Inter Press Service » Financial Crisis http://www.ipsnews.net News and Views from the Global South Sun, 01 May 2016 23:28:03 +0000 en-US hourly 1 http://wordpress.org/?v=4.1.10 Opinion: Illicit Financial Flowshttp://www.ipsnews.net/2016/04/opinion-illicit-financial-flows/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-illicit-financial-flows http://www.ipsnews.net/2016/04/opinion-illicit-financial-flows/#comments Fri, 29 Apr 2016 14:34:23 +0000 Jomo Kwame Sundaram http://www.ipsnews.net/?p=144905 Jomo Kwame Sundaram was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007. ]]>

Jomo Kwame Sundaram was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.

By Jomo Kwame Sundaram
KUALA LUMPUR, Malaysia, Apr 29 2016 (IPS)

International capital flows are now more than 60 times the value of trade flows. The Bank of International Settlements (BIS) is now of the view that large international financial transactions do not facilitate trade, and that excessive financial ‘elasticity’ was the cause of recent financial crises.

Jomo Kwame Sundaram. Credit: FAO

Jomo Kwame Sundaram. Credit: FAO

Illicit financial flows involve financial movements from one country to another, especially when funds are illegally earned, transferred, and/or utilized. Some examples include:
• A cartel using trade-based money laundering techniques to mix legal money, say from the sale of used cars, with illegal money, e.g., from drug sales;
• An importer using trade mis-invoicing to evade customs duties, VAT, or income taxes;
• A corrupt public official or family members using an anonymous shell company to transfer dirty money to bank accounts elsewhere;
• An illegal trafficker carrying cash across the border and depositing it in a foreign bank; or
• A terrorist financier wiring money to an operative abroad.

Global Financial Integrity (GFI) estimated that in 2013, US$1.1 trillion left developing countries in illicit financial outflows. Its methodology is considered to be quite conservative, as it does not pick up movements of bulk cash, mispricing of services, or most money laundering.

Beyond the direct economic impact of such massive haemorrhage, illicit financial flows hurt government revenues and society at large. They also facilitate transnational organized crime, foster corruption, undermine governance and decrease tax revenues.

Where Does The Money Flow To?
Most illicit financial outflows from developing countries ultimately end up in banks in countries like the US and the UK, as well as in tax havens like Switzerland, the Cayman Islands or Singapore. GFI estimates that about 45 per cent of illicit flows end up in offshore financial centres and 55 per cent in developed countries. University of California, Berkeley Professor Gabriel Zucman has estimated that 6 to 8 per cent of global wealth is offshore, mostly not reported to tax authorities.

GFI’s December 2015 report found that developing and emerging economies had lost US$7.8 trillion in illicit financial flows over the ten-year period of 2004-2013, with illicit outflows increasing by an average of 6.5 per cent yearly. Over the decade, an average of 83.4 per cent of illicit financial outflows were due to fraudulent trade mis-invoicing, involving intentional misreporting by transnational companies of the value, quantity or composition of goods on customs declaration forms and invoices, usually for tax evasion. Illicit capital outflows often involve tax evasion, crime, corruption and other illicit activities.

How Low Can You Go?
In the 1960s, there was a popular dance called the ‘limbo rock’, with the winner leaning back as much as possible to get under the bar. Many of today’s financial centres are involved in a similar game to attract customers by offering low tax rates and banking secrecy. This has, in turn, forced many governments to lower direct taxes not only on income, but also on wealth. From the early 1980s, this was dignified by US President Ronald Reagan’s embrace of Professor Arthur Laffer’s curve which claimed higher savings, investments and growth with less taxes.

With the decline of government revenue from direct taxes, especially income tax, many governments were forced to cut spending, often by reducing public services, raising user-fees and privatizing state-owned enterprises. Beyond a point, there was little room left for further cuts, and governments had to raise revenue. This typically came from indirect taxes, especially on consumption, as trade taxes were discouraged to promote trade liberalization. Many countries have since adopted value added taxation (VAT), long promoted, in recent decades, by the International Monetary Fund (IMF) and others as the superior form of taxation: after all, once the system is in place, raising rates is relatively easy.

A progressive tax system would seek to ensure that those with more ability to do so, pay proportionately more tax than those with less ability to do so. Instead, tax systems have become increasingly regressive, with the growing middle class bearing the main burden of taxes. Meanwhile, tax competition among developing countries has not only reduced tax revenue, but also made direct taxation less progressive, while the growth of VAT has made the overall impact of taxation more regressive as the rich pay proportionately less tax with all the loopholes available to them, both nationally and abroad. Overall tax incidence in many developing countries has not only long been regressive, but has also become more regressive over time, especially since the 1980s.

Although there are many reasons for income inequality, hidden untaxed wealth has undoubtedly also increased wealth and income inequality at the national and international level.

(End)

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The Hypocrisy of the West and Fiscal Paradisehttp://www.ipsnews.net/2016/04/the-hypocrisy-of-the-west-and-fiscal-paradise/?utm_source=rss&utm_medium=rss&utm_campaign=the-hypocrisy-of-the-west-and-fiscal-paradise http://www.ipsnews.net/2016/04/the-hypocrisy-of-the-west-and-fiscal-paradise/#comments Wed, 27 Apr 2016 15:17:35 +0000 Roberto Savio http://www.ipsnews.net/?p=144853 Roberto Savio, is founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News]]>

Roberto Savio, is founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News

By Roberto Savio
ROME, Apr 27 2016 (IPS)

The publication of the Panama Papers has now been digested, like any scandal, after just a few days. We are now getting so accustomed to scandals, that it is confusing, and the general public reaction often is: all are corrupt and politics is all about corruption.

Roberto Savio

Roberto Savio

This, of course, plays out well for the right wing, xenophobic parties, numbers of which are ever increasing in every election, from Donald Trump in the United States, to Nigel Farage in Great Britain who promptly asked for the resignation of British prime minister David Cameron, who is among the users of the legal office of Mossack and Fonseca in Panama, which has helped more than 14.000 clients to create 214,488 companies in 21 fiscal paradises.

In some cases, like Iceland, that brought the prime minister to his knees, is a concrete response to the public indignation. By and large the general reaction was similar to the model of Cameron’s style: deny any wrongdoing, and just wait for the fury to go die down.

The Panama Papers had of course a very prominent space in the media, where the issue was alive for several days (but never more than five). The media put very little effort into looking beyond the Panama Papers and to find out the real situation of the fiscal paradise. Had they done so, a very uncomfortable truth would have emerged: the same countries who speak publicly against such paradise, do very little to eliminate them.

For instance, according to the Panama papers, it emerges that more than half of the ghost companies created by Mossack-Fonseca were registered in the British Virgin Islands. It works there like in Panama: a company pays a fee to register and an annual fee after that (always less than 500 US dollars), and by law the company will have to pay taxes only on the activities realized in the country. It suffices to not have any commercial activity in Panama or in any other fiscal paradise to be completely out of the grip of local tax authorities.

It is clear that the Virgin Islands are a British territory, like the Bahamas, Bermuda, Turk and Caicos, and therefore London could oblige these territories to comply with the international laws on transparency and accountability. The Panama Papers are just, “one firm in one place” says the economist Gabriel Zucman, author of “The Hidden Wealth of Nations: The Scourge of Tax Havens.” So, it cannot be representative of what is happening in the whole world”. The total amount of registered firms avoiding taxation is not really known. In fact, Zucman estimates that the tax heavens are now sheltering a staggering 7.6 trillion dollars, or 8% of the world’s financial wealth. And he draws attention to the fact that the United Sates is a major fiscal paradise, just after Switzerland and Hong Kong, according to the Financial Secrecy Index published by the Tax Justice Network, based in Washington.

And here comes a very good example of double standards. After it became evident that Swiss banks were hiding American capital (for which the US Treasury hit them with a heavy fine), in 2010 the US passed the Foreign Account Tax Compliance Act, which requires all financial firms in the world to surrender details about Americans with offshore accounts. But the US has refused to be part of any agreement for exchanging financial information with other countries.

Edward Kleinbar and Heather A. Lowe, of Global Financial Integrity, say that American Banks are awash with money coming from foreign investors. Kleibard, who was chief of staff of the Congress’s Joint Committee on taxation, declares: “ the United Sates demands that the rest of the world tell it when an American holds an account at a foreign institution, but the US does not return the favour by providing similar information on foreign investors, in US banks to their home jurisdiction”.

But in fact, the secrecy of American banks go beyond that. In fact, several states in the US use their constitutional privileges to shelter their banks also from the central government. Heather A. Lowe, the legal counsel and director of government affairs for Global Financial Integrity, Washington, warned that the problem was in any American state, not just in the more notorious one. ”You can create anonymous companies anywhere in the US: The reason people know about Delaware, Nevada and Wyoming is because those states market themselves internationally”.

For instance, Delaware secretary of State has stressed in his annual reports that this marketing efforts have “helped the state to reach thousands of legal professionals in dozens of countries across the globe, to tell the Delaware story”. And Nevada boasted a similar advertisement on the state’s website: Why incorporate in Nevada? Minimal reporting and disclosing requirement. Stockholders are not public records”.

While the legitimacy of taxes as a concept may be up to personal interpretation, what matters in Hillary Clinton’s use of the so-called Delaware loophole, in particular, is her constant harping on the need for corporations and elite individuals to pay their fair share. In other words, Clinton’s employment of North Orange Street amounts to a telling, Do As I Say, Not As I Do. And, as the Guardian notes, both of “the leading candidates for president – Hillary Clinton and Donald Trump – have companies registered at 1209 North Orange, and have refused to explain why.”

John Cassara, a former special agent for the US Treasury Department, reported in the New York Times on April 8where many of the declarations are coming from, about the frustration that fiscal agents have when they try to investigate “who or what is behind that company: you basically strike out. It does not matter if is the FBI, at the federal level, state or local. Even the Department of Justice can’t get the information. There is nothing you can do.” He had to abandon an investigation in Nevada when they found a corporation that had received more than 3700 suspicious wire transfers, totalling over 381 million dollars.

Clearly, one cannot set up rules for global governance, when important rich countries have double standards and cannot even put their own house in order. But the lack of global governance becomes even more evident, when we find out that the debate about global tax negotiations is exclusive to the 34 members of the Organization for Economic Cooperation and Development (OECD), and all the other countries of the world are left out. The Group of 77 and China, which has 134 members, has repeatedly asked that the UN must play a greater role in global tax cooperation but to no avail.

And it is a fact that in the list of account holders in Panama there is a large presence of personalities from Arab Countries, China, Nigeria, Brazil and so on. But there is a cultural problem, for which there is no solution. The fiscal authorities of the OECD countries think that on delicate matters, it is better to exclude the developing countries, because it would create a mechanism of negotiations where they could find themselves in the minority. That of course, would be to recognize that global governance can only be effective with a democratic system of consultation and decision. That is not at all the prevailing mood in an increasingly fractured world. Therefore, it would be normal to expect many more scandals, with spotlight for a few days on the names that could emerge, followed by a total relapse, until the next scandal explodes.

How long this can last without damaging the foundations of democracy, it is difficult to predict. And some defenders of the present system are already maintaining that scandals are proof that democracy is alive. But if the citizen’s growing lack of trust in the political and economic elites continues, it is difficult to see how scandals will help nurture democracy.

(End)

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Will the IMF Facility Be a Turning Point in the Economy?http://www.ipsnews.net/2016/04/will-the-imf-facility-be-a-turning-point-in-the-economy/?utm_source=rss&utm_medium=rss&utm_campaign=will-the-imf-facility-be-a-turning-point-in-the-economy http://www.ipsnews.net/2016/04/will-the-imf-facility-be-a-turning-point-in-the-economy/#comments Sun, 24 Apr 2016 08:10:41 +0000 Editor Sunday Times http://www.ipsnews.net/?p=144789 By Editor, Sunday Times, Sri Lanka
Apr 24 2016 (The Sunday Times - Sri Lanka)

The IMF Extended Fund Facility (EFF) of US$ 1.5 billion with an agreement on an economic program supported by the IMF is now imminent. This could be a turning point in the economic fortunes of the country. The IMF facility would replenish the reserves, add confidence in the economy and have a salutary effect on capital inflows.

In as much as the loan is vital for getting the country out of the current critical balance of payments crisis, the commitment to the suggested economic reform program is essential to stabilise the economy and lay the foundation for a high trajectory of economic growth. The suggested corrective measures by ensuring fiscal discipline and prudent fiscal and monetary policies could get the country out of the current crisis, restore economic stability and provide the conditions for rapid economic growth.

Econ-Cartoon3-300x186IMF statement
The IMF statement of April 11th points towards the IMF granting a facility of US$ 1.5 billion with agreement on an economic program supported by the IMF. While the IMF agreement on the Extended Fund Facility (EFF) is not a fait accompli, the tenor and thrust of the statement leaves little doubt that it will be granted after the on going Annual Spring Meetings of the IMF Board and the discussions that are currently taking place in Washington D.C. between the IMF and the Sri Lankan authorities.

Economic recovery
The loan facility and the concomitant economic reform program could usher an economic recovery. The government must however have the political resolve to implement the associated economic reforms that are vital to strengthen the fiscal position, foreign exchange reserves and balance of payments.

Objectives
The broad objectives of the proposed economic program, according to the IMF, is to achieve “high and sustained levels of inclusive economic growth, restore discipline to macroeconomic and financial policies, and rebuild fiscal and reserve buffers.” The IMF identifies the key objectives underlying the reform agenda as improving revenue administration and tax policy; strengthening public financial management; reform of state enterprises; and structural reforms to enable a more outward-looking economy, deepen foreign exchange markets, and strengthen financial sector supervision.

Tax reform
One of the weakest features of the Sri Lankan economy is the low collection of government revenue. The revenue to GDP ratio has declined over the years from around 20 per cent of GDP to only 12 per cent, despite average annual GDP growth of around 7 per cent in recent years. This tax to GDP ratio is too low for the country’s level of per capita income. Countries with similar per capita incomes gather more than 20 per cent of GDP as revenue.

