Russia Relents, Gas Again Flows To Europe

This article appeared in Shore Line Times on Friday, January 30, 2009.

Dateline Europe

After two weeks of unconscionably turning off the gas to Europe, the Russian government has now relented and is letting it flow again. The two week shutdown of Russian gas was made even more unconscionable because of its timing in the midst of a bitter cold European winter. Hundreds of thousands of people in twenty European nations suffered from the shutdown, and it has been confirmed that at least 18 persons froze to death.

Russia is by far the largest supplier of gas to European nations, delivering over 150 billion cubic meters of gas annually that cross its neighbor Ukraine. Although there were some money issues involved, with Russia claiming that Ukraine was not caught up in paying its bills for Russian gas, that was not the central issue.

What really caused the dispute was that Ukraine was not showing proper deference and respect towards Russia. Not only was Russia insulted by its neighbor’s so-called “Orange Revolution” of four years ago, it was also displeased that Ukraine was now assiduously trying to join Western organizations, most especially the NATO defense alliance of the United States and allied European nations. Russia not too long ago taught Georgia a lesson that it must be treated with proper deference, now it was Ukraine’s turn.

However, there was a flaw in Russia’s geopolitico plan to punish Ukraine. That was that Ukraine had on hand enough gas reserves in its storage tanks to last until spring. Ukraine could, therefore, thumb its nose at Russia and wait it out. Let the Europeans do the howling!

Also, Russia was basically shooting itself in the foot throughout the dispute. By the time it was over, the Russian gas company, Gazprom, had lost over a billion and a half dollars in monies that it would have received from European customers, if it had not shut down the gas. Also, the shutdown greatly damaged Russia’s reputation as a dependable supplier of gas to European markets. Even though the agreement to restore the gas is supposed to be a ten-year deal, never again will the Europeans allow themselves to be so dependent on Russian gas.

In the end, in spite of a virtual parade of European leaders that lined up to beg Russian Prime Minister Vladimir Putin to turn back on the gas, only until Ukrainian Prime Minister Yulia Tymoshenko met with him was the dispute resolved.

Although Tymoshenko had joined Ukrainian President Viktor Yushchenko in leading the Orange revolution, since then she has softened her position towards Russia. Also, Putin must have remembered that when Ukraine’s President Yushchenko went to Georgia to cheer on Georgian President Mikheil Saakashvili in the midst of the war, Tymoshenko discretely stayed home and called for a peaceful end to the conflict.

At the signing of the agreement that ended the shutdown, the mutual respect between the two neighboring prime ministers was evident. Putin made note of the fact that Tymoshenko’s middle name, “Vladimirovna,” was the feminine version of his own first name “Vladimir,” and he pointedly addressed her as “Yulia Vladimirovna Tymoshenko.” She in turn addressed him as “Vladimir Vladimirovich.”

Now that the gas is flowing, it is clear that Russia was the loser and Ukraine was the winner in the dispute. Russia’s initial demand was for Ukraine to pay $450 per 1,000 cubic meters for Russian gas. Under the final deal, Ukraine will pay Russia on average below $250, and will receive a 20% discount from the European price. Ukraine’s $650 million debt for earlier purchases was also negotiated away.

Her role in ending the Russian gas shutdown will undoubtedly enhance the political standing of Tymoshenko, as she contemplates challenging incumbent President Yushchenko in next year’s Ukrainian elections. President Yushchenko is very vulnerable with his current approval ratings in the single digits.

No matter what the future holds as far as the elections go, Ukraine as a nation is suffering.  Its currency, the Hryvnia, has lost 50 percent of its value against the dollar, and its stock market has lost three fourths of its value. In addition,  Ukraine’s economy, which relies heavily on steel exports, is in a deep slide. Whether Tymoshenko after the elections next year will emerge as the new “Obama” of her country remains to be seen.

Russia’s Gas Shutdown Delivers Low Blow To Europe

Published in the Shore Line Times January 16, 2009

by Jerome L. Wilson

Dateline Europe

Even though Russia’s gas shutdown, affecting 18 European nations, may ultimately be resolved, it was truly an unwarranted and unconscionable act against hundreds of thousands of Europeans. The toll of pain was particularly harsh in Central and Eastern Rurope, where nations like Bulgaria, Poland and Slovakia were left without most of their gas supplies, used for cooking stoves and heating homes, as well as factories.

Furthermore, Russia pulled off its gas shutdown in the middle of a particularly harsh European winter where temperatures went down to one degree Fahrenheit in some areas. Only a person with the supreme arrogance of Russian Prime Minister Vladimir Putin would have taken sucha step. Russia has shown the world how important it is to have democratic checks and balances to restrain the rash actions by a single leader of a large and important nation.

Granted Russia appeared to have a legitimate dispute with Ukraine, the nation that owns the pipelines that carry the Russian gas to European customers. Russia wanted to end the low amount that it presently receives for the sale of Russian gas to Ukraine. This is gas that Ukraine uses for its own domestic purposes. To punish Ukraine for not agreeing to a price increase, on New Year’s Day Russia cut off all gas going to Ukraine. However, the gas flowing through Ukrainian pipelines to European customers was unaffected by the New year’s Day cutoff.

