Europe

 

 

 

 

Daddy’s sugar bowl empties

 

 

 

            It’s our tradition to control,
like Erich Honecker and Helmut Kohl,
remember him
from the Ukraine to the Rhone.
Sweet home uber alles,
Lord, I’m coming home.yah
Come on, Sugar Daddy, bring me home.

 

‘Hedwig and the Angry Inch’

 

http://www.youtube.com/watch?v=ef6M4sPrr8g&feature=player_embedded

 

George Soros isn’t the only sugar daddy whom former beneficiaries accuse of turning tightwad faced with rollercoaster stock markets and interminable debt debates.

 

German taxpayers all along were wary of becoming the only teat on the EC’s udder for what Winston Churchill once called Europe’s soft underbelly. There is nostalgia, too, for the once high-flying DMark which few wanted exchanged in 2002 for Euros. Now those feelings are exploding with Germany’s vaunted economy going south – but not just for bailouts for Greece, Portugal, Ireland, and possibly Spain, and even Italy.

 

German growth collapsed to near zero over the early summer which could take Germany, Europe [and the world] into recession by winter. That would mean abandoning hope Europe’s biggest industrial engine would salvage the EU common currency.

 

Many usual suspect talking heads called all this totally unexpected. Hello! Sixty percent of the German template for an export-led economy went to other EU countries. True, profligate Greeks, Portuguese, Spaniards and Irishmen should not have bought those Mercedes they couldn’t afford. But if they hadn’t, how would German auto plants have pumped out cars, keeping German unemployment relatively low!

 

The Germans, like everybody else with dreams going back to Marco Polo, turned to China [and Russia] for new markets. Trouble is the jerry-built Chinese “world factory” is in deep doo-doo too, cutting back on what its “Communism with Chinese characteristics” leaders thought was a foolproof, permanent formula for stability: unlimited infrastructure expansion, subsidized exports for super growth rates with corruption for the elite .

 

But more than one little piggie didn’t go to market. Chinese inflation [or should we use new Obama Administration’s gobbledygook, “core inflation”] is rising, particularly food where 80% of Chinese subsist. [Incidentally Chinese shortages mean huge US corn purchases lifting American prices.] And there are still Chinese who remember in 1949 the Communists installed that ogre Mao Tse-tung mostly because of rip-roaring inflation on Shanghai’s counting house tables, not battlefield valor.

 

Russia? There, increased German dependence on Soviet gas, even encouraging Moscow government monopolies to buy into Western distribution, was all well and good during the halcyon days of unlimited credit and rising consumption. But now Moscow bleeds; an incredible $30 billion capital outflow in the first six months of 2011. [No oligarch dares leave money lying around in Petersburg or Moscow lest the new Rasputin grab it]. Some 1.2 million professionals immigrating in the last three years carried part of it out. And with diving fossil fuel prices, the Russian economy is hanging by one energy thread. That’s why a half million small and medium sized German firms in Russia, ”highly leveraged” with government export credits, are sweating.

 

As the Euro stumbles from crisis to crisis, “solutions” boil down to two proposals: full-steam ahead toward economic integration permitting a unified fiscal and monetary strategy, or refinancing bankrupt southern members using a Eurobond guaranteed by the 17 members of the common currency and anybody else Brussels could seduce into signing on.

 

German Chancellor Angela Merkel and French Pres. Nicolas Sarkozy stumbled back from sacrosanct European summer holidays in mid-August to find a “solution”. But while their vague statement more or less endorsed the first approach, it offered not a clue how problematical negotiations could go forward as quickly as needs be – especially amidst crumbling economies gaining downward momentum.

 

They didn’t rule out the second solution. That’s because the last straw has been the rising cost of refinancing national bonds – more threatening even than bailouts’ size and conditions. But the Germans are more than aware any such new “credit instrument” has to be backed proportionately by Europe’s largest economy. Nor is it clear from its most enthusiastic sponsors, how rates would be set if they ignored/avoided the current race to the top for interest in a rocky market.

 

Of course, the 500-pound gorilla in the room is the option letting debtors drop back into their old national currencies to balance their books. But dismantling the oversold Euro [pun intended] might be the death of the European Union itself.

 

Keep tuned: the tragicomedy is still unfolding.

 

sws-07-20-11

 

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  A vicious circle tightens

The globalized economy’s undertow is ripping all around the world.

Even the economic optimists’ two darlings, China and India, are now troubled. Seen as the world’s growth machine [along with a now overheated Brazil] in a period of advanced economies’ stagnation, their downturn produces a universally grim world outlook.

India, now the world’s largest population, had promise to overtake China – perhaps more stable with its veteran private sector and representative government. But inflation threatens with food almost half its consumer index rising to more than 9 percent last month. Prime Minister Manmoham Singh, after all a graduate of Soviet-style Indian planning, has his foot on the brake and gas pedal at the same time. Reserve Bank of India rates force lending for preferred firms to 13 percent and notorious paper-shuffling babus [clerks] hobble initiative, sending Indian coal companies, for example, despite some of the world’s largest reserves, chasing projects from Australia to North America. A spate of influence peddling scandals, including $16-billion in telecommunications, further clouds the scene.