The low revenue collection results in high fiscal deficits and accumulation of public debt and leaves inadequate fiscal space for education, health and infrastructure development. The foreign funded high cost of infrastructure development in 2010-2014 has been the main reason for doubling of foreign indebtedness.

The reduction of the fiscal deficit is vital for economic stability. The IMF economic reform program lays considerable emphasis on fiscal consolidation. Its objective is “A durable reduction of the fiscal deficit and public debt through a growth-friendly emphasis on revenue generation.”

The cabinet has, according to the IMF statement, decided to reduce the 2016 fiscal deficit to 5.4 per cent of GDP. Although this is inadequate, it may be a realistic target. The government should take steps to achieve a fiscal deficit of 3.5 per cent of GDP in 2020 as targeted in the Prime Minister’s Economic Policy Statement of November 2015.

Strategy
The IMF strategy to increase revenue consists of broadening the tax base by reducing tax exemptions and introduction of a new Inland Revenue Act. The medium term revenue effort will be based on further reform of tax and expenditure policies, modernizing revenue administration and public financial management by implementation of key IT systems.

Pragmatic tax measures
Tax exemptions, tax avoidance and tax evasion are widespread endemic features. An effective tax system must take into account the inefficiency and corruption that prevails. The IMF proposals are essentially medium term and based on the assumption of an effective administration. New tax measures should be unavoidable and certain of collection such as withholding taxes and license fees. Otherwise the good intentions of curtailing tax evasion and tax avoidance would remain a delusion. Tax exemptions are easier to remove if the government is determined to not permit discretionary exemptions.

State enterprises
The other important economic reform that has been mooted is “a clear strategy to define and address outstanding obligations of state enterprises”. The colossal losses of state enterprises have been a heavy burden on the public finances. The reform of these enterprises is vital to redeeming the public finances. Drastic reforms, including the privatisation or part privatisation of some state owned enterprises are imperative. Will the government have the political will and courage to implement a privatisation program as was done by Chandrika Bandaranaike‘s government.

Reserves
The IMF loan facility will strengthen the country’s diminished reserves and add considerable international confidence in the Sri Lankan economy. The enhanced international confidence in the Sri Lankan economy would stem capital outflows and reduce the cost of international borrowing. As the Governor of the Central Bank, Arjuna Mahendran has stated “Depending on the success of the Extended Fund Facility with the IMF on which discussions are currently underway in Washington D.C. other global lending agencies will look at us much more favourably in the coming months.” He also said that the People’s Bank of China has given authorization to issue bonds in China in renminbi the official Chinese currency and that all these would enable the raising of US$ 3 billion at lower interest rates quite easy.

Concluding reflections
The expected IMF facility of US$ 1.5 billion will replenish the reserves and add confidence in the economy. This would have a beneficial impact on capital inflows. The corrective measures by the IMF of ensuring fiscal discipline and prudent fiscal and monetary policies are essential to get out of the crisis and restore economic stability and create conditions for higher investment and rapid growth.

This story was originally published by The Sunday Times, Sri Lanka

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Who Guards the Guardhouse?http://www.ipsnews.net/2016/03/who-guards-the-guardhouse/?utm_source=rss&utm_medium=rss&utm_campaign=who-guards-the-guardhouse http://www.ipsnews.net/2016/03/who-guards-the-guardhouse/#comments Tue, 15 Mar 2016 10:52:31 +0000 Ziauddin Choudhury http://www.ipsnews.net/?p=144186 By Ziauddin Choudhury
Mar 15 2016 (The Daily Star, Bangladesh)

In a surreal digital theft that befits a high octane movie thriller, we were recently informed of the daring heist at Bangladesh Bank in which nearly a billion dollars were siphoned off last month. As if this was not enough, the theft took place over several days early February through a series of about three dozen electronic fund transfers from the Bank to New York Federal Reserve for a total amount anywhere between eight hundred fifty to eight hundred seventy million dollars. All of the looted amount made through dozens of transfers would have been cashed had it not been due to the now famous spelling error in a twenty million check made to a Sri Lankan NGO. The error prompted the routing bank, Deutsche Bank, to seek clarification from the Bangladesh central bank, which stopped the transaction. But the mystery hackers still managed to swipe $80 million, one of the largest recorded bank thefts in history.

The news struck the headlines in the foreign press, particularly in the UK and the US, but what was possibly more puzzling to everyone is how a spelling error stopped a bank heist than the actual massive pilferage of funds from a central bank. The news highlighted the ability of a spelling error to stop the attempted digital robbery. It is through further investigation that news agencies came to know of the successful transfer of at least $80 million to the Philippines. All major news agencies referred to this latest heist as another instance of CEO fraud, a growing threat to world financial institutions that had cost globally $2 billion in the last two years.

So what is actually a CEO fraud, and how does the attack work? The scam is referred to as a CEO fraud because the perpetrator or perpetrators pose electronically as the chief executive or senior financial official of an institution they are targeting. For an attacker to successfully pull it off, they need to know a lot of information about the company they’re targeting. Much of this information is about the hierarchical structure of the company or institution they’re targeting. They’ll need to know who they’ll be impersonating. Although this type of scam is known as “CEO fraud”, in reality it targets anyone with a senior role – anyone who would be able to initiate payments. They will need to know their names, and their email addresses. It would also help to know their schedule, and when they will be travelling, or will be on vacation. Experts say the criminals managed to breach Bangladesh Bank systems and stole the credentials of its senior officials for online payment transfers. (The Federal Reserve of New York stated that the transfers had valid digital credentials of Bangladesh Bank.)

Frauds and scams that target corporations and financial institutions have happened before, but probably it is the first time a central bank was successfully targeted. The most sobering aspect of the heist is the divine intervention in foiling of the robbery in its entirety in the form of a spelling error.
It saved the bank much of the heist amount, and it could possibly recover some of the eighty million dollars that got away. It is also possible that with the help of international cyber security experts, that the bank has engaged, the source of the breach can be identified as well as corrections made in the bank’s system to prevent future breaches.

But the most unsettling part is the apparent revelation to the government by the bank’s news of the breach and heist after a month of its occurrence. There may be defense of some kind or the other for this delay, but it will be ludicrous to assume that the bank authorities chose to go hush-hush, lest the news adversely affects the financial market. A serious crime of this magnitude is not a paltry incident of burglary in a government office that may not warrant waking up the minister at night and reporting it to him. It is a major incident of financial loss just not to the bank, but the country of which the bank is a financial guard. Keeping news hidden from the government is like a house guard concealing the news of theft in the house from his master.

The original hacking of Bangladesh Bank happened between February 4 and 5, 2016, when the bank’s offices were shut. Security experts said the perpetrators had deep knowledge of the Bangladeshi institution’s internal workings, likely gained by spying on bank workers. This is not to say that some bank employees could be complicit, because the CEO fraud, as said earlier, does not necessarily require direct assistance of employees of the institution. They only need to follow the workers closely.

Perhaps in time, we will come to the bottom of this heist and find ways to prevent such occurrences in the future. But these will concern computer systems and digital security apparatus. What these will not do is change the human guards who watch over the institutions and their behaviour and determine how to react responsibly in crisis situations and own up to mistakes. This requires training and change of management of a different kind; one of accountability and leadership and courage to take responsibility for mistakes.

The writer is a political analyst and commentator.

This story was originally published by The Daily Star, Bangladesh

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Big Question for the UK on the European Unionhttp://www.ipsnews.net/2016/03/big-question-for-the-uk-on-the-european-union-2/?utm_source=rss&utm_medium=rss&utm_campaign=big-question-for-the-uk-on-the-european-union-2 http://www.ipsnews.net/2016/03/big-question-for-the-uk-on-the-european-union-2/#comments Wed, 02 Mar 2016 16:39:15 +0000 Jonathan Power http://www.ipsnews.net/?p=144061 For 30 years a journalist, of which 17 as columnist for the International Herald Tribune 1974-1991; Jonathan Power he has been a regular guest columnist in New York Times and Encounter.]]>

For 30 years a journalist, of which 17 as columnist for the International Herald Tribune 1974-1991; Jonathan Power he has been a regular guest columnist in New York Times and Encounter.

By Jonathan Power
LUND, Sweden, Mar 2 2016 (IPS)

The British have a problem. A referendum on continuing membership of the European Union scheduled for June may lead to Brexit- Britain heading for the exit. Anybody with any knowledge of Europe’s war-like history knows this would be totally self-defeating.

Writing in 1751 Voltaire described Europe as “a kind of great republic, divided into several states, some monarchical, the others mixed but all corresponding with one another. They all have the same religious foundation, even if divided into several confessions. They all have the same principles of public law and politics unknown in other parts of the world.” But they also had a lot of war.

Fifty years ago in a way that Charlemagne, Voltaire, William Penn and William Gladstone, the early advocates of European unity, could only dream, a united Europe became a reality.

War, time and time again, has interrupted the pursuit of that objective. Continued civil war across the continent, across the centuries, has pitted French against Germans, British against talians, Czechs against Poles, Serbs against Austrians and Spaniards against Spaniards reaching its dreadful climax in World Wars 1 and 2. As Jan Morris has written in her “Fifty Years of Europe”, “great cities lay in ruin, bridges were broken, roads and railways were in chaos. Conquerors from East and West flew their ensigns above the seats of old authority, and proud populations would do almost anything for a pack of cigarettes or some nylon stockings. Europe was in shock, powerless, discredited and degraded”. Over the ages no other continent has been the scene of so much war.

Many, if not most, of that generation wondered in 1945 if they’d ever see Europe again in any state of grace or glory, much less unified.

The fact that the urge to bury the hatchet and forge common institutions has come so far in such a short time against such a background is arguably for the world as a whole the twentieth century’s greatest political achievement. (Following the Declaration of Independence it took the US nearly 90 years to establish a fully mature common currency; Europe has travelled the same course in 40 years.)

Yet this astonishing and triumphant success begs the question, what is the glue that holds it all together? After all what is Europe? Geographically, it is no more than a peninsula protruding from the landmass of Asia. Culturally, it has always been a potage of languages, peoples and traditions. Politically, it is a moveable feast- of the 35 sovereign states in post Iron Curtain Europe nine have been created or resurrected since World War 2.

Indeed it is religion, not politics nor the single market and monetary union that through the ages has made Europe one, held it together through its vicissitudes and bloody wars (many, tragically, of religious origin) and provided the common basic morality and common identity that made the EU, makes a single currency workable, the Schengen agreement making passport-free travel possible inside most of Europe today and political union a tangible, if still hotly debated, goal tomorrow.

Broadcasting to a defeated Germany in 1945, the poet T.S. Elliot reminded his audience that despite the war and* “the closing of Europe’s mental frontiers because of an excess of nationalism it is in Christianity that our arts have developed, it is in Christianity that the laws of Europe – until recently – have been rooted. An individual European may not believe the Christian faith is true; and yet what he says, and makes, and does, will depend on the Christian heritage for its meaning.”*

Of course, today one can ask what do the contemporary European cults of finance, sports, TV, pop culture, eroticism and Ryanair flying wherever it wants have to do with a Christian heritage? Nevertheless, the fact is through changing fashions, through wars big and small, the idea of Europe that persists is essentially Christian- unity of principles and peace in relationships. On its own, economic self-interest never would have created the EU and, more recently, monetary union. Economic, legal, social and monetary union have been driven all along by men and women who were essentially idealistic and visionary. From Jean Monnet, the founder of modern Europe, to Helmut Schmidt, Valery Giscard D’Estaing, Francois Mitterand and Helmut Kohl, the founders and creators of the EU and the Euro, the urge to remove the causes of belligerency and to form institutions that would further the development of a common democracy has been a central purpose.

Europe is not first and foremost a political concept or a financial convenience. It is an ideal. Thus it will never be complete. We will work at it all our lives, as will future generations.

For the British to decide not to pull out now can only happen if the university-trained elite together with the leadership of the pro European trade unions (most of them) educate the public on the history and the ideals of Europe.

Copyright: Jonathan Power

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Brazil 2015: The Year When Everything Went Wronghttp://www.ipsnews.net/2015/12/brazil-2015-the-year-when-everything-went-wrong/?utm_source=rss&utm_medium=rss&utm_campaign=brazil-2015-the-year-when-everything-went-wrong http://www.ipsnews.net/2015/12/brazil-2015-the-year-when-everything-went-wrong/#comments Wed, 30 Dec 2015 08:15:23 +0000 Fernando Cardim de Carvalho http://www.ipsnews.net/?p=143469

Fernando J. Cardim de Carvalho, economist and professor at the Federal University of Río de Janeiro.

By Fernando J. Cardim de Carvalho
RIO DE JANEIRO, Dec 30 2015 (IPS)

As 2015 approaches its end, Brazilians live a period of extraordinary uncertainty. The recession seems to get worse by the day. Inflation is high and shows unexpected resistance to tight monetary policies applied by the Central Bank. The sluggish international economy has largely neutralized incentive and the strong devaluation of the domestic currency could represent a reality to exporters and to producers who compete with now more expensive imports. After an initial resistance, employment levels began to fall.

Fernando J. Cardim de Carvalho

Fernando J. Cardim de Carvalho

All this, however, is not just a “normal” recession. It takes place against a background of a major corruption scandal, which has all but paralyzed investment by major firms, like Petrobras. It also raises the concrete possibility of seeing political figures such as the president of the Federal Chamber of Deputies go to jail. The government leader at the Federal Senate is already in jail, as are many former authorities in President Luíz Inácio -Lula- da Silva’s administration (2000-2011). Hardly a day goes by without any news about new scandals or arrests of authorities and businessmen. On top of it all, in the early days of December, the embattled president of the Chamber of Deputies accepted a request to open impeachment proceedings against President Dilma Rousseff for alleged violations of the Fiscal Responsibility Act.