However, this did not resolve the dispute, and Ukraine persisted in its unwillingness  to pay the higher price for Russian gas. So what did Russia do? Cruelly and outrageously, a week later on January 7, Russia shut off all gas going to European nations through Ukrainian pipelines. In short, to get his way, Putin decided to hurt the innocent bystanders in his dispute with Ukraine: the Europeans.

Individual European nations even had what they thought were ironclad contracts to receive Russian gas. However, Russia blithely ignored them. It is ironic that Russian President Dmitry Medvedev in the past has m,ade much of that fact that he wants to respect “the ruke of law” in Russia. However, Russia’s shutting off the gas to European nations, in a dispute to which legally they’re not involved, turns the rule of law on its head in Russia.

The European Union has tried very hard to end the gas shutoff for the sake of those suffering in its 27 member nations. The present President of the EU, Czech Prine Minister Mirek Topolánek, has performed noble service in flying first to endure a five-hour talk with Russian strong man, Vladimir Putin, and then, successfully, getting him to sign an agreement to turn back on the gas. Next, Topolánek flew to Ukraine, and got Ukrainian Prime Minister Yulia Tymoshenko to sign the agreement in a manner that Russia accepted.

That agreement, so laboriously put together by the EU President, put in place a team of European Union monitirs, in the company of monitors from Russia and Ukraine as well. This was the agreed-to prerequisite to turning back on the gas. Russia could be assured that the Ukrainians were not siphoning off some of the Russian gas for their own domestic consumption, because so many monitors were watching. This should have been enough to assure Putin that Ukraine was not continuing to “steal” Russian gas, a charge that the Ukrainians have consistently denied.

As of this writing, it has been a week, and counting, since the Europeans have been without the gas that they are entitlted to receive from Russia. At one point, while the gas was still off, Putin even began to accuse the United States for ordering Ukraine not to cooperate with Russia. One would have to ask why the U.S., when it is in the midst of a transition of power to a new national administration, would want to get involved in a dispute in which it is not even remotely connected. Also, the Russians have been breathing fire that they are going to sue the Ukrainians for $800 million dollars for the revenue that they would have received, if they had not unilaterally shut off the gas to European customers in the first place.

The bottom line in all this is that Russia’s arbitrary cutoff of one-fifth of Europe’s gas supplies has made one thing loud and clear. That is that Russia simply cannot be trusted as a reliable source of energy for Europe. Therefore, Europe must urgently look for other places from which to get its gas supplies. Norway, Algeria, even Nigeria are possibilities. Also, alternative pipelines that skirt Russian control should be investigated. If Europe takes these important steps, it will be a lesson learned.

The Czech Republic Takes Over The European Union. Will It Work?

Published in the Shore Line Times

January 9, 2009

By Jerome L. Wilson

Dateline Europe

The very small country of the Czech Republic has taken over the Presidency of the very large European Union. The Czech repblic has a population of two million. The European Union, which consists of twenty-seven member European nations, has a population of 495 million.

Under the present system, each president of the European Union serves for a six month term before turning the job over to another EU member nation for a similar period. Prime Minister Mirek Topolánek of the Czech Republic is now the President of the European Union for one simple reason. It was his country’s turn to hold the presidency.

However, there is a serious question as to whether anyone will listen to the Czech President, even if he is the president of the EU. Will world leaders, such as Russian Prime Minister Vladimir Putin, or incoming United States President Barak Obama, even be willing to sit down with Topolánek to discuss serious issues?  Topolánek recently called for a truce among the warring parties in the Middle East, and he has also urged Russia and  Ukraine to patch up their differences so as not to disrupt energy supplies to Europe. What, though, is the credibility among world leaders of a here-today, gone-tomorrow official from a very small country, even though he is, temporarily, the president of the EU?

Further complicating the picture, unlike twenty-five other EU member states, the Czech government has yet to approve the Lisbon Treaty, a most necessary reform in the EU’s structure. In fact, Czech President Vaclav Klaus, the ceremonial head of the Czech government, has done everything in his power to block Czech approval of the reform treaty. Prime Minister Topolánek has promised to deliver on this issue, but has yet to do so.

Then, there is the question of the Czech government’s failure to adopt the euro as its currency. Stubbornly, the Czechs continue to use their sparsely circulated koruna. On the other hand, neighboring Slovakia, once the Czech Republic’s co-partner in Czechoslovakia, adopted the euro on January 1st, the 16th European Union nation to do so.

Adding to his reputation for being obstreperous, at a recent meeting with a delegation from the European Parliament, Czech President Klaus went so far as to charge that the EU was like the Soviet Union in exerting its powers over member states. This comment evoked a strong protest from the President of the European Parliament, Hans-Gert Pöttering, who attended the meeting.

The Czech President also believes that the threat of global warming is simply a “myth.”  He has repeatedly taken this position, even though combatting global warming  is a signature issue of the European Union. Reportedly, Czech Prime Minister Topolánek is going to try to muzzle Klaus for the next six months. However, he should be wary, because Klaus is a master at attracting attention.

As for policy positions, one thing that can be counted on during the Czech EU presidency is that the Czech Republic will continue to look to the United States for leadership. Most likely, it will stand firm in agreeing to a U.S. missile detection system within its borders, even in the face of Russian opposition. Of course, this position might become a bit confusing, if President-elect Obama decides not to press the issue.

The immediate past president of the European Union was French President, Nicolas Sarkozy. During his six months as head of the EU, Sarkozy made history by negotiating a stable peace in Georgia with Russian Prime Minister Putin. The French leader in his role as EU President carried this off, even in the face of oppositin from the Bush administration.

