By Wolfgang Reuter
As economic indicators have improved, concern about the financial crisis has abated. But the next big problem could be approaching. Greece's public deficit is skyrocketing and the country may become insolvent. The effect on Europe's common currency could be dire.
Josef Ackermann, the CEO of Deutsche Bank, has given the all-clear signal many times in the past. He has repeatedly said that the worst was over, only to see the financial crisis strengthen its grip on the world economy.
Last week, however, Ackermann was singing a completely different tune. Although many indicators are once again pointing skyward, he said at a Berlin summit on the economy, Chancellor Angela Merkel, the assembled cabinet ministers, corporate CEOs and union leaders should not to be deluded. He warned emphatically that the financial situation could deteriorate once again. "A few time bombs" are still ticking, Ackermann told his audience, noting that the growing problems of highly leveraged small countries could lead to new tremors. And then, almost casually, Ackermann mentioned the problem child of the European financial world by name: Greece.
Ackermann isn't alone in his opinion. Practically unnoticed by the public, an issue has returned to the forefront in recent weeks -- one that was a cause for great concern at the height of the financial crisis but then, as optimism about the economy began to grow, was eventually forgotten: the fear of a national bankruptcy in the euro zone. And the question as to whether such a bankruptcy, should it come about, could destroy the common European currency.
Greece was always at the very top of the list of countries at risk. But now the danger appears to be more acute than ever.
Insuring Against Default
The seismographs in the trading rooms at investment banks detected the initial tremors weeks ago. Today, when the code "Greece CDS 10Yr" appears on Bloomberg terminals, a curve at the bottom of the screen points sharply upward. It reflects the price that banks are now charging to insure 10-year Greek government bonds against default.
The price of these securities has jumped dramatically since Greek Finance Minister Giorgos Papakonstantinou announced three weeks ago that his country's budget deficit would reach 12.7 percent of gross domestic product this year, instead of the 6 percent originally forecast -- and well about the 3 percent limit foreseen by European Union rules.
A second curve is the mirror image of the first. It depicts the price of government bonds from the euro-zone country. It points sharply downward.
Greece already pays almost 2 percent more in interest on its debt than Germany. In other words, at a total debt of €270 billion ($402 billion), Greece will be paying €5 billion more in annual interest than it would if it were Germany. And, with rating agencies threatening to downgrade the country's already dismal credit rating, the situation is only likely to get worse.
The finance ministers and central bankers of the euro-zone member states are as alarmed as they are helpless. "The Greek problem," says a senior administration official in Berlin, "will be an acid test for the currency union."
No Buyers Can Be Found
Greece has already accumulated a mountain of debt that will be difficult if not impossible to pay off. The government has borrowed more than 110 percent of the country's economic output over the years, and if investors lose confidence in the bonds, a meltdown could happen as early as next year.
That's when the government borrowers in Athens will be required to refinance €25 billion worth of debt -- that is, repay what they owe using funds borrowed from the financial markets. But if no buyers can be found for its securities, Greece will have no choice but to declare insolvency -- just as Mexico, Ecuador, Russia and Argentina have done in past decades.
This puts Brussels in a predicament. European Union rules preclude the 27-member bloc from lending money to member states to plug holes in their budgets or bridge deficits.
And even if there were a way to circumvent this prohibition, the consequences could be disastrous. The lack of concern over budget discipline in countries like Spain, Italy and Ireland would spread like wildfire across the entire continent. The message would be clear: Why save, if others will eventually foot the bill?
A Domino Effect
On the other hand, if Brussels left the Greeks to their own devices, the consequences would also be dire. Confidence in the euro would be shattered, and the union would face a crucial test. What good is a common currency, many would ask, if some of the member states pay their debts while others do not?
Furthermore, there is a threat of a domino effect. If one euro member falls, speculators will test the stability of other potential bankruptcy candidates. This could destroy the currency union. Because of this systemic risk, say the economists at the Swiss bank UBS, "we believe that if a country is facing a problem with debt repayment or issuance, it will be supported.
A default of a euro-group country doesn't worry the monetary policy hawks at the Bundesbank, Germany's central bank. "So what if Greece stops paying its debts?" one of the executive board members asked at a recent banquet in Frankfurt. "The euro is strong enough to take it." The real threat, he says, is if Brussels comes to the Greeks' aid. "Then the currency union will turn into an inflation union."
But it remains to be seen whether politicians can maintain such an unbending approach. The prices for Greek government bonds plunged once in the past, until then German Finance Minister Peer Steinbrück, to the horror of the Bundesbank, publicly pledged to help the Greeks if necessary. There is much to be said for the government taking exactly the same position today.
Can Bankruptcy Be Prevented?
A national bankruptcy in Greece would have a serious impact on Germany, where many banks have invested heavily in the high-yield Greek treasury bonds -- after borrowing the money to buy the bonds from the European Central Bank (ECB) or other central banks at rates of 1-2 percent. Making money doesn't get much easier -- as long as the Greeks remain solvent.
But can a Greek bankruptcy even be prevented anymore? The answer, at least initially, depends heavily on the ECB. Will the custodian of the euro continue to accept Greek bonds as collateral for short-term liquidity assistance, or will it turn down the securities in the future? Another possibility is a compromise, under which the banks would pay additional interest when they submit Greek bonds.
The next meeting of the ECB takes place on Dec. 17. "The subject will be on the agenda," say officials in Frankfurt. Time is of the essence.
Central bankers in the euro zone are already speculating, behind closed doors, what would happen if the Greeks started printing euros without ECB approval. There is no answer to the question, and that makes central bankers from Lisbon to Dublin even more nervous than they are already.
Massaging Budget Figures
And more mistrustful. In 2004, it was discovered, completely by accident, that Greece had only managed to qualify for entry into the currency union by massaging its budget figures. The Greeks have only complied with the Maastricht criteria once since the introduction of the euro, in 2006.
Even those figures may have been doctored. At the time, the Greeks managed to increase their official gross national product by a hefty 25 percent, partly because they included the black market and prostitution in economic output. This brought down the deficit rate -- on paper, at any rate -- to 2.9 percent.
The figures representing Greece's budget deficit are constantly being revised upward. The most recent uptick, by close to 7 percent, is a record for Europe -- and it comes in a country that was relatively unaffected by the financial crisis. This year, the Greek economy will have shrunk by only 1.2 percent, say Greek economists. Next year they expect the economy to return to grown, albeit modest.
Particularly vexing to the remaining EU countries is the fact that Greece has profited from its EU membership for decades. Year after year, net transfers from Brussels have exceeded payments moving in the opposite direction by €3 billion to €6 billion. These numbers, too, have often been suspect. At times, the land area declared for agricultural subsidies was incorrect, and sometimes approval conditions were not met.
Resolute Words
Nevertheless, EU politicians find their hands tied. "The game is over," the chairman of the euro group, Jean-Claude Juncker, declared recently, only to turn around and assure the country of his solidarity. "I don't have the slightest suspicion that Greece could go bankrupt -- anyone speculating that this will happen is deluding himself," says Juncker.
His resolute words were directed at investment bankers in London, Frankfurt and New York. They know full well that Greece is indeed on the brink of bankruptcy, but they don't know whether the EU will, as Juncker insinuated, come to the aid of member state Greece. Juncker's message, in other words, was that those speculating on a bankruptcy could be left out in the cold.
The EU has now begun a tougher approach to Greece. Three weeks ago, the government in Athens received a rebuke from Brussels, followed by another one last week. So far, however, the Greek government has shown little inclination to take any significant steps. It does intend to reduce the deficit, but only to 9.1 percent next year. This is far too little for many European foreign ministers. As the new Greek finance minister, Giorgos Papakonstantinou, recently announced, the country will need at least four years to get its deficit under control "without jeopardizing the economic recovery."
But by then the government deficit will have reached about €400 billion, or about 150 percent of GDP. Servicing that amount of debt, even at current interest rates of about 5 percent, will make up at least one third of government spending.
A London investment banker is betting on the continued decline of prices for Greek bonds in the short term, while simultaneously waiting for the right time to start buying the securities again. He jokes: "If someone has €1,000 in debt, he has a problem. If someone has €10 million in debt, his bank has a problem. And the bank, in this case, is Europe."
Showing posts with label European Union. Show all posts
Showing posts with label European Union. Show all posts
Thursday, December 10, 2009
Monday, November 16, 2009
How Europe can be heard in Washington
By Jeremy Shapiro and Nick Witney
As Europeans gossip and conspire over the new post-Lisbon appointments to represent the European Union’s external face, they know only too well how global power is slipping away from them. European elites agonise over the spectre of irrelevance.
No doubt it was this anxiety that impelled EU leaders to press for the EU/US summit meeting in Washington earlier this month. With the guard about to change in Brussels, this was never going to be a productive encounter. The visitors got what they deserved – 90 minutes of the president’s time, and a lunch with Vice- President Joe Biden.
At least the experience may help Europeans take on board two important truths about Barack Obama, the man whose election so delighted them a year ago. First, his foreign policy strategy is to reposition America for the post-American world. Understanding that the US’s brief moment of global dominance has come and gone, he aims to ensure America gets its way by forging tactical alliances. He will work with China on the global economy, with Russia on nuclear disarmament, and with anyone else who can help serve the US’s interest.
Second, his self-declared pragmatism means a rigorous approach to how he allocates his time and energy. He will attend to those who can be useful, not the merely sympathetic. Glad-handing Europeans with nothing to offer will be a low priority.
For Europeans these are difficult truths to absorb. But they will not again carry weight in Washington until they grasp that a post-American world requires a post-American Europe. Such a Europe must discard a set of damaging illusions that, 20 years on from the end of the cold war, still shape its approaches to the US.
The first such illusion is of continuing dependence on US protection. With the Russian military a shadow of its Soviet predecessor, this is no longer the case. But it underlies Europe’s habitual deference to the US.
The second illusion is to mistake shared values for a transatlantic identity of interests. This encourages the widespread European belief that if Americans act in uncongenial ways this is a product of their naiveté – requiring Europeans tactfully to set them back on course.
These two misperceptions lead to a third – that the need to preserve a close and harmonious transatlantic relationship must always trump any more specific European objective. But a vital and healthy transatlantic relationship requires tough negotiations to establish compromises that work for both sides – even if, as the often-combative trade and competition policy dealings across the Atlantic show, that may mean the occasional row.
Such conciliatory attitudes lead European elites to feel – their fourth illusion – that confronting the US from a joint European position would be counter-productive, if not indecent. So the EU member states opt to do their defence and security business under US direction in Nato – and prioritise their bilateral links with Washington over almost everything else. The British may pride themselves on the most celebrated “special relationship”, but most other European nations also quietly believe they have a special “in” with Washington which is the best route for promoting their national interests.
Americans find all this attention-seeking tiresome, but will naturally not pass up the opportunities to divide and rule.
Some Europeans think the answer lies in a proper EU/US strategic dialogue, and they have plenty of proposals for new forums and further summitry to force such a dialogue. But that requires the EU, collectively, to have something to say, which in turn means Europeans must steel themselves to discuss, within the EU, the big strategic issues on which Europe will need to be able to engage the US in the post-American world.
Afghanistan should be an object lesson. European leaders have been happy to ignore this intractable issue in their regular EU meetings, delegating the problem to Nato and American leadership. They now find themselves with over 30,000 troops committed to a troubled campaign, and consigned to the ante-room while they wait to learn the new American strategy, which they must then defend to their publics as their own.
Russia and the Middle East are two more items on an unappetising list of problems that Europeans must address, not in the spirit of second-guessing where the US wants to go, but to assert common European positions. Failing that, even the most charismatic and forceful new EU leaders will find even photo-opportunities in Washington, never mind serious attention, in increasingly short supply.
Jeremy Shapiro is a director of research at the Brookings Institution. Nick Witney is a senior policy fellow at the European Council on Foreign Relations
As Europeans gossip and conspire over the new post-Lisbon appointments to represent the European Union’s external face, they know only too well how global power is slipping away from them. European elites agonise over the spectre of irrelevance.
No doubt it was this anxiety that impelled EU leaders to press for the EU/US summit meeting in Washington earlier this month. With the guard about to change in Brussels, this was never going to be a productive encounter. The visitors got what they deserved – 90 minutes of the president’s time, and a lunch with Vice- President Joe Biden.
At least the experience may help Europeans take on board two important truths about Barack Obama, the man whose election so delighted them a year ago. First, his foreign policy strategy is to reposition America for the post-American world. Understanding that the US’s brief moment of global dominance has come and gone, he aims to ensure America gets its way by forging tactical alliances. He will work with China on the global economy, with Russia on nuclear disarmament, and with anyone else who can help serve the US’s interest.
Second, his self-declared pragmatism means a rigorous approach to how he allocates his time and energy. He will attend to those who can be useful, not the merely sympathetic. Glad-handing Europeans with nothing to offer will be a low priority.
For Europeans these are difficult truths to absorb. But they will not again carry weight in Washington until they grasp that a post-American world requires a post-American Europe. Such a Europe must discard a set of damaging illusions that, 20 years on from the end of the cold war, still shape its approaches to the US.
The first such illusion is of continuing dependence on US protection. With the Russian military a shadow of its Soviet predecessor, this is no longer the case. But it underlies Europe’s habitual deference to the US.
The second illusion is to mistake shared values for a transatlantic identity of interests. This encourages the widespread European belief that if Americans act in uncongenial ways this is a product of their naiveté – requiring Europeans tactfully to set them back on course.
These two misperceptions lead to a third – that the need to preserve a close and harmonious transatlantic relationship must always trump any more specific European objective. But a vital and healthy transatlantic relationship requires tough negotiations to establish compromises that work for both sides – even if, as the often-combative trade and competition policy dealings across the Atlantic show, that may mean the occasional row.
Such conciliatory attitudes lead European elites to feel – their fourth illusion – that confronting the US from a joint European position would be counter-productive, if not indecent. So the EU member states opt to do their defence and security business under US direction in Nato – and prioritise their bilateral links with Washington over almost everything else. The British may pride themselves on the most celebrated “special relationship”, but most other European nations also quietly believe they have a special “in” with Washington which is the best route for promoting their national interests.
Americans find all this attention-seeking tiresome, but will naturally not pass up the opportunities to divide and rule.
Some Europeans think the answer lies in a proper EU/US strategic dialogue, and they have plenty of proposals for new forums and further summitry to force such a dialogue. But that requires the EU, collectively, to have something to say, which in turn means Europeans must steel themselves to discuss, within the EU, the big strategic issues on which Europe will need to be able to engage the US in the post-American world.
Afghanistan should be an object lesson. European leaders have been happy to ignore this intractable issue in their regular EU meetings, delegating the problem to Nato and American leadership. They now find themselves with over 30,000 troops committed to a troubled campaign, and consigned to the ante-room while they wait to learn the new American strategy, which they must then defend to their publics as their own.
Russia and the Middle East are two more items on an unappetising list of problems that Europeans must address, not in the spirit of second-guessing where the US wants to go, but to assert common European positions. Failing that, even the most charismatic and forceful new EU leaders will find even photo-opportunities in Washington, never mind serious attention, in increasingly short supply.
Jeremy Shapiro is a director of research at the Brookings Institution. Nick Witney is a senior policy fellow at the European Council on Foreign Relations
Thursday, November 12, 2009
Europe's next chapter starts now. It rests on looking beyond our borders
Timothy Garton Ash
Well, they did it beautifully. Despite the rain, I found the official celebration of the fall of the wall in Berlin night a genuinely, even an unexpectedly moving affair. The organisers, presumably guided by Angela Merkel, got almost every accent right. Freedom, Europe and the wider world were the main themes, not German unity. The east German woman from Leipzig who had been locked up by the Stasi for carrying a banner demanding "an open country with free people"; Lech Walesa and Poland's pioneering Solidarity; the Hungarians; Mikhail Gorbachev; the United States. Everyone was given their share of the credit. Oddly enough, the one person who did not receive adequate acknowledgement was Merkel's predecessor, Helmut Kohl.
The toppling of those giant dominoes was a brilliant coup de theatre, partly because you kept thinking: what if it goes wrong? What if one of the dominoes topples sideways, or just stops? But the Germans got the engineering right, of course – as efficient in toppling dominoes as in making BMWs. And how good to put near the end of the celebration an interview with Muhammad Yunus, the Bangladeshi pioneer of microcredits, who talked about the wall still separating rich north from poor south: die Mauer der Armut, the poverty wall.
So, three cheers for Germany and three cheers for Europe. Looking at the searchlights piercing the night sky above the Brandenburg Gate, we could reflect on the extraordinary distance travelled in a city that was at the heart of two world wars and the cold war. After all, for at least 50 years, from 1939 to 1989, searchlights at the Brandenburg Gate had been a prelude to killing people, one way or another, rather than a signal of their peaceful liberation.