Any subset of that list of events would be enough to generate widespread instability. All of them put together created a hitherto unheard of situation of political and economic crisis of which one has to make extraordinary efforts to see any way out.

Impeachment procedures against the president did not come out of the blue. The revelation of the Petrobras scandal has brewed rumors and suspicions, if not against the president herself, certainly against many of those who surround, or have surrounded, her (she is a former minister of energy in Lula’s government and a former chairman of the administration council of Petrobras.) So far, however, no accusations or evidence emerged against Rousseff. In fact, she does not even seem to be a major target of investigators, who seem to be zeroing in on Lula (and his immediate family.) The piece of accusation justifying the opening of impeachment proceedings relies on the use of accounting artifices to violate the constraints on public expenditure imposed by the Fiscal Responsibility Act, which a majority of opinion makers seem to consider too weak a case to sustain an impeachment. What makes the whole process more menacing is in fact her acute political fragility. Rousseff is universally seen as Lula’s creation, but never really relinquished his power over the party and the coalition it led.

Soon after Rousseff was reelected in November 2014, she announced a radical change of orientation in her administration’s economic policies. Austerity policies, cutting expenditures and raising taxes, seemed to be unavoidable in the face of the increased federal expenditure made to ensure her victory in the presidential elections.

The incumbent president repeatedly stated during the campaign that she rejected those policies, only to announce their implementation a few days after the result of the popular vote became known. Despite the apparent support of Lula, the change in orientation was badly received by the official Workers Party (PT), which grudgingly announced support for her, but conditioning it to a change in macroeconomic policies.

The party seemed to ignore the fact that during 2014, the increase in fiscal deficits failed to have any expansionary impact on the economy, which did not grow at all. The perception that the president had no political support of her own, however, stimulated her adversaries to aggressively advance proposals for her impeachment, based on whatever reason one could find, or the annulment of the election itself, or if nothing else worked, to force her to resign. With an aggressive opposition and unable to count on a supporting political base, the government was paralyzed for the whole year.

No relevant austerity measure has obtained Congress’ approval. Despite the effort of leftist parties to blame the pro-austerity Finance Minister Joaquim Levy for the contraction of the economy, it is impossible to ignore the fact that the failed attempts to get the proposed policies approved by Congress just made explicit the lack of political power that characterized Rousseff’s position. The impasse created by the inexistence of an effective government in the face of an aggressive opposition led decision-makers to postpone any but the most immediate decisions. Investment has fallen, workers have been fired in increasing numbers, consumption has been negatively impacted, etc.

The political crisis has transformed an expected recession into something that threatens to become a major depression, both in depth and duration. The situation is made more difficult by the difficulty to visualize any sustainable solution for the crises in the mediate horizon, let alone the coming months. If the impeachment process prospers, one could expect for sure increased political instability as a result, on the one hand, of attempts by PT and the social movements that are close to it to react somehow, and, on the other, by the fact that there is no organized opposition ready to take the place of the current administration. If the impeachment initiative is defeated, the problem remains that the president does not have any vision or power and it is overwhelmingly difficult to imagine how she could recover enough initiative to last the three remaining years of her term in office.

Paraphrasing the late historian Eric Hobsbawn, who observed that the Twentieth Century had been very short (beginning in 1914 and ending in 1991), 2015 may be a long year for Brazilians. The incompressible minimal duration of an impeachment process will take it to 2016, when the social situation may be more tense than it is now, with high inflation and increasing unemployment. If a national agreement of some sort, be it in terms of allowing Rousseff’s government to work or by removing it altogether, is not reached to avoid the worse, 2015 can last even longer. The country may dive into an unknown abyss of a combination of economic, political and social crises of which it is hard to see how, when and in what conditions it will recover.

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2016: The Forthcoming Adjustment Shockhttp://www.ipsnews.net/2015/12/2016-the-forthcoming-adjustment-shock-2/?utm_source=rss&utm_medium=rss&utm_campaign=2016-the-forthcoming-adjustment-shock-2 http://www.ipsnews.net/2015/12/2016-the-forthcoming-adjustment-shock-2/#comments Thu, 10 Dec 2015 14:24:17 +0000 Isabel Ortiz http://www.ipsnews.net/?p=143284 Isabel Ortiz, is the director of the Social Protection Department at the International Labour Organization (ILO). This column is based on the working paper “The Decade of Adjustment: A Review of Austerity Trends 2010-2020 in 187 Countries” by Isabel Ortiz, Matthew Cummins, Jeronim Capaldo and Kalaivani Karunanethy, and its policy brief, published by the ILO Social Protection Department, the Initiative for Policy Dialogue at Columbia University and the South Centre.]]> Isabel Ortiz, is the director of the Social Protection Department at the International Labour Organization (ILO). This column is based on the working paper “The Decade of Adjustment: A Review of Austerity Trends 2010-2020 in 187 Countries” by Isabel Ortiz, Matthew Cummins, Jeronim Capaldo and Kalaivani Karunanethy, and its policy brief, published by the ILO Social Protection Department, the Initiative for Policy Dialogue at Columbia University and the South Centre.]]> http://www.ipsnews.net/2015/12/2016-the-forthcoming-adjustment-shock-2/feed/ 0 Blackmail Politics Is the Name of the Game in Brazilhttp://www.ipsnews.net/2015/12/blackmail-politics-is-the-name-of-the-game-in-brazil/?utm_source=rss&utm_medium=rss&utm_campaign=blackmail-politics-is-the-name-of-the-game-in-brazil http://www.ipsnews.net/2015/12/blackmail-politics-is-the-name-of-the-game-in-brazil/#comments Thu, 03 Dec 2015 22:45:32 +0000 Mario Osava http://www.ipsnews.net/?p=143211 Brazilian President Dilma Rousseff next to advisers with worried faces, after addressing the media, shortly after the announcement of the impeachment trial. Credit: Lula Marques/ Agência PT

Brazilian President Dilma Rousseff next to advisers with worried faces, after addressing the media, shortly after the announcement of the impeachment trial. Credit: Lula Marques/ Agência PT

By Mario Osava
RIO DE JANEIRO, Dec 3 2015 (IPS)

The aim to impeach President Dilma Rousseff is no longer merely a threat that was poisoning politics in Brazil. Now it may be a traumatic battle, but in the light of day.

On Wednesday, Dec. 2 the speaker of the lower house, Eduardo Cunha, gave the go-ahead to impeachment proceedings to remove Rousseff from office. The motion was introduced by three jurists, including Helio Bicudo, a co-founder of the governing Workers Party (PT), and Miguel Reale Junior, a former justice minister.

Cunha announced his decision shortly after it came out that the PT would vote against him in the lower house ethics council, which is investigating the money he has in Swiss bank accounts, presumably the product of graft and embezzlement in the state oil company, Petrobras – a scandal that has already affected 170 politicians and businesspersons.“The game has changed, there is another chess board now, with some light shining, after months of uncertainty. An impeachment process triggers radical positions not only in Congress, but in society at large. But the hope is that the game will be more transparent, with all the cards out on the table.” -- Fernando Lattman-Weltman

This confirms what the media has been commenting on, but which has not been publicly acknowledged by those involved: that there was a tacit agreement between the presidency and Cunha, which previously stood in the way of legal proceedings that could lead to the removal of Rousseff and Cunha.

Behind the “embrace” between the president and the speaker, both of whom faced the threat of legal action, was Cunha’s opposition to the government, even though he is a member of the Brazilian Democratic Movement Party, the PT’s chief ally in the governing coalition.

The PT has three seats in the 21-member ethics council. Its votes are considered decisive in the case of Cunha, who as speaker of the lower house has the authority to accept or dismiss requests for impeachment of the president.

The three PT members on the council opted to align themselves with the leadership of their party and with public opinion, which is overwhelmingly opposed to Cunha, resisting the pressure from the presidency, which is more concerned about keeping the president in office and cobbling together enough votes to push through the legislative measures needed to help the economy recover from the current crisis.

“The game has changed, there is another chess board now, with some light shining, after months of uncertainty,” said Fernando Lattman-Weltman, a professor of political science at the Rio de Janeiro State University.

“An impeachment process triggers radical positions not only in Congress, but in society at large,” he told IPS. “But the hope is that the game will be more transparent, with all the cards out on the table.”

The analyst said “Cunha is finished, he won’t survive any longer now that he played his last card; he relinquished the weapon of blackmail” – the impeachment of Rousseff that he had been delaying.

The speaker of the lower house, controversial since he was named in February, has been accused of violating “parliamentary decorum” by lying in March when he testified in the committee investigating the Petrobras corruption scandal, claiming he did not have bank accounts abroad.

But the Swiss attorney general’s office refuted his claim several months later, and sent documents about his accounts to prosecutors in Brazil.

Eduardo Cunha, speaker of the lower house of Congress in Brazil, announcing his decision to allow the impeachment trial to go ahead against President Dilma Rousseff. Credit: Alex Ferreira/Cámara de Diputados

Eduardo Cunha, speaker of the lower house of Congress in Brazil, announcing his decision to allow the impeachment trial to go ahead against President Dilma Rousseff. Credit: Alex Ferreira/Cámara de Diputados

Cunha had already been accused of taking bribes from companies that were rewarded lucrative Petrobras contracts, in the testimony given by four people facing prosecution in the scandal, who decided to cooperate with the justice system, revealing what they knew in order to reduce their possible sentences.

This means it is unlikely that he will hold on to his seat in Congress. He will lose it if the ethics council rules that he violated parliamentary decorum and if a majority of the 513 lawmakers in the lower house vote in favour of that accusation.

But his downfall would take several months.

Moreover, he and dozens of other legislators under investigation could go to prison, but only with authorisation by the Supreme Court – the only legal body that can decide whether members of the executive and legislative branches should be tried.

The impeachment trial against Rousseff is more uncertain, according to Lattman-Weltman. The most likely outcome is that the president “will manage to overcome the challenge, after a tough battle with the opposition, and depending on how society reacts.”

The removal of a president in Brazil requires a two-thirds majority in the lower house to authorise the impeachment trial, which is held by the Senate, where a two-thirds majority is also needed to find the accused guilty.

Brazilian President Dilma Rousseff’s political fate will be decided in the next few months in this emblematic building in Brasilia, the seat of the national Congress. Credit: Brazilian Congress

Brazilian President Dilma Rousseff’s political fate will be decided in the next few months in this emblematic building in Brasilia, the seat of the national Congress. Credit: Brazilian Congress

It is a lengthy process, because it begins in a committee of legislators from all parties, represented in proportion to each party’s number of seats in the house. In this case, Rousseff is accused of violating Brazil’s fiscal responsibility law by signing decrees that increased public spending without authorisation from the legislature. The president denies any wrongdoing.

Impeachment requires that a concrete crime be committed during the president’s current term. But it is a political trial, based on criteria that differ from legal trials. Former president Fernando Collor de Mello was found guilty in 1992 by the Senate, which barred him from holding public office for eight years, even though the Supreme Court failed to find sufficient grounds to convict him for corruption.

One serious effect of the new political dispute is its impact on the economy, in recession since 2014, which many now describe as depression. GDP was 4.5 percentage points lower in the third quarter of this year than in the same period last year. Economists forecast a slight recovery in 2017.

With unemployment standing at 7.9 percent in October against 4.7 percent in the same month in 2014, and annual inflation at 10 percent, Brazil is suffering one of its worst crises in history. The political chaos is making the situation even worse, by standing in the way of the adoption of necessary measures and generating uncertainty that has led to a reduction in investment, consumption and credit.

To make matters worse, there was a threat of a paralysis of government this month, due to failure to meet the budget’s fiscal deficit target. But the government managed to get approval Wednesday to change this year’s fiscal target, allowing it to end the year with a primary deficit of 31 billion dollars, which eased the tension.

Without that it would be necessary to cut all public expenditure, including water and energy in public buildings and travel by the president herself, such as her trip to the swearing-in ceremony of Argentine president-elect Mauricio Macri on Dec. 10.

It was a triumph by the government, which won approval of several economic measures in the last few weeks, after suffering numerous defeats this year, especially in the lower house, where the speaker has a strong influence.

“Cunha’s leadership is hollow, he no longer has power or legitimacy to demand loyalty from his allies,” said Antonio Augusto de Queiroz, director of documentation of the Inter-Parliamentary Advisory Department.

Given the political bickering and the government’s difficulties, legislators “are responding to pressure from society and from economic players, on the argument that the political crisis must not paralyse the country,” he told IPS.

“All politicians are worried” about the scandal unleashed by Operação Lava Jato or Operation Car Wash, the investigation by prosecutors and police of the fraud and corruption scheme designed to embezzle assets from Petrobras, especially since the Nov. 25 arrest of Delcidio do Amaral, the leader of the PT in the Senate.

Recent laws, such as the one to combat organised crime and money laundering, gave “unprecedented power and instruments enabling them to take action” to oversight and law enforcement bodies like the prosecutor’s office, the federal police and the courts of auditors, “combating the culture of secrecy and strengthening transparency,” with positive effects for politics, said Queiroz.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

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Did Argentina’s Elections Mark Start of Shift to the Right in South America?http://www.ipsnews.net/2015/11/did-argentinas-elections-mark-start-of-shift-to-the-right-in-south-america/?utm_source=rss&utm_medium=rss&utm_campaign=did-argentinas-elections-mark-start-of-shift-to-the-right-in-south-america http://www.ipsnews.net/2015/11/did-argentinas-elections-mark-start-of-shift-to-the-right-in-south-america/#comments Tue, 24 Nov 2015 23:45:55 +0000 Mario Osava http://www.ipsnews.net/?p=143105 In the near future it will become clear whether the triumph of Mauricio Macri, to become president of Argentina on Dec. 10, marked the start of a new era in South America, with the emergence of conservative governments in a scenario where leaders identified as left-wing have been predominant so far this century. Credit: Mauricio Macri

In the near future it will become clear whether the triumph of Mauricio Macri, to become president of Argentina on Dec. 10, marked the start of a new era in South America, with the emergence of conservative governments in a scenario where leaders identified as left-wing have been predominant so far this century. Credit: Mauricio Macri

By Mario Osava
RIO DE JANEIRO, Nov 24 2015 (IPS)

Different degrees of economic problems are a common denominator in South American countries where governments that identify as leftist may start to fall, in a shift that began in Argentina and could continue among its neighbours to the north.

