Our World in 2011

Our World in 2011NEW EUROPE

Feat

uri

ng:

Tony Blair

Thorbjorn Jagland

Recep T.Erdogan

Ban Ki-moon

Yang Jiechi

Dominique Strauss-Kahn

Wolfgang Schauble

Javier Solana

Joseph E. Stiglitz

Nouriel Roubini

Peter Singer

Gunther Oettinger

RodiKratsa

Sebastian Pinera

HamrokhonZarifi

Nirupama Rao

More than 60 leading thinkers visualise our world in 2011

January 2011 | € 5.00 A New Europe Special EditionIssue # 916

Page 2| New Europe

New Year Special | January 2011CONTENTS

Politics over economics or chaos?The year 2010, which is heading for the history books, reveled to the world that whatever ide-ology the spheres of influence may want to force on the world, the truth is that politics re-mains the primary tool which societies use to shape their future, while the economy is alwayssubordinated to the needs of the conjuncture. In reality the free market theories that even theSwedish Nobel Academy honored by bestowing to its prophets the highest of prizes for econ-omists, bowed to the current crisis and leaving political leaders to take the reigns of the econ-omy in their hands, using taxpayers money and central banks to lead their societies to saferwaters.

All of a sudden, the European Union and more so the Eurozone’s political leaders discoveredlast spring that the most valuable asset of our economy, the single European currency, the Euro,was in the gravest danger since its birth ten years ago. First it was Greece, then Ireland andwhen the crisis became omnipotent, the European political leaders took the economy into theirhands. In the United States of America, the White House had already walked the path of sav-ing “free” markets from their own built-in sins, of which the deadliest is the classical overca-pacity crisis. This time it was the real estate sector; at the beginning of this Millennium, the‘dot.com’ crisis.

And now what? Is it possible to restore the functioning of the markets without taking percus-sions for the future? Many say yes, especially in the other side of the Atlantic. In New York, cap-ital markets are functioning again using free central bank finance and most people pretend thatnothing has happened. In Europe it is not like this. For one thing most of the world marketplayers and all rating agencies are exclusively American. On top of this the vast majority of theEuropeans are not as mad as the Americans in their belief and faith in the idealistic self-reg-ulating powers of free markets. And so, next year the European Union is planning to set newrules and controls.

Unfortunately Europe cannot do it alone. It has to be global or it will not work. In view of this,the next twelve months, the year 2011, will also remain in history books as the year when thewestern world decided to reappoint politics as the primary social function. The alternative, isanother crisis, sooner rather than later. Next year will be crucial in every way.

Dennis Kefalakos, Editor Alexandros Koronakis, Director

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New Europe | Page 3

New Year Special| January 2011CONTENTS

Tony Blair

Faith in aGlobalized Age

Ban Ki-moon

New Directionsfor the UN

5Sam Nunn, Igor

Ivanov, and

Wolfgang

Ischinger

A Post-NuclearEuro- AtlanticSecurity Order

4

Jaswant Singh

Asia’s FragileSpecialRelationship

6

Yuriko Koike

Is Cold War IIUnderway?

7

GeorgeReadings

How toRespond toAl-Qaeda ?

8

Thabo Mbeki

Sudan andAfrica’s Future

9

POLITICS: OUR WORLD

Rodi Kratsa

2011: AYear of Eu-ropean Potential

14

Joseph Daul BringingOurResourcesTogether toWork MoreEffectively

15

LotharBisky

Putting theEU on itsfeet

16

RebeccaHarms

Europe inthe eye of astorm

17

TimothyKirkhopeThe EUNeedsGreater Valuefor Money

18

EU: SPEAKING FOR EUROPEANS

Recep TayyipErdoğan

Turkey: TheNew Indis-pensableNation

19

HamrokhonZarifiTheMessagefrom theRoof of theWorld

20

ChristopherR. HillIran:AnotherProblemfrom Hell

21

Richard N.HaassTheEndgames inIraq andAfghanistan

22

FernandoHenriqueCardoso

Ending theNever-Ending Waron Drugs

23

ShahidJaved Burki

WhitherPakistan?

24

KrzysztofLisek

Georgia –Reactivation

25

SebastiánPiñera

Chile andthe ThirdWall

26

TzvetanVassilevBulgaria’sPotential forSustainableGrowth

27

DavidAltonSudan,Trade andwhat LiesBeneath

28

POLITICS: FOCAL POINTS

Javier Solana

A Window ofOpportunityfor EuropeanDefense

10

Yang Jiechi

China-EuropeTies on SteadyCourse in aFluid World

11

BrianSimpson

TransportingEurope into2011

12

Hido Biščević

South EastEurope Turnsto Future

13

POLITICS: THE EUROPEAN UNION

Page 4 | New Europe

New Year Special | January 2011 POLITICS: OUR WORLD

by Sam Nunn, Igor Ivanov, and Wolfgang IschingerSam Nunn, for 24 years a Democratic US Senator from Georgia, is Co-Chairman of the Nuclear Threat Initiative. Igor Ivanov was Russia’s foreign ministerfrom 1998-2004. Wolfgang Ischinger, a former German ambassador to the United Kingdom and the United States, is chairman of the Munich Security Confe-rence. They are Co-Chairmen of the Euro-Atlantic Security Initiative commission.

A Post-Nuclear Euro-Atlantic Security Order

WASHINGTON, DC – As weenter 2011, the Euro-Atlanticregion is a study in strategic

contrasts. Over the past 20 years, no geo-political space has undergone as dramatica transformation as that between the At-lantic and the Urals. In our lifetimes, wehave seen a welcome change from the dar-kest days of the Cold War, when a deva-stating conventional and nuclear war inEurope was a real possibility, to a new erain which no state faces this type of exi-stential threat.

But, despite these positive develop-ments, the two largest powers in the re-gion – the United States and Russia –each still possesses thousands of nuclearweapons, accounting for more than 90%of the world’s nuclear inventory. Many ofthese weapons remain deployed or desi-gned for use within the Euro-Atlantic re-gion.

Reduction and elimination of thisCold War-era nuclear infrastructure is thelargest piece of unfinished business fromthat bygone time. The continuing exi-stence of large strategic nuclear forces de-ployed on high alert, and of tacticalnuclear weapons deployed in certainNATO states and Russia, creates a risk ofaccidental, unauthorized, or mistaken use,and of terrorist groups acquiring these as-sets. So security vigilance is essential.

To meet this challenge, the three of us– building on the action plan adopted byconsensus at the 2010 Non-ProliferationTreaty (NPT) Review Conference – haveendorsed a series of urgent, practical stepstowards the long-term goal of a world freeof nuclear weapons. These include:

• increasing assured warning and deci-sion times for the launch of nuclear-armed ballistic missiles;

• developing cooperative missile-de-fense and early-warning systems;

• ensuring the highest possible stan-dards of security for nuclear weapons andmaterials;

• beginning a dialogue on tactical nu-clear weapons involving Russia, the US,and NATO;

• adopting a process to bring the Com-prehensive Test Ban Treaty into effect;

• developing international and multi-lateral approaches to manage the risks offuel production for civilian nuclear power;and

• further reductions in US and Russiannuclear forces.

As former US Secretary of State Ge-orge P. Shultz, former US Secretary ofDefense William J. Perry, former US Se-cretary of State Henry A. Kissinger, andformer US Senator Sam Nunn put it in2007, “Without the bold vision [of a nu-clear weapons-free world], the actions willnot be perceived as fair or urgent. Without

the actions, the vision will not be percei-ved as realistic or possible.”

Perhaps the most crucial step towardrealizing this vision is to redouble our ef-forts to resolve regional confrontationsand conflicts that give rise to new nuclearpowers. The great swath of states stretch-ing from North America across Europethrough Russia has a vital role to play instabilizing an increasingly fragmented andstressed international order.

These states can play this role, howe-

ver, only if first they transform this geo-graphic space into a genuinely inclusiveand vibrant security community. Failingthat (and we are failing today) the Euro-Atlantic states and their organizations willsettle for suboptimal – and too often ut-terly inadequate – responses to thetwenty-first century’s security challenges,including the threat of nuclear prolifera-tion. Lately, several national leaders, in-cluding the Russian and US presidentsand NATO secretary-general, have em-

braced the idea of a Euro-Atlantic secu-rity community, and begun stressing theimportance of fashioning a stronger andmore inclusive European security order.

The timing could not be better, as theEuro-Atlantic family has entered a criti-cal period. On November 19-20, NATOheads of states approved a new “strategicconcept” to guide the organization for thenext decade At the same time RussianPresident D. Medvedev and his NATOcounterparts issued a joint statement, en-dorsing the first Joint Review of 21stCentury Common Security Challengesand deciding to resume Threat MissileDefence Cooperation. Two weeks later,the Organization for Security and Coope-ration in Europe (OSCE) heads of stateassembled in Astana, Kazakhstan, to helpshape the OSCE’s next stage of develop-ment.

Joint action on nuclear-threat reduc-tion must be a critical element in movingthe Euro-Atlantic nations toward a levelof stability and strength and allow themto exercise badly needed global leadership.Achieving a genuinely collaborative ap-proach to missile-defense matters will ad-dress a common threat and help removemisgivings that are blocking progress to-ward a common security space.

Similarly, the Euro-Atlantic states canmobilize behind efforts to strengthen theInternational Atomic Energy Agency’s sa-feguards system, which ensures the non-diversion of peaceful nuclear programs, inorder to foster cooperation on counteringthe threat of nuclear terrorism, and to de-velop new mechanisms to protect jointlycritical infrastructure from cyber attack.Such actions are crucial to these states’ na-tional security and global efforts to miti-gate threats.

Pursuing arrangements that increasewarning and decision-making time for allcountries in the Euro-Atlantic regionwould introduce stability into the NATO-Russia relationship. Adjustments in ope-rational doctrine, as applied to strategic,tactical, and conventional forces, wouldconstitute a giant step toward ending therelationship’s militarized framework.

This is only a partial list of what mustbe done if governments are serious aboutbuilding a stronger, inclusive European se-curity order, one where the roles and risksof nuclear weapons are reduced, and ulti-mately eliminated. The three of us areworking with a distinguished group fromall corners of the Euro-Atlantic region todevelop these and other concrete stepsthat are essential to creating a genuine se-curity community, including its economic,energy, and environmental dimensions.NATO, OSCE, and other key regional in-stitutions must give this concept and pro-cess their essential support.

> Quote

Copyright: Project Syndicate, 2010. www.project-syndicate.org

A closed missile silo at Russia's Tatishchevo missile base, some 1,000 kilometers south of Moscow,where the first 10 new Topol-M missiles were deployed, 27 December 1998 |ANA/ EPA PHOTO/AP POOL


New Europe | Page 5

New Year Special| January 2011POLITICS: OUR WORLD

by Ban Ki-moonBan Ki-moon is the Secretary-General of the United Nations.

New Directions for the UN

NEW YORK – The United Na-tions today leads what seems attimes like a double life. On the

one hand, pundits criticize it for not sol-ving all the world’s ills. On the other hand,UN member states and people around theworld are asking it to do more, in moreplaces, than ever before – a trend that willcontinue in 2011.

It is not hard to see why. We have onlyto read the newspaper, turn on the televi-sion, or go online to appreciate the sheerscale of the need. Conflicts rage in toomany places. Natural disasters strike withgreater fury, and in greater numbers, thanever before.

On top of all this, we face a new gene-ration of threats, unlike any in history,which spill across borders and have globalreach. No single country or group, howe-ver powerful, can deal with them alone.All must work together – in commoncause for common solutions – to addresschallenges like climate change, poverty,and nuclear disarmament.

But there is profound skepticism thatwe can do so. The world looks to the UNas never before, yet the conventional wis-dom is that we are not up to the job. Theproblems are too complicated. Resourcesare too few. The UN itself appears too di-vided to make the vital difference.

The conventional wisdom is, however,wrong; worse, it is dangerous, for we haveall seen how quickly it can take hold, di-stort reality, and then harden like cement.For example, four years ago, when I cameto office, only a handful of global leaders

knew enough even to talk about climatechange – the defining challenge of ourtimes, whose effects we see every day, allaround us. Today, we have moved climatechange to the top of the global agenda.

But make no mistake: it has been a dif-ficult road.

In December 2009 in Copenhagen,world leaders talked far into the night, andemerged, according to the conventionalwisdom, with virtually nothing. In fact, th-ough we did not get a comprehensive, le-gally binding treaty that would usher in anera of sustainable, low-carbon prosperity,as we had hoped, there were significantachievements in Copenhagen.

For the first time ever, developed anddeveloping countries acknowledged theirresponsibility to curb emissions of gree-nhouse gasses and agreed on the goal of

limiting global temperature rise to belowtwo degrees Celsius. And, for the firsttime ever, countries made large pledges tofinance mitigation and adaptation efforts:$30 billion over the next three years forfast-start financing, and $100 billion peryear by 2020.

The lesson is that we should not dreamof overnight breakthroughs, or allow our-selves to fall into despair in the absence ofimmediate progress.

Let us work, instead, to build on manysmaller advances, wherever we can makethem – by mobilizing support, creatingbroad alliances, building coalitions, andtaking into account a web of moving partsand complex issues – because that will setthe stage for the eventual breakthroughsof tomorrow.

Collective action has never been easy,

but it has never been more necessary thanin achieving the UN’s Millennium Deve-lopment Goals – the world’s blueprint forending extreme poverty. The conventionalwisdom will tell you that the MDGs tar-gets – reducing poverty and hunger, im-proving the health of mothers andchildren, combating HIV/AIDS, increa-sing access to education, protecting theenvironment, and forging a global part-nership for development – are simplyunattainable. In fact, we are controlling di-sease – polio, malaria, and AIDS – betterthan ever before, and making big new in-vestments in women’s and children’shealth – the key to progress in many otherareas.

Nevertheless, on climate change, po-verty, and other issues, the conventionalwisdom is that the UN should cede re-sponsibility to the G-20.

But the G-20, by itself, is not the an-swer. Despite strenuous debate about cur-rency issues and trade imbalances at itssummit in Seoul in November, the solearea of agreement concerned an issue onthe G-20’s agenda for the first time – eco-nomic development. Recognizing thatglobal recovery depends on the emergingeconomies – that is, the developing world– G-20 leaders embraced investmentsaimed at lifting the world’s most vulnera-ble people out of poverty.

That is why G-20 leaders accept theneed to work closely with the UN – afterall, no organization does development bet-ter. The G-20 and the UN are finding newways to work constructively together – notas rivals, but as increasingly close partners.And that is the way it should be.

Forty years ago, a great American sta-tesman, Dean Acheson, looked back at theexcitement he felt in helping to build thepost-World War II order. “Present at theCreation,” he called his memoir.

Today, we find ourselves at an equallyexciting moment, no less critical to the fu-ture of humankind.

We, too, are present at a new creation.And the UN must constantly re-createitself as well. We must evolve and keeppace with a rapidly changing world. Wemust be faster and more flexible, efficient,transparent, and accountable. In an age ofausterity, resources are precious; we mustmake every dollar count. These are testingtimes for everyone. People everywhere livein growing anxiety and fear.

There is near-universal loss of trust ininstitutions and leaders.

Amid such uncertainty, our future de-pends on a UN that brings together thecountries of the world not only to talk anddebate, but also to agree and to act; thatmobilizes civil society, business, philanth-ropists, and ordinary citizens to help theworld’s governments solve current pro-blems; and that delivers peace, develop-ment, human rights, and global publicgoods – in a word, hope – to people aro-und the world every day.

> Quote

Ethiopian Veterans Kagnew Battalion who served alongside US Soldiers during the Korean War share ex-periences with US Army Africa instructors in Addis Ababa, Ethiopia |www.flickr.com

NEW DELHI – “Tzu-Ch’in said toTzu-Kung: …Our Master gets th-ings (done) by being cordial, frank,

courteous, temperate, deferential. That isour…way.” But will Chinese Premier WenJiabao live up to that standard, as conveyedin the Analects of Confucius, on his cur-rent visit to India?

The world has a variety of “special rela-tionships.” The United States’ partnershipwith the United Kingdom is one forged inwar – and a pillar of the West for morethan a half-century. The US-Soviet rivalryof the Cold War era was special in that re-lations between those two countries shapedthe fate of the world until the USSR im-ploded. The US and China are said to beforging a new special relationship.

But, in looking toward the future ofAsia – and, indeed, the future of world di-plomacy – it is the relationship between theworld’s two most populous countries andlargest emerging economies, India andChina, which will increasingly set the glo-bal agenda. Japan’s change of military doc-trine for the first time since the start of theCold War – a shift that implicitly makesChina the greatest threat – suggests thatthe Chinese leadership needs to take a hardlook at its regional grand strategy.

Wen’s priorities for his trip to India areclear: trade, security, and, far behind, theterritorial disputes between the two coun-tries. Such an approach might make tacti-cal diplomatic sense, as long as there is nobackground clatter. But it lacks a sense ofstrategic urgency, which, given rising inter-national tensions across Asia, amounts to aserious strategic blunder.

The sources of those tensions are clear:North Korea’s shelling of South Korea’sYeonpyeong Island and its flaunting of amodern, previously unknown, nuclearplant; the US-led armada now cruising th-rough the South China and Yellow Sea;and China’s claim that the South ChinaSea is an area of vital national interest akinto Tibet.

In its bilateral relations with India, Ch-ina’s shift in focus from its claims on theNortheastern Indian state of ArunachalPradesh to Jammu and Kashmir is enor-mously worrisome. Indeed, around Gilgitin Kashmir, China’s People’s LiberationArmy has greatly enhanced its troop pre-sence. Small wonder that, on the eve ofWen’s visit, China’s ambassador in NewDelhi finds relations between the two co-untries to be “very fragile, easily damaged,and difficult to repair.”

But, despite all this diplomatic friction,Wen’s entourage for his visit is dominatedby a large business delegation. Currently,

both countries’ economies are thrustingconfidently forward; both are thirsty formore and bigger markets.

India is growing at an annual rate ofaround 9%; China at around 10%. So theopportunities for trade between the twoare certainly enormous. But, for both co-untries, economic growth is not hurdle-free.

India’s economy is continuing to grow,but faces rising inflation, fiscal and cur-rent-account deficits, a slowdown in agri-cultural growth, and infrastructurebottlenecks. China’s problems arise mainlyfrom widening income disparities, whichare inciting hitherto unheard of levels oflabor unrest – though this should not beviewed as a precursor to change of the sortthat marked the rise of the Solidarity tradeunion and the end of communism in Po-land.

But labor unrest and the desire tomaintain 10% growth suggest that Chinashould be taking the lead in ensuring peace

on the Korean peninsula and preventingother political developments from derai-ling its economy. After all, as the Chineseleadership knows, only continued stronggrowth will provide the government withthe wriggle room it needs to begin to reva-lue the renminbi.

Revaluation of its currency is necessaryin part because the undervalued renminbihas become yet another a source of frictionin Asia, as many in the region now believethe Chinese are using their currency as a“policy weapon.” To untangle the complexpolicy web surrounding the renminbi’svalue will demand greater regional stabi-lity, not less.

Yet China’s international grand stra-tegy does not appear to reflect this. Instead,it remains focused on Northeast Asia,Tibet, Taiwan, and on its aspirations tomove into the Indian Ocean, that greatglobal highway of trade in the twenty-firstcentury.

China’s leaders recognize that their co-untry needs time, space, and peace for eco-nomic development. Yet their pursuit of adominant position on the strategic choke-points in the Indian Ocean underminesthese goals by raising tensions not onlywith India, but with Asia’s other powersand the US. Their focus on inhibitingIndia seems particularly misguided, giventhat China’s core interests (Tibet, Taiwan,and the heartland of the Chinese main-land) are far beyond the reach of most ofIndia’s military capabilities.

By contrast, India’s most important na-tional security concerns – the unsettledborder between the two countries, and Bei-jing’s ties with Pakistan, which often ope-rates as a Chinese surrogate – are closelyconnected to China: Both factors are di-rectly linked to China’s perceived threat toIndia’s Himalayan territory and its rapiddevelopment of strategic infrastructure inthat region. India’s concerns also focus onChina’s ongoing supply of arms, includingmissiles and nuclear weapons technology,to Pakistan.

No amount of discussion over trade canobscure the true issues of vital concern bet-ween China and India. China may takecomfort in remaining focused on non-coreissues, because such an approach suggeststactical cooperation with India. That is aconvenient international ploy, but it leavesthe sources of bilateral discord unattended.

The idea of collaboration only in areasof interest to China while neglecting issuesof substance to India is untenable, even inthe short term. Indeed, neglect of the coredisputes is what has resulted in the rela-tionship’s “extreme fragility.” India cannotand will not abandon its territorial soverei-gnty, or its pursuit of secure land borders ora greater balance in trade.

These are challenges that cry out forclarity, not diplomatic fudges. But surelytwo great and ancient civilizations can findtheir way to the type of “cordial, frank, co-urteous, temperate, deferential…” relationsthat would have pleased Confucius.

Page 6 | New Europe

New Year Special | January 2011POLITICS: OUR WORLD

by Jaswant SinghJaswant Singh is a former Indian finance minister, foreign minister, and defense minister, is the author of Jinnah: India – Partition – Independence

Asia’s Fragile Special Relationship

> Quote

Russia's President Dmitry Medvedev (L) meets with Indian President, Pratibha Devi Singh Patil(R) at Presidential Palace in New Delhi, 21 December 2010 |ANA/EPA/INDIAN PRESIDENT HOUSE


New Europe | Page 7


TOKYO – Mesmerized by China’svast military buildup, a new constel-lation of strategic partnerships

among its neighbors, and America’s revitali-zed commitment to Asian security, many sh-rewd observers suggest that 2010 saw thefirst sparks of a new Cold War in Asia. Butis “Cold War II” really inevitable?

Although appeasing China’s drive forhegemony in Asia is unthinkable, every rea-listic effort must be made to avoid militari-zation of the region’s diplomacy. After all,there was nothing very cold about the ColdWar in Asia. First in the Chinese civil war,and then in Korea, Indonesia, Malaysia, andIndochina – particularly Vietnam – theCold War raged not as an ideological/pro-paganda battle between rival superpowers,but in dogged, often fratricidal combat thatcost millions of lives and retarded economicdevelopment and political democratization.

It is this grim history that makes China’scurrent disregard for Deng Xiaoping’smaxim that China “disguise its ambition andhide its claws” so worrying for Asian leadersfrom New Delhi to Seoul and from Tokyoto Jakarta. From its refusal to condemnNorth Korea’s unprovoked sinking of theSouth Korean warship Cheonan and shel-ling of South Korean islands, to its claims ofsovereignty over various Japanese, Vietna-mese, Malay, and Filipino archipelagos andnewly conjured claims on India’s province ofArunachal Pradesh, China has revealed aneo-imperial swagger. So it should surpriseno one that “containment” is coming to do-minate Asian diplomatic discourse.

But it is wrong – at least for now – tothink that a formal structure of alliances tocontain China is needed in the way that onewas required to contain the Soviet Union.Containment, it should be recalled, was or-ganized against a Soviet totalitarian regimethat was not only ideologically aggressive

and in the process of consolidating its colo-nization of Eastern Europe (as well as Ja-pan’s Northern Territories), but alsodeliberately sealed off from the wider worldeconomy. Today’s China is vastly different.Overt military imperialism of the Soviet sorthas, at least historically, rarely been the Ch-inese way. Sun Tzu, the great Chinese theo-rist of warfare, focused on the weakening ofan adversary psychologically, not in battle.Until recently, much of China’s bid for re-gional hegemony reflected Sun’s concepts.

More importantly, China abandonedeconomic autarky three decades ago. Today,its economic links in Asia are deep, and – itis to be hoped – permanent. China’s exportmachine sucks in vast quantities of parts andcomponents for final assembly from acrossAsia – Thailand, Malaysia, the Philippines,and Indonesia, as well as richer Singapore,Taiwan, South Korea, and Japan. Member-ship of the World Trade Organization hashelped to bind China to highly sophisticatedpan-Asian production networks. Everybodyhas benefited from these ties.

Throughout China’s three-decade risefrom poverty to economic juggernaut, tradewithin East Asia has grown even faster than

the region’s trade with the rest of the world,suggesting deeper specialization and inte-gration. Indeed, China’s rise has profoundlyaltered the course of Asia’s trade flows. Japanno longer focuses on exporting finishedgoods to Europe and North America, but onexporting parts and components for assem-bly in China. In turn, Japan now importsfrom China finished goods (such as officemachines and computers) that once camefrom America and Europe.

Given that as many as half of China’s 1.3billion people remain mired in abject po-verty, it is in China’s interest to ensure thatthese economic relationships continue toflourish. In the past, China has recognizedthe vital need for good neighborly relations.During the Asian financial crisis of 1997-1998, Chinese officials did not engage incompetitive devaluation of the renminbi.Unfortunately, such clear-sighted and re-sponsible policymaking is a far cry fromwhat we are seeing today.

China’s dizzying increase in its militarycapacity is another obvious source of con-cern in Asia. But, even according to the hi-ghest estimates, China’s military budget isonly now about equal to that of Japan and, of

course, much less than the combined mili-tary budgets of Japan, India, and Russia, allof which border China – not to mention In-donesia, South Korea, and a militarily mo-dernizing Taiwan. Moreover, Russia andIndia possess nuclear weapons, and Japanhas the technological wherewithal to recon-figure its defense posture to meet any regio-nal nuclear threat.

So the challenge that China poses todayremains predominantly political and econo-mic, not military.

The test of China’s intentions is whetherits growing economic and, yes, military ca-pacities will be used to seek to establishAsian hegemony by working to excludeAmerica from the region and preventing re-gional partnerships from flourishing. The al-ternative is a China that becomes part of acooperative effort to bind Asia in a rules-based system similar to that which has un-derpinned long-term peace in Europe.

In this sense, Asia’s rise is also a test ofUS competitiveness and commitment inAsia. America’s historical opposition to he-gemony in Asia – included as a joint aimwith China in the Shanghai Communiquéof 1972 – remains valid. It will have to bepursued, however, primarily by political andeconomic means, albeit backed by US power.

Before 2010, most Asian countrieswould have preferred not to choose betweenChina and the US. But China’s assertivenesshas provided enormous incentives to em-brace an Asian multilateral system backedby America, rather than accept the exclusio-nary system that China seeks to lead. In2011 we may begin to see whether those in-centives lead China’s rulers to re-appraisetheir diplomatic conduct, which has leftthem with only the corrupt, basket case eco-nomies of Burma and North Korea as relia-ble friends in Asia.

by Yuriko KoikeYuriko Koike, Japan’s former Minister of Defense and National Security Adviser, is now Chairman of the Executive Council of the Liberal Democratic Party.

Is Cold War II Underway?

> Quote


A tourist takes a picture of two military guided missiles displayed at a Navy military museum in Qingdao city, eastern China's Shandong province, 19 April 2010. Thetwo active duty guided missiles HHQ-16 and YJ-83 which took part in the grand military review of 60th National Day on October 1st, 2009 have been displayed fortourists on 19 April |ANA/EPA/WU HONG

Page 8 | New Europe

New Year Special | January 2011POLITICS: OUR WORLD

George ReadingsGeorge Readings is a Research Fellow and Communications Officer for Quilliam, the world’s f irst counter-extremism think tank

How to Respond to Al-Qaeda ?

LONDON - How should democra-tic, liberal countries respond to theterrorist threat posed by al-Qaeda?

In order to stop terrorism, should govern-ments be prepared to work with peoplewho support many of al-Qaeda’s endgoals, for example the creation of an ex-pansionist ‘Islamic state’, but who opposeal-Qaeda’s terrorist methodology? Shouldsuch critics of al-Qaeda’s terrorist acts betreated as allies or should they be challen-ged as people whose ideas are ultimatelyharmful to free and pluralist societies?

In a year when a British citizen triedto assassinate a British Member of Parlia-ment, citizens of many European coun-tries were reported to be attendingterrorist training camps in Pakistan andseveral European capital cities were war-ned of potential ‘Mumbai style’ terroristattacks, these questions could not be morepertinent.

As on many other issues, however,there is little consensus across Europe.One school of thought considers non-vio-lent extremists to be a valuable bulwarkagainst terrorist violence, whilst anotherschool argues that the promotion of Isla-mists of any variety - violent or non-vio-lent - risks making Islamist terrorismmore likely. Moreover, the second schoolwarns, the spread of non-violent Islamismwithin a society is divisive and ultimatelyundermines cohesion and creates long-term instability.

The Danish Security Services sub-

scribe to the first school of thought: thatnon-violent Islamists are the people bestplaced to stop youngsters from engagingin terrorist violence. On the other hand,in Germany, the security service’s view ap-pears to be that, whilst non-violent Isla-mist groups do not recruit for terrorism,their focus on preserving an ‘Islamic iden-tity’ may intensify the fragmentation ofsociety and help create a breeding groundfor further radicalisation.

That is to say, although such non-vio-lent Islamist groups may be opposed tothe tactic of terrorism, their divisive mes-sage nonetheless lays the ideological gro-undwork for violent groups. The Dutchsecurity services seem to agree, warningthat “despite its non-violent form, thisideology is still disrupting the relationsh-ips within and between ethnic groups.This can result in radicalisation, polarisa-tion and social isolation.”

In Britain, advocates of the first sch-ool of thinking cite the ousting of theEgyptian extremist preacher ‘Abu Hamza’from Finsbury Park Mosque in Londonin 2003. Throughout the late 1990s, thefamously hook-handed preacher turnedthis mosque in North London into a hubfor violent Islamism. According to somereports, the building was even used forweapons training. Moreover, al-Qaedaoperatives Richard Reid and ZacariasMoussaoui are known to have prayedthere, while other regular attendees at themosque ended up travelling to join mili-

tants in Chechnya, Bosnia and Afghani-stan.

In 2003, the Metropolitan Police evic-ted Abu Hamza and his followers fromthe mosque, installing individuals fromthe Muslim Association of Britain, an Is-lamist group with links to the MuslimBrotherhood, in their place. As such,those who see non-violent Islamists as thebest opponents of militant Islamists con-sider the Finsbury Park case to be atriumph: supporters of al-Qaeda weresupplanted by supporters of the MuslimBrotherhood. But the events are not asclear cut as they appear.

In the same year as London’s policeforce put the Muslim Association of Bri-tain in charge of the Finsbury Park Mo-sque, the group also arranged a series oftalks by an American Muslim cleric. Inparticular, they organised a speaking tourfor him at various universities around theUK, allowing him to become a popularand respected preacher in some circles ofBritish Muslim youth. His name wasAnwar al-Awlaki.

Al-Awlaki has since been linked to se-veral terrorist attacks, including the FortHood shooting, the Christmas Day ‘un-derpants bomber’ and the attempt to de-tonate a bomb in New York’s TimesSquare. From his hiding place in Yemen,al-Awlaki has more recently called onyoung western Muslims to carry out ter-rorist attacks against their home coun-tries.

Some who have heard his talks, inclu-ding the attempted assassin of British MPStephen Timms, have taken up his call. Sodangerous is al-Awlaki considered to bethat his killing has been authorized byPresident Obama.

In 2003, removing Abu Hamza fromFinsbury Park Mosque and replacing himwith supporters on the Muslim Brotherh-ood seemed to make sense. In the longrun, however, this decision has turned outto be deeply problematic.

Admittedly, al-Awlaki’s publicly statedviews were less openly violent in 2003than they are now, but his extreme viewswere nonetheless still apparent. The factthat the Muslim Association of Britainand various other Muslim Brotherhoodlinked Islamist organisations in the UKwere, until relatively recently, happy tohost or sponsor events featuring talks byhim illustrates the risks posed by enteringinto alliances with non-violent Islamists.Such individuals and groups are oftenunable or unwilling to identify and chal-lenge militant Islamists in their midst.

Given that the threat of Islamistterrorism shows no signs of abating,European governments need counter-radicalisation strategies now more thanever. Empowering non-violent Islamistsagainst militant Islamists may sound likea hard-edged and cost-effective strategy,but not only is it likely to be highlyineffective, it may be dangerouslycounter-productive in the long run.

US Sergeant Brandt (L) of 4th Squad 73rd Cavalry Regiment of the 82nd Airborne Division makes a biometric control on a potencial suspect duringa search operation at a ex-Taliban compound in Shewan, Farah province, Afghanistan, 31 May 2010 |ANA/EPA/TIAGO PETINGA

New Europe | Page 9


JOHANNESBURG – It has been said,correctly, that Sudan is a microcosm of

Africa. For this reason, the entire conti-nent will follow events in Sudan over thenext few months with the greatest interest.

On January 9, 2011, the people ofSouth Sudan will vote in a referendum todecide whether they will remain part of aunited Sudan or form a new independentstate. If they choose the latter option, thenew state will come into being on July 9,2011.

During the same period, even as Sudanis addressing the issue of its North-Southrelations, it will also have to arrive at acomprehensive agreement to end the con-flict in Darfur.

During its nearly 55 years of indepen-dence, Sudan has experienced a successionof violent conflicts, in the South, the West(Darfur), and the East. It is commonly ac-cepted that what lay at the root of theseconflicts was the failure of independentSudan – one of Africa’s most racially, eth-nically, religiously, and culturally diversecountries – to construct a polity informedby the principle and practice of unity indiversity.

This challenge faces almost all Africancountries as they seek to construct stableand peaceful societies. Virtually all civilwars and other violent conflicts in post-colonial Africa have occurred because ofthe failure to manage properly the diver-

sity that characterizes these countries.These conflicts have taught Africa

that, in order to contain the centrifugalpressures that encourage fragmentationwithin our relatively new states, a consci-ous effort must be made to nurture andentrench national unity, which must in-clude democratic practices. Conflict hasalso communicated the unequivocal mes-sage that unity cannot be secured andmaintained by force alone.

Rather, it is only by respecting our di-versity – ensuring that each social groupenjoys a shared sense of belonging, ratherthan feeling marginalized and excluded –that the state’s unity and peace can be gua-

ranteed. Sudan has learned these lessonsthrough harsh practical experience, inclu-ding war.

As long ago as 1975, Gafaar al-Ni-meiry, Sudan’s military head of state, sta-ted with great prescience what Sudan andAfrica needed to do to achieve peace andstability. “Unity based on diversity has be-come the essence and the raison d’être ofthe political and national entity of manyan emerging African country today. Wetake pride in that the Sudan of the Revo-lution has become the exemplary essenceof this new hope.

The Sudan is the biggest country inAfrica. It lies in its heart and at its cross-

roads. Its extensive territory borders (nine)African countries. Common frontiersmean common ethnic origins, commoncultures, and shared ways of life and envi-ronmental conditions. Trouble in theSudan would, by necessity, spill over itsfrontiers, and vice versa. A turbulent andunstable Sudan would not therefore be acatalyst of peace and stability in Africa,and vice versa.”

Unfortunately, failure to implementpolicies based on genuine respect for thisperspective plunged Sudan into its secondcostly North-South war, fueled the violentconflicts in Western and Eastern Sudan,and created the possibility of the South’ssecession. Given this history, it is clear thatthe governments of Sudan and SouthSudan, as well as the overwhelming majo-rity of the Sudanese people, have had eno-ugh of war and passionately desire peace.

The processes in which the Sudaneseparties are currently engaged – the prepa-rations for the South Sudan referendum,negotiations on post-referendum arrange-ments, and the search for a negotiatedsettlement in Darfur – are all informed bythis desire for peace.

For this reason, Africa is following Su-dan’s evolution with intense interest – andis eager to see this country “at the heartand crossroads of Africa” give substance toal-Nimeiry’s vision.

But, regardless of the outcome of theSouth Sudan referendum, the impendingdevelopments in Sudan will result in im-portant changes to the structure of the Su-danese state. In this context, the Sudaneseparties – North and South – have acceptedthe important principle of establishing“two viable states” if the South secedes.

As happens during periods of majorand rapid change, the country will expe-rience social tension, uncertainty, and une-ase. Africa is keen that the Sudaneseleadership cooperate effectively to managethis delicate situation, in the interest ofthe continent as a whole.

This requires that Sudan’s various lea-dership collectives have sufficient strengthand cohesion to bring their constituenciesinto the settlement, and therefore that noone, from near or afar, does anything toweaken any of these collectives.

It is in Africa’s interest to see Sudan’speople living together in peace and coo-perating with one another for their mutualbenefit – fully respecting one another’s di-verse but not mutually exclusive interests,whether they live in one country or two. ASudan that truly embodied “the exemplaryessence” of respect for diversity of whichal-Nimeiry spoke would serve as a catalystfor peace and stability on our continent.

It is to be hoped that the sustained andenormous international focus on Sudanhas as its objective providing the necessarysupport to the Sudanese people to helpthem achieve this goal, including buildingtwo viable states, as may be necessary.

by Thabo MbekiThabo Mbeki, a former President of South Africa, is Chairperson of the African Union High

Level Implementation Panel for Sudan (AUHIP).

Sudan and Africa’s Future

> Quote


A resident of Kalma camp, for internally displaced persons (IDPs). in Nyala, South Darfur, with a child in an admi9nistration room before beginning theirjourney to return to their homes of origin in West Darfur on 6 December 2010 |ÁÍÁ/ÅÐÁ/ÁËÂÅÑÔ ÃÏÍÆÁËÅÆ ÖÁÑÑÁÍ / ÈÍÁÌÉÄ

Page 10 | New Europe

New Year Special | January 2011 POLITICS: THE EUROPEAN UNION


by Javier SolanaJavier Solana, President of the ESADE Center for Global Economy and Geopolitics, is a former EU High Representative for Common

Foreign and Security Policy and a former Secretary-General of NATO.

A Window of Opportunity for European Defense

MADRID – With budgets exceptio-nally tight in Europe nowadays,worries about European defense

have been growing. Paradoxically, however, de-velopments in 2010 offer hope for the future.

The defense agreement signed in Novem-ber by France and the United Kingdom iscomposed of two treaties, which cover jointdeployment of their armed forces, nuclear de-terrence, and improved equipment and com-munications. This initiative has the firmpolitical backing of both countries’ leaders, andexpresses a clear determination to unite againstcommon threats.

Implemented correctly, these treaties couldbecome a hopeful precedent for the entire Eu-ropean Union. By transcending strictly natio-nal limits, these treaties chart the future path ofEuropean defense and will help determine thecourse of Europe’s relations with the UnitedStates and NATO.

To better judge the treaties’ worth, we mustremember the context in which they were con-ceived. In 1998, the Saint Malo Declaration byFrench President Jacques Chirac and BritishPrime Minister Tony Blair indicated both co-untries’ determination to reinforce the EU’s se-curity and defense capabilities. Originallyreluctant to accept a Europe with autonomousmilitary capacity, the United Kingdom had le-arned from the intervention in Kosovo that theEU must be able to respond to crises rapidlyand efficiently.

The Saint Malo Declaration signaled thatthe EU’s leading military powers were prepa-red to develop their own defense policy, thoughone not fully autonomous of NATO. Indeed,through the Berlin Plus agreements, which fa-cilitate use of NATO resources for missionsundertaken under the European Defense andSecurity Policy (ESDP), NATO recognizedthe ESDP’s maturation over the past decade.

Indeed, the EU has undertaken 24 missions inEurope, Africa, and Asia, differing in nature,scope, and aims, and combining military andcivilian means.

Today, the EU is being asked to conductcomplex missions in adverse circumstances. Indoing so, Europe must draw on the lessons ofits past successes. We Europeans need to re-spond favorably, quickly, and effectively. De-fense missions must be more adaptable,prompt, multinational, and multi-instrumen-tal. They must be focused on stability and se-curity, regardless of the security situation or thenature of the conflict.

Yet it is clear that European defense is nowstruggling mightily with public financing. Mo-reover, the latest Eurobarometer poll showsthat defense is the last thing that Europeansare worried about.

It is precisely here that the Franco-Britishagreement becomes vitally important. The tre-aties mark an attempt to balance action andambition in a context of economic crisis, fiscalconsolidation, large-scale defense transforma-

tions, increasing interdependencies, and globalthreats – from terrorism and nuclear prolife-ration to climate change, resource scarcity, andepidemics – that are impossible to tackle uni-laterally. It also sets a precedent for the UK,preparing the way for future prime ministersto make advances in this direction.

Reinforcing both countries’ military capa-cities indirectly reinforces those of the EU. Thequest for synergies and efficiency that is im-plied by the agreement could well become adriving force for the European DefenseAgency. The British may now consider theEDA a defense expenditure, but, when betterdefined, it could represent a source of savingsfor every EU country. Moreover, the agree-ments foresee cooperation on cyber-security,terrorism, satellite communications, and ma-ritime security, which are also key elements ofthe Lisbon Treaty. Likewise, the joint expedi-tionary forces established under the treatiescould lead to the eventual creation of a widerstructure, as they already contemplate “bilate-ral cooperation with NATO, the European

Union, the United Nations, or other opera-tions.”

Solidarity and agreement on political ob-jectives are the pressing concerns of our age.The new pact between France and the UKcould be a historic step toward rationalizingdefense spending rather than toward demili-tarizing Europe. It all depends on the path ch-osen. In times of financial crisis, EU memberstates are unlikely to increase defense spending.But if France and the UK understand howmuch their projection of power is linked tothat of Europe, if they make cooperation reci-procal and expand it to other European coun-tries – according to the formula foreseen in thetreaties – we could eventually see an EU withthe ability to assume the defense role expectedof it by the global community. By forcing gre-ater efficiency and collaboration, misfortunecan yield benefit. This path can also ease USconcerns about lower European defense spen-ding. The Franco-British treaties do not ad-dress commitments to NATO, a key USinterest, because any reduction in the numberof European troops deployed abroad inevitablyimplies a greater economic burden for the US.

