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Posts Tagged ‘The Economist’

(Author’s note: I was writing this article during the summer so it might not be perfectly new but the points I make remain)

The election of François Hollande as the president of France has been an important turning point. He is a Head of State who is openly anti-austerity has been negatively portrayed by The Economist magazine’s article, which called him “rather dangerous”.

The election of François Hollande has been a sign of a current trend in Europe that is going against austerity.  Austerity across the EU is now in its third year almost. Some countries are feeling the pain of austerity, especially the PIIGS, which have all had to be bailed out.

With all of its current problems, the last thing Europe needs right now is a complete move away from austerity and fiscal tightening to a more expansionist monetary policy and more borrowing. These policies are, among other reasons, what caused the current crisis in the first place.

First of all, with the exception of the PIIGS, no real cuts are taking place or have actually taken place in Europe. The graphs on this blog post of an economics think-tank in Slovakia show that in reality no cuts took place. The only thing that happened is that the rise of government spending decreased. But it is still increasing nevertheless so there is no real austerity. In some EU countries governments were actually spending more than they had before.

The public across Western Europe was upset about the austerity and many politicians claim that it doesn’t work. What is really felt, however, is not the pain of the austerity since there isn’t really any, but the pain of the continuation of the economic crisis. The recovery of economic activity in 2010/2011 was largely due to expansionist monetary policies across Europe. Governments spent a giant amount of public money immediately after the start of the 2008/2009 crisis to stimulate the economy. But this kind of Keynesian stimulus only works as long as the government money keeps flowing. With every government dollar that flows into the economy the threat of high inflation increases.

Now, years later when governments started to cut public spending so that they do not run up huge public debts the economies are starting to slow down and the global outlook isn’t rosy. This has mostly manifested itself in fears of the so-called “double-dip” recessions.  These “artificial economic revivals” did not last and genuine economic recovery will not arrive easily.

In short austerity isn’t working because it hasn’t really been tried out. Germany and France have huge public debts, although still incomparable with the PIIGS.  There is one country in the EU, however, that has resisted this tide of “no real austerity” or “just a bit of austerity”. The Baltic state of Estonia has been making headlines around the world in being the “prime example” of austerity. Estonia is the only country in the Eurozone that is experiencing an economic growth, is having a budget surplus and its debt is actually decreasing. No other Eurozone country has all of these three things happening at the same time.

Estonia has felt the real pain of austerity. However, throughout the years the country’s inhabitants got closer together and got through the tough times. The politicians cut their wages by around 20% in order to persuade the public to go through with the tough fiscal tightening measures. Now the economy is recovering and it has very good prospects. Estonia adopted the Euro in January 2011 when no other country even considered joining the common currency union.

Estonia is the only country in all of Europe, which meets the economic criteria of the eurozone and the political and military criteria as a NATO member. The World Bank has graded it as the 24th country in the world in the ease of doing business ahead of France and Italy. Estonia’s economy might face problems in attracting FDI because of being right next to Russia, which is the reason why it was eager to join the North Atlantic alliance in the first place.

Estonia deserves a lot of respect and praise for its sacrifices. With a population of just roughly over 1 million, is certainly is a dwarf when compared to the biggest and the oldest EU members such as France or Germany.  The Estonians have chosen the “hard way”. After a tough and painful crash and a recession in 2009 and 2010 the country looks ahead to a highly potential bright future.  They haven’t decided to borrow more money for which they would have had to pay for later and which would have hurt much more than the austerity they went through.  Estonia’s Baltic neighbors: Latvia and Lithuania have chosen a similar economic policy as a way to sort out the crisis.

In a way, the two opposing ideas in the Eurozone are whether it is better to chose an immediate crash which is then followed by a real recovery or pursue a mild long recession made possible by more spending and borrowing which only gives the temporary impression of recovery. Estonia chose the 1st way which is tougher and certainly less attractive with the public.

Estonia should be an example for the European Union since it is one of the few countries that actually did try austerity as a way out of this crisis. It should also serve as an example in NATO, having kept all of its membership requirements.

These days this “new” EU member (having joined in 2004) is showing the right way.  The “old” members such as Italy, Spain, Portugal or Greece are facing grave problems. Germany and France, which are currently leading the way out of this crisis, have huge public debts and do not lack problems. Why should they have all the credibility?

Perhaps once in a while a “new dwarf” should be listened to or respected and given just as much credibility as the “old giants”. 

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Edward Lucas, the Central and Eastern European correspondent of The Economist recently narrated a video on The Economist‘s website, in its multimedia library. (I posted the video earlier click here to view it)
Lucas explained how in his opinion the concept of “Eastern Europe” which is used to describe all of ex-communist Europe is a messy concept that doesn’t make sense and should not be used any more.

This narrated video follows a TED Talk that Lucas gave at the TEDx event in Krakow. (To watch it on YouTube click here) During the talk he explained why calling the whole ex-communist region of Europe as one entity by using the name “Eastern Europe” is wrong, confusing and far from the truth. It is a messy concept that does not make sense. I shared this video via Twitter and other social media websites.

Lucas gave that TED Talk back in December 2011 and now months later he narrated a video with the same message. I noticed it and think that Edward Lucas is trying to make a serious point so I decided to make a post about it in my Blog.

It also concerns me since I’m originally from Slovakia, a country which gets caught in this messy concept as well with many other countries.

Edward Lucas is perfectly right. This concept does not even make sense geographically. If the Czech Republic is in Eastern Europe then why should Austria not be in there too. I know, for example, that French geography tex books divide Europe exactly like that and include Greece in “Western Europe”. That is close to insane.

