Anna Diamantopoulou, President of Diktyo Network. Picture right: Diktyo Network

“Let Europe Arise”¹

Southern Europe is burning. This crisis has turned out to be the great catalyst exposing national ills of prevailing political and banking systems. Conventions were overthrown and political establishments dismantled; yet, Europe seems to be on hold, or in slow motion at best, waiting the German elections. In the meantime, a toxic environment is breeding, European cohesion is eroding.

1. We are experiencing an intensifying crisis of orientation that may become a fertile ground for conflict. The EU, this unprecedented unique political formation succeeded to turn enemies to friends. The landscape, however, is rapidly getting distorted. If things go unabated, we may be witnessing a reversal with friends turning into enemies…again, nation vs. nation, north vs. south, the periphery vs. the center.

2. It is time for a “call to arms” for a renewed Europe. Staunch believers of the European ideal, that more Europe is the only solution for prosperity, safety and well being in the new world order, cannot afford to remain silent and passive. Urgently and with no delay, need to embark in a continental, across the board effort, transcending countries, political parties, civil society organizations, professionals, academics, and entrepreneurs creating a pan-European bottom up pressure and providing strong political legitimacy for change. But, to be able to rally, mobilize all powers and to rise to the challenge we need to go back to the roots: the EU is in vital need of a demos, a critical mass of popular support. A demos that would empower the EU leaders to proceed with solid and acceptable proposals towards genuine integration. Otherwise, Europe will inevitably dissolve under the pressure of a widespread social clash.

3. We owe to articulate a new vision, a “raison d’etre”, for our collective future. A new narrative, comprehensive, attractive, convincing, that collectively and individually, European citizens will embrace and adopt. Our collective cause needs form and shape with elements every citizen can identify and connect.

3.1. Eliminate war demons: our peace project. Unmistakably, EU’s greater achievement is peace. We lived six decades in peace; how certain are we that this is not the beginning of an armless “war”? Nothing should be taken for granted. A peace project is founded on the notion of mutual respect and a sense of belonging to a wider family with its own discreet identity and common rules. It is true that we have not done enough to build actively a common European Identity. A European identity not competing but complementing and strengthening further sovereign national identities. A European identity deeply rooted in our common inheritance and based on all those shared values and principles we all espouse: freedom, democracy, respect, justice, tolerance and solidarity as referred both in the Treaty and in our respective Constitutions.

3.2. Global strength in unity: a new geopolitical role for Europe. By 2050 Europe will be only 7% of the world population down from 20% in the 1950s. The largest EU countries will comprise a maximum 1%; Europe’s GDP will only be a 10% of world production, down from 30% in the 1950s. With changing demographics, energy needs and supply, and shifting world power from the west to the east, one can easily imagine how each European State will look like on its own a few decades from now. As Helmut Schmidt points out: “Every one of the European nations will make only a fraction of 1% out of world population”, or as J.C Junker put it, “A united Europe is our continents only chance to avoid falling off the world’s radar”.

3.3. From the elites to the people: the legitimacy of democracy. It is imperative that our emphasis should be on democratic legitimacy and accountability both at a European and at a national level. Three important issues: 1) More than half of Europeans (68%)² feel that their voice does not count in Europe. Citizens feel that decisions that influence their lives are taken from a distant bureaucracy accountable to none. 2) Management of the crisis has revealed the feebleness of EU institutions by been de facto relegated to the sidelines. Ultimate decision-making at the EU level has bypassed institutions and landed in the hands of the most powerful EU countries, or more precisely, a single country. The model of Europe governed and dominated by a single central power is not viable to say the least. The approach, tactics and methods used are turning Germany into an isolated giant while at the same time tensions and conflicts among people, institutions and countries are rapidly growing. Finally, 3) Drastic changes are required to reform institutional structures making them accountable for implementing and monitoring policies and reforms; that is to go beyond the current practice of report- and recommendation- making for the EU Bureaucracy.

3.4. Fundamental values precede finances: economic justice for all. Europe is a global player and should set rules in the financial sector. Citizens rightly ask why “troubled” Banks should be bailed-out at the expense of European citizens, yet the prevailing punitive approach falls on those less responsible for the crisis. Why should Banks be financed by loans given to troubled EU countries by the ECB and the IMF with repayment of those loans transferred to the citizens of those countries? And why the EU institutions did not fulfill their constitutional oversight? A strong banking union especially deposits insurance, and the tax on financial transactions currently under discussion would be positive steps in this direction. A narrative including those policies can ally European citizens. Concerted action for growth, economic justice and hope along with political responsibility are needed instead of just finger pointing to presumed sinner countries, punishment, fear and austerity.

3.5. Fairness and opportunity to all: growth equitably shared. The European periphery has entered recession, core economies are slowing down and so does the European economy as a whole. A fiscal stimulus comprised of three principal pillars is needed to ignite a solid recovery: a) Investment in pan-European infrastructure networks, (transportation, energy, telecommunication), b) transformation of ECB to a real Central Bank (with all associated functions and powers) and c) a true EU Budget. A growth instrument based on european resources, not mere country contributions totaling 1% of the European GDP. A budget allocated according to real needs to smooth inequalities and promote cohesion. Europe has both the mechanisms and the stature to rise against global financial system’s unjust and hazardous practices. A well-defined economic justice agenda may be center’s left last existential opportunity.

4. The time is NOW to regenerate Europe with a unifying new narrative, make the leap towards real integration and transform into a real Community, a Federation of Nation States. The time is NOW to eliminate once and for all any risk of dismantling the most noble and genuine accomplishment of Europe’s political history. The time is NOW to advert the likelihood of twenty-seven populist and ultra-nationalist parties (promoting scapegoating and insisting to “no” to everything) dominating the upcoming 2014 European Parliament elections.