What about the next world crisis, possibly involving Russia and Ukraine? Will the quarreling parties even be ready to meet with Topolánek? One can imagine the lonely Czech, his six-month presidential portfolio stuffed in his pocket, being shunted off to some lowly, deputy assistant foreign minister to discuss his concerns. Let’s just hope that it does not turn out this way.

After the Czech Republic’s turn ends in June, Sweden will become the next country to hold the six-month EU presidency. Sweden is another country which has hesitated to adopt the euro, although that could be changing. At least the Swedes have had the good sense to approve the Lisbon Treaty.

Truly, until the system of rotating EU presidents every six months is abolished, and a way to allow EU presidents to serve for longer periods is put in its place, there will continue to be problems with EU governance. The Lisbon Treaty addresses this question, and one hopes for its approval. Changes in this, and other areas, cannot come too soon.

Second Irish Vote Coming Up On European Union Reforms

Published in Shore Line Times, January 2, 2009

By Jerome Wilson

Dateline Europe

Friday the 13th, last June, was a bleak day for the European Union, the 27-member trade bloc of European nations. That was the day when, Ireland, by a solid majority, rejected an important package of reforms contained in what is called the Lisbon Treaty. Unless a second Irish referendum on this treaty overturns the earlier defeat, it could be back to square one for what everyone calls the “EU.”

For a while, it looked like there would not even be a second referendum in Ireland on the treaty. Now, however, there are positive signs that there will be a second vote sometime in 2009.

Among the important reforms proposed in the Lisbon Treaty, for the first time in its 50 year history, the European Union would have a full time, permanent President. Presently, the EU presidency changes every six months. This musical chairs arrangement has prompted former U.S. Secretary of State Henry Kissinger to grouse, “Who do you call,” when you want to speak to the person in charge of the European Union?

Also, the European Union now has two people in charge of foreign policy. Under the Lisbon Treaty, there would be only one High Representative in this important area. In addition, the new treaty would allow more flexibility on common defense and budget issues.

However, passage of a new treaty does require the unanimous approval of all the 27 EU member states. To date, the parliaments of 25 of them have approved the treaty and approval by the 26th, the Czech Republic, is anticipated. That would leave approval of the treaty short by one vote, that of Ireland.

Ireland is also the only EU member state that requires a popular referendum to approve a treaty. This means getting treaty approval in Ireland is even more challenging than in the other member states, where treaty approval by parliamentary vote is sufficient.

The first vote in Ireland on the Lisbon Treaty was clearly not democracy’s finest hour. The forces urging a “no” vote, by and large, played on people’s fears. In Roman Catholic Ireland they said that the treaty would legalize abortion and sanction gay marriage. They also said that the treaty would repeal Ireland’s favorable tax incentives on business and send Irish soldiers off to war against the country’s national will. The fears that these charges raised were real. That these charges were false was also real.

What should have been the number one issue in the first treaty campaign, and what certainly should be in the second, is that Ireland has received an unprecedented amount of financial aid from the European Union. This enormous amount of assistance has helped Ireland modernize, virtually, its entire infrastructure.

In fact, since it joined in 1973, Ireland has received over 60 billion euros in aid from the European Union. Because of this huge in-flow of euros, Ireland has been able to fashion itself as a world-class Celtic tiger. Also, Ireland is now a country to which people want to immigrate to, rather than to emigrate from.

Treaty opponents, in their wholly negative campaign, never mentioned that Ireland owes a staggering debt of gratitude to the European Union. Nor did they mention the benefits that Ireland receives from being a member of the EU, and a user of the euro.

So, even in the face of all that the European Union has done for Ireland, how did the “no” campaign pull off its victory in the first referendum? For one, it can thank the man who virtually came out of nowhere to lead the “no” campaign: Declan Ganley. Ganley, although he resides in Ireland, is a significant U.S. defense and homeland security contractor. In fact, Ganley’s company, Revada Networks, receives hundreds of millions of dollars in U.S. government contracts.

Ganley, 39, divides his time between taking care of business in Washington, D.C. and living a luxurious, Irish lifestyle at his palatial home in Galway, with an indoor pool and two luxury class automobiles. To defeat the treaty, Ganley, reportedly, took off two months from his D.C. activities and threw himself totally into organizing and directing the “no” campaign. Also, Ganley contributed some of his own personal wealth to the effort.

As the grand victor in the first vote over the Lisbon Treaty in Ireland, Ganley has promised to lead an equally vigorous campaign against the treaty in a second referendum. He has also made plans with Vaclav Klaus, who holds the largely ceremonial office of President of the Czech Republic, to enter a slate of “anti-EU” candidates in the over 700 races for the European Parliament next June.

Klaus, for his part, recently made a contentious visit to Ireland to confer with Ganley and while there he insulted both the Irish government and the local press. Klaus is something of a roving euro-skeptic. Among his controversial positions, he would completely shut down the European Union, and stop all efforts to prevent global warming, which he believes is a myth. To assist the “yes” campaign in Ireland, the Irish government, which supports the treaty, may insist that some redundant codicils be attached to the treaty. These would assure Irish voters that on issues, such as abortion and gay rights, that the EU could not change Irish national law. Another campaign idea might be for the government to post, “Thank you, European Union,” signs on the many infrastructure improvements that have been built across Ireland, with billions of euros from the EU.

