By Wolfgang Münchau
Published: February 15 2009 19:27 | Last updated: February 15 2009 19:27
“It is justifiable if a factory of Renault is built in India so that Renault cars may be sold to the Indians. But it is not justifiable if a factory ... is built in the Czech Republic and its cars are sold in France” – Nicolas Sarkozy, president of France.
This is a troubling statement indeed. But instead of launching a tirade against Mr Sarkozy, I would like to make an observation that is perhaps not immediately evident: his statement is entirely consistent with the way the European Union has reacted to the financial crisis.
To see the link between crisis management and the rise in protectionism, look at the initial policy response to last September’s financial shockwaves. European leaders have woefully underestimated the crisis and possibly still do. The European economy is now heading towards a depression, with German gross domestic product falling at an annualised rate of almost 9 per cent. The early misjudgment of the crisis resulted in stimulus packages with two defects. They were initially too small but, more importantly, they were not co-ordinated. One important aspect of the economic meltdown is the presence of strong cross-country spillovers, both globally and inside the EU. The policy response failed to take account of these spillovers.
For the bank bail-out programmes, the EU managed to set a minimum level of competition rules, but these programmes, too, were national and not co-ordinated. So how does the combined effect of these two unco-ordinated responses lead to protectionism?
If stimulus money is dispersed at national level, governments naturally try to make sure that the money stays inside their countries. The prospect that consumers might spend the money on imported goods was one of the reasons why eurozone governments were reluctant to cut taxes. Because of EU competition rules, the same logic also applies to government purchases. Under those rules, governments had to open public projects to EU-wide tenders. If you play by the rules, keeping the cash in your country is not easy.
Governments have since relaxed those rules. In other words, if you want to make sure that these programmes function in their warped way, you have to dismantle the single market. The same logic applies to the bank rescue packages. If the European Commission tried to block each uncompetitive bank rescue, it would be blamed for causing a financial collapse. Governments have found a way to circumvent the EU, by breaking so many rules at once, that the Commission cannot even begin to react effectively.
Expect to see three effects with progressively destructive force. The first is that the stimulus is much less effective than it could otherwise have been. When everybody tries to gain a competitive advantage over each other, the effects usually cancel out.
Second, the stimulus and bank rescue packages harm the single European market directly. The French subsidies are more blatant, as is the protectionist rhetoric of its president. But everybody in Europe plays the same game. It is not as though the single market is the default position for European commerce. Much of the service sector is exempted. Europe lacks an effective pan-European retail infrastructure and retail banking system. Reversing this programme long before it is completed would be a mistake.
Third, and most destructive, the combined decision on stimulus and financial rescue packages poses an existential threat to monetary union. A blanket loan guarantee to every bank, as most governments have granted, in combination with indiscriminate capital injections and a reluctance to restructure, will mean the transformation of private into sovereign default risk – aggravated further by the economic downturn. Some insolvent banks are now owned by the state, while the bulk of damaged, not-yet-insolvent banks are lingering on, hoarding cash. This programme is a drain of resources with no resolution in sight.
I would now expect several eurozone countries with weak banking sectors to get into serious difficulties as the crisis continues. There is a risk of cascading sovereign defaults. If this was limited to countries of the size of Ireland or Greece, one could solve this problem through a bail-out. But solvency risk is not a problem confined to small countries. The banking sectors in Italy, Spain and Germany are increasingly vulnerable.
When European leaders meet for their anti-protectionism summit on March 1, they will produce warm words to reaffirm their commitment to the single market. I suspect they will continue to misdiagnose the crisis. Protectionism is not the root of the problem. The protectionism we are experiencing now is caused by co-ordination failure. It is neither sudden, nor surprising.
The right course would be to solve the underlying problem – to shift at least some of the stimulus spending to EU or eurozone level and, ideally, drop those toxic national schemes altogether and to adopt a joint strategy for the financial sector, at least for the 45 cross-border European banks. But this is not going to happen. It did not happen in October, and it is not going to happen now. As a result of the extraordinary narrow-mindedness of Europe’s political leadership, expect serious damage to the single market in general and the single market for financial services in particular. As for the eurozone, I always argued in the past that a break-up is in effect impossible. I am no longer so sure.
Monday, February 16, 2009
Turkish banks feel heat from bad loans
By Delphine Strauss
Published: February 15 2009 20:12 | Last updated: February 15 2009 20:12
A jump in bad loans hit Turkish banks’ profits in the last quarter of 2008 after a long period in which they had expanded branch networks and rapidly increased consumer credit and lending to small businesses.
