Shifting Eastern Mediterranean Alliances
Shifting Eastern Mediterranean Alliances
The exploitation of energy resources in the Eastern Mediterranean has drawn together hitherto estranged states.
The Eastern Mediterranean is changing fast with its estimated 122 trillion cubic feet (tcf) of natural gas reserves (the equivalent of 21 billion barrels of oil) already having an impact on regional patterns of amity and enmity. With Israel and Cyprus well underway to becoming gas exporters, the problematic Israeli-Lebanese and Cypriot-Turkish relationships have been further strained. At the same time, energy cooperation has been the driving force behind the nascent Greek-Cypriot-Israeli partnership, manifested in rapidly growing defense and economic cooperation. Clearly, the development of energy resources and their transportation will have far-reaching geopolitical implications for the Eastern Mediterranean and its nations.
Natural gas is the fastest growing source of energy in the world, currently accounting for 22 percent of total global energy consumption. It is both affordable and more environmentally friendly than other commercially feasible options, resulting in an increasing demand even in an era of dropping oil prices. That demand seems likely to be met in large part by the newly discovered gas reserves of the Eastern Mediterranean.
Israel has the potential to become an important regional producer of liquefied natural gas. Its Tamar field, with estimated reserves of 9.7 trillion cubic feet (tcf), came online in 2013 while its Leviathan gas field (above), with a potential of 16 tcf, is slated to be ready for production in 2017.
Israel, for one, has the potential to become an important regional producer. Its Tamar field was confirmed to have estimated reserves of 9.7 tcf while its Leviathan gas field has the potential of producing up to 16 tcf.
Meanwhile, in November 2011, U.S.-based Noble Energy announced a major gas discovery south of Cyprus: The Aphrodite field was estimated to contain 7 tcf. In February 2013, a seismic survey south of Crete indicated that rich hydrocarbon resources may soon be found in Greek waters. Most recently, the Italian company Eni announced the discovery of a huge gas field off the coast of Egypt.
For reasons of geographical proximity, these Mediterranean energy resources concern first and foremost the European Union—the world’s third largest energy consumer behind China and the United States. While oil is still the dominant fuel, accounting for 33.8 percent of total EU energy consumption, natural gas comes in second at 23.4 percent. The Eastern Mediterranean gas reserves have three distinct advantages for European governments (and companies) and are thus viewed by them as a strategic priority. First, due to their smaller sizes and populations, the needs of Israel and Cyprus are relatively low and most of their gas could be exported. Second, Eastern Mediterranean gas could partly cover Europe’s energy needs and thereby decrease its dependence on an increasingly volatile Russia. Finally, since both Israel and Cyprus lack the capital and the offshore drilling technology to develop gas reserves on their own, foreign energy companies have identified them as investment opportunities that could generate significant financial returns.
As the Middle East implodes, security of energy supply has become an important policy objective for the EU. Indeed, there is a consensus among European governments that new initiatives are needed to address energy challenges. The EU is already directly involved to some extent in Eastern Mediterranean energy affairs because Greece and Cyprus are member states while Turkey is a candidate for membership and has a customs union with the EU. Although the governments of the EU and Israel are often at odds politically, economic relations between Jerusalem and Brussels are close and multifaceted.
The U.S. administration views Eastern Mediterranean gas as an alternative source for its European allies who depend heavily on Russian supplies.
Given the prominence of the Middle East for U.S. energy policy, it is hardly surprising that the gas finds in Israel and Cyprus have drawn Washington’s attention as well. Although the U.S. is likely to become the largest gas producer in the world as a result of increased use of shale gas, the administration views Eastern Mediterranean gas as an alternative source for its European allies who depend heavily on Russian supplies. Within the private sector, the American company, Noble Energy, has played a leading role in the exploration process; it has a 40 percent stake in the Leviathan fields, a 36 percent stake in Tamar, and a 70 percent stake in Aphrodite.
Not surprisingly, these discoveries have attracted Moscow’s interest as well due to a potential, adverse impact on its gas exports to European markets. Russian energy companies, which often act as the Kremlin’s long-arm, are particularly active in the region. In February 2013, for example, Gazprom signed a 20-year deal with the Israeli Levant LNG Marketing Corporation to purchase liquefied natural gas exclusively from the Tamar field. Then in December 2013, the Russian company SoyuzNefteGas signed an agreement with the Assad regime to explore part of Syria’s exclusive economic zone. One month later Putin signed an investment agreement with Palestinian leader Mahmoud Abbas to develop gas fields off the Gaza Strip.
Despite past support for the Palestinians, newly-elected Greek prime minister Alexis Tsipras (left) of the left-wing SYRIZA party, here with Israeli prime minister Binyamin Netanyahu, has sought to strengthen ties with the Jewish state. Greece’s location makes it a natural bridge between the energy-rich Eastern Mediterranean and energy-consuming Europe while Israel is now poised to become a major natural gas producer. Thus, Greece and Israel share significant energy interests.
Energy considerations have a long history of influencing the course of relations between states, and the new gas discoveries are no exception to this rule, affecting Israel’s relations with both Greece and Cyprus.
Greek-Israeli relations have been frosty for decades. The postwar Greek governments typically followed a pro-Arab foreign policy in order to protect the large Greek community in Egypt, secure Arab support on the Cyprus dispute in the United Nations, and maintain access to cheap Arab oil. While there was de facto recognition of the Jewish State in 1949, legal recognition needed to wait until 1990 under the right-wing Mitsotakis government. But the formation of a Turkish-Israeli strategic partnership in the mid-1990s provoked a strong backlash with Athens reverting to its pro-Arab policy.
This policy, too, has changed with the rise of Recep Tayyip Erdoan and his Islamist Justice and Development Party (Adalet ve Kalk?nma Partisi, AKP) in Turkey since the early 2000s. With Athens alarmed by Ankara’s growing regional assertiveness, and Jerusalem disturbed by the new regime’s fiercely anti-Israel approach, Greek-Israeli relations improved rapidly with the two countries signing a string of agreements in the fields of security, energy, trade, and tourism, and exchanging official visits at the ministerial, presidential, and prime-ministerial levels. In March 2012, the air-naval exercise Noble Dina, involving U.S., Israeli, and Greek forces, was conducted in the Aegean Sea while, a month later, a joint Greek-Israeli air exercise was held in central Greece. Most recently, Minister of Defense Panos Kammenos stated that “[Greek] defense planning should take into account friends and allies who seek defense cooperation in the region. And I clearly mean eastward toward Israel.”
Athens’s new Israel policy has been largely unaffected by the frequent change of governments in recent years. The last three prime ministers before the current one—George Papandreou (2009-11), Loukas Papadimos (2011-12), and Antonis Samaras (2012-15)—all met with Israeli officials and concluded agreements, all the more striking given the political and ideological differences among them: Papandreou is a moderate, left-of-center politician; Papadimos is known as a liberal technocrat, and Samaras, a right-wing politician.
In the wake of the economic crisis that has roiled domestic Greek politics and the austerity measures that the EU has sought to impose on Athens, Greeks took to the polls in January 2015 and brought to power the left-wing SYRIZA (Greek acronym of the Coalition of the Radical Left) party, in coalition with the small, right-wing party, the Independent Greeks. This caused considerable alarm in Jerusalem as many senior SYRIZA officials have strong pro-Palestinian sympathies: European Member of Parliament Sofia Sakorafa, for one, is a self-proclaimed friend of Hamas while Prime Minister Alexis Tsipras has participated in pro-Palestinian rallies. In late December 2015, the Greek parliament passed a non-binding resolution recommending recognition of “Palestine” as a state.
And yet, the SYRIZA-led government has not distanced itself from Jerusalem. Foreign Minister Nikos Kotzias identified Turkey as a source of threats while Minister of Defense Kammenos, leader of the Independent Greeks, harbors strong pro-U.S. and pro-Israeli views. In late November 2015, Tsipras visited Israel and, yet again, on January 27, 2016, together with six members of his cabinet when they held a joint meeting with the Israeli government. So it seems likely that the Greek-Israeli partnership will continue.
Athens is seeking bids for an Eastern Mediterranean pipeline to carry Israeli and Cypriot gas to Europe.
Beyond common concerns about Turkey’s intentions, Athens and Jerusalem share significant energy interests. Both countries want to implement the 1982 U.N. Convention of the Law of the Sea (UNCLOS) to facilitate the exploration and exploitation of the seabed; and both maintain that the Eastern Mediterranean could be unilaterally developed through its division into exclusive economic zones of 200 nautical miles. In contrast, Ankara has not signed on to UNCLOS and favors a settlement in the Aegean and the Eastern Mediterranean that would take perceived Turkish interests into greater account.
Moreover, Greece’s location makes it a natural bridge between the energy-rich Eastern Mediterranean, including Israeli fields, and energy-consuming Europe, and Greeks see the country as a hub for bringing Eastern Mediterranean gas to European markets. In March 2014, Athens announced an international tender for a feasibility study of the Eastern Mediterranean pipeline to carry Israeli and Cypriot gas to Europe via Crete and the mainland. While the proposed pipeline would be rather expensive and pass through disputed waters, Russian intervention in the Crimea and eastern Ukraine has given new momentum to the project as the EU looks for alternative sources of natural gas. The European Commission has included the proposed pipeline in its list of “Projects of Common Interests” that could receive financial support.
If Jerusalem and Nicosia decide to opt for liquefaction of their gas resources, then Greek-owned shipping could also play an important role in transporting liquid gas to the international market. During his visit to Israel in November 2015, Tsipras stated,
One of the main issues in our discussions today was [sic] the opportunities arising in the fields of energy in the Eastern Mediterranean … We are examining ways to cooperate in research, drilling, and the transportation of gas from Israel to Europe.
While energy is not the sole factor contributing to the improvement of bilateral relations, it has certainly played a crucial role in the convergence of Greek and Israeli interests in the Eastern Mediterranean.
The development and exploitation of Eastern Mediterranean energy resources have also given a boost to Israeli-Cypriot relations. Despite geographical proximity, the two countries have largely ignored each other for years. For most Israelis, Cyprus is either the site where Holocaust survivors were forcibly interned by the British (1946-49) as they sought refuge in mandatory Palestine or the closest place where couples unable or unwilling to contract a religious marriage in Israel are able to enter into a civil marriage.
For its part, Nicosia traditionally took a pro-Arab line in diplomatic settings that differed little from neighboring Greece; and just like in Greece, the AKP-induced chill in Turkish-Israeli relations had a warming effect on Cypriot-Israeli relations. In March 2011, Israeli president Shimon Peres hosted his Cypriot counterpart, President Demetris Christofias, who reciprocated this hospitality in November. Both sides came to view each other as potential counterbalances to Turkey’s presence in the Eastern Mediterranean. Cypriot defense minister Dimitris Iliadis signed an agreement on the “Mutual Protection of Confidential Information” in January 2012 with his Israeli counterpart, Ehud Barak, and a month later, Netanyahu paid a visit to Nicosia, the first ever by an Israeli prime minister, to discuss energy and defense cooperation. According to press reports, the Cypriot navy is planning to buy two Israeli-manufactured hi-tech offshore patrol vessels in order to patrol its exclusive economic zone.
