Poles and Czechs, their economies still relatively robust  despite global recession, are up in arms about what they see as international investors’ tendency to tar them with the same brush as their more troubled neighbours such as Hungary, Ukraine and Latvia.

But if history is any guide, investors are unlikely to be impressed, at least in the shorter term.

Poland’s zloty has fallen more than debt-ridden Hungary’s forint since last summer, even though Budapest had to negotiate an emergency IMF-led bailout, while the Czech crown is also down
some 16 percent from its 2008 highs.

But at an EU summit last weekend, Polish and Czech leaders refused to back a Hungarian appeal for a 180-billion-euro region-wide bailout, saying they did not need such help.

The European Commission and German Chancellor Angela Merkel have endorsed the Polish and Czech pleas to be judged on their own merits rather than by their geographical location.

“Not all the countries are in the same situation. You cannot compare the situation of the Latvian economy to the situation of the Czech economy,” European Economic and Monetary Affairs
Commissioner Joaquin Almunia said in Prague this week.

However, in his book “The Return of Depression Economics”, Nobel economics laureate Paul Krugman describes how countries as diverse as mainly agrarian Indonesia and industrial powerhouse South Korea were swept up by the 1997 Asian crisis.

“The appetite of investors for the region had been fed by the perception of a shared “Asian miracle”. When one country’s economy turned out not to be all that miraculous after all, it shook faith in all the others,” he wrote.

Krugman also analyses how quickly contagion, in an age of huge cross-border cash flows, struck Latin America in a similarly indiscriminate way, and on several occasions.

Fast forward to 2009, and emerging Europe’s ‘miracle’ is rapidly dissolving. Policymakers will point out that the Czech Republic has higher GDP per capita and far less debt than some older EU member states, but such virtue is not an automatic defence in turbulent times.

And while there are obvious differences — many, though not all, states in central and eastern Europe are EU members which can draw on help from the Union’s institutions, including the European Central Bank — there are some parallels too.

Back in 1997, then-Malaysian leader Mahathir Mohamad accused speculators such as international financier George Soros of being responsible for Southeast Asia’s economic woes and called
for a ban on currency trading.

In a joint statement on Wednesday, eastern European bank supervisors hit out at negative Western press over their financial sectors following commentators’ suggestions that the region may prove to be “the sub-prime of Europe”.

And Polish central bank governor Slawomir Skrzypek called for talks with the European Central Bank and the European Commission on ways to prevent “speculators” who profit from steep falls in currencies such as the zloty from receiving public funds in bailouts being organised by Western governments.

Polish tabloid Fakt was more succinct, comparing foreign bankers speculating against the zloty to “vampires”.

(Poland’s Prime Minister Donald Tusk (L) leaves after shaking hands with Czech Republic’s Prime Minister Mirek Topolanek, whose country currently holds the rotating presidency of EU, at the start of an emergency European Union leaders summit in Brussels March 1, 2009. EU leaders meeting in Brussels on Sunday will discuss possible action on the financial crisis amid concern Eastern European countries may need more help. REUTERS/Sebastien Pirlet (BELGIUM))

Some 25,000 people attended his funeral, countless books have been written about him, a bridge was named in his honour and now the spectre of Austrian far-right leader Joerg Haider is dominating a regional election in Austria.

“A campaign with the tragically deceased Haider”; “A dead man is spearheading us”; “And above all, the spectre of Joerg Haider” read newspaper headlines.

(Photo: Joerg Haider, May 10, 2005 /Miro Kuzmanovic)

Both of Austria’s far-right parties are staking their claim to Haider’s legacy in an election in the Alpine Province of Carinthia where he was governor for more than a decade.

“Carinthia is going HIS way,” proclaim the posters of Haider’s former Freedom Party. Freedom says Haider achieved his greatest successes when heading the party.

“We will look after your Carinthia,” echo the posters of Alliance for Austria’s Future, the splinter party that Haider set up in 2005 after internal disputes within Freedom.

Both parties, which mopped up a third of the vote between them in Austria’s recent parliamentary election, recognise the mileage still to be had out of Haider’s success.

The populist leader, who led the right into a coalition government from 2000-2006, was one of Austria’s rare internationally recognised public figures.

Austria went into mourning when Haider died four months ago in a high-speed car crash, and leaders of all political colours turned up for his funeral.

(Photo:A photo of Joerg Haider stands in the St. Stephens Cathedral during a memorial service in Vienna, Oct 15, 2008/Leonhard Foeger)

“People have the impression that, through Haider, they became a force to be reckoned with in the world,” Klaus Ottomeyer, professor of psychology at the university of Klagenfurt, told Reuters.

