How long before Russia seeks a Cyprus naval base?

Posted on March 18, 2013

The EU’s latest step to “solve” the Eurozone crisis is the pillaging of the savings stored in Cypriot banks. It’s not hard to see the various harmful implications – a collapse of confidence in bank saving in Cyprus itself, a blow to the already miniscule levels of confidence in banking elsewhere in the EU, further reductions in bank capitalisation as savers realise the mattress is the safest place for the cash and so on.

One aspect of the affair that has yet to be widely considered, though, is the opportunities this offers to Russian foreign policy. Russians are the largest group of foreign savers in Cyprus (some legitimately, others less so), and the Russian government has loaned billions to keep the faltering Cypriot state and banking sector afloat.

Now, with Cyprus plunged into a new crisis, Putin’s Kremlin is reportedly “considering” the generous step of extending the existing loans and possibly offering more. The question this raises is simple: what will the Russians want in return for their kind helping hand?

The answer is disturbingly self-evident. Only this morning, the Russian navy announced it was to establish a new, permanent naval presence in the Mediterranean – the first since the post-Soviet retreat of the early 1990s.

At the moment, the Russians have a naval facility in Tartus, a port in Syria. Their shameful solidarity with Bashar al-Assad has been motivated at least in part by the desire to keep a foothold in the Med, but their ally’s position of power is now in doubt. At any time the Syrian regime could fall, and be replaced by a government of rebels who are unlikely to look kindly on hosting a naval base for the chums of the dictator they have just unseated.

So the Russian Mediterranean Naval presence needs a new home. Cyprus seems the natural place – it’s at the Eastern end of the sea, close to allies in Syria and potential enemies in Israel in the event of a conflict with Iran. Most compellingly of all, Cyprus is broke – and evidently ready to do just about anything for cash.

When the Eurozone’s fans say the single currency protects our security, I’m not sure a new Russian naval base on our doorstep was what they had in mind.

Is Berlusconi set to confound the pollsters?

Posted on February 25, 2013

The polls for today’s Italian General Election have been clear for quite some time. Mario Monti, the EU’s pet technocrat, was going to get a welcome kicking in a popular rejection of unaccountable, top-down government from Brussels. Silvio Berlusconi, clambering from the grave like a permatanned Dracula, was going to be roundly beaten in both Houses of Parliament by the Leftist “Common Good” coalition led by Pier Luigi Bersani.

Well, it seems the pollsters shouldn’t have been so certain. Early voter samples by TV station RAI in the key battleground of Lombardy suggest that while Bersani is leading in the Lower House, Berlusconi may be on track to be the biggest political player in the Senate – meaning he will have the power to gridlock the Left’s plans. Cue all sorts of impacts on the stability of the Euro and its so-called recovery…

If RAI’s numbers are correct, and Berlusconi really is going to hold the Left to an effective draw of one house each, what has happened to make the polls so far off?

The UK General Election in 1992 holds some of the answers. The polls predicted a big win for Kinnock and the Labour Party, but on the day the Tories won out (not, arguably, to the long-term benefit of the centre right in Britain, but that’s for another day).

The explanation was simple: people lied to the pollsters.

It turned out that the human element still persists in polling – plenty of voters either wanted the Tories to win or feared the consequences of a Labour victory (or both), but were too embarrassed to tell a stranger from a polling company “I’m voting Conservative.”

The same may have happened in Italy – quite plausibly, given the very public pillorying Berlusconi came in for after his disastrous handling of Italy’s sovereign debt. Bizarrely, that would mean that the Italian equivalent of John Major in 1992 might be Silvio Berlusconi today – not a comparison anyone ever expected to be drawn.

It seems that supporting Silvio, perhaps the world’s most consistently brash political extrovert, has become a very private matter. If his supporters have gone to the ballot box to put him back in the limelight, I doubt he’ll care about how proud or public they might be.

