What happened in Slovakia before the elections? Just a big scandal!

What happened in Slovakia sounds like a scenario of a political movie: a private investment company, a bench of political leaders, a backdrop of national elections opposing the outgoing right wing party and the leftist populist candidate, and a secret file released on the Internet.

To me the most hurting is that the corruption operation took place during the integration of Slovakia into the EU. What was supposed to be a democratization and modernization process was completely diverted to serve the interest of the dominants. Open your eyes people, “Europeanization” is not what we have been told… Free market economy, democracy, human-oriented values, transparency and accountability, consumer protection… Where are all these things and how can we trust European institutions? And above all, how can we trust the political class?… Well to that second question, Slovaks already answered with indifference. No one is really surprised by the scandal, but still the governing party stepped down.    

So what are exactly the Gorilla file and the Penta affair?

 

The Gorilla file: Slovak election overshadowed by huge corruption, protesters toss bananas

For two years, the dossier claims, politicians of all stripes were pocketing kickbacks from members of an influential private investment group. In the wall of the apartment where the clandestine meetings took place was a listening device planted by a secret agent intrigued by why so many high-level visitors were dropping in.

The “Gorilla” files — mysteriously posted online by an anonymous source in December and said to be based on the wiretaps — have rocked the already-raucous world of Slovak politics ahead of elections Saturday. The fallout looks certain to propel populist former leader Robert Fico back into power, even though he himself has been implicated.

The file purportedly documents shady dealings between 2005 and 2006, and suggests investment group Penta bribed government and opposition politicians to win lucrative privatization deals. Politicians from almost all major parties have been tainted in the scandal, named after a beefy Penta guard whose apartment provided the venue for the meetings.

Prime Minister Iveta Radicova’s Slovak Democratic and Christian Union, whose free-market reforms earned the country NATO and EU membership, looks likely to be hit hardest. The party was in power in 2005-2006 and then-prime minister Mikulas Dzurinda is now foreign minister and party chairman.

Polls indicate the party will win only about 5 percent, despite overseeing an economic boom driven by solid growth, strong exports and the implementation of much-needed pension reforms. The early elections were called when the government fell after failing to approve Slovakia’s contribution to an EU bailout fund.

The left-wing Fico, who ruled from 2006 to 2010, says he is innocent and doesn’t recall the meetings he was said to have attended, adding that he couldn’t have influenced any decisions because he was in opposition.

One big winner in the scandal? Fruit vendors. Angry protesters, some in gorilla masks, have taken to the streets in numbers not seen since the final days of Communism to pelt Parliament and government offices with showers of bananas. In Prague, the capital of the neighboring Czech Republic, large painted gorilla footprints have been splashed along the streets leading up to Penta’s offices.

“You can’t really call it a proper election campaign — no programs or goals of political parties have been discussed,” said analyst Miroslav Kusy. “It’s all about these negative issues.” He said Slovaks — for whom “all politicians are just thieves” — could turn out in record low numbers of just 40 percent in a sign of their anger.

The spy agency — SIS — has refused to confirm the file’s authenticity. SIS heads are suspected of sweeping the wiretap findings under the carpet; police are now investigating following the anonymous leak.

Penta has vowed to clear its name.

The group’s Bratislava spokesman, Martin Danko, says the scandal has “undoubtedly negatively hit our reputation in Slovakia” but claims business has not been affected. In Slovakia, the group owns a health insurance company and two banks and has invested heavily in privatized firms.

The file claims that one former economy minister received the equivalent of $13 million for his assistance and that the head of the National Property Fund took in about $9 million. As with all figures caught up in the scandal, they deny wrongdoing…

Source.

 

What is Penta?:

Penta’s initial capital originates from the business that the two founding members, Marek Dospiva and Jaroslav Haščák, conducted in China. In the early 1990s, during their studies in Beijing, they began importing Chinese textiles to chain stores in Czechoslovakia.

Back in Bratislava, Haščák and Dospiva teamed up with their future partner, Jozef Oravkin, and began trading on the newly expanded stock exchange. At the end of 1993, they founded Penta Brokers and acquired two new partners – Martin Kúšik and Juraj Herko. All of the Penta partners had been schoolmates during their studies in Moscow and Czechoslovakia. The business name, Penta, is a tribute to the five original partners who founded the company.

In 1999, Penta was restructured into a holding with its mother company in Cyprus.

In 2005, Penta was changed its structure to that of a standard private equity company. In 2005, Penta decided to diversify its portfolio. Apart from its buyout business, Penta decided to invest in real estate.

Read more: http://www.pentainvestments.com/about-us/profile/penta-story

Thomas Nicholson: Why Slovakia’s corruption scandal is good for democracy

14 March 2012. He is the man who shook Slovakia. For years, Thomas Nicholson, a Canadian investigative journalist living in Slovakia, tried to publish the “Gorilla” file about corrupted politics in the country. No one would pay attention to it, until the beginning of this year when the documents he had received from a secret service agent surfaced on the Internet. The file had a major impact on the March 10 general elections. “Politicians will have more and more difficulties to continue practice corruption”, says Nicholson, when we met in a Bratislava café on the wake on the election.

