The new deal for Europe

The current banking crisis is an unintentional victim of a much deeper problem, that of the sovereign debt crisis. This debt crisis, and consequently that of the banks, is what must take priority over other issues.

These days, no-one seems to give a genuine thought to how we could solve the financial and banking crisis that is shaking up the old continent. Politicians seem to be taking their time, waiting for decisions to be made, neglecting to take into account that economic cycles often move much faster than political ones.

Still, the resolution of the sovereign debt crisis needs to, and can only be, tackled by the work of politicians and legislators. Governments of Eurozone countries need to step in once and for all, without further delay, to stem the financial haemorrhage and make it possible to rebuild a Eurozone which is capable of rising to the challenges of a world in which there has been a fundamental shift in the centres of power, in particular in a number of industrialised countries.

The economic, financial, banking and institutional situation that we are facing in Europe and across the rest of the world is unprecedented: the economic pillars that have governed the movements of the planet since World War II now find themselves in a situation where they need to reassess the fundamentals of their operations.

WHAT IS THE CURRENT STATUS OF WESTERN ECONOMIES ON THE EVE OF GREECE’S POTENTIAL BANKRUPTCY ?

Even if it manages to avoid recession, the US economy will, at the very least, need to face the weak growth forecast for 2012 which stands at just over 2.5%. The United States must solve its taxation and debt issues. However President Obama’s recent proposal to impose heavier taxes on the wealthy in the future may help.

In Europe, the effect of purchasing significant portions of the Spanish and Italian debt by the Central Bank is limited. ‘Eurobonds’, which are still under discussion, will have to be issued and used to overcome the financial limitations of the European Financial Stabilisation Fund.

Moreover, if the Greek debt were to be neutralised, it is highly likely that some lending countries such as China and Russia would increase their rates ‘sine die’ in the face of further potential European failures.

Therefore we need to accept the following fact: the financial health of Eurozone member countries is poor. There are also vast budget differences, for example if we look at Italy and France; the Italian budget excluding debt-servicing costs has a surplus, which is the opposite of the case in France. That leads us to question the present status of the UK’s financial health when it has yet to solve the issues linked to its toxic investments.

In the end, what is hanging over Europe as it wades through this crisis is the crack in the Eurozone, which could have major political and geopolitical consequences that would be likely to endanger European cohesion as we know it.

This is a bit like a domino effect; the decision not to bail out Greece may negatively affect other Eurozone countries which would be left with no other solution than requesting the powerful intervention of the Central European Bank. The consequence of this might well be to see Germany exit the Eurozone, as a result of Angela Merckel being weakened by successive electoral defeats.

WHAT IS IN STORE FOR THE EUROPEAN BLOC?

It is also clear that if Europe does survive this major financial crisis, new accessions to the European Union will stop for as long as it takes European leaders to overcome their internal problems.

This sovereign debt crisis represents the biggest challenge this continent has faced since the fall of Yugoslavia in the 90’s.

At this point, anything could happen and countries may even consider leaving the Eurozone. Although the case of Greece is being dealt with, other countries whose economies may have committed the same mistakes are in the spotlight. .

Likewise the overhaul of the “snake in the tunnel” is going to be an issue in light of the shift in the balance of powers experienced across the continent. This topic is also at the core of G20/G8/IMF and ECB debates, all of whom are expecting the emergence of new economic powers such as Brazil, Turkey, China and some countries in Africa and Asia.

The very unity of Europe, is now being undermined and ultimately the Europe’s deteriorating power in the international arena is a cause of great concern .

EUROPEAN COHESION IN DANGER

As noted in the introduction, the list of European countries at risk of bankruptcy is impressive. Enough so to worry the founders of the union with fingers being pointed at Greece, Portugal, Ireland, Italy and Spain in particular. But as previously noted both France and the United Kingdom could also be under threat.

In the past Europe has always managed to get through crises that have threatened its cohesion, either independently or with the assistance of third parties such as the United States, who have been very active in recent conflicts as well as throughout history. The Yugoslavian crisis was the first test of cohesion. The diplomatic agreements, which resulted in the division of the country into three parts, were only reached after a violent conflict that lasted more than three years.