The Franco-British agreement does, ho-wever, imply progress toward joint Europeanmilitary action, both in Europe and on the in-ternational scene, which will encourage the US.So will the fact that the initiative comes fromEurope’s two major military powers (whosecombined defense spending represents half ofthe Continent’s total), both of which have per-manent seats on the UN Security Council.

All of this is part of the transatlantic com-munity’s continuing transformation from a setof organizations designed to defend territoryagainst a known aggressor to something moreflexible and dynamic. Establishing joint ma-nagement and overhauling conventional de-fense capacities will be a two-prongedchallenge: functional, owing to the traditionalschema of defense organizations, and political,inasmuch as a cession of state sovereignty willbe required.

Another, equally important challenge iscooperation between NATO and Russia,which agreed at NATO’s Lisbon summit inNovember to collaborate on the Alliance’santi-missile defenses. This relationship mustbe based on cooperation that benefits bothsides, and that respects certain common prin-cipals of governance and non-interference. Butcoordinating and sharing capacities can helpboth partners deal with the new nature of con-flicts. Here, the EU can exercise leadership, forthis is a political process that has only justbegun. As British Prime Minister David Ca-meron said of the agreement with France:“This is the beginning of something new, notan end in itself ” – words that echo those ofJean Monet, one of the Union’s founding fa-thers, on cooperation in the West. “This is notan end in itself,” Monet said. “It is the begin-ning of the path toward a more ordered worldthat we must attain if we want to escape de-struction.”

The Franco-British agreement in 2010was one hopeful sign for 2011 and beyond: astep along the arduous but necessary path to-ward greater European security.

> Quote

Two Eurofighter fighter planes fly past the Ernst-Happel-Stadium in Vienna, one of the EURO2008 soccer tournament venues, Vienna, 4 June 2008 |ANA/EPA/BMLV/ ZINNER

New Europe | Page 11

New Year Special| January 2011POLITICS: THE EUROPEAN UNION

by Yang JiechiYang Jiechi is the Minister of Foreign Affairs of the People’s Republic of China

China-Europe Ties on Steady Course in a Fluid World

BEIJING - The international landscapein 2010 has been rather fluid. The mo-mentum of the global financial crisis

has been curbed, yet its impact has been dee-pening and it has triggered profound changesin international relations and the global pat-tern. The world economy has continued withits slow recovery, but more fragility and imba-lance have been exposed. Global economic andfinancial risks have persisted, and protectio-nism has further exacerbated. The issue of de-velopment has become more prominent, withmajor economies pondering adjustments totheir economic growth and management mo-dels. The global power configuration has be-come more balanced. A number of emergingeconomies have risen rapidly in succession, andshown strong momentum of growth as agroup, further closing the gap with developedcountries. And groupings like BRIC andBASIC countries have grown in strength.

Reform of the international economic sy-stem has made headway. Developing countriesare now participating in global economic go-vernance mechanisms in a more equal fashionthan the past. The G20 is evolving from a cri-sis response mechanism to one focusing onlong-term economic governance, and its role

and influence is receiving wide attention.There has also been positive progress in IMFand World Bank reforms.

The international security picture has be-come more complicated. Although peace is ta-king greater hold in the world, theintertwining of traditional and non-traditionalsecurity issues has made security threats morediverse and complex. While Asia enjoys gene-ral stability on the whole, security challenges

are on the rise and the hotspot issues heat upfrom time to time. Some Asian countries haveexperienced political instability and factors af-fecting security have become more complex.

More currents of thought have come to thefore. A lot of exchanges, reflection and changesare going on in the international cultural field.New ideas and proposals have been put for-ward by various countries.

And there has emerged a clearer trend of

more mutual learning and exchanges betweendifferent civilizations and different develop-ment models.

Thanks to concerted efforts, China andEurope have achieved steady growth in ourstrategic partnership in 2010.

There have been more frequent exchan-ges in the political field, closer economic tiesand more active people-to-people exchangesbetween the two sides. In the current situation,the case for China-Europe cooperation isstronger than ever. Our cooperation will bene-fit not only the development of our two sidesbut also stability and sustainable developmentof the world.

China and Europe may have differentviews on some issues due to our differences insocial system, development stage and culturaltradition. This is natural. It is important for usto rise above ideological differences, respectand treat each other as equals, seek commonground while setting aside our differences, andstrive for a win-win situation. In the comingnew year, China is ready to work with Europeto strengthen dialogue and cooperation, incre-ase mutual understanding and trust, and pro-mote sustained, sound and steady growth ofour relations.

> Quote

José Manuel Barroso, Hu Jintao, President of the People's Republic of China, and Liu Yongqing, wife of Hu Jintao (from left to right) | Credit© European Union, 2010


New Year Special | January 2011POLITICS: THE EUROPEAN UNION

BRUSSELS - Developments inTransport policy and the activitiesof the Parliament's Transport and

Tourism Committee in 2010 contradictthe "bruits de couloir" which suggest thatin general terms the new Parliament andCommission have been less active thantheir predecessors.

In fact in some ways 2010 has been adecisive year with particularly important ch-allenges for European transport policy. Ofcourse policy development and the adoptionof legislation do not fit into handy annualchunks and 2011 will see the fruits of muchwork done this year and last.

Let me begin with a major programmeand investment item, Trans-European Net-works. The debate is underway on how toensure actors other than the EU, principallythe member states, who push for their pro-jects inclusion in the programme but aresluggish on follow through, can be encoura-ged to be consistent. At the same time, howcan we enhance the added value of TEN-T?The Parliament's Transport and Tourismcommittee is leading this debate. We ado-pted in 2010 the recast guidelines for TEN-T. We have monitored progress inconjunction with the TEN-T coordinatorsfor key priority projects and have now prio-ritised the major problem of TEN-Ts,which is getting the infrastructure acrossnational borders.

Our input to the Policy Challenges com-mittee (SURE) and the general debate on thefuture financial perspective, now in prepara-tion, will frame how TEN-T is considered.There are other areas where we have taken abroader view and looked to the future. In theresolution on a Sustainable Future for Tran-sport proposed by the committee and ado-

pted by the Parliament efficient co modalitywas placed at the heart of Europe’s futuretransport policy. In maritime transport thecommittee proposed strategic goals and calledfor a cross-sectoral strategy in the context ofan integrated maritime policy.

But as well as taking a strategic overviewwe have addressed particular issues whichhave an immediate impact on the man andwoman in the street.

The Committee and Parliament havesought to maximise where possible bus andcoach passenger rights as the regulation onthis topic goes through first and second re-ading. Throughout 2010 Parliament foughthard for the rights of bus and coach passen-gers, first during second reading negotia-tions under the Spanish presidency andlater in Conciliation with the Belgians. Inthe Council there has been a great deal ofreluctance on this issue - some delegationswould have preferred the negotiations tofail.

The main issue has been the scope of the

Regulation. Pending Parliament's adoption ofthe agreement reached in Conciliation, the EPmanaged to include within the scope all regu-lar services above a scheduled distance of morethan 250km.

This is not ideal but way better than the500km initially offered by the Council. Moreimportantly however, the EP managed to ne-gotiate an extended list of basic rights for pas-senger of all services including those below the250km distance. These are mainly rights for di-sabled persons and persons with reduced mo-bility. They include the right to travelinformation in accessible formats throughoutthe journey, compensation for lost and dama-ged wheelchairs and disability-related trainingfor the personnel of bus companies.

But the EP also managed to improvesome of the general provisions, for instancethe introduction of right to compensationas well as the reimbursement of accommo-dation expenses in the event of a long delayor cancellation. Finally the transition pe-riods were brought down from 15 years (as

originally suggested by Council) to 8 yearsAfter tough negotiations with Council

there are grounds for hoping that there will bea real strengthening of passenger rights in thisarea, mirroring what we achieved in previousyears on air and rail passenger rights.

Another area where the work of thecommittee will have a major impact is in theadoption of "eurovignette" legislation allo-wing Member States to charge for freightusing road infrastructure. The Parliamentcompleted its first reading in 2009. Ourpersistence through the Spanish and Bel-gian presidencies has got us ever nearer toan agreement on a difficult file. Not everyMember State is in favour of this proposaldo to be at a point where exploratory talkswith the Belgian Presidency with a view toCouncil moving forward on this proposal isalready an achievement.

Finally I should mention tourism, espe-cially as, post Lisbon, the Parliament nowhas a legislative role in this policy area. To-urism accounts for 5.2% of our workforceand 5% of Europe's GDP after all. We arepreparing an own initiative report on Eu-rope as the worlds premier tourist destina-tion in the light of a Commissioncommunication and the need for a new po-litical framework for tourism in Europe,stressing sustainable tourism and our indu-strial heritage.

The above of course is merely a shortsummary of the activities of Parliament'sTransport and Tourism committee in 2010and leaves aside issues like aviation security,for example, which are almost constant con-cerns. We have had a busy year. 2011 willprobably be busier.

by Brian SimpsonBrian Simpson is Chair of the European Parliamentʹs Transport Committee

Transporting Europe into 2011

> Quote

View from the cockpit of highspeed train Railjet arriving to Berlin, Germany, 18 September 2008. The train operating the route Munich, Germany to Vienna,Austria is a joint venture of German and Austrian Railways and arrived to Berlin for a test ride for the media |ANA/EPA/ARNO BURGI

EUROPEAN PARLIAMENT


New Year Special| January 2011POLITICS: THE EUROPEAN UNION

by Hido BiščevićHido Biščević is the Secretary General, Regional Cooperation Council

Building on the Ashes of the Past with Cooperationand Dialogue: South East Europe Turns to Future

SARAJEVO - As 2010 comesto a close, the time is right fortacking stock of developments

in the south-eastern corner of Eu-rope over the last year and, perhapseven more intriguing, to try to shedsome light on the period ahead.

Looking back, stocktaking offersmuch more then routine and ritualoverview, since this year was markedby truly positive drives in many seg-ments of political and social life inSouth East Europe. In a word, theregion continued to advance alongthe path towards European Union –importance of this progress cannotbe overstated as the EU enlargementperspective and related reforms arestill the most solid anchors of stabi-lity and cooperation in South EastEurope. Visa liberalization is proba-bly the most vivid and illustrativeexample, just as this progress wasclearly reflected in the latest asses-sments by the European Commis-sion regarding the status of each ofthe aspiring countries, pointing tothe final stages of negotiation pro-cess of Croatia, granting a candidatestatus to Montenegro, appreciatingthe progress of Serbia and deliveringit the Commission’s questionnaire,and setting out roadmaps for deli-very in other enlargement countriesof the region.

Indeed, the very fact that theyare termed “enlargement countries”testifies to the strategic persistenceof the EU and a true commitmentto the enlargement policy as a keypillar of the most needed process of“completing peace” in Europe’s sou-theast. Given the broad challengeson EU agenda, this reinvigoratedcommitment is certainly the mostcommendable input from Brusselsto the Balkans in the year 2010.Alongside the progress in institutio-nal relations between the enlarge-ment countries and the EU, the yearwas marked also by an unpreceden-ted improvement of bilateral rela-tions and general relaxation ofpolitical and social atmosphere in

the region. As political leadershipsundertook a number of vitally im-portant steps related to tragic deve-lopments over the past decades ofanimosity, hatred, alienations andwars, the spirit of genuine reconci-liation has taken root. Even in some“difficult cases” – from relations bet-ween Belgrade and Pristina to Bos-nia and Herzegovina’s constitutionaldebate – one could note gradualshift towards moderation and prag-matism that should create a stimu-

lating framework for future develop-ments on both issues. A new win-dow of opportunities for tolerance,coexistence, mutual understandingand appeasement is in sight. Recon-ciliation and rapprochement are fi-nally the call of the day.

With these two achievements,EU advancement and rapproche-ment within the region, South EastEurope, and the Western Balkans inparticular, now needs to build uponthe positive trend and translate itinto a comprehensive and irreversi-ble tendency, by defining preciselythe role of every possible contribu-tor to this process – parliamenta-rians, business community,academia, civil society, etc. – and byfocusing on regional cooperation inthe most needy areas of economicand social life.

Since the current economic cri-sis has brought enormously harsh ef-fects on all countries in the region –with only a few exceptions – and re-vealed deep structural challenges formany national economies, it becameevident that no country can resolvethese problems without turning

across the border. South East Europe, especially

the Western Balkans, needs a com-prehensive regional recovery and de-velopment platform, in particular inthe areas of evident underdevelop-ment, such as physical infrastructure,transport and energy, where it lagsbehind EU standards.

In this sense, regional coopera-tion will continue to be an indispen-sable platform for elaborating suchregional “development master plan”,with support from the EU and in-ternational partners, by taking ad-vantage of the RegionalCooperation Council, the SouthEast Europe Investment Committeeand other fora to identify concreteand region-specific projects and ini-tiatives that would put to a betterand proper use many neglected orunderdeveloped natural and humanresources of the region. With theselessons learned and achievementmade in 2010, what could be expec-ted from 2011?

First, one would hope that theenlargement countries will continueto advance – namely, that in the firstquarter of the year Croatia wouldcomplete or be given a date for com-pletion of the negotiations, Monte-negro would qualify to get the datefor the start of the negotiations, bythe end of the year Serbia wouldqualify for a candidate status, andprogress would be achieved in rela-tions between the EU and the restof the Western Balkan countries andTurkey.

This will largely depend on thewill and the ability of political lea-derships from the region to keepthe pace of reforms, upgrade insti-tutional capacities, and ensure goodgovernance and the rule of lawagainst the backdrop of economiccrisis and accompanying social ten-sions. Furthermore, there is a dan-ger that troublesome challenge ofeconomic slowdown and disturbingsocial consequences in several criti-cal cases match the remaining un-resolved issues of political nature,thus potentially creating an envi-ronment of instability, renewed ten-sions, and “pockets of turbulence”.

It will be critically importantthat 2011 bring about further enh-ancement of the EU drive in SouthEast Europe, that the region addresseconomic recovery and develop-ment, and that political leaders finda way to resolve the remaining openissues by building on the currentnew spirit of rapprochement, thusboosting stability and “predictabi-lity” in the region, enabling the EUenlargement policy to keep the mo-mentum.

> Quote

A man rakes the embers during a traditional roasting of St. George's whole lamb'Cheverme' in the village of Patalenicha some 110km from Sofia, Bulgaria, 6 May2009 |ANA/EPA/VASSIL DONEV


New Year Special | January 2011 EU: SPEAKING FOR EUROPEANS

BRUSSELS - In 2011 Europe has tobe smart, great and ambitious to ach-ieve quick recovery from the crisis,

fiscal discipline and international competi-tiveness, whereas all the Eurozone countriesfocus on safeguarding the stability of thecommon currency. The recent financial andeconomic crisis has clearly indicated a num-ber of inadequacies of the current legal andpolitical framework, which are currentlybeing tackled by the EU. Hence, 2011 is ex-pected to be a year of challenges for the Eu-ropean Union in developing a newframework that will improve financial su-pervision, enhance economic governanceand establish a permanent crisis mechanism.In parallel, the challenges imposed by theageing population, climate change and thelack of innovative funding instruments re-main at the forefront of European, as wellas international discussions.

2011 marks the beginning of the newEuropean framework for financial supervi-sion. The measures include a European Sy-stemic Risk Board to oversee the health ofEurope's economy, while other supervisorybodies will overlook banking, financial mar-kets, insurance and pensions. It is expectedthat the new framework, adapted to thelevel of financial market integration, willenhance financial stability in the EuropeanUnion and, consequently, contain potentialrisks to the real economy and public finan-ces. The system will safeguard the interestsof consumers, investors, and other users andstakeholders of financial services, or at leastprevent the magnitude of the effects of apotential crisis. Eventually, it aims to makeEU financial markets more competitive and

foster integration, while supporting theirsustainable development. It is clear that inthe future there will be no place for frag-mented, national responses, with a lesser ef-fect to the globalized markets, but rather asingle and clear answer to external risks. Inaddition, the recent economic crisis has in-dicated that national policies have to be bet-ter coordinated to avoid similar crises in thefuture. 2011 will be a decisive year regar-ding the exact form of the new economicgovernance package, as well as its effective-ness. This new legislative framework is ex-pected to deliver increased fiscal discipline,broader economic surveillance, deeper co-ordination and stronger institutions. It isworth mentioning that budgetary consoli-dation alone cannot ensure neither sove-reign debt sustainability nor the correctionof the observed imbalances.

There are fears that expenditure cutsand higher corporate taxes may discourageinvestment, reduce demand and raise unem-ployment. Moreover, the tough sanctions

proposed may exacerbate the situation of al-ready heavily indebted countries and thusthe degree of automaticity is being debated.Europe needs a strategy that will allow gro-wth acceleration both in the core and theperiphery. Hence, European leaders areconfronted with the challenge of achievingfiscal discipline without hampering growth.

2011 will also be a year of decision forthe establishment of a permanent mecha-nism which will replace the temporary Eu-ropean Financial Stability Facility and aimat preventing, managing and resolving fu-ture crises, although it will probably not beimplemented before mid-2013.

The purpose of such a mechanism is tosafeguard financial stability in the euro areaand its implementation requires a limitedTreaty change. It has to be stressed that thisproposal encompasses two new features; thepotential participation of private creditorsin the financial assistance programs and thepossibility of debt restructuring or "control-led default".

The implementation of such proposalshas to take into serious consideration thedevelopment agenda and the social and eco-nomic specificities of Member States whichare facing fiscal problems and above all theEuropean solidarity and cohesion.

In this direction, the internal market'sadvantages should be fully exploited for itto achieve its potential. The extent of eco-nomic and political integration lies behindthe efforts of EU leaders in supporting thecommon currency. It is the right time topush market integration to new levels tar-geting the significant persistent imbalancesacross Member States as a well-functioningSingle Market is the only way to ensurelong-term growth for jobs. In this context,opening up market access for European -particularly small and medium sized - busi-nesses, modernizing public procurement ad-ministration rules, reforming tax systemsand regulating cross-border debt recoveryare all necessary steps that have to be taken.Structural reforms, such as liberalizing theservices sector, can promote productivity, in-novation and investment as well as attractvaluable human resources. Furthermore, itis essential that European institutions andnational governments put increased effortsinto designing and implementing an ambi-tious agenda for economic, social and terri-torial cohesion that supports awell-balanced development of regions andlocalities. 2011 also calls for greater emph-asis on the "knowledge triangle" of educa-tion, research and innovation which canspeed up recovery and employment in atime of globalization and growing inter-national competition. Combining highgrowth rates with poverty reduction is themajor challenge in achieving "inclusivegrowth".

The consolidation efforts by MemberStates put further pressure on public ex-penditure during an era of populationageing and rising cost of healthcare provi-sion and social protection. Hence, delive-ring adequate and sustainable pensions forEuropean citizens is a critical issue. Inconclusion, dealing with the economic cri-sis and building the momentum of reco-very, sustainable development and jobsrequires well thought-out solutions atboth national and European level in addi-tion to building an area of freedom, justiceand security, launching negotiations for amodern appropriate EU budget and pul-ling EU's weight on the global stage. Uni-lateral approaches seem not be sufficientin overcoming the difficulties countries arefacing in establishing sound public finan-ces and growth, finding innovative sourcesof funding the national and Europeanprojects and facing the strong internatio-nal challenges.

2011 is expected to be a promising yearfor European citizens and states, and ma-king the best use of the opportunities aheadwill allow Europe to broaden its horizonsand move towards new directions.

by Rodi Kratsa Rodi Kratsa is vice-President of the European Parliament, from Greece, member of the European People’s Party

2011: A Year of European Potential

> Quote

General view of the Clock Tower, displaying a projection of the EU flag during New Year's Eve celebra-tions at Puerta del Sol square in downtown Madrid, Spain, early 1 January 2010 |ANA/EPA/KOTE RODRIGO

EUROPEAN PARLIAMENT


New Year Special| January 2011EU: SPEAKING FOR EUROPEANS

by Joseph Daul MEPJoseph Daul, MEP, is Chairman of the European People’s Party Group in the European Parliament

Bringing Our Resources Together to Work More Effectively

BRUSSELS - In May 2010, we cele-brated the 60th anniversary of theSchuman declaration. Both Schu-

man and most of the other great visiona-ries who made Europe's reunificationpossible came from the centre and centre-right political family which we today callthe EPP. We are proud of that. We canalso be proud of the progress made overthe years: 60 years of peace and the esta-blishment of a single currency are greatachievements. However, the various criseswhich Europe is going through at the mo-ment call for new ideas, new visions andnew solutions.

For a long time, we in the EPP, Euro-pe's most influential political family, insi-sted that the EU institutions must bereformed and improved through whateventually became the Lisbon Treaty, inorder to be able to respond better to newchallenges.

The creation of a more permanent Co-uncil President, elected for two and a halfyears, and a High Representative for Fo-reign Policy and Security was no doubtseen as the most tangible novelty in the Li-sbon Treaty.

However, when the history books ofthis period are written in a decade or less,I am sure that the new powers vested inthe European Parliament, the democrati-cally elected body of the Europeans, willonce again prove to have been the mostspectacular change to the way Europeancooperation functions

The last quarter of 2010 has been mar-ked by the fight over the EuropeanUnion's budget for next year. The negotia-tions culminated with a stalemate between

the Parliament and the Council in No-vember. As this article goes to print we arestill not sure whether a 2011 budget willbe adopted or whether we will have toenter the new year with provisional anddeeply unsatisfactory monthly appropria-tions.To many, the budget crisis is justanother row over technicalities betweenthe EU's two lawmaking institutions. Nottrue. The problem is fundamentally politi-cal. It is not a question about how muchpublic money Europe should spend, buthow to spend the money in the most effi-cient way. To me, there is no doubt: themore the 27 Member States work togetheron common actions and projects, the moreefficiently do we spend the taxpayers'money. Should we pool fewer resourcesand work less together because there is adeep economic crisis which has hit hard inmany Member States? I don't think so.The fact of the matter is that one Euro

spent in a national budget is to a large ex-tent eaten by huge national debts whichhave to be serviced before whatever is leftcan be spent on something useful. OneEuro spent together in the EU is worth afull Euro because the European Uniondoes not have debt, nor do we have bud-gets in the red. Neither is allowed in theEU Treaties.

Moreover, Europe's national govern-ments have decided to give an ever-incre-asing number of tasks and responsibilitiesto the EU. The EPP Group therefore asksministers to make sure that the new EUprogrammes they call for and adopt alsoget the funding which is necessary to im-plement them.

I am always puzzled at the demand forless, not more Europe which some of Eu-rope's politicians and even some of its lea-ders are pleading for. The EPP Groupwhich I chair in the European Parliament

will never subscribe to, for instance, PrimeMinister David Cameron's minimalisticvision of Europe.

Naturally, I am not so naive as to claimthat spending all we have on Europe wouldsolve all our problems. And I am certainlynot deaf to justified criticism. Unfortuna-tely, the EU has not yet benefited fullyfrom the new tools and resources which wehave at our disposal with the new Treaty.Just to quote a few examples: we needmore from Europe on migration issues,more from Europe to ensure our security,but also to create growth and employment,to regulate the markets and to reduce ine-qualities. And we also need Europe to pro-vide citizens with a better representationin the world. How can we justify our ab-sence at the negotiating table between Is-rael and Palestine when we are the biggestdonors in the region? The answer is sim-ple: we can't. Europe is not over its manycrises, but we have made progress in tac-kling the challenges. Our citizens, and inparticular the younger generations, forwhom the EU and the advantages it offershave become self-evident, expect more andfaster action from us. These are justifiedexpectations. We have got the right toolsto work with, both in the current group of27 Member States, but also in a further en-larged EU. We cannot afford not to use theopportunity offered to us to bring togetheras many resources - political, financial,educational, scientific, cultural and social -as we can. If we succeed, history might oneday be able to look back on our era and saythat we managed to make the most of theheritage we got from the Founders of theEuropean Union.

> Quote

MEPs vote for the general 2011 budget during the Plenary Session at the European Parliamentin Strasbourg, France, 15 December 2010 |ANA/EPA/MATHIEU CUGNOT

EUROPEAN PARLIAMENT


New Year Special | January 2011EU: SPEAKING FOR EUROPEANS

BRUSSELS - 2010 has certainly beenan exciting and exhausting year. Butnone of the challenges we face in the

EU and beyond have been fully addressed, sofar.

Basically, there are still three things to do:Tackle the crisis;Find agreement on the mode of political

decision making in the EU;Seek out a modern and inclusive long

term vision for the EU.All over Europe, people are demonstra-

ting against austerity policies: against wagecuts, cuts to social benefits and public servi-ces, while they see corporate taxes and con-tributions to the welfare systems reduced.They are resisting paying the cost of the on-going financial and economic crisis; a crisiscaused by neoliberal deregulation in the fi-nancial and banking sector and misleadingeconomic strategies of privatisation and libe-ralisation.

On the institutional level, Member Sta-tes' governments are not willing to accept theprinciple of Parliamentary co-decision andscrutiny in major policy fields, particularly asregards the budget, a core competency of anyparliament in the world. Some Member Sta-tes “initiate” summit decisions, including bil-lion Euro packages, among themselves, huisclos, without any involvement from the Eu-ropean or national parliaments.

The EU2020 strategy, the so-called eco-nomic recovery plans as well as external rela-tions policy are mostly based on failedbuilding blocks:

Almost no Member State has been ableto adhere to the Stability and Growth Pact.

The principles of competitiveness andflexicurity delivered nothing for the 84 mil-lion people in the EU who live in poverty

(among them 19 million children) and nei-ther for the 1 billon people worldwide wholive on less than 1,25$ per day.

Freedom of movement and equal trea-tment has been extended for capital and (Eu-ropean) goods, but not for workers, let alonerefugees.

These issues as well as proposals are alre-ady on the table.

2011 will be a year of important debates,of striving for majorities and decisions.

For example:Cohesion policy must remain a centre-

piece of EU policy. Do we need what is cur-rently called a “transfer union”? Yes, I thinkso! Can cohesion policy work if it is subordi-nated to the priorities of “competitiveness”,“deregulation”, “adaptability” and “entrepre-neurship”? No, most probably not!

The same goes for CAP reform (and forthe fisheries sector): It must guarantee ap-propriate support for socially fair and envi-ronmentally sustainable agriculturalproduction that creates and secures employ-ment. At the same time, the EU should fi-

nally halt export subsidies that deprive far-mers in developing countries of their localmarkets and livelihoods.

Not surprisingly, the social question re-mains the key issue for the Left – first andforemost because it is the key issue for thepeople. We will underline the need to revokethe Stability and Growth Pact replacing itwith a pact for sustainable development, fullemployment, social security and environ-mental protection. Such a pact could bebased on a social progress clause that couldbe introduced into EU primary law.

It would aim at fostering public inve-stment, boosting internal demand by settingup appropriate minimum wages and othereconomic, social and environmental criteria.They must be tailor-made to the particularneeds of each Member State or region. Sucha pact must hold out against any attempt toweaken existing standards (such as the wor-king time directive).

If the question of social justice – a corevalue of the EU – is at stake, the multiannualfinancial framework 2014-2020 has to be

adapted accordingly. This does not onlyimply that sufficient money will be needed, italso means that Parliament must be fully in-volved in the decision making process. This isnothing beyond what the Lisbon Treaty pro-vides for on the co-legislative and powers ofscrutiny of the European Parliament.

As an old saying goes; “money is not eve-rything”.

But the best policy strategies will notfunction without money.

Bearing in mind the complicated nego-tiations on the 2011 budget, the austerity po-licies of Member States and – not to forget –the challenge of creating a more “Europeanimage" for the EU, the debate on the exten-sion of EU own resources is at stake.

In each and every case, stringent rules areneeded that prevent banks from taking ex-cessive risk or externalising risk to the sha-dow bank sector. Among others, it isindispensable to regulate and cut back hedgefunds, to strengthen rules on rating agencies,and to create a European public credit ratingagency. Why not introduce taxes on currencytransactions and stock exchange transactions(Tobin and/or financial transaction tax), star-ting at the EU level – one possible “own re-source”?

Yes, financial market regulation and su-pervision of rating agencies should be im-proved worldwide but as with – moreambitious and binding - climate protectionpolicy, we can and should start in the EU.

And why not debate a special EU-VATfor those enterprises that profit the mostfrom the internal market freedoms?

In short, the challenge of the day is tooverhaul the EU policy strategies and, para-phrasing Marx, the EU vom Kopf auf dieFüße stellen - to put the EU on its feet.

by Lothar Bisky MEPLothar Bisky is President of the GUE/NGL Group in the European Parliament

"Vom Kopf auf die Füße stellen" Putting the EU on its feet

> Quote

(L-R) Greek Prime Minister George Papandreou, Germany Federal Chancellor Angela Merkel and Italian Prime Minister SilvioBerlusconi during the European head of states summit in Brussels, Belgium, 16 December 2010 |ANA/EPA/OLIVIER HOSLET

EUROPEAN PARLIAMENT


New Year Special| January 2011EU: SPEAKING FOR EUROPEANS

by Rebecca HarmsRebecca Harms MEP is Co-President of the Greens/EFA group in the European Parliament

Europe in the eye of a storm

BRUSSELS - Many of the challen-ges that the European Union hasfaced in 2010 will continue to do-

minate over the coming year. This is cle-arly the case for Europe's economic andfiscal situation, but also the nationalisa-tion of European politics and concernsabout basic rights, as Europe's govern-ments lurch more to the right.

While European leaders sleepwalkedthrough the brewing economic crisis, clai-ming the worst was over, it is now clearthat the European economy is in the eyeof a storm. Given the scale of the solvencydifficulties facing national exchequers andEuropean banks, it was clear that a blin-kered focus on austerity measures wouldfail to address the problems and riskedmaking matters worse. We need a realitycheck on austerity.

The obsession with using publicmoney to recapitalise banks and protec-ting bondholders at all costs has been ca-lamitous and threatens the solvency ofmany Eurozone members. The bankingcrisis has morphed into a fight for thesurvival of the Eurozone. Even still at thispoint, the response of European leaders isdithering.

Clearly, we need to put into place apermanent and legally-watertight crisismechanism, which foresees debt restruc-turing to which bondholders also contri-bute. However, with the risk of a dominoeffect on the solvency of Eurozone mem-bers now clear and present, we urgentlyneed additional emergency measures, asthe current crisis mechanism is at its li-mits. This must also include provisions onrestructuring and bondholder liability.

Of course, the political situation at

EU-level has not facilitated coherent po-licy-making. There is an ever-clearertrend towards the nationalisation of Eu-ropean politics, with member states coun-terproductively defending their ownnarrow interests at the expense of thewider European interest.

Nowhere has this been more evidentthan in discussions on the EU budget for2011. The intransigent posturing of ahandful of member states has lead to astalemate. Money is not the problem, withthe European Parliament having agreedto the demands of the Council. Unfortu-nately, the blocking minority of memberstates seems to think it can just put its fin-gers in its ears and fail to implement theprovisions of the Lisbon Treaty on forma-lising the role of the Parliament in futurenegotiations on the EU's financial per-spectives.

The UK and Dutch governments maywant to play to their domestic grand-stands but they are being dishonest totheir electorates and ultimately acting

against their own national interests. TheCouncil must not let itself, and the EUbudget, be held hostage to this populism.We need to reach a pragmatic agreementas soon as possible.

The ongoing situation in France, Italyand other member states, where the na-tional authorities are actively discrimina-ting against the Roma (and otherminorities) is completely at odds with thefundamental rights on which the EU isfounded. Regrettably, the Barroso IICommission seems to retain a preferencefor kowtowing to member state govern-ments, rather than living up to its role asguardian of the treaties and defending therights of its citizens.

The Roma expulsions must be viewedin the context of growing lurch to theright in European politics. In this context,and with the fundamental rights of EUcitizens under growing threat, the needfor a strong European Commission to en-force the European treaties and legislationis more important than ever.

The EU has also slipped back in its ef-forts to transform our dated and flaggingeconomy to a green, sustainable economy.In the aftermath of the EU's ignominiousfailure in Copenhagen, Europe shouldhave seized the opportunity to push aheadwith more ambitious climate policies ne-cessary to pursue green growth.

The current 2020 greenhouse gas re-duction target of 20% is clearly obsoleteand there is plenty of evidence to suggestit is, in fact, holding back green inve-stments. The EU urgently needs to takethe belated step-up to a 30% reductiontarget to spur green growth. Making itstarget of reducing energy consumption20% by 2020 binding would also be a cru-cial step to this end. We can no longerwait for the outcome of the UN climatetalks or hide behind US inaction: pushingahead is in the European interest and theEU should lead by example.

In the context of the UN climate talks,the EU needs to play a much more proac-tive role in putting the negotiations backon track. Decisions on key areas like cli-mate aid and forestry emissions must beachieved in Cancun if we are to achieve afinal binding UN deal in 2011. To thisend it is both regrettable and embarras-sing that the EU is falling short of its pro-mised climate aid pledges for this year,and that much of this aid is not new andadditional, and is made up of loans. Thiswill do little to rebuild the much-neededconfidence of developing countries.

Europe has risen to meet daunting ch-allenges in the past and it can still do so,but only if its member states act togetherand realise that the European interest isthe national interest.

> Quote

French Police looking on as Roma evacuate an illegal squat in Saint Martin d'Heres,France, 19 August 2010 |ANA/EPA/MAXPPP/MARC GREINER

EUROPEAN PARLIAMENT


New Year Special | January 2011EU: SPEAKING FOR EUROPEANS

by Timothy Kirkhope Timothy Kirkhope is the Deputy Chair of the European Conservatives and Reformists Group in the European Parliament.

BRUSSELS - The highlight of thisyear for me has to be the change ofgovernment in the United Kin-

gdom and the election of my party leaderDavid Cameron as Prime Minister.

After thirteen years of a tired old La-bour party, we have seen the impact thatour coalition government is having notjust at home but also around the world.The previous government's approach tothe EU was one of retreat and bleat (i.e.do nothing in Brussels to stand up foryour nation but then posture and declaregreat victory in the British press). Our co-alition's policy has been one of positiveand constructive engagement but strongdefence of the national interests.

I was also very pleased to see that sh-ortly after his election, David Cameronwas joined by another European Conser-vatives and Reformists group leader in theEuropean Council when Petr Necas ofour sister ODS party was elected PrimeMinister of the Czech Republic.

The ECR group has continued togrow in strength and stature and to esta-blish itself as a credible force in the Eu-ropean Parliament for all those who wantthe EU to take a different path, away fromthe inexorability of federalism and to-wards a reformed EU that respects subsi-diarity.

Our group did suffer from a terribletragedy in the Spring when the Presidentof Poland, from our sister Law and Justiceparty, was killed along with his wife and94 other major figures in Poland . Ourwhole group mourned the loss.

This was also the year when Europestruggled to articulate a response to the fi-nancial crisis, recession and subsequentlythe Eurozone crisis that engulfed it. TheEU's response seemed to be somewhatknee-jerk to the financial crisis, seeking topoint the finger at any scapegoat it couldfind: hedge funds, Credit Rating Agen-cies, you name it. We managed to amendthe hedge funds directive to make it ma-nageable and we will have to do the samewith further EU financial services regula-tion coming down the pipeline.

The crises across the Eurozone sawprevious policy failures of a number of ad-ministrations come back to haunt all of us.It is in all of our interests that the Euro-zone does not fail; but stopping specula-tion seems to be beyond the powers of anypolitician or institution. I, for one, wouldtake no pride in seeing the Euro collapse.

The UK did not sign up to it but we needit to succeed.

Inside the European Parliament, I willremember this year as the year in whichthe institution gained new powers with-out necessarily understanding the level ofresponsibility that must come with them.The vote on the Terrorist Finance Trac-king Programme, which was initially re-jected by the parliament, left a massivetransatlantic data gap.

Voting for a six percent increase in theEU budget at a time of swingeing natio-nal austerity was seen by many people asout of touch. Creating further uncertaintyin the markets by failing to agree a budgetunless the parliament was given assuran-ces on future budgets, particularly regar-ding EU Own Resources (AKA Taxes)was not the most responsible action of agrown-up parliament in my view. I hope

that, as we enter our second full year withthese new powers, we will ensure that weexercise our mandates forcefully but witha sense of responsibility and proportiona-lity.

The EU faces a crisis on many fronts.Most worrying for me is the political cri-sis of confidence in the EU. The LisbonTreaty was meant to provide more stre-amlined procedures and a clear objective.Instead, it has led to more confusion andpower struggles. 2011 needs to be a yearof reform: not necessarily to the EU's in-stitutions but to its policies. I want theEU to succeed which is why I want it toreform.

The EU will have an excellent oppor-tunity to demonstrate it is in touch withthe people next year when debate surro-unding the next medium-term EU bud-get really gets going.

We must provide far greater value formoney, to redirect resources to projectsthat add value to national governments,and to substantially trim the fat of the in-stitutions so that the EU does less butdoes it better.

As we in the UK begin to feel the ef-fect of the unavoidable austerity measuresat home, it will be simply unacceptable ifwe are asked to hand over more of ourmoney to Brussels .

Our EU contributions must not incre-ase and we must keep our rebate. If theEU wants to avoid shooting itself in thefoot yet again, it should seriously reconsi-der any efforts to increase the budget orto give itself tax-raising powers.

> Quote

Great Britain Prime Minister David Cameron pictured during the second day of the European Top Summit inBrussels, Friday 17 December 2010 |ANA/EPA/JULIEN WARNAND

The EU Needs Greater Value for Money EUROPEAN

PARLIAMENT


New Year Special| January 2011POLITICS: FOCAL POINTS

by Recep Tayyip ErdoğanRecep Tayyip Erdoğan is the Prime Minister of the Republic of Turkey

Turkey: The New Indispensable Nation

ANKARA – Turkey put its imprintas one of the most influential coun-tries not only on 2010, but on the

first decade of the third millennium. At thestart of the new decade, too, Turkey’s geo-political position, rich historical heritage,cultural depth, well-educated young popu-lation, ever-strengthening democracy, gro-wing economy, and constructive foreignpolicy make it an indispensable country in aworld transformed by rapid globalization.

By making use of all of its assets, Tur-key is contributing to regional stability andpeace and working towards a global orderbased on justice, equality, and transparency.As an emerging power, Turkey will conti-nue to realize its own potential and simul-taneously contribute to global peace.

The chaotic conditions of the post-ColdWar world have made civil wars, occupa-tions, nuclear armament, and human traf-ficking chronic problems. Whileglobalization offers new opportunities, italso causes new global problems and dee-pens the inequalities embedded in theworld order. It is no longer possible to su-stain the current world order, which, basedas it is on a skewed notion of center-peri-phery relations, merely produces injusticeand inequality.

Turkey seeks to contribute to regionaland global peace by facilitating democraticreforms domestically and implementing aprincipled foreign policy. As a NATOmember, Turkey aims to become a fullmember of the European Union and esta-blish cordial relations with all of its south-ern and eastern neighbors. Turkey’s posture– looking both East and West – is neitherparadoxical nor inconsistent. On the con-trary, Turkey’s multidimensional geopoliti-cal position is an asset for the region.

There are few countries that can playsuch a critical role. Turkey constitutes a newsynthesis because of its ability to link suchdiverse qualities and backgrounds. Turkey isthus capable of overcoming the dichotomiesof East-West, Europe-Middle East, andNorth-South.

Indeed, this capacity is essential becausewe need to leave behind the Manichean di-sagreements, conflicts, and fears of the ColdWar era. Those who see the world throughthose old, fearful lenses have difficulty un-derstanding Turkey’s rising profile and dy-namism. But the realities of the twenty-firstcentury necessitate a multi-dimensional andinclusive political perspective.

Acting on these principles, Turkey isfollowing a proactive foreign policy stretch-ing from the Balkans to the Middle Eastand the Caucasus. This geography is Tur-key’s natural historical and cultural hinter-land. Turkey’s cultural and historical linkswith the peoples of these regions are deepand conducive to regional peace.

Turkey cannot remain indifferent to thisgeography, for it stands at the center of it.History clearly shows that it is impossibleto establish and sustain global peace with-out ensuring peace and stability in the Bal-kans and the Middle East. Turkey isfollowing a constructive and inclusive po-licy for these regions, which are marked byremarkable models of cohabitation, science,arts, culture, and civilization.

Due to our recent efforts, the wounds ofthe Bosnian war are being healed, facilita-ting peace and stability among Balkan peo-ples. Turkey’s efforts are also helping toprevent wars in the Middle East, and ourintense efforts have helped keep a diploma-tic track open on the Iranian nuclear issue.

Moreover, we are helping to facilitatepolitical stability in Iraq and helping theNATO mission in Afghanistan. And, of pa-ramount importance, Turkey is makingenormous efforts to help establish an inde-pendent and sustainable Palestinian state –efforts that are appreciated by Turkey’s We-

stern and Eastern friends alike.Today, Turkey is following a policy that

represents a sense of justice in the MiddleEast, and is working toward the removal ofartificial borders and walls among the re-gion’s peoples. We desire to live in a regionwhere the dignity of every person is respec-ted. That is why we have objected to Israel’saggression in and blockade of Gaza, andwill continue to do so.

We know that it is not possible to attainglobal peace unless we establish sustainablepeace in the Middle East, which requiresresolving the Palestinian question. There-fore, we urge Israel and all other countriesinvolved to follow constructive and peacefulpolicies.

