Category Archives: Europe

Turkey Haunted by Hubris

Turkey Haunted by Hubris

Dispatches From The Edge

Conn Hallinan

Nov. 1, 2012

Two years ago Turkey was on its way to being a player in Central Asia, a major power broker in the Middle East, and a force in international politics. It had stepped in to avoid a major escalation of the 2008 war between Georgia and Russia by blocking U.S. ships from entering the Black Sea, made peace with its regional rivals, and, along with Brazil, made a serious stab at a peaceful resolution of the Iran nuclear crisis.

Today it is exchanging artillery rounds with Syria. Its relations with Iraq have deteriorated to the point that Baghdad has declared Ankara a “hostile state.” It picked a fight with Russia by forcing down a Syrian passenger plane and accusing Moscow of sending arms to the regime of Bashar al-Assad. It angered Iran by agreeing to host a U.S. anti-missile system (a step which won Turkey no friends in Moscow either). Its war with its Kurdish minority has escalated sharply.

What happened? The wages of religious solidarity? Ottoman de’je vu?

There is some truth in each of those suggestions, but Turkey’s diplomatic sea change has less to do with the Koran and memories of empire than with Illusions and hubris. It is a combination that is hardly rare in the Middle East, and one that now promises to upend years of careful diplomacy, accelerate unrest in the region, and drive Turkey into an alliance with countries whose internal fragility should give the Turks pause.

If there is a ghost from the past in all this, it is a growing alliance between Turkey and Egypt.

Population-wise, the two countries are among the largest in the region, and both have industrial bases in an area of the world where industry was actively discouraged by a century of colonial overlords (the Turks among them). Ankara recently offered $2 billion in aid to cash-strapped Egypt, and both countries have moderate Islamic governments. Cairo and Ankara have also supported the overthrow of the Assad regime.

“Apparently now Egypt is Turkey’s closest partner in the Middle East,” Gamel Soltan of American University in Cairo told the New York Times. But while Egypt was once the Ottoman’s wealthiest provinces, 2012 is not the world of sultans and pashas, and, in this case, old memories may well be a trap.

Egypt is deeply mired in poverty and inequality. Indeed, it was as much the economic crisis gripping the region as issues of democracy and freedom that filled Tahrir Square. Cairo is in serious debt and preparing a round of austerity measures that will sharpen that inequality. The government of President Mohamed Morsi announced it will slice gas subsidies, which will fall particularly hard on the poor, especially given a jobless rate of over 12 percent and youth unemployment running at more than double that.

At first glance, both governments have a lot in common, particularly because Turkey’s Justice and Development Party (AKP) and Egypt’s Muslim Brotherhood are considered “moderately” Islamic. But many in the Brotherhood consider the AKP and Turkish Prime Minister Recep Tayyip Erdogan far too “moderate”—in Turkey it is still illegal to wear a head scarf if you run for public office or work in a government office.   While the West considers Morsi’s and Erdogan’s government “Islamic,” some of the jihadists groups Cairo and Ankara are aiding in their efforts to overthrow the Assad regime in Syria consider the Egyptian and Turkish government little more than non-believers or apostates.  As Middle East expert Robert Fisk puts it, the jihadists are a scorpion that might, in the end, sting them both, much as the Taliban has done to its Pakistani sponsors.

Turkey apparently hopes to construct a triangle among Ankara, Cairo, and the wealthy oil monarchies of the Gulf Cooperation Council—Saudi Arabia, Qatar, Kuwait, Bahrain, Oman, and the United Arab Emirates (Jordan and Morocco, two other monarchies, have been asked to join). The combination of population, industry, and wealth, goes the thinking, would allow that alliance to dominate the region.

The Council does have enormous wealth at its disposal, but how stable are autocratic monarchies in the wave of the democratic aspirations raised by the Arab Spring? Bahrain’s king rules through the force of the Saudi Army. Saudi Arabia itself is struggling to provide jobs and housing for its growing population, while weighed down by inequality, high unemployment, rampant corruption, and a restive Shia minority in its eastern provinces. Jordan’s monarch is wrestling with an economic crisis and a political opposition that is pressuring king Abdullah II for a constitutional monarchy.

How this new alliance will affect the Palestinians is not clear. Turkey had a falling out with Israel in 2009, and Egypt and Qatar have been sharply critical of Tel Aviv’s treatment of the Palestinians. So far, however, it appears the Islamic group Hamas in Gaza will benefit more than the secular Palestinian National Authority in the West Bank.

With the exception of Bahrain, all the countries involved have large Sunni majorities that, at first glance, would put them on the same page religiously. But most the Gulf monarchs are aligned with radical Islamic groups, some of which have morphed into al-Qaeda-like organizations that have destabilized countries from Pakistan to Iraq. On occasion, these groups have turned on their benefactors, as Osama bin Laden did on Saudi Arabia.

Such Islamic groups are increasingly active in the Syrian civil war, where Turkey finds itself in a very similar role to the one played by Pakistan during the 1979-89 Soviet-Afghan war. Some of the groups Pakistan nurtured during those years have now turned on their patrons. Will Turkey become the next Pakistan? In an interview with the Financial Times, one Syrian insurgent said that many of the rebels were stockpiling ammunition for “after the revolution.”

Bulent Alizira of the Center for Strategic and International Studies told the Financial Times that Turkey is in danger of becoming “like Pakistan, which became the forward base for the Afghan rebels. If that were to happen, it could confront all the pressures that Pakistan faced and from which it has never recovered.”

And why would the Erdogan government pick a fight with Russia? Russia is a major trading partner, and Turkey is keen on establishing good relations with the Shanghai Cooperation Organization (SCO) founded by Russia and China in 2001. The organization includes most of the countries in Central Asia, plus observers from India, Pakistan, Iran, and Afghanistan. The SCO accounts for 75 percent of the world’s energy resources and population, and coordinates everything from trade to oil and gas pipelines. Why would Ankara irritate one of the major players in the SCO?

Might it be pique at Moscow for blocking more aggressive measures by the UN Security Council to intervene in the Syrian civil war?  Russia, along with China, has consistently called for a political resolution to the Syria crisis, while Turkey has pursued a strategy of forcible regime change.  Erdogan has a reputation for arrogance and letting his temper get the best of him.

“His personal ambitions and overweening certainties may be eclipsing his judgment,” Morton Abramowitz of the Century Foundation told UPI, “and affecting Turkish interests.” Abramowitz served in the Carter and Reagan administrations and was appointed ambassador to Turkey from 1989 to 1991. He is also a director at the National Endowment for Democracy.

Relations between Turkey and Iran have also cooled, in part because of the U.S. anti-missile system, but also because Ankara is trying to overthrow one of Iran’s few allies in the region. In any case, backing Sunni jihadists against the Alawite Assad regime is hardly going to go down well in Shia Iran, or for that matter, in Shia Iraq. The Alawites are a branch of Shism.

Why, too would Turkey alienate major trading partners like Iran and Iraq? It is possible that the wealthy monarchies of the Gulf—who are anti-Shia and view Iran as their greatest threat— made Ankara an offer it can’t refuse. Whether the monarchies can deliver in the long run is another matter.

In the meantime, the Syrian war has unleashed the furies.

*Car bombs have made their appearance one again in Lebanon.

*The Kurds have bloodied the Turkish Army.

*Hundreds of thousands of refugees have poured out of Syria, and the fighting inside the country is escalating.

*Anti-aircraft missiles—the Russian SAM-7, or Strela, most likely “liberated” during the Libya war—have made an appearance. The hand-fired missiles may indeed discomfort Syrian aircraft, but if they get into the hands of the Kurds, Turkish helicopters will be in trouble as well, as will any number of other air forces, from Lebanon to Jordan. A Strela was fired at an Israeli aircraft in the Gaza Strip Oct. 16.

Turkey’s role in the Syrian civil war finds little resonance among average Turks. Some 56 percent disagree with the policy, and 66 percent oppose allowing Syrian refugees into the country.

“We are at a very critical juncture,” journalist Melih Asik told the New York Times. “We are not only facing Syria, but Iran, Iraq, Russia and China. Behind us we have nothing but the provocative stance and empty promises of the US.”

Four years ago Turkey set out to build strong ties with other countries in the region—“zero problems with the neighbors”—and decrease its dependence on the US. Today those policy goals are in shambles. But that is where illusion and hubris lead.

—30—

7 Comments

Filed under Asia, Central Asia, Europe, Iran, Iraq, Lebanon, Yemen, Etc, Middle East, Syria

Syria & The Phantom

Syria & The Phantom

Dispatches From The Edge

Conn Hallinan

June 26, 2012

What was that Turkish F-4 Phantom II up to when the Syrians shot it down?

Ankara said the plane strayed into Syrian airspace, but quickly left and was over international waters when it was attacked, a simple case of carelessness on the part of the Turkish pilot that Syrian paranoia turned deadly.

But the Phantom—eyewitnesses told Turkish television that there were two aircraft, but there is no official confirmation of that observation—was hardly on a Sunday outing. According to the Financial Times, Turkey’s Foreign Minister, Ahmet Davutoglu, told the newspaper “the jet was on a test and training mission focused on Turkey’s radar defense, rather than Syria.”

Translation: the F-4 was “lighting up” a radar net. It is a common—if dangerous and illegal—tactic that allows one to probe an opponent’s radar system. Most combat radar is kept in a passive mode to prevent a potential enemy from mapping out weaknesses or blind spots that can be useful in the advent of an attack. The probes also give you valuable information on how to neutralize anti-aircraft guns and ground to air missiles.

“Lighting up” radar was what the US Navy EP-3E Aries II was doing near China’s Hainan Island when it collided with a Chinese interceptor in 2001. Nations normally take a very dim view of warplanes entering their air space, particularly if there is tension between the countries involved.

