Why Western Australia doesn’t necessarily spell the end for Gillard


Saturday’s state elections in Western Australia were not good news for the Labor Party or for its leader, Australian prime minister Julia Gillard (pictured above).WA flag iconAustralia Flag Icon

First off, it’s important to note that no one expected Labor to win the election — premier Colin Barnett faced an electorate largely satisfied with the direction of the state’s economy and governance since he came to office in 2008.

Barnett’s center-right Liberal Party won 47.2% on Saturday to just 33.6% for the center-left Labor Party.  The leftist Green Party finished in third place with 7.9% and the conservative agrarian National Party in fourth with 6% — the National Party competes separately in Western Australia against the Liberal Party (unlike in federal elections, where it competes more or less in tandem with the Liberal Party as part of the Liberal/National Coalition).

Barnett’s victory gives him an expected 32 seats — an increase of eight — in the state’s 59-member lower house, the Legislative Assembly, which means that he’ll be governing with a majority for the first time; his previous minority government required a coalition with the Nationals.

Labor will drop from 28 seats to 20, the Nationals rise from five seats to seven.

That has resulted in yet another round of hand-wringing over Julia Gillard’s Labor government, which is seeking reelection in a vote scheduled for September 14 later this year — one former Western Australian Labor minister argues that Labor will suffer a ‘crucifixion’ at the polls if Gillard leads it through the election.

But while Gillard’s government — and her Labor leadership — remain on shaky ground, it seems doubtful that Western Australia, as such, should necessarily be the final domino to topple Gillard. Continue reading Why Western Australia doesn’t necessarily spell the end for Gillard

Václav Klaus, fresh from Czech presidency, discusses eurozone in Washington


Just three days after leaving the Czech presidency, Václav Klaus spoke at the Cato Institute in Washington earlier today — Klaus is joining Cato as a senior distinguished fellow this spring.czechEuropean_Union

Klaus, who stepped down after a decade in office, didn’t break much new ground — his remarks were essentially everything you’d expect from the famously euroskpetic former president, who was the last European Union head of state to sign the Treaty of Lisbon (and quite reluctantly, at that).

The great eurozone fight

In brief, Klaus has long argued that the eurozone is not an optimal currency zone, it’s a project that was implemented without sufficient democratic input from everyday Europeans, and the economic costs of monetary integration and centralization far outweigh the benefits, and those costs have become increasingly evident from the economic pain suffered today in Greece, Spain, Italy and throughout Europe.

Klaus’s diagnosis has become fairly uncontroversial — both on the left and the right, and for both intergovernmentalists and neo-functionalists alike.  A lot of European federalists would agree that the European Union needs more robust democratic institutions at the supranational level.  Many economists agree that the one-size-fits-all monetary policy has been incredibly harmful to many countries in southern Europe since 2008, and the painful internal devaluation forced upon many countries in the European periphery, from Latvia to Greece, has been a needless exercise in poor economic policymaking.

But whereas many economists would argue that the solution lies in greater fiscal harmony (especially through fiscal transfers from wealthier regions to poorer regions), looser monetary policy, a eurozone-wide borrowing capacity, debt forgiveness and a doubling-down on the more long-standing commitment to the free movement of goods, services and people throughout the European Union, Klaus’s solution is to unwind the eurozone.

Klaus would rather see a way for Greece — and other troubled economies — to simply exit from a eurozone that’s delivered now nearly half a decade of GDP contraction, painful downward pressure on income, and widespread unemployment and social rupture.

That’s not a crazy idea economically — if Greece could leave the eurozone tomorrow (or if Greece simply went bankrupt, thereby essentially forcing Greece out of the eurozone), it could conceivably pursue a much more aggressive monetary policy, devalue its currency, and take other steps to make its exports more competitive in global markets once it’s no longer yoked to a monetary policy that’s better suited for, say, the German economy.

But that’s not the entire story.  Greece might also suffer extraordinarily in the short-run while it makes that transition — starting with how it would reintroduce the drachma and how it would even finance basic governance outside the current eurozone regime, forcing perhaps even more austere budget-cutting in a country where the social safety net is already tattered.

And those are just the problems inside Greece — though the Greek economy is just a fraction of the European economy, it could set off a chain reaction of fear, bank runs and deep recession throughout the eurozone as investors pull out of not only the peripheral economies, but also out of the entire eurozone.  How would a massive Greek devaluation affect Cyprus? Would Spain and Italy withstand the inevitable bank runs and currency flight? The chain reaction of unraveling one of the world’s foremost reserve currencies could well be catastrophic.