Later, the 1999 Kosovo war was settled largely by NATO and the intervention of the US.

The Iraq conflict revealed fundamental divisions between the 1992 Common Market countries and new Eastern European member countries.

More recently in March, the Libyan conflict revealed the same cohesion issues with the alliance unable to find a common ground to jointly and simultaneously engage hostilities against Libya.

In the face of the banking and financial crisis that now faces Europe, there are many institutions who fail to see how a unitary agreement might be reached regarding these monetary and fiscal matters.

At present the very foundations of the Eurozone are being threatened and consequently the cohesion of the Union. The viability of the European Union could well depend on the stabilisation of the banking and financial sector.

 

TOWARDS EUROPEAN FEDERALISM?

The European Union is made up of States that are extremely different from one another, whether in terms of their economic power, infrastructure or political system. This is compounded by fundamental differences between the northern and southern European states.

In recent years, we have been able to observe an interesting example of the role of the regions in terms of a fluid European operation, which made up for the lack there of between the states. Being closer to the citizens and their everyday problems, the regions have, in terms of energy for instance, shown themselves to be excellent intermediaries of European policies even pushing states to be more proactive. It is worth highlighting that nowadays, regions do not hesitate to work with various economic and social sectors of their own nation, such as businesses for instance. Given that solutions can only occur as the result of a joint effort, this constitutes a step forward worth emphasising and acknowledging. A recent and successful example of this kind of initiative is the energy partnership which was established between the Assembly of European Regions and GE Energy in Europe (www.refer.eu.com).

So naturally, the question that underlies the issue of the EU’s Unity and operation is that of the status of European federalism. It begs the question of how far Europe should go to develop rules which would be uniformly adaptable to the different European states. Indeed fiscal federalism appears to be the only path that would allow Europe to emerge from the depths of this crisis.

There are numerous examples whereby wealthier states have come to the rescue of economically weaker counterparts by making contributions. This is especially true of the United States, India and China, where these systems operate in a relatively satisfactory manner.

However, achieving this level of fiscal federalism would require willingness and European political cohesion, which appears quite unlikely judging by the extremist votes that have cropped up in Europe (in the Netherlands and Finland) as of late. A socio-democratic jolt would probably help Europe curb these extremist trends which can only harm the Nations, as we have already seen many times throughout the history of the continent.

Still, given the urgency, it wouldn’t be outlandish to think that among the reforms needed in the near future, the power of the European government needs to be strengthened to better support and safeguard Europe’s cohesion policy.

GERMANY, A MAJOR EUROPEAN POWER-BUT WHAT DOES ITS FUTURE HOLD?

Germany’s stance throughout the handling of the Greek crisis is really quite interesting.

Conscious of its position as an economic and financial superpower in Europe, Germany is bound to have wanted to negotiate global recognition, in exchange for its intervention in support of Greece for instance, that would entail its positioning as a permanent member of the Security Council of the United Nations. These hopes might be in vain if it fails to take into account the pressures of the German public who does not support this economic and financial assistance and is making its stance known in the polls.

The Christian Democratic Party of the German Chancellor was heckled recently, even in its traditional strongholds. . Is this a sign of the times? The German Green Party has emerged as major benefactor of the CDU’s loss of support.

Lastly, Germany needs to act as a role model in terms of management and should it continue to stand alone against the rest of Europe could come to be seen as practicing an isolationist policy which would no longer fit in with that of the Union’s treaty.

More recently, some agreements between Berlin and Moscow were greeted with surprise and continue to stun Europeans.

It is difficult to find a balance and many envision that Germany might develop a super-currency financed by its own people. This would be a far cry from the European dream…

COULD OTHER EUROPEAN COUNTRIES BE FACING BANKRUPTCY?

As mentioned before, if a crisis like the one hitting Greece were to reach Italy or Spain, there could be dire consequences for the Euro zone.

To gain a better understanding of what might trigger such a domino effect, one simply needs to consider the fact that Greece only accounts for 2.5 of the GDP in the Eurozone. Despite this figure, the shockwave across Europe has been immense and its ripples are being felt, not just in Europe but also across the world.

