Monthly Archives: May 2016

The EU: A House Divided

European Union: A House Divided

Dispatches From The Edge

May 16, 2016

 

“Larger now than the Roman Empire of two thousand years ago, more opaque than the Byzantine, the European Union continues to baffle observers and participants alike.”

Perry Anderson

British historian

 

The European Union is one of the premier trade organizations on the planet, with a collective GDP that matches the world’s largest economies. But it is far more than a trade group. It is also a banker, a judicial system, a watchdog, a military alliance, and, increasingly, an enforcer of economic rules among its 28 members.

 

On the one hand it functions like a super state, on the other, a collection of squabbling competitors, with deep divisions between north and south. On June 23, the two-decade-old organization will be put to the test when Great Britain—its second largest economy—votes to stay in the EU or bail out.

 

The awkwardly named “Brexit” has stirred up a witches’ brew of xenophobia, racism and nationalism, but it has also served to sharpen a long standing debate among the European left over the nature of the organization, and whether it serves to unite a continent shattered by two world wars or functions as little more than a vehicle to spread a particular species of capitalism that has impoverished more people than it has lifted up.

 

The EU was originally sold as an effective way to compete with U.S. and Japanese commercial power (and later China) by integrating the economies of Western Europe into a common market. The 1957 Treaty of Rome established the European Economic Community (EEC), but that organization was plagued by currency instability.

 

Currency manipulation is a standard economic strategy, one the U.S. Treasury follows to this day. The idea is to boost exports by deflating one’s currency, thus making one’s products cheaper. In an organization like the EEC, however, where currencies were traded back and forth, that strategy caused chaos, particularly after the Americans decoupled the dollar from gold in 1971. The U.S. immediately began aggressively devaluing its currency and undercutting Germany.

 

To make a long history brief, Germany and France began pushing for a common currency, though for different reasons.

 

For Germany, fluctuating currency rates cut into that country’s export engine. For France, a common currency would give Paris some say over the EEC’s economic policies through the creation of a European Central Bank, policies that at the time were largely determined by Germany’s powerful economy.

 

Although Britain opted out of adopting the Euro, London rapidly became the financial center of the continent. In the end, 19 countries would adopt the Euro, creating the Eurozone. Eight others, including Denmark, Sweden and Poland kept their own currencies.

 

The common currency—established by the 1991 Maastricht Treaty and launched in 1999—effectively put the German Bundesbank in charge. Bonn agreed to the common currency, but only on the condition that everyone kept their budget deficits to 3 percent of national income and held their government debt level at 60 percent of GDP. Those figures matched Germany’s economy, but very few of the other states in the EU.

 

The Maastricht Treaty also transformed the EEC into the EU in 1993.

 

Deflating one’s currency as a tactic to increase exports and stimulate growth during a downturn was no longer an option, and the debt ratio was set so low that few economies could keep to its strictures. When the bottom fell out during the 2008 economic meltdown, EU states found out just what they had signed on for: draconian austerity measures, the widespread privatization of state owned enterprises—from water and electrical systems, to airports and harbors—and emigration. Millions of mainly young Portuguese, Irish, Greeks and Spaniards fled abroad.

 

The European Central Bank—with its cohorts, the International Monetary Fund and the European Commission, the so-called Troika—straitjacketed economies throughout the continent, turning countries like Greece, Spain, Portugal, and Ireland into basket cases, forcing them to borrow money to keep their banks afloat while instituting austerity regimes that led to massive unemployment, huge service cutbacks, and rising poverty rates.

 

The Troika had a neat trick: it shifted the debts incurred by private speculators on to the public, while the Germans spun up a fairy tale to explain the counter-example: the frugal frau.

 

“The Swabian housewife,” lectured German Chancellor Angela Merkel, “would have told us her worldly wisdom: In the long run you cannot live beyond your means.”

 

Except that the debts were not due to the Greeks, Irish, Spaniards, and Portuguese “living beyond their means.” They were just picking up the tab run up by the speculators. The vast majority of “bailouts” that followed the crash went directly into the vaults of French, British, German, and Austrian banks. On the day the Greek “bailout” was announced, French bank shares rose 24 percent.

 

In many ways, the EU resembles a military alliance on the march. Jan Zielonka, a professor of European politics at Oxford, calls the EU a “postmodern empire,” filling the vacuum created by the fall of the Soviet Union, using “checkbooks rather than swords as leverage.” During the Clinton administration, the EU—along with NATO—pushed eastward, creating what Zbigniew Brzezinski called “the Eurasian bridgehead for American power and the potential springboard for the democratic system’s expansion into Eurasia.”

 

The Obama administration strongly supports the UK remaining in the EU.

