Commentaries

Shelved missile shield tests NATO unity

After just six weeks as NATO secretary-general, Anders Fogh Rasmussen has his first crisis. The alliance may be slowly bleeding in an intractable war in Afghanistan, but the immediate cause is the U.S. administration’s decision to shelve a planned missile shield due to have been built in Poland and the Czech Republic.

The shield, energetically promoted by former President George W. Bush, was designed to intercept a small number of missiles fired by Iran or some other ”rogue state”. But Russia saw it as a threat to its own nuclear deterrent and NATO’s new east European members saw it as a useful deterrent against Russian bullying, by putting U.S. strategic assets on their soil.

President Barack Obama’s decision to drop plans to install it on Polish and Czech territory leaves those former Soviet satellites feeling betrayed — because they expended political capital to win parliamentary support — and more exposed to a resurgent Russia, especially after its use of force against Georgia last year.

Obama’s move is clearly part of a warming of U.S. relations with Moscow from which Washington hopes to gain help in return on supply routes to Afghanistan, pressure on Iran to rein in its nuclear programme, and an agreement on radical cuts in nuclear arsenals. But this “reset” of U.S.-Russian relations has only exacerbated the rift within NATO over Russia.

The three Baltic states and Poland were particularly critical of NATO’s low-key response to Moscow’s military action in Georgia. Some said the refusal of west European allies led by Germany and France to agree at a NATO summit last year to putting Georgia and Ukraine on a path to NATO membership emboldened the Kremlin to act. President Dimitry Medvedev’s harsh attack on Ukraine’s leader in an open letter last month fanned their fears of Russian bullying of its neighbours.

East European officials cite Moscow’s playing with the gas taps and trade disputes, and its apparent determination to keep its Black Sea fleet in the Crimean port of Odessa Sevastopol beyond a 2017 deadline agreed with Ukraine as part of a strategy of tension intended to reverse the “colour revolutions” in Kiev and Tbilisi, and bring other former Soviet republics to heel.

All that makes it a particularly awkward moment for Rasmussen to deliver his inaugural keynote speech on NATO-Russia relations on Friday in Brussels. The former Danish prime minister has put a few noses out of joint in his first weeks by making clear he intends to run NATO in a more results-oriented way, leaving less room and time for ambassadors in the North Atlantic Council to debate any idea to a standstill. He has set strict time-limits on council meetings, streamlined flabby agendas and outsourced the drafting of a new Strategic Concept to a group of 12 experts led by former U.S. Secretary of State Madeleine Albright, on which not all allies are represented.

Why Paddy powers past the field

Here’s why Paddy Power makes the other bookies look flat-footed. Microsoft’s politically-incorrect move to turn a black model’s face white for an ad featuring three smiley happy people that ran in Poland has produced the predictable grovelling apology from the company.

Now Paddy (is that racist? – ed) is offering odds on the racial mix when the campaign for MS Office 2010 is launched. Here they are: 12/1 against white and Asian, 4/1 white only, and a reassuring 11/10 for the original mix of white, Afro-American and Asian. Bet on the favourite, I’d say.

(Source: Engadget)

GM dumps Chinese in Opel race, standoff looms

Two things Opel junkies need to know in today’s news.

1) General Motors has dumped Chinese state-owned carmaker BAIC’s long-shot bid to take over GM’s main European arm. That leaves a two-horse race between Canadian-Austrian car parts maker Magna and Belgium-based financial investor RHJ, loosely associated with U.S. private equity firm Ripplewood.

2) The two trustees appointed by the German authorities to a board overseeing Opel in its transition to new ownership are refusing to toe Berlin’s line that Magna’s bid is the only game in town (according to an intriguing Reuters sources story).

This strengthens the prospect of a deadlock between Detroit and Berlin, which in theory would be arbitrated by the five-member Opel Treuhand (trustee) board. The panel comprises two GM appointees, one nominee of the German federal government, one representative of the four German states which have Opel plants on their territory, and a chairman — the president of the American Chambers of Commerce in Germany – who does not have a casting vote.

Chancellor Angela Merkel made crystal clear on Wednesday, before GM and German officials had held their first talks on the final offers, that the German authorities (both her national ”grand coalition” and all four regions) are backing the Magna solution, which she called “sustainable in all respects”.  The Opel workforce and the  co-governing Social Democrats strongly back Magna because it proposes fewer job losses and no plant closures, whereas RHJ would mothball the politically symbolic Eisenach factory in eastern Germany. 

Yet according to Reuters sources, both German trustees are defying their masters (and mistress). The Berlin government’s man is said to favour the offer by RHJ, which would downsize Opel and give GM a chance to buy back control in a few years. The regions’ representative is said to be leaning towards a managed insolvency, under which Opel would go into administration and viable bits would be auctioned off.

