Monthly Archives: January 2013

Cuba

Don’t worry about Cuba’s shamtastic elections — focus instead on Castro’s reforms

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Cuba — the Caribbean’s most populous nation with over 11 million people — is holding parliamentary elections this Sunday.cuba

But those elections are so stage-managed by the Cuban government that they make the recent troubling Jordanian elections look like best practices in liberal democracy.

As a technical matter, Cuban voters will elect all 612 members of the Asamblea Nacional del Poder Popular (the National Assembly of People’s Power).

Fortuitously, there are exactly 612 candidates who have been selected for the honor of running in the election, which follows virtually no campaigning or fundraising or any of the other effluvia of modern elections.  It’s fair to say that, in contrast, the selection of the Politburo Standing Committee of the People’s Republic of China, has much more drama.

That’s probably all the same, anyway, given that the Partido Comunista de Cuba (PCC, Communist Party of Cuba) has been enshrined in the Cuban constitution as the country’s governing party since 1959.

The National Assembly meets just twice a year, and although it’s officially the ultimate law-making authority in Cuba, the reality is that its role is essentially to ratify decisions made by the executive branch of Cuba’s government, where the real power lies with Cuban president Raúl Castro (pictured above, left, with his brother Fidel Castro).  He heads both the Consejo de Estado (the Council of State), a 31-member body that exercises legislative authority in between the two annual sessions of the National Assembly, and the Consejo de Ministros (Council of Ministers), essentially the Cuban government’s cabinet:

Since virtually all decisions are made as executive orders by the Council of Ministers, the parliament is relegated to rubber stamping decisions already made and sometimes already implemented.

Virtually all votes are unanimous and any debates among the members are held behind closed doors. Even an abstention is highly rare. This is to say 612 deputies routinely agree with every executive order passed by the Council of Ministers.

Despite the sham elections, it’s nonetheless a dynamic time for Cuban policymaking, so there’s never been a more optimistic time for proponents of economic and even political reform.  Furthermore, given the advanced age of both Castro brothers — Raúl is currently 81 — it’s nearly certain that Cuba’s leadership will pass to a new generation sooner rather than later.

Continue reading Don’t worry about Cuba’s shamtastic elections — focus instead on Castro’s reforms →

European Union, United Kingdom

Clarke’s pro-Europe tone highlights referendum risk to UK Tories from the center

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Longtime senior Conservative Party grandee — and former chancellor of the exchequer — Kenneth Clarke (pictured above) in no uncertain terms yesterday said that a British exit from the European Union would be a disaster.United Kingdom Flag IconEuropean_Union

That Clarke is pro-Europe is certainly not a surprise.

As former prime minister John Major’s chancellor from 1993 until the fall of the Tory government in the 1997 Labour electoral landslide, Clarke was the most prominent pro-European in Major’s government — at one point, Clarke was even in favor of the United Kingdom joining the eurozone.  When Major’s government irreparably fractured over divisons on the UK’s role with respect to Europe, Clarke was most certainly the top general of the pro-European faction.

So it’s not a shock to see Clarke joining forces with Peter Mandelson, the former Labour veteran, and others for a cross-party effort to boost the United Kingdom’s continued presence in the European Union:

“There’s a broad range of opinion inside the [Conservative] party. The number of people who actually want to leave the European Union; it’s quite tiny. They get a disproportionate amount of attention. My guess is that there are about 30 who want to leave and when we first joined the European Community I think there was slightly more than that.”

He warned that it would be “pretty catastrophic” if Britain left the EU and said he was now resigned to fighting a referendum on the issue if the Conservatives win the next election.

“The background climate in this county has become … unremittingly hostile. I think somebody has got to make the positive case again. The climate of public opinion just needs to be reminded how essential it is if we really want the UK to play a part in the modern world,” he said.

But it’s another headache for UK prime minister David Cameron, who announced in a widely anticipated speech last week that he would seek to renegotiate the United Kingdom’s role in the EU and, thereupon, call a referendum on the UK’s continued membership by 2017 (obviously depending on the reelection of the Tories in the 2015 general election).

Clarke’s outspoken support shows just how difficult Cameron’s balancing act on Europe has become — and it will only be more difficult as a potential referendum approaches. Continue reading Clarke’s pro-Europe tone highlights referendum risk to UK Tories from the center →

Assorted Links

First Past the Post: January 31

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East and South Asia

Japanese prime minister Shinzo Abe will determine his government’s stance on the Trans-Pacific Partnership before summer upper-house elections.

Taking a closer look at South Korean president-elect Park Guen-hye’s prime ministerial blunder.

North America

Calculated Risk on why the United States should not be too worried about its apparent 0.1% contraction in 4Q 2012.

Jonathan Chait at New York Magazine on why the US should be worried.

