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Posted on on March 5th, 2013
by Pincas Jawetz (

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.

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).
But recession has deepened, unemployment has risen and living standards have fallen back to the levels of the 1980s. Mr. Monti’s popularity never recovered from the deeply regressive tax he imposed on family homes.

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.


Posted on on March 4th, 2013
by Pincas Jawetz (

March 3, 2013

Populists or Business (Banking) Lobbyists?

The public media and European mainstream parties’ politicians are unisono lamenting the rise of populism as manifested by the strong showing of Beppe Grillo in Italy’s parliamentary election last weekend. They decry, as they did earlier in the case of Greece, when the “populist” Syriza party nearly won the election, the irresponsibility, the negativism, the “against-it-all” attitude of these parties’ leaders. Let us add to these election results the street demonstrations and battles in Greece, in Spain, in Portugal, in Bulgaria, in Slovenia – all these before the background of people jumping to death from windows of their to-be-repossessed apartments, of soup kitchens, of soaring unemployment rates (especially, and even more tragically, of the young), and of the horrifying increase in poverty rates in many of these and other countries.

It does seem, that in spite of these politicians’ lamentoes, that European citizens are no longer accepting the crisis resolution policies imposed on them by politicians – at the bidding of financial markets. Yes, Mario Monti, the unelected and now defeated prime minister, managed to calm “market fears”, yes, Mario Draghi, the ECB president, managed to do the same – and more – by last fall promising to “do everything necessary” to enable European states’ return to the financial markets, yes, some of the Southern states (plus Ireland) were able during the past months to place bond auctions at “sustainable” yields (i.e. below the benchmark of 6%). But the concomitant “aid programs” by the European Central Bank, the European Commission and the International Monetary Fund, the dreaded “troika” are what the restive populations are no longer willing to swallow. Since governments took over bank debt, the citizens have been called upon to foot the bill, by having their taxes increased, government expenditures, especially social expenditures, cut and losing their jobs as a result of the persistent recession which these programs (and the similar, if less stringent “debt brake” conditions imposed on all EU countries. There is already talk about a “lost decade” for Europe.

With all this austerity (which is portrayed as without alternative) it is completely unclear where future growth should come from even after this decade. The mainstream recipe that balanced budgets (and their corresponding structural reforms) guarantee growth has been proven false, not only in theory, but also in empirical practice. If the second largest economic block in the world (with about 18 trillion $ in GDP, about one fourth of the world economy) reduces public sector demand in addition to falling demand in the private sector, this affects the whole world. This is different from the frequently cited more recent cases, where one individual country managed to export its way out of recession, when all other countries were growing and thus increasing their demand.

In this situation, the EU parliament has achieved a spectacular success, by agreeing (also with EU Finance Ministers) to limit bankers’ bonus payments to 100% of base salary (in exceptional cases to 200%). This is part of a hard-fought package setting new rules for European banks’ equity and liquidity requirements. There are widespread “populism” cries by especially English bankers, but also their colleagues around Europe that this would drive out banking from Europe, that this is a Continental coup to transfer banking business from London to Paris or Frankfurt (??), that this is “unfair”. The more sanguine bankers say (see eg. Financial Times March 2, 2013) that this just means that their base salary will have to be doubled as a consequence. Tory MPs are fuming and using this as an additional argument that the UK should leave the EU as soon as possible. Of course, they do not mention the fact that it was their leader, David Cameron, who pulled the Tories out of the European Peoples’ Party group, which – in the form of the Austrian Othmar Karas – was leading the negotiations of the European Parliament with the Finance Ministers. They also forget to mention that banking lobbies (led by the English) have delayed and watered down the other parts of the Banking package to be concluded.

The Greek and Italian elections, the street protests, the events in many other European countries should lead to a realization by the EU policy makers, both in the Central Bank, in the Commission and in the Council, that it is not just “clowns” (@ Peer Steinbruck, the Social Democratic candidate for the German premiership) who say “no more” to this oppressive economic policy recipe, but it is large parts of the European populations who have not only lost confidence that these recipes will work, but actively are against them – because they see that as in the Great Depression of the late 1920s – they lead to impoverishment and political disaster. Politicians should listen more closely to their populations, and less to the financial sector lobbyists, who have caused this crisis and refuse to play their part in shouldering their part of the burden. It was the lobbyists’ close connection to the politicians who made banking debts into government debt, it was their whisperings which had told politicians fairy tales about the financial markets being the most efficient markets in the world, thus self-regulation and “light-touch” regulation was all that was needed.

What are the alternatives?

The primary policy objective should not be to “return countries to financial markets’ access”, but to have indebted states return to a sustainable economic and social policy path which improves the welfare of their populations. To this end, government debt financing should be taken away from financial markets and turned over to a publicly accountable public institutions (the ECB or the ESM with a banking licence).

As far as bank debt is concerned, a European plan must be developed with a medium-term view of how the European Financial sector should look like in 10-20 years. This would counter-act the present “re-nationalization” trends where every country attempts to save its banks (frequently at the expense of others) at high costs to the taxpayers. Some banks will need to be closed, others restructured, and effective regulation set up. It is clear that (some) debts will need to be repaid, but much of bank debt should be paid by bank owners and their bondholders, not by taxpayers. For highly indebted bank sectors, a European bank resolution fund could take over some of the debt.

It is true that a number of “problem countries” in the EU have pursued wrong policies in the past, e.g. waste of public (EU and national) funds, neglect of innovation and R&D policies, high military expenditures, neglect of industrial policies, neglect of modern education systems, neglect of building up sustainable energy systems (both on the supply and demand side), and many more. Each country needs to develop a positive vision of where it wants to stand in 10 years’ time, and then select the appropriate instruments, and convince its EU partners of its way.
The major political task will be to convince the populations that there is light at the end of the tunnel, that some sacrifices are necessary, but that these will be distributed equitably, that there are positive prospects for this and the next generation, that the social system will cushion the inevitable burdens. To generate the confidence that “we are all in this together” will not be credible, if voiced by those politicians who have gotten us (knowingly or unknowingly) into the present mess. This is the task for new, and credible politicians who not only know what possible alternatives are, but can also muster enough support, both political and technical, from the populations who voted for them. This may and will require new communication methods – as they have been employed during the recent elections.

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.


Posted on on December 1st, 2012
by Pincas Jawetz (

Six EU leaders to skip Nobel gala

30.11.12 @ 09:51

By Andrew Rettman on

BRUSSELS – Six EU leaders, including the UK, are to skip the Nobel gala next month, as criticism of the award multiplies.

  • A Nobel – the EU award continues to stir debate (Photo: EUobserver)

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.”


  1. Barroso and Van Rompuy win battle for Nobel limelight
  2. Pride, confusion and sour grapes after EU wins Nobel
  3. EU ambassador to attend Nobel gala despite Chinese ‘bullying’


Posted on on December 1st, 2012
by Pincas Jawetz (

Eurozone jobless rate climbs to record 11.7%: EU
Unemployment in the eurozone hit a record high in October with more than 170,000 extra jobs lost and youth unemployment at almost 24 percent as the …

German parliament approves aid for Greece
Germany’s parliament on Friday overwhelmingly approved billions of euros in international aid for Greece, handing a much-needed financial boost to …

Brazil grew a paltry 0.6 percent in third quarter
The Brazilian economy expanded a paltry 0.6 percent in the third quarter of 2012 compared with the previous three months, signaling a weaker than …

Japan Industrial Output Rises 1.8% In October
Japan’s industrial production grew 1.8% in October from the previous month for the first rise in four months, largely helped by demand …

Kuwaiti Voters Head to Polls to Elect National Assembly Members Over 400,000 Kuwaiti voters headed to the polls early Saturday in the country’s five constituencies to choose 50 National Assembly …


Posted on on November 5th, 2012
by Pincas Jawetz (

For the US it was the warning from President Dwight Eisenhower about the military – industrial complex. He was best positioned to understand the industry interest in supplying the military with materials they do not need. Today this is a political stand of Romney Republicans that pushes austerity on everybody else. Here an Obama campaign proposition that austerity itself is an unmanageable security threat to a State that allows unacceptable income gaps that destroy the middle class. The article uses the example of Europe in order to reflect on what might happen to the US.

Austerity Doesn’t Reduce Deficits.

By Terrance Heath from the Campaign for America’s Future…

November 1, 2012

Austerity is back in the news, and the news about austerity is never good. We’ve only had de facto austerity on this side of the pond. So as usual, the news is from Europe, where the austerians are going full-tilt boogie. Our homegrown austerians, like their European counterparts, tell us that the kind of severe austerity underway in Europe is necessary to reduce the deficit. Everything from food stamps to Medicaid and Medicare — everything except defense spending — must be cut in order to reduce the deficit.

The thing is, it hasn’t worked. In Greece, Europe’s austerity poster child, austerity has shrunk the economy and increased the national debt.

Greece’s draft budget for 2013 has forecast a deeper recession and worse debt problems than previously thought.

The economy is expected to shrink by 4.5% next year, and government debts to rise to 189% of economic output.

Greece held inconclusive negotiations with its rescue lenders on Wednesday over the economic reforms needed to release further bailout funds.

The government also faces opposition to the reforms from coalition partners and unions have called a general strike.

Finance Minister Yannis Stournaras held a conference call on Wednesday with his counterparts from the Eurogroup of eurozone finance ministers, as well as representatives of the International Monetary Fund and European Central Bank.

The German Finance Minister Wolfgang Schaeuble said afterwards that Athens still needed to do more.

Austerity is literally killing Greece. Yet the austerians demand more.

Austerity only increased inequality in Portugal. Now, after painful austerity measures that hit ordinary Portuguese and public sector workers hardest failed to reduce the deficit, Portuguese citizens are planning to rally against new tax increases.

Anti-austerity protesters in Portugal are planning street rallies as the country’s parliament is expected to approve big tax rises in a new budget.

The centre-right government in Lisbon is hoping to reduce its budget deficit as part of the 78bn-euro (£63bn; $101bn) EU-IMF bailout deal.

However, the proposed 2013 budget could face a challenge in court.

Portugal has already cut public sector wages and raised taxes, triggering a series of street demonstrations.

Unemployment in Portugal is at a record high, and people have faced sharp reductions in their incomes. None of it seems to have made a dent in Portugal’s debt problem. Yet the austerians demand more.

Austerity has been disastrous for Ireland, which once made the top ten on the Heritage Foundation’s Index of Economic Independence.

The Central Statistics Office released its yearbook of Ireland, giving a comprehensive picture with facts and figures on key areas of life, including population, education and the economy.

It revealed that the look of the labour market worsened in 2011, with jobs and pay still in decline since the recession.

The number of people in work fell to 1.821 million since 2010, while those unemployed rose 3.7 per cent to 304,500.

… A staggering 23 per cent of people had hit the deprivation rate by 2010 and were experiencing two or more types of poverty.

In September, Spain braced for further austerity measures even as hungry Spaniards foraged in trash bins for food. But Spain’s economy contracted for a fifth quarter, because of austerity-driven inflation.

Spain’s economy contracted for a fifth quarter, undermining efforts to plug the budget deficit that’s pushing the nation closer to a bailout, while austerity measures kept inflation at a 17-month high.

Gross domestic product declined 0.3 percent in the three months through September and 1.6 percent from a year earlier, the National Statistics Institute said today, compared with an Oct. 23 estimate from the Bank of Spain of a 0.4 percent contraction. Consumer prices, based on European Union methodology, rose 3.5 percent from a year earlier, INE said.

The deepening of Spain’s five-year slump, which is prompting record loan defaults at the nation’s banks and job cuts at companies including Gamesa SA, adds to pressure on Prime Minister Mariano Rajoy as he resists requesting international aid. While tax hikes he’s implementing as part of his austerity program are depressing consumption, they are also spurring inflation, which threatens to add 3 billion euros ($3.9 billion) to the country’s pension bill.

All across the EU, austerity has driven joblessness to a record high.

The jobless rate in the euro area climbed to a record in September as the fiscal crisis and tougher austerity measures threatened to deepen the economy’s slump.

Unemployment in the economy of the 17 nation single currency area rose to 11.6 per cent from 11.5 per cent in August, the European Union statistics office Eurostat said today. That’s the highest since the data series started in 1995.

Some 18.5 million people were unemployed in the euro area in September, up 146,000 from the previous month.

At 25.8 per cent, Spain had the highest jobless rate in the currency bloc.

Portugal’s unemployment rate was at 15.7 per cent, while Ireland reported a jobless rate of 15.1 per cent. France’s jobless rate was at 10.8 per cent.

Italy’s jobless rate rose to its highest point in 13 years, at 10.8 per cent on a seasonally adjusted basis.

Yet the austerians demand even more.

Americans should pay attention to the saga of austerity in the EU, for a couple of reasons. First, because conservatives here at home are committed to the same agenda that’s failed in Europe.

If Mr. Obama wins, he’ll presumably go back to pushing for modest stimulus, aiming to convert the gradual recovery that seems to be under way into a more rapid return to full employment.

Republicans, however, are committed to an economic doctrine that has proved false, indeed disastrous, in other countries. Nor are they likely to change their views in the light of experience. After all, facts haven’t gotten in the way of Republican orthodoxy on any other aspect of economic policy. The party remains opposed to effective financial regulation despite the catastrophe of 2008; it remains obsessed with the dangers of inflation despite years of false alarms. So it’s not likely to give up its politically convenient views about job creation.

And here’s the thing: if Mitt Romney wins the election, the G.O.P. will surely consider its economic ideas vindicated. In other words, politically good things may be about to happen to very bad ideas. And if that’s how it plays out, the American people will pay the price.

Second, if good things end up happening to bad political ideas here in the U.S., we may need to follow the example of Europeans who are standing up and saying “No,” when the austerians keep demanding more.


Posted on on October 20th, 2012
by Pincas Jawetz (

The Israeli navy boarded a ship attempting to break the sea blockade of Gaza on Saturday, and planned to take the passengers into custody.

Those aboard the ship were hoping to call attention to the blockade of the Palestinian territory, which has been under an Israeli blockade since 2007.

Vessels attempting to break Israel’s blockade of Gaza have sparked controversy — and violence — in the past.

In 2010, an Israeli raid on one flotilla ship resulted in the deaths of nine Turkish activists.


Even while the Prime Minister is considering bringing to his cabinet’s approval the report of Judge Edmond Levy, which asserts that the Palestinian territories are ‘not occupied’, Prime Minister Netanyahu, and his ally and rival Ehud Barak, have  ordered the Naval Commandos on a s resort to force, demonstrating that in effect  there is an occupation, and that the State of Israel is extending this occupation into international waters in the Mediterranean.Among the passengers on the Swedish ship “Estelle”, which is now being dragged to the port of Ashdod in Israel, are three Israeli peace activists – Elik Elhanan Reut Mor and Yonathan Shapira. They arrived at the boat a few days ago, going by speedboat from Greece, and dodging the Greek Coast Guard. Along with them came on board the “Estelle” five Members of Parliament, from Sweden, Norway, Spain and Greece.

