Archive for the Intl Relations Category

Kori Schake

Sarkozy’s Troubles

France held the first round of its presidential elections over the weekend, and it spells real trouble for President Sarkozy — and German Chancellor Merckel.  Sarkozy took only 27% of the vote, bested by the socialist party candidate, Francois Hollande.  The far left candidate pulled in 11% and can be relied on to offer that to Hollande.  The far right took 18%, but their leader shows no inclination to back Sarkozy.  Absent an April Surprise, it’s difficult to see how Sarkozy gets reelected on May 6th.

Hollande, the socialist, has run a campaign critical of Sarkozy’s divisiveness, and of the EU approach to its financial crisis.  He got a boost early on from German Chancellor Merckel endorsing Sarkozy — French voters prefer the image of a smart French rider astride a strong German horse to that of a bossy teuton meddling in French elections.  Hollande campaigned vigorously on his opposition to the “Merkozy”

In an effort to stave off Eurozone collapse, Chancellor Merckel has intimidated other European leaders into an austerity first strategy.  It is now reaching its political limits of acceptability not only in the political periphery of Greece, Spain, Portugal and Italy, but also in the bedrock of the Eurozone.  The honeymoon is over for technocratic governments in Greece and Italy; both are threatened by elections to overturn austerity.   Spain failed to meet its budget cuts and the newly elected government is facing a public backlash.  Even the Netherlands is likely to call elections after their government failed to agree on needed spending cuts.

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Kori Schake

Spain at the Precipice

Tuesday of this week the government of Spain must return to financial markets to auction 12- and 18-month treasury bills.  Thursday the Spanish government will float two- and ten-year bonds.  While the specific amounts are not yet announced, the government has only financed half of its 2012 debt needs.

Just released Bank of Spain data shows that Spain accounts for 28% of all European Central Bank lending since December, when the ECB set about injecting a tidal wave of liquidity into the seizing European banking sector.  Spain has soaked up $316 billion of the roughly $1 trillion the ECB pumped into Europe in the past six months.  Despite even that injection of capital, Spanish borrowing costs are once again what they were before the ECB effort, and the pace at which banks are resorting to the ECB has tripled since November.

The political maneuver decided on by the ECB — to offer cheap loans that banks could use to purchase government debt (shielding government from markets) — was necessitated by the EU treaty’s prohibition on the Bank loaning money directly to governments.  And the triangulation has actually worked.  But the European Central Bank has concluded its priming of the pump and has neither plans nor money in its bail out funds to revisit that decision.  Nor would Spain meet the EU bail-out criteria, having just announced it is increasing its deficit projections for the year beyond that agreed with the EU.

The bank data reveal that markets have deserted both Spanish government securities and Spanish banks.  Banks could not raise cash in the market; government bonds were not being bought other than by Spanish banks.  It also means the ECB has huge exposure to a Spanish default — virtually guaranteeing that the European Union will need to bail Spain out, if only to prevent the ECB from crashing when Spain falls.

If Spain should fail to meet its capital requirements on Tuesday and Thursday, it could easily trigger a flight from Spanish banks, government intervention to prevent their collapse, and then necessarily an EU bailout of Spain to keep the ECB from being dragged down by a Spanish default.

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Kori Schake

Sunday’s Washington Post featured an extensive article titled “U.S. Sees Gains in Iran Intelligence,” that details efforts by American intelligence services to penetrate Iran’s nuclear program by both technical means and human agents.  Sources in the article describe U.S. drones flying undetected over Iran, the CIA working through countries in the region to place spies in Iran and connect to knowledgeable Iranians.  The tone of the article is self-assured, conveying the message that Iran is not building a nuclear bomb.  It might more accurately be titled We Know What We’re Doing, under the Obama Administration’s byline.

The article is anonymously sourced by “seven current or former advisers on security policy who agreed to discuss U.S. options on Iran.”  Far from being a journalistic scoop of clandestine intelligence operations, the article should be read as a policy gambit by the Obama Administration.  They are attempting to discredit the need for an attack on Iran’s nuclear facilities.

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Robert Barro

Scrap the Euro Now

Until recently, the euro seemed destined to encompass all of Europe. No longer. None of the remaining outsider European countries seems likely to embrace the common currency. Seven Eastern European countries that recently joined the European Union (Bulgaria, the Czech Republic, Hungary, Latvia, Lithuania, Poland, and Romania) have announced their intention to revisit their obligations to adopt the euro.

Two non-euro members of the European Union, the United Kingdom and Denmark, have explicit opt-out provisions from the common currency, and popular opinion has recently turned strongly against euro membership. In Sweden, which lacks a formal opt-out provision (but has cleverly refused to fulfill one of the requirements for membership), a November poll on whether to join the euro was overwhelmingly negative: 80 percent no, 11 percent yes.

In light of the political response to the ongoing fiscal and currency crisis—which is leaning strongly toward a centralized political entity that will probably be even more unpopular than the common currency—I suggest that it would be better to reverse course and eliminate the euro.

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Fouad Ajami

The Arab Spring: What We Know Now

When the Arab spring began a year ago, the Western world was shocked. Liberty seemed to have bypassed the Arabs; they had seemed resigned to tyranny. But once unleashed, the upheaval knew no restraint, and there were both mayhem and promise in the streets of the Arab world. Since then, the rebellions have spawned a steady stream of punditry and conventional wisdom about the Arab spring—some of it vastly mistaken. Let’s explore what really fueled the uprisings.

Myth one: Obama’s 2009 Cairo speech helped inspire the Arab spring.

