Monthly Archives: October 2013

Czech Republic

New Czech party hopes to ride anti-corruption momentum to election gains

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It’s been a tumultuous year in Czech politics — a surveillance scandal involving the prime minister’s love triangle brought down the government, a power-hungry president elected in the first direct presidential election earlier this year is working to claw power away from the parliament, and what’s left of the Czech right boils down to a contest between an eccentric Bohemian aristocrat and a multi-millionaire entrepreneur. czech

Though it sounds like the long-lost plot of a Leoš Janáček opera, it’s the backdrop to this weekend’s parliamentary elections, which should be no less dramatic than the events that shaped them.

What was once expected to be an easy victory for the country’s main center-left party, the Česká strana sociálně demokratická (ČSSD, Czech Social Democratic Party) now looks it will be a less dominant victory — so much that the Social Democrats are no longer considered a lock to lead the next Czech government.  It’s the latest twist in a series of turns that could have major consequences for the economic and political development of the Czech Republic (or ‘Czechia‘ as its current president wants to call it) and its 10.5 million residents, to say nothing of the future expansion of the eurozone within central and eastern Europe. Continue reading New Czech party hopes to ride anti-corruption momentum to election gains →

Maldives

Maldives postpones presidential election yet again

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gayoom

The Maldives, which was supposed to hold a rerun of its presidential election over the weekend, has postponed it once again: maldives

Maldives electoral officials have set new dates for a presidential poll amid a growing row over the delayed vote.  The first round of the elections will now be held on 9 November, and a run-off – if required – on 16 November.  The first round of voting, in September, was annulled by a court, and on Saturday police blocked an attempted re-run.  Meanwhile President Mohamed Waheed told the BBC that the polls would be free and fair.

The Maldivian supreme court’s initial cancellation of the planned September 28 runoff was cause enough for alarm, but its decision to annul the original September 7 results and hold a new election on October 19 was even more discouraging.

Mohamed Nasheed, who won the country’s first democratic elections in 2008, was pressured to step down from office in early 2012 amid protests over the economy.  He won over 45% of the vote in the initial September election, and was set to face Abdulla Yameen,the half-brother of Maumoon Abdul Gayoom, who led the Maldives with an authoritarian government between 1978 and 2008 and whose influence continues to threaten the country’s turn to democracy.

Needless to say, it’s becoming increasingly clear that Gayoom (pictured above) and his allies in the Maldivian courts are trying to prevent Nasheed from taking power again.

Nasheed, after the latest postponement, called on Waheed to resign — Waheed, his former vice president, assumed the presidency upon Nasheed’s resignation in February 2012.

Under the constitution, the Maldives must have a president on November 11, so it’s unclear what will happen if no candidate wins more than 50% of the vote.

At this point, it would not be surprising to see Maldivian authorities find a way to shut Nasheed out from the election.

Luxembourg

Democrats gain despite Juncker’s likely return as prime minister in Luxembourg

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As expected, the party of Europe’s longest-serving prime minister Jean-Claude Juncker won Luxembourg’s parliamentary elections over the weekend.luxembourg

Despite having lost nearly 5% from the result of the previous 2009 elections, Juncker’s center-right Chrëschtlech Sozial Vollekspartei (CSV, Christian Social People’s Party) still finished with more support than any other party, entitling it to 23 seats in Luxembourg’s 60-member unicameral parliament, the D’Chamber (Chamber of Deputies), a loss of three seats:

“I am satisfied with the results as far as my party remains the number one party in Luxembourg, with a huge distance between my party and the two other main political parties,” Mr Juncker said.

“We should be entitled to form the next government.”  But he said it was too early to begin coalition talks.

Its coalition partner between 2004 and 2013, the center-left Lëtzebuerger Sozialistesch Arbechterpartei (LSAP, Luxembourg Socialist Workers’ Party), finished in second place, winning the same number as seats as it had previously (13), despite the fact that its support declined, especially in its stronghold in the south of the country.

But the third-place liberal Demokratesch Partei (DP, Democratic Party) also won 13 seats, a four-seat gain that makes it the clear winner, in terms of momentum, in Sunday’s election.

While the Democrats may have hoped for even more seats, the party made the starkest gains in Sunday’s election and that its leader, Luxembourg City mayor Xavier Bettel, is a rising star in Luxembourgish politics.  Though Bettel may not have won enough seats to make a play to become prime minister, he’s young enough (40) that he now stands a strong chance of making further gains in the next set of Luxembourgish elections.

Moreover, while Juncker may well return into a governing coalition with the LSAP, it was the LSAP’s refusal to back Juncker in a key vote over the summer over a scandal involving illegal domestic surveillance within Luxembourg’s secret service, which led to Juncker’s resignation and Luxembourg’s first snap elections in decades.  Though Juncker wasn’t directly involved in the scandal, a parliamentary inquiry found that he shared political responsibility for failing to adequately oversee the secret service and intelligence agency.  Despite the scandal, however, it wasn’t expected that the CSV would forfeit its dominance within Luxembourgish politics, though polls predicted slight losses for Juncker and his coalition partner, the LSAP.

Juncker has served as prime minister since 1995 and, between 1989 and 2009, also served as Luxembourg’s finance minister.

Given that the Democrats were the clear winners in Sunday’s vote, there’s a chance that Juncker could turn to the Democrats to join his government (as Juncker did between 1999 and 2004), putting Bettel even more clearly on the path as Juncker’s heir apparent.

LSAP leader Etienne Schneider hinted as much after Sunday’s votes were counted:

Schneider commented that another LSAP and CSV coalition would not necessarily be the most democratic, since it would exclude the party with the biggest gain in voter trust.

There’s also a small possibility of a so-called ‘Gambia’ coalition (named after the three colors of Gambia’s flag) among the LSAP (red), the Democrats (blue) and the Déi Gréng (the Greens), who won six seats.  Together, the three parties won 32 seats, an absolute majority, though it seems unlikely that Luxembourg’s next government would exclude Juncker’s top-polling party.

Though Juncker downplayed his interest throughout the campaign, he has been discussed as a potential candidate for the presidency of either the European Council or the European Commission, both of which will be vacant next year.  Christine Lagarde’s current term as managing director of the International Monetary Fund will end in 2016 — as the first chair of the Eurogroup, the group of eurozone finance ministers, Juncker has already played a key role in setting European Union monetary and financial policy, following in the long tradition of Luxembourgish leadership at the European level.