Estelle’s passengers got yesterday a message from the Government of Israel, passed by the Finnish Foreign Ministry, in which they were warned that if they continue on their way they would be taken into custody in Israel and that they might be prosecuted for “illegal entry into Israel.” They asked the Finns to relay back their answer – that they have no intention of or interest in trying to enter Israel, and that their sole purpose is to reach the Gaza Strip which is not part of Israel and from whose inhabitants they got an explicit invitation.

Yonathan Shapira wrote that his decision to participate in an attempt to break the siege and bring humanitarian aid to Gaza, is a direct continuation to his taking part, back in 2003, in the “Refuser Pilot Letter”. Previous to the publication of this letter, Shapira had served in the Israeli Air Force as a helicopter pilot. Shapiro has been detained in the past when he sailed on “The Jewish Peace Ship” which was stopped off the Gaza shore in 2010.

The question is now how these events will impact the US electioneering debate.

from Adam Keller via
as posted on October 18th:

Swedish Ship to Gaza – Former Israeli Air Force combat pilot evades coast guards in Greece to get on Gaza-bound boat.

Former Israeli Air Force combat pilot boards Gaza-bound boat

Came by motor boat, evading Greek coastguard, greeted with cheers

“Estelle” due at Gaza shore Saturday or Sunday

Activists on board:”Determined to reach Gaza, consent to UN inspection”

Israeli peace activist Yonatan Shapira, who had been a combat pilot in the Israeli Air Force and refused to take part in the bombing of Palestinian cities, has arrived on board the Swedish boat “Estelle” which is making her way towards the coast of Gaza.

When the Estelle passed near the shores of Greece, Shapira and other activists made their way in a motor boat, evading vessels of the Greek Coast Guard which sought to bar their way. “Along with the Greek Coast Guard  we saw a ship which seemed very much like an Israeli Navy vessel, though it did not fly a flag,” said Shapira.

He was received with cheers by activists already on board. Shapira had taken part in a similar sailing last year, being taken off by Israeli Navy Commandos near the Gaza shore and spending time in police detention, but not charged with any criminal offence.

Meanwhile, Israel’s Ambassador to the UN Ron Prosor has sent a letter calling on the United Nations to stop the Estelle from reaching her destination. To this activists on board respond: “If this means that Israel has decided to cede control over Palestinian territorial waters to the UN, this would actually be a step forward.

The UN and many other representatives of the International Community have for years characterized the siege of the Gaza strip as inhuman and incompatible with International Law.

“Ship to Gaza Sweden” assumes that that UN will not take over the implementation of this policy, by itself preventing a peaceful vessel from delivering humanitarian supplies.

“Ship to Gaza and the Freedom Flotilla have never opposed lawful inspections of cargo and vessel by representatives of the UN, as well as  by national authorities in the ports and waters we have passed through. We welcome further inspections of this kind by the UN, once we have anchored at Gaza City. What we refuse to accept is something which also the UN and the majority of The International Community oppose: The illegal siege of the Gaza Strip, with its devastating humanitarian results.”

The Estelle has now set course to Gaza and, weather permitting, is due to get there on Saturday.

Adam Keller, Spokesperson of Gush Shalom, who is in ongoing contact with the Estelle activists, says that Israel’s Prime Minister and Defense Minister still have some forty-eight hours’ grace to make a wise and courageous decision, and let the Estelle dock at the Port of Gaza – while implementing a thorough UN inspection of her cargo, to which the activists  specifically consent.

Ship to Gaza-Sverige –


Posted on on October 11th, 2012
by Pincas Jawetz (

Under Chinese, a Greek Port Thrives.


By Nikolia Apostolou

Privatizing the Port of Piraeus: The International Herald Tribune’s chief business reporter, Liz Alderman, profiles a Greek port where Chinese management is struggling to recast labor relations.

By , Published in The New York Times  October 11, 2012

PIRAEUS, Greece — The captain gazed from his elegant office overlooking this port on the Aegean Sea and smiled as towering cranes plucked container after container from a giant ship while robotic transport vehicles fanned out to transfer the cargo to smaller vessels bound for the Mediterranean.

The cargo volume here is three times the level it was two years ago, before the captain, Fu Cheng Qiu, was put in charge by his employer, Cosco, a global shipping giant owned by the Chinese government.

In a 2010 deal that put 500 million euros ($647 million) into the coffers of Greece’s cash-starved government, Cosco leased half of the port of Piraeus and quickly converted a business that had languished as a Greek state-run enterprise into a hotbed of productivity.

The other half of the port is still run by Greece. And the fact that its business lags behind Cosco’s is emblematic of the entrenched labor rules and relatively high wages — for those lucky enough to still have jobs — that have stifled the country’s economic growth.

“Everyone here knows that you must be hard-working,” said Captain Fu, under whose watch the Chinese-run side of the port has lured new clients, high-volume traffic and bigger ships.

In many ways, the top-to-bottom overhaul that Cosco is imposing on Piraeus is what Greece as a whole must aspire to if it is ever to restore competitiveness to its recession-sapped economy, make a dent in its 24 percent unemployment rate and avoid being dependent on its European neighbors for years to come.

As the Greek government contemplates shedding state-owned assets to help pay down staggering debts, it might be tempting to consider leasing or even selling the rest of the port to China. But if the Cosco example is representative, the trade-offs — mainly a sharp reduction in labor costs and job protection rules — might be ones many Greeks would be loath to accept.

“Unionized labor will push back to keep the protection it has enjoyed,” said Vassilis Antoniades, the chief executive of Boston Consulting Group in Greece. But the Cosco investment, he said, “shows that under private management, Greek companies can be globally competitive.”

Captain Fu, for his part, says Greece has much to learn from companies like his.

“The Chinese want to make money with work,” he said. In his view, too many Europeans have pursued a comfortable, protected existence since the end of World War II. “They wanted a good life, more holidays and less work,” he said. “And they spent money before they had it. Now they have many debts.”

Greece’s troika of foreign lenders — the International Monetary Fund, the European Central Bank and the European Commission — has made similar arguments. Among other things, they are urging Prime Minister Antonis Samaras to end blanket protections for workers and unions and to require Greece itself to operate more like a productive modern business.

Besides the $647 million that put half of the port of Piraeus into Chinese hands, the Greek government is receiving more income from taxes as a result of the port’s pickup in business.

Other than a handful of Chinese managers, moreover, Cosco’s operation is providing around 1,000 jobs to Greek workers — compared with the 800 or so who work the dock that is still under Greek management.

On Cosco’s portion of the port, cargo traffic has more than doubled over the last year, to 1.05 million containers. And while profit margins are still razor thin — $6.47 million last year on sales of $94.2 million — that is mainly because the Chinese company is putting a lot of its money back into the port.

Cosco is spending more than $388 million to modernize its dock to handle up to 3.7 million containers in the next year, which would make it one of the world’s 10 largest ports. Beyond that, workers are also laying the foundations for a second Cosco pier.

The Greek-run side of the port, which endured a series of debilitating worker strikes in the three years before Cosco came to town, has been forced by the Chinese competition to seek its own path to modernization. Still, only about a third of its business consists of cargo handling; the rest is made up of more lucrative passenger traffic.

For years, the container terminal was a profitable operation. But Harilaos N. Psaraftis, a professor of maritime transport at the School of Naval Architecture and Marine Engineering in Athens, said it was inefficient “because worker relations were very cumbersome.”

The salaries of some workers reached $181,000 a year with overtime; Cosco is typically paying less than $23,300. On the Greek side of the port, union rules required that nine people work a gantry crane; Cosco uses a crew of four.

“It was just crazy,” recalled Mr. Psaraftis, who was the chief executive of the port from 1996 to 2002. “I told them, ‘If you keep this up, this thing will be privatized.’ But they didn’t listen.”

Since Cosco arrived, “competition has forced us to take initiatives to find better ways of working,” said Stavros Hatzakos, the general director of Piraeus Port Authority, which runs the Greek operation. “Employees think twice about strikes and labor action now,” he said. And the ones still on the job have taken salary reductions as part of the across-the-board wage cuts of 20 percent or more that the government has placed on public employees.

On the other side of the chain-link fence that separates the Chinese and Greek operations, Captain Fu said he would love for Cosco to run all of Piraeus if the government put it up for sale. That expansion would cement Chinese dominance of one of the most strategic shipping gateways to Southern Europe and the Balkans.

Such a move, though, might meet stiff opposition from Greek unions and officials at the Piraeus Port Authority, who criticize Cosco’s approach to labor.

“It’s like another country over there,” Thanassis Koinis, a deputy director at the Piraeus Port Authority, said one recent morning as he stared out the window of his dilapidated office at the cranes soaring above Cosco’s docks.

Mr. Koinis and some other Greeks accuse Cosco of using employment subcontractors that hire temporary, unskilled, nonunion workers desperate for jobs and exploit them by paying low wages.

Babis Giakoymelos, a board member of the Dockworkers’ Union, contended that Cosco was also saving money by cutting corners on worker safety. “They are bringing third-world labor standards to Europe,” he said.

For Tasos Vamvakidis, Cosco’s commercial manager here, such complaints amount to sour grapes. “It’s easy to say things against Cosco; but when you come here, you see that everything works properly,” he said one morning on the Cosco dock, raising his voice to be heard above the machinery’s din. “We win business by showing that we work 24-7, 365 days a year.”

Casting a glance at the Greek side, he added: “Maybe in other terminals, people work less. In any case, if it’s so bad, thousands of people would not be applying to work for Cosco.”

Dimitrios Batsoulis begs to differ. He was fired from his job as a Cosco dockworker in February, after he tried to organize a workers’ committee to raise concerns about safety violations that he said Cosco subcontractors repeatedly ignored.

He said his bosses had blacklisted him several weeks earlier after he left the steering compartment of a crane when the heater broke one snowy morning, leaving his hands too cold and stiff to control the giant machine from his post 49 feet above ground.

“I was jeopardizing my life and my colleagues’ lives,” Mr. Batsoulis said. When he climbed down to warm himself, he said his manager and a Cosco executive chastised him for slowing operations. He said he was not called back to work for another week.

“If you are a worker for Cosco, then you know suddenly how it is to work in the Chinese Republic,” said Mr. Batsoulis, who is now suing the company for unlawful dismissal and unpaid overtime.

Cosco said it would not comment on the pending case. But Captain Fu contended that disgruntled workers like Mr. Batsoulis were in a minority.

Captain Fu said Cosco took pains to avoid seeming like an invader, partly by hiring Greek companies to rebuild the pier and to oversee the labor force in accordance with Greek law. He boasted repeatedly that Cosco had only seven Chinese managers, who he said trained their Greek work force up to the highest standards.

In the gleaming executive suites abutting Captain Fu’s expansive offices, a recently completed $1.29 million renovation attested to the efforts in Chinese-Greek corporate diplomacy. Pictures of sculptures of Greek gods faced paintings of Chinese dragons, while blown-up photos of President Hu Jintao standing shoulder to shoulder with Greek leaders adorned a cavernous meeting room.

“At the beginning, the Greeks were worried that the Chinese would come in here and take over,” Captain Fu said. “Instead, we showed the local people that we want to help them develop; we don’t want to take work from them and give it to the Chinese.”

As Greece struggles to overhaul its economy, he said, Cosco represents an opportunity for Greek workers — and the country itself. “Cosco is their future,” he said. “We are here to stay.”


Posted on on July 30th, 2012
by Pincas Jawetz (

US Press Roundtable in Athens, Greece

Philip H. Gordon
Assistant Secretary, Bureau of European and Eurasian Affairs
Athens, Greece
July 27, 2012

ASSISTANT SECRETARY GORDON: Thank you. It’s very nice to be back in Athens. It’s nice to see some of you again. I think I’ve seen you on a number of occasions including in this very room.

I am here to express our support and solidarity of the Greek people, and the Greek government as it undertakes some very difficult but we think really important economic reforms. We’re following these developments very closely and have a great stake in the outcome, not just for the sake of our friends and partners in Greece, but for the sake of the entire European area and the U.S. economy and the world economy. So we have great interest and we admire what the government is doing in undertaking, again, what we consider to be essential reforms, not just to convince world markets and European lenders of the soundness of the Greek economy, but for the sake of the Greek economy itself. In other words, we think these reforms are worth undertaking because they will lead to a more prosperous and sound Greek economy, let alone stabilize the eurozone.

We also appreciate Greece’s continued partnership with the United States on a number of regional and global issues, notwithstanding the economic difficulties. I had a chance to meet with the Foreign Minister. I also met earlier today with some of the other party leaders in the coalition. The latter mostly to talk about the economic situation, but obviously with the Foreign Minister, not just the economic situation but regional and global affairs. And as we discussed, world events don’t — you don’t get to hit the pause button while you deal with the economy. There are still a lot of issues between Greece and Turkey and the Balkans, Afghanistan, Iran, Syria, so we exchanged views on those and I expressed our appreciation for Greece’s partnership in dealing with those, even as it faces the economic difficulties.

So again, a big agenda. It’s very important to the United States, so I came here to try to get a better understanding of what’s going on in Greece and the region. I’ll be going on to Turkey from here. But as I began with, I also came to express support for what the government and the people of Greece are doing.

With that, I’ll be happy to take any questions.

QUESTION: One of the priorities of the new Greek government in foreign policy is to declare the exclusive economic zone. Do you believe it can go ahead with this or before that have an agreement or something like that with Turkey?

ASSISTANT SECRETARY GORDON: I think it’s important to avoid unilateral steps. The United States recognizes countries’ rights to declare exclusive economic zones but these things aren’t done in a vacuum and you’d have to understand the full context. We don’t think it would be in Greece’s interest to do it without full cooperation with neighbors including Turkey.

Fortunately you have mechanisms in place, and over the past number of years have developed bilateral channels in which these things can be discussed and I know that they have already contributed to progress and we would strongly encourage Greece to use those channels to have these conversations so that any steps in this area are done cooperatively in the interests of all parties.

They’re complicated issues and it’s not as simple as being able to declare an EEZ or not being able to declare an EEZ, and that’s precisely why it should be done cooperatively.

QUESTION: In order to get the economy started, which is the big issue for Greece, it is crucial to attract more and more investment. What do you believe should be the main reforms that Greece has to make in order to attract investment?

ASSISTANT SECRETARY GORDON: That’s a good question, because attracting investment is clearly a critical aspect to turning the Greek economy around. You need foreign investment. I think frankly over the years there has been a perception in Greece that it wasn’t friendly enough to foreign investment, that there were too many rules, too much bureaucracy, too slow approval rates, and investors need certainty and transparency. They want to be sure what the rules are, the regulations — that they’re not going to be changing. So I think creating a more investor-friendly climate is critical.

There are other less direct measures, but are still important measures, and those are the ones that I think the government is already working on in strengthening the overall economy so that you get growth and buying power, purchasing power, so that it’s worth making the investments. But I would start with the question of bureaucracy, rules and regulations. I think you can look at, there are rankings of countries in terms of, for example, how quickly an investment can be approved and I think Greece needs to advance on that list.