Latin America / Caribbean

Rafael Correa has a commanding 56% lead in advance of the Feb. 17 Ecuador presidential election — businessman Guillermo Lasso is his nearest competition with 13%.

Efraín Ríos Montt will face trial for genocide and crimes against humanity conducted while leading Guatemala in the 1980s.

More Ríos Montt background here.  [Spanish]

One economist on the performance of Peruvian president Ollanta Humala.

AMLO loses his battle over the July 2012 Mexican presidential election.

Africa

Zimbabwe — the country — has apparently only $217 left in its coffers. (Kickstarter, anyone?)

The grammatical ‘boo-boos’ of Nigerian president Goodluck Jonathan.

Shell will pay some compensation to Nigerian farmers following largely pro-Shell Dutch ruling.  More here.

French forces have taken the key northern Mali town of Kidal.

Patrice Motsepe, Africa’s wealthiest black man, will donate half his wealth to the poor.

Looking at the next Malagasy election.

Europe

French voters lack confidence in president François Hollande by a 65% to 30% margin.

A look at where voters stand if snap Czech parliamentary elections occur, amid new pressure on Petr Nečas’s government on the EU fiscal compact.

Benjamin Elsner and Klaus F. Zimmermann publish research on migration to Germany in the decade following EU enlargement.

Felix Salmon at Reuters examines the soon-to-be-previewed European financial transactions tax.

Lady Ashton weighs in on the Russian ‘gay propaganda’ ban.

Yanukovych’s ‘family’ spreads its tentacles in Ukraine.

UK senior Tory Kenneth Clarke says that leaving the EU would be a fatal mistake.

Looking back on the rise of Adolf Hitler on its 80th anniversary.

Middle East

Egyptian military chief Abdul Fattah al-Sisi warns the political crisis could lead to state collapse. (How far are we from a ‘memorandum coup’ circa Turkey 1997?)

Israeli president Shimon Peres meets party leaders following last week’s elections.

Tunisian Salafists on the rise?

Jordan

What comes next for Jordan after loyalists win rigged, boycotted elections

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The Jordan Times actually has a non-ironic headline for a story that reads: ‘Jordan biggest winner in elections — King.’jordan flag icon

I mistook it initially as reading that Jordan’s king was the biggest winner in the Jordanian elections, which would have probably been a more accurate headline, given that last week’s elections were certainly a ‘win’ in the nominal sense for Abdullah II, the Jordan monarch since 1999 (pictured above, right, with Saudi Arabian king Abdullah).

Those elections, held last Wednesday, January 23, were all but certain to elect to the Majlis al-Nuwaab (Chamber of Deputies), the lower house of Jordan’s Majlis al-Umma (National Assembly) a majority of legislators loyal to the monarchy — the 60 senators of the upper house, the Majlis al-Aayan (Assembly of Senators) are appointed by Jordan’s king.

Following the 2011 ‘Arab Spring’ protests in Jordan, Abdullah agreed to allow the Chamber of Deputies to select the next cabinet and prime minister.  Those deputies, however, include 108 out of 150 who were elected as ‘independents,’ mostly loyal to the monarchy, with just 15 seats reserved exclusively for women and just 27 reserved to be contested by political parties.

In light of the fact that 72% of the seats in the Chamber of Deputies are essentially rigged in favor of the monarchy, it’s understandable that the political wing of Jordan’s Muslim Brotherhood, the Islamic Action Front (جبهة العمل الإسلامي), boycotted the elections, alongside several other smaller parties, including many representatives of Hirak, the secular protest movement founded two years ago to protest the Jordanian monarchy.  The Muslim Brotherhood in Jordan has a longtime history of greater cooperation with the ruling state, and it itself is less conservative than other similar movements in the Middle East — it’s relatively progressive on women’s rights and is committed to democracy, for example.

Given the fact that the Brotherhood’s voters are typically more urban and more Palestinian, the elections will have resulted in disproportionately greater representation for the rural tribal population and the so-called East Bank Jordanians, who were never resident in the Palestinian-dominated West Bank of the Jordan River, annexed by Israel after the Six-Day War in 1967.

But the result is a bit more complicated than that.

International observers, such as the National Democratic Institute, have reported that the elections, by and large, were the freest elections yet experienced in Jordan, where 56% of eligible voters ignored the call to boycott and turned out to vote.  Given the turmoil currently engulfing Egypt under Muslim Brotherhood-supported president Mohammed Morsi, it’s not surprising that many Jordanians would be wary about turning over power to the Brotherhood in their own country.

Despite the Brotherhood boycott, however, 18 even more moderate Islamist candidates won seats, and another 20 or so leftist, nationalist or other government critics also won seats, a contrast to the prior Chamber of Deputies.