New Delhi’s geopolitical rival, China, has turned its back on its 25-year strategy to prevent destabilization of one-party dictatorship with maximum growth. With incipient inflation, Communist leadership enters a generational succession next year trimming its investment-led behemoth’s sails. Widespread civil violence – despite enormous expenditures for the most elaborate hi-tech suppression machine in the history of authoritarianism – jeopardizes any new tactics. In fact, all the Chinese boom’s contradictory chickens simultaneously are coming home to roost: vast overexpansion of infrastructure feeding the boom [along with subsidized exports] has produced marvels for photographers but a real estate bubble including, literally, empty new cities. There’s growing resentment over second class citizenship and lack of services among more than 200 million migrant labor from rural areas stampeded to coastal cities employment. Declining foreign markets, roaring imported commodity prices [ironically brought on in part by speculation on “unlimited” Chinese demand], wage pressure, competition from export-led cheap-wage producers, monumental corruption, all now threaten “the Chinese model”. Consumption continues to decline as a percentage of domestic product mocking talk of redirecting a growth strategy. A combination of nonconvertibility and hot money chasing an undervalued yuan demonstrates how empty talk of it as an international reserve currency is. Beijing’s capacity for foot in mouth disease is epitomized in its increasing hoard of dollars and Treasury debt [again on the upswing] while officials continuously publicly denigrate the dollar.

So much for “the emerging markets”.

Turning to the developed world, there, too, crises are escalating.

A bureaucratic hassle over the Euro with divergent views in Berlin, Paris, Brussels and Frankfurt is turning into a dragged out effort to save the 17 European Union members’ common currency. Meanwhile other integration efforts — a free labor market and common defense and foreign policy — are faltering. A Greek default could produce a European banking crisis [even contagion for North America]. In other words, a fiscal and monetary crisis is turning into a major political upheaval threatening accepted European patterns. Half-baked intervention in Libya, dragging in NATO and the U.S., was announced in idealistic terms by Europe’s leaders. But it encapsulates European concerns – unlike the increasingly hot American debate over Obama Administration’s opting for “a war of choice”. For Europe “Libya” is linked directly to falling birthrates and need for imported labor and unemployed North African, Middle Eastern and Black African youth almost literally swimming the Mediterranean at a time Muslim immigrant assimilation is increasingly questioned.

Europe faces, too, the fact the world’s window to the U.S. consumer maw which supplied the post-World War II economy not only with unlimited markets but revolutionary technology has a “closed for repairs” sign with no reopening time indicated. Whatever happens after decades of drunken sailor’s spending, there will be no substantial U.S. economic strategy in place until after November 2012. Current Washington debate, if it can be dignified with that title, over raising the debt limit and reducing government spending, is simply a foretaste of the pain necessary to get the U.S. economy – perhaps now sliding into a double-dip recession — back to its historic miraculous production of jobs and expanding markets.

It’s going to be a long hot summer and a grim fall — despite the American sideshow of political shenanigans with the curtain only temporarily coming down on the first [Weiner] scene.

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To deconstruct or not to deconstruct is no longer the question

                Increasingly, however reluctantly, Europeans are bellying up to the Eurozone’s ultimate crisis. Talking heads present a dilemma: either the European Community will pick apart its common currency or take radical steps toward a highly centralized economic command.

That’s because a triangle is strangling the Euro: markets faced with the threat bankrupt members of the monetary alliance will default raise the cost of refinancing; northern European taxpayers warn their elected governments they will not continue bailing out southern neighbors; and a plethora of national and international monetary organs desperately maneuver to protect their bloated bureaucracies’ turf by improvising temporary rescues.

Placing even more power into hands of unelected bureaucrats for economic amalgamation would be a giant step. That’s not going to happen because inauspicious as it is for the monetary crisis, widespread political opposition [most of it constitutional and peaceful] to the growing calls for austerity is evidence of grassroots sovereignties as old as the end of the Roman Empire. How difficult they are to assuage has been demonstrated by a half century of tortured progress of The European Project. More apparent daily is the inadequacy of building “Europe” from the top down – even given the vision of Gen. Charles de Gaulle and Chancellor Konrad Adenauer and their technocratic collaborators. Absence of a process such as the American Continental Congress with grassroots representation painstakingly compromising conflicts has led into a blind alley on the economic front, however much limited success has been achieved politically.

Meanwhile, as so often happens, the helter-skelter of daily events obscures the coming inevitable decision. Those include critical happenings on the dollar side of the Atlantic, too. Evidence of the refusal to face up is a proposal by idiosyncratic economics Nobel Prize winner Robert Mundell to fix the dollar to the Euro to anchor the ever more threatening parallel international currency instability. Mr. Mundell might just be defending his original sponsorship of the Euro, a common currency designed to bounce around a dozen different national economic strategies without an overall guiding hand. But pinning fixed prices for rapidly devaluing dollars to disintegrating Euros would be, indeed, rearranging deckchairs on the Titanic.

