British Airways Strike: Scabs Better Than Strikers

♠ Posted by Emmanuel in ,, at 5/17/2010 04:43:00 PM
The newswires are buzzing here in the UK about how British Airways cabin crews have been ordered back on the job by the High Court just a day before they were scheduled to go on strike again. Due to technical reasons in the way the Unite union (which 97% of cabin crew belong to) handled the strike ballot, BA has been able to secure an injunction. As if the airline isn't losing enough money from the sporadic belchings of Eyjafjallajokull. From Auntie:
British Airways has won a High Court injunction to stop the latest strikes by its cabin staff. The decision was based on a technicality and whether Unite followed rules in contacting its members with strike result details. The first of four five-day walkouts had been due to begin at midnight, but will not go ahead following Mr Justice McCombe's decision.

The union has said it will appeal against the injunction decision. BBC business editor Robert Peston said the decision created more uncertainty for passengers, and for employees. "Although the company may regard it as a victory, it doesn't appear to have solved what is a very serious industrial relations problem," our correspondent said.
However, the real question to me is whether British Airways should care to go to such great lengths to retain its regular (and quite militant) cabin crew. As these folks are paid significantly more than yours truly despite their apparent surliness, I am not exactly sympathetic to their cause. Given that there are literally thousands of unemployed here in the UK who would gladly fill in these posts, you can argue that they have greater incentive to do a good job than the strikers do.

Well, what do you know? As rolling strikes are expected to start once again depending on the outcome of the ruling, keep in mind that customer satisfaction ratings were actually higher for the replacement crew (or scabs in "industrial action" terminology than for the regulars. From the Evening Standard comes this insightful article:
Air passengers preferred the volunteer staff who replaced the regular cabin crew during the latest British Airways strike. A survey found there were small but key improvements among satisfaction levels when employees from other parts of the company took over during the seven-day industrial action at the end of March. The regular “Think Customer” questionnaire found overall satisfaction levels rose to 76 per cent, a one per cent increase on the previous survey. When passengers were asked whether they were happy “with the presence of staff” 75 per cent reported they were — a rise of two per cent.

There was also a two per cent increase when travellers were asked if problems were dealt with correctly. One passenger said: “My memory is how great the overall experience was from all members of your team bearing in mind they must have been under enormous pressure.” The survey was published in the in-house magazine BA News.

A company insider said: “We are delighted with the results. Although the increases are small they are key factors in showing how well the volunteer staff did their jobs — and they were clearly appreciated by our customers.” Union sources said: “BA would say that wouldn't they – it's a company survey which we would dispute.”

A further 20 days of strikes begin on Tuesday in the long-running cabin crew dispute. BA expects to have to cancel more than 5,000 flights and is preparing for a busy weekend with passengers trying to get away early.
Yes, you can complain that the surveys were conducted by BA, but the point is that I can think of no airline that farms out its customer feedback operations to, say, Deloitte. An economist type could have a field day with this finding--"people respond to incentives," whereas the strikers have a sense of (misplaced?) entitlement. All I can say is, why be so keen on keeping the strikers when there are apparently many out there who are at least as able to satisfy the customers?

And, of course, you can follow the latest news on the strike from the BA site.

India Also Practices Tech Protectionism vs China

♠ Posted by Emmanuel in ,, at 5/17/2010 12:21:00 AM
It appears that what goes around comes around. A few months ago, multinationals operating in China were all angry about Circular 618, a law mandating that government bodies preferentially purchase technology products from local firms. It was the old "infant industry" strategy dolled up for a newer age. However, lots of pressure from foreign firms eventually resulted in a relaxation of these procurement requirements.