But if the vote wasn’t entirely lacking in irregularities, it’s hard to argue that the elections were exactly fair, given that the largest opposition party will have no representation.

So it’s also not surprising that many Jordanians are now protesting (some reports describe rioting) in the aftermath of the elections:

Jordan is witnessing its third day of riots protesting against the outcomes of the parliamentary elections, which showed a victory for tribal forces. These riots have deepened the political crisis that the country has been going through since January 2011. Scenes of violence killed one and injured three in the eastern tribal city of Mafraq, and eclipsed governmental and Western reports, which confirmed the integrity of the voting process. This comes at a time when Jordanian King Abdullah II is considering his options regarding the formation of a new government.

At the same time, the Muslim Brotherhood cancelled its own planned protests, so it’s too soon to know if the post-election protests will reach the critical mass that would more imminently pressure the Hashemite monarchy to accelerate its reform efforts.

Caretaker prime minister Abdullah Ensour, who was appointed in October 2012 to oversee economic reforms, has stepped down, but will stay on pending the appointment of a new prime minister directly by the National Assembly.  Jordanians most recently gathered for large-scale protests in November 2012 over cuts in fuel subsidies, one of several steps that Abdullah’s government has taken in light of a budget deficit that reached 6.5% of Jordanian GDP in 2012.

So what comes next? Continue reading What comes next for Jordan after loyalists win rigged, boycotted elections →

Assorted Links

First Past the Post: January 30

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East and South Asia

The influence of former prime minister Thaksin Shinawatra on Thai government.

Mongolia is booming.

A profile of Cambodian prime minister Hun Sen.

Japan’s budget as an economics lesson.

Approval for the new Japanese government’s record budget.

The ongoing smog crisis in China.

The new prime minister-designate in South Korea withdraws.

North America

The Obama administration plots immigration reform.

The U.S. Senate has overwhelmingly approved senator John Kerry for U.S. secretary of state.

ThreeHundredEight‘s analysis of the Ontario Liberal leadership vote.

Latin America / Caribbean

Mexican finance minister Luis Videgaray pledges not to privatize Pemex.  [Spanish]

Barbados will go to the polls on February 21.

Why you shouldn’t care too much about the Feb. 3 Cuban elections.

Raúl Castro takes over the CELAC leadership.

Africa

Awaiting a Dutch court’s ruling over Shell’s actions in Nigeria.

Even more on Ethiopian water plans.

Uhuru Kenyatta will definitely be running for president of Kenya.

Elections in Mali by year-end now that Timbuktu is secured?  [French]

Europe

UK prime minister David Cameron will go to Algeria.

Catalunya, fresh off a vote for independence, is now asking the Spanish federal government for a fresh bailout.

French labour minister Michel Sapin claims the country is ‘totally bankrupt‘.

A controversy over the longtime Siena bank, Monte dei Paschi.

Weighing in on Armenia’s upcoming election.

Polish GDP growth fell from 4.3% to just 2.0 in 2012.

Norwegian-European relations are getting testy.

Greece’s finance minister says the country will recover in 2014.

Rainer Brüderle, a top politician in Germany’s Free Democratic Party, is under fire for making sexist remarks.

Middle East

Israel may have given its Ethiopian immigrants birth control involuntarily.

Israeli Central Bank governor Stanley Fischer is stepping down early.  Martin Wolf at The Financial Times adds his thoughts.

Israeli prime minister Benjamin Netanyahu is planning a coalition that includes two-thirds of the Knesset.

Jeffrey Goldberg pours cold water on the prospects for Israeli-Palestinian peace.

Germany prepares for the visit of Egyptian president Mohammed Morsi.

Meanwhile, his one-time presidential opponent and former regime figure Ahmed Shafiq is calling for a new constitution and elections.

Bassem Sabry’s 15 points on how Egypt can step back from its current crisis.

Australia

Prime minister Julia Gillard announces that the next federal election will be on September 14 (pictured above).

Global

Who will be the next secretary-general to lead the World Trade Organization?

Photo credit to Alex Ellinghausen.

Assorted Links

First Past the Post: January 29

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A very abbreviated version today, due to travel.

Queen Beatrix announced her plan to abdicate in favor of her son Willem-Alexander, who will be the first king of The Netherlands since 1890.

Populism and nationalism in the Czech election.

The French have retaken Timbuktu on behalf of Mali’s government.

Venezuelan president Hugo Chávez writes us a note.