Therefore, if we consider the cumulative amount of the Spanish and Italian, which are much greater than the Greek debt, the equation becomes practically unmanageable.

THE FUTURE OF THE EURO ZONE

After decades of negotiations, in 1999, the Eurozone became the most important European creation in the history of the Union.

By simply understanding this, it is easy to see that Europeans must do everything in their power to protect this pillar of European integration as destroying this would bring down the whole of Europe.

Indeed, what is at stake here is the entire future of the European project.

Europe was originally created with the noble ambitions of ensuring there would be no future world wars and to allow the creation of a bloc to the threat that the USSR then constituted. Since the latter threatno longer exists, the very purpose of the European Union could shift and give way to the pursuit of a unified market both large and competitive enough to be in a position to contend with those of India and China, among others.

The ability of the European project to adjust as it emerges from the new banking and financial crisis it is up against will determine the survival of the Union.

THE FUTURE OF EUROPEAN INFLUENCE

The other problem in the background is the risk of seeing Europe lose some of its power and influence to countries like China or Russia

Europe would then be left with very little room for manoeuvre on matters such as international trade, exchange rates, environmental issues, resources, energy dependence and human rights (to list but a few).

If weakened, Europe for instance would no longer have enough weight to influence the management of the Iranian nuclear crisis, which would jeopardize the entire geopolitical balance across the continent and the Middle East. In turn this could weaken world balance.

Indeed there would be no particular reason for Iran, Russia, or China to comply with the wishes of Brussels or other European capitals on this issue, or others for that matter.

Moreover, Russia might well benefit from the Euro crisis and regain its influence on Eastern European countries which it continues to regard as ‘satellites’. In turn, projects such as the US missile shield and the distribution of gas could face serious threats.

As highlighted previously this same energy issue is currently a much-discussed topic between Berlin and Moscow and one that appears to be leading to new links being forged..

One could also easily imagine future purchases of arms from China and Russia which would be ‘facilitated’ despite the opinion of former Soviet bloc countries, starting with Poland, might have on the matter.

As regards China, Beijing is increasingly willing to increase its sphere of influence by providing economic assistance to heavily indebted countries, as seen recently in the case of Italy, without necessarily lending much importance to the mechanisms for this established by European institutions in this area. As noted above, this strategy could reveal itself to be a genuine trap if China, in response to a Greek bankruptcy and the abandonment of European aids, were to raise its interest rates to levels beyond those that Rome could sustain.

THE RISE OF EXTREMISM IN EUROPE

This crisis is a complex and deep-rooted one and none of the usual strategies and approaches in this area seem to be working.

As previously noted as the crisis progresses, there is a high risk that political extremism will gain ground in the countries most affected by the debt and banking crisis. .

This phenomenon is one worth taking into account, as it comes coupled with sectarian and racist violence which must be nipped in the bud at all costs.

On a positive note however the regimes of the countries most affected by the crisis remain strong to date and these countries continue to operate relatively well.

The question worth raising here is whether or not this could be the case for all countries affected by the tremendous debt crisis. However examples such as South Korea provide some degree of reassurance on the matter.

COULD INSTABILITY SPREAD TO THE BALKANS AND THE TURKISH AREA?

Throughout history, the Balkans have often been Europe’s geopolitical barometer.

And so within the frame of the Greek crisis, unfortunately we must admit that all Balkan regions may indeed end up destabilised.

A Greece weakened by the debt crisis would open the door to the development of a kind of parallel market from the Balkans, further adding to economic, social, financial and physical insecurity.

As regards Greek-Turkish relations, the consequences could once again prove extremely severe:

One potential consequences of the crisis could be that Greece would see itself obliged to limit its military spending. Turkey could receive this as good news, enabling more relaxed relations between the two countries, unless the Turkish Prime Minister took advantage of this state of affairs and took on a more interventionist stance in this very sensitive matter.

Greece could well respond forcefully, not wishing to see military matters meet the same humiliating fate as its economy.