Interestingly, it appears that India, also keen on developing homegrown technology industries, is applying similar limitations on Chinese firms seeking to diversify their telecommunications business portfolio beyond borders. That old guise of protectionism, "security concerns," joins anti-dumping measures in a concerted effort to limit inroads made by Chinese suppliers. Indeed, their fear of China is such that phone companies are being made to buy from Western competitors even if it means higher costs. From Businessweek:
Facing increased competition at home and government pressure to expand overseas, Chinese telecom equipment makers have been looking toward India. The country is already the biggest export market for China's two leading phone gear manufacturers, Huawei Technologies and ZTE, and both companies have made India a top priority. "If [Indian] government policies are favorable," ZTE India managing director D.K. Ghosh said on Apr. 14, "we will further scale up our investments."

When it comes to China's Big Two, though, India's policies are hardly favorable. The government has sent letters to Indian phone companies saying they can't buy equipment from Huawei, ZTE, and several other mainland companies due to security risks. In April, researchers reported that Chinese hackers had targeted Indian defense computers. And in December, India banned many Chinese cell phones, also because of security concerns, and imposed anti-dumping duties on transmission gear from Huawei and other vendors. Huawei says it's committed to "the development of the Indian telecoms industry." ZTE says it adheres to Indian law.

[F]ew analysts doubt that China is the main target of the restrictions. "The Indians are incredibly paranoid about China," says David Zweig, a professor of politics at Hong Kong University of Science & Technology...

While India's phone companies could buy equipment from Western suppliers, they would pay far more. So carriers are lobbying the government for a change—and hedging their bets, says Sanjeev Aga, managing director at Mumbai-based Idea Cellular. "A lot of companies are finding suppliers in India," Aga says. Any resolution, though, may ultimately require talks between the two governments, says Kunal Bajaj, a partner with market research firm Analysys Mason. "There is going to be quite a bit of posturing between the two countries for some time," he says.
It's not very neighborly, eh?

S to N Korea: Sink Ship? No World Cup TV for You

♠ Posted by Emmanuel in , at 5/14/2010 12:07:00 AM
Dear readers, let me disclose that I haven't the slightest idea how North Korea qualified for the 2010 World Cup for the first time since 1966. Certainly, there are strong teams in Asia including the host countries of the 2002 event, South Korea and Japan. I vividly remember calls for Perugia FC to fire South Korean international Ahn Jung-Hwan after he stoked his country's side to victory against Italy during the quarterfinals in 2002. Perhaps the field is not very strong after regional powerhouses Japan and South Korea, allowing North Korea to sneak in.

At any rate, the story gets even more convoluted from there. Recently, the South Koreans have claimed that the fatal sinking of one of their military vessels was due to foul play from the North Koreans. While we wait for more solid evidence to this effect from the South Koreans, it seems they have come up with their own unique way to get back at Dear Leader Kim Jong-il's strange play acting. It turns out that, in the absence of a solid telecommunications infrastructure, North Korea relies on South Korea to provide a retransmission of international broadcasts of the World Cup. So, if South Korea really wants to turn the screws into North Korea, it's "no World Cup football for you, murderous regime." Just imagine what could happen if North Koreans cannot watch their national team (not progress) in the group of death of Brazil, Portugal, and the Ivory Coast (featuring Chelsea great Didier Drogba).

From the Financial Times comes this very curious article:
South Korea could block broadcasts of World Cup matches to football-mad Pyongyang, venting anger over the loss of a warship before North Korea make their first appearance in the tournament since their giant-slaying performance of 1966. Seoul has few practical responses to the loss of a corvette, which it suspects North Korea torpedoed in late March, killing 46 sailors. Pulling the plug on coverage of next month’s World Cup finals could touch a nerve.

North Korea, perhaps the competition’s most celebrated underdogs, knocked out Italy in 1966 before surrendering a 3-0 lead against Eusebio’s Portugal to lose in the quarter-finals. [Koreans of both persuasions seemingly have a record of knocking out the Italians.] Football stokes high emotions in the North and the only riot filmed there followed a match against Iran in 2005, when fans hurled seats and bottles on to the pitch.