 

European Union, United Kingdom

From Heath to Wilson to Thatcher to Cameron: continuity in EU-UK relations

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My friend and colleague, Dr. Michael J. Geary, and I, are in The National Interest today with a even-further revised piece on the history of relations between the United Kingdom and the European Union (pictured above are former prime ministers Edward Heath and Margaret Thatcher).United Kingdom Flag IconEuropean_Union

In particular, we continue to argue that British participation in the EU — including UK prime minister David Cameron’s latest speech demanding a renegotiation of the UK’s position in the EU and a straightforward in/out referendum by 2017 — must be viewed within the long context of the tumultuous 40-year history of UK-EU relations:

But even as the Eurozone accepts that deeper union is necessary to make the single currency workable, it’s unclear that in the reality of today’s “multi-speed Europe,” Cameron would need to renegotiate anything in order to retain the fiscal prerogative at home—just 22 days ago, the “fiscal compact” took effect through much of the rest of the EU, despite Cameron’s refusal to ratify it.

That’s why Europe should view Cameron’s speech not only in the narrow context of right-wing domestic politics or fiscal sovereignty, but within the wider scope of Britain’s troubled relationship with European integration. Ideally, Britain wants a European-wide free-trade area without the supranational institutional apparatus, something it proposed during the 1950s. Yet unless the euro implodes, that’s not the future of the EU.

Photo credit to Paul Grover.

Assorted Links

First Past the Post: January 28

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East and South Asia

Would China block Korean re-unification?

Democracy in Pakistan.

A month in, support for Japan’s new government is on the rise, actually, at 66.7%.

North America

Kathleen Wynne was elected the leader of the Ontario Liberal Party on Saturday night, making her the next Ontario premier and the first LGBT premier in Canadian history.

A joint interview between U.S. president Barack Obama and outgoing U.S. secretary of state Hillary Rodham Clinton.

Latin America / Caribbean

A nightclub fire that has killed nearly 230 people merits the attention of Brazilian president Dilma Rousseff.

An attack on the Dominican Republic’s opposition party headquarters.

Another batty U.S. plot on Cuba, this time originating from the foreign aid sector.

The latest on the Colombian government talks with FARC.

Honduras is officially the most violent country in Latin America.  [Spanish]

Africa

The French troops in Mali are pushing toward Timbuktu.

The local wing of al-Qaeda in Somalia, al-Shabab, has its Twitter account deactivated.

Kenyan prime minister Raila Odinga is leading the March 4 presidential race with 46%, followed closely by deputy prime minister Uhuru Kenyatta with 40%.  Another deputy prime minister, Musalia Mudavadi, lags far behind with just 5%.

Europe

Former social democratic prime minister Miloš Zeman won the Czech presidency in the first-ever direct election on Saturday.

Former Italian prime minister Silvio Berlusconi heaps praise on former fascist leader Benito Mussolini less than a month before Italian elections.

More than 1 in 50 Portuguese have emigrated since 2011.

Wolfgang Münchau asks, ‘What is the point of the European Union?’

A pro-gay marriage rally gathered in Paris over the weekend.

What did Greek opposition leader Alexis Tsipras get out of his trip to the United States? (Read my piece on his appearance at the Brookings Institution in Washington here).

Middle East

After years in a coma, there are signs of brain activity for former Israeli prime minister Ariel Sharon.

So now we have a state of emergency in three Egyptian cities.

Personal

Fear and loathing in Las Vegas

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Hello from Las Vegas (and, well, from the Grand Canyon).

Posting will be light Monday, in all likelihood, given that I’ll be coming back from Nevada for 10 hours on Monday, and won’t get back to Washington until late.Washington_DC_Icon

I’m eager to share some thoughts on the ongoing Israeli government-building process, the Jordanian election ‘results,’ and the upcoming Italian and Kenyan elections, so stay tuned this week!

With the greater part of a week left in January, Suffragio‘s traffic has already had its best month since I founded my blog eleven months ago.

So, as usual, thanks to all of my readers — known and unknown — for your support, and most importantly for your constructive criticism.  I’m, as always, looking for advice on how to make my blog smarter, sharper and stronger.

The key to Vegas, by the way, is Tacos El Gordo, a Tijuana-based chain. Seriously, and just north of the Wynn on the Strip.

Canada, Ontario

Wynne set to become highest-ranking LGBT official in Canadian history

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Ontario MPP Kathleen Wynne last night upended former Ontario MPP Sandra Pupatello to become the next leader of the Ontario Liberal Party — and, accordingly, soon to become the next premier of the most populous Canadian province.ontarioCanada Flag Icon

Pupatello, who was a slight favorite headed into the party convention, led on the first two ballots before Wynne clinched the leadership on the third and final ballot, with the support of the race’s original frontrunner, Gerard Kennedy, and another candidate, Charles Sousa.

That support was enough to turn the tide and it gave the leadership to Wynne on a vote of 1,150 to 866.

