Pope Benedict issued an ambitious call to reform the way the world works on Tuesday shortly before its most powerful leaders meet at the G8 summit in Italy. His latest encyclical, entitled "Charity in Truth," presents a long list of steps he thinks are needed to overcome the financial crisis and shift economic activity from the profit motive to a goal of solidarity of all people.

Following are some of his proposals. The italics are from the original text. Do you think they are realistic food for thought or idealistic notions with no hope of being put into practice?

• "There is urgent need of a true world political authority. .. to manage the global economy; to revive economies hit by the crisis; to avoid any deterioration of the present crisis and the greater imbalances that would result; to bring about integral and timely disarmament, food security and peace; to guarantee the protection of the environment and to regulate migration... such an authority would need to be universally recognized and to be vested with the effective power to ensure security for all, regard for justice, and respect for rights."
• The economy needs ethics in order to function correctly - not any ethics whatsoever, but an ethics which is people-centred..."
• "Financiers must rediscover the genuinely ethical foundation of their activity, so as not to abuse the sophisticated instruments which can serve to betray the interests of savers. Right intention, transparency, and the search for positive results are mutually compatible and must never be detached from one another."
• "Without doubt, one of the greatest risks for businesses is that they are almost exclusively answerable to their investors, thereby limiting their social value... there is nevertheless a growing conviction that business management cannot concern itself only with the interests of the proprietors, but must also assume responsibility for all the other stakeholders who contribute to the life of the business: the workers, the clients, the suppliers of various elements of production, the community of reference... What should be avoided is a speculative use of financial resources that yields to the temptation of seeking only short-term profit, without regard for the long-term sustainability of the enterprise, its benefit to the real economy and attention to the advancement, in suitable and appropriate ways, of further economic initiatives in countries in need of development."
• "One possible approach to development aid would be to apply effectively what is known as fiscal subsidiarity, allowing citizens to decide how to allocate a portion of the taxes they pay to the State."

(Photo: Pope Bendict, 1 July 2009/Tony Gentile)

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This is one in a series of post cards from Reuters correspondents across Europe, Middle East and Africa.

“Watch out for watermelons” was the ominous warning long given to visitors arriving by night in Lagos. The Third Mainland Bridge, Africa’s longest, snaking over the lagoon and into town from the airport, was notorious for armed robbery. A watermelon embedded with nails and rolled in front of your car was enough to stop you, allowing gunmen to relieve you of your possessions.

Times seem to have changed. Foreign executives are still swept into town under armed escort, sirens blaring, but the state governor has made fighting crime a priority, with some success. The biggest hassle is now police checkpoints and the notorious “Lagos shake-down” – the long arm of the law (usually waving an AK-47) begging “something for the boys”, a bribe to see you on your way and top up low wages. Security may have improved, but corruption remains endemic.

Glancing down from the bridge as it sweeps towards the skyscrapers of the banking district, the neighbourhoods of Iwaya and Ebute Metta swing in to view. Wooden shacks on stilts stand over the murky water, a reminder that this city of 14 million, one of the fastest growing in the world, is bursting at the seams – and that the gap between rich and poor in Africa’s most populous nation is cavernous.

Imported inflation is the biggest impact of the global crisis here. Despite being the world’s eight biggest crude oil exporter, Nigeria is almost entirely dependent on imports of refined fuel. Cargo ships light up the horizon like a floating city at night, waiting to berth with everything from diesel to rice. A weakening currency means fuel and food prices are rising, but there’s little sign of popular unrest – a decade out of military rule, this is a population used to graft and mismanagement. It expects little from government.

The banks have been suffering, although you wouldn’t know it from the champagne flowing in the upscale bars of Ikoyi and Victoria Island – Nigeria’s elite have a proud reputation for conspicuous consumption to maintain. But newspapers brim with speculation about bank collapses and stock market bailouts. Jobs have been lost and supermarket owners complain imported luxury foods are flying off shelves less quickly than before.

But on the street, the hustle continues unabated. Boys selling phone recharge cards in the notorious traffic jams are cashing in on the huge and rising number of mobile users, while the army of motorcycle taxi riders seems to grow by the day. And foreign exchange controls meant to defend the naira currency thriving business for some in the informal economy: the black market money changers have never been so busy.  

(An aerial view shows the central business district in Nigeria’s commercial capital of Lagos, April 7, 2009. Nigeria’s First Bank and Access Bank on Wednesday became two of a handful of Nigerian financial institutions to adopt international reporting standards, seen as key to restoring confidence in the battered sector. REUTERS/Akintunde Akinleye (NIGERIA CITYSCAPE BUSINESS POLITICS))

This is one in a series of post cards by Reuters reporters across Europe, Middle East and Africa.

