Monday, 9 August 2010

European Fiscal Federalism (Part 1): Introduction to the “irrefutable”

It seems that weekends are only reserved for Lady Ashton. On Sunday 8 August, Mr Janusz Lewandowski, the (Polish) EU budget commissioner started floating around the idea of a European tax to be levied by the European Commission on banks, financial transactions, carbon emissions (permits) and air traffic. Berlin, Paris and Westminster were not amused, but Poland, Austria, Belgium and Spain seemed to not dislike the idea too much. Anyway, this is part of the ongoing process of preparation for the 2014-2019 budget which will be presented by the afore mentioned Commissioner at the end of September 2010. Most interestingly of all for me was the response that the proposal received from the Financial Times. I believe that unless you've subscribed to the ft, even if only for free, you can't read this article. It's not complicated but I assume not everybody can be bothered to do it. As such I feel compelled to report some of the comments which are rather strong:

Sunday, 8 August 2010

Russian barley and weat and Collapse of civilizations

I'm not quite sure why I though of Jared Diamond's "Collapse" when I read the FT today. May be it was the fact that these three news appeared right after each other:

"Drought doubles price of barley in six weeks"

"Russian farmers on brink of bankruptcy"

"Air Pollution levels soar in Moskow"

"Flash floods hit central Europe"

... I'm not sure. It seemed to me as though some of these bad news might have had something to do with global warming... It probably had something to do with the fact that they say it is the warmest summer in Russia for 100 years, or something like that.

I really hope we are not Middle Age Icelanders or that stupid frog in the pan of boiling water...

Wikileaks - Julian Assange gets an "insurance"

I'm no specialist in Law, or Human Rights. That's for someone else... ;)

Not withstanding that I came accross this news report and found it compelling enough to share it on this blog (despite no one reading it.... ;) ). Now, this website is not about conspiracy theories, or else I would never shut up about UFOs, but I do think that wikileaks is a fascinating, and may be, paradigm changing tool.

The relevant file can be found here at the bottom of the page (if you want to get AES Crypt, necessary to read the file once the encryption key is made available, it can be found here . It's open source material, so it is available to everyone, for free). If for some reason this does not work, please just type "wikileaks Julian Assange insurance" on Google and something along the lines of this will show up.

I encourage everyone to download it. I don't know what it is, but it's 1.4 Gb of something in the middle of files lower than 1Mb in size, so even if it's nothing it's got to be something...

... Hey for all I know it could be something about UFOs... ;D

Anyway, the whole concept of wikileaks is interesting, in that it substancially increases the amount of information available to the public. This is very good, because there's a point where too much information makes it difficult to find what is relevant for you. That is why websites like that one, wikipedia and google are important. Their search engines decrease the length of the sorting out process, thus facilitating the relevant information to the relevant people at the blink of an eye.

Less theoretically so, I guess there's a problem of accountability. "Whoever died and made wikileaks distributor of sensitive information?" you might ask... well this is the problem with the internet. A guy in Sweden can post sensitive material about the USA... Whoever put him in charge? No one. He is just a service provider. It is, however, fair to assume that there is or might come to be some internal panel within "wikileaks" corp that decides whether some files are too sensitive, or whether parts of some files are too sensitive to be made available (names, times, places) in order to protect innocent bystanders. If they don't have that yet, than they ought to come up with it on their own... before someone else does.

Wednesday, 4 August 2010

The Impunity of the USA

Here's something different. This was brought to my attention, and one can't fail to be disturbed by these facts. Below this paragraph you can find the extract of an article from the Guardian, published on Thursday, 20 May 2004, reporting on the abuses endured by female prisoners in Iraq. These abuses seem to fall within the category of human rights abuses and international law violations. Anyway, it's depressingly true. I for one must admit that the most troubling thought I am left with is that of impunity. I wonder what happens to the individual perpetrators... No one wonders about their leaders. It reminds me of that quote from Thucydides that in war "the strong do what they have to and the weak accept what they must"... sad that after some 2500 years the world still works the same way... "

The other prisoners

Most of the coverage of abuse at Abu Ghraib has focused on male detainees. But what of the five women held in the jail, and the scores elsewhere in Iraq? Luke Harding reports
The note claimed that US guards had been raping women detainees, who were, and are, in a small minority at Abu Ghraib. Several of the women were now pregnant, it added. The women had been forced to strip naked in front of men, it said. The note urged the Iraqi resistance to bomb the jail to spare the women further shame.

