Germany On The Road To Reform?

“Voting for the C.D.U. Sunday meant putting a stop to Schr?der’s reform agenda…..But in the future, if the C.D.U. has power, there is no stopping the reforms.” says Morgan Stanley’s Elga Barsch (remember her?). This argument draws attention to an important enigma which must be puzzling a lot of people. As the New York Times puts it:

If voters are angry about economic legislation that rolls back the social welfare state, and they take out their anger on the governing party, does that make more such legislation inevitable?

As undemocratic as that might sound, investors in Germany seem to think so. As financial analysts said chances of new legislation had increased, the country’s stock market rallied Monday after a stinging defeat in regional elections for the Social Democratic Party of Chancellor Gerhard Schr?der, which led him to call for national elections in the fall.”
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No Fire Without Smoke

First a bit of ‘breaking news’ for German readers: the main factor which has lead to the massive round of cost cutting and staff reductions in Germany has not been the activity of a small group of hedge funds, the main culprit, let’s get it out of the cupboard, has been the high euro.

Whilst the contents of G7 meetings are never formally disclosed, it has been a more or less open secret that for some time now that the focus of recent meetings has been on how to overcome perceived imbalances in the global economy, and in particular how to force through ‘structural reforms’ in countries like Germany and Japan where such reforms are enormously politically unpopular. So the structural reforms have been pushed via the indirect route: making them virually inevitable due to cost pressures in export dependent economies.
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We don’t have a Plan B.

Because no one has one. Well, no one has a public plan about how to handle one or more rejections of the European consitution in upcoming national referenda. But as the French referendum is approaching and the numbers do not look too good for the “yes” camp, unofficial Plan Bs are suddenly everywhere, if only to scare the naysaying Gauls into becoming responsible citizens. I know it’s common knowledge by now, but let me repeat it once more – a French “non” would be the worst case, and have possibly nuclear consequences for the EU as we know it. So scaring the voters a little seems like a reasonable approach to me.

In this vein, Bettina Thalmeyer of the Munich based Center for Applied Policy Research has put together a list of possibilities for the day after (and has published a paper about it (in German)) – hoping that it will not be May 30 (the translation and slight modifications are mine, table in the extended).

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Is this the resolution?

Ten days on, and we may be close to a resolution of the crisis in the Ukraine. There’s definitely been some agreement between Kuchma, Yuschenko, Yanukovich and the mediators (Solana, Adamkus, Kubis and Kwasniewski) but, as ever, the devil is in the details. The basic points seem to be that there will be a revote, there will be constitutional reforms before the vote occurs, protestors will stop blockading government buildings and an all-party working group will implement changes based on the rulings of the Supreme Court.

The questions that remain to be answered though, are:

  • What form will the revote take? The full election, or just the second round? Will new candidates be allowed to stand, and will existing ones be barred from standing? Will more observers be allowed in for the elections, and will Yuschenko’s other requirements, such as limiting absentee ballots, be accepted?
  • What form will the constiutional reforms take? The general opinion seems to be that the Prime Minister and Cabinet will gain powers from the Presidency, but is this to weaken a potential Yuschenko Presidency? And will the reforms address the regional issues?
  • Where do the protestors go now? Blockades are over, but will some remain on the streets to keep the pressure on?
  • Finally, what will the Supreme Court actually rule and when? It seems the election process can’t really begin until its deliberations are completed?
  • As I said, reaction seems to be mixed amongst both the media and the bloggers as to whether this is the end of this stage of the crisis, or whether it still continues. See the Kyiv Post, PA/Scotsman, Le Sabot, Foreign Notes, Notes from Kiev and SCSU Scholars for more.

    In related news, The Argus notes that while the events in Ukraine may have inspired protestors in Tajikstan Uzbekistan, while attention’s been focused elsewhere, Russia is demanding Abkhazia reholds its recent election.

    Finally, I’ve received a report from Tarik Amar, who reported from Ukraine on John Quiggin’s blog last week. He’s been talking to the people in the tent city and you can read the full thing below the fold.
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    Book Review: “European Integration 1950-2003: Superstate or New Market Economy?”

    Once upon a time, there was a large, intellectually hegemonic, somewhat totalising ideology rooted in a heterodox school of economics. Its advocates proposed to make massive changes to the structure of society and claimed that only such a revolutionary realignment could alleviate the contradictions and failures of the existing order and save the world from stagnation and misery. They claimed that their programme would produce immediate results, and that the only reason it wasn’t immediately implemented was because entrenched interests were manipulating the public against them.

