The politics of food

An interesting article on American Thinker points to the "one reason above all for the current crunch in basic foodstuffs" … politics.

There is much with which we would agree this piece, written by J R Dunn. "The danger," he writes, "is that the current 'crisis' will stampede the international community into taking steps that will make things worse." Echoing our words in our earlier piece on the EU dimension, he adds: "It is almost like attempting to put out a fire with ethanol."

And, if this blog is verging on the obsessional on this issue, it is a reflection of our utter frustration that such an intensely political subject is being virtually ignored by our own politicians (and media), something which we articulated again in last night's posting.

Ignoring this issue will not make it go away. Nothing is more fundamental to the stability of a nation than the security of its food supply, in which context there are strategic and national decisions which need to be made. But, as Dunn points out, it is eminently possible that the wrong decisions will be made, making things worse.

If we continue to opt out of the debate – and the decisions which stem from it – the most likely outcome is that we, as a nation, will suffer and, if the wrong decisions are made, so will the rest of the world. That, as we well know, will trigger instability – and worse – which will have ramifications on a wide range of policies, and important, if unquantifiable consequences.

For that, we will have only ourselves to blame.

COMMENT THREAD

The Balkans again

It’s hard to tell how one should react to the various and variegated news from the Balkans. They could be treated as a big joke or as something created especially to try us all. Then again, many a European and world tragedy emerged from that difficult peninsula.

First things first. Serbia has signed a Stabilisation and Association Agreement (SAA) with the European Union. The 27 foreign ministers, who met today decided that Serbia, too, should be placed on the road to possible, if somewhat distant membership of the European Union.

Boris Tadic, the president interpreted the whole process somewhat differently in the statement issued yesterday afternoon:

Today, I am proud to announce that Serbia has finally signed the Stabilisation and Association Agreement with the EU. The Agreement sends a clear message: Serbia's future lies in Europe.

The message delivered today by EU Foreign Ministers was clear and unambiguous - they want Serbia to take its rightful place among them as a full and equal partner. There can no longer be any doubt about our shared commitment to make Serbia an integral part of a stronger and bigger EU.

For the citizens of Serbia the agreement will give greater freedom of travel, closer economic integration and removal of trade barriers, and most importantly the prospect of more employment. By signing the agreement today, we have reconfirmed our commitment to further reform and progress and prevented a path of economic isolation.

It pleases us particularly as we have delivered on this promise to the citizens of Serbia, ahead of the elections.

Now it is up to all citizens of Serbia to think carefully about the real long-term interests of our country and choose accordingly.

Well, of course, the man is fighting an election and the outcome is not at all clear. But this has always been the theme of the post-Communist countries – we want to be part of Europe. Sadly, the EU, incapable of seeing relations with neighbouring countries except in terms of them joining or not joining, never offers alternative agreements that would also make the "newcomers" feel as if they were part of Europe.

The only common foreign policy the EU can agree on with regards to neighbours (the most important aspect of one's foreign policy) is that of an amoeba: endlessly changing shape.

Meanwhile, the aspirant countries see possible membership as a kind of an El Dorado or Shangri-La – it will sort out their problems and give them lots of money to develop economically. Sadly, the reality is very different and the Serbs (and the Croats, the Bosnians, the Albanians) will find out, if, indeed, the EU lasts long enough for them to become members of it.

There are one or two other problems. Firstly, what happens if Tadic’s party loses the election to the more nationalistic groups and the question of Kosovo raises its head again. There is no evidence that it has been solved. Secondly, what is Russia, Serbia’s best friend (though not necessarily in need) going to say about all this?

The Serbs may be happy but neither the Greeks nor the Macedonians are. We have followed this convoluted saga on the blog. Yesterday’s Wall Street Journal carried an article by the Greek author and journalist, Takis Michas, which tried to explain the various problems that prevent the two countries from agreeing on any kind of a peaceful coexistence. They are not about to go to war but neither are they at peace.

It is about much more than just the name, the argument about which is something of a red herring. It is about that elusive Balkan entity – national identity, something that was supposed to disappear in the twenty-first century but, which, to the contrary, creates endless problems in countries, who spend a great deal of time re-writing and re-re-writing historic events and developments the better to define their identity.

Contrary to received wisdom, the dispute between Greece and Macedonia isn't over a mere name, but concerns competing national mythologies, symbols and histories. In other words, we have here all the usual Balkan issues over which people in this part of the world and elsewhere have butchered each other in the distant and not-so-distant past. No easy fix is possible, and a compromise over the name won't put to rest the basic conflict. Unless all the problems are addressed openly and honestly, mutual distrust will persist, ready to erupt again at the first opportunity – or once EU reconstruction funds dry up.

Had Athens and Skopje engaged in serious bilateral or multilateral talks during the past decade on all the points of contention, and not focused simply on the "name", perhaps they would not find themselves in their current, absurd predicament.

Then again, with EU reconstruction funds drying up, the two countries might be forced into some kind of accommodation with each other.

Be afraid …

There have only been a few months in the past 30 years which have been as cold in the tropical troposphere as March 2008 four months in the 1988-1989 La Nina… That from Climate Audit.

From Watts up with that (and elsewhere) we get:

A cool-water anomaly known as La Niña occupied the tropical Pacific Ocean throughout 2007 and early 2008. In April 2008, scientists at NASA's Jet Propulsion Laboratory announced that while the La Niña was weakening, the Pacific Decadal Oscillation (PDO) - a larger-scale, slower-cycling ocean pattern - had shifted to its cool phase.

Look out California agriculture, he writes. The wine industry, fruits and nut growers will be hit with a shorter growing season and more threats of frost, among other things. Recently in Nevada County, much of their grape crop was wiped out.

Nevada County's agricultural commissioner will seek disaster relief from the state after tens of thousands of dollars worth of crops were ruined from last week’s freezing temperatures. Orchard trees, wine grapes and pastures were hardest hit, Pylman said. The commissioner is compiling a report of damages that he will send to the state Office of Emergency Services in coming weeks. "Growers don’t have anything to harvest. That’s a disaster in my mind," Pylman said.

In Paradise, CA, Noble Orchards reports damage to their Apple crop from recent colder weather, as well as reports of issue with vineyards in the Paradise ridge area suffering from frost damage recently. In 1977, the PDO had switched to a warm phase. California agriculture has ridden a wave of success on that PDO warm phase since 1977, experiencing unprecedented growth. Now that PDO is shifting to a cooler phase, areas that supported crops during the warm phase may no longer be able to do so.

And, from Dow Jones we get a report about the US wheat crop:

Meteorologists are watching out for unusual cold weather systems in the central and southern Plains, DTN Meteorlogix said. Colder temperatures are expected in the northern Delta, although conditions should not be cold enough in the south to impact heading or flowering wheat, the private weather firm said. In the northern US Plains, spring wheat planting was 34 percent complete, compared to 28 percent last year and the average of 40 percent. Snow and rain may help recharge soil moisture in central and eastern areas of the region this week, although cold temperatures could slow seeding and the development of the crop, Meteorlogix said.

Recently, I was quite optimistic that, in respect of the "global food crisis", we were over the worst with Chicago wheat futures dropping 40 percent on reports of record wheat plantings.

But, as a rule of thumb – all other things being equal – the later development, the lower the yield. Planting may be up, but yields may be down, the one cancelling out the other. We are not out of the woods yet, even if price sentiment is still bearish.

