Global News Journal

Who do you call to speak to Europe?

Who do you call when you want to speak to Europe? The question, long attributed to Henry Kissinger, has yet to be answered convincingly by the 27-country European Union.

Six months ago, European Commission President Jose Manuel Barroso told a news conference the person to call on foreign policy issues was Catherine Ashton, who had just been chosen as the European Union’s foreign affairs chief.  The “so-called Kissinger issue is now solved”, he said.

Ashton reinforced that view on Monday by suggesting she was the person to call if Iran wanted to discuss the latest diplomatic moves on its nuclear programme. “They have my phone number,” she said.

But Barroso was more vague at the news conference last November when asked whom U.S. President Barack Obama should call if he wanted to speak to the EU. He pointed out that the EU was not one country, like the United States, China or Russia — implying they each had one clear leader. He seemed to be saying that the person you have to call depends on circumstances or the nature of the problem a foreign leader wishes to discuss.

So who did Obama call when he wanted to discuss the debt crisis threatening the group of 16 EU states that use the euro?

It wasn’t Ashton — as a Briton, she is not from a euro zone country and anyway this was a call about economics, which is not in her brief.

It wasn’t Herman Van Rompuy either, even though he too could stake a claim to be the face of Europe as the bloc’s first full-time president.

Deja vu? EU ministers meet on Greece

How many meetings does it take for the European Union to solve a problem? Quite a few — at least in the case of Greece’s debt crisis and preventing it from spreading to other euro zone countries.

There was a definite sense of “deja vu” when the bloc’s 27 finance ministers met on Sunday to approve measures aimed at ring-fencing Greece’s debt problems.

They were pretty much tackling the same problems as the leaders of the 16-country euro zone had dealt with at talks on Friday. The leaders had met to approve what Eurogroup finance ministers agreed five days before at talks that were called to build on agreements at a series of EU and euro zone meetings this year.

Securing agreement among all 16 euro zone countries or all 27 EU member states has never been easy but it is particularly hard for governments to make deals during an economic downturn or when they face domestic opposition to a bailout – as is true in Germany’s  case.

What has the effect of all these meetings been on financial markets? By Sunday evening, not too much, although  IMF and EU formal approval for a 110 euro ($148 billion)  loan package  for Greece over three years did at least help push up the  euro.

Previous EU action this year has failed to calm financial markets and ended up undermining the EU’s credibility.

Searching for silver in Greece’s storm clouds

Greece and the euro zone are still very much in the midst of a debt and deficit storm, with not just Athens but possibly Portugal and Spain at risk of being swept up in the maelstrom.

But that hasn’t stopped economists and political analysts looking for a silver lining in this unprecedented meltdown.

One positive is the impact the uncertainty is having on the euro, which has weakened sharply against the dollar and the British pound this year. That may not be very good for those in the United States or Britain holding euro-denominated assets, but it’s good for European exporters, whose goods become relatively less expensive for importers.

As Jennifer McKeown, a senior economist with Capital Economics, pointed out in a research note on Thursday, euro zone export orders are sharply up (by some counts they are now the highest in 10 years), while in April, euro zone manufacturing expanded at its fastest rate since November 2006, according to Markit.

That’s clearly a positive for the euro zone. The EU is the world’s largest trading bloc by value and exports are a key component of growth, particularly for the major economies such as Germany, France and Italy. Accountancy firm Ernst & Young said in a recent report that it expected net trade to contribute 0.7 percentage points to euro zone growth in 2010 — thereby accounting for three-quarters of the rise in overall GDP.

It is therefore perhaps not so surprising that economic and business sentiment in the euro zone rose strongly in April, despite the chaos in Greece and the volatility in financial markets across the region. 

But there is also a broader positive shakeout that could ensue from this crisis. It may take several years — at best — but economists and political analysts think it will force profound structural adjustments in several EU economies, including Greece, Portugal, Spain and possibly Italy.

from Emily Flitter:

A spiral for Europe?

Quelling the European debt crisis will take more than just a bailout package for Greece, says one expert in financial contagion. Other countries with shaky fiscal profiles need to get their finances in order--and fast. 

 Lasse Pedersen, a professor of finance at New York University's Stern School of Business, has made a close study of liquidity spirals in financial markets, and he sees parallels between his work and the European crisis. 

"Here the spiral is that the more concerned people will be about whether Greece can pay back its debts the higher the interest rate they will demand, and the higher the interest rate they demand the harder it will be. For instance, if the interest rate payments increase two or three times or more, it can become difficult to meet these payments even with a sound economic policy,"  Pedersen said in an interview. 

The danger that the feedback between investor anxiety and higher rates could appear in other European countries is real and needs some proactive attention, he added. 

"I do think that the contagion risk is very real and perhaps the way to stop it is for the International Monetary Fund or the European Union to already now think about making a deal with other countries like Portugal that aren't in immediate trouble now." 