Some people say that “Gorilla” pushed more people into social-democratic leader Robert Fico’s arms. What’s your opinion on Fico coming back to power?

I am surprised by how little effect the Gorilla file has had on these elections. The expectation was lower ballot participation because people would lose faith in democracy; the right wing would be absolutely destroyed, because this corruption scandal primarily affects them. They were in power when it happened, but in fact we have had the highest turnout since 2002 (60%). The right was punished but they got a second chance.

There are many positive things about these elections. First of all, the Nationalists did not get back into Parliament. And finally we have Fico as a single party government that will have no excuses, no Nationalists or Populists to blame for corruption or for his failure. It’s a good recipe for a better government than the last time he was in power [2006-2010].

I think all in all, these elections, even though they were bad news for the Right, are about as good as what we could have hoped for. People were tired of instability, stupid arguing and inability to make compromises. Gorilla has not much to do with it in the end. People were tired of instability. Fico himself is not an angel but compared to the right wing he represents stability and that was what people were looking for.

Fico is apparently mentioned in the Gorilla document. Do you think the investigations will continue during the second Fico government?

Fico is not directly threatened by Gorilla, but his party is. Obviously his secretary was in the incriminated flat [in which politicians were meeting members of the Penta financial group and which was wire-tapped by the secret service. The transcripts form the material of the Gorilla file], he accepted money from the Penta financial group to finance his party Smer. Whether he will support or not the investigation, that is very difficult to say. There is lot of public anger about this file, and this anger goes all across the political spectrum. If he wanted to gain political points he would appear to support the investigation. But we know how politics works. He can easily stop it. This file was buried in 2006 by Josef Magala, the head of the Slovak secret service SIS, when police got it under Fico they absolutely failed. So he is not probably going to be enthusiastic about the investigation.

Do you believe that thanks to the revelation of such a scandal Slovakia will become a more democratic country?

I do. It might sound naive, but I have concrete reasons to think that. I don’t think it’s possible anymore for any financial group to do business with the government or politicians, in the future these connections will be very politically fraught with danger for any politicians to have.

As a result of this Gorilla investigation there will be a lot of initiatives that have started focusing on transparency and clarity in politics. I am a good example. I will probably leave journalism to set up a website which will be a database of connections between politics, financial groups and organised crime. It will be publicly available to voters, especially when the next election comes around. All kinds of these initiatives will come up in next four years.

The public has been empowered by knowing how corruption works, it’s a knowledge about oligarchy, politicians, political nominees, how they work. Important is that people know about these connections. You have no governmental groups providing this kind of information. All that changes the environment that we had before. Politicians will have more and more difficulties to continue to practice corruption.

Your book about Gorilla has been banned by a tribunal in Bratislava. But you’ve started publishing some fragments of it anyway in the newspapers. The Penta group, which is considered as a financial shark swimming in the Central European waters, has pressed charges against you. Do you think you can win against them?

The suit against me is 500 pages long. But at the same time they have no foundation to stand on. These people, when they can’t buy someone or scare someone, they run out of ideas because they don’t know anything else. Besides the individual discomfort of being threatened by these people, I don’t need money, I don’t need fame, anything really. And I don’t have anything to lose. As Janis Joplin said a long time ago: freedom’s just another word for nothing left to lose. I don’t really care about their lawsuit. I have the publishing house Petit Press, who represent me. Whether the court will be for me or against me doesn’t make much difference, because Penta lost in the Court of public opinion and I don’t think anybody is afraid of them anymore. So whatever they win in terms of financial squeeze of my double-mortgage house, they are welcomed to it.

Source. 

David Cameron’s Speech, A Bold Mistake. #Davos #WEF #UK

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My lecture of:

David Cameron’s Davos speech in full/ in bold my comments

 Introduction

We meet today at a perilous moment for economies right across Europe.

Growth has stalled. Unemployment is rising. The prospect of Europe getting left behind is all too apparent.

In a globalized economy in which Europe is one of the main buyers, European crisis is alleged to penalise all the countries. So don’t worry European people, the world is not going to ignore you and keep going on the growth path

While China grows at 8%, India at 7% and Africa at 5.5%, the European Commission forecasts the EU will grow by just 0.6 per cent in the whole of 2012 – and even that is assuming the problems in the Eurozone get better not worse.

Ok, what’s the point of this comparison?

First of all, China and India are big protectionist and state subsidised economies. And second of all, for China and India and especially for the African continent, growth figures reflect the fact that they are coming from further. This is the “poor country” effect. As far as I know, when a GDP goes to $2 from $1, then the growth is 100%. Let’s compare what is comparable.

