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The Reform of Europe: A Political Guide to the Future- Book Review

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The European Union is in the midst of a sea change.  The UK is headed towards a no-deal Brexit, Italy is being governed by far-right Euro-skeptics, Macron’s neoliberalism has ignited unprecedented protests across France and Angela Merkel has announced that she will step down in 2021.  Michel Aglietta, cofounder of the regulation school of economics, writes about how to turn this grim tide in The Reform of Europe: A Political Guide to the Future.

Aglietta explores the problems that Europe has been facing for decades: low productivity, stagnant wages, unemployment, frequent market crashes, intra-nation inequality, etc.  Much of these issues stem from bank negligence and recklessness.  The author writes, “In the current European situation, repairing the balance sheets of financial intermediaries is the priority if there is to be any hope of reviving credit. It involves the full, complete realization of banking union. The latter is indispensable if monetary policy is not to continue to be trapped by the banks’ inability to do their job.”Banks in Europe are, as we learned during the recession, are over-leveraged, which creates financial vulnerability and stagnant growth for companies and nations alike.

The over-leveraging of lenders creates another deadly problem: lack of liquidity.  Countries and companies alike have found it increasingly difficult to secure credit to grow or recover from the recession.  There’s a dimension of inequality in this credit shortfall; countries like Spain and Greece were only given loan options at exorbitant interest rates.  The ECB refused to help out these southern European nations; thus, they had to resort to devastating austerity measures.  Echoing Keynes, Aglietta writes that, “The success of the [Danish, Canadian & two Swedish balanced budget initiatives] derived from the fact that they were initiated when growth had been restored following a recession, not during the recession. Prior closure of the output gap was a condition of success.”  Thus, he advocates for establishing a lender-of-last-resort for EU nations.

A lack of liquidity also stymies investment; both pubic and private investment expenditures have been stagnant across Europe.  The average European company is falling behind in terms of R&D, automation machinery, exports and innovation.  European tech companies are likewise falling behind in the crucial AI race.  Governments are also failing to adequately invest in infrastructure, job re-training for the hordes of the unemployed, public childcare to encourage female labor participation and countless other issues.  Aglietta thus endorses a pan-European development bank that lends to Small-Medium Enterprises (SMEs) and national governments.

Serious reforms are needed amongst Europe’s major banks.  This will require unprecedented cooperation between EU members… unlikely, given the current political climate.  But as Aglietta wrote in his last book, there is no divorcing finance from politics.  All of the issues plaguing Europe will need to be addressed via unified government action and partnership with businesses, especially small businesses.  Unemployment across Europe has greatly retarded productivity and fanned the flames of xenophobia and fascism.  This problem will only become a bigger threat in the coming decades; the author writes that, “Automation reduces the need for unskilled labor and reinforces the need to invest in skills, to respond to demands for skilled labor. It follows that life-long education must become a fundamental right of citizenship.”  In the short term, Aglietta also vouches for the importance of instituting an EU unemployment insurance program.  Likewise, addressing inequities in female labor participation and wages will strengthen economic output, discretionary spending and household stability.

The book has a whole chapter devoted to an EU iteration of the Green New Deal.  A government investment initiative of clean energy jobs, sustainable infrastructure like wind farms, reversing water/air/soil pollution, retrograding old buildings, etc. will solve the aforementioned problems of unemployment and stagnant productivity.  Such ventures will have to be funded by a fairly valued carbon tax and pan-EU “green” bonds, among other things.  With the Trump Administration’s abdication of leadership on climate change, the EU can potentially challenge China for global dominance in the emerging green economy.

