Tag: european union

Third Greek Bailout Is Not the Charm

Nearly a month ago Greek voters rejected more economic austerity as a condition of another European bailout. Today Athens is implementing an even more severe austerity program.

Few expect Greece to pay back the hundreds of billions of dollars it owes. Which means another economic crisis is inevitable, with possible Greek exit (“Grexit”) from the Eurozone.

Blame for the ongoing crisis is widely shared. Greece has created one of Europe’s most sclerotic economies. The Eurocrats, an elite including politicians, journalists, businessmen, and academics, determined to create a United States of Europe irrespective of the wishes of European peoples.

European leaders welcomed Athens into the Eurozone in 2001 even though everyone knew the Greek authorities were lying about the health of their economy. Economics was secondary.

Unfortunately, equalizing exchange rates cemented Greece’s lack of international competitiveness. Enjoying an inflated credit rating, Greece borrowed wildly and spent equally promiscuously on consumption.

Greece could have simply defaulted on its debts. However, Paris and Berlin, in particular, wanted to rescue their improvident banks which held Athens’ debt.

Thus, in return for tough loan conditions most of the Greek debt was shifted onto European taxpayers through two bail-outs costing roughly $265 billion. Greece’s economy has suffered, and the leftwing coalition party Syriza won Greece’s January election. Impasse resulted at the end of June as the second bailout expired.

Greece and the Euro Stagger Towards the Brink

Negotiations in Brussels to resolve the Greek fiscal crisis appear deadlocked, with Athens heading toward default. German Chancellor Angela Merkel insisted that Greece make a deal before the markets open Monday. The Eurogroup will meet again tomorrow on the issue.

The European Union was supposed to create a de facto United States of Europe. But after last January’s Greek election it was obvious that the EU does not speak for Greece, or perhaps anyone else other than the Eurocrats, an amalgam of bureaucrats, academics, journalists, businessmen, politicians, and lobbyists who dominate Brussels.

To most EU leaders common people are an impediment. The Eurocrats reflexively intone “more Europe” in answer to every question, but voters increasingly are supporting protest parties, some populist, some worse.

Europe’s Solar Cartel Enforcers Struggle to Keep Prices High

In what has been aptly named “the world’s dumbest trade war,” both Europe and America have fought to limit imports of low-cost Chinese solar panels.  Much to the chagrin of anyone who likes solar power, the United States and the European Union have imposed high tariffs on Chinese panels in order to protect their own subsidized domestic industries. 

In 2013, the EU negotiated a deal with Chinese solar manufacturers that exempted them from the duties as long as they agreed to sell panels above a set minimum price.  By managing trade in this way, European authorities are essentially creating a solar cartel that divvies up market share among established companies who agree not to compete on price.

But cartel arrangements are notoriously difficult to maintain because any member of the group can ruin the scheme by reneging.  This would seem especially likely when the cartel arrangement was forced on them involuntarily by government in the first place.

Greeks Vote Against Euro and For Democracy

Greece’s parliamentary elections could reshape Europe. In voting for the radical left the Greek people have reinvigorated home rule and democracy across the continent.

Greece has been in economic crisis seemingly for eternity. Even in the Euro the system could not generate the growth necessary to repay the debt:  the economy was hamstrung by enervating work rules, corrupting political influences, profiteering economic cartels, and debilitating cultural norms.

The inevitable crisis hit in 2009. Athens couldn’t make debt payments or borrow at affordable rates. Nor could Greece devalue its currency to make its products more competitive. The European “Troika” (European Central Bank, European Commission, and International Monetary Fund) developed a painful rescue plan.

Syriza, meaning Coalition of the Radical Left, arose to challenge the two establishment parties. Headed by Alexis Tsipras, Syriza won 36.2 percent and 149 seats, two short of a majority, on Sunday.

Syriza offered dreamy unreality:  free health care and electricity along with food subsidies, pension increases, salary hikes, and more public sector jobs. Billions in new revenue is to magically appear.

Not Just Another Friday in Brussels

While a typical summer Friday in the capital of the European Union might sound like a rather dull affair, today brought two significant events–one of them good, the other one less so.

First, the good news. Today, Ukraine, Moldova, and Georgia signed their association agreements with the European Union (EU). The treaties consist of, in part, free trade agreements between the EU and the three countries, and also a roadmap toward a prospective EU membership. Given the economic and political shape these countries find themselves in, the latter will likely take a long time and will not be without hurdles. After all, Turkey signed its association agreement back in 1963 and the country is still not a member.

There can be little doubt that free trade agreements with the EU will do good to these impoverished economies (GDP per capita in Moldova is just a little over $2,000) as well as to the EU. Furthermore, the prospect of a timely EU membership will hopefully serve as an impetus for economic and institutional reforms–just as was the case in the countries of Central and Eastern Europe that joined the EU in the past decade.