In addition to the other four major parties, the centrist Alternativ Demokratesch Reformpartei (Alternative Democratic Reform Party) won three seats and the far-left Déi Lénk won two seats:

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Saudi Arabia, United Nations

Why Saudi Arabia gave up its non-permanent Security Council seat

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On Friday, just one day after it was awarded a non-permanent, two-year seat on the United Nations Security Council, Saudi Arabia abruptly announced to the world that it was rejecting the seat, much to the bafflement and diplomatic dismay of the rest of the world.saudi_flag_iconUN

It’s unprecedented for a country to make a years-long effort to win a non-permanent seat, only to turn around a day later to renounce the seat.

The Saudis denounced the Security Council’s inability to act in the Middle East and called for reform:

The manner, the mechanisms of action and double standards existing in the Security Council prevent it from performing its duties and assuming its responsibilities toward preserving international peace and security as required,” the Saudi Foreign Ministry said in a statement. “Allowing the ruling regime in Syria to kill its people and burn them with chemical weapons in front of the entire world and without any deterrent or punishment is clear proof and evidence of the U.N. Security Council’s inability to perform its duties and shoulder its responsibilities.”

Security Council reform is long overdue, but it’s hard to see the Saudis becoming the poster child for political reform in Turtle Bay.

So what gives?

Commentators pointed to several immediate reasons.  The Saudis are angry that US president Barack Obama failed to hold steady in his threat to use military force against Syria.  The Saudis are upset that the United States recently cut off military aid to Egypt’s new, undemocratic government.  The Saudis are worried that the recent steps toward better relations with Iran could mean that the United States places less importance its longtime strategic relationship with Saudi Arabia.

But none of those really give us a full explanation — the Syria showdown was two months ago, and the Saudis would have more influence on the process to rid Syria of chemical weapons from within the Security Council than outside it.  Furthermore, they could use their vote on the Security Council for the next two years as leverage to curry favor with the United States.  And in the ‘P5 + 1’ talks with Iran, Saudi Arabia would certainly have a more central role if it were sitting on the Security Council while Iran struck a deal with the international community.

Eric Voeten, writing at The Monkey Cage, now at home at The Washington Post, argues that Saudi Arabia’s approach to diplomacy has long been a backdoor, behind-the-scenes affair, and that doesn’t fit well with the high profile of sitting on the Security Council: Continue reading Why Saudi Arabia gave up its non-permanent Security Council seat →

Canada

Despite CETA signing, Harper’s 2014 agenda remains unambitious

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barrosoharper

Canadian prime minister Stephen Harper today celebrated the signing of a landmark free-trade deal between Canada and the European Union, bringing to fruition one of the top accomplishments that Harper can claim since taking office with a minority government in 2006 and a majority government in 2011. Canada Flag Icon

Although the pact won’t be ratified until 2015, the Comprehensive Economic and Trade Agreement (CETA) removes tariffs between Canada’s economy and the $17 trillion economy of the European Union, which comprises 28 countries and over 500 million people.  Together with the North American Free Trade Agreement (NAFTA), it will give Canada exclusive access to more than half of the global economy.  CETA will allow Canadian automakers to export 12 times as many automobiles to Europe, and it will fully open the EU market to Canadian fruits, vegetables, wheat, grains and dairy, while removing tariffs on European wine and spirits, all seafood, metals and minerals (including steel and iron) and up to 29,000 tonnes of European cheese.  Furthermore, Harper is considering granting compensation to Canada’s dairy producers, especially in Québec, if they lose revenue in the wake of the agreement.

What’s more, Harper (pictured above with European Commission president José Manuel Barroso) will be able to brag that his vision for a Canadian-European free trade agreement served as a precedent for the Transatlantic Trade and Investment Partnership (TTIP) still being negotiated between the United States and the European Union.

At a time when the Liberal Party has emerged from the brink of political oblivion with the selection of its popular, telegenic leader Justin Trudeau, to lead polls in advance of the 2015 election — an iPolitics/EKOS poll earlier this week gave the Liberals 36% support to just 26% support for Harper’s Conservative Party and 25% for the social progressive New Democratic Party — the completion of CETA and its ratification gives Harper three domestic policy wins.

First, it’s perhaps his most significant policy accomplishment in seven years.  Second, not only does it give him a substantive accomplishment, it gives him one that bolsters the case that he’s dedicated to creating jobs and strengthening Canada’s economy, and it provides a contrast to Trudeau’s often wishy-washy blather.  Third, it hoists a difficult choice on the NDP — support the CETA and anger labor unions, especially within its new Québécois stronghold; or oppose to CETA to draw a stronger contrast to Trudeau’s newly invigorated Liberals.

But don’t expect much more in the way of ambition from Harper’s government this year.

The agreement comes after the reading of Harper’s 2013 Throne Speech, much of which constituted a victory lap detailing Canada’s superior employment and economic record compared to its developed-world peers, such as the United States and the European Union, where political instability, stagnant GDP growth and joblessness have been more acute.  While Harper hopes to pass a law requiring balanced budgets in the future, it’s unclear whether he can actually pass a bill through Canada’s parliament or that future governments would keep it in place.

The rest of Harper’s agenda amounted to an odd mix of populist consumer protection schemes:

The government promised to “take steps to reduce roaming costs” for cellphone users. It says it will take action so that cable and satellite customers can “choose the combination of television channels they want” by “unbundling” channel packages. And it promised to move on “hidden fees,” including making it so that “customers won’t pay extra to receive paper bills.” If this part of the agenda reads like it was pilfered from the NDP, that’s because to some extent it was.

It’s puzzling for a market-oriented party like the Tories to prioritize these kind of measures — services like Netflix and Hulu are already, in part, helped to unbundle television packages through market forces.  Roaming costs for Canadian users are already coming down due to market pressures.  So many of the consumer goals Harper listed are likely to come about through the market without the need for government interference.

It’s equally baffling to know how Harper will reduce ‘geographic price discrimination,’ his term for the price differential between consumer goods sold in Canada and the United States. Presumably, if the price difference is enough, Canadians (90% of whom live within 100 miles of the US border) will make a trip down south to buy them at cheaper prices, or enterprising entrepreneurs will find a way to undercut them — especially in the world of e-commerce.