The Reform of Europe is a comprehensive look at the causes and solutions of the EU’s most pressing problems.  American readers will also sympathize with the book’s descriptions of the EU’s post-recession malaise and hear echoes of the progressive-Democrat agenda in things like the Green New Deal, free college and the reining-in of banks that use their creditors’ money-and the whole world economy- as their personal casino.  Aglietta addresses the inequality between Western Europe & the rest of Europe, men and women in the workplace, the educated and non-educated, workers and the shareholders, and citizens vs. polluters.  His solutions are steeped in modern monetary theory, which is contingent upon having a sovereign currency.  The euro is obviously a supra-sovereign currency, so Aglietta writes about the need for it to become a “complete currency” through the complete cooperation of EU members on fiscal and monetary policy.  A fully united EU can jumpstart liquidity, mitigate future market shocks, decrease intra-European inequality, increase civic engagement and even challenge the global supremacy of the dollar.  No one can argue that the EU as currently constituted is sustainable, what with Brexit, the rise of Euro-skeptic fascist movements in major countries like Italy and France, and the collapse of Greece.

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Complicated puzzle in the UK

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Britain’s withdrawal from the European Union has become a major riddle in the country. Many English citizens do not have a complete understanding of the EU, the British government and the UK Parliament’s move to leave the European Union. However, the British authorities seem to have planned a tentative game.

Recently, some western news sources are speaking of an issue called “repeating the Brexit referendum”, and name it as a possible option! An option that had been previously denied by British authorities, including Theresa May, the Prime Minister of the country. According to the France news agency, regarding the increasing doubt about the British Prime Minister’s efforts to conclude an agreement with United Europe, the possibility of holding a second referendum on Brexit has multiplied.

However, one of the goals of the English authorities is to complicate the exit process of the European Union. Accordingly, “Brexit” continues to be an implicit term in Britain’s political equations. the British government, with its widespread negative propaganda against the Brexit, is seeking to re-arrange a referendum. In other words, the European authorities are trying to direct the public opinion about the Brexit.

It should not be forgotten that both Labor and Conservative parties in the UK in the 2016 referendum were opposed to withdrawal from the European Union. The negative propaganda of Theresa May’s government against the Bexit since 2016 is known to everyone. After the British citizens voted to leave the European Union in 2016, the two Labor and Conservative parties (as UK’s two traditional parties) tried their best to change the general vote on this issue.

 The active role played by people like former British Prime Minister Tony Blair can well indicate the dissatisfaction among British authorities over the Brexit. Although it seems that Theresa May is trying to convince legislators to give a positive vote to this agreement, not only members of the Labor Party, but also some members of the Conservative Party are opposing it. The MPs argue that Brexit is basically contrary to the interests of the UK.

 Meanwhile, supporters of the “People’s Vote” campaign, who is now very active in England, believe that the parliament’s negative vote will pave the way for a new referendum on the Brexit. This issue is no way contrary to the demands of Theresa May and the Conservative Party, but it’s secretly supported by them. 

Puzzles in the UK over the country’s exit from the European Union are becoming more and more complex. The European Union is also keen on the continuation of this complicated game. However, it is still not clear if England will eventually leave the European Union. As mentioned, the two traditional British parties were both opponents of leaving Europe.

Labor Party officials led by Jeremy Corbin have also agreed to vote again on the Brexit, and have officially backed this issue. The fact that Britain’s two rival parties have come to an agreement on holding a new referendum has provided the ground for its ultimate realization.

First published in our partner MNA

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Rift deepens between US and EU over Iran

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Munich Security Conference 2019: A view of the main conference hall, Image source: MSC / Kuhlmann

Recent days have been witness to two important events: the Middle East Conference in Warsaw (co-hosted by Poland and the US State Department from February 13-14, 2019) and the Munich Conference. Differences between the EU and US over dealing with challenges in the Middle East, especially concerning Iran, were primary during both events.

The Middle East Conference in Warsaw somewhat lacked legitimacy as a number of important individuals were not present. Some of the notable absentees were the EU Foreign Policy Chief, Federica Mogherini, and the Foreign Ministers of Germany, France, and Italy. Significantly, on February 14, Iranian President Hassan Rouhani, Russian President Vladimir Putin, and Turkish President Recep Tayyip Erdogan met in Sochi, Russia to discuss the latest developments in Syria and how the three countries could work together.

