Atlantic Update 6/20/2011


The Czech Republic announced a surprise exit from the U.S.-backed European missile shield proposal last week. Greece fights to handle its internal chaos as its people are protesting against stricter austerity measures whereas the Eurozone financial ministers are pressuring Greece to approve these measures before they decide on the second Greek loan. In order to prevent Greece from a default, the Eurozone is also urged by the IMF to respond more urgently to this grave financial issue that could potentially escalate into a global problem. Is Greece going to avoid defaulting and should it approve of more severe austerity measures against the demands of its people? 

No Deal For Greece (The Economist)

They bargained through the night, but in the end they failed to reach an agreement to release the next desperately-needed tranche of money for Greece. Expect a new round of panic in the bond markets. After seven gruelling hours in Luxembourg, which included a video conference with colleagues from G7 countries, the finance ministers of the 17 countries of the euro zone decided to delay until July the disbursement of €12 billion ($17 billion) in loans from the European Union and the IMF. By then, they said, two issues would have become clearer. Firstly, the finance ministers say they want to know how far Greece’s private creditors are willing to help “voluntarily” by rolling over Greek debt when current bonds mature. This has become vital for German domestic opinion to sweeten the bitterness of having to support a second bail-out for Greece.

Austerity Arrives in Lisbon (Foreign Affairs)

Portugal’s general elections on June 5 moved the country sharply to the political right. The elections took place against the background of economic crisis that rendered the country yet another Eurozone casualty of unsustainable public debt. Despite months of denial, Portugal has been forced, like Greece and Ireland, to seek a bailout from the European Community, the International Monetary Fund, and the European Central Bank. The Portuguese parliament had refused to accept the Socialist government’s austerity measures, and as a consequence, President Aníbal Cavaco Silva called a general election. The reigning Socialists were swept out of office, and a conservative majority was elected to replace them.

IMF tells EU: Stop ‘unproductive debate’ and integrate now (EUObserver)

The International Monetary Fund has bluntly warned the European Union it must put an end to its "unproductive debate" over debt restructuring and, in an unprecedented outside intervention in the construction of the European Union, told the bloc it must integrate faster and more deeply in order to stop a global disaster. Using much of the same censorious language about the EU that the EU has used about Greece, the international lender told the bloc to act "now" and that its handling of the situation "needs attention".

Medvedev says against co-run with Putin for presidency (Ria Novosti)

Russian President Dmitry Medvedev said that his running for presidency simultaneously with Prime Minister Vladimir Putin in the 2012 elections would be counterproductive. "Vladimir Putin (both my colleague and old friend) and I represent to a great extent the same political force," Medvedev said in an interview with the Financial Times published on Monday. "In this sense, competition between us could be detrimental to the goals and objectives we have been implementing over the past few years," he said. "It would not be the best scenario for our country and for the current situation." In line with the Russian Constitution, Putin, who served two presidential terms in 2000-2008, will become eligible to run for a new presidential term in 2012. Neither he nor Medvedev have ruled out putting themselves forward.

Debt and divisions in the Euro Zone (European Voice)

The markets react badly, history shows, when politicians air their disagreements in public. Keep discord behind closed doors, exude a sense of calm, and the markets generally stay quiet. But those in charge of dictating policy in the eurozone have shown that they just cannot help themselves. The disagreements are there for all to see, as Greece teeters once more on the brink. Of late, the loudest difference of opinion sees Jean-Claude Trichet and the European Central Bank (ECB) pitted against Wolfgang Schäuble, Germany’s finance minister, and the rest of the German government. They are at loggerheads, in public, over the prospect of Greek debt restructuring. The gloves are well and truly off. Eurozone finance ministers met on Tuesday (14 June), but agreement on the next course of action remains remote. They gather again next Monday (20 June), as they struggle to come up with some kind of deal before the European Council on 23-24 June.

