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Greece ‘backsliding in democracy’ in face of joblessness, social unrest, corruption and disillusion with politicians, says thinktank. The report, commissioned by the European parliament, noted that Greece was the most corrupt state in the 28-nation bloc…

 


Powered by Guardian.co.ukThis article titled “Greece’s democracy in danger, warns Demos, as Greek reservists call for coup” was written by Helena Smith in Athens, for The Guardian on Thursday 26th September 2013 19.27 UTC

No country has displayed more of a “backslide in democracy” than Greece, the British thinktank Demos has said in a study highlighting the crisis-plagued country’s slide into economic, social and political disarray.

Released on the same day that judicial authorities ordered an investigation into a blog posting by an elite reservist group linked to Greece’s armed forces calling for a coup d’etat, the study singled out Greece and Hungary for being “the most significant democratic backsliders” in the EU.

“Researchers found Greece overwhelmed by high unemployment, social unrest, endemic corruption and a severe disillusionment with the political establishment,” it said. The report, commissioned by the European parliament, noted that Greece was the most corrupt state in the 28-nation bloc and voiced fears over the rise of far-right extremism in the country.

The report was released as the fragile two-party coalition of the prime minister, Antonis Samaras, admitted it was worried by a call for a military coup posted overnight on Wednesday on the website of the Special Forces Reserve Union. “It must worry us,” said a government spokesman, Simos Kedikoglou. “The overwhelming majority in the armed forces are devoted to our democracy,” he said. “The few who are not will face the consequences.”

With tension running high after a crackdown on the neo-Nazi Golden Dawn party, a supreme court public prosecutor demanded an immediate inquiry into who may have written the post, which called for an interim government under “the guarantee of the armed forces”.

The special forces reservist unit who issued the social media call – whose members appeared in uniform to protest against a visit to Athens by the German chancellor, Angela Merkel – said Greece should renege on the conditions attached to an international bailout and set up special courts to prosecute those responsible for its worst financial crisis in modern times. Assets belonging to German companies, individuals or the state should be seized to pay off war reparations amassed during the Nazi occupation.

Underscoring the social upheaval that has followed economic meltdown, the blog post argued that the government had violated the constitution by failing to provide adequate health, education, justice and security.

Insiders said the mysterious post once again highlighted the infiltration of the armed forces by the extreme right. This week revelations emerged of Golden Dawn hit squads being trained by special forces commandos.

Fears are growing that instead of reining in the extremist organisation, the crackdown on the group may ultimately create a backlash. The party, whose leaders publicly admire Adolf Hitler and have adopted an emblem resembling the swastika, have held their ground in opinion polls despite a wave of public outrage over the murder of a Greek rap musician, Pavlos Fyssas, by one of its members. Golden Dawn, which won nearly 7% of the vote in elections last year and has 18 MPs in Athens’ 300-member parliament, has capitalised more than any other political force on Greece’s economic crisis. “Much will depend on how well it will withstand the pressure and they are tough guys who seem to be withstanding it well,” said Giorgos Kyrtos, a political commentator.

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USA 

Capital controls in Cyprus will intensify the slump while severely damaging the credibility of the euro. The idea that the single currency would rival the US dollar as a secure store of wealth has taken a pasting as a result of the disastrous handling of Cyprus…



Powered by Guardian.co.ukThis article titled “Demolishing some myths about the single currency” was written by Larry Elliott, for guardian.co.uk on Wednesday 27th March 2013 22.29 UTC

The introduction of capital controls in Cyprus is a textbook example of shutting the stable door after the horse has bolted. Rich Russians and wealthy Cypriots knew the crisis was coming and have had the best part of a fortnight to spirit their money out of the country since it broke, even assuming they did not do so beforehand. The restrictions will intensify the slump Cyprus faces while not removing the risk of bank runs when branches finally open for businesson Thursday. What’s more, the controls severely damage the credibility of the euro.

That’s not to say the controls are unnecessary. Even with the severe restrictions announced in place, there is a possibility of bank runs. Without them, bank runs would be a certainty. Modern banking is essentially based on a sleight of hand under which banks have readily available funds that are only a fraction of their total deposits. If all the customers demand their money at once, as would be the case in Cyprus without controls, the banks go under.

The government in Nicosia insists capital controls will be removed within a week, but that looks as heroic an assumption as the idea that the economy will shrink by just 3.5% this year, the current EU forecast. Iceland introduced capital controls in 2008 and still has them in place. There will no doubt be pressure from Brussels on Cyprus to lift the controls as quickly as possible, but most analysts expect them to be in place for a minimum of six months.