As we stand on the verge of greater integration or dissolution, is fitting to recall J. Monnet (incidentally, where is France?) ingenious statement: “crises are the big federators of history”. People tend to set aside their differences and work together when facing a grave, clear and present danger. Don’t we all see it by now?

Dis­claimer: This art­icle was ori­gin­ally pub­lished as “Let Europe Arise” on May 14, 2013 on Diktyo Network, EST cooper­a­tion partner.

Last Saturday, the members of the Indonesian student association (PPI) from the Netherlands, Germany, and France gathered through Historun. It is an event they have initiated as a way to discover and re-discover Indonesian history inscribed in the monuments of Leiden, a beautiful city in the Netherlands’ Randstad[1] which hosts the first university in the country and founded in 1575 by the Prince William of Orange[2]. There were around 80 participants, of whom most were either important Indonesian embassy officials, PhD candidates, researchers, scholars or Master students coming from all over the Netherlands, but some were also from Germany and France. They were all ready and well equipped for a walk through historical discovery.

The journey began with a lunch and a visit inside the National Museum of Anthropology/Volkenkunde museum (thankfully, as the rainy Dutch weather announced a rather difficult day). The collections for which the Indonesian students were coming to see are those of Frits Liefkes (curator Rijkmuseum Amsterdam). Liefkes and his partner have compiled around 1000 beautiful artifacts from every corner of the Indonesian archipelago, ranging from jewelries, statues, cloths and dolls. Two objects in particular draw attention on the complexity of multicultural identity: a box with the inscription of a statement in Dutch on one of its sides (“My grandpa is full, my father is half, I’m a quarter”) and a range of dolls wearing traditional clothes from the various ethnicities across the Dutch East Indies, sent by the Dutch East India Company to Queen Wilhemina to make her aware of the diverse identities of her subjects.

As the weather was getting a little better, the participants were divided into five groups, each led by a guide (one of the members of the association) who had searched for traces of Indonesian history spread all over Leiden. It was surprising to learn how many marks this history have left on the city’s architectures. One example is the former residence of the first Foreign Minister of the newly independent Republic of Indonesia, Achmad Soebardjo, when he lived in Leiden as a student before becoming an important actor of the Indonesian independence. Another one is the former residence building of C. Snouck Hurgronje, a Leiden University Professor and the first Western scholars of Oriental cultures who was examined by a delegation of scholars from Mecca before being allowed to make a pilgrimage to the Holy Muslim city of Mecca in 1885. Finally, the discovery of two Indonesian poems -one (in Bugis language) inscribed on the wall of the Royal Institute for Oriental Studies KITLV and the other (in Javanese) on the wall of a private building- add some artistic and cultural sides of the journey. Along the way, the participants have also discovered Dutch history through the residence of the famous Dutch painter Rembrandt, the Dutch military caserne, the famous buildings of Leiden University and other historical monuments. As the participants felt heavy rain and a wind gust coming, the journey ended at the Burcht of Leiden with some snacks offered by the association. The photo hunt game had to be cancelled, but all the participants left satisfied, without forgetting to congratulate the association for this great initiative.

Living in a world with multiple identities

What can we learn from this Indonesian students initiative? For one thing, it is the notion of complex or multiple identities. As I was passing through Indonesian history in Leiden with the participants, an idea came across my mind: in this increasingly interdependent world and with the rich diversity of European nations and history, how should one perceive a European identity? The Dutch and Indonesians have shared a common history, including the 3 centuries and a half period of colonisation. You can find a lot of Indonesian food all over the Netherlands in restaurants and supermarkets, but also many Indonesian descendants. Other EU member states, even those neighbouring the Netherlands, do not share the same history. Thus, it would be very hard for the EU not to accept the diverse and well forged identities of its member states. A search for identity, as the Historun demonstrates, cannot be limited to a “within” or “exclusive” perception of identity, nor can its perception be limited to economy and law.

The EU has made some interesting projects to promote intercultural dialogues between the EU member states, such as the European Capitals of Culture, European Heritage Days, Intercultural Cities Project, the Platform on Intercultural Europe and the European Year of Intercultural Dialogue (2008). The latter was the starting block of the ongoing process of intercultural dialogue, covering many EU policy fields such as culture, audiovisual sector, multilingualism, youth, research, integration and external relations. The EU has also allocated 1.7% of the EU Structural Funds on a cultural programme (€6 billion for the 2007-2013 term), although it is mainly focused on economic activities related to culture such as tourism, innovation and entrepreneurship.

Building a European identity

One might envision a European identity. However, there are still much to be done and it surely  takes time. We are all aware of the fact that European history is part of the global history, where people have shared multiple identities, within Europe and beyond. At the same time, we also know that European nations have fought for their existence. Thus, the idea of a European citizenship that the Treaty of Maastricht has created should be regarded as an open citizenship and complementary to the nation state identity and not a threat to it. It is the EU’s policy makers’ job to convince its citizens that it is the case. On the one hand, the form of ‘intrusive regionalism’ through economic policies that has been enhanced after the crisis could put in danger the EU’s legitimacy and thus widen the distance between EU institutions and European citizens. On the other hand, once EU institutions manage to overcome the challenges and regain its legitimacy and acceptance from European citizens, then the EU project could lead to an unprecedented form of a complementary identity creation, built not within one single nation but out of multiple nations. Hence, our generation and descendants would perhaps one day be able to say: ‘I’m half …. -half European’. We are in the midst of history, and the Indonesian students have made me realise this.

[2] Commonly believed as a reward to its population’s resistance against Spanish attacks during the Eighty Years’ War or the Dutch War of Independence against the king Phillip II of Spain (1568-1648). The episode referred to here is ‘the Defense of Leiden’ (1574).

Kurds on rally @ photobucket

With civil war in Syria, turmoil in Gaza, Arab Spring aftershocks, and the conflict over Iran’s nuclear program, it’s easy for outsiders to overlook one of the region’s most intractable ethnic conflicts – Turkey’s internal battles with Kurdish separatists. Yet, the Kurdish issue deserves attention as it remains a major inner security threat for the most politically modern and economically dynamic country of the region.

