Category Archives: Europe

China, Donald Trump, Europe, Military, Poland, Russia, United Nations, United States

The United States and other global risks

UNITED STATES

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Poland and the Baltic states feel threatened by Russia’s recent deployment of nuclear-capable Iskander missiles in Kaliningrad, the Russian territory wedged between Poland and Lithuania. The U.S. has responded by sending troops and reinforcements to Poland.

Intro: We need to turn away from Donald Trump’s Twitter feed and concentrate on some of the more worrying developments that the United States are involved in.

Much of the attention in the United States over the past week has been on Donald Trump and what the Russians may or may not have got on embarrassing material about his business and private life. The revelations have been fascinating, the risk of Mr Trump being held for blackmail on any hidden agenda with Russia lurid, but, nevertheless, it is no wonder such news has dominated the headlines.

Beneath all of this, however, there has been much more serious global developments with US involvement, eclipsed by the shenanigans and salacious disclosures of the incoming president’s behaviour. But it is best that they do not go unnoticed.

The first was the biggest deployment of U.S. troops in Europe since the end of the cold war. Some one thousand troops (of a promised four thousand) were deployed to Poland, part of President Barack Obama’s response to the nervousness of central European states in the face of Russian aggression. Agitated concerns have been expressed in many European states ever since Russia’s belligerence and actions in Ukraine and the Crimea. Notably, this is the first-time U.S. troops have been permanently stationed along Russia’s western border.

More than 80 main battle tanks and hundreds of armoured vehicles have already arrived in Germany and are being moved into eastern Europe by road and rail.

The Kremlin has been angered by the deployment, branding the arrival of tanks and reinforcements as a threat to Russia’s security.

Last October Russia sent nuclear-adaptable Iskander missiles to the Polish border and in December deployed Bastion anti-ship missile launchers to the Baltic. America has now responded to that threat given its commitment to peace in Europe. An old-fashioned arms build-up is now taking shape.

This is not the only part of the world where Russia and the U.S. are squaring up to each other. In another scenario, Russia has a powerful partner – China. The Asian economic powerhouse has also said U.S. actions in the region, namely in the South China Sea, are a threat to its national security.

In recent days China has sent its only aircraft carrier into the Taiwan Strait, largely seen as a provocative move amid ongoing tensions between Beijing and Taiwan. China claims that Taiwan is its rightful province.

China is also deeply resentful about a joint plan between the U.S. and South Korea to deploy an advanced missile defence system, ostensibly a defence system against any missiles fired from North Korea. China is North Korea’s only ally.

It is understood that representatives from Beijing and Moscow met last week and that they had agreed to take ‘further counter-measures’ in response to the U.S.-South Korea plan. It is not known what those counter-measures will be but it is likely that will be from a range of economic, military and diplomatic relations they have at their disposal.

Mr Trump is already heightening tensions in the region, first with his earlier decision to break diplomatic protocol and call Taiwanese president Tsai Ing-Wen, and then his secretary of state nominee Rex Tillerson saying the U.S. should deny Beijing access to new islands it has built in the heavily disputed waters of the South China Sea. Many in China, reinforced by editorials in Chinese newspapers, believe such U.S. action could result in war.

Rather than being obsessed and preoccupied with Mr Trump’s Twitter feed we should be concentrating instead on the bigger, more pressing, issues.

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Aid, Britain, Europe, European Union, Government, Politics, Uncategorized

Taking back control of the foreign aid budget

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Destinations and allocations of British foreign aid in 2015.

BRITISH FOREIGN AID

Intro: Enshrined into UK law is Britain’s ill-judged legal commitment to spend 0.7 per cent of GDP on foreign aid which ministers are obliged to spend.

The statement made by the European Commission that hundreds of millions of pounds spent on international aid will be returned to the Treasury will be welcome news for Out campaigners. This goes to the heart of the Brexit cause and why British voters chose to leave the European Union: leaving means that decisions taken in the name of British voters, using money that belongs to British taxpayers, are made by people who are directly accountable to those people.

This is one of the starkest examples of what was wrong with Britain’s involvement with the EU; a situation where large sums of money were extracted from taxpayers and handed to unelected and unaccountable Commission officials to spend on aid and vanity projects about which British voters were never consulted. Regaining control of such cash and such decisions is the essence of Brexit.

But, as things stand, that money will not be used very differently. Enshrined into UK law is Britain’s ill-judged legal commitment to spend 0.7 per cent of GDP on foreign aid which ministers are obliged to spend. This grim irony, a policy which is as unpopular with voters as EU membership was, shares similar undemocratic origins: a political project beloved by metropolitan elites who felt entitled to foist that commitment on taxpayers who did not consent to it.

Taking back control of money sent to Brussels, just as voters instructed, reconciles directly to what Brexit means. The same control must now be restored over the aid budget: the 0.7 per cent target should follow our EU membership into history.

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Britain, Economic, Europe, European Union, Financial Markets, Government, Italy, Politics

Italy’s populist vote and the uncertainty of the euro

EUROZONE CRISIS

IN a continuation of a wave of populist voting following Brexit and the election of Donald Trump, Italy has now followed suit. The ousting and forced resignation of Matteo Renzi, a very successful prime minister in Italy, adds yet more resonance to an EU that is breaking at the seams.

Despite what Marine le Pen, the far-right leader of France’s National Front, would like to portray, Italy’s revolt was not particularly based on an anti-EU stance. The top populist parties in Italy, Five Star and the Northern League, are not opposed to membership of the EU itself but they are averse to the Eurozone.

Nevertheless, it will hardly be seen as a ringing endorsement of the actions of the EU. The issues that have driven this latest referendum result – fears over the waves of refugees from Africa, a desire to rise up against the establishment, and unhappiness over the way the economy has been managed – are the same dissenting signals that we have seen elsewhere.

It is the economic impact that we have most to fear from the Italian result. There is also the issue of what that might mean for the negotiations over Britain’s exit from the EU. The Italian economy is far from healthy, despite marginal improvements in unemployment rates, and the banks remain weak. The country’s debt-to-GDP ratio, at a staggering 133 per cent, is second only to Greece’s in the Eurozone. Despite Italy being the Eurozone’s third largest economy, the country has contracted by around 12 per cent since the financial crisis of 2008.

President Sergio Mattarella will be anxious now to ease fears of instability. But regardless of what action he takes there will be a delay as the markets adjust. In reality, he remains helpless as to what he can do to ease those fears. How long that period of instability lasts is the biggest uncertain factor the markets face. Financial markets do not like uncertainty or instability.

There is a risk that the failure of a major Italian bank, such as the troubled Banca Monte dei Paschi di Siena, could set off a wider crisis. Making the banks strong enough becomes more difficult amid political ambivalence.

That could well provoke another crisis in the euro, at a time when Britain will be in negotiations about its withdrawal from the EU. The fusion of these events is not going to help any new euro crisis or aid Theresa May and her government getting a favourable Brexit deal.

The most telling comment yet has come from the German finance minister Wolfgang Schaeuble, who has said there was no reason for a euro crisis but that Italy urgently needs a functioning government. Startling. Mr Schaeuble infers that a currency crisis was not inevitable. Unfortunately, ending the uncertainty is more than just an Italian problem.

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