Stay tuned, round two in the campaign to approve the Lisbon Treaty in Ireland will soon be upon us.

European Union Launches Force To Combat Pirates

Printed in Shore View on Friday, December 19, 2008.

Dateline Europe by Jerome Wilson

The 27 member-nation European Union has launched a battle fleet to combat piracy off the coast of Somalia. It will be the first naval operation in the multi-national organization’s history. Called Operation: Atalanta, after one of the strongest females in Greek mythology, the EU naval fleet will be commanded by Rear Admiral Phillip Jones of the British Royal Navy, assisted by Commodore Antonios Papaioannou of the Greek navy.

The command ship of the operation is HMS Northumberland, a Duke Class, British frigate, and Operation: Atalanta, when fully operational, will have three frigates, three other combat vessels, a supply ship and three surveillance aircraft. In addition to Britain; France, Germany, Greece, the Netherlands and Spain will participate and other European countries may join as well.

As part of its mission, the EU fleet will post armed units on board vessels that are delivering food under the UN’s World Food Program. Also, the fleet will seek to protect ordinary merchant vessels cruising in the pirate waters off the coast of Somalia and beyond. When necessary, the EU vessels will use force to stop piracy attacks. In addition, ships of the U.S. Navy’s fifth fleet are on piracy patrol in the area, as are ships from India and Russia. Somali piracy is an enormous problem. Thirteen pirated ships are presently anchored off the Somali coast, awaiting ransom negotiations with 250 to 300 captured crewmen being held. To date, $30 million in ransom has been paid to the pirates by ship owners to free their vessels.

The seriousness of the situation was demonstrated last September when pirates seized a huge Ukrainian ship, the Faina. The captured ship was carrying a warehouse-sized load of 33 Soviet-made, heavy tanks, as well as tank shells, grenade launchers and various other arms. A crew of 17 Ukrainians, three Russians and a Lithuanian were also captured. Initially, the pirates wanted $20 million to free the Faina. Now, ransom negotiations are down to $3 million.

The pirates, like those that seized the Faina, are usually dispatched from a mother ship, which houses them between attacks. When the pirates attack, they generally use open speedboats with powerful outboards equipped with automatic rifles, rocket propelled grenades, loudspeakers and sirens. Many pirates are former fishermen, who know the local waters and some of them were trained by the now disbanded Somali navy.

Another vessel in the grim “hit parade’  of successfully pirated ships was the huge supertanker, the Sirius Star. This Saudi Arabian-owned vessel, which is as long as the U.S. aircraft carrier Admiral Nimitz, was carrying two million barrels of crude oil, worth $100 million, when seized.

Significantly, the capture of the Sirius Star demonstrated that Somali pirates are no longer limited to capturing ships in the Gulf of Aden off the Somali coast. The Saudi supertanker was seized hundreds of miles south of the Gulf. In an interesting wrinkle, an Islamic religious group on shore suggested to the pirates that they let the Sirius Star go free without a ransom payment because the ship’s owners are Muslim. The pirates, who are also Muslim, rejected the suggestion.

Then, there is the story of the very big cruise ship that got away. In early December, two small pirate skiffs in the Gulf of Aden attacked the Miami-based cruise ship, the Oceania Nautica. This mega ship had a crew of 386 and 690 passengers and was in the midst of a 30-day voyage from Rome to Singapore when the pirates attacked from their speedboats. Quickly, the cruise ship captain ordered all the passengers into their staterooms and, after taking evasive action, the cruise ship simply outran the pirates. The pirates fired a few rifle shots but they fell far behind the fleeing cruise ship.

Another happy ending took place in December off the coast of Tanzania, well down the east coast of Africa. Although it is certainly alarming that Somali pirates are now operating this far from their own Somali coastline, the pirate fire of rocket-propelled grenades and automatic weapons from two speedboats were ineffective against a Dutch container ship. Like the Oceania Nautica, the Dutch ship simply increased its speed and got away.

Hopefully, these two “near misses” are part of a trend. However, some cruise passengers are not taking any chances. On a round-the-world cruise, the passengers on board the German cruise ship, Columbus, were fearful of sailing into the pirate-infested waters of the Gulf of Aden. Therefore, they disembarked from the cruise ship in Yemen, well before the ship entered the dangerous Gulf. The cruise ship passengers then took chartered airplane flights to the safety of Dubai where they stayed for three days in a five-star hotel. The crew for its part, brought the “passenger less” ship through the Gulf of Aden without incident. Once united in Yemen, the passengers and crew continued on their round-the-world cruise.

If the European Union’s Operation: Atalanta is a success, hopefully cruise ship passengers in the future will be able to stay on board even through what are now dangerous waters.

Europeans Applaud Election Of Barack Obama To Presidency

This article appeared in Shore View on November 28, 2008.

Dateline Europe

by Jerome Wilson

Europe widely applauded the election of Barack Obama as our nation’s new president. There follows a sample of the comments.

“The French have not been this excited about America since they shipped over the Statue of Liberty in 1885,” said the Frenchman who ran a support committee for Barack Obama in Paris.

French President Nicolas Sarkozy also spoke glowingly of the Obama triumph. Yours is a “brilliant victory,” he said, which “crowns an exceptional campaign whose inspiration and exaltation have proved to the entire world the vitality of American democracy. By choosing you, the American people have chosen change, openness and optimism.”