Ottomeyer, who will publish a book in March about the making of the Haider myth, said the Carinthians have glorified their former governor as benevolent father figure, Robin Hood or even a patron saint.

This may baffle outsiders, who are mostly familiar with Haider’s blunt anti-immigrant rhetoric and verbal gaffes. His notoriety peaked in the 1990s when he cited “the proper labour policies” of Adolf Hitler’s Third Reich and referred to concentration camps as “penal camps” in a parliamentary debate.

But for all the far-right’s bickering over the claim to Haider’s legacy, it may be time to move on and find a new hero.

Political researcher Guenther Ogris said the Haider cult was beginning to fade, and Carinthians were turning their focus elsewhere.

“At the end of the day, the economic crisis is now the main thing on people’s minds — that is emotionally more important than the dead governor.”

Malcolm McLaren, the man who gave us The Sex Pistols, has found the real punks -- bankers. In an interview with Britain's The Observer, he says punk was not just about spiky hair and ripped t-shirts.

"It was all about destruction, and the creative potential within that. It turns out that the bankers may have been the biggest punks of all."

McLaren says we are now at a transformative moment.

"We're at the end of the culture of desires; we may be going back to a culture of necessity."

God Save The Queen

Pakistan has agreed with the International Monetary Fund (IMF) on a $7.6 billion emergency loan to stave off a balance of payments crisis. 

Shaukat Tarin, economic adviser to the prime minister, said the IMF had endorsed Pakistan's own strategy to bring about structural adjustments. The agreement is expected to encourage other potential donors, who are gathering in Abu Dhabi on Monday for a "Friends of Pakistan" conference.

The government had long delayed announcing its plans to turn to the IMF for help and President Asif Ali Zardari said in September the country did not want to seek IMF assistance. Tarin said in October that going to the IMF was "Plan C" if other lenders failed to come through.  "If we want to go to the IMF, we can ... but only as a backup," he said.

The times are clearly changing and in the midst of a financial crisis that has swept away some of the world's most august financial institutions, there is no shame in admitting a need for help.

For that matter, I can remember former IMF Managing Director Michel Camdessus declaring confidently at one of the annual IMF meetings I covered in Washington in the mid 1990s that Keynsianism was dead. I challenged him at the time over his certainty, but wish I could ask the same question now that western economies are spending their way out of trouble like there's no tomorrow.

But what will it mean for Pakistan that its new government, less than a year after elections that ushered in a new civilian democracy, has had to eat its words and turn to the IMF for help?

Does it bring to Pakistan the silver lining that it offered India, which when forced to accept an IMF bailout in the early 1990s began a programme of economic reforms?  As noted in an earlier post,  India as a result began dismantling decades of licence raj and never really looked back. 

And why did Pakistan's closest allies, including the United States, Saudi Arabia and China, let it down by leaving it to turn to the IMF for help? As discussed in an earlier post, China, with $2 trillion in foreign exchange reserves, was in a strong position to step in to head off what could turn into a deeply unpopular move.  Traditionally seen by Pakistan as its most reliable friend, China appears to have decided that an IMF programme was the best medicine.

A new beginning? Or another source of instability?

Posted by Guy Faulconbridge

Not all of Russia’s rich businessmen are queuing up for a loan under a government rescue package offering billions of dollars in state funds to bail out oligarchs who have been badly hit by the global financial crisis.

Russian billionaires Oleg Deripaska and Mikhail Fridman this week got a total of $6.5 billion in loans from a state-owned bank to help them cover foreign debts secured against stakes in major Russian companies, according to industry sources.

But Alexander Lebedev says there is no reason state money should be used to save oligarchs, the name given to a small group of well connected businessmen who made fortunes in the chaos following the fall of the Soviet Union.

“Why is profit private but the losses put on everyone else? I don’t understand that at all. Why should the rich government save rich citizens. It is not right,” Lebedev told Reuters on the sidelines of an investor conference in Moscow.

“The task of the government is affordable housing, to subsidise mortgages, health and so on but not handing out billions of dollars to certain people,” said Lebedev, a former spy who made a fortune through banking deals in the 1990s.

Lebedev was ranked by Forbes in May as Russia’s 39th richest man with a fortune of $3.1 billion. He  said he had not asked for any help from the government.

Some of Russia’s richest men, many of whom borrowed heavily for expansion over recent years, have faced margin calls from banks on loans they took out secured against large stakes in Russian companies.

Wealth cold now be redistributed among Russia’s richest men as the state steps in to save selected businessmen from default.

Moscow stepped in this week to help some businessmen, a bitter-sweet reversal of the asset sales of the 1990s when the near-bankrupt state sold off some of the biggest raw materials companies to the oligarchs at huge discounts.