Not seeing the home side – nicknamed the chollima or “stallions who run a thousand leagues” – could be politically explosive. “If there is a power cut during the World Cup, people start yelling at the screen and criticising the authorities. There could be trouble if they don’t broadcast it at all,” said Park Sang-hak, a North Korean defector who heads a non-governmental organisation.

Seoul’s ministry of unification says it has the right to block the broadcast depending on the final result of talks between SBS, the private Seoul broadcaster, and North Korea’s Chosun Central Television. SBS is negotiating to broadcast the World Cup free to North Korea if its cameramen are allowed to film crowds of fans watching games in Pyongyang. SBS transmitted World Cup footage free to Pyongyang in 2006, during the so-called sunshine policy of detente between North and South.

This year, however, the ministry of unification said it would have to weigh any deal, given the political climate. “Even if it is private business, goods being taken out of the country require prior approval from the unification ministry in accordance with the law. Broadcasting is also subject to that law,” said the unification ministry.

SBS said North Korea might be able to set up illegal pirate feeds but it had exclusive broadcast rights to the Korean peninsula. If the North wanted a separate deal through Fifa, football’s governing body, or the Asia-Pacific Broadcasting Union, it would need permission from SBS. The North Koreans face Portugal, Brazil and Ivory Coast in a “group of death” in this year’s tournament, which kicks off on June 11.
I can see the headlines now:

"Korean War Restarts Over World Cup TV Denial"; or better yet...

"Kim Jong-il Regime Collapses Over Lack of Football"

We can always dream, no?

UPDATE: A Different League has a fascinating profile of the DPRK squad. While I usually root for the underdog, I am still unsure if I can root for this particular team given the circumstances noted above.

UK's Odd Coalition: Tories Loathe, Libs Love EU

♠ Posted by Emmanuel in , at 5/12/2010 10:05:00 PM
And so it has come to pass: after the resignation of Gordon Brown as the UK's prime minister, we now have a Conservative-Liberal Democrat coalition after both parties reached an agreement. In a previous post, I explained my wholehearted support for the Liberal Democrats based on two issues which are most meaningful to me. To paraphrase the notion of a "single issue voter," I am a "double issue voter." The first issue of course is migration as I am but a migrant worker here in the UK. Second is the place of the UK in Europe. While the woes of Greece have dragged the euro down somewhat, I still regret not being paid in a currency which still promises to be a better store of value going forward than the pound. For another thing, what many casual observers seem to miss is that the US is racking up record deficits month after month while the Greek episode is occasioning moves towards limiting fiscal incontinence that Americans have no inclination to solve.

Actually, I am quite surprised the Liberal Democrats came away with as many Cabinet positions as they did given the circumstances--five, in fact. Still, the point remains that the two parties have longstanding differences on the matter of the UK's place in Europe. Earlier on, if you recall, there were hopes that the famously Eurosceptic Vaclav Klaus of the Czech Republic would put off signing on to the Lisbon Treaty for long enough so that the British Conservatives would come to power and put it to a referendum which would naturally doom the treaty [1, 2]. Thankfully, that has not come to pass.

Remember that Nick Clegg is a former Minister of European Parliament (MEP), and that he met his Spanish wife while serving as an MEP. During the televised debates, he famously chastised the Tories for aligning themselves not with the Europe People's Party--an more acceptable face of conservatism--to one which included "nutters, anti-Semites, people who deny climate change exists and homophobes" [!] Hence possible infighting over Europe can occur within the coalition government over matters such as aid contributions to Greece (which haven't been called for, anyway) and bank regulation emanating from Brussels that encompasses the City of London.

