Tuesday, March 26, 2013

More on Cyprus and other blogs...

Yanis Varoufakis will be speaking to my European Politics class in April and I highly recommend his blog:  http://yanisvaroufakis.eu/

Another blog post on Cyprus lays out the good, the bad and the ugly:  http://finance.fortune.cnn.com/2013/03/26/cyprus-the-worst-is-yet-to-come/

An anti-bailout protest in Cyprus

Sony Kapoor looks at the positive side of the Cyprus deal:
http://www.guardian.co.uk/commentisfree/2013/mar/26/cyprus-bailout-eurozone?CMP=twt_gu

In the meantime -- Italian parties are still trying to form a government after last month's election:
http://blogs.wsj.com/eurocrisis/2013/03/26/italian-election-fallout-qa-continued/

Sunday, March 24, 2013

Update on Cyprus

Cyprus has made a last-ditch deal with the EU and IMF:

A report from Sunday night/Monday morning from CNN Money: http://money.cnn.com/2013/03/24/news/economy/cyprus-bailout-eu/index.html

The Guardian UK has updated coverage:
http://www.guardian.co.uk/business/2013/mar/24/eurozone-crisis-cyprus-bailout-eurogroup-meeting?CMP=twt_gu

German finance minister Wolfgang Schäuble talks to the press in Brussels.

Analysis is limited at this point, but the deal was made in such a way that it won't need approval from the parliament in Cyprus.  The deal focuses the "haircut" on deposits above 100,000 Euros, but the percentage is not yet know. Earlier on Sunday, ATM withdrawals were limited to 100 Euros per day, and it's not clear when banks will reopen. The new deal reportedly imposes capitol controls in order to avoid runs on banks.

Russia has many deposit holders in Cyprus, and the government may continue to play a role in the overall negotiations.  Meanwhile, Russians are looking to other options for their offshore holdings, as reported in the FT: http://www.ft.com/intl/cms/s/0/de24fb32-94a1-11e2-9487-00144feabdc0.html#axzz2OWE1ipQZ

Some commentary:

The Wall Street Journal's Simon Nixon:  http://online.wsj.com/article/SB10001424127887324789504578380473415855386.html

A Euro-skeptic perspective from the FT: " A eurozone that compromises countries as diverse as Germany and Cyprus is not sustainable, even if the EU and Cyprus manage to find a last-minute compromise."
http://www.ft.com/intl/cms/s/0/1c481838-92e3-11e2-b3be-00144feabdc0.html#axzz2OZ4Xsn7n

From the Guardian UK:
Will this be the end of Cyprus's problems?
'No. In fact, analysts say it is only the beginning. Cyprus has benefited for years from attracting the deposits of wealthy individuals from around the eurozone. That business model is now broken and the country has nothing to replace it with. Tellingly, the EU gave no economic projections for Cyprus in its statement.

Gary Jenkins of Swordfish Research said: "The economy is crushed for the next god knows how many years. As soon as people can take their money out the banks, they will take it out. Confidence has disappeared. Who's going to want to do business with Cypriot corporates right now?"'
http://www.guardian.co.uk/business/2013/mar/25/cyprus-bailout-deal-at-a-glance


Thursday, March 21, 2013

The crisis in Cyprus




An update with an article from the Economist: http://www.economist.com/news/leaders/21573972-bailing-out-cyprus-was-always-going-be-tricky-it-didnt-have-be-just-when-you

The situation is evolving as I write this blog post, but this is a very important and possibly dangerous development in the Eurozone.  Last week's EU summit began with a focus on jobs and growth, but would end with a focus on Cyprus. Reporting before the summit noted there appeared to be little pressure for action coming from financial markets as in an article by Reuters.

Negotiations over Cyprus debt began to hit the news by Saturday morning. Saturday evening, an off the record session of the Brussels Forum on the Eurozone crisis focused on the risk of a breakup of the Euro based on political factors.  The discussion quickly turned to the agreement on the Cyprus "haircut" which would affect all depositors. Some of the same issues which have come up in the media were discussed that evening, and were similar to the comments below:

"The latest proposal of the Eurogroup, regarding the bail out of Cyprus has caused unprecedented unrest that has not been limited to the national or even the European level. The essence of the proposal is for Cyprus to contribute a third of the overall €17 billion financial assistance required via a haircut in depositors’ money, including even the average account holder whose deposits do not exceed €100,000 (i.e. violating the guarantee offered to them in case of bank failure) . In the last Eurogroup meeting, the German finance minister, Wolfgang Schäuble, with the backing of his northern allies and with the blessing of those countries possibly envying Cyprus’s success as an international financial centre, cold-bloodedly blackmailed Cypriot officials with a ‘take it or leave it’ deal. Cypriot officials, though accused by some domestically for their negotiation strategy, at the end of the day had to decide within minutes on accepting a wide haircut on deposits (a red line for Cypriot negotiators, even considered to be a ‘stupid idea’ by the Finance Minister) otherwise the island’s second largest commercial bank would be instantly refused further emergency liquidity assistance and essentially be left to collapse, possibly taking down with it the whole economy."
http://blogs.lse.ac.uk/europpblog/2013/03/20/cyrpus-eurozone-crisis-germany/