What I find utterly bizarre about all this though – although perhaps I should not – is the way agriculture, food supplies and "climate change" have dropped out of British politics. But Cameron has bought into to the AGW myth, so the Conservatives are totally compromised, while the government is more concerned with the revenue-raising potential of environmental taxes than it is with the reality.

With agriculture being an EU "competence", that rules out any discussion on that issue, which means that the minor question of whether in the future we get to eat – or can afford what is on offer – is off-limits to our politicians. It is a funny old world, as a former prime minister once observed.

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Your Community airline

National airlines in the EU no longer exist. They are all "community" airlines now. This comes from the EU commission – or so it tells us - having strengthened aviation relations with Australia.

Unremarkable this may be – and certainly not headline news - the commission is referring to an aviation agreement between the European Union and Australia which allows European airlines to fly between any EU Member State and Australia.

"I welcome this important step in the EU's air transport relations with Australia," warbles Jacques "Wheel" Barrot, vice-president in charge of transport. "This will pave the way for a comprehensive aviation agreement involving cooperation in key aviation areas such as competition, safety and the environment," he adds.

As to the detail, the "horizontal agreement" removes nationality restrictions in the bilateral air services agreements between EU Member States and Australia and therefore allows any EU airline to operate flights between any EU Member State where it is established and Australia.

Crucially though, this agreement acknowledges the existence of the European single market for air transport in the relations between the EU and Australia. It demonstrates, says the commission, that there is an external dimension of the single market for air transport.

And, here comes the rub. The commission also tells us: "The agreement recognises that airlines in the EU are not any longer national airlines but Community airlines".

Does British Airways know this?

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Well, it must be true

This is official, everybody. Neither the EU flag, nor the EU anthem has a legal status in the United Kingdom or in the European Union. How do I know this? From the House of Lords Hansard, where it is written that Lord Malloch-Brown (or some minion thereof) has so replied to Lord Pearson of Rannoch and, separately to Lord Tebbit, who asked only about the flag.

In fact, Lord M-B went further and explained that:

The EUflag and anthem have no legal status in UK or EU law. [my italics]

So that would be that. No legal status, no need to fly the flag or perform the anthem.

Interestingly, Lord M-B (George Soros's once and future best friend) also told us how the two symbols originated and it does not cast a particularly attractive light on the EEC/EC/EU.

The EU flag originated on 25 october 1955 when the Council of Europe Parliamentary Assembly took the unanimous decision to adopt a flag as its emblem. The Council of Europe's Committee of Ministers adopted it as the European flag on 8 December 1955.

In 1985, the European flag was adopted as the official emblem of the then European Communities by the heads of state and government. EU institutions have been using it since 1986.

Similarly, the Council of Europe adopted Beethoven's Ode to Joy as its anthme in 1972. It was adopted by the Heads of State or government of the then European Communities as the official anthem in 1985.

Yes, I know that there are certain grammatical illogicalities there but that is how the answer appeared in Hansard. Sic, as they say. You just can't get the staff these days. Perhaps, Mr Soros can chip in.

More to the point is the extraordinary lack of originality the EEC/EC heads of state and government displayed here. Let's have a look at what the Council of Europe has and then nick it.

The debate goes on without us

An interesting comment on the Margot Wallström blog refers to the formation of a new Dutch movement, "Proud of The Netherlands" (or TON in Dutch), capitalising on the general, if unfocused dissatisfaction with the political classes.

But, if the Dutch voters are not happy, observes the commenter, "the European Union has very little to do with that, since Europe as a subject of political debate seems to have gone back to pre-referendum obscurity."

That, of course, was the objective of operation apathy and, of all the policies the EU ever dreamed up, it is perhaps the only one which has ever succeeded – an one which the British media have embraced with gusto. Rarely has there been so little written about the EU in the British press and that which finds it way into the newspapers is largely of such banal triviality that even Margo is having a field day.

The huge danger though is that the debate goes on without us, most notably centred around the headline issue of the "global food crisis". This has the makings of the perfect beneficial crisis - for the whole of the tranzie class. For the EU, it offers the ideal platform for its next major power grab, led by France and Germany, setting the shape of the EU budget for 2013, when the current funding regime runs out, and thus the shape of the EU itself.

These two countries, performing their classic roles as the "motor of European integration" are already manoeuvring for position in the forthcoming negotiations over the EU budget, the British rebate and the next steps (not) in CAP "reform" – held over until the constitutional Lisbon treaty ratification is in the bag.

Make no mistake, these issues will determine for the next decade or more the continuation of what is still one of the EU's main (and most expensive) policy areas, the CAP. And, since the agricultural policy dominates the EU budget, the resolution will also decide, amongst other things, who gets the lion's share of EU funds (France) and who pays the bills (the UK).

Already, we have seen some ranging shots, first from France and then from Germany.

Then, yesterday, through Deutsche Welle, the commission pitched in, fronting Michael Mann, spokesman for the EU agriculture office in Brussels. Almost gratuitously, he informed the waiting world that, "There is no connection between EU agricultural subsidies and the rise in food prices or the food shortage in developing countries," thereby denying something that no serious commentator had thought to be the case.

Clearly, though, there is method in the madness: up pops
Michael Barnier (pictured) a former French foreign minister, ex-EU commissioner and member of the French governing centre-right UMP party. He launches into a pean in support of the CAP (major beneficiary France).

Barnier rails against "critics of the CAP" who are prepared to use surging food prices and threats of shortages to seek freer trade in agriculture, and then declares that the developing world should draw inspiration from Europe and form self-sufficient regional agricultural blocs funded with a redirection of development aid.

"I think [the CAP] is a good model," he says. "It is a policy that allows us to produce to feed ourselves. We pool our resources to support production. West Africa, East Africa, Latin America and the southern shore of the Mediterranean all need regional common agricultural policies."

He then tells us that "he would not allow" (note the "he") Europe's system of subsidies and barriers to trade to take the blame for "disorder" surrounding the commodities spike in prices and associated unrest in some countries.

"What we are now witnessing in the world is the consequence of too much free-market liberalism," he pronounces. "We can't leave feeding people to the mercy of the market. We need a public policy, a means of intervention and stabilisation."

For those inane (translate: brain-dead) British politicians who have over the decades soberly assured us that, "Europe is going our way", here is the wake-up call. This is state intervention and protectionism all rolled up into one. And with France in the driving seat - holding the EU presidency from 1 July – that thinking is going to be driving the agenda.

The worst of it is that Barnier, like so many others of his ilk, have lost sight of the CAP is really for. In fact, with its origins lost in the mists of time, there are few in either the commission or the member state capitals who understand it. After decades of misplaced and entirely false EU propaganda, they have come to believe that it truly is an instrument for promoting agricultural production and avoiding food shortages.

In fact, as we have pointed out, the policy was not designed to deal with shortages. It was constructed to deal with over-production and surpluses and to mitigate their financial and political consequences. However, at the moment, we are moving from a situation of global food surpluses to one of structural shortages (brought upon largely by the biofuels and renewable energy policies of developed nations - of which more in a later post).

Thus, we find that the EU is promoting a policy designed to deal with agricultural surpluses as the primary tool for dealing with expected food shortages. This is akin to turning on a fire hose to deal with a flooded cellar or, if you prefer, dousing a fire with petrol in order to put it out.

This cannot work – it will not work. It is the wrong tool for the job. At best, it will have no effect (but cost us a great deal of money). At worst, it make things inestimably worse. (I will publish an analysis of the mechanics, when I can get to it, but things are crowding in at the moment.)

