The Greek debt crisis saga continues with no resolution in sight. As expected, the European leaders rejected a last-minute proposal by Alexis Tsipras, Prime Minister of Greece, requesting an extension of the bailout program that expired on 30th June and seeking a new €29.1 billion bailout package that could have covered country’s debt obligations over the next two years.
The rejection led the country to default on its €1.6 billion loan repayment to the International Monetary Fund. Greece is the first developed country to default to the IMF. Even though the IMF does not use the term default, it will now classify Greece as being “in arrears” and the country will only receive funds in future once the arrears are cleared.
After several rounds of protracted negotiations in Brussels, Greece had rejected the anti-austerity conditions contained in the bailout package prepared by the troika (European Commission, European Central Bank and the IMF). The troika demanded substantial cuts in pension and wages besides overhauling value-added tax as a precondition for releasing the remaining funds from the bailout package which expired on 30th June. Disappointed over the rigid stand taken by troika, on 27th June, Mr. Tsipras announced a referendum to decide whether or not Greece should accept the bailout conditions. The referendum will take place on 5th July.
By announcing a referendum, the Greek government has put the ball in people’s court. It is hard to predict the outcome of forthcoming referendum. It is likely that a No vote would strengthen the bargaining power of the current government which came to power on anti-austerity platform in January 2015. While a Yes vote would make the government’s position untenable and probably lead to general elections.
On 28th June, the Greek government imposed capital controls and other regulatory measures to maintain liquidity and stability in the banking system. These include:
- All banks in the country will remain closed for a week (June 29- July 6, 2015).
- An individual can withdraw up to €60 per card a day from ATM.
- The foreign bank cards are exempted from this daily limit.
- The transfer of money to outside Greece will require approval from the official authorities.
- A specialized agency will deal with urgent payments that cannot be met through cash withdrawals or electronic transactions.
The Accumulation of Public Debt
No discussion on Greek debt crisis would be complete without analyzing how the country’s public debt got accumulated over the years. In 2004, the country’s public debt was €183.2 billion. By 2009, it reached as high as €299.5 billion, or 127 percent of country’s GDP.
Currently, Greece’s public debt stands at €323 billion, nearly 175 percent of country’s gross domestic product. Both the critics and supporters of Greek’s government admit that such a high debt-GDP ratio is unsustainable. The current government is seeking substantial write-off of country’s debt so as to put the country back on a growth trajectory. While seeking debt relief for Greece, several economists and legal experts have referred to London Agreement in 1953 which gave generous debt relief to West Germany by writing off its 50 percent of debt, accumulated after world wars. This debt relief was one of the key factors which enabled the reemergence of Germany as a world economic power in the post-war period.
In 2015, the Greek Parliament set up a Truth Committee about the Public Debt to investigate how country’s foreign debt got accumulated from 1980 to 2014. The Committee has recently released a preliminary report which states that Greek public debt is largely illegitimate and odious. I would earnestly request readers to read this report as it confronts several popular myths associated with the Greek public debt. According to the report, the increase in debt before 2010 was not due to excessive public spending but rather due to the payment of extremely high rates of interest to creditors and loss of tax revenues due to illicit capital outflows. Excessive military spending also took place before 2010.
More importantly, the report reveals how the first loan agreement of 2010 was used to rescue the Greek and other European (especially German and French) private banks. The loan agreements of 2010 (and 2012) helped private banks and creditors to offload their risky bonds issued by the Greek government. In simple words, the debt of the private banks was transformed into public sector debt via bail-outs. As pointed out by Tim Jones of Jubilee Debt Campaign, it is not the people of Greece who have benefitted from bailout loans from the troika but the European and Greek banks which recklessly lent money to the Greek government in the first place.
Out of €254 billion lent to the Greek government by troika since 2010, only 11 percent have been spent to meet government’s current expenditure. Of course, previous governments of Greece are equally responsible for spending beyond its means and falsifying its public accounts.
Who owns Greece’s public debt? Currently, close to 80 percent of Greece’s public debt is owned by public institutions — primarily from the EU (member-states, ECB and EFSF) and the IMF (see chart below) The rest is owned by private creditors.
