Tuesday, 29 May 2012

Christine Lagarde. Yeah!


Proverbs 22:7
The rich rule over the poor, and the borrower is servant to the lender.


In the charged pre-election atmosphere in Greece, Christine Lagarde’s comments on Greek taxation have fallen like a bombshell in the public media. They were published in an interview with The Guardian, and hardly contribute to improving the situation, no matter how correct she may be in essence about the need to crack down on tax evasion. I repeat the text here: each reader can draw their own conclusions as to what she meant to say, and what political response to her comments is worth. 


Nevertheless, while this might come as a surprise to Greeks suffering under extreme austerity, some say Lagarde's approach to the eurozone is less draconian than the IMF's traditional policy towards developing world economies. Is it easier to impose harsh demands upon small economies, but much harder to tell difficult truths to the big ones – particularly fellow Europeans?

"No," she says firmly. "No, it's not harder. No. Because it's the mission of the fund, and it's my job to say the truth, whoever it is across the table. And I tell you something: it's sometimes harder to tell the government of low-income countries, where people live on $3,000, $4,000 or $5,000 per capita per year, to actually strengthen the budget and reduce the deficit. Because I know what it means in terms of welfare programmes and support for the poor. It has much bigger ramifications."

So when she studies the Greek balance sheet and demands measures she knows may mean women won't have access to a midwife when they give birth, and patients won't get life-saving drugs, and the elderly will die alone for lack of care – does she block all of that out and just look at the sums?

"No, I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education. I have them in my mind all the time. Because I think they need even more help than the people in Athens." She breaks off for a pointedly meaningful pause, before leaning forward.

"Do you know what? As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax."

Even more than she thinks about all those now struggling to survive without jobs or public services? "I think of them equally. And I think they should also help themselves collectively." How? "By all paying their tax. Yeah."

It sounds as if she's essentially saying to the Greeks and others in Europe, you've had a nice time and now it's payback time.

"That's right." She nods calmly. "Yeah."

And what about their children, who can't conceivably be held responsible? "Well, hey, parents are responsible, right? So parents have to pay their tax."


(c) Philip Ammerman, 2012                      

Buy Buy Greece


Remember to recycle on your way out. 

Tuesday, 22 May 2012

Akis Tsochatzopoulos and the System


Former PASOK minister Akis Tsochatzopoulos has, for whatever reasons, released his private papers to the media. Mr. Tsochatzopoulos is in detention while legal proceedings are underway against him for bribery and money laundering. The origins of this prosecution date back to bribes on military contracts, and were originally revealed by German prosecutors prosecuting the Siemens and Ferrostahl cases, but also by Greek press investigations into real estate purchases by his wife.

A useful summary is available on his Wikipedia profile. According to this, Mr. Tsochatzopoulos held a variety of critical ministerial posts which have long been associated with large-scale public expenditure and all the attendant corruption effects this gives rise to:

·       Minister for Public Works (1981–1985)
·       Minister for the Presidency of the Government (1985–1987)
·       Minister for the Interior (1987–1989)
·       Minister for Transport and Communication (1989–1990) (Coalition Government)
·       Minister for the Interior (1993–1995)
·       Minister for National Defence (1996–2001)
·       Minister for Development (2001–2004)

My intent with this post is not so much to recount the allegations against Mr. Tsochatzopoulos, as to raise some questions for the future:

a.     Is Mr. Tsochatzopoulos’ health and safety in the Greek prison system assured? What steps are being taken to guarantee this?

b.     What judicial and financial resources are being assigned to this case by the interim government, and what commitments are being made by the leading political parties to ensure that these resources will be continued after an election?

c.     How is it that his papers have been leaked, and what right does the entire journalistic community of Greece have to reproduce and comment on them in the public domain? While I can understand that this creates a momentum for prosecution, it also enables potentially guilty parties to make preparations for their own defence (and evasion), which is no doubt already underway.

d.     Tracking down the money trail will involve specialised support and intra-judicial cooperation, notably with Cyprus. What steps are being taken for this to avoid the debacle of that seen in the Vatopedi “investigation”, where Greek requests for information on the beneficial ownership of Cypriot IBC companies were routinely stonewalled?

A final note: assuming this case is indeed investigated and prosecuted to the fullest extent, it will most likely unveil corruption involving not only the PASOK party system, but also major Greek and foreign suppliers, including those of Germany, France, and the United States.

