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Germany’s Position over Euro entrenched in Society

Interesting vignette visiting Germany recently and out at dinner in Hamburg. A group of oldsters was having a smashing night out together – about a dozen of them. When it came to settling their bill I noticed that they all paid individually and they all paid in cash. A micro picture of course, but it struck me that this small example illustrates the German pre-occupation with being able to pay your way. None of these individuals wanted to increase their debt by using a card. Nor would any of them have dreamed of printing the money required to pay for their meal.

This is the real dilemma at the heart of any deal to “save the Euro”. Nevermind the histrionics around Cameron’s exercise of the UK veto in relation to greater fiscal union. It doesn’t matter what institutional fiscal changes the Eurozone introduces going forward. What matters is dealing with the present unsustainable level of Eurozone debt right now. Germany will neither underwrite such debt nor print money to address it. Unless some other mechanism is found to defray such debt (e.g. significant IMF money) the markets will continue to take a sceptical view of the likely survival of the currency…

By |December 20th, 2011|Blog|Comments Off on Germany’s Position over Euro entrenched in Society

EU Treaty Negotiations – Still a deal to be done if the UK can learn from their ‘mistakes’

Where next for negotiations with the EU, after last week’s failed summit? Any assessment of prospects going forward must be rooted in an understanding of what happened at the summit.

In some ways, Mr. Cameron carried out a text book negotiation. The rule book says that if the other party to a negotiation will not allow you to get what you need in a negotiation then you should walk away. If the other side is going to be a “user” then walk away rather than being a “loser”.

There is a whiff of cynicism about the EU’s plans for a financial transaction tax which would hit the UK far harder than any other EU state. The UK Government feels this is a deliberate attempt to marginalise London’s role as Europe’s pre-eminent financial centre. David Cameron used the summit to try to engineer a right for the UK to prevent such a tax by requiring unanimity of voting on matters concerning financial services – since the greater fiscal unity proposed by the Eurozone members and which the EU countries were asked to approve might well hasten the arrival of just such a tax. When France and Germany refused to countenance this and made it clear that there was no chance of the UK winning this point, Cameron played his veto card. This must have felt like a better option to Cameron than nodding through a fiscal union treaty without protection for the City, and then having to defend treaty change without a referendum to his howling right wingers.

A closer look at what happened suggests that maybe events could have unfolded differently. It is fine to make a threat in a negotiation (as Cameron did, by […]

By |December 19th, 2011|Blog|Comments Off on EU Treaty Negotiations – Still a deal to be done if the UK can learn from their ‘mistakes’

US Elections – Reassurance set to be key in battle for electorate votes

If elections are like a deal process where the candidates negotiate for voters’ attention and favour then the US election should be a pretty interesting negotiation.

Most negotiations are resolved on the basis of meeting the participants underlying emotional needs. These are not to be confused with surface “content” needs like “price” or “quantity”. In an election like the US Presidential election the situation is no different. It will be the emotional needs of the electorate which have to be addressed rather than surface issues which dominate the media like “budget deficits” or “Iran”.

Sometimes voters have an “achievement” need to usher in a new regime of change, and certainly Obama benefitted from this sentiment last time – after 8 years of Bush, America wanted a new broom. Or sometimes voters may feel they yearn for someone who gives them a sense of “belonging”. Obama benefitted from this trend last time as well, with his inclusive approach and his internet strategy embracing millions.

On this occasion though, it may be a need for “reassurance” that dominates with the electorate – an anxious desire to be able to believe that everything is going to be ok. This would not be at all surprising given the extremely fragile state of the US and international economy. Emotional needs can be ranked, and people tend to satisfy their lower order needs like a need for “reassurance” before they attempt to satisfy higher-order needs like “belonging” and then “achievement”, so reassurance may well be the order of the day for the next US election.

So, who is the most reassuring candidate?

Obama has a bit of a deficit in this area at the moment, as people have spotted that there is […]

By |December 19th, 2011|Blog|Comments Off on US Elections – Reassurance set to be key in battle for electorate votes

Deadline pressure finally tells as NBA Lockout comes to an end

The 149-day NBA lockout ended last weekend with the players tentatively agreeing to a 50/50 split of league revenues (actually 49-51% based on certain ‘targets’ being met) – down 7% on their existing cut. This equates to a $3billion loss for the players over the 10-year agreement term. However, the players union actually secured several significant concessions during the final round of negotiations, notably regarding annual raises and salary cap exemptions. As players executive director Billy Hunter commented, “The parties settled the litigation because the owners either gave in or sufficiently compromised on all of the open issues.”

They still have a long way to go before a deal is ‘inked’ (as is highlighted by the fact that the season still isn’t scheduled to start until Christmas day) but both sides now feel confident the season will go ahead after all.