As a warplane, the F-4 is a pretty ancient. It was introduced back in 1960, and became the mainstay of the U.S. air war in Southeast Asia. In its day it was a highly capable aircraft, able to hold its own against interceptors like the MIG-21 in a dogfight, and could also carry heavy bomb payloads. It was also cheap and relatively trouble free, unlike the current crop of US high performance aircraft.

It is doubtful that Syria indentified exactly what the Turkish plane was, just that an unidentified warplane, flying low—generally the altitude one takes when trying to avoid radar—was in Syrian airspace. Paranoia? In 2007 Israeli warplanes—US-made F-16s, not Phantoms—slipped through Syria’s radar net and bombed a suspected nuclear reactor.

Even if Syria identified the plane as a Phantom, they could have taken it for an Israeli craft. Israel was the number one foreign user of F-4s, although they retired them in 2004. Indeed, the Turkish Phantom might even have begun life as an Israeli warplane.

If the Syrians are on hair-trigger alert, one can hardly blame them. The US, the European Union (EU), and NATO openly admit they are gunning to bring down the Assad regime.  Turkey is actively aiding the Free Syrian Army organize cross-border raids into Syria, and it is helping Saudi Arabia and Qatar supply arms and ammunition to the rebels.

For Turkey to send a warplane into Syrian airspace—or even near the Syrian border—on a radar mapping expedition at this moment was either remarkably provocative or stone stupid. The explanation could be more sinister, however.

NATO has established a command and control center in Iskenderun, Turkey, near the Syrian border, that is training and organizing the Free Syrian Army. It surely has a sophisticated setup for tapping into Syrian electronic transmissions and, of course, radar networks. If NATO eventually decides to directly intervene in Syria, the alliance will need those electronic maps. NATO aircraft easily overwhelmed Libya’s anti-aircraft systems, but Syria’s are considerably more sophisticated and dangerous.

There are a number of things about the incident that have yet to be explained. Turkey says the F-4 was 13 nautical miles from Syria when it was attacked—which would put it in international waters—but it crashed in Syrian waters. Damascus claims the plane came down less than a mile from the Syrian coast.

Turkey says one of its search planes was shot at as well—the Syrians deny this—and has called for a meeting of its NATO allies. So far, Ankara is only talking about invoking Article Four of the NATO treaty, not Article Five. Four allows for “consultations”; Five would open up the possibility of an armed response.

A thorough investigation of the incident seems in order, although Turkey’s Davutoglu says, “No matter how the downed Turkish jet saga unfolds…we will always stand by the Syrian people until the advent of a democratic regime there.” In short, regardless of what happened, Turkey will continue to pursue regime change in Damascus.

The Assad regime’s heavy-handed approach to its opponents played a major role in sparking the current uprising, but the default position of regime change by the EU and NATO has turned this into a fight to the death. Assad is broadly unpopular, but not universally so, and the support of the regime is not limited to his own Islamic sect, the Alawites, or other minorities, like the Christians.

Nor is all of the opposition a paragon of democratic freethinking. The heavy role played by Saudi Arabia and Qatar in supplying arms and money to the rebels, means the deeply conservative Salafist sect of Islam has a major presence in the resistance. This is exactly how the Afghan mujahedeen mutated into the Taliban and al-Qaeda.

The demand for regime change by the US, the EU, and NATO torpedoed the United Nations effort for a diplomatic solution. The Assad regime had no stake in a peaceful resolution, since it would mean its ouster in any case. And the opposition knew it need not respect a ceasefire, since everyone who supports them supports regime change.

It was into this situation that Turkey flew an F-4 Phantom through Syrian airspace. Exactly what did Ankara think Syria would do? On the other hand, maybe it knew exactly what Syria would do.

Conn Hallinan can be read at dispatchesfromtheedgeblog.wordpress.com and middleempierseries.wordpress.com

—30—

55 Comments

Filed under Europe, FPIF Blogs, Middle East, Military, Syria

Greed & the Pain in Spain

Greed & the Pain in Spain

Dispatches From the Edge

June 14, 2012

Nobel Laureate economist Joseph Stiglitz characterizes the Spanish bank bailout as “voodoo economics” that is certain “to “fail.” New York Times economic analyst Andrew Ross Sorkin agrees: “By now it should be apparent that the bailout has failed—or at least on its way to failing.” And columnist and Nobel Prize-winning economist Paul Krugman bemoans that Europe (and the U.S.) “are repeating ancient mistakes” and asks, “why does no one learn from them?”

Indeed, at first glance, the European Union’s response to the economic chaos gripping the continent does seem a combination of profound delusion, and what British a reporter called “sado-monetarism”—endless cutbacks, savage austerity, and widespread layoffs.

But whether something “works” or not depends on what you do for a living.

If you work at a regular job, you are in deep trouble. Spanish unemployment is at 25 percent—much higher in the country’s southern regions—and 50 percent among young people. In one way or other, those figures—albeit not quite as high—are replicated across the Euro Zone, particularly in those countries that have sipped from Circe’s bailout cup: Ireland, Portugal, and Greece.

But if you are Josef Ackermann heading up the Deutsche Bank, you earned an 8 million Euro bonus in 2012, because you successfully manipulated the past four years of economic meltdown to make the bank bigger and more powerful than it was before the 2008 crash. In 2009, when people were losing their jobs, their homes, and their pensions, Deutsche Bank’s profits soared 67 percent, eventually raking in almost 8  billion Euros for 2011. The bank took a hit in 2012, but the Spanish bailout will help recoup Deutsche Bank’s losses from its gambling spree in Spanish real estate.

And, just in case you thought irony was dead, it was the Spanish housing bubble that tanked that country’s economy—at the time Madrid’s debt was among the lowest in the Euro Zone—and German banks (as well as Dutch, French, British and Austrian) financed that bubble. German Banks also financed the real estate bubble that crashed Ireland’s economy. Some 60 percent of Deutsche Bank’s income is foreign based.

Consider this figure: in 1997 real estate loans in Ireland were 5 billion Euros. By 2007 they were 96.2 billion Euros, a jump of 1730 percent. Real estate prices rose 500 percent, the same amount that Spanish housing prices increased. The banks didn’t know they were pumping up a bubble?  Of course they knew, but they were making money hand over fist.

When the American financial industry self-destructed in 2008, the Irish and Spanish bubbles popped, and who got the bill? Irish taxpayers shelled out $30 billion to bail out the Anglo-Irish Bank—essentially the country’s total tax revenues for 2009—and in return got a 15 percent unemployment rate, huge cuts in the minimum wage, pension reductions, and social service cutbacks.  Spain is headed in the same direction.

As Spanish economist and London School of Economics professor Luis Garicano told the New York Times, “Unfortunately, Spain did not manage to reach one of its main goals in the negotiations [over the bailout], which was to have Europe bear part of the risk of rescuing the financial sector, without letting it fall instead directly onto the shoulders of the Spanish taxpayers.”

Garicano went on to complain, “Those who lent to our financial system were the banks and the insurance companies of Northern Europe, which should bear the consequences of these decisions.”

But of course they will not. Instead, the banks got to go to the casino, gamble other people’s money, and get repaid for their losses. That’s sweet work if you can get it.

However, the “sado-monetarism” strategy is about more than just bailing out the banks at the expense of the vast majority of European taxpayers. It cloaks its long-term designs in coded language: “rigid labor market,” “internal devaluation,” “pension reform,” “common budgetary process,” “political union.”

A quick translation.

“Rigid labor market” means getting rid of contracts that guarantee decent wages, working conditions and benefits, all won through a long process of negotiations and industrial action. As the New York Times put it, the current rightwing Spanish government is attempting to “loosen collective bargaining agreements.”

The drive to scrap union contracts is coupled with “internal devaluation,” which, as Krugman points out, “basically means cutting wages.” If the working class can be forced to accept lower wages and slimmer benefits—and there is no better disciplinarian in these regards than a high unemployment rate—profits will go up. Sure, the vast majority will be poorer, but not the people who run Deutsche Bank.

“Pension reform” simply means impoverishing old people, who had nothing to do with the real estate bubbles that brought down Ireland and Spain. But again, someone has to sacrifice, and old people don’t have all that much time left anyhow.

Oh, for ice floes to put them on.

“Common budgetary process” and “political union” means giving up national sovereignty in the service of keeping the banks solvent—in essence, the end of democracy on the continent. People could then elect any one they pleased, but no national government would have any say over economic policy. Want to do a bit of pump priming to get the jobless rate down and tax revenues up? Nope. But feel free to paint park benches any color you like.

The 100 billion Euro ($125 billion) Spanish bailout will fail for the average Spaniard, as bailouts have already failed the Irish, Portuguese and Greeks, and it will lock Spain into generations of debt. Italy is next (not counting the small fry like Cyprus and several Eastern European countries that may fall before Rome is finally sacked). The Euro Zone’s economies are predicted to contract 0.1 percent for all of 2012, and the jobless rate for the 17-country bloc is 11 percent, higher than at anytime since the Euro was established in 1999.

Spain’s right-wing prime minister, Mariana Rajoy, has tried to argue that the bailout was not as onerous as those imposed on Ireland, Portugal and Greece, but the Germans soon set him straight: “There will be a troika [the European Union, European Central Bank, and International Monetary Fund] and it will make sure the program is being implemented,” German Finance Minister Wolfgang Schaube told the Financial Times.

It is not unlikely that the Euro will fall sometime in the next year, but of course the debts will remain. The dead hand of the past will lie on the brow of the living for a long, long time to come.

Financier George Soros puts much of the blame for the current crisis on Germany—indeed, he accuses Chancellor Angela Merkel of trying to establish a “German Empire”—but that is simplistic. Germany has certainly led the “sado-monetarian” charge, but this strategy is not just about unleashing the austerity Panzers to establish a Fourth Reich. All over the world, capital is on the march, with the goal of rolling back the social programs of the post-World War II period and returning to the Gilded Age when the rich did pretty much as they pleased.

