WIth referendum call, Tusk gently backs away from eurozone


The economic blogosphere is lighting up over reports that Polish prime minister Donald Tusk is now talking about a referendum for his country to join the eurozone.Poland_Flag_Icon

That’s a big deal on the surface — with 40 million people, Poland is the largest European Union member after the United Kingdom not to use the single currency, and it’s one of eastern Europe’s fastest-growing economies.

Paul Krugman at The New York Times and Dylan Matthews at The Washington Post‘s Wonkblog are on the case, with very solid arguments for why Poland is crazy to want to join the eurozone.  Writes Matthews:

It’s fair enough if Poland wants to develop closer ties to its European neighbors. But as [Krugman notes], joining the euro would deprive Poland of the strategy that allowed it to weather the recession so effectively. The key to the Polish miracle was massive currency devaluation.

Krugman and Matthews both highlight that the Polish key to outperforming the rest of Europe has been its ability to devalue the złoty and control its own monetary policy.  It’s also helped that Poland has one of Europe’s lowest public debt loads — around 55% of GDP, compared to Germany’s 80% public debt load or 90% in France.

If you need to look any further for counterfactual proof, take a look at former East Germany, where economic growth still lacks former West Germany — despite the overwhelmingly strong political rationale for Germany reunification, it’s not clear that a currency union with West Germany made economic sense for East Germany, let alone a currency union with France, Belgium and the Netherlands. The Czech Republic, Slovakia and Poland have all grown at more rapid rates in the past two decades.

Krugman writes, ‘It really does make you want to bang your head against a wall.’

But they should probably calm down, because Poland is as unlikely as ever to join the eurozone — Tusk isn’t taking a gamble so much as he’s taking a bath on the Polish currency issue by pushing its resolution to sometime ‘at the end of the decade‘ — and far after the next Polish election.

Over two-thirds of Polish voters oppose eurozone membership, and those numbers seem unlikely to change anytime soon, given the chaos we’ve seen in peripheral eurozone countries from Cyprus to Portugal.

Tusk (pictured above with European Council president Herman van Rompuy), who has long been in favor of eurozone membership for Poland, is looking for a way out, not a way in. Facing reelection in 2015 for his liberal center-right Platforma Obywatelska (PO, Civic Platform), Tusk certainly doesn’t want to go to voters with the albatross of eurozone support around his neck. Continue reading WIth referendum call, Tusk gently backs away from eurozone

Gaspar defends Portuguese economic program at Brookings


Portuguese finance minister Vítor Gaspar (pictured above) spoke to a small audience at the Brookings Institution Tuesday, notably less than 36 hours after Cyprus and the ‘troika’ of the European Commission, the European Central Bank and the International Monetary Fund agreed on the terms for a Cypriot bailout — the fifth such eurozone bailout during the currency zone’s sovereign debt crisis.portugal flag

Of course, Portugal is one of those of other five countries, and Gaspar, for the past 21 months, has been responsible for implementing the terms of Portugal’s own bailout program.

Gaspar presented as optimistic a case as possible for Portugal’s current economic state on Tuesday. But he admitted that despite gains in lowering the country’s budget deficit, restoring Portuguese banks to greater health, and boosting the growth of Portuguese exports (the latter as much a sign of painful ‘internal devaluation’ of wages and incomes within Portugal as any sign of newfound productivity or competitiveness), Portugal’s GDP growth and employment rate remain problematic.  The Portuguese economy contracted by 1.6% in 2011 and 3.2% in 2012, and is expected to contract by a further 2.3% in 2013, while its unemployment rate, as of the last quarter of 2012, is 16.9%, its highest level yet.

As Gaspar noted, Portugal’s economy — second only to Italy’s — was already on the ropes when it entered the eurozone.  In particular, from 1990 to 2012, he claimed that the Portuguese economy marked a poorer performance than either Japan during its ‘lost decade’ or the United States during the Great Depression.  Regardless of whether that’s exactly right, there’s no denying that Portugal has faced long-term structural problems — since 2000, it’s notched GDP growth in excess of 2% just once (in 2007, when it grew by 2.37%, and that was at the height of the eurozone and global credit boom).