Motivated by these principles, SpanishPrime Minister José Luis Rodríguez Zapa-tero and I showed through our “Alliance ofCivilizations Initiative” in 2004 that cultu-ral, historic, and religious differences are noreason for conflict. The basis for our appro-ach to humanity is the following principleof the famous Turkish poet Yunus Emre:“We love and respect the created because ofthe Creator.”

As a result, we stand firmly opposed todiscrimination against any society, religion,sect, culture, or country. I consider anti-Se-mitism, Islamophobia, and prejudice againstChristianity crimes against humanity,whose common values and ethical rulesoblige us to confront and reject all forms ofdiscrimination.

Besides its cultural, historic, and diplo-matic values, Turkey’s vibrant economy hasbecome a source of stability and welfare.When my party took office in 2002, theTurkish economy totaled around $250 bil-lion. Today, Turkey’s annual GDP has rea-ched $800 billion, making it Europe’s sixthlargest economy and the 17th largest in theworld. It has also been one of the least im-pacted by the global economic crisis, withgrowing foreign trade, a strong banking sy-stem, and diverse and prospering small andmedium-size enterprises. Thus, the Turkisheconomy returned to its pre-crisis levels in2010.

All of these qualities have transformedTurkey into an attractive place for business,media, artists, diplomats, students, and non-governmental organizations from aroundthe world. Turkey’s ever-increasing softpower is becoming one of its most signifi-cant traits, which we will continue to use toenhance regional and global peace.

The impact of globalization has brou-ght about a rebalancing of power, but thedemand for justice, transparency, and legiti-macy remains constant. The global pro-blems of our times necessitate cooperation,political will, and sacrifice. That is why weare following a proactive policy in multila-teral institutions to facilitate an equitablesharing of our world’s resources.

Turkey will continue to work toward ajust and equitable global order in 2011 andbeyond. This is a responsibility emanatingfrom our history, geography, and the uni-versal values that we hold.

> Quote


The Bosporus bridge (L) and the Ortakoy Mosque (R) seen as the Bosporus is covered by heavy fog dur-ing a sunny day in Istanbul, Turkey. Istanbul was one of the three European Capitals of Culture in 2010along with Essen, Germany, and Pecs, Hungary |ANA/EPA/TOLGA BOZOGLU

Page 20| New Europe

New Year Special | January 2011POLITICS: FOCAL POINTS

DUSHANBE - The Republic ofTajikistan attaches great impor-tance to the development and ex-

tension of relations with the EuropeanUnion. Relations with the EU are amongpriority directions of the foreign policy ofour country.

The official visits of the President ofthe Republic of Tajikistan H.E. EmomaliRahmon to Brussels and several Europeancountries in February 2009 have confir-med the adherence of the Republic of Ta-jikistan to comprehensive development ofpartnership and cooperation with the EU.

The President of Tajikistan H.E.Mr.Emomali Rahmon submitted the pac-kage of the priority projects of regional si-gnificance to the leadership of theEuropean Commission. We hope that theEuropean Commission after thoroughconsideration of these projects will make apositive decision.

Tajikistan believes that the implemen-tation of the EU Strategy will contributeto the integration process in Central Asiaand will improve the bilateral relationsbetween countries in the region. The Stra-tegy covers the most significant and im-portant trends and areas of cooperationbetween Central Asian countries and theEuropean Union.

Bilaterally, an EU-Tajikistan relationis governed by the Partnership and Coo-peration Agreement, which was signed inlate 2004 and expected to enhance bilate-ral relations and heighten the EU profilein Tajikistan, as it sets out the parametersfor increased political dialogue and coo-peration and aims to promote bilateral

trade and investments. It provides a comprehensive and am-

bitious framework for joint EU-Tajikistanwork, in all key areas of reform.

The first meeting of the CooperationCouncil was held on December 13th,2010 in Brussels. The Co-operation Co-uncil provided a good opportunity to re-view recent economic and social reformsin Tajikistan.

Cooperation between Tajikistan andthe EU has been actively and intensivelydeveloped during the last years. Tajikistanis pursuing a closer relationship with theEuropean Union, targeting its co-opera-tion, to facilitate economic transition, pro-moting inclusive, sustainable human andeconomic development.

Tajikistan is interested in maximumuse of the bilateral economic cooperationpotential with the EU, attraction of Euro-pean investments to the development ofpriority areas of the country's economy,

in particular hydropower, transport andcommunications, industry and agriculture.

In relations with the EU the Republicof Tajikistan proceeds from the need tocover the most important trends and areasof interaction, including the process of de-mocratization, rule of law, border mana-gement, combating drug trafficking,transport and energy, particularly renewa-ble energy, water management, environ-mental protection, education, trade andinvestment, support of Tajikistan’s acces-sion to WTO.

The economic cooperation betweenthe Republic of Tajikistan and the EUneeds to be elevated to the level of politi-cal relations.

Tajikistan also receives regional andthematic assistance in areas like bordermanagement and drug control(BOMCA/CADAP), education (TEM-PUS, Erasmus Mundus), water / environ-ment, human rights and democracy

(EIDHR), non-State actors (NSA) andSME development (CA-Invest), and di-saster preparedness (DIP-ECHO).

Tajikistan first among the CentralAsian countries signed the frameworkAgreement on cooperation with the Eu-ropean Investment Bank. We hope thatafter its entry into force (1st December2009), the EIB will be actively involved ininvestment of projects in Tajikistan, parti-cularly in the hydropower sector.

The good example is the reconstruc-tion project of Kayrakum Hydropowerstation. It is planning to be started during2010 by the European Investment Bankin cooperation with the EBRD and theEuropean Commission.

Since the adoption of the EuropeanUnion and Central Asia: Strategy for aNew Partnership in June 2007, bilateralrelations between the EU and Tajikistanhave intensified in a number of fields.One particular area is that of human ri-ghts, where the EU and Tajikistan ente-red into an enhanced dialogue in October2008. The EU-Tajikistan human rightsdialogue offers a platform for discussionon questions of mutual interest, and ser-ves to enhance cooperation on human ri-ghts.

Under current circumstances, gainingenergy independence and releasing thecountry from communication isolation isa vital necessity for Tajikistan. For thesepurposes the EU assistance is importantin conducting feasibility study on hydro-power and communication projects in Ta-jikistan.

There 64 km3 of water stock out of anaggregate volume of 115 km3 of the AralSea basin generates in Tajikistan. In addi-tion, Tajikistan has abundant unexhaustedsources of hydro-energy ranking the 8thin the world on total amount and the 2ndon specific volumes.

Total hydropower potential of the co-untry is estimated at 527 billionkWt\hours of electricity per year.

Nature, picturesque and skyscrapingmountains, as well as unique landscape inTajikistan remind of a small Switzerlandin Central Asia. Wild nature, high moun-tains, fresh spring water and ancient hi-storic sights make Tajikistan attractive fortourists.

We are confident that today more thanever before the vitalization of the activityof the European Union in Central Asiafor solution of issues related to the pro-cess of further achievement of stabilityand sustainable economic development ofthe region is important.

Only with common consolidated ef-forts of the European Union and the co-untries of the region we would be able tosolve those problems and challengeswhich our governments and the peopleface today.

The Republic of Tajikistan, on its turn,is always open for effective and construc-tive cooperation, both with the EuropeanUnion, as well as with other countries.

by Hamrokhon Zarif iHamrokhon Zarifi is the Minister of Foreign Affairs of the Republic of Tajikistan

The Message from the Roof of the World

> Quote

Russian President Dmitry Medvedev (L) speaks withTajik President Emomali Rakhmon (R) during theirmeeting in the Black sea resort of Sochi, Russia, on 18 August 2010 |ANA/ EPA/DMITRY ASTAKHOV/RIA NOVOSTI/KREMLIN POOL



By Christopher R. HillChristopher R. Hill, a former US Assistant Secretary of State for East Asia, was US Ambassador to Iraq, South Korea, Macedonia, and

Poland, US special envoy for Kosovo, a negotiator of the Dayton Peace Accords, and chief US negotiator with North Korea from 2005-

2009. He is now Dean of the Korbel School of International Studies, University of Denver.

Iran: Another Problem from Hell

WASHINGTON, DC – Throu-ghout 2010, the pattern for ne-gotiations over Iran’s nuclear

program held to form. With just aboutevery diplomatic effort failing to yield re-sults, international efforts have increasin-gly given way to discussions aboutsanctions – and what mix of them wouldbe needed to bring Iran to heel. In 2011,a renewed focus on comprehensive econo-mic sanctions could turn out to be the badidea whose time has arrived.

Sanctions, of course, have a dismal hi-storical record in achieving their aims. In-deed, they have often been more useful inproving the law of unintended conse-quences. So it might be useful to step backand take one more look at our disagreea-ble negotiating partner – Iran – to seewhat should, and should not, be emphasi-zed diplomatically.

There is nothing easy about negotia-ting with Iran. It is one of the oldest sta-tes in the broader Middle East, with adeep culture. Despite its leaders’ grim pu-blic image, Iran has a sense of humanism,as any Kurd who fled from Saddam Hus-sein’s chemical-warfare attacks along theIranian border can attest. Bending, muchless breaking, will not come naturally tosuch a prideful country.

Iran also doesn’t “play well with oth-ers.” Most Americans remember it as thecountry that abducted US diplomats soonafter its Islamic revolution in 1979, hol-ding them for no apparent purpose for444 days. No American diplomat has beenstationed in Tehran since. American atti-tudes toward Iran are probably far moreconditioned by that episode than peoplerealize.

Iran is also internally divided. Its mul-

lahs bicker constantly, seeming to reflectthe country’s broader cleavages. Iran’s ci-vilian authorities apparently have limitedcontrol over the military and the dreadedsecurity services, which seem to answer tono one but themselves.

Iran’s Islamic Revolution, moreover,has run into a familiar contradiction: itcannot further its aims without acceptingWesternization and modernization. Iran’syouthful population – a product of themassive post-revolution baby boom – isincreasingly frustrated and depressed; notsurprisingly, young Iranians are havingfewer children than ever. As the June 2009election protests showed, Iran’s urbanyouth desperately want to end the coun-try’s isolation, but they have increasinglyfound that the only way out of isolation isto study or work abroad – and never re-turn.

Iran does not live in a great neighbo-rhood, either. Turkey can be a good nei-

ghbor, but otherwise Iran is bordered byinhospitable states to the east and thenorth. And, while its western neighborIraq is a fellow Shia-majority state, Iraq’sArab Shia make no secret of their distastefor the Persians and their claim to Shiaprominence. While most of the worldmay have missed it, there is an ongoingcompetition between Iraq’s Najaf andIran’s Qom over which city is holier.

Iran has virtually no friends among theSunni Arab states. As the world recentlylearned from the WikiLeaks release of USdiplomatic cables, Sunni Arab leaders areno more tolerant of an Iranian nuclearbomb than is the US or its allies. TheSunni reaction to Iran may reflect deep-seated suspicions about the Shia (witnessthe cold shoulder given by most Sunnis toShia rule in Iraq). Iran’s only friends, itseems, are those – like the Chinese – whoare more interested in its natural resourcesthan its people.

While sanctions may deepen Iran’spredicament, they are unlikely to breakthe diplomatic impasse on nuclear wea-pons. But, given the Iranian government’sincreasingly unhelpful reactions to diplo-matic overtures, there is unlikely to be anyinterest in toning down sanctions. Indeed,just the opposite response is likely – ef-forts to tighten sanctions still further.

Yet, just as the US adopted a “bomband talk” approach with the Serbs duringthe dénouement of the Bosnian war,America must be willing to “sanction andtalk” when it comes to Iran, thereby crea-ting greater space for an eventual diplo-matic strategy.

First, the US should consider establi-shing diplomatic relations with Iran andputting diplomats on the ground. Thiswould not be an easy process, and couldwell meet considerable Iranian resistance.But the Iranians have diplomatic relationswith other members of its main interlo-cutor in talks on its nuclear program, thesanctions-minded P-5+1 Group (China,France, Germany, Russia, the United Kin-gdom, and the US), and restoring Iran-USdiplomatic ties would shorten lines ofcommunications and close the 444-daychapter of 1979-1981.

Second, even if a stronger bilateralmechanism is forged, it should not be al-lowed to displace the P-5 approach. Theability of this group to work together iscritical to resolving this and future crises.

Third, the US should continue its ef-forts to encourage action by Iran’s neigh-bors. While Turkey’s lurch into the fray in2010 may have been unwelcome, its inte-rest in calming a situation involving animmediate neighbor is understandable.More problematically, the Sunni Arab sta-tes should also give more serious thoughtto addressing the situation, and shouldseek to reconcile their private and publicpostures.

Iran, after all, is not building an Isla-mic bomb. It is building an Iranian bomb,or, worse yet, a Shia bomb that Arab lea-ders must be more resolute in trying tostop. Private expressions of deep concerndo not compensate for public nonchalance(or changing the topic to Israel), and arehardly a basis for a successful policy to-ward a country whose nuclear ambitionscould have a catastrophic impact on theregion.

Finally, the Chinese and the Russianshave been brought along principally bythe US to a more robust policy, yet theyremain reluctant.

They need to convey through theirown bilateral approaches to Iran a senseof urgency – and perhaps even express alittle anger – at Iran’s unwillingness to ne-gotiate seriously.

Sanctions should be a tool of diplo-macy, not the other way around. Even aswe look to tighten sanctions on Iran in2011, we must strengthen our efforts toestablish a strong political and diplomatictrack.

> Quote


Iranian march during a protest demonstration against the Koran-burning initiative in the US, inTehran, Iran, 17 September 2010 |ANA/EPA/ABEDIN TAHERKENAREH

Page 22| New Europe


NEW YORK – For nearly a de-cade, American foreign policyhas been dominated by the wars

in Iraq and Afghanistan. As 2011 begins,with 50,000 US soldiers still in Iraq andanother 100,000 in Afghanistan, it maynot look like that era is coming to an end.But it is.

Iraq, the second most expensive “warof choice” (after Vietnam) in Americanhistory, is for the United States reachinga level of effort that will no longer absorbsubstantial military and economic reso-urces or garner significant domestic po-litical attention. All US troops are due toleave Iraq by the end of 2011.

Even if, as seems likely, several thou-sand soldiers remain, the number will besmall and their role limited to advisingand training Iraqi military and police for-ces and conducting missions against ter-rorists. Eight years, 4,300 lost Americanlives, and more than a trillion dollarslater, it will be, for better or worse, mo-stly Iraqis who determine their country’sfuture.

The initial performance of an Iraqrun by Iraqis is less than encouraging. Tobe sure, there have been a number of re-latively fair elections, political life is ac-tive, and the economy is growing. ButIraqi leaders’ difficulty in forming a go-vernment following last spring’s electionsbodes poorly.

Indeed, a political culture of compro-mise has not taken root, and the countrycontinues to be divided by geography,ethnicity, religion, and politics. There isno consensus on how to share the poten-tial wealth from Iraq’s vast energy reso-urces. The Kurdish north is largelyautonomous; where its writ ends and thecentral government’s begins is unsettled.Iranian influence is pervasive in the southand extensive in the center.

Moreover, the country still experien-ces regular bombings, and millions of Ira-qis are either internally displaced orrefugees. In short, conditions in Iraq,while significantly better than five yearsago, are more likely to deteriorate thanimprove.

Afghanistan is moving at a much slo-wer pace when it comes to US troop re-ductions. The Obama administration islikely to remove a small number of USsoldiers in July, the date selected by thepresident for the beginning of the Ame-rican military drawdown. But it will beonly the beginning of an extended, gra-dual process of American military reduc-tion, one that looks like it will take fouryears – and quite possibly longer.

What the US will have to show thenfor more than a decade of sacrifice andinvestment in Afghanistan is anybody’sguess. The sum total of the US effort interms of American money and lives willlikely be less than in Iraq, but still sub-stantial.

And it is difficult to be optimistic

about Afghanistan, given the Taliban’s re-silience, the weakness and corruption thatplague the government, and the realitythat Pakistan will continue to be a sanc-tuary for the Taliban and other armedgroups seeking to gain a foothold (ormore) in Afghanistan. An Afghanistanthat resembles a normal country is vir-tually impossible to foresee.

Nevertheless, the decisions to scaleback American involvement decisively inIraq, and gradually in Afghanistan, willultimately have significant consequencesfor the US – many of them welcome. Oneis financial. Current US policy towardIraq and Afghanistan costs roughly $150billion per year, which is more than 20%of total US defense spending. Cuttingthis sum will free up much-neededmoney for other defense needs and fordeficit reduction, arguably the principalnational security challenge facing the US.

Troop reductions in Iraq and Afgha-nistan will also allow the US military tobegin to recover from these two conflicts.Neither soldiers nor equipment can su-

stain the performance that has been de-manded of them. Recruitment and reten-tion of highly skilled individuals in theUS armed forces will increase as the levelof effort in the two conflicts winds down,and a great deal of deferred military mo-dernization will occur.

More fundamentally, reducing US in-volvement in Iraq and Afghanistan willpermit a rebalancing of US foreign anddefense policy. The two conflicts have ab-sorbed a disproportionate share of thecountry’s resources – military and econo-mic to be sure, but also the time and at-tention of policymakers and diplomats.

In the short run, doing less in Iraqand Afghanistan will allow the US toconcentrate on the two most immediateexternal threats to US interests: Iran andNorth Korea.

In the long run, the US needs to ge-nerate domestic and international sup-port for regional and global arrangementsdesigned to manage the defining pro-blems of this era, from the spread of nu-clear materials and terrorism tomaintaining an open world economy andslowing climate change. This will requirea foreign policy that focuses on the emer-ging powers of the twenty-first century,many of which are in Asia.

The US largely squandered the op-portunity to shape the international sy-stem in the first decade of the newcentury. Iraq and Afghanistan proved tobe strategic distractions, and, particularlyin Afghanistan, the US should resistpressures to prolong a substantial militarypresence.

There is now an opportunity to reo-rient American foreign policy to concen-trate on what matters most. It is in theinterest of the US and the world that thisopportunity not be missed.

by Richard N. HaassRichard N. Haass, a former Director of Policy Planning in the US State Department and currently President of the Council on

Foreign Relations, is the author of War of Necessity, War of Choice: A Memoir of Two Iraq Wars.

The Endgames in Iraq and Afghanistan

> Quote


Two Iraqi policemen stand guard at a checkpoint in central Baghdad, Iraq, 25 November 2010 |ANA/EPA/ALI ABBAS



SAO PAULO – The war on drugs isa lost war, and 2011 is the time tomove away from a punitive appro-

ach in order to pursue a new set of poli-cies based on public health, human rights,and common sense. These were the corefindings of the Latin American Com-mission on Drugs and Democracy that Iconvened, together with former presi-dents Ernesto Zedillo of Mexico andCésar Gaviria of Colombia.

We became involved with this issuefor a compelling reason: the violence andcorruption associated with drug traffic-king represents a major threat to demo-cracy in our region. This sense of urgencyled us to evaluate current policies andlook for viable alternatives. The evidenceis overwhelming. The prohibitionist ap-proach, based on repression of productionand criminalization of consumption, hasclearly failed.

After 30 years of massive effort, allprohibitionism has achieved is to shiftareas of cultivation and drug cartels fromone country to another (the so-calledballoon effect). Latin America remainsthe world’s largest exporter of cocaineand marijuana. Thousands of young peo-ple continue to lose their lives in gangwars. Drug lords rule by fear over entirecommunities.

We ended our report with a call for aparadigm shift. The illicit drug trade willcontinue as long as there is demand fordrugs. Instead of sticking to failed poli-cies that do not reduce the profitabilityof the drug trade – and thus its power –we must redirect our efforts to the harmcaused by drugs to people and societies,and to reducing consumption.

Some kind of drug consumption hasexisted throughout history in the most

diverse cultures. Today, drug use occursthroughout society. All kinds of peopleuse drugs for all kinds of reasons: to re-lieve pain or experience pleasure, toescape reality or enhance their perceptionof it.

But the approach recommended inthe Commission’s statement does notimply complacency. Drugs are harmful tohealth. They undermine users’ decision-making capacity. Needle-sharing spreadsHIV/AIDS and other diseases. Addic-tion can lead to financial ruin and dome-stic abuse, especially of children.

Cutting consumption as much as pos-sible must, therefore, be the main goal.But this requires treating drug users notas criminals to be incarcerated, but as pa-tients to be cared for. Several countriesare pursuing policies that emphasize pre-vention and treatment rather than re-pression – and refocusing their repressivemeasures on fighting the real enemy: or-ganized crime.

The crack in the global consensusaround the prohibitionist approach is wi-

dening. A growing number of countriesin Europe and Latin America are movingaway from a purely repressive model.

Portugal and Switzerland are compel-ling examples of the positive impact ofpolicies centered on prevention, trea-tment, and harm reduction. Both coun-tries have decriminalized drug possessionfor personal use. Instead of leading to anexplosion of drug consumption, as manyfeared, the number of people seeking tre-atment increased and overall drug usefell. When the policy approach shiftsfrom criminal repression to public health,drug users are more open to seeking tre-atment. Decriminalization of consum-ption also reduces dealers’ power toinfluence and control consumers’ beha-vior. In our report, we recommend eva-luating from a public-health standpoint– and on the basis of the most advancedmedical science – the merits of decrimi-nalizing possession of cannabis for per-sonal use.

Marijuana is by far the most widelyused drug. There is a growing body of

evidence suggesting that the harm it ca-uses is at worst similar to the harm cau-sed by alcohol or tobacco. Moreover, mostof the damage associated with marijuanause – from the indiscriminate incarcera-tion of consumers to the violence andcorruption associated with the drug trade– is the result of current prohibitionistpolicies.

Decriminalization of cannabis wouldthus be an important step forward in ap-proaching drug use as a health problemand not as a matter for the criminal ju-stice system.

To be credible and effective, decrimi-nalization must be combined with robustprevention campaigns. The steep and su-stained drop in tobacco consumption inrecent decades shows that public infor-mation and prevention campaigns canwork when based on messages that areconsistent with the experience of thosewhom they target. Tobacco was de-gla-morized, taxed, and regulated; it has notbeen banned. No country has devised acomprehensive solution to the drug pro-blem. But a solution need not require astark choice between prohibition and le-galization. The worst prohibition is theprohibition to think. Now, at last, thetaboo that prevented debate has beenbroken. Alternative approaches are beingtested and must be carefully reviewed. Atthe end of the day, the capacity of peopleto evaluate risks and make informed ch-oices will be as important to regulatingthe use of drugs as more humane and ef-ficient laws and policies. Yes, drugs erodepeople’s freedom. But it is time to reco-gnize that repressive policies towardsdrug users, rooted as they are in prejudice,fear, and ideology, may be no less a threatto liberty.

by Fernando Henrique CardosoFernando Henrique Cardoso, a former President of Brazil (1995-2002 ), is Co-Chair of the Latin American Commission on

Drugs and Democracy, and convener of the Global Commission on Drug Policy.

Ending the Never-Ending War on Drugs


> Quote

Spanish customs agents oversee the unloading of 20 tonnes of cannabis pollen seized by Spanish po-lice from a Dutch-flagged fishing boat 120 miles off the southern coast of Spain, at the port ofCadiz, Spain, 12 November 2010 |ANA/EPA/ROMAN RIOS

Page 24| New Europe


LAHORE – Pakistan remains theworld’s never-ending question. As2010 concludes, several outstan-

ding issues continue to bedevil the coun-try. How they are managed in the yearahead will determine not only Pakistan’simmediate future and long-term pro-spects, but also the security of its regionand, indeed, much of the world.

It has been said – without exaggera-tion – that Pakistan faces an existentialthreat. The country has not defined acoherent approach towards those who areresorting to terrorism to advance theiragendas, both within Pakistan andabroad. It remains uncommitted to theidea of denying sanctuaries on its terri-tory to Taliban fighters battling Ameri-can and NATO troops in Afghanistan.Relations with India have soured in re-cent months, because Pakistan’s govern-ment is once again lending diplomaticsupport to the insurgency in Indian-con-trolled Kashmir.

Domestic terrorism in Pakistan hastaken a heavy human and economic toll.It is no longer aimed at official supportof United States-led anti-terrorism acti-vities. Sunni Islamic extremists now tar-get minority groups as well as otherMuslim sects. Some 800 liberal and SufiIslamic scholars have died in targeted kil-lings by extremist groups who receive fi-nancial assistance from like-mindedpeople in the Middle East, and somewell-known and much-visited Sufi shri-nes have been bombed.

The economy is in shambles, and

unable to meet the International Mone-tary Fund demands for its continued sup-port. If the IMF terminates its currentprogram, Pakistan will be unable to ser-vice its foreign debt. Indeed, a senior ca-binet minister suggested recently that theinternational community should write offPakistan’s debts – an amount estimated at$40 billion. The minister of finance for-cefully repudiated the suggestion the fol-lowing day, indicating that thegovernment has not developed a consi-stent approach towards the faltering eco-nomy.

The economy was also badly hurt bythe massive floods of 2010, which causeddamage estimated at $10 billion. This da-mage could lower annual GDP growth by1-1.5% for several years to come. In the2010-2011 fiscal year, the IMF estimates

that economic output will increase by lessthan 3% – one-third the rate expected inneighboring India and less than half thatof Bangladesh.

Slower economic growth will cause ashortfall of jobs for new entrants to theworkforce, thereby increasing the inci-dence of poverty. Indeed, the number ofpeople living in absolute poverty is likelyto increase by 10 million, bringing thetotal to more than 70 million, or 40% ofthe population. Pakistan thus ends 2010as the sick man of South Asia.

The political system also remains un-settled. Despite passage in July of the18th amendment to the Pakistani consti-tution, which restored it to the form inwhich it was promulgated in 1973, poli-tical and executive authority remains inthe hands of President Asif Ali Zardari.

The changes are supposed to make theexecutive branch accountable to the elec-ted parliament, expand the prime mini-ster’s authority, devolve more power tothe provinces, and ensure independenceto the judiciary. In late 2009, the presi-dent also approved the seventh NationalFinance Commission, which will allocateto the provinces a larger share of the re-venues collected by the central govern-ment. But a significant transfer of powerfrom the presidency to parliament, orfrom the central to provincial govern-ments, has yet to be brought about.

Worse yet, the military remains ou-tside civilian control. General AshfaqPervez Kayani’s term in office, which wasset to expire in November, was extendedby three years. Thus empowered, the ge-neral has been able to exert his influenceover foreign policy, in particular in defi-ning the country’s relations with the US,India, and Afghanistan. Even though theUS offered $2 billion of assistance to themilitary to be disbursed over a period of3-5 years, Kayani has resisted Americanpressure to move against the Taliban’ssanctuary in North Waziristan, used tostage operations against US and NATOtroops in southern and eastern Afghani-stan.

So, is a further increase in violence byvarious extremist groups likely? Will theeconomy collapse if the IMF withdrawsits support? Will the US increase its pres-sure by intervening militarily if Pakistancontinues to harbor Taliban fighters ope-rating from the tribal areas? Will the mi-litary subvert the constitutional changesaimed at reforming the political system?

Despite all the grim news and augu-ries, there is some hope, owing to the in-creased political mobilization ofPakistan’s middle classes, whose membershave finally begun to question thoseespousing extremism. The judiciary isalso more active, and is attempting toforce the executive to remain within thebounds of the constitution.

Moreover, a trade agreement with Af-ghanistan that allows Afghan goods tocross Pakistan en route to India may beone step towards an improvement of eco-nomic relations with that large and ra-pidly growing neighbor.

Indeed, an able economic team thathas been installed in the governmentseems – at long last – to be addressingsome of the economy’s deep structuralflaws. As India in the 1990’s and Brazilin the early 2000’s showed, economies indeep distress can recover quickly once theright policies are implemented. It couldalso happen in Pakistan, which wouldhelp to solve other, seemingly intractableproblems.

So all hope is not lost in Pakistan. Onthe contrary, 2011 may well prove to be abetter year for a battered economy and apolitical system under stress.

by Shahid Javed BurkiShahid Javed Burki, a former Finance Minister of Pakistan and Vice President of the World Bank, is currently Chairman of the

Institute of Public Policy, Lahore.

Whither Pakistan?

> Quote


Elders of the Mehsud tribe, attend a Jirga, a centuries old tribal mechanism to resolve disputes, in Tank, atown neighboring south-Waziristran tribal region near the Afghan border in Pakistan, 20 December 2010|ANA/EPA/SAOOD REHMAN



BRUSSELS - Georgian President Mi-kheil Saakashvili held a speech in theEuropean Parliament recently. This

came apparently as no surprise because headsof states and prime ministers speak at the Eu-ropean Parliament virtually every month. Ho-wever, this was Mikheil Saakashvili’s secondvisit to the European Parliament. So far, onlythe Dalai Lama has had this privilege. M. Sa-akashvili was also a guest in the Foreign AffairsCouncil and showed unprecedented pro-Eu-ropean openness to discussion and an in-depthdebate with MEPs from many countries. Wi-thout doubt, this is an interesting signal of aEuropean offensive in Georgian foreign policy.The European Parliament welcomes such si-gnals with undisguised satisfaction, especiallyas Europe shows lively interest in the situationin the Caucasus. The European Parliament hasbeen the first and foremost forum for Geor-gians intending to demonstrate their effort inreforming their country and convince Europeabout their political arguments. One notewor-thy fact is that in his speech the Georgian Pre-sident has dramatically changed the rhetoricand priorities in international policy. The imageof an anti-Russian warrior has changed intothat of a proficient manager, consistently pur-suing to change his country and introducing re-forms with an effectiveness to be envied bymany countries in the world. The solemn de-claration to refrain from using force in relationswith Russia and the declaration of full readi-ness for peace talks may be a milestone on theroad to peace in the Caucasus.

Country of the economic revolutionGeorgia’s economy, which survived the

Russian military invasion in 2008, compared toother countries of similar size, proves to be hi-ghly robust and it has handled the worldwidefinancial crisis surprisingly well so far.

Since the time of the Rose Revolution, Ge-orgia has introduced a number of liberal, de-mocratic and business-friendly reforms aimedat creating a free market economy and a demo-cratic society. Since 2004, Georgia has freed bu-siness from the red tape in an unprecedentedfashion, simplifying the formalities linked toestablishing business to the maximum extent.A company can be registered in just 1 day,which is unprecedented even in some Euro-pean countries, and the rules are the same fordomestic and foreign entrepreneurs. The sameapplies to purchasing and registering real pro-perty. The tax system has been reformed by theintroduction of a flat personal income tax rateof 20% (15% from 2013 onwards). The statebudget’s income has increased fivefold, despitethe dramatic decrease in taxation. The govern-ment is planning to reduce the number of li-cences and permits required to run business by85%. With one of the lowest customs duties inthe world, Georgia has opened to free and uni-nhibited trade. There are no quantitative re-strictions on the export of goods or transit.What is more, the customs system has under-gone a radical reform: simplified export andimport procedures and modernised customsclearance points have been put into practice.

Within 3 years, Georgia has changed froma country where power shortages used to be

commonplace into an exporter of electricity,supplying it to all its neighbours, includingRussia. Finally, an achievement President Saa-kashvili can be truly proud of: Georgia haspractically eradicated corruption in state insti-tutions and the civil service by introducing anumber of reforms in the public sector (publicprosecutor’s office, court system and police) andpolitics. As a result, in contrast to many EasternEuropean countries, bribery is exceptionallyrare in Georgia. According to the 2009 Corru-ption Barometer prepared by Transparency In-ternational, Georgia ranks among the leastcorrupt countries in the world.

Georgia is currently viewed as a countrywith a dynamically developing economy.During my visit in the Ukraine, I heardsome noteworthy words from Prime Mini-ster Azarov: “When it comes to economy,we want to follow the footsteps of Georgia”.Investors continue to show increasing inte-rest in Georgia. The planned tourism inve-stments in the Batumi region areimpressive. The group of Georgia’s econo-mic partners is diversified, including com-panies from the EU, USA and Turkey.Between 2004 and 2007, the Georgian eco-nomy grew by an average of 9% annually. Atpresent, the forecast GDP growth for 2010is 5 to 6%. Most neighbouring countriesand even EU members can only envy theseresults. All this makes Georgia number oneon the list of the most business-friendly lo-cations in Central and Eastern Europe.

Western-style democracyReports from Western observers, Georgian

NGOs and even the opposition regarding thelast municipal elections praise Georgia. In con-trast to other CEE countries, there are no majorreservations about the election procedure, can-didate registration procedure, election cam-paign, access to the media or supervision over

the vote counting process. Observation mis-sions sent by international organisations haveall agreed that Georgia has recorded substantialprogress in developing democratic proceduresand civil society. The opposition operates fre-ely in and outside the parliament, and the di-verse media ensures pluralism of opinions.According to expectations, the President’s partywon the elections; president Saakashvili bearsno responsibility for the fact that the opposi-tion – plagued by internal divisions and disa-greement between the factions – put up ninecandidates against the ruling party’s candidatein the elections of the mayor of Tbilisi.

Interestingly, Georgia has also changed itsconstitution, based on the Constitution of theRepublic of Poland. The new constitution willmove Georgia in the direction of a parliamen-tary and cabinet system, with more powers fora government elected and monitored by theparliamentary majority.

Georgia in the European Union?In spite of the unresolved issue of occupa-

tion of Abkhazia and South Ossetia, we havewitnessed substantial progress in the develop-ment of relations between the EU and Georgiain recent years. This country actively participa-tes in bilateral and multilateral forms of part-nership within the Eastern Partnership,proposed by Poland and Sweden. Georgia hascommenced negotiations over the AssociationTreaty, it has signed an agreement on visa faci-litating measures, the readmission treaty, theagreement on marking agricultural productsand other food, and the Common AirspaceTreaty. Georgia’s government has taken somemajor steps at home regarding a prospectivefree trade agreement.

On the other hand, the European Unionhas played an important role in ensuring stabi-lity and security in Georgia, primarily by actingas a mediator in achieving a ceasefire agree-

ment. The European Union Monitoring Mis-sion (EUMM) – currently the only internatio-nal mission in Georgia – contributes to ensuresecurity and stability in the region. The EU ac-tively participates in the Geneva negotiations,stands firmly behind Georgia’s territorial inte-grity and supports a non-recognition policywith regard to the territories of South Ossetiaand Abkhazia under Russian control. It is bro-adly accepted that Georgia is a part of Europein terms of culture, history and politics, as it re-spects European values, rules and goals. There-fore, it comes as no surprise that Georgia’s fullintegration into the European Union has be-come the country’s long-term and strategic ob-jective. Also from our viewpoint, Georgia’sprospective EU membership would undoub-tedly support democratic processes, economicreforms, security and stability in Georgia itselfand among its neighbours. Georgia deserves aclear European perspective. The Eastern Part-nership should ensure any tools required to se-cure this goal, taking into consideration anindividual approach towards each of the sixmember countries.

Resolution of the conflict between Georgiaand Russia – Mission Impossible?

Georgia has no chances of approaching EUmembership with the current status of its rela-tions with Russia. Many European politiciansdeclare the recognition of Georgia’s territorialintegrity but do not risk a worsening of rela-tions with Moscow by supporting Mikheil Sa-akashvili. It is good that Georgia seekspartnership with the EU for a peaceful resolu-tion of the conflict. Only this step can ensurethe implementation of the six-point ceasefireagreement of 12 August 2008 and the subse-quent withdrawal of Russian military forcesfrom occupied Georgian territories. Georgia’sgovernment has devised a national strategy forthe occupied territories and an action plan forbuilding trust between communities divided bywar. The strategy is intended to ensure that theresidents of Abkhazia and South Ossetia canenjoy the same rights and privileges as all Ge-orgian citizens.

A large majority of residents in these re-gions have left their homes and have becomerefugees, living in temporary housing built byGeorgia’s authorities with international assi-stance. At present, the European Union plays akey role in ensuring security and stability inGeorgia. The EUMM is currently the only in-ternational monitoring mission present in thiscountry. The mission has managed to achieve aclear success in ensuring peace and preventingarmed incidents, despite being unable to fullyexercise its mandate on territories controlled bythe Russian military. Geneva talks provide anopportunity to convince Russia to support thedevelopment of the EUMM into an interna-tional peacekeeping force which would replaceRussian soldiers in Abkhazia and South Osse-tia. This plan sound like a mission impossible,but its success would be one of the EuropeanUnion’s greatest foreign policy achievements inhistory. The speech which I heard yesterdayfrom Georgia’s President as well as my MEPcolleagues’ response give reasons to believe thatit is doable.

by Krzysztof Lisek Krzysztof Lisek is a Member of the European Parliament from the election list of the

Civic Platform, standing reporter for Georgia in the European Parliament

Georgia – Reactivation

> Quote

European Council President Herman Van Rompuy (R) welcomes Georgian Presi-dent Mikheil Saakashvili prior to a meeting at the EU council headquarters inBrussels, Belgium, 18 November 2010 |ANA/EPA/OLIVIER HOSLET

EUROPEAN PARLIAMENT

Page 26| New Europe


SANTIAGO – Chile celebrated 200years of independence in 2010. Only20 of the 198 countries on Earth

have reached that age. Therefore, it hasbeen, for Chileans, a time of assessmentand of asking ourselves a very simple, yetprofound, question: have we done thingsright or wrong?

If we compare ourselves to the rest ofLatin America, the truth is that we havedone things very well, especially in the last25 years, during which we went frombeing one of the poorest countries on thecontinent to having the highest per capitaincome in the region. Yet if we compareourselves to the more exclusive group ofdeveloped countries, the truth is that westill have much to learn from them.

The great goal, the grand mission, theoverarching challenge of our generation,the Bicentennial Generation, is just one:for Chile to be the first country in LatinAmerica to be able to say, before the endof this decade, with pride and humility,that it has overcome poverty and becomea developed country with real opportuni-ties for material and spiritual advancementfor all its children.

Of course, this is a dream that has beenextraordinarily elusive in our first 200years of independence. So why should nowbe different?

First of all, unlike any time in the past,this goal has become fully attainable, andis, as a result, a moral imperative. Chilecurrently has a per capita GDP of$15,000, after adjusting for purchasingpower. We have set the goal of growing atan average of 6% annually, in order to at-tain, by 2018, the per capita GDP now en-joyed by European countries such asPortugal and the Czech Republic.

We are also working on doubling the

job-creation rate of recent years, with theaim of adding one million jobs in the pe-riod 2010-2014.

All indicators demonstrate that we areon the right path. Despite the devastatingeffects of the earthquake and tsunami oflast February, Chile’s economy is alreadygrowing at close to 6%, and we have crea-ted nearly 300,000 new jobs in the firstnine months of my administration – thehighest in our country’s history.

Secondly, these goals are attainable be-cause the world has changed. The IronCurtain, which for decades irreconcilablydivided the East from the West, is gone.And globalization and new technologieshave torn down the wall that for centuriesseparated the rich and prosperous coun-tries of the North from the poor and un-derdeveloped countries of the South.

Yet a third wall remains, less visiblethan the others but just as harmful, if notmore so.

This wall has been with us always, se-parating rusting spirits who live in nostal-

gia, fear the future, and believe that onlythe past was better, from youthful, creative,and entrepreneurial spirits who fearlesslyembrace the future and believe that thebest is always yet to come.

This wall kept Chile and Latin Ame-rica from joining the nineteenth-centuryIndustrial Revolution, which is why we re-main underdeveloped to this day. But weneed this wall to tumble if we do not wantto miss today’s revolution, which is delive-ring societies based on knowledge, tech-nology, and information. This revolutionwill be tremendously generous to thosecountries that embrace it – and utterly in-different, even cruel, to those that ignore itor let it pass by.

How will Chile breach this wall? First,by strengthening the three basic pillars wi-thout which development cannot germi-nate or opportunities flourish: a stable,vital, and participatory political demo-cracy; a social market economy that is free,competitive, and open to the world; and astrong state that is effective in the fight

against poverty and in promoting greaterequality of opportunities.

Yet not even this will suffice if we areto build on rock and not on sand. In thistwenty-first century, emerging countrieslike Chile must invest in the pillars of mo-dern society.

I mean developing our human capital,which is our greatest resource; encoura-ging innovation and entrepreneurship,which are the only truly eternal resourceswe have on hand; investing in science andtechnology, which will open up unsuspec-ted opportunities in the future; and pro-moting more dynamic and flexiblemarkets and societies that will put usahead, and at the helm, of change, ratherthan always lagging behind and trying tocomprehend and adapt to change.

Those are the pillars that our admini-stration is emphasizing. As Chile deepensits integration with the world, we are alsomoving forward with structural reformsthrough which we will be able to improvesubstantially the quality of education re-ceived by millions of our children andyouths; retrain three-quarters of Chileanworkers over the next four years; grantuniversal access to broadband Internetservice; double our investment in scienceand technology; promote innovation andentrepreneurship in the public and privatesectors; and reduce the time needed tostart up a company to one day – and thecost to zero. These are some of the manymeasures that form the goals – and foun-dation – of my administration. They aregrand, noble, and ambitious goals, butfully attainable for today’s Chile, the Bi-centennial Chile, a Chile now viewing thetwenty-first century with more optimismand enthusiasm than ever before.

by Sebastián PiñeraSebastián Piñera is President of the Republic of Chile.