“It is not possible yet to say whether this is the end of a cycle, because the reasons for it are still very present…but there is a very complex crisis affecting the governments that I call ‘distributionist’, which are facing difficulties, especially in Brazil, Argentina and Venezuela,” Professor Tullo Vigevani of the São Paulo State University told IPS.

For his part, retired diplomat Marcos Azambuja, a former Brazilian ambassador to Argentina and France, told IPS: “It’s not the end of a cycle in Latin America, but the waning of a group of governments tending towards populism associated with nationalism.”“My fear is that the dying Chavismo will come to an undemocratic end, given the fragile position of President Nicolás Maduro, while in Brazil the change will surely be democratic.” -- Marcos Azambuja

“Left” is a concept that has lost validity, he added, preferring to talk about populist governments, stressing the ones along South America’s Atlantic coast. “The ones along the Pacific coast are more modern,” he said.

Argentina is experiencing “the end of a cycle in a completely normal democratic manner, which should be celebrated,” after 12 years of presidency by the Kirchners, he said, referring to the consecutive terms of the late Néstor Kirchner (2003-2007) and his widow and successor Cristina Fernández, who steps down on Dec. 10. Both belonged to the Justicialista – Peronist – party.

“But any non-Peronist government will face great difficulties in that country,” Azambuja warned.

Neither of the last two non-Peronist presidents, Raúl Alfonsín (1983-1989) and Fernando de la Rua (1999-2001), managed to serve out their full terms; they were both forced to resign.

That will be a challenge for Mauricio Macri, mayor of Buenos Aires since 2007, who won the elections for president in the Nov. 22 runoff, representing the centre-right opposition Cambiemos (Let’s Change) coalition, made up of his conservative Republican Proposal (PRO) party and the traditional Radical Civic Union (UCR).

Helping him win the elections were the division of the Justicialista Party, on the political front, and the economic crisis.

But now he will have to deal with the country’s economic woes.

The problems include stagnation and the subsequent high unemployment, high inflation – close to 30 percent, say analysts, but only half that according to the authorities – dwindling foreign reserves, and a black market where the dollar is worth nearly 50 percent more than the official exchange rate.

There are also distortions, such as protectionist measures in some sectors, export duties on agricultural products, and subsidies that affect national production and trade with Brazil, whose main market for industrial exports used to be Argentina.

The economic changes promised by Macri, such as the removal of currency controls and restrictions on foreign trade, will affect relations with Argentina’s neighbours. But it is his foreign policy that could drastically modify things in the region.

He wants, for example, to exclude Venezuela from the Southern Common Market (Mercosur) as long as the current government there remains in power, by citing the bloc’s democratic clause, which already led to the suspension of Paraguay’s membership for over a year, due to the impeachment and removal of former president Fernando Lugo in 2012.

A return to warmer ties with the United States, trade accords with the European Union and Pacific rim blocs, and greater openness to trade in general form part of Macri’s plans, in contrast to the protectionist tendencies of governments described as leftist, populist, “distributionist” or Bolivarian, depending on the vocabularies used by different ideological currents.

But regional organisations like Mercosur, the Union of South American Nations (UNASUR) and the Community of Latin American and Caribbbean States (CELAC) will not fall into crisis as a result of the political changes in the region, according to Vigevani.

These kinds of organisations are slow to react, which “has adequately served a few limited objectives,” he said.

The change in Argentina and the crises in Brazil and Venezuela, which have political as well as economic aspects, point to a probable wave of right-leaning, neoliberal governments in Latin America, that put a higher priority on the economy than on the social policies of their predecessors.

The situations are different. In Venezuela, where the economy is virtually in a state of collapse, “my fear is that the dying Chavismo will come to an undemocratic end, given the fragile position of President Nicolás Maduro, while in Brazil the change will surely be democratic,” Azambuja predicted in his conversation with IPS.

In those three countries along the Atlantic coast of South America governments “did not adequately administer economic policy, leading to low levels of investment, low savings rates, and scarce technological training, and failed to develop policies to expand, rather than reduce, consensus. Thus, the capacity to prevent neoliberal advances was decisively reduced,” said Vigevani.

Brazil has been suffering from an economic recession since late 2014, aggravated by nearly 10 percent annual inflation and a fiscal deficit that scares off investors. To all of this was added a corruption scandal involving the state oil giant Petrobras as well as all of the country’s major construction companies and around 50 politicians.

In addition, the campaign that led to the reelection of left-leaning President Dilma Rousseff in October 2014 was marked by an unprecedented degree of violence, with clashes and accusations that destroyed the chances of dialogue and negotiation.

As a result, the contradictions between the government’s election promises and its actual practices became so obvious that they undermined the legitimacy and popularity of the president, who had the approval of less than 10 percent of the population according to the latest polls, and is facing the threat of impeachment.

The political bickering has made it impossible to cobble together a stable majority in Congress, which has stood in the way of a fiscal adjustment programme that requires legislative approval of public spending cuts and a rise in taxes.

The economic crisis, blamed by the government on an adverse international environment and by the opposition on mistakes by the government, thus drags on.

“Economic results are important factors in the shift in favour of conservative candidates,” said Vigevani. “But besides the crises and the recession, there are underlying theoretical problems to be addressed, which the neoliberals don’t have answers to either, and this leads to a balance, even in the case of Argentina.”

“Distributionism without a capacity for investment, innovation and adjustment of the productive system is not sufficient, although it is necessary,” he said.

Underestimating or poorly managing economic questions would seem to be the Achilles’ heel of governments seen as leftist or populist in Latin America.

That curse has not affected leaders who, even though they are distributionist or “Bolivarian”, adopted orthodox economic policies, such as Evo Morales, in power in Bolivia since 2006, or Rafael Correa, who has governed Ecuador since 2007.

At the same time, it does not seem to be possible for new or future leaders, even right-leaning ones, to eliminate or even reduce social programmes that “populist” governments have used to pull millions of families out of poverty. Macri has already announced that he will keep them in place.

Everything would seem to indicate that these programmes are now a new dimension incorporated into regional politics, while poverty and social inequality remain unacceptably high in a majority of the countries in Latin America which, despite these “inclusion policies,” remains the world’s most unequal region.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

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Not Yet Curtains for BRICshttp://www.ipsnews.net/2015/11/not-yet-curtains-for-brics/?utm_source=rss&utm_medium=rss&utm_campaign=not-yet-curtains-for-brics http://www.ipsnews.net/2015/11/not-yet-curtains-for-brics/#comments Tue, 24 Nov 2015 15:50:16 +0000 N Chandra Mohan http://www.ipsnews.net/?p=143102

Chandra Mohan is an economics and business commentator.

By N Chandra Mohan
NEW DELHI, Nov 24 2015 (IPS)

With Goldman Sachs folding up its haemorrhaging BRIC fund, is it curtains for the acronym that defined the investment bankers’ fancy for emerging markets? It certainly appears so after China’s stock market crash and a fast slowing economy triggered fears that the dragon will set off the next global recession.

N Chandra Mohan

N Chandra Mohan

Brazil’s economy is experiencing its deepest recession in 25 years. Russia, too, is contracting due to the crash in oil prices and sanctions. India remains a haven of stability. South Africa’s growth is sluggish with very high unemployment. Against this dismal backdrop, what are the prospects of BRICs playing a vital role in the world economy?

Fourteen years ago, BRICs was very much an idea whose time had come. Goldman Sachs projected them as the future growth engines of the world economy. This acronym soon became a self-fulfilling buzz word with a life of its own. A focus on these leading emerging economies, especially since 2006, provided handsome returns that peaked five years ago. Since 2010, however, BRIC Fund assets plunged from $842 million to $98 million in end-September 2015 according to Bloomberg. With no hope for “significant asset growth” in the near future, Goldman Sachs threw in the towel on October 23, the last trading day for this fund.

These financials clearly reflect the fast-deteriorating growth prospects of the BRIC economies. They were expected to overtake the US in size by 2015. But this isn’t likely to happen. A decelerating Chinese economy, in fact, threatens the first global recession in 50 years without help from the US, says a rival investment bank. Russia and Brazil are doing much worse as they are highly dependent on commodity exports to drive their growth. As China is the biggest importer of oil, iron ore and other raw materials, this is bad news for their commodity-driven prospects. Only India’s track record is creditable as the fastest growing economy in the world.

Such concerns can only make this grouping – which globally accounts for one-fifths of GDP, 42 per cent of population, 17.3 per cent of trade, 41 per cent of forex reserves and 45 per cent of agricultural production – less cohesive to have geo-economic significance in the world economy. Analysts consider the BRICs to represent an alliance of middle -sized economies that could lead to a serious attempt to counter-balance the US, the most powerful economy in the world. This is far from obvious except, perhaps for Russia, that has faced the full brunt of US-led sanctions due to its intervention in Ukraine. This is less true of India that is deepening its relations with the US.

But the BRICs are far from happy with the US-led global financial architecture. A striking feature of all the seven statements issued at BRIC summits from 2009 to 2015 is that this grouping aims to promote peace, security, prosperity and development in a multi-polar, equitable and democratic world order. The grouping seeks a greater voice and participation in institutions of global governance like the IMF, World Bank, WTO and UN. The Durban summit in 2013, for instance, indicated that the WTO required a new leader who demonstrated a commitment to multilateralism and that he or she should be a representative of a developing country.

The formation of a New Development Bank (NDB) is in fact a concrete expression of the desire of BRICs to set up its own alternative to the US-led World Bank and IMF. NDB President KV Kamath has indicated that the bank would blaze a different trail than the Bretton Woods twins who impose an unacceptable conditionality on their loan assistance. In sharp contrast, the NDB is expected to place a greater priority on borrowers’ interests instead of the lender’s interests; that it would better reflect the expectations and aspirations of developing countries. BRICs, however, are not keen to position the NDB as a rival to the World Bank or IMF.

At a BRICs meeting ahead of the recent G-20 summit in Turkey, India’s PM Narendra Modi stated that India will guide the NDB to finance inclusive and responsive needs of emerging economies. India will assume the chairmanship of BRICs in February 2016 and the theme of its chairmanship will be Building Responsive, Inclusive and Collective Solutions – the acronym lives on! PM Modi added for good measure that there was a time when the logic of BRICs and its lasting capacity were being questioned. But group members have provided ample proof of its relevance and value through action at a time of huge global challenges.

The good news is that the BRICs are cooperating and competing with one another for a place under the global sun. The seven summits from St Petersburg to Ufa testify to this. BRICs are the new growth drivers for low-income countries, especially in Africa, considering the growing importance of their trade and foreign direct investments in such economies. The BRICs may be passing through troubled times, but they do constitute a major consumer market. Incomes have grown as more and more people have joined the ranks of the middle class, resulting in greater demand for oil, cars and commodities in leading member countries like China and India.

But the grouping must seriously address the serious challenges of kick-starting its pace of expansion to power global growth as before. The BRICs may not be yielding returns to investment banks but they are in no immediate danger of fading into the sunset. Member countries after all take it seriously enough to set up a potential rival to the World Bank and IMF dominated by the US and Europe. Even if its creator has pulled the plug on the BRIC fund, the acronym will remain relevant in the future as well. Its resilience only exemplifies the profound truth of what the famous economist John Maynard Keynes stated long ago that the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else!

(End)

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Decent Work Crucial To Eliminating Poverty and Hungerhttp://www.ipsnews.net/2015/11/decent-work-crucial-to-eliminating-poverty-and-hunger/?utm_source=rss&utm_medium=rss&utm_campaign=decent-work-crucial-to-eliminating-poverty-and-hunger http://www.ipsnews.net/2015/11/decent-work-crucial-to-eliminating-poverty-and-hunger/#comments Tue, 03 Nov 2015 15:28:43 +0000 Jomo Kwame Sundaram http://www.ipsnews.net/?p=142886

Jomo Kwame Sundaram is the Coordinator for Economic and Social Development at the UN Food and Agriculture Organization and received the 2007 Wassily Leontief Prize for Advancing the Frontiers of Economic Thought.

By Jomo Kwame Sundaram
ROME, Nov 3 2015 (IPS)

Over the eight years since the onset of the global financial crisis in 2008, the ranks of the unemployed have swollen to over 200 million worldwide. That number captures only a fraction of those who remain vulnerable and insecure, since more than four-fifths of the global workforce is outside the formal sector, with poor access to unemployment or other traditional social security benefits.

Jomo Kwame Sundaram. Credit: FAO

Jomo Kwame Sundaram. Credit: FAO

In order to survive in the absence of social protection, unemployment is not an option for most poor people in the world. Instead, their fate is more likely to be that of the working poor – of low incomes due to underemployment, low productivity or limited survival options. According to the latest estimates of the World Bank, the number of extreme poor (living on no more than $1.25 per capita a day) has declined from 1.93 billion in 1981 to 1.91 billion in 1990 and 1.01 billion in 2011, projected to 835.5 million in 2015.

With the worsening global economic slowdown, especially following the collapse of agricultural commodity prices since late 2014, many wonder whether the bases for the Bank’s projections make sense. Evidently, the economic growth the global economy enjoyed in the half decade before 2008 did not bring enough jobs in terms of quantity or quality, catalyzing the “jobless growth” discourse.

Briefly, in 2009, significant resources were deployed by rich countries to save their financial systems, reflate their economies and strengthen social safety nets. But only a few rich countries have eschewed excessive fiscal austerity. Apparently successful expansionary monetary measures by the US Federal Reserve have been belatedly emulated by other rich countries with mixed consumers.