But even more, it’s small ball.  It’s the Canadian equivalent of former US president Bill Clinton’s much-derided 1995 agenda of school uniforms and ‘v-chips.’  Though consumer protection initiatives aren’t nothing, it’s hardly the kind of bold, conservative agenda that you might have expected Harper to champion upon coming to power seven years ago, and surely not what you’d expect from a government just two years after finally capturing a majority government.

John Ivison, writing in The National Post, likened the Throne Speech to ‘a botox treatment gone bad’:

The Throne Speech is littered with examples of the government wading into sectors of the economy to “fix” problems that should be left to either the market or the existing regulators — all to the detriment of millions of Canadian shareholders.  It’s all so transparent and light as tinsel.

But it’s not just this year’s Throne Speech.

Aside from CETA, it’s hard to point to any truly groundbreaking, signature legislative acts in the Harper era.  Sure, the government reduced the rate of the Goods and Services Tax from 7% to 5% by January 2008, and it will likely balance Canada’s budget by 2015.  But those accomplishments, significant as they are, won’t be remembered in 50 or 100 years in the same way that CETA could be remembered.  Continue reading Despite CETA signing, Harper’s 2014 agenda remains unambitious →

European Union, Luxembourg

Who is Xavier Bettel? (Maybe Luxembourg’s next prime minister.)

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Xavier Bettel may not win this weekend’s parliamentary elections in Luxembourg, but he’s likely to lead his party to significant gains, putting him in line as the heir apparent to the small European country’s long-time prime minister Jean-Claude Juncker.luxembourgEuropean_Union

Sure, that may not be the most world-shattering event in world politics — with about 538,000 people, Luxembourg has about one-fourteenth the population of Hong Kong.  But given the chief role that Juncker has played in steering eurozone policy, it’s worth keeping an eye on the top up-and-coming Luxembourgish leaders — every Luxembourgish prime minister since 1953 has played a crucial role in the European integration process.

So as a new generation of Luxembourgish politicians come to the fore, it’s not difficult to envision that they could play a starring role in European-wide policymaking later this decade and in the 2020s.

Enter Bettel, exit Juncker?

No Luxembourgish politician has emerged quite as forcefully as Bettel (pictured above), who during the campaign has emerged as Juncker’s chief rival.

A 40-year-old openly gay attorney, Bettel joined parliament in 1999, when the Democrats governed as the junior partner of a coalition with Juncker’s CSV.  Bettel was also elected to Luxembourg City’s communial council in 1999 and subsequently as mayor in October 2011, becoming the youngest mayor of any European capital, rising quickly to prominence, with a favorability rating higher than Juncker’s.

Bettel and his liberal Demokratesch Partei (DP, Democratic Party) are expected to make gains in Sunday’s election, though perhaps not enough gains to take over government.

Juncker was somewhat tarnished earlier this year with the revelation of abuses committed by the Service de renseignement de l’Etat luxembourgeois (SREL), the secret service and intelligence agency of Luxembourg.  The abuses include illegal wiretapping, surveillance of domestic political groups and other crimes that stretch back to the 1980s.  Although Juncker isn’t directly implicated in any of the abuses, a parliamentary inquiry found that he shared ‘political responsibility’ for the SREL’s bad behavior by neglecting to oversee the SREL with adequate oversight.  Perhaps more damaging than the official scolding is the more unshakeable sense that Juncker is perceived to have spent too much time on eurozone policy and not enough time governing his own country.

Facing a vote of no confidence in Luxembourg’s unicameral parliament, D’Chamber (Chamber of Deputies), Juncker resigned and called early elections for October 20.

The Democrats’ campaign hasn’t been incredibly subtle — it’s running on the platform of a ‘new beginning’ for Luxembourg, with ‘new ideas and new leaders.’  Bettel himself has criticized the slow pace of the Juncker government’s approach to reform.

While there’s not an incredible amount of polling data for Luxembourg, it shows that Junker can expect losses for his dominant center-right Chrëschtlech Sozial Vollekspartei (CSV, Christian Social People’s Party), which has won the greatest share of votes in all but one (1964) postwar Luxembourgish general election.

Juncker’s CSV has governed in coalition for the past decade with the center-left Lëtzebuerger Sozialistesch Arbechterpartei (LSAP, Luxembourg Socialist Workers’ Party), but the LSAP’s refusal to support Juncker over the secret service scandal precipitated this weekend’s early elections.   Continue reading Who is Xavier Bettel? (Maybe Luxembourg’s next prime minister.) →

Italy

Letta discusses political stability in Washington on day after US gov’t shutdown ends

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It’s astonishing that in his hour at the Brookings Institution earlier today, Italian prime minister Enrico Letta mentioned ‘Tea Party’ once, but the words ‘Berlusconi,’ ‘Lampedusa,’ or even ‘election law’ never escaped his lips. Italy Flag Icon

Letta said that he was following with interest the current political standoff in the United States over the debt ceiling and the government shutdown, especially with respect to the relationship between debt yields and political stability.  Letta, who is in Washington DC this week, met with US president Barack Obama earlier today, the day that the US federal government reopened after a 16-day shutdown:

This is why… I was so interested in understanding what’s happening here [in the United States], the discussion with the tea parties, the Republican Party and so on. It was something very interesting for me, of course, because of the future of the discussion of the political parties and of the discussion around the problem of the debt, around the problem of how to deal in a bipartisan way.

It’s saying something quite spectacular when an Italian prime minister, who leads Italy’s 64th postwar government, can compare the instability of the American political system to that of Italy’s system, where, most recently, former prime minister Silvio Berlusconi tried to cause Letta’s government to fall just 15 days ago.  Letta leads a ‘grand coalition’ among his own party, the center-left Partito Democratico (PD, Democratic Party), Berlusconi’s center-right Popolo della Libertà (PdL, People of Freedom), and a small group of centrists led by former technocratic prime minister Mario Monti.

Despite the precarious nature of Italy’s coalition government, Letta — with a professional, earnest, mild-mannered mien — has tried to project an aura of stability.  Letta is keenly aware that the perception of Italy’s own political instability could be the difference between a future of economic growth and dynamism and a future of demographic decline and economic stagnancy.

From today’s remarks, you may have gotten the sense that Letta thinks that a more integrated European Union and greater domestic political stability will be enough to transform Italy — he even said that the difference between the Italian government’s paying 3% interest rates and 6% interest rates is the difference between the sun and the moon.

