Opinion

The Great Debate

from Nicholas Wapshott:

The EU-U.S. love-hate relationship

The elaborate gavotte between the American and European economies continues.

While the Federal Reserve has begun to wind down its controversial quantitative easing (QE) program, the European Central Bank (ECB) the federal reserve of the eurozone, has announced it is considering a QE program of its own.

It is a belated acknowledgement, if not an outright admission, from Mario Draghi, president of the ECB, that five years of the European Union’s austerity policy has failed to lift the eurozone nations out of the economic mire. The ECB has presided over a wholly unnecessary triple-dip recession in the eurozone and sparked a bitter rift between the German-dominated European Union bureaucracy and the Mediterranean nations that must endure the rigors imposed from Brussels. All to little avail.

If there are any “austerians” left standing, let them explain this. Ignoring the cries of the unemployed and those pressing for urgent measures to promote growth in Europe, the ECB blithely imposed its punishing creed, arguing that there would be no gain without pain. The result? Little gain, endless pain.

The eurozone economy endured growth at a miserable 0.2 percent year-on-year in the last quarter of 2013 (after an 18-month-long eurozone recession). Unemployment is at a wretched 11.9 percent. The eurozone is suffering from chronic “lowflation,” with inflation at an annual 0.5 percent,  heading toward perhaps the most destructive economic condition of all -- deflation.

In response to this dunce’s report card, Draghi is considering pumping money into the eurozone through quantitative easing. Even then, he has made clear he does not mean what he says. He sees this policy -- which Washington abandoned when it was seen to be ineffective  -- as a last resort to push up inflation and avoid the spiraling collapse of prices and economic activity that threatened the world economy in the fall of 2008. But he hopes the mere threat of QE will be enough to lift prices and save Europe from the deflation that has dogged the Japanese economy for decades.

from Compass:

Putin’s action is no surprise

Surprise is the least forgivable sin of statecraft. Yet nothing has so characterized the Ukraine crisis as the West's continuing surprise at Russia's behavior.

The past 30 days have provided almost daily reminders of the deep disconnect between Western expectations of what statecraft would -- and ought to -- look like in the 21st century, and the reality of how the Kremlin seeks to assert its interests in the world.

From the outset of this crisis, the West consistently underestimated the strategic significance of Ukraine, and Crimea, to Russia. The West also assumed that the threat, and subsequent reality, of economic sanctions would alter Russian President Vladimir Putin’s strategic calculus. One month later, Russia has irreversibly annexed a region of Ukraine and left the West divided and floundering in its response.

Reaching for a deal on Crimea

There is a disturbing air of inevitability in Western capitals surrounding Russia’s annexation of Crimea. A growing consensus views this scenario as a rough analogy to  Moscow’s recognition of Georgia’s breakaway regions of Abkhazia and South Ossetia after the 2008 war — perhaps more severe, but still manageable.

Such complacency is misplaced, however. The consequences of the annexation of Crimea are not manageable. The moral high ground we currently occupy isn’t worth it.

Despite Russian President Vladimir Putin’s triumphalist speech on Tuesday, the United States and the European Union should not assume that Crimea is lost. Instead they should be working overtime to prevent annexation.

from Lawrence Summers:

Ukraine: Don’t repeat past mistakes

The events in Ukraine have now made effective external support for successful economic and political reform there even more crucial. The world community is rising to the occasion, with concrete indications of aid coming not just from the International Monetary Fund and other international financial institutions but also the United States, the European Union and the G20.

At one level, the Ukraine situation is unique -- particularly the geopolitical aspects associated with Russia’s presence in Crimea and the issues raised by Ukraine’s strategically sensitive location between Russia and Europe.

At a broader level, the world community has seen many examples over the last generation where an illegitimate, or at least highly problematic, government was brought down and the world community sought to support economic reform and a new, presumably more democratic and legitimate one. Think of the transitions after the Berlin Wall fell or the Arab Spring.

Assessing corporate risk in Ukraine

As the crisis in Ukraine escalates, boardrooms and senior management teams worldwide are now likely talking about the problems of doing business in conflict zones. These regions test the boundaries of risk tolerance.

Any multinational corporation involved in and around Ukraine and Russia must be feeling the impact. Companies such as Italian group Eni and France’s EDF, which signed an offshore oil and gas production-sharing agreement with Ukraine in November, are likely to be monitoring developments. So, too, are Chevron and Royal Dutch Shell, which signed shale gas deals with Ukraine.

