End of the Beginning in Syria

Unraveling is the word that pops to mind as events progress in Syria.  The civil war may take a sudden turn toward an end game.

Confirmed dead from the rebel assault on the security offices in Damascus are Assef Shawkat, Assad's brother-in-law and the deputy head of the armed forces and Assad’s his closest security adviser, Dawoud Rajha, the Minister of Defence and the government’s senior Christian official and Hassan Turkmani, the crisis management chief.  Other senior officials were wounded and now rumours are out and about that Assad also was wounded and is in Latakia – a convenient spot if Russia wants to pick him up by boat.  His wife, Asma al-Assad, is rumoured to be in Russia already.

If Assad’s wife has indeed fled to Russia, the Kremlin is going to need to re-calibrate its foreign policy fast for once.  The Kremlin is notorious for its reactive foreign affairs - which does not function well in situations like this.  Thinking ahead and incorporating possible black swans in its plans has never been a strong point in Moscow.

Of course, all the reports may well be wrong. Assad may hold on. But the vehemence with which the Syrian Information Minister Umran al-Zuabi, vowed that those behind the attack would be held accountable even if they were outside the country tends to support the rumours.  Of course, by adding that the bombing was orchestrated by combined Turkish, Qatari, Saudi Arabian and Israeli intelligence, removes a good deal of credibility from his remarks if only because this would be the strangest cast of conspirators in the long, bloody history of the Middle East.

One interesting question is what did the Hamas leadership see months ago when they hastily vacated Damascus and Syria? This is, of course, the region where historically “writing on the wall” originated. Then there is Hezbollah in Lebanon who will be in a difficult position, to say the least, as they lose both their arms depot in Syria and the arms route to Iran if Assad heads for a village in Russia with the added annoyance now of having to deal with Salafists within Lebanon who are fiercely (an understatement) conservative, destructive and dangerous.

Finally, will Russia go to Plan C soon (see previous post).

Syria, Russia and Slow Train Wrecks

English: President Bashar al-Assad, Aleppo, Abbarah square (Photo credit: Wikipedia)

To steal from Churchill, the now almost daily fighting inside Damascus, including the destruction of a major barracks and the attack on the State Security building, is not the beginning of the end, it is simply the end of the beginning.  The downfall of the Assad regime won’t come from the streets, however; it will only come when his own people determine that the status quo has changed and turn on him as they did on Qadaffi’s regime.  Stay tuned though because the military can still field thousands of tanks and artillery– all of whom are Alawite led and loyal so far.  This is not Egypt, Tunisia or Libya (where the military was essentially incinerated by NATO).  And if you think it can’t get much worse than it already is, consider that the government has begun to shift some of its chemical weapons.  If they are sent to fire units of any type, this could be very ominous, to say the least.  One hopes they are simply  being moved to more secure locations – itself an indication that the Syrian government is nervous.

Meanwhile, it is likely that the Kremlin is moving rapidly to a Plan C.  Plan A which amounted to unqualified support for the Assad regime, was modified a few weeks ago to Plan B when they announced that their purpose was not to sustain Assad in power but to bring about a negotiated settlement with no external intervention.  Like the Egyptian military who simply took advantage of the massive unrest to remove a threat to the regime itself (Mubarak and more to the point his son),  Russia is now saying that Assad is not the point.  But the optics are bad for them as they are seeming to support a regime because 1) they want to keep their wharf on the Med; 2) they want to be able to keep all the arms contracts; and, 3) they want to prevent an alternative route for oil to Europe that would open up with a change in government in Syria.  None of this has played well in the rest of the Arab world. And they, not to mention many Syrian’s who are likely to come to power, will not forget.

Nor should they.

Kick the Can Eurozone Style

Shorter Jörg Asmussen, Member of the Executive Board of the ECB:  Stop giving advice if you don't agree with us.....

Eurozone Redux

I’ve been absent for two good reasons.  The first is that political events are unfolding at too rapid a rate to make any sensible comment that would last more than a few hours.  Reading other blogs which vainly attempt to prognosticate, let alone to analyze, the collapse of the Euro, Syria’s seemingly unending nightmare, fear mongering, obstructionist Republicans in the US, the mess that is Egypt, Turkey’s coming of age, Russia’s desperate struggle to keep old ties afloat while deliberately alienating the West, etc. etc., I decided the task was not only fruitless, but rather stupid.  So I’ve watched al Jazeera and waited.  The second reason is that I’m busy.

