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MAGAZINE OF THE 73RD INTERNATIONAL SESSION OF EYP IN ZURICH, switzerland
ECONOMIC ISSUE
LEAD ARTICLE ECONOMIC ROUNDABOUT
HEAD-ORGANISERS MEET THE TEAM
ECONOMIC SUSTAINABILITY COMMITTEE ARTICLES
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EDITORIAL H
ave you experienced it yet? The moment when you draw back the curtains, when you decipher a treasure map, or when you finally manage to calculate Swiss Francs into Euros in under 30 seconds. All of these occasions of sudden clarity resemble to the moment when you realise why you do it. All of us have been to sessions of the European Youth Parliament before Zurich. We went through the awkwardness of our first teambuilding game, the thrill of the first time we saw a group of people agreeing to take a stand in committee work, and the outbreak of nervousness before our first General Assembly. But the reason we continue to re-live this process usually only becomes clear some way into working within the organisation. Once we do, the value we draw from the experience may be entirely different from that of the people we work alongside. The purpose of your engagement in the EYP covers as many ranges as there are colours in a spectrum. With its work, the Media Team of the International Session in Zurich wants to pay tribute to the different experiences that can be drawn from a session, be they educational, social, or emotional. We encourage you to be aware of personal differences and take them as a starting point for debate, to become active in exchanging cultural particularities, and to serve as stepping stones for each others’ personal development. See this session as a possibility to further establish your reason for being active in the EYP, and experience the delight of suddenly finding out why you bothered all along.
YOUR EDITORIAL TEAM LUCA OLUMETS FRANZISKA MAIER MAIRI SĂ•ELSEPP MARIE DROMEY
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economic roundabout p. 12-13
a guide to Zurich how to organise the organisers p. 14 CH for cheese p. 15
committee articles
p. 18-19
ECON I ECON II ECCON II EMPL AFCO I
swiss efficiency p. 6-7
CONTENTS
EYP ombudsman p. 21 3
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The Real Villain The secrecy measures tax havens provide enable account-holders to shift illegal assets and avoid tax. But who is the true criminal in the process? Berkok Yüksel explores who the real villain is and why tax havens should be taken into consideration when addressing the issue of tax evasion.
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ow do I possess that power, that sovereignty? Through privacy. Through the fact that nobody knows. Through the fact that I have to account to no-one.” (1) These words were uttered by the archenemy of James Bond, the notorious tax evader Dr. No and show us why tax havens have become so popular. The veil of secrecy that an ‘offshore financial centre’ provides is what makes the haven’s economy attractive for foreign investors. This goes for both privacyrelated purposes and criminal aims. However, the situation entails certain ambiguities: at what point does an investor stop seeking only account privacy and becomes a Dr. No; a villain who escapes his own country’s tax legislation? Who is the Bond in this context? And more importantly, where does the tax haven come into the picture? A tax haven is defined as a jurisdiction with nil or nominal tax rates and protection of account information. (2) Following this simple definition, the ju-
risdictions are not actually conducting illegal business but merely facilitating a lack of transparency within the financial sector, thus encouraging illegal actions. Nevertheless, the role of the tax haven does not surpass that of an accomplice in the crime of a business or an individual. The actual criminal is therefore the investor who abuses this potentially opaque financial jurisdiction. Why does the tax haven jurisdiction turn a blind eye on these criminal activities? Those who address the issue of tax evasion and avoidance tend to be narrow-minded and only take the viewpoint of the tax-losing ‘victim’ countries. It is true that tax evasion has had startling effects in countries with high corporate tax rates from which investors try to escape. However, it has also facilitated the flow of assets into tax havens hence creating a new type of financial income for these countries. In this respect, the tax haven is dependent on the investor. Nowadays, the financial sector of many tax havens plays an important role in shaping their eco-
C E N S O R E D
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nomic model, fueled by foreign assets and accounts taxed in the country. The Turks & Caicos Islands, one of the most famous tax havens, has 51% of its total revenues built around financial transactions and import duties. (3) Even within the EU, a banking crisis in Cyprus resulted in the country losing its status as a financial haven and thus destroying a key pillar of its economy. (4) The Swiss story is similar; with the government allowing banks to sidestep secrecy laws, many fear the famous banking hub will lose its attractiveness for foreign assets and lose economic revenue. (5) With economic revenue relying on the tax haven status, would a combination of a single-perspective increase in tax rates and transparency measures in offshore jurisdictions be fairminded to implement? Granted ‘victim’ countries need to recover from the suffered tax loss and prevent further tax evasion. However, is it fair to reclaim the assets and corporate accounts in these jurisdictions resulting in decimation of their economy? Exit taxes for companies and individuals, international transfer pricing rules, more attractive corporate tax rates in victim countries or fiercer precautions such as withholding taxes would all be more beneficial for both export and import countries. Many alternative solutions could be found to reduce tax evasion while protecting the offshore
countries’ economic agenda. However, the core of these policies is dealing with tax evaders rather than tax havens. As 007 does not have to take out each and every man with a gun but only Dr. No himself, Bond in this scenario should focus on the real villain as well.