Austerity Caused a Humanitarian Crisis
The social and economic consequences of austerity measures imposed by troika on Greece have been devastating. Since 2010, Greece’s GDP has fallen by 25 percent and unemployment rate is 26 percent. The youth unemployment rates are at an alarmingly high level. Currently, over 56 percent of young people in Greece are without a job and there are more than 450,000 families with no working members. After five years of fiscal adjustment and economic hardship under the austerity program, Greece’s major indicators (including GDP, employment and incomes levels) are still far below the pre-crisis levels.
The welfare spending cuts proved to be counter-productive. As pointed out by Ozlem Onaran of University of Greenwich: “The wage and pension cuts and fiscal consolidation led to lower GDP, tax losses, and higher public debt. Our estimates show that the fall in the wage share alone has led to a loss in GDP by 4.5%, and a 7.80% point increase in the public debt/GDP ratio. The fall in wages alone explains more than a quarter (27%) of the rise in the public debt/GDP ratio in this period. The conditionalities of the memoranda have not only been counterproductive in terms of its aims regarding debt sustainability, but also engineered a humanitarian crisis.”
Many legal experts argue that the harsh austerity program imposed by troika could potentially pose a violation of human rights. According to Ilias Bantekas, Professor of International Law at Brunel University Law School, “The measures imposed against the Greek people were wholly antithetical to fundamental human rights as these stem from customary international law, multilateral treaties and the Greek constitution. Consequently, these ‘loans’ were held to be odious, illegal or illegitimate.”
It is pertinent to note that not just in Greece, the austerity programs also failed to yield positive results in Cyprus, Spain and Ireland.
Grexit: Pain and Gain
What would happen if Greece abandons or is forced to exit the euro? In the short-term, it would certainly entail greater uncertainty and economic hardship. A massive capital flight by the elites along with collapse of banks and businesses which have borrowed in euros cannot be ruled out. The payments of salaries and pensions could also be delayed for months.
The social and economic consequences could be disastrous for Greek economy and its people if the transition from the euro to a new national currency (possibly drachma – its old currency) is badly managed. Hence, the transition should be well-planned and properly implemented with popular support.
There is a growing consensus that a massive devaluation of drachma would help in increasing domestic demand and improving the prospects of economic recovery. A weak drachma would make Greek exports more competitive and its tourism more attractive and therefore would open up new opportunities to enhance exports and encourage more tourism over the long-term. Exports account for nearly 30 percent of its GDP. Because of a weak new drachma, the demand for domestic goods would increase as imports will become more expensive thereby boosting the domestic demand which, in turn, would also encourage greater domestic production and create more jobs for Greek people.
In addition, Greece will also regain its independent monetary policy and fiscal space to set policies in tune with its own economic needs instead of those of Eurozone economies. Needless to say, a small country like Greece (representing less than 2 percent of EU’s GDP) should never have joined the flawed monetary union in the first place.
Wider Ramifications for Europe
Greece leaving the euro will have serious economic ramifications for the rest of Europe. If Greece leaves the Eurozone, the threat of financial contagion to other weak Eurozone economies (such as Portugal, Ireland, Spain and Italy) looms large and subsequently these economies may as well exit the euro. Not only such a move would weaken the Eurozone but, more importantly, it would spell the end of the single currency experiment and the larger European project towards greater economic integration.
Besides, one cannot ignore the fact that the euro may face massive devaluation if international investors liquidates their European assets and investments en masse.
Furthermore, there are human and geo-political ramifications which are not sufficiently understood by European leaders. How will the EU cope with the influx of migrants from North Africa who enter Europe (via Mediterranean route) without the active cooperation of Greek government?
Technically speaking, an exit from euro does not mean an exit from the EU. A Greek veto on extending sanctions against Russia over Ukraine would further weaken the European strategy to isolate Russia.
The observation made by many commentators that Grexit would isolate the country from the world economy is highly misplaced. Greece can explore new economic partnerships and build strategic alliances with Russia, China and other developing world. Given its favourable geo-economic location in Southern Europe, Greece can emerge as an important regional energy distribution hub. Greece has already launched discussions with Russia to build a gas pipeline to Greece via Turkey and then to Europe. This pipeline could bring immense benefits to Greece’s economy in terms of new investments and jobs. Greece is currently considering joining the New Development Bank (NDB) which was set up in 2014 by BRICS. Becoming a member of Asian Infrastructure Investment Bank is another possibility.
