Opinion

Hugo Dixon

A breakthrough year for nonviolence

Hugo Dixon
Dec 19, 2011 04:38 UTC

The views expressed are his own.

The most electrifying event of the year, for me, was the Egyptian revolution. I’d long had an interest in Gandhian-style struggles. Here was a nonviolent struggle unfolding in real-time against Hosni Mubarak’s repressive regime. Tens of millions of people were gaining their freedom.

The media coverage of the events in Tahrir Square focused on the Facebook revolution. But when I went to Cairo shortly after, I discovered that the use of social media was only part of the reason why the dictator had been toppled. Behind the protests was a cadre of activists who had been trained in the techniques of nonviolent struggle. This realization was a eureka moment. If it was possible to overthrow dictators with comparatively little bloodshed – less than a thousand died in Egypt’s revolution — many millions more elsewhere might be able to gain their freedom given proper planning and training.

2011 was a banner year for nonviolent struggle. Not only did it witness the successful Arab Spring revolutions against dictators in Egypt, Tunisia and Yemen; it also saw three Arab kings – in Morocco, Jordan and Kuwait — liberalize their political systems to head off similar protests. And the brave people of Syria went out on the streets again and again, despite being arrested, tortured and killed in their thousands.

Further afield, the Burmese regime started to reach an accommodation with pro-democracy activist, Aung San Suu Kyi, after two decades of nonviolent opposition; China experienced increasing stirrings of protest, for example when citizens posted nude photos of themselves on the internet after the authorities ruled that a photo of Ai Weiwei, the dissident artist, was pornographic; and even Vladimir Putin had to face demonstrations after seemingly widespread vote-rigging in Russia’s parliamentary elections.

The techniques of nonviolent struggle have also been used for purposes other than bringing down dictatorships. A man called Anna Hazare led a successful campaign against corruption in India. Meanwhile, the West had to contend with the Indignant anti-austerity movements in Spain, Greece and Italy as well as the anti-banker Occupy movements in the United States and Britain.

Hara-kiri, British style

Hugo Dixon
Dec 12, 2011 04:21 UTC

The opinions expressed are his own.

The UK’s self-immolation beggars belief. The government’s clumsy attempt to extract concessions from euro zone countries in their time of need has set off a chain reaction which could undermine Britain’s interests and even drive it out of the European Union.

It’s not clear what David Cameron thought he was doing at the European summit in the early hours of Dec. 9 when he demanded vetoes on financial regulation in the EU. Was the prime minister asking for something he knew was unacceptable so that he could return to Britain and parade as a hero in front of the euroskeptics in his Conservative Party? Or did he just vastly overestimate his negotiating position, thinking that the euro zone countries were so desperate to save their single currency that he could bounce them into accepting the British demands by presenting them with a take-it-or-leave-it offer in the middle of the night? If it was the former, Cameron was cynically putting his personal interests above those of the nation; if the latter, he was just extraordinarily inept.

Cameron did little to win allies for his position, not even circulating his list of proposals in advance of the summit, according to Reuters. Even worse, he put Britain in the position of seemingly being prepared to blow up the single currency if he didn’t get his way. In fact, Cameron didn’t have the power to stop the 17 euro zone countries from agreeing to sign a new treaty committing themselves to fiscal discipline. They just sidestepped the existing EU treaty. What’s more, they got all nine of the other countries which are part of the EU but not the single currency to sign up too. So all Cameron achieved in the middle of the night was to irritate Britain’s partners massively and isolate the UK 26-1.

Euro Disziplin may store up trouble

Hugo Dixon
Dec 5, 2011 04:11 UTC

The euro zone will probably get another short-term fix at its summit this week. Exactly how the fix will work isn’t clear. But both Germany and the European Central Bank have softened their positions so much that some sort of solution is in the works. The ECB will probably cut interest rates and spray more liquidity at the troubled banking system; it may also step up its purchases of government bonds; and some scheme for assembling enough money to bail out Italy and Spain — probably by getting national central banks to lend money to the International Monetary Fund, which could then pass it on to Rome and Madrid – may be unveiled.

