Sunday 23 November 2014

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In early 2010, fears of a sovereign debt crisis, the 2010 Euro Crisis developed concerning some European states. What should be the response? How should economic and financial policies be coordinated at the EU level?


How close did the Dutch come to ditching the euro?

Posted by on 19/11/14

The Guilder - was it close to making a comeback? 
Yesterday, former Dutch Finance Mininister Jan Kees de Jager, who held the role until November 2012, revealed something very interesting. Apparently, the Dutch government, together with the German govenrment, made contingency plans during the height of the eurozone crisis for the two countries to ditch the euro. A “team” of lawyers, foreign policy experts and economists were employed to investigate different scenarios,. One was to reintroduce the “guilder”:
"The team met regularly on Friday afternoons, but could also be present very quickly in case we needed to make a decision"
He also revealed how Germany was closely involved but other countries were less keen to prepare:
"Some countries considered the fact that several scenarios were being discussed in Europe already very scary. Remarkably enough they did not do this. We were one of the few countries[to discuss scenarios], together with Germany. We even had a team discussing scenarios, Germany-Netherlands.”
Finance Minister Jeroen Dijsselbloem also admitted that the Dutch government was at one point “preparing for the worst case scenario”, saying:  
 “Heads of government, including the Dutch cabinet, always said: ‘We want to keep the euro together and to keep the euro as a single currency.’ That said, we also looked at what would happen if that didn't succeed”.
Dijsselbloem added that no guilder notes were actually printed, and unlike de Jager, he refused to confirm whether Germany had made similar preparations.

This of course is in line with what we've heard before. The Dutch Central Bank has already admitted it made some contingency plans for a euro exit in 2012, while De Volkskrant has revealed that, in June 2012, Prime Minister Mark Rutte threatened the possibility of the Netherlands exiting the euro. Nevertheless, the detail and the format of the planning highlights just how seriously this was taken.

We can't help but feel it puts the continuous protestations by ECB President Mario Draghi that the single currency is  "irreversible" into a new light...

Outcry from Greece, a dissolving country

Posted by on 18/11/14
By Dimitris Rapidis Four years of harsh economic austerity are certainly not a fundamental factor for a country to dissolve. But as 2014 comes to an end, we might state that Greece is a state in full dissolution.

Steuervermeidungspraxis in Luxemburg und Europa

Posted by on 13/11/14

Der neue Kommissionschef hat heute noch einmal die Kurve gekriegt. Nach tagelangem Schweigen und immer breiteren Schlagzeilen in den Zeitungen hat Jean Claude Juncker endlich die Flucht nach vorne angetreten und sich den bohrenden Fragen angesichts der großflächigen Steuervermeidungspraxis in Luxemburg gestellt.

Ein erster, ein überfälliger Schritt. Denn ein Kommissionspräsident auf Tauchstation angesichts so schwerwiegender Vorwürfe hätte sehr schnell alle Sympathie verspielt.

Nun also hat Juncker endlich geredet und dabei versucht, eine Verteidigungslinie aufzubauen, hinter die sich auch schon der Luxemburger Finanzminister Pierre Gramegna vor ein paar Tagen verschanzt hatte. Im Kern lauten die Argumente: Die Absprachen zwischen Finanzbehörden und Konzernen stellten keinen Bruch der bestehenden Gesetze dar. Und nicht nur Luxemburg dürfe am Pranger stehen, die anderen Staaten hätten es schließlich genauso gemacht. Aber wenn manche Konzerne überhaupt keine Steuern mehr bezahlten, dann bestehe natürlich Handlungsbedarf.

Um es klar zu sagen: Es ist eine äußerst schwache Verteidigungslinie. Und Juncker ist angeschlagen, daran besteht kein Zweifel mehr. Auch wenn die Vorwürfe nicht substanziell neu sind, auch wenn sie schon vor seiner Nominierung zum Kommissionspräsidenten immer wieder öffentlich thematisiert worden sind.

