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March 10, 2010
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European Monetary Fund and the Greek Debt Crisis

Posted By Judah Grunstein 10 Mar 2010 The big news on Monday regarding the Greek debt crisis was the momentum gathered over the weekend by a proposal for a European Monetary Fund for the euro zone. Initially proposed by the German finance minister, the proposal was immediately embraced by the EU commissioner for monetary affairs. Now comes the inevitable backlash, which is necessary if only to get an idea of the realistic contours such a plan might assume. The major question concerns whether such an institution would require amendments to existing treaties, with that depending on what kind of linkage it would have to actual monetary policy. It seems increasingly clear, though, that just its hefty price tag will make it a long-term project rather than an immediate fix.

Meanwhile, credit default swaps -- and particularly "naked" shorts consisting of speculative purchases of default insurance on debt one doesn't hold -- are increasingly being lined up in the EU's crosshairs. That the jury is still out on how big a role such trading is playing in the Greek crisis is in many ways politically irrelevant, and will become increasingly so if the EU or individual member states are ultimately forced to bite the bullet and pony up some cash for Athens. In that case, they'll need to deliver some scalps, and further Greek austerity at the cost of potentially contagious social meltdown is unlikely to be the remedy of choice.

I can't help but get the feeling regarding the financial crisis that we're so busy admiring the size of the tsunami we narrowly escaped that we're blind to the one bearing down on us. There's little doubt that when it is definitively over, the Great Recession will result in a great deal of positive construction and regulation, as did the Great Depression. But I'm not convinced we've yet felt the necessary pain to push those reforms through, and I'm not convinced the measures already adopted will prove enough to avoid the next round.

Normalizing a Nuclear Middle East

Posted By Judah Grunstein 10 Mar 2010 "Israel makes provocatively timed inflammatory announcement" seems to be a headline with plenty of mileage these days. While the settlement announcement during Vice President Joe Biden's visit is getting the spotlight, I'd say the news out of Paris -- where Israel's infrastructure minister announced its intentions to build a civilian nuclear reactor -- is even more significant, for muddying the waters on so many different high-stakes fronts at once. To bullet-point them in no particular order:

- It puts France and the U.S. on the spot regarding a potential non-NPT "India exception" for Israel, at the very moment when both are trying to round up support for sanctions against Iran's non-compliant -- but NPT-bound -- nuclear program.

- It normalizes the simultaneous possession of an opaque weaponized nuclear program and a transparent civilian nuclear program at the very moment when fears of this very normalization are at the top of the regional agenda.

- It illustrates the glaring contrast between Israel's perception of Syria's rights as an NPT signatory (i.e., unilaterally bombed-out suspect facility) and its perception of its own presumed rights as a non-NPT signatory nuclear weapons state (i.e., international cooperation in developing a nuclear energy program).

There are already many ways in which Israel's "ambiguous" (i.e., silent) nuclear posture significantly complicates the effort to simultaneously normalize civilian nuclear energy in the Middle East while discouraging a regional nuclear arms race. But vividly broadcasting the inconsistencies of that posture in such a tone-deaf way displays either an ignorance of the optics surrounding the issue or a willful disregard of them.

2010 has been a pretty bad year so far for Israeli diplomacy. Hopefully it gets better, because it's hard to see how it could get worse.

Dire Warnings from Papandreou in D.C. Visit

Posted By Roland Flamini 09 Mar 2010 Greek Prime Minister George Papandreou speaks in calm, measured tones, but he is clearly determined to do what it takes to pull the debt-crushed remnants of his country's economy out of the fire. This week he is in Washington campaigning for a unified front against the "unprincipled" financial speculators who are betting that his crisis-hit country will default on its loans. At the Brookings Institution on Monday, he called for joint a U.S.-EU "initiative in dealing with speculators."

His government has introduced draconian reforms, but progress was being undermined, he said, by "the global power of poorly regulated markets . . . Traders and unprincipled speculators have forced interest rates on Greek bonds to record heights."

To this nit-picking reporter, however, Papandreou's account of how Greece got into this mess and how it plans to get out of it raised a couple of nagging questions. In October, Papandreou's socialists trounced the ruling conservatives to take over the government. The new administration, says Papandreou, then made the nasty discovery that the Greek budget deficit was double what the outgoing administration had declared -- and what had been a bad economic situation promptly became an urgent financial crisis.

