Fire Hydrant of Freedom
Politics, Religion, Science, Culture and Humanities => Politics & Religion => Topic started by: Quijote on November 24, 2006, 10:31:31 AM
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Opening up this topic in order to post my news about Europe:
As I've mentioned in another thread (America Alone (http://dogbrothers.com/phpBB2/index.php?topic=1033.msg8168#msg8168)) there is a restrengthend movement of neo-nationalism in Europe.? Not mentioned in this news is that the policeman was coloured.
Paris fan shot dead by policeman
A French football fan has been shot dead by a plain-clothed police officer after a European football match.
The officer reportedly fired tear gas, then live ammunition in an effort to disperse a fighting crowd near Paris' Parc des Princes football stadium.
The group of 150 Paris Saint Germain supporters were surrounding a fan of the Israeli team Hapoel Tel Aviv, who had beaten PSG 4-2 in the Uefa Cup.
An investigation has been launched into the shooting, police said.
Paris Saint Germain fans have a reputation for violent incidents, with the club disciplined over their behaviour several times in the past.
Cornered
The skirmish broke out by the Parc des Princes in the aftermath of PSG's defeat.
The police officer, who has not been identified, threw tear gas to break up a group of Paris fans surrounding the Israeli.
The officer was then chased towards a McDonald's restaurant nearby, holding the crowd at bay with his firearm before firing at least two shots, reports said.
Police union official Luc Poignant told the AFP news agency that the officer "had no choice but to defend himself and protect another person".
There was an atmosphere of high tension among Paris fans immediately after the game, which continued a poor run of form for the team.
AFP quoted witnesses describing a climate of "extreme confusion" in the streets.
Police reinforcements were sent to the area in an effort to calm the violence in the moments after the Paris fan was shot.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/europe/6179418.stm
Published: 2006/11/24 10:20:07 GMT
? BBC MMVI
fficer kills man in Paris soccer mob
By Katrin Bennhold
International Herald Tribune
French security and sports officials condemned racist violence by a mob of soccer fans in the capital Friday after a black police officer seeking to protect a Jewish fan of a visiting Israeli team shot and killed one man and wounded another.
The officer, Antoine Granomort, 32, rushed to the aid of a French fan of the Hapoel Tel Aviv club late Thursday after the Israeli team defeated Paris Saint-Germain in a UEFA Cup match, according to the police and witnesses.
About a hundred fans cornered the two men near the Parc des Princes, the stadium in Paris where the game was played, shouting racist and anti-Semitic epithets at them and making Nazi salutes, according to the accounts. When they began beating Granomort and threatening to kill the fan, the officer fired his service revolver.
A 25-year-old man was killed and another man, 26, was wounded. Both victims were identified by the police as members of a far-right group supporting Paris Saint-Germain, a club that has a long history of hooliganism among its fans.
"The seriousness of this event confirms the absolute necessity of fighting racism and anti-Semitism among PSG supporters," the mayor of Paris, Bertrand Delano?, said in a statement.
The Paris authorities have long grappled with hooligan violence in the capital, but tougher legislation has so far failed to stamp it out. There have been at least six incidents of major fan violence involving PSG supporters over the past 14 months.
Overt racism is a common occurrence at the Parc des Princes, the home stadium of PSG, with fans mocking black players with monkey chants and far-right slogans.
Sports Minister Jean-Fran?ois Lamour expressed dismay Friday at the "climate of tension and violence at certain soccer matches."
Interior Minister Nicolas Sarkozy, who has called himself a PSG fan, has vowed to clamp down on the violence.
Granomort, who was in custody Friday while magistrates investigated his assertion that he had acted in self-defense, was backed by fellow police officers, who stressed his right to self-defense.
The violence began around 10:50 p.m. Thursday, according to Philippe Brossard, a journalist for the magazine L'Express who witnessed the incident.
Dozens of angry PSG fans started pursuing Yanniv Hazout, a Frenchman who supported the Tel Aviv team, as he made his way to a M?tro station near the stadium.
Assigned to guard a nearby parking lot, Granomort, a plainclothes officer, first sought to stop the fans with a tear gas canister.
"He said several times: 'Stay behind me! Stay behind me!'" Brossard wrote in his account on the Web site of L'Express.
"The attackers move in on him, insult him," he wrote. "He retreats, panics, tries to leave to the right, loses his tear gas canister, picks it up again, retreats again. The mob continues to move closer."
According to Sarkozy, some fans shouted "Death to the Jew!" before attacking Hazout. Granomort was kicked and beaten before falling to the ground and drawing his weapon, the interior minister said.
Riot police are a common sight at the Parc des Princes. PSG has several factions of unruly fans, but one of the most notorious is the "Kop Boulogne," a group known for its allegiance to far- right parties like the National Front of Jean-Marie Le Pen.
Thirty PSG fans have been formally barred from entering the stadium, and some are under orders to present themselves to the police during matches. But dozens of other hooligans continue to attend, often clustering in a corner of the grandstand.
Fr?d?ric Thiriez, president of the French professional football league, said he was stunned by what had happened.
"Football is not about hatred," he said in a statement Friday. "Football cannot be war."
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Following up on the Danish cartoon provacateurs (sp?) :
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"Sex in the Park"
By Henrik Bering
The Weekly Standard | November 24, 2006
(Copenhagen) - You have to hand it to them: Few men in recent history have been more successful in creating mayhem than the small group of Denmark-based imams who turned the appearance of cartoons of Muhammad in a Danish newspaper into a world event. In a recent Egyptian opinion poll of nations seen as most hostile, Denmark registered third, right behind the United States and Israel, an impressive score for a small Nordic country that is normally known for its pacifism and humanitarian efforts.
Pretending to be on a mission to create understanding and dialogue, the imams set out from Denmark for the Middle East last December, where they spread false rumors of the Koran being burned on the streets of Copenhagen and otherwise did their best to incite violence against their host nation, resulting in attacks on embassies, trade boycotts, and flag burnings. They were later caught on hidden camera by a French documentary filmmaker, bragging about their exploits.
Not ones to rest on their laurels, this band of bearded brothers have continued to enjoy great success at getting their names into the headlines; their activities have been followed with particular interest by the Jyllands-Posten, the paper that originally published the cartoons and has had to live under a strict security regimen ever since. As always, there is an element of Monty Pythonesque farce in these imams posturing as holy warriors while being welfare-state spongers, and constantly tripping up in their own lies. Farce, that is, if it were not so deadly serious.
First a bit of good news: As reported in the Jyllands-Posten, Sheikh Raed Hlayhel, who has been in Denmark since 2000 and was the prime instigator behind the cartoon protest, recently announced that he had had it with Denmark and was leaving to settle down in his hometown of Tripoli in Lebanon. "And I am not coming back," he fumed, as if depriving the country of some tremendous cultural asset.
As a commentator noted, Hlayhel has not exactly been a model of successful integration. Having received his religious training in Medina in Saudi Arabia--where he imbibed pure, unadulterated Wahhabism--Hlayhel applied for asylum in Denmark and was at first denied. But as his young son suffers from spina bifida, and the Danish authorities felt the boy could not get the proper treatment in Lebanon, he was allowed in on humanitarian grounds.
Hlayhel thus did not have Danish citizenship and did not speak a word of Danish. But in Denmark's fundamentalist parallel society, Arabic will do just fine, especially when you preach jihad. The center of Hlayhel's activities was the Grimh?jvej mosque in the small town of Brabrand in Jutland, which has been closely monitored by Danish intelligence.
Among the users of the mosque were Slimane Hadj Abderrahmane, the so-called Guant?namo Dane--a holy warrior of Danish/Algerian parentage who was caught by American troops in Afghanistan--and Abu Rached, who has been identified by Spanish prosecutors as one of al Qaeda's main operatives in Europe.
What prompted Hlayhel's decision to pull up his tent pegs? He lost his lawsuit against the Jyllands-Posten for having printed the cartoons. And in matters like these, family considerations are clearly secondary. About his invalid son, who was receiving free care from the Danish national health system, Hlayhel stated, "His Muslim identity is more important than his treatment. I think all Muslims should live in a Muslim country. Farewell Denmark."
But before the Danes get too relieved, intelligence experts cited in the Jyllands-Posten warned that the sheikh can still make mischief from the Middle East. In his last prayer in Denmark, Hlayhel denounced the pope, warned against repetitions of the cartoons, and threatened retaliation: "We are people who love death and will sacrifice ourselves before Allah's feet. Do not repeat the tragedy, or else it will become a tragedy for you and the whole world."
Meanwhile, Hlayhel's fellow demagogue Ahmed Abu Laban, a Palestinian refugee who came to Denmark in 1984 and who is also not a Danish citizen, has written a book about the traveling imams' achievements entitled The Jyllands-Posten Crisis, which has come out so far only in Arabic and has been published in the Egyptian newspaper Al-Masri al-Youm.
Laban rails against a new group in Denmark called the Democratic Muslims, which was created in the wake of the cartoon crisis and whose leader, Naser Khader, he describes as "a rat" and "an apostate." This, according to a scholar cited in the Jyllands-Posten, amounts to a death threat, as in the fundamentalist view apostasy is a capital crime. Democratic Muslims are further characterized in the book as "such nice people, clean shaven, very clever, who are ready to have sex in the park, whenever they feel like it." The phrase "sex in the park" is common Arab code for homosexuality, which in sharia law also merits a death sentence.
Laban's name has been linked to Omar Abdel Rahman, the blind cleric who in 1993 was behind the first bombing of the World Trade Center; to Ayman al-Zawahiri, one of the planners of 9/11; and to Mohammed al-Fizazi, who was responsible for the 2003 Casablanca bombing. Laban at one point also claimed knowledge of an imminent terror operation on Danish soil.
His purpose with the book is to strengthen his own claims to leadership in the highly competitive world of extremist imams. Laban has also threatened in the past to leave Denmark, but, alas, thought better of it.
Downy bearded youth was also represented in the traveling cartoon road show in the person of 28-year-old Ahmed Akkari, who makes up for his tiny stature and squeaky voice with his great persistence. Akkari was born in Lebanon but has obtained Danish citizenship and is fluent in Danish. Among his political prognostications is that the leader of the Democratic Muslims would be blown up, should he ever become a government minister.
Most Danes were of the impression that Akkari had left the country last year to settle with his girlfriend in Lebanon, as he, too, felt insufficiently appreciated in Denmark. But lo and behold, when Denmark arranged for an evacuation of 5,000 people during this summer's war in Lebanon, who was among the rescued but Akkari, his girlfriend, and his little daughter. The Jyllands-Posten carried a telling photograph from the rescue operation with Akkari seen against the Danish flag gently wafting in the breeze--the very flag that he and his friends had caused to be burned all over the Middle East.
Predictably, Akkari found fault with the caliber of the Danish rescue mission. In the Extra Bladet, a Danish tabloid, he stated indignantly, "You should write about the horrible plane the Danish Foreign Ministry first wanted to send us home in. It was Jordanian and so old that it was life threatening."
In letters to the editor, Danes wondered the obvious: Why would a man who has so much to complain about want to return? They were also astounded by the number of Danish resident aliens found in Lebanon during the evacuation. There were calls to investigate how many were actually living in Lebanon while claiming unemployment benefits in Denmark. Predictably, the Danish liberal press deemed such questions crass and insensitive towards people who had been so massively traumatized by Israeli bombardments, but the issue will be debated in parliament in December.
Finally, the Danes have learned that Abu Bashar, a Syrian cleric living in the regional capital of Odense and working as a prison chaplain, has been fired after complaints from inmates at Nyborg State Prison that he was inciting hatred of Denmark, and after his statement in an article in the Fyens Stiftstidende that "Denmark is the next terror target."
Bashar's claim to fame stems from the cartoon crisis, when he showed a photograph of a man in a pig's mask on BBC television, and afterwards slipped it in among the material being presented by the touring imams in the Middle East, though it had nothing to do with the cartoons. It turned out to be a photo of a French comedian in a pig-calling contest. Bashar later claimed that he was misinterpreted and that the photo had been sent to him anonymously, showing how Muslims were insulted in Denmark. His forked tongue has severely damaged his credibility here.
To no one's surprise, Bashar claimed that his firing from his prison job was political. However, as a man who did not hold grudges, he was willing to forget the incident, if he could have his job back part-time, with disability pay. His knee was troubling him something awful. Sorry, no go.
The question remains why the Danish government puts up with these scoundrels and does not simply boot them out. France has rid itself of more than 20 extremist imams, as has Germany, while Spain and Italy each have deported four, and Holland three. Denmark so far has kicked none out. Surely, enough is enough.
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I think its noteworthy that many Scandinavians actually found it to be rather funny that muslim rioters got killed by the mob in Afghanistan, Pakistan and Egpyt.... I think the muslims will bite their teeth out when they try to convert Scandinavia to Scandiarabia... :wink:
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Friday, November 24, 2006
zaman.com
Fear of terrorism, which has seized Europe after the Sept. 11, Madrid and London attacks, has put more pressure on Muslims, who are now being treated as ?potential terrorists.?
Following statements in Britain that more than 600 Muslims were being monitored, Germany announced that 32,000 German Muslims were under surveillance.
Chair of the Bavaria Office for Protection of the Constitution, Wolfgang Weber stated that 32,000 out of 2,300,000 German Muslims were being monitored. Speaking at a panel in Munich, Weber, claiming that they were watching everybody who endangered the German democratic order, classified those who were monitored into three groups: 1) Those who wanted to establish an Islamic state based on Shariah law without resorting to violence, such as National Vision; 2) Those who collected donations for the violent groups, such as Hamas and Hezbollah; 3) Jihadist groups, such as al-Qaeda, and Ansar al-Islam. Weber asserted that Germany has become a venue where terrorists finalize their preparations.
Weber, who also responded with hesitancy to the proposal to establish dialogue with Muslim associations, noted that dialogue attempts should be conducted with the utmost care. Hep Monatzeder, Deputy Chair of Munich Municipality on Relations with Muslim, criticized Weber?s isolationist approach. Noting that the intelligence reports were based on assumptions, not on evidence and facts, Monatzeder stated: ?The inclusion of the name of an association in those reports does not mean all of its members pose danger. Muslim associations carry out a wide range of activities; we are unable to isolate those who benefit from those. We should continue dialogue.?
Speaking at the panel, Chair of Muslim Council Memduh Kapicibasi, who stressed that they felt offended by the connection made between Islam and terrorism, proposed the use of the notion ?religion-motivated violence.?
Media exaggerates the danger
Speaking to Zaman, Wolfgang Weber, Chair of the Bavaria Office for Protection of the Constitution, said that the terrorism threat had been exaggerated by the media. Noting that the point of view and the degree of exaggeration varied according to the channel and newspaper, Weber said they mostly focused on Islamic radicalism and extreme right wing groups, and further confessed that they had intelligence agents inside the Muslim associations.
Number of Mosques Rising, Churches Declining A recently conducted research in Germany revealed that the number of mosques was increasing, while the number of churches was declining. According to the study by Central Islamic Archive Institute, the number of mosques has risen from 141 to 159 since 2004, while 128 were under construction. Likewise, the number of Muslims has increased from 56,000 to nearly one million since the early 1980s.
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Sadly enough, anti-semitism is still strong in Europe, especailly among the lower classes and even more so in new EU partner countries like Poland. But there are signs of hope. One development I'm personally very proud of and looking forward to its further development, is the new synagogue, museum and jewish center in Munich:
Jews Celebrate New Munich Synagogue
By MELISSA EDDY 11.09.06, 1:18 PM ET
Nearly 70 years after Adolf Hitler declared Munich's main synagogue an "eyesore" in the center of his power base and personally ordered it torn down, the city's Jews celebrated a return to the heart of the southern German city. On Thursday, the 68th anniversary of Kristallnacht, or the Night of Broken Glass, Torah scrolls were marched through the winding, cobblestone streets of downtown Munich to a newly built synagogue in the heart of the city. Hundreds of onlookers and 1,500 police officers stood by.
Charlotte Knobloch, president of Germany's main Jewish group and a Munich native who survived the night when synagogues and Jewish businesses across Germany were attacked, praised the new synagogue and community center as a statement that Jews survived and are thriving in Munich.
"It has always been my great wish to open the Ohel Jakob synagogue, Munich's new main synagogue, on Nov. 9," Knobloch said, before some 1,200 government and religious officials and others attending the dedication ceremony.
"Because today we can show the entire world that Hitler did not succeed in annihilating us. There are Jews in the former capital of the Nazi movement."
President Horst Koehler and some 1,200 other government and religious representatives were present for the dedication of the Ohel Jakob synagogue.
The completion of the synagogue and its accompanying community center is a milestone for this burgeoning Jewish community of 9,200 members - Germany's second-largest after Berlin's. It not only brings their house of worship, schools and community centers under the same roof, but places them back in the city center, close to the spires of city hall and the landmark Frauenkirche, or Church of Our Lady.
For many, that also means that the buildings are close to the heart of German consciousness.
"There are synagogues that have been rebuilt, synagogues that have been renovated, synagogues that have been reconstructed, but those are totally different from building a center from scratch for a growing Jewish community," said Rabbi Israel Singer of the World Jewish Congress. "That builds hope."
Koehler expressed the hope such a symbol would help make the Jewish community a normal part of German society again.
"The new Jewish Center, to which this synagogue belongs, not only fills a hole left open in the city center since World War II, it also helps to bridge the spiritual and cultural hole ripped open by the expulsion and murder of the Munich Jews," Koehler said.
When the U.S. Army marched into Munich in 1945, only several dozen Jews remained. While the immediate postwar years saw an influx of mostly Eastern European Jews, most of them were fleeing their homes and swiftly moved on to Israel or the United States.
Those who remained and slowly started to rebuild took up residence in the city's only remaining synagogue, located in the backyard of a far-flung neighborhood. Since then, the city has had no visible Jewish buildings.
"It's symbolic for more profound change in terms of the consciousness of the Jewish community which sees itself no longer sitting on packed bags, rather declaring that they are here to stay," said Michael Brenner, a professor of Jewish history at the University of Munich.
The new synagogue, which seats 550, is a cubic structure of travertine stone topped by a glass cube aimed at giving worshippers a view of the heavens. The interior walls are paneled with warm cedar decorated with golden psalms.
Funding for the synagogue, which cost about $72 million, came from the city of Munich, the state of Bavaria and Munich's Jewish community. It stands on St. Jakobs Square, only a few blocks from where the city's original main synagogue stood until its demise in June 1938.
In 2003, authorities thwarted a plot by a group of neo-Nazis to bomb the ceremony to lay the cornerstone for the new synagogue.
Security concerns led Jewish leaders to decide to house a memorial to the 4,000 Munich Jews killed in the Holocaust in an underground tunnel between the synagogue and the community center.
Such fears, say Singer, are behind criticism from some Holocaust survivors who argue a new synagogue should not be built in the city that was home to the Nazi party, where Joseph Goebbels gave the orders for Kristallnacht.
Yet, as the home to what the World Jewish Congress describes as the world's fastest-growing Jewish community, conservatively estimated at more than 100,000, Germany must ensure that the rights of its new immigrants are respected, he said.
"There should be squares in Germany that are secure under the sign of David, not only under the sign of the cross," Singer said.
Copyright 2006 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed
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How neo-nationalism can look like in Germany:
http://www.youtube.com/watch?v=8fitl4ARpIc&mode=related&search=
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If I have it right the Neo-Nazis are the ones in front of the doorway with bats, the marchers are "anti-facists" and the ones with guns are the police. Is this right?
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Yup.
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The Russians probably are not pleased , , ,
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GEORGIA: The Georgian Parliament unanimously passed a declaration of the nation's desire to join NATO. During the vote, Parliament Speaker Nino Burdzhanadze said Georgia cannot be a neutral state. Georgian party leaders signed a declaration of national accord regarding NATO accession March 12.
stratfor.com
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And, as a housekeeping matter, I bring this post from another thread of the same name here so as to be able to delete that other thread:
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www.stratfor.com
Geopolitical Diary: The Other Side of EU Enlargement
The Bundestag, the lower house of the German parliament, voted Thursday on the EU accession treaty of Bulgaria and Romania, ratifying their members by a 529-12-10 vote. Though a few remaining procedures still must be completed, such as formal approval by the Danish parliament and the European Commission, German parliamentary approval was the last serious obstacle standing between the two states and full EU membership. Everything else is detail.
The inclusion of Bulgaria and Romania in the European club will transform the fundamental character of the union -- more so than the addition of any other members to date -- and help to usher in its downfall as a political grouping.
EU accession, slated for Jan. 1, 2007, will be a highlight in the histories of both countries. Neither has lengthy institutional legacies: The two states emerged as powers only with the Ottoman defeats at the tail end of the 19th century, and then spent the bulk of the next 100 years enmeshed in wars or under Soviet domination. After the Cold War, they were the poorest members of the Warsaw Pact -- a distinction that will not change when they become Members No. 26 and 27 in the much more wealthy European Union. It would be a deliberate exercise in understatement to say that full access to EU markets, not to mention the inflow of structural development funds and agricultural subsidies, will radically transform them.
As for the European Union itself ?
First, the good news. With Bulgaria and Romania admitted, the Balkans will be permanently locked into Western structures -- no small feat, considering the 15 years of ethnic cleansing, war and chaos that wracked much of the region (and that Sofia and Bucharest wisely, and competently, avoided). With this accomplished, the union can digest the rest of that region at its leisure.
Also, despite the poverty of the incoming members, this round of expansion will not carry the sticker shock that the last one did. Bulgaria and Romania have less than 30 million people; the 2004 expansion took in 10 states with a total of nearly 90 million. There will be no collective gasp at the cost among the existing members -- they see this bill coming, and it is not nearly as large as the last one.
Finally, both Bulgaria and Romania border on the Black Sea, which previously was beyond the European Union's purview. Now European economic interests can do something they dearly love: They can seek out new markets -- Ukraine and the Caucasus come to mind -- for their goods.
But there also is a very dark side to this enlargement for the European Union as an institution. It is not that rule of law or judicial effectiveness are subpar in Bulgaria or Romania; it has nothing to do with the lack of integration for their large Roma populations; it is not connected to the states' reputations as smuggling havens. Nor does it involve declining relations with the Russians or the inevitability of the Turks wondering why they, too, cannot be admitted. Rather, it is the simple issue of voting weight.
Until recently, France and Germany were the center of gravity for the European Union -- imposing their collective will on the rest of the union and driving it forward from institutional growth spurt to growth spurt. With only six states in the union this was easy. With 15, it grew difficult, and at 25, it became downright thorny.
But in a union of 27, the fundamental math changes.
The European Union's decision-making mechanism is a system of qualified majority voting: Each state has a number of votes proportionate to its population. Or, to be more precise, a number that is roughly proportionate. As a sop to Europe's many small states, the larger states are given relatively fewer votes, while the smaller states have relatively more. In a union of 25, the French-German axis does not always have its way, but by voting together, Paris and Berlin carry sufficient weight to block any measures they truly oppose. But when relatively pro-U.S. and pro-free market Bulgaria and Romania are added to the mix, that calculus no longer holds. The broadly pro-U.S. and pro-free market states now will enjoy an absolute majority, and the other EU states combined will have the voting power to override a Franco-German veto.
That may sound rather innocuous, but it should always be remembered that France designed the European Union in order to further French political ambitions, and that Germany has always been the biggest economy in the mix and the anchor for Europe's common currency. Paris and Berlin are used to dominating policy of all types, not having it forced on them.
Small EU states have always had to suck it up and convince themselves that the benefits of union membership outweigh the drawbacks. Paris has never had to do that math. And if Paris has never had much of a problem biting its thumb at London or Washington, how will it react once Brussels makes a decision running counter to French interests -- and is able to make it stick?
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Second post of the day:
stratfor.com
EU: A Plan for Energy Efficiency -- and Independence
Summary
The EU leadership has agreed to a draft energy plan that aims to kill the whole proverbial flock of birds with one stone. In theory, the policy will increase the use of renewable energy, decrease carbon emissions, diversify the use of biofuels and help Europe reduce its reliance on Russia by 2020. It is creative and ambitious -- and only the first step in Europe's new energy policy.
Analysis
Some detail-fudging by German President Angela Merkel, the current holder of the EU presidency and host of the ongoing EU heads-of-government summit, appears to have successfully paved the way to an EU-wide agreement on a bold new energy policy.
Under the terms of the deal, the European Union as a whole aims to reduce its carbon emissions by 20 percent, increase its use of renewable fuels to 20 percent of its total energy demand, use biofuels for 10 percent of transport demand, and most critically, reduce total EU energy demand by 20 percent. All of this is scheduled to take effect by 2020, and all is in addition to any progress that implementing Kyoto reductions has already achieved.
The reductions sound extremely sharp because they are, but Merkel has put forward a rather flexible method of attaining the goals. The binding targets will be achieved on an EU-wide basis rather than on a country-by-country basis, allowing richer states with more experience in renewable energy -- Denmark for example -- to shoulder more of the burden.
The biggest hang-up in the negotiations has been a desire by a few states -- led by France and Finland -- to classify nuclear power as an alternative fuel, a move staunchly opposed by non-nuclear states Ireland and Austria. Merkel's compromise was to blur in a new draft text between "alternative" and "low-emissions" technologies and insert fresh text that clearly makes a country's energy mix its own concern and not Brussels'. That move appears to have mitigated objections from both sides and paved the way to a formal agreement.
Other provisions would then be easily agreed upon, including one on pledging EU states to assist each other in maintaining security of supply, unity on negotiating with external energy suppliers and the development of an infrastructure to cushion Europe in the case of any supply shocks.
This document does far more than simply give Europe a green energy policy. The reduction of carbon emissions, the supply security, the increased alternative energy use and the overall reduction in energy demand clauses all serve a double purpose: political insurance. The Europeans, in particular the former Warsaw Pact states, fear the Russians are beginning to use energy exports to Europe as lever to gain influence over European policy. In essence, Russia is using its energy riches as a political tool. This essentially has led the Europeans to use the publicly attractive rhetoric of going green to achieve energy security.
Reducing total energy demand by a fifth -- and then mandating that at least a fifth of the remainder has to be from locally generated renewable sources as well as diversifying into low-carbon energy -- will take a huge bite out of European dependence on any particular petroleum supplier. Additionally, a network of infrastructure that can shuttle energy supplies back and forth across the union in case of disruption will be able to cope with disruptions resulting not just from acts of God, but also from acts of Moscow. Had such a system been in place in January 2006 or January 2007, Europe would not have felt the pinch of the Russian-Ukrainian natural gas tussle or the Russian-Belarusian oil spat.
The union can now get down to the nitty-gritty of two additional steps. The first is to diversify the sources of Europe's remaining petroleum imports. Austrian energy firm OMV is leading the charge at building a natural gas line from the Middle East, and France's Total is working to construct fresh facilities to import liquefied natural gas. This process will be costly and time-consuming, but for states like Poland that are a bit touchy about all things Russian, it will be a task eagerly attacked.
The second task will be the politically tricky one. Remember that the agreement will not spread the changes evenly across the union. It is up to the European Commission to propose -- by September -- specifically how to divide up the burden. Massaging away that little spoiler will require something a lot more creative than Merkel's technical blurring.
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stratfor.com
FRANCE: France is considering more fully participating in NATO, French Defense Minister Herve Morin said. France lacks influence in the military structure and misses opportunities to hold command positions because of its sideline status, Morin said. He also criticized France for appearing opposed to NATO's continuing evolution. NATO officials said they have not as yet held formal talks with France over full NATO re-entry.
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Pravda on the Hudson
LONDON — In a usual week, “Question Time” is a worthy but largely unexciting television production, a late-night panel discussion on the BBC that for 30 years has attracted a modest, pre-bedtime audience.
The police tried to keep back protesters on Thursday outside BBC offices in London before a TV appearance by the leader of the right-wing British National Party.
But on Thursday, it was transformed into the forum for Britain’s most widely anticipated political showdown in decades, drawing 8.2 million viewers, more than three times the program’s usual audience, on a par with the World Cup games played by England’s soccer team and more than the number of viewers for such weekly prime time hit shows as “Strictly Come Dancing.”
The occasion was the appearance on the program, the BBC’s flagship politics show, of Nick Griffin, leader of the British National Party, whose goal to “take back Britain” includes incentives that encourage the mass repatriation of Britain’s nonwhite immigrants, coupled with a deep hostility to Islam, which Mr. Griffin has described as “a wicked and vicious faith.” He has also spoken of his “repugnance” for lesbians and gay men, and advocated the end of civil contracts for same-sex relationships.
His record includes having denied the Holocaust, suggesting that some of the gas chambers at Auschwitz-Birkenau were built after World War II for the purposes of Jewish propaganda, and conceding, under questioning by a biographer, that Hitler, whom Mr. Griffin invoked in the past as a model, may have made mistakes. “Yes,” he said, according to the biographer, Dominic Carman, “Adolf went a bit too far.”
In June, the B.N.P. won two seats — one for Mr. Griffin — in Britain’s 72-seat contingent to the European Parliament, the first time it won election to anything higher than a local council. The party took more than a million votes, 6.2 percent of the total, and gained enough legitimacy, in the view of the BBC’s executives, to have its voice heard alongside the country’s mainstream parties on “Question Time.”
Mr. Griffin, 50, is a pinstripe-suit-and-tie-wearing Cambridge University law graduate whose mission is to put a mainstream gloss on a party that is the ideological descendant of the British Union of Fascists, the pro-Hitler “blackshirts” of the 1930s.
Since seizing the leadership of the British National Party a decade ago, Mr. Griffin, flak jacket concealed beneath his dark suit, has set out from his home in a heavily guarded farmhouse in Wales to change its members’ image, as a profile in Friday’s Daily Telegraph put it, “from skinheads in bomber jackets to ‘politically incorrect rebels.’ ”
For the B.N.P. and other parties, the timing of the TV debate was especially significant. It came barely seven months before the expected date for Britain’s general election in May. Soaring unemployment and immigration levels, as well as the threat of terrorism, are likely to be major issues then, and ones that could offer new openings to fringe parties like the B.N.P.
The BBC’s decision split Prime Minister Gordon Brown’s cabinet, as it did much of Britain. “If they are asked about their racist and bigoted views,” Mr. Brown said, “it will be a good opportunity to expose what they are about.” But his Welsh secretary, Peter Hain, vehemently disagreed. “The BBC should be ashamed of single-handedly doing a racist, fascist party the biggest favor in its grubby history,” he said.
As the TV taping approached on Thursday night, three hours before the debate was broadcast, a thousand protesters gathered outside the BBC’s Television Center in West London, setting off clashes with truncheon-wielding police officers. At one point, 30 protesters broke into the BBC’s lobby, before being pushed back. A handful of policemen and protesters were injured, and there were six arrests.
To reach the BBC studio, Mr. Griffin was ushered by a phalanx of bodyguards through a rear door of the TV center. For a while, it had looked as if the burly politician, once a boxer for the Cambridge team, might duck the occasion, citing the threat from the protesters — an outcome that would have fitted well with Mr. Griffin’s assertions that Britain’s “political class” will do everything it can to prevent the party’s message from gaining traction.
On Friday, Britain’s airwaves resonated with debate about who had won, and lost, in the 60-minute debate. The program’s format consists of five panelists taking questions from a studio audience of about 100 people and from the program’s presenter, David Dimbleby, a 71-year-old veteran of royal weddings and other state occasions who has achieved the status of a British Walter Cronkite with his middle-of-the-road manner and his custom on “Question Time” of ensuring that all points of view get a fair hearing.
The early reading by many of Britain’s major newspapers was that Mr. Griffin lost heavily on points. While he gained a mass audience for the first time, for a party that usually meets in cramped backstreet halls, he appeared shocked by the pounding he took from other panelists, by repeated booing in the studio and by infuriated interruptions from Mr. Dimbleby.
On Friday, Mr. Griffin said he would make a formal complaint to the BBC about “the venom” and “sheer unfairness” of the discussion. “That was a lynch mob,” he said.
============
Mr. Dimbleby led the charge. Quoting liberally from Mr. Griffin’s past remarks about the Holocaust, Islam, lesbians and gay men, as well as about restoring Britain to its “indigenous” white population, he demanded that Mr. Griffin say whether he stood by the remarks. After Mr. Griffin said he was “the most loathed man in Britain in the eyes of Britain’s Nazis,” the presenter interrupted brusquely: “Do you deny the Holocaust?”
The program drew 8.2 million viewers and angry questions in the studio about his party’s stances on race and the Holocaust.
When Mr. Griffin hesitated, he repeated the question. Mr. Griffin said that he had shifted from his earlier position of denial after listening to World War II radio intercepts of German plans for eliminating the Jews, but that he could not elaborate because of European laws that make Holocaust denial a criminal offense.
Jack Straw, Britain’s justice minister and a fellow panelist, called Mr. Griffin “the Dr. Strangelove of British politics,” a “fantasizing conspiracy theorist.” He said, “You don’t need radio intercepts to know that people were gassed at Auschwitz.”
The B.N.P. leader also sought to mollify anger in the studio audience — many of whose members were Asian or black — at the party’s stance on saving Britain for whites, saying it was not a matter of color but of preserving the rights of Britain’s “indigenous peoples,” who he said could trace their origins back 17,000 years. “We are the aborigines here,” he said.
That brought one man in the audience to his feet. “Where do you want me to go?” asked Khush Klare, whose parents immigrated from India in the 1960s. “I love this country, I’m part of this country.”
The B.N.P. leader also said that to earn the right to remain in Britain, Muslims should “acknowledge that Britain always has been and must remain fundamentally a British and Christian country.” On lesbians and gay men, he said that “a lot of people in this country find the sight of two grown men kissing in public really creepy.” That brought to her feet a woman in the audience who said she was a lesbian. “I have to say the feeling of revulsion is mutual,” she said.
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Dispatch: The Irish Bailout and Germany's Opportunity
November 22, 2010 | 2220 GMT
Click on image below to watch video:
Analyst Marko Papic examines the EU-IMF bailout of Ireland and the opportunities it may present for Germany.
Editor’s Note: Transcripts are generated using speech-recognition technology. Therefore, STRATFOR cannot guarantee their complete accuracy.
The EU and the IMF have come to an agreement with Ireland to provide Dublin with between €80 and €90 billion worth of loans. The bailout will be conditioned on Ireland pushing through a budget deficit reduction plan that will seek to bring the budget deficit under 3% of GDP as mandated by the Eurozone fiscal rules.
The terms of the bailout deal are still being revealed but what seems to be clear at this point is that the Irish low corporate tax rate will remain the same. At 12.5% the Irish corporate tax rate is one of the lowest in Europe and has really been the point of contention between Ireland and its larger EU member states. Countries like France have for long time focused on the Irish corporate tax rate in the argued that it gives Dublin an unfair competitive advantage over continental economies and that Ireland has been able to attract investors into Ireland with it’s low corporate rate. However behind this criticism is also a perception in Paris but also in Berlin that the low corporate tax rate has allowed Ireland to also be independent and to be independent-minded, however Dublin is fully funded until mid-2011 and therefore it felt that it was able to protect its corporate tax rate in the negotiations for the bailout right now, it felt it had an upper hand so to say.
What has happened now is that Germany seems to have withdrawn the corporate tax rate as one of the conditions for the bailout and has therefore allowed Ireland to keep it for the time being. Germany and France will take a wait-and-see approach with Ireland on this thorny issue and will wait for Ireland to slip up on the terms of its bailout bringing up the corporate tax rate perhaps at some later point in the future.
For Germany the bailout is another opportunity. First it allows Berlin to illustrates to the markets the effectiveness of the European Financial Stability Fund the EFSF which has about €440 billion plus the IMF money that brings it up to €750 billion. Now the fund was specifically designed to bail out Ireland, Portugal and Spain if the need arose. Now Ireland is falling down which means that Portugal could very will be next but the Portuguese needs would not be anymore to those of Ireland and Greece. And therefore the FSF has more than enough to handle both Ireland and Portugal however if Madrid also taps the EFSF the euro zone and Berlin may soon find themselves without any more ammunition in their clip to deal with further crises.
Ultimately Germany does not feel that the current crisis is one of existential nature. On one hand the uncertainty about the Eurozone and its’ markets means that the Euro is trading lower which helps German exports immensely. Furthermore Germany is using the opportunity of the crisis to redesign the European Union and its institutions and especially Eurozone fiscal rules and enforcement mechanisms of those rules. The real test for Eurozone therefore is not the panic level in Madrid or Lisbon or Dublin rather to what extent are the policymakers in Berlin concened.
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I post this for the information in it. The conclusion in the title is author's opinion. I think he is concluding on the positive side that the Euro will be stronger once its weakest members die off. Impressive side note: Germany's growth rate was 3.6% in 2010. (Note to Obama, the recession is over.)
http://www.telegraph.co.uk/finance/comment/jeffrandall/8284235/Buy-euros-the-single-currency-is-finished.html
... This, now, is the position of the Club Med countries within the eurozone. The single currency is functioning so brilliantly, its vulnerable members are sliding towards bankruptcy. Frittering away their credibility in remorseless bond markets, they turn to Das Scheckbuch in Berlin for hard cash.
On current form, Greece will be paying nearly 10 per cent of its GDP in interest by 2015. Portugal’s 10-year borrowing costs are close to an unsustainable 7 per cent and would be even higher were it not for market manipulation by the European Central Bank. And Spain is sitting on 700,000 unsold homes, 20 per cent unemployment and a 33 per cent deterioration in competitiveness against Germany since the euro was formed.
Yes, the system is working a treat. No luck required, just more money. But from where will it come? The bail-out fund of 750 billion euros, cobbled together by the European Union and IMF, will not be enough. It may buy time, allowing Athens, Lisbon and Madrid to play the wheel for longer than they should, but their financial attrition grinds on.
Of the six eurozone countries that still have triple-A credit ratings – Austria, Finland, France, Germany, Luxembourg and the Netherlands – only one really matters: Germany. As the EU’s economic powerhouse (GDP growth was 3.6 per cent in 2010), it has become the lender of last resort. So far, Berlin has paid up, but 62 per cent of Germans now oppose further rescue packages for EU losers. Faced with choosing between Europe’s olive belt and her own electorate, Chancellor Angela Merkel will turn off the aid tap.
So what can be done? Some are calling for the issuance of an all-embracing euro bond, enabling the weaklings to access credit on terms similar to those enjoyed by more muscular neighbours. Last week, I asked Finland’s prime minister, Mari Kiviniemi, if this was a good idea. She responded in the way that an exasperated teacher might scold a classroom dunce: “No, it is a very bad idea”.
What about the ECB? Can it be relied upon to loosen monetary policy and allow rising inflation to ease the pain of the over-borrowed and inefficient? Not while Jean-Claude Trichet is in charge. The central bank piper is unmistakeably French, but the tune he plays is that of a Bavarian oompah band. Forget a cut in the ECB’s interest rate; it’s more likely to go up.
In short, there is no get-out-of-jail card. As the Bank of England’s governor explained this week, eurozone countries that binged on cheap money and self-indulgent pay awards must face up to improving competitiveness: “But because they are part of a monetary union and so do not have their own currency, they can do so only through outright falls in nominal wages. And to force that adjustment, unemployment has had to rise very sharply, compounding the impact on living standards.”
What, I suspect, Mervyn King believes, but dare not say, is that the excruciating realignment of income to output in the Club Med has much further to run. Greece has barely scratched the surface of a sprawling and corrupt public sector, where standards of book-keeping shame a country that lays claim to the oldest counting board yet discovered (300BC).
Greece is learning the hard way that cutting the budget deficit and reducing overall debt are not the same thing. There comes a point where austerity alone cannot deliver a solution, because the burden of unaffordable obligations is rising faster than savings can be made. Long after the bullet has been bitten, total mortgage arrears continue to deteriorate.
As long as Greece remains locked in a currency that is deutsche mark with only a hint of garlic, its economy cannot recover. A lethal combination of rising unemployment, falling wages and an exodus of talent will force it to confront reality. That will occur when either the voters decide they can no longer stand the hair shirt or the country’s creditors run of out patience.
The same will apply to Portugal and, eventually, Spain. Thus the euro, as we know it, is finished. Which is why… I’m a buyer of the euro. When the crunch comes – and the laggards secede or are expelled – the residue will be a group of solvent nations, unhindered by chronic budget and trade imbalances. As veteran investor Jim Rogers explains: “The more I look at it, the more I see Germany taking control of the euro.” That’ll do nicely.
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A Tectonic Shift in Central Europe
At a Thursday meeting, the defense ministers of the Visegrad Group (V4) — a loose regional grouping of the Czech Republic, Hungary, Poland and Slovakia — decided to create a battle group. The decision is significant but expected. It’s significant because it shows that the V4 states are willing to upgrade their loose alliance to the security and military level. It’s expected because STRATFOR has long forecast that they would be forced to take security matters into their own hands by NATO’s lack of focus on the singular issue that concerns them: Russian resurgence in the post-Soviet sphere.
Europe’s two major political and security institutions are the European Union and NATO, both born in the aftermath of World War II, which devastated Europe. They then evolved in the shadow of a looming confrontation with the Soviet Union, which threatened to revisit such devastation. Approximating national interests to form a common security strategy was not perfect during the Cold War, but it was simple, especially with Soviet armored divisions poised for a strike at Western Europe via the North European Plain and the Fulda Gap.
“Poland could therefore be pivotal in any divergence of the blocs from the European core and hamper Moscow’s national security designs.”
The Cold War and the memory of World War II acted as bookends holding European states on the metaphorical bookshelf. Once the two eroded in the 1990s, the books did not immediately come tumbling down. Instead, the drive to expand NATO and the European Union became an end to itself, giving both organizations a raison-d’etre in the 1990s. Inertia drove the entities.
But a number of factors since the mid-2000s has shaken this unity, primarily the emergence of an independent-minded Germany and the resurgence of Russia as a regional power. While Russia does not pose the same threat it did during the Cold War, Central Europeans continue to see Moscow as a security threat and would prefer for NATO to treat Russia accordingly. Germany sees Russia as a business opportunity and an exporter of cheap and clean energy. The two views collided most recently during discussions for NATO’s New Strategic Concept, producing a largely incomprehensible mission statement for the alliance. There are other tremors. The United States, the guarantor of European security structures, has spent the last 10 years obsessed with the Middle East and has been unable to prevent the divergence of interests on the European continent.
NATO has unsurprisingly become incapable of approximating national security interests toward a common mean, while the European Union has failed — spectacularly so in Libya — to create a coherent foreign policy. Instead, European countries are diverging into regionally focused groupings. The two most prominent of these are the Nordic states, which are cooperating closely with the Baltic states, and the V4. The blocs’ security concerns regarding Russian intentions are rooted in separate geographies. The Nordic and Baltic states’ focus is in the Baltic Sea region, while the V4 is concerned with Moscow’s strength in the traditional border states of Belarus, Ukraine and Moldova. The two regional blocs remind us of primordial continental plates splitting off from Pangea. Europe’s tectonic plates, held together for 60 years by geopolitical conditions, have begun to diverge.
Poland is key. It shares a Baltic Sea coast with Nordic neighbors to the north, of which it perceives Sweden as a strategic partner. But its historical roots are in the northern slopes of the Carpathians, a geographical feature it shares with the other V4 members. It also happens to be the United States’ most committed Central European ally as well as the region’s most populous country and most dynamic economy. Poland could therefore be pivotal in any divergence of the blocs from the European core and hamper Moscow’s national security designs.
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from Der Spiegel
06/20/2011 05:42 PM
Time for Plan B
How the Euro Became Europe's Greatest Threat
The euro is becoming an ever greater threat to Europe's common future. The currency union chains together economies that are simply incompatible. Politicians approve one bailout package after the other and, in doing so, have set down a dangerous path that could burden Europeans for generations to come and set the EU back by decades. By SPIEGEL Staff
In the past 14 months, politicians in the euro-zone nations have adopted one bailout package after the next, convening for hectic summit meetings, wrangling over lazy compromises and building up risks of gigantic dimensions.
For just as long, they have been avoiding an important conclusion, namely that things cannot continue this way. The old euro no longer exists in its intended form, and the European Monetary Union isn't working. We need a Plan B.
Instead, those in responsible positions are getting bogged down in crisis management, as they seek to placate the public and sugarcoat the problems. They say that there is only a government debt crisis in a few euro countries but no euro crisis, citing as evidence the fact that the value of the European common currency has remained relatively stable against other currencies like the dollar.
But if it wasn't for the euro, Greece's debt crisis would be an isolated problem -- one that was tough for the country, but easy for Europe to bear. It is only because Greece is part of the euro zone that Athens' debts are a problem for all of its partners -- and pose a threat to the common currency.
If the rest of Europe abandons Greece, the crisis could spin out of control, spreading from one weak euro-zone country to the next. Investors would have no guarantees that Europe would not withdraw its support from Portugal or Ireland, if push came to shove, and they would sell their government bonds. The prices of these bonds would fall and risk premiums would go up. Then these countries would only be able to drum up fresh capital by paying high interest rates, which would only augment their existing budget problems. It's possible that they would no longer be able to raise any money at all, in which case they would become insolvent.
But if the current situation continues, the monetary union will invariably turn into a transfer union, a path the inventors of the euro were determined to prevent.
Democratic Deficiencies
The euro's founding fathers did not anticipate such a crisis, and thus did not include any provisions for it in the European Monetary Union's set of regulations. The euro welds together strong and weak countries, for better or for worse. There is no emergency exit, and there are no rules to follow in an emergency -- only the hope that everything will turn out well in the end. This is why the crises of a few euro countries are a crisis for the euro, as well as a crisis for the European Union, its governments and its institutions. And this is why the euro crisis has suddenly and expectedly mushroomed into a crisis for the political Project Europe, its future and its cohesion.
The fact that the countries funding the bailouts are lacking democratic legitimization is now becoming the greatest impediment to joint crisis management. Gone are the days of subtle debate over whether the European Parliament involves citizens in a just and proportional way in the decisions reached by the European Council, the body headed by the leaders of the European Union member states, and European Commission, the EU's executive. When things get serious, as they are now, decisions will no longer be made in the somewhat democratically legitimized EU bodies, but at the more or less secret meetings of a handful of leaders.
During the German chancellor's and the French president's quiet walks together, and at the behind-the-scenes meetings of discrete central banks, policies are being made that are then handed to the parliaments to rubber-stamp, even though hardly any of their members understand them.
The costly decisions that are ultimately reached by the luminaries of European solidarity don't just affect the citizens of the ailing member states in an existential way; they must also fear for their social security, their jobs and their assets.
The decisions of European politicians are just as troubling for citizens who live, like the Germans, on the sunny side of the union, and are worried that their country is running up debt that could remain on the books into a remotely distant future.
One of the reasons that Europeans are so incensed at their respective governments is that they are not involved in the decision-making process. Another is that they inevitably perceive their political leaders as being motivated by alleged factual constraints and the requirements of the financial markets, without having any plan of their own.
The euro debt crisis has already swept aside two governments, in Ireland and Portugal, and the Spanish and Greek governments could soon follow. Things are also getting precarious for the government in Berlin, where Chancellor Angela Merkel could lose her parliamentary majority in upcoming votes on bailout measures.
Resistance to Austerity Measures
A crack now bisects the continent, running between those countries that need more and more money and those that are expected to pay. With the Greeks frustrated over the Germans and the Germans over the Greeks, the Portuguese, the Spaniards and the Italians, the political peace project of European unity threatens to end in a great economic dispute among the nations.
In the debtor countries, there is growing resistance against the constant barrage of new austerity programs, while the people of the creditor countries are increasingly incensed over the billions in new aid. The "Outraged Citizens" are taking to the streets in Madrid and Athens while the " True Finns" gain strength in the parliament in Helsinki. Some 60 percent of Germans are opposed to a new aid package for Greece, and there is at least as much resistance among the opposition and trade unions in Athens to the government's efforts to rein in spending -- a precondition for additional loans.
Last Wednesday, thousands of Greeks staged a general strike intended to block access to the parliament building, where the new austerity program was being debated. Prime Minister Georgios Papandreou's limousine was showered with oranges, while rocks were thrown elsewhere. The police used tear gas to protect the elected representatives from the people they represent.
To secure payment of the next loan tranche under the European aid package, Papandreou intends to put together another austerity package worth more than €6.5 billion ($9.3 billion) by the end of the month. The protesters outside the parliament building, unwilling to accept the prime minister's course of action, shouted: "Thieves, traitors. What happened to our money?"
How long will citizens in the weak euro countries -- Greece, Portugal, Ireland and Spain -- continue to accept the harsh reforms? And how long will voters in the creditor countries tolerate their own governments taking ever-higher risks to rescue the euro?
Euro Has Become Greatest Threat to Continent's Future
Finland is a country that is often held up as a successful model for other European countries, but the success of the right-wing populist "True Finns," who captured 20 percent of the vote in April's parliamentary elections, came as a wakeup call to the political establishment in Brussels. As the skeptics gain ground throughout the EU, anti-European sentiments are growing in even the core countries of the union, like France and Germany.
The euro, created with the aim of permanently uniting Europe, has become the greatest threat to the continent's future. A collapse of the monetary union would set Europe back by decades, dealing it a blow from which it might never recover, especially with Europe's position already threatened by the fast-growing Asian economies. How is a fragmented Europe to prevail against this new competition?
This is why Europe's politicians want to defend the euro at all costs, and why they are approving one bailout package after the next. They are playing for time, hoping that the markets will settle down and the reforms will take hold.
The business community is supporting their efforts, too. In a major advertising campaign scheduled to run in leading publications this week, top German business executives, including ThyssenKrupp Chairman Gerhard Cromme, Siemens CEO Peter Löscher and Daimler CEO Dieter Zetsche, promote the monetary union and insist: "The euro is necessary." They argue that ailing member states must be assisted financially, and that the common currency is "absolutely worth this commitment."
The Euro Is a Fair-Weather Construct
But the causes of the euro crisis are more deep-seated than that. The monetary union is a fair-weather construct, as a number of economists said from the beginning. American economist Milton Friedman, for example, predicted that the euro would not survive its first major crisis, and later, in 2002, he added: "Euroland will collapse in five to 15 years."
For these reasons, the euro crisis, as suddenly as it occurred, was expected. However, the warnings had been ignored and treated as a minor nuisance. More than anything, the euro was a political project. Its advocates, most notably then German Chancellor Helmut Kohl and then French President François Mitterrand, wanted to permanently unite the continent's core countries and embed Germany, which many neighboring countries perceived as a threat following reunification, in the European community.
Politicians hoped that as a result of the common currency, the underlying problem of the euro's design would resolve itself, namely that the member states would almost automatically settle in at the same pace of economic development.
It was a deceptive hope. In fact, it was only interest rates that converged, now that the European Central Bank (ECB) was setting uniform rates for strong and weak members alike throughout the entire economic zone. As a result, a great deal of capital flowed to Spain and Ireland, where a real estate bubble developed, while the Greeks and the Portuguese were able to live shamelessly beyond their means. They imported more than they exported and took on more new debt to pay for their consumption.
This behavior continued unabated until the financial crisis put an end to it. Suddenly money was scarce. The bubbles in Ireland and Spain burst, the economy in the euro zone collapsed, and the Greeks were forced to admit that their debts were much higher than they had ever disclosed before -- and that they had falsified their numbers from the beginning and should, in fact, never have been allowed to join the monetary union in the first place.
Has the Euro Pushed Europe Apart?
Since then, the monetary union has been on the brink of collapse. Far from growing together economically, Europe has in fact grown even further apart. As a result, the chances that the euro will survive in its current form are slimmer than ever. Politicians who ignore the laws of economics cannot go unpunished in the long run.
If national currencies still existed, countries like Greece and Portugal could resort to a proven means of reducing their lack of competitiveness. They would simply have to devalue their drachma or their escudo, and then the laws of supply and demand would see to it that the flow of commodities was diverted.
The prices of Greek and Portuguese products would go down to make them more marketable abroad. At the same time, money would be worth less in Athens or Lisbon, so that residents of those countries could afford to buy fewer imported goods. This would be beneficial for the trade balance. Exports would rise and so would the foreign currency revenues, allowing the countries to service their debts more effectively. Not the government but the markets would reduce economic imbalances.
But in a monetary union, the exchange rate is no longer available as an adjustment valve. Instead, the member countries must regain their competitiveness in different ways, namely by imposing tough austerity measures and reducing wages and prices. In a monetary union, it is up to the governments to enforce what the exchange rate would do in a system of competing currencies.
Muddling Through
If this fails, the mountain of debt will continue to grow. In the end, a country with a large deficit has three options. First, it can declare itself insolvent and, after restructuring its debt, attempt to rebuild its economy. Second, it can also withdraw from the monetary union and reintroduce its national currency. Third, it can convince the creditor countries to keep issuing new loans, thereby providing it with permanent financing.
For more than a year now, European governments have been trying out a fourth option: muddling through.
And for just as long, politicians have been assuring the people that this approach is the alternative, and that it will end up costing taxpayers nothing at all, because the ailing countries will repay the debt, with interest and compound interest, once they've been bailed out. In fact, they argue, the whole thing is even a good business arrangement for the rescuers.
The truth is that governments and monetary watchdogs, despite all protestations to the contrary, have continually expanded their bailout programs, have built up massive risks that could significantly burden future generations and have violated both the European treaties and the iron-clad principles of the ECB.
To date, the history of the euro rescue program has not been a successful one. In fact, it is more of a history of mistakes and broken promises.
'There Will be No Budgetary Funds for Greece '
On March 1, 2010, Chancellor Merkel's spokeswoman said: "A clear no. There will be no budgetary funds for Greece." At that point, Athens was on the verge of bankruptcy, and politicians with Germany's center-right Christian Democratic Union (CDU) and pro-business Free Democratic Party (FDP) were suggesting that the country sell off a few islands.
On May 2, the euro countries and the International Monetary Fund (IMF) approved a €110 billion bailout package for the beleaguered country. Although the German portion of the loans was coming from the government-owned development bank KfW and not the budget, the federal government still served as guarantor. Every euro the Greeks do not repay will constitute a burden on the German taxpayer.
It was the first lapse, the first violation of the European treaties, which categorically rule out aid payments to needy euro countries. This so-called no-bailout clause was intended to guarantee that the monetary union didn't become a transfer union, and that the strong wouldn't have to pay for the weak. It was crucial to the acceptance of the treaty by the national parliaments; without it the German parliament, the Bundestag, would not have agreed to the monetary union.
The second lapse occurred soon afterwards. On May 9, 2010, the first euro bailout fund was launched. Although the volume of €440 billion alone made it clear that the opposite was the case, Merkel and Finance Minister Wolfgang Schäuble tried to downplay the importance of the European Financial Stability Fund (EFSF). They insisted that the fund was purely a precaution, would not be used and, most of all, was temporary.
"An extension of the current bailout funds will not happen on Germany's watch," Merkel said in Brussels on Sept. 16, 2010. This promise, too, lasted only a few months. On March 25, 2011, the leaders of the euro zone approved a new, constant crisis mechanism. Although it has a different name, the European Stability Mechanism (ESM), it will function on the basis of the same principle as its predecessor fund, the EFSF, beginning in mid-2013. The euro countries want to pry loose €700 billion for the fund, which will include a cash contribution for the first time. The Germans will be asked to pay at least €22 billion. To do so, Germany would have to take on additional debt.
'Outcome Is Very Close to a Transfer Union '
As if this weren't enough, in March the euro-zone member states also agreed that both the current bailout fund, the EFSF, and its successor, the ESM, would be authorized to buy government bonds from bankruptcy candidates with low credit ratings in the future. As a result, countries living beyond their means will no longer be punished with high interest rates, and market mechanisms will be eroded. Even the CDU's Michael Meister, one of the financial policy experts loyal to Merkel, says: "The outcome comes very close to a transfer union, which we reject."
All assurances aside, performance in return for Germany's willingness to play along would be absent again and again. Representatives of Merkel's government coalition government in Berlin have outdone each other in calling for strict penalties for countries that violate the euro-zone's deficit rules. There was talk of eliminating voting rights, of freezing EU subsidies like the bloated agriculture fund and, as a last-ditch solution, even of exclusion from the monetary union.
Most of all, however, the penalties were to be imposed automatically in the future when a country's budget deficit exceeded three percent of its gross domestic product. "We support the greatest amount of automatism possible," Merkel said in September 2010.
After taking a walk with French President Nicolas Sarkozy in the French seaside resort of Deauville, the chancellor abandoned the position that the deficit process was to be triggered automatically. Instead, the finance ministers in the euro zone must set it in motion first, meaning that any decision would be subject to the usual horsetrading in Brussels.
A Clear Market Reaction
The reaction by the markets to what is the biggest failure to date in the efforts to rescue the euro has been very clear. The yields for Greek and Irish government bonds rose, and Ireland sought protection from the bailout fund in November 2010, followed by Portugal in April 2011.
In recent months, the governments of the euro-zone countries have gradually expanded their bailout programs, and the risks for the German people and taxpayers have grown with each step.
There are already estimates of how much the Greek crisis will truly end up costing German taxpayers if the crisis drags on for years or a debt haircut becomes necessary. Economists Ansgar Belke of the University of Duisburg-Essen and Christian Dreger of Viadrina University in Frankfurt an der Oder estimate the cost at about €40 billion.
The Cologne Institute for Economic Research (IW) estimates the cost to German taxpayers at €65 billion if Portugal, Ireland and Spain also become insolvent. In the event of a complete collapse of the euro zone, Germany would be liable for all the guarantees and bailout aid it has provided.
And the potential costs for German taxpayers wouldn't stop there because they are also indirectly affected by the risks lurking in the accounts of the ECB and the state-controlled banks. Since May 2010, the ECB has spent €75 billion purchasing government bonds from ailing euro countries. Its goal was to bring calm to the markets and prevent the risk premiums for the bonds from skyrocketing. But many used the opportunity to unload the risky securities on the central bank.
The ECB is believed to have spent €40-50 billion to date on Greek government bonds. In addition, as of the end of April it had refinanced Greek banks to the tune of €90 billion.
Hardly anyone knows how high the risks are for the ECB. It has also accepted €480 billion in structured securities from the banks as collateral. The euro crisis has already turned into a threat to the ECB. German taxpayers bear 27 percent of the risk, which corresponds to the German Bundesbank's share of ECB capital.
Back at the Brink
Despite all of these bailout measures, and despite the risks that their rescuers have assumed, the weak euro countries are back where they were a little over a year ago, namely on the brink. The risk premiums on their government bonds have climbed to new record highs. The Greeks need fresh cash to avert bankruptcy, and the risk of the crisis spreading to other euro countries is far from averted.
The aid that euro countries and the IMF have provided to Greece so far is not enough. They had naïvely assumed that the crisis would end quickly. And they had seriously anticipated that the Greeks would return to the capital markets within the next two years, in order to raise about €60 billion on their own.
The money is missing because the Greek government, despite all of its reform efforts, is still not seen as creditworthy. This is why the funding gap needs to be closed, including with fresh money from the Europeans.
In return, the Greeks must fulfill even more stringent requirements. Given the Greek government crisis, achieving this seems more uncertain than ever. When the first bailout package of €110 billion was approved, Athens reacted with tough measures. Pensions were slashed, tobacco, petroleum and value-added taxes were drastically increased, and it was made easier for companies to lay workers off.
Nevertheless, Prime Minister Papandreou failed to meet the targets set by the so-called troika, consisting of the IMF, the ECB and the European Commission, the EU's executive arm. A maximum budget deficit of 8.1 percent of GDP had been stipulated for 2010, but in the end the deficit was 10.5 percent. After a "strong start" in the summer of 2010, the implementation of reforms has come to a "standstill in recent quarters," the troika concludes in its latest report. It also states that the gap between the planned and the actual deficit has once again "grown significantly" in recent months.
"There are many holy cows that were not slaughtered," explains Jens Bastian, an economist living in Athens. While more than 200,000 jobs were cut nationwide, many state-owned companies in particular are still seen as goldmines when it comes to sinecures.
In contrast to those privileged Greeks working in state-owned companies and government agencies, more and more people are now forced to live on small pensions or minimum-wage earnings of €750 to €800 a month, plus bonuses. Such incomes were hardly enough to live on in the past, and now they are to be reduced across the board or offset by drastic increases in the rate of tax on consumer goods.
Suffering and Sacrifices in Greece
"People don't know why they are suffering and making these sacrifices," says Athens political science professor Seraphim Seferiades. "The privilege of being in the euro zone is losing more and more of its value for people, because they benefit less and less from it." Almost 30 percent of Greeks would prefer to return to the drachma sooner rather than later.
Now the government will have to approve additional austerity measures if it is to obtain fresh cash from the EU and the IMF, in the form of a second aid package worth between €90 billion and €120 billion for the period until 2014. Greece will have to pay off old debts and make new ones. The government debt is currently about 150 percent of GDP and will likely rise to 160 percent soon.
How can such a weak country ever pay off such a huge debt? For once, almost all economists agree: It will be impossible without a debt restructuring involving creditors writing off large parts of their debts.
But a so-called haircut on Greek debt is not politically feasible at the moment. The financial markets are still too fragile, opponents argue, warning that it could trigger a new financial crisis like the one that followed the collapse of the US investment bank Lehman Brothers.
Germany Demands Private Investor Participation
But the Germans have been insisting that private sector creditors must also make a contribution to overcoming the crisis. Members of parliament with the governing parties -- the CDU, its Bavarian sister party the CSU, and the FDP -- recently made it clear to the government that they will reject another aid package in parliament if that doesn't happen. The chief budget expert with the CDU/CSU's parliamentary group, Norbert Barthle, urged his fellow members of parliament to act quickly. "If we wait much longer," he says, "there will hardly be any bonds left in the hands of private investors. Then taxpayers will end up shouldering the Greek bailout by themselves."
CSU Chairman Horst Seehofer agrees wholeheartedly. He is all too familiar with the constraints imposed by the general public in Germany, the majority of whom oppose a second bailout for Greece. "Experts have been telling me for a year that a restructuring of Greek debt is necessary," he says. "The time has come to start involving private lenders."
The German government recently came up with a proposal that would involve lenders in a relatively painless fashion: They would exchange their bonds for new securities with longer maturities. The contribution by the euro-zone countries would be reduced accordingly.
But with this demand, the Germans found themselves largely isolated. They were already viewed as troublemakers during the first Greek bailout, when they reluctantly yielded to the will of the majority and pressure from the ECB. Now, once again, they have been pressured from all sides to go along with the majority view.
That point was reached last Friday, when Merkel and Sarkozy agreed to a toothless compromise in Berlin. They agreed that private lenders should be involved in the new bailout package for Greece, but only on a voluntary basis -- a largely ineffective provision.
This solution is much too feeble for many German parliamentarians. "This is not the lender involvement that the Bundestag had demanded," says Frank Schäffler, a financial policy expert with the FDP. His CDU counterpart, Manfred Kolbe, even characterizes it as "fraudulent labeling," saying: "We need a debt haircut, and it won't happen voluntarily." CSU European expert Thomas Silberhorn calls for "binding regulations with the mandatory participation of private investors."
But from Sarkozy's standpoint, a tougher solution could jeopardize French banks. They are heavily exposed to Greek debt and could face serious difficulties.
German Banks, Insurers Unload Greek Bonds
German banks and insurance companies have systematically reduced their holdings of Greek government bonds. Since the beginning of 2010, they have reduced their total exposure from €34.8 billion to €17.3 billion, not including debt held by the state-owned development bank KfW. Insurance companies have reduced their investment in Greek bonds from €5.8 billion to only €2.8 billion in the last year.
In Germany, it is state-owned banks who have the greatest exposure to Greek debt. Commerzbank, a quarter of which is owned by the federal government, holds €2.9 billion in Greek bonds. The state-owned regional banks known as Landesbanken and their so-called bad banks hold additional risks of more than €4 billion.
The biggest dangers by far lurk on the books of FMS Wertmanagement, the bad bank for the nationalized mortgage lender Hypo Real Estate. It holds Greek government bonds and loans that constitute an economic risk of €10.8 billion. In the event of a debt restructuring, taxpayers would be hit hardest in Germany. A haircut would mean that FMS alone would need several billion in fresh equity capital.
ECB Considers Debt Crisis Greatest Risk To Banks
Now that the Germans and the French seem to be largely in agreement, they merely have to convince the ECB, the most determined opponent to date of the German proposal to require private sector involvement. The Frankfurt-based central bankers fear that this would trigger massive turmoil on the international money markets. In its new financial market stability report, the ECB categorizes the euro-zone sovereign debt crisis as the greatest risk to banks.
Most of all, the ECB doesn't want investors to be forced to write off part of their debt. The monetary watchdogs warn that the consequences would incalculable.
They argue that as soon as the powerful rating agencies gain the impression that the Greek government is not fulfilling its obligations without the complete consent of its creditors, they will have to downgrade its credit rating to D, the lowest level. The letter stands for "default." Even if the maturities of Greek bonds were extended with the consent of the lenders, they would have to be downgraded to a rating of SD, or "selective default."
Either way, under its statutes the ECB would no longer be allowed to accept such securities as collateral in returning for providing liquidity to banks. The consequences would be catastrophic. Greek banks would be largely cut off from the European money cycle and would thus run the risk of becoming illiquid. The Greek banking system would find itself on the brink of collapse.
Paving the Path to Euro Bonds
This is precisely where a compromise proposal that Finance Minister Schäuble plans to present to the ECB and to his counterparts from the euro-zone countries comes in. Under the proposal, if Greek bonds are no longer accepted as collateral following the participation of private lenders, the ECB will simply have to be offered bonds that satisfy its requirements.
A 10-member "Greece Task Force" at the German Finance Ministry has worked out how this could function. The experts propose that the Greek government, in addition to the €90 billion-€120 billion in fresh cash it may receive from the euro-zone countries and the IMF as part of a second bailout, also be given access to bonds issued by the EFSF, the euro rescue fund. It could pass on these securities, which have the rating agencies' highest rating of AAA, to Greek banks, which in turn could use them as collateral to obtain liquidity from the ECB.
The problem is that this measure would make the new bailout package significantly more expensive. To ensure that the EFSF had sufficient funds for the operation, its financial scope would have to be increased so that it could really make €440 billion available, as it was originally intended to do. To achieve this, the member states would have to double the scope of their respective guarantees. Germany, for example, would be liable for €246 billion in the future, instead of the current €123 billion.
The would-be euro rescuers are also considering accessing the so-called Hellenic Financial Stability Fund. This fund, set up as part of the first Greek bailout package in May 2010, contains €10 billion, which could be used to boost the capital of Greek banks in an emergency. The fund hasn't been touched yet.
Berlin Expecting the Worst
The details of the new bailout plan are to be worked out by July. This is absolutely necessary, because if the next tranche of aid is not paid by mid-July, Greece will be bankrupt.
Despite all of these hiccups, the money will flow to the Greeks. But no one, including the German government, believes that this will solve the problems in the euro zone. After more than a year of uninterrupted attempts at fighting the crisis, officials in Berlin are expecting the worst and intend to be ready just in case.
For this reason, Schäuble's crisis team has been instructed to review all possible scenarios. For example, what happens if a country can no longer meet its payment obligations or if a member leaves the monetary union? And how can imbalances in a common currency zone be averted?
There are essentially two alternatives. The first is a radical one, in which the governments pull the plug and leave the beleaguered countries to fend for themselves. The second, more pragmatic solution is to continue muddling along, though somewhat more efficiently, and to hope that things improve. Neither option will be cheap.
The radical cure works like this: Disappointed by the lack of progress and prospects for improvement, the euro-zone countries leave Greece to fend for itself. They refuse to throw even more money at Athens after all the money they have already spent.
The country would quickly become insolvent, because it would no longer be able to borrow any money on the markets. Because Greek lenders still shoulder a substantial portion of the government debt, the country's banking sector could see a number of bankruptcies.
This approach also carries with it the threat of contagion. If Greece slides into uncontrolled bankruptcy, investors might refuse to invest their money in other ailing euro-zone members. Even more banks could collapse in the ensuing chain reaction.
The Nuclear Option
In light of these incalculable developments, many are now considering the nuclear option as a real alternative: Greece withdraws from the monetary union and reintroduces the drachma. The government in Athens was already toying with the idea weeks ago, and now even internationally respected economists are recommending it. "A withdrawal from the euro would be the lesser of two evils," says Hans-Werner Sinn, head of the respected Munich-based Ifo Institute for Economic Research.
Nouriel Roubini, an economist at New York University, also supports the idea. The renowned professor argues Greece's only chance is to devalue its own currency and thus improve its competitiveness. Roubini was one of the few to predict the financial crisis three years ago.
In every financial crisis to date, it has taken a devaluation of the currency to reinvigorate the economy of a crisis-stricken country, Roubini argues. But historic examples can only be applied to the conditions in a monetary union to a limited extent.
The crisis would not end after Greece's withdrawal. In fact, it could even get worse. The country's debts would still be denominated in euros, which would turn them into foreign-currency debts overnight. Their value in the new national currency would rise rapidly, because the drachma would be devalued. Greek borrowers would be all but unable to meet their obligations.
Banks, in turn, would come under pressure, both in Greece and in the rest of the euro zone. And costly bailout measures for the banking industry would be needed once again.
At the end of such a development, the monetary union could disintegrate into a hard-currency bloc and a group with its own, weaker currencies. Critics of the common currency, like former Bundesbank board member Wilhelm Nölling, favor such a solution. Nölling and a group of like-minded people once filed and lost a suit against the introduction of the euro before Germany's Federal Constitutional Court, and now he is suing the government once against over the euro bailout fund. The court's decision is still pending.
The alternative to the breakup of the monetary union is hardly any less threatening, leading as it does directly to a transfer union. After a year of Greek bailouts, the beginning is already underway, and starting in 2013 the planned permanent bailout fund, the ESM, (which EU finance ministers approved on Monday) will be yet another step on this dangerous path.
Echoes of Italy's Mezzogiorno and Belgium's Wallonia
The end result could look something like this: The deficit countries would require permanent financing from the more stable north. What was treated as a loan in the past would be transformed into a subsidy, and thus requiring neither interest nor repayment. The monetary union would become a financial union and the debtor countries the permanent recipients of subsidies, dependent on contributions from their economically more powerful neighbors -- much like the Mezzogiorno in Italy or Belgium's Wallonia region.
To prevent this from happening, many politicians specializing in financial and economic affairs recommend bringing about the political union of Europe as quickly as possible, a union with a strong central government. They argue that if the nations in the euro zone formed a closer union, they could coordinate their financial systems more effectively, thus providing the common currency with a political foundation.
This would make it easier to implement reforms in the recipient countries and improve their competitiveness. Just recently, ECB President Jean-Claude Trichet proposed installing a European finance ministry equipped with the right to intervene in the individual member states.
A Cautionary Tale in German Reunification
But it isn't quite that easy. More integration doesn't necessarily mean that economic imbalances would disappear as a result. No one understands this better than the Germans, who had similar experiences with the monetary union between the two Germanys about 20 years ago. Effective July 1, 1990, the deutschmark became the official currency of East Germany. It was largely exchanged for the former East German mark at a ratio of one-to-one. The East German states joined the Federal Republic of Germany only three months later. It was the model case of a monetary union that was accompanied by a political union.
But anyone who believed that rapid unification would lessen the economic shock of the monetary union between the two Germanys was soon disappointed. In fact, the economic imbalances in reunified Germany became entrenched after that. Thousands of companies in the former East Germany went out of business, because they were unable to bring productivity up to Western standards.
The unemployment figures exploded, and financial transfers between the two parts of the country soon exceeded the trillion mark. To this day, the former East German states still lag behind the former West German states in terms of economic strength, productivity and income.
German reunification did nothing to change this. It merely helped to financially cushion the negative consequences of the monetary union. The states of the former East Germany were incorporated into the West German inter-state fiscal adjustment system (under which money is transferred from richer to poorer states) under favorable terms, and the former East Germans were suddenly given access to the blessings of the generous West German social system.
The lesson is clear: German unification is not a valid role model for European politicians, but rather a cautionary tale. It shows how quickly a poorly designed monetary union can lead to a permanent transfer union.
Such a model would in any case be incompatible with the European treaties. New agreements would have to be negotiated and ratified by all national parliaments, and perhaps even approved in referendums.
But perhaps the people of Europe and their representatives will decide the fate of the monetary union first. It could happen in Athens or in Lisbon, if the necessary reforms fail as a result of popular protests. Or in Berlin -- should the billions in loan guarantees actually come due.
REPORTED BY THOMAS DARNSTÄDT, ARMIN MAHLER, PETER MÜLLER, CHRISTOPH PAULY, CHRISTIAN REIERMANN, MICHAEL SAUGA AND ANNE SEITH
Translated from the German by Christopher Sultan
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TWO VISIONS OF EUROPE
There has been a fight between the advocates of two different ideals from the beginning of the European Union. Which stance it should adopt: the classical liberal vision, or the socialist vision of Europe? The introduction of the Euro has played a key role in the strategies of these two visions. In order to understand the tragedy of the Euro and its history, it is important to be familiar with these two diverging, and underlying visions and tensions that have come to the fore in the face of a single currency
THE CLASSICAL LIBERAL VISION
The founding fathers of the EU, Schuman (France [born in Luxembourg]), Adenauer (Germany), and Alcide de Gasperi (Italy), all German speaking Catholics, were followers of the classical liberal vision of Europe. They were also Christian democrats. The classical liberal vision regards individual liberty as the most important cultural value of Europeans and Christianity. In this vision sovereign European states defend private property rights and a free market economy in a Europe of open borders, thus enabling the free exchange of goods, services and ideas.
The Treaty of Rome in 1957 was the main achievement toward the classical liberal vision for Europe. The Treaty delivered four basic liberties: free circulation of goods, free offering of services, free movement of financial capital, and free migration. The Treaty restored rights that had been essential for Europe during the classical liberal period in the nineteenth century, but had been abandoned in the age of nationalism and socialism. The Treaty was a turning away from the age of socialism that had led to conflicts between European nations, culminating in two world wars.
The classical liberal vision aims at a restoration of nineteenth century freedoms. Free competition without entry barriers should prevail in a common European market. In this vision, no one could prohibit a German hairdresser from cutting hair in Spain, and no one could tax an English man for transferring money from a German to a French bank, or for investing in the Italian stock market. No one could prevent, through regulations, a French brewer from selling beer in Germany. No government could give subsidies distorting competition. No one could prevent a Dane from running away from his welfare state and extreme high tax rates, and migrating to a state with a lower tax burden, such as Ireland.
In order to accomplish this ideal of peaceful cooperation and flourishing exchanges, nothing more than freedom would be necessary. In this vision there would be no need to create a European superstate. In fact, the classical liberal vision is highly skeptical of a central European state; it is considered detrimental to individual liberty. Philosophically speaking, many defenders of this vision are inspired by Catholicism, and borders of the European community are defined by Christianity. In line with Catholic social teaching, a principle of subsidiarity should prevail: problems should be solved at the lowest and least concentrated level possible. The only centralized European institution acceptable would be a European Court of Justice, its activities restricted to supervising conflicts between member states, and guaranteeing the four basic liberties.
From the classical liberal point of view, there should be many competing political systems, as has been the case in Europe for centuries. In the Middle Ages, and until the nineteenth century, there existed very different political systems, such as independent cities of Flanders, Germany and Northern Italy. There were Kingdoms such as Bavaria or Saxony, and there were Republics such as Venice. Political diversity was demonstrated most clearly in the strongly decentralized Germany. Under a culture of diversity and pluralism, science and industry flourished.
Competition on all levels is essential to the classical liberal vision. It leads to coherence, as product standards, factor prices, and especially wage rates tend to converge. Capital moves where wages are low, bidding them up; workers, on the other hand move where wage rates are high, bidding them down. Markets offer decentralized solutions for environmental problems based on private property. Political competition ensures the most important European value: liberty.Tax competition fosters lower tax rates and fiscal responsibility. People vote by foot, evading excessive tax rates, as do companies. Different national tax sovereignties are seen as the best protection against tyranny.Competition also prevails in the field of money. Different monetary authorities compete in offering currencies of high quality. Authorities offering more stable currencies exert pressure on other authorities to follow suit.
THE SOCIALIST VISION
In direct opposition to the classical liberal vision is the socialist or Empire vision of Europe, defended by politicians such as Jacques Delors or François Mitterand. A coalition of statist interests of the nationalist, socialist, and conservative ilk does what it can do to advance its agenda. It wants to see the European Union as an empire or a fortress: protectionist to the outside and interventionist on the inside. These statists dream of a centralized state with efficient technocrats—as the ruling technocrat statists imagine themselves to be—managing it.
In this ideal, the center of the Empire would rule over the periphery. There would be common and centralized legislation. The defenders of the socialist vision of Europe want to erect a European mega state reproducing the nation states on the European level. They want a European welfare state that would provide for redistribution, regulation, and harmonization of legislation within Europe. The harmonization of taxes and social regulations would be carried out at the highest level. If the VAT is between fifteen and twenty-five percent in the European Union, socialists would harmonize it to twenty-five percent in all countries. Such harmonization of social regulation is in the interest of the most protected, the richest and the most productive workers, who can “afford” such regulation—while their peers cannot. If German social regulations were applied to the Poles, for instance, the latter would have problems competing with the former.
The agenda of the socialist vision is to grant ever more power to the central state, i.e., to Brussels. The socialist vision for Europe is the ideal of the political class, the bureaucrats, the interest groups, the privileged, and the subsidized sectors who want to create a powerful central state for their own enrichment. Adherents to this view present a European state as a necessity, and consider it only a question of time.
Along the socialist path, the European central state would one day become so powerful that the sovereign states would become subservient to them. (We can already see first indicators of such subservience in the case of Greece. Greece behaves like a protectorate of Brussels, who tells its government how to handle its deficit.)
The socialist vision provides no obvious geographical limits for the European state—in contrast to the Catholic-inspired classical liberal vision. Political competition is seen as an obstacle to the central state, which removes itself from public control. In this sense the central state in the socialist vision becomes less and less democratic as power is shifted to bureaucrats and technocrats. (An example is provided by the European Commission, the executive body of the European Union. The Commissioners are not elected but appointed by the member state governments.)
Historically, precedents for this old socialist plan of founding a controlling central state in Europe were established by Charlemagne, Napoleon, Stalin and Hitler. The difference is, however, that this time no direct military means would be necessary. But state power coercion is used in the push for a central European state.
From a tactical perspective, crisis situations in particular would be used by the adherents of the socialist vision to create new institutions (such as the European Central Bank (ECB) or possibly, in the future, a European Ministry of Finance), as well as to extend the powers of existing institutions such as the European Commission or the ECB.
The classical liberal and the socialist visions of Europe are, consequently, irreconcilable. In fact, the increase in power of a central state as proposed by the socialist vision implies a reduction of the four basic liberties, and most certainly less individual liberty.
THE HISTORY OF A STRUGGLE BETWEEN TWO VISIONS
The two visions have been struggling with each other since the 1950s. In the beginning, the design for the European Communities adhered more closely to the classical liberal vision.6 The European Community consisted of sovereign states and guaranteed the four basic liberties. From the point of view of the classical liberals, a main birth defect of the community was the subsidy and intervention in agricultural policy. Also, by construction, the only legislative initiative belongs to the European Commission. Once the Commission has made a proposal for legislation, the Council of the European Union alone, or together with the European Parliament, may approve the proposal.7 This setup contains the seed of centralization.
Consequently, the institutional setup, from the very beginning, was designed to accommodate centralization and dictatorship over minority opinions, as unanimity is not required for all decisions and the areas where unanimity rule is required have been reduced over the years.
The classical liberal model is defended traditionally by Christian democrats and states such as the Netherlands, Germany, and also Great Britain. But social democrats and socialists, usually led by the French government, defend the Empire version of Europe. In fact, in light of its rapid fall in 1940, the years of Nazi occupation, its failures in Indochina, and the loss of its African colonies, the French ruling class used the European Community to regain its influence and pride, and to compensate for the loss of its empire.
Over the years there has been a slow tendency toward the socialist ideal—with increasing budgets for the EU and a new regional policy that effectively redistributes wealth across Europe.10 Countless regulations and harmonization have pushed in that direction as well.
The classical liberal vision of sovereign and independent states did appear to be given new strength by the collapse of the Soviet Union and the reunification of Germany. First, Germany, having traditionally defended this vision, became stronger due to the reunification. Second, the new states emerging from the ashes of communism, such as Czechoslovakia (Václav Klaus), Poland, Hungary, etc., also supported the classical liberal vision for Europe. These new states wanted to enjoy their new, recently won liberty. They had had enough of socialism, Empires, and centralization.
The influence of the French government was now reduced.11 The socialist camp saw its defeat coming. A fast enlargement of the EU incorporating the new states in the East had to be prevented. A step forward toward a central state had to be taken. The single currency was to be the vehicle to achieve this aim.12 According to the German newspapers, the French government feared that Germany, after its reunification, would create “a DM dominated free trade area from Brest to Brest-Litowsk”.13 European (French) socialists needed power over the monetary unit urgently.
As Charles Gave14 argued on the events following the fall of the Berlin Wall:
For the proponents of the “Roman Empire” [socialist vision], the European State had to be organized immediately, whatever the risks, and become inevitable. Otherwise, the proponents of “Christian Europe” [classical liberal vision] would win by default and history would likely never reverse its course. The collapse of the Soviet Union was the crisis which gave the opportunity, and drive, to the Roman Empire to push through an overly ambitious program. The scale had been tipped and the “Roman Empire” needed to tip it the other way; and the creation of the Euro, more than anything, came to symbolize the push by the Roman camp towards a centralized super-structure.
The official line of argument for the defenders of a single fiat currency was that the Euro would lower transactions costs—facilitating trade, tourism and growth in Europe. More implicitly, however, the single currency was seen as a first step toward the creation of a European state. It was assumed that the Euro would create pressure to introduce this state.
The real reason the German government, traditionally opposed to the socialist vision, finally accepted the Euro, had to do with German reunification. The deal was as follows: France builds its European empire and Germany gets its reunification.15 It was maintained that Germany would otherwise become too powerful and its sharpest weapon, the Deutschmark, had to be taken away—in other words, disarmament.
The next step in the plan of the socialist camp was the draft of a European constitution (by French ex-President Valery Giscard d’Estaing Ginard), establishing a central state. But the constitution project failed utterly; it was voted down by voters in France and the Netherlands in 2005. As is often the case, Germans had not even been asked. They had not been asked on the question of the Euro either. But politicians usually do not give up until they get what they want. In this case they just renamed the constitution; and it no longer required a popular vote in many countries.
As a consequence, the Lisbon Treaty was passed in December 2007. The Treaty is full of words like pluralism, non-discrimination, tolerance and solidarity, all of which can be interpreted as calls to infringe upon private property rights and the freedom of contract. In Article Three, the European Union pledges to fight social exclusion and discrimination, thereby opening the doors to interventionists. God is not mentioned once in the Lisbon Treaty.
In actuality, the Lisbon Treaty constitutes a defeat for the socialist ideal. It is not a genuine constitution but merely a treaty. It is a dead end for Empire advocates, who were forced to regroup and focus on the one tool that they had left—the Euro. But how, exactly, does it provoke a centralization in Europe?
The Euro causes the kinds of problems which can be viewed as a pretext for centralization on the part of politicians. Indeed, the construction and setup of the Euro have themselves provoked a chain of severe crises: member states can use the printing press to finance their deficits; this feature of the EMU invariably leads to a sovereign debt crisis. The crisis, in turn, may be used to centralize power and fiscal policies. The centralization of fiscal policies may then be used to harmonize taxation and get rid of tax competition.
In the current sovereign debt crisis, the Euro, the only means left for the socialists to strengthen their case and achieve their central state, is at stake. It is, therefore, far from the truth that the end of the Euro would mean the end of Europe or the European idea; it would be just the end of the socialist version of it.
Naturally one can have an economically integrated Europe with its four basic liberties without a single fiat currency. The UK, Sweden, Denmark, and the Czech Republic do not have the Euro, but belong to the common market enjoying the four liberties. If Greece were to join these countries, the classical liberal vision would remain untouched. In fact, a free choice of currency is more akin to the European value of liberty than a European legal tender coming along with a monopolistic money producer.
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The Divided States of Europe
June 28, 2011
By Marko Papic
Europe continues to be engulfed by economic crisis. The global focus returns to Athens on June 28 as Greek parliamentarians debate austerity measures imposed on them by eurozone partners. If the Greeks vote down these measures, Athens will not receive its second bailout, which could create an even worse crisis in Europe and the world.
It is important to understand that the crisis is not fundamentally about Greece or even about the indebtedness of the entire currency bloc. After all, Greece represents only 2.5 percent of the eurozone’s gross domestic product (GDP), and the bloc’s fiscal numbers are not that bad when looked at in the aggregate. Its overall deficit and debt figures are in a better shape than those of the United States — the U.S. budget deficit stood at 10.6 percent of GDP in 2010, compared to 6.4 percent for the European Union — yet the focus continues to be on Europe.
That is because the real crisis is the more fundamental question of how the European continent is to be ruled in the 21st century. Europe has emerged from its subservience during the Cold War, when it was the geopolitical chessboard for the Soviet Union and the United States. It won its independence by default as the superpowers retreated: Russia withdrawing to its Soviet sphere of influence and the United States switching its focus to the Middle East after 9/11. Since the 1990s, Europe has dabbled with institutional reform but has left the fundamental question of political integration off the table, even as it integrated economically. This is ultimately the source of the current sovereign debt crisis, the lack of political oversight over economic integration gone wrong.
The eurozone’s economic crisis brought this question of Europe’s political fate into focus, but it is a recurring issue. Roughly every 100 years, Europe confronts this dilemma. The Continent suffers from overpopulation — of nations, not people. Europe has the largest concentration of independent nation-states per square foot than any other continent. While Africa is larger and has more countries, no continent has as many rich and relatively powerful countries as Europe does. This is because, geographically, the Continent is riddled with features that prevent the formation of a single political entity. Mountain ranges, peninsulas and islands limit the ability of large powers to dominate or conquer the smaller ones. No single river forms a unifying river valley that can dominate the rest of the Continent. The Danube comes close, but it drains into the practically landlocked Black Sea, the only exit from which is another practically landlocked sea, the Mediterranean. This limits Europe’s ability to produce an independent entity capable of global power projection.
However, Europe does have plenty of rivers, convenient transportation routes and well-sheltered harbors. This allows for capital generation at a number of points on the Continent, such as Vienna, Paris, London, Frankfurt, Rotterdam, Milan, Turin and Hamburg. Thus, while large armies have trouble physically pushing through the Continent and subverting various nations under one rule, ideas, capital, goods and services do not. This makes Europe rich (the Continent has at least the equivalent GDP of the United States, and it could be larger depending how one calculates it).
What makes Europe rich, however, also makes it fragmented. The current political and security architectures of Europe — the EU and NATO — were encouraged by the United States in order to unify the Continent so that it could present a somewhat united front against the Soviet Union. They did not grow organically out of the Continent. This is a problem because Moscow is no longer a threat for all European countries, Germany and France see Russia as a business partner and European states are facing their first true challenge to Continental governance, with fragmentation and suspicion returning in full force. Closer unification and the creation of some sort of United States of Europe seems like the obvious solution to the problems posed by the eurozone sovereign debt crisis — although the eurozone’s problems are many and not easily solved just by integration, and Europe’s geography and history favor fragmentation.
Confederation of Europe
The European Union is a confederation of states that outsources day-to-day management of many policy spheres to a bureaucratic arm (the European Commission) and monetary policy to the European Central Bank. The important policy issues, such as defense, foreign policy and taxation, remain the sole prerogatives of the states. The states still meet in various formats to deal with these problems. Solutions to the Greek, Irish and Portuguese fiscal problems are agreed upon by all eurozone states on an ad hoc basis, as is participation in the Libyan military campaign within the context of the European Union. Every important decision requires that the states meet and reach a mutually acceptable solution, often producing non-optimal outcomes that are products of compromise.
The best analogy for the contemporary European Union is found not in European history but in American history. This is the period between the successful Revolutionary War in 1783 and the ratification of the U.S. Constitution in 1788. Within that five-year period, the United States was governed by a set of laws drawn up in the Articles of the Confederation. The country had no executive, no government, no real army and no foreign policy. States retained their own armies and many had minor coastal navies. They conducted foreign and trade policy independent of the wishes of the Continental Congress, a supranational body that had less power than even the European Parliament of today (this despite Article VI of the Articles of Confederation, which stipulated that states would not be able to conduct independent foreign policy without the consent of Congress). Congress was supposed to raise funds from the states to fund such things as a Continental Army, pay benefits to the veterans of the Revolutionary War and pay back loans that European powers gave Americans during the war against the British. States, however, refused to give Congress money, and there was nothing anybody could do about it. Congress was forced to print money, causing the Confederation’s currency to become worthless.
With such a loose confederation set-up, the costs of the Revolutionary War were ultimately unbearable for the fledgling nation. The reality of the international system, which pitted the new nation against aggressive European powers looking to subvert America’s independence, soon engulfed the ideals of states’ independence and limited government. Social, economic and security burdens proved too great for individual states to contain and a powerless Congress to address.
Nothing brought this reality home more than a rebellion in Western Massachusetts led by Daniel Shays in 1787. Shays’ Rebellion was, at its heart, an economic crisis. Burdened by European lenders calling for repayment of America’s war debt, the states’ economies collapsed and with them the livelihoods of many rural farmers, many of whom were veterans of the Revolutionary War who had been promised benefits. Austerity measures — often in the form of land confiscation — were imposed on the rural poor to pay off the European creditors. Shays’ Rebellion was put down without the help of the Continental Congress essentially by a local Massachusetts militia acting without any real federal oversight. The rebellion was defeated, but America’s impotence was apparent for all to see, both foreign and domestic.
An economic crisis, domestic insecurity and constant fear of a British counterattack — Britain had not demobilized forts it held on the U.S. side of the Great Lakes — impressed upon the independent-minded states that a “more perfect union” was necessary. Thus the United States of America, as we know it today, was formed. States gave up their rights to conduct foreign policy, to set trade policies independent of each other and to withhold funds from the federal government. The United States set up an executive branch with powers to wage war and conduct foreign policy, as well as a legislature that could no longer be ignored. In 1794, the government’s response to the so-called Whiskey Rebellion in western Pennsylvania showed the strength of the federal arrangement, in stark contrast to the Continental Congress’ handling of Shays’ Rebellion. Washington dispatched an army of more than 10,000 men to suppress a few hundred distillers refusing to pay a new whiskey tax to fund the national debt, thereby sending a clear message of the new government’s overwhelming fiscal, political and military power.
When examining the evolution of the American Confederation into the United States of America, one can find many parallels with the European Union, among others a weak center, independent states, economic crisis and over-indebtedness. The most substantial difference between the United States in the late 18th century and Europe in the 21st century is the level of external threat. In 1787, Shays’ Rebellion impressed upon many Americans — particularly George Washington, who was irked by the crisis — just how weak the country was. If a band of farmers could threaten one of the strongest states in the union, what would the British forces still garrisoned on American soil and in Quebec to the north be able to do? States could independently muddle through the economic crisis, but they could not prevent a British counterattack or protect their merchant fleet against Barbary pirates. America could not survive another such mishap and such a wanton display of military and political impotence.
To America’s advantage, the states all shared similar geography as well as similar culture and language. Although they had different economic policies and interests, all of them ultimately depended upon seaborne Atlantic trade. The threat that such trade would be choked off by a superior naval force — or even by North African pirates — was a clear and present danger. The threat of British counterattack from the north may not have been an existential threat to the southern states, but they realized that if New York, Massachusetts and Pennsylvania were lost, the South might preserve some nominal independence but would quickly revert to de facto colonial status.
In Europe, there is no such clarity of what constitutes a threat. Even though there is a general sense — at least among the governing elites — that Europeans share economic interests, it is very clear that their security interests are not complementary. There is no agreed-upon perception of an external threat. For Central European states that only recently became European Union and NATO members, Russia still poses a threat. They have asked NATO (and even the European Union) to refocus on the European continent and for the alliance to reassure them of its commitment to their security. In return, they have seen France selling advanced helicopter carriers to Russia and Germany building an advanced military training center in Russia.
The Regionalization of Europe
The eurozone crisis — which is engulfing EU member states using the euro but is symbolically important for the entire European Union — is therefore a crisis of trust. Do the current political and security arrangements in Europe — the European Union and NATO — capture the right mix of nation-state interests? Do the member states of those organizations truly feel that they share the same fundamental fate? Are they willing, as the American colonies were at the end of the 18th century, to give up their independence in order to create a common front against political, economic and security concerns? And if the answer to these questions is no, then what are the alternative arrangements that do capture complementary nation-state interests?
On the security front, we already have our answer: the regionalization of European security organizations. NATO has ceased to effectively respond to the national security interests of European states. Germany and France have pursued an accommodationist attitude toward Russia, to the chagrin of the Baltic States and Central Europe. As a response, these Central European states have begun to arrange alternatives. The four Central European states that make up the regional Visegrad Group — Poland, the Czech Republic, Slovakia and Hungary — have used the forum as the mold in which to create a Central European battle group. Baltic States, threatened by Russia’s general resurgence, have looked to expand military and security cooperation with the Nordic countries, with Lithuania set to join the Nordic Battlegroup, of which Estonia is already a member. France and the United Kingdom have decided to enhance cooperation with an expansive military agreement at the end of 2010, and London has also expressed an interest in becoming close to the developing Baltic-Nordic cooperative military ventures.
Regionalization is currently most evident in security matters, but it is only a matter of time before it begins to manifest itself in political and economic matters as well. For example, German Chancellor Angela Merkel has been forthcoming about wanting Poland and the Czech Republic to speed up their efforts to enter the eurozone. Recently, both indicated that they had cooled on the idea of eurozone entry. The decision, of course, has a lot to do with the euro being in a state of crisis, but we cannot underestimate the underlying sense in Warsaw that Berlin is not committed to Poland’s security. Central Europeans may not currently be in the eurozone (save for Estonia, Slovenia and Slovakia), but the future of the eurozone is intertwined in its appeal to the rest of Europe as both an economic and political bloc. All EU member states are contractually obligated to enter the eurozone (save for Denmark and the United Kingdom, which negotiated opt-outs). From Germany’s perspective, membership of the Czech Republic and Poland is more important than that of peripheral Europe. Germany’s trade with Poland and the Czech Republic alone is greater than its trade with Spain, Greece, Ireland and Portugal combined.
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The security regionalization of Europe is not a good sign for the future of the eurozone. A monetary union cannot be grafted onto security disunion, especially if the solution to the eurozone crisis becomes more integration. Warsaw is not going to give Berlin veto power over its budget spending if the two are not in agreement over what constitutes a security threat. This argument may seem simple, and it is cogent precisely because it is. Taxation is one of the most basic forms of state sovereignty, and one does not share it with countries that do not share one’s political, economic and security fate.
This goes for any country, not just Poland. If the solution to the eurozone crisis is greater integration, then the interests of the integrating states have to be closely aligned on more than just economic matters. The U.S. example from the late 18th century is particularly instructive, as one could make a cogent argument that American states had more divergent economic interests than European states do today, and yet their security concerns brought them together. In fact, the moment the external threat diminished in the mid-19th century due to Europe’s exhaustion from the Napoleonic Wars, American unity was shaken by the Civil War. America’s economic and cultural bifurcation, which existed even during the Revolutionary War, erupted in conflagration the moment the external threat was removed.
The bottom line is that Europeans have to agree on more than just a 3 percent budget-deficit threshold as the foundation for closer integration. Control over budgets goes to the very heart of sovereignty, and European nations will not give up that control unless they know their security and political interests will be taken seriously by their neighbors.
Europe’s Spheres of Influence
We therefore see Europe evolving into a set of regionalized groupings. These organizations may have different ideas about security and economic matters, one country may even belong to more than one grouping, but for the most part membership will largely be based on location on the Continent. This will not happen overnight. Germany, France and other core economies have a vested interest in preserving the eurozone in its current form for the short-term — perhaps as long as another decade — since the economic contagion from Greece is an existential concern for the moment. In the long-term, however, regional organizations of like-minded blocs is the path that seems to be evolving in Europe, especially if Germany decides that its relationship with core eurozone countries and Central Europe is more important than its relationship with the periphery.
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We can separate the blocs into four main fledgling groupings, which are not mutually exclusive, as a sort of model to depict the evolving relationships among countries in Europe:
The German sphere of influence (Germany, Austria, the Netherlands, Belgium, Luxembourg, Czech Republic, Hungary, Croatia, Switzerland, Slovenia, Slovakia and Finland): These core eurozone economies are not disadvantaged by Germany’s competitiveness, or they depend on German trade for economic benefit, and they are not inherently threatened by Germany’s evolving relationship with Russia. Due to its isolation from the rest of Europe and proximity to Russia, Finland is not thrilled about Russia’s resurgence, but occasionally it prefers Germany’s careful accommodative approach to the aggressive approach of neighboring Sweden or Poland. Hungary, the Czech Republic and Slovakia are the most concerned about the Russia-Germany relationship, but not to the extent that Poland and the Baltic states are, and they may decide to remain in the German sphere of influence for economic reasons.
The Nordic regional bloc (Sweden, Norway, Finland, Denmark, Iceland, Estonia, Lithuania and Latvia): These mostly non-eurozone states generally see Russia’s resurgence in a negative light. The Baltic states are seen as part of the Nordic sphere of influence (especially Sweden’s), which leads toward problems with Russia. Germany is an important trade partner, but it is also seen as overbearing and as a competitor. Finland straddles this group and the German sphere of influence, depending on the issue.
Visegrad-plus (Poland, Czech Republic, Slovakia, Hungary, Romania and Bulgaria). At the moment, the Visegrad Four belong to different spheres of influence. The Czech Republic, Slovakia and Hungary do not feel as exposed to Russia’s resurgence as Poland or Romania do. But they also are not completely satisfied with Germany’s attitude toward Russia. Poland is not strong enough to lead this group economically the way Sweden dominates the Nordic bloc. Other than security cooperation, the Visegrad countries have little to offer each other at the moment. Poland intends to change that by lobbying for more funding for new EU member states in the next six months of its EU presidency. That still does not constitute economic leadership.
Mediterranean Europe (Italy, Spain, Portugal, Greece, Cyprus and Malta): These are Europe’s peripheral states. Their security concerns are unique due to their exposure to illegal immigration via routes through Turkey and North Africa. Geographically, these countries are isolated from the main trade routes and lack the capital-generating centers of northern Europe, save for Italy’s Po River Valley (which in many ways does not belong to this group but could be thought of as a separate entity that could be seen as part of the German sphere of influence). These economies therefore face similar problems of over-indebtedness and lack of competitiveness. The question is, who would lead?
And then there are France and the United Kingdom. These countries do not really belong to any bloc. This is London’s traditional posture with regard to continental Europe, although it has recently begun to establish a relationship with the Nordic-Baltic group. France, meanwhile, could be considered part of the German sphere of influence. Paris is attempting to hold onto its leadership role in the eurozone and is revamping its labor-market rules and social benefits to sustain its connection to the German-dominated currency bloc, a painful process. However, France traditionally is also a Mediterranean country and has considered Central European alliances in order to surround Germany. It also recently entered into a new bilateral military relationship with the United Kingdom, in part as a hedge against its close relationship with Germany. If France decides to exit its partnership with Germany, it could quickly gain control of its normal sphere of influence in the Mediterranean, probably with enthusiastic backing from a host of other powers such as the United States and the United Kingdom. In fact, its discussion of a Mediterranean Union was a political hedge, an insurance policy, for exactly such a future.
The Price of Regional Hegemony
The alternative to the regionalization of Europe is clear German leadership that underwrites — economically and politically — greater European integration. If Berlin can overcome the anti-euro populism that is feeding on bailout fatigue in the eurozone core, it could continue to support the periphery and prove its commitment to the eurozone and the European Union. Germany is also trying to show Central Europe that its relationship with Russia is a net positive by using its negotiations with Moscow over Moldova as an example of German political clout.
Central Europeans, however, are already putting Germany’s leadership and commitment to the test. Poland assumes the EU presidency July 1 and has made the union’s commitment to increase funding for new EU member states, as well as EU defense cooperation, its main initiatives. Both policies are a test for Germany and an offer for it to reverse the ongoing security regionalization. If Berlin says no to new money for the newer EU member states — at stake is the union’s cohesion-policy funding, which in the 2007-2013 budget period totaled 177 billion euros — and no to EU-wide security/defense arrangements, then Warsaw, Prague and other Central European capitals have their answer. The question is whether Germany is serious about being a leader of Europe and paying the price to be the hegemon of a united Europe, which would not only mean funding bailouts but also standing up to Russia. If it places its relationship with Russia over its alliance with Central Europe, then it will be difficult for Central Europeans to follow Berlin. This will mean that the regionalization of Europe’s security architecture — via the Visegrad Group and Nordic-Baltic battle groups — makes sense. It will also mean that Central Europeans will have to find new ways to draw the United States into the region for security.
Common security perception is about states understanding that they share the same fate. American states understood this at the end of the 18th century, which is why they gave up their independence, setting the United States on the path toward superpower status. Europeans — at least at present — do not see their situation (or the world) in the same light. Bailouts are enacted not because Greeks share the same fate as Germans but because German bankers share the same fate as German taxpayers. This is a sign that integration has progressed to a point where economic fate is shared, but this is an inadequate baseline on which to build a common political union.
Bailing out Greece is seen as an affront to the German taxpayer, even though that same German taxpayer has benefited disproportionally from the eurozone’s creation. The German government understands the benefits of preserving the eurozone — which is why it continues bailing out the peripheral countries — but there has been no national debate in Germany to explain this logic to the populace. Germany is still waiting to have an open conversation with itself about its role and its future, and especially what price it is willing to pay for regional hegemony and remaining relevant in a world fast becoming dominated by powers capable of harnessing the resources of entire continents.
Without a coherent understanding in Europe that its states all share the same fate, the Greek crisis has little chance of being Europe’s Shays’ Rebellion, triggering deeper unification. Instead of a United States of Europe, its fate will be ongoing regionalization.
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The Eurozone Crisis and the History of Europe's Financial Institutions
German financial institutions will contribute 3.2 billion euros ($4.7 billion) to the second Greek bailout, German Finance Minister Wolfgang Schaeuble announced Thursday. The banks involved in the deal will roll over all Greek debt holdings scheduled to mature by 2014. Schaeuble added that 55 percent of the estimated 10 billion euros of Greek debt held by German financial institutions mature after 2020. German financial institutions have therefore joined their French counterparts in expressing a willingness to participate in a voluntary rollover of Greek debt.
The news from Germany and France is a positive sign for Greece and follows a successful vote in Athens to implement new austerity measures and to privatize state assets. At the press conference in Berlin, executives from Deutsche Bank and the insurer Allianz stood next to Schaeuble and offered their support to Greece. While the details of the agreements have to be settled, the overall congratulatory tone of the announcement has generated optimism that when eurozone finance ministers meet on Sunday, July 3, Greece will be offered a bailout package with terms that will include private-sector participation.
That Germany and France have managed to cajole their financial institutions to participate in the rescue of Greece is not surprising. In Europe, banks and states have historically had a close relationship. Europe’s geography naturally fosters competition — a considerable number of powerful political entities are packed into a small space. Europe is essentially overpopulated, not with people, but with countries.
The French Revolution and subsequent Napoleonic Wars kicked off a race to establish political systems based on the nation-state concept — a process that required the borders of new states not only to conform to a particular linguistic and cultural agglomeration but also to contain a substantial capital pool, preferably one that captured a key European financial center. This evolution established a break from Europe’s past, when a hegemon like Hapsburg Spain could depend on Dutch bankers for capital.
“That Germany and France have managed to cajole their financial institutions to participate in the rescue of Greece is not surprising. In Europe, banks and states have historically had a close relationship.”
State building in the mid-to-late 19th century placed great strains on European governments because of the intensity of competition between rival states in such close proximity. Germany, for example, was born in 1871 following a short but intense war against France. Although Germany emerged from the war a united empire — and with a piece of France as a trophy, — it also understood that it had made a very dangerous enemy with which it had to compete to survive. Germany was under pressure to consolidate not only politically and militarily but also economically. Berlin, as well as its rivals, became obsessed with how much steel, coal and railway mileage they could produce.
Building railways, canals, schools, factories and navies requires capital. While coal and steel fueled late 19th-century industrialization, the common denominator for state building is ultimately capital. Therefore, as continental European states developed state champions of industry, they needed to create complementary state champions of finance and encourage relationships between the two. Rather than making a lot of money, the goal was to direct capital into the industries that would best ensure the state’s survival and independence.
The relationship between German industrial giant Siemens and the country’s largest financial institution, Deutsche Bank, is one of the most instructive in this regard. Executives of one often sat on the board of the other and their relationship was coordinated by the interests of the state for more than100 years.
The historical relationship between European states and financial institutions stands in contrast to the development of the United States. While the United States also faced security concerns (the threat of a British invasion) and incredible infrastructural challenges (such as the difficulty of crossing the Appalachians), these issues had either abated or been resolved by the mid-19th century. Europe was in the throes of post-Napoleonic competition and its states posed no threat to the United States. American railroad development was largely a private affair, and — while there was a geostrategic impetus to connect the coasts — the endeavor was not conducted in the atmosphere of the intense interstate competition that Europe experienced.
American financial institutions were therefore allowed to operate in almost ideal conditions for free-market competition. The main objective was to make money, not develop an economy that can defeat a neighbor in a war. It is no surprise that two of the world’s main three credit rating agencies — Moody’s and Standard & Poor’s — grew out of this era of American capitalism. Investors wanted an independent perspective of which railroad bonds and banks in which to invest. In Europe, the choice was clear — whichever institutions had the state’s backing.
The resulting differences in American and European financial systems therefore come with positive and negative attributes. One major drawback of European financial systems is that to this day many banks are thought of as social welfare institutions more than profit-driven businesses. German landesbanken and Spanish cajas come to mind as examples. Not surprisingly, these institutions are some of the most troubled banks in Europe. The second problem for Europe is that businesses have become dependent on bank lending for capital, whereas American businesses have traditionally looked to access the corporate bond market and raise capital through the stock market. The problem with the European approach is that it often stifles innovation. Companies with close relationships with financial institutions have greater access to financing than innovative start-ups. This approach also leaves corporations exposed to financial crises when banks stop lending.
However, benefits also exist. In the present case, Berlin and Paris managed to mobilize their financial institutions to help bail out a foreign state in a very short amount of time. The downside is that suspicions between EU member states remain, and the eurozone’s banking problems are somewhat a product of these suspicions. European states have jealously guarded their financial institutions for centuries. Europe needs an unified, eurozone-wide oversight mechanism presiding over the Continent’s banks to ensure that if a bank in Ireland needs to be closed, Dublin can’t stop it from happening. The fundamental difficulty is that banks are state-building tools. For states to allow a supranational entity to control these tools would be tantamount to handing over control of their destinies.
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**Who could have seen this happening? :roll:
http://www.spiegel.de/international/europe/0,1518,775301,00.html
Greece Threatened with Widespread, Long-Term Poverty
By Manfred Ertel in Athens
Getty Images
Greece is tightening its belt -- and the number of people living in poverty is surging as a result. Thousands line up in front of food banks and resort to rifling through rubbish bins. The country's financial crisis is rapidly turning into a social one -- while wealthy tax evaders manage to get off scot-free.
This time, the fight for survival last exactly 29 minutes. At precisely 3 p.m., Father Andreas, a 37-year-old Greek Orthodox priest, opens the doors of the food bank in downtown Athens. At this hour, the line of hungry people stretches all the way across the large square outside and into the street. Needy people of all ages are waiting patiently -- pensioners, unemployed people, mothers with children, immigrants, asylum seekers. "We can't let these people starve," the priest says. "They are already suffering so much. They should at least not go without food."
It is a charitable deed. But in just under half an hour, all of the kitchen's 1,200 servings have been taken, causing several dozen people to leave with empty hands and growling stomachs. They can only hope to be among the lucky ones next time.
Katarina was one of the lucky ones. The 44-year-old got her hands on eight servings of a salad made of carrots, potatoes and peas, several yoghurts and a bag of bread -- the only food her family will have today. Katarina is ashamed and prefers not to give her full name. She and her 7-year-old daughter have to take a bus in from a suburb and travel all the way across the sprawling city just to get a warm meal.
Katarina was laid off from her job at a biscuit factory roughly a year ago. Since then, she's been forced to rely on the handouts paid for by what Father Andreas calls "holy money." Katarina says there are no more jobs to be had. "No one will even pay you to stuff mailboxes with advertisements anymore," she says. "Greece is finished."
Skyrocketing Need
Spyros Xaplanteris has been coming to the food bank for a year. His shirt is greasy, his trousers tattered. "I'm driven here by need," he say. The 62-year-old lost his job in the storeroom of a Hilton hotel. "It hurts," he says. "But what am I supposed to do? I'm broke."
For weeks, thousands of enraged Greeks have been holding anti-government demonstrations outside Greece's parliament building. They come with bullhorns and banners, and a couple hundred also bring stones and Molotov cocktails. Camera crews from around the world are always there to film them, but they never turn their lenses toward those in the dark back alleys of central Athens.
In recent weeks, the needs of such people have been keeping Father Andreas and his colleagues very busy. Almost all of the 400 parishes in the Archdiocese of Athens have opened food banks like the one he runs. City officials have opened some as well.
His food bank distributes meals three times at day. Up to 2,000 come at noon, another 1,200 in the afternoon, and about another 1,000 in the evening. The workers try to make sure that they don't always supply the same people. Such vigilance is necessary because "the number of needy is skyrocketing," says one volunteer who estimates that the figure has increased by 30 percent in recent months. "But we can't be sure it will stay there," she says.
Most people who come to the food bank are so hungry that they eat their food right there on the square. They hunker down on benches and walls covered with pigeon droppings and drink water from sprinkler hoses.
Choked to Death by Belt-Tightening
Last week, Prime Minister Georgios Papandreou once again succeeded in getting a majority of Greek lawmakers to push through an austerity and privatization package worth €78 billion ($111 billion). In doing so, he was responding to pressure from the International Monetary Fund (IMF), the European Central Bank (ECB) and the European Commission. Indeed, many economic experts see the package's measures as the only way to fend off an imminent national bankruptcy at the last minute -- and the only way to save the euro from an even worse fate.
But is Papandreou saving his country to death? Savas Robolis thinks he is. "People are afraid," the 65-year-old says -- they're afraid of an uncertain future. Employees are particularly scared because they carry an unfairly high proportion of the tax burden. As a professor of economics and social policy at Athens' Panteion University and director of the Labor Institute of the General Confederation of Greek Workers, Robolis knows what he's talking about.
According to his calculations, roughly 930,000 of Greece's 960,000 registered companies have fewer than five employees. Most of these very small companies are "not very competitive," he says, and primarily focus on providing products and services to the 3.5 million private households in Greece. If household incomes sink, consumer demand will automatically fall as well. As Robolis sees it, this would mean a swift end to these small companies because they don't have enough liquidity to tide them over.
"That's exactly what's happened," Robolis complains. Over the last year, roughly 60,000 of these mini-companies have gone belly up, and he predicts at least as many closings in 2011.
'Deeply Unsettling' Developments
In 2010, the number of jobless in Greece rose by 230,000, to reach 14.8 percent. Given Greece's weak social safety net, unemployment is more or less tantamount to social bankruptcy. For example, unemployment benefits are only available for a year at a monthly rate of less than €500. After that, the state offers practically no assistance. Officials estimate that only about 280,000 of the 800,000 people without jobs are still eligible to claim unemployment benefits. This has resulted in a dramatic rise in the number of homeless people -- by up to 25 percent in Athens alone.
According to official data, unemployment is expected to climb to between 17 percent and 18 percent by the end of 2011, but the true figure could be as high as 23 percent. "That would be 1.2 million jobless people," Robolis says. The last time Greece saw something like this was in 1961, when the introduction of modern farming technology put thousands of agricultural laborers out of work.
At that time, the result was a wave of emigration to places like Germany. Robolis thinks the same thing could happen today -- but with one big difference: The people who left Greece in the 1960s were mostly unskilled workers. Robolis fears that the coming wave could be well-educated individuals with college degrees.
Greece has its tourist attractions and agricultural products. But apart from beaches, olive oil and feta, the economy doesn't have much to offer. As much as 70 percent of of Greece's economic output depends on private consumption, according to a recent study of the Friedrich Ebert Stiftung, a think tank with ties to Germany's center-left Social Democratic Party (SPD).
However, according to the study, in the last quarter of 2010, reductions in salaries and pensions drove consumption down 8.6 percent, retail sales shrank by 12 percent and 65,000 stores had to be shut down. Robolis predicts that, by 2015, when the new austerity measures are scheduled to take full effect, the standard of living for employees and pensioners will be 40 percent lower than it was in 2008. "That is deeply unsettling," he says.
Tax Cheats Have Nothing to Fear
Anxiety over current and future hardships is driving many Greeks into the streets. But while the lines continue to get longer outside food banks, many of the wealthy are getting through the crisis more or less unscathed. The average Greek consumer is now forced to pay the third-highest VAT rate in Europe, the third-highest social insurance contributions and the second-highest fuel taxes.
Two-thirds of Greeks regularly pay their taxes as well. Indeed, "contrary to widespread views," as the Friedrich Ebert Stiftung study put it, these taxes are automatically deducted along with social contributions from the paychecks of Greeks employed in both the private and public sectors. It is mainly the small wealthy class that manages to cheat the authorities out of €40 billion in tax each year. That is the OECD's estimated volume of annual tax evasion. The Greek central bank puts the losses at somewhere between €15 billion and €20 billion.
These tax cheats have little to fear. As Panos Kazakos, an Athens-based professor of politics, puts it: "I have never seen a single person put in jail for tax evasion." Robolis adds that the government, which supposedly has no money available for social services, just published a list of companies that owe the state a total of €9 billion in social contributions -- but it does nothing to get that money.
This injustice is what is making people in Greece so angry. The government has promised to change the system. But Robolis no longer has faith in its pledges. "This situation has been going on for 30 or more years," he complains. "They're just trying to protect themselves with these statements."
Ferry Batzoglou contributed to this story.
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Unfortunately, democracy alone does not ensure freedom.
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Unfortunately, democracy alone does not ensure freedom.
Lucky enough, we are smart enough to avoid this, right?
Right?
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PARIS (AP) — All countries that use the euro should have mandatory balanced budgets and better coordination of economic policy, the leaders of France and Germany said Tuesday, pushing for long-term political solutions instead of immediate financial measures like a single European bond.
