May 10, 2012

Europe's new dynamic holds risks for Britain

As Europe prepared for François Hollande's likely victory in France, two considerations were consistently uppermost. The first was that an Hollande presidency could severely strain the Franco-German partnership. The second was that, whatever the outcome, British-French relations would remain on an even keel. When Mr Hollande follows his recent predecessors in making his first foreign trip as President-designate to Germany, the first preconception could be confounded. The second could follow in short order – and not in a good way.

May 9, 2012

What’s Wrong with Argentina?

When President Cristina Fernández de Kirchner initiated the nationalization and expropriation of the Argentine assets of YPF, an oil company owned mostly by Spanish interests, it came as no surprise to anyone who has visited the country recently or watched it closely. The theft, a consistent manifestation of the Kirchner personality and the mercurial character of the Argentine political class, was more a return to business as usual for the country than a shock — and goes a long way toward explaining why Argentina is poor.

European alternatives to austerity? Here are six.

Very roughly speaking, here’s the euro zone’s current approach to its debt crisis: Individual countries are pursuing austerity measures to shrink their budget deficits. There’s a bailout fund for countries in truly terrible shape, such as Greece. And the European Central Bank is propping up the continent’s rickety banks.

A Merkel-Hollande bust-up? Less likely than you might think

Angela Merkel isn't due to meet François Hollande for the first time until next week, but she must think she already knows him fairly well. Otherwise her senior diplomats wouldn't have confidently announced that the German and French head of state will find a "pragmatic solution" over the new fiscal pact, as they told Süddeutsche Zeitung last week. But then she would say that: pragmatism is what Merkel is all about.

May 8, 2012

Will the End of Austerity Break Up the Eurozone?

With the elections in France and Greece Sunday, both supercharged by debt, deficits, and economic desperation, Europe is about to take a dramatic new direction. The eurozone is turning away from stringent austerity policies and toward those that stimulate demand. President-elect Francois Hollande, the first socialist president since Mitterrand, plans to raise taxes on the rich to meet some of his growth objectives.  However, without a credible debt reduction plan, Hollande risks a loss of confidence among investors and bondholders.  

Islamophobia: Europe's new political disease

A new wave of anti-Muslim intolerance and antagonism is sweeping Europe. The far right political gains seen in some parts of the continent are alarming. Anti-immigrant, anti-Muslim and extreme right parties seem to be cashing in on economic hardship and austerity measures. In a blinkered world of "us" and "them" they have found in Europe's Muslim citizens the "others".

Islam's European hope

Mohamed Merah's killing spree in and around Toulouse in March, like the 2004 Madrid train bombings and the 2005 suicide attacks in London's Underground, has highlighted once again the dilemmas that Europe faces with regard to its growing Muslim minority. No social-integration model has proven to be free of flaws. But is the picture really so bleak as those who despair of an emerging ‘Eurabia' would have us believe?

The Sanctions Fallacy: Iran and Japan

The strategy of imposing increasingly punitive economic sanctions has long been the cornerstone of U.S. policy towards Iran and other rogue nations, ranging from Iraq and Libya to North Korea. However, the fundamental question of whether this policy will tend towards a favorable outcome remains too often unexamined. Beyond the inherent challenges of collective action in constructing a comprehensive sanctions regime, it is unclear whether Iran would, in fact, accede to U.S. demands even if economic measures were maximally effective.