It would seem strange that a country as small as Cyprus with a population of 1.1 million people could be the focus of the current crisis, but it has raised many issues around the whole debt crisis in Europe. The Cypriot Parliament refused to support the deal, and now are in a race against time to find a solution to the debt problem - for now banks are expected to be closed through next Tuesday, but there are concerns that people will run out of cash, and even the British government had to send cash for their soldiers, pensioners and diplomatic personnel based in Cyprus. 
http://money.msn.com/business-news/article.aspx?feed=AP&date=20130321&id=16262088&ocid=ansmony11

Concerns about Russian depositors has played a role in the drama, and the Cypriot government has attempted to work with the Russian government to help solve the crisis, but the Russian government has been reluctant to offer funds. There have been discussions of a Russian base or access to gas reserves.

http://www.google.com/hostednews/afp/article/ALeqM5jBrASOxV9_pE5mntSBHRXsozpbyQ?docId=CNG.5bc8b1a45bb0c242f36354fb6e5c6d02.141&index=0

The latest statement from the Eurogroup shows a major shift since last weekend, away from taxing deposits below 100,000 Euros:
http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ecofin/136435.pdf

Protests have been ongoing since last weekend:

Sunday, March 17, 2013

Brussels Forum 2013 - March 14-17

I usually try to write a daily blog during the Brussels Forum, but I was busy throughout the weekend, so this will be a long post!

After catching up with friends and colleagues on Wednesday, things swung into high gear starting Thursday morning with the start of the German Marshall Fund's Transatlantic Inclusion Leaders Workshop.  Ten Americans and ten Europeans met to learn more about political campaigning and to start to develop networks to support each other as they pursue careers in politics.  I spoke about the similarities and differences in party politics in the U.S. and Europe and how changing demographics will impact party politics.


Presenters included Simon Woolley of Operation Black Vote in the UK, Parag V. Mehta who has worked as a campaign strategist for the DNC and David Johns of Team Impact in Washington, DC.  That evening we had dinner at the Residence Palace with a speech from former MEP Glyn Ford of the UK. 
Simon Woolley and workshop participants
Glyn Ford, Terri Givens, Sanchia Alasia (Councillor, Barking, UK) and Alex Johnson of the Helsinki Com mission
Brussels Forum, Day 1 - Videos from on-record panels will be available here: http://brussels.gmfus.org/multimedia/full-session-videos-2013/

The Brussels Forum began Friday afternoon with a prologue by Oxford Professor Timothy Garton Ash. He noted that we are in the longest era of great power peace in history and asked what will keep the peace as power shift?  The West has a dwindling share of the world's population but the U.S. and the EU make of 58% of arms expenditure. The ongoing Transatlantic partnership will be key moving forward. The full text of his presentation is available here: http://brussels.gmfus.org/files/2013/03/Prologue-Fragility-of-the-Global-System_ccedits-2.pdf

The first panel session and the theme for the weekend was "A Fragile World After Crisis." Former World Bank head Robert Zoellick pointed out the divergence between France (getting weaker) and Germany (still experiencing growth) and the need for France to get it's act together since the EU has run on the expectation of equal partners. He also emphasized need for the EU-US trade agreement, and that the worst outcome would be to talk but not to act.  The Brazilian Secretary of Foreign Trade emphasized the new focus on positive issues like free trade areas but that the issue of currency manipulation needs to be addressed adn that the IMF should act as a referee in the currency wars. Professor Qin Yaqing of China emphasized the need for global governance and cooperation on trade and currency issues.  He noted that China's surplus with the U.S. matched China's deficits with ASEAN countries.  MEP Lambsdorff also talked about whether the current system of global governance could integrate developing markets. Other challenges include the crisis of the Doha round of trade talks and climate negotiations.

Despite being in the middle of the European Summit European Council President, Herman von Rompuy gave a speech stating that youth unemployment would be the EU's absolute priority now, otherwise there may be deep social and political consequences.  He also called for a Marshall-type plan for Greece, and looked forward to transatlanric trade negotiations, arguing that the EU and U.S. are the backbone of the world economy, finishing his speech with the statement, "The West still exists." Labor protests during the EU summit emphasized the need to focus on growth and jobs across the EU, but particularly for youth in the south where unemployment is as high as 60% in Greece and 40% in Spain.

The next panel fon Mali and Syria, with hard questions for Wendy Sherman, Undersecretary for Political Affairs, U.S. Department of State.  However, a new proposal from France and the UK to end the arms embargo to Syria also raised serious issues.  Several panelists were concerned that providing more arms would only increase the bloodshed, and we still didn't know what to do with the humanitarian catastrophe of refugees flowing from Syria to Lebanon, Jordan and. Turkey.