The energy dimension of the nascent Israeli-Cypriot relationship is particularly strong. Nicosia has announced plans to build a liquefied natural gas plant in its Vassilikos industrial area to process its gas. Since the current gas finds are not large enough to make this multi-billion dollar project economically viable, Nicosia has suggested to Jerusalem that the two countries pool their gas reserves to form a single producing unit. In 2013, Minister of Energy Yiorgos Lakkotrypis declared:
[W]e feel that through a close collaboration with Israel, we will be able to be a major player in the world energy market, something that might be too hard for each country to achieve individually.
The future of the Israeli-Cypriot partnership will also depend on the export route of the Israeli gas. Jerusalem has examined a number of options for the optimum utilization of its gas fields but probably prefers to export gas westward in order to improve its relations with European countries. From the Israeli perspective, energy cooperation with Greece and Cyprus could build a new web of alliances with the EU that would help Jerusalem to break out of its increasing geopolitical isolation. The Netanyahu government even lobbied on behalf of Greece in Europe and the United States for an economy recovery plan. In late March 2012, during an energy conference in Athens, then Israeli minister of energy Uzi Landau spoke of “an axis of Greece, Cyprus, and Israel and possibly more countries, which will offer an anchor of stability.” In August 2013, the three countries signed an agreement to install a 2000-megawatt underwater electric cable to connect their power grids—the first of its kind to connect Europe and Asia.
Most recently, in December 2015, a series of trilateral consultations was held in Jerusalem in which a set of issues were taken up and discussed, with energy development topping the list. The parties agreed to further promote trilateral consultations and to meet on a regular basis, beginning with a meeting of their heads of state in Nicosia on January 28, 2016.
While revenues from the sale of oil and gas can bring wealth and prosperity to societies, they also have the potential to upset regional balances of power. In the Eastern Mediterranean, where countries have been locked in conflicts over territory for decades, gas discoveries seem likely to increase the stakes. Contested ownership of gas resources has, in fact, destabilized already strained relations between Israel and Lebanon as well as between Turkey and Cyprus.
Although a delimitation agreement between Lebanon and Cyprus was signed in January 2007, the Lebanese parliament has refused to ratify it to date, and Hezbollah declared the agreement
null and void because the Lebanese side that signed it had its official capacity revoked … The sea, like land, is a one hundred percent legitimate Lebanese right, and we shall defend it with all our strength.
When in December 2010, Nicosia signed an agreement with Jerusalem demarcating their maritime borders, Beirut accused both states of violating its maritime rights. The following year, in a televised speech marking the fifth anniversary of Hezbollah’s 2006 war with Israel, the group’s secretary general, Hassan Nasrallah, threatened Israel with a strike against its energy infrastructure:
We warn Israel against extending its hands to this area and steal[ing] Lebanon’s resources from Lebanese waters … Whoever harms our future oil facilities in Lebanese territorial waters, its own facilities will be targeted.
These are not hollow threats. Hezbollah has the military capacity to attack Israel’s offshore gas platforms should it choose to do so. The 2006 war revealed that its vast arsenal of missiles and rockets includes Chinese-manufactured C-802 anti-ship missiles (range 75 miles) and Zelzal-2 rockets (range 125-250 miles). For its part, the Israeli navy is acquiring at least two 1,200-ton patrol-class vessels, along with additional unmanned aerial vehicles and missile-armed, remote-control gunboats. In this way, Jerusalem seeks to deter possible raids from Lebanon. The protection and exploitation of gas reserves is thus seen by the Israeli leadership as a matter of national security.
The relationship between Turkey and Cyprus is yet another example of a long-standing conflict with few prospects of imminent resolution, and the AKP’s rise to power has only exacerbated the situation.
Turkey’s strongman, Islamist Recep Tayyip Erdo?an (left), seen here at the World Economic Forum, Davos, in 2009, publicly berating Israel’s then-president Shimon Peres for alleged Israeli misconduct, has managed to alienate—and alarm—Eastern Mediterranean neighbors with frequent outbursts and occasional saberrattling. This has led Cyprus, Israel, and Greece, the area’s potential energy producers and transporters, to seek closer ties that would have been inconceivable a decade ago.
In Erdogan’s increasingly paranoid worldview, the possible economic and diplomatic revival of Cyprus as a result of gas development poses a clear and present danger to Turkish national security. In September 2011, Ankara signed a continental shelf delimitation agreement with the “Turkish Republic of Northern Cyprus,” and shortly afterward, the Turkish state oil company (TPAO) started its first drilling near the occupied Cypriot city of Famagusta.
While Ankara has invited foreign companies to explore its Mediterranean coast for energy resources, only the Royal Dutch/Shell has thus far expressed interest. In late October 2014, a Turkish research vessel entered the Cypriot EEZ to collect seismic data. Nicosia viewed this as a violation of its sovereign rights, since it had already licensed parts of its EEZ to foreign energy companies.
Israeli and Turkish officials have recently concluded secret talks about bilateral reconciliation.
The energy factor has also internationalized the “Cyprus Problem,” creating a new point of friction between Ankara and Jerusalem. The Turkish government did not anticipate the rapid improvement of Israeli-Cypriot relations and fears that the bilateral cooperation will not be limited to the energy sector. Even before this development, Erdo?an had threatened Jerusalem over its gas exploration initiatives, warning that while “Israel has begun to declare that it has the right to act in exclusive economic areas in the Mediterranean…[it] will not be owner of this right.” For its part Jerusalem has not remained passive, requesting Cypriot permission for the use of the Paphos air base by Israeli fighter jets. In early November 2015, the two countries conducted the second Onisilos-Gideon military exercise in the western part of the island.
The internationalization of the “Cyprus Problem” extends well beyond the region. Chinese companies have already bid for gas exploration and liquefaction projects in the Eastern Mediterranean and are negotiating an agreement with the Cypriot government to purchase LNG by 2020. Consequently, Beijing has closely followed the Cyprus peace negotiations.
The Eastern Mediterranean energy boom has helped warm traditionally chilly bilateral relationships between some countries while aggravating already strained relations with others. Can it also become an engine for promoting regional cooperation?
While the last few years have seen a great deal of saberrattling out of Ankara, the likelihood of a military confrontation between Cyprus and Turkey, or Israel and Turkey, seems small. The construction and operation of energy infrastructure (e.g., pipelines, refineries, natural gas plants) is a costly business requiring political stability, and Ankara may not wish to undermine its role as an energy transit state. Indeed, Israeli and Turkish officials have recently concluded secret talks about bilateral reconciliation that covered, among other items, the laying of a natural gas pipeline between the two countries. This would allow Turkey to reduce its energy dependence on Russia (relations with which have worsened following the downing of a Russian fighter jet in November 2015) as well as to open up a new market for Israel’s natural gas projects off its coast.
In addition, Ankara has offered to build a “peace pipeline” to transport Cypriot gas to European markets via Turkish territory. Nicosia has not rejected this plan provided there is a resolution to the “Cyprus problem,” including the reunification of the island and the withdrawal of Turkish troops from the northern section. This bolsters the argument, advanced by the U.S. State Department among others, that gas profits could contribute to the island’s unification as both Greek and Turkish Cypriots would have major additional incentives to accept a peace deal. It is no coincidence that the special representative for regional energy cooperation for the newly-established State Department’s Bureau of Energy Resources is based in the U.S. embassy in Nicosia.
This optimism is rooted in the long-held, liberal view of international relations positing that economic benefits resulting from energy transportation can help resolve political conflicts. Yet if history offers any guide, an economic boom attending hydrocarbons exports can just as often lead to ethnocentrism and economic nationalism as to goodwill and shared prosperity. The production of large quantities of oil and natural gas in the North Sea, for example, has strengthened Scottish nationalism and may eventually lead to Scotland’s secession from the United Kingdom. Likewise, the Clinton administration’s promotion of a “peace pipeline” to carry Azerbaijani oil through the contested area of Nagorno-Karabakh and Armenia to the Turkish market failed because Armenia did not wish to make the necessary territorial concessions to Azerbaijan. Then again, in 2004, Georgian leader Mikheil Saakashvili floated the construction of a Russian-Georgian oil pipeline through the breakaway republic of Abkhazia to facilitate a solution to the Georgian-Abkhazian conflict, only to be rebuffed by both Russia and Abkhazia. The proposed Iran-Pakistan-India gas pipeline had the same fate in 2009 when the Indian government announced its decision not to participate in the project for security reasons.
Evidently, such pipelines have failed to materialize because states were neither willing to surrender territory nor comfortable depending on hostile neighbors in return for possible economic benefits. Those who envisage the prospect of a “peace pipeline” positively affecting the current negotiations between Greek and Turkish Cypriots for the resolution of the “Cyprus Problem” may find themselves seriously disappointed.
The new substantial gas discoveries in the Eastern Mediterranean are rapidly transforming regional orientations. Energy interests have brought Israel closer than ever diplomatically to Cyprus and Greece and have played an important role in the apparent thaw in Israeli-Turkish relations. At the same time, energy has generated new tensions between producing countries and countries that feel excluded from the regional natural gas development opportunities. Relations between Turkey and Cyprus as well as between Israel and Lebanon, poor at best, have come under further strain.
U.S. and European interests will be well served by the emergence of the Eastern Mediterranean as a gas-exporting region.
Undoubtedly, U.S. and European interests will be well served by the emergence of the Eastern Mediterranean as a gas-exporting region. However, this will only be possible if there is a resolution to the ownership issue that can accelerate the pace of private investment in the regional gas industry.
Without a region-wide legal agreement, energy companies may not be able to secure the necessary funding to develop and implement gas projects. Washington, which enjoys good relations with all Eastern Mediterranean countries, could act as a broker in hosting multilateral regional talks to defuse tensions and promote mutual understanding between countries in the region.
Emmanuel Karagiannis is senior lecturer at the department of defense studies, King’s College, London, and author of Political Islam in Central Asia (Routledge, 2010) and Energy and Security in the Caucasus (Routledge, 2002).
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The Vote for The renewed independence of Greece leads to the retirement of Ms. Angela Merkel and a more personal involvement by President Obama. The Incomplete birth of the Euro may have doomed it from start – but the EU must be saved.
Why is it that just about only two true liberal economists – Nobel Prize Winners Joseph Stiglitz and Paul Krugmann – seem to have it right on Greece vs. the German dominance of Europe?
With so much in the media – most of it telling about the writer – not the subject – we did not find it interesting to enter the fray. Looking up the subject in the SustainabiliTank.info memory – we found only one article to-date. It is: the January 26, 2015 article: “Can Bolivia Chart a Sustainable Path Away From Capitalism? Will Greece try to come up with a Pachamama and an ALBA Charge? In this Globalized economy can a State honestly drop out and isolate itself?”
I posted some excerpts of a very interesting and long article I picked up from Truthout – this with my thinking of the latest changes in Greece and wondering if rhetoric is true change – and how can Greece fare in a capitalist world with management outside its borders, but vested interests residing also in the country itself. Will there be a Greek Pachamama in Europe’s future? Will the Tsipris Greece be the Morales of an ALBA Charge of anti-capitalist rhetoric in Europe? The article I was looking at the time did not deal with Greece but with countries in Latin America that did shake off impositions from the globalization of capitalism.
The true problem in Europe seems to be that Ms. Angela Merkel just does not have the knowledge of European history. Having grown up under the Communism of East Germany, then liberated by the reunification process, she transferred the communist zeal into a capitalist zeal that basically says – all is well if you make money of it. What she does not understand is that the First World War caused the Second World War by imposing debt on the losing side Germany, but then after the Second World War, a Democratic Administration in the US, having learned from the previous experience, made sure that the rebirth of Europe, and Germany being a main ingredient of Europe, will be made possible by avoiding the sort of debt situation that the Treaty of Versailles allowed.