French President Nicolas Sarkozy and German Chancellor Angela Merkel also pledged to harmonize their countries' corporate taxes in a move aimed at showing the eurozone's largest members are "marching in lockstep" to protect the euro.
Both leaders stressed their commitment to defending the common currency, a cornerstone of integration on this long-fractured continent. They presented their proposals after meeting Tuesday in Paris amid signs of economic slowdown, and after an exceptionally turbulent week on financial markets prompted by concern about Europe's financial health.
Sarkozy told reporters that he and Merkel want a "true European economic government" that would consist of the heads of state and government of all eurozone nations.
The new body would meet twice a year — and more in times of crisis — and be led initially by EU President Herman Van Rompuy for a 2½-year term. After that, Sarkozy suggested, it could be opened up to other heads of states and government.
The move appeared a step toward the closer long-term economic integration that many analysts have said is inevitable to make the euro experiment survive, though it was unclear how much effect it would have in the short term.
"There has to be a stronger coordination of financial and economic policy" to protect the euro, Merkel said.
The chancellor stressed that the crisis built up over several years by the actions of several member states, and there is no solution to tackle the crisis within days now.
"We will regain the lost confidence," she said. "That is why we go into a phase with a new quality of cooperation within the eurozone," she added, referring to the proposal of forming a permanent economic government for the eurozone.
The two leaders ruled out, however, issuing common government debt in the form of eurobonds, at least for now, despite demand by many investors for such a bold but politically difficult move.
... http://news.yahoo.com/merkel-sarkozy-propose-eurozone-government-162137481.html (http://news.yahoo.com/merkel-sarkozy-propose-eurozone-government-162137481.html)
P.C.
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'The real lesson from Europe," wrote Paul Krugman in January 2010, "is actually the opposite of what conservatives claim: Europe is an economic success, and that success shows that social democracy works." Here are some postcards from the social democracy that works.
• In Britain, 239 patients died of malnutrition in the country's public hospitals in 2007, according to a charity called Age U.K. And at any given time, a quarter-million Britons have been made to wait 18 weeks or longer for medical treatment. This follows a decade in which funding for the National Health Service doubled.
• In France, the incidence of violent crimes rose by nearly 15% between 2002 and 2008, according to statistics provided by Eurostat. In Italy violent crime was up 38%. In the EU as a whole, the rate rose by 6% despite declines in robbery and murder.
• As of June 2011, Eurostat reports that the unemployment rate in the euro zone was 9.9%. For the under-25s, it was 20.3%. In Spain, youth unemployment stands at 45.7%, which tops even the Greek rate of 38.5%. Then there's this remarkable detail: Among Europeans aged 18-34, no fewer than 46%—51 million people in all—live with their parents.
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Rioters in London: Poster children for social democracy.
.• In 2009, 37.4% of European children were born outside of marriage. That's more than twice the 1990 rate of 17.4%. The number of children per woman for the EU is 1.56, catastrophically below the replacement rate of 2.1. Roughly half of all Europeans belong in the "dependency" category on account of their youth or old age. Just 64% of the working-age population actually works.
I could go on in this vein for pages, but you get the point. Europe is not a happy place and hasn't been for nearly a generation. It's about to get much worse.
This isn't simply because Europe's economic crisis is still in its infancy, although it is. The tab for bailing out Greece, Portugal and Ireland alone—which together account for about 5% of euro-zone GDP—already runs to hundreds of billions of euros, with no resolution in sight. By contrast, Italy's GDP is more than seven times as large as Greece's. Italy is too big to fail—and too big to save. If the so-called PIIGS wind up leaving the euro zone (or if Germany beats them to it by returning to a Deutsche mark), the dislocations will take years to sort through.
Even then, Europe will still have to address the more profound challenges of economic growth, demography and entitlement reform. But in order for it to do so it must have a clear idea of the nature of the challenges it faces. It doesn't. It also requires political resources to overcome the beneficiaries—labor unions, pensioners, university students, farmers, Brussels technocrats and so on—of the current system. That's not going to happen.
Politics, for starters, prevents it. Whenever a supposed "neo-liberal" comes to power—whether it's Nicolas Sarkozy or Silvio Berlusconi or Angela Merkel—they typically wind up doing no more than tinkering around the edges of regulatory or tax reform. That's because they are stymied by coalition compromises at home, or by European compromises in Brussels, or by some deeper failure of will and character.
Margaret Thatcher was the exception to this rule. But in both Britain and Europe she has had neither equals nor heirs.
Demography also prevents reform. The median age in the EU is 40.6 years. (In the U.S. it's 36.9). Older populations typically resist change, demand the benefits they've been taxed all their working lives for—and vote. The demographic balance is only going to tip further in their favor, and it will change only when younger Europeans decide that children, plural, are worth having. What that will take, only a faith in future prosperity—and in God—can provide. Outside of its growing Muslim population, Europe has neither.
Finally, there is ideology. For the past four decades, "Europeanism" has been an amalgam of Keynesian economics, bureaucratic centralization, and welfarism, corporate and social. Even now, the ideology remains unshaken by events. Though there is plenty of talk about getting spending under control and balancing budgets (typically by way of tax increases), nobody in Europe is proposing a serious growth agenda. At the beginning of the Greek crisis I asked a visiting official from Athens what his ideas were for growth: He suggested olive tree plantations and wind farms. He might as well have thrown a Sicilian Expedition into the mix.
For the U.S., none of this is yet in our cards: That's guaranteed by the tea party that so many Europeans (and Paul Krugman) find so vulgar. But it's worth noting what the fruits of social democracy—a world in which, as Kipling once wrote, "all men are paid for existing and no man must pay for his sins"—really are. And in the wake of the U.K. riots, the rest of his prophecy also bears repeating:
As surely as Water will wet us, as surely as fire will burn,
The Gods of the Copybook Headings with terror and slaughter return!
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EU Leaders Face A Crossroads In European Integration
German Chancellor Angela Merkel and French President Nicolas Sarkozy met in Paris today to prepare for the next meeting of European Union heads of government. At the conclusion of their summit, the pair announced a series of measures meant to push European integration forward.
Instead of addressing Europe’s short-term financial crisis, the two leaders focused on longer-term fiscal and political issues. Specifically, they announced that France and Germany would unify their corporate tax systems within five years and that the countries would together push for debt limits to be written into eurozone-member constitutions. They also agreed to advocate for governance measures to reinforce Europe’s economy.
Markets were left puzzled. The European financial crisis is now in its twentieth month. As recently as a few days ago, many observers were expecting bailouts for Spain, defaults in Italy and downgrades in France. Why would Europe’s top leaders choose to introduce measures that will require a new treaty, while the European project is already struggling so badly on its current terms?
“Considering that the Germans are in the process of rewiring the EU to suit their own national preferences, the entire premise behind EU membership for many states rests on precarious ground. “
What the markets often lose sight of is that this situation is not only — or even primarily — a financial and economic crisis. France originally intended European integration as a means to bolster its international position. Germany was shattered after the conclusion of World War II. The French picked up the pieces and, by initiating the process that eventually led to the creation of the European Union, Paris refashioned Germany into a platform from which France could project power. This system used German strength to entice other states to join the growing union. France promised three things: that European states would be more important collectively; that members would become rich by relying on German wealth; and that Germany would never again be in a position to hurt other European states.
By the middle part of the last decade, though, Germans had outgrown sixty years of policymaking shaped by what can be best described as an extended national apology. Germany began acting like a real country again. Real countries have many characteristics in common. They obviously like to speak for themselves, and they don’t like to be taken advantage of by their neighbors.
Germany started using its superior economic position to rework EU institutions to its liking. Until now, France has cooperated, driven by a mix of inertia, opportunity and fear. Inertia because it takes more than a few years to admit that after two generations, the ability to feed off the strengths of another economy without paying any price is gone. Nevertheless, opportunity still motivates because Paris may yet prove able to manage Germany and ride on its coattails. Fear of what might happen should Germany outgrow France also fuels Parisian cooperation.
The European economy is hardly a zero sum game. However, in the modern European system, economics is the glue that has held together the unstable political alignments of the post-World War II order. And that glue is not sticking like it once did.
Of the three main benefits that drew states into the European Union, two — that European states are more important collectively, and that other states can become rich thanks to German wealth — are no longer in play. The European Union’s efforts at political and military unification can best be described as stillborn. Economically, the current crisis has robbed the European Union of much of its shine. Data released today put collective EU growth at an unenviable 0.2 percent compared to the previous quarter. French growth came in at a flat zero. If the European Union cannot guarantee importance or wealth, then its remaining raison d’etre comes down to keeping the Germans in line. Considering that the Germans are in the process of rewiring the union to suit their own national preferences, the entire premise behind EU membership for many states rests on precarious ground.
Against this backdrop sits a massive disconnect between what the European elites — especially in the financial sector – desire and what the general population prefers. The elites have invested seventy years and tens of trillions of euros (once financial assistance, bond purchases and cross-collateralization of debt are all added up) to make European institutions work. The European Union is the key to their political and economic positions. They have already made it clear that they will pay any price to keep the European Union alive.
However, the average German, Frenchman or Latvian feels somewhat differently. With the benefits of the European system losing their luster, questions are starting to be asked about not just the EU institutions, but about whether European leaders are still fit to lead. Polls regularly indicate that half of Germans want the deutschemark back, and more than half think the Greeks should be unceremoniously ejected from the eurozone. So far these attitudes have not translated into a rejection of any major state’s political mainstream — but the Germans’ general disgust with the bailout programs is hardly an enthusiastic endorsement.
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By Brian Rohan | Reuters – 12 hrs agotweet5Share0EmailPrintRelated ContentArticle: Greek central bank provided emergency funding to banks
Reuters - 13 hrs ago
BERLIN (Reuters) - The interruption of talks between Greece and international lenders on a new aid tranche is a blow to the stability of Europe's currency, the deputy leader of Germany's junior coalition partners said on Saturday.
Christian Lindner, general secretary of the Free Democrats, (FDP) junior coalition partners in Chancellor Angela Merkel's center-right government, said Athens was endangering European solidarity.
"The breakdown of talks between the Troika and Greece is a blow to the stability of the euro," he said at a news conference in Berlin.
Referring to Greece's failure to meet deficit targets set in exchange for a second bailout package, Lindner said Athens was shirking responsibilities to which it had agreed.
"This is not about non-binding statements of intent, but contractually secured reciprocity for the emergency loans," he said. "We insist these agreements are observed."
Talks between Greece and the EU, IMF and ECB were put on hold on Friday after disagreement over why Athens has fallen behind schedule in cutting its budget deficit and what it must do to catch up.
The unplanned early departure of senior inspectors from the three bodies showed tension between Athens and its lenders over reforms, as clouds gathered over the second bailout package aiming to pull the country out of a severe debt crisis.
Separately, senior FDP official Hermann Otto Solms, a vice-president of the Bundestag and an economy committee member in parliament said since Greece could not handle its debt problem and it should consider leaving the euro.
"It should be considered whether a restructuring and exit from the euro would offer better perspectives for the currency union and Greece itself," he told Frankfurter Allgemeine Sonntagszeitung.
The pro-business FDP styles itself as a defender of the German taxpayer, a stance Lindner reiterated in his statement over Greece.
"Taxpayers in Northern Europe and especially Germany cannot accept inability or reluctance. In the eyes of the FDP, Greece must reaffirm its will for stability and reform."
"Mediation or postponements are no longer acceptable for us. The heads of the IMF and euro countries should therefore travel to Athens immediately to obtain binding declarations toward the fulfillment of the agreed goals."
In another comment to a newspaper, Gerda Hasselfeldt, who chairs the group of Chancellor Angela Merkel's Bavaria's sister party the Christian Social Union (CSU) in parliament, said Greece was not doing enough to tackle its debt problem.
"When you receive help, you must prove yourself reliable," she told the Tagesspiegel am Sonntag.
(Reporting by Brian Rohan)
P.C.
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Nearly 40 percent of Europeans suffer mental illness
By Kate Kelland LONDON (Reuters) - Europeans are plagued by mental and neurological illnesses, with almost 165 million people or 38 percent of the population suffering each year from a brain disorder such as depression, anxiety, insomnia or dementia, according to a large new study.
With only about a third of cases receiving the therapy or medication needed, mental illnesses cause a huge economic and social burden -- measured in the hundreds of billions of euros -- as sufferers become too unwell to work and personal relationships break down.
"Mental disorders have become Europe's largest health challenge of the 21st century," the study's authors said.
At the same time, some big drug companies are backing away from investment in research on how the brain works and affects behavior, putting the onus on governments and health charities to stump up funding for neuroscience.
"The immense treatment gap ... for mental disorders has to be closed," said Hans Ulrich Wittchen, director of the institute of clinical psychology and psychotherapy at Germany's Dresden University and the lead investigator on the European study.
"Those few receiving treatment do so with considerable delays of an average of several years and rarely with the appropriate, state-of-the-art therapies."
Wittchen led a three-year study covering 30 European countries -- the 27 European Union member states plus Switzerland, Iceland and Norway -- and a population of 514 million people.
A direct comparison of the prevalence of mental illnesses in other parts of the world was not available because different studies adopt varying parameters.
Wittchen's team looked at about 100 illnesses covering all major brain disorders from anxiety and depression to addiction to schizophrenia, as well as major neurological disorders including epilepsy, Parkinson's and multiple sclerosis.
The results, published by the European College of Neuropsychopharmacology (ENCP) on Monday, show an "exceedingly high burden" of mental health disorders and brain illnesses, he told reporters at a briefing in London.
Mental illnesses are a major cause of death, disability, and economic burden worldwide and the World Health Organization predicts that by 2020, depression will be the second leading contributor to the global burden of disease across all ages.
Wittchen said that in Europe, that grim future had arrived early, with diseases of the brain already the single largest contributor to the EU's burden of ill health.
The four most disabling conditions -- measured in terms of disability-adjusted life years or DALYs, a standard measure used to compare the impact of various diseases -- are depression, dementias such as Alzheimer's disease and vascular dementia, alcohol dependence and stroke.
The last major European study of brain disorders, which was published in 2005 and covered a smaller population of about 301 million people, found 27 percent of the EU adult population was suffering from mental illnesses.
Although the 2005 study cannot be compared directly with the latest finding -- the scope and population was different -- it found the cost burden of these and neurological disorders amounted to about 386 billion euros ($555 billion) a year at that time. Wittchen's team has yet to finalize the economic impact data from this latest work, but he said the costs would be "considerably more" than estimated in 2005.
The researchers said it was crucial for health policy makers to recognize the enormous burden and devise ways to identify potential patients early -- possibly through screening -- and make treating them quickly a high priority.
"Because mental disorders frequently start early in life, they have a strong malignant impact on later life," Wittchen said. "Only early targeted treatment in the young will effectively prevent the risk of increasingly largely proportions of severely ill...patients in the future."
David Nutt, a neuropsychopharmacology expert at Imperial College London who was not involved in this study, agreed.
"If you can get in early you may be able to change the trajectory of the illness so that it isn't inevitable that people go into disability," he said. "If we really want not to be left with this huge reservoir of mental and brain illness for the next few centuries, then we ought to be investing more now."
(Reporting by Kate Kelland; Editing by Matthew Jones)
P.C.
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38% seems like a really high number , , ,
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38% seems like a really high number , , ,
Well, leftism is a mental disorder, so.....
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In that case the number is far too low! :lol:
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http://www.nytimes.com/2011/09/06/business/global/reluctantly-europe-inches-closer-to-a-fiscal-union.html?_r=1&nl=todaysheadlines&emc=tha2
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What Comes After 'Europe'?
The riots of Athens will become those of Milan, Madrid and Marseilles. Border checkpoints will return. Currencies will be resurrected, then devalued.
By BRET STEPHENS
When the history of the rise and fall of postwar Western Europe is someday written, it will come in three volumes. Title them "Hard Facts," "Convenient Fictions" and—the volume still being written—"Fraud."
The hardest fact on which postwar Europe was founded was military necessity, crisply summed up by Lord Ismay's famous line that NATO's mission was "to keep the Russians out, the Americans in, and the Germans down." The next hard fact was hard money, the gift of Ludwig Erhard, author of the economic reforms that created the Deutsche mark, abolished price controls, and put inflation in check for generations. The third hard fact was the creation of Jean Monnet's common market that gave Europe a shared economic—not political—identity.
The result was the Wirtschaftswunder in Germany, Les Trente Glorieuses in France and il miracolo economico in Italy. It could have lasted into the present day. It didn't.
In 1965, government spending as a percentage of GDP averaged 28% in Western Europe. Today it hovers just under 50%. In 1965, the fertility rate in Germany was a healthy 2.5 children per mother. Today it is a catastrophic 1.35. During the postwar years, annual GDP growth in Europe averaged 5.5%. After 1973, it rarely exceeded 2.3%. In 1973, Europeans worked 102 hours for every 100 worked by an American. By 2004 they worked just 82 hours for every 100 American ones.
It was during this general slowdown that Europe entered the convenient fiction phase.
There was, for starters, the convenient fiction that if you just added up the GDP of the European Union's expanding list of member states, you had an economy whose size exceeded that of the United States. Didn't this make "Europe" an economic superpower? There was the convenient fiction that Europe didn't need robust military capabilities when it could exert global influence through diplomacy and soft power. There was the convenient fiction that Europeans shared identical values and could thus be subject to uniform regulations governing crime and punishment. There was the convenient fiction that Continentals weren't lagging in productivity but were simply making an enlightened choice of leisure over labor.
And there was, finally, the whopping fiction that Europe had its own "model," distinct and superior to the American one, that immunized it from broader international currents: globalization, Islamism, demography. Europeans love their holidays and thought they were entitled to a long holiday from history as well.
All this did wonders, for a while, to mask European failures and puff up European pride. But there is always a danger in substituting grandiosity for achievement, mistaking pronouncements for facts, or, more generally, believing in your own nonsense.
Here is where Europe slipped from convenient fiction to outright fraud.
There was the fraud of Greece's entry into the euro, a double-edged affair since Athens lied about its budgetary figures and Brussels chose to accept the lie. There was the fraud of the so-called Maastricht criteria—the fiscal rules that were supposed to govern the euro only to be quickly flouted by France and Germany and then junked altogether in the current crisis. There was the fraud of the European Constitution, overwhelmingly rejected wherever a vote on it was permitted, only to be revised and imposed by parliamentary fiat.
What is now happening in Europe isn't so much a crisis as it is an exposure: a Madoff-type event rather than a Lehman one. The shock is that it's a shock. Greece was never going to be bailed out and will, sooner or later, default. The banks holding Greek debt will, sooner or later, be recapitalized. The recapitalization will be borne by German taxpayers, and it will bring them—sooner rather than later—to the outer limit of their forbearance. The Chinese will not ride to the rescue: They know not to throw good money after bad.
And then Italy will go Greek. Europe's crisis will lap on U.S. shores, and America's economic woes will lap on Europe's—a two-way tsunami.
America will survive this because America is a state. But as Bismarck once remarked, "Whoever speaks of Europe is wrong. Europe is a geographical expression." The "fiscal union" that's being mooted will never come to pass: German voters won't stand for it, and neither will any other country that wants to retain fiscal independence—which is to say, the core attribute of democratic sovereignty.
What comes next is the explosion of the European project. Given what European leaders have made of that project over the past 30-odd years, it's not an altogether bad thing. But it will come at a massive cost. The riots of Athens will become those of Milan, Madrid and Marseilles. Parties of the fringe will gain greater sway. Border checkpoints will return. Currencies will be resurrected, then devalued. Countries will choose decay over reform. It's a long, likely parade of horribles.
Where is the Europe of Ismay, Erhard and Monnet? It's there in memory, if anyone cares to recover it. Give it another 50 years, and maybe someone will.
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By George Friedman
An important disconnect over the discussion of the future of the European Union exists, one that divides into three parts. First, there is the question of whether the various plans put forward in Europe plausibly could result in success given the premises they are based on. Second, there is the question of whether the premises are realistic. And third, assuming they are realistic and the plans are in fact implemented, there is the question of whether they can save the European Union as it currently exists.
The plans all are financial solutions to a particular set of financial problems. But regardless of whether they are realistic in addressing the financial problem, the question of whether the financial issue really addresses the fundamental dilemma of Europe — which is political and geopolitical — remains.
STRATFOR has examined the plans for dealing with the financial crisis in Europe, and we find them technically plausible, even if they involve navigating something of a minefield. The eurozone’s bailout fund, the European Financial Stability Facility, would be expanded in scope and reach until it can handle the bailout of a major state, the default of a minor state and a banking crisis of unprecedented proportions. Given assumptions of the magnitude of the problem and assuming general compliance with the plans, there is a chance that the solution we see the Germans moving toward could work.
The extraordinary complexity of the plans being floated in Europe is important to note. It is extremely difficult for us to understand the specifics, and we suspect the politicians proposing it are also less than clear on them. We have found that the more uncertain the solution, the more complex it is. And the complexity of the European situation is less driven by the complexity of the economics than by the complexity of the politics. The problem is relatively easy: Banks and countries under massive financial pressure almost certainly will default without extensive aid. By giving them money, default can be avoided. But the political complexity of giving them money and the opposition by many Europeans on all sides to this solution contributes to the complexity. The greater the complexity, the more interests can be satisfied and — ultimately — the less understanding there is about what has been promised. Some subjects require complexity, and this is one of them. The degree of complexity in this case tells another tale.
The Foundation of the Crisis
Part of that tale is about two dubious assumptions at the foundation of the crisis. The first is the assumption that interested parties are genuinely aware of the size of the financial problems, and to the extent they are aware of it, that they are being honest about it. Ever since 2008, the singular truth of the financial community globally has been that they were either unaware of the extent of the financial problems on the whole or unaware of the realities of their own institutions. An alternative explanation is, of course, willful ignorance. This translates as the leaders being fully aware of the magnitude of the problem but understating it to buy time or to position themselves personally for better outcomes. It could also simply be a case of their being engaged in helpless hopefulness — that is, they knew there was nothing they could do but remained hopeful that someone else would find a solution. In sum, it combined incompetence, willful deception and willful delusion.
Consider the charge that the Greeks falsified financial data. While undoubtedly true, it misses the point. The job of bankers is to analyze data from loan applicants and to uncover falsehoods. The charge against the Greeks can thus be extended to bankers. How could they not have discovered the Greek deception?
There are two answers. The first is that they didn’t want to. The global system of compensation among financial institutions — from home mortgages to the purchase of government bonds — separates the transaction from the outcome. In other words, in many cases bankers are not held responsible for the outcome of the loan and are paid for the acquisition and resale of the loan alone. They are therefore not particularly aggressive in assessing the quality of a given loan. Frequently, they work with borrowers to make their debt look more attractive.
During the U.S. subprime crisis, in the mortgage crisis in Central Europe and in the sovereign debt and banking crisis in Europe, the system placed a premium on transactions, immunizing bankers from the repayment of loans. The validity of the numbers systematically were skewed toward the most favorable case.
More important, such numbers — not only of the status of loans but also about the economic and social status of the debtors — inherently are uncertain. This is crucial because part of the proposed European solution is the imposition of austerity on debtor nation states. The specifics of that austerity and its effect on the ability to repay after austerity heavily depend on the validity of available economic and social statistics.
There is an interesting belief, at least in the advanced industrial countries, that government-issued statistics reflect reality. The idea is that the people who issued these statistics are civil servants, impervious to political pressure and therefore likely providing accurate data. A host of reasons exists for looking at national statistics with a jaundiced eye beyond the risk of politicians pressuring civil servants.
For one, collecting statistics on a society is a daunting task. Even small countries have millions of people. The national statistical database is based on the assumption that all of the transactions and productions of these millions can be measured accurately, or at least measured within some knowable range of error. This is an overwhelming undertaking.
The solution is not the actual counting of transactions — an impossible task — but the creation of statistical models that make assumptions based on various methodologies. There are competing models that provide different outcomes based on sampling procedures or mathematical models. Even without pressure from politicians, civil servants and their academic mentors have personal commitments to certain models.
The center of gravity of our global statistical system, particularly those of advanced industrial countries, is that the selection of statistical models is frequently subject to complex disputes of experts who vehemently disagree with one another. This is also a point where political pressure can be applied. Given the disagreements, the decision on which methodology to use — from sampling to reporting — is subject to political decisions because the experts are divided and as contentious as all human beings are on any subject they care about.
And this is the point at which outside decisions are made, based on outcome, not on the subtleties of mathematical modeling. There is a connection between the numbers and reality, but the mathematics of a bailout rests on a statistical base of sand. It is always assumed that this is the case in the developing world. This creates a certain advantage, in that it is understood that the statistics are unreliable. By contrast, the advanced industrial countries have the hubris to believe that complex mathematics has solved the problem of knowing what hundreds of millions of people in billions of transactions actually have done.
A Culture of Opaque States
Compounding this challenge, the European Union has incorporated societies on its periphery that never have accepted the principle that states must be transparent, a problem exacerbated by EU regulations. Southern and Central Europeans always have been less impressed by the state than Germans, for example. This is not simply about paying taxes but about a broader distrust of government, something deeply embedded in history. Meanwhile, regulations from Brussels, whose tax and employment laws make entrepreneurship and small business ownership extraordinarily difficult, have forced a good deal of the economy “off the books,” aka, underground.
While not an EU state, Moldova — said to be the poorest country in Europe — is an instructive example. When I visited it a year ago, the city (and villages outside the city) were filled with banks (from Societe Generale on down) and BMWs. There was clear poverty, but there also was a wealth and vibrancy not captured in intergovernmental statistics. The numbers spoke of grinding poverty; the streets spoke of a more complex reality.
What exactly is the state of the Greek, Spanish or Italian economy? That is hard to say. Official statistics that count the legal economy suffer from methodological uncertainty. Moreover, a good deal of the economy is not included in the numbers. One assessment says that 10 percent of all employees are off the books. Another says 40 percent of Greeks define themselves as self-employed. A third estimates that 40 percent of the total Greek economy is in the grey sector. When evaluating what tries to remain hidden, you’re reduced to guesswork. No one really knows, any more than anyone really knows how many illegal immigrants are participating in the U.S. economy. The difference, however, is that this knowledge is of profound importance to the entire EU bailout.
The level of indebtedness and the ownership of the debt of European banks and countries are as murky as who held asset-backed securities in the United States. Yet there is a precise plan designed to solve a problem that can’t be quantified or allocated. The complexity and precision of the plan fails to recognize the uncertainty because the governments and banks are loath to admit that they just aren’t certain. The banks have grown so big and their relationships so complex that the uncertainty principle parallels the state’s. The United States — where the same governing authority handles all fiscal, monetary and social policies — powered through such uncertainties in the 2008 financial crisis by sheer mass and speed. Europe, with dozens of (often competing) authorities, so far has found it impossible to exercise that option.
The countries that face default and austerity have no better understanding of their own internal reality than the financial institutions understand their own internal reality. Greek numbers on the consequences of austerity for government workers do not take into account that many of those workers show up to work only occasionally while working another job that is not taxed or known to the state statistical services. Thus, one has a complete split between the state and banking systems’ ability to honor debt obligations, the insistence on austerity and the social reality of the country.
Germany has always been different. Ever since the early 19th century German philosopher Georg Hegel declared the German civil service had ended history, the idea of the state as the embodiment of reason has meant something to Germans that it did not mean to others — in both a noble and a horrible sense. We are now at the noble end of the spectrum, but the idea that the state is the embodiment of reason still doesn’t capture the European reality. The Brussels bureaucracy is based on the German view that a disinterested civil servant can produce rational solutions that partisan politicians and self-interested citizens could not.
The founding concept of the European Union involves joining nations that do not share this view, and even find it bizarre, with a nation for which it is the cultural core. This has created the fundamental existential issue in the European Union.
The realization that the rational civil servants of Brussels and Berlin have failed to create systems that understand reality strikes at German self-perceptions. There is a willful urge to retain the perception that they understand what is going on. From the standpoint of Southern and Central Europe, the realization that the Germans genuinely thought that the states on the EU periphery had reached the level of precision of the German civil services (assuming Germany had in fact reached that stage), or that they even wanted to, is a shock. Their publics, which saw the European Union as a means of getting in on German prosperity without undergoing a massive social upheaval putting the state and the civil service — disciplined and rational — at the center of their society, experienced an even greater shock.
The political and geopolitical problem is simply this: Germany is unique in Europe in terms of both size and values. It tried to create a free trade zone based on German values allied with France that looked at the world in a much more complex way. The crisis we are seeing, which Germany is trying to solve with extraordinary complexity and precision, rests on a highly unstable base. First, the European banking system, like the American banking system, does not understand its status. Second, the entire mathematics of national statistics is inherently imprecise. Third, the peripheral countries of the European Union have economies that cannot be measured at all because their informal economies are massive. The fundamental principles and self-conception of Germany and Central Europe diverge massively. The elites of these countries might like to think of themselves as Europeans first — by the German definition — but the publics know they are not, and they don’t want to be.
The precision of the bailout schemes reveals the underlying misunderstanding of reality by Europe’s elites, and specifically by the Germans. To be more precise, this is willful misunderstanding. They all know that their precision rests on a foundation of uncertainty. They are buying time hoping that prosperity will return, mooting all of these problems. But the problem is that a precise solution to a vastly uncertain problem is unlikely to return Europe to its happy past. Reality — or rather the fundamental unreality of Europe — has returned.
In some sense, this is no different from the United States and China. But the United States has its Constitution and the Civil War’s consequences to hold itself together in the face of this problem, and China has the Communist Party’s security apparatus to give it a shot. Europe, by contrast, has nothing to hold it together but the promise of prosperity and the myth of the rational civil servant — the cultural and political side of the underlying geopolitical problem.
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Europe Entering the Danger Zone
The European financial crisis is consuming all available attention in Europe and quite a bit beyond Europe as well. Its causes are many, but can be summed up as a massive overcrediting of states, banks and corporations that now must be dealt with. STRATFOR has outlined the path we see the Europeans following in order to find a way out of the crisis. Key to this effort is the eurozone bailout mechanism — the European Financial Stability Facility (EFSF) — which upon full ratification will have the legal powers to address many of Europe’s financial woes. The only real obstacle remaining to the expansion of the EFSF’s powers is the approval of Slovakia, and after another drama-filled week we expect Bratislava to give its assent.
It was widely believed that after Slovakia approved the EFSF reforms, things in Europe would quiet down somewhat. Though the EFSF would still not be large enough to handle the full scope of problems, the facility’s upgrading would have bought the Europeans some time to figure out how to expand the EFSF to a larger, more capable force.
However, two developments on Tuesday raise the possibility — even likelihood — that Europe’s financial woes are about to worsen severely.
The first development is a decision by Moody’s Investor Service credit ratings agency to downgrade Italian government debt by three notches to A2 with a negative outlook. The cost to Italy of borrowing from international markets is about to go up dramatically. It’s hard to recall another time a state that wasn’t on the final verge of default or receivership faced a triple downgrade.
” Two developments on Tuesday raise the possibility — even likelihood — that Europe’s financial woes are about to worsen severely.”
Not that Italy isn’t deserving. The foibles of Prime Minister Silvio Berlusconi long ago degenerated from entertaining to debilitating. He’s gutted his government and coalition of competent individuals for fear they may seek to displace him. The only remaining technocrat in the government’s upper echelons, Economy and Finance Minister Giulio Tremonti, is now regularly used as Berlusconi’s scapegoat for the government’s meek efforts at budgetary control. The southern two-thirds of Italy has always been a massive drain on state coffers, and at 120 percent of gross domestic product, the state debt is the highest in the eurozone outside of Greece.
The second development is the sudden deterioration of Dexia, a major Franco-Belgian bank, which has cast the other side of the European debt crisis into stark relief. The overcrediting of Europe was not limited to governments. Between the sudden cheapening and glut of credit in the 2000s and a massive consumption boom, most of Europe’s banks are massively overextended and undercapitalized. Imagine the U.S. subprime disaster, but not limited to any particular region or subsector. That’s the scale of the problem Europe’s banking sector faces. After weeks of formal denials out of governments and the EU Commission, European Commissioner for Internal Market and Services Michel Barnier finally broke with the party line today describing the rapidly worsening status of Europe’s banks as “a fact of life.”
But even among European banks, Dexia stands out as one of the worst. Dexia holds roughly 520 billion euros in assets but has only 8.8 billion euros in equity, making for a leverage ratio of approximately 60:1. A healthy ratio would be 10:1. For comparison, when the American firm Lehman Brothers went bust in 2008 its ratio was 31:1. This isn’t only a bank that has failed, it has now failed twice. It crashed the first time back in 2008, when a 6.4 billion-euro bailout allowed it to linger on to the present day (what’s left of that 6.4 billion euro is included in the 8.8 billion figure of available equity). As a consequence of that bailout, Dexia became majority state-owned (23.3 percent by various French government interests, and 30.5 percent Belgian government interests).
Belgian and French authorities now appear set to break Dexia apart, loading its bad assets into a separate facility which will likely leech off of taxpayer money until they can be formally disposed off. The problem is that there isn’t much Belgian taxpayer money to be brought to bear. After all, Dexia has long served as a primary supplier of capital to Belgium’s national and regional governments. Very conservatively, Dexia is going to be absorbing 10 billion euros in government resources, and that’s assuming there are no problems with the 20 billion euros in Greek, Portuguese and Italian government bonds that the bank holds.
Belgium, like Italy, is getting deeper in debt and finding it increasingly difficult to tap international capital markets — particularly in the sort of big chunks that would be required to wind down Dexia. And while Italy’s governing leadership can be charitably described as eccentric, Belgium’s is quitting: the country has been without a government for 480 days and in September, acting Prime Minister Yves Leterme announced he’d soon be leaving his job.
The Europeans now face three challenges. First, while the EFSF is nearly ready to enter into reinvigorated force, it is not nearly large enough to handle an Italian bailout. That would require — at minimum — 700 billion euros.
Second, while the new and improved EFSF is designed to handle bank bailouts as well, and it probably can handle Dexia, the bank is the proverbial canary in a coal mine. There are many more banks like Dexia, some several times as large, and bailing them out will cost vastly more than the EFSF’s functional ceiling of 440 billion euros would cover.
Third, as the Dexia-Belgium crossover vividly underscores, Europe’s sovereign debt and banking crises are formally interlinked: a broke government cannot recapitalize damaged banks while damaged banks cannot help finance a broke government. Should one side stumble, the result is a near-immediate cascade of failures on the other. And all of this assumes that Greece, which has heretofore served as the crisis’ epicenter, doesn’t throw any more unexpected problems Europe’s way.
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Hey, I've got a great idea! Let's elect a president that admires european socialism!
Oh, wait.....
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Stratfor:
The European Counterbalance
The director of the European Department of the International Monetary Fund (IMF), Antonio Borges, startled observers Wednesday when he suggested the IMF could expand its assistance to Europe by taking the unorthodox step of directly intervening in their sovereign debt markets. Borges then backtracked on these statements mere hours later, saying that the IMF is not actually contemplating such a strategy and that pursuing it would require a discussion among IMF member states.
The causes behind this jarring series of events currently are unclear, but a number of possibilities exist. Borges could have simply let details from an internal brainstorming session slip out and then been called back into line, or his suggestion could be a sign of an internal struggle in the IMF over the best course of action to redress the deteriorating situation in Europe. It is even possible that the statement was intended to float the idea of bond market intervention to the IMF’s global audience to gauge reactions and steer the dialogue in that direction.
“There is a massive amount of inertia built up in the European experiment, an enormous amount of attachment to costs already paid — the flip side of which is an abiding fear of dissolution.”
Another possibility is that, viewing the mounting concern over the crisis, the IMF has decided to brandish its $396 billion lending capacity, perhaps in an effort to convince investors to rethink any bets against Europe. Public officials regularly employ rhetoric as a tool to impact financial markets; it costs a lot less than dipping into tax money and is often effective in the short run. On Tuesday, for example, EU economy minister Olli Rehn hinted at a “coordinated” and “concerted” bank recapitalization effort, which triggered a surge of buying in equities and other asset markets. Rehn’s words, like Borges’, are only words, and the markets will soon forget them.
It will take much more than words to fix Europe. STRATFOR has put the cost of shoring up Europe in the medium term in the realm of 2 trillion euros. Despite the fact that the cost to the globe of a European financial collapse would vastly outstrip this amount, interested parties from the IMF to the Chinese and even the Europeans themselves have not been able to materially abate the crisis. The reason is simple. All solutions to date have attempted to shuttle funds from healthier balance sheets onto the balance sheets of bankrupt lenders and countries on the verge of default. Cobbling together enough hard capital to tamp down this crisis will almost certainly prove impossible.
Aside from the sheer magnitude of the fundraising challenge, this poses a special kind of problem in Europe, where the incompatible sentiments of nationalism and European unity have checked the distribution of financial losses, as exemplified by the current legal spat between the lenders of Austria and the government and homeowners of Hungary. There is very little political room and virtually no financial ability for countries to take losses voluntarily.
However, there is one counterbalancing force in Europe that has not been discussed as much as the forces that threaten to break it. There is a massive amount of inertia built up in the European experiment, an enormous amount of attachment to costs already paid — the flip side of which is an abiding fear of dissolution. It is the fear that without economic integration, devastating warfare on the continent could again become conceivable. For some, it is the fear that a resurgent Russia may once again pose a threat. It is also the very real fear that dissolution would lead to economic irrelevance in a world where dynamic economies along the Pacific Rim increasingly call the shots.
It is this fear and inertia that could force Europe’s political and financial adjustment in the not-too-distant future. Europe has not yet faced an event on the scale of 9/11 or the Lehman Brothers bankruptcy. It has not been violently confronted by the prospect of collapse. The same states that now bicker over cobbling together capital measuring in the tens of billions of euros would, in the face of such an event, suddenly find themselves in agreement on a much larger, more streamlined “bailout” package linked to central bank credit.
Averting financial collapse would not address the core differences of the various European states; underlying tensions would remain. And since there is every reason to think the bigger price tags involved would be accompanied by a proportionate loss of national sovereignty, the seeds of Europe’s next set of problems would be sown.
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second post
The Franco-Belgian bank Dexia started collapsing Oct. 4, ushering the latest chapter of the nearly 2-year-old European financial crisis. Considering that Dexia is on the list of the top 50 global financial institutions, it is worth examining what happens during a bank bailout and shutdown process and applying that to the Dexia situation.
In minor cases, a cash infusion from a government is usually sufficient to hold the bank over until such time that normal economic growth can help the bank regenerate its finances. Growth has been middling in Belgium since 2008, and Dexia simply hasn’t been able to get out from under the problems caused by its non-performing assets.
In moderate cases, governments come in and take a percentage share of ownership of the bank, putting their own representatives on the bank’s board and forcibly restructuring it. This has already been done for Dexia, too. In the aftermath of that 2008 bailout, Dexia became majority-owned by various governments in France and Belgium.
But the restructuring procedures have not followed what we would consider to be a standard course. Normally, there are major changes at the top and policies are adjusted all throughout to make sure that the sort of indiscretions that led to the bank problems in the first place don’t happen again. Dexia, however, is not a normal consumer or business bank. Instead, much of its business comes from supplying credit to various parts of the Belgian state apparatus.
So when these entities took greater control of Dexia back in 2008, instead of encouraging Dexia to engage in more lending to private enterprise, which might actually regenerate its loan book, they instead encouraged Dexia to invest more in their dead issuances, allowing them to run larger deficits than they would’ve been able to otherwise. Somewhat ironically, the last bailout actually only reinforced the bad policies that had gotten Dexia into trouble the first place.
The final option is some sort of dissolution —typically the bank is broken up into pieces. The good pieces typically find eager buyers who are willing to pay more or less market value. The bad pieces, however, have to be bundled into some sort of bad bank where ultimately they are sold off piecemeal at pennies on the dollar. This is really the only option that is left for Dexia. But there are several problems even with this strategy.
First, any good asset sales right now in the current environment are not going to be bringing what we would consider full market value. Europe is basically in a mild recession at present — it could get a lot worse because of the financial crisis — and European banks have so far proven unwilling to lend much money to each other, much less go out and grab assets from a failed bank and one of Europe’s most debt-heavy states. Which means that the losses that the state is going to absorb when this is all resolved are going to be much higher than they would normally be.
Second, Belgium doesn’t have the money to absorb the losses of the bad bank right now anyway. Belgium already has a national debt of 100 percent of GDP and is having problems raising capital under normal circumstances — much less the sort of large infusion that would be required for a bailout of Dexia. Additionally, under normal circumstances, Belgium would turn to Dexia for financing — that’s obviously not an option anymore, which means, at least in the initial stages, the financial burden is going to be carried by France and France alone — something which will cost Belgium more in the long run.
Third, considering that Dexia is leveraged by a factor of 60-1 (for comparison, Lehman Brothers was only 30-1) and because it’s already 35-percent owned by the state, this is a bank that is going to be suffering far greater losses than normal because it’s extraordinarily damaged.
Dexia has over 500 billion euros in assets and 20 billion of those are government debts of Portugal, Italy and Greece. So let’s assume for the moment that the bailout only costs the Belgian government about 30 billion euros — which we see as fairly conservative. That alone would be sufficient to increase Belgium’s national debt load to 110 percent of GDP, putting them within easy reach of where Italy is right now.
Fourth, Dexia is a leading source of financing for the Belgian government – it’s not there anymore. Belgium is going to have to find another way to raise money on international markets — not just to cover the bailout but to cover its normal activities. That’s becoming increasingly difficult for states that have high debt and low government competency, and Belgium is certainly in that list. It’s now been over 480 days since Belgium has had a government, and last month its prime minister decided that he was going to quit. Added together, Belgium is being pushed very very close to needing a state bailout of its own.
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• Europe: A Shifting Battleground, Part 1
There are two important events coming up in Central Europe this weekend: the first being a summit of the Visegrad Four countries and the second is general elections in Poland. These two events give STRATFOR the opportunity to examine the importance of the region in the current context and looking forward as well.
The first event is the Visegrad summit which will take place in Hungary from Oct. 7 to the 8. The presidents of the four Visegrad states, which include Poland, Czech Republic, Hungary and Slovakia, will all be in attendance at the summit, which will mark the twentieth anniversary of the grouping. The summit will also mark the achievements of the bloc, which is most notably the introduction of all four Visgrad countries into the European Union and into NATO in the 2000s.
But more importantly the summit will be an opportunity to gauge where the bloc is headed in the future. There’s no shortage of problems in Europe right now, ranging from the eurozone debt crisis to growing pressures and divisions on NATO. It will thus be key to see whether the four Visegrad countries can show the same level of cooperation in addressing the issues that these two blocs face, as they did in joining them.
The second important event of this coming weekend will be the Polish general elections, which will take place on Oct. 9. These elections are, at this point, closely contested between the ruling Civic Platform Party of Prime Minister Donald Tusk and the opposition PiS party. But regardless of who wins the elections, there are deeper geopolitical issues that are facing Poland right now that any government would need to handle. While Poland has shown nascent signs of emerging as a leader of Central Europe, Warsaw is still trying to find its place within wider Europe.
It’s often left out discussions with major European countries like Germany and France, specifically over important issues like the eurozone debt crisis. The prevailing question in Poland is how the country can become a member of the group of established Western European countries, while also maintaining a leadership role in Central and Eastern Europe via initiatives like the Visegrad Four and the Eastern Partnership Program, which is a Polish led initiative to bring six former Soviet countries closer to the EU.
This question has become even more important for Poland as a resurgent Russia has been strengthening its relationship with key Western European countries, which is a concerning development for Warsaw. Therefore, no matter what declarations are made at the Visegrad summit and no matter which party gets more of votes in the Polish general elections, both events are subject to deeper geopolitical forces that will continue to shape the region regardless of policies or personalities.
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Summary
Germany’s parliament voted Oct. 26 to limit the German commitment to European bailouts. This move shows Germany’s unwillingness to continue serving as the primary source of funding for Europe as a whole. This means circumstances within Europe must shift in order for the European Union and the eurozone to survive the current financial crisis. Sharp writedowns of Greek debt would have to not trigger a financial meltdown, EU member states would have to put the union’s interests above their own, and outsiders would have to be persuaded to become the primary funders for the European bailout mechanism.
Analysis
STRATFOR has watched with great interest as the eurozone crisis has unfolded over the past 21 months. In many ways this is the final stage of the post-Cold War interregnum. In the aftermath of World War II, the European Union (and its predecessors) was created to both constrain Germany and harness Germany’s economic dynamism to bolster French power. This was made possible because Europe was split and occupied by U.S. and Soviet forces, while Germany was denied the ability to unilaterally further its national interests. Those circumstances have changed. The Soviets left, the U.S. presence is a shadow of what it once was, and the Germans are reunified and once again looking out for themselves. With the Cold War over, the European Union is left to its own devices.
Germany benefits greatly from the European Union and the eurozone. These structures keep European competition firmly in the realm of economics and finance — areas in which the Germans, with their capital richness, central location, highly skilled labor and powerful industrial base, are well prepared to win. The European Union even created a regulatory structure that expressly puts German industry at an advantage.
But Germany is no longer willing to fund Europe, which it has done from immediately after World War II until very recently. The Germans have “bailed out” Europe several times. They paid massive war reparations — primarily to the French — after World War II. They funded the majority of the European Union’s development costs and agricultural subsidies for the first three decades of European integration. They paid — by themselves — for the rehabilitation of the former East Germany and contributed the largest share of funding for the rehabilitation of the rest of the former Soviet satellites. They also were forced to allow the other eurozone states to enter into the common currency at artificially depreciated currency exchange rates.
Dissatisfaction with this past role was apparent Oct. 26 when Germany’s parliament, the Bundestag, voted overwhelmingly to approve Chancellor Angela Merkel’s negotiating position at the EU summit later that day.
The Bundestag capped Germany’s financial guarantee to the European Financial Stability Facility (EFSF) — the eurozone’s bailout mechanism — at its current level of 211 billion euros ($294 billion). (The EFSF does not contain actual state cash; it uses government guarantees as backing to raise money on private bond markets. Contributing states only have to fill their guarantees if states undergoing bailout procedures default, in which case investors will be reimbursed with state money.) The Germans believe they have done enough, and they will no longer serve as Europe’s cash machine.
The other important prohibitive clause in the legislation the Bundestag approved is opposition to the European Central Bank’s (ECB’s) purchasing any state debt. Such purchases are already illegal under EU treaties, but in order to prevent financial meltdowns the ECB has been making indirect purchases (it lends money to banks to buy the debt and, through economic machinations, ends up holding the debt). The Germans see such actions not only as undermining a clause they fought very hard to get included in EU treaties, but also as directly undermining their efforts to get the weaker eurozone states to implement austerity measures. Whether the ECB will follow the German recommendation — and it is a recommendation, as the ECB is officially independent — remains to be seen. Mario Draghi, the Italian who will take over as ECB governor Nov. 1, has made it clear that he intends to maintain the purchase policy. Discussions at the summit should be quite vigorous.
Between the prohibition on new government guarantees and the demand on ECB actions, the Germans have constrained — perhaps outright eliminated — the two largest and most credible sources of potential funding for the eurozone’s bailout systems.
Instead, the Germans are asking for much deeper private and non-European participation. They want holders of Greek debt to take a much larger restructuring than the 21 percent discount agreed upon in July. Leaks from the International Monetary Fund (IMF) have echoed this, indicating that perhaps a 60-75 percent reduction in the bonds’ value is necessary if Greece is to ever recover. In trade, the Germans are demanding that the current EU/IMF monitoring of Greece’s finances become permanent.
Somewhat surprisingly, there is no clear message on how the bailout fund will be expanded to handle more bailouts. At its current size — 440 billion euros — it might be able to barely handle Spanish remediation, but a banking crisis or an Italian bailout would utterly overwhelm it. In Merkel’s Bundestag speech Oct. 26, the chancellor indicated that some sort of financial leveraging option would be used, but that is something that will be debated and decided at the EU summit later in the day. Merkel will need to return to the Bundestag to get the specifics ratified.
With such limited financing options, the European bailouts are to be funded more or less by the kindness of strangers: The EFSF’s existing funding limits are woefully inadequate for the tasks at hand, and if the Germans will not lead the way to increase its volume directly, eurozone governments are now wholly dependent upon outsiders to meet those funding commitments the eurozone governments refuse to. The Germans have stated very clearly what they expect from the rest of the European Union: austerity. With no more German guarantees on order and with a leveraging plan that is somewhat dubious, the only means many EU states have of avoiding bankruptcy is to make extremely deep budget cuts. These states are now in a bit of a race to implement austerity measures before the markets cut off funding.
To work, this strategy requires three very unlikely developments.
First, sharp writedowns of Greek debt must not start a general crisis. The largest holders of Greek debt are the Greek banking sector and the Greek pension system, so sharp writedowns could save Athens on interest payments, but they will only increase the pension burden by causing a Greek banking meltdown that will require the Greeks — both state and private — to more aggressively tap the EFSF (which has not yet been expanded). Even this assumes that the banks agree to a “voluntary” restructuring and do not simply declare Greece to be in default, which would trigger the cascade of financial failures the Europeans have spent the past two years trying to avoid.
Second, all of Europe’s financially troubled governments would have to put the European Union and the euro ahead of their own survival. This is highly unlikely, but not (yet) impossible. The Slovak government has already fallen over the EFSF issue, but it still approved ratification. Additionally, in preparation for the Bundestag presentation and the subsequent summit, Merkel laid very heavily into one of Europe’s financial laggards: Italy. Merkel’s actions triggered a political crisis in Rome, where pension reforms were agreed upon but at the cost of the promised resignation of political and financial fixture Silvio Berlusconi as prime minister.
Third, forces beyond Europe would have to buy in, en masse, to the European bailout, likely without guarantees that their funds are completely safe. Under the pre-existing system any investors would be guaranteed to have 100 percent of their funds returned to them — courtesy largely of German taxpayers — should a weak state default. Under any leverage plan, that recovery percentage would be smaller; 20 percent is emerging as the likely number for an absolute guarantee. But the Europeans desperately need outsiders to buy in to provide the sort of bridge financing and financial safety nets required to keep Europe’s governments and banks afloat. To that end, EFSF chair Klaus Regling is already planning trips to China and Japan — the world’s largest holders of foreign currency reserves — to try and convince them to use their stored cash for assistance. Some purchases are likely, but if the Germans are unwilling to finance the rescue of a system they benefit from, it is difficult to envision others being willing to do more.
STRATFOR does not see any of these three scenarios as being particularly likely. But without a great deal of financial commitment from Germany and the other, richer eurozone states, this is what must happen if the eurozone is to survive.
Read more: The European Financial Crisis: Germany's Proposal | STRATFOR
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Throwing good money after bad. The EU is doomed.
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THURSDAY, OCTOBER 27, 2011 STRATFOR.COM Diary Archives
European Disunity Halts Solutions to Crisis
Eurozone leaders gathered in a summit Wednesday — the fourth in less than a week — out of which they had hoped to issue a firm line to address the financial crisis that has now reached its 21st month. Meanwhile — and according to STRATFOR, more importantly — the German parliament voted overwhelmingly to bar any further expansion of European bailout structures that might require a greater contribution by Germany.
There were three specific topics on the summit’s agenda. First, a major bank repair effort whose approval, it is hoped, could turn Europe’s damaged financial institutions into a source of strength, rather than a weakness. Second, a write-down of Greek debt — by at least half — that would give Greece’s economy a chance to recover, rather than drowning in interest payments. Finally, the summit was intended to seek an expansion of the eurozone bailout fund that would give the latter the ammunition to assist — if not directly underwrite — the broader European recovery effort.
“As the vote in the German parliament shows, even in the face of financial collapse there is little desire to take the steps necessary to save the structures of modern Europe.”
Of the three, only the first goal solidified, and even then only in part. While reports late in the day suggest that a voluntary write-down of 50 percent of the value of Greek bonds has been agreed to by bondholders, the exact details of the plan are not clear. Meanwhile, the Europeans agreed to increase banks’ capital adequacy ratios — the amount of cash that banks must hold in reserve — up to 9 percent by June of 2012, something that EU leaders estimated will cost about 100 billion euros. Considering that by the EU’s own numbers that reaching that degree of a security blanket would cost — conservatively — 200 billion euros without even pretending to address the banking sector’s other problems, the agreement fell well short of offering a comprehensive solution to the financial problems facing Europe. On the questions about Greek debt and about bailouts for struggling sovereign states, the Europeans asserted that they had “reached agreement,” but put off any specific decisions until the next major summit.
Europe’s financial crisis is getting worse by the week. What started nearly two years ago with Greece’s sovereign debt crisis has since spread to a half dozen countries — even affecting European heavyweight France — as well as most of the Continent’s major banks. What has not spread is the willingness of any particular European state to apply the necessary volume of resources to address the crisis. In fact, as the vote in the German parliament shows, even in the face of financial collapse there is little desire to take the steps necessary to save the structures of modern Europe.
Such reluctance is understandable; the price to stave off Europe’s crisis is remarkably high. STRATFOR estimates that an effective attempt to tackle the European crisis would require bailout resources of about 2 trillion euros. Simply arriving at the current level of less than 500 billion euros required a strenuous effort.
The European Central Bank (ECB) does not have full authority over monetary policy and banks in a manner similar to the U.S. Federal Reserve, the Bank of England or the Central Bank of Paraguay. When negotiating the Treaty on Monetary Union, European states reserved control over their own banks, ceding the least amount of authority possible to the ECB. The system was only sustainable — politically, economically and financially — as long as everyone was profiting. With the arrival of multiple debt crises and banking crises and considering a languishing global export market, the kind of economy that allowed this system to work is gone and unlikely soon to return.
Considering Europe’s political and economic disunity, the EU’s host of financial and institutional shortcomings, the sheer size of the problem and the ever-increasing pressure on governments and banks alike, perhaps the most notable outcome after a week of largely failed summits was that the eurozone remained intact. However, on the floor of the German Bundestag on Wednesday, it was made abundantly clear that the one country that might have the financial resources to resolve the crisis will not be sharing them. Neither the common currency nor the common market can exist in a Europe in which the union’s members are unwilling to share burdens and follow collective rules. Germany at present is focused on the rules, while the countries in need are focused on the burdens. Both approaches are correct in their own way, yet both are wrong.
Despite failing to articulate the specifics of any credible financial resolution to Europe’s debt crisis, this was about as good of a political response as Europe could hope for given the circumstances. By alluding to — but not mandating — a restructuring, no crushing pressure has been put on the banks, yet. By not announcing the details of how the European Financial Stability Facility will be expanded, European leaders have denied critics for now the opportunity to proclaim failure. That Germany, the one country whose participation is required in any solution for Europe, is pursuing its own interests in such a brash manner does not bode well for Europe’s future.
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PARIS — A day after European leaders unveiled their latest plan to save the euro, top officials opened talks with China in an effort to lure tens of billions of dollars in additional cash, giving China perhaps its biggest opportunity yet to exercise financial clout in the Western world.
China is expected to demand significant concessions, including financial guarantees and limits on what Beijing sees as discriminatory trade policies, in exchange for any investment in Europe’s emergency stability fund. The head of the rescue fund, Klaus Regling, got a cautious reply from Chinese officials Friday during a visit to Beijing, where he said he did not expect to reach an investment deal with China anytime soon.
A senior Chinese official, Vice Finance Minister Zhu Guangyao, said China — like the rest of the world — was still waiting for the Europeans to deliver crucial details on how the rescue fund, the European Financial Stability Facility, would operate and be profitable before deciding on whether to participate.
That Europe would turn so openly to China to help stabilize the debt crisis shows how quickly the Chinese economic juggernaut has risen on the world stage. Indeed, if China comes to Europe’s aid, it will signal a new international order, with China beginning to rival the role long played by the United States as the world’s pivotal financial power.
“This would be a tectonic shift,” said Pieter P. Bottelier, an expert on China who teaches at the School of Advanced International Studies at Johns Hopkins University. “It would be so important economically and politically.”
Arvind Subramanian, a senior fellow at the Peterson Institute for International Economics in Washington, said Europe’s appeal was another sign that China was already a dominant global power.
“China’s power is more imminent, broader in scope and greater in magnitude than anyone imagines,” he said. “For instance, China’s currency is already having a negative effect not just on the U.S. and Europe, but on everyone else, too. And the rest of the world can’t do anything about it. If that’s not dominance, what is?”
Europe has turned to Beijing and a handful of other emerging market economies to consider investing in the fund to supplement contributions by the 17 countries that use the euro. Outside investment was presented as critical for the Europeans to create a financial firewall of up to $1.4 trillion to prevent the debt crisis that started in Greece from ravaging larger countries, including Italy and Spain.
In a sign that the crisis was far from over and that investors were still wary of Italy’s political paralysis and its huge debt, it was obliged on Friday to pay the highest rate in more than a decade to sell a new bond issue.
The fear is that a failure to contain the crisis would lead to contagion in global financial markets on par with the Lehman Brothers debacle, and deliver a blow not only to the economies of Europe, but also to the United States and other major trading partners.
Such a deterioration would certainly be bad news for China, which could hardly afford to see two of its biggest markets hobbled at the same time.
China has a $3.2 trillion nest egg in foreign reserves, by far the largest hoard of foreign currency in the world, and it needs to find places to park those reserves rather than convert them all to Chinese renminbi, a step that could set off domestic inflation and lead to sharp appreciation in the currency’s value. Europeans know that China is eager to move some of the money out of its vast pile of United States Treasury securities, and they are pushing the Continent’s crisis as a good opportunity to invest on the cheap.
Hours after European leaders unveiled their grand plan, President Nicolas Sarkozy of France called President Hu Jintao to say that Europe was still looking for some cash, and lobbied Beijing to play a “major role” in helping Europe get its house in order.
Since the Europe crisis worsened two years ago, regional leaders once wary of China’s influence have rolled out the red carpet in hopes that China might be a savior for their ailing economies. China has already made deals to expand its footprint into choice Western European countries like Italy and Spain. Now, Chinese-owned companies run the biggest shipping port in Greece. They own highways and other crucial infrastructure, and are working to snap up other strategic businesses to anchor their presence on European soil.
But with Europe’s economy verging on its second recession in three years, Chinese officials are wary of taking too big of a risk abroad. China’s own economy is slowing, and there is growing unease about inflation and a property bubble. The income gap between the rich and the poor is widening, posing challenges to the leadership in Beijing.
Chinese citizens have also been venting anger on the Internet about government investments in Europe that have turned out to be anything but profitable, including billions of euros worth of volatile bond holdings from stricken countries like Spain and Greece. And on a per capita basis China is still much poorer than Spain, Greece or Italy, meaning officials in Beijing could face a popular outcry if they poured resources into rescuing European countries or banks.
“There is a lot of skepticism within the Communist Party, but also in Chinese public opinion, about China sinking money into European reserve assets,” said Jonathan Holslag, the head of research at the Brussels Institute of Contemporary China Studies.
Still, lending a hand to Europe could prove a golden opportunity for China to increase its financial and political clout, and make it more of an equal among giants on the Continent, analysts say.
Although leaders have pledged not to tie political demands to financial investments, Beijing has sought to get the European Union to recognize it as a market economy under global trade rules. Without that status, it is easier for other nations to initiate trade proceedings against China.
China is also eager to persuade Europe to drop its criticism of its currency valuation policies, especially at a time when the United States Congress is weighing legislation that would allow American companies to file trade cases against China on the basis of an undervalued renminbi.
Another longstanding sore point is the arms embargo that Europe and the United States imposed on China after its bloody 1989 crackdown on protesters in Tiananmen Square. The European Union recently considered easing the ban, but the United States has steadfastly objected. More than anything, lifting the ban would signal Europe’s acceptance of China as an equal on the world stage.
It is not clear whether China would push that hard, though. As much as Europe wants the cash, Beijing knows that taking things too far could backfire.
“When you look at the diplomatic agenda, most officials understand that trying to impose political conditions on financial support is not going to work, and might even be counterproductive,” said Mr. Holslag, the Brussels Institute researcher. “If they become too blunt and assertive in attaching a lot of demands, that might lead to a defensive, if not protectionist, stance in Europe.”
Moreover, Europe is China’s largest export market, so it may be in Beijing’s interest to help boost European stability, said an official close to the Chinese government’s deliberations although not directly involved in them.
If a contribution is made to the European stabilization fund, he said, it is likely to be sizable, although smaller than those by the biggest European countries or the International Monetary Fund. What would be crucial, he said, is that Germany, France and the European Central Bank are behind the plan to expand the fund.
“We are looking at China’s pile of reserves with envy, and hope the Chinese are willing to spend something on us,” said Paul de Grauwe, an economics professor at the University of Leuven in Belgium and an adviser to the European Commission. “But they surely don’t want to throw money at this except if they get an ironclad guarantee. If that doesn’t happen, I don’t think we should count on China to help us out.”
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Europe’s rescue plan
This week’s summit was supposed to put an end to the euro crisis. It hasn’t
Oct 29th 2011 | from the print edition
YOU can understand the self-congratulation. In the early hours of October 27th, after marathon talks, the leaders of the euro zone agreed on a “comprehensive package” to dispel the crisis that has been plaguing the euro zone for almost two years. They boosted a fund designed to shore up the euro zone’s troubled sovereign borrowers, drafted a plan to restore Europe’s banks, radically cut Greece’s burden of debt, and set out some ways to put the governance of the euro on a proper footing. After a summer overshadowed by the threat of financial collapse, they had shown the markets who was boss.
Yet in the light of day, the holes in the rescue plan are plain to see. The scheme is confused and unconvincing. Confused, because its financial engineering is too clever by half and vulnerable to unintended consequences. Unconvincing, because too many details are missing and the scheme at its core is not up to the job of safeguarding the euro.
This is the euro zone’s third comprehensive package this year. It is unlikely to be its last.
Words are cheap…
The summit’s most notable achievement was to forge an agreement to write down the Greek debt held by the private sector by 50%. This newspaper has long argued for such a move. Yet an essential counterpart to the Greek writedown is a credible firewall around heavily indebted yet solvent borrowers such as Italy. That is the only way of restoring confidence and protecting European banks’ balance-sheets, thus ensuring that they can get on with the business of lending.
Unfortunately the euro zone’s firewall is the weakest part of the deal (see article). Europe’s main rescue fund, the European Financial Stability Facility (EFSF), does not have enough money to withstand a run on Italy and Spain. Germany and the European Central Bank (ECB) have ruled out the only source of unlimited support: the central bank itself. The euro zone’s northern creditor governments have refused to put more of their own money into the pot.
Instead they have come up with two schemes to stretch the EFSF. One is to use it to insure the first losses if any new bonds are written down. In theory, this means that the rescue fund’s power could be magnified several times. But in practice, such “credit enhancement” may not yield much. Bond markets may be suspicious of guarantees made by countries that would themselves be vulnerable if their over-indebted neighbours suffered turmoil.
Under the second scheme, the EFSF would create a set of special-purpose vehicles financed by other investors, including sovereign-wealth funds. Again, there are reasons to doubt whether this will work. Each vehicle seems to be dedicated to a single country, so risk is not spread. And why should China or Brazil invest a lot in them when Germany is holding back from putting in more money?
Together, these schemes are supposed to extend the value of the EFSF to €1 trillion ($1.4 trillion) or more. Sadly, that looks more like an aspiration than a prediction. And because the EFSF bears the first losses, its capital is at greater risk of being wiped out than under a loan programme. This could taint France, which finances the rescue fund and has recently seen its AAA credit rating come under threat. Since the EFSF depends partly on France for its own credit rating, a French downgrade could undermine the rescue fund just when it is most needed.
If the foundations of the firewall are too shallow, then the bank plan plunges too deep. By the end of June 2012, banks are expected to establish a core-capital ratio of 9%. In principle, that is laudable. But if banks have months to reach their target, they can avoid raising new equity, which would dilute their shareholders' stakes, and instead move to the required ratio by shrinking their balance-sheets. That would be a terrible outcome: by depriving Europe’s economy of credit, it would worsen the downturn.
Then there is Greece. Although the size of the writedown is welcome, euro-zone leaders are desperate for it to be “voluntary”. That is because a default would trigger the bond-insurance contracts called credit-default swaps (CDSs). The fear is that a default could lead to chaos, because the CDS market is untested. That is true, but this implausibly large “voluntary” writedown will lead investors in other European sovereign bonds to doubt whether CDSs offer much protection. So while the EFSF scheme is designed to offer insurance to bondholders, the European leaders’ insistence that the Greek writedown be voluntary will make euro-zone debt harder to insure.
…but trust is nowhere to be found
Europe has got to this point because German politicians are convinced that without market pressure the euro zone’s troubled economies will slacken their efforts at reform (see article). Despite a list of promises presented to the summit by Silvio Berlusconi, Italy’s prime minister (see article), Germany has good reason to worry. But it needs to concentrate on institutional ways of disciplining profligate governments, rather than starving the rescue package of funds. As it is, this deal at best fails to solve the euro crisis; at worst it may even make it worse. As the shortcomings of each component become clear, investors’ fears will surely return, bond yields will rise and banks’ funding problems will worsen.
Yet again, disaster will loom. And yet again, the ECB will end up staving it off. Fortunately, Mario Draghi, the ECB’s incoming president, made it clear this week that he realises that is his job. But therein lies the tragedy of this summit. An ECB pledge of unlimited backing for solvent governments would have had a far better chance of solving the crisis months ago, and remains the best option today.
At this summit Europe’s leaders had hoped to prove that their resolve to back the euro was greater than the markets’ capacity to bet against it. For all the backslapping and brave words, they have once again failed. There will be more crises, and further summits. By the time they settle on a solution that works, the costs will have risen still further.
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Greek referendum is coin-flip on euro exit
COMMENTS (49)
The Greek referendum call is, while it lasts, effectively a plebiscite on euro membership.
Papandreou announced on Monday that he would put a hard-fought rescue deal to a referendum
I say "while it lasts" because the opposition is mobilising a parliamentary manoeuvre to bring down the government, which may succeed - returning Europe to its status quo of containable trauma.
If Greeks reject the 50% controlled default on the debts they owe to the banking sector, then the arithmetic I revealed on Newsnight on the eve of the Euro summit comes into play - without a 50% haircut, and a further 130bn euro bailout, on top of 110bn, Greek debt spirals out of control and the country goes bust.
At this point, the value of the debt falls to maybe 10% of its face value and Greece has broken all the rules of euro membership.
The euro leaders will be faced with the option of a forced transfer of taxpayers' money to shore up the entire Greek economy with no surety, and no "local representatives" as currently planned. Or Greece leaves the euro.
Most political economists I speak to believe this has been the logic all along, and brave though it has been for Prime Minister George Papandreou to try and buy time to do a proper structural reform of Greece, the implosion of Spain and Italy has robbed him of that time.
Greeks - even those fiercely opposed to Pasok from the left and right - are resigned to the fact that the country faces years of painful restructuring. The real question at issue is a) under whose control and b) in whose interest?
It is for this reason that, while the Greek CP wants out of the euro, the growingly influential far left parliamentary group SYRIZA does not, and neither does the hard-right religious party LAOS. Everybody can see that an external devaluation will be chaotic, painful and cause its own kind of social unrest, just as the attempted internal devaluation is doing.
But events are moving fast. Even as the Greek centre-left toys with the concept of repudiating "odious" debt, as per Latin America in the 1990s, the debt is being concentrated into the hands of other sovereigns - the European Central Bank (ECB), the International Monetary Fund (IMF), other governments…
The reason the markets are scared is not just because of the difference between 50% and 90% default, it is because in the old scenario (AKA the one we agreed on last Thursday morning!) this sovereign-held debt was out of the reckoning. An "Oxi" vote (it means "No" and was scrawled on thousands of banners hung from balconies last Thursday) would signal default across the whole range of debt, causing new turmoil for European states.
What caused Mr Papandreou's sudden move? Even some of the MPs closest to him had no idea it was going to happen.
Many of my Twitter correspondents suggest it was the vehemence of "Oxi Day" last week, leading to clashes between parading soldiers and protesters and local Pasok politicians getting hounded off the parades.
Pasok remains a very well rooted social democratic party, with multi-generational networks inside every village. If the village guys start ringing up and saying - there is no way we can hold it - Mr Papandreou is politician enough to hear this.
Another potential reason is capital flight. Anecdotal evidence suggests that the Greek elite are buying up property in London just as fast as they can find berths in Poole for their yachts. They are voting with their spinnakers, on the basis that the game is up. In any future Greece on offer, they will have to start paying taxes and they do not want to.
One banker told me the Greek super-rich have mostly left.
The one thing governments have that investment banks do not is intelligence services with the power to wiretap people. If you ever wonder why serving politicians go grey so quickly, it is in part because they see the intelligence. So Mr Papandreou may have looked at the file and said, I can't sell this to my party, nor to my voters, and the business elite are emigrating en masse, so throw the dice.
Referendums are, always, basically a coin-toss, an all-chips on the black romantic gesture. Right now, the scale of EU-level mobilisiation to dissuade Mr Papandreou is huge.
But if Greece votes no - and goes for euro-exit - there are several plans in the process of being published that explain what you have to do. Close the banks for days, ration food and energy, institute strict capital controls - with most probably a few fast patrol boats at Glyfada harbour to check every departing yacht for cash and bonds.
Later, you get massive devaluation, with inflation; your non-sovereign debts become instantly doubled so you cannot pay them (i.e., the stock of Greek private debt to external lenders, for example, or, intra-corporate debts).
Finally, you get the chance to become competitive again. (I base this on SOAS professor Costas Lapavitsas' upcoming document, which he has verbally outlined to me).
However, despite this very, very unappealing prospect, you are at least in control of your own economy and you do not have foreign civil servants dictating what ministers can do.
One reason so many Greeks have told me this route is impossible is because there is no Kirchner - no left-leaning autarchic politician who can pose as the tribune of the nation and create a narrative around the default process, as Nestor Kirchner did in Argentina. Nobody on the right wants to do it either. And that is Mr Papandreou's gamble - that nobody outside the KKE will present a coherent alternative to a yes vote, and that the KKE does not want power.
That is how it looks from the balcony of a small hotel in Cannes this morning. When the politicians get here, I will let you know what the whites of their eyes are telling me.
http://www.bbc.co.uk/news/business-15539350
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Interesting story. This line reminds me of issues here: "One banker told me the Greek super-rich have mostly left." One critical component of the 99% rule, Rob Peter to Pay Paul, is that you don't need Peter's consent, but you will need to lock the exits.
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As always, unexamined Keynesian type assumptions lurk in Stratfor's economic ananlyses, but the larger picture painted of a Europe unravelling bears consideration.
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The G-20 Summit Amid Escalation of the European Crisis
Five EU summits in the past two weeks have failed to stem the European financial crisis. In fact, by some measures the agreements reached have made it worse. European leaders proved unwilling to commit more of their own financial resources to the ongoing bailout program. So the European Financial Stability Facility (EFSF), which until recently claimed 440 billion euros of funding capacity and offered full guarantees for any investment in European bailouts, now will guarantee at most 25 percent. The idea is that the facility could now stretch four times as far. But as Klaus Regling, the facility’s manager, discovered during a visit to East Asia, no one is interested in investing in the EFSF if the guarantees are gone. Europe’s bailout fund has gone from a funding capacity of 440 billion euros in fairly certain cash, to at best a far lesser amount.
“Europe’s politicians are losing their ability to manage the European crisis.”
In the meantime, Greek Prime Minister George Papandreou announced plans to refer the eurozone’s bailout program for his country to a public referendum (assuming he himself survives a confidence vote on Friday). The Greeks are furious at being forced to operate under eurozone-mandated austerity, which leaves the country little hope of ever growing out from under their debt load, despite sharp write-downs negotiated as part of the bailout package. Should the Greeks vote down the bailout program, its funds will stop flowing to the country. Greece will default and be pushed, either by its own economic circumstances or by its European partners, out of the eurozone. Financial markets will shut out any other damaged states — most notably Italy — and the threat of default will repeat on a far larger scale. A meaningful bailout facility must be in place to keep the eurozone from breaking up.
If we are indeed witnessing the beginning of the end of the European project, we may also be seeing the last of the Cold War’s geopolitical support structures unwind. One of the primary reasons for the EU’s formation was to serve as the economic muscle tissue on the security skeleton of NATO. The West used those two entities to forge the political, economic and military integration needed to fight the Cold War against the Soviet Union. But just as NATO has struggled to find a reason to continue existing in the new era, the EU has discovered that without NATO eliminating competition in Europe, the idea of sharing a common foreign policy and military policy, as well as common markets and currencies, is dubious at best.
Europe’s politicians are losing their ability to manage the European crisis. A generation ago, Germany would have had no choice but to bail out Greece. But Germany is breaking free of its Cold War restrictions and has firmly resisted. A generation ago, Greece could have been made to accept the conditions of a bailout, regardless of the suffering inflicted. But the ties that bind Europe are no longer reinforced by the United States, and Greece is now at liberty to make its own decisions. A generation ago, Europeans would accept the decisions their leaders made. But with the pall of the Cold War gone, citizens across the Continent are choosing to follow nationalist inclinations at the expense of the European ideal. Nationalism isn’t creeping back into Europe — it has already arrived. It just hasn’t taken formal power yet.
The present crop of European leaders is not familiar with a world in which Europe is simply the name of the continent on which they live. Most of them will be swept out of power by the current political changes.
Only those politicians who learn to bolster their personal political standings with stances that benefit their own states will remain relevant. Case in point: French President Nicolas Sarkozy and German Chancellor Angela Merkel asserted today that no new bailout funds will flow to Greece until the results of the latter’s referendum are known. Such populist grandstanding may play well at home for a president facing a tough re-election vote this April, but it comes at the cost of nudging the Greek population to trigger a financial disaster: Greece will default far sooner if it loses its ongoing bailout support.
This is the European backdrop as the Group of 20 meets in Cannes, France on Thursday and Friday. Europe’s crisis has advanced to the degree that European structures threaten to fall apart. The resources to fix these structures are available even now, but Europeans are refusing to share what they have with each other. For the leaders coming to Cannes, the summit promises a strong dose of drama. And it may empty of Europeans, who may spend most of the G-20 summit on the sidelines, holding their own meetings in an attempt to stave off any further escalation of the crisis.
There is little that the visitors can do to help Europe if the Europeans are unwilling to help themselves; other visiting leaders at the G-20 summit can do little more than pass the time. Meanwhile, STRATFOR has to start imagining what the world might look like if Europe as we know it begins to unravel.
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Vice President of Strategic Intelligence Rodger Baker and Senior Eurasia Analyst Lauren Goodrich discuss how Russia and China are looking to exploit the European debt crisis to their advantage.
Editor’s Note: Transcripts are generated using speech-recognition technology. Therefore, STRATFOR cannot guarantee their complete accuracy.
Related Links
• In Europe’s Crisis, Russia Sees Opportunity
Colin: While Europe’s outlook is darkened by uncertainty, opportunity knocks for Russia and China as both look to seize the chance of taking advantage. Both have growing political influence and shedloads of cash, so what will they do? Welcome to Agenda, where STRATFOR’s leading analysts on Russia and China join me to discuss what Moscow and Beijing want.
Colin: With me now are Lauren Goodrich and Rodger Baker, thanks for joining me. While the Europeans sort out their mess, the Russians and the Chinese have shedloads of cash. Are there some bargains to be had in Europe? Are the Russians going to take advantage of this, do you think?
Lauren: The Russians are already taking advantage of it. The Russians are in negotiations at this time to pick up assets all across Europe, specifically in Central Europe. They are looking at things from energy firms, banks, credit unions, airports, ports… anything that gives them a strategic placement and foothold within Central Europe, something that they can use in the future. And Russia has plenty of cash to do this with. And so Russia right now is in negotiations with countries like the Czech Republic, Poland, Greece, of course, and then Italy to pick up assets.
Colin: Even Greece?
Lauren: Yes, in Greece they are picking up some of the largest assets. They are in negotiations and talks right now to pick up probably the state energy firms and maybe even Athens International Airport.
Colin: And what about the Chinese?
Rodger: The Chinese are really a lot more cautious than what we are seeing the Russians doing. The Chinese have talked about how the Europeans should get their own house in order, how the Europeans should have enough cash to do it themselves, and the Chinese are sending mixed signals depending upon what day of the week it is, depending upon which Chinese official it is. They are saying on the one hand we are willing to come in, we are willing to help out if Europe provides certain guarantees that our investments are going to be secured and that this will guarantee that the European Union and the eurozone will hold together. Or they are saying you know what, we really need to still watch, we need to see, we need to wait, we are just not so sure that Europe has its act in gear. And in some ways the Chinese get a little bit of a grand domestic PR (public relations) out of this. They get to seem the country that is the responsible economic country, at least for their home audience. They play this up, the same way they did toward the U.S. economic crisis, but in reality they are very concerned about the future of Europe.
Colin: So far they have been mostly looking at resources in terms of overseas acquisitions, but in Europe there are some big industrial companies which are probably undervalued. Do you think they have got any interest in them?
Rodger: The Chinese are looking at some of those. We have seen them show interest in the past. Things with technology, things in aerospace, in computer systems, ultimately things that would be related to dual-use technologies, they would love to get a better hold of. So they are watching those, but those are not necessarily going to be directly linked to the way in which they are looking the European investments. The Europeans are largely looking at China to invest in European bonds or to expand their purchase of European bonds, and that is where China is kind of holding back on right now.
Colin: Right and the Russians, of course, must be interested in some of European technology?
Lauren: Very much so. As far as technology, though, this is something that they have been looking into in a very long-term project. At this time though, with the crisis happening, they are looking to pick up very quick assets and things that give them political leverage. So where the Chinese seem to be doing things more financially motivated, economically motivated, or via technology, the Russians are thinking about the politics on this — how does this help them get leverage in Europe?
Colin: Can we turn this on its head for a moment? Because look at the harm that the mess in Europe is doing to China and Russia. For example, Europe is China’s biggest export market and it must be damaging the Chinese economy.
Rodger: For the last several years the Chinese economy has been struggling because of this European crisis, or in part because of the European crisis. And what it has done is it has taken a big toll on European exports, the combination of the U.S. and the European economic downturns, and that has brought to the fore inside China a very long-standing issue with the Chinese economy. The structural problems of the Chinese economy are now becoming very clear and very apparent. They have been known for a long time but they really have not been as visible.
And so we see the Chinese government in this very mixed position. On the one hand, they would really like to see the European economy just suddenly pick back up, start buying Chinese exports again and allow the Chinese simply to brush away some of these deeper reforms that are necessary, at least put them aside for a while. On the other hand, the Chinese cannot really count on this European resurgence of purchasing power anytime soon, and that means that in the end their attention is focused more on their domestic economy, on what they can do to try to not only pass themselves over this crisis but maybe use this crisis of the moment that forces them into being able to bring about economic change inside China.
Lauren: And this is very different than what we are seeing inside Russia. In Russia they are mainly worried because the Russians had counted on the Europeans to dump $100 billion in the next 3-5 years into modern technology, into the privatization programs and just in basic investment inside of the Russia. That money is not going to come anymore. Europe does not have $100 billion to dump inside Russia. So Russia is now having to revise its entire strategy for its economic future, which was supposed to be launched via these programs in the next few years. They are back to the drawing board.
But this does not mean that Russia does not have the money to do it themselves. Russia has $100 billion, Russia has $600 billion. So they have the cash to do it themselves, but the Russians tend to like to have other people pay for things before they pay for things. And so that is why they are going to have to step up if they want these programs to move forward.
Rodger: And this is an area, too, where we see the Chinese kind of keeping an eye on the Russians, because the Chinese have wanted a hand in a lot of this planned Russian privatization and sale of businesses. The Russians have been fairly reticent in allowing the Chinese in. The Chinese now see this as a potential opportunity, rather than to grab things in Europe necessarily, to grab things in Russia.
Lauren: So we could start actually seeing, probably, a strategic partnership between Russia and China economically grow. Which there is not much economic…
Colin: How likely is that?
Rodger: The Chinese really have got two big issues with the Russians. Number one, they would like to get it little bit more influence over the Russian economy overall. China continues to sit in a place where, even though it is economically much more powerful than Russia, politically it sees Russia as still having a lot more clout. China makes a lot more noise, but Russia seems to be a lot more influential, particularly in critical places for China like Central Asia, where they are pulling their resources from. Even more these days in Southeast Asia, where Russia is selling arms to, nominally, China’s opponents in Southeast Asia. This is troubling.
The second is energy, and the Russians and the Chinese go back and forth over energy prices. China wants to become a much larger consumer of Russian energy at a price much lower than what the Europeans pay. The Russians are not willing to make that deal with the Chinese.
Lauren: Which we will see if that changes because right now, as far as Russian exports, out of all of Russian exports 50 percent go to the EU. And if the EU market starts shrinking and the majority of those exports are energy, Russia has to find another market. If they have to do it at a discount then… they are going to have to do something.
Colin: Lauren what about the fallout on all of those countries that used to be part of the old Soviet Union? They went to Europe, basically, and this is where they had to be, this is the new thing for them, but now they must be looking at what is going on in Brussels and other European capitals and saying well maybe we should get closer to Russia again.
Lauren: Well the key country in that one is Ukraine. Ukraine has had a plan for 2011 to sign the very beginning steps to start a free trade agreement with Europe. It is on the shelf now, and no one in Brussels is returning Kiev’s phone calls at this time because they cannot even think about anything outside of the EU, let alone a country that Russia covets so much. The last thing Europe wants is to tick off Russia at a time that they are already in a crisis.
Colin: And President Medvedev has got, I think, trips to four European capitals this month — Rome, Athens, Berlin and Paris. So what is he up to?
Lauren: Yes. Well he is at the G-20 right now in France, he should be meeting with Sarkozy today. Next week he will be in Germany. What is interesting about the German visit, though, is that they will be discussing economics and Medvedev does have his economic team with him. But it is to launch the Nord Stream natural gas pipeline that directly connects Germany and Russia. So it is a very symbolic show of having Russia and Germany be such great partners together at a time when Europe is dividing within this crisis.
Colin: And the Chinese? They must be looking at these energy partnerships, and they need energy, and saying hey, we had better be part of this.
Rodger: They are watching energy partnerships. I think the Chinese probably will not be able to do much on the European front. Again, they are looking at being able to pull from eastern Russia and see what they can get out of that. And in some sense they hope that if the Europeans are going to continue to slow down, that will slow down the amount of energy going to Europe and require Russia to sell to them. What the Chinese are looking for is if they can see enough desperation in the European Union for Chinese money that they can exploit that.
The big thing on the table, I think, for the Chinese that they would be willing to put a lot of money down on is if the Europeans stop the arms embargo on China that they put in place in 1989, and that opens up new streams of technology for their own weapons development, for their own military improvements. That would be something for the Chinese that they would see very worthwhile to go ahead and lay down a whole load of cash.
Colin: Fascinating. Look, we will have to leave it there. Lauren and Rodger, thank you very much indeed.
Rodger: Thank you.
Colin: And that is Agenda for this week. Thanks for joining us. Bye for now.
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http://www.telegraph.co.uk/finance/financialcrisis/8872380/Goldman-euro-could-split-apart.html
Also last night, the chairman of the supervisory board of China Investment Corporation, the country’s sovereign wealth fund, put further distance between China and the eurozone bail-out, saying that Europe’s bloated welfare state meant that people did not work hard enough.
“I think if you look at the troubles which happened in European countries, this is purely because of the accumulated troubles of their worn out welfare societies,” Jin Liqun said in an interview with Al Jazeera television. “I think the labour laws are outdated – the labour laws induce sloth, indolence rather than hard working. The incentive system is totally out of whack.”
Eurozone leaders had been hoping that China would use some of its trade surplus to back the bail-out fund.
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Vice President of Analysis Peter Zeihan explains how Italian debt has become the greatest threat to the eurozone.
Editor’s Note: Transcripts are generated using speech-recognition technology. Therefore, STRATFOR cannot guarantee their complete accuracy.
The Italian government eked out a legislative victory today, but the victory was a hollow one. Only 308 of the parliament’s 630 MPs voted for the government’s budget, eight shy of a majority. The bill only passed because the opposition chose to abstain rather than defeat the budget. Italy has now taken the lead position in the contest of what can unravel the euro.
Greece, which has held that dubious honor for nearly two years, is actually now off the radar. Today the Greeks formed a national unity government that has the political authority to implement deep austerity while compartmentalizing political backlash against the system. It might not work, but it should last at least until the new year.
But today’s Italian budget vote — or more specifically the decision of several previously pro-Berlusconi deputies to abstain with the opposition — puts Italy squarely in the crosshairs.
Italy, like Greece, faces an insurmountable debt mountain. Italy, like Greece, has problems with political unity. But Italy, unlike Greece, has a leader who refuses to step aside in favor of a national unity government. Berlusconi has been at or near the top of the Italian political scene for a generation, and his People of Freedom party is his own personal political machine.
Berlusconi now has seven days to repair that machine. If he cannot muster an additional eight votes by Nov. 15, his government will fall in a scheduled confidence vote. That would push Italy into an election at a time when markets are waking up to the fact that it is not Ireland or Spain or even Greece that is the biggest threat to the eurozone. It is Italy.
Even in the worst-case scenario Greece only has about 350 billion euro of debt outstanding, most of which now is held either internally or by the European Central Bank. Italy has nearly 2 trillion euro in outstanding debt. An Italian credit cutoff would trigger a financial meltdown across Europe that would both be immediate and catastrophic.
Avoiding that would require a new Italian government without going through one of Italy’s famously destabilizing elections. In the aftermath of today’s budget vote, Berlusconi claims that he will resign after a series of austerity laws are adopted, ushering in a new unity government. Votes on those laws, however, are scheduled to be held after the confidence vote, so it’s not clear whether this is truly turning the page or simply stalling for time.
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Well, hopefully we'll kick in a godawful amount of money for them to piss away before the EU collapses. :roll:
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In the European economic crisis, all roads lead through Rome. The markets have raised the price of financing Italy's mammoth debt to new highs, and on Tuesday Silvio Berlusconi became the second euro-zone prime minister, after Greece's George Papandreou, to resign this week. His departure may keep the world's eighth largest economy solvent for the time being, but it hardly addresses the root of the problem.
In Italy, as in Greece, Spain and Portugal and eventually France, the welfare-entitlement state has hit a wall. Successive governments on the Continent, right and left, have financed generous entitlements with high taxes and towering piles of debt. Their economies have failed to grow fast enough to keep up, and last year the money started to run out. The reckoning has arrived.
If the first step in curing an addiction is to acknowledge it, there is little sign of that in Europe. The solutions on offer are to spend still more money, to have the Germans bail out everybody else, or to ditch the euro so bankrupt countries can again devalue their own currencies. France's latest debt solution includes raising corporate, capitals gains and sales taxes.
Yet Europe's problem isn't the euro. If it were, Hungary, Iceland and Latvia—none of which use the euro—would have been spared their painful days of reckoning. The same applies for Britain. Europe is in a debt spiral brought about by spendthrift, overweening and inefficient governments.
This is a crisis of the welfare state, and Italy is a model basket case. Mario Monti, who is tipped to lead a new government of technocrats, once described the Italian economy as a case of "self-inflicted strangulation." Government debt is 120% of GDP, making Italy the world's third largest borrower after the U.S. and Japan. Its economy last grew at more than 2% a year in 2000.
An aging and shrinking population is a symptom, but not a leading cause, of the eurosclerosis. A fifth of Italy's 60 million people are 65 or older and make increasingly expensive claims on state-paid pensions and other benefits. In fast-growing Turkey, only 6.3% fit that demographic. Italian women have on average 1.2 children, putting the country's birth rate at 207th out of 221 countries.
But the bulk of the responsibility lies with politicians. Mr. Berlusconi, Italy's richest man, promised a shake up each time he ran for office (in 1994, 1996, 2001, 2006 and 2008). He was the longest serving premier in post-war Italy, from 2001 to 2006, controlled parliament and could have pushed through reforms. He didn't. Promises to lower taxes and hack away at regulations and protections for Italy's powerful guilds—from taxi drivers to pharmacists to journalists—were broken.
"It is not difficult to rule Italy," Benito Mussolini once said, "it is useless." The so-called concertazione, or concert, of Italian coalition politics that brings together numerous parties in the Parliament makes for unstable and indecisive governments. So does the fear prominent in many European countries that any serious reform will provoke street protests. An unhappy byproduct of a welfare state is that it creates powerful interests that will fight to the last to preserve their free lunch, no matter the cost to the country.
But now hard choices can no longer be postponed. And the solution to Europe's debt crisis must begin with reforming, if not dismantling, the welfare state. Europe rose from the economic grave in the 1960s, it rode the Reagan-Thatcher reform wave to more modest growth in the 1980s-'90s, and it can grow again. A decade ago, Germany was called the "sick man of Europe," bedeviled by Italian-like economic problems. But a center-left coalition, supported by trade unions and German society, overhauled labor and welfare codes and set the stage for the current (if still modest) export-led revival in Germany.
The road from Rome may now lead to Paris, Madrid and other debt-ridden European countries. But this is no cause for U.S. chortling, because that same road also leads to Sacramento, Albany and Washington. America's federal debt was 35.7% of GDP in 2007, but it was 61.3% last year and is rising on an Italian trajectory. The lesson of Italy, and most of the rest of Europe, is never to become a high-tax, slow-growth entitlement state, because the inevitable reckoning is nasty, brutish and not short.
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Crisis Rewriting the Rules in Europe
Events in Europe over the past 72 hours have been nothing short of extraordinary.
“If someone is going to be able to get ahead of the crisis, it is going to be the Germans — but they are working with a tool kit that isn’t even half full.”
The International Monetary Fund, rather than asking the Russians and their $500 billion in currency reserves to help, has advised Moscow to protect itself from fallout from the European financial crisis. European government officials are no longer chastised by their peers when they publicly raise the need to eject Greece from the eurozone. European Commission officials are directly telling the Greeks and Italians what their governments should and should not look like. And in the United Kingdom there are requests that mainland Europeans finally choose someone to be in charge of everything.
If someone is going to be able to get ahead of the crisis, it is going to be the Germans — but they are working with a tool kit that isn’t even half full. They don’t want the European Central Bank (ECB) to continually support damaged states by directly purchasing sovereign debt — Berlin sees that as rewarding bad behavior. Germany’s citizens don’t support continued transfers of wealth to Southern European states. Berlin cannot force these states to implement austerity, since EU treaties guarantee their member states’ fiscal autonomy. Germany cannot even use public pressure to nudge Southern European governments to do what they think is the right thing: The public image of Germany as a bully is now so prevalent in Southern Europe that German statements often generate the opposite of their intent.
Efforts to enhance what tools there are have actually weakened existing options. During a late-October summit, eurozone leaders tried to expand the reach of Europe’s bailout fund, the European Financial Stability Facility (EFSF). The EFSF could originally access 440 billion euros of state guarantees, which the Facility uses to raise cash on private markets, funneling the money raised to states under bailout regimens. Four-hundred forty billion euros might sound like a lot. Indeed, this sum is sufficient to fund the existing bailouts of Greece, Ireland and Portugal, with enough left over to make an honest effort to support Spain. Still, no one thinks the sum is sufficient to support a bailout of Italy. The October summits thus shifted the EFSF structure to guarantee returns on only 15-30 percent of investments (the details have not yet been finalized).
Instead of attracting more funds, this has disrupted external and private interest in the EFSF to the degree that the Facility — even using full guarantees — was barely able to raise 2 billion euros this week to fund its pre-existing commitments. Far from having the capacity to bail out Italy or even Spain, the EFSF right now is unlikely to be able to handle the smaller bailouts that have already been agreed to.
Yet those larger states are still in danger, most notably Italy. Rome has 1.9 trillion euros in outstanding government debt, about 120 percent of Gross Domestic Product — proportionally twice that of Spain’s. An Italian funding shortfall, absent a much enlarged EFSF, will lead almost immediately to an Italian default. The aftereffects make it impossible to see the eurozone surviving.
Germany’s plan
Yet as the European financial crisis deepens and spreads, we are seeing the rough outlines of a German plan that uses what tools are available. States that will not agree to austerity in good times are proving somewhat more pliable as they move closer to financial catastrophe. Germany has made considerable efforts to alter both Greece and Italy in recent days.
The Germans are nudging both the Greeks and the Italians toward forming national unity governments. If successfully installed, the German hope is that these governments will be able to achieve four things.
• Full implementation of EU-mandated austerity programs. The hope is that technocratic governments can force through policies that would be political suicide for a normal, elected government.
• Constitutional amendments that would lock the states into somehow balancing their budgets. Germany needs these states to generate budget surpluses so they can whittle down their debt loads and mitigate their exposure to financial markets.
• Approval of treaty changes that will allow European institutions far more intrusive access to national procedures; the goal of which is to allow the direct rewriting of budget procedures so that these states can never again engage in what the Germans see as fiscal irresponsibility.
• Finally, Germans hope all of these things can be achieved without triggering elections. Berlin fears that any election now would be perceived in both Greece and Italy as a referendum on Europe in general, or specifically on German-inspired austerity measures, and that public rejection of Europe or austerity would bring down the entire European edifice.
That’s the plan, but there are several problems.
First, these governments must be successfully formed. Italian Prime Minister Silvio Berlusconi refuses to say on what date he will step aside. In Greece the main political parties, while eager to find someone to take the political heat for imposing austerity programs, have so far been unable to find a temporary prime minister willing to thereby end their political career.
Second, the parliament of even a technocratic government is not excused from the requirement of voting on austerity, treaty and constitutional revision packages. National unity governments sound nice, but the broad scope of changes the Germans are demanding mean that politics will not be held completely at bay.
Third, the citizens must not rebel. Europe is in an agitated state; strikes and unrest are the orders of the day. Governments — even national unity governments — seen as caving to the Germans are going to be challenged by citizens who do not wish to submit to the rules of a foreign state. The appeal for Germany of technocratic governments is that for a time they can ignore the people’s voice. Yet this approach could radicalize the populace, making it feel powerless and disenfranchised from a political process it already sees as being dominated by disconnected elites.
Fourth, changes agreed to by an interim government will not necessarily be honored by subsequent, more politically charged governments. European officials are attempting to force Greek parties to sign documents committing them to never challenge the austerity programs. So far, such efforts have been firmly rebuffed.
Finally, all of this has to happen without the markets bolting and thereby triggering immediate funding crises. This is perhaps the most dangerous catch. Germany needs these states to feel the financial heat, but too much pressure could result in financial destruction.
In the past 24 hours, Greece has struggled with the first, third and fourth problems; Italy with the first and fifth. At the time of this writing, Italian debt is trading at about 7.3 percent, nearly a full percent higher than it was a day earlier and more than the Serbian or even Namibian equivalent — and only aggressive ECB intervention this afternoon prevented a financial catastrophe.
It’s a delicate dance: Applying sufficient pressure to induce sharp changes, while the ECB provides a financial drip feed. The margin for error is very slim.
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Vice President of Analysis Peter Zeihan examines the equally unpleasant choice of monetizing the euro or letting the euro fail.
Editor’s Note: Transcripts are generated using speech-recognition technology. Therefore, STRATFOR cannot guarantee their complete accuracy.
Related Links
• Special Report: Europe’s North-South Divide on Infrastructure
• Europe’s Crisis: Beyond Finance
The Europeans are running out of tools to combat their deepening financial crisis. The bailout fund is at best compromised, European banks are degrading by the day and borrowing costs are rising week by week. One of the very few tools that remaining is something called monetization. In essence, the European Central Bank expanding the money supply to purchase distressed government debt, most notably for Italy. Monetization proponents argue that such activity would melt European debt away. The reality is not so clear-cut, and the Northern Europeans are at best leery of this option.
In the Northern European mind, monetization will not solve the core European problem — competition. Southern Europe is already non-competitive with Northern Europe. The average Southern European worker is 1/4 to 1/3 less productive than the average Northern European worker. Throwing free money at them will only make them less competitive. And for those who can remember back a few years, it’s obvious that throwing free money at Southern Europe is in a large part what caused the current debt crisis.
Instead what would be achieved is inflation. Monetization encourages consumption, which largely explains why the United States, United Kingdom and Japan have used the tool in recent years. But in the European case, it would be encouraging consumption in only part of the currency zone — in an area that is already a substantial importer. Southern Europe needs to get their consumption production in balance. Monetization does the opposite — deepening the existing imbalances while boosting inflation.
Now inflation does eat away at the relative value of debt. But it also eats away at the relative value of assets. Since Southern Europe is more debt-driven than asset-driven economy, it is easy to see why countries in the South see monetization as desirable option.
But in Northern Europe the circumstances are reversed. Northern European economies are creditors and very high-value-added, sporting massive industrial bases, highly educated work forces and excellent educational systems. Northern Europe is not high in debt — it is high credits and high in assets. And those assets are the key to Northern European income streams and Northern European political power within the EU. Monetization would directly endanger all of it. The Germans are particularly nervous about this aspect of monetization.
Monetizing Southern European debt would also have no clear chance for improving the European financial crisis. Monetization eliminates pressure upon states to reform. Case in point: the European Central Bank started buying Italian debt back in August. Italy abandoned their austerity plans in August. Unless watertight restrictions on state spending are in place before monetization begins, there is no reason for fiscal conservatism. And if those constraints are already in place, there’s no reason for monetization.
Finally, there’s demography. There is a big bulge in late-40-somethings in the German demographic with a very sharp drop off in younger population cohorts. These late-40-somethings know all the tricks of their trade — they are massively productive. They also have few bills and are at the height of their earning potential, so they are also massive creditors.
The skills and personal wealth of this group are the foundation of the current German geopolitical strategy — trade financial and economic strength to force the rest of Europe to agree to a rewiring of the EU to German preferences. And to achieve this before the demographic advantage dissolves in about 10 or 15 years, when the population bulge retries en masse.
Monetization would upend this strategy. First it would decrease competitiveness vis-a-vis Southern Europe, weakening the German leverage in reformulating Europe. Second, it would debase the assets and savings of Germany’s most economically and politically powerful demographic in favor of Southern Europeans. It is the monetary equivalent of the American government using Social Security funds to pay for services to Mexican immigrants, and expecting retirees to be ok with it.
But despite myriad disadvantages, monetization may well be emerging as the only tool that can preserve the euro, albeit in an increasingly damaging and distorted form. As Europe’s other tools fail, Northern Europe is going to be faced with a stark and painful choice — monetize and suffer the consequences, or let the euro fail and suffer the consequences.
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http://www.nytimes.com/2011/11/19/business/global/lenders-flee-debt-of-european-nations-and-banks.html?_r=1&pagewanted=all
Europe Fears a Credit Squeeze as Investors Sell Bond Holdings
Chris Ratcliffe/Bloomberg News
By NELSON D. SCHWARTZ and ERIC DASH
Published: November 18, 2011
Nervous investors around the globe are accelerating their exit from the debt of European governments and banks, increasing the risk of a credit squeeze that could set off a downward spiral.
Financial institutions are dumping their vast holdings of European government debt and spurning new bond issues by countries like Spain and Italy. And many have decided not to renew short-term loans to European banks, which are needed to finance day-to-day operations.
If this trend continues, it risks creating a vicious cycle of rising borrowing costs, deeper spending cuts and slowing growth, which is hard to get out of, especially as some European banks are having trouble meeting their financing needs.
“It’s a pretty terrible spiral,” said Peter R. Fisher, head of fixed income at the asset manager BlackRock and a former senior Treasury official in the George W. Bush administration.
The pullback — which is increasing almost daily — is driven by worries that some European countries may not be able to fully repay their bond borrowings, which in turn would damage banks that own large amounts of those bonds. It also increases the already rising pressure on the European Central Bank to take more aggressive action.
On Friday, the bank’s new president, Mario Draghi, put the onus on European leaders to deploy the long-awaited euro zone bailout fund to resolve the crisis, implicitly rejecting calls for the European Central Bank to step up and become the region’s “lender of last resort.”
The flight from European sovereign debt and banks has spanned the globe. European institutions like the Royal Bank of Scotland and pension funds in the Netherlands have been heavy sellers in recent days. And earlier this month, Kokusai Asset Management in Japan unloaded nearly $1 billion in Italian debt.
At the same time, American institutions are pulling back on loans to even the sturdiest banks in Europe. When a $300 million certificate of deposit held by Vanguard’s $114 billion Prime Money Market Fund from Rabobank in the Netherlands came due on Nov. 9, Vanguard decided to let the loan expire and move the money out of Europe. Rabobank enjoys a AAA-credit rating and is considered one of the strongest banks in the world.
“There’s a real sensitivity to being in Europe,” said David Glocke, head of money market funds at Vanguard. “When the noise gets loud it’s better to watch from the sidelines rather than stay in the game. Even highly rated banks, such as Rabobank, I’m letting mature.”
The latest evidence that governments, too, are facing a buyers’ strike came Thursday, when a disappointing response to Spain’s latest 10-year bond offering allowed rates to climb to nearly 7 percent, a new record. A French bond auction also received a lukewarm response.
Traders said that fewer international buyers were stepping up at the auctions. The European Central Bank cannot buy directly from governments but is purchasing euro zone debt in the open market. Bond rates settled somewhat Friday, with Italian yields hovering at 6.6 percent and Spanish rates around 6.3 percent; each had been below 5 percent earlier this year.
For Spain, the recent rise in rates means having to spend an extra 1.8 billion euros ($2.4 billion) annually to borrow, rapidly narrowing the options of European leaders. For Italy, every 1 percent rise in rates translates to about 6 billion euros (about $8 billion) in extra costs annually, according to Barclays Capital.
If officials simply cut spending to pay the added interest costs, they face further economic contraction at home. If they ignore the bond market, however, they could find themselves unable to borrow and pay their bills.
Either situation risks choking off growth in Europe and threatens the stability of the Continent’s banks, which would further undermine demand and business confidence in the United States and around the world.
Experts say the cycle of anxiety, forced selling and surging borrowing costs is reminiscent of the months before the collapse of Lehman Brothers in 2008, when worries about subprime mortgages in the United States metastasized into a global market crisis.
Just as American policy makers assured the public then that the subprime problem could be contained, so European leaders thought until recently that the fiscal troubles of a small country like Greece would not spread.
But after the bankruptcy last month of MF Global, spurred by its exposure to $6.3 billion of European debt, other institutions have raced to purge their portfolios of similar investments.
“This is just a repeat of what we saw in 2008, when everyone wanted to see toxic assets off the banks’ balance sheets,” said Christian Stracke, the head of credit research for Pimco.
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http://www.telegraph.co.uk/news/worldnews/europe/spain/8903054/Spain-election-Conservatives-set-to-win-landslide-victory-exit-polls-show..html
Who knows what this means now; they should have thought of that when they chose socialist leadership since 2004.
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From our Slovenian friend Andraz
http://www.voxeu.org/
hi Marc,
this is the website of the leading european financial think tank. It is quite technical at times, but basically covers everything EU at the moment of crisis.
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http://www.nationalreview.com/corner/284109/against-technocracy-andrew-stuttaford
Against Technocracy
November 25, 2011 3:20 P.M.
By Andrew Stuttaford
Writing in the Guardian, a hugely over-excited Simon Jenkins returns to the fray, wondering whether we are all “doomed” (here too,incidentally, before we all get smug, but then Derb has already explained that), before getting to this:
Emergency regimes have taken power in Greece and Italy, while Germany could not sell a third of its bonds. Salvation, according to Europe’s desperate “leader”, José Manuel Barroso, can only lie in “stronger governance in the euro area, both in discipline and in convergence”. He wants nation states to submit draft budgets of their taxing and spending to him for oversight, to be subject to Brussels’ “enhanced surveillance”.
This is more than alarming. Today’s European crisis was brought about by widespread popular revolt against the straitjacket of an unrealistic European monetary union. Barroso’s solution is apparently an even tighter straitjacket, and no nonsense about popular elections or national referendums. He wants Europe ruled by Aristotle’s aristocrats, by people like him.
Indeed that former Maoist does.
But then there’s this:
The present eulogising of technocracy, of the power of economic technique unsullied by the mob, has always been the harbinger of dictatorship. We should remember how many Britons admired the efficiency of 1930s Germany and lauded Mussolini’s trains running on time.
And let’s not forget the British intellectuals who slobbered over Stalin’s “new civilization”, another technocracy, complete with Five Year Plans.
But back to Jenkins:
Greece is now talking of a “German protectorate”. The technocrat Italian prime minister, Mario Monti, warns his people that “the management of the crisis has suffered from a deficiency of government, and must be overcome with action at a European level”. We need not reproduce the Greek magazine’s cover of a swastika on the Acropolis to shudder at the phrases “deficiency of government” and “action at a European level”. We heard those phrases before.
Consider the euphemisms. Barroso stamps on a possible Greek referendum as “a breach of trust”. In whom? The new German hegemony (which many Germans are commendably resisting) is called “enhanced co-operation”. Even a Guardian headline takes as axiomatic that a two-speed Europe is to be “feared”. Fast is synonymous with euro membership, German discipline, technocracy and progress; slow with a “peripheral”, populist democracy.
The irony here is that today’s technocrats are the dunderheads or Machiavellians (take your pick) responsible for creating the funny money that was always going to lead to a crisis much like this. Installing the oleaginous Monti, one of those responsible for steering Italy into a currency for which it was never going to be suited, is a huge bet for hope over experience.
Then again, don’t idealize the voters either: the decision to join the euro was something that most Italians supported.
What was it that someone once wrote about popular delusions and the madness of crowds?
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http://www.nytimes.com/2010/01/11/opinion/11krugman.html
The point isn’t that Europe is utopia. Like the United States, it’s having trouble grappling with the current financial crisis. Like the United States, Europe’s big nations face serious long-run fiscal issues — and like some individual U.S. states, some European countries are teetering on the edge of fiscal crisis. (Sacramento is now the Athens of America — in a bad way.) But taking the longer view, the European economy works; it grows; it’s as dynamic, all in all, as our own.
So why do we get such a different picture from many pundits? Because according to the prevailing economic dogma in this country — and I’m talking here about many Democrats as well as essentially all Republicans — European-style social democracy should be an utter disaster. And people tend to see what they want to see.
After all, while reports of Europe’s economic demise are greatly exaggerated, reports of its high taxes and generous benefits aren’t. Taxes in major European nations range from 36 to 44 percent of G.D.P., compared with 28 in the United States. Universal health care is, well, universal. Social expenditure is vastly higher than it is here.
So if there were anything to the economic assumptions that dominate U.S. public discussion — above all, the belief that even modestly higher taxes on the rich and benefits for the less well off would drastically undermine incentives to work, invest and innovate — Europe would be the stagnant, decaying economy of legend. But it isn’t.
Europe is often held up as a cautionary tale, a demonstration that if you try to make the economy less brutal, to take better care of your fellow citizens when they’re down on their luck, you end up killing economic progress. But what European experience actually demonstrates is the opposite: social justice and progress can go hand in hand.
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This just in:
Banks Build Contingency for Breakup of the Euro
http://www.nytimes.com/2011/11/26/business/global/banks-fear-breakup-of-the-euro-zone.html?_r=1&hp
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http://www.telegraph.co.uk/news/politics/8917077/Prepare-for-riots-in-euro-collapse-Foreign-Office-warns.html
Prepare for riots in euro collapse, Foreign Office warns
British embassies in the eurozone have been told to draw up plans to help British expats through the collapse of the single currency, amid new fears for Italy and Spain.
The Treasury confirmed earlier this month that contingency planning for a collapse is now under way Photo: BLOOMBERG
By James Kirkup, Deputy Political Editor
10:00PM GMT 25 Nov 2011
As the Italian government struggled to borrow and Spain considered seeking an international bail-out, British ministers privately warned that the break-up of the euro, once almost unthinkable, is now increasingly plausible.
Diplomats are preparing to help Britons abroad through a banking collapse and even riots arising from the debt crisis.
The Treasury confirmed earlier this month that contingency planning for a collapse is now under way.
A senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.
“It’s in our interests that they keep playing for time because that gives us more time to prepare,” the minister told the Daily Telegraph.
Recent Foreign and Commonwealth Office instructions to embassies and consulates request contingency planning for extreme scenarios including rioting and social unrest.
Greece has seen several outbreaks of civil disorder as its government struggles with its huge debts. British officials think similar scenes cannot be ruled out in other nations if the euro collapses.
Diplomats have also been told to prepare to help tens of thousands of British citizens in eurozone countries with the consequences of a financial collapse that would leave them unable to access bank accounts or even withdraw cash.
Fuelling the fears of financial markets for the euro, reports in Madrid yesterday suggested that the new Popular Party government could seek a bail-out from either the European Union rescue fund or the International Monetary Fund.
There are also growing fears for Italy, whose new government was forced to pay record interest rates on new bonds issued yesterday.
The yield on new six-month loans was 6.5 per cent, nearly double last month’s rate. And the yield on outstanding two-year loans was 7.8 per cent, well above the level considered unsustainable.
Italy’s new government will have to sell more than EURO 30 billion of new bonds by the end of January to refinance its debts. Analysts say there is no guarantee that investors will buy all of those bonds, which could force Italy to default.
The Italian government yesterday said that in talks with German Chancellor Angela Merkel and French President Nicolas Sarkozy, Prime Minister Mario Monti had agreed that an Italian collapse “would inevitably be the end of the euro.”
The EU treaties that created the euro and set its membership rules contain no provision for members to leave, meaning any break-up would be disorderly and potentially chaotic.
If eurozone governments defaulted on their debts, the European banks that hold many of their bonds would risk collapse.
Some analysts say the shock waves of such an event would risk the collapse of the entire financial system, leaving banks unable to return money to retail depositors and destroying companies dependent on bank credit.
The Financial Services Authority this week issued a public warning to British banks to bolster their contingency plans for the break-up of the single currency.
Some economists believe that at worst, the outright collapse of the euro could reduce GDP in its member-states by up to half and trigger mass unemployment.
Analysts at UBS, an investment bank earlier this year warned that the most extreme consequences of a break-up include risks to basic property rights and the threat of civil disorder.
“When the unemployment consequences are factored in, it is virtually impossible to consider a break-up scenario without some serious social consequences,” UBS said.
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http://www.theatlantic.com/business/archive/2011/11/will-the-eurozone-last-the-year/249202/
Will the Eurozone Last the Year?
By Steve Clemons
Nov 29 2011, 11:06 AM ET6
Ten days ago, Sean Kay, a political science professor at Ohio Wesleyan University and author of Celtic Revival? The Rise, Fall, and Renewal of Global Ireland, sent me the note below outlining Germany's options now after having failed to take the steps that might have put it in front of Europe's growing economic crisis:
One thing that is crucial to keep in mind is that the peripherals -- Ireland, Portugal and Greece -- may likely not even be worth in terms of assets the actual value that Germany and the rest of Europe and the IMF is bailing them out at, particularly if deepening recession stunts any prospects of economic growth.
Crucially, the argument for the Irish bailout (and Portugal and the first Greek tranche) was containment to stop contagion. But that was the "theory" behind it. Aggressively get Ireland early into that fold to stop the bleeding, especially to shore up German and other major bank exposure at the time.
Here's the key: that approach has clearly failed. Key to the Germans, It was not in to help those peripherals - but it instead wanted to use them to send the strongest possible messages to Italy (and Spain) about budget reform and austerity - and in both cases that has clearly failed as we are seeing the contagion nightmare unfold. What is amazing to me is that scenarios just a few week ago unthinkable now seem very possible.
1) Spin out the three peripherals - out of the Eurozone - gone, let them go, default, twist in the wind, whatever you call it - but dump them and see the capital in those states flee back to Germany as a safe haven. Use what is left as the key to leverage up Italy and protect French exposure. Then it becomes doable in the smaller Eurozone to include Italy and lets Spain make its own really hard choices and fast.
2) Spend a decade transferring North European capital to southern Europe. Not too likely - but that is what it means to "save the Eurozone" at this point.
3) Spend a decade driving down North European wages to match those in southern Europe to balance out the Eurozone wealth. Also can't see the German voters going for that.
4) Germany itself bolts the Eurozone - and then rebuilds a much smaller one around like-minded Northern neighbors, plus Italy if it can be saved.
Of course there is also the hope that it can be muddled through - but we are watching a slow motion replay of the 10 year bonds from what we saw a year ago in Ireland, and with the size of these economies and major global exposure, trying to patchwork this together - while hopefully will work, seems less and less realistic.
Kay's framework draws in part from analysis offered in July this year (pdf of "Europe on the Brink") by Peter Boone and former IMF Chief Economist Simon Johnson who have published a sobering assessment that concludes that the "Euro Area is Coming to an End."
The opener which makes clear the price Germany is now paying for not having acted more boldly sooner:
Investors sent Europe's politicians a painful message last week when Germany had a seriously disappointing government bond auction. It was unable to sell more than a third of the benchmark 10-year bonds it had sought to auction off on Nov. 23, and interest rates on 30-year German debt rose from 2.61 percent to 2.83 percent. The message? Germany is no longer a safe haven.
The reality, though, is that there are no safe havens anywhere any longer.
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STRATFOR
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November 30, 2011
CONCERNS ABOUT GERMANY'S COMMITMENT TO THE EUROZONE
The Eurogroup meeting Tuesday failed to deliver a concrete solution to the ongoing
European crisis. Jean Claude Juncker, the head of the Eurogroup, said once more that
the aim is to increase the firepower of the European Financial Stability Facility
(EFSF) by leveraging the remaining 250 euro billion guarantees to more than one
trillion euros. He suggested a broader involvement of the International Monetary
Fund in helping to solve the eurozone crisis and expressed hope that success is
near. New options were introduced at this meeting and further discussions are being
planned. But a sense of futility surrounds the EFSF, the EU flagship bailout fund.
German Finance Minister Wolfgang Schaeuble said the facility was overly complex,
implying that investors wouldn’t adopt it. Even after today's meeting, diplomats
said that it is unlikely that measures can be taken to leverage the EFSF above one
trillion euros, a sum that could allow it to fund bailouts of a limited number of
countries on the Continent for about a year. With such a dire atmosphere surrounding
these talks, a tangible outcome could not be expected, since Germany has not yet had
its demands answered. Implementing a fully funded and credible bailout mechanism
today would remove the motivation for the highly indebted peripheral economies to
accept the profound and binding fiscal controls Germany requires.
"If the eurozone were to break up, it would cause a panic that far outstrips the
fear caused by the Lehman Brothers bankruptcy. "
Negotiations on managing Europe's economic crisis are complex, and Germany seems to
be indicating that it is willing to stand by its agenda no matter how prohibitive
the cost is to the eurozone and consequently to the European Union. This stance is
what Polish Foreign Minister Radoslaw Sikorski was referring to when he said Monday
that he fears German power less than he fears German inactivity, adding that Germany
has become Europe's indispensable nation. Sikorski's statement should not be
understood as a call for greater German power. Poland would be one of the first
nations to be wary of any expansion of Berlin's sway, having struggled against being
crushed by such power for most of its history. Rather his words reflect the hope
that the core aim of the European Union -- continuing as a supranational entity that
subsumes the nationalist impulse -- can persist. Poland has been embroiled in a
constant struggle to act autonomously as a nation state located between Germany and
Russia. With the European balance of power locked up in the European Union over
several decades, Poland has been able to exist as an autonomous state and has
flourished during the last decade.