Should this be the case:

e.     What steps will be taken to lift parliamentary immunity and the statute of limitations on crimes committed by individuals under previous governments?

f.      What steps will be taken to assure their safety, but also to assure that they will not flee the country, as other key figures in corruption scandals have done?

In my opinion, the fair and "professional" prosecution and trial of Akis Tsochatzopoulos and his associates would be a serious sign that Greece is finally serious about cracking down on high-level political corruption.

This creates a serious burden of professional practise and objectivity not only among the civil service and justice system, but among the very political parties who have the most to lose from such an investigation and prosecution.

Unfortunately, precisely for these reasons, there may be few chances that a real investigation and prosecution is permitted to take place. We should remember that, as with Menios Koutsogiorgas in 1991, the ultimate statute of limitations is determined by survival.
  

© Philip Ammerman, 2012

Disinformation and Reality in the Persian Gulf


The Economist, in its May 19th issue, (Iran and nuclear weapons: stick now, carrot later) ran a useful summary of diplomatic efforts and options to get Iran to relinquish its nuclear research (weaponisation) programme. According to The Economist, Iran’s new willingness to negotiate is apparently due to the effect of economic sanctions as well as IAEA reporting:

Iran’s return to the table in an apparently more constructive mood marks a sharp change. The latest round of talks failed in January 2011, after Iran’s chief negotiator, Saeed Jalili, set preconditions that other countries found unacceptable. But since the end of 2011 pressure on the regime in Tehran has increased. The UN’s nuclear watchdog, the International Atomic Energy Agency (IAEA), published a damning report detailing its concerns over the “possible military dimensions” of Iran’s nuclear programme.

International sanctions have bitten hard—creating a “world of hurt” in President Barack Obama’s words. America now penalises any foreign financial institutions doing business with Iran’s central bank, the country’s main conduit for oil money, and the European Union has imposed an embargo on Iranian oil, due to come into full effect by July.

According to The Economist, based on IAEA and other sources, Iran may already have sufficient nuclear material for one nuclear bomb:

On all counts, Iran is now very close to the nuclear threshold. It already has about 6,000kg of 3.5% LEU, enough to produce about five bombs-worth of weapons-grade HEU. Using the four centrifuge cascades at the new Fordow enrichment site, near the holy city of Qom, and 15 additional cascades at the main Natanz site (each has between 164 and 174 centrifuges), it has recently tripled production of 19.75% LEU to about 13kg a month. It may now have a stockpile of 150kg—near to the 185kg needed to produce the 15-20kg of HEU required for a moderately sophisticated implosion device (although about twice that amount of 19.75% LEU would be needed for a first bomb because of initial wastage).

The IAEA’s November report also indicated that Iran had probably already tested a sophisticated detonation system for an explosive device suitable for use as a ballistic-missile warhead (albeit the tests are likely to have taken place before 2004, when the weaponisation side of the programme was pursued more energetically than it is today). Informed by the IAEA’s work and intelligence sources, estimates of Iran’s potential timeline to nuclear weapons—if the country were to quit the NPT and throw everything into its programme—vary between just a couple of months for a single crude device and more than two years for an arsenal of three or four nuclear-tipped, solid-fuelled ballistic missiles.

Unmentioned in this report is the military build-up which has been occurring in the Middle East and Persian Gulf over the past 6 months. This force increase is aimed both at Syria and Iran. In Syria, the force increase is meant to both discourage the Syrian conflict from spilling over to neighbouring regions, as well as to signal resolve towards the Syrian government. Recent press reports, however, indicate that Western public opinion is now being prepared to accept a force intervention in the name of protecting chemical weapons stockpiles and intervening against Al Qaeda. The Syrian conflict has already spilled over into Lebanon and Turkey, as well as involving more distant allies and proxies such as Libya and Iran. 

The Washington Post reported on May 19th (US, allies accelerating plans to secure chemical arsenal as Syrian crisis worsens) on plans to secure stocks of chemical weapons or intervene against Al Qaeda in Syria:

The planning, involving intelligence and military officials from at least seven countries, includes detailed arrangements for securing chemical arms with special operations troops in the event that parts of Syria are seized by militants, the officials said. Western and regional intelligence officials are increasingly concerned that Islamic extremists could attempt to seize control of whole towns and districts if the country slides into full-scale civil war.

