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Coalition crisis: Germany’s uncertain future

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Both German Chancellor Angela Merkel and Germany are facing an uncertain future after talks to form a coalition government – and secure her a fourth term – collapsed. Chancellor Merkel’s party, which lacks a majority in the Bundestag, had spent weeks trying to cobble together a ruling coalition with three other parties.

But the plan fell apart when the liberal Free Democratic Party (FDP) walked out of talks shortly before midnight on Sunday over disagreements on issues ranging from energy policy to migration.

Merkel’s Christian Democratic Union (CDU) party lacks a clear majority in the Bundestag (parliament). Merkel had hoped to build a coalition consisting of her conservative CDU, its sister party the Christian Social Union, the pro-business FDP, and the Green Party.

FDP negotiators walked out of what they described as “chaotic” talks, with party leader Christian Lindner said it was “better not to govern than govern badly”. All other parties attacked the liberals for deliberately collapsing the talks in a bid to boost its support in any snap election. FDP negotiators walked out of what they described as “chaotic” talks, with party leader Christian Lindner said it was “better not to govern than govern badly”.

The FDP’s walkout came after the four parties had already missed several self-imposed deadline to resolve their differences. But all other parties attacked the liberals for deliberately collapsing the talks in a bid to boost its support in any snap election. 

The AfD hailed the collapse of coalition talks. “We are glad that Jamaica isn’t happening,” said AfD co-leader Alexander Gauland. “Merkel has failed.” His co-leader, Alice Weidel, welcomed the prospect of fresh elections and called on Merkel to resign. Others suggested the walk-out was a high-risk FDP attempt to weaken Dr Merkel and forced fresh elections in which the liberals would pull back protest voters from the AfD. FDP rivals expressed concern that Lindner’s high-risk tactic could result in a further boost in support for the far-right Alternative für Deutschland (AfD), which polled almost 13 per cent in the September 24th election.

Fragile coalition 

Merkel’s position was widely seen as unassailable in the run-up to September’s elections, with many commentators suggesting the outcome was so predictable as to be boring.  Merkel had spent weeks trying to cobble together a ruling coalition with three other parties. But the plan fell apart when the liberal Free Democratic Party (FDP) walked out of talks over disagreements on issues ranging from energy policy to migration. The political analysts suggested the FDP’s move could blow up in its face. There are politicians who are strong with their back to the wall, why should Merkel not be one of those?”

The Chancellor told state broadcaster ZDF that she has not considered resigning. “There was no question that I should face personal consequences,” she said.

Merkel had been forced to seek an alliance with an unlikely group of parties after the ballot left her without a majority.  Voicing regret for the FDP’s decision, Merkel vowed to steer Germany through the crisis. “As chancellor, I will do everything to ensure that this country comes out well through this difficult time,” she said. The Greens’ leaders also deplored the collapse of talks, saying they had believed a deal could be done despite the differences.

A poll by Welt online also found that 61.4 percent of people surveyed said a collapse of talks would mean an end to Merkel as chancellor. Only 31.5 percent thought otherwise.

Germany’s Sept. 24 election produced an awkward result that left Merkel’s two-party conservative bloc seeking a coalition with the pro-business Free Democrats and the traditionally left-leaning Greens. The combination of ideologically disparate parties hadn’t been tried before in a national government, and came to nothing when the Free Democrats walked out of talks. Unable to form a coalition with one other party (as is the norm in Germany), Merkel emerged from the election substantially weakened.

Merkel’s liberal refugee policy that let in more than a million asylum-seekers since 2015 had also pushed some voters to the far-right AfD, which in September campaigned on an anti-immigration platform.

The country’s two mainstream parties — Merkel’s CDU/CSU alliance and the center-left Social Democratic Party (SDP) — suffered big losses.  Smaller parties, including the FDP and the far-right Alternative for Germany (AfD) — who won 12.6% of the vote and entered parliament for the first time — were the beneficiaries.

While the FDP blamed the CDU/CSU alliance for the breakdown, the Green Party thanked Merkel and the leader of the CSU, Horst Seehofer, for negotiating “hard” but “fair,” and accused the FDP of quitting the talks without good reason. The so-called “Jamaica coalition” — named after the parties’ colors — would have been unprecedented at federal level.

Christian Lindner, leader of the FDP said that the four discussion partners have no common vision for modernization of the country or common basis of trust. “It is better not to govern than to govern badly.” He expressed regret that the talks had failed but said that his party would have had to compromise on its core principles. His party returned to parliament in September four years after voters, unimpressed with its performance as the junior partner in Merkel’s 2009-2013 government, ejected it. “It is better not to govern than to govern wrong,” Lindner said.

For Dr Merkel there is only one other possible option of avoiding fresh elections: wooing back the SPD into office for a third grand coalition. But senior SPD figures signaled that eight years as Dr Merkel’s junior partner since 2005 was enough. “We are not Germany’s parliamentary majority reserve,” said Andrea Nahles, SPD Bundestag leader. Merkel could now try to convince the Social Democratic Party, which has been the junior coalition partner in her government since 2013, to return to the fold. But after suffering a humiliating loss at the polls, the party’s top brass has repeatedly said the SDP’s place was now in the opposition. Merkel is set to consult the country’s president and the possibility of new elections looming.

Trust deficit

The country has been plunged into its worst political crisis in years after negotiations to form the next government collapsed overnight, dealing a serious blow to Merkel and raising questions about the future of the longtime Chancellor. Germany could likely be forced to hold new elections. But that is not without peril for Merkel, who would face questions from within her party on whether she is still the best candidate to lead them into a new electoral campaign.

Following more than a month of grueling negotiations, the leader of the pro-business FDP, Christian Lindner, walked out of talks, saying there was no “basis of trust” to forge a government with Merkel’s conservative alliance CDU-CSU and ecologist Greens, adding that the parties did not share “a common vision on modernizing” Germany.

The negotiations, which turned increasingly acrimonious, had stumbled on a series of issues including immigration policy. Key sticking points during the talks were the issues of migration and climate change, on which the Greens and the other parties diverged, but also Free Democrat demands on tax policy. The parties also differed on environmental issues, with the ecologists wanting to phase out dirty coal and combustion-engine cars, while the conservatives and FDP emphasized the need to protect industry and jobs.