Deripaska, 40,  was one of the businessmen blessed with a state bailout this week. He was ranked in May as Russia’s richest man by Forbes with an estimated fortune of $28.6 billion.

United Company RUSAL, majority owned by Deripaska, received $4.5 billion from state bank VEB to pay back debt to foreign banks, which it amassed to buy a stake in mining giant Norilsk Nickel, banking sources said.

The 25 percent-plus-two shares stake in Norilsk was used as collateral for the loan and UC RUSAL was at risk of losing it if it failed to pay back the debt.

VEB has also agreed to disburse $2 billion to Fridman’s Alfa Group to help it pay back a loan to Deutsche Bank and rescue Alfa’s large stake in Russia’s No. 2 mobile phone firm, Vimpelcom which was used as collateral with the bank.

“Why did Deripaska get the money? Why did he get $4.5 billion?” said Lebedev.

Russia’s richest men — who say they risked their lives to build private business empires — are viewed with hostility in their own country for buying some of Russia’s biggest companies at a deep discount from the state in the chaos of the 1990s.

Lebedev said a better way to manage a bailout would be to nationalise the stakes and then sell them off at a later date.

“You should just tell the population: ‘You got cheated in the 1990s. They gave it all to some chaps who have now brought it back again,’” he said. ”Then you could then privatise these assets in a few years, but privatise them in the proper way, transparently.”

Lebedev also said he was opposed to the government’s use of VEB to invest directly in Russian stocks, a measure to calm Russia’s equity markets which have lost two thirds of their value this year.

“Why are they we so worried? Who gets hurt from the stock market? There are 800,000 people on that market and 500,000 of them are officials who bet their own money and a few dozen oligarchs.”

Posted by Gleb Bryanski

Foreign investors who filed into a Moscow hotel on Wednesday anxious to hear what Russia’s anti-crisis tsar First Deputy Prime Minister Igor Shuvalov had to say about the future of the market were disappointed to find he had not shown up.

They had many questions: the stock market is down around 70 percent since May peak, gold and forex reserves are have fallen below $500 billion for the first time in eight months as Russia props up the rouble and the economic outlook is uncertain.

Investors were left to listen to economists from UBS, whose conferences in better times used to attract the cream of Russia’s business and political elite. Other official speakers later took the floor.

“I am not going to answer your questions for now because there are journalists in the hall and I will have to give you very stupid answers,” said Stanislav Voskresensky, a 32-year-old deputy economy minister who is tipped as a rising star.

“Let’s talk more informally in the bar this evening, I will be able to give you more honest answers,” he added, before being ushered out of the hall by UBS-hired security guards, with reporters kept at a safe distance.

Russian officials, armed with the third largest forex reserves in the world, are trying to project an image of self-confidence. They are blaming the crisis on the United States.

They need to calm nerves among foreign investors in particular because much of the money that had been fleeing the Russian market and causing dramatic stock market loss is foreign-owned.

But ordinary Russians, who have been dumping roubles, and Western portfolio managers are not entirely convinced.

“The question everybody has is where is the bottom? I am sick of putting money in and watching it disappear. There is no liquidity, no-one is buying, it is like a nightmare,” said John Connor, portfolio manager at U.S. fund Third Millennium Russia. “It is like going to Las Vegas and watching the money fall through the floor. I am not into gambling with my investors’ money.”

Aivaras Abromavicius, from Sweden’s East Capital, asked Kremlin’s economic aide Arkady Dvorkovich what the government is planning to do about some majority owners pulling out of share buyouts despite complaints from minority shareholders.

Dvorkovich said the matter should be taken to court and the government did not plan to interfere in court decisions. Abromavicius said he was happy Dvorkovich was at least aware of the problem.

He added that Western funds were worried about arbitrary trade stoppages in the Russian bourses, which hindered fund redemptions, and were in his view a sign that the Russian market was still far from being civilised.

The government has unveiled a package of over $200 billion to keep the economy going and some investors, who also work in other ex-Soviet countries, have praised Moscow’s response.

“Unlike many other states, Russia makes decisions, takes measures, works out strategy. They have the money and the political will,” Abromavicius said. “What you need the least is officials sowing panic.”

Russian officials have become harder to reach with secretaries saying they are out in meetings all day. Shuvalov spent all morning on Tuesday in closed-door talks with a group of UK businessmen led by business minister Peter Mandelson.

Shuvalov’s office told Reuters the official had to prepare for the afternoon government meeting chaired by Prime Minister Vladimir Putin and had to cancel his speaking arrangement at the
UBS conference.