QUESTION: I will stick to the economy because that’s what’s troubling us. I don’t know if you could say a few words about the meetings that you had with the other two governmental partners. And we had the Assistant Secretary of the Treasury a few days ago and I was wondering, the idea is, especially ahead of the American elections, there is this notion and I think it’s understandable that the United States is beginning to lose patience not with Greece, but the way the European leaders are handling the crisis since Greece and Ireland are not a problem right now. Nothing compares to what will happen if Spain or Italy fail or these growing costs continue.

So it would be great if you would give us your insight on this, and what is worrying the United States, and apart from declarations of support, which are good, or that you have to do something. If you have any other idea of how you could convince the European leaders to move on the next step and do something decisive.

ASSISTANT SECRETARY GORDON: Sure. As I said right from the start, we are following it extremely closely because we have such a great stake in the outcome. We have a great stake because we care about the hundreds of millions of people who live in Europe and their prosperity, but we also even have a more direct national interest at stake, our economy is so dependent on growth and stability and that of our largest trading and investment partner in the world by far. I think it’s accurate to say that some of the drag on the U.S. economy right now are questions about the eurozone, and so that’s why we’re so committed.

We acknowledge also that we don’t have a direct say in some of the key decisions to be made in Europe. The question of how big is the firewall or whether there are bailout funds or whether the ECB should be buying bonds at a certain level are not issues on which we get a vote. But because we are so engaged and so committed and so intertwined with Europe, we have views and we share those views and I can tell you at the highest levels, including our President there are regular conversations with European leaders about the way forward.

You mentioned American impatience. I wouldn’t describe it as impatience. I would acknowledge that —

QUESTION: Losing patience. I think it’s right.

ASSISTANT SECRETARY GORDON: That’s different. Yes. We would like a comprehensive solution tomorrow or yesterday, but we also understand these are complicated decisions. They’re not easy. The reforms will take time. I think Angela Merkel but other leaders across Europe keep trying to explain that as well, that there is no magic bullet and there is no quick solution to this problem and we understand that. At the same time, we are urging leaders and I think have been for some time to be as decisive as possible as quickly as possible because the stakes are so great.

In terms of what — you asked about my meetings with the party leaders and what needs to be done — I would say I was encouraged from what I heard in the sense that the coalition members seemed determined to implement the agreements that have been reached. They seemed to have an appreciation that markets and governments need to see results and real efforts and structural reforms before they will respond positively. It goes back to the question that I was asked about investments.

Of course they took the opportunity to explain to me how difficult it was on the Greek people and the Greek economy, which we know and appreciate, but they also demonstrated a real understanding that only by taking these difficult measures will eurozone governments, the European Central Bank, and private investors be convinced that they can really put their money in Greece.

That’s what I encourage them to do as well, as quickly as possible and as decisively as possible, demonstrate in deed as well as in word, that there really is a new Greece, that Greece gets it, that it’s doing the things that are necessary to make clear that this is a place that you can really do business, and in this highly competitive globalized world there are a lot of places where you can send your money, as investors and hedge funds and others demonstrate every single day. And if they have the slightest doubts about a country’s ability to pay its debts or about what would be the fate of their investment, they’ll just go elsewhere.

That’s why it’s really incumbent on the country in question to take decisive, necessary measures. But as I say, from my meetings here I was convinced, I think it was in the first place encouraging to see the Greek people vote for parties that understood that, because the alternative would, in our humble estimation, really not serve Greece’s interests well. And it was encouraging to hear from those party leaders that they understand that and they’re determined to finish the job.

QUESTION: I would like to insist on the European economy matters. Are you worried about the possibility of a eurozone breakup and how possible do you find it? Because you see there were, even from German official, statements the past days about Greece leaving the eurozone, so —

ASSISTANT SECRETARY GORDON: I would say a couple of things. First, we’re confident that the eurozone will stay together, that the governments have the commitment and the means to keep it together, and we believe that’s in our common interest. So we don’t want to see a breakup of the eurozone.

I would add that we’re not alone in thinking that. I think it’s worth pointing out that notwithstanding all of the questions about the viability of the eurozone, all of the costs involved to certain countries in keeping it going, all of the real pressures on certain members including Greece to do difficult things to stay in, notwithstanding all of that, every single member of the eurozone and governments across the European Union remain committed to it. If you want to simplify, both the lender countries and the debtor countries, they still remain committed. Even in Greece where we know you’ve borne great costs to do the necessary things to stay in, the Greek government is committed to it, and the Greek people voted consciously for parties who are also committed to it, notwithstanding the costs. I think that shows a real recognition of the values of preserving the eurozone.

You point to German leaders speculating about a breakup. If you listen carefully — first of all the main German leader, the Chancellor, has been absolutely clear that she wants to preserve the eurozone and I think you see that in her actions when Germany puts up money to keep everybody in the eurozone — and so what you’ve had is a couple of leaders most recently say they’re no longer appalled by the notion of one country leaving the eurozone. That’s still a very long way from saying we should abandon the eurozone, it’s not in our interest. On the contrary, I think all evidence points to a real recognition that it’s in everybody’s interests.

Then take I think even just yesterday Mario Draghi, head of the ECB, saying we’ll do — you can check the quote exactly — but something along the lines of whatever it takes. So I think there’s a recognition among all key actors that as painful and difficult as it is, it is really worth preserving. That will in itself I think help support the eurozone.

QUESTION: I would like to ask two questions. One is [inaudible] be positive on an extension of the Greek adjustment program from two years to four years so that it’s easier for the people to accept it. The second is the situation in Syria seems to get out of control. The Obama administration has shown that any action that could possibly be taken should be in a collective manner. But do you believe that the only way to do this is through the UN Security Council? Or possibly if the situation gets even worse we should explore other possibilities like a coalition of the willing?

ASSISTANT SECRETARY GORDON: Thanks. Two separate things. First, on the question of an extension of the timetable for Greece’s program, that’s really between Greece and the Troika, which is the source of the original deal. It’s not for us to say what schedule it should be on.

That said, I would share my sense that the first thing Greece needs to do is demonstrate that it’s committed to the program and it is undertaking real reforms. I think, being perfectly frank, it’s too soon to start asking for an extension. Your election was what, less than two months ago. The government has started to undertake a number of important steps, but I think that receptivity in Europe to any talk of extensions now is premature. On what basis would they do that? So I don’t think it’s something that should be ruled out, but I think in terms of sequencing it should be first things first. Demonstrate over a period of time that you are genuinely committed to these difficult steps in implementing the program, and then on the basis of that effort I think the prospects for discussing timetables or flexibility would be much better than doing it in the other order.

As for Syria, we’re obviously very concerned about the situation in Syria. It has become clear to us for some time that there needs to be a political transition in Syria, that Syria will never be stable and peaceful under Assad who has used violence against his own people. And yes, we have gone to great efforts to work with the international community. This is not just a U.S. view. The international community, including most importantly all of Syria’s neighbors practically and the Arab League, are focused on a political transition as well.

Yes, our strong preference has been to work on it through the UN Security Council, that’s why we’ve been back to it three times for proposing different resolutions focused, as we say, on political transition. Unfortunately, every single time it didn’t pass in the Security Council because there was a veto by Russia and China, including most recently just two weeks ago, and, I might add, by nobody else. There were two abstentions and two vetoes. In the previous one it was 13 to 2. We regret that Russia and China have stood in the way of what clearly the rest of the international community believes to be the need for a resolution supporting political transition.

So yes, in that sense the Security Council route is blocked. We will continue to act with our international partners. There have been a number of meetings of the Friends of the Syrian People with participation of 40, 60, 80 countries and international entities, and we’ll continue to work through that channel and others to increase the pressure on the regime, change the balance on the ground, and support and coordinate the opposition so that when Assad does go, and he will, there is a better prospect for a more stable, inclusive government in Syria than otherwise. And we’re going to continue to work it. On that, we appreciate Greece’s support in those efforts.

QUESTION: Mr. Gordon, do you believe that the Greek-Turkish relations could be deteriorated, could be affected in some way because of the Syrian crisis and the complicated issues that emerge in the region with say the efforts of the Israeli and the [inaudible] to be more close to [inaudible], for example?

ASSISTANT SECRETARY GORDON: I don’t see any reason why the developments in Syria should be harmful to Greek-Turkish relations. In fact I think Greek and Turkish interests in Syria, and even policy in Syria, is aligned, which is aligned with the United States as well, to increase pressure on Assad and foster a political transition and support the opposition. There’s no reason that Turkish policy in Syria should be a problem for Greece or vice versa.

I’m encouraged that even with other complicated things going on in the region and even with political change in Greece, the Greek-Turkish relationship seems to continue to improve. That’s an important factor of stability throughout this region, especially at a time when unfortunately the Turkey-Israel relationship is not improving, it remains frozen at best for the past couple of years. Obviously relations between Turkey and Cyprus are complicated and potential tensions over energy. So this is a region that needs more progress in bilateral and trilateral and quadrilateral relationships and it’s all the more important for Greece and Turkey to be preserving their relationship.

QUESTION: Are you now more optimistic about Greece’s future in the eurozone than you were before coming to Athens? And I’m wondering, if you had a vote, you said the U.S. is not a member of the eurozone. If you have a vote, what would you say to the Germans? We all see there is a strong conflict between the U.S. and Germany.

QUESTION: You have a vote in the IMF.

ASSISTANT SECRETARY GORDON: We do have a vote in the IMF, and that’s really the only sort of direct way that we have a role. But the IMF is only one-third of the troika and we’re only, I won’t say one vote because we are more than one vote in the IMF, but one voice within the IMF.

On the first part of your question about optimism, I would just repeat what I said. I was encouraged to hear from the party leaders I met with their commitment to the reforms that we think are necessary to stabilize the Greek economy and to persuade markets and governments to work with Greece moving forward. That’s most critical of all, because obviously the coalition was elected to do certain things and it needs to stick with its agreements, it needs to demonstrate that, and so to hear directly from those party leaders that they get it, that they’re committed to doing it, they know how difficult it is, but they are not wobbling under these pressures is critically important. In that sense I am optimistic.

I think it matters less what I think than what the markets think and I think markets are voting in favor as well. You’ve seen some money start to flow back to Greece, whereas there was great question, especially the run-up to the election, that you would see bank runs and see money start to flow out. I think since the election of the government some of the steps that they’ve taken, people are more confident that Greece really is on the right track. So that is reassuring.

As for the latter, I won’t speculate on — you asked hypothetical membership in the European Union, but I think I’ve already said and the President and Secretary of Treasury and State have indicated the types of things that we think are necessary. We have urged more decisive action on the part of eurozone governments, I think we have stressed that while fiscal consolidation is critical, the entire weight of the reform effort can’t be borne by fiscal consolidation alone. You can’t just cut your way out of this crisis. I think that evidence over the past two years gives some credence to that notion, that there needs to be also an emphasis on growth, on liberalization and other structural reforms that will restore Europe to growth and competitiveness and jobs. I think that view is growing throughout the European Union, which we’re encouraged by.

We have urged that a substantial firewall be put in place not because we want it to be used, we don’t. The point of a firewall is precisely so that it will not have to be used and that you reassure markets that they can put their money somewhere and there’s less of a risk of default.

So I think in general while it’s not for us to give a precise prescription as to what Europeans should be doing, we’ve given general indications of what we think is the right direction. I think it’s fair to say that things have largely moved in that direction over time and they continue to do so, and if that balanced package continues to move forward, reforms and fiscal consolidation in the countries under pressure and solidarity and support from the countries in a position to do so, I think the future looks much more positive.

QUESTION: Are you worried about the moves of the Russian navy in the Eastern Mediterranean and the relation that [inaudible]has with Moscow ?

ASSISTANT SECRETARY GORDON: On the first point, we’ve been very clear about the question of Russians arms deliveries to Cyprus — Sorry, let me be clear, to Syria. I’m not breaking any news here. [Laughter].

QUESTION: [Inaudible].

ASSISTANT SECRETARY GORDON: Exactly. Russian arms deliveries to Syria which we think are only fueling a government that is using violence against its own people. And you heard Secretary Clinton talk about the attack helicopters that the Russians were planning to deliver. The Russians say they’re not signing new arms deals with Syria, just fulfilling old ones. Obviously we welcome that they’re not signing new ones but we regret that they’re fulfilling old ones because we think the last thing anyone needs is more arms in the hands of the Syrian government. So on that we’re clear.

Russia says it’s not taking sides, it wants to be balanced. But it’s hard for us to interpret arms deliveries to the Assad regime as anything else than supportive and lending legitimacy to a government that we think has clearly lost its legitimacy.

On Cyprus, I’m not sure if what you’re getting at is the loan question. We’re aware that Cyprus is considering a loan from Russia. It’s obviously up to the government of Cyprus where it gets its loans if it needs loans. We know they’re also obviously talking to the European Union and others. We would just hope that, there’s always a concern that financial dependency can lead to political dependency and that’s clearly something we wouldn’t want to see, but it’s really in the end a decision for the government of Cyprus if it wants to pursue a loan from some other sources.

QUESTION: Russians are concerned about the so-called Islamic bowl that emerged after Arab Spring in relations. How do you comment this [inaudible]?

ASSISTANT SECRETARY GORDON: There are different aspects to it. You may be referring specifically to Egypt and the trend in Egypt, election of a Muslim Brotherhood government in the wake of the fall of the Mubarak regime.

I think the first thing to keep in mind on questions like this is a certain sense of humility about our own role in the future of this region. It’s not up to us. It wasn’t up to us whether Mubarak stayed in power or not. It wasn’t up to us who the Egyptians chose to represent them, and once Mubarak was gone we felt there should be free and fair elections and it’s up to the Egyptian people who to support and they supported a Muslim Brotherhood government, and we reached out to that government. Secretary Clinton was there within the past couple of weeks. And we’ll look forward to working with them.

So we stand by our principles in those terms. When it comes to what we want to see is rule of law, fair treatment of all citizens of the countries including women, minorities, transparent elections, peace with neighbors. And if a government is willing to abide by those principles, then it’s up to the people what government should be in place.

Russian concerns about extremism we share. That’s a difference that we have with them when it comes to Syria where they talk about the risks that if Assad goes you could have extremism and al-Qaeda. Obviously that’s something we’re concerned about as well, but in our view that’s all the more reason to accelerate the transition or put the opposition and strengthen those groups that support the principles that are dear to us, as opposed to either do nothing or support the Assad regime which we fear will just lead to ongoing violence, civil war, and precisely the extremism that they’re worried about.

Thanks everybody. It’s nice to talk to you.

QUESTION: You’re going to visit the Halki School?

{The Halki seminary, formally the Theological School of Halki, was founded on 1 October 1844 on the island of Halki (now called Heybeliada), the second-largest of the Princes’ Islands in the Sea of Marmara. It was the main school of theology of the Eastern Orthodox Church‘s Ecumenical Patriarchate of Constantinople until the Turkish government stopped its use in 1971. The theological school is located at the top of the island’s Hill of Hope, on the site of the Byzantine-era Monastery of the Holy Trinity. The premises of the school continue to be maintained by the monastery and are used to host conferences. It is possible to visit the island where it is located via boat in approximately one hour from the shore of Istanbul.}


QUESTION: It’s the first time American officers visit the Halki?