Clearly, there is a serious trust deficit among the coalition partners that came to the fore in the negotiations. Party chiefs had initially set a deadline, but that passed without a breakthrough – after already missing a previous target on Thursday. But s the parties dug in their heels on key sticking points.

It’s likely to be a while before the situation is resolved. The only other politically plausible combination with a parliamentary majority is a repeat of Merkel’s outgoing coalition with the center-left Social Democrats — but they have insisted time and again that they will go into opposition after a disastrous election result.

If they stick to that insistence, that leaves a minority government — not previously tried in post-World War II Germany — or new elections as the only options. President Frank-Walter Steinmeier will ultimately have to make that decision, since the German constitution doesn’t allow parliament to dissolve itself.

Fresh poll

Two months on, however, that untested alliance has hit the wall meaning Germany and Europe face an extended period of insecurity. When the Bundestag meets for its second sitting, still without a government, acting chancellor Dr Merkel has no legal means to table a motion of no confidence to trigger fresh elections. The parties failed to make progress on a number of policy areas — including the right for family members of refugees in Germany to join them there — and tensions had risen.

Apparently, the end of Markel era is being talked about now as the collation of partners keep moving one by one, though she expressed the hope she would  be successful eventually and would  put in place a new government.

Fresh elections in Germany appeared increasingly likely after Chancellor Angela Merkel announced that she preferred a new vote over governing without a parliamentary majority. Merkel said her conservatives had left nothing untried to find a solution.  “I will contact the president and we will see how things develop,” said a clearly exhausted Dr Merkel, departing the talks. “It is a day to think long and hard about where things go now . . . and as acting chancellor I will do everything to ensure Germany is led well through these difficult days.”

Merkel, Germany’s leader since 2005 said she would consult President Steinmeier “and then “we will have to see how things develop.” She didn’t say more about her plans, or address whether she would run again if there are new elections.

To get to either destination, Steinmeier would first have to propose a chancellor to parliament, who must win a majority of all lawmakers to be elected. Assuming that fails, parliament has 14 days to elect a candidate of its own choosing by an absolute majority. And if that fails, Steinmeier would then propose a candidate who could be elected by a plurality of lawmakers.

Steinmeier would then have to decide whether to appoint a minority government or dissolve parliament, triggering an election within 60 days. Merkel’s Union bloc is easily the biggest group in parliament, but is 109 seats short of a majority.

To get to either destination, Steinmeier would first have to propose a chancellor to parliament, who must win a majority of all lawmakers to be elected. Assuming that fails, parliament has 14 days to elect a candidate of its own choosing by an absolute majority. And if that fails, Steinmeier would then propose a candidate who could be elected by a plurality of lawmakers.

Merkel said that the “path of minority government” should be considered “very very closely”. “I am very skeptical and I believe that new elections would be the better path,” she said. Merkel also confirmed that she would be ready to lead her party into any new vote. She did not rule out further talks with other parties, however, and acknowledged that the country’s next steps were in the hands of German President Frank-Walter Steinmeier. “The four discussion partners have no common vision for modernization of the country or common basis of trust,” said Christian Lindner, leader of the FDP. “It is better not to govern than to govern badly.”

Germany

Germany is facing unprecedented situation of coalition crisis. Was Germany’s past also was filled with crises?

Germany is a great power with a strong economy; it has the world’s 4th largest economy by nominal GDP. As a global leader in several industrial and technological sectors, it is both the world’s third-largest exporter and importer of goods. It is a developed country with a very high standard of living sustained by a skilled and productive society. It upholds a social security and universal health care system, environmental protection, and a tuition-free university education.

The Federal Republic of Germany was a founding member of the European Economic Community in 1957 and the European Union in 1993. It is part of the Schengen Area, and became a co-founder of the Eurozone in 1999. Germany is a member of the United Nations, NATO, the G7 (formerly G8 along with Russia), and the OECD. The national military expenditure is the 9th highest in the world. Known for its rich cultural history, Germany has been continuously the home of influential and successful artists, philosophers, musicians, sportspeople, entrepreneurs, scientists, engineers, and inventors.

Germany was declared a republic at the beginning of the German Revolution in November 1918. The worldwide Great Depression hit Germany in 1929. The Nazi Party led by Adolf Hitler won the special federal election of 1932. After a series of unsuccessful cabinets, Hindenburg appointed Hitler as Chancellor of Germany on 30 January 1933.[56] After the Reichstag fire, a decree abrogated basic civil rights and within weeks the first Nazi concentration camp at Dachau opened. The Enabling Act of 1933 gave Hitler unrestricted legislative power; subsequently, his government established a centralized totalitarian state, withdrew from the League of Nations following a national referendum, and began military rearmament

In 1935, the regime withdrew from the Treaty of Versailles and introduced the Nuremberg Laws which targeted Jews and other minorities. Germany also reacquired control of the Saar in 1935,[64] remilitarized the Rhineland in 1936, annexed Austria in 1938, annexed the Sudetenland in 1938 with the Munich Agreement and in direct violation of the agreement occupied Czechoslovakia with the proclamation of the Protectorate of Bohemia and Moraviain March 1939. In August 1939, Hitler’s government negotiated and signed the Molotov–Ribbentrop pact that divided Eastern Europe into German and Soviet spheres of influence. Following the agreement, on 1 September 1939, Germany invaded Poland, marking the beginning of World War II.  In August 1939, Hitler’s government negotiated and signed the Molotov–Ribbentrop pact that divided Eastern Europe into German and Soviet spheres of influence. Following the agreement, on 1 September 1939, Germany invaded Poland, marking the beginning of World War II.

Britain and France declared war on Germany.[68] In the spring of 1940, Germany conquered Denmark and Norway, the Netherlands, Belgium, Luxembourg, and France forcing the French government to sign an armistice after German troops occupied most of the country. The British repelled German air attacks in the Battle of Britain in the same year. In 1941, German troops invaded Yugoslavia, Greece and the Soviet Union.