The worst of it all though is that, while these are vital policy issues which are going to shape our lives and determine our prosperity, our own political classes and media have taken a vacation. They are avoiding grown-up issues. And, with the debate going on without us, we are about to get shafted (again). We going to be serious losers as a result.

COMMENT THREAD

A vicarious pleasure

Almost entirely ignored by the British media, the Irish constitutional Lisbon treaty referendum campaign is beginning to warm up nicely.

The latest development – as reported by New Zealand TV, which tells you something about our media – is a poll of 500 people by Ireland's Referendum Commission that had 62 percent admitting they did not understand the treaty at all. Only five percent claimed to understand the treaty text "well or very well" – and we are surprised that it is that many.

With lack of understanding – although that may be a coincidence – comes a rising tide of rejectionists. A separate poll over the weekend by Ireland's Sunday Business Post newspaper showed a drop in support for the "yes" camp with 35 percent saying they would back the treaty, down from 43 percent canvassed in February. Those who planned to vote "no" rose to 31 percent from 24 percent previously. "Undecideds" stood at 34 percent, up from 33 percent.

One of the "yes" campaign's concerns is that the treaty could be a focus for issues such as the harmonisation of corporate taxation, but there are other issues building up. Earlier this month - again unreported by the British media – more than 10,000 farmers took part in a protest march in Dublin city centre (pictured), against changes which are expected to follow the treaty ratification which could affect the way trade deals are negotiated by the EU.

High profile in the "no" campaign is Sinn Féin, the only Irish political party to oppose the treaty. Group leader Caoimhghín Ó Caoláin complains that government representatives and others on the "yes" side have been promoting the "scare story" that a rejection of Lisbon will see the Irish "turned into the dunces of the EU class who will be put standing in the corner or, worse still, expelled altogether".

Ó Caoláin said that prime minister Dermot Ahern and minister of state Dick Roche had specialised in this line. Yet, he said, "France and the Netherlands rejected the EU Constitution in 2005. They didn't lose influence or standing in the EU and nor would this State if we did likewise."

He added: "The purpose of a referendum is for the citizens of a member state to freely and democratically decide on the matter at hand. As democrats we must all, including our EU partners, respect the outcome of the referendum. Attempts to bully or bribe us into voting a particular way are undemocratic," then declaring: "The attempts by the political elite in Ireland and in Brussels to deceive the people have gone well beyond rhetoric…".

Amongst the "scare tactics" Ó Caoláin cited came from government MP, Ruairi Quinn, who said, "we have to support the treaty, it is not perfect but it is the only Europe around".

That is false stormed Ó Caoláin: "We have a choice. We can say no to the drive towards the type of Europe envisaged by Jose Barroso who said last July: 'Sometimes I like to compare the EU as a creation to the organisation of Empire. We have the dimensions of Empire'".

Would that we could ever hear such sentiments expressed by a British politician. Sadly though, the Westminster water seems to have rotted their brains and dissolved their spines. We will have to be content with the vicarious pleasure of enjoying the Irish in full flow, while we lament the turpitude of our own representatives.

COMMENT THREAD

News from the seat of the great and the good

For once it is not the IOC, possibly the most corrupt of all the tranzis, that the posting is about. We are back with our old friends, the United Nations, an organization that keeps trying to set itself up as the conscience and law-giver of the world.

First of all, we need to point out that the Head of UN Operations in DR Congo has denied that there had been a cover-up. Normally, when something is denied publicly, we can assume that it must be true. The fact that the BBC (the BBC?) is bringing us this story with a great deal of scepticism gives one furiously to think.

UN troops in DR Congo have been accused of all sorts of matters: rape and extortion of sexual favours in return for food, often from minors; smuggling of gold and ivory; sale of arms and ammunition to the various rebel groups in the country.

Alan Doss, the Head of Operations, said "that he had personally never experienced any political pressure to abort or adjust the findings of any investigation". In any case, he added, all these accusations are old hat.

Just because some troops (believed to be from India and Pakistan) have behaved badly – and Mr Doss went so far as to acknowledge that – it does not mean that we should blame whole countries for that.

We would agree with that, though we hope these arguments will apply when the odd American or British serviceman (or woman) is found to behave badly. The countries in question should not be blamed for this.

However, there is something to be said for blaming the UN. After all, there has been a long string of accusations levelled against UN peacekeepers and little enough has been done to sort the problems out, despite Claudia Rossett's and UN Watch's valiant campaign.

The UN, if it is even to pretend that it sends out peacekeeping troops and does something practical in the world, cannot afford to alienate countries that supply those troops, no matter what the accusations against the troops might be. It is, therefore, easier to try to suppress the investigations or come up with fatuous self-righteousness:

And the head of the United Nations division responsible for investigating corruption and mis-management, Inga Britt Ahlenius, has also defended the UN against the charges.

She said reports she had commissioned which showed a picture of considerable disarray in the organisation - and which have been seen by the BBC - refer to difficulties which are now in the past, and that new managers are in place.

Well, that's all right then. We know our money is safe with the likes of Ms Ahlenius.

Grow your own

What is intensely frustrating writing for this blog is that – far too often – you pick up what looks like an interesting story from one of the news sources but then find it lacks the essential detail needed to put it into context or clarify the issues.

Innocently, you start looking for the missing information in what should take just a few minutes and, before you know it, hours have elapsed and you are none the wiser. A simple little research job becomes a marathon.

Such is the case with the latest, highly entertaining spat which looks like emerging between the EU commission and the USA over the alleged dumping of biodiesel on the European market. This we reported on earlier and, according to diverse sources, the situation has now developed to a point where European biodiesel manufacturers have filed an official complaint to the commission and are expecting it to take action through the WTO.

At the heart of the dispute, as readers will recall, is the US law which applies to American biodiesel producers, which allows them to make the so-called "B99" blend which then qualify for subsidies of approximately €200 per ton.

This blend, which contains as little as 0.1 percent or less of mineral diesel can then be resold in Europe as pure biodiesel, where it is again eligible for European blending subsidy schemes. According to the European Biodiesel Board (which represents 56 companies and associations, responsible for 80 percent of biofuel production in the EU), the process allows US exporters to undercut EU prices – some say by as much as 30 percent. Then, the weak dollar is adding to the US advantage.

The EBB already tried this on last year (also including Argentina), when it complained that, if the distortions were allowed to continue, it could lead to the export of over half a million tons of B99 by the end of 2007.

By then, according to EBB estimates, the European industry would have been producing 10.3 million tons (a figure calculated on 1 July 2007), up from 4.9 million tons in 2006, with Germany in the lead, making 4.4 million tons of the stuff.

However, if we are to take theWall Street Journal at face value, EU officials and industry sources admit US producers are probably safe from any action.

Under WTO rules, retaliation against dumping is allowed only if a foreign subsidy affects 25 percent of overall production. Imports of US biodiesel to Europe, it says, came to about one million tons last year, "or less than 20 percent of the total EU consumption of 6 million tons."

Immediately one can see here a disparity between the EBB's projection of half a million tons, the WSJ claim of one million imports and the overall consumption figure, compared with the EBB's estimate of 10 million tons of European production.

On the face of it, the European producers do not have a case but, what we do not get any sense of the current situation, which might explain why they are taking what seems to be a doomed course of action.

We might get some idea if we could establish what was happening to the industry. For instance, we did report earlier that the German industry was in a state of collapse, owing to the onslaught of the US imports and as a result of changes to the German tax system, which were making biodiesel more expensive than the mineral equivalent.

