International (1/2)

PETROL PRICES
At last the price of petrol is going up. This will compel our economies to abandon the all-petrol system, so dangerous for the environment, and, in any case, rather pointless given resource depletion in the medium term. That this new awareness, though somewhat late in developing among our decision-makers, should come 30 years before the big shortage, is pure luck. We might even have enough time to bounce back in order to avoid the destabilization and wars accompanying the scarcity of this energy resource!

THE NOBEL PRIZE IN ECONOMICS 2009
When will Gordon Brown and the Eurogroup receive the Nobel Prize in economics for having broken the financial crisis cycle with inventive, concrete, and bold measures in the current ideological context? We’re tired of seeing the prize generously awarded to cranky ideologue economists, supported by powerful political trends in dominant states, such as Milton Friedman, Hayek.

THE REORGANIZATION OF THE INTERNATIONAL FINANCIAL SYSTEM
It is important to seek and listen to China’s and India’s point of view; together, these countries will account for one third of the world’s GDP by 2030-2050. Indeed, if these countries have been involved in the elaboration of new rules for world capitalism, then, when the next crisis takes place (as it will – crises punctuate the history of capitalism), neither India nor China will regards themselves as big players despoiled by the Big Bad Imperialist Western Wolf. This is important for world stability because these big countries will by then have reached a considerable military potential and one must never forget that, in times of crisis, fascist and other totalitarian ways are fatally attractive to governing elites and exasperated peoples, very easily manipulated at that particular point in history …

ROQUEFORT
Here we are, with another example of U.S. posturing, an intimidation move towards Europeans, a trial of strength with their own allies. What are we told? Roquefort cheese, French ladies and gentlemen, will receive three times the normal import taxes to the United States, with the blessing of the « impartial » WTO, despite a lawsuit.
What can be done? Another lawsuit and, immediately, grant compensation for the U.S.-export turnover loss suffered by the Roquefort producers; this would be financed by the near « voluntary » contribution of bovine meat farmers. The point is that this conflict between Europe and the United States is brought about by the Europeans’ refusal to import hormone-contaminated American bovine meat.
Since this protection benefits European bovine meat farmers, it’s only right that their association should fully compensate the producers of Roquefort cheese, particularly as this production is restricted to a small French village, compared with the huge market of European bovine meat!
Europeans, let’s not be weak! We mustn’t allow American economic interests to dictate our mode of life! When will they consider us as their strategic allies, to be cherished rather than brought to heel?

RUSSIAN GAS
Faced with the efforts towards a stalemate, the European Commission, the member states that are individual victims, the gas industrial suppliers, the other industries suffering losses following shortages, the associations of local communities and the associations of individuals, all these should not wait before launching an avalanche of reparations proceedings under private international law. This is a war of nerves, and time is against the Europeans because reserves are running out. The only goal of each state, Russia and Ukraine, is to force Brussels’ hand into choosing one side against the other, preferably its own. However, it simply is not in our geostrategic interest.

REVITALIZING THE AMERICAN FILM INDUSTRY
The American film industry is no longer successful in the international arena. It invariably revolves around extraterrestrial invasions, bloody and violent police investigations, or hackneyed sentimental comedies. It no longer holds the interest of the international community, particularly the French people.
Whereas French films succeed with humor, emotion, historical biographies, stories of loyal friendship (but unpoetic), English films succeed with socially aware films (Ken Loach). Why could not Hollywood renew itself by finding its topics in the social reality, so special in the U.S., of immigration and the melting pot, of successful social mobility? And all this against an immense rural background and an urban landscape that defines the United States?v In fact, it looks as though the current generation of producers and directors who control Hollywood do not see their country’s social reality as it unfolds under their own eyes. They command budgets that are 100 times superior to those of French productions, but these producers cannot push the emotional buttons that make spectators tick throughout the world.

THE GREEKS MUST PAY THEIR DEBT!
In my family, we like to use the saying, “God helps those who help themselves”. What does this mean when applied to the colossal Greek debt crisis?
What are the facts? Collective corruption, the non-payment of taxes, and an easy life on credit have resulted in bankruptcy for the Greek State. Who is responsible? Those who govern and those who elected them – this is a democracy and the country has regularly witnessed alternating political power.