Late last year, Swadi, one of seven female lawyers now representing women detainees in Abu Ghraib, began to piece together a picture of systemic abuse and torture perpetrated by US guards against Iraqi women held in detention without charge. This was not only true of Abu Ghraib, she discovered, but was, as she put it, "happening all across Iraq".

In November last year, Swadi visited a woman detainee at a US military base at al-Kharkh, a former police compound in Baghdad. "She was the only woman who would talk about her case. She was crying. She told us she had been raped," Swadi says. "Several American soldiers had raped her. She had tried to fight them off and they had hurt her arm. She showed us the stitches. She told us, 'We have daughters and husbands. For God's sake don't tell anyone about this.'"

Astonishingly, the secret inquiry launched by the US military in January, headed by Major General Antonio Taguba, has confirmed that the letter smuggled out of Abu Ghraib by a woman known only as "Noor" was entirely and devastatingly accurate. While most of the focus since the scandal broke three weeks ago has been on the abuse of men, and on their sexual humilation in front of US women soldiers, there is now incontrovertible proof that women detainees - who form a small but unknown proportion of the 40,000 people in US custody since last year's invasion - have also been abused. Nobody appears to know how many. But among the 1,800 digital photographs taken by US guards inside Abu Ghraib there are, according to Taguba's report, images of a US military policeman "having sex" with an Iraqi woman.

Taguba discovered that guards have also videotaped and photographed naked female detainees. The Bush administration has refused to release other photographs of Iraqi women forced at gunpoint to bare their breasts (although it has shown them to Congress) - ostensibly to prevent attacks on US soldiers in Iraq, but in reality, one suspects, to prevent further domestic embarrassment.

(...)

In Iraq, the existence of photographs of women detainees being abused has provoked revulsion and outrage, but little surprise. Some of the women involved may since have disappeared, according to human rights activists. Professor Huda Shaker al-Nuaimi, a political scientist at Baghdad University who is researching the subject for Amnesty International, says she thinks "Noor" is now dead. "We believe she was raped and that she was pregnant by a US guard. After her release from Abu Ghraib, I went to her house. The neighbours said her family had moved away. I believe she has been killed."

Honour killings are not unusual in Islamic society, where rape is often equated with shame and where the stigma of being raped by an American soldier would, according to one Islamic cleric, be "unbearable". The prospects for rape victims in Iraq are grave; it is hardly surprising that no women have so far come forward to talk about their experiences in US-run jails where abuse was rife until early January.

One of the most depressing aspects of the saga is that, unaccountably, the US military continues to hold five women in solitary confinement at Abu Ghraib, in cells 2.5m (8ft) long by 1.5m (5ft) wide. Last week, the military escorted a small group of journalists around the camp, where hundreds of relatives gather every day in a dusty car park in the hope of news.

The prison is protected by guard towers, an outer fence topped with razor wire, and blast walls. Inside, more than 3,000 Iraqi men are kept in vast open courtyards, in communal brown tents exposed to dust and sun. (Last month, nearly 30 detainees were killed in two separate mortar attacks on the prison; about a dozen survivors are still in the hospital wing, shackled to their beds with leather belts.) As our bus pulled up, the men ran towards the razor wire. They unfurled banners and T-shirts that read: "Why are we here?" "When are you going to do something about this scandal?" "We cannot talk freely."

The women, however, are kept in another part of the prison, cellblock 1A, together with 19 "high-value" male detainees. It is inside this olive-painted block, which leads into a courtyard of shimmering green saysaban trees and pink flowering shrubs, that the notorious photographs of US troops humiliating Iraqi prisoners were taken, many of them on the same day, November 8 2003. A wooden interrogation shed is a short stroll away. As we arrived at the cellblock, the women shouted to us through the bars. An Iraqi journalist tried to talk to them; a female US soldier interrupted and pushed him away. The windows of the women's cells have been boarded up; birds nest in the outside drainpipe. Captain Dave Quantock, now in charge of prisoner detention at Abu Ghraib, confirmed that the women prisoners are in solitary confinement for 23 hours a day. They have no entertainment; they do have a Koran.