German Chancellor Angela Merkel also congratulated Obama on his “historic victory.” She said, “I am convinced that, with closer and more trusting cooperation between the U.S. and Europe, we can resolutely confront the novel challenges and dangers facing us…” Reportedly, Chancellor Merkel got up in the early hours so she could learn the results of the American election.

United Kingdom Prime Minister Gordon Brown congratulated Obama. He observed, “The relationship between the United States and the United Kingdom is vital to our prosperity and security… Barack Obama ran an inspirational campaign, energizing politics with his progressive values and his vision for the future.”

For his part, the President of the European Commission, José Manuel Barroso said, “This is a time for a renewed commitment between Europe and the United States of America. We need to change the current crisis into a new opportunity. We need a new deal for a new world,” he said, echoing the words of American President Franklin Delano Roosevelt.

Dutch Prime Minister Jan Peter Balkenende said, “The necessity for cooperation between Europe and the United States is bigger than ever. Only by close trans-Atlantic cooperation can we face the world’s challenges.”

Polish Prime Minister Donald Tusk, speaking for his country, as well as for Hungary, the Czech Republic, Slovakia, Lithuania, Latvia and Estonia said, “This [the Obama election] is an important moment for Europe’s relations with the United States. We hope that Europe’s friendship with the United States will be strengthened by it.”

The leaders of the nordic countries of Sweden, Norway, Finland and Denmark said that they hoped that the U.S. would now take the lead in tackling global warming and the fnancial crisis.

As for the European press, the French newspaper Liberation said, “In this election a French bias about Americans is swept away… We also need to change our preconceptions about American prejudice. For the first time, an African-American and a woman were candidates for the highest office in the land. It seems like America could teach us a thing or two about democracy.”

Milan’s Corriere della Sera wrote, “Barack Obama, who was praised as the new Kennedy at the beginning of his campaign, instead crossed the finish line wearing the jersey of the ‘black Roosevelt’–the man who can save America from utter breakdown with a New Deal.”

France’s La Monde wrote, “In foreign policy, a Democratic president won’t work miracles. But through his personality, Barack Hussein Obama will be in harmony with a world where the economic and political center is no longer in the West.”

The Norwegian daily Aftenposten wrote, “After the U.S. presidential elections, we have great hopes that we are standing at the dawn of a new era when it comes to ties between the U.S.A. and the rest of the world… Unfortunately, the George W. Bush years brought about extreme frustration with the U.S.”

The Vienna Kurier offered the advice that the “next U.S, president will need to leave Iraq and its ethnic groups – with their merciless fights over oil, money and power – to their own devices. He will need to see that no power in the world will be able to force Afghanistan’s warring mountain groups into the corset of parliamentary democracy — a form of government that is useless there–despite any ‘we’ll get Bin Laden’ promises.”

Finally, the Neue Zuercher Zeitung in Zurich wrote, “Obama has drawn a new political map and triumphed in areas that for decades have been considered Repulican strongholds… The change of power is already historic because on 20th of January, on the steps of the Washington Capitol, an African American will for the first time be sworn in as president. Until the end, skeptics said America was not ‘ready’ for a black man in the White House.”

However, for all the effusive European comments about the Obama victory, in the African nation of Kenya, President Mwai Kibaki did them all one better. He declared the second day after the election a public holiday.

Euro Gaining In Popularity In The Financial Crisis

This article appeared in Shore View on November 21, 2008.

Dateline Europe

By Jerome Wilson

As the world’s financial crisis deepens, the euro is becoming more popular among European nations. This is certainly true among the fortunate 15 nations of the European Union’s 27 member states, which are presently using the euro and which include some of the world’s most advanced economies, including Germany, France, the Netherlands, Italy and Spain. Not that the euro is saving these countries from a severe downturn, but as they say about chicken soup, “it helps.”

This respect for the euro is the case for two Scandinavian countries, Sweden and Denmark, which in the past have shunned the euro, but which are now looking at it more favorably. The reason for the change of heart is the feeling that it is better to be part of a large currency bloc, such as the euro, than to hang on to a single national currency in a time of economic crisis.

As Swedish Prime Minister Frederik Reinfeld said recently, “When it’s a little bit unsafe out there, it’s better to be in a big currency like the euro.” Echoing this sentiment, Danish Prime Minister Anders Fogh Rasmussen said, “We have just seen, very strongly, how harmful it is for Denmark to stand outside the euro.”

However, before Sweden and Denmark can adopt the euro, they will have to hold new referendums. In 2003, the Swedes voted against using the euro and in 2000 the Danes did the same. However, these negative attitudes are changing. A recent poll in Sweden found that a near majority now favors the euro. Also, worrisomely, the Swedish krona has been losing value against the euro, as has the Danish krone. Opinion polls in Denmark also show growing support for the euro.

Having a big impact on Swedish and Danish attitudes is the extremely serious financial crisis that has been taking place in Iceland, a fellow Scandinavian nation which does not use the euro. Iceland’s stock market has collapsed, its banks have been nationalized and practically no one wants to accept the króna in trade. Then, a rescue package of some $6 billion came unglued, because Britain and other European nations want their own country’s depositors in Icelandic banks to be able to get their money back before Icelandic banks can be recapitalized. Notably, the European Union has not raised a financial finger to help non-member Iceland.