It seems as though the alternative to a negotiated deal being agreed here had become so bad that the pressures eventually told and both sides were forced to make concessions they had previously viewed as ‘unthinkable’. As Hunter said, “It was in both our interests to try and reach a resolution to save the game”.

Deadline pressure such as this often results in people being more realistic about their own objectives and needs. It can force them to re-evaluate their ‘official’ position and move them towards a more collaborative approach, where they are happy to enter into constructive dialogue about the needs of the other side. Note that this needs to be a ‘real’ deadline though, and not just something that is manufactured as a negotiating tactic. This is probably why it took until the actual […]

By |December 5th, 2011|Blog|Comments Off on Deadline pressure finally tells as NBA Lockout comes to an end

Focus should be on Negotiation with Iran to meet belonging and respect needs

The situation in Iran grows ever more perilous. Yet there seems to be precious little desire to negotiate.

Iran is reputed to be no more than 9 months away from having nuclear weapons at its disposal. The implications of this for peace in the Middle East are rather serious. Israel is acutely anxious about permitting this state of affairs to arise. There has been a much publicised debate in the Israeli media about the timing of a pre-emptive strike on Iran. For a start this is a risky operation. Iran’s facilities are being housed deep in mountains near Qom and would be very difficult to destroy from the air, certainly without killing thousands of civilians. Even if the Israeli’s were successful, one can only imagine the dangerous consequences of a raid. Iran has plenty of conventional weapons it could unleash on Israel. It also has allies in Hamas and Hezbollah who would escalate their terrorist activities. Iran might retaliate against the West, through terrorist activity or through mining the straits of Hormuz, through which one third of the world’s oil supplies flow.

All of this suggests that a negotiation is desperately called for. Yet in the US would-be Presidential candidate Mitt Romney has promised military intervention if he is elected. Meanwhile the West has embarked on a programme of economic sanctions to underscore its disapproval. France and Germany have withdrawn their envoys and the UK has expelled Iranian diplomats in the wake of the attacks on the UK’s embassy in Tehran. As one exiting Iranian diplomat ruefully put it “remember that I am one of those who was ready to talk – even if we disagreed”.

Part of the problem is our own demonisation of Iran. Its […]

By |December 5th, 2011|Blog|Comments Off on Focus should be on Negotiation with Iran to meet belonging and respect needs

Governments should look to inspire consumer and business optimism rather than dwelling on Economic Gloom

Much has been made during the week of the deluge of bad economic news and the self-fulfilling blight this creates for the UK economy. Let’s get that bit out the way first and then examine if there are any reasons to feel cheerful.

We are warned by Mervyn King that “The banking system is facing a full blown systemic crisis…an exceptionally threatening environment”. According to the Office for Budget Responsibility we are facing an unprecedented squeeze on consumer spending, whilst the Institute for Fiscal Studies has described the UK as facing a “lost decade”. Meanwhile the Euro crisis continues to lurch from one “final chance” to another. The latest “plan” being floated calls for greater fiscal unity going forward and a greater interventionist approach from the ECB to protect Italy and other troubled states from escalating debt bond yields, perhaps financed with the aid of €200 billion from the IMF. This takes place in a context where the heads of several multinationals, including Unilever, Philips and Shell have publicly said that “it is one minute to midnight” in the fight to save the currency…”. The implications for the UK if the Eurozone breaks up are stark – with a 7 percent fall in output being predicted.

The trouble with this kind of Tsunami of bad news is that it has a draining effect on the confidence of businesses and consumers. This results in them being less likely to implement spending decisions which would provide the best solution of all to these problems – by encouraging a return to economic growth.

How can Governments negotiate with businesses and consumers to feel differently and more positive about these problems? One clue lies in the adage that if you can’t […]

By |December 5th, 2011|Blog|Comments Off on Governments should look to inspire consumer and business optimism rather than dwelling on Economic Gloom

Public Sector Strikes: Still no focus on possible resolutions to the dispute

As the day of public sector strikes over pension plans draws nearer one cannot help feeling that the parties are no nearer to negotiating a solution, and are instead concentrating their energy on negotiating with the general public to support their position.

The Sunday Press was full of positional comments by government and Union representatives. David Cameron has branded the strikes as “irresponsible”. Danny Alexander has urged the unions to reconsider, saying that the government’s proposals on pension reform are “good and generous”. The Sunday Times carried a piece outlining the generous pensions of leading Union protagonists such as Bob Crowe (pension contributions equal to 40% of his salary). But it also carried interviews with ordinary workers explaining in measured terms why they are striking – one teacher commented: “This isn’t a whim. This is a national comment and the only way we can make our feelings known”.

Meanwhile TUC General Secretary, Brendan Barber has warned “This could be the beginning rather than the end…I don’t want this turned into a long battle, but they need to heed our warning”.

Amid the rhetoric, the one striking characteristic is that there seems to be no discussion about possible ways to resolve the dispute. This is largely a dispute about “values” – the Government valuing a reduction in public debt above all other priorities, and the Unions valuing the protection of existing benefits for their members.