The same newspaper reported on May 17th that a United Nations expert panel had identified that Iran was shipping illicit weapons to Syria and Afghanistan (Diplomat: UN experts report Syria continues to be main destination of illicit Iranian weapons). Interestingly enough, this article never establishes exactly what the illicit weapons are, although it does hint at “rockets”.

An expert panel monitoring U.N. sanctions on Iran has reported that Syria continues to be the main destination of illicit Iranian weapons, a Security Council diplomat said Wednesday. The diplomat, speaking on condition of anonymity because the panel’s report has not been released, said it identified three new illegal shipments, two involving Syria which was also the previous destination of a majority of Iranian arms shipments.

These press reports come on the heels of earlier reports that some 12,000 special forces troops from the United States and other countries have deployed on a "military exercise" in Jordan. Agence France Presse reports that:

The United States and its allies have started in Jordan what was described as the largest military exercises in the Middle East in 10 years, focusing on "irregular warfare," top officers said on Tuesday.…Eager Lion 2012 "is the largest exercise held in the region in the past ten years," he said at the King Abdullah II Special Operations Training Centre in north Amman. More than 12,000 soldiers are taking part in the war games, representing 19 countries, including Bahrain, Egypt, Iraq, Jordan, Saudi Arabia, Lebanon, Pakistan, Qatar, Britain, France, Italy, Spain and Australia.

In another set of reports, the press has been focussing on the build-up of forces around Iran in the Persian Gulf, and Israeli decision-making on whether or not to take military action.

On April 26th Aviation Week reported (UAE-based F22s a signal to Iran) that the US moved an F-22 wing to the Al Dafra Air Base in the United Arab Emirates.

As tensions between Tehran, Washington and Tel Aviv continue to mount over Iran’s pursuit of nuclear weapons technologies, the U.S. has quietly begun a deployment of its premier stealthy fighter, the twin-engine F-22, to the United Arab Emirates. Multiple Lockheed Martin aircraft will operate out of Al Dhafra Air Base there, industry sources say. This is the same base from which U.S. U-2s and Global Hawk UAVs have been launched since shortly after the 9/11 terrorist attacks.

The Los Angeles Times reported on January 12th (US boosts its military presence in Persian Gulf) of the increase of US forces in the Gulf region. These forces include troop contingents stationed there after their withdrawal from Iraq, as well as naval forces which have been transferred independently:

The Pentagon has stationed nearly 15,000 troops in Kuwait, including a small contingent already there. The new deployments include two Army infantry brigades and a helicopter unit, a substantial increase in combat power after nearly a decade in which Kuwait chiefly served as a staging area for supplies and personnel heading to Iraq.

The Pentagon also has decided to keep two aircraft carriers and their strike groups in the region. This week, the American aircraft carrier Carl Vinson joined the aircraft carrier John C. Stennis in the Arabian Sea, giving commanders major naval and air assets in case Iran carries out its recent threats to close the Strait of Hormuz, a strategic choke point in the Persian Gulf through which one-fifth of the world's oil shipments passes.

Finally, Reuters published an article on May 17th (Iran attack decision nears, Israeli elite locks down) that the Israeli political leadership is in the final process of decision-making as to whether or not to attack Iran, and when:

As the deadline for a decision draws nearer, the public pronouncements of Israel's top officials and military have changed. After hawkish warnings about a possible strike earlier this year, their language of late has been more guarded and clues to their intentions more difficult to discern.

"The top of the government has gone into lockdown," one official said. "Nobody is saying anything publicly. That in itself tells you a lot about where things stand."

This brief review of developments as described in “mainstream” media remind one of previous campaigns to prepare public opinion for war in the Persian Gulf. At this stage, it is difficult to understand whether the military build-up is there to be used, or as a negotiating tactic to force a diplomatic outcome. This is no doubt a deliberate tactic.

What remains to be seen, however, is how long this armed stability will last. It is difficult to imagine that Iran, for example, will risk a direct confrontation. On the other hand, it is difficult to imagine Iran giving up a hypothetical nuclear weapons programme given the lessons of the military interventions of the past 12 years (Afghanistan, Iraq, Libya). The leopard, it is said, does not change its spots, and in this case there are several leopards hunting in the same neighbourhood.


© Philip Ammerman, 2012

Sunday, 13 May 2012

Three Strikes in the Greek Government Formation: One Chance Remains



The struggle to form a Greek government continues. Efforts under PASOK have now ended: the baton is now taken up by President Karolos Papoulias, who is set to begin talks with party leaders on Sunday, extending into Monday.