Gaspar placed much of the blame on Portugal’s failure to pursue macroeconomic stability in accordance with ‘best practices’ — i.e., Portugal simply failed to adjust properly upon accession to the eurozone 14 years ago.

Gaspar serves under prime minister Pedro Passos Coelho, whose liberal, center-right Partido Social Democrata (PSD, Social Democratic Party) came to power in the last election in coalition with the more socially conservative Centro Democrático e Social – Partido Popular (CDS-PP, Democratic and Social Center — People’s Party).

Among his solutions are greater EU-level banking union as a means of reducing the risk premium associated with peripheral economies such as Portugal’s — Gaspar added that the higher borrowing costs that constitute financial headwinds, especially in the context of budgetary adjustment.

But it was surprising not to hear any mention of the emigration of up to 1 million Portuguese from the country over the past 14 years — and nearly 250,000 since 2011 alone.  Passos Coelho in late 2011 was criticized when he suggested that young, enterprising Portuguese citizens should emigrate to Portuguese-speaking countries, such as Brazil in South America, or to Angola in southeastern Africa, still in the throes of an oil boom.  Angolan visas issued to Portuguese nationals jumped from just 156 in the year 2006 to nearly 150,000 by mid-2012.

Mozambique, another former Portuguese colony, apparently issues 200 visas a day to Portuguese nationals.

Invariably, that escape valve has kept Portuguese unemployment lower than the rates over 25% recorded in Spain and Greece.

Edward Hugh at A Fistful of Euros has made a very compelling case that the emigration of younger, working age Portuguese, combined with a decreasing birth rate and greater longevity has resulted in relatively fewer workers contributing to pensions and health care for relatively greater numbers of retirees, placing extraordinary long-term fiscal pressure on Portugal, given the lackluster expectations for future growth: Continue reading Gaspar defends Portuguese economic program at Brookings

In death, the Chávez cult has become even creepier


If you already thought that Venezuela was the Turkmenistan of Latin American politics, you need no further proof than the latest stunt on Tuesday from acting president Nicolás Maduro.Venezuela Flag Icon

In the clip below, Maduro has launched an oversized check up to the heavens to a grateful Hugo Chávez, representing the dividends received by CANTV, the Venezuelan telephone company that Chávez nationalized in 2007.  It’s another great find from Caracas Chronicles, which has been on quite a roll in the post-Chávez era in covering Venezuelan politics:

‘!Vuela, Vuela!, ¡en homenaje al Comandante!,’ Maduro exclaims (‘Fly! Fly! In tribute to the comandante!’), as red balloons (red symbolizing the color most associated with Chávez) float the check of 1,800 million bolívars upward to the skies.

As outrageous as it seems, it’s part of a series of impressions that the post-Chávez era is featuring an even creepier cult of personality in Venezuela than when el comandante was alive.

It began with the plans — now apparently aborted — to embalm Chávez and place him on display, just like Vladimir Lenin is on display in Moscow or Mao Zedong is on display in Beijing.  Those plans were belatedly phased out after officials determined that officials had waited too long after Chávez’s death in order to embalm him.

Then there are the over-the-top tributes like this, mingling the legacy of Chávez with that of Venezuelan founding father Simón Bolívar and other left-wing martyrs, and even Chávez’s Cuban benefactors have a thorough celebration of his life at Granma. 

Maduro even joked (or was it a serious claim?) that Chávez, his place in heaven secured, nudged God to make Argentine cardinal Jose Maria Bergoglio the world’s first Latin American pope.

It wouldn’t surprise me if, like in Turkmenistan, Maduro started trying to rename the months of the calendar after Chávez — there’s even a snarky website, madurodice.com, that tracks the number of Maduro’s mentions of Chávez on the campaign pre-campaign trail.