But then it was over. Berliners trudged back through the drizzle; the police started clearing away the crowd-control barriers; and already at dinner, we are told, the leaders of the EU were quietly conspiring in corners about who should be the next so-called president (that is, chair) of the European council, and the new high representative for foreign and security policy. Perhaps that was what Gordon Brown, Nicolas Sarkozy and Merkel were really thinking about, on their chilly podium, as the long ceremony ended with young people from all over the world joining in the distinctly Obamaesque refrain of a specially written song, "We can be as one". (As for Silvio Berlusconi, he seemed to have his eyes closed whenever the television camera caught him. Dreaming of …? Better not ask.)
Should the president of the European council be the inspiring, haiku-writing Belgian, Herman van Rompuy? Should the high representitive be Britain's brainy foreign secretary, David Miliband? Has Miliband genuinely ruled himself out, bravely choosing to remain on the bridge of the New Labour Titanic? Will Peter Mandelson nobly step into the breach – then becoming, presumably, the Lord High Representative? (Cue music by Gilbert and Sullivan.) Or will the job go to former Italian prime minister Massimo d'Alema?
I have already proposed my candidates: the Nobel peace prizewinner and elder statesman Martti Ahtisaari for the chair; Joschka Fischer or, failing that, Miliband for high representitive. These personalities matter. Yet even if the usual EU haggling behind closed doors ends up producing two weak, colourless figures – two rabbits out of a grey hat – we will still have the possibility of creating a Europe that acts more "as one", to recall the words of the Berlin song. We will still be able to create the institutions, notably a new European foreign service. And what we do with those institutions anyway depends, with the Lisbon treaty as without it, on the political will of member states and their democratically elected governments. If they want it to happen, it will. If they don't, it won't.
They should want it to happen, because whether we in Europe have anything much to celebrate in another 20 years' time will depend on whether we get our act together in our relations with the rest of the world. Of course, there are still vital things to be done inside the frontiers of today's EU: the creation of new jobs, the integration of Muslim fellow citizens, to name but two. But increasingly the key challenges for the European Union lie not within its own borders but beyond them.
Geographically, the agenda starts with the rest of Europe that is not yet in the EU. Enlargement fatigue is palpable at every turn, but there is still a lot of Europe to be brought in, before "Europe" is really Europe: the rest of the Balkans, Ukraine, Moldova, Belarus, perhaps Georgia and Armenia – and, as a strategically vital special case, Turkey. Provided they meet all the conditions for membership, we should want all these countries to be EU members, in our own, long-term, enlightened self-interest, as well as in theirs.
Then there is Russia. If the EU does not have a Russia policy, it will not have a foreign policy. And to have a common Russia policy, it needs a common energy policy. To the south and southeast, there is the question of how we help the modernisation, liberalisation and eventual democratisation of mainly Muslim countries which are not, in any foreseeable future, going to be members of the EU. Though the Berlin wall has gone, there is still the wall separating Israelis and Palestinians.
Further afield, there are the great emerging powers such as China, India and Brazil. Measured against its own unhappy divided past, Europe has ascended; in relative power, it is descending. The United States no longer looks automatically to Europe as a strategic partner. (Obama's appearance in a video message at the Brandenburg Gate only served to remind everyone of his physical absence. They should have left it to Hillary Clinton.) Miliband's argument that we face the choice between a G2 world, with the crucial shots being called by the US and China, and a G3 world, including the EU as the third partner, usefully simplifies and exaggerates to make the right point.
Beyond that, looming larger still, is the poverty wall of which Yunus spoke. The EU has the largest economy in the world. It and its member states combined give more than half of the world's official development aid. If it acted "as one", and strategically, no one would have a better chance of lowering the wall between the rich north and the poor south. Largest and most important of all is the planetary challenge of climate change, with time now running out before the Copenhagen summit in early December.
The point is this: you don't need to have any sentimental attachment to Europe whatsoever to understand that to tackle these problems we need the scale and clout that only Europe gives. This has nothing at all do with dreams of an "ever closer union". Europe here is a means, not an end in itself. The purpose is to defend and advance the vital interests of all our citizens, Brits included.
Europe has a great story to tell from the last 60 years, and it was told brilliantly in Berlin on Monday night. But that story is mainly about what we have achieved inside Europe. The next chapter will depend on what we do outside it.
Well, they did it beautifully. Despite the rain, I found the official celebration of the fall of the wall in Berlin night a genuinely, even an unexpectedly moving affair. The organisers, presumably guided by Angela Merkel, got almost every accent right. Freedom, Europe and the wider world were the main themes, not German unity. The east German woman from Leipzig who had been locked up by the Stasi for carrying a banner demanding "an open country with free people"; Lech Walesa and Poland's pioneering Solidarity; the Hungarians; Mikhail Gorbachev; the United States. Everyone was given their share of the credit. Oddly enough, the one person who did not receive adequate acknowledgement was Merkel's predecessor, Helmut Kohl.
The toppling of those giant dominoes was a brilliant coup de theatre, partly because you kept thinking: what if it goes wrong? What if one of the dominoes topples sideways, or just stops? But the Germans got the engineering right, of course – as efficient in toppling dominoes as in making BMWs. And how good to put near the end of the celebration an interview with Muhammad Yunus, the Bangladeshi pioneer of microcredits, who talked about the wall still separating rich north from poor south: die Mauer der Armut, the poverty wall.
So, three cheers for Germany and three cheers for Europe. Looking at the searchlights piercing the night sky above the Brandenburg Gate, we could reflect on the extraordinary distance travelled in a city that was at the heart of two world wars and the cold war. After all, for at least 50 years, from 1939 to 1989, searchlights at the Brandenburg Gate had been a prelude to killing people, one way or another, rather than a signal of their peaceful liberation.
But then it was over. Berliners trudged back through the drizzle; the police started clearing away the crowd-control barriers; and already at dinner, we are told, the leaders of the EU were quietly conspiring in corners about who should be the next so-called president (that is, chair) of the European council, and the new high representative for foreign and security policy. Perhaps that was what Gordon Brown, Nicolas Sarkozy and Merkel were really thinking about, on their chilly podium, as the long ceremony ended with young people from all over the world joining in the distinctly Obamaesque refrain of a specially written song, "We can be as one". (As for Silvio Berlusconi, he seemed to have his eyes closed whenever the television camera caught him. Dreaming of …? Better not ask.)
Should the president of the European council be the inspiring, haiku-writing Belgian, Herman van Rompuy? Should the high representitive be Britain's brainy foreign secretary, David Miliband? Has Miliband genuinely ruled himself out, bravely choosing to remain on the bridge of the New Labour Titanic? Will Peter Mandelson nobly step into the breach – then becoming, presumably, the Lord High Representative? (Cue music by Gilbert and Sullivan.) Or will the job go to former Italian prime minister Massimo d'Alema?
I have already proposed my candidates: the Nobel peace prizewinner and elder statesman Martti Ahtisaari for the chair; Joschka Fischer or, failing that, Miliband for high representitive. These personalities matter. Yet even if the usual EU haggling behind closed doors ends up producing two weak, colourless figures – two rabbits out of a grey hat – we will still have the possibility of creating a Europe that acts more "as one", to recall the words of the Berlin song. We will still be able to create the institutions, notably a new European foreign service. And what we do with those institutions anyway depends, with the Lisbon treaty as without it, on the political will of member states and their democratically elected governments. If they want it to happen, it will. If they don't, it won't.
They should want it to happen, because whether we in Europe have anything much to celebrate in another 20 years' time will depend on whether we get our act together in our relations with the rest of the world. Of course, there are still vital things to be done inside the frontiers of today's EU: the creation of new jobs, the integration of Muslim fellow citizens, to name but two. But increasingly the key challenges for the European Union lie not within its own borders but beyond them.
Geographically, the agenda starts with the rest of Europe that is not yet in the EU. Enlargement fatigue is palpable at every turn, but there is still a lot of Europe to be brought in, before "Europe" is really Europe: the rest of the Balkans, Ukraine, Moldova, Belarus, perhaps Georgia and Armenia – and, as a strategically vital special case, Turkey. Provided they meet all the conditions for membership, we should want all these countries to be EU members, in our own, long-term, enlightened self-interest, as well as in theirs.
Then there is Russia. If the EU does not have a Russia policy, it will not have a foreign policy. And to have a common Russia policy, it needs a common energy policy. To the south and southeast, there is the question of how we help the modernisation, liberalisation and eventual democratisation of mainly Muslim countries which are not, in any foreseeable future, going to be members of the EU. Though the Berlin wall has gone, there is still the wall separating Israelis and Palestinians.
Further afield, there are the great emerging powers such as China, India and Brazil. Measured against its own unhappy divided past, Europe has ascended; in relative power, it is descending. The United States no longer looks automatically to Europe as a strategic partner. (Obama's appearance in a video message at the Brandenburg Gate only served to remind everyone of his physical absence. They should have left it to Hillary Clinton.) Miliband's argument that we face the choice between a G2 world, with the crucial shots being called by the US and China, and a G3 world, including the EU as the third partner, usefully simplifies and exaggerates to make the right point.
Beyond that, looming larger still, is the poverty wall of which Yunus spoke. The EU has the largest economy in the world. It and its member states combined give more than half of the world's official development aid. If it acted "as one", and strategically, no one would have a better chance of lowering the wall between the rich north and the poor south. Largest and most important of all is the planetary challenge of climate change, with time now running out before the Copenhagen summit in early December.
The point is this: you don't need to have any sentimental attachment to Europe whatsoever to understand that to tackle these problems we need the scale and clout that only Europe gives. This has nothing at all do with dreams of an "ever closer union". Europe here is a means, not an end in itself. The purpose is to defend and advance the vital interests of all our citizens, Brits included.
Europe has a great story to tell from the last 60 years, and it was told brilliantly in Berlin on Monday night. But that story is mainly about what we have achieved inside Europe. The next chapter will depend on what we do outside it.
European Union Struggles to Select New Leaders
By STEPHEN CASTLE
BRUSSELS — Days after securing the landmark treaty that will lead to the naming of the European Union’s first president, the bloc has lapsed into horse-trading-as-usual over the position — the kind of maneuvering that has often yielded the kind of bland leadership that the new presidency was supposed to overcome.
On Tuesday, the latest flurry over the flaws in the European Union’s way of choosing leaders swirled around the British foreign secretary, David Miliband, who reportedly dropped out of the race to become the union’s powerful new foreign policy chief.
Mr. Miliband’s preference for sticking with the Labour Party in Britain rather than moving to the uncertain corridors of Brussels threatened to wreck an emerging compromise package of appointments: a center-leftist as foreign policy chief, with a politician from the center-right, which dominates the European Parliament, getting the presumably bigger plum of the bloc’s presidency.
The Lisbon Treaty was designed to supply the union with the kind of leadership that would give it a more powerful voice on the global stage.
Some member countries — but not all — see the new president as an interlocutor with the presidents of the United States and China, for example.
The latest dealing has underlined the complications of getting 27 heads of state to agree on candidates who need to complement each other and reflect a political, geographical and ideological mix among large and small nations.
Without a direct election involving almost half a billion people in the bloc’s countries, that sort of maneuvering has been the traditional route for finding leaders.
Now, instead of negotiating behind doors for a solution, the union’s three largest nations — France and Germany on one side, Britain on the other — appear increasingly headed for an open clash.
The Lisbon Treaty, in addition to creating a permanent president of the European Council, where national governments meet, the Lisbon Treaty establishes a powerful foreign policy chief supported by a network of diplomats. With a reluctant signing by the Czech president, Vaclav Klaus, the treaty was finally secured last week after eight years of wrangling. Prime Minister Fredrik Reinfeldt of Sweden, which holds the current rotating union presidency, said Tuesday that he was halfway through consulting with the bloc’s leaders. But there is still no date for a summit meeting to decide the who will be selected for the new positions.
Even European ministers sound weary. “It should have been at the end of this week,” Bernard Kouchner, the French foreign minister, told France Inter radio, “but I don’t believe that will happen.”
Mr. Reinfeldt may have to threaten to use a new procedure, under which a weighted majority can agree on the selections without requiring the support of all 27 leaders.
In an implicit attack on the whole process, Poland suggested that candidates face a job interview in front of the union’s leaders where they would “present their vision of how their tasks would be conducted.”
In the unwritten rules for appointment to senior posts in the European Union, most candidates do not declare their interest before decisions are made. An elected official who is not selected for a senior position with the union could find the outcome politically costly at home.
Stephen Wall, a former British ambassador to the bloc, said that this type of negotiation was particularly difficult for diplomats, who are trained to forge compromise and not cling stubbornly to a political position.
“I think it’s always going to be a pretty messy situation, because this is a decision that E.U. leaders care about,” he said, “They will have strong views.”
But he is also dismissive of the Polish proposal for a job interview.
“Given that they have to placate the right, the left, the north, the south, the large and small nations, you could have a brilliant presentation but, if the politics didn’t fit, what would be the point?” he said.
The heavyweight contender for the presidential post had been former Prime Minister Tony Blair of Britain. When his campaign failed to gain momentum on the center-left, as well as in Germany and among some smaller nations, a new consensus began to emerge.
That would involve Prime Minister Herman Van Rompuy of Belgium, a conservative, becoming president of the union and acting as a broker of compromise, with foreign policy post going to Mr. Miliband, who is regarded as a big hitter among foreign ministers.
Mr. Miliband had declared himself unavailable for the post, but to many people that appeared to mere comply with the unwritten rule under which serving ministers never admit that they are candidates for senior jobs with the bloc. The BBC’s political editor reported Monday night, however, that Mr. Miliband had decided to remain in his current job.
A former Italian prime minister, Massimo D’Alema, is thought to be the new front runner for the foreign policy job, but his past in Italy’s Communist Party is a problem for some nations in eastern Europe. Other potential candidates from Britain include Peter Mandelson, a former European Commissioner, and the current Trade Commissioner, Catherine Ashton.
Prime Minister Gordon Brown of Britain is still supporting Mr. Blair, who is also not a formally declared candidate. Britain argues that if the presidential post goes to a technocrat like Mr. Van Rompuy, the union would miss an opportunity to expand its profile in the world.
But President Nicolas Sarkozy of France praised Mr. Van Rompuy on Tuesday in the newspaper Le Monde, describing him as “someone very good.”
Besides Mr. Van Rompuy, leading contenders for the presidency include the Prime Minister Jan Peter Balkenende of the Netherlands, Prime Minister Jean-Claude Juncker of Luxembourg and a former Latvian president, Vaira Vika-Freiberga.
Mr. Wall said that if past experience is a guide, it will not be possible to find a compromise without a real discussion among the leaders of the bloc’s nations.
“If the Swedes have already got a clear route through this,” he said, “I would be amazed.”
BRUSSELS — Days after securing the landmark treaty that will lead to the naming of the European Union’s first president, the bloc has lapsed into horse-trading-as-usual over the position — the kind of maneuvering that has often yielded the kind of bland leadership that the new presidency was supposed to overcome.
On Tuesday, the latest flurry over the flaws in the European Union’s way of choosing leaders swirled around the British foreign secretary, David Miliband, who reportedly dropped out of the race to become the union’s powerful new foreign policy chief.
Mr. Miliband’s preference for sticking with the Labour Party in Britain rather than moving to the uncertain corridors of Brussels threatened to wreck an emerging compromise package of appointments: a center-leftist as foreign policy chief, with a politician from the center-right, which dominates the European Parliament, getting the presumably bigger plum of the bloc’s presidency.
The Lisbon Treaty was designed to supply the union with the kind of leadership that would give it a more powerful voice on the global stage.
Some member countries — but not all — see the new president as an interlocutor with the presidents of the United States and China, for example.
The latest dealing has underlined the complications of getting 27 heads of state to agree on candidates who need to complement each other and reflect a political, geographical and ideological mix among large and small nations.
Without a direct election involving almost half a billion people in the bloc’s countries, that sort of maneuvering has been the traditional route for finding leaders.
Now, instead of negotiating behind doors for a solution, the union’s three largest nations — France and Germany on one side, Britain on the other — appear increasingly headed for an open clash.
The Lisbon Treaty, in addition to creating a permanent president of the European Council, where national governments meet, the Lisbon Treaty establishes a powerful foreign policy chief supported by a network of diplomats. With a reluctant signing by the Czech president, Vaclav Klaus, the treaty was finally secured last week after eight years of wrangling. Prime Minister Fredrik Reinfeldt of Sweden, which holds the current rotating union presidency, said Tuesday that he was halfway through consulting with the bloc’s leaders. But there is still no date for a summit meeting to decide the who will be selected for the new positions.
Even European ministers sound weary. “It should have been at the end of this week,” Bernard Kouchner, the French foreign minister, told France Inter radio, “but I don’t believe that will happen.”
Mr. Reinfeldt may have to threaten to use a new procedure, under which a weighted majority can agree on the selections without requiring the support of all 27 leaders.
In an implicit attack on the whole process, Poland suggested that candidates face a job interview in front of the union’s leaders where they would “present their vision of how their tasks would be conducted.”
In the unwritten rules for appointment to senior posts in the European Union, most candidates do not declare their interest before decisions are made. An elected official who is not selected for a senior position with the union could find the outcome politically costly at home.