Chile and the Third Wall

> Quote


Chilean miner Osman Araya (R), embraces his wife, Angelica, after leaving the Fenix rescue capsule during the rescue operation at the San Jose mine nearCopiapo, Chile, 13 October 2010 |ANA/EPA/HUGO INFANTE/GOVERNMENT OF CHILE/HO



by Tzvetan VassilevTzvetan Vassilev is the Chairman of the Supervisory Board of Corporate Commercial Bank AD

Bulgaria’s Potential for Sustainable Growth & How to Enhance it in 2011

SOFIA - In the last twenty years Bulga-ria has unfortunately established a re-putation as a country of economic

turmoil and permanent crisis. Undoubtedly,its recent past has been quite turbulent andcharacterized by chaotic development in thevarious sectors and industries. Politicians pro-moted senseless reforms just for the sake ofreforming without setting clear goals for thefuture and without considering the impact oftheir actions on the economy and on society.Indeed, most reforms were too fragmentaryand sporadic to target the core of Bulgaria’sproblems or to provide a long-term strategyfor sustainable development.

Hence it is not surprising that the inter-national community is concerned about Bul-garia’s economy and role on the global scene.Nonetheless, they should be aware that Bul-garia is a country with a lot of potential thatis yet to be exploited. Bulgaria has alwaysbeen a competitive player on the global mar-ket and has established traditions in manystrategic sectors of which I will present thethree I consider of utmost importance. Bul-garia’s growth, however, is inhibited by thelack of a consistent and viable national stra-tegy—an uneasy task that should be the co-untry’s priority in 2011.

Where does the potential for sustainablegrowth lie?

First of all, Bulgaria has been and still is aregional energy power with notable expertisein the full spectrum of energy production.Bulgarian NPPs, HPPs, and TPPs not onlyabide by international security standards, butalso sell energy at a significantly lower pricethan their counterparts in most EU countries(approximately 55 €/MW). Bulgaria has al-ways produced more energy than it consu-med and has traditionally exported to Turkey,

Greece, and the rest of the Balkan Peninsula.In addition, due to its geostrategic location,Bulgaria is a desired partner for internationalpipeline projects such as Nabucco and SouthStream which are meant to foster the energysecurity of Europe and which are to be nego-tiated in the near future.

Bulgaria has also turned into an impor-tant tourist destination that attracts visitorsfrom as far as Japan. The roots of Bulgariantourism can be traced back to 1896 when thefirst mountain resort was established and1908 when the first resort on the Black Seacoast was founded. Today, for a country of itssize, Bulgaria can offer an impressive array oftourist options: sea, mountain, and balneolo-gical resorts as well as a considerable culturalheritage. While in the past Bulgaria was pri-marily the choice of East Europeans, in re-cent years it has attracted the attention of EUtourists as well due to the good price-qualityratio. In 2008 the country received more fo-reign visitors than the size of its population:almost 8.6 million. This sector is to be fur-ther developed since there are numerous na-tural and archaeological sites that have notbeen discovered by the general public.

Agriculture is another major sector whichis often underestimated, but which could turninto a worthy engine of economic growth.Bulgaria has 6.2 million ha of agriculturalland of which 4.8 million ha is arable. On onehand, this land is valuable because of the cli-mate advantages and the omnipresence ofwater sources. On the other hand, the priceof land in Bulgaria is much lower than inother EU countries. For instance, while inItaly arable land can be purchased at 20 000€/ha, in Bulgaria it could be bought at 2000€/ha. Moreover, Bulgaria currently receivesonly 110 €/ha in European subsidies whereasAustria and Greece obtain as much as500€/ha. Even though agriculture representsonly 7.5% of Bulgarian GDP, it has the po-tential for major expansion particularly in thefield of organic farming since the country hasneither taken full advantage of its agricultu-ral production capacity nor of European fun-ding.

Why is the potential for growth exploi-ted inefficiently?

It is not a secret that Bulgaria needs aprofound administrative reform, but its bene-fits should outweigh its costs and its side ef-

fects. For a long time Bulgaria simply lackedpoliticians with a clear vision and strategy onpromoting Bulgaria’s most valuable assets.More specifically, Bulgarian politicians rarelyanalyzed the needs of Bulgarian business andseldom consulted representatives of the Bul-garian industries in order to hear the real pro-blems which they encountered in the span oftheir ordinary business activity. In traditionalmarket economies, however, the opinion ofbusiness counts.

Furthermore, most Bulgarian govern-ments dedicated more time and energy onblaming their predecessors about the state ofBulgaria’s economy instead of concentratingon the country’s future. Neither dwelling onthe past nor witch-hunting is a policy thatgives results or promotes economic growth. Itis more strategic and fruitful to demonstratehow bad the predecessors were by the exam-ple of hard work and sound leadership.

Bulgarian governments also need to dee-pen their relationship with the Bulgarianscientific community. Although good adviceis just a door away, Bulgarian politicians havea tendency to ignore the voices of leadingBulgarian professors and researchers in thefield of economics. Many of them have calledfor optimization of administrative structuresand cutting down of public expenses. Whilethese ideas can improve the country’s macro-economic outlook, they have been ignored.

Finally, the EU has a decisive role in in-tegrating Bulgaria as an equal member of theEuropean family. Sadly, there are numerousEuropean projects that have been completed,but have not been refinanced by EU authori-ties. This phenomenon hinders developmentin multiple sectors, interrupts Bulgaria’s pro-gress towards a better future, and jeopardizesEU credibility before Bulgarian business.

> Quote

A woman walks by the golden dome of the St Alexander Nevsky Cathedral during a rain fall in Sofia, Bul-garia, 28 March 2010 |ANA/EPA/VASSIL DONEV

Page 28| New Europe


by David AltonLord David Alton is Secretary of the UK All Party Group on Sudan

Sudan, Trade and what Lies Beneath

LONDON - These are momentoustimes for Africa's largest nation. Atthe beginning of 2011, on January

9th a referendum will determine if Sudanwill become two countries. For the peopleof South Sudan, many of whom are Chri-stian, it is an historic chance to break freeof the northerners who have brutally op-pressed them for centuries.

Ten years ago, during Sudan's civilwar, when 2 million people died in thesouth, I saw first-hand the scale of deva-station and misery caused by systematicaerial bombardment. In 2004 I visited andpublished a report on the genocidal cam-paign which was then unleashed on Dar-fur. Earlier this year I was back insouthern Sudan - where more people havedied in the past twelve months than evenin Darfur.

William Hague was consistently vocalin supporting Bashir's indictment on ge-nocide charges by the International Cri-minal Court. The Foreign Secretary - asbefits the biographer of William Wilber-force - has called for a foreign policy witha conscience. But there is always a dangerthat, in trying to balance the UK's com-mercial interests in a time of recession,that not all of his team are singing fromthat same hymn sheet.

In October, with US trade sanctionsagainst Sudan still in place, UK officialswelcomed a high level Sudanese trade de-legation, and Foreign Office MinisterHenry Bellingham MP said on a visit tothe Sudanese capital, Khartoum, "Wewant to see more UK banks taking a po-sitive view toward Sudan," adding that itwould be "wrong" for Britain "not to en-courage the trade."

I do not take issue with the need to in-crease UK trade: it is the timing that isquestionable. In the run up to the refe-rendum, it is crucial that the Khartoumregime is kept under pressure to deliver onits promises to the international commu-nity, and its obligations under the Com-prehensive Peace Agreement.

So far, the opposite has happened, si-gnaling the West's lack of seriousness.Khartoum has repeatedly broken its word,with no consequences.

UN resolutions on Sudan remainunimplemented, and the regime has con-tinued to bomb its own civilians in Darfurwith impunity. The international commu-nity is so keen to get Sudan out of its "inbasket' that it turns a blind eye to increa-sing human rights abuses, vote rigging,and the decimation of any free media.Now is the time to redouble the pressureon Khartoum, rather than appeasing it tosecure a peace that will disintegrate withinmonths.

At the core of the UK government's"new epoch" of relations with Sudan are490,000 barrels of oil a day, driving aneconomic boom that benefits the mainly

Muslim and Arab ethnic groups along theNile that have dominated Sudan for cen-turies. In a highly centralised and totali-tarian state, the regions remain shockinglypoor and undeveloped: a fifteen-year-oldgirl in South Sudan is statistically morelikely to die in childbirth than she is tocomplete primary school. Since a coupbrought him to power in 1989, Bashir, hasmanipulated and armed Arab nomads todispose of those who disagree with his Is-lamist ideology. Bashir, who shelteredOsama bin Laden during the 1990's, isstill using ethnic proxies to wage warsagainst the people of South Sudan andmore recently Darfur, causing the deathand displacement of millions.

In September, in Southern Sudan, Irepeatedly heard allegations that armswere being provided to Joseph Kony's le-thal Lord's Resistance Army - responsi-ble throughout the region for hundreds ofthousands of deaths, abductions andrapes.

If the forthcoming Southern referen-dum is free and fair, it will produce a mas-sive majority in favour of independencefrom Khartoum. But at stake are huge oil

reserves, 80% of which lie beneath whatwill be the new South Sudan. Many Sou-therners are convinced Khartoum will notsurrender these revenues without a fight,which is why thousands of them are alre-ady fleeing to neighbouring countries.

Sudan-watchers believe Khartoum isdeliberately creating a situation in whichthe South must declare unilateral inde-pendence, thereby giving Khartoum a pre-text to take possession of the oil fields. Itis doing so in several ways, including reo-pening debate on aspects of the peaceagreement, wearing down all those invol-ved in negotiations, and putting procedu-ral obstacles in the way of a peacefulreferendum. In this way it is demandingand getting concessions such as a higherpercentage of oil revenues.

None of this bodes well for a peacefulreferendum, or for a lasting and peacefuldivorce. The regime is already crackingdown on opposition parties, media andcivil society in what will be North Sudan.Amnesty International recently documen-ted the fate of those daring to speak out;kidnapping, torture, disappearances andclosed newspapers and radio stations.Bear in mind that Freedom House alre-ady ranks Sudan as among the nine mostrepressive nations in the world.

Bashir's regime is keen to develop clo-ser economic ties with Britain, and itwants the UK's help in getting its $30 bil-lion debt cancelled.

Now is exactly the moment when wemust use our leverage to hold Khartoumto its commitments. The brave and resi-lient people of Southern Sudan deservenothing less from us.

> Quote

British Ambassador to the United Nations (UN) Mark Lyall Grant (R) addresses a joint press conference with US Ambassador to the the UN Susan Rice (L) andUganda'a Ambassador to the UN Maurice Peter Kagimu Kiwanuka (C) in Khartoum, Sudan, 9 October 2010 |ANA/EPA/PHILIP DHIL

DominiqueStrauss-Kahn

New PolicyParadigms for aNew World

30

Joseph Stiglitz

What LiesAhead in 2011?

31

Daniel Gros

Dream House No More?

33

Nirupama Rao

The Emerging-Market GrowthEngine

34

Malcolm Harbour Driving the Single Marketahead in 2011

36

THE REAL ECONOMY

Yu Yongding

China GoingForward

32

N Chandrasekaran

Delivering India’sdemographicdividend

35

THE REAL ECONOMY

Mercedes Bresso

Regionalauthorities:caught in themiddle of theeconomic crisis

37

Staffan Nilsson

Europe NeedsCivil Society

38

Cillian Donnelly

2010: fallingeconomies andrising nationalism

39

Foteini Kalantzi

The Euro-MediterraneanPartnership in thenew financial era

40

FINANCEWolfgangSchäuble

ConqueringEurope’s DebtMountain

41

Nouriel Roubini

Fiscal Follies

42

Sharon Bowles

The problems ofmarching in step

43

Dionysios (Dennis)Kefalakos

The real money waris not overdevaluations

44


New Year Special| January 2011CONTENTS: ECONOMY & FINANCE


New Year Special | January 2011 THE REAL ECONOMY

by Dominique Strauss-KahnDominique Strauss-Kahn is Managing Director of the International Monetary Fund.

New Policy Paradigms for a New World

WASHINGTON, DC – Overthe last quarter-century, theglobal economy enjoyed a re-

markable stretch of stable growth and lowinflation. The so-called “Great Modera-tion” lulled many policymakers into a falsesense of security about their ability to ma-nage the economy and deal with financialcrises. But, as the Great Moderation me-tastasized into the Great Recession, fatalflaws in conventional thinking came tolight. One of the most notable was justhow poorly we grasped the linkages bet-ween the financial system and the broadereconomy – as well as the linkages betweencountries.

Today, as policymakers seek new para-digms for managing the economy in 2011and beyond, a better understanding ofthese linkages will be essential to promo-ting economic growth and reducing therisk of crises. Equally important is the re-alization that by working together, we canbuild a more successful and more stableglobal economy, for the benefit of all co-untries.

Let me spell out what this means forthree policy objectives: building a strongerand safer financial sector, achieving morebalanced and more stable growth, and ma-naging large and volatile capital flows.

A stronger and safer financial system isthe bedrock of a successful economy. Thisrequires strong regulation, with a sensiblerulebook for financial markets and institu-tions. And, to ensure that everyone playsby the rules, financial institutions must besupervised intensively.

Now, even with the best rules and su-pervision, crises will still occur – which iswhy we need effective resolution mecha-nisms to deal with institutions that get into

trouble. And, finally, given powerful inte-ractions within the financial sector andacross the broader economy, we need anoverarching framework to manage risks inthe financial system as a whole.

Much has already been done to ad-vance regulatory reform, notably the recentagreement to strengthen bank capital(Basel III). Yet we are far from having thesupervision needed for proper implemen-tation of the rules. Effective resolution me-chanisms and systemic frameworks remaineven more elusive.

Moving to the broader economy, wehave learned that growth must be balancedin order to be healthy. At the national level,this requires tools to prevent excesses inone sector from bringing down the entireeconomy. At the global level, it requires abetter distribution of growth across coun-tries, in order to prevent destabilizing im-balances.

What are the implications for macroe-conomic policy?

Monetary policy needs to look beyondits core focus on low and stable inflationand pay much greater attention to finan-cial stability. The debate now is how,exactly, to factor this imperative into mo-netary policy, and how to coordinate thework of monetary and regulatory authori-ties.

For fiscal policy, the crisis showed thevalue of maintaining low public debt anddeficits during good times: countries withhealthier public finances have more spaceto cushion the economic impact of crises.But the Great Recession has caused publicdebt and deficits in many advanced econo-mies to soar.

How quickly fiscal retrenchment sh-ould be launched – and the right balancebetween higher taxes and lower spending –will vary by country, reflecting factors likethe strength of the economic recovery, themarket’s appetite for debt, and initial spen-ding and revenue ratios. But the commonobjective for fiscal policy must be to sup-

port durable medium-term growth and jobcreation.

The distribution of income is anotherimportant issue.

In the years leading up to the crisis,inequality rose in many countries, withworrisome consequences for social cohe-sion. Rising inequality may also have in-creased vulnerability to crisis: with fewerpeople able to dip into savings during badtimes, the impact on growth is even larger.

Turning to the international dimen-sion, understanding better how policiesadopted in one country spill over ontoother economies is key.

This approach lies at the heart of theG-20’s efforts to achieve strong, stable, andbalanced global growth. The InternationalMonetary Fund is also stepping up itswork in this area, through “spillover re-ports” on China, the euro zone, Japan, theUnited Kingdom, and the United States.

Gaining a better appreciation of the fi-nancial linkages between countries is alsoimportant. During the crisis, we saw howquickly capital fled from countries previ-ously considered safe bets. Today, many ofthese countries are reeling from a veritabletsunami of returning money.

Policymakers in many emerging-mar-ket countries worry that surging capital in-flows will drive up the value of the localcurrency, destabilize financial markets, andfuel economic overheating.

Their reactions range from buying upthe foreign money to prevent currency ap-preciation to adopting capital controls,and, in extreme cases, to keeping themoney out altogether. The situation hasbecome quite tense, with talk of “currencywars” and a real risk of financial protectio-nism. Clearly, we need to get a betterhandle on what is driving these capital in-flows. We also need to identify the best po-licies for dealing with them – keeping inmind the impact of these policies on theglobal economy as a whole. And we shouldexplore whether a system of global rulesaimed at reducing the volatility of capitalflows would be useful.

Global financial insurance is an impor-tant related issue. Just as a family backstopsits savings with insurance, countries shouldbe able to tap into a global financial safetynet. Much has already been achieved sincethe crisis, through more resources for theIMF and new financing instruments. Butmore is needed, and the Fund is exploringcooperation with regional financing mech-anisms, as well as new ways to use its in-struments in a systemic crisis.

Let me tie all of this together.One principal policy failure in the run-

up to the crisis was a lack of imagination:we failed to appreciate just how intricatethe global economic and financial web hadbecome. Let our next failing not be the re-sult of a lack of cooperation. We mustreach across old dividing lines – both wi-thin economies and between them – andwork together to build a stronger, more re-silient global economy.

> Quote


Members of the G24 meet at the IMF headquarters in Washington, US, 22 April 2010 |ANA/EPA/ASTRID RIECKEN


New Year Special| January 2011THE REAL ECONOMY

NEW YORK – The global eco-nomy ends 2010 more dividedthan it was at the beginning of

the year. On one side, emerging-marketcountries like India, China, and the Sou-theast Asian economies, are experiencingrobust growth. On the other side, Europeand the United States face stagnation –indeed, a Japanese-style malaise – andstubbornly high unemployment. The pro-blem in the advanced countries is not ajobless recovery, but an anemic recovery –or worse, the possibility of a double-diprecession.

This two-track world poses some unu-sual risks. While Asia’s economic outputis too small to pull up growth in the restof the world, it may be enough to push upcommodity prices.

Meanwhile, US efforts to stimulate itseconomy through the Federal Reserve’spolicy of “quantitative easing” may back-fire. After all, in globalized financial mar-kets, money looks for the best prospectsaround the world, and these prospects arein Asia, not the US.

So the money won’t go where it’s nee-ded, and much of it will wind up whereit’s not wanted – causing further increa-ses in asset and commodity prices, espe-cially in emerging markets.

Given the high levels of excess capa-city and unemployment in Europe andAmerica, quantitative easing is unlikely totrigger a bout of inflation. It could, howe-ver, increase anxieties about future infla-tion, leading to higher long-term interestrates – precisely the opposite of the Fed’sgoal.

This is not the only, or even the mostimportant, downside risk facing the globaleconomy. The gravest threat comes fromthe wave of austerity sweeping the world,as governments, particularly in Europe,

confront the large deficits brought on bythe Great Recession, and as anxietiesabout some countries’ ability to meet theirdebt payments contributes to financial-market instability.

The outcome of premature fiscal con-solidation is all but foretold: growth willslow, tax revenues will diminish, and thereduction in deficits will be disappointing.And, in our globally integrated world, theslowdown in Europe will exacerbate theslowdown in the US, and vice versa.

With the US able to borrow at record-low interest rates, and with the promise ofhigh returns on public investments aftera decade of neglect, it is clear what it sh-ould do. A large-scale public-investmentprogram would stimulate employment inthe short term, and growth in the longterm, leading in the end to a lower natio-nal debt. But financial markets demon-strated their shortsightedness in the yearspreceding the crisis, and are doing so onceagain, by applying pressure for spending

cuts, even if that implies reducing badlyneeded public investments.

Moreover, political gridlock will en-sure that little is done about the other fe-stering problems confronting theAmerican economy: mortgage foreclosu-res are likely to continue unabated (legalcomplications aside); small and medium-sized enterprises are likely to continue tobe starved of funds; and the small andmedium-sized banks that traditionallyprovide them with credit are likely to con-tinue to struggle to survive.

In Europe, meanwhile, matters are un-likely to be any better. Europe has finallymanaged to come to the rescue of Greeceand Ireland.

In the run up to the crisis, both weregoverned by right-wing governmentsmarked by crony capitalism or worse, de-monstrating once again that free-marketeconomics didn’t work in Europe any bet-ter than it did in the US.

In Greece, as in the US, a new go-

vernment was left to clean up the mess.The Irish government that encouragedreckless bank lending and the creation ofa property bubble was, perhaps not sur-prisingly, no more adept in managing theeconomy after the crisis that it was before.

Politics aside, property bubbles leavein their wake a legacy of debt and excesscapacity in real estate that is not easilyrectified – especially when politically con-nected banks resist restructuring mortga-ges.

To me, attempting to discern the eco-nomic prospects for 2011 is not a parti-cularly interesting question: the answer isbleak, with little upside potential and a lotof downside risk. More importantly, howlong will it take Europe and America torecover, and can Asia’s seemingly export-dependent economies continue to grow iftheir historical markets languish?

My best bet is that these countries willmaintain rapid growth as they shift theireconomic focus to their vast and untap-ped domestic markets.

This will require considerable restruc-turing of their economies, but China andIndia are both dynamic, and proved theirresilience in their response to the GreatRecession.

I am not so bullish on Europe andAmerica. In both cases, the underlyingproblem is insufficient aggregate demand.The ultimate irony is that there are si-multaneously excess capacity and vastunmet needs – and policies that could re-store growth by using the former to ad-dress the latter.

Both the US and Europe, for instance,must retrofit their economies to addressthe challenges of global warming. Thereare feasible policies that would work wi-thin long-term budget constraints. Theproblem is politics: in the US, the Repu-blican Party would rather see PresidentBarack Obama fail than the economy suc-ceed. In Europe, 27 countries with diffe-rent interests and perspectives are pullingin different directions, without enoughsolidarity to compensate. The bailout pac-kages are, in this light, impressive achie-vements.

In both Europe and America, the free-market ideology that allowed asset bub-bles to grow unfettered – markets alwaysknow best, so government must not in-tervene – now ties policymakers’ hands indesigning effective responses to the crisis.One might have thought that the crisisitself would undermine confidence in thatideology. Instead, it has resurfaced to draggovernments and economies down thesinkhole of austerity.

If politics is the problem in Europeand America, only political changes are li-kely to restore them to growth.

Or else they can wait until the overh-ang of excess capacity diminishes, capitalgoods become obsolete, and the econo-my’s internal restorative forces work theirgradual magic. Either way, victory is notaround the corner.

by Joseph StiglitzJoseph E. Stiglitz is University Professor at Columbia University and a Nobel laureate in Economics. His latest book, Freefall:

Free Markets and the Sinking of the Global Economy, is now available in French, German, Japanese, and Spanish.

What Lies Ahead in 2011?

> Quote


A visitor stands on the bund with the Pudong Financial District in the background in Shanghai, Chinaon 05 December 2010. China and India are both dynamic, and proved their resilience in their response tothe Great Depression |ANA/EPA/QILAI SHEN


New Year Special | January 2011THE REAL ECONOMY

BEIJING – China’s per capita in-come, at $3,800, has now surpassedthe threshold for a middle-income

country. But, even as economists and stra-tegists busily extrapolate China’s futuregrowth path to predict when it will catchup to the United States, the mood insideChina became somber and subdued in2010. Indeed, Premier Wen Jiabao seesChina’s growth as “unstable, unbalanced,uncoordinated, and ultimately unsustaina-ble.”

Economic growth, of course, has neverbeen linear in any country. Throughout hi-story, there are countless examples ofmiddle-income countries becoming stuckin that category for decades and/or even-tually falling back to low-income status.The Nobel laureate economist MichaelSpence has pointed out that after WWII,only a handful of countries were able togrow to a fully-industrialized level of de-velopment.

China’s progress over the past three de-cades is a successful variation on the EastAsian growth model that stems from theinitial conditions bequeathed by a plannedsocialist economy. That growth model hasnow almost exhausted its potential. SoChina has reached a crucial juncture: wi-thout painful structural adjustment, itseconomic-growth momentum can sud-denly be lost.

China’s rapid growth has been achie-ved at extremely high cost. Only future ge-nerations will know the true price. Thecountry’s investment rate now stands atmore than 50% – a clear reflection of Ch-ina’s low capital efficiency. There are twoworrying aspects of this high rate. First,local governments influence a large pro-portion of investment decisions. Second,investment in real-estate development ac-counts for nearly one-quarter of the total.

Some local governments are literallydigging holes and then filling them inorder to create GDP. As a result, there aresimply too many luxurious condominiums,magnificent government office buildings,and soaring skyscrapers. Hotels in China’sprovincial cities can make five-star hotelsin Western capitals looked shabby.

China has become one of the most pol-luted countries in the world. Dust andsmog choke its cities. All of the country’smajor rivers are contaminated. Thoughprogress has been made, deforestation anddesertification are still serious. Drought,floods, and landslides have become com-monplace. Relentless extraction is quicklydepleting China’s resource deposits.

With China’s trade-to-GDP ratio andexports-to-GDP ratio already exceeding60% and 30%, respectively, the economycannot continue to depend on external de-mand to sustain growth. Unfortunately,with a large export sector that employsscores of millions of workers, this depen-dence has become structural, which implies

that to reduce China’s trade dependencyand trade surplus is much more than amatter of adjusting macroeconomic policy.

After decades of rapid expansion,China has become the workshop of theglobal economy. The problem is that it isno more than a workshop: lack of innova-tion and creation form the economy’s Ach-illes’ heel. For example, in volume terms,China now is the largest car producer inthe world, churning out 17 million thisyear. But the share of models developed byChinese carmakers is negligible.

In an era of rapid technological pro-gress, creativity, and innovation, the globaleconomic landscape can change rapidly.Without a strong capacity for innovationand creativity, even a giant has feet of clay.And when a giant falls, many are hurt.

Indeed, while China’s living standardshave risen dramatically over the past 30years, the gap between rich and poor haswidened sharply. Income distribution hasskewed in favor of the rich for too long,and the government has failed to provide

decent public goods. With the contrastbetween the opulent lifestyle of the richand the slow improvement of living con-ditions for the poor fomenting social ten-sion, a serious backlash is in the making.

If China fails to tackle its structuralproblems in a timely fashion, growth is un-likely to be sustainable. Any structural ad-justment is painful. But the longer thedelay, the more painful it will be. China’sstrong fiscal position today gives it a win-dow of opportunity. But that window willclose fast, because beneficiaries of specificreform policies have morphed into vestedinterests, which are fighting hard to pro-tect what they have.

What the Chinese public resents mostis the collusion between government offi-cials and businesspeople, described by therespected Chinese economist Wu Jianglianas “capitalism of the powerful and rich.”Breaking this unholy alliance will be thebig test for China’s leadership in 2011andbeyond. Under China’s current institutio-nal arrangements, meritocracy is a prere-quisite for good governance. Butmeritocracy has been eroded by a politicalculture of sycophancy and cynicism. Soonce again, the dialectics of economic de-velopment has brought political reformback to the fore.

Abroad, China’s rise has caused admi-ration, envy, suspicion, and even outrighthostility in some corners. No matter howoften Chinese leaders repudiate any hege-monic ambition, wariness about China’strue intentions will remain. That is under-standable: the rise of new powers has al-ways disrupted the establishedinternational order. When this new poweris a nation of 1.3 billion people livingunder an alien political system and ideo-logy, its rise is bound to cause even moreuneasiness.

by Yu YongdingYu Yongding, currently President of China Society of World Economics, is a former member of the monetary policy committee of the

Peoples' Bank of China, and a former Director of the Chinese Academy of Sciences Institute of World Economics and Politics.

China Going Forward

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A worker preparing cotton for spinning at Shanghai Textile mills in the suburbs of Shanghai, China,10 November 2010 |ANA/EPA/STRINGER



BRUSSELS – The financial crisis thatbegan in 2007 had its roots in exces-ses in the housing market that re-

mained unresolved in 2010 – and that willcontinue to roil economies in 2011 andbeyond. Everybody now knows about Ame-rica’s dodgy “sub-prime” mortgages (theterm says it all). But it is all too easy to for-get that the development of this market wasinitially welcomed, because it enabled evenpeople who would not normally qualify fora mortgage loan to aspire to homeowner-ship. Sub-prime mortgages made the Ame-rican dream come true.

Of course, billions of others around theworld share the same dream. But the wayhousing finance is organized differs enor-mously from country to country, and thesedifferences explain the recent global imba-lances and financial crashes.

In developed economies, constructioncan add only a relatively small amount eachyear to the existing stock of housing. Withpopulations stagnating (or declining inmany parts of Europe and Japan), the exi-sting stock of housing is exchanged amongdifferent parts of the population, and typi-cally bequeathed from old to young.

The situation is different in emergingeconomies, where the quantity and qualityof the existing stock of housing is woefullyinadequate. Moreover, most of the existinghousing tends to be in rural areas, whereasmost of the jobs are in the cities. This is whyurbanization means a huge building boomin emerging economies. China, as usual, isthe most extreme example, now accountingfor more than one-half of global cementconsumption. The dream of homeowner-ship is thus very much alive – and is a po-werful economic force – in the emergingworld. But mortgage markets remain un-

derdeveloped in most emerging economies.This means that young Chinese couples willfirst have to save a large part of their incomeas a down payment for their dream house(typically an apartment in a high-rise). Theabsence of “no money down” mortgagesmight be more important than Confucianethics in explaining China’s high savingsrate. One sure way to reduce the savings ratein China would be to develop an American-style mortgage market there.

The Chinese and others should, howe-ver, bear in mind that an increase in hou-sing prices does not make a country richer.Of course, every homeowner will feel richerif his property’s price goes up. But if theprice of all housing goes up, the country asa whole is no better off; after all, peoplehave to live somewhere, so, other thingsbeing equal, cashing in on higher house pri-ces would merely mean paying more forone’s next home. Housing booms thus cre-ate only an illusion of wealth, though it iscompelling enough to induce excessive con-sumption, as occurred in the United Statesover the last decade.

Conversely, a crash in house prices doesnot destroy any real wealth (the houses stillstand). On the contrary, a crash makes thedream of ownership more affordable, whichbenefits first-time buyers – typically theyoung and less well-off.

But, from an economic point of view,the share of homeowners versus tenants isnot very important. If the rental market iswell developed (as in, say, Germany), mostfamilies might elect not to own. But Ger-mans still own indirectly the houses theylive in through their investments with life-insurance companies and savings societies,which own and manage a large proportionof the country’s housing estates.

By contrast, from an economic point ofview, many American households really renttheir homes from the Chinese government.They might be proud homeowners onpaper, but their mortgage was probably un-derwritten by quasi-governmental institu-tions like Fannie Mae and Freddie Mac,which in turn rely heavily on capital fromChina for their own refinancing.

The real danger arises when everyone is

convinced that investing in real estate is thebest way to secure one’s own future becausehouse prices can only go up. This induceslenders to provide not only NINJA (no in-come, no job, no assets) mortgages, but alsogenerous loans to real-estate developers tobuild ever larger mansions and housingestates. As long as a boom lasts, everybodybenefits. But when the bubble bursts, theNINJAs cannot service their debt and buil-ders go into bankruptcy. Lenders find thatthe collateral (half-finished or empty hou-ses) is worth almost nothing, resulting inhuge losses in the banking system (as theUS found out in 2008). In extreme cases, asin Ireland (one hopes not in Spain), theneed to save the banking system can ban-krupt an entire country.

Housing booms can last a long time, ty-pically more than a decade. The downside isthat housing busts last equally long, beca-use houses are such a durable good. Oncetoo many houses have been built, the exi-sting overhang depresses the market for avery long time, and unemployed construc-tion workers are usually unable to find jobselsewhere. The last decade saw the peak ofan unprecedented housing boom in most ofthe rich world. The bust, with its bankingproblems and unemployment, is likely tolast for most of the coming decade, depres-sing growth in all those countries which lo-oked so strong in 2008. By contrast, theemerging economies have barely startedtheir own boom, which is underpinned bythe spillover of liquidity from the US. Theemerging world’s boom might well stretchover the entire next decade, as hundreds ofmillions of homes are built. The next bustcan be avoided only if emerging marketsmanage the dream of homeownership bet-ter than the US and Europe.

by Daniel GrosDaniel Gros is Director of the Center for European Policy Studies.

Dream House no More?

> Quote


A house for sale in London, Britain, 29 October 2007 |ANA/EPA/ANDY RAIN



(The author is the Chief Executive Officer of Tata Consultancy Services, Asia’s largest IT company)

by Nirupama RaoNirupama Rao is India’s Foreign Secretary.

The Emerging-Market Growth Engine

NEW DELHI – The key role ofemerging and developing coun-tries – including India, China, and

Brazil – in sustaining world economic gro-wth was brought into sharp focus duringthe recent global crisis, and has been welldocumented. This trend is likely to conti-nue in 2011 and beyond.

Indeed, the IMF expects that emergingand developing economies will grow by 6%in 2010 and 6.3% in 2011. Emerging-mar-ket economies have not only cushioned theglobal impact of the recent crisis, but havealso helped industrialized countries reversethe recessionary trend of 2008-2009. Butrecovery remains fragile in the developedworld, with unemployment remaining atcrisis levels.

But, while emerging economies areproving to be drivers of global demand, theright mix of government initiatives andpolicies is still required to ensure that theycontinue to provide the impetus for fasterworld economic recovery in the short termand be the engines of sustainable growthin the medium and long term. There is alsoa strong need for supporting long-term ca-pital flows to emerging economies to sti-mulate investment further, particularly intheir infrastructure sectors, thereby injec-ting much-needed additional demand intothe global economy.

In this regard, another important deve-lopment is the increasing number of emer-ging-market middle-class consumers, theirgrowing purchasing power, and thus theirpotential impact on global demand. Ac-cording to one estimate, middle-class con-sumers in a dozen emerging economiestoday wield annual purchasing power to-taling approximately $6.9 trillion.

Indeed, projections from McKinsey &

Company suggest that the purchasingpower of this rising middle class in emer-ging markets may rise to $20 trillion overthe next decade – twice the current level ofconsumption in the United States. Thefour biggest emerging economies – Brazil,Russia, India, and China (the BRICs) – arelarge producers and consumers of goodsand services, and will also be important inshaping the pace, direction, and sustaina-bility of global economic growth.

Let me turn to India specifically. In thefive years preceding the 2008-2009 crisis,the Indian economy grew at an averagerate of nearly 9% annually. During the cri-sis, annual growth slowed, but only to6.7%, reflecting the economy’s inherent re-silience. The growth rate subsequently re-covered to 7.4% in 2009-2010, and weexpect 9% growth by 2011-12.

The strength of the Indian economy isunderpinned by a high saving rate and ro-bust investment. The government’s promptaction to counter the crisis – fiscal stimu-

lus, growth packages, and monetary easing– proved effective. A sound financial andbanking system with limited exposure toglobal markets, together with the impor-tance of domestic consumption in sustai-ning demand, has also helped. But whatdistinguishes India from other emergingeconomies, in particular China and the So-utheast Asian countries, is that domesticdemand, rather than exports, is the pri-mary driver of growth. A return to highgrowth rates globally will require a broa-der revival of demand. Needless to say, thiswill occur only gradually, particularly in thedeveloped countries. Thus, India’s highgrowth rates will have to remain depen-dent on strong domestic demand. In orderto meet this challenge, we are focusing oninvestments in infrastructure sectors suchas power, telecommunications, roads, ports,and airports.

While the public sector will continueto play an important role, given the mas-sive investment required, substantial pri-

vate investment – including foreign inve-stment – would be needed to address In-dia’s huge “infrastructure deficit” and thefinancing gap that accompanies it. A stra-tegy of private-public partnership has beenadopted to address the infrastructure chal-lenge. At the same time, we need to investin our human capital, supporting the de-velopment and upgrading of the workfor-ce’s skills and capacity for innovation.

At its summit in Seoul in November,the G-20 firmly placed development at thecore of its agenda. Indian Prime MinisterManmohan Singh, underlining the impor-tance of infrastructure investment, madethe following proposal, which several lea-ders endorsed: “Recycling surplus savingsinto investment in developing countrieswill not only address the immediate de-mand imbalance, it will also help to ad-dress developmental imbalances. In otherwords, we should leverage imbalances ofone kind to redress imbalances of the otherkind.”

As we head into the second decade ofthe century, innovative ideas like using glo-bal savings or surpluses to finance infra-structure in emerging and developingcountries should be pursued seriously.Doing so would not only sustain the gro-wth momentum of these economies, butwould contribute to global recovery by ge-nerating much-needed additional demandin the developed countries.

While the emerging economies’ globalrole will inevitably grow in the comingyears, this shift will need to be anchored ina cooperative partnership with the develo-ped world. As for India, our resilient de-mocratic values, ability to manage diversity,and strong economic fundamentals under-pin our country’s current global posture.

> Quote

Indian Roupies |www.flickr.com eurok



NEW DELHI – By the year 2020,136 million Indian youngsterswill join the global workforce.

Compared to this enormous numberwhich accounts 17% of total global work-force, China will add only 23 million pe-ople and the USA will increase itsworking age population by 11 million du-ring this period. In contrast, there will bea decrease in the number of people bet-ween working ages of 18-60 in Europeand Japan by 21 million and eight mil-lion respectively.

Between 2000 and 2020, India’s totalpopulation (currently a little over 1.2 bil-lion) is projected to grow by as much asthe total current population of the US.This “Demographic Dividend” or thelarge increase in India’s working popula-tion is forcing changes in the world eco-nomic order.

It is changing the perception of thecountry and redefining India’s role in theglobal economic order. Not only is itemerging as one of the fastest growingconsumer markets in the world, but alsoa critical pool of supply for some of thebest scientific and technological talent ona scale no other country can match in thelong-term.

The United Nations estimates thatIndia will account for almost 26% of theincrease in global working-age popula-tion over the next 10 years. If the countryis able to increase its focus and inve-stment in the education sector, over thenext decade India could emerge as theglobal leader is producing high-school

and university graduates.The demographic dividend presents

enormous challenges and opportunitiesfor India. As a nation, we need to furtherstep up our growth rate which will helplift millions more out of poverty. In thepast two decades, the country has beenable to increase its historical rate of 3.0-3.5% GDP growth per annum to the cur-rent 8.0-9.5% range through acombination of economic reforms, globa-lization and demographics. But it has thepotential for more: to increase and su-stain its economic growth rate at doubledigits for the next decade and more. Theopportunity to do so is clear and present,if India as a nation can harness the po-tential of its young people.

It is critical that this potential is un-

locked because a large population aloneis not a sufficient condition to spur gro-wth. Growth can only accelerate if thecountry can ensure that its young citizensare made productive professionals in theglobal economy.

Supportive government policies arehelping put building blocks in place. En-rollment rates at primary schools haverisen sharply to 90% and 113% on a netand gross basis respectively.

The key driver of this trend has beensocial sector programs like UniversalEducation and Free Midday Meal sche-mes, where free lunches are provided tostudents to incentivize their parents tosend them to school. As a result, thenumber of children in the primary agegroup out of school dropped to less than

six million in 2007 from around 18 mil-lion in 2000, estimates the World Bank.On the other end of the spectrum, morestudents are now completing their edu-cation. Three-fourths of all students nowcomplete their education as opposed tojust over half in 2004.

If we assume this supportive policywill continue and we are able to createmore education infrastructure and betterthe current student-teacher ratios, Indiacould well emerge as the global leader inproducing educated talent by 2020. Thiswill benefit not only India but the entireworld.

The numbers are staggering. MorganStanley estimates that from around 3.7million graduates in 2009, the numberwill almost double to 7.2 million b 2020,with 25% coming from science and engi-neering. This would imply an increase inIndia’s university educated workforce sizefrom around 50 million in 2009 to 114million by 2020.

Information technology (IT) andother IT-enabled industries provideamong the best opportunities to absorbthis scale of talent.

India’s IT and IT-enabled services in-dustry revenues are predicted to reach $225 billion by 2020 from the current $70billion. The industry has managed to ge-nerate significant employment in theprevious decade, growing six-fold fromjust 430,000 employed in 2001 to directlyemploying about 2.3 million people in2010. In the past 12 months, the indu-stry has added an additional 200,000professionals.

Even more impactful is the indirectemployment it has created. Estimatessuggest that 8 million people are indi-rectly employed by the sector, providingancillary services to the sector such asreal estate, catering and transportationsservices. It is this multiplier-employmenteffect and its future potential that aboveall has policy makers following the suc-cess of the IT-BPO industry with closeinterest.

India’s software association NAS-SCOM estimates that the IT-BPO sec-tor will end up creating directemployment of 10 million and indirectemployment of 20 million by 2020.While this would represent an unprece-dented five-fold growth in direct and 2.5times growth in indirect employment, itis clearly not the single magic pill thatwill solve the larger issue of creating em-ployment for the estimated 100 millionwho will enter the labor force in the nextdecade. Hence, while the IT-BPO indu-stry is an essential part of the solution, itcannot be the only solution.

India must also have a larger strategyto generate jobs in other service-inten-sive sectors like real estate, financial ser-vices, telecommunications and retail toensure that its “demographic dividend”gets cashed.

by Natarajan ChandrasekaranNatarajan Chandrasekaran is the Chief Executive Officer of Tata Consultancy Services, Asia’s largest IT company

Delivering India’s Demographic Dividend

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Tourists walks outside the Taj Mahal Palace hotel in Mumbai India, 28 October, 2010|ANA/EPA/DIVYAKANT SOLANKI



BRUSSELS – 2011 will be an extre-mely important year for the SingleMarket. The draft proposal for a

Single Market Act, now in the consulta-tion phase, will be approved by Prime Mi-nisters in March at the Annual EconomicSummit. 2011 will put the revitalisationand reappraisal of the Single Market atthe centre stage, as the measures in theSingle Market Act starts to be implemen-ted. A Single Market Forum in Poland,during the Polish Presidency, will give allparticipants the chance to take stock ofthe new initiative.