1: Ian Fleming (1958), Dr. No, Publisher: Jonathan Cape 2: Identifying Tax Havens and Offshore Finance Centres, Tax Justice Network, Features of Tax Havens, Briefing Paper, p.1, Retrieved from: http:// www.taxjustice.net/cms/upload/pdf/Identifying_ Tax_Havens_Jul_07.pdf 3: Department of Economic Planning and Statistics of Turks & Caicos Islands, TCI Stats Box, Retrieved from http://www.depstc.org/quickstats/ qstat1.html 4: Peter Gumble (2013), Cyprus Rescue: The Destruction of a Tax Haven, TIME, Retrieved from: http://business.time.com/2013/03/25/cyprusrescue-the-destruction-of-a-tax-haven/ 5: Julia Werdigier and Lynnley Browning (2013), The New York Times, Switzerland to Allow Its Banks to Sidestep Secrecy Laws, Retrieved from: http://www.cnbc.com/id/100772607 5
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Swiss efficiency
Karim Ben Hamda and Lia Pachler got the chance to sit down with the Head-Organisers Philip Aiolfi and Felix Kurer during their very limited free time to see what will make Zurich 2013 run like clockwork.
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hilip and Felix have both overcome personal challenges in the run up to Zurich 2013. Although their lives outside EYP were often just as hectic as organising this session they never let this interfere with the preparation of the session. Felix managed to pass all his exams in the last summer semester and got 30 credit points in total despite being told that his university studies were in jeopardy due to his session commitments. He had to pass 3 exams with the session only a few weeks away and preparation was in its final process. On top of that he had to combine his job as a bar man as well as maintaining a long-term relationship. Philip was inspired by Felix‘ remarkable effort a lot and that further increased his motivation. They realised they work well together when head-organising the National Selection Conference 2011 of EYP
Switzerland in Ticino. At this session a large part of Zurich‘s organising team first met in its current formation. Consequently, this successful experience resulted in the wish to organise a session at the highest level and in the desire to use the potential of the organisers to realise this project. The opportunity came when Ueli Staeger, President of EYP Switzerland (CH), approached Philip and Felix with the idea of organising an International Session in Switzerland 4 days before the call for bids was closed. In that short period of time the framework and outline of Zurich 2013 was put to paper, having already been stuck in their heads for some time. Philip and Felix came up with their bid along with the board of EYP CH and Swiss EYP alumni who had head-organised the International Session in Basel in 2005. The Head-Organisers have both come a long way since then but their personal and professional relationship has only become stronger whilst organising Zurich 2013. Both of them have indicated that they complement each other perfectly. They have very similar ideas and visions on how to make Zurich 2013 a success. Yet, they are not afraid to confront each other when there is a disagreement. Sitting down together, rationally weighing the pros and cons and then deciding on what the best strategy is to take towards a certain issue is their approach to coming up with the best solution. Nonetheless, they are able to uphold a great personal relationship and are able to find common ground outside of EYP. After experiencing the first few days in Zurich and having talked to the Head-Organisers we have seen how their tremendous dedication to pre-session work has been reflected in how they have been handling the session so far. Additionally, their easy-going and approachable personalities contribute to the high quality of the session. We genuinely believe that we are all in safe hands and we advice everyone to make the best out of it because Philip and Felix have created the perfect platform for you to achieve this.
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The Euro‘s Rocky Roads to Recovery
Fiscal Union, break-up, two-tier system? Theodor Hall looks into reasons for the European Currency’s failure and possible ways forward.
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n many ways the fate of the European Union (EU) hangs on the Euro‘s steps forward at this point. As German Chancellor Merkel stated „If the Euro fails, Europe fails.“(1) It is pivotal for the EU to make the right decisions at this point in time and choose the right path at this crossroads. The question poses itself, which path would that be? The problems with the Euro are far more deep-seated than just misguided leadership. They are simply explained by Mundell, the Nobel Prize winning economist, in his theory of Optimal Currency Areas (OCA). The theory describes the ideal criteria for regions operating with a single currency, on a nation-
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al as well as supranational level. However, the Eurozone never was an OCA and the original hopes that this problem would solve itself have also proved a mistake. Too many criteria remain unfulfilled: The EU does not have full labour mobility due to its heterogenous employment laws. Different cultures, languages, social security systems and much more are all further hindrances for labour mobility. The European Monetary Union (EMU) is not an OCA is its vulnerability to asymetric shocks, due to the fundamentally different natures of its member‘s economies. The most debated point, however, is that the EU has little to no say in the Member States‘ individual fis-
cal policy and thus has hardly any budget to carry out fiscal federalism and stabilisation. In terms of fiscal integration, the EU has failed (2). There are a multitude of potential ways forward for the Eurozone. One must consider the long-term positives and negatives of each option. So, realistically, what are the options for the Euro‘s future? Well first you have the two polar options- break-up of the Eurozone and full integration to a Fiscal Union. Both are rather radical, arguably very unlikely, scenarios. If the EU or even an individual Member State was to cut its losses and abandon the Euro the impact would be huge. The de-
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leaving the Eurozone would also heavily boost the competitiveness of member states, one of the biggest problems facing many countries affected by the crisis.
parting countries currency would face extensive devaluation. Investors would most likely sell their government bonds immediately and a shortage in liquidity, all of which would mean very slow economic growth (3). From a socio-political perspective there is also a considerable fear that leaving the Eurozone would encourage the rise of far-right political parties such as Greece‘s ,Golden Dawn‘(4). In turn this could very easily critically damage the inter-european relationships of all involved. On the other hand, leaving the Eurozone would also heavily boost their competitiveness, one of the biggest problems facing many countries affected by the crisis. Countries in dire situations, such as Greece, may be able to stabilise faster and profit from controlling their own fate(5) . A European full Fiscal Union is a more advantageous scenario, but also more difficult to achieve. With centralised Fiscal Policy and a common budget asymetric shocks would be much easier to cope with. The EU could sustain its position as a global economic competitor, halting its decline in the global environment. However, for economic integration to work there must be full political integration. The loss of sovereignity would surely be too much for most Member States to handle and the opposition would be very large (6).
