Browsing articles in "Europe and Russia"
Jul 19, 2012
Center for Democracy and Civil Society

Should the eurozone debt be mutualised?

This question has been haunting everyone interested in the, well, world, for months now, and it is time to make a decision… at least in the debate promoted by The Economist magazine, which is about to close down. Last I checked, the score was 39% YES and 61% NO. I voted NO, because I think the political implications of mutualising the debt would be far too great to be acceptable to 27 countries. Europe is not America. But I’m happy to reconsider, if someone convinces me it is feasible to have that kind of integration in a stable way.

What do you think? Vote here http://econ.st/NZ8ku1  and let us know.

Other
Jun 19, 2012
Center for Democracy and Civil Society

Who Won in Greece After All

Antonis Samaras, leader of the center-right Greek party New Democracy

So the conservatives won in Greece. Given that this is the second elections in a very short period of time and that the winners of the last one were of the opposite side of the political spectrum, this victory per se can hardly be said to show any sort of trend stemming from the crisis. All it shows is confusion.

Still, the mainstream interpretation is that the forces pushing for austerity were strengthened, and that that is the path to follow.

To many, that is not the conclusion of a sound analysis, but the result of moral imperatives: the sinners must be punished. It doesn’t matter that the chosen path does not solve the fundamental issues, especially around the feasibility of the Euro. It finds someone to blame, regardless of the justice of that, and it points to corrections (never mind that these might be an illusion). For a large part of the public opinion (i.e. voters), that is enough.

Nonetheless, the victory should not be seen as an approval for the forces of austerity. Fear of collapse and threats of removal from the European Union and of the Euro zone are more likely to have been what prompted Greeks to prefer the bitter pill of structural adjustment. But no matter the reason, now the country and its fellow Southern European nations will suffer the consequences.

One of them, speculates the New York Times, may be that “the vote may delay concerted pro-growth steps by central banks and governments around the world, as well as the hard choices within Europe over deeper integration that are likely to prove necessary in the long run”.

For now, though, all of this helps Angela Merkel and the rest of the bosses in Germany. Merkel’s pro-austerity, pro-bail-out stance was becoming isolated, particularly after leftish Francois Hollande took over from Nicolas Sarkozy in France. Unlike Sarkozy, Hollande defends more spending to promote growth, and not more cuts and fiscal austerity. In addition, in the latest G-20 meeting in Los Cabos (Mexico), other countries, including the US, asked Germany to cut its neighbors some slack and at least ease a bit the pressure for immediate cuts. Still, with conservatives in power in Greece, Merkel feels a little more support.

I doubt that it’s what the Greeks want. They are already bearing an enormous burden; they are simply trying to choose the least bad option. Which option is that is not clear for them at this point. It is not even clear if Greece is being “saved” for its own sake or for the sake of others. At this point, what is Greece being saved from exactly? Most projections say that if the Greeks can endure the current suffering, they will be rewarded with more suffering in the future, with even more unemployment in 2-3 years.

It goes without saying that before anything else the Greeks must form a coalition government that lasts for a while –not such a tiny detail, particularly given that all that the last election shows is confusion.

Jun 18, 2012
Center for Democracy and Civil Society

Winners in Greece

A little morning humor. More on this later. (translation below)

 

 

 

 

 

 

 

 

 

 

“Who won the elections in Greece?”

“Germany.”

May 16, 2012
Center for Democracy and Civil Society

When Lightning Strikes

Merkel and Hollande in Berlin

Merkel and Hollande discuss the fate of Europe

If there are such things as signs, this one is unmistakable: the airplane that was taking France’s new president, Francois Hollande, to meet with German Chancellor Angela Merkel and discuss the Greek Disaster (aka “the end of times”) was struck by lightning shortly after it took off and had to return to Paris. Apparently the universe is trying to make things harder for Europe.

Hollande, of course, ignored the universe, got into another plane and headed to Germany, having met Merkel with only one hour of delay. His goal was indeed one that required persistence: to convince his fellow EU leader to focus more on spending, instead of saving, in order to restore order in the Euro zone. He didn’t quite achieve it yet, and the Germans (aka “the key to the safe”) insist on austerity measures, much to the regret of Greeks, Spanish, and others.

