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The right in France
Deeply divided
A leadership battles looms
Jun 30th 2012 | PARIS| from the print edition
SO tight was Nicolas Sarkozy’s grip over his party, and so abrupt was his departure after his defeat in France’s presidential election, that it was never going to be easy for the UMP to rally round a single successor. But the depth of recrimination has surprised even some in his camp. “Sarkozy has created a mess in his own house,” declared Roselyne Bachelot, his former health minister, as she published a book on the campaign this week.
The right is divided over almost everything: why Mr Sarkozy lost, what its values should be, how to deal with a resurgent far-right National Front—to say nothing of who should lead the party. Many centre-leaning figures are dismayed by a campaign that unapologetically courted National Front voters. Pressed by an influential adviser, Patrick Buisson, Mr Sarkozy increasingly evoked the menace from uncontrolled immigration, Islamism and crime. The idea was to rob the National Front of votes, as he did by talking about national identity in 2007. This time, Marine Le Pen, the front’s leader, secured nearly 18% of the vote in the presidential election, coming third, and the party won two parliamentary seats in June.
In a stinging critique, Ms Bachelot denounced a “right-wing strategy, which distanced us from moderate voters without bringing us closer to those of the National Front.” Nathalie Kosciusko-Morizet, a former minister and Mr Sarkozy’s own campaign spokesman, was equally outspoken, claiming this week that Mr Buisson had pursued the politics of Charles Maurras, a nationalist political thinker who backed Pétain’s Vichy regime. Others argue that Mr Sarkozy helped the National Front earn respectability by legitimising some of its positions. To clarify matters, Jean-François Copé, the UMP’s general secretary, held a seminar this week on the party’s values, suggesting they should be defined as “generosity, courage, firmness”. During the June legislative election Mr Copé ruled out any alliances with the National Front, though he called for people to vote neither for it nor against it in tactical situations.
Mr Copé is a leading candidate to take over the presidency of the party at a congress of UMP members in November. The job does not guarantee the incumbent the party’s 2017 presidential nomination, but will provide a handy springboard. Yet Mr Copé is by no means the only contender. François Fillon, Mr Sarkozy’s respected prime minister, who achieved the rare feat of both lasting five years in the job and ending up more popular than his boss, also has his eye on the candidacy. He is favoured by the party’s softer wing. Alain Juppé, a former prime minister, is also a possible runner.
To complicate matters further, Jean-Louis Borloo, who was once considered a potential prime minister under Mr Sarkozy, has now set up a separate parliamentary group with 28 other deputies, the Union of Democrats and Independents. He says that he wants to build this into a centre-right force comparable to that of Valéry Giscard d’Estaing, who went on to become president. He is helped by the troubles of François Bayrou, a defeated presidential candidate for a centrist party, who failed in his own re-election bid for parliament.
The upshot is an extremely fluid political picture on the right, with the UMP squeezed from both the centre right and the far right. Ms Le Pen has made no secret of her desire to pull apart the UMP and lure right-wing dissidents to her cause. The rivalry over the coming months among those hoping to lead the defence of the mainstream right, says one top UMP figure, will be “extremely violent”.
Investment banking and politics
A rush of power
Jun 26th 2012, 20:58 by D.S. | STUTTGART
THE interrogation by regional politicians had been relentless. On June 25th it took its toll: Dirk Notheis, head of the German and Austrian operations of Morgan Stanley (pictured), announced that he will take “time out” from his job, pending further inquiry into how he and his bank handled the sale of 45% of EnBW, a big German power utility, to the state of Baden-Württemberg in December 2010.
Mr Notheis is not only a banker, but a prominent political figure in the conservative Christian Democrat Party (CDU), which back then led the state’s government. That unusual mixture seems to have led to his (at least temporary) downfall.
Baden-Württemberg bought the stake in EnBW from EDF, the French state-owned power company, and paid €4.7 billion. A committee of the state’s parliament is now investigating how the deal was done, and whether a fair price was paid. It wasn’t, according to the state’s new Green-led government, which has filed an arbitration case with the International Chamber of Commerce in Paris (it wants a rebate of €2 billion). The Supreme Court in Baden-Württemberg has also ruled the deal unconstitutional, because it was made without the involvement of parliament and outside of the state budget.And on June 26th, astateaudit office report criticised the government andthe bank for not having followed the correct pricing procedure.