In the two videos Edward Lucas proposes two new concepts: “Baltic Europe” and “Danube Europe”. These two make perfect sense geographically and culturally.

A term that I believe should be used more often from a geographical point of view is “Central Europe”. Not that there is anything wrong in being from the East or being Eastern European, but calling half the continent Eastern Europe is not correct.

“Central Europe” is ideal to describe Poland, Czech Republic, Slovakia, Hungary, Austria and perhaps even Germany, Switzerland, Slovenia and Lichtenstein.  However, I do not think that the term “Eastern Europe” should be abandoned completely. I think it is ideal to use it to describe the countries that constitute the territory of the former Soviet Union: Russia, Ukraine, Belarus, Moldova and maybe the 3 Baltic States. The 3 Baltic states, however, would rather be included in “Northern Europe” among countries such as Finland and Sweden or they should be part of what Lucas calls “Baltic Europe”.  Sometimes according to some classifications the Baltic States along with Romania and Croatia also fall into “Central Europe”. To see the various ways of how “Central Europe” is classified view this Wikipedia entry here.

The term “Central Europe” should be used more often in international media. For example we commonly use  “Central European Time” or “CET” to describe the time zone that runs from Spain through most of Europe all the way to the Baltic States, Romania and the former USSR. That concept is also untidy and the time zone itself is confusing, but that is a different topic. I’m not going to get into that.

The ex-communist countries of Europe are far from being homogenous. Yes, they were all communist during almost half of the last century but that is all. Most of them are Slavic, but not all of them. In only some of them is the Eastern Orthodox Cristinatiy the dominant religion . The others are mostly Roman Catholic. ( Not to mention that two of them: Czech Republic and Estonia are among the most atheist countries in the world.) A common misconception abroad is that they all use the Cyrillic alphabet. Most of them actually use the Latin alphabet.

If you watch these two videos (it will not take a lot of your time) you will find out more about this part of Europe and what the countries of this region are like. Most of them are integrating deeper and deeper into the European Union and are also becoming important on the world stage. The recent EURO 2012 tournament for example was held in Poland and Ukraine.

Edward Lucas deserves thanks and  a lot of credit. The website of The Economist where his video is posted is visited daily by millions of people all over the world. Thanks to his video everyone who sees it will hopefully stop using the old concept of “Eastern Europe” and will recognize the ex-communist countries of Europe for what they really are.

Thank You Mr. Lucas

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(I’m not an expert in Latin America or Argentina. However, I always had an interest in the region, its culture and I do speak Spanish as well. Usually I would not write about Latin America and focus on other topics instead, but since the Falklands topic was a lot in the news recently I decided to sum up my thoughts about it)

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Recently Argentina, with the 30th anniversary of the Falklands War (April 2012) approaching, has once again re-started the old debate about whom the Falklands (Malvinas in Argentina) should belong to. Once again the tensions between the two countries, Argentina and the UK have increased. Argentina’s president Cristina Kirchner even accused the UK of militarizing the dispute by sending a naval ship into that region, and made a formal complaint to the UN.

This is nothing but a repetition of old patterns. The Falklands War in 1982 was started by the then-ruling Argentinian military junta. Amongst many other reasons, the main reason was to divert attention from domestic problems. Back then the Argentina was under rule of a military dictatorship of General Galtieri, so there were clearly political problems. But moreover there were economic difficulties which were undermining the military junta’s control. What could be a better diversion than a war? Later on the defeat in the war meant the end of the dictatorship.

Today the pattern appears the same. A need to divert public attention from domestic problems, means that  Argentina’s President is again spurring up the old debate. She convinced many other Latin American countries to refuse ships from the Falklands in their ports. She called UK and British Prime Minister David Cameron “neo-colonialist”.

Argentina does have domestic problems, and in my opinion this whole sabble-rattling  just proves that the internal problems are actually getting worse. Why else would Cristina Kirchner be diverting attention like this? Already back in 2010 Argentina was facing some economic and political difficulties. The Economist was fiercely criticizing the government’s policies. Both economic and political. (High inflation, control of the Central Bank, conflict with the media)

It is very unlikely that since 2010 the problems disappeared or things improved, if anything they most likely got worse. Recently when I talked to one young Argentinian he did say to me that in his opinion with Cristina Kirchner and her policies Argentina is “becoming Venezuela”.

To make a point, the Falklands never belonged to Argentina and the fact that they belonged to Spain before they became British does not change anything. And does anyone care what the inhabitants of the Falklands think? They do not want to be Argentinian, nor do they wish to discuss the sovereignty of the islands. Despite everything that Argentina says, its claims to those islands will never be legitimate.

One should not forget that oil is involved. No doubt Argentina would like to get piece of the action. If Argentina really wanted to control the Falklands or at least have some influence there, it should do the opposite and start cooperating with the UK: open its sea ports, its airports and its economy to the Falklands. Argentina and Buenos Aires, especially, would make an ideal land base for processing and further transporting the oil from the Falklands. Free movement of people between the islands and the continent would definitely enable many Argentinians to move onto the islands and this could make those, “really more Argentinian”. There’s great economic potential in cooperation for all the parties involved and it could finally make Argentina and the UK put their history of hostility behind them. The economic potential that this cooperation offers would benefit Argentina’s economy and help resolve its economic problems and Cristina Kirchner would not have to divert the public’s attention away from it by making populist claims.

Instead of trying to divert attention from a problem, it is better to try solving it.

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