In the meantime, the split between the Democratic Left (DL) and SYRIZA has widened, with DL’s Fotis Kouvelis accusing Alexis Tsipras of not being serious in his attempts to form a government. This does give rise to hopes that in the next 2 days, a government between New Democracy (ND), PASOK and DL can be formed, with the possible participation of Independent Greeks (IG).

However, this is not a foregone conclusion. Although Fotis Kouvelis has put forward relatively modest terms, it is not certain that all his MPs will support the move. This means that in a coalition government, unless DL party discipline is maintained for what promise to be very difficult expenditure cuts, the coalition government may be short-lived. Kouvelis’ latest statement, that “Mr. Tsipras’ statements after the meeting of three political leaders surpassed every limit of political misery” (Ο κ. Τσίπρας στις δηλώσεις του μετά τη συνάντηση των τριών πολιτικών αρχηγών, ξεπέρασε κάθε όριο πολιτικής αθλιότητας») is indicative of the current climate between the two parties.

In the meantime, new polls give SYRIZA the leading position in case of future elections, with different polls reporting between 20-25% voter support. All other parties are ranked lower compared to their previous voting results. This level of support would undoubtedly allow SYRIZA to form a government, although it would need the support of one more party, probably IG and/or DL, to have a majority in Parliament.

SYRIZA’s economic platform remains undefined, but definitely open to interesting contributions from SYRIZA leaders. Manolis Glezos today suggested that one way for Greece to survive economically was for citizen loans. Citizens making below a certain annual income—EUR 20,000—could volunteer to give a EUR 100/month loan to the government. Citizens making above this amount would be obliged to give the loan. While SYRIZA spokespeople hastened to add that this was a private opinion only, it is a sure sign of the realism, or lack thereof, of SYRIZA’s economic policies.

I give a 55% chance for having a government sworn in within the next 36 hours. This will cause DL and IG to “put up or shut up.” There may also be movement among the Independent Greeks to join a coalition government, although this prospect seems remote.

Failure to do so means elections by June 17th. Should a second round of elections take place, several consequences can be predicted absent a change in creditor policy:

·    There will be large-scale bank deposit withdrawals and an exacerbation of non-collection of taxes between now and then.

·    Greece will probably undergo a second technical default, as it is unlikely that international creditors will continue the bail-out programmes until a stable government is in place. At this point, this doesn’t matter in terms of international refinancing, but we will see a stop in payments to private sector creditors and probably salary or pension payment delays.

·    Upon taking power, SYRIZA will lose another 2-3 months in fruitless negotiations with creditors. By September, however, it is highly likely that a full default of Greece within the Eurozone will take place, together with increasing policy measures described by SYRIZA, including nationalisations, bank account seizures and other interventions.

·    This in turn will prepare the grounds for a Greek exit from the Eurozone, as a SYRIZA failure to comply with the bail-out terms will result in its full isolation in European policy circles. Although I still cannot see how this is legally possible, it will likely be engineered by January 1st 2013. Should a Eurozone exit not take place, Greece will implement a full default within the Eurozone, with all this implies. 

·    Deposit flight, business closure and migration will continue and accelerate in this scenario. Asset prices in Greece will reach record lows as people liquidate at any price. Bank capitalisation will take a major hit, resulting in the probably failure of at least one bank.

·    Political extremism may increase, since SYRIZA’s tactics until now have included occupations and physical attacks against public property and individuals (see their university record). Should Chryssi Avgi remain in Parliament, it becomes extremely difficult to track what will happen. One alternative is that both parties, having gained the respectability of the public office, will stand down their more violent supporters—many of whom have a long track record in street fighting against each other. The history of Greece and any number of other countries, however, indicates that the opposite may take place. In addition to violence between different political groups, I expect increasing violence against journalists, enterprise managers, bankers, certain university professors and other figureheads to take place.

This total break-down in political order is interpreted by some people as a “democratic choice”, and by others will define as blind self-destructiveness. Although I had signalled something like this occurring in February, I did not think at the time that (a) Antonis Samaras would so blindly press ahead with his demand for elections, and (b) that this would occur so quickly, and to such a degree.

In any case, the choice is now crystal clear. No voter, no resident, no worker, no business owner or entrepreneur can pretend to be uninformed of their choices and the consequences thereof. Greece has hit a new low in this past week, and unfortunately looks set to continue its negative trend in the next months.


© Philip Ammerman, 2012
Navigator Consulting Group Ltd.