Unlike Sweden and Denmark, which would undoubtedly qualify to use the euro, the situation is quite different for other European Union member states, particularly those located in Eastern Europe. These countries very much want to use the euro, but are not yet considered qualified to do so.

Giving them hope that it can be done, one Eastern European nation, Slovenia, was given permission to use the euro just last year and another, Slovakia, can begin using it in 2009. However, eight other European Union member states located in Eastern Europe will not be permitted to use the euro in the immediate future. This will leave them with no other choice but to use an unstable mix of kroons, lats, litas, levs, korunas, forints, zlotys and leus.* The largest European Union nation not using the euro in Eastern Europe is Poland. Seeking to calm jittery investors, Polish Prime Minister Donald Tusk recently approved a roadmap for the euro’s adoption. However, standing in the way of this initiative are the Kaczynski twins, one of whom is the country’s current President, and the other, a former Prime Minister. The twins have insisted on a referendum on the euro question and by last reports Prime Minister Tusk has agreed to hold one. Those favoring the use of the euro in Poland argue that its adoption would reduce currency risks and make trade easier with other euro nations.

Then, there is Hungary, another European Union member nation, which cannot use the euro. Hungary has suffered enormously from the financial crisis and the European Union, the International Monetary Fund and the World Bank have all come forward with a rescue package of 20 billion euros. At one point Hungary had planned to adopt the euro as early as 2009. However, because of the forint’s extreme volatility, among other factors, the planned entry date has been pushed back to 2012.

The three Baltic states of Estonia, Latvia and Lithuania also cannot use the euro, but would like to do so. However, like the others, they must first satisfy some strict entry requirements. They include: acceptable rates of inflation and interest rates, as well as manageable deficits and debt. In addition, the countries must undertake a two-year trial, during which the European Central Bank monitors the applicant’s exchange rate stability.

Demonstrating its eagerness to adopt the euro, Lithuania has already designed what a Lithuanian euro would look like, if approval does come.

Of course, the biggest non-user of the euro in the European Union is the United Kingdom. Opinion polls in the UK show consistent, strong opposition to using the euro. Although the European Commission has estimated that next year the UK will be the worst performer among Europe’s largest economies and that the UK, proportionally, has a larger fiscal deficit than any other European Union nation with the exception of Hungary, UK attitudes are not likely to change.

Some influential voices in the UK are now urging the adoption of the euro, but this is certainly not a common view.

* These are, respectively, the present currencies of Estonia, Latvia, Lithuania, Bulgaria, Czech Republic, Hungary, Poland and Romania.

Should Britain Replace The Pound With The Euro?

Gordon Brown (left) says, "Some day, maybe." David Cameron (right) says, "A flat no."

This article was published in Shore View on November 7, 2008

Dateline: Europe

By Jerome Wilson

The euro is the exciting newcomer on the block of world currencies. In just ten short years it has become the common currency of fifteen leading European nations, including Germany, France, Netherlands, Belgium, Italy, Spain, Greece, Portugal and Austria, among others.

Missing from this roster of European nations using the euro is Britain. Britain still uses the pound as its national currency.

However, many leading British economists have been urging their country for years to adopt the euro in place of the pound. Even the esteemed American economist, Paul Volcker, former Chairman of the Federal Reserve Board under Presidents Reagan and Carter, thinks that it would be a good idea for Britain to use the euro.

However, according to the polls, the average Britain will have none of it. They want to keep the pound.

Not surprisingly, British political leaders echo this euro-skepticism. David Cameron, the bright new star of the Conservative Party, states flatly “under the Conservatives, the United Kingdom will retain its own currency.” Labor Party Prime Minister Gordon waffles; saying that adopting the euro by Britain might be a good idea some day, but not right now. In fact, until either Brown or Cameron step forward and take the lead in advocating Britain’s use of the euro, it will be extremely difficult to move the issue forward.

Basically, the tension on this issue is between what the British people want, and what Britain needs. In the eyes of many from across the Atlantic, Britain needs the euro, especially in these times of world economic crisis.

The reality of Britain is that it is situated between two large, single currency blocs — the 15-nation bloc of European nations that uses the euro, and the 50-state United States bloc that uses the dollar. The U.S. has been using the dollar as a single currency for most of our nation’s history, and the fact that the dollar has been able to span a continent has been a major stimulus to the American economy.

Also, since the fifteen European nations replaced their earlier checkerboard of currencies with the euro, their single currency has been a major factor in their remarkable economic growth as well.

Britain, on the other hand, is a medium-sized country, heavily dependent on trade, with its own currency. As such, it would clearly benefit Britain in its role as a trading nation, if it were to adopt either the currency of the dollar bloc or the euro bloc. However, it is fanciful to think that Britain could ever use the dollar. We are too far away.

Furthermore, Britain presently does more than twice as much trade with Europe’s euro nations than it does with the U.S. Britain is a European nation, its “special relationship” with the United States notwithstanding.

So what would happen if Britain were to adopt the euro and then engage in trade with the other euro bloc nations of Europe? Well, for one, its intra-euro transactions would be totally free of exchange rate fluctuations, which are always a risk when trading parties use different currencies. Extra costs are generated in these situations because of very real “exchange rate risks.” Also, the expenses incurred in meeting these risks constitute very real impediments to trade in their own right. On the other hand, when trading partners use the same currency, as would be the case in our example, these risks are totally eliminated.