    Ultimately, advocates of these principles did gain power in many places and were able to implement elements of their programme. Some came to power through revolutions of various kinds that granted them the near-dictatorial powers they needed to make the changes they believed necessary. Others were able to convince electorates and even elites that theirs was the way of the future. They turned public dissatisfaction to their advantage, especially during economic downturns when people were willing to turn to new solutions and elites feared that the masses would turn against them.

    And, they had some arguable successes, but no unambiguous ones. In some places, particularly those where effectively unlimited power had shifted to them, they often maintained highly inequitable regimes which grew harder and harder to justify, faced ever growing public disaffection, and turned to more oppressive and manipulative means to sustain control. This undermined their movement, but despite the best efforts of their enemies was not quite able to kill it off.

    In states where more democratic methods had been used, the need to compromise with established interests and to sustain public consent forced them to accept measures often contrary to their initial programme. Their ideological identity tended to shift over time as winning elections grew more important than ideological purity and as the drawbacks of real power became apparent. Actually being held responsible for results forced many members of this tradition to accept their enemies’ interests as at least partially legitimate, and compelled them to less radical legislative programmes.

    In some of those nations, these radical parties became increasingly manipulative and difficult to distinguish from their former enemies. But, in a few places, the necessary dilution of their programme brought about an ideological synthesis that appeared successful, and this success in turn showed that the radical programmes they had once advocated were perhaps unnecessary. In the end, ideology had no real hold on them, and the models and methods that seemed to work became the political and economic programme that they were identified with. Their former allies who operated more dictatorial regimes were easily repudiated.

    But others were unable to accept that option. They included dissidents who had been burned by the growing authoritarianism of their own failed revolutions, or who were simply unable to accept that their early ideological purity had become superfluous. They were isolated and powerless, only able to function in the states where their former allies had become moderates, leaving them without meaningful public support. They fumed at the world’s unwillingness to go the way they wanted, and increasingly recast the history of the world in terms of their own ideological predispositions. The past became, in their minds, an unending conflict between an ideologically pure vanguard and scheming established interests, a story of their courageous champions betrayed by back-sliding traitors. Ultimately, the world moved on and these radicals virtually disappeared outside of intellectually protected milieux like privately-funded think tanks and universities.

    Of course, by the now the astute reader will have recognised that I am talking about the history of neoliberalism.
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    Fiscal Tickery

    Thanks David for the link. I haven’t commented on this because like Dutch finance minister Zalm (who I imagine working away weblogging into the early hours under a dim light provided only by his mobile phone) I am tired. I can’t help feeling that everything that needs to be said has already been said, and many times over. Now all we can reasonably do is wait and see the consequences.
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    Like You, Like Me: Like Me, Like You

    I don’t know why I hadn’t seen it before, but it was only while talking with a colleague this afternoon, and being asked what I thought about the unwillingness of the candidate countries to reform that it came to me: with all this coming and going on the Pact, what kind of message is being sent to the new members? Obviously if you give the impression that agreements are not to be complied with, you can get reactions you aren’t expecting, and that you don’t like. The Financial Times article you can find below, begins to give an idea of the size of the looming problem, whilst this one informs us that Standard and Poor’s has just downgraded the Polish currency rating because of concerns about deficits and rapidly growing government debt.
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    PKK ends ceasefire

    PKK ended its five year ceasefire a couple of days ago. This is very significant, and very terrible.

    There’s been a lot of progress in Turkey, but the kind of moderation and impovement of the Turkish attitude and treatment of its Kurdish minority that would put the conflict completely to an end was several years away. Unfortunately, I believe those things, and democratic reforms in general, are now less likely. And of course, new hostilities will be very, very very bad for the poulation of eastern Turkey.

    It’s likely the Turkish military will committ atrocities, which will make the prospect of opening negotiations about EU membership more remote, which will make the forces of reform weaker, which will make EU membership even more distant, etc ad infinitum.

    One good thing is that a lot of reforms have already been implemented in the last year, most lately the military was stripped of their considerable political power, but the reforms need to be implemented on the ground, not just on paper.

    As far as I can tell, the media hasn’t paid much attention to this story, which is sad and also odd since, unlike say the war in Congo, another (scandalously)underreported story, it has obvious geopolitical ramifications, even short-term ones, since, as Tacitus has pointed out it might further destabilize Turkey’s neigbour Iraq.

    I’m hardly an expert on Turkey. I will look for quality analysis on the subject and update this post if I find something.