Weakening unions is central to this, as is privatizing everything capital can get its hands on, and the economic crisis is the perfect cover to try an accomplish this. For a fascinating analogy, pick up Indian journalist P. Sainath’s brilliant “Everyone Loves A Good Drought” that exposed how wealthy landlords in India manipulated a natural crisis to increase their grip over agriculture.

Former Deutsche Bank head Ackermann recently prattled on about the “social time bomb” of economic inequality, but so far he has not offered to share his 8.8 million Euro bonus. In the meantime, according to the International Labor Organization, youth global unemployment will reach 12.7 percent this year and stay there for at least four years, creating a “lost generation” of workers.

So, the answer to Krugman’s question, “why are they repeating ancient mistakes?”

Because they are making out like bandits.

–30–

10 Comments

Filed under Europe, FPIF Blogs

Latin America Delivers A Swift Kick

Latin America Delivers A Swift Kick

Dispatches From The Edge

March 30, 2012

On one level, April’s hemispheric summit meeting was an old fashioned butt kicking for Washington’s policies in the region. The White House found itself virtually alone—Dudley Do Right Canada its sole ally—on everything from Cuba to the war on drugs. But the differences go deeper than the exclusion of Havana and the growing body count in Washington’s failed anti-narcotics strategy. They reflect profound disagreements on how to build economies, confront inequity, and reflect a new balance of power in world affairs.

The backdrop for the summit is anger in Latin America over the failure of the U.S. and Europe to stimulate their economies, all the while pursuing policies that have flooded the region with money—a “ monetary tsunami” in the words of Brazilian President Dilma Rousseff—driving up the value of southern hemisphere currencies and strangling local industries.

After meeting last month with President Obama, Rousseff said she told him of Brazil’s “concern with the expansionary monetary policies of the rich countries…leading to the depreciation of developed countries currencies and compromising growth among emerging economies.”

While Latin American economies are in better shape than those in Europe and the U.S., the recession dogging the latter areas—plus the cooling of the Chinese economy—has slowed growth throughout much of Latin America. Brazil’s most recent figures indicate a stalled economy, which could have an impact on efforts by the Rousseff government to raise living standards and narrow what was once the world’s biggest gap between rich and poor.

According to the Getulio Vargas Foundation Brazil has lifted 33 million out of extreme poverty since 2003 and, out of a population of 190 million, has created a relatively well-paid workforce of some 105.5 million. In contrast to the U.S. and Europe, where the wealth gap is accelerating, income for the poorest 50 percent of Brazilians has risen 68 percent, while for the top 10 percent, it has grown only 10 percent.

This growth has come about because most countries in Latin America reject the economic model pushed by Washington and the European Union: free trade, financial deregulation, and deep austerity.

Argentina is the poster child for the region’s rejection of the so-called “Washington consensus.” Throughout much of the ‘90s, a deeply indebted Argentina followed the strictures of the International Monetary Fund (IMF), slashing government spending and instituting a suffocating austerity. The result was a “debt trap”: cutbacks increased unemployment, which dampened tax revenues, which required yet more cutbacks, and more unemployment. In the end, debts went up. From 1998 to 2002, Argentina’s economy shrank 20 percent. By the time Buenos Aires finally said “enough” and defaulted on its $100 billion sovereign debt, half of its 35 million people were below the poverty line.

Argentina reversed course and primed the economy with government spending on housing, highways and education. It also subsidized 1.9 million low-income families, which cut poverty in half. Since 2002, the economy has grown at an average rate of 6 percent a year, and joblessness has fallen from 20 percent to 8 percent.

Brazil has followed a similar strategy that is now threatened by the fiscal and monetary policies of the U.S. and Europe. Those policies have caused the value of Brazil’s currency, the real, to grow, which prices Brazilian manufactured goods out of the international market.

“There is concern in South America about deindustrialization,” says Alicia Barcena of the UN Economic Commission for Latin America. “Therefore some countries are taking measures to support their productive sectors.” While the Obama Administration calls this support “protectionism,” Brazilian Finance Minister Guido Mantega says, “The measures we are using are to defend ourselves.”

There are other issues Latin Americans are unhappy about that never made it into U.S. media accounts on the summit, in particular the make-up of the permanent members of the United Nations Security Council that Brazil—along with India and South Africa—would like to join.

As former Brazilian President Luiz Lula da Silva told the African Union summit last July, “It isn’t possible that the African continent, with 53 countries, has no permanent representation in the Security Council. It isn’t possible that Latin America with its 400 million inhabitants does not have permanent representation. Five countries decide what to do, and how to do it.”

The five permanent members of the Security Council are the U.S., Britain, France, Russia, and China.

While the U.S. has endorsed India’s bid—in large part because it is wooing New Delhi to join its anti-China coalition—Washington has been consciously silent on Brazil’s bid.  Indeed,  United Nations U.S. representative Susan Rice has been sharply critical of Brazil, India and South Africa for not supporting intervention in Syria. “We have learned a lot [about these three countries] and frankly, not all of it encouraging.” The message is clear: back us and we will think about it.

The summit was particularly critical of the Obama administration around the exclusion of Cuba, causing the President to turn positively peevish. “Sometimes I feel…we’re caught in a time warp, going back to the 1950s and gunboat diplomacy and Yankees and the Cold War.”

But from Latin America’s point of view, by maintaining a half-century-old blockade, it is the U.S. who seems locked into the world of the Cold War. And there are, indeed, some worries about “gun boats,” specifically those that make up the newly re-constituted U.S. Fourth Fleet, mothballed in 1950 and revived by the Bush Administration. The U.S. has also recently established military bases in Colombia and Central America.

The Brazilians are particularly nervous about the security of their newly found offshore oil deposits, and the head of the Brazilian Navy, Admiral Luiz Umberto de Mendonca, is pressing Brasilia for surface ships and submarines.

Testifying before the Brazilian House of Representatives,  Simon Rosental of the prestigious Escuela Superior de Guerra (ESG) institute warned that “The world has known oil reserves that will only last 25 years and in the United States, only for the next ten years.”

It may be a bit of a stretch to imagine the U.S. actually threatening Brazil’s offshore oil deposits, but Latin Americans can hardly be blamed if they are a tad paranoid about the Colossus of the North. For the past 100 years the U.S. has overthrown governments from Guatemala to Chile, and supported military juntas throughout the region. Brazil only recently emerged from its own U.S.-backed dictatorship.

“South America,” says Moniz Banderia of the ESG, “is really trying to define its own identity, to differentiate itself from the United States, in opposition to its domination, which is evident in the creation of UANSUR [Union of South American Nations] and the South American Defense Council.”

UNASUR was established in 2008 and includes all 12 South American nations, plus observers from Panama and Mexico.

The Defense Council’s Action Plan 2012 aims to integrate the militaries of the region, establish a “peace zone” on the continent, and create a space agency, an essential step for launching satellites.

Certainly issues like Cuba, the war on drugs, and the tensions over Britain’s claim on the Malvinas/Falkland Islands are areas of friction between the U.S., Europe and South America. But it is in the realm of economics, poverty alleviation, and independent foreign policy that the differences are sharp.

South Americans tried the austerity model and found it wanting. They have also seen the U.S. and NATO spark wars in Afghanistan, Iraq, and Libya, and they are deeply suspicious of policy of “humanitarian intervention” in places like Syria because they don’t trust the motives behind it. Members of the BRIC countries, made up of Brazil, South Africa, India, Russia, and China, share those suspicions.

“There’s almost a third-world sense, a post-colonial sense,” says Mark Quarterman of the Center for Strategic and International Studies, “that they were meddled in, in ways that didn’t rebound to their benefit, and now the same countries are claiming humanitarian reasons for meddling.”

Thus in Libya, the UN enforced an arms boycott and an oil embargo on the Qaddafi regime, while the French supplied arms to the rebels and Qatar handled rebel oil sales. Brazil and other BRIC nations see a similar pattern in Syria. In the meantime, the U.S. and Europe are conspicuously silent on oil-rich Bahrain’s suppression of its Shiite majority and the lack of democracy in the monarchy-dominated Persian Gulf states.

So far the Obama Administration has responded to South America’s growing independence by increasing the U.S. military footprint in the region and acting churlish. While the leaders of India and South Korea got formal state affairs, the U.S. President gave Rousseff a two-hour meeting. “Obama could have taken her to dinner,” one Brazilian official complained to The Guardian (UK) “or to the Kennedy Center.”

But Latin Americans no longer pay as much mind to the atmosphere in Washington as they used to. They are too busy confronting poverty and underdevelopment, forging a multi-polar world in which the U.S. is looking increasingly out of touch.

—30—

5 Comments

Filed under Europe, FPIF Blogs, Latin America

Ireland’s Debt and the Heart of St. O’Toole

Ireland’s Debt & the Heart of St. O’Toole

Dispatches From The Edge

Conn Hallinan

March 17, 2012

Someone has pinched the heart of St. Lawrence O’Toole, and thereby hangs a typical Irish tale filled with metaphors, parallels, and some pretty serious weirdness.

Who done it? The suspects are many and varied.

Could the heist from Dublin’s Christ Church Cathedral have been engineered by the infamous “troika” of the European Commission, the European Bank, and the International Monetary Fund?  Seems like a stretch, but consider the following: O’Toole—patron saint of Dublin—was, according to the Catholic Church, famous for practicing “the greatest austerity.” Lawrence liked to wear a hair shirt underneath his Episcopal gowns and spent 40 days in a cave each year.