ASSISTANT SECRETARY GORDON: I think our current Ambassador was there during his current tenure. President Clinton went to the Halki Seminary. So it’s not the first and it’s just a continued —

QUESTION: You’re going to press [inaudible].

ASSISTANT SECRETARY GORDON: That’s my point about it being consistent with our longstanding policy. We’re encouraged by what we’ve heard out of Turkey in terms of hopes to open it. It’s been our longstanding position that it should be open, so it’s just an opportunity to express our support for that.


Posted on on July 22nd, 2012
by Pincas Jawetz (

Dear Reader,

We have all been greatly saddened by the horrific shooting last night in Aurora, Colorado. Our hearts go out to the victims of another senseless act by a killer with access to dangerous weapons. If you feel strongly about keeping guns out of the hands of dangerous people and wish to express your condolences to the victims and their families, please click here. Join with more than 700 U.S. Mayors committed to ending gun crime.

Don Hazen
Executive Editor, AlterNet


YES – but not enough. Let us understand finally that we have been hijacked by our own inaction.

The papers this weekend want us to believe that the two greatest things that are happening right now are the start of Olympics 2012 in London and the opening of  “The Dark Knight Rises” or Batman III. What goes on in Syria is just a distraction from above focal points of our lives.

Just in case – if we want a little bit more then tragicomedy in our lives – the main attraction at the London Olympics – the first since 1948 – will be the helicopter-carrier positioned in the middle of the Thames River, and the main advertisement for the Batman movie was done with the help of news from the killings at Aurora, Denver, Colorado.

For the honest reality show – the whole world was placed in a Ghetto by the terror act at the Munich Olympics in 1972.

The present Olympics Committee – just a mere 40 years later, did not even agree to have a special ceremony at this year’s Olympics – the tenth since that on-TV event of 1972. Now the TV programs amaze us with the killings of Arab-against-Arab, as in the Damascus routine, and the pre-Olympic celebration in Burgas near the Bulgarian Black Sea coast. There, a terrorist blew himself up, and took along six other people – five of them Israelis – his presumable targets.

Who was the terrorist of Burgas? We do not know and do not assume to know, but we read that Israel says Hamas, and the US know that it was a Hezbollah man backed by Iran, while  the Bulgarian official version is simply – he was not Bulgarian but someone who came from the outside with a pre-conceived plan. Strangely – a Bulgarian journalist had more to say.

He wrote on hat the killer, Mehdi Muhammad G. (33) was born in Sweden, son of immigrants – an Algerian father and a Finnish mother, and went to Pakistan to absorb Islamic teachings. There he was found by the US and brought to Guantanamo on December 1, 2001.

July 2004 (that is still during the G.W. Bush US Presidency – something worthwhile noting right here in the light of the potential of politicizing the event – if true)  he was subsequently released upon request from Sweden. We have no proof that this story is true, but if it is there will clearly be repercussions at the EU and in the US.  So far we read only in Austrian papers, whatever the facts, Bulgaria’s chances to join the Schengen agreement are now diminished.

But above mishap, or perhaps an Olympic reminder to the survivors of the Israeli 1972 team, that went this week to re-visit the Munich site, was coincidentally only a first step – followed by an unrelated event – that we argue to be related nevertheless.

The second event is the Aurora shooting in at a movie house near Denver, Colorado – the killing of 12 people, and injuring 59 more, by what the papers try to describe as a deranged person who had – in a US crazy way – legal access to buy guns and ammunition. (The amo bought on internet and delivered to his home and school, the guns bought directly from official dealers based on his having a clean record.)

James Eagan Holmes, a 24 year young student of neuroscience, hair dyed red, with a gas mask on his face, armed with tear gas and guns, did his thing at the midnight premiere of Batman III, a movie officially titled “The Dark Knight Rises,” that was going to bring in a lot of money to its producers – who prepared as well a great advertising campaign with the help of a website The website itself, though managed by the film-critics community is owned by Warner Brothers – the studio that produced this film.

The critics, based on seeing trailers or having been at previews, posted 197 articles out of  which 86% were positive.
The first negative review earned the critic, Marshall Fine, threats to his life.

The film, like all Batman films, deals in hidden ways with what is interpreted as a glorification of the George W. Bush, post 9/11 War on Terror. That would not have excited us. We decided to write this posting only when we read that Rush Limbaugh, the fire-brand of the US Tea-Party, and the storm-trooper of the fight against an Obama Presidency, pointed out that the character’s name  in the film – Bane, is a hidden psychological hint at the Bain Capital Company (same pronunciation) owned by Mitt Romney in real life, and this is no coincidence according to Rush.

Rush expressed the certainty that this was intended so that it plants in the mind of the viewers the idea that Romney is a personification of evil. The fact that the book was actually written in 1993 by a conservative writer –  Christopher Nolans – and the character was already there – is a detail of no importance to Rush – but we fear  that in real political life of the Republican Party  in the USA of 2012, facts have no importance.   …. It is the figments of imagination that are being expressed as facts, and weak minds draw weak conclusions. The real  problem is that such conclusions can kill.

Holmes booby-trapped his apartment in Aurora, and now the police must be very careful in gaining access – we hope they do not proceed by blowing up the place and losing whatever further evidence can be found there.

In Paris the opening of  The Dark Knight Rises was cancelled, in Vienna the Tuesday preview is still on, and the opening is scheduled for Wednesday. In New York, supposedly the movie’s Gotham City – a sin city of the stock exchange if you want this sort of interpretation for creation of good ticket-box results, Mayor Bloomberg, who calls for gun-control laws, has made sure that the movie house is supervised by no-nonsense police.

Also, we understand that some wise person wrote a pro-guns’ proliferation piece contending that had there been more guns in the theater room, the number of casualties would have been smaller. I guess, if this logic holds, our lives would be safer living in a wild west coral – like in the movies – all of us would would be drawing guns.


Our posting is very short – if interested here are some further material that throws light at the low state we find ourselves in the post-Munich insecurity that benefits only the arms producers and the outspoken and powerful moron politicians:


Posted on on June 3rd, 2012
by Pincas Jawetz (

George Soros Remarks at the Festival of Economics.

June 2, 2012

Trento, Italy

Ever since the Crash of 2008 there has been a widespread recognition, both among economists and the general public, that economic theory has failed. But there is no consensus on the causes and the extent of that failure. I believe that the failure is more profound than generally recognized. It goes back to the foundations of economic theory.

Economics tried to model itself on Newtonian physics. It sought to establish universally and timelessly valid laws governing reality. But economics is a social science and there is a fundamental difference between the natural and social sciences. Social phenomena have thinking participants who base their decisions on imperfect knowledge. That is what economic theory has tried to ignore.

Scientific method needs an independent criterion, by which the truth or validity of its theories can be judged. Natural phenomena constitute such a criterion; social phenomena do not. That is because natural phenomena consist of facts that unfold independently of any statements that relate to them. The facts then serve as objective evidence by which the validity of scientific theories can be judged. That has enabled natural science to produce amazing results.

Social events, by contrast, have thinking participants who have a will of their own.  They are not detached observers but engaged decision makers whose decisions greatly influence the course of events. Therefore the events do not constitute an independent criterion by which participants can decide whether their views are valid. In the absence of an independent criterion people have to base their decisions not on knowledge but on an inherently biased and to greater or lesser extent distorted interpretation of reality. Their lack of perfect knowledge or fallibility introduces an element of indeterminacy into the course of events that is absent when the events relate to the behavior of inanimate objects. The resulting uncertainty hinders the social sciences in producing laws similar to Newton’s physics.

Economics, which became the most influential of the social sciences, sought to remove this handicap by taking an axiomatic approach similar to Euclid’s geometry. But Euclid’s axioms closely resembled reality while the theory of rational expectations and the efficient market hypothesis became far removed from it. Up to a point the axiomatic approach worked. For instance, the theory of perfect competition postulated perfect knowledge. But the postulate worked only as long as it was applied to the exchange of physical goods. When it came to production, as distinct from exchange, or to the use of money and credit, the postulate became untenable because the participants’ decisions involved the future and the future cannot be known until it has actually occurred.

I am not well qualified to criticize the theory of rational expectations and the efficient market hypothesis because as a market participant I considered them so unrealistic that I never bothered to study them. That is an indictment in itself but I shall leave a detailed critique of these theories to others.

Instead, I should like to put before you a radically different approach to financial markets. It was inspired by Karl Popper who taught me that people’s interpretation of reality never quite corresponds to reality itself. This led me to study the relationship between the two. I found a two-way connection between the participants’ thinking and the situations in which they participate.

On the one hand people seek to understand the situation; that is the cognitive function. On the other, they seek to make an impact on the situation; I call that the causative or manipulative function. The two functions connect the thinking agents and the situations in which they participate in opposite directions.

In the cognitive function the situation is supposed to determine the participants’ views; in the causative function the participants’ views are supposed to determine the outcome. When both functions are at work at the same time they interfere with each other. The two functions form a circular relationship or feedback loop. I call that feedback loop reflexivity. In a reflexive situation the participants’ views cannot correspond to reality because reality is not something independently given; it is contingent on the participants’ views and decisions. The decisions, in turn, cannot be based on knowledge alone; they must contain some bias or guess work about the future because the future is contingent on the participants’ decisions.

Fallibility and reflexivity are tied together like Siamese twins. Without fallibility there would be no reflexivity – although the opposite is not the case: people’s understanding would be imperfect even in the absence of reflexivity. Of the two twins, fallibility is the first born. Together, they ensure both a divergence between the participants’ view of reality and the actual state of affairs and a divergence between the participants’ expectations and the actual outcome.

Obviously, I did not discover reflexivity. Others had recognized it before me, often under a different name. Robert Merton wrote about self-fulfilling prophecies and the bandwagon effect, Keynes compared financial markets to a beauty contest where the participants had to guess who would be the most popular choice. But starting from fallibility and reflexivity I focused on a problem area, namely the role of misconceptions and misunderstandings in shaping the course of events that mainstream economics tried to ignore. This has made my interpretation of reality more realistic than the prevailing paradigm.

Among other things, I developed a model of a boom-bust process or bubble which is endogenous to financial markets, not the result of external shocks. According to my theory, financial bubbles are not a purely psychological phenomenon.  They have two components: a trend that prevails in reality and a misinterpretation of that trend. A bubble can develop when the feedback is initially positive in the sense that both the trend and its biased interpretation are mutually reinforced. Eventually the gap between the trend and its biased interpretation grows so wide that it becomes unsustainable. After a twilight period both the bias and the trend are reversed and reinforce each other in the opposite direction. Bubbles are usually asymmetric in shape: booms develop slowly but the bust tends to be sudden and devastating. That is due to the use of leverage: price declines precipitate the forced liquidation of leveraged positions.

Well-formed financial bubbles always follow this pattern but the magnitude and duration of each phase is unpredictable. Moreover the process can be aborted at any stage so that well-formed financial bubbles occur rather infrequently.

At any moment of time there are myriads of feedback loops at work, some of which are positive, others negative. They interact with each other, producing the irregular price patterns that prevail most of the time; but on the rare occasions that bubbles develop to their full potential they tend to overshadow all other influences.

According to my theory financial markets may just as soon produce bubbles as tend toward equilibrium. Since bubbles disrupt financial markets, history has been punctuated by financial crises. Each crisis provoked a regulatory response. That is how central banking and financial regulations have evolved, in step with the markets themselves. Bubbles occur only intermittently but the interplay between markets and regulators is ongoing. Since both market participants and regulators act on the basis of imperfect knowledge the interplay between them is reflexive. Moreover reflexivity and fallibility are not confined to the financial markets; they also characterize other spheres of social life, particularly politics. Indeed, in light of the ongoing interaction between markets and regulators it is quite misleading to study financial markets in isolation. Behind the invisible hand of the market lies the visible hand of politics. Instead of pursuing timeless laws and models we ought to study events in their time bound context.

My interpretation of financial markets differs from the prevailing paradigm in many ways. I emphasize the role of misunderstandings and misconceptions in shaping the course of history. And I treat bubbles as largely unpredictable. The direction and its eventual reversal are predictable; the magnitude and duration of the various phases is not. I contend that taking fallibility as the starting point makes my conceptual framework more realistic. But at a price: the idea that laws or models of universal validity can predict the future must be abandoned.

Until recently, my interpretation of financial markets was either ignored or dismissed by academic economists. All this has changed since the crash of 2008. Reflexivity became recognized but, with the exception of Imperfect Knowledge Economics, the foundations of economic theory have not been subjected to the profound rethinking that I consider necessary. Reflexivity has been accommodated by speaking of multiple equilibria instead of a single one. But that is not enough. The fallibility of market participants, regulators, and economists must also be recognized.  A truly dynamic situation cannot be understood by studying multiple equilibria.  We need to study the process of change.

The euro crisis is particularly instructive in this regard. It demonstrates the role of misconceptions and a lack of understanding in shaping the course of history. The authorities didn’t understand the nature of the euro crisis; they thought it is a fiscal problem while it is more of a banking problem and a problem of competitiveness. And they applied the wrong remedy: you cannot reduce the debt burden by shrinking the economy, only by growing your way out of it. The crisis is still growing because of a failure to understand the dynamics of social change; policy measures that could have worked at one point in time were no longer sufficient by the time they were applied.


Since the euro crisis is currently exerting an overwhelming influence on the global economy I shall devote the rest of my talk to it. I must start with a warning: the discussion will take us beyond the confines of economic theory into politics and the dynamics of social change. But my conceptual framework based on the twin pillars of fallibility and reflexivity still applies. Reflexivity doesn’t always manifest itself in the form of bubbles. The reflexive interplay between imperfect markets and imperfect authorities goes on all the time while bubbles occur only infrequently. This is a rare occasion when the interaction exerts such a large influence that it casts its shadow on the global economy. How could this happen? My answer is that there is a bubble involved, after all, but it is not a financial but a political one. It relates to the political evolution of the European Union and it has led me to the conclusion that the euro crisis threatens to destroy the European Union. Let me explain.

I contend that the European Union itself is like a bubble. In the boom phase the EU was what the psychoanalyst David Tuckett calls a “fantastic object” – unreal but immensely attractive. The EU was the embodiment of an open society –an association of nations founded on the principles of democracy, human rights, and rule of law in which no nation or nationality would have a dominant position.

The process of integration was spearheaded by a small group of far sighted statesmen who practiced what Karl Popper called piecemeal social engineering. They recognized that perfection is unattainable; so they set limited objectives and firm timelines and then mobilized the political will for a small step forward, knowing full well that when they achieved it, its inadequacy would become apparent and require a further step. The process fed on its own success, very much like a financial bubble. That is how the Coal and Steel Community was gradually transformed into the European Union, step by step.

Germany used to be in the forefront of the effort. When the Soviet empire started to disintegrate, Germany’s leaders realized that reunification was possible only in the context of a more united Europe and they were willing to make considerable sacrifices to achieve it.  When it came to bargaining they were willing to contribute a little more and take a little less than the others, thereby facilitating agreement.  At that time, German statesmen used to assert that Germany has no independent foreign policy, only a European one.

