How Europe can stave off a crisis
By Gordon Brown The views expressed are his own.
It was said of European monarchs of a century ago that they learned nothing and forgot nothing. For three years, as a Greek debt problem has morphed into a full blown euro area crisis, European leaders have been behind the curve, consistently repeating the same mistake of doing too little too late. But when they meet on Sunday, the time for small measures is over. As the G20 found when it met in London at the height of the 2009 crisis, only a demonstration of policy intent that shows irresistible force will persuade the markets that leaders will do what it takes. An announcement on a new Greek package will not be enough. Nor will it be sufficient to recapitalize the banks. European leaders will have to announce a comprehensive — around 2 trillion euro — finance facility; set out a plan to fundamentally reform the euro; and work with the G20 to agree on a coordinated plan for growth.
For three years it has suited leaders across Europe to disguise Europe’s banking problems and, citing the blatant profligacy of Greece, they have defined the European problem as simply a public sector debt problem. And it has suited Europe’s leaders to call for austerity (and if that fails, more austerity) and forget how the inflexibility of the euro is itself dampening prospects for growth, keeping unemployment unacceptably high and weakening Europe’s competitive position in the world today. Indeed, Europe’s share of world output has now fallen to just 18 percent. And it is a measure of how it is losing out in the growth markets of the future that just 7.5 percent of Europe’s exports go to the emerging markets that are responsible for 70 percent of the world’s growth.
When I attended the first ever meeting of the euro group of leaders in October 2008 there was astonishment when I reported that Europe’s banks had bought half America’s subprime mortgages and there was incredulity when I said that European banks were far more at risk than U.S. banks because they were far more highly leveraged. Since 2008, as American banks have tackled their toxic assets, they have written off 4 percent of their loans and raised the equivalent of another 4 percent in new equity. But euro area banks have written off just 1 percent of their loans, and have raised their capital base by only 0.7 percent, leaving them highly vulnerable even before their exposure to sovereign debt has become a central issue. Their vulnerability is increased because they have always been far more dependent for their funding on the short term and confidence-dependent wholesale markets, and countries within the euro zone are able to do far less in the face of capital flight than, say, Britain.
Of course in 2008, governments could fund the rescue of indebted banks; in 2011, indebted governments are finding that more difficult. For they know that even after they recapitalize the banks, they have still to deal with the even bigger financial problem of funding the borrowing needs of the most at-risk countries: Greece, Ireland, Spain Portugal and Italy, which could cost as much as $2 trillion in the years to 2014.
It is thus clear that the 400 billion euro rescue fund, the European stability fund, is wholly inadequate to address this profound failure across the European financial system, and that without a mechanism for fiscal coordination the euro cannot easily survive. A few days ago, U.S. Treasury Secretary Tim Geithner said that “the critical imperative is to ensure that the governments and the financial systems under pressure have access to a more powerful financial backstop.”
I believe that only an impenetrable firewall will show the determination of European leaders to head off the crisis and save Europe from a new recession. I know of all the doubts about a new but temporary role for the ECB, but it is unlikely that any other organization has the resources for quick action. But the IMF should back them up, funding their contribution through loans from the oil states and China. It may now be impossible to avoid hundreds of billions in bank de-leveraging and liquidations, but a coordinated approach with the support of the international community could provide the breathing space for what matters — the reform of the euro.
A tale of two rape charges
By Naomi Wolf The opinions expressed are her own.
With the arrest of Dominique Strauss-Kahn, then Managing Director of the International Monetary Fund, New York City has abruptly become the scene of two very different official approaches to investigating sex-crime cases, one traditional and one new. The new approach so far appears to be reserved for Strauss-Kahn alone.
Consider the first case: the ongoing trial of two police officers, Kenneth Moreno and Franklin Mata, charged in the rape of a 27-year-old Manhattan woman. She was drunk, and, after helping her to enter her apartment, Moreno and Mata allegedly made a false emergency call so that they could return to her. At that point, the woman says, she woke periodically out of her intoxicated state to find herself being raped, face down, by Moreno, as Mata stood guard.
The alleged rape of a citizen by a police officer — and the alleged collusion of another officer — is surely a serious matter. But the charges and trial have followed an often-seen pattern: the men’s supporters have vociferously defended their innocence (the presumption of which has been scrupulously upheld in the press); the victim’s pink bra has been the subject of salacious speculation, and her intoxication has been used to undermine her credibility. As the wheels of justice grind unglamorously forward, Mayor Michael Bloomberg has made no public statement supporting the victim’s side.