Already, negotiations for a coalition government were supposedly thrown into some disarray as a leaked memo was unearthed revealing the Tories renewing Margaret Thatcher's aggressive attitude towards Brussels. Red lines, the European superstate, and all that jazz which has emanated from 10 Downing Street for years and years is once more...
A secret letter outlining Tory plans towards the EU has complicated efforts to secure a Conservative-Lib Dem coalition. The document, obtained by the Observer, was written by civil servants last week on the assumption of an outright Tory victory at the general election. It adopts a firm approach to the EU, and stresses that shadow foreign secretary William Hague would have adopted a tough approach to repatriation of powers in a meeting of EU foreign minister to be held tomorrow.

It would have set EU leaders on a crash course with the new Conservative government, with demands for the return of powers over criminal justice, and social and employment policy during the first term of a Conservative government. The staunchly eurosceptic stance will prove a major sticking point in David Cameron's talks with Lib Dem leader Nick Clegg today, as the two men desperately try to put together a viable coalition government.

The pro-EU Lib Dems are likely to be unnerved by the letter, especially given explicit statements from Mr Cameron assuring voters that EU policy would constitute a Tory red line in negotiations. The letter, which would have been written from the foreign secretary to the prime minister, stresses that "the British relationship with the EU has changed with our election".

Mr Hague planned to tell his EU counterparts: "Rest assured that we seek engagement, not confrontation. But our aim is to achieve these commitments during this parliament. "You will find us firm but fair, playing a leading role, fighting our corner, practical and straight-talking." Tory sources told the Observer newspaper they had no knowledge of the letter last night.
However, you need to remember that, like many political parties, there are different wings even within the Conservative Party. In it there is a long line of grandees who are actually positively disposed to the European project unlike Thatcher and her figurative offspring. Think of grand old folks like the last Hong Kong Governor Christopher Patten or, more pertinently for today's example, Kenneth Clarke. Clarke is a Tory evergreen who has served in various posts for Thatcher and Major--Chancellor, Health, and Business Secretary--and now as Justice Secretary and Lord Chancellor. (Being the shadow business secretary, Clarke was in line to fill that position again until the Liberal Democrats' Vince Cable took that role as part of the coalition.) The move is seen by many as another concession to the Liberal Democrats. By placing a pro-Europe Tory in the cabinet, he symbolizes that the new government will (hopefully) not stray too far in the Eurosceptic direction to the discomfort of the Lib Dems.

The infamously Tory-leaning Daily Telegraph describes Clarke, a man who's not endeared himself to many Tories by consistently backing scrapping the pound in favour of the euro, thusly:
Ken Clarke is one of the "big beasts" of the last Conservative government, and was the chancellor under John Major's government. He is credited with leading Britain out of the recession of the 1990s. He held a wide variety of other ministerial posts under both Thatcher and Major. Staunchly pro-Europe, he is a controversial figure on the Conservative front bench.
It will of course be interesting to see how the odd bedfellows, the Tories and Liberal Democrats, try to shape a cohesive European policy especially on security and economic matters. The choice of Clarke is an important gesture. However, I think it signals more of a consolidation of how far in the UK has become involved in the wider scheme of European integration than of how much further it wants to get involved.

The usual Tory threat position remains--any further movement into European integration should be subject to a referendum. Given how poisoned the UK media is against Europe--the Murdoch media machine especially--I don't think even moderate strides towards embracing Europe more are possible. Then again, it's good the Liberal Democrats are there to temper runaway Eurosceptic dyspeptics.