Bunga Bunga…

EU Nobel Peace Prize nomination in pictures

Posted on October 12, 2012

When Henry Kissinger won the Nobel Peace Prize, comedy songrwiter Tom Lehrer declared that satire had become obsolete. Today we learn that the Peace Prize has been given to the European Union -  accordingly, satire has now been dragged out of her retirement home and beaten by riot police.

In case you were wondering why the EU could possibly be given the Nobel Peace Prize, here is a short, pictorial summary of the peace Brussels has brought to Greece and Spain in the last 18 months:

Mehdi Hasan airbrushes the Stasi from history

Posted on June 21, 2012

To say the new edition of the New Statesman gives Angela Merkel both barrels would be an understatement. At the hands of Mehdi Hasan, the outgoing Political Editor, the German Chancellor gets the full Rasputin treatment – poisoned, shot, beaten and then thrown into a freezing river to ensure the job is done.

The cover splash describes her as “Europe’s most dangerous leader”, while inside the magazine Hasan’s article is headlined with the claim that her “mania for austerity is destroying Europe”. The piece itself takes the verbal assault even further, arguing that Merkel’s refusal to support a Keynesian solution to the sovereign debt and Eurozone crisis “has brought the continent, and perhaps the world, to the edge of a second Great Depression”.

Strong stuff, but not necessarily a surprise – I doubt I will ever be surprised to learn that Mehdi and I don’t always agree on economics.

(The one element of their coverage that I sympathise with is their portrayal of her as the Terminator – though while this is intended to imply she’s destroying everything, I prefer to interpret it as saying she has been sent by the children of the future to stop 2012’s politicians running up crippling debts that they will have to pay off.)

But he then goes further, shifting from hyperbole to the downright ridiculous.

“Merkel is the most dangerous German leader since Hitler.”

Yes, let’s read that again: The. Most. Dangerous. German. Leader. Since. Hitler.

To Hasan’s credit, he does acknowledge the risk of fulfilling Godwin’s Law (“As an online discussion grows longer, the probability of a comparison involving Nazis or Hitler approaches 1”) up front.

But that’s not what bothers me – it’s the historical ignorance, wilful or otherwise, involved in making such a claim.

Let’s consider the proposition: who were the other German leaders since Hitler?

To be charitable, we’ll start by assuming he really meant “The most dangerous German leader since the Nazis”, given that Hitler’s two immediate successors were Josef Goebbels and Admiral Donitz, who even Mehdi must surely recognise were pretty dangerous. I guess “since Hitler” simply sounds catchier.

And after Donitz? Well, there were the Chancellors of West Germany – Adenauer, Erhard, Kiesinger, Brandt and Schmidt – all a rather inoffensive bunch overall.

Then there was Helmut Kohl, who oversaw the reunification of East and West Germany.

He was followed by Gerhard Schröder, not a dangerous man per se (though if the New Statesman thinks Merkel is dangerous for her attempts to solve the Euro crisis, surely some blame should be allotted to the man who led Germany into the Euro in the first place?).

If we accept Mehdi’s core belief that austerity in the face of a sovereign debt crisis is dangerous, then perhaps Merkel is indeed the most radical of that list. But that list is only half the story.

Somewhere along the way he seems to have forgotten (or ignored, or absolved?) the leaders of the entire other half of Germany between 1949 and 1990. That is to say, the GDR, commonly known as East Germany.

Those men – Erich Honecker, Walter Ulbricht, Egon Krenz and plenty of others in the confused hierarchy of single-party East Germany – were truly dangerous.

Under their authoritarian regime, the Stasi spied on East Germans on a scale and with a rigour that even the Gestapo never reached, with some estimating that they gathered over 1 billion pages of information on a population of 16 million people. Thousands were tortured, murdered, kidnapped, beaten and even allegedly irradiated to induce cancer for the simple “crime” of not supporting the regime.

They attempted to run a prison state, constructing the Berlin Wall and killing those who tried to flee to freedom.

If domestic terror and oppression isn’t enough to qualify them as more “dangerous” than Angela Merkel, perhaps the run-down of their international activity might bolster the case. Among their crimes abroad you can count: setting up Idi Amin’s secret police, funding neo-Nazis in West Germany, providing supplies and a safe haven to Carlos the Jackal, and sponsoring the murder and bombing campaign of the Baader-Meinhof terrorist group. There are plenty more crimes where those came from, too.