That is a point of view the troika can respect. They have overseen a massive austerity program in Ireland that has strangled the economy, cut wages 22 percent, slashed education, health care, and public transport, raised taxes and fees, and driven the jobless rate up to 15percent—30% if you are young. At this rate many Irish will soon be living in caves, and while hair shirts may be uncomfortable, they are warm.

There are other suspects as well. For instance, St. O’Toole was friendly with the Norman/English King Henry II, who conquered the island in 1171. The Irish are not enamored of Henry II, indeed most of them did their level best to drive the bastard into the sea. Not Lawrence. He welcomed Henry to Dublin and, according to the Church, “Paid him due deference.”

So “deference” establishes yet another suspect: the current Fine Gael/Labor ruling coalition. Fine Gael leader and Irish Taoiseach (Prime Minister) Enda Kenny has already signed the new European Treaty, but was forced to put it up for a public referendum at home (no other EU county is being allowed to vote “yea” or “nay”). Kenny is pressing for a “yes” vote, and Labor’s Tánaiste Eamon Gilmore argues that a “yes” vote would be a “vote for economic stability and a vote for economic recovery.”

The Treaty will not only continue the austerity program, it will move decision-making to EU headquarters in Brussels. This means that governments will be powerless when it comes to the economy. Think “Model United Nations” and lots of earnest high school students.

Who will make these decisions? Good question. Well, it turns out that a committee of the German Bundestag debated the Irish austerity proposals before the Dublin government even got a chance to look at them. How did that happen? Again, good question, but no answer yet.

Maybe German Chancellor Andrea Merkel lifted O’Toole’s heart. She certainly has a motive: Merkel is leading the “austerity is good for you” charge, a stance that has battered economies from Spain to Greece. In any case, the Irish are already suspicious of the German chancellor. An anti-austerity demonstration outside the Dail, Ireland’s parliament, featured a poster calling government ministers “Angela’s Asses.”

Much of the economic crisis in Europe—and virtually all of it in Ireland— is due to the out-of-control speculation by German banks, along with the Dutch, Austrian, and French financial institutions.  “Yet it is the working people of Ireland and Europe who are being asked to pay the price,” argues Des Dalton of Sinn Fein. It appears that the Germans have discovered that one does not need Panzer divisions to conquer Europe, just bankers and compliant governments.

“Compliant,” however, has run into some difficulties in Ireland, a place where “difficulty” is a very common noun. On Mar. 2, Sinn Fein President Jerry Adams trekked out to Castlebar in the west of Ireland to resurrect the ghost of Michael Davitt, founder of the Land League and leader of the 1878 Land War (there was an earlier one from 1761 to 1784, but more on that later). Adams told the Mayo County crowd “The Irish people cannot afford this treaty.”

The Castlebar symbolism was about as heavy as you can get. Davitt, along with the great Irish Parliamentarian Charles Stewart Parnell, launched the land war from that city, calling up the words of the great revolutionary, James Fintan Lalor: “I hold and maintain that the entire soil of a country belongs by right to the entire people of that country.”

These days that is not a popular sentiment in most European capitals, where governments are shedding public ownership in everything from airlines to energy production. The Irish government is trying to sell off several lucrative holdings, including Aer Lingus, Ireland’s natural gas company, and parts of its Electricity Supply Board. The state’s forestry will be sold as well. “It is the depth of treachery to sell billions of Euros worth of State assets to pay bad gambling debts,” Socialist Party member Joe Higgins said in the Dail.

The land wars were a reaction to efforts by the English to apply to Ireland the Enclosure Acts, a policy that sold “common land” to private landowners and forced the rural population of England, Scotland and Wales into the hellishness of industrial Manchester, Birmingham, Glasgow and Liverpool.

As Laura Nader and Ugo Mattei maintain in their book “Plunder: When the rule of law is illegal,” what is currently happening in Ireland (and all over Europe) is a 21st century version of the Enclosure Acts. The last vestiges of public ownership are being systematically auctioned to the highest bidder, and the concept of “the common good” is fading like the ghost of providence.

But not without a fight.

While Adams was resurrecting the spirit of Michael Davitt, demonstrators were besieging Parliaments in Greece, Spain and Romania.

Ireland rejected two previous European treaties, only to pass them in a second round of voting. However, under the new rules, it no longer has veto power. If 12 out of the 17 Euro Zone countries endorse—pretty much considered a slam-dunk—then the new treaty goes into effect.

A number of commentators are saying that the 12 country threshold makes the Irish referendum irrelevant, but a “no” vote will be a blow to the Euro currency, and it might eventually encourage similar “no” votes in other countries.  In that sense, the Irish tail could end up wagging the European dog.

Since Irish stories always include parallels, there is certainly one to be made between the first land war and the current debt crisis. The 1761 effort by English landlords to apply the Enclosure Acts to Ireland ignited resistance, first in Limerick, then spreading to Munster, Connacht and Leinster. Crowds of Irish tenants dressed in linen masks and coats—hence their generic name, the” Whiteboys”— burned hayricks, knocked down enclosure walls, and hamstrung cattle. On occasion they pitched land agents into the local bog.

The Irish resistance to the Enclosure Acts was not unique, but a very odd thing happened in Ireland: they won. A combination of population growth and war had driven up the price of food, so even the small-scale agriculture practiced by the Irish was profitable. Plus the rent capital skimmed off the Irish peasantry was playing an important role in helping to capitalize the English industrial revolution. Add to this the resistance, and the English decided that it was in their best interests to back off.

The average Irish tenant knew nothing about international finance or capital accumulation, but they got the idea that if you dug in your heels and went toe-to-toe with the buggers, you could beat them. It was a momentous experience, and a collective memory that would help fuel more than 150 years of rebellion.

Can the current Irish resistance movement turn the tide against the austerity madness that has gripped the European continent? Well, the Left is on the rise (in some places, so is the Right). Sinn Fein’s support in the most recent opinion polls shows a 25 percent approval ratting, up 4 percent. In comparison, Fianna Fail—the party that ushered in the current crisis—has dropped from 20 percent to 16 percent. Labor has fallen to 10 percent, and Fine Gael is at 32 percent. Other Left parties are also doing well.

Indeed, the Left seems to be resurging in other countries as well. A center-left party in Slovakia ousted a right-wing government, and France seems posted to vote socialist. The Greek Left is fractious, but its various stripes now make up a majority.

Weirdness. Remember weirdness? For starters, an 832-year-old heart is pretty strange. And it wasn’t just the heart that was snatched. Someone also stole a splinter of the “true cross” (if one added up all the splinters in all the Cathedrals of Europe you end up with a fair size forest). And then there is the matter of the cheekbone of St. Brigid that just missed getting lifted from a church in North Dublin.

In the end, saints will not preserve Ireland from an invasion of the austerity snakes. The Irish people will have to do that. But they sport an impressive track record of overturning imperial designs, and they have long memories: put enough people into the streets of Castlebar (Dublin, Cork, Waterford, Galway, Limerick, etc) and the bastards will back off.

As Adams said in Castlebar, “Stand together, stand united, and there is nothing we cannot achieve.”

—-30—

6 Comments

Filed under Europe

2011 Dispatches News Awards

2011 Dispatches News Awards

Dispatches From The Edge

Conn Hallinan

Jan 1 2012

Every year Dispatches From The Edge gives awards to news stories and newsmakers that fall under the category of “Are you serious?” Here are the awards for the year 2011.

The Golden Lemon Award to Lockheed Martin, the world’s biggest arms company, whose F-22 Raptor fighter has some “performance” problems: the pilots can’t breathe.

The U.S. Air Force was forced to “stand down” its fleet of 160+ F-22s—at $150 million apiece, the single most expensive fighter in the world—when pilots began experiencing “hypoxia-like symptoms” from a lack of oxygen.  But the company got right on it, according to Lockheed Martin vice president Jeff Babione, who said he was “proud to be a part” of the team that got the radar-evading aircraft back into the air—for five weeks. When pilots continued to have problems, the F-22 fleet was grounded again.

According to the Air Force, no one can figure out why oxygen is not getting to the pilots, but that pilots “would undergo physiological tests.” To see if the pilots can go without air?

Runner-up in this category is Lockheed Martins’ F-35, at $385 billion the most expensive weapon system in U.S. history. The cost of an individual F-35 has jumped from $69 million to $113 million a plane, and while this is cheaper than the F-22, the U.S. plans to eventually purchase more than 16 times the number of F-35s than F-22s. It seems the F-35 fighter has “cracks” and “hot spots” that, according to the director of the program, Vice Adm. David Venlet, are “hard to get at.”

Dispatches suggests that the Air Force issue ice packs and super glue to pilots.

 

The P.T. Barnum Award to Dennis Montgomery, a computer programmer who scammed the U.S. government for more than $20 million. Montgomery claimed he had software that could spot terrorist conspiracies hidden in broadcasts by the Qatar-based Arabic news network, Al-Jazeera. He said his program could also detect hostile submarines and identify terrorists in Predator drone videos.

The Bush administration took his claims so seriously that in December 2003 it turned back flights from Britain, France and Mexico because the software had “discovered” the planes flight information embedded in an Al Jazeera’s crawl bar. The White House, fearing the planes would be used to attack targets in the U.S., actually talked about shooting the planes down.

The CIA eventually concluded the software was a fabrication, but rather than rebuking those in charge during the hoax—Donald Kerr and George Tenet—both men got promotions. The spy agency also didn’t bother to tell anyone in the military, so in 2009 the U.S. Air Force bought the bogus software for $3 million.

 

C. Northcote Parkinson Award to the U.S. Defense Department for upholding the British sociologist’s dictum that “work expands so as to fill the time available for its completion.” Parkinson—a social scientist with a wicked sense of humor—was hired after World War II to examine the future of the Royal Navy. He concluded that, given the military’s deep love of fancy gold lace, as well as its addiction to bureaucracy, eventually there would be more admirals than ships. Needless to say, that is exactly what happened.