Besides finally annulling the German debt from WWI eventually in 1953 the European debtors of a reborn West Germany, including Greece, decided on writing off the major part of the new debt.
Sustainability is thus based on writing off debt, rather then in puritanical insistence on repayment. This is not just a matter of an uninformed Ms. Angela Merkel, but also of a large part of US politics – the present Republican party of all its streams.
We find today that my question of January 2015 is becoming very relevant in the European negotiations of July 2015, and the two above Professors seem to have reached some very similar conclusions. It just makes better sense for Greece to bail out from a system full of directives and regain their independence by printing their own money, and running their own country by themselves – and for themselves.
The problem with all those conservative-puritanical blind a-National capitalism adherents that were trained also in blind Business Administration – they have no feelings for social issues, and the understanding that good income for the lower classes creates the customers for the goods that are produced in the country that finds employment for its citizens. Making profits overseas and not paying taxes at home – just does not lead to sustainability of a Nation.
Providing fake “bail-outs” by providing money to pay for the interest on old loans, is only an illusion of help and leads only to further decline of the debtor Nation. The Greeks were totally right in voting OXI over NAI. Now Ms. Merkel wants to charm them back into submission – but only Debt forgiveness provides a path to a solution.
In absence of such an approach, the Greeks are advised by the above two professors to leave the EURO, create a NEW DRACHMA, devalue it to the point it hurts – but it promisses a better future for their children – something that is in their hands to achieve and not decided for them from outside by a non-Union that only rules but does not tend to their social needs.
We wish the best luck to Prime Minister Tsipras. He already sacrificed his finance Minister Yanis Varoufakis and brought in a milder speaking Euclid Tsakalotos, but the EU has not yet reciprocated by retiring Ms. Merkel. What Germany needs is a leader not afraid, or mentally opposed, to tackle their Bank Managers who on their own will never make the needed decisions.
The Official debt of Greece is to:
Germany 68.2 bn EURO
IMF 21.4 bn
US 11.3 bn
UK 10.8 bn
Belgium 7.5 bn
Of these EU countries, Italy and Spain, are themselves heavily indebted and might very soon be in need of bailouts.
From pro-American to pro-Russian? Nikola Gruevski as a political chameleon.
A former staunch ally of the US-led War on Terror, Macedonia PM Nikola Gruevski has gradually turned his country away from the west towards Russia – all the while keeping his neoconservative ideology intact.
Meanwhile, political analysts have detected a certain rift in the relations between Skopje and the West which has resulted in the Macedonian government’s more decisive reorientation towards Moscow.
From one neocon to another:
The latter objective was achieved via the recruitment of a younger pool of cadres. Following a widespread trend all over Southeast Europe (e.g. Albania’s Edi Rama and Serbia’s Vuk Jeremi?), the party’s central committee and later the Cabinet of Ministers consisted of young, aspiring and, often, Western-educated individuals (e.g. the Foreign Minister between 2006 and 2011, Antonio Milošoski). Moreover, Gruevski maintained the central aspects of Georgievski’s strategy of rapprochement vis-à-vis the ethnic Albanian community.
Despite this, Gruevski’s term in office has been marked by the emphatic endorsement of Neo-Macedonism to the detriment of the modernist narratives over the Macedonian ethno-genesis in the nineteenth century. The adoption of Neo-Macedonism became further institutionalized through the endorsement of grandiose architectural projects, largely inspired by classical antiquity, which commenced in 2010.
On the domestic front, the Socialists/SDSM and other opposition circles accused the government of investing a disproportional percentage of the state’s budget on these projects. In foreign policy, the emphasis on Neo-Macedonism further complicated relations with the southern neighbour, Greece.
Since the early days of Nikola Gruevski’s term in office, the ‘new’ VMRO-DPMNE drew inspiration from the rather influential trend of neoconservatism among policymaking circles in the US. As it was the case with various other statesmen in Central and Southeast Europe (e.g. Romania’s Traian B?sescu), Nikola Gruevski underlined his firm commitment to Euro-Atlantic institutions and opted for the rapid liberalization of the economy along post-Keynesian lines.
Meanwhile, Gruevski constantly stressed his deep faith in God and highlighted the significance of Eastern Orthodoxy and its system of moral values as a fundamental pillar of the state’s identity. In the field of foreign policy, Nikola Gruevski soon emerged as a staunch supporter of George W. Bush’s policy-doctrine on the Middle East. Throughout the 2000s, FYR Macedonia had dispatched military personnel to Afghanistan and Iraq under the auspices of the US-led ‘Coalition of the Willing’.
The pendulum shifts: Fluctuating geopolitics and disillusionment with the West
Meanwhile, the simultaneous advent of the economic crisis made European policymakers more introverted and reluctant to the prospects of the EU’s wider enlargement. With specific regard to FYR Macedonia, European policymakers and political analysts soon stroke a critical stance towards Nikola Gruevski and his apparatus. The main areas of concern were symptoms of nepotism and authoritarianism as well as accusations over the relentless propagation of ‘ethno-kitsch’.
This shifting landscape in global and regional politics had direct ramifications on the government circles in Skopje. Several commentators have argued that delaying the state’s accession to Euro-Atlantic institutions runs detrimental to FYR Macedonia’s stateness and it is largely to account for Skopje’s disillusionment with the West. From a more ‘ideological’ angle, though, the change of guard in the White House and the subsequent adoption of a new US foreign policy doctrine are not to be overlooked either.
In other words, Nikola Gruevski’s government has lost much of the patronage that it enjoyed during George W. Bush’s tenure in office. Moreover, we are currently experiencing the transition from a unipolar to a multipolar world order. The last few years have witnessed the consolidation of semi-authoritarian models of governance among emerging regional actors (e.g. Recep Tayyip Erdo?an in Turkey and Vladimir Putin in Russia). The latter development has encouraged the, if only subtle, admiration of certain statesmen throughout Central and Southeast Europe towards the above-mentioned models.
For instance, Hungary’s Viktor Orbán recently coined the concept of illiberal democracy. According to the Hungarian PM, ‘it is not an imperative that contemporary democracy must be structured along the ideological frame of Liberalism…there can be numerous other models of democracy in Europe, nowadays’. Moreover, Viktor Orbán has also positioned Hungary’s foreign policy more solidly within Russia’s orbit of influence.
In particular, both FIDESZ and VMRO-DPMNE converge along a common axis. Both are post-Communist parties that commenced their engagement in politics as, anti-establishment, umbrella-initiatives that hosted a wide range of conservative as well as liberal standpoints. However, in the long run, local adaptations of neoconservatism evolved into the dominant intra-party trend.
Nikola Gruevski and/or Viktor Orbán are not merely unhappy with the outlook(s) of Euro-Atlantic institutions on their respective states or the way(s) that their rule has been portrayed in the Western press. They have also isolated specific elements in Vladimir Putin’s leadership which they deem rather akin to their brand(s) of neoconservatism. These are, namely, Russia’s leader-centred and strong government, the promotion of national and Christian values, and the safeguarding of ‘naturally ascribed’ gender-roles.
Especially in the light of a multipolar international system, one might contend that the neoconservative, ideological, core in parties such as VMRO-DPMNE and/or FIDESZ has remained intact despite the, apparent, foreign policy readjustment towards Moscow.
Pro-government circles have hinted at the involvement of ‘foreign decision-making centres’ who are not particularly content with the bilateral cooperation between Russia and FYR Macedonia. In the other end of the spectrum, opposition circles have suspected the government of engineering the Kumanovo troubles in an attempt to play the card of ‘national unity’ as a last resort. A third assumption that has not been examined to an adequate extent is the possibility of a peculiar, yet amorphous, blend between Albanian ethno-nationalism and elements of Islamic fundamentalism along the lines of the ‘Chechen precedent’.
Russia, on its part, has been quick to point the finger for both the Kumanovo incidents and the anti-government mobilization at the West. The US and the EU have been accused of orchestrating one more ‘Maidan-style’ coup with the aim to destabilize the government and obstruct cooperation with Russia in energy issues.
Russia Today and other pro-Kremlin media outlets dedicated considerable time to the coverage of pro-government demonstrations where Russian flags also featured among the crowd. Quite a few Western political analysts have expressed the wishful thinking that Nikola Gruevski may be forced to resign under popular pressure and be replaced by a coalition government with a Euro-Atlantic orientation.
Apart from nominally right-wing parties, centre-left statesmen in the region have also detected, albeit more subtly, some ‘positive’ aspects in Vladimir Putin’s pattern of governance (e.g. the Bulgarian Socialist Party/BSP and Slovakia’s SMER). Therefore, in order to grasp such chameleonic mutations more adequately, one should also pay close attention to political culture among post-Communist parties in Central and Southeast Europe and its evolution.
WE SUGGEST TO THINK ALSO THROUGH THE ELECTION RESULTS IN THE UK WHEN READING ABOVE ARTICLE – THIS SO THAT THE MAKINGS OF A EUROPEAN UNION ARE CONSIDERED WHEN LOOKING AT CENTRIPETAL MOVEMENTS LIKE THOSE APPEARING IN CENTRAL AND SOUTH EASTERN EUROPE.
Related Articles: The deep roots of Macedonia’s current turmoil – and the way forward – Heather Grabbe -the same source.
Heather Grabbe 13 May 2015, openDemocracy, London
The country must avoid just replacing the driver in the seat of a captured state machinery – by increasing inclusion and pluralism in governance. This will be impossible without EU and NATO assistance.
For nearly two decades, Macedonia has been a pressure cooker of public anger at corruption, deteriorating governance and chronic unemployment. Now the valve has blown. This year, union-organised strikes were followed by student protests against flawed education reforms. Then the opposition party released recordings of conversations that exposed government wire-tapping of more than 20,000 citizens. Quickly dubbed “bombs”, these recordings were released over the last three months by the main opposition party leader at press conferences. On them appear the voices of Prime Minister Nikola Gruevski, senior officials, journalists, judges and security officials conspiring in electoral and judicial fraud, and organising systemic corruption. On the latest, released on 4 May, the prime minister discusses with interior ministry officials a cover-up of the murder in June 2011 by one of his bodyguards of 21-year old Martin Neshkovski, a student who supported the ruling party.
These revelations have led to a new wave of protests, led by grassroots networks of civil society rather than the opposition party. The young activists have become more radical in their demands under sustained attacks by riot police and government infiltrators, who provoked the protestors for five nights in a row. Last Friday, they pledged to come back to demand the resignation of the prime minister. Then the population awoke on Saturday morning to news of what the government called a “terrorist attack” in an ethnically mixed neighbourhood in Kumanovo, a town near the Serbia/Kosovo border. The results were the deaths of police officers and arrests of alleged terrorists. The government-controlled media called for unquestioning support for the government, and labelled as a traitor anyone who disputed the official interpretation of events. What is going on? Is this a security crisis or a consolidation of power by the ruling party in the face of mounting opposition?
High stakes – but for security or politics?