Other countries share Poland's outlook. Russia and the United Kingdom, countries
that would normally be expected to favor a fractured Continent, have urged the
Germans to simply get on with it and bail out the European periphery despite the
fact that this could mean a stronger European integration -- especially of the core
around Germany. Lately the feeling is that the endless negotiations should cease and
catastrophe should be simply averted by giving the European Central Bank (ECB) the
role of the lender of last resort. Even as German officials prepare to present next
week their latest plans to consolidate and salvage the eurozone, Berlin's commitment
to the effort remains questionable -- and it must be balanced against its implicit
threat to abandon the eurozone.
It is difficult to overstate the impact of such an outcome. If the eurozone were to
break up, it would cause a panic that far outstrips the fear caused by the Lehman
Brothers bankruptcy. Trade would likely grind to a halt as credit retreats to
safety, financial markets weather devastation and economic output withers. On the
other side of the table, sovereign nations are being asked to relegate fiscal
responsibilities to outside interests. This request has large-scale implications for
national self-determination -- a mainstay of political thought in the modern era --
and it introduces questions about the operation of national security, social welfare
and defense policy, among others.
With inflexibility on both sides of the negotiations bearing such dire consequences,
it would be reasonable to expect the European players to gravitate toward the
center. Germany has already overseen the release of multiple tranches of bailout
funds for Greece, for example, despite Greece’s failure to meet austerity targets.
Now technocrat Greek Prime Minister Lucas Papademos has signed a document agreeing
to a more advanced set of fiscal monitoring and controls in exchange for further
bailout funds. It remains to be seen how well this agreement will be implemented.
Greece has proven especially adept at circumventing regulatory and reporting
requirements, and Germany will not risk eurozone dissolution over a 10 billion euro
tranche of bailout funds. Across the Adriatic Sea sits Italy, whose troubles present
a far greater danger to the eurozone than Greece. Italy, despite having no credible
austerity program, continues to receive behind-the-scenes monetary financing from
the ECB, something the Germans publicly profess to be off the table. The German
inactivity Sikorski fears threatens the existence of the eurozone in its current
form. So far Germany has done well in its efforts to buy time and in doing so,
Berlin has shown that it is not willing to gamble away the eurozone.
Copyright 2011 STRATFOR.
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Printing money to save Euro-socialism
Last Updated: 3:40 AM, December 2, 2011
Posted: 10:33 PM, December 1, 2011
Charles Gasparino
After Wednesday’s massive stock-market rally, it looks like the world’s most sophisticated investors believe Europe is finally coming up with a solution to its sovereign-debt crisis so that economic chaos won’t be spreading across the globe.
But these same “sophisticated” investors who bid up the Dow Jones Industrial Average nearly 500 points on Euro-bailout euphoria also bid up the Dow to record levels in 2007 — betting that the big banks were safe just months before we all discovered they weren’t.
As they did then, investors misread this week’s real news: European economic policymakers (with help from those in the US) are only inching toward a bailout of countries like Italy and Spain. There’ll be plenty more ups and downs before a very imperfect solution is achieved. And, one way or another, that ultimate solution will be the bitter pill of printing money.
It’s especially bitter for the Germans — the continent’s strongest economy and de facto leader — who either recall or have been taught that printing money means lots of long-term pain, possibly like the hyperinflation of the Weimar Republic, which bred the political instability that gave rise to Hitler.
But sorry, there’s no way Europe can come up with a fix that avoids printing money. That’s the only way to “make good” on the debts run up by these welfare states.
There will be lots of gyrations along the way, as the Germans come to realize that such a massive bailout is the only way to keep the likes of Italy and Spain from default — which would lead to a worldwide banking crisis and to the political instability they fear.
The bigger problem for the Europeans is what comes next after they finish running the printing press and papering over the debts of the continent’s basket-case economies. If these countries are to avoid Third-World economic status, they’ll have to finally rein in their out-of-control welfare states. And that will be the most bitter pill for the Europeans to swallow.
For years, Europeans loved to lecture Americans on the both the safety and soundness of the continent’s banking system as opposed to our own, and how their economic system worked so much better than ours. Well, one lesson of the 2011 financial crisis is that many of their banks are probably in worse shape than the US banks were in 2008.
At least our banks’ troubled investments were tied to real estate, which may rebound once our economy improves. Their banks are holding debt tied to some of the world’s least productive, no-growth countries.
Why so underproductive? Most of the evidence points to the failure of the European welfare state.
Again, the Europeans loved to lecture Americans on how government-run health-care and cradle-to-grave entitlements provided such safety and comfort for the masses. People supposedly didn’t mind paying higher taxes because it enhanced their standard of living.
Until, of course, it didn’t enhance anything — and Greece, Italy, Spain and Portugal face the collapse of their safety nets because they can’t borrow to pay for them anymore, even as unemployment is rampant. (Meanwhile, France is not far behind.)
Privately, business people over there will concede that the vicious web of taxes and regulations makes it brutally hard for entrepreneurs to start businesses — and near-impossible for economies to grow fast enough to pay for those lavish entitlements.
You may be tempted to take some delight in Europe’s misfortunes as they basically copy our bailout methodology of running the printing press to paper over the problems. But New Yorkers’ schadenfreude shouldn’t last.
Because our city has adopted the European welfare-state model with the same disastrous results: high taxes, high unemployment and businesses leaving for somewhere else. Ironically, it’s only taxes from Wall Street’s “one percent” that keeps the city going.
Giving people what they want always comes at a price.
Charles Gasparino is a Fox Business Network senior correspondent.
Read more: http://www.nypost.com/p/news/opinion/opedcolumnists/printing_money_to_save_euro_socialism_Mc0QpUMta5nXe2YIHLNuYJ
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http://www.telegraph.co.uk/journalists/andrew-gilligan/8933457/Fiddling-as-the-euro-burns.html
Fiddling as the euro burns
It is, said the foreign minister whose country holds the EU presidency, "the edge of a precipice the scariest moment of my ministerial life."
(http://i.telegraph.co.uk/multimedia/archive/02074/Greece_2074361b.jpg)
Police assist a colleague hit by a petrol bomb in the riots in Greece in October. Further turmoil is predicted if the euro fails Photo: REUTERS
By Andrew Gilligan
9:00PM GMT 03 Dec 2011
162 Comments
The chief executives of Shell, Unilever and Phillips called it "one minute to midnight." Even the EU's own financial affairs commissioner, Olli Rehn, says Europe only has ten days to stop the euro falling apart.
By this coming Friday, the ninth of those ten days, the continent's leaders are supposed to have agreed a plan that satisfies the markets and gives their tottering currency a future. They have tried, and failed, three times this year already. A fourth failure would probably be the end. But in the Brussels corridors, with the sands fast running out, you really wouldn't know that these are perhaps the most dangerous times in Europe since the Second World War.
At the Berlaymont, the Commission HQ, on Thursday, they were proudly launching their "better airports package." "There is no Commission proposal for the auctioning of new airport capacity," explained an official. "The decision was to go ahead with liberalising the secondary trading of existing slots." Across the road the European Council, the ministerial decision making body, was busy on a resolution deciding that member states must "combat negative stereotypes regarding older persons" and demanding that "optimism has to prevail in the EU." The week before, the Commission announced a new drive to "protect our sharks," proclaiming it a "very good day, not just for European sharks, but for sharks worldwide." The sharks in question were the finned, not the financial, variety.
The European Parliament was doing a little better. Mario Draghi, the new head of the European Central Bank, addressed MEPs on ways out of the crisis. His speech was easily the most important thing said in this particular building for years. Amazingly, however, he made it to an almost empty chamber. Of the 736 MEPs, about 700 – or 95 per cent – were elsewhere. Still, never mind. They had a key meeting later on the subject of "online gambling at a policy crossroads: towards an EU regulatory approach or increased member states' co-operation?"
Parliament still teemed with people discussing the EU unitary patent and the Euro-Ukraine association deal. MEPs and their staff could still have their hair done at the "Guy Alexandre" salon. In the members' restaurant, there was honey – or rather filet de poulet avec sauce chasseur – still for tea. But as the world's most expensive ship, with its glittering passenger load of ex-social workers from Brighton and lecturers from Lower Saxony, sailed closer to the iceberg, you could hear the distinct sound of deckchair rearrangement.
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Now is the time to forge a new relationship with Europe
04 Dec 2011
It is because the EU, at all levels, has consistently failed to rise to the occasion that it now finds itself in a position where it might never pass another "better airports package" or online gambling policy crossroad; where its currency, the euro, might not reach adolescence, let alone old age; where merely declaring your support for something – optimism, say, or economic and monetary union – is no longer enough to make it succeed.
"I don't know whether we will have an EU in six months' time," says Sharon Bowles, the British Lib Dem MEP who chairs the parliament's economic and monetary affairs committee. Asked whether she meant the EU or the euro, she said: "I don't think we'll have either it's game over." Ms Bowles and the Commission's president, José Manuel Barroso, are among those pushing one of the only things which can halt the slide – the creation of "eurobonds," mutual debt instruments backed by all the euro states collectively, with the strongest standing behind the weaker ones. But both eurobonds, and any use of the European Central Bank as lender of last resort, have been blocked in the place that would have to pay for most of them, and which really makes the decisions these days: Berlin.
Along the EU's 24 miles of neutrally-carpeted corridors, in all its airport-style bars with their little high tables and chairs, there is a feeling of powerlessness and denial. Asked to sketch out what would happen if the euro went down, one top official said: "I am trying not to think about it." There are reports, including in the Economist, that commission staff have been scrabbling around for ways to protect their savings, though local banks told The Sunday Telegraph that they had seen no increase in withdrawals. The shark protection initiatives and the rest are not just the bureaucracy grinding on as usual; they are important displacement activity to take people's minds off catastrophe.
One staff member for a pro-European British MEP laughed as she played me the latest YouTube video from the European Central Bank on her smartphone: a new six-minute PR film to "celebrate" the tenth anniversary, next month, of the introduction of the euro. "Europe is more than just a place on the map," purred the commentary. "With its shared values and achievements, Europe builds bridges and inspires hope." "It's surreal, isn't it?" she said. "At a time when Europe is going back to being just a place on the map, they do this." The Germans' solution, as their chancellor, Angela Merkel, announced on Friday, is essentially to make the whole of Europe more like Germany: a fiscal Euro-superstate or, more unkindly, a financial semi-dictatorship. Euro countries' taxation and spending would be placed under much tighter control from Brussels to stop the kind of "misbehaviour" that has got Greece and Italy into trouble. The French support the idea too, though they want it to be done inter-governmentally rather than through the EU.
The EU is perhaps not the ideal organisation to enforce fiscal discipline. It is, of course, a body whose auditors have for the last 17 years running refused to sign off its own budget because of "material errors" amounting, last year, to 3.7 per cent of all its expenditure. The EU's financial control systems were, the auditors said, "only partially effective." Nearly 40 per cent of its agro-environmental aid budget, they found, went to farms on which there were no environmental problems on site or within a seven-mile radius. And the EU budget is a mere £105 billion, a minute fraction of the sums it is supposed to be supervising under the German plan.
But there are bigger problems with Berlin's idea than that. First, it will need time to take effect: time that the euro may not have. It will have to be agreed, probably with a treaty amendment, then implemented successfully, perhaps in the face of significant opposition from electorates. And even more importantly, it might be the wrong answer anyway, on its own.
The Germans believe that "the structure of the eurozone is fine, all you need to do is cure errant behaviour within it," says Philip Whyte, senior research fellow at the pro-EU Centre for European Reform (CER).
"To me, that doesn't cut it. The structure itself is badly flawed, and to compensate for those flaws they are imposing the policies of the 1930s. The only way the likes of Italy can repay their debts is to grow, but austerity is killing growth and making the problems worse." In Greece, the country furthest along the road, austerity and discipline is clearly not working; the cuts have hammered domestic demand and driven Greece even further into debt. It is hard to see how Greece can realistically stay in the euro. A Greek exit would put further pressure on Italy.
"My hunch is that [next week's] plan will fail. It is not going to be enough," says Whyte, who says there is now a "fifty-fifty" chance of the euro's collapse. "We already have a slow-motion run on the banking system in certain countries. If that starts gathering pace, and we start having TV pictures like Northern Rock, it could spread very quickly to Italy or Spain." By the end of last week, the panic had subsided a bit: Italian bond yields fell back to about 6.5 per cent. Senior figures in Brussels were sounding a bit more hopeful. "In return for her fiscal union, we are hopeful that Mrs Merkel will, at this week's summit, make some kind of movement towards allowing shorter-term fiscal relief," said one high official. "She is under pressure from a lot of countries and she does not want to be held responsible for the collapse of the euro." There is talk of essentially laundering extra bail-out money through the IMF, or turning the bail-out fund itself into a bank. Even eurobonds are hovering somewhere in the background.
Mrs Merkel is moving. For some, the key question is whether she will move far or fast enough to save the euro. But as the currency tries to couple together fundamentally divergent economies, the more important question is whether anything can save it.
Opposite the Euro-Parliament, with spectacularly bad timing, a new visitors' centre has just opened extolling the "fascinating world" of the EU. In classic fashion, it is three years late and 50 per cent over budget (a bargain £15.5 million.) There's even a souvenir shop, where you can buy euro note tissues and a wall-clock in the likeness of a one-euro coin. Sales, alas, have been slow.
Desperate-looking teenagers, dragged along by their schools, pass a long montage of pictures intended to depict Europe's journey from nationalist darkness into the EU light. The Fifties, quite a prosperous time for most, are shown as a decade of poverty and gloom, but once the EU gets going the pictures cheer up. The ones showing scapegrace Britain are mainly of riots, protests and derelict factories throughout.
"National sovereignty is the root cause of the most crying evils of our time," says a quote, in English, on one wall of the exhibition.
"The only final remedy for this supreme and catastrophic evil is a federal union of the peoples." But right by this inspiring statement, a group of Italian tourists is struggling with their state-of-the-art audioguides to get it translated into their own language: as good a demonstration as you could want of the essential fantasy of a federal union, and the enduring nature of national difference.
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EU Crisis: European Unity Versus Political Reality
European leaders arrived in Brussels on Thursday for the beginning of the eighth crisis summit this year — a summit that is being billed by journalists and politicians alike as the last chance to save the euro. Despite heightened expectations, it quickly became evident that the prevailing attitude among Europe’s heads of state as they gathered for yet another meeting was not one of confidence. This is for good reason. The impasse that European leaders find themselves at today has nothing to do with “political will” and everything to do with the political realities they each face.
In the 1990s, STRATFOR anticipated that divergent national interests would kill the concept of the European Monetary Union (EMU) before it even came into formation. We were wrong. STRATFOR also forecast that a monetary union between independent European nations would be inherently unsustainable — an assessment that has remained intact for twenty years despite the eurozone’s endurance.
In the 1990s, STRATFOR laid out what we saw as the fundamental flaws of the nascent currency union in Europe: “On the one hand, the reluctance of major powers to abdicate sovereignty to Brussels makes negotiations difficult and subject to collapse and breakdown. On the other hand, the fact that the EU contains both net creditor and debtor nations makes the creation of a single, integrated fiscal policy — the precondition for monetary union — difficult to imagine. The idea that Greece or Portugal and Norway or the Netherlands will share fiscal strategies is a bit difficult to imagine. As the EMU frays, European integration in general will be questioned.”
“A public break in the Franco-German alliance that has driven the financial crisis rescue attempts thus far would likely signal the ultimate futility of Europe’s attempt at unity.”
Fifteen years later, it is precisely this tension between national sovereignty and shared economic fate that is tearing at the institutional seams of Europe. In exchange for agreeing to come to the aid of struggling member states that have exhausted all other options, Germany is demanding treaty reforms that would entail the transfer of some degree of sovereignty over national budgets to an as-yet-to be created eurozone authority. In the lead up to the Dec. 8-9 summit, the term “transfer of national sovereignty” was used openly by the media and politicians in reference to the proposed treaty changes that would be discussed at the meeting. No matter what language is used, the concept of subordinating national sovereignty is a hard sell for a politician to make to his or her domestic public. This is particularly true for European heavyweights such as the United Kingdom and France.
One of Britain’s primary benefits from membership in the European Union is the ability to influence — and when necessary disrupt — policies that run counter to British national interests. As a non-eurozone member, the United Kingdom would be isolated from the decision-making process on financial regulations of any hypothetical eurozone authority — a risk which is unacceptable to a country whose economic strength is centered on its financial services sectors. British Prime Minister David Cameron is under increasing pressure from the hardliners within the Conservative Party — his traditionally euro-skeptic political party — as evidenced by his clarification at the summit that his main objective in attending was to ensure British national interests.
Despite the fact that France has, up to this point, supported German initiatives in hopes of ultimately running Europe in some sort of tandem with Germany, the divergent interests of the two neighbors are becoming increasingly difficult to hide. French President Nicolas Sarkozy has been attempting to walk a fine line of not openly opposing Germany’s call for treaty reforms while simultaneously asserting that France would never agree to a solution that compromised its sovereignty. With appallingly low levels of public support and presidential elections less than five months away, the last thing Sarkozy can appear to be is kowtowing to German interests. At the same time, a public break in the Franco-German alliance that has driven the financial crisis rescue attempts thus far would likely signal the ultimate futility of Europe’s attempt at unity.
The financial crisis facing the eurozone requires drastic fiscal measures — like delegation of sovereignty and sharing of debt burdens — to be applied to every country if the European Union hopes to correct its structural deficiencies. Creative fiscal machinations may buy time for the Europeans, but in the end, underlying geopolitical realities dictate that any solution that does not include a monetary and political union will be inadequate. The question of the day — at least on the domestic level — is whether some transfer of national sovereignty provides politicians with a point of deflection against criticism for the dire economic straits that lie before them or whether it makes them more vulnerable to potential nationalist backlash from a domestic constituency that is already seeing signs of tougher times ahead.
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By ROBERT BARRO
Until recently, the euro seemed destined to encompass all of Europe. No longer. None of the remaining outsider European countries seems likely to embrace the common currency. Seven Eastern European countries that recently joined the European Union (Bulgaria, Czech Republic, Hungary, Latvia, Lithuania, Poland and Romania) have announced their intention to revisit their obligations to adopt the euro.
Two non-euro members of the EU, the United Kingdom and Denmark, have explicit opt-out provisions from the common currency, and popular opinion has recently turned strongly against euro membership. In Sweden, which lacks a formal "opt-out" provision (but has cleverly refused to fulfill one of the requirements for membership), a November poll on whether to join the euro was overwhelmingly negative—80% no, 11% yes.
In light of the political response to the ongoing fiscal and currency crisis—which is leaning strongly toward a centralized political entity that will likely be even more unpopular than the common currency—I suggest that it would be better to reverse course and eliminate the euro.
When the United Kingdom debated whether to join the path to a single currency in the mid-1990s, my view was that the benefits of euro membership—enhancements for international trade in goods and services and financial transactions—were offset by required participation in its poor social, regulatory and fiscal policies. Still, I thought the U.K. should join if it could get just the common currency.
Now I think that the option of a monetary union without the rest of the baggage is an impossible dream. The single money is inevitably linked to a common central bank with lender-of-last-resort powers. This setup creates important features of fiscal union, showing up recently as bailouts in Greece, Portugal, Ireland, Italy and Spain.
The political reaction at each step of the ongoing crisis has been to strengthen this union—bailout money from the EU and the International Monetary Fund, fiscal involvement by the European Central Bank, and more EU influence on each government's fiscal policies. A common currency loaded on top of a free-trade zone is leading toward a centralized political entity.
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.Despite some scale benefits from having larger countries, the cost of forcing heterogeneous populations with disparate histories, languages and cultures into a single nation could be prohibitively high.
One legitimate counterexample is to point to the United States. It has prospered with fiscal union, despite the continuing potential for federal bailouts of state governments (such as through explicit rescue programs or the kinds of transfers contained in the stimulus package of 2009-10).
The main saving grace is that, except for Vermont, the states have long histories of balanced-budget requirements. However, with the growing unfunded programs for pensions and health care for state government workers, the balanced-budget requirements have become less meaningful. Structural fiscal problems in the U.S. federal system may eventually become as serious as those in Europe.
The EU specifies with great detail how candidate countries can qualify for euro membership, but it offers no recipe for exit or expulsion. A natural possibility would be to start by throwing out the least qualified members, based on lack of fiscal discipline or other economic criteria. Greece is an obvious candidate—it has been increasingly out of control fiscally since the 1970s. But instead of expulsion, the EU reaction has been to provide a sufficient bailout to deter the country from leaving.
A better plan is to start from the top. Germany could create a parallel currency—a new D-Mark, pegged at 1.0 to the euro. The German government would guarantee that holders of German government bonds could convert euro securities to new-D-mark instruments on a one-to-one basis up to some designated date, perhaps two years in the future. Private German contracts expressed in euros would switch to new-D-mark claims over the same period. The transition would likely feature a period in which the euro and new D-mark circulate as parallel currencies.
Other countries could follow a path toward reintroduction of their own currencies over a two-year period. For example, Italy could have a new lira at 1.0 to the euro. If all the euro-zone countries followed this course, the vanishing of the euro currency in 2014 would come to resemble the disappearance of the 11 separate European moneys in 2001.
A key issue for the transition is to avoid sharp reductions in values of government bonds for Italy and other weak members of the euro zone. After all, the issue that has prompted ever-growing official intervention in recent months has been actual and potential losses of value of government bonds of Greece, Italy and so on. Governments and financial markets worry that these depreciations would lead to bank failures and financial crises in France, Germany and elsewhere.
Worries about values of government bonds are rational because it is unclear whether—even with assistance from the center—Italy and other weak members will be able and willing to meet their long-term euro obligations. A new (or restored) system of national currencies would be more credible, because Italy should be able and willing to meet its obligations denominated in new liras. This credibility underlay the pre-1999 system in which the bonds of Italy and other euro-zone countries were denominated in their own currencies. The old system was imperfect—notably in allowing some countries to have occasionally high inflation—but it's become clear that it was better than the current setup.
My prediction is that an announcement of the new system would raise the value of German bonds, because Germany has strong individual credibility and would no longer have to care for its weak neighbors. Even Italian and other weak-country bonds are likely to rise in value because concerns about individual credibility would be offset by the improved functioning of the overall system.
The euro was a noble experiment, but it has failed. Instead of wasting more money on expanding the system's scope and developing ever larger rescue funds, it would be better for the EU and others to think about how best to revert to a system of individual currencies.
Mr. Barro is an economics professor at Harvard University and a senior fellow of Stanford University's Hoover Institution.
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European financial markets have gotten very strange. Greece's one-year government bond yield hit 376% yesterday, while Germany, Switzerland and the U.K. sold short-term debt this week at yields below 0%. That means investors are effectively paying the latter governments for the privilege of lending to them. Reuters also reported Monday that blue-chip firms like Johnson & Johnson and Pfizer are lending to struggling European banks, turning the usual creditor-debtor relationship on its head.
At this point, flying saucers over the Eiffel Tower or the Colosseum in Rome wouldn't surprise anyone.
There's a serious point here. The longer Europe's crisis lumbers on, the more distortions it creates in credit markets across Europe, not merely in the distressed South. The big uncertainties—will the euro zone break up? will the European Central Bank step in?—are causing capital to flee troubled markets for safer shores. But in the financial world, a flight to safety is a clear warning sign for both the trouble spots and the safe havens.
Take those negative sovereign yields. The governments that sell debt at below-zero rates get to borrow on hugely favorable terms. Germany joined the negative-yield club on Monday, but the Netherlands, Denmark, Switzerland and the U.K. have all seen their borrowing costs dip below zero at various points in the past few months.
The more important implication is that investors are so risk-averse that they'd rather lose a little money keeping funds with a reasonably solvent national treasury than potentially lose much more in private markets. Consider the calculation from the buyer's perspective: When yields are negative, bondholders can only make a capital gain if yields drop even further below zero.
That should have policy makers in Berlin and London quaking in their boots, not celebrating the good performance (at least by comparison) that has caused them to be perceived as safe. When yields on Japanese government bills turned negative in 1998, the radical pessimism it suggested soon proved to presage a broader economic downturn.
As for Europe's banks, the fact that they are taking loans from their clients is only one sign of their plight. Before Christmas, the ECB offered banks hundreds of billions in cheap three-year loans, but evidence since then suggests that lenders are turning around and parking that cash right back at the central bank. Banks still aren't comfortable lending to each other, and the ECB can only pick up the slack for so long.
That means it's still up to the politicians to heed the now almost-Biblical warning signs. (Plague of locusts, anyone?) Angela Merkel and Nicolas Sarkozy met in Berlin on Monday. They took their first announcement of the year as an opportunity for more sweeping promises about Europe's new fiscal pact, which will almost certainly include a tax on financial transactions among other "decisive" measures. It is time for Europe's leaders to act more like leaders and less like politicians moving step by step and going nowhere.
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Germany's Role in Europe and the European Debt Crisis
By George Friedman | January 31, 2012
The German government proposed last week that a European commissioner be appointed to supplant the Greek government. While phrasing the German proposal this way might seem extreme, it is not unreasonable. Under the German proposal, this commissioner would hold power over the Greek national budget and taxation. Since the European Central Bank already controls the Greek currency, the euro, this would effectively transfer control of the Greek government to the European Union, since whoever controls a country's government expenditures, tax rates and monetary policy effectively controls that country. The German proposal therefore would suspend Greek sovereignty and the democratic process as the price of financial aid to Greece.
Though the European Commission rejected the proposal, the concept is far from dead, as it flows directly from the logic of the situation. The Greeks are in the midst of a financial crisis that has made Greece unable to repay money Athens borrowed. Their options are to default on the debt or to negotiate a settlement with their creditors. The International Monetary Fund and European Union are managing these negotiations.
Any settlement will have three parts. The first is an agreement by creditors to forego repayment on part of the debt. The second is financial help from the IMF and the European Union to help pay back the remaining debt. The third is an agreement by the Greek government to curtail government spending and increase taxes so that it can avoid future sovereign debt crises and repay at least part of the debt.
Bankruptcy and the Nation State
The Germans don't trust the Greeks to keep any bargain, which is not unreasonable given that the Greeks haven't been willing to enforce past agreements. Given this lack of trust, Germany proposed suspending Greek sovereignty by transferring it to a European receiver. This would be a fairly normal process if Greece were a corporation or an individual. In such cases, someone is appointed after bankruptcy or debt restructuring to ensure that a corporation or individual will behave prudently in future.
A nation state is different. It rests on two assumptions. The first is that the nation represents a uniquely legitimate community whose members share a range of interests and values. The second is that the state arises in some way from the popular will and that only that popular will has the right to determine the state's actions. There is no question that for Europe, the principle of national self-determination is a fundamental moral value. There is no question that Greece is a nation and that its government, according to this principle, is representative of and responsible to the Greek people.
The Germans thus are proposing that Greece, a sovereign country, transfer its right to national self-determination to an overseer. The Germans argue that given the failure of the Greek state, and by extension the Greek public, creditors have the power and moral right to suspend the principle of national self-determination. Given that this argument is being made in Europe, this is a profoundly radical concept. It is important to understand how we got here.
Germany's Part in the Debt Crisis
There were two causes. The first was that Greek democracy, like many democracies, demands benefits for the people from the state, and politicians wishing to be elected must grant these benefits. There is accordingly an inherent pressure on the system to spend excessively. The second cause relates to Germany's status as the world's second-largest exporter. About 40 percent of German gross domestic product comes from exports, much of them to the European Union. For all their discussion of fiscal prudence and care, the Germans have an interest in facilitating consumption and demand for their exports across Europe. Without these exports, Germany would plunge into depression.
Therefore, the Germans have used the institutions and practices of the European Union to maintain demand for their products. Through the currency union, Germany has enabled other eurozone states to access credit at rates their economies didn't merit in their own right. In this sense, Germany encouraged demand for its exports by facilitating irresponsible lending practices across Europe. The degree to which German actions encouraged such imprudent practices -- since German industrial production vastly outstrips its domestic market, making sustained consumption in markets outside Germany critical to German economic prosperity -- is not fully realized.
True austerity within the European Union would have been disastrous for the German economy, since declines in consumption would have come at the expense of German exports. While demand from Greece is only a small portion of these exports, Greece is part of the larger system -- and the proper functioning of that system is very much in Germany's strategic interests. The Germans claim the Greeks deceived their creditors and the European Union. A more comprehensive explanation would include the fact that the Germans willingly turned a blind eye. Though Greece is an extreme case, Germany's overall interest has been to maintain European demand -- and thus avoid prudent austerity -- as long as possible.
Germany certainly was complicit in the lending practices that led to Greece's predicament. It is possible that the Greeks kept the whole truth about the Greek economy from their creditors, but even so, the German demand for suspension of Greek national self-determination is particularly striking.
In a sense, the German proposal merely makes very public what has always been the reality. For Greece to have its debt restructured, it must impose significant austerity measures, which Athens has agreed to. The Germans now want a commissioner appointed to ensure the Greek government fulfills its promise. In the process, the debt crisis will profoundly circumscribe Greek democracy by transferring fundamental elements of Greek sovereignty into the hands of commissioners whose primary interest is the repayment of debt, not Greek national interests.
The Judgment of Athens
The Greeks have two choices. First, they can accept responsibility for the debts on the terms negotiated and accede to the constraints on their budget and tax discretion whether imposed by a commissioner or by a less formal structure. Second, they can default on all debts. As we have learned from corporate behavior, bankruptcy has become a respectable strategic option. Therefore, the Greeks must consider the consequences of simply defaulting.
Default might see them frozen out of world financial markets. But even if they don't default, they will be present in those markets only under the most constrained circumstances, and to the primary benefit of creditors at that. Moreover, as many corporations have found, borrowing becomes more attractive after default, as it clears the way to new post-default debt. It is not clear that no one would lend to Greece after a default. In fact, Greece has defaulted on its debt several times and managed to regain access to international lending.
More significantly, defaulting would allow Greece to avoid fueling its internal political crisis by forfeiting its national sovereignty. Much of the political crisis inside of Greece stems from the Greek public's antipathy to austerity. But another part, which would come to the fore under the German proposal, is that the Greeks do not want to lose national sovereignty. In their long history, the Greeks have lost their sovereignty to invaders such as the Romans, the Ottomans and, most recently, the Nazis. The brutal German occupation still lives in Greek memories. The concept of national self-determination is thus not an abstract concept to the Greeks. Its loss plus austerity imposed by foreign powers would create a domestic crisis in which the Greek state would be seen as an economic and political enemy of Greek national interests along with the commissioner or some other mechanism. The political result could be explosive.
It is unclear if the Greeks will opt not to default. The certain price of default -- being forced to use their national currency instead of the euro -- actually would increase national sovereignty. There will be economic pain if the Greeks continue with the euro, and there will be economic pain if the Greeks leave the euro; the political consequences of losing sovereignty in the face of such pain could easily be overwhelming. Default, while painful to Greece, might well be less painful than the alternative.
The German Dilemma
The Germans are caught in a dilemma. On the one hand, Germany is the last country in Europe that could afford general austerity in troubled states and the resulting decline in demand. On the other hand, it cannot simply tolerate Greek-style indifference to fiscal prudence. Germany must have a structured solution that to some degree maintains demand in countries such as Spain or Italy; Germans must show there are consequences to not complying with the orderly handling of debt without default. Above all, the Germans must preserve the European Union so they can enjoy a European free-trade zone. There is thus an inherent tension between preserving the system and imposing discipline.
Germany has decided to make an example of the Greeks. The German public largely has bought into Berlin's narrative of Greek duplicity and German innocence. German Chancellor Angela Merkel has needed to frame the discussion this way, and she has succeeded. The degree to which the German public is aware of the complexities or the consequences of a generalized austerity for Germany is less clear. Merkel must now satisfy a German public that questions bailouts and sees Greece as simply irresponsible. Capitulation from Greece is necessary for her as a matter of domestic politics.
The German move into questions of sovereignty has raised the stakes in the debt crisis dramatically. Even if the Germans simply back off this demand, the Greek public has been reminded that Greek democracy is effectively at stake. While Greece may have borrowed irresponsibly, if the price of that behavior is yielding sovereignty to an unelected commissioner, that price not only would challenge Greek principles, it would bring Europe to a new crisis.
That crisis would be political, as the ongoing crisis always has been. In the new crisis, sovereign debt issues turn into threats to national independence and sovereignty. If you owe too much money and your creditors distrust you, you lose the right to national-self determination on the most important matters. Given that Germany was the historic nightmare for most of Europe, and it is Germany that is pushing this doctrine, the outcome could well be explosive. It could also be the opposite of what Germany needs.
Germany must have a free-trade zone in Europe. Germany also needs robust demand in Europe. Germany also wants prudence in borrowing practices. And Germany must not see a return to the anti-German feeling of previous epochs. Those are several needs, and some of them are mutually exclusive. In one way, the issue is Greece. But more and more, it is the Germans that are the question mark. How far are they willing to go, and do they fully understand their national interests? Increasingly, this crisis is ceasing to be a Greek or Italian crisis. It is a crisis of the role Germany will play in Europe in the future. The Germans hold many cards, and that's their problem: With so many options, they must make hard decisions -- and that does not come easily for postwar Germany.
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The State of the World: Germany's Strategy
By George Friedman | March 13, 2012
The idea of Germany having an independent national strategy runs counter to everything that Germany has wanted to be since World War II and everything the world has wanted from Germany. In a way, the entire structure of modern Europe was created to take advantage of Germany's economic dynamism while avoiding the threat of German domination. In writing about German strategy, I am raising the possibility that the basic structure of Western Europe since World War II and of Europe as a whole since 1991 is coming to a close.
If so, then the question is whether historical patterns of German strategy will emerge or something new is coming. It is, of course, always possible that the old post-war model can be preserved. Whichever it is, the future of German strategy is certainly the most important question in Europe and quite possibly in the world.
Origins of Germany's Strategy
Before 1871, when Germany was fragmented into a large number of small states, it did not pose a challenge to Europe. Rather, it served as a buffer between France on one side and Russia and Austria on the other. Napoleon and his campaign to dominate Europe first changed the status of Germany, both overcoming the barrier and provoking the rise of Prussia, a powerful German entity. Prussia became instrumental in creating a united Germany in 1871, and with that, the geopolitics of Europe changed.
What had been a morass of states became not only a unified country but also the most economically dynamic country in Europe -- and the one with the most substantial ground forces. Germany was also inherently insecure. Lacking any real strategic depth, Germany could not survive a simultaneous attack by France and Russia. Therefore, Germany's core strategy was to prevent the emergence of an alliance between France and Russia. However, in the event that there was no alliance between France and Russia, Germany was always tempted to solve the problem in a more controlled and secure way, by defeating France and ending the threat of an alliance. This is the strategy Germany has chosen for most of its existence.
The dynamism of Germany did not create the effect that Germany wanted. Rather than split France and Russia, the threat of a united Germany drew them together. It was clear to France and Russia that without an alliance, Germany would pick them off individually. In many ways, France and Russia benefited from an economically dynamic Germany. It not only stimulated their own economies but also provided an alternative to British goods and capital. Nevertheless, the economic benefits of relations with Germany did not eliminate the fear of Germany. The idea that economics rule the decisions of nations is insufficient for explaining their behavior.
Germany was confronted with a strategic problem. By the early 20th century the Triple Entente, signed in 1907, had allied Russia, France and the United Kingdom. If they attacked simultaneously at a time of their choosing, these countries could destroy Germany. Therefore, Germany's only defense was to launch a war at a time of its choosing, defeat one of these countries and deal with the others at its leisure. During both World War I and World War II, Germany first struck at France and then turned to deal with Russia while keeping the United Kingdom at bay. In both wars, the strategy failed. In World War I, Germany failed to defeat France and found itself in an extended war on two fronts. In World War II, it defeated France but failed to defeat Russia, allowing time for an Anglo-American counterattack in the west.
Binding Germany to Europe
Germany was divided after World War II. Whatever the first inclinations of the victors, it became clear that a rearmed West Germany was essential if the Soviet Union was going to be contained. If Germany was to be rearmed, its economy had to be encouraged to grow, and what followed was the German economic miracle. Germany again became the most dynamic part of Europe.
The issue was to prevent Germany from returning to the pursuit of an autonomous national strategy, both because it could not resist the Soviet forces to the east by itself and, more important, because the West could not tolerate the re-emergence of divisive and dangerous power politics in Europe. The key was binding Germany to the rest of Europe militarily and economically. Put another way, the key was to make certain that German and French interests coincided, since tension between France and Germany had been one of the triggers of prior wars since 1871. Obviously, this also included other Western European countries, but it was Germany's relationship with France that was most important.
Militarily, German and French interests were tied together under the NATO alliance even after France withdrew from the NATO Military Committee under Charles de Gaulle. Economically, Germany was bound with Europe through the emergence of more sophisticated multilateral economic organizations that ultimately evolved into the European Union.
After World War II, West Germany's strategy was threefold. First, it had to defend itself against the Soviet Union in concert with an alliance that would effectively command its military through NATO. This would limit German sovereignty but eliminate the perception of Germany as a threat. Second, it would align its economy with that of the rest of Europe, pursuing prosperity without undermining the prosperity of other countries. Third, it would exercise internal political sovereignty, reclaiming its rights as a nation without posing a geopolitical threat to Western Europe. After the fall of the Soviet Union, this was extended to include Eastern European states.
The strategy worked well. There was no war with the Soviets. There was no fundamental conflict in Western Europe and certainly none that was military in nature. The European economy in general, and the German economy in particular, surged once East Germany had been reintegrated with West Germany. With reintegration, German internal sovereignty was insured. Most important, France remained linked to Germany via the European Union and NATO. Russia, or what was left after the collapse of the Soviet Union, was relatively secure so long as Germany remained part of European structures. The historical strategic problem Germany had faced appeared solved.
Europe's Economic Crisis
The situation became more complex after 2008. Germany's formal relationship with NATO remained intact, but without the common threat of the Soviet Union, the alliance was fracturing over the divergent national interests of its members. The European Union had become Germany's focus, and the bloc had come under intense pressure that made the prior alignment of all European countries more dubious. Germany needed the European Union. It needed it for the reasons that have existed since World War II: as a foundation of its relationship with France and as a means to ensure that national interest would not generate the kinds of conflicts that had existed in the past.
It needed the European Union for another reason as well. Germany is the second-largest exporter in the world. It exports to many countries, but Europe is a critical customer. The free-trade zone that was the foundation of the European Union was also one of the foundations of the German economy. Protectionism in general, but certainly protectionism in Europe, threatened Germany, whose industrial plant substantially outstripped its domestic consumption. The pricing of the euro aided German exports, and regulations in Brussels gave Germany other advantages. The European Union, as it existed between 1991 and 2008, was critical to Germany.
However, the European Union no longer functions as it once did. The economic dynamics of Europe have placed many countries at a substantial disadvantage, and the economic crisis of 2008 triggered a sovereign debt crisis and banking crisis in Europe.
There were two possible solutions in the broadest sense. One was that the countries in crisis impose austerity in order to find the resources to solve their problem. The other was that the prosperous part of Europe underwrites the debts, sparing these countries the burden of austerity. The solution that has been chosen is obviously a combination of the two, but the precise makeup of that combination was and remains a complex matter for negotiation.
Germany needs the European Union to survive for both political and economic reasons. The problem is that it is not clear that a stable economic solution can emerge that will be supported by the political systems in Europe.
Germany is prepared to bail out other European countries if they impose austerity and then take steps to make sure that the austerity is actually implemented to the degree necessary and that the crisis is not repeated. From Germany's point of view, the roots of the crisis lie in the fiscal policies of the troubled countries. Therefore, the German price for underwriting part of the debt is that European bureaucrats, heavily oriented toward German policies, be effectively put in charge of the finances of countries receiving aid against default.
This would mean that these countries would not control either taxes or budgets through their political system. It would be an assault on democracy and national sovereignty. Obviously, there has been a great deal of opposition from potential recipients of aid, but it is also opposed by some countries that see it as something that would vastly increase the power of Germany. If you accept the German view, which is that the debt crisis was the result of reckless spending, then Germany's proposal is reasonable. If you accept the view of southern Europe, which is that the crisis was the result of the European Union's design, then what Germany is proposing is the imposition of German power via economics.
It is difficult to imagine a vast surrender of sovereignty to a German-dominated EU bureaucracy, whatever the economic cost. It is also difficult to imagine Germany underwriting the debt without some controls beyond promises; even if the European Union is vitally important to the Germans, German public opinion will not permit it. Finally, it is difficult to see how, in the long term, the Europeans can reconcile their differences on this issue. The issue must come to a head, if not in this financial crisis then in the next -- and there is always a next crisis.
An Alternative Strategy
In the meantime, the basic framework of Europe has changed since 1991. Russia remains a shadow of the Soviet Union, but it has become a major exporter of natural gas. Germany depends on that natural gas even as it searches for alternatives. Russia is badly in need of technology, which Germany has in abundance. Germany does not want to invite in any more immigrants out of fear of instability. However, with a declining population, Germany must do something.
Russia also has a declining population, but even so, it has a surplus of workers, both unemployed and underemployed. If the workers cannot be brought to the factories, the factories can be brought to the workers. In short, there is substantial synergy between the Russian and German economies. Add to this that the Germans feel under heavy pressure from the United States to engage in actions the Germans want to be left out of, while the Russians see the Americans as a threat to their interests, and there are politico-military interests that Germany and Russia have in common.
NATO is badly frayed. The European Union is under tremendous pressure and national interests are now dominating European interests. Germany's ability to use the European Union for economic ends has not dissipated but can no longer be relied on over the long term. Therefore, it follows that Germany must be considering an alternative strategy. Its relationship with Russia is such a strategy.
Germany is not an aggressive power. The foundation of its current strategy is its relationship with France in the context of the European Union. The current French government under President Nicolas Sarkozy is certainly committed to this relationship, but the French political system, like those of other European countries, is under intense pressure. The coming elections in France are uncertain, and the ones after that are even less predictable. The willingness of France to engage with Germany, which has a massive trade imbalance with France, is an unknown.
However, Germany's strategic interest is not necessarily a relationship with France but a relationship with either France or Russia to avoid being surrounded by hostile powers. For Germany, a relationship with Russia does as well as one with France. An ideal situation for Germany would be a Franco-German-Russian entente. Such an alliance has been tried in the past, but its weakness is that it would provide too much security to Germany, allowing it to be more assertive. Normally, France and Russia have opposed Germany, but in this case, it is certainly possible to have a continuation of the Franco-German alliance or a Russo-French alliance. Indeed, a three-way alliance might be possible as well.
Germany's current strategy is to preserve the European Union and its relationship with France while drawing Russia closer into Europe. The difficulty of this strategy is that Germany's trade policies are difficult for other European countries to manage, including France. If Germany faces an impossible situation with the European Union, the second strategic option would be a three-way alliance, with a modified European Union or perhaps outside of the EU structure. If France decides it has other interests, such as its idea of a Mediterranean Union, then a German-Russian relationship becomes a real possibility.
A German-Russian relationship would have the potential to tilt the balance of power in the world. The United States is currently the dominant power, but the combination of German technology and Russian resources -- an idea dreamt of by many in the past -- would become a challenge on a global basis. Of course, there are bad memories on both sides, and trust in the deepest sense would be hard to come by. But although alliances rely on trust, it does not necessarily have to be deep-seated trust.
Germany's strategy, therefore, is still locked in the EU paradigm. However, if the EU paradigm becomes unsupportable, then other strategies will have to be found. The Russo-German relationship already exists and is deepening. Germany thinks of it in the context of the European Union, but if the European Union weakens, Russia becomes Germany's natural alternative.
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I'm having a hard time with this URL at the moment, but the idea of German bond yields rising sounds rather ominous , , ,
http://p.nytimes.com/email/re?location=4z5Q7LhI+KVBjmEgFdYACPLKh239P3pglXYbemSNO/AX6jrpfwo+EtEc6C3/PT/lR7Qw/+lAMTlnQyK0F++W3ncf9N/siRM+YCILyr0J9gAK8Co5ZUETDNuLZg2iHWSpF1E2Q6gD6ktXm1vJFeYiB94JjypKTQKIlFSheUVpYAyecMI/IXTl9g==&campaign_id=129&instance_id=13844&segment_id=31227&user_id=52f016547a40edbdd6de69b8a7728bbf
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http://pjmedia.com/tatler/2012/03/23/a-jew-free-europe/
A Jew-Free Europe
The specter of A Jew-Free Europe has been raised again in this chilling post-Toulouse oped by Giulio Meotti:
A new exodus from the Diaspora could now take place. In the past few years, the number of French Jews immigrating to Israel has doubled. Hundreds of French Jews have bought apartments in Israel. It’s their “pied-a-terre” in case the situation gets darker in Europe.
According to the statistics available, due to aliyah and assimilation, French Jewry is projected to experience a dramatic decline from 520,000 in 2000, to 480,000 in 2020, to 380,000 in 2050, and to 300,000 by 2080. The Jewish population in the United Kingdom will also decline to 240,000 in 2020, 180,000 in 2050, and 140,000 in 2080.
Why the rise European anti-Semitism after the Holocaust? Meotti continues:
To quote psychiatrist Zvi Rex: “Europe will never forgive the Jews for Auschwitz.” Europe doesn’t want to live under the psychological burden of Auschwitz forever. The Jews are living reminders of the moral failure of Europe. This leads to the projection of guilt on Israel and the remaining European Jews.
No question.
[I wonder how Peter Beinart feels about that?-ed. He doesn't.]
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Off Drudge:
"Hollande has promised to boost France’s public education system by 60,000 employees and reduce the retirement age from 62 to 60 for people who have completed a minimum 41 years of work.
He also campaigned on a pledge to give all foreigners the right to vote in local elections in line with laws already in place for EU citizens living in France. The Socialist has said he will balance the country’s budget by 2017."
This could be our future.
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Even the left-leaning Economist writers are afraid of Hollande in France.
To think that asking a few people to take public funded retirement at 62 instead of 60 (after 41 years of that job) is even too much for them to accept shows how hard it is for people to give up benefits once they get them.
http://www.economist.com/node/21553446
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PS:
France is EXACTLY where Brock wants to take us.
It seems the idea that this is precisely why the Euro and its countries are mostly in their quagmire because of crushing social programs is apparantly BESIDES the point.
It seems to me the socialists including Brock are trying everything they can to bring a new order to capatilist societies.
How else can one explain this?
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One take is anti-incumbency,ery much like America in 2006, 2008. I understand that people were tired of Bush and anyone like him then, and Sarchozy now. I don't understand why that change has to be in the direction statism instead of freedom.
Just what the world needs is another leading nation to re-learn the failures of socialism. Didn't we already have enough data on that?
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" Didn't we already have enough data on that?"
There appears no end to voters voting themselves perks from the treasury
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Now on Drudge Oba-mao invites Hollande to WH with congratulations.
Probably standard etiquette but I can't help think behind the scenes they will give each other high fives while calling for "forward" together.
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Monday Morning Outlook
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Dead Cat Bounce for Socialism To view this article, Click Here
Brian S. Wesbury - Chief Economist
Bob Stein, CFA - Senior Economist
Date: 5/7/2012
The Social Welfare State is dying. Like the Berlin Wall and the Iron Curtain, the cradle-to-grave social welfare experiment must eventually collapse. A system of taxing work and profits, while subsidizing leisure, sloth, and retirement, must eventually fail.
The end of the Social Welfare State is painful for many, and it will not end quickly or quietly as the elections of this past weekend prove. Francois Hollande, a Socialist, was elected president of France, while Greece saw a surge in votes for “anti-bailout” political parties in parliament.
These elections are described as blows against “austerity.” They are also seen as anti-German. Germany resisted bailouts and pushed spending cuts.
In theory, a rejection of austerity could be a good thing. Some people include tax hikes in the concept of austerity and avoiding tax hikes would be a good thing for Europe. France has a top income tax rate of 45%, a wealth tax of 0.5% and a Value Added Tax (VAT) of 21.2%. Greece has a top income tax rate of 45% and a VAT of 23%. These burdensome tax rates hinder growth, investment and work effort and still don’t cover all the spending.
To solve the deficit problem, Francois Hollande wants to raise France’s top income tax rate to 75%. Greece’s “anti-bailout” parties, mostly on the left, also want higher taxes on the upscale, plus defense cuts. The Greek military helps break up domestic riots, so this is a self-serving demand.
So, in reality, French and Greek rejection of austerity does not mean policies that would enhance long term economic growth. Instead, it means they want to temporarily pull the wool over their own eyes, resist the obvious need to reduce government spending, and just hope for the best.
This chapter of the French story will not end well. The country has already gone much further along the road to socialism than the US, with general government spending equal to about 56% of GDP, very near the highest of any advanced or emerging market in the world. Greece, at 49%, is not far behind. Yet, voters are doubling down.
Markets already sense the problems this will cause. The Euro is weaker and stock prices are down around the globe. Many fear that pressure on the European Central Bank to buy more Euro debt and help avoid austerity will create inflation. This is happening despite the fact that Hollande was a huge favorite to win and this should have been built into the market already. It was the ease of victory, combined with the vote in Greece that made the day feel even more anti-market.
But even easy money would ultimately be a dead end, leading to higher interest rates and less capital investment. Anyway, the Germans would never go along with a euro as weak and inflationary as many in Greece and France want. And Germany has huge leverage: if the ECB gets too loose, only Germany could leave the euro, go back to its old currency, and not get hammered by financial markets.
In the end, this is a battle the socialists are simply not going to win. Greece is too small to be convincing; France is about to show the world what doesn’t work.
With any luck, after dabbling in folly, France will reverse course quickly. Maybe Hollande himself, not an unintelligent man, will realize the mistake of fighting the end of the social welfare state. The citizens of Europe who think austerity is unnecessary are about to get a lesson in reality. In the end the only way out is more capitalism.
And this brings us to our most important point. Financial markets in the US moved abruptly to a “risk off” trade as these election results were finalized. Stocks sold off and bonds rallied. But those who think these elections will hurt the US are wrong. The end of the social welfare state in Europe is a precursor for the US. It’s a Dead Cat Bounce for Socialism.
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" The end of the social welfare state in Europe is a precursor for the US. It’s a Dead Cat Bounce for Socialism."
And out of the ruins will arise the most free market, capatilistic, expansion of the world economy that lifts alll boats the world has ever known.
How do I know? Wesbury said so.
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The stalled economy of Europe is 50% government. If larger and larger government could cause economic growth, European countries would be swimming in it.
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"Austerity? Spending has boomed in the EU over the last decade. During the 2000s, EU member nations collectively boosted government outlays by 62%. Average government spending by EU nations today stands at about 49.2% of GDP — vs. 44.8% in 2000."
"National budgets are NOT decreasing their spending, they are increasing it," the EU says, noting that in 2011, 23 of the 27 nations in the EU increased spending. This year, 24 of 27 will do so.
Did that decade-long spending increase boost GDP growth? No. During the 2000s, average annual GDP growth in the EU fell to 1.2% from 2.2% in the 1990s.
http://news.investors.com/article/610596/201205071832/european-voters-swallow-media-myth-of-budget-austerity.htm
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1.2% growth for a decade!? - Or what our President might call a model for our economy going 'forward'.
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http://papermoneycollapse.com/2012/05/europes-voters-say-no-to-economic-reality/
Europe’s voters say ‘No’ to economic reality
BY DETLEV SCHLICHTER ON MAY 10, 2012 • 23 COMMENTS
Image by Salvatore Vuono
“Europe fights back against austerity” was how The Daily Telegraph headlined its weekend election coverage. “Anti-austerity movements are gathering pace across Europe following political earthquakes in France and Greece. A total of 12 European governments have now been dismissed in three years.”
As the European welfare state is officially in its death-throes none of us should be surprised if political strife gets cranked up to eleven. I firmly expect that we will see much more of this in the future. While I can understand the anger of the electorate and sympathize with the sense of desperation and foreboding, I can, however, not consider the electoral choices of the weekend particularly enlightened, and I do not think that they reflect a coherent, let alone intelligent strategy as the Daily Telegraph headline seems to imply. If those who ‘won’ the election deliver on their promises, economic disintegration will only accelerate. What is being offered in terms of ‘solutions’ is a dangerous assortment of economic poisons, more suitable to describe the European disease than provide a recipe for stronger growth.
Recovery through early retirement and infrastructure spending? – C’mon. Nobody can take that seriously.
But it seems that just because this heap of economic stupidity can neatly be swept under the wide tent of ‘anti-austerity’, the commentariat seems somehow willing to believe in the wisdom of the crowds and look for some deeper insights here.
I guess the reason for this is that the economic ideologies that are now being strenuously interpreted into the election results rhyme with the economic prejudices of most commentators. They, too, believe that state bankruptcy is best to be ignored or not to be taken too seriously so that we can spend our way out of this mess. For a long time media pundits have treated us to the perceived wisdom that economic growth can only come from the actions of the government. Only devaluation through euro-exit, inflation through more money printing and more government deficit-spending, preferably by the still credit-worthy Germans and then fiscally-transferred to the maxed-out Greeks, can revive the economy because only this can lift aggregate demand, the magic cure-all of economic problems.
What is lost on these commentators is that the European mess is nothing but the inevitable result of government-stipulated aggregate demand. Easy money funded the Spanish and Irish real estate booms and bankrupted their banks and by extension their governments. Easy money allowed Greece’s political class to go on a borrowing binge that has now bankrupted the country and lured large parts of the population into zero-productivity, soon-to-be-eliminated public sector jobs.
Do you still want the state to ‘stimulate’ the economy? – Be careful what you wish for.
The real culprit of high youth unemployment in Spain and Italy is not ‘austerity’, which hasn’t even started there, but a bizarrely overregulated and sclerotic labour market in which it is almost impossible for firms of a certain size to fire people. The incentives are thus stacked massively against hiring. Yet, in France one of Hollande’s election promises is not to deregulate the labour market. If I were unemployed in France I would not be counting my chances of getting a job over the next five years.
In France the state runs more than half the economy, yet Hollande promises not to privatize state-run industry. Where is the wisdom in that?
Yet, the statists and socialists are delighted. Paul Krugman, who never saw a debt crisis you could not borrow and spend your way out of, rejoices at such display of economic genius. We are all Keynesians now! Listening to Krugman you would think Greek and French voters were not using the ballot to cling desperately to some remnants of the welfare state but were in fact positively advertising the wisdom of government stimulus and the mystical ‘multiplier’.
Some of the commentators tried to argue that what happened over the weekend was also some kind of anti-establishment vote, a verdict against centralisation and the dominance of the deservedly despised bureaucratic elite in Brussels.
Nice try but I think that that is rubbish.
This was not an anti-establishment vote at all. It was not a vote for change but a desperate vote for the status quo. Of course, the old elite deserved the sack but they were largely booted out not because people got tired of the old policies but because the leadership now finally admitted that they could no longer deliver on the old promises.
The established parties lost because they could not continue upholding the false promise that had kept them in office for years or decades, the promise to make the “European model” work. They had to admit that the European welfare state was now bankrupt. Kicking the can down the road is increasingly not an option as the end of the road is now in sight.
And the election winners were those who had the chutzpah to maintain that drastic belt-tightening and painful reform were not required but that the people just had to ‘stick it to the man’, who is Angela Merkel and sits in Berlin. The tactic is straightforward. Shoot the messenger!
In France that meant voting for a charisma-free Socialist bureaucrat who will revive France with higher taxes, early retirement and a Hoover dam funded by Eurobonds and the ECB. In Greece, the big winner was an ex-Communist firebrand who admires Hugo Chavez, and who has raged against austerity measures and structural reform.
I guess we now know what the electorate is against. “Say no to cuts!” But what is it for? Over in Ireland, the deputy leader of Sinn Fein, Mary Lou MacDonald, had the answer: “A No vote (to the ‘Austerity Treaty’) in Ireland will strengthen those arguing for jobs and growth.”
Well, who could not love a politician who promises jobs and growth? But the relationship between politics and jobs and growth is a tenuous one. Politicians are not savers who fund the creation of a capital stock through saving, and they are not entrepreneurs who put that capital to productive use. Politicians are people who spend other people’s money. In Ireland the budget deficit runs at 13 percent of GDP per annum, which according to Krugman’s logic must be a fantastic recipe for jobs and growth. Let’s just sit back and watch how that economic miracle is going to unfold.
My guess is that many people in Europe still know, or at least instinctively sense, that the promises of jobs and growth through state spending and money printing are hollow. They know that the state is bust and cannot keep spending money it doesn’t have. The policy options are much more limited than the campaign rhetoric indicates. On trend, fiscal consolidation and structural reform will continue, and Germany’s negotiating position will remain strong.
Yet, on the margin this was an indication that Europe, and in particular France, remain in many areas unreformable, and that the pressure on the ECB to sustain the unsustainable with sizable money injections will, if anything, intensify.
In the meantime, the debasement of paper money continues.
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One way to look at this week's events in Greece is as George Papandreou's revenge. As Prime Minister last November, he proposed that Greeks vote on whether they could live with the conditions the EU and IMF were imposing in return for a bailout. The idea sent markets into a tizzy, Mr. Papandreou lost his job, and the referendum never occurred.
But Greek voters are having their say anyway. On Tuesday Greek President Karolos Papoulias called a new election for next month, after no party could put together a majority following this month's splintered election.
The far-left Syriza coalition, which finished second in the voting, is rejecting the bailout terms and demanding an end to fiscal restraint and economic reform. Presumably the Greeks will now have a no-holds-barred debate about the consequences of their policy choices, including possible ouster from the euro zone.
The rest of Europe may find this inconvenient, but this strikes us as progress and in any event was inevitable. That was the wisdom behind Mr. Papandreou's stillborn idea. Like every other country in the EU, Greece is still a democracy. Greek voters reserve the right to say no to Brussels, or even to elect those willing to abrogate agreements made in their names by former governments.
For decades, the European conceit has been that voters would gladly cede their national right to democratic accountability in return for Continental peace and prosperity. This worked as long as there was prosperity. But now that pan-European governance includes painful policy choices imposed from afar, the national publics want their franchise to mean something.
Angela Merkel may want to enshrine fiscal rectitude for all time in a fiscal pact. The German Chancellor may even be right as a policy matter to want to do that given that her taxpayers will otherwise have to pay. But the fatal flaw in her vision is that she can't control the course of democratic events outside Germany's borders. All the more so when she has become arguably the main issue in Greek politics, complete with demagogic posters of her in Nazi garb.
In a sense the Greeks are using their elections as a way to renegotiate the terms of their most recent €130 billion bailout by the rest of Europe. They assume that if they refuse to go along, the Germans and the European Central Bank will give in and ease the terms of fiscal retrenchment and reform.
The belief, at least on the Greek left, is that the country will be able both to stay in the euro and keep its generous welfare state, albeit with some mild adjustment. Syriza leader Alexis Tsipras is even proposing to hire 100,000 more public employees.
European leaders will be doing everyone a favor if they make clear that there is no such easy way out. If Greeks want to continue being rescued by the rest of Europe, they must meet European terms. If Greeks can't manage that, then Athens will get no more bailout cash and will have to find the money to pay its own bills.
Enlarge Image
CloseAssociated Press
Greek President Karolos Papoulias.
.And if Athens fails to do so, then default and ouster from the euro zone are likely, with all of the predictably terrible consequences for Greek living standards following the return of the drachma and devaluation. Instead of staying as part of modern Europe, Greece will slide toward a Third World future.
European leaders need to deliver this message not as a threat, but as the reality of what Greeks are risking if they reject reform. At least this is a choice Greeks will be making for themselves. The lesson will not be lost on voters elsewhere in the euro zone.
Europe's leaders can't repeal democracy on the Continent, and therefore they can't ask countries in the euro zone for more than their politicians can deliver or their populations can take. This means admitting that the bailout model that Europe adopted for Greece two years ago has failed and is increasing political polarization across Europe, and not only in Greece.
The euro zone was conceived as a currency union among countries adhering to certain basic fiscal rules. Had it stuck to that vision in this crisis—rather than turn it into a fiscal or debt union—and let Greece face the consequences of its economic mismanagement from the beginning, Greece might have defaulted and stayed within the euro.
Now so much damage has been done that it's hard to see such an outcome. Trying to turn the euro into a larger political union has put the entire euro zone in jeopardy.
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I know some of us enjoy snarky commentary about Wesbury, but at the moment his track record is quite a bit better than ours. He's a smart guy, well grounded in supply side economics, and I continue to post him because I think him well worth our time.
http://www.ftportfolios.com/blogs/EconBlog/2012/5/17/the-golden-drachma
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Economist position is that Greece's exit would be worse than shoring it up. If I were German I would say good riddance:
(Reminds me of my thoughts on Kalifornia)
http://www.economist.com/node/21555572
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Seems like a good summary of the economic turmoil in the Euro "zone":
http://www.usnews.com/opinion/mzuckerman/articles/2012/06/04/mort-zuckerman-can-the-eurozone-survive
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Should Germany Leave the Euro? To view this article, Click Here
Brian S. Wesbury - Chief Economist
Bob Stein, CFA - Senior Economist
Date: 6/18/2012
The weekend victory for the center-right keeps the Greek “austerity” plan alive and makes it less likely Greece will try to leave the Euro. It may be difficult to form a broad coalition government, but for the time being, the Greek election raises hope for market friendly reforms.
Initially, stock prices rose sharply as election results arrived. Then, as the different factions began to posture, threaten and negotiate, stocks pulled back. If Greece does not move forward with austerity, talk of it leaving the Euro may increase again. Leaving the Euro would be an unmitigated disaster for Greece and a problem for the Eurozone, but the odds of this happening are priced into the Euro already.
What isn’t priced into the Euro is the exit of another country. No, not Spain, Portugal, or Italy. We’re talking about the inner-most core of the Euro-zone: Germany.
Back in the 1990s, when the final details of the Euro were worked out, every country had a good reason to join, over and above the obvious one that it made it easier to do business across borders. France had always been jealous of “reserve-currency countries” – one used by other countries as a reserve. The UK, the US, and Germany all had that privilege and it galled the Gauls that France did not. The Euro changed this.
Many of the other countries that joined the Euro, like Italy, Greece, and Spain, got something even more important: good monetary policy. They had proven time and again that their central banks could not maintain low inflation. So why not, in effect, import tough German central bankers to run monetary policy. Germans, after all, often blamed the hyperinflation after World War I as laying the groundwork for the Nazi takeover in the early 1930s. As a result, since World War II, they had kept inflation relatively low.
Germany got something even more important when it joined the Euro: it got the other countries to treat it as a normal country again. No more guilt over WWI or II. Bygones were finally bygones, once and for all.
But now, given the trouble some other Euro-zone countries have gotten themselves into, it looks like the bargain is changing. Germany could find itself on the hook for other countries’ debts – on a persistent basis. And, if other countries have their way, the European Central Bank could be used to run an inflationary monetary policy.
In other words, the Germans may be forced to pay higher taxes and accept a debased currency in order to fund profligate social welfare spending schemes in other countries.
So why not just leave the Euro behind and go back to the Deutschemark (DM)? In the end, only a strong currency can replace a weak one. This is why the Drachma is not going to make a comeback…it would fail miserably and do nothing positive. But, for Germany, it is a different story.
If Germany left the Euro and brought back the DM, it would likely soar versus the euro. Without Germany, the Euro would be dominated by countries with a track record of loose money. While a strong DM might hurt some German exporters, the Euro is already strong relative to the dollar and the unemployment rate is only 6.7%. In other words, this is a favorable time to make the move. Meanwhile, imports would cost less and Germany would have less inflation.
German debtors (including the government) who have debt denominated in Euro’s would get a windfall gain; they would pay back debt denominated in a weak Euro with a strong DM. At the same time they wouldn’t feel as responsible for bailing out profligacy. Life would be good.
France, Italy, Spain, Portugal, and Greece would finally get to run the loose money they all want the ECB to implement anyhow, so they couldn’t complain about that. Their real problem is that Germany would no longer subsidize their spendthrift ways.
Most humiliating for the rest of Europe is that the ECB would probably want to buy German debt, denominated in DM as a reserve, while the Germans would have no need to buy the Euro-debt of the other countries to back up the new DM. So while short-sellers and pessimists try to ramp up fear of a “Grexit”…it’s a more rational German exit from the Euro that would expose the flaws and irrational behavior of tax and spend government policy. It’s way better to deal from a position of strength than from one of weakness.
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This proposition makes perfect sense. Brits don't want a monetary union. France just elected the far left. Greece, Portugal, Italy,Spain, even Ireland aren't proving worthy. Eternal bailouts do not fix underlying problems.
The original aim of the monetary union as I understood it was that membership would cause fiscal responsibility because losing that status would be unthinkable.
That was worth a try but didn't work.
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A strange comment I heard and will try to repeat / paraphrase
On PBS a couple of weeks ago John McLaughlin asked Pat Buchanan during the Queen's celebration why Monarchy survives in Europe but not here:
'There was a time in Europe when all the adventurous, free-spirited people who sought out imdividual freedoms and self rule left (for the new world) and those who preferred to be ruled stayed.'
(The EU perhaps is another iteration of rule from afar somewhat lacking in consent of the governed.)
Maybe our European friends on the board have a different view...
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http://www.michaelyon-online.com/netherlands-why-i-chose-the-gun.htm
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Theodore Dalrymple
Rejecting the European Project
Daniel Hannan’s book deserves a wide audience.
7 September 2012
A Doomed Marriage: Britain and Europe, by Daniel Hannan (Notting Hill Editions)
There is nothing quite like self-interest for blinding people to the obvious, and it is the genius of the European Union to have placed an entire cadre of powerful but blind beneficiaries—unable and unwilling to see writing on the wall, even if inscribed in flashing blue neon lights—in strategic political and economic positions in every European country. And so the continent limps toward the abyss, its “ever closer union” resuscitating old national stereotypes and antagonisms and increasing the likelihood of real conflict.
Daniel Hannan is a British Member of the European Parliament who first came to wide notice with his brief but devastating (because entirely accurate) attack in that body on Britain’s then–prime minister, Gordon Brown, who responded to it with all the wit of a hanged sheep. Hannan has now written a short and brilliant book setting forth with inexorable logic and a fine command of the salient historical and economic facts the deficiencies of the so-called European Project, from its premises to its practices—all of which are not only wrong, but obviously wrong.
Like all people with bad habits, politicians and bureaucrats are infinitely inventive when it comes to rationalizing the European Project, though they’re inventive in nothing else. Without the Union, they say, there would be no peace; when it’s pointed out that the Union is the consequence of peace, not its cause, they say that no small country can survive on its own. When it is pointed out that Singapore, Switzerland, and Norway seem to have no difficulties in that regard, they say that pan-European regulations create economies of scale that promote productive efficiency. When it is pointed out that European productivity lags behind the rest of the world’s, they say that European social protections are more generous than anywhere else. If it is then noted that long-term unemployment rates in Europe are higher than elsewhere, another apology follows. The fact is that for European politicians and bureaucrats, the European Project is like God—good by definition, which means that they have subsequently to work out a theodicy to explain, or explain away, its manifest and manifold deficiencies.
Since, as Gibbon puts it, truth rarely finds a favorable reception in the world, it is worth inquiring why so lucid and cogent a book as Hannan’s will not have the effect that it should—an answer that the book itself supplies. Here we must descend to the ad hominem, but we are dealing with men, after all.
The personal interests of European politicians and bureaucrats, with their grossly inflated, tax-free salaries, are perfectly obvious. For politicians who have fallen out of favor at home, or grown bored with the political process, Brussels acts as a vast and luxurious retirement home, with the additional gratification of the retention of power. The name of a man such as European Council president Herman Van Rompuy, whose charisma makes Hillary Clinton look like Mata Hari, would, without the existence of the European Union, have reached most of the continent’s newspapers only if he had paid for a classified advertisement in them. Instead of which, he bestrides the European stage if not like a colossus exactly, at least like the spread of fungus on a damp wall.
Corporate interests, ever anxious to suppress competition, approve of European Union regulations because they render next to impossible the entry of competitors into any market in which they already enjoy a dominant position, while also allowing them to extend their domination into new markets. That is why the CAC40 of today (the index of the largest 40 companies on the French stock exchange) will have more or less the same names 100 years hence.
More interestingly, perhaps, Hannan explains the European Union’s corruption of so-called civil society. Suppose you have an association for the protection of hedgehogs because you love hedgehogs. The European Union then offers your association money to expand its activities, which of course it accepts. The Union then proposes a measure allegedly for the protection of hedgehogs, but actually intended to promote a large agrarian or industrial interest over a small one, first asking the association’s opinion about the proposed measure. Naturally, your association supports the Union because it has become dependent on the Union’s subsidy. The Union then claims that it enjoys the support of those who want to protect hedgehogs. The best description of this process is fascist corporatism, which so far (and it is of course a crucial difference) lacks the paramilitary and repressive paraphernalia of real fascism. But as the European economic crisis mounts, that distinction could vanish. One should not mistake the dullness of Eurocrats for lack of ambition, or the lack of flamboyance for the presence of scruple. History can repeat itself, even if only analogically rather than literally.
Hannan writes from a British perspective, which I share. Whenever I read the French press on the subject of the European crisis, for example, I’m struck by how little questions
of freedom, political legitimacy, separation of powers, representative government, or the rule of law feature, even in articles by academic political philosophers. For them, the problem is mainly technical: that of finding a solution that will preserve the status quo (there is no such solution, but intelligent people searched for the philosopher’s stone for centuries).
Alas, the British political class is composed largely of careerists. The only thing that will move them to action is popular anger, which, though it exists, remains muted. One can only hope that it is not catastrophe that brings about change, but Hannan’s brilliant little book, which could hardly be bettered or, more importantly, refuted—not that anyone will try, since in the Eurocrats’ world, ignoring arguments is the highest form of refutation. A Doomed Marriage deserves the widest possible circulation. Perhaps its author could apply for a European subsidy.
Theodore Dalrymple is a contributing editor of City Journal and the Dietrich Weismann Fellow at the Manhattan Institute.
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http://www.cnbc.com/id/49162890
Spain Recoils, as Its Hungry Forage Trash Bins for a Next Meal
Published: Tuesday, 25 Sep 2012 | 1:26 PM ET Text Size By: Suzanne Daley
The New York Times
On a recent evening, a hip-looking young woman was sorting through a stack of crates outside a fruit and vegetable store here in the working-class neighborhood of Vallecas as it shut down for the night.
Getty Images
The European Union (EU) flag, left, flies alongside the Spanish national flag.
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At first glance, she looked as if she might be a store employee. But no. The young woman was looking through the day’s trash for her next meal. Already, she had found a dozen aging potatoes she deemed edible and loaded them onto a luggage cart parked nearby.
“When you don’t have enough money,” she said, declining to give her name, “this is what there is.”
The woman, 33, said that she had once worked at the post office but that her unemployment benefits had run out and she was living now on 400 euros a month, about $520. She was squatting with some friends in a building that still had water and electricity, while collecting “a little of everything” from the garbage after stores closed and the streets were dark and quiet.
Such survival tactics are becoming increasingly commonplace here, with an unemployment rate over 50 percent among young people and more and more households having adults without jobs. So pervasive is the problem of scavenging that one Spanish city has resorted to installing locks on supermarket trash bins as a public health precaution.
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A report this year by a Catholic charity, Caritas, said that it had fed nearly one million hungry Spaniards in 2010, more than twice as many as in 2007. That number rose again in 2011 by 65,000.
As Spain tries desperately to meet its budget targets, it has been forced to embark on the same path as Greece, introducing one austerity measure after another, cutting jobs, salaries, pensions and benefits, even as the economy continues to shrink.
Most recently, the government raised the value-added tax three percentage points, to 21 percent, on most goods, and two percentage points on many food items, making life just that much harder for those on the edge. Little relief is in sight as the country’s regional governments, facing their own budget crisis, are chipping away at a range of previously free services, including school lunches for low-income families.
For a growing number, the food in garbage bins helps make ends meet.
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At the huge wholesale fruit and vegetable market on the outskirts of this city recently, workers bustled, loading crates onto trucks. But in virtually every bay, there were men and women furtively collecting items that had rolled into the gutter.
“It’s against the dignity of these people to have to look for food in this manner,” said Eduardo Berloso, an official in Girona, the city that padlocked its supermarket trash bins.
Mr. Berloso proposed the measure last month after hearing from social workers and seeing for himself one evening “the humiliating gesture of a mother with children looking around before digging into the bins.”
The Caritas report also found that 22 percent of Spanish households were living in poverty and that about 600,000 had no income whatsoever. All these numbers are expected to continue to get worse in the coming months.
About a third of those seeking help, the Caritas report said, had never used a food pantry or a soup kitchen before the economic crisis hit. For many of them, the need to ask for help is deeply embarrassing. In some cases, families go to food pantries in neighboring towns so their friends and acquaintances will not see them.
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In Madrid recently, as a supermarket prepared to close for the day in the Entrevias district of Vallecas, a small crowd gathered, ready to pounce on the garbage bins that would shortly be brought to the curb. Most reacted angrily to the presence of journalists. In the end, few managed to get anything as the trucks whisked the garbage away within minutes.
But in the morning at the bus stop in the wholesale market, men and women of all ages waited, loaded down with the morning’s collection. Some insisted that they had bought the groceries, though food is not generally for sale to individuals there.
Others admitted to foraging through the trash. Victor Victorio, 67, an immigrant from Peru, said he came here regularly to find fruits and vegetables tossed in the garbage. Mr. Victorio, who lost his job in construction in 2008, said he lived with his daughter and contributed whatever he found — on this day, peppers, tomatoes and carrots — to the household. “This is my pension,” he said.
For the wholesalers who have businesses here, the sight of people going through the scraps is hard.
“It is not nice to see what is happening to these people,” said Manu Gallego, the manager of Canniad Fruit. “It shouldn’t be like this.”
In Girona, Mr. Berloso said his aim in locking down the bins was to keep people healthy and push them to get food at licensed pantries and soup kitchens. As the locks are installed on the bins, the town is posting civilian agents nearby with vouchers instructing people to register for social services and food aid.
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http://www.cnbc.com/id/49162890
Spain Recoils, as Its Hungry Forage Trash Bins for a Next Meal
Published: Tuesday, 25 Sep 2012 | 1:26 PM ET Text Size By: Suzanne Daley
The New York Times
http://www.telegraph.co.uk/finance/financialcrisis/9501771/Unilever-sees-return-to-poverty-in-Europe.html
Unilever sees 'return to poverty' in Europe
Unilever will adopt marketing strategies used in developing countries in order to drive future growth in Europe, as the head of its European business warned that poverty will rise in the region as a result of the debt crisis.
A homeless man suffering from HIV begs for money in central Athens. Photo: AFP By Szu Ping Chan
2:25PM BST 27 Aug 2012
The company behind Persil, PG Tips and Flora said it will apply lessons from its Asian business as consumers change their shopping habits amid a financial crisis that has left Greece mired in recession for the past five years and Spain with the highest unemployment rate in the industrialised world.
"Poverty is returning to Europe," Jan Zijderveld, the head of Unilever's European business told the Financial Times Deutschland in an interview.
"If a consumer in Spain only spends €17 when they go shopping, then I'm not going to be able to sell them washing powder for half of their budget."
Unilever has already started to change the way it sells some of its products. In Spain, the company sells Surf detergent in packages for as few as five washes, while in Greece, it now offers mashed potatoes and mayonnaise in small packages, and has created a low-cost brand for basic goods such as tea and olive oil.
"In Indonesia, we sell individual packs of shampoo 2 to 3 cents and still make decent money," said Mr Zijderveld. "We know how to do that, but in Europe we have forgotten in the years before the crisis."
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http://www.euronews.com/2012/10/11/greek-joblessness-hits-25-per-cent-and-rising/
One in four people in Greece are now out of work with unemployment running at a rampant 25 per cent with things likely to get worse.
The jobless rate has more than tripled since the country’s five year recession began in 2008.
Greeks are now braced for another round of searing cuts as the government prepares further austerity measures.
“Generally I don’t think that there is anything out there. It is all a joke. They have been toying with us for more than 20 years. Money exists for the few.”
The spending cuts are touching nearly all sectors of Greek life and anger continues to fester. Earlier hundreds of pupils and students congregated outside the Greek Finance Ministry to complain about a lack of school buses.
Chants of the “scoundrels drive around in limousines.” in reference to government ministers filled the air.
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http://www.telegraph.co.uk/news/worldnews/europe/greece/9626423/Malaria-returns-to-crisis-torn-Greece.html
Malaria returns to crisis-torn Greece
Malaria has returned to Greece as financial cuts contribute to the re-emergence of a once extinct disease.
Medecins Sans Frontiers is offering the sort of treatments it usually provides in sub-saharan Africa to southern Greece Photo: REUTERS
By Damien McElroy, Foreign Affairs Correspondent
6:30PM BST 22 Oct 2012
Global health bodies have issued warnings to travellers to the worst hit region in the south of the country, with fears that Athens could soon be affected.
Austerity budgets have resulted in drastic cutbacks in municipal spraying schemes to combat mosquito borne diseases.
In what is believed to be a first for Western Europe, Greece has experienced the first domestic cases of malaria since 1974.
Other mosquito-borne diseases that have slipped back into Greece include West Nile virus.
Statistics show that there were 70 instances of mosquito borne diseases in Greece in the first nine months of the year.
The vast majority were contracted abroad but more than ten per cent were caught within the country. The disease was recorded in seven regions across the country.
Scientists have warned that it is a matter of time until the disease spreads to the capital, Athens. Only eight of 56 districts around Athens undertook anti-mosquito spraying this year.
The budget squeeze is getting worse with the Greek government under pressure to find another 11 billion euros in budget cuts to secure a Europe bail-out next month.
The American Centre for Disease Control last week warned travellers that the outbreak continues to grow. Visitors to the worst hit region, Evrotas, have been advised to take antimalarial pills.
Johan Giesecke, of the European Centre for Disease Prevention and Control, said the diseases should be part of the past in Europe. He said: "It's a serious problem."
Medecins Sans Frontiers (MSF), the international charity, is offering the sort of treatments it usually provides in sub-saharan Africa to southern Greece.
"For a European country, letting this kind of situation develop and not controlling it is a big concern," says Apostolos Veizis, MSF's director of medical-operational support in Greece.
"You can't run after malaria. In a country in the European Union, we should not be running after a disease like this in emergency mode. Even in poorly-resourced countries in Africa, they have a national plan in place. What I expect from a country that is a member of the EU is at least that."
Some 16 million tourists visit Greece each year and almost none will have researched the precautions necessary to prevent mosquito borne diseases
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http://www.worldaffairsjournal.org/blog/alan-johnson/whiff-weimar-greek-crisis-gets-worse
A Whiff of Weimar: The Greek Crisis Gets Worse
25 October 2012
One of the best sources of news about the Greek social crisis has been the dispatches sent by the BBC correspondent Paul Mason. So we should pay attention when Mason decides to ring the alarm bell.
Last month, the Greek prime minister, Antonis Samaras, warned Europe that his country was on the edge of a Weimar Germany-style social collapse. What I have seen on the streets of Athens convinces me this is not rhetoric. There is a violent far-right party, its MPs committing and inciting violence with impunity; a police force that cannot or will not prevent Golden Dawn from projecting uniformed force on the streets. And a middle class that feels increasingly powerless to turn the situation round.
Is it really that bad? Yes.
How deep is the economic hole? The Greek statistics agency EL.STAT is reporting that the 2011 deficit stood at 9.4 percent of GDP and the public debt at a staggering 170.6 percent. Greece is begging the EU and IMF to release the latest tranche of aid—a staggering 31.2 billion euros ($39.7 billion). Forget trite talk of Greeks losing only their feather-bedded pensions and early retirement. The cuts are deep, the pain real, and the anger white-hot.
The neo-fascist party Golden Dawn won 6 to 7 percent of the vote in the Greek elections of May and June 2012 and is polling at twice that today, as anger rises against the economic austerity measures of the coalition government of Conservatives, Socialists and the Democratic Left.
Recently, the theater director Laertis Vassiliou saw Golden Dawn thugs shut down the play Corpus Christi, assaulting actors while the police—large numbers of whom openly support Golden Dawn—stood by and watched. Golden Dawn MP Christos Pappas was filmed “de-arresting” a demonstrator—removing him from police custody. Vassiliou caught the whiff of Weimar. “People went home with broken bones. Every day they phone me now, they phone the theatre, saying: your days are numbered,” Vassiliou said. “This was the Greek Kristallnacht.”
Why does this creeping control of the streets by Golden Dawn’s uniformed militia matter so much? The answer can be read in this prescient analysis by Leon Trotsky of the rise of fascism in Europe in the 1930s:
These [Fascist] demagogues shake their fists at the bankers, the big merchants and the capitalists. Their words and gestures correspond to the feelings of the small proprietors bogged up a blind alley. The Fascists show boldness, go out into the streets … That makes an impression on the despairing petty bourgeois. He says to himself: “The Radicals, among whom there are too many swindlers, have definitely sold themselves to the bankers; the Socialists have promised for a long time to abolish exploitation but they never pass from words to deeds, the Communists one cannot understand at all—today it is one thing tomorrow another; let’s see if the Fascists cannot save us.”
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BARCELONA, Spain—This vibrant northern region of Catalonia has long been known as the "factory of Spain" for generating wealth that helped sustain the entire nation. Now Catalonia, beaten down by years of recession, has become the battleground in what threatens to become an economic civil war.
In protests large and small, hundreds of thousands of Catalans are embracing a stark proposition: Only by breaking ties with Spain and becoming an independent country can Catalonia free itself from economic malaise.
Catalans go to the polls Nov. 25 for a regional parliamentary election, and polls show pro-independence parties in front.
"Madrid has been draining us dry for too long," says Josep Casadella, a corporate human-resources administrator. He became an Internet sensation not long ago after posting a video of himself refusing to pay the fare at a toll booth and complaining that Spain should build free roads for all the taxes it collects.
The region's president, Artur Mas, has called the marriage between Catalonia and Spain's capital one of "mutual fatigue." He has pledged to place an independence referendum before voters.
Appalled at the separatist sentiment, a military veterans' association said that politicians pushing for Catalonian independence should be tried for "high treason." In recent days, pro-Spanish-unity protesters held a smaller demonstration of their own. Marchers held a sign reading: "Help, Europe. Nacionalists are crazy."
Spain's internal struggle echoes a larger debate convulsing the euro zone itself, as wealthier northern nations complain about supporting poorer southern ones. But now, as Europe enters its fifth year of crisis, the economic strains are deepening the fractures within some nations. In Spain and Belgium, and to a degree Italy, local and national governments are battling over how to allocate scarce resources. Even within Germany, which is economically stronger and politically stable, richer areas are grumbling about the cost of subsidizing the poorer areas.
Catalonia's president, Artur Mas, called the marriage between his region and the Spanish capital one of "mutual fatigue" in a speech, likening it to the way "northern and southern Europe have grown weary of one another."
Cultural and linguistic variances within many EU countries only make matters worse. Catalonia itself is a prime example: Its own language is widely spoken and instilled in younger generations as the main language in most elementary schools.
Throughout the continent "there are some very long-standing strains and tensions of unequal regional economic development that are now being brought to the surface," says Adrian Smith, editor of the journal European Urban and Regional Studies.
Catalonia's turmoil represents a major threat to European leaders' hope of containing Europe's crisis by stabilizing Spain, which is home to the euro zone's fourth-largest economy but is also vying with Greece for the highest unemployment rate in the euro zone, around 25%. Policy makers had hoped that EU aid would keep Spain afloat while investors digest losses in Greece, which is even more troubled. Spain's financial markets are quivering at the mere talk of secession of Catalonia, which produces almost 19% of Spain's economic output and 21% of its taxes. Investors fear the revolt will undermine Prime Minister Mariano Rajoy's plan to get a grip on spending, particularly in the 17 regional governments that have been a big source of Spain's deficit.
If pro-independence parties triumph at the ballot box in next month's regional election, Catalonia's leader, Mr. Mas, will face pressure to make good on a vow to place an independence referendum before voters. National authorities say that would be illegal. Mr. Mas studiously avoids the word "independence" to define his goal. Some analysts believe he would satisfied simply with a more favorable revenue-sharing deal. Meanwhile, impelled by swelling support for secession, he has become bolder, asserting publicly several times that "Catalans demand the instruments of State."
"We are convinced that an independent Catalonia is perfectly viable economically," says Albert Carreras, Catalonia's finance secretary. "Rather, we question whether Spain is viable if Catalonia were independent."
Further muddying the Spanish political picture, pro-independence groups in Basque Country—another region where separatist sentiment is strong—won control of parliament there in elections Oct. 21.
Outside of Spain, Belgium faces the biggest separatist strain. There, a vibrant separatist movement in the wealthier, Dutch-speaking Flanders wants to cut ties with poorer, French-speaking Wallonia. For the moment, a political impasse has been avoided by formation of a coalition government that excludes the separatist N-VA party, even though it won the most votes. Still, local elections this month only heightened tensions. The N-VA's leader, Bart de Wever, won the mayoral race in Antwerp, the country's second-largest city, and used his acceptance speech to call for more independence. "Your government does not have the support of Flanders," he told Prime Minister Elio Di Rupo, who hails from Wallonia.
In Italy, as in Spain, the regional spats are partly rooted in precrisis deals that gave regional governments more spending authority, but without more responsibility to raise revenue, says Alberto Alesina, a Harvard University economist. "All that people are talking about are enormous scandals and wasting of money at the regional level," says Mr. Alesina. In Italy, he says, the south is the bigger culprit but says the north is hardly blameless.
When the southern island of Sicily recently needed a €400 million transfer, or about $520 million, from the central government to continue paying its bills, Northern Italians grumbled about claims of payroll-padding there. They cited as an example the island's 27,000-strong corps of forest rangers hired during the fire season. Sicily is roughly the size of Massachusetts.
In Spain, financial woes are putting the union on the rocks. In August, Catalonia said it would seek a €5 billion bailout from the national government to make debt payments. Catalan officials say they would have no need for budget-cutting or bailouts if the central government were distributing tax revenue fairly. Some 43 cents of every euro Catalonia pays in taxes doesn't come home, according to data compiled by the Catalonia government.
Underlying the grievances is Catalans' image of themselves as a hardworking, thrifty people, "the Germans or Lutherans of Spain," says sociologist Enrique Gil Calvo, who was born in a neighboring northern region. Residents of Catalonia, about three-quarters of whom speak Catalan, are openly scornful of what they consider to be the indolence of southern Spaniards. People from Madrid, for their part, poke fun at what they perceive to be Catalans' workaholic, stingy nature. The discovery of copper wire, one joke goes, came about as a result of two Catalans engaging in a tug of war over a penny.
The debate is no laughing matter to Catalan independentistas, as the secession supporters are known. They view themselves as patriots "just like George Washington," says Jaume Vallcorba, a businessman who heads a pro-independence group, Fundacio Catalunya Estat.
As an independent nation, Catalonia would have GDP per capita of €30,500, which would rank it seventh in the European Union, just behind Denmark and ahead of Germany, Mr. Vallcorba's group says in its presentation. He adds that Catalonia's exports to the rest of the world recently surpassed its sales to the rest of Spain.
Spain's prime minister, Mr. Rajoy, termed the Catalan independence push "madness of colossal proportions" in a speech this month. In a briefing, a senior official in Madrid said that Catalans conveniently overlook help they get from the national government, such as the billions of euros being used to bail out a locally run savings bank.
Even some Catalans think the independentistas "are painting a picture that is prettier than the reality would be," says José María Gay de Liébana, an economist at the University of Barcelona who can trace his Catalan lineage to the Middle Ages. How, he asks, would Catalonia's already indebted and deficit-ridden government shoulder the added economic burden of opening embassies all over the world, creating its own police and customs agencies, and possibly an army?
Mr. Gay de Liébana adds that Catalonia would have to assume a reasonable share of Spain's national debt, perhaps as much as €200 billion. And he wonders whether the breakaway nation would ever be accepted into the EU, particularly in the face of certain opposition from Spain. "People would say we abandoned the ship when things got tough, instead of rowing together," he says.
As Spain's economy sinks further into recession, however, more people seem willing to take the plunge to independence. "There are many people who didn't favor independence a couple of years ago, who now view it as our only hope," says Laia Serrano, an economist who last year formed a nonprofit group, BarcelonActua, to help the growing number of recession victims.
On a recent Thursday night, she had set up a soup kitchen on a downtown Barcelona street where about 60 people lined up for meal boxes. One 78-year-old retiree said the situation reminded him of waiting for ration tickets in the hard years after the Spanish Civil War of the 1930s.
"Everyone says that independence will mean more jobs, so we have to support it," said another man, who said he was 35 years old and unemployed for four years.
Clashes with central authority are a recurring theme in Catalan history. In the 18th-century War of Spanish Succession, Spain's Bourbon king, Philip V, crushed Catalan forces who had cast their lot with his Austrian rival. Later, during the Civil War, Catalonia was a stronghold of resistance to another strongman, Gen. Francisco Franco, who would harshly suppress Catalan culture during his four-decade dictatorship.
Perhaps because Catalonia couldn't count on much support from central authorities, an aggressive spirit of entrepreneurship flourished. "Catalonia was globalized before anyone knew what that meant," says Salvador Cardús i Ros, a political writer. Even in the 19th century, he notes, a distinctively Catalan product, the tangy sausage butifarra, was marketed abroad and manufactured with machinery from Germany, meat from Northern Europe and spices from Asia. Today Barcelona is home to international heavyweights such as Mango MNG Holding SL, the women's fashion retailer, and Grupo Planeta, the dominant publisher in Spain and Latin America.
Catalonia is a big tax contributor to the central government. But officials in Barcelona complain the money isn't redistributed fairly. The annual deficit between what Catalonia pays in taxes and what it gets back from Madrid represents about 8% of Catalonia's total output, roughly €16 billion, Catalonian officials calculate.
Catalans complain that, as a consequence of underinvestment, their local roads and infrastructure is inferior to that in poorer parts of Spain. "We have to choose between using public roads that are dangerous, or toll roads that are expensive," says Manel Xifra, president of Comexi, a packaging-machinery company with €100 million in revenue. In Catalonia, toll roads make up almost three times the proportion of the regional highway system as they do in the region of Madrid—a smaller geographical area, but one that is roughly similar in GDP and population.
He also complains that national officials have dallied for years in making a logistically important investment to connect Barcelona's port to its train line. And that Barcelona's airport provides too few international flights, forcing transfers when he travels for business.
Some Catalan executives, though, are worried about the impact of the independentistas on business. Jose Manuel Lara, the chief of Grupo Planeta, recently told a radio interviewer that much of the company's operations would need to be transferred out of Catalonia if it seceded, because it wouldn't make sense for a Spanish language publisher to be based in a region where Catalan was the official language.
To cover its expenses, Catalonia's government has ratcheted up the top marginal income-tax rate to 56%. That is the highest in Spain, and only a hair below Sweden, at 56.6%.
"You can't tolerate a Swedish level of taxes and African level highways," says Xavier Sala-i-Martín, a Catalan economist who teaches at Columbia University and who says he is "pro choice," supporting the Catalans' effort to determine their future democratically.
Catalonia's frustrations surged to the forefront during a Sept. 11 independence rally that drew more than one million demonstrators. Rosa Maria Sastre, an 81-year-old retiree, was too infirm to join the independentistas, so her granddaughter marched carrying a poster-size photograph of Mrs. Sastre. "We'd been waiting a long time to send a message," Mrs. Sastre says.
On both sides, ardor is rising. The mayor of the Catalan city of Vic recently draped the red-and-yellow striped Catalan banner on the balcony of the historic municipal hall there. A few nights later, vandals climbed up and burned the flag to cinders.
—Frances Robinson and David Román contributed to this article.
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http://hotair.com/archives/2012/11/15/its-official-eurozone-back-in-recession/
It’s official: Eurozone back in recession
posted at 10:31 am on November 15, 2012 by Ed Morrissey
If you feel down about the American economy, perhaps a look across the pond will have you counting your blessings. Reuters reports that the Eurozone fell into an official recession last quarter, even though France and Germany had rebounded all the way back to a growth rate of, er … 0.2% (via OTB):
The debt crisis dragged the euro zone into its second recession since 2009 in the third quarter despite modest growth in Germany andFrance, data showed on Thursday.
The two leading economies both managed 0.2 percent growth in the July-to-September period.
But the resilience could not save the austerity-hit 17-nation bloc from overall contraction as the likes of The Netherlands, Spain, Italy and Austria shrank.
Economic output in the euro zone fell 0.1 percent in the quarter, following a 0.2-percent drop in the second quarter.
Those two quarters of contraction put the euro zone’s 9.4 trillion euro ($12 trillion) economy in recession, although Italy and Spain have been contracting for a year already and Greece is suffering an outright depression.
Of course, this isn’t good news, even comparatively speaking. We depend on demand from Europe for our own economy, and a recession there — even a mild one — will have a negative impact on the American economy. There is never a convenient time for that, but we’re on the precipice of the fiscal cliff at the moment, and most of our solutions to that depend on being able to generate robust growth in the near future.
What’s most troubling is the slow growth of the two central national economies within the EU. The resolutions on the table for the Eurozone debt crisis relies on Germany and France to supply enough support to allow nations like Greece, Spain, Portugal, and Italy to apply austerity measures to get their debt ratios under control. That low GDP growth rate in the core doesn’t provide much confidence that Germany and France can remain committed to that kind of support for the long run, especially with France driving entrepreneurs away with its new Socialist tax policies.
At some point, the Germans and French citizens will tire of having their production dedicated to rescuing less disciplined neighbors on the Continent. When that day comes, the Atlantic will not protect us from the shock waves — which is why it’s more urgent than ever for the US to get its own fiscal house in order.
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A tangential observation if I may; the Germans' export driven model has had as an indespensible element the financing of purchases by the uncreditworthy.
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http://finance.yahoo.com/news/greece-jobless-rate-26-percent-105437202.html
Greece jobless rate up to 26 percent
Greece jobless rate up to 26 percent as recession continues
ATHENS, Greece (AP) -- Greece's unemployment rate rose to 26 percent in September, as the country heads toward a sixth year of recession.
The Greek Statistical Authority announced Thursday that 1.295 million people were recorded as being unemployed in September — pushing up the jobless rate up from 25.3 the previous month and 18.9 percent a year earlier.
The number of people employed stood at 3,695,053 while another 3,373,692 were listed as financially inactive, according to a statement with September data.
Greek unemployment has surged as a result of harsh austerity measures imposed in return for international rescue loans. The Bank of Greece forecast this week that the country's gross domestic product would contract by more than 6 percent this year, and by a further 4-4.5 percent next year.
..
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Greece jobless rate up to 26 percent
Greece jobless rate up to 26 percent as recession continues
"Good thing this can't happen here"
Depends on what one means by the term "jobless". Maybe it already did.
U.S. workforce "non-participation" rate, 2012: 36%
http://www.bls.gov/news.release/empsit.t02.htm
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http://blogs.the-american-interest.com/wrm/2012/12/05/businesses-fleeing-greece/
December 5, 2012
Business Flees Greece for Safer Pastures
Greece is entering the latest stage of its long decline, as businesses flee the country and move their headquarters away from the collapsing country. Those businesses that choose to remain not only face rising taxes and increased regulations; they are also risking credit downgrades for the simple fact that they are located in Greece. Coca-Cola’s Hellenic branch and yogurt company Fage (known for its distinctive Greek yogurt) have already moved their headquarters elsewhere, and other businesses are considering following suit. The Washington Post has the story:
For workers on the production line like [Marios] Vrachnakis, 52, the movements are yet another sign that their futures are crumbling. Fage, which makes the yogurt labeled as Total in the United States, benefited from the good years in Greece, he said, but it’s escaping the rough ones, since it will avoid the rapidly shifting tax situation and the instability of the grinding austerity measures that every month seem to bring new pain.
“We must all be patriotic,” companies included, he said. “All Greeks must contribute to save the country.”
But the country’s biggest, healthiest businesses have the most to gain by moving their headquarters elsewhere. Many economists say the prospect of a Greek revival remains in doubt, in part because of the churning cycle that is driving companies away. So long as the threat of being pushed out of the 17-nation euro zone remains real, few investors can be secure about getting payouts in euros, not drachmas. And as companies pull back, the country becomes even more difficult to save.
Credit costs more in Greece these days, thanks to the crippled Greek banking industry and investor fears that loans made in euros will be repaid in drachmas if Greece leaves the eurzone before the loans come due; companies who move their headquarters out of Greece can save get more credit at a cheaper price. Perversely, European policy is creating incentives for companies to shift business away from Greece, further undermining the fragile economy.
Greece’s troika of lenders recently agreed on terms for a bailout-payment that will enable the Mediterranean nation to continue using the euro, for now. As a result, some Greeks are attempting to keep a positive outlook, saying that Greece can count on agriculture and tourism at to help it stay afloat (ignoring the fact that neighbors like Turkey and Bulgaria are cheaper alternatives in these sectors). But the combination of austerity and massive business flight will make it extremely difficult for Greece to deal with its unemployment crisis and is likely to make the situation worse.
Unless this dynamic changes—and quickly—Greece is set up for failure, bailout or no.
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As most of you know (and especially with a name like mine) I have been living in Greece since 1993.
I don't much listen to the news or read the local papers here, but I do get interesting information from the people around me who do.
The bad news we get here on the local media, has been fairly constant since about 2009. One really does not know what to believe anymore.
Here are some "snapshots" - bits of information and some personal thoughts..
In my opinion, a sizable portion of Greeks believe that..
- the business moguls who own the private television stations and newspapers in Greece are bribed by politicians to be "careful" about what news they make public, and how often
- their own corrupt business and political elite has had much to do with the resulting mess
- the harsh economic medicine will not help - only make things worse
Other bits and pieces...
- In many (yes many, not just a few) apartment blocks in Athens, there is no heat - people can no longer afford to pay the cost of natural gas or heating oil
- Most young people live with their parents (for economic reasons).
- I used to encourage people to visit Greece - I haven't done that in years
To me and many others who live here, Greece is well on its way to becoming more like a poor former-East-bloc country, than a "western democracy" - and the austerity is helping that along.
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Woof Kostas:
Thank you for your on-the-ground report.
I know this is not your usual area of expression, but may I ask for your sense of what should be done?
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Woof Kostas:
Thank you for your on-the-ground report.
I know this is not your usual area of expression, but may I ask for your sense of what should be done?
Before answering, it might be interesting to note that a few hours ago, I learned that in Athens, sales of heating fuel and natural gas to heat people's homes has fallen 80% (yes eighty) since last year.
As far as what should be done, my suggestions are as follows:
- ensure that money loaned to Greece is accounted for - have strict controls on it, no matter how many howls of protest there may be by the Greek government that national sovereignty is being infringed upon
- focus on growth - too much austerity is not helping - there is enough evidence for this already
- give it time - two, even more additional years, if necessary - even if it means additional compromises by Greece's creditors
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That 80% decline in heating fuel is a powerful number full of human meaning , , ,
What would be the best way to focus on growth?
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That 80% decline in heating fuel is a powerful number full of human meaning , , ,
What would be the best way to focus on growth?
Yes it is. Of myself and my three students/training partners, three of us (including myself) are making do without heat. So far its not been really cold, but it certainly makes one feel that things are indeed hitting "close to home"
I do not know what the best way would be to focus on growth. But I do feel that the well-off are not only more insulated, but are not being made to pay their fair share. By well-off I do not mean people who are doctors or layers, I mean people whose families are connected to some member of parliament, or to some rich business or media personality.
Also, I do not mean that the rich should be taxed so as to kill incentive for business growth. But there continue to be tax evaders who are not pursued. As I noted before, the Lagarde list was handed to Greek authorities over a year ago, and some minister I believe resigned exactly because it was being hushed up. Then there is the famous singer Tolis Voskopoulos who owes 5 million euro in back taxes and has not payed - in part because his beautiful wife is an MP.
Now getting the rich tax evaders to pay is not going to solve all of Greece's problems - but the austerity is disproportionately hitting those less able to pay. How is the economy ever going to get off the ground when many people can barely afford to heat their homes? There have also been record numbers who have had their electricity cut off because they can no longer afford to pay. The electricity bills keep going up. WHY ? people are hurting, so why does the power company (owned by the state), which has done everything to stifle competition from private firms, keep raising its rates?
Then there are the billions (yes BILLIONS, not millions but BILLIONS) of euros stashed away by rich Greeks in foreign accounts. As far as I know, if the political will was there, it is possible to go after them to pay taxes, but unfortunately, it is lacking.
It sounds like I keep going on about the rich are to blame, but the economy will never recover by getting those least able to afford it, to dig deeper into their empty pockets. It simply can not work that way.
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Why are we emulating them?
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http://finance.fortune.cnn.com/2013/01/09/france-economy-crisis/
The euro crisis no one is talking about: France is in free fall
By Shawn Tully, senior editor-at-large January 9, 2013: 9:26 AM ET
The euro zone's second-largest economy is suffering more than any other member from a shocking deterioration in competitiveness. And it's doing nothing to stop it.
FORTUNE -- Given investors' confidence in its sovereign debt, and its image as Germany's principal partner in the sturdy, sensible "northern" eurozone, you'd think that France endures as the co-guardian of the endangered single currency. Indeed, the rate on France's ten-year government bonds stands at just 2%, just a few ticks above Germany's. From a quick look at the headline numbers, France doesn't appear nearly as stressed as the derisively titled "PIIGS," Portugal, Ireland, Italy, Greece and Spain. So far, the trajectory of its debts and deficits isn't as distressing as the figures for the PIIGs, or even the U.K. and the U.S.
France's vaunted role in the creation and initial success of the euro enhances its aura of solidity. It was President Francois Mitterrand who in 1989 persuaded Chancellor Helmut Kohl to back monetary union in exchange for France's support for German reunification. In fact, France and Germany, along with the Netherlands, dramatized their commitment by effectively uniting the franc and deutschemark in a currency union that held their exchange rates in a narrow band, and heralded the euro's birth in 1999. In the boom years of the mid-2000s, France virtually matched Germany as the twin growth engine of the thriving, 17-nation eurozone.
A deeper look shows that France is mired in no less than an economic crisis. The eurozone's second-largest economy (2012 GDP: 2 trillion euros) is suffering more than any other member from a shocking deterioration in competitiveness. Put simply, France's products -- its cars, steel, clothing, electronics -- cost far too much to produce compared with competing goods both from Asia and its European neighbors, including not just Germany but even Spain and Italy. That's causing a sharp and accelerating fall in its exports, and a significant decline in manufacturing and the services that support it.
The virtual implosion of French industry is overlooked by analysts and pundits who claim that the eurozone had dodged disaster and entered a new, durable period of stability. In fact, it's France -- not Greece or Spain -- that now poses the greatest threat to the euro's survival. France epitomizes the real problem with the single currency: The inability of nations with high and rising production costs to adjust their currencies so that their products remain competitive in world markets.
So far, the worries over the euro have centered on dangerously rising debt and deficits. But those fiscal problems are primarily the result of a loss of competitiveness. When products cost too much to make, the economy stalls or actually declines, so that even modest increases in government spending swamp nations with big budget shortfalls and excessive borrowings. In this no-or-negative growth scenario, the picture is usually the same: The private economy shrinks while government keeps expanding.
That's already happened in Italy, Spain and other troubled eurozone members. The difference is that those nations are adopting structural reforms to restore their competitiveness. France is doing nothing of the kind. Hence, its yawning competitiveness gap will soon create a fiscal crisis. It's absolutely astonishing that an economy so large, and so widely respected, can be unraveling so quickly.
The world's investors and the euro zone optimists should awaken to the danger posed by France. La crise est arivée.
France's decline is best illustrated by the rapid deterioration in its foreign trade. In 1999, France sold around 7% of the world's exports. Today, the figure is just over 3%, and falling fast. The same high costs that are pounding exports draw an ever rising flow of goods from Germany, China and even southern Europe. Those imports are taking an increasing share of sales from pricier French-made products. In 2005, France's trade balance was a positive 0.5% of GDP. Today, it stands at minus 2.7% of national income, meaning imports now far exceed exports, turning trade from a growth-generator into a major drag. An excellent illustration of the competitiveness gap is the chasm between German and French exports to China. Germany sends $70 billion in cars, machine tools and other products to China each year, seven times the figure for France.
Even tourism is suffering because of the France's high prices. France is now struggling clientele from a surging, bargain-seeking tranche of the market, travelers from Asia, Brazil, India and Russia. In the mid-2000s, foreigners spent 15 billion euros more visiting the Champs Elysees and the Riviera than the French paid to vacation abroad. That surplus has since fallen by one-third, to around 10 billion euros.
The main reason for France's cost disadvantage is the burden of labor, a factor that typically accounts for around 70% of all corporate expenses worldwide. In France, the problem comprises a both high wage and social costs, and rigid laws, including a 35-hour work week that allows French employees the lowest number of working hours in the developed world. An astounding 86% of all wage earners enjoy "contrats a durée indéterminées," permanent contracts that make layoffs extremely expensive and time-consuming.
In France, 42 euros for every 100 euros in total expenses go to social charges, versus 34 euros in Germany, 26 in the UK, and 20 in the US.
Obviously, the restrictive laws and hostile unions are nothing new. What's causing the crippling malaise is the recent rapid rise in labor costs when rivals are lowering or moderating the weight of weight of their workforces.
Since 2005, France's unit labor costs -- the expense of producing a single car or steel beam, for example -- has jumped 17% compared with 10% for Germany, 5.8% for Spain, and 2% for Ireland. Today, French workers earn an average of 35.3 euros per hour, compared with 25.8 in Italy, 22 in the UK and Spain.
The result is a steep fall in French manufacturing and the services that support it, everything from consulting to logistics. Corporate profits have plunged to 6.5% of GDP, about 60% of the euro zone average. That's because French exporters are losing market share, and the ones that survive must lower margins to charge competitive prices. As a result, they lack the funds to invest in new plants and technologies. France now has half as many exporting companies as Germany and, amazingly, Italy. German industry benefits from 19,000 robots, five times the number in France. As for R&D spending, it's dropped 50% in the past four years.
Remarkably, the Hollande government is raising revenue by heightening the burden on business. In September, France announced new laws that limit deductions for interest payments and loss carry-forwards, effectively heaping higher taxes on business. Those measures will shrink already meager profits, and crimp future investment.
The cost-gap wouldn't be so damaging if France specialized in sophisticated, high-margin products. Indeed, the nation remains strong in fashion, luxury goods, and pharmaceuticals. But though those offerings symbolize France's economic élan, the nation is heavily dependent on autos, textile, steel, telecom equipment and other mid-to-low margin products that are extremely price sensitive on world markets. "France has never been strong in high-end, sophisticated products like machine tools or high-end computer equipment," says Jean-Christophe Caffet of Flash Economics in Paris. "And even in the high-end, it's lost a lot of market share to Germany."
Germany, for example, specializes in fancy cars, Audis, Mercedes and BMWs that folks are willing to keep buying if prices rise a bit. By contrast, France makes cheaper Renaults and Peugeots that risk losing sales to Ford or Fiat unless manufacturers hold down prices -- or settle for puny or non-existent profits.
Nor is France reacting to the looming crisis by following its neighbors' campaign to lower labor costs. Germany made big strides in the mid-2000s with its Hartz IV reforms that lowered the social charges on businesses. Spain recently raised the retirement age for full pensions from 65 to 67 and allows wage negotiations at the company level, a departure from the centralized system of imposing mandatory nationwide increases in pay. Italy is gradually raising the retirement age for women from 60 to 66 over the next six years.
But Francois Hollande, elected president in May, is taking far more tepid steps. The government is pledging to modestly lower social charges on businesses, but the reforms don't start until 2014, and last just two years.
It's the prospect of a future without growth, a direct legacy of the competitiveness problem, that could unleash a fiscal crisis. It's remarkable that in the mid-1990s, France had a lower unemployment rate than Germany, smaller deficits, less debt to GDP, and approximately the same growth rate. All of those measures have now totally reversed.
In 2012, the French economy expanded at just 0.2%, and its real growth rate for the past three years averaged 1.2%, less than half Germany's 2.7% performance. For 2013, France's ODDO Securities makes a persuasive case that the economy will actually shrink. The unemployment rate stands at a 14-year high of 10.9% and rising, compared 6.7% for Germany. Debt to GDP is nearing the danger zone of 90%, and could hit 97% in 2013.
It's not that France has been raising government spending at an outrageous rate. The issue is that a nation with already high spending levels and no growth has run out of room to keep lifting spending, and debt, at all. It's extraordinary that from 2004 to 2012, the private sector in France showed no growth whatsoever, adjusted for inflation. The entire rise in GDP, a mere 7.3% over eight years, came from government spending. It's the private economy that supports that spending, and it will keep dwindling, driving France further and further into debt.
Government spending now accounts for 57% of GDP and increasing, 12 points higher than Germany. By the way, Germany's private sector is growing briskly as public expenditures drop as a share of national income. The opposite dynamic is plaguing its long-time partner.
It's totally implausible to blame "austerity" for France's poor growth. Austerity is generally defined as large reductions in budget deficits, mainly driven by falling government spending. But France's spending has increased in real terms, and its deficits have been remained at a substantial 5% or so of GDP in 2011 and 2012, with the same figure likely for this year.
It's unclear when the crisis that's going mostly unacknowledged by investors and the Hollande government will erupt into a panic. The chance that France will lower labor costs by the 20% to 30% needed to restore growth is practically zero. Reforms can only happen when the economy is expanding and citizens feel good about the future, the antithesis of the gloom now enveloping France.
France is heading towards an economic Bastille. The longer it stays on that path, the more possible that the eurozone regime it labored so hard to create will crumble.
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http://www.spiegel.de/international/europe/bad-economy-means-young-europeans-having-trouble-leaving-home-a-877616.html
Hotel Mama: Bad Economy Has Young Europeans at Home
Young Europeans in countries hit hardest by the Continent's economic crisis are finding it difficult to move out of their parents' home. Data shows that over 50 percent of those aged 25 to 34 in some countries have yet to move out.
DER SPIEGEL
Young people in Southern and Eastern Europe live at home longer.
Most young adults are eager to leave home to start independent lives. But in those European countries where the economic crisis has hit hardest -- particularly in southern and eastern EU member states -- that appears to be a difficult move to make.
ANZEIGEIn 2011, more that 50 percent of the 25- to 34-year-olds in Greece, Bulgaria, Slovakia and Malta still lived in their parents' homes, a SPIEGEL analysis of information from the European Commission statistics division Eurostat has revealed.
In Portugal, Italy, Hungary and Romania more than 40 percent of those in this age group remain in the nest (see graphic).
Nations with a high percentage of Catholics show a particularly high number of young adults who have yet to move out of their parents' home. This is also the case in Eastern Europe, where working conditions for entry-level workers are particularly precarious.
These numbers are in stark contrast to those in the EU's most northerly member nations, where less than 5 percent of 24- to 34-year-olds in Finland, Sweden and Denmark continue to enjoy the luxuries of Hotel Mama. In Germany, the level is 14.7 percent.
A similar phenomenon, dubbed the "boomerang generation," has been identified in the United States, which is suffering from a long recession. The Pew Research Center reports that some 29 percent of Americans in the same age have had to return to their parents' home in recent years. And some 78 percent of them say they are happy with their living arrangements.
SPIEGEL/kla
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Apart from the economics of this, IMHO multi-generational family structures have a lot of merit.
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United Kingdom Moves Away from the European Project
January 22, 2013 | 1000 GMT
By Adriano Bosoni
British Prime Minister David Cameron will deliver a speech in London on Jan. 23, during which he will discuss the future of the United Kingdom's relationship with the European Union. Excerpts leaked to the media suggest that harsh EU criticism will figure prominently in the speech, a suggestion in keeping with Cameron's recent statements about the bloc. But more important, the excerpts signal an unprecedented policy departure: renegotiating the United Kingdom's role in the European Union. London has negotiated exemptions from some EU policies in the past, even gaining some concessions from Brussels in the process; this time, it is trying to become less integrated with the bloc altogether.
Cameron has pledged to hold a referendum after 2015 on the United Kingdom's role in Europe. He has also said he would reclaim powers London surrendered to the European Union. While they no doubt reflect similar anxieties across the Continent, such statements are anathema to the European project, and by making them, Cameron could be setting a precedent that could further undermine the European Union.
Cameron's Compromise
Cameron's strategy partly is a reaction to British domestic politics. There is a faction within the ruling Conservative Party that believes the country should abandon the European Union entirely. It was this faction that pressed Cameron to call a referendum on the United Kingdom's EU membership. Some party members also fear that the United Kingdom Independence Party, the country's traditionally euroskeptic party, is gaining ground in the country.
Such fears may be well founded. According to various opinion polls, roughly 8-14 percent of the country supports the United Kingdom Independence Party, even though it received only 3.1 percent of the popular vote in the 2010 elections. These levels of support make the party a serious contender with the Liberal Democrats as the United Kingdom's third-largest party (after the Labour Party and the Conservative Party). Some polls show that the United Kingdom Independence Party already is the third-most popular party, while others suggest it has poached members from the Conservative Party, a worrying trend ahead of elections for the European Parliament in 2014 and general elections in 2015.
Its growing popularity can be attributed to other factors. Beyond its anti-EU rhetoric, the United Kingdom Independence Party is gaining strength as an anti-establishment voice in the country, supported by those disappointed with mainstream British parties. Similar situations are developing elsewhere in Europe, where the ongoing crisis has weakened the traditional political elite.
The debate over the United Kingdom's role in the European Union is also causing friction with the Conservatives' junior coalition partner, the Liberal Democrats. Party leader and Deputy Prime Minister Nick Clegg has repeatedly criticized the Conservatives' push for a referendum, arguing that the proposal is creating uncertainty in the country and by extension threatening economic growth and job creation. Several of the country's top businessmen share this belief. On Jan. 9, Virgin Group's Richard Branson, London Stock Exchange head Chris Gibson-Smith and eight other business leaders published a letter in the Financial Times criticizing Cameron's plan to renegotiate EU membership terms.
British citizens likewise are conflicted on the subject. In general, polls have shown that a slight majority of Britons favor leaving the European Union, but recent surveys found that opinion was evenly split. Conservative Party voters particularly support an EU withdrawal.