The personalized aspect of Trump’s diplomacy

In addition to the dissonance between the EU and US over handling Iran, the dependence of Trump upon his coterie, as well as his overly-personalized diplomacy, was clearly evident. Trump’s son-in-law and senior advisor, Jared Kushner, spoke about the Middle East peace plan at the Warsaw Conference, which Trump will make public, after elections are held in Israel in April 2019. The fact that Netanyahu may form a coalition with religious right-wingers could of course be a major challenge to Trump’s peace plan. But given his style of functioning and excessive dependence upon a few exclusive members within his team who lack diplomatic and political experience, this was somewhat expected.

EU and US differences over Iran

While Israel, the US, and Arabs seem to have identified Iran as the main regional threat, the European Union, while acknowledging the threat emanating from Iran, made it amply clear that it disagreed with the US method for dealing with Iran unilaterally and was against any sort of additional sanctions. US Secretary of State, Mike Pompeo, even went so far as to state that the goal of stability in the Middle East could only be attained if Iran was ‘confronted’. The EU, unlike the US, is opposed to the US decision to get out of the Joint Comprehensive Plan of Action (JCPOA).

At the Warsaw Conference, Vice President Mike Pence criticized European Union member countries for trying to circumvent sanctions which were imposed by the US. Pence was referring to the SPV (Special Purpose Vehicle) launched by Germany, France, and Britain which de facto undermine US sanctions against Iran. The US Vice President stated that the SPV would not just embolden Iran but could also have a detrimental impact on US-EU relations.  

Differences at Munich Conference

The differences between the US and EU over Iran were also visible at the Munich Conference. While Angela Merkel disagreed with Washington’s approach to the Nuclear Deal, she agreed on the threat emanating from Iran, but was unequivocal about her commitment to the JCPOA. While commenting on the importance of the Nuclear Agreement, the German Chancellor said:

“Do we help our common cause…of containing the damaging or difficult development of Iran, by withdrawing from the one remaining agreement? Or do we help it more by keeping the small anchor we have in order maybe to exert pressure in other areas?”

But it was at the Munich Conference that the US Vice President clearly flagged Iran as the biggest security threat to the Middle East. Pence accused Iran of ‘fueling conflict’ in Syria and Yemen, and of continuously backing Hezbollah and Hamas.

GCC Countries at the Warsaw Conference

It is not just the US and Israel, but even representatives of GCC Countries took a firm stand against Iran. A video leaked by Israeli Prime Minister Benjamin Netanyahu revealed this.

Bahraini Foreign Minister Khaled bin Ahmed Khalifa stated that it was not the Israeli-Palestinian Conflict but the threat from Iran which posed the gravest threat in the Middle East.  Like some of the other delegates present at the Warsaw Conference, the Bahraini Foreign Minister accused Iran of providing logistical and financial support to militant groups in the region. Similarly, another clip showed the Saudi Minister of State for Foreign Affairs, Adel Al Jubeir, saying that Iran was assisting and abetting terrorist organisations by providing them with ballistic missiles.

Iran was quick to dismiss the Middle East Conference in Warsaw and questioned not just its legitimacy but also the desired outcome. Iranian President Hassan Rouhani stated that the conference produced an ‘empty result’.

US allies and their close ties with Iran

First, the US cannot overlook the business interests of its partners not just in Europe, but also in Asia, such as Japan, Korea, and India. India is not just dependent upon Iran for oil, but has significantly invested in development of the Chabahar Port. This will be its new modern gateway to Afghanistan and Central Asia. New Delhi in fact took over operations of the Chabahar Port in December 2018. On December 24, 2018 a meeting – the Chabahar Trilateral Agreement — was held and representatives from Afghanistan, Iran, and India jointly inaugurated the office of the India Ports Global Chabahar Free Zone (IPGCFZ).

The recent terror attacks in Iran as well as India have paved the way for New Delhi and Tehran to find common ground against terror emanating from Pakistan. On February 14, 2019, over 40 of India’s paramilitary personnel were killed in Pulawama (Kashmir) when a suicide bomber attacked a convoy of Central Reserve Police Personnel (CRPF). The attack is one of the worst in recent years. The terror group Jaish-E-Muhammad claimed responsibility. On February 13, 2019, 27 members of Iran’s elite Revolutionary Guards were killed in a suicide attack in the Sistan-Baluchistan province which shares a border with Pakistan. Iran stated the attack was carried out by a Pakistani national with the support of the Pakistani state.