A further consequence of the European crisis could well be its impact on regional structures in the world. The Asia-Pacific region, which follows the example of the structure of the European Union, could decide to simply give up on its regional union projects as a result of Europe’s lack of constructive response to Greece.

 

CONCLUSION: A WEAKENED EUROPE

The debt and banking crisis has profoundly weakened the European Union and the countries that constitute it

Even if the Eurozone were to pull through now, the contradictions that have surfaced, notably in its cohesion and tax programmes, will need to be settled very quickly for the European project to continue.

Should this situation persist, it is highly likely to force Europe to withdraw into itself to address its internal problems. This would result in a major loss of influence on the international scene, especially in light of the fact that in the face of its contradictions, Europe would also have to manage the rise of extremism in a number of countries of the Union.

All of this of course favours countries experiencing double figure or close growth In other words, a redistribution of power maps between the East, West, North and South, which has already begun, and will be taken into account regardless of what may happen.

Europe is going to need a real programme, a lot of courage and some true leaders to survive. It will require the talents of those truly capable of breathing new life into Europe and of managing a European “New Deal”, a genuine Marshall Plan for the future.

Recently, one man, the ex-President of the IMF, Dominique Strauss-Kahn suggested erasing the debts of these countries and managing them on a European level – true European leadership, a real Federal Nation, respectful of virtuous growth and the individuals involved.

A European ‘New Deal’?

What if this was the answer to the crisis, the European Dream and the future?

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How do you put forward the various activities in which your company is involved?

Within the range of tools offered by social media and/or Web 2.0/3.0, creating a news program is an enormous challenge. One needs to set up a network of local journalists in different countries, and manage production and editorial projects with teams spread across the globe. In that instance, positive results are almost always guaranteed with both internal and external audiences.

I have developed, on behalf of GE Energy, the ‘GE Energy News Bulletin’, a video interface which allows GE Energy to present its activities, as well as the ones of its customers/partners, in an interactive way. These Social Media driven news broadcasts target both the Internal and External Audiences.

The bulletin is a unique and innovative way for companies to highlight the projects in which they are involved and the challenges they face. It is also a way to promote customers and/or partners and get their message across various organizations.

In the video below, I discuss the Istanbul EPC summit, GE Energy’s new integrated gasification combined cycle power plant, and a major deal that GE Energy has signed with the government of Iraq.

http://www.youtube.com/watch?v=ch6jvGeZ5bY

In the second of GE Energy’s ‘Partnering News’ bulletin, I present a behind the scenes outlook at one of the power industry’s biggest events, POWER-GEN Europe. I also give an insight into the European Regions Energy Day taking place every 4th week of April and that I created. The video also discusses the latest energy trends and issues with leading GE Energy executives. On a different note, viewers are also given the opportunity to get a closer look at a power plant using Jenbacher advanced gas engine technology, as well as a visit to GE Energy’s new sales and services center in Moscow.

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The Parliamentary Elections In Turkey: Continuity Or Radicalisation?

The Parliamentary elections in Turkey on 12th June were historic and long-awaited by Turkish citizens, as well as by the international community and foreign investors.

Prime Minister Erdogan had in fact promised to revise the constitution during this third term of office, hoping to have an absolute majority in Parliament and at least 330 seats in order to do this.

He did not get them.

It is important to note that the number of women members of parliament rose from 50 to 77 and that the Kurdish language was used without restriction. Lastly, the issue of membership of the European Union was not included in the debates, although the majority of Turkish citizens still claim to be in favour of joining.

In terms of domestic policy, the ever-growing middle class in this country is an encouraging sign of future stability. In fact, this growing class is increasingly in favour of the fair distribution of wealth, better social coverage and better management of diversity, in particular regarding the role of women in Turkish society.

The Islamist threat which hangs over national cohesion has a strong influence in Turkish politics as well on its economic, social and international actions. This threat could be fatal to Turkish growth.

1. – The impact of the parliamentary elections on Turkey’s domestic policy.

The party currently in power is more popular but less representative. The opposition has greater presence but is heavily divided.