Therefore, if Britain were to become a euro nation, it would have immediate, unfettered and equal access to the markets of the fifteen other European nations that use the euro. This in turn would mean vastly larger markets for British goods and services, and wider access to competitive suppliers as well.

Also, if British companies using the euro wished to build new plants in other euro nations, the process would be both easier and less expensive than at present. Labor costs and construction costs of any new British facilities could also be precisely measured in advance, because all attendant costs would be denominated in euros.

Finally, if a British firm using euros wanted to build a plant in another euro country, it would find that European euro countries no longer predominantly situated their plants in their own home countries. In fact, if a British company wanted to build a plant in Spain these days, likely as not it would find the plant next door to be German or French owned, or even Dutch.

The successful ten year history of those European nations which have adopted the euro clearly demonstrate the many advantages that accrue to a euro nation, when it engages in trade within a large bloc of other euro nations. In fact, the economic strength of these nations is now far greater than that of the British economy. This has meant that euro nations have been able to increase public expenditures for new roads and railroads, and other infrastructure improvements, to a far greater extent than in Britain. Some of Britain’s present infrastructure shows it.

However, none of these arguments are meant to denigrate the very deep feelings of those in Britain, who want to stick with the pound and shun the euro. As one wrote in a recent letter in the Telegraph, “The British must keep their sterling. It is their identity. Why give up your identity?” Another wrote, “Keep the pound and keep our sovereignty and control within the UK.” Still, many hope that eventually the British will make the change to the euro. Hopefully, the switch, when it comes, won’t be too painful.

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Jerry Wilson writes Dateline: Europe, which deals with public issues from a European prospective. He has traveled widely in Europe and has made a study of the European Union. Comments on this article can be made on his blog at http://jeromelwilson.wordpress.com/

Europeans Blame the U.S. for the World Financial Crisis

DATELINE: EUROPE

Published in Shore View on October 24, 2008

By Jerome Wilson

The financial crisis "came from America," UK Prime Minister Gordon Brown

European leaders are making clear in their public statements that they blame the United States for creating the world’s most serious financial crisis in decades. Britain’s Prime Minister Gordon Brown has been quoted as saying that the world’s recent financial problems “came from America.” Italian Prime Minister Silvio Berlusconi has placed the blame on the “capitalism of adventures” in the United States, and French President Nicolas Sarkozy has said, “This crisis was not born in Europe. This crisis was born in America. It is now a global crisis.”

Furthermore, European leaders, who have fashioned a rescue plan that among their several states exceeds well over two trillion dollars, are hopeful that it will solve the crisis. Essentially adopting the European scheme of directly infusing national banks with government monies, U.S. Secretary of the Treasury Henry Paulson has announced that that the United States government will invest $250 billion of capital in U.S. banks and will receive preferred stock from the banks in return. In addition, the U.S. will make massive temporarily guarantees for new senior debt issued by the banks, as well as insure billions of dollars of bank deposits. The potential cost of the total U.S. rescue package is estimated to be $2.25 trillion.

British Prime Minister Gordon Brown is justifiably taking the credit for creating the template that the nations of Europe are now committed to, and which the United States has now adopted as well, to solve the financial crisis. The two principal elements of Brown’s creation are that governments should directly invest their government monies in their troubled banks and take steps to increase liquidity in the loans that their banks make among themselves.

Brown has said that he anticipated that other countries would follow his own country’s “unexpected but essential” bailout. The British bailout sum has now reached 400 billion pounds, or $693 billion. Brown is quoted in the Financial Times as saying, “In extraordinary times, with our financial markets ceasing to work, the government cannot just leave people on their own to be buffeted about.”  Interestingly, Brown’s Tory rivals have not had much to say, other than “me too,” to Brown’s bailout actions.

Taking it a step further, last week Brown met with other European leaders to get their support for a whole new, worldwide approach to what he calls “the first financial crisis of the global age.” Essentially, Brown wants increased surveillance powers for the International Monetary Fund, so that it can detect well in advance future financial meltdowns.

As for the present crisis, it is certainly impressive the way that European nations have come together to meet the situation. They did not, however, adopt a single European bailout fund, after the U.S. example. Rather the individual European nations have made commitments that address the financial needs of their own countries.

For example, as the Financial Times has reported, France has allocated $485 billion for loan guarantees and taking stakes in its troubled banks; Germany has allocated $675 billion to stabilize its financial markets and guarantee bank debt; Spain has budgeted $135 billion to guaranteed new bank debt and buy bank shares; Italy has allocated $54 billion to facilitate liquidity and will grant banks bailout funds on a case by case basis; Austria has a $135 package of guarantees for banks and depositors; and the Netherlands has authorized $270 to guarantee interbank lending and recapitalise its banks. The total of these rescue packages is $1.75 trillion in monies authorized to address the crisis. Adding the $693 billion in rescue monies allocated by Britain, means that these European governments have allocated $2.44 trillion worth of euros and pounds. Also, this amount does not include monies and guarantees that have been extended by Ireland, Greece and other members of the 21-nation European Union to their banks and depositors.