The shootings in Kumanovo have woken up the rest of the world because they are reminiscent of the security crisis fifteen years ago, when ethnic Albanians took to the hills with their guns to demand rights, representation and jobs. The country narrowly escaped a full-blown civil war thanks to the Ohrid Agreement, which gave the Albanians greater political and economic inclusion, including quotas for public-sector jobs and parliamentary seats.
It was NATO and the EU that took responsibility for Macedonia’s security in 2001, with Javier Solana, as EU High Representative for Foreign Policy at the time, and George Robertson, then NATO Secretary-General, as the main negotiators at Ohrid. But the current crisis is not primarily driven by ethnic tensions. The security framing by the government obscures a much deeper crisis in the body politic, and a looming one for the economy.
After 24 years of independence, Macedonia’s model is crumbling. The ruling party has held onto power by controlling the state and media, and borrowing on international markets to keep the economy going. This has undermined the country’s fragile democracy – despite the promises made at Ohrid, which are still not fully implemented – and failed to build rule of law and a sustainable economy. Prime Minister Gruevski won power nearly a decade ago on promises of clean government and economic development. But he then perfected the system of clientelism and state capture begun by Branko Crvenkovski, his predecessor as opposition leader and prime minister, and later president. Gruevski has used snap elections twice to keep his party in power, and his leadership has become increasingly coercive. The wiretap recordings have confirmed that his VMRO-DPMNE party has captured all vital areas of the economy and established complete control over media, even imprisoning critical journalists. Macedonia’s ranking has fallen from 36 to 136 in the freedom of media index produced by Reporters Without Borders.
The government dispensed with parliamentary debate at the end of 2013. Faced with a short deadline to approve the next loan to pay pensions before the Christmas and New Year holidays, they forcibly expelled the opposition and media from the parliament during a debate over the state budget rather than find an agreement.
The public is scared. More than half of Macedonians believe they cannot freely express their opinions. A staggering 81 percent believe that fear of consequences for them and their families prevent them and others from speaking out. Their political fears are heightened by their economic vulnerability.
The chronic economic malaise underlying acute political crisis.
The Macedonian economy appears to be financially stable. The government nurtures an image of business promoter and responsible borrower. Until recently, it was the region’s poster child for the International Monetary Fund and the World Bank. European banks were happy to earn good returns on Macedonian state bonds. Macedonia’s average GDP growth of 3% in the last three years is the highest in the region, completing this picture of prosperity.
But the economy is not sustainable. The government has used debt financing to invest in grandiose infrastructure projects, including the flagship “Skopje 2014” project, which erected statues and faux-classical buildings in the capital at a cost of over 600 million euro. Between 2008 and 2014, Macedonia’s public debt quadrupled, rising from 23% of GDP in 2008 to around 46% in 2014. Debt is projected to reach the 60% ceiling prescribed by the international financial institutions by 2019. The state budget increased by a third over the same period (from roughly 2 to 3 billion euro). Inflows of foreign direct investment averaged only 2.8% of GDP per year between 2009 and 2014, low even by regional standards.
Life for citizens has become more precarious. Around a third of the workforce is unemployed, the second highest rate in Europe after Kosovo. Without the heavy borrowing, the fragile economy could not sustain more than 300,000 pensioners, who rely on the state budget for half of their needs. Nor could it afford to pay the huge number of state employees. The last official number was 140,000 in 2008, and latest estimates range from 200,000 to 255,000. The total number of people employed in Macedonia is 700,000 – meaning that the state employs nearly a third of the workforce. No wonder people are leaving to seek better prospects abroad. A census has been postponed by the government, but Gallup estimates that more than 300,000 people have left the country. According to Deutsche Welle, most of the 120,000 Macedonians who acquired Bulgarian passports have already emigrated to the EU or elsewhere. Macedonia seems to have more registered voters (at 1,780,128) than residents.
VMRO-DPMNE has kept its hold on power in this unhappy state by resorting to strident nationalism and intimidation of its opponents, increasing the divisions in a multi-ethnic country. Ethnic Macedonians are understandably aggrieved by the lack of a solution to the dispute with Greece over the country’s name, which already blocked entry to NATO – and Gruevski has adroitly used the issue to rally nationalism in support of the government. Meanwhile, the ethnic Albanian political parties have been co-opted by their share in the spoils of mis-governance, even though their people remain even more alienated and poorer than the rest of the population.
The divisions are deepening right across society. Three-quarters of ethnic Albanians still firmly believe in EU and NATO accession as the way to a better future, but by now over 62 percent of other Macedonians think badly of joining the EU. Three-quarters of the ruling party’s supporters see the name dispute with Greece as the key reason for Macedonia’s now bleak EU accession prospects; but only 20% of opposition supporters agree. The biggest divide is between rich and poor, especially along party lines. The poor are undoubtedly getting poorer: resources available to the poorest fifth of citizens fell by 38% between 2008 and 2012. But business profits have grown by almost two and a half times since the year 2000. Nearly 80% of all Macedonians believe it is unfair that employment in state institutions and general prosperity is based on political party membership.
Macedonia is once again becoming a security threat on the EU’s borders. But this time it’s different: a non-partisan civic movement has taken to the streets for the first time to change the country. There is a real opportunity to use this energy to build democracy and a market economy in this multi-ethnic state.
No party is doing well in Macedonia: the secret recordings have lost the government all credibility, but the public has little faith in the leaders of the opposition and ethnic Albanian parties either. The immediate solution lies in collective action first by all those who have created the problem.
Now that three of the prime minister’s key allies have tendered their resignations, Macedonia should turn again to the solution that averted the civil war in 2001: a unity government composed of the four main parties. To foster the necessary compromises and offer a fresh start. it would not include the current prime minister, public prosecutor or speaker of the parliament – but opposition parties must be involved in open and credible oversight of the intelligence agencies, and take responsibility for the discredited interior ministry.
The most promising scenario is a government of national unity that lasts for 12-18 months, to prepare the country for free and fair elections, and create an independent commission to investigate all the events since the opposition was violently ejected from the parliament in 2013. And it should agree on a common negotiating platform on the name dispute with Greece. Macedonia’s newly reinvigorated civil society should also contribute to the work of the parliamentary commissions and monitor the new government’s progress in restoring the accountability of public institutions. The country must avoid just replacing the driver in the seat of the captured state machinery, by increasing inclusion and pluralism in governance.
As so often in the Balkans, such a scenario will be impossible without EU and NATO assistance. The default position among EU foreign ministers is to expect sovereign countries to sort out their own political problems through democratic institutions. But after a decade of unconsolidated democracy and state capture, Macedonia does not possess those institutions. Therefore, other levers of influence are needed. NATO could offer a tangible incentive to all parties by offering a possibility to re-open membership talks. EU accession negotiations are far off because so much time has been lost on necessary reforms, but the enlargement process is vital to offer hope, especially to the ethnic Albanians, and guidance to reformers who are seeking to take back captured parts of the state. The support of EU institutions, member-states and banks is vital for the country’s macroeconomic stability. Neighbouring governments could also exert more pressure, as their own security is at stake. Bulgarian Prime Minister Borisov was the first to request Gruevski to step down.
The EU can no longer afford to indulge a model of governance in Macedonia that has been far more aggressive in its authoritarian zeal than nearby Montenegro or Turkey. The European People’s Party has a particular responsibility to get involved, having accepted and protected VMRO-DPMNE as a sister party for all these years. Now it must act to uphold the standards of democracy on which it was founded, by putting pressure on VMRO-DPMNE to relinquish its grip on power and join a unity government. The time to move is now, as the costs of inaction will continue to rise.
Can Bolivia Chart a Sustainable Path Away From Capitalism?
FOR THE FULL ARTICLE PLEASE GO TO: truth-out.org/news/item/28778-can…
The number of conflicts over natural resource extraction and refining, road building and pipeline construction, and forest and water use have all steadily grown under Morales.
Ruthless extraction of Bolivia’s bountiful natural resources has concentrated the natural and social wealth of the country in a small group at the top of society, and exposed Bolivians to an extreme degree of imperial intrigue and attempted subjugation.
In stark contrast to monoculture farming, several hundred different varieties of potato are grown in the Bolivian Andes, as a resilient subsistence food by 200,000 small-scale farmers.
With the melting of the Andean mountains ice and climate change farmers no longer know how community can grow food because “it now rains at all different times, and it’s drier for longer. This place did not used to be as hot as it is now.”
Higher average temperatures will lead to an increase in evaporation, causing soils to dry out. In turn, drier soils will increase erosion and loss of topsoil, an effect that will be compounded by two other effects of a warmer climate.
But for all of Morales’ rhetorical championing of “buen vivir,” Gudynas believes that the MAS government instead operates more along the lines of a new form of Keynesian neoliberalism, or what he calls “neo-extractivismo.”
And despite a change in official rhetoric, and some welcome redistribution of wealth, Morales’ policies are practically the same as his predecessors’ with respect to natural resource extraction.
“We have lost an opportunity for something based on our self-organization and self-management.”
“The people do not decide; the government decides. Despite the constitution guaranteeing rights for indigenous people and Mother Earth, those policies are not implemented; they are just words.”
As through so much of its history, the small Andean nation of Bolivia sits at the center of a whirlwind of political, social and climatological questions. Arguably, no other country thus far in the 21st century raises the question of an “exit strategy” from neoliberal capitalism more concretely, and with greater possibility and hope, than Bolivia. That hope is expressed specifically in the ruling party, MAS, or Movement Toward Socialism. The country’s leader, former coca farmer and union organizer Evo Morales – South America’s first indigenous leader since pre-colonial times – was overwhelmingly elected to his third term of office in 2014. Morales has broadly popularized the Quechua term pachamama, which denotes a full commitment to ecological sustainability, and public hopes remain high that he’ll guide the country toward realizing that principle.
Bolivia has seen impressive and consistent economic growth since Morales’ first election victory in 2006, including the establishment of government programs to alleviate poverty and attain the social equity goals promised in his campaign. However, this growth has primarily rested on an expanded and intensified exploitation of the country’s natural resources, principally from fossil fuel production, mining, and the growth of large-scale, mono-crop agriculture and manufacturing.
This economic growth has also created what the Bolivian non-governmental organization CEDLA (Centro de Estudios Para el Desarrollo Laboral y Agrario) calls the rise of a new bourgeoisie comprised of Santa Cruz agriculture producers, traders from the west of the country and small mining producers. The Bolivian government also believes that a new class is emerging, and will become Bolivia’s new dominant group. Carlos Arce, researcher from CEDLA, says in an article in the Bolivian press:
A new type of entrepreneur has emerged from the popular classes. These emerging strata are mostly traders and are also present in the cooperative sectors, especially in mining. This new type of entrepreneur saves more and has a more austere mentality, in the classical Weberian sense. Within the state, representatives of this strata interface with middle-class intellectuals and other sectors of society, seeking to build alliances with small urban and rural producers that respond to the prerogatives of the market.
The so-called “plural economy” institutionalized by the government recognizes the state, communitarian, private and cooperative forms of economic organization. It also puts the state in direct control of the plans for economic development. In other words, the Bolivian people are the owners of the natural resources, but it is the state that administers and industrializes these natural resources.
In Arce’s view, the government exalts this new “emerging bourgeoisie.” The government’s program of a plural economy “facilitates the alliance of these market-driven sectors with key sectors of international capital. This opens the door to transnational corporations and makes permanent their presence.”
In December 2014, the Financial Times reported on the rise of a new indigenous bourgeoisie in El Alto, less constrained by older cultural ties of thrift, and striving for greater wealth, more ostentatious luxury buildings and opulent traditional clothing.
