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Did Europe's Blatant Indecisions Lead to FYR Macedonia switching to a Novel Conservative pro-Putin Side?
Posted on Sustainabilitank.info on May 23rd, 2015
From pro-American to pro-Russian? Nikola Gruevski as a political chameleon.
A former staunch ally of the US-led War on Terror, Macedonia PM Nikola Gruevski has gradually turned his country away from the west towards Russia – all the while keeping his neoconservative ideology intact.
Meanwhile, political analysts have detected a certain rift in the relations between Skopje and the West which has resulted in the Macedonian government's more decisive reorientation towards Moscow.
From one neocon to another:
The latter objective was achieved via the recruitment of a younger pool of cadres. Following a widespread trend all over Southeast Europe (e.g. Albania's Edi Rama and Serbia's Vuk Jeremi?), the party's central committee and later the Cabinet of Ministers consisted of young, aspiring and, often, Western-educated individuals (e.g. the Foreign Minister between 2006 and 2011, Antonio Milošoski). Moreover, Gruevski maintained the central aspects of Georgievski's strategy of rapprochement vis-à-vis the ethnic Albanian community.
Despite this, Gruevski's term in office has been marked by the emphatic endorsement of Neo-Macedonism to the detriment of the modernist narratives over the Macedonian ethno-genesis in the nineteenth century. The adoption of Neo-Macedonism became further institutionalized through the endorsement of grandiose architectural projects, largely inspired by classical antiquity, which commenced in 2010.
On the domestic front, the Socialists/SDSM and other opposition circles accused the government of investing a disproportional percentage of the state's budget on these projects. In foreign policy, the emphasis on Neo-Macedonism further complicated relations with the southern neighbour, Greece.
Since the early days of Nikola Gruevski's term in office, the 'new' VMRO-DPMNE drew inspiration from the rather influential trend of neoconservatism among policymaking circles in the US. As it was the case with various other statesmen in Central and Southeast Europe (e.g. Romania's Traian B?sescu), Nikola Gruevski underlined his firm commitment to Euro-Atlantic institutions and opted for the rapid liberalization of the economy along post-Keynesian lines.
Meanwhile, Gruevski constantly stressed his deep faith in God and highlighted the significance of Eastern Orthodoxy and its system of moral values as a fundamental pillar of the state's identity. In the field of foreign policy, Nikola Gruevski soon emerged as a staunch supporter of George W. Bush's policy-doctrine on the Middle East. Throughout the 2000s, FYR Macedonia had dispatched military personnel to Afghanistan and Iraq under the auspices of the US-led 'Coalition of the Willing'.
The pendulum shifts: Fluctuating geopolitics and disillusionment with the West
Meanwhile, the simultaneous advent of the economic crisis made European policymakers more introverted and reluctant to the prospects of the EU's wider enlargement. With specific regard to FYR Macedonia, European policymakers and political analysts soon stroke a critical stance towards Nikola Gruevski and his apparatus. The main areas of concern were symptoms of nepotism and authoritarianism as well as accusations over the relentless propagation of 'ethno-kitsch'.
This shifting landscape in global and regional politics had direct ramifications on the government circles in Skopje. Several commentators have argued that delaying the state's accession to Euro-Atlantic institutions runs detrimental to FYR Macedonia's stateness and it is largely to account for Skopje's disillusionment with the West. From a more 'ideological' angle, though, the change of guard in the White House and the subsequent adoption of a new US foreign policy doctrine are not to be overlooked either.
In other words, Nikola Gruevski's government has lost much of the patronage that it enjoyed during George W. Bush's tenure in office. Moreover, we are currently experiencing the transition from a unipolar to a multipolar world order. The last few years have witnessed the consolidation of semi-authoritarian models of governance among emerging regional actors (e.g. Recep Tayyip Erdo?an in Turkey and Vladimir Putin in Russia). The latter development has encouraged the, if only subtle, admiration of certain statesmen throughout Central and Southeast Europe towards the above-mentioned models.
For instance, Hungary's Viktor Orbán recently coined the concept of illiberal democracy. According to the Hungarian PM, 'it is not an imperative that contemporary democracy must be structured along the ideological frame of Liberalism…there can be numerous other models of democracy in Europe, nowadays'. Moreover, Viktor Orbán has also positioned Hungary's foreign policy more solidly within Russia's orbit of influence.
In particular, both FIDESZ and VMRO-DPMNE converge along a common axis. Both are post-Communist parties that commenced their engagement in politics as, anti-establishment, umbrella-initiatives that hosted a wide range of conservative as well as liberal standpoints. However, in the long run, local adaptations of neoconservatism evolved into the dominant intra-party trend.
Nikola Gruevski and/or Viktor Orbán are not merely unhappy with the outlook(s) of Euro-Atlantic institutions on their respective states or the way(s) that their rule has been portrayed in the Western press. They have also isolated specific elements in Vladimir Putin's leadership which they deem rather akin to their brand(s) of neoconservatism. These are, namely, Russia's leader-centred and strong government, the promotion of national and Christian values, and the safeguarding of 'naturally ascribed' gender-roles.
Especially in the light of a multipolar international system, one might contend that the neoconservative, ideological, core in parties such as VMRO-DPMNE and/or FIDESZ has remained intact despite the, apparent, foreign policy readjustment towards Moscow.
Pro-government circles have hinted at the involvement of 'foreign decision-making centres' who are not particularly content with the bilateral cooperation between Russia and FYR Macedonia. In the other end of the spectrum, opposition circles have suspected the government of engineering the Kumanovo troubles in an attempt to play the card of 'national unity' as a last resort. A third assumption that has not been examined to an adequate extent is the possibility of a peculiar, yet amorphous, blend between Albanian ethno-nationalism and elements of Islamic fundamentalism along the lines of the 'Chechen precedent'.
Russia, on its part, has been quick to point the finger for both the Kumanovo incidents and the anti-government mobilization at the West. The US and the EU have been accused of orchestrating one more 'Maidan-style' coup with the aim to destabilize the government and obstruct cooperation with Russia in energy issues.
Russia Today and other pro-Kremlin media outlets dedicated considerable time to the coverage of pro-government demonstrations where Russian flags also featured among the crowd. Quite a few Western political analysts have expressed the wishful thinking that Nikola Gruevski may be forced to resign under popular pressure and be replaced by a coalition government with a Euro-Atlantic orientation.
Apart from nominally right-wing parties, centre-left statesmen in the region have also detected, albeit more subtly, some 'positive' aspects in Vladimir Putin's pattern of governance (e.g. the Bulgarian Socialist Party/BSP and Slovakia's SMER). Therefore, in order to grasp such chameleonic mutations more adequately, one should also pay close attention to political culture among post-Communist parties in Central and Southeast Europe and its evolution.
Related Articles: The deep roots of Macedonia's current turmoil – and the way forward – Heather Grabbe -the same source.
Heather Grabbe 13 May 2015, openDemocracy, London
The country must avoid just replacing the driver in the seat of a captured state machinery – by increasing inclusion and pluralism in governance. This will be impossible without EU and NATO assistance.
For nearly two decades, Macedonia has been a pressure cooker of public anger at corruption, deteriorating governance and chronic unemployment. Now the valve has blown. This year, union-organised strikes were followed by student protests against flawed education reforms. Then the opposition party released recordings of conversations that exposed government wire-tapping of more than 20,000 citizens. Quickly dubbed "bombs", these recordings were released over the last three months by the main opposition party leader at press conferences. On them appear the voices of Prime Minister Nikola Gruevski, senior officials, journalists, judges and security officials conspiring in electoral and judicial fraud, and organising systemic corruption. On the latest, released on 4 May, the prime minister discusses with interior ministry officials a cover-up of the murder in June 2011 by one of his bodyguards of 21-year old Martin Neshkovski, a student who supported the ruling party.
These revelations have led to a new wave of protests, led by grassroots networks of civil society rather than the opposition party. The young activists have become more radical in their demands under sustained attacks by riot police and government infiltrators, who provoked the protestors for five nights in a row. Last Friday, they pledged to come back to demand the resignation of the prime minister. Then the population awoke on Saturday morning to news of what the government called a "terrorist attack" in an ethnically mixed neighbourhood in Kumanovo, a town near the Serbia/Kosovo border. The results were the deaths of police officers and arrests of alleged terrorists. The government-controlled media called for unquestioning support for the government, and labelled as a traitor anyone who disputed the official interpretation of events. What is going on? Is this a security crisis or a consolidation of power by the ruling party in the face of mounting opposition?
High stakes – but for security or politics?
The shootings in Kumanovo have woken up the rest of the world because they are reminiscent of the security crisis fifteen years ago, when ethnic Albanians took to the hills with their guns to demand rights, representation and jobs. The country narrowly escaped a full-blown civil war thanks to the Ohrid Agreement, which gave the Albanians greater political and economic inclusion, including quotas for public-sector jobs and parliamentary seats.
It was NATO and the EU that took responsibility for Macedonia's security in 2001, with Javier Solana, as EU High Representative for Foreign Policy at the time, and George Robertson, then NATO Secretary-General, as the main negotiators at Ohrid. But the current crisis is not primarily driven by ethnic tensions. The security framing by the government obscures a much deeper crisis in the body politic, and a looming one for the economy.
After 24 years of independence, Macedonia's model is crumbling. The ruling party has held onto power by controlling the state and media, and borrowing on international markets to keep the economy going. This has undermined the country's fragile democracy – despite the promises made at Ohrid, which are still not fully implemented – and failed to build rule of law and a sustainable economy. Prime Minister Gruevski won power nearly a decade ago on promises of clean government and economic development. But he then perfected the system of clientelism and state capture begun by Branko Crvenkovski, his predecessor as opposition leader and prime minister, and later president. Gruevski has used snap elections twice to keep his party in power, and his leadership has become increasingly coercive. The wiretap recordings have confirmed that his VMRO-DPMNE party has captured all vital areas of the economy and established complete control over media, even imprisoning critical journalists. Macedonia's ranking has fallen from 36 to 136 in the freedom of media index produced by Reporters Without Borders.
The government dispensed with parliamentary debate at the end of 2013. Faced with a short deadline to approve the next loan to pay pensions before the Christmas and New Year holidays, they forcibly expelled the opposition and media from the parliament during a debate over the state budget rather than find an agreement.
The public is scared. More than half of Macedonians believe they cannot freely express their opinions. A staggering 81 percent believe that fear of consequences for them and their families prevent them and others from speaking out. Their political fears are heightened by their economic vulnerability.
The chronic economic malaise underlying acute political crisis.
The Macedonian economy appears to be financially stable. The government nurtures an image of business promoter and responsible borrower. Until recently, it was the region's poster child for the International Monetary Fund and the World Bank. European banks were happy to earn good returns on Macedonian state bonds. Macedonia's average GDP growth of 3% in the last three years is the highest in the region, completing this picture of prosperity.
But the economy is not sustainable. The government has used debt financing to invest in grandiose infrastructure projects, including the flagship "Skopje 2014" project, which erected statues and faux-classical buildings in the capital at a cost of over 600 million euro. Between 2008 and 2014, Macedonia's public debt quadrupled, rising from 23% of GDP in 2008 to around 46% in 2014. Debt is projected to reach the 60% ceiling prescribed by the international financial institutions by 2019. The state budget increased by a third over the same period (from roughly 2 to 3 billion euro). Inflows of foreign direct investment averaged only 2.8% of GDP per year between 2009 and 2014, low even by regional standards.
Life for citizens has become more precarious. Around a third of the workforce is unemployed, the second highest rate in Europe after Kosovo. Without the heavy borrowing, the fragile economy could not sustain more than 300,000 pensioners, who rely on the state budget for half of their needs. Nor could it afford to pay the huge number of state employees. The last official number was 140,000 in 2008, and latest estimates range from 200,000 to 255,000. The total number of people employed in Macedonia is 700,000 – meaning that the state employs nearly a third of the workforce. No wonder people are leaving to seek better prospects abroad. A census has been postponed by the government, but Gallup estimates that more than 300,000 people have left the country. According to Deutsche Welle, most of the 120,000 Macedonians who acquired Bulgarian passports have already emigrated to the EU or elsewhere. Macedonia seems to have more registered voters (at 1,780,128) than residents.
VMRO-DPMNE has kept its hold on power in this unhappy state by resorting to strident nationalism and intimidation of its opponents, increasing the divisions in a multi-ethnic country. Ethnic Macedonians are understandably aggrieved by the lack of a solution to the dispute with Greece over the country's name, which already blocked entry to NATO – and Gruevski has adroitly used the issue to rally nationalism in support of the government. Meanwhile, the ethnic Albanian political parties have been co-opted by their share in the spoils of mis-governance, even though their people remain even more alienated and poorer than the rest of the population.
The divisions are deepening right across society. Three-quarters of ethnic Albanians still firmly believe in EU and NATO accession as the way to a better future, but by now over 62 percent of other Macedonians think badly of joining the EU. Three-quarters of the ruling party's supporters see the name dispute with Greece as the key reason for Macedonia's now bleak EU accession prospects; but only 20% of opposition supporters agree. The biggest divide is between rich and poor, especially along party lines. The poor are undoubtedly getting poorer: resources available to the poorest fifth of citizens fell by 38% between 2008 and 2012. But business profits have grown by almost two and a half times since the year 2000. Nearly 80% of all Macedonians believe it is unfair that employment in state institutions and general prosperity is based on political party membership.
Macedonia is once again becoming a security threat on the EU's borders. But this time it's different: a non-partisan civic movement has taken to the streets for the first time to change the country. There is a real opportunity to use this energy to build democracy and a market economy in this multi-ethnic state.
No party is doing well in Macedonia: the secret recordings have lost the government all credibility, but the public has little faith in the leaders of the opposition and ethnic Albanian parties either. The immediate solution lies in collective action first by all those who have created the problem.
Now that three of the prime minister's key allies have tendered their resignations, Macedonia should turn again to the solution that averted the civil war in 2001: a unity government composed of the four main parties. To foster the necessary compromises and offer a fresh start. it would not include the current prime minister, public prosecutor or speaker of the parliament – but opposition parties must be involved in open and credible oversight of the intelligence agencies, and take responsibility for the discredited interior ministry.
The most promising scenario is a government of national unity that lasts for 12-18 months, to prepare the country for free and fair elections, and create an independent commission to investigate all the events since the opposition was violently ejected from the parliament in 2013. And it should agree on a common negotiating platform on the name dispute with Greece. Macedonia's newly reinvigorated civil society should also contribute to the work of the parliamentary commissions and monitor the new government's progress in restoring the accountability of public institutions. The country must avoid just replacing the driver in the seat of the captured state machinery, by increasing inclusion and pluralism in governance.
As so often in the Balkans, such a scenario will be impossible without EU and NATO assistance. The default position among EU foreign ministers is to expect sovereign countries to sort out their own political problems through democratic institutions. But after a decade of unconsolidated democracy and state capture, Macedonia does not possess those institutions. Therefore, other levers of influence are needed. NATO could offer a tangible incentive to all parties by offering a possibility to re-open membership talks. EU accession negotiations are far off because so much time has been lost on necessary reforms, but the enlargement process is vital to offer hope, especially to the ethnic Albanians, and guidance to reformers who are seeking to take back captured parts of the state. The support of EU institutions, member-states and banks is vital for the country's macroeconomic stability. Neighbouring governments could also exert more pressure, as their own security is at stake. Bulgarian Prime Minister Borisov was the first to request Gruevski to step down.
The EU can no longer afford to indulge a model of governance in Macedonia that has been far more aggressive in its authoritarian zeal than nearby Montenegro or Turkey. The European People's Party has a particular responsibility to get involved, having accepted and protected VMRO-DPMNE as a sister party for all these years. Now it must act to uphold the standards of democracy on which it was founded, by putting pressure on VMRO-DPMNE to relinquish its grip on power and join a unity government. The time to move is now, as the costs of inaction will continue to rise.
The Media Creating EU policy on Greece forced Greece to Act Not in its Best Interests. The Media just did not deal with substance when attacking the Syriza Finance Minister.
Posted on Sustainabilitank.info on April 28th, 2015
from: kurtbayer.wordpress.com/2015/04/…
Kurt Bayer's Commentary
The international media rejoice in the fact that Greek Prime Minister Tsipras has removed finance minister Varoufakis from his role as the main negotiator with the EU authorities about the completion of the second bail-out program, which should release another 7.2 bill € to the Greek government.
During the past two months, much more attention was given to Varoufakis' outfits, his mode of transport, his style, his eccentricities than to the substance of the Greek negotiating position. Admittedly, Varoufakis' personal style must have been infuriating to his ECOFIN colleagues whom he lectured on how wrong their anti-crisis economic policy was.
True, his interventions were longer on generalities than on detail, because in order to argue that Eurozone policy had failed, detailed program assessments were not necessary: the fact that Eurozone output is still below its pre-crisis Peak (-24% for Greece), unemployment more than one third higher (25% for Greece), the combined debt Ratio 15 percentage points higher (now nearly 180% for Greece) should – in a rational discussion atmosphere – suffice to make a point. However, Varoufakis massively misjudged the Eurozone ministers' readiness to engage in a constructive, very principled dialogue about the direction of Eurozone economic policy with a tiny Eurozone Country which had massively underperformed for decades, and needed help. While such a discussion would be more than called for, Varoufakis' presumption that the dismal Greek case was the moment and opportunity to do this, was wrong: his ministerial colleagues would not have this, period!