Akbank, Turkey’s biggest lender by market value, reported fourth-quarter net income of TL212m ($128m) after the market close on Friday – below expectations and 39 per cent below the third quarter. Net income of TL1.78bn in 2008 was 15 per cent below the previous year.
At Garanti Bank, part-owned by General Electric, unconsolidated net profit fell 14 per cent quarter on quarter to TL350m. Year-end net profit was down 24 per cent from 2007 at TL1.75bn.
Analysts polled by Reuters expect Is Bank, Turkey’s second biggest by market value, to report a 7 per cent drop in full-year earnings.
Turkish banks have largely avoided the travails of their western counterparts and still have sound loan-to-deposit ratios and capital adequacy ratios at 13 per cent or above.
But Tevfik Bilgin, head of Turkey’s banking regulator, has warned that non-performing loans (NPLs) would rise from 2008’s average rate of 3.6 per cent as the economic contraction took its toll on businesses and consumers.
Garanti and Akbank said bad loans had jumped 46 per cent and 35 per cent, respectively, in the last quarter – although both are still beating the sector average – and their drop in profits was partly due to higher provisioning expenses. Shares in Garanti, the most actively traded stock on Istanbul’s exchange, rallied on Friday.
But Akbank’s shares fell sharply last week after it emerged some family shareholders planned to sell stakes in both the bank and its parent, Sabanci Holding, totalling more than $1bn even at depressed prices.
Nergis Kasabali, analyst at Ata Invest, said the news would weigh on Akbank’s share price unless a sale to institutional investors was announced soon.
Copyright The Financial Times Limited 2009
Published: February 15 2009 20:12 | Last updated: February 15 2009 20:12
A jump in bad loans hit Turkish banks’ profits in the last quarter of 2008 after a long period in which they had expanded branch networks and rapidly increased consumer credit and lending to small businesses.
Akbank, Turkey’s biggest lender by market value, reported fourth-quarter net income of TL212m ($128m) after the market close on Friday – below expectations and 39 per cent below the third quarter. Net income of TL1.78bn in 2008 was 15 per cent below the previous year.
At Garanti Bank, part-owned by General Electric, unconsolidated net profit fell 14 per cent quarter on quarter to TL350m. Year-end net profit was down 24 per cent from 2007 at TL1.75bn.
Analysts polled by Reuters expect Is Bank, Turkey’s second biggest by market value, to report a 7 per cent drop in full-year earnings.
Turkish banks have largely avoided the travails of their western counterparts and still have sound loan-to-deposit ratios and capital adequacy ratios at 13 per cent or above.
But Tevfik Bilgin, head of Turkey’s banking regulator, has warned that non-performing loans (NPLs) would rise from 2008’s average rate of 3.6 per cent as the economic contraction took its toll on businesses and consumers.
Garanti and Akbank said bad loans had jumped 46 per cent and 35 per cent, respectively, in the last quarter – although both are still beating the sector average – and their drop in profits was partly due to higher provisioning expenses. Shares in Garanti, the most actively traded stock on Istanbul’s exchange, rallied on Friday.
But Akbank’s shares fell sharply last week after it emerged some family shareholders planned to sell stakes in both the bank and its parent, Sabanci Holding, totalling more than $1bn even at depressed prices.
Nergis Kasabali, analyst at Ata Invest, said the news would weigh on Akbank’s share price unless a sale to institutional investors was announced soon.
Copyright The Financial Times Limited 2009
EU is losing its grip on Caspian gas corridor
Borut Grgic
Published: February 15 2009
The European Union faces two obstacles to its project to pipe gas via a southern corridor from the Caspian region and thus reduce western Europe’s dependence on Russian supplies: Turkey’s attitude and the Balkan activities of Gazprom, the state-controlled Russian oil monopoly.
After receiving less than a warm embrace by the EU, Recep Tayyip Erdogan’s administration and the Turkish public are not eager to jump on the EU bandwagon when it comes to the southern gas corridor. Ankara’s objective is to turn Turkey into a regional energy hub. This means that Turkey would not be a transit state, but a buyer and reseller of Caspian gas to European customers. Of course, Mr Erdogan is playing hardball to get this status for Turkey. But it is a proposal the EU must refuse. There is no added value in buying Turkish gas when we can be buying Azeri and Turkmen gas directly from the producers.
European energy supply security has been suffering partly because of the problems that exist between the producing countries and transit states. The most recent example is the Russian-Ukrainian “gas war three”.