By 1942, Germany and other Axis powers controlled most of continental Europe and North Africa, but following the Soviet Union’s victory at the Battle of Stalingrad, the allies’ reconquest of North Africa and invasion of Italy in 1943, German forces suffered repeated military defeats. In June 1944, the Western allies landed in France and the Soviets pushed into Eastern Europe. By late 1944, the Western allies had entered Germany despite one final German counter offensive in the Ardennes Forest. Following Hitler’s suicide during the Battle of Berlin, German armed forces surrendered on 8 May 1945, ending World War II in Europe. After World War II, former members of the Nazi regime were tried for war crimes at the Nuremberg trials.

In what later became known as The Holocaust, the German government persecuted minorities and used a network of concentration and death camps across Europe to conduct genocide of what they considered to be inferior peoples. In total, over 10 million civilians of all races were systematically murdered

Nazi policies in the German occupied countries resulted in the deaths of 2.7 million Poles, 1.3 million Ukrainians and an estimated 2.8 million Soviet war prisoners. In addition, the Nazi regime abducted approximately 12 million people from across the German occupied Europe for use as slave labor in the German industry. German military war casualties have been estimated at 5.3 million, and around 900,000 German civilians died; 400,000 from Allied bombing, and 500,000 in the course of the Soviet invasion from the east. Around 12 million ethnic Germans were expelled from across Eastern Europe. Germany lost roughly one-quarter of its pre-war territory. Strategic bombing and land warfare destroyed many cities and cultural heritage sites.

After Germany surrendered, the Allies partitioned Berlin and Germany’s remaining territory into four military occupation zones. The western sectors, controlled by France, the United Kingdom, and the United States, were merged on 23 May 1949 to form the Federal Republic of Germany (Bundesrepublik Deutschland); on 7 October 1949, the Soviet Zone became the German Democratic Republic (Deutsche Demokratische Republik). They were informally known as West Germany and East Germany. East Germany selected East Berlin as its capital, while West Germany chose Bonn as a provisional capital, to emphasize its stance that the two-state solution was an artificial and temporary status quo.

East Germany was an Eastern Bloc state under political and military control by the USSR via occupation forces and the Warsaw Pact. Although East Germany claimed to be a democracy, political power was exercised solely by leading members (Politbüro) of the communist-controlled Socialist Unity Party of Germany, supported by the Stasi, an immense secret service controlling many aspects of the society. A Soviet-style command economy was set up and the GDR later became a Comecon state

West Germany was established as a federal parliamentary republic with a “social market economy”. Starting in 1948 West Germany became a major recipient of reconstruction aid under the Marshall Plan and used this to rebuild its industry.  The Federal Republic of Germany joined NATO in 1955 and was a founding member of the European Economic Community in 1957.

The Berlin Wall, rapidly built on 13 August 1961 prevented East German citizens from escaping to West Germany, eventually becoming a symbol of the Cold War. Tensions between East and West Germany were reduced in the early 1970s by Chancellor Willy Brandt’s Ostpolitik. In summer 1989, Hungary decided to dismantle the Iron Curtain and open the borders, causing the emigration of thousands of East Germans to West Germany via Hungary. This had devastating effects on the GDR, where regular mass demonstrations received increasing support. The East German authorities eased the border restrictions, allowing East German citizens to travel to the West, preparing ground for reunion of Germany. The fall of the Wall in 1989 became a symbol of the Fall of Communism, the Dissolution of the Soviet Union, German Reunification

The united Germany is considered to be the enlarged continuation of the Federal Republic of Germany and not a successor state. As such, it retained all of West Germany’s memberships in international organisations. Based on the Berlin/Bonn Act, adopted in 1994, Berlin once again became the capital of the reunified Germany, while Bonn obtained the unique status of a Bundesstadt(federal city) retaining some federal ministries. The relocation of the government was completed in 1999.  Following the 1998 elections, SPD politician Gerhard Schröder became the first Chancellor of a red–green coalition with the Greens party. Among the major projects of the two Schröder legislatures was the Agenda 2010 to reform the labor market to become more flexible and reduce unemployment.

The modernisation and integration of the eastern German economy was a long-term process scheduled to last until the year 2019, with annual transfers from west to east amounting to roughly $80 billion

Since reunification, Germany has taken a more active role in the European Union. Together with its European partners Germany signed the Maastricht Treaty in 1992, established the Eurozone in 1999, and signed the Lisbon Treaty in 2007. Germany sent a peacekeeping force to secure stability in the Balkans and sent a force of German troops to Afghanistan as part of a NATO effort to provide security in that country after the ousting of the Taliban. These deployments were controversial since Germany is bound by domestic law only to deploy troops for defence roles

In the 2005 elections, Angela Merkel became the first female Chancellor of Germany as the leader of a grand coalition.[43] In 2009 the German government approved a €50 billion economic stimulus plan to protect several sectors from a downturn.[94]

In 2009, a liberal-conservative coalition under Merkel assumed leadership of the country. In 2013, a grand coalition was established in a Third Merkel cabinet. Among the major German political projects of the early 21st century are the advancement of European integration, the energy transition (Energiewende) for a sustainable energy supply, the “Debt Brake” for balanced budgets, measures to increase the fertility rate significantly (pronatalism), and high-tech strategies for the future transition of the German economy, summarized as Industry 4.0.[95]

Germany was affected by the European migrant crisis in 2015 as it became the final destination of choice for many asylum seekers from Africa and the Middle East entering the EU. The country took in over a million refugees and migrants and developed a quota system which redistributed migrants around its federal states based on their tax income and existing population density

Observation: Options and uncertainly

End of Markel era is being talked about now as the collation of partners keep moving one by one. Short of resolving the impasse with the FDP, Merkel’s options are limited. President Steinmeier would then have to decide whether to appoint a minority government or dissolve parliament, triggering an election within 60 days. Merkel’s Union bloc is easily the biggest group in parliament, but is 109 seats short of a majority.

The article 63 of the post-war Basic Law requires three attempts to elect a new chancellor – a humiliating process for Dr Merkel if, as they signaled, none of the other parties are prepared to back her. The FDP was “deeply traumatized” by its term in office with Dr Merkel which ended in its 2013 election expulsion from the Bundestag. 

