MUNICH 1938

Diplomatic negotiations can only lead to a durable peace, if the negotiators have a genuine wish to leave the other side with something worthwhile. Hitler had no such intention at Munich, but Chamberlain did not see that. 

“Munich 1938, Appeasement and World War II”, by David Faber, describes the negotiations that led to the dismemberment of Czechoslovakia in 1938.

It is true that Czechoslovakia was an “unstable unit”, created by the Versailles Treaty, by which 7.5 million Czechs held political sway over 3.5million Sudeten Germans, 2.5million Slovaks, 0.5million Hungarians, and 80,000 Poles.  The supposed principle of “national self determination” was bound to be difficult to apply in such a setting.

As the crisis developed in 1938,  and Hitler’s demands escalated, a number of things became clear. The French were not really willing to stand by their military guarantee to Czechoslovakia, unless forcefully backed up by the British. The British were tepid and unsure, and cultivated the illusion that Hitler was someone they could do business with.

The Czechs were prepared, as the pressure from their “friends” mounted, to concede almost any demand of their German speaking population, but the concessions would never be enough, because Hitler was determined to visibly humiliate the Czechs.

Even before Chamberlain met Hitler at Bad Godesburg, and later at Munich, the Czechs had already agreed that the Sudetenland could effectively secede from Czechoslovakia. The arguments between Chamberlain and Hitler were about timing. 

It is interesting to observe that Czechoslovakia’s immediate neighbours, including Poland which would itself  fall victim to Hitler itself in 1939, were happy to cooperate with him in the dismemberment of Czechoslovakia.

In these circumstances, the French and the British did not have a strong logistical basis for any military defence of the Czechs. And they were in the same weak position when they eventually went to war over Poland in 1939.

In retrospect, it seems that Chamberlains biggest mistake was in February 1938, when he fobbed off an initiative by President Roosevelt to involve himself directly in the Central European situation.

As later transpired, it was only when US industrial power was deployed, along with the vast manpower resources of the Soviet Union, that Germany could be defeated.

Chamberlain was under the illusion that Hitler could be contained by British and French Empires acting on their own. Now it is easy to see  that he was wrong, but not so easy at the time.

He was also unable to see that he was not just dealing with a “normal” dictator in Adolf Hitler, but with a pathological gambler, to whom the conventional rules of human behaviour did not apply. 

WHAT DOES BRITAIN WANT FROM AN EU RENEGOTIATION, AND WHAT TERMS WOULD IT GET IF IT LEFT?

I took part recently in London in an exercise organised by the think tank, Open Europe. 

It first examined the issues that might arise in a possible renegotiation of the United Kingdom’s terms of membership of the European Union. 

It then went on to look at the terms the UK might get if, in a referendum on the results of such a renegotiation, voters in the UK had decided to withdraw from the EU. 

At the moment, these eventualities are only likely to arise if the Conservative Party gets an overall majority in Parliament. This could happen after the 2015 General Election, and, if not then, after some subsequent General Election, unless or until the Conservative Party changes its policy.  So this will be a live issue for many years to come.

The issue could also be precipitated if the EU itself has to revise its Treaties. A Treaty revision would require the consent of the UK. Any UK government will be under pressure to use that Treaty negotiation to press the UK’s renegotiation agenda. This is partly why many EU leaders are unwilling to attempt any further Treaty change. Thus internal UK politics could become a paralysing force in the politics of the entire European Union.

The only place in the EU where the issues that might arise from a UK renegotiation or withdrawal are being debated at all is in the UK itself. That debate is narrowly focussed on UK concerns, and takes little account of the effect on the 27 other member states of the EU, including Ireland, of the various UK renegotiation/withdrawal scenarios.

Other EU leaders have taken a vow of silence on the internal UK debate, even though it is one in which their own electorates have a vital interest. Understandably, they do not want to aggravate UK public opinion, which might claim to resent “foreign” intervention in what would be construed, inaccurately, as a purely “domestic” UK matter. 

The downside of this approach is that UK public and media opinion may develop unrealistic expectations of the terms it could achieve in a renegotiation, leading to disappointment, and a consequent increase in support for outright withdrawal.  In fact, EU countries are already so integrated with one another, that what the UK is likely to ask for, is a domestic issue for all members. 

The UK needs to take account of opinion in other EU states. The consent of a majority of the other EU states will be needed if

+  a renegotiation is to be concluded to the satisfaction of the UK, or+  if the UK is to withdraw from the EU, a majority among the other EU states would also be needed to agree the  terms of a new EU relationship with the UK, to allow, for example,  continuing privileged access for the UK to the EU Single Market (for example for financial services).

Neither of these can be taken for granted. 

The first question the UK should ask itself is whether it is in the national interest of the UK that the EU itself remains a viable and confident institution, which can make decisions with reasonable speed, after the various scenarios have been played out.  

