Nick Andrews

My Fleishman Hillard colleague in Brussels, Nick Andrews, has a nice rumination on the desire for many companies to be left alone.  He notes that companies in the throws of some public affairs crisis pine for the indifference of government for what they do.  He brilliantly describes the mindset:

Broadly, this depends on a line of argument which goes something like this. “We’re really important to the (normally global) economy. You don’t really understand what we do because you’re not technical like us. We’re quite capable of self-regulating. We’re really very responsible (no, really). Best to leave us alone.” Whilst I totally understand the attraction of this approach, I have one small issue with it. I’ve never seen it work. Ever.

I am very familiar with this attitude and I agree with Nick that it is utterly self-defeating.  But I do think he underestimates the path from this attitude to ultimate success in the way a company conducts its public affairs program.

The challenge is always to look beyond the immediate crisis, to the positioning opportunity. A positive, solution-oriented, industry-leading point of view, stated passionately, widely and consistently, can only stand organisations in good stead. It puts their opponents on the back foot and shapes the debate. It raises morale internally and galvanizes the sector. After all, they might as well. The one thing we can say with certainty is that they won’t be left alone.

As usual, Nick’s guidance is spot on and companies would be wise to take it.  But I’m reminded of the scene from beginning of Peter Pan when Peter is trying to help the children to fly.  As long as they were simply following Peter’s instructions, they were unsuccessful.  It was only when the “truly believed” that they were lifted off the ground.

So it is with a successful corporate public affairs program.  If it is done because it is something “you have to do” to keep the government at bay or even if it is done because Nick Andrews said so, it will fail in the end.  It is only when a company appreciates the fact that, in the current policy and political environment, companies have responsibilities greater than to provide jobs for their employees, ROI for investors or even good value for customers.  In fact, the broader public now holds companies accountable for larger social goals, like sustainability or humane treatment of their stakeholders, very broadly defined.  It is only when companies embrace these values will they achieve their proper role in society.   Like it or not, corporate leaders are put in the same pot as government leaders.  The general public believes all such elites have failed them in their obsessive search for power or money.  The burden falls on all societal leaders to demonstrate their commitment to the greater good.

And, if they do it right, they might even, in the end, be left alone by government.  Thank so?

Nah!

Britain’s position in Europe is once again a burning political issue after up to 81 Tory MPs voted against David Cameron in the biggest rebellion of Government MPs in years.

It had been predicted that around 60 MPs would rebel, but according to the BBC, around 80 have done so in what would appear to be an unprecedented disaster for Chief Whip Patrick McLoughlin.

Not sure what all this means, but it’s not good for Cameron….or for Europe.  Watch this space for further developments.

The past two weeks have seen the increasing threat of financial turmoil in both the EU and the US. On 21 July, Eurozone leaders agreed a new package of measures, aimed at shoring up the Euro. At the same time, the US appeared no closer to internal agreement on raising the debt ceiling. The deadline is 2 August.

The emergency summit of Eurozone leaders on 21 July produced a number of outcomes:
1. Greece is to receive a second bail-out from the EU and IMF, of €109 billion;
2. An additional €37 billion is expected to come from the private sector;
3. The repayment schedule on Greek loans is extended from 7.5 years to between 15-30;
4. The interest rate on all Greek loans is to come down from 5% to 3.5%;
5. The new repayment schedule and rate is to be applied to Ireland and Portugal too;
6. The European Financial Stability Fund (EFSF) is given powers to act pre-emptively in states as well as financial institutions (banks) and, as needed, markets.
Reaction
Global markets have reacted with cautious optimism to what is really a story of two halves: Greece and the broader mechanisms of the Eurozone. In what was clearly a well-rehearsed line, every leader emphasised Greece was a unique case, and that the second bail-out was therefore a unique response, but well deserved. Greece had made a lot of effort to meet its obligations and change its ways, and therefore was worthy of a second round of help. In order to ensure it remained unique, the lower interest rates and extended schedule would be applied to Ireland and Portugal. The second common line was that the new powers given to the EFSF are anything from game-changing to historic, since they potentially herald a European IMF, as President Sarkozy put it.
Analysis
Though the real driver of the summit was a dread of contagion, it was the forbidden word. Instead, much was said about solidarity and determination. The first was palpable: whether driven by empathy, fear or calculation, the decision to stick with Greece was an act of solidarity, not least because there is no clear way to remove it.
Determination, however, remains qualified. There was clearly a determination to do something together, but not too much – or at least not in a way that national electorates would deem too much. At least not publically. For the harsh reality is that it is becoming increasingly difficult to understand the evolving nature of the EFSF, or how it is meant to work with the ECB, and how they will interact with states and the Commission. In other words, in grand EU tradition, ever more institutions are being created behind which politicians can hide, promising their voters everything is being done at a national level while allowing ever more to be done at the collective one.
THE EUROZONE SUMMIT
EVERY LEADER EMPHASISED GREECE WAS A UNIQUE CASE, AND THAT THE SECOND BAIL-OUT WAS THEREFORE A UNIQUE RESPONSE…