Stephen Wall, a former British ambassador to the bloc, said that this type of negotiation was particularly difficult for diplomats, who are trained to forge compromise and not cling stubbornly to a political position.
“I think it’s always going to be a pretty messy situation, because this is a decision that E.U. leaders care about,” he said, “They will have strong views.”
But he is also dismissive of the Polish proposal for a job interview.
“Given that they have to placate the right, the left, the north, the south, the large and small nations, you could have a brilliant presentation but, if the politics didn’t fit, what would be the point?” he said.
The heavyweight contender for the presidential post had been former Prime Minister Tony Blair of Britain. When his campaign failed to gain momentum on the center-left, as well as in Germany and among some smaller nations, a new consensus began to emerge.
That would involve Prime Minister Herman Van Rompuy of Belgium, a conservative, becoming president of the union and acting as a broker of compromise, with foreign policy post going to Mr. Miliband, who is regarded as a big hitter among foreign ministers.
Mr. Miliband had declared himself unavailable for the post, but to many people that appeared to mere comply with the unwritten rule under which serving ministers never admit that they are candidates for senior jobs with the bloc. The BBC’s political editor reported Monday night, however, that Mr. Miliband had decided to remain in his current job.
A former Italian prime minister, Massimo D’Alema, is thought to be the new front runner for the foreign policy job, but his past in Italy’s Communist Party is a problem for some nations in eastern Europe. Other potential candidates from Britain include Peter Mandelson, a former European Commissioner, and the current Trade Commissioner, Catherine Ashton.
Prime Minister Gordon Brown of Britain is still supporting Mr. Blair, who is also not a formally declared candidate. Britain argues that if the presidential post goes to a technocrat like Mr. Van Rompuy, the union would miss an opportunity to expand its profile in the world.
But President Nicolas Sarkozy of France praised Mr. Van Rompuy on Tuesday in the newspaper Le Monde, describing him as “someone very good.”
Besides Mr. Van Rompuy, leading contenders for the presidency include the Prime Minister Jan Peter Balkenende of the Netherlands, Prime Minister Jean-Claude Juncker of Luxembourg and a former Latvian president, Vaira Vika-Freiberga.
Mr. Wall said that if past experience is a guide, it will not be possible to find a compromise without a real discussion among the leaders of the bloc’s nations.
“If the Swedes have already got a clear route through this,” he said, “I would be amazed.”
EU calls for budget deficit cuts
Thirteen members of the European Union have been told to take action and get their budget deficits back in line.
EU requirements mean that they should not exceed 3% of the country's GDP. However, since the financial crisis most countries have broken that rule.
Deadlines ranging from 2012 to 2014 have been issued.
France, the UK, Spain and the Irish Republic have longer to comply because their economies have worsened since the original deadline was imposed in April.
'Bite the bullet'
France has already warned that it will not meet the new deadline. The government wants to focus on boosting growth rather than cutting spending.
Germany and six other countries have until 2013. Belgium and Italy have the tighter deadline of 2012.
The BBC's business correspondent in Brussels, Nigel Cassidy, said the EU's economy commissioner, Joaquin Almunia, saved his harshest criticism for Greece. Mr Almunia said the country had taken "no effective action".
Our correspondent said: "Ultimately the message from Brussels is straightforward enough. Economic crisis notwithstanding, the named countries must bite the bullet and act now to cut their borrowings".
He says that will mean tax rises or benefit cuts in order to bring budget deficits under control.
EU requirements mean that they should not exceed 3% of the country's GDP. However, since the financial crisis most countries have broken that rule.
Deadlines ranging from 2012 to 2014 have been issued.
France, the UK, Spain and the Irish Republic have longer to comply because their economies have worsened since the original deadline was imposed in April.
'Bite the bullet'
France has already warned that it will not meet the new deadline. The government wants to focus on boosting growth rather than cutting spending.
Germany and six other countries have until 2013. Belgium and Italy have the tighter deadline of 2012.
The BBC's business correspondent in Brussels, Nigel Cassidy, said the EU's economy commissioner, Joaquin Almunia, saved his harshest criticism for Greece. Mr Almunia said the country had taken "no effective action".
Our correspondent said: "Ultimately the message from Brussels is straightforward enough. Economic crisis notwithstanding, the named countries must bite the bullet and act now to cut their borrowings".
He says that will mean tax rises or benefit cuts in order to bring budget deficits under control.
Saturday, October 3, 2009
Irish 'Yes' to EU treaty expected
Voters appear to have backed the EU's Lisbon Treaty in the Republic of Ireland's crucial second referendum.
Early returns are showing clear majorities for the "Yes" campaign - just 18 months after voters rejected the treaty first time round.
The treaty, aimed at streamlining decision-making in the 27-nation EU, cannot take effect unless all member states ratify it.
Ireland's foreign minister predicted a convincing win for the "Yes" campaign.
"I am delighted for the country," Micheal Martin told Irish radio on Saturday.
The official result is expected late on Saturday afternoon.
Ireland was the only EU member state to hold a referendum on Lisbon, though there have been calls for referendums in several countries.
The leader of the anti-Lisbon lobby group Libertas, Declan Ganley, said the result marked a "very convincing win" for the "Yes" camp.
Counting started at centres across the country at 0900 (0800 GMT) and results are being relayed to the national count centre in Dublin Castle.
Tallies based on partial results indicate a 60:40 "Yes" vote in some constituencies.
Swedish Foreign Minister Carl Bildt, whose country currently holds the EU presidency, called it "an important victory for Ireland and for all of Europe".
He said it was just a matter of time until the EU "finally can push the button for the better European co-operation that the Lisbon Treaty will give us".
Turnout was higher than 50% when polling stations closed at 2200 on Friday.
Taoiseach optimistic
Many voters said they had switched from "No" to "Yes" this time around, the BBC's Jonny Dymond reports.
Opinion is thought to have swung behind the "Yes" vote this time because of the severity of the economic downturn, as well as the legal "guarantees" on Irish sovereignty that the EU pledged after the first referendum.
The legally binding "guarantees" state that Lisbon will not affect key areas of Irish sovereignty, such as taxation, military neutrality and family matters such as abortion - significant issues in last year's campaign in Ireland. But they have not yet been attached to the treaty.
The treaty is intended to make EU institutions better suited to the enlarged bloc of 27. The current Nice Treaty was designed for a 15-nation bloc and predates the EU's eastward expansion of 2004.
Opponents see Lisbon as part of a federalist agenda that threatens national sovereignty.
Big 'Yes' swing
Early count centre tallies showed constituencies in the capital Dublin had voted 56% in favour, with early indications from Galway putting the "Yes" vote at 63%, Irish broadcaster RTE reported.
An informal exit poll by the main opposition Fine Gael party estimated a 60% "Yes" vote, RTE said earlier.
Irish bookmaker Paddy Power was offering odds of 1/25 on a "Yes" vote - suggesting it was the overwhelming favourite.
In last year's vote, 46.6% of Irish voted "Yes" and 53.4% "No", and the rejection of the treaty plunged the EU into political gridlock.
The Irish anti-Lisbon group Coir said on Saturday voters appeared to have approved the treaty.
"We are extremely disappointed that the voice of the people was not heard the first time around," said Richard Greene, a spokesman for Coir, which means Justice in English.
Analysts say Irish approval of the Lisbon Treaty would be a big step towards full ratification across the EU. The only other countries yet to ratify the treaty are Poland and the Czech Republic.
Three million people were eligible to vote in the referendum.
All of the republic's major parties campaigned for a "Yes" vote except the nationalist Sinn Fein. The party believes rejecting the treaty would mean a more democratic EU.
Early returns are showing clear majorities for the "Yes" campaign - just 18 months after voters rejected the treaty first time round.
The treaty, aimed at streamlining decision-making in the 27-nation EU, cannot take effect unless all member states ratify it.
Ireland's foreign minister predicted a convincing win for the "Yes" campaign.
"I am delighted for the country," Micheal Martin told Irish radio on Saturday.
The official result is expected late on Saturday afternoon.
Ireland was the only EU member state to hold a referendum on Lisbon, though there have been calls for referendums in several countries.
The leader of the anti-Lisbon lobby group Libertas, Declan Ganley, said the result marked a "very convincing win" for the "Yes" camp.
Counting started at centres across the country at 0900 (0800 GMT) and results are being relayed to the national count centre in Dublin Castle.
Tallies based on partial results indicate a 60:40 "Yes" vote in some constituencies.
Swedish Foreign Minister Carl Bildt, whose country currently holds the EU presidency, called it "an important victory for Ireland and for all of Europe".
He said it was just a matter of time until the EU "finally can push the button for the better European co-operation that the Lisbon Treaty will give us".
Turnout was higher than 50% when polling stations closed at 2200 on Friday.
Taoiseach optimistic
Many voters said they had switched from "No" to "Yes" this time around, the BBC's Jonny Dymond reports.
Opinion is thought to have swung behind the "Yes" vote this time because of the severity of the economic downturn, as well as the legal "guarantees" on Irish sovereignty that the EU pledged after the first referendum.
The legally binding "guarantees" state that Lisbon will not affect key areas of Irish sovereignty, such as taxation, military neutrality and family matters such as abortion - significant issues in last year's campaign in Ireland. But they have not yet been attached to the treaty.
The treaty is intended to make EU institutions better suited to the enlarged bloc of 27. The current Nice Treaty was designed for a 15-nation bloc and predates the EU's eastward expansion of 2004.
Opponents see Lisbon as part of a federalist agenda that threatens national sovereignty.
Big 'Yes' swing
Early count centre tallies showed constituencies in the capital Dublin had voted 56% in favour, with early indications from Galway putting the "Yes" vote at 63%, Irish broadcaster RTE reported.
An informal exit poll by the main opposition Fine Gael party estimated a 60% "Yes" vote, RTE said earlier.
Irish bookmaker Paddy Power was offering odds of 1/25 on a "Yes" vote - suggesting it was the overwhelming favourite.
In last year's vote, 46.6% of Irish voted "Yes" and 53.4% "No", and the rejection of the treaty plunged the EU into political gridlock.
The Irish anti-Lisbon group Coir said on Saturday voters appeared to have approved the treaty.
"We are extremely disappointed that the voice of the people was not heard the first time around," said Richard Greene, a spokesman for Coir, which means Justice in English.
Analysts say Irish approval of the Lisbon Treaty would be a big step towards full ratification across the EU. The only other countries yet to ratify the treaty are Poland and the Czech Republic.
Three million people were eligible to vote in the referendum.
All of the republic's major parties campaigned for a "Yes" vote except the nationalist Sinn Fein. The party believes rejecting the treaty would mean a more democratic EU.
Thursday, June 25, 2009
Sweden gears up for EU challenges
Sweden will assume the EU's six-month rotating presidency on 1 July, amid great economic challenges and institutional uncertainty for the 27-nation bloc.
If ratification of the Lisbon Treaty is completed this year it could be the last six-month presidency.
What are Sweden's priorities as it takes over from the Czech Republic?
ECONOMIC CRISIS
Sweden is taking over the reins of an EU reeling from the impact of the economic crisis - the worst since the 1930s. Prime Minister Fredrik Reinfeldt says the EU must continue with its recovery plan, shoring up banks with liquidity and guarantees, so as to get credit flowing again.
High unemployment is an EU-wide problem, so Sweden is anxious to lay the foundations for a new growth and employment strategy, to replace the EU's Lisbon Agenda. That agenda, adopted in March 2000, aimed to make the EU "the most competitive and dynamic knowledge-based economy in the world" by 2010.
EU leaders have agreed on a framework for improved financial supervision, and Sweden hopes to get the corresponding EU legislation passed during its presidency. The plan is to install new EU supervisory bodies to identify systemic risks and to monitor individual financial firms, to prevent another meltdown.
Sweden also has the job of defending the EU's single market against protectionist pressures fuelled by the economic crisis.
CLIMATE CHANGE
The EU has set strict targets for reducing carbon dioxide (CO2) emissions, but Sweden says it will work to get similar commitments from other industrial powers ahead of the UN climate conference in Copenhagen in December.
Mr Reinfeldt has said "everyone talks about the importance of reducing emissions and yet global greenhouse gas emissions have not even started to decline". But he welcomes the "encouraging signals from the new US administration".
A major Swedish goal is to get EU agreement on measures to help developing countries convert to renewable energy and reduce their emissions.
The Copenhagen conference is intended to map out a new global climate agreement to succeed the Kyoto Protocol.
LISBON TREATY
Institutional uncertainty overshadows the Swedish presidency, because the Lisbon Treaty has not yet been ratified by all member states. Much depends on the Republic of Ireland's second referendum, expected in October. A win for the "Yes" camp would give the treaty a good chance of coming into effect this year.
Under Lisbon, the six-monthly rotating EU presidency would be replaced by one that runs for two-and-a-half years, there would be a powerful new foreign affairs chief and the European Parliament would gain wider powers.
The treaty would give the parliament a bigger say over the appointment of the new European Commission and would boost the number of Euro MPs from 736 to 754.
BALTIC SEA CO-OPERATION
Sweden says it wants joint EU efforts to tackle pollution in the Baltic Sea and to revive economic activity in the region, which has been hit hard by the financial crisis.
"The objective is to adopt an EU Strategy for the Baltic Sea which will contribute to a cleaner sea and make the region more economically dynamic," the Swedish government says.
IMMIGRATION
Sweden plans to promote a common asylum policy "characterised by legal certainty and transparency".
It wants to boost EU co-operation on migration through a "Stockholm Programme," covering border controls, visa policy, asylum and law enforcement.
If ratification of the Lisbon Treaty is completed this year it could be the last six-month presidency.
What are Sweden's priorities as it takes over from the Czech Republic?
ECONOMIC CRISIS
Sweden is taking over the reins of an EU reeling from the impact of the economic crisis - the worst since the 1930s. Prime Minister Fredrik Reinfeldt says the EU must continue with its recovery plan, shoring up banks with liquidity and guarantees, so as to get credit flowing again.
High unemployment is an EU-wide problem, so Sweden is anxious to lay the foundations for a new growth and employment strategy, to replace the EU's Lisbon Agenda. That agenda, adopted in March 2000, aimed to make the EU "the most competitive and dynamic knowledge-based economy in the world" by 2010.
EU leaders have agreed on a framework for improved financial supervision, and Sweden hopes to get the corresponding EU legislation passed during its presidency. The plan is to install new EU supervisory bodies to identify systemic risks and to monitor individual financial firms, to prevent another meltdown.
Sweden also has the job of defending the EU's single market against protectionist pressures fuelled by the economic crisis.
CLIMATE CHANGE
The EU has set strict targets for reducing carbon dioxide (CO2) emissions, but Sweden says it will work to get similar commitments from other industrial powers ahead of the UN climate conference in Copenhagen in December.
Mr Reinfeldt has said "everyone talks about the importance of reducing emissions and yet global greenhouse gas emissions have not even started to decline". But he welcomes the "encouraging signals from the new US administration".
A major Swedish goal is to get EU agreement on measures to help developing countries convert to renewable energy and reduce their emissions.
The Copenhagen conference is intended to map out a new global climate agreement to succeed the Kyoto Protocol.
LISBON TREATY
Institutional uncertainty overshadows the Swedish presidency, because the Lisbon Treaty has not yet been ratified by all member states. Much depends on the Republic of Ireland's second referendum, expected in October. A win for the "Yes" camp would give the treaty a good chance of coming into effect this year.
Under Lisbon, the six-monthly rotating EU presidency would be replaced by one that runs for two-and-a-half years, there would be a powerful new foreign affairs chief and the European Parliament would gain wider powers.
The treaty would give the parliament a bigger say over the appointment of the new European Commission and would boost the number of Euro MPs from 736 to 754.
BALTIC SEA CO-OPERATION
Sweden says it wants joint EU efforts to tackle pollution in the Baltic Sea and to revive economic activity in the region, which has been hit hard by the financial crisis.
"The objective is to adopt an EU Strategy for the Baltic Sea which will contribute to a cleaner sea and make the region more economically dynamic," the Swedish government says.
IMMIGRATION
Sweden plans to promote a common asylum policy "characterised by legal certainty and transparency".
It wants to boost EU co-operation on migration through a "Stockholm Programme," covering border controls, visa policy, asylum and law enforcement.
Wednesday, June 10, 2009
Far right exploits rising insecurity
By Vincent Boland in Milan, Michael Steen and Thomas Escritt
The far right made gains in the elections to the European parliament, with voters in Italy, the UK, Hungary and the Netherlands, among others, supporting candidates who espoused explicitly anti-immigrant, anti-Islamic and hardline nationalist platforms.
Italy’s Northern League, stridently anti-foreigner, more than doubled its share of the vote to 10.2 per cent and won eight seats. In Hungary, the Jobbik party, with its anti-gypsy platform, won three seats. In the Netherlands, the Freedom party of Geert Wilders, the maverick politician who has become the face of anti-Islamic sentiment across Europe, won four seats.