1: Heather A. Conley & Uttara Dukkipati (2011), Center for Strategic and International Studies, retrieved from http://csis.org/publication/if-euro-fails-europe-fails-accordinggerman-chancellor-angela-merkel-and-if-europe-fails 2: Martina Fürrutter (2012), The Eurozone: An Optimal Currency Area?, retrieved from http://igeuropeanresearch.files.wordpress. com/2012/02/paper_ifier_martina_fuerrutter_feb2012.pdf 3: Paper by the Friedrich Ebert Stiftung (2013), Future Scenarios for the Eurozone, re-
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At this crossroads there seem to be these two main roads to take- a unified bus-trip along the rocky motorway or a parting of ways in their individual automobiles. However, there are alternatives. To continue as is with few structural reforms and bail-outs could perhaps lead to a short-term recovery but would leave the EU vulnerable to asymetric shocks. Driving along the road with no brakes and three tyres, if you may. Another alternative would be the twotier Euro system (7). A core group of leading, successful European economies would form the inner circle of the EU, stabilising and seeking further union and integration. The other countries with weaker economies, so-called periphery countries, would form the outer circle with the possibility of joining the inner circle upon having established themselves as economically stable. This system has the danger of forming a class system between members of the EMU, further straining inter-european relations. This road could be considered a road with a speed lane for the more expensive cars (8). No solution solves everything and there are valid arguments to represent each theory. Stuck in the traffic jam of the crisis, the important matter now is, which of the rocky roads does Europe choose?
trieved from http://library.fes.de/pdf-files/id/ ipa/09723.pdf 4: Helena Smith (2013), The Guardian, Retrieved from http://www.guardian.co.uk/ world/2013/apr/01/greece-golden-dawnglobal-ambitions 5: Friedrich Ebert Stiftung (2013) 6: Ibid. 7: Stephen Hill (2013), The Guardian, retrieved from http://www.guardian.co.uk/commentisfree/2013/jan/29/two-tier-european-union 8: Friedrich Ebert Stiftung (2013) 9
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“Nobody said it was Easy”
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aving finished a degree in Chemistry, it is now time for Eduardo to start living the life of an adult and find a job with which he can sustain himself economically. Barry Finlay, a South-African mountain climber and an author of the book “Kilimanjaro and Beyond”, has said that every mountain top is within reach if you just keep climbing. One can easily compare the issue of nowadays finding a job to a heavy mountain-climbing exercise. And this one looks like a challenging one. Like Eduardo, 23.2% of Europe’s youth in the 27 Member States fall under the category of unemployed(1). Leading this catastrophic and shameful statistic, are Greece and Spain with
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Nobody said that taking the first steps in the transition from being a young student towards becoming a working professional would be easy. Juan Estheiman Amaya investigates the difficulty of entering the labour market in todays Europe. a youth unemployment rate of 57.9% and 55.2% respectively. On the other hand, the lowest youth unemployment rates can be found in Germany (7.9%), Austria (8.7%) and the Netherlands (9.8%). Even though the situation in these countries seems ideal, behind those “under ten per cents”, the only ones in Europe, we find that a great part of their youth is employed in either unpaid or deplorably paid internships, or have temporary contracts which facilitate dismissal without any kind of social guarantees(2). This shows that unemployment is not the only ghost that haunts our youth in the labour market. Unfairness in conditions and poor remuneration are also part of the story, but remain unmentioned. Of his group of 5 friends,
Eduardo is the only one to have finished his studies without failing any courses. Even though they are all the same age, the others’ stories are quite different. Two of his friends are still in university, while another one works as a waiter in a self-owned family local restaurant. He does not have a contract or social security, but the pay is just enough to get by every month. He is part of the estimated 19% of people in Europe that work in the sector of restaurants and hotels, inside the shadow economy(3). The remaining one, Duarte, is what’s commonly known as a NEET(4). Even though extremely skilful with his hands, letters and numbers were never Duarte’s strengths; at the age of 19 he dropped out of high school after failing a course
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for the third time. Without an accessible vocational program(5) that would have helped him develop his skills, he was forced to look for a job. Unfortunately, his academic background was insufficient to accomplish his goal. After three years of being deliberately rejected from the labour market, he has now given up. Fourteen million young people aged 15 to 29 years old in the 27 Member States(6) are unemployed, and do not receive any kind of education or training. Since the economic crisis started in 2008, the amount of money that Europe loses because of its inability to provide young people with jobs has risen from €120 billion in 2008 to €153 billion in 2012. This current amount represents around a 1.2% of Europe’s total GDP. It will be rough for Eduardo to find a job. Despite that, he has always believed that he can succeed as an entrepreneur. Becoming an entrepreneur in Europe is not extremely popular when striving for economic auto-sufficiency. If we compare Germany, France and Portugal’s 5.3%, 5.2% and 7.7% of Total “early-stage” Entrepreneurial Activity (TEA) to Brazil’s 15.4% or the USA’s 12.8%, in 2012(7), the difference is overwhelming. This is mainly due to
the high start-up and patent costs in Europe. The burden to which entrepreneurs are sentenced to in case of bankruptcy also deserves a special mention. In France, an entrepreneur can hold a debt for almost decade until the liquidation process is complete, while in the USA this process usually takes around a few months(8). With the current panorama, Eduardo will need to be brave if he decides to pursue this goal. In 2001, while recording the album A Rush of blood to the head, Coldplay’s lead singer Chris Martin wrote one of the band’s greatest hits. The original interpretation of The Scientist talks about the impossibility of accomplishing emotional fulfilment. Today, it could perfectly relate to the situation of an unfulfillment in our youth’s labour demands. It is undeniable that urgent measures have to be taken so we are not remembered as the lost generation. Like Eduardo, a quarter of our young men and women are struggling to enter the labour market and make a life for themselves. Today more than ever; nobody said it was easy.