Value disputes can normally only be resolved by reference to over-arching common values, which are bigger than the values which divide the parties. So, one way to make progress would be to re-frame the issue so that it captures shared values. For example, if the issue was framed as “How do we […]

By |November 29th, 2011|Blog|Comments Off on Public Sector Strikes: Still no focus on possible resolutions to the dispute

Government actions continue to show they are Negotiating with the Public not the Unions

Interesting to see Francis Maude quoted at the weekend, suggesting that the Government would be “ok” if the Unions just staged a “token” strike for 15 minutes on the planned day of action on November 30th.

There were also some side swipes at the Union personnel involved in the negotiations with Mark Serwotka being described as “too grand to come to meetings…politically motivated…. and betraying his members”.

Once more, one is left with the irresistible feeling that there isn’t a real negotiation going on with the Unions here. The Government seems reconciled to a day of action going ahead, so the real negotiation is with the wider public, to gain their support for the Government’s position. In this context, the 15 minute strike “offer” is surely not expected to be taken seriously by the Unions, but it is another example of the government wanting to be seen as being “reasonable”. Equally, rubbishing of the other side in public is hardly conducive to getting a deal done, but it does play up to traditional public stereotyping of an old fashioned Union leader as aggressive and overbearing.

The “offer” of the 15 minute strike deal is also accompanied by a threat – abandon the strikes or face legislation making it illegal to strike without at least 50% of members voting for a strike. Threatening the other side is a “push” behaviour, which in the seeming absence of meaningful negotiation to date can only serve to heighten the tension.

Finally there has been much written about Francis Maude playing “Good Cop” in the negotiation and Danny Alexander playing “Bad Cop”. Good Cop/Bad Cop is a pressure tactic which can normally be punctured by letting the other side know that you know […]

By |November 15th, 2011|Blog|Comments Off on Government actions continue to show they are Negotiating with the Public not the Unions

Conrad Murray partly to blame for the loss of his own ‘Negotiation’

As we digest the verdict in the Conrad Murray trial it’s worth bearing in mind that being on trial is something of a negotiation – albeit with an umpire. You need to be able to persuade the Judge or jury to go along with your point of view rather than the other side’s.

As in any negotiation you need to make the most of your bargaining power and in this sense I feel that Dr Murray has had to deal with two crucial elements which were not in his favour.

One source of bargaining power is “authority”. This can come from your reputation or your position in the hierarchy. In this case an enormous amount of bargaining power vested in the Prosecution by dint of the fact that, in effect, they represented one of America’s greatest icons of popular culture. It is difficult to have more authority than that in the US. This will have weighed against Dr Murray – there must have been a small voice in the heads of a number of the jurors that revered Jackson’s status and told them that America needs someone to blame for the loss of one of its greatest stars.

Secondly, Dr Murray has declined to testify. You always have your personal power in any negotiation and that can be a potent source of bargaining power. However, by not testifying Dr Murray chose to give away that personal power – any skills he had as a negotiator he chose not to use. Moreover, when one party doesn’t explain its position in a negotiation, it is not uncommon for other parties to fantasise about the motivations for that and assume the worst.

So, Dr Murray faced a large deficit in bargaining […]

By |November 8th, 2011|Blog|Comments Off on Conrad Murray partly to blame for the loss of his own ‘Negotiation’

Eurozone finally on the right track with potential IMF Deal?

So the G20 summit has duly failed to deliver a meaningful plan for solving the Eurozone crisis. Or has it?

To the consternation of many observers the best that could be managed was a communique vaguely promising that further IMF resources would be made available for the Eurozone. The summit had been billed by George Osborne as the last chance to save the Euro, and expectations were high. This muted outcome, played out against the tragi-comedy of the Greek on-off referendum and their no-confidence motion, will no doubt have its repercussions in the Financial Markets this week.

The irony is that finally the Eurozone may be inching its way towards the right answer – at least temporarily. It has been apparent from day one that there was not enough money in the Eurozone to solve its 7 trillion sovereign debt problem. The attempts to impose impossible austerity programmes on beleaguered states, or partition debt between Greece and its creditors, or announce bailout funds that don’t exist, have all been the equivalent of shuffling the deckchairs on the Titanic as the Eurozone sank. The only European-based solutions have been largely impossible politically – Germany to write a blank cheque for a Euro Bond; full monetary union; indiscriminate printing of money by the ECB; or a dismantling of the Euro. It has been apparent for some time that the solution to this problem needed to come from outside Europe, where there is genuine money available to address it.

Attempts to solicit cash directly from the likes of China are unlikely to work – from a negotiating point of view China holds all the Aces. However, the idea of the IMF providing financial support seems far more plausible. The only […]

By |November 7th, 2011|Blog|Comments Off on Eurozone finally on the right track with potential IMF Deal?