Turkey is dispensable as a transit state. To get to the Caspian gas, Europe can go across the Black Sea and connect Georgia and Romania. A connection between Azerbaijan and Georgia already exists. Romania has been subtly making a case for itself as a viable alternative to Turkey, but the Georgian option is not risk-free.
How can we forget the Georgia-Russia August war that has seen the birth of two new semi-states – Abkhazia and South Ossetia? A Moscow-controlled Abkhazia could pose a problem in building a secure gas connection from Azerbaijan through Georgia. But if Turkey keeps digging in its heels on the transit of Azerbaijan gas to Europe, even the Abkhazia problem will find a solution. The Turkish offer to the Azeris for gas is around $144 per 1,000 cubic metres – a price so low when compared with the $400-plus market price in Europe that the offer cannot be taken seriously in Baku. For the difference in the price Caspian producers can pay off the Abkhaz authorities to make sure they do not interfere with the gas terminals on Georgia’s Black Sea coast close to the Abkhazia border.
The bottom line is clear. The preferred way to get gas from Azerbaijan to Europe is via Turkey, but not under any condition. Mr Erdogan has to be flexible, and Europe, too. He is right to say the EU should open the energy chapter in membership negotiations with Turkey before talking to him about the transit issue. Part of the blame is on the shoulders of Cyprus and other EU states, such as France, who are blocking the energy chapter.
It is time to get serious about the southern corridor, lest Azerbaijani gas be sold to Russia and Iran. Both have expressed interest. If Baku sells its gas elsewhere, what will be the incentive for Turkmenistan to sell to Europe?
An attractive offer should be made to Turkey – something to the effect of the unlocking of the energy chapter in return for a transit agreement from Ankara. This is a deal the Czech EU presidency should bring when it next meets Mr Erdogan – hopefully soon.
On a separate note, Russia’s Gazprom has just concluded a deal with Serbia and bought NIS, the Serbian national oil and gas company. With NIS in its pocket, Gazprom now has access to all the downstream markets of the former Yugoslavia. Serbia was a gas hub in the past and the networks are still there, if a little rusty. By refilling them with cheaper-than-market-price Russian gas, Gazprom can establish control over the south-east European gas market in no time.
This will not necessarily derail the southern corridor option, but it can complicate developments further. With the south-east European gas market in the hands of Gazprom, what are the incentives for the Caspian producers to look for alternative options to the Russian one to deliver their gas to Europe? If they sell the gas into the Russian grid at market price minus transit, or straight to Gazprom at a competitive price, why bother with bogus alternatives? Their profits will be large and they will not have to worry about getting the gas to the market and all the complications along the way.
Europe is losing its grip on the southern gas corridor. If no quick fixes are pursued – which above all means signing a deal with Ankara on transit of Azerbaijani gas this year – it is best that we learn to deal with Russia as the only supplier of gas from the east.
The writer is director of the Institute for Strategic Studies, Brussels
Copyright The Financial Times Limited 2009
Published: February 15 2009
The European Union faces two obstacles to its project to pipe gas via a southern corridor from the Caspian region and thus reduce western Europe’s dependence on Russian supplies: Turkey’s attitude and the Balkan activities of Gazprom, the state-controlled Russian oil monopoly.
After receiving less than a warm embrace by the EU, Recep Tayyip Erdogan’s administration and the Turkish public are not eager to jump on the EU bandwagon when it comes to the southern gas corridor. Ankara’s objective is to turn Turkey into a regional energy hub. This means that Turkey would not be a transit state, but a buyer and reseller of Caspian gas to European customers. Of course, Mr Erdogan is playing hardball to get this status for Turkey. But it is a proposal the EU must refuse. There is no added value in buying Turkish gas when we can be buying Azeri and Turkmen gas directly from the producers.
European energy supply security has been suffering partly because of the problems that exist between the producing countries and transit states. The most recent example is the Russian-Ukrainian “gas war three”.
Turkey is dispensable as a transit state. To get to the Caspian gas, Europe can go across the Black Sea and connect Georgia and Romania. A connection between Azerbaijan and Georgia already exists. Romania has been subtly making a case for itself as a viable alternative to Turkey, but the Georgian option is not risk-free.
How can we forget the Georgia-Russia August war that has seen the birth of two new semi-states – Abkhazia and South Ossetia? A Moscow-controlled Abkhazia could pose a problem in building a secure gas connection from Azerbaijan through Georgia. But if Turkey keeps digging in its heels on the transit of Azerbaijan gas to Europe, even the Abkhazia problem will find a solution. The Turkish offer to the Azeris for gas is around $144 per 1,000 cubic metres – a price so low when compared with the $400-plus market price in Europe that the offer cannot be taken seriously in Baku. For the difference in the price Caspian producers can pay off the Abkhaz authorities to make sure they do not interfere with the gas terminals on Georgia’s Black Sea coast close to the Abkhazia border.
