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Brexit’s geopolitical and financial ramifications

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Following the referendum on UK membership of the European Union (EU), upholding Brexit, world politics is expected to herald a period of immense instability and turmoil. There is likelihood of economic crisis in Europe and UK, even globally.

Unexpected or unintended?

Britain’s exit from EU is now almost final, pending only some formalities and the EU is pushing for early conclusion of the Brexit deal. It is quite clear that British Prime Minister David Cameron had not expected the referendum to lose, thereby forcing him to quit, having found no other credible alternative. The result is primarily the outcome of a political miscalculation by Cameron and allies that caused geopolitical and financial issues. The British capitalist lords are staggering about as they try to pick up the pieces while the situation spirals out of control.

Geopolitical relations in Europe have been destabilized as a direct consequence of the Brexit. Without Britain anchored in Europe, relations between France and a far more powerful Germany will deteriorate. Equally, relations between the EU and the United States—for which Britain provided a bridge—will be thrown into flux.

Martin Schulz, president of the European Parliament, insist there must be no delay in Britain invoking Article 50 of the Lisbon Treaty to formally initiate exit proceedings, so as to limit financial damage and impose a harsh settlement on Britain that will serve as an example to others. Far-right forces in Europe are now demanding referenda in their own countries, including the National Front in France and similar parties in Slovakia, Poland, Italy, the Netherlands, Denmark and elsewhere.

Amid dire warnings of economic catastrophe and the boost the referendum gave to right-wing, anti-immigrant nationalists, millions fear for the future. A petition is circulating that has gained some three million votes for another referendum to be held.

There is widespread shock and anger at the Brexit outcome in the UK, even among some who voted for leaving the EU. The result indicates anger on the art of the Britons in the very project of EU- an integration of basically different entities with varying degree of geopolitics and economic variations.

Meanwhile, the UK itself is in danger of breaking apart. Conservative Party and Labour Party could split, amid speculation of a snap general election. The Scottish National Party is pressing for a second independence referendum and also seeking early talks with Brussels and EU member states. In Northern Ireland, where the referendum vote was polarized along Republican and Unionist lines, the most severe crisis since the formal end of the civil war in 1998 is looming.

Crisis

The historic Brexit that democratically became a reality create Brutish soverign nation once again after decades of being a part of EU, is feared to kickstart another “Great Financial Crisis” of 2008, and threatens to blow up even further, if more European countries exit for EU. The Bank for International Settlements (BIS), has warned of deep-rooted problems in the global economy.

The economic cost of the successful referendum by Britain to cede from EU is aid to be very high globally. The ongoing market sell-off wiped $2.5 trillion from the values of world equities markets on June 24 itself is the most visible manifestation of a much deeper crisis of the global economy. both the International Monetary Fund has warned in effect that the USA and world economy face conditions of stagnation characterized by a long-term reduction in growth rates.

The BIS report said the world economy was threatened by a ‘risky trinity’: debt levels that are too high, productivity growth that is too low, and room for policy manoeuvre that is too narrow.” It cast doubt on the ability to continue to combat crises with monetary policy. However, the BIS had no solution to the ongoing crisis besides further austerity measures. It called for slashing government debt while improving the “quality of public spending… notably by shifting the balance away from… transfers.”

Virtually every global central bank issued a statement saying it would either begin or was ready to implement a further expansion of liquidity measures in response to the share selloff. Markets are increasingly betting that the Federal Reserve will halt, or even reverse, its announced plans to begin raising interest rates. These conditions have weakened productive investment, fueled a global expansion of debt, making it near impossible for central banks to respond in an effective manner to the eruption of new crises.

In the latest such measure, the Japanese government of Prime Minister Shinzo Abe and the Bank of Japan announced the provision of additional funds to the financial system.

The growth of negative interest rates, promoted by central banks seeking to reassure the markets, is a risk with “a long fuse, with the damage less immediately apparent and growing gradually over time. Such rates tend to depress risk premiums and stretch asset valuations, making them more vulnerable to a reversal by encouraging financial risk-taking. All the actions taken by global central banks since the 2008 crisis have only exacerbated the cancerous growth of financial parasitism. At the end of May, close to $8 trillion in sovereign debt, including at long maturities, was trading at negative yields—a new record.” Due to the continuous infusions of cash into world markets, monetary policymakers have found it harder to push inflation back in line with objectives, leading to economic slump.