Since the scandal first emerged there is general agreement that conditions at Abu Ghraib have improved. A new, superior catering company now provides the inmates' food, and all the guards involved in the original allegations of abuse have left. were they arrested? were they tried? Court-martialled?

Nevertheless, there remain extremely troubling questions as to why these women came to be here. Like other Iraqi prisoners, all five are classified as "security detainees" - a term invented by the Bush administration to justify the indefinite detention of prisoners without charge or legal access, as part of the war on terror. US military officials will only say that they are suspected of "anti-coalition activities".

(...)

The women appear to have been arrested in violation of international law - not because of anything they have done, but merely because of who they are married to, and their potential intelligence value. US officials have previously acknowledged detaining Iraqi women in the hope of convincing male relatives to provide information; when US soldiers raid a house and fail to find a male suspect, they will frequently take away his wife or daughter instead.

The International Committee of the Red Cross, whose devastating report on human rights abuses of Iraqi prisoners was delivered to the government in February but failed to ring alarm bells, says the problem lies with the system. "It is an absence of judicial guarantees," says Nada Doumani, spokesperson for the ICRC. "The system is not fair, precise or properly defined."

During her visit to Abu Ghraib in March, one of the prisoners told Swadi that she had been forced to undress in front of US soldiers. "The Iraqi translator turned his head in embarrassment," she said. The release of detainees, meanwhile, appears to be entirely arbitrary: three weeks ago one woman prisoner who spoke fluent English and who had been telling her guards that she would sue them was suddenly released. "They got fed up with her," another lawyer, Amal Alrawi, says.

Last Friday, about 300 male prisoners were freed from Abu Ghraib, the first detainees to be released since the abuse scandal first broke. A further 475 are due to be released tomorrow, although it is not clear if any of the women will be among them. General Geoffery Miller, who is responsible for overhauling US military jails in Iraq, has promised to release 1,800 prisoners across Iraq "within 45 days". Some 2,000 are likely to remain behind bars, he says. Iraqi lawyers and officials aredemanding that the US military hands the prisons over to Iraqi management on June 30, when the coalition transfers limited powers to a UN-appointed caretaker Iraqi government. Last week, Miller said "negotiations" with Iraqi officials were ongoing.

Relatives who gathered outside Abu Ghraib last Friday said it was common knowledge that women had been abused inside the jail. Hamid Abdul Hussein, 40, who was there hoping to see his brother Jabar freed, said former detainees who had returned to their home town of Mamudiya reported that several women had been raped. "We've know this for months," he said. "We also heard that some women committed suicide."

While the abuse may have stopped, the US military appears to have learned nothing from the experience. Swadi says that when she last tried to visit the women at Abu Ghraib, "The US guards refused to let us in. When we complained, they threatened to arrest us."

"

Friday, 23 July 2010

Seven EU banks fail stress tests

According to the BBC:

"They include five Spanish banks - Diada, Espiga, Bianca Civica, Unnim and Cajasur.

The other two were Germany's Hypo Real Estate and Greece's ATEBank."

Here´s what the European Commission has to say about it, and here´s what the CEBS (Committee of European Banking Supervisors) has to say about it.

These stress tests and the transparency they endow the banking industry with are relevant to the extent that they decrease asymmetries of information, and the ensuing uncertainties about the quality of the EU´s banks´ balance sheets. They should thus revive investor confidence in EU banks, and the industry, if as expected they are, overall, good.

For those banks who fail to pass these tests, recapitalization awaits; either through a private take-over(Germany and Greece?) or through public lending (Spain?).

Friday, 9 July 2010

Understanding the financial crisis through the UK's LIBOR

Inspired by the previous post, here's a similar analysis of the Leading interbank offered rates for the pound. I've been compiling some data to do the same for Euribor rates, but it's taking me a while. The source for the events is the BBC.

