The Great Debate UK

from The Great Debate:

Global action for a global recovery

By Christine Lagarde The opinions expressed are her own.

The global economy has entered a dangerous new phase. There is a path to sustained recovery, but it is narrowing. To navigate it, we need strong political will around the world – leadership over brinksmanship, cooperation over competition, and action over reaction.

One of the main problems today is too much debt in the global financial system – among sovereigns, banks, and households, especially among the advanced economies. This is denting confidence and holding back spending, investment, and job creation. These countries face a weak and bumpy recovery, with unacceptably high unemployment. The eurozone debt crisis has worsened, and financial strains are rising. Political indecision in some quarters is making matters worse. Social tensions bubbling beneath the surface could well add fuel to the crisis of confidence.

In these circumstances, we need collective action for global recovery along four main policy lines: repair, reform, rebalancing, and rebuilding.

First, repair. Before doing anything else, we must relieve some of the balance-sheet pressures – on sovereigns, households, and banks – that risk smothering the recovery. Advanced countries need credible medium-term plans to stabilize and reduce public debt.

But consolidating too quickly can hurt the recovery and worsen job prospects. There is a solution. Credible measures that deliver and anchor savings in the medium term will help create space to accommodate growth today – by allowing a slower pace of consolidation. Of course, the precise path is different for each country, as some are under market pressure and have no choice, while others have more space.

It is also important to relieve pressure on household and banks. With respect to the United States, I welcome President Barack Obama’s recent proposals to address growth and employment; actions like more aggressive principal-reduction programs or helping homeowners to take advantage of low-interest rates would also help. And, in Europe, the sovereigns must address firmly their financing problems through credible fiscal consolidation. In addition, to support growth, banks must have sufficient capital buffers.

from The Great Debate:

Global action for a global recovery

By Christine Lagarde The opinions expressed are her own.

The global economy has entered a dangerous new phase. There is a path to sustained recovery, but it is narrowing. To navigate it, we need strong political will around the world – leadership over brinksmanship, cooperation over competition, and action over reaction.

One of the main problems today is too much debt in the global financial system – among sovereigns, banks, and households, especially among the advanced economies. This is denting confidence and holding back spending, investment, and job creation. These countries face a weak and bumpy recovery, with unacceptably high unemployment. The eurozone debt crisis has worsened, and financial strains are rising. Political indecision in some quarters is making matters worse. Social tensions bubbling beneath the surface could well add fuel to the crisis of confidence.

In these circumstances, we need collective action for global recovery along four main policy lines: repair, reform, rebalancing, and rebuilding.

First, repair. Before doing anything else, we must relieve some of the balance-sheet pressures – on sovereigns, households, and banks – that risk smothering the recovery. Advanced countries need credible medium-term plans to stabilize and reduce public debt.

But consolidating too quickly can hurt the recovery and worsen job prospects. There is a solution. Credible measures that deliver and anchor savings in the medium term will help create space to accommodate growth today – by allowing a slower pace of consolidation. Of course, the precise path is different for each country, as some are under market pressure and have no choice, while others have more space.

It is also important to relieve pressure on household and banks. With respect to the United States, I welcome President Barack Obama’s recent proposals to address growth and employment; actions like more aggressive principal-reduction programs or helping homeowners to take advantage of low-interest rates would also help. And, in Europe, the sovereigns must address firmly their financing problems through credible fiscal consolidation. In addition, to support growth, banks must have sufficient capital buffers.

Has Ireland de-coupled from the periphery?

By Kathleen Brooks. The opinions expressed are her own.

Ireland is on a wave. After a bad patch and a massive loss of confidence eventually it looks like it has turned a corner and we can start to believe that there may be brighter times ahead. Of course, I could be talking about the Irish rugby team who had a stunning win over Australia at the rugby World Cup in New Zealand. But the economy isn’t doing too badly either.

Data last week showed that the economy grew by a respectable 1.6 percent in the second quarter, after expanding by an even better 1.9 percent in the first three months of this year. This beats the dismal growth rates in the UK and the euro zone, which both came in at 0.2 percent in the three months to June.

More importantly to Dublin, however, has been the drop in Irish bond yields. In recent weeks it has bucked the trend of other euro zone countries with dodgy financials who have seen their bond yields rise, instead its 10-year yield has fallen from a high of 14 percent in July to 8.7 percent at the end of last week. In contrast, Greek yields have risen more than 10 percent over the same period.

