Will They Do It This Time?: EU Summit, the European Crisis and Little Courage or Hope? And The Manifesto of Two World Renown Economists!

This is written just before the EU Summit on Friday the 29th. The betting remains on “too little too late” as the outcome. Today, Angela Merkel and French President Francois Hollande will meet to see if they can find common ground.  But before the meetings, Ms. Merkel has stated her objections to a “grand deal” to place on the table the institutions and resources to put the crisis to rest.

But there are other dynamics at work that may in time force a systemic and credible European-wide response.  One dynamic is the nasty market and the forces betting on both bringing down the Euro and gaining profit from outrageous interest rates and derivative betting. The other force, and the most important, is the utter disaster that their austerity policies have brought upon their people.  Those who have been hurt are rising up and have already defeated a conservative French President who played with the rich and used racist imagery in his election instead of addressing the needs of the majority of his citizens not comprising the 1% of his nation.

But also at work is the growing realization throughout European society (and we hope American as well), that austerity was the wrong direction.  As almost every good economist has cried from the rooftops, stimulus and growth and directly addressing unemployment have to be at the top priority of society.  Today, Paul Krugman and Richard Layard (from Princeton and the London School of Economics) have an op-ed in the Financial Times with the headline: “A Manifesto for Economic Sense.”  They have asked all who see their plain good sense economic argument to rally to the manifesto they have proposed. I urge all to read this article and ponder its clear call to stop the massive suffering being imposed on the people.

The vitality, prosperity, and security of Europe, the United States and the globe depend on leaders who, at last, will recognize the cliff of depression we are approaching and will radically change their direction.

Changing of the Guard? Sarkozy/Hollande and Putin/Medvedev: Bad Policies and Their Consequences

The French presidential election between François Hollande and Nicolas Sarkozy had dramatic results, which were not only a return to power of the socialists but a strong voice of the people in France rejecting the failed policies of blind austerity. They said enough is enough!

This seems to be the rising voice of most of Europe. What is so strange is that it took this long for the people to see the stupidity of counterproductive austerity and a war on the poor and middle classes by the rich. Sarkozy, the son himself of an immigrant, campaigned against immigrants and sought, through appealing to the far right Le Pen backers, the low road to salvation. It did not work. What is interesting also is that the German finance minister, Wolfgang Schauble, called for wage increases for German workers. Was it an act of fear or an act of prudence?

Along with the fall of Sarkozy, the pro-austerity right government in The Netherlands was booted out, and anger grows in the troubled nations, like Greece, Ireland, Italy, Portugal, and Spain. Also of significance were the local election results in the non-euro currency Britain, which had pushed a right-wing austerity effort, and is now in a second recession and bound for failure. Europe may, at last, be rethinking its options and seeing a failed economic policy for what it is – an effort by the rich to thrive at the expense of the 99%. The question now is how long it will take Americans to come to the same conclusion with the Republicans in Congress forcing austerity blindly upon a hurting average citizen?

The challenges ahead remain formidable for Europe. The sad fact is that Germany has a veto over any changes in policies. But the other side is that France too has its own veto over future policies. Also, other nations can bar future actions within the euro zone and in the EU. The question is whether there is room for compromise on both sides. Key decisions are coming up not only on Greece debt but on rules for future limits on euro zone member nations’ debt, which would impose rigid rules leading to even further depressing economic and fiscal actions.

For America, there is also a need to reassess these changes and their implications for our policies and how, given the new landscape, we can best respond to these new forces and especially whether we have an opportunity to pick up where President Obama and former UK Prime Minister Brown hoped to go three or so years ago – a consensus towards global reflation rather than destructive deflation of the global economy.

Looking east: On May 7th, Vladimir Putin took office as the Russian president in Moscow. Demonstrations on Sunday led to violence as thousands protested his election. There is a mood of desire for change at least on the public space. The switch to a Putin/Medvedev “tandem” probably does not mean a fundamental change in Russian policies immediately, which were largely set by Putin even over the last five years. But the landscape of Russia has changed as more and more people are rising for a voice in their governance. The vision of the Arab Spring and the changes in Western Europe act as a beacon for hopes in Russia for a fairer system. But the desire for both a “strong leader” and continued strong forces of a narrow nationalism vying with desire for democratic reform is an old story in Russia which continues to play out with ever-increasing tension and uncertainty.