On the other hand, while many journalists and analysts have focused on the accomplishments of the Morales’ government, few have looked at the state of the labor force, unions and labor conditions. Research by local organizations shows that finding secure employment has become very difficult. According to the Bolivian Labor Ministry’s own data just 30 percent of the labor force in Bolivia has a secure and formal job, with almost 70 percent working in the informal sector. These workers have no employment security, which makes people more dependent on welfare protections and programs that have become more elaborate and extensive in recent years.
Bolivia’s geography is very diverse: The verdant and tropical Amazonian lowlands give way to the austere beauty of the highlands and snow-capped peaks of the Andes that ring the capital, La Paz. Bolivian elevations range from 130 to 6,000 meters above sea level dividing the country into three distinct geographical areas: the high plateau, the Andean valleys and the eastern lowlands.
Given all of these factors, Bolivia offers a case study on the impact of climate change, people’s resistance to exploitation and racist oppression, and the potential for genuine change from below.
Much of that resistance was formed in response to centuries of relentless extraction of the country’s minerals, semi-precious and precious metals, and guano. Following the privatization of Bolivia’s public airline, train system and electric utility, in 1999, the government sold the water and sanitation system of Cochabamba to a transnational consortium. Over the following five months, mass demonstrations and violent confrontations with the police and military forced the government to cancel the contract and keep the water supply in public hands. This popular struggle for public control of water became recognized worldwide as the Cochabamba Water War.
Marcela Olivera is a water commons organizer based in Cochabamba, Bolivia. After graduating from the Catholic University in Cochabamba, Bolivia, Marcela worked for four years in Cochabamba as the key international liaison for the Coalition for the Defense of Water and Life, the organization that fought and defeated water privatization in Bolivia. Since 2004, she has been developing and consolidating an inter-American citizens’ network on water justice named Red VIDA.
Chris Williams is an environmental activist and author of Ecology and Socialism: Solutions to Capitalist Ecological Crisis. He is chairman of the science department at Packer Collegiate Institute and adjunct professor at Pace University in the department of chemistry and physical science. His writings have appeared in Z Magazine, Green Left Weekly, Alternet, CommonDreams, ClimateandCapitalism.com, Counterpunch, The Indypendent, Dissident Voice, International Socialist Review, Truthout, Socialist Worker and ZNet. He reported from Fukushima and was a Lannan writer-in-residence in Marfa, Texas. He recently was awarded a Lannan Cultural Freedom Fellowship.
The objective that the EU enshrined in the Treaty – that it should pursue the welfare of its populations – seems to have been forgotten – writes Kurt Bayer. Ross Douthat, without clear analysis, thinks South Europe leaving the Euro will help. A solid further look by Brussels, not just Berlin, is needed.
On May 29, the EU Commission (as well as OECD) published its assessment of the budgetary and reform programs of its member states and issued its “country-specific recommendations” – with the exception of Portugal, Greece and Cyprus which had already received their “adjustment programs” earlier.
Media reporting focused on the extension (by 2 years) of the time by which some countries have to achieve their medium-term objectives, and on President Hollande’s rebuke of the EC’s recommendations for France.
Commission President Barroso spoke of the need to loosen the consolidation efforts and to start combating unemployment, especially for youths. 6 bill EUR should be available for this purpose. Suddenly, promoting growth is no longer a taboo. The recent Franco-German announcement of an impending
Still, Barroso (and the EC) thinks that ”structural reforms” in goods and labor markets are the key to growth, and thus need to be speeded up. His (marginal) slowing down of austerity is not based on the recognition that the EU crisis strategy has proven to be a complete failure, but “only” on the lack of political acceptance by the unemployed citizens of the EU.
It seems to be impossible for politicians, both national and supranational ones, to admit past mistakes. But this would be the pre-requirement for a turnaround. Barroso and the others act as if everything so far had been going according to plan, had been successful, and that now one just adds another element to the heretofor successful strategy. This behavior, repression of facts, has been analyzed extensively by my late compatriot Sigmund Freud.
Technically, the EC assessed the Stability Programs and the Reform Programs. In its own words, by assessing them jointly, the EC purports to assess the complete economic policy of its member states. Let us look at the Austrian assessment as a case in point.
Economic growth is mentioned only with respect to the Austrian forecasts which underlie the programs – which are seen as being too optimistic. The prime objective of the analysis is, as usual, the positively assessed path of budget consolidation. The medium-term objective (as structural deficit of 0.45% of GDP) should be achieved 2 years earlier than originally (2017) planned. But Austria’s public expenditure share path again is seen as too optimistic. With respect to the tax system, the EC tells the Austrians that the least growth-damaging real estate taxes are far below the EU average, and thus could be increased.
The most important points of criticism concern the labor market: the participation rates of females and seniors are by far too low, income differences between genders too high, the pension age for women creeps only marginally towards that of men, early retirement is still to prevalent; education achievements are under par, at the same time costs of the system too high, migrants are left behind. All this against the background of the recognition that (measured) unemployment in Austria is the lowest in the EU. The EC criticizes also inadequacies in financial market supervision between home and host countries, as well as too many barriers for professional services and for personal services in health and care sectors.
For all these areas, EC gives recommendations to speed up reforms. All these points are well taken (by me, not necessarily the authorities), but: their implementation alone, while important, does not generate growth. There is not enough emphasis on promoting innovation, on real problems with the tertiary education system, no mentioning at all about a positive growth expectation – which would require an increase in effective demand in Europe. The structural problems of the financial sector are largely ignored, with the exception of the possible budgetary consequences of winding down one of the nationalized banks.
Macropolicy is not mentioned, not in the Austrian assessment, not in the assessment of the Eurozone. There EC mentions the need to achieve an adequate policy mix by better coordination of budget consolidation and structural policies, but no word is lost on coordination between the fiscal stance of the Eurozone and ECB’s monetary policy. This shows once more that macroeconomic policy is a foreign concept to the EC, that economic policy consists of budget policy cum supply side (micro) economics. Briefly, imbalances in foreign trade are mentioned, plus its necessary “rebalancing”, but that is it. When reading the documents, one sees that the focus on individual countries’ assessment virtually crowds out the assessment of the Eurozone and the EU as a whole. They are seen as the sum of the individual countries, but not as an objective of macroeconomic policy.
Conclusion: Nothing much has changed in the EU’s policy orientation. While the soaring youth unemployment is – finally – seen as a major (mainly political) problem, austerity is slowed down and youth training programs are encouraged. But this is not a change in the mainly austerity-driven paradigm. It does appear that the requirements of the financial markets still drive EU economic policy, rather than the life expectations of the EU citizens. The recent news about the watering-down and delay of the Financial Transactions Tax are only one indicator of this. The objective that the EU should pursue the welfare of its populations, enshrined in the Treaty, seems to have been forgotten.
Op-Ed Columnist – THE NEW YORK TIMES.
Prisoners of the Euro
By ROSS DOUTHAT
Published by The New York Times: June 1, 2013
TO its custodians and admirers, the European Union is the only force standing between its member states and the age-old perils of chauvinism, nationalism and war. That was the pointed message that the Nobel Committee sent last year, when it awarded the union a Peace Prize for its role in “the advancement of peace and reconciliation, democracy and human rights.” And it is the message hammered home relentlessly by the Continent’s politicians, who believe their citizens face a stark choice, in the words of Chancellor Angela Merkel of Germany, between continued integration and a return to “centuries of hatred and blood spill.”
But right now, the E.U. project isn’t advancing democracy, liberalism and human rights. Instead, it is subjecting its weaker member states to an extraordinary test of their resilience, and conducting an increasingly perverse experiment in seeing how much stress liberal norms can bear.
That stress takes the form of mass unemployment unseen in the history of modern Europe, and mass youth unemployment that is worse still. In the Continent’s sick-man economies, the jobless rate for those under 25 now staggers the imagination: over 40 percent in Italy, over 50 percent in Spain, and over 60 percent in Greece.
For these countries, the euro zone is now essentially an economic prison, with Germany as the jailer and the common currency as the bars. No matter what happens, they face a future of stagnation — as aging societies with expensive welfare states whose young people will sit idle for years, unable to find work, build capital or start families.
The question is whether they will face ideological upheaval as well. So far, the striking thing about the aftermath of the 2008 financial crisis, both in Europe and the United States, is how successfully the center has held. Power has passed back and forth between left and right, but truly radical movements have found little traction, and political violence has been mercifully rare.
In a sense, Francis Fukuyama’s post-cold-war declaration of the “end of history” — by which he meant the disappearance of credible alternatives to liberal democracy and mixed-economy capitalism — has held up pretty well in the last five years. Amid the worst economic disaster since the Great Depression, illiberal societies like Egypt and Syria have faced political crises, but the developed world has not. There has been no mass turn to fascism, no revival of Marxist economics, no coup d’états in Madrid or jackboots in Rome.
But you have to wonder whether the center can hold permanently, if unemployment remains so extraordinarily high. How must liberal democracy and mixed-economy capitalism look to young people in the south of Europe right now? How stable is a political and ideological settlement that requires the rising generation to go without jobs, homes and children because the European project supposedly depends on it? And for that matter, how well is the Continent’s difficult integration of Muslim immigrants likely to proceed in a world where neither natives nor immigrants can find work?
Already, the Greek electorate has been flirting with empowering a crypto-communist “coalition of the radical left,” even as a straightforwardly fascist party gains in the polls as well. Hungary’s conservative government has tiptoed toward authoritarianism. Spain has seen huge street protests whose organizers aspire to imitate the Arab Spring. And lately, Sweden, outside the euro zone but not immune to its youth unemployment problems, has been coping with unsettling, highly un-Scandinavian riots in immigrant neighborhoods.
These perturbations do not threaten democracy in Europe yet, and maybe they never will. Maybe the liberal democratic consensus is so bred into the bone that no amount of elite misgovernment can persuade Europe’s younger generation to turn against it. Maybe nothing can end the end of history.
But for the countries facing a youth unemployment crisis, that still seems like an awfully risky bet to make.
Yet there’s a Catch-22 facing Greeks and Spaniards and Italians looking for an alternative to just staying the course. As wrenching as it would be, the option that would do the most to defang extremists of the left and the right would probably be to abandon the euro immediately, with each country regaining control of its own fiscal and monetary policy and seeing what options open up. But at the moment, the only people arguing for that course are … the extremists of the left and the right!
For that to change, more of the Continent’s political elites would need to recognize that their beloved integration project may actually be threatening Europe’s long democratic peace. For now, there simply aren’t enough responsible people ready to unwind what should never have been knitted together in the first place. But with every increase in the unemployment rate, the odds get better that irresponsible and illiberal figures will end up unwinding it instead.
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A version of this op-ed appeared in print on June 2, 2013, on page SR11 of the New York edition with the headline: Prisoners Of the Euro.
For the sake of our European Friends – There are two Europes Now – the Triple A North and the South that was kept alive by the image of a Common Market for the North. Oh Well – the Voters in the North seem to rebel now and call for the South to grow up.
The following is a presentation of facts that cannot be ignored anymore. Deserves close reading by those in the North that thought you can bumble your way through without creating a real union capable of calling out “it is all for one and not just one for all!” The EU is not just the fulfilling of the German dream of takeover of Europe by peaceful means. Cyprus dreaming of being the Mediterranean base of Russia? What else? Austria a bridge to the East? Yes, but only after twinning up with Finland.