So, as ironic as it may seem, during the current period of market turmoil when stocks and other risky assets experienced heavy losses, Irish bond yields were one of the few winners out there along with the dollar and the yen. This is an about turn, back in November when Ireland applied for bailout funds its position was considered so precarious that it caused a wobble in the euro more severe than the decline we have seen in September.

But while officials in Dublin might not be allowing themselves to have grand ideas that Ireland could turn into the next safe haven they will be delighted that their bond yields have fallen as this not only lowers their costs of funding, but also brings them one step closer to achieving their goal of re-entering the capital markets in 2013. The cost to insure Irish debt from default has also fallen by more than 100 basis points over the past few weeks, which suggests investors are more confident that Ireland has stepped back from the edge of the default.

So what has Ireland done right? Growth in the second quarter was driven primarily by exports, which expanded by a whopping 23.9 percent between the second quarter of 2010 and 2011. The industrial (excluding construction) forestry, fishing and agriculture were the only sectors to see positive annual growth rates, but that is still not bad for an economy that just seven months before had to go cap in hand to the IMF and EU for a bailout loan.

from FaithWorld:

Luther rehabilitated? Catholics and Protestants disagree

(Martin Luther by Lucas Cranach the Elder, painted in 1529)

Among Catholic-Protestant splits on display during Pope Benedict's visit to Germany is a disagreement over whether Martin Luther, the 16th century reformer who launched the split in western Christianity, has now been rehabilitated.

Pope Leo X cast Luther out of the Roman Catholic Church in 1521 with a vociferous decree branding him "the slave of a depraved mind" and calling his followers a "pernicious and heretical sect." But his present-day successor, Benedict, spoke so positively of Luther's deep faith during a visit to the monk's old monastery in Erfurt on Friday that Germany's top Protestant bishop announced Luther had effectively been rehabilitated.

"Luther has experienced a de facto rehabilitation today through this appreciation of his work," Bishop Nikolaus Schneider, head of the Evangelical Church in Germany (EKD), announced to journalists on Friday after talks with Benedict. "We heard this very clearly from the mouth of the pope," he said. "What follows now formally is another question ... but that's not so important for me."

Vatican spokesman Rev Federico Lombardi begged to differ on Saturday. “To say that would be exaggerated," he told journalists in Freiburg, the last stop on the pope's four-day tour of his homeland. "What this is about is having deep faith and I think it emphasises the commonalities we have in our love of faith.”

What happened 490 years ago is taking on new significance in Germany because Protestants here are preparing to celebrate the 500th anniversary of Luther's 95 Theses of 1517, the manifesto of dissent that eventually led to the Reformation. The Protestants would like Catholics to say Luther was not a heretic but a major Christian theologian. "It would be nice if they could declare him a doctor of the Church," Erfurt's Lutheran Bishop Ilse Junkermann told Reuters.

from The Great Debate:

Help Pakistan rein in the ISI

By David Rohde The opinions expressed are his own.

Admiral Mike Mullen’s blunt declaration on Thursday that a Taliban faction known as the Haqqani network acts as a “veritable arm” of Pakistan’s military intelligence agency is a welcome shift in U.S. policy. After a decade of privately cajoling the Pakistani military to stop its disastrous policy of sheltering the Afghan Taliban, the United States is publicly airing the truth.

Pakistan’s top military spy agency, the Directorate of Inter-Services Intelligence (ISI), supported the Haqqanis as they carried out an attack on the American embassy last week, Mullen said during Congressional testimony. Last year, they arrested a Taliban leader who engaged in peace talks without their permission, according to American officials. And many Afghans suspect ISI involvement in the assassination this week of the head of Afghan peace talks that did not involve Pakistan.

The airing of the ISI’s links to the Haqqanis is long overdue. To me, the ISI is a cancer on Pakistan. It is vital, though, that American officials punish the Pakistani military--not all Pakistanis--for the ISI’s actions.

Dominated by hard-line ultra-nationalists obsessed with defeating archrival India, the ISI has killed Pakistani journalists who openly criticize it, harassed human rights activists and undermined efforts to establish democracy. A shadow government unaccountable to the country's weak civilian government, the ISI is widely feared by Pakistanis.

The agency is dominated by military officers wedded to a paranoid, antiquated and dangerous mindset the C.I.A. helped foment during the 1980s anti-Soviet jihad, according to American and Pakistani officials. More ultranationalists than jihadists, ISI officers believe they are the true guardians of Pakistan. To them, the U. S. is an untrustworthy and dissolute nation that is in rapid decline. India is Pakistan’s primary threat. And militants are proxies that can be controlled.