 The other countries where high debt-to-GDP ratios have already attracted concern also need to move more quickly with reforms, Pedersen said. 

 "These countries have to realize that the main party that has to save them is themselves--they have to have a responsible fiscal policy that means they can pay back whatever debt they have." 

from UK News:

Ash-stranded 2,000 kilometres from home – Tuesday update

* 1600 euros the quoted fare for taxi from Barcelona to Perpignan

* Train from Perpignan cancelled, but we blag our way on to Paris-bound service

* Chaos in Calais

Original post: “We’ve gone on holiday by mistake!”

That quote from "Withnail and I" has been rattling around my brain for the last few days as I’ve looked for a way to complete the 2,000 kilometres (1,243 miles) or so from the small town I’ve been staying in south of Valencia, Spain, and my home in London.

I’ve spent most of the last 72 hours on the internet, searching in vain for reasonably priced car hire, bus, train and ferry tickets.

Lapland’s part in EU foreign policy

Last weekend, Finland’s foreign minister gathered six of his colleagues and the EU’s foreign affairs chief, Catherine Ashton, in the frozen far reaches of Lapland for two days of talks on the future of European foreign policy.

As informal ministerial gatherings go, it was a rather jolly (if cold) affair, complete with a ‘family photo’ taken with a pair of nervous reindeer, a chance to see the northern lights and activities such as skiing, sledging and snow-mobiling. Some of the ministers even brought along their families.

But as well as a relaxing weekend staying in luxurious cabins 250 km inside the Arctic Circle in the village of Saariselka, what exactly is the point?

Alexander Stubb, Finland’s young and energetic foreign minister, well know for doing triathlons and for his near-permanent grin, says such retreats help foreign ministers get to know each other better and allow them to discuss critical issues without outside pressure. First, they don’t have to worry about reaching hard-headed decisions, and equally they don’t have advisers whispering in their ears or minute-takers holding them to their every word. It’s an open-ended chat among colleagues about topics close to their heart.

France’s foreign minister, Bernard Kouchner, and his Italian counterpart, Franco Frattini, certainly backed up that impression as they relaxed in jeans and open-necked shirts and chatted openly with a handful of journalists  also invited along. They went snow-mobiling and celebrated Frattini’s 53rd birthday. 

In terms of discussions, the participants — who also included the foreign ministers of Sweden, Spain, Turkey and Estonia — covered everything from the EU’s role in the world to sanctions on Iran, developments in the Middle East and the setting up of a European diplomatic corps. Over dinner of reindeer steaks and Lapland cloudberries, they sought to put the world to right.

But at the back of their minds, they were also worrying about their own futures.

Does Washington care about the EU?

Try as it might, the European Union’s efforts to act like a bigger player in world affairs keep running into obstacles.

The latest setback is a report that President Barack Obama won’t be able to make it to the annual EU-U.S. summit this year, pencilled in for Madrid in May. A hectic domestic agenda and the fact the U.S. president made 10 foreign trips last year — more than any other president in his first year in office — means staying at home is the priority and the Europe Union will have to wait.

Spanish officials — Spain holds the rotating six-month presidency of the EU and is hosting the summit – say the White House has not officially withdrawn his attendance. As far as they are concerned Obama is still coming, even if the dates for the meeting have not yet been finalised. 

But doubts about the trip have been sewn and soul-searching has begun in Brussels about whether Washington even cares about Europe.  If Obama doesn’t come, goes the thinking, it’s a blow to those who believe the 27-country EU, with its impressive economic power, might one day stand shoulder-to-shoulder with Washington in international affairs, and act as a counterweight to a rising Beijing.

Obama may still decide to come, and even if he doesn’t, there is still the annual U.S.-EU summit in the United States, scheduled for the autumn. But rather than a ‘will-he-come-or-won’t-he?’ story, the debacle says more about the awkward institutional structure of the EU and why it’s a barrier to the region becoming more influential.

Obama was invited by Spain before it took on its six-month presidency on Jan. 1. But before that tenure began, the EU brought into force the Lisbon treaty, which reformed the bloc’s structure, creating a new president of the Council of Ministers, effectively an EU president with a renewable 2-1/2-year mandate, and a more powerful high representative for foreign affairs.

Even though Spain is hosting the EU-U.S. summit, it will be chaired by the new EU president, Herman Van Rompuy. Van Rompuy’s office knew nothing on Monday about whether Obama was attending, saying only that it had read press reports that he wasn’t coming. Officials referred calls to the Spanish rotating presidency in Brussels, which is in charge of planning summits and other meetings for the next six months.

Will EU ever move on from “soft touch” diplomacy?

Spain’s Foreign Minister Miguel Angel Moratinos recalled this week that it had been said of the previous U.S. administration that what American diplomacy needed was “regime change”. Europeans, meanwhile, he said, simply needed “a regime”.