Everyone learned a lesson from the “bail-in” of the Cypriot banks: Russian account holders who’d laundered and stored their money on the sunny island; bank bondholders who’d thought they’d always get bailed out; Cypriot politicians whose names showed up on lists of loans that had been extended by the Bank of Cyprus and Laiki Bank but were then forgiven and written off. Even brand-new Finance Minister Michael Sarris who got axed because he’d been chairman of Laiki when this was going on. His lesson: when a cesspool of corruption blows up, no one is safe. And German politicians learned a lesson too: that it worked!
“With the Cyprus aid package, it was proven that countries like Germany, the Netherlands, and Finland, if they stick together, are able to push for a strict stability course,” Hans Michelbach told the Handelsblatt. The chairman of the finance committee in the German Parliament and member of the CSU, Chancellor Angela Merkel’s coalition partner, called for deeper collaboration of the triple-A countries in the Eurozone “to strengthen the confidence of citizens and investors in the common currency.”
There are still five in that euro triple-A club: Germany, Austria, the Netherlands, Finland, and Luxembourg. “It would be good if we could also convince Luxembourg to participate more strongly in this stability collaboration,” he said. It would be in the best interest of Luxembourg as major financial center, he added. A reference to Luxembourg’s precarious status, as Cyprus had learned, of being a tiny country with banks so large that it can’t bail them out by itself.
To protect the euro, the alliance of the triple-A countries must be united firmly against large euro countries like Italy and France, he said. “Strong signals of stability would be of great importance for the Eurozone,” particularly now, given the “unclear situation” in Italy, renewed doubts about Greece, and the failure of the French government in its stability policies.
Exactly what French President François Hollande needs: the euro triple-A club breathing down his neck. He’s already in trouble at home. To reverse the slide, he got on state-owned France 2 TV last Thursday to speak to the French people so that they could see how his sincerity, wisdom, and economic policies would stop the country from sinking ever deeper into a quagmire.
And a quagmire it is: double-digit unemployment, a Purchasing Managers Index just above Greece’s, new vehicle sales that plunged almost 15% so far this year, a budget deficit that refuses to be brought under control…. He has tweaked some policy measures here and there. And he dug up a new version of the 75% income-tax bracket that had been squashed by the Constitutional Court. But Jérôme Cahuzac, the Budget Minister who’d tried to get the first version through the system, went up in flames over allegations of tax fraud and “tax fraud laundering.”
Now the people have had it. After the TV appearance, his approval rating, ten months into his term, plummeted another 6 points to 31%, a low that scandal-plagued Nicolas Sarkozy took four years to reach. And only 27% approved of his economic policies. “The French simply don’t want austerity,” lamented an unnamed government insider.
France was suffering the consequences of the “socialist experiments” of its government and was becoming less and less competitive, explained Michelbach. He emphasized that France would remain an important partner of Germany. He wasn’t kidding: France buys 10% of Germany’s exports and is crucial to the German economy. But if France didn’t change course, he said, that could become a “serious problem” for the Eurozone.
As opposed to the mere hiccups of Cyprus or Greece. More banks and more countries will require bailoutsSlovenia, Spain, Italy, and Malta are on the list. And no one wants to see France on that list. Even Italy is too large to get bailed out by other countriesthough it’s rich enough to bail itself out, à la Cyprus [ A "Politically Explosive" Secret: Italians Are Over Twice As Wealthy As Germans].
But in Germany, a revolt against these save-the-euro bailouts has been brewing for a while. With elections in September, it’s taking on volume and voices, and the structure of a political party, the Alternative for Germany, not unpalatable radicals but the educated bourgeoisie, and they want to stop the bailouts and dump the euro.
The government is feeling the heat. No one can afford to lose votes. Michelbach’s triple-A club, a line of demarcation in the Eurozone, is one of the reactions. Merkel might benefit from it in the elections. The other four countries might find if appealing, though it will be of dubious appeal in the rest of the Eurozone. But if efforts fail to fix the Eurozone’s problemsand the Eurozone lumbering that waya tightly knit triple-A club could weather the storm together, more stable and more unified than the Eurozone ever was. And Michelbach had just floated a version of that idea.
Every country in the Eurozone has its own collection of big fat lies that politicians and Eurocrats have served up in order to make the euro and the subsequent bailouts or austerity measures less unappetizing. Here are some from the German point of view…. Ten Big Fat Lies To Keep The Euro Dream Alive
Wolf Richter wrote also – “White House Hypocrisy And Trade Sanctions Against China.” - Practically every car sold in the US contains Chinese-made components. But suddenly, in the middle of a heated presidential campaign, the Obama administration decided to do something about it.
Wolf Richter is a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience.
In www.nakedcapitalism.com/2013/03/w… he explains “Having worked a bit on international deals, and for companies operating in foreign markets, cross border transactions have an even lower success rate than domestic ones. The big reason is the one mentioned here, which is marked cultural incompatibility between the seller and buyer. Here the Chinese did less badly than they could have (they could have tried forcing Chinese practices on the German operation, which would have destroyed the value of the asset). But the logic of the transaction was unclear. Was it technology transfer? Consolidation? It appears both might have been goals, and neither happened very much.
But I find it intriguing that as lousy as the Japanese were at doing deals (they found it hard to understand that the contract was the deal, and were too inclined to overpay), they were good at managing workers in manufacturing operations (service businesses were another kettle of fish, there they tended to drive Americans crazy). This is a skill the Chinese will have to master, since they desperately need to re-invest their surpluses, and they are trying to acquire more real-economy assets.” FASCINATING.
His insights in Wall Street machinations are also very good.
The Media finally catches up to it – Cyprus – Will Russia get now a piece as it did years ago in Syria? This might be “plan D” that lets the potentially gas rich mini-State float away from the EURO and eventually the EU. Could an Obama Foray help by reconciling Turkey and Cyprus now that Greece was weakened by its own crisis?
Russian PM lectures Barroso on Cyprus.
Medvedev: ‘The euro crisis has strengthened ideas that Europe is in decline.’
BRUSSELS - Russian Prime Minister Dmitry Medvedev humbled European Commission chief Jose Manuel Barroso in public remarks on Thursday (21 March) over the EU’s handling of Cyprus.
Speaking alongside Barroso at a conference in Moscow, he called the EU’s original Cypriot bailout idea “to put it mildly, surprising … absurd … preposterous.”
“The situation is unpredictable and inconsistent. It [the bailout model] has been reviewed several times. I browsed the Internet this morning and I saw another Plan B, or a Plan C or whatever,” he noted.
He upbraided EU institutions for failing to give Moscow due notice of its decision.
“The system of early warning did not work very well … that means we need to work on it,” he said.
He also quoted unnamed Russian “eurosceptics” as saying: “The euro crisis has strengthened ideas that Europe is in decline in the 21st century … that the European project has turned out to be too cumbersome.”
Earlier the same say, he told Russian newswire Interfax that he is thinking of reducing Russia’s holding of euro-denominated currency reserves.
In a sign of broader Russian upset, Leonid Grigoriev, an academic and a former Russian deputy finance minister, told a separate news conference that Russian money is no longer safe anywhere in the EU.
“The Cyprus situation has created new uncertainty in the banking sector. People have started thinking whether the same can happen elsewhere, in Spain, Portugal, Ireland?” he said.
The EU’s Plan A for Cyprus was to lend it €10 billion, but to impose a 7-to-10 percent levy on all Cypriot savers, including Russian expats, who alone stood to lose €2 billion.
It has now been scrapped.
It is unclear what new model might be found.
But the Cypriot finance minister, Michael Sarris, also in Moscow on Thursday, said he is in talks to give Russia shares in Cypriot “banks, natural gas [reserves]” in return for Russian bailout money.
For his part, Barroso told Medvedev that the EU could not have warned Russia even if it wanted to.
“Regarding the conclusions of the last Eurogroup [euro finance ministers, who drew up Plan A], Russia was not informed because the governments of Europe were not informed – let’s be completely open and honest about that issue. There was not a pre-decision before the Eurogroup meeting. The Eurogroup meeting concluded, I think, in the very early hours of Saturday and the decision was the result of a compromise,” he said.
He added: “Don’t believe in this idea of the decline of Europe … The European Union is stronger than it is today fashionable to admit.”
Leaked documents on internal EU talks seen by the Reuters news agency give substance to Russia’s criticism, however.
The notes record remarks by finance officials from euro-using countries during a panicky conference call about Cyprus held on Wednesday.
According to Reuters, a French official said Cyprus’ decision not to take part in the phone-debate is “a big problem … We have never seen this.”
A German official said Cyprus might quit the euro and there is a need to “ring-fence” other countries from contagion.
A European Central Bank official said there is a “very difficult situation” because savers might pull money from the island if banks re-open next week.
Meanwhile, Thomas Wieser, an Austrian-origin EU official who chaired the phone-meeting, described the situation as “foggy.” He added: “The economy is going to tank in Cyprus no matter what.”
To the above we add that Turkey, its holding onto North Cyprus, and its interest in the gas fields that stretch from Cyprus to Israel and Lebanon, having first development seen by Israel, are part of the larger scope of the Cyprus potential move away from the EU. But, In effect, these other aspects might make the EU stiffen up in a bailing out effort conditioned only on reorganizing some of the Cypriot Banks – letting Russian oligarchs foot part of the bill – without selling to Russia port holdings in the Mediterranean. Seeing a Syria solution that drives out Russia from its port facilities there, may be part of the American interest in the region as well. In short – Cyprus is not Iceland – this because it is geographically located in a very complicated region of the Outer EU. Is it so that an Obama trip could help by forcing a Cyprus-Turkey reconciliation first?
We just found out that The New York Times is catching up:
White Smoke to be seen in Jerusalem so President Obama finds a government in place – though his people will still wonder who is the real Foreign Minister and Peace Negotiator. The situation is different then the one now in Italy’s Rome, that may do well also without an elected government.
March 16, 2013
To the Victor, the Spoils.
IN THE days following the recent Israeli elections, Ya’ir Lapid, the major winner, let it be known that he wanted to be the next Foreign Minister.
No wonder. It’s the hell of a job. You can’t lose, because the Foreign Minister is responsible for nothing. Serious foreign fiascos are always laid at the door of the Prime Minister, who determines foreign policy anyway. The Foreign Minister travels around the world, stays in luxury hotels with gourmet cuisine, has his picture taken in the company of royalty and presidents, appears almost daily on TV. Sheer paradise.
For someone who declares publicly that he wants to become Prime Minister soon, perhaps in a year and a half, this post is very advantageous. People see you among the world’s great. You look “prime ministerial”.
Moreover, no experience is needed. For Lapid, who entered politics less than a year ago, this is ideal. He has all a Foreign Minister needs: good looks and a photogenic quality. After all, he made his career on TV.
So why did he not become Foreign Minister? Why has he let himself be pushed into the Finance Ministry – a far more strenuous job, which can make or break a politician?
Simply because the Foreign Ministry has a big sign on its door: Occupied.
THE LAST Foreign Minister, Avigdor Lieberman, was, probably, the least suitable person for the job in the whole country. He is no Apollo. He has an air of brutality, shifty eyes and spare vocabulary. He is unpopular everywhere in the world except Russia and its satellites. He has been avoided throughout by most of his international colleagues. Many of them consider him an outright fascist.