Doch das Ausmaß der organisierten Steuervermeidung in Luxemburg erschüttert und hat damit auch den früheren Premier des Großherzogtums erheblich beschädigt, der heute – ausgestattet mit einem neuen Amt – für mehr Gerechtigkeit und Transparenz in Europa kämpfen will. Doch es ist kaum vorstellbar, dass der Aufstieg Luxemburgs zum zweitgrößten Finanzplatz der Welt ohne die notwendige politische Rückendeckung erfolgen konnte. Und dass dabei bereitwillig in Kauf genommen worden ist, dass einige Konzerne fast keine Steuern mehr bezahlen mussten.

Das ist und bleibt vorerst Junckers Problem und damit das der neuen EU-Kommission, die nun merklich geschwächt ist, bevor sie überhaupt richtig zu arbeiten begonnen hat. Was übrigens einigen Mitgliedstaaten durchaus gelegen kommen dürfte.

Sieht man es positiv, könnte Luxemburg-Leaks aber neuen Schwung in die vielen Anläufe bringen, die Steuergesetzgebung in Europa weiter zu harmonisieren. Zumindest die EU-Kommission wird nun schon aus Selbsterhaltungstrieb einiges daran setzen, die bestehenden Löcher weiter zu stopfen.

Doch ob hier auch die Mitgliedstaaten mitziehen werden, bleibt abzuwarten. Ebenso, was die laufenden Ermittlungen der Kommission gegen Luxemburg und andere Länder noch alles ans Licht bringen werden. Juncker hat der zuständigen Wettbewerbskommissarin Vestager völlig freie Hand versprochen. Sollte aber die Dänin gerade Luxemburg den Aufbau eines Systems zur systematischen Steuervermeidung nachweisen, wäre der so furios gestartete neue Kommissionspräsident politisch wohl kaum noch zu halten.

Juncker responds to Luxleaks tax scandal

Posted by on 12/11/14
By Open Europe European Commission President Jean-Claude Juncker has made an impromptu appearance at the midday press briefing to make a statement on the leaked documents showing the significant number of favourable tax deals given to corporations by the Luxembourg government during his tenure as prime minister and/or finance minister (1989 - 2013). The key points...

Life after the ECB’s stress tests

Posted by on 06/11/14
by Vicky Pryce, Chief Economic Adviser at CEBR and author of ‘Greekonomics’, Biteback Publishing, 2013 /// Has the Asset Quality Review (AQR) and the accompanying stress tests done their job? It is worth reflecting on it now that the excitement has died down, at least temporarily. They had been expected with a considerable holding of [...]

EU – Wirtschafsprognosen

Posted by on 05/11/14

Haben die Verantwortlichen der Wirtschaft Europas auch eine wirtschaftliche Kompetenz? Nach dem Höhepunkt der Finanzkrise war es für vernünftige Menschen offenkundig, dass Sparhaushalte in Verbindung mit einer Politik des knappen Geldes die erhoffte Erholung der Wirtschaft in Europa behindern würden. Die Sparsamkeit ist bis vor kurzem beibehalten worden. Heute schwenken die gleichen Verantwortlichen das Schreckgespenst der Deflation, die die Krise in Europa um mehrere Jahre verlängern könnte. Die Hexenmeister warnen uns vor den Ergebnissen ihrer schlechten Erfahrungen. Aus dieser Tragikomödie gibt es nur einen Ausweg: Eine radikale Kursänderung der europäischen Wirtschaftspolitik, der Europa insgesamt zum Opfer fallen könnte.

Commission forecasts paint a less than optimistic picture for eurozone outlook

Posted by on 04/11/14
The European Commission has this morning released its Autumn 2014 Economic forecasts. While these forecasts can often be quite mundane owing to the very managed message they are trying to send, this set look to be a bit different (see here for our take on Winter 2014 and Autumn 2013). Maybe unsurprisingly the tone to more sceptical, critical and possibly realistic. Below outline some interesting themes.

Another downward growth revision
Once again growth for the Eurozone has been revised down. The previous forecast saw 1.2% and 1.8% growth in 2014 and 2015 respectively. The new forecast predicts 0.8% and 1.1% respectively, quite a significant downward revision, especially since growth next year is now expected to be below the original forecast for this year. The initial blame (in the press release) for this revision seems to be laid at the feet of “increasing geopolitical risks and less favourable world economic prospects”. However, that raises the question of why it is seen as enduring up to 2016. In the report itself the assessment is thankfully more candid highlighting “incomplete internal and external adjustment” and “low productivity gains”.