As a forced medicine, austerity measures, coming too strictly and too soon, are killing the patient, according to a growing number of economists (and people with good common sense).  Not only that: it might be helping spread the disease, including its political symptoms. Greece is close to game over stage, with the winners of the May 6 elections failing to form a coalition government that could keep the terms of the bailout and the membership of the Euro zone. Meanwhile, European leaders are trying to portray the next Greek elections, scheduled for June 17th, as a referendum on the Euro membership. Greeks overwhelmingly favor sticking with the currency, according to polls, and the rest of Europe hopes that this is translated by a victory of parties more willing to abide by the current rules.

Still, Hollande speaks of stimulating economies (as opposed to imposing cut after cut) as indispensable. The alternative, he says, doesn’t look good so far: Greece’s unemployment is at 24% and the government (when they have one) is far from being able to reduce the deficit to manageable levels. The risk of being forced to print money to pay the bills is rising, and it would make Greece the first to abandon the Euro. Expected shocks stemming from that could make sure it’s not the last.

There is an argument around that the medicine is being applied out of morals. It’s like Europe is making Greece “pay” for the sin of overspending. Germans would argue: “why do we, who have been responsible, have to pay for their mistakes?”. That might even sound fair, but the edge of the abyss is no place to be clinging to moral debates. Greece is falling, and it might take a lot of others with it. Europe should stop being self-righteous and start being practical. We’ll see if Hollande will be able to facilitate that.

Apr 25, 2012
Center for Democracy and Civil Society

Europe x the BRICs

 

Christine Lagarde, french, managing director of the IMF

Not even the threat of an impending Euro-mageddon is enough to tame Europe’s cling to traditional positions of power. The current dispute at the IMF is witness to that. Europeans want the Third World to participate in building collective firewalls (in the form of new funds for bilateral loans) that are obviously meant to keep their own countries afloat; but when reminded of promises to reform the decision making structure at the institution, they tend to change the subject.

 Europe’s collective whining at this year’s IMF and World Bank Spring Meetings, which ended this past weekend in DC, won them US$ 430 billion in extra funds for the firewall. The money is to be made available by the IMF officially for whoever needs it. “It is basically to tell the markets: calm down, we have resources”, an IMF spokesperson told me. Europeans themselves contributed with the largest amount, about US$ 200 billion –which sounds right, if not insufficient. They have the money (well, some of them do) and this is obviously for their own sake. Japan gave US$ 60 billion; the UK, Korea and Saudi Arabia, US$ 15 billion each. BRIC countries (Brazil, Russia, India and China), meanwhile, are being pressured to give at least as much as Sweden and Switzerland (US$ 10 billion), and billions more than Australia, Norway or Denmark. The US did not give a cent.

Not so fast, they said.  Before opening their wallets, they wanted the big ones to move on with the implementation of the reform of the voting quotas at the IMF, which was agreed to in 2010 but remains just a promise. Not only that, they want to discuss more reforms. The BRICs thus decided to act as if they were a united group (they keep trying…) and declared they will join the firewall efforts, but before announcing the size of their contribution, Europe must commit to the reform of the quotas.

 It is not an unreasonable demand. But, unfortunately, it does not seem to get them very far.

First of all, the message came out clumsy and it only conveyed once again the confusion that is characteristic of the group. First Russia stated that it would contribute with between US$ 10 billion and US$ 20 billion, then the Russian Finance minister took it back and said no minimum amount was on the table just yet. Brazil, as usual, complained to everybody about the unfairness of the international system and from the start refused to talk numbers. India gave an interview saying that there was no conditionality whatsoever to the collaboration; it was not about the reform, it was just that they needed to discuss the matter with their domestic audiences first. And China didn’t say much.

Christine Lagarde, managing director of the IMF, was clearly displeased. She made ironic comments during press conferences and rolled her eyes when asked about the BRICs. I was covering the Spring Meetings this past weekend and asked her what did the Brics tell the IMF after all, since they each said a different thing to the public. She just smiled and replied to me: “Of course. It is in their interest to create as much confusion as possible. What they told me is clearly something that they do not want the press to know.” Lagarde is teasing, implying that Brazil, Russia, India and China did talk numbers with the institution, but want to pretend they are the tough guys now. Will it work?

Germany’s response to a question about the quota reform shows the Bric’s blackmailing attempt will be difficult. Berlin will keep its end of the bargain, they said. The agreements of 2010 will hold. But as for going further, like the BRICs want… the best answer the Germans could give was to say they “acknowledge” the desire. And then, they changed the subject.

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Founded in 2004, Democracy and Society is a biannual print journal published by the Center for Democracy and Civil Society at Georgetown University. The D&S Blog provides web-only content, including special reports and investigative series, on issues relating to democracy and development.

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