But Netanyahu is afraid of Lieberman. Without Lieberman’s parliamentary storm troopers, Likud has only 20 seats – just one more than Lapid. And within the joint party, Lieberman may well replace Netanyahu in the not too distant future.
Lieberman has been forced out of the Foreign Office by the law that forbids an indicted person to serve in the government. For many years now, a dark judicial cloud has been hanging over his head. Investigations followed suspicions of huge bribes. In the end, the Attorney General decided to content himself with an indictment for fraud and breach of trust: a minor diplomat turned over to Lieberman a secret police dossier concerning his investigation and was awarded an ambassadorship.
Netanyahu’s fear of Lieberman induced him to promise that the Foreign Minister’s post would remain empty until the final judgment in Lieberman’s case. If acquitted, his lofty position will be waiting for him.
This may be a unique arrangement. After barring Lapid’s ambition to succeed him, Lieberman declared this week triumphantly: “Everyone knows that the Foreign Office belongs to the Israel Beitenu party!”
THAT IS an interesting statement. It may be worthwhile pondering its implications.
How can any government office “belong” to a party?
In feudal times, the King awarded his nobles hereditary fiefs. Each nobleman was a minor king in his domain, in theory owing allegiance to the sovereign but in practice often almost independent. Are modern ministries such fiefs “belonging” to the party chiefs?
This is a question of principle. Ministers are supposed to serve the country and its citizens. In theory, the best man or woman suited for the job should be appointed. Party affiliation, of course, does play a role. The Prime Minister must construct a working coalition. But the uppermost consideration, even in a multi-party democratic republic, should be the suitability of the candidate for the particular office.
Unfortunately, this is rarely the case. Though no elected Prime Minister should go to the length of Ehud Barak, who displayed an almost sadistic delight in placing each of his colleagues in the ministry he was most unsuitable for. Shlomo Ben-Ami, a gentle history professor, was put into the Ministry of Police (a.k.a. Interior Security), where he was responsible for an incident in which several Arab citizens were shot. Yossi Beilin, a genius bubbling with original political ideas, was sent to the Ministry of Justice. And so on.
I remember meeting several of the new ministers at a diplomatic reception soon after. They were all deeply embittered and their comments were of course unprintable.
But that was not the point. The point was that by appointing ministers quite unsuitable to the tasks entrusted to them, Barak did great damage to the interests of the state. You don’t entrust your body to a surgeon who is really a lawyer, nor do you entrust your money to a banker who is really a biologist.
YET THE idea of political entitlement was hovering over the whole process of forming the cabinet. The awarding of the ministries more closely resembles a dispute among thieves over the spoils than a responsible process of manning or womanning the ministries which will be responsible for the security and well-being of the nation.
The quarrel that held up the formation of the new government for several crucial days was over the Ministry of Education. Lapid wanted it for his No. 2, an orthodox (though moderate) rabbi. The incumbent, Gideon Sa’ar, desperately clung to it, organizing petitions in his favor among teachers, mayors and what not.
This could have been a legitimate fight if it had been about questions of education. For example, Sa’ar, a fanatical Likud man, has sent the pupils to religious and nationalistic sites in Greater Eretz Israel, to imbue them with proper patriotic fervor. He is also more intent on his pupils winning international capability tests than on education as such.
But nobody spoke about these subjects. It was a simple fight over entitlement. In medieval times, it might have been fought out with lances in a tournament. In these civilized days, both sides use political blackmail. Lapid won.
I AM not a great admirer of Tzipi Livni and her air of a spoilt brat. But I am happy about her appointment to the Ministry of Justice.
Her last two predecessors were intent on destroying the Supreme Court and putting an end to “judicial activism”. (This seems to be a problem in many countries nowadays. Governments want to abolish the court’s power to annul anti-democratic laws.) Tzipi can be relied on to buttress the Supreme Court, seen by many as “the last bastion of Israeli democracy”.
Much more problematical is the appointment of Moshe Ya’alon as Minister of Defense. He inherited the job because there is just nobody around who could be appointed instead. Israelis take their defense seriously, and you cannot appoint, say, a gynecologist to this job.
“Bogy”, as everybody calls him, is a former Chief of Staff of the Army, and a very undistinguished one. Indeed, when he finished the standard three years on the job, Prime Minister Ariel Sharon refused to grant him the almost automatic fourth year. Bogy was bitter and complained that he always had to wear high boots, because of the many snakes in the Ministry of Defense and the General Staff. He may need them again now.
His many detractors call him a “bock” – German and Yiddish for a goat, symbolizing a lack of intelligence. He is an extreme militarist, who sees all problems through the sights of a gun. He can be sure of the allegiance of Israel’s vast army of ex-generals (or “degenerals”’ as I call them).
THE MOST problematical appointment of all is the choice of Uri Ariel for the crucial post of Minister of Housing.
Uri Ariel is the arch-settler. He was the founder of a settlement, a leader of the settlers’ organization, the Ministry of Defense official responsible for the settlements. He was also a director of the Keren Kayemet – Jewish National Fund – a major arm of the settlement enterprise. He entered the Knesset when Rehavam Ze’evi, the leader of the extreme-extreme Right, was assassinated by a Palestinian hit squad.
Turning this Ministry over to such a person means that most of its resources will go to a frantic expansion of the settlements, each of which is a nail in the coffin of peace. Yet Lapid supported this appointment with all his new-found political clout, as part of his “brotherhood” bond with Naftali Bennett, who is now the godfather of the settler movement.
Bennet’s party also gained the all-important Knesset finance committee, which is needed to funnel the funds to the settlements. It means that the settlers have gained complete control of the state.
Lapid’s big election victory may yet be revealed as the biggest disaster for Israel.
The brotherhood pact between Lapid and Bennett made it possible for them to blackmail poor Netanyahu and get (almost) everything they longed for. Except the Foreign Ministry.
How will Lapid turn out as Minister of Finance? Difficult to say. Since he is totally innocent of any economic knowledge or experience, he will have to depend on the Prime Minister above and the ministry bureaucracy below. Treasury officials are a tough lot, with a thoroughly neo-liberal outlook. Lapid himself also adheres to this creed, which is called by many Israelis “swinish capitalism” – a term invented by Shimon Peres.
ONE of Lapid’s main election promises was to put an end to the Old Politics, held responsible for all the ills and ugliness of our political life until now. Instead, he said, there will be the New Politics, an age of shining honesty and transparency, embodied by selfless and patriotic leaders, such as the members of his new party.
Not for nothing did he call his party There Is A Future.
Well, the Future has arrived, and it looks suspiciously like the Past. Indeed, the New Politics look very much like the Old Politics.
Very, very old. Even the ancient Romans are supposed to have said “To the victor, the spoils!” But then, Ya’ir Lapid doesn’t know Latin.
Others, like Ari Shavit of Haaretz, look at the Obama visit, with expressed worry – something like - The President who holds Israel’s fate in the palm of his hand: Israel has recently lost quite a bit of its ability to chart its own strategic future, and this will make Obama’s upcoming trip different than previous ones by U.S. presidents.
Above is potentially much more serious then if Ms. Merkel would pay a visit to Rome as in our second clip. There it is only about restructure and money – in Israel it is about restructure and Near East neighborhood policy.
New York Times Editorial – March 15, 2013
Italy, in Search of a Government.
Published: March 14, 2013
Italy’s newly elected Parliament convenes on Friday with no clear governing majority. Only a government with a strong popular mandate can push through the kind of radical changes Italy really needs: sweeping labor market and tax reforms, tough anticorruption laws, electoral reform and a new fiscal bargain with euro-zone partners that replaces austerity with growth. All or most of that will now have to wait until new elections, probably later this year, can produce more definitive results.
The vote produced a four-way split among two parties that endorse the European-backed austerity policies that have plunged Italy into deep recession, the anti-establishment Five Star Movement and a bloc led by former Prime Minister Silvio Berlusconi.
That four-way split means that no politically feasible coalition is mathematically possible, especially since the Five Star Movement’s founder, Beppe Grillo, has repeatedly declared that the movement will not support a government led by any of the other groupings. Even if Mr. Grillo does not reconsider that position, there is no need for Italians, their European partners or the bond markets to panic. Mario Monti will continue as the caretaker prime minister until Parliament can agree on a successor. Taxes will be collected, government bills paid and administrative decisions taken. One ratings agency, Fitch, last week downgraded Italian bonds one notch but still considers them investment grade. Bond auctions this week went tolerably well, and Rome has now successfully raised a significant chunk of the money it will need to see it through this year. Democracy’s ways can be frustratingly slow, especially when radical changes are on the agenda and long established parties fail to rise to the occasion. Yet democracy is the European Union’s founding and defining principle. Italy’s partners, though understandably frustrated, need to be patient and supportive. And the European Central Bank must be prepared to deter speculators by stepping in if necessary as a lender of last resort.
Those, like Chancellor Angela Merkel of Germany, who pressured Mr. Monti’s government to tighten the screws of austerity on Italy’s growth-starved economy share some responsibility for his disappointing electoral performance. And they now share some responsibility to stand by Italy as it seeks a democratic way out of the resulting parliamentary deadlock.
Related: A Jester No More, Italy’s Gadfly of Politics Reflects a Movement (March 4, 2013)
This is serious – a professional clown is a good man trying to make a living. A clown impersonator is something else. While Bepe Grillo is fighting for the cause of change in Italy and everywhere else, it is Mr. Berlusconi who used the facade of government and wealth in order to create a court of clowns to his kingdom and rule. True Conservatives reject his behavior but corralled to save him because he was in their service.
March 4th, 2013 the Karl Renner Institute of the Socialist Party of Austria had a reassessment of the Italian elections with the participation of two Journalists from Italy – Tonia Mastrobuoni from La Stampa in Turino, and Franz Koessler who was for many years the foreign policy commentator at the Austrian “Falter” and is now a freelance in Rome.
I learned that Monti who was seen by the European banking institutions as the man who will save them and Italy, and was seen as having the baking of over 50% of the Italians – just came in as a poor fourth with 10%. It is the 25% that Grillo’s movement got .and the fact that the other two parties that have less then 30% each – that make it impossible to form a government that is supported by a clear majority.
The popular thinking is that new elections will favor Mr. Grillo and put him in the position to dictate the rules for a coalition government.
Conventional thinking believes that if he has not put forward a real plan, and is not ready to join another party, this is a sign that his group will eventually break up. But why? His Grillini want to see change, and not being politicians that live by having a political job, they may actually relish the idea of having brought about change and be very calculated in their support of any government.
I suggested that the original individuals that started out like them, could actually be the example for the Grilini – and the warning being that eventually politicians from the right got hold of their movement and turned the Tea Party that started out as “Taxes we had enough” ended up backing all sort of ideas that had nothing to do with their original rebellion.
On the other hand, if the Grillini manage to avoid the fate of the Tea Party, they may become the toast of all those in the EU that would want to change the rullling strata in most of the EU Member States.
The New York Times Editorial
Italy Chooses None of the Above
First Published: February 27, 2013
Italy’s voters surprised and frightened governments and financial markets across Europe with their repudiation of austerity and much of the Italian political establishment.
Related: Inconclusive Vote in Italy Points to Fragmenting of Political System (February 27, 2013)
Europe’s fears of an ungovernable Italy and renewed euro-zone crisis may prove justified. With no party holding a majority in the new Parliament, there is little chance for renegotiating the economic straitjacket demanded by European lenders or enacting needed reforms.