Instead of blaming all Pakistanis for the action of the ISI, the United States must help Pakistan reform an out-of-step, out-of-control agency. Military aid to Pakistan should be halted until the ISI stops sheltering the Afghan Taliban. At the same time, civilian aid to Pakistan should be continued and even increased.

from Pakistan: Now or Never?:

The “end game” is in Pakistan

The United States has turned on Pakistan with such dizzying speed over the past few weeks that it is difficult to keep pace. Yet what is clear after Admiral Mike Mullen's extraordinarily blunt statement that the Haqqani militant network is a "veritable arm" of the Inter-Services Intelligence (ISI) agency is that it now has the Pakistan army very firmly in its sights.

Mullen accused the ISI, which is effectively a wing of the Pakistan army, of supporting the Haqqani network in a truck bomb attack on a U.S. base in Afghanistan and an assault on the U.S. embassy in Kabul which led to a 20-hour siege. "We also have credible intelligence that they (the Haqqani network) were behind the June 28 attack against the Inter-Continental Hotel in Kabul and a host of other smaller but effective operations," he said.

It was the most forthright assertion yet by the Americans that the Pakistani military is not merely turning a blind eye to militant groups based on its border with Afghanistan but actively encouraging them to attack American interests.  The Pakistan army says it is overstretched as it is tackling militant groups which target Pakistan without creating new enemies by attacking Afghan militants and denies it retains links with the Haqqani network.

Just one month ago in a report titled "Pakistan, the United States and the End Game in Afghanistan"  a group describing themselves as "the foreign policy elite" laid out what Pakistan wanted to happen in Afghanistan.  Among their suggestions were that both the Afghan Taliban led by Mullah Mohammed Omar and the Haqqani network be included in talks on a political settlement in Afghanistan.  The report was heavily criticised by those who saw it as  an attempt by Pakistan to maintain its old policy of "strategic depth" - using militant proxies to stamp its influence on Afghanistan and counter India.

It looks like the United States is having none of it. I dislike the expression "end-game" applied to either Afghanistan or Pakistan (or Britain for that matter) with its implication that the people living in those countries come to an end when outside powers lose interest.  But it is worth considering the expression just to show how much has changed. The so-called "end-game" is  now in Pakistan.

That is not to say there are not worsening problems in Afghanistan itself, especially with the assassination of peace council chairman Burhanuddin Rabbani "laying open again the fracture lines" of civil war, as Kate Clark wrote at the Afghanistan Analysts Network. Nor is to suggest that anyone disputes the need for a political settlement in Afghanistan. Nor indeed that American tactics and strategy in Afghanistan are not open to criticism - Pakistan repeatedly says it is being used as a scapegoat for U.S. failures in Afghanistan. And nor would it be fair to dismiss Pakistan's own concerns that by going after the Haqqani network - with its links to the Tehrik-e-Taliban Pakistan and other militant groups - it would face even greater violence on its own soil. Those  are all subjects which merit separate and serious discussion.

But it is to say that the particular end-game going on now is between the United States and the Pakistan army.  Look closely at the proposition being made by Washington.  According to Mullen's testimony  Pakistan - and specifically its army - must give up support for the Afghan Taliban (the so-called Quetta shura Taliban) and the Haqqani network.  In return the United States will help Pakistan find "an increasing role for democratic, civilian institutions and civil society in determining Pakistan’s fate."

Dale Farm highlights need for new approach to travellers

By Mark Hillary. The opinions expressed are his own.

The Dale Farm barricades are being dismantled and all political eyes are now focused on the party conference season. Just yesterday, Nick Clegg managed to impress the Lib Dem faithful in Birmingham, though convincing the voters that all is well with the good ship Lib Dem might be a bigger challenge for the Deputy PM.

But as the dust settles on Dale Farm, have we learned anything from the fiasco where Basildon Council attempted to evict 52 families from their homes, with no option of staying in the area due to there being no other local authorised sites for travellers?

It would appear not. Some travellers are now dispersing to other illegal sites throughout the south of England and the council is fighting tooth and nail to get the injunction preventing eviction quashed – so they can carry on.

The issue for the council is simple. A group of travellers on an authorised site purchased some adjoining land and started expanding their site into the new area. They own the land, but had not been granted planning permission for the extended site.

It’s an open and shut case – no planning permission means no building and any buildings that have been erected without permission need to be destroyed.