The fact that the incoming government had to be told this by the outgoing one doesn't say much for the Socialists' vigilance while in opposition. Would the Republicans fail to notice if the Obama administration's budget deficit were not really $438 billion, which they say it is, but secretly more like $876 billion? Papandreou's explanation is that the conservative government and its trading agents were indulging "in all kinds of practices that were too opaque for us to see and prevent."

Secondly, in saying firmly that Greece was not asking for a bailout but would do its borrowing from the banks, Papandreou seemed to making a virtue out of necessity. In visits to Berlin and Paris, he garnered praise for his tough austerity program, but no talk of a bailout. Chancellor Angela Merkel, for one, knows better than to go against German public opinion, which is strongly against any financial support for the Greeks. And the IMF, in this situation the institution of last resort for Papandreou's government, is clearly skeptical of being able to help Greece on the scale required to stave off collapse. Greece raised $7 billion last week, but needs another $90 billion before the end of this year.

Thirdly, if Papandreou brought any concrete plan to Washington for combating Wall Street piracy, he did not reveal it at Brookings, where the not-so-veiled sub-text of his speech was a warning to Greece's European partners that they should consider helping Athens as insurance against being caught in the backwash should the worst befall his country. Or, to put it more crudely, if Papandreou goes down, he's taking everyone else with him. Greece's financial crisis, the prime minister cautioned, "is a challenge to our democratic institutions."

Leading Indicators: Off-the-Radar News Roundup

Posted By Judah Grunstein 09 Mar 2010 - Turkey's Interior Ministry is training the Sudanese police force in anticipation of the country's April elections. Sudan has been one of the problematic areas of Turkey's maverick "open arms" foreign policy orientation, but this seems like an area where even that could deliver some payoff.

- Russian Foreign Minister Sergey Lavrov seems pretty convinced the START follow-on nuclear arms control treaty between the U.S. and Russia will include a "legally binding" link to missile defense. I'm pretty convinced that's the kind of treaty that won't make it past the Senate.

- Russian President Dmitry Medvedev directed the Defense Ministry to open talks with South Ossetia with the aim of establishing a Russian military base in the broken-away Georgian province, along the lines of the arrangement already in place in Abkhazia.

- The European Parliament weighed in on the proposals currently circulating for the formation of the European diplomatic corps, demanding budgetary control and oversight powers over the service, and generally siding with the European Commission over the European Council in terms of influence within the new structure. That's to be expected, since the parliament has an oversight role over the supranational commission, and not over the national governments that make up the council.

- The European aircraft manufacturer EADS formally dropped out of the bidding for a U.S. Air Force tanker contract that it already won in 2008, only to see the deal returned to a tender following an appeal by U.S. competitor Boeing. EADS complained of new specifications that favored the U.S. defense contractor, and the entire maneuver is being viewed on the continent as a protectionist trade measure driven by nativist defense contracting concerns.

- Brazilian President Luiz Inacio Lula da Silva is poised to leave office with a 73 percent approval rating.

- Nigeria's Acting President Goodluck Jonathan took what appear to be his first steps toward seriously securing his grip on power by firing the country's national security adviser, a loyalist to ailing President Umaru Yar'Adua. Among other things, the former NSA was in a position to block the release of Yar'Adua's medical records, which might now see the light of day.

Researched by Kari Lipschutz.

On International Women's Day, Still a Long Way to Go

Posted By Juliette Terzieff 09 Mar 2010 Women's rights advocates, governments, NGOs and women around the world marked International Women's Day yesterday, with cheers for progress achieved and calls for even more global efforts to ensure protection for the rights of women and girls.

"Most girls now receive an education, particularly at primary level, and more women are now more likely to run businesses or participate in government. A growing number of countries have legislation that supports sexual and reproductive health and promotes gender equality," United Nations Secretary-General Ban Ki-moon said in his International Women's Day 2010 message. "Nonetheless, much work remains. Maternal mortality remains unacceptably high, too few women have access to family planning, and violence against women remains a cause for global shame."

Virtually every sign of progress continues to be mixed, with some bitter disappointments for women's rights activists. Perhaps there is no better example than India, where equality efforts are in a constant battle against stereotypes and traditional gender-based biases.

The Indian Parliament considered legislation on Monday that would reserve one-third of seats at the national and state levels for women, on the same day that Air India launched its first-ever all-women crews on several flights. The legislative efforts stalled, however, over critics' concerns that all women -- not just those from higher castes -- be represented.

At the same time, India and neighboring China are "missing" 85 million women who have died as a result of violence, neglect, infanticide or gender-specific abortions, the United Nations Development Program said in a report released yesterday. This sobering reality has left large swathes of Asia contending with severely skewed gender ratios.