At any rate, here is the full text of what has been agreed on Europe; at least on paper:
  • We agree that the British Government will be a positive participant in the European Union, playing a strong and positive role with our partners, with the goal of ensuring that all the nations of Europe are equipped to face the challenges of the 21st century: global competitiveness, global warming and global poverty.
  • We agree that there should be no further transfer of sovereignty or powers over the course of the next Parliament. We will examine the balance of the EU's existing competences and will, in particular, work to limit the application of the Working Time Directive in the United Kingdom.
  • We agree that we will amend the 1972 European Communities Act so that any proposed future Treaty that transferred areas of power, or competences, would be subject to a referendum on that Treaty - a 'referendum lock'. We will amend the 1972 European Communities Act so that the use of any passerelle would require primary legislation.
  • We will examine the case for a United Kingdom Sovereignty Bill to make it clear that ultimate authority remains with Parliament.
  • We agree that Britain will not join or prepare to join the Euro in this Parliament.
  • We agree that we will strongly defend the UK's national interests in the forthcoming EU budget negotiations and that the EU budget should only focus on those areas where the EU can add value.
  • We agree that we will press for the European Parliament only to have one seat, in Brussels [instead of shuttling between Strasbourg and Brussels].
  • We agree that we will approach forthcoming legislation in the area of criminal justice on a case by case basis, with a view to maximising our country's security, protecting Britain's civil liberties and preserving the integrity of our criminal justice system. Britain will not participate in the establishment of any European Public Prosecutor.

Strauss-Kahn to Greece: Don't Fear the IMF

♠ Posted by Emmanuel in ,,, at 5/12/2010 05:14:00 PM
Running over the same old ground
What have we found? The same old fears
Wish you were here


It seems the old adage that time goes around in circles is correct. I suddenly received a whole bunch of hits to an older post I made, when the world was still young it seems, featuring the signature image of then-IMF Managing-Director Michel Camdessus hunching over former Indonesian President Suharto in arranging yet another bailout package with the IMF in 1998. The famously strict conditionalities imposed on Indoesia are widely believed to have fomented the race riots that helped bring down the Suharto regime--in power for 21 years.

Although the riots in Greece are pretty vehement this time around, I have mentioned that they pale in comparison if your yardstick is the human toll extracted as the IMF is called in. Estimates place the fatalities in Indonesia of 1998 at 1,500. Greece, on the other hand, has suffered 3 to date. Nevertheless, we are running over the same old fears as Pink floyd once sang as the Greek government fears domestic pressures may lead to a similar overthrow of the current government.

It turns out that I was linked to by none other than our old friends at Bloomberg--still in my topmost rung of news sources. What's more, the context they write in is that of current IMF conditionalities being imposed on Greece by the IMF and to a lesser extent the EU. Already, IMF First Managing Director John Lipsky has been quick to point out Greek "ownership" of these conditionalities. That is, they should be up to meeting them since the government helped draw them up in the first place.

Without further ado, here is what Bloomberg has to add on how the IMF is keen on shooting down Indonesia 1998 (Camdessus) - Greece 2010 (Strauss-Kahn) analogies this early in the game:
International Monetary Fund Managing Director Dominique Strauss-Kahn told Greeks last month not to fear his institution. As money begins to flow, it may be the IMF that starts worrying about lending to Greece. That’s the view of some former IMF and government officials on the Washington-based fund’s $38 billion contribution to a $139 billion loan package by nations sharing the euro. With no say on monetary or currency policy and investors doubting the rescue will prevent a Greek debt restructuring, the IMF’s credibility is riding on the second-largest program in the fund’s 65-year history.

“If not mission impossible, it’s certainly mission highly improbable,” said Morris Goldstein, a senior fellow at the Peterson Institute for International Economics in Washington and a former IMF deputy research director. “If the thing doesn’t work, then their reputation will be hurt.”

Since 2008, the IMF has committed more than $122 billion to nations from Hungary to Pakistan to contain the global financial crisis. The Greek loan is the first to a euro member, and Strauss-Kahn must share control with European Union officials, who will help decide whether Greece is meeting its targets for spending cuts and tax increases...

Allan Meltzer, an economist at Carnegie Mellon University in Pittsburgh who wrote a congressional report in 2000 that examined the fund’s role as a lender of last resort to governments since 1945, called Greece “a basket case” that will default on its debt.

IMF officials have said debt restructuring has never been part of negotiations and that the Greek program will result in a budget surplus, excluding debt payments, and a more competitive economy. “This program is going to be very successful, and we are going to achieve a gradual reduction in debt,” the IMF’s Greek mission chief, Poul Thomsen, told reporters May 2.