Early on as it is, it’s rash and, of course, daunting, at this juncture to speculate in a few hundred words implications of the Euro’s demise. But where angels fear to tred, here are some guesses:

  • Whether or not hard-nosed advocates will win out in fostering surgical cutbacks of American government spending in order to save the dollar from being overwhelmed by domestic and international deficits – a question as large as the Euro’s future – the role of the dollar as the international reserve currency is willy-nilly being strengthened. Any talk of massive huge East Asian dollar holdings shifting into Euros – never a real possibility – is now out the window. Talk of a non-convertible Chinese international reserve currency is too idiotic to discuss. We have already been through a failed “supracurrency” experiment of creating the International Monetary Fund’s “drawing rights”. And there may not be enough gold to cover ever-expanding liquidity demands.
  • The attenuation of the Euro crisis unfortunately has elevated its role in the total project for a stable, prosperous, unified Europe. It was, originally, if always highly important, only one of many unification efforts – a common trading market, a common labor/migratory zone, financial, environmental and health regulatory unification, a common foreign policy, a common defense. These have been, at best, only partially achieved just as only 17 – notably excluding Britain with its world finance hub in The City — of 27 EU members adopted the Euro. Always important, the Euro has been exalted to the touchstone for success of unification and its demise therefore now made increasingly catastrophic.
  • The coming Euro breakup coincidentally will partially rehabilitate the U.S. superpower role despite Washington’s obvious economic and geopolitical-military overextension, persistently exaggerated by Pres. Barack Obama’s determined campaign to deflate the American image. That will be coupled not only with hedonistic Europe’s continuing lack of determination to tend its own military defenses but its continuing reliance on the U.S., for example, an American intercontinental anti-missile shield which Washington has no option but to build in pursuit of  its own security.

So, accept: the Euro construct is dead! long live European diversity — the wellspring of Western civilization!

sws-06-03-11

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Germany on the hot seat

The crisis of the European Union’s common currency goes into its second act, replete with a Spanish fandango as the curtain rises with the biggest peripheral Euro player downstage. Spain’s economy is almost twice as large as the combined early crisis victims – Greece and Ireland and waiting in the wings, Portugal. As the world’s No. 9 national economy, it is 10% of all Eurozone activity. And Madrid’s problems caricature the political issues dogging all the 27 EU members. They promise an endemic crisis.

As with all Europe, Spain is torn by internal rivalries as old as the nation state itself. Spaniards have always spoken of Las Españas – the Spains – acknowledging and rationalizing these differences. The divisions are more than regional geography but language, custom and legalities from before the modern era with important economic implications. The Chartered Community of Navarre, for example, one of Spain’s Basque-speaking political subdivisions, even has its own special tax arrangements dating from its inclusion in a united Spain in 1515.

Because the European Union was a top down construction – the creation of statesmen looking for a way out of centuries of warfare to permanent stability and prosperity – it has, as a byproduct, fed these differences. Like other European countries’ autonomous zones – including even highly centralized France – Spain’s regions increasingly see themselves as EU partners rather than nation state components. As more power has been seized by unelected Brussels Eurocrats – Europe’s parliament is a powerless figurehead where discredited politicians go to die – Madrid’s hold on its constituencies weakens. Separatism was fed, too, by subsidies [€347 billion in the last five years] from Brussels targeted at backward EU areas, revealed in the light of the new austerity as corrupt [along with huge agricultural subsidies].

As the economic crisis deepened, last month’s elections in Catalonia – which with the Basque Countries had per capita income a third higher than the national Spanish average — produced a majority advocating either more autonomy or independence. Ironically, Prime Minister José Luis Rodríguez Zapatero’s minority Socialist government has hung on by swapping autonomy concessions for the support of ethnic nationality parties in Madrid’s Cortes [parliament]. That’s despite their otherwise social and economic conservatism. That collaboration is ending with the economic strains.

For in addition to its central debt, Madrid has to deal with the autonomous governments having borrowed heavily. With their industry sparking Spain’s remarkable two decades of progress, they now are suffering the highest unemployment. That is going to further complicate Mr. Zapatero’s austerity program aimed at funding Spain’s debts. He proposes reducing deficits from €45 billion to €30 billion next year. A Socialist leader has gone to such lengths as advocating privatizing the world’s oldest lottery and other state-owned enterprises. But in the face of 20% unemployment, his core constituency, the trade unions, demand strengthening rather than dismantling generous unemployment benefits and protective labor legislation, a major impediment to growing the economy out of debt.

In fact, growth is stalling in the 16 countries using the Euro, even in Germany, and actually negative in the basket cases of Greece and Ireland, in part because of their very austerity programs. It’s hitting Spain, too, faced with rising debt refunding rates — up 20% in the last two months.