Morgan Stanley advised Baden-Württemberg on the purchase, which effectively renationalised EnBW. Mr Notheis is a friend and political ally of Stefan Mappus, who headed the coalition of the CDU and the liberal Free Democrats in Baden-Württemberg at the time. Interest in the inquiry has risen dramatically since the publication of e-mails and other details on June 17th, which give a flavour of how politics and investment banking sometimes get intertwined.
Mr Notheis, it seems, did more than advise: he often seemed to be driving the deal. And there was considerable pressure to get the transaction done before the end of 2010.Morgan Stanley was given the mandate on November25th. No investment bank was advising EDF, but the head of Morgan Stanley in France, Réné Proglio, had special access to the boss of EDF, who happens to be his twin brother Henri. Morgan Stanley seems to have made little effort to negotiate the price down on behalf of its client. On the contrary, Mr Notheis, in an email to Réné Proglio, quoted in the German weekly Frankfurter Allgemeine am Sonntag, says “your brother has already agreed to €40 which, as we know, is more than rich.”
A price of €41.50 a share (which included a dividend of €1.50) was agreed on November28th. Morgan Stanley gave a “fairness opinion” on December 4th, and Baden-Württemberg could have sought a second valuation from another bank. But Mr Notheis discouraged Mr Mappus from doing this: “…it would just put sand in the wheels, and I don’t need that right now,” he wrote in an email on December 4th. By December 6th the deal was signed. The Baden-Württemberg parliament was kept in the dark; not even Mr Mappus’s finance minister knew about it until the eve of the signing.
What was the hurry? Both sides may have had their reasons. For EDF, because of an accounting rule change, 2010 was the last year that it could include EnBW in its consolidated earnings—so it was a good time to sell. For Mr Mappus it meant getting the deal under his belt before a crucial election (which he lost) in March 2011. For Morgan Stanley it ensured the bank would unseat its rival Goldman Sachs at the head of the 2010 European league table for mergers and acquisitions.
The Stuttgart parliamentary committee may discover more, but it has limited powers. Réné Proglio, for example, has refused to appear before it (the committee can only subpoena German citizens living in Germany).
Mummy Merkel
But the effect on Morgan Stanley’s reputation has been considerable: the tone of Mr Notheis’s emails have embarrassed him and the bank, especially one referring to German chancellor Angela Merkel as “Mutti” (mummy in German) and suggesting that Mr Mappus’s influence in the CDU is strong enough to"kill Angela with his troops".
The question remains whether the state of Baden-Württemberg overpaid. Several “fairness opinions” after the event, one by LBBW a local bank and another by Barclays Capital, a British investment bank, support the price as fair. But the Barclays assessment for one is so hedged that it hardly carries much weight: “This opinion is not and should not be considered a valuation opinion”.
At any rate, the business prospects for EnBW changed dramatically after the nuclear accident at Fukushima in March 2011 and the German government’s decision to exit from nuclear power. Two of EnBW’s four nuclear power stations were immediately shut down. EnBW’s shares, which barely trade, are now at around €33. It is tempting to judge the EnBW transaction in the light of those events.
Britain and the EU
A Brixit looms
Jun 21st 2012, 15:49 by Bagehot
MY PRINT column this week considers the political implications in Britain of the deepening euro crisis:
DAVID CAMERON does not want Britain to leave the European Union, though he finds it exasperating and fears euro-zone meltdown could cost him re-election. His Liberal Democrat coalition partner, Nick Clegg, is a pro-European. Nor does the Labour opposition leader, Ed Miliband, want out. Mr Miliband is a European social democrat by instinct (his relatives were refugees from the Holocaust) and by judgment, seeing the EU as a way of delivering public goods such as action on climate change.
Yet the chances of Britain leaving the EU in the next few years are higher than they have ever been. A Brixit looms for several reasons. For one thing, the British never fell in love with Europe, instead weighing costs against economic benefits. Right now the EU is seen as a basket case (though British finances are hardly in great shape).