During the last decade, the Turkish foreign policy has undergone profound changes. By the end of the Cold War and in search for a new role in the emerging world order, the foreign policy of Turkey has redefined certain policies and especially relations with its neighbors. Turkey, as heir of the Ottoman Empire, is seeking to establish itself not only as a regional power in the Middle East, the Balkans and the Mediterranean region but also as a model of democracy.

The Turkish foreign policy under the AKP administration has been associated with the name of the current Foreign Minister Ahmet Davutoglu. Davutoglu, an academic himself, before his ministerial appointment in 2009, had published several writings, most important of which the book “Strategic Depth”, in which he outlines his strategic vision concerning the Turkish foreign policy. A basic principle of the so called Davutoglu Doctrine is the balance between the security and democracy inside the country. For this reason, Turkish Prime Minister, Recep Tayyip Erdogan, is trying to transform Turkey from a regional power into a model of prosperity and democracy, a kind of good paradigm for the Middle East countries. Recent events, however, show that Turkey is still in the search of its new role and historical narrative, while there is an almost permanent internal crisis.

The Kurdish issue: Key to government’s stabilization?

The goal of achieving domestic security and strengthening of democratic institutions is in question mainly due to the media censorship and the mass persecutions of military officers after the elections of 2011. Apart from this, more than 70 journalists in Turkey have been prosecuted and kept in jail all over the country due to state reasons according to reports.

The most important problem for the Turkish government though, remains the Kurdish issue.

The historic call that the leader of the Kurdistan Workers Party (PKK), Abdullah Ocalan, made about a month ago to armed militants asking them to ceasefire seems,  nonetheless, to be giving  a new impetus to negotiation efforts after almost three decades of conflict between the party and the Turkish government.

Ocalan’s announcement came at the right time. Developments in Syria have taken an unpredictable way, the pressure on nuclear Iran and the ongoing conflict between Israel and Palestine complicate the situation even more for Ankara. A political solution to the conflict with the Kurds could considerably facilitate the position of Turkey.

The prospects for an end to the insurgency have improved significantly since the Turkish government has realized the ineffectiveness of using military forces, which are strongly disapproved by the people. At the same time, the Kurdish issue is closely linked to the political ambitions of Recep Tayyip Erdogan, who is going through his second term as Prime Minister. According to the statutes of the Party of Justice and Development Party (AKP), Erdogan is not able to claim premiership again, after the end of the second term in 2014. For this reason, he aims to run in the next elections for President.

Considering that the office of the President is largely ceremonial, Erdogan intends to change the law so as to give stronger enforcement powers to the President. As the AKP does not have enough votes in the parliament to promote these constitutional changes, the support of the pro-Kurdish Peace and Democracy Party (BDP), with 33 seats in parliament seems rather needy. Erdogan believes that a peaceful attitude of the government and the efforts to resolve the Kurdish issue will secure the consent of the BDP.

Burdens on the way

However, many issues could make things difficult, if not derail the agreement. A significant amount of Turkish people consider the members of the PKK terrorists and does not want them to be released from jails. But the Kurds have clarified that the amnesty issue is of high importance and insist that the PKK militants should be granted amnesty as part of any agreement.

At the same time, the agreement is not for granted since the PKK during the last years has turned into a transnational movement network and some hardliner nationalist groups may still be reluctant to lay down their arms. One thing is for sure: even if the agreement is reached, the way towards solving the problem will be long, and the achievement of peace a time consuming process.

The chances of a two-state solution have rarely looked worse. In a recent open letterto European Union foreign policy chief Catherine Ashton, 19 former senior European officials, politicians and diplomats claimed, “the Oslo process has nothing more to offer” and that without immediate action, the window of opportunity for a viable two-state solution to the Israeli-Palestinian conflict would soon close. A number of analysts have disputed this and gone ever farther, claiming that the Oslo process, referring to the process of political negotiation for a Palestinian state that began with the 1993 Oslo Accords, is already dead.

Bitter Sentiments

These sentiments are increasingly shared across the political spectrum. The apparent death of the two-state solution has been celebrated among segments of the left and right always hostile to the plan, while being decried and lamented both by many members of the foreign policy establishment who supported the Oslo process through thick and thin, and by liberal elements of the Western Jewish establishment. As Israeli settlements continue to secure “facts on the ground” by gobbling up expropriated Palestinian farmland and blurring the Green Line, the 1967 armistice line separating occupied territory and Israel proper, a viable Palestinian state seems less and less likely.

This is compounded by political disunity and dysfunction on the Palestinian side. Division between Hamas, an Islamic extremist faction which rules Gaza, and the secular nationalist Fatah in the West Bank has made it impossible to create a united Palestinian representative in negotiations; this is only made harder by technocratic Prime Minister Salam Fayyed’s recent and abrupt resignation. Finally, both Israel and the Palestinians, with extremely difficult choices ahead, seem unable to come to a compromise of any type on any issue, let alone the gut-wrenching compromises over borders, refugees, religious sites and compensation that would entail a final agreement for a two-state solution.

What Alternatives to the Two-State Solution?

Over the years, a wide variety of solutions have been suggested to end the conflict, each with its own ideological grounding, advantages and disadvantages. One solution, commonly called the “one-state solution”, proposes a single, secular, democratic state including both Jews and Palestinian Arabs as equal citizens, stretching from the Jordan River to the Mediterranean. This solution has been proposed primarily from the left side of the political spectrum, and was the official policy of the Palestine Liberation Organization (PLO) from its inception until 1988.

A one-state solution has the advantage of simplicity. Issues like refugee flows and border tensions disappear when everything is united under a democratic framework. Critics rightfully point out that this state would be the end to a Jewish state. Others claim that it would be a recipe for disaster, with ethno-religious violence and civil breakdown inevitable. This is borne out by public opinion both in Israel and Palestine, which broadly rejects a one-state solution.