Given the issue's sensitivity, Cameron has sought to please everyone. He said there would be a referendum, but it would entail the United Kingdom's position in the European Union, not British membership. Despite his criticisms of the bloc, Cameron has said he does not want to leave the European Union outright; rather, he wants to repatriate from Brussels as many powers as possible. Cameron believes the United Kingdom still needs direct access to Europe's common market but that London should regain power regarding such issues as employment legislation and social and judicial affairs. Most important, the referendum would take place after the general elections of 2015.
London's Costs of Membership
London also believes that the United Kingdom has surrendered too much of its national sovereignty to supranational EU institutions. The United Kingdom is a net contributor to the European Union, and London feels that the costs of membership exceed the benefits. The Common Agricultural Policy, which subsidizes agricultural sectors in continental Europe, does not really benefit the United Kingdom, and the Common Fisheries Policy has forced the United Kingdom to share its fishing waters with other EU member states.
Yet the United Kingdom is a strong defender of the single market. Roughly half of its exports end up in the European Union, and half of its imports come from the European Union. While the United States is the United Kingdom's single most important export destination, four of its five top export destinations are eurozone countries: Germany, the Netherlands, France and Ireland. Germany is also the source of about 12.6 percent of all British imports.
Some critics suggest that the United Kingdom could leave the European Union but remain a part of the European Economic Area, the trade agreement that includes non-EU members, such as Iceland and Norway. However, the country would still be required to make financial contributions to continental Europe and adapt its legal order to EU standards, but it would not have a vote in EU decisions. According to Cameron, the United Kingdom must be part of the common market and have a say in policymaking.
The issue points to the United Kingdom's grand strategy. Despite an alliance with the United States, the United Kingdom is essentially a European power, and it cannot afford to be excluded from Continental affairs. Throughout history, London's foremost concern has been the emergence of a single European power that could threaten the British Isles politically, economically or militarily. Maintaining the balance of power in the Continent -- especially one in which London has some degree of influence -- is a strategic imperative for the United Kingdom.
The United Kingdom's Strategic Dilemma
The United Kingdom's push to renegotiate its status in the European Union threatens the European project. In the past, the bloc granted special concessions to the British, such as allowing them to keep the pound sterling during Maastricht Treaty negotiations. These concessions inspired other EU members to ask for similar treatment -- most notably Denmark, which also managed to opt out of the euro.
However, this is the first time that London has openly demanded the return to a previous stage in the process of European integration. At no other time has a country tried to dissociate itself from the bloc in this way. The decision not only challenges the Franco-German view of the European Union but also makes a compromise extremely difficult and risky between France and Germany and the United Kingdom.
Most important, Cameron is framing his proposals not in terms of national sovereignty but in terms of social well-being. In doing so, he acknowledges the social implications of the European crisis. Cameron has even said that the European Union currently is hurting its citizens more than it is helping them. According to leaked portions of his upcoming speech, he believes that there is a "growing frustration that the EU is seen as something that is done to people rather than acting on their behalf" and that the issues are "being intensified by the very solutions required to resolve the economic problems."
The excerpts also cite Cameron as saying "people are increasingly frustrated that decisions taken further and further away from them mean their living standards are slashed through enforced austerity or their taxes are used to bail out governments on the other side of the Continent." This rhetoric could become highly attractive in Europe, where people from Germany to Finland believe that taxpayers' money is being used to bail out inefficient peripheral countries. And many Greek, Spanish and Portuguese citizens probably would sympathize with the notion that austerity is worsening their quality of life. Cameron's rhetoric suggests that he is positioning the United Kingdom to be the leader of a counternarrative that opposes Germany's view of the crisis.
But this strategy is not without risks for the United Kingdom. In recent years, the country's veto power in the European Union has been reduced substantially. With each reform of the European treaties, unanimous decisions were replaced by the use of qualified majority. Even in cases where unanimity is required, Berlin and Paris have managed to bypass London when making decisions. For example, Cameron refused to sign the fiscal compact treaty in 2011, but Germany and France decided to proceed with it, even if only 25 of the 27 EU members accepted it.
Moreover, the "enhanced cooperation mechanism," the system by which EU members can make decisions without the participation of other members, increasingly has been used to move forward with European projects. Currently, the EU's Financial Transaction Tax is being negotiated under this format. In recent times, London has been able only to achieve exemptions without real power to block decisions.
Meanwhile, the ongoing crisis has compelled the European Union to prioritize the 17 members of the eurozone over the rest of the bloc. This has created a two-speed Europe, where core EU members integrate even further as the others are neglected somewhat. London could try to become the leader of the non-eurozone countries, but these countries often have competing agendas, as evidenced by recent negotiations over the EU budget. In those negotiations, the United Kingdom was pushing for a smaller EU budget to ease its financial burden, but countries like Poland and Romania were interested in maintaining high agricultural subsidies and strong development aid.
The dilemma is best understood in the context of the United Kingdom's grand strategy. Unnecessary political isolation on the Continent is a real threat to London. The more the European Union focuses on the eurozone, the less influence the United Kingdom has on continental Europe. The eurozone currently stretches from Finland to Portugal, creating the type of unified, Continental entity that London fears.
For the British, this threat can be mitigated in several ways, the most important of which is its alliance with the United States. As long as London is the main military ally and a major economic partner of the world's only superpower, continental Europe cannot afford to ignore the United Kingdom. Moreover, London also represents a viable alternative to the German leadership of Europe, especially when France is weak and enmeshed in its own domestic problems. And even if the United Kingdom chooses to move away from mainland Europe, its political and economic influence will continue to be felt in the Continent.
The United Kingdom's grand strategy has long been characterized by balancing between Europe and the United States. Currently, London is not so much redefining that grand strategy as it is shifting its weight away from Europe without completely abandoning the Continent.
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Read more: United Kingdom Moves Away from the European Project | Stratfor
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http://www.telegraph.co.uk/finance/financialcrisis/9832845/France-totally-bankrupt-says-labour-minister-Michel-Sapin.html
France 'totally bankrupt', says labour minister Michel Sapin
France's labour minister sent the country into a state of shock on Monday after he described the nation as “totally bankrupt”.
The comments came as President Hollande attempts to improve the image of the French economy Photo: AFP
By Graham Ruddick
8:00PM GMT 28 Jan 2013
Michel Sapin made the gaffe in a radio interview, which left French President Francois Hollande battling to undo the potential reputational damage.
“There is a state but it is a totally bankrupt state,” Mr Sapin said. “That is why we had to put a deficit reduction plan in place, and nothing should make us turn away from that objective.”
The comments came as President Hollande attempts to improve the image of the French economy after pledging to reduce the country’s deficit by cutting spending by €60bn (£51.5bn) over the next five years and increasing taxes by €20bn.
Data from Banque de France showed earlier this month that a flight of capital has already left the country amid concerns that France’s Socialist leader intends to soak the rich and businesses. The actor Gérard Depardieu has renounced his French citizenship and decamped to Russia in protest, while David Cameron said Britain will “roll out the red carpet” to attract wealthy individuals.
Pierre Moscovici, the finance minister, said the comments by Mr Sapin were “inappropriate”.
He added: “France is a really solvent country. France is a really credible country, France is a country that is starting to recover.”
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We don't need a separate "European" thread anymore. Just include into the government programs thread.
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Crafty wrote recently: "I note how hard the first Euro downturn hit the US markets."
That was back in the good old days when the European problem was Greece. Then Ireland, Portugal, Spain, Italy.
Now we have France making Obama look like a supply-sider and Germany shutting down all nuclear and choking itself over energy:
http://rt.com/news/germany-poland-nuclear-fukushima-574/
Germany is facing rapidly climbing energy costs after turning away from nuclear power following the Fukushima disaster, instead relying increasingly on renewable energy. Meanwhile, its neighbors are building nuclear power stations on its doorstep.
Who holds up Europe when France implodes and the German economy stalls? The steady UK economy where they raised tax rates from 40% to 50% and panicked and lowered them to 45%, all since 2010.
http://www.guardian.co.uk/business/2013/feb/13/uk-low-gdp-growth-bank-england-inflation
UK set for low GDP growth for at least two years, Bank of England warns.
The problem with socialism is that you eventually run out of other people's money.
http://www.goodreads.com/author/quotes/198468.Margaret_Thatcher
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http://hotair.com/archives/2013/03/01/yikes-eurozones-unemployment-rate-hits-a-new-high/
Yikes: Eurozone’s unemployment rate hits a new high
posted at 5:21 pm on March 1, 2013 by Erika Johnsen
As Ed mentioned in his rundown of the Eurozone’s systemic problems earlier this week, Italy as a country just resoundingly voted in rejection of fiscal austerity, and their financial and economic outlook is looking pretty bleak — an outlook just made even bleaker by January’s record-high unemployment numbers released today. Via Reuters:
Italy’s seasonally adjusted unemployment rate jumped to 11.7 percent in January from 11.3 percent the month before to hit its highest level for at least 21 years, data showed on Friday.
The figure was above all forecasts in a Reuters survey of analysts which pointed to a marginal uptick to 11.3 percent. …
Both overall unemployment and youth unemployment were the highest since the current statistical series was begun in 1992.
And that’s not all. Italy’s increasingly poor economic performance combined with all of the Eurozone’s continued economic doldrums has pushed the 17-member bloc’s collective unemployment rate into new territory:
The unemployment rate in the euro zone edged up in January to a new record, official data showed Friday, as the ailing European economy continued to weigh on the job market. …
Unemployment in the 17-nation euro zone climbed to 11.9 percent in January from 11.8 percent the previous month, according to Eurostat, the statistical office of the European Union.
For the 27 nations of the Union, the jobless rate in January stood at 10.8 percent, up from 10.7 percent in December. All of the figures were seasonally adjusted. …
The jobless data “suggest that wage growth is set to weaken from already low rates” and further depress consumer spending, which has already been damped by government austerity measures, Jennifer McKeown, an economist at Capital Economics in London, wrote in a research note.
Europe did pretty well at convincing themselves that the worst of the European debt crisis was over, but was it really just the eye of the storm? These unemployment rates and the recently revised economic growth forecasts for 2013 aren’t going to make austerity measures any more welcome in the eyes of voters — and if Italy and Spain, the bloc’s third and fourth largest economies end up needing bailouts, it could very well spell extended troubles for the eurozone’s prospects, says Robert Samuelson:
The euro crisis is back. Actually, it never left. But there was an extended period, beginning last summer, when Europe’s political, business and media elites convinced themselves the worst had passed. The European Central Bank (ECB) — Europe’s Federal Reserve — had tranquilized jittery bond markets. …
But Italians did send a message. “The election wasn’t just anti-austerity. It was also anti-German,” says David Smick, editor of The International Economy magazine. “Berlusconi’s rhetoric was very anti-German. In Italian politics now, it’s dangerous to appear being the lapdog of [German Chancellor] Angela Merkel.” In one dazzling stroke, Italian voters rejected both Europe’s main response to high government debt — cut spending, raise taxes — and the policy’s most powerful architect, Germany’s Merkel. If Italy needs to be bailed out, the negotiations already look tortuous. …
The amounts required would dwarf the rescues of Greece, Portugal and Ireland. Agreement would be hardly guaranteed. As conditions for aid, the ECB and Germany have insisted on precisely the austerity and structural changes that Italian voters just rejected. Could Italy, backed by other debtor nations, force changes in old policies and, if not, what happens? Europe’s future remains in play.
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Dangerous Times: How Euro-socialism Set off a Fascist Bomb
By James Lewis and Justine Aristea
In the terrible economic crisis of 1922 Benito Mussolini got 25% of the vote in Italy. Two years later he had more than a majority.
You know the rest.
In the economic crisis of 2013, Beppe Grillo received 24% of the vote (see last week's analysis of Grillo's political beliefs). This week he blocked a government from forming. Grillo now controls the Senate, but he is going for a majority in both houses in the upcoming vote in June.
That's in Italy, but in Greece the Golden Dawn party is following the same path. So is the new Hungarian fascist resurgence. In Germany it's called the "Pirate Party."
Europe's political class is shocked and panicked. They are pretending Grillo is just a "populist" and a "reformer" -- but he also wants to "process" all the Jews in the world, who are responsible for all the evil. Grillo wants to nationalize the banks and abolish interest rates, "just like the Islamic Development Bank."
To understand the new upsurge of European fascism, you have to imagine what it's like to live in Rome.
Imagine the US government being sunk in red ink. The United Nations suspends the US Constitution and compels us to adopt a new UN currency called the UNO, designed to favor other countries. The United States no longer runs its own currency. Our economy tanks and our deficit keeps getting worse.
Therefore the UN unilaterally appoints a caretaker president for the US named Monti, who imposes radical budget cuts on our dependent welfare state.
1. Social Security is cut by half. People have to live on 700 euros per month.
2. ObamaCare is cut by half. Two hospitals in Rome do not pay their medical staffs for six months.
3. Taxes on income and sales are raised to an average of 50%.
4. Small business taxes are increased -- but big businesses taxes are lowered, "because big business is more efficient." (Meaning it has bigger unions).
5. Politicians and bureaucrats get major pay raises. The figurehead President of the US doubles his salary.
Government at all levels is corrupt. It's the only way people can survive. Everybody is playing double games. People are doing two jobs and running their own businesses out of government offices. Everybody cheats on taxes. The mafia controls half the country. Survival depends on the black market, the black economy. The currency is kept artificially high, so exports crash.
It's happened to Italy under the European Union. Don't think it can't happen here. Obama is a Euro socialist, representing faculty lounge socialism in America, so completely arrogant and cocksure that Paul Krugman just knows how to run the trillion-dollar US economy. Nobody else can figure it out, but Krugman knows that he knows. Our new rulers are control freaks, just as free market economists have said since Adam Smith. They are six year olds steering the family car and thinking they are in control until...
... until it all blows up.
This week Europe blew up. The media haven't caught up yet, because they are what they are. But the markets are catching up fast.
This is a huge event for the United States, because our political elite is bound and determined to turn us into Europe. Hasn't the EU found the answer to war and peace and prosperity forever?
Our Democrats believe it. Europe is their model. Every batty new idea they have is copied from the glorious European Union. Twenty years ago they still celebrated the Soviet Union, until that house of cards crumbled. Now they have shifted their fantasy paradise to Europe.
Over there, fifty years of increasingly centralized control have made it impossible for voters to be heard. The political parties are stuck in GroupThink. Only the fascist "protest" parties agitate for reform. The ruling class doesn't listen. They don't have to -- they don't have to run for election.
So European voters fled to the fascists to express their rage and despair. Imagine one out of four US voters going for Lincoln Rockwell, and you get the idea.
In Italy, Beppe Grillo the Clown just received 24% of the vote, the biggest percentage a single party has received since Benito Mussolini, Il Duce, in 1922, another economic crisis year.
The Italian vote gives the Clown control of the Senate, and the biggest voice in the lower house. The Grillini now speak for the capital city of Rome. Since fascism is illegal in Italy, the Five Star Party pretends not to be fascist; but scratch the surface and that old grinning ghost stares back at you.)
The EU and US media are still in denial, but Italian party politicians instantly flew to Berlin to talk with Angela Merkel, and came back to build a common front against Grillo the Clown. But the Joker refused to play. He wants another election in June.
Currency markets are signaling panic. Don't believe the media. Believe the markets.
Europe is our future. It's Obama style of Chicago "governance," and as long as the people were inundated by EU propaganda they believed that Europe had discovered the secret of peace and welfare forever. Talk to any European and that's what you hear. They keep wondering why we don't follow them to Never-Neverland. If you tell question them they turn a deaf ear. They're mentally stuck.
As long as America defends Europe, they will keep hating us and pretending they are running the ocean liner, like kids with plastic steering wheels.
The key to the whole farce is Europe's "democracy deficit," which means that the people can vote for the European Parliament -- but it has no legislative powers at all. The Parliament is a Potemkin front. It has no power to pass binding laws.
On the other hand, the unelected ruling class has centralized more and more power in "Commissions" -- which is what the word "Soviets" used to mean. But the EU has no electoral legitimacy. Nobody votes for the people who really run the place. That means the EU receives no feedback about the impact of its cult-like policy fantasies. When the people wanted a public referendum on the EU, the political class arrogantly told them to go... yes.
In France, the Grand Corps of the State ("Enarques") run the government. Germany and Britain are similar. Together they appoint the European ruling elite. This is the EU socialist Apparat, the Political Machine that controls everything. And yes, there are capitalists, but they work hand-in-glove with the Apparat. It's Crony Social Capitalism (technically the same as fascism).
As a result normal people feel totally powerless. As long as the Ponzi scheme lasts, the victims loved it. The media churned out neo-imperialist propaganda about how Europe had finally discovered peace and welfare forever, and everybody wanted to believe.
Today, southern and eastern Europe are running into a brick wall, designed by Europe's ruling class in its delusional way. The north blames the south, and vice versa. Nobody can stop the ruling class from its mad rush to destruction, so we are seeing a 'protest vote" in Germany, Poland, eastern Europe, and the PIIGS -- the Mediterranean coastal countries plus Ireland.
The only protest party people can vote for are barely disguised fascists: The Five Star party in Italy, Golden Dawn in Greece, Pirate Party in Germany, and fascist insurgents in Hungary.
Here's how it's done. In Italy Beppe Grillo ran as a sly comedian, spinning off conspiracy theories about 'chemtrails" (jet contrails) that poison the Italian people, the Rockefellers, Rothschilds and Illuminati who run the world to oppress the poor, and all the usual paranoid fantasies. But he also attacked massive corruption (which is true) and self-serving politicians (also true), and the euro currency that killed Italian exports (also true). Grillo voiced criticisms that other politicians avoided. Everybody knows about massive corruption, for example. Grillo said it.
Now the Clown has his own sources of money and ideology, which lead straight to Tehran, as we have pointed out. The Clown hates the Jews, and his website mentions "Jews" 2,500 times, and "Iran" 2,500 times. The Islamic Development Bank doesn't charge interest, the Clown tells us. This is pure Islamic fascist propaganda. Banks that loan free money don't exist in the real world, because they can't survive. But demagogues tell sucker lies, and this is a good one. Beppe tells his followers that he will nationalize the banks (like Il Duce) and give away free loans. It's like Obama phones, straight from Obama's stash. The suckers love it.
The Jews run the world by charging "usury" (this is an old, old story in Europe). In Beppe's Fantasyland money comes free, exactly what Islamist propaganda says. Beppe tells the world that "Everything I know about the Middle East I've learned from my father-in-law" Parvin Tajik, who runs a major construction business in Tehran, and therefore has to be in cahoots with the super-corrupt mullahs.
Guess who plays the scapegoat in this age-old drama? Yup.
People laughed at old Beppe the Clown for fifteen years.
Today the joke's on them.
Read more: http://www.americanthinker.com/2013/03/how_euro-socialism_set_off_a_fascist_bomb.html
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Summary
DANIEL ROLAND/AFP/Getty Images
The euro sign in front of the European Central Bank building in Frankfurt, Germany
Since the onset of its economic crisis, Europe has been marked by widening divides over the eurozone's goals and structure. In recent months, a new split has emerged: The populations of countries on the eurozone's periphery -- those feeling the sharpest sting of austerity measures -- still widely support the common currency. Meanwhile, euroskeptic narratives that reject some of Europe's fundamental structures -- namely the free movement of people, goods and services -- have been gaining support in Europe's wealthier core countries.
But peripheral support for the currency bloc is likely shaded by hopes of a return to Europe's pre-crisis environment. And the core's insistence on austerity measures and economic reforms makes such a return unlikely in the near future. Such conflicting views appear likely to undermine policies designed to deal with the crisis and threaten the very foundations of the European Union.
Analysis
On March 10, an opinion poll was published in Italy suggesting that, despite the country's political and economic crises, more than 70 percent of Italians support membership in the eurozone. The dynamic in Italy resembles those in other peripheral countries such as Greece and Spain, where opinion polls have consistently revealed strong support for the currency bloc, despite the crisis. In contrast, recent German media attention has been focused on Alternative for Germany -- a new political party proposing that countries should be allowed to leave the eurozone and create smaller currency unions with fewer members.
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In the peripheral countries, support for austerity measures implemented by Brussels has waned, while discontent with the political elites who support such policies has become widespread. The 2012 elections in Greece and elections in Italy in February 2013 confirmed this trend, with anti-system parties in both countries performing strongly. Indeed, rejections of austerity policies in Europe have often been accompanied by strong criticism of the bureaucracy in Brussels -- and even Germany's leadership during the crisis -- as well.
Reasons to Remain
However, few Italians wish to return to the lira and even fewer Greeks want the drachma. There are some concrete economic explanations for this sentiment. For example, a strong currency allows peripheral countries to sustain their energy imports. There are also less-quantifiable reasons to remain in the eurozone, such as a sense of belonging to Europe. In peripheral countries -- states that might otherwise be isolated internationally or subjugated by other external actors -- EU membership and the euro have high symbolic value.
This sentiment partly explains why, for example, Latvia still hopes to join the eurozone by Jan. 1, 2014, and Croatia is seeking to join the European Union in July. Moreover, Portugal, Greece and Spain each joined after the fall of a dictatorship, and each believed that EU membership would expedite integration with the West and invite investment and funding from Europe and the broader international community. In Italy, the anti-establishment Five Star Movement has gradually softened its criticism of the eurozone and centered its campaign on a criticism of the country's political elites. None of these countries want to risk being isolated from the rest of Europe.
However, the evident desire to remain in the eurozone, and even in the European Union, is likely affected by hopes that Europe will return to its pre-crisis environment. In other words, it is a desire for the Continent to return to the days of cheap credit, low unemployment and high social spending. In essence, the European periphery wants the benefits of the eurozone without most of the costs. Opinion polls can be misleading if questions about remaining in the common currency are not linked to austerity measures.
For peripheral countries, a return to pre-crisis Europe will likely be hindered by conflicting visions of the eurozone between the bloc's core and peripheral countries. Governments in core countries tend to view peripheral countries critically and, for example, believe that they should implement austerity measures and economic reforms to clean up their balance sheets and avoid sparking a repeat crisis.
Such views have often been even more pronounced among local populations. While national governments accept the idea that peripheral members should receive bailouts eventually to prevent the crisis from deepening, such rescues often are unpopular among voters. Thus, governments in core countries have been forced into a sort of balancing act: To maintain domestic support, they have attempted to appear inflexible toward peripheral countries in pressuring them to apply economic reforms. But to prevent the financial crisis from spreading, core governments have still been willing to dole out rescue funds.
Cracks in the Eurozone's Foundation
VIDEO: The Eurozone's Political Challenge (Agenda)
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This dynamic has created a significant political problem in Europe's core, where the strongest opposition to some of the fundamental principles of the European Union have emerged. Among core political parties and governments, discontent has been especially strong about issues such as immigration, the Schengen area, the common currency and even the free movement of goods.
As a result, Northern Europe is currently facing the real possibility that euroskepticism gains enough popularity to become an issue capable of swinging elections. Even leaders who recognize the benefits of EU membership may become euroskeptics if they perceive a change in the social mood. The growing criticism of the European Union by the British government highlights this possibility.
One of the main causes of the crisis in Europe -- and probably the biggest obstacle to implementing the policies needed to escape the crisis -- is the difference in visions held by Europeans about the bloc's function and objectives. These rifts remained dormant during the prosperous period that followed the creation of the European Union. But the European crisis has allowed these issues to reemerge, and it is threatening the European project at its foundations.
Read more: Differing Views of Eurozone Membership | Stratfor
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EU to suspend aviation carbon tax
http://www.iol.co.za/business/international/eu-to-suspend-aviation-carbon-tax-1.1485577#.UUNIdFLNvTq
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http://www.cnbc.com/id/100562290
S&P Warns of Socially Explosive Situation in Euro Zone
Published: Monday, 18 Mar 2013 | 6:15 AM ET
Standard and Poor's sees a high risk that Spain, Italy, Portugal and France will not be able to carry through necessary reforms as the unemployed become less willing to put up with austerity, S&P's Germany head Torsten Hinrichs told a newspaper.
"The high unemployment in Spain, Italy and France is socially explosive," Hinrichs was quoted as saying in Monday's Neue Osnabrcker Zeitung.
"There has to be a social consensus for saving measures. High unemployment ... does not help."
Hinrichs said the people of Spain and Portugal had already proven they were willing to bear with austerity measures, but "this cannot continue forever".
In Italy, there was the further danger that "a new government may not be strong enough for the still necessary reforms to strengthen growth," he said.
Hinrichs said S&P still rated Germany as a triple A with stable outlook and did not see any reason for concern: "It is one of the few AAA and stable countries that we still have in Europe".
The weak profitability of the banking sector due to the profusion of banks was the only problem in Germany, he said, although he saw positive changes in the sector in terms of equity capital and refinancing.
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On the roundtable of the Bret Baier Special Report someone (Krauthammer?) said that the Russians have offered to bail out Cyprus in return for the rights to the huge natural gas field in Cyprian waters , , ,
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Europe's Disturbing Precedent in the Cyprus Bailout
March 26, 2013 | 0900 GMT
Stratfor
By George Friedman
Founder and Chairman
The European economic crisis has taken different forms in different places, and Cyprus is the latest country to face the prospect of financial ruin. Overextended banks in Cyprus are teetering on the brink of failure for issuing loans they cannot repay, which has prompted the tiny Mediterranean country, a member of the European Union, to turn to Brussels for help. Late Sunday, the European Union and Cypriot president announced new terms for a bailout that would provide the infusion of cash necessary to prevent bankruptcies in Cyprus' banking sector and, more important, prevent a banking panic from spreading to the rest of Europe.
What makes this crisis different from the previous bailouts for Greece, Ireland or elsewhere are the conditions Brussels has attached for its assistance. Due to circumstances unique to Cyprus, namely the questionable origin of a large chunk of the deposits in its now-stricken banking sector and that sector's small size relative to the overall European economy, the European Union, led by Germany, has taken a harder line with the country. Cyprus has few sources of capital besides its capacity as a banking shelter, so Brussels required that the country raise part of the necessary funds from its own banking sector -- possibly by seizing money from certain bank deposits and putting it toward the bailout fund. The proposal has not yet been approved, but if enacted it would undermine a formerly sacred principle of banking in most industrial nations -- the security of deposits -- setting a new and possibly destabilizing precedent in Europe.
Cyprus' Dilemma
For years before the crisis, Cyprus promoted itself as an offshore financial center by creating a tax structure and banking rules that made depositing money in the country attractive to foreigners. As a result, Cyprus' financial sector grew to dwarf the rest of the Cypriot economy, accounting for about eight times the country's annual gross domestic product and employing a substantial portion of the nation's work force. A side effect of this strategy, however, was that if the financial sector experienced problems, the rest of the domestic economy would not be big enough to stabilize the banks without outside help.
Europe's economic crisis spawned precisely those sorts of problems for the Cypriot banking sector. This was not just a concern for Cyprus, though. Even though Cyprus' banking sector is tiny relative to the rest of Europe's, one Cypriot bank defaulting on what it owed other banks could put the whole European banking system in question, and the last thing the European Union needs now is a crisis of confidence in its banks.
The Cypriots were facing chaos if their banks failed because the insurance system was insufficient to cover the claims of depositors. For its part, the European Union could not risk the financial contagion. But Brussels could not simply bail out the entire banking system, both because of the precedent it would set and because the political support for a total bailout wasn't there. This was particularly the case for Germany, which would carry much of the financial burden and is preparing for elections in September 2013 before an electorate that is increasingly hostile to bailouts.
Even though the German public may oppose the bailouts, it benefits immensely from what those bailouts preserve. As I have pointed out many times, Germany is heavily dependent on exports and the European Union is critical to those exports as a free trade zone. Although Germany also imports a great deal from the rest of the bloc, a break in the free trade zone would be catastrophic for the German economy. If all imports were cut along with exports, Germany would still be devastated because what it produces and exports and what it imports are very different things. Germany could not absorb all its production and would experience massive unemployment.
Currently, Germany's unemployment rate is below 6 percent while Spain's is above 25 percent. An exploding financial crisis would cut into consumption, which would particularly hurt an export-dependent country like Germany. Berlin's posture through much of the European economic crisis has been to pretend it is about to stop providing assistance to other countries, but the fact is that doing so would inflict pain on Germany, too. Germany will make its threats and its voters will be upset, but in the end, the country would not be enjoying high employment if the crisis got out of hand. So the German game is to constantly threaten to let someone sink, while in the end doing whatever has to be done.
Cyprus was a place where Germany could show its willingness to get tough but didn't carry any of the risks that would arise in pushing a country such as Spain too hard, for example. Cyprus' economy was small enough and its problems unique enough that the rest of Europe could dismiss any measures taken against the country as a one-off. Here was a case where the German position appears enormously more powerful than usual. And in isolation, this is true -- if we ignore the question of what conclusion the rest of Europe, and the world, draws from the treatment of Cyprus.
A Firmer Line
Under German guidance, the European Union made an extraordinary demand on the Cypriots. It demanded that a tax be placed on deposits in the country's two largest banks. The tax would be about 10 percent and would, under the initial terms, be applied to all accounts, regardless of their size. This was an unprecedented solution. Since the global financial crisis of the 1920s, all advanced industrial countries -- and many others -- had been operating on a fundamental principle that deposits in banks were utterly secure. They were not regarded as bonds paying certain interest, whose value would disappear if the bank failed. Deposits were regarded as riskless placements of money, with the risk covered by deposit insurance for smaller deposits, but in practical terms, guaranteed by the national wealth.
This guarantee meant that individual savings would be safe and that working capital parked by corporations in a bank was safe as well. The alternative was not only uncertainty, but also people hoarding cash and preventing it from entering the financial system. It was necessary to have a secure place to put money so that it was available for lending. The runs on banks in the 1920s and 1930s drove home the need for total security for deposits.
Brussels demanded that the bailout for Cypriot banks be partly paid for by depositors in those banks. That demand essentially violated the social contract on the sanctity of bank deposits and did so in a country that was a member of the European Union -- one of the world's major economic blocs. Proponents of the measure pointed out that many of the depositors were not Cypriot nationals but rather foreigners, many of whom were Russian. Moreover, it was suggested that the only reason for a Russian to be putting money in a Cypriot bank was to get it out of Russia, and the only motive for that had to be nefarious. It followed that the confiscation was not targeted against ordinary people but against shady Russians.
There is no question that there are shady Russians putting money into Cyprus. But ordinary Cypriots had their money in the same banks and so did many Cypriot and foreign companies, including European companies, who were doing business in Cyprus and need money for payroll and so on. The proposal might look like an attempt to seize Russian money, but it would pinch the bank accounts of all Cypriots as well as a sizable amount of legitimate Russian money. Confiscating 10 percent of all deposits could devastate individuals and the overall economy and likely would prompt companies operating in Cyprus to move their cash elsewhere. The measure would have been devastating and the Cypriot parliament rejected it.
Another deal, the one currently up for approval, tried to mitigate the problem but still broke the social contract. Accounts smaller than 100,000 euros (about $128,000) would not be touched. However, accounts larger than 100,000 euros would be taxed at an uncertain rate, currently estimated at 20 percent, while bondholders would lose up to 40 percent. These numbers will likely shift again, but assuming they are close to the final figures, depositors putting money into banks beyond this amount are at risk depending on the financial condition of the bank.
The impact on Cyprus is more than Russian mafia money being taxed. All corporations doing business in Cyprus could have 20 percent of their operating cash seized. Regardless of precisely how the Cypriot banking system is restructured, the fact is that the European Union demanded that Cyprus seize portions of bank accounts from large depositors. From a business' perspective, 100,000 euros is not all that much when you are running a supermarket or a car dealership or a construction company, but this arbitrary level could easily be raised in the future and the mere existence of the measure will make attracting investment more difficult.
A New Precedent
The more significant development was the fact that the European Union has now made it official policy, under certain circumstances, to encourage member states to seize depositors' assets to pay for the stabilization of financial institutions. To put it simply, if you are a business, the safety of your money in a bank depends on the bank's financial condition and the political considerations of the European Union. What had been a haven -- no risk and minimal returns -- now has minimal returns and unknown risks. Brussels' emphasis that this was mostly Russian money is not assuring, either. More than just Russian money stands to be taken for the bailout fund if the new policy is approved. Moreover, the point of the global banking system is that money is safe wherever it is deposited. Europe has other money centers, like Luxembourg, where the financial system outstrips gross domestic product. There are no problems there right now, but as we have learned, the European Union is an uncertain place. If Russian deposits can be seized in Nicosia, why not American deposits in Luxembourg?
This was why it was so important to emphasize the potentially criminal nature of the Russian deposits and to downplay the effect on ordinary law-abiding Cypriots. Brussels has worked very hard to make the Cyprus case seem unique and non-replicable: Cyprus is small and its banking system attracted criminals, so the principle that deposits in banks are secure doesn't necessarily apply there. Another way to look at it is that an EU member, like some other members of the bloc, could not guarantee the solvency of its banks so Brussels forced the country to seize deposits in order to receive help stabilizing the system. Viewed that way, the European Union has established a new option for itself in dealing with depositors in troubled banks, and that principle now applies to all of Europe, particularly to those countries with financial institutions potentially facing similar problems.
The question, of course, is whether foreign depositors in European banks will accept that Cyprus was one of a kind. If they decide that it isn't obvious, then foreign corporations -- and even European corporations -- could start pulling at least part of their cash out of European banks and putting it elsewhere. They can minimize the amount of cash on hand in Europe by shifting to non-European banks and transferring as needed. Those withdrawals, if they occur, could create a massive liquidity crisis in Europe. At the very least, every reasonable CFO will now assume that the risk in Europe has risen and that an eye needs to be kept on the financial health of institutions where they have deposits. In Europe, depositing money in a bank is no longer a no-brainer.
Now we must ask ourselves why the Germans would have created this risk. One answer is that they were confident they could convince depositors that Cyprus was one of a kind and not to be repeated. The other answer was that they had no choice. The first explanation was undermined March 25, when Eurogroup President Jeroen Dijsselbloem said that the model used in Cyprus could be used in future bank bailouts. Locked in by an electorate that does not fully understand Germany's vulnerability, the German government decided it had to take a hard line on Cyprus regardless of risk. Or Germany may be preparing a new strategy for the management of the European financial crisis. The banking system in Europe is too big to salvage if it comes to a serious crisis. Any solution will involve the loss of depositors' money. Contemplating that concept could lead to a run on banks that would trigger the crisis Europe fears. Solving a crisis and guaranteeing depositors may be seen as having impossible consequences. Setting the precedent in Cyprus has the advantage of not appearing to be a precedent.
It's not clear what the Germans or the EU negotiators are thinking, and all these theories are speculative. What is certain is that an EU country, facing a crisis in its financial system, is now weighing whether to pay for that crisis by seizing depositors' money. And with that, the Europeans have broken a barrier that has been in place since the 1930s. They didn't do that casually and they didn't do that because they wanted to. But they did it.
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Read more: Europe's Disturbing Precedent in the Cyprus Bailout | Stratfor
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The ‘Emminger letter’ forms one of the more obscure parts of the history of the German Bundesbank. It is also one of the most chilling. And, in the hard-line negotiations over the latest Cyprus bail-out package, 35 years after it was written, it has just made a singular re-entry.
The document, drawn up in secret in 1978, gave the German central bank the power to side-step formal obligations to support weaker countries via foreign exchange intervention during European currency turmoil. Emminger was one of the most influential figures rebuilding German post-war central banking from the 1950s.
He was a member of the board of the Bundesbank and its forerunner, Bank deutscher Länder, for 26 years, finishing as Bundesbank president from 1977 to 1979. Emminger died in 1986. But his spirit lingers on.
The European Central Bank (ECB) ultimatum delivered to Cyprus on 21 March, giving the country until the following Monday to agree a lending deal with the International Monetary Fund and the European Union or risk bankruptcy, bore the Emminger hallmarks. The ECB governing council said its Emergency Liquidity Assistance (ELA) to Cyprus would not be renewed unless an official programme was in place – sparking frantic diplomatic action that led finally to a deal closing down the island’s second biggest bank and imposing swingeing write-offs on large depositors.
The ultimatum marked a dramatic change of ECB tactics. In previous action, the ECB had maintained generous ELA assistance for Ireland and Greece, under lending that is deemed semi-automatic unless the governing council (currently 23 people, all men) decides with a two-thirds majority to close it down. The lending has attracted great displeasure in Germany and other current account surplus countries.
With Cyprus, the hard currency central banks behind the ECB, led by the Bundesbank, decided they had had enough. By ensuring its habitually tough line unreservedly became ECB policy, the Bundesbank – without needing to act in public – strode to the front line of the debate over the future of economic and monetary union (EMU).
The Emminger episode bears resemblance to this because, in the 1960s and 1970s, the Bundesbank was perennially haunted by the fear that its efforts to control the German monetary base and hence German inflation would be compromised by commitments to buy large volumes of foreign currencies to maintain exchange rate stability. These obligations were imposed first by the Bretton Woods fixed exchange rate agreements and then by various European currency arrangements.
In EMU, the Bundesbank is highly wary of the risks caused by the build-up of its assets with the ECB reflecting the ECB’s lending to hard-hit peripheral countries, which includes borrowings under the ELA. The Bundesbank’s assets under the so-called Target-2 system for short term liquidity transfers were €613bn as of end-February, up from €547bn in February last year, making up roughly two-thirds of the Bundesbank’s balance sheet. The Target-2 total has declined by around €140bn since the peak in August last year, but greatly exceeds the Bundesbank’s gold stocks worth €132bn as of end-February as well as its €29bn of foreign exchange reserves.
The significance of the Emminger letter is that he wrote it at a similarly fraught time of skirmishing over Europe’s monetary framework. Emminger sent the missive to Helmut Schmidt, then West German chancellor, on 16 November 1978 to register the Bundesbank council’s approval of most of the elements of the prospective agreement setting up the European Monetary System (EMS), which developed later into EMU.
However, Emminger and his council colleagues disagreed with the feature of the EMS agreement that the Bundesbank would be forced to intervene with unlimited amounts of D-Mark sales and foreign currency purchases whenever European partners’ currencies reached their floor in the EMS’s exchange rate mechanism (ERM).
The letter made clear the Bundesbank’s desire to be freed from this obligation to intervene during monetary crises. Schmidt sent Emminger a telex message signalling agreement on all the outstanding issues apart from the intervention exemption.
On 30 November Schmidt attended a lengthy Bundesbank council meeting in Frankfurt to clinch agreement on the EMS details. Schmidt pointed out, to Emminger’s evident satisfaction, that – in relation to the intervention exemption – he had annotated the Bundesbank president’s letter of 16 November with an ‘r’ to indicate ‘richtig’ (‘right’ in German) or, as he said, ‘factual agreement’.
This deviation, Schmidt told the council, was allowable under the classical legal exemption clause ‘clausula rebus sic stantibus’ (‘Treaties may become inapplicable because of changes in circumstances’). However, he affirmed that the modification should remain secret and could not be part of a formal agreement. ‘Let us imagine that this appeared in a French or Italian newspaper tomorrow,’ Schmidt told the council, according to official documents that were published only 30 years later. ‘The editorials would criticise their own governments for believing such a shallow promise from the Germans. A [German] government promises to intervene to uphold certain rules of the game, but then writes in an internal paper that it intends to act differently at times of emergency.’
The Emminger letter was brought into play, with great effect, 24 years later on Friday 11 September 1992, a day after the Banca d’Italia, the Italian central bank, publicly complained about ‘excessively high’ Bundesbank interest rates, when the lira fell to its lowest permitted point in the exchange rate mechanism, triggering enormous obligatory intervention from the Bundesbank and Banca d’Italia. In the light of massive inflows of liquidity threatening to disrupt German monetary policy, the Bundesbank invoked the Emminger let-out clause to free it from the constraint of making unlimited lira support purchases.
The news shocked the Italians. Carlo Azeglio Ciampi, governor of the Banca d’Italia, was conferring with prime minister Giuliano Amato and finance minister Piero Barucci at the prime minister’s office in Rome when Ciampi was called to the telephone to be told that the Bundesbank would stop intervening on Monday. ‘When he came back, he was pale, almost white,’ Amato recalled later. The episode forced a lira devaluation over the weekend and helped sparked a run on the British pound on Wednesday 16 September (known later as ‘Black Wednesday’) when both the UK and Italy had to leave the ERM.
The Bundesbank carefully avoided having to resort to the Emminger letter that day because it intervened to buy Dutch guilders, forcing the guilder rather than the D-Mark to the top of the ERM intervention framework against sterling and therefore avoiding any Bundesbank obligation to undertake unlimited purchases of sterling.
The Emminger letter was also invoked later that month in a furious battle with the French government and the Banque de France to prevent the French franc from devaluing within the ERM. A top French official Guillaume Hannezo reiterated Paris’s surprise over the discovery of the Emminger letter limiting the Bundesbank’s intervention obligations. ‘This is singular: a treaty from state to state can be repudiated by an independent public organ.’
The various intrigues surrounding the Emminger letter are shadowy and somewhat convoluted. Jens Weidmann, the current Bundesbank president, who has been known to cite Emminger approvingly in his speeches, was 10 years old when the document was written.
However, there is one man to whom it is not a mystery. Mario Draghi, the ECB president, and the man who authorised the 21 March Cypriot ultimatum, was head of the Italian Treasury during the September 1992 encounters with the Bundesbank.
Draghi has been on the receiving end of the Bundesbank’s power. And he could be excused for now thinking he can unleash some of it in the service of the ECB.
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http://hotair.com/archives/2013/04/02/eurozone-unemployment-hits-a-record-12-percent/
Eurozone unemployment hits a record 12 percent
posted at 12:01 pm on April 2, 2013 by Erika Johnsen
Yikes. The end of 2012 marked a collective economic contraction in the eurozone for the fifth straight quarter, and the 17-member currency bloc is well on track to logging their sixth:
Official figures for first-quarter economic activity won’t be released until May 15, but the monthly Eurocoin measure of euro-zone output released Friday signaled a contraction for March, having earlier signaled declines in activity in January and February.
The measure, which is compiled by London-based Center for Economic Policy Research and the Bank of Italy, also showed a drop in gross domestic product in each of the three months of the fourth quarter, an indication borne out later when official data showed the euro-zone economy shrank by 0.6%.
That dreary outlook is further corroborated by the revised January and today’s February jobs reports, which reported eurozone unemployment coming in at a whopping 12 percent — the highest figure since the currency was first launched in 1999.
The number of people unemployed in the 17 member states rose by 33,000 during [February], to hit 19.07 million, the statistics agency Eurostat said. …
The jobless figures from Eurostat also showed that Spain’s unemployment rate hit 26.3% in February, while the rate in Portugal remained stable at 17.5%.
The lowest rates were recorded in Austria (4.8%) and Germany (5.4%), both unchanged from January. The overall unemployment rate for the eurozone in January was revised up from 11.9% to 12%. …
The fresh high in the unemployment rate “is further confirmation of the underlying weakness of the economy”, said Jennifer McKeown at Capital Economics.
“The rise in unemployment was the 22nd in a row, making this labour market downturn the most prolonged since the early 1990s.”
And this is all from February, before the Cyprus situation even got started — it’s relative impact might not be huge, but I’d doubt that that chaos and the accompanying market-jitters are going to do anything helpful for business confidence or the labor market, nor for the EU’s long-term stability.
These are just more reminders of what happens after repeated failures to substantively deal with brewing debt crises and practice fiscal responsibility — but hey, it’s cool, because “we don’t have an immediate crisis in terms of debt” and “for the next 10 years, it’s gonna be in a sustainable place,” or something.
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"Shed no tears. Cyprus reaps the foreseeable consequences of a deliberate plan, hatched 40 years ago, to create a lightly-regulated financial centre and capture restless offshore money. Finance moved en masse from Beirut to Cyprus when Lebanon collapsed into civil war. Milosevic’s Serbia banked and traded through Cyprus to evade sanctions during the Yugoslav wars. Russian billions round-tripped through Cyprus to evade tax. Real earnings in Cyprus quadrupled in 1975-2011. Victims? Hardly."
Cyprus reaches end of a long and sleazy road
By David Gardner in Beirut
The island’s collapse is not really the result of a random lurch
The sudden tumble of Cyprus from sun-kissed prosperity into bleak penury must certainly have felt precipitate to many of its citizens – more like a scalping than a haircut
But the collapse is not really the result of a random lurch or shift in axis. It is the end of a path traced in a long, complacent arc of ease and sleaze that hit a wall.
It is almost 40 years since the east Mediterranean island was traumatised by partition. In 1974, an Athens-inspired coup aimed at unifying Cyprus with Greece led to Turkey’s invasion of the island, the northern third of which remains largely isolated under Turkish tutelage.
Yet it was not long after this that the Greek Cypriot south embarked on the economic course that would ultimately lead it to meltdown: to bet its part of the island on building a low tax, high-return, lightly regulated banking centre, with comfortable layers of ancillary services in auditing and law, “corporate formation” and shipping management, real estate and so on. For a long time, this worked exceptionally well.
Ordinary Greek Cypriots will now feel they are victims of brutal outside forces in a German-dominated Europe. But Cyprus was also the beneficiary of brutal outside developments. Cyprus grew rich on the misfortunes of its neighbours; its decision to do a certain kind of banking for a living was shaped by the disintegration of Lebanon, the former Yugoslavia and the Soviet Union.
Beirut was the unchallenged financial and services entrepôt between the west and the petrodollar-fired Middle East until Lebanon descended into civil war in 1975. As that tribal war ground on until 1990, with two further wars with Israel to come, Cyprus acquired bits of Beirut’s banking business, but seemingly little of the ostensibly free-wheeling Lebanese capital’s conservative banking habits – such as high levels of provisioning against bad loans and very high deposits to loans ratios.
One need go no further than compare Cypriot banks’ catastrophic exposure to Greek bonds, a market with which Beirut financiers were familiar, but cautious.
By the time the Lebanon war ended, the wars of the Yugoslav succession were getting underway. Bankers and politicians in Cyprus gave Slobodan Milosevic, the Serbian strongman, a lifeline by enabling him to evade western sanctions and prosecute the wars in Bosnia and Kosovo during the 1990s. By then, Cyprus had acquired critical mass as a banking destination sufficient for its close-knit elite to profit mightily from the collapse of the Soviet Union, the rise of Russia’s oligarchs, and then the uncertainties of doing business under Vladimir Putin’s unpredictable rules. Russian billions, round-tripping through Cyprus, gave the island’s economy a huge lift.
In per capita income terms, Cypriots quadrupled their real earnings, in constant money, between 1975 and 2011, according to the World Bank; in nominal terms, or current US dollars, the UN records a rise in earnings per head from $1,451 to $30,523 over the same period.
While Cyprus used the common ties of the Christian Orthodox religion to strengthen all these connections, it was received into the European Union (in 2004) and the euro (in 2008), was designated by the IMF an advanced economy (in 2011), and even became a modest net contributor to the EU budget, alongside the Germans and the Dutch. Times were sweet.
Nobody – including, until recently, the markets – appears to have suggested to the Cypriots that tax havens and brass plaque economies were falling out of favour; that giant financial bubbles attached to small islands (think Iceland) were falling into the sea; or that if politicians in the EU north were taking flak about “bailing out” the south they would certainly not form an orderly queue to aid wealthy Russian depositors.
Cyprus, moreover, has not made too many friends in the EU because of its obstructionism over the 2004 UN plan to reunify the island and over fraught relations with Turkey. An irony of its current drama is that one partial palliative – the discovery of rich hydrocarbons reserves in its coastal waters – will push Cyprus towards Turkey, the most easily accessible market for its gas when it desperately needs to find ways of replacing banking-generated wealth.
That has gone for ever.
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And a response:
>>>> One need go no further than compare Cypriot banks’ catastrophic exposure to Greek bonds <<<<
There is only one serious question - WHY did the Cypriot banks invest so heavily into those Greek bonds? I'm willing to bet a $20 bill against a cup of Starbucks that it was related to political pressure. I expect that sooner or later the truth will emerge, and it will be similar to the way our politicians "encouraged" financial institutions to offer mortgages to people who clearly couldn't afford to pay them.
The talk about the "Russian mobsters" is smoke and mirrors, designed to make this bank robbery a little more palatable to the masses. This is a precedent which will damage the very foundations of Western society. If politicians can order appropriations of private funds from private banks - so, whom can you trust? Where are you going to keep your saving? The Caymans? It wouldn't take a single platoon of Marines to take full control of that country (if, of course, the UK is on on the deal).
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The Crisis of the European Common Market
April 11, 2013 | 0509 GMT
Summary
The European Union was founded on the free movement of people, goods, services and capital. All of these basic freedoms are inextricably intertwined with the European crisis. The free movement of people is being questioned in numerous countries, while the free movement of goods and services is in part responsible for the current crisis. The free movement of capital has forced EU leaders to face the consequences of different national banking regulations that allow capital flight and tax evasion. While better oversight and collaboration make tax collection across borders easier, they do little to stem capital flight, which weakens banking sectors in already struggling economies.
Analysis
The creation of a common market where people, goods, services and capital could move freely was one of the main goals of the Treaty of Rome -- the agreement between France, West Germany, Italy, the Netherlands, Belgium and Luxembourg that created the European Economic Community in 1957. It took the four decades between the Treaty of Rome and the 1992 Treaty of Maastricht for the members of the European Union to develop the principles of the common market, and some gaps remain.
The free movement of people is the principle that allows EU citizens to travel to or live and work in any member country. It has come under threat from several governments and political parties in Europe. In the United Kingdom, the conservative government of Prime Minister David Cameron is analyzing ways to prevent the arrival of Romanian and Bulgarian workers, who will be allowed to work legally in the United Kingdom starting next year. According to the British government, those workers would collapse the British healthcare system. In countries such as France, Sweden, Finland and Denmark, parties that reject immigration are gaining ground.
The free movement of goods and services is fundamental to the customs union and a key component of the crisis of the eurozone. The creation of the eurozone put 17 countries with varying levels of economic development and competitiveness in a currency union. This has created significant trade imbalances between the less developed economies in the eurozone periphery and Germany, Europe's main exporter. Before the introduction of the euro, countries in the periphery could apply monetary policy to deal with growing current account deficits, but now the common currency has deprived them of that tool.
As the crisis deepens, the European Union has begun to pay more attention to the links between the crisis and the last founding principle -- the free movement of capital. The bailouts for Ireland, Greece and Spain highlighted the fragility of the banking sectors in the eurozone periphery and created fears of financial instability spreading to the rest of the members of the common currency. The bailout for Cyprus incorporated an additional element, due to the island's opaque banking sector, that forced depositors to take a hit. This decision brought uncertainty about the future format of EU bailouts. Even though the leaders of Portugal, Slovenia and Luxembourg said that Cyprus was an isolated issue, there is no way to be certain that this will not be the new norm for bailouts in the eurozone.
The European Union is trying to address the problems of its banking sector through the creation of a banking union -- a mechanism that would put all the eurozone banks under the supervision of a single entity, provide joint funds to rescue banks in distress and provide all banks with the common deposit guarantee. This idea has been controversial since the beginning. First, there was a debate regarding which banks should be supervised. In December 2012, the European Union agreed that only the largest banks in the eurozone would be put under supervision. Second, the idea of a joint insurance mechanism and bank resolution fund was highly controversial because countries with strong banking sectors refuse to take responsibility for failing banks. As a result, EU leaders decided to postpone the insurance mechanism's implementation.
With the first stage of the banking union projected to become operational in early 2014, EU leaders are dealing with another one of the eurozone's problems: the fight against tax evasion. Often, residents of EU countries are able to avoid taxation in their country of residence by having bank accounts in another member state. In 2003, the European Union tried to solve this problem by getting EU members to agree to implement an automatic exchange of information between states concerning interest payments.
But Belgium, Austria and Luxembourg objected to the disclosure of account holders' names, arguing that they would not be able to compete with non-EU countries with strong banking sectors such as Switzerland and Liechtenstein. As a result, they were granted exceptions to the system of information exchanging. In 2010, as the crisis on the Continent intensified, Belgium decided to comply with the exchange of information system, and now Brussels is pressuring Austria and Luxembourg to do the same. The issue has recently become particularly heated. Countries such as France and Spain have seen numerous corruption scandals in which public officials had secret bank accounts in other countries.
Under pressure from the European Union, the government of Luxembourg announced April 10 that it will implement rules on the automatic exchange of bank account information with the rest of the European Union beginning in 2015. The decision took place one day after the finance ministers of Germany, France, the United Kingdom, Italy and Spain sent a letter to the EU Commission proposing the creation of an information exchange system to fight tax evasion. In addition, Austrian Chancellor Werner Faymann said April 9 that his country is ready to discuss a more intensive exchange of information about its banking sector.
VIDEO: European Union's Push for Bank Transparency
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While efforts to share banking information are moving forward, two problems remain. The first is enforcement. In their April 9 letter to the EU Commission, Europe's five largest economies (Germany, France, the United Kingdom, Italy and Spain) proposed to improve the current mechanisms of information exchange between banks in the European Union, admitting that the mechanisms in place are not enough to prevent evasion. Second, these information-sharing measures are not designed to prevent capital flight from countries in the periphery to countries in the core -- another significant problem based on the free movement of capital. In October, the International Monetary Fund warned that uncertainty is encouraging flights of money from the periphery to Northern Europe and to countries outside the currency union.
Leading up to the crisis, free capital mobility facilitated a credit boom in the eurozone periphery. With the crisis, this mobility has weakened the banking sectors of countries in the periphery because depositors face no hurdles in fleeing to more stable banking sectors in the north. Bank loans are the most important credit channel for companies in Europe, so the continued weakening of banking sectors in the periphery adds more problems to these already struggling economies, thus exacerbating the differences between the core and the periphery of the eurozone.
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Read more: The Crisis of the European Common Market | Stratfor
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News from our allies...
ALERTS TO THREATS
IN 2013 EUROPE (powerlineblog.com)
The English are feeling the pinch in relation to recent events in Syria and have therefore raised their security level from “Miffed” to “Peeved.” Soon, though, security levels may be raised yet again to “Irritated” or even “A Bit Cross.” The English have not been “A Bit Cross” since the blitz in 1940 when tea supplies nearly ran out. Terrorists have been re-categorized from “Tiresome” to “A Bloody Nuisance.” The last time the British issued a “Bloody Nuisance” warning level was in 1588, when threatened by the Spanish Armada.
The Scots have raised their threat level from “Pissed Off” to “Let’s get the Bastards.” They don’t have any other levels. This is the reason they have been used on the front line of the British army for the last 300 years.
The French government announced yesterday that it has raised its terror alert level from “Run” to “Hide.” The only two higher levels in France are “Collaborate” and “Surrender.” The rise was precipitated by a recent fire that destroyed France ‘s white flag factory, effectively paralyzing the country’s military capability.
Italy has increased the alert level from “Shout Loudly and Excitedly” to “Elaborate Military Posturing.” Two more levels remain: “Ineffective Combat Operations” and “Change Sides.”
The Germans have increased their alert state from “Disdainful Arrogance” to “Dress in Uniform and Sing Marching Songs.” They also have two higher levels: “Invade a Neighbour” and “Lose.”
Belgians, on the other hand, are all on holiday as usual; the only threat they are worried about is NATO pulling out of Brussels ..
The Spanish are all excited to see their new submarines ready to deploy. These beautifully designed subs have glass bottoms so the new Spanish navy can get a really good look at the old Spanish navy.
Australia, meanwhile, has raised its security level from “No worries” to “She’ll be right, Mate.” Two more escalation levels remain: “Crikey! I think we’ll need to cancel the barbie this weekend!” and “The barbie is cancelled.” So far no situation has ever warranted use of the last final escalation level.
And as a final thought – Greece is collapsing, the Iranians are getting aggressive, and Rome is in disarray. Welcome back to 430 BC.
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Doug,
The USA raised their alert to "Our narcissist in chief put his big left foot in his mouth". :cry: :x
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News from our allies...
ALERTS TO THREATS
IN 2013 EUROPE (powerlineblog.com)
The English are feeling the pinch in relation to recent events in Syria and have therefore raised their security level from “Miffed” to “Peeved.” Soon, though, security levels may be raised yet again to “Irritated” or even “A Bit Cross.” The English have not been “A Bit Cross” since the blitz in 1940 when tea supplies nearly ran out. Terrorists have been re-categorized from “Tiresome” to “A Bloody Nuisance.” The last time the British issued a “Bloody Nuisance” warning level was in 1588, when threatened by the Spanish Armada.
Britain didn't exist in 1588 though :?
They also get p**sed of when people use "english" and "british" interchangeably :lol:
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Norway election: Conservative Erna Solberg triumphs
http://www.bbc.co.uk/news/world-europe-24014551
With three-quarters of the votes counted, the bloc of four right-wing parties had won 96 of 169 seats in parliament.
Welfare issues dominated the election campaign, as well as Ms Solberg's pledge to lower taxes and diversify the economy away from its heavy reliance on oil revenue.
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*It's scientific!
http://www.telegraph.co.uk/finance/10390571/france-hollande-taxes-socialist-farrage.html
Today, one out of four French university graduates wants to emigrate, “and this rises to 80 per cent or 90 per cent in the case of marketable degrees”, says economics professor Jacques Régniez, who teaches at both the Sorbonne and the University of New York in Prague. “In one of my finance seminars, every single French student intends to go abroad.”
“The French workforce is now two-speed,” explains a headhunter who shuttles between Paris and London. “Among the young, perhaps a third speak English, are willing to relocate, and want to work. For one thing, their dream employers are the more prosperous of the large French multinationals, almost all those in the CAC40 index, who make over half of their profits abroad, sometimes over 90 per cent – companies like, say, L’Oréal, Schneider or Danone. This is why French universities have shocked the Académie française and now teach many courses in English.
“But I’ve also seen determined young people take jobs in places like Vietnam, with local contracts and nothing like the level of protection afforded by French labour law, in order to gain a proper first experience of business in a competitive environment. And then you have a large group whose ambition is simply to stay outside the economy.”
This means a trade-off with which anyone in France is familiar: young people, and many of their parents, dream of getting any kind of state or local administration post, usually badly paid, very often frustrating, but which ensures complete job security, unrelated to the economic situation, the market, or their own performance.
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WSJ
Germany said it believed that U.S. intelligence agencies may be spying on Chancellor Angela Merkel's cellphone, an intrusion that could escalate the international furor over U.S. data surveillance and complicate Washington's relationship with one of its staunchest allies.
Ms. Merkel spoke by phone with President Barack Obama on Wednesday and made clear that such surveillance among allies would be "fully unacceptable" and a "grave breach of trust," her spokesman said in a statement released late Wednesday in Berlin.
Mr. Obama assured the German leader that the U.S. isn't monitoring her communications and won't in the future, a White House spokesman said. He wouldn't say whether it had occurred in the past.
The uproar in Berlin is the latest sign that the National Security Agency scandal has the potential to continue to inflict damage on Washington's relationships with overseas partners. Earlier this week, Mr. Obama called French President François Hollande, who expressed his "deep disapproval" over reports that the NSA was collecting data on tens of millions of French phone calls and messages. Reports of U.S. spying on Brazilian President Dilma Rousseff as well as Mexico's Enrique Peña Nieto during his successful presidential campaign have already strained the U.S. relationship with Latin America.
The German government's sharply worded statement came after it looked into an inquiry from the weekly Der Spiegel, the magazine reported. Der Spiegel said U.S. spies may have specifically targeted Ms. Merkel's cellphone—as opposed to having just intercepted her communications as part of a broader dragnet.
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U.S. Spy Charges Enliven EU Digital Summit
Apple marks its territory in the Chinese tablet market, the "Bishop of Bling" is suspended by Pope Francis, and Germany suspects the U.S. is tapping Angela Merkel's mobile phone. The Foreign Bureau tracks the top world stories of the day.
German intelligence followed up on the information and determined it may be true, according to the magazine, leading to the tense phone call with the White House.
There was no information as to how Ms. Merkel's phone was monitored or what information the U.S. gleaned.
If true, the allegations would present Washington with an even more serious diplomatic challenge that could affect a range of economic and security issues.
Germany, a member of the Group of Seven leading economies and the dominant economic force in Europe, is a crucial partner for the U.S. on a range of international issues, from combating the euro-zone crisis to negotiating a trans-Atlantic free-trade agreement.
Ms. Merkel has played an important role in talks over global hot spots like Syria and Iran, and Germany is home to the U.S. military's most important bases in Europe. In 2011, Mr. Obama hosted Ms. Merkel in Washington for a state dinner.
Given the depth of the relationship between the two countries and Germany's long-standing support of the U.S., it is unclear why U.S. intelligence might target her. Mr. Obama said over the summer, as allegations about NSA spying first surfaced, that he could simply call Ms. Merkel if he needed to know what she was thinking.
But Ms. Merkel conceivably may have been targeted for advance knowledge of Germany's positions before a major summit, or to understand Germany's relations with countries like Iran and Russia, said James Lewis, a former State Department official who is now a technology-policy specialist at the Center for Strategic and International Studies.
"The Germans are basically running Europe now," he said. "What are the Germans thinking about the European crisis? Are the Germans going to stop bailing out the Greeks?"
The new revelations come ahead of a European Union summit on Thursday, where leaders are expected to discuss ways to protect personal data in the wake of previous disclosures about the NSA's surveillance programs. Demands for stronger protections and guarantees from the U.S. that it won't violate European privacy laws will have even more urgency following the disclosures about Ms. Merkel.
Ms. Merkel, despite an uproar in Germany over NSA surveillance over the summer, had appeared willing to give the U.S. the benefit of the doubt. Asked in a news conference July 19 whether she ever had "the uncomfortable feeling that the big brother from America might be listening in" while she talked on the phone, Ms. Merkel answered simply: "No."
On Wednesday night, the tone in Berlin changed sharply.
"The government has received information that the mobile phone of the chancellor may be under surveillance by U.S. agencies," said Ms. Merkel's spokesman, Steffen Seibert. "We have made an urgent inquiry to our American partners and have asked for an immediate and comprehensive explanation."
In her call with Mr. Obama, Ms. Merkel said she "unequivocally deplores such practices and sees them as completely unacceptable," according to Mr. Seibert. The spokesman said Ms. Merkel expected U.S. agencies to explain their overall surveillance practices against Germany, "questions that the German government asked months ago."
Ms. Merkel is known as a frequent texter, sometimes sending and receiving missives in public.
When the NSA scandal first broke in Germany over the summer, with reports that the U.S. was spying on Germans, opposition parties tried to use U.S. surveillance as a campaign issue against Ms. Merkel.
But despite the approaching parliamentary election in September, she resisted calls to take drastic action against the U.S.—such as shelving talks on the free-trade agreement—and underscored the importance of international cooperation in collecting intelligence.
Germany's highly unusual statement and strong words came after Der Spiegel contacted the government about a related story it was working on, the publication reported on its website. Der Spiegel said Germany's intelligence agency and its information security office checked out the magazine's information and believed it was serious enough to confront the U.S. government with it.
Der Spiegel didn't say what sources its research was based on, but the magazine has published a series of articles in recent months based on documents from former NSA contractor Edward Snowden. Der Spiegel said there was evidence that Ms. Merkel "may have been a target for years for U.S. intelligence agencies." It didn't publish documents or other evidence to back up those claims.
The White House said Mr. Obama assured Ms. Merkel in the call that the U.S. "is not monitoring and will not monitor" her communications. "The United States greatly values our close cooperation with Germany on a broad range of shared security challenges," White House spokesman Jay Carney said.
While not usually discussed in public, it is well known within intelligence circles that allies spy on each other.
Washington's assurances on Wednesday didn't appear to be entirely convincing.
"Between close friends and partners, as Germany and the United States have been for decades, such surveillance of the communications of heads of government cannot exist," Mr. Seibert said. "This would be a grave breach of trust."
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Fake outrage. We spy on everyone and they do the same in return.
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Fake outrage. We spy on everyone and they do the same in return.
And they will stop cooperating with us on the fight against terrorism? Good luck with that.
Like drone warfare, Libya intervention and so many other things, imagine if this had happened under Bush - or Romney, Pres. Cruz. etc. Like you say, instead we see the obligatory, fake outrage. Other than seek campaign contributions, Obama isn't going to do anything with the information.
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Inspired by Scotland's hopes for independence and hot on the heels of Crime'a 95% preference for accession to Russia, 89% of the citizens of Venice voted for their own sovereign state in a ‘referendum’ on independence from Italy. As The Daily Mail reports, the proposed ‘Repubblica Veneta’ includes the five million inhabitants of the Veneto region and has been largely driven by the wealthy 'who are tired of supporting the poor and crime-ridden south' (Venice pays EUR71bn in taxes and receives only EUR21bn in services and investment). The ballot appointed a committee of ten who immediately declared independence from Italy. Venice may now start withholding taxes from Rome. http://www.dailymail.co.uk/news/article-2586531/Venice-votes-split-Italy-89-citys-residents-opt-form-new-independent-state.html
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As is often the case with Stratfor, the economics of the following is littered with Keynesian babble, but there are some interesting details to be gleaned nonetheless.
Berlin Fears a High Court Ruling Could Threaten the European Union
Geopolitical Weekly
Tuesday, April 15, 2014 - 03:03 Print Text Size
Stratfor
By Marc Lanthemann
The Greek economy ended its four-year exile from international markets last week with a triumphant 3 billion euro (about $4.1 billion) bond sale. The global financial media trumpeted this somewhat unexpected achievement as a sign that things were finally turning around in the European Union's most blighted country. Media reports to the contrary, Greece's return to the market does nothing to resolve Greece's systemic economic deficiencies. Instead, it enables Greece to build up more debt, which will leave it a permanent bailout state for the foreseeable future.
In any case, events in Athens, a city perennially destined to be a dependent on the great powers of any given time, will not be pivotal to the future of the European Union. Nor will decisions made in Spain, Italy or even France. Instead, the Continent's fate in the 21st century will be decided in Germany. Germany stands increasingly alone as the guardian of the very European order that allowed it to prosper and quelled its historical insecurities about its neighbors.
Something as seemingly banal as a conversation at an Italian restaurant in Berlin does a much better job of illustrating how far Europe actually is from recovery, and how the fate of the Continent lies in Germany's hands. In the first days of April, German Interior Minister Thomas de Maiziere met with a group of scholars of constitutional law for dinner and discussion of the options for limiting the reach of Germany's powerful Federal Constitutional Court. The meeting stands testament to the German fear of seeing the European order crumble and to the severity of the political crisis brewing under the surface in the Continent.
The Perils of Unemployment
Stratfor has warned for years that the economic downturn that began battering Europe in 2008 would evolve into a full-blown social and political crisis. Nearly six years have gone by, and the European system remains as dysfunctional today as it was then. Great Depression-levels of unemployment have become the norm in Southern Europe, and have begun to creep northward.
Growing numbers of the unemployed and underemployed are fertile ground for political radicalism. Now, hopelessness about the future of Europe is moving into the mainstream. In election after election from France to Hungary, nationalist and Euroskeptic parties continue to gain in popularity to the point that they are becoming entrenched parts of the political system.
They remain a minority, for now. But many of them, in particular the National Front in France, have had to moderate some of the more radical parts of their platforms to break into the political mainstream. As popular discontent against what is seen as the failures of the pro-European mainstream parties grows alongside the economic crisis, so does support for some of the more nationalistic policies espoused by the far right.
The modern European establishment has only recently begun acknowledging the threat of radical parties. Next month's EU parliamentary elections have amplified the establishment's concerns. National elites have a tendency to deride what they perceive as loud and unrefined fringe groups, and to show considerable surprise when they become a political mainstay.
More aggressive commentators have denounced the European leadership for allocating inordinate resources to stabilizing the Continent's financial sector while pursuing tepid policies to stem the unemployment crisis. But while unemployment is ultimately a much more dangerous risk factor for the medium- to long-term stability of Europe, it is also a more difficult problem to solve.
Unemployment is a deeply political issue, much more so than a bank's balance sheet. It intersects not only with issues of economics, but also with myriad others including social welfare and sovereignty. While it is generally agreed that a growing economy leads to lower unemployment, the mechanics of job creation are not as clear-cut as those governing sovereign debt risk.
A sea change on how European elites, and Germany in particular, view the crisis now appears to lie ahead. The strategic threat posed by unemployment-fueled nationalism has become a core preoccupation in both Berlin and Brussels. It is becoming clearer that while current stopgap measures, including European Central Bank President Mario Draghi's famous open-ended bailout guarantee, may have warded off a fatal shock to Europe's economy, they are doing little to revive it.
Actually reviving it would require particularly bold action from the European leadership. Once-taboo topics such as giving the European Central Bank the ability to pursue monetary financing or mutualizing the debt of eurozone members are now openly discussed at the highest levels of European government.
The thinking has also changed within the German leadership, for whom austerity used to be a quasi-religious mantra and fears of inflation bordered on irrational. Now, even some of the most hawkish representatives of the German Central Bank are making cautious overtures regarding an expansionary monetary policy, especially as the European Union, including Germany, veers toward deflation.
The Limits of the European Central Bank
Calls for the European Central Bank to replicate the policies of its overseas counterparts have grown louder. These often overlook the fact that unlike the Federal Reserve and the Bank of England, which have guaranteeing employment as a charter goal, the sole mandate of the European Central Bank is to ensure price stability, much like the German Central Bank on which it was modeled. Even then, the bank is remarkably constrained. For example, it cannot directly purchase government bonds. These legal constraints can be changed, but only through a difficult political process.
With interest rates at 0.25 percent and data unclear as to the effectiveness of negative interest rates, quantitative easing is becoming increasingly popular, even within the European Central Bank. It is one of the few powerful tools the European leadership has left to kick-start the Continent's moribund economy. It also happens to be the only one that has at least a veneer of legality. Even then, it is hard to conceive of a meaningful program on par with the United States' three rounds of quantitative easing that could be easily contained within the bounds of the European Central Banks's inflation control-only mandate.
Herein lies the root of the problem, which is that all the measures that might reboot the European economy in essence require sacrificing more sovereignty to a central European authority. Even at this hour, when consensus is slowly but surely building on the political side for more drastic action, the European Union's perennial mandate problem is derailing any hope of recovery.
So far, the European leadership (including the courts) has shown itself to be remarkably creative in finding loopholes and drafting tack-on amendments to sidestep some of the most cumbersome EU legislation and get the job done. Unfortunately, there is no easy answer when it comes to nations having to surrender sovereignty, whether economic, political or social, to a group of barely accountable European technocrats.
The debate surrounding the role of the German Federal Constitutional Court comes against this backdrop. The court, a revered institution in Germany, is spearheading the defense of national interests against perceptions of EU overreach into sovereign matters.
A Threat From the Constitutional Court
Much like the U.S. Supreme Court, upon which Germany's highest court was partially modeled after World War II, the German Federal Constitutional Court is the final interpreter of constitutional law. Accordingly, it has the last word on the legality of any treaties, agreements or actions undertaken by Germany at the European level.
The court already has challenged German involvement in some of the more creative legal acrobatics undertaken by the European Union. These include the establishment of the EU emergency bond-buying plan known as the Outright Monetary Transactions program. In that case, the German Federal Constitutional Court proceeded with caution and referred the case to the European Court of Justice. But there are strong indications that it could be more aggressive in future cases. A rejection of government moves in a landmark case, such as one involving potential German participation in a strengthened quantitative easing program, could derail the Continent's recovery.
Economic policy is not the only issue on which the court has proven to be a thorn in German Chancellor Angela Merkel's side. German electoral law currently requires a party to win a minimum of 5 percent of the national vote to enter the national parliament, a measure designed to keep small radical parties out of an already relatively fragmented parliament. Berlin used to apply a similar threshold to German parties seeking access to the European Parliament. The German constitutional court recently struck down this requirement, and some politicians fear it could soon do the same for German federal elections. The current surge in popularity of nationalist parties heretofore excluded from the legislature may jeopardize the existence of a strong government in Berlin, the only real decision-making body in a battered Europe.
The court's current course of action poses an existential threat to Merkel's political career and to Germany's economy and stability, which continue to depend on the health of the European Union and the economies of its constituent members. Should the court so rule, Germany could rapidly lose its place as the Continent's strongman, being condemned instead to internal paralysis as it watches Europe slowly stagnate.
As with most of the really important developments in Europe, the battle between the court and the German government will be drawn out and will remain out of the public eye for now. Still, the very existence of open discussions about reducing the power of one of the most trusted and impartial institutions in Germany testifies to how seriously the chancellor's office takes the danger of the fallout from the court's potential ruling.
Read more: Berlin Fears a High Court Ruling Could Threaten the European Union | Stratfor
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National Front's Marine Le Pen of France Leads Anti-EU Drive
In European Parliament Voting, French Far-Right Leader Seeks to Unite Nationalists Who Want to Abolish EU
By Gabriele Parussini
Updated May 23, 2014 10:51 a.m. ET
Marine Le Pen supporting a National Front candidate for the European Parliament, where she aims to lead an anti-European Union coalition. Sipa Press
VILLERS-COTTERÊTS, France—Marine Le Pen, leader of France's far-right National Front, doesn't typically draw votes from people like Marius Pigoni.
For decades, the 80-year-old sawmill owner voted for moderate politicians who espoused the European ideal of building an economic bloc free from the nationalist forces that drove the continent into two world wars.
But as people in the European Union's 28 member countries vote on a new European Parliament, Mr. Pigoni's focus is a worry that his sawmill business will be ruined by low-cost imports, including from Eastern Europe.
Ms. Le Pen is leading a campaign to abolish the EU. She is getting Mr. Pigoni's vote.
"As someone who saw the war, I can tell you the EU was a great idea," he said. "But now it's become a farce. We're broke and we're offering billions to Ukraine."
View Graphics
Like Mr. Pigoni, many Europeans have fallen out of love with mainstream political parties and their technocratic creation, the EU.
The EU, they say, has become a bureaucratic machine that excels at dispensing edicts on how cheese is labeled while ignoring everyday problems such as unemployment and illegal immigration. By some polling estimates, myriad anti-EU groups could nearly double their tally in May 22-25 voting from the last European Parliament election five years ago by taking as much as a quarter of the seats.
Casting the EU as public enemy No. 1, Ms. Le Pen and other nationalists are presenting themselves as credible alternatives to Europe's mainstream, pro-EU leaders, and no longer as mere loudspeakers for protest voters.
"The EU nowadays is like the U.S.S.R.: It can't be improved. We need to let it crumble and build after it a Europe of free and sovereign nations," Ms. Le Pen said in an interview at the National Front headquarters just outside Paris.
Having expanded her National Front's following in France, she is setting out to unite Europe's disparate nationalist parties into an anti-EU caucus at the European Parliament—one that could stall the decadeslong march toward a United States of Europe.
The formation of a potent anti-EU minority would also pose a risk to EU policies some economists consider important to restoring growth. One likely target: an ongoing effort to forge a trans-Atlantic free-trade agreement.
That wouldn't bother Ms. Le Pen. She calls the effort "pure folly."
As the election approached, mainstream politicians were sounding the alarm. "The ideas promoted by the far right aren't the values of France and once were behind Europe's nightmare," said French Prime Minister Manuel Valls, alluding to the world wars. In Italy, President Giorgio Napolitano warned of "populist impulses" that endanger the EU.
With many EU members' economies still limping, the bloc has yet to demonstrate an ability to halt the ravages of the sovereign-debt crisis, making this election a crucial test.
Although the elections are for the European Parliament, they are likely to have effects on national governments in some countries. In Italy, the expected rise of anti-EU movements could endanger the frail coalition supporting the government of Prime Minister Matteo Renzi. In France, fallout may be more limited because President François Hollande reshuffled his government after his Socialist Party suffered a stinging defeat in local elections in March.
For Ms. Le Pen, uniting Europe's unruly protest parties under a single banner is likely to be a daunting task. The parties, ranging from Italy's Northern League to Austria's FPÖ to the Sweden Democrats, are often focused on issues local to their regions and share little beyond a desire to disband the EU. They began as fringe groups, and some still are.
The influence of the coalition Ms. Le Pen envisions will also depend in part on her ability to woo groups that oppose the EU but reject nationalist ideology. Among these is the 5-Star Movement of Italian comedian-turned-politician Beppe Grillo, which includes leftists traditionally opposed to Ms. Le Pen. It is forecast to garner more than 20% of the Italian vote in the parliamentary election.
Mr. Grillo recently wrote on his blog that "Marine Le Pen is a fine-looking, successful lady. I don't hate her. But her political stance is different" from his movement's.
One leading euroskeptic, Nigel Farage of the U.K. Independence Party, has called Ms. Le Pen's National Front anti-Semitic, which she denies.
"Ms. Le Pen is best positioned to pull together the anti-Europeans," said Jean-Dominique Giuliani, head of a Paris think tank called the Robert Schuman Foundation. "But running such a rowdy coalition will be a big challenge."
So far, Ms. Le Pen, who has held a seat in the European Parliament for 10 years, has shown a knack for corralling disparate anti-EU forces. Since taking the reins of the National Front in 2011 from her father, Jean-Marie Le Pen, she has hopscotched the continent—joining singalongs with other nationalists in Stockholm, attending a ball with far-right leaders in Vienna and shuttling to meetings of Dutch firebrand Geert Wilders's Freedom Party.
European Parliament Elections 2014
At home, Ms. Le Pen, 45 years old, has built a network of young cadres who are refashioning the movement she inherited into a full-fledged political party.
In March, the National Front won about 10 cities in French municipal elections, a strong showing for a group that until recently had no roots in local administrations. Now, polls predict it will collect 23% of the French vote for the European Parliament, topping Mr. Hollande's Socialists and their UMP conservative opposition.
As the municipal-election results came in, Ms. Le Pen's cellphone buzzed with congratulations from allies such as Franz Obermayr from Austria's FPÖ and Gerolf Annemans from a Flemish nationalist group. Wrote Mr. Annemans: "This is a victory for Europe as much as it's a defeat for the European Union."
Part of the gains, nationalist allies say, stem from Ms. Le Pen's success in projecting a modern image and distancing herself from her father, who used to boast of taking part in France's colonial wars in Indochina and Algeria.
"Marine is of a generation that looks into the future, not into the past," said Andreas Mölzer, an Austrian nationalist who sits close to Ms. Le Pen in the European Parliament. "She likes pop songs more than military marches."
The makeover is sometimes disrupted by inflammatory remarks on religion and immigration by her father. On Tuesday, talking to aides about a population boom in the developing world, Mr. Le Pen said, "The problem could be taken care of in three months by Monseigneur Ebola." Mr. Le Pen said later he wasn't calling for an epidemic; his daughter's chief of staff said his words had been misinterpreted.
Ms. Le Pen's rise is also fueled by the declining popularity of the EU's single currency. Support for it across the euro zone fell to 52% last fall from 60% in 2008, according to a poll the EU Commission ordered.
She has tapped into a vast well of public discontent driven by high unemployment, branding the euro as the culprit for many of Europe's economic problems. That message enables the National Front to connect with some voters who aren't animated by its other issues, such as crime and immigration.
Although the EU has had some success in restoring calm on Europe's sovereign-debt markets, its main prescription of austerity for overindebted countries has left large parts of the continent fighting long-running recessions. Greece is burdened by debt nearly twice the size of its economy, Spain by 25% unemployment and Portugal by budget woes that have forced the layoff of a fifth of the civil service. Protesters from 20 countries clashed with police in Brussels last month, waving banners that said "Stop austerity."
Ms. Le Pen maintains that without the euro there would be no need for austerity. The Bank of France could print money to finance the state.
Ms. Le Pen wants her country to create a Ministry of Sovereignties to regain control over powers ceded to Brussels. Calling the euro zone a "prison," she has said the strong common currency hobbles manufacturers' efforts to sell their goods abroad.
"What has been done in the past can, in fact, be undone," Ms. Le Pen said.
When she took over in 2011 as head of the movement her father founded, Ms. Le Pen quickly set about bonding with other nationalist leaders in Europe, often picking cards from her father's Rolodex.
First she met in Rome with a Northern League leader, Mario Borghezio, and the two flew to Lampedusa. The small Italian island near Tunisia was convulsing under waves of illegal immigrants from the Middle East and Africa.
Ms. Le Pen toured its vast refugee camps and its port strewn with abandoned fishing boats used by the refugees. After a meeting with migrants, she said: "I have a lot of compassion for you. I also have a heart. But Europe doesn't have the capacity to welcome you."
Aides to Ms. Le Pen said the trip was part of a campaign aimed at remodeling the image of the National Front, long associated with the xenophobic figure of her father, to show that its stance against immigration wasn't race-based.
Her softer tone helped her gain followers, but she continued to face accusations she hadn't severed links with Europe's more extreme nationalists.
Ms. Le Pen this month with her father, Jean-Marie Le Pen, former leader of the National Front. Associated Press
In early 2012 Ms. Le Pen appeared in a sleek black dress at the imposing Hofburg Palace in Vienna, a guest of the FPÖ for an annual ball held by student groups that accept only ethnic Germans. The date that year fell on the 67th anniversary of the liberation of Auschwitz, and 5,000 protesters harangued guests as they made their way into the palace under police protection.
"In going dancing in Vienna, Ms. Le Pen accomplished a major faux-pas," said the center-right editorial page of the French weekly Le Point.
Later in 2012, Ms. Le Pen joined nationalists from four countries at a dinner in a Stockholm restaurant decorated with stuffed animal heads. It was punctuated by singing, and in her turn at the mike, Ms. Le Pen sang "Paroles, Paroles," a love-duet hit from the 1970s in which a woman bemoans the emptiness of her partner's promises.
"Words, words, words, words, words," she sang in French. Language barriers among the guests didn't hide the gibe at mainstream politicians.
In between those trips abroad to court other nationalists, Ms. Le Pen ran in France's May 2012 presidential election, placing third behind Mr. Hollande and incumbent Nicolas Sarkozy. Her 17.9% showing topped any vote tally her father gained in his earlier runs for president.
This year, Ms. Le Pen has ventured into new territory for the National Front: foreign affairs. On a trip to Moscow last month, she met with the speaker of the Russian parliament's lower house, Sergei Naryshkin, who is among the targets of U.S. and EU sanctions imposed after Russia annexed Crimea. "I'm surprised to see how some inside the European Union have declared a Cold War on Russia," Ms. Le Pen said at a briefing with her host.
In developing her anti-euro platform, Ms. Le Pen has exchanged notes with Matteo Salvini of Italy's Northern League, a politician who brandishes campaign posters with screaming yellow banners that read "Basta €uro"—"enough with the euro."
In Italy, the slogan is luring a new generation of voters toward nationalist and populist parties. Among them is Roberto Brazzale, who heads a 200-year-old cheese-making firm in the Vicenza area bearing his family name.
He is nostalgic for the era when Italy's currency was the lira. Then, countries such as Italy could compensate for an erosion of competitiveness by devaluating their currencies. With the euro, that isn't possible.
"The common market is the best thing that ever happened to us," said Mr. Brazzale—"and the euro is about to make it explode."
Italy made a mistake in joining the euro 15 years ago, said 58% of respondents to a March survey by polling firm Istituto Demopolis.
In the election for the European Parliament, Italian parties campaigning against the EU, including the 5-Star Movement, are expected to win about 37% of the votes, according to a Pollwatch prediction based on surveys conducted by three pollsters. Five years ago, the Northern League was the only party with an anti-EU platform, and drew just 10.2%.
In Villers-Cotterêts, the French town northeast of Paris where Mr. Pigoni has his sawmill, he says nearly all of 30 competing mills that once dotted the region are gone. He complains that local schools buy imported furniture rather than turn to local suppliers.
Reinforcing his decision to vote for Ms. Le Pen on Sunday, he said, was a recent pledge by France's president to rekindle growth with small tax cuts spread through 2020.
"What's the point?" Mr. Pigoni said. "By then, France will have lost all its industries."
—Nicole Lundeen, Charles Duxbury and Ellen Proper contributed to this article.
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second post
LONDON — Voters in Britain sent a forceful message of discontent to established political parties on Friday, as returns from local elections showed an even stronger following than expected for the anti-European Union, anti-immigration United Kingdom Independence Party.
The results had an immediate impact across the political spectrum, hurting the Labour Party as well as the partners in the governing coalition, the Conservatives and the Liberal Democrats. The outcome is likely to increase the pressure on Prime Minister David Cameron to take an even harder line on reducing the powers of the European Union.
The local vote is expected to presage another strong showing for the Independence Party in elections for the European Parliament when those votes are counted late on Sunday. Some opinion polls showed the party with slightly more support than the other parties in the European voting, which took place on Thursday, the same day as the local balloting.
Coming on the heels of a strong showing in France’s local elections for the right-wing National Front party of Marine Le Pen, the returns provide a clear signal of the dissatisfaction of Europeans with their mainstream political parties, as well as with the European Union political establishment after six years of economic doldrums, which is still being felt by many despite hints of recovery.
In Britain, the strong showing for the Independence Party will not only leave Mr. Cameron, a Conservative, further embattled, but will also embolden Labour Party critics who say that their leader, Ed Miliband, has not convinced voters of his leadership capacity.
The Liberal Democrats, known for their strength locally, and their leader, the vocally pro-European Nick Clegg, were hit very hard by their usual voters, who are unhappy with the compromises of a coalition government.
Nigel Farage, the Independence Party’s leader, said it was now “a serious player,” adding, “The UKIP fox is in the Westminster henhouse.” He appeared on British television for interviews dressed in a sober gray suit, but he celebrated with his trademark pint of beer, and said he would run for the British Parliament in the general election next May.
While right-wing parties skeptical of Europe are expected to do well all over the European Union in what is normally a low turnout, the Dutch went against the trend and put its right-wing Party for Freedom, led by Geert Wilders, into fourth place, behind pro-Europe parties, according to an exit poll conducted by Ipsos for Dutch TV.
Mr. Wilders, whose party had been expected to top the Dutch voting, attributed his poor showing to a low turnout of around 35 percent.
Still, despite its sweeping gains in the local British elections, the Independence Party will not control a single local council and does not have a single member in Parliament. Nor does it have a coherent set of economic policies. But Mr. Farage’s message — British values, British beer, controls on immigration from within the European Union and a British exit from the bloc — is clearly resonating with disaffected voters from across the spectrum who are angry about the cost of living, the drop in real income and years of austerity.
A similar message is echoed by other anti-Europe and more far-right parties, including the National Front in France and the Five Star Movement in Italy.
The Independence Party has already proved itself to be an alternative to the status quo, being to the right of the Conservatives but trying to avoid, or repress, the racism of far-right parties like the British National Party. It has touched a nerve with Britons who believe that jobs are being taken away by immigrants from countries like Romania, Bulgaria and Poland who have the right to travel and work freely within the European Union but are willing to work for lower salaries.
The party could deny the established parties an overall majority in the general election a year from now, with Tories especially concerned that the Independence Party will take away enough votes to block their victory in tight election districts.
“UKIP should be extremely pleased with themselves,” said Tim Bale, a professor of politics at Queen Mary University of London. “But they still face this enormous hurdle of the electoral system, which is going to make it very difficult for them to convert even this level of support into parliamentary seats in 2015.”
A YouGov poll published on Friday about voting intentions for the 2015 general election had the Independence Party at 14 percent, with the Conservatives and Labour tied at 34 percent each, and the Liberal Democrats at 9 percent. That could be bad news for Labour, too, which needs to have a larger share now, since polls traditionally narrow closer to Election Day.
Mr. Clegg, who debated Mr. Farage twice and was considered to have been bested, said, “There’s a very strong antipolitics mood around, a restlessness and dissatisfaction with all the main parties.” He said he would not resign as the leader of the Liberal Democrats.
Mr. Cameron said he took away “a clear message” that “people want us to deliver more on issues that frustrate them and frustrate me.” He promised “to work flat out to deliver more on the economy, immigration and welfare.” He also vowed that he would not make any kind of electoral pact with the Independence Party.
In the latest local results, with 154 of 161 councils declared, Labour had gained 292 seats, the Independence Party had gained 155, the Liberal Democrats had lost 284 and the Conservatives had lost 201.
Though Labour, the main opposition party, also made gains, they were not as large as expected, and the Independence Party’s advances, which included some in traditional Labour heartlands in the north, spread alarm through Labour’s ranks, as well as those of the two governing parties.
Despite important gains in London and some other parts of the country, Labour would normally hope to be polling better a year ahead of a general election. Mr. Miliband said he had taken note of the anxieties of those who opted for the Independence Party. “I am determined that over the next year we persuade them that we can change their lives for the better,” he said.
But except in areas of the southeast, the Independence Party’s vote appeared to be spread thinly, which means that it could emerge from 2015 with no parliamentary seats. In the British system, each election district has its own vote, and national percentages of the vote do not matter.
In the past, the party’s share of the vote dropped significantly in general elections. In 2010, it registered about 3 percent, a year after European elections in which it took more than 16 percent.
The rise of the party seemed implausible eight years ago, when Mr. Cameron, newly elected as the Conservative Party leader but not yet in power, described it as “a bunch of fruitcakes, loonies and closet racists.”
In all, 4,216 seats in 161 local councils in England and 462 seats in 11 local councils in Northern Ireland were up for election.
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http://www.nationalreview.com/article/384766/end-nato-victor-davis-hanson
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Economic growth in Europe came in at zero in the second quarter of 2014. That's not the growth that Europe — with its huge unemployment rate of 12 percent, or roughly 19,130,000 people out of work — needs.
http://theweek.com/article/index/266423/europe-is-in-an-epic-depression--and-its-getting-worse
Euro-Zone Economy Stalls in Second Quarter as German GDP Slips
http://online.wsj.com/articles/french-gdp-fails-to-grow-in-second-quarter-1407994573
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Problems of Europe failing/floundering from a US point of view:
1) Our economies are linked. The EU is the largest trading partner of the US with $367.8 billion worth of EU goods going to the US and $268.6 billion of US goods going to the EU as of 2011, totaling approximately $636.4 billion in total trade. http://en.wikipedia.org/wiki/List_of_the_largest_trading_partners_of_the_United_States
2) We are copying their failed economic model.
3) We are backing their currency and bailouts: http://newmediajournal.us/indx.php/item/4018
"The gloomy numbers out of the euro zone—whose roughly $13 trillion economy accounts for 17% of the world's gross domestic product—join a litany of similarly sour reports this week from Asia, all pointing to signs of sudden weakness among many major economies." - WSJ link
Brian Wesbury remains optimistic, sees buying opportunities...
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Similarities to the Tea Party:
http://en.wikipedia.org/wiki/UK_Independence_Party
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This columnist, Niles Gardner, has credibility with me. That said, 4 of these points are opinion and open to question. Only one 2. Britain’s nuclear deterrent will have to be moved is a solid fact. But that point stands alone as a huge issue IMHO. Making Britain a weaker nuclear power makes the world a more dangerous place.
What I find odd about the issue is that it is (our family's alleged homeland) Scotland that is too liberal and the rest of the UK that is too conservative for them. The vote is later next week, Sept 18, and the polling is about even.
http://blogs.telegraph.co.uk/news/nilegardiner/100285670/the-united-states-should-be-nervous-about-the-scottish-independence-referendum/
1. The Special Relationship will be undercut.
2. Britain’s nuclear deterrent will have to be moved
3. The coalition against Isil will be weakened
4. US markets will take a hit
5. An independent Scotland will be an insignificant ally to the U.S.
Details on each at the link. Expanding on no. 2: Britain’s nuclear deterrent will have to be moved
The UK’s entire nuclear deterrent is based in Scotland, and all Britain’s nuclear bases and warheads will have to be moved out of the country, a huge headache not only for London, but also for Washington. Any threat to Britain’s status as a nuclear power is a matter of great concern for the United States. The Nato alliance was originally conceived as a nuclear alliance, one that has been underpinned since its founding by the American, British and (at times) French nuclear deterrents. Anything that undermines Britain’s position as an independent nuclear power and weakens Nato is a matter of significant concern to the United States.
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No doubt the anti-nuke movement will prevent much of the arsenal from being re-located, and potentially put out of service, like Obama is doing here.
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The Origins and Implications of the Scottish Referendum
Geopolitical Weekly
Tuesday, September 16, 2014 - 03:01 Print Text Size
Stratfor
By George Friedman
The idea of Scottish independence has moved from the implausible to the very possible. Whether or not it actually happens, the idea that the union of England and Scotland, which has existed for more than 300 years, could be dissolved has enormous implications in its own right, and significant implications for Europe and even for global stability.
The United Kingdom was the center of gravity of the international system from the end of the Napoleonic Wars until World War II. It crafted an imperial structure that shaped not only the international system but also the internal political order of countries as diverse as the United States and India. The United Kingdom devised and drove the Industrial Revolution. In many ways, this union was a pivot of world history. To realize it might be dissolved is startling and reveals important things about the direction of the world.
Scotland and England are historical enemies. Their sense of competing nationhoods stretches back centuries, and their occupation of the same island has caused them to fight many wars. Historically they have distrusted each other, and each has given the other good reason for the distrust. The national question was intertwined with dynastic struggles and attempts at union imposed either through conquest or dynastic intrigue. The British were deeply concerned that foreign powers, particularly France, would use Scotland as a base for attacking England. The Scots were afraid that the English desire to prevent this would result in the exploitation of Scotland by England, and perhaps the extinction of the Scottish nation.
The Union of 1707 was the result of acts of parliaments on both sides and led to the creation of the Parliament of Great Britain. England's motive was its old geopolitical fears. Scotland was driven more by financial problems it was unable to solve by itself. What was created was a united island, acting as a single nation. From an outsider's perspective, Scotland and England were charming variations on a single national theme -- the British -- and it was not necessary to consider them as two nations. If there was ever a national distinction that one would have expected to be extinguished in other than cultural terms, it was this one. Now we learn that it is intact. We need a deeper intellectual framework for understanding why Scottish nationalism has persisted.
The Principle of National Self-Determination
The French Enlightenment and subsequent revolution had elevated the nation to the moral center of the world. It was a rebellion against the transnational dynasties and fragments of nations that had governed much of Europe. The Enlightenment saw the nation, which it defined in terms of shared language, culture and history, as having an inherent right to self-determination and as the framework for the republican democracies it argued were the morally correct form of government.
After the French Revolution, some nations, such as Germany and Italy, united into nation-states. After World War I, when the Hapsburg, Hohenzollern, Romanov and
Ottoman empires all collapsed, a wave of devolution took place in Europe. The empires devolved into their national components. Some were amalgamated into one larger nation, such as Yugoslavia or Czechoslovakia, while others, such as Poland, were single nation-states. Some had republican democracies, others had variations on the theme, and others were dictatorships. A second major wave of devolution occurred in 1992, when the Soviet Union collapsed and its constituent republics became independent nation-states.
The doctrine of the right to national self-determination drove the first wave of revolts against European imperialism in the Western Hemisphere, creating republics in the Americas. The second wave of colonial rising and European withdrawal occurred after World War II. In some cases, nations became self-determining. In other cases, nation-states simply were invented without corresponding to any nation and actually dividing many. In other cases, there were nations, but republican democracy was never instituted except by pretense. A French thinker, Francois de La Rochefoucauld, said, "Hypocrisy is the tribute that vice pays to virtue." Even while betraying its principles, the entire world could not resist the compulsion to embrace the principles of national self-determination through republican democracy. This effectively was codified as the global gold standard of national morality in the charters of the League of Nations and then the United Nations.
The Imperfection of the Nation-State
The incredible power of the nation-state as a moral principle and right could be only imperfectly imposed. No nation was pure. Each had fragments and minorities of other nations. In many cases, they lived with each other. In other cases, the majority tried to expel or even destroy the minority nation. In yet other cases, the minority demanded independence and the right to form its own nation-state. These conflicts were not only internal; they also caused external conflict over the right of a particular nation to exist or over the precise borders separating the nations.
Europe in particular tore itself apart in wars between 1914 and 1945 over issues related to the rights of nation-states, with the idea of the nation-state being taken to its reductio ad absurdum -- by the Germans as a prime example. After the war, a principle emerged in Europe that the borders as they stood, however imperfect, were not to be challenged. The goal was to abolish one of the primary causes of war in Europe.
The doctrine was imperfectly applied. The collapse of the Soviet Union abolished one set of borders, turning internal frontiers into external borders. The Yugoslavian civil war turned into an international war once Yugoslavia ceased to exist, and into civil wars within nation-states such as Bosnia, Serbia and Croatia. At the same time, the borders in the Caucasus were redrawn when newly independent Armenia seized what had been part of Azerbaijan. And in an act that flew in the face of the principle, NATO countries divided Serbia into two parts: an Albanian part called Kosovo and the rest of Serbia.
The point of all this is to understand that the right to national self-determination comes from deep within European principles and that it has been pursued with an intensity and even viciousness that has torn Europe apart and redrawn its borders. One of the reasons that the European Union exists is to formally abolish these wars of national self-determination by attempting to create a framework that both protects and trivializes the nation-state.
Scotland's Case
The possibility of Scottish independence must be understood in this context. Nationalism, the remembrance and love of history and culture, is not a trivial thing. It has driven Europe and even the world for more than two centuries in ever-increasing waves. The upcoming Scottish election, whichever way it goes, demonstrates the enormous power of the desire for national self-determination. If it can corrode the British union, it can corrode anything.
There are those who argue that Scottish independence could lead to economic problems or complicate the management of national defense. These are not trivial questions, but they are not what is at stake here. From an economic point of view, it makes no sense for Scotland to undergo this sort of turmoil. At best, the economic benefits are uncertain. But this is why any theory of human behavior that assumes that the singular purpose of humans is to maximize economic benefits is wrong. Humans have other motivations that are incomprehensible to the economic model but can be empirically demonstrated to be powerful. If this referendum succeeds, it will still show that after more than 300 years, almost half of Scots prefer economic uncertainty to union with a foreign nation.
This is something that must be considered carefully in a continent that is prone to extreme conflicts and still full of borders that do not map to nations as they are understood historically. Catalonia, whose capital is Barcelona, the second-largest and most vibrant city in Spain, has a significant independence movement. The Treaty of Trianon divided Hungary so that some Hungarians live in Romania, while others live in Slovakia. Belgium consists of French and Dutch groups (Walloons and Fleming), and it is not too extreme to say they detest each other. The eastern half of Poland was seized by the Soviet Union and is now part of Ukraine and Belarus. Many Chechens and Dagestanis want to secede from Russia, as do Karelians, who see themselves as Finns. There is a movement in northern Italy to separate its wealthy cities from the rest of Italy. The war between Azerbaijan and Armenia is far from settled. Myriad other examples can be found in Europe alone.
The right to national self-determination is not simply about the nation governing itself but also about the right of the nation to occupy its traditional geography. And since historical memories of geography vary, the possibility of conflict grows. Consider Ireland: After its fight for independence from England and then Britain, the right to Northern Ireland, whose national identity depended on whose memory was viewing it, resulted in bloody warfare for decades.
Scottish independence would transform British history. All of the attempts at minimizing its significance miss the point. It would mean that the British island would be divided into two nation-states, and however warm the feelings now, they were not warm in the past nor can we be sure that they will be warm in the future. England will be vulnerable in ways that it hasn't been for three centuries. And Scotland will have to determine its future. The tough part of national self-determination is the need to make decisions and live with them.
This is not an argument for or against Scottish nationhood. It is simply drawing attention to the enormous power of nationalism in Europe in particular, and in countries colonized by Europeans. Even Scotland remembers what it once was, and many -- perhaps a majority and perhaps a large minority -- long for its return. But the idea that Scotland recalls its past and wants to resurrect it is a stunning testimony less to Scottish history than to the Enlightenment's turning national rights into a moral imperative that cannot be suppressed.
More important, perhaps, is that although Yugoslavia and the Soviet collapse were not seen as precedents for the rest of Europe, Scotland would be seen that way. No one can deny that Britain is an entity of singular importance. If that can melt away, what is certain? At a time when the European Union's economic crisis is intense, challenging European institutions and principles, the dissolution of the British union would legitimize national claims that have been buried for decades.
But then we have to remember that Scotland was buried in Britain for centuries and has resurrected itself. This raises the question of how confident any of us can be that national claims buried for only decades are settled. I have no idea how the Scottish will vote. What strikes me as overwhelmingly important is that the future of Britain is now on the table, and there is a serious possibility that it will cease to be in the way it was. Nationalism has a tendency to move to its logical conclusion, so I put little stock in the moderate assurances of the Scottish nationalists. Nor do I find the arguments against secession based on tax receipts or banks' movements compelling. For centuries, nationalism has trumped economic issues. The model of economic man may be an ideal to some, but it is empirically false. People are interested in economic well-being, but not at the exclusion of all else. In this case, it does not clearly outweigh the right of the Scottish nation to national-self determination.
I think that however the vote goes, unless the nationalists are surprised by an overwhelming defeat, the genie is out of the bottle, and not merely in Britain. The referendum will re-legitimize questions that have caused much strife throughout the European continent for centuries, including the 31-year war of the 20th century that left 80 million dead.
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Europe Rediscovers Nationalism
Analysis
January 11, 2015 | 14:02 GMT Print Text Size
French nationals attend a vigil in Taipei on Jan. 9, mourning the victims of the shooting at the Paris office of the satirical newspaper Charlie Hebdo that took place Jan. 7. (SAM YEH/AFP/Getty Images)
Analysis
In his latest novel, French writer Michel Houellebecq presents a controversial situation: The year is 2022, and France has become an Islamicized country where universities have to teach the Koran, women have to wear the veil and polygamy is legal. The book, which created a stir in France, went on sale Jan. 7. That day, a group of terrorists killed 12 people at the headquarters of French satirical magazine Charlie Hebdo.
Also on Jan. 7, German Chancellor Angela Merkel met British Prime Minister David Cameron in London. Although the formal reason for the meeting was to discuss the upcoming G-7 summit, the two leaders also discussed Cameron's proposals to limit migration in Europe. Finally, a much less publicized event took place in Germany that day: A group of politicians from the Euroskeptic Alternative for Germany party met with members of Pegida, the anti-Islam protest group that has staged large protests in Dresden and minor protests in other German cities.
The date of these four episodes is only a coincidence, but the issues involved are not. A growing number of Europeans believe that people from other cultures are threatening their national identities and livelihoods. The emergence of Germany's Pegida movement, which opposes the "Islamization" of Germany, the terrorist attack in Paris and the recent attacks against mosques in Sweden put the focus on Muslims. But the Europeans' fear and mistrust of "foreigners" is a much broader phenomenon that goes beyond the issue of Islam-related violence. What is actually happening is that Europe is rediscovering nationalism.
The Limits of European Integration
Europe traditionally has been a cradle for nationalism. From the romantic nationalism of the 19th century to the totalitarianism of the 20th century, Europeans have long defined themselves by a strong sentiment of national belonging, often linked to language, ethnicity and religion, and distrust of foreigners. The love for the place you were born, the trust of the people who surround you, and the fear of what strangers could do to you and your community is a basic human feeling. But in Europe, nationalism is particularly notable for the sheer scale of death and destruction it historically has brought to the Continent.
Conscious of the dangers of nationalism, after World War II Europeans sought to weaken the nation-state and progressively replace it with the European Union, a grouping of supranational institutions that, over time, were meant to create a supranational European identity. The idea worked for some time, especially at the economic level, where institutions quickly achieved integration. But over the past few years, several changes in Europe have exposed the limits of the project.
The first is the economic crisis. To a large extent, prosperity was the glue holding the European Union together. During good times, when most people have a job and children are convinced that they will have a better life than their parents, the idea of giving up national sovereignty to supranational institutions is easier to accept. But prosperity is no longer a certainty, and many in Europe are beginning to have second thoughts about the benefits of the European project. The economic decline is also leading to a crisis of representation; a growing number of citizens no longer feel represented by mainstream political parties, unions and other traditional institutions.
The second element is immigration. The economic crisis is affecting the Continent unevenly; countries in northern Europe generally are faring better than those in the south. In addition, the European Union's enlargement in the mid 2000s opened the door for immigration from countries in the former Communist bloc. As a result, countries such as Germany, the United Kingdom and the Netherlands are dealing with immigration from southern and eastern EU countries.
Moreover, Europe's economic crisis coincides with a deepening of the chronic instability in the Middle East and the Levant. This instability has led to a refugee crisis in Europe as hundreds of thousands of asylum seekers arrive in Europe every year, most of whom are Muslims.
In times of economic hardship, people tend to look for simple answers to complex problems, and "foreigners" are usually the easiest target. It is not a coincidence that the Pegida protests emerged in Saxony — one of the German states with the lowest rates of immigration but with some of the highest rates of unemployment. Ethnically and linguistically cohesive areas tend to be less tolerant of people with a different cultural background.
The third issue is integration. Most European governments operate under the idea that immigration could help the European Union mitigate the effects of their shrinking, aging populations. But many countries struggle to fully integrate the newly arrived. Encountering obstacles such as rigid citizenship laws and pervasive cultural barriers, many foreigners find it hard to feel at home in their new countries of residence. In some cases, this situation continues for generations.
Youth unemployment, lack of opportunities and social discrimination were some of the triggers of the French riots of 2005. A decade later, nothing much has changed in France in terms of integration, while the economic crisis has compounded some of the country's structural problems, and Islamist groups such as the Islamic State are successfully using social networks to attract Western European youth.
Click to Enlarge
European nationals returning home after receiving training in the Middle East perpetrated many of the recent terrorist attacks in Europe. Since the outbreak of civil war in Syria, more than 550 Islamists reportedly have left Germany to travel to the region. Slightly more than half of them held German citizenship. French media recently reported that some 400 French nationals are fighting in Syria. There is a vicious cycle of young men and women who feel disenfranchised and discriminated against turning to violence — which only fuels anti-immigration and anti-Islam rhetoric.
Political Systems Under Duress
Western European governments are under considerable stress. They have to deal with immigration from less-developed EU nations while trying to assimilate the asylum seekers that arrive from the Mediterranean. Simultaneously, they face the emergence of anti-immigration parties (from the National Front in France to the U.K. Independence Party in the United Kingdom) and recurring terrorist attacks by nationals who received training in the Middle East. Many Western European countries have to deal with these problems alongside stagnating economies and pervasively high unemployment. The combination of economic malaise and resistance to immigration is seriously challenging the cohesion of the European Union.
Sweden's Electoral Season Reveals Growing Concern with Immigration
Click to Enlarge
National and regional governments are questioning the Schengen agreement, which eliminates border controls among most EU member states. In recent months, a debate erupted when the government of the German state of Bavaria accused the Italian government of allowing asylum seekers (who, according to EU norms, should have remained in Italy) to leave the country and request asylum somewhere else in the bloc. Rome demanded more solidarity among EU members in the reception of refugees. From Bavaria's point of view, the Schengen agreement should be suspended. From Italy's point of view, the European Union cannot force its coastal nations to bear the sole responsibility of housing the asylum seekers.
The Schengen pact also faces criticism from groups arguing that insufficient internal border controls makes it easier for terrorists to move within the European Union after they enter the bloc. Moreover, some countries have been accused of applying weaker border controls than others. In recent months EU members have discussed ways to improve information sharing across the Continent, but regardless of better cooperation in this area, it is impossible to follow every single potential threat.
Even outside the Schengen agreement, the principle of the free movement of people — one of the founding pillars of the European Union — is under question. Partly because of pressure from the U.K. Independence Party and partly because of its own ideology, the British government flirted with the idea of introducing "emergency brakes" on EU immigration. Germany quickly dismissed the idea, and London eventually abandoned it. But the fact that a moderate government in a core EU country is making these proposals reflects the extent to which the debate over migration in the European Union is no longer at the ideological fringes of the political spectrum.
After decades of post-war supranationalism, the Europeans are once again discussing their national identities. The French tried to start a discussion in 2009, when then-President Nicolas Sarkozy launched a public debate on "what it means to be French" — an exercise that degenerated quickly into a discussion of the role of Muslims in the country. The Pegida protests led to similar debates in Germany, a country that for historic reasons feels extremely uncomfortable with the topic but also considers generational change to be breaking old taboos. Pegida-inspired demonstrations will take place in Austria in February, potentially leading to controversy there as well. These debates will not go away in Europe and will force the Europeans to deal with difficult questions that have remained dormant for decades.
At the core of these problems is growing resistance to globalization, understood as the free movement of goods, services and, most important, people. From the Italian shoemaker who cannot compete with cheap Chinese imports to the British factory worker who believes that Polish immigrants are threatening his job, many Europeans believe globalization is a menace to their way of life. The fact that the European Union was built on many of the principles of globalization explains why the bloc is becoming increasingly fragmented and why the promise of a "United States of Europe" probably will never be achieved.
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Note her comments about Putin, especially in light of my recent postings of Glenn Beck's musings on Russia
The Champion of French Anxiety
The National Front leader says ‘we are the only ones to solve the problem’ of the country’s Islamist threat.
ENLARGE
Zina Saunders
By
Sohrab Ahmari
Jan. 16, 2015 6:50 p.m. ET
218 COMMENTS
Nanterre, France
Following last week’s terror attacks in Paris on journalists at the satirical newspaper Charlie Hebdo and on a kosher supermarket, many Western leaders have been reluctant to say the motive was at all religious. French President François Hollande said Charlie Hebdo had been targeted by “obscurantism,” whatever that is. And White House spokesman Josh Earnest on Tuesday spent a painful five minutes explaining the Obama administration’s aversion to using the term “radical Islam.”
That’s not a problem for Marine Le Pen, who is never obscure.
“It’s clear Islamic fundamentalism,” says the leader of the National Front, France’s far-right political party that has been gaining in the polls. “Now all the eyes are open,” she adds, referring to a general French awakening to the Islamist threat. And “we are the only ones to solve the problem,” by which she means the National Front.
Once a political outlier, Ms. Le Pen has been gaining prominence as France’s problems—a moribund economy and its un-assimilated Muslim-immigrant population—have become more acute and seemingly beyond cure by the traditional political class. Now, in the aftermath of the home-grown Islamist slaughter in Paris, Ms. Le Pen is betting that she is the French politician most likely to benefit from her countrymen’s shock and disbelief over the threat in their midst.
So it seems a good moment to visit with Ms. Le Pen, whom I met Friday at the National Front’s headquarters in Nanterre, a northwestern suburb of Paris. National Front posters with the slogan “Oui, la France” depict a fierce woman with steely eyes, and that she is: a tall, commanding presence who speaks rapidly in a husky rumble of a voice. But the 46-year-old Ms. Le Pen, alternately smiling or reserved as the moment requires, is also unquestionably charming. There’s a smile covering the steel.
When discussing the terror attacks, or many of France’s other problems, Ms. Le Pen steers the conversation to immigration. “The first problem is that the borders are open, and practically anyone can go freely all around,” she says. “There is no responsible country that would accept such a situation.” It should have been “obvious,” Ms. Le Pen adds, that “massive immigration would just allow the fundamentalists to increase their numbers.”
Seated with three large French flags on the wall nearby, she adds: “There are obvious signs that among the people coming so easily into our country, the hormones of unrest will rise. The French Republic needs to offer to its forces, police, security and army, the proper means to protect our country.”
Yet Ms. Le Pen balks at the prospect of heightening government surveillance to prevent future attacks: “We are totally for individual freedom. The freedom for all is important. In order to catch some, we should not block everybody.”
At the same time she rejects as too weak the tough new counterterror measures announced by Prime Minister Manuel Valls on Friday—including isolation of jihadists in prison, increased staffing at intelligence agencies and granting security services broader power to monitor online communications. “Valls’s speech,” she says, “it was just a speech.” Beyond restricting immigration, her main counterterror proposal is the construction of new prisons and additional funding for the penitentiary administration.
In a country already made wobbly by years of economic anemia—with unemployment hovering intractably above 10%, roughly one in four young people unemployed, and negligible to nonexistent growth—and now quaking after the eruption of Islamist terrorism, Ms. Le Pen’s blunt-force prescriptions have made the National Front more plausible as a political force than it has ever been. Where the party had been an alarming but relatively marginal player under the leadership of her father, the rhetorical bomb-thrower Jean-Marie Le Pen, the more media-savvy Ms. Le Pen has been better at selling the nationalist line since taking over from him in 2011.
Her fixes for France’s troubles are simple: Exit the European Union and end the reign of “globalist” economics—the free movement of goods, capital and labor—that she blames for the fact that France is “dying.” Above all: “Stop immigration,” not just to discourage the potential Islamist threat, but for the overall health of the country. “There are 200,000 legal immigrants coming to France every year,” Ms. Le Pen says. “They just add to the problems.”
Ms. Le Pen doesn’t directly answer my question about what she proposes to do about the millions of Muslim immigrants whose only nationality is French. Instead, she turns her attention to immigrants with dual citizenship. “Do you know that there are 700,000 voters, Algerian and French, who voted in the recent Algerian elections?” she asks. “These people can and should decide one way or the other. We have nothing against being a foreigner in France, but they have to decide.” The message: Choose France or get out. Also: Those with dual citizenship who commit crimes in France should “be sent back.”
It’s tempting to dismiss these views as unrealistic and against the tide of history—the French political and media establishments routinely do. As Ms. Le Pen says: “Many political parties in France and many in the media, the first question they ask about anything is: ‘Will this be advantageous for the National Front?’ ” A notable example was the decision by the organizers of last weekend’s unity march in Paris not to invite Ms. Le Pen and her supporters.
But merely to dismiss or ignore Ms. Le Pen and the National Front doesn’t deter her political project. She represents a real and substantial constituency of people who, as one Paris-based journalist told me, “don’t recognize the French republic they used to know anymore.” These are working-class voters, mostly white, who once answered the old left’s call of class solidarity but who now feel left behind as manufacturers and job-creators flee the country under the press of France’s rigid labor laws, protectionist rules and high taxes.
When France’s postwar economy was still booming, and the welfare state was cash-flush, the country could afford to absorb millions of Muslim immigrants, mainly from France’s former colonies in North Africa. At the time, lawmakers made almost no effort to encourage these newcomers to assimilate. They were relegated to banlieues, public-housing ghettoes on the outskirts of major cities, where the French republican ethos—liberty, equality, fraternity—rarely penetrated.
Ms. Le Pen says it is too late to bring these immigrants into the mainstream: “You can’t assimilate a group,” she says. “The group will impose the laws of the group on the individual. . . . The French nationality, either you earn it, or you deserve it, but it’s not granted automatically.”
She cites Lassana Bathily, the black Muslim employee of the besieged kosher supermarket who helped save Jewish lives during the hostage crisis, as a model. “It’s good that we gave him the French nationality” after his heroism became known. By contrast, the Kouachi brothers, who perpetrated the Charlie Hebdo attack, “already had a police record, and obviously they should not have been given French nationality,” she says.