As far as the real economy is concerned, Latvia – which had pegged its currency to the euro – suffered an 18% contraction of its economy following a banking collapse. And bank deposits were just 100% of GDP in Latvia; in Cyprus they were 800% of GDP before the crisis. To sum up, Cyprus is going to have a collapsing economy buttressed by capital controls, but unlike Iceland will not have the option of devaluation to make itself more competitive. Speculation that it will become the first country to leave the euro will not go away. Indeed, it will intensify the longer the capital controls are in place.

There are, of course, wider implications for Europe despite attempts over the last week to say that Cyprus is a special case. When the euro was created just over a decade ago it was supposed to embody certain principles. One of those principles was that a euro would be a euro anywhere inside the single currency zone. That has now been violated; a euro in Nicosia is not worth the same as a euro in Berlin.

A second trait of the single currency was that it was supposed to be a secure store of wealth. International investors would have confidence in it and it would rival the dollar as a global reserve currency. That idea has also taken a pasting as a result of the disastrous handling of Cyprus; the decision to make deposit holders pay a share of the bailout has been accompanied by a fall in the value of the euro against the dollar. That’s hardly surprising; savings in US banks are perceived as rock solid whereas those in eurozone banks are not.

A third core belief was that the euro would lead to economic convergence, with the weaker and poorer countries raising their performance to the level of the rich nations at the monetary union’s core. This has looked increasingly absurd against a backdrop of bailouts for Greece, Ireland and Portugal, and the chronic lack of competitiveness displayed by Italy, Spain and – more recently – France.

So Cyprus has put two myths to bed. One is the myth of convergence; the other is that the debt crisis is over. A new chapter has opened, that’s all.

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Former prime minister, who resigned in 2007, appears to have put troubles behind him as his party decisively regains power with resounding victory in Sunday’s election. Yen drop to a new low after the pro-easing Liberal Democratic Party wins…



Powered by Guardian.co.ukThis article titled “Japanese election victory hands Shinzo Abe a chance for redemption” was written by Justin McCurry in Tokyo, for The Guardian on Sunday 16th December 2012 16.57 UTC

Japan’s voters appear to have short memories. Shinzo Abe, who is assured of becoming prime minister after his party’s resounding victory in Sunday’s election, last led the country in 2006, but stepped down after a troubled year in office.

The official reason given for his abrupt resignation was a chronic bowel ailment, which the leader, 58, says he now controls with a new drug. But his health condition may have been a cover. Abe’s first administration was marred by scandals and gaffes. Months before he quit, his Liberal Democratic party [LDP] suffered a heavy defeat in upper house elections.

Abe says he has learned the lessons of his inglorious debut as prime minister. His tenure began with encouraging diplomatic overtures to Beijing and Seoul over historical and territorial disputes. It ended with accusations that he had filled his cabinet with close friends who were woefully under-qualified for their posts.

Sunday’s resounding election victory has given him one last shot at redemption, as only the second Japanese politician to serve twice as prime minister since the war.

Behind Abe’s soft-spoken manner and aristocratic background lurks a fervent nationalist, which led one liberal commentator to describe him as “the most dangerous politician in Japan”.

Abe has often said he went into politics to help Japan “escape the postwar regime” and throw off the shackles of wartime guilt. In its place he has talked of creating a “beautiful Japan” defended by a strong military and guided by a new sense of national pride.

“I have not changed my view from five years ago when I was prime minister that the biggest issue for Japan is truly escaping the postwar regime,” he said in a recent magazine article.

Abe’s biggest ideological influence was his maternal grandfather, Nobusuke Kishi, who was arrested, but never charged, for alleged war crimes. He went on to become prime minister in the late 1950s.

Decades later, confronted with an aggressive China and nuclear-armed North Korea, Abe is eager to fulfil his grandfather’s dream of giving Japan’s military the teeth he believes it has been denied by the country’s postwar pacifism.

His return to office will surely ring alarm bells in Beijing and Seoul. Abe says he will not cede ground in territorial disputes with China and South Korea. He is also the founding member of a group of rightwing MPs who support a revisionist version of history that plays down, or overlooks, Japanese militarism’s worst excesses in Asia in the first half of the 20th century.

Abe’s confirmation as prime minister later this month represents his last chance to take care of unfinished business. Japan, and the wider region, is waiting to see if he stays true to his beliefs or, as some expect, gives way to a more pragmatic Abe Mark II.