Employment conditions

Beyond the rising number of the unemployed and underemployed, the conditions of many of those employed have been deteriorating as well. Globally, informal employment and short-term contracts, which give workers few entitlements and little security in their jobs, are becoming the norm for far too many. Outsourcing and subcontracting have become more common, causing more insecurity for workers, now dubbed the “precariat.” Such worsening employment conditions have been taking place in many countries, especially for workers with low education and low skills.

National policies aimed at counteracting these trends and lowering unemployment have had limited success at best. In their desire to remain or become competitive, governments and employers around the world have taken many steps to increase labour market flexibility, thus increasing insecurity among most workers. Such labour market flexibility has exacerbated economic insecurity and inequality, undermining prospects for decent work.

Meanwhile, the employment share of the service sector in total global employment exceeded the share of agriculture over a decade ago. For decades now, the world has seen employment increasingly dominated by the service sector, in which many jobs are low-paying and precarious, and not covered by formal social security provisions. Thus, entitlement to unemployment benefits has ceased to be a social right for many in the developed world.

Decent work for all

Still elusive for the working poor, the goal of decent work for all, introduced by the International Labour Organisation in 1999, means productive, rewarding and secure occupations with fair income and social protection for the employed and their families. Decent work implies equality of opportunities and treatment, and offers good prospects for both personal development and social inclusion. It ensures freedom for people to express their concerns, organize and participate in decisions that affect their lives.

Strategies promoting productive employment and decent work must address income and other inequalities. They should promote social progress and ensure equal treatment for all regardless of gender, culture, age or national origin, as well as protect the rights of persons with disabilities. Policies should ensure that conditions of work steadily improve, especially for the lowest-paid and those facing the most unacceptable and hazardous employment conditions.

Governments should employ those needed to provide basic services, including for infrastructure construction and maintenance as well as for social services, expected by the people and needed to ensure human resources for sustainable development. Greater incentives are needed to encourage private investments while better regulations can help improve employment opportunities.

Civil society and the private sector can play vital roles in promoting decent work for all. Governments and the private sector should step up efforts to promote corporate social responsibility to help realize decent work for all. Through full employment and decent work, the benefits of economic recovery and growth can be better shared within as well as among countries.

Ultimately, people will judge changes by what it brings to their lives. Secure and decent employment is surely on top of most personal agendas, and should also be national and international priorities. Decent work is the surest way for the poor to escape poverty, and must therefore be a priority of any serious effort to reduce hunger and poverty on a sustained basis.

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OPINION: Time to Reform the Global Casinohttp://www.ipsnews.net/2015/10/opinion-time-to-reform-the-global-casino/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-time-to-reform-the-global-casino http://www.ipsnews.net/2015/10/opinion-time-to-reform-the-global-casino/#comments Tue, 20 Oct 2015 10:12:18 +0000 Hazel Henderson http://www.ipsnews.net/?p=142740

Hazel Henderson, president of Ethical Market Media (U.S. and Brazil) is a futurist, science policy advisor and author of Mapping he Global Transition to the Solar Age and other books.

By Hazel Henderson
ST. AUGUSTINE, Florida, Oct 20 2015 (IPS)

The year 2015 highlights the global shift from traditional money-based, gross domestic product (GDP)-measured economic growth to the new models of sustainable, inclusive human development embodied in the United Nations Sustainable Development Goals (SDGs) ratified by its 193 member nations.

Hazel Henderson Credit:

Hazel Henderson

This historic shift still involves ideological and political struggles between incumbent industries of the earlier Industrial Revolution and the disruptive forces and technologies of our succeeding Information Age. The battles continue between the fossilized economic and financial sectors and those rising in the knowledge-richer technologies and cleaner, greener companies based on efficiency, renewable energy and “shareconomies.”

This multi-generational shift also involves deeper processes of changing world views, social organisations and evolving cultures in our global human family of some 7.5 billion people.

These historic changes in 2015, now visible in the SDG 17’s intertwined goals, go far beyond the earlier Millennium Development Goals (MDGs). They embrace the major problems and opportunities for continuing the successful evolution of human societies on planet Earth. The SDGs close the obsolete textbooks on money-based, GDP-measured economic growth. Today, the social and environmental costs of this earlier GDP model are evident to all in pollution, ecological and social disruption, widespread effects of climate change, global warming and rising sea levels – all measured daily by 120 Earth-observing satellites.

All this physical evidence of humans stressing ecological limits and planetary boundaries also led to the focus on finance as driver of these failed models of GDP-growth and short-term profits. The “free market” models of Britain’s prime minister Margaret Thatcher and US president Ronald Reagan in the 1980s drove “financialisation” and globalization which privatized and deregulated economic activities – divorcing them from their social context and consequences.

Finance became a global casino, the servant of fossilized industrialization and its overemphasis on investing in coal, oil and gas. This is highlighted in the research of the British NGO Carbon Tracker: trillions of “assets” in fossil fuel companies balance sheets became potential liabilities because they could not be burned without further damage to the climate. Client Earth, a public interest law firm, announced it is monitoring 250 corporations and their directors for possible legal action pursuant to the Companies Act of 2006.

Many science policy analysts, including this writer, and millions of citizens have been pointing out the failures of economics and its GDP-growth fetish which still drives financial markets. Yet, it took decades before today’s physical evidence, growing crises and millions of ethical investors produced the global transitions now recognized in the UN’s SDGs. This fossilized global finance is addressed in the two-year, ground-breaking United Nations Environment Programme (UNEP) Inquiry: Design of a Sustainable Financial System, whose report The Financial System We Need was released October 8, 2015.

This two-year Inquiry was steered by a global advisory board of central bankers, stock exchange and pension fund executives, regulators led by UNEP administrator Achim Steiner, and was co-directed by Nick Robins and Simon Zadek. It explores how to reshape and align crisis-prone global financial markets with the new SDGs – beyond short term speculative high speed trading toward serving needs of the real world economies. The UN Inquiry report contains many innovative studies including Greening China’s Financial System; Exploring Financial Policy and Regulatory Barriers to Private Climate Finance in South-East Asia; Scaling Green Bond Markets for Sustainable Development; Financial Reform, Institutional Investors and Sustainable Development; Fiduciary Duty in the 21st Century; Values BasedBanking; Insurance 2030 – Harnessing Insurance for Sustainable Development; and reports on these issues from India, Brazil, Indonesia, Bangladesh, Africa and Colombia.

Many innovative critiques are also referenced, including Ethical Markets’ Reforming Electronic Markets and Trading; Britain’s New Economics Foundation’s Financial System Impact of Disruptive Innovation, on the electronic shareconomy, crowdfunding, peer-to-peer lending – all bypassing conventional finance. Canada contributed research from CIGI (Center for International Governance Innovation) on environmental risk disclosure, its new FALSTAFF model and Central Banks Can and Should Do Their Part in Funding Sustainability, which boldly calls for central banks to use their quantitative easing (i.e., money printing) to buy new green bonds to grow the next economy for real people rather than bailing out past mistakes of big banks.

The Inquiry’s 4th progress report: The Coming Financial Climate reviewed all the findings on how governments, regulators, standard-setters and market actors are starting to incorporate sustainability factors into the rules that govern the financial system. Although there is much still to be done to de-risk and transform conventional finance, this Inquiry has broken down major barriers and brought together many of the progressive forces taming speculative markets and reforming practices that led to the 2008 crises and resulting human misery. The battle lines are drawn. Ending tax breaks and subsidies to fossil fuels and nuclear power will accelerate the new cost advantages of the more efficient renewable sectors worldwide.

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Opinion: Misinformation Hides Real Dimension of Greek “Bailout”http://www.ipsnews.net/2015/08/opinion-misinformation-hides-real-dimension-of-greek-bailout/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-misinformation-hides-real-dimension-of-greek-bailout http://www.ipsnews.net/2015/08/opinion-misinformation-hides-real-dimension-of-greek-bailout/#comments Thu, 20 Aug 2015 11:14:47 +0000 Roberto Savio http://www.ipsnews.net/?p=142057

In this column, Roberto Savio, founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News, writes that the purpose of Greece’s third bailout is clear – all but seven percent of the 86 billion euros will go to pay debt with the other European governments, recapitalize Greek banks, pay interest on Greece’s debt and pay the debt of the state with Greek enterprises, while the country’s citizens will see none of it.

By Roberto Savio
SAN SALVADOR, Aug 20 2015 (IPS)

The long saga on Greece is apparently over – European institutions have given Athens a third bailout of 86 billion euros which, combined with the previous two, makes a grand total of 240 billion euros.

Roberto Savio

Roberto Savio

There is no doubt that the large majority of European citizens are convinced that this is a great example of solidarity, and that if Greece is not now able to walk on its own feet, the responsibility will lie solely with Greek citizens and their government.

But this is only due to the fact that the media system has, by and large, ceased to provide alternative views … and some people even ignore that the bailout is a loan, and therefore increases the country’s debt.

In fact, the productive economy of Greece saw very little of that money because the bailouts were merely financial operations and Greek citizens, not only did not see anything, they have even had to pay a brutal price.

The truth behind the operation has been aptly described by Mujtaba Rahman, the respected chief Eurozone analyst for the London-based Eurasia Group, who said: “The bailout is not really about a growth plan for Greece, but a plan to make sure the European Central Bank (ECB) and the International Monetary Fund (IMF) get paid, and the euro area does not break up.”

And the purpose of this third bailout is clear. Of the famous 86 billion, 36 billion will go to pay the debt with the other European governments (and first of all Germany). Another 25 billion will go to recapitalize the Greek banks, because much capital left the country, heading for safer European banks. Another 18 billion will go to pay interest on the debt which Greece has been piling up. And, finally, seven billion will go to pay the debt of the state with Greek enterprises.“How could any economist, even in the first year of studies, fail to understand that, by cutting consumption and raising taxes you are bound to depress an already depressed economy?”

So, seven will go to the real economy and nothing to the citizens, who will have now to go through several new drastic measures of austerity, which will further depress their standards of living and their ability to spend.

Financially, the bailouts have been a success. All the losses and bad exposure of European institutions have been passed on to Greece. Before the first bailout, French banks were exposed with bad bonds for 63 billion euros, now only for 1.6 billion with no losses. German banks have gone from 45 to five billion.

What is intriguing is that a number of studies show that until the very last moment, when it was widely known that Greece was in deep crisis, European banks and investors continued to buy Greek bonds.

Were they certain that Greece would pay? No, but they were confident that the Greek government would be rescued, and that they would therefore recover their investments, which is exactly what happened.

The financial system has now a life of its own and has nothing to do with real economy, which it dwarfs by being 40 times larger (if we judge by the volumes of daily financial transactions against the production of goods and services). Capital is untouchable and circulates freely in Europe, unlike its citizens. And now there is a great wave of legislation to introduce lower taxation for the richest one percent!

During the negotiations, one frequent accusation levelled against the Greeks was that they were unable to have their rich ship-owners pay their share of taxes. Of course, ship-owners place their money where it cannot be reached.

But is this not hypocritical when we know that there are at least two trillion euros stashed in fiscal paradises, and that, just to give one example, nobody has got Ryanair to really pay taxes? Not to mention the fact that when he was prime minister of Luxembourg, European Commission President Jean-Claude Juncker granted secret tax rebates to over a hundred international companies?

Now Agence France Press has circulated a new astonishing study from the German Leibnitz Institute of Economic Research, which says that Germany has profited from the Greek crisis to the tune of 100 billion euros, saving money through lower interest payments on funds the government borrowed amid investor “flights to safety” and “these savings exceed the cost of the crisis – even if Greece were to default on its entire debt.”

Meanwhile, a large number of studies point out how, by having a positive balance of trade with its European partners, Germany is in fact sucking capital from Europe.

Interpreting the third bailout and its conditions of austerity as a mere economic operation would be to commit a great error.

No economist can believe that Greece will be able to pay back and not only because it has always had a fragile economy, with little industry and with tourism as its main source of income (aggravated by decades of mismanagement and the corruption of its traditional parties, the very parties that European leaders would like to see come back).

Greece is already in recession and now the doubling of VAT is going to compress consumption further, also because there will now be further reductions in pensions and public salaries (which have been already cut by 20 percent).  It is widely believed that the Greek debt will now reach 200 percent of its GDP, up from 170 percent prior to the bailout.

How could any economist, even in the first year of studies, fail to understand that, by cutting consumption and raising taxes you are bound to depress an already depressed economy?

Well, it is no coincidence that the IMF, which is the Rotary Club of conservative economists, has refused to join this bailout. The IMF has said it will not put in any money unless European creditors (which is a diplomatic way of saying Germany) accept a restructuring of the Greek debt.

It is clear that the bailout has not been a technical but a political operation. Many European leaders, starting with Juncker himself, intervened in last month’s internal Greek referendum, asking Greeks to vote against Prime Minister Alexis Tsipras. They indicated clearly and openly, in a campaign that the Wall Street Journal repeated in the United States, that the revolt against austerity and the neoliberal economy should be stopped dead in its tracks to avoid political contagion.

For her part, German Chancellor Angela Merkel has declared on German television that she has come to the conclusion that °Tsipras has changed°. This has an air of dejà vu … was it not then British Prime Margaret Thatcher who, intent on destroying the trade unions, launched her famous TINA slogan – There Is No Alternative?

And is there no alternative to this kind of Europe? (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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Time to Work Out a Plan C for Greecehttp://www.ipsnews.net/2015/08/time-to-work-out-a-plan-c-for-greece/?utm_source=rss&utm_medium=rss&utm_campaign=time-to-work-out-a-plan-c-for-greece http://www.ipsnews.net/2015/08/time-to-work-out-a-plan-c-for-greece/#comments Tue, 18 Aug 2015 16:14:04 +0000 Pavlos Georgiadis http://www.ipsnews.net/?p=142029 Original illustration courtesy of Stéphane Roux

Original illustration courtesy of Stéphane Roux

By Pavlos Georgiadis
ATHENS, Aug 18 2015 (IPS)

Just over a month ago, Greek citizens were asked to go to the polls for a referendum that posed the country with an unprecedented existential dilemma and challenged the EU with the possibility of its collapse.