It also means that Wynne will become Ontario’s next premier — incumbent Dalton McGuinty is stepping down after nearly a decade as premier and after leading the Ontario Liberals to three consecutive electoral victories, albeit with a minority government in his third term.  McGuinty has served as the leader of the Ontario Liberals since 1996.

Wynne defeated David Turnbull, then an incumbent Progressive Conservative minister of enterprise, in the 2003 provincial election in a municipal Toronto riding to enter the Ontario legislature a decade ago.  She served as minister of education (just as Kennedy and Pupatello once did, ironically) from 2006 to 2010 before becoming minister of transportation and then minister of municipal affairs and housing and aboriginal affairs.

Wynne directly addressed the question of whether a lesbian could proceed to win an election province-wide following her win:

I want to put something on the table: Is Ontario ready for a gay premier? You’ve heard that question. You’ve all heard that question, but let’s say what that actually means: Can a gay woman win? That’s what it means….

You know, there was a time, not that long ago, when most of us in this leadership race would not have been deemed suitable. We would have been deemed unsuitable. A Portuguese-Canadian, an Indo-Canadian, an Italian-Canadian, female, gay, Catholic. Most of us could not have hoped to stand on this stage. But the province has changed. Our party has changed.

It’s a strong statement, and with Wynne’s elevation, Canada joins the vanguard of countries in the world where gay men and women have reached the pinnacle of political power.  By contrast, even in relatively liberal California, the most populous U.S. state, it seems unlikely to think that voters would elect a gay governor less than a decade after former governor Arnold Schwarzenegger referred to lawmakers as ‘girly men’.

Wynne, who has three children with her former husband, came out at age 37, and has been with her current partner Jane Rounthwaite, since 1990.

So Wynne’s Saturday evening victory should be recognized for its historic importance.

But back in the world of day-to-day Ontario politics, the reality is that Wynne has a difficult task ahead of her in rejuvenating the Ontario Liberals after a decade in government if she doesn’t want to wind up as the Kim Campbell of Ontario politics.‡ Continue reading Wynne set to become highest-ranking LGBT official in Canadian history →

Czech Republic

Why Miloš Zeman won the Czech presidency

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Czech voters returned to the polls yesterday and today for the runoff in the Czech Republic’s first direct election for president.czech

Former social democratic prime minister Miloš Zeman has defeated the current more conservative foreign minister Karel Schwarzenberg by a margin of around 54.8% to just 45.2% for Schwarzenberg.

Schwarzenberg emerged as a surprise challenger to Zeman after the first round, edging out former prime minister Jan Fischer, setting up a runoff that  featured two candidates with incredibly colorful personalities.

Schwarzenberg, who belongs to the Bavarian nobility, spent much of his life in Austria, where his family lived in exile during the Communist occupation of Czechoslovakia, increasingly fighting in the 1980s alongside Václav Havel to liberate the country from Soviet rule.  As the leader of the Tradice Odpovědnost Prosperita 09 or ‘TOP 09′ (Tradition Responsibility Prosperity 09), which he formed for the 2010 Czech parliamentary elections, his party is the second-largest member of the coalition headed by prime minister  Petr Nečas, the leader of the Občanská demokratická strana (ODS, Civic Democratic Party).

Zeman, formerly a prime minister from 1998 to 2002 from the Czech Republic’s main center-left party, the Česká strana sociálně demokratická (ČSSD, Czech Social Democratic Party), is known for his sharp wit and aggressive persona, but lost his first run for the presidency in 2003 to the outgoing incumbent, Václav Klaus.  Zeman, at odds with the current ČSSD leadership, left the party in 2009 to form his own.

While Schwarzenberg peaked at the end of the first round, and certainly entered the second round with a bit of momentum, it wasn’t enough to power a 75-year-old aristocrat with a penchant for napping, into the Czech presidency.

It certainly didn’t help that Schwarzenberg spent three decades outside of the country and his Czech language skills were sometimes seen as less than pristine, and Zeman’s campaign took advantage of the perceived ‘otherness’ of his opponent.

Zeman’s supporters even intimated, despite any evidence, that Schwarzenberg’s family collaborated with Nazis.

World War II featured as an issue in a debate between the two candidates when Schwarzenberg claimed that the Beneš decrees, which dealt with the expulsion of ethnic Germans from Czechoslovakia after World War II would today be considered a war crime, and Zeman responded by attacking Schwarzenberg as a Sudaten German himself.

Zeman and Schwarzenberg both achieved endorsements from unlikely sources in the second round.

Despite their ideological differences, Zeman long ago won Klaus’s endorsement (Klaus also enabled Zeman’s prime ministerial term in 1998 when he agreed to support the government in exchange for patronage and government positions for the ODS).  Zeman and Klaus belong to the same generation of Czech political leadership, and many see in Zeman a lot of the same qualities as Klaus, who has been outspokenly conservative as president, outspokenly eurosceptic and even cast doubts on the validity of manmade climate change.