More generally, worldwide maternal mortality rates have remained largely stagnant in the last 15 years, and 70 percent of women worldwide will experience gender-related violence during their lifetimes, according to the U.N.(.pdf).

"Investing in the potential of the world's women and girls is one of the surest ways to achieve global economic progress, political stability and greater prosperity for women -- and man -- the world over," Secretary of State Hillary Clinton said in a videotaped message.

New York Times journalist and best-selling author Nicholas Kristoff argued yesterday that the world needs more cost-effective solutions for the broad range of issues facing women. His suggestions include increased efforts toward education and more support for female business owners.

International Women's Day was first celebrated in 1911, and is now recognized around the world as an opportunity to celebrate achievements by women.

Leading Indicators: Off-the-Radar News Roundup

Posted By Judah Grunstein 08 Mar 2010 - China's foreign minister said that the China-Russia oil pipeline will be completed by the end of 2010.  The Chinese section of the pipeline will be fully operational in 2011.

- Japanese Prime Minister Yukio Hatoyama is facing opposition from coalition partner Social Democratic Party regarding plans to promote nuclear energy as part of a climate change bill. Hatoyama's popularity has plummeted and his coalition is experiencing tension on a variety of fronts. that makes for a pretty short honeymoon for a party taking power for the first time in 50 years.

- Iran's state TV reported that the country had launched production of a short-range cruise missile capable of destroying targets of up to 1,000 tons. As the National article drily notes, "Iran frequently makes announcements about new advances in military technology that cannot be independently verified." I would add, less drily, that "new advances in military technology" could be replaced by "election results," "its nuclear program," and any number of other subjects without impacting that sentence's accuracy.

- Turkish Foreign Minister Ahmet Davutoglu was in Syria for talks with President Bashar al-Assad and other high-level Syrian leaders. There was a time not so long ago when that would be suggestive of various foreign policy threads, but given recent relations between Turkey, Syria, Israel and the U.S., it's anyone's guess what the agenda of the meetings was this time.

- Plans emerged over the weekend for a European Monetary Fund as a way of addressing debt crises in the euro zone without recourse to the IMF. Significantly, the proposal was first made by Germany's finance minister before being quickly embraced by the EU's monetary affairs commissioner.

- Ecuador's foreign minister is currently in Iran for two days of talks, before continuing on a Middle East tour that will also bring him to the UAE and Turkey. The Tehran visit fits into the narrative of expanding Iran-South American ties, but the real story here is the other two stops, which indicate Quito's thoughtful selection of partners. Of all the Chavezistas, Ecuador's President Rafael Correa seems to be the savviest in terms of advancing national interests without falling prey to his own rhetoric. Ecuador has always been the little country that couldn't, but if it manages its resources and its development and trade relationships well, there's no reason it can't become the little country that could. Correa seems like he's on that track.

- Nigeria's government once again sent in troops to contain sectarian violence in the northern Jos region, where 500 people were reportedly killed, just weeks after hundreds died in violence in the same region.

Researched by Kari Lipschutz.

After the Dutch, Who's the Next to Leave Afghanistan?

Posted By Roland Flamini 08 Mar 2010 If our European allies want to capture Barack Obama's full attention, they could certainly do so by announcing en masse their intention to withdraw from Afghanistan by the coming July. Europe would suddenly loom large on Obama's radar screen, triggering a flurry of diplomatic activity by the White House in a bid to prevent or at least whittle down the extent of the exodus. Obama would be in Madrid like a shot for this month's EU-U.S. summit -- from which he had previously begged off, citing commitments at home -- and again for the NATO summit in April.

The Europeans' justification for pulling out could start with the argument that Article V of the NATO Treaty, which considers an attack on one member state an attack on all the members, no longer applies to Afghanistan. Beyond that, the Obama administration's unilateral deadline of July 2011 for beginning a drawdown from Afghanistan means that Europe is logically entitled to set its own.

But the underlying causes would of course be political: A war that once had broad public acceptance in the immediate aftermath of 9/11 is now dangerously unpopular. The German government, which fields the third-largest force in Afghanistan, is certainly not the only NATO member with a more-or-less secret contingency plan spelling out the circumstances when calling it quits would become a matter of political survival.

Regardless of national caveats on the rules of engagement, the departure of some 36,000 troops representing some 25 nations would leave northern and eastern Afghanistan bereft of virtually any effective allied presence. That would probably cause the collapse of the whole Afghan "adventure" (as Gerhard Schroeder once described the U.S.-led Iraq war).