So it seems Mehdi’s charge against Merkel is just plain wrong.

This isn’t a flippant point, it matters that these crimes are remembered, rather than brushed aside for the convenience of bringing a shocking-sounding charge against someone the New Statesman disagrees with on economic policy.

How to write a catchy song about the wonders of Eurofederalism

Posted on January 13, 2012

Sounds like an impossible task, doesn’t it?

Well how about we take the tune of Breakfast at Tiffany’s by nineties one-hit wonders Deep Blue Something, and recast the lyrics to include such gems as:

Democracy, freedom, subsidiarity
Federalism, the solution we’ve got

How does that sound? Dreadful, actually, but it didn’t stop the Young European Federalists doing the whole song, acting it out and uploading it to Youtube:

This clip has been doing the rounds for some time, but I thought I’d share it as a timely reminder that the true horrors of a Federal EU are far deeper and grimmer than simply bankruptcy, economic stagnation and the abolition of democratic sovereignty.

In case you missed those classic lyrics, or would like to sing along at home, here they are in full:

— VERSE 1 —
They say that we’ve got nothing in common
No cultural ties to build on
The project just can’t work
They say that nationalism will break us
Conservatives will fight us
But trust we really do care

— CHORUS —
And we shout what about Europe United?
Peace and safety for all of the people
Democracy, freedom, subsidiarity
Federalism, the solution we’ve got

— VERSE 2 —
They say we’ll never work together
To make our union stronger
Let us say no!
We’ll build a Europe bold and new
A democracy that’s true
Europe United as one!

— CHORUS —

— VERSE 3 —
We say the EU’s a confusion
Lacking a Constitution
But we know what to do
Reform now, we want to see enlargement
Accept our major statement
Europe united as one!

— CHORUS —

— CHORUS —

Mandy’s McAvity memory loss on the origins of the Euro crisis

Posted on November 15, 2011

Peter Mandelson has been industriously digging himself a hole over the Eurozone crisis. Normally a fervent debater and a nimble performer when it comes to picking his words carefully, he got a bit of a shoeing from Paxo on Newsnight last night.

It can’t have been comfortable for the Prince of Darkness, but there are further troubles ahead if he sticks with the line of attack that he has chosen.

We’re choosing to be outside [the Eurozone] and not showing up at those Councils and bodies where the decision-making and economic discussions of the Eurozone are taking place

The problem he faces on this one is a curmudgeonly, sociopathic Scotsman called Gordon Brown. Back when Brown was Chancellor he was notorious for not bothering to attend the meetings of ECOFIN – the council of EU Finance Ministers. When the group met, McAvity Brown more often than not was nowhere to be seen.

As the FT reported in 2006:

Gordon Brown, Britain’s chancellor of the exchequer, has not been to Brussels for a single meeting this year….Mr Brown has the worst attendance record, going to barely half the meetings since 1999. In 2004 he made it to a little over a third of meetings.

The difference between then and now is that while today’s Government are refusing – rightly – to take part in building a new Euro bailout package, which would be as expensive as it would be unpopular, back then Brown was skipping the very meetings which sowed the seeds of the current Eurozone crisis.

Around that table in the late 90s and the early years of the 21st Century a consensus developed that it was acceptable for the vast majority of Eurozone countries to brazenly breach the Stability and Growth pact, running huge deficits and piling up vast national debt mountains.

Now that is crashing down on all our heads leaving Britain, Europe and even the whole world to pay a heavy economic price.

Brown opted out of those meetings, passing up a chance to warn of the consequences of the Eurozone countries’ actions. Then, of course, Mandelson went on to help him limp on as Prime Minister for three miserable, costly years.

Does the good Lord really want to start this argument?