Yesterday in Britain we had the official figures for the final quarter of last year – and they were negative. Other large economies of Europe are forecast to have a similar outcome.

In just four years Government debt per EU citizen has risen by 4,500 euros. Foreign direct investment has fallen by around two-thirds.

And in more than half of EU Member States, a fifth of all young people are now out of work. So this is not a moment to try and pretend there isn’t a problem.

Nor is it a moment to allow the fear of failure to hold us back. This is a time to show the leadership our people are demanding.

I think we agree on that.

Tinkering here and there and hoping we’ll drift to a solution simply won’t cut it any more. This is a time for boldness not caution.

Boldness in what we do nationally – and together as a continent.

 Part 1: How great Britain is doing at the moment

In Britain we’ve had to be bold.

We were faced with the biggest budget deficit in our peacetime history more than 10 per cent of our GDP.

We had the most leveraged banks, the most indebted households and the biggest housing boom. To be cautious would have been catastrophic.

Instead we were bold and decisive. We formed the first Coalition government for 70 years.

We legislated for a fixed-term, five year, Parliament which has helped to give people the confidence of stability and credibility.

We put forward an aggressive set of plans to get to our economy back on an even keel. £5.5 billion saved in the first financial year.

Well, figures are not really supporting Cameron’s optimism. According to the WSJ, “Mr. Cameron is also under growing pressure at home after data released Wednesday showed the U.K. economy contracted 0.2% in the fourth quarter of 2011” and the Guardian stated that “UK economy now only one quarter of contraction away from a double-dip recession”. But worse is to come. PM Cameron explained how he got these good numbers.

Welfare bills – cut.

The idea of changing the system, so that it’s a better option for jobless people to take the job they are given instead of living on the state financial aid, was undeniably good. But most of the unemployed people in the UK are not jobless because they are too lazy or because they’re good in mathematics. The crisis and the job cuts in every sector are a more fundamental cause than the imperfection of the welfare system. Moreover, the jobs that are proposed are less and less sustainable. So at the end of the day, the crisis is to be paid by the poor workers and the system which drew the country to this situation can still go on. 

The cost of government – cut.

Public sector pay – frozen.

The State Pension Age – increased.

Let me give you one example – reform of public sector pensions. This is a difficult issue for any government. We want public servants to have good pensions. We’ve ensured that’s the case but at the same time cut the long term cost in half.

By taking bold decisions to get to grips with the debt, Britain has shown it’s possible to earn credibility and get ahead of the markets.

Hum, why not? But I thank god I am not a British citizen (well, I must confess that in my country things are not better at all). At some point it’s a “way of life” choice. To me that’s clearly not attractive. Where are the perks of being british? Is the government not supposed to protect and to serve the citizens? I guess I am too naïve! But those who want to live in a country which wants to preserve the financial industry, the return on invest for the investors (at least some of them), and so forth… you know where to go! 

Our borrowing costs have fallen to the lowest for a generation.

We will be equally bold in meeting our key ambition: supporting enterprise and making Britain the best place in the world in which to start or grow a business.

What about the best place to live in? I guess Davos was not the right audience for this kind of speeches!

So we’re pursuing an unashamedly, pro-business agenda.

Scrapping needless red tape, simplifying planning and reviewing all regulation. Creating the most competitive business tax regime in the developed world. Making bold investments in new infrastructure, including high speed rail.

Yes, well some of us saw here an attempt to lobby: “He lobbied Bombardier not to quit Britain after losing a contract to build new railway rolling stock to Germany’s Siemens.” (The Guardian).

And while we may be fiscal conservatives, we are monetary radicals injecting cash into the banking system and introducing credit easing measures to make it easier for small businesses to access finance.

The banking system is never loser in our economies. “Too big to fail”, banking industry represents the source of cash for the policymakers, the roots of our GDP and one of the first employers. Can’t fight!

So my message to you – in this special Olympic year for Britain – is that we are a country that is absolutely committed to enterprise and openness.

Come to Britain. Invest in Britain.

Be part of this special year in a truly great country.

Yes, that’s exactly what this speech was: a seduction operation to investors. “His […] objective was to milk the Olympics for all it was worth, showcasing London in the hope that overseas investors will come to Britain. The government is eager to get a return on the £9bn the games will cost.” Especially in times of financial distress.

So yes, in Britain we are taking the bold steps necessary to get our economy back on track.

But my argument today is that the need for bold action at European level is equally great.

Part 2: How bad Europe is doing

Europe’s lack of competitiveness remains its Achilles Heel.

For all the talk, the Lisbon Strategy has failed to deliver the structural reforms we need.

The statistics are staggering. As measured by the World Economic Forum, more than half of EU Member States are now less competitive than they were this time last year while five EU Member States are now less competitive than even sclerotic Iran.

For every Euro invested in venture capital in the EU, five times as much is being invested in the US.