Not one of the mainstream papers or media reported on the conflicts in substance between the new Greek government and the Eurozone Ministers.
Rather, the gist of the stories was "that the Greeks refused to deliver". Very little mentioning of the fact that the disfunctionalities of the Greek economy and society were not the responsibility of the new government, but rather that of the previous government parties – which the populace had removed from government in the last election.
No mentioning of the fact that the new government program puts first emphasis on (admittedly under-defined) growth strategies, instead of crippling the economy even further.
It seems that the European Mainstream media are so enthralled with the morals-based disciplinary arguments of the Eurozone Finance Ministers and heads of State ("old Agreements must be honored no matter what") that they forget that democratic elections are the backbone of Europe, that the miserysation of large swaths of Greek population warrants rethinking of the strategy, that support from the Greek population for the anyhow very difficult recovery of the Greek economy, is crucial for the viability of an agreed program, and for the survival of the Eurozone. What is needed is to bring the Greek government to its feet.
To get the new Greek government thrown out, in order to bring the old Mainstream parties back, cannot be the consideration for driving finance ministers' negotiations with the difficult Greeks, or can it?
An Open Letter to the Eurogroup Meeting on Feb. 11, 2015
The Greek Crisis as a Lesson for the Eurozone – In "Crisis Response"
Laokoon and the Serpents – In "Crisis Response"
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trollwickk on Neue Demokratisierungsvorschläge – das Grünbuch von #besserentscheiden
Posted on Sustainabilitank.info on February 5th, 2015
The so called Islamic State has shown that there is no limit to their subhuman nature. It is first for all God Fearing Muslims to act against them – and also for all Europeans that remember what happens if you accept something like the Holocaust – to rally behind decent Muslims and help them exterminate this 21st Century insanity that came into our living rooms via the sensationalism loving corporate mass media.
King Abdullah II has done the right thing terminating by hanging the life-license of convicted mass-murderers. The IS leaders that managed her wanted her release in exchange of a Jordanian pilot whom they burned alive five weeks ago and released only now a video showing that act thinking that this will frighten us to submit some more to them. Weak minded people of the West might indeed equivocate and wait uselessly for a sign from the oil-sellers that taking serious steps against this menace is allowed.
The Jordanian pilot was shot down over the city of Rakka – the capital of their Islamic State located in what used to be called Syria – on Christmas day 2014 – in an American led bombing action. The immediate reaction called for now is for Jordan to obliterate the city of sin – Rakka – and for Europe to applaud such an action. Just remember that in 1942 the US refused to save innocent people by refusing to bomb the railways leading to the extermination camps. We did not forget and the Arabs are called not to forget now that burning pilot.
Further, and we do not feel this is unrelated – we call for Europe to unite under an Angela Merkel – Merkel Plan for a strong European Union – by starting with a plan to deal with the insolvency of the Greek State by seriously reducing their debt that was instigated by irresponsible capitalism pushing money on folks they knew had no economy that would ever return those funds.
It is rather a United Europe that could back States like Jordan – to do the right thing in the face of the 21st century scourge.
Next, we need a Green Economy to repair the devastation caused by the income-inequality fossil fuel economy over the last 40 years. Justice requires the wealthy to voluntarily adopt a Maximum Income to help repay their debts to society that came from taking money from people and treasuries and transferring it to oil exporters that then used it to fuel this pseudo-Islamic fury.
Muslim Outrage Against Islamic State after Killing of Jordanian Pilot – Liz Sly and Hugh Naylor
Declarations of outrage swept the Middle East on Wednesday as the spectacle of an Arab pilot being burned alive in a cage triggered some of the harshest reactions yet. The pan-Arab daily al-Hayat headlined its coverage: "Barbarity," while Iyad Madani, secretary general of the Organization of Islamic Cooperation, condemned the killing as an affront to Islam. "Most of the people executed by [the Islamic State] have been foreigners, but this time it was an Arab Muslim man," said Labib Kamhawi, a political analyst ba sed in Amman.
See also Muslim Clerics Denounce Burning Alive of Pilot as Un-Islamic – Sami Aboudi and Suleiman Al-Khalidi
The Grand Sheikh of Al-Azhar, Ahmed al-Tayeb, Egypt's top Muslim authority, said the killers themselves deserved to be "killed, crucified or to have their limbs amputated." In Qatar, the International Association of Muslim Scholars, headed by Youssef al-Qaradawi and linked to the Muslim Brotherhood, called the burning of t he pilot a criminal act. (Reuters)
So what now?
Can Bolivia Chart a Sustainable Path Away From Capitalism? Will Greece try to come up with a Pachamama and an ALBA Charge? In this Globalized economy can a State honestly drop out and isolate itself?
Posted on Sustainabilitank.info on January 29th, 2015
Can Bolivia Chart a Sustainable Path Away From Capitalism?
FOR THE FULL ARTICLE PLEASE GO TO: truth-out.org/news/item/28778-can…
The number of conflicts over natural resource extraction and refining, road building and pipeline construction, and forest and water use have all steadily grown under Morales.
Ruthless extraction of Bolivia's bountiful natural resources has concentrated the natural and social wealth of the country in a small group at the top of society, and exposed Bolivians to an extreme degree of imperial intrigue and attempted subjugation.
In stark contrast to monoculture farming, several hundred different varieties of potato are grown in the Bolivian Andes, as a resilient subsistence food by 200,000 small-scale farmers.
With the melting of the Andean mountains ice and climate change farmers no longer know how community can grow food because "it now rains at all different times, and it's drier for longer. This place did not used to be as hot as it is now."
Higher average temperatures will lead to an increase in evaporation, causing soils to dry out. In turn, drier soils will increase erosion and loss of topsoil, an effect that will be compounded by two other effects of a warmer climate.
But for all of Morales' rhetorical championing of "buen vivir," Gudynas believes that the MAS government instead operates more along the lines of a new form of Keynesian neoliberalism, or what he calls "neo-extractivismo."
And despite a change in official rhetoric, and some welcome redistribution of wealth, Morales' policies are practically the same as his predecessors' with respect to natural resource extraction.
"We have lost an opportunity for something based on our self-organization and self-management."
"The people do not decide; the government decides. Despite the constitution guaranteeing rights for indigenous people and Mother Earth, those policies are not implemented; they are just words."
As through so much of its history, the small Andean nation of Bolivia sits at the center of a whirlwind of political, social and climatological questions. Arguably, no other country thus far in the 21st century raises the question of an "exit strategy" from neoliberal capitalism more concretely, and with greater possibility and hope, than Bolivia. That hope is expressed specifically in the ruling party, MAS, or Movement Toward Socialism. The country's leader, former coca farmer and union organizer Evo Morales – South America's first indigenous leader since pre-colonial times – was overwhelmingly elected to his third term of office in 2014. Morales has broadly popularized the Quechua term pachamama, which denotes a full commitment to ecological sustainability, and public hopes remain high that he'll guide the country toward realizing that principle.
Bolivia has seen impressive and consistent economic growth since Morales' first election victory in 2006, including the establishment of government programs to alleviate poverty and attain the social equity goals promised in his campaign. However, this growth has primarily rested on an expanded and intensified exploitation of the country's natural resources, principally from fossil fuel production, mining, and the growth of large-scale, mono-crop agriculture and manufacturing.
This economic growth has also created what the Bolivian non-governmental organization CEDLA (Centro de Estudios Para el Desarrollo Laboral y Agrario) calls the rise of a new bourgeoisie comprised of Santa Cruz agriculture producers, traders from the west of the country and small mining producers. The Bolivian government also believes that a new class is emerging, and will become Bolivia's new dominant group. Carlos Arce, researcher from CEDLA, says in an article in the Bolivian press:
A new type of entrepreneur has emerged from the popular classes. These emerging strata are mostly traders and are also present in the cooperative sectors, especially in mining. This new type of entrepreneur saves more and has a more austere mentality, in the classical Weberian sense. Within the state, representatives of this strata interface with middle-class intellectuals and other sectors of society, seeking to build alliances with small urban and rural producers that respond to the prerogatives of the market.
The so-called "plural economy" institutionalized by the government recognizes the state, communitarian, private and cooperative forms of economic organization. It also puts the state in direct control of the plans for economic development. In other words, the Bolivian people are the owners of the natural resources, but it is the state that administers and industrializes these natural resources.
In Arce's view, the government exalts this new "emerging bourgeoisie." The government's program of a plural economy "facilitates the alliance of these market-driven sectors with key sectors of international capital. This opens the door to transnational corporations and makes permanent their presence."
In December 2014, the Financial Times reported on the rise of a new indigenous bourgeoisie in El Alto, less constrained by older cultural ties of thrift, and striving for greater wealth, more ostentatious luxury buildings and opulent traditional clothing.
On the other hand, while many journalists and analysts have focused on the accomplishments of the Morales' government, few have looked at the state of the labor force, unions and labor conditions. Research by local organizations shows that finding secure employment has become very difficult. According to the Bolivian Labor Ministry's own data just 30 percent of the labor force in Bolivia has a secure and formal job, with almost 70 percent working in the informal sector. These workers have no employment security, which makes people more dependent on welfare protections and programs that have become more elaborate and extensive in recent years.
Bolivia's geography is very diverse: The verdant and tropical Amazonian lowlands give way to the austere beauty of the highlands and snow-capped peaks of the Andes that ring the capital, La Paz. Bolivian elevations range from 130 to 6,000 meters above sea level dividing the country into three distinct geographical areas: the high plateau, the Andean valleys and the eastern lowlands.
Given all of these factors, Bolivia offers a case study on the impact of climate change, people's resistance to exploitation and racist oppression, and the potential for genuine change from below.
Much of that resistance was formed in response to centuries of relentless extraction of the country's minerals, semi-precious and precious metals, and guano. Following the privatization of Bolivia's public airline, train system and electric utility, in 1999, the government sold the water and sanitation system of Cochabamba to a transnational consortium. Over the following five months, mass demonstrations and violent confrontations with the police and military forced the government to cancel the contract and keep the water supply in public hands. This popular struggle for public control of water became recognized worldwide as the Cochabamba Water War.
Marcela Olivera
Marcela Olivera is a water commons organizer based in Cochabamba, Bolivia. After graduating from the Catholic University in Cochabamba, Bolivia, Marcela worked for four years in Cochabamba as the key international liaison for the Coalition for the Defense of Water and Life, the organization that fought and defeated water privatization in Bolivia. Since 2004, she has been developing and consolidating an inter-American citizens' network on water justice named Red VIDA.
Chris Williams is an environmental activist and author of Ecology and Socialism: Solutions to Capitalist Ecological Crisis. He is chairman of the science department at Packer Collegiate Institute and adjunct professor at Pace University in the department of chemistry and physical science. His writings have appeared in Z Magazine, Green Left Weekly, Alternet, CommonDreams, ClimateandCapitalism.com, Counterpunch, The Indypendent, Dissident Voice, International Socialist Review, Truthout, Socialist Worker and ZNet. He reported from Fukushima and was a Lannan writer-in-residence in Marfa, Texas. He recently was awarded a Lannan Cultural Freedom Fellowship.
Cyprus is trying a relationship with Greece and Israel. North Cyprus has shown interest in this as well. Could this be a novel Middle East diplomacy?
Posted on Sustainabilitank.info on August 12th, 2013
Cyprus Mail, Monday, 12th August, 2013
Israel's minister for energy and water resources, Silvan Shalom spoke this prospect on Wednesday. He said: "The fact that we are here shows that we do not only work well on (issues concerning) water, but it's also about geopolitics, strategy and political issues among the three countries."
While the good intentions exist, so far, most plans of co-operation exist in the realm of theory, nothing tangible having been decided, let alone agreed. The memorandum provides a framework for exploring the feasibility of joint projects – one envisages linking the three countries through an underwater electricity cable, a second would involve an underwater gas pipeline linking the Eastern Mediterranean to Europe via Greece and the third relates to LNG storage facilities in Cyprus. But these projects might not even be viable – feasibility studies would have to be undertaken.
There is no shortage of ideas for co-operation. During Shalom's visit there were also reports that the Israeli Electricity Company had proposed to supply Cyprus with cheaper electricity through an underwater cable. And when Cyprus started to produce cheap electricity, the flow could be reversed with Israel buying power from the island. Such an arrangement would make the agreement for the temporary supply of natural gas, that the government is currently negotiating, unnecessary.
While plenty of proposals are floating about, it was only a memorandum of understanding that was signed yesterday. There is a very long way to go before any of the plans take shape and are implemented. When this happens, we can talk about historic agreements, geopolitics and strategy, but at present such talk seems premature. What can be said was that yesterday's signing of the memorandum was an important first step – a declaration of intent – but the words need to be followed by actions if the 'historic agreement' billing is to be justified.
Posted on Sustainabilitank.info on July 27th, 2013
Posted: 25 Jul 2013 08:49 PM PDT
Cyprus Oil SpillBetter call out that airborne Mediterranean pollution surveillance crew Tafline just wrote about! Last Tuesday, an oil tanker delivering fuel to a power plant in the Turkish Cypriot-controlled north of Cyprus spilled approximately 40 tons of oil into the Mediterranean Sea.
In a separate report, officials estimated more than 100 tons of oil were spilled near pristine coastline, threatening wildlife and tourism facilities. There has been no explanation for the conflicting fuel estimates.
A spill barrier has been established but officials, anticipating additional leakage, are seeking to extend it, Turkish Cypriot Environment Minister Mehmet Harmanci told Reuters in a telephone interview. He described the risk as "ongoing".
According to Harmanci, power plant owner Aksa Enerji pins the spill on a pressure problem or an improper connection in the pumping process. Human error has not been ruled out.
Local authorities were struggling to contain the slick which extends for 4.5 miles along the Karpasia peninsula. Clean-up materials, including oil-absorbing solvents, were ordered from Turkey but, as of this writing, delivery has been delayed.
cyprus-oil-spillThe Karpasia peninsula, which stretches approximately 50 miles, boasts unspoilt beaches and a rich variety of wildlife. The area is a recognized nature reserve that serves as a breeding ground for rare turtles, with July and August the most critical months for spawning.
It is one of the last undeveloped areas in Cyprus, in large part due to stalled development attributed to international sanctions that stunt the northern Cypriot economy. The region's biggest tourism area, the nearby town of Bafra, is also threatened.
As reported by World Bulletin, only Turkey recognizes the Turkish Cypriot administration, while the rest of the world sees the Greek Cypriot government as the sole authority in the island. Cyprus was divided between Turkish and Greek Cypriots in1974, when Turkish forces invaded in the wake of a short-lived coup by Greek Cypriots seeking union with Greece.
Aksa said operations at the Kalecik power station were unaffected.
The objective that the EU enshrined in the Treaty – that it should pursue the welfare of its populations – seems to have been forgotten – writes Kurt Bayer. Ross Douthat, without clear analysis, thinks South Europe leaving the Euro will help. A solid further look by Brussels, not just Berlin, is needed.
Posted on Sustainabilitank.info on June 2nd, 2013
Are We Witnessing the Long-Awaited Turnaround in EU Economic Policy?
On May 29, the EU Commission (as well as OECD) published its assessment of the budgetary and reform programs of its member states and issued its "country-specific recommendations" – with the exception of Portugal, Greece and Cyprus which had already received their "adjustment programs" earlier.
Media reporting focused on the extension (by 2 years) of the time by which some countries have to achieve their medium-term objectives, and on President Hollande's rebuke of the EC's recommendations for France.
Commission President Barroso spoke of the need to loosen the consolidation efforts and to start combating unemployment, especially for youths. 6 bill EUR should be available for this purpose. Suddenly, promoting growth is no longer a taboo. The recent Franco-German announcement of an impending
Still, Barroso (and the EC) thinks that "structural reforms" in goods and labor markets are the key to growth, and thus need to be speeded up. His (marginal) slowing down of austerity is not based on the recognition that the EU crisis strategy has proven to be a complete failure, but "only" on the lack of political acceptance by the unemployed citizens of the EU.
It seems to be impossible for politicians, both national and supranational ones, to admit past mistakes. But this would be the pre-requirement for a turnaround. Barroso and the others act as if everything so far had been going according to plan, had been successful, and that now one just adds another element to the heretofor successful strategy. This behavior, repression of facts, has been analyzed extensively by my late compatriot Sigmund Freud.
Technically, the EC assessed the Stability Programs and the Reform Programs. In its own words, by assessing them jointly, the EC purports to assess the complete economic policy of its member states. Let us look at the Austrian assessment as a case in point.
Economic growth is mentioned only with respect to the Austrian forecasts which underlie the programs – which are seen as being too optimistic. The prime objective of the analysis is, as usual, the positively assessed path of budget consolidation. The medium-term objective (as structural deficit of 0.45% of GDP) should be achieved 2 years earlier than originally (2017) planned. But Austria's public expenditure share path again is seen as too optimistic. With respect to the tax system, the EC tells the Austrians that the least growth-damaging real estate taxes are far below the EU average, and thus could be increased.