Prima facie, the PKA, whose share of the vote rose from 46.7% to 49.9% between June 2007 and June 2011, is the outright winner of these elections. The distribution of seats in parliament, however, reflects a different reality. The number of PKA members of parliament fell from 341 to 325 seats, missing the required absolute majority of 367 seats.

Moreover, the fact that the PKA did not manage to obtain the 330 seats also makes it impossible to force through the constitutional reforms promised by the Prime Minister, the content of which had started to be drafted in 2002 when the PKA initially came into power.

This failure is the result both of the greater presence of the opposition parties, which remain however greatly divided, and of a strong sign of democracy.

For example, the extreme right and its  “National Action” party has, notwithstanding a scandal in connection with pornographic videos, still managed to exceed the threshold of 10% of the votes required to obtain representation in parliament, even though this party also suffered a fall in its representation in parliament with a drop from 70 to 54 seats and 14.3% of the votes against 13% this time.

The representation of the traditional opposition parties is increasing: the CHP led by Kemal Kilicdaroglu has seen the number of its members of Parliament increase from 112 to 135 seats. Similarly, the independent candidates have managed to obtain 35 seats in parliament against 25 in 2007.

The International Community is hoping for institutional balance between the traditional holders of power, such as the army, so as to shield Turkey from a future coup d’état or Islamic radicalisation. The Prime Minister must therefore not only show that he is in control of the country to prevent the military from entertaining such intentions, but also ensure that his country’s economic prosperity continues in parallel with social redistribution.  This should make it possible to avoid the movement of refugees towards a radical Islam for which poverty and social injustice are fertile terrain. This difficult balancing act must be achieved so as to satisfy a constantly-evolving Turkish middle class, spurred on by extremely encouraging economic results.

This new middle class does not look very favourably on secular or traditional institutions such as the army or the courts. What this middle class wants is for Turkey to develop a more parliamentary system, enabling all political parties to express themselves better. If this movement were to gain in strength, it would provide protection against a radical Islam in the sphere of political and social activities.

Lastly, if the Turkish Prime Minister intends to progress towards a more presidential regime, he would certainly need to obtain the support of members of the “Kurdish peace” party and of the democratic party alike, by allocating more rights and greater autonomy to the Kurdish regions, so as not to clash with the opposition.

Major differences between Islamists and Secularists:

There is a big difference between the party of Islamic moderates which has just been re-elected and the more traditional parties which include representatives of the army and the courts as well as the main opposition party, the PHC (Republican People’s Party). This is indeed one of the main forces on the Turkish political scene. Each faction has a very different idea of society in all its aspects, whether it be the court system, business, media or education.

The opponents of the majority party have pointed out that if religion were to mix with the major State departments such as education, it could then easily model future generations on a radical Islamist ideal, which would be detrimental to the democratic evolution of Turkey. This concern is often concentrated on the mullah in exile, Fethullah Gulen.

The opposition party also denounces the instructions given by the Prime Minister relating to the establishment of a new constitution which would concentrate power around him on a project that was more “presidential” than parliamentary. Indeed, Prime Minister Erdogan cannot be re-elected after his third term in office. Some consider the establishment of a new constitution to be the first step towards his ascent to supreme power on the expiry of his third term in office.

This opposition between the two camps is a danger to the country’s stability, as the two streams have already fought bitterly in the past, as was the case in 1980 and 1997.

2. – The impact of the parliamentary elections on Turkey’s Economic Policies.

Foreign investors require stability to make long-term investments in Turkey. And this extra influx is fundamental to the country which needs to absorb its public deficit, one of the main causes of which is a major trade imbalance. The country needs to increase its domestic production. And foreign investors need to feel secure both that the country will not suffer Islamic radicalisation in the future and that the institutions and the economy will be stable.

Although the new majority party in Turkey has succeeded in getting re-elected for a third consecutive term in office, it has not, this time, obtained the 2/3 of the seats in Parliament which would have enabled it to carry out unilateral changes to its country’s constitution.

Paradoxically, this is a positive point for Turkish democracy, which may reassure foreign investors as to the stability of the country. Moreover, as the opposition parties did very well, the party currently in power will have to take into account their respective aspirations in its future decisions. It must also comply with the fundamental principles of democratic governance.