Fischer, who could have been expected to endorse Schwarzenberg as a more center-right candidate, failed to do so.  He didn’t endorse Zeman, but he said that he could not vote for Schwarzenberg.

Furthermore, the official ČSSD candidate, Jiří Dienstbier Jr., who finished a surprisingly strong fourth place in the first round, said that he could not vote for Zeman.

Although other ČSSD leaders endorsed Zeman, they were certainly less than enthusiastic in their support.  Although it’s likely that Zeman won the share of ČSSD voters, his win today makes it likely that the next five years will feature an awkward relationship between Zeman’s camp and the formal ČSSD leadership.

The tattooed fifth-place finisher, Vladimír Franz, endorsed Zeman, after attracting worldwide attention in advance of the first round.  Although Franz’s voters likely leaned to the left, they were younger and urban, a constituency to which Schwarzenberg appealed — Zeman’s voter base featured older and more rural voters.

Although Havel, who served as president of Czechoslovakia from 1989 to 1993 and, after the 1993 breakup of the union, the Czech Republic, until 2003, wasn’t as universally popular within the Czech Republic, I wonder if the election would have turned out differently if Havel were still alive to endorse and campaign for his longtime friend Schwarzenberg.  Havel died just 13 months ago in December 2011.

Ultimately, the massive unpopularity of the Nečas government, certainly made a Schwarzenberg victory an uphill challenge, given the double misery of a troubled economy and, like in many European countries these days, pursuing a policy of budget cuts and economic reform.  In the first round, the official ODS candidate, Přemysl Sobotka, a senator, won just 2.46% and placed eighth out of nine candidates.

Cyprus, European Union, Greece

Europe concedes Cyprus default less than a month before presidential election

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Felix Salmon has a tantalizing tidbit about Olli Rehn, European commissioner for economic and monetary affairs, apparently conceding that a Cypriot default is now virtually inevitable, less than a month before the Cypriot presidential election:European_UnionGreece Flag Iconcyprus_world_flag

EU economics commissioner Olli Rehn went on the record telling him that Cyprus is going to have to restructure its debt — just two weeks after ruling such a thing out.

That might come as little surprise, given that Cypriot banks were loaded up to the gills with Greek debt, and Greek debt suffered a 70% haircut. Cyprus is tiny, and could never afford the €17 billion needed to bail out the banks and the government — especially since that would bring the country’s debt load up to more than 140% of GDP.

Salmon cites a report from The Wall Street Journal‘s Stephen Fidler reporting from Davos.

The Republic of Cyprus, with just over 800,000 people, is the third-smallest member of the eurozone (after Malta and Luxembourg), and it’s a relative newcomer to the single currency, having replaced the Cypriot pound for the euro only in January 2008, although the Turkish-controlled northern part of the island still uses the Turkish lira.

The country accounts for just 0.2% of the eurozone economy, though its GDP per capita is a relatively wealthy $29,000, and it’s been in negotiations for a bailout for some time now.  That hasn’t yet been successful, in part because of the unique legal, political and financial complexity of the negotiations.

Rehn’s statement, if true, is essentially a declaration that time has run out — Moody’s downgraded Cypriot debt in July 2011 to junk status.

Nonetheless, a €17 billion bailout would be dwarfed by the Greek bailout (€245.6 billion), the Spanish bailout in July 2012 to provide liquidity to Bankia (€41 billion), and even the bailout provided by the ‘troika’ of the European Commission, the European Central Bank and the International Monetary Fund of Romania that began in 2009 (around €20 billion).

In many ways, a Cypriot default will be a key test for the European Union, given that it would be the first default since the treaty establishing the European Stability Mechanism formally came into effect at the end of September 2012.

Unlike in Greece, where much of its debt is governed by Greek law, much of Cypriot debt is governed under various international law, which will make it a messier restructuring.

Keep in mind, also, that the island of Cyprus remains split between the Republic of Cyprus (largely populated by Greek Cypriots) and the Turkish-occupied northern half of the island, the Turkish Republic of Northern Cyprus (largely populated by Turkish Cypriots).  The island has been divided since a 1974 coup, Greece’s attempt to annex the entire island, and Turkey’s subsequent invasion, and the formal declaration of Northern Cyprus’s independence in 1983.

Add to that the fact that Cyprus is seen as a hub for worldwide money laundering, especially with respect to illicit funds from Russia, despite the protestations of Panicos Demetriades, president of the Central Bank of Cyprus, earlier this week.

That means bailout proceeds could go directly into the pockets of some of Russia’s wealthiest oligarchs, a position that’s unlikely to go down well politically throughout the rest of the eurozone, especially as Germany gears up for federal elections later this year — German officials have even demanded that Russia contribute to any Cypriot bailout.