Attempting to come to the rescue, the EC’s central bank has been playing cat and mouse with the markets since May, occasionally sneakily buying up €67 billion worth of governments’ bonds to reduce interest rates. But it’s nothing like the €2 trillion or so which would be needed to mop up “the Club Med debt”. Berlin, with its historic fear of cheap money and inflation, adamantly opposes imitating the “quantitative easing” pursued by the U.S. Fed — printing Euros. In fact, German Chancellor Angela Merkel’s proposals for setting up contingencies for coming “bailouts” has only added to investors’ jitters and run up the price of refunding.

A growing number of critics hold that “bailouts”, in any case, are not the solution since they only kick the ball down the road. They argue the remedy has to be “restructuring”, default under which bondholders take their lumps. But as indicated by recent revelations of the massive extent to which the U.S. Fed came to the rescue of European banks in 2007-08, those kinds of losses for the banking system could bring on a whole new round of international financial crisis. The European central bank is already extending “emergency” loans to some European banks including the Spanish caja, savings banks.

This rats’ nest increasingly suggests dismantling the Euro may be the only way out, but something Mrs. Merkel has said is unthinkable because it is so emblematic of the European Union itself. Furthermore, a specter down the road for Germany, the powerhouse of the EU as the world’s largest economic entity, is a return to a neodeutschemark would bring speculators running, driving up German prices, possibly creating inflation – and threatening Berlin’s huge dependence on exports, the motor of its post-WWII prosperity.
sws-11-03-10

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Charting the Arab dark

Imagine two lines on a graph – one zigs and zags, another rises rapidly. They could represent two current unsettling world currents. The first would chart U.S. efforts to eradicate Islamic terrorists, on Afghanistan and Iraq battlefields but also a wider intellectual war against political Islam from Casablanca to Zamboanga. The second would trace a rising tide of embittered frustration leading to seduction of young Muslims — not excluding their progeny in the West – by fanatics, and, ultimately terrorists.

The mid-January rioting in Tunisia [just over 10 million, the size of California] which overthrew Zine El Abidine Ben Ali, the country’s only second chief executive ruling since 1987, dramatizes the contest. Seen in the mid50s at independence as one of the more progressive ex-colonial countries, and although maintaining a 5% domestic growth rate and higher rates of literacy than most Muslim states, the regime sank into a swamp of political repression and corruption. With more than half its population under 30, increasing unemployed youth want more. It remains to be seen who will come out on top in Tunis. But across North Africa – from Egypt to Morocco – underground religious Muslim opposition festers. Alas! in Tunisia, as elsewhere, the Iranian mullahs’ total corruption and Saudi Arabian hypocritical lifestyle notwithstanding, the Islamicists’ appeal is growing. It promises puritanical reform and return to a nonexistent paradisiacal past under a Muslim caliphate [theocracy] as alternative to bad copies of Western government.

Meanwhile, whether Vice Pres. Joe Biden returns from his Afghanistan, Pakistan and Iraq survey – and cheerleading –with new solutions, there’s increasing skepticism of Gen. David Petraeus’ Afghanistan strategy. And with mounting U.S. domestic problems, it will be hard to keep building on the sacrifice of young lives and more than $1 trillion already spent since 9/11 on the worldwide war against terrorism.

The argument over how to win asymmetrical wars against fanatical opponents is raging again. The danger in COIN [counter-insurgency warfare] expounded by Gen. Petraeus is an old American intellectual heresy, scientism. The 19th century philosopher [founder of modern psychology] William James warned against overintellectualizing. Dr. James’ counsel applies to guerrilla warfare. For in the nature of things, insurgencies are particularistic. There’s little commonality among the Moros [whom Gen. “Black Jack” Pershing brutally crushed] in the southern Philippines at the turn of the 20th century, the Vietcong in the Mekong Delta in Vietnam in the 1960s, the Tupamaros on the streets of Montevideo, Uruguay, in the 1970s, or al Qaeda in Afghanistan in 2011. These movements built on specific local conditions. Any formula for combating insurgencies must do likewise. Yes, vacuous “counterinsurgency” generalizations can be formulated: the army should not steal the peasants’ chickens. But learning the ins and outs of Pakistan-Afghanistan frontier Hatfields and McCoys is essential – taking time and patience, not handbooks trying to apply the scientific method to social issues.

For war is not only cruel and brutal but probably the most inefficient human activity since the first caveman hit the second caveman over the head with a club. The weapons are increasingly more sophisticated. But the human animus remains the same. For every sophisticated multidisciplined approach to villagers caught between intimidation by both sides, there have been exponents of brute force. [A cynical old Vietnam War saying: “Grab their ____, and their hearts and minds will come.”] That’s the rationale, perhaps, for U.S. drone attacks on terrorist leaders in Pakistan with grim fallout of civilian casualties, providing a political football for local politicians who hypocritically supply intelligence for the kills.