Tuesday, 6 July 2010

No contagion: The irrelevance of greek debt restructure to healthcare service suppliers

John Dizard of the FT warns us that "Greece is restructuring debt". Now this is misleading but it is well written. It is misleading, because Greece is not restructuring all of its debt, only the debt of the healthcare system. It's a well written title because the author only refers to debt, which implies some debt, not all. It's beautiful when the media uses semantics to say one thing while subliminarly implying its hyperbole. Anyway, this news seems to have been picked up by Yves Smith at naked capitalism who has some further comments on it. Moreover this restructuring is happening despite it's fantastic performance, according to the IMF (via Tony Barber of the FT). Is this horrible? Well its not good, particularly if you are the relevant pharma companies. However I would guess that this is debt that Greece can afford to restructure and that the rest of the EU can afford to let it restructure. I would suppose that Greece's small size makes it a fairly small customer and thus it would have little effect on the world market for health care products. Alternatively, and because I know nothing of the market and regulations of healthcare in the EU, other than what this article tells me, if healthcare is a protected industry then whatever economic hailments may befal the pharma companies will be limited to such Greek companies. In conclusion, there cannot be much or any contagion from this restructuring. This reality of healthcare suppliers is clearly opposed to the contagion that would happen if central government would default to banks . This implies that Greece can restructure all debt that will not affect its economy to a large extent or spread to the economy of its neighbours. As a result, I would expect markets to not react much to this recent revelation as according to the logic I have just outlined central government's agencies' bonds are not the same as central government's bonds. Therefore the restructuring of one should not imply the restructuring of the other. At the same time, according to John Dizard "What the pharmas do [when payment stops or slows] is supply only the basics like penicillin or insulin. At the end they stop doing even that." Now as you'll see from his original post this was said in the context of the Soviet Union, so I don't think that that insight is transferable to Greece, and that we won't see patients dying because the state cannot pay for their medicines. Naked capitalism has some very "inspired" comment on what would happen if this were to happen in Greece... But it seems rather inappropriate to compare Greece to the USSR.

Wednesday, 30 June 2010

Markets, Information, Communication and the Euro-zone Fiscal crisis

Above you can see a segment from an extremely good article by Carmassi and Micossi which can be found at VoxEU. It is about the chronology of the fiscal crisis in Greece and how miscommunication between the European Commission and Germany may have made a mess. To be honest it should be said that they do survey a very limited and rather biased sample of newspapers (Thompson-Reuters and the FT), but it is a fairly acceptable simplification from constructing a weight matrix for a larger number of newspapers that would provide a rather limited improvement of the explanation. A "must read" nonetheless!

Jean Quatremer interviews the Greek finance minister

The full article as it was published online in his blog at the website of Libération, can be found here. I've excluded the introduction. I am impressed by the apparent serenity of the Greek official. Please check ou the original website for more content. There's a particularly intriguing article about British disinformation and the Greek isles of the Aegen sea... You do however need to read French to follow the article. Alternatively run it through google translate. Here it is:

Sunday, 27 June 2010

VoxEU and Policies for a Europe in a Fiscal Crisis

VoxEU, that "not-for-profit" beakon of economic thinking, has released a very good eBook on the ongoing fiscal crisis, edited by Richard Baldwin and Daniel Gros. I take the liberty of pasting the table of contents from the link above. If you have any interest in economic policy and the future of the EU, you can't miss this.

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The eBook’s Table of Contents

Completing the Eurozone rescue: What more needs to be done? Edited by Richard Baldwin and Daniel Gros

Introduction: The euro in crisis – What to do? Richard Baldwin and Daniel Gros

Drawing a line under Europe’s crisis Barry Eichengreen

The Eurozone needs a political union, or at least elements of one Paul De Grauwe

The Eurozone's levitation Charles Wyplosz

Eurozone governance: What went wrong and how to repair it Jean Pisani-Ferry

The European bicycle must accelerate Angel Ubide

What more do European governments need to do to save the Eurozone in the medium run? Thomas Mayer

The narrative outside of Europe about Europe’s fiscal crisis is wrong Avinash D. Persaud

Rethinking national fiscal policies in Europe Philip R Lane

A credible Stability and Growth Pact: Raising the bar for budgetary transparency Michael C. Burda and Stefan Gerlach

Fiscal policy at a crossroads: The need for constrained discretion Antonio Fatás and Ilian Mihov

Fiscal consolidation as a policy strategy to exit the global crisis Giancarlo Corsetti

German spending is not the cure Alberto Alesina and Roberto Perotti

The long shadow of the fall of the wall Daniel Gros