In the aftermath, the Indian Foreign Minister, Sushma Swaraj, met with Iranian Deputy Foreign Minister Seyed Abbas Aragchchi en route to Bulgaria. In a tweet the Iranian Deputy Foreign Minister stated that both sides had decided to strengthen cooperation to counter terrorism, remarking that ‘enough is enough’. This partnership is likely to evolve further. In fact, many strategic commentators in India are pitching for an India-Afghanistan-Iran security trilateral agreement to deal with terrorism.

Conclusion

 So far, Trump’s Middle Eastern Policy has focused on Iran and his approach suits both Saudi Arabia and Israel but it is opposed by a number of significant US allies. As a result of the recent terror attack in Pulwama, geopolitical developments within South Asia are extremely important. Thus, the US and GCC countries need to keep a close watch on developments in South Asia and how India-Pakistan ties pan out over the next few weeks. If Iran strengthens ties with India, and given the fact that it already has Russian support, achieving its isolation will be tough for America. New Delhi may have no option but to enhance links with Tehran given its own national security interests in the region. Trump needs to be more pragmatic towards Iran and should think of an approach acceptable to all, and not just the small cabal within his Cabinet that view the region from an anti-modern perspective.

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Montenegrin political earthquake

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In mid-January, across Montenegro, one video clip caused a real political storm. For the first time it was seen how a businessman close to the government gives 97,000 euros to Slavoljub Stijepovic, former mayor of capital Podgorica and senior official of the rulling Democratic Party of Socialists (DPS), to fund the election campaign. It all happened ahead of the parliamentary elections in 2016. Dusko Knezevic, chairman of the Montenegro-based Atlas Group, meanwhile suspected of money laundering and other financial malversations, explained that this was just one in series of multi-million donations to the DPS of President Milo Djukanovic, during which time the DPS has never been out of power. This video clip was the first concreate confirmation of something that has long been an open secret in Montenegro.

Ten days after the release of the video Djukanovic confirmed that Knezevic was a donor, but not in the figures stated by Knezevic. The Prosecution Office needed three days to make a statement after Knezevic’s video, which shocked most of the public. Also, it was shocking how the Prosecution Office led the investigation. Thus, after the audio recording as part of the affair Atlas, the former Vice Governor of the Central Bank Velibor Milosevic was arrested expressly, because of the suspicion of being part of a criminal organization, for whose boss is marked Dusko Knezevic. Milosevic was detained for up to 30 days, due to possible influence on witnesses. On the other hand, the video from the beginning of the story was not a sufficient reason to treat Slavoljub Stijepovic in the same way. He was interviewed only 20 days after the appearance of the video, as a citizen. Unlike Velibor Milosevic, who was detained by the prosecutor with handcuffs and in front of television cameras, Stijepovic had the privilege to come to the Prosecutor’s office through the premises of the Ministry of Justice and to come out unnoticed.

The Prosecution Office decided to suspect Stijepovic for the criminal offense of Money Laundering by helping, but Prosecution Office in his case, as in the case of Velibor Milosevic, did not see a threat to the influence of witnesses or the need for detention. According to some media reports, Stijepovic took the guilty upon himself, which is why the Prosecution assessed that there was no need for the hearing of Milo Djukanovic, president of Democratric Party of Socialists and Montenegro. Stijepovic also reportedly told the Prosecution Office the names of DPS activists from the Zeta region who received money. More than 20 were heard in the Prosecutor’s Office, no detention was ordered.