Nor does Ms. Le Pen favor a grand bargain with French Muslims, an oft-proposed model in which the French state, which is colorblind according to its founding ideals, gives Muslim immigrants a leg up in exchange for a pledge of allegiance from their communal leaders. “Positive discrimination, this is very bad for France,” she says. “This again was imported from the U.S., and it will never work in France. The grand bargain in France is called secularism. The laws had to be respected by all.”
She adds: “Whom do you talk to in France with the Muslim community? The current major Muslim organization in France, which is privileged nowadays, is linked to the Muslim Brotherhood. Meanwhile, General Sisi in Egypt is fighting the Muslim Brotherhood.”
Under her father’s leadership, the National Front developed a reputation as a party of cranks and anti-Semites. Mr. Le Pen caused a storm in 1987 by calling the Holocaust a “detail in the history of World War II.” Last year he said that “Mr. Ebola” could “sort out” the world’s “demographic explosion.”
Ms. Le Pen has tried to distance the party from her father’s legacy, and she has made a few inroads in the French Jewish community. She says she has been ahead of others in sounding the alarm about anti-Semitism. Muslim fundamentalists, she says, “take advantage of the Israeli-Palestinian conflict. The National Front is the best shield to protect France’s Jewish citizens against this threat. We are the only ones to solve this problem.”
The National Front is by no means a traditional right-wing party. On economic matters, the party is closer to the left. Take the Trans-Atlantic Trade and Investment Partnership, or TTIP, the Euro-American free-trade agreement that analysts estimate would boost growth by $100 billion on both sides of the pond. The environmentalist left and labor unions fiercely oppose the TTIP; so does Ms. Le Pen.
“The U.S. way of conducting business doesn’t bring anything to France,” she says. “The hygienic and social methods imposed in the U.S. are not similar to the needs of France and the French. The multinational interests that impose their own ways are not good for France. Practically, all these are just weakening France. I am in defense of economic ways that would help France.”
Ms. Le Pen also has a soft spot for Russian President Vladimir Putin . “Putin did very difficult work,” she says. “He had to face and put together Russia after the Soviet Union. It’s a complicated country. We should not continue anymore to impose our own ideas and our judgment on the situation in Russia. Putin was able to gain Russia respect and place it again on a high level on the international stage.”
American global leadership is anathema among the National Front crowd. “I am for a multi-polar world,” says Ms. Le Pen, “where each country definitely has its own sovereignty. The economic model suggested by Putin, which is a patriotic model, is positive in my eyes. Russians are patriotic, and this is a welcome thing. We can do nothing against Russia. There is a Cold War now against Russia that France is involved in. We should work with Russia.”
Regarding allegations that the National Front has received a €10 billion loan ($11.58 billion) from a Kremlin-tied bank, Ms. Le Pen says: “All is false as usual. We went to French banks, many European banks, but all refused our request. The bank in question is not a Kremlin bank but a private bank. This in no way has an influence on the National Front’s political views and that will never change. If a U.S. bank or a French bank would like to lend us money, we would accept gladly.”
The European Union, which even its supporters concede suffers from a democratic deficit, draws her scorn. “I believe in nations,” she says. “I believe in democracy. I believe in people who are in charge of their own destinies. The European Union concentrates all the worst aspects of hyper-socialist ideas and all the worst aspects of the ultra-liberal ideas. The European Union was made against the people’s wills. It is a failed experiment.”
In last May’s elections to the European Parliament, the National Front thumped both the center-right Union for a Popular Movement and the center-left Socialists. In a September poll, Ms. Le Pen beat President Hollande in a hypothetical face-off. France’s next presidential election is still two years off.
Meanwhile, on Thursday police raided an Islamist cell that spread across Belgium and France. Authorities said jihadists were planning to murder police officers in the streets. Two suspects in Belgium were killed. Fifteen suspects were arrested in the two countries—and France shuddered anew.
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The New Drivers of Europe's Geopolitics
Geopolitical Weekly
January 27, 2015 | 02:00 GMT Print Text Size
Stratfor
By George Friedman
For the past two weeks, I have focused on the growing fragmentation of Europe. Two weeks ago, the murders in Paris prompted me to write about the fault line between Europe and the Islamic world. Last week, I wrote about the nationalism that is rising in individual European countries after the European Central Bank was forced to allow national banks to participate in quantitative easing so European nations wouldn't be forced to bear the debt of other nations. I am focusing on fragmentation partly because it is happening before our eyes, partly because Stratfor has been forecasting this for a long time and partly because my new book on the fragmentation of Europe — Flashpoints: The Emerging Crisis in Europe — is being released today.
This is the week to speak of the political and social fragmentation within European nations and its impact on Europe as a whole. The coalition of the Radical Left party, known as Syriza, has scored a major victory in Greece. Now the party is forming a ruling coalition and overwhelming the traditional mainstream parties. It is drawing along other left-wing and right-wing parties that are united only in their resistance to the EU's insistence that austerity is the solution to the ongoing economic crisis that began in 2008.
Two Versions of the Same Tale
The story is well known. The financial crisis of 2008, which began as a mortgage default issue in the United States, created a sovereign debt crisis in Europe. Some European countries were unable to make payment on bonds, and this threatened the European banking system. There had to be some sort of state intervention, but there was a fundamental disagreement about what problem had to be solved. Broadly speaking, there were two narratives.
The German version, and the one that became the conventional view in Europe, is that the sovereign debt crisis is the result of irresponsible social policies in Greece, the country with the greatest debt problem. These troublesome policies included early retirement for government workers, excessive unemployment benefits and so on. Politicians had bought votes by squandering resources on social programs the country couldn't afford, did not rigorously collect taxes and failed to promote hard work and industriousness. Therefore, the crisis that was threatening the banking system was rooted in the irresponsibility of the debtors.
Another version, hardly heard in the early days but far more credible today, is that the crisis is the result of Germany's irresponsibility. Germany, the fourth-largest economy in the world, exports the equivalent of about 50 percent of its gross domestic product because German consumers cannot support its oversized industrial output. The result is that Germany survives on an export surge. For Germany, the European Union — with its free-trade zone, the euro and regulations in Brussels — is a means for maintaining exports. The loans German banks made to countries such as Greece after 2009 were designed to maintain demand for its exports. The Germans knew the debts could not be repaid, but they wanted to kick the can down the road and avoid dealing with the fact that their export addiction could not be maintained.
If you accept the German narrative, then the policies that must be followed are the ones that would force Greece to clean up its act. That means continuing to impose austerity on the Greeks. If the Greek narrative is correct, than the problem is with Germany. To end the crisis, Germany would have to curb its appetite for exports and shift Europe's rules on trade, the valuation of the euro and regulation from Brussels while living within its means. This would mean reducing its exports to the free-trade zone that has an industry incapable of competing with Germany's.
The German narrative has been overwhelmingly accepted, and the Greek version has hardly been heard. I describe what happened when austerity was imposed in Flashpoints:
But the impact on Greece of government cuts was far greater than expected. Like many European countries, the Greeks ran many economic activities, including medicine and other essential services, through the state, making physicians and other health care professionals government employees. When cuts were made in public sector pay and employment, it deeply affected the professional and middle classes.
Over the course of several years, unemployment in Greece rose to over 25 percent. This was higher than unemployment in the United States during the Depression. Some said that Greece's black economy was making up the difference and things weren't that bad. That was true to some extent but not nearly as much as people thought, since the black economy was simply an extension of the rest of the economy, and business was bad everywhere. In fact the situation was worse than it appeared to be, since there were many government workers who were still employed but had had their wages cut drastically, many by as much as two-thirds.
The Greek story was repeated in Spain and, to a somewhat lesser extent, in Portugal, southern France and southern Italy. Mediterranean Europe had entered the European Union with the expectation that membership would raise its living standards to the level of northern Europe. The sovereign debt crisis hit them particularly hard because in the free trade zone, this region had found it difficult to develop its economies, as it would have normally. Therefore the first economic crisis devastated them.
Regardless of which version you believe to be true, there is one thing that is certain: Greece was put in an impossible position when it agreed to a debt repayment plan that its economy could not support. These plans plunged it into a depression it still has not recovered from — and the problems have spread to other parts of Europe.
Seeds of Discontent
There was a deep belief in the European Union and beyond that the nations adhering to Europe's rules would, in due course, recover. Europe's mainstream political parties supported the European Union and its policies, and they were elected and re-elected. There was a general feeling that economic dysfunction would pass. But it is 2015 now, the situation has not gotten better and there are growing movements in many countries that are opposed to continuing with austerity. The sense that Europe is shifting was visible in the European Central Bank's decision last week to ease austerity by increasing liquidity in the system. In my view, this is too little too late; although quantitative easing might work for a recession, Southern Europe is in a depression. This is not merely a word. It means that the infrastructure of businesses that are able to utilize the money has been smashed, and therefore, quantitative easing's impact on unemployment will be limited. It takes a generation to recover from a depression. Interestingly, the European Central Bank excluded Greece from the quantitative easing program, saying the country is far too exposed to debt to allow the risk of its central bank lending.
Virtually every European country has developed growing movements that oppose the European Union and its policies. Most of these are on the right of the political spectrum. This means that in addition to their economic grievances, they want to regain control of their borders to limit immigration. Opposition movements have also emerged from the left — Podemos in Spain, for instance, and of course, Syriza in Greece. The left has the same grievances as the right, save for the racial overtones. But what is important is this: Greece has been seen as the outlier, but it is in fact the leading edge of the European crisis. It was the first to face default, the first to impose austerity, the first to experience the brutal weight that resulted and now it is the first to elect a government that pledges to end austerity. Left or right, these parties are threatening Europe's traditional parties, which the middle and lower class see as being complicit with Germany in creating the austerity regime.
Syriza has moderated its position on the European Union, as parties are wont to moderate during an election. But its position is that it will negotiate a new program of Greek debt repayments to its European lenders, one that will relieve the burden on the Greeks. There is reason to believe that it might succeed. The Germans don't care if Greece pulls out of the euro. Germany is, however, terrified that the political movements that are afoot will end or inhibit Europe's free-trade zone. Right-wing parties' goal of limiting the cross-border movement of workers already represents an open demand for an end to the free-trade zone for labor. But Germany, the export addict, needs the free-trade zone badly.
This is one of the points that people miss. They are concerned that countries will withdraw from the euro. As Hungary showed when the forint's decline put its citizens in danger of defaulting on mortgages, a nation-state has the power to protect its citizens from debt if it wishes to do so. The Greeks, inside or outside the eurozone, can also exercise this power. In addition to being unable to repay their debt structurally, they cannot afford to repay it politically. The parties that supported austerity in Greece were crushed. The mainstream parties in other European countries saw what happened in Greece and are aware of the rising force of Euroskepticism in their own countries. The ability of these parties to comply with these burdens is dependent on the voters, and their political base is dissolving. Rational politicians are not dismissing Syriza as an outrider.
The issue then is not the euro. Instead, the first real issue is the effect of structured or unstructured defaults on the European banking system and how the European Central Bank, committed to not making Germany liable for the debts of other countries, will handle that. The second, and more important, issue is now the future of the free-trade zone. Having open borders seemed like a good idea during prosperous times, but the fear of Islamist terrorism and the fear of Italians competing with Bulgarians for scarce jobs make those open borders less and less likely to endure. And if nations can erect walls for people, then why not erect walls for goods to protect their own industries and jobs? In the long run, protectionism hurts the economy, but Europe is dealing with many people who don't have a long run, have fallen from the professional classes and now worry about how they will feed their families.
For Germany, which depends on free access to Europe's markets to help prop up its export-dependent economy, the loss of the euro would be the loss of a tool for managing trade within and outside the eurozone. But the rise of protectionism in Europe would be a calamity. The German economy would stagger without those exports.
From my point of view, the argument about austerity is over. The European Central Bank ended the austerity regime half-heartedly last week, and the Syriza victory sent an earthquake through Europe's political system, although the Eurocratic elite will dismiss it as an outlier. If Europe's defaults — structured or unstructured — surge as a result, the question of the euro becomes an interesting but non-critical issue. What will become the issue, and what is already becoming the issue, is free trade. That is the core of the European concept, and that is the next issue on the agenda as the German narrative loses credibility and the Greek narrative replaces it as the conventional wisdom.
It is not hard to imagine the disaster that would ensue if the United States were to export 50 percent of its GDP, and half of it went to Canada and Mexico. A free-trade zone in which the giant pivot is not a net importer can't work. And that is exactly the situation in Europe. Its pivot is Germany, but rather than serving as the engine of growth by being an importer, it became the world's fourth-largest national economy by exporting half its GDP. That can't possibly be sustainable.
Possible Seismic Changes Ahead
There are then three drivers in Europe now. One is the desire to control borders — nominally to control Islamist terrorists but truthfully to limit the movement of all labor, Muslims included. Second, there is the empowerment of the nation-states in Europe by the European Central Bank, which is making its quantitative easing program run through national banks, which may only buy their own nation's debt. Third, there is the political base, which is dissolving under Europe's feet.
The question about Europe now is not whether it can retain its current form, but how radically that form will change. And the most daunting question is whether Europe, unable to maintain its union, will see a return of nationalism and its possible consequences. As I put it in Flashpoints:
The most important question in the world is whether conflict and war have actually been banished or whether this is merely an interlude, a seductive illusion. Europe is the single most prosperous region in the world. Its collective GDP is greater than that of the United States. It touches Asia, the Middle East and Africa. Another series of wars would change not only Europe, but the entire world.
To even speak of war in Europe would have been preposterous a few years ago, and to many, it is preposterous today. But Ukraine is very much a part of Europe, as was Yugoslavia. Europeans' confidence that all this is behind them, the sense of European exceptionalism, may well be correct. But as Europe's institutions disintegrate, it is not too early to ask what comes next. History rarely provides the answer you expect — and certainly not the answer you hope for.
Editor's Note: The newest book by Stratfor chairman and founder George Friedman, Flashpoints: The Emerging Crisis in Europe, is being released today. It is now available.
Read more: The New Drivers of Europe's Geopolitics | Stratfor
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Obama Snubs NATO Chief as Crisis Rages
Josh Rogin
1408 Mar 24, 2015 7:20 PM EDT
By Josh Rogin
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President Barack Obama has yet to meet with the new head of the North Atlantic Treaty Organization, and won't see Secretary General Jens Stoltenberg this week, even though he is in Washington for three days. Stoltenberg’s office requested a meeting with Obama well in advance of the visit, but never heard anything from the White House, two sources close to the NATO chief told me.
The leaders of almost all the other 28 NATO member countries have made time for Stoltenberg since he took over the world's largest military alliance in October. Stoltenberg, twice the prime minister of Norway, met Monday with Canadian Prime Minister Stephen Harper in Ottawa to discuss the threat of the Islamic State and the crisis in Ukraine, two issues near the top of Obama's agenda.
Kurt Volker, who served as the U.S. permanent representative to NATO under both President George W. Bush and Obama, said the president broke a long tradition. “The Bush administration held a firm line that if the NATO secretary general came to town, he would be seen by the president ... so as not to diminish his stature or authority,” he told me.
America's commitment to defend its NATO allies is its biggest treaty obligation, said Volker, adding that European security is at its most perilous moment since the Cold War. Russia has moved troops and weapons into eastern Ukraine, annexed Crimea, placed nuclear-capable missiles in striking distance of NATO allies, flown strategic-bomber mock runs in the North Atlantic, practiced attack approaches on the U.K. and Sweden, and this week threatened to aim nuclear missiles at Denmark’s warships.
“It is hard for me to believe that the president of the United States has not found the time to meet with the current secretary general of NATO given the magnitude of what this implies, and the responsibilities of his office,” Volker said.
Bernadette Meehan, a spokeswoman for the National Security Council, declined to say why Obama didn’t respond to Stoltenberg’s request. “We don’t have any meetings to announce at this time,” she told me in a statement. Sources told me that Stoltenberg was able to arrange a last-minute meeting with Defense Secretary Ashton Carter.
According to White House press releases, Obama didn’t exactly have a packed schedule. On Tuesday, he held important meetings and a press conference with Afghan President Ashraf Ghani at the White House (Ghani will meet with Stoltenberg while they are both in town). But the only event on Obama’s public schedule for Wednesday is a short speech to kick off a meeting related to the Affordable Care Act. On Thursday, he will head to Alabama to give a speech about the economy.
Stoltenberg is in town primarily for the NATO Transformation Seminar, a once-a-year strategic brainstorming session that brings together NATO’s leadership with experts and top officials from the host country. The event is organized by the Allied Command Transformation in Norfolk, Virginia, and the Atlantic Council.
“The focus of this year’s seminar is to think through how best to update NATO’s strategy given real threats in the east and the south, against the backdrop of a dramatically changing world,” said Damon Wilson, a former NSC senior director for Europe who is now with the Atlantic Council. “The practical focus is to begin developing the road map to the next NATO summit, which will take place in Warsaw in July 2016, a summit which will presumably be the capstone and last summit for the Obama administration.”
Last year, the seminar was hosted in Paris, and then-NATO Secretary General Anders Fogh Rasmussen got a separate bilateral meeting with President Francois Hollande of France.
Last Friday, at the German Marshall Fund Brussels Forum, Stoltenberg talked about the importance of close coordination inside NATO in order to first confront Russian aggression and then eventually move toward a stable relationship with Moscow.
“The only way we can have the confidence to engage with Russia,” he said, “is to have the confidence and the strength which is provided by strong collective defense, the NATO alliance.”
Polish President Bronislaw Komorowski told the Brussels Forum that there has been a worrisome lag between NATO’s promises of more defensive equipment for Poland and what has actually arrived, a blow to the alliance's credibility. “It’s very important and necessary for everyone to have the conviction, including the potential aggressor to have this conviction, that NATO is truly determined to execute contingency plans,” he said.
The White House missed a perfect opportunity to reinforce that message this week in snubbing Stoltenberg. It fits into a narrative pushed by Obama critics that he would rather meet with problematic leaders such as Iraqi Prime Minister Haider al-Abadi, who will get an Oval Office meeting next month, than firm allies. The message Russian President Vladimir Putin will take away is that the White House-NATO relationship is rocky, and he will be right.
To contact the author on this story:
Josh Rogin at joshrogin@bloomberg.net
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Europe: The Anna Karenina Principle at Work
Geopolitical Diary
June 4, 2015 | 22:03 GMT
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Leo Tolstoy's Anna Karenina begins with one of the most famous lines in literature: "Happy families are all alike; every unhappy family is unhappy in its own way." According to this idea, to be happy, a family has to solve a large number of complex and interconnected problems — ranging from the management of money to coping with adultery — and not fail to deal with any of them. This concept gave birth to the "Anna Karenina principle," which dictates that a deficiency in any one of a number of factors dooms an endeavor to failure, or simply; "unhappiness."
The European Union may have chosen the poet Friedrich Schiller's "Ode to Joy," used by Beethoven in his Ninth Symphony, as its anthem, but it has not been a happy family for a long time. The bloc grew in membership and prerogatives in the 1990s and early 2000s because everybody seemed to benefit. As long as member states were growing and unemployment was low, governments and voters supported the process of continental integration. The economic crisis changed things dramatically for Europe, and the union became "unhappy" in various ways.
What is a Geopolitical Diary? George Friedman Explains.
At the moment, the Continent's focus is on Greece, and rightly so. The country's deep economic crisis is a threat to the European project, if not from a financial point of view, at least from a political perspective. A "Grexit" could open the door for other countries to leave the union in a progressive fragmentation that could have unforeseeable consequences.
While most European eyes are on poor and indebted Greece, a proud and wealthy island nation is slowly but steadily moving closer to holding a referendum on EU membership. As Mark Twain might put it, reports of the death of British Conservatives were greatly exaggerated. Contradicting all opinion polls, David Cameron was easily re-elected in May and now feels more confident than ever in his push to renegotiate the European Union's founding treaties. Considering the lack of appetite for treaty change in continental Europe, the British government will soon have to decide whether it wants to campaign for what some people are calling a "Brexit."
In the meantime, more subtle processes are taking place elsewhere in Europe. In Spain, the two-party system that guaranteed political stability for almost four decades is in the process of collapsing. It could be replaced by a multi-party system where protest parties have a larger say in policymaking. In Italy, the ruling center-left government is losing ground to right-wing and anti-establishment forces that, while lacking in unity, represent the dissatisfaction of a nation facing secular economic stagnation. Even in Poland, the only EU member that avoided recession during the crisis, citizens recently punished the establishment by voting for protest and nationalist parties in last month's presidential election. In very different ways, years of economic crisis and political fragmentation are making people question the European project and the perceived elites that back it.
While the European Union is breaking apart at its edges, the core is trying to come up with answers and solutions. The economy ministers of France and Germany wrote a joint article on June 3, calling for institutional reforms to ensure greater economic convergence in Europe. According to the French and German officials, the core of this new phase of integration would be the creation of a common budget for the eurozone.
The idea seems promising on the surface, but it doesn't really address some of the European Union's key questions: Will Germany agree to share its national wealth with economically weaker countries in the south? Will France give up on its ability to collect and spend state revenue (the ultimate expression of national sovereignty)?
The past six months have been quite good for France from a European perspective. In late 2014, the EU Commission granted Paris extra time to meet its budget targets. In early 2015, the European Central Bank introduced a bond-purchasing program that led to a weaker euro — one of France's main demands. The problem for French President Francois Hollande is that France's timid recovery is not being followed by a decrease in unemployment and, even if that were the case, most French voters have already lost confidence in him. In Germany, low unemployment levels and modest economic growth have softened the impact of these unpopular measures, but German conservatives are growing increasingly restless. Chancellor Angela Merkel's own supporters are criticizing her for moving dangerously close to the center — worryingly close to France's plans for the European Union.
Regardless of what happens to Greece this year, the future of the European Union is linked directly to the evolution of the Franco-German alliance. Even if Paris and Berlin manage to keep their differences under control over the next two years, 2017 will be a turning point for the Continent. That is the year France holds presidential elections, and the main contenders could be a right-wing party and a far-right party competing to see which one is more Euroeskeptic. This is especially true if former President Nicolas Sarkozy wins the current power struggle within his party. Germany will also hold general elections in 2017, and if Merkel decides not to run for a fourth time, the rebel forces inside her party could ultimately decide that Germany will no longer make concessions for weaker European countries. Finally, voters in the United Kingdom may choose not to remain in a bloc that London failed to reform to its liking.
For decades, prosperity was the glue holding the European Union together. Now, to a certain extent, fear of the unknown has become the unifying principle in Europe. Greece will probably not leave the eurozone this year. It doesn't matter. The European family is unhappy in enough ways to break the familial bonds apart.
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Greece is Detroit, Not Lehman To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 6/16/2015
Greece is the land of misinformation. We constantly hear that a Greek default will cause a market panic and be as damaging to financial markets as the default of Lehman Brothers back in 2008. While there is no possible way to know for sure, we believe that a Greek default will look and feel more like the Detroit default. In other words, it may make a great deal of noise, but the European economy will not collapse. In fact, we believe any sell-off in the equity markets is a buying opportunity.
We believe this for five reasons:
First, as long as you weren’t in hibernation this past winter, or even during the past 2000 years, Greek financial problems are not new. Economic authors, Reinhardt and Rogoff calculated that since it became independent in 1829, Greece was in default or rescheduling its debt 51% of the time through 2006. This most recent crisis started in 2009, so financial markets have had plenty of time to prepare. In contrast, the Lehman collapse was totally unexpected, mostly due to people believing government would handle it like Bear Stearns.
Second, and some may not know this, Greek GDP (approximately $240 billion in 2013) is roughly equal to the Detroit Metro Area’s GDP ($224 billion in 2013). At the same time, European Union GDP is roughly equal to US GDP. In other words, the impact on the EU and on the world will be minimal. Yes, Greece has more debt than Detroit, but markets are prepared.
Third, Greek debt is a “sunk cost.” For economic growth it is a moot point. The money has already been underutilized, growth has already suffered. The only thing left is for the realization of losses to rearrange balance sheets. Some banks may take losses, but the money does not disappear – it’s already been spent by retirees and the Greek government. The European Central Bank can count it as money creation, which will lead to more inflation over time. The IMF will take a loss, but a smaller IMF would actually be good for the world.
Fourth, the idea that other countries (Spain, Portugal or Italy) will decide they can default, too, is highly questionable. A default would bring added pain to the Greek economy, which is already devastated. No other country will want that. The true “moral hazard” would occur if Greece were bailed out without major budget and pension reform. Then, other countries could use the same strategy to get money and bailouts for themselves.
Finally, think about where many of these arguments are coming from. Keynesians tell us that government spending will increase growth. Then, when that doesn’t work, and an economy is teetering toward collapse, they say if we don’t bail it out the rest of the world is at risk. Heads, government gets bigger; Tails, the private sector gets smaller.
Robert Mundell, who invented the Euro, hoped that it would impose fiscal discipline on European countries. This would happen because they could not devalue their currency and hide problems with inflation. For the record, inflation doesn’t help anyone – it lowers living standards by reducing purchasing power. But, it does get the government off the hook for actually having to cut budgets, payrolls and pensions. The people who are hurt by this tend to get angry at the politicians who do it. Inflation is a more circuitous and hidden tax and lets politicians off the hook.
While the Euro didn’t stop Greece from borrowing its way into bankruptcy; it is finally imposing Mundell’s discipline. If the EU does the right thing, and forces true austerity or allows a default, then the Mundell hypothesis about a single currency will be proven correct. This could be the best thing that ever happened to Europe. Stay tuned.
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What Borders Mean to Europe
Geopolitical Weekly
June 23, 2015 | 08:00 GMT
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By George Friedman
Europe today is a continent of borders. The second-smallest continent in the world has more than 50 distinct, sovereign nation-states. Many of these are part of the European Union. At the core of the EU project is an effort to reduce the power and significance of these borders without actually abolishing them — in theory, an achievable goal. But history is not kind to theoretical solutions.
Today, Europe faces three converging crises that are ultimately about national borders, what they mean and who controls them. These crises appear distinct: Immigration from the Islamic world, the Greek economic predicament, and the conflict in Ukraine would seem to have little to do with each other. But in fact they all derive, in different ways, from the question of what borders mean.
Europe's borders have been the foundation of both its political morality and its historical catastrophes. The European Enlightenment argued against multinational monarchies and for sovereign nation-states, which were understood to be the territories in which nations existed. Nations came to be defined as groupings of humans who shared a common history, language, set of values and religion — in short, a common culture into which they were born. These groups had the right of national self-determination, the authority to determine their style of government and the people who governed. Above all, these nations lived in a place, and that place had clear boundaries.
The right of national self-determination has created many distinct nations in Europe. And, as nations do, they sometimes distrust and fear one other, which occasionally leads to wars. They also have memories of betrayals and victimizations that stretch back for centuries before the nations became states. Some viewed the borders as unjust, because they placed their compatriots under foreign rule, or as insufficient to national need. The right of self-determination led inevitably to borders, and the question of borders inevitably led to disputes among states. Between 1914 and 1945, Europeans waged a series of wars about national boundaries and about who has the right to live where. This led to one of the greatest slaughters of human history.
The memory of that carnage led to the creation of the European Union. Its founding principle was that this kind of massacre should never happen again. But the union lacked the power to abolish the nation-state — it was too fundamental to the Europeans' sense of identity. And if the nation-state survived, so did the idea of place and borders.
If the nation-state could not be abolished, however, then at least the borders could lose their significance. Thus two principles emerged after World War II: The first, predating the European Union, was that the existing borders of Europe could not be changed. The hope was that by freezing Europe's borders, Europe could abolish war. The second principle, which came with the mature European Union, was that the bloc's internal borders both existed and did not exist. Borders were to define the boundaries of nation-states and preserved the doctrine of national self-determination, but they were not to exist insofar as the movement of goods, of labor and of capital were concerned. This was not absolute — some states were limited in some of these areas — but it was a general principle and goal. This principle is now under attack in three different ways.
The Movement of Muslims in Europe
The chaos in the Middle East has generated a flow of refugees toward Europe. This is adding to the problem that European nations have had with prior Muslim migrations that were encouraged by Europeans. As Europe recovered from World War II, it needed additional labor at low cost. Like other advanced industrial countries have done, a number of European states sought migrants, many from the Islamic world, to fill that need. At first, the Europeans thought of the migrants as temporary residents. Over time, the Europeans conceded citizenship but created a doctrine of multiculturalism, which appeared to be a gesture of tolerance and was implicitly by mutual consent, given that some Muslims resisted assimilation. But this doctrine essentially served to exclude Muslims from full participation in the host culture even as they gained legal citizenship. But as I have said, the European idea of the nation was challenged by the notion of integrating different cultures into European societies.
Partly because of a failure to fully integrate migrants and partly because of terrorist attacks, a growing portion of European society began perceiving the Muslims already in Europe as threatening. Some countries had already discussed resurrecting internal European borders to prevent the movement not only of Muslims, but also of other Europeans seeking jobs in difficult economic times. The recent wave of refugees has raised the matter to a new level.
The refugee crisis has forced the Europeans to face a core issue. The humanitarian principles of the European Union demand that refugees be given sanctuary. And yet, another wave of refugees into Europe has threatened to exacerbate existing social and cultural imbalances in some countries; some anticipate the arrival of more Muslims with dread. Moreover, once migrants are allowed to enter Europe by any one country, the rest of the nations are incapable of preventing the refugees' movement.
Who controls Europe's external borders? Does Spain decide who enters Spain, or does the European Union decide? Whoever decides, does the idea of the free movement of labor include the principle of the free movement of refugees? If so, then EU countries have lost the ability to determine who may enter their societies and who may be excluded. For Europe, given its definition of the nation, this question is not an odd, legal one. It goes to the very heart of what a nation is, and whether the nation-state, under the principle of the right of national self-determination, is empowered to both make that decision and enforce it.
This question does not merely concern Muslims. In the 19th and 20th centuries, the Ostjuden — the Jews coming into Western Europe as they fled czarist edicts — raised the same challenge, even though they sought more vigorously to assimilate. But at that point, the notion of borders was unambiguous even if the specific decision on how to integrate the Jews was unclear. In many countries, the status of minorities from neighboring nations was a nagging question, but there were tools for handling it. The Muslim issue is unique in Europe only to the extent that the European Union has made it unique. The bloc has tried to preserve borders while sapping them of significance, and now there is an upsurge of opposition not only to Muslim immigration, but also to the European Union's understanding of borders and free movement.
The Greek Crisis
The question of borders is also at the heart of the Greek crisis. We see two issues: one small, the other vast. The small one involves capital controls. The European Union is committed to a single European financial market within which capital flows freely. Greeks, fearing the outcome of the current crisis, have been moving large amounts of money out of Greece into foreign banks. They remember what happened during the Cyprus crisis, when the government, capitulating to German demands in particular, froze and seized money deposited in Cypriot banks. Under EU rules, the transfer of deposits in one country of the bloc, or even outside the bloc, is generally considered legitimate. However, in the case of Cyprus, the free movement of capital across borders was halted. The same could conceivably happen in Greece.
In any event, which is the prior principle: the free movement of capital or the European Union's overarching authority to control that flow? Are Greek citizens personally liable for their government's debt — not merely through austerity policies, but also through controls imposed by the Greek government under European pressure to inhibit the movement of their money? If the answer is the latter, then borders on capital can be created temporarily.
The larger issue is the movement of goods. A significant dimension of this crisis involves free trade. Germany exports more than 50 percent of its gross domestic product. Its prosperity depends on these exports. I have argued that the inability to control the flow of German goods into Southern Europe drove the region into economic decline. Germany's ability to control the flow of American goods into the country in the 1950s helped drive its economic recovery. The European Union permits limits on the movement of some products, particularly agricultural ones, through subsidies and quotas. In theory, free trade is beneficial to all. In practice, one country's short-term gain can vastly outweigh others' long-term gains. The ability to control the flow of goods is a tool that might slow growth but decrease pain.
The essential principle of the European Union is that of free trade, in the sense that the border cannot become a checkpoint to determine what goods may or may not enter a country and under what tariff rule. The theory is superb, save for its failure to address the synchronization of benefits. And it means that the right to self-determination no longer includes the right to control borders.
Ukraine and the 'Inviolability' of Borders
Finally, there is the Ukraine issue — which is not really about Ukraine, but about a prior principle of Europe: Borders cannot be allowed to change. The core of this rule is that altering borders leads to instability. This rule governed between 1945 and 1992. Then, the fall of the Soviet Union transformed the internal borders of Europe dramatically, moving the Russian border eastward and northward. The Soviet collapse also created eight newly free nations that were Soviet satellites in Central and Eastern Europe and 15 new independent states — including Russia — from the constituent parts of the Soviet Union. It could be argued that the fall of the Soviet Union did not change the rule on borders, but that claim would be far-fetched. Everything changed. Then came the "velvet divorce" of Slovakia and the Czech Republic, and now there are potential divorces in the United Kingdom, Spain and Belgium.
Perhaps most importantly, the rule broke down in Yugoslavia, where a single entity split into numerous independent nations, and, among other consequences, a war over borders ensued. The conflict concluded with the separation of Kosovo from Serbia and its elevation to the status of an independent nation. Russia has used this last border change to justify redrawing the borders of Georgia and as a precedent supporting its current demand for the autonomy and control of eastern Ukraine. Similarly, the border between Azerbaijan and Armenia shifted dramatically as the result of war. (On a related note, Cyprus, divided between a Turkish-run north and a Greek-run south, was allowed into the European Union in 2004 with its deep border dispute still unsettled.)
Since the end of the Cold War, the principle of the inviolability of borders has been violated repeatedly — through the creation of new borders, through the creation of newly freed nation-states, through peaceful divisions and through violent war. The principle of stable borders held for the most part until 1991 before undergoing a series of radical shifts that sometimes settled the issue and sometimes left it unresolved. The Europeans welcomed most of these border adjustments, and in one case — Kosovo — Europeans themselves engineered the change.
It is in this context that the Ukrainian war must be considered. Europe's contention, supported by America, is that Russia is attempting to change inviolable borders. There are many good arguments to be made against the Russians in Ukraine, which I have laid out in the past. However, the idea that the Russians are doing something unprecedented in trying to redraw Ukraine's borders is difficult to support. Europe's borders have been in flux for some time. That is indeed a matter of concern; historically, unsettled borders in Europe are precursors to war, as we have seen in Yugoslavia, the Caucasus and now Ukraine. But it is difficult to argue that this particular action by Russia is in itself a dramatically unprecedented event in Europe. The principle of national self-determination depends on a clear understanding of a nation and the unchallenged agreement on its boundaries. The Europeans themselves have in multiple ways established the precedent that borders are not unchallengeable.
There are two principles competing. The first is the European Union's desire that borders be utterly permeable without the nation-state losing its right to self-determination. It is difficult to see how a lack of control over borders is compatible with national self-determination. The other principle is that existing borders not be challenged. On the one hand, the union wants to diminish the importance of borders. On the other hand, it wants to make them incontestable.
Neither principle is succeeding. Within Europe, more forces are emerging that want to return control over borders to nation-states. In different ways, the Muslim immigrant crisis and the Greek crisis intersect at the question of who controls the borders. Meanwhile, the inviolability of borders has been a dead letter since the fall of the Soviet Union.
The idea of borders being archaic is meaningful only if the nation-state is archaic. There is no evidence that this is true in Europe. On the contrary, all of the pressures we see culturally and economically point to not only the persistence of the idea of nationality, but also to its dramatic increase in Europe. At the same time, there is no evidence that the challenge to borders is abating. In fact, during the past quarter of a century, the number of shifts and changes, freely or under pressure, has only increased. And each challenge of a national border, such as the one occurring in Ukraine, is a challenge to a nation's reality and sense of self.
The European Union has promised peace and prosperity. The prosperity is beyond tattered now. And peace has been intermittently disrupted — not in the European Union, but around it — since the Maastricht Treaty was signed in 1992 to create a common economic and monetary union. All of this is linked to the question of what a border represents and how seriously we take it. A border means that this is my country and not yours. This idea has been a source of anguish in Europe and elsewhere. Nevertheless, it is a reality embedded in the human condition. Borders matter, and they matter in many different ways. The European crisis, taken as a whole, is rooted in borders. Attempting to abolish them is attractive in theory. But theory faces reality across its own border.
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http://knote.com/2014/11/10/why-germans-work-fewer-hours-but-produce-more-a-study-in-culture/?utm_content=buffer62ebf&utm_medium=social&utm_source=twitter.com
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"The EU has a flag no one salutes, an anthem no one sings, a president no one can name, a parliament whose powers subtract from those of national legislatures, a bureaucracy no one admires or controls, and rules of fiscal rectitude that no member is penalized for ignoring." - George Will
http://www.nationalreview.com/corner/420154/best-sentence-ive-read-today-ramesh-ponnuru?target=author&tid=1843
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George sure has a way with words!
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http://consolatione.tumblr.com/post/128255835609/how-the-modern-swede-was-created
Haven't had a chance to read this yet but it looks interesting.
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E.U. approves migrant plan, overruling four nations
Tuesday, September 22, 2015 12:02 PM EDT
European Union ministers on Tuesday approved a plan for individual countries in the bloc to accept a share of the hundreds of thousands of refugees seeking asylum on the continent — but only after overruling four former Soviet bloc countries. The home affairs and interior ministers, meeting in an emergency session here, voted on a plan to apportion 120,000 refugees — still only a small fraction of those flowing into Europe — among members of the European Union.
The dissenters were the ministers representing the Czech Republic, Hungary, Romania and Slovakia. Under European law, three of the countries — the Czech Republic, Romania and Slovakia — would be required to accept migrants against their will, said one European Union diplomat, who spoke on condition of anonymity shortly after the vote.
The idea behind the plan is to relieve the pressure on front-line nations like Italy and Greece, which migrants from the Middle East, Afghanistan and African have been flooding.
France and Germany back a compulsory approach to resettling refugees. But a call for the members to share the burden of absorbing the migrants according to the wealth and population of the member countries met with fierce resistance. The squabbling has highlighted the lack of a united European response to one of the worst humanitarian crises in decades.
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Oh I get it. The new leftist line is we need the workers to feed the social security ponzy scheme. The SS system was broken by the drunk spending politicians instead of being in a trust fund like it should have been. Who are the people of what we keep hearing, "Brussels" who seem to be the masters of Europe and now are being followed by Obama and his gang? Who are these people that are the new form of tyranny who are ruling over us behind the scenes?
Here is one theory about Merkel. Someone yesterday called in to Michael Savage. She was from Southern Germany and unfortunately I didn't get to here the whole conservation but she said she wonders if Merkel who is from the former East Germany has lived and raised from the Communist mindset has something to do with it. She was suspicious that she is part of something behind the scenes. I suspect it is just part of this whole progressive movement.
One article suggests Merkel is being practical. To get more workers in to Germany to support the generous welfare retirement state:
****Immigrants: Why Merkel Opened Up The Flood Gates
By Mauldin Economics • on September 20, 2015 • in Politics
impose quotas under pain of sanctions, Brussels has unwisely brought home the reality that states have given up sovereignty over their borders, police and judicial systems, just as they gave up economic sovereignty by joining the euro.
This comes as a rude shock, creating a new East-West rift within European affairs to match the North-South battles over EMU. With certain nuances, the peoples of Hungary, Slovakia, the Czech Republic, Poland and the Baltic states do not accept the legitimacy of the demands being made upon them.
But it is the countries of Eastern Europe that are bearing the brunt of the immigration crisis. This map from the New York Times depicts the general flow of immigrants from Turkey into Germany. It was not all that long ago that one could pass freely from one country in the EU to another, but now border walls and controls are being erected.
And while Merkel says Germany can take 800,000 immigrants, notice that they are instituting border controls to stem the flow. It’s is all well and good to say you can absorb nearly a million immigrants, but where you going to put them? How will you feed them or school them? That effort takes planning and time, planning and time that have not been much in evidence the past few years in Europe.
Just as the Grexit crisis showed us the underbelly of European monetary integration, the refugee crisis highlights the huge difficulty of political integration. Hungarians, Slovaks, and Czechs do not want Brussels telling them how many Syrians they must admit and support. I don’t blame them.
Ambrose astutely points out that Europe must now deal with an east-west split on immigration along with the still-unbridged north-south economic chasm. Yet EU leaders push blithely on, thinking they can roll right over their opposition. To them each crisis presents another opportunity to impose structure and an artificial unity from the top down.
This is maddening, and it leaves an interesting question unanswered. Why is Germany so willing to accept so many migrants, while other countries are not? Aside from the 800,000 it will take this year, officials have said Germany can handle 500,000 more per year, indefinitely.
That starts to add up in a few years, even in a country of 80+ million. This is more than a gesture. What is Merkel thinking?
The answer is that Merkel is thinking ahead. Germany’s economy is going to need those people. Germany currently has a population of 82 million, but that number is expected to fall by 12 million over the next 40 years. Further, as the population ages, the number of potential workers who are not retired will be reduced by many more millions. The percentage of people in Germany of working age (between 20 and 65) was projected by a recent study to drop from 61% to 54% by 2030. Germany recorded the lowest birth rate in the world from 2008 to 2013. Hold that thought. (Mitchell)
Merkel’s immigration plan presents huge problems, given Germany’s generous retirement benefits and social programs. For every baby boomer that stops working, the country needs at least one person to start working. The US is in better shape only because we have enough legal immigrants to keep the demographic pipeline flowing. Even so, we will hit the wall at some point unless more and more potential retirees keep working.
Germany is in much deeper trouble on this point, and Merkel knows it. I suspect she wants to bring in quite a few million immigrants, somehow make good Germans out of them, and keep the economy humming.
My good friend Dennis Gartman wrote about this in his September 15 daily report:
But there is a very real demographic reason why Germany is so willing to take a surfeit of these refugees: German’s demographics demand it. Simply put, Germany’s population… and especially its indigenous… population is imploding swiftly and certainly.
Already there are very real shortages of young, skilled workers, and many German companies openly and regularly complain that they cannot hire enough workers to fill job vacancies because there are not enough workers available for those jobs.
Further, Germany needs younger workers to fill those jobs because it needs their salaries for the social welfare programs that Germany is so renowned for. Simply put, there are not enough workers paying into the social programs to pay for them at present, and this problem shall become worse, not better, unless Germany’s population swells measurably in the coming years and decades.
So, Ms. Merkel has a clear ulterior motive for her seeming generosity: she wants the present welfare system in Germany that benefits now and will even more greatly benefit more in the future her normal constituency. If Germans are going to retire they shall need either newly born Germans to take their place and pay into the social security systems or Germany shall need to “import” foreign workers. For now, it is the latter that Ms. Merkel is embracing.
Immigrants – Newfound Sympathy
Before going any further, let’s define some terms. Refugees are persons driven from their homes by war, natural disasters, or other circumstances beyond their control. They have little or no choice but to seek refuge elsewhere.
Migrants, in contrast, are people who have homes but choose to move elsewhere, typically for economic reasons. They think they can increase their income or improve their lives in a new country.
This distinction is important in international law. Various treaties and agreements obligate governments to give refugees at least temporary shelter. Migrants, because they have a home to which they could return, receive lower priority.
One of the problems is that Europe’s incoming masses include both refugees and migrants. Sorting them out is not always easy. Many lack passports and other identifying documents. I saw a small note in the Wall Street Journal this week saying that Sweden is paying a language-analysis firm to verify refugee candidates’ origins by their accents. As good a method as any, I suppose.
I think everyone agrees that sheltering genuine refugees is simply the right thing to do. We all know that in other circumstances we could be the homeless ones. Some older Europeans saw World War II uproot millions. Their children and grandchildren have heard the stories, and that awareness probably drives some of the sympathy we see now.
While the goals are laudable, there are limits. Even a continent as large as Europe needs to manage population inflows and screen out undesirables. The sheer scale of the challenge is mindboggling. More than four million people have left Syria alone. Tens of thousands more are leaving each week. Most are still in the bordering states of Turkey and Jordan, which have their own challenges and can’t offer permanent resettlement.
This graphic from Stratfor shows where people are leaving and where they want to go.
Merkel immigrantsimmigrants
You can see that part of the problem is intra-European. People from Kosovo, Montenegro, and Albania want to leave their countries. While some of them might be able to legitimately claim refugee status, I think most can be properly labeled as economic immigrants.
It’s also interesting which countries have received the most asylum applicants
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http://www.amazon.com/Caliphate-Tom-Kratman/dp/1439133425
Military Science Fiction by the Author of A Desert Called Peace and A State of Disobedience. A Frighteningly Possible Novel of the Next Century, Where Europe is an Islamic Stronghold and the Staging Ground for the Final Jihad Against the Great Satan: America. First Time in Paperback.
“Slavery is a part of Islam . . . Slavery is part of jihad, and jihad will remain as long there is Islam.” —Sheikh Saleh Al-Fawzan, author of the religious textbook At-Tawhid (“Monotheism”) and senior Saudi cleric.
Demography is destiny. In the 22nd century European deathbed demographics have turned the continent over to the more fertile Moslems. Atheism in Europe has been exterminated. Homosexuals are hanged, stoned or crucified. Such Christians as remain are relegated to dhimmitude, a form of second class citizenship. They are denied arms, denied civil rights, denied a voice, and specially taxed via the Koranic yizya. Their sons are taken as conscripted soldiers while their daughters are subject to the depredations of the continent’s new masters.
In that world, Petra, a German girl sold into prostitution as a slave at the age of nine to pay her family’s yizya, dreams of escape. Unlike most girls of the day, Petra can read. And in her only real possession, her grandmother’s diary, a diary detailing the fall of European civilization, Petra has learned of a magic place across the sea: America. But it will take more than magic to free Petra and Europe from their bonds; it will take guns, superior technology, and a reborn spirit of freedom.
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http://www.bbc.com/news/world-europe-34573825
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The Paris Attacks Will Have Far-Reaching Effects
Geopolitical Diary
November 17, 2015 | 02:06 GMT Text Size
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With the French and many others around the world still in shock after the terrorist attacks in Paris on Nov. 13, French President Francois Hollande said Monday in a speech before the two chambers of Parliament that France is at war and announced a series of policies to fight terrorism. The attacks revealed the extent to which the situation in Syria, the immigration crisis in Europe and international terrorism are interconnected. The repercussions of the attacks will be similarly far-reaching.
The Paris attacks will seriously challenge the continuity of the Schengen Agreement, which eliminated border controls in Europe. As of Monday, the Schengen Agreement is effectively suspended in many places. France has re-established border controls, as have Sweden, Germany and Slovenia. Hungary built a fence to protect its border with Serbia, which is not a member of the treaty. So far, these actions are taking place within the framework of Schengen, which allows for the temporary reintroduction of border controls during emergencies.
What is a Geopolitical Diary?
The big question is whether Schengen will be formally abolished, or if countries will begin to opt out from it. The concept of a Europe without borders has become very difficult for governments to defend. As a first reaction, European governments could enact measures to improve intelligence sharing and increase cooperation between security forces in Europe while trying to preserve the agreement. But the future of Schengen is ultimately in the hands of European voters. If the popular sentiment turns against Schengen, moderate governments — or, after the next electoral cycle, nationalist governments — could withdraw from the agreement.
Meanwhile, closing off Europe's external borders without finding a home for the migrants could lead to serious problems in the Balkans, where migrants will be stranded. As several thousand men and women become involuntary immigrants to countries with high unemployment and latent ethnic tensions, the region's already fragile political and social structures will experience significant strain in the next few months.
The Paris attacks could accelerate the rise of nationalist parties across Europe. After the dust settles in France, voters could decide that Hollande's Socialist government has failed to protect them. In the upcoming municipal elections (scheduled for December), the center-right Republicans and the far-right National Front will probably have strong showings, paving the way for a strong performance for both parties in the presidential election of 2017. To different degrees, the two parties criticize Europe's policies on migration and, in the case of the National Front, France's membership in the eurozone.
The rise in Euroskepticism will be felt elsewhere in Europe. In Germany, Chancellor Angela Merkel has already changed policy to toughen regulations on asylum. In the coming days she will be under pressure from conservative forces to follow the policy changes with political changes, potentially including an admission of mistakes in the handling of the migration crisis. If anything, the Paris attacks could accelerate Germany's growing Euroskepticism ahead of the general elections of 2017 and especially after the vote.
The Paris attack will also make it hard for the European Commission to defend its plan to relocate refugees across the Continent. The plan was already in serious trouble: Only a few hundred of the 120,000 men and women included in the scheme have actually been relocated. Poland said it will opt out from the plan, and other countries in Central and Eastern Europe will probably follow suit. Brussels will be too weak to introduce sanctions against the countries that choose not to participate in the plan.
Before the Paris attacks, the European Union was already trying to enhance cooperation with Turkey to prevent asylum seekers from entering Europe. The Turkish government basically made three requests: money, visa liberalization for Turkish citizens and a no-fly zone in northern Syria. The European Union has already approved giving Ankara some 3 billion euros ($3.2 billion) to deal with the migration crisis. After the Paris attacks, Brussels will probably offer more flexible visa conditions for Turkish citizens.
Now the stage is set for Turkey to solicit firmer support from the Europeans as it tries to push forward its plans to establish a "safe zone" in northern Syria. Turkey and the United States already appear to be in advanced talks over stepping up military operations in northern Syria, and Ankara is looking for diplomatic cover from NATO members to proceed, preferably with the participation of European countries willing to put boots on the ground. There is no guarantee that Turkey will get that much of a commitment from the Europeans, but it can count on broader European involvement overall in the air campaign against the Islamic State. The major question is still whether Turkey and potential coalition partners can reach an understanding with Russia to quell the fighting.
In addition, the Paris attacks could compel more EU members to seek accommodation with Russia on the end of the civil war in Syria. Countries that were originally against keeping Bashar al Assad in power could decide to stick with the devil they know to slow down emigration from Syria. This could open the door for cooperation in other issues — most notably, Ukraine — but that would happen later in the process. The European Union is still likely to extend sanctions against Moscow when they expire in late January 2016, and the United States probably will encourage its European partners to keep pressure on Russia. Moreover, even with Russian cooperation, substantial challenges remain in Syria, given the disputes over which Syrian parties can be negotiated with, the presence of extremist factions in Syria that do not want a cease-fire to be implemented, and the vast number of armed factions in the conflict.
Europe also faces limitations when it comes to a military reaction to the Paris attacks. Airstrikes against Islamic State positions in Syria and Iraq will intensify in the coming days, but Europe is unlikely to go beyond that. Germany will oppose any form of military intervention in Syria and will push for a diplomatic solution to the civil war in the country. Countries such as the United Kingdom and Italy could join the airstrikes in Syria, but they are unlikely to send ground troops to the conflict. Even U.S. President Barack Obama said on Wednesday that putting boots on the ground would be a mistake.
The Paris attacks will accelerate some processes that were already underway in Europe, such as resistance to migration and criticism of the Schengen Agreement. The attacks will also affect the European Union's already complex relationship with Turkey and Russia, but pre-existing factors — such as political divisions among member states on how to deal with Moscow and Ankara — as well as logistical constraints will continue to shape the European Union's foreign policy, regardless of what has been said publicly the past three days.
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Nov. 26, 2015 5:00 p.m. ET
30 COMMENTS
Europeans will remember 2015 as the year in which national security became an everyday concern, from Russia’s encroachments on NATO’s periphery to the jihadist threat to their urban centers. So kudos to David Cameron’s government for reversing years of cuts to Britain’s military spending with a strategic review that starts to take account of the world as it is.
“We must expect the unexpected,” the Prime Minister warned Parliament on Monday. Britain, he added, “can make sure that we have the versatility and the means to respond to new risks and threats to our security.”
To that end, the government plans to spend £2 billion ($3 billion) on additional weapons for its special forces, hire 1,900 new foreign and domestic intelligence personnel, buy 20 long-range Reaper drones, restore Britain’s maritime patrol capabilities with nine P8 Poseidon aircraft (useful for hunting Russian submarines), and add new squadrons of land-based Typhoon and sea-based F-35 jets. The government will also set aside £41 billion to build Britain’s next generation of nuclear missile submarines.
As important, Mr. Cameron seems belatedly to recognize the need for Britain to maintain robust expeditionary forces. The number of deployable troops will increase to 50,000 from 30,000, including two new strike brigades of 5,000 troops each, capable of moving on short notice. “Not one of these capabilities is an optional extra,” he noted. “These investments are an act of clear-eyed self-interest.”
The Prime Minister is surely right, though even this new spending is not sufficient given the degraded state of Britain’s military. The U.K. spent 5.4% of GDP on defense in 1982, when it was barely able to muster the forces needed to retake the Falkland Islands from Argentina. Defense spending now hovers at 2.2%—large by European standards but barely meeting the NATO minimum of 2%.
Another concern is that many of the new capabilities won’t be operational for several years, while the security threats are increasing now. Mr. Cameron wants to increase Britain’s involvement in attacking Islamic State targets in Iraq and Syria, but Britain’s involvement is partly limited by not having an aircraft carrier capable of deploying fixed-wing aircraft. The U.K. is building two large carriers to replace the small jump-jet carriers it retired over the last decade, but the new ships aren’t scheduled to come into service until the 2020s. Maybe they’ll be put to use against whatever comes after Islamic State.
All of this is a reminder of the danger of shortchanging the military in a belief that the world will stay peaceful without a robust deterrent. That’s one of President Obama’s signature illusions, with his predictions of a receding tide of war. U.S. defense spending is also too low in an era of multiplying threats. Still, Mr. Cameron has made a useful start, and his NATO allies should follow his lead.
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The Fear of the Other Europe
Geopolitical Weekly
November 24, 2015 | 08:00 GMT Print
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(Stratfor)
By Reva Bhalla
Refugees are a natural byproduct of revolution. Stripped of status and security in the throes of political change, the masses will tend to sacrifice a life of familiar faces, customs and places and flock to foreign lands in search of simple things: a place to live, earn and provide for their kin in peace. But in that search for the path of least physical and political resistance, migrants cannot avoid disturbing the peace along the way. Their names, clothes, accents, languages and religions — everything that gives them a sense of place and belonging at home — make them "the other" in the eyes of their new hosts and thus undeserving of the rights and privileges of those with whom they are expected to assimilate. For the many who end up in Europe, assimilation will instead occur in the ghettos, where migrants already pushed to the fringes of society cling to rose-tinted memories of the life they left behind, widening a chasm in which radical ideas can fester for generations.
These are the conditions that threaten to radicalize and mobilize migrant offspring in France, Belgium and elsewhere. These were also the conditions endured by waves of displaced Goths who flooded the Roman Empire to flee their Hun invaders and of the millions of Eastern Europeans whose identity cards could scarcely keep up with the borders changing beneath their feet in the fervor and confusion of the world wars (the great "migration of nations," as Polish-born writer Aleksander Wat named it). In each mass migration, identities were lost, traded or hijacked along the way. As deeper phobias develop and moral restraint wears away, inventive and often dangerous schemes are developed to "solve" the problem of "the other." In 1926, the League of Nations had the idea to relocate former czarist emigres from Russia to the interior of Bolivia, Paraguay and Peru, an offer only briefly taken up by a few hundred Cossacks who warned their countrymen that a persecuted life in Europe, or even suicide, was still preferable to the exotic dangers they encountered in malaria-infested jungles. For the Third Reich, it was the ideological pursuit of lebensraum, or living space, through aggressive territorial expansion and genocide that would be framed in Nazi propaganda as an answer to Germany's post-World War I travails.
Europe Struggles to Find Its Balance
If refugees are a product of revolution, then the product of mass refugee flows is often a blend of economic stress and ethnic nationalism, the foundation of many transformative geopolitical events in our time. It would therefore be prudent to think through the deeper consequences of the large numbers of migrants fleeing lawlessness in the Middle East for a European Union that was sliding into an existential crisis before the most recent wave of migrants even showed up.
Over the past century, Europe has swung dramatically between two poles. After taking a destructive leap into ethnic nationalism, years of industrial-scale killings exhausted Europe to the point that states developed the extraordinary will to sacrifice their national sovereignty for the sake of avoiding conflict and pursuing prosperity in a union of European states. Europe's storied past, in a sense, would be overcome only by pushing nationalism under the rug and focusing on making money instead. That worked only until the promise of prosperity was crushed in the financial crisis of the early 21st century.
As economic pain grew from south to north and west to east on the Continent, the Euroskeptics calling for taking care of one's own before bailing out the distant relatives in the union gained popularity and strength at the expense of the Europeanists advocating an ever-closer union. Whether the message came from the right or the left or from the creditors or the debtors of the crisis, the idea was the same: When livelihoods are threatened, a state must look after its own interests before making sacrifices for the other. Even before Syrians, Libyans and Afghans began arriving en masse on European shores, the European Union was struggling with the idea that Germany shared the identity and fate of Greece. The suggestion, then, that a German taxpayer would now have to make sacrifices for a Syrian on the run was simply a bridge too far.
The Paris attacks did not send Europe into an entirely new direction; they catalyzed the long-running and arguably inevitable trend of European fragmentation. The debate over borders — lines that distinguish one's own from the other — is a logical flashpoint. As part of the European Union's efforts to forge a common European identity, the Schengen Agreement was designed to eliminate physical borders, a policy anchored in the bloc's foundational principle of allowing free movement of Europeans across national boundaries. But as more countries from the farther reaches of the Continent joined, fears grew of Balkan peoples straining social welfare systems and bringing crime into the core of Europe. The influx of refugees from the Middle East only deepened European disillusionment with Schengen as Syrians, Libyans and other migrants took advantage of weak border controls in the Balkans to make their way north. In the wake of the Paris attacks, the potential for militants to camouflage themselves in migrant flows only reinforces Europeans' paranoia over the security of their borders.
While lengthy, sophisticated and ultimately ineffectual debates over Schengen were taking place in Brussels, the countries on the front lines of the migrant crisis took matters into their own hands. Hungary and Slovenia built fences, and border controls were reimposed throughout the Schengen zone. No one was about to wait around while Brussels tried to come up with a 28-member consensus on how to deal with the problem. The danger now is that as Greece continues to funnel refugees northward, as Hungary and Slovenia shut off their non-Schengen neighbors to the south with fences, and as the Carpathian Mountains create physical difficulties for rerouting to the east, a bottleneck will develop in the Balkans. Already, some Balkan countries are trying to cherry-pick which refugees they will accept based on nationality and religion. This is a region where numerous unsettled issues from the 1990s can spark ethnic riots that a distracted Europe will have trouble containing.
As the Schengen pillar of the European Union comes crashing down, logically we should give the foundation of the European Union — France and Germany — a closer inspection. The European Union, after all, is a form of grand compromise between Paris and Berlin whereby they put aside their historical competitive impulses along the North European Plain and economically tether themselves to each other as a form of mutual containment. An economically stagnant France is more likely to identify with its southern Mediterranean roots as it grows more alienated from its economically healthier European peers to the north. Both France and Germany will face elections in 2017. In France, the nationalist and Euroskeptic currents underpinning Marine Le Pen's far-right National Front and Nicolas Sarkozy's center-right Republicans are likely to continue strengthening as economic stresses persist and as security concerns overwhelm the state. In Germany, Chancellor Angela Merkel's voice is already being drowned out by her more Euroskeptic Cabinet members and coalition partners who are showing less inhibition as they assert German rights in violation of pan-European interests.
Elsewhere in Europe, the United Kingdom is in the process of negotiating additional distance between itself and its European peers, creating political space for Poland to also go down a reverse-integration path. The Dutch have recently put forth an idea to create a mini-Schengen of culturally like-minded states with the Netherlands, Belgium, Luxembourg, Germany and Austria, a grouping that harkens back to the Holy Roman Empire of the late 18th century. The fact that European elite are comfortable openly discussing a break-up into smaller blocs of culturally and historically harmonious entities and the ejection of more awkward elements such as Greece should not be taken lightly. Indeed, the debate over a "Grexit" is bound to resurface as a politically fragile Athens continues to struggle to implement reform. Germany's irritation will reverberate throughout the eurozone once again as Greece tries to leverage the growing number of refugees bottled up within its borders to negotiate a more lenient bailout timeline with its creditors. Only this time, the term Grexit and proposals to form new blocs is no longer taboo.
A Cycle of Division
A divided Europe will not necessarily replicate the horrors of the early 20th century. History will rhyme, however, at the intersection of several trends running in parallel. The splintering of Europe overlays the erosion of central authority within the Sykes-Picot borders in the Middle East — borders that the Europeans created to divide the region and tighten their colonial grip. With those territories in prolonged conflict, the weakening of those regimes and the radical ideologies borne out of power vacuums will risk drawing a minority of European Muslims into battle while driving migrants into the heart of Europe, accelerating Europe's path toward fragmentation.
As the core powers of Europe become more skeptical of the benefits of the European Union, compromises on issues ranging from migration to bailout policies will become elusive. A resurgent Turkey will leverage its position as the migrant gateway to Europe to exact concessions from the West while reassuming its imperial responsibilities in northern Syria and Iraq. Russia will use European divisions to its advantage as it tries to temper a Western encroachment in its former Soviet space even as it remains just as susceptible as the Europeans to the ethnic frictions and security threats emanating from mass migrant flows.
The global hegemon, by definition, will find itself at the center of this oddly familiar set of challenges afflicting Eurasia. The United States already shoulders most of the burden in extending a security buffer against Russia in Central and Eastern Europe and in trying to put a lid on conflicts in the Middle East. But an even bigger challenge may not have fully registered on Washington's radar: the darker side of a Europe willing to re-embrace nationalism in response to a fear of the other.
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By Ian Morris
The slow-motion crisis of the European Union finally seems to be coming to a head. "Europe could lose its historical footing and the project could die quickly," French Prime Minister Manuel Valls warned in a speech at this year's World Economic Forum in Davos, Switzerland. "Things could fall apart within months," which, German Finance Minister Wolfgang Schaeuble added, "would be a tragedy."
The catalyst for these fears is Britain's upcoming referendum on its EU membership, due by the end of 2017. I am writing this column having just left Congress Hall in Davos after British Prime Minister David Cameron's own speech on "Britain in the World." At least, that was what the speech was supposed to be about; in fact, it might have been better titled "Britain in the European Union (and What I Don't Like About It)." There are, to be sure, bits of Europe that Cameron does like, particularly its potential to create a single market for goods and services, but there is much more of which he disapproves. The core issue, he insisted, is that "if Europe is about ever-deepening political union, with ever-deepening political institutions, then it's not the organization for us."
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Pressed on this point in the Q&A session, Cameron accepted that "you [can] never forget that this is a group of countries that used to fight each other and kill each other, and have actually now come together in a common endeavor"; but that coming together, he suggested, was the result less of the movement toward political union than of "some values that we in Britain are very proud of, in terms of committing to democracy and freedom and rights and all the rest of it."
Much ink has been spilled over whether David Cameron's speeches about the European Union represent his own views, those of his party, or a subtle attempt to manage the British nation's political mood. Yet whatever the prime minister's motives, seeing the 70-year process of European integration as part of a much longer history of state formation casts an interesting new light on the arguments Cameron offered at Davos.
Forging a New Path to Peace?
When I was a teenager growing up in 1970s Britain, no topic seemed quite as dull as the European Community (as it was called until it rebranded itself as the European Union in 1993). Nothing could get me to turn the TV off quite as quickly as yet another announcement from the bureaucrats in Brussels about what I was allowed to eat or drink and what size container it could come in. But I — and the millions of others who shared my lack of interest in all things European — was very wrong to react this way.
For 5,000 years, since the first states were created in what is now southern Iraq, governments have been using violence to create political unity and then using politics (and, when necessary, more violence) to create economic and cultural unity everywhere that their power reached. From 3000 B.C. through the late 1940s, it is hard to find a single example of a state formed in any other way. Since the late 1940s, though, Western Europeans have been turning history's most successful formula on its head.
The European Union has arguably been the most extraordinary experiment in the history of political institutions, but the reason its accomplishments seemed so boring was that dullness was the bloc's whole point. In committee meeting after committee meeting, unsung bureaucratic heroes spun a web of rules and regulations that bound the Continent's formerly sovereign states into an economic and cultural unit and then began using economics and culture to create a political unit. "The final goal," Helmut Schlesinger, the head of the German Bundesbank, explained in 1994, "is a political one … to reach any type of political unification in Europe, a federation of states, an association of states or even a stronger form of union." In this agenda, "the economic union is [merely] an important vehicle to reach this target."
For the first time in history, huge numbers of people — 500 million so far — have come together to form a bigger society without anyone using force to make them to do so. The consequences have been extraordinary: Between 1914 and 1945, Europeans killed more than 60 million people in two world wars, but by 2015 the European Union had become the safest place on Earth. Its citizens murdered each other less often than any other people on earth, its governments had abolished the death penalty, and it had renounced war within its borders (and almost renounced it outside them, too).
In 2003, opinion pollsters found that only 12 percent of French and German people thought that war was ever justified, as opposed to 55 percent of Americans. "On major strategic and international questions today," U.S. strategist Robert Kagan concluded that same year, "Americans are from Mars and Europeans are from Venus."
The contrast with the lands beyond the European Union's eastern border, where Russian leaders have not hesitated to assassinate their critics and use force against weaker neighbors, could hardly be starker. Small wonder that the Nobel Committee decided in 2012 to award its Peace Prize to the European Union as a whole.
The Drawbacks of Europe's Experiment
Why, then, Cameron's insistence that "Britain has never been happy with the idea that we are part of an ever-closer political union?" My own (admittedly unsystematic) survey of the discussions makes me think that there are three main arguments. The first is tribal: as Cameron put it in Davos, "We're a proud, independent country, with proud, independent democratic traditions." Britons have not been persuaded that the gains from surrendering their independent traditions and identity outweigh the costs.
The second argument, and the one least spoken about, is geostrategic. Since the 17th century, British grand strategy has consistently revolved around engaging with the wider world while preventing any single power from dominating continental Europe. "We have no eternal allies and we have no perpetual friends," Lord Palmerston, the foreign secretary, famously observed in 1848; only "our interests are eternal and perpetual." Between 1689 and 1945, Britain built and broke alliances and paid huge costs in blood and gold to prevent the political unification of Europe; and as I have discussed before, since 1945 it has carried on a delicate diplomatic dance to remain engaged with the Continent while undermining any ever-deepening political union.
Third is what seems to be the most powerful argument of all: that Europe's novel path of coercion-free state formation is just not working. For nearly 15 years after the signing of the crucial treaty at Maastricht in 1992, the opposite had seemed to be the case. From Ireland to Estonia, most Europeans began sharing a single currency and central bank, accepting rulings from a European court and parliament, and crossing borders without passports. Since 2010, however, the tedious path of consensus building has increasingly broken down.
As the countries that had adopted the euro as their currency plunged into a debt crisis (or, more accurately, a balance-of-payments crisis between the highly productive North and the less productive South), they discovered the limits of a rules-based union that lacked the centralized coercive powers of a traditional state. An old-style empire could have used force to solve the problems, as Britain did when it sent gunboats to extract debt payments from Greece in 1850; but in the new Europe, no German tanks would be rolling through the streets of Athens to restore fiscal discipline.
Having chosen a path of state formation that denied it the very possibility of enforcing its rules with violence, the European Union has been teetering on the brink of an abyss for the last five years. By late 2011, the Swiss bank UBS was even worrying that the absence of central coercive power would unleash violence of a different kind: "Almost no modern fiat currency monetary unions," its analysts observed, "have broken up without some form of authoritarian or military government, or civil war." However, as of early 2016, the much-criticized policy of masterly inactivity — doing just enough to keep indebted countries afloat, but no more — does seem to be averting disaster. Despite eye-watering unemployment, occasionally violent street protests and regularly recurring political crises, Greece has hung on within the eurozone; and despite mounting pressure on Ireland, Portugal, Spain, Italy and even France, none has collapsed.
Since 2014, however, a second problem has emerged for the European path toward state formation. Nearly 2 million refugees — less than half of one percent of the European Union's population, but a formidable number nonetheless — have flooded into Europe from the south and east. The borderless Schengen area, which will eventually comprise 26 of the 28 EU countries plus Iceland, Lichtenstein, Norway and Switzerland, has struggled to cope since it was constructed in 1985. Amid scenes of misery and even violence, internal borders are returning. State formation is going into reverse.
The Problem of Governing Without Power
For more than 60 years after its beginnings in the late 1940s, the European Union's revolutionary path of state formation without centralized coercive power gradually mastered its members' tribalism and local strategic interests. In many ways, this has been an inspirational story, challenging head-on Thomas Hobbes' assertion in Leviathan that the only force strong enough to prevent people from using violence to pursue self-interest is a government that has more violence at its disposal than any of its subjects.
Since 2010, however, evidence has been mounting that the European path toward state formation only really works in the best-case scenario. Confronted by genuinely Hobbesian challenges of greed and desperate refugees, the limitations of Brussels' rules and committees have become clear.
If correct, this seems to leave just two options. The first is that the champions of political union will turn the crisis of state formation into an opportunity, persuading the bloc's members to strengthen central institutions at the expense of local ones and thereby giving Brussels the powers it needs to tackle the forces of dissolution. Right now, however, that does not seem to be the direction Europe is moving in.
The second option is the one that Cameron championed at Davos: rejecting "ever-deepening political union, with ever-deepening political institutions" as Europe's goal. Cameron's claim that the pacification of Europe since 1945 has been a product of the Continent's shared democratic values rather than of political integration sweetens the pill, but rests on an unstated counterfactual assumption — that even if European nations had not surrendered so much of their sovereignty since the late 1940s, pacification would have happened anyway. In favor of Cameron's counterfactual is the point that violence has declined across most of the world in the last 70 years even though the number of independent nation-states has grown; against it, perhaps, the fact that violence has declined more inside the European Union than anywhere else.
No one has a crystal ball, and because Europe's experiment in state formation without violence is unique in the annals of history, we cannot even appeal to arguments from analogy to see where it might lead. One of the clearest trends of the last 10,000 years has been the creation of larger and larger political units, which might mean that Cameron is wrong and that the European Union will somehow muddle through. On the other hand, because these larger units have always been formed by governments monopolizing the use of legitimate violence within their territories and because this is the one strategy that the European Union has always rejected, perhaps we should conclude that Cameron is right, and that ever-deepening political union is a dead letter.
Back in 1651, Hobbes speculated that Leviathan — an awe-inspiring government controlling sufficient force to deter its subjects from using violence in their own interests — could be created in more than one way. The most common route, he surmised, was what he called "commonwealth by acquisition," which depended on threats and coercion, "as when a man maketh his children, to submit themselves, and their children to his government, as being able to destroy them if they refuse; or by war subdueth his enemies to his will, giving them their lives on that condition." However, Hobbes argued, it was also possible for there to be "commonwealth by institution … when men agree amongst themselves, to submit to some man, or assembly of men, voluntarily."
More than three centuries on from Leviathan, the European Union has been giving commonwealth by institution the most serious test it has ever had. It has been a noble and inspiring experiment in solving collective action problems without the threat of coercion. But if Cameron was right in Davos, the experiment is failing.
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second post
Jan. 27, 2016 7:21 p.m. ET
26 COMMENTS
Europe’s system of passport-free travel is on the way to history’s dustbin. The latest sign came Wednesday after the European Union issued a report faulting Greece for its handling of the refugee crisis. Greece now has three months to rectify its migrant-processing shortcomings or face suspension from Schengen, the treaty that facilitates visa-free travel across European frontiers.
The report followed Monday’s warning from EU interior ministers that they could move the EU’s external border up to Central Europe, effectively fencing Greece outside Schengen. Border controls have already been erected by Austria, Denmark, France, Germany, Norway and Sweden, while Britain and Ireland were never in the Schengen area. Expect other borders to close as the next wave of migrants moves in with warmer weather.
We don’t usually sympathize with Greece’s left-wing government, but it’s hard to see what Brussels expected in the face of the human tide. Most of the million refugees who arrived in Europe last year came by way of Greece’s Aegean islands. The EU has provided Greece a paltry €28 million ($30.4 million) in emergency funding to field five “hotspot” processing centers on the Greek isles, of which only one is in operation. That’s in addition to the €474 million in routine migration-management assistance the EU pledged to Greece from 2014 to 2020. By comparison, the EU donates some €100 million a year to Myanmar.
Europe’s real problem is Chancellor Angela Merkel’s refusal to set a ceiling on the number of refugees Germany is willing to accept, combined with Europe’s failure to create safe zones in Syria, Libya and other failed states to stop the refugee flow. Migrants will continue to take desperate risks to get to Europe as long as they are fleeing chaos—and Germany continues to promise shelter, welfare and eventual citizenship.
Mrs. Merkel has sought to get other European countries to take in migrants on a quota system, but Poland, the Czech Republic, Hungary and Slovakia have vowed to veto the plan. An effort last fall by Mrs. Merkel to persuade Ankara to do a better job of policing its own borders in exchange for European money and visa-free travel for Turks has yielded no results.
Meantime, the risk that the refugee crisis will become a security one continues to grow, with French Interior Minister Bernard Cazeneuve warning Monday that Islamic State has “set up a true industry of fake passports.” A Paris-style attack perpetrated by terrorists masquerading as refugees would be a tragedy and cause a political backlash that could favor Europe’s far-right typified by France’s Marine Le Pen.
A borderless Europe is still an ideal worth fighting for—assuming Europe can police its external borders and intervene abroad to prevent the tragedies of the Middle East from becoming its own. If Europe’s centrist leaders can’t do it, they will pave the way for the rise of their own Donald Trumps.
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Can any one dream of any greater foolishness then this. Crucifying themselves for the sins of the world . Go ahead and be stupid - but leave us out of this madness:
http://www.breitbart.com/london/2016/02/03/10000-migrants-to-be-housed-in-luxury-berlin-hotels-while-local-homeless-go-without-shelter/
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http://www.theguardian.com/politics/2016/apr/02/eu-referendum-young-voters-brexit-leave
My guess is that it will be a close vote to stay in since this is almost margin of error close and people are mostly afraid of change. Similarly, Scotland voted narrowly to stay in the U.K.
Which way would YOU vote? My instinct would be to vote yes for the economic common market, no for open borders, no for Euro currency and in this case no for E.U.
Being just one member is too little control of your own country. The E.U. is not a country. It is not an e pluribus unum, out of many, one. Nor are we anymore, but Europe is less so. Too many screwed up, failing states, Spain, Portugal, Italy, Greece... and too much going wrong in the so called stronger ones such as a million new refugees in Germany, trouble in France, Brussels, etc.
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I wonder what others here think. If you were British, how would you vote to exit or remain in the European Union.
(Do we have a separate Great Britain, U.K. thread?)
The E.U. is clearly stronger and better off with the UK in. But what does the U.K. gain in return? They don't even want the currency and neither side would gain from a trade war retaliation of their exit. EU has no defense beyond the larger countries acting on their own.
The future of the EU will be the richer, more productive states bailing out the poorer, less productive ones. As a richer nation, wouldn't you get out at every opportunity?
But the real, driving force of this is, out of control, open immigration. Because it is in the EU, the UK does not have the sovereignty to stop the current invasion. Wouldn't they want to get the power back? The UK should make UK immigration decisions. No?
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Right now we look at the British EU exit vote but the whole German-European question is even harder to understand. Germany is the stable economy of the EU, holding up places like Greece. What does Germany gain from it? Export markets, for one thing but wouldn't they have that anyway?
Just like the monetary question here, zero interest policy hurts savers. Zero interest rate policy hurts Germany. But Germany doesn't have a central bank; they are part of a union of 19 nation-states. the immigration explosion some saw as a demographic opportunity will be called in question by the voters. The political direction of Germany could change next year and those who pursued nonsense and danger might find themselves out.
Worthwhile read, accept for their misguided advice to re-energize their economy through increased spending.
http://www.realclearworld.com/articles/2016/06/02/germanys_2017_election_is_already_rattling_europe_111887.html
Germany's 2017 Election Is Already Rattling
Behind the war of words between Berlin and the European Central Bank is a convergence of problems that might have repercussions for all of Europe. Both sides have a point. The fact that next year will see elections in Germany is creating unnecessary nervousness.
After months of taking repeated drubbings by leading German politicians, European Central Bank President Mario Draghi decided to strike back. In a stinging and seldom seen rebuke, issued in response to charges that the ECB is hurting the German economy, the fiercely independent institution released a research paper documenting how it isn't the ECB's monetary policy that is hurting Germany, but rather the domestic policies of successive German governments.
Draghi has been excoriated relentlessly by German Finance Minister Wolfgang Schauble for allegedly depriving German savers and pensioners of money by way of the ECB's expansive monetary policies, which have depressed interest rates. Schauble went so far as to say that Draghi's decisions to pump billions of euros into the European money market were pushing voters to populist parties.
On May 30 Schauble reiterated his warnings about the ECB. The rebuke came just one year ahead of general elections in Germany.
The ECB's research paper opines that Berlin's investment policy (or the lack thereof) is at fault. The Bank reasons that a dearth of public investment into the country's infrastructure, research and development, and German consumer spending in general is holding back the German economy.
In short: Because the ECB is keeping interest rates low, it is much easier for the German government to take on cheap loans -- something which it can easily do, since it has a budget surplus and national debt is declining fast -- and invest, thereby boosting the domestic economy.
Ramifications for all of Europe
The outcome of the debate between the ECB and Berlin is all the more important because Germany has a current account surplus thanks to its strong exports. As one economic truism goes: One man's gain is another man's loss.
Yet a country's economy cannot live on exports alone; it also needs to enthrall consumers into buying more German products, which will also aid supplier countries to Germany. If German consumers buy more products, so the ECB argues, the economies of European countries where those products are partly produced or assembled will benefit, thus lifting the entire European economy.
The ECB's reasoning in this case fits right in with what many economists have been saying for years: that the German consumer needs to boost all of Europe by buying European. So far the German government has resisted pressure to dig into its pockets and boost domestic spending.
Yet on the other hand there is a case for Berlin's point of view. Germany's leaders realize that further down the line, the country is facing enormous problems.
Germany is a demographic time bomb. Germans will be leaving the labor force in droves in the coming years, straining the German collective welfare state. There are simply too many people reaching retirement age and too few young people picking up the tab, especially to finance the country's cherished healthcare system. This while the German pensions system isn't sufficient for Germans to keep up retirement incomes equal to their expenditures.
So Germans like to save for their retirement. Low interest rates on their savings are making a lot of elderly Germans understandably nervous as their retirement looms closer.
This economic reality helped push Angela Merkel's open-door policy for refugees. She aims to quickly integrate approximately 1 million refugees into the German labor force. This new blood will hopefully help to pay the bills.
The war of words between the ECB and Berlin shouldn't need to be a matter of either-or. While the ECB agrees that in the short term, interest rates are depressed by the Central Bank's expansive monetary policy, in the long run, smart public spending by the German government, such as in its truly ailing infrastructure, should lift all boats -- in Germany and Europe. People in other European countries will have more money in their pockets with which to buy German products in the years to come.
It's just that it is a tough message to sell for Angela Merkel's CDU party with a new populist, pro-savers party in the shape of the popular Alternative fur Deutschland breathing down her neck in the upcoming election campaign. Expect more artillery barrages between Berlin and the ECB until the voting booths close.
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Massive generational divide marks 'Brexit' debate
http://www.9news.com/news/nation-now/massive-generational-divide-marks-brexit-debate/228790259
One survey found that 75% of those 18 to 24 want Britain to stay, but 67% of those over 65 favor a "Brexit" — British exit. The figures exclude those who don't know or say they won't vote.
“Older people are much more likely to stress the importance of immigration and issues relating to sovereignty,” while young people are mostly concerned about jobs and the economy,
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I confess the youth vote surprises me.
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All kinds of good news (sarc.) around the world in year 8 of Barack Obama's stint as leader of the free world. Latin America, China and Europe collapsing... whatever... Yes, Obama had a hand in Hollande's failure, and also, simply, socialism fails.
http://www.realclearworld.com/articles/2016/06/03/is_frances_fifth_republic_doomed_111890.html
... The government has not been able to staunch the rebellion on the streets. The protests have taken two different, but equally menacing, directions. The first, Nuit Debout (Rise Up at Night), is unprecedented. Convening every evening at Place de la République, thousands of students, workers, and activists practice direct democracy. Holding general assemblies -- one part group therapy session, one part constituent assembly -- participants speak briefly on issues ranging from unfair housing practices to the ongoing state of emergency.
The movement’s slogan -- “Our Dreams Don’t Fit Your Ballot Boxes” -- is a worthy ideal, but hard to translate into policy. As for the other form of protest, its anti-government slogan might as well be “Your Dreams Are Our Nightmares.” These traditional labor union strikes are rooted in the long history of what, 40 years ago, sociologist Michel Crozier called “la société bloquée,” or “the stalled society.” The French, Crozier argued, distrust negotiation and compromise, and do not identify with political parties. Given their “horror of face-to-face contact,” their resistance to cooperation, and their fear of innovation, the French are most comfortable with confrontation. The take-no-prisoners policy of both the government and the General Federation of Workers, the militant union leading the strikes, suggests that Crozier’s analysis is still pertinent. With the start next week of the Euro Cup football championship, hosted by France, one or the other side will have to blink.
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The most likely candidate for this providential man is, in fact, a woman: Marine Le Pen, leader of the extreme right-wing National Front. Le Pen’s approval ratings continue to climb, and last month, in a poll taken for the newspaper Le Parisien, she outdistanced Hollande in the second round of next year’s presidential election, 55 percent to 45 percent.
While she fares less well against some of the other contenders, Le Pen’s growing strength nevertheless underscores the republic’s predicament: its survival perhaps depends on someone whose politics resembles that of another providential figure: Philippe Pétain, the head of the xenophobic, reactionary, and authoritarian Vichy regime. Over the next few weeks, it is not just the Euro Cup, but perhaps also the Fifth Republic that will be at stake.
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I confess the youth vote surprises me.
Likewise. When I read the headline, massive generational divide, I didn't guess which way it would split. Youth are trained to be one world government advocates and the EU is a big step in that direction. Like American exceptionalism, one would have to believe in Britain is exceptional as compared to Europe in order to favor the surrender of sovereignty.
Does anyone remember when the biggest power in Europe was bombing the sh*t out of England? Young people don't. Does anyone believe the UK, such as it was under Thatcher for example, is capable of greater things economically than the stagnant, socialistic states of most of the rest of Europe? Not if you favor stagnant, wealth fighting socialism.
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"Youth are trained to be one world government advocates"
Yes , and trained to be social justice warriors, socialists, and get free stuff and it is the rich vs the poor and it is whites vs the world and all the rest
They need to wake up.
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Gee I wonder why so many people hate Jews:
http://www.breitbart.com/london/2016/06/09/soros-shorts-europe-america/
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Sometimes Europeans crack me up. Over a soccer game. :lol: What hits me is the near complete lack of any women in the crowds. Maybe a good thing. What a cat fight that would be:
http://www.dailymail.co.uk/news/article-3636705/The-Big-Kick-Hundreds-England-Russia-fans-clash-running-battles-streets-Marseille-ahead-tonight-s-Euro-2016-match-baton-wielding-police-fighting-tear-gas.html
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I wonder what our view here would be if we were British. The Spectator UK seems to sum up my view at the moment (below). All that is good with European affiliation is possible without taking with it all that is bad. The UK can negotiate a free trade agreement with the EU. Worst case if they don't out of retaliation is the 4% WTO tariff limit. Not enough to give up sovereignty over. Otherwise, what else do they receive with EU membership, loss of sovereignty, a failing currency, handcuffed national security, economic guarantees to failed states, and an invasion of people they are unable to control or assimilate. The vote is this Thursday.
This article refers to the 1975 vote. I traveled to the capitals in Europe in December 1991 in advance of the Europe '92 initiative, Maastricht Treaty that opened up European telecom networks to outside suppliers. The free trade aspects of the European initiative have been amazingly positive. The immigration and defense aspects have not.
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"The question... is not whether Britain should co-operate with our European allies; the question is how."
"As the world’s fifth-largest economy, Britain has a reasonable chance (to put it mildly) of being able to cut trade deals with countries keen to access our consumers."
http://www.spectator.co.uk/2016/06/out-and-into-the-world-why-the-spectator-is-for-leave/
Out – and into the world: why The Spectator is for Leave
...when Britain last held a referendum...only two national titles backed what is now called Brexit: the Morning Star and The Spectator.
Our concern then was simple: we did not believe that the Common Market was just about trade. We felt it would be followed by an attempted common government, which would have disastrous effects on a continent distinguished by its glorious diversity. The whole project seemed to be a protectionist scam, an attempt to try to build a wall around the continent rather than embrace world trade. Such European parochialism, we argued, did not suit a globally minded country such as Britain. On the week of the 1975 referendum, The Spectator’s cover line was: ‘Out – and into the world.’ We repeat that line today.
Since 1975 the EU has mutated in exactly the way we then feared and now resembles nothing so much as the Habsburg Empire in its dying days. A bloated bureaucracy that has outgrown all usefulness. A parliament that represents many nations, but with no democratic legitimacy. Countries on its periphery pitched into poverty, or agitating for secession. The EU’s hunger for power has been matched only by its incompetence. The European Union is making the people of our continent poorer, and less free.
This goes far beyond frustration at diktats on banana curvature. The EU has started to deform our government. Michael Gove revealed how, as a cabinet member, he regularly finds himself having to process edicts, rules and regulations that have been framed at European level. Laws that no one in Britain had asked for, and which no one elected to the House of Commons has the power to change. What we refer to as British government is increasingly no such thing. It involves the passing of laws written by people whom no one in Britain elected, no one can name and no one can remove.
Steve Hilton, David Cameron’s chief strategist for many years, gave an example of this institutional decay. A few months into his job in No. 10, he was dismayed to find his colleagues making slow progress because they were all bogged down by paperwork that he didn’t recognise. He asked for an audit, and was shocked by the results: only a third of what the government was doing was related to its agenda. Just over half was processing orders from Brussels. To him, this was more than just a headache: it was an insidious and accelerating bureaucratic takeover.
With the EU’s fundamental lack of democracy comes complacency on the part of its leaders and the corruption of those around them — which has led us to the present situation. Voters are naturally concerned about the extraordinary rise of immigration, and their governments’ inability to control it. Free movement of people might have been a laudable goal before the turn of the century, when the current global wave of migration started. But today, with the world on the move, the system strikes a great many Europeans as madness. The EU’s failure to handle immigration has encouraged the people trafficking industry, a global evil that has led to almost 3,000 deaths in the Mediterranean so far this year.
In theory, the EU is supposed to protect its member states by insisting that refugees claim asylum in the first country they enter. In practice, this law — the so-called Dublin Convention — was torn up by Angela Merkel when she recklessly said that all Syrians could settle in Germany if they somehow managed to get there. Blame lies not with the tens of thousands who subsequently arrived but with a system hopelessly unequal to such a complex and intensifying challenge.
The Spectator was, again, alone in the British press in opposing Britain’s entry to the Exchange Rate Mechanism from the beginning. Why, we asked, should the Bundesbank control another country’s interest rates? When the single currency came along, the risks became greater: what if a country’s economy crashed, but it was denied the stimulus of a devaluing currency?
The answer can now be seen across Europe. Sado–austerity in Italy. Youth unemployment of about 50 per cent in Greece and Spain. The evisceration of these economies, in the name of a project supposed to bring people together, has been a tragedy.
Last week, a Pew poll showed how far dismay about the EU extends across the continent. In Greece, 71 per cent now view the EU unfavourably; in France, it’s 61 per cent. In Britain, it was 48 per cent — about the same as Spain, Germany and the Netherlands. This was why David Cameron had a strong case for renegotiation: the demand for change was widespread, and growing. A recent poll has suggested that Swedes will vote to leave the EU if Britain does. The absence of a deal worth the name was final proof that the EU is structurally incapable of reform.
Jean-Claude Juncker, the unelected president of the European Commission, sees intransigence as a great strength. His priority is the survival of the EU and the single currency: the welfare of Europeans and even the notion of democratic consent seem distant concerns. When he dismisses the ever-louder voices of protest as the shriek of ‘populism’, he echoes the Bertolt Brecht poem: ‘Would it not be easier… to dissolve the people/ and elect another?’ When Britain asked for reform, he took a gamble: that we were bluffing and would not dare vote to leave.
All this has placed the Prime Minister in an impossible position. Unable to make a positive case for staying in the EU, he instead tells us that Britain is trapped within it and that the penalties for leaving are too severe. His scare stories, peppered with made-up statistics, have served only to underline the emptiness of the case for remaining. It also represents a style of politics that many find repugnant. The warnings from the IMF and OECD and other acronyms have served only to reinforce the caricature of a globalised elite telling the governed what to think.
Talk of anyone being made ‘worse off’ by Brexit is deeply misleading. Of the many economists who have made projections for 2030, none have suggested that we’d be poorer. The question is whether we’d be, say, 36 per cent better off or 41 per cent better off by then. Not that anyone knows, given the monstrously large margin of error in 15-year predictions. So these studies offer no real reasons to be fearful. This is perhaps why George Osborne had to resort to concocting figures, such as his now notorious claim that households would be £4,300 worse off. If the economic case against Brexit were so strong, why would the Chancellor have to resort to fabrications?
As the world’s fifth-largest economy, Britain has a reasonable chance (to put it mildly) of being able to cut trade deals with countries keen to access our consumers. The worst-case scenario is to use World Trade Organisation rules, tariffs of about 4 per cent. That’s a relatively small mark-up, and the effect would be more than offset by a welcome drop in the pound. And if house prices fall, as the Chancellor predicts, then so much the better. A great many would-be homeowners have been praying for just that.
There would certainly be turbulence, which would be the price of our leaving the EU. This would affect City financiers more than the skilled working class (two thirds of whom support Brexit). This week, we’re being invited to panic at the prospect of a falling pound. But why? A weaker currency would give our exporters the stimulus they need.
The question at this referendum is not whether Britain should co-operate with our European allies; the question is how. Sir Richard Dearlove, former head of MI6, has explained how our intelligence alliances are bilateral. Our closest is with the ‘five eyes’ of the United States, Australia, Canada and New Zealand. The Lancaster House agreements with France over military co-operation is another example. Alliances work when they are between nations with a shared agenda, with the ability and (crucially) the will to act.
The EU is an alliance of the unwilling, which is why it is useless on security — as we saw with Bosnia and Libya. Even the migrant crisis has to be handled by Nato, which has been the true guarantor of western security. It’s sometimes claimed that Vladimir Putin would want Britain to vote for Brexit. This is unlikely: what could suit the Kremlin more than European security being entrusted to the most dysfunctional organisation in the West?
EU campaign 520x100
As David Cameron rightly says, the British way is to fight rather than quit. Given that the EU has proved that it is structurally incapable of reform, we now have a choice. Do we cave in, because we’re too scared to leave? Or do we vote to retrieve our sovereignty, walk away from the whole racket and engage with the world on our own terms? A vote to leave would represent an extraordinary vote of confidence in the project of the United Kingdom and the principle of national self-determination. It would also show reform-minded Europeans that theirs is not a lost cause. And that we stand willing to help forge a Europe based on freedom, co–operation and respect for sovereignty.
The value of sovereignty cannot be measured by any economist’s formula. Adam Smith, the father of economics, first observed that the prosperity of a country is decided by whether it keeps its ‘laws and institutions’ healthy. This basic insight explains why nations thrive or fail, and has been the great secret of British success: intellectual, artistic, scientific and industrial. The principles of the Magna Carta and achievements of the Glorious Revolution led to our emergence as a world power. To pass up the chance to stop our laws being overridden by Luxembourg and our democracy eroded by Brussels would be a derogation of duty to this generation and the next.
No one — economist, politician or mystic — knows what tumult we can expect in the next 15 years. But we do know that whatever happens, Britain will be better able to respond and adapt as a sovereign country living under its own laws. The history of the last two centuries can be summed up in two words: democracy matters. Let’s vote to defend it on 23 June.
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England isn't quite dead yet.
Happy to see this.
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England isn't quite dead yet.
Happy to see this.
http://www.reuters.com/article/us-britain-eu-idUSKCN0Z902K
This is fantastic news.
Pres. Obama says they will be at the back of the queue for a trade deal with the US.
Really? If Barack doesn't have time, I'll write it: The following parties agree to trade freely: US, UK.
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WWWOOOFFF!!!
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http://www.huffingtonpost.co.uk/entry/eu-referendum-result-londoners-independent-capital_uk_576ce096e4b0232d331dae7e?section=
So if Trump wins, will Washington DC residents vote to leave the US?
What a bonus that would be! :wink:
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How Brexit Will Change America and the World
Britain is free of global government. America can be next.
June 24, 2016
Daniel Greenfield
Daniel Greenfield, a Shillman Journalism Fellow at the Freedom Center, is a New York writer focusing on radical Islam.
Yesterday the British people stood up for their freedom. Today the world is a different place.
Celebrities and politicians swarmed television studios to plead with voters to stay in the EU. Anyone who wanted to leave was a fascist. Economists warned of total collapse if Britain left the European Union. Alarmist broadcasts threatened that every family would lose thousands of pounds a year if Brexit won.
Even Obama came out to warn Brits of the economic consequences of leaving behind the EU.
Every propaganda gimmick was rolled out. Brexit was dismissed, mocked and ridiculed. It was for lunatics and madmen. Anyone who voted to leave the benevolent bosom of the European Union was an ignorant xenophobe who had no place in the modern world. And that turned out to be most of Britain.
While Londonistan, that post-British city of high financial stakes and low Muslim mobs, voted by a landslide to remain, a decisive majority of the English voted to wave goodbye to the EU. 67% of Tower Hamlets, the Islamic stronghold, voted to stay in the EU. But to no avail. The will of the people prevailed.
And the people did not want migrant rape mobs in their streets and Muslim massacres in their pubs. They were tired of Afghani migrants living in posh homes with their four wives while they worked hard and sick of seeing their daughters passed around by “Asian” cabbies from Pakistan in ways utterly indistinguishable from the ISIS slave trade while the police looked the other way so as not to appear racist. And, most of all, they were sick of the entire Eurocratic establishment that let it all happen.
British voters chose freedom. They decided to reclaim their destiny and their nation from the likes of Count Herman Von Rompuy, the former President of the European Council, selected at an “informal” meeting who has opposed direct elections for his job and insisted that, “the word of the future is union.”
When Nigel Farage of UKIP told Count Von Rompuy that “I can speak on behalf of the majority of British people in saying that we don't know you, we don't want you and the sooner you are put out to grass, the better,” he was fined for it by the Bureau of the European Parliament after refusing to apologize. But now it’s Farage and the Independence Party who have had the last laugh.
The majority of British people didn’t want Count Von Rompuy and his million-dollar pension, or Donald Tusk, Angela Merkel, Francois Hollande and the rest of the monkeys squatting on Britain’s back.
Count Von Rompuy has lost his British provinces. And the British people have their nation back.
The word of the future isn’t “union.” It’s “freedom.” A process has begun that will not end in Britain. It will spread around the world liberating nations from multinational institutions.
During Obama’s first year in office, Count Von Rompuy grandly declared that “2009 is also the first year of global governance.” Like many such predictions, it proved to be dangerously wrong. And now it may just well be that 2016 will be the first year of the decline and fall of global governance.
An anti-establishment wind is blowing through the creaky house of global government. The peoples of the free world have seen how the choking mass of multilateral institutions failed them economically and politically. Global government is an expensive and totalitarian proposition that silences free speech and funnels rapists from Syria, Sudan and Afghanistan to the streets of European cities and American towns. It’s a boon for professional consultants, certain financial insiders and politicians who can hop around unelected offices and retire with vast unearned pensions while their constituents are told to work another decade. But global government is misery and malaise for everyone else.
The campaign to stay in the EU relied on fear and alarmism, on claims of bigotry and disdain for the working class voters who fought and won the right to decide their own destiny. But the campaign for independence asked Britons to believe in their own potential when unchained from the Eurocratic bureaucracy. And now Brexit will become a model for liberation campaigns across Europe.
And it will not end there.
Brexit showed that it is possible for a great nation to defy its leaders and its establishment thinkers to throw off its multinational chains. And while the European Union is one of the biggest prisons forged by global government, it is far from the only one. America and Britain are sleeping giants covered in the cold iron links of multinational organizations that limit their strength and their potential.
It is time to break those chains.
Americans who want to cut their ties with the United Nations have found Brexit inspiring. Leaving the UK was once also seen as a ridiculous idea at the margins that could never be taken seriously. Serious politicians refused to listen to it. Serious thinkers refused to discuss it. And then it gathered speed.
There is growing opposition even among Democrats to treaties like the TPP. Trump has challenged NAFTA. Americans across the political spectrum are suspicious of economic treaties and organizations. Support for Brexit came from Labour areas in the UK. Support for Trump’s challenge to multinational treaties and alliances could very well come from unexpected places, like Bernie Sanders backers.
Brexit has shown us the weakness of the multinational establishment. Its vast bureaucratic power rests on using the media to suppress political dissent. When the media’s special pleading fails to stop the democratic process, it is more helpless than any dictator when the outraged mob pours into his palace.
What was true of Britain, is also true of America. Our elites are just as impotent. The power they have illegally seized is defended zealously by a media palace guard that spends every minute of every day lecturing, hectoring and messaging Americans. But when no one listens to the media, then the men and women who run our lives, who feed off us like a colony of parasitic insects, are helpless.
Their power is purely persuasive. When we stop listening, then we are free.
That is the lesson of Brexit. It is the future.
The future is not a vast behemoth of global government that swallows up nations and individuals, that reduces democratic elections to a joke and eliminates freedom of speech, but the individual. The elites have gambled everything on big government, big media and big data. But all of those lost to Brexit.
They lost to Brexit in the UK. They can lose in the US too. And they will lose.
The power of the establishment is illusory. Like the naked emperor, it depends on no one challenging it. The harder it is challenged, the harder it will fall. Brexit was an impossible dream. Then it was reality.
Our impossible dreams, the policies that conservatives are told by the establishment are not even worth talking about, can be just as real as Brexit.
If we are willing to fight for them.
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Apparently Northern Ireland is now making noises about exiting Britain to unify with Ireland
https://www.facebook.com/sinnfein/videos/1003910339678597/
and Scotland and Wales are making similar noises.
We live in interesting times.
And, a trip down memory lane with the Iron Lady:
https://www.youtube.com/watch?v=Tetk_ayO1x4
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Apparently Northern Ireland is now making noises about exiting Britain to unify with Ireland
https://www.facebook.com/sinnfein/videos/1003910339678597/
and Scotland and Wales are making similar noises.
We live in interesting times.
And, a trip down memory lane with the Iron Lady:
https://www.youtube.com/watch?v=Tetk_ayO1x4
Interesting times made possible by the Brexit vote. Without it we were turning into Oceania, Eurasia and Eastasia, Orwell's '1984' nations.
Northern Ireland interested in re-joining Ireland is a good thing, right? I love Scotland but not their politics. Let them join with whomever they wish, except for the military installations that belong to the UK and NATO. London can put up the London wall and enjoy all the prosperity of East Berlin, pre-Reagan.
Like DDF suggests, let's get a little reorganization going here too and some self determination instead of rule by others from afar, Washington DC, UN, IPCC etc.
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https://www.facebook.com/DemocraziaVerde/videos/275977272757274/?pnref=story
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https://www.facebook.com/ozpoliticallyincorrect/videos/1655630014762457/
a 70 minute documentary advocating the Brexit vote:
https://www.youtube.com/watch?v=UTMxfAkxfQ0
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http://www.theguardian.com/politics/2016/jun/25/leave-campaign-rows-back-key-pledges-immigration-nhs-spending
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http://www.theguardian.com/politics/2016/jun/25/leave-campaign-rows-back-key-pledges-immigration-nhs-spending
The Guardian = The Left. More positive stories at the Telegraph: http://www.telegraph.co.uk/
Wimbledon gearing up, soccer news, Kate Middleton's dresses, life goes on.
The vote is to bring back sovereignty, to decide these issues as a nation, not solve all problems automatically. It is still a divided nation.
This was their independence day, only half of them including all of the elites didn't want it.
Panic in the UK, OMG, we don't have rule from afar anymore. How will we possibly survive?
I hate to comment on markets because they will move a different direction as soon as I say anything, but it looks to me like the markets have stabilized in a day and that the German, French and Euro markets dropped further than the British market.
EU wanted free trade with Britain in the EU, why wouldn't they want that now? Or is all the panic and doom-saying intentional?
Why hasn't our own Bozo in Chief signed a free trade agreement with Britain yet? Obama promised retaliation and he delivers. Where was all that integrity on healthcare and selling the Iran deal?
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Not enough to say "The Guardian is of the Left."
Is what the article says true or not?
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Not enough to say "The Guardian is of the Left."
Is what the article says true or not?
I didn't find that they made a point. They are no doubt right in their reporting that one Leave-advocate believes immigration will continue after Leave and another opposes putting all EU money into socialized healthcare, but how is that the story? British voters can put their EU money into healthcare or not with Leave, a choice they did not have with remain. How could the Leave campaign promise zero immigration? In my posts on this, the Leave campaign was promoting that Britain instead of EU decide that issue for Britain. "Zero immigration" is either a straw argument or a bad idea in the first place. The vote was to leave the EU, being ruled from afar. Out of control immigration was the largest factor but not the issue on the ballot. They can vote out their 'rino's' (TINOs?) next if they continue the invasion, an option that would have been made moot with Remain.
"if people watching think that they have voted and there is now going to be zero immigration from the EU, they are going to be disappointed.”
Who wants zero immigration, zero movement, zero mobility or zero ties with the continent? What people want is an end to the invasion.
The flip side is what is true. If you vote remain and win, you lose your country. Nearly half the country said yes to that - including 'The Guardian'.
Seek with agenda-based reporting and you will an angle to make your opponent look bad. Put it on the front page, top center, and it is a big story. That's what it looks like to me.
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"But within hours of the result on Friday morning, the Ukip leader, Nigel Farage, had distanced himself from the claim that £350m of EU contributions could instead be spent on the NHS"
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How a Brexit Would Undermine Europe's Balance of Power
Geopolitical Weekly
June 21, 2016 | 08:03 GMT Print
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If Britain quits the European Union, it risks disrupting the base of power the bloc has come to rest on. (CHRISTOPHER FURLONG/Getty Images)
By Adriano Bosoni
Britain's approaching referendum has led to rampant speculation about the economic and financial consequences of a vote to leave the European Union. And indeed, in the wake of a Brexit, uncertainty — the archenemy of economic growth and financial stability — would abound. But if Britain withdraws from the Continental bloc, its primary effect would be geopolitical, shaking the balance of power in Europe to its very foundation and forcing the bloc to rethink its role in the world.
The Franco-German alliance is the cornerstone on which European power dynamics rest. Conflict between the two drove three Continental wars between 1870 and 1945; its resolution facilitated peace after World War II, planting the seeds of eventual integration through the European Union. But France and Germany are not the only countries shaping Europe's course. A third actor plays the role of power broker between the two, stabilizing their relationship and, by extension, the Continent: the United Kingdom.
When France and West Germany founded the European Economic Community (EEC), the European Union's predecessor, in the 1950s, they had two goals. The first was to create a political and economic structure that would bind the two states together, reducing the chances of another war breaking out in Europe. The second was to facilitate trade and investment to rejuvenate Europe's war-weary economies. Both were pleased with the solution they found: France felt it had neutralized its eastern neighbor while maintaining control of Continental politics, and Germany had successfully reconciled with the West.
Meanwhile, the United Kingdom's relationship with the European project was somewhat ambiguous. As an island nation, Britain historically had been shielded from events unfolding on the mainland. If the United Kingdom intervened in Continental affairs, it was usually to ensure that power remained balanced and yet dispersed enough to keep Britain safe. When the EEC was born, London initially reacted with skepticism, wary of any project that would transfer more sovereignty from the British Parliament to unelected technocrats in Brussels. France, moreover, was eager to keep Britain out of the bloc; it was concerned about granting EEC membership to a country Charles de Gaulle described as "an American Trojan Horse in Europe." De Gaulle was also reluctant to include the only country in Western Europe capable of competing with France for leadership of the bloc. It came as no surprise when, in the 1960s, France vetoed Britain's membership twice.
But in the early 1970s, things changed. De Gaulle was no longer France's president, and both Paris and Berlin were quickly realizing the geopolitical importance of expanding the EEC's membership. Across the English Channel, London had lost its empire and was in the midst of reassessing its international priorities and trade relationships. Though it saw EEC membership as an opportunity to influence the process of Continental integration, Britain's interest in accessing the common market far outweighed its aspirations of building a federal Europe. Unlike France and Germany, Britain had little enthusiasm for transforming the Continent into a United States of Europe.
These motives formed the basis of Britain's modern relationship with Europe, which was largely established during the administration of Prime Minister Margaret Thatcher. Under the Tory leader, Britain simultaneously pushed to lower its contribution to the EEC budget and eliminate trade barriers inside the bloc. In Thatcher's now-famous Bruges Speech, she dismissed the notion of a federal Europe, instead describing the Continental organization as an agreement among sovereign states to establish free trade. A few years later her successor, John Major, negotiated Britain's opt-out from the eurozone.
Thatcher also advocated enlarging the EEC to the east, a strategy Labour Party Prime Minister Tony Blair continued in the early 2000s. Bringing the former communist states under the Continental umbrella not only sped up their transition to market economies but also created new demand for British exports. As an added perk for London, the bloc's expansion into a larger and more loosely connected entity helped to dilute France and Germany's hold over Europe.
But Britain's approach has produced only mixed results. Few new EU members have joined the eurozone, showing the limits of the federal union, and many share Thatcher's view of the bloc as a pact among sovereign states. At the same time, the admission of countries such as Poland and Romania has led to a significant increase in immigration to the United Kingdom, a development that Brexit supporters consider a primary reason for leaving the bloc.
Upsetting the Balance of Power
If Britain quits the European Union, though, it risks disrupting the base of power the bloc has come to rest on. Germany relies on Britain's backing when it comes to promoting free trade in the face of France's protectionist tendencies. France sees Britain as not only a key defense partner but also a potential counterweight to German influence. Removing Britain from the equation would shatter this tenuous arrangement at a particularly dangerous time for the deeply fragmented Europe, when neither Germany nor France is satisfied with the status quo.
Should the "leave" camp win the British referendum, tension would rise between the Continent's north and south. Countries in Southern Europe want to turn the European Union into a transfer union that redistributes wealth from the relatively rich north to the less developed south and shares risk equally among members. Northern Europe, by comparison, is eager to protect its affluence and would agree to share risk only if the bloc assumed greater control over the south's ability to borrow and spend. The regions also disagree on how the European Union should use its funds. Southern Europe advocates generous subsidies for agriculture and development, a view most Eastern European states share, but Northern Europe would prefer to freeze or even reduce the bloc's budget.
As a net contributor to the European Union's budget, Britain has been particularly vocal on these issues. According to VoteWatch Europe, the country was on the losing side of votes related to EU spending more often than any other member between 2009 and 2015. Generally speaking, Northern European states such as Sweden, the Netherlands and Denmark tend to vote alongside Britain. Germany also usually sees see eye to eye with Britain on certain topics, such as Europe's common market, though the two tend to disagree on issues like the environment. But regardless of other members' stances, Britain has proved more willing than any of its peers to openly voice opposition to EU decisions. Without it, the European Union would be short a liberalizing and market-friendly member, and the bloc's political balance would shift in the favor of protectionist countries in Southern Europe such as France, Italy and Spain.
As fears of a takeover by this Mediterranean group grow among Northern European governments, they would probably become more resistant to the process of Continental integration. After all, the European Union is already deeply divided over related issues such as the eurozone and Schengen Agreement, which have little to do with Britain since it is not a member of either. The looming referendum has only revealed more points of contention within the bloc that would be aggravated by a Brexit. The Dutch government, for example, recently argued for limiting membership in the Schengen zone to a handful of countries in Northern Europe, while the right-wing Alternative for Germany party proposed the creation of a "northern eurozone."
The north-south divide would not be the only gulf to widen on the Continent, either. Should Britain leave, the European Union would split between east and west, too. Countries in Central and Eastern Europe see Britain as the defender of non-eurozone members' interests, and many share London's views on the sovereignty of member states. Poland, Hungary and the Czech Republic, for instance, are generally supportive of the European Union but suspicious of Brussels' attempts to interfere with their domestic affairs. In particular, these countries have sympathized with British Prime Minister David Cameron's campaign to give national parliaments more power to block EU legislation. Poland and the Baltic states also see Britain as a critical partner on the issue of Russia, since London has fought for a tough European stance against Moscow in response to its annexation of Crimea. In the event that Britain leaves the Continental bloc, its Central and Eastern European allies may eventually become more isolated from Brussels.
Weakening Europe's Influence Abroad
The loss of one of the few EU members that is able to operate on a global scale would undermine the bloc's external strength as well. Only France can match the international presence Britain has, thanks to London's vast political and economic connections and its considerable military prowess. Though a Brexit would not keep Britain from cooperating with Europe completely, given its continued NATO membership and shared security interests with France and Germany, its collaboration with the Continent would be limited. As a result, Europe's ability to cope with challenges abroad — whether the migrant crisis, international terrorism or a more assertive Russia — would diminish.
Germany's and France's recent calls for the European Union to deepen its military and security cooperation seem to suggest the two are concerned about this very outcome. Berlin has steadfastly avoided taking on the more active role in world affairs that a Brexit would require. Since the start of the European financial crisis, Germany has reluctantly shouldered the burden of leading the bloc's political and economic policymaking, but assuming a prominent military role is another matter. France, for one, would accept it only within the framework of an EU-wide military union, something that would be difficult to achieve amid the atmosphere of isolationism that has settled over the Continent. The political calculations of French and German leaders preparing for general elections in 2017 would make such cooperation even harder to come by.
No matter what British voters choose, the damage to Europe has already been done. If Britain leaves the European Union, it would throw the Continent into yet another political and economic crisis, giving Euroskeptic forces greater ammunition against the bloc and voters fewer reasons to defend it. But if Britain keeps its membership, it would have proved to other European governments that it is possible to demand concessions from Brussels while winning support at home. And so, regardless of what happens June 23, Britain has set a precedent that Brussels cannot stop other EU members from following.
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"But within hours of the result on Friday morning, the Ukip leader, Nigel Farage, had distanced himself from the claim that £350m of EU contributions could instead be spent on the NHS"
The video: http://www.independent.co.uk/news/uk/politics/brexit-eu-referendum-nigel-farage-nhs-350-million-pounds-live-health-service-u-turn-a7102831.html
'The EU money should be spent here in Britain.' (It wasn't a budget proposal.)
Did one Brit vote Exit thinking it was a heathcare vote? Did one Brit think zero immigration was the guarantee?
The vote was about who decides those questions.
Was someone somewhere teased with the idea of what could be done with all that money if they quit sending it to Brussels? Sure. It could go into healthcare.
Boris Johnson, former mayor of London, the next Prime Minister(?) wrote strongly in favor of Leave:
"Americans would never accept EU restrictions – so why should we?"
http://www.telegraph.co.uk/opinion/2016/03/16/boris-johnson-americans-would-never-accept-eu-restrictions--so-w/
Not a mention of NHS, National Health Service, zero immigration. He opposes "uncontrolled immigration"!
The UK Spectator wrote persuasively about 'Leave', no utterance of doing so for heathcare dollars.
http://dogbrothers.com/phpBB2/index.php?topic=1078.msg96829#msg96829
Nor were those claims in any other post here on the forum I can see.
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Doug:
NOW I have an answer to that accusation. Thank you.
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The Left's response to Brexit is clear and their intentions are now splayed open for the world to see.
They label Brexit as a catastrophic, which of course it is not.
The controlling "elites" or whatever we call them, ( I think there are better names) are clear they WILL make Britain pay for this . Obama also made it clear GB would pay by making the country go to the back of the bus. He later walked back his words but we all know he meant what he said when he said it and the later word is just to hide his intentions.
If the Right (us) had a real good spokesperson we might have been able to fend this off. Trump is not looking good at this point.
The establishment Republicans will respond to this NOT by fighting back, but by figuring out how they can make futures for themselves in the Left's agenda. Just as they have done since Herbert Bush.
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PARIS — IF there’s one thing that chafes French pride, it’s seeing the British steal the limelight. But in the face of real courage, even the proudest French person can only tip his hat and bow. The decision that the people of Britain have just made was indeed an act of courage — the courage of a people who embrace their freedom.
Brexit won out, defeating all forecasts. Britain decided to cast off from the European Union and reclaim its independence among the world’s nations. It had been said that the election would hinge solely on economic matters; the British, however, were more insightful in understanding the real issue than commentators like to admit.
British voters understood that behind prognostications about the pound’s exchange rate and behind the debates of financial experts, only one question, at once simple and fundamental, was being asked: Do we want an undemocratic authority ruling our lives, or would we rather regain control over our destiny? Brexit is, above all, a political issue. It’s about the free choice of a people deciding to govern itself. Even when it is touted by all the propaganda in the world, a cage remains a cage, and a cage is unbearable to a human being in love with freedom.
The European Union has become a prison of peoples. Each of the 28 countries that constitute it has slowly lost its democratic prerogatives to commissions and councils with no popular mandate. Every nation in the union has had to apply laws it did not want for itself. Member nations no longer determine their own budgets. They are called upon to open their borders against their will.
Countries in the eurozone face an even less enviable situation. In the name of ideology, different economies are forced to adopt the same currency, even if doing so bleeds them dry. It’s a modern version of the Procrustean bed, and the people no longer have a say.
And what about the European Parliament? It’s democratic in appearance only, because it’s based on a lie: the pretense that there is a homogeneous European people, and that a Polish member of the European Parliament has the legitimacy to make law for the Spanish. We have tried to deny the existence of sovereign nations. It’s only natural that they would not allow being denied.
Your Thoughts on Brexit
What fears or hopes do you have about your own country, whether you are in Europe or elsewhere, after Britain’s decision to exit? Share your thoughts.
Brexit wasn’t the European people’s first cry of revolt. In 2005, France and the Netherlands held referendums about the proposed European Union constitution. In both countries, opposition was massive, and other governments decided on the spot to halt the experiment for fear the contagion might spread. A few years later, the European Union constitution was forced on the people of Europe anyway, under the guise of the Lisbon Treaty. In 2008, Ireland, also by way of referendum, refused to apply that treaty. And once again, a popular decision was brushed aside.
When in 2015 Greece decided by referendum to reject Brussels’ austerity plans, the European Union’s antidemocratic response took no one by surprise: To deny the people’s will had become a habit. In a flash of honesty, the president of the European Commission, Jean-Claude Juncker, unabashedly declared, “There can be no democratic choice against the European treaties.”
