Bill Jamieson: Double trouble is looming for 2017

If you thought 2016 was cataclysmic for the UK and US, just wait to see what trouble is in store for Europe says Bill Jamieson

Woeful economic performance in France has been a key contributor to the collapse in popularity of President Francois Hollande.
Woeful economic performance in France has been a key contributor to the collapse in popularity of President Francois Hollande.

You thought 2016 was convulsive? Stand by for 2017 with political upheavals that could blow apart our understanding of what the EU is, and its direction of travel.

And here in Scotland, there is every prospect of a prolonged legal and constitutional war between the Holyrood and Westminster parliaments over Brexit, with Article 50 activation delayed into 2018 and beyond. The entire Brexit process – already obscured in a miasma of Westminster argument and confusion – would be reduced to farce.

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If the government loses its High Court appeal, and the Scottish parliament is allowed to vote against Brexit, the UK may have to choose between remaining in the EU to preserve the union at home.

In all of this, I do not envy the task of Mike Russell, “Scottish Government Minister for UK Negotiations on Scotland’s place in Europe” and Keith Brown, “Cabinet Secretary for the Economy, Jobs and Fair Work” (oh, for a Scottish Government Minister for Shorter Job Titles). Both gave evidence at Holyrood this week on the impact of Brexit on the Scottish economy.

A more futile exercise given the fast changing dynamics at home and across Europe would be hard to imagine. A report commissioned from the Fraser of Allander Institute, purporting to assess the implications for Scottish trade, offers few doubts, concluding that “under all modelled scenarios” (sic) Brexit was predicted to have a negative impact on Scotland’s economy.

The paper has been widely criticised, not least by economist Tony Mackay for its mistakes and omissions, ignoring the impact on imports and import substitution. He also points out that the report was commissioned by the Scottish Parliament Information Centre (SPICe) – normally a source of respected research - which paid the FoA’s Professor Graeme Roy and colleagues £2,000 a day for the study, without even putting the work out to tender. “A very poor use of the Scottish government’s money” is how Mackay describes it.

The unquestioned assumption behind the pro Remain insistence of Scottish government ministers is that the EU is an economic success and that closer integration would improve our economic performance.

But look at the reality on the continent that is fuelling voter swings to the radical Left and Right. The cumulative effects of slow growth, near stagnation, high levels of unemployment, poor business investment and a continuing lack of competitiveness make it virtually impossible for the old order simply to settle back and continue as before. The period of lacklustre economic performance has endured for so long, and levels of unemployment so persistently high, that the social fabric in many countries has worn dangerously thin.

Since 1999 – the founding year of the European single currency that was supposed to accelerate trade and growth among member countries - the UK economy has grown by almost 40 per cent. But in Germany and France performance has been much weaker at around 25 per cent. As for Italy, its economy has grown by less than six per cent over this period.

Hand in hand with this stagnation has been a disastrous record on employment. This now stands at 16.2 million across the Euro-zone or 10 per cent of the workforce – more than twice the comparable rate in Scotland (4.6 per cent) and the UK (4.9 per cent). In Italy unemployment stands at 11 per cent, in Spain 19.3 per cent and Greece 23. 2 per cent.

The fact is that the Euro has failed to provide any uplift in the region’s deeply flawed economic models. Italy is the worst performing of the region’s biggest economies. Its banking system is in deep trouble, and the economy is forecast to grow by just 0.8 per cent this year with no improvement expected next. To achieve any meaningful recovery it needs to see a much lower exchange rate in the order of 20 to 30 per cent – an outcome only possible by leaving the single currency zone.

Economic performance in France has also been woeful – and a key contributor to the collapse in popularity of President Francois Hollande. Unemployment stands at 10.2 per cent, the 1.5 per cent GDP growth target for 2016 has been abandoned (1.3 per cent is now the hope) and scope for big reflation limited with a debt-to-GDP ratio of 95.8 per cent. In Germany, so often held up as a model, the economy slowed more than expected in the third quarter, with growth down from 0.4 per cent to 0.2 per cent.

This is the dry tinder on which political sparks are set to land – and make 2017 a year as turbulent for Europe as 2016 has proved for Britain and America.

Little wonder that, back here one million Scots voted against ‘Remain’. Within the SNP Alex Neil MSP, a former Cabinet member and party grandee has led the opposition, and indicated that he is not alone. Yet as Conservative MSP Ross Thomson points out, just seven MSPs backed Leave – five per cent of the total, despite almost 40 per cent of Scottish voters backing a Leave vote – including 400,000 independence supporters.

All this now threatens a stand-off between the Scottish and Westminster parliaments. A ruling by the Supreme Court next week on the government appeal against the High Court verdict that a vote in parliament is needed before the Article 50 can be activated is set to put the UK constitution into play.

First is an assertion by Supreme Court judge Lady Hale that full blown legislation would be needed, requiring the consent of the House of Lords, potentially delaying Article 50 into 2018 and beyond. Second is that this would also require Scottish parliament approval as under the new Scotland Act the UK parliament “will not normally legislate with regard to devolved matters without the consent of the Scottish parliament”.

Expect lengthy disputation of what the word “normally” means in this context and whether the UK’s EU membership is “a devolved matter”. A most helpful starting point is the legal expert Alan Trench. “It would be hard to avoid concluding”, he writes on his website Devolution Matters, “that devolved legislative consent for Brexit is not needed, at least so far as Scotland is concerned”. But then there is the human rights dimension where the Supreme Court needs to provide some clarity.

“If it is left hanging”, he writes, “it will only lead to further legal uncertainty (and litigation, and delay) in the process of Brexit, or yet more political grandstanding with little legal or constitutional foundation… It is yet more evidence, if evidence were needed, that the path to the UK leaving the EU is a long, complex, twisting and messy one.”

Given all this, it might have been better had there been no EU referendum at all and that the matter was left for learned lawyers to decide whether Scotland and/or the UK as a whole could or could ‘Leave’.

But as matters stand, we now face a constitutional abyss at home. And this is set to unfold against a background of political upheaval across Europe. For Mike Russell, Keith Brown - and all the rest of us – welcome to 2017.