The bottom line is clear. The preferred way to get gas from Azerbaijan to Europe is via Turkey, but not under any condition. Mr Erdogan has to be flexible, and Europe, too. He is right to say the EU should open the energy chapter in membership negotiations with Turkey before talking to him about the transit issue. Part of the blame is on the shoulders of Cyprus and other EU states, such as France, who are blocking the energy chapter.
It is time to get serious about the southern corridor, lest Azerbaijani gas be sold to Russia and Iran. Both have expressed interest. If Baku sells its gas elsewhere, what will be the incentive for Turkmenistan to sell to Europe?
An attractive offer should be made to Turkey – something to the effect of the unlocking of the energy chapter in return for a transit agreement from Ankara. This is a deal the Czech EU presidency should bring when it next meets Mr Erdogan – hopefully soon.
On a separate note, Russia’s Gazprom has just concluded a deal with Serbia and bought NIS, the Serbian national oil and gas company. With NIS in its pocket, Gazprom now has access to all the downstream markets of the former Yugoslavia. Serbia was a gas hub in the past and the networks are still there, if a little rusty. By refilling them with cheaper-than-market-price Russian gas, Gazprom can establish control over the south-east European gas market in no time.
This will not necessarily derail the southern corridor option, but it can complicate developments further. With the south-east European gas market in the hands of Gazprom, what are the incentives for the Caspian producers to look for alternative options to the Russian one to deliver their gas to Europe? If they sell the gas into the Russian grid at market price minus transit, or straight to Gazprom at a competitive price, why bother with bogus alternatives? Their profits will be large and they will not have to worry about getting the gas to the market and all the complications along the way.
Europe is losing its grip on the southern gas corridor. If no quick fixes are pursued – which above all means signing a deal with Ankara on transit of Azerbaijani gas this year – it is best that we learn to deal with Russia as the only supplier of gas from the east.
The writer is director of the Institute for Strategic Studies, Brussels
Copyright The Financial Times Limited 2009
Friday, February 13, 2009
Turkey says any IMF deal to be short-term
By Selcuk Gokoluk
ANKARA, Feb 12 (Reuters) - Turkish Economy Minister Mehmet Simsek said on Thursday that a possible IMF loan deal to help the country face a global financial crisis will be for a duration of 18 months to 3 years.
Turkish financial markets have long waited for a fresh loan programme to replace the $10 billion accord which expired last May and shore up the $750 billion economy which has slowed sharply under the impact of the global crisis.
However, protracted IMF talks were suspended in January due to disagreements over its terms, raising concerns about whether a deal -- expected at around $25 billion -- will be agreed. Ambivalent comments have come from Prime Minister Tayyip Erdogan, who has the final say on the fate of the talks, about the likelihood of an agreement.
Analysts say the government may be trying to drag out talks with the Fund in order to avoid having to curtail spending ahead of municipal elections on March 29. Any major IMF stand-by agreement would traditionally be accompanied by strict fiscal conditions.
The IMF has been pushing for tighter fiscal policy and a higher primary surplus while the government has wanted to use IMF money to stimulate economic growth.
In an interview with broadcaster CNBC-e, Simsek said there was no disagreement with the IMF on targets and the contents of the deal and that the outstanding issues were more concerned with technical matters. However, on January 30 Simsek said disagreements were not over minor issues.
'If there is an agreement with the IMF its duration can be a minimum 18 months and it can go up to three years,' Simsek said. Turkey has in the past mostly signed three-year stand-by deals with the IMF.
ANKARA, Feb 12 (Reuters) - Turkish Economy Minister Mehmet Simsek said on Thursday that a possible IMF loan deal to help the country face a global financial crisis will be for a duration of 18 months to 3 years.
Turkish financial markets have long waited for a fresh loan programme to replace the $10 billion accord which expired last May and shore up the $750 billion economy which has slowed sharply under the impact of the global crisis.
However, protracted IMF talks were suspended in January due to disagreements over its terms, raising concerns about whether a deal -- expected at around $25 billion -- will be agreed. Ambivalent comments have come from Prime Minister Tayyip Erdogan, who has the final say on the fate of the talks, about the likelihood of an agreement.