ENERGY
Oil prices determine the pace of prosperity. The oil-price boom 2002-2008 allowed countries to invest hundreds of billions of dollars in infrastructure and diversification. They also amassed billions in sovereign wealth funds, which has lifted their profile on the international stage. As oil prices recede, so does the pace of growth and wealth accumulation, although most states possess enough stored wealth to cushion the downturn.
RISK: Prolonged downturn topples GCC states’ ambitious plans.

TRANSPARENCY
Rulers or agendas can shift with little warning by decree overnight. Crises are resolved – or not — behind closed doors, leaving the beneficiaries and the victims uncertain. Who will benefit from Dubai’s rescue plan? Authorities say they will disburse the money in secret. The state’s central role in the economy means that foreign players can be left hanging when times turn tough while local cronies prosper. Major investment policies can shift unannounced. Compliance with reporting regulations is spotty. 
RISK: Investors may be badly surprised by moving targets, changing agendas and legal regimes.

FINANCIAL CRISIS
Few major risks here, relative to the developed world, with a few exceptions. The economies in Kuwait, Bahrain and the UAE will suffer but Saudi will chug along and Qatar will prosper.
RISK: Bank-systemic problems may dampen growth.

PURE POLITICS
Kuwait saw a parliamentary standoff derail a $17 billion deal with Dow Chemical in December. The potential for a leadership change in Saudi holds uncertain consequences. Will a more conservative ruler continue to open the country’s equity markets to outside participation? Bahrain and Saudi face tensions with minority Shi’ite populations.
RISK: Domestic tensions and shifting international power centres may empower reactionary fractions. In Kuwait, the stalemate has already derailed reforms.

((Kitesurfers surf as the Burj Al Arab, Dubai’s 7-star luxury hotel, is seen April 12, 2009. REUTERS/Steve Crisp (UNITED ARAB EMIRATES SOCIETY))

This is one in a series of post cards from Reuters reporters across Europe, Middle East and Africa.

Who rules the world’s biggest energy producer? That’s the question that is bugging many people in Russia as the country’s two leaders – PM Vladimir Putin and President Dmitry Medvedev — try to cope with the worst economic crisis since the 1998 domestic debt default.

Many believe Putin, a former KGB spy, is still the boss despite handing over power to Medvedev last year. But boss of what? The economy forecast to contract this year and Moscow is facing tumbling budget revenues as the income from oil, gas and metals exports dries up.

The Kremlin says it is concentrating on avoiding social tensions but the country’s richest men – the oligarchs – also say they need state bailouts. Russia’s richest man has been forced to open restructuring talks with Western creditors and more are likely to follow.

Russian debt and equity markets have rallied this year as bottom feeders snap up what they say are bargains of the decade. Sovereign yield spreads have narrowed. But friends in major companies report tumbling demand across the board – from shampoo to cars. The banking system has stopped giving out credit, job losses are soaring and the property market is paralysed with fear.

The smartest people in Moscow expect this to be a deep, long Russian crisis that will send prices down far further. The question is how the ruling duo of Putin and Medvedev handle the crisis; or rather, what happens if they fail to.

(Communists line up at Vladimir Lenin’s mausoleum to pay their respects to the Soviet state founder on his birthday in the Red Square in Moscow April 22, 2009. REUTERS/Denis Sinyakov (RUSSIA POLITICS))

This is one in a series of post cards from Reuters reporters across Europe, Middle East and Africa

Ukraine’s famous instability, verbose politicians and haphazard legislation present the investor – and the journalist – many red herrings. While talk of impeachment of President Viktor Yushchenko ring alarm bells, constitutionally it is nonsense. As CDSs go off the rails, Ukraine’s sovereign debt repayments are small and manageable. As Prime Minister Yulia Tymoshenko calls for the central bank governor’s blood, he is still at the helm. And while Yushchenko and Tymoshenko fight like Itchy and Scratchy, the country – to the amazement of some – has yet to collapse. 

Investors inside Ukraine have long known this and with good lawyers have managed to get on with business as the economy driven by steel and grain exports boomed at 7 percent annually since 2000. They follow political events constantly but are less quick to judge, because often their significance appears later or in fact does not exist. Those outside Ukraine overestimate the consistency of its politics. None of the three major parties – Tymoshenko’s, Yushchenko’s or opposition leader Yanukovich’s can be branded liberal, conservative, socialist, pro or anti Russian. Populism and pragmatism – usually at the last minute — are the key policies.