Almost 10 years ago – one wonders if current “politically correct” discussion of Islam would tolerate it now – a UN commission led by noted [if mostly exiled] Arab intellectuals searched for causes of Araby’s backwardness. Initiated before the 9/11 attacks, they predicted 280 million people in the 22 Arab countries would grow to as many as 459 million by 2020 but emphasized their isolation. Arab translations in the last thousand years, it noted, were only what Spain translates in just one year. Yet there are Arab bestsellers, often obscurantist screeds on the Koran, the word of Allah that no critic is permitted to challenge.

Emigrants from burgeoning North African [along with South Asians, Muslim and Hindu, West Indians and Africans] have drifted willy-nilly into Western Europe searching for livelihood in these last decades of its enormous prosperity. But daily incidents from the Netherlands, Germany, France, Belgium and even Scandinavia, demonstrate that counter intuitively, the second and third generations have failed to assimilate. Most European leaders including German Chancellor Angela Merkel now admit “multiculturalism” – leaving migrants to fend for themselves in their own ghettoes off welfare state handouts – has not succeeded. But the gap of willful ignorance now is too often replaced by misplaced tolerance of premodern horrors – discrimination against women, “honor killings”, child marriage, etc., etc. Defensiveness about European traditions and posturing to understand “basic issues” is condescending and as useless as the former disregard.

Somehow, some way, American and Western information and propaganda must find a way to bridge that gap or face new explosions when the two lines on our fictitious graph collide.

sws-01-14-11

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NATO is dead, long-live NATO?

The North American Treaty Organization [NATO] has been history’s most successful alliance. It protected Western Europe from Soviet Communist engulfment, halted intra-European civil wars which almost destroyed Western civilization, and underpinned unparalleled prosperity for 400 million. And, of course, monumentally outlived its designated enemy, the Soviet Bloc.

Ironically, post-Soviet events were NATO’s finest hour. In 2003 NATO assumed the International Security Assistance Force command established by the UN Security Council to cleanse Afghanistan of Islamic terrorists. Its credo, an attack on any member was an attack on all, triumphed. NATO to Afghanistan was idealistic. But pragmatically it called on 28 nations to prevent future bestiality. After 9/11 European newspapers had headlined “We are all Americans”; repeated European terrorist attacks justified that universal concern.

But Afghanistan was much more. It carried NATO beyond its nominal European theater to a worldwide stage. There was a moment of hope that, finally, the world had found its policeman. It would no longer be the Americans, who, often alone, willy-nilly shouldered the burden of maintaining world peace whether in Korea, Vietnam, the Balkans or the Mideast, however successfully or unsuccessfully.
But could the Afghanistan gesture have been NATO’s last magnificent flowering? NATO’s annual summit this past weekend, dedicated to finding an Afghanistan exit strategy, may have been the Alliance’s nadir. It certainly was virtual confusion.

If truth were told, whatever mistakes Washington has made pursuing a non-state but potent international enemy in Afghanistan, the Europeans – with notable exceptions – once again have not held up their end. Employing European contingents with one-arm tactically tied behind their backs has frustrated the effort.

With mission far from accomplished, the Summit waffled around an Afghan takeover. Clearly, the Alliance has not delivered Islamic terrorists the psychological and strategic coup de grace that would halt attempts to repeat their 2001 success from other dark corners, whether Yemen, Somaliland, or even closer to Europe’s heartland, North Africa. Yet Europeans, more than Americans, fear rising terrorist recruitment even among their own Muslims.

What’s at issue is NATO’s viability. Luckily, Russia’s Vladimir Putin, for all his bare-chested huffing and puffing, represents a demoralized, rapidly declining military power. As a leader of the similarly disappearing Russian opposition has said, US Senate START Treaty ratification or no, economics and flagging technology will further reduce Russian arms.

One could be accused of shouting “Wolf! Wolf!” for all this has been said before.
But for all the noble language, last week’s Summit even more deliberately than usual skirted pressing problems:

A meeting dedicated to Afghanistan strategy did not have an essential Pakistani presence!

Turkey, in hot pursuit of regional power is playing footsie with everyone from terrorist-sponsoring Syria to Moscow [despite its aggression on neighboring Georgia] to military exercises with the Chinese. Ankara cheapens if not completely devalues NATO membership.

There is the unfinished eastern European expansion that might have spared Georgia dismemberment, a threat still endangering Ukraine.
There are perennial coordination matters [although a new UK-France forces merger may be a start the European Rapid Deployment Force never really made].

And not least, the abandoned Bush Administration’s European anti-missile shield has been replaced with a nominal 10-year proposal, obviously behind the curve of rapidly developing Iranian and North Korean missiles. This is even replete with hints of a dangerous technological transfer to Moscow.

Over all hovers the dark shadow of inadequate resources. With only five NATO members meeting minimum defense requirements of 2% of GDP – much of that fattening bloated bureaucracies – Europe is looking at a defense spending free-fall. Theoretically, drastic reform would help. But bureaucrat vs. boots-on-the-ground mismatch is endemic. Some defense establishments spend more than 60% on personnel. Of two million men under arms, only 3-5% is deployable, then only 30% in an expeditionary force. Germany, the heart of European defense, toys with abandoning universal service – adopted early by the Federal Republic as a check on revanchist militarism. But imitation of America’s volunteer army would be even more expensive and dictate drastic force reduction.