The economic crisis has also forced Russia to finally launch its own “Invest in Russia” Website, available at www.investinrussia.info, in a sign that the country may warm up to foreign investors.

“We hope this will somehow help us,” Voskresensky said.

The global financial crisis has produced broad agreement that the world needs a new financial architecture, but world leaders are a long way from reaching agreement on what shape it should take.

Many countries have rescue plans to support banks and unfreeze credit markets. The United States has set in motion reforms to change the relationship between Washington and Wall Street.

But calls are being made for much deeper, coordinated reforms, and a series of global summits is planned to discuss how to reform the financial system. The first of these meetings will be held on Nov. 15 in the United States.

Capitalism as we used to know it may be on its deathbed. Some world leaders have called for a revamp of the 1944 Bretton Woods conference that resulted in the post-World War Two financial order and created the IMF and the World Bank. 

Economists and commentators have been filling newspapers with suggestions about what should be included in the new financial architecture, from more regulation to concerns about climate change and trade.

Some experts say world leaders risk making terrible mistakes of they get it wrong and must stand back and properly assess what went wrong before enacting wholesale reforms. Others say it would be wrong to force one country or region’s vision on another.

There is little doubt we are now, as British Prime Minister Gordon Brown put it, at a “defining moment” for the world economy. But there are more questions than answers.

Can world leaders overcome their differences and live up to the task? Will they have any concrete proposals to discuss on Nov. 15? Will it be more than a big talking shop?

As financial and philanthropist George Soros says, what kind of system will evolve from this is a very open question. 

European leaders have finally got their act together. After weeks of looking divided over how to tackle the global financial crisis, they agreed on joint measures at  emergency talks in Paris. 

Their meeting followed talks in Washington at the weekend involving G7 finance ministers and officials from the International Monetary Fund and the World Bank at which governments pledged to support the financial system. U.S. President George W. Bush said he was confident the world’s major economies could overcome the challenges.

But is it enough to stave off the crisis? 

Some equity investors appeared to be comforted. The pan-European FTSEurofirst rose on Monday, U.S. stock futures went up and Asian shares outside Japan, which was closed for a holiday, made gains. 

Just a few days ago, the IMF warned of the danger of financial meltdown but its chief, Dominique Strauss-Kahn said on Monday the worst of the crisis was possibly over. 

Many newspapers were cautious. The Toronto Globe and Mail saw hope in the fact that the world’s financial  leaders have started setting aside their differences but said some market participants could be disappointed by the lack of specifics. Floyd Norris wrote in The New York Times that there was no assurance that credit would flow when markets reopen this week.

The Economist said the “dithering” was over but  some problems remained.

Commentators and politicians are united in saying that staying together holds the key to success and that the consequences could be dire if unity does not hold. 

Commentator Will Hutton, writing in The Observer, said: ”I don’t know whether politicians and their advisers can move as quickly as they need in so many areas and collaborate across so many countries to restore stability.”

He added:  ”Without collaboration and leadership, we face disaster.”

Politicians are always looking for new ways of dealing with the press and public. These days, for example, it is quite common for them to say they “misspoke” about something - a neat way of admitting to a mistake without actually doing so. This was made popular by the Richard Nixon’s old press secretary Ron Ziegler who would famously say something one day then announce “I misspoke myself” the next day. Such statements, Time magazine reported in 1973, were “not incorrect, not misinformed, not untrue - simply inoperative, like batteries gone dead”.Is it now possible that press-shy Republican vice presidential candidate Sarah Palin has come up with a new technique set to be emulated far and wide? During her debate with Democratic counterpart Joe Biden last week, she responded to one question by saying she was not going to answer it because she wanted to talk about something else.

Probably coincidental, but British finance minister Alistair Darling did much the same thing on Wednesday as he was part nationalising Britain’s bank. “I think I heard enough to be able to answer you, or put it another way, here is the answer I am going to give anyway, regardless of what your question might be!,” he said in response to one question.

Can it be long before we hear someone say “I am going to Palin that one” or “I’ll take a Palin on that”?

The European Union has come under sharp criticism for having a fragmented approach to the financial crisis. It is exemplified by Ireland’s go-it-alone decision to guarantee all accounts and Germany’s surprise announcement after a meeting of leading members that it was taking unilateral action too.

Relief, then, that the 27 member states issued a statement on Monday that they would do what it takes to bolster citizens’ savings and build financial stability. Only problem was, they could not coordinate the announcement. First Italian Prime Minister Silvio Berlusconi released it, then Portugal. Only after a while did French President Nicholas Sarkozy weigh in. He does head the current EU presidency after all.

No wonder Washington called for more coordination.