What can be done? Morality dictates (whether religious or democratic secular morality) that those responsible, namely the whole of the Greek people, should now make amends and embark on in-depth behavior change so as to be able to reimburse the cumulated debt down to the last cent.
To go back to my family’s favorite saying, “God” is the Deus ex machina, in the form of human solidarity, since the European states have decided to help Greece regain macroeconomic stability so that the country may achieve the reimbursement over time and less painfully.
Needless to say, altruism has its own, perfectly understandable, limits that stem from the self-respect of those one wishes to help. In other words, if the Greek people give themselves up to strikes and inappropriate demands, that is, immature behavior in this situation of collective bankruptcy – hence affecting each individual – then it would be madness for the European governments to try and fill up the bottomless pit of Greek debt – the bottomless, leaky barrel of the Danaids that can never be filled up. What I’m saying here is accurate, and will be seen again regarding the Irish, Portuguese, Spanish, Italian, Belgian, etc. and French debt too – let’s not delude ourselves …

STATE-CUMULATED DEBT NEEDS TO BE RESCHEDULED, NOT REDUCED
The best assistance European states can bring to the bankrupt ones is to reschedule the debt to be repaid over time (so as not to smother completely the crisis-ridden countries) and to replace market trading by borrowing at reasonable rates to refinance the bankrupt states (thus taking a real risk of default). What is to be avoided is that public, semi-public and private operators should abandon for good all or part of the debt owed to them. In bankrupt democratic states, it is the people who have put pressure on their elected representatives to be overly pampered in an obviously unreasonable fashion. Hence, it is the people who must take responsibility for their own redemption, under the guidance of those leaders who have made amends and rectified their spendthrift behavior. What is at stake is the morality of money, of bankrupt honor, and the example to be provided to the rest of the world, to those whose behavior falls between thoughtless culpability and criminal predation.

THE AMERICAN DEBT: RAISE TAXES!
The American debt is differently analyzed from the European debt. Whereas in Europe, the debt results from the leaders’ weakness, leaders who cannot refuse the “we want more” chanted by the electorate, the American debt results from the fact that the rich, who hold power, have decided among themselves that they would pay as little tax as possible, even though the redistribution levels in the U.S. are way below the European ones.
Thus, in the final analysis, the American authorities are advised to increase urgently the tax rate for those who can take part in the national recovery effort, namely the wealthiest (the upper class and the upper middle class) and the bloated multinationals that have benefited extensively from the current American system.

GREEK BANKRUPTY: PANDORA’S BOX IS OPEN
By accepting default, even partially, from Greece, the Europeans, with Germany at the helm, have just opened Pandora’s Box of European sovereign debt. From this box will escape all the evils that will bring down Euroland, which will lead to the fall of the dollar itself (also subject to a severe debt crisis); China will see its exchange reserves, so patiently and honestly built up, melt away like snow in the sun. Without those reserves, and in the grip of global stagnation, China will not reach the 7% annual growth that is necessary to maintain social cohesion. A nationalist regime, vindictive towards Europe, will then take the power, and we will thus find ourselves on the eve of World War III – dictatorships against democracy! This predictable chain of events should remind historians of the Weimar debt crisis, followed by the rise to power of National Socialism in self-sufficient countries, on the eve of World War II. The Germans, highly implicated in that history, are inexcusably thoughtless in their current conception of the debt crisis resolution in Europe…
Angela Merkel is demonstrating unbelievable amateurishness. Surely, when one does not know, then one at least listens to one’s advisors! Rather unfairly for Sarkozy, he will be blamed in the 2012 elections for not having succeeded in reorienting our German partners. He will be criticized for the collapse of the Euro, and so will all the current European leaders …