Only cutting the right head off the Eurozone Hydra will kill this crisis

Posted on November 08, 2011

Appropriately, the key to understanding the EU’s continued failure to solve the Eurozone crisis lies in Greek mythology. The second of the Twelve Labours of Hercules was the slaying of the Learnean Hydra – a many-headed beast that had the nasty and inconvenient habit of growing two new heads every time you cut one off.

This meant that many who tried to slay the Hydra ended up exerting themselves only to make it even more ferocious and threatening. Hercules eventually triumphed because he discovered that one of its heads was mortal – only by cutting off that one could the Hydra be destroyed.

So it is with the Eurozone crisis. Politicians, observers and – most sinfully – the markets are so desperate for all the effort going into each “solution” to be worthwhile that they convince themselves that just cutting off one more head will solve the Euro’s problems.

Time after time, though, they have chosen the wrong head.

First, simply announcing no Eurozone country would go bust or could go bust was meant to do the trick. It didn’t.

Then bailing out Greece from its short term liquidity crisis would solve all of the problems. It didn’t.

After which, Greece’s austerity package being voted through their Parliament would provide a panacea. It didn’t

Then bailing Greece out again was going to put the crisis to bed once and for all. It didn’t.

Then the “bazooka” deal would unite Europe in defeating the fiscal threat. It didn’t.

Last week, only George Papandreou ditching his referendum proposal and resigning would bring the nightmare to an end. It didn’t.

Now, they have seized desperately on the idea that Berlusconi’s resignation will calm the markets and stop the carnage.

It won’t, and it won’t for a very simple reason: Berlusconi is not the problem.

Of course, he isn’t the solution, either – he’s a clownish figure who lacks the authority or the desire to solve Italy’s problems – but any idea that he is the only thing that stands between Italy and fiscal stability is a fantasy as deranged as his self-perception of being God’s gift to women.

The sad thing is that there is such desire to believe that cutting off each of these Hydra’s heads will end the crisis that the markets briefly buoy when each one approaches, only to fall back further when reality intrudes again.

With each false hope and every false promise, the credibility of the next “solution” is reduced, the panic becomes deeper and the cost of borrowing rises. For a stark illustration of this problem, just look at the trouble the EFSF is having raising money from the international markets. As Liberal Conspiracy point out, it is now paying 4 times as much to borrow as it was in June. It isn’t just Greece and Italy that international lenders such as China view as too risky to lend to - it’s the supposed solution mechanism for the crisis.

The underlying problem – the true mortal head of this economic  Hydra – is that membership of the Euro has straightjacketed these economies from defaulting or devaluing to address their sovereign debt problems. But political leaders find this so unpalatable in their world of “ever closer union” that they turn a blind eye to it, and keep lopping off other heads, increasingly bewildered at the sprouting of more and more in their place.

Let me make a prediction (which is a risky business, but hey). If Berlusconi does resign, the markets will briefly rise only to dip swiftly once it becomes clear that weeks of political wrangling or even a General Election will be necessary to even form a new Italian Government, still less implement a viable austerity plan. This will radically increase the cost of Italy’s borrowing even further, leading perhaps to a crisis in other Eurozone banks and further bailouts in Benelux and France and almost certainly to an attempt at direct budget control by the European Commission.

Even Hercules was not strong enough to keep chopping off the wrong heads indefinitely. To find the right head and dispatch this Hydra before being eaten the Eurozone countries need to get on to the real issue quickly, and escape their state of denial.

The EU’s solution seals its painful fate

Posted on October 27, 2011

Apologies for the lack of posts for the last few days – a switch of server combined with a busy week conspired to keep me away from the keyboard.

The biggest news, which cannot be ignored, is the so-called “solution” to the Eurozone crisis. As some have pointed out, it would be surprising if the EU’s leaders were even able to agree on a workable dinner menu for the summit, never mind a unifying solution to the vast economic crisis that they have created through their political foolishness and fiscal blindness.