 

But the EU has very little to do with “democracy,” as the recent Greek crisis demonstrated. In a confrontation between the then newly elected Greek Finance Minister Yanis Varoufakis and German Finance Minister Wolfgang Schauble, the latter refused to negotiate over the austerity program that had cratered Greece’s economy. “I’m not discussing the program,” said Schauble, “This was accepted by the previous [Greek] government and we can’t possibly let an election change anything.”

 

In short, the Troika—an unelected body—makes all economic decisions and is unwilling to consider any other approach but that of the mythical Swabian housewife. It isn’t democracy moving east, but the Bundesbank, and a species of capitalism that is unmoved by unemployment, poverty and widespread misery

 

So is the Brexit a challenge to the growing might of capital and an implicit critique of the EU’s dearth of democracy? Nothing’s that simple.

 

First, the loudest critics of the EU are people one needs a very long spoon to sup with: Marine Le Pen’s racist National Front, Britain’s xenophobic United Kingdom Independence Party, Hungary’s thuggish Jobbik, Greece’s openly Nazi Golden Dawn, and Italy’s odious Northern League. Hatred of immigrants and Islamophobia are the glue that binds these parties, which are active and growing throughout the EU.

 

Indeed, some on the British left have suggested voting against a Brexit precisely because the most vocal opposition to the EU comes from the most reactionary elements in the UK. The British Conservative Party is deeply split on the issue, with its most rightwing and anti-immigrant members favoring getting out.

 

The left is also filled with crosscurrents. While some argue for getting out because they see the EU as an undemocratic vehicle for the expansion of international capital, others are critical, but advocate staying in. British Labour Party leader Jeremy Corbyn—hardly a friend to international capital— opposes the Brexit.

 

While Corbyn is deeply critical of the EU’s lack of “democratic accountability, “ and its push to “privatize public services,” he argues that there is a “strong socialist case” for staying in. Corbyn says the EU plays a positive role on climate change, and that exiting the EU would initiate a race to the bottom on issues like equal pay, work hours, vacations and maternity leave. The Scottish National Party, which is to the left of the Labour Party, also opposes a Brexit, and threatens to call for another independence referendum if it passes.

 

Left parties in Greece, Italy, Spain, Portugal, and Ireland are critical of the EU, but most do not advocate withdrawing. What they are demanding is a say over their economic decisions and relief from the rigid rules that favor economies like Germany, and bar many others from ever becoming debt free.

 

It is ironic that Germany—the country that refuses to even consider retiring some of the overwhelming debts that enchain countries like Greece—owes its current wealth to the 1951 London Conference that cut post-war Germany’s debt in half, lowered interest rates, and stretched out debt payments. The result was the “Wirtschaftwunder” [economic miracle] and the creation of an industrial juggernaut. Greece’s Syriza Party has long called for such a conference to deal with the EU countries mired in debt.

 

There is no secret why Germany, France and the European Banks oppose debt reduction, or “haircuts”: Between the three of them they hold almost $84 billion of Greece’s debt

 

The polls show the British electorate could go either way on a Brexit. What happens if they do leave is hardly clear, because it would be a first. The predictions range from doom and gloom to sunny days, and everything in between, although it is doubtful the EU would severely punish Europe’s second largest economy.

 

One model the left needs to look at in this battle is Portugal, where three left parties, who have long fought with each other, found common ground around reversing the austerity policies that have racked the country’s economy for four years. Portugal just recently received a barely favorable bond rating that gives the coalition government some breathing room. The economy is growing and unemployment down, but at 129 percent of GDP, Portugal’s debt burden is still the third highest in Europe.

 

Alone, Portugal is no match for power of the Troika, but Lisbon has allies in Spain, Greece, Ireland and increasingly, Italy. Support for the EU in Italy has gone from 73 percent in 2010 to 40 percent today. “Europe has taken the wrong road,” says Italian Prime Minister Matteo Renzi. “Austerity alone is not enough.”

 

Given the absence of a strong, continent-wide left, however, reversing the current economic rules of the EU may be a country-by-country battle.

 

It is already underway, and for all of the economic power of the EU, the organization is vulnerable to charges that Brussels has sidelined democracy.

 

If Brussels—read Germany—can be persuaded or forced to agree to debt reductions, to loosen the spending restrictions and start pump priming, Europe can do something about its horrendous unemployment rate and underperforming economies. If not, whether the British leave or not may be irrelevant: a house divided cannot stand for long.

 

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Baiting The Bear: NATO and Russia

Bear Baiting: Russia & NATO

Dispatches From The Edge

April 28

 

Aggressive,” “revanchist,” “swaggering”: These are just some of the adjectives the mainstream press and leading U.S. and European political figures are routinely inserting before the words “Russia,” or “Vladimir Putin.” It is a vocabulary most Americans have not seen or heard since the height of the Cold War.