EURO-BONDS: THE LESSER EVIL FOR GERMANY
Euro-obligations will be single rate (medium) obligations undertaken by all the member states of the Euro zone. The more economically stable states, such as Germany, will be at a disadvantage, since they will have to pay a surcharge in terms of their own, isolated signature, but this is the way they will prove their solidarity regarding the more economically fragile states, which, in contrast, will benefit from the system.
Germany’s current Economy Minister, from the FDP party, is opposed to this mechanism, which is yet effective and easy to implement; it is, indeed, the only relevant mechanism. He should be reminded of the following two realities of the situation:
- Germany benefits from the Euro for its exports and specialization within the Euro zone, to the detriment of less industrialized countries that are experiencing de-industrialization and job losses. The structural funds for development are simply not sufficient to offset this negative consequence. Hence, to be fair, Germany ought to assist those countries it is placing in a difficult position through the mechanism of the single currency.
- Should the Euro collapse, following the successive debt crises of the member states, the resurrected Mark will strengthen so much in relation to the other global currencies that a major and lethal recession will occur in Germany, which has based its economic model on exports and will then be penalized by an excessively strong currency. Thus, it is surely a lesser evil to pay the penalties linked to the Euro-obligations; it is in its own well-understood business interests that Germany (authorities and the people) should accept the implementation of the Euro-bonds mechanism.

GERMANY PLAYS A DOUBLE GAME REGARDING THE EURO
Implicitly and unconsciously for certain German leaders, but consciously, explicitly and hidden for others, the Germans play a double game regarding the Euro: they pretend to be happy with the Euro while dreaming of returning to a Mark zone. How else could we account for their stubborn rejection of the only two remedies that could help save definitively the common currency, namely the Euro-bonds (=Euro-obligations) and the monetization of the debt through the European Central Bank along the only working model, that of the American Federal Reserve Bank, even if this means producing controlled but non-lethal inflation – whereas the end of the Euro would be lethal for many European countries?

The Germans will always remind us of their old stories concerning the Weimar hyperinflation in the 1930s; but what’s the connection between a 5% or even 10% inflation rate and the inflation at the rate of 1000% a day? There isn’t any – unless one wants to portray the Germans as an illiterate and pre-logical nation – and if this were true, Germany would not be so successful economically… I tend to believe that after absorbing East Germany and gradually recovering from two world wars, Germany is now holding its head up, becoming more self-confident, forgetting the friends who gave support during the Cold War, and it is picking up old stories, indeed, but these now concern their “space of influence” (which used to be called vital space) within Europe; this, today, goes through a hegemonic Mark, solely driven by Germany’s needs.
M. President Sarkozy, it is high time you were firm with Germany and determined whether the country wishes to remain a reliable partner of Europe as it is being slowly built. If not, appropriate action should be taken so as not to lose too much when the Euro collapses.
In concrete terms, how does one negotiate?
1- Ask diplomats, the secret services, German-speaking professors and intellectuals to put together a detailed press pack containing the title or topic of those interventions that have been published in newspapers, the press in general, or books by German opinion leaders (senior politicians, CEOs of significant companies, intellectuals, academics, experts, bankers) who are in favor of a strong Mark, rid of the Euro. Needless to say, the press pack should be connected to a secure Internet site of the Foreign Affairs Ministry.
2- Require a summit meeting between France and Germany to discuss openly with Angela Merkel and her staff (fully aware of the ins and outs of that meeting) our condemnation of the hidden return of the Mark.
3- Distribute all attending the press pack containing all the intervention titles mentioned above. Ask them to consult it during the meeting. Take time.
4- In theory, you are administering an electric shock and telling them that either their secret plans have been uncovered or they have made the serious error of not being informed of such an important issue. In my family, this type of clarification process is called “rubbing people’s nose in it”. The knock-out or mental chaos that follows will bring about a cognitive reconfiguration (this is what doctors tell me) such that anyone is then willing to start negotiating immediately, and on top of that, from a low bargaining position … Now, let’s play the game!

WHERE IS PLAN B FOR LEAVING THE EURO?
Clarification: I do not wish to see the breakup of the Euro, as the precedent articles have demonstrated. The point is, though, that when one goes into politics, particularly in the macroeconomic and management areas, one needs to consider one’s success chances realistically and one needs to be able to adapt to any situation type to survive. In this case, the deck is stacked, we don’t hold all the cards, and Germany is leading the game. Whatever Nicolas Sarkozy boasts to his potential voters, he has not been able to make Angela Merkel’s position change one inch regarding the Eurobonds and the European Central Bank’s role as lender of last resort. The latest institutional construct puts forward a meeting of 6 wealthy countries; this is simply grotesque because it does not address the short-term issues of credibility of banks and weak states through which the whole Eurozone structure will crumble.
This is yet one more avatar of the German obsession to straighten up the countries’ accounts immediately, with no extension. We know full well that a household with a 100% debt on its annual resources will straighten up in 20 or 30 years, namely with a 5% annual savings. How could we possibly imagine that countries with a 100% debt on their GDP would manage differently? As for the Eurobond-type solutions suggested by the European Commission, they are complex, second-rate ones, probably the result of a negotiated compromise with Germany …
Faced with the German-created deadlock (I have watched the various TV-broadcasted German statements), I repeat my question: what is the progress of our Plan B for leaving the Euro at the least cost to our countries, banks, companies, individuals? Is the plan ready? At the current rate of degradation, and faced with the German wall of refusal, the Euro will collapse before the 2012 presidential elections …