So claims that they’ve got it all sewn up and everything is going to be fine should raise our suspicions. Lo and behold, as soon as you look at the plan the problems are clear. The BBC’s three-bullet summary of the package is as follows, with my comments in bold:

  • Banks holding Greek debt would accept a 50% loss

Forgive me for pointing it out, but Europe’s banks – and still less the rest of the world’s – are not run by the EU Commission or the premiers of member states. The precedent of politicians enforcing these losses in a laughably named “voluntary” deal is dangerous and will further deter international investors from backing EU ventures.

  • A mechanism to boost the eurozone’s main bailout fund to about 1tn euros (£880bn; $1.4tn)

Where is the money coming from? If as many suggest it will be from sovereign wealth funds from around the world, what financial and political price do we expect Saudi Arabia and China to demand in return for stepping in?

  • Banks must also raise more capital to protect them against losses resulting from any future government defaults

Yes, having enforced 50% losses on the banks who lent to Greece, the EU is now attacking them for not having enough capital. Again, where will the money come from? The Eurozone crisis has severely damaged global confidence in European economies and businesses, and we’re not exactly awash with credit at the moment. If the markets won’t bet their house on the dodgy nag which is the Eurozone, will we see Governments stepping in? If so, err, isn’t it Government indebtedness which is already the problem driving this crisis? 

Just as worryingly, can anyone rely on Italy, Greece and other Eurozone flops to carry out the reforms needed to become competitive and shed their zombie economy status? Sure, they may be pledging to now, but they pledged to when they joined the Euro and signally failed to live up to their promises and treaty pledges.

Most disturbing of all, we are also seeing a trend amongst the EU elites – emphatically separate to the peoples of Europe – towards a “consensus” in favour of fiscal union. The architects of European integration have never been ones to let a good crisis go to waste, so behind their furrowed brows and mutters of concern there can be little down that plenty of them are jumping for joy about the prospect of Brussels siezing power over the budgetary affairs of 17 countries.

If you think the EU is undemocratic and bossy now, you’d be right – but this is a walk in the park compared to what will happen when the EU Budget Inquisition start stretching national Chancellors on the rack until they agree to obey the diktats flowing from Brussels.The protests and chaos in Athens will multiply and spread to other countries once Brussels starts to enforce its measures against the will of voters across Europe with a minimum of accountability.

Of course, the EU’s own accounts are famously full of holes, and fraud and waste are rife, so even if they get this central bullying power we can be certain they will fail to use it responsibly or successfully. There will be pain without any gain – a further recipe for disillusionment and disturbance.

Critics of the EU – including myself – have long said we should dismantle it carefully and responsibly before it tears itself apart painfully. This latest deal puts on the path to yet more economic misery, yet more antidemocratic abuse of power and yet more suffering for ordinary people. In its death throes, I fear the EU will harm a lot of people.

Exclusive interview with Slovakian Euro bailout rebel Juraj Droba MP

Posted on October 13, 2011

Juraj Droba Freedom and Solidarity SaS Slovakia MPThe attention of the global media has been fixed – unusually – on Slovakia this week. With 16 of the 17 Eurozone nations already having committed their taxpayers to supporting a vastly increased bailout of Greece, Slovakia was the only one left standing. On Tuesday, their Parliament voted to reject the EU’s bailout plan, thanks in large part to an insurgency led by the Freedom and Solidarity Party – commonly known in Slovakia as the SaS – which led to the collapse of the governing coalition.

The SaS are a true classical liberal party, combining free market economics with civil libertarian principles such as drug legalisation. What is it that led them to bring down the coalition government of Slovakia rather than vote for the Greek bailout? What will happen next? To find out, I conducted a brief interview with my friend Juraj Droba, one of the 21 SaS MP sitting in the Slovakian Parliament and Vice-Chairman of the Parliament’s Foreign Affairs Committee. Square brackets denote my own explanatory notes.

Q. Can you sum up for British readers why you and your parliamentary colleagues have voted to reject the bailout motion?

Many reasons – the moral hazard, the fallacy of trying to solve indebtedness with more debt which will only prolong the agony, the principle that poorer people in responsible countries must not pay for irresponsibility of politicians in richer countries. This money would not go to people, but to the shareholders of the French and German banks – these profited heavily over decades from high-interest risky loans guaranteed by the governments.