Needless to say, the European leaders need to act more like statesmen as the European Union is founded on the values of respect for democracy, equality, human rights and solidarity.
The Broader Meanings of ‘No’ Vote
Finally, the Greek citizens have delivered a resounding ‘No’ to bailout conditions demanded by creditors in a referendum held on 5th July. The referendum was announced by Greece’s Prime Minister, Alexis Tsipras, on 27th June after bailout talks with the creditors failed. The referendum asked voters to decide “whether to accept the outline of the agreement submitted by the European Union, the European Central Bank and the International Monetary Fund at the Eurogroup of 25/06/15.”
The government-backed ‘No’ side won with 61.31 percent of votes, while ‘Yes’ got the remaining 38.69 percent. Further, not a single electoral district of Greece voted for ‘Yes’. No one in Greece had predicted such a massive victory for ‘No’ vote. Most opinion polls had predicted a tight contest with ‘No’ side winning by a slim margin.
Does a ‘No’ victory mean Greece leaving the euro and the EU? Not exactly. As pointed out by PM Tsipras, “This is not a mandate of rupture with Europe, but a mandate that bolsters our negotiating strength to achieve a viable deal.”
Undoubtedly, the landslide victory in the referendum has greatly strengthened the bargaining power of the current government with creditors. The impacts of the austerity measures imposed by the international creditors have been catastrophic. The Syriza-led government, which came into power on an anti-austerity platform in January 2015, has resisted pressure to implement harsh austerity programs that affect the elderly and the poor.
Another positive outcome of the referendum is that the opposition parties have also given support to the Syriza-led government to negotiate a new deal with creditors. In many important ways, the decisive referendum has brought political stability in Greece which has witnessed four elections in five years.
A New Deal for Greece
In the current circumstances, a new deal is challenging but still feasible. Both sides need to realize the sense of urgency to pursue a realistic agenda. The negotiations between Athens and Brussels should resume immediately in order to avoid a major financial meltdown.
On their part, the leaders of Eurozone should accept a compromised deal to end the impasse. They should not insist that any special privileges to Greece would encourage other potential rule-breaking eurozone countries. The costs of a Grexit are high not only for Greece but also the entire Europe in terms of wider economic and geo-political implications.
It is important to note that the IMF in its preliminary draft debt sustainability analysis (dated June 26, 2015) has sought substantial debt reduction along with extended concessional financing for Greece. This IMF analysis specifically points out that Greece needs “a significant haircut of debt, for instance, full write-off of the stock outstanding in the GLF facility (€53.1 billion) or any other similar operation.” The Greek Loan Facility (GLF) consists of bilateral loans pooled by the European Commission.
A new deal is feasible if the European leaders realize the true importance of ‘No’ vote. The message of Greek referendum is loud and clear: harsh austerity measures imposed by the EU lack democratic legitimacy. And the debt relief should not be treated as a taboo.
Hence, keeping the wider interests of the European project in mind, its political leadership should adopt a more flexible approach towards Greece based on the principles of democracy, human rights, cooperation and solidarity. After all, the financial rules are meant to serve the people, not the other way around.
In return, Greece should also undertake policy measures to check massive tax evasion by oligarchs and streamline its public finances. Needless to say, the Greek government should be given a fair chance to put its house in order. This entails patience on the part of official creditors.
All Those Croatian Presidents
Since those days when it emerged from the ruins of the Yugoslav federation as an independent state, Republic of Croatia had 4 Presidents – 4 men and a Lady President. The first one whom only death, in the opinion of many, saved from the International Hague Tribunal, but who is still (or because of that?) called by his admirers “Father of the Nation” was a self-proclaimed “Mesiah”, who although “only” a President acted as master and commander. One of his closest collaborators remembers how Franjo Tudjman asked him once: “To whom should I leave Croatia?” For a monarch without heirs from the 19th century a quite appropriate question. But, for the President of a modern state that found its way to the international scene at the very end of the 20th century – unthinkable!