Meanwhile, Cyprus will go to the polls in less than a month to replace Demetris Christofias, the country’s left-wing president since 2008.  Unlike in many European countries with parliamentary systems, Cyprus’s president is both head of state and head of government.

With a default (orderly or otherwise) on the horizon, Cyprus now faces a presidential election on February 17 — with a runoff, if necessary, a week later on February 24 — in the midst of a financial crisis and perhaps in the midst of bank runs.

Christofias, who has presided over economic turmoil and an unemployment rate that’s now at 14%, has so far refused to engage in massive privatizations of state-run industries as a condition for a potential bailout.

Add all of those factors together — the size of the Cypriot banking sector’s debt, the legal complexity of the debt, the Russian laundering issue, the complexity of the Turkish political reality with Northern Cyprus, and the leftism of the Christofias administration — and you start to understand why Cyprus is now allegedly headed to a default.

Continue reading Europe concedes Cyprus default less than a month before presidential election →

European Union, United Kingdom

Taking a deeper look at Cameron’s EU speech and UK relations with Europe

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Over at EurActiv, Dr. Michael J. Geary, a friend and colleague at the Woodrow Wilson International Center for Scholars, and I have written a piece placing UK prime minister David Cameron’s speech from Wednesday in greater context in respect of existing European Union structures and the longstanding 40-year history of the United Kingdom’s tumultuous relationship with the EU and its predecessor, the European Economic Community.
United Kingdom Flag IconEuropean_Union

You can read it here.

We note, among other things, that Cameron’s latest gambit is well-placed within the UK’s long-standing discomfort as a member of Europe:

In fact, if Cameron’s latest gambit has a sense of déjà vu to it, it’s because it comes almost directly out of the political playbook of former Labour prime minister Harold Wilson.

Just one year after [Edward] Heath secured British membership in the EU’s predecessor, the European Economic Community, Wilson sought to renegotiate the original deal and, in 1975 held a referendum on whether Britain would remain in the Community.

But British-EU relations have always been troubled, and even the British accession to the EEC is poised with original sin. Denied membership to the EEC twice during the 1960s by French president Charles de Gaulle, Britain finally gained entry in 1973 after months of protracted negotiations between pro-European Conservative prime minister Edward Heath and de Gaulle’s successor, Georges Pompidou….

In some ways, British truculence goes back well beyond the era of European Union – in 1931, the United Kingdom was the first major European power to ditch the gold standard, goosing its own economic recovery while leaving the economies of Germany and France clamped to 24-carat chains.

We also place the speech in the context of what are likely to be negotiations, initiated by German chancellor Angela Merkel, for a new EU treaty that attempts to locate greater fiscal policymaker power with Brussels, at least among the eurozone nations:

[Merkel], who wants a new EU treaty granting greater fiscal control to Brussels (and to Berlin, in no small part), may be willing to trade more opt-outs to Cameron in exchange for green-lighting further integration for the core eurozone countries.

Cameron may also be hoping that he can use negotiations on the still uncertain EU budget for 2014 to 2020 as a bargaining chip.

Negotiations wouldn’t begin in earnest until after Cameron’s reelection in 2015 (still a questionable proposition) and after German federal elections expected in September 2013, so it’s impossible to know whether the 2014 budget or a new Merkel-led treaty effort would even come into play.

After all, it’s not clear if the eurozone will exist in its current form through the next five months, let alone five years. But if Merkel and French president François Hollande balk at Cameron’s push, will it be enough for him if he manages to, say, renegotiate an opt-out from the EU’s working time directive, or perhaps repatriate additional justice policymaker powers from Brussels?

Assorted Links

First Past the Post: January 24-25

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East and South Asia

A closer look at Jakarta governor Joko Widodo, a rising star in Indonesian politics.

Kim Yong-jun was named prime minister-designate by South Korean president-elect Park Guen-hye.

PML-F politician Pir Pagara may become Pakistan’s caretaker prime minister.

Japan’s trade deficit climbs to its highest level since 1980.

North America

U.S. vice president Joe Biden is ‘intoxicated’ by a 2016 presidential run.

The Globe and Mail endorses Sandra Pupatello for Ontario Liberal leader.

Former Ontario Liberal frontrunner Gerard Kennedy seeks a last-minute boost.

Latin America / Caribbean

Foreign Policy examines gay rights in the Americas.

Guatemalan president Otto Pérez Molina takes his fight for an alternative anti-drug strategy to Davos.  [Spanish]

Africa

Zimbabwe is set to approve a new constitution.

Will Sudan further disintegrate?

Europe

A surprisingly gentle response from German chancellor Angela Merkel to UK prime minister David Cameron’s EU speech.