Reaction

On the same day when he was charged with a criminal offense, Stijepovic  came to the session of the Presidency of the Democratic Party of Socialists, where “traditional centers of destruction”, media and other circles, were blamed for current affair, aimed at destabilizing the country. Milo Djukanovic, according to a tried-and-tested model, tried to show that behind this affair are centers of power from Russia. So his media machine was trying to show that Dusko Knezevic is in Moscow and that he work at the orders of the Russian intelligence services. However, it soon became clear that Dusko Knezevic is in London. In an interview with Al Jazeera Balkans in London, Dusko Knezevic presented new accusations against Milo Djukanovic. Dusko Knezevic stated that he has a lot of videos that shows how he personally gives money to Djukanovic. He keeps these videos for the finals of the affair, when he says, will completely reveal the criminal octopus of Milo Djukanovic.

This criminal affair encouraged people to action. Soon protests were organized. The first protests were held on February 2. The protest was organized by a group of citizens who claimed that they started “civil struggle” against the regime in Montenegro, and that behind them stands no organization. With whistles and sirens, the demonstrators scandalized the “Street of Freedom”, “Rise Up, People”, “We Want Justice”, after which they left 97 envelopes in front of the building of the Supreme State Prosecutor’s Office, on which they wrote “1,000 Euros” on the one hand, and on the other some of the long-standing unsolved affairs that the Prosecution should solve. On Saturday, February 16th, second large gathering was held in the capital of Montenegro, where the demands to the Protesters Office were presented. From the protest gathering, held under the slogan “97,000 Resist”, urgent and irrevocable resignations were sought from the president of the state and the government, Milo Djukanovic and Dusko Markovic, Supreme State Prosecutor (VDT) Ivica Stankovic, Special State Prosecutor (SDT) Milivoje Katnic and Director of the Agency for the Prevention of Corruption (ASK) Sreten Radonjic. Since Dusko Knezevic has said that there is a part that is not corrupt in the Democratic Party of Socialists, the protestants decisively denied that. The current events with the new affair of Milo Djukanovic were also used by Albanians from the United States. A truck with the inscription “Meet the Montenegrin president – a man of organized crime in the year 2015” was parked near the White House, the Congress, the State Department, the Montenegrin and the EU Embassy in Washington. On the truck also stood the message “Stop the discrimination of Albanians in Montenegro”.

Conclusion

Montenegro, which is, a NATO member since July 2017 and a candidate for EU membership, is often accused of not doing enough to tackle organized crime and corruption. EU has demanded more concrete results in the fight against corruption at a high political level as one of the main conditions for its making progress towards joining the EU. The entire rule of Milo Djukanovic is marked by affairs, but what this sets out is the fact that Dusko Knezevic is an insider, a man who took part in many important tasks. In addition to his testimonies, Dusko Knezevic also presents video recordings as well as documents. What many analysts spoke and warned about long time ago, now is documented. This affair also clearly demonstrated that all institutions in Montenegro are under the control of Milo Djukanovic. Initially, the scandalous silence of the Prosecution Office after the outbreak of the affair, the subsequent refusal to execute detention measures for Stijepovic, but above all the absence of a hearing of Djukanovic despite the unquestionable evidence of his involvement in illegal work, is in favor of the long-held thesis that these institutions are an integral part of the regime. Judicial institutions do not even try to show that they are independent. There is no doubt that the affair initiated by Montenegrin businessman Dusko Knezevic seriously shaken Milo Djukanovic and his party. It is still early to predict how the affair will culminate because all the evidence Knezevic announces has not yet been published. However, this is clear indication that the West has decided to significantly weak Djukanovic. An attempt by the media machine of Mila Djukanovic to connect Dusko Knezevic with Russian intelligence services, is not accepted in the West. Dusko Knezevic clearly shows that he is doing all the attacks on Djukanovic from London, where he currently lives. The fact that some political parties that are close to the Western Embassies support street protests, which was not the case before, speaks enough. One of the reasons why Milo Djukanovic has been ruling for almost three decades is complete obedience to the West. However, Djukanovic did all the tasks that the West needed, the separation of Montenegro from Serbia, the recognition of Kosovo’s independence, and finally the violent entry of Montenegro into NATO. Now with his biography, which is full of affairs, he is only a burden to the West. In any case, this affair will either take Djukanovic out of power or send him a clear message that it is time for political retirement.

First published in our partner International Affairs

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