More realism about the labour market
There is a wider acceptance in these forecasts that unemployment will remain elevated for some time and that differences in labour market performance will persist. That said, at the moment any real prospect on employment growth in the Eurozone seems optimistic.

Bad news in nearly all the large economies
France and Germany’s growth prospects for this year have been revised downwards to 0.3% and 1.3%, from 1% and 1.8% respectively. Italy is expected to contract by 0.4% this year and only grow 0.6% and 1.1% in 2015 and 2016 respectively. Given that these three countries account for nearly 60% of Eurozone GDP this suggests a very poor outlook for the Eurozone with growth risks tilted to the downside. In general, the core vs. periphery split is less clear in this report, at least in growth terms as many countries are now acting as a drag on the Eurozone economy for a number of reasons.

Significant and increasing reliance on domestic over external demand
Early on in the crisis there was a clear focus on facilitating export led recoveries, often in the German model. However, over the past 12 – 18 months this has shifted, possibly driven by global economic weakness, and these forecasts finalise the shift. The Commission itself says,  “Net exports are likely to contribute only marginally to GDP growth over the forecast horizon”. Spain is a prime example of this, see here for a longer discussion of the issue.

While finding a balance between the two is important (we cannot have 18 Germanys in the Eurozone) the shift may have been too stark. Let’s not forget that there is still a huge amount of public and private debt (both household and corporate) in the Eurozone, especially in problem countries. This will limit potential domestic demand growth. So while the flows are shifting in a way which should see an uptick in domestic demand, we should not forget that the huge stock of debt may provide a ceiling on this as a driver of growth.

Low inflation is here to stay
The Commission has also downgraded its inflation forecast with CPI expected to be 0.8% in 2015 compared to previous forecast of 1.2%, while it is only expected to be 1.5% in 2016. The forecast for 2015 is below the ECB’s of 1.1% but the 2016 is above the ECB’s which is 1.4%. Interestingly, the Commission continues to make the case that “low, or negative, inflation rates as part of [some countries] inevitable adjustment process”. This is an argument which has been absent all recent ECB press conferences. In terms of deflation, the Commission sides with the ECB, saying the risks of outright deflation remain low.

We’ll update the blog throughout the day as we pour over the 185 page report. But for now, we’ll leave you with a thought from Commissioner Jyrki Katainen in the press conference, when asked how much the forecasts can be trusted given a history of being incorrect he simply responded, “Nobody knows”. Quite.

51 countries back deal in tax evasion clampdown

Posted by on 03/11/14

Political Consultant Ben Rochelle highlights a groundbreaking deal intended to prevent tax evasion.

To read Ben’s article, please click here.

The Whitehouse Consultancy is one of Europe’s leading public affairs and communications agencies.

Hacia la tercera recesión sin freno cuesta abajo y erre que erre

Posted by on 02/11/14

La ya larga crónica de la crisis económica que nos azota desde la caía de Lehman Brothers el 15 de septiembre de 2008, hace ya seis cruentos años, nos debería ir dejando suficientes lecciones y experiencias prueba error como para ser capaces de articular reformas del modelo que nos ha llevado hasta aquí. Sin embargo, conocido es que pese a que al ser humano le hayamos autobautizado como el homo sapiens, su capacidad para cometer errores y lo que es peor para perpetuarse en ellos, es casi ilimitada. Por desgracia, es el caso de las políticas europeas impuestas desde Alemania para el resto de la Unión. El Atlántico que debería unirnos más que separarnos, ha marcado una clara línea diferenciadora entre las medidas adoptadas en Estados Unidos por la Reserva Federal y los Gobiernos del presidente Obama y las correspondientes llevadas a efecto por la Comisión Europea y el Banco Central Europeo al dictado de la canciller Merkel. Resultados a fecha de hoy de uno y otro lado: EE.UU. creciendo al 3,5% y con una tasa de paro por debajo del 5%, mientras que las principales economías de la zona euro están estancadas y con niveles de desempleo en torno al 15%. Y todo ello, con la grotesca situación monetaria de un euro valorado por encima del dólar. El hecho diferencial muy simple, mientras Estados Unidos tomó el camino de los estímulos, Europa optó por la austeridad, unos adoraron a Keynes y otros lo hicieron a Friedman.