True, Europe’s Afghanistan ambivalence was spurred by Pres. Barack Hussein Obama earlier promising to march back down the hill on a timeline. It will be left to the military historians to judge the U.S.-UN-NATO mistakes. But a new French minister of defense – if a tired old politician — in all too familiar French oratory calls Afghanistan a “trap”. [Who knows better with Paris’ ghosts of Indochina and Algerian catastrophes?] Germany’s Foreign Minister Guido Westerwelle, in his own metrosexual, multiculturalist world far from the origins of his Free Democrats Party, wants withdrawal of Berlin’s no-night-warfare, beer-guzzlers. [Incidentally, his own Chancellor Angela Merkel says “multiculturalism” has failed.]

With American taxpayers facing new budget trials and tribulations, Defense Secretary Robert Gates’ pre-summit pep talks was a cry from the heart. But Pres. Obama came encumbered by his Congressional defeat and what Europeans regard as his disdain for them.

Another day, another international conference.

If there is a new NATO aborning, somewhere, somehow, it was hard to see or hear through the fog of war – and mindless rhetoric – in Lisbon.
sws-11-19-10

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Drang nach Osten

Posted on March 21, 2011 by yeoldecrabb| Leave a comment | Edit

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For almost a millennium dreams of riches and power in the Slavic and Finno-Ugric lands to their east had been a powerful magnet for Europe’s burgeoning Germanic tribes. Whether mercenary Middle Ages Teutonic knights conquering Balts, 18th century settlement of Volksdeutsche peasants by Russian Empress Catherine, Kaiser’s Prussian legions plunging into the World War I’s Eastern Front , or Hitler’s fatal Unternehmen Barbarossa, generation after generation of Germans have joint the “drive to the east”. Often it has been catastrophic.

Watching German Chancellor Angela Merkel’s latest Russian visit, it is hard not to recall this phenomenon dictating so much of modern European history. The Chancellor made all the obeisances at Yekaterinabervg, heart of the vast country, for her fifth meeting this year with Russian leaders: “We will also discuss domestic political problems and about various issues which have to do with human rights, But also about research, education and health.” But “that we do business, that we make profits and that we cooperate more intensively” was the thrust.

Once suspicious of close bilateral ties, Mrs. Merkel now was trailed by a large coterie of German industrialists, signing billions in new sales. This strategy was fed by her growing economic policy dilemma: Berlin helped bring on the continuing Euro crisis with aggressive, subsidized exporting. Unfortunately, of the 60 percent of German exports going to the EU market, disproportionate sales went to the peripheral smaller economies now in deep do-do; Greece presently the most desperate. Frankfurt is now searching desperately for other markets, difficult in a prolonged worldwide recession. The underdeveloped Russian economy with its seeming compatibility with Germany’s thirst for raw materials – not the least gas and oil – is all too attractive.

The Russian come-on is siren-like. Pres. Dmitry Medvedev invited German companies to invest in Russian enterprises until now blocked to foreigners. This time, for example, Germany’s heavy industrial giant Siemens alone signed for $2.8 billion to rebuild Russian railroads. These new investments follow an already estimated $20 billion by 6,000 German companies, many small and medium sized.

But even Mr. Medvedev lamented that it is a one-way traffic.

Still, addressing “Dear Dmitry”, the Chancellor announced the two governments had reached “a high level of understanding”. One of the ironies, of course, is Mrs. Merkel’s new Russian friendship ignores her bitter experiences growing up in the Soviet satellite East Germany. Even more incongruous is that her new ally, Prime Minister Vladimir Putin’s slim claim to statecraft expertise is largely his years as KGB liaison in Dresden with the German Communist Stassi secret police that persecuted Mrs. Merkel’s Lutheran pastor father.

The explanation for Mrs. Merkel’s strategy is obvious. Nimble politician that she is, Mrs. Merkel is nevertheless increasingly hemmed in. On the one hand, she has growing economic problems not only in Germany but of the whole European Community for which it has been the mainstay. More ominous is the increasingly fractured German political spectrum that looks too much like the failed post-World War I Weimar Republic whose demise led to Hitler and World War II.

True, the Germans – as even more their Russian partners – are now in a rapid demographic decline. This time, too, the German appetite is fed almost exclusively by commercial interest. But anyone taking a second look at Russia today must ask himself just how secure are these ambitious plans — and credits. As in earlier adventures, German enthusiasm may be based on wishful thinking, however vast a market and rich in raw materials the post-Soviet Russian Federation.