But does a solution to Italy’s political and economic problems lie solely in the balance between 3% and 6% yields? Continue reading Letta discusses political stability in Washington on day after US gov’t shutdown ends →

China, United States

Amid debt ceiling showdown, China sharply calls for a ‘de-Americanized’ world

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renmimbi

In case you missed it over the weekend, China’s state-run newspaper Xinhua printed an extraordinary editorial calling for a turn to a ‘de-Americanized’ world that appears to have had the support of the top leadership within the world’s most populous country:China Flag IconUSflag

As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world….

The tone only sharpens as the editoral blames the United States for torturing prisoners and killing civilians in drone attacks before fully condemning the era of ‘pax Americana‘:

Moreover, instead of honoring its duties as a responsible leading power, a self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas…

Most recently, the cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations’ tremendous dollar assets in jeopardy and the international community highly agonized.

Elements of the editorial are somewhat biased — a self-serving ding against Washington for ‘instigating regional tensions amid territorial disputes’ is more reminiscent of Chinese bluster and blunder on relations with Taiwan, Hong Kong and Tibet, as well as the recent territorial dispute with Japan over the Senkaku/Diaoyu Islands.  But if, as is almost certainly the case, the editorial has the backing of top Chinese leadership, it will be the strongest call to date for a move to a ‘de-Americanized’ world.

It’s important to keep in mind that, for all the defeatist talk that China has eclipsed the United States, the US economy remains roughly twice the size of the Chinese economy:

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Furthermore, for all of the talk that the United States is becoming ever-more indebted to the Chinese, it’s also important to keep in mind that of the $16.7 trillion or so in outstanding US debt issuance, around $4.7 trillion amounts to intergovernmental holdings (e.g., amounts held by the US Federal Reserve).  Another significant chunk of that debt is held by state and local pension funds, the Social Security Trust Fund.  In fact, as of July 2013, foreign governments held just $5.59 trillion of the debt, and China held just $1.277 trillion of it, while Japan held nearly as much with $1.135 trillion.  Here’s a closer look at the breakdown of the foreign holders of US debt:

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In all the loose talk about China’s rise, it’s easy to lose track of those two items — China holds just over 7.6% of all US debt and its economy is just 52.5% the size of the US economy.

So while China isn’t today in a position to issue edicts about the de-Americanization of the world economy, its views are becoming increasingly influential, especially as it takes a greater investment role within the world from Latin America to Africa.  Its call for developing and emerging market economies to play a greater role in international financial institutions like the World Bank and the International Monetary Fund mean that the days of an always-American World Bank president and an always-European IMF managing director are numbered.

Even in the worst-case scenario in which the US Congress’s failure to lift the debt ceiling leads to another Lehman-style panic, China can’t do much immediately to bring about a de-Americanized world.  But, like Humphrey Bogart’s warning to Ingrid Bergman in Casablanca, the threat will come ‘maybe not today, maybe not tomorrow, but soon — and for the rest of your life.’

So when China makes noise about a de-Americanized world, it essentially means two things: a world where US debt is no longer perceived as the world’s safest investment and the US dollar is no longer the world’s reserve currency.  I’ll take a look at each in turn, but first, it’s worth making sure we’re all on the same page as to the basics of the debt ceiling standoff itself.

The debt ceiling crisis

US treasury secretary Jack Lew has pinpointed October 17 as the day that the United States will be truly jeopardized by its failure to raise the debt ceiling (currently at $16.7 trillion).

With about 24 hours to go until the world hits that deadline, the Republican Party, which controls a majority of the votes in the US House of Representatives, are nowhere near approving a bill that, with or without conditions, would raise the debt ceiling for even a short period of time, and the US Senate, which is controlled by the Democratic Party, will spend Wednesday taking the lead on a last-ditch effort at negotiations between Senate majority leader Harry Reid and Senate minority leader Mitch McConnell.

It’s reassuring to know that Moody’s isn’t quite as pessimistic about the October 17 deadline — in a memo from earlier this month, Moody’s experts argued that the US government could quite possibly hobble along, quite possibly until November 1, when a slew of entitlement spending means that the US government will be unlikely to meet its obligations on time.  The US government will certainly prioritize interest payments on US debt and meet its other obligations on the basis of incoming revenues.  But the clock’s ticking, and while Wall Street and global markets seem nonplussed about the shutdown and even about the October 17 debt ceiling deadline, there’s no way to know when that could change.

Market sentiment is a tricky thing to forecast — recall the speed in 2008 with which former US treasury secretary Hank Paulson went from worrying about the moral hazard of bailing out Lehman Brothers on September 14 to, less than 24 hours later, worrying about rescuing the entire financial system from a global panic.  While it seems unlikely that markets will immediately tank at midnight tonight if the US Congress fails to act on the debt ceiling, there are signs that other actors in the global economy are running out of patience.  One of the other top three credit ratings agencies, Fitch, put the United States on warning Tuesday by lowering the outlook on its ‘AAA’ credit rating from ‘stable’ to ‘negative,’ citing the brinksmanship in the US political system that’s so far failed to secure a debt ceiling hike.

For those of you who might have been living on a deserted island for the past three years, the US Congress is generally obligated to raise the total aggregate amount of US debt issued, irrespective of whether the US Congress has approved the spending levels associated with issuing such additional debt.  No other country (except Denmark) has a similar concept, which is why the debt ceiling crisis is such a foreign concept for non-Americans.

Between 1798 and 1917, the US Congress had to approve every single issuance of new debt; the onset of the ‘debt ceiling’ concept was initially a way to streamline debt issuance during World War I.  Since 1917, the US Congress raised the debt ceiling over 100 times, and 14 between 2001 and 2013.  Traditionally, in times of divided US government, though those votes have sometimes been subject to one party’s political posturing.  US president Barack Obama himself cast a vote against raising the debt ceiling in 2006 when he was just a US senator, and he issued some pious, if garden-variety, blather about ‘shifting the burden of bad choices today onto the backs of our children and grandchildren.’  Matt Yglesias at Slate called out Obama for ‘bullshitting’ back in 2006.