If positions do not change, the trustees ought logically to back GM and vote for RHJ. That would leave German authorities with a straight choice between agreeing, however reluctantly, to give state credit guarantees to RHJ, or refusing, at the risk of plunging Opel into insolvency. 

Polish EU vision breaks the mould

At last — a Polish vision of the future of the European Union that does not involve refighting World War Two or dying in a ditch for outsized voting rights.

In a thoughtful report entitled “Europe can do better”, a group of eminent Poles, including two former foreign ministers and a former central banker, offer a blueprint for Poland to partner EU heavyweight Germany in advancing European integration.  Even if some of the proposals look unrealistic, Berlin would do well to grasp the outstretched hand from Warsaw and explore common ground.

The authors advocate a more free-market, open Europe that ought to appeal to many Germans at a time when their historic partner in European leadership, France, is promoting a more protectionist, closed-door agenda for the EU.  Their key messages that the EU is in danger of exhaustion or even deconstruction after the failure of the federalist dream, and that Poland can help promote a pragmatic, market-oriented, incremental European integration, make sense.

They are right to focus on policies rather than institutions and on applying the EU model of multilateral governance to the big global challenges of combating climate change and rebuilding a rules-based form of globalisation after the crisis.  And they are right to surmise that France seeks a different kind of Europe — with a state-directed economy and an end to enlargement — and that the next British government may become “the main show-stopper in the EU”.

But they are almost certainly too optimistic about the commitment of Germany to deeper European cooperation, especially where that would require Berlin to relinquish some control over economic and budget policy, or immigration and the labour market. Last month’s German Constitutional Court ruling on the Lisbon Treaty on EU reform drew strict limits on any further sharing of sovereignty, which will make the Germans resist any step that requires treaty change or is open to legal challenge.

The report calls for improved macroeconomic management in the EU with a greater role for the European Commission in the governance of the euro zone. Yet while Berlin may want more say over its European partners’ economic and budget policies because it fears they are trying to pick its pocket, it will not tolerate Brussels’ hands on its own fiscal rudder.

Nevertheless, a Poland that sees Germany as its main partner in making Europe work, rather than as a revanchist adversary seeking to diminish Warsaw’s voting power, will make friends and influence people, in Washington as well as Brussels, if the Germans reciprocate by taking Polish initiatives seriously.

Politics, economics collide over Opel

Political and economic logic are set to collide in the byzantine decision-making over the future of German carmaker Opel, the main European arm of fallen U.S. auto giant General Motors. If politics prevail, as seems likely, the cost to German taxpayers will be higher and the chances of commercial success lower.

The aim of the Berlin government and four federal states, which are sustaining Opel with bridging finance, is to save as many German jobs and production sites as possible. That makes political sense ahead of September’s general election. But the business logic is that only a greatly slimmed-down Opel can survive in an industry with chronic overcapacity. In theory, it is up to GM’s board to choose among the three offers it expected to receive on Monday from Canadian-Austrian car parts maker Magna <MGa.TO>, Belgian financial investor RHJ <RJHI.BR>, and, less plausibly, Chinese state-owned auto maker BAIC. But there are several other powerful players with a say. They include the trustees responsible for the company since GM entered U.S. bankruptcy in June, the German federal and state governments, Opel’s works council and, last but not least, the European Commission, which must approve the restructuring plan as a condition for authorising the state aid.

The German authorities and Opel’s workforce prefer Magna’s bid, which is backed by Russia’s Sberbank <SBER03.MM> and automaker GAZ. The strategy is to seek growth in the dynamic but volatile Russian market. Magna requires the most state aid — 4.5 billion euros — but has pledged to keep all German production sites and cut 10,000 of the 50,000 workforce across Europe, of which just 2,500 would go in Germany. GM Europe also assembles Opels in Belgium, Spain and Poland, and in Britain under the Vauxhall marque.

GM management is thought to prefer RHJ because its offer includes a buy-back clause that could put Detroit back in the driver’s seat after three years in which Opel would be shrunk. RHJ wants less state aid — 3.8 billion euros — and plans a similar number of job cuts. However, the make-up of those cuts would be unpalatable to the Germans: it plans to shrink the plant at Bochum and idle that in Eisenach until 2012.

However smart business this may be, it is lousy politics. Bochum, in the Ruhr industrial rust belt, is still smarting from the offshoring of a Nokia plant to Romania. And Eisenach was the first new car factory to open in ex-communist eastern Germany. Indeed if GM defies Berlin’s wishes, the government has said it would reconsider the offer of state aid to any other bidder.

The key may ultimately lie in Brussels. Germany’s economics minister says the EU competition watchdog will require any buyer to inject more of its own funds as a condition for allowing state aid. That could lead to a more rational business solution, but it could also drive Opel into a dead end by making the deal unattractive to investors seeking a cheap ride.