(1) EUROSTAT. (May 2013). Official unemployment statistics. http://epp.eurostat.ec.europa.eu/ statistics_explained/index.php/ Unemployment_statistics (2)AEGEE. (May 2013). Poor pay: the flipside of Germany’s low unemployment. http://www.projects.aegee.org/yue/?p=542 (3) Visa Europe. (2013). The Shadow Economy in Europe. http://www.visaeurope.com/ i d o c. a s h x ? d o c i d = 6 c 1 c f 1 f d 0 b 4 0 - 4 d 3 6 - a 5 9 4 997f05284281&version=-1 (4) Eurofound. (2013). Neet Definition. http://www.eurofound.europa.eu/areas/industrialrelations/ dictionary/definitions/neet.htm (5) European Center of Development for Vocational Training Home Page. (2013). http://www. cedefop.europa.eu/EN/Index. aspx (6) Eurofund. Youth and NEETS. (January 2013): http://www.eurofound.europa.eu/emcc/labourmarket/youth.htm (7) Global Entrepreneurship Monitor. (2013). Key Indicators. http://www.gemconsortium.org/ key-indicators (8)The Economist. (July 2012). European Entrepreneurs; Les miserables. http://www.economist.com/node/21559618 11
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ECONOMIC ROUNDABOUt
E Aida Grishaj and Waltter Suominen ponder the circularity of the economical crises and how they are tackled.
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conomic crises are not an invention of the 21st century. Economic instabilities have been documented since the Roman Empire in the 3rd century. With rising international dependence, economic crises have increased and repeated themselves in a constant pattern. While causes and implications vary, ups and downs in the world economy have always been present. Yet they constantly manage to surprise, shock and damage the world, although in reality it is only history repeating itself. After the crisis of the Roman Empire the economic insecurities occurred again in the 14th Century in the form of a banking crisis. Starting from the 17th Century onwards there has been an exponential increase in the incidences with four notable ones in the 18th Century, followed by nine in the 19th Century, the Great Depression and fourteen others within the 20th Century, with the most recent eight in the past thirteen years. In the light of these events, it does not seem surprising that most economists support the cyclical development of the markets. Macroeconomic theory pro-
vides us with two main economic cycles: the short-term cycle and the long-term cycle. For the short-term cycle, the economy is predicted for a period of one year, during which growth is most probable. These projections lead people to expect natural growth and a state of crisis would not be expected to be part of the natural economical development. The longer cycle predicts longer periods of around 50 years or more. According to this theory, the economic development is seen as cyclic, meaning that periods of growth are followed by periods of recession. Therefore, an economic crisis is actually part of the natural development. However, this theory is largely ignored and society reacts poorly to the economic situation, failing to consider the bigger picture. As it stands, there is a tendency in following Counter Cyclical Economic Policies. In this way, short-term governmental subsidiaries seem to be the preferred approach to prevent the immediate effects of a recession. The policy makers tend to bring more funds to the system through bailouts without considering the long-term implications of such moves. These actions could be an underline cause in making the crises occur more frequently. The more bailouts are implemented, the more the economies become reliant on the support of the governments. In the future to achieve a similar state the amount of capital flowing into the markets
SPECTRUM lead article must be increased. Not letting the economy fall naturally keeps it in a static state that in a long run will only result making the recession last longer, ultimately resulting in longer crises and bad investments. One could argue in favour of such intervention by stating that the short-term effects of a recession should be held back to ensure employment, and that there is a risk in letting crises solve naturally, as it is not clear how many years it would take for the economy to solve itself. The effects of this would be
detrimental as the welfare of the country would be damaged and the unemployment would skyrocket. On the other hand it is difficult to imagine a crisis receiving no action. Thus one should also not neglect to consider whether continuous investment into a flawed system is the right course of action. Based on the conjunctive cycle and the historical occurrences, an assumption that economic crises are cyclic does not seem false. The word “crisis” is a buzzword of our soci-
ety. It is defining a whole generation, their expectations and the way they accept challenges. Often, daily dialogue revolves around the situations in current countries in crisis being unprecedented cases. In the past, societies went through times of crises as well only that they used the word “panic” instead of crises. In this way, should we accept the cyclical nature of things and assume a resolution shall come naturally or focus on preventing the immediate backlash?