But only in 2011 did one party seek to wield the debt ceiling as a weapon of economic destruction — give us what we want on our policy priorities or the world economy gets it!  In 2011, just months after Obama’s party suffered devastating losses in the November 2010 midterm elections, Obama agreed to make budget cuts in exchange for a hike in the debt ceiling.  But now, fresh off reelection, Obama is arguing that he won’t negotiate over the debt ceiling — partly to discourage anyone from trying to use the debt ceiling as an instrument of political blackmail in the future.

In any event, for the best reporting in the United States on the debt ceiling crisis in terms of both politics and policy, go read Ezra Klein (and friends) at Wonkblog at The Washington Post and every word that Robert Costa at National Review reports from within the House and Senate Republican caucuses.

But it’s vitally important to the global economy because US debt — Treasury debt securities (called ‘Treasurys’) and, specifically 10-year Treasurys (called ‘T-notes’) — is generally viewed as the safest investment in the world.

Why US Treasurys are so special 

As Felix Salmon at Reuters memorably explained Tuesday, US-issued debt is the ‘risk-free vaseline which greases the entire financial system’: Continue reading Amid debt ceiling showdown, China sharply calls for a ‘de-Americanized’ world →

Bosnia/Herzegovina

Bosnia-Herzegovina census highlights tripartite fractures, constitutional problems

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You won’t find it on any election calendar, but the census that ended today in Bosnia and Herzegovina amounts to the most important election in the country’s history since emerging from the brutal war that resulted from the breakup of Yugoslavia in the early 1990s.srpskafederationBosnia-Herzegovina

The current governing structure of Bosnia and Herzegovina is a mess — the country remains divided largely on the lines of the Dayton Agreement from 1995, and a tripartite government more or less guarantees power to each of the country’s three main ethnic groups — Bosniaks, Serbs and Croats — even while the country itself remains divided between the Federation of Bosnia-Herzegovina (51% of the country) and the Serb-dominated Republika Srpska (49% of the country).

That governance framework effectively ended the gruesome fighting and ethnic cleansing that upended not only Bosnia and Herzegovina, but the entire former Yugoslavia two decades ago.  But it’s a governing structure that has inhibited the country’s political and economic development to the point that the Dayton-era mechanisms have been denounced by the European Court of Human Rights and EU leaders are demanding fundamental constitutional changes in order to begin talking seriously about the accession of Bosnia and Herzegovina to the European Union.

Into this volatile mix comes this month’s census, which began on October 1 and will officially conclude today.  The census attempts, for the first time in over two decades, to provide an accurate count of the country’s various ethnic groups — not just its Bosniaks, Serbs and Croats, but the country’s other minorities as well, including the country’s Jewish, Roma, Albanian, Hungarian, Montenegrin, Ashkali, Slovenian, Slovakian and so on.

In the last census taken in 1991 (just before the Yugoslav breakup) the population of Bosnia and Herzegovina, then just part of the greater Yugoslav federation, broke down as follows:

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That represented nearly a complete reversal from 1948, when Serbs numbered around 44% and Muslims numbered around 30%.

The current census, which was originally scheduled to be conducted in 2012, asks each person to identify three attributes — their ethnicity, their language and their religion, each of are highly correlated in Bosnia and Herzegovina.

Ethnicity in the country breaks down largely on religious lines — Bosniaks are predominantly Muslim, Serbs are predominantly Serbian Orthodox and Croats are predominantly Roman Catholic.  A 2008 estimate by the Bosnian-Herzegovinian state statistics office found that 45% of the country is Muslim, 36% is Orthodox and 15% is Catholic, setting a baseline for what we might expect the 2013 census to establish more formally in terms of ethnicity.  While all three ethnic groups essentially speak the same, mutually intelligible Serbo-Croatian language, there are standard ‘Bosnian,’ Croatian,’ ‘Serbian,’ and ‘Montenegrin’ varieties of the language.

That means that political leaders from within each of the country’s three dominant ethnic groups are pushing hard to maximize turnout, lest one group’s numbers fall behind with constitutional reform likely to come in the years ahead — ethnic leaders want to enter constitutional negotiations from as strong a standpoint as possible vis-à-vis the other ethnic groups.  Even Croatia’s government has taken an aggressive interest in the survey by urging Bosnian Croats abroad to vote.

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Furthermore, the choice for Bosnian Muslims is even more difficult, who are weighing what it means to be ‘Bosniak’ versus simply ‘Bosnian’ or even ‘Muslim’:

The new census will be the first time the country’s Muslims will have the opportunity to identify themselves as “Bosniaks,” an ethnicity that some Serbs say does not really exist.  “For the first time, Bosniaks will be able to declare themselves as Bosniaks speaking the Bosnian language,” says Sejfudin Tokic, the coordinator of a project called It Is Important To Be Bosniak. “This is a historic census — from the Austro-Hungarian period when they were forced to declare themselves as Muhammadans or during the Kingdom of Yugoslavia when a Bosniak identity was not acknowledged, or during Communist Yugoslavia when Bosniaks were forced to declare themselves as Serbs or Croats practicing Islam. In this regard, this is a historic census.”

Between 1974 and 1993, Bosniaks in Yugoslavia were permitted to identify their ethnicity as “Muslim.” After the war broke out, they adopted the term “Bosniaks,” a historic name dating back to Ottoman times.  But many Bosniaks are themselves wary of the Bosniak tag, which they see as overly politicized. Some have said they will answer “Muslim” or “Bosnian” when asked about their ethnic identity, a prospect that has alarmed Bosniak political parties.

Bosnia and Herzegovina featured the highest percentage of people who claimed ‘Yugoslav’ as their ethnicity in the 1991 census, which means that a large percentage of the country’s population could simply describe themselves as ‘Bosnian’ this time around.  That could be especially true among the younger generation that wants to put the memory of the Bosnian war firmly in the past, even as bullet holes still scar the urban landscape and land mines still dot the rural, mountainous countryside.

By way of background, Bosnia and Herzegovina is just one of several new countries to emerge from the former Yugoslav union at the end of the Cold War: Continue reading Bosnia-Herzegovina census highlights tripartite fractures, constitutional problems →

Belgium, European Union

Remembering the legacy of former Belgian PM Wilfried Martens

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Wilfried Martens, a longtime Belgian and European statesman, died last Wednesday night at the age of 77, and though it’s still been a few days, it’s worth pausing to consider his legacy to his country and his continent. Belgium FlagEuropean_Union

While European Commission president Jacques Delors, French president François Mitterrand and German chancellor Helmut Kohl all receive much of the credit for bringing about the modern-day version of the European Union and the single currency, Martens played a crucial role in boosting ever closer union, appropriately for someone who grew up in the aftermath of World War II in poverty in Ghent.