In the UK, the anti-Islamic British National party (BNP) won its first two European parliamentary seats amid widespread disaffection with the ruling Labour party among white voters in the depressed industrial north.
Analysts said there was a pattern to the rise of the far right: it was able to exploit what seems to be a rising sense of insecurity and hostility to immigrants. Writing in Corriere della Sera, the political commentator Massimo Franco said the rise in support for the Northern League “legitimises a politics that is shared by xenophobic forces that are on the rise nearly everywhere, especially in Holland and Austria”.
High on most far-right parties’ to-do lists, however, is keeping Turkey out of the EU. Roberto Cota, a senior Northern League official, said the party would be working “above all to block illegal immigration and the entry of Turkey into the Union”.
The challenge for these parties now, analysts said, was to form a coherent grouping in the European parliament, given the unpredictable nature of many of their MEPs. Mr Wilders will not take up a seat himself, and he said his MEPs would co-operate “if other parties have good proposals”, though the party is likely to want to maintain some distance from other far right parties.
Jobbik intends to set up a new political bloc in co-operation with the BNP.
The BNP confirmed this move, and said it was also exploring tie-ups with Jean-Marie Le Pen’s Front Nationale in France, Austria’s Freedom Party and Vlaams Belang of Flanders. The party would also approach the Dutch Freedom Party, a spokesman said, though agreeing on a leader for the bloc could prove difficult.
Jobbik has ruled out co-operation with the Greater Romania Party, which won three seats, or the Slovak National party, which won a seat, because both are fiercely anti-Hungarian.
The far right made gains in the elections to the European parliament, with voters in Italy, the UK, Hungary and the Netherlands, among others, supporting candidates who espoused explicitly anti-immigrant, anti-Islamic and hardline nationalist platforms.
Italy’s Northern League, stridently anti-foreigner, more than doubled its share of the vote to 10.2 per cent and won eight seats. In Hungary, the Jobbik party, with its anti-gypsy platform, won three seats. In the Netherlands, the Freedom party of Geert Wilders, the maverick politician who has become the face of anti-Islamic sentiment across Europe, won four seats.
In the UK, the anti-Islamic British National party (BNP) won its first two European parliamentary seats amid widespread disaffection with the ruling Labour party among white voters in the depressed industrial north.
Analysts said there was a pattern to the rise of the far right: it was able to exploit what seems to be a rising sense of insecurity and hostility to immigrants. Writing in Corriere della Sera, the political commentator Massimo Franco said the rise in support for the Northern League “legitimises a politics that is shared by xenophobic forces that are on the rise nearly everywhere, especially in Holland and Austria”.
High on most far-right parties’ to-do lists, however, is keeping Turkey out of the EU. Roberto Cota, a senior Northern League official, said the party would be working “above all to block illegal immigration and the entry of Turkey into the Union”.
The challenge for these parties now, analysts said, was to form a coherent grouping in the European parliament, given the unpredictable nature of many of their MEPs. Mr Wilders will not take up a seat himself, and he said his MEPs would co-operate “if other parties have good proposals”, though the party is likely to want to maintain some distance from other far right parties.
Jobbik intends to set up a new political bloc in co-operation with the BNP.
The BNP confirmed this move, and said it was also exploring tie-ups with Jean-Marie Le Pen’s Front Nationale in France, Austria’s Freedom Party and Vlaams Belang of Flanders. The party would also approach the Dutch Freedom Party, a spokesman said, though agreeing on a leader for the bloc could prove difficult.
Jobbik has ruled out co-operation with the Greater Romania Party, which won three seats, or the Slovak National party, which won a seat, because both are fiercely anti-Hungarian.
Voters steer Europe to the right
Voters steer Europe to the right
Centre-right parties have done well in elections to the European Parliament at the expense of the left.
Far-right and anti-immigration parties also made gains, as turnout figures plunged to 43% - the lowest since direct elections began 30 years ago.
The UK Labour Party, Germany's Social Democrats and France's Socialist Party were heading for historic defeats.
The centre-right European People's Party (EPP) looks set to continue to hold power in the parliament.
Jose Manuel Barroso, who seems set for a second term as European Commission president following the centre-right success, thanked voters and assured them their voices would be heard.
"Overall, the results are an undeniable victory for those parties and candidates that support the European project and want to see the European Union delivering policy responses to their everyday concerns," he said.
Socialist leader Martin Schulz said his group's defeat would be analysed.
"It's a sad evening for social democracy in Europe. We are particularly disappointed, [it is] a bitter evening for us," he said.
German Chancellor Angela Merkel praised the EPP's performance, saying: "This result shows that the core of society in Europe has become stronger."
Vice-president of the European Commission Margot Wallstrom said the low turnout was a "bad result".
Green gains
Fringe groups appear to have benefited, with far-right and anti-immigrant parties picking up seats in the Netherlands, Austria, Denmark, Slovakia and Hungary. The British National Party won two seats - its first ever in a nationwide election.
Greens also made gains - the Green-European Freedom Alliance bloc has so far taken 50 seats, compared with 43 in the last assembly.
Sweden's Pirate Party, which wants to legalise internet file sharing, won 7% of the national vote and one of the country's 18 seats in the European Parliament.
Several governments battling the economic downturn are facing a heavy defeat, says the BBC's Oana Lungescu in Brussels.
However, governing parties in France and Germany appear to have done relatively well despite the crisis.
Angela Merkel described the increase in the vote of her Christian Democrats over the Social Democrats as "sensational" and said it boded well for her chances in the nation's general election in September.
In results so far:
French President Nicolas Sarkozy's UMP trounced socialist opponents, while greens from the Europe-Ecologie party also made gains
In Italy, Prime Minister Silvio Berlusconi's centre-right People of Freedom party won most votes - 35% - although that was well below his prediction. The anti-immigrant Northern League made strong gains
In the UK, the governing Labour Party suffered a serious defeat, gaining its lowest share of the vote for a century
Spain's conservative Popular Party beat the ruling Socialists, but the four percentage point margin was lower than they had expected
Poland's governing centre-right Civic Platform gained ground at the expense of the Eurosceptic Law and Justice Party
Portugal's conservative Social Democrats secured about 31% of the vote. The ruling Socialists fell a massive 18 percentage points from the last European election, to about 26%
Austria's far right increased its vote on the last European election but was well down on its percentage in last year's national polls
Greece's Socialist party, PASOK, bucked the European trend by securing the largest vote percentage, ahead of the ruling conservatives
Voters have been choosing representatives mainly from their own national parties, many of which then join EU-wide groupings with similarly-minded parties from other countries.
The centre-right EPP retains its place as the largest grouping over the past five years, securing an estimated 264 of the 736 seats (the overall number of seats in the assembly has been reduced from 785). The socialists are on 183, while the liberal ALDE has an estimated 84.
Provisional figures released by the EU suggested turnout was at an all-time low in some countries, including France, where it dropped to 40.5%.
Lowest turnout was seen in Slovakia (19.6%) and Lithuania (20.9%), while the highest figures came from Luxembourg (91%) and and Belgium (85.9%) - both countries where voting is compulsory.
Overall turnout has fallen at each European election in the last 30 years, from a high of nearly 62% in 1979.
Centre-right parties have done well in elections to the European Parliament at the expense of the left.
Far-right and anti-immigration parties also made gains, as turnout figures plunged to 43% - the lowest since direct elections began 30 years ago.
The UK Labour Party, Germany's Social Democrats and France's Socialist Party were heading for historic defeats.
The centre-right European People's Party (EPP) looks set to continue to hold power in the parliament.
Jose Manuel Barroso, who seems set for a second term as European Commission president following the centre-right success, thanked voters and assured them their voices would be heard.
"Overall, the results are an undeniable victory for those parties and candidates that support the European project and want to see the European Union delivering policy responses to their everyday concerns," he said.
Socialist leader Martin Schulz said his group's defeat would be analysed.
"It's a sad evening for social democracy in Europe. We are particularly disappointed, [it is] a bitter evening for us," he said.
German Chancellor Angela Merkel praised the EPP's performance, saying: "This result shows that the core of society in Europe has become stronger."
Vice-president of the European Commission Margot Wallstrom said the low turnout was a "bad result".
Green gains
Fringe groups appear to have benefited, with far-right and anti-immigrant parties picking up seats in the Netherlands, Austria, Denmark, Slovakia and Hungary. The British National Party won two seats - its first ever in a nationwide election.
Greens also made gains - the Green-European Freedom Alliance bloc has so far taken 50 seats, compared with 43 in the last assembly.
Sweden's Pirate Party, which wants to legalise internet file sharing, won 7% of the national vote and one of the country's 18 seats in the European Parliament.
Several governments battling the economic downturn are facing a heavy defeat, says the BBC's Oana Lungescu in Brussels.
However, governing parties in France and Germany appear to have done relatively well despite the crisis.
Angela Merkel described the increase in the vote of her Christian Democrats over the Social Democrats as "sensational" and said it boded well for her chances in the nation's general election in September.
In results so far:
French President Nicolas Sarkozy's UMP trounced socialist opponents, while greens from the Europe-Ecologie party also made gains
In Italy, Prime Minister Silvio Berlusconi's centre-right People of Freedom party won most votes - 35% - although that was well below his prediction. The anti-immigrant Northern League made strong gains
In the UK, the governing Labour Party suffered a serious defeat, gaining its lowest share of the vote for a century
Spain's conservative Popular Party beat the ruling Socialists, but the four percentage point margin was lower than they had expected
Poland's governing centre-right Civic Platform gained ground at the expense of the Eurosceptic Law and Justice Party
Portugal's conservative Social Democrats secured about 31% of the vote. The ruling Socialists fell a massive 18 percentage points from the last European election, to about 26%
Austria's far right increased its vote on the last European election but was well down on its percentage in last year's national polls
Greece's Socialist party, PASOK, bucked the European trend by securing the largest vote percentage, ahead of the ruling conservatives
Voters have been choosing representatives mainly from their own national parties, many of which then join EU-wide groupings with similarly-minded parties from other countries.
The centre-right EPP retains its place as the largest grouping over the past five years, securing an estimated 264 of the 736 seats (the overall number of seats in the assembly has been reduced from 785). The socialists are on 183, while the liberal ALDE has an estimated 84.
Provisional figures released by the EU suggested turnout was at an all-time low in some countries, including France, where it dropped to 40.5%.
Lowest turnout was seen in Slovakia (19.6%) and Lithuania (20.9%), while the highest figures came from Luxembourg (91%) and and Belgium (85.9%) - both countries where voting is compulsory.
Overall turnout has fallen at each European election in the last 30 years, from a high of nearly 62% in 1979.
Thursday, June 4, 2009
Turnout fear as EU election opens
Voting for the European Parliament, the EU's most powerful legislative body, is under way, with the Netherlands and Britain the first to go to the polls.
UK voters will elect 72 seats and the Dutch 25 seats in the 736-member parliament. The rest of the EU's 27 members will vote in the coming days.
The first results are expected late on Sunday, the day the bulk of countries go to the polls.
Observers will be watching to see if turnout is higher than 2004's 45.5%.
But this is the first big electoral test across Europe since the region has been hit by economic meltdown, the BBC's Dominic Hughes in Brussels says.
In Britain, the European election, held at the same time as local elections, follows weeks of scandal over what some MPs have been charging to their expense accounts. Correspondents say no one quite knows how the public will respond.
Powerful institution
More than 375 million people are eligible to vote for the 736 seats up for grabs under various forms of proportional representation.
Germany, with the biggest population, gets the most seats - 99 - while Malta will have just five.
The newly elected MEPs will take their seats in one of Europe's most powerful political institutions, scrutinising and shaping legislation that covers everything from air quality to the cost of mobile phone calls.
Despite all this, in the past Europeans have failed to be moved by the elections, our correspondent says.
Last time around in 2004, turnout in the UK was 38% and in the Netherlands 39%. Some of the lowest turnouts were recorded in the newer member states of central and eastern Europe.
Ireland voters go to the polls on Friday. Latvia, Cyprus, Malta and Slovakia vote on Saturday and Italy and the Czech Republic over the weekend. The remaining 18 countries vote on Sunday.
UK voters will elect 72 seats and the Dutch 25 seats in the 736-member parliament. The rest of the EU's 27 members will vote in the coming days.
The first results are expected late on Sunday, the day the bulk of countries go to the polls.
Observers will be watching to see if turnout is higher than 2004's 45.5%.
But this is the first big electoral test across Europe since the region has been hit by economic meltdown, the BBC's Dominic Hughes in Brussels says.
In Britain, the European election, held at the same time as local elections, follows weeks of scandal over what some MPs have been charging to their expense accounts. Correspondents say no one quite knows how the public will respond.
Powerful institution
More than 375 million people are eligible to vote for the 736 seats up for grabs under various forms of proportional representation.
Germany, with the biggest population, gets the most seats - 99 - while Malta will have just five.
The newly elected MEPs will take their seats in one of Europe's most powerful political institutions, scrutinising and shaping legislation that covers everything from air quality to the cost of mobile phone calls.
Despite all this, in the past Europeans have failed to be moved by the elections, our correspondent says.
Last time around in 2004, turnout in the UK was 38% and in the Netherlands 39%. Some of the lowest turnouts were recorded in the newer member states of central and eastern Europe.
Ireland voters go to the polls on Friday. Latvia, Cyprus, Malta and Slovakia vote on Saturday and Italy and the Czech Republic over the weekend. The remaining 18 countries vote on Sunday.
Wednesday, April 29, 2009
Albania applies for EU membership
Albania has formally applied for membership of the European Union.
Prime Minister Sali Berisha submitted the application in Prague to his Czech counterpart, Mirek Topolanek, whose country holds the EU presidency.
"This act has historic significance, marking the return of my nation to the family of European nations," he said.
Mr Topolanek said Albania had undergone "tremendous positive changes", but stressed that the Balkan state was still "facing a huge amount of work".
Albania is not expected to join the EU until 2015 at the earliest.
The EU and Albania concluded a Stabilisation and Association Agreement (SAA), seen as the first step towards membership, in June 2006. The negotiations took three-and-a-half years - three times longer than they took in Croatia's and Macedonia's case.
Correspondents say this is because the EU thought Albania was moving too slowly in the fight against corruption and organised crime. The EU is also said to have doubts about Albania's energy sector, which suffers unstable supplies.
At the ceremony in Prague, the head of the European Commission's enlargement directorate, Michael Leigh, praised Albania's progress on key reforms and its "constructive and stabilising role in the region".
"It is now up to Albania to demonstrate its capacity to move to the next stage of European integration," he said. "Holding parliamentary elections in June in a free and fair manner remains a key condition."
Prime Minister Sali Berisha submitted the application in Prague to his Czech counterpart, Mirek Topolanek, whose country holds the EU presidency.
"This act has historic significance, marking the return of my nation to the family of European nations," he said.
Mr Topolanek said Albania had undergone "tremendous positive changes", but stressed that the Balkan state was still "facing a huge amount of work".
Albania is not expected to join the EU until 2015 at the earliest.
The EU and Albania concluded a Stabilisation and Association Agreement (SAA), seen as the first step towards membership, in June 2006. The negotiations took three-and-a-half years - three times longer than they took in Croatia's and Macedonia's case.
Correspondents say this is because the EU thought Albania was moving too slowly in the fight against corruption and organised crime. The EU is also said to have doubts about Albania's energy sector, which suffers unstable supplies.
At the ceremony in Prague, the head of the European Commission's enlargement directorate, Michael Leigh, praised Albania's progress on key reforms and its "constructive and stabilising role in the region".
"It is now up to Albania to demonstrate its capacity to move to the next stage of European integration," he said. "Holding parliamentary elections in June in a free and fair manner remains a key condition."
Friday, April 17, 2009
Time for Turkey to try quiet diplomacy
President Barack Obama’s visit to Turkey last week – towards the end of his first big international trip – paid a handsome compliment to the country’s growing influence in international affairs. Under the administration of George W. Bush, relations between Washington and Ankara slipped badly, not least because Turkey refused to support the US-led invasion of Iraq in 2003. But Mr Obama’s state visit may have marked a turning point. The US president underlined Turkey’s importance as a bridge between the Islamic world and the west. He made clear that Turkey had a role as a negotiator between Israel and the Arab world. He voiced, too, the hope that Turkey would one day join the European Union.
This last aspiration, of course, prompted another display of anguish from some European leaders. No sooner had Mr Obama spoken than Nicolas Sarkozy, French president, argued that “the immense majority” of EU states opposed Turkey’s accession. Angela Merkel, German chancellor, acknowledged there were huge “differences of opinion” inside her country on Turkey’s EU hopes.
Such doubts over Turkey’s EU ambition are regrettable. As Abdullah Gul, Turkey’s president, reminded the FT in an interview last week, his country has begun entry negotiations with the EU and is pressing on with political reforms needed to underpin its bid. It should be encouraged in this. The prospect of EU membership is one of the best guarantees of Turkey’s political stability. It would also help improve relations between Islam and the west.