The most important points of criticism concern the labor market: the participation rates of females and seniors are by far too low, income differences between genders too high, the pension age for women creeps only marginally towards that of men, early retirement is still to prevalent; education achievements are under par, at the same time costs of the system too high, migrants are left behind. All this against the background of the recognition that (measured) unemployment in Austria is the lowest in the EU. The EC criticizes also inadequacies in financial market supervision between home and host countries, as well as too many barriers for professional services and for personal services in health and care sectors.
For all these areas, EC gives recommendations to speed up reforms. All these points are well taken (by me, not necessarily the authorities), but: their implementation alone, while important, does not generate growth. There is not enough emphasis on promoting innovation, on real problems with the tertiary education system, no mentioning at all about a positive growth expectation – which would require an increase in effective demand in Europe. The structural problems of the financial sector are largely ignored, with the exception of the possible budgetary consequences of winding down one of the nationalized banks.
Macropolicy is not mentioned, not in the Austrian assessment, not in the assessment of the Eurozone. There EC mentions the need to achieve an adequate policy mix by better coordination of budget consolidation and structural policies, but no word is lost on coordination between the fiscal stance of the Eurozone and ECB's monetary policy. This shows once more that macroeconomic policy is a foreign concept to the EC, that economic policy consists of budget policy cum supply side (micro) economics. Briefly, imbalances in foreign trade are mentioned, plus its necessary "rebalancing", but that is it. When reading the documents, one sees that the focus on individual countries' assessment virtually crowds out the assessment of the Eurozone and the EU as a whole. They are seen as the sum of the individual countries, but not as an objective of macroeconomic policy.
Conclusion: Nothing much has changed in the EU's policy orientation. While the soaring youth unemployment is – finally – seen as a major (mainly political) problem, austerity is slowed down and youth training programs are encouraged. But this is not a change in the mainly austerity-driven paradigm. It does appear that the requirements of the financial markets still drive EU economic policy, rather than the life expectations of the EU citizens. The recent news about the watering-down and delay of the Financial Transactions Tax are only one indicator of this. The objective that the EU should pursue the welfare of its populations, enshrined in the Treaty, seems to have been forgotten.
Op-Ed Columnist – THE NEW YORK TIMES.
Prisoners of the Euro
By ROSS DOUTHAT
Published by The New York Times: June 1, 2013
TO its custodians and admirers, the European Union is the only force standing between its member states and the age-old perils of chauvinism, nationalism and war. That was the pointed message that the Nobel Committee sent last year, when it awarded the union a Peace Prize for its role in "the advancement of peace and reconciliation, democracy and human rights." And it is the message hammered home relentlessly by the Continent's politicians, who believe their citizens face a stark choice, in the words of Chancellor Angela Merkel of Germany, between continued integration and a return to "centuries of hatred and blood spill."
But right now, the E.U. project isn't advancing democracy, liberalism and human rights. Instead, it is subjecting its weaker member states to an extraordinary test of their resilience, and conducting an increasingly perverse experiment in seeing how much stress liberal norms can bear.
That stress takes the form of mass unemployment unseen in the history of modern Europe, and mass youth unemployment that is worse still. In the Continent's sick-man economies, the jobless rate for those under 25 now staggers the imagination: over 40 percent in Italy, over 50 percent in Spain, and over 60 percent in Greece.
For these countries, the euro zone is now essentially an economic prison, with Germany as the jailer and the common currency as the bars. No matter what happens, they face a future of stagnation — as aging societies with expensive welfare states whose young people will sit idle for years, unable to find work, build capital or start families.
The question is whether they will face ideological upheaval as well. So far, the striking thing about the aftermath of the 2008 financial crisis, both in Europe and the United States, is how successfully the center has held. Power has passed back and forth between left and right, but truly radical movements have found little traction, and political violence has been mercifully rare.
In a sense, Francis Fukuyama's post-cold-war declaration of the "end of history" — by which he meant the disappearance of credible alternatives to liberal democracy and mixed-economy capitalism — has held up pretty well in the last five years. Amid the worst economic disaster since the Great Depression, illiberal societies like Egypt and Syria have faced political crises, but the developed world has not. There has been no mass turn to fascism, no revival of Marxist economics, no coup d'états in Madrid or jackboots in Rome.
But you have to wonder whether the center can hold permanently, if unemployment remains so extraordinarily high. How must liberal democracy and mixed-economy capitalism look to young people in the south of Europe right now? How stable is a political and ideological settlement that requires the rising generation to go without jobs, homes and children because the European project supposedly depends on it? And for that matter, how well is the Continent's difficult integration of Muslim immigrants likely to proceed in a world where neither natives nor immigrants can find work?
Already, the Greek electorate has been flirting with empowering a crypto-communist "coalition of the radical left," even as a straightforwardly fascist party gains in the polls as well. Hungary's conservative government has tiptoed toward authoritarianism. Spain has seen huge street protests whose organizers aspire to imitate the Arab Spring. And lately, Sweden, outside the euro zone but not immune to its youth unemployment problems, has been coping with unsettling, highly un-Scandinavian riots in immigrant neighborhoods.
These perturbations do not threaten democracy in Europe yet, and maybe they never will. Maybe the liberal democratic consensus is so bred into the bone that no amount of elite misgovernment can persuade Europe's younger generation to turn against it. Maybe nothing can end the end of history.
But for the countries facing a youth unemployment crisis, that still seems like an awfully risky bet to make.
Yet there's a Catch-22 facing Greeks and Spaniards and Italians looking for an alternative to just staying the course. As wrenching as it would be, the option that would do the most to defang extremists of the left and the right would probably be to abandon the euro immediately, with each country regaining control of its own fiscal and monetary policy and seeing what options open up. But at the moment, the only people arguing for that course are … the extremists of the left and the right!
For that to change, more of the Continent's political elites would need to recognize that their beloved integration project may actually be threatening Europe's long democratic peace. For now, there simply aren't enough responsible people ready to unwind what should never have been knitted together in the first place. But with every increase in the unemployment rate, the odds get better that irresponsible and illiberal figures will end up unwinding it instead.
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A version of this op-ed appeared in print on June 2, 2013, on page SR11 of the New York edition with the headline: Prisoners Of the Euro.
For the sake of our European Friends – There are two Europes Now – the Triple A North and the South that was kept alive by the image of a Common Market for the North. Oh Well – the Voters in the North seem to rebel now and call for the South to grow up.
Posted on Sustainabilitank.info on April 4th, 2013
The following is a presentation of facts that cannot be ignored anymore. Deserves close reading by those in the North that thought you can bumble your way through without creating a real union capable of calling out "it is all for one and not just one for all!" The EU is not just the fulfilling of the German dream of takeover of Europe by peaceful means. Cyprus dreaming of being the Mediterranean base of Russia? What else? Austria a bridge to the East? Yes, but only after twinning up with Finland.
Everyone learned a lesson from the "bail-in" of the Cypriot banks: Russian account holders who'd laundered and stored their money on the sunny island; bank bondholders who'd thought they'd always get bailed out; Cypriot politicians whose names showed up on lists of loans that had been extended by the Bank of Cyprus and Laiki Bank but were then forgiven and written off. Even brand-new Finance Minister Michael Sarris who got axed because he'd been chairman of Laiki when this was going on. His lesson: when a cesspool of corruption blows up, no one is safe. And German politicians learned a lesson too: that it worked!
"With the Cyprus aid package, it was proven that countries like Germany, the Netherlands, and Finland, if they stick together, are able to push for a strict stability course," Hans Michelbach told the Handelsblatt. The chairman of the finance committee in the German Parliament and member of the CSU, Chancellor Angela Merkel's coalition partner, called for deeper collaboration of the triple-A countries in the Eurozone "to strengthen the confidence of citizens and investors in the common currency."
There are still five in that euro triple-A club: Germany, Austria, the Netherlands, Finland, and Luxembourg. "It would be good if we could also convince Luxembourg to participate more strongly in this stability collaboration," he said. It would be in the best interest of Luxembourg as major financial center, he added. A reference to Luxembourg's precarious status, as Cyprus had learned, of being a tiny country with banks so large that it can't bail them out by itself.
To protect the euro, the alliance of the triple-A countries must be united firmly against large euro countries like Italy and France, he said. "Strong signals of stability would be of great importance for the Eurozone," particularly now, given the "unclear situation" in Italy, renewed doubts about Greece, and the failure of the French government in its stability policies.
Exactly what French President François Hollande needs: the euro triple-A club breathing down his neck. He's already in trouble at home. To reverse the slide, he got on state-owned France 2 TV last Thursday to speak to the French people so that they could see how his sincerity, wisdom, and economic policies would stop the country from sinking ever deeper into a quagmire.
And a quagmire it is: double-digit unemployment, a Purchasing Managers Index just above Greece's, new vehicle sales that plunged almost 15% so far this year, a budget deficit that refuses to be brought under control…. He has tweaked some policy measures here and there. And he dug up a new version of the 75% income-tax bracket that had been squashed by the Constitutional Court. But Jérôme Cahuzac, the Budget Minister who'd tried to get the first version through the system, went up in flames over allegations of tax fraud and "tax fraud laundering."
Now the people have had it. After the TV appearance, his approval rating, ten months into his term, plummeted another 6 points to 31%, a low that scandal-plagued Nicolas Sarkozy took four years to reach. And only 27% approved of his economic policies. "The French simply don't want austerity," lamented an unnamed government insider.
France was suffering the consequences of the "socialist experiments" of its government and was becoming less and less competitive, explained Michelbach. He emphasized that France would remain an important partner of Germany. He wasn't kidding: France buys 10% of Germany's exports and is crucial to the German economy. But if France didn't change course, he said, that could become a "serious problem" for the Eurozone.
As opposed to the mere hiccups of Cyprus or Greece. More banks and more countries will require bailoutsSlovenia, Spain, Italy, and Malta are on the list. And no one wants to see France on that list. Even Italy is too large to get bailed out by other countriesthough it's rich enough to bail itself out, à la Cyprus [ A "Politically Explosive" Secret: Italians Are Over Twice As Wealthy As Germans].
But in Germany, a revolt against these save-the-euro bailouts has been brewing for a while. With elections in September, it's taking on volume and voices, and the structure of a political party, the Alternative for Germany, not unpalatable radicals but the educated bourgeoisie, and they want to stop the bailouts and dump the euro.
The government is feeling the heat. No one can afford to lose votes. Michelbach's triple-A club, a line of demarcation in the Eurozone, is one of the reactions. Merkel might benefit from it in the elections. The other four countries might find if appealing, though it will be of dubious appeal in the rest of the Eurozone. But if efforts fail to fix the Eurozone's problemsand the Eurozone lumbering that waya tightly knit triple-A club could weather the storm together, more stable and more unified than the Eurozone ever was. And Michelbach had just floated a version of that idea.
Every country in the Eurozone has its own collection of big fat lies that politicians and Eurocrats have served up in order to make the euro and the subsequent bailouts or austerity measures less unappetizing. Here are some from the German point of view…. Ten Big Fat Lies To Keep The Euro Dream Alive
Wolf Richter wrote also – "White House Hypocrisy And Trade Sanctions Against China." - Practically every car sold in the US contains Chinese-made components. But suddenly, in the middle of a heated presidential campaign, the Obama administration decided to do something about it.
Wolf Richter is a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience.
In www.nakedcapitalism.com/2013/03/w… he explains "Having worked a bit on international deals, and for companies operating in foreign markets, cross border transactions have an even lower success rate than domestic ones. The big reason is the one mentioned here, which is marked cultural incompatibility between the seller and buyer. Here the Chinese did less badly than they could have (they could have tried forcing Chinese practices on the German operation, which would have destroyed the value of the asset). But the logic of the transaction was unclear. Was it technology transfer? Consolidation? It appears both might have been goals, and neither happened very much.
But I find it intriguing that as lousy as the Japanese were at doing deals (they found it hard to understand that the contract was the deal, and were too inclined to overpay), they were good at managing workers in manufacturing operations (service businesses were another kettle of fish, there they tended to drive Americans crazy). This is a skill the Chinese will have to master, since they desperately need to re-invest their surpluses, and they are trying to acquire more real-economy assets." FASCINATING.
His insights in Wall Street machinations are also very good.
The Media finally catches up to it – Cyprus – Will Russia get now a piece as it did years ago in Syria? This might be "plan D" that lets the potentially gas rich mini-State float away from the EURO and eventually the EU. Could an Obama Foray help by reconciling Turkey and Cyprus now that Greece was weakened by its own crisis?
Posted on Sustainabilitank.info on March 24th, 2013
Russian PM lectures Barroso on Cyprus.
Medvedev: 'The euro crisis has strengthened ideas that Europe is in decline.'
By Andrew Rettman
BRUSSELS - Russian Prime Minister Dmitry Medvedev humbled European Commission chief Jose Manuel Barroso in public remarks on Thursday (21 March) over the EU's handling of Cyprus.
Speaking alongside Barroso at a conference in Moscow, he called the EU's original Cypriot bailout idea "to put it mildly, surprising … absurd … preposterous."
"The situation is unpredictable and inconsistent. It [the bailout model] has been reviewed several times. I browsed the Internet this morning and I saw another Plan B, or a Plan C or whatever," he noted.
He upbraided EU institutions for failing to give Moscow due notice of its decision.
"The system of early warning did not work very well … that means we need to work on it," he said.
He also quoted unnamed Russian "eurosceptics" as saying: "The euro crisis has strengthened ideas that Europe is in decline in the 21st century … that the European project has turned out to be too cumbersome."
Earlier the same say, he told Russian newswire Interfax that he is thinking of reducing Russia's holding of euro-denominated currency reserves.
In a sign of broader Russian upset, Leonid Grigoriev, an academic and a former Russian deputy finance minister, told a separate news conference that Russian money is no longer safe anywhere in the EU.
"The Cyprus situation has created new uncertainty in the banking sector. People have started thinking whether the same can happen elsewhere, in Spain, Portugal, Ireland?" he said.
The EU's Plan A for Cyprus was to lend it €10 billion, but to impose a 7-to-10 percent levy on all Cypriot savers, including Russian expats, who alone stood to lose €2 billion.
It has now been scrapped.
It is unclear what new model might be found.
But the Cypriot finance minister, Michael Sarris, also in Moscow on Thursday, said he is in talks to give Russia shares in Cypriot "banks, natural gas [reserves]" in return for Russian bailout money.
For his part, Barroso told Medvedev that the EU could not have warned Russia even if it wanted to.
"Regarding the conclusions of the last Eurogroup [euro finance ministers, who drew up Plan A], Russia was not informed because the governments of Europe were not informed – let's be completely open and honest about that issue. There was not a pre-decision before the Eurogroup meeting. The Eurogroup meeting concluded, I think, in the very early hours of Saturday and the decision was the result of a compromise," he said.
He added: "Don't believe in this idea of the decline of Europe … The European Union is stronger than it is today fashionable to admit."
Leaked documents on internal EU talks seen by the Reuters news agency give substance to Russia's criticism, however.
The notes record remarks by finance officials from euro-using countries during a panicky conference call about Cyprus held on Wednesday.
According to Reuters, a French official said Cyprus' decision not to take part in the phone-debate is "a big problem … We have never seen this."
A German official said Cyprus might quit the euro and there is a need to "ring-fence" other countries from contagion.
A European Central Bank official said there is a "very difficult situation" because savers might pull money from the island if banks re-open next week.
Meanwhile, Thomas Wieser, an Austrian-origin EU official who chaired the phone-meeting, described the situation as "foggy." He added: "The economy is going to tank in Cyprus no matter what."
To the above we add that Turkey, its holding onto North Cyprus, and its interest in the gas fields that stretch from Cyprus to Israel and Lebanon, having first development seen by Israel, are part of the larger scope of the Cyprus potential move away from the EU. But, In effect, these other aspects might make the EU stiffen up in a bailing out effort conditioned only on reorganizing some of the Cypriot Banks – letting Russian oligarchs foot part of the bill – without selling to Russia port holdings in the Mediterranean. Seeing a Syria solution that drives out Russia from its port facilities there, may be part of the American interest in the region as well. In short – Cyprus is not Iceland – this because it is geographically located in a very complicated region of the Outer EU. Is it so that an Obama trip could help by forcing a Cyprus-Turkey reconciliation first?
We just found out that The New York Times is catching up:
White Smoke to be seen in Jerusalem so President Obama finds a government in place – though his people will still wonder who is the real Foreign Minister and Peace Negotiator. The situation is different then the one now in Italy's Rome, that may do well also without an elected government.
Posted on Sustainabilitank.info on March 15th, 2013
Uri Avnery
March 16, 2013
To the Victor, the Spoils.
IN THE days following the recent Israeli elections, Ya'ir Lapid, the major winner, let it be known that he wanted to be the next Foreign Minister.