Between 1990 and 2013, Martens served as the leader of the chief center-right grouping in the European Parliament, the European People’s Party.

Belgium today seems to be virtually ungovernable amid splits between the Dutch/Flemish-speaking Flanders in the north and the French-speaking Wallonia in the south — the country famously went 589 days without a government between 2009 and 2011.  Martens’s death draws a bright line against an era when Belgium, as a unitary state, was still governable, if something less than stable.  The always-nimble Martens himself led nine different coalition governments of varying regional and ideological tilt between 1979 and 1992, becoming Belgium’s longest-serving postwar prime minister:

The crisis [that brought Martens to power] was the result of fundamental divisions between the coalition government’s Socialist and Christian Democrat parties over how to tackle economic problems, a burgeoning welfare deficit and the long-term decline of Belgium’s traditional heavy industries. This, together with growing tensions over the country’s regional and linguistic divide between Flemish and French speakers, formed long-running threads in his premiership and resulted in the sequence of shifting coalition allegiances over which Martens presided, as he came to be seen as the indispensable leader, the only man capable of holding factional governments together.

He achieved this balancing act with skill – not least in the face of opposition from some more senior ex-prime ministers – though King Baudouin must have become used to his regular trips to the palace to offer his resignation.

Economic crisis forced Belgium into undertaking many of the structural economic reforms that Germany and Sweden endured in the 1990s (under varying circumstances) and that much of Mediterranean Europe seems destined to enact at even more painful costs today.  Though Martens came to power as a Flemish nationalist, he governed as a Belgian federalist — he helped craft a new constitutional arrangement that made Belgium a much more federal state, in which many powers are devolved to either the Flemish or Walloon regional governments.

If you’re paying attention in Madrid and London (and Barcelona and Edinburgh), the lesson of Martens-era Belgium is that even when Spain and the United Kingdom manage to return to healthier economic conditions, the Catalan and Scottish independence issues won’t necessarily retract. Continue reading Remembering the legacy of former Belgian PM Wilfried Martens →

Australia

Shorten set to lead Australian Labor through its wilderness period

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Hardly a month after the Australian Labor Party lost its bid for a third consecutive term in power under former prime minister Kevin Rudd, Australia’s chief center-left party has a new leader — Bill Shorten.Australia Flag Icon

But Shorten, who won the leadership without the support of the party’s rank-and-file membership, will face an immediate showdown with prime minister Tony Abbott over scrapping Australia’s carbon pricing scheme, which in turn could lead to early ‘double dissolution’ elections within months that would favor Abbott’s Liberal Party (which governs in coalition with the National Party) — and that could see Labor switch leaders just as easily.

Shorten has his work cut out for him.

For now, however, the leadership victory caps a meteoric rise for Shorten (pictured above), who came to national prominence as the head of the Australian Worker’s Union between 2001 and 2007, when he was first elected to the House of Representatives on the wave that brought Rudd and Labor to power.  As the AWU’s national secretary, Shorten attained national prominence for his role during the Beaconsfield mine collapse in Tasmania in 2006.  Reelected in 2010, he was appointed minister for financial services and superannuation under prime minister Julia Gillard, and he took on the workplace relations portfolio in 2011.  Shorten, who supported Gillard when Labor kicked Rudd out of office in June 2010, played a key role in backing Rudd in June 2013 when an increasingly desperate Labor Party caucus believed Gillard would lead them to an electoral disaster, and Shorten served for two and a half months under Rudd in 2013 as education minister.

But even under the more popular Rudd, Labor still lost the September 2013 elections, and the Coalition won a solid (if not quite landslide) victory, Gillard left parliament last June, and though Rudd was narrowly reelected in his Queensland district, no one expects him to play much of a role going forward — and if he follows the well-trod path of former prime ministers, Rudd will step down from parliament sometime within the next year.

Picking up the pieces of a defeated Labor Party — and facing down the conservative Abbott government — now falls to Shorten, who will benefit from a fairly united Labor Party supporting him.  He certainly won’t face the toxic interpersonal, intraparty Rudd-Gillard schism that plagued Labor when it was in government, and new party rules adopted when Rudd most recently returned to the leadership mean that it will be especially difficult to remove Shorten from power.

In addition to the new rules for the leadership contest (described below), a 60% supermajority of the Labor parliamentary caucus (or 75% in government) is now required to remove a leader.  That should slow Labor’s propensity to change leaders with such frequency — at least, unless Labor decides to change the rules to lower the threshold.  The rules change dates not only from the poisonous Rudd-Gillard rivalry that so damaged Labor’s last stint in government — Labor went through five leadership changes the last time it was in opposition: former deputy prime minister Kim Beazley from 1996 to 2001, Simon Crean from 2001 to 2003, Mark Latham from 2003 to 2005, Beazley (again) from 2005 to 2006, and finally, Rudd until the successful 2007 election.

In the most recent leadership race, Shorten faced former deputy prime minister Anthony Albanese in Australia’s first dual leadership ballot — unlike prior leadership spills determined solely by the parliamentary caucus, the new rules require that the Labor caucus and the rank-and-file party membership hold dual votes — each vote has 50% weight in determining the final result.

That means that a leader can be elected despite losing a majority of the Labor caucus or of the Labor party membership and, sure enough, that’s what happened in the first contest under the new rules.  While Shorten, traditionally Labor’s right wing, won 55 of the 86 Labor MPs (62.95% of the Labor caucus), Albanese, from Labor’s left wing, won 59.92% of the rank-and-file vote.  So although Shorten lost the party membership by a wide margin, he won the combined vote with 52.02% due to his superior strength among Labor’s MPs.  Continue reading Shorten set to lead Australian Labor through its wilderness period →

Syria

Nobel by elimination: OPCW was the only worthy recipient

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OPCW

The committee awarding the Nobel Peace Prize historically doesn’t shy away from making political statements through its award — and this year was no different.nobel-peace-prize

In retrospect, despite the Western media swoon over 16-year-old Malala Yousafzai, who was shot in the head by the Pakistani Taliban and recovered in the United Kingdom to become a living symbol of the fight for women’s rights in the Muslim world, it makes a lot of sense that the Nobel committee would want to highlight the fight against chemical weapons, given that the use of chemical weapons in the Syrian civil war in August earlier this year was the worst chemical weapons attack since their use in the 1980s by Iraq.