The Single Market remains incomplete. And there are still a colossal 4,700 professions across the EU to which access is regulated by government.

And that’s not all. In spite of the economic challenge, we are still doing things to make life even harder.

In the name of social protection, the EU has promoted unnecessary measures that impose burdens on businesses and governments, and can destroy jobs.

The Agency Workers Directive, the Pregnant Workers Directive, the Working Time Directive.

At least the EU tries to improve our social level. Thank you for pointing out that the EU is not always the big heartless capitalist institution that some people try to make us believe. According to the Guadian, “Phillip Jennings, general secretary of the UNI global union, said the PM’s championing of deregulation was based on a “big, bold lie”. While it was true that some European countries were languishing at the bottom of international league tables for economic performance, those at the top were from northern Europe, where social protection was strong, people were secure to take risks, and paid their taxes.”

The list goes on and on. And then there’s the proposal for a Financial Transactions Tax.

Of course it’s right that the financial sector should pay their share. In the UK we are doing exactly that through our bank levies and stamp duty on shares. And these are options which other countries can adopt.

But look at the European Commission’s own original analysis.

That showed a Financial Transactions Tax could reduce the GDP of the EU by 200 billion euros cost nearly 500 thousand jobs and force as much as 90 per cent of some markets away from the EU.

Yes because we don’t have any industry (or barely) left in Europe and the financial sector is the main job provider but doesn’t and can’t provide a job for everyone. So it does mean that we can’t change the system and leave the financial industry alone. This industry has been the more permeable to crises across History. And Germany’s position is comfortable at the moment partly because they have a real and strong industry and they always saw this big financial thing as an anglo-saxon whim.

Even to be considering this at a time when we are struggling to get our economies growing is quite simply madness.

We can’t go on like this. That is why Britain has been arguing for a pro-business agenda in Europe.

And this is not just a British agenda. Over the last year we have spearheaded work with 15 other member states across the EU – both in and outside of the Eurozone.

This weekend Chancellor Merkel joined me in calling for a package of deregulation and liberalisation policies.

Here we go again. At the beginning of this speech, PM David Cameron was praising China and India for their successes. As I mentioned earlier, these countries are anything but liberalised countries. That’s also the case of the Northern European countries… So where does this lead us? I can’t follow the Britsh Prime Minister’s argumentation.

And our ideas now lie at the heart of what the European Commission is promoting too.

Very reassuring…

Part 3: PM’s suggestions to save Europe

Together we’re pushing for the completion of the Single Market in Services and Digital which could alone add €800 billion to EU GDP and leading the drive to exempt micro-businesses from excessive regulation – both new and existing.

But we need to be bolder still. Here’s the checklist.

All proposed EU measures tested for their impact on growth. A target to reduce the overall burden of EU regulation.

And a new proportionality test to prevent needless barriers to trade in services and slash the number of regulated professions in Europe.

Together with our international partners, we also need to take decisive action to get trade moving.

Now I’m not going to give you the standard speech on Doha.

Last year, at this very forum, world leaders called for an all out effort to conclude the Doha round in 2011. We said it was the make or break year. It was. And we have to be frank about it. It didn’t work.

But let’s not give up on free trade. Let’s step forward with a new and ambitious set of ideas to take trade forwards.

First, rather than trying to involve everyone at once, let’s get some bi-lateral deals done.

Pascal Lamy, director general of the World Trade Organisation said “There is no magic wand. The reasons the multilateral talks are stalled will reappear in bilateral negotiations. Bilateral deals can’t substitute or replace multilateral trade opening.”

Let’s get EU Free Trade Agreements with India, Canada and Singapore finalised by the end of the year.

Completing all the deals now on the table could add 90 billion euros to Europe’s GDP.

And let’s also look all the options on the table for agreement between the EU and the US, where a deal could have a bigger impact than all of the other agreements put together.

Next, let’s be more creative in the way we use the multilateral system.

Far from turning our back on multilateralism, we need the continued work of the WTO to prevent any collapse back to protectionism to ensure we take account of the interests of the poorest countries and to ensure the WTO framework is fit for 21st century trade.

Yeah… Still picturing something that doesn’t exist.

And it means going forwards, perhaps with a coalition of the willing so countries who want to, can forge ahead with more ambitious deals of their own, consistent with the WTO framework.

There are some proposals out there already – like the Trans-Pacific Partnership – but why not also an ambitious deal between Europe and Africa? Or even a Pan-African Free Trade Area?

This is a bold agenda on trade which can deliver tangible results this year. And I am proposing that we start work on it immediately.

Of course, the most urgent question of all facing Europe right now is how to deal with Eurozone crisis. And this is where I believe Europe needs to be boldest of all.

Vital progress has been made. The European Central Bank has provided extensive additional support to Europe’s banks.