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The Big Four of the eurozone pledged 1% of GDP to spur economic growth as a way out of the financial crisis, but leaders of France, Germany Italy and Spain fail to endorse full plan to protect countries under attack by markets…



Powered by Guardian.co.ukThis article titled “Eurozone big four pledge 1% of GDP to underwrite banks and stimulate growth” was written by John Hooper in Rome and Ian Traynor in Brussels, for guardian.co.uk on Friday 22nd June 2012 18.42 UTC

The leaders of the eurozone’s biggest economies announced on Friday night that 1% of the European Union’s GDP was to be set aside to help the continent grow its way out of the financial crisis. But doubts were immediately expressed as to what share of the package – said to be worth €130bn (£105m) – would be genuinely new money.

After several hours of apparently tense discussions, there was no immediate agreement on a plan outlined by Italy’s prime minister, Mario Monti, on Thursday, aimed at stabilising Europe’s banks and protecting countries under attack in the markets.

“There was an agreement between all of us to use any necessary mechanism to obtain financial stability in the eurozone,” said Mariano Rajoy, the Spanish prime minister, afterwards.

But the German chancellor, Angela Merkel, insisted that the EU must take full advantage of the instruments already at its disposal. Her remark suggested she is wary of two new funds – to guarantee bank depositors and as a lender of last resort to ailing banks – understood to have been on the agenda at Friday’s talks.

In a sign that tempers are becoming increasingly frayed before next week’s crucial summit, the normally gentlemanly Monti used his closing remarks to attack France and Germany publicly.

With Merkel and the French president, François Hollande, standing just feet from him on the podium, he reminded the world’s media that it was not Greece or any of the other alleged EU basket cases that had first broken the rules on fiscal discipline in the eurozone, but the single currency’s two biggest nations – albeit with the endorsement of Italy, which then held the EU presidency.

Friday’s meeting of the big four leaders in Rome came as yet more gloomy eurozone economic indicators were released. German business confidence has fallen to a two-year low, while Italian consumer confidence has plunged to its lowest level on record. Monti’s popular support is in decline as the Italian economy fights both recession and rising unemployment and Rome faces increased borrowing costs.

Hollande revealed that all four leaders were in favour of a European financial transactions tax, a small tax on all financial deals which was originally proposed to tame speculation in the financial markets. His comment followed agreement by a group of countries – not including the UK – at the EU finance ministers’ meeting in Luxembourg to press ahead with plans for the tax.

David Hillman of the UK’s Robin Hood Tax campaign – which backs the financial transactions tax and wants any cash raised to be earmarked for development – welcomed the agreement, but added that “the UK public will be rightly angry that George Osborne is resisting efforts to make the City pay its fair share”.

He said that a Robin Hood tax would “boost growth as well as raising billions to tackle poverty and protect public services at home and abroad”.

One of the keys to next week’s summit will be the precise terms of the growth package. The €130bn would appear to represent a sum that might be raised or redirected from existing funds, rather than any commitment of new money. Nicholas Spiro, of Spiro Sovereign Strategy, said: “The pact has a shuffling of the deckchairs feel to it.”

EU governments have already agreed to boost the capital of the European Investment Bank by €10bn, hoping it will be leveraged into €60bn in the financial markets for investment purposes. The growth package also appears to entail deploying up to €55bn in unspent EU structural funds.

Governments have already agreed to allow the sale of “project bonds” in the markets in the hope of raising capital for major infrastructure projects.

Another measure by which the summit will be judged is progress towards a project for guaranteeing financial stability which, according to an informed source, was being worked on by the “gang of four”, including representatives of the European Central Bank (ECB), Eurogroup, and European commission and council. One aspect of the project was spelled out by Monti in an interview with the Guardian and other leading European newspapers on Thursday.

This would involve tying the purchase of sovereign bonds to the performance of the country in need of help. Virtuous states that had introduced structural reforms and contained their budget deficits would be rewarded.

In its present form, the plan would see the buying done by the European Financial Stability Facility, the bailout fund for states, rather than the European Central Bank.

The other aspects of the plan would involve the creation of two new rapid response funds: one would guarantee bank depositors; the other could be used to deal with institutions such as Spain’s Bankia that looked as if they might pose a threat to the entire eurozone, creating, if not a bank of last resort, a fund of last resort.

Merkel appeared to be less than convinced of this idea, or at least bent on ensuring it was accompanied by iron controls. In an apparent reference to the still-secret plan, she said that if Germany were to give money to a Spanish bank she would have no way of knowing how it was spent – and that would be a “giant problem” for her.

The proposed new bank intervention fund appears to require new administration because the ECB, with a mandate to deal strictly with monetary policy, could not run the proposed new funds.

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