“The word crisis is a buzzword of our society. It is defining a whole generation, their expectations and the way they accept challenges.” 13
How to organise the organisers For the majority of you, the session has just started, while for others, it is the peak of a 20-months-long journey. Zuzana HolakovskĂĄ took a look on what the organisers have been doing before they sat behind the check-in desk.
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nce Philip and Felix decided they would like to build on their head-organising success from Ticino 2011 and applied to host an International session (IS) they started searching for 25 organisers to form a team. They were willing to dedicate 20 months of their lives to a project with little recognition for their efforts. Since December 2011 the organisers were divided into five different departments according to their preferences. Based on their skills and experience, six of these organisers became team-leaders. From the very beginning, English was the working language of the organising team however some teams required two team leaders – separate ones for the German and French speaking part of Switzerland. Many of the organisers had already worked under Felix and Philip, however organising an IS required the organisers to learn how to use their initiative as well as fulfil tasks assigned to them. As Philippe, Head of the Logistics, Infrastructure, Venues, and Events (LIVE) said, he had to learn how to take responsibility and also find the balance between giving orders and completing tasks himself. Martina, the Head of Food and Beverage seconds Victor when remark-
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ing that she had to delegate a lot of work that she could have done herself if she spoke German. However, she also noted how relying on each other promoted trust between the organisers. The organisers spent an innumerable amount of hours simply writing personalised letters and emails to various companies and potential venues. Therefore every time you bite the heart-shaped cookie remember how much effort Madlaina put into getting those for you from explaining what EYP does to arranging the delivery. After 20 months of struggling to balance schoolwork and preparing the IS, the organisers have achieved incredible feats, considering their age and other commitments. Such feats vary from getting in touch with Chief Executive Officers of companies or explaining to Swiss entrepreneurs that even if we’re an international organisation and not specifically Swiss, it should not hinder them from considering a sponsorship. Overall, while staying motivated was sometimes challenging, the fact that the organisers were united as a team meant that the work ethic and performance has never faltered.
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As everyone needs to eat, there are over 7 billion different opinions on food. Therefore, it is always an interesting topic to ingest in a foreign country. Follow Kaarle Olav Varkki taking a taster session into a few wonders of the Swiss cuisine. Prepare for some Cheeze-y annocdotes.
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s a major cheese lover (you chedder believe it), Switzerland is a Gouda place for me to try out different options for a heavenly dish of tongue-melting fromage. First up, we have emmental – a beautifully yellow cheese with big holes. When sampling, I try to ignore the disconcerting fact that Emmental really isn’t value for money given the holes and instead focus on the nutty undertones. Next up on the offering plate is Vacherin - a soft weird-looking cheese with a strong smell. The French produce something similar I’m told. Smells like old socks and I’m starting to suspect that my taster may be out of date. I’m not sure, but I believe that “chewy” isn’t a positive term when describing cheese. Alas, I struggle on to Appen-
zeller - one of the oldest cheeses, said to date back to the 13th century. This cheese is advertised as having “unique flavours” but in the end it still tastes like cheese. I briefly wonder how literal I should take the “dates back to the 13th century” comment that came with the suspicious looking speciman I was presented with. I believe I have found my cheese soul mate with Fondue – hot, gooey, melted cheese. This is edam good. Plus it meets the essential requirement not smelling like socks. If you like your cheese brie-ly hard, gruyère is the one to go with. Dice it up and welcome it into your mouth with a crumbly piece of baguette. Or ditch the baguette and run off with the cheese, it is totally worth it. Switzerland might be politically neutral but in terms of cuisine, it is anything but. If cultures like the
CH stands for cheese French, German and Italian meet, there is bound to be a clash. In Switzerland’s case the resulting culinary explosion is a spectrum of flavours that will surely have you and your tastebuds addicted. Certainly, my Swiss cheese experience was grate. While I remain unconvinced over the expiration dates of a few of the samples, I really brielieve that Switzerland is a melting pot of culinary delight.
“Switzerland might be politically neutral but in terms of cuisine, it is anything but.”
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he European Union (EU) is much like a school. There are the ‘cool’ kids who do their own thing, the clever kids, who are consistently brilliant, and all those in between. The EU is also a place of great bureaucracy and hierarchy with all its bodies and committees, institutions and boards. In light of the financial crisis of 07/08, in 2010 the President of the European Parliament (EP) Martin Schulz declared the EP would “do everything in its powers to establish a pan-EU supervisory system”(1), and thus the idea of the Single Supervisory Mechanism (SSM) came into play. The SSM is set to not be another institution, rather a mechanism within the framework of the European Central Bank (ECB), accountable to the EP, which will monitor and record the actions and steps of the Euro-banks. The legal basis for the SSM is a mouthful, and leads as: “The Council, acting by means of regulations in accordance with a
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A New Hall Monitor in the EU Corridors The problem-children of the European Union are being placed on a shorter leash. Hugo Dürr hopes to make sense of what it will mean for banks of the Eurozone who are no longer trusted.