But it is not just the Brits who yearn for the golden epaulets. According to the Project On Government Oversight (POGO), the U.S. military is adding brass to its ranks at a record pace. While the enlisted ranks have grown by 2 percent from 2001 to 2011, three and four star generals and flag rank admirals have increased 24 percent, one and two star generals and admirals by 12 percent, and lower ranking officers by 9.5 percent.

Former Secretary of Defense Robert Gates made an attempt to cut the ranks of the top brass, but as soon as Leon Panetta took over the post, he reversed the cuts and added six more generals. In fact, at the same time as the Pentagon was cutting the enlisted ranks by 10,000 in anticipation of an end to the Iraq War, it added 2,500 officers.

According to POGO, “Today’s military is the most top-heavy force in U.S. history.” Between 2012 and 2021, POGO estimates that the six new generals Panetta appointed will cost taxpayers $14 million.

However, there may be a silver lining here. Generals and admirals don’t fight, that’s the job of enlisted men. At this rate the U.S. will run out of privates and the business of war will be left to generals and admirals. If that comes to pass, Dispatches predicts an outbreak of pacifism.

 

The Confused Priorities Award is a three-way tie between British Prime Minister David Cameron, Canadian Prime Minister Stephen Harper, and former Irish Taoiseach (prime minister) Bertie Ahern.

In the midst of a savage austerity program, with massive cutbacks in social spending, Cameron’s Conservative-Liberal government will spend up to $40 billion on a new generation of missile-firing submarines. While British Defense Secretary Liam Fox said the submarine was necessary to maintain the country’s nuclear deterrence, critics say the program is really a boondoggle for BAE Systems, the United Kingdom-based arms company that will make the new weapon system.

Canada’s Harper got into the winner’s circle by spending over $100 million on summit meetings and pork barrel projects for Conservative cabinet member Tony Clement. The summit expenditures included $13,711 for “glow sticks,” $62 million for accommodations, and $4.3 million for a temporary fence to keep Canadians away from the lake where the Group of 8 meeting took place. Half of the summit money was used to build an office building in Fraser’s district, as well as develop airports and communities that the cabinet member could take credit for. In the meantime, Harper slashed spending for health care and education, and cut $200 million from environmental protection and monitoring.

Ahern, Taoiseach of the Irish Dail from 1997 to 2008, oversaw the bank speculation and real estate bubble that destroyed Ireland’s economy in 2008. Ahern claimed that no one told him that the financial situation was so dire, although an investigation by independent analyst Rob Wright found that the Fianna Fail government had repeatedly been warned that a crash was coming. Asked what his greatest regret was, Ahern replied that it was his failure to build a stadium to match those in Arab states. “I think unfortunately when I see little countries like Qatar and Kuwait…talking about their 10 stadiums and we never succeeded in getting one national stadium. That’s an achievement I tried hard to do but I didn’t get.”

 

The White Elephant Award to the Greek Army for considering taking 400 free M1A1 Abrams tanks from the U.S. “This is a free offer,” said Greek army spokesman Yiannis Sifakis.

Well, sort of free.

The Abrams, the U.S.’s main battle tank, is a 67.6-ton behemoth that burns 10 gallons of gas just to start, and gets 1.6 gallons to the mile. The tanks will also cost $11 million to transport to Greece.

In the meantime, the Greek Socialist government has laid off tens of thousands of workers, cut wages, slashed health care, increased sales taxes, and advanced the retirement age. Massive demonstration and general strikes have convulsed major cities, and the country is on the verge of bankruptcy.

Maybe the army is thinking that if German banks try to repossess the country, those 400 Abrams tanks might come in handy (if Greece can afford to gas to run them)?

 

The Dr. Frankenstein Award to former U.S. Secretary of State Madeline Albright for her sponsorship of Kosovo Prime Minister Hashim Thaci, a man accused of murdering Serb prisoners during the 1999 Yugoslav War and selling their body parts.

Reporting on the scandal in CounterPunch, reporter Diana Johnstone, author of “Fools Crusade: Yugoslavia, NATO and Western Delusions,” cites a report by Swiss Senator Dick Marty implicating former Kosovo Liberation Army commander Thaci of running “safe houses” during the war where Serb prisoners were tortured and killed.

The Parliamentary Assembly of the Council of Europe, a human rights organization with 47 member states, sponsored the Marty investigation.

“An undetermined but apparently small number of prisoners were transferred in vans and trucks to an operating site near Tirana international airport [Albania], from which fresh organs could be flown rapidly to recipients” the Marty Report says. “Captives were killed, usually by a gunshot to the head, before being operated on to remove one of more of their organs.” Kidneys seem to have been the major harvest.

Thaci has also been linked to the heroin trade and prostitution.

Albert and her aide, the late Richard Holbrooke, pushed Thaci into the leadership of Kosovo during the Rambouillet negotiations leading up to the war. According to Johnson, far more prominent leaders of the Kosovo delegation to those talks were pushed aside, and Thaci—known in law enforcement circles as “The Snake—became the face of Albanians secession movement.

Asked about the Marty Report, U.S. State Department spokesman Phillip Crowley said the Americans would continue to work with Thaci because “any individual anywhere on the earth is innocent until proven otherwise.” Of course, it also helps that Thaci approved the construction of a massive U.S. base in Kosovo, Camp Bondsteel, giving the U.S. its first military foothold in the Balkans.

 

The Surreal Award to the U.S. Justice Department for finally agreeing that lawyers defending prisoners at Guantanamo can view classified files that were prominently displayed on the WikiLeaks website. The Department ruled that lawyers may access the documents, but cannot “download, save, print, or disseminate” the material, a ruling that attorney David Remes said was “still surreal.”

 

The Grinch Award to the International Monetary Fund (IMF) for complaining that Colombia’s minimum wage was too high, and driving up the cost of labor. The minimum wage is $1.80 an hour and, for full time workers, brings in around $300 a month.

 

The Historical Re-write Award to Jean-Francois Cope, general secretary of French President Nicolas Sarkozy’s conservative Union for Popular Movement and the man behind the “Burka Ban.”  Cope organized a recent conference on secularization that, according to French Prime Minister Francois Fillon, led to “a stigmatization of Muslims.”

Cope defended the conference as “controversial but necessary,” adding that “the values of France are like the Three Musketeers: liberty, equality, fraternity.”  Except that the Alexander Dumas novel was set in 1625, and the Musketeers were fighting for Louis XIII and the Catholic Church. “Liberty, equality, fraternity” was the slogan of the 1789 French Revolution, and was not highly thought of in the Feudal court of Bourbons.

The creative Language Award to the Obama administration for its denial that the American bombing of Libya constituted a war. It was, according to the White House, a “time-limited, scope-limited military action.”

4 Comments

Filed under Europe, FPIF Blogs, Military, Year Awards

The New Scramble For Africa

The New Scramble for Africa

Foreign Policy In Focus

Aug. 31, 2011

Is current U.S. foreign policy in Africa following a blueprint drawn up almost eight years ago by the rightwing Heritage Foundation, one of the most conservative think tanks in the world? While it seems odd that a Democratic administration would have anything in common with the extremists at Heritage, the convergence in policy and practice between the two is disturbing.

Heritage, with help from Joseph Coors and the Scaife Foundations, was founded in 1973 by the late Paul Weyrich, one of the most conservative thinkers in the U.S. and a co-founder of the Moral Majority. While the Moral Majority whipped up the culture wars against abortion and gays, Heritage lobbied for an aggressive foreign policy and American military supremacy.

In October 2003, James Carafano and Nile Gardiner, two Heritage Foundation heavyweights, proposed a major shift in U.S. military policy vis-à-vis the African continent. Carafano is a West Point graduate who heads up the Foundation’s foreign policy section, and Gardiner is the director of Heritage’s Margaret Thatcher Center for Freedom.

In a “Backgrounder” article entitled “U.S. Military Assistance for Africa: A Better Solution,” the two called for the creation of a military command for the continent, a focus on fighting “terrorism,” and direct military intervention using air power and naval forces if “vital U.S. interests are at stake.” Such interventions should avoid using ground troops, the authors argue, and should include the participation of other allies.

Almost every element of that proposal has come together over the past year, though some pieces, like African Command (Africom) and the Trans-Sahara Counterterrorism Initiative, were in place before the Obama administration took office.

The Libya war seems almost straight off of Heritage’s drawing board. While the U.S. appeared to take a back seat to its allies, NATO would not have been able to carry out the war without massive amounts of U.S. military help. It was the U.S. who took out the Libyan anti-air craft systems, blockaded the coast, collected the electronic intelligence, fueled the warplanes, and supplied munitions when NATO ran low.

While the UN resolution forbade using ground troops, U.S. special forces and CIA teams, along with special units from Britain, France, Qatar, and the United Arab Emirates organized the rebels, coordinated air strikes, and eventually pulled off an amphibious operation that sealed Tripoli’s fate.

The Heritage scholars were also clear what they meant by vital U.S. interests: “With its vast natural and mineral resources, Africa remains strategically important to the West, as it has been for hundreds of years, and its geostrategic significance is likely to rise in the 21st century. According to the National Intelligence Council, the United States is likely to draw 25 percent of its oil from West Africa by 2015, surpassing the volume imported from the Persian Gulf.”

It was a sentiment shared by the Bush Administration. “West Africa’s oil has become a national strategic interest,” said U.S. Assistant Secretary of State for Africa, Walter Kansteiner in 2002.

The UN tasked NATO with protecting civilians in Libya, but France, Britain, the U.S. and their Gulf allies focused on regime change. Indeed, when leaders of the African Union (AU) pushed for negotiations aimed at a political settlement, NATO and the rebels brusquely dismissed them.