On the wave of the desire for changes, which grew more and more as dark sides of the war for independence and of the privatization and transition started (but only started) to emerge, Tudjman was after his death succeeded by a former highly positioned politician of his Party who broke all ties both with Tudjman as well as with the Croatian Democratic Union (HDZ), because he could not and would not support their policy towards Bosnia and Herzegovina. Before doing that he, alas, following the official HDZ policy, gave a couple od “antologic” statements which he found himself in a position of explaining even after years. However, Stjepan Mesić displayed enough honesty and political courage to admit these statements and escapades and to apologize for them, saying they were wrong and out of place. He won the presidential elections twice and although he is by his enemies from the right still branded both as a clown and as a traitor, he initialized key processes aimed at putting Croatia on the world scene again, after it was, at the end of Tudjman’s rule, practically put into international isolation because of his policy towards minorities, especially the Serb one, and to human rights in general.
Mesić opened the way for returning antifascism (although already put into Constitution) to the place it deserves in the Croatian society; without any reservations he labeled fascism and its Croatian version (Ustasha) as evil and as a crime; he opposed the historical revisionism that was present from the very beginnings of the Croatian state; ha changed the attitude towards minorities, in the first place, the Serb minority and he favored the return to Croatia of those Croatian citizen of Serb origin who fled the country during the war; he laid foundations for a everyday’s normalization of the relations in the region; he opened Croatia to the world, presenting it as a partner willing to cooperate on the terms of full equality with everybody. Despite diminished powers, because Croatia switched after Tudjman’s death from semi-Presidential to parliamentary system, he knew how to resolutely say “no”, when Croatia’s interests were at stake (for example resisting the pressure to make Croatia part of the so called Coalition of willing put together by the US for the purpose of invading Iraq). And he never ceased repeating that he is a citizen-President whose job is not to rule, but to serve.
After his 10 years in office a new tenant came into the Office of the President – university professor and composer, candidate of the left, Ivo Josipovic. There can be no doubt that he too wanted to be a “real President”, that he even had some ideas how to do this (let us forget his statement that he intends to compose an opera, while being President), the fact remains that he – objectively – managed to halt or to freeze many of the positive processes started by his predecessor; though at the same time some of them he simply copied, repeating for example in the Israeli parliament the excuse, on behalf of the Croatian state, for the crimes committed by the Ustasha against Jews. If he is going to be remembered for anything, it will be for being a weak President, who – by not being able to define himself and by not understanding what politics is all about, practically put in the position of the President Kolinda Grabar Kitarovic. Because, apart from the HDZ voting machinery, people did not vote for her, wanting just her as the new President, but because they were, to put it mildly – fed up by Ivo Josipovic. He did not know how to make real contact with citizens (contrary to Mesic, who was a virtuoso in doing this) and the citizens did not understand him – for example when he announced that he will run for the second term with he concept of a new Constitution.
The first woman-President in the short history of Croatia, presented a respectable C/V (minister for European Integration, Foreign minister, ambassador to the US, assistant to the Secretary General of NATO). But, very soon it became apparent and it remained apparent through her 5 years in office that she came totally unprepared and unfit for the position. She was intoxicated by the ceremonial accompanying the position of the President, she was literally in love with the military component of the function (although the President is the Supreme commander only in times of war), she loved uniforms and weapons and, above all – she was obsessed – by moving her Office from one town to the other (together with a ceremonial military unit that was present during the playing of the national anthem and raising the flag upon her arrival; in normal circumstances it is just the President visiting this or that town, or region of Croatia, which was – but without the pomp upon which she so insisted – done by Mesic, by Josipovic, even by Tudjman.