Shutdown showdown: Utilities prepare lawsuit on German nuclear law (Deustche Welle)

Germany’s major energy companies have authorized a number of prominent law firms to prepare a lawsuit against the government over plans to shut down the country’s nuclear power plants, the weekly magazine Der Spiegel reports. In its Monday edition, the magazine said the energy utilities, E.on, Vattenfall and RWE, were aiming to have Germany’s recently passed nuclear power law declared unconstitutional, and then sue the government for damages – a move that could cost taxpayers billions of euros if successful. In an assessment prepared for E.on, former Defense Minister Rupert Scholz and legal counsel Christoph Moench said the German government’s exit from nuclear energy production is clearly unconstitutional.

Greece under pressure to approve austerity package (European Voice)

Finance ministers to meet on 3 July to discuss next tranche of Greek loan. Eurozone finance ministers have stepped up the pressure on Greece’s authorities to introduce sweeping privatizations and approve strict austerity measures following the conclusion of their meeting in Luxembourg this afternoon (20 June). A team of officials from the European Union, European Central Bank (ECB) and International Monetary Fund (IMF) will travel to Athens tomorrow to assess whether Greece is carrying out its pledges to reform the economy. The results of that mission – together with a vote on the measures in the Greek parliament – will largely determine whether Greece obtains the next €12 billion tranche of its bail-out loan.

‘EU has lost its leverage on Turkey’, ambassador says (EUObserver)

Flush with post-election self-confidence, the Turkish administration has said it will no longer take EU recommendations into account in its internal reforms. Turkey’s ambassador to the EU, Selim Kuneralp, told EUobserver in an interview on Friday (17 June) that Prime Minister Recep Tayyip Erdogan’s top post-election priority is to draft a "modern, liberal" constitution. But due to the breakdown in EU entry talks, Brussels will not play a big role in the project, he added.

Czechs, Disliking Role, Pull Out of U.S. Missile Defense Project (The New York Times)

The Czech Republic announced Wednesday that it was withdrawing from plans to participate in the United States missile defense program out of frustration at its diminished role in the system, which was conceived as a deterrent against a potential threat from Iran. The administration of President George W. Bush had initially proposed stationing 10 ground-based interceptors in Poland and a radar facility in the Czech Republic. But in September 2009, the Obama administration scrapped those plans and proposed a revamped program with an unspecified role for the Czechs. Two months later, it offered the Czech Republic the possibility of hosting a separate early warning system.


‘Heart of the Euro Problem Is Europe’s Indecision’ (Der Spiegel)

After lengthy talks on Sunday night in Luxembourg euro-zone finance ministers announced that they would withhold the next tranche of financial aid to Greece until the government in Athens passes new austerity measures. The decision was clearly meant to pressure the Greek government and parliament to do their part in battling the country’s ongoing debt crisis. Markets, however, have interpreted the move as a continuation of European indecision which has characterized the most recent Greek debt flare up.

Greece faces insolvency in mid-July should it not receive the €12 billion ($17 billion) payment from the €110-billion package set up last May, but resistance from the opposition has threatened to torpedo the necessary austerity measures, set to be passed by parliament next week. The euro group has been urging Greek lawmakers to support the package and a cabinet reshuffle undertaken by Prime Minister Giorgios Papandreou last week appears to have quieted a growing revolt within his socialist party.

Libya highlights Europe’s defense weakness (EurActiv)

The ability of we Europeans to provide for our own defense has been increasingly in doubt since the end of the cold war. I well remember George Robertson, when he was NATO secretary-general, contrasting the size of Europe’s military forces, running into millions, with the inability of European allies to provide just a few thousand troops for NATO operations. The Libyan campaign has forced the issue into sharp focus. Last Friday’s speech by US Defense Secretary Robert Gates at the Security and Defense Agenda meeting in Brussels spelled out the harsh realities of a changing world and warned Europe of the consequences of neglecting its military capabilities.

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