The process culminated with the Maastricht Treaty and the introduction of the euro. It was followed by a period of stagnation which, after the crash of 2008, turned into a process of disintegration. The first step was taken by Germany when, after the bankruptcy of Lehman Brothers, Angela Merkel declared that the virtual guarantee extended to other financial institutions should come from each country acting separately, not by Europe acting jointly. It took financial markets more than a year to realize the implication of that declaration, showing that they are not perfect.

The Maastricht Treaty was fundamentally flawed, demonstrating the fallibility of the authorities. Its main weakness was well known to its architects: it established a monetary union without a political union. The architects believed however, that when the need arose the political will could be generated to take the necessary steps towards a political union.

But the euro also had some other defects of which the architects were unaware and which are not fully understood even today. In retrospect it is now clear that the main source of trouble is that the member states of the euro have surrendered to the European Central Bank their rights to create fiat money. They did not realize what that entails – and neither did the European authorities. When the euro was introduced the regulators allowed banks to buy unlimited amounts of government bonds without setting aside any equity capital; and the central bank accepted all government bonds at its discount window on equal terms. Commercial banks found it advantageous to accumulate the bonds of the weaker euro members in order to earn a few extra basis points. That is what caused interest rates to converge which in turn caused competitiveness to diverge. Germany, struggling with the burdens of reunification, undertook structural reforms and became more competitive. Other countries enjoyed housing and consumption booms on the back of cheap credit, making them less competitive. Then came the crash of 2008 which created conditions that were far removed from those prescribed by the Maastricht Treaty. Many governments had to shift bank liabilities on to their own balance sheets and engage in massive deficit spending. These countries found themselves in the position of a third world country that had become heavily indebted in a currency that it did not control. Due to the divergence in economic performance Europe became divided between creditor and debtor countries. This is having far reaching political implications to which I will revert.

It took some time for the financial markets to discover that government bonds which had been considered riskless are subject to speculative attack and may actually default; but when they did, risk premiums rose dramatically. This rendered commercial banks whose balance sheets were loaded with those bonds potentially insolvent. And that constituted the two main components of the problem confronting us today: a sovereign debt crisis and a banking crisis which are closely interlinked.

The eurozone is now repeating what had often happened in the global financial system. There is a close parallel between the euro crisis and the international banking crisis that erupted in 1982. Then the international financial authorities did whatever was necessary to protect the banking system: they inflicted hardship on the periphery in order to protect the center. Now Germany and the other creditor countries are unknowingly playing the same role. The details differ but the idea is the same: the creditors are in effect shifting the burden of adjustment on to the debtor countries and avoiding their own responsibility for the imbalances. Interestingly, the terms “center” and “periphery” have crept into usage almost unnoticed. Just as in the 1980’s all the blame and burden is falling on the “periphery” and the responsibility of the “center” has never been properly acknowledged.  Yet in the euro crisis the responsibility of the center is even greater than it was in 1982. The “center” is responsible for designing a flawed system, enacting flawed treaties, pursuing flawed policies and always doing too little too late. In the 1980’s Latin America suffered a lost decade; a similar fate now awaits Europe. That is the responsibility that Germany and the other creditor countries need to acknowledge. But there is now sign of this happening.

The European authorities had little understanding of what was happening. They were prepared to deal with fiscal problems but only Greece qualified as a fiscal crisis; the rest of Europe suffered from a banking crisis and a divergence in competitiveness which gave rise to a balance of payments crisis. The authorities did not even understand the nature of the problem, let alone see a solution. So they tried to buy time.

Usually that works. Financial panics subside and the authorities realize a profit on their intervention. But not this time because the financial problems were reinforced by a process of political disintegration. While the European Union was being created, the leadership was in the forefront of further integration; but after the outbreak of the financial crisis the authorities became wedded to preserving the status quo. This has forced all those who consider the status quo unsustainable or intolerable into an anti-European posture. That is the political dynamic that makes the disintegration of the European Union just as self-reinforcing as its creation has been.  That is the political bubble I was talking about.

At the onset of the crisis a breakup of the euro was inconceivable: the assets and liabilities denominated in a common currency were so intermingled that a breakup would have led to an uncontrollable meltdown. But as the crisis progressed the financial system has been progressively reordered along national lines. This trend has gathered momentum in recent months. The Long Term Refinancing Operation (LTRO) undertaken by the European Central Bank enabled Spanish and Italian banks to engage in a very profitable and low risk arbitrage by buying the bonds of their own countries. And other investors have been actively divesting themselves of the sovereign debt of the periphery countries.

If this continued for a few more years a break-up of the euro would become possible without a meltdown – the omelet could be unscrambled – but it would leave the central banks of the creditor countries with large claims against the central banks of the debtor countries which would be difficult to collect. This is due to an arcane problem in the euro clearing system called Target2. In contrast to the clearing system of the Federal Reserve, which is settled annually, Target2 accumulates the imbalances. This did not create a problem as long as the interbank system was functioning because the banks settled the imbalances themselves through the interbank market. But the interbank market has not functioned properly since 2007 and the banks relied increasingly on the Target system. And since the summer of 2011 there has been increasing capital flight from the weaker countries. So the imbalances grew exponentially. By the end of March this year the Bundesbank had claims of some 660 billion euros against the central banks of the periphery countries.

The Bundesbank has become aware of the potential danger. It is now engaged in a campaign against the indefinite expansion of the money supply and it has started taking measures to limit the losses it would sustain in case of a breakup. This is creating a self-fulfilling prophecy. Once the Bundesbank starts guarding against a breakup everybody will have to do the same.

This is already happening. Financial institutions are increasingly reordering their European exposure along national lines just in case the region splits apart. Banks give preference to shedding assets outside their national borders and risk managers try to match assets and liabilities within national borders rather than within the eurozone as a whole. The indirect effect of this asset-liability matching is to reinforce the deleveraging process and to reduce the availability of credit, particularly to the small and medium enterprises which are the main source of employment.

So the crisis is getting ever deeper. Tensions in financial markets have risen to new highs as shown by the historic low yield on Bunds. Even more telling is the fact that the yield on British 10 year bonds has never been lower in its 300 year history while the risk premium on Spanish bonds is at a new high.

The real economy of the eurozone is declining while Germany is still booming. This means that the divergence is getting wider. The political and social dynamics are also working toward disintegration. Public opinion as expressed in recent election results is increasingly opposed to austerity and this trend is likely to grow until the policy is reversed. So something has to give.

In my judgment the authorities have a three months’ window during which they could still correct their mistakes and reverse the current trends. By the authorities I mean mainly the German government and the Bundesbank because in a crisis the creditors are in the driver’s seat and nothing can be done without German support.

I expect that the Greek public will be sufficiently frightened by the prospect of expulsion from the European Union that it will give a narrow majority of seats to a coalition that is ready to abide by the current agreement. But no government can meet the conditions so that the Greek crisis is liable to come to a climax in the fall. By that time the German economy will also be weakening so that Chancellor Merkel will find it even more difficult than today to persuade the German public to accept any additional European responsibilities. That is what creates a three months’ window.

Correcting the mistakes and reversing the trend would require some extraordinary policy measures to bring conditions back closer to normal, and bring relief to the financial markets and the banking system. These measures must, however, conform to the existing treaties. The treaties could then be revised in a calmer atmosphere so that the current imbalances will not recur. It is difficult but not impossible to design some extraordinary measures that would meet these tough requirements. They would have to tackle simultaneously the banking problem and the problem of excessive government debt, because these problems are interlinked. Addressing one without the other, as in the past, will not work.

Banks need a European deposit insurance scheme in order to stem the capital flight. They also need direct financing by the European Stability Mechanism (ESM) which has to go hand-in-hand with eurozone-wide supervision and regulation. The heavily indebted countries need relief on their financing costs. There are various ways to provide it but they all need the active support of the Bundesbank and the German government.

That is where the blockage is. The authorities are working feverishly to come up with a set of proposals in time for the European summit at the end of this month. Based on the current newspaper reports the measures they will propose will cover all the bases I mentioned but they will offer only the minimum on which the various parties can agree while what is needed is a convincing commitment to reverse the trend. That means the measures will again offer some temporary relief but the trends will continue. But we are at an inflection point.  After the expiration of the three months’ window the markets will continue to demand more but the authorities will not be able to meet their demands.

It is impossible to predict the eventual outcome. As mentioned before, the gradual reordering of the financial system along national lines could make an orderly breakup of the euro possible in a few years’ time and, if it were not for the social and political dynamics, one could imagine a common market without a common currency. But the trends are clearly non-linear and an earlier breakup is bound to be disorderly. It would almost certainly lead to a collapse of the Schengen Treaty, the common market, and the European Union itself. (It should be remembered that there is an exit mechanism for the European Union but not for the euro.) Unenforceable claims and unsettled grievances would leave Europe worse off than it was at the outset when the project of a united Europe was conceived.

But the likelihood is that the euro will survive because a breakup would be devastating not only for the periphery but also for Germany. It would leave Germany with large unenforceable claims against the periphery countries. The Bundesbank alone will have over a trillion euros of claims arising out of Target2 by the end of this year, in addition to all the intergovernmental obligations. And a return to the Deutschemark would likely price Germany out of its export markets – not to mention the political consequences. So Germany is likely to do what is necessary to preserve the euro – but nothing more. That would result in a eurozone dominated by Germany in which the divergence between the creditor and debtor countries would continue to widen and the periphery would turn into permanently depressed areas in need of constant transfer of payments. That would turn the European Union into something very different from what it was when it was a “fantastic object” that fired peoples imagination. It would be a German empire with the periphery as the hinterland.

I believe most of us would find that objectionable but I have a great deal of sympathy with Germany in its present predicament. The German public cannot understand why a policy of structural reforms and fiscal austerity that worked for Germany a decade ago will not work Europe today. Germany then could enjoy an export led recovery but the eurozone today is caught in a deflationary debt trap. The German public does not see any deflation at home; on the contrary, wages are rising and there are vacancies for skilled jobs which are eagerly snapped up by immigrants from other European countries. Reluctance to invest abroad and the influx of flight capital are fueling a real estate boom. Exports may be slowing but employment is still rising. In these circumstances it would require an extraordinary effort by the German government to convince the German public to embrace the extraordinary measures that would be necessary to reverse the current trend. And they have only a three months’ window in which to do it.

We need to do whatever we can to convince Germany to show leadership and preserve the European Union as the fantastic object that it used to be. The future of Europe depends on it.


And from todays’s New York Times: “In the United States, the ease of borrowing has not made it politically easier to increase the pace of spending. Instead, there is the possibility of “Taxmageddon,” the threat that the unwillingness of politicians to compromise could lead to a combination of big automatic spending cuts and tax increases in 2013 that could devastate economic growth. All this is taking place in the midst of an election campaign that is widely expected to be the nastiest ever.

Moreover, the consensus that financial regulation should be strengthened and standardized has evaporated. In Europe and the United States, banks say that institutions across the Atlantic have unfair advantages, and regulators complain that the other continent has not taken the needed steps.

In the United States, a major push by the banks to weaken rules may or may not have been badly damaged by the multibillion-dollar trading loss suffered recently by JPMorgan Chase. But many in Congress, primarily but not exclusively Republicans, have gone back to the old belief that it was excessive government regulation that created the problem.

The widespread pessimism could dissipate as rapidly as it accumulated. Some surprisingly good economic news in the United States and China would help. More important would be for Europe’s leaders to reach agreement on a course of action that offered hope for recovery in the most stricken areas of the Continent while assuring that the common financial system would have the support of common institutions if needed. Europe has previously managed to cobble together something when disaster appeared to loom, and perhaps it could do so again.

Germany — the country that would have to pick up most of the bill to rescue its neighbors — could decide that not spending the money created greater dangers. The United States could find ways to help out despite fiscal pressures and Congressional hostility to foreign aid. A new consensus on common bank regulation could emerge. But, for now at least, the outlook is far darker than it seemed to be only a couple of months ago.”


In Economic Deluge, a World That’s Unable to Bail Together

Published: June 2, 2012

Less than four years ago, with the world’s financial system in danger of collapsing, major countries managed to come together on a coordinated course that averted a global depression.

Central banks pumped vast amounts of cash into economies, and banks were bailed out, with vows that they would be subject to stronger regulation.

By early 2009, financial markets had bottomed out and begun strong recoveries. Economies were slower to follow; by last year, slow growth seemed to be the global pattern, spurring hope that the crisis had passed.

But within the last few weeks, much of that hope seems to have faded.

In Europe, the crisis has grown worse, not better, and thedisputes among European leaders have intensified as much of the Continent appears to have drifted into a newrecession. In China, growth remains robust by Western standards. But concern is rising over the possible end of a property boom that had been fueled in part by local government borrowing and spending.

In the United States, which had been an oasis of relative calm with a growing economy and rising employment, job growth in May, reported Friday, was a puny 69,000. To make the outlook even gloomier, earlier numbers were revised lower. That capped a series of three disappointing monthly reports.

Moreover, there seems to be little willingness — or perhaps lit-tle ability — for the major countries to act together again. Squabbles have grown, some countries are in fiscal distress, and others face daunting domestic problems. The European situation is the most pressing. Banks are under pressure in many countries, for a combination of reasons. They did not raise as much capital as they might have when markets were more buoyant last year. In some cases, they appear to have been slow to recognize their real estate loan losses.


Posted on on May 21st, 2012
by Pincas Jawetz (

Monday, May 21, 2012

G-8 first-timers Noda, Hollande share concerns over European debt crisis


Washington — Prime Minister Yoshihiko Noda shared his concerns about Europe on Saturday with new French President Francois Hollande as fears continue to rear up again about the region’s sovereign debt crisis, the Foreign Ministry said.

Noda, in his first face-to-face meeting with Hollande, urged France and the other eurozone economies to make further efforts to overcome the crisis. Hollande, a Socialist, won the May 6 election by advocating more economic growth.

The two leaders met on the fringes of the Group of Eight summit at the U.S. presidential retreat in Camp David, Maryland. Both Noda and Hollande were making their G-8 debuts.

Noda, who recently called Europe’s sovereign debt crisis the “biggest risk” to Japan’s economy, urged France and other eurozone countries to work together to stabilize the region’s economy.

He also reminded them of the money Japan has thrown their way to combat the crisis, a $60 billion shot in the arm of the International Monetary Fund, and the bonds Japan has purchased from the European Financial Stability Facility, the eurozone’s temporary bailout fund.

Hollande was quoted by the ministry as praising Japan’s help while stressing that Greece must be prevented from leaving the euro. He also said Greece should fulfill its international obligations, a reference to the austerity measures Athens promised in exchange for an international bailout.

During their 30-minute meeting, Noda and Hollande also shared deep concerns about the Iranian nuclear standoff and agreed to deal sternly with North Korea.

As for the issue of Japanese citizens abducted by Pyongyang decades ago, Hollande promised to continue to support Japan in resolving the issue, the ministry said.

Noda also called for France’s help in swiftly launching negotiations on a free-trade agreement between Japan and the European Union, the ministry said.

Hollande showed his support for such an FTA but called on Japan to make more efforts to open its markets to foreign products and services.

In a step to boost Japan-France ties under the new French leader, Noda invited Hollande to visit Japan at an early date.


