Monthly Archives: February 2009

According to a combination of 19 national opinion polls, the winner of the June 2009 European Parliament elections will be the centre-right European People’s Party, which is projected to pick up 265 of the 736 available seats. The Socialists are predicted to win 195 seats and the liberals 95, with the rest divided among the far left, Greens and rightwing nationalists.

The centre-right is therefore on track to remain the parliament’s largest force, an outcome that would boost José Manuel Barroso’s chances of reappointment as European Commission president.

http://julienfrisch.blogspot.com/2009/02/european-parliament-elections-2009-55.html

It was the late, great Frank Zappa who said you’re not a real country unless you have a beer and an airline.

Well, Lithuania certainly has the first – a rich, golden brew known as Svyturys. But since January 23, when the main national carrier, flyLAL, declared bankruptcy, it hasn’t had the second. The result, as I discovered last week, is that it is harder to travel to Lithuania than any of the European Union’s other 26 member-states.

To get to Lithuania, I flew with Finnair from Brussels to Helsinki and then on to Vilnius. Door to door, the journey took up an entire working day. On the way back, I flew with Czech Airlines from Vilnius to Prague and then back to Brussels. That was okay, except that my flight from Vilnius left at a ghost-eyed 05:55.

It seems strange, to put it mildly, that you cannot fly direct between the capital of an EU member-state and Brussels, where the bloc’s main institutions – the European Commission, the Council of Ministers and the European Parliament – are based. What message does that send to the rest of the world about EU integration, EU efficiency and EU solidarity at a time of crisis?

Meanwhile, in case you didn’t know, the EU has named Vilnius as this year’s European Capital of Culture. Nice idea – but not much use if you can’t get there, eh?

A few new rules for financial market supervision, a potentially bigger role for the European Central Bank, but no single European regulator. That, in a nutshell, is the message of today’s long-awaited report on how the European Union should reform the regulation of its financial sector.

The report was prepared by a committee of experts led by Jacques de Larosière, the former French central bank governor and International Monetary Fund managing director. It’s likely to set the framework for Europe’s stance at the April 2 G20 talks in London on reshaping the world financial system.

In my view, the most useful proposal is that of creating a European Systemic Risk Council to “pool and analyse all information relevant for financial stability”. This council would be chaired by the European Central Bank’s president, going some way to meeting the ECB’s long-standing wish to be more closely involved in supervising the financial sector.

How effective would such a council be? Obviously, it’s too early to say. But the creation of such a council would address one of the fundamental weaknesses of Europe’s financial sector, a weakness that’s been brutally exposed over the past six months. This concerns systemic risk.

Europe was exceptionally vulnerable to the financial sector instability generated in the US, because national regulators in EU member-states had allowed many large banks on their patches to pile up excessive leverage. That didn’t cause any trouble when the price of risk was low. But when risk aversion returned with a vengeance to the markets, many of Europe’s banks came under intolerable pressure.

By early October, the complete collapse of the European banking system was a distinct possibility – not only because of “contamination” from the US, but because financial sector regulation in the EU just hadn’t been strict enough. Only a last-minute rescue plan devised by leaders of the eurozone and the UK at an emergency summit in Paris saved the day.

The irony is that, now the prospect of total collapse has faded, the EU’s national governments feel less pressure to act as one and come up with a bold vision of regulatory reform. So we won’t have a single pan-European supervisor. Instead, as the de Larosière report puts it, we’ll have “enhanced, pragmatic, sensible European co-operation for the benefit of all”.

Well, it might work. But if there is one lesson for Europe from the financial crisis, it is that national authorities cannot be trusted to perform effective oversight of systemic risk in their banking systems.

Perhaps I’m getting Marxist in my old age, but would it be wrong to suggest that economics is driving most things political in Belarus these days? That’s to say, does the world economic crisis explain the very modest gestures in the direction of political liberalisation that have recently been taken in what is emphatically Europe’s most tightly controlled state?

At the start of this year, with its economy tottering, Belarus devalued its currency by 20 per cent and negotiated a $2.5bn loan from the International Monetary Fund. Belarus has also secured a pledge of $2bn in credits from Russia, the giant neighbour from which it receives almost all its energy supplies at subsidised prices. Belarus has large debt repayments looming. The fact is, Belarus is in deep economic trouble and won’t get out of it without help from the IMF, the European Union and – let this not be forgotten in Western countries – Russia.