The NATO bombing “really undermined the AU’s initiates and effort to deal with the matter in Libya,” complained South African President Jacob Zuma. More than 200 prominent Africans released a letter Aug. 24 condemning the “misuse of the United Nations Security Council to engage in militarized diplomacy to effect regime change in Libya,” as well as the “marginalization of the African Union.”

The suspicion that the Libya war had more to do with oil and gas than protecting civilians is why the AU has balked at recognizing the rebel Transitional National Council. For much of Africa, the Libya war was a “shot heard ‘round the continent,” and there is a growing unease at the West’s “militarized diplomacy.”

Though the Defense Department’s African Contingency Operation Training and Assistance Program, the U.S. is actively engaged in training the militaries of Mali, Chad, Niger, Benin, Botswana, Cameroon, the Central African Republic, Ethiopia, Gabon, Zambia, Uganda, Senegal, Mozambique, Ghana and Malawi, and Mauretania.

In June 2006, NATO troops stormed ashore on Sao Vicente island in the Cape Verde archipelago in operation “Steadfast Jaguar” (an odd choice of monikers, since jaguars are natives of the New World, not Africa). The exercise, which brought together a host of nations, including France, Germany, Spain, Greece, the U.S. and Poland, was aimed at “protecting energy supplies” in the Niger Delta and Gulf of Guinea.

Major oil producers in the region include Angola, Nigeria, Cameroon, Gabon, Equatorial Guinea, Chad and Mauritania.

Protecting energy supplies from whom?

In the case of the Niger Delta, it means protecting oil companies and the Nigerian government from local people fed up with the pollution that is killing them, and corruption that denies them any benefits from their resources. Under the umbrella of the Emancipation of the Niger Delta (MEND), locals are waging a low-key guerilla war that at one point reduced oil supplies by 20 percent.

MEND is certainly suspicious of American motives in the region. “Of course, it is evident that oil is the key concern of the U.S. in establishing African Command,” says the organization’s spokesman, Jomo Gbomo.

The Nigerian government labels a number of restive groups in Nigeria as “terrorist” and links them to al-Qaeda, including Boko Haram in the country’s north.

But labeling opponents “terrorists” or raising the al-Qaeda specter is an easy way to dismiss what may be real local grievances. For instance, Boko Haram’s growing penchant for violence is more likely a response to the heavy handedness of the Nigerian Army than an al-Qaeda inspired campaign.

Terrorism and the protection of civilians may be the public rationale for intervention, but the bottom line looks suspiciously like business. Before the guns go silent in Libya, one British business leader complained to The Independent that Britain was behind the curve on securing opportunities. “It‘s all politics, no commercial stuff. I think that is a mistake. We need to be getting down there as soon as possible,”

The Spanish oil company Reposal and the Italian company Eni are already gearing up for production. “Eni will play a No.1 role in the future,” says Italian Foreign Minister Franco Frattini. Almost 70 percent of Libya’s oil goes to four countries, Spain, Germany, France and Italy. Qatar, which is already handing oil sales in Eastern Libya, will also be on the ground floor as production ramps up.

A major loser in the war—and some would argue, not by accident—is China. Beijing had some 75 companies working in Libya and 36,000 personnel, and accounted for about 11 percent of Libya’s pre-war exports. But because China complained that NATO had unilaterally changed the UN resolution from protecting civilians to regime change, Beijing is likely to suffer. Abdeljalil Mayouf, information manager of the rebel oil firm AGOCO told Reuters that China, Brazil and Russia would be frozen out of contracts.

Brazil and Russia also supported negotiations and complained about NATO’s interpretation of the UN resolution on Libya.

For Heritage, keeping China out of Africa is what it is all about. Peter Brookes, the former principal Republican advisor for East Asia on the House Committee on International Relations, warned that China was hell-bent on challenging the U.S. and becoming a global power, and key to that is expanding its interests in Africa. “In a throwback to the Maoist revolutionary days of the 1960s and 1970s and the Cold War, Beijing has once again identified the African continent as an area of strategic interest,” he told a Heritage Foundation audience in a talk entitled “Into Africa: China’s Grab for Influence and Oil.”

Beijing gets about one third of its oil from Africa—Angola and Sudan are its major suppliers—plus important materials like platinum, copper, timber and iron ore.

Africa is rife with problems, but terrorism is not high on that list. A severe drought has blistered much of East Africa, and, with food prices rising, malnutrition is spreading continent-wide. The “war on terrorism” has generated 800,000 refugees from Somalia. African civilians do, indeed, need help, but not the kind you get from fighter-bombers, drone strikes, or Tomahawk cruise missiles dispatched at the urging of right-wing think tanks or international energy companies.

—30—

Leave a comment

Filed under Africa, Asia, China, Europe, Middle East, Military, Oil, Policy

Italy: The Barbarians At The Gates

Italy: The Barbarians At The Gates

Foreign Policy In Focus

July 13. 2011

Paestum, Italy

Walls tell you a lot about a country’s history. Since their purpose is to keep people out who want to get in, they generally mean trouble. In the case of this stunning ruin of a city southeast of Naples, back in the 6th century BC the Greeks were trying to keep out the Etruscans who didn’t cotton to a colony plunked down in their midst.

 

Italy has lots of walls, particularly in the north and center where towns and cities cluster on the high ground. The Italians did not build on mountain tops for the view. What is picturesque now was safe haven from the barbarians back then.

 

Except, the barbarians are back, only this time they are not tribes with scary names like Goths, Huns and Lombards. Today the brutes have bland sounding labels like the International Monetary Fund IMF), the European Union (EU) and Moody’s. And some of the worst are homegrown: Silvio Berlusconi and Giullo Tremonti.

 

Italy is in deep trouble, though it is hardly alone. While the headlines go to Greece, Portugal and Spain, Italy has the second highest rate of debt in Europe and one of the lowest growth rates. On July 8, Italian bond yields jumped to a nine-year high, and the country’s stock market tanked. Given that Italy has the third largest economy in the Eurozone, if it is in trouble, so is the Euro. And, unlike Portugal, Greece or Ireland, Italy is far too big for a bail out (not that the thuggish austerity programs being forced on all three of those countries have anything in common with “bail outs.” They are simply taxpayers covering ruinous speculation binges by French, German and Dutch banks).

 

There are signs that the Italian economy is running off the rails, but the signs are subtle. Lots of locked houses and long grass, for instance.

 

The locked houses are in Pompeii, where the government no longer has the money to shore up the walls of the 2,000 year-old city. From the Pompeii of glorious mosaics and stunning frescos it has become a ghost town that one views from roads and sidewalks.

 

The immense Doric temples at Paestum are wonderfully preserved, but grass has reclaimed much of the rest of the site. It is charming to wander through the ruins, finding lovely mosaic floors, peristyle gardens or swimming pools, but the Italian authorities did not let the grass grow in order to stimulate the curiosity of tourists; they don’t have the money to cut it.

 

There is a sense in this country that people are holding their breath. The current center-right government is pushing through a $68 billion austerity package that will increase the retirement age, cut medical benefits, and lay off state workers, but many of the cuts will not take effect until 2013 and 2014. Hoping to avoid the wrath of voters, the current finance minister, Giullo Tremonti, has back loaded the cuts so they won’t take effect until after next spring’s elections.

 

As in ancient Rome, there are graffiti everywhere. There are hammers and sickles painted on the walls in Naples, as well as scrawls threatening “death to the Communists.” The left took power here in the last elections and is currently locked in a battle with the local Mafia over corruption. A cursory glance at this teeming, energetic, and most Italian of cities suggests the left is holding its own: the Mafia’s tactic of flooding the place with garbage is not working. The streets are chaotic, loud, and anarchic, but clean.

 

Sometimes it is hard to decide if Italians are holding their breath or their noses. For instance, Tremonti’s political advisor, Marco Milanese, a member of parliament, was arrested last week as part of a corruption investigation, forcing Tremonti to give up using Milanese’s luxury flat in Rome. In the meantime, Prime Minister Silvio Berlusconi secretly tried to slip a clause into the budget bill that would delay paying a huge $1.5 billion fine against his flagship media company, Fininvest.

 

Compared to social unrest in Greece, Spain, Britain and Portugal, Italy has been relatively tranquil. While the Greeks are in open rebellion against the austerity packages of the IMF and the EU, Italian demonstrations have been big but generally quiet. Tremonti told the Financial Times that Italians are different than Greeks and would accept austerity, because “The Italian people understand,” he said, “their demand is to be serious and rigorous. People are strongly in favor of this discipline.”

 

Tremonti is whistling past the graveyard, his words an eerie echo of Greek Prime Minister George Papandrerou’s comment that Greeks were “unified” behind the government program.” Outside the parliament Athens seeths with rage, and hundreds of thousands of Greeks battle tear gas and police batons to demonstrate quite the opposite. A recent poll found that 80 percent of the Greeks oppose the austerity plan.

 

There is nothing to indicate that Italians won’t follow the Greeks into the streets once the cuts hit home here. A stencil on a wall in Citta de Castello shows two stick figures, one firing a gun at the head of the other. Underneath the picture is one word: “capitalism.”

 

Europe (and much of the world) is currently in the throes of a counterrevolution led by a combination of local capitalists and international finance. Using the crisis sparked by bank speculation, its goals are to weaken trade unions, roll back social services and pensions, and privatize as much as possible. Wages have fallen across the continent, and temporary jobs with sketchy or non-existent benefits have grown at the expense of regular employment.

 

The “crisis” is a one-way street. As a Financial Times analysis pointed out last month, “Millionaires across the world are richer they were before the financial crisis, the latest sign that the wealthy have weathered the downturn far better than other groups.”