For both Western Europe and America, there is much anxiety over what will evolve from the new (old?) regime. The new ruler over the Russian Federation has difficulties and challenges ahead. These include a narrow economy based on oil and gas revenues, a failing social support infrastructure (including a health system that is a total disaster), continued centrifugal forces at the fringe of the Federation, an ever-growing awareness of the force of freedom and democracy, government corruption, and, not least, the continued backwardness of much of the country. But decisions must be made anew about long-term relations with the West, China, and on global issues like climate change, the global economic crisis, security (including solution to the missile defense initiative of the West and Russian participation or opposition), and continued support of the indefensible countries of Syria, Iran, and Sudan. But as this blog has noted, Russia and the U.S. have key mutual interests that need to be strengthened on both sides. (More on all of this on our RNS blog in the days ahead.)

We welcome your comments.

By Harry C. Blaney III.

Europe’s Bleak or Hopeful Future?

This weekend the first round of the French presidential election has taken place. Socialist Hollande came out first by just a bit but betting is he will win also by a bit in the second round. Already commentators are either crying he would be a “disaster” or just another reorder of the deck chairs.

The preceding elections in Europe, mostly of those states in financial difficulties, have seen the fall of the old ruling parties or leaders and their replacement with new leaders. This year will see additional national and regional elections or changes in governments. These major European elections will be a harbinger of political change in Europe with large potential for a reordering of the political and economic landscape in ways that are yet hard to predict.

In France, the current President Nicolas Sarkozy, in an Ipsos poll before the first round, was running behind the Socialist leader Francois Hollande by some 12% points. The gap was much smaller in the actual election. The sad part is that Sarkozy has only himself to blame as he has been tilting to the right – including nasty statements about “immigrants” and other efforts to gather supporters from the extreme right candidacy of racist Marine Le Pen of the National Front. He carried out the same tactics in his first statement after the election results. Le Pen’s forces came in third and the question remains: will we see a turn to the right and its anger coalescing into a viable long term negative political force? 

Hollande, for his part, has also rightly criticized the counterproductive policies of Germany and France in pushing overly harsh austerity economic and financial programs in already hard hit states like Greece, Spain, Ireland, and Italy. He has called on the European Central Bank to support those states directly by buying their bonds and moving towards a policy of growth rather than the stupidity of the present austerity efforts which have only depressed the impacted economies as they implemented the killing depressive strictures forced on them by Merkel and Sarkozy and other “Austrian economic school” right wingers. There is, frankly, a lesson for the American economy and politics in this European struggle and its consequences.

But Hollande had competition on the far-left in Jean-Luc Melenchon of the Left Front, who has energized the left with his more populist vision and his passion. But he did not reach the second round on May 6th, and pundits are predicting his votes will largely go to Hollande in the second round. But Melenchon has galvanized the disenchanted and a fundamental anger of the unfairness of the present French system and society.

The more important question is whether the political changes that we are seeing in Europe are sufficient to change the downward equation which the blind policies of forced austerity have imposed and which have continued and sharpened the “Euro Crisis” because they have so far failed to rejuvenate the EU economy. None of these policies helped those who have been hurt by the excesses of the banks, the right-wing politicians pandering to their paymasters, and the indifference of so many of the rich and powerful to the social ills of their societies.

The other question must be whether there is an alignment of forces and of public support for an agenda which puts growth above austerity as a main but not only way of getting out of the present crisis. But beyond that is whether there is what I will call a “unifying critical mass of social and moral conscious’ that can propel forward not only a more just society but also institutionalize that consensus into effective long-term governance.

That achievement might bring not only a new and different EU, but spur a wider movement to reach out to address our global challenges more effectively and thereby create a more safe, humane, and healthy global environment. It might be nice for America to join such an effort if Americans have the wisdom to elect a president and congress which put balanced growth, fairness, security, and global responsibility in the forefront of its agenda.

By Harry C. Blaney III.