Many financial institutions also have exposure. Consider UniCredit, one of Ukraine’s top 10 lenders. International companies involved with Russian finances include Austria’s Raiffeisen, France’s Société Générale, and Citigroup, Morgan Stanley, and Goldman Sachs.

Ukraine: Obama must escape the ‘Cold War syndrome’

When it comes to the mounting crisis in Ukraine, President Barack Obama is stuck playing an old role. Since World War Two, U.S. presidents have steadfastly held to the same course when it comes to Russia.

Obama is but the latest interpreter of the Truman Doctrine, which pledged the United States “to support free people who are resisting attempted subjugation by armed minorities or by outside pressure.”

When President Harry S. Truman threw down that challenge to Congress in 1947, he didn’t use the phrase “Cold War.” He didn’t name the Soviet Union. But everyone knew what he was talking about.

Ukraine after the Maidan

Writing the first draft of history is always difficult, especially when the opening act curtain has not officially fallen. Yet developments in Ukraine have now reached a critical turning point, with certain consequences likely to follow.

Historians will long debate the chain of events that provoked the February 18, 2014 confrontation. What we know is that the simmering demands of the opposition — over Ukraine’s thwarted path to Europe, the failure to re-instate the 2004 Constitution and President Victor Yanukovich’s insincere negotiations – all boiled over in a violent clash with the Ukrainian security services. The fight for Ukraine’s future was being resolved in the streets of Kiev – in live pictures transmitting around the globe.

Two symbols undoubtedly will emerge from the events of the last few days: a heroic Maidan and a bloody Yanukovich. Half the population will not accept the results, but it is also unlikely that Ukrainian opposition can impose its will on the country. So even if the Maidan were somehow to hold its ground and gain the upper hand — and it was still resisting at the time of this writing — a political consensus would still have to be found.

Moscow fiddles, while Kiev burns

Timing is everything in politics, and this adage could not be truer for the whirlwind now enveloping Russia and Ukraine. Both countries are in the headlines — Russia for the coming $50 billion Winter Olympics extravaganza, and Ukraine for an economic and political collapse that has left the country on the cusp of revolution.

The confluence of these two events has created a unique set of circumstances unlikely to change until the Olympic flame is extinguished on February 23. For the prestige of hosting the Olympics — and the huge international spotlight that accompanies the spectacle — limits Moscow’s ability to act decisively toward Ukraine as it might have otherwise.

This unexpected inaction can be traced to a failure of Russian soft power and a large segment of the Ukrainian population’s unwillingness to be bought off.

Ukraine’s Protests: Not (yet) a revolution

In the three weeks since Ukraine formally suspended talks aimed at signing an Association Agreement with the European Union, two important facts have become clear.

First, it is now apparent that Ukraine’s president, Viktor Yanukovich, had no effective strategy to resist intense pressure against the EU deal from Moscow. The Kremlin promised big cash loans, a gas discount and debt forgiveness, while explicitly threatening to block Ukraine’s access to the Russian market and implicitly threatening to stoke separatism in regions of the country.

Second, as street demonstrations gain momentum in Kiev and other cities, it has become clear that a strong, diverse and increasingly vocal plurality of Ukrainians will not accept their country’s continued isolation from the West. The authorities have confronted street protestors with shocking violence, and have offered no significant political concessions. Yet the prospect of real reform driven by the EU association has now become a key symbol for Ukraine’s national identity.

A new look at climate change

The annual United Nations climate change talks, which concluded last month in Warsaw, unfortunately found little common ground on carbon. The talks broke down over the world’s richest nations’ inability to agree with the poorest on how to address the financial costs of global climate change.

While disappointing, it’s not surprising. Developed countries like the United States and the nations of the European Union, which have wielded the largest carbon footprints over the past decades, are not as often the victims of climate-related disasters. In fact, the countries facing the most severe effects of climate change are often the poorest and most under-developed. They are forced to confront not only natural destruction but economic ruin.

Consider the Philippines, now recovering from Super Typhoon Haiyan, which devastated the country last month. The rate of sea-level rise in the Philippine Sea is one of the fastest in the world — nearly 12 millimeters per year. Yet the Philippines contributes less than 1 percent of the total CO2 emitted in the world annually. This demonstrates the stunning inequality of climate change.

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