Stepping into the euro area is raising the IMF’s profile and risking Strauss-Kahn’s legacy, said Domenico Lombardi, a former IMF board member. Strauss-Kahn, 61, was the French Finance Minister when the European currency was launched in 1999. “It’s not just an economic crisis, and therefore this entails a much higher risk,” Lombardi said.

The risks were highlighted by street protests in Athens against austerity measures required as a condition of the loan to Greece. Three bank employees died when their building was set afire by a group of self-styled anarchists. The measures, including wage cuts for public workers and a three-year freeze on pensions, aim to reduce Greece’s budget deficit to below 3 percent of its gross domestic product by the end of 2014, from 13.6 percent last year. The package was approved by a vote of 172-121, with Prime Minister George Papandreou ousting three deputies from his party after they cast blank ballots.

“It’s a very tough adjustment program which undoubtedly will demand sacrifice from the Greek people,” John Lipsky, the IMF’s first deputy managing director, said May 9 after the fund’s board voted to approve the program. “But at the same time it’s necessary, it’s credible and it’s achievable.”

IMF officials, criticized after the Asian financial crisis for imposing austerity measures on countries from South Korea to Indonesia as a condition of aid, are now stressing that Greece is making its own choices. A Jan. 15, 1998 photograph shows then-IMF Managing Director Michel Camdessus looking on with arms crossed as Indonesian dictator Suharto signed an agreement promising measures that included scrapping foreign ownership limits on banks and raising taxes on gasoline, tobacco and alcohol. Four months later, Suharto was ousted amid riots sparked by austerity measures.

“Greece needs to diligently examine whether the prescriptions have direct relations to the problems that it faces,” Ginandjar Kartasasmita, who served as Indonesia’s finance minister and coordinating minister of the economy in 1998, said in a May 5 interview.

Strauss-Kahn said he wants to protect the “most vulnerable” in Greece from hardship. Since taking over the IMF in November 2007, Strauss-Kahn has eased conditions for lending and has created a credit line that offers money upfront to nations deemed to have sound economic policies. Some observers are skeptical. “They’re trying to be nice guys, and nice guys lose money,” Meltzer said.
And here is an insightful point made by Bloomberg. Latvia has been able to cope with the demands placed on it while maintaining a peg between its currency and the euro. If a non-EMU country could cope without the blandishments being offered by the EU, what more Greece? The EU is giving it almost every lifeline available:
Latvia may offer a guide to the success or failure of the Greek program. The Baltic nation approved budget cuts equal to about 10 percent of its economy to comply with the terms of a 7.5 billion-euro ($9.5 billion) loan from a group led by the IMF and the EU. The program has helped restore investor confidence, though at the price of an 18 percent contraction last year. At the same time, Latvia kept its currency, the lats, pegged to the euro.

“We seem to be proving that we were able to manage something many thought was impossible -- an internal devaluation,” Latvian Prime Minister Valdis Dombrovskis said April 30 in Munich. He recommended euro countries facing “dramatically” rising debt push through similar measures.

One difference is that while the IMF expects Latvia’s debt to peak at 70 percent of GDP, it sees Greece’s burden reaching more than twice that level in 2013. “The question is: Are the Greeks like the Latvians,” Goldstein of the Peterson Institute said. “I don’t know if they are going to be willing to take the same amount of pain.”

Welcome OECD's Latest Member, Israel (or Not)

♠ Posted by Emmanuel in , at 5/12/2010 12:11:00 AM
I myself have taken my eye off the ball in not mentioning this turn of events amidst all the news emanating from Europe regarding the European Stabilization Fund. On Tuesday, Baroness Catherine Ashton of Upholland, High Representative of the European Union for Foreign Affairs and Security Policy, came to speak here at the LSE. Goodness, she has almost as many honorifics as her Labour contemporary Peter Mandelson during his recent glory days! During question time, a member of the audience then questioned why the EU has stood idly by while Israel has been accepted as a member of the Organization of Economic Cooperation and Development (OECD) despite perceptions of its continued human rights violations against the Palestinians. Since the EU claims to be an enlightened body when it comes to upholding human rights, shouldn't it at least attempt to block Israel's entry into this rich country's club?