America got its regime change with President Barack Obama, Moratinos explained this week, while Europeans got a new regime with the Lisbon treaty, a document that is supposed to help bolster the EU on the world stage and creates a more powerful foreign policy chief for the bloc.

The question now is whether the EU, a group of 27 nations and 500 million people that has consistently punched below its weight in foreign affairs even as its economic influence grows, will be bold enough to seize the opportunity Lisbon presents to make it presence fully felt in the world.

Europhiles have argued for years about the need for Europeans to back their ability to exert “soft power” through aid and trade with a united approach to international diplomacy backed by credible “hard power”, or military capability.

Lisbon partly opens the way by providing for the formation of a European diplomatic service. But a rigid reluctance among most big European states to cede sovereignty on foreign and security policy means any “hard power” vision remains a distant concept.

Sceptics will point to the appointment of an unglamorous first EU President in Herman Van Rompuy and an equally low profile foreign affairs chief in Catherine Ashton as evidence that Europe’s most powerful nations remain distinctly reluctant to cede influence or limelight any time soon.

The catastrophe in Haiti, for which the EU has offered 420 million euros in emergency aid and long-term redevelopment, presented an early opportunity for Van Rompuy — a Belgian and a committed EU federalist — to argue the case for combining such EU “soft power”, with a bit of hard power.

‘Dinnergate’ perks up German campaign

The German election campaign has so far lacked the riveting debates and explosive issues to which voters were treated in previous battles for power, perhaps because Chancellor Angela Merkel and her rival, Vice-Chancellor Frank-Walter Steinmeier, have worked together in the same “grand coalition” government for the past four years and neither party seems especially eager to rock the boat.

Filling the void have been several somewhat bizarre little scandals that each side has tried to use to tarnish the other, taking pot shots without resorting to full firepower. They are, after all, partners in power.

First there was Ulla Schmidt, the Social Democratic health minister whose questionable use of her official car on holiday in Spain came to light only after the car was stolen. Merkel’s Christian Democrats and opposition parties have done all they can to turn the “Dienstwagenaffaere” into a campaign issue — an example of a minister out of touch with voters for taking full advantage of government privileges — even though Schmidt insists she has done nothing wrong.

Now Merkel, the CDU chancellor, is facing criticism from the SPD and opposition parties for throwing a controversial dinner party at the chancellery (at the taxpayers’ expense) last year for Deutsche Bank CEO Josef Ackermann to mark his 60th birthday. “She told me at the time she would like to do something for me,” Ackermann told German TV in a profile of Merkel last week. “She said I should invite 30 or friends I’d like to spend an evening with to the chancellery.”

Merkel defended the meeting, saying she is always trying to bring different groups of people together at dinners.

And also in the spotlight is Economy Minister Karl Theodor zu Guttenberg, the rising young star of the Bavarian Christian Social Union, for using external advisers to draft complex financial legislation.

A parliamentary budget committee has started an investigation into whether any government rules were violated. Germany’s best-selling daily Bild has already reached its verdict: “It’s all nonsense,” wrote Einar Koch in a column on Wednesday. “The petty dispute about the dinner in the chancellery shows how devoid of content the 2009 election really is. If the chancellor of Europe’s leading economic power cannot invite 25 important industry and cultural leaders to a dinner in the chancellery, then it’s ‘good night’ for Germany”. His paper’s editor-in-chief Kai Diekmann and its publisher Mathias Doepfner were among those at the Ackermann party. So is it misuse of taxpayer money for the chancellor to throw a birthday party at her office for one of the most powerful bankers in the country? Or is it simply a smart thing to do, getting industry, political and cultural leaders together for some high-powered elbow rubbing?

It’s all the fault of those people who work and save too much

One thing we’ve learnt from the crisis is that if something sounds funny it probably is. All that talk about slicing and dicing subprime debt to turn it into triple-A securities was hard to understand at the time and now we know it was just the 21st century equivalent of alchemy.

The current debate about the responsibility that surplus countries like China, Germany and Japan share for the crisis has a similar ring.

Plenty of people warned that the huge deficits and debts that countries like the United States, Britain and Spain ran up over the past decade were unsustainable. Recently the argument has been made that the countries that sold the Americans and Brits all those things they bought on credit share the blame.

In economic terms, it takes two to tango: if one country has a deficit, there must be a surplus somewhere else. In fact, if you run a big surplus, you are practically forcing someone else to have a deficit.

Well before the crisis broke, in March 2005, Fed Chairman Ben Bernanke discussed the “global savings glut” as an explanation for the persistent and rising U.S. current account deficit.

In recent weeks, The Economist has subjected the economies of surplus countries China, Germany and Japan (as well as that of the United States) to critical examination in a series on “rebalancing the world economy”. In its latest edition, for example, it describes the Japanese as “serial exporters”.