The guiding idea behind the SingleMarket Act is to generate political energy,and obtain Member State commitmentbehind a new drive to create a more holi-stic and citizen-oriented Single Market.Its concept was an action plan of 50 legis-lative and non-legislative initiatives aimedat creating a highly competitive socialmarket economy. A big challenge for theInternal Market and Consumer Protec-tion Committee in 2011 is to define thepriorities in the three chapters of theCommission's proposal: (I) Single Marketfor Enterprises, with an emphasis onSMEs and including the European pa-tent, Services, Public Private partnershipsand concessions, Public Procurement forInnovation, and Standardisation; (II) ASingle Market for Europeans (consumersand citizens) with proposals on Servicesof General Interest, Social Services, figh-ting discrimination against consumers, aEuropean savings account, mobility of ci-tizens; and (III) Governance and Partner-ship and the launch of a large annualevent, the 'Single Market Forum'.

Alongside the big picture, work mustcontinue to update and improve existingSingle Market instruments, with smallenterprises demanding special attention.In 2010, the IMCO Committee brokeredagreement on the recast late payments di-rective.

This is a serious problem affectinghundreds of thousands of businessesacross the EU, demonstrated by the factthat European written off debt – moniesowed to a business but never paid – hasreached the record level of €300 billion.The new legislation, which will be tran-sposed by 2013, introduces, at the behestof Parliament, a 60 day cap for paymentsby public authorities. The Parliament wasalso instrumental in securing a statutoryinterest rate payable on outstanding debts,of at least 8% above the European Cen-tral Bank’s reference rate.

Agreement was reached at the end of2010 on significant legislation aimed atovercoming the current barriers that im-

pede the free circulation of constructionproducts across the EU. This included across reference to the hazardous substan-ces covered by the REACH regulation, toensure for workers using constructionproducts and of users of constructionworks. Standardisation will also be a keytopic for 2011 with the Commission pro-posing a new ‘Standardisation Act', whichwill unite all the existing legal instrumentsinto one Regulation. We expect this in thefirst half of 2011. In 2010, standardisationwas the subject of a well-received and ti-mely initiative report by the Committee,which put the subject high on the politi-cal agenda. The report analysed the chal-lenges and provided strategicrecommendations for the improvement ofthe existing system. Standardisation is anincreasingly important component notonly of innovation and competitivenessbut as a way to improved protection andwelfare of consumers.

In 2011, we hope to make progress on

the Consumer Rights Directive, whichhas been the subject of a record 1600amendments in Committee and well asvexed discussions on the level of harmo-nisation needed. It is still too early to pre-dict, but the legislation can potentiallybring added-value in new, future-proofrules on distance and off-premises selling.

The action programme of the SingleMarket act and seven blueprints for actionset out in the EU 2020 flagship proposals,will undoubtedly determine the course ofdebates and political action in the comingyear. IMCO will work to further e-com-merce and e-procurement, to stimulatethe still modest cross-border activity inthese areas. At the same time, the IMCOCommittee will continue its work withnational parliaments, exploring new me-thods such as the committee-to-committee video-conference held with theAssemblée nationale. It will give sharpfocus to its work on implementation, andexamine whether the Services Directiveand the Mutual Recognition of Professio-nal Qualifications are delivering for citi-zens. Neither will we neglect the externalaspect of a single market in a globalisingworld, whether it be the safety of productscoming for China, convergence and regu-latory cooperation with the United Statesor co-innovation with India.

In 2011, we must build on the politicalsuccess of getting the completion of theSingle Market recognised as a key foun-dation of Europe's Competitiveness.

The new raft of Flagship Projects alldepend on completing the Single Marketfoundations. 2011 is a chance to make realprogress.

by Malcolm Harbour Malcolm Harbour MEP is the Chair of the Internal Market and Consumer Protection Committee in the European Parliament

Driving the Single Market Ahead in 2011

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A stock broker talks on the phone on the trading floor at the stock market in Frankfurt,Germany, 06 December 2010 |ANA/EPA/ARNE DEDERT



BRUSSELS – In these times of eco-nomic crisis, austerity has becomethe latest buzzword. National go-

vernments seem to be focused on cutbacksand savings above all else, and they expectEurope to follow suit. In turn, austerity me-asures have given rise to public unrest inmany countries – from Greece to the UK,from Ireland to Spain – as citizens voicetheir concerns about the potential threat tojobs, pensions or services.

Caught in the middle of all this are localand regional authorities. Not only are theythe first to suffer when budgets are cut bycentral government, leaving them withoutthe means to guarantee front-line servicessuch as healthcare, but they are also the onesthat have to pick up the pieces from theprotests. And with the same financial au-sterity now being imposed on EU budgetsas well, there is also uncertainty over theirlong-term access to European funds for keyinfrastructure and other projects.

Let's not underestimate the importanceof local and regional authorities (LRAs) wi-thin the wider economic context: they ac-count for one third of public expenditureand two-thirds of public investment in Eu-rope. Yet recent studies suggest that 80% ofLRAs have seen their revenues fall since thestart of the crisis, 67% have increased theirexpenditure on social costs such as unem-ployment benefit and 38% of them havebeen forced to reduce their own staff num-bers. The Europe 2020 strategy, with itsfocus on building smart, sustainable and in-clusive growth, which offers the best hopefor driving the European economy out ofrecession. The Committee of the Regions,through its Europe 2020 Monitoring Plat-

form, a network of regions that report backto the CoR on the implementation and ef-fectiveness of the strategy on the ground,has been closely following the impact of thestrategy in its first year, focusing in particu-lar on the involvement of LRAs in the cre-ation of each country's national reformprogramme (NRP), the 'roadmap' for gro-wth in each country.

Given the central role that LRAs play instimulating the local and regional economy,it would seem sensible to include them inthe development of NRPs at the nationallevel, but the CoR's first annual report onthe Europe 2020 strategy shows that this isstill far from being the case. Just 10 coun-tries have thus far involved LRAs in the de-velopment of their programmes, althoughthere are encouraging signs that more willbe involved in other countries before thefinal deadline for submission of the planscomes in April 2011.

The Committee of the Regions believesthat this process should be taken a step fur-

ther, with the development of TerritorialPacts – effectively, contracts between natio-nal, regional and local government in eachmember state that would enable NRPs tobe drawn up and implemented much moreeffectively, for example through setting re-gional as well as national targets. Thesepacts would in turn help the European in-stitutions to prioritise their policy actionsaimed at achieving the Europe 2020 goals,for example through cutting the red tapesurrounding access to and management ofEU funds, or through a better coordinationof the Europe 2020 strategy with cohesionpolicy funding priorities.

For LRAs to cope with the current cri-sis, and to ensure that they can meet theircommitments within the framework of Eu-rope 2020, they also need to know that theycan rely on the funding necessary to com-plete long-term projects.

This is why the debate over the futureof the EU budget is so important, and whythe Committee calls on national govern-

ments to look beyond the current economicdifficulties to ensure a stable, long-termbudget that is sufficient to achieve the EU'scommon goals.

Indeed, while Member States have cal-led for a reduction in the EU budget, in linewith austerity measures at home, Europehas a greater need than ever before to raiseits own resources, which is why I have sup-ported calls for the creation of a Eurobond,which would give Europe the funds it needswithout increasing debt levels by nationalgovernments. But the European Commis-sion's proposal to withhold funds from co-untries with excessive public deficits is adangerous one, for it would be LRAs – themain beneficiaries of structural funds – whowould suffer for the profligacy of their na-tional governments. I do, however, welcomethe move towards a 10-year timeframe witha mid-term review for the EU budget,which is something that the Committee hasitself been pushing for in order to give morelong-term assurance and greater flexibilitythan the current system.

For the CoR, cohesion policy can helpLRAs face the crisis head on, but for thatit needs to adapt. It must be better focusedon helping to create more sustainable jobsand businesses. It needs to remain accessi-ble to every region of Europe, and not justthose considered to be the least well off.For if there is one thing that the currentcrisis has shown us, it is that no-one is safefrom the vagaries of recession, and that,now more than ever, Europe's local and re-gional authorities need the support of theEU and their national governments, wor-king together towards the same goal ofserving their communities.

by Mercedes BressoMercedes Bresso is the President of the Committee of the Regions

Regional Authorities: Caught in theMiddle of the Economic Crisis

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A general view of the banks at Canary Wharf in London, Britain |ANA/EPA/ANDY RAIN



by Justin Yifu LinJustin Yifu Lin is Chief Economist and Senior Vice President for Development Economics at the World Bank.

Industrial Policy Comes Out of the Cold

WASHINGTON, DC – One ofthe best-kept economic secretswas strongly reconfirmed in 2010:

most countries, intentionally or not, pursuean industrial policy in one form or other. Thisis true not only of China, Singapore, France,and Brazil – countries usually associated withsuch policies – but also for the United Kin-gdom, Germany, Chile, and the United Sta-tes, whose industrial policies are often lessexplicit.

Given that industrial policy broadly refersto any government decision, regulation, or lawthat encourages ongoing activity or inve-stment in an industry, this should come as nosurprise. After all, economic development andsustained growth are the result of continualindustrial and technological change, a processthat requires collaboration between the pu-blic and private sectors.

Historical evidence shows that in coun-tries that successfully transformed from anagrarian to a modern economy – includingthose in Western Europe, North America,and, more recently, in East Asia – govern-ments coordinated key investments by privatefirms that helped to launch new industries,and often provided incentives to pioneeringfirms.

Even before the recent global financialcrisis and subsequent recession, governmentsaround the world provided support to the pri-vate sector through direct subsidies, tax cre-dits, or loans from development banks inorder to bolster growth and support job cre-ation. Policy discussions at many high-levelsummits sought to strengthen other featuresof industrial policy, including public financingof airports, highways, ports, electricity grids,telecommunications, and other infrastructure,improvements in institutional effectiveness,an emphasis on education and skills, and a

clearer legal framework. The global crisis has led to a rethinking

of governments’ economic role. The challengefor industrial policy is greater, because it sh-ould assist the design of efficient, govern-ment-sponsored programs in which thepublic and private sectors coordinate their ef-forts to develop new technologies and indu-stries.

But history also tells us that while go-vernments in almost all developing countrieshave attempted to play that facilitating role atsome point, most have failed. The economichistory of the former Soviet Union, LatinAmerica, Africa, and Asia has been markedby inefficient public investment and misgui-ded government interventions that have re-sulted in many “white elephants.”

These pervasive failures appear to be duemostly to governments’ inability to align theirefforts with their country’s resource base andlevel of development. Indeed, governments’propensity to target overly ambitious indu-stries that were misaligned with available re-

sources and skills helps to explain why theirattempts to “pick winners” often resulted in“picking losers.” By contrast, governments inmany successful developing countries havefocused on strengthening industries that havedone well in countries with comparable fac-tor endowments.

Thus, the lesson from economic historyand development is straightforward: govern-ment support aimed at upgrading and diver-sifying industry must be anchored in therequisite endowments. That way, once con-straints on new industries are removed, pri-vate firms in those industries quickly becomecompetitive domestically and internationally.The question becomes how to identify com-petitive industries and how to formulate andimplement policies to facilitate their deve-lopment.

In developed countries, most industriesare advanced, which suggests that upgradingrequires innovation. Support for basic rese-arch, and patents to protect successful inno-vation, may help. For developing countries,

Célestin Monga and I have recently develo-ped an approach – called the growth identi-fication and facilitation framework – that canhelp developing-country governments incre-ase the probability of success in supportingnew industries.

This framework suggests that policyma-kers identify tradable industries that have per-formed well in growing countries with similarresources and skills, and with a per capita in-come about double their own. If domesticprivate firms in these sectors are already pre-sent, policymakers should identify and re-move constraints on those firms’technological upgrading or on entry by otherfirms. In industries where no domestic firmsare present, policymakers should aim to at-tract foreign direct investment from the co-untries being emulated or organize programsfor incubating new firms.

The government should also pay atten-tion to the development by private enterpri-ses of new and competitive products, andsupport the scaling up of successful private-sector innovations in new industries. In co-untries with a poor business environment,special economic zones or industrial parks canfacilitate firm entry, foreign direct investment,and the formation of industrial clusters. Fi-nally, the government might help pioneeringfirms in the new industries by offering tax in-centives for a limited period, co-financing in-vestments, or providing access to land orforeign exchange.

Our approach provides policymakers indeveloping countries with a framework totackle the daunting coordination challengesinherent in the creation of new, competitiveindustries. It also has the potential to nurturea business environment conducive to private-sector growth, job creation, and poverty re-duction.

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Visitors attend Bauma China 2010, the leading international trade fair in Asia for all sectors of the con-struction-machinery industry at the New Shanghai Exposition Centre in Shanghai, China, 23 November2010 |ANA/EPA/QILAI SHEN



by Cillian DonnellyCillian Donnely is an EU Affairs Editor at New Europe newspaper

BRUSSELS - 2010 was a year domi-nated by the economy. The year sawtough austerity measures introduced

throughout the EU in a government-widedrive to stem the tide of complete fiscal col-lapse. The second half of the year, in parti-cular, was dominated by the threat ofcontagion; an old word resurrected for mo-dern times. Contagion, as everyone mustsurely know by now, is the contamination ofone country's economy by another, like theold domino theory; when one country col-lapses, its neighbour will follow. Marketspeculators focussed on the so-called PIGS– Portugal, Italy, Greece and Spain – but itwas Ireland that ended the year bottom ofthe class. Elsewhere, in the United Kin-gdom a change of government brought withit a new direction and Prime MinisterDavid Cameron's volunteer-heavy 'Big So-ciety', a thinly-veiled attempt to disguise thefact there is a major shortage of paying jobs,in the same way that his assertion that "weare all in it together" was simply a way ofdeflecting from the fact that the bankers areto be let off the damage they have causedsociety, but at everyone else's expense. Thecoalition government did face some civil di-sobedience in the form of student prote-sters, who took to the streets over a plannedraise in tuition fees, and who had the ta-bloids fuming over a hairy encounter withthe Duchess of Cornwall, but overall, Ca-meron and co got off lightly compared toGreece, where rioting was a regular occur-rence, as angry demonstrators patrolled thestreets of Athens and other cities in a showof displeasure, and 24 news channels wereawash with footage of the head-crackingactivities of the Greek police.

As the European Union mobilised itself,slowly and with habitual infighting, and

came up with the permanent crisis mecha-nism, its strategy was clear: save the singlecurrency at any cost.

New reports of contagion began to sub-side in December, but some speculationcontinues. Belgium, which managed tocomplete its six-month presidency of theEU without actually having a government,is still the focus of unwanted attention; po-litical instability, the naysayers have it, willbring the country down, and the EU wat-ches nervously. Time will tell, but the sub-text of this, that the Union is tacitlydemanding a quicker resolution of situa-tions like the Belgian one is something thatwill not help its cause, as European citizensresentful of outside interference start tolook inwards.

As well as the failing economy, the riseof nationalism was also a dominant featureof the year, as the far-right won electoralgains in various member states across the

Union, leading to a renewed resentment ofthe EU on the one hand and a kind of rear-guard action from governments on theother; in France and Germany for example,both governments tried to stem the far-right by a dubious kind of divide-and-conquer, incorporating some of thearguments of the extremists in an attemptto win their votes in an underhand way ra-ther than facing them head-on in a politicaldebate. The centre-right in those countries,it seems, do not want to be seen as soft inthe face of rising economic and social pres-sures, but the lack of political courage isstartling.

Although it has yet to see a significantrise in the far right, Ireland, perhaps unsur-prisingly, also saw the rise of nationalist sen-timent in the latter half of 2010. As theInternational Monetary Fund (IMF) impo-sed crippling loans on the country, and thegovernment introduced the toughest bud-

get in the history of the state, fears of a lossof sovereignty were widely expressed in themedia and on the streets.

The once pro-European nation was tur-ning its back on its former benefactor, as acurious conservative-nationalist force beganto rise. Along with the far-left, long-termopponents of the European Union, they willbe the most vocal during the general elec-tion, expected in March, which will see anexpected and resounding defeat for the cur-rent Fianna Fáil-Green Party coalition.

Oddly, on 16 December, the same daythe European Council was finalising its per-manent crisis mechanism, Ireland sufferedanother international defeat, as the Euro-pean Court of Human Rights ruled that thegovernment had failed to correctly imple-ment the constitutional right to abortion.Ireland will now have to adjust its laws, so-mething that will not be taken well by thecurrent government who have been cour-ting the religious constituency of late in anattempt to secure what they can of the elec-torate. Arguing their position, the govern-ment said that the current laws were basedon "profound moral values deeply embed-ded in Irish society".

This is something of a dubious conten-tion, but it does raise a question similar tothat which will is set to feature heavily inthe first few months of 2011 in relation toEurope's dealings with African, Caribbeanand Pacific (ACP) states; namely how canwe define the particular values of a country,and if those values are deemed to be some-how against the prevailing trend of, say, theEU, then does the EU the right to imposechange on a third country.? It wouldn't do itin the case of a member state like Ireland,but will it pressurise an African country?2011 may hold the answer.

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2010: Falling Economies and Rising Nationalism

Consumers walk in the main shopping area in Athens, Greece, on 19 December 2010|ANA/EPA/PANTELIS SAITAS



LONDON - The Euro-Mediterra-nean Partnership was created inNovember 1995 and its goal was to

form a Mediterranean region, wherepeace, security and prosperity would pre-vail. The founding stone was the so-cal-led Barcelona Declaration, after thelaunch of Barcelona Process by Ministersof Foreign Affairs from 15 Europeanmember-states and 14 Mediterraneanpartners. The main specific goal was thecreation of a political and security part-nership, where a common area of peaceand stability would be established. Also,the members of the Partnership were in-terested to create an economic and finan-cial partnership for shared prosperity,through a free-trade area, economic coo-peration and concerted action. Additio-nally, they wished to be partners in social,cultural and human affairs, by developinghuman resources, promoting understan-ding between cultures and exchanges bet-ween civil societies.

The Euro-Mediterranean Partnershipwas re-launched in 2008 with 43 membersthis time under the name Union for theMediterranean (UfM). The French presi-dent Nicholas Sarkozy suggested the re-launching of the Partnership, which waspart of his presidential election campaign.The enlarged partnership added morescope to the free trade in the area. The in-stitutional arrangements (creation of thepermanent Secretariat based in Barcelonaand the two rotating presidencies) attri-buted more gravity to the Union. Thenew ideas and the specific new projectswere received with a lot of enthusiasmfrom the participating countries. Themain areas of UfM focus have been: the

environment (especially the cleanup of theMediterranean Sea), transportation, civilprotection, alternative energy sources(Solar Mediterranean Plan), high-leveltraining and research (establishment ofthe Euro-Mediterranean University) anddevelopment of small- and medium-sizedenterprises (Mediterranean Business De-velopment Initiative).

Despite the enthusiastic climate at thecreation of the UfM, there has been a lotof pessimism with regards to the bilateralrelationships in the wider Mediterraneanarea. The cancellation of the last two sum-mits (mainly because of the Arab-Israeliconflict) underlines the latter.

Moreover, the latest negative develop-ments in the financial sector make theprospects even more difficult. The sove-

reign debt crisis in south-European eco-nomies has threatened the very monetarystability in the Eurozone. Also, the posi-tion of FEMIP Mediterranean countries(FMCs) in the global financial arena haschanged. Although FEMIP countrieshave reacted well to the crisis, they felt theshock in exports, transfers of income, to-urism and direct investment . The afore-mentioned serious challenges that theUfM members face could mean a tran-sformation in the Euro-Mediterraneanrelations. For example, the much-wantedtrade integration in the Euro-Mediterra-nean area could be at stake. In addition tothat, the economic crisis has affected thehope that UfM can receive financial sup-port from the private sector and other fi-nancial organisations; especially

considering the fact that the main donatorof the Secretariat is the European Union.

However, the need for new structuralpolicies in the framework of the globalcrisis can be seen as a chance for growth;as the European Investment Bank andFEMISE study suggests: ‘the global con-text of emergence from the crisis providesan opportunity for the Mediterraneanpartner countries to improve their compe-titiveness but also poses a challenge, na-mely that of developing new forms ofgrowth (7 to 8% per annum), in order todrive both the modernisation of their eco-nomies and the creation of some 60 mil-lion new jobs’.

Furthermore, the new goals set by theUfM are a sign of the willingness by itsmembers to strengthen the EuroMedtrade partnership.

At the November 2010 meeting bet-ween EU Trade Commissioner Karel DeGucht and Trade Ministers of the UfM inBrussels, ministers endorsed measures tofacilitate the trade of Palestinian productsto Euro-Mediterranean markets and setpriorities for bringing the partnership clo-ser to economic operators, such as a Tradeand Investment Facilitation mechanism toprovide centralised information on tradeand investment flows, regulations andconditions in the Euro-Mediterranean re-gion. They also set the goal of jointlycombating piracy and counterfeiting.

The financial crisis is undoubtedly achallenge for the EuroMed partners; itcan be observed as an opportunity for in-creasing the levels of trade links betweensouthern and eastern Mediterranean co-untries and achieving full trade liberalisa-tion in the wider area.

by Foteini Kalantzi Foteini Kalantzi is a research associate, specialising in economic aspects of the UfM, at Euro-Mediterranean Observatory

(EuroMedO), part of Hellenic Centre for European Studies

The Euro-Mediterranean Partnership in the NewFinancial Era: Challenges and Trade Opportunities

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Greek Prime Minister George Papandreou (L) talks with his Turkish counterpart Recep Tayyip Er-dogan (R) during the 'Mediterranean Climate Change Initiative' held in Athens, Greece, on 22 Oc-tober 2010 |ANA/EPA/SIMELA PANTZARTZI


New Year Special| January 2011FINANCE

BERLIN – The International Mo-netary Fund estimates that the cri-sis-induced net cost of

financial-sector support provided by G-20countries in 2009 amounted to 1.7% ofGDP ($905 billion), while discretionaryfiscal stimulus amounted to 2% of GDPin both 2009 and 2010.

All the eurozone countries, except Lu-xembourg and Finland, reported fiscal de-ficits in excess of 3% of GDP in 2009,while Greece, Spain, and Ireland ran defi-cits of more than 10%. Within a singleyear, eurozone governments’ general debtincreased by almost 10 percentage points(78.7% of GDP in 2009, compared with69.3% in 2008).

As for Germany, the 2010 federal bud-get features a record-high deficit of wellabove €50 billion. Public-sector debt willsurpass €1.7 trillion, approaching 80% ofGDP. Interest payments, which consumemore than 10% of Germany’s federal bud-get, will grow along with the mountingdebt burden – and even faster if interestrates rise.

Yet the financial crisis and the ensuingrecession go only so far towards explai-ning these high levels of indebtedness.The truth is that many European and G-20 countries have lived far beyond theirmeans – including Germany, despite itsreputation as a paragon of fiscal rectitude.

Even in good times, governments havefor too long been spending more thanthey received.

Perhaps worse, some also spent morethan they could easily repay, given theireconomies’ declining long-term growthpotential because of the aging of their po-pulations. Such profligacy has led to levelsof debt that will become unsustainable ifwe do not act.

This is why Germany decided in 2009to enshrine strict fiscal rules in its consti-tution. The Schuldenbremse, or “debtbrake,” requires the federal government torun a structural deficit of no more than0.35% of GDP by 2016, while Germany’sLänder will be banned from runningstructural deficits at all as of 2020. Thecurrent federal government will certainlyabide by these rules, which implies redu-cing the structural deficit to approxima-tely €10 billion by 2016 – a reduction ofabout €7 billion a year.

Welfare benefits account for morethan half of Germany’s federal spendingthis year. So there is little choice but to cutwelfare spending, at least moderately. Butthis sort of fiscal consolidation can beachieved only if a majority perceives it asbeing socially equitable. Recipients of so-cial and corporate welfare alike, as well ascivil servants, must share the sacrifice.

Thus, German corporations will haveto contribute to fiscal consolidation thro-ugh reductions in subsidies and additional

taxes on major energy companies, airlines,and financial institutions. Similarly, civilservants must forego promised pay incre-ases, and the government is looking forannual savings in the federal armed forcesof up to €3 billion through structural re-forms.

Germany’s binding fiscal rules set apositive example for other eurozone co-untries. But all eurozone governmentsneed to demonstrate their own commi-tment to fiscal consolidation in order torestore the confidence of markets – and oftheir own citizens.

Recent studies show that once a go-vernment’s debt burden reaches a thresh-old perceived to be unsustainable, moredebt will only stunt, not stimulate, econo-mic growth.

Greece’s debt crisis was a clear war-ning that European policymakers mustnot allow public debt to pile up indefini-tely. The EU was right to react decisivelyto ensure the euro’s stability by providingshort-term assistance to Greece and esta-

blishing the European Financial Stabili-zation Mechanism. But, while the EFSFis a necessary step towards restoring con-fidence, the Greek crisis has revealedstructural weaknesses of the EuropeanMonetary Union’s fiscal-policy frameworkthat cannot, and should not, be fixed byroutinely throwing other countries’ moneyat the problem.

Indeed, I consider the EFSF to be astopgap measure while we remedy thefundamental shortcomings of the Stabi-lity and Growth Pact, whose fiscal ruleslack both substantive and formal bite.This is why we need a more effective cri-sis-prevention and crisis-resolution fra-mework for the eurozone, one thatstrengthens the Pact’s preventive and cor-rective provisions. Sanctions for eurozonecountries that seriously infringe EMUrules should take effect more quickly andwith less political discretion, and also sh-ould be tougher.

Germany and France have proposedstricter rules on borrowing and spending,backed by tough, semi-automatic sanc-tions for governments that do not comply.Countries that repeatedly ignore recom-mendations for reducing excessive deficits,and those that manipulate official stati-stics, should have their EU funds frozenand their voting rights suspended.

Monetary union was intended to beneither a panacea for eurozone membersnor a get-rich scheme for financial specu-lators. Nor was it meant to be a system ofredistribution from richer to poorer coun-tries via cheaper borrowing for govern-ments by means of common Eurobonds oroutright fiscal transfers. It won’t succeedif some countries persistently run deficitsand weaken their competitiveness at theexpense of the euro’s stability.

EMU was designed to encouragestructural reforms. Profligate memberswere supposed to be forced by the Stabi-lity and Growth Pact, as well as by theirpeers, to live within their means and thusstrengthen their competiveness. Instead,Germany’s former social-democratic go-vernment weakened the pact when doingso was politically convenient, while lesscompetitive eurozone members allowedwages to rise and the public sector to be-come bloated, and then looked away aseasy credit fueled both debt and assetbubbles.

We cannot foster sustainable growthor preempt a sovereign-debt crisis in Eu-rope (or anywhere else) by piling-up moredebt. European countries need to reducetheir deficits in a growth-friendly fashion,but reduce them they must.

It can be done: Germany is reducingits debt burden to sustainable levels whilestrengthening its long-term growth pro-spects. Its course of pro-growth deficit re-duction, together with its suggestions forstrengthening Europe’s fiscal framework,could serve as a blueprint for Europeaneconomic governance.

by Wolfgang SchäubleWolfgang Schäuble is Germany’s Federal Minister of Finance.

Conquering Europe’s Debt Mountain

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German Chancellor Angela Merkel (L) and French President Nicolas Sarkozy (R) smile and waveas they inspect a guard of honor as they arrive for the German-French Summit in Freiburg, Ger-many, 10 December 2010 |ANA/EPA/ROLF HAID

NEW YORK – The fiscal stimulusthat most advanced economies andemerging markets implemented

during the 2008-2009 global recession –together with monetary easing and thebackstopping of the financial system – pre-vented the Great Recession from turninginto another Great Depression in 2010. Ata time when every component of privatedemand was collapsing, the boost from hi-gher government spending and lower taxesstopped the global economy’s free-fall andcreated the basis for recovery.

Unfortunately, stimulus spending andthe related bailout of the financial system,together with the recession’s effect on re-venues, contributed to fiscal deficits on theorder of 10% of GDP in most advancedeconomies. According to the InternationalMonetary Fund and others, these econo-mies’ ratio of public debt to GDP will sur-pass 110% by 2015, compared to 70%before the crisis. Aging populations inmost advanced economies imply additio-nal public debt in the long term, owing tonon-fully-funded pension schemes and ri-sing health-care costs.

Thus, in most advanced economies,deficits need to be reduced to avoid a fi-scal train wreck down the line. But muchresearch, including a recent study by theIMF, suggests that raising taxes and redu-cing government spending has a negativeshort-term effect on aggregate demand,thereby reinforcing deflationary and re-cessionary trends – and undermining fi-scal consolidation.

In an ideal world, where policymakerscould credibly commit to medium- tolong-term fiscal adjustment, the optimaland desirable path would be to committoday to a schedule of spending reductionsand tax increases, phased in gradually over

the next decade as the economy recovers.That way, if the economy needed anothertargeted fiscal stimulus in the short run, fi-nancial markets would not respond by dri-ving up borrowing costs. Unfortunately,the fiscal policy currently adopted by vari-ous advanced economies deviates sharplyfrom this path of credible medium-termconsolidation combined with short-termadditional stimulus.

In the US, we have the worst of all pos-sible worlds. On one hand, stimulus hadbecome a dirty word – even within theObama administration – well before theRepublicans’ mid-term election victoryruled out another round altogether. On theother hand, medium-term consolidationwill be all but impossible in America’s cur-rent atmosphere of hyper-partisanship,with Republicans blocking any tax incre-ase and Democrats resisting reforms of en-titlement spending. Nor is there anypressure from bond markets to concentratethe minds of policymakers.

In the periphery of the eurozone, theproblem is the opposite: bond vigilantesare demanding that Greece, Ireland, Por-

tugal, Spain, and Italy front-load fiscalconsolidation or watch their borrowingcosts go through the roof, risking themtheir market access and triggering a public-debt crisis. Markets don’t care that front-loaded fiscal consolidation is exacerbatingrecession and thus making the goal of re-ducing debt and deficits as a share of GDPnear-impossible to achieve.

To avoid a persistent and destructiverecession, the fiscal and structural reformsimposed by the bond vigilantes should beaccompanied by other euro-zone policiesthat restore growth and prevent viciousdebt dynamics. The European CentralBank should ease monetary policy in orderto weaken the value of the euro and boo-tstrap the periphery’s growth. And Ger-many should cut taxes temporarily – ratherthan raising taxes, as planned – in order toincrease disposable income and stimulateGerman demand for the periphery’s goodsand services.

Alas, neither of the two biggest playersin the euro zone is pursuing policies consi-stent with restoring sustained growth inthe euro zone’s periphery. The ECB’s mo-

netary policy is too tight; and Germany isfront-loading fiscal austerity. Thus, the pe-riphery is destined to a destructive defla-tionary and recessionary adjustment thatwill exacerbate the risks of recession, in-solvency, eventual defaults and, possibly,exit from the euro.

In the United Kingdom, the new go-vernment gave several reasons for front-lo-ading fiscal consolidation. The bondvigilantes might have woken up if early au-sterity was not implemented; the deficitwas very large and the public sector bloa-ted; and it is always politically easier to im-plement tough measures early in anadministration, when popular support isstill high and the next election is far off.

Certainly, the UK was playing with fi-scal fire and needed some commitment toearlier austerity. But phasing in austeritymore gradually, and thus back-loading theadjustment, would have posed less risk tothe economy’s anemic recovery whilemaintaining a credible commitment to fi-scal consolidation. Instead, the governmentcould well end up with no plan B in caseplan A – massively front-loaded austerity –leads to a double-dip recession.

In short, an optimal path of fiscal au-sterity would, in most countries, imply aback-loaded but credible commitment tomedium-term consolidation, togetherwith short-term additional stimuluswhen necessary and allowed by marketconditions, thereby avoiding the prospectof a deflationary and recessionary spiral.Unfortunately, the main advanced econo-mies are following a divergent path –which, in some cases, will lead them inthe opposite direction in 2011. As a re-sult, the risks of debt deflation and even-tual disorderly sovereign andprivate-sector defaults are rising.


New Year Special | January 2011FINANCE

by Nouriel RoubiniNouriel Roubini is Chairman of Roubini Global Economics (www.roubini.com), Professor of Economics at New York University’s

Stern School of Business, and co-author of Crisis Economics.

Fiscal Follies

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Pedestrians reflected in the doors of the Royal Bank of Scotland in Bishops Gate, London|ANA/EPA/ANDY RAIN


New Year Special| January 2011FINANCE

by Sharon Bowles Sharon Bowles, MEP, is Chair of the Economic and Monetary Affairs Committee in the European Parliament

The Problems of Marching in Step

BRUSSELS-Right now you couldsay that legislators have never hadit so good: mention ‘crisis’ and eve-

rything seems to be justified. Yet politi-cians complain - about banks in particular- that they think nothing has changed andit is business as usual.

In fact quite a lot has changed, and theproblem with everything changing at onceis that it is difficult to predict the interac-tions, and all too easy to lose sight of someof the fundamentals of existing legislation,which has not all been proved wrong.

In Europe we have been following theglobal G20 agenda which has largelycoincided in time with the scheduled re-view of the legislation of the FinancialServices Action Plan. The crisis has crea-ted risk aversion, one consequence ofwhich is that, at least in Europe, safetynow ranks above efficiency.

Part of the reason for the safety firstapproach is that everyone is interested inthe crisis and this has driven the rhetoricof politicians in particular, but also others.There is no doubt some have seen it as anopportunity to connect with citizens and- in my opinion - have fallen into popu-lism on some matters that are too seriousfor that.

In times past the interconnection ofmacroeconomic policy and financial regu-lation was left to academic debate. Nowthe connection is in the mainstream - atleast as far as the setting up of systemicrisk boards is concerned. But there are al-ready examples around us that show this isa matter for current consideration.

One of the first crisis responses was tohit out at securitisation, the vehicle thathad spread the contagion of subprimemortgages and, so it seems, dissipated the

interest of supervisors. Despite a few lonevoices indicating the dangers of dispro-portionate measures, we are now in the si-tuation of trying to find measures toencourage and restore securitisation forthe benefit of the economy.

In similar vein rules in markets willhave a direct effect on the prudential side,on capital in banks and other institutionsand also on sovereign debt, growth anddeficits. Likewise prudential rules on qua-lity of capital as well as quantity will haveknock on effects.

Already underway is the considerationof EMIR (European Market Infrastruc-ture Regulation - which covers centralclearing for OTC derivatives) and the roleof central counterparties. Recently we sawthat LCH, a central counterparty, raisedits margin requirement on Irish sovereigndebt, and quite rightly too for they musthave margins that reflect risk. In someways this had the same effect as a ratingdowngrade and the markets responded ina pro-cyclical way. Previously we've had

Commission utterings condemning aGreek sovereign downgrade as inconve-nient – and my repost that I did not wantratings that were ‘convenient’ be that forinvestment banks or central banks – so isa future target for political wrath the mar-gining requirements of CCPs? I would sayit is important not to have political inter-ference but ensure that margining modelsare robust and encompass a range of vola-tility prior to needing adjustment.

All margining – on CCPs and in bila-teral collateralised trading – will probablyhave this pro-cyclical behaviour, and willneed to be watched, but the effect inCCPs may well be more systemic. Thisshould remind us that in regulation thereis never a win-win position, we can noteliminate risk we can only aim for bettermanagement, and that is why understan-ding is paramount.

The crisis shows us how markets, so-vereign debt and deficits are interlinkedand of course sovereign bonds are at theheart of capital requirements.

There are some serious things to con-sider with regard to maintaining their li-quidity, not escalating their cost ongovernments, and the special situation ofthe Euro. We may be in the position thatregulation forces banks to purchase some-body’s sovereign bonds, but other buyersin the market can not be forced, and ifthey are absent then liquidity suffers withall that that implies.

On sovereign bonds I have been dra-wing attention to the fact that when thereis a currency union such that printingmoney is not an option, the assumption ofzero risk weighting for sovereign bonds isincorrect.

Now, the European Council decisionon bail-in reinforces this view, effectivelyputting beyond reasonable doubt thatthere is in future credit risk in the debtsof Eurozone governments. Of course whathas been a problem, if corrected and har-nessed as part of a discipline measure ineconomic governance, can become useful.All regulation is aimed at reducing risk,but if we do it in such a risk averse waythat it is impossible – via bans – or unaf-fordable – via cost – to take a differentview from the majority, then we can notget the smoothing of cycles that is madepossible by those who are prepared to takethe opposite view from the herd. So weare at a definitive moment these next fewmonths when the choices that are mademight make our risk-averse world morerather than less pro-cyclical.

History reminds us how an army mustbreak its step to cross a bridge - otherwisethe bridge resonates and collapses. Is ourmicro-prudential marching in step put-ting at risk the macroeconomic bridge?

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European Council President Herman Van Rompuy (R), and European Commission President Jose Manuel Barroso give a news conference at the end of the first day atthe European head of states summit in Brussels, Belgium, 16 December 2010 |ANA/EPA/OLIVIER HOSLET

EUROPEAN PARLIAMENT

Page 44| New Europe

New Year Special | January 2011FINANCE

by Dionysios (Dennis) KefalakosDennis Kefalakos is the Editor-in-Chief of New Europe newspaper

The real money war is not over devaluations

BRUSSELS-Come the spring of theyear 2013 and Eurozone would be a re-born first rate world economic entity,

have the Franco-German plans for the euro so-vereign debt rearrangement is successful. Untilthat time the money war would be ranging,with the English language print and digitalpress having declared on many occasions theend of the euro money. It is not about highlycompetitive but officially demonized devalua-tions as many believe, but the very existence ofthe monies. The truth is that the euromoneyright from its appearance at the turn of theMillennium has created a lot of problems to theBritish pound and to a lesser degree it has un-dermined the world dominate position of thedollar. In any case the euro has changed the wayfinancial markets function. For one thing everyfinancial firm based in New York or Londoncould not any more take it for granted that itsdealings in the main European markets, beingit stocks or bonds, are to be always profitable.Mainland Europeans are no longer willing tolet others take advantage of their economic gro-wth, without paying an “entry fee”. There weretwo incidents that make this pretty clear to eve-rybody outside Europe. The first incident hadto do with the stock of the famous German carmanufacturer Porsche, which also owns aroundthirty percent of the much larger car producerVolkswagen. Some US “investors” thought toearn some easy euro and tried to play with thestock of those firms. At the end they paid a dearprice and their losses amounted to billions ofdollars. The other important incident is aroundthe sovereign bonds issued by Greece. Hereagain a number of American and British fi-nancial “players” tried to make billions out ofplaying short those bonds. The outcome of thisoperation is not yet clearly decided but it lookslike those “investors” are again to write largelosses instead of profits. Today the investor re-lations www site of Porsche warns everybody

with the following announcement: “The Por-sche Automobile Holding SE is responsible forthe stock of the operating subsidiary, Dr. Ing.h.c. F. Porsche AG, and for the investments inVolkswagen AG. With the new structure, Por-sche ensures that the autonomy and indepen-dence of the traditional Stuttgart-basedcompany remain fully protected. This is themain purpose of separating holding and opera-ting activities. At the same time, the holdingalso represents a single company responsible forthe management of stock”.

So the terms of the new financial play inthe worldwide arena are now rewritten with theeuro is fighting for a prime position. WhatNew York and London fear most is that Euro-zone’s economic expansion all over the world,can be financed with bond and stocks issued ineuro, with the US and Britain being left entirelyoutside from huge regional markets, like EastEurope and Russia, both in the financial andthe industrial facets.

For example the modernization of the Rus-sian railways is a huge project in itself that canbe exclusively designed, engineered and finan-ced from west European industrial and finan-cial centers in Frankfort, Paris and Milano.

New York and London may be left out, just towatch the successes of Eurozone’s economicmight. All those issues are now being foughtfor, in the midst of the world gravest sovereigndebt financial crisis. New York and Londonwant this crisis to unfold solely on mainlandEuropean soil. And this despite the fact thatthe dollar’s and the pound sterling’s value is notbased on the solid ground of exports as in thecase of the euro but on the political help of Bei-jing and the oil producers Kingdoms of thePersian Gulf. On the other hand euromoney’sposition in the world markets is wan with thesweat of German metal workers, Paris hoteliersand Roman restaurateurs, despite the fact thatthe European PIGS do not entirely share thismainland European vision of the future.

In the everyday facet now, the euro has pre-sently to prove that it can self finance thePIGS’s problems, because there will be no helpfrom elsewhere. The IMF’s involvement in thesupport mechanisms for Greece, Ireland andprobably tomorrow Portugal does not repre-sents American or British money because it ismore than analogically financed by the Euro-zone member countries contributions to IMF’scapitalization. All along this exercise, Eurozone

authorities will be having to also make face tothe rest of the world antagonism. Even certainRussian quarters are not at all happy to see theeuro coming out unscratched from this battle.In any there will be for sure some scratches inthe face of the euro, because such fights are notwithout victims. Average Irish and Greeks in-come earners are already felling this cost deepin their family budgets. The same is true for theDuisburg and Lyon metal workers and theDutch, the Austrian and the Finish taxpayers.It is actually a pan European effort to save theeuro money.