She will be remembered by stubbornly repeating some notorious lies (such as that Croatia/Yugoslavia was behind the Iron Curtain, or that Croats were not allowed in times of Yugoslavia to call themselves as Croats, or that the Ustasha salute (For homeland – ready) was an ancient Croatian salute (here she eventually admitted, most probably under pressure from outside, that she was wrong, blaming one of her advisers for this!). She will not be remembered for her policy, even not for the “3 seas concept” she so loved to speak about, although it is not her concept at all. But she will be remembered as an enthusiastic cheer leader during the World soccer championship, as somebody who embraced sweaty soccer players in their wardrobes and – as her term in office started to come close and closer to its end – as somebody who liked to sing in public (even “discussing” this with some media, objecting that they reported she does not know how to sing, although – she said – “I sing well”). Finally she will be remembered by a series of public appearences which made many people to raise their eyebrows and than to start laughing at her (“My friend, the American general”, or “they say it’s not possible, but I tell you it is possible; I have already arrangements with certain foreign countries that Croats will go there for schooling, return after that to Croatia and work on-line from their homes for 8.000 Euro monthly”, ending with “I will stay in Croatia, although I have offers from all around the world”. She loved to sing a song whose text portrays part of Bosnia and Herzegovina as Croatia, she boasted that the pop-singer, icon of the political right whose most popular song begins with the Ustasha salute “For homeland – ready!” is her favorite singer, and let us stop here, although there would be much more. She missed no opportunity to equale antifascism (calling it communism) with fascism and she loved to remember how both of her grandparents were partisans, but turned into anticommunists right after the victory in 1945. About her being sent to school in the US she said that her father sent her there and not Tito (“forgetting” that Tito was at that time several years dead already).
She made peace with the HDZ prime minister, because she needed her party’s support in the election campaign. All the HDZ politicians started to repeat, as parrots; “She will win!”. She lost. If she manages to get into history, than history will remember her as somebody who transformed the role of the President into a stage act and managed, instead of policy that should be waged at the top of the state, to present a rather bad “patriotic” reality show.
It is high time for “realpolitik” to replace this reality show. Yes, we might expect some surprises from the President-elect too, some of them might not please those who voted for him. But, one thing is sure; because of Zoran Milanović nobody who really cares for Croatia and for Croatia’s reputation in the world, will not blush, or feel ashamed (which was not the case in previous 5 years). Milanović in not an “unknown”, both in Croatia and in the world, neither as a person, nor as a politician (chairman of the Social-democratic party, Prime minister). It is a known fact that he too, sometimes, speaks and even acts faster that he thinks, putting himself in the position to explain afterwards what he really wanted to say or demonstrate (the most benign example is his jumping from a APC and falling to the ground before TV cameras, and saying laconically only: “I wanted to boast”.
In retrospect: the first “mesianic” President saw himself as the owner of the country and behaved accordingly. The second, and history will one day admit this, was a President, as Presidents should be. The third did not know how to be the President and the fourth, the Lady President, understood and performed her duty as a cheap reality show. One should hope, the time is ripe for a “realpolitiker”, someone who is fully aware of the fact that he is the President of a small country, but at the same time aware of its (meaning his) responsibility for the state of democracy in Croatia, for the situation in the region and for Croatia’s place in the world. Voters do remember Milanovic from previous times. So it is no surprise that on internet one can read such a commentary: “Good luck, don’t slip, because we will not forgive.”
US naming of first corrupt Bulgarian official is a joke
Last week, US Secretary of State Mike Pompeo announced the first ever designated Bulgarian official barred from entering the United States over corruption, under Section 7031(c) of the Department of State, Foreign Operations, and Related Programs Appropriations Act.
The newly implemented non-judicial mechanism to “fight corruption” in Bulgaria had many here in high hopes. Would the US really name names and help Bulgarian society clean up by pointing the finger and sanctioning the most corrupt and dangerous elements?
Well, don’t hold your breath.
The glaringly political and self-serving designation disappointed many here. The US government black-listed a Bulgarian judge and the only thing he is known for is that he allowed a pro-Russia society activist to visit Russia and receive an award from Russian President Putin, while the pro-Russian activist was under investigation over espionage charges.
The decision struck many here as something out of an outdated Cold War scenario.
The US is not really fighting corruption with this move — it’s just settling old scores with a pro-Russian judge. Actually one does not even have to be pro-Russia to ask themselves if a decision we don’t like automatically becomes corruption. The US has not provided any evidence for corruption — whether the judge was paid, whether there were any shady dealings, etc.
The US has a long way to go if it wants to show that corruption rather than pro-Russian interests is what it is really after in Bulgaria. As this is just the first designation in a long list to come, the US Embassy in Sofia would do well to address actual corruption that Bulgarian citizens are sick of. That’s the way to win over Bulgarians.