Now, the issue of Israel has long been a cause celebre among British academics, with calls to boycott Israel's universities being a particularly contentious matter that surfaces periodically. As for our kids, remember that our student union recently decided to twin the LSE with the Islamic University of Gaza. At any rate, I was surprised by how deftly Baroness Ashton handled the questions posed to her, including this one. Basically, her response was that OECD membership is decided on strictly economic criteria--meeting this and that macroeconomic indicator. Indeed, she already indicated something to this effect earlier on the matter. Despite the surface unity, there has been much wrangling among existing OCED members about what Israel's membership signifies:
A Norwegian diplomat told EUobserver that 24 countries, including the EU group-of-19 as well as Mexico, Norway, Switzerland and Turkey in their individual statements at the conclave said the move should not be seen as a legitimisation of Israeli settlements in occupied Palestinian territories. "We don't want membership to influence the question of Israel's borders," the Norwegian source said. "There's been a huge debate on this. It's not an easy subject."

Some countries proposed attaching a footnote to Israel's official letter of invitation saying the OECD does not recognise any changes to Israel's pre-1967 boundary. But the move did not gain unanimous support, the Norwegian contact added. The OECD is to set up an expert group to ensure that Israel clearly separates economic activity on its territory proper from activity in settlements when reporting statistics, however.

Membership of the prestigious Paris-based institution is based primarily on economic criteria and will help Israel to attract foreign investors and to borrow money more cheaply on international markets. But the move also has a political dimension. The OECD's rulebook says members must be committed to "pluralist democracy based on the rule of law and the respect of human rights" and to look to the "attainment of the purposes of the United Nations..."

For her part, EU foreign relations chief Catherine Ashton on Monday welcomed progress between Israel, the Palestinian authorities and the US on so-called "proximity" talks designed to end the decades-old conflict. "I am delighted the proximity talks appear to be moving," she said.

Commenting on the EU's commitment to human rights in its foreign policy-making more broadly, she said: "They are the silver thread that runs through everything we do and will be the silver thread that runs through the EAS [the EU's nascent diplomatic corps] when it is up and running."
As such, there was practically no discussion of human rights issues or suchlike in the membership criteria. Think of the country as a Dr. Jekyll and Mr. Hyde situation; what the OECD authorities have done is to basically observe Dr. Jekyll and ignore Mr. Hyde. OTOH, Israel's Ministry of Foreign Affairs has this to say:
Today (10 May 2010), the Organization for Economic Co-operation and Development (OECD) invited Israel to become a member of the organization. The unanimous decision, taken by the 31 member-states, recognizes Israel's achievements, economic strength and ability to contribute to the organization and to the world's economy. The accession negotiations were led by the Foreign Ministry. An additional team for professional subjects was headed by the Ministry of Finance.

In order to maximalize [sic] Israel's connections with the organization, the Foreign Ministry is currently establishing Israel's Delegation to the OECD. The Delegation will operate out of the Embassy in Paris, and the Ambassador to UNESCO will be Israel’s Ambassador to the OECD, in addition to his other duties.

During the three year review process that checked compliance with OECD standards and benchmarks, OECD experts closely examined the policy and functioning of government offices, governmental authorities and the public sector and also met with representatives of economic and social organizations, universities and NGOs. Following this review process, recommendations on improvements and efficiencies were made.