This means that ultimately the European rescue package of $2.44 trillion plus will be greater in amount than the $2.25 trillion package of the United States. This will come as a surprise to some in this country. However, it is certainly understandable. The European economy is now larger than that of the U.S. with an annual gross domestic product of $19 trillion, compared with an annual GDP of the United States of $15 trillion. Also, the Europeans are working with a stronger currency than our dollar, $1.35 to one euro.

It is, however, unfair to place all the blame for the world’s current financial problems on the United States. Many of the European banks invested “whole hog” in sub-prime real estate securities, and like their American counterparts ignored the fact that these instruments in many instances were practically worthless.

Also, looking at it from a positive standpoint, it is both welcome and comforting that our country now has a strong partner in Europe, working with us to address these troubling financial times in the world.

Mr. Wilson writes a Dateline: Europe column, which deals with public issues from a European prospective. He has traveled widely in Europe and has made a study of the European Union. Comments on this article can be made on his blog at http://jeromelwilson.wordpress.com/

Is Ukraine Next On The Russian Menu?

From The Ithaca Journal  October 20, 2008
Jerome Wilson / Guest Column

Ukraine Prime Minister Yulia Tymoshenko

What’s next for the hungry bear? Having chewed up much of the nation of Georgia, are the Russians now looking for another morsel, as they seek a larger place at the table of nations?

Without question the next tempting dish for Russia is Ukraine.

However, unlike its “over the top” military actions in Georgia, Russia’s advances toward Ukraine, so far, have been both subtle and enticing.

In the grand scheme of things Ukraine has always been more important to Russia than Georgia. Georgia was an irritant to the Russians, with a president who even made it more so. However, Georgia was never of major strategic importance.

Ukraine on the other hand is of enormous strategic value to Russia. The Ukrainian port city of Sebastopol is home to Russia’s Black Sea naval fleet, where some 50 Russian ships and 80 aircraft are stationed. Also, rather embarrassingly, Russia has been forced to rent the space for its Black Sea naval base from Ukraine. Certainly, it is always nicer to be your own landlord.

Also, whereas Georgia was an easy-to-conquer nation of five million, Ukraine has a population of 47 million. To humble a nation of this size would clearly fit nicely into the restorative Soviet dreams of Russia’s true leader, Prime Minister Vladimir Putin.

Putin has not been idle. Consistent with Russia’s new velvet glove offensive, he recently held a cordial meeting in Moscow with Ukrainian Prime Minister Yulia Tymoshenko. This in turn was followed by a late night chat with Russian President Dmitry Medvedev.

The fiery Tymoshenko is an important person for Russia to entertain and to woo. She was the co-leader, with Ukrainian President Viktor Yushchenko, of Ukraine’s historic “Orange Revolution” in 2004. As the world watched, this event dramatically replaced a Russian-leaning government with a Western-style democracy.

Tymoshenko and Yushchenko now, however, are bitter enemies. The split between the two became evident when the prime minister declined to accompany the president to Georgia while the war was raging. Rather she stayed home, calling simply for a cessation to the hostilities.

Also, whereas President Yushchenko has been strident in calling for Ukraine to become a member of NATO, Prime Minister Tymoshenko has been far more muted in favoring such a step. Her position reflects a recent poll, reported in the UK Times, that found that Ukrainians by a margin of three to one did not wish to join the military alliance. On the other hand Ukrainians do want to join the European Union to take advantage of the benefits that this 27-nation trade alliance could provide.

Greatly acerbating the split between the two leaders, in September Prime Minister Tymoshenko successfully sponsored a measure in the Ukrainian parliament that diluted the powers of Yushchenko’s presidency. She pulled this off by enlisting the support of the parliamentary group that represents the Russian speakers in the country. This pro-Moscow group is one of the three major voting blocs in the parliament. The other two are those members loyal to the president and those loyal to the prime minister.

The president’s reaction to the prime minister’s disloyalty was to call for a snap election to create a new parliament, as early as Dec. 7. A new election would mean the third general election in Ukraine in three years and would be an expensive proposition as well.

In response, the prime minister went to court and won a judgment that the president’s call for new elections was illegal. However, before the court’s decision could become effective, President Yushshenko fired the judge and then claimed that the decision was invalid.

The upshot of this maneuvering, which sounds more like a skit on “Comedy Central” than the actions of a government of close to 50 million people, is that the lower court’s judgment, canceling the election, is now on appeal to a higher court. Until the higher court decides the question, election officials are refusing to begin preparations for another election.

Meanwhile, while all this is going on, Bloomberg News reported that the costs of protecting the Ukraine economy from default soared, after President Yushchenko’s called for early elections. In fact, Ukraine has the highest risk of default among all Europe’s emerging markets. “It’s a panic,” said a Ukrainian fund manager, who manages more than a billion dollars of Ukrainian assets from the capital of Kiev.

As for Ukraine’s political future, should Tymoshenko decide to run to replace Yushchenko as president, she again might need the votes of the bloc that represent the Russia speakers in the parliament. Should she accept support from this bloc, the ultimate question would be how many Moscow friendly actions would be required to bring the members of this bloc over to her side. How she answers this question could be critical to her nation’s future as a truly independent nation.

Oh, yes, and on top of all this, the pirates off Somalia have yet to release, peacefully, the huge Ukrainian cargo ship that they captured in the Arabian Sea.

Jerome Wilson is a former New York State Senator who served for many years as counsel to the New York Newspaper Publishers Association.

(This article is an updated version of an article which appeared in The Shore View on September 12, 2008.)