special legislative procedure, may unanimously, and after consulting the European Parliament and the European Central Bank, confer specific tasks upon the European Central Bank concerning policies relating to the prudential supervision of credit institutions and other financial institutions with the exception of insurance undertakings.”(2) Succinctly put, the SSM will make observations and suggestions, based on the actions of Euro banks, upon which they should continue their operation. As the legal framework only allows the SSM to make suggestions; this, obviously, carries no authoritative notion whatsoever, thus its legitimacy could be questioned. How much transparency will be required? How much will be granted? Will banks still keep some integrity? Another blurry area of the SSM is which banks it will have direct supervision over; as of now, the ECB and SSM will have direct supervision of 150-200 of
the 6000 Euro-banks. These are the largest and state-supporting banks, nicely categorised as the “significant” banks by Professor Eddy Wymeersch of the University of Gent (3). The remaining banks will be delegated to the National Competent Authorities (NCA), such as governments, institutions, etc. The SSM and ECB will still have supervisory responsibilities to those delegated to the NCAs, but will not lay as much focus as with those 150-200 directly supervised. However, the German finance minister Wolfgang Schäuble asks where the line for “significant” should be drawn. What is it that entitles a bank as significant or not? Small banks, in numbers, can be just as influential as one big bank in times of crisis. This unclear distinction is troubling(4). It is not difficult to see that the SSM will add to the chain of hierarchy of the EU. The bureaucracy will mount, and we are not moving away from a more integrated Europe, placing more trust in the
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The bureaucracy will mount, and we are not moving away from a more integrated Europe, placing more trust in the institutions, or rather mechanisms, which tie member states together.
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institutions, or rather mechanisms, which tie member states together. But what would that entail? The SSM, an extension of the ECB as it is today, will call for more transparency, reducing fiscal sovereignty. The SSM will not be able to tell anyone what to do, only make suggestions. The SSM will have to play the whistleblower, making it automatically unpopular with the cool kids. The SSM will be the new Hall Monitor of the European Union, elected by the teachers, with no hard power, to act as an example for the slightly mischievous children. Teachers often make use of this in desperate situations, but is this the right choice for the EU right now? Personally, I must con-
cede that, yes, this is a step in the right direction. The night is darkest before the dawn, and the SSM is the groundwork for a promising, long-term rule book. The idea of having a mechanism solely with the purpose of supervision is major step in improving the current layout of the EU. But we are not there yet, no fireworks or fancy weddings. The SSM is still only a step, and we need the whole march. The implementation must be synchronised with new initiatives, such as the Deposit Guarantee Schemes (DGS) as well as Bank Recovery and Resolutions (BRR)(5). Yet, that is for another conversation.
(1) Library of the European Parliament, 16th May 2013 (2) Treaty Functioning of EU, Article 127/ §6 (3) Eddy Wymeersch, Professor at the University of Gent. 17th December 2012 (4) Forbes. Wolfgang Schäuble, German finance minister. 31st October 2012 <http:// www.forbes.com/sites/karlwhelan/2012/10/31/shouldecb-supervise-all-banks-or-justbig-ones/> (5)EU Monetary Dialogue 2013. Nicolas Véron and Guntram B. Wolff.
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A GUIDE TO ZURICH
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Journo-duo-extraordinaire Conall Oâ&#x20AC;&#x2122;Rourke and Manfredi Danielis hang up their cameras and computers to explore the dense financial jungle that is central Zurich
SPECTRUMentertainment
Z
urich, originating from the German “Zu Reich” (too rich), tells you all you need to know about this money driven, tax dodging, bank ridden city. Known to EYPers as “that place that isn’t Basel”, Zurich has something for everyone. From its efficient tram service, to its awkward power sockets, Swiss ingenuity can be seen in every small detail. But what language does this wondrous country speak? From interviews with the locals it seems they were so busy building watches and training their landlocked navy they never actually had the time to develop their own language, and so speak either; French, German, Italian, or Romanian depending on how social they are after the happy hour. But for other Europeans, this happy hour is more likely sad and depressing. Six francs for a beer, 3.50 for a cappuccino, 4.20 for a bus ticket. As you may have figured this city is not cheap. Zurich is considered to be the most expensive city in Switzerland and ranks 6th on the international scale of most costly cities on the planet. There are many explanations for this Swiss abundance. The world leading banking industry, the traditional high quality export sector but most importantly the oligopolistic structure of the Swiss economy. In Switzerland it is normal for cartels to restrict local competition. Most trades are protected by corporations or guilds which restrict the number of people employed in their sector, and set high, mandatory prices for their services. Of course Swiss people don’t only spend a lot, they also earn a considerable amount. The average pre-tax salary in Zurich is a bit over
7,000. Still, even with such huge sums the Swiss purchasing power is not that exuberant. With huge wages and huge expenditures, the Swiss claim to live along the same standard of living as other Europeans. So don’t be surprised if these fun silvery looking heavy coins and colourful notes fly out of your pockets faster than you can realise. The Swiss are notorious for enticing foreigners with this unique currency and sweet chocolate only to charge them so much they can’t afford the transport home. Some theorists even believe this to be part of a nationwide conspiracy to hold EU citizen’s hostage until Jose Manuel Barroso declares Switzerland a “World Power”. So be prepared, young European traveler, to be hit with one of the following Swiss jokes In Switzerland stuff is so expensive that: -Tourists run after garbage trucks with grocery lists -Tourists get their bread thrown from Swiss ducks -Tourist go to Swiss KFC only to lick other people’s fingers -Tourist carve holes in cheese hoping to get a discount -Tourists get robbed only for practice The typical visit to Zurich lasts one night and can be broken down as follows. 3pm: Check into “cheap” hostel that is same price as a 5-star hotel in any other country. 4pm: Hide in the back of a tram into the city because you cannot afford a ticket. 5pm: Wander around the old city and look at all the things you cannot buy. Pretend to be interested in buying chocolate so that you get free samples and then run before they
realise you are poor. 7pm: Walk back to your hostel after seeing a conductor checking tickets on your tram, and realise all the supermarkets are closed so you will have to eat the mouldy sandwich your mom packed the day before. 8pm: Decide to go wild and venture out to the nearest Irish pub. 9pm: A few pints later your bank card stops working because you have spent your life savings on drinks in Zurich. 11pm: Stumble home to your hostel to watch Game of Thrones on your laptop, only to realise the battery is dead and your EU charger doesn’t work. 12pm: Fall asleep hungry and broke, but happy knowing that this crazy nightmare will be over soon. So sit back and relax delegates, forget about your college fees, your round Europe trip, the car you’ve been saving up for; you will never afford them. All you can do is prepare for the most fun filled and expensive ten days of your life! A short comparison of prices Average price of a coke (33cl) in Zurich 3.63€: compared to Berlin, Germany (+81%), compared to Athens, Greece (+202%), Compared to Addis Adeba, Ethiopia (+632%). Average price of a loaf of bread (500gr) in Zurich 2.38€ : compared to Berlin, Germany (+126%), Compared to Athens, Greece (+197%), Compared to Addis Adeba, Ethiopia (+467%). Average price of a Rolex watch (Gold) in Zurich 30,000 €: compared to Berlin, Germany (+56%), compared to Athens, Greece (+120%), Compared to Addis Adeba, Ethiopia (NA).