For another, if euro-zone members overcome their differences and integrate much more deeply, they would arguably be leaving Britain, especially if their integration fragments the single market that is the bedrock of British membership. Mr Cameron and his chancellor of the exchequer, George Osborne, may talk of the euro’s “remorseless logic” compelling richer members to stand behind the weak. But there are paths of European integration down which no government led by Mr Cameron (or for that matter Mr Miliband) could follow. At the top of the Conservative and Labour parties, economic debate is dominated by those who saw the euro as a disaster and think they are being proved right. The public agrees, though their certainty has less to do with economics than misanthropy: the British do not like southern Europeans enough to offer them a subsidy union, and have never believed that other rich northerners, deep down, felt differently.
British politicians can be forgiven a degree of passivity, then. Yet if Britain is closer to the exits than before, politicians do bear the blame in one important way. A worrying number of MPs seem to believe that—as a happy result of this crisis—Britain can blackmail its way to more favourable terms of membership.
As Conservative Party leader in 1998, the current foreign secretary William Hague predicted that the single currency would turn into a “burning building with no exits” (in a speech mostly written by a young aide called George Osborne, as it happens). Now that the euro is ablaze, some Tory Eurosceptics want to park in front of the fire station, blocking treaty changes aimed at shoring up the currency unless the EU returns swathes of powers to British control. Their vehicle for such blackmail would be a “referendum lock” that became British law last year, guaranteeing a national vote on any future transfer of powers from Westminster to Brussels. Technically, euro-zone rescue plans could be crafted to avoid transfers of sovereignty from Britain. But some Tories, including—it is reported—some cabinet ministers, have told Mr Cameron that deep euro-zone integration would so alter Britain’s relations with Europe that a referendum should be held anyway.
Tory leaders think they can win that argument. In parallel they also think that they can fend off calls from other Eurosceptics for a straight in-out referendum, calling such a vote the wrong question at a time of rapid change to Europe’s structures.
Such arguments are relatively easy to win. Most Tory MPs do not favour outright withdrawal. They want a looser relationship with Europe, involving single-market membership without the bits they dislike such as environmental and employment rules, or big budget contributions. Most Tory MPs also realise that a block-the-fire-station blackmail strategy, unleashed at the height of a global economic crisis, is risky.
Instead, a supposedly safer wheeze is generating enthusiasm: to head into the next general election promising a formal renegotiation of British ties with Europe, with the results to be put to a “validating referendum”. The problem is that a negotiate-then-validate strategy is just a prettified form of blackmail. It amounts to a bet that other EU members will grant big concessions, knowing that otherwise British voters would reject the deal.
Nobody is going to pay Britain to stay
Germany—seen by Mr Cameron as the dominant force in a fast-changing Europe—has clearly signalled that Chancellor Angela Merkel will not be blackmailed into British opt-outs or special treatment. Germany accepts that in the event of treaty changes to create new euro-zone institutions, Mr Cameron would need concessions to get such changes endorsed by Parliament. Perhaps certain narrow powers could return to the national level for all EU members, Britain has been told. But push too hard and euro-zone integration will be pursued outside EU structures.
Germany may be bluffing a bit, but not wholly. Nor is it easy to see why MPs think a referendum to validate new terms of membership is safer than an in-out vote. Draw a map of possible outcomes, and to avoid defeat the future government would need to secure a renegotiation, win hefty concessions, convince the public that they were hefty and then persuade voters to answer the question on the ballot paper rather than generally vent spleen. A single wrong turn would lead to the EU exits.
Yet within Parliament and Whitehall, a startling number of senior figures think that one of the big parties will pledge an EU referendum before the next general election, forcing the others to follow. Labour, it is said, might call a referendum to split the Tory Party. The Conservatives might call one to shore up their core vote. Both might be bounced by rising support for the United Kingdom Independence Party, which favours withdrawal.
None of the party leaders want to leave the EU, but it could happen. All have much to lose from an EU referendum, yet such a vote is starting to feel almost inevitable. How this ends is unknowable, and only partly in Britain’s hands.