Mandelson undone by the politics of economics in the EU
Dear Lord Mandelson,
After being heralded by Gordon Brown as a powerful figure in European circles when you returned to the Cabinet, one would expect you to be able to successfully negotiate with other EU countries when it came to industrial matters. Unfortunately for you and the British car industry, it looks like you have seriously underestimated the German government’s desire to save their own backside when it comes to car manufacturing. You are already threatening to go to the EU competition authorities in Brussels if the German government-led bailout of General Motors Europe leads to job losses among its 5,000 Vauxhall workers in the UK.
The German government is taking a lead role in the rescue because Opel, the car maker’s German division which employs 25,000 workers, is the largest in Europe. With elections due this autumn, the chancellor Angela Merkel is particularly keen to limit job losses in Germany. Her government has put billions of euros of soft loans on the table and rumour has it that they are now planning to make financial support conditional by getting guarantees on the future of inefficient car plants in Germany – which would have serious implications for two UK plants owned by the same company. You are warning that the UK is not prepared to invest in a restructured GM Europe that is not commercially viable. Whitehall insiders argue that to do so would put taxpayers’ money at risk, even though any withdrawal of government support could jeopardise Vauxhall’s operations, and UK Government officials are apparently still hoping that the restructured GM Europe will keep its most productive plants and that the rescue plan to be based on commercial decisions. Fritz Henderson, GM chief executive has said the two plants at Ellesmere Port and Luton are among its most productive in Europe. GM says three plants in Europe must close to cut costs and capacity, but has not said which. Neelie Kroes, the competition commissioner, will tomorrow warn European ministers not to pursue “tit-for-tat” protectionist measures over GM Europe. The commission, which must approve the billions of euros of state aid earmarked for GM Europe, is expected to make a statement outlining its position, as emergency talks to rescue the carmaker continue.
How ironic. Major industry suffers downturn due to inefficiency and lack of competence, politician in need of votes, politician steps in with a rescue package irrespective of the futility or likely success of such measures – sound familiar? Northern Rock, anyone? Gordon Brown has publicly played it tough over the car industry for months, despite the industry being on its knees, and then lo and behold the government offers 0% finance deals and the new car scrapping scheme that has got off to a modest start. Now the German government has started to play the same game, knowing that the demise of an industry could be catastrophic from an electoral and media point of view – and you’re quite upset about it. Since when did ‘Whitehall insiders’ give a damn about putting taxpayers’ money at risk? Our national debt has rocketed thanks to Labour’s cavalier and deeply flawed approach to bailing out firms and industries, regardless of whether they are viable businesses. The strange thing is that I would have thought someone with a track record of working in EU trade negotiations would know that principles are quickly forgotten when political aspirations get involved. You’ve seen the disgraceful French protectionism over the CAP, you’ve seen the EU reject free trade for years, you’ve now seen the German protectionism over the car industry, yet you still fail to stop the rot. There are two possible conclusions to be drawn from this: 1. You are totally incompetent; 2. Vested interest and selfishness are at the heart of everything the EU says and does. Take your pick.
It’s not often that you get politically outmanouvered but this time you are genuinely struggling to keep up with the might of the German government. Their sheer force of will is not to be underestimated. The EU can talk all it wants about cooperation, trade and expansion but the reality is that major EU nations such as Germany and France will never sacrifice their own interests, thus preventing any serious move towards opening up trade and reducing subsidies / loans to their preferred industries. I suspect that you do understand this issue, but that just makes it all the more amusing to watch you get trampled over.
Yours sincerely,
A.Tory
I don’t see your alternatives as an either/or. both running concurrently is entirely possible.
Certainly Mandelson looks really worried in recent pictures. Merkel, like the rest of the Council of Ministers, is aware of just how weak The Labour Govt. is. She has, probably rightly, calculated that Brown will get no support from the 1st division of the EU, who are also frantically protecting their own. On a personal level crowing about his economic prowess in the early part of the decade, and his pomposity and hubris in the last year, has not endeared Brown to his european colleagues.
Mandelsons’ only “success” has been winning the handbag fight with boy George over yaughtgate. Otherwise,he has been unable to do anything to arrest Labour’s downfall since returning to British politics, and Alistair Campbells’ contribution has been farcical, as his blog demonstrates.
Mandelson probably has one last charge left in him, but I would suggest that he is finished as an influential political figure.
and that possibility makes me INCREDIBLY happy.
As I keep trying to tell everyone, “free trade” and the “free market” don’t exist. Virtually, every nation in the world has measures in place to “protect” their key manufacturing and production industries – we’re one of the very few that doesn’t and we suffer because of it.
Let’s just imagine Angela Merkel for a minute:
1) Angela Merkel persuaded Gordon Brown not to hold a Referendum on the Lsibon ConTreaty; it’s ratified unless the Tories get in quick
2) Angela Merkel knows that Gordon and Labour are dead and buried as far as the next election is concerned
3) Angela Merkel has an election coming up and needs to secure German votes
Now why should she adopt an EU-wide perspective? Gordon has tied us into the EUSSR (run by Germany and France to suit themselves). She needs votes. She will therefore do whatever is necessary to save the German car industry and her political future – and the UK/Gordon/Labour can go hang.
In a year’s time, she will be dealing with Cameron but Vauxhall will be long gone. And Mandelson? He’s just an EU tool – committed to supporting the EU or he loses his pension. Do we really think he’d put UK business above the interests of Peter Mandelson?
LFAT, seriously, do you want to be an indirect and involuntary shareholder in a loss-making car manufacturer, as well as being an indirect and involuntary shareholder in loss-making banks?
I know that I don’t – don’t you remember British Leyland?
Yup – if a (foreign owned, incidentally) car manufacturer is making cars that people don’t want to buy then they need to go bust. That Darwinian process is a key part of capitalism – it is the risk that balances the reward of profit if things go well.
Naturally I feel sorry for the workers but ultimately this isn’t Soviet Russia or Saddam’s Iraq – we don’t need to pay to manufacture things that nobody wants. Sorry!
GOH, I agree that Mandelson’s career is hanging by a thread. Loving it.
Stan, it’s going to be a fascinating challenge to see how a future Conservative government deals with the issue of saving failing industries, as the politics/economics balance is always lop-sided.
Boudicca, I don’t think Merkel gives a damn about Brown, Mandelson or the UK. She has an election to win and she won’t let any failing British politico get in the way.
Mark and Shaun, I certainly don’t want British taxpayers to be sucked into saving a failing industry / firm, but the UK wing of GM Europe is apparently very efficient so if they scaled back elsewhere the jobs could be sustained in Britain without taxpayer’s help (in theory).
LFAT. Mark and Shaun are correct. HMG cannot make cars or run car plants. That has been proved beyond any doubt.
35,000 orders for new cars have been placed since the scrappage scheme came in {sky news}.
Thats about 20% of registrations isn’t it?
Mr Mandelson seems to have succeeded in his aim, but already the word is out that its first come, first served. {I.e. its limited funding only}
You say;-
“There are two possible conclusions to be drawn from this: 1. You are totally incompetent; 2. Vested interest and selfishness are at the heart of everything the EU says and does.”
There is of course a third possible conclusion;-
3. Mandelson is totally incompetent AND Vested interest and selfishness are at the heart of everything the EU says and does.
I’ll go for number 3.