The euro fell following the news, although analysts said the longer-term implications for the currency were not yet clear.

Germany as the leader of European Union of Germany has been plunged into its worst political crisis in years after negotiations to form the next government collapsed overnight, dealing a serious blow to Merkel and raising questions about the future of the longtime Chancellor. Merkel, who has been in power for 12 years, could also lead a minority government but she had signaled that she was not in favor of such instability. German president warns politicians to solve political crisis.

Not only Germany, but for EU as well the collapse in Germany of ruling coalition would have serious repercussions. Europe’s biggest economy now faces weeks, if not months, of paralysis with a lame-duck government that is unlikely to take bold policy action. And with no other viable coalition in sight, Germany may be forced to hold new elections that risk being as inconclusive as September’s polls.

Angela Merkel is now facing uncertainly as the clash of interests in the u ruling coalition questions reliability of her leadership. Merkel is left battling for political survival after high-stakes talks to form a new government collapsed, plunging the country into a crisis that could trigger fresh elections. She said that she “will do everything to ensure that this country is well-led through these difficult weeks.”  Merkel also vows to fight snap election to retain power. Germany: Angela Merkel runs out of options. That vote was viewed as a slap in the face for the outgoing coalition of Dr Merkel’s CDU/CSU and the centre-left Social Democrats (SPD).

The SPD, Merkel’s junior governing partner for the last four years, ruled out a renewal of their so-called “Grand Coalition” on the night of the election and reiterated that position. The SPD is also reluctant to renew the coalition as it would leave the AfD as the largest opposition party, granting it a set of privileges including the right to respond first to the Chancellor and a boost in resources — an outcome none of the other parties want.

Fresh elections are the option after the liberal Free Democratic Party (FDP) walked out just before midnight on Sunday following four weeks of exploratory talks with Dr Merkel’s Christian Democratic Union (CDU), her Bavarian (CSU) allies and the Green Party.

Merkel’s CDU/CSU alliance could still attempt to form a minority government with either the FDP or the Green Party separately, but this has happened rarely — and never successfully — at the federal level in Germany.  Recent polling puts all parties roughly where they were on election night, meaning a new election could result in similar deadlock.

If all other options fail, Steinmeier, the German President, has the power to set in motion a complex process that could lead to a new vote early next year.

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Unilateral vs Bilateral Euroisation: Political, technical and practical issues in the curious case of north Cyprus

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The island of Cyprus has been split between a Greek Cypriot south and a Turkish Cypriot north since 1974. The Turkish Cypriot state declared in the north is recognised only by Turkey, while the Republic of Cyprus in the south is recognised internationally and is a European Union (EU) member since 2004. In 2004, 65 percent of Turkish Cypriots voted in favor of the United Nations’ Annan Plan for reunification only for Greek Cypriots to reject it. As a result, Cyprus joined the EU as a de facto divided island. Despite joining the EU as a divided island, the whole of Cyprus is considered an EU territory. However, the EU law is suspended in the north until reunification is achieved.

This resulted in the euro being the legal tender only in the southern part of the island. With the recent and continuous depreciation of the Turkish lira, the long-standing question of whether and how the north could switch to the euro has once again intensified. While a bilateral adoption of the euro is not on the cards until a reunification on the island, north Cyprus could technically unilaterally adopt the euro. However this could cause complications in the future as the EU is adamant that unilateral euroisation cannot be used as a mechanism by Member States to circumvent the stages foreseen by the Maastricht Treaty.

Under normal circumstances, “Member States with a derogation”, i.e. the Member States that have not yet fulfilled the necessary conditions for the adoption of the euro are first required to enter the Exchange Rate Mechanism (ERM II) to achieve eurozone membership. This is a “waiting room” where any country aspiring to adopt the euro is required to stay for at least for two years. It is now a well-known fact that the ECB shares the opinion of the Economic and Financial Affairs Council (ECOFIN), i.e. the meeting of the finance ministers of EU Member States adopted in 2000, that this requirement should not be waived. Assuming the northern part of Cyprus is considered a Member State, the same principle will apply and therefore it would not be welcome to adopt the euro unilaterally, bypassing the convergence process foreseen by the Treaty for the adoption of the euro.

Currently, ERM II comprises the currencies of Bulgaria, Croatia and Denmark. Just like these countries, north Cyprus would be expected to peg its national currency to the euro and, given the consent of the European System of Central Banks, fixe a “central exchange rate” and a “deviation margin” under Exchange Rate Mechanism (ERM II) for a duration of no less than two years. If successful based on its ERM II performance, a final exchange rate would be determined and the redenomination would be done over a transition period. 

In the case of north Cyprus, it is understood that the EU might have already agreed to apply a fast track approach where there would be a one-year transition period. However, this has not been confirmed officially by the EU so the EU’s stance in practice is not known. After all, even Denmark, a Member State which has negotiated an opt-out arrangement before the adoption of the Maastricht Treaty has been participating in ERM II although it chose not to adopt the euro. So the EU’s approach in the case of northern Cyprus would not expected to be too lenient. There is no way to find out unless north Cyprus continues the dialogue with the EU.

In the meantime, a more relevant question is whether a unilateral euroisation could be possible. The short answer is yes. For instance the euro was introduced in Kosovo and Montenegro that did not have a status of a sovereign state at the time. In both cases, the decision was made in 1999. Kosovo, defined the Deutsche Mark as the designated currency, which was replaced by the euro in 2002. Similarly, Montenegro introduced a parallel currency system in 1999, in which the Deutsche Mark was allowed to circulate alongside the then legal tender. In 2001, the Deutsche Mark became the only legal tender and was replaced by the euro in June 2002.

In the case of Montenegro, now an official EU candidate, the adoption of the euro without an agreement with the European Central Bank (ECB) was acknowledged by the European Commission as a measure which had to be taken due to “extraordinary circumstances” present in the country at the time. This could be precedent for north Cyprus. However, it is important to note that the ECB still supports the view that unilateral euroisation is not compatible with the Maastricht Treaty and cannot be a way to bypass the convergence process.