At the same time, President Alexander Lukashenko has relaxed political controls a little bit, allowing two independent newspapers to be sold through the state-run distribution network and setting up public consultative councils on human rights and media freedom. Opposition activists in Minsk told me last week that these measures didn’t add up to much and could be reversed at any moment. Moreover, two former political prisoners were rearrested earlier this month on what look like trumped-up charges of causing damage to property.

Nevertheless, EU policymakers have the impression that change – controlled change - may be on the horizon in Belarus. Some trace it to the appointment last July of one Vladimir Makey as the powerful head of Lukashenko’s presidential administration. Makey is an interesting guy. For one thing, he is, so I’m told, of mixed Lithuanian-Scottish origin (is “Makey” the Cyrillic spelling of “Mackay”?). For another, he trained as a foreign linguist and served in the Soviet armed forces in the communist era. About much of the rest of his career his official biography is not so specific.

Neither Lukashenko nor Makey is going to turn Belarus into a pro-Western country. It makes absolutely no strategic sense for a small country that, geographically and culturally, is so close to Russia. But Russia’s military smashing and de facto dismemberment of Georgia last August served as a wake-up call to Belarus’s leaders. If they want their country to remain independent, they need to draw a bit closer to the EU. And that means introducing a degree of political reform.

Economics explains a lot. But in the case of Belarus, so does the Russian bear factor.

Every year, back in communist times, British university students learning Russian used to get the chance to spend three months in the Soviet Union. If you were sent to Moscow or Leningrad (now St Petersburg), you’d hit the jackpot: wild times and minimal amounts of study were guaranteed. Kiev was held to be pretty good, too. But nobody, nobody at all, wanted to go to Minsk. It was as if a Russian learning English had hoped to go to London and found himself instead in Stoke-on-Trent.

Minsk, capital of what used to be called Soviet Byelorussia, and from 1991 the capital of independent Belarus, has changed quite a bit since then. But not in all respects. When I was there on a short trip last week, I found it hard to take my eyes off the huge Soviet-era sign in the middle of town that declares Minsk a “hero city” for its part in the victory over Nazi Germany. Belarus must be one of the few places on earth where the 1917 Bolshevik Revolution is still officially celebrated – not to mention “Tankmen’s Day”, another public holiday with Soviet military origins.

As in the 1980s, Belarus is a pretty difficult place to get into. I entered the country by car at a border point called Kammeny Log on the Lithuanian-Belarusan frontier. A grim sign there warns visitors (there aren’t many of them) that any attempt to bribe the border guards will earn you a fine and up to two years of “correctional labour” – or three years in prison.

For some bizarre reason, a Lithuanian who was travelling with me was ordered to buy health insurance at the border or else she wouldn’t be allowed in. It cost a mere €2, so this wasn’t some sneaky way of extracting large amounts of hard currency from foreigners to stave off national bankruptcy. Rather, it was perhaps just a way of delaying our entry, surmised a European ambassador in Minsk when I told him the story.

Getting out of Belarus is a bit of a palaver, as well. One border guard checks your car to see if there are the same number of people in it as there were when you entered Belarus. Another guard orders you to lift up your car’s bonnet to make sure … to make sure what? That you’re not hiding a revolver, a tin of caviar or a miniature dissident next to the dipstick?

More tomorrow on how the world financial crisis is threatening Belarus and confronting Alexander Lukashenko, Belarus’s authoritarian president since 1994, with some difficult choices between the European Union to the west and Russia to the east.

Members of the European Parliament have devised a scale for classifying documents, from “EU restricted” to “EU top secret”, for documents whose unauthorised disclosure could harm the interests of the European Union or its member states. Documents on legislative procedures won’t be classified.

http://www.europarl.europa.eu/news/expert/infopress_page/016-49529-047-02-08-902-20090216IPR49528-16-02-2009-2009-false/default_en.htm

Here’s the latest news from a Milan courtroom …

http://www.ansa.it/site/notizie/awnplus/english/news/2009-02-17_117317393.html

… Of course, if corporate lawyer David Mills took the bribe (he denies it), then someone must have given it, right?

Apart from all their summits on the recession and financial crisis, European Union leaders are planning to get together in Prague on May 7 to launch something called the “Eastern Partnership”. This is an initiative designed to draw six post-Soviet states – Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine – closer to the EU, without holding out an explicit promise of membership at some future date.

Let’s hope that fate treats the Eastern Partnership more kindly than it has done the EU’s Union for the Mediterranean (UfM), a similar initiative for the bloc’s southern neighbours. This project, the brainchild of French President NIcolas Sarkozy, was launched in Paris to great fanfare in July. Then it nose-dived in January when the Gaza war broke out.