No wonder. It's the hell of a job. You can't lose, because the Foreign Minister is responsible for nothing. Serious foreign fiascos are always laid at the door of the Prime Minister, who determines foreign policy anyway. The Foreign Minister travels around the world, stays in luxury hotels with gourmet cuisine, has his picture taken in the company of royalty and presidents, appears almost daily on TV. Sheer paradise.
For someone who declares publicly that he wants to become Prime Minister soon, perhaps in a year and a half, this post is very advantageous. People see you among the world's great. You look "prime ministerial".
Moreover, no experience is needed. For Lapid, who entered politics less than a year ago, this is ideal. He has all a Foreign Minister needs: good looks and a photogenic quality. After all, he made his career on TV.
So why did he not become Foreign Minister? Why has he let himself be pushed into the Finance Ministry – a far more strenuous job, which can make or break a politician?
Simply because the Foreign Ministry has a big sign on its door: Occupied.
THE LAST Foreign Minister, Avigdor Lieberman, was, probably, the least suitable person for the job in the whole country. He is no Apollo. He has an air of brutality, shifty eyes and spare vocabulary. He is unpopular everywhere in the world except Russia and its satellites. He has been avoided throughout by most of his international colleagues. Many of them consider him an outright fascist.
But Netanyahu is afraid of Lieberman. Without Lieberman's parliamentary storm troopers, Likud has only 20 seats – just one more than Lapid. And within the joint party, Lieberman may well replace Netanyahu in the not too distant future.
Lieberman has been forced out of the Foreign Office by the law that forbids an indicted person to serve in the government. For many years now, a dark judicial cloud has been hanging over his head. Investigations followed suspicions of huge bribes. In the end, the Attorney General decided to content himself with an indictment for fraud and breach of trust: a minor diplomat turned over to Lieberman a secret police dossier concerning his investigation and was awarded an ambassadorship.
Netanyahu's fear of Lieberman induced him to promise that the Foreign Minister's post would remain empty until the final judgment in Lieberman's case. If acquitted, his lofty position will be waiting for him.
This may be a unique arrangement. After barring Lapid's ambition to succeed him, Lieberman declared this week triumphantly: "Everyone knows that the Foreign Office belongs to the Israel Beitenu party!"
THAT IS an interesting statement. It may be worthwhile pondering its implications.
How can any government office "belong" to a party?
In feudal times, the King awarded his nobles hereditary fiefs. Each nobleman was a minor king in his domain, in theory owing allegiance to the sovereign but in practice often almost independent. Are modern ministries such fiefs "belonging" to the party chiefs?
This is a question of principle. Ministers are supposed to serve the country and its citizens. In theory, the best man or woman suited for the job should be appointed. Party affiliation, of course, does play a role. The Prime Minister must construct a working coalition. But the uppermost consideration, even in a multi-party democratic republic, should be the suitability of the candidate for the particular office.
Unfortunately, this is rarely the case. Though no elected Prime Minister should go to the length of Ehud Barak, who displayed an almost sadistic delight in placing each of his colleagues in the ministry he was most unsuitable for. Shlomo Ben-Ami, a gentle history professor, was put into the Ministry of Police (a.k.a. Interior Security), where he was responsible for an incident in which several Arab citizens were shot. Yossi Beilin, a genius bubbling with original political ideas, was sent to the Ministry of Justice. And so on.
I remember meeting several of the new ministers at a diplomatic reception soon after. They were all deeply embittered and their comments were of course unprintable.
But that was not the point. The point was that by appointing ministers quite unsuitable to the tasks entrusted to them, Barak did great damage to the interests of the state. You don't entrust your body to a surgeon who is really a lawyer, nor do you entrust your money to a banker who is really a biologist.
YET THE idea of political entitlement was hovering over the whole process of forming the cabinet. The awarding of the ministries more closely resembles a dispute among thieves over the spoils than a responsible process of manning or womanning the ministries which will be responsible for the security and well-being of the nation.
The quarrel that held up the formation of the new government for several crucial days was over the Ministry of Education. Lapid wanted it for his No. 2, an orthodox (though moderate) rabbi. The incumbent, Gideon Sa'ar, desperately clung to it, organizing petitions in his favor among teachers, mayors and what not.
This could have been a legitimate fight if it had been about questions of education. For example, Sa'ar, a fanatical Likud man, has sent the pupils to religious and nationalistic sites in Greater Eretz Israel, to imbue them with proper patriotic fervor. He is also more intent on his pupils winning international capability tests than on education as such.
But nobody spoke about these subjects. It was a simple fight over entitlement. In medieval times, it might have been fought out with lances in a tournament. In these civilized days, both sides use political blackmail. Lapid won.
I AM not a great admirer of Tzipi Livni and her air of a spoilt brat. But I am happy about her appointment to the Ministry of Justice.
Her last two predecessors were intent on destroying the Supreme Court and putting an end to "judicial activism". (This seems to be a problem in many countries nowadays. Governments want to abolish the court's power to annul anti-democratic laws.) Tzipi can be relied on to buttress the Supreme Court, seen by many as "the last bastion of Israeli democracy".
Much more problematical is the appointment of Moshe Ya'alon as Minister of Defense. He inherited the job because there is just nobody around who could be appointed instead. Israelis take their defense seriously, and you cannot appoint, say, a gynecologist to this job.
"Bogy", as everybody calls him, is a former Chief of Staff of the Army, and a very undistinguished one. Indeed, when he finished the standard three years on the job, Prime Minister Ariel Sharon refused to grant him the almost automatic fourth year. Bogy was bitter and complained that he always had to wear high boots, because of the many snakes in the Ministry of Defense and the General Staff. He may need them again now.
His many detractors call him a "bock" – German and Yiddish for a goat, symbolizing a lack of intelligence. He is an extreme militarist, who sees all problems through the sights of a gun. He can be sure of the allegiance of Israel's vast army of ex-generals (or "degenerals"' as I call them).
THE MOST problematical appointment of all is the choice of Uri Ariel for the crucial post of Minister of Housing.
Uri Ariel is the arch-settler. He was the founder of a settlement, a leader of the settlers' organization, the Ministry of Defense official responsible for the settlements. He was also a director of the Keren Kayemet – Jewish National Fund – a major arm of the settlement enterprise. He entered the Knesset when Rehavam Ze'evi, the leader of the extreme-extreme Right, was assassinated by a Palestinian hit squad.
Turning this Ministry over to such a person means that most of its resources will go to a frantic expansion of the settlements, each of which is a nail in the coffin of peace. Yet Lapid supported this appointment with all his new-found political clout, as part of his "brotherhood" bond with Naftali Bennett, who is now the godfather of the settler movement.
Bennet's party also gained the all-important Knesset finance committee, which is needed to funnel the funds to the settlements. It means that the settlers have gained complete control of the state.
Lapid's big election victory may yet be revealed as the biggest disaster for Israel.
The brotherhood pact between Lapid and Bennett made it possible for them to blackmail poor Netanyahu and get (almost) everything they longed for. Except the Foreign Ministry.
How will Lapid turn out as Minister of Finance? Difficult to say. Since he is totally innocent of any economic knowledge or experience, he will have to depend on the Prime Minister above and the ministry bureaucracy below. Treasury officials are a tough lot, with a thoroughly neo-liberal outlook. Lapid himself also adheres to this creed, which is called by many Israelis "swinish capitalism" – a term invented by Shimon Peres.
ONE of Lapid's main election promises was to put an end to the Old Politics, held responsible for all the ills and ugliness of our political life until now. Instead, he said, there will be the New Politics, an age of shining honesty and transparency, embodied by selfless and patriotic leaders, such as the members of his new party.
Not for nothing did he call his party There Is A Future.
Well, the Future has arrived, and it looks suspiciously like the Past. Indeed, the New Politics look very much like the Old Politics.
Very, very old. Even the ancient Romans are supposed to have said "To the victor, the spoils!" But then, Ya'ir Lapid doesn't know Latin.
Others, like Ari Shavit of Haaretz, look at the Obama visit, with expressed worry – something like - The President who holds Israel's fate in the palm of his hand: Israel has recently lost quite a bit of its ability to chart its own strategic future, and this will make Obama's upcoming trip different than previous ones by U.S. presidents.
Above is potentially much more serious then if Ms. Merkel would pay a visit to Rome as in our second clip. There it is only about restructure and money – in Israel it is about restructure and Near East neighborhood policy.
New York Times Editorial – March 15, 2013
Italy, in Search of a Government.
By THE EDITORIAL BOARD
Published: March 14, 2013
Italy's newly elected Parliament convenes on Friday with no clear governing majority. Only a government with a strong popular mandate can push through the kind of radical changes Italy really needs: sweeping labor market and tax reforms, tough anticorruption laws, electoral reform and a new fiscal bargain with euro-zone partners that replaces austerity with growth. All or most of that will now have to wait until new elections, probably later this year, can produce more definitive results.
The vote produced a four-way split among two parties that endorse the European-backed austerity policies that have plunged Italy into deep recession, the anti-establishment Five Star Movement and a bloc led by former Prime Minister Silvio Berlusconi.
That four-way split means that no politically feasible coalition is mathematically possible, especially since the Five Star Movement's founder, Beppe Grillo, has repeatedly declared that the movement will not support a government led by any of the other groupings. Even if Mr. Grillo does not reconsider that position, there is no need for Italians, their European partners or the bond markets to panic. Mario Monti will continue as the caretaker prime minister until Parliament can agree on a successor. Taxes will be collected, government bills paid and administrative decisions taken. One ratings agency, Fitch, last week downgraded Italian bonds one notch but still considers them investment grade. Bond auctions this week went tolerably well, and Rome has now successfully raised a significant chunk of the money it will need to see it through this year. Democracy's ways can be frustratingly slow, especially when radical changes are on the agenda and long established parties fail to rise to the occasion. Yet democracy is the European Union's founding and defining principle. Italy's partners, though understandably frustrated, need to be patient and supportive. And the European Central Bank must be prepared to deter speculators by stepping in if necessary as a lender of last resort.
Those, like Chancellor Angela Merkel of Germany, who pressured Mr. Monti's government to tighten the screws of austerity on Italy's growth-starved economy share some responsibility for his disappointing electoral performance. And they now share some responsibility to stand by Italy as it seeks a democratic way out of the resulting parliamentary deadlock.
Related: A Jester No More, Italy's Gadfly of Politics Reflects a Movement (March 4, 2013)
Italy shows the way how to display lack of accepting political reality – You call in the professional clowns.
Posted on Sustainabilitank.info on March 5th, 2013
This is serious – a professional clown is a good man trying to make a living. A clown impersonator is something else. While Bepe Grillo is fighting for the cause of change in Italy and everywhere else, it is Mr. Berlusconi who used the facade of government and wealth in order to create a court of clowns to his kingdom and rule. True Conservatives reject his behavior but corralled to save him because he was in their service.
March 4th, 2013 the Karl Renner Institute of the Socialist Party of Austria had a reassessment of the Italian elections with the participation of two Journalists from Italy – Tonia Mastrobuoni from La Stampa in Turino, and Franz Koessler who was for many years the foreign policy commentator at the Austrian "Falter" and is now a freelance in Rome.
I learned that Monti who was seen by the European banking institutions as the man who will save them and Italy, and was seen as having the baking of over 50% of the Italians – just came in as a poor fourth with 10%. It is the 25% that Grillo's movement got .and the fact that the other two parties that have less then 30% each – that make it impossible to form a government that is supported by a clear majority.
The popular thinking is that new elections will favor Mr. Grillo and put him in the position to dictate the rules for a coalition government.
Conventional thinking believes that if he has not put forward a real plan, and is not ready to join another party, this is a sign that his group will eventually break up. But why? His Grillini want to see change, and not being politicians that live by having a political job, they may actually relish the idea of having brought about change and be very calculated in their support of any government.
I suggested that the original individuals that started out like them, could actually be the example for the Grilini – and the warning being that eventually politicians from the right got hold of their movement and turned the Tea Party that started out as "Taxes we had enough" ended up backing all sort of ideas that had nothing to do with their original rebellion.
On the other hand, if the Grillini manage to avoid the fate of the Tea Party, they may become the toast of all those in the EU that would want to change the rullling strata in most of the EU Member States.
The New York Times Editorial
Italy Chooses None of the Above
First Published: February 27, 2013
Italy's voters surprised and frightened governments and financial markets across Europe with their repudiation of austerity and much of the Italian political establishment.
Related: Inconclusive Vote in Italy Points to Fragmenting of Political System (February 27, 2013)
Europe's fears of an ungovernable Italy and renewed euro-zone crisis may prove justified. With no party holding a majority in the new Parliament, there is little chance for renegotiating the economic straitjacket demanded by European lenders or enacting needed reforms.
For decades, the political establishment, regardless of party, has failed to deal with Italy's well-known problems — excessive bureaucracy, official corruption, organized crime, unequal and regressive taxes and anemic economic growth. The past 15 months of growth-crushing austerity policies under Prime Minister Mario Monti have mainly added to the pain. Italy's borrowing costs declined (at least until the election returns came in).
A protest vote driven by public anger is not so surprising. The big losers were centrist supporters of Mr. Monti, who came in a dismal fourth, and the center-left Democratic Party, led by Pier Luigi Bersani, which won only a slim plurality in the lower house and ran a disappointing second in the regionally apportioned Senate. These two blocs were expected to form a coalition government with policies not very different from Mr. Monti's. That would have pleased Europe, but is now impossible.
The winners were the anti-establishment Five Star Movement, founded just three years ago by the comedian Beppe Grillo, and the People of Liberty led by the disgraced former prime minister, Silvio Berlusconi. Mr. Berlusconi's slate won the largest number of Senate seats and the second largest contingent in the lower house. Mr. Berlusconi, who bears much responsibility for Italy's economic and political dysfunction, brought his party back from near oblivion by shamelessly restyling himself as an anti-establishment, anti-austerity populist. He even promised to refund the homeownership tax, offering to dip into his personal fortune to do so.
As the top vote-getter, the Democratic Party gets the first chance to form a new government. Recognizing how tough that will be, Mr. Bersani has begun setting forth a limited legislative program that he hopes can attract support from beyond his own ranks. Mr. Grillo declared Wednesday that his supporters would not form an alliance with Mr. Bersani, or Mr. Berlusconi, who gets to try next if Mr. Bersani fails. But he did leave open the option of backing specific reform measures proposed by other parties. That is not a prescription for stable government and could force another election later this year. But it is probably the best hope for enacting at least some of the political reforms and anti-corruption laws Italy desperately needs and so many fed-up Italian voters desperately want.
A Kurt Bayer comment on European Banking that leads to re-birth of Populism, that could also be viewed in context of the US and Israel. It is the bankers that give us now clowns, but please do not forget, they can bring to life also failed painters and assorted demagogues.
Posted on Sustainabilitank.info on March 4th, 2013
March 3, 2013
Populists or Business (Banking) Lobbyists?
The public media and European mainstream parties' politicians are unisono lamenting the rise of populism as manifested by the strong showing of Beppe Grillo in Italy's parliamentary election last weekend. They decry, as they did earlier in the case of Greece, when the "populist" Syriza party nearly won the election, the irresponsibility, the negativism, the "against-it-all" attitude of these parties' leaders. Let us add to these election results the street demonstrations and battles in Greece, in Spain, in Portugal, in Bulgaria, in Slovenia – all these before the background of people jumping to death from windows of their to-be-repossessed apartments, of soup kitchens, of soaring unemployment rates (especially, and even more tragically, of the young), and of the horrifying increase in poverty rates in many of these and other countries.
It does seem, that in spite of these politicians' lamentoes, that European citizens are no longer accepting the crisis resolution policies imposed on them by politicians – at the bidding of financial markets. Yes, Mario Monti, the unelected and now defeated prime minister, managed to calm "market fears", yes, Mario Draghi, the ECB president, managed to do the same – and more – by last fall promising to "do everything necessary" to enable European states' return to the financial markets, yes, some of the Southern states (plus Ireland) were able during the past months to place bond auctions at "sustainable" yields (i.e. below the benchmark of 6%). But the concomitant "aid programs" by the European Central Bank, the European Commission and the International Monetary Fund, the dreaded "troika" are what the restive populations are no longer willing to swallow. Since governments took over bank debt, the citizens have been called upon to foot the bill, by having their taxes increased, government expenditures, especially social expenditures, cut and losing their jobs as a result of the persistent recession which these programs (and the similar, if less stringent "debt brake" conditions imposed on all EU countries. There is already talk about a "lost decade" for Europe.
With all this austerity (which is portrayed as without alternative) it is completely unclear where future growth should come from even after this decade. The mainstream recipe that balanced budgets (and their corresponding structural reforms) guarantee growth has been proven false, not only in theory, but also in empirical practice. If the second largest economic block in the world (with about 18 trillion $ in GDP, about one fourth of the world economy) reduces public sector demand in addition to falling demand in the private sector, this affects the whole world. This is different from the frequently cited more recent cases, where one individual country managed to export its way out of recession, when all other countries were growing and thus increasing their demand.