Nevertheless, with yet another “final” Euro summit underway the time seems appropriate to re-address the unraveling of the Eurozone. 

At the crux, of course, is Greece.  The election of the centrist coalition solved nothing,  If the left had won, Germany’s bluff would have been called. But, unfortunately now that particular scenario has been delayed.  In the lottery for the dubious honour of becoming Greece’s Finance Minister so that the Germans could kick him and solutions down the road, Yannis Stournaras won.  He was there in 1994 to negotiate Greece’s entry into the Eurozone.  He may well be there on its exit.

Minister Stournaras only has a couple of moves before disintegration.  Will they happen and will Germany accede?  No.  But, anyway, official time for Europe has expired and we’re now in the first overtime.  Yannis Stournaris must resist the pressure to buy more time by extending the bailout, which will only produce more debt which will be paid to German banks in the end.  Don’t extend the bankruptcy. Call the German bluff.  Get a deal from Europe.

Keep in mind that all the bailout funds masterminded by the Germans are nothing more than payments to the banks, not to the Greek people.  Furthermore, much of the bailout goes to allow Greek banks pay German and other European banks for loans that should never have been made.  Greece’s sovereign debt problem is not being addressed and won’t be until Germany is forced into a position where it can no longer dictate its austerity program for others while maintaining its competitive advantages that were deliberately structured into the Eurozone system.  Money that re-capitalized Greek banks should not be part of the national debt – that releases a bunch of Euro’s, by the way.  Let the European Financial Stability Facility own the banks and do with them what they need to do. 

Everyone, including the Germans, are now talking about a growth strategy.  Well, let’s say growth returns in one or two years.  Until that time there should be no payments required on the loans.  After growth begins to appear, payments can be resumed with a ratio pegged to growth. 

To be clear, I don’t think any of this will happen as Germany, and Germans, seem to forget that their growth is dependent on buyers and as usual are forgetting that their economic strength lies only in exports. Losing buyers in Europe by sticking to an inane austerity policy is just plain stupid.  What they are doing is saving the banks and abandoning the people.

What Germans and the German government refuse to admit is that the Euro ship and its economies are sinking fast and, like the Titanic, it will take down the wealthy and the poor, those who are industrious and those who are not.  Their attitude and solutions are Hooveresque without the quaintness. He and his government, in response to a rapidly disintegrating economy in the US, moved rapidly to reduce government expenditure, and cut wages. He was an idiot then and Merkel and company are the idiots today.

Finally, and what makes the Eurozone almost problematic at this point, is that Chancellor Merkel wants to create a German Europe; every nation should  live, work and apply its governance according to German rulebooks.

Merkel and many (if not most) Germans have an annoying tendency to patronize the southern tier, telling them to “do their homework” for example, so that they can all become good little Germans.  This is nothing more than a tool to bring all of Europe under German leadership.  The word “rule” might be too harsh. Maybe.  However, this makes Germany a threat to the Eurozone and Europe – not Greece, Italy, Spain or Ireland.  So everyone else in Europe needs to decide if they want to live under German leadership or resist.

Merkel keeps saying that she and Germany will do whatever it takes to save the euro; except that every plan presented by others has been vetoed to satisfy German voters, German banks and the German press. Oh, and yes, national interests.

American Moron Romney

MILWAUKEE, WI - APRIL 03: Republican presidential candidate, former Massachusetts Gov. Mitt Romney speaks to supporters during his primary night gathering at The Grain Exchange on April 3, 2012 in Milwaukee, Wisconsin. Mitt Romney addressed supporters after winning primary elections in Wisconsin, Maryland and the District of Columbia. (Image credit: Getty Images via @daylife)

Mitt Romney on the campaign trail. You just can't make this crap up...

“I’m not familiar precisely with exactly what I said, but I stand by what I said whatever it was.”

Would-be president Mittens. Would you buy a used company from this guy?

Once More Into the Breach....

On July 1 the new European Stability Mechanism Fund comes into effect.  It is a more robust attempt to resolve the financial crises that has the Euro on the ropes.  But it is also a key date because in June, Greeks will go to the polls again and if they vote the same way, or even strengthen the anti-austerity parties to the extent they can form a government, then after July either the German led team of austerity believers will blink or Greece will set in motion the withdrawal from the Eurozone.   Because, austerity plans are now a social and economic disaster for Greece, Spain and Portugal.  Actually, austerity is not a plan at all – it is a knee-jerk reaction by the rich and powerful to retain that power at the expense of the periphery in Europe which requires a growth plan – not more austerity and unemployment that it brings.