Another solution, partway between a one and two-state solution, is a bi-national or confederal state. Under this framework, Palestinian Arabs and Jews would be largely self-governing, with some shared institutions responsible for trade, borders, security and potentially foreign affairs in a sort of confederation. A variety of outlines exist within the confederal or bi-national framework, from a patchwork of partially segregated cantons to a consociational system like Lebanon to a loose, EU-style union.

The advantage of this framework is that it seems to be able to reconcile the goals of Zionism, a homeland for the Jews, with the goals of Palestinian nationalism, the return of refugees and self-determination. Palestinian refugees would be able to return to what is now Israel, while remaining Palestinian citizens and not overwhelming a Jewish state demographically, while the larger Israeli settlement blocks could be left in place. The main disadvantages to this framework are in its inherent complexity; any system built on an ethnic and political balancing act would be delicate and prone to sudden collapse in the face of crisis or political opportunism; the civil wars of Yugoslavia and Lebanon offer a cautionary tale.

Another solution, prominently advocated by the far-right settler-dominated party, The Jewish Home, calls for the annexation of Area C, the sparsely-populated majority of the West Bank controlled directly by the Israeli military under the Oslo Accords, with its residents given Israeli citizenship. People living in the rest of the West Bank would be allowed “self-rule”, while being holed up in overcrowded enclaves cut off from one another and the outside world by a sea of Israeli territory. This would effectively end any hope for real Palestinian self-determination, and would lead to a situation resembling apartheid South Africa’s Bantustan system, inevitably leading to cycles of violence, retaliation and human rights catastrophe.

To paraphrase Winston Churchill, the two-state solution is the worst solution available, other than all of the other options. It is the only solution that will not result in inevitable ethno-religious violence or massive human rights abuses, while also ending a running sore on the world’s body politic, and allowing real self-determination for Israelis and Palestinians. If the two-state solution is well and truly dead, hope for a tolerable future for Israelis and Palestinians may be dying with it.

- Alex Langer

Featured photo:  davidsotokarlin, Creative Commons, Flickr

Photo 1:  Synne Tonidas, Creative Commons, Flickr

Dis­claimer: This art­icle was ori­gin­ally pub­lished as “The Green Line Blurs: Fading Hope for a Two-State Solution” on April 23, 2013 on The Polit­ical Bouil­lon, EST cooper­a­tion partner.

Youth unemployment in Europe

The European sovereign debt crisis is certainly having a devastating effect on youth unemployment. Around 5.5 million Europeans under 25 (22.7%) are unemployed during the third quarter of 2012. In some countries, such as Spain and Greece, the situation is even more dramatic with over 50% of youth unable to find a job. With fewer and fewer investors in Europe, young people and seniors are the most vulnerable to budget cuts and the reduced amoun of investment. In addition to this, the jobs offered in the EU labour market and the skills and qualifications of young Europeans are mismatched. This asymmetry leads to 2 million unfilled vacancies in the EU, despite the crisis.

Clearly, the EU has identified and attempted to tackle the main issues described in the previous part. Its key actions include measures in the field of education and culture, EU skills panorama, Youth on the Move, Youth Employment Package (2012) and Youth Employment Initiatives (2013)[1]. These measures are monitored and the results are published on the Europa website. However, just as tackling the barriers for services (as opposed to goods), barriers to youth employment are simply too difficult to counter, even more so since the EU’s competence on this field is limited to coordination and support (and stipulated in the Lisbon Treaty). Moreover, are these measures attractive enough to counter the increasing investments in emerging economies and the difficulties for Europe to maintain its social level and system?

Given the overall picture of the situation, what can –or should- we do now? The two main solutions available to young Europeans seem to be struggling in Europe by accepting temporary jobs or moving out of Europe to seek opportunities elsewhere.

Should I stay or should I go?

Just one or two generations ago, work could be found more easily in the European market when the “temptation from the East (emerging economies)” were still distant. Businesses were predominantly hold in the Western world and opportunities to work abroad were not so evident, so a great majority of young people followed a scheme that was quite comprehensible and chose a path following that scheme. In this very rapidly interdependent world however, investments are restraining in a Europe with high social costs and being less and less competitive. Three main groups of youth seem to emerge. First, young people who want to move to richer European countries or abroad and but are somehow limited by their traditions, language and skills, but also the lack of investments in their respective country. Second, young people who are amongst the privileged elites who can then have the sufficient global networks and means to deal with the crisis situation. The third one is the middle-class societies who have the opportunity and means to adapt themselves to the global challenge, but still faced with some identity issues due to the rapid changes in the world economy and politics. In the long term, working abroad does not really leave a space for a stable private life and some might come back with a shock and are forced to re-adapt themselves.  The depiction of this situation only reflects what I have experienced so far and when I speak with young people around me. Surely other situations exist, but these seem to be the most prevailing.

The EU’s solutions to the youth unemployment as mentioned in the first part of the article seem to address the first group in particular. The third group might also benefit from these solutions by programmes such as ERASMUS and Your First EURES Job. These are interesting programmes that young Europeans should seek to benefit from. However, social issues (education, language, culture, identity) are very difficult to tackle and the EU itself cannot be hold responsible for all the problems. How can we build and cement a sense of European identity and culture in this increasingly multipolar world? Looking for jobs in another European country could be a solution, but with fewer and fewer opportunities even in the richest countries in Europe, the majority of the graduated young people of Europe could only expect for temporary jobs even in the richest countries. Is it that worthy? Should we choose Europe and struggle for it at whatever cost or leave everyone to seek opportunities elsewhere? An article posted by The Guardian gives a rather nuanced depiction of the situation of those who have attempted the risks. But after all, do we have a choice? These are questions on our young generations’ minds and which not only European policy-makers, but also all the youth concerned, need to consider.