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SPECTRUMsession
Krista Simberg, Finland, 28 active since 2003
3 EYP Tips Get to know as many people as possible / the more you put in, the more you get out of it / be daring in your ideas Justifying my existence in max. 30 words I’m nice to have around and I make great carrot cake. Back in my day... we brought sleeping bags and slept in school classrooms. It was still exotic to have foreign officials at national sessions. Usb sticks had very little space. I got my facebook account at an EYP session.
Senior Wisdom Ever wondered what it would be like to do over 50 EYP sessions? Rebecca Smith gathered wisdom from senior members of EYP, from their many years and sessions.
Dmytro Honcharenko, Ukraine, 22 active since 2007 3 EYP Tips Try to get to know as many people as possible. Don’t be shy! / Try to see the city in which the session is held / Power nap Justifying my existence in max. 30 words I organise events where people meet best friends. Back in my day... we used myspace, not facebook, to find EYP friends. None of the chairs had laptops so we would be locked in computer labs with only limited time to type and proofread the resolution. Never so many foreigners came to national session, Ukraine has opened in a huge way. There were no low-cost airlines, so it would cost 1000 euros to fly to Germany.
Ruben Wagenaar, The netherlands, 24 active since 2004 3 EYP Tips At least once a day try to get into a conversation with someone you don’t know. / Good can turn into great if you know a lot about your topic and are well prepared for committee work. You will miss out if your topic is not your highest priority. / Especially as alumni, you’ve done it before so challenge yourself to do something more. You are the master of your own development in EYP, take it seriously. Justifying my existence in max. 30 words I have this rare quality that I make people feel great about themselves. I try to be supportive, encouraging and appreciative. Back in my day... We didn’t have facebook, topic overviews, fact sheets and position papers didn’t exist. Pressrooms did not have internet. Everything was more primitive. 20
SPECTRUMopinion
EYP OMBUDSMAN Character Types There are many aspects of our organisation that could be classified as unfair and exclusive. In this recurring column, Dirk Hofland tries to shed light on these issues, starting with the EYP’s Darwinistic predisposition towards extroverts.
W
hile the European Youth Parliament prides itself on being an inclusive organisation, priority is given to one group of individuals over another. It is a public secret that while extraversion is not a requirement for participants, it definitely is an advantage. This unfortunate reality is definitely something our organisation should acknowledge. The personality trait extraversion such should never be a prerequisite for participation. The division between introverts and extroverts is one of the most fundamental differences between individuals. Typically, introverts tend to be more observant, less impulsive and have
a significantly smaller comfort zone than extroverts. Where introverts would closely study a social situation, an extrovert might happily dive in headfirst and rejoice in the attention. Scientific research has shown that individuals are genetically predisposed to either introversion or extraversion, further implying that this character trait is an intrinsic one. Extraversion is both more socially acceptable and desired trait with public opinion propagating the notion that extraversion is the trait of successful individuals. Unfortunately, this divide has a great influence on the way participants are selected in the EYP. Effectively, committees experience a race for dominance, in which the more quiet people don’t stand a chance. Given that statistically, roughly 50% of the world population would be classified as introverted, this consequential and subconscious elimination is hugely unfair and quite restrictive. “I find being an introvert in EYP quite a big challenge – I even started in EYP for the sole purpose of forcing myself to get more comfortable around
people”, confides an official of this session. Surely individuals should not be pressured into acting out a personality different from their own just because it is valued more to be dominant and outgoing. The fact that this value is such an inherent factor in the selection process of many sessions, for both delegates and officials, implies that it will be a difficult problem to challenge. An important first step is for the EYP community to become aware that some may feel overwhelmed by the intense social experience. It should furthermore be realised that being “quiet” is not a sign of disinterest, but simply a different way of participating. Given that EYP participants are prized for their creativity, the following quote seems fitting, ‘there is zero correlation between being the best talker and having the best ideas’.