Looking to national parallels: the Czechoslovak breakup and German reunification

Klaus related the current monetary union to the breakup 20 years ago of Czechoslovakia into two separate nations — a process that Klaus said was painful though necessary (though the Slovak economy is doing much better these days than the Czech economy).  But Greeks might be troubled by the more painful example of the breakup of the Yugoslav federation and the Soviet Union, both of which were also monetary unions as well as political unions.  The breakup of the ‘ruble zone’ led to massive hyperinflation throughout the Soviet Union and an economic shock that cut standard of living in half.  There’s simply no way to know what forces could be unleashed by the process — no matter what anyone says, there’s not a precedent for unraveling even a tiny part of the world’s largest currency union in an orderly fashion.

I would have liked to hear, in particular, Klaus’s thoughts on another contemporary experiment in currency union: German reunification.

Continue reading Václav Klaus, fresh from Czech presidency, discusses eurozone in Washington

First Past the Post: March 11


East and South Asia

Afghanistan’s president Hamid Karzai has harsh words for both the Taliban and the United States.

The People’s Republic of China announces a new government reorganization plan.

One of the alleged assailants in India’s infamous gang rape case has either committed suicide or has been murdered in prison.

A battle of the ports in the growing China-India rivalry.

Anti-nuclear activists protest Japanese prime minister Shinzō Abe.

Former presidential candidate Ahn Cheol-soo returns to South Korea today.

North America

Susan Rice, U.S. ambassador to the United Nations, is the frontrunner to become the Obama administration’s national security advisor.

A new book from Darrell Bricker and John Ibbitson argues that the rise of Canada’s west and the proliferation of immigrants is changing the nature of the Canadian elite — in part by making it more conservative (h/t Tyler Cowen).

Trouble for Canada’s economy?

Latin America / Caribbean

Residents of the Falklands Islands (pictured above) go to the polls today for a new status referendum that’s widely expected to result in a local victory to remain a British overseas territory.

Henrique Capriles, the runner-up in the October 2012 presidential election to the late Venezuelan president Hugo Chávez, will run against his hand-picked successor, Nicolás Maduro, in the snap April 14 Venezuelan election.

Caracas Chronicles live-blogs the Capriles announcement.

Megan McArdle last week provides a very thoughtful indictment of the Chávez era.

Mexican president Enrique Peña Nieto marks his first 100 days in office.

Sub-Saharan Africa

For the avoidance of doubt, Jubilee alliance candidate Uhuru Kenyatta officially won election as Kenya’s fourth president Saturday morning with 50.07% of the vote.

The Coalition for Reforms and Democracy, which backed Raila Odinga for president, will present a petition in court on Monday challenging the result.

Kenyatta has tough choices in selecting a new cabinet.

Outgoing Kenyan president Mwai Kibaki is set to turn over power to Kenyatta.

Looking at the relatively improved political fortunes of Zimbabwe’s longtime president Robert Mugabe since 2008.

Lessons for Zimbabwe’s March 16 constitutional referendum from Kenya.


Malta’s Labour Party has triumphed by a landslide 55.1% to 43.1% margin against the long-ruling Nationalist Party in Saturday’s parliamentary elections. (with Labour leader Joseph Muscat set to become Malta’s next prime minister).

Edward Hugh considers the long-term demographic and economic trends for Portugal.

Free Democratic Party leader Philipp Rösler criticizes his coalition partner, German chancellor Angela Merkel over citizenship rights and same-sex marriage.

Another week, another conviction for former prime minister Silvio Berlusconi, this time for illegal wiretapping.

European Union leaders are criticizing a planned constitutional vote in the Hungarian parliament.

Russia and Former Soviet Union

DW interviews Lithuanian president Dalia Grybauskaite.

Armenian presidential runner-up Raffi Hovannisian has gone on a hunger strike in opposition to the alleged fraud in the reelection of his rival, incumbent Serzh Sargsyan.

Middle East and North Africa

Saudi Arabia has jailed two political activists.

Tunisia’s Islamist Ennahda party is moving closer to a new government under prime minister-designate Ali Larayedh.

Israel is likely to get a new government this week under prime minister Benjamin Netanyahu, with Yair Lapid getting the finance ministry.

Libya’s parliament is temporarily suspending activity.

Bassem Sabry on the Egyptian judiciary decision to overturn planned parliamentary elections.

Egyptian president Mohammed Morsi is considering the dismissal of prime minister Hisham Qandil.

Australia and Oceania

Liberal premier Colin Barnett won reelection in Western Australia in state elections Saturday, further adding to Labor prime minister Julia Gillard’s woes.