All this would be cause for celebration. The problem is the price that Germany and seemingly the ECB are demanding for their help: fiscal discipline, embedded in a treaty. Merkel wants the European Commission in Brussels to have the power to overturn irresponsible national budgets and for the European Court of Justice to fine governments that step out of line.

This idea for a treaty is stirring up all sorts of problems. One is that Britain, which is not part of the euro zone but is a member of the European Union, wants a quid pro quo for signing a revised treaty – probably in the form of returning powers over social and judicial affairs to London or getting some veto over the regulation of financial services, the UK’s largest industry.

Don’t leave Plan B too late

Hugo Dixon
Nov 28, 2011 10:00 UTC

It is fashionable for pundits outside Germany to lambast its government, the Bundesbank and the European Central Bank for being inflexible or stupid or both. Can’t they see that all that’s needed is for the ECB to fire its bazooka by printing unlimited money, and the euro crisis would be over?

After spending a couple of days in Frankfurt and Berlin last week, my impression is that these three institutions are neither stupid nor totally inflexible. That said, Germany is still determined to try its current plan for solving the euro crisis, though it has little chance of working. And by the time the trio get round to implementing a Plan B, the euro zone could be in deep recession or even have exploded.

The current plan has three elements. First, the governments of troubled countries such as Italy and Spain need to implement structural reforms and austerity. Second, the zone’s fire extinguisher, the European Financial Stability Facility, needs to be got in good working order in case the fires in Rome and Madrid become uncontrollable. Finally, governments need to agree a treaty committing them to long-term budgetary discipline.

The euro zone’s self-fulfilling spiral

Hugo Dixon
Nov 20, 2011 20:41 UTC

When confidence in a regime’s permanence is shaken, it can collapse rapidly. The fear or hope of change alters people’s behavior in ways which make that change more likely. This applies to both political regimes such as Hosni Mubarak’s Egypt and economic regimes such as the euro.

Fear that the single currency may break up now risks becoming a self-fulfilling prophecy. Banks and investors are beginning to act as if the single currency might fall apart. Politicians and the European Central Bank need to restore belief that the single currency is here to stay. Otherwise, it could unravel pretty fast.

Until a few weeks ago, the idea that the euro wouldn’t survive the current debt crisis was a fringe view. Since the euro summit on Oct. 26-27, it has become a mainstream scenario. So much so that last week risk premiums on the bonds of even triple-A rated countries such as France and Austria rose to record levels, while Spain became the latest country to be sucked into the danger zone.

Italy’s super Mario brothers

Hugo Dixon
Nov 14, 2011 00:50 UTC


The Super Mario Brothers need to work together to save Italy and the euro.

Even if Mario Monti can form a strong government in Italy, the euro zone is vulnerable to bank runs and a deflationary spiral. Stopping that is the role of Mario Draghi, the European Central Bank’s boss. The zone needs vigorous supply-side reform but looser monetary policy. With Silvo Berlusconi gone, the duo and Germany’s Angela Merkel should try to forge a new grand bargain based on this.

Last week witnessed both the Italians and the Greeks dragged to the brink, look into the abyss and dislike what they saw. The two countries have or are in the process of forming national unity governments led by technocrats. This is a step in the right direction. But dangers abound.

The biggest risk is of a visible bank run. There has already been massive deposit flight in Greece as savers fear that the country could get kicked out of the euro – a scenario which is still real despite Lucas Papademos’ appointment as prime minister. But so far there have been no queues outside branches as there were with the UK’s Northern Rock in 2007. If that were to happen, television pictures would be relayed across Europe in seconds potentially provoking copycat runs.

Chaotic catharsis

Hugo Dixon
Nov 7, 2011 02:31 UTC

Chaos, drama and crisis are all Greek words. So is catharsis. Europe is perched between chaos and catharsis, as the political dramas in Athens and Rome reach crisis point. One path leads to destruction; the other rebirth. Though there are signs of hope, a few more missteps will lead down into the chasm.