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SPECTRUMeconII
A single rulebook will change the game, but not the players
I
f one would ask the average European who would be to blame for the current economic turmoil, there’s a very good chance that he will blame the bankers. Then again, it is undeniable that banking culture has been a determining factor in the outbreak and expansion of the most recent economic crisis. The mere focus on short term profit, illustrated by huge quarterly bonuses and disproportionate golden parachutes, had brought about a leniency towards risk-taking. This has alienated many of the top bankers from the clients they were originally supposed to serve(1). Though not being the only instigator of the crisis, it is apparent that banking ethics are a key factor that needs to be addressed in an all-encompassing approach for the sector. Because, when the ethics are not addressed, further compliance with any other regulation cannot be fully guaranteed. The EU has taken 2 major initiatives addressing banking practices up to date. These are respectively the Capital Requirements Directive (CRD) and the Capital Requirements Regulation (CRR) (2), often referred to as the ‘CRD IV package’ as they try to further implement the Basel III principles
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(3) in law. The main focus of these instruments is to make banks set aside more and higher quality capital. Furthermore, this set of regulations also fosters convergence of supervisory practices across the EU, thus ensuring an improved and more stable banking system. For the CRR, the EU has chosen the figure of a regulation so as to ensure that this particular set of rules can be directly implemented in all the Member States without any risk of arbitrary interpretation. The most important aspect of the CRR is the so called Single Rulebook. The rulebook focuses on levelling the playing field for all banks operating within the single market by reducing the amount of loopholes and ensuring legal certainty (4). The CRR further holds measures addressing the matters of venture capital, leverage and loans to SME’s. The CRD, just like any directive, will have to be incorporated into national law by the respective governments. It most notably contains regulations on bankers’ remuneration and bonuses, but it also addresses prudential supervision, corporate governance and capital buffers (5). By capping bonuses at a maximum of 200% of salaries and other measures, the CRD aims to ensure that irresponsible risk-taking is not further encouraged. As can be told from the previous enumeration of regulations enshrined within the CRD IV package,
SPECTRUMeconII
Jonathan Piepers formulates the problem related to the culture of banking and what the European Union (EU) has undertaken to tackle this. Subsequently he also points out the potential flaws of these instruments.
these are very technical. Although I would not dare to deny their necessity, I do believe that there are some flaws within this system. First and foremost the timeline for these reforms is very lenient, with the final deadline for the entire package being set somewhere in 2019. The European Banking Federation (EBF) was the most prominent institution to also voice its concerns about this as they fear that the levelled implementation is endangered (6). Furthermore, it is argued by a lot of parties that the cap on bonuses will not resort the desired effect as banks will simply raise the basic salary of their employees, thus nullifying the effect of the measure (7). That said, there are more than just technicalities that need to be addressed. As said by Mark Carney, governor of the Bank of England: “Virtue cannot be regulated. Even the strongest supervision cannot guarantee good conduct. Essential will be the rediscovery of core values, and ultimately this is a question
of individual responsibility…” (8). If one wants to effectively tackle the problems faced by the banking sector there is a distinct need for changes that also affect the ethics of banking. This is vital because individuals will be responsible for implementing the regulations of the CRD IV, but some of these same individuals are the ones who have made rather poor business decisions in the past. With the CRD IV the EU has delivered the most revolutionary and comprehensive banking regulations so far, but it is far from ideal. Next to some technical shortcomings, the package fails to address the sometimes twisted morale partly responsible for the current crisis. It seems that the EU fails to recognise that, just like changing the rules of a Pokémon battle will not suddenly make Team Rocket better persons, these rules will not suddenly revolutionise banking ethics.
1: Robert Peston. (2013). Barclays’ Salz Review blames bank culture. Retrieved from http://www.bbc. co.uk/news/business-22012261 2: Dorota Kolinska. (2013). EU Bank Capital Requirements Regulation and Directive. Retrieved from http://www.europarl.europa.eu/news/en/pressroom/ content/20130412BKG07195/ html/EU-Bank-Capital-Requirements-Regulation-and-Directive 3: Bank for international settlements. (2013). International regulatory framework for banks (Basel III). Retrieved from http://www. bis.org/bcbs/basel3.htm 4: European Banking Authority (EBA). (2013). The Single Rulebook. Retrieved from http:// www.eba.europa.eu/regulationand-policy/single-rulebook;jsessio nid=E606DB8E4522A061D4FF 80457E812953 5: EurActiv. (2013). Parliament gives green light to cap bankers’ bonuses. Retrieved from http:// www.euractiv.com/euro-finance/ parliament-curbs-bankers-bonuses-news-519181 6: European Banking Federation (EBF). (2012). Position of the European Banking Federation on the proposals for a Single Supervisory Mechanism (SSM). Retrieved from http://www.ebf-fbe.eu/uploads/ D1794D-2012-Final%20EBF%20 position%20on%20a%20Single%20Supervisory%20Mechanism%20%28SSM%29.pdf 7: Jill Treanor. (2013). EU bonus cap could double bankers’ salaries, City regulator warns. Retrieved from http://www.guardian.co.uk/ business/2013/may/20/europebonus-cap-bankers-salaries-fca 8: Seth Thomas. (2013). The problem with banking culture. Retrieved from http://blogs.bsg. ox.ac.uk/2013/04/01/the-problem-with-banking-culture/ 23