La presidenta de la Reserva Federal Janet Yellen acaba de anunciar urbi et orbi el fin de la era de los estímulos y lo ha hecho pacíficamente señalando que ya no hacen falta. Su homólogo europeo, aun no tan todopoderoso, Mario Draghi, no se cansa de repetir a los jefes de Estado y de Gobierno que con meras medidas monetarias no saldremos de la doble W cíclica en que han convertido nuestra economía. Llevamos cuatro años, saldados los dos primeros de la crisis dedicados al absurdo esfuerzo de salvar, que no sanear, un sistema financiero especulativo y corrupto, viendo como el crecimiento aflora tímidamente, para volver a caer a los seis meses. De los brotes verdes del 2% al 0% con claros síntomas de estanflación. Y nuestros líderes se miran atónitos, escuchan a sus euritos asesores de cabecera durmientes y se quedan paralizados sin articular una sola decisión. Un continente viejo y avejentado, cuyos jóvenes buscan nuevos retos en nuevos destinos alejados de nosotros, que lo único que sabe hacer es decirle grandilocuentemente al mundo que hará todo lo que haga falta para sacarnos de la crisis.


El diagnóstico de nuestra enfermedad no es tan complicado. A Europa le está matando la globalización, la presión de los productores emergentes en un mercado abierto y, sobre todo, su incapacidad de ser más eficiente y competitivo, no en la reducción de los costes de producción, sino en los procesos de investigación e innovación, es decir, en el conocimiento. No soy partidario de los rankings, de cualquier tipo, pero aunque solo sea como vara de medir, año tras año estamos observando cómo el liderazgo en la gestión del conocimiento humano se está desplazando del Atlántico, donde llevaba instalado casi 300 años, al Pacífico. El liderazgo del mundo ha emprendido un camino, tal vez sin retorno, contrario a la rotación solar, de Oeste a Este y hoy las universidades vanguardia están en Estados Unidos y en China. De hecho la propia China ya es la primera economía mundial y soporta el 60% de la deuda pública norteamericana. Y, por si fueran pocos nuestros males, la UE adolece de fuentes de energía de recurso propio para alimentar su industria y su consumo, un problema que también acometemos a paso de tortuga con una energías alternativas de alto coste y ridículas inversiones en investigación en este campo. ¿Para cuándo una política energética común? Pero al fin y al cabo, siempre podemos decir que en Europa se vive mucho mejor, que tenemos los mejores vinos, los mejores restaurantes y, cómo no, los mejores museos, o más bien que nos estamos convirtiendo en un enorme museo que atesora el espíritu de Occidente. Los ancianos guardianes de una civilización en proceso de extinción.

Pero que no cunda el pánico, aleluya hermanos, la semana que viene tenemos nueva Comisión Europea, ese grupo de hombres y mujeres con la fácil empresa de cambiar Europa y ponerla al frente del mundo. Claro que aunque tuvieran la voluntad de hacerlo, valor debemos suponerles, e incluso fueran capaces de hacerlo, aptitudes ya tengo más duda que tengan, tendrían que dejarles esos jefecillos de Estados venidos patéticamente a menos, que se envuelven en sus banderas dieciochescas para tratar de demostrar que aun pintan algo en un universo que se nueve a millones de giga bits por minuto y donde un fondo de inversión puede comprarles o dejar caer el 30% de su deuda en una decisión única. O sea que tenemos el pequeño inconveniente de nuestra propia insignificancia. La de tratar de permanecer en estructuras obsoletas y caducas, la de impedir el cambio y la regeneración de nuestro tejido, el económico, pero sobre todo el social.