Alenka Bratušek, the new PM of Slovenia (picture from Wikipedia)

Despite severe financial and economic problems, Slovenia can still avoid a bail-out – if investors stay confident

Slovenia’s course: From model student to problem case of Central Eastern Europe

 When Slovenia joined the EU in 2004, it was the most developed among the countries of Central Eastern Europe (CEE) and generally considered a success story of economic transition towards market economy. Slovenia’s income level had already reached 80% of the EU’s and its macroeconomic performance was so promising that in 2007, Slovenia was the first CEE country to be admitted into the Euro zone[1].

Only six years later, Slovenia has turned into a problem case for the Euro zone and is named a strong candidate for the next bail-out. The economy has re-entered into recession in 2012, its banking sector is ailing and the government persistently runs a primary deficit. What has gone wrong? Slovenia was hit by the financial and economic crises in a way much similar to what other advanced economies experienced[2]: an unsustainable boom of the construction and housing sector came to an abrupt end, the consecutive credit defaults forced domestic banks to deleverage, which in turn led to a tightening of credit that transmitted the crisis into the real economy. Slovenia’s banking sector was hit harder than other CEE’s because its biggest banks are still state-owned and had been badly managed prior to the crisis. But it is not only the banking sector that is in bad shape: pension system and labour market have long been needing structural reforms, but these were delayed until 2011 – only to be vetoed in a referendum[3]. Additionally, the export-oriented Slovenian economy suffered from the recession in the rest of Europe and particularly in its biggest trading partner Italy.

Next to economic problems, Slovenia has just gone through a political crisis: A government formed after elections in 2011 was brought down by a vote of no confidence against former Prime Minister Janez Janša who was accused of corruption[4]. Opposition leader Alenka Bartušek managed to form a centre-left coalition, but her government has already had to deal with a first scandal – a minister that had to resign due to a real estate affair[5].

 Implementing structural reforms – gradually, but thoroughly

 So all in all, Slovenia’s current situation looks rather gloomy – and this picture is not going to change overnight. Recession will prevail for at least another year, the government deficit is still much above the 3% Maastricht threshold and the banking sector is likely to need some more 1€ billion of fresh capital[6].

But things are changing in Slovenia:  Since 2012, a number of reforms have been initiated to tackle the most pressing financial and economic problems. The newly founded Bank Asset Management Company, a “bad bank” in finance jargon, will take on bad assets and allow troubled banks to clean up their balance sheets. A pension reform adopted in December 2012 increases the retirement age and will thus help to face the consequences of a rapidly ageing population. In the labour market, reforms have rendered work contracts more flexible and administrative processes easier. These measures might in particular benefit young graduates who are facing severe troubles entering the labour market. Furthermore, the Janša government started a process of fiscal consolidation, the goal being a balanced budget by 2015. It is not yet clear whether the Bratušek government will stick to this strict course, but in general, there has been a high tendency of continuity in politics despite the change of government. Not only were reforms passed with near-unanimous support in the parliament, but they are also backed by social partners. This might help to contain public protests which had been rising recently.

Slovenia’s reforms have been greeted by the EU and by other international organisations as steps in the right direction[7]. Though many of the measures might turn out not to be sufficient, they could mark the beginning of a gradual process of restructuring that will bring the country’s economy and financial system back on track. Slovenia could still avoid a bail-out – if it just had enough time.

 A race against time

 Slovenia now has to pay the price for having delayed necessary reforms for too long: The country is under an extreme time pressure to prove that the measures initiated over the last year are not only the right ones, but will also be implemented with rigour. The new government has only been in office for a month and nobody is yet able to say whether it will be up to the job. If Ms. Bratušek and her ministers do not quickly succeed in gaining credibility at home and abroad, Slovenia could well tumble into the abyss.

But even if Slovenia managed to implement its reform agenda as projected, it could still lose the race against time and end up asking for a bail-out. This is where Cyprus enters the stage. The uncoordinated and delayed rescue plan for Cyprus has yet again squandered investors’ trust in the Euro area and made them look for the next victim in the Euro domino play. The risk of contagion becomes visible when looking at the long-term interest rates for Slovenian government bonds.  In March 2013, yields for 10-year bonds were still at 5.09%, but within little more than a month they rose to 6.33%[8] and are now nearing the psychologically important mark of 7% above which a bailout is said to be inevitable. Of course, Italy’s political crisis and drawbacks in the Portuguese reform agenda are not helping either. The moment of truth for Slovenia is likely to come at the beginning of June when the government will have to issue about 1€ million of new debt. While Ms. Bratušek keeps repeating that her country does not need a bailout, the Slovenian public is less optimistic. An opinion poll by the market research agency Delo Stik in March showed that 48% of Slovenians believe that the country will not survive without international help, while only 44% believe that it will[9].

[1] European Commission, http://ec.europa.eu/economy_finance/publications/publication11325_en.pdf 

[2] See IMF Country Report Slovenia 2012, http://www.imf.org/external/pubs/ft/scr/2012/cr12319.pdf

[3] OECD: Economic Survey Slovenia April 2013, http://www.oecd-ilibrary.org/docserver/download/1013071e.pdf?expires=1366453664&id=id&accname=ocid177643&checksum=C73E93C9CBD71066AA2E5F1B056E0150

[4]The Economist, http://www.economist.com/blogs/easternapproaches/2013/02/slovenia

[5]http://blogs.ft.com/beyond-brics/2013/03/26/guest-post-slovenia-not-as-bad-as-cyprus/#axzz2P0XbBBsd

[6] IMF Slovenia 2013 staff visit – concluding statement of the mission, http://www.imf.org/external/np/ms/2013/031813d.htm