In this situation, the EU parliament has achieved a spectacular success, by agreeing (also with EU Finance Ministers) to limit bankers' bonus payments to 100% of base salary (in exceptional cases to 200%). This is part of a hard-fought package setting new rules for European banks' equity and liquidity requirements. There are widespread "populism" cries by especially English bankers, but also their colleagues around Europe that this would drive out banking from Europe, that this is a Continental coup to transfer banking business from London to Paris or Frankfurt (??), that this is "unfair". The more sanguine bankers say (see eg. Financial Times March 2, 2013) that this just means that their base salary will have to be doubled as a consequence. Tory MPs are fuming and using this as an additional argument that the UK should leave the EU as soon as possible. Of course, they do not mention the fact that it was their leader, David Cameron, who pulled the Tories out of the European Peoples' Party group, which – in the form of the Austrian Othmar Karas – was leading the negotiations of the European Parliament with the Finance Ministers. They also forget to mention that banking lobbies (led by the English) have delayed and watered down the other parts of the Banking package to be concluded.
The Greek and Italian elections, the street protests, the events in many other European countries should lead to a realization by the EU policy makers, both in the Central Bank, in the Commission and in the Council, that it is not just "clowns" (@ Peer Steinbruck, the Social Democratic candidate for the German premiership) who say "no more" to this oppressive economic policy recipe, but it is large parts of the European populations who have not only lost confidence that these recipes will work, but actively are against them – because they see that as in the Great Depression of the late 1920s – they lead to impoverishment and political disaster. Politicians should listen more closely to their populations, and less to the financial sector lobbyists, who have caused this crisis and refuse to play their part in shouldering their part of the burden. It was the lobbyists' close connection to the politicians who made banking debts into government debt, it was their whisperings which had told politicians fairy tales about the financial markets being the most efficient markets in the world, thus self-regulation and "light-touch" regulation was all that was needed.
What are the alternatives?
The primary policy objective should not be to "return countries to financial markets' access", but to have indebted states return to a sustainable economic and social policy path which improves the welfare of their populations. To this end, government debt financing should be taken away from financial markets and turned over to a publicly accountable public institutions (the ECB or the ESM with a banking licence).
As far as bank debt is concerned, a European plan must be developed with a medium-term view of how the European Financial sector should look like in 10-20 years. This would counter-act the present "re-nationalization" trends where every country attempts to save its banks (frequently at the expense of others) at high costs to the taxpayers. Some banks will need to be closed, others restructured, and effective regulation set up. It is clear that (some) debts will need to be repaid, but much of bank debt should be paid by bank owners and their bondholders, not by taxpayers. For highly indebted bank sectors, a European bank resolution fund could take over some of the debt.
It is true that a number of "problem countries" in the EU have pursued wrong policies in the past, e.g. waste of public (EU and national) funds, neglect of innovation and R&D policies, high military expenditures, neglect of industrial policies, neglect of modern education systems, neglect of building up sustainable energy systems (both on the supply and demand side), and many more. Each country needs to develop a positive vision of where it wants to stand in 10 years' time, and then select the appropriate instruments, and convince its EU partners of its way.
At a European level, a new more comprehensive economic policy umbrella must be opened. The nearly exclusive attention to budget consolidation was geared to placating the financial markets – who also are getting cold feet seeing what "their" policies do to growth (see the most recent downgrade of the UK). It must throw off the yoke of financial market dictate and turn itself to strengthening the European model, with a view to balance social, economic and environmental requirements for the future.
European civil society is growing together. Public institutions, like the labor movement, are not. In the face of the crisis, labor unions are re-nationalizing, attempting to save jobs for their own members at the expense of their foreign colleagues. They should learn from the business lobby, which has been much more successful in convincing European and national policy makers of their own interests.
The Nobel Prize for Peace awarded by Norway – not an EU member – goes to the EU, and this prompts some Heads of States to stay away. The UK (David Cameron) and Czech (Vaclav Klaus) will be among six European Heads of State that will not participate – Sweden has a scheduling conflict.
Posted on Sustainabilitank.info on December 1st, 2012
Six EU leaders to skip Nobel gala
30.11.12 @ 09:51
By Andrew Rettman on www.EUobserver.com
BRUSSELS – Six EU leaders, including the UK, are to skip the Nobel gala next month, as criticism of the award multiplies.
Nobel Institute director Geir Lundestad told EUobserver on Friday (30 November) that 18 EU leaders will come to watch the Union's top three officials – Herman Van Rompuy, Jose Manuel Barroso and Martin Schulz – collect the peace prize in Oslo on 10 December.
He declined to list them. But he indicated that they include the "big" countries – France, Germany, Italy, Poland and Spain.
He said six others – including the Czech republic, Sweden and the UK – have confirmed they are not going, while the rest are still making up their mind.
The British and Czech decisions come from two eurosceptic VIPs – David Cameron and Vaclav Klaus – and are likely to fuel talk on whether Cameron thinks the UK is on its way out of the bloc.
Sweden's Frederik Reinfeldt cannot go because he is busy in a parallel Nobel event in Stockholm the same day.
Lundestad declined to speculate on whether Cameron and Klaus' decision amounts to a boycott. "It's up to them to explain why they are not coming," he said.
But he did criticise four cabinet ministers from Norway's eurosceptic Centre Party for also deciding to stay away.
"They put the emphasis on Norway and whether Norway should be a member of the EU or not. The committee dos not address that question. It recognises the EU's contribution to a more peaceful Europe through six decades. It has nothing to do with Norway," he noted.
The Nobel decision back in October prompted debate on whether the EU deserves the prize.
Some of the arguments were repeated this week.
For his part, the Austrian leader of the centre-left S&D group in the EU parliament, Hannes Swoboda, said in a debate in Brussels: "The EU was a vision for peace, after WWII. And the EU brought peace."
But a joint letter by the World Council of Churches and the Conference of European Churches said: "The economic and humanitarian tragedy today in Greece challenges the EU as a peace builder for the next generation."
Meanwhile, the recent Gaza crisis – which claimed 168 Palestinian lives and five Israeli ones – prompted a fresh rebuke.
A joint letter by 52 former peace prize laureates, artists, academics and diplomats on Wednesday said the EU should be disqualified for its ties to Israel.
"The role of the European Union must not go unnoticed, in particular its hefty subsidies to Israel's military complex through its research programmes," they wrote.
Former Nobel laureates Desmond Tutu, Mairead Maguire and Adolfo Perez Esquivel also wrote a letter attacking the EU as a party in conflicts around the world.
"The EU is clearly not 'the champion of peace' that Alfred Nobel had in mind when he wrote his will … The Norwegian Nobel committee has redefined and remodelled the prize in a manner that is not consistent with the law," they said.
They called for the committee to withhold the prize money of €930,000, even though the EU has promised to give it to charities for child victims of war.
For his part, Lundestad said the Tutu letter was organised by Fredrik Heffermehl, a Norwegian jurist who has "protested for many, many years against every decision of the Nobel committee."
He added: "The prize money has never been withheld."
The Eurozone record joblesness, Germany/Greece, Brazil, Japan, Elections in Kuwait are the News-Watch of the MENA (Middle East – North Africa) Financial Network (MENAFN) today.
Posted on Sustainabilitank.info on December 1st, 2012
Eurozone jobless rate climbs to record 11.7%: EU
German parliament approves aid for Greece
Brazil grew a paltry 0.6 percent in third quarter
Japan Industrial Output Rises 1.8% In October
Kuwaiti Voters Head to Polls to Elect National Assembly Members Over 400,000 Kuwaiti voters headed to the polls early Saturday in the country's five constituencies to choose 50 National Assembly …
Austerity does not help Europe, why does one expect it to help a US economy pushed to keep up high military expenditures?
Posted on Sustainabilitank.info on November 5th, 2012
For the US it was the warning from President Dwight Eisenhower about the military – industrial complex. He was best positioned to understand the industry interest in supplying the military with materials they do not need. Today this is a political stand of Romney Republicans that pushes austerity on everybody else. Here an Obama campaign proposition that austerity itself is an unmanageable security threat to a State that allows unacceptable income gaps that destroy the middle class. The article uses the example of Europe in order to reflect on what might happen to the US.
Austerity Doesn't Reduce Deficits.
By Terrance Heath from the Campaign for America's Future
November 1, 2012
Austerity is back in the news, and the news about austerity is never good. We've only had de facto austerity on this side of the pond. So as usual, the news is from Europe, where the austerians are going full-tilt boogie. Our homegrown austerians, like their European counterparts, tell us that the kind of severe austerity underway in Europe is necessary to reduce the deficit. Everything from food stamps to Medicaid and Medicare — everything except defense spending — must be cut in order to reduce the deficit.
The thing is, it hasn't worked. In Greece, Europe's austerity poster child, austerity has shrunk the economy and increased the national debt.
Austerity is literally killing Greece. Yet the austerians demand more.
Austerity only increased inequality in Portugal. Now, after painful austerity measures that hit ordinary Portuguese and public sector workers hardest failed to reduce the deficit, Portuguese citizens are planning to rally against new tax increases.
Unemployment in Portugal is at a record high, and people have faced sharp reductions in their incomes. None of it seems to have made a dent in Portugal's debt problem. Yet the austerians demand more.
Austerity has been disastrous for Ireland, which once made the top ten on the Heritage Foundation's Index of Economic Independence.
In September, Spain braced for further austerity measures even as hungry Spaniards foraged in trash bins for food. But Spain's economy contracted for a fifth quarter, because of austerity-driven inflation.
All across the EU, austerity has driven joblessness to a record high.
Yet the austerians demand even more.
Americans should pay attention to the saga of austerity in the EU, for a couple of reasons. First, because conservatives here at home are committed to the same agenda that's failed in Europe.
Second, if good things end up happening to bad political ideas here in the U.S., we may need to follow the example of Europeans who are standing up and saying "No," when the austerians keep demanding more.
A Question in the making for the Third and last UN Presidential Debate at Lynn University in Boca Raton, Florida – The Swedish ship Estelle intended to break this weekend the Israeli ring around Gaza. UPDATED
Posted on Sustainabilitank.info on October 20th, 2012
Swedish Ship to Gaza – Former Israeli Air Force combat pilot evades coast guards in Greece to get on Gaza-bound boat.
Former Israeli Air Force combat pilot boards Gaza-bound boat
Came by motor boat, evading Greek coastguard, greeted with cheers
"Estelle" due at Gaza shore Saturday or Sunday
Activists on board:"Determined to reach Gaza, consent to UN inspection"
Israeli peace activist Yonatan Shapira, who had been a combat pilot in the Israeli Air Force and refused to take part in the bombing of Palestinian cities, has arrived on board the Swedish boat "Estelle" which is making her way towards the coast of Gaza.
When the Estelle passed near the shores of Greece, Shapira and other activists made their way in a motor boat, evading vessels of the Greek Coast Guard which sought to bar their way. "Along with the Greek Coast Guard we saw a ship which seemed very much like an Israeli Navy vessel, though it did not fly a flag," said Shapira.
He was received with cheers by activists already on board. Shapira had taken part in a similar sailing last year, being taken off by Israeli Navy Commandos near the Gaza shore and spending time in police detention, but not charged with any criminal offence.
Meanwhile, Israel's Ambassador to the UN Ron Prosor has sent a letter calling on the United Nations to stop the Estelle from reaching her destination. To this activists on board respond: "If this means that Israel has decided to cede control over Palestinian territorial waters to the UN, this would actually be a step forward.
The UN and many other representatives of the International Community have for years characterized the siege of the Gaza strip as inhuman and incompatible with International Law.
"Ship to Gaza Sweden" assumes that that UN will not take over the implementation of this policy, by itself preventing a peaceful vessel from delivering humanitarian supplies.
"Ship to Gaza and the Freedom Flotilla have never opposed lawful inspections of cargo and vessel by representatives of the UN, as well as by national authorities in the ports and waters we have passed through. We welcome further inspections of this kind by the UN, once we have anchored at Gaza City. What we refuse to accept is something which also the UN and the majority of The International Community oppose: The illegal siege of the Gaza Strip, with its devastating humanitarian results."
The Estelle has now set course to Gaza and, weather permitting, is due to get there on Saturday.
Adam Keller, Spokesperson of Gush Shalom, who is in ongoing contact with the Estelle activists, says that Israel's Prime Minister and Defense Minister still have some forty-eight hours' grace to make a wise and courageous decision, and let the Estelle dock at the Port of Gaza – while implementing a thorough UN inspection of her cargo, to which the activists specifically consent.
Ship to Gaza-Sverige - www.shiptogaza.se
A lesson from China to the EU The COSCO Chinese half of the Port of Piraeus in Athens compares favorably to the other half Greek-run. Is here a lesson for how to get the EU out of its troubles?
Posted on Sustainabilitank.info on October 11th, 2012
Under Chinese, a Greek Port Thrives.
{ACTUALLY – HALF OF THE PIRAEUS PORT THRIVES UNDER CHINESE MANAGEMENT – THE OTHER HALF WAS LEFT TO THE GREEKS FOR EASY COMPARISON! WHAT CAN THE EU LEARN FROM THE CHINESE IN GENERAL? Will Ms. Merkel consider giving an EU prize to the Chinese?}
By Nikolia Apostolou
Privatizing the Port of Piraeus: The International Herald Tribune's chief business reporter, Liz Alderman, profiles a Greek port where Chinese management is struggling to recast labor relations.
By LIZ ALDERMAN, Published in The New York Times October 11, 2012
PIRAEUS, Greece — The captain gazed from his elegant office overlooking this port on the Aegean Sea and smiled as towering cranes plucked container after container from a giant ship while robotic transport vehicles fanned out to transfer the cargo to smaller vessels bound for the Mediterranean.
The cargo volume here is three times the level it was two years ago, before the captain, Fu Cheng Qiu, was put in charge by his employer, Cosco, a global shipping giant owned by the Chinese government.
In a 2010 deal that put 500 million euros ($647 million) into the coffers of Greece's cash-starved government, Cosco leased half of the port of Piraeus and quickly converted a business that had languished as a Greek state-run enterprise into a hotbed of productivity.
The other half of the port is still run by Greece. And the fact that its business lags behind Cosco's is emblematic of the entrenched labor rules and relatively high wages — for those lucky enough to still have jobs — that have stifled the country's economic growth.
"Everyone here knows that you must be hard-working," said Captain Fu, under whose watch the Chinese-run side of the port has lured new clients, high-volume traffic and bigger ships.
In many ways, the top-to-bottom overhaul that Cosco is imposing on Piraeus is what Greece as a whole must aspire to if it is ever to restore competitiveness to its recession-sapped economy, make a dent in its 24 percent unemployment rate and avoid being dependent on its European neighbors for years to come.
As the Greek government contemplates shedding state-owned assets to help pay down staggering debts, it might be tempting to consider leasing or even selling the rest of the port to China. But if the Cosco example is representative, the trade-offs — mainly a sharp reduction in labor costs and job protection rules — might be ones many Greeks would be loath to accept.
"Unionized labor will push back to keep the protection it has enjoyed," said Vassilis Antoniades, the chief executive of Boston Consulting Group in Greece. But the Cosco investment, he said, "shows that under private management, Greek companies can be globally competitive."
Captain Fu, for his part, says Greece has much to learn from companies like his.
"The Chinese want to make money with work," he said. In his view, too many Europeans have pursued a comfortable, protected existence since the end of World War II. "They wanted a good life, more holidays and less work," he said. "And they spent money before they had it. Now they have many debts."
Greece's troika of foreign lenders — the International Monetary Fund, the European Central Bank and the European Commission — has made similar arguments. Among other things, they are urging Prime Minister Antonis Samaras to end blanket protections for workers and unions and to require Greece itself to operate more like a productive modern business.
Besides the $647 million that put half of the port of Piraeus into Chinese hands, the Greek government is receiving more income from taxes as a result of the port's pickup in business.
Other than a handful of Chinese managers, moreover, Cosco's operation is providing around 1,000 jobs to Greek workers — compared with the 800 or so who work the dock that is still under Greek management.
On Cosco's portion of the port, cargo traffic has more than doubled over the last year, to 1.05 million containers. And while profit margins are still razor thin — $6.47 million last year on sales of $94.2 million — that is mainly because the Chinese company is putting a lot of its money back into the port.
Cosco is spending more than $388 million to modernize its dock to handle up to 3.7 million containers in the next year, which would make it one of the world's 10 largest ports. Beyond that, workers are also laying the foundations for a second Cosco pier.
The Greek-run side of the port, which endured a series of debilitating worker strikes in the three years before Cosco came to town, has been forced by the Chinese competition to seek its own path to modernization. Still, only about a third of its business consists of cargo handling; the rest is made up of more lucrative passenger traffic.
For years, the container terminal was a profitable operation. But Harilaos N. Psaraftis, a professor of maritime transport at the School of Naval Architecture and Marine Engineering in Athens, said it was inefficient "because worker relations were very cumbersome."
The salaries of some workers reached $181,000 a year with overtime; Cosco is typically paying less than $23,300. On the Greek side of the port, union rules required that nine people work a gantry crane; Cosco uses a crew of four.
"It was just crazy," recalled Mr. Psaraftis, who was the chief executive of the port from 1996 to 2002. "I told them, 'If you keep this up, this thing will be privatized.' But they didn't listen."