THE MARKETS CANNOT WAIT FOR THE UMPTEENTH INSTITUTIONAL STRUCTURE FOR THE EURO
Germany acts as though there is still time to talk, negotiate, develop, and ratify new and more rigorous institutional structures for the Euro, which could take months, even years. The point, though, is that even if Germany still has the time, other countries do not, facing, as they do, speculation and a crisis of confidence. The timing is simply off. What is needed is that, in return for formal commitments to reduce government deficits in all European countries and bring to zero the cumulated debt over 20 or 30 years, Germany takes a step towards the other countries and accepts concession arrangements in terms of inflation by the central bank, lender of last resort, and debt-pooling through Euro-obligations.
Let’s see this in a war context: it’s as if deployed troops face a huge mine that blocks their progress and their commanding officers, in order to solve the issue, convene an international conference to prohibit mine production and use …. While waiting for the discussions to succeed (and why shouldn’t they?) everybody will be dead on the field. Any response to the current crisis needs to be adapted to the actual issue and, granted, should anticipate a potential repetition.

In the present case, to kill any speculation against the Euro, the European Central Bank has to act like all the central banks in the world that work; in other words, it needs to be a lender of last resort. In return, a bottom-line, constitutional ruling needs to be adopted by the countries that wish to benefit from this ECB guarantee and the Euro-obligations (i.e. the risk-pooling): the objective must be to bring to zero the cumulated debt in the governmental and parastatal accounts, significantly reducing the debt (by at least 1/20° to pay it off in 20 years) in those years of economic growth but allowing a deficit increase in case of recession.
I really do not see myself as Cassandra, but I also believe that Germany’s obstinacy is morbid (in the sense of life-threatening), the result of overconfidence, reckless faith in its analyses, its IQ, its influence, its power over other countries and over markets, a sign of domineering conceit and vengeful pride, as if the Germans are announcing the predicted, yet still resistible catastrophe of the fall of the Euro, to their dear fellow European citizens …

RETRANSFORMING THE EURO INTO COMMON CURRENCY?
I’d like to present the Plan B suggested by Jean Pierre Chevènement, particularly in Sortir la France de l’impasse (Getting France out of the deadlock, pp. 64-66). The idea is to find an intermediate solution between the complete breakup of the Euro and the return to exclusively nation-based monetary strategies on the one hand, and an unmanageable Euro because it does not correspond to a homogeneous economic zone. A former Gaullist minister, M. Chevènement is suggesting the return to a “common” currency of the same type as the one in use at the time of the European currency snake and/or the European Monetary System.
It is good that there is this solution, and that it is viable. But the competition for good ideas and willing actors is still open!

WHAT ARE EUROBONDS = EURO-OBLIGATIONS?
Opinions are divided regarding the limits of European solidarity:
• Should we set up a common debt that all nations in the Euro zone should pay off? Of course not, as the principle of accountability for the debt maker would be denied, the less virtuous countries would rush headlong into more debt, and the prudent (thrifty) peoples would no longer be able to relate to that Europe.
• Euro-obligations should become the sole mechanism used by countries to borrow on financial markets, whereas today France, Germany, Spain, etc. all borrow obligations in Euros at different rates. This mechanism for unifying the instruments to finance the debt of each country would have the merit of averaging the rates of monetary loans: the stronger countries would contribute to monetary solidarity by agreeing to pay extra interest, while the more fragile countries would be supported by paying lower interest rates than the market balance of power would normally allow.
The key is to define carefully the Eurobond=Euro-obligations mechanism and therefore the implied level of solidarity; this is what will make this new financial instrument acceptable by even the most reticent governments.