None of the major reforms promised repeatedly by post-Soviet leadership have succeeded. One index is that Moscow businessmen ship as much of their capital West as quickly as possible out of fear of Mr. Putin’s corrupt siloviki henchmen seizing it or his erratic policies. Russian net capital outflow continued last year at a staggering $52.4 billion. [When Mr. Putin staged his five-day war in Georgia in August 2008, domestic and foreign investors tossed more than $300 billion to safety in Swiss, French and even dollar institutions.]

Whether it is the continuing fall in male morbidity or repeatedly announced and failed military reform, the picture on all sides is essentially bleak. There has been a return to random political assassination, one-party government, Soviet-style media control, centralized bureaucratic governance [“a vertical power structure” Mr. Putin calls it]. Russia’s rulers – however much Mr. Putin’s puppet, Pres. Medvedev promises reform –do not provide an investment climate for the faint of heart. For example, confiscation [in Sakhalin against petrogiants BP, Shell and Japanese financial interests] in the very fossil fuel industry on which the economy now almost totally depends is a new style of Russian roulette scaring off essential capital and technology transfer. That’s why Mrs. Merkel’s subsidized German lending has almost a noncompetitive field.

In a world economy turned upside down by the sharpest downturns since The Great Depression, some old axioms are giving way to new slogans. But only time will tell if Germany’s new old “drive to the east” will achieve better results.

sws-07-16-10

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Negotiations or surrender?
As that old saying goes, the French have a word for it: déformation professionelle. It means to make a judgmental mistake as a result of one’s occupation. Thus, as a first reaction to a problem/crisis a physician who is a surgeon might be more tempted to cut than he should, a lawyer to litigate, a teacher to instruct, etc. Obviously, a diplomat might quickly try to negotiate to solve a geopolitical crisis.
But thereby lies the rub. Negotiations for the sake of negotiations often result in disaster. That is particularly true with U.S. diplomats, steeped in that powerful American ethos to be successful, who see any negotiation as having to have a fruitful outcome, i.e., in all probability a compromise between the parties. In a grim scenario, to avoid violence and war of course, the goal is obviously laudatory.
Furthemore, negotiations, often take place in an exotic world — subject to the imitation military hierarchy of the U.S. Foreign Service, in primitive locales or in the world’s fleshpots, in foreign languages, all involving “the parameters” of special diplomatese. The jargon and the “modalities” often intimidate the outsider, especially other Americans whose preoccupation is with domestic affairs rather than the elite world of diplomats. It explains, in part, why so many politicians appointed to Secretary of State have become prisoners of the professional diplomats in Foggy Bottom, turning on their heel against earlier deeply held positions. Mrs. Hillary Clinton is only the latest; even a foreign policy expert like former Pres. George W. Bush’s National Security Adviser Condoleezza Rice succumbed. The stereotypical American, on the other hand, attempts to employ Alexander’s solution of the Gordian Knot with problems – cut through “the BS” and reach a “gentleman’s agreement”. President Barack Obama calls this “a comprehensive solution”. But more often these are traditionally difficult, long term problems, infinitely complex and an overall solution requires too many concessions by too many interests.
Furthermore, if you are negotiating outside the norm of the circle of peaceful and friendly democratic nations, you have a problem. A stonewalling opponent may strengthen his position by stringing along his American counterpart. That simply means that in the end, the U.S. diplomat makes whatever concessions are necessary to get “a successful outcome”, what is perceived at least to be a “settlement”. The end result is not a negotiation but can well be surrender.
Our American diplomatic history, alas! is replete with examples of where we fell into this trap. And at the moment, the Obama Administration appears locked in two such enterprises which bear intense scrutiny for this very reason. This Administration did not create them, of course, nor, indeed, were they created in the eight Bush years. Rather their origins are buried in a long past.
• The sinking of a South Korean warship by a North Korean submarine has raised the ante in the long-standing dispute on the Korean peninsular. Pyongyang represents a bankrupt regime – both morally and economically. Starvation and malnutrition for its 15 million people has been hallmark of yet another Communist state. Now a new crisis arises from the collapse of a dysfunctional family in the only Communist monarchy. The dilemma for the regime – and for Washington – is that North Korean Dictator Kim Jong Il seems to believe that to move toward proffered help for liberalization of his economy [even “the China model”] would begin a total disintegration much like that which overtook Nicolai Ceausescu’s Romania.
• Coincidentally – although the two regimes have done as much as they can to reinforce one another – Washington is attempting to negotiate its way out of the threat of an aggressive regime in Tehran developing nuclear weapons. Although the mullahs, in one of the most corrupt regimes in the long history of Persian abuse of power, have managed to enrich themselves, their economy hangs by a thread. Huge exports of oil at prices the former Shah Reza Pavlevi only dreamed of, are not enough to fund an enormous weapons program, a worldwide terrorist and subversion network, a rapidly expanding population, and the dereliction of any real economic development. But the dream of rebuilding the ancient Persian Empire and dominating the Middle East [and its oil resources] are a goal the current rulers may not abandon – without their own demise.
Into this arena, the Obama Administration – led by its FSOs — has plunged. He has apologized for what he sees as past [moral and strategic] mistakes of American policy. And he has launched a wide-ranging effort to initiate negotiations with former and perceived present opponents.
The question is, of course, that old American philosophical one: will it work? Is this American pragmatism or is it an ideological approach to problems doomed to even greater disasters than the sinking of an ally’s ship in time of armistice.
sws-05-28-10