Posted on on May 17th, 2012
by Pincas Jawetz (

There is ‘no need to fear a more federal Europe’

Europe needs to rediscover its élan and purpose or we will sleepwalk into disintegration and disunity – warns MEP and ALDE group leader


There is ‘no need to fear a more federal Europe.’

by Guy Verhofstadt

Europe needs to rediscover its élan and purpose or we will sleepwalk into disintegration and disunity – warns MEP and ALDE group leader

The French and Greek elections last weekend both delivered a body blow to Europe’s austerity drive designed to rein in national over-spending and reduce the enormous debt mountains that have been accumulating over the past 30 years or more. That Francois Hollande picked up on the anti-austerity theme was probably as much to do with pragmatic politics as ideology. He knows very well that he will not be able to keep all his policy commitments from the campaign trail.

France is not Greece, but it does not have any laurels to rest on either. It was recently downgraded by one rating agency, has high youth unemployment at 25 per cent and a budget that has not been balanced in three decades. That the people voted for a candidate promising a brighter future, reversing pension reforms, creating thousands of new jobs and re-negotiating Europe’s fiscal compact is little surprise – but may shortly be rudely confronted by reality.

At least Hollande is a democrat and a good European. Nicolas Sarkozy was too when he took up office. His interventions in the European Parliament during the French Presidency of the European Union could not be faulted by federalists. And his energy and dynamism were deployed in the common interest. That is until he found himself facing likely defeat to his socialist challenger. He then turned abruptly to the right in a vain effort to woo the voters of Marine Le Pen. Time and again, EU leaders who experiment with populist messages have only served to strengthen – rather than weaken – the hand of the initiators of such messages. In the Netherlands, Finland, Greece and elsewhere – populist, racist and extremist parties have all benefitted from such heightened rhetoric. Why vote for a copy when you can vote for the original?

At the other end of the Mediterranean, the Greek elections delivered an anarchic result in which the two main parties rightly got punished for the decades of corruption and clientilism. But the anti-establishment parties that have reaped the benefit and filled the vacuum have largely vented their anger against the EU and international financial institutions that have imposed tough austerity measures in return for bailing them out from certain bankruptcy. The result leaves no party in Greece able to form a government and everyone promising to voters what cannot be delivered.

So the beleaguered Greek citizen continues to suffer from an inept and self-serving political class that now counts neo-Nazis among its ranks. On the other side of the spectrum is a new far left party, Syriza, which has blatantly and opportunistically capitalised on the country’s woes and the tough adjustment plan imposed by external creditors. It is disingenuous of the party leader to pretend he can tear up the bailout conditions, so painfully negotiated over the last two years, and offer a painless alternative.

The tendency of politicians in both France and Greece to blame foreigners – Brussels bureaucrats or third country migrants – for their country’s travails is a telling indicator that the construction of Europe over the last 60 years still remains a fragile structure that can be so easily and quickly overturned by irresponsible and populist rhetoric – leading to a recrudescence of the kind of nationalism that led us into two world wars, in the first half of last century. Growing Euroscepticism across member states must be countered by a radical renewal of those who are convinced Europeans. We cannot afford to become complacent or indifferent to events that are now shaping public opinion. Europe needs to rediscover its élan and purpose or we will sleepwalk to disintegration and disunity.

Ending the current economic crisis must be everyone’s top priority. No stone must be left unturned in finding a solution, even if that means further pooling of sovereignty. Germany for instance is currently deaf to some practical solutions, such as a European debt redemption fund – which would combine discipline with solidarity – because it fears a loss of sovereignty and accepting responsibility for other people’s debt. But the alternative – never-ending taxpayer funded bailouts – is surely worse.

It is too simplistic and economically nonsensical to argue that austerity is wrong and growth is good. They are two sides of the same coin. Governments cannot invest in growth if they are paying huge interest rates on their borrowing to cover their debts. Annual deficits need to be reined in by reducing unnecessary expenditure so that the resources subsequently liberated can be invested in productive jobs and growth strategies. Some countries have more to do than others in this regard but the rules agreed by European leaders and recently enshrined in a political pact on budgetary discipline remain sensible for long-term budgetary planning.

In this week when we commemorate the speech on May 9, 1950, by French foreign minister, Robert Schuman. The words launched the idea of European integration and pooled sovereignty. His message remains as relevant now as it did then. Europe will not stand still. It will either collapse under the weight of growing nationalism and scepticism or it will recover its sense of purpose, agree to make a qualitative leap in integration in response to the crisis and therefore offer the next generation the kind of peace and stability that we have enjoyed over the past half century. It is not enough to hope that the latter scenario will prevail for there are forces actively working to destroy it. There is no need to fear a more federal Europe, but every reason to embrace it.

Guy Verhofstadt MEP is leader of the Alliance of Liberals and Democrats for Europe group in the European Parliament…

[This article has been also published on and ]


Posted on on May 14th, 2012
by Pincas Jawetz (

European Intellectuals Speak Out AGAINST AUSTERITY – and provide an alternative.

The Tikkun Magazine, May 10, 2012

Editor’s Note:  Tikkun author Ulrich Duchrow, a professor of systematic theology at the University of Heidelberg, Germany, and cofounder and moderator of Kairos Euope, an ecumenical network striving for economic justice (see his article A European Revival of Liberation Theology in Tikkun’s Winter 2011 issue) presents us with a statement of European intellectuals speaking out against the neo-liberal austerity economic programs that are the weapon-of-choice by the 1% in its class war against the 99%.

Stop the neo-liberal crisis politics – dispossess the beneficiaries!

We are experiencing the deepest crisis of capitalism since the great depression of the 30s – and the European governments continue to pour oil on the fires! From the very beginning, some governments have prevented a solidarity-based solution to the crisis in Europe and are significantly responsible for its exacerbation. This refers particularly to the German government, which, in August 2008, blocked a substantial economic stimulus package for Europe. Hardly had the recession reached its lowest point in Germany in 2009, when the German government preached the necessity for hard austerity policies. The “debt brake” was anchored in the constitution: politics disempowered itself, shaped by neo-liberal ideology. The austerity measures taken in various EU states affected above all wage-earners, pensioners, the unemployed and the self-employed, while the wealthy, the banks and the corporations were spared. In spring 2010 the German government blocked aid for Greece, causing a rise in the Greek national debt and making a solution of the crisis more difficult and expensive. The loan commitments for Greece and other countries in crisis came with obligatory and ridiculous demands which would only make the crisis worse. For example, the reduction in the Greek minimum wage did not contribute to an increase in “competitiveness”, as the country hardly has any internationally competitive industries. Instead, the reduction of the minimum wage destroyed the internal market further. This example makes clear that the current crisis politics redistributes wealth from wage-earners to those who possess the capital, regardless of the macro-economic and societal consequences. Greek salaries have already dropped by 20-30%, hundreds of thousands of people are losing their jobs, over 10,000 schools are closed, hospitals are running out of medication, children are starving. Similar developments are also looming in Portugal and in other European countries.

Neo-liberal politics, whose failure has become obvious in this crisis, is being radicalised once more. The aim of the “fiscal pact”, for example, which was agreed by the heads of state and heads of government of 24 EU states on 2nd March 2012, is to make neo-liberal austerity policies legally binding for all time. A “debt brake” in line with the German model should be anchored across the whole of Europe.  National budget deficits should, in future, be capped at 0.5% of GDP. This plan overlooks the fact that already in the 1990s the “Stability and Growth Pact” agreed by the European Economic and Currency Union, which had allowed a budget deficit of 3% of GDP, could not withstand the reality of a capitalist society dogged by crises. The 3% deficit was frequently exceeded. The “Treaty on Stability, Coordination and Governance in the Economic and Monetary Union”, as the Fiscal Pact is officially called, is more than the result of unrealistic plotting by neo-liberal economists and politicians.  Further waves of privatisation, destruction of jobs, restriction of public services, social degradation, and wage reduction, are pre-programmed across the whole of Europe; and all to protect the profits of a small group of rich capitalists. The destructive policies which have been pushed  ahead mainly by the  German and French governments have been accepted and put into practice by nearly all EU governments, because in every state there is a dominant wealthy clique who profit from the increasing pressure on the wage-earning population.

The European crisis policies lead to an increased undermining and devaluing of democracy. Not least through international pressure were the governments in Greece and Italy removed from office and replaced by a government of “technocrats” in order to calm “the markets”. These governments make far-reaching decisions without having the legitimacy of being elected. A proposed referendum on the austerity measures in Greece was quickly quashed after pressure from the ruling powers. Elections become meaningless when the large parties represent more or less the same policies, as recently in Portugal and Spain. Responsibilities are moved from the national level to the EU-level without an adequate democratic control of the activities of the EU institutions such as the European Commissions, the European Central Bank, or the European Court of Justice. We note with great concern the increased nationalist, racist and fascist movements in various European countries.

And yet the prevailing policies are not without an alternative. A significant alternative, however, is only possible when the roots of the crisis are correctly identified. National debt crises form only one aspect of the current European crisis, in which the tensions of European integration (unequal development, common financial policies without common policies on wages, taxation and industry) collide with a structural over-accumulation of capital. There is too much capital, measured by the possibilities which remain to exploit work and the environment.

An alternative strategy for attacking the crisis needs to include the following elements:

– No ratification of the Fiscal Pact

The Fiscal Pact means further loss of democracy, commits nations to neo-liberal policies, and increases the crisis.

– Cancellation of national debts

A public debt audit must clarify how the debts were incurred and who is in possession of the government bonds. One person’s debts are another person’s wealth. The savings and pension entitlements of the broad mass of the population must be secured, while the interest and repayment entitlements of the wealthy, the banks, the hedge funds and the corporations must be cancelled.

– Nationalisation of the banks

Banks which have been saved by public funds must be nationalised. Banks which are “too big to fail” must be divided up.

– Radical redistribution of income and wealth

We need a tax on financial transactions, an increase in taxation on capital returns, a re-introduction of wealth tax and a much stronger progression in income tax, in order to  achieve a lasting financing of state spending and increase in benefits, and to enable social and environmentally necessary investments, as well as to combat world poverty.

– Overcoming of mass unemployment

Mass unemployment, low wages and wage reduction are important reasons for decreasing wage rates and the creation of surplus capital which inflates the financial sector. There must be an end to the manipulation of unemployment statistics. Mass unemployment can only be overcome by a radical reduction in working hours.

– Democratising democracy

Democracy must be strengthened at all levels, especially at the European level, and must also include the economic sector.  It cannot be possible that democracy comes to a stop at the gates of the factories and the banks, and that a small group has the means of production at its disposal, when human survival depends on it.

The “Arab Spring”, the movement of the “indignant ones” in Spain, the numerous strikes and demonstrations in Greece and the worldwide “Occupy” movement which started in the USA, are all a source of encouragement. It is high time to strengthen the protests and to take them to the place where the European crisis policies are apparently decided. This is why we are announcing the world-wide decentralised protest demonstrations on 12th May as well as the European protest demonstrations which will take place in Frankfurt am Main on 17th-19th May 2012.

Organisations / Networks

  • Attac Portugal
  • Attac Wallonia
  • CADTM Europe
  • Commission on Globalisation and Environment of the Protestant Federation, Italy
  • Kairos Europe, Belgium
  • Legambiente Ecopolis Torino, Italy
  • Specialist Advisory Council of Attac Germany
  • Specialist Advisory Council of Attac Spain


  • Prof Elmar Altvater, Freie Universität Berlin
  • Prof Jens Christopher Andvig, Norwegian Institute of International Affairs
  • Cristina Asensi, Board of Attac Spain
  • Prof Amit Bharudi, Pavia University, Italy
  • Prof Adelheid Biesecker, University of Bremen
  • Prof Ulrich Brand, University of Vienna
  • Franco Carminati, Attac Wallonia-Brussels
  • Thomas Coutrot, Co-President of Attac France
  • Carlos Cuesta, Board of Attac Spain
  • Dr Rolf Czeskleba-Dupont, Roskilde University Denmark
  • Yiannis Dragasakis, SYRIZA, Greece
  • Prof Ulrich Duchrow, University of Heidelberg, Germany
  • Prof Hans Ebbing, University of Bergen, Norway
  • Prof Trevor Evans, Berlin School of Economics and Law
  • Prof Marica Frangakis, Nicos Poulantzas Institute, Athens
  • Prof Alan Freeman, Metropolitan University, London
  • Prof Cees J. Hamelink, Vrije University Amsterdam
  • Prof Wolfgang Fritz Haug, Institute for Critical Theory
  • Prof Peter Herrmann, University of Cork
  • Prof Rudolf Hickel, University of Bremen
  • Dr Anne Karrass, scientific assistant in the German Parliament
  • Prof Pierre Khalfa, Scientific Council of Attac France
  • Prof Jeremy Leaman, Loughborough University, UK
  • Prof Ingrid Lohmann, University of Hamburg
  • Dr Kathleen Lynch, University College Dublin
  • Prof Birgit Mahnkopf, Berlin School of Economics and Law
  • Prof Mohssen Massarrat, University of Osnabrück
  • Prof John P. Neelsen, University of Tübingen
  • Dr Miguel Otero-Iglesias, University of Oxford
  • Prof Norman Paech, HWP Hamburg, em.
  • Christine Pagnoulle, University of Liege
  • Prof Mario Pianta, University of Urbino, Italy
  • Frederico Pinheiro, SOL, Portugal
  • Dr Ralf Ptak, University of Cologne
  • Prof Rainer Rilling, Philipps-University Marburg
  • Prof Roland Roth, Magdeburg-Stendal University of Applied Sciences
  • Carlos Ruiz, Co President of Attac Spain
  • Dr Thomas Sablowski, Justus-Liebig-University, Gießen
  • Prof Anwar Shaikh, New School for Social Research, New York
  • Prof Rune Skarstein, Norwegian University of Science and Technology, Trondheim
  • Roland Süß, Board of Attac Germany
  • Prof Gerd Steffens, University of Kassel
  • Steffen Stierle, Board of Attac Germany
  • Eric Toussaint, President of CADTM Belgium
  • Aurelié Trouvé, President of Attac France
  • Prof Isidor Wallimann, University of Applied Sciences and Arts Northwestern Switzerland
  • Prof Frieder Otto Wolf, Freie Universität Berlin


Posted on on May 13th, 2012
by Pincas Jawetz (

Greek Tragedy.

Published, The New York Times as Opinion: May 12, 2012

{please note – she writes this on Mothers’ Day Weekend – and she knows how to write – then she must have inherited as well some genes from her unsuccessful father attempts at owning media. Clearly – for the Greeks it is all in the family – and  EU is not family.}


As I follow the modern Greek tragedy unfolding in Europe, I flash back to the 18 years I spent in Athens, walking to school in Plaka (the old part of the city), on the same streets that have recently been filled with protesters and violent clashes.

When I was growing up, my family was a tiny microcosm of the current Greek economy. We were heavily in debt; my father’s repeated attempts to own a newspaper ended in failure and bankruptcy. Eventually, my mother took my sister and me and left him. We all lived in Athens and we continued to see my father, though we had our own one-bedroom apartment. (It wasn’t the bankruptcy that got to my mom in the end, but the philandering; “I don’t want you interfering in my private life,” my father had told her when she complained.)