The question that shook the world was a choice between a Plan A – more of the same, evidently failed austerity policies that made the country lose 25 percent of its GDP in five years – and a Plan B – a poorly designed Grexit, with unpredictable consequences that could mean the country’s sudden death.Instead of viewing Greece as a scapegoat, Europe should take this unique opportunity to capitalise on the solutions created by the civil society in the country.

It is an indisputable fact that Greece requires major reforms and Greeks know this better than anyone else. These are related, among others, to major existing legislative gaps, the country’s geography which generates huge transaction costs, a cultural gap between cities and rural areas, and the decision making processes in the country.

Such reforms are of systemic nature, something that no politician in Greece seems able to grasp or advocate. The old guard that still rules the country’s affairs, despite being fully aware of its own failure, is still opting for quick and flaky solutions that hardly address the causes of this crisis.

The same goes for Europe’s leaders, who seem to be more cloistered than ever, limited to their national egos and political clientele. They seem to lack the capacity, both morally and intellectually, but above all the vision to steward Europe’s human face, while addressing this crisis.

A project of “unity in diversity” is threatened by its outdated, largely opaque decision making structures that govern its economics. This explains why European leaders, in the past years, instead of solutions have been offering no more than a narrative based on the worst possible stereotypes.

A top-down approach that plundered Greece into depression and made Greeks, especially the youth, feel like little hamsters in some sort of sick socio-economic experiment.

The Birth of a New Solidarity Economy

Some impressive civil society projects are already being implemented at the local grassroots level, piloting a parallel solidarity and needs-based economy and participa-tory governance.

Every day, a community kitchen called “The Οther Ηuman” is supplying free meals to hundreds of Greeks in need, and lately to immigrants from Syria and Afghanistan, camping in the parks of Athens.

The Metropolitan Community Clinic at Helliniko near the old Athens airport, a 1.2 hectare plot of prime land on the beachfront of Athens, set to be privatised in a scan-dalous low price, is delivering free medicine, health check ups and preventive treat-ments to citizens with no insurance.

Both initiatives have no legal structure nor bank accounts, basing their operations in a currency that survives the capital controls: solidarity and humanity. Speaking of new ways of transaction, a bartering system is making a comeback in response to the closed banks, especially in rural areas.

Open access technologies are driving this transition, as they always do with initiatives promoting public dialogue, knowledge exchange, political participation and account-ability between citizens and politicians.

Politeia 2.0, a grassroots initiative for citizens’ engagement which is pioneering methods for participatory design of a new constitution and Vouliwatch, an independ-ent parliament watchdog, are just two of them.

With such prototypes launched, tested and operating at different levels, the challenge now is to scale and communicate them in every neighbourhood, village and city of the country.

This crisis never had its crisis manager, exposing the EU’s deficiencies and the distance that splits the politicians’ realities with those of citizens. This is not only evident in the way political leaders handle the Greek case, but other challenges too, such as the TTIP, climate change and immigration.

A new political arena is thus emerging within the EU, that has nothing to do with traditional ideological divides of the left or the right. This new political arena struggles to balance top-down versus bottom-up approaches to our ways of making decisions and planning the future.

Based on this recognition, it is clear that besides a “Plan A” (a politically humiliating and financially unsustainable agreement) and a “Plan B” (the risk of a Grexit), Greece is in dire need of working out a “Plan C”.

A roadmap for advancing towards a real transition back to the Commons, based on civil engagement for participatory mapping and collective management of the assets that influence what is currently under attack: the everyday lives of the people.

Greece needs to put in an unprecedented effort in order to overcome an unprecedented challenge, engaging the best actors in key social fields such as health, food, education and social welfare, just to name a few. At this point, this is absolutely necessary in order to maintain social cohesion and explore systemic solutions during the difficult times to come.

The starting point should probably be in the fields, which a recent study by Endeavor Greece identified as the only dynamic sectors that survive the crisis: agriculture, product manufacturing and Information and Communications Technology (ICT).

The food sector, especially, can pave the way since it is already an integral part of the country’s cultural fabric. With around 13 percent of the Greek workforce engaged in agriculture (the EU average is just over 5 percent), a carefully structured plan for a transition towards agroecology can become an extremely powerful vector of change and a drive for Greece’s new economy.

Community gardens like Per.Ka., located inside an abandoned army camp in Thessaloniki, and peer to peer networks like Peliti -Europe’s largest seed-swap community- are already carving out new food system paradigms.

This new process can only be led by the youth of Greece. Highly skilled, socially networked and internationally educated, many of them are looking back to the land to seek ways out of unemployment.

All these years, these young Greeks have been deprived access to bank loans, while others were transferring 250 billion euros outside the country. Should they be connected with food business incubators, seed funding opportunities and open source technologies, they could catalyse this transition towards a quality, climate-friendly agrifood system which connects the land with health, education, tourism, energy, transport and other services.

Of course, this would require the types of reforms against existing institutional barriers and an outdated legal framework in Greece. Unfortunately, in the last five years, such reforms have never been put on the table by successive Greek governments nor their creditors.

Agrifood is only one example of the few sectors that can generate considerable social, economic and environmental benefits which are necessary towards a more resilient future for the country.

Moreover, it is possibly one of the very few ways to create jobs for the youth, who are challenged by a staggering 52.4 percent unemployment rate, the highest in the EU. Citizens are in need of new options and new development indicators need to be considered in rebuilding the country’s economy.

This change needs to start at the local level, leveraging the potential of the aforementioned initiatives and many more that are acting at the grassroots.

The conditions are ripe, as the 2014 municipal elections brought staff with fresh ideas into office in Greek local authorities. The cities of Athens and Thessaloniki, home to half of the country’s population, received the Mayors Challenge and 100 Resilient Cities awards respectively.

Each one offers one million euros to their budgets for delegating, implementing and scaling strategies for civic participation and urban regeneration. It remains to be seen whether the tools and opportunities offered by those grants and networks will be used efficiently, and not from obsolete mismanagement attitudes and the nepotism of the past.

The challenge is also huge for the citizens of the rest of Europe, who are largely misinformed by reporters of mainstream media, landing in Athens with a mandate from their editors to mainly report on horror stories and misery icons.

This is the time to change this agenda of shame, and instead of viewing Greece as a scapegoat, Europe should take this unique opportunity to capitalise on the solutions created by the civil society in the country.

Again, the youth can play a major role in strengthening the vision of a unified Europe, despite the power games that unfold at the political level. After all, we are the first true European generation.

Evidently, Greece was turned into an experiment in suffocating austerity. But what if Greece became the testing ground for visualising, prototyping and scaling a new economic paradigm that is socially inclusive, climate friendly and economically viable?

I am not sure whether the “Plan C” is the right name for this process. It is quite likely that populist politicians in Greece and Europe might abuse the term, like they did with so many others.

But the essence remains: this is a plan of solidarity, collaboration and resilience. And it is time that this dialogue opened all over Europe, if it wants to remain a Union, and maintain its leading role in the world.

Follow Pavlos Georgiadis on  Twitter: @geopavlos

Edited by Kitty Stapp

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Opinion: Crisis, Emergency Measures and Failure of the ISDS System: The Case of Argentinahttp://www.ipsnews.net/2015/08/opinion-crisis-emergency-measures-and-failure-of-the-isds-system-the-case-of-argentina/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-crisis-emergency-measures-and-failure-of-the-isds-system-the-case-of-argentina http://www.ipsnews.net/2015/08/opinion-crisis-emergency-measures-and-failure-of-the-isds-system-the-case-of-argentina/#comments Wed, 12 Aug 2015 05:40:36 +0000 Federico Lavopa http://www.ipsnews.net/?p=141942

In this column, Federico Lavopa, Professor, University of San Andrés and University of Buenos Aires, argues that the way in which the investor-state dispute settlement (ISDS) system was used to handle a spate of claims from foreign investors against Argentina following its economic and financial crisis of 2001/2002 has shown up flaws in the system and the need for its reform.

By Federico Lavopa
BUENOS AIRES, Aug 12 2015 (IPS)

The investor-state dispute settlement (ISDS) system has come under increasing criticism in recent years.

Inconsistent decisions, poorly reasoned awards, lack of transparency, parallel proceedings, serious doubts about arbitrator’s impartiality and the sheer size of the compensations sought by investors and awarded by arbitration tribunals are just some examples of the flaws that have been pointed out by detractors of the system.

Federico Lavopa

Federico Lavopa

The dozens of cases that were initiated against Argentina as a result of the outburst of one of its worst economic and financial crises in late 2001 became an often-quoted sad illustration of many of these shortcomings of the ISDS system.

Apart from the tragic consequences entailed by the economic and political crisis which was faced by Argentina, in particular in 2001/2002, which included a fall in gross domestic product (GDP) per capita of 50 percent, an unemployment rate of over 20 percent, a poverty rate of 50 percent, strikes, demonstrations, violent clashes with the police, dozens of civil casualties and a succession of five presidents in 10 days, Argentina received a flood of claims from foreign investors that were filed under different ISDS mechanisms and, in particular, before the International Centre for Settlement of Investment Disputes (ICSID).

Indeed, in the period 2003-2007, claims against Argentina represented one-quarter of all the cases initiated within the framework of the ICSID Convention. These claims before international arbitral tribunals challenged the changes to the economic rules that Argentina had implemented to contain the effects of perhaps the worst economic cycle of its history.

After 1991, Argentina had embarked on an economic deregulation and liberalisation programme. Among others, this programme included the convertibility of the Argentine peso and the creation of a currency board to maintain parity between the peso and the U.S. dollar by limiting the local money supply to the amount of Argentina’s foreign exchange reserves. “If all investors that sued Argentina had obtained 100 percent of their claims, the total amount that the country should have had to bear would have been at around 80 billion dollars”

This economic and pro-market programme was accompanied by a strong emphasis on the attraction of foreign investment which, among other aspects, resulted in the conclusion of 58 bilateral investment treaties (BITs) – 55 of which came into effect.

It also included a mass privatisation process of public companies which, at that time, represented an important part of the domestic economy.

This market-oriented model reached its limits in the late 1990s, and in May 2003 a new president took office, whose government reformed the regulatory framework for the economy – particularly that for the public services privatised over the 1990s – and introduced a package of emergency laws which implied a considerable change in the conditions under which foreign investors and, in particular, public services providers had to run their business in Argentina.

As a consequence, many of them decided to resort to the investor-state dispute settlement mechanisms embodied in the dozens of bilateral investment treaties that Argentina had signed in the 1990s. In total, in the period 2001-2012, exactly 50 cases were filed against Argentina.

A striking characteristic of the Argentinian experience is the amount of requests for compensations made by the companies that sued Argentina. According to estimates made when the peak of cases following the crisis was reached, if all investors that sued Argentina had obtained 100 percent of their claims, the total amount that the country should have had to bear would have been at around 80 billion dollars.

This sum would have been practically impossible to pay, even if Argentina had not been undergoing a period of acute economic crisis, because it represented approximately 13 percent of Argentina’s GDP for 2013.

Although Argentina’s response to this flood of cases was varied and it is still early to offer definite figures, it is already possible to conclude that, in general, arbitration tribunals were prone to render awards in favour of investors.

Almost 45 percent of the cases have received a condemnatory award, although most of these cases could still be reversed by annulment proceedings, whereas only 15 percent of the arbitration proceedings ended up with a final decision completely in favour of Argentina. The remaining 30 percent are mostly cases which resulted in an agreement between the parties or which were altogether suspended.

All in all, of the 80 billion dollars of the possible amount of compensations calculated when the peak of cases against Argentina was reached following the crisis, Argentina has so far received final rulings involving the payment of 900 million dollars.

The first salient conclusion is that the ISDS system has a very low capacity to adapt to totally exceptional circumstances for which it does not seem to have been designed. Despite the efforts of Argentinian attorneys to show that the measures implemented in the post-crisis period were adopted in an emergency context, being so exceptional as to justify any breach of the substantial clauses of the BITs, few tribunals were prepared to sustain this defence.

This notwithstanding, and with most of these cases having already been dealt with, the upcoming scenario for Argentina seems much less drastic than that forecast when the peak of cases was reached.

While they represent a heavy burden for a developing country like Argentina, so far the compensations actually paid amount to a small portion of the sum initially estimated.

The Argentinian case also represents a worrisome example of the failure of the ISDS system to ensure coherence and soundness in its decisions.

Although the dozens of cases submitted against Argentina addressed exactly the same package of measures (the post-crisis emergency laws) and  had to assess very similar arguments of the different claimants and a practically identical series of defences put forward by the Argentinian government, the conclusions at which they arrived have shown striking differences.

Additionally, some of the decisions have been subject to strong criticism and/or declared null and void by annulment committees.

Finally, the experience of Argentina shows the difficulties that arbitration tribunals might encounter when trying to scrutinise the economic policy choices made by governments. On top of the sensitiveness of examining sovereign decisions of States, arbitrators might find themselves in the awkward situation of deciding on highly technical matters which they are clearly ill-equipped to assess.

The case of Argentina thus represents a sad example of the urgent need to reconsider and reform the ISDS system. Yet, the lessons to be drawn from this experience do not seem to lead to clear conclusions about which direction to take.

On the one hand, the system has proved to be extremely inflexible, which prevented it from addressing the exceptional peculiarities of the Argentinian case. On the other hand, however, the wide margin of discretion available for the arbitral tribunals resulted in the adoption of inherently poor decisions, and with high levels of incoherence among them. (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

*  This column is based on a paper with the same title published as South Centre Investment Policy Brief No 2, July 2015, available here.

