 2024

British Exit From the European Union Is Not Widely Embraced

Buoyed by the falling value of the pound and a work force with fewer of the labor restrictions found in many parts of Europe, Britain’s industrial exports, led by companies like BM and better-known names like Land Rover and Mini, could find growth markets in the dynamic economies of Asia and Latin America rather than continuing to rely on the rules-bound common market of Europe.

And yet the idea that Britain might be better off outside the 27-member European Union, a notion embraced with a near religious fervor by a small but influential faction of Mr. Cameron’s Conservative Party, is by no means widely accepted by the majority of voters here, according to opinion polls.

Nor is it the belief of top executives at BM Catalysts. They worry that Britain’s withdrawal from the bloc would make it harder to do business in Europe.

Britain, simply put, is already having enough trouble competing in the regional and global economy without making things more difficult by risking its open access to trade with the Continent, to which 58 percent of the country’s exports now go.

A British withdrawal from the European Union “would be a big problem for us,” said Mark Blinston, commercial director at BM. The company depends on the bloc for a third of its sales, which reached £22 million, or $34 million, last year.

In fact, BM, based in Mansfield in the north of England, has already started having trouble in Europe — not because of the Brussels bureaucracy but because of the harsh realities of competitive trade.

BM has been losing market share recently to a leading rival, AS, which is based in Spain, a nation that has one of Europe’s most troubled economies.

Because recession and high unemployment have driven down Spanish labor costs, AS has been able to undercut BM on price in the crucial German automotive market, as well as on BM’s home turf in Britain.

“We are worried,” Mr. Blinston said. “Economic changes in another market can really have an effect on you.”

On Jan. 23, Mr. Cameron called for a referendum on his country’s continued membership in the European Union if sufficient changes from Brussels were not forthcoming. In a poll after the speech, 40 percent of Britons said they would vote to opt out. But nearly as many, 38 percent, said they would oppose withdrawal.

Highlighting the stark trade reality this month was the incoming Bank of England governor, Mark J. Carney. In his first public remarks before Parliament, Mr. Carney pointed out that since 2000, Britain’s share of global exports have decreased about 50 percent — the steepest decline among the world’s 20 biggest economies.

That decline is all the more startling if one considers that it has happened during a time that the pound has lost up to a third of its value against other major currencies, one of the largest currency devaluations in the country’s history.

All other things being equal, a cheaper pound should make British assets, whether exports sent abroad or construction of factories at home, more of a bargain for foreign buyers and investors.

But a growing number of economists and policy experts say that a cheap currency alone is not enough to keep Britain competitive.

They make the case that the painful adjustments undertaken by government and industry in Spain, Ireland, Portugal and Greece have halted the decade-long loss of competitiveness that was at the root of Europe’s sovereign debt crisis.

Unable to devalue their currencies as Britain has, these euro zone nations have cut spending, raised taxes and laid off millions of employees. The resulting gains in competitiveness, painful and hard won as they have been, are now apparent. All of those countries are reporting smaller budget gaps and improved trade deficits that in some cases have swung to surpluses.

By these crucial yardsticks, Britain is emerging less as an economic dynamo poised to become a main trading partner with China than as the surprising economic sick man of a Europe committed to putting its financial house in order.

According to the European Commission, on the purest measure of how much more a government spends than it takes in through taxes, Britain’s primary deficit of 3.9 percent of gross domestic product will be the largest in the European Union this year.

And on the trade front, Austria and France are the only other European countries that, like Britain, have experienced a widening trade deficit since the onset of the financial crisis in 2007.

Through January of this year, new export orders by British industry have fallen for 13 consecutive months, according to official statistics.

Article source: http://www.nytimes.com/2013/02/13/business/global/britains-risk-filled-choice.html?partner=rss&emc=rss

Nick Clegg Criticizes David Cameron on Europe Vote

Mr. Clegg told the BBC that the decision by Prime Minister David Cameron, a Conservative, to veto proposed European treaty changes left Britain in danger of being “isolated and marginalized” in Europe. He added that if he had been in charge, “of course things would have been different.”

Mr. Cameron vetoed the proposals early Friday after seeking, and failing to secure, safeguards he said were vital for the health of London’s financial sector. But with the 26 other members of the European Union either agreeing to the proposed plan outright or saying they would put the matter before their Parliaments, Mr. Cameron’s veto left Britain alone on the margins at a time of great upheaval on the Continent, with the European Union struggling to resolve its financial crisis.