For decades, the political establishment, regardless of party, has failed to deal with Italy’s well-known problems — excessive bureaucracy, official corruption, organized crime, unequal and regressive taxes and anemic economic growth. The past 15 months of growth-crushing austerity policies under Prime Minister Mario Monti have mainly added to the pain. Italy’s borrowing costs declined (at least until the election returns came in).
A protest vote driven by public anger is not so surprising. The big losers were centrist supporters of Mr. Monti, who came in a dismal fourth, and the center-left Democratic Party, led by Pier Luigi Bersani, which won only a slim plurality in the lower house and ran a disappointing second in the regionally apportioned Senate. These two blocs were expected to form a coalition government with policies not very different from Mr. Monti’s. That would have pleased Europe, but is now impossible.
The winners were the anti-establishment Five Star Movement, founded just three years ago by the comedian Beppe Grillo, and the People of Liberty led by the disgraced former prime minister, Silvio Berlusconi. Mr. Berlusconi’s slate won the largest number of Senate seats and the second largest contingent in the lower house. Mr. Berlusconi, who bears much responsibility for Italy’s economic and political dysfunction, brought his party back from near oblivion by shamelessly restyling himself as an anti-establishment, anti-austerity populist. He even promised to refund the homeownership tax, offering to dip into his personal fortune to do so.
As the top vote-getter, the Democratic Party gets the first chance to form a new government. Recognizing how tough that will be, Mr. Bersani has begun setting forth a limited legislative program that he hopes can attract support from beyond his own ranks. Mr. Grillo declared Wednesday that his supporters would not form an alliance with Mr. Bersani, or Mr. Berlusconi, who gets to try next if Mr. Bersani fails. But he did leave open the option of backing specific reform measures proposed by other parties. That is not a prescription for stable government and could force another election later this year. But it is probably the best hope for enacting at least some of the political reforms and anti-corruption laws Italy desperately needs and so many fed-up Italian voters desperately want.
A Kurt Bayer comment on European Banking that leads to re-birth of Populism, that could also be viewed in context of the US and Israel. It is the bankers that give us now clowns, but please do not forget, they can bring to life also failed painters and assorted demagogues.
March 3, 2013
The public media and European mainstream parties’ politicians are unisono lamenting the rise of populism as manifested by the strong showing of Beppe Grillo in Italy’s parliamentary election last weekend. They decry, as they did earlier in the case of Greece, when the “populist” Syriza party nearly won the election, the irresponsibility, the negativism, the “against-it-all” attitude of these parties’ leaders. Let us add to these election results the street demonstrations and battles in Greece, in Spain, in Portugal, in Bulgaria, in Slovenia – all these before the background of people jumping to death from windows of their to-be-repossessed apartments, of soup kitchens, of soaring unemployment rates (especially, and even more tragically, of the young), and of the horrifying increase in poverty rates in many of these and other countries.
It does seem, that in spite of these politicians’ lamentoes, that European citizens are no longer accepting the crisis resolution policies imposed on them by politicians – at the bidding of financial markets. Yes, Mario Monti, the unelected and now defeated prime minister, managed to calm “market fears”, yes, Mario Draghi, the ECB president, managed to do the same – and more – by last fall promising to “do everything necessary” to enable European states’ return to the financial markets, yes, some of the Southern states (plus Ireland) were able during the past months to place bond auctions at “sustainable” yields (i.e. below the benchmark of 6%). But the concomitant “aid programs” by the European Central Bank, the European Commission and the International Monetary Fund, the dreaded “troika” are what the restive populations are no longer willing to swallow. Since governments took over bank debt, the citizens have been called upon to foot the bill, by having their taxes increased, government expenditures, especially social expenditures, cut and losing their jobs as a result of the persistent recession which these programs (and the similar, if less stringent “debt brake” conditions imposed on all EU countries. There is already talk about a “lost decade” for Europe.
With all this austerity (which is portrayed as without alternative) it is completely unclear where future growth should come from even after this decade. The mainstream recipe that balanced budgets (and their corresponding structural reforms) guarantee growth has been proven false, not only in theory, but also in empirical practice. If the second largest economic block in the world (with about 18 trillion $ in GDP, about one fourth of the world economy) reduces public sector demand in addition to falling demand in the private sector, this affects the whole world. This is different from the frequently cited more recent cases, where one individual country managed to export its way out of recession, when all other countries were growing and thus increasing their demand.
In this situation, the EU parliament has achieved a spectacular success, by agreeing (also with EU Finance Ministers) to limit bankers’ bonus payments to 100% of base salary (in exceptional cases to 200%). This is part of a hard-fought package setting new rules for European banks’ equity and liquidity requirements. There are widespread “populism” cries by especially English bankers, but also their colleagues around Europe that this would drive out banking from Europe, that this is a Continental coup to transfer banking business from London to Paris or Frankfurt (??), that this is “unfair”. The more sanguine bankers say (see eg. Financial Times March 2, 2013) that this just means that their base salary will have to be doubled as a consequence. Tory MPs are fuming and using this as an additional argument that the UK should leave the EU as soon as possible. Of course, they do not mention the fact that it was their leader, David Cameron, who pulled the Tories out of the European Peoples’ Party group, which – in the form of the Austrian Othmar Karas – was leading the negotiations of the European Parliament with the Finance Ministers. They also forget to mention that banking lobbies (led by the English) have delayed and watered down the other parts of the Banking package to be concluded.
The Greek and Italian elections, the street protests, the events in many other European countries should lead to a realization by the EU policy makers, both in the Central Bank, in the Commission and in the Council, that it is not just “clowns” (@ Peer Steinbruck, the Social Democratic candidate for the German premiership) who say “no more” to this oppressive economic policy recipe, but it is large parts of the European populations who have not only lost confidence that these recipes will work, but actively are against them – because they see that as in the Great Depression of the late 1920s – they lead to impoverishment and political disaster. Politicians should listen more closely to their populations, and less to the financial sector lobbyists, who have caused this crisis and refuse to play their part in shouldering their part of the burden. It was the lobbyists’ close connection to the politicians who made banking debts into government debt, it was their whisperings which had told politicians fairy tales about the financial markets being the most efficient markets in the world, thus self-regulation and “light-touch” regulation was all that was needed.
What are the alternatives?
The primary policy objective should not be to “return countries to financial markets’ access”, but to have indebted states return to a sustainable economic and social policy path which improves the welfare of their populations. To this end, government debt financing should be taken away from financial markets and turned over to a publicly accountable public institutions (the ECB or the ESM with a banking licence).
As far as bank debt is concerned, a European plan must be developed with a medium-term view of how the European Financial sector should look like in 10-20 years. This would counter-act the present “re-nationalization” trends where every country attempts to save its banks (frequently at the expense of others) at high costs to the taxpayers. Some banks will need to be closed, others restructured, and effective regulation set up. It is clear that (some) debts will need to be repaid, but much of bank debt should be paid by bank owners and their bondholders, not by taxpayers. For highly indebted bank sectors, a European bank resolution fund could take over some of the debt.
It is true that a number of “problem countries” in the EU have pursued wrong policies in the past, e.g. waste of public (EU and national) funds, neglect of innovation and R&D policies, high military expenditures, neglect of industrial policies, neglect of modern education systems, neglect of building up sustainable energy systems (both on the supply and demand side), and many more. Each country needs to develop a positive vision of where it wants to stand in 10 years’ time, and then select the appropriate instruments, and convince its EU partners of its way.
At a European level, a new more comprehensive economic policy umbrella must be opened. The nearly exclusive attention to budget consolidation was geared to placating the financial markets – who also are getting cold feet seeing what “their” policies do to growth (see the most recent downgrade of the UK). It must throw off the yoke of financial market dictate and turn itself to strengthening the European model, with a view to balance social, economic and environmental requirements for the future.
European civil society is growing together. Public institutions, like the labor movement, are not. In the face of the crisis, labor unions are re-nationalizing, attempting to save jobs for their own members at the expense of their foreign colleagues. They should learn from the business lobby, which has been much more successful in convincing European and national policy makers of their own interests.
The Nobel Prize for Peace awarded by Norway – not an EU member – goes to the EU, and this prompts some Heads of States to stay away. The UK (David Cameron) and Czech (Vaclav Klaus) will be among six European Heads of State that will not participate – Sweden has a scheduling conflict.
Six EU leaders to skip Nobel gala
30.11.12 @ 09:51
BRUSSELS – Six EU leaders, including the UK, are to skip the Nobel gala next month, as criticism of the award multiplies.
Nobel Institute director Geir Lundestad told EUobserver on Friday (30 November) that 18 EU leaders will come to watch the Union’s top three officials – Herman Van Rompuy, Jose Manuel Barroso and Martin Schulz – collect the peace prize in Oslo on 10 December.
He declined to list them. But he indicated that they include the “big” countries – France, Germany, Italy, Poland and Spain.
He said six others – including the Czech republic, Sweden and the UK – have confirmed they are not going, while the rest are still making up their mind.
The British and Czech decisions come from two eurosceptic VIPs – David Cameron and Vaclav Klaus – and are likely to fuel talk on whether Cameron thinks the UK is on its way out of the bloc.
Sweden’s Frederik Reinfeldt cannot go because he is busy in a parallel Nobel event in Stockholm the same day.
Lundestad declined to speculate on whether Cameron and Klaus’ decision amounts to a boycott. “It’s up to them to explain why they are not coming,” he said.
But he did criticise four cabinet ministers from Norway’s eurosceptic Centre Party for also deciding to stay away.
“They put the emphasis on Norway and whether Norway should be a member of the EU or not. The committee dos not address that question. It recognises the EU’s contribution to a more peaceful Europe through six decades. It has nothing to do with Norway,” he noted.
The Nobel decision back in October prompted debate on whether the EU deserves the prize.
Some of the arguments were repeated this week.
For his part, the Austrian leader of the centre-left S&D group in the EU parliament, Hannes Swoboda, said in a debate in Brussels: “The EU was a vision for peace, after WWII. And the EU brought peace.”
But a joint letter by the World Council of Churches and the Conference of European Churches said: “The economic and humanitarian tragedy today in Greece challenges the EU as a peace builder for the next generation.”
Meanwhile, the recent Gaza crisis – which claimed 168 Palestinian lives and five Israeli ones – prompted a fresh rebuke.
A joint letter by 52 former peace prize laureates, artists, academics and diplomats on Wednesday said the EU should be disqualified for its ties to Israel.
“The role of the European Union must not go unnoticed, in particular its hefty subsidies to Israel’s military complex through its research programmes,” they wrote.
Former Nobel laureates Desmond Tutu, Mairead Maguire and Adolfo Perez Esquivel also wrote a letter attacking the EU as a party in conflicts around the world.
“The EU is clearly not ‘the champion of peace’ that Alfred Nobel had in mind when he wrote his will … The Norwegian Nobel committee has redefined and remodelled the prize in a manner that is not consistent with the law,” they said.
They called for the committee to withhold the prize money of €930,000, even though the EU has promised to give it to charities for child victims of war.
For his part, Lundestad said the Tutu letter was organised by Fredrik Heffermehl, a Norwegian jurist who has “protested for many, many years against every decision of the Nobel committee.”
He added: “The prize money has never been withheld.”