Upholding the international ban on chemical weapons drew a very reluctant US president Barack Obama to the brink of military engagement in the Middle East.  In terms of war and peace over the past 12 months, there’s no denying that chemical weapons have playing a tragic starring role:

“The conventions and the work of the OPCW have defined the use of chemical weapons as a taboo under international law,” said Thorbjoern Jagland, the head of the Nobel Peace Prize committee, in announcing the award. “Recent events in Syria, where chemical weapons have again been put to use, have underlined the need to enhance the efforts to do away with such weapons.”

(Honorable mention should go to Denis Mukwege, the Congolese doctor who’s risked his life to fight rape in the Democratic Republic of the Congo.)

Even if the Nobel committee’s goal should have been clear in retrospect, it was always going to be a challenge to identify an individual worthy of receiving the award.

Maybe Russian president Vladimir Putin, who took up an offhand comment from US secretary of state John Kerry to broker a United Nations Security Council deal whereby Syria would identify and begin eliminating its chemical weapons stockpiles.  But it may have been the US threat of force that pushed Putin to make the offer more than Putin’s natural instinct for peace.

Moreover, Putin presides over an awfully authoritarian state, and his record on press freedom, LGBT rights, civil rights for minorities and the Chechnya conflict hardly screams out ‘Nobel laureate.’  It was always more likely that Alexei Navalny, the crusading opposition figure, would win the prize.  Or Lyudmila Alexeyeva, the human rights activist and chair of the Moscow Helsinki Group. Or Lilia Shianova, the director of Golos, Russia’s independent voting rights organization. Or Svetlana Gannushkina, who’s been a leading figure in providing humanitarian and legal aid in Chechnya.

It certainly couldn’t be Syrian president Bashar al-Assad, who’s leading one side of an increasingly intractable civil war and whose regime was responsible for the August sarin attack on the outskirts of Damascus.  Despite Assad’s apparent and swift cooperation with chemical weapons inspectors, he’s still engaged in a bloody fight against a mixed force of Sunni rebels and other opponents who want to end his family’s Alawite regime, which has governed Syria with an iron fist since 1971.  It also couldn’t be any of Syria’s rebel forces, some of whom are aligned with the most radical Islamist terror networks in the world.

Nor could it be US president Barack Obama, who already won a Nobel Peace Prize in 2009, and his administration’s response to the chemical weapons attack in Syria was bumbling at best.  That may be the nature of realpolitik, and the end result is probably beyond what Obama and Kerry ever expected would be possible.  But it was hardly a shining moment for US foreign policy.

Moreover, both the United States and Russia have so far failed to destroy their own chemical weapons stockpiles, a fact that the Nobel committee acidly noted in awarding the prize.

So who was left? The chemical weapons inspectors themselves.

Through the process of elimination, the Nobel committee decided to award the prize to the entity whose very job is the elimination of chemical weapons in Syria and throughout the world.

That’s the Organization for the Prohibition of Chemical Weapons (Ahmet Uzumcu, the OPCW’s director-general pictured above), a 16-year-old organization based in The Hague in the Netherlands and the watchdog tasked with keeping the world’s countries in compliance with the Chemical Weapons Convention — and which is now playing the crucial role of effecting a deal that should eliminate Syria’s chemical weapons capability by mid-2014, if all goes according to plan.  The challenge in Syria represents the most high-profile challenge for the OPCW since its creation but, so far, the OPCW is rising to the task.

Awarding the Nobel Peace Prize to an organization sometimes falls like a wet blanket, even though it’s happened 24 times since 1901.  This year’s award follows the decision last year to award the prize to the European Union for its role in becalming the European continent over the past seven decades.

Giving the award to the OPCW instead of Malala (or even Putin or another individual) didn’t necessarily provide a picture-perfect, feel-good catharsis.  But it rightly shines a spotlight on an unheralded protagonist at a time when the OPCW’s work is far from complete — even if it succeeds in Syria, the world won’t be rid of chemical weapons.

Photo credit to AFP / Bas Czerwinski.

Germany

Merkel’s coalition talks with Green Party leaders this week seem serious

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German chancellor Angela Merkel, fresh off a victory at the end of last month in her country’s federal elections, turned this week to a once very-unlikely coalition partner — Germany’s Die Grünen (the Green Party). Germany Flag Icon

When news broke last week that Merkel would hold talks with the Greens, it was easy to blow it off as a formality.  After all, everyone assumed after the September 22 elections that Merkel’s center-right Christlich Demokratische Union Deutschlands (CDU, Christian Democratic Party) would form another ‘grand coalition’ with the center-left Sozialdemokratische Partei Deutschlands (SPD, Social Democratic Party).

But throughout the campaign, I listed all of the reasons why a ‘black-green’ coalition made a lot of sense — and those reasons still make as much sense now as they did before the election.  Merkel’s decision to phase out nuclear power in 2011 removed the key policy difference that most divided her from the Greens.  The leadership and the rank-and-file membership of the Greens is becoming older, wealthier and, in general, more like the CDU electorate.  Moreover, its younger members are less radical and more moderate, and don’t have the same antipathy to business as the (pardon the generalization) founding ‘1960s, hippie, flower child’ generation.

With the announcement that the Greens and Merkel’s CDU will explore a second round of talks over a potential coalition, however, everyone seems to be taking seriously the possibility of a ‘black-green’ coalition, which would be unprecedented in national German politics (though the Greens and the CDU joined forces in government recently, to mixed results, in Saarland and Hamburg).

There were always really compelling reasons why another CDU/SPD ‘grand coalition’ makes little sense.

After all, Merkel’s near-landslide victory left her CDU and the more Catholic, conservative, Bavaria-based Christlich-Soziale Union in Bayern (CSU, the Christian Social Union) just five seats short of an absolute majority.  She doesn’t need the SPD’s 192 seats, she needs five votes.  Moreover, the SPD’s collaboration with Merkel won it few votes, neither in Germany’s 2009 federal elections when the grand coalition’s foreign minister Frank-Walter Steinmeier led the party to its worst election result in postwar history nor in the most recent elections when the grand coalition’s finance minister Peer Steinbrück led the SPD to its second-worst result.  As such, the SPD is looking to draw a contrast with Merkel over the next hour years, not prop up Merkel’s government as her junior partner.