Moreover, Moreno and Mata have not been asked to strip naked for “evidence” photos, were not initially denied bail, and were not held in solitary confinement, and are not being strip-searched daily. Their entire case has followed the usual timetable of many months, as evidence was gathered, testimony compiled and arguments made.
Then there is the Strauss-Kahn approach. After a chambermaid reportedly told her supervisor at the elegant Sofitel hotel that she had been sexually assaulted, the suspect was immediately tracked down, escorted off a plane just before its departure, and arrested. High-ranking detectives, not lowly officers, were dispatched to the crime scene. The DNA evidence was sequenced within hours, not the normal eight or nine days. By the end of the day’s news cycle, New York City police spokespeople had made uncharacteristic and shockingly premature statements supporting the credibility of the victim’s narrative — before an investigation was complete.
The accused was handcuffed and escorted before television cameras — a New York tradition known as a “perp walk.” The suspect was photographed naked, which is also unusual, initially denied bail and held in solitary confinement. The Police Commissioner has boasted to the press that Strauss-Kahn is strip-searched now multiple times a day — also unheard-of.
I am certain that the cops raped the woman because they had no business being in her apartment. If she was to drunk and needed medicinal assistance they would have called 911. It’s common knowledge by the way that cops commit crimes all the time. My father was a cop and he told me that about half of them where corrupts. There is also nothing like cops solidarity and judges giving cops the green light 99% of the time. In my case the cops made forgeries in order to frame. Search google with: Turku police forgeries . But lets go back to Dominique Strauss-Kah. It is also common knowledge that the rich and wealthy can get away with anything 99% of the times but in this case not? I don’t say he did or not because I wasn’t there but everything points to a setup to frame for sex crimes. “If” the maid had his DNA over her body I do not know but even if she had this still would not be a sign for rape nor any scratches on her body since she could have made them herself but he is already condemned before any investigation started? I am certain it’s political and most likely a setup. “You are presumed to be innocent until proven guilty under a court of law”. I grow up with this. So what happen since my school days? Accusations = guilt? Reminds me of the fake rape charges towards Assagne, founder of wikileaks.
from MacroScope:
A “Greed Tax” on banks
The International Monetary Fund has done what it was bid by the G20 and come up with proposals for getting banks to pay for the government help they receive when they get in trouble. You can read the actual wording here, but it comes down to this:
1) A "Financial Stability Contribution" which would be pooled into a fund that would use it to help weak banks, or just go into general government revenues.
2) A "Financial Activities Tax" -- perhaps intentionally known as FAT -- to be levied on combined bank profits and remuneration (for which read "bonuses") and paid to governments.
The first is a kind of insurance policy. The second, however, looks decidedly like what might be called a Greed Tax -- government action on the kind of wealth that has infuriated taxpayers across the world.
The debate will be over whether this is simple kowtowing to populist sentiment or whether it is a reasonable limit on people being accused of knowing none.
G20 ends Anglo-Saxon era
– Paul Taylor is a Reuters columnist. The opinions expressed are his own –
Thursday’s G20 summit may not mark the end or even the beginning of the end of the global recession. It did mark the end of the ascendancy of the unfettered, Anglo-Saxon model of capitalism.
What comes next is far from sure, but it will be different from the headlong dash for individual enrichment, short-term profit and financial acrobatics that began with the dominance of U.S. President Ronald Reagan and British Prime Minister Margaret Thatcher in the 1980s. The widespread acceptance of increased regulation would have been anathema for U.S. President Barack Obama‘s predecessors.
“The old Washington consensus is over,” British Prime Minister Gordon Brown declared after chairing the London summit. It was a clear acknowledgement that the deregulation that allowed casino capitalism to flourish on Wall Street and in the City of London, the world’s two biggest financial centers, had failed and will be fundamentally overhauled.
Brown’s role in brokering a bigger-than-expected G20 deal on refinancing and reforming the International Monetary Fund and World Bank, extending the scope of regulation and providing new finance for trade and the poorest countries was a personal success. But it may not help him much at home, where many recall his 1997-2007 decade as a “light-touch” finance minister who claimed to have ended the cycle of “boom and bust.”
The $1.1 trillion in funds for the IMF, the World Bank, trade finance and development which he announced, even if it is not all new money, may begin to restore market confidence that countries will not default, and to revive trade flows.