Q. Why do you think it was you and your colleagues in Slovakia who said No when all the other Eurozone countries said yes to the bailout?

We are a new party, composed of people who were previously successful in the commercial sphere. Our bottoms are not glued to the political chairs, we are ready to leave anytime and even sacrifice our mere political existence for a principle as noble as pointing out the main trobules with EFSF and ESM [the Euro bailouts].

Q. Is there any polling evidence of what the Slovakian voters think about the issue? Will this have an impact on the next general election in your country?

Over 50 percent majority did not want Slovakia to participate in the bailout. The impact on the early elections in March 2012 is questionable, several other issues are more salient than a somewhat remote and complicated EFSF.

Q. The EU is famous for making people vote again if they come out with the “wrong” answer. Will the parliament have a second vote on the issue – and if so, how soon will it be and what do you think the result will be?

Unfortunately, yes. It will happen this Friday and it will be carried with the votes of the opposition. The price we pay is early elections, because our Liberal party was removed from the government coalition.

Q. If the rest of the Eurozone goes for bailouts and further fiscal integration, can you foresee a day when Slovakia would want to leave the EU to go its own way?

No. Slovaks as people are rather euro-optimistic, as evidenced in polls. We still believe that euro is a good project. We are not against the common currency, we are against irresponsibility of governments and constant breaking of the basic rules…

Q. Have you or your colleagues been pressured from outside Slovakia to change your position and vote for the bailout – either from EU institutions, businesses or foreign politicians?

All of these combined. SaS leader Richard Sulik had a private meeting with Guido Westerwelle [German Minister for Foreign Affairs], the Prime Minister was harshly pushed by Merkel and Sarkozy, we as Liberals received a decent and polite letter from our partners from the ELDR [the European Liberal Democrats, who both the SaS and the UK Lib Dems belong to], foreign diplomats mentioned the issue at every possible meeting occassion with any of us, etc. The pressure even increased after this week’s No vote.

Exclusive: EU official: The Euro’s existence is under threat, and we will screw the poor to save it

Posted on September 23, 2011

The political and economic disaster which is the Euro has reached new depths – as David Cameron noted in Ottawa yesterday “the problems in the eurozone are now so big that they have begun to threaten the stability of the world economy”.

Traditionally, the only place where logic, democracy and facts have never been able to penetrate when it comes to the glaring failure of the Euro has been the European Commission. It’s rare that they ever come clean about the EU’s dubious tactics and unheard of for them to even admit there’s a serious problem.

This morning, though,  a European Commission official called Michele Calandrino was speaking at London’s City Hall as part of an EU Committee of the Regions Open Day, addressing an audience of local authorities and regional apparatchiks. My source tells me that first he confessed that:

European funding is an incentive for Member States to play the game at the European level

Which was a surprisingly frank statement in itself, given the long history of pretending that funding is allocated to target problems rather than to provide political incentives to “play the game”, ie hand over more and more sovereignty to Brussels. A confession of their dodgy dealing from the horse’s mouth.

The really fascinating bit came next, on the Eurozone crisis. The problems were so serious, said Mr Calandrino, that:

we are worried about the future of the Social Fund because of the need for fiscal consolidation to save the Euro

To translate the jargon, the European Social Fund is the main tranche of the EU budget targeted at creating jobs and providing skills training to the unemployed and disadvantaged. As well as being a large amount of money, it’s one of the EU’s posterchildren for how great Brussels is.

If the Commission thinks it may have to scrap the ESF “to save the Euro”, then they are evidently more concerned for the Euro’s future than they have previously let on. As far as I’m aware, the Commission has never previously confessed that the current crisis threatens the currency’s very existence. It’s a measure of how bad things have got that even they appear to be abandoning the pretence that the Euro will inevitably survive.

This confession is also very revealing about the EU Commission’s priorities – they would rather withdraw funding from the unemployed and poverty-stricken than abandon their disastrous vanity project. What a message to send.