Tal vez todo lo dicho suene a pesimismo y eso que viene de un optimista y de un europeista congénito. Pero los síntomas de la enfermedad se agravan y los responsables de la curación están más preocupados de su aspecto que de la intervención quirúrgica. Urge liderazgo en Europa, urge federalismo integrador en Europa, urge regeneración democrática en Europa, urge poner el conocimiento al frente de Europa, urge pensamiento sobre Europa, pero ante todo, urge Europa. Sin Europa unida nuestro mundo tal y como lo conocemos desaparecerá. El enemigo existe y está a las puertas nuestras fronteras de ricos acomodados. Se llama hambre, se llama ébola y también se llama un fanático cortando cabezas para exponerlas en Internet en nombre de Alá. Podemos seguir dormidos en nuestra autocomplacencia pero el reloj de la historia de nuestra caducidad no para y el de los males que nos acechan se acelera. Es tiempo de reacción.


Can the eurozone escape Italy?

Posted by on 02/11/14
About two weeks ago I found myself in a conversation with a lady at a dinner party. She spoke at length about Italy and kept repeating more and more loudly that “Italy has collapsed”. That may be true. In trying to make her understand my slightly more nuanced position I made the point that the [...]

¥uan and Waterloo of Petro$ (Part 1/2)

Posted by on 30/10/14

yuan logoOngoing western sanctions due Ukraine are pushing China and Russia to close cooperation – the great Eurasian axis is already in motion. Despite the headlines in mainstream western media related to civil war in Ukraine the primary war is being fought monetarily. The Russia-China Strategic Partnership (RCSP) is truly global in scope, having come to encompass the entire world to varying degrees. The Ukraine War might be the U.S. Dollar Waterloo event.

As the Americans and their allies are trying to squeeze Russia and Iran with a combination of economic sanctions and political isolation, alternative poles of power are emerging that soon may present a serious challenge to the U.S.-dominated world that emerged from the end of the Cold War.

The Russian response to ongoing western sanctions has been launching a counter-strategy that could bring the cost boomeranging right back to Washington. Namely, the formation of a potential non-dollar trading block among major players in the global energy markets including Iran and China.



The end of the Petrodollar

(In 1971 Richard Nixon was forced to close the gold window taking the U.S. off the gold standard and setting into motion a massive devaluation of the U.S. dollar.In an effort to prop up the value of the dollar Nixon negotiated a deal with Saudi Arabia that in exchange for arms and protection they would denominate all future oil sales in U.S. dollars. )

For decades, virtually all oil and natural gas around the world has been bought and sold for U.S. dollars. Since World War II, America’s geopolitical supremacy has rested not only on military might, but also on the dollar’s standing as the world’s leading transactional and reserve currency.

Last year Russia produced about 10.5 million bbls. of oil per day and exported 70% of it. That amounts to nearly 2.6 billion barrels with a value of nearly $250 billion at world market prices. It also exported the equivalent of nearly 1 million barrels per day of natural gas with a market value of upwards of US$50 billion. The truth is that Russia is the largest exporter of natural gas and the second largest exporter of oil in the world. If Russia starts asking for payment in currencies other than the U.S. dollar, that will essentially end the monopoly of the petrodollar.

China just overtook the US as the world’s largest economy. The US national debt is now past €17 trillion. China – their biggest creditor – has been cutting on US debt holdings and hoarding gold on the side to be prepared for the possible collapse of the dollar. The US federal government ran an estimated budget deficit of $486 billion, or 2.8 per cent of GDP, in fiscal year 2014. By contrast, Russia just posted a federal budget surplus of 2 per cent of GDP.

dollar collapseWhen U.S. politicians started plan economic sanctions on Russia, they probably never even imagined that there might be serious consequences for the United States. But now the Russian media is reporting that the Russian Ministry of Finance is getting ready to pull the trigger on a “de-dollarization” plan. For decades, virtually all oil and natural gas around the world has been bought and sold for U.S. dollars. As I will explain below, this has been a massive advantage for the U.S. economy. In recent years, there have been rumblings by nations such as Russia and China about the need to change to a new system, but nobody has really had a big reason to upset the status quo. However, that has now changed. The struggle over Ukraine has caused Russia to completely reevaluate the financial relationship that it has with the United States.

The largest natural gas producer on the planet, Gazprom, has signed agreements with some of their biggest customers to switch payments for natural gas from U.S. dollars to euros. If other nations start following suit – start trading a lot of oil and natural gas for currencies other than the U.S.$ – that will be a massive blow for the petrodollar, and it could end up dramatically changing the global economic landscape.