The general public has a lot of sympathy with this no-nonsense approach. Travellers are generally seen as scroungers who want to avoid the normal structures of society – taxes and planning permission – yet they squeal about the Human Rights act when challenged. The man in the street could for forgiven for asking why there is one set of rules for travellers and another for the average law-abiding citizen.

from Business Traveller:

Travel Flash!

Why Jetsetter’s recent UK launch is likely to give online hotel bookers a run for their money, and why it is not at all like Groupon.

Jetsetter, a members-only flash-sale site, aims to help travellers discover and purchase curated holidays at a discounted rate. Set up two years ago in the U.S., and this week in the UK, funded by flash-sale site Gilt Groupe, it now has two million members, and sells 400,000 room nights through 20-40 flash-sales per week at prices up to 50 percent off.

Drew Patterson, 34 year-old CEO and founder of Jetsetter, reminds me of the eloquent, young, American tech-wizards portrayed in Facebook biopic The Social Network. We meet at the aptly named The Booking Office for breakfast at the Victorian-terminus chic St Pancras Renaissance London Hotel.

Patterson is no stranger to dabbling in travel technology; after graduating from Harvard, he joined Starwood Hotels where he launched a consortium with leading hotel brands to compete with Expedia and Travelocity. He left to become part of the founding team at KAYAK, thence to Jetsetter.

The genius of the flash-sale model, thinks Patterson, is that it really can enable affordable luxury: “By having a variable inventory, a mix of destinations, limited amounts of rooms, constraining the amount of inventory available on any given night, our partners are able to […] segment their customer base and address this audience that otherwise wouldn’t be coming to us.” Eighty four percent of his customers say that they discovered a property by seeing it on Jetsetter.

As the bad news continues for daily deal company Groupon, whose suppliers seem to be getting the raw end of the profitability deal, deal companies using the flash model can smugly point out that they are driving discounted business in a profitable way by working cannily with their vendors’ inventories. “We know when and where suppliers are looking to fill rooms, trips or boats,” says Patterson, “which allows us to make sure we’re creating profitable business, as opposed to displacing things that would otherwise be sold at a higher rate.”

But is an experience as fretted over as a holiday really suited to the flash model; how many people can make such a spontaneous decision on a holiday? Patterson tells me that it generally happens like this: a couple, or a group of friends, have been talking about taking a trip for a month or more and sort of know what they want to do but haven’t pulled the trigger. Then they see the deal on Jetsetter, think it looks good, and get off the couch and book it. The Jetsetter CEO thinks his site provides a “call to action”. Members can also search and book from a blackbook of 500 favourite hotels featured in the Jetsetter 24/7 collection.

from The Great Debate:

My uphill battle against the Afghanistan intervention

By Rory Stewart The views expressed are his own.

I returned to Afghanistan (after spending a short time at Harvard) in 2005. And when I heard that the British government was about to send three thousand soldiers into Helmand, I was confident that there would soon be a widespread insurgency. I also predicted that the military would demand more troops, and would get dragged ever deeper.

It wasn’t that I had any particular skill in predicting the future. I failed to predict that Egypt’s President Hosni Mubarak would fall. I was wrong about Iraq. And my prediction for Helmand wasn’t based on any knowledge of Helmand. It was simply that I recognized the mindset and the actions of the NATO governments from Iraq. And I wasn’t alone in warning against the deployment. Many others predicted the same thing in Helmand. A military friend of mine had returned from a reconnaissance trip saying, “There isn’t an insurgency, but you can have one if you want one.” The Helmand surge continued regardless. The British government seemed to have a momentum, quite distinct from any individual politician or policy-maker. Troops were increased from two hundred U.S. Special Forces in 2005 to three thousand British soldiers in 2006.

At the time, senior officials reassured me that they understood the danger of being dragged in too deep. Two offered to sign a document saying that if the three thousand troops didn’t “establish governance, economic development, and security” within six months, they would admit the policy was a mistake, rather than claim that the problem had simply been strategy and resources. But I did not force them to sign. And when six months passed and the situation had worsened, the same officials supported the call to increase the number of troops to five thousand, and a few months later to seven thousand. I began writing and speaking publicly against the policy. I argued that what was needed was not a surge but a reduction to a light long-term footprint.