Further austerity was coming, but my mother was clear about one thing: she would cut back on everything except our education and good, healthy food. She owned two dresses and never spent anything on herself. I remember her selling her last pair of little gold earrings. She borrowed from anyone she could, so that her two daughters could fulfill their dreams of a good education — me at Cambridge, and my sister at the Royal Academy of Dramatic Art in London. At the time, Greek girls still offered dowries to be married. My mother used to tell me, “Your education is your dowry.”

As I contemplate the statistics — especially the 54 percent unemployment rate among young Greeks — I think of all the stories behind this appalling data. All the dreams dashed. All the promise unfulfilled. And all the guilt, shame and fear that so often go hand in hand with intractable unemployment and little hope for a better future.

The punitive path of austerity and relentless economic contraction is, not surprisingly, likely to lead to further stagnation in 2013 and cannot be allowed to continue. And as last week’s election results show, the Greek people are not going to allow it to continue; they will instead demand change through either the ballot box or violence in the streets — or some combination of both.

The dangers of violent protest are obvious. But there are dangers in the ballot box, too: an extreme right-wing anti-immigration party received almost 7 percent of the vote, while Pasok, the establishment party of the left, lost 119 seats in Parliament in a humiliating third-place finish. If the European Central Bank does not abandon its destructive obsession with austerity, Greece will have few options but to leave the euro zone. This would be fraught with its own dangers, of course, but the European Union has left Greece with few sustainable alternatives.

Argentina, which defaulted and restructured beginning in 2001, offers a point of comparison. The austerity crowd warned that Argentina would collapse if it stopped pegging the peso to the dollar and defaulted on its debt. There are many differences between Argentina and Greece. But Argentina’s default was followed by a few short months of economic crisis and then many years of steady economic growth — a dramatically different direction than the one Greece is now taking toward a potentially endless path of contraction that is destroying millions of lives and crippling the indomitable Greek spirit.

Yes, the Greeks acted irresponsibly before the economic collapse — the same way my father had acted irresponsibly in his private and professional life. But that is not reason to punish the children, to destroy their future as part of a remedy for a past for which they bear no responsibility.

I spent many nights last summer in Syntagma Square, directly across from the Greek Parliament. The protesting crowd was mixed, full of young people and old, self-employed, unemployed, activists, pensioners. Millions of outraged Greeks — who famously relish connection, expansiveness, intimacy — used social media to connect with the rest of the country and the world; those in the square itself connected and organized the old-fashioned way, face-to-face.

Everywhere waiters, taxi drivers, salespeople, storekeepers, people at the table next to you at dinner, were talking about the same thing. They were — and still are — giving voice to a desire for more say in their own future, a future with more choices than those on offer from the European Central Bank.

When George Papandreou, who was prime minister at the time but resigned last November, visited The Huffington Post newsroom, he expressed the same feelings: “People think they’re being punished unjustly, because they feel they weren’t to blame for this crisis,” he said.

Greece, like my mother, has always been devoted above all else to its children. When the future of those children is diminished, the future — and life — of the country will be diminished, too.

My favorite picture from the protests shows a young man pumping his fist at a line of riot police officers while his mother stands beside him, holding his jacket, to make sure he doesn’t catch a cold. If Greece stays on its current dead-end path of austerity-fueled recession, the children will revolt, and the parents will be right there beside them, cheering them on and watching protectively over them.

And if having a future means leaving the euro, that’s most likely what the Greeks will choose. They invented democracy, and now it’s time to rekindle that Greek spirit of innovation and ingenuity — before economic trouble generates further despair and its dangerous progeny in the streets and in the ballot box.


Arianna Huffington is President and editor in chief of The Huffington Post Media Group, and author, most recently, of “Third World America.”


Recent elections in France and Greece pose significant challenges to the strict economic austerity policies Germany has called for in response to the eurozone sovereign debt crisis. Still, Germany has resolutely rebuffed any efforts to alter the European fiscal compact agreed to late last year, explains Council on Foreign Relation’s Sebastian Mallaby. “There’s a battle coming up between Hollande and his European partners as to quite what a growth agenda might mean,” he says. At the same time, the political situation in Greece is “more potentially cataclysmic in its consequences,” Mallaby argues, because it could not only signal a Greek exit from the eurozone, but also undermine European financial institutions and facilitate further sovereign debt contagion.

Voters in Greece rejected the country’s mainstream political parties, and, by extension, the latest EU-IMF bailout. In France, voters elected François Hollande to implement pro-growth policies in a worsening economic climate.What are the implications of these recent elections on EU efforts to resolve the eurozone debt crisis?

In the case of France, what François Hollande has done by defeating current President Nicolas Sarkozy is basically to put on the agenda a “growth pact.”

The question is how to define that rebalancing of European policies away from the austerity formula that has driven it so far.

We suggest – read some of the material that goes into the RioDialogues, throw out the books on Economics 101, and start formulating new economic policies that bring the interest in FUTURE GENERATIONS into your present CURRENT ACCOUNT policies. Oh Well! we know it is hard to create change when under pressure – but talk please to the mothers of Greece as depicted by Arianna Huffington.


Posted on on April 21st, 2012
by Pincas Jawetz (

The news from the elections in France: At a time of crisis in the economy right is wrong and the large majority of the populus say it is left to the needed help in rather quiet ways.

Messieur Holande will replace Messieur Sarcozy and Mr. Romney will not replace Mr. Obama.

Further, 2012 will see more switches from right to left and blocking of right trying to take leadership from left.

Above is contagious and will spread over both ends of the Atlantic.

The Sunday April 22, 2012 – first round results in France are:

Exit polls from the French presidential elections show Socialist candidate Francois Hollande with 28.4% of the vote and President Nicolas Sarkozy with 25.5%, French officials announced Sunday.

A presidential candidate must receive more than 50% of the vote to win office. If no one claims a majority in the first round of voting, the top two vote-getters advance to a second round of voting. The runoff would take place May 6.

From the total of 10 candidates – In addition to Sarkozy and Hollande, candidates that got significant results were:

Marine Le Pen on the extreme right with 20%, Jean-Luc Melenchon on the extreme left with 11.7%, and centrist Francois Bayrou with 8.5%.

Considering that the Le Pen vote was mainly from the working class conservatives they are not expected to transfer their vote automatically to Mr. Sarcozy who represents the bourgeois – rich. This leaves Holande as the best alternative for all those that did not vote Sarcozy in the first round.

The strong showing by the left and anger on the political extremes seemed to reflect a desire for change in France after 17 years of centrist, conservative presidents. And it could continue an anti-incumbency trend that began with the economic crisis in Western Europe, where center-right governments dominate from Britain to Spain to Germany.

It may also represent the first stirrings of a challenge to the German-dominated narrative of the euro crisis, which holds that public debt and runaway spending are the main culprits and that austerity must precede growth. Over the weekend, the Dutch government was left tottering after failing to gain a majority in support of austerity measures, and demonstrators in the Czech Republic turned out in the greatest numbers since 1989 to protest a tax increase and budget cuts.

The French vote “is a reaction against austerity, and austerity is you,” Mr. Hollande’s campaign manager, Pierre Moscovici, said to the leader of Mr. Sarkozy’s party, Jean-François Copé.

But the vote was also about an electorate that has grown increasingly disenchanted with politics and the political class.


Posted on on February 11th, 2012
by Pincas Jawetz (

Why Going ‘Back To Normal’ Is No Longer An Option for the American Economy — And Where We’re Headed Now

Stop waiting around, because “normal” as we know it isn’t coming back. READ MORE

Sara Robinson / AlterNet

5 Right-Wing Governors Gutting Schools to Fund Prisons, Tax Breaks for the Rich…And a Bible Theme Park

When state after state slashes education dollars, we see what matters to them–and where they spend while cutting schools tells us even more. READ MORE

Sarah Jaffe / AlterNet

New Hampshire GOP Reps Offer Bill to Eliminate Lunch Breaks for Workers
By Booman | Booman Tribune


Tensions flare in Athens ahead of austerity vote – 10/02/2012 18:06:03

Greek anti-austerity protesters threw rocks and petrol bombs at police
outside parliament on Friday, as MPs prepare to vote through new cuts over
the weekend.


Sunday is Darwin Day. How Will You Celebrate It?

February 12 is Darwin’s Birthday — a holiday for the reality-based community  READ MORE

By Glenn Branch / AlterNet


Posted on on January 27th, 2012
by Pincas Jawetz (

The New York Times OP-ED contributor from The World Economic Forum, Davos, Switzerland

At Davos, Debating Capitalism’s Future

By  Ed Miliband –  a member of the British Parliament and the leader of the Labour Party.
Published: January 26, 2012

IS 20th-century capitalism failing 21st-century society? Members of the global elite debated that unusual question on Wednesday at the annual World Economic Forum.

There was a time, not long ago, when such a debate would have been held only among the protesters who annually shelter in igloos farther down the Alpine slopes. So it is encouraging that more than three years since the global financial crisis, a belated process of soul-searching has begun in search of the right lessons to learn from it.

In Britain, members of the Conservative-led government — not least the prime minister, David Cameron — have echoed the Labour Party’s call for a more responsible capitalism.

There is a great difference, however, between being willing to talk about an issue and being ready to act.

It is a difference between those who still believe that all governments can do is get out of the way and those who believe there is a real role for governments in first reviving our economies, and then setting the right rules for future success. The challenge therefore is not just to capitalism but also to politics.

At the Group of 20 summit in London three years ago, Prime Minister Gordon Brown and President Obama led concerted action to guide the world economy from the brink. Three years later, some governments are engaging in a short-sighted fiscal protectionism that can only lead to stunted growth.

If we learned anything from the 1930s, it was that governments cannot shrug their shoulders and watch as their own people are consigned to unemployment. I find it tragic and astonishing that some governments need to learn this lesson again.

Nor should we forget the causes of the current growth and debt crisis as we seek to put our economies on a more sustainable footing.

Both the United States and Britain suffered because their economies were overly reliant on the financial sector’s artificial profits; living standards for the many worsened while the economic rewards skewed to the top 1 percent; a capitalist model encouraged short-term decision-making oriented toward quarterly profits rather than long-term health; and vested interests — from giant banks to media moguls —were deemed too big to fail or too powerful to challenge.

We need to recognize that the trickle-down promise of conservative theorists has turned into a gravity-defying reality in which wealth has flowed upward disproportionately and, too often, undeservedly. To address properly the squeeze in middle-class incomes on both sides of the Atlantic requires fresh thinking from governments about how people train for their working lives and what a living wage should be.

Governments can set better — not necessarily more — rules to encourage productive businesses that invest, invent, train, make and sell real products and services. We need rules that discourage the predatory behavior of those seeking the fast buck through hostile takeovers and asset-stripping that do not have the interests of the shareholders, the employees or the economy at heart.  In Britain, the Labour Party is considering how we can raise the bar for corporate takeovers so that companies’ futures are not determined by just a handful of speculators.

And governments must remember they are elected to serve the people, not the powerful lobbies who can pay for access or influence.

Too often the real enemies of market capitalism are some of the leading beneficiaries of the current model, which favors price-gouging cartels and consumer exploitation.

In Britain, airlines need to be more upfront about  the true cost of their fares, and pension firms cannot continue to sign up customers for products that can chip away at their retirement income through exorbitant management fees.

As President Obama noted in his State of the Union address on Tuesday, it is neither socially nor economically sustainable for the wealthiest and most powerful to avoid paying their fair share. I support proposals for a financial transactions tax levied equally on the major trading centers from Hong Kong and Singapore to Wall Street and the City of London. The British government needs to show more leadership on this issue in Europe — and all members of G-20 need to help make it happen.

Britain loses billions of pounds in revenues because of outdated rules that allow our richest citizens to keep their money in off-shore tax havens. Tax authorities need to know about income and wealth hidden behind front companies, trusts and other complex financial products. If these rules cannot be changed by international agreement, progressive governments should go ahead and do it themselves.

As President Obama said in his State of the Union address this week, it is “common sense” to ask a billionaire to pay, proportionally, at least as much as his secretary in taxes. Indeed, in Davos this week, I will look around the room and ask myself who pays taxes at a higher rate — those eating the soup or those serving it?

In my country, I believe that changing the rules of capitalism will mean a change of government. But more generally, it will require a change in what citizens expect and ask of politics. The question is not so much whether 20th-century capitalism is failing 21st-century society but whether politics can rise to the challenge of changing a flawed economic model.


George Soros’s essay in the forthcoming edition of the New York Review of Books:
The essay is adapted from a speech he delivered at the opening of the World Economic Forum in Davos.

All best from Michael Vachon

How to Save the Euro

George Soros

The upcoming issue of The New York Review of Books.

My new book, Financial Turmoil in Europe and the United States, tries to explain and, to the extent possible, predict the outcome of the euro crisis. It follows the same pattern as my other books: it contains an updated version of my conceptual approach and the application of that approach to a particular situation, and it presents a real-time experiment to test the validity of my interpretation. Its account is not complete because the crisis is still ongoing.

We remain in the acute phase of the crisis; the prospect of a meltdown of the global financial system has not been removed. In my book, I proposed a plan that would bring immediate relief to global financial markets but it has not been adopted.

My proposal is to use the European Financial Stability Facility (EFSF), and its successor the European Stability Mechanism (ESM), to insure the European Central Bank (ECB) against the solvency risk on any newly issued Italian or Spanish treasury bills they may buy from commercial banks. Banks could then hold those bills as the equivalent of cash, enabling Italy and Spain to refinance their debt at close to 1 percent. Italy, for instance, would see its average cost of borrowing decline rather than increase from the current 4.3 percent. This would put their debt on a sustainable course and protect them against the threat of an impending Greek default. I call this the Padoa-Schioppa plan, in memory of my friend who helped stabilize Italy’s finances in the 1990s and who inspired the proposal. The plan is rather complicated, but it is both legally and technically sound. I describe it in detail in my book.

The European financial authorities rejected this plan in favor of the Long-Term Refinancing Operation (LTRO) of the European Central Bank, which provides unlimited amounts of liquidity to European banks—not to states themselves—for up to three years. That allows Italian and Spanish banks to buy the bonds of their own country and engage in a very profitable “carry trade”—in which one borrows at low interest to buy something that will pay higher interest—in those bonds at practically no risk because if the country defaulted the banks would be insolvent anyhow.

The difference between the two schemes is that mine would provide an instant reduction in interest costs to governments while the one actually adopted has kept the countries and their banks hovering on the edge of a potential insolvency. I am not sure whether the authorities have deliberately prolonged the crisis atmosphere in order to maintain pressure on heavily indebted countries or whether they were driven to their course of action by divergent views that they could not reconcile in any other way. As a disciple of Karl Popper, I ought to opt for the second alternative. Which interpretation is correct is not inconsequential, because the Padoa-Schioppa plan is still available and could be implemented at any time as long as the remaining funds of the EFSF are not otherwise committed.