 

The question is, why?

 

Is Russia really a military threat to the United States and its neighbors? Is it seriously trying to “revenge” itself for the 1989 collapse of the Soviet Union? Is it actively trying to rebuild the old Soviet empire? The answers to these questions are critical, because, for the first time since the 1962 Cuban missile crisis, several nuclear-armed powers are on the edge of a military conflict with fewer safeguards than existed 50 years ago.

 

Consider the following events:

  • NATO member Turkey shoots down a Russian warplane.
  • Russian fighter-bombers come within 30 feet of a U.S. guided missile destroyer, and a Russian fighter does a barrel roll over a U.S. surveillance plane. Several U.S. Senators call for a military response to such encounters in the future.
  • NATO and the U.S. begin deploying three combat brigades—about 14,000 troops and their equipment—in several countries that border Russia, and Washington has more than quadrupled its military spending in the region.
  • S. State Department officials accuse Russia of “dismantling” arms control agreements, while Moscow charges that Washington is pursuing several destabilizing weapons programs.
  • Both NATO and the Russians have carried out large war games on one another’s borders and plan more in the future, in spite of the fact that the highly respected European Leadership Network (ELN) warns that the maneuvers are creating “mistrust.”

 

In the scary aftermath of the Cuban missile crisis, the major nuclear powers established some ground rules to avoid the possibility of nuclear war, including the so-called “hot line” between Washington and Moscow. But, as the threat of a nuclear holocaust faded, many of those safeguards have been allowed to lapse, creating what the ELN calls a “dangerous situation.”

 

According to a recent report by the ELN, since March of last year there have been over 60 incidents that had “the potential to trigger a major crisis between a nuclear armed state and a nuclear armed alliance.” The report warns that, “There is today no agreement between NATO and Russia on how to manage close military encounters.”

 

Such agreements do exist, but they are bilateral and don’t include most alliance members. Out of 28 NATO members, 11 have memorandums on how to avoid military escalation at sea, but only the U.S., Canada and Greece have what is called “Preventing Dangerous Military Activities” (DMA) agreements that cover land and air as well. In any case, there are no such agreements with the NATO alliance as a whole.

 

The lack of such agreements was starkly demonstrated in the encounter between Russian aircraft and the U.S. The incident took place less than 70 miles off Baltiysk, home of Russia’s Baltic Sea Fleet, and led to an alarming exchange in the Senate Armed Services Committee among Republican John McCain, Democrat Joe Donnelly, and U.S. Gen. Curtis Scaparrotti, soon to assume command of U.S. forces in Europe.

 

McCain: ”This may sound a little tough, but should we make an announcement to the Russians that if they place the men and women on board Navy ships in danger, that we will take appropriate action?”

 

Scaparrotti: “That should be known, yes.”

 

Donnelly: “Is there a point…where we tell them in advance enough, the next time it doesn’t end well for you?”

 

Scaparrotti: “We should engage them and make clear what is acceptable. Once we make that known we have to enforce it.”

 

For the Americans, the Russian flyby was “aggressive.” For the Russians, U.S. military forces getting within spitting range of their Baltic Fleet is the very definition of “aggressive.” What if someone on the destroyer panicked and shot down the plane? Would the Russians have responded with an anti-ship missile? Would the U.S. have retaliated and invoked Article 5 of the NATO Treaty, bringing the other 27 members into the fray? Faced by the combined power of NATO, would the Russians—feeling their survival at stake—consider using a short-range nuclear weapon? Would the U.S. then attempt to take out Moscow’s nuclear missiles with its new hypersonic glide vehicle? Would that, in turn, kick in the chilling logic of thermonuclear war: use your nukes or lose them?

 

Far-fetched? Unfortunately, not at all. The world came within minutes of a nuclear war during the Cuban missile crisis and, as researcher Eric Schlosser demonstrated in his book “Command and Control,” the U.S. came distressingly close at least twice more by accident.

 

One of the problems about nuclear war is that it is almost impossible to envision. The destructive powers of today’s weapons have nothing in common with the tiny bombs that incinerated Hiroshima and Nagasaki, so experience is not much of a guide. Suffice it to say that just a small portion of world’s nukes would end civilization as we know it, and a general exchange could possibly extinguish human life.

 

With such an outcome at least in the realm of possibility, it becomes essential to step back and try to see the world through another’s eyes.

 

Is Russia really a danger to the U.S. and its neighbors? NATO points to Russia’s 2008 war with Georgia and its 2014 intervention in eastern Ukraine as examples of “Russian aggression.”

 

But from Moscow, the view is very different.