Sherry, there is nothing wrong with charity. But most of the countries where there is poverty, there is a corrupt government to deprive the people. Think India. Think Rwanda. These places don’t have a subsisting impoverished class because their nation is outright poor — it’s because every time the idiots at the UN elect to send food, the food is taken by the government to go where the government wants it… which is the government alone. Everyone else is left in the dust, and the government couldn’t care less. Therefore, it isn’t an issue of what the governments in our first-world nations can supply through generosity, but what our goverments can slowly encroach onto us as they raise the taxes like the temperature of a frying pan on which the frog sits. We’ll be okay with tiny increases year after year, until we give more than half of what we make to the government so they can play around with a few billion more dollars of money that isn’t theirs to begin with. This sort of thinking, letting the government do as it pleases, brought us into this mess.
“Truman doctrine” could boost IMF firepower
– Paul Taylor is a Reuters columnist. The opinions expressed are his own –
The day before he returned to the U.S. Treasury for six weeks to help the understaffed Obama administration, Edwin Truman published a proposal to give the International Monetary Fund more firepower to fight the financial crisis.
Truman’s idea — a one-off $250 billion allocation of Special Drawing Rights (SDRs) to IMF member states — looks like the quickest way to put a safety net under developing countries and avert financial contagion. The Group of 20 world leaders should embrace it at the meeting in London on April 2.
U.S. Treasury Secretary Tim Geithner has not endorsed the plan in public, but the British minister preparing the summit confirmed it is one of the options under consideration. It could supplement a proposed doubling of the IMF’s resources and get around the reluctance of surplus countries such as China and Saudi Arabia to contribute more for now.
SDRs are international reserve assets, calculated in a basket of major currencies, that are allocated to the IMF’s 185 members according to their quota of the Fund’s capital. A special issue would be a bit like a global central bank printing money to help countries with payments difficulties.
A G20 endorsement would show financial markets that world powers are cooperating to overcome the crisis by supporting developing nations starved of credit by the collapse of international bank lending.
THE BENEFITS
Poor countries do not need to be economically and politically crushed with the burden of more debt. Instead of advancing $250 billion, why doesnt the IMF just FORGIVE $250 billion in existing debt??? Listen up all you politicians — the public is worn out on all this funny money stuff that does nothing but increase our collective tax burden.
Buck-passing augurs ill for G20 summit
– Paul Taylor is a Reuters columnist. The opinions expressed are his own –
The foreplay to next month’s G20 summit is degenerating into a buck-passing exercise rather than crafting a Grand Bargain to save the world economy and regulate capitalism.
The industrialized powers do not agree on how to arrest the steep slide in output, how to handle collapsing banks, how much market regulation is needed, how to reach a world trade deal and prevent protectionism, or how to redistribute power to emerging nations in exchange for their money.
At this rate, the April 2 London summit — U.S. President Barack Obama’s global economic debut — is highly unlikely to restore confidence.
The United States says other countries must follow its lead and spend more on a fiscal stimulus to boost demand. It is turning a deaf ear to calls for radical financial regulation. Euro zone finance ministers, anxious to preserve the budget discipline that underpins their common currency, are refusing to pile up more debt before their current stimulus efforts have taken effect.
The EU seeks a doubling to $500 billion of the International Monetary Fund’s war chest to bail out countries in trouble, including in eastern Europe, and it wants China, Saudi Arabia, Russia and others to pay most of the tab. Yet there is little sign the Europeans are willing to accept a diminution of their IMF seats and votes to make room for the emerging economies.
Washington and London are resisting pressure from France and Germany for mandatory regulation of all financial markets and institutions, including hedge funds and private equity.
Unfortunately Paul Taylor is probably correct in his assessment that the divisions among G20 members will lead to more show than substance at the London G20 meeting.
One of the tragic short comings of Western G20 members is their refusal to acknowledge how the balance of economic power is shifting from West to East. We want Asian nations to contribute more money to the IMF but don’t want to give them more representation with important leadership positions at G20, IMF or anyplace else.
In order to receive more cooperation from Asian nations the West will have to reconcile the present dominance of the West within G20 and elsewhere. If each nation acts only in its own self interest financial conditions could deteorate very fast indeed.
at last some clear analysis…bvious, but yet clear and sophisticated…nevertheless problems of trust and adjustment work against co-ordination…we need a psycologival recognition in the west that the balance of power is rapidly shifting. such a recognition needs to be on all sides to develop the trust necessary….and there is the problem. If I was China, I would not trust.