Either way, it is Germany that dictates European policy because at times of crisis the creditors are in the driver’s seat. The trouble is that the cuts in government expenditures that Germany wants to impose on other countries will push Europe into a deflationary debt trap. Reducing budget deficits will put both wages and profits under downward pressure, the economies will contract, and tax revenues will fall. So the debt burden, which is a ratio of the accumulated debt to the GDP, will actually rise, requiring further budget cuts, setting in motion a vicious circle.

To be sure, I am not accusing Germany of acting in bad faith. It genuinely believes in the policies it is advocating. Germany is the most successful economy in Europe. Why should not the rest of Europe be like it? But it is pursuing an impossibility. In a closed system like the euro clearing system, everybody cannot be a creditor at the same time. The fact that a counterproductive policy is being imposed by Germany creates a very dangerous political dynamic. Instead of bringing the member countries closer together it will drive them to mutual recriminations. There is a real danger that the euro will undermine the political cohesion of the European Union.

The evolution of the European Union is following a course that greatly resembles a sequence of boom and bust or a financial bubble. That is no accident. Both processes are “reflexive,” that is, as I have argued elsewhere, they are largely driven by mistakes and misconceptions.

In the boom phase the European Union was what the British psychologist David Tuckett calls a “fantastic  object”—an unreal but attractive object of desire. To my mind, it represented the embodiment of an open society—another fantastic object. It was an association of nations founded on the principles of democracy, human rights, and the rule of law that is not dominated by any nation or nationality. Its creation was a feat of piecemeal social engineering led by a group of farsighted statesmen who understood that the fantastic object itself was not within their reach. They set limited objectives and firm timelines and then mobilized the political will for a small step forward, knowing full well that when they accomplished it, its inadequacy would become apparent and require a further step.

That is how the European Coal and Steel Community was gradually transformed into the European Union, step by step. During the boom period Germany was the main driving force. When the Soviet empire started to fall apart, Germany’s leaders realized that reunification of their country was possible only in a more united Europe. They needed the political support of other European powers, and they were willing to make considerable sacrifices to obtain it. When it came to bargaining they were willing to contribute a little more and take a little less than the others, thereby facilitating agreement. At that time, German statesmen used to assert that Germany had no independent foreign policy, only a European policy. The process—the boom, if you will—culminated with the Maastricht Treaty in 1992 and the introduction of the euro in 2002. It was followed by a period of stagnation that turned into a process of disintegration after the crash of 2008.

The euro was an incomplete currency and its architects knew it. The Maastricht Treaty established a monetary union without a political union. The euro boasted a common central bank to provide liquidity, but it lacked a common treasury that would be able to deal with solvency risk in times of crisis. The architects had good reason to believe, however, that when the time came further steps would be taken toward a political union. But the euro also had some other defects of which the architects were unaware and that are not fully understood even today. These defects contributed to setting in motion a process of disintegration.

The fathers of the euro relied on an interpretation of financial markets that proved its inadequacy in the crash of 2008. They believed, in particular, that only the public sector is capable of producing unacceptable economic imbalances; the invisible hand of the market would correct the imbalances produced by markets. In addition, they believed that the safeguards they introduced against public sector imbalances were adequate. Consequently, they treated government bonds as riskless assets that banks could buy and hold without allocating any capital reserves against them.

When the euro was introduced, the ECB treated the government bonds of all member states as equal. This gave banks an incentive to gorge themselves on the bonds of the weaker countries in order to earn a few extra basis points, since the yields on those bonds were slightly higher. It also caused interest rates to converge. That, in turn, caused economic performance to diverge. Germany, struggling with the burdens of reunification, undertook structural reforms, principally in its labor markets, and became more competitive. Other countries, benefiting from lower interest rates, enjoyed a housing boom that made them less competitive. That is how the introduction of the euro caused the divergence in competitiveness that is now so difficult to correct. The banks were weighed down with the government bonds of less competitive countries that turned from riskless assets into the riskiest ones.

The tipping point was reached when a newly elected Greek government revealed that the previous government had cheated and the national deficit was much bigger than had been announced. The Greek crisis revealed the gravest defect in the Maastricht Treaty: it has no provisions for correcting errors in the euro’s design. There is neither a mechanism for enforcing payment by member states of the European debt nor an exit mechanism from the euro; and member countries cannot resort to printing money. The statutes of the ECB strictly prohibit it from lending to member states, although it lends to banks. So it was left to the other member states to come to Greece’s rescue.

Unfortunately the European authorities had little understanding of how financial markets really work. Far from combining all the available knowledge in the market’s movements, as economic theory claims, financial markets are ruled by impressions and emotions and they abhor uncertainty. To bring a financial crisis under control requires firm leadership and ample financial resources. But Germany did not want to become the deep pocket for bad debtors. Consequently Europe always did too little too late and the Greek crisis snowballed. The bonds of other heavily indebted countries such as Italy and Spain were hit by contagion—i.e., in view of the failure in Greece they had to pay higher yields. The European banks suffered losses that were not recognized on their balance sheets.

Germany aggravated the situation by imposing draconian conditions and insisting that Greece should pay penalty rates on the loans in the rescue package that Germany and other states provided. The Greek economy collapsed, capital fled, and Greece repeatedly failed to meet the conditions of the rescue package. Eventually Greece became patently insolvent. Germany then further destabilized the situation by insisting on private sector participation in the rescue. This pushed the risk premiums on Italian and Spanish bonds through the roof and endangered the solvency of the banking system. The authorities then ordered the European banking system to be recapitalized. This was the coup de grâce. It created a powerful incentive for the banks to shrink their balance sheets by calling in loans and getting rid of risky government bonds, rather than selling shares at a discount.

That is where we are today. The credit crunch started to make its effect felt on the real economy in the last quarter of 2011. The ECB then started to reduce interest rates and aggressively expand its balance sheet by buying government bonds in the open market. The ECB’s LTRO facility provided relief to the banking system but left Italian and Spanish bonds precariously balanced between the sustainable and the unsustainable.

What lies ahead? Economic deterioration and political and social disintegration will mutually reinforce each other. During the boom phase the political leadership was in the forefront of further integration; now the European leaders are trying to protect a status quo that is clearly untenable. Treaties and laws that were meant to be stepping stones have turned into immovable rocks. I have in mind Article 123 of the Lisbon Treaty, which prohibits the ECB from lending money directly to member states. The German authorities, notably the Constitutional Court and the Bundesbank, are dead set on enforcing rules that have proved to be unworkable. For instance, the Bundesbank’s narrow interpretation of Article 123 prevented Germany from contributing its Special Drawing Rights to a rescue effort by the G20. This is the path to disintegration. Those who find the status quo intolerable and are actively looking for change are driven to anti-European and xenophobic extremism. What is happening today in Hungary—where a far-right party is demanding that Hungary leave the EU—is a precursor of what is in store.

The outlook is truly dismal but there must be a way to avoid it. After all, history is not predetermined. I can see an alternative. It is to rediscover the European Union as the “fantastic object” that used to be so alluring when it was only an idea. That fantastic object was almost within reach until we lost our way. The authorities forgot that they are fallible and started to cling to the status quo as if it were sacrosanct. The European Union as a reality bears little resemblance to the fantastic object that used to be so alluring. It is undemocratic to the point where the electorate is disaffected and it is ungovernable to the point where it cannot deal with the crisis that it has created.

These are the defects that need to be fixed. That should not be impossible. All we need to do is to reassert the principles of open society and recognize that the prevailing order is not cast in stone and rules are in need of improvement. We need to find a European solution for the euro crisis because national solutions would lead to the dissolution of the European Union, and that would be catastrophic; but we must also change the status quo. That is the kind of program that could inspire the silent majority that is disaffected and disoriented but at heart still pro-European.

When I look around the world I see people aspiring to open society. I see it in the Arab Spring, in various African countries; I see stirrings in Russia, and as far away as Burma and Malayasia. Why not in Europe?

To be a little more specific, let me suggest the outlines of a European solution to the euro crisis. It involves a delicate two-phase maneuver, similar to the one that got us out of the crash of 2008. When a car is skidding, you first have to turn the steering wheel in the direction of the skid, and only after you have regained control can you correct your direction. In this case, you must first impose strict fiscal discipline on the deficit countries and encourage structural reforms; but then you must find some stimulus to get you out of the deflationary vicious circle— because structural reforms alone will not do it. The stimulus will have to come from the European Union and it will have to be guaranteed jointly and severally. It is likely to involve eurobonds in one guise or another. It is important, however, to spell out the solution in advance. Without a clear game plan Europe will remain mired in a larger vicious circle in which economic decline and political disintegration mutually reinforce each other.


Posted on on November 13th, 2011
by Pincas Jawetz (

Fareed’s Take: Only China can save Europe

By Fareed Zakaria, CNN, November 11, 2011

The European crisis that you’ve been reading about in the paper is worth watching carefully. In fact, it has now morphed into something much bigger than a European crisis – it could batter the entire global economy, which is pretty fragile anyway.

You’ve read a lot about Greece, but the problem in Europe is Italy. Greece is a nano-state; it makes up about 2% of the European Union’s gross domestic product. Italy, on the other hand, is one of the seven largest economies in the world. Its debts are greater than those of Spain, Portugal, Ireland and Greece combined. It has long been governed in an almost cartoonishly bad manner. Italy is too big to fail but might also be too big to bail. Even Germany might not be able to credibly bail it out along with all the other troubled countries. So what can be done?

I don’t think the leading proposals will work – creating Eurobonds or giving Brussels broader power to tax. They’re simply not going to happen. Governments oppose it and people oppose it. And anyway, creating a tighter European Union will take ten years. Markets needs reassurance now.

So I have a proposal: We need a big bazooka. Facing a similar crisis in 2008, then-Treasury Secretary Henry Paulson talked about the need for a sum of money large enough to scare markets into submission. A bazooka. But the problem is this: All of the EU combined doesn’t have one big enough. So who has the kind of money Italy needs?

Take a guess? They have $3 trillion in foreign exchange reserves. Yup, China. In fact, today, 10 trillion dollars of foreign exchange reserves are sitting around across the globe. That is the only pile of money large enough from which a bazooka could be fashioned.

The International Monetary Fund could go to the leading holders of such reserves – China, but also Japan, Brazil and Saudi Arabia – and ask for a $750 billion line of credit. The IMF would then extend that credit to the troubled EU economies, but insist on closely monitoring economic reforms, granting funds only as restructuring occurs. That credit line would more than cover the borrowing costs of both Italy and Spain for two years. The IMF terms would ensure that the two nations remained under pressure to reform and set up conditions for growth.

Now, the Chinese would have to devote at least half the funds. What’s in it for them? A new global role. This could be the spur to giving China a much larger say at the IMF. In fact, it might be necessary to make clear that Christine Lagarde would be the last non-Chinese head of the organization.

In a world awash in debt, power shifts to creditors. After World War I, European nations were battered by debts, and Germany was battered by reparation payments. The only country that could provide credit was the United States.

For America, providing desperately needed cash to Europe was its entry into the councils of power, a process that ultimately brought a powerful new player inside the global tent.

Today’s crisis is China’s opportunity to become a “responsible stakeholder” in the global system. If this doesn’t happen, hold on to your seat because we’re in for a rough ride.

For more of my thoughts throughout the week, I invite you to follow me on Facebook and Twitter and to visit the Global Public Square every day. Also, for more of my takes, click here.


APEC currently has 21 members, including most countries with a coastline on the Pacific Ocean.

APEC member economies shown in green

APEC Members account for approximately 40% of the world’s population, approximately 54% of the world’s trade.



Posted on on November 13th, 2011
by Pincas Jawetz (

Europe’s real problem: Lack of growth

By Fareed Zakaria, CNN, written November 10, 2011 – posted November 13, 2011.

I was in Germany this week and the mood there is pretty grim: Europe is facing its most severe challenge since 1945. If the Greek crisis morphs into an Italian crisis – Italy being too large to bail out – the entire structure of post-World War II Europe could unravel.

Finally, European leaders seem to recognize that their strategy of kicking the can down the road has not worked. The result will not be a dramatic solution – that is not how Europe works – but, more likely, a series of steps that together will be more comprehensive than anything done before. But they will not address Europe’s core problem: a lack of growth.

The Europeans – by which I mean the Germans – are trying to find some solution to this crisis that will not let countries like Greece and Italy off the hook. Germans feel these countries need to feel the pressure – only then will they reform their budgets and their habits. So the solutions will be complex – trying to stop a crisis while not bailing out these countries entirely.

The real problem – however – is not so much that Greece has been unwilling to make sacrifices. It has made many. But Greece’s budget numbers look bleak because its growth forecast looks bleak. It needs to address a much larger question of competitiveness. What can the Greek economy do to attract capital and investment? And at what wage levels? These are questions most European countries will need to answer to fully solve their problems.

Italy’s economy has not grown for an entire decade. No debt restructuring will work if it stays stagnant for another decade.

Even Germany is not immune, with an average growth rate of only 1.5%. German officials know that with a declining population, in five to seven years the country is likely to grow at an annual rate of just 1%. That’s not much of an engine for Europe.

Europe needs a crisis agenda to get out of its bind, but beyond that it needs a growth agenda, which involves radical reform. The fact is that Western economies – with high wages, generous middle-class subsidies and complex regulations and taxes – have become sclerotic. Now they face pressures from three fronts: demography (an aging population), technology (which has allowed companies to do much more with fewer people) and globalization (which has allowed manufacturing and services to locate across the world).

If Europe – and, for that matter, the United States – cannot adjust to this new landscape, it might escape this storm only to enter another.

For more on this, read my column in The Washington Post. For more of my thoughts throughout the week, I invite you to follow me on Facebook and Twitter and to bookmark the Global Public Square. Also, for more of my takes, click here.

OP-ED CONTRIBUTOR to The New York Time MAURIZIO VIROLI – November 11, 2011.

Can Italy Put Berlusconi Behind It?

Silvio Berlusconi will fall, but his hold on Italy will remain until the country can undergo a moral awakening.


OP-ED COLUMNIST to The New York Times, November 11, 2011, Paul Krugman:

Legends of the Fail.

With Italy following Greece off a cliff, it’s hard to see how the euro can survive. Now that the euro project is on the rocks, what lessons should we draw?


Greece and Italy Seek a Solution From Technocrats


The question in both countries is whether the new leaders can succeed where their predecessors failed and dislodge the entrenched cultures of political patronage.


Sovereign Debt of Euro Zone Turning Sour


The debt crisis was fed by governments that borrowed too much, regulators that let banks treat the bonds as without risk and investors who viewed the bonds of all countries as solid.


Posted on on November 6th, 2011
by Pincas Jawetz (

Greece and Israel in a Changing Region
Wednesday, November 16, 2011, 16:00
Senate Hall, Feldman Conference Center, Building 301, Bar-Ilan University

Chair: Prof. Efraim Inbar, BESA Center
Dr. Aristotle Tziampiris, University of Piraeus
Hellenic-Israeli Strategic Cooperation in the Eastern Mediterranean
Prof. Amikam Nachmani, BESA Center
Greece and Israel: The Third Chance
Prof. Athanassios Platias, University of Piraeus
Strategic Development in the Eastern Mediterranean

This event will be held in English and is open to the public

Faculty of Social Sciences
Department of Political Studies, 03-531-8959