The implications of the Treaty framework for in the case of Montenegro currently remain unknown and are expected to be detailed “by the time of possible future negotiations for accession to the EU”. In particular it remains uncertain whether the country would be required to introduce its own currency before it can join ERM II. Should this be the case as Montenegro makes further progress towards EU membership, this would entail substantial operational and changeover costs. Authorities in north Cyprus, should therefore monitor the developments very closely.

Normally, non-euro area Member States are denied the option of unilateral euroization due the principle of equality, i.e. the EU considers bypassing the convergence process incompatible with the EU Treaty and actively discourages it.In particular, the Treaty sets out that there has to be a Community assessment of the fulfilment of these criteria and mutual agreement on the appropriate exchange rates. This means that the ECB does not welcome unilateral euroisation, as such an adoption of the euro outside the Treaty process would run counter to the underlying economic reasoning of European Monetary Union.

However, as north Cyprus is already an EU territory the adoption of the euro could be considered a “common interest of the EU” and therefore an exception could be possible. In fact, the policy of the EU with regard to the Turkish Cypriot community which was set out by the General Affairs Council in 2004 states that “the Council is determined to…facilitate the reunification of Cyprus by encouraging the economic development of the Turkish Cypriot community”. So in the case of north Cyprus, a switch to the euro could be allowed by way of exception although this would obviously imply circumventing the process of multilateral assessment by the EU Member States.

While the EU could give the green light to adoption of the euro by north Cyprus without a successful exchange-rate procedure under ERM II, it would not allow this to undermine the process of convergence prior to the adoption of the euro. In other words, the Convergence criteria outlined in the Maastricht Treaty would still remain relevant and important as the Treaty requires Member States to achieve a high degree of sustainable economic convergence before they can join the euro area.

In other words the economies of Member States with a derogation must be able to keep pace with those already using the euro. Exchange rate stability, for instance, is evaluated by assessing whether the exchange rate of the country’s currency has remained within the fluctuation bands provided for by ERM II for at least two years without devaluating against the euro.

Besides exchange rate stability, the convergence criteria also include price stability, sound public finances, and convergence in long-term interest rates. This means, for instance, that a country’s long-term interest rate, measured on the basis of long-term government bonds or comparable securities, should not exceed that of the three best-performing Member States in terms of price stability by more than 2 percentage points during the one-year observation period prior to the assessment.   

On the other hand, a country is considered to meet the price stability criterion if its average inflation rate does not exceed the inflation rate of the three best-performing EU Member States by more than 1.5 percentage points during a one-year observation period. These criteria are intended to ensure the sustainability of public finances and that the government is able to manage its debts.

Article 140 (1) of the Treaty on the Functioning of the European Union (TFEU) requires the European Commission (EC) and the European Central Bank (ECB) to report to the Council, at least once every two years, or at the request of a Member State with a derogation on the progress of the country in fulfilling their obligations regarding the achievement of economic and monetary union. In addition to preparing these “Convergence Reports”, both the ECB and the Commission regularly monitor progress throughout the year.

A Convergence Report is normally published at least once every two years or at the request of an EU Member State which would like to join the euro area. Both the ECB and the European Commission issue these reports describing the progress made by non-euro area Member States towards achieving the criteria necessary for a country to adopt the euro. According to the latest report, among countries legally committed to adopting the euro, Croatia and Sweden fulfil the price stability criterion, Bulgaria, Czechia, Croatia, Hungary, Poland and Sweden fulfil the criterion on public finances, Bulgaria, Czechia, Croatia, Hungary, Poland and Sweden fulfil the long-term interest rate criterion. However none of them meet all the requirements for adoption of the euro. So convergence process is very strict and challenging.

In particular, it should be noted that convergence must be sustainable, meaning that satisfying the economic convergence criteria at one point in time is not enough and they are expected to be met on a lasting basis. A Member State’s general financial position is considered sustainable based on two criteria, namely, the government’s annual fiscal deficit should not exceed 3% of gross domestic product, and overall government should not exceed 60% of gross domestic product. This is very important for northern Cyprus as it will need to ensure that its economy is resilient.

It is known that the Maastricht Treaty provides some flexibility and the final assessment depends on the ECOFIN Council. Whether and how this would apply in the case of northern Cyprus remains a mystery. While details remain unknown to the public, the one-year transition period envisaged in the case of northern Cyprus could be related this. However, it should be noted that the decision on whether north Cyprus can adopt the euro would ultimately be a political one and would lie with the Council of the European Union. This means that representatives from all EU countries would be required to take a decision based on a proposal by the EC and after consulting the European Parliament.

Given that participation in the ERM II is a precondition for as well as fulfilment of the nominal convergence criteria to join the euro, it is binding and is unlikely to be waived for any country regardless of any special circumstances. This is because ERM II provides the framework to manage the exchange rates between EU currencies, which is necessary for exchange rate stability. As such north Cyprus would be expected to participate in the mechanism without devaluing its central rate against the euro before it can qualify to adopt the euro.

While no provision of the EU Treaty states explicitly that Member States with a derogation must have their own currency, the Treaty is by and large based on this assumption. In addition, the entry into ERM II is decided by mutual agreement of all ERM II parties, which consist of the ministers of the euro area Member States, the President of the ECB and the minister and the central bank governor of Denmark, as the only non-euro area Member State currently participating in the mechanism.

So in the case of north Cyprus adoption of the euro could mean that the country should first introduce its own currency. This could be a more viable alternative and north Cyprus could then peg its currency to the euro as a preparation for an eventual switch to the euro. Indeed, some countries joined ERM II with their preexisting currency pegs. To give a recent example, the currencies of Bulgaria and Croatia were already closely tied to the euro at the time of applying to the ERM II. Bulgaria had a currency board, first with the Deutsche Mark, and subsequently with the euro after 1999. Croatia had a peg first with the Deutsche Mark, and from 1999 to the euro, with a narrow band.