More recently we get some intimation that things are awry, with news that the US NTR group has lost up to €35 million "after the collapse of a German biodiesel venture, which has filed for insolvency as a result of regulatory and tax changes in that market."

But, as for hard detail on what precisely is going on, this is proving elusive – to put it mildly. EBB figures stop in July last year and go no further. Anything we can find find from other sources (official or unofficial) is contradictory, out of date, or both. Clearly, there are quite serious problems in the European biodiesel industry, but the extent of those problems is unknown.

The ultimate irony here is that the picture that is presented is not a healthy one – more of an industry with acute structural problems that is contracting rapidly. Yet this, along with the (supposedly) emerging ethanol industry, is at the heart of the EU's renewable fuels strategy, and absolutely essential if the EU is going to meet its 10 percent target for 2020.

At the moment though, it does not look as if the EU is anywhere near being able to deliver – indicating at, as so often, we have one of those grandstanding policy initiatives (remember the Lisbon strategy?) that turns out to be empty rhetoric. It looks like the only way we are going to get any biodiesel – as another EU policy bites the dust – is to grow our own.

COMMENT THREAD

The propaganda flies

Nearly two years late, after a run of technical and financial problems, the EU's second (and last) test satellite in the Giove series was launched yesterday, the next step in getting their white elephant Galileo satellite navigation system up and running.

Even then, it is a month behind its revised, revised schedule, the launch actually having been booked for March of this year.

The satellite, officially named Giove-B, was put into orbit by a Soyuz rocket in Kazakhstan and is due to test technologies for Galileo such as a high-precision atomic clock and the triple-channel transmission of navigation signals.

Inevitably, as it soared skywards, its land-based sponsors launched a torrent of rhetoric (aka propaganda) to mark this modest achievement.

Despite the upgrades to the Navstar system planned by the US, which will deliver performance enhancements which will match or exceed Galileo capabilities (if the system meets specifications), the EU is still maintaining that its system will offer superior performance.

Furthermore, transport commissioner Jacques "Wheel" Barrot – in his last days before moving over to "Justice" – is putting it about that the system will be profitable.

To that effect, he cites predictions that the European market for personal navigation devices will be worth €135 billion, failing to mention that these consumer systems contribute nothing to the development or upkeep of the primary systems and, in any event, will be used primarily with the US GPS system.

It was precisely the lack of profitability – and the inability of the commission to offer any credible commercial model to private sector contractors which led them to pull out of the convoluted partnership deal with the commission but, according to the Reuters report, this decisive action – which precipitated a major crisis for the project – is dismissed as "industry doubts" over its (Galileo's) viability.

In fact, industry had no "doubts". It absolutely refused to have anything to do with the project unless it was taxpayer-funded, knowing that it cannot generate enough funds to make it a worthwhile commercial venture.

Nevertheless, Barrot is still twittering about "working on putting its products and services on the market in 2013," – a highly unrealistic date for commissioning the system, that is unlikely to be achieved, especially as the commission is still massively understating the overall costs.

Against the estimate of €3.4 billion, the true cost is likely to be in excess of €5 billion and possibly as high as €10 billion, for which the commission has yet to secure a line of funding. There are, therefore, going to be plenty more dramas and crises before we see the system operation, by which time the upgraded Navstar satellites will be flying, providing a free to end-user signal for all comers.

However, there seems nothing capable of shaking the commission out of its fantasy that Galileo will actually make money, leaving its claims totally within the realm of propaganda – about as credible as the EU project as a whole.

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Complexity upon complexity

Diving in to a subject when blessed with supreme ignorance is very easy and rewarding. Fortified with indignation and innate prejudice, one can so easily come up with solutions that all the other idiots – the so-called "experts" – have missed, and then rail at their inability to see the obvious.

That is something to which this blogger is particuarly prone and is beginning to happen with the "global food crisis" where, as the issue climbs up the political agenda, various pundits – not least this one - are offering their own nostrums to solve the problems.

Invariably, in support of the "global" part of the crisis thesis, authors – including myself - list the areas which have recently suffered food riots, lumping them together as having that one thing in common (either rising food prices or shortages), as if they are part of one global phenomenon.

A more sanguine look at the situation, however, will tell you that, while civil disturbances may be the common feature of these disparate events - ranging geographically from Egypt to Bangladesh and China – the actual causes are many and varied. In many instances, food shortages and prices may be only incidental to the problem, and are most often symptoms of underlying defects or stresses in the system.

Bringing on this reflection is a recent article in the Egyptian Daily Press (via the blog Subalternate), which points to corruption in an already creaking and inefficient food supply system as the proximate cause of the riots.

The article, written by Daanish Faruqi, a Senior Researcher and Editor, at the Ibn Khaldun Center for Development Studies in Cairo, suggests that the problem which triggered the riots stemmed from the corrupt management of government wheat flour subsidies.

What was happening was that, as the international price of wheat rose to record levels last month, heavily subsidised wheat supplied to government-owned bakeries – and used to make cheap country, or baladi bread, at a very marginal profit – was siphoned off into the black market and thence to private bakeries to service communities which could well afford the price rises.

Badly-paid government inspectors were easily – and cheaply – bribed to turn a blind eye, as a result of which the poorer workers in the industrial towns, and their families, found that they could no longer get supplies of cheap bread and were forced to buy higher-priced bread elsewhere. From that, the riots developed and the poor - who could least afford to do so - were forced to bear the brunt of the price rises.

Of course, the increasing price of wheat was a factor in this, but there are other, more complex issues. Not least is the extraordinary structure of the Egyptian farming sector, illustrated in a detailed study. Although the sector, dominated by very small farms, produces nearly half of Egypt's wheat (and could grow considerably more) most of the product is consumed by the farmers themselves or absorbed by the rural communities.

In fact, one half of Egyptian wheat farmers are net buyers, whose wheat purchases (expressed in grain equivalent) exceed their sales. Most of these households are wheat farmers that do not sell wheat at all and supplement their wheat production with purchases of bread and other wheat products.

As a result, the urban poor are fed not by home-grown product but by government-subsidised wheat bought on the international market, while the private sector also relies on imports, but bought on the open market without subsidy. Where corruption abounds, the situation was always going to be fraught.

In this case, it was exacerbated by the fact that Egypt has one of the highest wheat per capita consumption levels in the world and, out of a total consumption of wheat in 2005/2006 estimated at 13.9 million tons, nearly seven million tons was imported, of which the government controlled (i.e., subsidised) wheat was only about 2.5 million tons.

Egypt is also chronically short of storage capacity and keeps minimal strategic stocks, making the country especially vulnerable to sudden upwards shifts in the international grain price.

Thus, it is fair to say that the recent "food riots" were triggered by a combination of local factors, that combination being unique to Egypt. Some elements will undoubtedly exist in other countries, especially the endemic corruption and government intervention.

Examining each of the different areas where there have been civil disturbances, it is undoubtedly the case that multiple (but different) factors will have been at play. Food prices or local shortages may have been only a small factor, or symptomatic of more profound, long-standing structural problems.

All this goes to say that there is no magic wand when it comes to resolving issues in the developing world. Nor can it be said that aid, per se is always (or ever) the answer.

Egypt is a country with a growing economy and record-breaking foreign investment. But it also receives massive US aid. It gets $1.3 billion annually in military aid and, in addition, the U.S. Agency for International Development provided over $25 billion in economic and development assistance to Egypt between 1975 and 2002, a sum now increased to over $28 billion.

Simple nostrums, therefore, are not always the right ones. The "global food crisis" brought on by higher prices and local shortages is an issue, but there are other factors which may be as important, or even more so.

COMMENT THREAD

Vintage Booker

In a way, Booker's column today, featuring Dr Rubinah Chowdhary, director of the small chemical company QuatChem, is a throwback.

It is a vintage EU "red tape" story. It is of a type that we used to do virtually every week in the late 90s, and even went on to do similar weekly columns in The Daily Mail and The Daily Telegraph.

That we do this type of story less often does not mean that the burden of "red tape" is any less – far from it. However, there is a limit to the number of stories we could write about mainly small businesses, usually owned by distinctly unphotogenic middle-aged men suffering the slings and arrows of outrageous Brussels legislation. Eventually, even we tired of writing them.

The great problem was that, with the Tories just as complicit as Labour in accepting this tidal wave of legislation, there was never any political traction which could pull the stories out of their "red-tape ghetto" and propel them into the mainstream. Then as now – as we see with Dr Rubinah Chowdhary, who has had no help from her MPs or MEPs – when issues like this come up, the politicians dive for cover, knowing full well that there is nothing they can do.

Anyhow, the Booker story speaks for itself, although even he can barely touch on the complex ramifications of this issue – and so very few people care that we have to be sparing with the details.

However, what struck me when I spoke to Dr Chowdhary earlier this week was the casual incompetence of the legislators who brought this instrument of torture, the Biocidal Products Directive, into being.

At its heart is a well-meaning – if flawed – intention: that all "biocidal products" (disinfectants, to you and me) should be regulated, all in the interests of the "consumer" of course.

What does the damage is the way they have gone about it, and the blithe, totally unwarranted assumptions that they have made in constructing their new law.

It is at this point, as we dive into the detail that we lose most of our readers. Their eyes glaze over and they more onto the more entertaining fare of Mr Dale's Diary. Who, after all, gives the proverbial fig about the intricacies of the workings of an arcane EU directive, when we can soar to the giddy heights of speculation about the current lead item - Harriet Harman's blog password?

Anyhow, for the sole reader who is still with me, Dr Chowdhary's essential problem is that the Biocidal Products Directive adopts a two-stage approval process, known in the trade as the "Annex 1" and "Annex VI" processes. See what I mean about detail? Who the hell cares?

Ploughing on – talking now only to myself – one finds the process requires, in the first instance, that manufacturers first get their base chemicals "listed" on Annex 1 and only once they are so listed can they be used in formulations – the finished products, comprising many different chemicals – which must then get "market authorisation" under Annex VI (involving yet more costs).

Now, the point is that once a basic chemical is listed in Annex 1, it is theoretically available for use by any formulator. Without some creative fixing, this means that the company which invests the £6 million-odd that it takes to get a chemical listed is giving its competitors a gift. They can then pile into the market, making formulated products based on the listed chemical.

To get over what is known as the "free rider" problem, the geniuses in the commission imagined that all the manufacturers producing specific chemicals would all happily get together to form consortiums, sharing the costs of getting their chemicals listed. That way, the pain was shared and no one got a free ride.

So all these fiercely competitive companies, who would cut their grandmothers' throats for a few percent uplift in market share were all going to ride off into the sunlit uplands, holding hands with each other as they shepherded their chemicals through the regulatory maze? Yeah, right!

Of course, it didn't happen. And the first casualties were minnows like QuatChem. Dr Chowdhary did try to join one of the "listing" consortia, offering to pay costs in proportion to turnover. That went down like a lead balloon and, after a few stiff bills from consortia "legal advisors" – how is it that the lawyers always make money? – she was forced out into the cold.

Now comes the rub. The evil geniuses in the commission went to work. They decided that, although the legislation said that, once a product was listed under Annex 1, it could be used by any formulator, that was not going to be the case.

In order to apply for an Annex VI "market authorisation", formulators would have to submit official technical details of the chemicals used. But those official details are not published. They are in the "dossiers" submitted by applicants who had pursued Annex I listings. To get that information, you had to have a "letter of access", which would be granted only to those who had participated in the original listing process.

At this point, I fully appreciate that I have completely lost anyone who might have come back into the fray and tried to follow the gist of what I am writing. But complexity is what EU law is all about. You can see why the politicians run for cover and why the real political bloggers concern themselves with far more important things like Harriet Harman's blog password.

For the likes of Dr Chowdhary though, what all this incomprehensible guff means is that, unless her company coughs up £6 million or so – or such unspecified lesser sum as the regulators may decide, but haven't yet – in order to duplicate the information that numerous other companies and consortia are also providing, QuatChem is out of business. Outside the listing process, she will not get her "letter of access" and will not be able to sell the product her company makes.

But, like I said – who the hell cares? This is all far too complicated. The bones make for a good little story in the Booker column and, to the delight of the Sunday Telegraph, Dr Chowdhary isn't a middle-aged man, so she photographs well.

Still, it gave us a good post and an opportunity for Tim Worstall to sound off. Next week, we will do another story. Dr Chowdhary will be left with the mess and, in due course, her company will go out of business, like the thousands more before her, and the thousands to follow. Vintage Booker, it may be, but it is not one in which our politicians, or their groupies, are the least bit interested.

Thank you for listening.

COMMENT THREAD

Mail on Sunday

Enjoy!

Compare and contrast with this, this and this. And then, there is this one.

COMMENT THREAD

Some data on legislation

The fortnightly publication, eurofacts, carries an article on the number of laws that originate in Brussels. Unfortunately, there is no link to the article itself, but we can all read the House of Commons research notes from which the figures were taken.

What triggered the eurofacts article was a piece in the monthly magazine Prospect (apparently, some people still read it), which trotted out the well-known line that less than 10 per cent of British legislation originate in Brussels. Actually, even that proportion would be too high, but, in any case, it is completely wrong, as the figures show, for one very good reason. Prospect does not take into account Regulations and Decisions.

The actual research paper shows

… that over the previous seven parliamentary sessions the number of statutory instruments laid under the European Communities Act 1972 represents about nine per cent of the total number of the total number of statutory instruments laid before Parliament during this period.

This, however, is only a relatively small part of the picture.

One part of said picture that the editors of eurofacts do not mention is that numerous statutory instruments laid under other Acts of Parliament also introduce legislation that originated in Brussels though, as the research paper points out:

Although distinct from UK legislation, EC laws become part of UK law by virtue of the European Communities Act 1972. EC law also takes precedence over existing UK law, which must be amended if it is found to conflict with EC law.

Furthermore, though Regulations are directly applicable, "for practical reasons, uniformity is not always possible without additional implementing measures, particularly in the area of agriculture. Thus, many agricultural regulations are in fact implemented in the UK by Statutory Instrument (S.I.)". These would not necessarily be counted as statutory instruments introduced under the 1972 Act.

I am inclined to agree with Vaughne Miller, the author of the research paper, in that “it is impossible to give an accurate answer to the question of how many laws orginate in Brussels”. Well, maybe not impossible, but very difficult, indeed.

The research paper, or Note, to give it its proper title, is extremely helpful and I recommend it to all our readers or, at least, those of them who are genuinely interested in working out the relationship between EU and British legislation.

It explains the three most important forms of EU legislation, how they are produced within the EU and how they are implemented into British law.

Pages 4 to 7 give figures of European legislation from 1980 to 2006, breaking them down according to whether they were passed by the Commission or the Council, with or without the European Parliament and according to what kind of legislation they were.

All the figures are of interest, but the last few years especially so, as we have been told repeatedly that the EU now aims to do less and to do it better.

Thus in 2002 the Commission produced 44 directives, 602 regulations and 610 decisions while the Council produced 149 directives (inc.36 with EP), 164 regulations (inc.24 with EP) and 57 decisions (inc.6 with EP). That makes a total of 193 directives, 766 regulations and 667 decisions, that is a grand total of 1,626 pieces of legislation.

The numbers in 2003 and 2004 went down, then started climbing again in 2005. In 2006, though they shot up again. The Commission produced 76 directives, 1,795 regulations and 781 decisions; the Council obliged with 101 directives (inc.38 with EP), 238 regulations (inc.43 with EP) and 264 decisions (inc.21 with EP). That gives us a total of 177 directives, 2,033 regulations and 1,045 decisions or, in other words, 3,255 pieces of legislation, most of which have not been implemented into British law yet and will not be for some time to come.

One of the things we must remember is that there is always a time lag between legislation passed in the EU, which in itself is a process that takes many years, disregarding such minor matters as elections, and their appearance in the British parliament or just in British life. By that time it is too late as the legislation is a done deal.

The paper does discuss the question of what proportion of British legislation comes from the EU and comes up with fudged answers, either because they are from departments that do not come under EU competence or come under it only partially or because the civil servants who write those replies play with words.

Lord Pearson of Rannoch asked in January 2006

Further to the Written Answer by Lord Triesman on 14 November (WA 117), why they will not provide a full estimate of the United Kingdom legislation which originated in the European Union since 1998, bearing in mind that the GermanFederal Department of Justice has estimated that 80 per cent. of German laws or regulations were so made over that period.

The response was a masterpiece of obfuscation:

Many EU regulations have a purely technical or temporary effect. We estimate that around 50 per cent. of UK legislation with a significant economic impact has its origins in EU legislation. OECD analysis of regulation in Europe yields similar results. In 2002, they estimated that 40 per cent. of all new UK regulations with a significant impact on business were derived from Community legislation. Despite reports that 80 per cent. of German regulation emanates from the EU, the German Government estimates that the proportion is about 50 per cent.

Who calculates what is a significant impact? Read the whole paper. It is very useful and instructive.

The real crisis has yet to come (Part 2)

Part 2 is now up on EU Referendum 2. This looks at the effect of the EU's biofuels quota on the global food supply, with the conclusion that it is unrealisable, without creating massive food shortages and worse.

This piece has taken me the best part of today to write – read it or you die! And, while you are about it, buy the Mail on Sunday tomorrow (with your Sunday Telegraph of course).

COMMENT THREAD

Wasted opportunity

Most of us would agree that Serbia has not had a particularly good press in the last five to ten years in the West. Before that, of course, the European Union and most of the political establishment supported Slobodan’s Milosevic to keep that federation together. Some people have not quite recovered from that point of view but, by and large, any support has been tepid to lukewarm.

So I was not surprised when I heard that the Foreign Minister, Vuk Jeremic, was travelling to several countries in the EU, trying to present Serbia’s case to politicians and the media. In short, I assumed that this was going to be a charm offensive and was pleasantly surprised when I found out that he was very interested in speaking to bloggers in several countries.

The organizers of the visit suggested that I spend some time interviewing him on behalf of EUReferendum. Great, I thought, and prepared meticulously by reading all the stories as they came out meticulously and looking up Mr Jeremic’s biography. (And very interesting it is, too, particularly the comment about him coming from “a long lineage of Pozderac family considered one of the most influential political families in Bosnia and Herzegovina during the communist rule”.)

On the whole, Mr Jeremic has not distinguished himself by particularly adroit diplomacy, as we pointed out soon after Kosovo’s declaration of independence. Still, the man is young and wants to remain in his position, we must assume, after the May 11 election.

I was wrong. Mr Jeremic, though the Foreign Minister, seems to have only a very slight understanding of diplomacy. He met with foreign ministers and tried to persuade them to be nice to and about Serbia in their forthcoming Council meeting but diplomacy means a good deal more than just formal discussions.

Mr Jeremic was due to appear on Newsnight on Friday evening, to give interviews to the Financial Times, another BBC programme, EUReferendum and, possibly, one or two other outlets. The problem was that other stories intervened and Newsnight decided, possibly not very courteously, decided to devote the programme to the closure of the Grangemouth oil refinery and the looming strike.

One could argue that Newsnight does a little too much of this: both discarding potential interviewees and concentrating for too long on just one story. None of that is relevant. The thing to do at such a time is to double the charm offensive with the other outlets you have had an interview arranged with and say yah-boo to Newsnight.

Sadly, Mr Jeremic has all of this to learn and the way things are going in his country he may not get the chance. Instead of redoubling the charm offensive he flew into a rage and cancelled all interviews. All attempts to make him change his mind failed. A wasted opportunity to present Serbia’s point of view and to explain one or two matters, such as his reaction to the softening of the Dutch stance on Serbia and the EU signing an SAA.

Other questions from me would have been about his predictions for the May 11 election and, above all, his opinion on what Serbia would be getting out of its agreement with Russia.

The latest information we have is that Russia is beginning to bully Serbia already, demanding that the deal signed by President Tadic and Prime Minister Kostunica earlier this year be finalized, despite the fact that the present governments is merely a caretaker one.

Critics charge that the caretaker government has no authority to finalize the deal, under which Russia will allegedly acquire NIS for a fraction of its market value in repayment for its political support over Kosova. Defense Minister Dragan Sutanovac, who belongs to Tadic's Democratic Party and is an outspoken critic of Kostunica, said on April 24 that he will block any attempts to finalize the deal before the May 11 Serbian general elections. He also wants the agreement renegotiated in any event. Kostunica argues that the deal is "too important" to be held up any longer. Several high-ranking Russian officials recently called on Serbia to ratify the agreement.

These are all important matters and the Serbian Foreign Minister’s job, if he is travelling at the Serbian people’s expense, is to try to get across his country’s point of view. Well, he has wasted his opportunity.

The real crisis has yet to come (Part 1)

I started last night writing a quick round-up of the "food crisis", only to find that, like topsy, it just growed. I have, therefore, published it on EU Referendum 2.

Reviewing the piece and doing more work on it this morning, I have decided to break it into two parts, withdrawing part of the original which I intend to re-publish later as a stand-alone Part 2.

The first part deals with the current "food crisis", which concludes that, with additional planting and the expectation of a record wheat harvest for this coming year, the worst is over, in the short-term. Wheat futures have already dropped 40 percent from their February peak, in anticipation of a healthy surplus, and the decline may continue.

In the second part, however, I deal with the medium to long-term, looking in detail at the biofuel issues. Here, it beomes apparent that the rush to green fuels - if allowed to continue - will outstrip the capacity of the global agricultural system, and precipitate massive price-hikes and food shortages.

Worst still, the EU's case for biofuels seems to rely on back-of-the-envelope calculations, and accounting which has more in common with Enron than anything that might be considered worthy of a government. Given the probable effect of its 10 percent biofuels quota, this could prove - despite the competition - one of the worst policy blunders the EU has ever made.

COMMENT THREAD

A new era of incompetence

What really offends about the way our hybrid system of government works (not) is the casual way policy is now formulated, most often it seems on the hoof, without any idea of the implications and consequences.