Even so, the Turkish government must be aware of one thing. It does itself no favours when adopting a needlessly brash tone on the world stage. Turkey may be playing a constructive role in attempts to stabilise Iraq and Afghanistan. But Recep Tayyip Erdogan, prime minister, nearly wrecked the recent Nato summit with his lone opposition to Anders Fogh Rasmussen’s nomination as the organisation’s secretary-general. The summit was too important a stage for such petty grandstanding, which damaged Turkey’s international image.
Instead, this is a time for Turkey to display quiet and responsible diplomacy. The next few months bring two great challenges. The first is to normalise relations with Armenia and reopen the border closed by Turkey in 1993 in support of Azerbaijan. The second is to reach a settlement with Greece over Cyprus, a dispute which poisons decision-making inside the EU and Nato. If Turkey can display statesmanship on both these fronts, it will significantly bolster its claims to EU accession.
This last aspiration, of course, prompted another display of anguish from some European leaders. No sooner had Mr Obama spoken than Nicolas Sarkozy, French president, argued that “the immense majority” of EU states opposed Turkey’s accession. Angela Merkel, German chancellor, acknowledged there were huge “differences of opinion” inside her country on Turkey’s EU hopes.
Such doubts over Turkey’s EU ambition are regrettable. As Abdullah Gul, Turkey’s president, reminded the FT in an interview last week, his country has begun entry negotiations with the EU and is pressing on with political reforms needed to underpin its bid. It should be encouraged in this. The prospect of EU membership is one of the best guarantees of Turkey’s political stability. It would also help improve relations between Islam and the west.
Even so, the Turkish government must be aware of one thing. It does itself no favours when adopting a needlessly brash tone on the world stage. Turkey may be playing a constructive role in attempts to stabilise Iraq and Afghanistan. But Recep Tayyip Erdogan, prime minister, nearly wrecked the recent Nato summit with his lone opposition to Anders Fogh Rasmussen’s nomination as the organisation’s secretary-general. The summit was too important a stage for such petty grandstanding, which damaged Turkey’s international image.
Instead, this is a time for Turkey to display quiet and responsible diplomacy. The next few months bring two great challenges. The first is to normalise relations with Armenia and reopen the border closed by Turkey in 1993 in support of Azerbaijan. The second is to reach a settlement with Greece over Cyprus, a dispute which poisons decision-making inside the EU and Nato. If Turkey can display statesmanship on both these fronts, it will significantly bolster its claims to EU accession.
Interview transcript: Abdullah Gul
In an interview with Delphine Strauss in Ankara after Barack Obama’s visit, Abdullah Gul, Turkey’s president spoke of his reaction to the US president’s initiatives and warned that European criticisms could pose a threat to western security interests. The following is a transcript of the interview
What do you expect the impact of President Obama’s visit to be inside Turkey?
Gul: First of all we were very happy because this is the first overseas visit – the first bilateral visit of the new US president - to our country and the fact that he has chosen Turkey and has chosen to address the Islamic world from the Turkish parliament made us very happy.
We have seen that they realise the place of Turkey. I told him, take out a piece of paper and write down the priorities for US foreign policy. I’d also take a paper and write down the issues Turkey has been dealing with. You will not see such similarities with any other country in the issues they are dealing with.
Of course the US is a superpower, so they have duties, but in this region we are one of the important countries. In this region, from Afghanistan to the Balkans, from energy security to the Middle East, from terrorism to nuclear disarmament, these are issues not only of interest to Turkey but to all of the world.
Therefore the visit of the US president to Turkey was not only aiming at strengthening bilateral relations between the two countries but also of great relevance to regional and international issues.
One of the most important messages Obama gave yesterday was his support for the talks going on between Armenia and Turkey. He also met yesterday evening with both foreign ministers. What is left to resolve before we see public steps on this issue?
Gul: As I’m sure you know there have been efforts at normalisation from time to time between the two countries, but as you see these efforts accelerated after my visit to Armenia. This visit was a historical visit because this was the first time a Turkish president was in Yerevan and from that time on from telephone calls and other communications we have come to a certain mutual understanding on normalisation of relations. Through bilateral talks, I can say that we have reached a good understanding towards normalisation. In fact, after last summer there has been a new situation in the Caucasus. Everybody saw that these problems which we thought were frozen could immediately become big problems.
Therefore we have started an initiative named Stability and Cooperation in the Caucasus. From this perspective the major problem in the Caucasus is the Karabagh question between Armenia and Azerbaijan, We wish that this problem is resolved so that a new climate emerges in the Caucasus, because in fact although this is a relatively small area it can become a wall between East and West or it can become a gateway.
We are in a great effort to resolve these problems in the Caucasus and I believe that the year 2009 is a year of opportunity in that respect. And therefore I would like to invite everybody, beginning with the Minsk group, to multiply their efforts to come up with a solution.
We heard from president Obama that a breakthrough in these talks could be very close. Are you saying we should not expect a public step forward before there has been progress in the Minsk group?
Gul: I can say that there is a good level of understanding between the parties and goodwill on both sides
There is a clear statement that partnership with Turkey is crucial to US policies in the region. What role exactly does the US want Turkey to play, for example, in Afghanistan?
Gul: Frankly in this visit there was no concrete demand. Based on our understanding of our responsibility in that matter we have increased our efforts, our contributions, not only in terms of our military presence but also in our civilian activities.
As you know we had the command of ISAF twice before and we will now take over the command of the forces in Afghanistan. There are other sides of our military activities but what’s more important is the civilian activities that we’re undertaking and I’ve shared this extensively in our Nato meeting. I’ve visited Kabul. I stayed there two days, I visited everywhere in that city and I saw that we cannot win people’s hearts and minds no matter how much we spend on the military side. I said before that the streets of Kabul are flooded with mud. People are walking there as if they are just floating on mud. We’ve now allocated $100m for asphalting streets in Kabul. We’ve almost finished the tender process and started actually preparing the roads. In a country where the girls are not allowed to go out in the street, we’ve open tens of schools for girls. In total we’ve opened hundreds of schools.
You might have followed that five days ago we had the president of Afghanistan and Pakistan and also the general chiefs of joint staff [for meetings in Ankara]... This was very important... Our sole objective in this was to establish a working relationship between these institutions and it actually materialised.
I have obtained in full the opinion of both of these presidents so that I can convey these views to the Nato leaders and to president Obama. I was very happy that I shared our assessments and the realities and the facts in a very open manner and I think it was of great service.
Our foreign minister has visited all three regions in Afghanistan, many cities, with his wife. We are not leaders to go to Afghanistan and to visit our troops there in an isolated manner and come back. So the capacity of contribution in Turkey in those matters is very large. Why are we doing all of this? We are doing all of this for peace and stability and to expand our common values.
I understand that as Turkey takes over command in Afghanistan that will involve increasing the numbers of troops. Is that correct?
Gul: Yes, as I’ve said we’re increasing our military and civilian presence. The way in which we do these things, the military authorities are working on that.
Do you have a sense of the numbers involved?
Gul: This will certainly be an important contribution but there will not be any combat forces.
Turkey has been very assertive in its foreign policy recently, for example making its objections to the appointment of Mr Rasmussen very clear. Is there a risk of all this antagonising its European partners?
Gul: That shouldn’t be the case. Especially in a defence organisation like Nato, it is necessary that you discuss these matters in decision making mechanisms and come to a decision. Since 1952 Turkey has been the most active member of nato and a major contributor. During the cold war period Turkey spent its own resources for the defence of Europe. This should be appreciated.
We have discussed [Rasmussen’s candidacy] with all of our partners over the phone and we had some questions and we shared our concerns and so our concerns are met.
Now we must look to the future and we have to work all together in order to make the new secretary general successful.
In fact concerning the points you have raised I am aware of some opinions from various circles and this is worrying.
[Breaking in on translator in English] It’s very dangerous and making us disturbed.
[Switching back to Turkish] You know for example even in the EU, some countries whose contributions are smaller may be blocking or vetoing some strategic issues which can be extremely important.
In this present case, if a country has a significant and vital contribution to the organisation, if they have concerns, rational concerns on a concrete subject it is very natural that this should be listened to and responded to. So these points should not be underestimated.
We neither engaged in blackmail nor did we have an irrational request. We acted in a rational logical and in a modern way within the compromise which is a European culture. And indeed in the end we came to an understanding. Therefore I am surprised to see comments of that nature coming from certain countries. I don’t find it terribly in line with the European spirit.
There’s been a lot of speculation about exactly what guarantees given allowed Turkey to overcome its objections [to Rasmussen’s appointment]. Can you able to tell me how president Obama was able to convince you?
Gul: I prefer not to communicate through newspaper headlines. We should look to the future. We should make Nato and the new Secretary General successful.
One issue in particular is causing friction in Nato now – the difficulties over EU-Nato cooperation where of course Cyprus plays a part. Is this an issue where Turkey would be able to make some kind of gesture that would make the issue less sensitive?
Gul: In fact if there’s going to be a gesture I think there should be a gesture to us, not from us… We make more contribution, a more strategic contribution and more sacrifice. Not others.
This is very important. I was foreign minister for 5/6 years and at all of our meetings in Nato in the EU I have told my colleagues time and again that we have to solve this problem on time, as soon as possible because in the future it is likely to poison some more important and strategic issues.
So the world is a very fragile place and there is a big potential for problems, there are big threats and there may be times when we need even stronger cooperation. This problem might hijack the huge issues and prevent us having a huge solidarity so therefore I used to warn all my colleagues, let’s solve this problem in a fair manner. I was warning them many times…
You are right, it’s a problem in the EU. It’s a problem that the EU and Nato have not been having very healthy and full cooperation. But it’s not because of us. It’s because of the others.
Are you worried that time is running out for talks to solve the Cyprus issue?
Gul: We are very serious for a solution. We really wish this problem to dissolve - I’m not making propaganda, we proved this in 2004. We took the risk, we compromised, we challenged inside and we made sacrifices and the plan was put to a referendum on both sides. So Turks and Turkey said yes, the other side rejected.
What else we can do? Anyway, that’s old, we start again and we have a full intention to reach a comprehensive solution over there. That’s why we have full support behind president Talat. We wish this problem to be over very soon. Once the problem is over we believe that Turkey, Greece and the whole of Cyprus can be another pillar in the EU with full cooperation. This is our real desire, this is our vision. Once, when it was not a joke, in 2004 we proved ourselves, so we have the credibility.
Is it helpful for the US to intervene in support for Turkey’s EU bid – or the reverse?
Gul: We do not ask them to do it. They’ve done these public declarations because of their strategic approach, and nobody should be disturbed by this, because in the end the decision regarding Turkey is the decision of members of the European Union and nobody will be making this decision under pressure. All member states made their own decision – by unanimity and of their own free will – to start membership negotiations with Turkey… This is not likely to happen under pressure. They have elaborated and studied the matter to see whether Turkey is an asset or not and they came to the conclusion that it’s probably an asset
[The decline in domestic support for EU process] is not because its taking a long time. But some public statements coming from some member states are upsetting public opinion and undermining the credibility of those states. Because they are then in conflict with their own signatures, their own commitments. In the meantime the negotiation process is going on and Turkey is amending its laws and regulations and constitution to harmonise with the Community acquis… In any case we are going to continue with our reform process because these are our reforms and we want to do them ourselves.
What do you expect the impact of President Obama’s visit to be inside Turkey?
Gul: First of all we were very happy because this is the first overseas visit – the first bilateral visit of the new US president - to our country and the fact that he has chosen Turkey and has chosen to address the Islamic world from the Turkish parliament made us very happy.
We have seen that they realise the place of Turkey. I told him, take out a piece of paper and write down the priorities for US foreign policy. I’d also take a paper and write down the issues Turkey has been dealing with. You will not see such similarities with any other country in the issues they are dealing with.
Of course the US is a superpower, so they have duties, but in this region we are one of the important countries. In this region, from Afghanistan to the Balkans, from energy security to the Middle East, from terrorism to nuclear disarmament, these are issues not only of interest to Turkey but to all of the world.
Therefore the visit of the US president to Turkey was not only aiming at strengthening bilateral relations between the two countries but also of great relevance to regional and international issues.
One of the most important messages Obama gave yesterday was his support for the talks going on between Armenia and Turkey. He also met yesterday evening with both foreign ministers. What is left to resolve before we see public steps on this issue?
Gul: As I’m sure you know there have been efforts at normalisation from time to time between the two countries, but as you see these efforts accelerated after my visit to Armenia. This visit was a historical visit because this was the first time a Turkish president was in Yerevan and from that time on from telephone calls and other communications we have come to a certain mutual understanding on normalisation of relations. Through bilateral talks, I can say that we have reached a good understanding towards normalisation. In fact, after last summer there has been a new situation in the Caucasus. Everybody saw that these problems which we thought were frozen could immediately become big problems.
Therefore we have started an initiative named Stability and Cooperation in the Caucasus. From this perspective the major problem in the Caucasus is the Karabagh question between Armenia and Azerbaijan, We wish that this problem is resolved so that a new climate emerges in the Caucasus, because in fact although this is a relatively small area it can become a wall between East and West or it can become a gateway.
We are in a great effort to resolve these problems in the Caucasus and I believe that the year 2009 is a year of opportunity in that respect. And therefore I would like to invite everybody, beginning with the Minsk group, to multiply their efforts to come up with a solution.
We heard from president Obama that a breakthrough in these talks could be very close. Are you saying we should not expect a public step forward before there has been progress in the Minsk group?
Gul: I can say that there is a good level of understanding between the parties and goodwill on both sides
There is a clear statement that partnership with Turkey is crucial to US policies in the region. What role exactly does the US want Turkey to play, for example, in Afghanistan?
Gul: Frankly in this visit there was no concrete demand. Based on our understanding of our responsibility in that matter we have increased our efforts, our contributions, not only in terms of our military presence but also in our civilian activities.
As you know we had the command of ISAF twice before and we will now take over the command of the forces in Afghanistan. There are other sides of our military activities but what’s more important is the civilian activities that we’re undertaking and I’ve shared this extensively in our Nato meeting. I’ve visited Kabul. I stayed there two days, I visited everywhere in that city and I saw that we cannot win people’s hearts and minds no matter how much we spend on the military side. I said before that the streets of Kabul are flooded with mud. People are walking there as if they are just floating on mud. We’ve now allocated $100m for asphalting streets in Kabul. We’ve almost finished the tender process and started actually preparing the roads. In a country where the girls are not allowed to go out in the street, we’ve open tens of schools for girls. In total we’ve opened hundreds of schools.
You might have followed that five days ago we had the president of Afghanistan and Pakistan and also the general chiefs of joint staff [for meetings in Ankara]... This was very important... Our sole objective in this was to establish a working relationship between these institutions and it actually materialised.
I have obtained in full the opinion of both of these presidents so that I can convey these views to the Nato leaders and to president Obama. I was very happy that I shared our assessments and the realities and the facts in a very open manner and I think it was of great service.
Our foreign minister has visited all three regions in Afghanistan, many cities, with his wife. We are not leaders to go to Afghanistan and to visit our troops there in an isolated manner and come back. So the capacity of contribution in Turkey in those matters is very large. Why are we doing all of this? We are doing all of this for peace and stability and to expand our common values.
I understand that as Turkey takes over command in Afghanistan that will involve increasing the numbers of troops. Is that correct?
Gul: Yes, as I’ve said we’re increasing our military and civilian presence. The way in which we do these things, the military authorities are working on that.
Do you have a sense of the numbers involved?
Gul: This will certainly be an important contribution but there will not be any combat forces.
Turkey has been very assertive in its foreign policy recently, for example making its objections to the appointment of Mr Rasmussen very clear. Is there a risk of all this antagonising its European partners?
Gul: That shouldn’t be the case. Especially in a defence organisation like Nato, it is necessary that you discuss these matters in decision making mechanisms and come to a decision. Since 1952 Turkey has been the most active member of nato and a major contributor. During the cold war period Turkey spent its own resources for the defence of Europe. This should be appreciated.
We have discussed [Rasmussen’s candidacy] with all of our partners over the phone and we had some questions and we shared our concerns and so our concerns are met.
Now we must look to the future and we have to work all together in order to make the new secretary general successful.
In fact concerning the points you have raised I am aware of some opinions from various circles and this is worrying.
[Breaking in on translator in English] It’s very dangerous and making us disturbed.
[Switching back to Turkish] You know for example even in the EU, some countries whose contributions are smaller may be blocking or vetoing some strategic issues which can be extremely important.
In this present case, if a country has a significant and vital contribution to the organisation, if they have concerns, rational concerns on a concrete subject it is very natural that this should be listened to and responded to. So these points should not be underestimated.
We neither engaged in blackmail nor did we have an irrational request. We acted in a rational logical and in a modern way within the compromise which is a European culture. And indeed in the end we came to an understanding. Therefore I am surprised to see comments of that nature coming from certain countries. I don’t find it terribly in line with the European spirit.
There’s been a lot of speculation about exactly what guarantees given allowed Turkey to overcome its objections [to Rasmussen’s appointment]. Can you able to tell me how president Obama was able to convince you?