[7] See Statement by President Barroso following a meeting with Ms Bratušek on 09/04/2013, http://europa.eu/rapid/press-release_SPEECH-13-296_en.htm , IMF: Concluding Statement of the Slovenia 2013 Staff Visit, http://www.imf.org/external/np/ms/2013/031813d.htm, OECD: Economic Survey Slovenia April 2013, http://www.oecd-ilibrary.org/docserver/download/1013071e.pdf?expires=1366453664&id=id&accname=ocid177643&checksum=C73E93C9CBD71066AA2E5F1B056E0150

[8]Reuters, http://www.bloomberg.com/news/2013-04-18/germany-s-bonds-little-changed-before-spanish-french-debt-sales.html

[9]Reuters, http://uk.reuters.com/article/2013/04/05/uk-slovenia-bailout-insight-idUKBRE9340IJ20130405

Image: neveryetmelted.com

Liberté, égalité, fraternité. The famous motto to presumably epitomize the correct model and stage of societal and economic development. Admittedly, a great portion of the Western world owes their success and progress to this powerful ideology. However, today’s France under the leftist leadership captained by President Francois Hollande has taken the premise of égalité to another level. Consequently, history may remember Hollande’s reign differently: as a time of fiscalité, misere, faillite.

Results or Intentions?

In 1975 Milton Friedman famously said, ” One of the great mistakes is to judge policies and programs by their intentions rather than their results.” Evidently, in 2012 France decided to think the opposite when Francois Hollande was elected as the 24^th President of France. By promising glamorous policies to improve the conditions of the poor and middle-class at the expense of the wealthy, the majority of France mistakenly believed in utopian intentions, rather than in economic realities. Today a sense of remorse and urgency has arrived to France[1], where a large part of citizens have grown to enjoy unaffordable social services promised by the inept Hollande administration. Of course the promises of Hollande were only part of the traditional political game, but even by European standards the level of socialism in Hollande’s policy proposals has been overwhelmingly unpragmatic.

Spending Other’s Money Is Easy

Out of many Hollande’s unreal policies, the 75% upper level income tax rate has been by far the most disturbing penalty for the wealthy. Even though such tax would not affect many households or individuals, it was nevertheless a troublesome sign of where the French political idealism is heading. Furthermore, anti-business rhetoric combined with lunatic taxation policies came to be seen as an invitation to a duel against businesses. As a direct result from Hollande’s discrimination against businesses, France’s economic growth estimate was reduced from the initial 1.3% to 0.8% and later on to actual decline of growth in 2013. Consequently, France won’t achieve its 3% deficit reduction goal, meaning that public sector spending would remain at 56% of GDP. Financing public sector services with more debt despite the shrinking pool of taxable income will further increase the deficits to levels far beyond the Maastrict Treaty requirements. Therefore, by looking at these numbers it is needless to further analyze the trajectory of France’s economic competitiveness. If France’s nemesis and the European growth engine Germany has a minuscule 0.8% growth forecast in 2013 with more disclipined monetary and fiscal policies than in France, Hollande is going to have more nightmares than fantasies about economic recovery.

Au Revoir Depardieu

Allthough the Constitutional Council rejected the 75% income tax due to its unconstitutional character, the damage has already been done. Data from the Banque de France illustrated how capital flight increased rapidly after Hollande revealed his egalitarian plans to rearrange the French economy. Capital outflows resulted in net-losses of 53 billion Euros, which exacerbated the contraction of M1 and further escalated the nervousness of the markets both in France and EU. Unemployment rate naturally increased, putting stronger pressure to the short-term sustainability of the unemployment benefits. After all, investing to social security services requires larger pool of taxable income and Hollande’s policies are discouraging foreign investors to bring vital capital to France, which could improve the employment, hence expand taxable incomes. It is all together more puzzling to search the rationality from such policy when the overall revenue collected with the 75% income tax would had been 300-500 million Euros. Such amount would not have made much improving contributions to the chronic public deficits. On the contrary, the public finances have become even more crippled. Therefore, it seems the intention of such lunatic policies was to score political points and encourage public discord between classes rather than improve the distribution of wealth.

добро пожаловать Depardieu

Why won’t the adherents of socialism never learn from their mistakes? Such fanatics of state-controlled economy falsely hold on to the Scandinavian-model and argue how their mistakes were the consequence of being taxed too little. Unfortunately, the Scandinavian-model works only in homogeneous nations with strong trust to the government, but France has neither of these attributes. In order to revitalize the French economy people need to wake up to reality and understand how the phrase c’est la vie no longer applies in a world where somebody else has to pick up the tab from the choices of others. Especially when the Euro has integrated European economies to a single market area, where the results of one nation’s hard work can be diminished by other’s choice to live off the system. In conclusion, if Paris Saint-German has any desires to beat Real Madrid or Manchester United in the Champions League next year, Hollande must lower income taxes so that great players (Ibrahimovic & Beckham are not such) would find it profitable to work in France. Currently, nobody feels this way apart from the socialist government.

Author serves as the EST Ambassador to Croatia and is a graduate student at Dubrovnik International University.

Where has Europe been in all this? The turmoil on the continent’s doorstep – let’s not forget almost all the Arab and Sahel countries are European Neighbourhood ‘Partners’ – could hardly have come at a worse time for EU leaders, whose own problems have unsurprisingly stolen the limelight. This said, the EU has not ignored the events and has tried to provide assistance. Despite lazy press comparisons to 1989, similarities between then and now are few and far between, and so Europe can give little help based on its own experiences; it has therefore worked hard to proffer encouragement, expertise and money.

What has the EU done so far?

On the 8th February, just over two years since the start of the uprisings, the EU released its report on the ‘state-of-play’ in the region, a 10-page document describing support given to each country. Stressing the “deep connection with politics” that economic matters have on the very first page certainly sets the tone. But while cynics and eurosceptics cry that the EU doesn’t want to get properly involved and instead just throws money at the region, the EU’s approach is astute. It is crucial to bear in mind that economic grievances were what started the protests – daily bread, rather than day-to-day liberties, was the chief concern and it was when popular dissent snowballed that opposition and pro-democracy groups seized the opportunity. The EU is therefore absolutely right to pursue economic goals, the success of which will be favourable to political development.