That means that the SPD will be looking for the first opportunity for snap elections — and it’s not exactly a foregone conclusion that Merkel will lead the CDU/CSU into a fourth consecutive campaign.  At first glance, a coalition with the Greens may seem more bold, but it might well be the more cautious option for Merkel.  They’ll be less likely to cause problems for Merkel and, with a smaller parliamentary caucus,

Here’s the breakdown of seats in the lower house of Germany’s parliament, the Bundestag, following the September 22 vote, which will have 630 seats — a ‘grand coalition’ would amount to about four-fifths of the entire Bundestag.

bundestag seats

Given that the CDU’s coalition partner between 2009 and 2013, the liberal Freie Demokratische Partei (FDP, Free Democratic Party), failed to surpass the 5% electoral threshold and lost all of its seats in the Bundestag in September, there’s only one other party to which Merkel can turn — the Greens.

Though Merkel’s coalition partners might both regret their cooperation (i.e., the SPD and the FDP both notched postwar nadirs in 2009 and 2013, respectively), there’s a strong case that a ‘black-green’ coalition could give the Greens a new identity at the very heart of Germany politics.  As a junior partner in Merkel’s third consecutive government, its supporters wouldn’t expect much, so to the extent that the Greens moderate Merkel’s agenda over the next four years (through policies that boost renewable energy or reduce CO2 emissions), their core voters should be fairly satisfied.  But the Greens stand to pick up many more centrist voters that might otherwise vote for the SPD or even for the CDU or the FDP.

The Greens ran an undeniably leftist campaign, pledging tax hikes and a 15% wealth tax to boot, along with the oft-ridiculed national ‘Veggie Day,’ and one of its four leaders, Jürgen Trittin, a former environmental minister from 1998 to 2005, faced ridicule over his approval of a pamphlet from 1981 that appeared to call for the legalization of sex between adults and minors.  Despite polls that in 2011 showed the Greens winning up to 25% or even 30% of the vote, they finished with just 8.4% of the vote — a swing of 2.3% less than their 2009 total.

Former Green Party leader and foreign minister Joschka Fischer, among others, took the Greens to task for their campaign within 48 hours of the election:

“It looks almost as though the current leadership of the Greens has gotten older but still hasn’t grown up,” Fischer told SPIEGEL following Sunday’s vote. “They followed a strategy that not only failed to win over new voters, but drove away many old ones.” Noting the party’s focus on tax hikes and social spending during the campaign, Fischer said that emphasizing a “leftist course” was a “fatal mistake.”

Former party head Reinhard Bütikofer has likewise not been complimentary of the current Green leadership. “The failure … to engage in a serious debate with Chancellor Merkel regarding … her policies for Europe granted her political hegemony” on the issue, he told SPIEGEL. He also criticized Trittin for being a mouthpiece of the party’s left wing.

Since the election, the Green leadership resigned en masse, and they elected two new leaders, including the centrist rising star Katrin Göring-Eckardt, who had served as one of two chancellor-candidates for the Greens during the election.  The Greens, who have long been divided between a more centrist realo (‘realist’) faction and a more radical fundi (‘fundamentalist’) faction, have long elected leaders in pairs (the new leftist Green leader is Anton Hofreiter, who, unlike Trittin, comes from the new generation of Greens parliamentarians).

But the clear exemplar of Greens success is Winfried Kretschmann (pictured above), the first and only minister-president of any of Germany’s 16 states — and in Baden-Württemberg, a wealthy (and relatively conservative) state in Germany’s southwest that’s a hub for commerce and industry.  Though Kretschmann came to power in 2011 on a wave of opposition to the Stuttgart 21′ rail development project, Kretschmann is now helping to implement the project after it won nearly 60% support in a subsequent referendum specifically on the project’s future.  Kretschmann, who’s firmly within the ‘realo,’ right wing of the Green Party, has won plaudits from business leaders as well, and he’s apparently playing a role in the CDU-Green negotiations.

Severe obstacles remain to a ‘black-green’ coalition. Continue reading Merkel’s coalition talks with Green Party leaders this week seem serious →

Maldives

Maldives nullifies presidential ballot, new vote set for October 19 vote

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Maldives Politics

After halting a runoff in the Maldives at the last minute, the Maldivian supreme court has now annulled the results of the first round of the election on September 7, calling a new election that’s supposed to be held October 19, with a potential runoff on November 4.maldives

Though nullifying the result may be an overhasty response, the supporters of Mohamed Nasheed aren’t entirely unhappy about it, because the October 19 race gives them an opportunity to reach the 50% mark to avoid a potential runoff and thereby restore Nasheed to the Maldivian presidency:

Thousands of Nasheed Maldivian Democratic Party (MDP) supporters cautiously welcomed the Supreme Court announcement of the date of the polls.

“Do not worry. Now we have the election in our hands. We wanted an election date. Now we will not even have to go for a second round,” MDP legislator Mohamed Nazim told a gathering outside the court.

Nasheed’s supporters have taken to the streets since the initial September 28 runoff was cancelled.  The former president, who was pressured to step down in 2012, won over 45% of the vote in the initial September 7 election, and was set to face Abdulla Yameen, the candidate of the Progressive Party of Maldives, and the half-brother of Maumoon Abdul Gayoom, who ruled the Maldives between 1978 and 2008, when he lost the country’s first democratic election to Nasheed.

The third-place candidate Gasin Ibrahim, a tourist and media businessman, is a former Gayoom regime finance minister, and his complaint

But no one really knows if the October 19 vote will actually take place given the shenanigans that have already occurred (more Suffragio background here).

It’s not rare to see a fraudulent election denounced by international observers upheld by a country’s judicial system, but it’s odd to see a perfectly free and fair election, conducted with praise from international observers, vacated by the highest court in the land.

Moreover, there’s now a petition now before the Maldivian supreme court to disqualify Nasheed from the ballot on the basis of, well, I’m not entirely sure:

The Supreme Court petition filed today (October 10) states as grounds for stripping Nasheed’s candidacy his “outright criticism towards Islam and imposing Islamic Sharia’ in the Maldives” and his criticism of the judiciary.

Stay tuned.  Something tells me this won’t end well.