During this process, legal requirements should not also been underestimated. Article 140(1) of TFEU requires the convergence reports to assess the compatibility of national legislation, including the statutes of the national central bank and the Statute of the European System of Central Banks and of the ECB. There could also be additional unprecedented requirements and countries may be required to commit to implementing specific policy measures on a variety of topics. For instance, in the case of Bulgaria and Croatia, such requirements range from the anti-money laundering framework, state-owned enterprises and the insolvency framework, to the non-banking financial sector, corruption and even organised crime. It is highly unlikely that the national legislation in north Cyprus is currently compatible with that of the EU as the latest convergence report suggests that the respective national legislations in none of the seven new EU Member States would be deemed “fully compatible” with the exception of Croatia.

In fact, the former north Cyprus President Mustafa Akıncı himself had confessed that “serious work” would needed to ensure the harmonization of the national institutions with the EU acquis. As can be seen in the case of Croatia and Bulgaria, this has now become a prerequisite not only for joining the EU but also in terms of adopting the euro as a new Member State. For instance, this was the main reason behind the delay in Bulgaria’s acceptance to ERM II. Bulgaria was able to get the green light to join ERM II two years after it formally announced its intention to join the mechanism.

The delay was due to the requirement imposed by the Eurozone governments requiring Bulgaria to join ERM II and the Banking Union simultaneously. This prerequisite is known as “the Cooperation Decision” and requires Member States which adopt the euro to also participate in the Banking Union, i.e. the Single Supervisory Mechanism (SSM), the Single Resolution Mechanism (SRM) and the Single Resolution Fund (SRF). . Therefore, participating in ERM II with a view to later adopting the euro will also involve preparing for joining the Banking Union.

This requirement will now apply to all future candidates including north Cyprus. However, it should also be noted that the procedure for entering the Banking Union is separate from the assessment of the convergence criteria. Joining the Banking Union is irreversible and involves direct powers of the SSM and the SRM over its banking system. This has important implications for the banking sector as banks that will come under the direct supervision of the ECB will also be subject to the direct supervision of the Single Resolution Board (SRB).

To be more specific, this means that, the ECB will become responsible for the direct supervision of the significant credit institutions following the “significance assessment process”. This applies to banks considered to meet the “materiality criteria” as set out in the SSM Regulation (Regulation 1024/2013) and the SSM Framework Regulation (Regulation 468/2014). The criteria include “economic importance for the country” so could technically apply to banks in north Cyprus despite their insignificant sizes in comparison to the EU economy. Therefore, for new joiners like north Cyprus the accession process would involve not only the harmonization with the aquis but also the strengthening of their institutions and administrative capacity that will enable them to implement and monitor the enforcement of the harmonized legislation.

Therefore, adoption of the euro by north Cyprus, bilaterally or unilaterally, would not be as easy as it may look. More than anything else, this would require political will, courage and determination. The former President Mustafa Akıncı, a devoted supporter of a federal solution and the EU, had set an ambitious target of the euro going into circulation “from the first day” in the case of a reunification. However with the failure of the last reunification talks in 2017 in Crans Montana, Switzerland, political conditions have changed dramatically. The current President Ersin Tatar who is a very passionate proponent of the two-state solution is wholeheartedly against the EU and the euro. Therefore, the general stance towards the adoption of the euro in the northern part of the island remains fragmented. Given these circumstances, adoption of the euro in north Cyprus seems a distant prospect.

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Europe

How Red Are the EU’s ‘Greens’?

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Blood-red. But that’s a banned fact. (It will be documented in what follows.)

Here are the announced values (the “Guiding Principles”) of the European Green Party:

“Environmental Responsibility”

“Freedom through Self-Determination”

“Extending Justice”

“Diversity, an Indispensable Condition”

“Non-Violence”

“To sum it up, Sustainable Development”

This “Charter of the European Greens” fills-in those blanks by stringing together clichés, which 90% of the pubic will like, because they’re written so as to avoid (as much as possible) saying anything that’s broadly controversial. For example, “Our answer is sustainable development, which integrates environmental, social and economic objectives for the benefit of all.” (Oh? And how is that pap to be realized in actual policies? What are the measures, and the precise priority-rankings, when any of those values conflict with one-another, which is often?) The Green Party is simply conning liberals, but what is their reality? What are they actually doing, when in power? Inside their own country, and in the EU? Let’s take a very concrete (but broadly representative) case:

Germany, as I recently pointed out, is so corrupt that it has virtually no bans on who or what may donate to politicians. Foreign interests can donate, corporations can donate, even corporations that have government contracts (sell to the government) can donate, donations needn’t go through the banking system, donations may be accepted in any amount, anonymous donations are acceptable, etc. It’s super-libertarian. It is open-sesame to billionaires and centi-millionaires (the few people who have the most money) to control the Government by means of their ‘news’-media persuading the voters, and by means of political campaign donations to present the billionaires’ favored candidates’ viewpoints in the most favorable way — and their least-favored candidates in the least favorable way. It’s control by dollars, instead of control by voters. That’s libertarianism.

A March 2015 academic study showed that, of all 28 EU member-nations, the only five that were more corrupt than Germany were Malta, Austria, Denmark, Ireland, and Netherlands. Then, on 10 June 2015, a Pew survey in Germany, Poland, Spain, France, Italy, UK, U.S., and Canada, showed that, among those 8 countries, ONLY Germany (and by a big margin: 57% to 36%) opposed Ukraine joining NATO. However, when German and foreign billionaires s‘elected’ the new German Government that became installed on 8 December 2021, it appointed as the Germany’s new Foreign Minister the Green Party’s losing candidate for Chancellor, Annalena Baerbock, whose entire career as a candidate and as an official was the most notable for her strident advocacy for hostility toward Russia, and for Ukraine to be admitted into NATO (the anti-Russian U.S. military alliance). She thus became — though she lost her campaign for the Chancellorship — the most powerful Green Party politician in Europe or anywhere.

Immediately, she reversed Angela Merkel’s policies which had allowed the Russian-Swiss-German natural gas pipeline from Russia to Germany, Nord Stream 2, to be constructed to bring into the EU the least expensive of all gas to Germany, which is Russia’s pipelined gas. Gas-prices in Germany are now already soaring, and Germans will increasingly freeze, as a result of this ‘German democracy’ and its obedience to its billionaire masters in America.