As I said, always for banks! And there were no counterparts. Cheap money for three years, and they can do whatever they want with it: to meet the new legal liquidity requirements, to recapitalise their balance sheet, to buy their own bonds (making a benefit), in a less extent to lend this money with a higher interest rate (here again to make easy money), and so forth. Whereas we need cheap credit for people and businesses and cash to support public policy.

Many Eurozone countries are taking painfully difficult steps to address their deficits and to give up a degree of sovereignty over the governance of their economies in the future.

And of course there was the agreement to set up the firewall. These are welcome and necessary steps.

And I don’t under-estimate the leadership and courage that has got us this far. But we need to be honest about the overall situation.

The crisis is still weighing down on business confidence and investment.

A year ago bond rates were 5% in Spain, nearly 5% in Italy, and more than 7% in Portugal.

Today they are still 5% in Spain, up to 6 % in Italy and 14% in Portugal.

So we still need some urgent short term measures.

Part 4: How lucky we are to be outside the Eurozone and how shameful Germany should be to let down its partners

The October agreement needs to be fully implemented. The uncertainty in Greece must be brought to an end. Europe’s banks recapitalised.

As the IMF has said, the European firewall needs to be big enough to deal with the full scale of the crisis.

And Chancellor Merkel is absolutely right to insist that Eurozone countries must do everything possible to get to grips with their own debts.

But we also need to be honest about the long-term consequences of a single currency.

Now, I’m not one of those people who think that Single Currencies can never work.

Look at America. Or the United Kingdom. But there a number of features common to all successful currency unions.

A central bank that can comprehensively stand behind the currency and financial system.

The deepest possible economic integration with the flexibility to deal with economic shocks.

More integration in Europe?

And a system of fiscal transfers and collective debt issuance that can deal with the tensions and imbalances between different countries and regions within the union.

Currently it’s not that the Eurozone doesn’t have all of these it’s that it doesn’t really have any of these.

LOL

Now clearly if countries are close enough in their economic structure, then tensions are less likely to arise.

But when imbalances are sustained and some countries do better than others year after year, you can face real problems.

That’s what the current crisis is demonstrating. Of course private capital flows can hide these problems for a while.

In the Eurozone that’s what happened. But once markets lose confidence and dry up you are left in an unsustainable position.

Yes, tough fiscal discipline is essential. But this is a problem of trade deficits not just budget deficits.

We so agree on that!

And it means countries with those deficits making painful decisions to raise productivity and drive down costs year after year to regain their competitiveness.

But that does not happen overnight. And it can have painful economic and even political consequences. Nor is it sufficient.

You need the support of single currency partners – and as Christine Lagarde has set out, a system of fiscal integration and risk sharing, perhaps through the creation of Euro area bonds to make that support work.

As Mario Monti has suggested, the flip side of austerity in the deficit countries must be action to put the weight of the surplus countries behind the Euro.

I guess this is a gentle way of asking Chancellor Merkel to face her responsibilities as German Chancellor.

I’m not pretending any of this is easy. These are radical, difficult steps for any country to take.

Knowing how necessary but also how hard they are is why Britain didn’t join the Eurozone.

But they are what is needed if the single currency, as currently constituted, is to work.

Of course some people will say, it’s all very well Britain making these points, but you’re not in the Euro and last month you even vetoed adding a new Treaty to the EU.

Let me answer that very directly.

I understand why the Eurozone members want a Treaty inside the EU but if they do, there have to be safeguards for those countries in the EU but who have no intention of joining the single currency.

I didn’t get those safeguards so the Treaty isn’t going ahead inside the EU.

Mmh, so that’s the reason.

But let me be clear. To those who think that not signing the Treaty means Britain is somehow walking away from Europe let me tell you, nothing could be further from the truth.

Britain is part of the European Union. Not by default but by choice.

It fundamentally reflects our national interest to be part of the single market on our doorstep and we have no intention of walking away.

Some of us are hoping that the EU will be more than just a single market in the future.

So let me be clear: we want Europe to be a success.

As a free trade area.

And all the measures we’ll be proposing for next week’s European Council can help achieve that success.

But we want Europe to succeed not just as an economic force. But also as a political force: as an association of countries with the political will, the values and the voice to make a difference in the world.

Yeak, it sounds good, but he emphasized the “association of countries”… therefore we are not really talking about an integrated union.

When that political will is there, we can make a decisive difference.

Part 5: European political influence

Together with President Sarkozy, Britain led the new European sanctions on Iran’s oil exports so the world does not have to confront a nuclear armed Iran or a wider military conflict.

In Syria, we have taken a lead against Assad’s repressive violence and we will not let up until he steps aside.

And of course in Libya we secured a UN Resolution and put together a multinational national coalition faster than at any time in history.

British and French pilots led the way in the early hours when the fate of Benghazi was at stake and together we saw it through, helping the Libyan people overcome tyranny and secure their own future.