The types of fiscal austerity measures and labor market restructuring called for by the BIS have been brought forward in every major economy in response to the 2008 crisis. These range from the USA, where state education spending has been slashed by 25 percent, to Greece, Spain, Portugal and, most recently, France, with the implementation of the El Komri labor reforms by the Hollande government, where sweeping social cuts have been combined with attacks on protections for jobs and conditions.

Austerity policies have transferred ever more wealth to the financial elite, who have proceeded to use their cash hoards for speculation and financial parasitism, fueling a vicious cycle of economic stagnation, rising inequality and financial crisis, in turn inflaming international antagonisms and the growth of protectionism.

The global economy cannot afford to rely any longer on the debt-fueled growth model that has brought it to the current juncture, the “persistent and otherwise puzzling” global slowdown in productivity growth. It tellingly attributed the slowdown to the effect of a massive series of booms and busts that have characterized the global economy in recent years as it has become increasingly dominated by financialization and speculative mania, fueled by virtually unlimited cash from global central banks.

Observation

A full scale disintegration of the EU is now a real possibility – yes, only a possibility and not necessarily the reality, mainly because Germany would not let EU disintegrate.

EU Integration was an attempt by the ruling classes of the continent, with the support of the United States, to prevent a new eruption of national conflicts that had twice plunged the world into all-out war. However, “unity” within the framework of capitalism could never mean anything other than the domination of the most powerful nations and corporations over the continent and its peoples.

The fracturing of the EU along national lines that is now taking place is once again driving inexorably towards world war. But the EU cannot be put back together again. The Brexit result has made manifest a broader crisis that is insoluble within capitalism because it is rooted in the fundamental contradiction between the integrated character of the global economy and the division of the world into antagonistic nation states based on private ownership of the means of production.

Europe must be united. However, this cannot be done on a progressive basis through efforts to preserve the moribund institutions of the EU or other bureaucratic mechanisms. The progressive and democratic unification of Europe can be achieved only from below, through a revolutionary struggle for socialism across the continent led by the working class.

The likely economic fallout from the Brexit vote on the rest of the world over could be huge. In addition to the direct trade effect, business investment around the globe is likely to be dampened somewhat due to the heightened uncertainty about the global implications of Brexit and the tightening of financial conditions. Companies now delay investment projects to assess how Brexit could affect them.

One impact on the government is the effect on the value of its holdings in banks. The value of the government’s holding in RBS and Lloyds Banking Group dropped by about £8bn, although it has recovered somewhat since.

The pound has dropped considerably against the US dollar; less so against the euro. That has not had a great deal of impact on the economy so far, although it is likely to stoke inflation in due course. National income is reported in pounds so will not be hit automatically by a weaker pound, although it will suffer in comparison with other countries – the status as the world’s fifth biggest economy may be threatened.

There may already have been an impact on the economy or the public finances but there are no data as yet showing that. Throughout the campaign pro Brexit leaders argued that UK would save money from not contributing to the EU Budget.

However, the impact on global growth and inflation is likely to be relatively small – and almost certainly not large enough to push the global economy into recession. UK import demand would be minimal as the UK accounts for only 3.6% of global imports of merchandize goods.

This could lower potential growth even further and would likely lead to higher wage and inflation pressures.

Chancellor of the Exchequer George Osborne says that companies have already started cutting back on investments following the vote to leave the European Union.

The Brexit shock is likely to intensify the pressure on current and future mainstream governments to address inequality and limit migration.

Of course, Europe, USA and the rest of nations would undertake urgent measures to minimize the impact of Brexit and according to reports the European Union has already begun action in the respect. Investors will have to factor in a higher chance of a stagflationary outcome over the next three to five years: even lower growth or near-stagnation coupled with a significant rise in inflation. This could lower potential growth even further and would likely lead to higher wage and inflation pressures.

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A New Redrawing of Balkan Borders: A Road to Hell

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More than a decade after Kosovo region’s unilateral declaration of independence from Serbia, the issue of redrawing borders is back on the agenda. The ongoing negotiations between Belgrade and Pristina on the settlement of bilateral relations under the auspices of the European Union may lead to an unexpected result – the breakaway of Serbia’s three predominantly Albanian-populated southern Serbian regions of the Presevo Valley and their accession to Kosovo – which, in turn, will be carved up into Serbian and Albanian parts. Such a scenario, in turn, can set off disintegration processes in Macedonia, Bosnia and Herzegovina, Montenegro and even Greece (with Albanians enclaves in the north).

The Pesident of the self-proclaimed Kosovo Republic, Hasim Thaci, said that in the event of an agreement signed between Belgrade and Pristina, the Presevo Valley adjacent to the Kosovo border, would likewise join Kosovo.