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Drang nach Osten
For almost a millennium dreams of riches and power in the Slavic and Finno-Ugric lands to their east had been a powerful magnet for Europe’s burgeoning Germanic tribes. Whether mercenary Middle Ages Teutonic knights conquering Balts, 18th century settlement of Volksdeutsche peasants by Russian Empress Catherine, Kaiser’s Prussian legions plunging into the World War I’s Eastern Front , or Hitler’s fatal Unternehmen Barbarossa, generation after generation of Germans have joint the “drive to the east”. Often it has been catastrophic.
Watching German Chancellor Angela Merkel’s latest Russian visit, it is hard not to recall this phenomenon dictating so much of modern European history. The Chancellor made all the obeisances at Yekaterinabervg, heart of the vast country, for her fifth meeting this year with Russian leaders: “We will also discuss domestic political problems and about various issues which have to do with human rights, But also about research, education and health.” But “that we do business, that we make profits and that we cooperate more intensively” was the thrust.
Once suspicious of close bilateral ties, Mrs. Merkel now was trailed by a large coterie of German industrialists, signing billions in new sales. This strategy was fed by her growing economic policy dilemma: Berlin helped bring on the continuing Euro crisis with aggressive, subsidized exporting. Unfortunately, of the 60 percent of German exports going to the EU market, disproportionate sales went to the peripheral smaller economies now in deep do-do; Greece presently the most desperate. Frankfurt is now searching desperately for other markets, difficult in a prolonged worldwide recession. The underdeveloped Russian economy with its seeming compatibility with Germany’s thirst for raw materials – not the least gas and oil – is all too attractive.
The Russian come-on is siren-like. Pres. Dmitry Medvedev invited German companies to invest in Russian enterprises until now blocked to foreigners. This time, for example, Germany’s heavy industrial giant Siemens alone signed for $2.8 billion to rebuild Russian railroads. These new investments follow an already estimated $20 billion by 6,000 German companies, many small and medium sized.
But even Mr. Medvedev lamented that it is a one-way traffic.
Still, addressing “Dear Dmitry”, the Chancellor announced the two governments had reached “a high level of understanding”. One of the ironies, of course, is Mrs. Merkel’s new Russian friendship ignores her bitter experiences growing up in the Soviet satellite East Germany. Even more incongruous is that her new ally, Prime Minister Vladimir Putin’s slim claim to statecraft expertise is largely his years as KGB liaison in Dresden with the German Communist Stassi secret police that persecuted Mrs. Merkel’s Lutheran pastor father.
The explanation for Mrs. Merkel’s strategy is obvious. Nimble politician that she is, Mrs. Merkel is nevertheless increasingly hemmed in. On the one hand, she has growing economic problems not only in Germany but of the whole European Community for which it has been the mainstay. More ominous is the increasingly fractured German political spectrum that looks too much like the failed post-World War I Weimar Republic whose demise led to Hitler and World War II.
True, the Germans – as even more their Russian partners – are now in a rapid demographic decline. This time, too, the German appetite is fed almost exclusively by commercial interest. But anyone taking a second look at Russia today must ask himself just how secure are these ambitious plans — and credits. As in earlier adventures, German enthusiasm may be based on wishful thinking, however vast a market and rich in raw materials the post-Soviet Russian Federation.
.None of the major reforms promised repeatedly by post-Soviet leadership have succeeded. One index is that Moscow businessmen ship as much of their capital West as quickly as possible out of fear of Mr. Putin’s corrupt siloviki henchmen seizing it or his erratic policies. Russian net capital outflow continued last year at a staggering $52.4 billion. [When Mr. Putin staged his five-day war in Georgia in August 2008, domestic and foreign investors tossed more than $300 billion to safety in Swiss, French and even dollar institutions.]
Whether it is the continuing fall in male morbidity or repeatedly announced and failed military reform, the picture on all sides is essentially bleak. There has been a return to random political assassination, one-party government, Soviet-style media control, centralized bureaucratic governance [“a vertical power structure” Mr. Putin calls it]. Russia’s rulers – however much Mr. Putin’s puppet, Pres. Medvedev promises reform –do not provide an investment climate for the faint of heart. For example, confiscation [in Sakhalin against petrogiants BP, Shell and Japanese financial interests] in the very fossil fuel industry on which the economy now almost totally depends is a new style of Russian roulette scaring off essential capital and technology transfer. That’s why Mrs. Merkel’s subsidized German lending has almost a noncompetitive field.
In a world economy turned upside down by the sharpest downturns since The Great Depression, some old axioms are giving way to new slogans. But only time will tell if Germany’s new old “drive to the east” will achieve better
sws-07-16-10

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