Brexit may not have been the first cry of hope, but it may be the people’s first real victory. The British have presented the union with a dilemma it will have a hard time getting out of. Either it allows Britain to sail away quietly and thus runs the risk of setting a precedent: The political and economic success of a country that left the European Union would be clear evidence of the union’s noxiousness. Or, like a sore loser, the union makes the British pay for their departure by every means possible and thus exposes the tyrannical nature of its power. Common sense points toward the former option. I have a feeling Brussels will choose the latter.
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One thing is certain: Britain’s departure from the European Union will not make the union more democratic. The hierarchical structure of its supranational institutions will want to reinforce itself: Like all dying ideologies, the union knows only how to forge blindly ahead. The roles are already cast — Germany will lead the way, and France will obligingly tag along.
Here is a sign: President François Hollande of France, Prime Minister Matteo Renzi of Italy and acting Prime Minister Mariano Rajoy of Spain take their lead directly from Chancellor Angela Merkel of Germany, without running through Brussels. A quip attributed to Henry Kissinger, “Who do I call if I want to call Europe?” now has a clear answer: Call Berlin.
So the people of Europe have but one alternative left: to remain bound hand-and-foot to a union that betrays national interests and popular sovereignty and that throws our countries wide open to massive immigration and arrogant finance, or to reclaim their freedom by voting.
Calls for referendums are ringing throughout the Continent. I myself have suggested to Mr. Hollande that one such public consultation be held in France. He did not fail to turn me down. More and more, the destiny of the European Union resembles the destiny of the Soviet Union, which died from its own contradictions.
The People’s Spring is now inevitable! The only question left to ask is whether Europe is ready to rid itself of its illusions, or if the return to reason will come with suffering. I made my decision a long time ago: I chose France. I chose sovereign nations. I chose freedom.
Marine Le Pen is president of the National Front party in France. This essay was translated by John Cullen from the French.
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https://www.facebook.com/nigelfarageofficial/videos/1056952377685698/
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https://www.facebook.com/adam.zillin/videos/10157075566520402/
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Typical liberal progressives. They will not accept defeat. They regroup have powows to figure out what different phoney labels to use, repackage the same dogma, make the same thing sound like it is different and then continue to shove it down our throats:
http://www.theguardian.com/politics/2016/jul/02/brexit-shock-calls-change-eu-european-union
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http://www.breitbart.com/london/2016/07/08/german-couple-sentenced-migrant-critical-facebook-group/
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http://www.nytimes.com/2016/07/15/world/europe/boris-johnson-uk-foreign-secretary.html?emc=edit_th_20160715&nl=todaysheadlines&nlid=49641193
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http://www.businessinsider.com/r-swiss-tell-eu-hands-off-veterans-assault-rifles-2016-8
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http://seekingalpha.com/article/4028410-italian-instability-derail-global-economy?auth_param=evk9c:1c4ckon:b222d80a2f844823a161d20c1848c6a5&uprof=46
It would be all too tempting for the incoming Trump administration to dismiss last weekend's Italian referendum as an inconsequential vote on a distant shore that will have little bearing on the U.S. economy.
Sadly, that would be a big mistake.
Unlike Greece, Italy has a large economy that is of considerable systemic economic importance. It also has the most compromised of economic fundamentals, which makes it singularly ill-prepared to weather a prolonged period of political instability. As such, it has the potential to both roil global financial markets and to derail the global economic recovery.
The incoming Trump administration would be ignoring Italian political and economic developments at its peril, particularly in light of the Italian government's resounding defeat in last weekend's referendum.
After all, Italy is the eurozone's third-largest member country, with a banking system that has around $4 trillion in assets. It also happens to be the world's third-largest government bond market, with bonds in excess of $2.5 trillion.
These factors make Italy's economic well-being essential for the euro's longer-run survival. Yet, they also make Italy too big for Europe to save in the event that it were to experience a full-blown economic and financial crisis.
In the run-up to last weekend's Italian referendum, money flew out of Italy at an alarming rate as Italians fretted about the stability of an Italian banking system, with nonperforming loans totaling as much as 18 percent of its balance sheet. Indeed, European Central Bank data on Italy's TARGET2 balances - the eurozone's payment system - through September 2016 suggest that capital flight from the country has been on a scale of that experienced at the height of the eurozone debt crisis in the first part of 2012.
In the months immediately ahead, there is every prospect that capital flight out of Italy will gather pace. It will do so as Italian bank depositors fear a prolonged period of political instability that will highly circumscribe the government's ability to address the country's banking sector challenges.
In the immediate aftermath of last weekend's referendum, Prime Minister Matteo Renzi has followed through on his pledge to resign if he lost that referendum. While Renzi's resignation is unlikely to prompt early Italian elections, it is likely to mean that Italy will have a government that will have little authority to govern, given the overwhelming margin by which it lost the referendum.
It is also likely to put wind in the sails of the radical Five Star Movement party that is committed to taking the country out of the euro.
A weak government saddled with an unreformed Senate that can continue to block legislation is the last thing a country needs when its economy is as sclerotic as that of Italy, when its government is over-indebted, when its banks are saddled with a mountain of nonperforming loans and when the country has become internationally uncompetitive.
Without a strong government, there is little prospect for the type of economic reforms that might kick-start the Italian economy and allow it to grow out of its public debt and banking sector problems.
There are also few prospects that the country will extricate itself from its downward economic and political spiral. Should the Italian economy lurch toward an economic and financial crisis over the next few months, it would be doing so at an inopportune time for its major economic partners.
France is scheduled to go to the polls in April and May, while Germany is expected to hold its parliamentary elections in September. With Marine Le Pen of the French National Front rising in the polls and with German Chancellor Angela Merkel's political star waning, these elections will make it very difficult for both the French and the German governments to offer support to Italy on the scale that they have done in previous Italian economic crises.
All of this suggests that President-elect Donald Trump could be tested by a European economic baptism of fire in the early months of his administration as the Italian economic crisis comes to a head.
Hopefully, Trump will have the flexibility to adapt his proposed U.S. economic program to the new realities of the global economy. One also has to hope that he will tone down his confrontational rhetoric on international economic issues and provide the sort of global economic leadership that might limit the fallout from an Italian economic and financial market meltdown.
If he does not do so, we should brace ourselves for some very rough sledding both in the U.S. and the global economies in the years immediately ahead.
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https://www.washingtonpost.com/world/europe-leaders-shocked-as-trump-slams-nato-eu-raising-fears-of-transatlantic-split/2017/01/16/82047072-dbe6-11e6-b2cf-b67fe3285cbc_story.html?utm_term=.f9d75b161668&wpisrc=nl_most&wpmm=1
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Forecast
The eurozone's underlying economic risks have been exacerbated by the political risks facing Europe in the year ahead.
Recent setbacks in the bloc's effort to sever the link between banks and their countries' governments will make the danger to the eurozone more acute.
New ideas for fixing this "doom loop" are likely to meet stiff resistance from Germany, where national elections are scheduled for September.
Analysis
As European policymakers look at the turbulence ahead in 2017, they are watching the eurozone's bond market with growing concern. A sell-off in government bonds, matching the same trend worldwide, is adding stress to the bloc's already vulnerable economies, especially in Southern Europe. Officials' fears have only been worsened by the sell-off's uneven pace, as some members' bonds have been sold more rapidly than others'. The differences in yield between Italian and German bonds, for example, has reached levels not seen since 2012, when a sovereign debt crisis nearly brought the currency union crashing down.
That debt crisis exposed the "doom loop" created by European banks' tendencies to hold their home government's debt. In theory, the vicious cycle could start when markets lose faith in a government's ability to pay back its debt, precipitating a sell-off of its bonds. The resulting drop in bond prices would then hit the balance sheets of the banks that still hold those bonds, making them more likely to need a bailout from their governments. This, in turn, could further erode investor confidence, leading to additional sell-offs that damage the banks even more. Despite the danger that banks' practices pose, eurozone regulators have yet to find a way to sever the loop.
Since mid-2016, rising expectations of a return to inflation have driven investors to sell off their bonds, especially in the wake of the U.S. presidential election. (Higher inflation reduces the attractiveness of bonds to investors, and bond markets have seen sharp sell-offs across the board over the past few months.) Those expectations have already played out in the eurozone, where the annual inflation rate rose from 0.2 percent in July to 1.8 percent in January. This has encouraged the European Central Bank (ECB) to scale back its bond purchase program, which it uses to stimulate inflation, from 80 billion euros ($85 billion) to 60 billion euros per month. With the ECB providing less support for bond prices, yields (which move in the opposite direction of prices) have risen.
On its own, this would have caused problems for the currency union by putting more pressure on indebted countries such as Italy, which would in turn face higher debt payments. But mounting political risk in countries such as France, Italy and Germany has magnified the sell-off's effects as the gap in bond yields between Europe's peripheral countries and Germany, whose debt acts as a baseline because of its perceived safety, has widened. This indicates that the market's fears of a eurozone breakup are growing. If the currency union implodes, investors would much rather be left holding German debt, for example, than bonds issued by Greece or Italy.
A Weighty Set of Political Worries
National elections are scheduled this year in the Netherlands, France and Germany. But concerns about electoral outcomes are running especially high with regard to France's two-round presidential election in April and May, where there is still a chance that nationalist candidate Marine Le Pen, who has promised to pull France out of the eurozone as quickly as possible, could win. Though France's electoral system is designed in part to keep an extremist party like Le Pen's National Front out of office, all other candidates running for the presidency have weaknesses that could prove fatal to their campaigns. Her defeat, therefore, is not a foregone conclusion.
In Italy, meanwhile, a fragile government and deepening divides among the ruling Democratic Party have increased the likelihood that elections will be called there sometime this year. The result could easily usher in a new government that is heavily influenced by the Five Star Movement or the Northern League, parties that both want Italy to leave the eurozone.
If Euroskeptic forces are able to access power in either country, they wouldn't necessarily have to win a referendum on leaving the eurozone to damage it. Even the act of scheduling a vote in France or Italy could precipitate a crisis that would shake the currency union to its foundations.
Greece is another cause for worry among eurozone leaders, who do not want Athens' debt bailout program to linger as an issue in the Continent's elections. With sizable debt repayments due in July, Greece faces pressure to accept a bailout review, which it must do before it can get the funds it needs to make the payments. To keep Greece's situation from influencing election results, this would ideally happen at the Feb. 20 meeting of the eurozone's finance ministers. Greece has enough money to last until July, but if the issue is not resolved by then, it would have to negotiate a brand new bailout program. This would trigger another Greek crisis much like the one that preoccupied the eurozone in 2015 and carry the danger of a Greek exit from the eurozone.
Breaking the Doom Loop
At the same time, economic risks continue to swirl, particularly around Italy. The eurozone's third-largest economy has its second-largest ratio of debt to gross domestic product (132.4 percent), while its banking sector — saddled with 276 billion euros in bad loans — is teetering on the edge of crisis. Adding to its troubles, Italy is the eurozone member most vulnerable to a doom loop: Italian institutions are the bloc's biggest holders of their own government's debt, which accounts for just under 12 percent of its banking sector's total assets.
In the years since a doom loop triggered by the Greek crisis nearly led to the eurozone's collapse, authorities have tried (but failed) to break the bond connection between banks and their governments. A German proposal to limit the amount of their own government's debt that banks can hold has been hotly contested by Italy and Spain, since implementing it would cause massive disruptions to their economies.
Another German-led measure involved the creation of "bail-in" rules, which were adopted at the start of 2016. They required that a troubled bank's private debtholders absorb its losses first, essentially losing their investment, before government money could be used to bail it out. The first major test of these rules came in December, when the long-ailing Banca Monte Dei Paschi di Siena — Italy's third-largest bank — ran into serious trouble and needed a bailout. But many of the bank's debtholders were unsuspecting private citizens who had been sold the debt as a safe savings vehicle. Forcing them to take a loss with a bail-in would have spurred a major political backlash, strengthening the hand of Euroskeptic parties such as the Five Star Movement.
The Italian government's solution to shield itself from the political fallout involved two sleights of hand. First, it used a nearly out-of-date stress test from mid-2016 to justify a more favorable type of recapitalization. Then, armed with the excuse that debtholders had been misled about the nature of their investment, it reimbursed them. Rome's tactics saved the bank, at least for the time being, and prevented a substantial public outcry. The European Commission, no doubt also worried about the ramifications of strengthening Euroskeptic parties, signed off on the plan. Nevertheless, the situation is not entirely resolved: European authorities must still approve a business plan for the bank before the bailout can proceed. The bail-in rules, moreover, seem to have fallen at their first hurdle, while the potential doom loop between banks and their governments remains intact.
Europe Explores New Solutions
The existing fix for the doom loop appears to be failing, but European authorities have not stopped searching for ways to correct it. In January, the European Banking Authority suggested the creation of a Europe-wide "bad bank" that could buy nonperforming loans from EU banks to get them off the banks' balance sheets, thereby improving the sector's financial health. The bad bank would then sell those loans to investors. If it took a loss on any of its transactions, it could theoretically seek reimbursement from the originating bank so that the plan's original backers would not lose money.
Another idea first floated in October 2011 has also been gaining traction lately: the creation of European safe bonds, or ESBies. Under this plan, an entity (private or public) would buy the bonds of all eurozone countries and create two pools: one for riskier economies and another for safer ones. It would then issue bonds representing the risky debt pool (preliminarily named European junior bonds, or EJBies, containing debt from countries such as Greece and Portugal) and others for the safer pool (with debt from countries such as Germany and the Netherlands). This pooling could make it harder for investors to pick one country to desert in a crisis while also creating a larger pool of truly safe assets that investors could rely on. In September, the European Systemic Risk Board, headed by ECB President Mario Draghi, created a task force to explore the idea, and the European Commission is expected to publish a white paper on it in March.
Unfortunately for the plans' architects, Germany — the eurozone's most influential voice — has raised objections to both ideas. The German public is strongly opposed to any proposal that might involve subsidizing the indebted south with its tax money. Over the past few years, Germany has taken steps to insulate itself from the eurozone's potential dissolution. When the ECB launched its bond-buying program in January 2015, for example, Germany finally relented to a policy it had disagreed with on the condition that the bonds continued to be divided among members' central banks rather than pooled centrally, making the arrangement clearer in the event of a future divorce. More subtly, data from the Bank for International Settlements has shown that German banks have stopped lending to companies based elsewhere in the eurozone in recent years, preferring instead to keep their money inside Germany — another step away from integration and liability mutualization within the bloc. So, any idea that appears to involve risk pooling will probably receive short shrift in Germany, especially during an election year.
Will the Eurozone Survive the Year?
The eurozone has entered a difficult year, and some investors are showing more and more doubt in its ability to survive. If Europe successfully leaps the political hurdles that lie ahead, uncertainty in the market should rapidly fade, returning money to its bond markets. But even if that does happen, economic risks (made worse by political factors on the Continent) will continue to feed fears for the currency union's future.
European bond yields are rising, buoyed by global expectations of inflation and by the ECB's gradually tightening monetary policy, which means that debt repayments will also rise. If they continue to do so gradually, bond yields are unlikely to reach uncomfortable levels during 2017. But because the doom loop between banks and their governments is still intact, and because the Italian banking sector is still extremely fragile, Italy will be highly prone to crisis. And upticks in debt repayments, no matter how gradual, will only increase its vulnerability.
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second post
A Storm Is Brewing Over Europe
Geopolitical Weekly
February 14, 2017 | 08:00 GMT
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Dark clouds over the Reichstag building in Berlin may be a sign of things to come. (JOHANNES EISELE/AFP/Getty Images)
By Adriano Bosoni
Storm clouds are once again gathering above the eurozone. In coming months, its continuity will be threatened by events in Europe and the United States. Germany, the largest political and economic player in Europe, will try to keep the bloc together. But the crisis could be too big for Berlin to handle, especially since some of the actors involved see Germany as a part of the problem rather than the solution.
U.S. President Donald Trump recently described the European Union as "a vehicle for Germany." He and members of his administration argue that Germany's industry has benefited significantly since the introduction of the euro in the early 2000s. The boon to Germany, the argument goes, is that the common European currency is weaker than the deutsche mark would be; the result is more competitive German exports. Trump was not the first U.S. president to criticize Germany's trade surplus, the biggest in the world. But he was the first to suggest the United States could take countermeasures against German exports.
Some of Germany's own eurozone partners have also accused the country of exporting too much and importing too little, a situation that leads to low unemployment in Germany and to high unemployment elsewhere in the currency area. Their charges, however, do not focus on the value of the euro (which is set by the European Central Bank) but on Berlin's tight fiscal policies, which restrict domestic consumption and limit Germans' appetite for imports. The European Commission and the International Monetary Fund have asked Germany to increase investment in public infrastructure and raise the wages of German workers.
Addressing the German Question
Indeed, the European Union is a vehicle for Germany, but for reasons that go well beyond trade. Many of Europe's current political and economic structures were designed to resolve the question of Germany's role in Europe. Situated at the center of the North European Plain, the largest mountain-free territory in Europe, Germany has no clear borders. This means that its neighbors in the east and the west can easily invade, a fact that has traditionally given German leaders a sense of constant insecurity. In addition, before the country's unification in the 1870s, the Germans had little in common other than language. Their location at the heart of trade routes in Central Europe and their access to many navigable rivers allowed the Germans to develop multiple economic centers. The Holy Roman Empire, which ruled over German lands, lasted for 10 centuries precisely because the emperor had limited influence on the affairs of the hundreds of political entities that made up the empire. Seeing a strong, united Germany in the 21st century makes it easier to forget that the country has traditionally had strong regional identities and powerful centrifugal tendencies that worked against national unity.
Germany's Geographic Challenge
Between the mid-19th and the mid-20th centuries, German leaders sought to solve the country's geopolitical challenges through war, with disastrous consequences for Germany and for the rest of Europe. After World War II, Germany built a federal system where wealth is distributed between states, under the supervision of the federal government. This was coupled with a corporatist economic model that incorporates the economic elites into the leadership structure and strong social safety nets that prevent social upheaval. This entire social-political structure relies on an economic model that is heavily dependent on exports.
To a large extent, the European institutions were imposed on Germany. A weak and occupied West Germany saw membership in the European Economic Community (the European Union's predecessor) as a way to peacefully return to the international community after two world wars. The political and economic integration of Western Europe was actually a French idea encouraged by a great deal of U.S. pressure. After Germany's reunification in 1990, the creation of the eurozone followed a similar pattern. Paris saw the introduction of a common currency as a way to bind France and Germany so close together that another war between them would be impossible. At the time, the idea of another Franco-German war did not seem as far-fetched as it does now, and to a large extent losing the deutsche mark was the price that Germany had to pay for reunification.
Solving Problems and Creating New Ones
Europe's economic and political integration enabled Germany to achieve some of its main geopolitical goals. It reduced the likelihood of another war on the North European Plain by creating a co-leadership of the Continent with France. Even after the French economy started to show signs of decay, Berlin made sure to keep Paris involved in continental decision-making. European integration also opened markets from Portugal to Romania, and from Finland to Cyprus, for German exports. All of this was possible while Germany's membership in NATO kept Berlin's defense expenditures modest.
But the euro's arrival deprived some of Germany's main trade partners of the ability to devalue their currencies to compete against their neighbor in the north. At the time the bargain seemed fair, since countries in Mediterranean Europe were suddenly able to issue debt at Northern European interest rates, which they did enthusiastically. Access to cheap debt made many countries in the eurozone delay the introduction of structural reforms in their increasingly less competitive economies.
The euro may not have been a German idea, but Berlin made sure that it did not threaten its interests. The European Central Bank was modeled after the Bundesbank, with its mission of low inflation (a German obsession after the hyperinflationary 1930s) and with no explicit mandate to foster economic growth. The eurozone was created as a monetary union without a fiscal union. No mechanisms to transfer resources from Europe's wealthy north to its relatively poorer south, or to share risk among their financial sectors, were introduced. To accept greater risk sharing, countries in the north require their southern partners to completely surrender their fiscal policies to technocrats in Brussels. This is something that countries like Greece could be pressured to accept but that is unacceptable for countries such as France or Italy.
A Perfect Storm in the Making
These shortcomings became apparent during the past decade. Europe's economic crisis, and the austerity measures that followed it, led to the emergence of nationalist, populist and anti-establishment political forces across the Continent. Some are critical of the European Union, while others want to get rid of the eurozone. The economic decline of France and Italy left Germany without reliable partners to redesign either one of them.
Every year of the past decade has been a test of the eurozone's resilience, but 2017 could be the year when the bloc's very survival in endangered. France will hold presidential elections in two rounds in April and May. Opinion polls say the National Front party, which has promised to hold a referendum on France's membership in the eurozone, should win the first round but be defeated in the second. The Brexit referendum and the U.S. presidential election, however, have shown that polls sometimes fail to detect the deep social tendencies driving populist movements.
Moreover, a recent scandal involving France's main conservative presidential candidate, Francois Fillon, has damaged his image. Should the center-right fail to reach the second round of the elections, millions of conservative votes will be up for grabs. Some would probably migrate to centrist parties, attracted by their promise of economic reform. But many would go to the far right, seduced by proposals to increase security, impose tougher rules on immigration and restore France's national sovereignty. A win by the far-right candidate — a direct threat to the eurozone's survival — cannot be ruled out.
In Italy, things are even more complex, as two of the three most popular political parties want to leave the eurozone. Italian lawmakers are using the need to reform the country's electoral law as a pretext to delay elections. But even if Parliament ends its mandate in early 2018, Italy's threat to the eurozone will be delayed rather than averted. Unlike France, where the two-round electoral system was designed to prevent extremist parties from reaching power, Italy's proportional system means that Euroskeptic forces stand a real chance of entering the government. And no matter the outcome of the election, Italy's massive public debt (which, at roughly 130 percent of GDP, is the second-highest ratio in the eurozone after Greece) will remain a ticking bomb for the currency area.
The mere announcement of a referendum on eurozone membership in France or Italy could be enough to precipitate the collapse of the currency area. A run on Southern European banks could happen before the referendum even took place if people feared that their savings could be converted into national currencies. People in countries such as Italy, Spain or Portugal could transfer their savings to havens in Northern Europe, hoping to be given German marks instead of Italian lira, Spanish pesetas or Portuguese escudos.
To make things more complicated, the Greek saga is not over. Greece's creditors are debating whether the terms of the bailout program are realistic and whether Athens should be granted debt relief. Ten years into the Greek crisis and three international rescue programs later, Athens remains a danger for the eurozone. The main concern is not Greece's debt per se, because most of Athens' debt is in the hands of institutional creditors such as the IMF, the ECB and the European Union's bailout funds, which means that a Greek default can be contained. The problem is that a Greek exit from the eurozone could lead to a contagion effect that could hurt the likes of Italy, Spain or Portugal. Some have argued that the eurozone would actually be stronger without Greece in it, but the price of finding out whether that's true could be too high.
Should France or Italy be taken over by Euroskeptic forces, or should Greece precipitate yet another crisis in the eurozone, Germany's instinctive reaction would be to seek accommodation with its partners in the currency area to protect the status quo. But depending on the magnitude of the crisis, officials in Berlin could be forced to make preparations for a post-eurozone world. This could involve returning to the deutsche mark or, as some German economists have proposed, creating some kind of "northern eurozone" with the likes of Austria and the Netherlands. But a strategy that makes sense from a financial point of view could be risky from a geopolitical perspective, since any moves to distance Germany from France hide the germ of a future conflict between the two. No matter what Berlin does, it has to ensure that political ties with Paris remain as strong as possible. Germany holds general elections in September, and events in the previous six months would have a direct impact on the electoral strategies of the main political parties.
A Fragile Eurozone
The threats to the eurozone would be easier for Germany to tolerate if things were quiet in the United States. But Trump's protectionist rhetoric is encouraging nationalist forces in Europe. France's National Front leader, Marine Le Pen, has even bragged that the U.S. president is actually copying proposals she made five years ago.
The coming storm in the eurozone does not necessarily have to destroy it. The U.S. government could decide to avoid a trade war with its allies in Europe. Moderate forces could win the general elections in France and Italy, and Greece and its creditors could find yet another last-minute agreement. But the fact that the eurozone has reached a point where the entire system can collapse because of an election, a bailout negotiation or measures taken by a foreign government speaks volumes of its fragility.
Even if the doomsday scenario is averted in 2017, the relief may last only until the next election. In Europe, as in the United States, there are millions of voters who feel that the alleged benefits of globalization have not reached them, and who believe that their economic problems could be solved by putting an end to the free movement of people, goods and services — the very principles upon which European integration was built.
The rhetoric from the U.S. government and the rise of nationalist forces in Europe pose a fundamental threat for an export-dependent economy like Germany's. They also threaten the continuity not only of the eurozone but, depending on how events unfold, also of many of the political and economic strictures that Europe built after the war. The supranational eurozone is a half-built house in a neighborhood where national sovereignty has been eroded but not completely erased. The irreconcilability of this dilemma could take the currency bloc from its current fragmentation to outright dissolution.
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The left is just as vile in Europe as here I guess. Prob funded by Soros:
http://www.breitbart.com/london/2017/02/27/german-carnival-attack-trump-decapitated/
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The left is just as vile in Europe as here I guess. Prob funded by Soros:
http://www.breitbart.com/london/2017/02/27/german-carnival-attack-trump-decapitated/
Interesting bit of projection. Who is decapitating people?
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"Who is decapitating people?"
The latest allies of the LEFT.
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http://www.independent.co.uk/news/world/europe/europe-visa-free-travel-americans-european-parliament-vote-a7609406.html
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http://www.bbc.com/news/world-europe-39140100
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The incumbent, Mark Rutte, is considered to be from the free market conservative party. I don't think of the Netherlands as a free market country so I don't really know what that means. "Our ability to create jobs, our future growth, is built on the free market. It's built on open borders." - Mark Rutte
https://en.wikipedia.org/wiki/People's_Party_for_Freedom_and_Democracy
The top challenger is Geert Wilders of the 'Freedom' party who has made a name with bold talk against Muslim immigration. They have been coalition partners as well as rivals. I can't comment on the Dutch immigration problem without bias; I was knifed by "immigrants" on my last Holland visit. I came out of it better than Theo Van Gogh did: http://www.nytimes.com/2004/11/03/world/europe/dutch-filmmaker-an-islam-critic-is-killed.html
Regarding Wilders, it's about time someone spoke up about the problem. Whether he is the best candidate, I don't know. Wilders has lost support in the last poll, but everyone seems to know after Brexit and Trump, polls on these matters have been amazingly unreliable.
This will be interesting to watch.
https://www.ft.com/content/6bc14dee-0909-11e7-97d1-5e720a26771b
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http://thefederalistpapers.org/us/trump-doesnt-mince-words-tells-germany-to-pay-up
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https://matadornetwork.com/life/9-american-habits-i-lost-when-i-moved-to-germany/1/
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https://matadornetwork.com/life/9-american-habits-i-lost-when-i-moved-to-germany/1/
Yeah, this article will be very out of date soon.
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https://www.youtube.com/watch?v=9bTKSin4JN4
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https://www.youtube.com/watch?v=9bTKSin4JN4
https://www.express.co.uk/news/world/724800/Syrian-refugee-Ghazia-A-four-wives-23-children-320000-benefits-germany-Montabaur-Twasif
Perhaps they should try that on these "Germans".
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Behind Le Pen’s Ideological Face Lift
The National Front leader peddles Holocaust revisionism.
April 10, 2017 8:54 p.m. ET
Marine Le Pen has spent years trying to clean up the French National Front’s image as a party of cranks, anti-Semites and apologists for the Nazi-collaborationist Vichy regime. Then the mask slid back down on Sunday as the far-right Presidential nominee reminded the world that Holocaust revisionism still lives in the Front.
Ms. Le Pen in an interview said that “France isn’t responsible for the Vel d’Hiv,” a reference to the rounding up of more than 13,000 Jews—including some 4,000 children—in July 1942. Nazi occupiers, with the help of the Vichy regime of Marshal Pétain, crowded the victims into a cycling stadium before dispatching them to concentration camps. The majority were sent to Auschwitz.
Ms. Le Pen lamented how such historical events had been used to teach French children to be ashamed of the French past. She added: “If there are people responsible, it’s those who were in power at the time. It’s not France.”
This is an historical evasion. Many French fought the Nazis, but the scale of French collaboration was vast, with some 350,000 French citizens purged or punished postwar for collaboration. Current French President François Hollande and the center-right former President Jacques Chirac have accepted state responsibility for the Vel d’Hiv episode and apologized.
Ms. Le Pen’s remarks suggest backtracking and revisionism, which is why they drew condemnation from France’s Jewish leaders as well as Israel’s foreign ministry.
The comments echoed the National Front of Ms. Le Pen’s father, Jean-Marie. Mr. Le Pen in 1987 described the Holocaust as a “detail in the history of World War II” and more recently suggested that “Mr. Ebola” could solve the world’s “demographic” problems.
Emmanuel Macron, the centrist independent who is Ms. Le Pen’s main Presidential rival, noted, “Some had forgotten that Marine Le Pen is the daughter of Jean-Marie Le Pen.” With the first round of voting less than three weeks away, Ms. Le Pen is alerting voters to what has—and hasn’t—changed in her party.
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Insights on the thinking of Theresa May calling early elections:
1. A new election declares void any challenges to the last election.
2. Head off the shrinking of the number of seats in parliament that would hurt Tories.
3. May needs a greater majority to get things done domestically.
4. Leverage against a new Scottish independence vote.
5. Increase May's legitimacy to govern. Gain power to execute Brexit.
6. Hit the opposition while they are in disarray.
http://www.newstatesman.com/politics/elections/2017/04/four-thoughts-theresa-mays-general-election-decision
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http://www.tabletmag.com/jewish-news-and-politics/183350/frances-toxic-hate-4-le-pen-2?utm_source=tabletmagazinelist&utm_campaign=b1851de1db-EMAIL_CAMPAIGN_2017_04_23&utm_medium=email&utm_term=0_c308bf8edb-b1851de1db-207194629
Not often discussed-- the attitude/alliance with/money from Russia thing raises serious questions.
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The globalist ideal has been tabled by events. Neither Macron nor anyone on his ideological team has any idea how to solve France or Europe's problems.
"Macron's is a remarkable achievement, because he represents optimism." - Where have we heard this before?
The trouble with Emmanuel Macron
James Poulos
Sylvain Lefevre/Getty Images
April 23, 2017
Emmanuel Macron, a French technocrat running an independent presidential campaign to put political distance between himself and his fellow established elites, edged out insurgent nationalist Marine Le Pen in the most closely watched French election of many Americans' lifetime. Macron nabbed nearly one-fourth of the vote in an 11-candidate field, followed closely by Le Pen. Now he'll face her one on one in the May 7 runoff. But the partisans of the West's mushy middle — favoring more liberal globalization, more financial and economic regulation in lieu of political agency, and no social unrest in the bargain, thanks — are already popping champagne.
"It's a political earthquake in this country and in Europe," one respected journalist told CNN. "Macron's is a remarkable achievement, because he represents optimism."
Yes, fellow Americans, this is how bad it's gotten abroad: Squeaking out a first-round win by symbolizing a future of niceness now strikes the status-quo-ites as the beginning of a world made new.
The reality is considerably grimmer. How dire it was, throughout the French campaign, to watch centrists left and right insist that only they could beat back the forces of "extremism," that catchall term which has served the West so poorly in organizing its resources against foes foreign and domestic. The continued rise of populist, nationalist, and, yes, even communist parties in Europe has shown just how extreme a reaction established neoliberalism has provoked in its failings to date — inadequate, costly efforts, by turns ham-handed, shambolic, and impotent, to manage everything from the Eurozone crisis to the immigration debacle.
Yes, it's all been a tall order; yes, the ruling (or is it managing?) classes should have seen it coming. And yes: However well-intentioned and authentic the likes of Macron and Co., who probably grasp how truly bad it can get in Europe, their ilk are still locked into policies guaranteed to further aggravate political extremism left, right, and Islamic. They think their political stalemate with Le Pen and her fellow travelers is a victory. Really, it spells a fiercer culture war.
The real story of France and Europe laid bare by Macron's whisker of a win is that simply no consensus exists among today's adult generations about how to refashion a future for Europe. Right now, there is really no question that the globalist center's ideal "future" has been tabled indefinitely by events. There's not even any falling back on an "end of history." History is skipping like a bad record, glitching over the same travails. An open-ended financial and economic predicament with no rational solution and no mores deep enough to cauterize the wound and start fresh. A continuous low-grade panic attack of police action and surveillance, struggling undermanned and under cultural constraints to prevent just enough terror attacks and abuses, whatever that magic number may be. A complete forfeit of any plan to push EU regulatory unification toward the singularity point that the European project had always envisioned, however abstractly, as its justifying goal.
Neither Macron nor anyone on his ideological team has the first inkling of how to surmount or steer clear of these impasses.
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Not wild about Marine's economics , , ,
By Matthew Dalton
April 26, 2017 4:34 p.m. ET
11 COMMENTS
AMIENS, France—French presidential candidates on Wednesday turned a Whirlpool Corp. factory threatened with closure here into an impromptu stage for an ideological battle over how to revive the country’s declining industrial might.
Far-right candidate Marine Le Pen has made the plant’s looming closure a national rallying point for her antiglobalist, euroskeptic campaign. The Michigan-based appliance maker announced in January it would close the plant and move production to Poland, a European Union country where wages are a fraction what they are in France.
Her rival, centrist candidate Emmanuel Macron, held a scheduled meeting with Whirlpool union delegates behind closed doors in the center of Amiens. For 45 minutes he argued for his economic program, preaching the importance of free trade and of guarding France’s place in the EU.
National Front candidate Marine Le Pen smiling with people in front of the Whirpool factory in Amiens on Wednesday.
National Front candidate Marine Le Pen smiling with people in front of the Whirpool factory in Amiens on Wednesday. Photo: Agence France-Presse/Getty Images
Shortly before his meeting was over, Ms. Le Pen showed up in a surprise visit 2 miles away at the Whirlpool plant itself and criticized Mr. Macron for not being there with the workers.
“I’m here exactly where I belong, among Whirlpool workers who are resisting wild globalization,” she said in the plant’s parking lot. “There are millions of unemployed today, and there will be millions more tomorrow under the economic model Mr. Macron wants to impose.”
In a last-minute decision, Mr. Macron’s team took him to the factory, where he made his way through a crowd chanting “Marine for president” to present his case to workers. “After the closure of borders, what is there? The destruction of thousands of jobs that need them open,” Mr. Macron shouted over jeers and whistles as clouds of black smoke from tires set alight by the workers enveloped the parking lot.
Related Stories
Le Pen’s Bid to Lead France Hinges on Low Turnout (April 25)
How a Macron Presidency Could Bring About ECB Tapering (April 24)
Le Pen’s Rise Fueled by Industrial Decline (April 20)
Wednesday’s sparring in Amiens, in France’s economically struggling north, shows how France’s withering industrial regions have become a key battleground in a presidential race that has become a referendum on the EU, free trade and open borders.
Polls show Ms. Le Pen’s candidacy facing long odds. With less than two weeks until second-round balloting on May 7, an OpinionWay survey published Wednesday showed she would lose 40% to 60%.
Still, first-round results suggest the country is more divided than ever over the EU. Votes for the main euroskeptic candidates, primarily Ms. Le Pen and far-left firebrand Jean-Luc Mélenchon, accounted for nearly half of the tally on Sunday.
The anger against the political establishment in industrial areas like Amiens is one result of France’s industrial decline, which governments of the left and the right have been powerless to stop. French industrial production is 10% lower than it was when France adopted the euro in 1999.
Emmanuel Macron: France's Next President?
He was relatively unknown in French politics. Now, he could become the youngest ever president of France. Who is Emmanuel Macron, what does he stand for, and could he win? WSJ’s Niki Blasina reports. Photo: Getty Images.
Although the Whirlpool plant is in his hometown region, Mr. Macron has been reluctant to weigh in on the looming factory closure. “My silence is a refusal to manipulate the situation,” he said on French television earlier this month.
After meeting with workers on Wednesday, he criticized Whirlpool for not negotiating with the unions in recent days. Workers have been on strike since Monday because the company’s management hasn’t started talks over severance and other issues associated with the plant’s closure.
“Our top priority remains to enable the emergence of a viable and sustainable solution for the Amiens site,” Whirlpool said. The company, its workers and the French government are looking for investors to buy the site, a process required under a law passed in 2015 to stem France’s industrial losses.
Ms. Le Pen has pledged to impose a 35% tax on Whirlpool and other companies that move production out of France. She also said the government would step in to buy the plant if she is elected and no other buyer has been found.
‘We’ve voted left-right, played Ping-Pong for 20 years. Finally, we’ve seen they’re the same. We’ll try the National Front.’
—Whirlpool worker David Gallo
Mr. Macron sought to warn the workers surrounding him on the parking lot of the risks of withdrawing from the EU and imposing tariffs at French borders, as Ms. Le Pen has proposed. Another major employer in the region, Procter & Gamble Co. , whose Amiens plant exports across the EU, would see its business suffer, he said.
“If Ms. Le Pen is elected, that [other] plant closes,” he told reporters.
Afterward, David Gallo, who has worked at Whirlpool for more than 20 years, said Mr. Macron was well-spoken but had failed to convince him.
“He’s been trained to speak,” Mr. Gallo said, “that’s not the problem. The question is what he will do.”
Mr. Gallo, who voted for conservative Nicolas Sarkozy in 2012, said he wants to give Ms. Le Pen a chance. “We’ve voted left-right, played Ping-Pong for 20 years,” he said. “Finally, we’ve seen they’re the same. We’ll try the National Front.”
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Not wild about Marine's economics , , ,
Likewise. I find myself pulling for her to shake up the system but I don't agree with her economics.
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Not wild about Marine's economics , , ,
Likewise. I find myself pulling for her to shake up the system but I don't agree with her economics.
Yes, but the French love them some socialisme. The economic damage means they just haven't tried enough.
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The Man Who Saved Europe the Last Time
Konrad Adenauer restored democracy to Germany and helped unify a devastated Continent.
Konrad Adenauer (second from left), Sept. 21, 1949, with the high commissioners of the occupation (left to right), America’s John J. McCloy, Britain’s Sir Brian Robertson and France’s André François-Poncet.
Konrad Adenauer (second from left), Sept. 21, 1949, with the high commissioners of the occupation (left to right), America’s John J. McCloy, Britain’s Sir Brian Robertson and France’s André François-Poncet. Photo: Bettmann Archive
By Henry A. Kissinger
April 28, 2017 6:10 p.m. ET
6 COMMENTS
The attribute of greatness is reserved for leaders from whose time onward history can be told only in terms of their achievements. I observed essential elements of Germany’s history—as a native son, as a refugee from its upheavals, as a soldier in the American army of occupation, and as a witness to its astonishing renewal.
Only a few who experienced this evolution remain. For many contemporary Germans, the Adenauer period seems like a tale from an era long transcended. To the contrary, they live in a dynamic established by Konrad Adenauer, a man whose lifespan, from 1876 to 1967, covered all but five years of the unified German national state first proclaimed in 1871.
Devastated, impoverished, partitioned, the Federal Republic came about after World War II by the merger of the American, British and French zones of occupation, containing just two-thirds of Germany’s prewar population. Five million refugees from Germany’s prewar territories needed integration; they agitated for the recovery of lost territories. The Soviet occupation zone, containing 18 million people, was turned into a communist political entity.
The Federal Republic’s advent capped a century of discontinuity. The Empire after Bismarck had felt beleaguered by the alliances surrounding it; the Weimar Republic after World War I had felt abused by an imposed peace settlement; Hitler had sought an atavistic world dominion; the Federal Republic arose amid a legacy of global resentment.
The newly elected German Parliament chose Adenauer as chancellor by a margin of just one vote on Sept. 15, 1949. Shortly afterward, on Nov. 22, 1949, he signed the Petersberg Agreement with the three Allied high commissioners, conferring the attributes of sovereignty on the Federal Republic but withholding its premise of juridical equality. The center of its mining activity, the Ruhr, remained under special Allied control, as did the industrial Saar region along the French border. Adenauer’s acquiescence to these terms earned him the sobriquet from his opposition “Chancellor of the Allies.”
In his first formal encounter with the three high commissioners, on Sept. 21, 1949, Adenauer demonstrated that he would accept discrimination but not subordination. The high commissioners had assembled on a carpet; to its side, a place for Adenauer had been designated. The chancellor challenged protocol by stepping directly onto the carpet facing his hosts.
From this posture, Adenauer heralded a historic turning point. The new Federal Republic would seek, in his words, “full freedom” by earning a place in the community of nations, not by pressure or by seizing it. Calling for an entirely new conception of foreign policy, Adenauer proclaimed the goal of “a positive and viable European federation” to overcome “the narrow nationalistic conception of the states as it prevailed in the 19th and 20th century . . . in order to restore the unity of European life in all fields of endeavor.”
Adenauer’s conduct reinforced his rejection of European history. Tall, erect, imperturbable, his face immobile from an automobile accident in his youth, he exuded the serenity of the pre-World War I world that had formed him. Equally distinctive was his sparse speaking style. It conveyed that unobtrusiveness and performance, not exhortation or imposition, were to be the operating style for the new Germany.
Winston Churchill had made a comparable proposal for Europe two days before in Zurich, but Churchill was not in office then. Governing amid defeat and division, Adenauer had proposed an indefinite (possibly permanent) partition of his country while integrating it into a nascent European structure. The country whose nationalism had precipitated two world wars would henceforth rely on partnership with its erstwhile enemies.
The turn westward proved fundamental. The choice of Bonn as the new capital, located in the westernmost part of Germany, with close links to Western Europe, was symbolic. Adenauer convinced the Parliament to select Bonn because, as he said sardonically, he wanted the capital to be in the wine region, not amid potato fields, and not least because his home village of Rhöndorf (population of about 1,000) was not suitable for a capital.
It required all of Adenauer’s personality and stature to implement these visions. Opposition came largely from the Social Democratic Party, which, while pro-democracy, insisted on a national policy of neutrality. The opposition included vestiges of German conservatives, one of whose spokesmen was Heinrich Brüning, the chancellor whose overthrow in 1932 had opened the way for Hitler.
Adenauer proved adamant. He made democratic regeneration his first priority as the precondition to integration into Europe. A renewed reputation for reliability was essential. Maneuvering between the superpowers would destroy confidence and repeat historical tragedies.
Adenauer’s foreign policy was founded on the moral imperative of democracy. He envisaged a relentless progression toward the twin goals of a security partnership with America and political integration with Europe.
The Petersberg Agreement of 1949 was followed by negotiations over European defense, spurred by the Korean War and the Soviet military buildup in Central Europe. As NATO was forming, Adenauer urged the European nations to pool their efforts into the European Defense Community. After the French Assembly rejected this concept, Adenauer in 1954 agreed to the Paris Accords, which ended West Germany’s occupation, affirmed its sovereignty, and opened the way to its national membership in NATO. The culmination was Adenauer’s 1955 visit to Washington. When the German national anthem was played as he visited the Tomb of the Unknown Soldier, Adenauer described it as the most moving moment of his life.
European integration followed a comparable, in retrospect inevitable, sequence. From France and Germany’s 1951 agreement to establish the Coal and Steel Community to the Treaty of Rome in 1957, which established the European Economic Community, Adenauer, working with wise French leaders, overcame one of world history’s once-hereditary national animosities.
Within the space of six years, Adenauer had moved his country from an outcast to an equal member in political and security arrangements unprecedented in European history. This was made possible by a spirit of American creativity which, in the Marshall Plan and the origination of NATO, overcame America’s pre-World War II isolationism.
The U.S. became Germany’s principal link to security through NATO, and to economic recovery through the Marshall Plan. France, as the link to the European Community, played a comparable role. In America, John Foster Dulles symbolized the relationship; in France, President Charles de Gaulle. They both represented to Adenauer elements capable of stabilizing the inevitable storms the future might hold. In that sense, Adenauer viewed Europe as a potential corrective to the fluctuations into which global responsibilities and a certain inherent restlessness on occasion drew the U.S. When, in 1956, Guy Mollet, France’s prime minister, stressed a gap between the obligations of NATO and American conduct in the Suez Crisis, Adenauer defended the existing structures as flexible enough to recover shared vitality: “Europe will be your revenge,” he said.
I had the privilege of hearing Adenauer’s vision in several conversations with him over a 10-year period. His courtesy and serenity were his most memorable traits. Our first meeting took place in 1957, shortly after a Soviet ultimatum threatening Berlin. Adenauer concentrated on the nightmare of everyone privy to nuclear planning: whether any U.S. president would actually bring himself to unleash the catastrophe on which NATO nuclear strategy was based. Since the official answer was formal but the actual one would depend on unknowable contingencies and personalities, he raised the question at every subsequent meeting.
Another major issue preoccupying Adenauer was geopolitical evolution. Did I realize that a break between China and Russia was imminent? The West should prepare for that contingency and not provide too many temptations to its adversaries by its divisions. He construed surprised silence as assent and, on his first visit to the White House in 1961, repeated the prediction, adding, to an astonished President Kennedy: “Professor Kissinger agrees with me.”
In 1962, as part-time consultant to President Kennedy, I was asked during a crisis to reassure Adenauer about America’s determination and capacity to defend Berlin and support Germany. I had been briefed to present details of some nuclear capabilities and deployments on a personal, presidential basis—information which, at that time, was shared with only the U.K.
As I began my presentation of the political issues, Adenauer interrupted: “They have already told me this in Washington. If it did not convince me there, why would it convince me here?” I replied that I was an academic, and a government employee only a quarter of my time. Adenauer was nonplussed. In that case, he replied: Let us assume you will convince me three-quarters of the way.
But when I presented the military briefing, Adenauer was transformed—partly because of the enormous gap in the West’s favor that it demonstrated, but above all because of the confidence President Kennedy had shown in him. It turned into the warmest of all my meetings with him.
A moving aftermath followed some decades later. I received a letter whose sender I did not recognize. He had served as an interpreter during that conversation (though German is my native language, I generally conduct official conversations in English because my vocabulary is more precise, especially on technical matters). Adenauer had given me his word of honor not to distribute the nuclear information I had shared with him. The interpreter informed me that he had, in fact, given a full record of my briefing to Adenauer, who had instructed him to destroy the nuclear portion out of respect for his word of honor.
The historic German-American partnership that began with the Adenauer chancellorship proceeded from almost diametrically opposed starting points. Adenauer assumed office at probably the lowest point of German history. The U.S. was at the zenith of its power and self-confidence. Adenauer saw his task as rebuilding Christian and democratic values through new designs for traditional German and European institutions. America had equally grand objectives and, at times, pursued them with insistent certainty. For Adenauer, the reconstruction of Europe was the rediscovery of ancient values; for America, the implementation of prevailing ones. For Adenauer to succeed, it was necessary to stabilize the soul of Germany; for America, to mobilize existing idealism. Occasionally there were strains, especially when American optimism overestimated the scope for more-fragile structures and divergent historic memories.
The Atlantic relationship between Bonn and Washington transformed, however, the shattered world it inherited and helped create a half-century of peace between major powers.
This system is now under stress from simultaneous upheavals on several continents. Can it heal a fractured world by rediscovering the conviction and creativity with which it was built?
Mr. Kissinger served as national security adviser and secretary of state under Presidents Nixon and Ford. This is adapted from an April 25 speech to the Konrad Adenauer Foundation.
Appeared in the Apr. 29, 2017, print edition.
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https://www.thestar.com/news/world/2017/05/05/forget-trump-forget-brexit-a-le-pen-win-on-sunday-could-be-the-wests-biggest-shock-this-century-analysis.html
Everyone says it won't happen...
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https://www.thestar.com/news/world/2017/05/05/forget-trump-forget-brexit-a-le-pen-win-on-sunday-could-be-the-wests-biggest-shock-this-century-analysis.html
Everyone says it won't happen...
President Hillary Clinton unavailable for comment.
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http://www.independent.co.uk/news/world/europe/emmanuel-macron-email-hack-leaks-election-marine-le-pen-russia-media-ordered-not-publish-commission-a7721111.html
Emmanuel Macron hacked emails: French media ordered by electoral commission not to publish content of messages
Journalists could face criminal charges for violating laws preventing influence on vote
Lizzie Dearden @lizziedearden 2 hours ago629 comments
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Mr Macron's En Marche! party said he had been the target of a "massive" attack Reuters
France's electoral commission has ordered media not to publish contents of Emmanuel Macron's leaked campaign emails to avoid influencing the election.
It warned news outlets in France that journalists could face criminal charges for publishing or republishing the material, under laws that came into effect at midnight forbidding any commentary liable to affect the presidential race.
There were fears the hack could swing Sunday’s final vote, where Mr Macron was expected to comfortably beat far-right candidate Marine Le Pen.
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Le Pen v Macron: The debate in 60 seconds
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Emmanuel Macron's campaign says it has been hacked
As much as 9GB gigabytes of data were posted on a profile called EMLEAKS to an anonymous document sharing site under two days before the final vote.
While French election rules forbid the media from publishing the emails, they also ban Mr Macron or his team from commenting on or denying any allegations.
His En Marche! party said it had “been the victim of a massive and coordinated hack” on Friday evening, adding that it had “given rise to the diffusion on social media of various internal information”.
A spokesperson said the communications only showed the normal functioning of a presidential campaign, but that authentic documents had been mixed on social media with fake ones to sow “doubt and misinformation”.
“This operation is obviously an attempt at destabilising democracy, as has already been seen in the US during the last presidential campaign,” he added.
“The ambition of the authors of this leak is obviously to harm the En Marche! movement within hours of the second round of the French presidential election.”
French Presidential Election
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En Marche! previously complained about attempts to hack its emails, blaming Russian interests in part for the cyber attacks despite denials from the Kremlin.
Officials said it had been the target of failed attempts to steal email credentials dating back to January, identifying a hacking group operating in Ukraine.
READ MORE
Young French voters urged to embrace 'the lesser of two evils'
Macron launches legal complaint over offshore account allegations
Le Pen accused of using 'fake news by Russians' during election debate
Vitali Kremez, director of research with US-based cyber intelligence firm Flashpoint, told Reuters APT 28, a group tied to Russia’s military intelligence directorate, was behind the leak.
The collective, also known as “Fancy Bear” and “Sofacy”, has been linked to cyber attacks on the Democratic National Committee during the US election, the White House, German Parliament, Nato and French media.
Last month, APT 28 hackers registered decoy internet addresses to mimic the name of En Marche!, which were used to send corrupted emails to hack into the campaign’s computers, Mr Kremez said.
“If indeed driven by Moscow, this leak appears to be a significant escalation over the previous Russian operations aimed at the US presidential election, expanding the approach and scope of effort from simple espionage efforts towards more direct attempts to sway the outcome,” he added.
Far-right American activists are believed to be behind early efforts to spread the documents on social media, before they were picked up by Ms Le Pen’s supporters in France.
The leaks emerged on 4chan, where an anonymous poster provided links to documents on Pastebin with the message: “This was passed on to me today so now I am giving it to you, the people.”
The hashtag #MacronLeaks was spread by prominent Twitter accounts including that of Jack Posobiec, a pro-Donald Trump activist and employee of the far-right site Rebel TV.
The cyber attack came after repeated allegations of Russian interference in elections across Europe and the US, with Mr Macron previously targeting state media including Russia Today and Sputnik for spreading “fake news” to damage his campaign.
The two government-owned news outlets has announced legal action against Mr Macron over his allegations, which came after the politician denied unsubstantiated reports of an alleged offshore bank account.
Margarita Simonyan, the editor of both RT and Sputnik, said: “We are tired of their lies. We will sue them.”
Mr Macron has filed a legal complaint over the reports, which were raised by Ms Le Pen during a heated television debate.
The Paris’ prosecutor’s office said no one was named in the complaint, which has triggered an inquiry into the suspected spread of false stories aimed at influencing the election.
Vladimir Putin has dismissed allegations of interfering in foreign elections including the US and Germany, hitting out at unproven "rumours".
“We never interfere in other countries’ politics and we want no one to meddle in ours,” the Russian President said during a tense press conference with Angela Merkel.
“Unfortunately, we have seen the opposite happening for years. We have seen attempts to influence political processes in Russia through the so-called NGOs and directly.
“Realising the futility of such efforts, it has never occurred to us to interfere."
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Macron won, 66-34. Though I found myself pulling for disruption versus more of the same, Le Pen and her party really gave nothing much to identify with.
Her party was recently associated with holocaust denial? and anti-semitism? Her own economics has nothing to do with mine, how do you side against free trade?
The objection with 'Europe' / EU from my point of view is about being governed by afar, by bureaucrats. If I were French, I would oppose loss of sovereignty, not oppose trade.
France has and unemployment rate of 10% while younger workers have an unemployment rate of 20%. Sadly, his election will do nothing to improve that. Le Pen likely wouldn't have fixed that either.
Macron winning means that no better candidate or party was on the ballot. France isn't a conservative country. The left reforms by changing their name. The conservative / right needs a new political economic paradigm as well.
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Macron won, 66-34. Though I found myself pulling for disruption versus more of the same, Le Pen and her party really gave nothing much to identify with.
Her party was recently associated with holocaust denial? and anti-semitism? Her own economics has nothing to do with mine, how do you side against free trade?
The objection with 'Europe' / EU from my point of view is about being governed by afar, by bureaucrats. If I were French, I would oppose loss of sovereignty, not oppose trade.
France has and unemployment rate of 10% while younger workers have an unemployment rate of 20%. Sadly, his election will do nothing to improve that. Le Pen likely wouldn't have fixed that either.
Macron winning means that no better candidate or party was on the ballot. France isn't a conservative country. The left reforms by changing their name. The conservative / right needs a new political economic paradigm as well.
"Sexual abuse survivor elected to France's highest office!"
The french deserve to get what they voted for.
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"The french deserve to get what they voted for."
True, but WE would be better off with a better France.
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"The french deserve to get what they voted for."
True, but WE would be better off with a better France.
Sure we would, but cheese eating surrender monkeys gotta be cheese eating surrender monkeys.
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There is also the matter of the Russians opening lending her campaign millions of dollars. Surely this should be a very big deal? Surely this should have bothered her many well-wishers here in the US due to her immigration/defense of French culture stance? But it did not , , ,
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http://www.breitbart.com/london/2017/06/29/czech-republic-passes-constitutional-right-to-bear-arms/
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http://www.breitbart.com/london/2017/06/29/czech-republic-passes-constitutional-right-to-bear-arms/
Very nice! Good for them!
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http://www.speroforum.com/a/JNUGTRROXW20/81215-Austria-blocks-migrants-with-armored-vehicles?utm_medium=email&utm_campaign=EJFXXTUNLE46&utm_content=JNUGTRROXW20&utm_source=news&utm_term=Austria+blocks+migrants+with+armored+vehicles#.WV3AmnokSGA
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https://heartiste.files.wordpress.com/2017/07/bestmerkelmeme.jpg?w=500&h=277
(https://heartiste.files.wordpress.com/2017/07/bestmerkelmeme.jpg?w=500&h=277)
https://www.gatestoneinstitute.org/10306/childless-europe
Europe's Childless Leaders Sleepwalking Us to Disaster
by Giulio Meotti
May 6, 2017 at 5:00 am
https://www.gatestoneinstitute.org/10306/childless-europe
As Europe's leaders have no children, they seem have no reason to worry about the future of their continent.
"Europe today has little desire to reproduce itself, fight for itself or even take its own side in an argument". — Douglas Murray, The Times.
"'Finding ourselves' becomes more important than building a world." — Joshua Mitchell.
There have never been so many childless politicians leading Europe as today. They are modern, open minded and multicultural and they know that "everything finishes with them". In the short term, being childless is a relief since it means no spending for families, no sacrifices and that no one complains about the future consequences. As in a research report financed by the European Union: "No kids, no problem!".
Being a mother or a father, however, means that you have a very real stake in the future of the country you lead. Europe's most important leaders leave no children behind.
Europe's most important leaders are all childless: German Chancellor Angela Merkel, Dutch Prime Minister Mark Rutte and the French presidential hopeful Emmanuel Macron. The list continues with Swedish Prime Minister Stefan Löfven, Luxembourg's Prime Minister Xavier Bettel and Scottish First Minister Nicola Sturgeon.
As Europe's leaders have no children, they seem have no reason to worry about the future of their continent. German philosopher Rüdiger Safranski wrote:
"for the childless, thinking in terms of the generations to come loses relevance. Therefore, they behave more and more as if they were the last and see themselves as standing at the end of the chain".
Living for today: Europe's most important leaders are all childless, among them German Chancellor Angela Merkel (left) and Mark Rutte (right), Prime Minister of the Netherlands. (Image source: Minister-president Rutte/Flickr)
"Europe is committing suicide. Or at least its leaders have decided to commit suicide", wrote Douglas Murray in The Times. "Europe today has little desire to reproduce itself, fight for itself or even take its own side in an argument". Murray, in his new book, entitled The Strange Death of Europe, called it "an existential civilisational tiredness".
Angela Merkel made the fatal decision to open the doors of Germany to one million and half migrants to stop the demographic winter of her country. It is not a coincidence that Merkel, who has no children, has been called "the compassionate mother" of migrants. Merkel evidently did not care if the massive influx of these migrants would change German society, probably forever.
Dennis Sewell recently wrote in the Catholic Herald:
"It is that idea of 'Western civilisation' that greatly complicates the demographic panic. Without it, the answer would be simple: Europe has no need to worry about finding young people to support its elderly in their declining years. There are plenty of young migrants banging at the gates, trying to climb the razor wire or setting sail on flimsy boats to reach our shores. All we need to do is let them in".
Merkel's childless status mirrors German society: 30% of German women have not had children, according to European Union statistics, with the figure rising among female university graduates to 40%. Germany's Minister of Defense, Ursula von der Leyen, said that unless the birth rate picked up, the country would have to "turn the lights out".
According to a new study published by the Institut national d'études démographiques, a quarter of European women born in the 1970s may remain childless. Europe's leaders are no different. One in nine women born in England and Wales in 1940 were childless at the age of 45, compared to one in five of those born in 1967.
French politician Emmanuel Macron has rejected French President François Hollande's assertion that, "France has a problem with Islam". He is against suspending the citizenship of jihadists, and keeps insisting, against all evidence, that Islamic State is not Islamic: "What poses a problem is not Islam, but certain behaviours that are said to be religious and then imposed on persons who practice that religion".
Macron preaches a sort of multicultural buffet. He speaks of colonialism as a "crime against humanity". He is in favor of "open borders", and for him, again against all evidence to the contrary, there is no "French culture".
According to philosopher Mathieu Bock-Coté, the 39-year-old Macron, who is married to his 64-year-old former teacher, is the symbol of a "happy globalization freed of the memory of the French lost glory". It is not a coincidence that "Manif Pour Tous," a movement that fought the legalization gay marriage in France, urged voting against Macron as the "anti-family candidate". Macron's slogan, "En Marche!" ("Forward!"), embodies the globalized élites who reduce politics to an exercise, a performance.
That is why Turkish leader Erdogan urged Muslims to have "five children" and Islamic imams are urging the faithful to "breed children": to conquer Europe. Islamic supremacists are busily building a clash of civilizations in Europe's midst, and they depict their Western host countries collapsing: without population, without values, and abandoning their own culture.
If you look at Merkel, Rutte, Macron and others, are these Islamic supremacists so wrong? Our European leaders are sleepwalking us to disaster. Why should they care, if at the end of their lifespans Europe will not be Europe? As Joshua Mitchell explained in an essay, "'finding ourselves' becomes more important than building a world. The long chain of generations has already done that for us. Now let us play".
Giulio Meotti, Cultural Editor for Il Foglio, is an Italian journalist and author.
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Stratfor Worldview
Aug 29, 2017 | 20:20 GMT
Europe: EU Members Push to Extend Border Controls
Despite the declining flow of migrants entering Europe illegally, some EU member states are pushing to keep in place the temporary border controls implemented to reduce migration, arguing that they are needed to combat terrorism. Border controls are currently allowed inside the border-free Schengen area, between Austria, Germany, Denmark, Sweden and Norway. But they are set to expire Nov. 11.
Though the European Commission said an extension of the controls is not possible after Nov. 11, it suggested a "compromise solution": EU member states could apply to enact border controls by proving that open borders would pose a serious threat to public order and security. This would allow Europe to retain border controls — this time using terrorism, rather than migration, as justification.
And European leaders have mounting evidence to prove that terrorism is a serious threat to the Continent. Recent attacks in Spain, France, Germany and Belgium won't soon be forgotten. On Aug. 25, Bavarian Interior Minister Joachim Herrmann said that border controls should be extended because the threat of terrorism is "even more acute" than illegal migration. Similarly, German Chancellor Angela Merkel, who is campaigning for the German federal elections in September, called for border controls to remain in place until security authorities determine that they are no longer necessary.
When it comes to lingering migration concerns, European leaders are opting to work with African leaders to address the problem at its root. France hosted a summit Aug. 28, during which European and African leaders signed a broad roadmap on managing migrant flows through the Mediterranean. The European leaders decided to continue with their strategy of providing money and resources to migrants' countries of origin, since this is much easier for the bloc to do than reforming its migration rules.
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Revisiting Europe, the Heroic Delusion
By Jacob L. Shapiro
The European Union is what political philosopher Leo Strauss might have called a “heroic delusion.” It is a noble dream, a dream that the only thing necessary for peace in Europe is shared prosperity. And for a time, the EU was living the dream. The hardships of the 2008 financial crisis, however, showed what a flimsy basis shared prosperity was for the EU’s future. Much of the infighting we observe today within the EU is a last-ditch effort by some to give the EU the types of powers it would need to forge an effective and politically sovereign entity. They are unlikely to succeed.
Take the bureaucratic spat between Poland and the European Commission. The two have long been at odds over the current Polish government’s desire to reform Poland’s judicial system in a way that gives it more power to select and remove judges. The latest chapter in the saga began Aug. 28, when Poland’s Foreign Ministry released a statement rejecting the commission’s critiques of Poland as “groundless” and sent a 12-page document of legal reasoning to Brussels to underscore the point. The European Commission fired back Aug. 31, with the deputy head of the commission saying the body would not drop the issue and would seek all means at its disposal to bring Poland to heel. The same day, in an interview with Le Point, French President Emmanuel Macron said Poland’s policies were “very worrying,” saying they call into question European solidarity and even the rule of law itself.
This kind of back-and-forth isn’t all that unusual for bureaucracies such as the EU’s, but it ignores the inescapable dilemma: The Continent is populated not by Europeans but by several vastly different nations. The inability or unwillingness to understand as much was apparent in the rest of Macron’s interview in Le Point. When asked how he would revive Europe, his first answer was, “I believe in Europe.” To believe in Europe is to confess that the existence of “Europe” as a political entity is based not on fact or shared interest but on hope. Hope is a good thing, and there is a time and a place for it. But hope is not what defines lasting political realities.
Not a Country
I don’t mean to deride Macron for suggesting a collective identity. Community, after all, is important. Humans formed them because the world is dangerous and volatile and, for better or worse, they have come to identify with them. After Hurricane Harvey, for example, Americans of all ethnicities, genders and political persuasions donated their time, money, thoughts and prayers to those in need. They did this because no matter their differences, they share an elemental bond of being American.
The French and European Union flags stand next to each other during a meeting of the French and European Commission presidents. AURORE BELOT/AFP/Getty Images
The problem is that the community Macron is talking about doesn’t really exist. At one point in the interview, the French president spoke of Europe regaining its sovereignty. The interviewer pushed back, noting with surprise that France’s pro-EU president would speak of sovereignty in his first major interview with the press. Macron, ever the believer, responded that he envisioned Europe as a continent “of the dimensions of American and Chinese powers.” Strictly speaking, Macron is right about Europe’s potential. The EU has a gross domestic product of around $16 trillion. That’s just a bit less than the GDP of the United States ($18.6 trillion) and almost a third larger than China’s ($11.2 trillion). Taken together, the EU has more than 500 million residents, making it the third-most populous country in the world after China and India – if it were a country.
The EU, however, is not a country, and it is not about to become one. If Europe were a country, German tax dollars would be allocated toward paying down Greece’s debt. If Europe were a country, its military would be deployed in Poland to defend its borders from Russia. If Europe were a country, rules would apply equally to all: France wouldn’t get to ignore European budget deficit rules and then single out Poland as a black sheep for violating democratic norms because of its judicial reforms. If Europe were a country, a Romanian would be willing to die to protect a Spaniard. I have no doubt that there are people of goodwill in all these countries, none of whom wish to see harm visited upon others. But there’s a difference between passive hope for all to live in peace, and active sacrifice to protect members of the same community.
This sense of community is alive and well in most pockets of Europe. And it has to be. In the era of the nation-state, governments are legitimized in part by their ability to represent and protect a particular nation: a group of people who speak the same language, who grew up in the same place, and who feel that if one of their own is under attack, then the nation is under attack. Even the most stalwart supporters of European integration feel a deep sense of national pride in their own countries. France, Germany and the other Western European states represent the very cradle of nationalism itself, and even the most passionate of EU supporters don’t want to surrender their national identities.
And yet the leaders of these countries cower in the face of their nationalists, no doubt a consequence of the Continent’s sordid history. After all, it wasn’t all that long ago that there were those who sought to conquer Europe with Panzer divisions instead of neoliberal trade regimes. But perhaps there is more than just fear of the past at work here. Perhaps there is also a yearning for the past too. Perhaps Western European countries are nostalgic, wistful for a time when individual European nation-states ruled the world, and cognizant of the reality that the only way that can come to pass again is if all of Europe’s vast geographic, military and economic resources are harnessed and directed toward the pursuit of one goal as opposed to 51 sets of different goals.
Hands Tied
And therein lies the difficulty of talking about Europe. So diverse is the Continent that it’s often more useful to think of it regionally: Western Europe, Eastern Europe, Northern Europe, Southern Europe. (Useful doesn’t mean perfect. There are negative connotations associated with “Eastern Europe,” for example, as being considered retrograde or backwater. You might get into knock-down, drag-out fights in bars in places like Prague and Budapest if you suggest to a local that you are visiting eastern, and not central, Europe.) But even if these designations help to broadly explain sometimes-inexplicable dynamics, they still belie just how complex Europe really is. Countries such as Hungary and Poland, which we at GPF categorize as Eastern Europe, have been pushing back against the EU in recent years. Supporters of greater EU integration often try to single Hungary and Poland out as exceptions rather than as harbingers of future trends. They don’t see, for instance, that Hungary and Poland’s refusal to take the refugees the EU wanted them to take in 2015 wasn’t exceptional but was a sign of things to come (think of how much anti-EU sentiment over refugees shaped Brexit). They say, as Macron said last week, that Poland does not speak for Eastern Europe, that Hungary’s government does not speak for the true desires of the Hungarian people. They say that the masses of Europe are pro-European, and that Brussels is charged with safeguarding Europe’s cherished principles of tolerance, equality and freedom, and that if everyone would just follow the rules Europe would rule the world once more.
And they’re right, insofar as Poland does not speak for Eastern Europe. Hungary does not speak for Romania. But France and Germany don’t speak for Eastern Europe, either – the only times in history when they did was at gunpoint. Consider also the perspective of a country like Poland. Poland has roughly two-thirds the population of France. But in economic terms, Poland’s GDP is just under 20 percent of France’s. While Western Europe was rebuilt after World War II with American dollars, Eastern Europe languished behind the Iron Curtain. Now, Eastern Europe is emerging – more self-confident, more defensive of its independence, the most economically dynamic region in Europe. The government in Warsaw does not oppose the EU in principle. It wants to be treated fairly and reacts harshly when it faces what it sees as Brussels’ double standards.
The EU was not built to create a liberal democratic Europe. That was just its ideological raiment. The EU was created to tie Germany’s hands behind its back (and to tie Germany’s and France’s hands together) so that the Continent wouldn’t rip itself apart as it had in World War I and World War II. Countries like Poland are not willing to cede sovereignty to an institution that has no reason to care about them, other than a sheet of paper that says it should. Why would Poland want to leave its fate in the hands of a committee constituted by very few Poles that largely discounts Poland from its decision-making? Rightly or wrongly, Poland speaks for Poland, and Polish voters hold the Polish government accountable for how well it speaks for them.
The nobility of the EU’s dream does not have to die with the EU. Peace is never an eternal state of affairs, but perhaps it will last longer if countries treat each other as they are, and not as they would want them to be. Perhaps not. The only thing that is certain is that the future of Europe will be defined as it always has been: by decisions made in London, Paris, Berlin, Warsaw, Budapest, Belgrade, Rome and other national capitals. The EU may issue as many statements as it wishes, and no doubt will threaten to throw all the articles of the Maastricht Treaty at European countries of whom its bureaucratic institutions do not approve. Poland is the target now. That’s because Poland is changing Europe’s balance of power whether Brussels approves or not, and no amount of indignation, whether justified or not, about Polish judicial reforms can stop that train.
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Poland Challenges the European Identity
By George Friedman
I am writing this from a hotel room in Warsaw, surrounded by memorials to Frederic Chopin, the great Polish composer and champion of self-determination for the Polish people. This is a particularly appropriate time to be here, since Poland is locked in a battle with the European Union over the question of Polish national self-determination – more than two centuries after Chopin was born.
The issue comes down to this: Poland elected a government that pledged to change the direction in which the country was moving. The new government was of the right. It opposed the policies and institutional stance of the previous, left-of-center government. The previous government had embedded its followers in various institutions, such as the courts and national radio, as governments tend to do. The new government saw itself as facing a hostile judiciary and state-owned media. And so it sought to change the management of the state-owned media and “reform” (in its terms) the judiciary.
When it tried to change personnel in both institutions, the opposition charged that these actions violated the constitution, that the government had overstepped its bounds and that it was trying to repress critics. The government countered that the opposition was trying to thwart the new government from ruling. It had been elected by a substantial majority, and it had clearly expressed its policies during the elections.
Politics as Usual
So far this is politics as usual. Examples of it abound. In the United States in the 20th century, President Franklin D. Roosevelt, facing a Supreme Court of entrenched conservatives, tried to expand the court’s size and pack it with his own supporters. He lost. In Britain in the decades after World War II, the state-owned BBC had a monopoly on broadcasting and had been staffed by Labour governments. Conservative governments accused it of being hostile to them, and attempts to change the staff were met with accusations of censorship.
These sorts of arguments are endemic to democracies with government bureaucracies. The public mood changes but the bureaucracies’ ideology remains intact. A battle ensues. Competing factions all point to dire consequences if their views don’t prevail, but a viable if not altogether acceptable solution is normally found.
What makes the Polish situation different is the threatened intervention by the European Union bureaucracy and the vocal hostility of Germany to the new government’s policies. This includes threats to suspend Poland from participation in some EU functions and various hostile claims about the Polish government.
This not only raises the stakes but also goes to the heart of liberal democracy. At the core of liberal democracy is the right of national self-determination. Self-determination, according to theorists of liberal democracy like Locke and Montesquieu, involves some sort of democratic process, a concept with a wide variety of institutional structures, all of which have at their core some sort of electoral process. There is no question that Poland’s current government was elected in a legitimate vote, and in that sense, it represents the determination of the people. The implicit claim made by its opponents is that in implementing this mandate the government violated the Polish Constitution. I am reminded of Andrew Jackson’s response to a Supreme Court ruling with which he disagreed, when he suggested that the court should have to enforce its own ruling because his government wouldn’t. Jackson undoubtedly violated the essence of the U.S. Constitution, but the republic survived.
Deviation
Given that Poland’s government emerged as an act of self-determination, and given that the actions it has undertaken are not unprecedented in the annals of liberal democracy, it is strange that the EU and Germany should be so aggressive in raising an alarm over Poland. There are a number of reasons. First, the EU has a core ideology. One part of it is a commitment to free trade. The other is a commitment to a social order that is primarily secular, that seeks to overcome national distinctions and that is intolerant of intolerance. By this I mean that it embraces the doctrine that the state must not only permit variances in private life but be prepared to enshrine them in a legal system of compulsory tolerance. The combination of a commitment to free trade and a commitment to private choices being enshrined as part of public policy inevitably finds certain varieties of liberal democracy unacceptable. Nationalist exclusivity, erosion of secularism by religiosity and a reluctance to turn private freedom into something explicitly celebrated by the state are rejected.
Polish President Andrzej Duda attends a press conference to announce his projects of judicial reforms after he blocked controversial parliamentary judicial reforms on July, in Warsaw, Poland, on Sept. 25, 2017. WOJTEK RADWANSKI/AFP/Getty Images
The Polish government’s misfeasance is not really about courts or broadcasting. Rather, it is about Poland deviating from the EU’s ideology. The Polish government has opposed unlimited immigration into Poland by Muslims, arguing that it would change the country’s national character. In other words, Poland has elevated national distinctions to a level unacceptable to the European Union. It insists that there is a Polish nation and that others with differing values cannot become part of it.
There is the additional question of secularism. Poland is a Catholic country, not only in the sense that many practice that religion but in the deeper sense that Polish history is bound up with Catholicism. This is true for all of Europe (adding in Orthodox and Protestantism), but for Poland this bond is far fresher. The destruction of communism in Poland, and to a great extent in Eastern Europe in general, was deeply dependent on the Polish Catholic Church, which encouraged and protected the resistance movement against communism and against the German occupation that preceded it.
When Catholicism was seen as an anti-totalitarian movement, the Europeans celebrated it. When it was discovered that the Catholic Church was not just a nongovernmental organization demanding human rights but was also truly Catholic – a religion – Europeans cooled to it. When the Catholic Church, always deeply embedded in Polish political life, pursued positions on private life unacceptable to the EU’s ideology and was entwined with the new government, the hostility jelled.
Benefits of Membership
The Polish government represents a fundamental challenge to the EU. The EU promoted an ideology in which national distinctions were to subside and be replaced by a European ideology. Since 2008, resistance to the priority of Europeanism over national identity has increased. This is what motivated the Brexit. Poland and some other Eastern European countries have been particularly unwilling to abandon their national identities. In Poland’s case, this national identity was tied to public religiosity – a religion unwilling to be confined to the private sphere and unwilling to accept the EU’s views on the state’s affirmation of a variety of behaviors.
The EU’s ideology became more problematic after 2008 as the economic benefits of membership declined. The EU has sought to protect its moral and social principles in the face of this decline. The Polish government directly challenges this ideology. If the idea of Europeanism weakens and the idea of the nation rises, while Europe fails to return to its pre-2008 prosperity, then the moral principles binding the EU will wither.
There is a reason Eastern Europe – Poland and Hungary, in particular – are championing this. Poland was sovereign for about 20 years during recent centuries. It lost its sovereignty to Germany and Russia. Losing it again to the EU, whose economic promise is in question and which demands the right to judge and guide Poland’s internal life, seems like a bad deal. Eastern Europe has struggled for its sovereignty for a long time. Sovereignty means not bending your knee to a greater power.
But for the EU, Poland and Hungary are mortal challenges. They have defined being European in a certain way. Poland and Hungary are reclaiming their right to their own national identity. The spread of the idea of national identity over EU values leaves the EU as an economic relationship, an elective affinity based on what the EU brings to the table. The EU is configured to judge its members. If the Polish (and British) disease spreads, the members will be judging the EU.
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"The Polish government’s misfeasance is not really about courts or broadcasting. Rather, it is about Poland deviating from the EU’s ideology. The Polish government has opposed unlimited immigration into Poland by Muslims, arguing that it would change the country’s national character. In other words, Poland has elevated national distinctions to a level unacceptable to the European Union. It insists that there is a Polish nation and that others with differing values cannot become part of it."
Unlike the wonderfully diverse western european countries, Poland doesn't have massive rapes and jihad attacks. Funny how that works.
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Reality Check
By Jacob L. Shapiro
A Fight Spain Can’t Win
Catalonia’s referendum is an existential threat to Spain as we know it.
The autonomous Spanish community of Catalonia plans to hold an independence referendum on Oct. 1. The Spanish government intends to prevent that referendum from taking place ¬– by any means necessary. Ironically, Spain’s crackdown, while predictable, exacerbates the very threat Spain is trying to subdue. Whether or not Madrid’s heavy-handed approach prevents a declaration of independence, in the long term it will only push more Catalans toward the conclusion that their future lies not with Spain but with themselves. Spain, the European Union’s fourth-largest economy, sits on the verge of a major political crisis that it has no way of solving.
Nations Within Nations
This standoff is only the latest expression of an issue between Madrid and Barcelona that is almost a millennium old: the Catalan people’s desire to rule themselves.
Present-day Catalonia has a culture, language and history that is unique and all its own. It has preserved this identity despite losing multiple wars for self-rule, and despite periods of intense suppression. Catalonia’s desire for independence played a major role in the 1936-39 Spanish Civil War, another conflict in which Catalonia ended up on the losing side. Francisco Franco’s rule and repression of Catalonia after the war did nothing to dim Catalonia’s identity, or for that matter any of the identities of the various nations that today make up the Kingdom of Spain.
Franco died in 1975, ending 36 years of military dictatorship. Three years later, Spain adopted its current constitution by a popular referendum in which over 91 percent of voters cast their ballots for ratification. But that constitution did nothing to solve Spain’s fundamental problem: Though it claims to be a unified nation, Spain is made up of several different nations, of which Catalonia is just one. Section 2 of the Spanish Constitution’s Preliminary Title says, “The Constitution is based on the indissoluble unity of the Spanish Nation, the common and indivisible homeland of all Spaniards; it recognizes and guarantees the right to self-government of the nationalities and regions of which it is composed and the solidarity among them all.”
Students gather as they demonstrate against the position of the Spanish government to ban the self-determination referendum of Catalonia during a university students strike on Sept. 28, 2017, in Barcelona, Spain. DAN KITWOOD/Getty Images
This is, of course, a contradiction. First it says Spain is one unified nation. Then it says it’s the responsibility of that one unified nation to preserve the right to self-government of the various nations that comprise it. Nations are not composed of other nations. The concept of the nation is that a group of people share a history, language or principles in common, and that these unique attributes make them different from all other groups of people. The great political organizing principle of our time is that unique groups of people should govern themselves. Spain is, in effect, trying to take a group of nations and create one nation out of them.
With that in mind, Catalonia’s referendum is an existential threat to Spain as we know it. Consider that today, Spain is divided into 19 autonomous regions. Catalonia is one of the most autonomous – it is one of the few regions to have its own police force, for example. If Catalonia were to leave Spain, not only would roughly 20 percent of Spain’s gross domestic product disappear overnight, but it would also raise the possibility that other autonomous regions might be interested in national self-determination too.
(click to enlarge)
Countdown
It is little wonder, then, that the Spanish government, unable to halt the referendum through political means, has in recent weeks responded with force. It has arrested Catalan politicians, put Catalonia’s 17,000-strong Mossos d’Esquadra police force under the control of the Spanish Interior Ministry, dispatched additional Spanish police to Catalonia, and carried out police raids to seize ballots and other referendum materials. Spain’s president declared that his forces would do “all that is necessary” to prevent the vote from taking place.
From Madrid’s perspective, it had little choice in how it could respond. It doesn’t matter that more polls indicate a slight preference among Catalans to remain part of Spain rather than to leave. More polls indicated a slight preference for “remain” over “leave” in Brexit too. The polls are too close for Madrid’s comfort, and Spain won’t leave its future to chance.
It’s a lose-lose situation. Letting the referendum proceed could spell the slow and painful dissolution of Spain as we know it, but cracking down only strengthens the argument for Catalan independence. In fact, though the polls have indicated that the referendum is a toss-up, they’ve been unambiguous about one thing: Many Catalans who are against independence also believe that the choice is ultimately theirs, not Madrid’s, to make.
At a certain point, the referendum will stop being just an internal Spanish issue and will become a European one. Indeed, prominent voices within Spain have already sought Brussels’ help. In a Sept. 28 op-ed for The Guardian, Barcelona Mayor Ada Colau wrote that although she personally opposed independence, the Spanish government had gone too far. She therefore appealed to the European Commission to intervene and mediate between the Spanish and Catalan governments so that the two sides could come to a “negotiated and democratic solution.” Catalonia is not the only would-be new nation-state in Europe, and from Scotland to Kosovo, eyes are trained on Brussels, awaiting its response. When it looked like Scotland might try to leave the United Kingdom after Brexit, the EU ignored the issue. It will be much harder for Brussels to look the other way if Catalonia votes for independence or if Spain cracks down even harder than it already has in the lead-up or aftermath of the referendum.
A spokesman for the Catalan government on Sept. 25 described the Spanish government’s most recent attempts to block the referendum as being no different from the ways in which authoritarian regimes in China and North Korea govern their respective countries. That is an exaggeration – Catalan ministers aren’t being executed by anti-aircraft batteries or facing a Great Proletarian Cultural Revolution. But the Spanish government is undeniably using force to prevent the referendum, and whether Oct. 1 or sometime later, there is probably more violence to come. That is because from Madrid’s perspective, the nobility and legitimacy of the Spanish nation is under attack from hulking giants. The trouble for Madrid is that it is not under attack from giants. It is tilting at Catalans. And it isn’t a fight Madrid can win.
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Fracturing/collapsing nation-states isn't going away anytime soon. In fact, expect it to spread globally.
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https://www.thetimes.co.uk/edition/news/spain-torn-apart-as-850-hurt-in-catalan-referendum-riots-3glprtngh
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G M:
Fracturing/collapsing nation-states isn't going away anytime soon. In fact, expect it to spread globally.
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"Catalonia to move to declare independence from Spain on Monday
by Reuters"
http://news.trust.org/item/20171004112122-805c3
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It makes me wonder, what is Spain without its strongest region. What is Spain without Barcelona, losing a good deal of Mediterranean coast bordering on the south of France, tourism, agriculture, employment? Catalonia is one of the richest regions in Spain.
https://www.marketplace.org/2017/09/29/economy/big-reason-catalonia-wants-secede-economic-richest-regions-in-spain
http://www.euronews.com/2017/09/29/six-charts-on-how-catalonia-compares-to-the-whole-of-spain
As the most prosperous of Spain's 17 regions, Catalonia houses roughly 19 percent of Spain's economy, benefiting from tourism, exports, manufacturing, and industry.
https://www.cnbc.com/2017/09/21/heres-how-bad-economically-a-spain-catalonia-split-could-really-be.html
As GM suggests, what other regions of what other countries will follow.
Is Spain even a country? Or is EU the country?
In some ways, aren't we generally better off with smaller, self-governing jurisdictions that make voluntary agreements for security and trade with our neighbors?
Muslims want Iberian peninsula back.
https://www.thetimes.co.uk/article/we-re-coming-to-take-back-spain-isis-video-says-hpjhjrc9d
Does this make the rest of Spain more vulnerable? The parts closer to and touching north Africa?
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IIRC Spain's birth rate is around 1.1 or 1.2, which essentially is a demographic death spiral.
I did seminars in Cartagena for nine years running, and have done seminars in Barcelona and Madrid as well. The last of them was around 2011 (?) and IIRC the unemployment rate was in the 20s and for the young in the 40s.
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Like California separating from US.
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Like California separating from US.
Yes. An even bigger part of Spanish economy than Calif is to US.
Other independence movements in Europe. Scotland obviously and 6 others:
http://theduran.com/7-independence-movements-in-europe-that-have-the-potential-to-destroy-the-eu/
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http://www.dw.com/en/finland-wins-admirers-with-all-inclusive-approach-to-defense/a-40806163
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BREAKING NEWS
Germany may have to hold new elections. Angela Merkel endorsed the move after coalition talks failed, raising fears of instability in Europe.
Monday, November 20, 2017 1:56 PM EST
Chancellor Angela Merkel of Germany faced the greatest crisis of her political career on Monday, after late-night negotiations to form a new government collapsed, raising the prospect of a snap election.
The chancellor expressed a preference for a new election, saying that she was doubtful that a government lacking a majority in Parliament could handle the many challenges it faces.
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Negotiations to form a German government collapsed Nov. 19, opening a period of political uncertainty as leaders try to form a minority government or even seek new general elections.
Prolonged political uncertainty in Germany will complicate France's plans for eurozone reforms and delay discussions about financial and institutional reforms for months.
The situation in Germany could also delay negotiations about the United Kingdom’s future ties with the European Union.
Germany's role as the beacon of political stability and predictability in Europe is now in doubt. Negotiations to form a government collapsed Nov. 19 after the pro-business Free Democratic Party (FDP) left coalition talks, opening a period of prolonged political uncertainty. For weeks, the FDP, German Chancellor Angela Merkel's conservative Christian Democratic Union (CDU), its Bavarian sister party the Christian Social Union (CSU) and the environmentalist Green party have negotiated over controversial issues such as migration, the environment, and taxes to avoid this scenario. Now, German parties and German President Frank-Walter Steinmeier must decide what to do next. The rest of Europe will be watching as well, waiting for a new government to be appointed in Berlin before it can resume talks about the future of the European Union.
Germany Is Divided
Germany's political melee is a consequence of inconclusive Sept. 24 general elections, which produced a fragmented parliament. Germany's biggest parties, the CDU and the center-left Social Democratic Party (SDP), lost support to smaller parties, including the FDP, the Greens, the anti-immigration Alternative for Germany (AfD) party and the far-left The Left. Weaker support for the CDU and the SPD, which had ruled Germany in a grand coalition for years, can be partly attributed to voter exhaustion, but the refugee crisis factored as well. Merkel's decision to open Germany's borders to hundreds of thousands of Syrian asylum seekers in 2015 caused concern among some of the German electorate. It helped spur the AfD's strong election performance, and it was one of the reasons coalition talks collapsed: The parties simply could not agree on Germany's future refugee policy. The CSU and the FDP wanted to introduce an annual cap on asylum seekers and make family reunification harder for refugees to prevent additional migrants from entering the country. The Greens and some of the CDU opposed the proposal. Even though the number of refugees entering Europe has since declined, the topic continues to shape German politics.
In the coming days, three scenarios are possible. First, the CDU could seek another alliance with the SPD. The SPD rejected that option on Nov. 20, because it wants to spend some time in the opposition to become more attractive for voters in the future. Still, the prospect of prolonged political uncertainty could make the party change its mind, though it seems unlikely.
The second scenario would involve the formation of a minority government. Merkel's administration would require support from opposition parties on a case-by-case basis to pass legislation. But Germany has never had a minority government before, and Merkel said on Nov. 20 that this is not her preferred option. Notably, it would open the door for potential parliamentary cooperation with far-right lawmakers from the AfD to pass legislation.
The third scenario would be for the German president to dissolve the lower chamber of parliament, the Bundestag, and hold new elections. But before the Bundestag could be dissolved, lawmakers would have to try to appoint a new chancellor, a process that would take up to three weeks. Afterward, Steinmeier would be able to call new elections to take place within 60 days, meaning snap elections could not be held before early March. The problem is that opinion polls show that new elections would produce a similarly fragmented Bundestag, once again leading to multi-party coalition talks. On Nov. 20, Steinmeier spoke against new elections and said that in the coming days he would hold talks with all parties in the German parliament to find a possible government.
Europe Is Watching
The rest of Europe was waiting for a new German government to coalesce before making crucial decisions. The collapse of coalition talks will extend that wait. EU member states were expected to discuss issues such as eurozone reform and immigration at the EU summit on Dec. 14-15, but with Germany under a caretaker government, the summit won't be as decisive as originally thought.
It's a particularly disappointing situation for France. In recent weeks, the French government made several proposals to reform the eurozone, including to create a separate budget for the currency area and to complete the banking union. A German minority government would hurt Paris' agenda because Berlin would have to negotiate every French proposal with the opposition. In some cases, Berlin could even use the situation as an excuse to oppose French ideas altogether. If early elections are called, Germany will refuse to commit itself to any meaningful reforms to the eurozone until after the vote. And even then, lengthy coalition talks would delay the beginning of negotiations with France until at least mid-2018. This next government in Berlin could include the CDU, the SPD or the Greens, which would support EU integration. But a new administration including the FDP would be more Euroskeptical. Moreover, if Merkel isn't the candidate for the chancellery in the elections, the CDU could also move toward more Euroskeptical positions, further complicating France's plans. Another risk facing Paris is that, as German coalition talks linger, momentum for reform at the EU level could be lost.
But France has an opportunity as well. With Berlin focusing on domestic issues, the French government could intensify its lobbying efforts in Europe to gain support for its reform proposals. Though Paris could try to fill the power vacuum in Europe left by Germany, a French diplomatic push probably won't be enough to appease Northern Europe about eurozone reforms.
To a lesser extent, Germany's domestic troubles could affect the Brexit process, too. A special team appointed by the European Union is conducting much of the Brexit talks. These negotiations will continue regardless of what happens in Berlin. But when it becomes decision time, Germany's ucertain political situation could delay an EU decision, such as whether to start negotiations about the United Kingdom's future ties with the bloc. After all, it would be months before a new German government is appointed, and the United Kingdom has to leave the European Union in March 2019. Timing will be crucial.
Germany's general election in September exposed an increasingly divided electorate. The country's largest parties gave ground to emerging forces on the left and right. Germany could join the United Kingdom in being led by a fragile minority government, or emulate Spain and hold two general elections within a year. Either way, one of the pillars of European stability is not looking so stable anymore.
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Europe’s Border Problem
Oct 23, 2017
By George Friedman
For centuries Europe has fought wars over borders. During the 19th century and the first half of the 20th century, Europe’s borders shifted wildly, as empires fragmented, new nations arose and wars were waged. After 1945 and the beginning of the Cold War, a new principle emerged on the Continent. The borders that existed at the end of World War II were deemed sacrosanct, not to be changed. The confrontation of the United States and the Soviet Union in Europe was enormously dangerous. It was understood that border disputes had been one of the origins of the two world wars and that even raising the legitimacy of post-war borders risked igniting passions that led to violence.
Europeans generally accepted that living with unreasonable or unjust borders was far better than trying to get them right. So, during the Cold War, border issues were rarely raised, and when they were, they were usually quickly swept under the rug. The U.S. and Soviet Union were calling the shots, and neither wanted a world war over Europe’s borders, nor did they trust the common sense of European politicians, particularly after the wars of the first half of the 20th century.
Similarly untouchable were the existing spheres of influence on the Continent. There was the East and the West, and neither would mess with the other. Thus, when
the Soviets crushed independence movements in Hungary and Czechoslovakia, the United States refrained from any military action (not that there were many options). When Yugoslavia chose a pro-Western neutrality over membership in the Warsaw Pact, and the Soviets might have responded by supporting independence movements in Yugoslavia’s member states, they ultimately declined. Borders, and the reckless behavior of Europe’s leaders over those borders, had led to tens of millions of deaths. The Americans and Soviets were more prudent, in part because it wasn’t their borders at stake.
In 1991-92, two things happened. First came the fall of the Soviet Union; then came the signing of the Maastricht Treaty and the creation of the European Union.
Border issues began to drive events again. The border of the Soviet Union collapsed, and a multitude of countries popped up to reclaim their past. There were many questions about borders that were mumbled about. The border of Ukraine and Belarus had moved far to the west in 1945. The borders in the Caucasus were poorly defined. The borders in Central Asia were theoretical. And the borders between Eastern European countries had been the subject of suspended dispute.
For Eastern European countries, other problems took precedence: establishing national sovereignty, finding their place in a Europe that they longed to join, and building a new life for their people. They let the border issue drop – for the most part.
Yugoslavia and the Caucasus were exceptions that drove home the lesson of European borders. There, outside the framework of the EU and of little consequence to others, more than 100,000 people died. Compare this to the Velvet Divorce of the Czechs and Slovaks, which took place within the context of future European states and left no one dead. After this, and with Yugoslavia and the Caucasus in mind, the European Union tried to reinstate the principle that borders were sacrosanct. It provided what it had promised – peace and prosperity – and treated borders as anachronistic. No one was supposed to care where the lines were drawn.
But there was a problem. The European Union had affirmed the principle of national self-determination while avoiding the question of what a nation actually was. A nation was, under the bloc’s definition, any political entity that was in place when the EU was formed. There was little consideration after that.
This is why Catalonia is so important, along with Scotland. The Scots rejected a divorce by a startlingly narrow vote. One would have expected 90 percent of Scots to want to remain in the United Kingdom. Slightly more than 55 percent wanted to, which means secessionists are within striking distance of secession – which would not only divide Scotland from England, but would also maintain the divide among the Scots.
Add to this another critical element. Catalonia has been part of Spain for a long time, but it has considered itself a unique nation apart for an even longer time. Spain will not legalize an independence vote. The underlying questions are the ones the Europeans tried to bury, particularly after Yugoslavia: What is a nation, and what rights does it have? Both Scotland and Catalonia are nations. Do they therefore have a right to national determination or have they lost that right? And what are the consequences if the Catalans disagree?
This is not the only such issue festering in Europe. Hungary was partitioned between Romania and Slovakia. Does it have a right to reclaim these lands? Belgium was a British invention binding the Dutch and French in an unhappy marriage. Can they divorce? Lviv used to be a very Polish city, and now it is part of Ukraine. Can western Ukraine secede and its people rejoin the countries they were citizens of before 1945?
The European Union promised universal prosperity for everyone if they suspended the question of borders and ignored their identities. It was a good bargain. But times have changed, and economic problems make borders much more important. Europe, of course, has no solution to the problem. That we would be talking about an independent Scotland and Catalonia in 2017 would seem preposterous. No economist would see it as a rational discussion.
The economic man, as envisioned by the EU, is unfortunately an insufficient explanation for who we are. Nations matter because Europe is merely a continent, and the EU is merely a treaty. It is a useful entity, and being useful is the only thing that justifies it. If it loses its utility, it loses its legitimacy. And that would also mean that the boundaries it has set on what is admissible would wither and die. Catalonia and Scotland both have serious independence movements. They want to determine their own futures, because they see themselves as distinct. Even if they were to join the EU on their own, the very idea of old European nations reasserting themselves, and questioning the legitimacy of borders as they were drawn in 1945, terrifies the EU. Indeed, it should frighten it more than Brexit. Almost all current nations in Europe have border issues and constituent parts that want to be independent. Most are quiescent at the moment. But they are watching Scotland and Catalonia. And they know where border issues in Europe lead.
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http://www.bbc.com/news/world-europe-43667367
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http://www.bbc.com/news/world-europe-43667367
I blame the Swedish National Hand Grenade Association.
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https://www.dailywire.com/news/29808/british-authorities-crack-down-nazi-dogs-and-angry-ben-shapiro?utm_source=shapironewsletter&utm_medium=email&utm_content=042418-news&utm_campaign=position1
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https://www.prageru.com/videos/suicide-europe
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https://www.dailysignal.com/2018/05/23/hungarys-experiment-could-rebuild-a-sense-of-nation-in-europe/?utm_source=TDS_Email&utm_medium=email&utm_campaign=MorningBell&mkt_tok=eyJpIjoiTlRjeU1qZGpNREprT0RkaSIsInQiOiJmWW5UM1llTE0rRTdmVHJLVW5Sd2g5cjFhTG5NM0Z6UkNjaVdXdkFLSkczMit6QW1mbVV3aDl1YjQxdENsRTYzUDFiakRidWU1R1JvSnpOOE1rQlJjR2lpYlNLSTV4NjFwS2VjQ2JZYWNcL3ZVNDcxZmdGckVLMkpsWDZPNWloNncifQ%3D%3D
Hungary’s maverick prime minister, Viktor Orban, is once again stirring the pot of goulash.
Four years ago, Orban gave his critics ammunition when he said he was constructing an “illiberal democracy.” This month he doubled down, declaring liberal democracy dead and urging other European leaders to stop trying to revive the corpse.
Instead, Orban exhorted them to get busy invoking a new democracy based on Christian principles.
“Liberal democracy is no longer able to protect people’s dignity, provide freedom, guarantee physical security or maintain Christian culture,” he said in Hungary’s parliament earlier this month. “Some in Europe are still tinkering with it, because they believe that they can repair it, but they fail to understand that it is not the structure that is defective: The world has changed.”
The liberal Left continue to push their radical agenda against American values. The good news is there is a solution. Find out more >>
The response, he added, is “to replace the shipwreck of liberal democracy by building 21st-century Christian democracy.”
For many reasons, Orban deserves our attention when he says his ambition—“now we want to hunt really big game” is precisely how he put it—is to change the course of Europe.
He is flushed with an electoral victory in which his party last month captured more votes than all of the opposition combined. He has defeated German Chancellor Angela Merkel on the important philosophical debate over immigration (Orban says it should be lowered). And he has vanquished the leftist billionaire George Soros, who just announced his nongovernmental organization is leaving Hungary.
Most importantly, the question of values is the fundamental issue confronting the Continent. Unlike the United States, modern European states are not founded upon creedal documents that lay out the constituting character and culture of the nation, and how to preserve them.
When “Europe” was more or less coterminous with “Christendom,” that text was the Bible. The culture that defined all the European nations—the paintings, the music, the festivals, the folk wisdom—was suffused with Christianity and its imagery. Greco-Judeo-Christian ethics bonded Portuguese and Finns in the absence of DNA or language links.
As Europe has de-Christianized, at best it has evolved into a values-free, empty husk. At worst it has become a supranational entity that pretends adherence to hate-speech codes, mandatory work rules, open borders, and coercion of everyone into publicly affirming lifestyles they find repugnant—all violations of different freedoms, and ironically of liberalism itself—now form “European values.”
Orban thumbs his nose at European Union pieties with gusto, which is why he can be forgiven if he uses provocative terms to attract attention to an important project.
But first it is important to note obvious downsides. Orban is no Thomas Jefferson, and his emphasis on ethnicity, not civic nationalism contained within borders, is sui generis.
If you believe that all men are created equal, are endowed by their Creator with certain unalienable rights, and that governments are instituted “to secure these rights” and “the blessings of liberty,” then the type of state that Orban wants to build is likely not your bag.
He says he believes that Hungarians are exceptional innately, not as a result of national traits that are acquirable. “We are a unique species,” he said last week. “There is a world which we alone see.”
This Hungarian nation is not geographically defined within juridical and electoral boundaries. The Hungarian nation, Orban said four years ago, “sometimes coincides with the country’s borders, sometimes doesn’t.”
Most important, securing individuals’ liberties is most assuredly not the central purpose of the state he is busy creating. As he said, again, in the 2014 speech:
“The new state that we are constructing in Hungary is an illiberal state, a non-liberal state. It does not reject the fundamental principles of liberalism such as freedom, and I could list a few more, but it does not make this ideology the central element of state organization, but instead includes a different, special, national approach.” (Emphasis added.)
There is good reason why ethnic, rather than civic, nationalism gives us pause. Though ethnic nationalism is unassailable from a natural rights perspective, it does de-emphasize the individual’s agency by making citizenship (belonging) non-volitional.
All of this is less of an indictment of Orban than one would think, however. First, he’s building a state for Hungarians, not Americans—and we must remember that even though safeguarding freedom must be our central animating spirit, to do that, we too, must preserve America’s unique culture.
Also, Hungarians are more ethnically separate than most. They are descended from seven tribes that emerged out of Central Asia more than a millennium ago and settled eventually in the Carpathian Basin.
Surrounded by a sea of German and Slavic, they continue to speak a language that is Asian in origin, not European, and to have distinct foods and customs. They are highly homogenous at home, and have enclaves in neighboring countries who are still considered part of the “Hungarian nation.”
And Orban is not—with due respect to his critics—vowing to pursue his project by depriving Hungarians of their freedom or property. He really doesn’t have a beef with liberal democracy, if understood as a system of representative government where the rule of the majority is checked by constitutional guarantees for minority rights and checks and balances prevent tyranny. Though he does not make freedom “the central element” of his project, he does secure people’s rights. He’s not Putin, Castro, or Xi Jinping.
It is instructive that for Orban, the inflection point for systemic change was the 2008 financial crisis. What he saw, what many saw, was intellectual and financial elites, transnational in outlook, suffering less than their working-class compatriots. He is trying to reconstruct a sense of nation.
By attempting to reintroduce the Judeo-Christian ethic into a secularized Europe, Orban arguably is giving Europe a chance to do just that. Even if the ethnic model he and his electorate may be pursuing is irreplicable in America or most of Western Europe, the values model could have a lot to offer.
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Italy’s Crisis—and Europe’s
The president rejects the populist election winners, setting up a clash between democracy and the EU.
Italian President Sergio Mattarella speaks after meeting Italy's premier-designate Giuseppe Conte in Rome, May 27.
Italian President Sergio Mattarella speaks after meeting Italy's premier-designate Giuseppe Conte in Rome, May 27. Photo: Fabio Frustaci/Agenzia Nazionale Stampa Associata via Associated Press
By Francesco Ronchi
May 29, 2018 7:20 p.m. ET
95 COMMENTS
Minor decisions and small mistakes can change history. Italian President Sergio Mattarella’s decision to reject the populist right-left coalition’s attempt to form a government in Italy may turn out to be a turning point for Europe.
While Mr. Mattarella’s desire to protect the country from turbulence is no doubt sincere, his action could end up having the opposite result. By openly invoking the role of investors, financial markets and the defense of the eurozone in his speech on Sunday, the president lends credence to the populist argument that Italy has become the battleground in a war between the international establishment and national democracies. Even if populists win the elections, their supporters believe, they will never be allowed to hold power for fear that they would oppose the dogma that dominates the eurozone.
The statement by Günther Oettinger, one of the most senior members of the European Commission, that “markets will teach Italians how to vote” is not a reassuring one. Likewise, German Chancellor Angela Merkel’s comparison between Italy and Greece is an unveiled threat: Italians had better toe the line, or they will not be spared what the Greeks have been going through.
This disdain for Italian voters is not only undemocratic but also dangerous. It fuels nationalism and anti-German sentiment in Italy. By appealing to national pride and the defense of democracy against external influences, populist parties are likely to increase their share of the vote in the next elections, which may take place in the next few months. Transforming these elections into a de facto referendum on eurozone membership would be another dangerous gamble in a climate of growing Euroskepticism.
Italy is not Greece. It is the third-largest economy in the eurozone and the ninth-largest in the world. An Italian government with an openly Euroskeptic mandate would head for a clash with Germany, which would certainly have a disruptive effect on the eurozone.
But what is happening in Rome is not only about the future of the euro. It has also to do with the state of democracy, in Italy and in Europe. Discussing and questioning the governance of the eurozone, as the Italian right-left populist coalition wished to do, should not be a taboo in mature democracies.
If Berlin and Brussels really care about the survival of the eurozone, they should not fear such a debate. The economic gap between Southern and Northern Europe is widening and will be unsustainable before long if it isn’t properly addressed.
Limiting the space for democratic debate in Europe seems to confirm the perception that the EU is immune to public opinion. That dangerously widens the divide between Europe’s people and institutions.
Barring populist forces from government will also weaken Italy’s already fragile democracy. A right-left populist cabinet would have helped integrate the populist forces into the constitutional system. The League and 5 Star Movement would have been confronted with the almost impossible task of governing Italy. They would have been forced to make decisions, to form alliances, to play fully the democratic game. Incorporating populists into the institutions would have broadened the democratic base and legitimacy of the Italian constitutional system, making it stronger and more resilient.
Instead, the decision to marginalize the League and 5 Star has already radicalized their positions and polarized Italian public opinion. Italian politics is volatile and unpredictable and could change course within hours. A right-left populist government, based on a stable majority in Parliament, could still be created if President Mattarella, the League and 5 Star find a reasonable compromise that allows both sides to save face. Voters would then judge the new government based on its actions.
If this does not happen, Italy could experience a major constitutional crisis. It could end up as a case study in how liberal democracies commit suicide.
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http://www.alloutdoor.com/2018/05/30/entire-country-sweden-just-went-prepper/?utm_source=Newsletter&utm_medium=Email&utm_content=2018-06-03&utm_campaign=Weekly+Newsletter
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The Latest Chapter in the European Migration Crisis
The European Union’s three largest members have had a rough week.
When 630 people were rescued by a ship called the Aquarius off the coast of Libya last weekend, little did they know their plight would set off a series of events that would deepen the divisions in an already fractured Europe. Within less than a week of the migrants’ rescue, the German government appeared ever closer to collapse, and the French and Italian governments were engaged in a diplomatic spat. The story of the Aquarius will now become part of European history, another chapter in the migration saga that began with German Chancellor Angela Merkel’s open-door refugee policy in 2015 and whose end seems much further away today than it did just a week ago.
‘Close the Doors’
On June 10, as the Aquarius approached Italian waters, the Italian government refused to allow the ship to dock at its ports. The country’s new populist government, which came to power in large part due to the country’s frustration with being the frontline in the migration crisis, used the Aquarius to demonstrate that it was following through on its promise to get tough on illegal immigration. Matteo Salvini, Italy’s new interior minister, took to Twitter to make his government’s position abundantly clear: “Close the doors.”
(click to enlarge)
On June 11, with the Aquarius stranded off the Italian coast, Germany’s struggle over its own immigration policy was intensifying. Merkel rejected Interior Minister Horst Seehofer’s proposal to turn away at the border any refugee who had applied for asylum in another European country. Upon learning of Merkel’s decision, Seehofer canceled a presentation of his 63-point plan to deal with the migration problem scheduled for the following day. A spokeswoman for the German Interior Ministry downplayed the cancellation, explaining that some details simply needed to be ironed out, but she also declined to announce a new date for the presentation.
On June 12, France entered the fray. French President Emmanuel Macron blasted the Italian government as irresponsible and cynical for blocking the Aquarius from Italian ports. The Italian government responded the following day by canceling a meeting in Paris between the French and Italian economy ministers. Italy also summoned the French ambassador and demanded an apology from Macron. Italy’s new prime minister even called Macron’s stance “hypocritical” and decried French self-righteousness over an issue Italy has had to manage with little support from the EU. Meanwhile, the Aquarius set sail for Spain, which granted the ship permission to dock.
(click to enlarge)
On June 13, Seehofer declined to attend a summit in Berlin held by Merkel, and instead met with Austrian Chancellor Sebastian Kurz. Seehofer explained that the move was not a snub but rather had to do with the presence of a journalist who had compared him to the Nazis. But it was Kurz who stole the headlines on this day, as he called for an “axis of the willing against illegal migration” to be formed between Austria, Germany and Italy. Seehofer added that he had spoken to his Italian counterpart the previous day and that they were in “full agreement” over how to secure European borders. None of the men involved seemed concerned about the memories an axis involving Austria, Germany and Italy might dredge up.
Meanwhile, Macron’s government attempted to patch things up with Italy. Macron didn’t issue an apology, but he did call Italian Prime Minister Giuseppe Conte and insisted that he didn’t want to offend Italy. In addition, France’s European affairs minister stressed the need for dialogue and directed France’s criticism away from Italy. Instead, the minister blamed Europe for turning its back on Italy and insisted that Europe needed a much better way of dealing with migrants. This appeared to be enough for the Italian government: Conte pledged his solidarity with Europe in dealing with the issue and is scheduled to meet with Macron on June 15.
On June 14, just when it seemed the worst had passed, German media reported that Merkel’s government might collapse. Tension between her Christian Democratic Union party and coalition partner the Christian Social Union, chaired by Seehofer, has been brewing over Merkel’s immigration policies since 2015. But German newspaper Augsburger Allgemeine, citing multiple CSU sources, reported that Seehofer raised the possibility during a party meeting of defying Merkel, which could split the governing coalition. German papers are now speculating about a potential vote of no confidence should the spat go on.
A Dangerous Bet
To recap, the three largest and most important countries in the European Union – Germany, Italy and France – are now divided, internally and externally. France continues to push for stronger EU reforms and is tired of waiting for Germany to sign up; in fact, France may now see that Germany is too weak to protest and that it must take the lead. Italy’s new government is anxious to follow through on its campaign promises and is both cautious about and intrigued by the shift in power between Europe’s two heavyweights. Germany seems lost – at worst, it’s on the verge of a government collapse, and at best, it’s so inwardly focused that it can hardly play the leadership role it used to. And all this because the migration issue, now three years old, remains unresolved. A single ship with 630 refugees has laid the contradictions bare for all to see.
This, of course, is not the only problem facing Europe today. The United Kingdom, which voted for Brexit in no small degree due to Germany’s lectures on London having to accept its fair share of refugees back in 2015, finds itself in chaos over its next steps. Germany’s foreign minister gave a rousing speech about a “post-Atlantic Europe” and seems more concerned with pushing back against perceived American slights at Germany than at coming to terms with the friction in his own government. The Balkans seems primed for even more disruption, with Russia this week announcing it wants to be more engaged in the region and the Serbian president saying he was warned that NATO would treat any Serbian incursion into Kosovo as a hostile act.
But most important, and buried under the headlines, is the fact that the European Central Bank announced that it will phase out its bond-buying stimulus program by the end of the year – a program that has staunched the bleeding from the 2008 financial crisis but also exacerbated economic inequality throughout the eurozone. In both Europe and the United States, economies are finally returning to normal after a decade of being coddled by policymakers. Now, the training wheels are about to come off, and policymakers are betting that the economic recovery is stable enough to keep going on its own.
That’s a dangerous bet, especially considering that the economic recoveries in Europe and the United States are fragile at best. The U.S. has rarely gone this long without a cyclical recession. But as the Aquarius has shown, Europe has plenty more problems to contend with, even if the optimists are right about the economy. Ironically, at the center of all this is France, the new de facto leader of Europe. Which brings to mind the old maxim: Be careful what you wish for. You just might get it.
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BERLIN—German Chancellor Angela Merkel’s ruling conservatives are holding last-ditch talks this weekend to defuse an escalating dispute over immigration and avert a breakup of her government.
Horst Seehofer, who is Ms. Merkel’s interior minister and a party leader in her fragile coalition, has threatened to ignore a veto by the chancellor and forge ahead next week with a plan to turn away some migrants at the German border.
Doing so would effectively hand the chancellor an ultimatum: Fire Mr. Seehofer, which would fracture the coalition and prompt new elections just under 100 days after the government was sworn into office; or give in to his demands and see her authority further diminished.
German Interior Minister Horst Seehofer, arriving here for a debate on refugee policy at the German parliament in Berlin on Friday, said he would go against the chancellor’s wishes and order stricter policing on the Austrian border next week.
German Interior Minister Horst Seehofer, arriving here for a debate on refugee policy at the German parliament in Berlin on Friday, said he would go against the chancellor’s wishes and order stricter policing on the Austrian border next week. Photo: clemens bilan/epa-efe/rex/shutte/EPA/Shutterstock
Signalling the level of concern in Ms. Merkel’s circle, a conservative cabinet minister told The Wall Street Journal on Friday that such an unprecedented show of defiance by a member of a government would likely lead to the collapse of Ms. Merkel’s alliance.
Mr. Seehofer and his party said he would start implementing his controversial plan on Monday, even without approval from the chancellor.
The row is pitting Ms. Merkel’s Christian Democratic Union against the Christian Social Union, its sister party in the southern state of Bavaria, which Mr. Seehofer leads. The two have long shared a parliamentary group, acting as a single party on the national stage. They rule together in a fragile alliance of staunch conservatives, centrists and left-leaning Social Democrats, all with diverging views on immigration.
But Mr. Seehofer’s CSU has grown increasingly estranged from Ms. Merkel since her decision to open Germany to hundreds of thousands of asylum seekers in the summer of 2015.
The influx has since abated but the political tension it triggered has refused to go away.
The anti-immigration Alternative for Germany, which was created in 2013 and polled in the low single digits for years, is now the biggest opposition party in parliament. An Infratest Dimap poll published on Thursday gave AfD 15% of voter support, 2½ points above its September election result.
Mr. Seehofer’s CSU is particularly concerned about a state election in Bavaria this October. A poll by Civey this month showed that the party could lose its absolute majority, dropping to around 41% of the vote as the AfD becomes the second-biggest party with 13.5%.
Immigration policy has also reshaped political landscapes elsewhere in Europe, at times dramatically so, and strained relations between European Union members. In Austria, Chancellor Sebastian Kurz has moved to tighten immigration and reduce benefits available to asylum seekers since he took office in December.
On Wednesday, Mr. Kurz joined Mr. Seehofer in a Berlin press conference and called for an “axis of the willing” to combat illegal migration between Austria, Italy and Germany—the countries along the main route for irregular migrants crossing the Mediterranean.
Italy’s new populist government, which has taken a hard line on asylum, has also signaled support for Mr. Seehofer. Rome prompted international condemnation this week by closing Italian ports to the Aquarius, a French ship that carried over 600 migrants rescued at sea. French President Emmanuel Macron said the Italian government had acted with “cynicism and irresponsibility.”
Mr. Macron himself, has been no exception to the trend, announcing tighter immigration laws this year. Sweden, long Europe’s most welcoming country for refugees, has all but closed its borders.
The sudden escalation in Berlin came as a surprise this week. Mr. Seehofer had been due to present a 63-point immigration plan on Tuesday when he canceled the event because of a dispute with Ms. Merkel.
At issue is a single measure that would give German border police authority to turn back anyone entering the country illegally if they have no identity documents or are found to have previously requested asylum in a different EU country.
Ms. Merkel and her supporters argue that the initiative would alienate Germany’s neighbors just as she is trying to engineer a pan-European approach to asylum and refugees.
Mr. Seehofer argues that the move is compliant with international law and would only prevent people with no prospect of obtaining asylum from entering Germany.
After almost a week of talks there was no sign of compromise by Friday evening. Mr. Seehofer and the CSU said they would start implementing the plan next week, deploying police along the border with Austria. The party has said that if Mr. Seehofer loses the interior minister post it would pull out of the government.
In a sign of acrimony, legislators from the CDU and the CSU met separately in parliament for the first time. Ms. Merkel asked her party to wait until after a summit of EU leaders on June 28, so she could hammer out bilateral deals with countries who would take back migrants rejected by Germany, according to lawmakers who attended the meeting.
“I believe that we should not act unilaterally, we should not act in an uncoordinated manner and we should not act to the detriment of other countries,” Ms. Merkel said Thursday.
Rejecting asylum seekers at the German border could trigger a domino-effect and jeopardize European integration, Annegret Kramp-Karrenbauer, secretary-general of Ms. Merkel’s CDU and widely seen as her preferred successor, wrote in an email to all party members this week.
Hinting at possible divisions within Ms. Merkel’s own party, Ms. Kramp-Karrenbauer exhorted party members to back the chancellor against Mr. Seehofer.
Mr. Seehofer countered in an interview with the Süddeutsche Zeitung daily published on Friday that it was the CDU and Ms. Merkel that had divided Europe by opening German borders to refugees in 2015.
Under EU rules, immigrants must apply for asylum in the country where they first enter the bloc. Currently, all asylum seekers are allowed to stay in Germany pending the review of their applications.
“Relations between the sister parties have never been this bad and the government is now hanging by a thread,” said Robin Alexander, a journalist who wrote a book about the 2015 refugee crisis.
The arrival of 1.4 million people since 2015 has turned politics in what had long been one of Europe’s most stable countries upside down. While Ms. Merkel won September’s election, she scored her party’s worst result since 1949 and took more than six months to form a government.