According to him, “the requests of the Albanian population of the Presevo Valley for joining Kosovo are institutionalized,” and if an agreement is reached between Belgrade and Pristina, neither the EU, nor NATO or the US would be able to interfere with its implementation. Moreover, he said that the problem of Presevo will soon be discussed in Brussels anyway.

However, he once again ruled out the possibility of Kosovo proper being divided into Serbian and Albanian parts (which is increasingly being discussed in Serbian political and public circles), although he was rather vague about the possibility of “adjusting the Kosovo-Serbian border.” For his part, Serbian President Aleksandar Vucic supports the idea of carving up Kosovo, which he argues would help avoid a new conflict.

“A territory, if you don’t know how to treat it or who it belongs to, is always a source of potential conflicts and problems.” “I am foursquare behind this [separation] and this my policy, whether people like it or not. I am holding out for separation with Albanians,” Vucic stated. rts.rs.

Serbia’s current Foreign Minister Ivica Dacic was the first top-level politician to come up with the idea of dividing Kosovo, describing it as a long-term compromise solution to the Kosovo conflict. In an interview with the Pristina-based Albanian-language newspaper Zeri, Ivica Dacic, who was then First Deputy Prime Minister and Interior Minister, said that “the only real solution is to leave the Serbs in Serbia and separate the other part where Albanians live. It will be a working mechanism to quickly solve the problem. Other options will be just a waste of time.”

However, the idea of partitioning Kosovo can now become part of a broader “package” agreement on the normalization of relations between Belgrade and Pristina. The European Commission makes Serbia’s admission to the European Union, which in this case could come in 2025, strictly conditional on a legally binding agreement signed by Belgrade and Pristina.

Many media outlets consider the division of Kosovo and a territorial exchange a very likely scenario. The Croatian newspaper Jutarnji List even claims that the matter is already a “done deal,” and warns of possible negative consequences: “In fact, it’s not just Kosovo. Pandora’s box may be thrown open. This could have a knock-on effect. Just imagine the worst possible scenario the partition of Kosovo could lead to. Bosnia and Herzegovina would immediately follow suit, followed by Macedonia. Montenegro could possibly come next.” jutarnji.hr

The Albanian leaders of southern Serbian Presevo Valley, which is home to three mixed Serbian-Albanian communities, admitted the possibility of a “territorial exchange” as envisaged by pertinent agreement between Belgrade and Pristina, as early as in 2012. The leader of the Presevo community, Ragmi Mustafa, emphasized that the three communities (Presevo, Medvedja and Bujanovac) “must join Kosovo,” while “northern Kosovo must join Serbia.” He believes that a pertinent proposal should be discussed in Brussels.

“I think that this holds the future for our region,” he said. A year before that – in the summer of 2011 – representatives of Albanians living in Kosovo and Presevo Valley, including Ragmi Mustafa, met in Gnilan and adopted a resolution on “facilitating the return” of Presevo Valley communities to “independent Kosovo Republic,” including with the participation of the international community. The latter, according to the participants, would help deter the Serbian government from “obstructing the free will of the Presevo Valley population.”

Accurate and reliable data on the ethnic composition of the three communities is not available. However, if we compare the estimates, we will see that 90 percent of Albanians and 10 percent of Serbs live in Presevo, 60 percent of Albanians and 30 percent of Serbs live in Bujanovac and 30 percent of Albanians and 60 percent of Serbs live in Medvedja. Thus, Albanians now constitute an absolute majority in  Presevo and Bujanovac.

Just as the President of the Turkish International Cooperation Agency in Ankara, Umut Arik, warned as early as in the mid-1990s, all talk about creating a security system in the Balkans makes no sense until “decisions relating to nation-states can be made and revised unilaterally”. This is exactly what has recently been happening around Kosovo. What is also evident is the interrelated development of disintegration processes going on in the Balkans. This may force the leading world powers and international institutions to abandon what they have professed all these years – “a policy focused on the state, rather than territory” as the University of Pristina professor of public law Enver Hasani puts it.

Such a policy provides for solving the problems of each Balkan country separately from one another. This approach was at the heart of the Stability Pact for Southeast Europe, devised by the European Union and introduced in 1999.

The unilateral declaration of independence for Kosovo in 2008 embedded in this concept a provision about the “uniqueness of the Kosovo case.”

However, amid the current impasse around Kosovo Serbs and the growing activity of Albanian nationalists, the international curators of the Balkan settlement, above all the most business-minded and openly cynical of them in the form of the administration of the US President Donald Trump, could switch to a “territory-focused policy,” which views a region not as an combination of already established states, but as a system of territories in dynamic equilibrium and, therefore, capable of reformatting.