However, many European billionaires are also being served by this ‘Green’ Party. Much like America’s Democratic Party (or liberal) billionaires, Europe’s liberal billionaires have been investing heavily in ‘green’ technologies, and are betting against their opposition, conservative billionaires, who are still committed to fossil fuels. So: the ‘Green’ Party represents liberal billionaires, against conservative billionaires. 

On 8 September 2021, “Capital Radar” newsletter bannered “‘Most important choice for the next 100 years’: 1.25 million euros from the Netherlands for the Greens” (“„Wichtigste Wahl der nächsten 100 Jahre”: 1,25 Millionen Euro aus den Niederlanden für die Grünen”) and reported that:

               • A Dutch tech billionaire donates 1.25 million euros to the German Greens.

               • It is the largest donation in the party’s history.

               • In an interview with RND, the major donor explains why Annalena Baerbock should steer the ship of state and why the federal election is so important.

Amsterdam. The Dutch entrepreneur and philanthropist Steven Schuurman [archive.md/ZjwWW] donated 1.25 million euros to the German Greens. It is the largest donation in the party’s history. Billionaire Schuurman, born in 1975, is co-founder and ex-head of the data search and analysis company Elastic and co-founder of Atlantis Entertainment. He has already donated millions in the Dutch election campaign.

The Greens have already received large sums of money this year: the pharmaceutical heir Antonis Schwarz [archive.md/COcng] bequeathed them 500,000 euros; the Greifswald Moritz Schmidt, who got rich through Bitcoin deals, one million euros; and Sebastian Schel’s net heir, 250,000 euros. The election program for the federal election states: “Party donations should be capped at an annual maximum amount of 100,000 euros per donor.” [But Germany has separate laws for candidates, and no limits are placed on donations to them.]

Schuurman was quoted as saying that, of the three candidates for Chancellor, only Baerbock took global warming seriously. He ignored the more pressing and sooner danger of avoiding a nuclear war, on which Baerbock’s policy-commitments are rabidly anti-Russian. No U.S.-and-allied billionaires — either liberal or conservative — are opposed to that. But those policies are blood-red, and now.

At the level of the EU itself, the most powerful person over the entire European Union has been a lifelong hater of Russia, the American billionaire George Soros, who controls the Open Society Foundation and other ’non-profits’ that have poured billions of dollars over decades (starting in 1993, just two years after his self-declared war against communism in Russia had become no longer an excuse when Russia abandoned communism in 1991) into color-revolutions targeted against Russia. On 5 November 2017, Alex Gorka at Strategic Culture, headlined “The Myth of European Democracy: A Shocking Revelation”, and opened:

It’s an open secret that the “Soros network” has an extensive sphere of influence in the European Parliament and in other European Union institutions. The list of Soros has been made public recently. The document lists 226 MEPs from all sides of political spectrum, including former President of the European Parliament Martin Schulz, former Belgian PM Guy Verhofstadt, seven vice-presidents, and a number of committee heads, coordinators, and quaestors. These people promote the ideas of Soros, such as bringing in more migrants, same-sex marriages, integration of Ukraine into the EU, and countering Russia. There are 751 members of the European Parliament. It means that the Soros friends have more than one third of seats.

George Soros, a Hungarian-American investor and the founder and owner of Open Society Foundations NGO, was able to meet with President of the European Commission Jean-Claude Juncker with “no transparent agenda for their closed-door meeting.” 

Many but not all of his agents at the European Parliament are Greens. U.S.-and-allied billionaires donate to all politicians that are ready, willing, and able, to advance the U.S. empire to encompass the entire world, and don’t donate to just to one Party. 

Soros was a major funder of the coup-operation that started in the Obama Administration (led by Victoria Nuland under Hillary Clinton) by no later than June 2011 to overthrow Ukraine’s democratically elected President, Yanukovych, and replace him by a racist-fascist (or nazi) anti-Russian regime and to seize Russia’s largest naval base, which was and is in Crimea, to turn it into a U.S. naval base. (Putin was able to block the latter attempt.) Hillary and Obama had first met with Yanukovych in 2010 and failed to persuade him to push for Ukraine’s NATO membership in NATO, but he said no — NATO then was very unpopular among Ukrainians. During 2003-2009, only around 20% of Ukranians wanted NATO membership, while around 55% opposed it. In 2010, Gallup found that whereas 17% of Ukrainians considered NATO to mean “protection of your country,” 40% said it’s “a threat to your country.” Ukrainians predominantly saw NATO as an enemy, not a friend. But after Obama’s February 2014 Ukrainian coup, “Ukraine’s NATO membership would get 53.4% of the votes, one third of Ukrainians (33.6%) would oppose it.” Obama turned Ukraine around — from being a neutral country on Russia’s border, to being a nazi anti-Russian country. And Annalena Baerbock is a strong backer of today’s nazi Ukraine.

However, the ‘Green’ Party is green in one way: it follows the dollars, not the voters. Other than that way of being green, it’s really only blood-red. Even the ‘Green’ Party’s proposed policies against global warming are futile to prevent global burnout, and they ignore the only policy that, even conceivably, might halt global warming: to outlaw the purchase of stocks and bonds of fossil-fuel-extraction companies. So: they are total fakes. The response of billionaires is to bet either for crackpot business-ventures to halt global warming, or else for extending yet further into the future the use of mainly fossil fuels and ignore even the pretense of caring about the welfare of the generations yet to come. In other words, all billionaires, both liberal and conservative, are really only blood-red, for expanding yet further their empire, in the final analysis.

This doesn’t come from what the voters want; it reflects ONLY what the billionaires want. Here are some data showing that despite all the billionaires’ propaganda for expanding yet further the U.S.-and-allied empire, a majority in some countries — including Germanydon’t want it:

Only Germans “oppose Ukraine joining NATO”: 57% to 36%

“Ukraine Joining EU” opposed by Germans 54% to 41%, opposed by French 53% to 46%

“Oppose Supplyiing Ukraine with Arms Against Russia: Germans 77% to 19%, French 59% to 40%, Italians 65% to 22%.