Analysts say the government may be trying to drag out talks with the Fund in order to avoid having to curtail spending ahead of municipal elections on March 29. Any major IMF stand-by agreement would traditionally be accompanied by strict fiscal conditions.
The IMF has been pushing for tighter fiscal policy and a higher primary surplus while the government has wanted to use IMF money to stimulate economic growth.
In an interview with broadcaster CNBC-e, Simsek said there was no disagreement with the IMF on targets and the contents of the deal and that the outstanding issues were more concerned with technical matters. However, on January 30 Simsek said disagreements were not over minor issues.
'If there is an agreement with the IMF its duration can be a minimum 18 months and it can go up to three years,' Simsek said. Turkey has in the past mostly signed three-year stand-by deals with the IMF.
Week before Gaza op, Israel and Syria were ready for direct talks
By Zvi Barel
Erdogan had invited Olmert to his official residence after he met Turkey's president. He suggested calling Assad and drafting a joint announcement about a direct discussion between the Israeli and Syrian delegations.
The source said Erdogan called Assad, told him that Olmert was at his residence and asked whether he would accept Erdogan's mediation. Assad agreed and the two began drafting the statement.
Every few minutes Erdogan's assistant brought Olmert, who was in another room, notes from Erdogan's talk with Assad and asked for his comments. Erdogan passed Olmert's comments on to Assad and took down his responses, which he then passed on to Olmert.
The source said the three-way conversation continued for more than four hours, until about 1 A.M. Olmert told Erdogan he must return to Israel. Erdogan said he would continue talking to Assad and call Olmert the next day for his comments.
"The joint Syrian-Israeli statement was nearly finished and needed only a few corrected words to be completed," the Turkish source said.
"After making the statement, the parties were to announce that they were ready to start direct negotiations and Erdogan was convinced that he had an agreed-on draft," the source said.
The statement had been expected to include an agreement to adhere to the understanding reached with Yitzhak Rabin.
This stipulated that Israel would be prepared to withdraw from the entire Golan in exchange for permanent peace and security arrangements, as well as agreement on what the term normalization would mean for future peaceful relations.
But a week later, Israel launched the offensive in Gaza. When Erdogan heard of the attack he said that Olmert had stabbed him in the back and that Israel must pay for it, one of his aides said.
Erdogan had invited Olmert to his official residence after he met Turkey's president. He suggested calling Assad and drafting a joint announcement about a direct discussion between the Israeli and Syrian delegations.
The source said Erdogan called Assad, told him that Olmert was at his residence and asked whether he would accept Erdogan's mediation. Assad agreed and the two began drafting the statement.
Every few minutes Erdogan's assistant brought Olmert, who was in another room, notes from Erdogan's talk with Assad and asked for his comments. Erdogan passed Olmert's comments on to Assad and took down his responses, which he then passed on to Olmert.
The source said the three-way conversation continued for more than four hours, until about 1 A.M. Olmert told Erdogan he must return to Israel. Erdogan said he would continue talking to Assad and call Olmert the next day for his comments.
"The joint Syrian-Israeli statement was nearly finished and needed only a few corrected words to be completed," the Turkish source said.
"After making the statement, the parties were to announce that they were ready to start direct negotiations and Erdogan was convinced that he had an agreed-on draft," the source said.
The statement had been expected to include an agreement to adhere to the understanding reached with Yitzhak Rabin.
This stipulated that Israel would be prepared to withdraw from the entire Golan in exchange for permanent peace and security arrangements, as well as agreement on what the term normalization would mean for future peaceful relations.
But a week later, Israel launched the offensive in Gaza. When Erdogan heard of the attack he said that Olmert had stabbed him in the back and that Israel must pay for it, one of his aides said.
'Netanyahu Is Not Prepared to Compromise'
It still isn't clear who will be asked to form Israel's next government. But if Netanyahu gets the nod, German commentators fear the peace process will suffer.
Israel is set to announce the final tally from Tuesday's parliamentary vote on Thursday. But even before the official numbers are in, Likud party Chairman Benjamin Netanyahu has started a major push to form a coalition government as quickly as possible, even though early results had him running (just barely) behind his rival, Tzipi Livni.
According to the Israeli paper Haaretz on Thursday, Netanyahu was planning to offer Avigdor Lieberman, from the ultra-nationalist Israel Beitenu party, the Finance Ministry in an effort to quickly bind him in a new government. The paper also reported that "Bibi," as Netanyahu is known to both friends and foes alike, will then invite his rivals from the Kadima party, chaired by Livni, to take on the foreign and defense portfolios.