 

The number of millionaires in North America went from 2.7 to 3.4 million from 2008 to 2010 and, in Europe, from 2.6 to 3.1 million during the same time period. Italy was the only EU country that saw a slight drop in the number of millionaires: 179 to 170. The countries with the largest number of millionaires are, in decreasing order, the U.S., Japan, Germany, China and Britain.

 

Capital is playing hardball in this counterrevolution.

 

On one level, governments like in Greece have unleashed their police in an effort to drive the hundreds of thousands of young people, teachers, government workers and trade unionists off the streets.

 

On another level, rating agencies like Moody’s, Standard & Poor’s, and Fitch deliberately downgrade bonds in order to protect private investors. When investors are asked to absorb some of the losses that their speculation generated, the rating agencies step in and make an offer no country can refuse: drop efforts to make private speculators pay or we tank your bonds and drive up the cost of borrowing money.  “The credit rating agencies are playing politics not economics. The timing of the downgrades are not a coincidence,” one “senior EU official” told the Financial Times.

 

The “bailout” will not stop Greece from defaulting on its debt (with Ireland, Portugal and Spain likely to follow). Nor is there any way for a country like Greece to climb back out of the debt pit as long as its currency policies are dictated by Germany and France.

 

Italy has some experience with this business of crisis and currency, although its current leaders choose to ignore it. Back in the early 19th century, Naples was the largest city in Italy, and the south had a diverse and dynamic economy. It was the first region in Italy to build railroads, but the madness of the Catholic Church derailed the effort by blocking passage through the Papal States. Pope Gregory XVI called rails “roads to hell.”

 

According to Sir Martin Jacomb, former Chancellor of the University of Buckingham, the sabotage of railway development marks the beginning of the south’s decline. But it wasn’t until the lira was made the national currency in 1861 that “ it [the south] lost its ability to correct its uncompetitive position. Able and enterprising people moved to the north or emigrated, and the situation became permanent, as it remains today. The tragedy endures.”

 

Southern Italy has been locked into poverty for close to 200 years, a fate that is almost certain to befall other periphery members of the EU. Generations of poverty and emigration will be the price tag for protecting the investments of the very people who brought the current economic crisis on. The Citta di Castello stencil was, if anything, an understatement.

 

So far Italy is quiet, but everyone is aware that the coup of capital is being contested in the streets of Greece, Spain, Portugal and Britain, as it will eventually be in Rome, Naples, and Milan.

 

In the aftermath of the Peterloo massacre in 1819, where the British government sent cavalry to scatter a massive demonstration demanding political reform, an enraged Percy Bysshe Shelly penned “The Mask of Anarchy,” which ended in words that today’s powerful would do well to consider:

 

“Rise like Lions after slumber

In unvanquishable number—

Shake your chains to earth like dew

Which in sleep had fallen on you—

Ye are many—they are few.”

 

—30—

 

 

 

 

 

 

 

 

 

 

 

3 Comments

Filed under Europe, FPIF Blogs

The Great Game’s New Clothes

The Great Game’s New Clothes

Dispatches From The Edge

May 5, 2011

According to the U.S. Central Intelligence Agency (CIA) Director Leon Panetta, the U.S. never informed Pakistan about the operation to assassinate al-Qaeda leader Osama bin Ladin because it thought the Pakistanis could “jeopardize the mission” by tipping off the target.

Maybe, and maybe not. This is, after all, the ground over which the 19th century “Great Game” was played, the essence of which was obfuscation. What you thought you saw or knew was not necessarily what was.

The “official” story is that three CIA helicopters—one for backup—took off from Jalalabad, Afghanistan and flew almost 200 miles to Abbottabad, most of it through Pakistani airspace. Pakistan scrambled jets, but the choppers still managed to land, spend 40 minutes on the ground, and get away.

Is it possible the helicopters really did dodge Pakistani radar? During the Cold War a West German pilot flew undetected through the teeth of the Soviet air defense system and landed his plane in Red Square, so yes. Choppers are slow, but these were stealth varieties and fairly quiet. But at top speed, the Blackhawks would have needed about an hour each way, plus the 40 minutes on the ground. That is a long time to remain undetected, particularly in a town hosting three regiments of the Pakistani Army, plus the Kakul Military Academy, the country’s equivalent of West Point. Abbottabad is also 35 miles from the capital, Islamabad, and the region is ringed with anti-aircraft sites.

Still, it is possible, except there is an alternative scenario that not only avoids magical thinking about what choppers can do, but better fits the politics of the moment: that Pakistan’s Directorate of Inter-Service Intelligence (ISI) knew where Bin Ladin was and fingered him, estimating that his death would accelerate negotiations with the Taliban. Why now? Because for the first time in this long war, U.S. and Pakistani interests coincide.

Gen. Hammad Gul, former head of the ISI, told the Financial Times on May 3 that the ISI knew where he was, but regarded him as “inactive.” Writing in the May 5 Guardian (UK), author Tariq Ali says that a “senior” ISI official told him back in 2006 that the spy organization knew where bin Ladin was, but had no intention of arresting him because he was “The goose that laid the golden egg.” In short, the hunt for the al-Qaeda leader helped keep the U.S. aid spigot open.

Indeed, bin Ladin may have been under house arrest, which would explain the absence of trained bodyguards. By not allowing the al-Qaeda leader a private militia, the ISI forced him to rely on it for protection. And if they then dropped a dime on him, they knew he would be an easy target. As to why he was killed, not captured, neither the U.S. nor Pakistan wanted him alive, the former because of the judicial nightmare his incarceration would involve, the latter because dead men tell no tales.

As for the denials: the last thing the ISI wants is to be associated with the hit, since it could end up making the organization a target for Pakistan’s home-grown Taliban. If the ISI knew, so did the Army, though not necessarily at all levels. Did the Army turn a blind eye to the U.S. choppers? Who knows?

What we do know for certain is that there is a shift in Pakistan and the U.S. with regards to the Afghan war.

On the U.S. side, the war is going badly, and American military and intelligence agencies are openly warring with one another. In December the U.S. intelligence community released a study indicating that progress was minimal and that the 2009 surge of 30,000 troops had produced only tactical successes: “There remains no clear path toward defeating the insurgency.”  The Pentagon counter-attacked in late April with a report that the surge had been “a strategic defeat for the Taliban,” and that the military was making “tangible progress in some really key areas.”

It is not an analysis agreed with by our NATO allies, most of which are desperate to get their troops out of what they view as a deepening quagmire. A recent WikiLeak cable quotes Herman Van Rompuy, president of the European Union, saying “No one believes in Afghanistan anymore. But we will give it 2010 to see results.” He went on to say Europe was only going along “out of deference to the United States.”  Translation: NATO support is falling apart.

Recent shifts by the Administration seem to signal that the White House is backing away from the surge and looking for ways to wind down the war. The shift of Gen. David Petraeus to the CIA removes the major U.S. booster of the current counterinsurgency strategy, and moving Panetta to the Defense Department puts a savvy political infighter with strong Democratic Party credentials into the heart of Pentagon. Democrats are overwhelmingly opposed to the war but could never get a hearing from Secretary of Defense Robert Gates, a Republican.

The last major civilian supporter of the war is Secretary of State Hillary Clinton, but Gates, her main ally, will soon be gone, as will Admiral Mike Mullen, head of the Joints Chiefs of Staff. The shuffle at the top is hardly a “night of the long knives,” but the White House has essentially eliminated or sidelined those in the administration who pushed for a robust war and long-term occupation.

A surge of sanity? Well, at least some careful poll reading. According to the Associated Press, six in 10 Americans want out of the war. Among Democrats 73 percent want to be out in a year, and a USA Today/Gallup Poll found that 72 percent of Americans want Congress to address an accelerated withdrawal. With the war now costing $8 billion a month, these numbers are hardly a surprise.

Pakistan has long been frustrated with the U.S.’s reluctance to talk to the Taliban, and, from Islamabad’s perspective, the war is largely being carried out at their expense. Pakistan has suffered tens of thousands of civilian and military casualties in what most Pakistanis see as an American war, and the country is literally up in arms over the drone attacks.

The Pakistani Army has been deployed in Swat, South Waziristan, and Bajaur, and the U.S. is pressing it to invade North Waziristan. One Pakistani grumbled to the Guardian (UK), “What do they [the U.S.] want us to do? Declare war on our whole country?” For the 30 million Pashtuns in the northwest regions, the Pakistani Army is foreign in language and culture, and Islamabad knows that it will eventually be seen as an outside occupier.

A poll by the New America Foundation and Terror Free Tomorrow of the Federally Administered Tribal Areas in Pakistan’s northwest—home and refuge to many of the insurgents fighting in Afghanistan—found some 80 percent oppose the U.S. war on terror, almost nine in every 10 people oppose U.S. attacks on the Taliban, and three quarters oppose the drone attacks.

The bottom line is that Pakistan simply cannot afford to continue the war, particularly as they are still trying to dig themselves out from under last year’s massive floods.

In April, Pakistan’s top military, intelligence and political leadership decamped to Kabul to meet with the government of Harmid Karzai. The outcome of the talks is secret, but they appear to have emboldened the parties to press the U.S. to start talking. According to Ahmed Rashid, author of “Taliban” and “Descent into Chaos,” the White House is moving “the fledgling peace process forward” and will “push to broker an end to the war.” This includes dropping “its preconditions that the Taliban sever links with al-Qaeda and accept the Afghan constitution before holding face-to-face talks.”

Given that in 2008 the Taliban agreed to not allow any “outside” forces in the country and pledged not to pose a danger to any other country, including those in the West, this demand has already been met. As for the constitution, since it excluded the Taliban it will have to be re-negotiated in any case.

While there appears to be a convergence of interests among the major parties, negotiations promise to be a thorny business.