Moscow, allied with the BRICS, is actively working to bypass the US dollar. The core point is that Russia is not alone. Besides the BRICS also the G-77, the Non-Aligned Movement (NAM), the whole Global South is critical to U.S. led bullying and would like to have other alternative in international relations. This past summer, the BRICS countries created an alternative to the largely U.S.-controlled World Bank and International Monetary Fund (IMF), and the Shanghai Cooperation Organization (SCO) added 1.6 billion people to its rolls.

G-7 vs E-7

Back in 1971, it was necessary to assure that the dollar would retain its position in world trade as the world’s premiere currency, in spite of the fact that it was no longer backed by anything. The U.S. reached an agreement with Saudi Arabia that, in trade for arms and protection, the Saudis would denominate all future oil sales, worldwide, in dollars. The other OPEC countries fell into line, and the “petrodollar” was assured.

Now the Sino-Russian cooperation is challenging the Americans, and there are many countries that would be happy to join them in dethroning the US dollar as the world’s reserve currency. The historic gas deal between Russia and China is very bad news for the petrodollar – it might be start of the “de-Americanised” world.


Yuan replacing the Petrodollar

petrodollarOn April 24th 2014 the Russian government organized a special “de-dollarization meeting” dedicated to finding a solution for getting rid of the US dollar in Russian export operations. Top level experts from the energy sector, banks and governmental agencies were summoned and a number of measures were proposed as a response for American sanctions against Russia.

Over the last few weeks there has been a significant interest in the market from large Russian corporations to start using various products in renminbi and other Asian currencies, and to set up accounts in Asian locations,” Pavel Teplukhin, head of Deutsche Bank in Russia, told the Financial Times, The renminbi is the official currency of the People’s Republic of China. literally means “people’s currency”. The yuan is the basic unit of the renminbi, but is also used to refer to the Chinese currency generally, especially in international contexts.

Moving the yuan towards internationalisation involves three distinct phases: turning the Chinese currency into a) a trading currency, b) an investment currency, and c) a reserve currency.

Some recent developments:

  • Chinese credit rating agency Dagong has downgraded U.S. debt from A to A- and has indicated that further downgrades are possible.
  • China has just entered into a very large currency swap agreement with the eurozone that is considered a huge step toward establishing the yuan as a major world currency.
  • Back in June 2014, China signed a major currency swap agreement with the United Kingdom. This was another very important step toward internationalizing the yuan.
  • China currently owns about 1.3 trillion dollars of U.S. debt, and this enormous exposure to U.S. debt is starting to become a major political issue within China.
  • Mei Xinyu, Commerce Minister adviser to the Chinese government, warned (on Oct 2014) China may decide to completely stop buying U.S. Treasury bonds.

China is the largest producer of gold in the world, and it has also been importing an absolutely massive amount of gold from other nations and in addition China plans to buy another 5,000 tons of gold.) There are many that are convinced that China eventually plans to back the yuan with gold and try to make it the number one alternative to the U.S. dollar.

If China does decide to back the yuan with gold and no longer use the U.S. dollar in international trade, it will have devastating effects on the U.S. economy. If other nations stopped using the dollar to trade with one another, the value of the dollar would plummet dramatically. One could claim that the entire way of life in U.S. depends on the U.S.$ being the primary reserve currency of the world. (Source: The Economic Collapse )

eu-china trade map

The dollar does not just predominate in China’s trade with the United States, but with other countries as well. The first steps towards the internationalisation of the yuan emerged in 2008-2009. At that time, businesses and companies were allowed to use the yuan in trade with Hong Kong (Xianggang), Macau, and ASEAN countries. In 2012, every Chinese company with a licence for export and import transactions was able to use the yuan. An active transition to foreign trade settlements in yuan is happening alongside an increase in the use of the national currencies of China’s trading partners. This is being facilitated by the signing of bilateral currency swaps between the People’s Bank of China (PBC) and the central banks of China’s trading partners. To date, the PBC has signed more than 20 currency swap agreements. At the end of 2013-beginning of 2014, the yuan overtook the euro in terms of the amount of payments used for international trade, and took second place after the US dollar. According to the People’s Bank of China (PBC) , there was more than 1.3 trillion yuan overseas at the end of 2013, which is equivalent to approximately US $250 billion. In fact, this money is forming an offshore yuan market. At present, the yuan can be directly converted with the US dollar, the Japanese yen, the Australian dollar, the Russian rouble, the Malaysian ringgit, and the New Zealand dollar. The latest such agreement was signed between China and New Zealand in March 2014. (Source: Strategic Culture Foundation )


