Thursday, February 21, 2002

Bush turns away from the weaklings of Europe "Europeans and Americans are now living on different planets ... the huge gap that now exists between the world view of Europe’s policymakers and their American counterparts. .... To the Bush team, the War on Terror is a defining moment in history ... The consensus in Washington ... is that Europe is irrelevant to the world today. Because it will not spend what is necessary to matter as a military power, its views on issues that involve the use of such power are of no consequence ... the increase in America’s defence spending is almost half again as large as the total budget of Europe’s biggest defence spender, the UK." " ... there is an unfortunate coincidence of timing: the War on Terror has made clear Europe’s impotence at precisely the time that it has demonstrated America’s overwhelming technological advantages. ... The military weakness of Europe is only one factor ... [some think] Europe is completely inward-looking ... They contrast this with outwardlooking America. While Europe fusses over Macedonia and the problems of French farmers, America is developing new, innovative long-run policies towards countries that really matter in the 21st century — China, Russia, India." " ... those who matter here are convinced of two things: the important business of the world will be done by America, which will not let any coalition dictate its mission; and Europe is largely irrelevant to our efforts to make America safe from further harm. There is more. Several Administration economists are convinced that Europe is doomed to economic weakness — low growth and high unemployment. Its military irrelevance will be matched by its economic irrelevance ..." " ... doesn’t understand why the European elites don’t see in the collapse of Argentina a warning. Fixed exchange rates don’t work when labour can’t move freely among nations in the fixed-rate area ... All America can do ... is wait for the strains on the euro to become intolerable, and then politely refrain from saying 'I told you so.' ... he can understand Europe’s frustration, it once having been a great centre of Western culture and power, now reduced to irrelevance." ... [more] 3:38:19 PM    comment  []

Mending the world's piggy bank [IMF Reform] " ... Argentina[s] ... economic and financial crisis [causes] attention ... to focus on ways of preventing future crises, and making those that do occur easier to deal with ... " "Does it refuse further assistance and precipitate the crisis; or continue to prop up what may well be an unsustainable situation? Either way, it is bound to be criticised—and either way the crisis will, eventually erupt. ... new impetus to the efforts to improve crisis prevention. ... the administration’s preference for handling issues such as Argentina through the IMF rather than bilaterally." " ... one of the central issues that everyone seems to agree needs tackling: a more orderly way of achieving sovereign-debt restructuring. ... floated some ideas ... given a cautious ... a green light to develop them further. Key to this is the American attitude, which has been markedly receptive to such ideas ... A key aim of such reforms ... to increase the flow of funds going to emerging markets, at lower interest rates." "During the third-world debt crisis of the early 1980s, it was usually possible to get most creditors round a table to work out a restructuring deal:  ... most lending to emerging-market economies ... syndicated bank lending. Now most lending ... bonds. The proportion of outstanding public external debt owed to private creditors via bonds ... up from 13% in 1980 to 60% in 2000. Bondholders are anonymous ... " "The proposals being discussed will need to be turned into a detailed reform plan quickly if the current interest in finding a better way to handle international financial crises is not ... to evaporate. But the Argentine experience ... spur the rich nations to act before the next crisis comes ... "   ... [more] 3:24:51 PM    comment  []

[Japan] The non-performing country " ... Japan's triple menace of debt, deflation and political deadlock. ... Japan's economic slide ... deflation and depressed spending continue unabated, bringing fears of an accelerating downward spiral. ... falling prices have continued to be matched by dwindling jobs. ... rickety banking system, and from the common knowledge that the government must one day do more to deal with the banks' bad loans ... job losses follow collapsing balance sheets ... as falling prices squeeze profits and make it harder ... to service their debts ... 19,000 companies went bankrupt last year ..." " On April 1st ... a pair of decisive changes. Banks ... will be made to value ... shares at market prices. Because equity prices have fallen sharply, the banks will have to show losses of more than one-and-a-quarter times their operating profits. ... those losses ... could prompt more depositors or investors to flee. ... [also] the government will begin rolling back the blanket deposit ... Many depositors have already moved their money ... The risk remains that the partial repeal will cause bank runs. ... These looming changes ... rais[e] the odds that Japan's long-awaited crisis will at last arrive, leading to some kind of economic meltdown ... " "Worse will follow if bond investors come to share the alarm. ... Japan's official public debt has risen to 130% of GDP. The budget ... will easily drive the ratio above 140% within a year. ... Japan's fiscal position ... has already prompted downgrades by the rating agencies: ... Moody's said it might lower Japan's credit rating to the same levels as Poland and South Africa. ... Unlike most previous bouts of panic, this one has far more potential to cause trouble in the rest of the world ... Japan remains a big trader, investor and lender, so any collapse would affect all its counterparties." " ... political obstacles to reform ... [Koizumi] has not shown himself determined enough to take on the forces obstructing reform ... too willing to compromise with them ... " " ... three developments ... First, he could not reform much since the despised 'resistance forces' in the LDP and the bureaucracy have watered down all his plans. Second, these forces, having bought time, have cashed in on the recession by persuading people that Japan needs to pursue 'anti-deflation' (by which the LDP means more public spending) before structural reforms (which would cut off the tap). Thirdly, Mr Koizumi sacked Ms Tanaka, foolishly provoking a backlash and losing his only real asset, his popularity."  ... [more] 2:57:46 PM    comment  []

[China represents] Proliferating challenges " ... Underlying tensions ... over weapons proliferation" " ... CHINA has its worries about American power and where it might next be displayed ... China’s president, Jiang Zemin, above all wants to keep the relationship stable, as he focuses his attention on affairs at home. ... For Mr Jiang, the events of September 11th provided a welcome pretext to strengthen ties with America ... " " ... the relationship is still just as plagued by deep-seated misgivings on both sides as it was before September 11th. ... As the director of the CIA ... said, China 'remains deeply sceptical' of American intentions in Central and South Asia ... Mr Bush will make clear his concerns about missile proliferation ... saying non- proliferation was 'a make or break issue' in the relationship. ... there are still no clear signs that a breakthrough is imminent." " ... Vice- President Hu Jintao. ... Those who meet him come away little the wiser about how he will lead China through a period of wrenching social and economic change. ... For America, such uncertainty in a country so crucial to its security interests should be a cause of concern." ... [more] 2:16:29 PM    comment  []

The Texan and His Rogues " ... world-wide hunt for anti-American baddies. But the three states which have suddenly become the focus of the Manichaeian world view, with which Americans reduce complex problems to manageable confrontations between good and evil ... the "underdogs" are only left with an "asymmetric response", resorting to unconventional means and weapons ... Bush is now making every effort to deprive so-called rogue states of such means ... " ... [more] 2:05:52 PM    comment  []