A more ridiculed response from UKIP leader Nigel Farage.

The Catalan parliament approved a declaration supporting an independence referendum by a 85-41 vote.

Kosovo considers its first ambassador to Belgrade.

Spain’s unemployment rate rises to 26%.

Polish prime minister Donald Tusk is hospitalized.

The Czech presidential campaign nears its end, each candidate on the Czech economy, and tattooed former candidate Vladimír Franz will vote for Miloš Zeman.

Speigel interviews former Russian finance minister Alexei Kudrin.

Icelandic EU accession talks are merely delayed, not terminated.

Middle East

Israeli prime minister Benjamin Netanyahu will seek a broad-based coalition that includes both Yesh Atid and Bayit Yahudi.

Government loyalists have won the Jordanian parliamentary elections that most other parties boycotted.

Egyptian parliamentary elections will occur in three or four months, according to president Mohammed Morsi.

Sri Lanka aims to ban sending women to Saudi Arabia to work as housekeepers.

Turkey has a surprise cabinet reshuffle.

Leading Sunni cleric Abdul Malek al-Saadi is coming out against Iraqi prime minister Nouri al-Maliki.

Global

A nickel glut.

European Union, United Kingdom

Cameron pledges 2017 EU referendum: ‘It is time for the British people to have their say’

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UK prime minister David Cameron, calling the democratic legitimacy of the European Union ‘wafer thin,’ has this morning pledged to renegotiate a new settlement with the European Union for the United Kingdom, and then a straight in-or-out referendum within the United Kingdom by 2017.European_UnionUnited Kingdom Flag Icon

Well, then.  Today’s address was probably the most important speech of Cameron’s career and perhaps the most important turning point on UK-EU relations since Britain’s hard-fought entry 40 years ago into what was then the European Economic Community.

Less than a month after the EU fiscal compact treaty goes into effect, and on the day that France and Germany are celebrating 50 years of friendship –as cemented by the Élysée Treaty — no less, Cameron is pledging the referendum that neither his Conservative predecessors as prime minister, Margaret Thatcher nor John Major dared to hold.

Given that the United Kingdom is not (and will not anytime soon) be a member of the eurozone, there’s a rationale for the UK to negotiate a role where it is not subject to the ever-closer political union that the eurozone crisis has required, and it should be clear that the UK won’t cede fiscal and banking policymaking to Brussels when it hasn’t ceded monetary policymaking.  But it doesn’t follow that the UK needs to renegotiate those issues; after all, given the ‘Europe at multiple speeds’ approach that’s now reality, the UK has opted out of many EU initiatives — not only the single currency, but also the Schengen Agreement that eliminates internal border controls within the EU.

I’ll have plenty of longer thoughts on Cameron’s gambit later this week.

But for now, as I listen to his speech in real time, here are some initial reactions.

Cameron has ended his speech with a note of caution that the United Kingdom is not Norway and it is not Switzerland, and he’s discussing the benefits of membership in the EU — ‘more powerful in Washington, Beijing, Delhi’ by remaining in the EU — not to mention the free trade benefits of the single market.

By 2017, if there’s actually a referendum, and Cameron’s Tories have won the 2015 general election, I predict that Cameron will be arguing for a ‘yes’ vote on such a referendum.

It’s worth noting that no member-state has ever left the European Union (although Greenland, part of the Danish realm, voted to pull out of the EU in 1985 in order to protect its fishing rights — an issue that’s snagged Icelandic and Norwegian membership in the EU as well).

In the meanwhile, this seems like a political masterstroke — Cameron has pulled a play directly from the political playbook of Labour prime minister Harold Wilson, who held his own referendum on the United Kingdom’s EU membership in 1975 (it won 67,2%).

Consider:

  • In giving the euroskeptics a clear referendum on Europe, Cameron has now given them a reason to work hard for a Tory victory in 2015.
  • Given the relatively anti-Tory and pro-Europe view of the Scottish, the referendum, scheduled for 2017, need not spook the Scottish toward independence, given the scheduled 2014 referendum within Scotland on Scottish independence.
  • He will have quieted the euroskeptic right within his own caucus, notably his former defense minister Liam Fox and other anti-Europe Tories.
  • He will have managed to draw some daylight between his party and his coalition partner, the Liberal Democrats, who are incredibly pro-Europe, thereby giving the Lib Dems something with which to distance themselves from the Tories.  That will only help win votes away from Labour in 2015.
  • He will have taken the steam out of the rising United Kingdom Independence Party, not only for 2015, but for next year’s elections to the European Parliament.
  • By keeping the terms of renegotiation vague, Cameron can take any concessions from Europeans and declare victory (say, an opt-out from the working time directive), and push for a ‘yes’ vote in 2017.