My conclusion

In my conclusion the era when the IMF, World Bank, and U.S. Treasury could essentially dictate international finances and intimidate or crush opponents with sanctions, pressure and threads are drawing to a close – the BRICS and the Shanghai Cooperation Organization are two nails in that coffin. These independent poles (BRICS, SCO, USAN) are developing fast and it remains to see what their ultimate impact on international politics will be – my scenario is that the impact will be a drastic shift from U.S. dominance to more balanced juxtaposition of U.S. and Eurasia.

the end of dollar

Short memory of Prime Minister Orban

Posted by on 28/10/14

History teaches us to remember its lessons and draw relevant conclusions. Someone who doesn’t do it will be punished sooner or later.
Unfortunately, this truth hasn’t been comprehended by Hungarian governmental authorities who have come into power as the fates decree. Prime Minister of Hungary Victor Orban is a good example of this opinion. A great number of reforms, that was promised by him before his election chief of government was not carried out neither in 2010 nor in 2013 after reelection. Moreover, he has started crackdown on human rights and freedoms in the country and coming back to totalitarian ideas.
Nowadays, Hungary is a small country with communist past, which joined the European Union and has been trying to approach political, economical and social standards of leading Western nations. The experts have started, however, to find impartial similarities, comparing his policy with policy of Russian president. As example there is adoption of “Media act”. This act tightens up Media control in the country and permits the state structures to fine Mass Media for “non-balanced” or “amoral” publications. It’s known that this act caused mass protests in Hungary.
It should be noticed that so warm relations between Hungary-Russia caused by Russian credits. These credits make Hungarian government much more compliant. So, Orban’s government has blocked the EU sanctions against Russia.
Besides, in June of current year Hungarian parliament adopted disputable 10 billion euro credit contract for building and financing of 2 nuclear reactors by Russian concern “Rossatom”. In spite of the EU insisted to carry on tender. Implementation of this contract can significantly strengthen economic and political dependence on Russia. Also, building of nuclear reactors needs further utilization of nuclear waste. In result the cooperation with “Rossatom” will lead to, that Russia will be able to tie fuel supply with its political demands. Nevertheless, Hungarians gave its peremptory preference to Russians. Thus, Hungary neglected Brussels’ commentary, signed contract with “Rossatom” and intensified energetic dependence on Russia.
Victor Orban openly criticized implementation of next package of sanctions against Russia after the EU Council Meeting on the August, 30-31. He stated that sanctions against Russia are self-deception and it will be inefficient action.
In connection with such declaration we should remind Vicror Orban about event had happened 60 years ago. Then Hungarian government’s attempts of implementation of harmless reforms caused in instant reaction of Kremlin. In October 1956, soviet troops bloodily suppressed aspiration for liberty and independence of Hungarian people. Despite of Hungarian people resistance Soviet Union imposed its values on Hungary for many years.
Mr. Orban shouldn’t forget lessons of history and price that nation paid. Don’t forget about drag of country development but only if Hungary was not under the yoke of Soviet Union it could be one of the most advanced European states. It’s a good example of dangerous friendship with Russia because this friendship isn’t on an equal footing. That’s why when the scale is trembling between personal sympathy of some politicians and fate of the country, high rank officials must make a right choice.

What’s Osborne’s plan in the face of increased borrowing?

Posted by on 28/10/14

Whitehouse Consultancy Head of PR Chris Rogers claims increased borrowing will make George Osborne’s austerity message a harder sell.

To read Chris’ article, please click here.

The Whitehouse Consultancy is one of Europe’s leading public affairs and communications agencies.