Gul: I prefer not to communicate through newspaper headlines. We should look to the future. We should make Nato and the new Secretary General successful.
One issue in particular is causing friction in Nato now – the difficulties over EU-Nato cooperation where of course Cyprus plays a part. Is this an issue where Turkey would be able to make some kind of gesture that would make the issue less sensitive?
Gul: In fact if there’s going to be a gesture I think there should be a gesture to us, not from us… We make more contribution, a more strategic contribution and more sacrifice. Not others.
This is very important. I was foreign minister for 5/6 years and at all of our meetings in Nato in the EU I have told my colleagues time and again that we have to solve this problem on time, as soon as possible because in the future it is likely to poison some more important and strategic issues.
So the world is a very fragile place and there is a big potential for problems, there are big threats and there may be times when we need even stronger cooperation. This problem might hijack the huge issues and prevent us having a huge solidarity so therefore I used to warn all my colleagues, let’s solve this problem in a fair manner. I was warning them many times…
You are right, it’s a problem in the EU. It’s a problem that the EU and Nato have not been having very healthy and full cooperation. But it’s not because of us. It’s because of the others.
Are you worried that time is running out for talks to solve the Cyprus issue?
Gul: We are very serious for a solution. We really wish this problem to dissolve - I’m not making propaganda, we proved this in 2004. We took the risk, we compromised, we challenged inside and we made sacrifices and the plan was put to a referendum on both sides. So Turks and Turkey said yes, the other side rejected.
What else we can do? Anyway, that’s old, we start again and we have a full intention to reach a comprehensive solution over there. That’s why we have full support behind president Talat. We wish this problem to be over very soon. Once the problem is over we believe that Turkey, Greece and the whole of Cyprus can be another pillar in the EU with full cooperation. This is our real desire, this is our vision. Once, when it was not a joke, in 2004 we proved ourselves, so we have the credibility.
Is it helpful for the US to intervene in support for Turkey’s EU bid – or the reverse?
Gul: We do not ask them to do it. They’ve done these public declarations because of their strategic approach, and nobody should be disturbed by this, because in the end the decision regarding Turkey is the decision of members of the European Union and nobody will be making this decision under pressure. All member states made their own decision – by unanimity and of their own free will – to start membership negotiations with Turkey… This is not likely to happen under pressure. They have elaborated and studied the matter to see whether Turkey is an asset or not and they came to the conclusion that it’s probably an asset
[The decline in domestic support for EU process] is not because its taking a long time. But some public statements coming from some member states are upsetting public opinion and undermining the credibility of those states. Because they are then in conflict with their own signatures, their own commitments. In the meantime the negotiation process is going on and Turkey is amending its laws and regulations and constitution to harmonise with the Community acquis… In any case we are going to continue with our reform process because these are our reforms and we want to do them ourselves.
Wednesday, April 8, 2009
Obama stresses Turkey's role in 'civilisation' outreach
US President Barack Obama began a groundbreaking visit to Ankara and Istanbul today (6 April), seeking to boost the role of this large Muslim ally on the world stage.
Background:
The second forum of the 'Alliance of Civilisations', held on 6-7 April in Turkey, seeks to address some of the ongoing tensions and dividing lines across cultures and religions, and to examine some of the broader challenges related to good governance of cultural diversity in an age of rapidly accelerating globalisation.
Hosted by Turkish Prime Minister Recep Tayyip Erdogan, the forum convenes a network of global leaders, including US President Barack Obama, heads of international organisations including UN Secretary-General Ban Ki-moon, civil society and youth groups. Its declared aim is to forge partnerships aimed at building substantive interaction between diverse communities and strengthening trust and reconciliation across cultures.
The conference builds upon the success of the inaugural Alliance Forum which was held in Madrid, Spain, in January 2008. The high representative for the Alliance of Civilisations is former Portuguese President Jorge Sampaio.
Turkey-related controversy has outshined other topics during the successive European stopovers of US President Barack Obama over the last few days.
At the NATO summit in Strasbourg on 3-4 April, discussions centred on overcoming Ankara's initial reluctance to appoint Danish Prime Minister Anders Fogh Rasmussen as the Alliance's next secretary-general.
Rasmussen finally got the job after Turkish President Abdullah Gül dropped his opposition, following intense telephone mediation by Italian Prime Minister Silvio Berlusconi and Obama himself. Turkey was against the appointment of Rasmussen due to the 2006 'cartoon' crisis (EurActiv 15/02/06), as well as Denmark's hosting of a Kurdish satellite channel, Roj TV.
Bargaining gains
Erdogan told Turkish television that Turkey had received "guarantees" from Obama that one of Rasmussen's deputies would be a Turk and that Turkish commanders would be present in the alliance's command, Reuters reported. Also, according to Bloomberg, Rasmussen had promised that his country would shut down Roj TV, if investigations show it has connections with terrorists.
During his next stop in Prague for an EU-US summit on 4-5 April, Obama put his weight behind Turkey's membership of the European Union, prompting French President Nicolas Sarkozy to reiterate in strong terms his government's opposition to the country's EU accession.
France against Turkey in EU
In an interview in Prague for French television channel TF1, Sarkozy said his negative stance towards Turkish membership of the bloc had not changed.
"I have always been against [Turkey's] admission and I continue to be opposed to it. I think I can say a huge majority of member countries take the same position as France," Sarkozy said.
Czech Foreign Minister Karel Schwarzenberg told journalists that Turkey's EU admission was not officially discussed at the EU-US summit in Prague.
"It is known that a few states - not only France, but also Germany - are sceptical enough about Turkey joining. The Austrians are not happy about it either," Schwarzenberg said.
Regional and global contribution
According to the Turkish press, Obama's official visit to Turkey, which is taking place not long after the new US president took office, is a sign of the importance of the two countries' bilateral relationship.
In Ankara, Obama will have talks with President Gül, Prime Minister Erdogan, parliament speaker Köksal Toptan and leaders of the opposition parties represented in parliament. He will also address a plenary session of the parliament today (6 April), reflecting the US administration's support for Turkey's parliamentary democracy.
NATO's role in Afghanistan, where Turkey currently has more than 800 troops, is likely to be high on the agenda of Obama's talks with Turkish officials. Obama's new approach to Afghanistan, which highlights the need for more civilian efforts there, is a point which has been frequently underlined in the Turkish capital, Zaman wrote.
The US president will then proceed to Istanbul, which is hosting the second forum of the UN-led Alliance of Civilisations (UNAOC). The forum, which kicked off today (6 April) and ends tomorrow, is likely to see Obama's participation to a reception held tonight for world leaders attending the forum.
As the Turkish daily Zaman reminds, during the Munich Security Conference held in Germany in February, US Vice President Joe Biden reiterated Obama's desire to steer clear of the 'clash of civilisations' theory, stressing his desire to break with some of the more confrontational aspects of former President George W. Bush's foreign policy.
Turkey is also seen by Washington as a key player in the Middle East conflict. Erdogan recently obtained hero status in the Arab world when he walked out on the Israeli president, Shimon Peres, during a debate earlier this year in Davos (EurActiv 30/01/09).
Mediation with Teheran?
The Turkish press is also speculating that Obama may meet former Iranian President Mohammad Khatami in Istanbul. The speculation comes after Turkey announced its readiness to mediate in possible talks between Tehran and Washington.
Turkey is the ideal location for a rapprochement between Washington and Tehran should such a meeting take place, the Middle East Times writes.
Relations between Washington and Ankara have been going through a difficult spell since 2003, when the Turkish parliament voted not to let President George W. Bush use Turkish soil to open a front of the invasion of Iraq.
In a damage-limitation strategy, any tension over difficult issues, such as Turkey's denial of an Armenian genocide during the Ottoman era, is expected to be avoided during Obama's trip. Unlike his predecessors Bush and Clinton, Obama will not pay a visit to Ecumenical Patriarch Bartholomew I of Constantinople, the spiritual leader of the world's Orthodox Christians. Turkey harbours historical mistrust toward the patriarchate.
Positions:
Sami Kohen of the Turkish daily Milliyet wrote that the centre of gravity of Obama's visit is not just about giving support to Turkey's EU bid, but also highlights the importance of Turkey's geostrategic position.
"Obama is eager to win Turkey back," the author writes. "Turkey is building up close relations with Middle East countries and the Muslim communities. The US is quite worried about that, and Obama wants a new insight in Turkey-US relations. This is why Obama is paying a visit to Turkey."
The visit, Kohen continues, has a different objective to Obama's European trip. "He visited European countries, but there he participated in multi-lateral meetings such as the NATO summit or the EU-US summit. But his visit to Turkey has a different characteristic. He comes to Turkey just for Turkey [for bilateral relations]. The US is reconsidering its foreign policy. Obama's message is:'Let's not alienate Turkey'."
Mustafa Akyol, deputy editor of the Hurriyet daily, writes that together with Obama, the Turkish government is hoping that it can build up its soft power in the region.
"The Bush administration was not very open to dialogue with several important actors in the Middle East. So, when Obama came to power with a more reconciliatory tone, with a message that says 'The United States will listen,' and when Obama said he wants to engage in a process with Iran, Turkey said, 'Yes, this is what we have been waiting for'."
Nusret Kandemir, a former Turkish ambassador, stated: "This visit is quite different than any other visits of US presidents to Turkey. In the past, it has always been Turkey which wanted to gain something from US or which has been the demanding side. And the point has always been whether Turkey achieved its goals or not. But this time, US wants to change its image of the last eight years. Now the US is the demanding part."
Background:
The second forum of the 'Alliance of Civilisations', held on 6-7 April in Turkey, seeks to address some of the ongoing tensions and dividing lines across cultures and religions, and to examine some of the broader challenges related to good governance of cultural diversity in an age of rapidly accelerating globalisation.
Hosted by Turkish Prime Minister Recep Tayyip Erdogan, the forum convenes a network of global leaders, including US President Barack Obama, heads of international organisations including UN Secretary-General Ban Ki-moon, civil society and youth groups. Its declared aim is to forge partnerships aimed at building substantive interaction between diverse communities and strengthening trust and reconciliation across cultures.
The conference builds upon the success of the inaugural Alliance Forum which was held in Madrid, Spain, in January 2008. The high representative for the Alliance of Civilisations is former Portuguese President Jorge Sampaio.
Turkey-related controversy has outshined other topics during the successive European stopovers of US President Barack Obama over the last few days.
At the NATO summit in Strasbourg on 3-4 April, discussions centred on overcoming Ankara's initial reluctance to appoint Danish Prime Minister Anders Fogh Rasmussen as the Alliance's next secretary-general.
Rasmussen finally got the job after Turkish President Abdullah Gül dropped his opposition, following intense telephone mediation by Italian Prime Minister Silvio Berlusconi and Obama himself. Turkey was against the appointment of Rasmussen due to the 2006 'cartoon' crisis (EurActiv 15/02/06), as well as Denmark's hosting of a Kurdish satellite channel, Roj TV.
Bargaining gains
Erdogan told Turkish television that Turkey had received "guarantees" from Obama that one of Rasmussen's deputies would be a Turk and that Turkish commanders would be present in the alliance's command, Reuters reported. Also, according to Bloomberg, Rasmussen had promised that his country would shut down Roj TV, if investigations show it has connections with terrorists.
During his next stop in Prague for an EU-US summit on 4-5 April, Obama put his weight behind Turkey's membership of the European Union, prompting French President Nicolas Sarkozy to reiterate in strong terms his government's opposition to the country's EU accession.
France against Turkey in EU
In an interview in Prague for French television channel TF1, Sarkozy said his negative stance towards Turkish membership of the bloc had not changed.
"I have always been against [Turkey's] admission and I continue to be opposed to it. I think I can say a huge majority of member countries take the same position as France," Sarkozy said.
Czech Foreign Minister Karel Schwarzenberg told journalists that Turkey's EU admission was not officially discussed at the EU-US summit in Prague.
"It is known that a few states - not only France, but also Germany - are sceptical enough about Turkey joining. The Austrians are not happy about it either," Schwarzenberg said.
Regional and global contribution
According to the Turkish press, Obama's official visit to Turkey, which is taking place not long after the new US president took office, is a sign of the importance of the two countries' bilateral relationship.
In Ankara, Obama will have talks with President Gül, Prime Minister Erdogan, parliament speaker Köksal Toptan and leaders of the opposition parties represented in parliament. He will also address a plenary session of the parliament today (6 April), reflecting the US administration's support for Turkey's parliamentary democracy.
NATO's role in Afghanistan, where Turkey currently has more than 800 troops, is likely to be high on the agenda of Obama's talks with Turkish officials. Obama's new approach to Afghanistan, which highlights the need for more civilian efforts there, is a point which has been frequently underlined in the Turkish capital, Zaman wrote.
The US president will then proceed to Istanbul, which is hosting the second forum of the UN-led Alliance of Civilisations (UNAOC). The forum, which kicked off today (6 April) and ends tomorrow, is likely to see Obama's participation to a reception held tonight for world leaders attending the forum.
As the Turkish daily Zaman reminds, during the Munich Security Conference held in Germany in February, US Vice President Joe Biden reiterated Obama's desire to steer clear of the 'clash of civilisations' theory, stressing his desire to break with some of the more confrontational aspects of former President George W. Bush's foreign policy.
Turkey is also seen by Washington as a key player in the Middle East conflict. Erdogan recently obtained hero status in the Arab world when he walked out on the Israeli president, Shimon Peres, during a debate earlier this year in Davos (EurActiv 30/01/09).
Mediation with Teheran?
The Turkish press is also speculating that Obama may meet former Iranian President Mohammad Khatami in Istanbul. The speculation comes after Turkey announced its readiness to mediate in possible talks between Tehran and Washington.
Turkey is the ideal location for a rapprochement between Washington and Tehran should such a meeting take place, the Middle East Times writes.
Relations between Washington and Ankara have been going through a difficult spell since 2003, when the Turkish parliament voted not to let President George W. Bush use Turkish soil to open a front of the invasion of Iraq.
In a damage-limitation strategy, any tension over difficult issues, such as Turkey's denial of an Armenian genocide during the Ottoman era, is expected to be avoided during Obama's trip. Unlike his predecessors Bush and Clinton, Obama will not pay a visit to Ecumenical Patriarch Bartholomew I of Constantinople, the spiritual leader of the world's Orthodox Christians. Turkey harbours historical mistrust toward the patriarchate.
Positions:
Sami Kohen of the Turkish daily Milliyet wrote that the centre of gravity of Obama's visit is not just about giving support to Turkey's EU bid, but also highlights the importance of Turkey's geostrategic position.
"Obama is eager to win Turkey back," the author writes. "Turkey is building up close relations with Middle East countries and the Muslim communities. The US is quite worried about that, and Obama wants a new insight in Turkey-US relations. This is why Obama is paying a visit to Turkey."
The visit, Kohen continues, has a different objective to Obama's European trip. "He visited European countries, but there he participated in multi-lateral meetings such as the NATO summit or the EU-US summit. But his visit to Turkey has a different characteristic. He comes to Turkey just for Turkey [for bilateral relations]. The US is reconsidering its foreign policy. Obama's message is:'Let's not alienate Turkey'."
Mustafa Akyol, deputy editor of the Hurriyet daily, writes that together with Obama, the Turkish government is hoping that it can build up its soft power in the region.
"The Bush administration was not very open to dialogue with several important actors in the Middle East. So, when Obama came to power with a more reconciliatory tone, with a message that says 'The United States will listen,' and when Obama said he wants to engage in a process with Iran, Turkey said, 'Yes, this is what we have been waiting for'."
Nusret Kandemir, a former Turkish ambassador, stated: "This visit is quite different than any other visits of US presidents to Turkey. In the past, it has always been Turkey which wanted to gain something from US or which has been the demanding side. And the point has always been whether Turkey achieved its goals or not. But this time, US wants to change its image of the last eight years. Now the US is the demanding part."
Obama urges EU to welcome Turkey
By Joshua Chaffin in Prague, Scheherazade Daneshkhu in Paris and Chris Bryant in Berlin
On the eve of his first visit to Turkey, US President Barack Obama on Sunday urged European leaders to overcome their reservations and grant the country full admission to the European Union as a way to build stronger ties to the Muslim world.
“Moving towards Turkish membership in the EU would be an important signal of your commitment to this agenda and ensure that we continue to anchor Turkey firmly in Europe,” Mr Obama told fellow heads of state at an EU-US summit in Prague.
Mr Obama’s plea restated a well-known US position but had special resonance since it came just hours before he was due to leave for Ankara as part of his first visit to a mostly Muslim country. It was swiftly rejected by two of the EU’s biggest member states – France and Germany – however.
“I have always been opposed to this entry and I still am,” French president Nicolas Sarkozy said in a television interview. “When it comes to EU matters, it’s for member-states of the European Union to decide,” Mr Sarkozy added.
Angela Merkel, the German chancellor, said she believed it was “in all our interests” that Turkey develop close ties to the EU, but suggesting that this could take the form of a “privileged partnership” rather than full membership.