This put me in a difficult position because the policy-makers were my friends and I lived in Kabul, where I had just started an NGO, restoring part of the historic city and establishing an institute for traditional crafts. My personal life and work indebted me to many of the people whose policies and governments I was criticizing. I found myself writing op-eds against generals who had been my hosts; giving academic lectures mocking the books and theories written by friends; and publicly debating an ambassador whom I admired. I was calling on the governments that were giving money to my NGO to send less money to Afghanistan. I was arguing against fighting the Taliban while many of the philanthropists who supported my work did so out of hatred of the Taliban. Many of my upper-class Afghan friends who had returned from the West to Kabul and were relying on the international community to build a state were particularly confused and hurt by my arguments. In retrospect and in the circumstances, I am astonished how forgiving they all were. Only one ambassador gently asked whether I could stop criticizing his country, in return for the millions his nation’s taxpayers were giving to our NGO. But when I wouldn’t make the commitment, the money still came.

Most of the internationals I knew in Kabul disagreed with me strongly. They said that I didn’t know what I was talking about. And in many ways they were right. I was certainly not an expert on Afghanistan. Academics such as Tom Barfield and Barnett Rubin are truly scholars of Afghanistan. Afghan statesman such as Ashraf Ghani and the Afghan-American Zalmay Khalilzad have a much more detailed sense and understanding of Afghan history and politics. Journalists such as Ahmed Rashid have a much better sense of the language, the recent past, and the regional context. People who have run projects on the ground, from Andrew Wilder and Antony Fitzherbert to Michael Semple and Martine van Biljert, have a much more detailed sense of the reality of international assistance in Afghanistan. Generals and ambassadors and development directors know far more about military tactics, practical diplomacy, and development theory. There are, most importantly, thirty million Afghans who intuitively understand far more about Afghanistan than any foreigner. And, as the British pointed out gleefully, I had traveled only in the north and center of Afghanistan—I had been to Helmand only once.

Nevertheless, I was confident that I was right. I tried to explain that this was not based on any special insights about Afghanistan, but instead on a sense of ourselves: the international community. I felt I had learned in the Balkans and particularly in Iraq that we—the foreign government organizations and their partners—know much less and can do much less than we pretend. I knew the international community underestimated the reality of Afghan rural life: they did not grasp just how poor, fragile, and traumatized Afghanistan was; just how conservative and resistant to foreigners, villages could be. Our institutions were too inherently optimistic, too ad hoc, too isolated from the concerns and realities of Afghan life, too caught up in metaphysical abstractions of “governance” and “the rule of law” ever to succeed—or to notice that we were not succeeding.

from The Great Debate:

How to prevent a depression

By Nouriel Roubini The opinions expressed are his own.

AMSTERDAM – The latest economic data suggests that recession is returning to most advanced economies, with financial markets now reaching levels of stress unseen since the collapse of Lehman Brothers in 2008. The risks of an economic and financial crisis even worse than the previous one – now involving not just the private sector, but also near-insolvent sovereigns – are significant. So, what can be done to minimize the fallout of another economic contraction and prevent a deeper depression and financial meltdown?

First, we must accept that austerity measures, necessary to avoid a fiscal train wreck, have recessionary effects on output. So, if countries in the eurozone’s periphery are forced to undertake fiscal austerity, countries able to provide short-term stimulus should do so and postpone their own austerity efforts. These countries include the United States, the United Kingdom, Germany, the core of the eurozone, and Japan. Infrastructure banks that finance needed public infrastructure should be created as well.

Second, while monetary policy has limited impact when the problems are excessive debt and insolvency rather than illiquidity, credit easing, rather than just quantitative easing, can be helpful. The European Central Bank should reverse its mistaken decision to hike interest rates. More monetary and credit easing is also required for the US Federal Reserve, the Bank of Japan, the Bank of England, and the Swiss National Bank. Inflation will soon be the last problem that central banks will fear, as renewed slack in goods, labor, real estate, and commodity markets feeds disinflationary pressures.

Third, to restore credit growth, eurozone banks and banking systems that are under-capitalized should be strengthened with public financing in a European Union-wide program. To avoid an additional credit crunch as banks deleverage, banks should be given some short-term forbearance on capital and liquidity requirements. Also, since the US and EU financial systems remain unlikely to provide credit to small and medium-size enterprises, direct government provision of credit to solvent but illiquid SMEs is essential.

Fourth, large-scale liquidity provision for solvent governments is necessary to avoid a spike in spreads and loss of market access that would turn illiquidity into insolvency. Even with policy changes, it takes time for governments to restore their credibility. Until then, markets will keep pressure on sovereign spreads, making a self-fulfilling crisis likely.

Today, Spain and Italy are at risk of losing market access. Official resources need to be tripled – through a larger European Financial Stability Facility (EFSF), Eurobonds, or massive ECB action – to avoid a disastrous run on these sovereigns.