Stresstest der Europäischen Zentralbank (EZB)

Posted by on 27/10/14

Beim Stresstest der Europäischen Zentralbank (EZB) sind 25 der 130 untersuchten Institute im Euroraum durchgefallen – ist das eine gute oder eine schlechte Quote? Egal, denn dieses Ergebnis ist ja eh nur vorläufig – die “angeschlagenen” Häuser haben nämlich die Möglichkeit, die geforderte Kapitaldecke innerhalb von neun Monaten aufzubringen. Vorausgesetzt, sie schaffen es – sind dann die 130 Banken, die 85 Prozent des europäischen Bankensektors abdecken, gegen künftige Finanzkrisen gewappnet? Das kann keiner beantworten. Und insofern ist der Stresstest zwar ein sinnvolles Druck-Instrument gewesen, um einfach eine höhere Eigenkapitalquote bei den Banken zu “erzwingen”, aber letztlich keine Garantie, künftigen Krisen genügend Geld entgegenzusetzen. Der Stresstest ist wie ein Airbag im Auto: Er ist sinnvoll, weil er unbestritten die Sicherheit erhöht, aber schwere Verletzungen sind durch ihn auch nicht gänzlich ausgeschlossen. Die Wirkung des Airbags kann bei einem schweren Unfall manchmal auch nicht mehr das Schlimmste verhindern. Und wie schwer ein Unfall in der Wirkung ist, hängt von vielen Faktoren ab: der eigenen Fahrweise, der der anderen und den Witterungsbedingungen. Die Banken täten gut daran, wenn sie sich nicht nur auf ihren Stresstest-Airbag verlassen würden.

Jet Crash at Moscow’s Vnukovo Airport: Undesirable Person Elimination

Posted by on 27/10/14

On October, 20 at Vnukovo airport the corporate “Falcon-50” jet was taking off as it clipped a snow-plough and burst into flames. Three members of crew and Total’s CEO Christophe de Margerie were lost. The Investigations Committee of Russia has set out two basic versions of the accident: criminal negligence by the dispatcher and the crash through snow-plough driver fault. The driver was accused by investigating authorities of being drunk. The lawyer and relatives of the driver state that he has a chronic disease non compatible with drinking. Observers has taken notice to the following: the plane was in good order, the crew was experienced and capable to flight in any circumstances (It was foggy that day). In other words, there was no objective cause for the accident to happen, but it occurred. The first obvious factor which led to the tragedy is systemic deficiencies in business activity arrangement at the aviation enterprise as well as at the safety ensuring units. The second one is a human factor (euphemism for Russian disorder, sloppiness and irresponsibility). It is possible to conduct show investigation and then to punish a little man. Most likely they let it be so. But one can be sure that the story about malice or elimination of the undesirables will never appear in the investigation reports, at least, in official papers. However one cannot exclude that the crash at Vnukovo airport has been a contract killing. Christophe de Margerie was an enthusiast of doing business with and in Russia. On the day of his death, he took part at the Advisory council annual meeting devoted to foreign investment in Russia chaired by the Prime-Minister of the Russian Federation Medvedev. Now public doesn’t know exactly what had happened at the meeting or in its margins, but it is widely known that in September 2014 Mr. de Margerie announced suspension of joint venture creation together with Lukoil due to EU sanctions. This project was aimed to explore for shale oil in Russia. One more Total’s project – participation in Novatec’s “Yamal compressed natural gas“ project – appears to be a problem. The joint venture has confronted with great difficulties trying to attract investors; moreover, some western companies have refused to deliver equipment for LNG plant (Total has just been constructing the facilities). Besides the Shtokman field development project (with Norwegians and Gazprom) was shelved, and Total lost 340 million dollars it had already spent for the project. Thus one can reasonably suggest that Total’s management and Christophe de Margerie personally, had revised approach towards Russia and decided to curtail Russian projects. Such a stand could have pushed large Western companies operating in Russia to similar conclusions concerning doing business with Russians and, finally, have painfully hit Putin’s image and pride. It’s easy to guess what resolution had the person with KGB-past been able to adopt. There is an important fact, backing the given assumption. Major-general Gurevich has been appointed the head of investigation team to investigate the air crash in Vnukovo international airport. It’s interesting, but it was he who investigated circumstances of the jet TU-154 wreck with Polish President Kachinsky onboard near Smolensk.