Category Archives: Europe

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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Europe, France, Government, Islamic State, Society, Terrorism

Europe and Islamist attacks

TERRORISM IN EUROPE

Intro: President François Hollande of France may think that declaring war on the extremists will shore up his own fragile political position

THE INSTINCTIVE RESPONSE on horrors such as those that have taken place in France and Germany in recent days is to look for a pattern, a narrative that might go some way to explain the inexplicable.

The brutal and bloody murder of an 86-year-old priest in Normandy invites such thinking, since it follows years of attacks on Christians in the Middle East: first by al-Qaeda and then by Islamic State of Iraq and the Levant (ISIL). Is radical Islam seeking a war with Christianity?

The very suggestion or notion of such a conflict between faiths would delight followers of ISIL, but it is hard to reconcile with that group’s dreadful persecution of fellow Muslims. ISIL has killed many more Muslims than it has Christians or Jews.

Or are the Islamists targeting Western liberal values more broadly, seeking to reinstate the Islamic Caliphate that once existed across the Middle East and parts of Southern Europe?

If so, that end has been poorly served by the enormity and mayhem in Normandy and Bavaria, lands that were never home to Muslims in the middle ages and which have only come to have Muslim residents as a result of those liberal Western values.

Seeking some kind of explanation for the evil that has been perpetrated is perfectly natural, but we should not impute too much calculation or design to those individuals who carry out such heinous crimes.

Whilst we may look for explanations the truth is there is no rationale or logic, nor any coherent argument in explaining away why Europe is suffering such appalling atrocities on its streets. These are the acts of inadequate and disturbed individuals with a nihilistic desire to destroy anything that challenges them and their ill-formed and warped idea of the world.

We must harden our defences against such acts, but we should be wary of the idea that those acts represent a clash of cultures – for that suggests some sort of parity between irrational extremist ideology on the one hand and a civilisation of shared traditions developed over thousands of years on the other.

President François Hollande of France may think that declaring war on the extremists will shore up his own fragile political position. Such a response, however, also risks validating the arguments of Marine Le Pen’s National Front (i.e. that the French establishment has failed to face up to the existential threat of terrorism).

Security and intelligence operations should be reviewed in the face of these latest attacks, particularly as the numerous intelligence agencies that operate in France are highly dysfunctional and disjointed. Great care must be taken not to dignify the attackers or their pathetic dreams of grandeur. They are murderers only deserving of contempt.

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Britain, Defence, Europe, Government, Military, NATO, Politics, United States

UK commits to defence spending of 2 per cent of GDP for next five years…

DEFENCE SPENDING

Britain has committed in meeting the NATO target of spending 2 per cent of national income on defence, the Chancellor announced in the Budget.

Military chiefs applauded the decision although there are fears of ‘creative accounting’ – because intelligence spending could be included in the figures.

The Commons foreign affairs committee chairman, Crispin Blunt, said: ‘The pledge to meet the NATO target of 2 per cent of GDP on defence is not quite as profound as it appears.

‘The Government is apparently changing the way they measure defence spending to meet this important target by including expenditure outside the MoD budget, including £2.5 billion on the secret intelligence agencies.’

The pledge will likely be welcomed both by NATO and the US, who have both voiced concerns about the importance of meeting this target.

Whilst welcoming the announcement Admiral Lord West warned: ‘If this is creative accounting I would be very disappointed.’

George Osborne said the Government would spend 2 per cent of GDP on the military every year of this decade and raise the defence budget by 0.5 per cent a year in real terms. Until now, ministers had not committed to spending at that level beyond the current financial year – prompting pressure from backbench MPs and military chiefs.

Mr Osborne said: ‘The Prime Minister and I are not prepared to see the threats we face to both our country and our values go unchallenged.

‘Britain has always been resolute in defence of liberty and the promotion of stability around the world. And with this government it will always remain so.’

The Chancellor announced a new fund, worth up to £1.5billion a year, which will be spent on intelligence items such as cyber security.

Recent figures released by NATO revealed that Britain is line to spend 2.1 per cent of national income on defence this year. But this includes all of the £1billion cross-departmental fund known as the Conflict Pool, which is used to support fragile and war-torn states rather than military operations.

The UK is just one of four of NATO’s 28 member states who currently meet the 2% target and last month the U.S. called for billions more to be spent citing the situation in the Balkans. ‘I think it’s clearly the view at NATO that the Ukraine situation has been a game-changer,’ said Robert Bell, the U.S. secretary of defence representative in Europe.

NATO announced in June that it would be ‘naming and shaming’ the Western European countries which failed to spend more than 2% of their gross domestic product on defence, at the same time that US President Barack Obama expressed his concerns at the G7 summit that UK spending would fall.

The 2015 Strategic Defence and Security Review which is taking place this year will review the threats facing Britain and its ability to tackle them. Writing in a British newspaper last month, defence secretary Michael Fallon said that the review will ‘be positive and assertive about Britain’s place in the world: ready, willing and able to act to defend our values as we always have done.’

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