Now a deep economic recession is upon the former Soviet republic and presidential and parliamentary elections will decide the fate of the country. So what to expect? Not revolutions certainly, but as the country gears up to the polls, expect patience to wear thin amongst the population. Expect a dirty campaign allowing for new faces to appear that will get nowhere in the elections but be included in top jobs because of their fresh credentials. Expect continual constitutional change that may settle the question of who has real power — the president or prime minister.  Expect Tymoshenko to put up a fierce fight and Yushchenko to wither away. And expect Russia’s heavy gaze on this all.  

Police officers rest in a central park in Kiev April 23, 2009. REUTERS/Konstantin Chernichkin (UKRAINE SOCIETY IMAGE OF THE DAY TOP PICTURE)

This is one in a series of post cards from Reuters correspondents across Europe, Middle East and Africa, recounting how the financial crisis is playing out in the capitals where they are based.

The Czechs appear to be riding out this crisis but it’s a matter of where you live.

In Prague, it’s as if all the bad news – the government ousted halfway through its stint as European Union president, industry falling off a cliff – was happening somewhere else. But the Czechs haven’t had a strong government since 1996, and the 2 percent economic contraction this year is nothing when compared to Latvia or even Germany.

I overhear a lot people discussing banks shedding workers, would-be home buyers being turned down for mortgages, and hotels cutting rates. But I don’t know anyone who has lost a job and there are still throngs of Italians and Germans flowing through Prague’s tourist sites. Also, it’s true that real estate prices are falling, but that’s largely in the dilapidated communist blocks and the eerily similar new builds thrown up by Anglo-funded developers now facing bankruptcy.

In smaller industrial towns it’s very different. Although Angela Merkel’s scrap subsidy looks to have saved the car plants for now, many producers are suffering. Shops and restaurants are empty. It almost feels like it did 10 years ago when the country was just getting used to the idea of capitalism.
One thing to remember, though, is that most Czechs are used to hardship. They save. They don’t shop much. And on weekends, many people head for the countryside, where some 50 percent have a second home in their family. Once there, people keep gardens and orchards and raise bees to produce honey. No kidding. They hike in the hills, and at night they go to the pub where a beer still costs a dollar. It’s largely a return to the 1990s, and most people are depending on the more modest way of living they’ve known for most of their lives.

(People enjoy a sunny day in a park in Prague April 15, 2009. The sunny weather is expected to last until Friday when rain is forecast. REUTERS/David W Cerny (CZECH REPUBLIC WEATHER SOCIETY ENVIRONMENT))

This is part of a series of post cards from Reuters reporters from across Europe, Middle East and Africa.

Political risk is set to fall in Turkey if the government plays its cards right

Turkey’s ruling party posted its worst election result since 2002 in March local polls as voters penalised the AK Party and Prime Minister Tayyip Erdogan for failing to address a weakening economy, corruption allegations and a perception that the government was losing touch with voters. In a rare move, Erdogan, a tough politician who keeps tight control of levers of power in Turkey, admitted his party had underestimated the global crisis and promised to focus on the economy, including speeding up finalising a deal with the IMF. He also promised to reach out to the opposition over EU reforms. If he sticks to his promises, the economy will begin to improve, but probably not fully until 2010, and political risk will fall.

Unlike some emerging market peers, Turkey is lucky in that it does not face social unrest as a result of the economic slowdown, as the AK Party remains popular, the opposition is weak and labour unions are fragmented.

However, Erdogan’s character is unpredictable and the next test will be how he addresses a planned amendment to the military-inspired constitution. If the AK Party, which has roots in political Islam, fails to engage the opposition we could face another standoff with the secular establishment, including army generals and judges, and return to the political tensions of 2006-2008. Some senior advisers of Erdogan have already forgotten about the election results and are saying ‘what crisis?’ — a worrying sign. Another risk will be how far authorities push an investigation into an alleged coup plot against the government. If the probe appears as a witch hunt against opponents and the military’s name is sullied, the generals may not be able to hold back rebellion among junior ranks.

(Turkey’s Prime Minister Tayyip Erdogan addresses a news conference in Hanover April 19, 2009. REUTERS/Hannibal Hanschke (GERMANY POLITICS))

This is one of a series of post cards by Reuters reporters looking at how the financial crisis is playing out for ordinary people across Europe, Middle East and Africa.

