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, 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.


  • German Defense Minister Karl-Theodor zu Guttenberg says he is rethinking conscription. To cut defense spending, Guttenberg plans to suspend the draft, an official said on June 2. Guttenberg has called for cutting €1 billion from the budget, 100,000 troops, and some major purchases. The last thing he wants is massive defense budget cuts, but by seizing the initiative and threatening drastic cuts, he has guaranteed to make defense a hot issue for Merkel’s struggling coalition government. At the same time, he is bringing Germany’s military profile before the public for more open discussion.
  • Mideast

  • Turkey, Syria, Lebanon and Jordan agreed to establish a High Cooperation Council and free-trade zone at the Turkish-Arab Cooperation Forum on June 10. As the trade between Turkey and the three Arab countries is small, the deal represented more of a political statement than an economic development. Ankara is seeking to use its newfound popularity resulting from the Turkish flotilla incident to increase its influence in the region.
  • The UN Security Council on June 9 approved a fourth round of sanctions on Iran for its nuclear efforts. Unsurprisingly, Tehran said it would continue with its uranium enrichment. The sanctions were weak; Stratfor noted that after years of haggling, “to achieve these sanctions, the United States had to remove almost any teeth they might have.” In fact, the resolution simply enables Tehran to keep defying the world.
  • Iraq’s two largest Shiite coalitions finalized their merger in June to form the biggest bloc in parliament, the National Alliance. The alliance between Prime Minister Nouri al-Maliki’s State of Law (SoL) coalition and the Islamist Iraqi National Alliance (ina) was announced June 10. The move establishes a political bloc that can form a government, pushing out the winning party in the March elections, the Sunni-supported centrist alliance, al-Iraqiya List. The merger further strengthens Iran’s influence in Iraq.
  • Washington seeks to build up “the more moderate elements” of Iran’s Lebanese terrorist proxy, Hezbollah, said John Brennan, assistant to the president for homeland security and counterterrorism, on May 18. Reuters pointed out that Brennan “did not spell out how Washington hoped to promote ‘moderate elements’ given that the organization is branded a ‘foreign terrorist organization’ by the United States.” Brennan’s comments reflect the U.S. administration’s philosophy of appeasement and working with enemies.
  • Asia

  • The March 26 sinking of a South Korean warship created a security crisis on the Korean Peninsula and illuminated Beijing’s expanding regional power. Seoul produced evidence that North Korea was behind the attack, which killed 46 sailors. But the fact that China has refused to blame Pyongyang cripples South Korea’s ability to marshal support for punishment of North Korea. Beijing’s support of Pyongyang is concerning to South Korea, Japan and the U.S., and an indication that China’s rapidly growing influence is not the benign force many Western analysts imagine it to be.
  • On June 13, officials from Taiwan and China decided on the structure of a trade agreement that would entwine the two economies closer together. The deal will remove many of the economic obstacles currently between Beijing and Taipei. Since Taiwanese President Ma Ying-jeou took office in 2008, Taiwan and China have made a series of cross-strait deals, and are now fast-tracking negotiations to bring about a bilateral free-trade agreement. Over 50 years ago, Herbert W. Armstrong predicted that China would recapture Taiwan. This warming relationship is a step toward the realization of this prediction. As it forges deep inroads into the Taiwanese economy, China is “invading” through soft power and diplomacy.
  • Africa/Latin America

  • Two bombs exploded at a crowded political rally in Nairobi, Kenya, on June 13. The blast and the subsequent stampede killed five people and wounded over 100. It brought back memories of the bloody 2008 post-election violence. The rally was organized to oppose a new constitution that will be put to a vote in August. This attack could be a prelude to more violence as voting gets underway.
  • The Honduran government announced on June 15 that the 2009 assassination of Gen. Julian Aristides Gonzalez, director of counternarcotics operations, was the work of a subsidiary of the Mexican drug cartel, the Sinaloa Federation. The fact that a Mexican cartel can murder a high-ranking official of another government is proof of the cartels’ growing strength and reach.
  • Stratfor reported an alleged meeting between representatives of 12 insurance companies and a member of the Gulf cartel at the end of May. The cartel member proposed a “business agreement” in which the companies would pay a monthly fee to avoid being targeted. As the still-massive flow of drugs through Mexico has been restricted by Mexican President Felipe Calderón, crime rings have expanded their “business” into other areas, including kidnapping and extortion.
  • Cuba and Venezuela may have become much closer than previously realized. According to Associated Press, Cuban officers have “sat in high-level meetings, trained snipers, gained detailed knowledge of communications and advised the military on underground bunkers built to store and conceal weapons” in Venezuela (May 31). Venezuelan President Hugo Chávez himself claims the two countries are so close as to be “one single nation.” Retired general Antonio Rivero warned that Cubans could become part of a guerrilla force if Chávez were voted out of office. The two countries, both led by outspoken enemies of the U.S., are definitely drawing closer to each other—and to Iran.
  • Anglo-America

  • On June 9, a massive drug investigation in the U.S. culminated in a 15-state sweep that resulted in the arrest of 429 suspects and seizure of nearly 3,000 pounds of marijuana, 247 pounds of cocaine, $5.8 million in U.S. currency and 141 weapons. During its 22 months, Project Deliverance seized 62 tons of marijuana, 2.2 tons of cocaine, and about a thousand pounds of methamphetamines.
  • In early June, “Super Tuesday” primaries in several states saw a host of women win their party’s nominations for governors’ and U.S. Senate seats, including Republican nominees Meg Whitman, Carly Fiorina, Sharron Angle and Nikki Haley and Democrat Blanche Lincoln. Expect both parties to put forth more and more women for top leadership positions.
  • On June 2, the U.S. Treasury Department reported that federal government debt had exceeded $13 trillion, more than 90 percent of the country’s gross domestic product. According to the White House, the public debt will exceed 100 percent of gdp in the next fiscal year.
  • Less than two weeks after U.S. drones killed one of the highest-ranking terrorists in Afghanistan, the United Nations in June issued a blistering report attacking the legal basis for drone operations. The UN criticizes the use of private contractors at the cia to operate the craft in other nations, warning against a “PlayStation” mentality (referring to a popular video game console) that could spiral out of control if the 40 other countries with drones join in.
  • Advocates of Internet safety raised concerns June 15 that children are being exposed to pornography on the Web of “epidemic proportions.” At the U.S. Capitol Visitor Center, researchers decried the lack of enforcement of existing obscenity laws that protect children. The Washington Times reported that 7 in 10 children have accessed pornography on the Internet accidentally and 3 in 10 had accessed it intentionally. One in four accidentally saw Internet pornography though innocent word searches. The average age of exposure was 11, with some viewing it as early as 8 years old.
  • The British government has axed £10 billion in commitments that the previous administration had made, the London Times reported in mid-June. Two dozen projects were cut by the Treasury, which said the decision was “difficult and painful” but that the Labor administration had promised to spend money “it simply did not have.”
  • In May, it emerged that the United Kingdom will pay the EU 60 percent more next year. Its net contribution to the EU will rise from £4.1 billion this year to £6.4 billion in 2010/11. Although the figure was released with a minimum of fanfare, it will fuel the debate over whether or not Britain gains from being in the EU. More than a quarter of UK voters in the 2010 European elections supported parties that want to take Britain out of the Union.
  • Britons started watching the first-ever television advertisement for abortions on May 24. An international charity that performs 65,000 abortions per year in Britain is airing the ad. About half of Britain’s 42,000 teenage pregnancies each year end in abortion. One third of British women have had an abortion. More than 90 percent are funded by the National Health Service.