Since Cosco arrived, "competition has forced us to take initiatives to find better ways of working," said Stavros Hatzakos, the general director of Piraeus Port Authority, which runs the Greek operation. "Employees think twice about strikes and labor action now," he said. And the ones still on the job have taken salary reductions as part of the across-the-board wage cuts of 20 percent or more that the government has placed on public employees.
On the other side of the chain-link fence that separates the Chinese and Greek operations, Captain Fu said he would love for Cosco to run all of Piraeus if the government put it up for sale. That expansion would cement Chinese dominance of one of the most strategic shipping gateways to Southern Europe and the Balkans.
Such a move, though, might meet stiff opposition from Greek unions and officials at the Piraeus Port Authority, who criticize Cosco's approach to labor.
"It's like another country over there," Thanassis Koinis, a deputy director at the Piraeus Port Authority, said one recent morning as he stared out the window of his dilapidated office at the cranes soaring above Cosco's docks.
Mr. Koinis and some other Greeks accuse Cosco of using employment subcontractors that hire temporary, unskilled, nonunion workers desperate for jobs and exploit them by paying low wages.
Babis Giakoymelos, a board member of the Dockworkers' Union, contended that Cosco was also saving money by cutting corners on worker safety. "They are bringing third-world labor standards to Europe," he said.
For Tasos Vamvakidis, Cosco's commercial manager here, such complaints amount to sour grapes. "It's easy to say things against Cosco; but when you come here, you see that everything works properly," he said one morning on the Cosco dock, raising his voice to be heard above the machinery's din. "We win business by showing that we work 24-7, 365 days a year."
Casting a glance at the Greek side, he added: "Maybe in other terminals, people work less. In any case, if it's so bad, thousands of people would not be applying to work for Cosco."
Dimitrios Batsoulis begs to differ. He was fired from his job as a Cosco dockworker in February, after he tried to organize a workers' committee to raise concerns about safety violations that he said Cosco subcontractors repeatedly ignored.
He said his bosses had blacklisted him several weeks earlier after he left the steering compartment of a crane when the heater broke one snowy morning, leaving his hands too cold and stiff to control the giant machine from his post 49 feet above ground.
"I was jeopardizing my life and my colleagues' lives," Mr. Batsoulis said. When he climbed down to warm himself, he said his manager and a Cosco executive chastised him for slowing operations. He said he was not called back to work for another week.
"If you are a worker for Cosco, then you know suddenly how it is to work in the Chinese Republic," said Mr. Batsoulis, who is now suing the company for unlawful dismissal and unpaid overtime.
Cosco said it would not comment on the pending case. But Captain Fu contended that disgruntled workers like Mr. Batsoulis were in a minority.
Captain Fu said Cosco took pains to avoid seeming like an invader, partly by hiring Greek companies to rebuild the pier and to oversee the labor force in accordance with Greek law. He boasted repeatedly that Cosco had only seven Chinese managers, who he said trained their Greek work force up to the highest standards.
In the gleaming executive suites abutting Captain Fu's expansive offices, a recently completed $1.29 million renovation attested to the efforts in Chinese-Greek corporate diplomacy. Pictures of sculptures of Greek gods faced paintings of Chinese dragons, while blown-up photos of President Hu Jintao standing shoulder to shoulder with Greek leaders adorned a cavernous meeting room.
"At the beginning, the Greeks were worried that the Chinese would come in here and take over," Captain Fu said. "Instead, we showed the local people that we want to help them develop; we don't want to take work from them and give it to the Chinese."
As Greece struggles to overhaul its economy, he said, Cosco represents an opportunity for Greek workers — and the country itself. "Cosco is their future," he said. "We are here to stay."
Philip H. Gordon, Assistant Secretary, Bureau of European and Eurasian Affairs, US Department of State, met the Press in Athens on July 27, 2002. Topics range from the economy to Syria and Turkey.
Posted on Sustainabilitank.info on July 30th, 2012
US Press Roundtable in Athens, Greece
Philip H. Gordon
Assistant Secretary, Bureau of European and Eurasian Affairs
Athens, Greece
July 27, 2012
ASSISTANT SECRETARY GORDON: Thank you. It's very nice to be back in Athens. It's nice to see some of you again. I think I've seen you on a number of occasions including in this very room.
I am here to express our support and solidarity of the Greek people, and the Greek government as it undertakes some very difficult but we think really important economic reforms. We're following these developments very closely and have a great stake in the outcome, not just for the sake of our friends and partners in Greece, but for the sake of the entire European area and the U.S. economy and the world economy. So we have great interest and we admire what the government is doing in undertaking, again, what we consider to be essential reforms, not just to convince world markets and European lenders of the soundness of the Greek economy, but for the sake of the Greek economy itself. In other words, we think these reforms are worth undertaking because they will lead to a more prosperous and sound Greek economy, let alone stabilize the eurozone.
We also appreciate Greece's continued partnership with the United States on a number of regional and global issues, notwithstanding the economic difficulties. I had a chance to meet with the Foreign Minister. I also met earlier today with some of the other party leaders in the coalition. The latter mostly to talk about the economic situation, but obviously with the Foreign Minister, not just the economic situation but regional and global affairs. And as we discussed, world events don't — you don't get to hit the pause button while you deal with the economy. There are still a lot of issues between Greece and Turkey and the Balkans, Afghanistan, Iran, Syria, so we exchanged views on those and I expressed our appreciation for Greece's partnership in dealing with those, even as it faces the economic difficulties.
So again, a big agenda. It's very important to the United States, so I came here to try to get a better understanding of what's going on in Greece and the region. I'll be going on to Turkey from here. But as I began with, I also came to express support for what the government and the people of Greece are doing.
With that, I'll be happy to take any questions.
QUESTION: One of the priorities of the new Greek government in foreign policy is to declare the exclusive economic zone. Do you believe it can go ahead with this or before that have an agreement or something like that with Turkey?
ASSISTANT SECRETARY GORDON: I think it's important to avoid unilateral steps. The United States recognizes countries' rights to declare exclusive economic zones but these things aren't done in a vacuum and you'd have to understand the full context. We don't think it would be in Greece's interest to do it without full cooperation with neighbors including Turkey.
Fortunately you have mechanisms in place, and over the past number of years have developed bilateral channels in which these things can be discussed and I know that they have already contributed to progress and we would strongly encourage Greece to use those channels to have these conversations so that any steps in this area are done cooperatively in the interests of all parties.
They're complicated issues and it's not as simple as being able to declare an EEZ or not being able to declare an EEZ, and that's precisely why it should be done cooperatively.
QUESTION: In order to get the economy started, which is the big issue for Greece, it is crucial to attract more and more investment. What do you believe should be the main reforms that Greece has to make in order to attract investment?
ASSISTANT SECRETARY GORDON: That's a good question, because attracting investment is clearly a critical aspect to turning the Greek economy around. You need foreign investment. I think frankly over the years there has been a perception in Greece that it wasn't friendly enough to foreign investment, that there were too many rules, too much bureaucracy, too slow approval rates, and investors need certainty and transparency. They want to be sure what the rules are, the regulations — that they're not going to be changing. So I think creating a more investor-friendly climate is critical.
There are other less direct measures, but are still important measures, and those are the ones that I think the government is already working on in strengthening the overall economy so that you get growth and buying power, purchasing power, so that it's worth making the investments. But I would start with the question of bureaucracy, rules and regulations. I think you can look at, there are rankings of countries in terms of, for example, how quickly an investment can be approved and I think Greece needs to advance on that list.
QUESTION: I will stick to the economy because that's what's troubling us. I don't know if you could say a few words about the meetings that you had with the other two governmental partners. And we had the Assistant Secretary of the Treasury a few days ago and I was wondering, the idea is, especially ahead of the American elections, there is this notion and I think it's understandable that the United States is beginning to lose patience not with Greece, but the way the European leaders are handling the crisis since Greece and Ireland are not a problem right now. Nothing compares to what will happen if Spain or Italy fail or these growing costs continue.
So it would be great if you would give us your insight on this, and what is worrying the United States, and apart from declarations of support, which are good, or that you have to do something. If you have any other idea of how you could convince the European leaders to move on the next step and do something decisive.
ASSISTANT SECRETARY GORDON: Sure. As I said right from the start, we are following it extremely closely because we have such a great stake in the outcome. We have a great stake because we care about the hundreds of millions of people who live in Europe and their prosperity, but we also even have a more direct national interest at stake, our economy is so dependent on growth and stability and that of our largest trading and investment partner in the world by far. I think it's accurate to say that some of the drag on the U.S. economy right now are questions about the eurozone, and so that's why we're so committed.
We acknowledge also that we don't have a direct say in some of the key decisions to be made in Europe. The question of how big is the firewall or whether there are bailout funds or whether the ECB should be buying bonds at a certain level are not issues on which we get a vote. But because we are so engaged and so committed and so intertwined with Europe, we have views and we share those views and I can tell you at the highest levels, including our President there are regular conversations with European leaders about the way forward.
You mentioned American impatience. I wouldn't describe it as impatience. I would acknowledge that –
QUESTION: Losing patience. I think it's right.
ASSISTANT SECRETARY GORDON: That's different. Yes. We would like a comprehensive solution tomorrow or yesterday, but we also understand these are complicated decisions. They're not easy. The reforms will take time. I think Angela Merkel but other leaders across Europe keep trying to explain that as well, that there is no magic bullet and there is no quick solution to this problem and we understand that. At the same time, we are urging leaders and I think have been for some time to be as decisive as possible as quickly as possible because the stakes are so great.
In terms of what — you asked about my meetings with the party leaders and what needs to be done — I would say I was encouraged from what I heard in the sense that the coalition members seemed determined to implement the agreements that have been reached. They seemed to have an appreciation that markets and governments need to see results and real efforts and structural reforms before they will respond positively. It goes back to the question that I was asked about investments.
Of course they took the opportunity to explain to me how difficult it was on the Greek people and the Greek economy, which we know and appreciate, but they also demonstrated a real understanding that only by taking these difficult measures will eurozone governments, the European Central Bank, and private investors be convinced that they can really put their money in Greece.
That's what I encourage them to do as well, as quickly as possible and as decisively as possible, demonstrate in deed as well as in word, that there really is a new Greece, that Greece gets it, that it's doing the things that are necessary to make clear that this is a place that you can really do business, and in this highly competitive globalized world there are a lot of places where you can send your money, as investors and hedge funds and others demonstrate every single day. And if they have the slightest doubts about a country's ability to pay its debts or about what would be the fate of their investment, they'll just go elsewhere.
That's why it's really incumbent on the country in question to take decisive, necessary measures. But as I say, from my meetings here I was convinced, I think it was in the first place encouraging to see the Greek people vote for parties that understood that, because the alternative would, in our humble estimation, really not serve Greece's interests well. And it was encouraging to hear from those party leaders that they understand that and they're determined to finish the job.
QUESTION: I would like to insist on the European economy matters. Are you worried about the possibility of a eurozone breakup and how possible do you find it? Because you see there were, even from German official, statements the past days about Greece leaving the eurozone, so –
ASSISTANT SECRETARY GORDON: I would say a couple of things. First, we're confident that the eurozone will stay together, that the governments have the commitment and the means to keep it together, and we believe that's in our common interest. So we don't want to see a breakup of the eurozone.
I would add that we're not alone in thinking that. I think it's worth pointing out that notwithstanding all of the questions about the viability of the eurozone, all of the costs involved to certain countries in keeping it going, all of the real pressures on certain members including Greece to do difficult things to stay in, notwithstanding all of that, every single member of the eurozone and governments across the European Union remain committed to it. If you want to simplify, both the lender countries and the debtor countries, they still remain committed. Even in Greece where we know you've borne great costs to do the necessary things to stay in, the Greek government is committed to it, and the Greek people voted consciously for parties who are also committed to it, notwithstanding the costs. I think that shows a real recognition of the values of preserving the eurozone.
You point to German leaders speculating about a breakup. If you listen carefully — first of all the main German leader, the Chancellor, has been absolutely clear that she wants to preserve the eurozone and I think you see that in her actions when Germany puts up money to keep everybody in the eurozone — and so what you've had is a couple of leaders most recently say they're no longer appalled by the notion of one country leaving the eurozone. That's still a very long way from saying we should abandon the eurozone, it's not in our interest. On the contrary, I think all evidence points to a real recognition that it's in everybody's interests.
Then take I think even just yesterday Mario Draghi, head of the ECB, saying we'll do — you can check the quote exactly — but something along the lines of whatever it takes. So I think there's a recognition among all key actors that as painful and difficult as it is, it is really worth preserving. That will in itself I think help support the eurozone.
QUESTION: I would like to ask two questions. One is [inaudible] be positive on an extension of the Greek adjustment program from two years to four years so that it's easier for the people to accept it. The second is the situation in Syria seems to get out of control. The Obama administration has shown that any action that could possibly be taken should be in a collective manner. But do you believe that the only way to do this is through the UN Security Council? Or possibly if the situation gets even worse we should explore other possibilities like a coalition of the willing?
ASSISTANT SECRETARY GORDON: Thanks. Two separate things. First, on the question of an extension of the timetable for Greece's program, that's really between Greece and the Troika, which is the source of the original deal. It's not for us to say what schedule it should be on.
That said, I would share my sense that the first thing Greece needs to do is demonstrate that it's committed to the program and it is undertaking real reforms. I think, being perfectly frank, it's too soon to start asking for an extension. Your election was what, less than two months ago. The government has started to undertake a number of important steps, but I think that receptivity in Europe to any talk of extensions now is premature. On what basis would they do that? So I don't think it's something that should be ruled out, but I think in terms of sequencing it should be first things first. Demonstrate over a period of time that you are genuinely committed to these difficult steps in implementing the program, and then on the basis of that effort I think the prospects for discussing timetables or flexibility would be much better than doing it in the other order.
As for Syria, we're obviously very concerned about the situation in Syria. It has become clear to us for some time that there needs to be a political transition in Syria, that Syria will never be stable and peaceful under Assad who has used violence against his own people. And yes, we have gone to great efforts to work with the international community. This is not just a U.S. view. The international community, including most importantly all of Syria's neighbors practically and the Arab League, are focused on a political transition as well.
Yes, our strong preference has been to work on it through the UN Security Council, that's why we've been back to it three times for proposing different resolutions focused, as we say, on political transition. Unfortunately, every single time it didn't pass in the Security Council because there was a veto by Russia and China, including most recently just two weeks ago, and, I might add, by nobody else. There were two abstentions and two vetoes. In the previous one it was 13 to 2. We regret that Russia and China have stood in the way of what clearly the rest of the international community believes to be the need for a resolution supporting political transition.
So yes, in that sense the Security Council route is blocked. We will continue to act with our international partners. There have been a number of meetings of the Friends of the Syrian People with participation of 40, 60, 80 countries and international entities, and we'll continue to work through that channel and others to increase the pressure on the regime, change the balance on the ground, and support and coordinate the opposition so that when Assad does go, and he will, there is a better prospect for a more stable, inclusive government in Syria than otherwise. And we're going to continue to work it. On that, we appreciate Greece's support in those efforts.
QUESTION: Mr. Gordon, do you believe that the Greek-Turkish relations could be deteriorated, could be affected in some way because of the Syrian crisis and the complicated issues that emerge in the region with say the efforts of the Israeli and the [inaudible] to be more close to [inaudible], for example?
ASSISTANT SECRETARY GORDON: I don't see any reason why the developments in Syria should be harmful to Greek-Turkish relations. In fact I think Greek and Turkish interests in Syria, and even policy in Syria, is aligned, which is aligned with the United States as well, to increase pressure on Assad and foster a political transition and support the opposition. There's no reason that Turkish policy in Syria should be a problem for Greece or vice versa.
I'm encouraged that even with other complicated things going on in the region and even with political change in Greece, the Greek-Turkish relationship seems to continue to improve. That's an important factor of stability throughout this region, especially at a time when unfortunately the Turkey-Israel relationship is not improving, it remains frozen at best for the past couple of years. Obviously relations between Turkey and Cyprus are complicated and potential tensions over energy. So this is a region that needs more progress in bilateral and trilateral and quadrilateral relationships and it's all the more important for Greece and Turkey to be preserving their relationship.
QUESTION: Are you now more optimistic about Greece's future in the eurozone than you were before coming to Athens? And I'm wondering, if you had a vote, you said the U.S. is not a member of the eurozone. If you have a vote, what would you say to the Germans? We all see there is a strong conflict between the U.S. and Germany.
QUESTION: You have a vote in the IMF.
ASSISTANT SECRETARY GORDON: We do have a vote in the IMF, and that's really the only sort of direct way that we have a role. But the IMF is only one-third of the troika and we're only, I won't say one vote because we are more than one vote in the IMF, but one voice within the IMF.