Turkey, The EU and – Oh, Yes – Cyprus

“This half-a-country, this incomplete country will take over the EU Presidency. There will be a half-presidency leading a miserable union.”

The partial country?  Cyprus.  The speaker?  Turkish President Abdullah Gul in remarks to Turkish journalists during his recent official visit to Great Britain, as quoted by Reuters and published in the newspaper Cyprus Mail of November 23.  The Head of State of Turkey, an applicant for EU membership while for thirty-seven years the occupier and colonizer of much of EU member state Cyprus, in the absence of any official correction or contradiction would seem to have dropped the bid and set back hopes for Cypriot reunification.  But, let’s hope not: in politics, as elsewhere, action often speaks louder than words.

European purists, most notably German Chancellor Angela Merkel and French President Nicolas Sarkozy, will welcome Gul’s pronouncement, taking them off the hook for killing Turkish accession to the EU while at the same time justifying their conviction that Turks and their like simply do not belong in the club.  Merkel, Sarkozy and their like, but the two of them in particular, had surely been outraged by Turkish Prime Minister Recep Tayyip Erdogan’s (undated) response to the final question posed by an interviewer from Time magazine (see the October 10 issue) as to whether Turkey no longer planned to join Europe: “We’re still determined, because no leader in the EU will be there forever.  But Turkey is getting stronger as time goes by, and the situation of many European states is quite obvious.”

It is also quite obvious that the principal actors in the multi-faceted drama on stage today are going for sound bites over policy, as often as not for reasons of domestic politics and survival.  Sarkozy was widely quoted as saying the following on October 7, during a visit to Armenia:  “France doesn’t see Turkey in the EU…. Turkey is a kind of bridge between the East and the West.  Being a part of Asia Minor, it has an important role in the world, but that role is not for the EU.”  The intended nail in the coffin, if one were needed, was his public call for Turkish recognition of and apology for the Armenian Genocide of 1915, but he failed to mention the importance of the votes of the Armenian diaspora in France, said to number more than 300,000, when presidential elections are held next Spring.

Sarkozy is not alone, for Merkel and Erdogan/Gul (along with Israeli Prime Minister Binyamin Netanyahu) are playing in large part to home audiences as they seek to prolong their presence on the scene.  What they shout now from center stage may be trumped in the end by those diplomats working hard in the wings (and with no worries about upcoming elections) for peaceful resolutions of potentially dangerous disputes.  As recently as October 12, EU Enlargement Commissioner Stefan Fule, introducing the publication of the latest annual progress report on Turkey’s accession process, spoke calmly but firmly about measures remaining to be addressed by that country in advance of EU membership, and he did not hesitate to speak of Cyprus in several respects.  Likewise, UN Secretary General Ban Ki-moon and Special Advisor on Cyprus Alexander Downer continue to promote talks under UN auspices between the Greek-Cypriot and Turkish-Cypriot communities aimed at a federal solution agreeable to all parties concerned.  In short, while we must be wary of the big words shouted by the leaders, we ought not let their big mouths convince us that progress on several fronts is impossible.  Nevertheless, it was discouraging and scarcely comprehensible to read the eight-page cover story on Erdogan and Turkey in the November 28 edition of Time without finding a single reference to Cyprus – not even when the EU accession topic comes up.

The American role in the 1974 events that led to the long-standing military occupation by Turkish troops of some 40% of EU and UN member Cyprus, discussed here under the heading “Cyprus and National Security” on October 25, has been treated in two articles appearing in the July-August 2011 issue of the Foreign Service Journal (FSJ).  In an excerpt from her forthcoming book, The Dissent Papers: The Voice of Diplomats in the Cold War and Beyond, Hannah Gurman writes that, before the coup launched by the Greek military junta that overthrew the Cypriot Government, State Department Cyprus Desk Officer Thomas Boyatt had warned in official channels of the consequences of US inaction, to wit, that continued passive support of Cypriot rebels would result in an overthrow of the government and give Turkey an excuse to invade the island on behalf of the Turkish-Cypriot minority.  While Gurman does not say so explicitly, it is extremely difficult to imagine that Secretary of State Henry Kissinger was unaware of Boyatt’s views, which cannot have failed to work their way up through the bureaucracy. Nevertheless, Gurman is careless enough to write that Cyprus experts agree that “Kissinger was willfully ignorant of the area’s complex political dynamic” (emphasis added).  In supposed support of this judgment, she quotes former Under Secretary of State George Ball as having written that Kissinger “knew nothing about Cyprus and did not bother to inform himself”, but she does not explain how Ball’s apparent attempt to excuse Kissinger meets the definition of “willfully”, which means nothing other than “deliberately” or “intentionally”.

