|Europe’s leaders would do well to listen to some constructive criticism
|When US Treasury Secretary Jacob J Lew arrived in Europe earlier this week for two days of talks with European Union officials and government ministers he might have been forgiven for expecting a sympathetic hearing.
After all, the message that he wanted to convey - “The United States is recovering at a much faster pace than Europe and, how I can put this politely, there might perhaps be one or two lessons you can learn from us” – was hardly an outrageous affront to diplomatic niceties.
Mr Lew told his hosts that the evidence from his side of the Atlantic suggested increased government spending and looser monetary policy was having a more positive effect than anything being tried in Brussels.
The rebuff from German finance minister Wolfgang Schauble, sitting alongside him at a press conference in Berlin, was instant: “Nobody sees this contradiction between fiscal consolidation and growth,” he said.
With measured understatement, a US Treasury official told the International Herald Tribune that the Americans had not been trying to lecture the Europeans, but had focused on the profound need for growth on the Continent.
When he arrived back in Washington, Mr Lew may have permitted himself a wry smile at hearing the news that the bailout for Cyprus will have to increase to €23bn from the original figure of €17.5bn – the latest chapter in a grim soap opera that has done nothing to enhance the reputation of politicians either on the Mediterranean island or in Brussels. Cyprus now needs to find €13bn to secure €10bn funding from the EU and the IMF: quite a task for an economy worth around €18bn.
It has never been the habit of the eurozone’s leaders to ask difficult questions of themselves when procrastination is an alternative, but the need for hard-headed thinking cannot be postponed indefinitely.
Which is why a book of essays published by the Institute of Economic Affairs on Friday could not be better timed.
In the introduction, economist Philip Booth writes of the eurozone crisis: “Like Dickens’ Great Expectations, this story has two possible endings: a 'sad' one and an ambiguous one. The unfortunate ending would be the continuation of the status quo."
The intention of the dozen economists who have contributed to the book is to bring “rational economic thinking” to the debate and find ways in which the euro could, if necessary, be allowed to break up in an orderly way.
While many of their solutions will be unpalatable to the euro’s apologists – the idea of floating national currencies running in parallel to the euro, for example, or the suspension of some eurozone members – and others may simply be politically impractical, they certainly deserve a polite hearing.
Although, as Mr Lew found out, constructive criticism is rarely welcomed at the heart of Europe.
Let’s hope BP’s trial ends with justice
If BP chief executive Bob Dudley still had misgivings about going to trial over the Gulf of Mexico oil spill, they would at least have been eased on Thursday.
The oil company’s annual gathering of shareholders in the Excel Centre in east London saw investors voice their anger over the scale of the financial claims laid at BP’s door over the Deepwater Horizon disaster, which claimed 11 lives and left America with its worst offshore oil spill.
The $34bn of economic damages sought by Gulf states, such as Alabama and Louisana, drew particular ire. To warm applause, one elderly shareholder railed against the “frenzy of unjustified claims”.
It is a sentiment that would have been echoed by BP’s board and among the company’s highly-paid lawyers who have been camped in New Orleans since shortly after the rig exploded in April 2010, though in the interests of public relations they feel unable to articulate them away from the privacy of the boardroom.
Although the trial has drawn much of the attention since it began in New Orleans on February 25, BP has been waging a parallel, though less high-profile, battle. The company has tried and, so far, failed to persuade District Judge Carl Barbier to overturn awards made to local Gulf businesses that BP believes are “fictitious” and “absurd”.
The claims are part of the $8.5bn settlement that BP reached this time last year with local businesses and individuals hit by the spill and which has since been administered by a court-appointed official. After failing to persuade Barbier, BP may well take its case to an appeal court.
It was always going to be a challenge to separate the need to punish BP financially from the politics of playing to the grandstand.
Its not clear how many of BP’s shareholders gathered in the Excel Centre on Thursday have heard the reports that politicians in Alabama are hoping to use some of the fines that BP is likely to pay to build a new conference centre on the state’s coast - a project that is hard to dress up as enviromental restoration.
Their reaction, had they been made aware of them, can easily be imagined.
The trans-Atlantic politics of the spill have simmered ever since President Barack Obama pointedly rechristened BP as British Petroleum in the days after the oil began leaking from the Macondo well.
On Thursday, after attacking the frenzy of claims, that vocal shareholder of 59 years standing asked the BP board to enlist the Foreign Office in support and for British tourists to boycott Walt Disney in protest.
But that’s not the answer. There is enough politics in the oil business already. BP has gone to trial in the belief that it could ultimately save its shareholders billions of pounds by proving it was not grossly negligent in the run-up to the spill. We should have confidence that Judge Barbier, who has handled the case since 2010, will reach the correct decision, free from political pressure or outside interference.