Day two - Saturday, March 16

Saturday morning started off with a discussion between NY Times Paris Bureau Chief Steven Erlanger and EU High Representative for Foreign Affairs Catherine Ashton.



When I met her, I learned that her daughter is in Houston, at Rice University, so we'll have to make sure we invite her to speak at the University of Texas the next time she visits her daughter!  She spoke about her role within the EU institutions, and that she wasn't surprised by the French and British proposal to end the Syrian arms embargo.  However, she felt that the EU Council needed to all the implications of ending the embargo.  She noted that regardless, there needs to be a political process to work through.  She also talked about her role in the Iran talks, and confidence building measures.  When asked about the biggest challenge in her job, she said that she wouldn't have chosen to start an external action service during a time of fiscal austerity and so much going on in the "neighborhood" - but the EEAS will end up being one of her legacies.

The next panel focused on "China in Transition" - a lively discussion followed, focusing initially on whether China's new president will radically change China or not.  Ai Ping said that he hoped change would be incremental, referencing the "mistake" of the Great Leap Forward that led to great suffering. Other issues included China's relationship with North Korea and broader trade and security issues.  One comment raised eyebrows "The Chinese are the most materialistic people on earth!"

The Italian Labor Minister, Elsa Fornero, had a great deal to say about Italy's current situation, in the session on "Economies in Crisis." She pointed out that the pension reforms she had to make as part of the technocrat government did not lead to a general strike, but it did eventually get a response in the recent election.She argued that the goverment didn't have the time to do a good job of explaining reforms and that the bad politics of the last 20 years, i.e., Berlusconi, had led to the current situation but the parties were bad actors during the election.

The panel on "EuroAtlantic Integration" examined the challenges of the Eurozone staying together, and the potential impact of a UK referendum on EU membership.  Would it be back to a free trade union or "ever closer union?" NATO was an early driver of EuroAtlantic integration and is still playing an important role for potential members like Bosnia and Georgia.

One of the main questions raised during the session on "Energy Security" was whether U.S energy independence would lead major shifts in energy market.  Other issues included the future of renewable energy, particularly the decline of solar and the potential for gasless cars.  Fracking and the potential new sources for natural gas also were considered important issues.

Panelists argued that now is the time for a "US-EU Trade" agreement.  Failure isn't an option and that this would be important for renewing the Transatlantic alliance. The U.S. representative argued that both sides will have to be pragmatic about structural constraints, including engaging with states and localities. Carl Bild, Swedish Foreign Minister, also argued that the two sides will also have to look at relationships with other parts of the world, including China, Turkey and Canada.

The night owl session on the Euro crisis was illuminating, particularly in regard to the situation with Cyprus, and I will write in more detail about this issue later.

Sunday, March 17
I missed the first two session on Sunday (jet lag kicked in), but the session on the "Global Atlantic" was a very lively and interesting panel. The panelists discussed issues around the role (strategic or otherwise) of China in Africa, the impact of the EU-U.S. trade agreement on Brazil, China, India and South Africa.  The panelists from Mexico and Brazil traded barbs about Brazil's desire to have permanent seat on the UN security council, with the Mexican representative nothing that Brazil always abstains when it has the opportunity to vote.

Karen Donfried of the National Intelligence Council, Terri Givens, Swedish Foreign Minister Carl Bildt and Nik Gowing of the BBC
The final discussion was about "The World in 2030" which is a report  done by the U.S. National Intelligence Council. Many issues were raised, including the role of the U.S. in a world of diffuse power.  I was very impressed with the demographic figures showing the median age in India going from 26 to 32, in China from 35 to 43, in Japan from 45 to 52, in Germany from 44 to 49 and in the U.S. from 37 to 39.
Adam Hollier, Lyse Doucet of the BBC, David Johns, Terri Givens, Lisa Mullins of PRI's The World, and Hicham El Mzairh

Terri Givens, David Ignatius of the Washington Post and Lyse Doucet of the BBC

A sliver of moon in the Grand Place

Overall  the Brussels Forum gets better every year, I was particularly impressed with the participants from other parts of the world.  Even though the focus is on Transatlantic relations, the issues being dealt with are global. Transatlantic Inclusion Leaders concludes tomorrow, so more to come!

...and don't forget, it's the European Year of the Citizen!


Wednesday, March 13, 2013

Brussels Day 1, March 13, 2013

I arrived in Brussels this morning, and was a bit surprised to see snow on the ground, even though I knew there had been a snowstorm on Tuesday. After settling in at a friend's house, and discussing the latest on European politics, I took a short nap and ventured out into the cold to see some of my favorite sights in Brussels.  My first stop is always the Grand Place



The old square looks better than ever - the last time I was in town they were doing major renovations on many of the building, so it was nice to see that everything was in good shape and all the scaffolding was gone.  Nearby is a shopping arcade:


I took many pictures as I wandered around, highlighting some of the more interesting shops, like the hip hop outlet and Beer Temple:










 I ended my walk with some pictures of the snow, which had turned into slush by the end of the day: