Uncertainty for Portugal, Spain and... the Euro?

Portugal has asked the European Union to lend it tens of billions of Euros, becoming the third member of the Euro-zone asking for assistance after Greece and Ireland. The ramifications of the decision of the Portuguese government, will almost certainly involve cuts on public expenditures and wages of the Portuguese people. However, the consequences of the Portuguese bail out might lead investors to ask themselves who is going to be next?

The answer to that question is Spain.  The consensus among financial analysts is that Spain will not need to be bailed out by the other members of the European Union. However, the Spanish unemployment is hovering around 20% and the economy has not recovered yet from the housing bubble. Though at this time Spain seems to be secure from financial disaster, it only takes a rumor or a negative economic  indicator for speculators to begin a process of destruction that will not only affect Spain's fate but the Euro itself.

The Spanish economy is twice as big as the  economies of Greece, Portugal, and Ireland combined. The size of the Spanish economy coupled with the exposure of other European banks make Spain an economy "too big to fail". If a country or a financial institution is too big to fail it means that its failure could create a "systemic risk". The "system" here is the Euro-zone.

Though the European experiment is a great achievement in human history, and its further integration, the Euro-zone, might come to an end. If the Spanish economy fails, then the usual question the markets ask is "who is next"? If followed to its logical conclusion there will not be a "next" country. That is due to, if not all, most European countries, even the strongest like Germany and France, have high foreign debts. If Spain fails then the cost of borrowing for the other European countries will increase leading to a downward spiral that has no end in sight.

The aforementioned scenario is not likely to happen. That is due to one main reason. The foreign or domestic investors that have lend their money to European countries do not wish their investments to evaporate. Because if the Euro-zone fails and the European countries revert to their old currencies, it is certain that the investors will lose a great deal from their investments. And I am sure investors are rational individuals.

Unfair Dismissal

John Galliano, Christian Dior's chief designer, has been fired for anti-Semitic comments he made at a Parisian cafe. I am not surprised at the action taken by Dior but, is it the right decision?

John Galliano with Charlize Theron. Letter Chen/Flickr

In France, inciting racial hatred is a crime and the local police is already investigating the incident. So why should a person lose both his job and face criminal prosecution? Is it not one punishment enough? I think it is.

It is an undisputed fact that Galliano's racist remarks do not affect in any way, shape, or form his craft. Firing a person for abhorrent comments he has made, which he might face charges about, is not the right one. It is true that his remarks might alienate customers from the Dior brand, but either he made the racist comments or not his ability to create high fashion clothing remains the same. Galliano's firing speaks volumes about the people who made the decision to fire him. Their political correctness, could have been shown by strongly condemning Galliano's comments and disassociating the brand from those statements. Firing him, is blatantly overzealous. Separating the professional and private aspects of one's life, although difficult, it is vital.

The rapid response of Dior in firing Galliano is another example where our desire to seem politically correct leads us to incorrect decisions. Other examples of excessive political correctness include Don Imuse's comments, Keith Olbermann's temporary suspension for contribution to members of Congress etc.

In conclusion, we all agree that the comments made by Galliano and Imus are flat-out wrong and despicable, and Olbermann's action incorrect. However, we should not correct a wrong by committing another wrong.

Another mistake in the making?

Are the United States and Great Britain heading towards making the same mistake as they did in Iraq and Afghanistan? Recent statements by David Cameron, British Prime Minister, and Hillary Clinton, the United States Secretary of State show that they are prepared, if need be, to take military action against the Libyan regime.

Military intervention followed by nation-building are endeavours that are costly in time, money, and resources mostly with undesirable consequences. The Iraqi and Afghanistani examples have showed that nation-building requires far more than ousting a dictator or religious fanatics out of power. It requires a population that is educated, a growing economy, and non-corrupt statesmen and administrators. Notwithstanding the resources and money spent by the intervening country. For the time being, nation-building is nothing but a distant possibility. However, if the U.S. or Britain intervene militarily, then, it is almost certain that the relationship between the intervening countries and the host country will not end there.

That is due to the difficult position the intervening country finds itself in. If it withdraws  from intervening in the internal politics that will emerge, then it will not be able to influence or shape it. The volatile environment created in case the United States or Britain withdraws, then the country could descend into chaos or another "Gaddafi" might emerge. Thus, the only viable solution is to do exactly what the Coalition of the Willing is doing in Iraq. Attempt to build a nation on the principles of democracy, human rights, and market-based economy. However, the Coalition has failed in all three areas.