On the first part of your question about optimism, I would just repeat what I said. I was encouraged to hear from the party leaders I met with their commitment to the reforms that we think are necessary to stabilize the Greek economy and to persuade markets and governments to work with Greece moving forward. That's most critical of all, because obviously the coalition was elected to do certain things and it needs to stick with its agreements, it needs to demonstrate that, and so to hear directly from those party leaders that they get it, that they're committed to doing it, they know how difficult it is, but they are not wobbling under these pressures is critically important. In that sense I am optimistic.
I think it matters less what I think than what the markets think and I think markets are voting in favor as well. You've seen some money start to flow back to Greece, whereas there was great question, especially the run-up to the election, that you would see bank runs and see money start to flow out. I think since the election of the government some of the steps that they've taken, people are more confident that Greece really is on the right track. So that is reassuring.
As for the latter, I won't speculate on — you asked hypothetical membership in the European Union, but I think I've already said and the President and Secretary of Treasury and State have indicated the types of things that we think are necessary. We have urged more decisive action on the part of eurozone governments, I think we have stressed that while fiscal consolidation is critical, the entire weight of the reform effort can't be borne by fiscal consolidation alone. You can't just cut your way out of this crisis. I think that evidence over the past two years gives some credence to that notion, that there needs to be also an emphasis on growth, on liberalization and other structural reforms that will restore Europe to growth and competitiveness and jobs. I think that view is growing throughout the European Union, which we're encouraged by.
We have urged that a substantial firewall be put in place not because we want it to be used, we don't. The point of a firewall is precisely so that it will not have to be used and that you reassure markets that they can put their money somewhere and there's less of a risk of default.
So I think in general while it's not for us to give a precise prescription as to what Europeans should be doing, we've given general indications of what we think is the right direction. I think it's fair to say that things have largely moved in that direction over time and they continue to do so, and if that balanced package continues to move forward, reforms and fiscal consolidation in the countries under pressure and solidarity and support from the countries in a position to do so, I think the future looks much more positive.
QUESTION: Are you worried about the moves of the Russian navy in the Eastern Mediterranean and the relation that [inaudible]has with Moscow ?
ASSISTANT SECRETARY GORDON: On the first point, we've been very clear about the question of Russians arms deliveries to Cyprus — Sorry, let me be clear, to Syria. I'm not breaking any news here. [Laughter].
QUESTION: [Inaudible].
ASSISTANT SECRETARY GORDON: Exactly. Russian arms deliveries to Syria which we think are only fueling a government that is using violence against its own people. And you heard Secretary Clinton talk about the attack helicopters that the Russians were planning to deliver. The Russians say they're not signing new arms deals with Syria, just fulfilling old ones. Obviously we welcome that they're not signing new ones but we regret that they're fulfilling old ones because we think the last thing anyone needs is more arms in the hands of the Syrian government. So on that we're clear.
Russia says it's not taking sides, it wants to be balanced. But it's hard for us to interpret arms deliveries to the Assad regime as anything else than supportive and lending legitimacy to a government that we think has clearly lost its legitimacy.
On Cyprus, I'm not sure if what you're getting at is the loan question. We're aware that Cyprus is considering a loan from Russia. It's obviously up to the government of Cyprus where it gets its loans if it needs loans. We know they're also obviously talking to the European Union and others. We would just hope that, there's always a concern that financial dependency can lead to political dependency and that's clearly something we wouldn't want to see, but it's really in the end a decision for the government of Cyprus if it wants to pursue a loan from some other sources.
QUESTION: Russians are concerned about the so-called Islamic bowl that emerged after Arab Spring in relations. How do you comment this [inaudible]?
ASSISTANT SECRETARY GORDON: There are different aspects to it. You may be referring specifically to Egypt and the trend in Egypt, election of a Muslim Brotherhood government in the wake of the fall of the Mubarak regime.
I think the first thing to keep in mind on questions like this is a certain sense of humility about our own role in the future of this region. It's not up to us. It wasn't up to us whether Mubarak stayed in power or not. It wasn't up to us who the Egyptians chose to represent them, and once Mubarak was gone we felt there should be free and fair elections and it's up to the Egyptian people who to support and they supported a Muslim Brotherhood government, and we reached out to that government. Secretary Clinton was there within the past couple of weeks. And we'll look forward to working with them.
So we stand by our principles in those terms. When it comes to what we want to see is rule of law, fair treatment of all citizens of the countries including women, minorities, transparent elections, peace with neighbors. And if a government is willing to abide by those principles, then it's up to the people what government should be in place.
Russian concerns about extremism we share. That's a difference that we have with them when it comes to Syria where they talk about the risks that if Assad goes you could have extremism and al-Qaeda. Obviously that's something we're concerned about as well, but in our view that's all the more reason to accelerate the transition or put the opposition and strengthen those groups that support the principles that are dear to us, as opposed to either do nothing or support the Assad regime which we fear will just lead to ongoing violence, civil war, and precisely the extremism that they're worried about.
Thanks everybody. It's nice to talk to you.
QUESTION: You're going to visit the Halki School?
{The Halki seminary, formally the Theological School of Halki, was founded on 1 October 1844 on the island of Halki (now called Heybeliada), the second-largest of the Princes' Islands in the Sea of Marmara. It was the main school of theology of the Eastern Orthodox Church's Ecumenical Patriarchate of Constantinople until the Turkish government stopped its use in 1971. The theological school is located at the top of the island's Hill of Hope, on the site of the Byzantine-era Monastery of the Holy Trinity. The premises of the school continue to be maintained by the monastery and are used to host conferences. It is possible to visit the island where it is located via boat in approximately one hour from the shore of Istanbul.}
ASSISTANT SECRETARY GORDON: I am.
QUESTION: It's the first time American officers visit the Halki?
ASSISTANT SECRETARY GORDON: I think our current Ambassador was there during his current tenure. President Clinton went to the Halki Seminary. So it's not the first and it's just a continued –
QUESTION: You're going to press [inaudible].
ASSISTANT SECRETARY GORDON: That's my point about it being consistent with our longstanding policy. We're encouraged by what we've heard out of Turkey in terms of hopes to open it. It's been our longstanding position that it should be open, so it's just an opportunity to express our support for that.
Aurora? Not at all – it is rather the reality of our nakedness (in reference to US, UK, Germany, Bulgaria, Israel, Syria, Russia).
Posted on Sustainabilitank.info on July 22nd, 2012
Dear Reader,
We have all been greatly saddened by the horrific shooting last night in Aurora, Colorado. Our hearts go out to the victims of another senseless act by a killer with access to dangerous weapons. If you feel strongly about keeping guns out of the hands of dangerous people and wish to express your condolences to the victims and their families, please click here. Join with more than 700 U.S. Mayors committed to ending gun crime.
Don Hazen
YES – but not enough. Let us understand finally that we have been hijacked by our own inaction.
The papers this weekend want us to believe that the two greatest things that are happening right now are the start of Olympics 2012 in London and the opening of "The Dark Knight Rises" or Batman III. What goes on in Syria is just a distraction from above focal points of our lives.
Just in case – if we want a little bit more then tragicomedy in our lives – the main attraction at the London Olympics – the first since 1948 – will be the helicopter-carrier positioned in the middle of the Thames River, and the main advertisement for the Batman movie was done with the help of news from the killings at Aurora, Denver, Colorado.
For the honest reality show – the whole world was placed in a Ghetto by the terror act at the Munich Olympics in 1972.
The present Olympics Committee – just a mere 40 years later, did not even agree to have a special ceremony at this year's Olympics – the tenth since that on-TV event of 1972. Now the TV programs amaze us with the killings of Arab-against-Arab, as in the Damascus routine, and the pre-Olympic celebration in Burgas near the Bulgarian Black Sea coast. There, a terrorist blew himself up, and took along six other people – five of them Israelis – his presumable targets.
Who was the terrorist of Burgas? We do not know and do not assume to know, but we read that Israel says Hamas, and the US know that it was a Hezbollah man backed by Iran, while the Bulgarian official version is simply – he was not Bulgarian but someone who came from the outside with a pre-conceived plan. Strangely – a Bulgarian journalist had more to say.
He wrote on inter-view.info hat the killer, Mehdi Muhammad G. (33) was born in Sweden, son of immigrants – an Algerian father and a Finnish mother, and went to Pakistan to absorb Islamic teachings. There he was found by the US and brought to Guantanamo on December 1, 2001.
July 2004 (that is still during the G.W. Bush US Presidency – something worthwhile noting right here in the light of the potential of politicizing the event – if true) he was subsequently released upon request from Sweden. We have no proof that this story is true, but if it is there will clearly be repercussions at the EU and in the US. So far we read only in Austrian papers, whatever the facts, Bulgaria's chances to join the Schengen agreement are now diminished.
But above mishap, or perhaps an Olympic reminder to the survivors of the Israeli 1972 team, that went this week to re-visit the Munich site, was coincidentally only a first step – followed by an unrelated event – that we argue to be related nevertheless.
The second event is the Aurora shooting in at a movie house near Denver, Colorado – the killing of 12 people, and injuring 59 more, by what the papers try to describe as a deranged person who had – in a US crazy way – legal access to buy guns and ammunition. (The amo bought on internet and delivered to his home and school, the guns bought directly from official dealers based on his having a clean record.)
James Eagan Holmes, a 24 year young student of neuroscience, hair dyed red, with a gas mask on his face, armed with tear gas and guns, did his thing at the midnight premiere of Batman III, a movie officially titled "The Dark Knight Rises," that was going to bring in a lot of money to its producers – who prepared as well a great advertising campaign with the help of a website www.RottenTomatoes.com The website itself, though managed by the film-critics community Flixter.com is owned by Warner Brothers – the studio that produced this film.
The critics, based on seeing trailers or having been at previews, posted 197 articles out of which 86% were positive.
The film, like all Batman films, deals in hidden ways with what is interpreted as a glorification of the George W. Bush, post 9/11 War on Terror. That would not have excited us. We decided to write this posting only when we read that Rush Limbaugh, the fire-brand of the US Tea-Party, and the storm-trooper of the fight against an Obama Presidency, pointed out that the character's name in the film – Bane, is a hidden psychological hint at the Bain Capital Company (same pronunciation) owned by Mitt Romney in real life, and this is no coincidence according to Rush.
Rush expressed the certainty that this was intended so that it plants in the mind of the viewers the idea that Romney is a personification of evil. The fact that the book was actually written in 1993 by a conservative writer – Christopher Nolans – and the character was already there – is a detail of no importance to Rush – but we fear that in real political life of the Republican Party in the USA of 2012, facts have no importance. …. It is the figments of imagination that are being expressed as facts, and weak minds draw weak conclusions. The real problem is that such conclusions can kill.
Holmes booby-trapped his apartment in Aurora, and now the police must be very careful in gaining access – we hope they do not proceed by blowing up the place and losing whatever further evidence can be found there.
In Paris the opening of The Dark Knight Rises was cancelled, in Vienna the Tuesday preview is still on, and the opening is scheduled for Wednesday. In New York, supposedly the movie's Gotham City – a sin city of the stock exchange if you want this sort of interpretation for creation of good ticket-box results, Mayor Bloomberg, who calls for gun-control laws, has made sure that the movie house is supervised by no-nonsense police.
Also, we understand that some wise person wrote a pro-guns' proliferation piece contending that had there been more guns in the theater room, the number of casualties would have been smaller. I guess, if this logic holds, our lives would be safer living in a wild west coral – like in the movies – all of us would would be drawing guns.
Our posting is very short – if interested here are some further material that throws light at the low state we find ourselves in the post-Munich insecurity that benefits only the arms producers and the outspoken and powerful moron politicians:
George Soros at the Trento Festival of Economics – OUR PROBLEMS RESULT FROM ECONOMIC THEORY ITSELF – WHAT WE CALL A SOCIAL SCIENCE DEALS WITH SOCIAL PHENOMENA BASED ON DECISIONS BY PEOPLE WITH IMPERFECT KNOWLEDGE RATHER THEN FACTS. He proceeds then to analyze the EU and concludes that there is now a last window of opportunity of 3 months for Germany to show leadership.
Posted on Sustainabilitank.info on June 3rd, 2012
George Soros Remarks at the Festival of Economics.
June 2, 2012
Trento, Italy
Ever since the Crash of 2008 there has been a widespread recognition, both among economists and the general public, that economic theory has failed. But there is no consensus on the causes and the extent of that failure. I believe that the failure is more profound than generally recognized. It goes back to the foundations of economic theory.
Economics tried to model itself on Newtonian physics. It sought to establish universally and timelessly valid laws governing reality. But economics is a social science and there is a fundamental difference between the natural and social sciences. Social phenomena have thinking participants who base their decisions on imperfect knowledge. That is what economic theory has tried to ignore.
Scientific method needs an independent criterion, by which the truth or validity of its theories can be judged. Natural phenomena constitute such a criterion; social phenomena do not. That is because natural phenomena consist of facts that unfold independently of any statements that relate to them. The facts then serve as objective evidence by which the validity of scientific theories can be judged. That has enabled natural science to produce amazing results.
Social events, by contrast, have thinking participants who have a will of their own. They are not detached observers but engaged decision makers whose decisions greatly influence the course of events. Therefore the events do not constitute an independent criterion by which participants can decide whether their views are valid. In the absence of an independent criterion people have to base their decisions not on knowledge but on an inherently biased and to greater or lesser extent distorted interpretation of reality. Their lack of perfect knowledge or fallibility introduces an element of indeterminacy into the course of events that is absent when the events relate to the behavior of inanimate objects. The resulting uncertainty hinders the social sciences in producing laws similar to Newton's physics.
Economics, which became the most influential of the social sciences, sought to remove this handicap by taking an axiomatic approach similar to Euclid's geometry. But Euclid's axioms closely resembled reality while the theory of rational expectations and the efficient market hypothesis became far removed from it. Up to a point the axiomatic approach worked. For instance, the theory of perfect competition postulated perfect knowledge. But the postulate worked only as long as it was applied to the exchange of physical goods. When it came to production, as distinct from exchange, or to the use of money and credit, the postulate became untenable because the participants' decisions involved the future and the future cannot be known until it has actually occurred.
I am not well qualified to criticize the theory of rational expectations and the efficient market hypothesis because as a market participant I considered them so unrealistic that I never bothered to study them. That is an indictment in itself but I shall leave a detailed critique of these theories to others.
Instead, I should like to put before you a radically different approach to financial markets. It was inspired by Karl Popper who taught me that people's interpretation of reality never quite corresponds to reality itself. This led me to study the relationship between the two. I found a two-way connection between the participants' thinking and the situations in which they participate.
On the one hand people seek to understand the situation; that is the cognitive function. On the other, they seek to make an impact on the situation; I call that the causative or manipulative function. The two functions connect the thinking agents and the situations in which they participate in opposite directions.
In the cognitive function the situation is supposed to determine the participants' views; in the causative function the participants' views are supposed to determine the outcome. When both functions are at work at the same time they interfere with each other. The two functions form a circular relationship or feedback loop. I call that feedback loop reflexivity. In a reflexive situation the participants' views cannot correspond to reality because reality is not something independently given; it is contingent on the participants' views and decisions. The decisions, in turn, cannot be based on knowledge alone; they must contain some bias or guess work about the future because the future is contingent on the participants' decisions.
Fallibility and reflexivity are tied together like Siamese twins. Without fallibility there would be no reflexivity – although the opposite is not the case: people's understanding would be imperfect even in the absence of reflexivity. Of the two twins, fallibility is the first born. Together, they ensure both a divergence between the participants' view of reality and the actual state of affairs and a divergence between the participants' expectations and the actual outcome.
Obviously, I did not discover reflexivity. Others had recognized it before me, often under a different name. Robert Merton wrote about self-fulfilling prophecies and the bandwagon effect, Keynes compared financial markets to a beauty contest where the participants had to guess who would be the most popular choice. But starting from fallibility and reflexivity I focused on a problem area, namely the role of misconceptions and misunderstandings in shaping the course of events that mainstream economics tried to ignore. This has made my interpretation of reality more realistic than the prevailing paradigm.
Among other things, I developed a model of a boom-bust process or bubble which is endogenous to financial markets, not the result of external shocks. According to my theory, financial bubbles are not a purely psychological phenomenon. They have two components: a trend that prevails in reality and a misinterpretation of that trend. A bubble can develop when the feedback is initially positive in the sense that both the trend and its biased interpretation are mutually reinforced. Eventually the gap between the trend and its biased interpretation grows so wide that it becomes unsustainable. After a twilight period both the bias and the trend are reversed and reinforce each other in the opposite direction. Bubbles are usually asymmetric in shape: booms develop slowly but the bust tends to be sudden and devastating. That is due to the use of leverage: price declines precipitate the forced liquidation of leveraged positions.
Well-formed financial bubbles always follow this pattern but the magnitude and duration of each phase is unpredictable. Moreover the process can be aborted at any stage so that well-formed financial bubbles occur rather infrequently.
At any moment of time there are myriads of feedback loops at work, some of which are positive, others negative. They interact with each other, producing the irregular price patterns that prevail most of the time; but on the rare occasions that bubbles develop to their full potential they tend to overshadow all other influences.