The second FSJ article is by Boyatt himself, and he leaves no doubt concerning the warnings he had given, with support of fellow officers working on Greek and Turkish affairs:  “The Greek junta was planning to overthrow (Cypriot) President Makarios, notwithstanding their denials of such intent; if the Greek colonels established a puppet regime in Cyprus, the Turkish Army would invade and partition the island; and such an outcome would be disastrous for the United States, for it would destabilize NATO’s eastern flank, giving the Soviets a chance to intervene, and turn the Cyprus problem into a permanent irritant.”  Boyatt goes on to say that he had argued further for confronting the junta and telling them to stay out of Cyprus, but that his recommendations had been ignored.  Kissinger’s public admission thirty years later that Boyatt’s views had not received the attention they deserved, cited by Boyatt in his article, did nothing to relieve his guilt, tarnish his reputation or help the small country he had sold down the river to keep the Turkish generals happy.  Instead, it served only to confirm the sad truism that holds that “old new is no news” and carries no threat for the exposed party no matter how guilty.

Once again, the criminal goes free and the interests of the United States suffer.

Footnote:  A greatly expanded, well-researched and totally convincing account of Kissinger’s absolute responsibility for both the Cyprus events of 1974 and the situation in which that country finds itself in 2011 can be found at the following site: http://hellenicantidote.blogspot.com/2011/04/exposing-kissingers-cyprus-lies.html

By Alan Berlind.

The Crisis of Governance in America and in Europe

Posted from London – Having watched the imbecilities taking place in both America and Europe, it seems we are experiencing a kind of fundamental flaw in governance on both sides of the Atlantic. And the price to be paid is going to be horrific.

In America we have developed an immobilized government due to the absurdness, irresponsibility, and stubbornness of the “crazy” Republicans. The proof of this is a look at the crop of GOP presidential candidates — not a single rational, creditable statesman in the whole lot. Their proposal for “change,” taken as a whole, would be a disaster from an economic, political, and strategic viewpoint. When Americans need the best, the Republicans are scraping the bottom of the barrel.

The Democrats remain defensive and cowered by the assault of the “Tea Party” types, while the right-wing dominated Supreme Court has made sure the rich corporations with their dollars will trump individual hopes and average American citizens on election day. We see a dysfunctional and indeed an absurd second party plus a far right ideological court system willing to hollow out both our constitution and our democracy. The Europeans are looking on in disbelief!

I simply ask anyone: would the framers of our constitution have ever contemplated this absurd concept? Is there a word in our constitution that gives corporations the right of a citizen along with unlimited, anonymous funds to control our politics, including elections?  All this for an inanimate construct whose only purpose is to make money for a few.

Here in Europe, there is almost equal disarray and an unneeded economic and financial crisis, which has reached debacle proportions. The recent crop of European leaders seems now incapable or unwilling of either putting their own national houses in order or growing their economies. Nor do they seem yet able to build a European construct which can collectively save the EU/EURO Zone from financial collapse. Worse they are collectively pushing a disastrous policy of deflation and austerity which will not only bring them down but will also impact most other developed countries outside the region.

The disarray of European leadership is exemplified by the likes of Italy’s Berlusconi.  His recent departure, after bringing his nation to its knees, has necessitated the turning over of governance to a highly qualified “technocrat.”  In France, President Sarkozy is both unpopular and facing a despairing economic outlook and labor unrest with cuts to spending and jobs. In Germany they are seeing a downturn in their growth rate, continued national deficit, and yet they are unwilling under Merkel to agree to a “grand scheme” to empower the European Central Bank and other institutions with sufficient authority and resources to meet any attack on their bonds or credit rating. Yet she still wants some unclear “strengthening” of the Euro Zone and EU. It rests largely in German hands to make the deal that will create stability in the Euro Zone.