The dramas in the two cradles of European civilization are similar and, in bizarre ways, linked. Last week’s decision by George Papandreou to call a referendum on whether the Greeks were in favor of the country’s latest bailout program set off a chain reaction that is bringing down not only his government but probably that of Silvio Berlusconi too.

The mad referendum plan, which has now been rescinded, shocked Germany’s Angela Merkel and France’s Nicolas Sarkozy so much that they threatened to cut off funding to Greece unless it got its act together — a move that would drive it out of the euro. But this is probably an empty threat, at least in the short term, because of the way that Athens is roped to Rome. If Greece is pushed over the edge, Italy could be dragged over too and then the whole single currency would collapse. So, ironically, Athens is being saved from the immediate consequences of its delinquency by the fear of a much bigger disaster across the Ionian Sea.

All roads lead to Berlusconi’s Rome. For now.

Hugo Dixon
Oct 31, 2011 01:14 UTC

The euro zone’s future hangs on Italy – and Italy’s future hangs on its politics. The best way forward would be a grand coalition replacing Silvio Berlusconi’s discredited government. But after the prime minister’s Houdini act last week, that doesn’t seem likely and other scenarios aren’t as attractive.

Until recently, investors didn’t pay too much attention to the multi-dimensional chess game that is Italian politics. The state may have nearly 2 trillion euros of debt, equal to 120 percent of GDP,  but the country is rich: Net household wealth was 8.6 trillion euros in 2009, according to the Bank of Italy. The deal-making and back-stabbing in Rome – or for that matter, Berlusconi’s bunga-bunga sex parties – didn’t seem to matter. True, the country has virtually stopped growing in recent years. But there was even a view that Italy benefited from having politicians that were so concerned with their elaborate games that they couldn’t interfere with the business of business.

All that changed in early July. As the euro crisis gathered pace, scandals and wrangling in Rome unsettled markets. The 10-year bond yield, which had been a relatively comfortable 4.8 percent, shot up to 6 percent in two weeks. Berlusconi and Giulio Tremonti, his previously respected finance minister, fell out. The center-right government, which survives on a wafer-thin majority, was able to pass austerity measures to cut the deficit. But the actions were seen as too little, too late. Investors became hyper-sensitive to Italian politics and were no longer willing to take things on trust.

The euro and the Hotel California

Hugo Dixon
Oct 26, 2011 15:26 UTC

The euro zone is like Hotel California, UBS wrote in a report published in September. “You can check out any time you like but you can never leave,” it said, quoting the Eagles song. A British businessman, Simon Wolfson, has now offered a 250,000 pound prize to the person who can come up with the most convincing explanation of how an orderly exit from the single currency is possible.

The problem is the word “orderly.” There are lots of scenarios where a country such as Greece could quit the euro in a disorderly fashion, destroying its own economy and that of its neighbous as well as possibly plunging the world into a recession. But how is it possible to do this without triggering financial Armageddon?

The first difficulty stems from the fact that an exit couldn’t happen overnight. There is no legal procedure for a country to quit. Joining was supposed to be an irrevocable commitment.

Bankers issue nostra culpa for economic crisis

Hugo Dixon
Oct 24, 2011 11:17 UTC

To: Barack Obama
From: Humboldt Pye, Chairman of First Reform Bank

Dear Mr. President:

I’m writing an open letter to you and other G20 leaders on behalf of the chairmen of the world’s leading banks to say sorry.

We do not think banks are to blame for every ill the world currently faces, as the Occupy Wall Street protests and their kin in other countries suggest. A balanced audit would attribute responsibility to policymakers too: you and your predecessors set the rules of the game that we so craftily exploited. Even the public had a hand in the current mess: excess spending in some countries and inadequate taxpaying in others allowed people to consume too much.

But we are not in a position to lecture the rest of society. During the bubble years, we focused first on our own pay packages and then on profits for our shareholders. Insofar as we thought about the wider interest, we comforted ourselves with the belief that financial markets were efficient and free markets were the best way of generating wealth. So, as we pursued our self-interest, the world must by definition get better.