Hundreds of millions of euros in grants will be made available to MENA countries as part of the SPRING programme, which rewards democratic progress with cash. Whether this will work is not certain – a Commission review of the ENP in 2010 made clear that while the EU is good at promoting sectoral reform, promoting democratic reform has proved a much harder task. Therefore, the EU should not be afraid to shout about its economic assistance programmes, which sound far more useful in a world where talk of millions and billions no longer causes awe to the average citizen.

The newly-launched European Neighbourhood Programme for Agriculture and Rural Development (ENPARD) is a stellar example of such a scheme. Aimed at modernising and expanding agricultural production through tailored dialogues, there is much promise for efficiency gains in the sector that is so uniformly important across the region. A similar scheme proved to be beneficial during the accession of member states in Eastern Europe. As well as having the potential to promote bottom-up economic growth through increased incomes for farmers, the programme could also alleviate subsistence concerns. What is more, higher agricultural competition will hardly be well-received by European farms so it can be seen as somewhat of a selfless move by the EU. Negotiations over a free-trade area are set to commence this year, which may see the reduction of barriers to agricultural trade among the terms.

Challenges and accomplishments

The EU has come under fire from pressure-groups, charities and even Home Affairs commissioner Cecilia Malmström for its handling of the migration issue in the wake of civil unrest across the Arab world, though this is unwarranted. Unprecedented numbers of asylum seekers fled north, including 1 million escaping the bloodshed in Syria; 185,000 of these are camped on the EU’s doorstep in Turkey.

The issue here is far from one of simple EU policy. The intergovernmental nature of the Union in the area of migration means that sensitive migration motions are extremely difficult, if not impossible, to pass. After Italy gave temporary residence visas to migrants in April 2011 France reacted with fury, temporarily stopping all trains crossing the Franco-Italian border. Whether or not this was a direct violation of the Schengen agreement is open to question (reinstating border controls is only possible in the case of a “serious threat to public security”) but the episode serves to highlight the severe tensions felt by member states. In a climate of growing euroscepticism it would have been a PR disaster for the EU to call for an influx of unskilled migrants on grounds of compassion. Besides, migrants entering the EU and sending money to their relatives back home would not be a long-term solution to the economic problems in the MENA region. At best, it would slow down progress, at worst, cause a ‘brain drain’ of highly-educated, highly-skilled workers flocking to Europe. Far more useful are programmes which help cultivate the region’s human resources. An example is Erasmus Mundus, the EU’s student exchange programme with third countries, to which funding has recently been increased.

Finally, the ‘State of Play’ report makes several references to stimulation of the private sector, a shrewd move and one that will address one of the MENA region’s most damaging shortcomings. In many countries private development is hampered by large state power in business, a lack of integration in global markets and red tape acting as a barrier to entry for new firms. The European Bank for Reconstruction and Development (EBRD), which is largely financed by the EU and the European Investment Bank, will play a key role in remedying this. Of course, it will be hard to eradicate the cronyism that is commonplace, but “cautious privatisation” (the words of EBRD president Thomas Mirow) and trade promotion, in conjunction with the variety of other policies outlined previously, should allow MENA economies to finally get off the ground and give countries more fertile ground for democratic growth.

The “Islanders” of the Falklands were called to a referendum on the 10^th and 11^th of March, centering on the archipelago’s continued association with the United Kingdom. The vote yielded unsurprising results, given that asking a crowd of Brits whether they think they ought to remain British smacks somewhat of an exercise in the absurd. This is however rather irrelevant when this affair is regarded from the point of view of diplomacy rather than democracy. A move which has played into a conflict taking place between China and Japan an ocean away .

The question of the Falklands has been a bone of contention between Argentina and the United Kingdom for nearly two centuries when the colonization of the archipelago’s was first undertaken by the British in 1833. Today the islands are home to 2841 civilians  and 1300 soldiers, not counting the 500 000 sheep who’s company they keep. The capital, Port Stanley, sits at about 480 km from Argentinian shores and 14000 km from the white cliffs of the Metropolis.

In 1988, the discovery of oil reserves with an estimated value of 8 billion barrels reignited tensions between Argentina and the United Kingdom. A development which lead to the United Nations Special Committee on Decolonization to issue numerous exhortations to both nations to come to the negotiating table to discuss rights to the islands. The announcement of a referendum on the political future of the islands brought the Argentinian ambassador to London Alicia Castro to declare:

The referendum is utterly meaningless from the perspective of international law. There exist 40 resolutions by the UN demanding the opening of negotiations between the United Kingdoms and Argentina. Thus this referendum is the result of a strategy which has as its goal to avoid opening talks.

The British MP George Galloway has also called on his government to produce proof of real intent in regards to the Falklands referendum. According to him, the government’s obstinacy on the issue stems from an old imperial reflex that he sees as incredibly detrimental to future relations between his nation and those of South America . He reminds us that every member of the Union of South American Nations  (UNASUR) has denounced the referendum, indicating its insignificance in actual political legitimacy. “ We are prejudicing fatally our interests and our reputation in Latin America by continuing by continuing to attempt to hold onto this appendage of colonial rule” Galloway declared, advocating instead a program of shared sovereignty.

On March 11 however, the question of the referendum took a turn which has brought the relevance of this question to parties unconnected to the Islanders and their would-be countrymen in Britain and Argentina, when the Chinese minister of foreign affairs Hua Chunying stated that “China supports Argentina’s claim to the Islands and expects both sides to resolve the issue through dialogue in accordance with the law.” This Chinese intervention is not however a move to improve Sino-Argentinian relations. The true target seems to be one an ocean away from the British Argentinian issue. China’s aim is to force a dialogue with Japan on the question of the Senkaku-Diaoyu archipelago, a current holding of the Japanese government which China has long claimed rights to the islands as an integral part of its territories.