Libya seems to resemble Iraq in that both countries had oppressive dictators for decades and political dissent, democratic institutions, and human rights protections were limited and, at times, non-existent. So, what benefit would a foreign military intervention have? None. Thus, I would advocate the United States use the same tactics as in Afghanistan, where the CIA would supply the Mujahedin stinker missiles and other ammunition to fight off the Russians in the 80's. Such policy would make more sense and it has proven to work.

Given the bad shape the American and British economies are at, it seems improbable that another foreign military entanglement is imminent. However, firm political stance toward the Gaddafi regime is the proper response.

When embassies gossip...

Julian Assange gets hold of that information and publishes it on wikileaks. The promulgation of hundreds of thousands of "cables", internal communications between US embassies and Washington, became the news-feeder of countless tv programs and newspapers. The cables concerned what embassy staff and other diplomats' views were regarding socio-political events or political figures. None of the information published can be cross-examined, since it only reflects the views of the United States Embassy or the official who made them. Further, the information published did not advance the dialogue in any meaningful or transformative way.

Cable-gate, as it was inaptly named, is the last set of information published by the founder of wikileaks. The data revealed on Iraqi casualties did have a far greater real effect than what the embassy cables have shown so far. It provided for counting the number of Iraqi civilians killed and the circumstances of their deaths or injury.

The most significant piece of data, published by wikileaks was that of the video of a helicopter raid on innocent people and killing them, among them were two reporters. This revelation led to an official investigation of what happened.

So why does information that has no real effect on the lives of ordinary Americans or to that of the United States government, other than embarrassing it momentarily, become such an international issue? Maybe because we love to gossip also?

Who can forget the cable that indicated how close was Muammar Gadaffi with his "voluptuous" Ukranian nurse? I think cable-gate should give way, and it has, to the recent revelation that a former banker gave Assange discs containing the bank accounts of thousands of public figures and corporations. I hope the coming revelations would lead to criminal investigations or otherwise they might have the fate of cable-gate.

Financial crisis of 2008: who is to blame?

To use an American political cliche, there is plenty of blame to go around. First and foremost, the greedy behaviour of the Investment Banks, and secondly the non-existent Congressional oversight.

Number one rule for profit-making companies is to maximise the profit of their shareholders. In the world of investment banking the more risky the behaviour of the bank, the more profit the shareholders will make. Thus, there is a built-in mechanism for greed in the capitalistic system. However, internalising the profits and externalising the damages is disadvantageous to the taxpayer. More specifically, the banks, or to be more precise, their risky division (investment banks owned by the parent bank) have been engaging in the derivatives market, which is highly complex and speculative, and when the banks would make profits they would give it to their shareholders, however when banks are in danger of failing, the bankers demand from the government to bail them out or otherwise the banking system would collapse (systemic risk) and take with it the whole economy.

The overwhelming part for the blame lies with the regulators, and generally with the government. Since the late 1970's successive governments have deregulated the banking sector to a point where the derivatives market size was 500 trillion dollars and the regulators did not know anything material about it. The government also failed to separate the big banks to investment and commercial thus not letting the risky activities of the investment bank affect the commercial part of the bank. In addition, the government failed to stop the banks like Goldman Sachs, Citibank, and Morgan Stanley developing into huge banking conglomerates. These banks became so big that in case they were to fail the economy would collapse also, and not only that of the United States. This scenario would have materialised if Congress would not have passed TARP in September 2008 to save the ailing banks.

So, it would be preferable not to ask bankers to be less greedy but to ask governments to regulate risky financial activities that banks undertake. Thus reducing the chance of the economic system collapsing in future crisis.

Obama: the deal-maker

Well, that does not look like a change we can believe in, does it? President Obama has been in office for two years and to the dismay of many Democrats he has not delivered on the promises made.

On healthcare reform, the proposed bill was watered down in order to satisfy the demands of the Republicans, the Bush-era tax-cuts were extended for two years, however, the Democrats' plan was to eliminate them. The don't ask/don't tell policy has not yet been repealed. Issues such as the aforementioned have shed a less than positive light on the abilities of President Obama to lead America on the set of policies he campaigned for.

Many on the left think of Obama as weak and unable to stand up to the Republicans. As a side note, irrespective of your political beliefs you have to admire their military-type conformity on the issue of healthcare reform. I do not think Obama is a weak negotiator, what he lacks is a "air-tight" Democratic party that stands behind him when the going gets tough.

For example, on the healthcare reform plan there were members of the Democratic Party that did not keep the party line. I am talking about you Max Baucus and the rest who got millions of dollars to vote along. This is not Obama's fault. Harry Reid should take a page from the Republican textbook on how to keep the members of the party on the same page. Thus leading Obama to make deals with the Republicans in order to get something done.