Sadly in Britain Prime Minister Cameron has been making contradictory statements, as we noted earlier, about UK relations within the EU. In effect at the same time saying the UK will remain a member of the EU, while also trying to take away its authority and give it back to member states. He even calls himself a European “skeptic” while trying to assert an EU leadership role. The reaction to these statements in Europe by Cameron and his right-wing Chancellor of the Exchequer Osborne was disbelief and anger, which did UK interests no good.

Here in London more and more information is leaking out on how Cameron is cutting social security for the poor, the young and the old, and the unemployed. Quietly he is dismantling environmental protections. According to the Nurses Society his policies are cutting or threatening some 50,000 nurses’ positions.  The ToryLibDerms are changing the ground rules for family assistance, which is being condemned by the Lords Bishops as cruel and unchristian. They are also doing what the Republicans in the U.S. are pushing for, namely a devolution of social support funding in such a way as to cut massively funding for the poor and programs carried out by regional bodies but now paid for by the central government. In short, the Tories and their LibDem coalition partners (a better word would be co-conspirators), are carrying out, in a stealthy way, efforts that will make life worse for the most vulnerable at a time when people are already deeply hurting in Britain.

In keeping with their defense of the rich bankers in The City, the Tories will sell the nationalized bank of Northern Rock at a loss to taxpayers of some 600 million pounds.  It will go to Virgin’s Group controlled by Richard Branson who is a big backer of the right-wing Tories.  Labour MPs have criticized the sale as a loss for taxpayers.

As a result of actions aimed at public servant’s wages, salaries and pensions, the public sector unions are going on strike on November 30th.  The government is now threatening to take their last offer to the unions off the table if they do so, and threatening even more dire actions than they have already announced. While bankers enrich themselves at government expense for their misdeeds the Tory leaders think the middle class and poor should pay.

So as America is facing a new political and economic crisis with the “Super Committee” unable to come to an agreement, the likelihood of a closing down of much of government, a showdown over the 2012 appropriations, and a lack of any significant action on a stimulus package, Europe seems in equal disarray.

The national security implications for each side are clear. A nation or a region that is in decline, where political stalemate is the norm, narrow greedy interests prevail, and the average citizen can only contemplate economic decline or ruin, is not a society that can secure its vital interests nor effectively shape a global community that is safe and dealing with its global challenges. Europe and America together either will fall or grow and time is indeed short to sort out the many problems and act before even more calamity befalls the two regions with much of the world’s resources and global reach.

By Harry C. Blaney III.

Europe Still in Distress, Disarray Despite Changes in Governments

Posted from London – Coming to Europe one gets the impression that for all the reshuffling of heads of government and promises from other key heads of governments to solve the economic crisis, Europe remains in disarray and the future remains uncertain.  Markets plunged, Italian and Spanish bonds’ interest rates rose to historic levels, and there is no consensus amongst the Euro zone governments on a long-term systemic solution. Indeed their policies seem designed to depress their economies and exacerbate recovery.

Among the many uncertainties is whether the new Greek and Italiangovernments will be permitted to carry out the needed reforms in such a way that they do not lead to further depression of their economies. Things do not look good at the moment. Our TV screen was showing a pompous Berlusconi after his fall indicating that he would stay in politics, implying he may come back.  Just what Europe needs at this moment of deep crisis for his nation. At the heart of the European economic crisis is the total inability of the governments to recognize that austerity policies are counterproductive to solving both the debt problem and fixing the ever higher unemployment and stagnant growth.

German Chancellor Angela Merkel’s odd stance has been to both stand against giving the power to the European Central Bank to act as a lender of last resort to governments in distress, while at the same time she called for Europe to build a stronger “political union” to support the Euro. Confusion over German intentions thus remains.  In the end, much of the blame or much of the praise will rest with Merkel and Germany depending on whether the crisis is solved or Europe falls into even greater disarray as it continues its policies of austerity.