On an Easter break in south Lebanon with visitors from Britain, we see scores of election posters lining the highway ahead of the June 7 parliamentary poll — the first big test of stability here since a Qatari-brokered deal last year calmed an internal crisis that had dragged Lebanon towards renewed civil war. Vague slogans on the slickly produced adverts promise change, democracy, resistance (to Israel) and much else beside. But the election will change little. Power might shift a bit
between Lebanon’s dominant alliances — one backed by the West and Saudi Arabia, the other by Syria and Iran. But voters have scant choice as the sectarian power-sharing system allows party leaders to do deals that stitch up most seats in advance.

Election tension might spark low-level clashes, but external factors — a Syrian-Saudi rapprochement, Obama’s overtures to Damascus and Tehran — have helped cool the atmosphere. And the Lebanese, who have so far survived the global downturn thanks to the liquidity and conservative policies of their banks, know any major violence could wreck the lucrative summer tourist season.

On the Beirut-Tyre highway, billboards for beach resorts alternate with Hezbollah banners. The Iranian-backed Shi’ite group does not seem keen to provoke a repeat of its 2006 war
with Israel, but no one doubts its military capacity, however well concealed. South of the Litani river, we see only UNIFIL peacekeepers and Lebanese army checkpoints. The calm we enjoyed on our break would of course unravel swiftly if Israel’s confrontation with Iran were to ignite in outright conflict.

Not that all is quiet in Lebanon — four soldiers were ambushed and killed in the Bekaa Valley this week by brothers of a drug baron slain earlier at an army checkpoint, illustrating the fragility of the rule of law, especially in neglected rural hinterlands. We decide to skip the Roman ruins of Baalbek.

Back in Beirut, cranes swing over building sites where Syrian workers toil away as if Lebanon were immune from the world’s economic woes. In fact property prices have lost some froth, but the crisis has been strangely slow to bite. Money sent home by Lebanese working in the Gulf and elsewhere makes up more than a quarter of GDP, but the finance minister says his compatriots are not the first to be fired.

Perhaps the impact will be felt later, but for now Lebanese can still afford to employ many foreigners themselves. Not just Syrian labourers. Our visitors were also struck by the Ethiopian maids twittering from balconies, not to mention the Bangladeshis in green overalls dusting the traffic lights downtown.

(Tourists walk in the forest of cedars, located north of Mount Lebanon July 24, 2008. Sturdy cedars perched high in the mountains stand for many Lebanese as symbols of their fractured lands survival. But some environmentalists worry that the trees face a new threat from global warming. Picture taken July 24, 2008. To match feature LEBANON-CEDARS/ REUTERS/ Jamal Saidi (LEBANON))

By Dean Yates

(The author lived in Indonesia from 1992-1995 and 2000-2005, with various assignments in between)

It was not that long ago that Indonesia was lurching from crisis to crisis, even drawing some (misplaced) predictions it could go the way of the former Yugoslavia and break apart. These days it rarely makes the front page. It has a steady president in Susilo Bambang Yudhoyono, probably the freest press in Southeast Asia and political violence appears to be a thing of the past. The last major bomb attack blamed on Islamic militants was in 2005.

It’s worth recalling how bad things were in Indonesia as this country of 226 million people prepares to vote in parliamentary elections on Thursday, which will set the stage for the more important presidential poll in July. The parliamentary election will be the third time voters in the world’s most populous Muslim nation have elected their representatives at a national level since the downfall of former autocrat Suharto in 1998. As the Wall Street Journal noted in an editorial on April 8, Indonesia
shows that democracy and Islam aren’t mutually exclusive.

All this progress seemed so unlikely early in 1998 when the country’s economy was in freefall. It’s hard to imagine a currency losing 85 percent of its value, but that’s what happened to the rupiah when the Asian financial crisis savaged Indonesia. I remember stunned Indonesian colleagues in the Reuters Jakarta bureau, their hands on their head, as the rupiah crashed to a low of 17,000 to the U.S. dollar. Months before, one U.S. dollar bought 2,500 rupiah. Food prices soared and the “wong cilik”, or little people, rebelled. Food riots hit markets. Protests escalated. Students demanded democratic change. Then Suharto — under pressure from the International Monetary Fund — hiked fuel prices on May 4, 1998. A week later, violence exploded, killing 1,200 people in Jakarta. Suharto was forced out a few days later.   