It is unclear whether the gambit will work. Preliminary results show that Netanyahu's party won 27 seats in parliament, against 28 for Kadima. But because the right side of the political spectrum -- boosted by 15 seats won by Israel Beitenu -- trounced the left, overall, it appears difficult for Livni to form a stable coalition. Still, Interior Minister Meir Sheetrit, a member of Kadima, said the party would not join an extreme right-wing government under Netanyahu's leadership.
"We will join a Netanyahu government only if it is (not extreme)," he said, according to Haaretz. "We are not afraid to sit in the opposition."
There is still some time before President Shimon Peres has to decide who to ask to form a government. Results will become official next week. If Peres opts for Netanyahu, it will be the first time in Israel's history that the strongest party was passed over to lead a government.
Outside Israel, many are viewing developments with some concern. The hawkish tone from Likud and other parties on the right has raised fears that the Middle East peace process might stall under Netanyahu. Lieberman's participation in any Netanyahu-led government is particularly worrying for many. His platform has been profoundly anti-Arab -- in fact Lieberman proposed that all Arab Israelis should sign a loyalty oath to Israel as a Jewish state.
German commentators on Thursday also voiced their concerns.
The left-leaning Die Taggeszeitung writes:
"Israel has voted for the right and, in doing so, reacted to the radicalization of the Palestinians. Three years after the electoral victory of Hamas, Israel's left-leaning parties no longer have a chance at winning a majority. Every missile that was shot at Israel from the Gaza Strip strengthened the position of those Israeli politicians who aren't willing to compromise."
"Hamas aided Israel's right-leaning politicians in gaining power -- and now the right may even be able to secure a stabile, long-term coalition."
The Financial Times Deutschland writes:
"Even if Jerusalem ends up with a coalition that is prepared to work towards peace, the battle is still far from over. As long as Hamas' goal is the destruction of Israel, creating a two-state solution will remain nearly impossible, as a separate peace with Fatah cannot exist. It's also difficult to imagine progress in the Middle East unless Syria and Iran stop supporting Hamas and fueling the conflict."
"If US President Barack Obama wants his 'aggressive' peace initiative to have a chance, it won't be enough to sit around hoping that Israel's new government will work on a peace agreement. It also won't be enough to put pressure on Jerusalem if, in the end, hardliners there have all the say."
The center-right Frankfurter Allgemeine Zeitung focuses on the need for a new political system in Israel:
"Only with Ms. Livni is there a real chance (for peace) because the foreign minister campaigned on a platform of one day living peacefully next to a Palestinian state and returning the Golan Heights to Syria in exchange for peace. Benjamin Netanyahu is not prepared to accept any of these compromises and would, at best, aid Palestinians in making economic progress."
"In order to undertake painful compromises with the Palestinians and Arab neighbors, Israel needs a stable governing majority.... Israel desperately needs to overhaul its political system because whoever wins power will have to commit a large portion of his or her time to building a shaky coalition and then keeping it together -- more time than for important issues that require full commitment. That means, not only finding a peaceful solution to the conflict with Palestinians, but also addressing the international financial crisis that is currently hitting Israel with full force and has already cost countless Israelis their jobs."
The center-left Süddeutsche Zeitung writes:
"Netanyahu's win has created a dilemma for Obama. The US president needs to make progress in the peace process in order to move toward reconciliation with the Arab world. Netanyahu will be an uncompromising ruler, and his promised toughness and politics of fear helped win a parliamentary majority for the right. He opposes peace talks like the ones Livni held with moderate Palestinians in the West Bank.... He doesn't want to discuss borders, refugees and Jerusalem with Palestinians but rather to stick with the politics of containment. At best, he could assist in creating industry parks."
"It would be courageous to aid Palestinians in creating a state, as the US government is currently doing on a small scale by training Palestinian security forces in the West Bank. It would furthermore be courageous to reform the Israeli election system. Twelve parties are represented in the new Knesset and they will, as always, be a hindrance to one another. The 2 percent rule hinders every step toward parliamentary progress. It also keeps courageous politicians like Livni from breaking the vicious cycle of Israel's internal politics."
-- Caroline Winter, 2:45 p.m. CET
Israel is set to announce the final tally from Tuesday's parliamentary vote on Thursday. But even before the official numbers are in, Likud party Chairman Benjamin Netanyahu has started a major push to form a coalition government as quickly as possible, even though early results had him running (just barely) behind his rival, Tzipi Livni.