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Opinion: The Sad Historical Consequences of the Greek Bailouthttp://www.ipsnews.net/2015/08/opinion-the-sad-historical-consequences-of-the-greek-bailout/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-the-sad-historical-consequences-of-the-greek-bailout http://www.ipsnews.net/2015/08/opinion-the-sad-historical-consequences-of-the-greek-bailout/#comments Sat, 01 Aug 2015 16:59:06 +0000 Roberto Savio http://www.ipsnews.net/?p=141832

In this column, Roberto Savio, founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News, writes that what lies behind the recent convoluted negotiations over Greek debt is nothing other than a dramatic demonstration that Europe is no longer about solidarity, which was the original European dream, but all about fiscal and monetary considerations.

By Roberto Savio
SAN SALVADOR, Aug 1 2015 (IPS)

In recommendations to German Chancellor Angela Merkel at the end of July, the German Council of Economic Experts outlined how a weak member country could leave the Eurozone and called for strengthening the European monetary union.

German Finance Minister Wolfgang Schäuble wants Greece out because he does not believe that it will ever be able to refund the loans it has received so far, and because he thinks it is question of principle to be strict. In an interview with Der Spiegel a few days after the historical date of Jul. 13, at the end of negotiations on Greece, he said: “My grandmother used to say: benevolence comes before dissoluteness.”

Roberto Savio

Roberto Savio

Explaining the recommendations of the Council of Economic Experts, however, its chairman Christoph M. Schmidt expressed another opinion. “To ensure the cohesion of monetary union, we have to recognise that voters in creditor countries are not prepared to finance debtor countries permanently … A permanently uncooperative member state should not be able to threaten the existence of the euro.”

This is the best illustration of Germany’s Europe. Any country which does not fit into the German scenario will have to quit. Europe is no longer a question of solidarity, it is all about fiscal and monetary considerations.

Germany now says that federalism has exceptions – whenever a member of the Eurozone is perceived to be challenging the rules of the monetary union, it will be subject to complete annihilation of its state sovereignty and national democracy. This is the kind of federalism that Germany has now proclaimed.

This German position on its vision of Europe, where political and ideal considerations are no longer the basis of the European project, has triggered a strong response from a normally obedient France.“We should all realise that the idea of Europe as a political project, based on solidarity and mutual support, is on the wane. Monetary union is no longer just a step towards a democratic political union”

President François Hollande, who appears to have suddenly woken up, has come out with a call to reinforce European integration through the establishment of a “Eurozone government”, which run in the opposite direction from that of Berlin.

Germany will of course go ahead and pursue its own course, but the Paris-Berlin axis which was conceived as the fulcrum of European integration has now been seriously weakened after Germany’s imposed agreement on Greece on Jul. 13. So we have now a major realignment.

France has been the country which has always blocked any substantial progress on European integration, by continually voting against any radical step towards integration in order to preserve as much of its national sovereignty as possible.

Now it is Germany which is intent on changing the course of integration, from a political project to a fixed exchange monetary system based on creditor countries – a system in which some democracies are more equal than others.

Schäuble has been reported as expressing concern over the European Commission’s increased political role, interfering in political issues for which it has no mandate. And it is a stark fact that the Jul. 13 Brussels agreement has sought to remove politics and discretion from the functioning of the monetary union, an idea that has long been very dear to the French, and now are the French who want more European integration as protection from a German Europe.

We should all realise that the idea of Europe as a political project, based on solidarity and mutual support, is on the wane.

Monetary union is no longer just a step towards a democratic political union, as Helmut Kohl and François Mitterand sought at the reunification of Germany, and the creation of the Euro.

We are, in fact, going back to a more toxic version of the old exchange-rate mechanism of the 1990s that left countries trapped in a mechanism which worked primarily for Germany, and which led to the exit of the British pound and the temporary exit of the Italian lira.

But the euro, as Nobel laureate in economics Paul Krugman says, “has turned into a Roach Motel, a trap that’s hard to escape.” Once you’re in, you cannot get out, and you have to accept the diktat of the creditors.

Another Nobel laureate in economics, Joseph Stigliz, who was Chief Economist of the World Bank, says that the current European policy of austerity at any cost, is like going back to a “19th century debtors’ prison. Just as imprisoned debtors could not make the income to repay, the deepening depression in Greece will make it less and less able to repay.”

Of course, what is never said openly (except by Stigliz) is that in the Greek bailout one central reason for the extremism of the new package of conditions was to teach a lessons to a radical left-wing party, Syriza, and to the Greek people who had had the audacity to reject the calls from European leaders to vote against that party.

It is not by chance that countries like Poland, which were asking to be admitted to the Eurozone, have withdrawn their applications.  The euro has become a rallying political issue, with parties from all over Europe asking to withdraw. It has become the first line of action for those who oppose European integration.

Until now, the answer of European governments has been that withdrawal is impossible under the European constitution. But now that the German Council of Economic Experts has come out with a concrete proposal on how to do that, that line of defence is crumbling.

According to many analysts, Angela Merkel is playing with fire. Germany cannot remain a credible leader of a coalition of Northern and Eastern European countries and ignore the realities and needs of Southern Europe. This is unsustainable, even in the medium term.

Meanwhile, the world goes on. Within seven years India will have overtaken China as the most populous country in the world, while within a few decades Nigeria will have a larger population than the United States.

And Europe? Europe will have become the continent with most old people and lower productivity, and will have to face its four horses of the apocalypse:

  • a solution to relations with Russia;
  • common agreement on how to deal with the dramatic flow of immigrants, when countries are not even able to relocate 40,000 people in a region of 450 million;
  • a real policy on the explosive Middle East and terrorism; and soon
  • the request of United Kingdom for a new agreement on the European Union, or else it will exit Europe.

We can safely bet that those negotiations, which will be based purely on economic issues, will be the kiss of death for the original European dream. (END/COLUMNIST SERVICE)

Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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Civil Society Sceptical Over “Action Agenda” to Finance Developmenthttp://www.ipsnews.net/2015/07/civil-society-sceptical-over-action-agenda-to-finance-development/?utm_source=rss&utm_medium=rss&utm_campaign=civil-society-sceptical-over-action-agenda-to-finance-development http://www.ipsnews.net/2015/07/civil-society-sceptical-over-action-agenda-to-finance-development/#comments Wed, 15 Jul 2015 23:38:10 +0000 Thalif Deen http://www.ipsnews.net/?p=141608 Secretary-General Ban Ki-moon (left) addresses a press conference before departing from Addis Ababa, after attending the Third International Conference on Financing for Development. At his side is Wu Hongbo, UN Under-Secretary-General for Economic and Social Affairs. Credit: UN Photo/Eskinder Debebe

Secretary-General Ban Ki-moon (left) addresses a press conference before departing from Addis Ababa, after attending the Third International Conference on Financing for Development. At his side is Wu Hongbo, UN Under-Secretary-General for Economic and Social Affairs. Credit: UN Photo/Eskinder Debebe

By Thalif Deen
UNITED NATIONS/ADDIS ABABA, Jul 15 2015 (IPS)

Despite high expectations, the third International Conference on Financing for Development (FfD) ended on a predictable note: the United Nations proclaimed it a roaring success while most civil society organisations (CSOs) expressed scepticism over the final outcome.

Hours after the conclusion of the conference in the Ethiopian capital, the United Nations trumpeted the Addis Ababa Action Agenda (AAAA) as a “ground-breaking agreement that provides a foundation for implementing the global sustainable development agenda that world leaders are expected to adopt this September.”“The outcome will not deliver the reforms we need in areas like tax, that most in civil society had hoped for and, that are needed to increase the resources available for development." -- Dr. Danny Sriskandarajah

U.N. Secretary-General Ban Ki-moon sounded optimistic when he said the agreement was a critical step forward in building a sustainable future for all since it provides a global framework for financing sustainable development.

He added, “The results here in Addis Ababa give us the foundation of a revitalized global partnership for sustainable development that will leave no one behind.”

But Dr. Danny Sriskandarajah, Secretary-General of the Johannesburg-based CIVICUS, was blunt: “This week we saw a further sign that we are at the beginning of the end of the post-World War II (WWII) development world order.”

Rich countries seem unable or unwilling to increase official aid flows, which stand at a fraction of what they themselves promised years ago, he said.

“We are disappointed that the FfD process has not yielded new resources to fund the investments needed to end poverty or taken meaningful steps to address problems in the international financial system,” he said at the conclusion of the conference Wednesday.

He added: “The outcome will not deliver the reforms we need in areas like tax, that most in civil society had hoped for and, that are needed to increase the resources available for development.”

Asked about the failed proposal for the creation of a global tax body, ActionAid’s international tax power campaign manager, Martin Hojsik, told IPS: “The decision is an appalling failure and a great blow to the fight against poverty and injustice.”

He said it means that developing countries, which are losing billions of dollars a year to tax dodging, are not being given an equal say in fixing unjust global tax rules.

“This lost money could have gone to the provision of education, healthcare and other poverty-reducing public services. While the multinationals prosper, the poor and marginalised will suffer,” he said. “The fight for a fair global tax system should not and cannot falter.”

In a statement released here, Oxfam International said unresolved rigged tax rules and privatised development are the major drawbacks of the FfD outcome.

However, after such tense negotiations there can be no doubt that developing countries’ determination to call for true global tax reform and tax cooperation has been noted, and cannot go unheeded for long.

Oxfam International Executive Director Winnie Byanyima said: “Today, one in seven people live in poverty and Addis was a once in a decade chance to find the resources needed to end this scandal. But the Addis Action Agenda has allowed aid commitments to dry up, and has merely handed over development to the private sector without adequate safeguards.”

She said developing countries held firm in Addis on the need to set up an intergovernmental tax body that would give them an equal say in how the global rules on taxation are designed.

“Instead they are returning home with a weak compromise meaning rigged rules and tax avoidance will continue to rob the world’s poorest people.”

Byanyima said fair taxation is vital in the fight against poverty and inequality.

“Citizens must be able to depend on their own governments to deliver the services they need. But it is just not logical to ask developing countries to raise more of their own resources without also reforming the global tax system that prevents them doing this,” she added.

Eric LeCompte, executive director of the Jubilee USA Network, told IPS “while compromised language on a tax committee was reached, we have the first global agreement that notes the harm of illicit financial flows and calls to stop them by 2030.”

Right now the developing world is losing a trillion dollars a year to corruption and tax evasion, he said, pointing out, “those are resources we need to end poverty.”

In a joint statement released late Wednesday, Global Financial Integrity (GFI), the Africa Progress Panel (APP) and Jubilee USA applauded the global commitment to reduce the massive flow of illicit funds from developing country economies.

For the first time international consensus was reached on the importance of an issue that has been at the forefront of efforts by hundreds of research and development organisations for the last 10 years.

Specifically, the FfD3 Outcome Document requires member states to “redouble efforts to substantially reduce illicit financial flows (IFFs) by 2030, with a view to eventually eliminate them, including by combatting tax evasion and corruption through strengthened national regulation and increased international cooperation.”

Additionally, the final text calls on “appropriate international institutions and regional organizations to publish estimates of IFF volume and composition”

The statement said the ability to measure illicit flows was at the heart of significant disagreement during the FfD3 preparatory negotiations in New York earlier this year with the 132-member Group of 77 developing countries calling for country-level estimates of illicit flow volumes.

In its statement, the United Nations said the Addis Ababa Action Agenda contains more than 100 concrete measures.

It also addresses all sources of finance, and covers cooperation on a range of issues including technology, science, innovation, trade and capacity building.

The Action Agenda builds on the outcomes of two previous Financing for Development conferences, in Monterrey, Mexico, and in Doha, Qatar.

Wu Hongbo, the Secretary-General of the Conference, said, “This historic agreement marks a turning point in international cooperation that will result in the necessary investments for the new and transformative sustainable development agenda that will improve the lives of people everywhere.”

Edited by Kitty Stapp

The writer can be contacted at thalifdeen@aol.com

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Opinion: U.N. Can Help Reform the International Financial Systemhttp://www.ipsnews.net/2015/07/opinion-u-n-can-help-reform-the-international-financial-system/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-u-n-can-help-reform-the-international-financial-system http://www.ipsnews.net/2015/07/opinion-u-n-can-help-reform-the-international-financial-system/#comments Tue, 14 Jul 2015 10:03:21 +0000 Jomo Kwame Sundaram http://www.ipsnews.net/?p=141569 Jomo Kwame Sundaram. Credit: FAO

Jomo Kwame Sundaram. Credit: FAO

By Jomo Kwame Sundaram
ROME, Jul 14 2015 (IPS)

The growth in global interdependence poses greater challenges to policy makers on a wide range of issues and for countries at all levels of development.

Yet, the mechanisms and arrangements put in place over the past three decades have not been adequate to the challenges of coherence and coordination of global economic policy making. The recent financial crises have exposed some such gaps and weaknesses.The U.N. was among the very few warning Mexico in 1994 and the East Asian countries in 1997 that excessive liberalisation threatened crisis.

Reforming the international economic governance architecture, through the United Nations system, can address these problems.

Although sometimes seemingly slow, the U.N. has a clear advantage in driving discussion on reform because of its more inclusive and open governance.

Lop-sided influence in the current international financial system is a principal reason why many countries lack confidence in the existing arrangements. Rebuilding confidence in such arrangements will require that all parties feel they have a stake in the reform agenda.

But the U.N. is also suited to drive the discussion because of its long tradition of reliable work on international economic issues.

The United Nations secretariat has developed and maintained an integrated approach to trade, finance and sustainable development, with due attention to equity and social justice issues.

The ongoing ‘secular stagnation’ has again highlighted the interdependence of global economic relations, exposing a series of myths and half-truths about the global economy.

These include the idea that the developing world has become “decoupled” from the developed world; that unregulated financial markets and the new financial instruments have ushered in a new era of “great moderation” and “stability”; and that macroeconomic imbalances — due to decisions made in the household, corporate and financial sectors — are less dangerous than those involving the public sector.

The U.N. secretariat has long doubted such arguments, and warned that any unravelling of global macroeconomic imbalances would be unruly.

Also, persistent asymmetries and biases in global economic relations have particularly hit developing countries, both emerging and least developed.