Britain after Brexit: Between US and EU
On January 31, the United Kingdom left the European Union, after three years of exhausting negotiations in which the terms of the “divorce” were postponed several times. Now, Britain is setting sail free. A staunch supporter of the exit, Prime Minister Boris Johnson claims that breaking away from the EU will “liberate the country from a terrible” yoke “.” Johnson promises the British “a decade of prosperity and opportunity.” A major advantage to the breakaway is believed to be the prospect of a new rapprochement between Britain and the United States. How realistic are these expectations?
US current President Donald Trump spoke strongly in favor of Brexit from the very beginning. He called for a most dastic form of severing relations between Britain and the European Union, in return for which he promised the British a comprehensive free trade agreement in the shortest possible time. In September last year, British media reported that Trump and Johnson had allegedly agreed to sign a free trade agreement, which “will become the largest-scale deal the United States has ever reached.” According to these reports, the final signing of the contract is scheduled for July 2020. The terms of the transaction will not take effect immediately but after the Brexit transition period, which, according to the current agreements between London and Brussels, will come to a close in December 2020.
On January 25, US Treasury Secretary Stephen Mnuchin said he was optimistic about the possibility of concluding a US-British free trade agreement this year. According to Reuters, Donald Trump also tends to consider the feasibility of reaching an agreement with the UK before the US presidential election in November. Britain, in turn, expects to use the agreement with the United States as an argument during trade negotiations with the EU. Both London and Washington declare their intention to “substantially expand” bilateral trade. Meanwhile, Mnuchin, along with a number of American Congressmen, have already made it clear that they deem unacceptable London’s plans to introduce a tax on digital services by such American IT giants as Facebook, Google and Amazon. So differences in the economic sphere are already in place now.
The doubts of the American establishment are also clear. Ten years ago, optimists believed that Britain’s future was unimaginable without the EU. Simultaneously, “special relations” with the United States enabled London to become a major moderator and, perhaps, the only Western country capable of streamlining the predictably inevitable weakening of American hegemony. At least, it was done with minimal losses for the entire “golden billion”, and in case of success it made possible extending its leading position among other world players for the foreseeable historical perspective.
When the “impossible” – Brexit – became reality, it became clear that the appearance of yet another “variable” in Europe could be beneficial for both Washington and London. The United States gets an effective tool of influence on Europe – it will make use of the differences between London and a number of East European countries traditionally oriented at the UK, and the other leading EU capitals. And the United Kingdom gets a chance to return to the “top of the world” with the support of still strong, but not so “strategically astute” or “politically flexible”, America.
By now, skeptics say, the nature of British-American relations has changed irreversibly. The trade deal could become a major stumbling block. In the first place, Trump has so far signed only one truly fundamental trade agreement – a new version of NAFTA. He is always seeking to dictate his will – “particularly, if the partner is weaker or in need.” “And for the United States, Britain is, at best, a satellite, not an equal partner.” In addition, with less than a year to go before the US presidential election, voters expect Trump to step up protective measures, rather than make concessions. Secondly, a full-scale trade agreement is subject to approval by the Congress. Trump is currently at “war with the Democrats.” Many Republicans may also come forward with requests to secure significant concessions from London. These could be farmers, the Irish lobby, who would want concessions over the border between Northern Ireland and Ireland, and representatives of IT corporations.
Thirdly, a trade agreement with the EU is more important for London. According to the BBC, British exports to the EU are 2.5 times higher than to the United States. The EU share in UK imports is almost 5 times higher than that of the US. The European market is closer and larger, while the overseas market is much smaller. Technically, an agreement with the European Union seems to be more achievable, given that now both parties have “common rules and standards”. Moreover, success in trade negotiations with the EU will deprive London of the opportunity to make substantial concessions to America. Finally, comprehensive trade agreements are prepared for years, if not decades. There could be exceptions, of course, for example, a kind of “mini-transaction” confined to a particular industry. However, such deals “will be problematic to present to the public as overwhelming success of Britain on the global scene and they will hardly make an adequate compensation for the break with the EU.” It is also unclear whether London is willing to pay the political price. For example, Trump may require unconditional support in the confrontation with China, or Iran, as a “bargain”. Or he may ask for a rejection of the “digital tax.” As a result, it will not be a trade agreement, but only a “transaction concerning trade”.