Likewise for France’s President Nicolas Sarkozy, whose poll standing has plummeted.  Like other nations, France faces serious debt and growth problems itself and seems for the moment immobilized by the political forces within the French society and government and anger both from the right and the left.  The French economy just grew in the third quarter at the annual rate of 0.4%, while Germany the so-called “strong economy” grew at just 0.5% and the whole Euro zone grew at just 0.2%.  So much for the results of “slash and cut” as a conservative policy for growth.

Prime Minister Cameron in his speech at the City of London’s Lord Mayor’s Banquet, focused on foreign policy especially the economic/financial crisis including the EURO Zone debt issue. The problem with the speech is the lack of acknowledgment of how disastrous his own austerity policy has been for Great Britain and especially for the middle class and the poor. The background of his speech was not pretty, either at home or in Europe.

Cameron tried to separate himself from the generation of UK leaders before him of the post WWII generation; his youth influence was in the post 1989 fall of the Iron Curtain.  His focus seemed narrow, with self-serving generalizations, and it showed no recognition of the crisis being experienced by his people. He made disparaging remarks about the EU while saying the UK would not withdraw from the EU and wanted to influence it by withdrawing some of its powers.  Confusing and unconstructive would be a fair assessment.

As noted, coincidently, at about the time of his speech in the City (London’s “Wall Street”) two government leaders, Cameron and Bloomberg of New York representing the rich, used police force to remove protesters of the “Occupy Wall Street” and “Occupy the City” (outside of St. Paul’s), showing again that the 1% are having their way, and that free speech and the protests of the 99% are being trampled on. None of this will solve the fundamental problems of either side of the Atlantic. As economic conditions get worse one wonders what the impact will be and whether people will feel even stronger that their voice is not being heard.

The resulting instability, loss of productivity, and ever higher unemployment will undermine the capacity of Europe and America to act effectively to deal with the host of challenges we jointly face in an increasingly dangerous and risky world.

More on these events and trends and their implications in the coming days. We welcome your comments.

By Harry C. Blaney III.

Libya: Disquiet and Concerns Approaching the Denouement of the Conflict

We are now seeing the final chapters in the Libyan revolution which are playing out with growing disquiet and concerns about the evolution of a new society and the fledgling government. Observers are now looking closely at indications of the likely way forward. They know it is up to the new government to build a national coalition and bring stability and security to the nation. However, there has been a spate of reports recently about the influence of more extreme Islamic elements trying to gain greater political control. The urgent need to isolate these elements must be high on the National Transitional Council’s agenda along with widening its representation, dampening down tribal rivalries, and disarming civilians.

There is some good news in the advance of rebel forces towards areas controlled by the old Gaddafi regime. Also the new government is starting to get some of the money that is being held abroad.  Further, there are efforts underway to recover the oil infrastructure and exports which will generate significant income to rebuild the nation. As noted here before, the immediate employment of out of work citizens in public works and other projects is vital to stability and cutting back on unrest. However, some observers are seeing splits in the governing council and regional divisions.

During the recent visit of British Prime Minister David Cameron and French President Nicolas Sarkozy to the capital, they received a warm welcome.  They said they would continue to provide military and economic support to the new government. They acknowledged that the fight was not over and Gaddafi was still at large. The visits were efforts by the British and the French to cement ties with both the Libyan people and the new authorities. While they must have hoped for economic cooperation and trade benefits, they said there was “no prior agreement” and disclaimed any desire for “preferences.” My guess, however, is that given the recent history, the coalition partners will likely gain an advantage especially over those who were not supportive like China and Russia or even Germany. But Islamic members of the coalition, like Turkey and the Arab League, are likely to want to participate in new economic relations with the emerging Libya.

But the most important issue is still the composition and the unity of the new government. It is hoped that America will strengthen its diplomatic representation and also establish a strong development assistance effort aimed at not providing money but technical assistance and military and civilian training.  Private investment is another place that America can make a contribution.  The key is to make Libya a model for other countries of the Arab Spring still in their own difficult transitions.

This is also a time of starting to ratchet down somewhat the purely military efforts in the coming weeks and turn more to “nation building.” Some are noting that the visits reflect a key transition in trying to draw a line, reduce high military costs and a kind of “partial completion of mission.” The question is will the NATO nations, including the U.S. blow the opportunity of the good will they have gained?

By Harry C. Blaney III.