The British probably would not sign on to such a plan -- although if Prime Minister Gordon Brown could summon up the courage to lead the withdrawal he would in one stroke ensure his re-election and at the same time position Britain at the head of Europe for at least the next decade. Realistically, the initiative would be Franco-German driven. But fortunately for Obama and his commitment to Afghanistan, the Europeans have shown themselves incapable of such unified action.

So far. But now the Canadians are planning to pull out, and so are the Dutch, barring some unlikely miracle. Both are brave contingents that have seen their share of fighting and casualties. The gradual process of corrosion will continue even as Afghanistan's elaborate dance of death drags on, despite the surge in U.S. forces.

The Obama administration lives with this reality. Defense Secretary Robert Gates hinted at Washington's frustration in a recent speech: "The demilitarization of Europe -- where large swathes of general public and the political class are averse to military force and the risks that go with it -- has gone from a blessing in the 20th century to an impediment to achieving real security and lasting peace in the 21st century."

And there will be little Obama can do to stop European support for the Afghanistan war from draining away. This is partly because his administration has lost the old Washington knack of making the Europeans feel important in order to achieve American objectives.

WPR on France 24: The World Last Week

Posted By Judah Grunstein 08 Mar 2010 I again had the pleasure last Friday of appearing on France 24's panel discussion week-in-review program, The World This Week. The other panelists were Tom Redubrun of the IHT, Stefan de Vries of RTL, and Laura Dagg of Toute l'Europe. Topics included the Iraqi elections, the Greek debt crisis, and U.S.-Turkey relations in the aftermath of the Armenian Genocide bill. Part one can be found here. Part two can be found here.

The Modest Failure of Obama's Iran Policy

Posted By Judah Grunstein 05 Mar 2010 As the push for a new round of sanctions against Iran falters, it's becoming increasingly apparent that the Obama administration's game plan on Iran policy was long on tactics and short on strategy. We've heard a bit about how U.N sanctions are up against a "bad UNSC," which currently includes Brazil, Turkey and Lebanon as non-permanent members. But that should come as no surprise, and the same goes for those three countries' predictable resistance to getting vocally on board for stiff sanctions.

Now comes word that the administration is trying to carve out an exemption for China in unilateral U.S. sanctions making their way through Congress. Japan and South Korea, on the other hand get no such special attention, with the inescapable message being that friendship and solidarity don't pay quite as well as obstructionism and a pile of U.S. debt.

This is a consequence of the administration's failure of nerve -- or lack of imagination -- at the outset, when either a bold engagement with Iran or a bold engagement with Russia would have more likely delivered better long-term strategic results. Instead, we saw a tepid outstretched hand combined with a tepid reset, neither of which seems to have paid off. Instead of a shift in the underlying strategic logic of how to contain Iran's nuclear ambitions, the Obama administration essentially tried to pass off a "new & improved" version of the Bush administration's carrot and stick approach, or what Dennis Ross called "better carrot & better stick."

Admittedly, the domestic politics of true engagement on either front would have been costly for President Barack Obama. There's also no guarantee that either would have delivered better results, especially in light of Iran's post-election turmoil. And as I have argued previously, even the administration's lukewarm Iran engagement has made it clear that it is now the Iranians who are unwilling to take yes for an answer. But that's little consolation if it comes up short of the desired strategic payoff.

As Bobby Z put it, "There's no success like failure, and failure's no success at all." In trying to avoid a spectacular failure, Obama has come away with a modest one instead.

Reading Turkey's Signals

Posted By Judah Grunstein 05 Mar 2010 Turkey's decision to recall its ambassador in Washington for discussions following yesterday's passage of the Armenian Genocide bill by the House Committee on Foreign Affairs is understandably getting quite a bit of attention. But in what is likely to be the overlooked counterbalance to that decision, Turkish Foreign Minister Ahmet Davutoglu said today that Ankara remained determined to normalize relations with Armenia, although he acknowledged that parliamentary ratification of recently signed protocols was not guaranteed.

The recall of the ambassador signals Turkey's willingness to flex its diplomatic muscles,  which the Obama administration currently has need of in addressing Iran's nuclear program, as well as in Iraq. But the move is mainly pre-emptive, and meant to test whether the Obama administration is willing and able to keep the Armenian Genocide bill from advancing further.

Davutoglu's statement today indicates that whatever damage has been done is limited and reversible. It also signals that rapprochement with Armenia is in Turkey's interests, independent of its bilateral relations with the U.S.