On Friday, Mr. Clegg appeared to support Mr. Cameron’s decision, although he warned the Conservative Party’s anti-Europe wing against being too triumphant about the problems facing the European Union. But his stance hardened over the weekend, and on Sunday he appeared to have backtracked, or at least tried to finesse his explanation to show that was in line with his party’s pro-Europe principles.

In fact, Mr. Clegg told the BBC that when Mr. Cameron called him at 4 a.m. Friday with the news that Britain had vetoed the plan: “I said this was bad for Britain. I made it clear that it was untenable for me to welcome it.”

Mr. Clegg has already lost the confidence of many Liberal Democrats by appearing to betray the party’s position when he has supported the government on other issues, like increasing the amount of tuition colleges can charge.

After the summit meeting, many prominent Liberal Democrats went further than Mr. Clegg.

A former party leader, Paddy Ashdown, described Mr. Cameron’s veto as a “catastrophically bad move” and said it would do nothing to shield London’s financial district, the City, from future European regulations. “In the name of protecting the City, we have made it more vulnerable,” he said.

Lord Ashdown also warned that the move had alienated Europe in a way that would haunt the United Kingdom.

“The anti-European prejudice of some in the Tory party,” he said, “has now created anti-British prejudice in Europe.”

Mr. Clegg, a former member of the European Parliament, said he would now “fight, fight and fight again” to make sure Britain remained an influential force inside the European Union. He said he would resist “tooth and nail” efforts by some Conservatives to take the country completely out of the union, particularly since the United States has found Britain a useful conduit to Europe.

“A Britain that leaves the E.U. will be considered irrelevant by Washington and a pygmy in the world, when I want us to stand tall in the world,” he said.

Mr. Clegg criticized Conservatives who had hailed Mr. Cameron as a “British bulldog” for his tough line on Europe.

“There’s nothing bulldog about Britain hovering somewhere in the mid-Atlantic, not standing tall in Europe, not being taken seriously in Washington,” he said.

To which one Conservative member of Parliament, Mark Pritchard, retorted, “Better to be a British bulldog than a Brussels poodle,” The Associated Press reported.

Mr. Cameron, meanwhile, was welcomed as a hero by his party’s anti-Europe right wing. “Up Eurs,” was the headline in Rupert Murdoch’s populist, anti-European tabloid newspaper, The Sun, along with a photograph of Mr. Cameron in a Churchillian bowler hat, holding two fingers up to Europe — the equivalent of an American middle finger.

“He did what I would have expected Margaret Thatcher to have done,” Andrew Rosindell, a Conservative member of Parliament, said approvingly.

But Kenneth Clarke, the Justice secretary and the Conservatives’ most prominent pro-Europe member, said in a radio interview that Mr. Cameron’s veto was a “disappointing, very surprising outcome.” He said he would be listening carefully to the prime minister’s statement in Parliament on the matter on Monday.

As upset as he is, Mr. Clegg said he did not want the coalition government to collapse.

“It would be even more damaging for us as a country if the coalition government was to fall apart,” he said. “That would cause economic disaster for the country at a time of great economic uncertainty.”

Article source: http://feeds.nytimes.com/click.phdo?i=7bae711affbc0e0abf23a7fec966e894

E.U. Looks to Ease Terms for Greece and Ireland

The European Union is looking to lower interest rates on bailout loans to Greece and Ireland and is working on a second rescue for Athens in a chaotic effort to prevent a disorderly debt restructuring. The efforts were in motion as Standard Poor’s lowered its rating on Greece’s debt even further.

The executive European Commission said Monday that it hoped to see a decision within weeks on reducing the rate charged to Ireland to make Dublin’s debt more sustainable.

“The commission is clearly in favor of a rate cut,” said a spokesman for Olli Rehn, the European Union’s economic and monetary affairs commissioner. “The commission is against debt restructuring.”

The new Irish government’s bid for lower interest payments has so far been blocked by Germany and France, which want Dublin to drop its veto on harmonizing the corporate tax base in Europe in exchange or raise its own low corporate tax rate.