So I’m proud to work with my European partners.

And I’m proud of what we can achieve. I stood on this platform only a year ago and said that Europe could recover its dynamism.

I still believe we can. But only if we are bold. Only if we fight for our prosperity. Get to grips with the debt.

Conclusion

Take bold decisions on deregulation, on opening up the single market, on innovation and trade and address the fundamental issues at the heart of Eurozone crisis.

All these decisions lie in our own hands.

They are the test of Europe’s leaders in the months ahead.

Yes, the stakes are high, incredibly high.

But there is nothing about the current crisis that we don’t understand.

Of course, it’s happening all over and over again years after years because we still have the same system.

The problems we face are man-made and with bold action and real political will we can fix them.

The Guardian

 The WSJ

Was it really necessary?

WHO “deeply concerned” by mutated birdflu research By Kate Kelland – LONDON | Fri Dec 30, 2011 4:43pm EST

The World Health Organization issued a stern warning on Friday to scientists who have engineered a highly pathogenic form of the deadly H5N1 bird flu virus, saying their work carries significant risks and must be tightly controlled.

The United Nations health body said it was “deeply concerned about the potential negative consequences” of work by two leading flu research teams who this month said they had found ways to make H5N1 into a easily transmissible form capable of causing lethal human pandemics.

The work by the teams, one in The Netherlands and one in the United States, has already prompted an unprecedented censorship call from U.S. security advisers who fear that publishing details of the research could give potential attackers the know-how to make a bioterror weapon.

H5N1 bird flu is extremely deadly in people who are directly exposed to it from infected birds. Since the virus was first detected in 1997, about 600 people have contracted it and more than half of them have died.

But so far it has not yet naturally mutated into a form that can pass easily from person to person, although many scientists fear this kind of mutation is likely to happen at some point and will constitute a major health threat if it does.

The U.S. National Institutes of Health funded the two research teams to carry out research into how the virus could become more transmissible in humans, with the aim of gaining insight on how to react if the mutation occurred naturally.

WHO also said it was vital that new rules on the sharing of viruses and scientific know-how were enforced to ensure those countries at most immediate risk from H5N1, mainly developing countries in Asia such as Indonesia, Vietnam and others, would benefit from advances in research.

Source.

AWESOME!!! GREAT NEWS!!! And BTW, what’s the point again?

My reading of NY Times’ “Euro Crisis Pits Germany and U.S. in Tactical Fight”

The NY Times titles “Euro Crisis Pits Germany and U.S. in Tactical Fight”.

“Even as European leaders put together their latest response to the euro crisis last week, a German-American clash over how best to manage a vast financial crisis and put the world economy back on a sound footing was set in stark relief. “

According to the NYTimes’ article, there are basically two positions: The one that says that European countries should do anything to satisfy the markets and the one that condemns all quick action and gives priority to structural changes and profound questioning of the past choices.

– German Chancellor Angela Merkel would be the supporter of the latter:

“Chancellor Angela Merkel of Germany defied skeptics and laid the groundwork for a deeper union that she said rights the mistakes of the euro’s birth and puts integration on a stable path for the long term. In the process, she forced German fiscal discipline on Europe as the prescription for combating the ills that afflict the region.”

– And President Obama would be the herald of the first one: “at the heart of the debate is the question of how far governments must bend or even bow to the power of markets. Mr. Obama sees retaining the stability of markets and the confidence of investors as a primary goal of government and a prerequisite for achieving any major changes in public policy.”

And the article to transcribe Almut Möller’ s words who is a European Union Expert at the German Council on Foreign Relations: “It’s a battle of ideas […]. There is a different understanding of how to set up a sustainable economy in a globalizing world. Here there is a major rift.”

To my opinion, it’s not just a difference of strategies but a difference of conceptions, how they consider their duties and how they define financial markets.

Whereas both of them see the market as a source of money to invest in the country, they don’t use it the same way.

It’s clear that the German way is based on the idea that there is no such thing as a market’s will. The market is just the addition of investors (different kinds of investors) just trying to figure out where to invest their money. Basically, there must be two criteria to make a country a safe place for investors.

1) The country has to create value. This may sound obvious but there is value and value. It’s a broad concept and we might need here to return a bit to our manuals of economy. The value is usually associated with the GDP. But there are at least two ways of calculating the GDP: the total of the expenses or the total of the created assets. In the German mind, the value comes naturally from the industry. People’s work aims to produce products and services that will be sold for a certain price and that will count for the revenue of a country. As long as workers keep producing stuff that brings in more than it costs, everything’s fine. The country gets richer and richer and everyone is happy… as long as the fiscal system is efficient enough to guarantee durability.