According to the Israeli paper Haaretz on Thursday, Netanyahu was planning to offer Avigdor Lieberman, from the ultra-nationalist Israel Beitenu party, the Finance Ministry in an effort to quickly bind him in a new government. The paper also reported that "Bibi," as Netanyahu is known to both friends and foes alike, will then invite his rivals from the Kadima party, chaired by Livni, to take on the foreign and defense portfolios.
It is unclear whether the gambit will work. Preliminary results show that Netanyahu's party won 27 seats in parliament, against 28 for Kadima. But because the right side of the political spectrum -- boosted by 15 seats won by Israel Beitenu -- trounced the left, overall, it appears difficult for Livni to form a stable coalition. Still, Interior Minister Meir Sheetrit, a member of Kadima, said the party would not join an extreme right-wing government under Netanyahu's leadership.
"We will join a Netanyahu government only if it is (not extreme)," he said, according to Haaretz. "We are not afraid to sit in the opposition."
There is still some time before President Shimon Peres has to decide who to ask to form a government. Results will become official next week. If Peres opts for Netanyahu, it will be the first time in Israel's history that the strongest party was passed over to lead a government.
Outside Israel, many are viewing developments with some concern. The hawkish tone from Likud and other parties on the right has raised fears that the Middle East peace process might stall under Netanyahu. Lieberman's participation in any Netanyahu-led government is particularly worrying for many. His platform has been profoundly anti-Arab -- in fact Lieberman proposed that all Arab Israelis should sign a loyalty oath to Israel as a Jewish state.
German commentators on Thursday also voiced their concerns.
The left-leaning Die Taggeszeitung writes:
"Israel has voted for the right and, in doing so, reacted to the radicalization of the Palestinians. Three years after the electoral victory of Hamas, Israel's left-leaning parties no longer have a chance at winning a majority. Every missile that was shot at Israel from the Gaza Strip strengthened the position of those Israeli politicians who aren't willing to compromise."
"Hamas aided Israel's right-leaning politicians in gaining power -- and now the right may even be able to secure a stabile, long-term coalition."
The Financial Times Deutschland writes:
"Even if Jerusalem ends up with a coalition that is prepared to work towards peace, the battle is still far from over. As long as Hamas' goal is the destruction of Israel, creating a two-state solution will remain nearly impossible, as a separate peace with Fatah cannot exist. It's also difficult to imagine progress in the Middle East unless Syria and Iran stop supporting Hamas and fueling the conflict."
"If US President Barack Obama wants his 'aggressive' peace initiative to have a chance, it won't be enough to sit around hoping that Israel's new government will work on a peace agreement. It also won't be enough to put pressure on Jerusalem if, in the end, hardliners there have all the say."
The center-right Frankfurter Allgemeine Zeitung focuses on the need for a new political system in Israel:
"Only with Ms. Livni is there a real chance (for peace) because the foreign minister campaigned on a platform of one day living peacefully next to a Palestinian state and returning the Golan Heights to Syria in exchange for peace. Benjamin Netanyahu is not prepared to accept any of these compromises and would, at best, aid Palestinians in making economic progress."
"In order to undertake painful compromises with the Palestinians and Arab neighbors, Israel needs a stable governing majority.... Israel desperately needs to overhaul its political system because whoever wins power will have to commit a large portion of his or her time to building a shaky coalition and then keeping it together -- more time than for important issues that require full commitment. That means, not only finding a peaceful solution to the conflict with Palestinians, but also addressing the international financial crisis that is currently hitting Israel with full force and has already cost countless Israelis their jobs."
The center-left Süddeutsche Zeitung writes:
"Netanyahu's win has created a dilemma for Obama. The US president needs to make progress in the peace process in order to move toward reconciliation with the Arab world. Netanyahu will be an uncompromising ruler, and his promised toughness and politics of fear helped win a parliamentary majority for the right. He opposes peace talks like the ones Livni held with moderate Palestinians in the West Bank.... He doesn't want to discuss borders, refugees and Jerusalem with Palestinians but rather to stick with the politics of containment. At best, he could assist in creating industry parks."
"It would be courageous to aid Palestinians in creating a state, as the US government is currently doing on a small scale by training Palestinian security forces in the West Bank. It would furthermore be courageous to reform the Israeli election system. Twelve parties are represented in the new Knesset and they will, as always, be a hindrance to one another. The 2 percent rule hinders every step toward parliamentary progress. It also keeps courageous politicians like Livni from breaking the vicious cycle of Israel's internal politics."
-- Caroline Winter, 2:45 p.m. CET
US and Iran 'Like Two Boxers Circling around a Ring'
This week has seen a number of comments from leaders in the US and Iran that signal a potential thawing in relations. German commentators welcome the change in tone but worry that talk of negotiations might merely be wishful thinking.