The precedent of an EU member state getting preferential terms, because of a threat withdrawal from the EU, could corrode mutual confidence among the remaining 27 members.   One has the sense that some in the UK do not care about this, others have not thought about it, and some others would actually be happy if the whole process tore the EU apart.  

My own sense is that, whether it is a member itself or not, the UK has a vested interest in the EU remaining effective. An effective EU keeps Europe at peace, and of creates a single open market that is good for British trade.  Britain would not sell as much in a Europe that had reverted to 27 different markets with 27 different currencies. An EU that could not make decisions because it was paralysed by fear about who might be next to follow the UK out the door, would not be good for Britain.

Furthermore some of the likely UK proposals  in a renegotiation would undermine the effectiveness and stability of the EU in an even more direct way.

One such proposal is a so called “Red Card”, whereby a minority of National parliaments could veto an EU law, even though that law

+ had already been passed by majority in both the Council of Ministers, where all states, including the UK, would have had a vote, and
+ has been passed by a majority in the European Parliament, where all states including the UK have directly elected MEPs. 

This idea of a Red Card  has won support from the British Foreign Secretary and even from some in the Labour Party.

The Fresh Start Group of 100 Conservative MPs has gone further, and said that an unspecified group of national parliaments should be able to repeal existing EU laws, bypassing the European Parliament and the EUs existing decision making structures.

This “Red Card” would paralyse EU decision making, in ways that might not suit the UK itself. It could also be used by others to block the very measures that the UK itself wants, like the liberalisation of the Services market in the EU.

A provision whereby shifting majorities among national parliaments could by pass the EU’s democratic decision making procedures, and unilaterally repeal settled EU laws and agreements, would undermine the stability of the EU Single market. It would become an instrument for reopening  long settled compromises on which the EU Single market is based, and making them subject populist pressures on an ongoing basis.

Both of these proposals would require a Treaty change, because the role of national parliaments in the EU process is defined in a Protocol to the existing Treaties, and a Protocol has the same legal status as an article in the Treaties themselves. To change the Protocol in question, every one of the 28 member states and the European Parliament would have to agree. 

Another likely UK demand would be to opt out of having the European Court of Justice as the final adjudicator on disputes concerning the meaning of EU agreements on the fight against crime. The UK is likely to demand that these issues be adjudicated instead in national courts, which could mean 28 different interpretations, and many new loopholes through which well advised criminals could evade justice.

If the UK electorate is not satisfied with the terms offered to keep the UK in the EU, and votes that the UK should withdraw from the EU, a new negotiation would start. The purpose of this would be to decide on the terms on which the UK, outside the EU, would have access to the EU for its people, goods, and services. This second negotiation would have to be concluded within two years.

It would be conducted under article 50 of the EU Treaty, which requires a qualified majority in the European Council and a majority in the European Parliament to agree the terms to be granted to a country withdrawing from the EU. It is likely that such terms would include a continuing financial contribution to the EU budget, in return for UK access to the EU single market.

In the event no agreement being reached within the two year deadline, the UK would be out of the EU, and automatically subject to restrictions and tariffs on its exports to EU countries of goods and services. Customs posts would have to be reintroduced on the border in Ireland and at cross channel ports.

Furthermore, if the UK, then outside the EU, wanted to restrict immigration from the EU, it would have to introduce passport controls on the Irish border, a measure that would undermine the work done to promote peace and reconciliation.

DEATH OF FORMER COUNCILLOR MARY SYLVER

I wish to pay tribute to the life of public service of Mary Sylver, of Piercetown, Dunboyne, who served for many years as a Fine Gael member of Meath County Council, representing the then Dunshaughlin Electoral Area, which encompassed all of South East Meath, including Ratoath and Ashbourne.

Mary was a woman of resolute convictions.  She had firm views of political issues, but argued for them in a considerate and moderate way. 

She had a vision for the development of her locality, and was, I believe, the first public representative of any party to make the case for the reopening of the rail service to Dunboyne, which now is in place, and provides a platform for the economic development of Dunboyne, linking it to the financial and technological hub in Dublin.

She was married to the late Michael Sylver, a prominent greyhound trainer.

She had wide cultural interests, was accomplished in flower arrangement, and worked for people with disabilities, after her retirement from politics.

She will be remembered locally a particularly kind neighbour, who cared for people who had troubles, and called in to see people who might be isolated in any way. I was proud to count her among my closest friends and allies during my political career.

Tribute by former Taoiseach,  John Bruton

WORLD TRADE DEAL IN BALI IS A BIG BOOST TO CONFIDENCE

Globalisation has meant that, no matter where we live in the world, we are liable to be affected by what happens very far away.