In reality there is no danger whatsoever fora total collapse of the European single money.On the other hand though Washington, Lon-don and why not Beijing does not want towatch the euro just losing some of its foreignvalue, thus make the European exports ofgoods and services more competitive. That iswhy the English language press and certainthink tanks in Britain and Washington openlyspeak of the extinction of the euro. It seems thatnow some percentage losses in foreign value arenot at all within the targets of the other side.The total victory is the sole purpose of the con-frontation. At the point we have arrived in thiswar, things are so advanced that everybody istrying to cut a piece of the cake. For exampleChina did not hesitate to help Greece finan-cially, in exchange of secure and low price foothole on Eurozone’s real soil. Beijing knows verywell that by helping Greece it helps the eurogain in value vis-à-vis the dollar. And Beijinggoes along with its Greek plans despite thehuge Chinese investments in dollar denomina-ted assets. Obviously at this level decisions arenot taken with short term criteria. Decisionmakers think not only globally but have beforetheir eyes a long time horizon. The time of theNew York dealers who plaid in every marketwith a few hours horizon has being a trait ofthe past. Now all major financial houses haveremembered the existence of the Political Eco-nomists and even the Swedish Academy’sNobel Prize award board in Economics forgotthe perfect market mathematicians and choo-ses socially minded economic analysts, even iftheir major is that they work as analysts in…newspapers, American of course.

As in any war however none of the adver-saries is to disappear. It will be so crippled th-ough so as not to present a threat to the other.That is why Germany and France have placedall the reserves they have in the European Fi-nancial Stability Mechanism (EFSM around60 billion euro) and the European FinancialStability Facility (EFSF around 440 billioneuro). And this is real money not counting thepractically unlimited quantities of it, that theEuropean Central Bank can produce by buyingEurozone sovereign bonds from holders ofsuch assets. No doubt all arms are to be used inthe money war, but Europe has better chancesthan the US and Britain because Germany,France, Holland, Finland and Austria have ac-cumulated real reserves through past trade sur-pluses. On the other side of the fence US andBritain have more political clout over the entireplanet than Eurozone. And the players are toput in this battle, whatever they have in theirarsenal.

> Quote

The euro sculpture in front of the European Central Bank (ECB) in Frankfurt Main, Germany

Ian Buruma

Needed But NotWanted

46

Staffan Nilsson

Europe NeedsCivil Society

48

NikiforosDiamantourosHow do EU CitizensBenefit from theLisbon Treaty

49

Louise Kissa ChangingReality in2011 andbeyond

50

DmitryChernyshenkoThe Vitality ofSporting eventsfor BRICcountries

51

Tom Spencer

Of people & the public affairs ofthe remembrance

52

Athanassios Kotsis

The Role of ICTServices Providers inGov 2.0 andWeGovernment

54

Jan Mühlfeit

Fast forward intoEurope’s future

55

Peter Singer

Is open diplomacypossible?

56

Andy Carling

The hidden meaningof the WikiLeaksstory

58

AlexandrosKoronakis

The InformationRevolution

57

Alia Papageorgiou

Wikigov and Facebook Diplomacy

59

Thorbjørn JaglandDemocratic Securityand Respect forHuman Rights in the21st century

60

Laima AndrikieneOn human rights inthe world and theEU's policy on thematter

61

Nicolas Berger

EU diplomacy mustput human rightscentre stage

62

INNOVATION

INFORMATION PARADIGMS

SOCIETY & CULTURE

HUMAN RIGHTS


New Year Special| January 2011CONTENTS: OUR SOCIETIES

Tony Blair

Faith in aGlobalized Age

47


New Year Special | January 2011 SOCIETY & CULTURE


By Ian BurumaIan Buruma is Professor of Democracy and Human Rights at Bard College. His latest book is Taming the Gods: Religion and Democracy

on Three Continents.

Needed But Not Wanted

NEW YORK – Baruch Spinoza,the seventeenth-century Dutchphilosopher, Benjamin Disraeli,

the nineteenth-century British prime mi-nister, and Nicolas Sarkozy, the twenty-first century French president, have onething in common: all were sons of immi-grants. People have migrated to other co-untries for thousands of years – to escape,prosper, be free, or just to start again. Nota few enriched their adopted homelandsby achieving great things, or producingchildren who did.

New waves of immigrants are rarely, ifever, popular. But they are often needed.Many people have migrated to WesternEuropean countries from North Africaand Turkey during the last half-century,not because of Western generosity, but be-cause they were required for jobs that na-tives no longer wanted. They were treatedas temporary workers, however, not as im-migrants.

Once the job was done, it was assumedthat the migrants would go home. Whenit became clear that most had elected tostay, and were joined by extended families,many were grudgingly allowed to becomecitizens of European states, without ne-cessarily being treated as such.

Xenophobes, as well as leftist multi-cultural ideologues, regarded these newEuropeans as utterly different from thenative born, albeit for different reasons.Multi-culturalists saw attempts to inte-grate non-Westerners into the Westernmainstream as a form of neo-colonialistracism, while xenophobes just didn’t likeanything that looked, talked, or smelledforeign.

We who live in rapidly aging societies,such as Western Europe or Japan, still

need immigrants. Without them, neces-sary institutions, such as hospitals, wouldbe unstaffed, and more and more elderlypeople would have to be supported byfewer and fewer young people.

And yet many politicians, especially inEurope, now treat immigration as a disa-ster. New populist parties garner largenumbers of votes simply by frighteningpeople about the supposed horrors ofIslam, or of clashing civilizations. For thepopulists, however, the real enemies – pe-rhaps even more nefarious than the im-migrants themselves – are the“cosmopolitan elites” who tolerate andeven encourage these horrors. Mainstreampoliticians are so afraid of this populistdemagoguery that they often end up mi-micking it.

The failure of integration of non-We-stern immigrants in such countries asFrance, Germany, or The Netherlands isoften exaggerated by hysterical alarmists;

Europe, after all, is not about to be “Isla-mized.” But the fact that some young pe-ople of African, South Asian, or MiddleEastern descent feel so alienated in theEuropean countries of their birth thatthey are happy to murder their fellow ci-tizens in the name of a revolutionary reli-gious ideology, means that something isamiss. Children of immigrants in the past,however unwelcome they were made tofeel, rarely wished to blow up the placesto which their parents had chosen tomove.

Politics in many Muslim countries ispartly to blame. Islamist extremism is ahandy revolutionary creed for vulnerableyoung people to latch onto, to gain a senseof power and belonging. Hindus, Chri-stians, or Buddhists lack such a cause,which is why political terrorism is largelyconfined to Muslims.

But, as the occasional riots in Frenchimmigrant areas show, violence is not con-

fined to Muslims. National policies havesomething to do with this, but so do thedeeply flawed immigration policies in allEuropean Union countries.

Apart from EU citizens, who in theoryare allowed to seek work anywhere in theUnion (Romanian gypsies in Francemight argue otherwise), three other cate-gories of people have been allowed tosettle in Europe: former colonial subjects,such as Algerians in France, Indians andPakistanis in Britain, or Surinamese inThe Netherlands; “guest laborers” who ar-rived in the 1960’s and 1970’s; and politi-cal refugees, the so-called asylum-seekers.Unlike in Canada or the United States,economic immigrants are not allowed tobecome citizens in exchange for their ne-cessary labor.

Immigrants – not “guest workers” –who come for work are more likely towant to integrate to some degree, and tobe treated as fellow citizens, than peoplewho come with the baggage of empire, orsimply as refugees, or, worse, people pre-tending to be refugees because they haveno other way to gain access to wealthy co-untries’ job markets.

But European welfare states are betterequipped to deal with asylum-seekers andother newcomers as needy dependentsthan as people in need of a job.

When European politicians claim thatFrance, Britain, or The Netherlands arenot traditional “immigrant countries” likethe US, they are right only up to a point,as the examples of Spinoza, Disraeli, andSarkozy show.

What is true is that large numbers ofde facto immigrants have accumulated inmany countries in a very short time, in ahaphazard way that makes it seem as th-ough no government was ever in control.

Children of guest workers feel unwan-ted. Refugees languish helplessly in wel-fare nets, or are suspected of being cheats.And former colonial subjects, though inmany cases remarkably well integrated,still bear the scars of troubled imperial hi-stories.

Japan, and even the US, is not immuneto these problems, either. The Japanesegovernment simply got rid of its Iranianguest workers when jobs dried up. But itwon’t be as easy to deal with the hundredsof thousands of Chinese who live in Japanwithout the rights of citizenship. Thesame is true of Mexicans working in theUS, often illegally.

Millions of people around the worldremain in limbo – often needed, or pitied,but nonetheless unwanted.

There is no quick or easy way out ofthis problem, especially in bad economictimes. But Europe – and Japan, for thatmatter – should start by making economicmigration legitimate.

This means working out what jobsneed to be filled, and welcoming thosewho will fill them, not as guests, but asequal citizens.

> Quote

Four sub-Saharan illegal immigrants rest in Fuente Caballo beach, in the Spanish North African en-clave of Cueta, after six sub-Saharan people were rescued by Spanish authorities drifting off Ceutacoast on board a rubber dinghy, 10 November 2010 |ANA/EPA/REDUAN


New Year Special| January 2011SOCIETY & CULTURE

LONDON – For years, it was assu-med, certainly in the West, that, associety developed, religion would wi-

ther away. But it hasn’t, and, at the start of anew decade, it is time for policymakers totake religion seriously.

The number of people proclaiming theirfaith worldwide is growing. This is clearly soin the Islamic world. Whereas Europe’s bir-thrate is stagnant, the Arab population is set todouble in the coming decades, and the popu-lation will rise in many Asian Muslim-majo-rity countries. Christianity is also growing –in odd ways and in surprising places.

Religion’s largest growth is in China. In-deed, the religiosity of China is worth reflec-ting on. There are more Muslims in Chinathan in Europe, more practicing Protestantsthan in England, and more practicing Catho-lics than in Italy. In addition, according to thelatest surveys, around 100 million Chineseidentify themselves as Buddhist. And, of co-urse, Confucianism – a philosophy rather thana religion – is deeply revered.

There is a huge Evangelical movement inBrazil and Mexico. Faith remains for many inthe United States a vital part of their lives.Even in Europe, the numbers confessing to abelief in God remain high. And, of coursethere are hundreds of millions of Hindus andstill solid numbers of Sikhs and Jews.

Those of faith do great work because of it.Around 40% of health care in Africa is deli-vered by faith-based organizations. Muslim,Hindu, and Jewish relief groups are active theworld over in combating poverty and disease.In any developed nation, you will find selflesscare being provided to the disabled, the dying,the destitute, and the disadvantaged, by peo-ple acting under the impulse of their faith.Common to all great religions is love of nei-ghbors and human equality before God.

Unfortunately, compassion is not the onlycontext in which religion motivates people. Itcan also promote extremism, even terrorism.

This is where faith becomes a badge of iden-tity in opposition to those who do not share it,a kind of spiritual nationalism that regardsthose who do not agree – even those within afaith who live a different view of it – as unbe-lievers, infidels, and thus enemies.

To a degree, this has always been so. Whathas changed is the pressure of globalization,which is pushing the world’s peoples ever clo-ser together as technology advances and sh-rinks the world. Growing up 50 years ago,children might rarely meet someone of a dif-ferent cultural or faith background. Today,when I stand in my ten-year-old son’s play-ground or look at his friends at his birthdayparty, I find myriad different languages, faiths,and colors.

Personally, I rejoice in this. But such aworld requires that mutual respect replacemutual suspicion. Such a world upends tradi-tions and challenges old thinking, forcing us tochoose consciously to embrace it. Or not.

And there is the rub: for some, this force isa threat. It menaces deeply conservative socie-ties. And, for those for whom religion matters,globalization can sometimes be accompaniedby an aggressive secularism or hedonism thatmakes many uneasy.

So we must make sense of how the worldof faith interacts with the compulsive processof globalization. Yet it is extraordinary howlittle political time or energy we devote todoing so. Most of the conflicts in today’s worldhave a religious dimension.

Extremism based on a perversion of Islamshows no sign of abating; indeed, it will notabate until it is taken on religiously, as well asby security measures.

This extremism is, slowly but surely, pro-ducing its own reaction, as we see from Isla-maphobic parties’ electoral gains in Europe,and statements by European leaders that mul-ticulturalism has failed.

Of course, throughout time, religion hasoften been part of a political conflict. But thatdoesn’t mean that religion should be discoun-ted. On the contrary, it requires a special focus.I see this very plainly spending so much timein Jerusalem, where – East and West – there isan emphatic increase in religiosity.

I started my Faith Foundation precisely tocreate greater understanding between the fai-ths. My reasoning is simple. Those advocatingextremism in the name of religion are active,well resourced, and – whatever the reactionarynature of their thinking – brilliant at using

modern communication and technology. Weestimate that literally billions of dollars everyyear are devoted to promoting this view of re-ligion.

So my Foundation has a university pro-gram – now underway in nine countries – thatis designed to take religion out of the sole pre-serve of divinity schools and start analyzing itsrole in the world today.

We have another program – in 15 coun-tries, with others set to join – that links highschool students across the world through in-teractive technology to discuss their faith andwhat it means to them. And we have an actionprogram through which young people workwith those of another faith to raise awarenessof the Millennium Development Goals, theUnited Nations-led program to combat worldpoverty.

We are just one organization. There areothers starting. But governments should startto take this far more seriously. The Alliance ofCivilizations, begun by Spain and Turkey, isone example.

The King of Saudi Arabia has also showngreat leadership in this sphere. Yet this is notjust about bringing high-level people together.It has to be taken down into the grassroots ofnations, especially into the media of theiryoung people.

Finally, religious leaders must accept a newresponsibility: to stand up firmly and resolu-tely for respecting those of faiths differentfrom their own. Aggressive secularists and ex-tremists feed off each other. Together, they doconstitute a real challenge to people of faith.We must demonstrate the loving nature oftrue faith; otherwise, religion will be definedby a battle in which extremists seize control offaith communities and secularists claim thatsuch attitudes are intrinsic to religion.

This would be a tragedy. For, above all, itis in this era of globalization that faith can re-present reason and progress. Religion isn’tdying; nor should it. The world needs faith.

by Tony Blair Tony Blair is a former Prime Minister of the United Kingdom

Faith in a Globalized Age

> Quote


Iraqi Shiite Muslims take part in Ashura celebrations outside the tomb of Imam Hussein inthe holy city of Karbala, southern Iraq on 17 December 2010 |ANA/EPA/KHIDER ABBAS


New Year Special | January 2011SOCIETY & CULTURE

BRUSSELS - Engaging people fora sustainable Europe is the mainpolitical message of my term as

President of the European Economic andSocial Committee (EESC).

At a moment when the EU has tomake long-term strategic choices, and toopt for realistic, yet ambitious policy re-sponses to Europe's economic and socialchallenges, I have decided to make su-stainability and engagement with Euro-peans the flagships of my programme forthe next two and a half years. Sustainablegrowth to finance our European socialmodels and promote our interests and va-lues on the world stage, as well as regai-ning citizens' trust in the EU and theirgovernments are keys for the future ofEurope.

More civil society involvement at EUlevel through dialogue and participation,sustainability and green growth, and soli-darity with the developing world are mypriorities. I want the organized civil so-ciety to be able to play a bolder role in thedecision-making process of the EU. Thisis most likely to happen as the new Tre-aty compels all EU institutions to engagein structured dialogue with civil society.Not all of the EU institutions are equip-ped to do it, nor are all willing to do it.But the EESC, with more than half acentury of experience in consultation andconsensus-building, is ready to help. Thiswould not only make the EU more de-mocratic, but also keep the vision of acommon Europe alive.

How can the EESC have a strongersay in EU policy-making affairs? The an-

swer is – EU institutions need to usemore our membership's expertise! TheCommittee's members not only have theknow-how to analyse particular policy is-sues from all angles and to propose con-crete policy recommendations, but theycan also carry out a reality check of Eu-ropean initiatives and ideas to ensure thatthey do not miss their goals.

With members from all walks of lifewho spend most of their time with theirown organisations in their home coun-tries, the Committee brings together eco-nomic, social and civic organisations inthe 27 Member States: employers' asso-ciations and trade unions, the professions,farmers' organisations, SMEs, and othernon-governmental organisations workingfor the environment, consumer protec-tion, human rights, social inclusion etc.

For me, sustainability should be theumbrella strategy embracing all policyareas. The source for jobs and green eco-nomic growth is entrepreneurship. In-

centives and regulatory simplification areneeded to make people more willing tostart and run businesses. I define sustai-nable businesses as those that aim atmore than just the maximum profit, suchas the social economy companies – e.g.cooperatives, mutuals and associations.These often offer more sustainable busi-ness models than the traditional listedones. My vision for a recovered Europealso includes its ability to act effectivelyand with one voice on the world stage. Itis clear that the competitive global eco-nomic environment is also about out-th-inking others. For instance, the EU hasthe potential to lead global sustainabledevelopment. Under my presidency, theEESC will draw up a European organi-sed civil society's position in preparationfor the 2012 World Summit on Sustaina-ble Development Rio+20. The Rio+20Summit is about mobilising not only go-vernments but also civil society.

My work programme fully supports

the concerted work of the EU institu-tions and Member States on the Europe2020 Strategy. I have just initiated a EU-ROPE 2020 Steering Committee in theEESC, a horizontal strategy group, coor-dinating all the thematic work of theEESC and getting the national economicand social councils involved in it. Theaim is to identify and promote particularinitiatives and best practises in the on-going reform process in the Member Sta-tes. Only with the civil society on board,can the Europe 2020 Strategy deliverconcrete results and make Europeanshappier than they are now under auste-rity measures.

The European Commission has askedthe EESC to play a major role in the re-form process implied by the Europe2020Strategy. In my view, besides tackling thecrisis effects, we need to look towards thefuture. We need both a social and a com-petitive Europe and the EU is capable ofmaking the impossible possible.

EUROPE 2020 should go beyondgoodwill to action. The EESC can comeup with concrete proposals for makingthe EU reform strategy a reality in allMember States. This claim is based onthe EESC's strong links with the natio-nal civil society stakeholders. I have juststarted a series of visits to the MemberStates to discuss cooperation strategiesbetween national economic and social co-uncils and governments on the reformprocess. I urge national civil society in-cluding social partners to take full ow-nership of the economic and socialreform process.

by Staffan Nilsson Swedish farmer, a long-standing European advocate, and an EESC member in the Various Interests Group since 1995, has just been elected

President of the EESC for two-and-a-half year term. In his programme, he makes sustainability a strategic imperative for all EU policies

Europe Needs Civil Society

> Quote

With the Europe 2020 strategy, citizens will see a better Europe in terms of employment, innovation, education, social inclusion and climate/energy. It is hoped thatthis will be the drive a stronger European civil society; the ultimate guage for which is the EU Election turn out | www.flickr.com | GeS



BRUSSELS - Almost twenty yearsago, the framers of the MaastrichtTreaty introduced the concept of citi-

zenship of the European Union, wherebyevery national of a Member State shall be acitizen of the Union. Among the rights linkedto Union citizenship are the right to complainto the European Ombudsman, to petition theEuropean Parliament, and to vote and tostand in local and European Parliament elec-tions. Also of major importance is the rightto move and reside freely within the territoryof the Member States.

The entry into force of the Treaty of Li-sbon and the decision to grant the Charter ofFundamental Rights equal legal value as theTreaties mark the latest stage in the long,evolving process of empowering European ci-tizens. The Charter, in particular, gives astrong signal regarding the importance theUnion attaches to citizens' rights.

The section of the Charter entitled ‘Citi-zens’ Rights’ contains, of course, the right tocomplain to the European Ombudsman.Every year, the Ombudsman receives morethan 3000 complaints from citizens, busines-ses, NGOs, associations or other organisa-tions and opens inquiries into over 300 casesalleging maladministration in the EU admi-nistration.

The Charter also contains the right togood administration, a right which lies at theheart of what the European Ombudsmandoes. Elements of the now legally bindingright to good administration which are speci-fically mentioned in the Charter include, forexample, the right to have one’s affairs hand-led "impartially, fairly and within a reasonabletime by the institutions, bodies, offices andagencies of the Union".

Enhancing transparencyEvery year, by far the most common alle-

gation examined by the Ombudsman is lackof transparency in the EU administration.This allegation arises in more than one thirdof all inquiries and includes refusal of infor-mation or access to documents. The Ombud-sman remains concerned about this highnumber, since an accountable and transparentEU administration is key to building citizens'trust in the EU.

The Lisbon Treaty provides for greatertransparency in the activities of EU institu-tions, bodies, offices, and agencies. It includes,for instance, a provision for the Council tomeet in public when it deliberates and deci-des on draft legislation - an improvement theOmbudsman has long called for. The Treatyalso requires the Union administration toconduct its work as openly as possible, inorder to promote good governance and to en-sure the participation of civil society.

Article 42 of the Charter of Fundamen-tal Rights is especially important as regards

greater transparency. It provides that citizensshall have a right of access to documents ofthe Union institutions, bodies, offices andagencies. This provision constitutes a signifi-cant improvement with respect to the past,since it extends the application of the right ofaccess to documents to all EU institutions,bodies, offices, and agencies, including, for thefirst time, the European Council, and not justto the European Parliament, Council andCommission, as was the case until now.

Citizens' participationThe Lisbon Treaty also strengthens the

right of citizens and associations to participatein the democratic life of the Union. It requiresthe Union institutions to maintain an open,transparent and regular dialogue with repre-sentative organisations and civil society. Broadpublic consultations have to be carried out withparties concerned in order to ensure that theUnion's actions are coherent and transparent.Thanks to the "European Citizens' Initiative",one million citizens from a number of Member

States will have the possibility to call on theCommission to bring forward new legislativeproposals. The Ombudsman participated in thepublic consultation on this initiative, with aview to making sure that it will function in themost transparent way and with a minimum ofbureaucracy. Once the relevant Regulation isadopted, there may well be complaints to theOmbudsman if citizens are dissatisfied with theCommission’s handling of a citizens’ initiative.

ConclusionThe European Union is often perceived

as a remote bureaucracy, detached from theevery day life of its citizens. The new provi-sions in the Lisbon Treaty and the Charter ofFundamental Rights allow citizens to moni-tor more effectively the work of the EU in-stitutions, as well as of the governments theyhave elected as national citizens. Furthermore,European citizens have obtained the right toan open and transparent EU administrationthat takes their views into account.

One of the Ombudsman's main prioritiesfor the coming years is to help citizens makefull use of their rights, as provided for underthe Treaty of Lisbon and the Charter of Fun-damental Rights.

He is committed to informing citizensabout these rights and to working with theEuropean Parliament and with national andregional ombudsmen in the Member Statesin order to achieve this goal. A better infor-med citizenry knows what its rights are andhow to use them effectively. Such a condition,which strengthens accountability and contri-butes to greater transparency, substantivelyenhances the quality of democracy at both thenational and the European levels to the be-nefit of all.

by P. Nikiforos DiamandourosEuropean Ombudsman

How do European Citizens Benefit from the Lisbon Treaty?

> Quote

German Chancellor Angela Merkel (L) and German Defence Minister Karl-Theodor zu Guttenberg (R)chat at the German parliament Bundestag in Berlin, Germany, 15 December 2010. Merkel said that she ex-pected small changes to the Lisbon Treaty to be ratified by the end of 2012 |ANA/EPA/WOLFGANG KUMM

PARIS - As 2010 comes to its end, weturn back in an attempt to recollectthe undeniable changes that marked

this year. As the curve steepens and we falldeeper into recession with no hope ofescape before a long, still undeterminedtime, consumers under pressure are facedwith the necessity of making long-lasting,life-changing choices. On the one hand thetrivialization of society, notably throughcommon reality television programs, reflectsthe image of passive citizens who are ex-pected to be gullible consumers. On theother hand, the accessibility and variety ofservices offered by the web reveal and mul-tiply the number of active, opinionated, andautonomous thinkers.

Don’t know how to eat, clean your houseor feed your dog? No matter what your pro-blem is, you’ll definitely find a well-groo-

med and well-intentioned television guruwho’s got it all figured out for you. Pushingthe boundaries of what has ever been so-cially tolerable (showing nude infected partsor giving birth on TV!) reality programs‘offer a voice’ to the most disadvantaged sec-tion of the population, that are too oftenunemployed, left out of the educational sy-stem and deprived of any social welfarecover. In Great Britain, ‘health-oriented’shows defy the National Health System byclaiming that they offer help that the statecan no longer provide…so much for the di-screet text on the show’s website decliningany medical or ethical responsibility.

Why use the poor as scapegoats? Tofeed the voyeuristic need of observing theweaknesses and vices of human nature?Maybe, but it could be so much more.

The fragile, frightened and pessimisticmiddle classes could be led to wonder:What will it take for me to not end up likethis? A private medical insurance? A life in-surance? The new Pilates machine? A heal-thier diet? Whatever it takes to keep your

social dignity, to fit in, to be more produc-tive; roughly, to continue consuming pro-ducts. An avenger of these popular showswould say: ‘the candidates don’t see anyth-ing wrong with explaining their problemson television. After all, they’re happy to belooked after, cared for.’ Indeed, poverty doesmean social isolation, a lack of informationand a lack of recognition, and that’s the realtaboo.

In this culture of disaster and misery, di-scrimination and prejudice are justified bythe conviction that the intellectual and so-cial level of ‘the people/the spectators’ is verylow. However, this pessimistic view is con-tradicted by the amount of activity on theweb and the dynamism of its ever-youngusers.

The web offers a new form of huma-nism through its free-sharing spirit, itspraise of knowledge, participation, opinionsharing, anonymity and freethinking. Withall its faults, saturation, lack of selection,tones of unfiltered junk and invasion of pri-vacy, the net restores our independence and

dignity, knowing that access to higher edu-cation will become increasingly expensive,as was clearly noted this year.

Modern web users are demanding citi-zens who can polish and edit their profilesaccording to their desires and ambitions andmaintain their rank, as they avoid the ten-sion and requirements of real social compe-tition. These all-mighty clients take theirtime to appreciate the quality, reparabilityand sustainability of an item while bargai-ning for the best price and exchanging opi-nions with other fellow consumers.

Recently shaken by the reduction oftheir incomes and the progressively chan-ging mentality of living in a healthier, safer,fairer and more sustainable environment,consumers now rediscover the benefits oflentils (cheap and nutritious), cycling, elec-tric cars or chlorine rather than expensivescented detergents, announcing the returnof good old values. Bio home-cooking, do-it-yourself hairdressing and makeup kitsshow the rational need for having morecontrol over what one buys and consumes,as well as reflecting a general feeling of di-sbelief.

It would seem that this air of purifica-tion has come to clean out the damage ca-used by conspicuous consumption and itsdisappointments.



by Louise Kissa Louise Kissa is a Fashion & Life Style Editor at New Europe newspaper

[email protected]

Changing Reality in 2011 and Beyond

REAL LIFEStephen Stickler© Getty Images

YES WE CAREChayo Mata

© Getty Images

GOOD FOR YOUR SELFMartin Barraud© Getty Images

WELL WHO WOULD KNOW?Colin Anderson© Getty Images

ENOUGHJohn Lund

© Getty Images

SOCIALIZINGJohn Lund

© Getty Images



MOSCOW - In little more than3 years, 45,000 people represen-ting more than 100 nationalities

will come to Sochi to watch athletes per-form, to share in an extraordinary expe-rience and to discover Russia and theSochi region itself, still largely unknownto most people.

In addition to those 45.000 live spec-tators, hundreds of millions will watch theevents and ceremonies on their TVs, com-puters, smartphones, iPhones or any of thenew revolutionary devices which will un-doubtedly have been invented by then andwhich will allow even more people to fol-low the event.

Organizing an international sportingevent such as the Olympics thereforemeans having hundreds of millions of pe-ople look at you from all angles, literallyand figuratively. I should immediatelytake the opportunity to address one mi-sconception before going any further: nonation uses sporting events to showcase itspower and tries at the same time to hidethe injustices going on within its borders.That trick simply couldn’t survive theworld’s scrutiny for even a day. That’s notto say that all host nations are perfect; butthey must be sincerely willing to committhemselves to improvements in order totake the risk of two weeks of intense ob-servation by millions of spectators, not tomention the years of preparations closelysupervised by official and unofficial inter-national experts.

That said, one might wonder why anycountry would spend money and energyon a one-time event. It is common kno-wledge that sporting events provide hostcountries with modernized infrastructu-res, marketing revenues, increased touristappeal; it is thus generally assumed thathuge potential profits lie behind countries’

eagerness to organize them. And it’s true:sporting events can be a source of shortand long term revenue. But much morethan that, they help bring people togetherbehind one shared goal and unite a coun-try’s population in a mood of positivism,one which makes individuals want to wel-come the world to their homeland, shareits culture and traditions and offer a uni-que, unforgettable experience to visitorsand spectators.

This intangible legacy is the most im-portant reason why sports events are socrucially important for the BRIC coun-tries. It is no surprise that Brazil, Russia,India and China have all recently hosted,or are about to host, major internationalsporting events. We need those events tohelp project an accurate image of our co-untries, far removed from the clichéd per-ceptions people have which often cause usto be viewed with a mix of amazementand disquiet, and which tend to be basedon stereotypes, and projected fears anddesires. We need the events to strengthen

our identity as spearhead countries lea-ding global economic growth and our sta-tus as reliable and relevant partners. Thisis the best way for us to give our people aplatform for economic and social deve-lopment while enhancing their sense ofindividual and collective pride, thus rein-forcing their confidence and their abilityto develop new relationships with the restof the world.

By putting its trust in the BRIC coun-tries capacity to honour its brand, theIOC effectively changes the way theworld sees us and makes it more willingto listen to what we have to offer, from aneconomic and cultural perspective. Of co-urse the risk the IOC is taking is balan-ced with a huge benefit which lies in theopening up of new markets; but by doingso it goes way beyond simply changing theworldwide geography of sports - it chan-ges the very perception people have of thisgeography, making whole new cities ap-pear on their mental map and buildingnew bridges between them.

The IOC and other sports organisa-tions help us develop new expertise in avariety of areas, and their endorsementhelps us appear as credible partners for fo-reign organizations. For instance, workingwith the IOC’s International Partners,who are all global leaders in their ownfield, is highly profitable, and helps us de-velop new partnerships with companiesfrom France, Germany, the UK, the Uni-ted States and many more. We trust thesecompanies to help us benefit from theirknow-how and assist us in creating eventsof the highest possible quality, and in re-turn we help them develop their presencein our markets.

This is why it is perhaps not giving thefull picture to say that Russia, which I ob-viously know best, is organizing the Sochi2014 Games completely on its own; Rus-sia is certainly shouldering the primary re-sponsibility, but the OrganizingCommittee, in cooperation with the IOC,International Sports Federations, Interna-tional and National Partners and all thecompanies which are part of the project,all have important roles to play in makingthe Games happen.

The actual hosting of the Games onthe other hand will be uniquely Russian.The energy and enthusiasm of the Rus-sian people will build a unique atmosph-ere at the event and offer an extraordinaryexperience, even for those who will onlyexperience it via their TV screens. It is byoffering this experience that Russians willchange the understanding other peoplehave of their country.

This applies to the other BRIC coun-tries just as much as it does to Russia: asporting event’s most precious legacy do-esn’t lie in making the world come to theevent; it lies in making them want more,after the event has finished.

by Dmitry Chernyshenko Dmitry Chernyshenko is the President and CEO of Sochi 2014 Organizing Committee

The Vitality of Sporting Events for BRIC Countries

Russian President Dmitry Medvedev (R) and Prime Minister Vladimir Putin (L) during a break in their ski-ing activities at Krasnaya Polyana mountain ski resort near Black sea resort of Sochi, Russia 26 March 2010. Ina little more than 3 years, people around the world will come to Sochi to watch athletes perform|ANA/EPA/MIKHAIL

KLIMENTYEV/RIA NOVOSTI/KREMLIN POOL



By Tom SpencerTom Spencer is the Executive Director of the European Centre for Public Affairs

Of People & the Public Affairs of the Remembrance

BRUSSELS - “The remembrance ofthings past is not necessarily the re-membrance of things as they were.”

Marcel Proust. It is raining. There is nobugler. The names of the fallen of twoworld wars are read out by the Anglicanwoman Priest in Charge. The Roman Ca-tholic Church has re-timed its service sothat the whole village can attend. Themain road is closed for the two minute si-lence. These are Burke’s “small battalions”acting out a ceremony that has remainedunchanged since 1919, but whose detailsreveal exactly how much has changed inthe last generation of Englishmen. Tendays before the local Church of Englandhad held its first service on All Souls Day.A commercialised Halloween has come toreplace the Bonfire Night burning of GuyFawkes the Catholic conspirator of theGunpowder Plot. As if to echo the mood,the BBC shows a long documentary re-evaluating Elgar and comparing him toMahler. Rather than the imperial marti-net of the Pomp and Circumstance mar-ches, he is revealed as a passionate andtortured Catholic intellectual, who foundways of giving expression to an English-ness that endures. The sermon containspraise for David Cameron’s Big Society, ifonly in contrast to Margaret Thatcher’sassertion that there is “no such thing associety”. It also contains the gardeninginsight that poppies grow best on distur-bed land. The villagers leave their poppieson the War Memorial and walk home th-rough the rain.

What can poppies teach us about Eu-ropean public affairs in the twenty firstcentury? I have for some years felt ill atease wearing my poppy in the EuropeanInstitutions in the week before Remem-brance Day, 11th November. This year

British MEPs seemed to be wearing theirpoppies as a badge of difference ratherthan of remembrance. UK IndependenceParty members seemed to have found asupply of bigger than normal poppies. Imuch prefer the discreet lapel badge wornby Jim Nicholson the Ulster UnionistMember for Northern Ireland. Perhaps itis time for English super-patriots to fol-low the lead of the Ulster Unionists? I re-alise that I have been here before. In aNovember in the early 1970s the YoungEuropean Federalists held a committeemeeting in Luxembourg on Remem-brance Sunday. I and other British colle-agues suggested that we should recognisethat Europe’s civil wars in the first part ofthe twentieth century were the wellspringof European unity. We proposed thereforethat the eleventh day of the eleventhmonth should be a holiday for all Europe-ans. Jo Leinen, then leader of the GermanYoung Federalists and now President ofthe European Parliament EnvironmentCommittee, smilingly pointed out that11/11 was the start of Carnival in Colo-

gne. We abandoned the idea and with-drew to contemplate our strange British-ness during a two minute silence lookingout over the ravine.

So where do poppies come from in thiscontext? They grew in huge numbers onthe disturbed ground of First World Warbattlefields. They came to be seen as re-presenting the blood of the fallen. In May1915 a Canadian surgeon, Lieutenant Co-lonel John McCrae wrote the poem “InFlanders fields”. John McCrae was bornin Guelph in Ontario. In October I spokeon the handsome campus of the Univer-sity of Guelph. I was struck by the paucityof our collective memory that has mana-ged to forget how many service men fromthe British Empire died in the mud ofFlanders: sixty thousand Canadians andas many from the Indian Empire. Thatfailure of empathy continues to this day.Canadian losses in Afghanistan are 152out of a population of 34 million. Bycomparison the British have lost 322 outof a population of 61 million. To this dayremembrance and poppies are a big event

in the Canadian calendar. Indeed, just asin the UK, Remembrance Day has para-doxically become more enthusiastically ce-lebrated despite the passing of thegenerations which fought both WorldWars. There has to be a suspicion that re-cent Canadian and British governmentsare keen to glorify past sacrifice as a nudgethat they are “strong on defence and secu-rity”. The BBC makes no reference toCanadian losses in Afghanistan. They, andthe rest of the British media, have showna maudlin concentration on the grief ofindividual families. I find it faintly unple-asant that business in the House of Com-mons should have to stop for the readingof the latest death toll. This is “PrincessDiana” politics culminating in ill-spelthandwritten letters from Gordon Brown.Traditionally we celebrated our victoriesand set aside certain days to remember thefallen. Lest we forget …

Such forgetfulness can only lead totrouble as when members of the UK Go-vernment, led by the Prime Minister, insiston wearing their poppies in the GreatHall of the People in Beijing, provokingthe entirely justifiable Chinese observa-tion that it was tactless for the British,who had started the Opium Wars, to insiston wearing opium poppies in today’sChina. No doubt similar thoughts mayhave crossed the minds of our gallant Af-ghan allies as British and Canadian forcesproudly displayed their poppies in No-vember. The key to peace in Afghanistanlies through dealing honestly with the he-roin trade that finances the Taliban and allthe other war lords. Instead of sourcingthe West’s need for the medical derivativesof opium from ring-fenced plantations onTasmania, could we not buy up all thepoppies in Afghanistan?

> Quote

Canadian Provincial Reconstruction Team (PRT) of NATO's International Security Assis-tance Force (ISAF) prepare to distribute food ration to Afghanis, in volatile Kandahar,Afghanistan, 26 September 2008. Canadian losses in Afghanistan are 152 out of a popula-tion of 34 million |ANA/EPA/HUMAYOUN SHIAB



The wisest and gravest of my CentralEuropean friends, Pavel Bratinka the foun-der of the Civic Democratic Alliance Party(ODA) in Czecho-Slovakia, has long insi-sted on the importance of remembrance.He believes that an easy sliding away fromthe truth about the Communist regimes ofEastern Europe could only set up problemsfor the future. The Polish poet CzeslawMilosz maintained that “the man of theEast cannot take Westerners seriously” be-cause they had not experienced the extraor-dinary mass violence that had been imposedby Hitler and Stalin on Poland, the Balticsand the Ukraine. “Their resultant lack ofimagination is appalling”. I was remindedof this by Anne Applebaum’s review of Ti-mothy Snyder’s new book “Bloodlands: Eu-rope between Hitler and Stalin”. Annewrites “Historians of the region certainlyknow that three million Soviet soldiers star-ved to death in Nazi camps, that most of theHolocaust took place in the East, and thatHitler’s plans for Ukraine were not differentfrom Stalin’s. Snyder’s original contributionis to treat all of these episodes – the Ukrai-nian famine, the Holocaust, Stalin’s massexecutions, the planned starvation of SovietPOWs, post war ethnic cleansing – as dif-ferent facets of the same phenomenon. In-stead of studying Nazi atrocities or Sovietatrocities separately, as many others havedone he looks at them together. Yet Snyderdoes not exactly compare the two systemseither. His intention rather, is to show thatthe two systems committed the same kindsof crimes at the same times and in the sameplaces, that they aided and abetted one ano-ther, and above all that their interactionwith one another led to more mass killingthan either might have carried outalone”……… “To look at the history ofmid-twentieth-century Europe in this wayalso has consequences for Westerners.Among other things, Snyder asks his rea-ders to think again about the most famousfilms and photographs taken at Belsen andBuchenwald by the British and Americansoldiers who liberated those camps. Thesepictures, which show starving, emaciatedpeople, walking skeletons in striped uni-forms, stacks of corpses piled up like wood,have become the most enduring images ofthe Holocaust. Yet the people in these ph-otographs were mostly not Jews; they wereforced laborers who had been kept alive be-cause the German war machine neededthem to produce weapons and uniforms.Only when the German state began to col-lapse in early 1945 did they begin to starveto death in large numbers ………. “UnderGerman rule, the concentration camps andthe death factories operated under differentprinciples. A sentence to the concentrationcamp Belsen was one thing, a transport tothe death factory Belzec something else.The first meant hunger and labor, but alsothe likelihood of survival; the second meantimmediate and certain death by asphyxia-tion. This, ironically is why people remem-ber Belsen and forget Belzec.”

By adopting the poppies of the FirstWorld War to represent what happened inthe Second World War, we entrenched avery Western European view of the mid-twentieth century. By concentrating onFranco-German reconciliation and the sagaof Alsace-Lorraine, we managed to forgetthe nightmares of genocidal killing to theEast. As Anne Applebaum puts it “we li-berated one half of Europe at the cost ofenslaving the other half for fifty years. Wereally did win the war against one genocidal

dictator with the help of another”. Then weallowed Russian diplomats after the SecondWorld War to define genocidal in a waythat excluded Stalin’s mass murders. I liketo think that I understand the impact ofmemory on modern politics. Yet at the veryleast I have clearly been culpable of a veryWestern view of recent European history.Working in the Balkans in the 1990s Icould logically argue that the success of theEuropean idea on the Rhine could be ex-tended to the countries of the Danube.Even then however I failed to fully graspthe nightmare of the Bloodlands.

This whole story is a salutary reminderto all of us not to jump to conclusions aboutthe judgment of history. The baby boomergeneration look increasingly to have lived inthe sunny uplands of an Augustan age, withthe collapse of the Berlin Wall and the So-viet Union as its apogee. Yet it is this gene-ration which has unleashed, from 1970onwards, the vast majority of the greenh-ouse gasses which look set to bring the sun-lit Age to a close. Viewed from thisperspective the great dramas of de-colonia-lisation and American exceptionalism looklike mere surface eddies on the river of time.How appropriate therefore that societies ca-pable of thinking in millennia rather thandecades, such as India and China, should beemerging from their three hundred yeareclipse by the brilliance of European achie-vement just as the planetary mood darkensonce again. Truly the Chinese and Indianattitudes to climate change will determinethe fate of humanity. Their attitudes will ofcourse be shaped by what they chose to re-member. For the Chinese their memory isof national humiliation at the hands of Eu-rope after millennia in which the MiddleKingdom lay in the centre of a uni-polarworld. Increasingly there are those in Asiawho believe that “China rising” anticipatesjust such uni-polarity in Asia. Indian me-mories are of millennia of invaders comingthrough the mountains from the North, fol-lowed by subjugation by Europeans whocame from the sea. Chinese support for Pa-kistan, its continued pressure on India’s mo-untain border and its cultivation of alliesaround the Indian Ocean thus manages totrigger Indian suspicions on all points of thecompass. Many of the tensions would eva-porate if India and China’s dependence on

hydrocarbons were not so pronounced. Ho-wever while China’s autocratic governmentcan decree action and concentrate resources,India’s democracy takes longer.