The Senkaku-Diaoyu debate shares a number of interesting features with the case of the Falklands as both controversies arose as consequences of colonialism. And while China supports the Argentinian position, Japan, in an attempt to defend its claim to the Senkaku-Diaoyu islands, has employed a rhetoric familiar to the Thatcher playbook of the 1980s during the war in the Falklands.

It was in this vein that on the 28^th of February the Japanese Prime Minister Abe made the following declaration: “Our national interests have been immutable. They lie in making the seas which are the foundation of our nation’s existence, completely open, free and peaceful.”

Ultimately, the impotence of this referendum must be noted. Argentina’s position, though once only regionally important, now backed up by China, one of the most influential  members of the UN Security Council, can no longer be ignored. As it stands the only hope of resolving these two longstanding conflicts in the long term is to be found only in dialogue. Despite any legitimacy of rule that might be accorded to Japan and the UK, the fate of these Islands, remnants of an era marred by imperialism, must be placed in the hands of international law. Only by this method will Sino-Japanese and British-Argentinian relations be brought closer to complete stability.

- Pier Alexandre Lemaire, translated by Jacob Leon

Original article: Les archipels de la discorde

(Featured photo: wallygrom, Creative Commons, Flickr)

Dis­claimer: This art­icle was ori­gin­ally pub­lished as “The Disputed Archipelagos: Falklands and Senkaku-Diaoyu” on April 2, 2013 on The Polit­ical Bouil­lon, EST cooper­a­tion partner.

“Euro Is a Common Liability” is a 3-part series response to Aleksander Thomas’ EST article ” The Euro Is Our Common Fate“. For part I, refer here.

As another expected Euro crisis unraveled in Cyprus, a consecutive round of critical examinations of the common currency is required. Instead of repeating the same mantras of lost independent monetary policies or severe differences in the European economies’ business cycles, another approach is needed. Perhaps the inconvenient truth and the negative unintended consequences of the common market are the fact that with one currency, fluctuations in the European Union minimum wage are inherently creating detrimental imbalances.

Pragmatism, please.

First, let us examine the fundamentals of minimum wage and the consequences of such to economic growth. The current discussions on minimum wage have been futile given the fact that a great majority of the arguments for increasing wages are based on emotionally attached sentiments. Admittedly, the school of Keynesian economics suggests how higher wages would produce more consumption, hence stimulate growth through higher aggregate demand. However, such reasoning is a fallacy simply because in this particular topic, we must exercise counter-intuitive thinking. One doesn’t have to be necessarily a firm adherent of the Austrian School of Economics or understand the premise of Say’s Law, but rather examine the tacit unintended consequence of increasing wages without considering overall labor productivity and added value.

How Much Are You Worth?

To put it simply, wage represents the value of one’s input, or the value of your skills. If the government sets the level of minimum wage at a certain level (let us use 5EUR/hour as an example) such decision directly implies that the least valuable skill in a given economy is worth of 5 Euros/hour. Such position seems a bit random given the fact that if some portion of labor currently do not possess skills valued at 5 Euros but 3.50 Euros, should they be employed with the current minimum wage? The followers of social equality and people with assumed knowledge of other individuals’ marginal benefits would insist on hiring such individuals simply on the basis of inaccurate motives. If the contribution of the worker does not create profit for the business, there is no reasonable justification to pay for such worker the current mandatory hourly wage. As a result, the employer cannot hire a person, whose skills are not aligned with with the required wage-level. The marginal costs of labor do not match the marginal benefits, hence the employer is better-off not hiring, unless he/she will increase the final price of the product/service. Such outcome is not efficient given that the consumers would bear the adjustment through higher prices, decreasing temporarily their purchasing power.

Differences in Europe

In 2013, 20 EU members had implemented a minimum wage legislation. With a common currency and a single-market the difference in national (monthly) minimum wages is expected to be quite small. Unfortunately the difference between the lowest (Romania, 123EUR) and the highest (Luxembourg, 1847EUR) suggests that the common currency has not delivered necessary balance in the EMU-area wages. It is all the more troublesome when one sees the wage difference relative to each Member State’s overall price level[1]. One might ask whether such phenomenon makes much difference for the EMU’s economic growth. At first it might seem that such differences would not have spill-over effects on the overall economic performance of the Euro-zone, but once again we must peek through the veil of claims and data. With open borders for capital and people, the labor movement in the Euro-zone is something that the optimal currency area praised. However, with such vast differences in wage levels within the Euro-zone, the concentration of labor movement is directed to the higher-wage areas. For example, Estonian workers migrate to Finland or Ireland in search for higher wages, or Romanians and Bulgarians seek higher standard of living in Germany. Consequently, some people might ask naively: What could go wrong?

A Lot Can Go Wrong

Such movement towards higher wages does not necessarily result in higher productivity. With higher wages and more competition in labor markets, those who do not possess the skills worth of 5EUR/hour cannot find work. Furthermore, when Estonians migrate to Ireland for work, an actual shortage of skilled workers in Estonia causes unnecessary unemployment: since the wage levels in Estonia are not compelling for a Spaniard or youngsters from France, nobody has the incentive to replace the lost workforce in Estonia. To make the situation more detrimental, higher labor movement would mean that domestic economies are going to have severe future problems in their pension funds since less people are contributing to the domestic social security system.

No Escape

What can be done? With a common currency, such differences in domestic wage levels are causing more irreversible damages. Such dilemma (adjusting the common currency or setting European wide minimum wage) is a combination of an incomplete monetary union, aggressive labor movement and broad differences in minimum wages between Member States. Since such policies are difficult to reform (thus reflecting the realities of 27 Member States), the Euro has become a mutual liability, rather than a fate or common asset.

Author serves as the EST Ambassador to Croatia and is a graduate student at Dubrovnik International University.