It was that which characterised the March 2007 European Council in Brussels, where Tony Blair – in one of his last acts as prime minister – so blithely committed the UK to the EU biofuel and renewable energy quotas, all as part of some mad bidding process to allow the EU leaders to appear "greener than thou".

Only later did we get confirmation that the government had already been warned that the renewable energy quota was "unachievable" (not that we needed it), while the biofuels target, from the very start, was obviously a non-starter.

The obvious problem with the biofuels quota was to meet the demand using wheat (the preferred crop) would require more land than is currently available in the UK, on which basis it must have been (or should have been) evident to our policy-makers that a goodly proportion of our biofuels requirement would have to be imported.

Now, even though this might seem to be blindingly obvious, it appears that our gifted policy-makers – and certainly not the grandstanding Mr Blair – ever gave it a thought.

Courtesy of The Guardian, we discover that not only is Britain is facing a big shortage of specialist ships needed to carry biofuels, shipping companies are unwilling to invest in the extra 400 suitable vessels needed, "unless politicians give clear guidelines about the future of renewable fuels."

This comes from Richard Sadler, chief executive of Lloyd's Register, who says, "There is so much uncertainty that makes it very difficult for a shipowner to invest in a sector with so much political risk."

Furthermore, this is not just a local problem. Sadler is saying that the world fleet might be "unable to cope" unless there is a 20 percent increase in the number of ships.

This sort of uncertainty is by no means confined to this sector, witness the debacle over MRI scanners, where the EU produced totally unrealistic legislation, only to have to delay its implementation while they had second thoughts about the consequences of their actions.

So it is with biofuels, and much else, in this instance with energy minister Malcome Wicks voicing open reservations about the policy, saying, "It would be ridiculous if we fill up our cars with 5-10 percent biofuels if the consequences are that somewhere else in the world people are not being fed … We need to have a second look [at the EU's biofuels target]. I think we will."

In the dim and distant, rose-tinted past, we used to have Royal Commissions and other learned bodies which deliberated, sometimes for years, on specific issues and the implications of action, before issuing weighty recommendations which then formed the basis of legislation.

All this seems to have gone by the board, leaving one with the impression (certainty?) that our leaders do not have the first idea of what they are doing. And, while our politicians are only caught out so comprehensively only rarely, so badly is the legislative process tainted that there can be very little confidence left in their capabilities.

At a time when we have such great need of good government, we seem to moving into new era of incompetence.

COMMENT THREAD

The women of Basra

A propos the report by Sean Rayment which we examined in our previous post, The Times today offers an account of life in the newly liberated Basra, written by a female British journalist – on the spot in Basra. That, in itself, is a measure of the success of the Iraqi Army operation. For a long time now ...

Continued on Defence of the Realm

Let's have 27 common foreign policies

Would it not be a good idea to have a common European foreign policy? You know it makes sense. Think of all those times that Europeans would like to play a strong part in world affairs and … well … never quite manage it because the world and its affairs are not terribly interested or interested only in some things said by Europeans. So, if they all combine and speak with one voice, all those problems will disappear.

Europe, as the European Union is sometimes called, the largest single entity of unknown kind, the largest single market with a GDP that sometimes equals and sometimes surpasses that of the United States, depending on who is doing the counting, would play a political role that was commensurate with its economic strength.

Or something like that.

What this argument manages to leave out is the very important question, mentioned on this blog more times than we can comfortably link to in a single posting, of what the Single European Voice is going to say.

This problems has become particularly important since the entry of the various post-Communist (sometimes the “post” bit is a little elliptical) states, whose attitude to the world and its various powers are somewhat different from that of France and Germany.

There is the case of Russia. Edward Lucas, author of “The New Cold War”, thinks that we need a strong, united European Union because that is the only way we can stare Russia down in her most bullying mood. But would we?

It is entirely possible that the foreign ministries of Finland and Estonia have been reading Mr Lucas’s book, as they have come up with a proposal that he would most likely agree with.

They have called for a common EU policy on Russia but, one must assume, they would prefer their own view to be the one that prevails.

A strong EU is in the interests of both Estonia and Finland, Alexander Stubb, visiting Finnish Foreign Minister, told reporters after meeting with his Estonian counterpart Urmas Paet in Tallinn.

If the EU wants to be an authorized power on the international stage, it should have a common foreign policy especially on ties with Russia, Stubb said.

EU member states' policy towards Russia may vary due to their own situations, but such policy should be in conformity with the EU's collective approach, he said.

Mr Stubb explained in a little more detail what he had in mind:

Finland's Minister for Foreign Affairs Alexander Stubb (Nat. Coalition Party) says that his personal goal is to link Russia more closely to the European system. He does not believe that Russia will ever become a member of the European Union, because he feels that two great powers will not fit into one union.

"I believe in a free trade area, in which goods would move between Russia and the EU without tariffs. The closer the relations that are established, the more solid the dependency", Stubb emphasised at a lunch on Tuesday of the Association of Political Journalists.

While we go along with the understanding that Russia is not really a serious candidate for European Union membership, a view that is quite clearly shared by the Russian authorities (most people in that country have not really heard of the EU), we cannot help wondering why Mr Stubb thinks that a strong common foreign policy will work on creating a free trade area.

Furthermore, even if he cannot recall what it was like to have the Soviet Union on the doorstep, many others in Finland can and some recent developments in Russia have brought those memories back.

If he finds some of these matters hard to work out, he might like to consult his Estonian colleagues who are moving up to an anniversary of the saga of the bronze soldier and, no doubt, remember the Russian boycott imposed at the time as part of President Putin’s bullying tactics that, in the end, got him nowhere.

Meanwhile, what is that common foreign policy towards Russia to be? Perhaps each member state could produce one of its own. Then we could have 27 common foreign policies. Well, at least. I am sure some countries will be able to produce several.

The wheels are coming off …

"The wheels are coming off the eurozone economy," says David Owen, an economist at Dresdner Kleinwort – as retailed by Ambrose Evans-Pritchard in The Daily Telegraph today.

This is good news for Eurosceptics – if it is true – who (rightly) detest the euro as a political project designed primarily to promote the cause of European political integration. But it is also bad news for all of us. No one – or certainly not mere mortals like ourselves – benefits from economic disruption.

Furthermore, since Ambrose is always predicting the collapse of the euro (he is right, of course – it is just a matter of "when" rather than "whether"), many caution that his words should be taken with the proverbial pinch of salt.

Nevertheless, the piece starts with a core of indisputable fact, which makes for sober reading. The euro has suffered its sharpest drop in four years, writes Ambrose, "as a blizzard of weak data from Germany, Belgium, France, and Spain spark fears that economic contagion may be spreading from the Anglo-Saxon world to Europe."

He picks up on the continuing economic trauma in Spain, telling us that the Spanish business federation warned that it unemployment will rise by 500,000 by the summer unless the government takes "valiant measures" to offset the housing and construction crash.

We also learn that the country's credit group ASNEF is reporting that the volume of personal loans had dropped 30 percent in the first quarter, the worst performance since the country's financial crisis in the early 1990s.

Troubling data in Spain has been building for months, Ambrose then writes (which we have been following) but investors have tended to focus on Germany as a proxy for the whole eurozone.

What has changed is that there has been a shock drop in Germany's IFO business confidence index yesterday, caused an abrupt change of mood in the currency markets. The euro plunged to $1.5646 against the dollar, down from its all-time peak of $1.6018 on Tuesday. It is still 27 percent above its level two years ago.