Libya, never an enthusiastic supporter of the UfM in the first place, said scathingly that the project was “a motionless corpse” and “the time-wasting, play-acting and ridiculous spectacles must end”. Of course, Libya doesn’t speak for everyone in north Africa and the Middle East. But there can be no doubt that the Israeli-Palestinian conflict is a curse on the UfM.

As for the Eastern Partnership, it seems another example of how the EU often has its heart in the right place, while lacking the power, conceptual vision and unity of purpose to do what it aspires to do. If the partnership had been in place a year ago, it wouldn’t have done much to affect the course of last August’s Russian-Georgian war, or January’s Russian-Ukrainian gas crisis, or Ukraine’s present economic meltdown.

All six states covered by the Eastern Partnership exist in the shadow of Russia, some more comfortably than others. The EU’s offer of free trade deals, visa facilitation arrangements and seminars to improve understanding of EU laws simply does not match the military, political and economic influence that Russia can wield in the region. After all, one of the favoured six – Georgia – was in effect partitioned by Russia a mere six months ago, in spite of all the EU’s protests, after Moscow’s recognition of the independence of Abkhazia and South Ossetia.

That doesn’t mean the EU should remain inactive. But the Eastern Partnership’s credibility isn’t helped by the open secret that Poland and Sweden proposed the initiative last year largely to counter-balance Sarkozy’s UfM.

However, perhaps the most glaring weakness of the UfM and the Eastern Partnership is that the EU, at the insistence of its budget-conscious governments, is committing only limited funds to both projects. This hasn’t gone unnoticed in the places where it matters. “They have one common problem – they don’t have dedicated finances and support. Whatever isn’t supported by a line in the budget usually doesn’t fly very high,” one interested observer said serenely last week.

Who was he? Vladimir Chizhov, Russia’s ambassador to the EU in Brussels.

Last week I met Ivan Simonovic, justice minister of Croatia, whose bid to join the European Union in 2011 or 2012 depends to a great extent on how well the EU authorities judge the nation’s struggle against organised crime and corruption is going.  Simonovic, an energetic reformer of Croatia’s judicial system, told me that Croatia now had “a stronger system of prevention and suppression of organised crime than in many European Union countries”.

He didn’t mention any countries by name, but it may have been no coincidence that on the same day the European Commission published its latest reports on Bulgaria and Romania, easily the two most corruption-ridden EU member-states. The report on Bulgaria struck me as surprisingly mild, permitting Prime Minister Sergei Stanishev to describe it as “a clear, encouraging signal that we are on the right track”. Still, the report’s final sentence pulled no punches: “No major court decisions on high-profile cases of organised crime have been taken in recent months.”

The assessment of Romania was noticeably harsher. “The pace of progress noted in the Commission’s report of July 2008 has not been maintained… Some investigations of high-level cases remain blocked by the Romanian parliament… The capacity of the judicial system in Romania is still weak… It is important that the Romanian authorities regain momentum on judicial reform and the fight against corruption, so as to reverse certain backward movements of recent months.”

The corridors of power in Brussels still echo to the mutterings of policymakers who think Bulgaria and Romania, which became EU members in January 2007, were admitted too soon into the bloc. Once a country joins, so the argument goes, its fellow member-states and the EU institutions lose much of their leverage to make that new entrant behave better. True, but one could perhaps make the case that Bulgaria’s recent improvement – if that’s what it really is – owes something to the European Commission’s decision last year to withdraw or suspend EU funds worth several hundred million euros.

Overall, though, it is difficult to disagree with the latest verdict from Transparency International, the anti-corruption watchdog: “Since 2007, some anti-corruption measures have been launched by both countries, but results are far from satisfactory since these initiatives are limited to the EU’s minimal mandatory requirements and do not address the core corruption problems faced by Bulgaria and Romania.”

The European Parliament’s foreign affairs committee lent support to the Greek Cypriot government of Cyprus this week by passing a resolution (65 for, four against and one abstention) that calls on Turkey to withdraw its military forces from the divided island in order to promote a negotiated settlement. 

http://www.europarl.europa.eu/news/expert/infopress_page/027-48800-040-02-07-903-20090209IPR48761-09-02-2009-2009-false/default_sv.htm

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Peter Spiegel is the FT's Brussels bureau chief. He returned to the FT in August 2010 after spending five years covering foreign policy and national security issues from Washington for the Wall Street Journal and the Los Angeles Times, focusing on the wars in Iraq and Afghanistan. He first joined the FT in 1999 covering business regulation and corporate crime in its Washington bureau, before spending four years covering military affairs and the defence industry in London and Washington.

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