Nothing could be further from the truth. By the time of these rebellions, the Arab and Muslim romance with President Obama had long vanished. He had gone to Cairo in June 2009 promising a new American approach to the Arab-Muslim world. But embattled liberals in the Arab world (and in Iran) had already begun to see through him. While Obama pledged “a new beginning between the United States and Muslims around the world, one based on mutual interest and mutual respect,” Arabs saw the new American leader’s ease with the status quo.

Obama set out to repair America’s relations with Syria and Iran, and gave George W. Bush’s “diplomacy of freedom” a quick burial. “Ideology . . . is so yesterday,” Secretary of State Hillary Rodham Clinton bluntly proclaimed in April 2009, identifying Bush’s assertive foreign policy as a thing of the past. As upheaval swept through Iran in the first summer of the Obama presidency, the self-styled bearer of a new American diplomacy ducked for cover.

Continue reading Fouad Ajami…

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Michael Boskin

Europe’s Only Choice

Greece, Italy, and many other countries obscured the problem of unsustainable social-welfare benefits for too long. For many of these countries, meaningful reform is now unavoidable.

The social-insurance systems in Europe, as in the United States, Japan, and elsewhere, were designed under certain economic and demographic circumstances—rapid economic growth, rising populations, and lower life expectancy—vastly different from those prevailing today. Governments (the focus is on Greece and Italy at the moment, but they are not alone) promised too much, to too many, for too long. My 1986 book Too Many Promises pointed to the same problem with America’s social-welfare system.

This fundamental problem has now manifested itself in these countries’ unsustainable debt dynamics. Euro membership, which temporarily enabled massive borrowing at low interest rates, merely aggravated it.

Reforming social-welfare benefits is the only permanent solution to Europe’s crisis. One hopes that with the help of national governments, the European Central Bank (ECB), the International Monetary Fund (IMF), and the European Financial Stability Facility (EFSC) the holes in the sovereign-debt-funding dike will be temporarily plugged, and that European banks will be recapitalized. But this will work only if structural reforms make these economies far more competitive. They must both lower the tax burden and reduce bloated transfer payments. Too many people are collecting benefits relative to those working and paying taxes.

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Stephen Krasner

Ending the Double Game

On September 22, 2011, Admiral Mike Mullen, then-chairman of the U.S. Joint Chiefs of Staff, made his last official appearance before the Senate Armed Services Committee. In his speech, he bluntly criticized Pakistan, telling the committee that “extremist organizations serving as proxies for the government of Pakistan are attacking Afghan troops and civilians as well as U.S. soldiers.” The Haqqani network, he said, “is, in many ways, a strategic arm of Pakistan’s Inter-Services Intelligence Agency [ISI].” In 2011 alone, Mullen continued, the network had been responsible for a June attack on the Intercontinental Hotel in Kabul, a September truck-bomb attack in Wardak province that wounded seventy-seven U.S. soldiers, and a September attack on the U.S. embassy in Kabul.

These observations did not, however, lead Mullen to the obvious conclusion: Pakistan should be treated as a hostile power. And within days, military officials began walking back his remarks, claiming that Mullen had meant to say only that Islamabad gives broad support to the Haqqani network, not that it gives specific direction. Meanwhile, unnamed U.S. government officials asserted that he had overstated the case. Mullen’s testimony, for all the attention it received, did not signify a new U.S. strategy toward Pakistan.

Yet such a shift is badly needed. For decades, the United States has sought to buy Pakistani cooperation with aid: $20 billion worth since 9/11 alone. This money has been matched with plenty of praise from U.S. leaders, who have also spent an outsized amount of face time with their Pakistani counterparts. As secretary of state, Hillary Clinton has made four trips to Pakistan, compared with two to India and three to Japan. Mullen made more than twenty visits to Pakistan.

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James Huffman

How Green Is My Folly

European parliamentarians want the upcoming United Nations Conference on Sustainable Development to demand that all nations hew to a sweeping legal claim: that international law forbids nations to amend or repeal laws designed to protect the environment.

Most of the European Parliament’s nonbinding resolution is a catalog of the usual appeals for green this and sustainable that, backed by mind-bending assertions such as the scarcity of resources is a “new and emerging problem” and “that a green economy must be focused on decoupling economic activity from resource use.” Hasn’t resource scarcity been the central theme of economic history? And exactly how would the green economy get by without resources?

The resolution also reiterates the well-trod “precautionary principle.” That’s the idea that the burden is on developers to prove their projects are without risk to the environment, rather than on environmentalists to prove environmental costs of development will exceed the benefits. If adhered to, the precautionary principle is like a trump card that can be played to stop almost any project. It’s the card that author Bill McKibben and his merry band of Keystone pipeline protesters have maneuvered Barack Obama into playing, notwithstanding the U.S. State Department’s carefully considered conclusion that the environmental risks of the pipeline are extremely low in relation to significant economic benefits.

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Ed Meese

Secure Solution

The detention and interrogation facility at Guantánamo Bay, Cuba, which I have visited, has served and continues to serve an important role in the war against terrorists since it opened a decade years ago. It houses high-value terrorist detainees, like Khalid Sheik Muhammad, the architect of September 11.

The military commissions’ courthouse, called the Expeditionary Legal Compound, is a world-class, state-of-the-art facility specifically designed to accommodate the needs of both defense and prosecutors dealing with classified information. The detainees there are represented by civilian and military counsel, and the U.S. Supreme Court has ruled that they enjoy the constitutional right of habeas corpus. The conditions of detention there are safe, secure, and humane, and comply with national and international standards, including Common Article 3 of the Geneva Conventions.

It is important to remember that the United States of America is engaged in armed conflict and has been since September 11, 2001. The September 18, 2001, Authorization for Use of Military Force, relied upon by both the Bush and Obama administrations, gives our military the legal authority to engage the enemy under appropriate circumstances.

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