A series of diplomatic comments emanating from leaders in both Washington and Tehran this week indicate that a slow thawing of relations may have already have begun between the two countries.
The exchange began with United States President Barack Obama's inauguration speechlast month, when he told Muslim countries that America "will extend a hand if you are willing to unclench your fist." This sentiment was echoed in a press conference on Monday, when Obama said that his administration was reviewing Iran policy and "looking at areas where we can have constructive dialogue" and acknowledged that "there's been a lot of mistrust built up over the years."
On Tuesday, in Tehran, Iranian President Mahmoud Ahmadinejad responded with his own gentler words. "Our nation is ready to hold talks based on mutual respect and in a fair atmosphere," Ahmadinejad said in front of tens of thousands of spectators while delivering a speech marking the 30th anniversary of the 1979 Iranian revolution.
This exchange was followed by more statements on Wednesday. Hassan Qashqavi, a spokesman for the Iranian Foreign Ministry, sounded a harsher tone when he said that talks would only come if the US stopped making "baseless" accusations against Iran about seeking nuclear weapons and supporting terrorism, according to the Associated Press. Foreign Minister Manouchehr Mottak struck a softer tone when he told Reuters that changes in US policies and stances would be greeted as "happy news" in Tehran.
Also on Wednesday, Secretary of State Hillary Rodham Clinton told reporters she was hopeful that the US and Iran would be able to "work out a way of talking." At a news conference with Czech Foreign Minister Karel Schwarzenberg, whose country currently holds the six-month rotating presidency of the European Union, Clinton added that Washington might "reconsider where we stand" on its deployment of a missile shield in Eastern Europe if it feels Iran is willing to abandoned its alleged pursuit of nuclear weapons. Clinton added, however, that "we are a long, long way from seeing any evidence of a behavioral change." Under the missile defense program planned by former US President George W. Bush, the Czech Republic would have been the site of a major radar installation used in the shield.
German commentators, who are generally opposed to the US missile plan, welcome these statements but also express concern. Commentators fear there is too much uncertainty in the region, with the final outcome of Israeli election still uncertain and presidential elections in Iran slated for June 12. The outcome of both elections could deeply influence -- positively or negatively -- any efforts aimed at rapprochement.
A series of diplomatic comments emanating from leaders in both Washington and Tehran this week indicate that a slow thawing of relations may have already have begun between the two countries.
The exchange began with United States President Barack Obama's inauguration speechlast month, when he told Muslim countries that America "will extend a hand if you are willing to unclench your fist." This sentiment was echoed in a press conference on Monday, when Obama said that his administration was reviewing Iran policy and "looking at areas where we can have constructive dialogue" and acknowledged that "there's been a lot of mistrust built up over the years."
On Tuesday, in Tehran, Iranian President Mahmoud Ahmadinejad responded with his own gentler words. "Our nation is ready to hold talks based on mutual respect and in a fair atmosphere," Ahmadinejad said in front of tens of thousands of spectators while delivering a speech marking the 30th anniversary of the 1979 Iranian revolution.
This exchange was followed by more statements on Wednesday. Hassan Qashqavi, a spokesman for the Iranian Foreign Ministry, sounded a harsher tone when he said that talks would only come if the US stopped making "baseless" accusations against Iran about seeking nuclear weapons and supporting terrorism, according to the Associated Press. Foreign Minister Manouchehr Mottak struck a softer tone when he told Reuters that changes in US policies and stances would be greeted as "happy news" in Tehran.
Also on Wednesday, Secretary of State Hillary Rodham Clinton told reporters she was hopeful that the US and Iran would be able to "work out a way of talking." At a news conference with Czech Foreign Minister Karel Schwarzenberg, whose country currently holds the six-month rotating presidency of the European Union, Clinton added that Washington might "reconsider where we stand" on its deployment of a missile shield in Eastern Europe if it feels Iran is willing to abandoned its alleged pursuit of nuclear weapons. Clinton added, however, that "we are a long, long way from seeing any evidence of a behavioral change." Under the missile defense program planned by former US President George W. Bush, the Czech Republic would have been the site of a major radar installation used in the shield.
German commentators, who are generally opposed to the US missile plan, welcome these statements but also express concern. Commentators fear there is too much uncertainty in the region, with the final outcome of Israeli election still uncertain and presidential elections in Iran slated for June 12. The outcome of both elections could deeply influence -- positively or negatively -- any efforts aimed at rapprochement.
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