According to my theory financial markets may just as soon produce bubbles as tend toward equilibrium. Since bubbles disrupt financial markets, history has been punctuated by financial crises. Each crisis provoked a regulatory response. That is how central banking and financial regulations have evolved, in step with the markets themselves. Bubbles occur only intermittently but the interplay between markets and regulators is ongoing. Since both market participants and regulators act on the basis of imperfect knowledge the interplay between them is reflexive. Moreover reflexivity and fallibility are not confined to the financial markets; they also characterize other spheres of social life, particularly politics. Indeed, in light of the ongoing interaction between markets and regulators it is quite misleading to study financial markets in isolation. Behind the invisible hand of the market lies the visible hand of politics. Instead of pursuing timeless laws and models we ought to study events in their time bound context.
My interpretation of financial markets differs from the prevailing paradigm in many ways. I emphasize the role of misunderstandings and misconceptions in shaping the course of history. And I treat bubbles as largely unpredictable. The direction and its eventual reversal are predictable; the magnitude and duration of the various phases is not. I contend that taking fallibility as the starting point makes my conceptual framework more realistic. But at a price: the idea that laws or models of universal validity can predict the future must be abandoned.
Until recently, my interpretation of financial markets was either ignored or dismissed by academic economists. All this has changed since the crash of 2008. Reflexivity became recognized but, with the exception of Imperfect Knowledge Economics, the foundations of economic theory have not been subjected to the profound rethinking that I consider necessary. Reflexivity has been accommodated by speaking of multiple equilibria instead of a single one. But that is not enough. The fallibility of market participants, regulators, and economists must also be recognized. A truly dynamic situation cannot be understood by studying multiple equilibria. We need to study the process of change.
The euro crisis is particularly instructive in this regard. It demonstrates the role of misconceptions and a lack of understanding in shaping the course of history. The authorities didn't understand the nature of the euro crisis; they thought it is a fiscal problem while it is more of a banking problem and a problem of competitiveness. And they applied the wrong remedy: you cannot reduce the debt burden by shrinking the economy, only by growing your way out of it. The crisis is still growing because of a failure to understand the dynamics of social change; policy measures that could have worked at one point in time were no longer sufficient by the time they were applied.
Since the euro crisis is currently exerting an overwhelming influence on the global economy I shall devote the rest of my talk to it. I must start with a warning: the discussion will take us beyond the confines of economic theory into politics and the dynamics of social change. But my conceptual framework based on the twin pillars of fallibility and reflexivity still applies. Reflexivity doesn't always manifest itself in the form of bubbles. The reflexive interplay between imperfect markets and imperfect authorities goes on all the time while bubbles occur only infrequently. This is a rare occasion when the interaction exerts such a large influence that it casts its shadow on the global economy. How could this happen? My answer is that there is a bubble involved, after all, but it is not a financial but a political one. It relates to the political evolution of the European Union and it has led me to the conclusion that the euro crisis threatens to destroy the European Union. Let me explain.
I contend that the European Union itself is like a bubble. In the boom phase the EU was what the psychoanalyst David Tuckett calls a "fantastic object" – unreal but immensely attractive. The EU was the embodiment of an open society –an association of nations founded on the principles of democracy, human rights, and rule of law in which no nation or nationality would have a dominant position.
The process of integration was spearheaded by a small group of far sighted statesmen who practiced what Karl Popper called piecemeal social engineering. They recognized that perfection is unattainable; so they set limited objectives and firm timelines and then mobilized the political will for a small step forward, knowing full well that when they achieved it, its inadequacy would become apparent and require a further step. The process fed on its own success, very much like a financial bubble. That is how the Coal and Steel Community was gradually transformed into the European Union, step by step.
Germany used to be in the forefront of the effort. When the Soviet empire started to disintegrate, Germany's leaders realized that reunification was possible only in the context of a more united Europe and they were willing to make considerable sacrifices to achieve it. When it came to bargaining they were willing to contribute a little more and take a little less than the others, thereby facilitating agreement. At that time, German statesmen used to assert that Germany has no independent foreign policy, only a European one.
The process culminated with the Maastricht Treaty and the introduction of the euro. It was followed by a period of stagnation which, after the crash of 2008, turned into a process of disintegration. The first step was taken by Germany when, after the bankruptcy of Lehman Brothers, Angela Merkel declared that the virtual guarantee extended to other financial institutions should come from each country acting separately, not by Europe acting jointly. It took financial markets more than a year to realize the implication of that declaration, showing that they are not perfect.
The Maastricht Treaty was fundamentally flawed, demonstrating the fallibility of the authorities. Its main weakness was well known to its architects: it established a monetary union without a political union. The architects believed however, that when the need arose the political will could be generated to take the necessary steps towards a political union.
But the euro also had some other defects of which the architects were unaware and which are not fully understood even today. In retrospect it is now clear that the main source of trouble is that the member states of the euro have surrendered to the European Central Bank their rights to create fiat money. They did not realize what that entails – and neither did the European authorities. When the euro was introduced the regulators allowed banks to buy unlimited amounts of government bonds without setting aside any equity capital; and the central bank accepted all government bonds at its discount window on equal terms. Commercial banks found it advantageous to accumulate the bonds of the weaker euro members in order to earn a few extra basis points. That is what caused interest rates to converge which in turn caused competitiveness to diverge. Germany, struggling with the burdens of reunification, undertook structural reforms and became more competitive. Other countries enjoyed housing and consumption booms on the back of cheap credit, making them less competitive. Then came the crash of 2008 which created conditions that were far removed from those prescribed by the Maastricht Treaty. Many governments had to shift bank liabilities on to their own balance sheets and engage in massive deficit spending. These countries found themselves in the position of a third world country that had become heavily indebted in a currency that it did not control. Due to the divergence in economic performance Europe became divided between creditor and debtor countries. This is having far reaching political implications to which I will revert.
It took some time for the financial markets to discover that government bonds which had been considered riskless are subject to speculative attack and may actually default; but when they did, risk premiums rose dramatically. This rendered commercial banks whose balance sheets were loaded with those bonds potentially insolvent. And that constituted the two main components of the problem confronting us today: a sovereign debt crisis and a banking crisis which are closely interlinked.
The eurozone is now repeating what had often happened in the global financial system. There is a close parallel between the euro crisis and the international banking crisis that erupted in 1982. Then the international financial authorities did whatever was necessary to protect the banking system: they inflicted hardship on the periphery in order to protect the center. Now Germany and the other creditor countries are unknowingly playing the same role. The details differ but the idea is the same: the creditors are in effect shifting the burden of adjustment on to the debtor countries and avoiding their own responsibility for the imbalances. Interestingly, the terms "center" and "periphery" have crept into usage almost unnoticed. Just as in the 1980's all the blame and burden is falling on the "periphery" and the responsibility of the "center" has never been properly acknowledged. Yet in the euro crisis the responsibility of the center is even greater than it was in 1982. The "center" is responsible for designing a flawed system, enacting flawed treaties, pursuing flawed policies and always doing too little too late. In the 1980's Latin America suffered a lost decade; a similar fate now awaits Europe. That is the responsibility that Germany and the other creditor countries need to acknowledge. But there is now sign of this happening.
The European authorities had little understanding of what was happening. They were prepared to deal with fiscal problems but only Greece qualified as a fiscal crisis; the rest of Europe suffered from a banking crisis and a divergence in competitiveness which gave rise to a balance of payments crisis. The authorities did not even understand the nature of the problem, let alone see a solution. So they tried to buy time.
Usually that works. Financial panics subside and the authorities realize a profit on their intervention. But not this time because the financial problems were reinforced by a process of political disintegration. While the European Union was being created, the leadership was in the forefront of further integration; but after the outbreak of the financial crisis the authorities became wedded to preserving the status quo. This has forced all those who consider the status quo unsustainable or intolerable into an anti-European posture. That is the political dynamic that makes the disintegration of the European Union just as self-reinforcing as its creation has been. That is the political bubble I was talking about.
At the onset of the crisis a breakup of the euro was inconceivable: the assets and liabilities denominated in a common currency were so intermingled that a breakup would have led to an uncontrollable meltdown. But as the crisis progressed the financial system has been progressively reordered along national lines. This trend has gathered momentum in recent months. The Long Term Refinancing Operation (LTRO) undertaken by the European Central Bank enabled Spanish and Italian banks to engage in a very profitable and low risk arbitrage by buying the bonds of their own countries. And other investors have been actively divesting themselves of the sovereign debt of the periphery countries.
If this continued for a few more years a break-up of the euro would become possible without a meltdown – the omelet could be unscrambled – but it would leave the central banks of the creditor countries with large claims against the central banks of the debtor countries which would be difficult to collect. This is due to an arcane problem in the euro clearing system called Target2. In contrast to the clearing system of the Federal Reserve, which is settled annually, Target2 accumulates the imbalances. This did not create a problem as long as the interbank system was functioning because the banks settled the imbalances themselves through the interbank market. But the interbank market has not functioned properly since 2007 and the banks relied increasingly on the Target system. And since the summer of 2011 there has been increasing capital flight from the weaker countries. So the imbalances grew exponentially. By the end of March this year the Bundesbank had claims of some 660 billion euros against the central banks of the periphery countries.
The Bundesbank has become aware of the potential danger. It is now engaged in a campaign against the indefinite expansion of the money supply and it has started taking measures to limit the losses it would sustain in case of a breakup. This is creating a self-fulfilling prophecy. Once the Bundesbank starts guarding against a breakup everybody will have to do the same.
This is already happening. Financial institutions are increasingly reordering their European exposure along national lines just in case the region splits apart. Banks give preference to shedding assets outside their national borders and risk managers try to match assets and liabilities within national borders rather than within the eurozone as a whole. The indirect effect of this asset-liability matching is to reinforce the deleveraging process and to reduce the availability of credit, particularly to the small and medium enterprises which are the main source of employment.
So the crisis is getting ever deeper. Tensions in financial markets have risen to new highs as shown by the historic low yield on Bunds. Even more telling is the fact that the yield on British 10 year bonds has never been lower in its 300 year history while the risk premium on Spanish bonds is at a new high.
The real economy of the eurozone is declining while Germany is still booming. This means that the divergence is getting wider. The political and social dynamics are also working toward disintegration. Public opinion as expressed in recent election results is increasingly opposed to austerity and this trend is likely to grow until the policy is reversed. So something has to give.
In my judgment the authorities have a three months' window during which they could still correct their mistakes and reverse the current trends. By the authorities I mean mainly the German government and the Bundesbank because in a crisis the creditors are in the driver's seat and nothing can be done without German support.
I expect that the Greek public will be sufficiently frightened by the prospect of expulsion from the European Union that it will give a narrow majority of seats to a coalition that is ready to abide by the current agreement. But no government can meet the conditions so that the Greek crisis is liable to come to a climax in the fall. By that time the German economy will also be weakening so that Chancellor Merkel will find it even more difficult than today to persuade the German public to accept any additional European responsibilities. That is what creates a three months' window.
Correcting the mistakes and reversing the trend would require some extraordinary policy measures to bring conditions back closer to normal, and bring relief to the financial markets and the banking system. These measures must, however, conform to the existing treaties. The treaties could then be revised in a calmer atmosphere so that the current imbalances will not recur. It is difficult but not impossible to design some extraordinary measures that would meet these tough requirements. They would have to tackle simultaneously the banking problem and the problem of excessive government debt, because these problems are interlinked. Addressing one without the other, as in the past, will not work.
Banks need a European deposit insurance scheme in order to stem the capital flight. They also need direct financing by the European Stability Mechanism (ESM) which has to go hand-in-hand with eurozone-wide supervision and regulation. The heavily indebted countries need relief on their financing costs. There are various ways to provide it but they all need the active support of the Bundesbank and the German government.
That is where the blockage is. The authorities are working feverishly to come up with a set of proposals in time for the European summit at the end of this month. Based on the current newspaper reports the measures they will propose will cover all the bases I mentioned but they will offer only the minimum on which the various parties can agree while what is needed is a convincing commitment to reverse the trend. That means the measures will again offer some temporary relief but the trends will continue. But we are at an inflection point. After the expiration of the three months' window the markets will continue to demand more but the authorities will not be able to meet their demands.
It is impossible to predict the eventual outcome. As mentioned before, the gradual reordering of the financial system along national lines could make an orderly breakup of the euro possible in a few years' time and, if it were not for the social and political dynamics, one could imagine a common market without a common currency. But the trends are clearly non-linear and an earlier breakup is bound to be disorderly. It would almost certainly lead to a collapse of the Schengen Treaty, the common market, and the European Union itself. (It should be remembered that there is an exit mechanism for the European Union but not for the euro.) Unenforceable claims and unsettled grievances would leave Europe worse off than it was at the outset when the project of a united Europe was conceived.
But the likelihood is that the euro will survive because a breakup would be devastating not only for the periphery but also for Germany. It would leave Germany with large unenforceable claims against the periphery countries. The Bundesbank alone will have over a trillion euros of claims arising out of Target2 by the end of this year, in addition to all the intergovernmental obligations. And a return to the Deutschemark would likely price Germany out of its export markets – not to mention the political consequences. So Germany is likely to do what is necessary to preserve the euro – but nothing more. That would result in a eurozone dominated by Germany in which the divergence between the creditor and debtor countries would continue to widen and the periphery would turn into permanently depressed areas in need of constant transfer of payments. That would turn the European Union into something very different from what it was when it was a "fantastic object" that fired peoples imagination. It would be a German empire with the periphery as the hinterland.
I believe most of us would find that objectionable but I have a great deal of sympathy with Germany in its present predicament. The German public cannot understand why a policy of structural reforms and fiscal austerity that worked for Germany a decade ago will not work Europe today. Germany then could enjoy an export led recovery but the eurozone today is caught in a deflationary debt trap. The German public does not see any deflation at home; on the contrary, wages are rising and there are vacancies for skilled jobs which are eagerly snapped up by immigrants from other European countries. Reluctance to invest abroad and the influx of flight capital are fueling a real estate boom. Exports may be slowing but employment is still rising. In these circumstances it would require an extraordinary effort by the German government to convince the German public to embrace the extraordinary measures that would be necessary to reverse the current trend. And they have only a three months' window in which to do it.
We need to do whatever we can to convince Germany to show leadership and preserve the European Union as the fantastic object that it used to be. The future of Europe depends on it.
And from todays's New York Times: "In the United States, the ease of borrowing has not made it politically easier to increase the pace of spending. Instead, there is the possibility of "Taxmageddon," the threat that the unwillingness of politicians to compromise could lead to a combination of big automatic spending cuts and tax increases in 2013 that could devastate economic growth. All this is taking place in the midst of an election campaign that is widely expected to be the nastiest ever.
Moreover, the consensus that financial regulation should be strengthened and standardized has evaporated. In Europe and the United States, banks say that institutions across the Atlantic have unfair advantages, and regulators complain that the other continent has not taken the needed steps.
In the United States, a major push by the banks to weaken rules may or may not have been badly damaged by the multibillion-dollar trading loss suffered recently by JPMorgan Chase. But many in Congress, primarily but not exclusively Republicans, have gone back to the old belief that it was excessive government regulation that created the problem.
The widespread pessimism could dissipate as rapidly as it accumulated. Some surprisingly good economic news in the United States and China would help. More important would be for Europe's leaders to reach agreement on a course of action that offered hope for recovery in the most stricken areas of the Continent while assuring that the common financial system would have the support of common institutions if needed. Europe has previously managed to cobble together something when disaster appeared to loom, and perhaps it could do so again.
Germany — the country that would have to pick up most of the bill to rescue its neighbors — could decide that not spending the money created greater dangers. The United States could find ways to help out despite fiscal pressures and Congressional hostility to foreign aid. A new consensus on common bank regulation could emerge. But, for now at least, the outlook is far darker than it seemed to be only a couple of months ago."
In Economic Deluge, a World That's Unable to Bail Together
By FLOYD NORRIS
Published: June 2, 2012
Less than four years ago, with the world's financial system in danger of collapsing, major countries managed to come together on a coordinated course that averted a global depression.
Central banks pumped vast amounts of cash into economies, and banks were bailed out, with vows that they would be subject to stronger regulation.
By early 2009, financial markets had bottomed out and begun strong recoveries. Economies were slower to follow; by last year, slow growth seemed to be the global pattern, spurring hope that the crisis had passed.
But within the last few weeks, much of that hope seems to have faded.
In Europe, the crisis has grown worse, not better, and thedisputes among European leaders have intensified as much of the Continent appears to have drifted into a newrecession. In China, growth remains robust by Western standards. But concern is rising over the possible end of a property boom that had been fueled in part by local government borrowing and spending.
In the United States, which had been an oasis of relative calm with a growing economy and rising employment, job growth in May, reported Friday, was a puny 69,000. To make the outlook even gloomier, earlier numbers were revised lower. That capped a series of three disappointing monthly reports.
Moreover, there seems to be little willingness — or perhaps lit-tle ability — for the major countries to act together again. Squabbles have grown, some countries are in fiscal distress, and others face daunting domestic problems. The European situation is the most pressing. Banks are under pressure in many countries, for a combination of reasons. They did not raise as much capital as they might have when markets were more buoyant last year. In some cases, they appear to have been slow to recognize their real estate loan losses.