Crimes committed by migrants—including rapes, killings and terrorist attacks—have kept the issue in the news, as have allegations of mismanagement and corruption at Germany’s migration agency. And while the flow of arrivals is sharply down from three years ago, some 10,000 people still enter the country illegally every month, according to government estimates.
An Infratest Dimap poll for public-sector broadcaster ARD conducted earlier this week found that 62% of Germans supported turning back some migrants at the border, while 86% backed more robust deportations of rejected asylum seekers; 63% said they weren’t satisfied with the work of the coalition.
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https://www.nationalreview.com/magazine/2018/07/30/angela-merkel-immigration-policy-open-borders-roiled-europe/
She is poster girl for "elitist" like Soros
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For France, keeping Europe together isn’t as important as keeping Germany engaged on French terms.
Last week, French President Emmanuel Macron called for a review of defense cooperation in the European Union – because, he said, the EU can no longer rely on the United States for its security. Macron said it was time for the EU to develop a strategic relationship with Turkey and to bring EU relations with Russia out of the Cold War and into the 21st century. On the same day, Macron threw down the gauntlet on Hungary, Italy and any other nationalist European country challenging his self-described “progressive” view of the EU’s future. Perhaps most significantly, France softened its hitherto hard-line position on Brexit. France, not Germany, has been the EU’s dominant voice on Brexit, and Paris’ softening means the European Commission may not be far behind.
That France has become the most outspoken champion of European integration is ironic. After World War II, France was one of integration’s most recalcitrant critics. That is admittedly a slight exaggeration – France did desire integration, but not of the cooperative sort. After the war, France wanted to dismember Germany and seize its resources – most importantly its coke and coal – for itself. The goal was twofold: to prevent Berlin from posing a threat to French sovereignty ever again and to rebuild the French economy with German resources. From Paris’ point of view, the only problem with Versailles was that it had not gone far enough, and the end of the war offered a wonderful opportunity to repair its shortcomings.
France’s support for the creation of what would become the EU’s grandfather, the European Coal and Steel Community, in 1952 came only after the U.S. and U.K. promptly told France that Germany was not to be dismembered (at least, not any more than it already had been by the Soviets and the Allies). Instead, West Germany would be rehabilitated as a liberal democracy in a new international order, and France would have to learn to live with it. France may have had a seat at the Allied table, but the seat had been offered as a matter of etiquette more than anything else. The Allies knew it wasn’t France that had defeated Nazi Germany and Imperial Japan. Germany’s defeat did not mean France would be allowed to take its place as European hegemon.
For the next 66 years and counting, French strategy has been more or less locked in place. The French economy needed privileged access to German imports to recover after the war. And French security depended on British and American guarantees against German revanchism and Soviet ambitions, not to mention material support for France’s ill-fated attempts to keep what was left of its empire in Indochina and Algeria. If France could not destroy Germany, it would do the next best thing – integrate Germany into Europe on France’s terms. In 1948, it was the U.K. and the U.S. urging European integration. By 1950, European integration had become France’s cause celebre. In fact, one of the reasons the U.K. did not join the new ECSC was because the French-designed integration went further than the British were willing to stomach.
Emmanuel Macron is this line of strategic thinking made flesh. Macron clothes his support of EU integration in the form of “progressivism,” but that is more personal preference than accurate depiction. The European Union has come under great strain since the 2008 financial crisis. Greece very nearly left. Eastern European states like Hungary and Poland are in open political rebellion. And most worrying of all, Germany has become the center of gravity of the European project. Germany has lost some of its credibility because of its support for austerity and migration, but even so, what began as a French project to control Germany has evolved into a German project to prosper from Europe. Germany, reunified in 1990, has an economy almost 40 percent larger than France’s. Germany’s export supply chain is Europe’s blood supply. In an era when euros, not tanks, define power in Europe, Paris has found itself playing second fiddle to Berlin. For France, all of this means the EU needs serious reform.
The answer to this problem from France’s point of view is the same as it was in 1952, when the ECSC came into being – more centralized control, not less. The 1950 Schuman Plan, which led to the creation of the ECSC, proposed to put all French-German coal and steel production under a single joint “High Authority,” which would have the power to set prices, direct investment and take whatever other measures were necessary to encourage competition. The ECSC never fully exercised its considerable powers, but its original conception was nothing less than French control of German resources dressed up as a multilateral “European” institution. It is possible to see in this historical echo the impetus for the reforms France is proposing in the EU today: creating a joint EU defense force (which France, as the most significant military power on the Continent, would surely dominate), instituting a body to oversee all EU economic policy and developing a common eurozone budget.
Germany is suspicious of France’s reform efforts because Germany wants to preserve the status quo. The integrationists did their job well: Germany is militarily irrelevant but economically prosperous, and it thinks primarily in economic terms. For Germany, that means keeping the eurozone together so that more European countries can buy German goods. It means making sure that German taxpayers don’t have to bail out Greeks or Italians in times of financial crisis. And it means ensuring that Germany can do what it wants with its massive and ever-growing trade surplus – rather than being forced to spend it on other European countries. For France, the issue is not keeping the eurozone together so much as it is keeping Germany tied to an institutional framework that keeps it weaker than and dependent on France. That is why France is pushing for a so-called two-speed system, in which countries that want more integration can have it, and countries that Macron derides as nationalist, like Hungary, can stop gumming up the works.
To accomplish this, France is doing what all aspiring dominant powers do: It is attempting to recreate its would-be partners and institutions in its own image. In this sense, Paris can use Brexit to its advantage, because it means one less powerful voice with which to struggle over defining the EU’s future. Germany, despite and because of its economic power, cannot push too hard because the historical memory of the last time Germany got heavy-handed in Europe is still present. On the flip side, there is no one still living who personally experienced the Napoleonic wars or France’s many attempts to build a mighty French empire encompassing the entire European peninsula. A country like Hungary does not fit in Macron’s EU because Hungary will not kowtow to Paris, and France can afford to sacrifice Hungary or any other Eastern European satellite state. A more integrated EU-16 in which France has a dominant position serves France’s strategic interests better than a diffuse EU-27 – as long as Germany remains in the bloc.
France is in a strong position – arguably the strongest position it has been in since before World War I began. Its economy, though stagnant, is still second largest in Europe. Crucially, France’s demographics are relatively healthy. Like most European countries, France’s fertility rate dropped below replacement level in the late 1970s and remained there for roughly two decades. But in the 2000s, France started having more babies while Germany and other countries didn’t. While most European countries are aging, France is getting younger. The dividends of this “stimulus” package will allow France’s economy to grow while young Germans, Italians and Poles will be coping with how to pay for the ever-increasing older share of their populations. And unlike other European countries, France has remained a first-rate military power. France does not require U.S. protection anymore, and that France ever needed it in the first place has always been something of an embarrassment to the Gaullist mindset.
Macron got himself in some hot water over the term “Gaul” late last week – not in reference to Charles de Gaulle, but to the ancient Celtic ancestors of the French people. While visiting Copenhagen, Macron lamented the French people’s obstinacy toward the neoliberal economic reforms he wants to institute. He expressed a longing that his “Gauls, who are resistant to change” be more like the Danish “Lutheran people, who have lived through the transformations of recent years.” The nationalists in France were angered by Macron’s derision. This is the same faction in France that wanted to dismember Germany and wanted no part in NATO or the charity of the Allies at the end of World War II. It is a faction that is as euroskeptic as Macron is euro-smitten. De Gaulle and a generation of leaders after him, though profoundly prideful of the French nation, controlled nationalist extremes because France’s challenges after World War II required a certain degree of pragmatism. France had no choice but to support EU integration and to align itself with the United States, even if it held its nose while doing it.
That the extreme nationalist strain in French politics has become stronger even as the current French government pushes for greater European integration is not a coincidence. Both of these foreign policy factions inside France want the same strategic ends: the neutralization of Germany as a threat, the decoupling of French foreign policy from the U.S. and a dominant position for France on the European continent. They just have very different ideas about how to achieve those goals. Macron aims to achieve them with a stronger, French-reformed EU, and that is why he is engaging in a war of words with leaders like Viktor Orban and pushing for new and better “High Authorities” in Brussels. The bureaucrat is mightier than the sword.
This is not about progressives and nationalists. It has become cliche to talk about the “German question.” But before there was a German question, there was a “French question.” Based on how France is pursuing its strategic ends, it’s one we ought to be asking ourselves again.
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https://www.atlasnetwork.org/news/article/the-story-of-sweden-is-about-markets-not-socialism
The story of Sweden is about markets, not socialism.
[Norberg's film]...takes viewers on a journey through Sweden’s economic past and present; learning how freedom of the press, a free market, innovation, and reduced taxation helped repair the nation one step at a time.
“Interestingly, many social democrats in the U.S. use Sweden as a kind of cover for their own statist policies,” said Norberg, who also served as executive editor for the program. “I don't think the American Left knows that Sweden is the country of pension reform, school vouchers, free trade, low corporate taxes and no taxes on property, gifts and inheritance. Sweden affords its big welfare state because it is more free-market and free trade than other countries. So if they want to redistribute wealth they also have to deregulate the economy drastically to create that wealth.”
...
“Sweden is not an exception to general economic laws,” said Norberg. “It's not the place where we showed that prosperity and big government go hand in hand. Sweden got rich when taxes and public spending was lower than in other places, including the U.S. Only then, in the 1970s did we start to tax and spend heavily. And that is when we began to lag behind. Only after reforms since the 1990s did we get back on track. So, one message is: don't get cocky, don't think you can do anything and break economic laws just because you're on top of the world for the moment."
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I can only guess what the main issue was in the election that drove Merkel from power, immigration.
https://www.theatlantic.com/international/archive/2015/09/germany-merkel-refugee-asylum/405058/
The Staggering Scale of Germany’s Refugee Project (2015)
I still don't know, what the hell was she thinking?
Will anything good come out of this?
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The Long-Term Implications of France's 'Yellow Vest' Protests
Protesters face riot police on Dec. 7, 2018, in Toulouse, France.
(REMY GABALDA/AFP/Getty Images)
The French government's comfortable majority in the National Assembly makes it possible for President Emmanuel Macron to implement his pro-business reforms agenda, but resistance from volatile grassroot movements, right- and left-wing political opponents and labor unions will constrain the government's room for action.
A plan to reform the pensions system in 2019 will open the door to new street protests, while a plan to amend the French Constitution will give opposition parties the chance to weaken the government.
Resistance from Northern European countries and institutional turnover in 2019 will make it hard for France to achieve its plans of deeper risk-sharing and greater money transfers within the European Union.
Since mid-November, tens of thousands of protesters in France have rallied against the government in a cause that has become known as the "yellow vest" movement, a reference to the safety vests that French drivers keep in their cars. While large political protests are nothing new in France, the intensity of the yellow vest protests has not only led to some of the worst rioting in Paris in decades and forced authorities to shut down parts of the city, but also forced President Emmanuel Macron to back down on a policy decision for the first time in his 18-month presidency. The French government announced on Dec. 5 that it would scrap the controversial fuel tax increase that prompted the yellow vest protests in the first place. The protests come at a time when Macron's popularity has fallen to record lows. The situation is threatening to weaken Macron's authority at home and reduce France's influence in European Union affairs.
The Big Picture
Social and political developments in France will constrain the government's ability to pass reforms to try to make the country more competitive. At the same time, they will weaken Paris' role in shaping EU policy. French President Emmanuel Macron's election in 2017 was seen as a significant victory against nationalist and populist forces in the European Union, but disappointment with the French government creates fertile ground for new episodes of social unrest and the strengthening of extremist forces.
Since becoming president in May 2017, Macron has tried to make the French economy more competitive by cutting taxes on companies, reducing public spending and easing the tax burden on the wealthy. These policies, which were meant to send the message to domestic and foreign investors that France is open for business, damaged Macron's image, and his critics now refer to him as "the president of the rich."
The yellow vest movement quickly evolved from opposition to the fuel tax increase into a broader demand to improve the purchasing power of middle-class families. Combined with demands to roll back Macron's pro-business agenda, this shows that there is a large sector of the French electorate that is vocally disappointed with the president's policies. Despite Macron's reformist push, the recovery of the French economy remains slow and uneven. France's unemployment rate is around 9 percent, which is one point lower than it was when Macron took office but is still the fourth-highest in the European Union — and more than twice Germany's unemployment rate. According to the European Commission, France's economic growth will slow to 1.6 percent in 2019, from an estimated 1.7 percent in 2018. Moreover, the French Economic Observatory, an independent think tank, has warned that Macron's policies have reduced the purchasing power of the bottom 5 percent of French households while increasing that of the top 5 percent.
Graphics showing the purchasing power, unemployment rate and income inequality in France.
Persistent Protests
The emergence of the yellow vests, a movement with no direct connections to any political parties, non-governmental organizations or trade unions, is not a new phenomenon in France. Similar grassroots movements, like the "red caps" (who protested a tax on trucks in 2013) and the "nuit debout" (who protested labor reforms in 2016), have emerged in recent years. The arrivals of such movements show that France's traditional channels of representation are failing to absorb the whole spectrum of social discontent. To some extent these grassroots movements tend to represent a temporary challenge for the French government, because movements without a clear leadership and organization tend to fade away quickly. But these movements are also problematic because they don't have a clear leadership the government can negotiate with. Social unrest can escalate quickly and incite other groups to join the protests, which is what has happened with the yellow vests.
Macron's rivals, including left- and right-wing political parties and trade unions, will try to co-opt these social forces and use the movements' demands to their own political advantage. Echoing the yellow vests' demands for higher standards of living for the middle class, the combative General Confederation of Labor recently announced its own anti-government protests. For their part, the right-wing National Rally (formerly known as the National Front) and the left-wing Unsubmissive France have used the yellow vests' proposals to ask for the government's resignation. Next year's elections for the European Parliament, scheduled for May, will show whether these parties can capitalize on the ongoing social discontent.
The more Macron's popularity erodes, the more emboldened his rivals will feel to challenge his policies. Over time, the combination of an unpopular government, modest economic growth, social protests and an increasingly active opposition could make it harder for Macron and his allies to move forward with their reformist agenda. Macron's party, La Republique En Marche! (Republic on the Move!) controls a comfortable majority in the National Assembly, which means it can pass reforms without the support of other parties. But lingering social discontent could make the French government warier of promoting structural reforms, while lawmakers in the National Assembly could become more cautious in their support for Macron. As a result, Macron's reform agenda could be compromised.
The more Macron's popularity erodes, the more emboldened his rivals will feel to challenge his policies.
The next big challenge for the French government will be to reform the country's pensions. Macron's administration wants to replace France's multiple pension systems with a single system and to change the way that pension payments are calculated, which could lead to payment reductions in some cases. The French government wants to present a formal pension reform proposal in mid-2019 and put it to a vote in the National Assembly by the end of the year. This reform would affect multiple sectors of French society, which means it will generate strong resistance and set the conditions for further protests. In 2019 the French government also plans to cap increases in family benefits below the inflation rate, tighten the eligibility criteria for unemployment insurance, and reduce the number of employees in the public sector. This means that the ground will remain fertile for social unrest in France next year, regardless of the fate of the yellow vest movement.
The French government is also planning to reform the French Constitution to reduce the number of parliamentarians by a third, introduce faster legislative procedures and make it illegal for public officials to hold multiple positions. Unlike the pensions reform, the constitutional reform probably will not generate significant protests. But Macron will need opposition support in the Senate to amend the constitution, and his adversaries may block the president's proposals in order to weaken him. In the past, Macron has threatened to put the constitutional reforms to a referendum should the Senate reject them. But in the current political climate, the government will think twice before calling for a vote it could lose or, worse, become an unofficial referendum on Macron's presidency.
France's Northern Rivals
France's domestic issues will constrain its ability to influence developments at the European level. France wants deep reforms in the eurozone, including the introduction of a separate budget for the currency area, the strengthening of its bailout fund, and the completion of the banking union. But these reforms require a broad consensus at the EU level, and France will struggle to find it.
France's main partner in the European Union, Germany, is dealing with political problems of its own that reduce Berlin's ability to make concessions to Paris. At the same time, the countries in Northern Europe that oppose France's proposals are becoming increasingly assertive. These countries, commonly known as the New Hanseatic League, want to limit, and if possible abort, France's plans for eurozone reform. The fact that Italy has a euroskeptic government that is challenging the EU's fiscal targets is giving ammunition to those northern countries that oppose increasing financial risk-sharing in the eurozone.
There are early signs that this resistance to France's proposals is working. Germany and France recently agreed to create a budget for the eurozone. But, contrary to France's original proposal, it will be a part of the broader EU budget, which means its approval will require unanimity. Moreover, Berlin is pushing for a small budget, contrary to Paris' request of a budget that represented "several points" of the European Union's GDP. France also wanted to turn the European Stability Mechanism into a European Monetary Fund with full powers to assist countries in financial distress. However, EU finance ministers meeting on Dec. 4 only agreed to grant the mechanism a greater participation in the design and monitoring of financial assistance programs in coordination with the European Commission. And plans to introduce a deposit insurance scheme for eurozone banks were kicked down the road.
To make things more complicated, new members will be appointed in 2019 to key EU institutions such as the European Commission and the European Central Bank. The appointments will require significant negotiations among EU member states and will be another source of friction between Northern and Southern Europe over the future of EU policy. France's rivals will try to take advantage of Macron's domestic weakness to contain Mediterranean Europe's influence on the future of the European Union. Even if EU governments manage to keep the discord within tolerable margins, the mere process of appointing new officials will slow policy process at a continental level and put a limit on France's ambitions.
A Constrained Government
France's next presidential election is in 2022, and Macron is likely to remain in power despite the destabilizing attempts by his rivals. The president has several tools at his disposal to deal with political crises. He can, for instance, appoint a new prime minister in charge of a new Cabinet, to try to regain popular support. He can also call for an early legislative election to let voters express their opinion on policy, but that would be a last-resort decision considering that Macron's party controls a majority of seats in the National Assembly and it would be risky to threaten that majority with a new vote.
In other words, growing social unrest and a more active opposition probably will not threaten the continuity of Macron's presidency. However, such factors are likely to constrain the government's room for action when it comes to introducing meaningful reforms. And a disappointing presidency could threaten Macron's chances for reelection and open the door for right- and left-wing political parties to improve their performance in the next presidential election.
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(https://i2.wp.com/www.powerlineblog.com/ed-assets/2018/12/Thatcher-letter.png?resize=768%2C1102&ssl=1)
Credit: Historian Steve Hayward
https://www.powerlineblog.com/archives/2018/12/a-reminder-of-better-times-and-better-leaders.php
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Wish we had a "Like" button feature!
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Almost all of these have similar meaning for U.S. I agree with most, some are great, some are controversial. 100 specific policy proposals to make Britain "richer, freer, and happier."
https://www.adamsmith.org/100-policies-for-mrs-may-1/
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https://voiceofeurope.com/2018/12/we-need-a-europe-of-nation-states-not-a-federal-europe-polish-prime-minister/?fbclid=IwAR2gWHkSvre4Ty9bvUXOI9gDGBUq-PbImyY6CNZzprc-ONMjUo_FGDF98WQ#.XBOb57DJsMs.twitter
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Ah yes, our allies , , ,
https://www.bbc.com/news/world-europe-46692176?fbclid=IwAR006ihHSm5CYXSnNTVearwBT-MDuXY5mSij_4fOZcp7aaqji9Q-2RpLW-8
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Ah yes, our allies , , ,
https://www.bbc.com/news/world-europe-46692176?fbclid=IwAR006ihHSm5CYXSnNTVearwBT-MDuXY5mSij_4fOZcp7aaqji9Q-2RpLW-8
(https://upload.wikimedia.org/wikipedia/commons/b/bd/Bundesarchiv_Bild_101III-Mielke-036-23%2C_Waffen-SS%2C_13._Gebirgs-Div._%22Handschar%22.jpg)
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https://www.reuters.com/article/us-eu-migration-germany/eu-may-need-rules-to-stop-doctors-emigrating-german-minister-idUSKCN1P70GO?fbclid=IwAR2M3qyw2F1CyCUv5JMaQGsOnzVdQJH6kkKLeMDIenfwYADheN6Z-xI1dJs
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https://www.reuters.com/article/us-eu-migration-germany/eu-may-need-rules-to-stop-doctors-emigrating-german-minister-idUSKCN1P70GO?fbclid=IwAR2M3qyw2F1CyCUv5JMaQGsOnzVdQJH6kkKLeMDIenfwYADheN6Z-xI1dJs
No need to chain them in place these days!
https://www.sierrawireless.com/products-and-solutions/sims-connectivity-and-cloud-services/managed-iot-solutions/omnilink-offender-monitoring-solution/?lsc=paid_google_cpc___numerex-omnilink&cid=70141000001N4OtAAK&campaigntype=paid&utm_source=google&utm_medium=cpc&utm_campaign=numerex-omnilink&gclid=EAIaIQobChMIubr6-rHs3wIViCCtBh1uEAfYEAMYASAAEgJwr_D_BwE
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https://www.gatestoneinstitute.org/13620/france-germany-european-army
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https://www.gatestoneinstitute.org/13620/france-germany-european-army
An army that won't know to fight or surrender.
:roll:
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What Happened
Germany, France and the United Kingdom announced Jan. 31 that they had established a channel for trade with Iran that circumvents U.S. sanctions. The system, known as the instrument in support of trade exchanges (INSTEX), will facilitate commerce between European businesses and Iran. INSTEX will be a state-owned trade intermediary based in France, managed by a German, run by a British-based supervisory board and all overseen by the European Union. Meanwhile, countries outside the bloc, such as India, China or Russia, may be able to join later. Under INSTEX, an Iranian enterprise will be able to sell its products in Europe and receive credit to buy European goods. In the beginning, trade will focus on food and medicine, which do not face U.S. sanctions, and likely benefit small and medium-sized European enterprises the most. Iran, however, still needs to set up its counterpart to INSTEX, and that could take months.
Why It Matters
Whether or not it works, the formation of INSTEX (a legal entity known as a special purpose vehicle or SPV) shows that Tehran's EU allies want to stand behind the Iran nuclear deal. The United States withdrew from that deal, known as the Joint Comprehensive Plan of Action (JCPOA), last year. INSTEX also sends a message to Washington that European countries are willing to conduct trade unilaterally with Iran despite rising U.S. sanctions pressure. In addition, it is notable that France decided to host the institution (in a Foreign Ministry building) after the European Union reportedly encountered difficulties in finding a host country. INSTEX is part of Paris' push for greater EU "strategic autonomy" and independence from the United States. Moreover, the SPV is a trilateral initiative by three powerful EU countries, meaning that the United States will have to think twice about sanctioning such important allies.
However, the future of the SPV is uncertain. European companies may fear that INSTEX doesn't offer enough protection from U.S. sanctions and decline to use it. Iran, too, is aware of the SPV's vulnerability. On Jan. 31, Deputy Foreign Minister for Political Affairs Abbas Araqchi said, "Americans have already threatened they are going to deal with this mechanism." Indeed, the United States has said it will take aim at the SPV if it facilitates trade in goods beyond food, medicine and humanitarian items.
European companies may fear that INSTEX doesn't offer enough protection from U.S. sanctions.
Another source of uncertainty for the SPV lies in how Europeans and Iranians view it, with Tehran urging quicker development of the mechanism. According to the French government, INSTEX will focus mostly on food and medicine during the initial stage. Iran, however, wants the channel to be used for sanctioned goods as well and at a faster pace — highlighting a potential point of contention between Tehran and European Union.
Background
The European Union has been trying to keep Iran in the JCPOA since the U.S. pullout in May 2018. The formation of the SPV is one factor among many that could alter Iran's decision-making. But Tehran will need to evaluate the vehicle's effects on trade and gauge whether it provides the economic benefits it needs. Those decisions and benefits will determine whether Tehran continues to follow the JCPOA and cooperate with its EU allies. Those allies are taking a multifaceted approach to dealing with Iran, as evidenced by France's decision to host INSTEX. But France is ultimately trying to continue its humanitarian trade and its economic ties to Iran, even as it and others in the bloc have emphasized the need to curtail some of Iran's ballistic missile activity and develop a common EU position on the issue before a summit on Middle East security and Iran in mid-February.
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Link copied…
Opinion Global View
Incredible Shrinking Europe
The Continent’s grand unity project is failing, and its global influence is fading.
166 Comments
Feb. 11, 2019 6:41 p.m. ET
Incredible Shrinking Europe
Photo: iStock/Getty Images
Last week offered fresh evidence that the most consequential historical shift of the last 100 years continues: the decline of Europe as a force in world affairs. As Deutsche Bank warned of a German recession, the European Commission cut the 2019 eurozone growth forecast from an already anemic 1.9% to 1.3%. Economic output in the eurozone was lower in 2017 than it was in 2009; over that same period, gross domestic product grew 139% in China, 96% in India, and 34% in the U.S., according to the World Bank.
As its economy lags behind, Europe is becoming more divided politically. Brexit negotiations have inflamed tempers on both sides of the English Channel; Central European countries like Hungary and Poland are alienated from the West; much of Southern Europe remains bitter about the aftermath of the euro crisis; and anti-EU political parties continue to gain support across the bloc. A recent report from the European Council on Foreign Relations projects that anti-EU parties from the right and left are on course to control enough seats in the next European Parliament that they will be able to disrupt the EU and weaken it further. This wasn’t supposed to happen. The EU was founded to stop Europe’s decline, not reflect it.
As Europe’s founders saw it, two factors contributed to the Continent’s geopolitical decline in the 20th century. One was inevitable: As the technologies of the industrial heartland spread to Asia and the Americas, the wealth gap between Europe and the rest of the world necessarily narrowed. The diffusion of medical innovations—which also often originated in Europe—contributed to population explosions in the rest of the world. Meanwhile Europe, the first continent to industrialize, was the first to experience the decline in birthrates associated with urbanization and affluence.
The second factor in Europe’s decline was internal division and nationalistic animosity. This was the problem the EU’s founders sought to cure. Two world wars left much of Europe impoverished and in ruins. If the Continent could unify under a single set of values and political institutions, future wars could be averted. The unification process began with Franco-German reconciliation after World War II. As the Cold War ended and Germany was reunified, European leaders launched an ambitious program to broaden and deepen transnational cooperation.
The union would expand to the east, securing democracy in the former Warsaw Pact countries. Economic cooperation would deepen with the development of a single market, the establishment of a common currency, and the adoption of common economic policies. Diplomatically, the Europeans would seek a united front in their dealings with the outside world. Building a new Europe that could compete on equal terms with the U.S. and China in the post-Cold War world is Europe’s overarching goal.
It’s become increasingly apparent that this grand project is failing. An uneven and perhaps overambitious expansion weakened rather than strengthened the EU. The euro was both an economic and political failure, and diplomatic unity remains a distant dream.
Neighbors like Russia, Turkey, Israel and the Arab states flout the EU’s wishes at will. European influence in Washington, already declining in the Obama years, has reached a nadir under Donald Trump. Neither Moscow nor Washington showed much regard for Europe’s interests while suspending the Intermediate-range Nuclear Forces Treaty, which limits missile deployments in Europe. China takes Japan and India more seriously than it takes the EU, and neither the U.S. nor China has been particularly concerned about what Europeans think as they negotiate bilateral trade arrangements that may redefine the world trade system.
One European initiative did work: the single market. Europe remains formidable as a consumer bloc, and the EU’s ability to regulate the conditions under which foreign companies like Google and Gazprom operate inside its wealthy market is the most important card in its hand.
Leaders in France and Germany remain firmly committed to the European project, but with Britain on the brink of secession, Italy and Poland mutinous and Hungary defiant, the outlook is dimming. If Paris and Berlin could devise a program to reignite European growth, secure its frontiers, and satisfy the nationalist emotions now roiling the bloc, Europe could arrest its decline. So far at least, such an outcome seems unlikely.
Some on the nationalist right in the U.S. welcome Europe’s decline. This is a mistake. A strong Europe, even if it is sometimes cantankerous and disagreeable, is better for the U.S. than a weak Europe that can neither secure its own neighborhood nor contribute to global stability. But the U.S. must deal with the Europe we have, and the Europe we have isn’t doing well.
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https://www.youtube.com/watch?v=BBUyoeYk4i8
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https://www.youtube.com/watch?v=BBUyoeYk4i8
Friedman makes a number of good points, that the EU as we know it now won't last.
Funny that all the talk about Brexit is from the Brit point of view, what will they do without Europe, but isn't the EU a diminished group without Britain. Why aren't they reforming instead of disintegrating?
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Don't Fear a "Hard Brexit" To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 2/25/2019
The clock is winding down, and the United Kingdom has some major decisions to make. Should it stay in the European Union or should it go? If it goes, under what terms? Some analysts and investors are concerned about a "Hard Brexit," in which the UK supposedly plunges into chaos as they crash out of the EU without an agreement. According to the pouting pundits, this would throw the UK into a deep recession and send the British pound plummeting, taking world equity prices down steeply.
Count us skeptical.
The EU and the Euro currency are separate issues. The Euro has been a boon to the countries that have adopted it, and it would be a major mistake for these countries to leave (with the exception of Germany and maybe France). But leaving the EU is a completely different ballgame. Any harm to the UK's economy would be relatively mild, and any related drop in equities would be a great buying opportunity.
It's not like there would be no trade between the UK and the EU after a Hard Brexit. Trade rules would simply shift to the rules that apply between the EU and other countries under the World Trade Organization, like those that apply to EU-US trade or between the EU and China or Japan.
But the EU would be under enormous pressure to lower tariffs and cut a new deal with the UK. In 2017, the rest of the European Union ran a roughly $90 billion trade surplus with the UK. So if a Hard Brexit makes it tougher for the rest of the EU to export to the UK, every national capital in the EU would be flooded with lobbyists asking to cut a deal. Meanwhile, leaving the EU means the UK would have the freedom to make free trade deals with the US and Canada, and any other country it wanted, without having to wait for the EU. Yes, a Hard Brexit risks some financial jobs, but the same argument was used when the UK decided not to join the Euro currency-bloc, after which London kept its role as Europe's financial center.
But there's another basic reason why a Hard Brexit would be in the long-term interests of the UK, and it comes down to political philosophy and human nature. Let's imagine for a moment that the EU were always and everywhere dedicated to free markets and nothing else. Even in that instance, we would argue that, as much as we would like the policies it was pursuing, the UK should leave.
Why? Because any organization powerful enough to over-rule the democratic process in the UK regarding economic laws and regulations – even in favor of free markets – is also powerful enough to impose anti-free market policies as well. And, over time, since men are not angels and power corrupts, any international body with such power would gravitate toward policies that aggrandize the international political elite, comprised of elected officials remote from the people who elect them, anonymous regulation-writing bureaucrats, and judges who tend to impose their own personal cultural preferences on the rest of the continent.
In fact, the EU has already issued rules that stifle competition, like setting a standard minimum Value-Added Tax rate for all members at 15%.
Don't get us wrong, we wholeheartedly support the liberalization of trade the EU has developed through much of Europe. And the downside risk of Brexit is that it would lead to the UK experimenting with protectionism. But we are confident such policies, if followed, would make the British people suffer, and would ultimately be rejected at the polls.
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https://bigleaguepolitics.com/hungary-warns-of-the-eus-open-borders-agenda/
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https://winstonchurchill.org/publications/churchill-bulletin/bulletin-128-mar-2019/churchill-a-criminal/
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https://www.youtube.com/watch?time_continue=24&v=lzEtXa_bmo8
Professor Hans-Werner Sinn: "What Brexit Means for Europe: A German Perspective" (4 March 2019)
Hat tip Alan Reynolds, his favorite German economist, for rigor, not ideology. This is analyzed from a German perspective.
Many important points in there. 1 hour lecture. A few of his points:
Britain (UK) economy is equal to the 19 smallest countries [of the 28] in the EU - who get an equal vote? Britain's lack of a proportional voice is not right.
With Brexit EU loses one of two nuclear powers leaving them with just France and a NATO threatened by Trump. From a German perspective, big loss to Europe.
Under current rules it takes 35% minority to block majority mandates. With Britain gone, the remaining balance of EU power changes. More protectionist and only the Mediterranean group can block initiatives, the northern countries no longer can block initiatives they oppose.
Different countries have different main economic sectors. Britain exports financial services. France's main sector is government, a little hard to export (subtle condescending German humor). Germany is also an export economy. One point: When Trump threatens duties on German automobiles to remove EU duties that protect France's agriculture, they do not have an equal interest to solve that. EU is a much more protectionist group without historically free trading Britain.
EU should reform in a couple of ways to keep Britain. The Brexit debate has been in Britain but EU has a great loss coming if Britain leaves and should correct some wrongs in effort to keep them.
You cannot have a re-distributive welfare society and free migration. There are two types of social benefits, earned (retirement, medical, unemployment insurance for examples) and unearned. New migrants perhaps should not instantly and automatically receive benefits not earned or the system will collapse. Need at least a waiting period.
Governing beyond the EU mandate must stop. One easy example was light bulb mandate. They already capture that externality in a tax. No need to govern the other country. Another to him is the emission of German diesel that is local to a city, not the CO2 already governed. Some things should be governed locally. EU is not a country. Britain and others want to keep some sovereignty.
There should be no punishment for leaving. Europe needs to offer UK free trade or great trade agreement *after* Brexit is done; it is the best interest of both.
UK pays EU x per year now (forgot the number), relatively small amount. At current duty rate 3%, UK would pay EU same x per year. Money is not the issue.
Migration is the issue in Britain. Migrants from outside EU but also migrants from lower wage and lower benefit countries within the EU.
Where to draw the line between UK and EU? Create a new border between Ireland and Northern Ireland where currently there is none, big step backward, and IRA will kill a border guard the first day, he says. Make the sea the border and Scotland sees the deal that Northern Ireland has and will also want to split off and UK is down to England, Wales, not the intent of Brexit.
He only partly expresses this point but you cannot have generous welfare system and unlimited migration. He is for the free movement of labor and for the redistributive welfare system but there must be some rule or waiting period to receive certain benefits.
He does not say this conclusion, but EU is screwed if Britain leaves. He says it more gently, EU is greatly changed if Britain leaves.
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Thank you for taking the time for write up those notes Doug.
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https://www.gatestoneinstitute.org/14168/european-elections-prague
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I'm looking for good analysis of what happened and what this means. Outsider wins in Italy. La Pen beats Macron. Brexit Party and everyone else beats Tories. Socialists win in Spain.
https://pjmedia.com/trending/eu-elections-populist-wave-in-europe-shows-no-sign-of-ebbing/
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As Expected, EU Elections Result in a Fragmented Parliament
The Big Picture
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Stratfor's 2019 Second-Quarter Forecast predicted that the May election for the European Parliament would result in a fragmented legislature and a slower and more complex parliamentary process. The forecast for Europe also highlighted that the most recent vote would mark the beginning of a dispute between member states to appoint the leaders of the main EU institutions.
________________________________________
EuropeEuropean DisintegrationEU: Regional Blocs
The votes have been counted in Europe and the results are in. As expected, the European Parliament elections, which ran from May 23 to 26, resulted in a fragmented legislature; the center-right European People's Party (EPP) and the center-right Socialists and Democrats (S&D) lost ground to emerging forces, including the Alliance of Liberals and Democrats for Europe (ALDE), the Greens and the Euroskeptic Europe of Nations and Freedom (ENF).
Here are the main takeaways of the vote:
A More Fragmented Parliament
For decades, the EPP and the S&D controlled a joint majority of seats in the European Parliament, which meant that an agreement between them was all it took to pass legislation. That will no longer be the case in the next legislature because the EPP and the S&D will have to canvass smaller parties to pass legislation. This will give parties such as ALDE and the Greens a greater role in shaping EU policies. While ALDE is pro-business and wants to reduce bureaucracy in the European Union, the Greens support policies to reduce Europe's carbon footprint and improve rights for workers across the Continent. The latter initiatives could become problematic in future negotiations over free trade agreements with non-EU countries because the EU Parliament could pressure the commission to include these kinds of provisions in deals.
Parties including the Alliance of Liberals and Democrats in Europe and the Greens will have a greater role in shaping EU policies going forward.
While the Euroskeptic parties improved their parliamentary representation, they are not strong enough to influence the legislative process in a meaningful way. A more fragmented parliament also means a slower legislative process and greater chances for conflict between the EU Parliament and the European Council, whose approval is required to pass EU laws.
The Race for the Main EU Institutions Is On
In the next six months, governments in the European Union will have to appoint presidents for three of the most important institutions in the bloc: the EU Commission (around September), the European Central Bank (around October) and the European Council (around November). These decisions will come in addition to replacing some of the senior staff of the three institutions. The trio of appointments are interconnected, in part because EU governments will try to find a balance between geography and ideology when it comes to distributing power within the bloc. Germany and France, the European Union's main political powers, are both eyeing the presidency of the European Commission, the bloc's executive arm. The "loser" of this dispute, or a member of a like-minded country, will probably be given the presidency of the European Central Bank, while the presidency of the European Council (the least relevant of the three appointments) will probably be a consolation prize for the region that lost the other two competitions.
In the coming months, EU governments will have to appoint presidents for three of the most important institutions in the bloc: the European Commission, the European Central Bank and the European Council.
These are not minor disputes: The commission is in charge of proposing legislation in the European Union, represents the bloc abroad and handles negotiations on issues such as trade agreements. The new commission will have to hit the ground running, especially since the European Union and the United States are still struggling to negotiate a trade agreement (agriculture remains the primary obstacle) while the White House's deadline for the bloc to come up with ways to limit its exports of cars to the United States will arrive in November. The European Central Bank, in turn, sets the monetary policy for the 19 members of the eurozone and will be a key player in any future crises in the currency area. While there is not a direct connection between geography and ideology, southern Europe is likely to push for an ECB president that continues some of outgoing ECB President Mario Draghi's signature policies — such as low interest rates and bond-buying programs — while northern Europe is likely to push for a more orthodox president.
Unhappy Governments
The elections also triggered domestic repercussions across the European Union. In Italy, the governing League party's strong performance will increase disputes with its coalition partners in the Five Star Movement, especially as the League will look to introduce policies that the Five Star Movement opposes — including competing for big infrastructure projects and granting more autonomy to Italy's northern regions. At the same time, the League will push to cut taxes in Italy. This is something that will irritate the European Commission, which is worried about the impact on Italy's deficit.
In Germany, meanwhile, the worse-than-expected performance of the governing center-right Christian Democratic Union (CDU) and Social Democratic Party (SPD) is a reminder that this is an awkward alliance that nobody wanted. While the parties are likely to stick together, the collapse of the government and an early general election cannot be ruled out. This is exactly what's happening in Greece, where the ruling center-left Syriza party decided to call an early election after its poor performance in the EU Parliament vote. The vote is expected in late June or early July. The French government, for its part, had a bittersweet election: President Emmanuel Macron's En Marche party lost the election to the right-wing National Rally, which shows that many voters are not happy with the Elysee and could force the government to slow down its reform agenda. But Macron's party is allied with ALDE in the European Parliament and expects to be a key member in the future legislature.
Brexit Blues
The elections for the EU Parliament in the United Kingdom produced mixed results. On one hand, support for parties that want the United Kingdom to remain in the European Union was slightly higher than support for parties that want to leave the bloc. This only adds to pressure on leaders of the Labour Party, the main opposition party, to abandon its current ambiguity about a second Brexit referendum and openly support a new vote.
When it comes to Brexit, the question still remains the same: What kind of exit to push for?
On the other hand, the absolute protagonist of the election was the Brexit Party, which obtained 32 percent of the vote. This result will influence the leadership contest within the Conservative Party — which obtained a disappointing 9 percent, its worst-ever result — as a large number of people who voted for the Brexit Party are former Conservative voters. The outcome will convince the Conservatives to finally "deliver Brexit" and try to regain the votes they lost. The question remains the same, however: What kind of Brexit to push for? Surveys suggest that a hardliner (who considers that a no-deal Brexit is an acceptable outcome if London cannot negotiate a satisfactory deal with Brussels) stands a better chance of becoming party leader (and therefore the next prime minister) than a softliner. The new Conservative leader should be appointed in late July, and no matter who becomes the next prime minister, their first attempt will be to negotiate an orderly deal with Brussels.
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second post
https://www.breitbart.com/europe/2019/05/27/caroline-glick-elite-contempt-is-the-common-denominator-in-populist-victories/?fbclid=IwAR3iRtXsz-F8zZoHanpmCDnerQ76EfleEMlV1h7dY9Trp7q4UP7d8s8xBHA
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If the most nationalist of the constituents can leave (Brexit), what remains is further Left - and emboldened. The more Left the EU turns, the larger and stronger the nationalist, populist opposition grows. I see nothing but discord and polarization in their future.
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https://www.nationalreview.com/2019/05/understanding-the-results-of-the-european-parliamentary-elections/
...
And these projects are indeed formidable: to centralize the power and sovereignty of 27 nation-states in European institutions without solving their existing democracy deficit; to replace their independent budgetary arrangements with a single European fiscal policy without the power of tax collection; to create a common European defense structure separate from NATO without increasing anyone’s defense expenditure; to replace fossil fuels with renewables to solve climate change without massive regulation, and a realistic plan to prevent a huge rise in energy costs for industry and consumers. This is the hubris of government, but its costs always fall on others.
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May 30, 2019
By George Friedman
Europe Redefined
The European Parliament elections are a benchmark for a continent in flux.
The biggest takeaway from the European Parliament elections, which were held last weekend, is that the political center continued its decadelong retreat. This election is a milestone in that regard, though it is difficult to articulate why, considering the European Union has no clear constitution that defines its institutions and its powers. Instead it is governed by treaties among nations. Treaties among nations are necessarily compromises, and compromises necessarily make for ambiguity. Some institutions are controlled by constituent governments, of course, through which democracy is mediated by domestic elections. But the European Parliament is the only institution in which the votes of EU citizens create the membership. The multiplicity of authoritative bodies and their overlapping powers only adds to the ambiguity.
From the beginning of the European project, few European governments were prepared to cede power to pan-European institutions. The European Union is not a multinational state. Yet the European Parliament reflects the idea of Europe as a single political entity. The rest of the European Union reflects the fact that it is the nation-states that have joined together in a treaty organization, the elected governments of those nation-states retain ultimate authority, collectively over the EU, and ultimately over themselves.
Before the Maastricht Treaty went into effect in 1992, there were several disagreements between European nations over policy issues, with many going their own way. These faded for a while but never completely disappeared. Nations occasionally chose to disregard European rules and go their own way, but they were bound together by their original ideology, which dictated simply that after two world wars of staggering horror, Europe sought an exit from its past. The creation of economic unions (one of the stipulations of the Marshall Plan) was designed to eliminate what was thought to be the fundamental cause of these wars: nationalism. The thought was that binding nation-states together economically would reduce the chance of war. It worked insofar as there were no wars, though that had as much to do with the general weakness and dilapidation of Europe as it did with the fear of battle.
Nationalism may have been the original motive for the EU’s creation, but after 1992 the bloc adopted another principle:
technocracy, which arose from the ashes of the Soviet Union. The Cold War had been an ideological battle. Europe’s leaders envisioned something that moved beyond ideology. They wanted a government of experts, a government that made decisions without the burdens of outdated systems of belief about what government should do. Beneath the nation-states, and beneath the democratic parliaments, emerged a cadre of what might be called technocrats, a disinterested class committed to efficiency and governance. The EU managed the enormously complex system through regulations, and the regulations were formally approved by political masters but were generated and controlled by the civil service.
All this worked to some extent until 2008, when the competence of the technocrats was brought into question, and when national leaders became more responsive to the problems in their own countries for fear that they would lose their jobs. The idea that the technocracy of Europe was not ideological was an illusion. Technocracy is itself an ideology, deciding what is better and worse based on the consensus of the moment, rather than on explicit principles.
The consensus between 1992 and 2008 was the belief that economic growth, seen as the inhibitor of war, was all-important. The distribution of wealth, or the damage done to some through the impositions of efficiencies leading to growth, was simply a price to pay. Somewhere along the way, a tacit consensus emerged between center-left and center-right parties of a Europe with common values. In their shared vision, Europe’s laws aligned not with the wishes of their voters but with the principles of the parties and the technocrats who shared them.
The measure of a technocracy, though, is its competence. It appeared to many that Brussels was incompetent, and that their pious repetition of the centrist belief in European values was merely a cover for the interests of the European elite.
This came to a head with the Muslim migration issues, and it did so in three ways. First, it raised the issue of whether the EU principles could compel nations to accept migrants based on European principles from which some states and many people dissented. Second, there was the awareness that when migrants came, they would not live in the elite, affluent neighborhoods of the member states – in other words, the places that advocated the loudest for open doors. Third, it raised fundamental questions about the limits of EU power and the rights to self-determination of member states.
Over the past 10 or so years, the EU’s center held in the face of the British referendum to leave the EU, the Greek crisis, the election of governments in Poland and Hungary that pursued the wishes of their electorates rather than the EU, and of Italy, which resisted the EU’s attempt to impose a solution to its financial crisis.
Naturally, the center responded by demonizing all of these centrifugal forces. Also natural was the spread of these movements labeled as populist. What they were was a return to what Europe had always been and truthfully never left, for all the efforts of the EU. Nationalism was re-emerging, drawing the lower classes into the system, insisting on controlling who may reside there, and treating Europe as a treaty rather than a nation. The EU was created to suppress such forces, and the EU was losing control of the situation. As happens to those who believe that they have the right to govern, they could not accept the idea that the right to govern was slipping away.
Hence the importance of these EU elections. The centrist parties weakened a little. The nationalist parties strengthened a little. And, depending on where you draw the line between left and right, left-of-center parties fared pretty well. But what is important is the fact that the elections showed that the center parties are losing control over the political system, however slowly. (Losing, but not yet having lost.) The decisions on this will not be made in the European Parliament but in the national parliaments, which are directly representative of their citizens. I suspect that one more economic crisis or attempt by the EU to impose behaviors that many oppose, such as migration into Europe, can break the increasingly fragile structure. Since the technocrats can’t imagine losing authority, this will be led by an unwillingness to adjust to changing realities, the weakness of all treaties.
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https://www.nationalreview.com/2019/06/angela-merkel-germany-anti-american-views/
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https://www.youtube.com/watch?v=PgcF0f63q8A
8.5 minutes. [watch it]
This is a serious leader with a serious plan.
I would rather be Britain leaving than be the EU without Britain.
If Britain can leave and get a free trade agreement with the EU, and
If Britain after Brexit can quickly get a free trade agreement with the US,
And if China can resolve its trade differences with the US,
Then the global economy can resume robust growth and many good things will come out of that.
All of this is possible - this year.
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(https://pbs.twimg.com/media/EGMn1dAW4AMYzYc?format=jpg&name=900x900)
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Do we still post Britain under European Matters? :-D
Boris' Tories pulling ahead. Nigel Farage's Brexit pulling out to make way.
We will see.
https://www.bbc.com/news/uk-politics-49798197
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Best wishes for Boris today over at our ally Britain. If he can pull this off, it is world changing IMHO.
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Britain and western europe will be shifting over to "islam in islamic countries" not too far off in the future.
Do we still post Britain under European Matters? :-D
Boris' Tories pulling ahead. Nigel Farage's Brexit pulling out to make way.
We will see.
https://www.bbc.com/news/uk-politics-49798197
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Best wishes for Boris today over at our ally Britain. If he can pull this off, it is world changing IMHO.
https://www.bbc.com/news/election-2019-50765773
This is world changing. Trump needs to make immediate free trade agreement with them, a framework for the rest of the world.
The rest of Europe needs to re-think everything now. Europe without Britain is badly damaged goods.
What Brexit means for (continental) Europe
https://dogbrothers.com/phpBB2/index.php?topic=1078.msg116169#msg116169
This changes the balance in the EU between northern and southern Europe. In other words, what is wrong politically with the EU now gets much worse without the UK.
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President Trump this morning repeated his previous offerings of good trade deal with Britain.
And yes, the EU faces grave internal contradictions. If/when it goes, what implications for NATO countries on Russia's border?
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President Trump this morning repeated his previous offerings of good trade deal with Britain.
And yes, the EU faces grave internal contradictions. If/when it goes, what implications for NATO countries on Russia's border?
The countries actually willing and able to defend themselves need to form their own alliances.
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Brexit After the Election: For the UK, the Political Risk Is Only Beginning
By: Ryan Bridges
The United Kingdom went to the polls Thursday and voted again for Brexit. The Conservative Party won 364 of 650 seats in parliament, giving it a strong majority to advance the EU withdrawal agreement negotiated by its leader and Prime Minister Boris Johnson and leave the European bloc at the end of January 2020. Passage of the agreement in theory resolves one of the most critical issues, the status of the Irish border, which significantly reduces the political risk for the EU side of Britain’s departure.
But for the United Kingdom, the political risk is only beginning. The start of formal trade negotiations will draw farming and business lobby groups deeper into the negotiation and force both sides into difficult compromises. Moreover, any trade deal will require the approval of the European Parliament as well as the parliaments of constituent member states, subjecting to it political scrutiny that it has generally yet to experience. Hopelessly optimistic pledges aside, the chances of resolution on the future relationship by the end of 2020 are slim. A deal would require significant concessions by one or both sides in a very short time frame, while no deal would greatly increase the risk of the breakup of the United Kingdom.
Much more important than what is happening between London and Brussels will be how London manages its relationship with the governments of Scotland, Northern Ireland and, to a far lesser extent, Wales. The pro-Scottish independence Scottish National Party (SNP) secured 45 percent of the vote in Scotland, a gain of more than 8 percentage points over the 2017 election and good enough for 48 of 59 seats in the regional parliament. The SNP campaigned on holding another independence referendum – which would be the second since 2014 – and party leader Nicola Sturgeon was quick to declare that the results gave her a mandate to follow through on that pledge. Meanwhile, Johnson – whose party lost more than half its seats in Scotland, falling to six seats from 13 – vowed during the campaign not to permit another Scottish independence referendum. Technically, the SNP needs the consent of the government via a Section 30 order to hold another referendum, though some constitutional experts believe there may be leeway.
Regardless, were Downing Street to refuse, it would likely strengthen the Scottish independence movement and create even more problems down the line. Opinion polls still show a roughly even split on Scottish independence. The three most recent surveys – conducted by YouGov, Panelbase and Survation, all in December – find the anti-independence side ahead by 10, 6 or 1 percentage points, respectively. The “No” side won the 2014 referendum by 10 percentage points, so these margins suggest a closer vote this time. A hard line by London could boost the Scottish nationalist cause, especially if combined with a hard Brexit; 62 percent of Scots voted to remain in the EU, and polls suggest that a harder Brexit increases support for independence.
At the same time, London might be facing unrest by unionists in Northern Ireland in the coming year. To secure the
EU withdrawal agreement, Johnson agreed to apply customs checks on goods moving across the Irish Sea from Britain to Northern Ireland. This outraged unionists, for whom the agreement is tantamount to the forced economic reunification of Ireland, or at least the partitioning of Northern Ireland from Britain. Unionist groups are already warning that they will blockade ports and take other unspecified measures to disrupt trade with the Irish Republic in the event that checks are instituted. Such checks would occur only if no trade deal were worked out at the end of the U.K.-EU transition period, which will terminate at the end of 2020 but as it stands can be extended until the end of 2022. At the same time, nationalist parties in Northern Ireland won more seats in Thursday’s election than did unionists, a first since Ireland’s partition in 1921. This prompted nationalist calls for a border poll on a united Ireland, though such an event is likely years away.
The Conservative Party’s election manifesto ruled out any extension, but given that the party has opposed every Brexit extension to date only to acquiesce at the last minute, there are doubts about its sincerity. And importantly, delay in this case would work to London’s advantage – not necessarily in the negotiations with Brussels, but in its dealings with Edinburgh and Belfast. The SNP wants to hold a referendum quickly – Sturgeon has said she will seek approval for a vote before Christmas – but the case for independence may be weakened if the vote is held while negotiations are ongoing, an extension has been secured (a request for extension must be made by the end of June) and a softer Brexit looks possible. The SNP’s best chance for independence may be to wage a protracted battle over the legality of another referendum or otherwise drag its feet while hoping that the Johnson government agrees to either the hardest possible Brexit deal or no deal at all – though in that case it runs the risk of a soft Brexit that deprives it of its momentum. Similarly, delay means no customs checks in the Irish Sea, which for England puts off the problem of unionist unrest in Northern Ireland.
All signs suggest that the U.K. and EU will need all the time they can get for the next phase of the negotiation. Both sides obviously want a trade agreement, but after the way the withdrawal agreement talks went, Brussels believes Johnson is a pragmatist who can get away with making concessions that other politicians can’t. Brussels will also need to proceed cautiously to better account for the wishes of individual member states in the next phase, since any deal will require national approval. And the EU is fully aware of the Scottish situation, which it can use to its advantage so long as Scotland’s status is unresolved. The British government needs a favorable trade agreement with its largest trade partner, but more than that it needs to keep its own union together – especially when it comes to Scotland, which is larger, wealthier and more populous than Northern Ireland and, importantly, shares an island with England. For at least the next year, the phase of Brexit that ostensibly covers the trade relationship between the U.K. and EU will hardly be about trade.
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In March 2019, conservatives trailed liberals in polling. Pasting the entire article, long but all of it is important. Very different system, but this is a direct analogy to the US and Trump with our next election story yet to be written. The article is filled with facts and analysis. Michael Barone is (another) rare example of a professional, credentialed journalist, where you can say all that without sarcasm. )
https://www.washingtonexaminer.com/opinion/boris-johnsons-revolution
First, the numbers. The Conservatives won 365 seats in the House of Commons, which gives them a majority of 80 if every other member votes against them. The election yielded the most seats Conservatives have won since the days of Margaret Thatcher, when they took 397 in 1983 and 376 in 1987. It’s a parliamentary majority that will endure for the five-year limit on this term of Parliament.
The Labour Party won only 203 seats. That’s the lowest number for Labour since the election of 1935, 84 years ago. This is a harsh repudiation of the party and its left-wing leader, Jeremy Corbyn.
Second, this was an immense personal victory for Johnson. Twelve months ago, he was a much-mocked backbencher, having resigned as foreign minister in July 2018 to protest the latest feckless proposal by Prime Minister Theresa May to reach an agreement to withdraw from the European Union. British voters, in their highest election turnout ever, voted to Leave rather than Remain in the EU, but May, a Remain voter, placed the negotiations in the hands of civil servants — "Yes, minister" types — determined to frustrate the will of the 17.4 million Leave voters, the largest number of Britons in history voting for any party or position.
Remainers on the BBC, and even at Sky News, the Times, the Financial Times, and the Economist — affluent and fashionable Londoners — increasingly felt free to dismiss Leave voters as bigoted and stupid. Former Prime Ministers Tony Blair and John Major called for a second referendum, while the Liberal Democrats promised to ignore any referendum result that didn’t support Remain. A majority of parliamentary constituencies voted for Leave, but a majority of members of the House of Commons supported Remain and, as May fumbled, became increasingly bold in their contempt for their fellow citizens.
In the end, they didn’t capture the hearts of the people. Immediately after May missed her own March 31, 2019, deadline for withdrawing from the EU, the Conservative Party fell behind Labour in the polls. Conservatives finished fifth, with a pathetic 9%, in the May 2019 European Parliament elections in which Britain only participated because it hadn't withdrawn as expected. May was finished, and by June, she accepted that she must resign.
This time, Johnson was elected in her place. As the lead spokesman for Vote Leave, he was the obvious candidate for party leader after the June 2016 referendum, but he was opposed at the last minute by his up-to-then ally Michael Gove. That left the field open for May. Johnson became prime minister in July 2019, but Remainers, confident now that they could somehow prevent Brexit, had majorities in the Commons and the overt support of Speaker John Bercow, who abandoned the traditional neutrality of his office.
Johnson prorogued (kept out of session) Parliament for two weeks more than usual for the three party conferences, and when fellow Conservatives opposed his policy, he “withdrew the whip,” throwing them out of the party and effectively preventing them from running as Conservatives in the next election. Parliament passed a bill barring him from withdrawing from the EU on his promised date of Oct. 31; he contemptuously complied. Still refusing to rule out a “hard Brexit” — leaving the EU without a Withdrawal Agreement and trading under WTO terms — he got the EU to agree to what smug Remainers said it never would.
In all his defiance, Johnson's course resembled that of William Pitt the Younger's tenure as prime minister in 1783 and 1784. Pitt was installed by King George III, and Johnson was effectively installed by the majority in the Brexit referendum, but both lacked majorities in the Commons. Both were pummeled each day by smug and eloquent opponents, ridiculed for their oddities and supposed incompetence. Both stood and took it, returning day after day to experience more humiliating roll calls. Both were confident that they had the backing of the voters, and both outmaneuvered their opponents to call a general election.
Pitt won an overwhelming victory in the election of 1784 and remained prime minister until he resigned in 1801. He then returned to the office in 1804 until his death in 1806. Only 24 in 1783, he served as prime minister for a large majority of his adult life. Johnson, who is 55, is unlikely to last so long in office. But last Thursday, he won a victory as smashing and as personal as Pitt’s. And under the fixed-term law that David Cameron’s Lib Dem coalition partners persuaded him to pass, he is set to be prime minister, with a large majority, for five years.
For two insightful portraits of Boris by two writers who have known him since the 1980s, see this July 2019 Quillette article by Toby Young (son of Michael Young, the author of Meritocracy) and this post-election piece by Andrew Sullivan.
A third note: I’ve known Dominic Cummings a dozen years, from the time he was leading a successful campaign to keep Britain out of the Euro. He was the lead strategist of the Vote Leave campaign and is widely credited with securing the Brexit majority in June 2016. (The definitive account is Tim Shipman’s All-Out War.) When Johnson moved into 10 Downing Street, he called Cummings in and put him in charge of political strategy and planning for a general election.
Throwing Remainer Conservatives out of the party — not just cranky backbenchers but former chancellors of the exchequer, foreign ministers, home ministers, and a grandson of Winston Churchill — was a daring move characteristic of Cummings, who has often voiced his contempt for Conservative MPs, civil servants, and all of SW1 (the postal code for Parliament and the whole Westminster village). So was the Conservatives’ three-word campaign slogan, voiced often at the focus groups Cummings studies closely: “Get Brexit Done.” So was the emphasis on beefing up the National Health Service and treating it as an essential and central institution of British nationalism rather than (as some free marketeers regard it) an inefficient anachronism.
Johnson and his campaign trail companion, Michael Gove, had worked with Cummings on the Vote Leave campaign, and Gove had hired him during his years as education secretary between 2010 and 2014. In that post, despite a hostile bureaucracy and a very hostile national teachers union called NUT, Gove established hundreds of “academies,” very similar to American charter schools, mostly free from stifling government bureaucracy and union rigamarole. Cummings left late in the term, and Cameron transferred Gove out of Education in July 2014 for fear that his presence there would motivate the teacher unions to oppose Conservatives vigorously in the May 2015 election. But as Cummings argues, the academies continue to exist, and parents and children who did well in academies will continue to be a political constituency for Gove-like education reform for many years to come.
In other words, Cummings understands that policies can be changed back and reforms can lose their edge, but the creation of long-term constituencies for policies is more lasting. He thinks more of the creation of special government organizations capable of achieving distinct, difficult goals and generating creative ideas over the long run. In some of the very long blogs he has written over several years, Cummings has voiced his contempt for standard bureaucracy and his admiration for some public sector organizations that actually got things done — the Manhattan Project, NASA’s moon launch program, the Defense Department’s DARPA — and for some similarly venturesome and unconventional private sector initiatives. Now Johnson is keeping him on, with a view toward reforming British government. A Sunday Telegraph headline reads “Boris Johnson plans radical overhaul of civil service to guarantee ‘people’s Brexit.'”
So, how about the Labour Party? Formed in 1900, it led its first government coalition in 1923; in this election, it won fewer seats in the House of Commons, just 203, than it has in any election since 1935.
Conservatives won 66 Labour-held seats, mostly in the Midlands and North of England, part of the “Red Wall” (in British politics, Labour is colored red, Conservatives blue) of Labour seats from the North Sea west to the Irish Sea and the border of Wales. These were historic gains for the Conservative Party, which has not carried many of these seats for decades — in some cases for a century. They included former coal mining and industrial seats such as Bishop Auckland (Labour since 1935), Rother Valley (Labour since 1918), Don Valley (Labour since 1922), Blyth Valley (Labour since 1950), and Leigh (Labour since 1922). The biggest swing from Labour to Conservatives, as political scientist John Burne-Murdoch calculated, came in seats with low percentages of college graduates and high percentages of low-skilled workers.
These seats all voted Leave in the Brexit referendum, as did virtually all the seats Conservatives gained from Labour (the one seat they lost to Labour, Putney, in affluent London, voted heavily Remain). But Brexit wasn’t the only issue. This was also a backlash against Labour’s left wing party leader Corbyn and the coterie of left-wing North London aides who dominated the party. Voters brought up in the working-class tradition of the North of England were turned off by Corbyn’s refusal to sing the national anthem, by the video in which he identified his pronouns as him and his, by his past association with IRA terrorists (he invited them to Westminster Palace days after they blew up the hotel where Margaret Thatcher was staying at the Conservative Party conference), and by his tolerance and effective encouragement of vile expressions of anti-Semitism in the Labour Party.
In the Brexit referendum, the great difference between electoral blocs was not the traditional divide between the affluent and the working classes. It was geographic — between the metropole and the ethnic fringes (London voted 60% and Scotland 62% for Remain, with higher percentages in both posh Kensington and heavily Muslim Tower Hamlets), while the heartland of England beyond metro London, with 70% of the population of the United Kingdom, voted 57% Leave. Yvette Cooper, a former contender for the Labour leadership, after nearly losing her Northern seat, said the Corbyn leadership took working-class people for granted and, while it ran reasonably well in cities (northern Manchester as well as London), got clobbered in the more numerous northern towns.
The Corbyn crowd hoped that promises of economic redistribution — higher taxes on the rich, free tuition, and free broadband — would bring back traditional working-class voters to the Labour Party. But this “boob bait for the Bubbas,” in Daniel Patrick Moynihan’s phrase, didn’t work. It lacked credibility — where would they find all that money? — and failed to offer the one thing the metropolitan elite refused to offer people with traditional working-class outlooks: respect.
The Conservative breakthrough in the Red Wall, their success in the North of England, gives them a different sort of constituency than Margaret Thatcher won in the 1980s. Those Conservative majorities were tilted toward the south of England, toward the affluent and those made affluent by purchasing public housing or seeing their privately purchased houses zoom up in value in London and southeast England’s robust housing market. They appreciated Thatcher’s contraction of the public sector and the resulting expansion of the private sector. But in the North, Thatcher Conservatives were resented for allowing the contraction of old, heavy industry and coal mining and for reducing labor unions’ powers.
Johnson’s Conservative Party is more northern, more downscale, with more “loyalty to the land beneath your feet,” in the phrase of British analyst Sumantra Maitra.
It is also a party committed to heavier spending on the NHS, to infrastructure projects in the North, even if they score low on cost-benefit grounds.
The left-wing Labour and “one nation” Conservative tendencies of the parties are contrary to their character 20 years ago. Tony Blair’s New Labour Party, with its respect for free markets and accommodation of Thatcherite reform, made huge inroads in the affluent south of England while holding onto traditional industrial Labour seats without any heavy-breathing effort. But opposition to Blair’s backing of the Iraq war and left-wing dissatisfaction with his free market policies has changed the party, without devastating electoral consequences. Blair’s New Labour won 418 seats in the 1997 general election, more than twice as many as the 203 seats Corbyn’s Labour Party won last Thursday.
The Conservative Party’s response to New Labour’s strength was initially an attempt to gain ground in the Thatcherite south. Cameron, elected party leader in 2005, took up environmental issues and proclaimed that the blue Conservative Party was also green. As prime minister from 2010 to 2016, he and his ally, Chancellor of the Exchequer George Osborne, pursued austerity, eliminating 1 million public sector jobs while cutting taxes. That exactly doubled the Conservative seat total from 165 in 1997 to a narrow majority of 330 in 2015. Then Cameron and Osborne took the opposite position on Brexit from what Thatcher’s admirers think she would have taken, and they were swept from office in 2016. May’s snap election reduced the Conservative total to a non-majority of 317; Johnson’s new Conservative Party is now up to a robust, Thatcher-sized 365.
I discern a pattern here, in Britain and in the United States as well. Post-World War II political parties increased the size of the state and pursued policies that led to runaway inflation. Conservatives did this as well as Labour in Britain, Republicans as well as Democrats in the U.S. Then free-market-oriented reformers came to power — Margaret Thatcher in 1979, Ronald Reagan in 1981 — and produced dynamic economic growth and created robust majorities for their center-right policies, centered in affluent metropolitan areas. In response, center-left parties, after repeated trouncings, turned right, and under the leadership of Bill Clinton and Tony Blair eschewed leftish expansions of government and attracted many of the upscale conservatives who had formed the basis of Thatcher and Reagan majorities.
But after the revitalized center-left loses power, Democrats in 2001, New Labour in 2010, their party turns sharply left and, either because its leaders overlook the obvious political lessons or because they elevate conviction over calculation, present an image favored by the upscale metropolitan Left but repulsive to its historic working-class base outside the largest metropolitan areas. Attempted bribes of its traditional downscale supporters are rejected as transparently insincere and irrelevant to on-the-ground circumstances. And the center-right party accepts the cues of the political marketplace, shifts its policies to match an increasingly non-metropolitan and downscale base. The question now is whether the newly oriented center-right governments of Donald Trump and Johnson can produce results for which new constituents will see as fulfilling their promises.
Similar patterns can perhaps be discerned, or teased out of recent election results, not just in Britain and America, but also in their Anglosphere cousins in Australia and Canada and perhaps in European and Latin American nations as well. But that gets beyond what has already become a lengthy analysis of what I am sure will long be regarded as a landmark British election, and one whose outcome seems rooted in fundamental trends but which nonetheless seemed far from certain even a few months ago. Political talent, in this case Johnson’s, can make a difference in the political life of a nation.
Finally, are there any implications for the U.S.? There are many possible analogies between the political scenes in the U.K. and the U.S. In the victory of Johnson’s Conservative Party one can find reasons to imagine the reelection of Trump this year, but certainly not to imagine it as inevitable. The unpalatability of Corbyn’s Labour Party would certainly seem to provide some cautionary lessons for America’s Democrats, though many of them are as unlikely as the Corbynista faithful to find them persuasive. Certainly, as I have written since June 2016, there are resemblances between the two nations’ emergent political divisions between the metropole and the ethnic fringe on one side and the geographic and historic heartland on the other — and between the center-left party moving upscale and the center-right party moving downscale in their appeal and their core constituencies. In both countries, we have seen predictions proven wrong, at least temporarily, that an increasing number of non-white voters and the attitudes of younger generations would make it impossible for center-right parties to win national elections.
The final point is that individual politicians can make an enormous difference in framing issues and determining outcomes. Johnson, moldering on the backbenches a few months ago, made such a difference this year. Trump did the same in 2016. Can he do it again next year?
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https://www.foxnews.com/opinion/victor-david-hanson-europ-importer-gas-oil
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January 28, 2020 Open as PDF
The Fragmentation of the European Union
By: George Friedman
At the end of this week, the United Kingdom, the second-largest economy in Europe, will exit the European Union. Meanwhile, Poland is under intense attack by the bloc for violating EU regulations by attempting to limit the independence of Polish judges; Hungary is also under attack for allegedly violating the rule of law; and one of the major parties in Italy has toyed with the idea of introducing a parallel currency that would allow the country to manage internal debt without regard for EU regulations and wishes.
The founding principle of the EU was the unification of hitherto warring nations into a single bloc, built around common economic and political principles and a common European identity. The assumption was that given Europe’s history, putting aside differences was a self-evident need for all European countries. But as we see in the case of Italy, it is not clear that there is a common European economic interest. Given the tensions with Poland and Hungary, it’s also unclear if there is a common political interest. And the U.K.’s decision to leave also raises questions over whether these common interests persist and whether national identity can be subsumed under a European identity. The tensions within the EU do not reflect marginal disagreements; they represent fundamental questions over whether national interests and identities can be reconciled with poorly defined European interests. The EU, therefore, is moving toward an existential crisis. It may survive, but only as a coalition of nations representing a fraction of Europe.
Self-Determination or Nothing
The fundamental issue is national identity and sovereignty. The U.K., Italy, Poland and Hungary are all European nations, but they have different histories and therefore different sensibilities. What it means to be Italian is not the same as what it means to be British. They in turn have a different sense of self from the Germans or Romanians. The question, therefore, is: What is this European sensibility? The common assumption is that it is liberal democracy. The problem is that there are many types of liberal democracy and, more to the point, the fundamental principle behind liberal democracy is national self-determination – the idea that the nation must select the government and that the government is answerable to no one other than the nation. If you sever the idea of national self-determination from liberal democracy, you undercut liberal democracy’s fundamental principle and, with it, the European identity. Liberal democracy is national self-determination or it is nothing.
The governments in the U.K., Italy, Poland and Hungary all have been elected. Some politicians who were defeated in elections have made the claim that these elections were the result of fraud or illegitimate manipulation of public opinion, as was the case with the Brexit vote. But the fact is that those of us who know these countries know that the views the governments hold are not alien to the countries. Poland and Hungary have their own understanding of what state power should look like; Italy has a long history of complex and fragmented government needing to control its own economy; and the United Kingdom’s constituent parts have national identities that are very different from those of other countries.
Europe’s nations are all different, and while history made each adopt the garb of liberal values beyond just national self-determination, they never gave up their own identities because they could not. They are what history made them, and while German or Soviet occupation shaped them, a few decades of horror – and the adoption of the idea that national self-determination must be determined through elections – was not enough to cause them to abandon who they were. France was France before it held its first election. In other words, national identity may exist prior to and outside of liberal democracy for some countries. This is not the case for the United States; its very identity from its founding was liberal democratic. German identity, however, has varied dramatically over the decades, and Germans were still German in spite of the variations. Hitler represented the national will well after he abandoned elections.
This takes us to extreme places we need not go, but it also points out that national identity and national self-determination can be expressed in ways that are faithful to the national will but violate the liberal democratic methodology in nations with ancient and complex foundations.
The Illusion of European Identity
If the idea of national identity is so complex, then how can we define the European identity? The European identity that the Maastricht treaty embodied was a snapshot of a unique moment in European history in which the Anglo-American occupation of Western Europe and the Soviet occupation of Eastern Europe were ending. The liberal democracy that was imposed on Germany’s destroyed cities seemed to be part of German identity, history notwithstanding. The Poles and Hungarians yearned to be Europeans, and the liberal democracy that emerged from World War II was their template, as it was for Italy.
But I would argue that that European identity was an illusion to which Europe clung, fearing that the only alternative was a return to its own bloody past. After the Berlin Wall came down, there finally appeared to be one Europe, and all would be gathered into it. The problem, as I have said, is that the histories of Italy, Germany, the U.K., Poland and Hungary were all wildly different. At that moment, they all yearned for the same thing, but as the moment passed, each country recollected what it was, and they are now – without the shame it would have brought in 1991 – resurrecting it. The European invention of technocratic liberalism was alien to them, and the right of national self-determination was both an empirical reality and a moral principle.
And so they begin to go their own way, with EU officials hurling threats and condemnation over frustration that the EU bureaucracy is not only no longer authoritative but also no longer frightening. The British economy grew in January, an indication that the catastrophe Brussels had wished for the U.K. may not visit London, or Italy, if it should decide to go its own way with its currency. And certainly, neither Poland nor Hungary, having survived Stalin and Hitler, is likely to be cowed into submission by increasingly small EU subsidies. The weakening of the EU has undercut its ability to pay for conformity.
Europe once had a magnificent idea, a free trade zone called the European Economic Community whose main focus was trade, not inventing identities. It was replaced by the European Union, but the EU can now look to another example, the North American trade zone, which has a slightly larger gross domestic product than the EU. The two are fundamentally different; the North American bloc does not claim to represent a North American identity, its members sometimes dislike each other intensely, and it does not have a secretariat to dictate how they should live. But then, the North Americans did not live through what the Europeans lived through and they are not trying to suppress who they were and, of course, still are.
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Merkel's chosen successor drops out of Chancellor race
https://www.nytimes.com/2020/02/10/world/europe/annegret-kramp-karrenbauer-resign.html
Past prediction: EU is screwed "greatly changed" if Britain leaves.
https://dogbrothers.com/phpBB2/index.php?topic=1078.msg116169#msg116169
With Britain gone, the remaining balance of EU power changes. More protectionist, hurting Germany's exports, and only the Mediterranean group can get 35% support to block initiatives. With Britain out the northern countries no longer can block initiatives they oppose.
Deutsch-xit: Germany should leave the EU. Germany should pass free trade agreements with US, UK, Europe if they want it. Germany should protect its borders, manage its immigration. Establishment shouldn't need their hated outsiders to figure that out.
Germany fears its far right. Germany's policy of wilkommenskultur built the far right.
Crime spike: https://www.pbs.org/newshour/show/crime-spike-in-germany-puts-pressure-on-immigration-policy
Teaching Germany to migrants:
https://uk.reuters.com/article/uk-europe-migrants-germany-integration-i-idUKKCN0YG1ZM
"From a list of holidays that includes Easter, Christmas and Labour Day, they must identify which ones are Christian; they must determine whether foods like white sausage, pizza and doner kebabs are German or foreign; and they must pick out the types of insurance they need here." [All in conflict with Sharia Law, right?]
What could possibly go wrong?
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https://www.gatestoneinstitute.org/15615/spain-migrants-deportations
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Is Europe on the Cusp of Another Migration Crisis?
Adriano Bosoni
Senior Europe Analyst, Stratfor
Emily Hawthorne
Middle East and North Africa Analyst, Stratfor
9 MINS READ
Mar 6, 2020 | 19:28 GMT
A photo of refugees and migrants waiting in line to receive blankets and food near the Greek border in Edirne, Turkey, on March 5, 2020.
Refugees and migrants wait in line to receive blankets and food near the Greek border in Edirne, Turkey, on March 5, 2020. Thousands have flocked to the border since the Turkish government announced it would allow migrants to cross into Europe on March 1.
HIGHLIGHTS
There is a high chance that a migration crisis in 2020 results in a situation similar to the one that unfolded in 2015, with Greece again bearing most of the weight of the migration influx.
But unlike five years ago, Germany will be more willing to protect the European Union's external border and less interested in accepting a large number of migrants.
Turkey will also be more willing to weaponize the country's landmark migrant agreement with the European Union to secure additional diplomatic and financial help from the bloc.
On March 1, Turkey announced it would no longer enforce an agreement with the European Union to prevent migrants from entering the Continental bloc. Since then, tens of thousands of migrants have been trying to enter Greece from Turkey, fueling fears of another looming migration crisis in Europe. In response, the Greek government has increased security at its borders and announced that no asylum requests would be accepted for a month — though it's far from certain whether Greece will be able to contain a continued flood of migrants at its doorstep. Unless Turkey changes its position in the coming weeks, there's a good chance Greece's sea and land borders will once again become the hottest access point for Europe-bound migrants. But unlike the crisis in 2015, Athens will find even fewer EU countries willing to help lift the load this time around.
The Big Picture
Because of its weak economy, Greece is not the final destination for most migrants. But in 2015, many migrants either ran out of resources to keep moving north to wealthier countries in Europe or they found that other transit countries, such as Serbia and Hungary, had closed their borders. While a new migration crisis will likely repeat some of these patterns, several new developments over the past five years will also play a significant role in shaping how a new crisis could unfold in the coming weeks.
Turkey Lights the Fuse
At the heart of the unfolding new migrant crisis is Turkey's willingness to gamble its landmark migrant agreement with the European Union. Turkey's struggling economy is having a direct political impact on the popularity of its government, and Ankara knows it might ultimately prove unable to ward off a Syrian and Russian incursion into Syria's Idlib province. The popularity of Turkey's ruling Justice and Development Party (AKP) also risks waning amid increasingly angry and cash-strapped Turks, who see the country's large refugee population as partially to blame for their grievances. This was made clear by the country's 2019 local elections, in which the AKP suffered sizable losses among urban voters living in closest proximity to refugees. This, combined with the economic headwinds Turkey has experienced since 2015, has created an even more hostile environment in Turkey for refugees. And in 2019, Ankara imposed tighter residency restrictions on refugees.
Against the backdrop of these mounting economic and political threats, an increasingly desperate Ankara has shown that it's willing to breach its migration agreement with the European Union to secure more support from the bloc. Specifically, Turkey wants more money to help provide for the refugees and migrants it is currently hosting, and more EU diplomatic support in its offensive against Syrian and Russian forces, including support for a no-fly zone and long-term refugee resettlement in northern Syria (which Germany has already given support for, but cannot provide alone). Ankara knows that threatening to scrap the existing migrant agreement can help force Brussels to fall in line. And should the March 5 cease-fire between Turkey and Russia fall through, Ankara will be even less likely to remove this lever of migrants as leverage in its EU negotiations.
Similarities to the 2015 Crisis
A new migration crisis would likely repeat some of the patterns of the previous crisis, including:
Greece's lack of capacity. Greece has very limited room to deal with new migrants and is likely already nearing its capacity.
Around 74,600 asylum seekers reached Greece last year, the highest number in the European Union. Some 42,000 of them are trapped in migrant camps in the islands, as Athens does not allow them to move to the mainland until their legal situation is cleared. Reports from the ground say that most migrants are crammed in facilities that are being used well beyond their capacity. In recent months, migrants have protested in some of the islands, particularly in Lesbos, which is home to some 25,000 asylum seekers.
Closed borders along the Balkan migration route. In 2015, many migrants found that countries along the so-called Balkan migration route to Northern Europe, including Serbia and Hungary, had closed their borders. Should another crisis unfold in the coming months, countries like Albania, North Macedonia and Serbia (which are not in the European Union) are likely to again close their borders in an attempt to block the migration route. Hungary, which is an EU member, may also do the same if migratory pressure increases significantly.
More money, less action out of Brussels. Under the European Union's current migration rules, migrants have to apply for asylum in the country where they first enter the bloc, which Greece has long argued unfairly places the burden on them. But a systematic, blocwide effort to distribute migrants across the European Union remains unlikely, as countries in Northern and Eastern Europe will reject any move to alter these rules. If the crisis worsens, and if the number of arrivals in Greece and other countries on the bloc's external border increases, we are instead more likely to see bilateral agreements, under which countries like Germany would accept small groups of migrants in an attempt to ease the pressure on Greece. Brussels, meanwhile, will likely continue to throw money at the problem as it has done in similar situations in the past. And indeed, we've already seen a bit of this, with the European Commission announcing it was sending Greece 700 million euros ($791 million) to help maintain the recent influx of migrants, as well as extra personnel from the European Border and Coast Guard Agency (also known as Frontex) to help protect Greece's borders.
Differences From the 2015 Crisis
In addition to these similarities, there are also some important differences that will shape how a potential migration crisis would unfold in 2020 compared with the crisis in 2015:
Stricter EU asylum policies. Some migrants will now have a harder time requesting asylum in 2020 than they did in 2015, especially those who have been in Turkey for years and cannot really claim to be running away from extreme hardship. While this could weigh negatively on some migrants' cost-benefit analysis of whether to attempt crossing into EU territory, the flow of attempted crossings in recent days shows that for thousands of migrants the risk is still worth taking.
If there is an influx of "new" asylum seekers, that is, people who are currently in Syria and have been displaced because of recent events in Idlib, they may have a better chance of successfully obtaining the refugee status, but it will still be hard. In January, Greece introduced new asylum rules that make the application process faster, which also has the goal of making deportations faster — though Athens will probably continue to struggle to enforce deportations, and many of the migrants whose asylum requests are rejected will probably remain in Greece and live in legal limbo.
If Turkey continues allowing migrants to flood its border, Greece could again become the epicenter of Europe's next migration crisis.
Germany's skepticism around asylum seekers. While Germany may accept a few migrants from Greece, it probably will not open its borders as it did five years ago. Germany reacted to the 2015 migration crisis by welcoming around a million asylum seekers into the country, which, in the long run, has weakened the popularity of Chancellor Angela Merkel and contributed to her decision not to seek reelection in 2021. Germany's open-door policy in 2015 also contributed to the rise of the far-right Alternative for Germany party, which has become the main opposition party since the country's 2018 general election. Germany's reaction to a new immigration crisis would, therefore, probably be different this time around. In fact, the German government has been posting tweets in Arabic, Farsi, English and German saying that Berlin supports Athens' recent efforts to protect the bloc's external borders, which is basically meant to discourage migrants from trying to enter the European Union.
Instead of taking in migrants, Germany is likely to support granting additional resources, money and assistance to Greece to help protect the border with Turkey. Berlin will also reach out to Ankara to try to keep the migration agreement in place, and even propose cooperation on issues such as establishing a no-fly zone in northwestern Syria. Finally, Germany will increase pressure on Russia to de-escalate the conflict in Syria. In this, the problem for Germany is that it has very limited influence on Moscow, a key actor in the war, and has little to offer to Turkey other than EU funds and diplomatic support.
Impact on Italy
At least during an early phase of a new migration crisis, Italy is unlikely to be significantly affected, as its weak economy will make it a less attractive final destination for migrants entering the European Union from Turkey compared with more financially secure countries such as Austria, Germany, the Netherlands and Sweden. Instead, the main threat for Italy is events in Turkey encouraging migrants in other parts of the world to try to reach the European Union. If this happens, migration routes that have been relatively calm in recent years could be reactivated, such as the Libya-Italy route.
In mid-2017, Italy reached a deal with the Libyan government to have the Libyan coast guard begin intercepting migrant boats in exchange for money, resources and training. But this deal is fragile for two key reasons:
Human trafficking organizations who transport migrants from sub-Saharan Africa to Libya, and then to Italy, may decide that the conditions are ripe again to resume their operations, which could overwhelm Libya's weak and fragile government.
The current Libyan government may also decide that a new migration crisis in Europe is a good opportunity to ask Italy for more money and resources in exchange for keeping their agreement in place.
A significant surge in the arrival of migrants would happen at a very difficult time for Italy. The country is expected to have very low economic growth in 2020, and the impact of the ongoing coronavirus outbreak could put it in a recession. Authorities in Rome recently announced a stimulus package to deal with the economic impact of the outbreak, but an immigration crisis would create additional problems for Rome's already strained coffers. At the same time, the Italian coalition government is fragile, and the opposition League party, which has a strong anti-immigration stance, is polling strongly. An early election in Italy within the context of a recession and immigration crisis would certainly increase the chances of the League winning the vote and accessing power — an outcome that would further spook financial markets and investors' already shaky confidence, given that some League members have pushed for Italy to leave the eurozone.
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The EU Wasn’t Built for This
By: Allison Fedirka
Europe has always struggled to define what the European Union really means, particularly after the 2008 financial crisis. It was a harsh reminder that all its members have different political and economic needs, and every move it has made since then – financial compromises, Brexit, immigration reform – has only widened the differences, even as it has stoked nationalist sentiment. This bodes poorly for the EU's ability to confront its latest crisis: a two-front war against a virus and the economic and social unrest it threatens to unleash.
(click to enlarge)
Before the coronavirus outbreak, the EU knew it was approaching a recession. The only question was exactly when and how bad would it be. The virus helped answer these questions – now, and potentially catastrophic. It also meant that the questions of public health measures (a national issue) and economic recession (a union issue) became intimately linked. The bloc will be judged on its ability to manage the crisis with the goal of avoiding the chaos and decline that occurred after the 2008 financial crisis. As part of its efforts to stay ahead of the economic crisis, the EU included a public health component to its initial response, something no one expected Brussels to do. As a result, the bloc faces a defining moment as it has now positioned itself as a possible solution to problems national governments may not be able to solve on their own.
The EU was meant to foster economic prosperity and thus to prevent any more continent-wide wars from breaking out. In time, its mandate evolved, eventually including more complex arrangements such as a common currency, production standards, the free movement of people and so on – all to support trade, the common market and general economic well-being. By design, it needed to be prepared for economic crises, and though its record during the 2008 financial crisis leaves something to be desired, the union held nonetheless. Brussels enacted some strong central measures for the eurozone as constituent states imposed policies that at times rivaled the EU's, but the mutual dependencies and benefits of being in the eurozone have outweighed the costs of completely breaking ties.
But the bloc was never designed to address mass public health issues and there's no history of collaboration in this area. In the past decade, health and medical sectors have been standardized somewhat for the purposes of trade, but EU legislation generally allows its members to break rank when national security is at stake. The coronavirus has certainly become a matter of national security, and though Brussels will be judged on its ability to manage the current crisis (after all, it is still expected to play a role on the economic side of the problem), its performance will depend on the buy-in and cooperation of panicked member states that are likewise scrambling for answers.
Addressing the public health crisis puts two forces at odds. On the one hand, the bloc is trying to solve a problem as a community. This makes sense on the economic level as the economies are closely integrated. On the health side, there is also a case for an integrated response given the threat is a communicable disease, how freely the populations move among one another, the close proximity of multiple countries and the desire to maintain what trade is possible. On the other hand, the member states demonstrate that they consider themselves to be facing exceptional circumstances likened to a state of war. Such a likening is not unheard of given the scale of economic and human consequences brought about by the pandemic. Given the EU was built with the intention of decreasing the risk of wartime behavior, its tools and approach are not compatible with countries in war mode where the me-or-them mentality prevails. The EU was never designed to lead a war nor fight public health battles. Member states most affected by the virus find themselves needing to do exactly this.
However ill-suited the bloc may be, it understands that the coronavirus outbreak warrants a collective response. To that end, the European Council approved Commission proposals to help guide the bloc through the public health crisis. Earlier this week, it recommended closing borders, limiting internal trade to the essentials and allowing citizens to return home. The proposals also called on the capacities of rescEU, a union-owned reserve that provides assistance in extraordinary situations. Thus, the Commission is now taking stock of medical equipment, collectively procuring supply and distribution of existing stock with the goal of equitable access and minimizing potential shortages.
The problem is that member states are responsible for reporting stocks and determining how many supplies their people need, and it’s unclear how each government makes those determinations. It’s also unclear how well Brussels can coordinate supply efforts.
(click to enlarge)
However, it is clear what the EU needs to combat the crisis: face masks, ventilators, health care professionals, hospital beds and so on. But already there are reports of shortages. Estimates of the disease's progression show no country has sufficient ventilators, face masks and hospital beds to meet potential peak demand. Health care professionals were already scarce prior to new demand levels. (This is to say nothing of high demand outside of Europe.)
Some countries are able to meet their own needs better than others, hence the discrepancies in which members do and do not support EU initiatives. Germany, for example, is better suited than most to manage the crisis on its own. It has the largest medical device market in Europe (ahead of the U.K., France and Italy) and the third-largest in the world (behind the United States and Japan). With Switzerland, Germany is home to the two leading ventilator producers in Europe. Italy, by contrast, boasts just one low-capacity ventilator manufacturer. France has some, but Spain has none. German company DACH Schutzbekleidung is also a leader in medical masks, particularly outside of China, though other countries such as Spain, the Netherlands and France also can produce masks.
Yet even Germany faces a potential shortage of hospital beds and health care workers. Many of these workers come from Poland and enter Germany on a rotating basis for multi-month shifts. The recent border restrictions have disrupted the cycle, making it difficult for more health care workers to enter back in.
Between the outbreak, medical shortages and lack of self-sufficiency in the public health and medical industries, many EU member states have started to turn toward their national governments for answers. In response, Berlin and Paris have imposed export restrictions on medical supplies. Given the advantages Germany has as a producer of these goods, it’s not a surprise that one of Berlin’s first moves was to restrict exports to ensure domestic needs were met first. Over the weekend, Berlin and the European Commission came to an agreement that allowed Germany to approve exports of protective equipment such as masks, goggles and gloves. Since then, it has issued licenses for the export of protective equipment to Italy, Switzerland and Austria.
What recourse, then, is there for member states? Most have begun inching toward the nationalization of key companies or operations so that the government can directly control resources during the crisis. Spain and Italy nationalized private hospitals and have legal standing to do more if they want with other companies. Germany has called on hospitals to postpone nonessential surgeries. France declared a state of “sanitary emergency” on March 18 allowing Paris to take more action in the economic sector to provide for the health system. The government is also supporting local factories as they shift production lines to produce high-demand products such as masks. Romania restarted and nationalized a company that had closed before the crisis and enlisted the help of the military to resume work to produce disinfectants. Other companies have been put to work by the state and switched to producing masks, other protective equipment and biocides (though, notably, not ventilators).
Thus there are two competing solutions to the coronavirus crisis. The EU is stepping up to grow beyond its current role to show members it’s a reliable manager. It had to, given that the source of the economic problems it needs to address requires addressing ways to stabilize a public health crisis. Meanwhile, states encourage the very kind of nationalist tendencies EU membership is supposed to dispel. Ultimately, the EU’s efforts to keep the bloc together will rest more on its ability to weather the economic impact than the public health battle.
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The EU is done.
The EU Wasn’t Built for This
By: Allison Fedirka
Europe has always struggled to define what the European Union really means, particularly after the 2008 financial crisis. It was a harsh reminder that all its members have different political and economic needs, and every move it has made since then – financial compromises, Brexit, immigration reform – has only widened the differences, even as it has stoked nationalist sentiment. This bodes poorly for the EU's ability to confront its latest crisis: a two-front war against a virus and the economic and social unrest it threatens to unleash.
(click to enlarge)
Before the coronavirus outbreak, the EU knew it was approaching a recession. The only question was exactly when and how bad would it be. The virus helped answer these questions – now, and potentially catastrophic. It also meant that the questions of public health measures (a national issue) and economic recession (a union issue) became intimately linked. The bloc will be judged on its ability to manage the crisis with the goal of avoiding the chaos and decline that occurred after the 2008 financial crisis. As part of its efforts to stay ahead of the economic crisis, the EU included a public health component to its initial response, something no one expected Brussels to do. As a result, the bloc faces a defining moment as it has now positioned itself as a possible solution to problems national governments may not be able to solve on their own.
The EU was meant to foster economic prosperity and thus to prevent any more continent-wide wars from breaking out. In time, its mandate evolved, eventually including more complex arrangements such as a common currency, production standards, the free movement of people and so on – all to support trade, the common market and general economic well-being. By design, it needed to be prepared for economic crises, and though its record during the 2008 financial crisis leaves something to be desired, the union held nonetheless. Brussels enacted some strong central measures for the eurozone as constituent states imposed policies that at times rivaled the EU's, but the mutual dependencies and benefits of being in the eurozone have outweighed the costs of completely breaking ties.
But the bloc was never designed to address mass public health issues and there's no history of collaboration in this area. In the past decade, health and medical sectors have been standardized somewhat for the purposes of trade, but EU legislation generally allows its members to break rank when national security is at stake. The coronavirus has certainly become a matter of national security, and though Brussels will be judged on its ability to manage the current crisis (after all, it is still expected to play a role on the economic side of the problem), its performance will depend on the buy-in and cooperation of panicked member states that are likewise scrambling for answers.
Addressing the public health crisis puts two forces at odds. On the one hand, the bloc is trying to solve a problem as a community. This makes sense on the economic level as the economies are closely integrated. On the health side, there is also a case for an integrated response given the threat is a communicable disease, how freely the populations move among one another, the close proximity of multiple countries and the desire to maintain what trade is possible. On the other hand, the member states demonstrate that they consider themselves to be facing exceptional circumstances likened to a state of war. Such a likening is not unheard of given the scale of economic and human consequences brought about by the pandemic. Given the EU was built with the intention of decreasing the risk of wartime behavior, its tools and approach are not compatible with countries in war mode where the me-or-them mentality prevails. The EU was never designed to lead a war nor fight public health battles. Member states most affected by the virus find themselves needing to do exactly this.
However ill-suited the bloc may be, it understands that the coronavirus outbreak warrants a collective response. To that end, the European Council approved Commission proposals to help guide the bloc through the public health crisis. Earlier this week, it recommended closing borders, limiting internal trade to the essentials and allowing citizens to return home. The proposals also called on the capacities of rescEU, a union-owned reserve that provides assistance in extraordinary situations. Thus, the Commission is now taking stock of medical equipment, collectively procuring supply and distribution of existing stock with the goal of equitable access and minimizing potential shortages.
The problem is that member states are responsible for reporting stocks and determining how many supplies their people need, and it’s unclear how each government makes those determinations. It’s also unclear how well Brussels can coordinate supply efforts.
(click to enlarge)
However, it is clear what the EU needs to combat the crisis: face masks, ventilators, health care professionals, hospital beds and so on. But already there are reports of shortages. Estimates of the disease's progression show no country has sufficient ventilators, face masks and hospital beds to meet potential peak demand. Health care professionals were already scarce prior to new demand levels. (This is to say nothing of high demand outside of Europe.)
Some countries are able to meet their own needs better than others, hence the discrepancies in which members do and do not support EU initiatives. Germany, for example, is better suited than most to manage the crisis on its own. It has the largest medical device market in Europe (ahead of the U.K., France and Italy) and the third-largest in the world (behind the United States and Japan). With Switzerland, Germany is home to the two leading ventilator producers in Europe. Italy, by contrast, boasts just one low-capacity ventilator manufacturer. France has some, but Spain has none. German company DACH Schutzbekleidung is also a leader in medical masks, particularly outside of China, though other countries such as Spain, the Netherlands and France also can produce masks.
Yet even Germany faces a potential shortage of hospital beds and health care workers. Many of these workers come from Poland and enter Germany on a rotating basis for multi-month shifts. The recent border restrictions have disrupted the cycle, making it difficult for more health care workers to enter back in.
Between the outbreak, medical shortages and lack of self-sufficiency in the public health and medical industries, many EU member states have started to turn toward their national governments for answers. In response, Berlin and Paris have imposed export restrictions on medical supplies. Given the advantages Germany has as a producer of these goods, it’s not a surprise that one of Berlin’s first moves was to restrict exports to ensure domestic needs were met first. Over the weekend, Berlin and the European Commission came to an agreement that allowed Germany to approve exports of protective equipment such as masks, goggles and gloves. Since then, it has issued licenses for the export of protective equipment to Italy, Switzerland and Austria.
What recourse, then, is there for member states? Most have begun inching toward the nationalization of key companies or operations so that the government can directly control resources during the crisis. Spain and Italy nationalized private hospitals and have legal standing to do more if they want with other companies. Germany has called on hospitals to postpone nonessential surgeries. France declared a state of “sanitary emergency” on March 18 allowing Paris to take more action in the economic sector to provide for the health system. The government is also supporting local factories as they shift production lines to produce high-demand products such as masks. Romania restarted and nationalized a company that had closed before the crisis and enlisted the help of the military to resume work to produce disinfectants. Other companies have been put to work by the state and switched to producing masks, other protective equipment and biocides (though, notably, not ventilators).
Thus there are two competing solutions to the coronavirus crisis. The EU is stepping up to grow beyond its current role to show members it’s a reliable manager. It had to, given that the source of the economic problems it needs to address requires addressing ways to stabilize a public health crisis. Meanwhile, states encourage the very kind of nationalist tendencies EU membership is supposed to dispel. Ultimately, the EU’s efforts to keep the bloc together will rest more on its ability to weather the economic impact than the public health battle.
-
quote author=G M
"The EU is done."
------------------
Yes. The EU was dysfunctional before Brexit. The economic growth rate in the best of times was near zero. The EU without Britain is a greatly changed, greatly weakened group. Greece, Italy, Spain were in really bad shape before Wuhan virus. The open borders feature of the EU is now closed (probablly the only good news in this). The weakening of their currency means they can't and won't buy American goods. Without Britain, the 27 countries of the EU have but one nuclear 'power', France. The greatest economic power in the EU, Germany, has been shutting down its electric power capacity, switching to 'solar without sunshine'. Europe has the Muslim migration challenge, rising crime rates, stressed social spending systems, failing healthcare systems, demographic disaster, the failure of assimilation, the resumption of reliance on Russia, the debt crisis, already high tax rates and excessive burden of government spending.
Where does it go from here? Down. They will have a much harder time recovering economically than the US.
From an American perspective, they will sadly become less and less relevant. Less tourism, less strategic militarily, less important economically.
Then we have roughly half of America saying, let's be more like Europe.
----------------------
Case study, Italy: https://nationalinterest.org/blog/buzz/coronavirus-could-create-massive-eu-debt-crisis-think-italy-137177
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oh, but that merkel gal
is just great
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https://www.gatestoneinstitute.org/15803/coronavirus-european-union-unravels
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oh, but that merkel gal
is just great
Well, she is still in a strong second place for the worst German leader in history rating.
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Let's not forget the one who now heads to consortium with Russia doing the gas pipeline to cut Poland out of the loop , , ,
=====================
March 27, 2020 View On Website
Open as PDF
The German Economy Is in Trouble
By: GPF Staff
(click to enlarge)
It’s no secret that the global economy has slowed down in March as major economies across the globe introduce measures to combat the coronavirus outbreak. Measuring the impact of these measures is challenging since data for this period has, for the most part, not be released yet. In Germany, however, the Ifo Institute’s business climate index, which measures sentiment among German managers in the areas of manufacturing, services, trade and construction, is a useful indicator.
And according to this indicator, the future doesn’t look good. In the institute’s own words, the sentiment among business managers has turned “extraordinarily dire.” “The German economy is in shock,” the institute said. The two sectors contributing most to the declining business climate were trade and manufacturing. More worrying than the plunge in the business climate, however, is the plunge in expectations for the next six months. As mentioned in GPF’s 2020 forecast, Germany is vulnerable to an economic downturn because of its dependence on exports, which account for 47.4 percent of the country’s gross domestic product, according to the latest World Bank figures. This means every 2 percent drop in exports will translate into a nearly 1 percent decline in GDP.
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Probably a bad sign:
https://www.msn.com/en-in/finance/topstories/finance-minister-of-german-state-commits-suicide-after-worrying-over-coronavirus-covid-19-economic-crisis/ar-BB11SkQ3
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Probably a bad sign:
https://www.msn.com/en-in/finance/topstories/finance-minister-of-german-state-commits-suicide-after-worrying-over-coronavirus-covid-19-economic-crisis/ar-BB11SkQ3
Wesbury: Upward mobility in German government indicates a return of bull market!
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https://www.cnbc.com/2019/03/25/italy-signs-deals-worth-2point5-billion-euros-with-china.html
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n Europe, COVID-19 Extends the Tenure of Fragile Governments
Adriano Bosoni
Adriano Bosoni
Senior Europe Analyst, Stratfor
7 MINS READ
Mar 30, 2020 | 17:21 GMT
An illustration of a microscope image of the new coronavirus and a surgical mask overlaying a 100 euro banknote.
A surgical mask and microscopic images of the new coronavirus overlay a 100 euro banknote. As it tears EU economies apart, the COVID-19 pandemic is also helping unite the bloc's formerly fragmented governments.
(Shutterstock/Kenan Stocks)
HIGHLIGHTS
As it tears EU economies apart, the pandemic is also bringing the bloc's fragmented political climate together. Though this renewed stability will only last as long as the health crisis....
The coronavirus outbreak is ravaging Europe’s economy by simultaneously bringing production, consumption, investment and trade to a near halt. But the pandemic is also helping freeze the Continent's political crises by forcing governments to unite against the escalating existential threat. Europe's political tumult, however, will return once the immediate contagion has abated. And several countries, in particular, will see a combination of financial and legislative fragility that will limit their ability to deal with the enduring economic repercussions.
The Big Picture
European governments have reacted to the coronavirus crisis by pumping money into their economies. These efforts have, in part, been made possible by once-fragile governments putting aside their differences to introduce emergency measures. But when the coronavirus crisis is over, many governments will be made weak once again, hindering their capacity to quickly and effectively recover from the lingering economic impact.
COVID-19: Political Stability's Unexpected Ally
Several EU countries started the year with minority governments, caretaker administrations or unstable coalitions that the coronavirus crisis has since made much more resilient:
Italy
Before COVID-19 was detected in Italy, tensions between the country's coalition partners — the anti-establishment Five Star Movement and the center-left Democratic Party — were on the rise over issues such as the annual budget and reforms of the criminal justice system. Poor results in regional elections and the defection of several lawmakers to opposition parties had also further weakened the government. Prior to the outbreak, opinion polls had suggested the Euroskeptic League party could win if an early election was called, and would form a government with like-minded parties. A government led by the League would make investors nervous about Italy’s membership in the euro, adding political and economic uncertainty to Italy’s future.
The escalation of coronavirus cases and the drastic measures that followed, however, have since temporarily suspended Italy's political crisis. The March 29 referendum on a constitutional reform to reduce the number of lawmakers in the Italian Parliament has also been indefinitely postponed due to the COVID-19 crisis. Italy will probably not hold an early general election before the referendum takes place because of the complications related to electing members of parliament before the reduction in the number of lawmakers is enforced.
Germany
Germany's coalition government between the center-right Christian Democratic Union (CDU), the Christian Social Union and the center-left Social Democratic Party was also on the verge of collapse at the start of 2020. The partners have different views on fiscal policy, and were also trying to differentiate themselves in the eyes of voters after governing together for the majority of the past 20 years. Their poor performance in regional elections in late 2019 and early 2020 led to internal debates over whether to put an end to the coalition and hold an early general election.
But the arrival of COVID-19 has since put the coalition's crisis on pause. After months of virtual paralysis, the German government swiftly closed the country’s borders, announced tax benefits for companies and households, and offered government-backed loans to businesses. The outbreak also postponed the CDU’s plans to appoint a new leader. A party congress that was scheduled for April 25 has been suspended, and the new date has yet to be announced. The new CDU leader stands a decent chance of winning a general election and becoming the new chancellor after Angela Merkel's term ends in 2021. He or she will also have to decide whether to continue with Angela Merkel’s centrist approach, or to move to more right-wing positions to stop the party's continued hemorrhage of voters to the far-right Alternative for Germany party. But without a leader, the CDU will not be interested in exiting the government coalition and holding an early general election.
Belgium
In mid-March, the COVID-19 crisis convinced nine political parties in Belgium's parliament to put their ideological differences aside and formally support Prime Minister Sophie Wilmes’s caretaker government, which had been operating with limited powers since October. This formal support for Wilmes has granted her government full powers to pass emergency measures to cope with the outbreak. But while the coronavirus gave Belgium its first fully-fledged government since the inconclusive general election of May of 2019, the parties have only given their support to Wilmes for six months, after which she will have to ask for the confidence of parliament again in mid-September. If the worst part of the health crisis is over by then, the prime minister may struggle to win that vote and her government may in turn collapse, leading to renewed political turbulence in Belgium.
Romania
When the coronavirus crisis hit Romania, the country was struggling to find a new prime minister. Prime Minister Ludovic Orban of the center-right National Liberal Party was in power only in a caretaker role after losing a no-confidence motion in early February. Parliament was unable to appoint a successor, opening the door for a potential early general election. But after the COVID-19 outbreak took hold in early March, the Romanian parliament formally re-appointed Orban as prime minister, with support from some of the opposition lawmakers that voted to oust him just a month before. Shortly after his reappointment, Orban announced a stimulus package including cheap loans to companies and state support for workers who were suspended because of the pandemic.
A Fleeting Lifeline
Having stable governments in Europe is beneficial at a time when the Continent is feeling the immediate economic blow of the coronavirus outbreak. When governments do not have to deal with internal disputes and are united toward a common goal, they are in a better position to make decisions to mitigate the economic effects of crises, such as the current health emergency. But this new phase of political stability may not survive long after the danger has passed, as the sense of urgency that brought political adversaries together will be gone. And as a result, the governments that were fragile before the outbreak will see their disagreements resurface.
Political instability will return to many European countries at a time when their economies are still reeling from the aftermath of the COVID-19 crisis.
In addition, there will be a lag between the drop in contagion cases and the recovery of the economy. The eventual relaxation of quarantine measures will allow the services and industrial sectors to resume their activities as people are allowed to leave their homes and production and consumption gain traction again. The problem is that many businesses will not survive the crisis, and some of the workers that were suspended during the peak of contagion will not get their jobs back. Europe’s largest economies — including Germany, France and Italy — were already cooling down before the COVID-19 outbreak, meaning that the Continent's post-virus recovery will likely be slow and uneven.
To make things more complicated, slow economic growth, higher unemployment and fragile governments will coincide with the financial problems created by the policy reaction to the outbreak. Countries such as Italy, France, Germany and Spain have announced large packages of stimulus measures (including cheap loans for companies, assistance for self-employed workers and delays in tax payments) that will partially be financed by taking on additional debt. In a context of low growth, this decision will deepen their deficits and widen their debt-to-GDP ratios, which could make financial markets once more worry about whether this is sustainable.
Political instability will thus return to many European countries at a time when their economies are still reeling from the aftermath of the COVID-19 crisis. This will reduce the room for many governments to introduce structural reforms to deal with the growth problems that predated the pandemic. Meanwhile, the prospect of early general elections in large countries such as Italy and Germany will also result in households and investors postponing some of their spending and investment decisions amid the reemerging political uncertainty. This means that Europe will feel the consequences of the coronavirus outbreak long after the outbreak is put under control.
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By: GPF Staff
Anticipating an economic crash. According to a European Commission report, the economic crash resulting from the coronavirus pandemic could cause a recession deeper than the one that followed the 2008 financial crisis, which saw a 4.3 percent drop in the European Union’s gross domestic product. The report did not, however, specify by how much the economy would contract this time around. So far, European countries have introduced stimulus packages worth on average 2 percent of GDP and provided liquidity of around 13 percent – but the European Central Bank has already warned that 2 percent will not be nearly enough. Italian business lobby Confindustria has said it expects Italy’s GDP to shrink this year by 6 percent, it’s biggest fall since 1946. And though the EU is considering issuing so-called “coronabonds,” the head of the eurozone’s bailout fund warned that it could take up to three years to set them up.
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South Europe hit hardest. North Europe richer, can afford this, S. Europe poorer, can't. N. Europe now missing UK.
From the article:
"Portugal’s Prime Minister António Costa agrees: “Either the EU does what needs to be done or it will end.” Inaction, warned French President Emmanuel Macron, could be the death of the EU."
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https://www.wsj.com/articles/coronavirus-reopens-europes-old-division-11586386729?mod=opinion_featst_pos2
Coronavirus Reopens Europe’s Old Division
The economics of the pandemic pit the South against the North on the question of ‘corona bonds.’
By Walter Russell Mead
April 8, 2020
European Union flags fly outside the European Central Bank’s headquarters in Frankfurt, Feb. 13, 2015.
PHOTO: MARTIN LEISSL/BLOOMBERG NEWS
Usually it’s right-wing U.K. and U.S. euroskeptics who prophesy doom for the European Union, but in the past couple of weeks voices of gloom have come from the heart of the EU establishment.
Former European Commission President Jacques Delors spoke of a “mortal danger” to the bloc. Former Italian Prime Minister Enrico Letta warned of the “deadly risk” Europe faces. Spain’s Prime Minister Pedro Sánchez called this Europe’s “worst crisis since the Second World War.” Portugal’s Prime Minister António Costa agrees: “Either the EU does what needs to be done or it will end.” Inaction, warned French President Emmanuel Macron, could be the death of the EU.
The coronavirus has reopened old wounds and torn Europe in two along the old creditor-debtor line—a mostly Latin Southern Europe vs. a largely Nordic and Germanic North. The massive economic and social shock of the pandemic has hit every European country, but the Germans and their neighbors can manage, mostly, on their own resources. Southern states, many already burdened with high levels of debt and some having yet to recover from the 2007-09 recession, need help.
That much isn’t controversial. Even the tightfisted Dutch agree that the coronavirus is a once-in-a-century crisis that demands a pan-European response. The Northerners recognize that the bailouts following the 2007-09 recession didn’t work as well as hoped, and they understand, or claim to understand, the resentment that is so common in the South. They say they’re willing to approach this crisis in a generous spirit of European solidarity.
They have already agreed to lift the much-criticized deficit caps on member states. The European Central Bank is providing unlimited support for member states’ bonds, and the European Investment Fund is also ready to help. Beyond that, the European Stability Mechanism has about €400 billion ($435 billion) ready to be deployed. Another €100 billion fund will support crisis-hit businesses and workers. The Northerners are also signaling that in light of this unprecedented challenge, they are ready to live with a somewhat larger EU budget to help with the recovery.
But this isn’t enough for the South. Italy and Greece remember the humiliating conditions attached to the bailouts following the 2008 crash. The ensuing decade of austerity and slow growth generated a deep, bitter anger toward what the South saw as a stingy North. Public opinion in Italy, once among the most pro-European countries in the union, swung sharply against the EU. A March poll showed that 88% of Italians thought Europe was being unhelpful in Italy’s fight with the coronavirus, and 67% of those polled said that Italy’s membership in the EU was a “disadvantage.”
Against this background, Prime Minister Giuseppe Conte has taken a hard line against further conditional loans, demanding that the EU issue joint bonds in the crisis. Italy and other struggling countries could use the funds from these bond sales for relief and economic recovery, with taxpayers in Northern countries equally responsible for repaying the debt. Eight other EU member countries, including France and Spain, have joined in his demand.
To many Southerners, the need for “corona bonds” is obvious. Wealthy Northern countries have the resources to cope with the emergency. Germany, whose ratio of debt to gross domestic product is about 60%, can afford to subsidize small business, bolster its banks, and pay generous benefits to the unemployed—even as it provides health care to an unprecedented number of ailing citizens. Italy, with a debt totaling about 135% of GDP before the crisis, doesn’t have the fiscal firepower to cover these costs. Rome has had enough of bailouts and loans; it is insulting to be given strict conditions and required to accept oversight simply to take steps toward overcoming a national calamity.
Debt mutualization is a step too far for many in the North. At the time the euro was adopted, Northern voters were promised that the eurozone wouldn’t become a “transfer union” in which richer states would be compelled to support the governments of poorer (and, some say, less well-managed) states in the South. Introducing common EU bonds might weaken the power of euroskepticism and populism in the South—but it would increase such feelings in the North. Is the EU really better off if Italy is pro-Europe again, but Germany and the Netherlands turn euroskeptic?
A 14-hour marathon teleconference among EU finance ministers failed to reach a consensus Tuesday night over what conditions should be placed on emergency loans. The even more divisive issue of corona bonds was postponed to the future. Despite the dire warnings and the bruised feelings on both sides, the standoff is unlikely to end the EU. Realistically, Italy and other Southern countries have nowhere else to go. Hundreds of billions of euros will be needed to cover the cost of the epidemic and the economic closures and to launch the recoveries ahead. The U.S., Russia, China and international financial institutions aren’t going to bid against the EU for the privilege of bailing the Southerners out. It’s Brussels or bust.
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https://www.theguardian.com/politics/2020/apr/12/boris-johnson-leaves-hospital-as-he-continues-recovery-from-coronavirus
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Stratfor Worldview
Southern Europe’s COVID-19 Crisis Is Just Beginning
7 MINS READ
Apr 13, 2020 | 10:00 GMT
HIGHLIGHTS
For many governments in Southern Europe, containing the COVID-19 contagion in the coming weeks may prove to be the easy part. After the immediate health crisis subsides in the region, much bigger economic and political troubles will quickly follow in the second half of the year. Countries including France, Italy,...
For many governments in Southern Europe, containing the COVID-19 contagion in the coming weeks may prove to be the easy part. After the immediate health crisis subsides in the region, much bigger economic and political troubles will quickly follow in the second half of the year. Countries including France, Italy, Spain, Greece and Portugal will experience deep recessions and severe fiscal problems, which in some cases will be made worse by the return of political instability and the strengthening of nationalist opposition parties.
The Big Picture
Countries in Southern Europe are currently focusing their efforts on containing COVID-19 contagion and mitigating the negative economic effects of quarantine measures. But this will come at the expense of worsening deficits and higher debt levels that, over time, could make investors nervous about the sustainability of debt in Southern Europe and trigger new financial crises across the Continent.
Deep Recessions
Most, if not all, countries in Southern Europe will be in a recession this year because of the quarantine measures implemented to contain COVID-19. Many economies in the region were already slowing down before the pandemic. In the fourth quarter of 2019, France’s economy contracted by 0.1 percent, Italy’s by 0.3 percent and Greece’s by 0.7 percent. Countries such as Spain (+0.5 percent) and Portugal (+0.7 percent) saw some growth, but it was weak.
The data for the first quarter of 2020 will be negative, but the data for the second quarter will be worse. Southern European countries introduced their toughest quarantine measures in March, which means that normal economic activity in January and February will somewhat mitigate the impact of the COVID-19 in the first quarter. But with the quarantine measures in full force in April, and a progressive lifting of the measures potentially starting in May, the second quarter will probably show deeper GDP contractions in Southern Europe.
It is impossible to know the exact duration and depth of the recessions since they will depend on the evolution of contagions and the progressive lifting of the lockdowns. But because many companies have gone out of business during the quarantine, and hundreds of thousands of workers have lost their jobs, production, consumption and investment will probably remain weak in the third and potentially even the fourth quarter of 2020.
Higher Unemployment
Unemployment rates fell steadily in Southern Europe since the peak of the financial crisis in the early 2010s. In early 2020, unemployment was below 10 percent in Portugal, France and Italy, and around 14 percent in Spain and 16 percent in Greece. But these rates will increase significantly in the coming months because many of the workers who lost their jobs or were suspended during the quarantine will not find immediate employment once the outbreak is over.
The quarantine measures are destroying millions of jobs in Europe. In Spain, almost 900,000 jobs (in a labor force of roughly 23 million) were lost between layoffs and suspensions in the second half of March alone. In France, nearly four million workers (in a labor force of around 30 million) were on state-subsidized furloughs at the beginning of April. In Portugal, by late March, companies had asked for state permission to dismiss more than 500,000 workers (in a labor force of less than 6 million). Unemployment benefits and state subsidies are not a full substitute for salary, which reduces the affected workers’ ability to consume and further weakens the economy.
Higher Deficit and Debt Levels
In recent weeks, national governments have pumped massive amounts of money into the economy in the shape of state-backed loans for companies, delays in tax payments for households, and assistance for workers who lost their jobs. A big part of these measures will be funded by taking on additional debt. So far, Southern European governments have been able to take on new debt at low-interest rates, partially because of the intervention of the European Central Bank in debt markets. But when the COVID-19 contagion is over, these countries will find themselves with higher debt levels amid deep recessions.