An environmental disaster, a financial panic, or a disease outbreak, in one part of the world can quickly affect people on the other side of the globe. No country, no matter how big, prosperous, or well armed is really an island any more.

The world, and its problems, were easier to manage (perhaps unfairly), when a small number of countries had to give their consent to any global agreement or rule.

This was especially the case during the century when most of the world’s surface was controlled by a few colonial empires.

It remained the case, when most of the major international organisations were founded, in the aftermath of the Second World War. Indeed that War, and a desire to ensure it was not repeated, forced nations to go beyond national sovereignty, and find new institutions to allow joint actions on a global scale.  Initially these institutions worked  easily enough because a cartel of big countries, the ones with permanent seats and vetoes on the UN Security Council, could both set, and decide, the issues on the agenda.

That world has gone.

The number of countries enjoying legal sovereign status has increased dramatically, so unanimous agreements are harder to achieve, The number who can  say “no”, on questions to which everyone else is (however reluctantly) is saying “yes”, has increased out of recognition.

Meanwhile, economic power, and thus the ability to pay for military power, is shifting. 

The world may soon have several policemen, with conflicting mandates, rather than a single (American) policeman.

China is testing the old order in the East China Sea at the moment.  This new multi polar order may seem fairer, but it will not make the world safer. 

At times, it seems as if it had become impossible to agree anything on a global scale. 

The bleakest moment was when the Climate Change talks collapsed in Copenhagen. The invasion of Iraq was another such dispiriting moment.

Now, with little notice, signs of hope have  appeared.

An interim deal with Iran on its nuclear programme has been agreed, although Israel (which officially has no nuclear capacity but actually in the only nuclear weapons power in the Middle East) is not happy.

And then, out of the blue it seemed to many, a world trade deal was concluded, by the 160 member WTO, in Bali last weekend!

During my time as EU Ambassador in Washington, I saw the draining away of hope that a world trade deal would ever happen. This was soul destroying, because the WTO seemed until then to be the only global organisation which really worked, and whose  disciplines were uncomplainingly incorporated by nations into their domestic law.

Now a deal has been put together  in Bali which will reduce the cost of trade by  10% to 15 %, by simplifying and standardising custom procedures. Limits will be placed on export subsidies.

The WTO disputes resolution procedures (a sort of World Trade court) will see their credibility restored by this breakthrough, because the organisation behind them, has shown it can actually make decisions, after all. That was a good week end’s work.

This will also help restore business confidence more generally , in ways that will have little to do with the ostensible content of the the deal in Bali.

BIG POTENTIAL FOR FINANCIAL SERVICES GROWTH IN THE MIDDLE EAST

I was a keynote speaker at the Middle East Banking Forum in Dubai this week, the first such event organised  by the UAE Banking federation. The forum was addressed by the Governor of the Central Bank, Sultan As Suawaidi.

I believe this part of the world has many opportunities for people with good financial knowledge.

A number of interesting points came up at the Forum

Only 20% of the overall population and 12% of women have bank accounts so there is great scope for expansion. Globally only 11% of Muslims have a bank account. Having a bank account enables people to use their money more efficiently, and is a way of escaping poverty.

Banking is growing in other parts of the world ,while it is contracting in Europe.

Of the top 1000 banks in the world in 1990, 444 were in Europe and 58 in the Middle East. Now, in 2013, only 283 European banks are in the top 1000, and 92 are in the Middle East. 257 of the top 1000 banks are now in Asia as against only 104 in 1990.

CAN WE LEARN FROM ISLAMIC BANKING ? ......  QUESTIONS ABOUT RATING AGENCIES

Islamic banking is growing at 13% per year (from a very low base) whereas conventional banking is growing at 4%. It takes a more patient approach to seeking a return on its investment, which insulates it from some of the recent errors of the Western banking model.

The role of Rating Agencies was strongly questioned.

Although they are relied upon to provide totally objective information, and are key players in deciding who can borrow and at what rates, Rating Agencies failed to see the crisis coming in US and European Banks.

One participant suggested that it was wrong that Rating Agencies seek to make a profit on their work because this creates a potential for conflicts of interest, and that they should operate on a non profit basis. A representative of a rating agency replied that the IMF is a non profit organisation and it did not foresee the crisis either!

THE FUTURE OF BANKING

I said that the banking industry worldwide needs to




1. innovate to provide the timely, accessible and secure banking
service that a young, mobile and discerning customers base needs.(There are a lot of young people in the Middle East so this will be a particular challenge there)




2. strike the right balance between face to face contact with
customers, and electronic speed and convenience (many customers still value a personal relationship with their bank and their needs should not be neglected in the rush to automate) 

and


3.  develop systems to provide finance for small and medium sized
business on the basis of good and reliable information about
creditworthiness.  Big companies may have no trouble getting credit for bad investments,  while small companies may not get finance for good ones.