The exchanges over Turkey stood out at a summit meeting that was largely dedicated to emphasising the renewed health of a transatlantic relationship frayed by the Iraq war.
Appearing beside José Manuel Barroso, the president of the European Commission, Mr Obama called the EU-US relationship “one of the key foundations for progress in the world” and vowed to “pursue it and strengthen it” in the future.
That sentiment, endorsed by a beaming Mr Barroso, appeared to trump lingering differences between the two parties on fundamental issues – such as how to tackle the economic crisis and Europe’s contribution to the war effort in Afghanistan.
Mr Obama also called on EU members to accept some detainees from the US prison in Guantánamo Bay to help him meet his pledge to close the centre by January next year. The US President said it was “urgent that the European Council issue a common position supporting the right of your member states to accept detainees if they so choose”.
EU members have been split on how far they are prepared to go and whether they would accept Guantánamo inmates – particularly those with no link to their own countries.
Mr Barroso offered special praise for the Obama administration’s commitment to fight global warming, saying that the “EU was now much more on a convergence path with our American friends” heading into a December meeting in Copenhagen aimed at achieving a global pact on climate change.
On the eve of his first visit to Turkey, US President Barack Obama on Sunday urged European leaders to overcome their reservations and grant the country full admission to the European Union as a way to build stronger ties to the Muslim world.
“Moving towards Turkish membership in the EU would be an important signal of your commitment to this agenda and ensure that we continue to anchor Turkey firmly in Europe,” Mr Obama told fellow heads of state at an EU-US summit in Prague.
Mr Obama’s plea restated a well-known US position but had special resonance since it came just hours before he was due to leave for Ankara as part of his first visit to a mostly Muslim country. It was swiftly rejected by two of the EU’s biggest member states – France and Germany – however.
“I have always been opposed to this entry and I still am,” French president Nicolas Sarkozy said in a television interview. “When it comes to EU matters, it’s for member-states of the European Union to decide,” Mr Sarkozy added.
Angela Merkel, the German chancellor, said she believed it was “in all our interests” that Turkey develop close ties to the EU, but suggesting that this could take the form of a “privileged partnership” rather than full membership.
The exchanges over Turkey stood out at a summit meeting that was largely dedicated to emphasising the renewed health of a transatlantic relationship frayed by the Iraq war.
Appearing beside José Manuel Barroso, the president of the European Commission, Mr Obama called the EU-US relationship “one of the key foundations for progress in the world” and vowed to “pursue it and strengthen it” in the future.
That sentiment, endorsed by a beaming Mr Barroso, appeared to trump lingering differences between the two parties on fundamental issues – such as how to tackle the economic crisis and Europe’s contribution to the war effort in Afghanistan.
Mr Obama also called on EU members to accept some detainees from the US prison in Guantánamo Bay to help him meet his pledge to close the centre by January next year. The US President said it was “urgent that the European Council issue a common position supporting the right of your member states to accept detainees if they so choose”.
EU members have been split on how far they are prepared to go and whether they would accept Guantánamo inmates – particularly those with no link to their own countries.
Mr Barroso offered special praise for the Obama administration’s commitment to fight global warming, saying that the “EU was now much more on a convergence path with our American friends” heading into a December meeting in Copenhagen aimed at achieving a global pact on climate change.
IMF urges eastern EU to adopt euro
By Stefan Wagstyl, Eastern Europe Editor
Crisis-hit European Union states in central and eastern Europe should consider scrapping their currencies in favour of the euro even without formally joining the eurozone, according to the International Monetary Fund.
The eurozone could relax its entry rules so countries could join as quasi-members, without European Central Bank board seats, says the fund.
“For countries in the EU, euroisation offers the largest benefits in terms of resolving the foreign currency debt overhang [accumulation], removing uncertainty and restoring confidence.
“Without euroisation, addressing the foreign debt currency overhang would require massive domestic retrenchment in some countries, against growing political resistance.”
Disclosure of the confidential report, prepared about a month ago, could reignite a fierce debate over strategies to assist central and east Europe.
Even though global leaders hailed last week’s G20 summit as a success, eastern Europe’s challenges remain. Amid deepening recession, Ukraine and Latvia, two states already in IMF programmes, have in recent days balked at approving IMF-mandated reforms. A third, Hungary, is struggling to create a government capable of implementing reforms.
The IMF report was compiled to support a campaign by the fund, the World Bank and the European Bank for Reconstruction and Development to persuade the EU and eastern European states to back a region-wide anti-crisis strategy, including a regional rescue fund. The campaign failed amid widespread opposition from both west and east European states.
Eurozone members also oppose easing the eurozone’s entry rules, as does the ECB.
The IMF, which forecasts a 2.5 per cent decline in regional gross domestic product in 2009, estimates that “emerging Europe” – including Turkey – must roll over $413bn in maturing external debt in 2009 and cover $84bn in projected current account deficits.
The report estimates that “the financing gap” – money needed from international financial institutions, the EU and governments – will be $123bn this year and $63bn next, or $186bn in total.
Much could come from the IMF. But the report says “up to $105bn” could be needed from other sources, including the EU.
Crisis-hit European Union states in central and eastern Europe should consider scrapping their currencies in favour of the euro even without formally joining the eurozone, according to the International Monetary Fund.
The eurozone could relax its entry rules so countries could join as quasi-members, without European Central Bank board seats, says the fund.
“For countries in the EU, euroisation offers the largest benefits in terms of resolving the foreign currency debt overhang [accumulation], removing uncertainty and restoring confidence.
“Without euroisation, addressing the foreign debt currency overhang would require massive domestic retrenchment in some countries, against growing political resistance.”
Disclosure of the confidential report, prepared about a month ago, could reignite a fierce debate over strategies to assist central and east Europe.
Even though global leaders hailed last week’s G20 summit as a success, eastern Europe’s challenges remain. Amid deepening recession, Ukraine and Latvia, two states already in IMF programmes, have in recent days balked at approving IMF-mandated reforms. A third, Hungary, is struggling to create a government capable of implementing reforms.
The IMF report was compiled to support a campaign by the fund, the World Bank and the European Bank for Reconstruction and Development to persuade the EU and eastern European states to back a region-wide anti-crisis strategy, including a regional rescue fund. The campaign failed amid widespread opposition from both west and east European states.
Eurozone members also oppose easing the eurozone’s entry rules, as does the ECB.
The IMF, which forecasts a 2.5 per cent decline in regional gross domestic product in 2009, estimates that “emerging Europe” – including Turkey – must roll over $413bn in maturing external debt in 2009 and cover $84bn in projected current account deficits.
The report estimates that “the financing gap” – money needed from international financial institutions, the EU and governments – will be $123bn this year and $63bn next, or $186bn in total.
Much could come from the IMF. But the report says “up to $105bn” could be needed from other sources, including the EU.
Thursday, March 26, 2009
Czech threat to Lisbon treaty
Ratification of the European Union’s reform treaty could be made more difficult by the fall of the Czech government and its knock-on effect for the EU presidency, which is held by Prague, officials warned on Wednesday.
In Strasbourg, Alexandr Vondra, Czech deputy prime minister, said Prague’s ratification of the Lisbon treaty, which requires the approval of all 27 countries in the EU bloc, could be more problematic after Tuesday night’s vote of no confidence.
“The ratification process is on track . . . but it will be a lot more difficult now to convince people to vote in favour,” he said at the European parliament.
The Czech upper house had been expected to vote on the treaty next month. But there were some suggestions on Wednesday that this might now be postponed because of the fluid domestic situation.
In Ireland, meanwhile, Micheal Martin, foreign minister was reported as saying the development made his country’s talks over revisions ahead of new referendum on the Lisbon treaty “more complex”.
The treaty was vetoed in a referendum in Ireland last year but the country agreed to hold a second vote provided certain guarantees, in areas such as tax policy and military ventures, were forthcoming. These discussions were being held with the Czech Republic in its capacity as holder of the rotating EU presidency.
“Now we have to see how things evolve with the Czech presidency and who we will be negotiating with . . . that’s a bit more complex than we would have anticipated,” the Irish minister said.
However, José Manuel Barroso, the European Commission president, urged countries not to let the treaty fall victim to local political forces. “It should not be used as a weapon on domestic issues,” he said.
In Brussels, senior EU officials continued to insist that the Czechs would continue to hold and run the presidency in “business as usual” fashion. They pointed out that this was not the first time that a national government had fallen in the course of holding the rotating office.
Mirek Topolanek, in his role as caretaker prime minister, will greet Barack Obama, the US president, as planned when they met in Prague on April 5, for instance.
But after an already bumpy and crisis-strewn start to the Czech presidency, some diplomats seemed to be concerned that the next three months could be even more ineffectual, especially in the area of foreign policy.
The timing is also particularly unkind, with the economic crisis continuing to pose big challenges for the bloc and the timing of the parliamentary elections in June meaning that some key legislation needs to be sorted out before then and texts agreed between member states and lawmakers.
In Strasbourg, Alexandr Vondra, Czech deputy prime minister, said Prague’s ratification of the Lisbon treaty, which requires the approval of all 27 countries in the EU bloc, could be more problematic after Tuesday night’s vote of no confidence.
“The ratification process is on track . . . but it will be a lot more difficult now to convince people to vote in favour,” he said at the European parliament.
The Czech upper house had been expected to vote on the treaty next month. But there were some suggestions on Wednesday that this might now be postponed because of the fluid domestic situation.
In Ireland, meanwhile, Micheal Martin, foreign minister was reported as saying the development made his country’s talks over revisions ahead of new referendum on the Lisbon treaty “more complex”.
The treaty was vetoed in a referendum in Ireland last year but the country agreed to hold a second vote provided certain guarantees, in areas such as tax policy and military ventures, were forthcoming. These discussions were being held with the Czech Republic in its capacity as holder of the rotating EU presidency.
“Now we have to see how things evolve with the Czech presidency and who we will be negotiating with . . . that’s a bit more complex than we would have anticipated,” the Irish minister said.
However, José Manuel Barroso, the European Commission president, urged countries not to let the treaty fall victim to local political forces. “It should not be used as a weapon on domestic issues,” he said.
In Brussels, senior EU officials continued to insist that the Czechs would continue to hold and run the presidency in “business as usual” fashion. They pointed out that this was not the first time that a national government had fallen in the course of holding the rotating office.
Mirek Topolanek, in his role as caretaker prime minister, will greet Barack Obama, the US president, as planned when they met in Prague on April 5, for instance.
But after an already bumpy and crisis-strewn start to the Czech presidency, some diplomats seemed to be concerned that the next three months could be even more ineffectual, especially in the area of foreign policy.
The timing is also particularly unkind, with the economic crisis continuing to pose big challenges for the bloc and the timing of the parliamentary elections in June meaning that some key legislation needs to be sorted out before then and texts agreed between member states and lawmakers.
EU leader condemns US ‘road to hell’
European Union hopes for a new era in relations with the US were thrown into chaos on Wednesday when the holder of the EU presidency condemned American remedies for the global recession as “the road to hell”.
Barely a week before Barack Obama is due to arrive in Europe on his first official visit as US president, Mirek Topolanek, the Czech Republic’s prime minister, put the 27-nation EU on a collision course with Washington.
His attack compounded the confusion that has engulfed EU policy after the Czech leader lost a no-confidence vote in the country’s parliament on Tuesday, forcing him to offer his government’s resignation midway through its six-month EU presidency.
Mr Topolanek said EU leaders had been disturbed at a summit in Brussels last week to hear calls from Tim Geithner, the US Treasury secretary, for more aggressive policies to fight the global downturn.
“The US Treasury secretary talks about permanent action and we, at our spring council, were quite alarmed at that . . . The US is repeating mistakes from the 1930s, such as wide-ranging stimuluses, protectionist tendencies and appeals, the Buy American campaign, and so on,” he told a European parliament session in Strasbourg. “All these steps, their combination and their permanency, are the road to hell.”
US officials made no comment on the remarks. But the Obama administration says it took great pains to ensure that the Buy American provisions in the $787bn (€579bn) stimulus that the president signed into law last month were consistent with World Trade Organisation rules. It followed, therefore, that any attempt to make them permanent would continue to be consistent with WTO rules.
EU diplomats said it was the most extraordinary outburst from a political leader in charge of running the EU’s affairs since Silvio Berlusconi, Italy’s prime minister, caused uproar in 2003 when he likened a German socialist member of the European parliament to a Nazi concentration camp guard.
Other leaders of EU member states, including Angela Merkel, Germany’s chancellor, disagree with US calls for big fiscal stimuli to battle the recession. But they have couched their opposition in more diplomatic language than Mr Topolanek’s.
The Czech leader was speaking eight days before Mr Obama was due to arrive in London for a G20 summit of the world’s developed and emerging economies.
After the summit and a Nato meeting in France and Germany, the US president is due to fly to Prague for an EU-US summit, at which the Czech Republic will represent all 27 member states.
Relations between the Obama administration and Mr Topolanek’s government have been delicate in recent weeks because of signals from Washington that Mr Obama may reassess plans to deploy parts of a US anti-missile shield in the Czech Republic, a project to which the Topolanek government has been committed.
Mr Obama has vigorously opposed the view that the Great Depression was caused by too much spending, rather than too little, a view held by a small handful of rightwing economists.
Barely a week before Barack Obama is due to arrive in Europe on his first official visit as US president, Mirek Topolanek, the Czech Republic’s prime minister, put the 27-nation EU on a collision course with Washington.
His attack compounded the confusion that has engulfed EU policy after the Czech leader lost a no-confidence vote in the country’s parliament on Tuesday, forcing him to offer his government’s resignation midway through its six-month EU presidency.
Mr Topolanek said EU leaders had been disturbed at a summit in Brussels last week to hear calls from Tim Geithner, the US Treasury secretary, for more aggressive policies to fight the global downturn.
“The US Treasury secretary talks about permanent action and we, at our spring council, were quite alarmed at that . . . The US is repeating mistakes from the 1930s, such as wide-ranging stimuluses, protectionist tendencies and appeals, the Buy American campaign, and so on,” he told a European parliament session in Strasbourg. “All these steps, their combination and their permanency, are the road to hell.”
US officials made no comment on the remarks. But the Obama administration says it took great pains to ensure that the Buy American provisions in the $787bn (€579bn) stimulus that the president signed into law last month were consistent with World Trade Organisation rules. It followed, therefore, that any attempt to make them permanent would continue to be consistent with WTO rules.
EU diplomats said it was the most extraordinary outburst from a political leader in charge of running the EU’s affairs since Silvio Berlusconi, Italy’s prime minister, caused uproar in 2003 when he likened a German socialist member of the European parliament to a Nazi concentration camp guard.
Other leaders of EU member states, including Angela Merkel, Germany’s chancellor, disagree with US calls for big fiscal stimuli to battle the recession. But they have couched their opposition in more diplomatic language than Mr Topolanek’s.
The Czech leader was speaking eight days before Mr Obama was due to arrive in London for a G20 summit of the world’s developed and emerging economies.
After the summit and a Nato meeting in France and Germany, the US president is due to fly to Prague for an EU-US summit, at which the Czech Republic will represent all 27 member states.
Relations between the Obama administration and Mr Topolanek’s government have been delicate in recent weeks because of signals from Washington that Mr Obama may reassess plans to deploy parts of a US anti-missile shield in the Czech Republic, a project to which the Topolanek government has been committed.
Mr Obama has vigorously opposed the view that the Great Depression was caused by too much spending, rather than too little, a view held by a small handful of rightwing economists.
Wednesday, March 25, 2009
Gathering storm
For the past 20 years, foreign businesspeople working in central and eastern Europe have seen unremitting progress in local business conditions, particularly in the 10 states that joined the European Union in 2004.
The modernisation of laws, regulations and commercial practices, integration with western Europe, huge investments in infrastructure, and, above all, rapid economic growth have transformed the business environment.
But now the global economic crisis has added a new dimension of difficulties. The crisis is hitting the region principally through the financial sector. The west European banks that dominate the market are suffering unprecedented difficulties refinancing themselves, both for their day-to-day operations and for capital to boost their balance sheets to cope with increases in bad debts.
Credit growth has slowed dramatically, leaving companies, particularly smaller enterprises, desperately short of cash. As in western Europe, businesses are increasingly cautious about choosing clients and suppliers, and setting contract terms. Companies prefer to trust the counterparties they know best, making it even harder for newcomers to break into the market.
While all of these challenges have also emerged in western Europe, they are much more acute in some east European states, particularly those most dependent on foreign financing.
Katinka Barysch, deputy director of the Centre for European Reform, a think-tank, writes in a recent report: “The traditional central and east European growth model appears to be broken, at least for now.”
But it is important to keep in mind that the region is composed of states with increasingly different business environments. As the common communist starting point fades into history, economic conditions come under the influence of more recent policymaking. In Hungary, for example, successive years of high government borrowing helped drive the country into economic crisis and forced it to seek an emergency loan from the International Monetary Fund.