After three decades of authoritarian rule that combined rapid economic growth with political repression and breathtaking corruption, Suharto’s “New Order” government had collapsed. It was replaced by a vacuum. Communal animosity that had simmered for years in the eastern Moluccas, an idyllic group of islands evenly split between Muslims and Christians, erupted. Thousands
were killed. President Abdurrahman Wahid, an affable moderate Muslim cleric with a penchant for cracking jokes, was toppled in 2001 in an impeachment vote, effectively for incompetence.

International perceptions of Indonesia, already pretty grim, got worse in 2002 when Islamic militants bombed two nightclubs in Bali, killing 202 people, mostly foreign tourists. As I stepped over debris the following morning, bits of flesh still under twisted metal, all I could think of was why? Why Bali? Why this beautiful island? The answer was obvious of course — kill holidaymakers enjoying themselves on one of the world’s most famous islands and you will get the world’s attention.

And then came the Asian tsunami. A massive undersea earthquake of 9.15 magnitude unleashed giant waves that smashed into the Indonesian province of Aceh in December 2004, killing around 170,000 people. The toll was unbelievable. Bodies lay rotting for weeks. I still remember Adnan Ibrahim, who had spent days searching refugee camps in the local capital Banda Aceh for his son, Syawaluddin, 17. “The boy is very smart. He is good with computers,” said Ibrahim, before breaking into sobs. I am sure he never found him.

Beside elections of that year — which brought Yudhoyono to power — the tsunami was a turning point for Indonesia. In the early days after the disaster, Yudhoyono decided to allow foreign militaries and aid workers to descend on Aceh to help with rescue and recovery efforts. He had opened the door to a province that until then was virtually sealed off to foreigners, scene of a vicious conflict between the Indonesian military and separatist rebels that had killed 15,000 people over the past 30 years. The tsunami was a catalyst for a peace deal between the government and the rebels in 2005. It confounded sceptics who predicted it would never last. Former rebels will even run for local office in the elections on Thursday.

Few thought Indonesia would make such strides and be where it is today. Democracy is well entrenched — “taken root and flourished” — in the words of the Economist in its April 2 edition. Sure there are problems. It’s a huge, unwieldy place to govern. Corruption is still a major problem and the country’s infrastructure needs an overhaul. And it is still poor. But compared to a little over 10 years ago, Indonesia has done pretty well. It has a huge civil society. Think of any issue and there will be an NGO in there fighting for justice and accountability. Indonesians are a people of great warmth, humour and openness. They deserve the international praise that now comes their way.

Peer Steinbrueck, the front man in Germany's fight against the financial crisis, has a new challenge on his hands: Karl-Theodor zu Guttenberg. The young economy minister, in the job for only a month, is already proving to be a thorn in Finance Minister Steinbrueck's side. The telegenic 37-year-old is coming up with policy initiatives that challenge Steinbrueck's plans, and draw media attention away from him.

This is new territory for Steinbrueck. Until last month, he was able to capitalise on the low profile of former economy minister Michael Glos to make himself Germany's primary spokesman on matters financial and economic -- and the man Chancellor Angela Merkel turned to for leadership on these issues. Glos's shock resignation last month opened the way for Guttenberg to make the step up from Bavarian politics to the national stage, and he hasn't looked back.

This week he proposed amending a planned law on saving stricken banks, which was drafted by Steinbrueck's ministry, to try to avoid nationalising them. The idea may not take off, but it grabbed media attention. And while Steinbrueck (wiping face in picture) joins other G20 finance ministers this weekend for a meeting in England, Guttenberg  (left in picture) will be preparing for a trip to the United States next week, where he will meet Treasury Secretary Timothy Geithner -- Steinbrueck's opposite number -- as well top White House adviser Lawrence Summers, IMF Managing Director Dominique Strauss-Kahn and World Bank President Robert Zoellick.

"Peer Steinbrueck has to share the crisis management with high-flyer Karl-Theodor zu Guttenberg -- much to his displeasure," ran a headline in Friday's edition of the Handelsblatt business newspaper.

With a federal election looming in September, Guttenberg is using every opportunity he can to boost his profile. As a member of the conservative Christian Social Union (CSU), Bavarian sister party to Merkel's Christian Democrats, he is naturally more politically allied with the chancellor than Steinbrueck, a Social Democrat. His suave demeanour and aristocratic background are a contrast to Steinbrueck's plain-speaking approach, and his media blitz could start to drown out Steinbrueck's message.

"Like fire and water, these two", Handelsblatt wrote.

(Reuters photo: Fabrizio Bensch)