Will it work ?
The Eurozone summit has bought time: it most definitely has delayed the crunch time in Greece and possibly staved off contagion, at least over the summer. But since a second bail-out was necessary, this is an expensive summer holiday for the European tax-payer, and unjustifiably so: from the start of this crisis it was clear fiscal mechanisms of some sort were necessary to make a monetary union work. The adamant political refusal to accept this has meant that much of the hundreds of billions spent over the past eighteen months on Greece, Ireland and Portugal – plus the costs of shoring up the currency – could have been reduced, the money put to better use elsewhere, and the EU kept more intact.
The core questions were as clear then as they are now, namely: will the Eurozone establish itself as a true currency, establishing fiscal arrangements – or will it dissolve into history, taking the EU with it? To date, the answers delivered by European leaders, in and out of summits, have been “sort of yes” to the former, and “no” to the latter. At the summit of 21 July the answers were “ok, yes, but don’t tell anyone” and “absolutely not”. If the markets accept that line, the Euro will slowly rally, which is what most leaders want: a fast rally would make it too expensive.
THE US FINANCIAL CRISIS
The summer rush has wrung a deal out of EU leaders, and the heat wave in the US will probably do the same there. The Eurozone has been saved, at least for now – and possibly for the duration. Ironically, the ungainly and expensive manner of doing this, spread over eighteen months and involving four bailouts (two to Greece), has effectively transformed the Eurozone precisely into what its weak leaders keep promising it will not become: a transfer union, in all but name.
Meanwhile across the sea, the official transfer union of the US seems to be in gridlock, stuck on narrow ideology while near drowning in a sea of debt. Worse still, due to the election year the most that can be hoped for is immediate relief since all wider agreements will be shot down in campaigning. A hard year is ahead.
CONCLUSION
The US crisis is, in many ways, more serious: the immediate problem is an inability to agree between Democrats and Republicans on raising the debt ceiling. If no agreement is reached by 2 August, the US will default, the ratings agencies will all downgrade it, and a crisis of some sort is therefore deemed inevitable. The impact of such a crisis would immediately reverberate far and wide, not least because China is the chief holder of US debt.
In reality the debate is potentially irrelevant, since it is about allowing the US to borrow even more in addition to its massive outstanding debt, which is now in excess of US$14 trillion2. The core of the disagreement is not on the specific act, but on debt reduction measures necessary to calm the ratings agencies and markets. Debates on these appear stuck: Republicans demand budget cuts while Democrats demand higher taxes. Since the US is heading into an election year, and neither side would wish to take the blame for the US defaulting, there are finally signs the two sides will agree on the raise before the deadline, and possibly also on a package of measures.
However, precisely because it is an election year, any such agreement should be taken with a large pinch of salt: rather than enshrined, all its faults will be held up by both sides. Most probably it will therefore not be enacted, and the sides will be back at the table to try and raise the ceiling again before too long, with the debt growing all the while.

Dr Ilana Bet-El,
Senior Policy Advisor

I was most struck by the following excerpt:

Lisbon failed because lots of Europeans do not want to live in the most dynamic and competitive economy in the world. They prefer to work fewer hours than Americans or Japanese (about 10% fewer, on average), to take long holidays, and to retire as soon as possible. Among EU leaders it is fashionable to predict that the financial crisis will lead to a revolution in “European economic governance”. Yet that phrase hides a dearth of new ideas.

I find that quote very telling, because it exposes this view that economic growth should be an end in itself.  What he’s saying is that, in their heart of hearts, Europeans will choose a better quality of life over economic growth for its own sake.  I have to say I admire that view. When conservative attack liberals for their secret agenda to Europeanize the American economy, I think “what part of total healthcare coverage, fewer work hours,  longer vacations, earlier retirement, do you not like?”

An economic system should be a means to an end with the end being a better human existance.  As the saying goes, “nobody every laid on their deathbed saying, ‘I wish I’d spend more time at the office.’”   Obviously, you can overshoot and, if your economic system does not produce enough wealth to sustain a good quality of life, it needs to be adjusted.  And maybe the ideal is somewhere between Europe and the U.S.  But, in the American debate, it seems that that we sometimes lose sight of what the real purpose of a strong economy ought to be.

The Financial Times has, of course, the best coverage. Particularly interesting is a piece informed by the views of one of the original visionaries of the European idea, Valerie Giscard d’Estaing, former French president.  He, too, see this as a missed opportunity.

It’s one of the reasons all attention in Washington points to the East when it comes to foreign and global economic policy.