In Germany, a senior lawmaker in Chancellor Angela Merkel’s conservative party said a further cut in the rate on emergency loans to Greece, already reduced by one percentage point in March, would be justified if it carried out further reforms to reduce its debt risk.

Michael Meister, finance policy spokesman of Ms. Merkel’s Christian Democrats, told German radio he opposed any idea that Athens should restructure its debt or that it should consider leaving the euro zone.

But a German Finance Ministry spokesman, Martin Kotthaus, said at a news conference: “There is no discussion at the moment about extending the payment schedule or lowering the interest rates for Greece.”

On Monday, Standard Poor’s lowered its rating on Greece’s debt to B from BB-, dragging it further into junk territory over concerns that a debt restructuring is increasingly likely.

“In our view, there is increased risk that Greece will take steps to restructure the terms of its commercial debt, including its previously issued government bonds,” the agency said in a statement, warning that more downgrades could come.

It said its projections suggest that principal reductions of 50 percent or more could be needed to restore Greece’s debt burden to a sustainable level.

Greece, whose fiscal slippages set off Europe’s debt crisis, is rated junk by all three major rating agencies.

The calls within the European Union for lower interest rates for Greece and Ireland came after a select group of top euro zone policy makers held not-so-secret talks in Luxembourg on Friday evening on how to stem the currency bloc’s deepening sovereign debt crisis.

The cost of insuring Greek, Irish and Portuguese debt against default rose further on Monday as market jitters intensified over the risk that Greece may have to restructure its debt, forcing investors to take losses.

European shares fell amid signs the three euro zone states in intensive care are staging a bidding war for easier terms by pointing to concessions made to each other.

The jitters also followed a report by the German magazine Der Spiegel alleging that Greece was considering leaving the euro zone, which drew indignant denials from Athens and E.U. ministers.

A German government spokesman said Ms. Merkel would meet the European Commission president, José Manuel Barroso, head of the E.U.’s executive arm, and the European Council president, Herman van Rompuy, who chairs the bloc’s regular summit meetings, on Wednesday to review the situation.

A Greek exit from the euro has never been under discussion and is not now, he said at a news conference.

Euro zone and E.U. finance ministers are due to meet next week to approve Portugal’s aid program amid lingering uncertainty over whether Finland, which has a caretaker government and has not yet begun negotiations for a new coalition, will be in a position to give the required agreement.

Pressure is mounting for those meetings to deliver decisions on Ireland and Greece as well.

Responding to anger in some countries that were not invited to Friday’s talks, a German Finance Ministry spokesman insisted there was no attempt to create a two-class euro zone.

The Greek finance minister, George Papaconstantinou, who attended the Luxembourg meeting, said investors did not believe that his country could return to capital markets next year as envisaged in its E.U./I.M.F. plan, so it might need alternative financing.

Jean-Claude Juncker, chairman of the Eurogroup of finance ministers of the 17-nation euro area, said after Friday’s talks that there was a consensus that Athens would require a second rescue.

“We think that Greece does need a further adjustment program,” he said after meeting with ministers from Germany, France, Italy, Spain, Mr. Rehn of the European Union and the European Central Bank president, Jean-Claude Trichet.

He gave no details, but a euro zone source said one idea under consideration was for the European Financial Stability Facility rescue fund to buy Greek bonds in the primary market upon issuance next year, in return for a new form of collateral.

Greece, which has a debt mountain of nearly 150 percent of gross domestic product, is supposed to raise 27 billion euros in the market in 2012, according to the existing rescue plan.

Market analysts are convinced Athens will have to reduce its debt substantially by a mixture of rescheduling maturities, lower interest rates and possibly convincing private investors to take voluntary losses to avoid a disorderly default.

Some also believe Ireland will be unable to repay its debt, set to reach 120 percent of gross domestic product, and will face mounting political pressure to make bank bondholders share the cost.

A senior Irish minister said on Sunday that Dublin was watching to see what concessions it can win on its E.U./I.M.F. bailout if Greece is given a new deal to resolve its crisis.

Energy Minister Pat Rabbitte said he hoped Ireland would win a 1 percentage point cut in the rate it is paying on some 40 billion euros of loans from the E.U. at the meeting of the organization’s finance ministers.

Article source: http://feeds.nytimes.com/click.phdo?i=51a4730fc67cf621aa87b40471dfc650