The German data follows a slide in the Belgian index, which captures crucial port activity in Antwerp. The headline confidence figure fell to -7.4 in April from plus 1.2 in March, with a dramatic slump in the export order books to -14. This is flashing near-recession warnings, Ambrose tells us.

It is then that he quotes David Owen, his economist at Dresdner Kleinwort, saying that Europe would soon be engulfed by the twin effects of a "collapse in export volumes" and a slow motion credit squeeze, offering our opening quote: "The wheels are coming off the eurozone economy."

What is then interesting is that Ambrose retails a warning from BNP Paribas that the "decoupling story" was no longer credible. This is the fiction that somehow the European economy works to rules different from that governing the US and global economies and is thus insulated from the financial turnoil afflicting the rest of us.

BNP Paribas is pretty brutal on this score, puncturing the hubris with the blunt statement that: "We see Europe in the early stage of a credit crunch, and if we are right credit supply will shut down."

On cure, we find that, "Key governors of the European Central Bank began to back away from their hawkish stance of recent weeks, clearly disturbed by the market perception that they are mulling a rate rise to choke off price rises. Inflation has reached a post-EMU high of 3.6 percent on surging oil and food costs."

Then there is Eric Chaney, Europe strategist at Morgan Stanley, who says the April survey by French corporate treasurers was "alarming", pointing to distress in the financial system. "Let's call a spade a spade, some sort of credit crunch is unfolding in the funding of French companies," he says.

Ambrose elaborates on his views on his blog, eliciting a number of informed (and some less-informed) comments, which make it clear that we are in for some interesting times.

But whether we are any closer to a denoument is, as always, anyone's guess.

COMMENT THREAD

Wasting their time …

The EU commission has unveiled a cunning plan to bring more coverage of EU affairs to television, radio and multimedia platforms.

It will bribe encourage audiovisual media professionals to create and take part in European audiovisual networks and has proposed a network of TV stations to complement the network of radio stations launched on 1 April this year.

The commission is also to increase the amount of raw audiovisual material which it already provides free of charge to audiovisual media professionals and will increase its own production of videos to illustrate or explain EU policies.

This is on the basis that TV and radio channels remain the preferred medium of information for most people so that, if the commission wants to reach a larger audience, it must go down this route.

However, as always, it is wasting its time – and our money. Although, in Eurobarometer surveys financed by the commission, "EU citizens" express a desire to be better informed about EU issues, the fact is that there are plenty of information sources available – not least this blog.

The main reason why people are ill-informed is because they do not want to be informed, or cannot be bothered to find out – not least because EU affairs are so damn boring. Furthermore, even if they could care less, their national media establishments are much more interested in domestic issues.

Nothing the commission can do will change all this, but it does mean that there will be a lot more money sloshing around, some of it to find its way into the pockets of that band of journalists who will push the EU line whenever they have the opportunity.

COMMENT THREAD

A'boycotting we will go

Boycotting goods is all the rage. The Chinese are doing it to the French (and that deserves a separate posting) and the Macedonians are doing it to the Greeks. News of this comes from Transitions Online, whose journalist, Ljubica Grozdanovska, may know a great deal about the Balkans but seems to be a bit hazy on the United States.

When the French government refused to support the American-led invasion of Iraq in 2003, restaurants in Washington replaced “French fries” with “freedom fries” and the Gallic kiss became taboo. Patriots poured vintage champagne down the drain to show their distaste for the F-word.

Americans may now be eating crow with their fried potatoes and sparkling wines.

I’ve got news for the lady, which she and some other Europeans might like to think about. While French fries have remained available in the States, often called freedom fries, the alternative, known as home fries, are absolutely delicious. Even more to the point, Californian wine is not something to sneer at. Its consistently high quality is pushing French wines out of the world market, boycott or no boycott.

Getting back to Macedonia. As we have written before, Greece will not agree to the country becoming part of either NATO or the EU unless it changes its name, the present one, fully accepted by all except the EU under Greek pressure, apparently indicating that Macedonia may have territorial demands on northern Greece. Macedonia denies this and, to be fair, has, rather unusually for a Balkan country, never given the slightest indication of those demands.

Discussion of Macedonian membership of NATO – not necessarily something to be wished for – was postponed at the Bucharest summit because of Greek objections and the issue was reduced in importance, what with the kerfuffle over Ukraine and Georgia.

The Greeks are now trying bribery, as Macedonia Online reports.

"Greece will increase the financial support of its northern neighbor and will remove the visa regime if Skopje distances itself from the stubborn position for its name" says Greek Foreign Minister Dora Bakoyannis in todays interview for 'Apogevmatini'.

"Athens will invest 75 million euros for the highway infrastructure of Corridor 10, which connects the neighboring country with Greece and EU, will invest in business and will gradually remove the visas". says Bakoyannis.

Well, how nice. And who will be providing those 75 million euros, one wonders, given the amount of money Greece receives from the European Union in the form of one subsidy or another. A case of Greeks bearing other people’s gifts, methinks.

Macedonian President, Branko Crvenkovski has complained to UN SecGen Ban Ki-Moon, about Greece blocking his country’s application to NATO because of the 17-year long dispute over the name.

Don’t know about the UN SecGen but the NATO SecGen, Jaap de Hoop Scheffer, who has gone to Skopje, is staying firmly on the fence, urging all to resolve the name dispute as soon as possible.

Meanwhile, the Macedonians themselves are taking matters into their own hands. As Ms Grozdanovska says:

But Macedonians appear to be using a similar show of altruism against a neighbor by removing “Greek” from their salads and gyros, and dropping olives from their diet.“Don’t buy Greek ouzo.” “Don’t travel to Greece.” “Boycott all Greek products.” “Protest against Greece’s behavior.” “Forget Greek olives.” “Don’t eat Greek gyros.”

These are just a few of the messages and public statements floating around Macedonia since Greece blocked its neighbor’s entry to NATO at the alliance’s recent Bucharest Summit. Leaders of the 26-member NATO alliance agreed on 4 April to invite Croatia and Albania to join, but bowed to Greek opposition to Macedonia’s constitutional name (Republic of Macedonia) after several compromises failed.

There are a few setbacks to the Macedonian boycott policy of the kind that the Americans might not have experienced when they were filled with righteous anger against the people they described as “cheese-paring surrender monkeys”.

But the name controversy may have deeper implications for the citizens of Macedonia, an EU candidate country with a 36-percent unemployment rate and economic output that is 27 percent of the EU average. Since the trade embargo ended in 1995, Greece has accounted for a growing portion of Macedonia’s investment and trade.

In recent years, thousands of Greeks have crossed the border to visit Macedonian towns such as Bitola, Dojran, Gevgelija and Strumica, drawn by lower prices at restaurants, shops and markets.

Visiting Greeks also have flocked to the new casinos built in the near border area. The growth in commerce has boosted cooperation at a very human level – people on both sides of the border are learning the other country’s language.

Strains are now showing in these relationships, with commerce in these border towns slowing to a trickle, according to Greek and Macedonian media reports.

Donco Tanevski, president of the Hotel Association of Macedonia, said 90 percent of Greeks planning to visit Ohrid for May Day had cancelled their reservations. Typically, some 2,000 Greek tourists show up in the lakeside town for the 1 May holiday, Tanevski said.

Then again, this sort of low-level commercial interchange is likely to revive. After all, the Greeks do have to go somewhere to gamble.