Many Indians are rightly nervous of thespeed with which they are being pulled intoa global role that they have not sought withanything like the ambition of their Chineseneighbours. Indeed “Incredible India”,which dates from the end of Licence Raj inthe early 1990s, is a very sudden develop-ment for an old and conservative society. InNew Delhi to deliver a lecture on Environ-mental Security to the Centre for Air Po-licy Studies and senior officers in the IndianAir Force, I tried to argue that the elephantwas a better symbol for India than the tiger.After all India is old, wise, huge and veryhard working. Perhaps unaware of the un-fortunate precedent of the Celtic Tiger, mymilitary audience were resolutely in favourof the aggressive and mobile Tiger whenconfronting the Dragon to the North. In-dians, and especially their military, are proudof their democratic traditions, while deeplyregretting what some refer to as the “crimi-nalisation of Indian politics”.

The growth of corruption at all levels ofIndian society threatens to cast doubt onexactly how “credible” India is as a globalpower. Today’s corruption of both the bu-reaucracy and politics is contrasted with theremembered purity of the struggle for inde-pendence.

The Indian military however rememberuncomfortably that defeat in the Sino-In-dian war of 1960 was, at least in part, cau-sed by neglect of sensible requirements forself- defence. I am impressed by the speedof development since my last visit to Indiatwo years ago and by the energy and intel-ligence of military officers and public affairspractitioners, both of which find themsel-ves pitch-forked into global complexity. Intalking to the Public Affairs Forum inDelhi, I was initiating a conversation abouthow global public affairs may evolve in thenext ten years. In talking to the Indian mi-litary about their role in a world of floods,erratic monsoons and melting glaciers, I wassimilarly only looking ten years ahead.Abrupt change is sure to mark both econo-mic and environmental developments in thenext decade.

Public memory is a strange animal even

when required only to reach back twelvemonths. There is already a lively debateover what we remember of last year’s Cope-nhagen Climate Summit. There is a schoolof thought which now wants to place theblame almost entirely on the Danes. Thisseems to me grossly unfair. The failure inCopenhagen was due to three roughly equalforces. The negotiations are genuinely te-chnically difficult.

They are bedevilled by a brilliantly con-ducted spoiler campaign by the fossil fuelindustry, and they are further complicatedby the immaturity of the multi-polar systemwhich has taken over from American hege-mony. The process undoubtedly put im-possible strains on the negotiators. It isnotable that the debate since Copenhagenhas been much more frank in identifyingthat “political problems” are usually the re-sult of public affairs pressure from vested in-terests.

Any success for the UNFCCC processbefore the Kyoto Protocol lapses in 2012will depend on greater transparency aboutthe extent to which science has been pollu-ted and a broader political focus that allowsan expanded deal to take precedence overthe zero sum game of negotiators. BothIndia and China are what old fashioned hi-storians used to regard as societies organisedaround the provision and control of water.Both have an instinctive understanding ofthe cycles of history. Paradoxically they maylack the sense of urgency that comes withthe sense of “end times” common to theAbrahamic religions. It is devoutly to behoped that both India and China will notbe so entranced with the cycles of their pastthat they fail to understand that humanity iscapable of rendering our planet uninhabita-ble.

Engraved on many Western Europeanwar memorials is the so-called Kohimaprayer - “When you go home, tell them ofus and say, for your tomorrow, we gave ourtoday.” Kohima is close to the border bet-ween India and Burma and marks the pointwhere the Japanese invasion of India failedin 1944. As the ministers drag themselveshome from Cancun, with minimal gainsand little sense of inter-generational equity,they might like to consider that they havereversed the Kohima prayer. “For our today,we stole their tomorrow”.

Installation representing clean energy sources seen outside the Delhi Pavilion at the 2010 India International Trade Fair in New Delhi, India, 14 November 2010.Many Indians are slightly nervous of the speed with which they are being pulled into a global role | ANA/EPA/ANINDITO MUKHERJEE


New Year Special | January 2011 INNOVATION

by Athanassios KotsisAthanassios Kotsis is the CEO of INTRASOFT International

The Role of ICT Services Providers in Gov 2.0 and WeGovernment

ATHENS - In the past 20years ICT services provi-ders working for govern-

ment customers focused on thedevelopment of computerized so-lutions in support of all kinds ofpublic functions and systems. Suchwere initially developed for inter-nal use by Civil Servants, and wereeventually extended to serve a bro-ader audience of a nation’s citizensand businesses. As time goes bythe interaction between citi-zens/business and Public Serviceshas thus evolved from conventionalpaper based exchanges (using di-stribution vehicles such as telex,fax, postal services) to online Inter-net based submissions and infor-mation exchange (Web, email,FTP). The new interactions even-tually developed in various typesdepending on target audiences;Government to Citizens (G2C),Government to Business (G2B)and Government to Government(G2G). Generically, this becamewidely known as eGovernment andhas enjoyed broad adoption in vir-tually all the nations of the FreeWorld.

In the advent of Web 2.0 thatwe have seen in the last five to tenyears, we have gradually witnessedhighly visible representatives ofPublic Functions become partici-pants in a number of externally runsocial networking platforms (You-Tube, Twitter, Facebook, MySpace,Flickr…).

The trend further extended tomany more new participants fromPublic Services, often representingformal Bodies of Government, whoin torrential fashion joined thehundreds of millions of social net-working users aiming at highertransparency of information provi-sion towards citizens and busines-ses (Gov 2.0 or OpenGovernment). The basic characte-

ristic of Gov 2.0 information exch-ange is the direction in which it ty-pically flows: from Government(one) to its citizens (many). No in-teractions among citizens themsel-ves exist in any significant form,only between Government and itscitizens (one-to-many).

In recent years a new growingtrend emerged. It has been definedas an area, where Government andits citizens co-create new forms ofcollaboration and service that usetechnology, public data, citizen-ge-nerated data and the social web toaddress vital issues and solve publicproblems (source : Personal demo-cracy Forum). In such interactionsinformation can originate at thelevel of individual citizens and beequally important as the informa-tion provided by a GovernmentBody, being one of the many parti-cipants of the collaborative commu-nity. In other words, such Internet‘social’ interactions become many-to-many. Several such initiatives areactive and broadly in use today, andhave been geographically observedin all corners of the world.

Simply explained, any typicalcomputerized information systeminvolves two key aspects/compo-nents: the user interface (UI), usedfor data creation and retrieval, andthe Database (DB) design and ph-ysical storage (of critical businessdata) that will guarantee scalableand efficient retrieval, integrity andsecurity.

Although the UI is what end-users eventually experience in theirman-machine interactions, and it isbasically what they think of as the‘application’, it is the DB Manage-ment that is the most business cri-tical component, and consumesmost resources (intellectual, so-ftware/hardware and financial) du-ring the development andmaintenance process of computeri-

zed solutions. Traditionally thirdparty ICT services providers, whohave been selected to develop andmaintain Public Services systems,are quite knowledgeable of the ar-chitecture and design options in-volved in the related DBManagement components of thosesystems. This knowledge placesthose same providers in a strategi-cally advantageous position to as-sist Governments and their PublicServices bodies when systems ini-tiatives as we described above areinvolved, namely Gov2.0/OpenGovernment and WeGovernment.

It is also a well-known fact thatfrom a technical point of view mostGovernment projects leading toGov 2.0/Open Government andWeGovernment systems consist indeveloping appropriate ‘platforms’based on current (legacy) systemsand infrastructure. To enable sy-stem access to third parties (com-munities, commercial solutionproviders, open software projects)

partner ICT Services organizationswill in the near future assist theirPublic Services customers in ope-ning-up legacy environments tothe outside world by means of,among other, the so-called Appli-cation Program Interfaces (APIs),conform established standards andprotocols.

Finally, quite a few among ICTservices providers, active in Go-vernment business, are also expec-ted to undertake initiatives towardsthe creation of simple, functionallyfocused, UI applications that aretypically offered to the Public for‘free’. Those (will) run on new po-pular ‘Internet Things’, like themany trendy mobile devices andtablets that seem to gradually re-place conventional desktop andportable PCs. This is a new area ofdevelopment that on the long runis also expected to substantially im-pact existing business models thatmost known ICT services provi-ders currently use and operate.

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New Year Special| January 2011INNOVATION

by Jan MühlfeitJan Mühlfeit is Chairman of Microsoft Europe

Fast Forward into Europe’s Future

Prague - What will life be like forEuropeans in 2020? Faster, I hope.This may come as unwelcome

news to those who blame technologicalprogress for the already frantic pace oftheir lives. But look at what technologyis achieving now and think about what allthis speed could mean for the way humanbeings spend their time in future.

Consider Europe’s research commu-nity. When Marie Curie began her pio-neering work into radium-isolation shedid not know what she was looking for,or that it would take 4 backbreaking yearsof stirring pitchblende to yield just eno-ugh radium to cover the tip of a teaspoon.Marie’s vision and diligence eventuallyearned her two Nobel prizes and pavedthe way for the radiotherapy used to treatcancer. Fast forward 100 years and com-pare the drudgery of Marie’s experienceto that of the European scientists whoare building on her legacy. Today, resear-chers working on breakthrough drugtrials at the University of Newcastle haveused cloud computing to cut the amountof time it takes to achieve research resultsby 99%.

Similarly, an image segmentation te-chnique developed by Antonio Criminifrom Microsoft Research is showinghuge potential for speeding up radiationtreatment, with some estimates sugge-sting that as much as 4 million hourscould be saved globally in particularlycomplex cases.

Months and years spent undergoingresearch or radiotherapy could soon becompressed into a matter of weeks ordays. Just think what both these advan-

ces could mean not only for medical pro-gress, but also for the quality of life forcancer sufferers and their families.

The breakneck speed at which tech-nology changes means no one can trulyknow how great its social impact will bein 2020. But I do know that the pace atwhich it metamorphoses means that re-gulation must leave room for the industryto breathe if Europe is to recover and flo-urish. Online privacy and security are justtwo examples of thorny issues regulatorsmust get right – both in relation to per-sonal data but also cloud computing andits impact on science and business. Thedebate may seem complex and the an-swers often elusive, but the fact it evenexists is a reflection of the freedom andpower technology has brought to mil-lions.

For technology to remain the life-blood of European business, science andinnovation, it needs a regulatory frame-

work that is both visionary and instruc-tive. And it must be genuinely European.

That’s why we are fully supportive ofthe Commission’s Innovation Union andits aspiration to make Europe an excitingand easy place to break research frontiersand produce new products. There ismuch to be praised in the Commissionblueprint, which builds on the Europe2020 economic strategy and calls for amulti-pronged approach to creating asingle market for innovation by 2020.But progress in this area must be built onthe free and flowing exchange of ideasthat can only come from an ongoing con-versation between policymakers, busines-ses, academia and other stakeholders.

In the 21st century, Europe’s prospe-rity will be built on her ability to remaincompetitive, flexible and an incubator ofexceptional talent. But she must also haveworkers who are able to execute the vi-sion of her entrepreneurs and scientists.

At present the gap that persists betweenemployers’ needs and workers’ skills isgrowing.

In 5 years 90% of European jobs willrequire some form of computing skills.They will no longer be the domain of ex-perts but the non-exchangeable currencyfor the European worker who will worklonger and change jobs many times in hisor her life. Digital skills will be the rea-ding and writing for 21st century: with-out them Europe’s workers will be theilliterates of the global labor market. Th-at’s why it ’s so important that Europetakes the vital steps to invest in its futureeven at a time of crisis.

Even when budgets are tight there isa role for us all to play. Governments andpolicymakers must maintain appropriatelevels of investment if Europe’s work-force is to get the education and ICTskills it so badly needs. The private sectorcan also help by sharing its expertise andknowledge, particularly with older wor-kers, the disabled or those to whom tech-nology and its applications do not alwayscome automatically.

The European Commission and theMember States need to design the incen-tives and instruments for up-skilling andtraining to prepare the youth and theworkforce for the jobs of tomorrow. Thelong-term prosperity of Europe’s next ge-neration is dependent on her ability toremain competitive.

Without adequate investments intoresearch and mechanisms to support in-novation that will help Europe’s talentsthrive, there will be no fast-forward intothe future.

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A guest tries out the new Microsoft operating system Windows Phone 7 on a handset during thelaunch in Singapore 12 October 2010 |ANA/EPA/STEPHEN MORRISON


New Year Special | January 2011 INFORMATION PARADIGMS

By Peter SingerPeter Singer is Professor of Bioethics at Princeton University and the author, most recently, of The Life You Can Save: Acting Now to

End World Poverty

Is Open Diplomacy Possible?

PRINCETON – At Princeton Uni-versity, Woodrow Wilson, who waspresident of the university before he

became president of the United States, isnever far away. His larger-than-life imagelooks out across the dining hall at WilsonCollege, where I am a fellow, and ProspectHouse, the dining facility for academicstaff, was his family home when he led theuniversity.

So when the furor erupted over Wiki-Leaks’ recent release of a quarter-milliondiplomatic cables, I was reminded of Wil-son’s 1918 speech in which he put forward“Fourteen Points” for a just peace to endWorld War I. The first of those fourteenpoints reads: “Open covenants of peacemust be arrived at, after which there willsurely be no private international actionor rulings of any kind, but diplomacy shallproceed always frankly and in the publicview.”

Is this an ideal that we should take se-riously? Is Wikileaks founder Julian As-sange a true follower of WoodrowWilson?

Wilson was unable to get the Treaty ofVersailles to reflect his fourteen pointsfully, although it did include several ofthem, including the establishment of anassociation of states that proved to be theforerunner of today’s United Nations. ButWilson then failed to get the US Senateto ratify the treaty, which included the co-venant of the League of Nations.

Writing in The New York Times ear-lier this month, Paul Schroeter, an emeri-tus professor of history, argued that opendiplomacy is often “fatally flawed,” andgave as an example the need for secret ne-gotiations to reach agreement on the Tre-aty of Versailles. Since the Treaty bearssubstantial responsibility for the resurrec-tion of German nationalism that led tothe rise of Hitler and World War II, it has

a fair claim to being the most disastrouspeace treaty in human history.

Moreover, it is hard to imagine that ifWilson’s proposals had formed the basisof the peace, and set the tone for all futurenegotiations, the history of Europe in thetwentieth century would have been worsethan it actually was. That makes the Tre-aty of Versailles a poor example to use todemonstrate the desirability of secrecy ininternational negotiations.

Open government is, within limits, anideal that we all share. US President Ba-rack Obama endorsed it when he took of-fice in January 2009. “Starting today,” hetold his cabinet secretaries and staff,“every agency and department shouldknow that this administration stands onthe side not of those who seek to withholdinformation but those who seek to make itknown.” He then noted that there wouldhave to be exceptions to this policy to pro-tect privacy and national security.

Even Secretary of Defense RobertGates has admitted, however, that whilethe recent leaks are embarrassing andawkward for the US, their consequencesfor its foreign policy are modest.

Some of the leaked cables are just opi-nion, and not much more than gossipabout national leaders. But, because of theleak, we know, for example, that when theBritish government set up its supposedlyopen inquiry into the causes of the Iraqwar, it also promised the US governmentthat it would “put measures in place toprotect your interests.” The British go-vernment appears to have been deceivingthe public and its own parliament.

Similarly, the cables reveal that Presi-dent Ali Abdullah Saleh of Yemen lied tohis people and parliament about the so-urce of US airstrikes against al-Qaeda inYemen, telling them that Yemen’s militarywas the source of the bombs.

We have also learned more about thelevel of corruption in some of the regimesthat the US supports, like those in Afgh-anistan and Pakistan, and in other coun-tries with which the US has friendlyrelations, notably Russia. We now knowthat the Saudi royal family has been ur-ging the US to undertake a military attackon Iran to prevent it from becoming ca-pable of producing nuclear weapons.Here, perhaps, we learned something for

which the US government deserves cre-dit: it has resisted that suggestion.

Knowledge is generally considered agood thing; so, presumably, knowing moreabout how the US thinks and operatesaround the world is also good. In a demo-cracy, citizens pass judgment on their go-vernment, and if they are kept in the darkabout what their government is doing,they cannot be in a position to make well-grounded decisions. Even in non-demo-cratic countries, people have a legitimateinterest in knowing about actions taken bythe government.

Nevertheless, it isn’t always the casethat openness is better than secrecy. Sup-pose that US diplomats had discoveredthat democrats living under a brutal mili-tary dictatorship were negotiating withjunior officers to stage a coup to restoredemocracy and the rule of law. I wouldhope that WikiLeaks would not publish acable in which diplomats informed theirsuperiors of the plot.

Openness is in this respect like paci-fism: just as we cannot embrace completedisarmament while others stand ready touse their weapons, so Woodrow Wilson’sworld of open diplomacy is a noble idealthat cannot be fully realized in the worldin which we live.

We could, however, try to get closer tothat ideal. If governments did not misleadtheir citizens so often, there would be lessneed for secrecy, and if leaders knew thatthey could not rely on keeping the publicin the dark about what they are doing,they would have a powerful incentive tobehave better.

It is therefore regrettable that the mostlikely outcome of the recent revelationswill be greater restrictions to prevent fur-ther leaks. Let’s hope that in the new Wi-kiLeaks age, that goal remains out ofreach.

> Quote


US Secretary of Defense Robert Gates (C) listens to US Secretary of State Hillary Clinton(R) deliver remarks on the Afghanistan-Pakistan annual review during a press conference atthe White House in Washington DC, US, 16 December 2010 |ANA/EPA/MICHAEL REYNO


New Year Special| January 2011INFORMATION PARADIGMS

by Alexandros KoronakisAlexandros Koronakis is the Director of New Europe newspaper

An Information Revolution

EUROPE - If 2010 could take labels,one could be ‘the year of the diploma-tic leakage’. Like a sewage system

after a storm, overflowing at the structurallyweakest points in the network, diplomatic cir-cles, international institutions, the highest le-vels of governments and security agenciesshowed us that there is no such thing as ‘con-fidential’.

The digital facilitation of revolutionMany have suggested that the next revo-

lution will be a digital revolution. The inter-net, as a platform is one which lends itself toa large public forum with no borders, boun-daries, and no problems of distance; in fact,itis the perfect platform for starting a revolu-tion. However, platforms do not start revolu-tions; information does. And we are in an erawhere critical information is becoming moreaccessible, less obscure, and can nowadays befound in abundance.

Abundance of leakageMore than 640,000 non-public US docu-

ments were put into the public domain bycontroversial organisation Wikileaks in 2010.These included nearly 400,000 reportsknown as ‘The Iraq War Logs’, and morethan 250,000 secret US Embassy Cablesfrom with information from around theworld (being leaked slowly but gradually). Forthe first time, people from around the worldgot a glimpse into what goes on behind theclosed doors of politics and military situationrooms. The US was shown to be spying onthe United Nations, from top to bottom, ga-thering intelligence on ally and foe, makingbackroom deals with countries, and even pro-moting interests of US companies. To a go-vernment: simply embarrassing; to thegovernment of what is labelled the numberone power in the world: a disaster.

The operation that ensued, to take down

the Wikileaks website, and to take the ‘headof the snake’ Julian Assange, co-founder andspokesperson of WikiLeaks out of the pic-ture was an elaborate plan to muffle one ofthe only voices of truth left on the planet.

American joke/hero, Republican SarahPalin demanded that Assange be hunteddown like Osama bin Laden. Meanwhileanother Republican, presidential hopefulMike Huckabee has called for the people be-hind the leak of the 250,000 diplomatic ca-bles to be executed.

Leaks of information should of coursenot happen. Those who handle sensitive in-formation, whether at the government levelor the corporate level are both compensatedwell for their trust, and face dire legal conse-quences should they let even an inconse-quential piece of classified information leakout; let alone the ethical implications of be-traying your country.

And had the information that was leakedcontained only information threatening toUS and international security, no one wouldbe supporting the dissemination of this in-formation. Unfortunately, some of the infor-mation was embarrassing to USgovernment(s) and administrations, and togovernments around the world. It was thekind of information that empowers “the pe-ople”, and brings clichés like “who is protec-ting us from the protectors?” to the forefront.

The US government however did try andcontain the uncontainable, by explaining togovernment employees that they are not infact permitted to read anything coming outof Wikileaks as it remains classified informa-tion. Meanwhile US college students wereadvised that they should not post Wikileaksinformation and comment on such materialon social media if they are considering go-vernment positions. In the eyes of the federalgovernment, the documents remain classified,"thus, reading them, passing them on, com-

menting on them may be seen as a violationof Executive Order 13526, Classified Natio-nal Security Information," said Maura Kelly,Boston University law assistant dean for ca-reer development and public services, in an e-mail to students.

In my personal opinion, any intelligenceofficer, or government official should have atleast as much information about his govern-ment as is available on the public domain.When classified documents enter the publicdomain, disallowing access to them is a liabi-lity, and not an asset; of course a governmentcarrying out such censorship also faces otherkinds of PR backlash, but that’s an entirelydifferent matter.

Cablegate, civil unrest, and all out attackThe global dislike to some of the disco-

veries made as a result of “cablegate” echoedthrough some articles in the press, and com-ments on websites, but initially did not trans-late to protests on the streets. In today’s worldof political apathy, people seek to defend ca-uses when they are linked to particular peoplethe can relate to and cases which impact themdirectly, rarely nowadays seeking to protestgeneric policies that should outrage them asa matter of principle.

And so, through a combination of go-vernments’ desires, and extremely counter-productive timing, the attack on Wikileaks,and its spokesperson and co-founder, JulianAssange, took off.

Initially, civil feedback was in the charac-ter of a non-activated response, a sentimentof global distrust started to build against theUS Government. The work and message ofWikileaks started to become increasingly un-derstood and sympathised with by the public;less government officials from around theworld and big companies who also fear theymay one day be uncovered.

Pwnage and martyrdomThe offensive started with the DNS pro-

vider revoking their cooperation with Wiki-leaks, which left the world without access tothe Wikileaks.org website. Amazon followedsuit, terminating their agreement to provideserver space, while Paypal discontinued thefacilitation of donation to Wikileaks throughtheir platform. Visa and even Mastercard pul-led their support, leading to popular discon-tent and defacing of the ‘Priceless’ advertisingcampaign of Mastercard.

“Freedom of speech: Priceless. For every-thing else, there is Mastercard”.

At the same time, old sexual assault char-ges for Julian Assange resurfaced after politi-cal forces became involved. The initialcharges were reportedly dropped within 24hours after review from Sweden’s most seniorprosecutor, yet Assange was jailed in the UK,and later released on strict bail conditionsonce the charges were resurrected.

And so, the counterattack started. Th-ough the Wikileaks.org site was not reacha-ble in the first days of December , within 24hours, over 100 mirror sites were launched.By the end of the year, thousands of mirrorsites (more then 3000 in fact) were available.

Visa, Mastercard, Paypal and other Wi-kileaks critics were attacked by its supportersin the social media, while hackers also tooktheir turn in assaulting the organisations thatacted against Wikileaks and Julian Assangewith some success.

Assange’s arrest gave Wikileaks a figurethe general public could relate to. Assangetook on the characteristics of a martyr. And asis the case with martyrdom, this made acti-vated people to take the streets in protest; ofboth Assange’s arrest and the attacks on Wi-kileaks. Around the world, several protestsamassing hundreds of people in some casestook place in December.

By no means is this a revolution. It is ho-wever, an indication, that we, the people, stillhave capacity for revolution. And if such a re-volution ever comes, a revolution born of in-formation, it has the potential to reachinternational magnitude.

In every single way that the interested go-vernment(s) tried to kill Wikileaks, they fai-led. They even managed to make a martyr outof a man that is still alive. It is safe to say thatso far; and it is fitting considering the chil-dish political and administrative reactions wehave come to witness in the last months, theUS government and administration andother governments, as well as companies whohave acted against Wikileaks, have been‘Pwn3d’.

*Wikipedia: Pwn is a leetspeak slang termderived from the verb own, as meaning toappropriate or to conquer to gain ownership.The term implies domination or humilia-tion of a rival, used primarily in the Inter-net-based video game culture to taunt anopponent who has just been soundly defeated(e.g., "You just got pwned!").

www.flickr.com| tetedelacourse

BRUSSELS - When theEconomist’s Brussels corre-spondent, David Rennie, fi-

nished his time in the city, hewrote a final article with a tellingdescription of a discussion with theBrussels elite:

“I found myself at a gala dinnerin Brussels. Sitting on a gilt armch-air in a panelled stateroom, I wastold by the head of a Brusselsthink-tank that the Irish result pro-ved the idiocy of putting EU trea-ties to the people. “F***ing voters,”he declared, languidly extendingone arm so the hovering stewardcould refill his champagne glass. “Imean, f***ing voters, what do theyknow?”

Reading this anecdote, many inthe Brussels bubble shifted uncom-fortably in their seats, recognisingthat attitude. What has this to dowith WikiLeaks and Julian As-sange, the e-martyr? More than youmay think.

The internet is one of the stran-gest inventions of mankind. Ini-tially conceived as a method tohave a cold war defence mecha-nism, one that could re-route aro-und damaged control centres andsurvive even a nuclear assault, itwas quickly co-opted by people andused in unlikely and unpredictedways.

It quickly became a web of con-nections between users, which soonpushed further and faster than the'official' web of serious scientists.Facebook is called a social network,but that term accurately describeswhat the entire internet has be-come. I suggest that one way of lo-oking at WikiLeaks is as ahuman/machine symbiosis that hasre-routed against a damaged demo-cracy.

Although it is rarely discussed,the EU is a damaged democracy.The founders were shell shockedafter a war that had seen peopleflock to demagogues, to ideologiesand leaders who can only be descri-bed as evil, whose thought, wordsand deeds had a sulphurous stink tothem. Compared to that, who canblame them for ‘thinking ahead’ of

the citizens and building a new fu-ture?

One measure of their progressis just how different Europe is now,how more aware and educated thecitizens are.

Times have changed and thepaternalistic attitude of the Euro-pean elite now seems, as in theRennie anecdote, outdated, unde-mocratic and a little sinister.

The Brussels bubble has yet tomake the psychological change totoday’s world.

Perhaps the worst example ofthis split between the public andprivate faces of our leaders has beenthe examples of Afghanistan andIraq. But it is not just the politicalideologues who are to blame, themedia are also at fault.

In the last few years, reportersand newspapers have fallen over th-emselves apologising for their de-reliction of duty as war approachedand ran its course.

Dan Rather, the venerable CBSjournalist said recently that if themedia had asked the tough que-stions it should have, the war maynot have happened. Rageh Omar,the BBC’s ‘Scud Stud’ winces as hisreporting is played back to him.Others, such as Fox News stillcheer from the sidelines, conti-nuing to turn fact into fiction andvice versa.

These gaps became the birth-place of WikiLeaks. When I inter-viewed Assange in June, he was

scathing about journalists:“The history of journalism is

not a glorious history, it is a historyof cover up punctuated by somefine journalists who actually get thetruth out... It should be remembe-red that while newspapers are de-creasing in their profitability andtheir ability to project journalists todifferent places, the communica-tion of knowledge is also happe-ning outside of the press and itincludes email, You Tube, Twitter,and the most difficult informationof all, which is what WikiLeaksdeals with. So that decrease in thecelebrated values of some of thepress, is in fact being offset, not en-tirely but importantly, by the com-munication of knowledge outsidethe press.”

Since our encounter, WikiLeakshas unleashed an unimaginablenumber of documents, many expo-sing the everyday duplicity andhorror of wars we have initiated. Inreturn, the US has thrown away therulebook, bullying companies intoblacklisting the whistleblowers andare plotting to have Assange extra-dited, even though none of his de-tractors have an idea of exactlywhat law was broken by the noma-dic Australian behind the site.

It gets worse, many leadingcommentators and politicians inthe self-described Land of the Free,including a recent Vice-Presiden-tial candidate, appear to be callingfor Assange’s murder.

On the side of WikiLeaks arethe thousands of mirror sites,which replicate their entire con-tents and a mysterious, heavily en-crypted file, put on bit torrent sitesby WikiLeaks, called ‘insurance’.We can only guess at what thatcontains.

What WikiLeaks does, is inha-bit the cracks in our democracy andtheir revelations hold up a mirror tothose in authority and shows us alltheir true selves, speaking truth topower. For those, such as Rennie’sdining companion, who inhabit theworld of the elite, courtesy of thetaxpayer, we can see just how arro-gant and out of date they are. Apartfrom the obvious, that if these guyswere so good, we wouldn’t be in themess we are in.

The WikiLeaks saga has a mes-sage for them. Your day is over.There needs to be a better, moreopen, more transparent way of con-ducting policy and politics. Becausewherever democracy is broken, thesocial internet will find a way aro-und. In China, in Iran and yes, evenin our precious European Union.


New Year Special | January 2011INFORMATION PARADIGMS

by Andy CarlingAndy Carling is a European Affairs Editor at New Europe newspaper

The Hidden Meaning of the WikiLeaks Story

> Quote

The Logo of the London-based organization WikiLeaks which leaked hundreds ofthousands of US State Department documents on 28 November 2010 which re-vealed a hidden world of backstage international diplomacy |ANA/EPA/WIKILEAKS / HANDOUT


New Year Special| January 2011INFORMATION PARADIGMS

BRUSSELS - When I came toBrussels just over three years now,European Politicians were not on

Facebook, election ads were not made orbroken by one’s twitter adeptness and noone in the European Commission hadbeen told that any of these should be anoption.

In the European Parliament I remem-ber not more than one year ago having adiscussion with a Parliamentary Assistanton whether their high profile MEP sh-ould even consider twitter as I was cham-pioning it and they had seen theiremployer’s reluctance, not irrelevance topolitics.

On a recent blog post of Jon Worth’s Irediscovered the concept and unexpectedresults of Change.gov the Obama admi-nistration’s attempt at inviting opinioninto the legislation process ‘for the firsttime’ or at least the means.

Fast forward to the end of 2010 andwhat we have is an electronic shift, politi-cians are taking the challenge – all butJose Manuel Barroso seem to be tweetingwhether full time or part time additionallyadded to by a press team and even Barrosohas all spokespeople tweeting away tomake the process of being in touch withthe Commission that much quicker if ne-eded. And it works – they don’t need morethan that. Open Government is not onlynecessary but being established by the lastBelgian Presidency conference of the year(I believe) which was the Lift Off towardsOpen Government Conference where

Herman Van Rompuy made a funnyabout Wikilieaks and Neelie Kroes anno-unced the European eGovernment ActionPlan 2011-2015.

One of my favorites has been open-gov.gr and one of their labs where the in-troduction of a fixmystreet.co.uk(obvi ously to be fixmystreet.gr) was di-scussed as an upcoming project in Athens!I cannot tell you how many times I com-plain about the footpaths in Greece – thiswould be a Christmas miracle! But, I di-gress..

Back to Mr Van Rompuy and the Wi-kileaks aside… I don’t want to also jumpon the bandwagon and try to get an extra200 clicks by putting Mr Assange’s famenext to mine – that’s not the point – nordo I want to get into the debate of whe-ther he’s a terrorist, an unethical freedom

fighter or the best thing to happen to di-plomacy since Fareed Zakaria was editingForeign Affairs, but, what I do want togive him Kudos for is taking over themedia for the last month or so.

Touche.I do see a space for an overhaul of pu-

blic documents and their structure for abarrier breakdown between what journa-lists and the public see and what actuallygets reported. But now that it has begun Ialso marvel at the simplicity of such a siteas opengov.gr for example – and similarprojects in governments around Europeand the world.

Listening to Vivek Kundra at theOpen Government Conference, the firstinformation Officer appointed by Presi-dent Obama in the US in March of 2009to streamline all digital projects was an eye

opener. But then the Obama administra-tion has not only appointed officers onICT but also on Innovation and tries tolook a the holistic picture.

As one Commission official explainedto the audience at the same conference inBrussels in Europe we try to revive eventhe dead policies that you know should beleft alone and prolong non workable pro-jects as much as possible.

The Cloud could be the future of it all,the US could be a template of it all, andalthough seemingly heavy and immovableeven the Commission has managed totweet its way into 2011 (not to mentionthe treaty changes that just seem to hap-pen left right and center these days at theEuropean Council, but that’s another co-lumn). I’ll leave all these thoughts withyou and wish you an abundant 2011 (Yearof the Rabbit where we’ll all have a greattime according to the Chinese) and withNeelie Kroes’ (Vice President of the Eu-ropean Commission Responsible for theDigital Agenda) closing remark at theOpen Government Conference.

“Europe should be the world’s labora-tory for innovation in the public sector.We have the talent, the imperative and thetechnologies. We must be very concrete.Find the real problems in our pilots andexperiences and deal with them. That isthe recipe for getting Every European Di-gital,” Commissioner Kroes said.

That is the recipe for the next stepsahead.

I’m heading to the kitchen.

by Alia PapageorgiouAlia Papageorgiou is New Europe’s Eurocentrique columnist, and a former EU Affairs Editor at

New Europe newspaper

Wikigov and Facebook Diplomacy

> Quote

European Commission President Jose Manuel Barroso arrives for the second day of the European head of states summitin Brussels, Belgium, 17 December 2010. All but Barroso seem to be tweeting whether full time or part time and even hehas his spokespeople tweeting away |ANA/EPA/JULIEN WARNAND BELGIUM OUT

BRUSSELS - Human rights serve asthe guiding principle in the EuropeanUnion's (EU's) external action. Hardly

are there other state-actors in the world thatwould place such an emphasis on the spreadand protection of human rights abroad.

This is also the area where normally theEU finds a common position and is able totake a consolidated stance. In this regard theEuropean Parliament (EP) is one of the mostimportant players, as it normally takes a strongand principled position on human rights vio-lations wherever they would occur. The fa-mous EP Sakharov Prize for Freedom ofThought, which went to Cuban dissidentGuillermo Fariñas this year, has gained repu-tation as one of the most prestigious humanrights awards in the world. In the same waythe EP's Annual Report on Human Rights inthe World and the European Union’s policyon the matter is a tool to assess the overall si-tuation of human rights in the world and toexert control over the actions and decisionstaken by the EU Council and the EuropeanCommission. I was the EP’s Rapporteur forthe latest Report that was adopted in the EPplenary on 16 December. This Report, cove-ring the period from the middle of 2008 untilthe end of 2009, was adopted by an overwh-elming majority of MEPs. It was preceded bya discussion with the EU’s High Representa-tive for Foreign Affairs and Security PolicyCatherine Ashton.

European and international contextBeing the EP’s Rapporteur I had to take

into account a number of turbulent and game-changing developments that had an impact onthe situation of human rights in the world andalso on the EU's action in this field.

One of them was certainly the global fi-nancial and economic crisis which started atthe end of 2008 and which had an especially

negative impact on economic, social and cul-tural rights. In this year's Report we have cle-arly recognized that the rights of the poorestpeople were affected most and because of ri-sing global prices, millions have been strug-gling to meet basic needs in a number ofcountries in Africa, Asia and Latin America.Another macro-trend was the ongoing fightagainst terrorism which continues to causeproblems when it comes to reconciling theanti-terrorist measures with the respect forhuman rights. This year we also stressed thelasting and long-term negative impact climatechange has on human rights, especially forvulnerable groups in the developing world,such as indigenous peoples.

Another major development for the EUhas been the adoption of the Treaty of Lisbonand the creation of the European ExternalAction Service (EEAS). The EP has highhopes that the EEAS, headed by BaronessCatherine Ashton, will place a strong emph-asis on the mainstreaming of human rightsthroughout the EU’s external action.

I made this point clear to EU’s High Re-presentative during the denate in the EP ple-nary. I told Baroness Ashton that primaryattention within the EEAS should be focusedon strengthening democracy and protecting

human rights in the world and this should bereflected both in terms of structure of this ser-vice, as well as its funding. It may be a Direc-torate for Human Rights and Democracy(International Law) or another structure butwith the same content. What we should avoidis reducing or sidelining human rights fromthe main agenda of the EU and the structureof the EEAS. We have also suggested creatingwithin the EEAS the posts of Special Repre-sentatives for Human Rights, who wouldwork in different countries or regions, espe-cially where the EU does not have its diplo-matic representations. These SpecialRepresentatives should have full mandate todefend human rights in places of their work.

Horizontal issues vs specific casesOne of the dilemmas I had to face was

whether to concentrate on horizontal issues orto engage in "naming and shaming". At theend a middle track was chosen where we con-centrated on major horizontal issues but didnot shy away from mentioning the most con-spicuous cases of human rights violations.

A special attention in the Report wasgiven to such horizontal issues as death pe-nalty, freedom of religion and the situation ofhuman rights defenders. The EP reiterated its

tough stance against any form of capital puni-shment and condemned countries like Chinaor Iran, which represent respectively first andsecond positions in the league table of coun-tries with the highest number of executions inthe world. The EU also expressed its deepconcern that discrimination based on religionor belief still exists in all regions of the world,and that persons belonging to particular reli-gious communities, including religious mino-rities, continue to be denied their humanrights in many countries. MEPs from diffe-rent political groups also congratulated theupgrade of EU Guidelines on human rightsdefenders which should ensure that human ri-ghts defenders (NGOs or individuals) in anycountry would be provided with training, fi-nancial assistance or physical protection in thecase that they might be threatened by local au-thorities. EP’s Report is complemented by anextensive supplementary list of specific humanrights violations across the world, which wastaken into consideration while preparing theReport. These are specific names, specific co-untries and real cases of human tragedy andlost lives. One such case – the death of a Rus-sian lawyer Sergei Magnitsky on 16 Novem-ber 2009, caused considedarable controversywithin the EP. Apart from stating that thiscase is an outstanding example of the seriousshortcomings within the country's judicial sy-stem, the EP also called on the Council to“consider imposing an EU entry ban for Rus-sian officials involved in this case” and encou-raged EU law enforcement agencies to“cooperate in freezing bank accounts andother assets of these Russian officials in all EUMember States”.

MEPs also strongly condemned the on-going second trial of former YUKOS oil com-pany chief Mikhail Khodorkovsky and hisbusiness associate Platon Lebedev. In the viewof the EP, this trial is "representative of unfairtrials in Russia" and MEPs therefore calledupon Russian authorities to ensure that fun-damental norms of due process and human ri-ghts are respected in the prosecution of theseand all other defendants in the country’s ju-stice system. The EP, as a scrutinizing institu-tion, also did not shy away from criticising theCouncil and the Commission about the lackof results from their actions and even the lackof benchmarks to assess whether actions in thehuman rights area have given any results. In astrong message, MEPs expressed their disap-pointment at the "lack of progress achieved bythe human rights dialogues and consulta-tions", which are conducted by both Com-mission and Council officials.

The EP has come a long way to find acommon ground on human rights issues,especially the most sensitive ones. This showsthat the EP stands united on human rights is-sues. It also shows that the days when the EPwould just applaud the Commission or theCouncil are over. The EP is now a seriousplayer in the area of human rights and all thestakeholders operating in the field will have totake note of that.


New Year Special | January 2011 HUMAN RIGHTS

by Laima AndrikieneLaima Andrikiene is a Member of the European Parliament from Lithuania representing the largest political group in the EP -

the European People's Party (EPP). Apart from being the EP's Rapporteur on the Annual Report on human rights and the

European Union's policy on the matter, she is also a Vice-Chair of the EP's Sub-Committee on Human Rights

On Human Rights in the World and the EU's Policy on the Matter

> Quote

People hold posters depicting former Yukos chief Mikhail Khodorkovsky (R) and former Menatep head Platon Lebedev (L) during a protest against the pro-nouncement of the verdict, near the Khamovnichesky courthouse in Moscow, Russia 15 December 2010. The pronouncement of the sentence on the secondcase against Mikhail Khodorkovsky and former Menatep head Platon Lebedev was postponed to 27 December |ANA/EPA/MAXIM SHIPENKOV

EUROPEAN PARLIAMENT


New Year Special| January 2011HUMAN RIGHTS

STRASBOURG - Europe has witnes-sed dramatic changes in recent years ,which gave Europe more peace and

unity than ever before in its history, as well asa constant economic growth which - combi-ned with a colossal technological revolution -afforded to European societies an unprece-dented high level of affluence. The financialcrisis of recent months now threatens to un-dermine general stability and self-confidence,creating serious uncertainty. The task is big-ger than just to pull Europe out of the eco-nomic predicament. Our societies arechanging. Immigration flows are modifyinginternational population trends.. In severalEuropean States the number of people withthe immigration background constitute morethan 10 % of the population. At the sametime the demographical tendencies show cle-arly that the European societies are aging.More and more people look with concern atthe sustainability of the European model ofsocial welfare. European security, respect forhuman rights, and the rule of law are surelyfacing new challenges. The internationalagenda in the last several months has beendominated by the economic issues. The worldhas been going through the most serious eco-nomic recession in many years. Globalizationhasn’t been a universal formula providing ananswer to all challenges. It is natural that forboth the politicians and the ordinary peoplethe most important imperative has become toprotect the economic conditions of the life ofthe society - jobs, wages, pensions, cost of li-ving. Politics becomes more pragmatic. Aspi-rations gravitate down to the earth.

Yet, as the world and Europe are now re-covering from the crisis, we should remindourselves of the key lesson of the past 60years: that the sustainability of the civilizatio-nal progress can only be based only on uph-olding the universal values of the humancivilization – the respect for human rights andfundamental freedoms.

At the global level, the Universal Decla-ration of Human Rights, proclaimed by theGeneral Assembly of the United Nations in1948, entails essentially political commi-tments, whereas the European Conventionon Human Rights is a legally-binding char-ter with a specific Court judging on humanrights violations. The recent 60th anniversaryof the European Convention served as an op-portunity to send an important signal – theConvention has become unalienable part andparcel of the European identity. Its provisionsare the compass for the progress of the Euro-pean project. Perhaps not a model for othercontinents, but it should serve as the sourceof inspiration to our partners across the globe.