“For some Balkan politicians, talk about territorial division and redrawing of maps is like adrenaline,” the Croatian newspaper “Jutarnji list” rightly wrote.

“The question is, what will happen to the federation of Bosnia and Herzegovina? Will this catastrophic disintegration of Bosnia and Herzegovina affect Croatia, or will a peaceful Bosnia finally emerge taking in “parts of Croatia”!? Another question is, how would the Bosnians and their defenders, such as Turkey, react to this?! Perhaps, for Serbia, the matter would not be limited to Presevo, and the processes would affect both Sandzak and the very north of Serbia. On the other hand, the exchange of territories with Kosovo could raise the issue of ‘consolidating the Albanian nation,’ which would revive old ideas of dividing Macedonia. And with the process of Albanian consolidation on and with the Republika Srpska already  part of Serbia, this would whet Serbian appetite, if not for the whole of Montenegro, then at least for its ‘Serbian parts,’” the newspaper forecasts and makes a sad conclusion: “Despite the seeming simplicity (“we give you, you give us”), this decision leads to hell.” jutarnji.hr

In all fairness, any new changes in the situation in the Balkans – and above all, the delineation of borders – will raise the discussion to a higher international level and may potentially bring them back to the floor of the UN and the UN Security Council where Russia  wields a veto power.

Simultaneously, such scenarios are forcing Belgrade to work more closely together with Moscow, which is one of its key international allies.

The Serbian political class is aware that it cannot move forward without progress toward resolving the long-standing Kosovo issue. But in order to save face with its constituents, the Serbian leadership has to come up with some settlement in which Serbia will not be perceived as the total loser of the Kosovo dispute. To that end, Serbia must have a great power backer in the negotiating process, and as Serbia lacks a patron in the West, Russia is useful in that role. As long as Kosovo remains in play and as long as Serbian leadership lacks a settlement acceptable to public opinion, Russia will have a high place in Serbian foreign policy considerations. The West should be cognizant of this. For their part, both the European Union and the United States need to be aware that close ties between Russia and Serbia are in large part the result of taking Serbia and the Balkans for granted,” The American Interest emphasizes.

Given the situation at hand, Russia needs to figure out the possible options of such a reformatting of the Balkans and choose the ones, which are best suited to its geopolitical interests and those of its allies and partners in the Balkans region and beyond.

First published in our partner International Affairs

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Merkel’s projection regarding nationalist movements in Europe

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In recent years, we have repeatedly spoken about the blows that hit the United Europe hard, and resulted in constant and overwhelming crises in this block. The European authorities now refer to “returning to nationalism” as a potential danger (and in some cases, the actual danger!) In this block, and warn against it without mentioning the origin of this danger.

The German Chancellor has once again warned about the rise of nationalism in Europe. The warning comes at a time when other European officials, including French President Emmanuel Macron, have directly or indirectly, acknowledged the weakening of Europe’s common values. This indicates that the EU authorities don’t see the danger of extensive nationalism far from reality.

“Nationalism and a winner-take-all attitude are undermining the cohesion of Europe”, German Chancellor Angela Merkel said. “Perhaps the most threatening development for me is that multilateralism has come under such pressure,” Merkel said. “Europe is facing attacks from the outside and from the inside.”

A simple contemplation on the issue of “return of the United Europe to nationalism” suggests that the current European authorities have played an active role in the desire of their citizens to return to the time before the formation of the European Union. In the 2014 general election, we saw more than 100 right-wing extremist candidates finding way to the European Parliament.

This could be the starting point for making fundamental changes in macroeconomic policies and creating a different relationship between the European leaders and the citizens of this block. But this did not happen in practice.

Although the failure of European leaders to manage the immigration crisis and, most importantly, the continuation of the economic crisis in some of the Eurozone countries has contributed to the formation of the current situation, but it should not be forgotten that the growth of radical and nationalist parties in Europe has largely been due to the block’s officials incapability in convincing European citizens about the major policies in Europe. In this regard, those like Angela Merkel and Macron don’t actually feel any responsibility.

Undoubtedly, if this process doesn’t stop, the tendency to nationalism will spread across the Europe, and especially in the Eurozone. European officials are now deeply concerned about next year’s parliamentary elections in Europe. If this time the extreme right parties can raise their total votes and thus gain more seats in the European Parliament, there will be a critical situation in the Green Continent.