By contrast, its central European peers – Poland, the Czech Republic and Slovakia – ran tighter budgets and have weathered the storm better. Slovakia, like Slovenia, has the added advantage of being in the eurozone.
As Manfred Wimmer, chief financial officer of Erste Group, the Austrian bank which has extensive east European operations, says: “What’s been lost in this crisis, very often, has been the ability of people to differentiate.”
For foreign businesspeople new to the region, the challenges are particularly relevant. Government agencies and chambers of commerce are aware of the problems and are offering to help with information and contacts. Nevertheless, as in western Europe, the authorities are finding it difficult to counteract the caution in the market place, especially in the crucial banking sector.
Foreign investment is shrinking dramatically. The Institute of International Finance, a bankers’ umbrella group, estimates that private capital flows to emerging Europe (including Russia and Turkey) shrank from £283bn in 2007 to £183bn in 2008, and just £21bn so far this year. The turnround in banking finance makes a dramatic contribution to these totals: dropping from an inflow of £156bn in 2007 to one of £88bn last year to a forecast net outflow of £19bn this year.
And yet, there is business to be done in these conditions. The credit crunch is driving down asset prices, with debt-laden owners forced to do deals or sell out altogether at valuations they would have found laughable a year ago.
Those owners who can afford to wait for better times will do so, but others cannot. For cash-rich investors this creates a rare chance to invest in the region, at prices not seen for years. Industrial companies, private equity funds and rich individuals are all sniffing around in the hope of snapping up a bargain.
Among them is, for example, Zdenek Bakala, a Czech entrepreneur. His coal company, New World Resources, is buying a 25 per cent stake in Ferrexpo, the Ukrainian iron ore group, from Kostyantin Zhevago, Ferrexpo’s controlling shareholder, after Mr Zhevago came under financial pressure and had to sell the stock.
The same arguments apply in trade. Companies were raising prices for their products a year ago but are now under pressure to cut prices. In comparison with western European companies, they may find this easier to do because they are more flexible, having lived through a series of mini-crises in the past two decades.
Lower wage costs, for example, were one reason Dell, the US computer maker, decided to cut operations in Ireland and move them to an existing site in Poland. The sharp decline in eastern European currencies has also increased the competitiveness of the region’s exporters.
Meanwhile, the crisis has had little impact on the ease of doing business in the region – in terms of dealing with officialdom and red tape. But this may not last, if governments increase their role in the economy. As the European Bank for Reconstruction and Development noted in its annual review last autumn: “While there has been no serious backtracking on reform in any transition country during the past year, there have been worrying instances of the state taking a more intrusive role in key sectors of the economy, notably in Russia.”
After years of reform, conditions in the most advanced east European states are now approaching west European levels. The World Bank reported last summer that Slovakia, the top-rated east European state, came 36th on a global list of countries ranked by the ease of setting up companies and similar functions, only nine places behind Austria. Hungary was not far behind in 41st place. Admittedly the east European “tail” is rather long, with the Czech Republic ranked 75th, Poland 76th and Ukraine 145th. And the World Bank does not capture the whole picture. Bulgaria and Romania do well on its criteria, ranking 45th and 47th, but they have a poor reputation for fighting corruption.
Some observers fear that if the state’s economic role increases, it could make life more difficult for businesses, particularly newcomers with little knowledge of domestic bureaucratic practices. Pavol Demes, a former Slovak foreign minister and head of the central and east European office of the German Marshall Fund, a US think-tank, says that people are beginning “to question” liberal democracy, market economics and the loose regulatory frameworks of recent years.
Ivan Krastev, head of the Centre for Liberal Studies, a Bulgarian think-tank, warns that the crisis is undermining the people who were the strongest supporters of the globalisation drive and creating opportunities for inward-looking politically oriented rivals. “The worst hit are the best integrated, best managed and most westernised companies,” he says.
But, for the moment, these risks should not be exaggerated. Countries inside the EU will be obliged to continue operating within the single market’s rules. Candidate countries will have to stick to these regulations too, or jeopardise their accession hopes. While populist leaders may demand, for example, protectionist policies, east European governments will have to bear in mind that they are currently significant beneficiaries of EU aid programmes, financed by west European states.
For multinational businesses, the principal attraction of the region remains: low-cost, high-skilled labour inside the huge EU market. Even in the depths of the crisis, companies are intensely aware of this.
Sergio Marchionne, chief executive of Fiat, the Italian carmaker, recently pointed out that the group’s one Polish factory makes 400,000 cars a year, while the six Italian plants together produce 600,000. “This is offensive,” he told an Italian newspaper.
It may also become unsustainable.
Stefan Wagstyl is eastern Europe editor
The modernisation of laws, regulations and commercial practices, integration with western Europe, huge investments in infrastructure, and, above all, rapid economic growth have transformed the business environment.
But now the global economic crisis has added a new dimension of difficulties. The crisis is hitting the region principally through the financial sector. The west European banks that dominate the market are suffering unprecedented difficulties refinancing themselves, both for their day-to-day operations and for capital to boost their balance sheets to cope with increases in bad debts.
Credit growth has slowed dramatically, leaving companies, particularly smaller enterprises, desperately short of cash. As in western Europe, businesses are increasingly cautious about choosing clients and suppliers, and setting contract terms. Companies prefer to trust the counterparties they know best, making it even harder for newcomers to break into the market.
While all of these challenges have also emerged in western Europe, they are much more acute in some east European states, particularly those most dependent on foreign financing.
Katinka Barysch, deputy director of the Centre for European Reform, a think-tank, writes in a recent report: “The traditional central and east European growth model appears to be broken, at least for now.”
But it is important to keep in mind that the region is composed of states with increasingly different business environments. As the common communist starting point fades into history, economic conditions come under the influence of more recent policymaking. In Hungary, for example, successive years of high government borrowing helped drive the country into economic crisis and forced it to seek an emergency loan from the International Monetary Fund.
By contrast, its central European peers – Poland, the Czech Republic and Slovakia – ran tighter budgets and have weathered the storm better. Slovakia, like Slovenia, has the added advantage of being in the eurozone.
As Manfred Wimmer, chief financial officer of Erste Group, the Austrian bank which has extensive east European operations, says: “What’s been lost in this crisis, very often, has been the ability of people to differentiate.”
For foreign businesspeople new to the region, the challenges are particularly relevant. Government agencies and chambers of commerce are aware of the problems and are offering to help with information and contacts. Nevertheless, as in western Europe, the authorities are finding it difficult to counteract the caution in the market place, especially in the crucial banking sector.
Foreign investment is shrinking dramatically. The Institute of International Finance, a bankers’ umbrella group, estimates that private capital flows to emerging Europe (including Russia and Turkey) shrank from £283bn in 2007 to £183bn in 2008, and just £21bn so far this year. The turnround in banking finance makes a dramatic contribution to these totals: dropping from an inflow of £156bn in 2007 to one of £88bn last year to a forecast net outflow of £19bn this year.
And yet, there is business to be done in these conditions. The credit crunch is driving down asset prices, with debt-laden owners forced to do deals or sell out altogether at valuations they would have found laughable a year ago.
Those owners who can afford to wait for better times will do so, but others cannot. For cash-rich investors this creates a rare chance to invest in the region, at prices not seen for years. Industrial companies, private equity funds and rich individuals are all sniffing around in the hope of snapping up a bargain.
Among them is, for example, Zdenek Bakala, a Czech entrepreneur. His coal company, New World Resources, is buying a 25 per cent stake in Ferrexpo, the Ukrainian iron ore group, from Kostyantin Zhevago, Ferrexpo’s controlling shareholder, after Mr Zhevago came under financial pressure and had to sell the stock.
The same arguments apply in trade. Companies were raising prices for their products a year ago but are now under pressure to cut prices. In comparison with western European companies, they may find this easier to do because they are more flexible, having lived through a series of mini-crises in the past two decades.
Lower wage costs, for example, were one reason Dell, the US computer maker, decided to cut operations in Ireland and move them to an existing site in Poland. The sharp decline in eastern European currencies has also increased the competitiveness of the region’s exporters.
Meanwhile, the crisis has had little impact on the ease of doing business in the region – in terms of dealing with officialdom and red tape. But this may not last, if governments increase their role in the economy. As the European Bank for Reconstruction and Development noted in its annual review last autumn: “While there has been no serious backtracking on reform in any transition country during the past year, there have been worrying instances of the state taking a more intrusive role in key sectors of the economy, notably in Russia.”
After years of reform, conditions in the most advanced east European states are now approaching west European levels. The World Bank reported last summer that Slovakia, the top-rated east European state, came 36th on a global list of countries ranked by the ease of setting up companies and similar functions, only nine places behind Austria. Hungary was not far behind in 41st place. Admittedly the east European “tail” is rather long, with the Czech Republic ranked 75th, Poland 76th and Ukraine 145th. And the World Bank does not capture the whole picture. Bulgaria and Romania do well on its criteria, ranking 45th and 47th, but they have a poor reputation for fighting corruption.
Some observers fear that if the state’s economic role increases, it could make life more difficult for businesses, particularly newcomers with little knowledge of domestic bureaucratic practices. Pavol Demes, a former Slovak foreign minister and head of the central and east European office of the German Marshall Fund, a US think-tank, says that people are beginning “to question” liberal democracy, market economics and the loose regulatory frameworks of recent years.
Ivan Krastev, head of the Centre for Liberal Studies, a Bulgarian think-tank, warns that the crisis is undermining the people who were the strongest supporters of the globalisation drive and creating opportunities for inward-looking politically oriented rivals. “The worst hit are the best integrated, best managed and most westernised companies,” he says.
But, for the moment, these risks should not be exaggerated. Countries inside the EU will be obliged to continue operating within the single market’s rules. Candidate countries will have to stick to these regulations too, or jeopardise their accession hopes. While populist leaders may demand, for example, protectionist policies, east European governments will have to bear in mind that they are currently significant beneficiaries of EU aid programmes, financed by west European states.
For multinational businesses, the principal attraction of the region remains: low-cost, high-skilled labour inside the huge EU market. Even in the depths of the crisis, companies are intensely aware of this.
Sergio Marchionne, chief executive of Fiat, the Italian carmaker, recently pointed out that the group’s one Polish factory makes 400,000 cars a year, while the six Italian plants together produce 600,000. “This is offensive,” he told an Italian newspaper.
It may also become unsustainable.
Stefan Wagstyl is eastern Europe editor
Global Insight: EU must find courage to enlarge
The 2004-2007 enlargement of the European Union from 15 to 27 countries is an achievement of which all EU governments should be proud. But the outlook for future enlargement is darkening, thanks to some pig-headed behaviour among members and applicant states.
Consider the manifesto that Germany’s Christian Democrats – the party of Angela Merkel, chancellor – adopted last week for June’s European parliament elections. It says that, because the EU’s latest expansion required such formidable efforts, “the CDU stands for a phase of consolidation, during which the strengthening of the European Union’s identity and institutions takes precedence over further EU enlargement”.
True, the CDU makes an exception for Croatia, whose admission it would not delay. But Croatia’s membership bid is in trouble anyway. That is because Slovenia, hoping to force concessions from its former Yugoslav neighbour in a bilateral maritime border dispute, paralysed Croatia’s accession negotiations in December. Nationalist rhetoric on both sides has restricted the scope for compromise.
All other EU governments oppose Slovenia’s blatant attempt to exploit its membership at the expense of a future entrant. But the EU operates by consensus, so Slovenia is getting away with it.
So, too, is Cyprus – or to be precise, the internationally recognised Greek Cypriot government of the divided island. The Greek Cypriots are obstructing Turkey’s accession talks, partly because they have always been hostile to Turkish membership, but also because they hope to gain leverage in their negotiations with the Turkish Cypriots over a settlement for Cyprus.
What is more, they know that Ms Merkel and Nicolas Sarkozy, France’s president, oppose full Turkish membership of the EU.
In defence of their behaviour, the Greek Cypriots can point to the presence of 30,000 Turkish troops in the island’s Turkish Cypriot north. By contrast, no military logic underpins Greece’s refusal to let the former Yugoslav republic of Macedonia’s aspirations make progress.
The country has been an official EU candidate since 2005. But Greece objects to its neighbour’s use of the word “Macedonia” in its name. It says this implies a threat to Greece’s territorial integrity, cultural heritage and national identity.
Athens has prevented the start of Macedonia’s talks by not giving the green light for the European Commission to express an opinion on the country’s readiness for membership. But the blame does not entirely rest with the Greeks, as is illustrated by a bizarre episode involving, of all people, Alexander the Great. Macedonia’s leaders have renamed the section of a main north-south trans-European highway that passes through their country after Alexander. It is a way of claiming the renowned ancient Macedonian leader as a hero with links to their modern state, with its Slav Macedonian majority. When this news reached Brussels, EU officials despaired. Nothing was more certain to harden Greek attitudes.
Bosnia-Herzegovina’s EU hopes are being damaged by the narrow-minded rivalries of its nationalist political leaders. But in Serbia’s case, it is the Dutch government that is blocking the path to the EU. The Dutch want Belgrade to hand over Ratko Mladic, the fugitive Bosnian Serb general accused of war crimes in the 1990s, to the United Nations tribunal in The Hague.
Other EU governments think the Serbs have co-operated closely enough with the tribunal to deserve full implementation of its stabilisation and association agreement, a milestone towards EU entry that Serbia signed with the bloc last April. But once again, the EU’s consensus rule means that nothing will happen unless the Dutch, or the other 26, budge.
The history of EU enlargement shows that, when economic conditions in Europe falter, public and political support for embracing new countries goes down. Never since 1945 have conditions been as precarious as they are now.
But the EU must summon the courage to resolve the disputes blocking enlargement. The Balkans and Turkey are politically fragile, economically vulnerable but strategically important parts of Europe. If they receive the message they are unwanted, the price the EU will pay will be all the greater.
Consider the manifesto that Germany’s Christian Democrats – the party of Angela Merkel, chancellor – adopted last week for June’s European parliament elections. It says that, because the EU’s latest expansion required such formidable efforts, “the CDU stands for a phase of consolidation, during which the strengthening of the European Union’s identity and institutions takes precedence over further EU enlargement”.
True, the CDU makes an exception for Croatia, whose admission it would not delay. But Croatia’s membership bid is in trouble anyway. That is because Slovenia, hoping to force concessions from its former Yugoslav neighbour in a bilateral maritime border dispute, paralysed Croatia’s accession negotiations in December. Nationalist rhetoric on both sides has restricted the scope for compromise.
All other EU governments oppose Slovenia’s blatant attempt to exploit its membership at the expense of a future entrant. But the EU operates by consensus, so Slovenia is getting away with it.
So, too, is Cyprus – or to be precise, the internationally recognised Greek Cypriot government of the divided island. The Greek Cypriots are obstructing Turkey’s accession talks, partly because they have always been hostile to Turkish membership, but also because they hope to gain leverage in their negotiations with the Turkish Cypriots over a settlement for Cyprus.
What is more, they know that Ms Merkel and Nicolas Sarkozy, France’s president, oppose full Turkish membership of the EU.
In defence of their behaviour, the Greek Cypriots can point to the presence of 30,000 Turkish troops in the island’s Turkish Cypriot north. By contrast, no military logic underpins Greece’s refusal to let the former Yugoslav republic of Macedonia’s aspirations make progress.
The country has been an official EU candidate since 2005. But Greece objects to its neighbour’s use of the word “Macedonia” in its name. It says this implies a threat to Greece’s territorial integrity, cultural heritage and national identity.
Athens has prevented the start of Macedonia’s talks by not giving the green light for the European Commission to express an opinion on the country’s readiness for membership. But the blame does not entirely rest with the Greeks, as is illustrated by a bizarre episode involving, of all people, Alexander the Great. Macedonia’s leaders have renamed the section of a main north-south trans-European highway that passes through their country after Alexander. It is a way of claiming the renowned ancient Macedonian leader as a hero with links to their modern state, with its Slav Macedonian majority. When this news reached Brussels, EU officials despaired. Nothing was more certain to harden Greek attitudes.
Bosnia-Herzegovina’s EU hopes are being damaged by the narrow-minded rivalries of its nationalist political leaders. But in Serbia’s case, it is the Dutch government that is blocking the path to the EU. The Dutch want Belgrade to hand over Ratko Mladic, the fugitive Bosnian Serb general accused of war crimes in the 1990s, to the United Nations tribunal in The Hague.
Other EU governments think the Serbs have co-operated closely enough with the tribunal to deserve full implementation of its stabilisation and association agreement, a milestone towards EU entry that Serbia signed with the bloc last April. But once again, the EU’s consensus rule means that nothing will happen unless the Dutch, or the other 26, budge.
The history of EU enlargement shows that, when economic conditions in Europe falter, public and political support for embracing new countries goes down. Never since 1945 have conditions been as precarious as they are now.
But the EU must summon the courage to resolve the disputes blocking enlargement. The Balkans and Turkey are politically fragile, economically vulnerable but strategically important parts of Europe. If they receive the message they are unwanted, the price the EU will pay will be all the greater.
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