The Council of Europe continues to pur-sue normative standard-setting and monito-ring of legislation in our 47 Member States,in order to prevent violations happening. Ourmission is democratic or “soft” security : pro-tection of fundamental rights, tolerance, in-tercultural dialogue, social cohesion, respectfor minorities, prevention of extremism, ra-cism and torture, combined with intergo-vernmental co-operation against crime,terrorism, corruption, money laundering, andtrafficking of human beings.

The Strasbourg hemicycle is the onlypan-European forum where the 27 European

Union countries are on an equal footing with20 other European nation states such as Rus-sia, Turkey, and states in the Balkans, and theCaucasus.

Europe is looking back on sixty years ofhuman rights and fundamental freedomsprovided by the Convention. We can beproud of the achievements: the concept of aliberal society rooted in democracy with rela-tive peace and prosperity has been developedand broadened to ever more countries on theEuropean continent.

Today, I believe, international politics hascome to a crossroads. We need a strong mul-tilateralism, rooted in the idea of human ri-ghts and sustained by a rational and criticaldebate, and adapted to the challenges of the21st century.

Peace and stability need new approach tosecurity - a political innovation and a com-plementary element to traditional military“hard security”. And “innovation is key to anysuccess”, wrote Austrian economist JosephSchumpeter. Today our societies are changingfrom within. Main threats to security origi-nate within States rather than between them.The democratic acquis of Europe are at stake.

The European response to the challengesshould be based on what I call the deep secu-rity concept. Deep security is built only by

upholding the values upon which the societyis based and not by sacrificing them. Securityshould be fostered through more democracy.The democratic principles and practices canmake it stronger. The deeper the common va-lues are rooted in the society, the stronger itssecurity. Deep security implies the need to ch-ange our mindset, to make it adaptive to ch-ange and to cultivate the culture of beingopen to change and diversity. The concept ofdeep security means building security by par-ticipation and not simply by passive protec-tion.

To be a European citizen is to be a mem-ber of a community based on full enjoymentof individual rights – guaranteed by demo-cratically elected governments and protectedby an impartial and independent judicial sy-stem – as well as tolerance, mutual respect andacceptance of diversity. It also means acce-pting certain responsibilities in respect of oth-ers, complying with the rules of democracyand contributing to the development of a fairand cohesive society. The European system ofthe protection of human rights will be signi-ficantly strengthened by the accession of theEuropean Union to the European Conven-tion of Human Rights. Mandated by the Li-sbon Treaty, the accession negotiations haveacquired promising dynamics. Hopefully theywould come to the successful conclusion in2011. The “European model” is under scru-tiny due to a resurgence of intolerance and di-scrimination. Many Council of Europemember states have seen a deterioration ofsocial ties, growing religious radicalism andinter-ethnic tensions leading too often to vio-lence. Distrust, doubt and fear have increaseddivisions between different communities andare entering our hearts and minds. We musthave confidence in our democratic core va-lues – the values for which we have fought.Europe is a continent of minorities. The im-portant question now – key to the concept of“soft security”, is how are we going to “live to-gether”?

A group of nine eminent persons, chairedby former German Minister of Foreign Af-fairs, Joschka Fischer, is helping the Councilof Europe, under the current Turkish Chair-manship, to advise on how we can best ad-dress the new challenges and safeguard ourcore values of democracy, human rights andthe rule of law. The purpose of the Group isfundamentally to look deeper beneath thesurface of current political developments inEurope and examine their root causes. I ampersuaded that it is necessary to take a closerlook at what is happening to our societies,analyse the anxieties of the people, theirneeds, and their preoccupations. Without un-derstanding the changes occurring in our so-cieties, without listening attentively to theexpectations of European citizens, no organi-sation will be able to provide relevant answersand be judged as useful in times of rapid ch-ange. The pace with which European socitiesare changing will not recede. The Council ofEurope will be busy for the years ahead. Itsrole as the guardian of the common values isas important as ever.

by Thorbjørn JaglandThorbjørn Jagland is Secretary General of the Council of Europe

Democratic Security and Respect forHuman Rights in the 21st century

> Quote

Human rights activists protest in front of the Brandenburg Gate in Berlin, Germany, 10 December2010 |ANA/EPA/STEPHANIE PILICK


New Year Special | January 2011HUMAN RIGHTS

by Nicolas BergerNicolas Berger is the Director of Amnesty International’s European Institutions Office in Brussels

EU Diplomacy Must Put Human Rights Centre Stage

BRUSSELS- The European Union’sspanking new diplomatic service,known officially as the European

External Action Service (EEAS), finallysaw the light of day on 1 December. It wasa subdued birth. Neither the mother northe midwife had a lot to say on the bigday. But however restrained the Service’sstart in life has been, Amnesty Internatio-nal is concerned that if its parents’ dreamsare to be fulfilled, the Service will need toplace human rights at the very heart of theEU’s foreign policy. Worryingly, BaronessAshton’s vague assurances do little to re-assure us that her new wunderkind willdeliver on its promises. Indeed, it seemsall too likely that if the Service developsin the direction we have been encouragedto believe, the EU’s capacity to work onhuman rights will be drastically slashed.

When the Lisbon Treaty finally cameinto effect a year ago, after a long and ex-cruciating wait, we were assured that itsguiding spirit would dramatically dyna-mise the EU’s impact on human rightspolicy around the world. To meet theseaudacious but laudable goals, the EEASclearly needs to have the passion and ca-pacity to defend human rights and inter-national law. But this can only happen ifwe have a major spring clean of the fo-reign policy house. We need to shifthuman rights out of the attic and into theliving room, ensuring that no visitor canavoid bumping into it. For this to happen,the EEAS must have a workable structureand staff, whether at its Brussels head-quarters or in its diplomatic missions (de-legations) across the globe. What worries

me on this count is that the Service hasbeen far from transparent nor has it spe-cified how it will become a human rightsheavy-hitter, and key stakeholders, inclu-ding ourselves, have been essentially igno-red. So do we fear that the EU will seeonly a modest increase in its human rightsreach? If only we had such mild misgi-vings.

Mainstreaming isn’t dilettantismUnfortunately Baroness Ashton has

done nothing to deny the growing suspi-cion that the EEAS will be taking a majorstep backwards, further marginalisinghuman rights. There is nebulous talk of‘mainstreaming’ human rights throughoutthe Service. Is this an attempt to claimthat every official will be thinking ofhuman rights throughout his or her wor-king day? How will anyone measure theimpact of all this part-time pondering if

there are no specialists to monitor it, takethe initiative or set goals? Thirty years ofgender mainstreaming experience haveshown that experiments of this type areuseless if there is no central body to setpolicy and oversee its implementation.

A Directorate for human rights The answer is clear. The EEAS needs

a strong and well-staffed human rights di-rectorate. Anything less and it won’t beable to fulfill the EU’s human rights am-bitions and obligations. The directoratemust have the resources to assess the ex-ternal human rights impact of all EU po-licies. Mainstreaming simply cannot workwithout the support of a strong, well-re-sourced team of experts. The directoratewould also ensure that human rights con-siderations are central to decision-makingin other key areas like climate change, po-verty reduction, trade, energy, health, and

Common Security and Defence Policy(CSDP).

A human rights focus in EU delegations Amnesty International is also concer-

ned that the current plans for the EEASwill mean that the EU’s diplomatic mis-sions, (delegations), will lack human ri-ghts know-how on the ground. It wouldbe a retrograde step if only a few delega-tions had human rights focal points. Whyshould we allow the existing, far-from-perfect, standards to deteriorate? If thebulk of delegations in countries withmajor human rights abuse don’t get thenecessary resources and expertise the EUwon’t be able to bolster the vital work oflocal human rights defenders, and wouldfind it hard to identify early warning signsand head off abuses before they occur.

High-level responsibility In closing, I should add that Amnesty

International firmly believes in the needfor explicit human rights portfolios at alllevels of the EEAS to ensure that humanrights experts are fully integrated into itsdecision-making. It follows that properconsideration of human rights in the Ser-vice’s decision-making is unlikely to occurunless there is a high-level official in themanagement team, a deputy secretary ge-neral or higher, who holds specific re-sponsibility for human rights. In theseason of miraculous births, the attributesI have listed would do Baroness Ashton’snewborn, and Europe’s human rightsclout, a power of good.

> Quote

High Representative for Foreign Affairs and Security Policy Catherine Ashton in Brussels, Belgium, 17 December 2010. Worryingly, Baroness Ashton’s vague assurances do little to reassure us that her new wunderkindwill deliver on her promises |ANA?EPA/JULIEN WARNAND

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Günther Oettinger

Securing Europe’sEnergy Supply

64

Joe Leinen

Europe’s Environmen-tal Responsibilities

66

Kostis Geropoulos

Gazing through theEnergy Crystal Ballfor 2011

67

ENERGY & CLIMATELes Faits Sont Têtus

68

KASSANDRA


New Year Special| January 2011CONTENTS: ENERGY


New Year Special | January 2011 ENERGY & CLIMATE

BRUSSELS - Energy is the heart of oureconomy and our society. If we investin our energy system, we are investing

in the future. If, however, we neglect our energysupply and energy efficiency, the consequencescould be profound and irreversible. In this re-spect, our plans regarding energy technologyand infrastructure are crucial.

The market guarantees our energy supply.But the proper regulatory framework is vitalfor the functioning of the energy market. Thethird package on the internal energy markethas created this new framework at EU level.However, energy supply and technology deve-lopments are not just closely linked to our dailylife but also to major geopolitical events in theworld. Political signals have a direct influenceon the decisions of the energy industry.

The need to invest in new energy infra-structure, technologies and sources of energyis enormous. It is estimated that by 2030 up toone trillion euros will have to be invested in theEuropean electricity grids and electricity ge-neration and 150 billion euros in the gas net-work, excluding import pipelines from thirdcountries.

We must not forget that investments in theenergy industry work on a long-term basis. In-vestments made today date back to decisionsmade years ago and determine the structuresof our energy supplies for the period up to2030 and 2050. The players in the energy arenathus have a major responsibility vis-à-vis fu-ture generations.

As the European Commissioner's newEnergy Commissioner, I can confirm that inrecent years the EU has succeeded in develo-ping a comprehensive European energy policy.This was a process that was pursued jointly andambitiously by the Member States (and theGerman Länder in particular), the industryand the European Institutions.

The EU’s energy policy sets out clear re-quirements and targets for sustainable, compe-titive and secure energy. Our main aims are to

achieve a 20% reduction in greenhouse gases,to provide EU consumers with a supply thatincludes a 20% share sourced from renewableenergies and a 20% improvement in energy ef-ficiency by 2020.

The January 2008 legislative package forenergy and climate binds the Member Statesto these ambitious objectives in the area of re-newables and emission reductions. The EUwill not be able to realise its ambitious goalswithout making important and immediate ch-anges to energy networks and comprehensiveinvestments in new technologies and in a wideenergy mix from emission-free and domesticenergy resources, including nuclear technologyif a Member State has decided in favour of it.

The energy industry plays a significant rolein this respect, as it is obliged to undertake andfinance projects to secure the energy supplyand new initiatives for research and develop-ment. The most important condition affectingthe private sector's willingness to invest is aclear and stable regulatory framework. One ofthe main goals of the energy and climate pac-kage and the third internal market package forenergy to complete the internal market for gasand electricity was to create this framework.

Implementing the third internal marketpackage for energy will involve considerablechanges in terms of network planning, inclu-ding requirements on unbundling, coordina-

ting the regulations through the EuropeanAgency for the Cooperation of the EnergyRegulators and reorganising how the Euro-pean networks of transmission system opera-tors (ENTSO-E and ENTSO-G) worktogether. Another key point is the develop-ment of the Community-wide ten-year net-work development plans and increasedtransparency to promote an efficient and se-cure network.

In order to send the right signals to theenergy market, we must now begin laying thefoundations for a more sustainable Europe. Myfirst priority as Energy Commissioner is to im-plement the new European regulatory frame-work promptly and properly. This will alsoconsiderably improve the conditions for the se-curity of our energy supply. We must also, ho-wever, work together with the Member Statesand the European Parliament to develop Eu-ropean measures to foster new energy net-works and innovations and improve theinvestment climate. The challenge for us is toattain a low-carbon economy, with the ulti-mate objective of achieving emission-freeenergy generation and transport sectors.

I would like to specifically highlight threetopics that are of fundamental importance forthe proper functioning of the internal marketin energy and our future energy supply, namelytechnology, infrastructure and finances.

Infrastructure Infrastructure is the circulatory system of

the internal market in energy. It is intrinsicallylinked to the security of the energy supply. It isvital for a successful decarbonisation policy,which requires adjusting the network to morerenewable and decentral production.

The European Commission has been exa-mining the security and sustainability of ourenergy networks since 2006. The new focus inthe European Union’s energy strategy is thuson energy networks and transport.

The gas crisis of January 2009 and thepower cuts in Italy in 2003 and Germany in2006 show that Europe's network is too weakto deal with such interruptions. In 2009, manyof the new Member States had no alternativesto compensate for the Russian gas supplybeing cut off. And the situation in Europe willmost likely get even worse, as our gas pipelinesare antiquated in places and there are inade-quate links between the Member States. Do-mestic resources are also in continual decline.

At the moment, around 61% of the EU’sdomestic consumption of natural gas comesfrom imports. 42% of these imports come fromRussia, 24% from Norway, 18% from Algeriaand around 16% come from other countries,the latter mainly in the form of liquefied natu-ral gas. At national level, some Member Statesget their natural gas from a sole supplier for hi-storical reasons. With regard to natural gas, wetherefore need to increase import capacitiesand diversify sources. New gas pipelines are ne-eded, particularly in the new Member States,and the import sources and channels must bediversified. We must consider new possibilitiesfor storing gas and new ‘reverse flow’ projects.The Nabucco pipeline in southeast Europeand the Nord Stream gas pipeline will play animportant rule in securing gas supplies for Eu-rope in the future and our policies must sup-port these.

Liquefied Natural Gas is particularly im-portant. It promotes not only the liquidity ofthe gas market, but also competition on the in-ternal market in energy.

As far as the electricity industry is concer-ned, we need new, modernised and smart gridsto achieve our climate objectives. Our currentnetwork is not geared towards decentral elec-tricity production at a remove from the user.This is an opportunity to develop sustainableand flexible smart grids. Increased use of rene-wable energy sources requires cross-border so-lutions. Wind, water, solar and geothermalenergy are dependent on local conditions. Thelack of suitable grid connections is an obstacleto investments in renewable energies and de-central production.

In the electricity sector we need a greaterdiversification of production and more flexibi-lity in consumption. For this we need to be ableto feed offshore wind energy and renewableenergies into the European network to a gre-ater extent. The European network must beflexible enough to allow this. We need a planfor creating a European smart and high-per-formance grid system. We must also discussand decide how to finance it (though subsidiesor transit charges).

by Günther H. OettingerEuropean Commissioner for Energy

Securing Europe’s Energy SupplyThe priorities for European energy policy in the coming years

> Quote

Icicles hang on a pipeline forwarding Russian natural gas from Ukraine at the receiving station of Mol Natural Gas Transporting Corp. in Beregdaroc, 302 kilome-ters east of Budapest, Hungary, near the Ukrainian border, 3 January 2009. The gas crisis of 2009 and the power cuts in Italy in 2003 and Germany in 2006 showthat Europe’s network is too weak to deal with interruptions |ANA/EPA/ATTILA BALAZS


New Year Special| January 2011ENERGY & CLIMATE

We must also exploit the potential of thesmart grid in combination with smart electri-city meters. By better managing demand, net-work operators could better manage peaks andtroughs in production and reduce the need forconsiderable surplus capacities (often fromcoal, gas or oil) by up to 50%. By better con-trolling electricity use, consumers could reducetheir energy consumption by 20% and thuscontribute to reducing the total demand,energy costs and CO2 emissions. An electri-city network with more information and com-munication technology will be important forthis transformation. The convergence betweeninformation and communication technologyand energy production is a central element ofa smart grid.

Thus, it is critical to address the challenges(such as the need for financing, technical un-certainties with regard to data protection andstandardisation) for using smart grids at Eu-ropean level.

TechnologyWe must develop a new generation of te-

chnologies with regard to achieving the '20-20-20' goals and a C02-free energy sector by2050. Even if some of these technologies can-not be used in the medium term, it is very im-portant to launch them as soon as possible. Itoften takes decades before new technologiesbecome established and achieve a significantmarket presence. It is estimated that the globalmarket for renewable energies will generateover $500 billion (or €418 billion) in the nextfour years. It is clear why investors from allareas want to profit from this market.

Energy technologies and services that arelow in CO2 will undoubtedly be the biggestgrowth sectors in the coming decades. The bestway to grow this market is through Europeancooperation. The European Strategic EnergyTechnology Plan (SET Plan) has paved theway for this. European policy must make it ea-sier to introduce new and proven technologies.Many technologies, such as photovoltaics, off-shore wind, network technologies or carboncapture and sequestration, are still too expen-sive and not yet efficient enough. At present,research and development are chronically un-derfunded in the EU. We risk missing the boatif there is a boom in the markets for newenergy technologies. The Commission is assu-ming that in the next ten years another €50billion must be invested in energy research.This would almost triple the annual volume ofinvestment in the EU, by increasing it from

three to eight billion euros. It is clear that the Member States, compa-

nies and research centres must combine theirefforts to advance the technologies required forfuture energy supplies by the year 2020. TheCommission’s new EU2020 strategy will behighly relevant for this.

Despite – or perhaps because of - the eco-nomic crisis, there is a greater need than everfor both public and private-sector investmentin energy technologies.

FinancesStrategic goals and political commitment

alone will not build any infrastructures or placeany new technologies on the market. Moneyis needed for that, but that is a significant ob-stacle in the current economic crisis. The In-ternational Atomic Energy Agency hasestablished that following the financial andeconomic crisis, in 2009 investments in the oiland gas infrastructure decreased by around21% worldwide in comparison with the previ-ous year. This means that the amount globallyinvested fell by around 100 billion US dollars(83 billion euros).

In their economic recovery plan, the Com-mission and the Member States committedthemselves to boosting infrastructure inve-stment in the European economy in 2009 and2010. In May 2009 the European Parliamentand the Council adopted an energy financialpackage of €3.98 billion as part of the Euro-pean Economic Recovery Programme. Neverbefore has the EU made such a contributionto the energy sector. This stimulus financingboosts investment projects in the gas and elec-tricity connections sector (€2 365 million), off-shore wind farms (€565 million) and carboncapture and sequestration (€1 050 million). Inthis way, the economic recovery package willcontribute to regenerating the European eco-nomy, improving the security of the energysupply and reducing greenhouse gases.

In spring 2010 the Commission producedan initial report on the European economic re-covery package and reported on the progressin energy interconnections, carbon capture andsequestration and offshore wind farms. Someof the package's projects are also priority pro-jects in the Trans-European Energy Network(TEN-E) programme.

As far as the financial framework forenergy technologies is concerned, demonstra-ting and marketing carbon capture and seque-stration (CCS) will continue to be a highpriority. Demonstration of the technology at

an early stage is an important prerequisite forits commercial use. In recent years, we haveseen a lot of positive developments in this area,particularly in the business sector. Some CCSprojects also received support from the econo-mic recovery package. Other financial incen-tives for demonstrating CCS will be providedby the new European emissions allowance tra-ding scheme.

Without considerable funds, we will notimprove the security of supply and reach ourclimate and energy targets. Securing theenergy supply has a price and the earlier we in-vest in it, the lower this price will be. It is, the-refore, particularly important not to allow therecession to restrict our efforts to invest. TheEuropean measures will not just stimulate theeconomy. They will also decrease our depen-dency on fluctuating oil prices in the future.

New European Energy Infrastructure Instrument

We can also use the experience from theeconomic recovery package for the develop-ment of the new infrastructure package reque-sted by the European Council.

By the end of the year the Commissionwill present a package showing the challengesand specific requirements for developing newelectricity networks to facilitate the integrationand extension of renewable energy sources.

We must proceed with a broad scope and,for example, also include the promotion of sto-rage capacities, of smart European high-per-formance grids and networks and low-carbonenergy sources (renewable energy sources andCCS). The public sector will not be able to payfor everything, but it will be able to offer an in-centive. New financing possibilities must alsobe fully utilised in the future, for example th-rough a combination of financing with grantsand low-interest loans (calls for tender: EIB).

Nuclear energyWe note a growing increase in nuclear

energy worldwide. Around 60 States haveasked the International Atomic EnergyAgency for help in developing this technology.Within the EU, most countries already use nu-clear energy. Other Member States are takingconcrete steps to start nuclear energy pro-grammes, resume them or develop them fur-ther.

With around 150 reactors, which producearound a third of Europe’s electricity, the EUhas the greatest park of nuclear power plantsworldwide. The nuclear companies in the EU

are world leaders. This goes for all stages of thefuel cycle: from the construction and opera-tion of nuclear power plants to enrichment andreprocessing. Nuclear energy can thus be ananswer to both climate change and securingthe energy supply, and also help make the EUmore competitive. As an important source oflow-carbon electricity, it is now a key techno-logy in Europe’s energy mix. While public opi-nion in Europe does recognise its advantages,it is also aware of the risks of nuclear energy.This calls for a continuing policy to ensure thatmaximum standards are set and kept with re-gard to safety and security requirements. Andthis is the challenge that the EU is settingitself.

The EU is therefore trying to stimulate apublic debate on nuclear energy and the pos-sible actual contribution to the EU’s energypolicy goals, while leaving the Member Statesfree to choose their own energy mix. Keen toensure transparency, the Commission has setup a 'European nuclear energy forum' with thesupport of the European Council, to discussthe advantages and disadvantages of nuclearenergy with all stakeholders and with no holdsbarred.

The EU is also prepared to use the instru-ments of the Euratom treaty to ensure the bestframework for radiation protection, safety andnon-proliferation. Last year in the Council theMember States unanimously adopted a Di-rective on the safety of nuclear installations.And we remain ambitious.

Showing that we can dispose safely of thewaste produced by nuclear power plants or re-sulting from medical procedures is vital to en-sure a higher level of acceptance of this sourceof energy. This is particularly evident in Ger-many, where on the one hand, the Asse nuclearwaste storage facility shows what should notbe done and, on the other hand, valuable timewas wasted by halting the exploratory work inGorleben. In this light, I intend to present aDirective on nuclear waste later on this year.The aim is a common framework for the safedisposal of radioactive waste and spent fuelrods throughout the Community. If we use nu-clear energy, we must also develop a plausiblesolution for its final storage. With an effectivelegal framework for safety and non-prolifera-tion, nuclear energy in Europe can make along-term contribution to securing the energysupply, competitiveness and climate protection.

Ambitious but realisticOur vision of achieving a carbon-free

energy and transport system by 2050 is indeedambitious but entirely realistic. Besides a con-siderable increase in energy efficiency, we wantto produce electricity exclusively from sourceswith the lowest possible CO2 emissions. Weare talking about a future energy mix producedpredominantly from renewable and nuclear so-urces, but also fossil fuels with carbon captureand storage.

For these reasons, the EU must above allcreate the necessary energy policy stimuli andincentives for investment to boost investmentsin infrastructure, technology and energy effi-ciency. The above-mentioned smart grids andnetworks and alternative fuels play a major rolein this regard. Ultimately it comes down to theenergy mix and market players’ behaviour.

The internal market in energy, energy sup-ply security, energy efficiency, renewable ener-gies, infrastructure and low-emission energynetworks for tomorrow: there are the main is-sues for Europe's energy policy. Together withthe development of an external European po-licy for energy, they are also my priorities asEnergy Commissioner for the coming years.


New Year Special | January 2011ENERGY & CLIMATE

by Jo Leinen Joe Leinen is Chair of the Environment Committee in the European Parliament

Europe’s Environmental Responsibilities

BRUSSELS - Being responsible forenvironment, climate, health andfood safety issues the agenda of the

environment committee (short ENVI) ofthe European Parliament is always busy.With the Lisbon Treaty the responsibili-ties of the Parliament and its committeeshave grown even more, e.g. regarding newco-decision competences, a consent pro-cedure for international agreement inclu-ding those on environmental and climateissues, but also the approval of commis-sioners. There is now a new balance ofpower between the EU institutions.

2010 was the international year of bio-diversity. The ENVI committee was veryactive on this issue with a report on theEU's own biodiversity action plan 2000-2010, a resolution for the UN Conventionon Biodiversity (CBD) and legislation onillegally logged timber. In this regulationthe Parliament achieved the objective ofprohibiting the import of illegally loggedtimber and introduced a strong due dili-gence system.

For the UN conference on the con-vention for biodiversity (COP 10) in Na-goya, Japan in October 2010 ENVIwelcomed a resolution asking for progressin the global fight against biodiversityloss, including a clear roadmap for thenext decade, a fair solution on access andbenefit sharing and the necessary finan-cial support, from public as well as fromprivate sources. At previous conferences,EU Member States got caught up in in-ternal discussions and missed their chan-ces to influence or even steer thenegotiations in the desired direction.Against this background MEPs appealedto the EU Member States to reduce in-ternal debates and focus on promoting theEU's position with one voice. Not leastbecause of a united EU, the Nagoya con-ference was brought to a successful end

and gives hope for the future protectionof biodiversity.

In 2010 the environment committeedealt with a broad legislative agenda. Par-ticularly important was the agreementwith the Council on the prevention andcontrol of pollution of the air, water andsoil resulting from emissions from indu-strial installations (IPPC Directive), suchas sulphur and nitrogen compounds, dustparticles, asbestos and heavy metals. TheParliament succeeded in reducing the ex-tent of exemptions regarding the com-pliance with the directive and inintroducing the application of current bestavailable techniques for new large combu-stion plants earlier than foreseen by Co-uncil and Commission. Less pollution,cleaner air and the promotion of new te-chnologies will have substantial positiveimpact on health of citizens and on thecompetitiveness of European industry.

This is also the goal of the proposedlegislation on Co2 reduction for lightcommercial vehicles. The ENVI commit-tee has proposed 140g Co2/km as a long-term target for 2020 and is now innegotiations with the Council on the

matter. Road transport is a major contri-butor to the high Co2 emissions in Eu-rope. After self commitment pledges bythe industry did not yield tangible success,the introduction of a regulatory frame-work, spanning from car emissions vialight commercial to heavy duty vehicleshas become necessary. The Co2 require-ments for cars have already produced firstsuccesses. MEPs now aim at a similar out-come for the light commercial vehicles.

Reducing the burden on the environ-ment and on human health by using lesshazardous chemicals in electric and elec-tronic equipment such as computers ormobile phones is the goal of the so calledRohs directive.

The debate on the use of further sub-stances, e.g. halogenated flame retardants,on an open scope and on the alignmentwith the chemicals directive REACH hasbeen high on the political agenda throu-ghout the year. Parliament tried to strikea balanced deal between the protection ofenvironment as well as human health andthe interests of producers.

In the second big policy field ofENVI, namely public health policy, the

year 2010 has also been busy. MEPs ma-naged to advance negotiations on the ph-arma and health package, thusinformation to patients, falsified medici-nes, pharmakovigilance, cross-borderhealth care and safety of organ tran-splantations. The Parliament's focus is onthe patient, putting their safety and theirrights first. Against this backgroundMEPs are striving to put the possibilitiesof patients to get independent informa-tion on medicines and treatments beforethe interest of industry to promote cer-tain products and to advertise for specificcures. Furthermore they aim to easecross-border treatment for patients inneed, to strengthen the control mecha-nisms for pharma products, also afterthey have been put on the market and byclosing loopholes, such as unsupervisedinternet trade, in the fight against falsi-fied medicines.

Climate policy is an area the ENVIcommittee is following very closely. Theimplementation of the climate and energypackage remains on the agenda for regu-lar checks and control.

In November a resolution on the COP16 conference in Cancun/Mexico, by thecommittee was passed by the plenary.MEPs demand the move to a 30% EUCo2-reduction target by 2020. This willincrease the credibility of the EU duringthe current negotiations talks and sendclear signals to the industry that the tran-sformation of Europe towards a low car-bon economy by 2050 has started, settingthe regulatory framework for investmentsin climate and environment friendly tech-nologies.

An EP delegation attended the Can-cun climate summit, informing about andpromoting the EU's commitments regar-ding emission reductions and financialcontributions.

> Quote

Domino stones made of ice fall and reveal a -30 behind a -20 percent number in Berlin, Germany, 6 December 2010 |ANA/EPA/TOBIAS KLEINSCHMIDT

EUROPEAN PARLIAMENT


New Year Special| January 2011ENERGY & CLIMATE

by Kostis Geropoulos Kostis Geropoulos is the Energy and Russian Affairs Editor of New Europe newspaper

Gazing through the Energy Crystal Ball for 2011

ATHENS - As the latest massivesnow storm wreaked havoc acrossEurope, disrupting Christmas

plans for hundreds of passengers in Paris,London, Frankfurt, and the rest of theworld, it seems demand for natural gas isnot likely to fall significantly in 2011.

Justin Urquhart Stewart, director andco-founder of Seven Investment Manage-ment, a UK fund management house, toldNew Europe by phone from London thatthere is still going to be a lot of demandfor gas coming through. “In Europe theyare very weather-affected for gas ratherthan necessarily industry affected,” he said.“There will be more increased demand forgas because obviously of the bad winters,the concern over some of the pipelines,even the new ones coming on,” he said.“You have got the Qatari LNG (liquefiednatural gas) coming quite significantly th-rough Milford Haven in Wales so there isgoing to be more supply there available,but it will be interesting to see if we havethe annual lets-tread-on-the-Russian-pipelines discussion,” he said.

Gas relations between Russia andUkraine have significantly improved sincethe election of Ukrainian President ViktorYanukovych in February 2010. “The que-stion is if the Russians need to show anyflexing of muscles at the moment. I don’tthink they do. But there certainly going tobe an increased demand from Europe atthe moment. The winter is going to belong and cold,” Urquhart Stewart said.

An issue that could disrupt Russia-Ukraine relations is the proposed mergerof Russian gas monopoly Gazprom andstate-owned JSC Naftogaz Ukrainy. “Rus-sia and especially Gazprom is dreamingabout this process, but it is not in the inte-rest of Ukraine and of Naftogaz especiallybecause in such situation Ukraine will loseall its importance in the gas chain,” Mi-khail Gonchar, director of energy pro-grams at the Ukraine-based NomosCenter, told New Europe by phone fromKiev. He noted that gas relations betweenRussia and Ukraine are good, but he didnot rule out another gas crisis given thatthere is “no willingness of the Ukrainianside to go into deeper cooperation withGazprom.”

There is a fierce struggle for the Euro-pean gas market. The EU portrays an opti-mistic scenario of growing competitionbetween producers: there is much talkabout a sharp increase in LNG supplies,the beginning of shale gas production, thecoming of new producers from the Ca-spian and Central Asia to the EU marketand the EU’s energy efficiency policies, ac-cording to Russia's National Energy Secu-rity Fund (NESF).

In 2011 the struggle between the EU,Russia and China to develop deposits ofhydrocarbons from the Caspian Sea regionand Central Asia is likely to continue.Turkmenistan wants to pave the way for itsgas to Europe but the legal status of the

Caspian Sea is not defined yet, makingtransportation of hydrocarbons a problem.China is willing to boost its consumptionof Turkmen gas but the EU can offer amuch higher price for Caspian gas. “In thecompletion for Caspian gas, the EU sh-ould be a bit more active, because the cur-rent policy is not sufficient to achieve thisgoal and if it will continue China will havethis gas,” Gonchar said.

There will also be a real battle for sup-plies of Azeri gas with pipeline consor-tiums playing a high-stakes poker game,wondering who is going to blink first. Na-bucco, ITGI (Italy–Turkey-Greece Inter-connector), TAP (Trans Adriatic Pipeline)and the Azerbaijan–Georgia–Romania In-terconnector (AGRI) are proposed projectsof Europe’s Southern corridor competingfor Azerbaijan’s gas because it’s the onlygas available to be produced and exportedin the short term. Shareholders in TAPand ITGI are in ongoing talks and somesort of cooperation seems likely. TAP sha-reholders are heavyweights Norway’s Sta-toil, Swiss EGL Company and Germany'sEON Ruhrgas.

“It is a matter of synchronization,” anAzeri diplomat told New Europe. “We ex-pect to come up with some sort of decisionin the first part of 2011.” It is up to theprojects to prove their feasibility and thatthey will be constructed as gas from Azer-

baijan’s Shah Deniz 2 field comes onstream. He stressed that the issue of tariffsis also important. He said Azerbaijan canprovide 10 billion cubic meters (bcm) ofgas but Azeri state oil company SOCARcould increase this amount, using its ownresources.

Directly competing with Nabucco, theGazprom-led South Stream project wouldbring gas from Russia to Southeastern Eu-rope. “Russia is strictly against Nabuccobecause it would like to hinder the deve-lopment of Nabucco and Russia sees SouthStream as a killer of Nabucco,” Goncharsaid, urging the European Commission tomake “not declarative but real push” forNabucco in terms of securing gas suppliesfrom Azerbaijan. “We see some progress inrelations with Azerbaijan and Turkmeni-stan and it gives us some hopes to have abit more progress in that project,” Goncharsaid.

Vladimir Chkhikvishvili, Russian Am-bassador in Greece, told New Europe inAthens that Russia is quite prepared tostart work on South Stream in 2013 and itcould become operational some time in2015. He also said that the consumptionof gas will probably increase in Europe.“Europe will need a lot of new gas so thatis why we are planning this pipeline,” hesaid. The Russian ambassador noted thatITGI and South Stream are not compe-

ting. “Different sources of energy, differentsources of gas,” he said.

Meanwhile, Nord Stream, the plannedgas pipeline from Russia to Germanyacross the Baltic Sea, will move ahead in2011 as planned. On 16 December, NordStream signed an agreement with 24 banksfor a new tranche of €2.5 billion. Backedby such giants as the Russian Gazprom,German Wintershall Holding and E.ONRuhrgas, French GDF Suez and DutchGasunie, the project offers investment se-curity. The project consortium said on 16December that everything is going asplanned for the construction of the pipe-line. The first branch of the pipeline wason schedule to deliver gas to Europe bylate 2011. The first line of the 1,224-kilo-meter pipeline was more than half com-plete by early December. Construction onthe dual pipeline started in April and itwill pass through economic zones in Rus-sia, Finland, Sweden, Denmark and Ger-many. The cost of the pipeline is around$10 billion. Both lines are expected to becompleted in 2012.

Regarding oil, Bulgarian Prime Mini-ster Boyko Borisov has been balking at theconstruction of the Burgas-Alexandroupo-lis oil pipeline that would bypass the crow-ded Bosporus straits. Asked if BurgasAlexandroupolis is dead, Chkhikvishvilisaid: “No I don’t think so, let’s wait and seebecause my understanding is that we havesent the Bulgarian government and theGreek government an assessment of theenvironmental protection as far the Bur-gas-Alexandroupolis pipeline is concernedand the Bulgaria side promised us to givethe answer as far as this assessment is con-cerned sometime in March next year soprobably in March we will hear from them.But I will be very frank. Mixed signals arecoming from Sofia so I’m not sure, we arenot sure. Just wait and see.” He noted thatGreece is completely on board.

The construction of the Samsun-Ceyhan oil pipeline through Turkey is seenas the major competitor and alternative tothe oil pipeline through Bulgaria and Gre-ece. But Chkhikvishvili cited Russian ex-perts as saying that both pipelines areneeded to accommodate additional Russiaand Kazakh oil to come to the Black Sea.

Regarding oil prices, Organization ofPetroleum Exporting Countries (OPEC)ministers meeting in Quito, Ecuador, on11 December did not raise oil production.Oil prices have been bouncing between$87 and $90 a barrel. Oil price may riseinitially but later in 2011, it may fall againas demand starts to slow, Urquhart Stewartsaid, adding: “There will still be able to seedemand in the development nations, butwith China may be slowing down to 5 per-cent, India slowing down as well, overalldemand will be weaker and United Statesrecovery will be seen as anemic.”

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> Quote

Russian Prime Minister Vladimir Putin (CL) visits the Solitaire ship, which lays pipes forthe Nord Stream pipeline in the Finnish gulf, 200 kilometers west of St Petersburg, Russia,20 September 2010 |ANA/EPA/ALEXEY DRUZHINYN RIA NOVOSTI

As Europe is sinking deep in thebiggest systemic crisis ever and al-though alarming fears for an imminentcollapse of the Euro are looming all overthe Eurozone, governments are ignor-ing the facts, and are trying to give so-lutions to new problems with oldrecipes.

Twenty three centuries ago, Pericles ofAthens said, “We can see Gods, we can seeDemons, but we cannot see our nose, ohmen of Athens.” Taking the argumentfurther, “ordinary people look at thetrees but leaders look at the forest.” Idare say, no, “leaders do not look at theforest, only managers look at the forest;leaders rise above the forest and look forthe ocean.”

The Crisis is Systemicand non-Linear

Today, Europe is led by celebrities likeAngela Merkel, Nickolas Sarkozy, Sil-vio Berlusconi, Jose Luis RodriguezZapatero, David Cameron and othersand their best ability is to communicate.With or even without managerial abil-ities, our leaders were appointedthrough democratic election proceduresby media, lobbying and public relationsfirms. Real leaders are not appointed;they emerge from confrontations,whether wars, barricades or otherchaotic situations. Francoise Mitter-rand was a leader, so was Konrad Ade-nauer and Winston Churchill. The lackof leadership in Europe is a seriousshortcoming because managers capableof handling “linear” situations, yet inca-pable to foresee “black swans,” are re-quired to handle an unprecedented“chaotic” socio-political systemic crisis.

Every phenomenon, whether physical,political or social, has an interpretation.Today, everybody looks at Germany asbeing responsible for the crisis. Yet,Germany has only accelerated theprocess.

The German Case

Germany, after being defeated twice intwo world wars by Britain and its Alliesis now fighting the third world war withthe Euro. Shortly after Prof. ZeliuZhelev was elected President of the

post-communist Bulgaria and for thefirst time met the then German Chan-cellor Helmut Khol, he blandly askedthe Chancellor: “Tell me, how you feelafter your country was defeated in twoworld wars?” With a disarming smileKohl replied: “I have no problem with

that because we will win the third worldwar with the Deutsch Mark!” In thesame context comes the Berlin-Moscow energy axis which secures onthe long-term cheap energy (naturalgas) to Germany from Russia thus dis-allowing the development of alternativesources of supply for Europe. In thismatter, the three major political partiesof Germany, CDU, SPD and CSU arealiened since decades. All this has upset

Anglo-Americans who decided to replyin their way. Does anyone believe thatBritain and the United States, twocountries who fought one next to eachother on the same side of the barricadesin two wars in the past century will letGermany go this time?

Re-Inventing the System

However, the crisis we are facing goesbeyond the economy, the Eurozoneand the German ambitions. It is a sys-temic crisis with non-linear evolution.Our economic system is based on rulesinvented many centuries ago and wasde facto obsolete by two new elementswhich entered our lives since threedecades ago, globalisation and digital-

isation. European leaders, however, ig-nored new realities and continue torule on the assumption that “business isas usual.”

Banks and enterprises still operate onprinciples institutionalized by Lorenzode Medici of Florence in the fifteenthcentury, principles which today, underthe new realities are obsolete. There-fore, to get through this crisis, we haveto re-invent the system. We need new,completely new, financial structuresand we need a completely new entre-preneurial framework. Such innova-tions will give room for newcitizen-state relations, a redefinition ofroles in a new social context, newlabour relations and a new bankingsystem while abolishing all mecha-nisms producing wealth out of noth-ing. This is unavoidable to happen.The question is when and how. Thesooner we realize this reality, the lesspainful the transition will be.

The Way Out

Our socio-political system is in the in-tensive care unit under life support andstimulus packages through cheap fi-nancing to banks and recession gener-ating assistance to needy countries willnot solve the problem. On the contrary,such actions lead to the depletion ofEurope’s middle class, creating a fastgrowing class of neo-poor. At thispoint and time, chances for a smoothtransition are limited.Our situation is quite similar to the lastdays of Pompeii, when Vesuvio was fordays erupting ashes and the people ofHerculaneum were enjoying a freneticvalueless decay in apathy, waiting forthe volcano to explode.

Les Faits Sont Têtus, if Vladimir IlyichUlyanov were alive would have saidwhich means that we are close to thepoint of no return. The ruling elite ofEurope must stop acting as managersand become leaders. It is not easy be-cause, among others, they will have todefeat two huge monsters they have cre-ated, “the markets” and the “nomen-clatura of the administration.” Theonly way to succeed will be under awide popular consensus, to violate ex-isting rules and legitimacy. It is difficultbut it is all political and worth trying.

BC

KASSANDRA“Jesus Christ resurrected because if He

didn’t, our faith is in vain,” said Apostle

Paul. If we do not believe that our eco-

nomic system is obsolete all stimulus

packages will be in vain.

New Year Special | January 2011

[email protected]

Once upon a time in Brussels...

Follow me on twitter @Kassandra_NE

Lorenzo de Medici (1449-1492), said “il Magnifico” the uncrowned ruler ofFlorence in violent times, leading personality of the true “Renaissance,” statesman,poet, philosopher and one of the founding fathers of our banking system, systemstill in use today.

Les Faits Sont Têtus

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