The fact is that far-right extremists in countries such as France, Sweden, Austria and Germany have been able to increase their votes, and while strengthening their position in their country’s political equations, they have many supporters in the social atmosphere.
Finally, the German Chancellor remarks, shouldn’t be regarded as a kind of self-criticism, but rather are a new projection of the European leaders. Merkel, Macron and other European officials who are now warning about the emergence of nationalism in Europe should accept their role in this equation.

This is the main prerequisite for reforming the foundations in Europe. If they refuse to feel responsible, the collapse of the European Union will be inevitable, an issue that Merkel and Macron are well aware of.

First published in our partner MNA

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Dayton Peace Accord 23 Years On: Ensured Peace and Stability in Former Yugoslavia

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For the past twenty-three years life has been comparatively peaceful in the breakaway republics of the former Yugoslavia. The complicated civil war that began in Yugoslavia in 1991 had numerous causes and began to break up along the ethnic lines. The touching stories and the aftermath effects of the breakaway republics of Bosnia- Herzegovina, Croatia and in Kosovo are still unfolding. Though the numbers of deaths in the Bosnia- Herzegovina conflict in former Yugoslavia are not known precisely, most sources agree that the estimates of deaths vary between 150,000 to 200,000 and displaced more than two million people. During the conflict a Srebrenica a North-eastern enclave of Bosnia once declared as a United  Nations  (UN ) safe area” saw one of the worst atrocity since second world war.

It has been estimated that more than 8,000 Muslim Bosniaks were massacred in Srebrenica and it was one of the most brutal ethnic cleansing operations of its kind in modern warfare. The US brokered peace talks revived the a peace process between the three warring factions in Bosnia- Herzegovina. For Peace in Bosnia and Herzegovina a United States (US ) -brokered peace deal reached in Dayton on 21st November 1995. In a historic reconciliation bid on 14 December 1995 , the Dayton Peace Accord was signed in Paris, France, between Franjo Tudjman president of the Republic of Croatia and Slobodan Milosevic president of the Federal Yugoslavia (Serbia and Montenegro), Alija Izetbegovic, president of the Republic of Bosnia-Herzegovina.

When conflict in Bosnia- Herzegovina, Croatia ended, the reconciliation began between ethnically divided region. The US played a crucial role in defining the direction of the Peace process. In 1996, North Atlantic Treaty Organization (NATO) -led 60,000 multinational peace enforcement force known as the Implementation Force (IFOR)) was deployed to help preserve the cease-fire and enforce the treaty provisions. Thereafter, the Court was established by Resolution 808 and later, Resolution 827 of the United Nations Security Council, which endorsed to proceed with setting up of the International Criminal Tribunal for the former Yugoslavia (ICTY) to try crimes against humanity . International Criminal Tribunal for the Former Yugoslavia (ICTY) was the first United Nations (UN) war crimes tribunal of its kind since the post-second world war Nuremberg tribunal.

In the late 1990’s, as the political crisis deepened a spiral of violence fuelled the Kosovo crisis between the Kosovo Liberation Army (KLA) and the Yugoslav forces. Unlike the Bosnia- Herzegovina, Kosovo was a province of Serbia, of former Yugoslavia that dates back to 1946, when Kosovo gained autonomy as a province within Serbia. It is estimated that more than 800,000. Kosovos were forced out of Kosovo in search of refuge and as many as 500,000 more were displaced within Kosovo.

Subsequent t hostilities in Kosovo the eleven week air campaign led by NATO (North Atlantic Treaty Organisation) against Yugoslavia in 1999 the Yugoslavian forces pulled troops out of Kosovo NATO. After the war was over, the United Nations Security Council, under the resolution 1244 (1999) approved to establish an international civil presence in Kosovo, known as the United Nations Interim Administration Mission in Kosovo (UNMIK). Nevertheless UNMIK regulation No 1999/24 provided that the Law in Force in Kosovo prior to March 22, 1989 would serve as the applicable law for the duration of the United Nations Interim Administration Mission in Kosovo (UNMIK).

In this  context reconciliation is a key to national healing of wounds after ending a violent conflict. Healing the wounds of the past and redressing past wrongs is a process through which a society moves from a divided past to a shared future. Over the years in Serbia, Bosnia- Herzegovina, Croatia and in Kosovo the successful peace building processes had happened. The success of the peace building process was possible because of participation of those concerned, and since appropriate strategies to effectively approach was applied with all relevant actors. The strengthening of institutions for the benefit of all citizens has many important benefits for the peace and stability of former Yugoslavia. Hence, the future looks bright for the Balkan states of Serbia, Bosnia- Herzegovina, Croatia and Kosovo.

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