Not surprisingly, the U.N. Secretariat has also drawn attention to the close links between the financial crisis and the food and energy crises.

A more integrated approach to handling these threats is needed, particularly to alleviate the downside risks for the poorest and most vulnerable communities.

The U.N. Secretariat has a strong track record of identifying systemic threats from unregulated finance, warning against a misplaced faith in self-regulating markets and offering viable solutions to gaps and weaknesses in the international financial system.

Special drawing rights (SDRs), the 0.7 per cent aid target and debt relief, for example, were all conceived within the U.N. system during the 1960s and 1970s.

From the 1980s, the U.N. secretariat – both in New York and Geneva — have consistently warned against the excessive conditionalities attached to multilateral lending, promoted the idea of rules for sovereign debt restructuring, and cautioned that the international financial institutions were moving away from their traditional mandates of guaranteeing financial stability and providing long-term development finance.

During the 1990s, U.N. agencies warned against the dangers to economic stability, particularly in developing countries, from volatile private capital flows and the speculative behaviour associated with unregulated financial markets.

The U.N. was among the very few warning Mexico in 1994 and the East Asian countries in 1997 that excessive liberalisation threatened crisis.

The U.N. system was also almost alone among international institutions to identify growing inequality as a threat to economic, political and social stability, and insisted early on measures for a fairer globalisation.

Many of these concerns culminated in the 2002 Financing for Development Conference in Monterrey, Mexico.

More recently, the U.N. has insisted on the importance of policy space for effective development strategies and particularly on the need for macroeconomic policies to support long-term growth, technological upgrading and diversification.

Some countries have sometimes resisted such work by the U.N. secretariat.

However, the combination of a strong track record and a core secretariat steeped in its tradition of an integrated approach to policy-oriented research places the U.N. secretariat in the best position to advance current discussions to reform the international financial architecture.

Edited by Kitty Stapp

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Opinion: “Slight Deceleration” in G20 Trade Restrictions but Continued Vigilance Neededhttp://www.ipsnews.net/2015/06/opinion-slight-deceleration-in-g20-trade-restrictions-but-continued-vigilance-needed/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-slight-deceleration-in-g20-trade-restrictions-but-continued-vigilance-needed http://www.ipsnews.net/2015/06/opinion-slight-deceleration-in-g20-trade-restrictions-but-continued-vigilance-needed/#comments Mon, 29 Jun 2015 06:43:56 +0000 Roberto Azevedo http://www.ipsnews.net/?p=141284

In this column, Roberto Azevêdo, sixth Director-General of the World Trade Organization (WTO), writes that the continuing increase in the G20’s stock of new trade-restrictive measures since the financial crisis of 2008 remains of concern in the context of an uncertain global economic outlook; individually and collectively, he says, the G20 must show leadership and refrain from implementing new measures taken for protectionist purposes while removing existing ones.

By Roberto Azevêdo
GENEVA, Jun 29 2015 (IPS)

The latest report by the World Trade Organisation (WTO) on G20 trade measures shows a slight deceleration in the application of new trade-restrictive measures by G20 economies, with the average number of such measures applied per month lower than at any time since 2013.

According to the thirteenth such WTO report, issued on Jun. 15, G20 economies had applied 119 new trade-restrictive measures since mid-October 2014, an average of 17 new measures per month over the period.

Roberto Azevêdo

Roberto Azevêdo

A slight decrease in the number of trade remedy investigations by G20 economies has also contributed to this overall figure.

But it is not yet clear that this deceleration will continue and the WTO calls on G20 leaders to show continued vigilance and reinforced determination towards eliminating existing trade restrictions.

The longer term trend remains one of concern, with the overall stock of trade-restrictive measures introduced by G20 economies since 2008 continuing to rise.

Of the 1,360 restrictions recorded by this exercise since 2008, less than one-quarter have been eliminated, leaving the total number of restrictive measures still in place at 1,031. Therefore, despite the G20 pledge to roll back any new protectionist measures, the stock of these measures has risen by over seven percent since the last report.

The broader international economic context also supports the need for continuing vigilance and action. According to the WTO’s most recent forecast (14 April 2015), growth in the volume of world merchandise trade should increase from 2.8 percent in 2014 to 3.3% percent 2015 and further to four percent in 2016, but remaining below historical averages.“The longer term trend [vis-à-vis protectionism] remains one of concern, with the overall stock of trade-restrictive measures introduced by G20 economies since 2008 continuing to rise”

The overall response to the 2008 financial crisis has been more muted than expected when compared with previous crises. The multilateral trading system has proved an effective backstop against protectionism.

During this period, G20 economies also continued to adopt measures aimed at facilitating trade, both temporary and permanent in nature.

These developments confirm that G20 economies overall have shown a degree of restraint in introducing new trade restrictions. However, it is not yet clear that the deceleration in the number of measures introduced will continue in future reporting periods. It is also relevant that the slow pace of removal of previous restrictions means that the overall stock of restrictive measures is continuing to increase.

The broader international economic context also supports the need for continuing vigilance and action.

Trends in world trade and output have remained mixed since the last monitoring report, as merchandise trade volumes and GDP growth picked up in the second half of 2014 but appear to have slowed in the first quarter of 2015.

Economic activity remained uneven across countries as the United States and China slowed in the first quarter, while growth in the Euro area and Japan picked up.

Plunging oil prices and strong exchange rate fluctuations, including an appreciation of the U.S. dollar and a depreciation of the Euro contributed uncertainty to the economic outlook.

Lower prices for oil and other primary commodities were expected to provide a boost to importing economies, but reduced export revenues weighed heavily on commodity exporters.

In light of these developments, our most recent forecast (14 April 2015) predicted a continued moderate expansion of trade in 2015 and 2016, although the pace of recovery was expected to remain below historical averages.

In the area of government procurement, work from the Organisation for Economic Cooperation and Development (OECD), identifying 65 measures implemented since the financial crisis, suggests that discriminatory government procurement policies have become increasingly popular and potentially affect 423 billion dollars of government procurement in the implementing economies.

This report shows that G20 economies implemented 48 new general economic support measures during the period under review, with the majority targeting the manufacturing and agricultural sectors through various incentive schemes, often, but not exclusively, in the context of exports.

The overall assessment of this thirteenth report on G20 trade measures is that the continuing
increase in the stock of new trade-restrictive measures recorded since 2008 remains of concern in the context of an uncertain global economic outlook.

Individually and collectively, the G20 must show leadership and deliver on the pledge to refrain from implementing new measures taken for protectionist purposes and to remove existing ones. (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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Opinion: Greece – A Sad Story of the European Establishmenthttp://www.ipsnews.net/2015/06/opinion-greece-a-sad-story-of-the-european-establishment/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-greece-a-sad-story-of-the-european-establishment http://www.ipsnews.net/2015/06/opinion-greece-a-sad-story-of-the-european-establishment/#comments Tue, 09 Jun 2015 11:40:11 +0000 Roberto Savio http://www.ipsnews.net/?p=141035

In this column, Roberto Savio, founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News, writes that the latest development in the tug of war which has been going on between Greece and a German-dominated Europe is the desire to punish an anti-establishment figure like Greek Prime Minister Alexis Tsipras and show that the radical left cannot run a country.

By Roberto Savio
ROME, Jun 9 2015 (IPS)

Only 50 years of Cold War (and the fact that German Chancellor Angela Merkel grew up in East Germany) can possibly explain the strange political power of the United States over Europe.

After a bilateral meeting between Merkel and U.S. President Barack Obama (so much for transparency and participation), the Jun. 7-8 G7 summit opened in Germany and we found out that there had been a trade-off.

Roberto Savio

Roberto Savio

Merkel agreed that Europe should continue the sanctions against Russia – and so the other members of the G7 duly agreed – and Obama toned down the U.S. position on Greece.

That position had been forcefully expressed by U.S. Treasury Secretary Jacob Lew a few days earlier to European leaders: solve the Greek problem, or this will have a global impact that we cannot afford. This had suddenly accelerated negotiations, with the hope then that everything would be solved before the G7 summit.

But Greece did not accept the plan of the President of the European Commission, Jean-Claude Juncker, which was suspiciously close to International Monetary Fund (IMF) positions.

At the G7 summit, Obama softened the U.S. position on Greece, and even said that “Athens must implement the necessary reforms.”

Obstinacy on sanctions against Russia ignores the fact that, in a very delicate economic moment, Europe has lost a considerable part of its exports because of Russia’s retaliatory block on European imports. It is also difficult to see what advantage there is for Europe in pushing Russia into the arms of China. We will soon be seeing joint naval exercise between the two countries, which will only escalate tensions.

But let us look at Greece given that its tug of war with Europe has now been going on for five years.

Let us recall briefly. Greece had been spending much more than it could by distributing public jobs under any government, by giving easy pensions to everyone, and so on. Then, in 2009, the centre-left Panhellenic Socialist Movement (PASOK) won the elections and we found out that the figures Athens had been giving Brussels were false.

The real deficit stood at almost 12.5 percent of gross domestic product (GDP), confirmation of what the European Union and its bodies had long suspected but which it had done nothing about.“Europe is now led by Germany and the Germans are convinced that what they did at home is valid everywhere. Together with the countries of northern Europe, they look on the people of southern Europe as unethical, people who want to enjoy life beyond their means”

To avoid going into the agonising details of the continuous negotiations between Greece and the European Union, I jump to the January elections this year which the left-wing Syriza party won and its leader Alexis Tsipras was named Prime Minister on a clear programme: stop the austerity programme imposed by the “Troika” – IMF, EU and the European Central Bank (ECB) – on behalf of the European countries, led by Germany, Netherlands, Austria and Finland.

Greece is on its knees. Officially, unemployment has gone from 11.9 percent in 2010 to 25.5 percent today, but it is widely considered to be around 30 percent. Among young people, it is close to 60 percent. GDP has gone into a 25 percent decline, Greek citizens have lost about 30 percent of their revenues and public spending has been slashed to the point that hospitals have great difficulty in functioning.

Yet, the request (order) of the “Troika” is simple – cut everything the deficit has been eliminated.

So, for example, cut pensions, which have been already been cut twice. In any case, this would reap a paltry 100 million euros but would cripple people who are living on less than 685 euro a month. Or, raise VAT on tourism, from the present 6.5 percent to 13.6 percent, which would be a deadly blow to Greece’s only important source of income.

This is the plan presented by Juncker, whose arrival as head of the European Commission was accompanied by a grandiose Marshall Plan for Europe, a plan which has since disappeared totally from the scene.

In an article a few days ago titled ‘Europe’s Last Act?”, Joseph E. Stiglitz, Nobel laureate in economics, argues that the idea of austerity as a uniform recipe for Europe is missing reality.

“The troika badly misjudged the macroeconomic effects of the program that they imposed. According to their published forecasts, they believed that, by cutting wages and accepting other austerity measures, Greek exports would increase and the economy would quickly return to growth. They also believed that the first debt restructuring would lead to debt sustainability.

“The troika’s forecasts have been wrong, and repeatedly so. And not by a little, but by an enormous amount. Greece’s voters were right to demand a change in course, and their government is right to refuse to sign on to a deeply flawed program.”

It is on austerity that the paths of the United States and the European Union divide.

The United States has embarked on investing for growth, despite pressure from the Republican party for austerity, and the U.S. economy is picking up again.

But Europe is now led by Germany and the Germans are convinced that what they did at home is valid everywhere. Together with the countries of northern Europe, they look on the people of southern Europe as unethical, people who want to enjoy life beyond their means. As The Economist put it in an article on the Greek crisis: “In German eyes this crisis is all about profligacy”.

It did not help that another very minor crisis – that of Cyprus between 2012 and 2013 – confirmed Germany’s view about the profligacy of the south of Europe. In the case of Cyprus, the “Troika” settled the crisis at a cost of 10 billion euros.

There is widespread agreement that the crisis of Greece, which represents just two percent of the total European budget, could have been settled at the beginning with a 50-60 billion euro loan. But only since Tsipras became prime minister, and with popular support started to refuse to accept the creditors’ plan, has Greece has become a very important issue.

There is now talk of a “Grexit”, or Greece’s exit from the European Union. This would have a cascade effect, and it would mean the end of Europe as a common dream, of a Europe based on solidarity and communality.

In the G7, Obama has insisted on investments and demand as a way out of the crisis. Merkel has again repeated that Europe does not need stimulus financed by debt, but stimulus coming from the reform of inefficient economies. At this point, perhaps “everything is always about something else”, as the late award-winning Sri Lankan journalist Tarzie Vittachi once told me.

An enlightening comment on the Greek situation has come from Hugo Dixon writing in The New York Times of Jun. 7. The Greek prime minister “will have to choose between saving his country and sticking to a bankrupt far-left ideology. If he is smart, he can secure a few more concessions from creditors and a goodish deal for Greece. If not, he will drag the country into the abyss.”

And then, it is interesting to note that one of the main reasons for being so hard with Syriza is that the citizens of Spain, Portugal and Ireland, who were the first to swallow the bitter pill of austerity, would revolt if they saw a different path for Greece, and it just happens that those countries have conservative governments.

The entire European political system reeled with shock at the victory of Syriza, and again a few days ago at the victories of the left-wing anti-establishment Podemos party in municipal elections in Spain.

For some reason, the very authoritarian and conservative government of Viktor Orbán in Hungary, the victory of the very conservative Andrzej Duda as president in Poland, as well as the rise of Matteo Salvini’s anti-European and anti-immigration Lega Nord party in Italy create no panic, not even if Salvini looks to Russian President Vladimir Putin and Marine Le Pen, leader of France’s right-wing Front National, as figures of reference.

So, the real issue now in the case of Greece is to punish an anti-establishment figure like Tsipras and show that the radical left cannot run a country.

Who really believes that there will masses of citizens in Madrid, Lisbon or Dublin taking to the streets to protest if Europe does a somersault of solidarity and idealism, and lowers its requests or dilutes them over more time? (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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