Germany seems to think that threats are the order of the day.  They seem to forget that the Greek voter makes the choices – not Berlin.  Enough economists have said that the German led austerity program is bogus that perhaps Merkel and her ever diminishing circle of allies should sit down and come up with a compromise because by staying in the Euro, Greece will never recover economically because it will be forced to use a foreign currency within a group of wildly differing economies.  The system does not work.

Jean-Claude Juncker, who presides over the Euro-zone's finance ministers, criticized those who seem to think that threats against Greece were appropriate.  He said that Greek voters must be respected.  Mr. Juncker however, is leaving and thus can easily speak his own mind.  The problem is that the other ministers – Finland comes to mind – are fully supportive of the current policy and their tone to Greece is not diplomatic.  This is a gross mistake because people in general don’t respond well to threats and being treated like children. These same ministers praise Ireland and Portugal for keeping to the austerity route. The problem is that Ireland had no sovereign debt crises – it, like Spain is all private debt.  Frankly, anyone who thinks that Ireland is improving or stable is running a high fever. Spain’s banks are in trouble because of a housing bubble that burst in spectacular fashion and an unemployment rate over 25%.  Austerity is not the solution for Spain.

Coming back to Greece though, is the question of who will replace Juncker?  At the head of the pack is none other than Wolfgang Schäuble, the German finance minister and someone heavily invested into austerity and maintaining German export superiority.  Freshly elected Hollande is unlikely to be enthusiastic about having a German in that spot as he campaigned promoting a growth, not contraction policy.  Putting Schäuble into the driver’s seat is likely to send Greece really over the edge.

In June, Europe will know which way Greece is going.  Withdrawal from the Euro will help Greece, hurt banks and embarrass the EU (read, Germany).  But frankly, it will give Greece the chance to become competitive again.  Hopefully, there is a semblance of a plan in place to deal with the exit.

Economic Denial

100,000 peaceful anti-austerity protesters in front of the parliament of Greece on 29 June 2011. (Photo credit: Wikipedia)

Without question, things are getting a whole lot worse in the Eurozone and in Greece and Spain in particular. 

I’ve done a good deal of Germany and ECB bashing, all of it I believe well deserved.  The German solution to everything has been crushing austerity for everyone except the banks while forgetting that their own prosperity is derived from a fixed game where everyone else has to buy their stuff while simultaneously being unable to devalue because it’s impossible to devalue a foreign currency.  I think it is now pretty much settled that the ECB, by concentrating almost exclusively on inflation, has ignored fundamental economic equality and growth factors needed in Europe.  It is also pretty much settled everywhere outside of Berlin that austerity does not produce growth and without growth you get massive unemployment, poverty and social upheaval all of which might lead to the end of the European Experiment.

Angela Merkel is on the way down unless her party changes course. There are hints of that after the recent drubbing of her party in regional elections.  Even Germans are unhappy.  I would assume that someone has a contingency plan for Greek default, unwinding of the Euro in Greece (and perhaps elsewhere) and the cracking of the current economic structure. After all, even the US has a contingency plan for war with the UK.  But don’t count on it because it is very difficult to convince a buyer that he has bought a fake painting despite evidence to the contrary.

The meetings in Greece over the weekend in the desperate attempt to form a government and avoid another round of expensive elections have not gone as planned.  Curiously, what may result in a new election is the support for the moderates, as opposed to the radical left party, because Greeks actually seem to want to stay in the Eurozone.  This is strikingly similar to the former Greek government announcing that a referendum on the agreed upon austerity program would be held to approve or reject it which, at the time, came as a shock to both Sarkozy and Merkel.  That idea was shot down very quickly and publicly leading to the instant collapse of the Greek government.  Now, we are back to the same position, except Germany can hardly object to elections as opposed to an unscheduled referendum.

The austerity plans so far have resulted in extraordinary economic suffering for people who had little to do with the banking crises but who now are expected to pay for it.  The no-growth austerity policy is virtually impossible to implement and if a policy remains that unachievable (and it was from day one) then it is just a Panglossian academic exercise that is better suited for someone’s doctorate thesis rather than the real world.  So, as in war and sports – everyone has a plan until they’ve been hit. The Eurozone has been hit. The getting-up is up to them.