 

In 1990, U.S. Secretary of State James Baker and German Chancellor Helmet Kohl pledged to then Soviet Premier Mikhail Gorbachev that NATO would not move eastward, nor recruit former members of the East bloc military alliance, the Warsaw Pact. By 1995 NATO had enlisted Pact members Romania, Hungry, Poland, the Czech Republic, Latvia, Lithuania, Estonia, Bulgaria, Slovakia, and signed on Montenegro this year. Georgia is currently being considered, and there is a push to bring Ukraine aboard. From Moscow’s perspective NATO is not only moving east, but encircling Russia.

 

“I don’t think many people understand the visceral way Russia views NATO and the European Union as an existential threat,” says U.S. Admiral Mark Ferguson, commander of U.S. naval forces in Europe.

 

Most NATO members have no interest in starting a fight with Russia, but others sound like they think it wouldn’t be a bad idea. On April 15, Witold Waszczykowski, the foreign minister of Poland’s rightwing government, told reporters that Russia is “more dangerous than the Islamic State,” because Moscow is an “existential threat to Europe.” The minister made his comments at a NATO conference discussing the deployment of a U.S. armored brigade on Poland’s eastern border.

 

Is Russia reneging on arms control agreements? The charge springs from the fact that Moscow has refused to consider cutting more of its nuclear weapons, is boycotting nuclear talks, deploying intermediate range nuclear missiles, and backing off a conventional weapons agreement. But again, Moscow sees all that very differently.

 

From Moscow’s point of view, the U.S. is continuing to spread its network of anti-missile systems in Europe and Asia, which the Russians see as a threat to their nuclear force (as does China). And as far as “reneging” goes, it was the U.S. that dumped the Anti-Ballistic Missile Treaty, not Russia,

 

The U.S. is also pouring billions of dollars into “modernizing” its nuclear weapons. It also proposes using ICBMs to carry conventional warheads (if you see one coming, how do you know it’s not a nuke?), and is planning to deploy high velocity glide vehicles that will allow the U.S. to strike targets worldwide with devastating accuracy. And since NATO is beefing up its forces and marching east, why should the Russians tie themselves to a conventional weapons treaty?

 

What about Russia’s seizure of the Crimea? According to the U.S. State Department, redrawing European boundaries is not acceptable in the 21st century—unless you are Kosovo breaking away from Serbia under an umbrella of NATO air power, in which case it’s fine. Residents of both regions voted overwhelmingly to secede.

 

Georgia? The Georgians stupidly started it.

 

But if Russia is not a threat, then why the campaign of vilification, the damaging economic sanctions, and the provocative military actions?

 

First, it is the silly season—American elections—and bear baiting is an easy way to look “tough.” It is also a tried and true tactic of the U.S. armaments industry to keep their production lines humming and their bottom lines rising. The Islamic State is scary but you don’t need big-ticket weapons systems to fight it. The $1.5 trillion F-35s are for the Russkies, not terrorists.

 

There are also those who still dream of regime change in Russia. Certainly that was in the minds of the neo-cons when they used The National Endowment for Democracy and Freedom House to engineer—at the cost of $5 billion—the coup that toppled Ukraine into NATO’s camp. The New American Century gang and their think tanks—who brought you Afghanistan, Iraq, Libya and Syria—would love to leverage Russia out of Central Asia.

 

The most frightening aspect of current East-West tension is that there is virtually no discussion of the subject, and when there is it consists largely of distorted history and gratuitous insults. Vladimir Putin might not be a nice guy, but the evidence he is trying to re-establish some Russian empire, and is a threat to his neighbors or the U.S., is thin to non-existent. His 2014 speech at the Valdai International Discussion Club is more common sense than bombast.

 

Expansionist? Russia has two bases in the Middle East and a handful in Central Asia. The U.S. has 662 bases around the world and Special Forces (SOF) deployed in between 70 and 90 countries at any moment. Last year SOFs were active in 147 countries. The U.S. is actively engaged in five wars and is considering a sixth in Libya. Russian military spending will fall next year, and the U.S. will out-spend Moscow by a factor of 10. Who in this comparison looks threatening?

 

There are a number of areas where cooperation with Russia could pay dividends. Without Moscow there would be no nuclear agreement with Iran, and the Russians can play a valuable role in resolving the Syrian civil war. That, in turn, would have a dramatic effect on the numbers of migrants trying to crowd into Europe.

 

Instead, an April 20 meeting between NATO ministers and Russia ended in “profound disagreements” according to alliance head Jens Stoltenberg. Russian ambassador to NATO, Alexander Grushko said that the continued deployment of armed forces on its borders makes it impossible to have a “meaningful dialogue.”

 

We are baiting the bear, not a sport that ever ends well.

 

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