2) That’s the second element supporting the safeness of country. The fiscal system has to make sure that the state’s treasury will receive a part of the revenue in exchange of the spending for infrastructure. The government asks for money to the financial market, invest in the infrastructure so that the industry can flourish easily and then ask for a return to pay back the debt and hopefully make a profit. It is the government’s duty to manage this fiscal system between the too greedy pole where companies and people are suffocating under the weight of taxes and the too lax extreme keeping the state from the riches while the social subventions increase.

Therefore, the German conception would be that investors will invest in a country where industry is strong because it makes the country’s growth sustainable and where fiscal system is cautious and allows the government to pay its debts without increasing them beyond the no-recovery ceiling. And the government has to invest warily to help the industry without wasting money and use the fiscal policy as a leverage to make its investment work.

On the other hand, we have the American conception, more cicada than ant. Let’s try to summarize this conception in two elements:

1) The Anglo-American approach of the value has much more to do with the addition of the expenses than with the addition of the productions. It is generally admitted in these countries that the West can’t compete with the emerging countries in terms of production costs. The theory of the competitive advantages says that each country should focus on what they do best. The industry has been given up and only survived the stated funded big industries (cars, pharma, and so on), the state funded agriculture, the research and the services. No matter the production, because in these countries the value creation is supported by consumption and consumption is supported by credits and subventions. So the government’s duty is to make sure that its constituents can consume. To do so, the financial system has to be liquid and fluent. And that’s exactly where the financial markets intervene.

2) Financial markets are seen as a whole flow of money going where there is a profit opportunity. All those who work in the financial industry are paid to find a profit… every day. Financial markets are like a big hungry lion looking for investments, credits, in short looking for being placed. Of course, this lion wants a return on invest and as big as possible. Like every starving animal, financial markets think about eating now and just ask for some basic guarantees. In times of economic pressure, they want someone to smooth it up. And that’s the second duty of the State, provide guarantee for its people.

So Anglo-American leaders think that as long as there is consumption, there is growth and growth attracts markets’ money. The government has to reinforce the credibility of its solvency acting of the consumption level in any ways.

The result is that:

“Many Germans also view the Anglo-American infatuation with the financial industry as the root of the West’s decline in competitiveness with the rising East. Big banks create and exploit bubbles, requiring huge bailouts, they say, without creating sustainable growth. Meanwhile, German exports will set a record this year, breaching the 1 trillion euro mark, or roughly $1.3 trillion, for the first time.”

Western “Economists have fretted for months that forcing austerity plans on Europe’s troubled economies — while a good long-term solution — could lead to deep recessions in the short term, compromising any chance for effective change.”

In anayways, the result is that Germany masters the decision making process in Europe. Well they write the check for the rest of Europe (with the support of France, Netherlands, Finland,…), and, above all, they can borrow money at better costs than all the neighbours. That’s the main point. When no one can really afford a massive rescue, Germany still benefits from credibility to borrow relatively cheap money.

“On a political level, Mrs. Merkel could look back on last week’s meeting of leaders in Brussels and declare, “We have succeeded.” Where her mentor, former Chancellor Helmut Kohl, failed, Mrs. Merkel managed to push through enforceable oversight of government spending that would allow the European Court of Justice to strike down national laws that violate fiscal discipline.”

No one here is saying that Germany succeeded only thanks to its economic policy. European Union has profited to Germany and its neighbours’ frivolity contributed to the past good results. But as matter a fact, “Mrs. Merkel, the hard-line austerity queen of Europe, has won a hollow victory, one that will unravel like every other solution that was proclaimed as lasting but proved to be fleeting.”

In opposition, the NY Times awards Mr. Obama of a victory against the markets: “Mr. Obama is fiercely proud of the record he achieved in keeping not just the United States but the entire world out of an acute financial meltdown after 2008, presiding over enormous stimulus spending in tandem with unrestrained support from the Federal Reserve. Now, the president and his allies say that in doing so, they may well have prevented the world from falling into another Great Depression.”

As we said, what the American way would recommend is to increase the consumption by stimulating the economy. Put it short, Mr. Obama recommends that European countries spend money instead of pressuring people. “Strong governments can borrow cheaply, mainstream economists on both sides of the Atlantic argue, and have an obligation to intervene more aggressively than they would in normal times to make up for the slump of private demand.”

Many observers, as well as many politicians, criticize German’s obsession with inflation. Journalists usually explain that it’s because of history and the traumatism of the 1920’s hyperinflation. “Germans are staunchly opposed to any solution that involves greater debt, but even more so to policies that might court inflation, their historic obsession.”

But the reasons might be found also in today’s situation. German people don’t consume a lot and they save as much as they can. Some theorists explained that trend by the protestant heritage. The consequence is that German constituents hold savings in their banks. Therefore, it’s comprehensible that the German Chancellor doesn’t want anything that would increase inflation and shrink the real value of German’s savings.

But the German Chancellor is not the only one taking care of national interests: “President Obama, of course, faces re-election and sees Europe as one of the biggest threats to his chances, as it could tip the American economy back into recession if austerity worsens the slump there. German officials are well aware of that and complain privately that electoral results are Mr. Obama’s chief concern.”