This is not to say that Obama has not made any mistakes. The way he handled the healthcare debate and the tax-cuts for the wealthy is wrong. Most of us thought that Obama, will be a different kind of President, especially when comparing him to his predecessor (President Bush). However, it seems that he is not able to break through the incredibly slow process of change in Congress. Leading Obama to resort in making deals with the Republicans.

Egyptian protests: is the world better off if they succeed?

Protesters Occupy Tahrir Square in Cairo, Egypt.

Tunisian protesters overthrew the government of President Zine el-Abidine Ben Ali sending shock-waves to the Arab world. In this spirit, Newsnight, a nightly news program on BBC, was asking, "who is next?". Well, it seems that Egypt might be next. Reports, as of tonight, seem to indicate that the Mubarak government is getting prepared for some regulatory changes. Whether those changes will be significant or not only time will tell. A significant change would be if President Mubarak resigned. However, the scenario of overthrowing Mubarak might not be the best outcome.

Undoubtedly President Mubarak has kept the lid on the social, political, and religious demands of the people making Egypt a stable country that was accepted by the West. Yet, let us not forget that Egypt is home to the Muslim Brotherhood. The Brotherhood claims to be a religious group that has no connection to radical Muslims. That is not the case because Ayman Al Zawahiri, Usama Bin Laden's mentor, is an Egyptian member of the Brotherhood who during his years as a medicine student in Cairo was attracted by the beliefs of Sayyid Qutb, a revered figure of the Brotherhood's past.

Given the influence of the Brotherhood in Egyptian politics it would be reasonable to believe that the protesters to a smaller or greater degree espouse the beliefs of the Brotherhood. Now, with the present danger that the Egyptian people might elect, if and when Mubarak resigns, in the eventual elections a radical Muslim, how will the United States, Israel, Syria and the Middle East in general react to such events? I can guess, they are not going to be happy about it.

If Egypt "falls", it would be the catalyst event for major changes in the political realm throughout the Middle East. The domino effect will only gain strength if Mubarak loses power. And the next in line is the autocratic leader of  Syria, Bashar al-Assad. However, the status quo might be a better option than a domino effect that takes place "uncontrollably". A "controlled" domino effect is what the West and other Middle Eastern countries would prefer. Because on the one hand, the West wants a stable Egypt that can do business with, and on the other hand other Middle Eastern countries would want more time to solidify their power and silence any attempt for change.

What is the big deal?

Lately, the story of phone-hacking celebrities is everywhere. For those who are not familiar, The News of the World, a British tabloid, reporters would hack into the phones of celebrities and other individuals. The process was easy, early 2000s era, the reporters would call the person of interest and after the victim did not respond, then press 9 to enter their voicemail. Information obtained by the hacking would later appear as front-page news.

This issue has political ramifications since Andy Coulson, David Cameron's communications director resigned, after it became clear that a second police investigation was under-way that might implicate him in the scandal as he was the editor of the tabloid at the time when the alleged hackings took place.

However, i fail to see why has it been discussed so much.

The scope of the phone-hacking was limited, the Metropolitan Police has launched a second investigation, and Andy Coulson's damage to the image of the coalition government will be minimal at most.

Albania: six days later...

Albanian police guarding the Prime Minister's Office

Three protesters shot dead, presumably by the police, have been buried. There is a pending investigation as to who shot the protesters. An indication as to who shot them is the "arrest warrants" issued by the Prosecution Office to six police officers. However, the "arrest warrants" are not being executed by the Prime Minister, Sali Berisha, because he believes that the Prosecution Office does not have jurisdiction over the police officers present at the governmental buildings when the protesters were shot.

The clash between institutions is not a new phenomenon in Albania or any other country for that matter, but, when the Prime Minister blatantly violates his constitutional role in non-executing the "arrest warrants", then the rule of law ceases to function.  In this case the judiciary can find the solution, however, in Albania that is not the case.

The judiciary is practically powerless. That is partly due to the corrupt judiciary and partly due to the executive branch's pressure. As a result there has not been a single case where a public official of the upper echelons of government to have been prosecuted and sentenced due to their involvement in alleged corruption scandals such as the building of Durres-Morine motorway, the Gerdec explosion, killing tens of people, and the newest of scandals, that of Ilir Meta, deputy Prime Minister and Foreign Affairs Minister.

It is clear that the rule of law is not functioning. Setting back the aspirations of millions of Albanians to join the European Union for a while.