Meanwhile, in geopolitical sphere, relations between London and Washington are far from perfect too. In the summer of 2018, the UK expressed interest in establishing cooperation with the participants in the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership. The latter is an upgraded version of the Trans-Pacific Partnership, which Trump, in the very first weeks of his presidency, renounced as “not beneficial” for America. Britain’s position also clashes with that of the US on the preservation of a nuclear deal with Iran. Moreover, in addition to supporting Europeans, Germany and France at the diplomatic level, Britain was among the initiators of a European payment mechanism to circumvent US sanctions against Iran (INSTEX), which, however, has yet to become functional.
According to The Economist, in January this year, British Secretary of Defense Ben Wallace publicly questioned Washington’s credibility as an ally. Present-day Britain, he said, is far from always ready to fight on the side of America. Wallace also expressed regret over his country’s “very strong” dependence on the United States for military aviation, as well as for electronic intelligence and surveillance. “We need to diversify our options” in these areas, – summed up the head of the military department of the United Kingdom. British experts were quick to remark that there had been no statements of this kind in London’s official statements of the past 70 years. The British leadership is still hoping to pursue the country’s own programs of creating advanced weapons, including fighters and spy satellites. Finally, what causes London’s growing concern is Trump’s “contempt for the allies” and the difference in strategic priorities. One British diplomat commented in The Economist as follows: “We fear Russia more than anyone else, while the US is wary of China. ”
What triggered the bulk of political and trade differences between London and Washington is London’s intention to include the Chinese company Huawei into the suppliers of equipment for fifth-generation telecommunications networks. The United States accuses Huawei of acting on orders from official Beijing to “spy” on residents of Western countries and even damage communications systems. Washington has been doing its utmost to convince all its allies that it is true. Last December the US introduced an amendment to the 2020 defense budget under which the government is to cut intelligence data exchanges with those allies that have endorsed the use of Huawei technologies in fifth-generation networks. The amendment will first concern anglophone countries that form the Five Eyes alliance whose members are involved in tight-knit cooperation on intelligence data exchanges and integrating electronic espionage infrastructure. Washington commentators describe the amendment as a “warning signal”.
The head of the US State Department Mike Pompeo did his best to put pressure on Britain, including in the course of his meeting with the head Foreign Office in Washington in January. However, what the US has achieved so far is Britain’s reiteration of its commitment to its former position under which Huawei will be kept away only from the “most sensitive” in terms of security elements of British IT and communication infrastructure. The US executive and legislative branches of power have reacted differently. The day before Brexit, on January 30th, Pompeo visited London, where he assured the British about the inviolability of privileged relations within the Five Eyes group. According to Reuters, Mike Pompeo expressed optimism over the prospect of signing a trade deal. Simultaneously, a number of Republican Senators have signaled unavoidable obstacles in the way to a bilateral trade agreement, which will entail London’s decision on 5G.
Overall, it looks like we are in for a long period of struggle for influence on Britain between Europe and the US. President Emmanuel Macron of France, along with the European Commission’s Head of Task Force for Relations with the UK Michel Barnier and the EU’s High Representative for Foreign Affairs and Security Policy Josep Borrel, have made it clear that the EU is planning to maintain close ties with Britain, including in «security and defense», and in addressing global issues in a multilateral international format. «The EU and Britain share history, geography, culture, common values and principles, and in international relations they are both committed to a multilateral approach on the basis of rules». Rules in this context mean European rules and standards.
As for the US, Washington began to move «away from Europe» in the days of George Bush Jr. and continued to do so under Obama. For many Europeans it has long become clear that Trump’s European policies of the past three years smack of the old imperial principle of “divide and rule”. Apparently, the EU leadership have grounds to believe that the British will quickly come to the understanding that the current “world order” is impossible to preserve. The times of «symphony» between Thatcher and Reagan are a thing of remote past. Donald Trump is but a sign of the changes, not their cause. As said above, some principal figures in the Johnson Cabinet have said openly that the pattern of relations with America which came into existence after 1945 is going into the past. It looks like the prime minister is secretly hoping to organize a geopolitical “auction” in which two coasts of the Atlantic will bet for new terms of a union with the Foggy Albion. Right now, however, as Brexit critics say, after leaving the EU, Britain is playing the role of «a minor empire squeezed between two major ones». Is this the kind of future breakaway supporters want for their country?
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