3. – The impact of the Parliamentary elections on Turkey’s Foreign Policy.

Lastly, these elections are also crucial to Turkey’s future foreign policy. The difficulties in gaining European Union membership, the new relationships with the West, Russia and Israel as well as closer ties with emerging countries, are all points which are closely followed by diplomatic circles.

Efforts will continue to be made to liberalise the economy, even though foreign policy decisions will make it more difficult for Turkey to accede to the European Union.  Such accession does not seem possible before 2020.

The influence of the United States and Israel could be greatly reduced, or even eventually disappear in the case of Israel.

Economic aid will be granted to support a foreign policy more geared toward the Middle East, the countries of the former Soviet Union, the CIS (Commonwealth of Independent States) and Africa. The traditional agreements between NATO and the State of Israel would be expected to take progressively lower priority.

However, it does not seem as though tensions with Armenia are likely to be resolved any time soon. Consequently, Turkey will have to continue to manage the consequences of tensions with the Kurdish populations in the North of Iraq and Russia. It is possible that economic interests will prevail and that bilateral economic relations will eventually be established between these countries, in view of the possible new priorities of Turkish external policy.

Certain analysts have also suggested the possibility of the creation of a new axis of regional security which would ally countries such as Turkey, Saudi Arabia and Israel against fundamentalist Islamist republics such as Iran. As we are currently in a climate of major historical change, this option would benefit by being taken more into account by analysts.

BACKGROUND

Turkey is a democratic parliamentary regime whose members of parliament are elected by universal suffrage: 550 members of parliament are elected for 4-year terms.

The President is Abdullah Gul, elected for a 5-year term, and can be re-elected once only.

The Prime Minister is Tayyip Erdogan, who is from the PKA party.

The most important individuals are: the Deputy Prime Ministers, Ali Babcan and Bulent Arinc, the Finance Minister, Mehmet Simsek, the Minister for Foreign Affairs, Ahmet Davutoglu, the Governor of the Central Bank, Durmus Yilmaz, the Secretary of State, Ikler Basbug and the President of the Constitutional Court, Hasim Kilic.

Main political parties:

The PKA: centre, favourable to markets, a moderate Islamic party close to the European Christian-Democrats. The main political issues centre around economic reforms with one objective: joining the EU. Its chairman is Prime Minister Tayyip Erdogan.

The People’s Party: centre left, a traditional secular social-democratic party with a strong nationalist leaning. This party may be regarded as Eurosceptic. It considers that the economic reforms proposed would threaten the “secular” constitution. Its Chairman is Deniz Baikal.

The Nationalist Party: Very nationalist and populist, this party recommends abandoning accession to the EU in favour of a Turkey that is unique and without regionalism. Its Chairman is Devlet Bahceli.

The Social Democratic Party: Nationalist and ethnic Turkish party. Its main political objective is to obtain both independence and autonomy for the Kurdish regions. This party is thought to have close ties with the banned Kurdish workers party. Its members of parliament appear in the Turkish parliament as “independents”. Its Chairman is Ahmet Turk.

In influencing Turkish policy, the Kurdish workers party has been fighting with arms against the Turkish government since the 1970s. They use terrorist-type tactics, including planting bombs in civilian areas in the main towns of Turkey.

The Turkish government is fighting hard against the Kurdish PKK separatists, who operate out of bases in Northern Iraq. Their military action was intensified in Iraq in 2007 and 2008.

As regards Armenia, Turkey has not always maintained diplomatic relations with this country, in particular because of the profound disagreement regarding the recognition of the Armenian genocide during the Ottoman regime.

As for Cyprus, Turkey still refuses to recognise the Greek government of Nicosia, and is the only State to recognise the Turkish self-proclaimed Republic of Northern Cyprus.

It had been a member of NATO since 1952 and an associate member of the European Economic Community since 1965. Turkey has been a candidate for European accession since 1999.

The parliamentary elections took place on 12 June 2011. The next presidential elections will be held in 2012.

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