Italian business lobby Confindustria recently calculated that the country's debt could reach 147.2 percent of GDP in 2020 from 134.8 percent in 2019. Goldman Sachs, meanwhile, said that Italy's debt could reach as much as 160 percent of GDP this year. According to the Swiss financial services firm Credit Suisse, Spain’s sovereign debt will reach 105.3 percent of GDP in 2020 from 94.4 percent in 2019. And the Italian bank Unicredit said Portugal’s debt could reach 145.7 percent from 117.6 percent a year ago.
The main question that markets will try to answer after the COVID-19 pandemic is over is whether these levels of debt are sustainable. One of the places where they will look for answers is fiscal deficits, and the situation will not be reassuring. Before the current health crisis, some countries in Southern Europe were struggling to take their deficits below the EU-mandated threshold of 3 percent of GDP. But the broad trajectory was still toward compliance with the bloc’s requests. However, the massive stimulus packages in Southern Europe will lead to deficits that, depending on the calculation, could be between 5 and 10 percent of GDP in 2020 (some analysts suggest they could be even higher).
Credit rating agencies could react to these debt and deficit levels by downgrading the countries in trouble. This would make it more expensive for governments to borrow and, in countries such as Italy, would bring debt dangerously close to “junk” status, which means that many investors would not be able to purchase Italian debt because of their internal rules against the purchase of risky assets. A degradation in the quality of bonds would also have a negative impact on the assets portfolio of the banks that hold them — a problem that is particularly acute in Italy, where banks hold billions of euros in debt from the national government.
A heavier debt burden, combined with higher borrowing costs, would also constraint the Southern European government’s room to spend domestically because a significant part of public revenue would have to be used to service the debt. Over time, national governments may have to introduce spending cuts and tax hikes to increase state revenue and reduce their deficit, limiting their ability to emerge from the recession.
Southern European Countries will experience deep recessions long after the COVID-19 pandemic subsides, which could give rise to another wave destabilizing nationalist movements.
The economic crisis will also create problems for banks holding private debt. In recent years, banks in Southern Europe have been reducing their exposure to non-performing loans at a fast pace. But the risk of households and companies defaulting on their loans will increase hand-in-hand with the rise in unemployment and the contraction of economic activity. The four EU member states with the highest ratio of non-performing loans are all southern: Greece, Cyprus, Portugal and Italy. These are the places to look at for banks potentially failing because of the economic downturn.
Another Nationalist Wave?
The COVID-19 crisis brought temporary political stability to several countries in Europe. Politicians across the Continent have put their ideological differences aside to back emergency measures, increasing the popularity of many governments. But when the worst part of the health crisis is over, pre-existing political disputes will return. And governments that were either fragile (such as Italy’s) or unpopular (such as France’s) will see their old problems come back. Once the emergency passes, the blame game will begin as opposition parties focus their criticism on the things that the governments should have done differently. Nationalist and Euroskeptic parties in the south will attack countries in the north for their lack of solidarity, and will criticize the European Union for its slow reaction to the crisis.
The austerity measures could further complicate the political situation. During the financial crisis of the early 2010s, most of the governments that implemented unpopular spending cuts were punished by voters in the next election. The crisis also contributed to the emergence of anti-establishment parties, some of which had anti-immigration and anti-EU positions. So far, nationalist parties such as Italy’s League and France’s National Rally have struggled to take advantage of the coronavirus pandemic. But these kinds of parties thrive in times of recession, which means that the door will be open for existing or new parties to emerge as a result of the new economic crisis that is just now beginning Europe.
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https://ukandeu.ac.uk/brexit-negotiations-what-do-we-now-know/#
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Previously in this thread, Brexit [will] result in a shift of the balance of power in the EU (greater Germany) from the richer northern countries to the southern poorer countries.
https://www.dw.com/en/frugal-four-nations-counter-franco-german-eu-initiative/a-53545304
Austria, Denmark, the Netherlands, and Sweden put forward a counter-proposal to France and Germany's recently submitted €500 billion ($545 billion) coronavirus economic recovery plan, a source reported on Saturday.
Many saw Chancellor Angela Merkel and French President Emmanuel Macron's initiative as an important step towards stronger European Union (EU) financial relations. However, the four fiscally conservative states – already reputed in the bloc as the "frugal four" – are seeking a unique emergency fund to re-strengthen the EU's economy.
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After Brexit, the Deluge
Boris Johnson faces many tests. If he can pass them, Britain may emerge stronger.
By Walter Russell Mead
July 20, 2020 6:29 pm ET
Few world leaders face as many staggering tests as Boris Johnson. Withdrawing from a trading bloc that accounts for 43% of British exports was already going to be the biggest challenge in U.K. foreign and economic policy for a generation. Then came Covid, and as if that weren’t enough, China imposed harsh new security laws in the former British territory of Hong Kong. The U.K. has offered British residence to qualified Hong Kong residents, suspended its extradition agreement with the city, and—in an unrelated decision that also enraged Beijing—announced plans to exclude Huawei from the U.K. telecommunications market. As China threatens retaliation, Britain will have to reform its relationship with its many European trading partners and weather the pandemic-induced recession sweeping the world.
Meanwhile, London’s resurgence as a global financial center—the biggest success for the U.K. economy since World War II—is under threat. The mix of financial deregulation and globalization since the 1980s has brought extraordinary benefits to British finance and service firms. But now many countries are turning toward reregulation and deglobalization. Financial centers like London may have to reinvent themselves to thrive. Worse, U.K. markets and investors will likely face harsher treatment from EU authorities in a post-Brexit world.
Relations with Moscow, already icy following the 2018 poisoning of a Russian defector on British soil, are also worsening. Last month, the U.K. angered both Donald Trump and Vladimir Putin by announcing its opposition to Russia’s re-entry into the Group of Seven. This Tuesday, British investigators are expected to announce evidence of Kremlin meddling in the Brexit referendum, the referendum on Scottish independence, and last December’s general election.
Speaking of Scexit, strong pro-secession sentiment in Scotland could boil over in next year’s scheduled Scottish elections. Recent polling shows a majority of Scottish voters favor independence, and the Scottish National Party is projected to win by a landslide.
As the EU turns inward, relations between the U.K. and its member countries are unlikely to improve. Europe’s political energy and financial resources will be directed toward addressing the economic tensions between North and South and the political tensions between the West and populist-ruled countries like Hungary and Poland. Unfortunately, a navel-gazing Europe has less energy for the kind of flexible and creative diplomacy that could build a strong new U.K.-EU relationship.
None of this is good for Britain, and it will certainly make Mr. Johnson’s tenure in Downing Street memorable, but it’s not the end of the world. U.K. exports to the EU and to China will suffer. They won’t disappear. Brexit and antiglobalism abroad will challenge London, but it has overcome challenges before. With the Battle of Brexit and the Corbynite era of the Labour Party both receding into the past, British politics may be settling down. And an infusion of entrepreneurial, talented and grateful Hong Kong people will likely boost U.K. prospects over the long run.
Although the North Atlantic Treaty Organization will remain the core of Britain’s security policy and relations with Europe will figure prominently in its diplomacy, Britain is looking elsewhere for its future. Fifty-two years after Harold Wilson announced that the U.K. was retreating from “East of Suez,” Mr. Johnson’s Britain is returning to the Indo-Pacific. The Five Eyes, Asian countries concerned about China’s rise, and longtime U.S. and U.K. allies in the Persian Gulf are the basis for a new grouping in world affairs in which Britain hopes to find a place. With a combined 29% of the world’s population and 46% of its gross domestic product, this bloc offers rich prospects for new British markets and partnerships.
The Gulf Arab states remain vital for the U.K. Close ties between British and Arab elites persist and will be critical to London’s future as a world banking center. We can also expect an intense U.K. effort to build ties with India, a natural alternative to China as both a market and a manufacturing platform.
The key to Britain’s new foreign policy will be Washington. Britain badly needs an ambitious new trade agreement with the U.S. and will hope to work with other members of the emerging Indo-Pacific entente to persuade America to make a rules-based trading system an integral part of its Asia policy.
For Washington, the U.K. remains a vital ally and Britain’s return to the Indo-Pacific is good news. British and American interests in the region are broadly aligned, and the development of a stable and prosperous region in the face of Chinese hostility will benefit from Britain’s presence. Secretary of State Mike Pompeo’s message to the U.K. today should be one of support and reassurance. It is very much in America’s interest for Britain to be great.
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Eternal Brexit
By: George Friedman
In 2016, the British government called for a referendum on whether the United Kingdom should remain a member of the European Union. The British people voted to leave. Since then, there has been a struggle in Britain to reverse the decision and a struggle between Britain and the EU on the terms of the departure. It’s now 2020, and the process still isn’t finished. Given that the EU is based merely on a treaty – not a federation – sovereignty is a matter for individual states, not the “government” in Brussels. Treaties are arrangements between nations, not a merger of nations, and therefore are reversible.
Since we are about to see a new and presumably final round of negotiations on the divorce, with the EU now calling for a rapid resolution, even as the Irish question is now the blocker, the real issue is how this matter has dragged on so long. To anyone who has been divorced or seen one, it makes sense: Divorces are almost always filled with rage, recrimination, desires to inflict pain and sometimes the desire that the old affection be resurrected. The children are made pawns. Friends must choose sides.
The difference, of course, is that Britain’s relationship to the EU is simply a matter of national interest and not the result of a love affair. Britain and the EU lived together when they had to, but they never married. And so the lawyers continue to meet as each side creates more barriers to an amiable disengagement.
The first barrier to the separation was within Britain. The technocratic classes and the financial community took it for granted that Brexit would be rejected by the voters. When it wasn’t, they had two choices: face the fact that they had misunderstood their country, or label the vote flawed and the result of ignorance on the part of those who voted for withdrawal. Naturally they chose the latter, a decision that is primarily responsible for Brexit’s delay. If the ignorant voted for Brexit, all they needed was a little education in the error of their ways, or so the thinking went. The best strategy, then, was to delay Brexit and persuade the country that Brexit would be catastrophic so that the government could reverse the vote.
The problem was that the technocracy and the financial community were confusing their interests with those of the country as a whole. Free trade had benefitted many, but it had also left the industrial classes struggling as low-wage countries had access to the British market. The result was a near depression in the industrial heartland of Britain. As in other countries, those who benefitted from free trade were either indifferent or mostly ignorant of the price others were paying. They never imagined they would lose the referendum, but then they didn’t know how many unemployed industrial workers there were.
A second barrier concerned national sovereignty, particularly on immigration. The enlightened elite felt a moral obligation to help immigrants. They were in lockstep with the elite of the European continent on this. Of course, the immigrants would not be living with the elites in their neighborhoods. Immigrants live in low-cost housing, the same kind that the industrial class has lived in since its decline. The idea that immigration could not be blocked under EU rules meant not only a loss of national sovereignty but a burden to be uniquely carried by those who have lost the most.
The irony was that, historically, the political factions that championed the interests of the industrial working class and were hostile to the financial elite found themselves with the opposite stance: The industrial working class was now perceived as reactionary and racist, while the financial and technocratic elite was seen as enlightened. If opposition to Brexit was enlightened, then the vote could be reversed once the rest of the country understood as much. Hence the strategy to reverse the vote and reaffirm British commitment to the EU. This continued until the election of Boris Johnson settled the question.
The EU, meanwhile, did what it could to make Brexit unpalatable with a two-pronged approach. The first was to make it appear that Brexit would be financially catastrophic for Britain and relatively inconsequential to the EU. The second prong was to make the negotiations as difficult as possible, setting terms as onerous as possible and difficult for Britain to accept. The irony was that if Brexit was of so little concern to the EU as it portrayed, then the seemingly inflexible stance it took made no sense. In truth, losing free access to the second-largest economy in Europe was enormously important, and bargaining positions notwithstanding, some accommodation was essential.
The driving force in this strategy was an implicit alliance between anti-Brexit Britons and the EU. Both badly wanted to keep Britain in the EU, and the actions of each were meant to help the other. A rigid negotiating position by Brussels made a manageable Brexit seem impossible, and might strengthen the hand of anti-Brexit British. At the same time, the constant maneuvers to reverse Brexit strengthened Brussels’ hand since they were dealing with what might be a declining faction in Britain. Together, these two factions might break the back of Brexit.
The strategy failed, of course, because neither faction could recognize or concern itself with the price the British industrial class was paying. Both expected this class to weaken, but in fact, the faction remained intact and even attracted others. The lower class movements, labeled right wing by the elite, became more powerful and more extreme. The British problem became the European problem, same as it ever was.
We are now entering what seems to be the final phase. Brussels appears to be bitter at how long the process has taken, and the chief EU negotiator, who had been threatening and unrelenting in his negotiating strategy, appears to have been removed from his position. In other words, the EU is no longer the issue. Once Britain had decided to leave, there was nothing the EU could do except delay. The issue now is the historical British issue: Ireland. Ireland is in the EU and will stay. It wants free trade with Northern Ireland. Northern Ireland is part of the U.K. and therefore will leave the EU. The EU cannot permit free trade between an EU member and a part of Britain since that will turn into free trade with England, which is not nearly as much a problem for Ireland or Britain as it is for the EU. The EU is balking, and Britain is leaving. That may reignite the political conflict in Northern Ireland.
Marriages are wonderful things. Divorces are agonizing things for all involved. This is particularly relevant when the couple has merged as completely as a good marriage requires. The lesson for nations is that all alliances end in divorce. And the more focused and limited, the less agonizing the inevitable is. In a marriage, all are one, or should be. In a political arrangement that is never the case. It’s nothing more than nations pursuing their national interest. Until death do us part does not apply to nation-states.
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“The eurozone is sliding further into a debt-deflation trap, risking a protracted economic depression in the southern countries and a slow-motion insolvency crisis. Large areas of the eurozone are at risk of debt deflation, a term used by Irving Fisher in the 1930s for when falling price levels cause real debt burdens to deteriorate in a vicious circle. It is extremely hard to break out of such a self-feeding process. It ends in mass default. The OECD’s worst case scenario sketches debt-to-GDP ratios next year reaching 229 percent in Greece, 192 percent in Italy, 158 percent in Portugal, 152 percent in France, and 150 percent in Spain. “We’re seeing a storm building up that may come to a head over the next six months,” said Ashoka Mody, the International Monetary Fund’s former deputy director in Europe. ‘Debts have to be repaid and a lot of new debt has been guaranteed by governments that can’t pay.’”
https://www.telegraph.co.uk/business/2020/10/02/deepening-deflation-pushes-southern-europe-closer-debt-spiral/
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What will President Harris Biden do about this?
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https://www.gatestoneinstitute.org/16868/hungary-europe-borders
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In Spain, the Next Phase of Catalonia's Independence Push
7 MINS READ
Dec 21, 2020 | 15:40 GMT
Demonstrators hold a Catalonian flag ahead of a political meeting in Perpignan, France, on Feb. 29, 2020.
Demonstrators hold a Catalonian flag ahead of a political meeting in Perpignan, France, on Feb. 29, 2020.
(LLUIS GENE/AFP via Getty Images)
HIGHLIGHTS
Pro-independence forces in Spain’s Catalonia region will likely remain in power after February regional elections, but they are unlikely to achieve their secessionist goals in the near-to-medium term. Nonetheless, Catalonia’s persistent push for independence will risk eventually undermining its own political and economic stability, as well as that of Spain’s. It could also stoke a nationalist backlash in other parts of the country. Catalonia will hold an early regional election on Feb. 14, though the vote could be postponed depending on the evolution of Spain’s COVID-19 epidemic. Opinion polls suggest that secessionist forces, which include the Republican Left of Catalonia (ERC) and Together for Catalonia (JxCat) will win enough seats in the Catalan parliament to form a government. Both parties were involved in the illegal referendum and the 2017 unilateral declaration of independence, and some of their leaders are in jail while others have fled the country to avoid arrest. ...
Pro-independence forces in Spain’s Catalonia region will likely remain in power after February regional elections, but they are unlikely to achieve their secessionist goals in the near-to-medium term. Nonetheless, Catalonia’s persistent push for independence will risk eventually undermining its own political and economic stability, as well as that of Spain’s. It could also stoke a nationalist backlash in other parts of the country. Catalonia will hold an early regional election on Feb. 14, though the vote could be postponed depending on the evolution of Spain’s COVID-19 epidemic. Opinion polls suggest that secessionist forces, which include the Republican Left of Catalonia (ERC) and Together for Catalonia (JxCat) will win enough seats in the Catalan parliament to form a government. Both parties were involved in the illegal referendum and the 2017 unilateral declaration of independence, and some of their leaders are in jail while others have fled the country to avoid arrest.
In early December, the Barcelona-based El Periodico newspaper released a GESOP poll in which 22 percent of respondents said they planned to vote for the ERC. JxCat came in second at 19.4 percent, followed by the two unionist parties — the Socialist Party of Catalonia (PSC) and Ciutadans (Cs) — with 18.9 percent and 10.6 percent, respectively.
Some polls suggest pro-independence parties in Catalonia may, for the first time, receive more than 50 percent of the popular vote in the next election. If this happens, the secessionist parties — who already have a majority of seats in the Catalan parliament — will use it to legitimize their demands for a legally binding independence referendum. But a larger popular mandate in Catalonia is unlikely to change Madrid’s opposition to such a vote.
Instead of making unilateral moves toward succession, the next Catalan government will likely focus on selectively challenging the authority of the Spanish central government, as it seeks to continue cooperating with Madrid in areas where it proves beneficial. The desire to secure extra national funding for the region, along with extra help in managing the spread of COVID-19, will compel Catalonia’s pro-independence parties to maintain a working relationship with Madrid. These parties will also want to avoid a repetition of the events of 2017, which resulted in the Spanish central government dismissing the Catalan regional government and taking direct control of the region. These tactical reasons to cooperate with Madrid — along with internal divisions within the pro-independence camp — will, in turn, reduce the probability of unilateral action to secede from Spain.
The COVID-19 pandemic has temporarily made Catalan independence a secondary issue for many voters. Similarly, the regional government’s immediate priority is to address the health and economic repercussions of the pandemic.
In recent months, the ERC and, to a lesser extent, JxCat have cooperated with the Spanish central government on certain issues. In early December, both parties voted in favor of the 2021 budget proposed by Spanish Prime Minister Pedro Sanchez’s government, which included roughly 2.3 billion euros in investment and fiscal transfers for Catalonia.
On Nov. 10, the Spanish parliament reformed a national law requiring that Spanish be the main language taught in schools throughout the country. This was a longstanding demand of Catalan and Basque nationalists that was made possible by the region’s cooperation with the central government.
ERC and JxCat are also interested in cooperating with the Spanish government to ensure the early release of the pro-independence leaders who are in prison. Madrid is currently considering pardoning the jailed leaders and modifying the country’s sedition laws that were used to detain them.
Small secessionist parties, like the left-wing Popular Unity Candidacy (CUP) are likely to continue demanding unilateral action and defend a confrontational strategy vis-a-vis Madrid, but their impact on actual policy will be modest.
Conservative parties in Spain will accuse the central government of being too lenient with Catalonia, which will likely exacerbate the country’s political polarization by opening the door to protests and the potential radicalization of some Spanish voters. Center-right Spanish political parties, including the Popular Party (PP) and Ciudadanos (Cs), will escalate their criticism of Sanchez’s government, accusing it of putting the country’s territorial unity at risk. In particular, Spain’s far-right Vox party will likely organize anti-government protests, trying to capitalize on growing nationalist sentiments across the country. Spain’s growing political polarization could pave the way for a center-right central government following the country’s next general election, which is scheduled for late 2023 but could happen sooner if the current minority government collapses before then. A more right-wing Spanish government would worsen Madrid’s relationship with Catalonia, increasing the probability of renewed unilateral action in the region.
As of late November, Spain’s Socialist Party was polling at roughly 28.8 percent, followed by PP at 18 percent. Recent polls also put Vox’s popularity at around 17 percent, an improvement from the 15.1 percent of the vote it received in the general election of November of 2019.
In late November, a group of 73 retired army officials sent a letter to Spanish King Felipe VI warning that the Spanish central government’s cooperation with secessionist parties was putting the country’s territorial integrity at risk. While this position does not necessarily represent the views of the active army officials, it coincides with the position of some nationalist political parties like Vox.
Spain’s central government only controls 155 of the 350 seats in the Congress of Deputies. While Sanchez managed to obtain 188 votes in favor of his budget, this majority could evaporate if nationalist parties in Catalonia and the Basque country stop cooperating with the central government.
Questions about Spain’s territorial integrity will continue to generate political and economic risk in the country, exacerbating the financial fallout from the COVID-19 crisis. The ongoing pandemic poses the most immediate threat to the Spanish economy, with domestic consumption and investment likely to remain depressed for at least several more months. In the longer term, the Spanish central government will also have to deal with worsening fiscal deficit and rising debt levels, which could raise questions in financial markets about the sustainability of Madrid’s fiscal policies. The risk of households and companies defaulting on their bank loans will remain high during 2021, as will the risk of companies going bankrupt — especially those that are small- and medium-sized). In a longer-term, the question of Spain’s territorial integrity will be of concern for both domestic and foreign actors in the country’s economy, influencing their investment and spending decisions.
The European Commission expects the Spanish economy to contract by 12.4 percent in 2020, followed by a 5.4 percent expansion in 2021. This means that Spain’s overall economic growth is expected to remain below pre-pandemic levels throughout the next year.
Spain’s unemployment rate also reached 16.2 percent in the third quarter of 2020, up from 13.9 percent in the same quarter of 2019. Catalonia’s unemployment rate, meanwhile, reached 13.2 percent in the third quarter of 2020, up from 10.8 percent in the same quarter of 2019.
Spain’s sovereign debt is expected to reach around 120 percent of GDP in 2020, from 95 percent of GDP in 2019.
Uncertainty about Catalonia’s future appears to have also contributed to a decrease in foreign direct investment (FDI) in the region, which decreased by roughly 5 billion euros between 2016 and 2019, according to Catalonia’s Statistics Institute. During that same period, FDI in the community of Madrid increased by nearly 3 billion euros.
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The EU and U.K. Reach a Trade Deal, Ending Brexit. What Now?
Adriano Bosoni
Adriano Bosoni
Senior Europe Analyst, Stratfor
6 MINS READ
Dec 24, 2020 | 16:58 GMT
HIGHLIGHTS
Five years of economic uncertainty for households and companies that began with the Brexit referendum of 2016 have come to an end. The European Union and the United Kingdom have reached a free trade agreement that covers most goods, but only a limited number of services. This means that manufacturers in the European Union and the United Kingdom will be able to continue trading with each other from Jan. 1, 2021, without any quotas or tariffs, and the heavily disruptive scenario of trade under World Trade Organization tariffs has been avoided. On the contrary, the services sector (which represents around 80% of the British economy) will have limited access to the EU single market. ...
Five years of economic uncertainty for households and companies that began with the Brexit referendum of 2016 have come to an end. The European Union and the United Kingdom have reached a free trade agreement that covers most goods, but only a limited number of services. This means that manufacturers in the European Union and the United Kingdom will be able to continue trading with each other from Jan. 1, 2021, without any quotas or tariffs, and the heavily disruptive scenario of trade under World Trade Organization tariffs has been avoided. On the contrary, the services sector (which represents around 80% of the British economy) will have limited access to the EU single market. On Dec. 24, Brussels and London announced a free trade agreement after nine months of negotiations. The announcement came only a week before the scheduled British exit from the single market on Dec. 31. In addition to trade, the deal covers cooperation on areas including nuclear energy, energy interconnections, aviation, fishing, police and judicial affairs.
The deal includes the elimination of tariffs and quotas for EU and British goods. Customs controls, however, will be applied to ensure goods comply with the agreement. This will result in additional bureaucracy that did not exist when the United Kingdom was a part of the single market.
Starting Jan. 1, companies in the British financial services sector will lose their authorization to sell their products in the single market. The European Union grants so-called "passporting" and "equivalence" rights to third countries with similar regulatory environments, but no deal has been reached yet. This is a crucial issue for the United Kingdom, as financial services represent around 7% of the British economy. London is likely to try to reach an agreement with Brussels on this issue in 2021.
The agreement does not automatically recognize one another's professional qualifications. This means that lawyers, accountants, architects and other professionals in the European Union and the United Kingdom will not be able to automatically sell their services in each other's markets and may need to open offices in the European Union and the United Kingdom, respectively, to do so. This is another area of possible negotiation in 2021.
The deal does not include a so-called "mutual recognition of conformity assessment," which means that EU and British companies will have to certify their products in each other's markets, which will create extra costs.
The free movement of people between the European Union and the United Kingdom will end, which means that people will need visas to work in each other's territories.
The deal will now be put to a vote at the European Council, which represents the EU governments, and the British Parliament. The vote at the European Parliament will take place in January, which means that the trade deal will enter force only provisionally Jan. 1, pending full confirmation from EU lawmakers. The European Commission has been in permanent contact with EU governments during the negotiations, which means that the European Council will likely ratify the deal. In the United Kingdom, Prime Minister Boris Johnson's Conservative Party controls a comfortable majority of seats in Parliament, and some members of the opposition Labour Party may also vote for the deal. While some euroskeptic Conservative members of parliament may vote against the deal, the rebellion should not be strong enough to torpedo the deal. The provisional implementation of the deal will create some uncertainty about its future, but the European Parliament will probably ratify it considering the significant political capital that the European Commission has invested.
Nigel Farage, who leads the Brexit Party, and some hard-line Conservative members of parliament have already criticized the deal. But most Conservative members of parliament have said they will support it, which means it will probably be ratified.
The French government has been particularly loud in its claims that it would not support a "bad" trade agreement. But Paris is unlikely to veto the agreement after so many months of negotiation.
The European Parliament will not have the power to modify the terms of the deal in January; the vote will be on a "take it or leave it" basis.
In the short term, the United Kingdom's reduced access to the EU market is likely to negatively impact the British economy. In the long run, this trade deal gives London some degree of autonomy to develop its own regulations and standards and opens the door for it to negotiate free trade agreements with other countries. For the European Union, the deal preserves access to the British market for a sector where it has a trade surplus (goods) while reducing its exposure to a sector where it has a trade deficit (services). The deal also achieved the EU goal of keeping the Irish border open and preserving the integrity of the single market from external competition because it includes provisions to sanction the United Kingdom in the case of unfair competition.
The current British trade strategy started in 2019, when London chose to exit the EU single market and customs union and negotiate a basic free trade agreement with the European Union.
In a press statement on Dec. 24, the British government said that the deal guarantees "we are not bound by EU rules, there is no role for the European Court of Justice and all of our key red lines about returning sovereignty have been achieved."
The British government has expressed interest in signing multiple free trade agreements around the world with countries such as the United States and the members of the British Commonwealth; many of these countries were waiting for the EU-U.K. negotiations to end before proceeding with their own talks.
In recent years, firms in the British financial services sector have moved some of their staff and operations to the single market in order to continue to be able to sell their products in the European Union.
This agreement puts an end to the period of political and economic turbulence that began with the Brexit referendum of June 2016. The European Union and the United Kingdom will continue to negotiate aspects of the bilateral relationship that remain unaddressed as well as the bilateral disputes that may emerge during its implementation. But with a free trade agreement in place, Brexit will finally become a secondary issue in European politics. Since 2016, business groups, unions, farmers, consumers' associations and other groups have demanded clarity from the European Union and the United Kingdom about their future relationship. Brexit has also been a dominant factor of British politics and, to a much lesser extent, EU politics.
One of the more important long-term political consequences of Brexit for the United Kingdom will be the issue of Scottish independence. A majority of Scottish voters supported the "remain" side during the Brexit referendum, and the governing Scottish National Party wants another independence referendum in the country, something London opposes.
For the European Union, a key political goal was to send the message to domestic voters that exiting the bloc is not easy or painless. Nationalist and euroskeptic political parties in the bloc will now face the challenge of adapting their rhetoric to a post-Brexit Europe.
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https://worldview.stratfor.com/article/pro-secession-majority-catalonia-signals-uncertainty-spain?id=743c2bc617&e=de175618dc&uuid=94aad0cf-3e05-4e43-9d93-953d576335cc&mc_cid=b18f0255b5&mc_eid=de175618dc
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I leave pop culture issues to our correspondent ccp, but if I am to understand this European crisis correctly, Meghan contends it was Kate who made her cry, not the other way around as reported in the press, and it is unforgivable that Kate did not correct the wrong reports. Resultingly, Meghan felt suicidal until she scored this multimillion dollar revenge in an even larger false media report.
And what if the baby had looked black, OMG. But if you speculate a baby might have red hair, be tall, thin or smart it's okay?
Is it bad to be black? Everyone else is bragging about their non-white heritage, even if fictitious.
I didn't see the interview, just hoping Kate gets equal time. A two hour apology? But Meghan said she did apologize.
In the end, they all make up on a never seen before, never done before, four hour Oprah special. Right?
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French protests. For the fourth consecutive week, protests against a COVID-19 health pass broke out in France over the weekend. According to the Interior Ministry, 237,000 people participated in the demonstrations, an increase of roughly 30,000 from the previous weekend. Similar protests were also held in Italy, though on a much smaller scale.
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https://oilprice.com/Energy/Natural-Gas/Skyrocketing-Energy-Prices-Could-Cripple-Europes-Economy.html
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https://www.19fortyfive.com/2021/09/how-a-rising-china-complicates-europes-future/
ByJames Jay Carafano Silviu Nate and Oana-Antonia ColibasanuPublished18 hours ago
China's Xi Jinping at BRICS SummitChina's Xi Jinping at BRICS Summit
Beijing’s relentless drive to transform itself into a global power places it in direct competition with the U.S. That has affected both nations’ relations with regional powers, such as Russia and Turkey, and those effects will continue to ripple across Europe. Along the borderlands, from the Baltics to the Balkans, friction with China will only increase.
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Definition
The China Problem
China’s economic diplomacy is the most astringent irritant in great power politics. Under the Belt and Road Initiative, Beijing established the 17+1 (now 16+1 since Lithuania pulled out in May) cooperation mechanism with Central and Eastern European countries stretching between the Baltic Sea, the Black Sea, and the Adriatic. Chinese investment has focused mainly on infrastructure such as the transportation, energy, and telecommunications sectors.
From 2009-2019, the arrangement has generated financial flows estimated at around $13.5 billion (two-thirds of this in the last five years). This figure includes not just foreign direct investment, but also development loans, grants, mergers, and acquisitions of local assets or through long-term concession agreements.
The flood of Chinese cash has done more to raise red flags than GDP. Most recently, Montenegro became a posterchild for the “debt-trap” problem a country can face after taking up a large loan from China without necessarily considering a cost-benefit analysis of holding massive, unsustainable public debt. Today, Montenegro owes Beijing over a $1 billion—a debt that is one-fifth the size of the nation’s economy. Other countries in the region, such as Bosnia Herzegovina, have also taken Chinese loans translating into significant national debt. These practices not only expand Chinese economic influence in Europe, they undermine fiscal prudence and good governance practices.
More at link.
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likely due to that Merkel just got her butt beat:
https://www.cbsnews.com/news/germany-angela-merkel-election-2021-to-bring-shift-to-the-left/
https://www.dw.com/en/german-population-of-migrant-background-rises-to-21-million/a-54356773
Reminds me of the Bush stooges
welcome immigrants till they vote them out and those who lived here for all their lives
nothing stupid about that :roll:
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Worst inflation since 2008 led by 18% rise in energy costs.
https://apnews.com/article/business-europe-prices-inflation-european-union-9005439103bdb90fad2254ce5436246e
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https://www.macaubusiness.com/polish-court-rules-against-supremacy-of-eu-law/
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https://www.breitbart.com/europe/2021/10/30/fishing-wars-france-says-britain-should-be-punished-brexit/
history repeats itself
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December 1, 2021
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Why the Poland-Belarus Border Crisis Won’t Last
It’s particularly bad for the Belarusian president.
By: Antonia Colibasanu
Images of migrants – many of them with children, coming mainly from the Middle East – camped at the border as they try to force their way into Poland from Belarus continue to litter the news. There are rumors that the situation is dying down, of course. On Nov. 18, it was reported that many of the migrants were being moved by Belarusian security forces back from the border into a government-run facility. There were also reports that at least a couple of flights traveled from Minsk to Iraq carrying migrants who had agreed to return to their homeland. But plenty of migrants remain, and it’s unclear what the long-term plan is for those who have no intention of leaving.
Though the current crisis will likely end, as most do, Belarusian political stability remains uncertain. That, in turn, opens the door for increased pressure from Russia – which needs to hold Minsk in its sphere of influence. Rumors of an alleged Russian invasion of Ukraine may dominate the headlines, but Belarus holds the key to regional instability in the months to come.
Vulnerability
But before we look east, let’s look to Belarus’ west. Last week, Belarusian President Alexander Lukashenko said the European Union should pay for the migrants to return home. The EU accused Belarus of “the instrumentalization of human beings” for political purposes. On Nov. 15, the European Council increased sanctions on Belarus by broadening the criteria on which specific designations can be based – the EU is now able to target individuals and entities helping illegal crossings of the EU's external borders. It also allocated about $850,000 in humanitarian assistance to support migrants stranded at the Belarusian border. (Notably, it is doing so through its non-governmental partner organizations, not through the government in Minsk.)
With the 2015 immigration crisis fresh on its mind, the EU sees migration like this as a threat to its own socio-economic security. Put simply, an influx of immigrants will make it more difficult for the EU to solve its pandemic-related economic problems. Poland and other Eastern European member states have said they would prefer not to accept migrants, especially since most are trying to go to Western European countries. But many in the West such as Germany and France are struggling to accommodate migrants and refugees too.
What complicates things is that because the crisis most immediately affects a NATO member and a pro-Russia government, this is now also a NATO issue. On Nov. 25, the alliance’s secretary-general said, “Allies have made clear that they strongly condemn the Lukashenko regime’s exploitation of vulnerable people to pressure neighboring countries.” He threw in a jab about Russia’s military buildup near Ukraine for good measure.
This comes ahead of a NATO foreign ministers meeting in Riga from Nov. 30 to Dec. 1 – a summit where NATO representatives will also meet the foreign ministers of Ukraine and Georgia. Given the context, it’s probably no coincidence that on Nov. 29 the deputy chairman of Russia's Security Council, Dmitry Medvedev, described the situation on the Belarus-Poland border as one of the gravest migration crises in Europe, one that may have delayed global effects. Meanwhile, Belarusian Defense Minister Viktor Khrenin announced on Nov. 29 that Belarus is planning military exercises with Russia to cover the southern borders at a yet unspecified date. In other words, the issue is not only about the migrants but also about the potential to draw opposing powers into conflict.
Russia is a vulnerable nation. It isn’t in its interest to start a fight, but it would welcome an opportunity to play the victim. Its core strategy is to maintain its buffer zone and prepare for any potential aggressive action from the West. It sees NATO’s enlargement as a threat to its interests, so having a NATO member launch a direct attack would certainly be a validation. It has, meanwhile, developed a soft approach to deal with the West, using political and economic problems to enhance its influence in its buffer zone. The current border crisis fits the mold. A mistake at the border that could be interpreted as an attack of the West against Belarus would give Russia a great excuse to complain about NATO and to play the hero in Belarus.
Lessons Learned
The current border crisis started in May, when migrations first tested the more vulnerable borders of Lithuania and Latvia. Both countries have since declared a state of emergency at the border with Belarus, indirectly channeling migrants to the Polish border.
For their part, Poland and Belarus see both challenges and opportunities in the current crisis. From the Polish perspective, Russia is clearly involved somehow. Warsaw argues that the situation closely resembles the Finland-Norway dispute of 2015-16 and is therefore orchestrated. (The Finnish border was attacked in early 2016 after Norway ceased to consider asylum applications from migrants with documents attesting to their legal residence in Russia.) The migration routes (Middle Eastern immigrants coming into Europe from the north) are similarly odd, and the attacks are likewise consistent: Basically, migrants attempting to cross the border alternate between small group attacks and massive attacks.
Back then, the EU had sanctions imposed on Russia, and Finland had curbed bilateral ties with Russia in response to the Russian intervention in Ukraine. Finding a solution to the dispute allowed Russia to finagle its way to foster cooperation between the Nordic states and Belarus. It’s not a stretch to think that both sides learned lessons from the Finland-Norway dispute.
The Polish government is in a tough spot, needing to live up to its tough-on-migration stance at home without going too far and provoking a crisis with Russia or losing the backing of the EU or NATO. In 2015, Brussels slammed ruling party leader and current Vice President Jaroslaw Kaczynski for saying Poland did not have a moral obligation to accept refugees. But Warsaw’s anti-immigration policy has continued, and today Poland has one of the lowest shares of foreign nationals in the EU. Pinning the blame for the current crisis on Russia is key for Poland’s strategy, because it portrays Poland as a defender against a Russian hybrid attack and pressures the EU to rally behind Warsaw. At the same time, Poland can’t allow the standoff to escalate too far and risk triggering a conflict that no one, save perhaps Russia, would welcome.
For its part, Belarus is also playing a high-stakes game. Lukashenko needs to prove that he is in control. Moreover, he is angry with the Baltic states and Poland for hosting Belarusian political figures who have led opposition to his regime. More than anything, Lukashenko wants the EU to recognize his leadership over the country. He hopes to force European leaders to talk with him and recognize him as one of their peers, something German Chancellor Angela Merkel explicitly tried to avoid during her phone conversations with Lukashenko, referring to him as “Herr (Mr.) Lukashenko” instead of “president.” He also wouldn’t mind some EU money, even if it’s only to send migrants back home. It’s worked for Belarus in similar situations in the past.
That said, Lukashenko also is feeling the heat at home, and he needs to maintain order and gain the public’s trust. Solving the humanitarian crisis on the border is one way he hopes to achieve that. It’s safe to say he no longer has the support of the majority of the population. According to a closed survey by the Russian Public Opinion Research Center that was leaked online in October, 59 percent of Belarusians want Lukashenko to be replaced. If Moscow wanted to replace him with another pro-Russian leader, it would not have to look too hard: Jailed leader Viktor Babariko, a bank chief with links to Russia, would be a prime candidate.
Growing Paranoia
Lukashenko says he is loyal to Moscow, but he has worked hard to keep Belarus engaged with the West to give himself leverage against the Kremlin and options in case of a Russian economic crisis. The Kremlin is certainly agitated that it has invested years in the idea of a military union with Belarus that still has not been achieved. It has had to use all sorts of tactics, including energy pressure, to stop Lukashenko from leaning too far toward the West. With Ukraine lost to the West, Russia has had to double down on Belarus.
At some recent webinars I participated in, even voices from Belarus confirmed that Russia may want to protect its influence in the country by getting rid of Lukashenko. After all, he is an authoritarian leader who believes he can defy Moscow when it suits him. There was speculation that Russian troop movements that the West fears are directed at Ukraine may in fact be a threat to Lukashenko’s regime. Lukashenko certainly worries about having Russian troops on Belarusian soil, even if they have a good excuse to be there, as they did a few months ago for the Zapad 2021 war games. If Belarusians are openly speculating on this, the Lukashenko regime must be at least as anxious.
The cold weather and the fact that Minsk has agreed to accommodate the migrants in government facilities suggest the border crisis will likely fade within weeks. But considering the growing isolation of Lukashenko, who leads a country that is both economically weak and mostly dependent on Russia, the potential for instability and even regime change in Belarus is rising. In the present circumstances, when most of the pro-Western opposition to Lukashenko has been exiled, unrest would likely lead to the installment of a new pro-Russian regime.
This may not be something that happens in the next few weeks or months, but Lukashenko is increasingly and legitimately worried about it. The Belarusian leader is trapped in a corner, and the danger is that he may take desperate measures to try to save himself. A slip-up that threatens Russian interests in Belarus or the region could turn Lukashenko’s fears into reality. This is probably the most important reason that Lukashenko hopes to end the border crisis quietly.
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January 28, 2022
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The German Question
Thoughts in and around geopolitics.
By: George Friedman
Regardless of how the Ukraine crisis ends, one thing present but often overlooked is the German question. It’s a question that has hounded Europe for centuries. After the Napoleonic Wars, the concern was whether Germany would unite into a single state. The Germans, especially the leaders of their fractious countryside, worried about this too, for in an age of monarchs and emperors, there can be only one ruler. But for the rest of Europe, the prospect of a revived Holy Roman Empire, a once-powerful entity even without the sense of unity or shared “German” identity, was frightening. The possibility that it might share Prussia’s militarism made their fears all the more acute.
The German question loomed large, but it wouldn’t be answered until 1871 when the fragments of Germany were cajoled by Prussia and Otto von Bismarck to at least partially unite. Germany was a weak experiment that nonetheless defeated France in a rapid war. This bought the southern Catholic part of Germany into the new nation-state. Germany was thus created, and France was defeated.
The next question was what the German state would be. In a Europe now constructed around the Industrial Revolution, the new Germany surpassed France and challenged the United Kingdom as an economic powerhouse. (Particularly frightening were German efforts to develop a navy.) The very existence of a united Germany undermined the balance of power in Europe that had been settled after the defeat of Napoleon.
Both world wars pivoted around the German question. After 1945, the issue seemed to have been settled, but alas, Germany was too strategically important to the U.S. and the Soviet Union. The Soviets' forward position was in East Germany. NATO was created to guard West Germany, and a West German military force was created to guard its eastern frontier. West Germany, rich in expertise if nothing else, executed an economic miracle that propelled Germany to the top of the European economic hierarchy.
The country became a front line in the Cold War. The Germans didn’t want this; they wanted a united Europe that would bury German nationalism under new institutions and create a framework for economic growth. The European Union was intended to achieve both but failed in a fundamental way. Germany emerged not only as the major economic power of the bloc but also as the de facto arbiter of European affairs. Obscured by the Cold War, the German question clarified itself again. Germany was the dominant force in Europe.
The genuine desire of most Germans was to not allow the country's economic power to overshadow its position as simply another European power. After the Cold War ended, Europe focused not on military force but on prosperity. But history took a turn. The prosperity of Europe was not uniform, and Germany itself was not safe from history. The interests of the EU’s members were profoundly different. Italy’s economy could not bear what Germany had to have. Eastern Europeans had values the Germans disliked. In other words, the reality was far more complex than what the Germans wanted.
And so, as the crisis plays out along Ukraine’s border, the German question has once again emerged. Russia has risen from the collapse of the Soviet Union as a military power insisting on reshaping Ukraine and Eastern Europe to its interests. Germany depends on Russia for energy, and it is horrified by even the possibility of armed conflict to its east. NATO is now a trap for Germany, compelling Germany to cooperate on the one thing it did not want to do: prepare for a potential war. It has refused to send weapons to Ukraine, putting it at odds with the U.S. and Britain. It cannot afford to risk its economic relationship with Russia. Every time Germany tries to escape history, history pulls it back in.
For Germany, life after World War II, but especially after the Cold War, was about economics. It achieved through the EU what it couldn’t achieve since 1871: domination of Europe. And it did so without the kind of violence that had ripped the Continent apart for centuries.
That may no longer be the case. Russia, less powerful than before but powerful still, is reclaiming lands in its supposed sphere of influence. The U.S. is once again on the defensive. NATO still exists, and Germany is part of it. Germany is thus essential in the Ukraine affair. Economic power, economic needs, fear of war and fear of what peace would look like tear at the Germans.
Germany had hoped that its past could be forgotten. But in this confrontation, the German question is vital. How Berlin answers that question – or how others try to answer it – will once again reshape Germany and Europe. Germany may not like it, but the question has been around since the Battle of the Teutoburg Forest. Nations don’t get to select what questions are put to them.
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NATO is a joke and has long outlived it’s usefulness.
January 28, 2022
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The German Question
Thoughts in and around geopolitics.
By: George Friedman
Regardless of how the Ukraine crisis ends, one thing present but often overlooked is the German question. It’s a question that has hounded Europe for centuries. After the Napoleonic Wars, the concern was whether Germany would unite into a single state. The Germans, especially the leaders of their fractious countryside, worried about this too, for in an age of monarchs and emperors, there can be only one ruler. But for the rest of Europe, the prospect of a revived Holy Roman Empire, a once-powerful entity even without the sense of unity or shared “German” identity, was frightening. The possibility that it might share Prussia’s militarism made their fears all the more acute.
The German question loomed large, but it wouldn’t be answered until 1871 when the fragments of Germany were cajoled by Prussia and Otto von Bismarck to at least partially unite. Germany was a weak experiment that nonetheless defeated France in a rapid war. This bought the southern Catholic part of Germany into the new nation-state. Germany was thus created, and France was defeated.
The next question was what the German state would be. In a Europe now constructed around the Industrial Revolution, the new Germany surpassed France and challenged the United Kingdom as an economic powerhouse. (Particularly frightening were German efforts to develop a navy.) The very existence of a united Germany undermined the balance of power in Europe that had been settled after the defeat of Napoleon.
Both world wars pivoted around the German question. After 1945, the issue seemed to have been settled, but alas, Germany was too strategically important to the U.S. and the Soviet Union. The Soviets' forward position was in East Germany. NATO was created to guard West Germany, and a West German military force was created to guard its eastern frontier. West Germany, rich in expertise if nothing else, executed an economic miracle that propelled Germany to the top of the European economic hierarchy.
The country became a front line in the Cold War. The Germans didn’t want this; they wanted a united Europe that would bury German nationalism under new institutions and create a framework for economic growth. The European Union was intended to achieve both but failed in a fundamental way. Germany emerged not only as the major economic power of the bloc but also as the de facto arbiter of European affairs. Obscured by the Cold War, the German question clarified itself again. Germany was the dominant force in Europe.
The genuine desire of most Germans was to not allow the country's economic power to overshadow its position as simply another European power. After the Cold War ended, Europe focused not on military force but on prosperity. But history took a turn. The prosperity of Europe was not uniform, and Germany itself was not safe from history. The interests of the EU’s members were profoundly different. Italy’s economy could not bear what Germany had to have. Eastern Europeans had values the Germans disliked. In other words, the reality was far more complex than what the Germans wanted.
And so, as the crisis plays out along Ukraine’s border, the German question has once again emerged. Russia has risen from the collapse of the Soviet Union as a military power insisting on reshaping Ukraine and Eastern Europe to its interests. Germany depends on Russia for energy, and it is horrified by even the possibility of armed conflict to its east. NATO is now a trap for Germany, compelling Germany to cooperate on the one thing it did not want to do: prepare for a potential war. It has refused to send weapons to Ukraine, putting it at odds with the U.S. and Britain. It cannot afford to risk its economic relationship with Russia. Every time Germany tries to escape history, history pulls it back in.
For Germany, life after World War II, but especially after the Cold War, was about economics. It achieved through the EU what it couldn’t achieve since 1871: domination of Europe. And it did so without the kind of violence that had ripped the Continent apart for centuries.
That may no longer be the case. Russia, less powerful than before but powerful still, is reclaiming lands in its supposed sphere of influence. The U.S. is once again on the defensive. NATO still exists, and Germany is part of it. Germany is thus essential in the Ukraine affair. Economic power, economic needs, fear of war and fear of what peace would look like tear at the Germans.
Germany had hoped that its past could be forgotten. But in this confrontation, the German question is vital. How Berlin answers that question – or how others try to answer it – will once again reshape Germany and Europe. Germany may not like it, but the question has been around since the Battle of the Teutoburg Forest. Nations don’t get to select what questions are put to them.
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https://www.gatestoneinstitute.org/18202/eu-alliance-conservatives-populists
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Polish Prime Minister Morawiecki said that Europe's future rests on sovereign states:
"We have shown that there is a different future for Europe, which is based on sovereign countries, not on any centralized structure that takes away powers from states.
"We showed each other that we think almost alike about such important issues as the Russian threats towards Ukraine, migratory pressures, energy issues, with very high gas prices being the result of manipulations on the part of Russia.
"The most important thing is to be united in our values ... and create a document presenting an alternative to the future of Europe. I hope that we are the alternative to the future of Europe."
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like libs doing here
https://www.voanews.com/a/clouds-over-merkel-s-legacy-as-russian-invasion-lays-flaws-bare/6481942.html
forget globalism
the world, as has been obvious for decades, has been spitting into a few large groups
a real leader will
organize and fit the US into a new place
within these groups
I have zero confidence in the Democrats to do this
nor do I want them deciding for us little people
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https://jungefreiheit-de.translate.goog/kultur/gesellschaft/2022/ukrainerin-vergewaltigt/?_x_tr_sl=auto&_x_tr_tl=en&_x_tr_hl=en-US&_x_tr_pto=wapp
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https://www.zerohedge.com/geopolitical/48-hours-after-orbans-landslide-victory-eu-launches-punitive-rule-law-mechanism?utm_source=&utm_medium=email&utm_campaign=588
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https://www.zerohedge.com/geopolitical/48-hours-after-orbans-landslide-victory-eu-launches-punitive-rule-law-mechanism?utm_source=&utm_medium=email&utm_campaign=588
https://www.zerohedge.com/news/2022-04-06/why-liberal-west-hates-orbans-hungary
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Hungary Is No Model for Conservatives
Viktor Orbán is lauded for fighting liberal ‘tyranny,’ but he always takes money from Brussels in the end.
By Joseph C. SternbergFollow
April 7, 2022 11:43 am ET
One of the stranger phenomena of the age is that a certain kind of conservative now holds out Hungary as the model of Christian governance to which the West should aspire. This explains why this week you’ve read more than you ever wanted to about last Sunday’s re-election of Viktor Orbán as prime minister of the small and dysfunctional European state.
The case for Orbánism is that Mr. Orbán fights. His international reputation and some of his domestic success are built on a string of fierce political conflicts with European Union grandees in Brussels and across the bloc’s other member countries.
Mr. Orbán resisted the EU’s opening to mass migration from the Middle East in 2015. He has crossed swords with civil-society goo-goos over laws aimed at reducing the political influence of the likes of Hungarian-born left-wing billionaire George Soros (“the likes of” in Hungary comes tinged with anti-Semitism since Mr. Soros was born into a Jewish family). More recently Mr. Orbán has waded into sexual politics: Also on the ballot in Sunday’s election was a referendum to ratify a law resembling Florida’s restrictions on inappropriate sex ed in early grades.
All of this is deeply offensive to so-called good Europeans in politics, academia and the media. Some of it has proved effective at needling European institutions because Mr. Orbán has lit on issues where the EU leadership has drifted furthest from the electorate, most acutely on immigration.
The only problem for the credibility of Mr. Orbán’s fans is that he never actually fights all that hard. The tiltyard in which Mr. Orbán and his critics stage their jousts is the EU budget. Hungary is a net recipient of funds from the bloc. A pressing issue concerns up to €7.2 billion in pandemic aid that Brussels is stalling—Mr. Orbán says because he’s conservative, Brussels says because Budapest is corrupt.
For all the bellyaching about an overweening European bureaucracy, money is the only power Brussels has. That’s no small thing, but it’s something countries can accept or reject relatively freely. If Mr. Orbán really considers the EU’s demands on matters such as the organization of the judiciary to be intolerable affronts to Hungarian sovereignty, he could refuse Brussels’ handouts. He could even propose that Hungary leave the EU. Britain did, and the invading army staging a Reconquista from Belgium has yet to appear.
That Mr. Orbán never does either of those things should be more embarrassing to his boosters than it seems to be. One reason he doesn’t is that the EU remains popular in Hungary. Some 47% of Hungarian respondents had a positive view of the EU and only 13% had a negative view in the latest Eurobarometer poll, published this month—better than the 44% and 17% for the EU population as a whole. Last spring’s edition, for which more-complete breakdowns are available, found more Hungarians trust the EU (56%) than trust their own government (45%).
More embarrassing still should be the way Mr. Orbán’s claim on EU resources turns the sovereignty argument on its head. What’s at stake in Hungary isn’t the sovereignty of Hungarians to make decisions about immigration or social policy. No one is stopping them, provided they’re willing to fund their own government. What’s at stake is the sovereignty of taxpayers in socially liberal European states to decide on what sorts of neighbors they’d like to lavish their largess.
Those voters appear genuinely to believe some version of the left-liberalism asserted by the national politicians who are elected to represent them and who appoint the Brussels bureaucracy. Take the vexed question of sex as an example, since Mr. Orbán’s conservative defenders so often do. Some 49% of Hungarians told Pew pollsters in 2019 that “homosexuality should be accepted by society.” But 86% of Germans hold that view, and they’re the ones writing the checks.
The threat to the European Union has never been that charity cases such as Hungary will leave the bloc. The danger is that the large creditor states will give up if or when they conclude the EU no longer serves their values. Mr. Orbán’s genius is to find a way to profit politically from giving Brussels its own opportunity to virtue-signal. It feels like a piece of bad performance art, although to suggest either side planned it is to give them both too much credit.
As for the conservatives who keep buying tickets for this show, perhaps the reason they overlook Mr. Orbán’s embarrassing failure to put muscle behind his bluster is that they know his refusal spares them deeper blushes. All evidence suggests that if ever the form of Habsburg Restoration these national conservatives advocate ends up on a ballot, it will lose. Mr. Orbán’s great utility to them is to fight the good fight, but never hard enough to fail.
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https://michaelyon.locals.com/upost/2506766/serbia-and-kosovo-shooting-at-each-other
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The Risk of Another Balkans War, Part 1: Placing Recent Flashpoints in Context
undefined and Director of Analysis at RANE
Sam Lichtenstein
Director of Analysis at RANE, Stratfor
10 MIN READAug 15, 2022 | 19:38 GMT
Editor's Note: This column is the first of a two-part series that assesses the risk of another war breaking out in the Balkans amid renewed concerns over ethnic tensions, political unrest and competing external influence in the region.
Call it the ''license plate conflict'' — or maybe not. Two weeks ago, global media outlets intensely covered the short outbreak of protests in northern Kosovo. A recurring dispute over license plates led ethnic Serbs to block roads and forced Kosovar authorities to briefly close two border crossings into Serbia. Kosovar police also reported that unknown assailants fired shots at them, though there were no injuries, and some Serbian demonstrators reportedly beat up a few drivers who tried to bypass the roadblocks. The protests began July 31, but were over by Aug. 1.
Depending on your perspective and choice of media coverage, the incident was either much ado about nothing or a harbinger of a potential return to ethnic conflict. However, as is often the case in all-or-nothing framing of events, the flare-up should not be dismissed and deserves real attention, but it also does not suggest Kosovo, or the wider Balkans region, is in imminent danger of collapsing into widespread violence as it did in the 1990s. Instead, the license plate dispute is a symptom of a much larger challenge — unresolved ethnic identity politics — which makes it incumbent on us as analysts to consider the risks, but also the larger context in which they are present.
The Ghosts of Balkans Past
The July 31 protests were by no means unprecedented. The dispute has been simmering since September 2021, when Kosovar authorities first announced they would not renew a decade-old agreement with Serbia to recognize its license plates in Kosovo. Kosovar authorities played down the decision, saying the change would merely match the rules issued by Belgrade, which does not recognize osovo Unification Risks Destabilizing the Balkans. However, in a preview of the latest flare-up, ethnic Serbs in northern Kosovo temporarily blocked border crossings, with sporadic reports of low-level street violence, before Kosovar authorities withdrew the ban and the situation de-escalated.
While the row is ostensibly about license plates, it taps into much deeper divisions that explain why the measure has generated these flare-ups in unrest. Although various peace agreements ended the fighting that comprised the multiple conflicts that accompanied the breakup of Yugoslavia in the 1990s, they left many fundamental questions unsettled — most of which touch on questions of ethnic identity. As one of the largest regional flashpoints, the dispute between Kosovo and Serbia touches on two underlying challenges. First, there is the aforementioned question of the legitimacy of Kosovo's independence. The dispute is nominally a political one that could, in theory, reach some form of accommodation. But it also has an ethnic dimension because the vast majority of Kosovo's population is ethnically Albanian and Muslim, whereas Serbia's is largely ethnically Serbian and Christian. Adding to this division is the fact that more than half of Kosovo's Serbian minority is concentrated in the northernmost region of Mitrovica, bordering Serbia, making it ethnically distinct from the rest of Kosovo and helping explain why demonstrations over the license plate dispute have been concentrated there. Further complicating matters, however, is the fact that smaller groups of Serbian minorities are spread throughout pockets of the rest of Kosovo.
Many academic studies have dissected the question of whether ethnic conflicts are truly about competing identities or whether they're actually veiled disputes over other issues, such as political power and access to natural resources. However, the fact remains that such conflicts can cause serious divisions, especially when ethnic differences and material grievances overlap.
In the Balkans, this is partly because of its history. After all, Yugoslavia — be it as a kingdom prior to World War II or as a communist federation in its wake — was always held together by a strong central leader, not because of any logical unity among the varied peoples that inhabited the territory. Unsurprisingly, therefore, the wars (and war crimes) of the 1990s that comprised the dissolution of Yugoslavia were fought largely along ethnic lines, thus reinforcing the fundamental importance of cultural identities.
Since then, Balkan leaders across the political spectrum have frequently made appeals to ethnicities over nationalities, thus keeping personal identities at the center of society. This has meant that many aspects of daily life — everything from political debates to, yes, license plates — still have ethnic connotations. Even measures designed to assuage ethnic concerns, such as ethnic quotas for government positions in many countries, have kept identity politics front of mind and in some cases worsened tensions.
As a tragic demonstration of the salience of identity politics, even highly unlikely threats risk inflaming ethnic unrest in the Balkans. For instance, there has long been speculation over the creation of a ''Greater Albania'' that would incorporate Kosovo's majority-Albanian population into Albania itself. Politicians in both countries have spoken in favor of it and polls suggest citizens on both sides of the border would, in theory, be amenable to the idea. Nonetheless, the notion of a ''Greater Albania'' has largely been relegated to the periphery, as it is widely believed that creating such a state would run into potentially insurmountable legal challenges, practical objections over implementation and unpopular economic and political changes. But even so, the mere discussion of the idea has raised heckles from Serbia and prompted concerns of the knock-on effects in other Balkan countries with large Albanian minorities — all of which have kept ethnic divisions front and center.
To this end, while it was ethnically-tinged tensions between Kosovo and Serbia that most recently made the news, arguably the greater threat of unrest lies in Bosnia and Herzegovina — another Balkan country with a large, distressed Serbian minority. There, decentralized governance is effectively split into two largely autonomous entities: the mainly Bosniak-Croat Federation of Bosnia and Herzegovina and the Serb-dominated Republika Srpska. This unwieldy system — which also includes a tripartite presidency (one from each of the three main ethnic groups) at the national level — was established in the 1995 Dayton agreement that ended the Bosnian War. While the U.S.-brokered peace deal resolved the more than three-year war, it did so at the cost of creating an unsustainable governance structure that has effectively paralyzed the country and entrenched ethnic distinctions.
This has resulted in numerous flare-ups in Bosnia and Herzegovina, most recently caused by the country's top Bosnian Serb politician, Milorad Dodik. Dodik leads the Republika Srpska and often engages in cynical political appeals to ethnic divisions. Most concerningly, he has repeatedly threatened to remove the Republika Srpska from Bosnia and Herzegovina's national institutions — a move that would directly undermine the tenuous postwar peace. As a testament to this threat, earlier this year the United States and the United Kingdom each sanctioned Dodik for charges related to threatening the stability of both his country and the wider region.
Looking to the West
But for all the media headlines questioning whether the Balkans is barreling toward another war, these recent flashpoints have notably resulted in much more of a whimper than a bang. This is in large part because, for all their differences, the Balkan states share a desire to integrate deeper into Europe and in many respects depend on Western economic financing and in some cases security guarantees.
Most importantly, every country in the region is either already an EU member (Croatia and Slovenia), an official ''candidate country'' engaged in ongoing negotiations with Brussels (Albania, North Macedonia, Montenegro and Serbia), or a ''potential candidate country'' for EU membership (Bosnia and Herzegovina and Kosovo). All Balkan states are thus highly incentivized to keep the peace, as any return to violence would jeopardize their accession process and the many benefits they hope to accrue by joining the European Union.
The European Union is already the main economic partner for regional countries, with Brussels and individual EU countries accounting for the majority of trade and much of the financial aid that flows into the Balkans. Straining EU relations by engaging in conflict is thus not merely a notional, longer-term concern, but one that would have immediate consequences for Balkan economies as well.
Combined with historic U.S. political and economic influence (as evidenced by Washington's role in ending the Yugoslav Wars of the 1990s), the European Union's influence over the Balkans is crucial leverage that has time and again helped to calm tensions. Furthermore, the presence of EU and NATO peacekeepers, advisors and trainers on the ground in Kosovo and Bosnia and Herzegovina provides a tangible check on conflict in arguably the two largest potential powderkegs in the region, both by deterring violence and ensuring unrest remains minimal when flare-ups do occur.
Take the license plate dispute between Serbia and Kosovo, for example. It was EU and U.S. political intervention, backed by NATO peacekeepers on the ground, that de-escalated tensions last September, as well as two weeks ago. In fact, the European Union's foreign policy chief is scheduled to hold negotiations in Brussels on Aug. 18 between Kosovo and Serbia as part of an ongoing EU-facilitated dialogue (another restraint on armed conflict) between the two sides. While the territorial dispute at the root of the issue is unlikely to be resolved anytime soon, multinational pressure and historical precedent suggest that Kosovo will adjust the license plate measure or again delay its implementation beyond Sept. 1, when it is currently scheduled to take effect. This means the disagreement is likely to remain a stalemate, much more of a problem to be managed than a crisis to be countered. Indeed, for all their rhetorical bluster, neither Kosovar Prime Minister Albin Kurti nor Serbian President Aleksandar Vucic
has shown a serious appetite for actual armed conflict, which would bring significant costs for both of their countries with little benefit. Instead, both leaders appear to be using the appeals of ethnic identity more as a way to drum up domestic political support, establish strong negotiating positions and, in some cases, extract concessions from the West — before ultimately backing down.
Furthermore, consider that some Balkan states are taking steps to deepen regional integration. Indeed, ethnic and other disputes have not prevented Albania and Serbia (along with North Macedonia and potentially others one day) from making plans to create a single market to allow the free movement of people, goods, services and capital. While the process is admittedly slow-going and faces near-term challenges, it is hardly the sort of policymaking that suggests these countries are planning for major conflict.
Finally, what may seem like intractable problems need not be so. What is now North Macedonia had a nearly three-decade dispute over its former name, simply Macedonia, which is also a region in Greece. For years, the disagreement — which also featured arguments over ethnic identity — was a source of regional instability. Tensions with Greece over the name change also inhibited Macedonia's aspiration to join NATO and the European Union, as neither bloc wanted to admit a country that had such an ongoing dispute with an existing member. Ultimately, however, Athens and Skopje came to an agreement in 2018 in which Macedonia became North Macedonia, facilitating its entrance into NATO and becoming an official EU candidate in 2020 — a clear demonstration of the underlying drivers for peace over conflict even after years of rhetorical sniping and negotiations at loggerheads.
In the second part of this series, we'll explore China and Russia's increasing interest in the Balkans and what it may mean for the region's long-term stability.
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Bernie Sanders and his ilk think "Scandinavian socialism" is the model, with open borders. Swedes don't.
https://www.nytimes.com/2022/09/14/world/europe/sweden-election-result-right.amp.html#amp_tf=From%20%251%24s&aoh=16632448669233&referrer=https%3A%2F%2Fwww.google.com
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https://www.theamericanconservative.com/the-threat-of-civil-war-in-europe/
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https://www.theamericanconservative.com/the-threat-of-civil-war-in-europe/
https://archive.ph/YwGAK
Why is VodkaManBad starving europe?
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Her party would not implement her policies.
I'm waiting for good analysis on this from closer to the scene, but
The newer members of her conservative coalition were/are anti-Thatcherites. (per John Thielen, American Experiment)
The circumstances in Britain are a bit like here, perhaps worse, and from history it is a repeat of what we call the Jimmy Carter years, a stagnating economy and runaway inflation.
The answer required was two-pronged, tight money combined with massive supply side stimulus through regulatory relief and tax burden relief in the productive sector. What we call Reaganomics, they call Thatcher(ism?).
Without doing those, both of those, failure is imminent. Tight money alone is the root canal policy, and the pain just gets worse and worse without addressing the productive side of the equation.
Biden is resigned to failure and Liz truss is not. I take her to be saying, if you guys want failure, don't put my name on it.
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https://www.breitbart.com/europe/2022/10/24/coronation-covid-era-tax-and-spend-rishi-sunak-makes-it-through-leadership-challenge-unopposed-will-be-prime-minister/
from Right to extreme LEFT in 2 weeks or so! :-o
GB is gone .......
Germany gave us Marxism (Marx Engels )
Germany gave us Naziism ( we know who)
Germany gave us the new World Order / Global Elitism (Klaus et al)
I am beginning to hate Germany all over again.... :x
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Trying to figure out what happened to the Liz Trius era...
https://www.nationalreview.com/2022/10/the-death-of-the-thatcherite-rebirth/?utm_source=recirc-desktop&utm_medium=homepage&utm_campaign=right-rail&utm_content=capital-matters&utm_term=second
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Supply side economics is really taking a hit. It fails every time it is not tried.
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France Sliding toward Barbarity and Chaos
by Guy Millière • November 8, 2022 at 5:00 am
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Hundreds of thousands of immigrants enter Europe illegally each year. Many head for France and stay there. They have been benefiting, since 2000, from financial aid and free medical care to which even poor French citizens do not have access. If they are arrested, like Lola's murderer, they are ordered to leave the country, but are not placed in a detention center so the order, never enforced, is not an order at all. In 2020, 107,500 orders to leave France were issued; fewer than 7% took place.
Approximately 48% of all crimes committed in Paris in 2021, he notes, were committed by illegal immigrants. Murders almost as gruesome as Lola's -- most of which are committed by illegal immigrants -- are committed nearly every day. No one even mentions them. The victims often have their throats slit.
Maurice Berger, a psychiatrist, speaks of "gratuitous violence": violence for no other reason than the pleasure of committing it. He reports that in France, gratuitous violence resulting in injury or death happens, on average, every two minutes. France reports more than two hundred rapes a day.
In L'archipel français ("The French Archipelago")... sociologist Jérome Fourquet writes of a French "collective nervous breakdown" and the "crumbling" of French society. He notes that the religious and historical moorings of the French people are disappearing: churches are empty, important moments in the country's history are no longer taught in schools... France's Muslim population, on the other hand, maintains its culture, customs and traditions, assimilates into French society less and less, and appears more and more filled with contempt and hatred for France...
Speaking about a "great replacement" of the population in France is taboo. Anyone who does it is immediately demonized and described as a follower of conspiracy theories. But the numbers are clear... In addition to hundreds of thousands of illegal immigrants already in France, approximately 400,000 more immigrants from Africa and the Arab world enter France each year. At the same time, hundreds of thousands of French people emigrate from France annually. In 2018, the most recent year for which figures are available, 270,000 French people left. Over the past 20 years, the number of French people living abroad has increased by 52%.
Whenever someone is arrested, injured or killed by the police in or near a no-go zone, riots break out. When an arrest turns violent, the police are asked to let criminals seeking refuge in a no-go zone escape. The government evidently fears that a larger conflagration might occur.
Inside classrooms, in high schools and primary schools, the French educational system is subject to Islamic intimidation.... Those who might have thought that the beheading of Samuel Paty would lead the authorities to make drastic decisions were proven wrong. Today, teachers throughout France report the relentless threats they receive. In the complaints they file, many say that Muslim students threaten "doing a Samuel Paty" to them.
Economically, France is in decline. French GDP has gone from fifth in the world in 1980 to tenth today.... France is among the European countries which impose the heaviest tax burden on its population (45.2% of GDP in 2022). France also has the highest level of public expenditure in the developed world (57.9% of GDP in 2022) -- and an increasing share of public expenditure goes toward financial aid to immigrants, legal and illegal.... Taxes, however, are insufficient to pay for these public expenses....
"Worse than the rise of barbarity is the feeling that our leaders are in denial and unable to take the strong and effective decisions that would be necessary to ensure the protection of the population. Barbarity spreads when the authorities no longer know how to be the guarantors of law and order." — Céline Pina, author, Le Figaro, October 19, 2022.
Lola, a 12-year-old French girl, was recently raped and murdered in Paris by an Algerian illegal immigrant. Illegal immigrants in France are the perpetrators of nearly half of crimes committed. Murders almost as gruesome as Lola's are committed nearly daily. The psychiatrist Maurice Berger reports that in France, crimes of gratuitous violence resulting in injury or death happen, on average, every two minutes. France reports more than two hundred rapes a day. Pictured: Protesters hold portraits of Lola reading "Lola could have been our little sister," in Paris on October 20, 2022. (Photo by Emmanuel Dunand/AFP via Getty Images)
October 15. The corpse of a 12-year-old girl hidden in a big plastic box is discovered on a sidewalk in the eastern part of Paris. The victim's name was Lola. She was the daughter of the caretakers of the building where the murder took place.
Witnesses, fingerprints and images from surveillance cameras quickly lead police to arrest a woman. She confessed but said she had absolutely no remorse. The details she gave, confirmed by the autopsy, are that she gagged Lola with tape, undressed her, tied her to a chair, raped her with objects, partially cut her throat, put the blood in a bottle and drank it, smoked a cigarette, then finished slitting Lola's throat and beheaded her. The woman stabbed the corpse multiple times before placing it in a plastic box, and took it down to the street.
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https://www.youtube.com/watch?v=XIHmZ0rOEbg&t=20s
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https://www.youtube.com/watch?v=YGkELtG8IMw
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The EU's Shifting Balance of Power
undefined and Director of Analysis at RANE
Adriano Bosoni
Director of Analysis at RANE, Stratfor
10 MIN READJan 5, 2023 | 17:18 GMT
EU flags fly outside the headquarters of the European Commission on Feb. 23, 2022, in Brussels, Belgium.
EU flags fly outside the headquarters of the European Commission on Feb. 23, 2022, in Brussels, Belgium.
(Thierry Monasse/Getty Images)
Between 2020 and 2022, three heavily disruptive geopolitical events altered the balance of power within the European Union, increasing the influence of countries in the south and the east of the bloc to the detriment of traditionally more influential countries in the north. These new power dynamics will not only shape EU domestic and foreign policy in the coming years, but likely lead to internal conflict further down the line that will once more test the bloc's internal unity.
A Turbulent Three Years
The first of the three disruptive events was Brexit. The United Kingdom left the bloc in January 2020 after years of negotiations that began with the June 2016 referendum. Britain had previously been one of the bloc's strongest supporters of free trade, deregulation and limited social, economic and political integration in the continent. For decades, the United Kingdom had also been an ally to Northern (and especially Nordic) European countries that defended an open Europe with a pro-business approach to economic affairs and were skeptical of EU federalization. Britain's departure from the European Union, therefore, created an opportunity for countries in Southern Europe, which tend to defend a more interventionist EU that shields their economies from external competition while also pooling financial resources across the continent to pay for bloc-wide policies.
Right after Brexit came the COVID-19 pandemic, which resulted in the first wave of EU-wide lockdowns in March 2020. The devastating human and economic impact of the pandemic opened the door for the European Union to take unprecedented steps, including launching a massive 750 billion euro stimulus package in July 2020 that included grants and loans for its members, with Italy and Spain receiving the largest sums of money. Notably, the 27 EU member states allowed the European Commission to borrow in financial markets on their behalf to pay for the package — a policy that had proved impossible to implement during the financial crisis only a decade prior due to firm opposition from northern European governments. To some extent, the north supported the 2020 package because, unlike the 2009 eurozone crisis, the economic damage in Southern Europe was not the result of irresponsible fiscal policies but of events beyond their control. Still, both in scale and especially in the way it was financed, the stimulus package was unprecedented in recent European history and was a strong sign of a more influential Southern Europe. As such, it has established a precedent for future crisis responses.
The third geopolitical event that altered the balance of power in the European Union was Russia's invasion of Ukraine in February 2022, which led to a spike in inflation across Europe amid tighter and more expensive energy supplies. The economic fallout from the war and the subsequent disruptions to Russian energy exports saw European governments (again) introduce large stimulus packages, as well as desperately look for alternative supplies of natural gas to avoid gas rationing and blackouts. Energy-intensive industries across the continent in sectors ranging from cement to fertilizers were also forced to reduce or halt their operations. The war presented both a risk and an opportunity for Central and Eastern European countries, which for decades had warned about Russia's threat to peace in the continent, and had demanded a greater presence of NATO troops in the region and a more hawkish EU position toward Moscow. Under pressure from Poland and the Baltic states, the European Union imposed economic and political sanctions on Russia while increasing financial, humanitarian and military aid for Ukraine. Notably, the war also forced Germany to break with its decades-old policy that sought to keep political tensions between Russia and the West separated from Germany's massive imports of Russian natural gas. Berlin's decision in February 2022 not to use the controversial Nord Stream 2 pipeline connecting Germany to Russia (which previous German governments had fervently defended) was highly illustrative of this policy change.
Perhaps more crucially, the war also gave NATO a renewed sense of purpose that was in line with Central and Eastern Europe's views, less than three years after French President Emmanuel Macron had declared the military alliance ''brain dead'' and promoted European alternatives to NATO cooperation. The fact that Sweden and Finland broke their historical neutrality to join the Western security alliance realized Poland, Lithuania, Latvia and Estonia's aspiration of completely surrounding Russia in the Baltic region and opened the door to deeper Baltic-Nordic security cooperation.
Finally, the war also increased the strategic importance of Southern European countries, which overnight became key players in the European Union's push to diversify its natural gas supplies away from Russia. Spain and Italy's multiple LNG terminals and their pipeline connections with Northern Africa contrast with Germany's high dependence on pipelines coming from Russia, and put Madrid and Rome at the center of ongoing plans to multiply and diversify the European Union's energy suppliers. In addition, Southern Europe's significant investments in renewable energy (including solar power, which has a huge potential in sun-blessed Mediterranean countries) will only further expand its role in the bloc's energy mix in the coming years —- especially if Northern Europe is willing to pay for the necessary infrastructure to distribute the energy across the continent. Ironically, Europe's energy crunch also resulted in Brussels tolerating countries using more coal, which was a short-term victory for heavy coal users like Poland and other countries in the region.
The Impact Moving Forward
The effects of Brexit, the COVID-19 pandemic and the war in Ukraine were visible in 2022, but their impact will continue in 2023 and beyond. Now that the taboo of joint EU borrowing has been broken, Southern European governments will continue to push for joint borrowing to pay for continent-wide initiatives in areas ranging from climate change to energy infrastructure. Meanwhile, the European Commission (which in 2020 suspended EU rules on sovereign debt and fiscal deficit limits so that countries could spend their way out of the pandemic) is pushing for a redesign of the rules before they are reintroduced in 2024. Under pressure from the south, the new rules will likely focus on more flexible goals related to long-term growth and debt sustainability as opposed to the current rules, which are more skewed toward meeting short-term, rigid fiscal goals that have proven almost impossible to achieve. In addition, the European Union will use protectionist measures in China and the United States to justify its own ramping up of state aid, subsidies and other forms of assistance to strategic sectors of its economy, which is also in line with Southern Europe's views on how the bloc should operate.
The coming years will also offer new opportunities for Central and Eastern Europe to increase their ability to steer the European Union's strategic direction. Poland and the Baltic states will use their newfound influence on EU foreign policy to ensure that sanctions against Russia are kept and, if possible, expanded. They will also call for (and contribute to) an increased presence of NATO troops in the region, and push against any French plans to implement defense initiatives that would compete with the U.S.-led military alliance. A cease-fire in Ukraine is unlikely in 2023, which means that Poland and its Baltic allies will probably achieve these goals in the short to medium term. More importantly, Poland is emerging as a leading military power in Europe thanks to years of increased defense spending and military modernization, a trend that Russia's invasion of Ukraine will accelerate. This, combined with the fact that Poland is one of the most dynamic economies in the European Union, means that Warsaw's clout in European affairs is likely to only increase in the coming years.
A Permanent Shift?
While these power shifts in Europe will be visible in 2023, they may not be permanent. Once the pandemic- and war-related sense of urgency is gone, Northern European countries may decide that the combination of more flexible fiscal rules and massive EU spending backed by joint debt is not a responsible or sustainable policy. This could result in significant pushback against these measures later this decade out of fears of a new financial crisis in the European Union.
This potential change in attitude will largely hinge on Germany, because many of the current EU policies have been made possible by the fact that two of the three members of Germany's coalition government are economically progressive. By depriving Brussels of decisive German leadership, Berlin's increased focus on domestic affairs over the past year in response to mounting economic and energy crises has also granted Southern European governments room to raise their own profiles in the bloc. But Germany's next general election (which is scheduled for 2025) could bring the conservatives back to power and, with them, more hawkish positions on EU fiscal integration. Early rebellions against the European Union's laxer debt and deficit policies are also likely in countries like the Netherlands, Sweden, Austria and Denmark if the bloc's economic recovery from the current crises happens faster than anticipated. Even without a return to north-south conflict over fiscal policy, volatility in financial markets caused by significant jumps in sovereign debt levels (especially in southern countries like Italy) could be a wake-up call for the European Union to change direction.
The influence of Central and Eastern European countries faces constraints of its own. Poland's sway over EU policy grew in 2022, but the country is still under the threat of sanctions from the European Commission due to rule of law-related disputes that could result in the freezing of billions of euros in EU funds. And while Poland is a leading voice in Russia-related policy, pro-EU countries like Estonia, Latvia and Lithuania do not necessarily share Poland's euroskeptic views on continental integration, which means that there could be divides among the Central and Eastern European governments that are the leading Russia hawks. Moreover, the war in Ukraine isolated Hungary, which was left alone in opposing some of the sanctions against Russia. But Hungary and Poland are still aligned and back each other on social, cultural, rule of law and institutional issues that irritate most Western EU member states and limit cooperation with them. Opinion polls suggest that Poland's pro-European opposition stands a decent chance of winning the general election in late 2023 (which would improve Warsaw's relations with Brussels). However, times of war also tend to benefit incumbent governments, meaning Poland's euroskeptic leaders may secure another term, which would limit its influence on EU policy beyond security issues.
So far, the European Union has managed to remain united despite the seismic changes that took place between 2020 and 2022. But the effect of these changes on EU policy may fade with time. Protectionist trends in China and, to a lesser extent, the United States will give EU members that support state intervention continued justification for their views, which means that such policies will likely persist. But Northern Europe is unlikely to remain passive to the fiscal policies promoted by Southern Europe for fear of rising moral hazard and the risk of new debt crises in the south. In addition, some Eastern European countries' skepticism regarding further EU political and economic integration will likely clash with the more pro-integration views in Western Europe. From a security perspective, China's military rise will not bring the European Union together in the same way that Russia's invasion of Ukraine did, which will result in internal debates over the future of both NATO and defense integration in Europe. This means that while the ongoing shift in internal power dynamics does not pose an immediate existential threat to the European Union, the seeds are currently being planted for new confrontations that will likely come to a head later in the decade — and when they do, the bloc's unity will once again be tested.
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Third
Serbian buildup. Serbia will increase its special forces personnel, Serbian President Aleksandar Vucic said on Wednesday. He also said Serbia received its first delivery of weapons – launchers and missiles – from a Western country, though didn’t specify which one. Vucic ordered the Serbian military to go on high alert in December, when tensions escalated in northern Kosovo following clashes between ethnic Serbs in the area and Kosovar authorities.
I am told that we have been training their SF for some years now.
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https://legalinsurrection.com/2023/01/berlin-german-climate-militants-block-autobahn-bring-jackhammers-to-tear-up-the-road/
(Helps answer the question of who is attacking our grid)
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"Swedish activist Greta Thunberg’s “Fridays for the Future” group will also join the Berlin climate protests, German media reported"
THIS - is not funny
the smile is wiped from my face as of now!
:-o
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https://www.axios.com/2023/04/04/finland-nato-official-member-russia-invasion
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https://www.gatestoneinstitute.org/19549/france-field-of-ruins
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option #1 is this
age limit raised from 62 to 64 to at least buy more time
option #2
social security collapses and people starve in the streets
and string up the Soros' et al. on "lamp posts" (George's own phrase * 'Once Upon a Time in Russia; The Rise of the Oligarchs )
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How Sweden Became a Gangster's Paradise
by Peder Jensen • June 2, 2023 at 5:00 am
After the Russian invasion of the Ukraine in February 2022, Sweden and Finland abandoned generations of neutrality to apply for membership in the NATO military alliance. However, there is already a gang war going on in Swedish streets, and it has nothing to do with Russia.
[National Police Commissioner Anders] Thornberg estimated that more than 30,000 people are now involved in gang violence in Sweden... According to Thornberg, the situation is "extremely serious," with organized crime infiltrating and corrupting the democratic society, the business world and the public sector.
Some two million immigrants (20% of the population) now live in Sweden, according to David Jones in the Daily Mail, Many come from the most troubled parts of Asia and Africa and have not integrated well into Swedish society. Rival gangs now shoot each other on a regular basis. In Stockholm alone, 52 gangs are vying for control of the burgeoning drug trade, according to a police report, and they are becoming ever more ruthless. Some child gang members even carry explosives in their school thermos flasks. Jones writes:
"Twenty years ago, gun crime was almost non-existent here." — David Jones, the Daily Mail, February 10, 2023.
"Ten to fifteen years ago, it was about shoplifting when we were dealing with 14-year-olds, but now they deal in drugs and handle automatic weapons... Older criminals use children to avoid being caught themselves, and for the children, it is a sign of status to be chosen. It starts as a cool thing for a kid who can't see consequences and ends up getting involved in gang conflicts."— Police officer who asked to remain anonymous, document.no, March 1, 2023.
When available resources are dedicated to investigating shootings and bombings, other crimes such as burglary or theft have become effectively risk-free. This inversion of law enforcement contributes to a growing sense of lawlessness now being felt by many Swedes. What is the point of having laws if they are not enforced, or only used to punish honest citizens?
Since 2010, shoplifting in Sweden has doubled.
More serious crime is also being ignored or de-prioritized by an understaffed police force. In the city of Uppsala, victims of rape complain that they must wait for months to be interviewed.... Most available police resources are now dedicated to combating criminal gangs.
Swedish schools are also becoming increasingly violent, for teachers and pupils alike. Reports about threats and violence at schools have more than doubled since 2012. These reports mainly concern students who have attacked teachers with threats, punches, or strangulation.
In Malmö, Sweden's third-largest city, native Swedes are already a minority. The city is experiencing a kind of "white flight." Many move to smaller towns to find safer environments and schools for their families.
While ownership of rifles for hunting is not uncommon in Sweden, owning guns for self-defence had never, until recently, been a reason to be granted a firearms license.
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Where is the magic soil?
How Sweden Became a Gangster's Paradise
by Peder Jensen • June 2, 2023 at 5:00 am
After the Russian invasion of the Ukraine in February 2022, Sweden and Finland abandoned generations of neutrality to apply for membership in the NATO military alliance. However, there is already a gang war going on in Swedish streets, and it has nothing to do with Russia.
[National Police Commissioner Anders] Thornberg estimated that more than 30,000 people are now involved in gang violence in Sweden... According to Thornberg, the situation is "extremely serious," with organized crime infiltrating and corrupting the democratic society, the business world and the public sector.
Some two million immigrants (20% of the population) now live in Sweden, according to David Jones in the Daily Mail, Many come from the most troubled parts of Asia and Africa and have not integrated well into Swedish society. Rival gangs now shoot each other on a regular basis. In Stockholm alone, 52 gangs are vying for control of the burgeoning drug trade, according to a police report, and they are becoming ever more ruthless. Some child gang members even carry explosives in their school thermos flasks. Jones writes:
"Twenty years ago, gun crime was almost non-existent here." — David Jones, the Daily Mail, February 10, 2023.
"Ten to fifteen years ago, it was about shoplifting when we were dealing with 14-year-olds, but now they deal in drugs and handle automatic weapons... Older criminals use children to avoid being caught themselves, and for the children, it is a sign of status to be chosen. It starts as a cool thing for a kid who can't see consequences and ends up getting involved in gang conflicts."— Police officer who asked to remain anonymous, document.no, March 1, 2023.
When available resources are dedicated to investigating shootings and bombings, other crimes such as burglary or theft have become effectively risk-free. This inversion of law enforcement contributes to a growing sense of lawlessness now being felt by many Swedes. What is the point of having laws if they are not enforced, or only used to punish honest citizens?
Since 2010, shoplifting in Sweden has doubled.
More serious crime is also being ignored or de-prioritized by an understaffed police force. In the city of Uppsala, victims of rape complain that they must wait for months to be interviewed.... Most available police resources are now dedicated to combating criminal gangs.
Swedish schools are also becoming increasingly violent, for teachers and pupils alike. Reports about threats and violence at schools have more than doubled since 2012. These reports mainly concern students who have attacked teachers with threats, punches, or strangulation.
In Malmö, Sweden's third-largest city, native Swedes are already a minority. The city is experiencing a kind of "white flight." Many move to smaller towns to find safer environments and schools for their families.
While ownership of rifles for hunting is not uncommon in Sweden, owning guns for self-defence had never, until recently, been a reason to be granted a firearms license.
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https://www.youtube.com/watch?v=eQXHc-tJMXM
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https://gatesofvienna.net/2023/09/open-warfare-at-the-hungarian-border/
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https://www.msn.com/en-us/news/world/an-unusual-military-build-up-in-southern-europe-sparked-fears-of-another-invasion-like-russia-s-full-scale-assault-on-ukraine/ar-AA1hAW5v?ocid=msedgntp&cvid=55c5c0ce8dc24f4e8c1d7baabadbd11b&ei=19#image=AA1guRmo|1
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Hamas’s Violence Is Another European Policy Failure
The EU hoped to influence the world via economic clout. It didn’t work with China and Russia either.
Joseph C. Sternberg
Oct. 12, 2023 5:17 pm ET
If the European Union were a single country it would be the world’s third-most-populous nation—behind India and China—and boast the second-largest economy, behind the U.S. The bloc has evolved a central administrative apparatus that is leading to ever greater political integration and that increasingly attempts to exert its influence on the rest of the world.
The question about all this following Hamas’s invasion of Israel: So what?
The terrorist war launched last weekend from Gaza has shocked Europe in much the same way that Vladimir Putin’s invasion of Ukraine did 19 months ago. Gone—at least for now—is the moral and intellectual torpor that has afflicted Europe’s Middle East strategy for decades. Dawning—again, at least for now—is the realization that one side in Israel’s long-running struggle for security is barbaric, and it isn’t Israel.
As happened to an extent following the Ukraine war, the shock will deepen as Europeans continue to absorb the horrific images currently filling their television screens and ask what they should do next. That’s because this disaster, like last year’s, is in part an indictment of Europe’s fundamental way of thinking about itself and its role in the world.
EU foreign policy always has been about the economy. Today’s EU was born in the 1950s as a six-country coal-and-steel bloc intended to use economic integration to secure peace in Western Europe. As the European project expanded—pacifying and enriching the Continent—a new aspiration developed to leverage the bloc’s economic heft into global influence without the need for costly and exhausting military force.
This dream has collapsed in spectacular fashion over the past 19 months under the weight of three challenges.
The Russian invasion of Ukraine was the start. Europe’s hope, dating to West Germany’s Ostpolitik in the 1970s, had been that the carrot of access to a large, prosperous economic bloc could tame its aggressive eastern neighbor. This helps explain Europe’s willing pre-2022 energy dependence on Russia. As preposterous as it sounds in retrospect (and did to sensible people at the time), many European leaders convinced themselves that this was a sign of strength: So great would be Russia’s economic benefit from selling energy to Europe that the Kremlin would never step too far out of line. Oops.
The collapse of that plan has opened European eyes to the second great failure of their old way of relating to the world—China. Here was meant to be an even more muscular version of what the Germans called Wandel durch Handel, or “change through trade.” Trade and European investment into China would hasten the country’s transformation into a more democratic market economy.
This hope was shared by the U.S. and others when China was allowed to join the World Trade Organization in 2001, and it seemed to work for a while. But the West now faces an antagonistic leader in Beijing, Xi Jinping, who cares less about the economy and more about expanding China’s hard power. Though economic influence might not work, the U.S. maintains a Navy capable of projecting power in Asia. What does Europe have?
Hamas’s invasion of Israel represents a different sort of European failure. Across the Middle East, Europe’s strategy generally has been to marshal its domestic resources to buy influence abroad via generous aid. The EU describes itself as the “most important donor for the Palestinian people,” shoveling money into the Palestinian Authority directly and also via the United Nations refugee agency that is particularly active in Gaza.
It has been obvious for some time that an embrace of European values wasn’t following this money, and Brussels announced Monday it is reviewing whether to cut off some or all of this aid. Yet it isn’t clear what other mechanisms the EU might have to exert itself in a region where many of the risks—such as the possibility of new migration flows or a nuclear Iran—pose direct threats to Europe.
The precise reasons for these foreign-policy disasters are many and varied. A common thread is Europe’s failure to admit that other parts of the world weren’t as ideologically exhausted as it was. The Continent’s reliance on economic leverage leaves it ill-equipped to deal with counterparts for whom prosperity is secondary to some other goal—the reconstitution of a Russian empire, the preservation of the Chinese Communist Party, the destruction of the Jews.
Europe’s failures in Russia and China have triggered painful, albeit so far only partial, political recalibrations over the past year and a half. One result is a reinvigoration of the North Atlantic Treaty Organization as Europe discovered that military muscle still matters. A sign that Europe is really learning will be if a similar debate breaks out over Middle East policy now.
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since Vivek brought this up in veiled attack on Jewish media (intentional or not?):
https://www.cnn.com/2023/09/20/asia/azerbaijan-armenia-nagorno-karabakh-explainer-intl/index.html
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https://www.youtube.com/watch?v=xmEhTFjQB1g
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October 18, 2023
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Europe’s Biggest Challenges Ahead
The Israel-Hamas conflict has complicated some of the Continent’s deepest divides.
By: Antonia Colibasanu
A little over a week ago, I was set to depart for a conference in Brussels when news broke about Hamas’ attack on Israel. The unfolding conflict introduced another layer of complexity to the conference, which was supposed to focus on the challenges facing the Eastern Mediterranean and Southern Europe over the past year stemming from the war in Ukraine. It also made my journey to Brussels more complicated – as I believe will be the case for all travelers to major Western European capitals in the months ahead.
I arrived in Brussels on Oct. 12, just hours after Hamas called on its supporters to observe Oct. 13 as a “day of rage.” In a rush to prepare for my speech at the conference, I didn’t leave my hotel and confined myself to the Brussels bubble, occupied by fellow analysts, lobbyists and policymakers. The day after the conference, I finally left the hotel, and the city seemed empty. The area I was staying in was home not only to buildings of major European institutions but also to one of the largest mosques in Brussels. Walking around the city, I noticed a Palestinian flag hanging on a building and a heavier security presence than I had seen on my previous visits. The friend I was supposed to meet asked if we could convene at another location, farther from the European Parliament. When I got there, she asked if I knew about the terrorist attack in France that had happened just minutes earlier. It was then that I realized the reason for the relative lack of congestion in Brussels at the time: People in the city, particularly those working at EU buildings, were worried about a terrorist attack.
After the EU publicly expressed its support for Israel, flyers condemning the move and supporting the Palestinians were plastered on walls around EU buildings. They were quickly removed, but concerns were growing.
By the end of the day, France announced that it would increase its state of alert to the highest level. Major museums and tourist attractions in Paris were closed the next day. While fears of terrorist attacks in European cities aren’t new – Brussels saw a major attack in 2016, and Paris in 2015 – it seems what’s happening in the Middle East has given such concerns more validity. My friend and I tried to go about our day more or less as usual, but we too were worried. (Little did we know that a Tunisian man claiming to be a member of Islamic State would kill two people in Brussels a few days later.)
I walked back to my hotel through Ixelles, a neighborhood with a large community of people with African origins. Hearing loud chatter about the Middle East and the fate of Palestine, it was clear to me that residents were not indifferent to what was happening in the Middle East. Later that evening, when walking to dinner, I passed by a group of young people – judging by their French accents, likely international students or workers from North Africa – having a strong disagreement over Israel’s actions. At the restaurant, a group of young Italians were debating the same topic. Clearly, many in Europe are preoccupied with the crisis.
There are a few reasons for this, each pertaining to the three dimensions that define European geopolitics: security, economics and politics. The situation in the Middle East has the most obvious impact on security. France announced on Oct. 14 that it would deploy 7,000 soldiers around the country to beef up security. Its Ministry of Interior said it has already addressed 189 incidents of antisemitism since Oct. 12 when Hamas issued its call to supporters of the Palestinians. After the United States, France has the world’s largest Jewish community outside of Israel, as well as Europe’s largest Muslim population. The possibility that the Israeli-Palestinian conflict could spill over into its streets is a major cause for concern among French authorities.
While France is likely the most vulnerable place in Europe to a potential spillover, other countries on the Continent will also have to address the problem. Since Oct. 13, protests in support of the Palestinian cause have taken place in London, Madrid, Barcelona, Brussels, Rome, Amsterdam, Luxembourg City, Bern, Dusseldorf and others. Vienna and Berlin saw pro-Israeli protests over the weekend, while police in the German capital broke up a protest on Oct. 15 that had been banned by authorities at short notice. The German interior minister confirmed on Oct. 16 that security services were instructed to consider using all legal options to expel Hamas supporters from Germany.
While officials focus publicly on the need to stamp out antisemitic and anti-Israel actions and statements, the concerns over violence point to much deeper friction relating to Europe’s socio-economic problems. In addition to supporting the Palestinian cause, the people participating in pro-Palestinian demonstrations are also doing so out of self-interest. They believe they have been oppressed not by the state of Israel but by the governments and the elites who control much of the wealth and opportunities where they live. This is a common view among poorer classes in European societies, but the feeling of being unjustly treated grows even bigger when race or religion plays a role.
Over the past decade, class-based polarization in Europe has been growing. This is largely due to the economic crisis but has been magnified by the large influx of migrants over the past several years. Between 2014 and 2016, Europe saw a record surge of refugees fleeing wars in Syria and elsewhere, primarily Muslim countries in Africa. Over the past six months, the Continent has seen another wave of migrants, most fleeing poor socio-economic conditions, which were exacerbated by disruptions in global food supplies as a result of the war in Ukraine.
In fact, the Hamas attack happened just as EU member states were discussing a new deal to tackle the refugee influx. Under the agreement, nations like Italy, Greece and Spain – which are among the top migrant recipients in Europe – could speed up asylum procedures and request immediate assistance from their EU peers, including financial aid and relocations. In addition, Germany announced on Oct. 11 that it intends to make it easier and faster to deport unsuccessful asylum-seekers, particularly those with a criminal record, by shortening notice periods and making it easier for authorities to conduct searches, including for documents at an asylum-seeker's home. These moves are all responses to the recent wave of migration, which will grow only bigger with a new conflict in the Middle East.
The measures also highlight concerns by various European governments over established Muslim communities in their countries. According to a poll conducted by Pew Research, Muslims accounted for about 4.9 percent of the total European population in 2016. Countries with the largest Muslim populations were France, Germany, the U.K., Italy, the Netherlands and Spain – all of which have seen protests and stepped up security measures in recent days. The migration issue will exacerbate these concerns, considering that many migrants come from Muslim-majority countries.
There’s also a political dimension to fears over what the Israel-Hamas conflict could mean for Europe. The countries mentioned above have all seen populist movements growing in popularity over the past decade. Most populist parties (particularly those on the right but also many on the left) have been highly critical of migration into the EU from Muslim-majority countries. According to Pew polling from 2019, supporters of populist parties have developed negative attitudes toward Muslims in their countries. This issue, and its security implications, will likely play a large role in political campaigns ahead of European Parliament elections in 2024, as well as elections in member states.
Meanwhile, EU members are also in talks on how to modify the bloc's budget to tackle growing problems, including the post-pandemic economic recovery and Russia’s invasion of Ukraine. EU leaders will sit down to review the budget in December, but the European Commission has already suggested that funding for Ukraine needs to increase. In 2021, the commission established the European Peace Facility, a project funded outside the EU budget aimed at continuing to supply the Ukrainian military with arms. Initially worth 5.6 billion euros ($5.9 billion), the commission this year proposed increasing the fund by another 20 billion euros over the next four years. It also wants to secure an additional 50 billion euros in macroeconomic assistance for Ukraine. It’s likely the EU will also consider new funds for the Middle East as the situation there intensifies.
However, adoption of these plans will depend on the priorities of EU member states in the coming months. With populist and mainstream parties disagreeing over migration policies and Russian President Vladimir Putin’s vision for the world, Europe is in for an intense campaign season. And as the conflict in the Middle East escalates and the United States heads into its own election season, it seems that divisions in Europe will only worsen.
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There has got to be more to this, but it appears a Chinese ship somehow damaged a Finnish ocean pipeline and now the Finnish popo are trying to unravel just what occurred. Perhaps this is just an ancho dropped in the wrong place, or maybe this is 4D energy chess. Whatever it is, it has been eclipsed by the Hamas atrocities and hence few are looking into it:
https://poliisi.fi/en/-/the-investigation-is-now-focused-on-the-role-of-the-vessel-newnew-polar-bear?embed=true&fbclid=IwAR3GmJNxMP6M7RFFmrjbVznUh4M5KYXMYbOkIjGsOfaXfP-SQhmSsecCkwY
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Yeah, I saw this one too. Weird.
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This is pretty white bread and there are several points that inspire an eye roll; however its publication appears to mark a dawning grasp of anti-dhimmitude, and might even be cast as bold given the certainty some will object, perhaps vociferously, particularly as these points more than suggest they are written in response to a mindset of medieval religious thuggery:
https://rairfoundation.com/german-newspapers-50-point-manifesto-for-migrants-we-do-not-arrange-marriages-for-children-or-beat-them-men-cannot-have-multiple-wives-knives-are-for-kitchens-not-our-pockets/?fbclid=IwAR1H8x1c40nX7w-mXVnHBeGSnv2j_ieqKNSvhSrk228OtqKST9uXyScrBbY
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https://americanmind.org/salvo/europe-is-burning/?utm_campaign=American%20Mind%20Email%20Warm%20Up&utm_medium=email&_hsmi=282035074&_hsenc=p2ANqtz--JaXRRXS7xI6Hvz2CrsFZePv3Xdvojax-PshUuXZb3U_9pAVe-fVCMwUPAgX4AilWyVQ1VfWRyXkHYRK8mT3r5fw0JSw&utm_content=282035074&utm_source=hs_email
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https://www.breitbart.com/europe/2023/11/11/300000-anti-israel-activists-protest-in-london-on-armistice-day/
Armistice Day
Jihad day!
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The whole world is turning left, all except the voters. The voters turned left but then found out what the results of that are. It's like Lucy and the football. They keep trying to elect the good kind of socialism and instead they get the real kind and they don't like it.
https://www.americanthinker.com/blog/2023/11/the_netherlands_just_elected_a_conservative_prime_minister.html
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https://theconversation.com/geert-wilders-how-election-victory-in-the-netherlands-for-party-for-freedom-fits-into-a-wider-picture-of-european-radical-right-populism-218477
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https://dailycaller.com/2023/11/23/victor-davis-hanson-can-europe-become-western-again/
https://www.statista.com/statistics/1293562/expenditure-on-military-defense-as-gdp-share-in-the-european-union-eu-27/#:~:text=On%20average%2C%20the%20EU-27%20countries%20spent%201.2%20percent,two%20percent%20of%20their%20GDP%20for%20defense%20purposes.
In 2021, the United Kingdom's defense spending as a share of Gross Domestic Product was estimated to have been 2.3 percent. Since 1980, the UK's defense spending was at it's highest in 1984 when 5.5 percent of the UK's GDP was spent on the military.
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https://americanmind.org/salvo/irelands-tragic-demise/?utm_campaign=American%20Mind%20Email%20Warm%20Up&utm_medium=email&_hsmi=285646602&_hsenc=p2ANqtz-_58zZ0Qcko1BhJdrpuB1oGh_PGNSQ8RFr-0pbcgv1vpF47rAiebPZcQtjzuRMc1nqMq7lxkgMw24Py4wzN7-ySdjKbYw&utm_content=285646602&utm_source=hs_email
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https://www.youtube.com/watch?v=rUw4cs2MHwc&t=2s
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https://www.gatestoneinstitute.org/20301/islam-overtaking-europe
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and here we see more and more demonization of Christians, especially evangelicals.
how often did we see and hear admonishment from the main stream media recently of them while the Iowa caucuses were in progress?
the caliphate continues its growth
Mo could not be happier in his grave.
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https://theupheaval.substack.com/p/poland-and-the-demon-in-democracy?utm_source=post-email-title&publication_id=330796&post_id=141156064&utm_campaign=email-post-title&isFreemail=true&r=z2120&utm_medium=email
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https://www.youtube.com/shorts/LzciCSBa-2c
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Pols across three parties sought to insert de rigueur language into the Irish constitution, but were soundly defeated. My guess is the pols will prove tone deaf to voter sentiments and instead will lament that insufficient communication addressing voter ignorance was the cause:
https://www.politico.eu/article/irish-voters-reject-bid-to-rewrite-constitutions-view-women-family/
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https://europeanconservative.com/articles/interviews/loretta/
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"“Europe is a digital colony of the United States… an economic colony of China… a demographic colony of Africa… and is about to become a religious colony of Islam.”
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April 9, 2024
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The Hungarian Crisis
By: George Friedman
Viktor Orban governed Hungary from 1998 to 2002 and again from 2010 to the present. In that time, he has dominated Hungarian politics and, to a great extent, Hungarian life. But late last week, his reign was challenged as tens of thousands of demonstrators gathered in Budapest, calling for his downfall. Demonstrations continued through the weekend. Since Orban assumed the premiership more than a decade ago, the Hungarian opposition has been fractured and generally ineffective. For so many people to rally against his rule after so much time is therefore a stunning event, regardless of whether it leads to his removal.
As the leader of Hungary, Orban created an ideology that has influenced other countries. It has two critical dimensions. The first is opposition to migration into Hungary. A decade ago, millions of people from the Middle East sought refuge in Europe, where many governments allowed them entry even when faced with domestic resistance. Orban’s position ran counter to European liberalism. He argued that Hungary was not just a place but a culture and that waves of immigrants threatened that culture and history. His position won support in Central Europe, where an anti-migration coalition formed in opposition to the prevailing view in Brussels. Over the years, Orban’s view has gained many more adherents throughout Europe.
Second, Orban was hostile to what some now refer to as “woke” culture, particularly its attitude toward homosexuality. His criticisms were partly based on a conservative understanding of Christianity but even more on the belief that homosexuality would corrupt Hungarian society. Again, he was taking a stand against European liberalism, and again his view gained acceptance in other countries over time. In the most recent Dutch election, for example, the party of Geert Wilders, an open and vigorous ally of Orban, unseated the liberal party whose erstwhile leader was one of Orban’s strongest critics.
The influence of Orban’s ideology has also reached the United States. During a March trip to the U.S., Orban had an intensive meeting with Donald Trump. Whether he changed any of Trump’s opinions is uncertain, but they apparently reached a common understanding, and both men have referenced the meeting in speeches.
Returning from that trip, Orban appeared politically secure in Hungary. However, a powerful anti-Orban force was lurking, built on a belief that the Orban regime was corrupt and that various members were enriching themselves at the cost of the people. In a sense, there is now a battle of moral values underway between the woke and the allegedly corrupt – one that may eventually be waged in other countries. But this time, it struck Orban. It is not clear what the uprising will achieve. Outrage about the alleged corruption is widespread, but so is the sense that Orban represents the deep meaning of Hungary.
Another dimension of the Orban drama involves the Ukraine war. Before the Russian invasion, while NATO was trying to determine its strategy, Orban traveled to Moscow to have a lavishly covered meeting with Russian President Vladimir Putin. In that meeting, Orban suggested that Russia’s demands were reasonable and said sanctions against the Kremlin would not work. In doing so, he broke rank with Hungary’s allies in NATO. Shortly after the war started, Orban refused to commit Hungarian forces or even to allow NATO to base weapons in or transport them through Hungarian territory – a notable setback for the NATO and EU campaigns to support Ukraine, which shares a border with Hungary. As for Russia, Orban’s positions seem to track more closely with Putin than Europe.
Orban’s decisions regarding Ukraine seemed to be an attempt to follow the Hungarian public, which wanted no part in the war in general, just as it did not want immigrants. Orban has long been an effective politician. That makes the events of last week even more perplexing. Orban seems to have lost his touch, and if there is a political shift in Budapest, it is possible that the Hungarian position on NATO, Russia and more might shift as well.
But Orban is not yet finished. And even if he is, it is not clear whether his opponents have a vision that goes far enough beyond their disdain for corruption to bring a broader shift to Hungary.
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Well this was a pitiful and fascist showing all the way around:
The Brussels gangster state
The attempt to silence the National Conservatives provided a rare moment of clarity
MELANIE PHILLIPS
APR 17, 2024
The view from behind the door of the Claridge as Brussels police barricaded National Conservatives inside
On Monday, I journeyed from Israel to Brussels for the two-day National Conservatism conference where I was due to speak this morning. I travelled from one war zone. I hadn’t expected to be entering another.
National Conservatism, a movement underpinned by the thinking of the Israeli-American philosopher Yoram Hazony, promotes the nation state and the defence of its historic values against the nihilism of the post-moral, anti-western and anti-human ideologies that pass for much progressive thinking.
This mainstream position is denounced as “far right” by left-wingers who use this smear to denounce anyone who dares oppose their agenda of destroying the western nation and its historic culture and values.
During last year’s National Conservatism conference in London, left-wingers went nuts about the fact that it was happening at all.
This year’s conference in Brussels produced meltdown before participants even started gathering in the Belgian capital. This was because speakers included some of the cartoon Hitlers of the feverish liberal imagination: Reform party president Nigel Farage, former Home Secretary Suella Braverman, representatives of “populist” parties such as the Flemish nationalists Vlaams Belang, the French anti-Islamist firebrand Éric Zemmour — and Satan’s granddaddy himself, the Hungarian prime minister Viktor Orbán.
Journalists who routinely smear people as “far-right” or “hard-right,” rather as if they use voodoo dolls to ward off any challenge to the purity of their partisan hatreds, deployed their familiar tactics of character assassination and guilt by association to call in advance for this “far-right” conference to be shut down.
Brussels, the headquarters of the European Union, has become ground zero of the totalitarian leftism that the NatCons fight. They therefore knew they would be gathering in the very belly of the anti-western, anti-nation state beast. But no-one could have predicted what actually then happened.
Bowing to left-wing protests, a Socialist Party Brussels mayor, Philippe Close — who last year invited Tehran mayor Alireza Zakani, a member of Iran's tyrannical Islamist regime, for an official visit — pressured the NatCons’ venue, Concert Noble, to cancel the event. Concert Noble, a high-end event space, duly caved.
Undaunted, the conference organisers secured a second venue at the Sofitel hotel. Late on Monday, Sofitel also cancelled after a second Brussels mayor, Vincent de Wolf, applied the thumbscrews. Sofitel duly sought police help to eject the conference organisers from its premises hours before the conference was due to start.
The conference organisers went to court to seek an injunction against Sofitel. The judge threw that out. Hundreds of people were arriving in Brussels for a conference that had nowhere to meet.
With remarkable persistence and determination, the organisers located a third conference venue, a nightclub called Claridge. They worked most of Monday night setting up from scratch all the equipment, food and other supplies necessary for a two-day conference. By the time the conference registration opened at 8 am on Tuesday morning, it was all up and running — a formidable achievement. This was, however, far from the end of the story.
For yet another Socialist Party Brussels mayor, Emir Kir, issued an order to shut down the conference. His reasons were
that [NatCon’s] vision is not only ethically conservative (e.g. hostility to the legalisation of abortion, same-sex unions, etc.) but also focused on the defence of “national sovereignty”, which implies, amongst other things, a “Eurosceptic” attitude…
He also said that some of the speakers “are reputed to be traditionalists” and that the conference must be banned “to avoid foreseeable attacks on public order and peace”.
Mayor Kir, a man of Turkish origin who reportedly supports the Islamist president of Turkey Recep Tayyip Erdoğan, then got to work using mafia-style tactics to get the conference shut down.
After his order was issued, three police officers turned up at the back of the hall demanding a shutdown with “immediate effect” on the grounds that the opinions of Farage, Braverman and other speakers could lead to public disorder. When the TV cameras swivelled round to film the police, however, they beat a retreat outside, doubtless aware that being seen to shut down prominent European politicians wouldn’t be a good look.
In the negotiation that followed, the police said they would shut the conference down only “gradually”. What that meant was that they wouldn’t storm the venue to throw everyone out, but they wouldn’t let anyone in and if anyone left they wouldn't be allowed back.
The mayor’s lackeys repeatedly threatened the Tunisian-Belgian owner of the Claridge, Lassaad Ben Yaghlane, to force him to cancel the conference. They towed away his car, threatened his family and said they would take away the venue’s licence to put him out of business. They forced the company providing security for the conference to cancel its contract. They did the same to the companies providing catering services such as crockery or food. They threatened to cut off the venue’s electricity.
With remarkable courage, however, Ben Yaghlane stood his ground, getting increasingly angry as the threats mounted against him and his family. The reason he lives in Brussels rather than Tunisia, he said, was because he valued the freedom to argue rather than resort to violence. He told the media:
I am open to discussion. These are not the people I normally share the same values with. But I prefer to debate, even if it is [with] Vlaams Belang.
What a hero.
So, barricaded into the Claridge with limited food and drink and apparently no plates or cups, on the conference went. A wartime spirit prevailed. Guest speakers were smuggled in through a back entrance; the Conservative MP Miriam Cates donned a headscarf as disguise. Somehow, the heroic catering staff rustled up reception-style food to keep everyone in the hall going.
The schedule was hastily reorganised to get the principal speakers on stage fast in case the police decided to shut the conference down altogether. Down the road several police vans were parked, waiting.
The whole thing could have been specially choreographed for Nigel Farage, the man who had warned for years about the threat to democracy posed by the EU and its Brussels bureaucracy. He duly bounced round the stage milking every moment, observing that the behaviour of the mayors and police had now revealed to the world that Brussels was indeed the epicentre of illiberalism. The authorities’ actions against the Claridge showed that “legally held opinions from people who are going to win national elections” were “no longer acceptable in Brussels, the home of globalism. This is cancel culture in a very, very big way,” he said.
Next, on came Suella Braverman who spoke about the need for the UK to withdraw from the European Convention of Human Rights. She added:
The thought police instructed by the mayor of Brussels saw fit to try and undermine and denigrate what is free speech and free debate. What really concerns me is that, only last year, the mayor of Brussels was happy to host the mayor of Tehran. And yet he seems to be pretty offended by democratically elected politicians, people from all over the European continent, who are giving voice to millions of people talking about things like securing our borders.
Other supposedly terrifying topics discussed by the speakers were EU overreach, farmers’ protests, the failing birthrate and the pressures of mass immigration.
Another speaker, German Cardinal Ludwig Müller, was visibly shocked by the police blocking the entrance to the Claridge when he arrived. “This is like Nazi Germany,” he said. “They are like the SA.”
What was originally a small conference of no great interest to anyone beyond a few thousand political nerds was now creating waves across the world. Country after country voiced shock and outrage about the way it had been treated. Britain’s prime minister, Rishi Sunak, called the attempt to shut down the conference “extremely disturbing”. The events at the Claridge were trending on Twitter. It was publicity for National Conservatism beyond its supporters’ wildest dreams.
But would the conference go ahead on the second day, featuring the appearance by the Dark Lord himself, Hungary’s prime minister Orbán? At the door to the Claridge the police, who seemed uneasy about their role, said they wouldn’t lock in participants until 10 am. If they arrived before then, the police would turn a blind eye.
However, on Tuesday afternoon Belgium’s prime minster Alexander De Croo, a centre-right opponent of the Socialist Party, expressed his displeasure. In a post on social media, he said that what had happened was “unacceptable”. He wrote:
Municipal autonomy is a cornerstone of our democracy but can never overrule the Belgian constitution guaranteeing the freedom of speech and peaceful assembly since 1830. Banning political meetings is unconstitutional.Full stop.
The police at the door started melting away. Hopes rose. Had the Belgian prime minister’s intervention defused the crisis?
No. Mayor Kir promptly doubled down and instructed the policer to allow absolutely no-one into the conference on Wednesday at any time at all.
For a second time, the conference organisers went to court to get the order quashed. Once again, the court batted them away.
With the second day of the conference now only a few hours away, a fourth venue was proving impossible to find. In desperation, the organisers decided that, if it came to it, all the conference participants would just turn up early and attempt to get into the Claridge, hoping that the police wouldn’t relish TV footage being beamed round the world of the Brussels police manhandling hundreds of very unthreatening people with traditional views.
Meanwhile, the NatCons’ lawyers filed a plea to a more senior court, in a final attempt to get some sense out of the Brussels judiciary. At 2 am on Wednesday morning, that court ruled against the mayor. The barricade was lifted. The conference could go ahead as planned. And I delivered my own presentation, which I’ll post up on this website as soon as the video becomes available,
As Yoram Hazony told the conference while we were all barricaded into the Claridge:
There are new rules for democracy: stop the other guy from speaking. We can’t expect basic decency or any kind of grace from our opponents…
We want the possibility of controlling our own borders, controlling the immigration system, controlling our own budgets. There are not extraordinary things to demand… But our adversaries find us so frightening, so threatening, they can’t even possibly allow us to speak, not even once when we turn up in Brussels, so frightening is the idea of National Conservatism.
We don’t know whether we're going to win this time, but we do know we’re going to win. We know because we’re asking for decent democratic things, the inheritance of our forefathers and foremothers. It’s not much to ask. It’s the right thing to ask and it will triumph in the end of what we may have to describe soon as the former democracy.
And what was the reaction to this thuggery of those supposed British champions of the decent middle ground, Sir Keir Starmer’s new model Labour party? While the conference was barricaded into the Claridge by the police, Labour’s health spokesman Wes Streeting said in the Commons of Suella Braverman, to guffaws and general hilarity from the Labour front benches, that she
couldn’t be with us today because she’s currently in Brussels surrounded by the police who are trying to shut down the event she’s attending with some other far-right fanatics with whom she has much in common.
That’s what the new model Labour party thinks about sending in the police to shut down a legitimate political gathering. It defames the victims of the tactics of a dictatorship while laughing at their plight.
What happened in Brussels was a moment of rare clarity. At a stroke, the people who smear conservatives as intolerant, oppressive and a threat to democracy were shown that it is in fact they who are intolerant, oppressive and a threat to democracy —indeed, they present a chilling threat to freedom in the style of the former Soviet Union or Chinese Communist Party. National Conservatism is now revealed as the resistance.
You really couldn’t make this up. A big hand for those Brussels mayors who have scored such a spectacular own goal for their side.
https://melaniephillips.substack.com/p/the-brussels-gangster-state?r=1qo1e&utm_campaign=post&utm_medium=email&triedRedirect=true