1. Why Europe could turn ugly
Europe’s financial crisis continues to dominate the news. The euro, and therefore the whole EU, is on the brink of collapse, German Chancellor Angela Merkel told the German parliament on May 19. She announced a unilateral ban on risky trading practices, including short-selling—essentially betting that the price of a stock will go down—on Germany’s most important stocks. The move triggered panic over the future of the euro: Shares in London, Paris, Berlin and Madrid all fell by about 3 percent, and the euro fell to its lowest-ever value, though it made a slight recovery shortly after.
On June 4, Hungary announced that its budget deficit for 2010 is projected to be over 7 percent of gross domestic product—almost double the earlier estimate of 3.6 percent. On June 8, Hungarian Prime Minister Viktor Orban unveiled new austerity measures to bring the country back on target.
Also in June, fears arose that Spain was in talks with the EU, the International Monetary Fund and the United States concerning a €250 billion rescue fund—a bailout over twice as large as the €110 billion Greece received. European leaders met on June 17 but denied that a Spanish rescue package was being discussed. That didn’t stop traders worrying, however. Foreign banks refuse to lend to Spanish banks, firms and the government. A Spanish financial crisis would be far worse than a Greek one, simply because Spain’s economy is five times larger.
As they react to the crisis, leaders across the Continent are slashing their budgets. Germany is leading the way, with over €80 billion in cuts planned by 2014. Greece and Italy are planning to cut €24 billion each, France and the Netherlands €45 billion each, Ireland €2 billion, and so on. Naturally, trade unions are not happy, raising the specter of nationwide or even continent-wide strikes. The months ahead could be extremely volatile politically and socially for Europe.
German President Horst Köhler resigned on May 31. Though the role is largely ceremonial, the surprise move shook the government. Merkel’s coalition, which helped install Köhler in 2004, was already struggling. It has lost elections in Germany’s most populous state and in its upper house of parliament.
2. A partnership to keep an eye on
The European Union and the South American trading bloc Mercosur agreed May 17 to resume free-trade talks that stalled in 2004.
The EU also formed its first-ever free-trade agreement with Central American nations—Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama—the next day at a summit in Madrid between European leaders and leaders from Latin America and the Caribbean.
The EU is the largest investor in Latin America and the region’s second-largest trading partner. European President Herman Van Rompuy said, “EU and Latin America are natural partners and allies. Our countries are linked by strong historical, cultural and economic ties.”
In May 1962, the Trumpet’s predecessor, the Plain Truth, declared that “the United States is going to be left out in the cold as two gigantic trade blocs, Europe and Latin America, mesh together and begin calling the shots in world commerce.” For more on Europe’s role in Latin America, request our new booklet He Was Right and read “Europe’s Latin Assault.”
3. ‘Repeat of the 1930s’
European leaders agree. European Commission President José Manuel Barroso and the general secretary of the European Trades Union Congress, John Monks, have said that Europe is headed for a repeat of the 1930s, though they disagree on how this will come about.
“This is extremely dangerous. This is 1931, we’re heading back to the 1930s, with the Great Depression, and we ended up with militarist dictatorship,” Monks said in a June 14 interview with EU Observer. “I’m not saying we’re there yet, but it’s potentially very serious, not just economically, but politically as well.”
Monks fears the austerity measures being enacted across Europe will push the Continent to the brink of dictatorship. Barroso believes instead that without the austerity measures, Europe is bound to fail.
“I had a discussion with Barroso last Friday about what can be done for Greece, Spain, Portugal and the rest, and his message was blunt: ‘Look, if they do not carry out these austerity packages, these countries could virtually disappear in the way that we know them as democracies. They’ve got no choice, this is it,’” said Monk. “He shocked us with an apocalyptic vision of democracies in Europe collapsing because of the state of indebtedness.”
The two opinions of these men illustrate the catch-22 Europe has found itself in. If it implements the cuts necessary to put its economy in order, it risks triggering massive unrest, leading to the rise of extreme parties and policies and a return to the 1930s.
Yet if it doesn’t, then entire nations could go bankrupt, leading to chaos and unrest, which could also usher in the dictatorships of the 1930s.
These well-informed leaders are warning of a real danger: that 1930s-style dictatorships could well return! Think about what this could mean: 1930s-style dictatorships lead to 1940s-style war.
4. How not to have peace
Palestinian Authority Prime Minister Salam Fayyad has been photographed burning Israeli products as a means of boosting the PA’s political standing among Palestinians.
“The PA prime minister did not choose to be photographed next to children, nor among factory workers, nor at a hospital, but while burning Israeli-made products,” the Jerusalem Post reported June 12. “It is an act that involves more than a small degree of incitement against a country with whom, so he claims, he wishes to establish peaceful and neighborly relations.”
The PA government has been running an aggressive campaign over recent months against products that originate in industrial areas beyond the Green Line, the Post reported.
In addition to burning Israeli products, this campaign involves “the boycott of these products from stores, the seizure of trucks with these goods and even threats of imprisonment against those who dare to engage in the trading of such products” (ibid.).
How this is meant to benefit the 25,000 Palestinians who work in these Israeli factories and have no alternative employment is clearly not a consideration. Evidently this is a political act aimed at competing with the radical group Hamas for Palestinians’ support. It is yet another indication that the Fatah-controlled PA is not the moderate force for peace that much of the Western media and governments portray it to be.
Germany and the Palestinian Authority (PA) began the new German-Palestinian Steering Committee on May 18. German Foreign Minister Guido Westerwelle and PA Prime Minister Salam Fayyad co-chaired the meeting. The committee is set to meet once a year, similar to the joint cabinet meetings Germany holds with Israel. Westerwelle also announced that Germany would give the PA $62 million in aid for 2010. Watch for Germany to continue seeking ways to get more involved in the Mideast peace process.
5. Key U.S. base could get axed
Amid ethnic violence in Kyrgyzstan, interim Deputy Prime Minister Azimbek Beknazarov threatened on June 17 to shut down the U.S. military airbase in Manas. His demand: that the United Kingdom extradite Maxim Bakiyev, the son of the country’s former president. Kyrgyzstan accuses the exiled former president of fomenting chaos in the country and wants Britain to stop giving him and his family members asylum.
The Kremlin has been pressuring Kyrgyzstan to close Manas, America’s last military base in Central Asia. Speculation is rife that Moscow is awaiting Kyrgyzstan’s commitment to shut Manas down before it agrees to intervene and bring an end to the ethnic violence. With 50,000 American troops passing through Manas on their way to and from Afghanistan, the base is vital to Washington, but Moscow hates the U.S. presence in its backyard.
Whether because of London’s refusal to extradite Bakiyev, or as a means of securing Russian assistance, Bishkek appears prepared to close the base. Even the mass instability in Kyrgyzstan is threatening operations at the base.
On Aug. 8, 2005, theTrumpet.com wrote, “The eviction of America from Central Asia will constitute a severe geopolitical defeat for the U.S. and significant win for Russia and China. … We can expect Russia and China to succeed in evicting America from Central Asia.”
Whether blatantly or subtly, Russia will use its growing leverage to accelerate the demise of U.S. influence and to further tip the scales of power toward Moscow.
Japan’s Prime Minister Yukio Hatoyama announced his resignation on June 2 after he came under fire for failing to keep campaign promises to remove a U.S. military base from Okinawa. Two days later, former Finance Minister Naoto Kan was named the nation’s fifth prime minister in less than four years. Kan has pledged a “big and sustained” effort to reduce Okinawa’s burden in hosting the U.S. base. He could be key in reorienting Tokyo’s foreign policy away from America and toward Beijing.