The article describes Germany’s behaviour in a frightening way: “The Germans, for their part, seem almost to welcome the collapse of market confidence: without the rising pressure from markets, Silvio Berlusconi would not have resigned as prime minister of Italy. And most European partners would not have given the European Court of Justice the power to overturn laws inconsistent with fiscal discipline without the incentive of fear.”

Implicitly, the article gives to the “financial markets” the power to overthrow governments without people’s consent. Isn’t it naïve? This is actually the result of the American conception of the financial market. From the German perspective, we may consider that Mr. Berlusconi’s administration was not able to deal with the crisis and then took its responsibilities. A change was needed and when it can’t come from inside then it has to come from outside. Moreover, should we be ready to do whatever it takes to calm down the financial markets? But at the same time, can’t we accept that sorting out this crisis requires a change of government? That’s another debate.

The main point here is that the one who pays the bill is usually to claim the right to impose his way.

However, who is going to pay the bill?: “Americans take a far more accommodating approach to the problem of moral hazard than Germans. The time for a reckoning is after financial stability has been restored, Americans say; otherwise, it is ordinary people, not the rich, who suffer most in a downturn”.

U.S. unemployment rate : improving or not?

Here and there we can hear that the American unemployment rate is decreasing and investors in Europe want to believe in an improvement coming from the West.

Well, I think it’s time to check out the figures. And we should do it carefully. In times of American elections, the unemployment rate is one of the most important indicators of the re-election chances for the current President.

And it’s not easy to understand the job market situation in Uncle Sam’s country.

In a recent interview with CBS “60 minutes” program, President Obama was cautious about the situation of his country. However, Reuters announced that “the U.S. jobs picture has improved in recent weeks, with the national unemployment rate falling to 8.6 percent from 9 percent” (Obama says economic fix could take years, Reuters 9/12/2011). Although there is nothing outstanding in these figures, an improvement in the current situation is more than welcome. The American government even reported last week that “the number of Americans filing new claims for unemployment benefits dropped to a nine-month low last week”. Well done! Of course Reuters noticed that a normal rate in the United States would be between 4 and 5 percent. But an improvement is an improvement. No one could deny it. Some experts are already talking about “recovery” and everyone seems surprised by such a good result. According to Reuters (Jobless claims at 9-month low as recovery quickens, Reuters 8/12/2011, ),”Initial claims for state unemployment benefits fell 23,000 to 381,000, the Labor Department said, the lowest since late February. Economists had expected a smaller fall to 395,000”. Reuters has been taken up by the very serious New York Times. And that’s where I am surprised.

Actually, one week earlier the NYT published an article titled “Signs of Hope in Jobs Report; Unemployment Drops to 8.6%” (NY Times, 2/12/2011). The journalist was wary but wanted apparently to mirror the general optimism. But in the article we learnt many things darkening the general positive conclusion:

– First, the journalist explained that the unemployment rate fell because more American got jobs but also because workers dropped out of the labour force. The question is: what percentage of the rate decrease do the new hired people represent? Or at least, just to get some ideas, we would like to know if the number of new hired people is higher that the number of dropouts?

Well according to the figures highlighted by this article, not exactly. 120.000 persons got a job in November whereas 315.000 people quit their position of job seekers for other reasons than finding a job. “That left the share of Americans actively participating in the work force at a historically depressed 64 percent, down from 64.2 percent in October”.

– Secondly, if we just focus on the existing unoccupied labour force, we count more than 13 million people looking for jobs for an “all-time high” average of 40.9 weeks (or more than 10 months).   

– Thridly and that’s really interesting, people got jobs but for a smaller salary. “Average hourly earnings fell 0.1 percent in November, and […] the share of national income going to labor was at an all-time low last quarter”.

Let’s summarize a bit. The unemployment rate has been reduced of  0,4% last month, because 120.000 people got jobs and 315.000 people didn’t but were not counted as official job-seekers anymore. The rest are still looking for a job and spend even more time on it. And the share of the national income going to worker reached an historical low level. Do you understand my perplexity?  

As I said, an improvement is an improvement and we should celebrate… unless these 8,6% are not the picture of the reality.

    

Articles:

Jobless claims at 9-month low as recovery quickens, Reuters 8/12/2011

http://www.reuters.com/article/2011/12/08/us-usa-economy-idUSTRE7AL14I20111208

 

Obama says economic fix could take years, Reuters 9/12/2011

http://www.reuters.com/article/2011/12/10/us-usa-economy-obama-idUSTRE7B901H20111210

 

Signs of Hope in Jobs Report; Unemployment Drops to 8.6%, NY Times 2/12/2011

http://www.nytimes.com/2011/12/03/business/economy/us-adds-120000-jobs-unemployment-drops-to-8-6.html?ref=unemployment