In 2013, the median favorability of Russia in the EU was 37%; by the time of 2015 it had become 26% — 26/37 or 30% less than only two years earlier, which is to say prior to 

Obama’s having grabbed Ukraine in a very bloody U.S. coup. (Obama was the most successful heir to Hitler since WW II, and was especially successful in jeopardizing the national security of the Russians by grabbing Ukraine on Russia’s border and intensifying the anti-Russian military alliance, NATO, whereas Hitler’s attempt to conquer Russia had turned out to be an colossal failure.)

So, Baerbock — the most powerful ‘Green’ politician in Europe, and even anywhere, though she had failed at the ballot-box — gets here hate (against Russia), her warmongering, not from the voters, but from the sheer cravings of U.S.-and-allied billionaires, to expand their U.S.-and-allied empire, to encompass the entire world. That’s what she (and many Green Party politicians) push for the most.

The ‘Greens” are actually blood-red, for war.

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Europe

The Path to Corruption in France

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Whereas Germany takes an extremely libertarian approach to corruption, and even allows foreigners to donate secretly and in any amount to support a candidate, France has one of the world’s best anti-corruption legal systems, so that virtually the only pathway by which a person can legally perpetrate corruption of the French Government is indicated by the IDEA.int site’s question-answer set on its question # “26. Is there a ban on donors to political parties/candidates participating in public tender/procurement processes? No.”  That’s even worse than in America (which is famously controlled by the owners of its arms-producers and “MIC”), where the published answer is “No data.”

In other words: military procurement — selling (mainly) military products-weapons or services (the types of things that constitute the bulk of governmental purchases) to the French Government — is allowed by French laws to be corrupt. A prospective seller to the French Government is allowed to donate not only to a candidate but to a political party. (Obviously, this gives those government contractors immense influence over French foreign policies, and especially over ‘defense’ policies, including how much and which corporation’s weapons to buy.) However in order to be able to contribute lots of money to a particular candidate or party, a coordinated operation that might include many cooperating donors from a given weapons-producer might be necessary. By contrast, in the United States, which nominally prohibits almost every type of corruption, the fine-print exceptions allow massive donations from any billionaire or mega-corporation via PACS and other allowed tricks. On balance, therefore, France seems to be less corrupt than America, and far less corrupt than Germany, according to these legal yardsticks. And if military procurement were not an issue, then France would appear to be significantly less corrupt than America, as well as vastly less corrupt than Germany.

But, just as there are legal ways around the nominal anti-corruption provisions in America, there likewise are legal ways around the nominal anti-corruption provisions in France. Furthermore, in one way, France is far more corrupt even than America, because in France there is actually much more secrecy regarding campaign donations than there is in America. Also, an EU study of the various member-nations’ campaign-finance laws found that even foreign donations have been, at least until 2019, virtually unregulated, in all EU nations. Nonetheless, like in America, the owners of France’s weapons-producers have especially ready legal pathways to control the government (which is their main customer, the biggest buyer of their products).

So, in France, politicians who are unfavorable toward NATO and other weapons-marketing organizations will probably need to rely more on regular, run-of-the-mill donors, than on billionaires or their generally war-profiteering corporations. In other words, any such candidate will need to have considerable left-wing populist appeal, in order to compete effectively against the better-financed contenders, who are more military-contractor-backed.

In any case, the main path to corruption in France seems to be through military procurement. That could turn out to be a major reason why one of France’s perennial Presidential candidates, Marine Le Pen, whose policies would be a threat to military contractors, will again lose. 

Marine Le Pen is basically a populist leftist who inherited from her conservative populist father the Front Nationale Party and switched the name to the National Rally Party and moved it to a populist left ideological position, but her father’s reputation still haunts leftist voters, who, in a second-round election therefore peel off to the more-establishment liberal opponent, who then receives the endorsements of the candidates who had been eliminated in the first round, so that the French military-industrial complex will end up being represented by the next President. This is likely to happen again. 

She also needs to retain at least some portion of the voters who had supported her fascist father, whom she despises (but can’t say so publicly, because she needs at least some of those voters, too). Therefore, she talks about her father as little as possible, and maintains ambiguity on lots of issues, in order to hold together, as much as possible, a populist coalition that’s both left and right, progressive and conservative. But the billionaires — both the conservative fascist ones and the liberal fascist ones — know that they wouldn’t be able to control France (as they do) if she were to become President. So, their media always refer to her as “far-right” in order to scare away voters, by portraying her as being secretly just like her father was — even though most of her policy-commitments are opposite to that (but only few voters actually base their votes on policy-positions, and politically involved billionaires know this). She continually walks a political tightrope.  But one thing about Marine Le Pen seems clear: France’s billionaires fear her; none supports her.

On December 10th the Financial Times headlined “Valérie Pécresse, the woman who could beat Macron”, and Victor Mallet presented a credible case that that establishment conservative is the likeliest person to end up as the winner, in the second round. However, Mallet noted that “her hardline stance on law and order and her commitment to economic reform and fiscal orthodoxy will play well on the French right.” If so, then a second-round contest between her and Le Pen could very likely produce a bigger-than expected liberal vote for Le Pen, as being a lesser-of-two-evils, in their view. The biggest barrier to that happening would be that this time, Le Pen might not end up in the second round, because Éric Zemmour, who hates her (and Muslims), and who appeals more than she does to rich conservatives, many of whom might be invested in armaments stocks, could end up reducing her first-round vote so that Le Pen won’t make it to the second round. He might even be largely financed in order to keep her out of the second round, so that Pécresse, or the current President, Macron, will win. Right now, Zemmour is campaigning mainly against Le Pen, but, if the final contest will be between Pécresse and Le Pen, then he would probably endorse Pécresse, which would cause many conservative voters to vote for her. 

On December 18th, Bloomberg bannered “Macron Likely to Face Pecresse in French Runoff, Poll Shows”, and reported that, “The monthly poll puts National Rally candidate Marine Le Pen and Eric Zemmour, her competitor on the far-right, neck and neck with 14.5% of voter intentions, a score that would knock both of them out of the second round.” That is exactly what France’s military-industrial complex, and French billionaires, would hope for. If Pécresse wins, then America’s billionaires will also win, because then there will be a France that is even more of a U.S. vassal than is now the case, under Macron.

Author’s note: first posted at The Duran

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