The Pentagon will resist a major troop drawdown. There is also opposition in Afghanistan, where Tajik, Uzbek, and Hazara minorities are deeply suspicious of the Taliban. The Karzai government also appears split on the talks, although recent cabinet shuffles have removed some of the more anti-Pakistan leaders.

Then there is the Taliban, which is hardly a centralized organization, especially since U.S. drone attacks and night raids have effectively removed more experienced Taliban leaders, leaving younger and more radical fighters in charge. Can Taliban leader Mullah Omar deliver his troops? That is not a given.

Both other insurgent groups—the Haqqani Group and Hizb-i-Islami—have indicated they are open to negotiations, but the Americans will have a hard time sitting down with the Haqqanis. The group has been implicated in the deaths of numerous U.S. and coalition forces. To leave the Haqqani Group out, however, will derail the whole process.

The U.S. would like to exclude Iran, but as Rashid points out, “No peace process in Afghanistan can succeed without Iran’s full participation.” And then there is India. Pakistan sees Indian involvement in Afghanistan as part of New Delhi’s strategy to surround Pakistan, and India accuses Pakistan of harboring terrorists who attack Indian-controlled Kashmir and launched the horrendous 2008 attack on Mumbai that killed 166 people.

Murphy’s Law suggests that things are more likely to end in chaos than reasoned diplomacy. But self-interest is a powerful motivator, and all parties, including India, stands to gain something by ending the war. India very much wants to see the 1,050-mile TAPI pipeline built, as it will carry gas from Turkmenistan, through Afghanistan and Pakistan, to Fazilka, India.

A lot is at stake, and if getting the peace process going involved taking out Osama bin Ladin. Well, in the cynical world of the “Great Game,” to make an omelet, you have to break eggs.

Back in the Victorian era the British Army marched off singing a song:

“We don’t want to fight but by jingo if we do/

We’ve got the ships, we’ve got the men, and we’ve got the money too”

But in the 21st century most our allies’ armies don’t want to fight, ships are useless in Afghanistan, there aren’t enough men, and everyone is broke.

For 33 years the people of Afghanistan have been bombed, burned, shot, tortured and turned into refugees. For at least the moment the pieces are aligned to bring this awful war to an end. It is time to close the book on the “Great Game” and bring the troops home.

—30—

4 Comments

Filed under Afghanistan, Central Asia, Europe, FPIF Blogs, India, Iran, Middle East, Military, Pakistan

The European Crisis and The Pain In Spain

Europe’s Crisis & The Pain In Spain

Dispatches From The Edge

April 26, 2011

When the current economic crisis hit Europe in 2008, small countries on the periphery were its first victims: Iceland, Ireland, and Latvia. Within a year it had spread to Greece and Portugal, though the GDP of both nations—respectively 11th and 12th in the European Union (EU)—are hardly central to the continent’s economic engine.

But now the contagion threatens to strike at the center of Europe. Spain, the fifth largest economy in the EU and 13th largest in the world, is staggering under a combination of debt and growth-killing austerity, and the balance books in Italy, the Union’s fourth largest economy, don’t look much better. Indeed, Italy’s national debt is higher than that of Greece, Ireland or Portugal, three countries that have been forced to apply for bailouts.

Spain is a victim of the same real estate bubble that tanked the Irish economy. In fact, house prices in both countries rose at almost exactly the same rate: 500 percent over the decade. A feeding frenzy of speculation, fueled by generous banks and accommodating governments, saw tens of thousands of housing units built that were never inhabited. There are currently 50,000 unsold units in Madrid alone and, according to the web site Pisosembargados, Spanish banks are on track to eventually repossess upwards of 300,000 units.

Bailing out Ireland, Portugal and Greece has strained the financial resources of the EU and the International Monetary Fund (IMF), but rescuing Spain would be considerably more expensive. If Italy goes—with an economy a third larger than Spain’s and more than twice as big as that of the EU’s three current basket cases—it is not clear the Union or its currency, the Euro, could survive.

Given the current tack being taken by EU and the IMF, that might not be the worst outcome for the distressed countries involved. The current formula for “saving” economies in Ireland and Greece consists of severely depressing economic activity that is likely to lock those countries into a downward spiral of poverty and unemployment that will last at least a decade.

First, it is important to understand that the so-called “bailouts” of Greece and Ireland, and the one proposed for Portugal, will not “save” those countries economies. As Simon Tilford, chief economist for Center for European Reform, points out, the money is being borrowed—at a high interest rate—to bail out speculators in Germany, France and Britain. It is German, French, British, and Dutch banks that will profit from these “packages,” not the citizens of Ireland, Greece, or Portugal.

Indeed, Portugal was forced to ask for a bailout, not because its economy is in particularly bad shape, but because speculators in other EU countries drove up borrowing rates to a level that the government could no longer afford. Rather than intervening to nip off the speculators, the European Central Bank sat on its hands until the damage was done, the government fell, and Portugal was essentially forced to sue for peace. The price for that will be steep: severe austerity, brutal cutbacks, rising unemployment, and a stagnant economy.

Spain and Italy are vulnerable to the same forces that forced Portugal to its knees, only they are far bigger countries whose economic distress will have global effects.

The current blueprint for reducing debt is to cut spending and privatize.  But in a recession, cutbacks increase unemployment, which reduces tax revenues. That requires governments to borrow money, which increases debt and leads to yet more cutbacks. Once an economy is caught in this “debt trap,” it is very difficult to break out. And when economies do improve, cutbacks to education, health care, housing and transportation put those countries at a competitive disadvantage.

For instance, Spain has drastically cut its education budget, resulting in a wave of “early leaving” students—at a rate that is double that of the EU as a whole—and a drop in reading, math and science skills. Those figures hardly bode well for an economy in the information age.

The “cuts to solve debt” theory is being played out in real time these days.

When the Conservative-Liberal alliance took over in Britain, it cut spending $128 billion over five years, on the theory that attacking the deficit would secure the “trust” of the financial community, thus lowering interest rates to fuel economic growth. But retail sales fell 3.5 percent in March, household income is predicted to fall 2 percent, and projections for growth have been downgraded from 2.4 percent to 1.7 percent. In terms of British people’s incomes, this is the worst performance since the Great Depression of the 1930s. “In my view, we are in serious danger of a double-dip recession,” says London Business School economist Richard Portes.

As bad as things are in Britain, they are considerable worse in those countries that bought into the “bail out.” Ireland’s growth rate has been downgraded from an anemic 2.3 to a virtual flat line 1 percent, personal income has declined 20 percent, and unemployment is at 14 percent. Greece is, if anything, worse, with a 30 percent jobless rate among the young, an economy that is projected to fall 4 percent this year, and between 2 and 3 percent the next.

If Portugal—with an unemployment rate of 14 percent—takes the $116 billion bailout, it will torpedo what is left of that nation’s economy.

Even the managing director of the IMF seems to be taking a second look at this approach. Dominique Strauss-Kahn recently quoted John Maynard Keyes about the need for full employment and a more equal distribution of wealth and income. He also warned that bailing out the financial sector and focusing just on debt at the expense of the economy is a dead end strategy: “…the lesson is clear: the biggest threat to fiscal sustainability is low growth.”

Is this a serious change of heart by the organization, or does one needs to take the IMF director’s recent comments with a grain of salt? He is rumored to be resigning this summer to run for president of France as a Socialist. Hard-nosed market fundamentalism is not exactly the path toward heading up that particular ticket. And while Strauss-Kahn says one thing, the IMF’s board of directors—largely dominated by the U.S. Treasury Department—has yet to signal a change in course.

However, the director’s comments may reflect a growing recognition that “bailouts” that protect banks and their investors, while locking countries into a decade of falling growth and rising poverty, are not only politically unsustainable, they makes little economic sense.

The next step is debt restructuring, which means investors will have to take some losses—a “haircut,” interest rates will be lowered, and payments stretched out over a longer period of time. So far, Greece and Portugal are refusing to consider restructuring because it will affect their credit status, but in the end they may have no choice in the matter.

“The basic reality is that we cannot service our debt,” Greek economist Theodore Pelagid told the New York Times, “We don’t need another bailout, we need creditors to take a hit.”

Of course, there is always the Argentine approach: default. Faced with an astronomical debt burden, a stalled economy, and growing poverty, Buenos Aires tossed in the towel and walked away from the debt in 2001. “The economy shrank for just one quarter,” writes Mark Weisbrot of the Guardian (UK),”and then grew 63 percent over the next six years, recovering its pre-crisis level of GDP in just three years.”

So far there is no talk of defaulting by the financially stressed European countries, but the subject is sure to come up, particularly given the growing anger of the populace at the current austerity programs. Hundreds of thousands of people have poured into the streets of Athens, Lisbon and London to challenge the austerity-debt mantra, demonstrations that are likely to grow in the coming months as the full impact of the cutbacks hit home.

Iceland recently voted to reject a 30-year plan to pay British and Dutch banks $5.8 billion to cover their depositors who speculated on Iceland’s high interests rates. Britain and the Netherlands are threatening to block Iceland’s EU membership bid if it doesn’t pay up, but these days, threats like that might be treated more with relief than chagrin in Reykjavik.

The bailouts have had a devastating impact on European politics. Governments have fallen in Ireland and Portugal, and the Greek government is deeply unpopular. In essence, the demands of banks and bondholders are unbalancing democratic institutions across the continent.

Spain’s unemployment rate is 20 percent, the highest in Europe. If the EU and the IMF sells it a “bailout” similar to the ones Ireland, Greece and Portugal accepted, Spain’s “pain” will be long lasting and brutal.

And Italy—with its decade-long 1 percent growth rate—waits in the wings.

If Italy goes, the EU will be split between northern haves and southern have-nots. Can a house so divided long endure?

2 Comments

Filed under Europe, FPIF Blogs