But the massive miles-long queues of people waiting to pay tribute to Chávez in death, and an extremely elegant funeral that drew nearly every leader in Latin America from Chile to México, with a ley seca (dry law) implemented to keep life in Caracas especially a bit more subdued in the potentially challenging days following Chávez’s death should have been enough to mark the extremely oversized impact that Chávez played within Venezuela’s political system — and above all in the spoils system that funneled oil wealth from the government to its supporters, from top government officials on downward.

All of this and Venezuela’s formal campaign season doesn’t even kick off until April 1.

French public intellectual Bernard Henri-Lévy has already decried the growing chavismo cult of personality:

What is less known, something that we will regret overlooking as the posthumous cult of Chávez swells and grows more toxic, is that this “21st-century socialist,” this supposedly tireless “defender of human rights,” ruled by muzzling the media, shutting down television stations that were critical of him, and denying the opposition access to the state news networks.

For Chávez supporters, there are certainly myriad policy reasons to support Maduro in the upcoming election over challenger Henrique Capriles — like him or not, he fundamentally transferred Venezuela’s oil wealth to the poorest Venezuelans in amounts unknown in nearly a century of the country’s oil wealth.  You can argue that Chávez’s redistribution of wealth has been inefficient, that his expropriations and other economic policies have left Venezuela mired in debt, a pariah of the global financial system and ill-prepared for the day that oil prices drop, and that other more moderate regimes from Perú to Brazil have notched records of poverty reduction just as impressive as — or more so than — Venezuela under chavismo. Continue reading In death, the Chávez cult has become even creepier

First Past the Post: March 27


East and South Asia

More threats from North Korea.

New protests in Bangladesh among those still gathered at Shahbagh.

North America

Ezra Klein’s wrap-up of the main arguments in Tuesday’s same-sex marriage case (on Proposition 8 in California) before the U.S. Supreme Court.

Total coverage of the Prop 8 case from SCOTUSBlog.

The U.S. Supreme Court will consider a second case on same-sex marriage rights today — the constitutionality of the Defense of Marriage Act.

The New Democratic Party holds a 20-point lead over the Liberal Party in upcoming British Columbia provincial elections.


Acting president Nicolás Maduro appoints a new chair of the foreign exchange management committee.

Venezuela has loaned $2.1 million to Nicaragua in the past four years. [Spanish]

Presidential challenger Henrique Capriles pledges to protect the misiones of former president Hugo Chávez.  [Spanish]

Latin America / Caribbean

Problems with the stadium in Rio de Janeiro that was to be used in the upcoming 2016 summer Olympics.

Sub-Saharan Africa

Spiegel interviews Malian coup leader Amadou Sanogo.

Congolese war crimes suspect Bosco Ntaganda appears before the International Criminal Court.

Former Zambian president Rupiah Banda (pictured above) pleads not guilty over oil-related charges.

International implications of the rebel coup in the Central African Republic.

Kenya’s top court delivers a setback to the challenge of presidential candidate and prime minister Raila Odinga.


Former British foreign secretary, onetime Labour leadership contender (he lost the Labour leadership to brother Ed) David Miliband will leave Parliament to head the International Rescue Committee in New York.

Polish prime minister Donald Tusk opens a path for a referendum on Poland’s eurozone membership (sometime after 2015).

Former French president Valéry Giscard d’Estaing thinks Germany finance minister Wolfgang Schäuble should be president of the Eurogroup.

Doubts about Jeroen Dijsselbloem.

Italian foreign minister Giulio Terzi has resigned over the flap over Italian marines in India.

Still no movement in the Italian government formation process, with center-left leader Pier Luigi Bersani running out of time.

Google gets aggressive with Sweden for coining the term ‘ungoogleable’ (‘ogooglebar‘ in Swedish).

Pope Francis has shunned the papal apartments in the Vatican for something simpler.

Croatia will become the 28th member of the European Union on July 1.

Middle East and North Africa

Syria’s opposition gets a seat at the Arab League’s table.

New curbs on the right to protest in Egypt.

Prime minister Najib Mikati may lead a new national unity government in Lebanon (very good news, if true).

Speculation about Jordan’s new government.