Of course, the EU is far from perfect and it is quite possible that these countries will soon grapple with the same problems as Slovakia, Czech Republic, or Bulgaria–namely how to manage the inflow of “structural funds” into their economies without encouraging corruption and entrenchment of venal elites. But arguably, that will not be the worst problem to have, considering that the alternative is the continuation of the status quo, muddling along from one crisis to another and being part of Russia’s zone of influence. Further enlargement, extending the common market and free movement of people further east, will likely prove to be beneficial to the EU as well.

Second, the bad news. The EU leaders have appointed Jean-Claude Juncker as the new head of the European Commission. Although initially the governments of Sweden and Netherlands had misgivings about his presidency, in the end it was only the UK’s prime minister, David Cameron, who decided to openly oppose the nomination.

The issue is not just with the personality of the candidate, but also with the process through which Juncker was selected. For the first time, the European Parliament took the lead in picking the head of the Commission, while no treaty empowers it to do so. While the appointment needs to rely on a parliamentary majority, the choice has always been made by the political leaders of EU member states, not by the Parliament. For those who do not wish to see the accountability of the Commission to national politicians wane completely, the Juncker appointment should be a cause for concern.

Let us hope that these two events are not completely unrelated. Hopefully, the prospect of another eastward enlargement will serve as an impetus for European policymakers to look for a model of European governance that provides the benefits of the common market and effective action on issues of mutual interest, without entrenching an obscure and unaccountable center of power in Brussels. 

Beware of the Kremlin’s Propaganda

Since the beginning of the turmoil in Ukraine, some have attributed a large part of the blame for the crisis to the European Union and the United States, whose meddling allegedly brought down the President Viktor Yanukovych.

While, as a general rule, the foreign policy of the EU and the US deserve to be criticized on various grounds, it should not be forgotten that other actors are present on the world’s geopolitical scene as well – some of them quite malevolent. The idea that the eclectic, bottom-up movement that fueled the revolution in Kyiv was somehow orchestrated by the United States (and/or by the notoriously unimaginative bureaucrats in Brussels) is grotesque – as is the notion that Russia’s invasion of Crimea is a response to genuine secessionist desires of the citizens of South-Eastern Ukraine.

In short, one needs to be careful to avoid the trap of falling for the propaganda spread by Russia’s current regime, as Alexander McCobin and Eglė Markevičiūtė, both from Students for Liberty, argue here:

It’s much too simplistic to solely condemn the United States for any kind of geopolitical instability in the world. Non-interventionists who sympathize with Russia by condoning Crimea’s secession and blaming the West for the Ukrainian crisis fail to see the larger picture. Putin’s government is one of the least free in the world and is clearly the aggressor in Crimea, as it was even beforehand with its support of the Yanukovych regime that shot and tortured its own citizens on the streets of Kyiv.

[…]

Some libertarians’ Kremlin-style speculation about pro-western Maidan’s meddling in Crimea’s affairs is very similar to what Putin’s soft-power apparatus has been trying to sell in Eastern Europe and CIS countries for at least 15 years. Speaking of the Crimean secession being democratically legitimate is intellectually dishonest given that the referendum was essentially passed at gunpoint with no legitimate choice for the region to remain in Ukraine’s sovereign power.

Nightmare Scenario Underway in Ukraine

As the Ukrainian security forces are moving to clear Kiev’s ‘Maidan’ protest camp again, after an unsuccessful attempt last night, the events are unfolding quickly and with the characteristically scary dynamics of an autocratic regime acting under pressure:

Ukraine’s state security service said it was launching an “anti-terrorist operation” across the country after the seizure of administrative buildings and arms and ammunition depots by “extremist groups.”

Labeling the opposition as ‘terrorists’ is a common rhetorical device used by authoritarian governments under duress. But we should make no mistake – the current situation is not just an outcome of the divisions existing within Ukrainian society but also a result of Vladimir Putin’s long standing and sinister meddling in Ukraine.

For Mr. Putin, the current situation is both a source of fear and an opportunity. The fear stems from the possibility of Ukraine setting a precedent of a bottom-up, civil society-driven initiative displacing a Moscow-sponsored leadership in a country with strong cultural and historical ties to Russia. The opportunity lies in leveraging the current unrest and the ethnic divisions it has uncovered to strengthen Russia’s influence over the country’s politics. The Russian government already provided Mr. Yanukovych with cash in December 2013; this week, another bond purchase worth $2 billion was announced, conditional on the government successfully tackling the opposition.

The international response is too timid given the magnitude of the problem and its proximity to the European Union’s borders. Targeted EU sanctions, such as the asset freezes and travel bans directed at Ukrainian officials, which are likely to be adopted tomorrow, seem fully justified–although they come very late. Still, care needs to be exercised so that they hurt the regime and not ordinary citizens.

More importantly, European leaders need to clearly articulate the long-term alternative that they are offering to Ukraine lest it remain the Kremlin’s client state. The roadmap to full EU membership ought to have an accelerated timeline, incentivizing Ukrainian policymakers to adopt open political and economic institutions.

The EU’s engagement with the country needs to come with tangible benefits for Ukrainians. Those would include most fundamentally a removal of trade and regulatory barriers, as well as immigration restrictions, making Ukrainians a de facto part of the common European market now rather than at an uncertain point in the future.

Pages