Becoming a member state of the OECD will lead to economic advances and enhance Israel's image, as well as improving the functioning of various sectors in Israel's society and economy, including in the fields of environment, education and employment. The improvement and upgrading process will continue even after Israel joins the OECD as part of the government’s commitment to ongoing peer review by the organization and to adjust its regulation policy to the standards held by member-states.
And here is some mention, in passing at least, of those who tried to stop Israel from joining the OECD. Contrary to Baroness Ashton's argument about Israel's membership being on strictly economic criteria, Israel depicts the unanimous decision to allow Israel entry into the OECD as validation of its international standing. From Foreign Minister Avigdor Liberman comes this statement:
FM Liberman welcomes OECD decision
(Communicated by the Foreign Minister's Bureau)

Deputy Prime Minister and Minister of Foreign Affairs Avigdor Liberman welcomes the OECD decision inviting Israel to join the Organization for Economic Co-operation and Development. FM Liberman stated that the resolution is the result of a long-term diplomatic effort, and congratulated the MFA officials responsible. According to the Foreign Minister, the resolution is a stamp of approval for the country's economy and its achievements in technology.

FM Liberman added that the resolution was unanimous, despite attempts by anti-Israel entities to prevent the acceptance of Israel into the OECD. The fact that the attempts failed is proof of Israel's solid standing with the international community and shows that it is recognized for its achievements, despite the fierce incitement against it in every conceivable arena: political, security and economic.
You could of course turn matters around and argue that Israel has used "fierce incitement" against the Palestinians in the areas noted above. It has always struck me how Israel regards its foreign affairs with this same kind of siege mentality after all these years. On a lighter note, observe that largely unimpeachable states Estonia and Slovenia have also been extended an invitation to join the OECD after undergoing similar evaluation processes.

I do not parse questions of membership in largely symbolic rich country's clubs too much as it's not a matter of great concern to this child of the Global South. But I do it for you, dear readers, as it is indeed an IPE question that has not garnered enough attention. What others miss, I will write about.

Hugo and Gringos: Bolivar Plunges to All-Time Low

♠ Posted by Emmanuel in at 5/12/2010 12:08:00 AM
Imagine a country which needs to maintain a dual market where US dollars--admittedly pretty crappy pieces of paper--have to be rationed in such a way that the government maintains an official rate which it gives to favoured entities and another which pervades the unofficial market. Yes, this situation describes Venezuela, where the official rate and the parallel market rate are showing even greater signs of divergence:
Venezuela will allow a free-floating parallel currency market to continue but is preparing measures to ensure the exchange rate remains within a "rational" range, a senior government source said on Tuesday. President Hugo Chavez's government has promised action to control the parallel market after the bolivar currency plunged to a historic low of more than 8.0 to the dollar last week.

Volumes have dropped as traders await the measures, and there has been speculation Chavez would outlaw the market all together. "We are working on a methodology which will help to keep the runaway parallel exchange price at a rational rate," the source, who asked not to be named, told Reuters. "But there are no plans at all to eliminate the parallel market. That is totally false."

The source said one option might be some sort of price band for the parallel market, linked to the price of local bonds traded abroad. The president of the Venezuelan parliament's finance commission said on Monday that lawmakers would soon create tougher currency exchange rules to help slow the bolivar's depreciation.

Chavez also declared war on currency and price speculators at the weekend. The bolivar currency has lost about 25 percent in value on the free-floating market since a January devaluation fixed two official rates of 2.6 and 4.3 per dollar. Because of restricted access to officially-priced dollars, more than half of imports rely on the parallel market, local economists say. The convoluted system causes macroeconomic distortions, creates opportunities for making money from the different rates and fuels inflation.
Hugo, what does it say for your brand of socialism when (a) people prefer something as pathetic as the dollar to your currency and (b) exchange rates that prevail in the real world indicate that the currency named after the great Simon Bolivar is dropping like a rock?

The Arguments Against Greek Debt Restructuring

♠ Posted by Emmanuel in ,, at 5/11/2010 12:04:00 AM
Some commentators believe it's inevitable that Greece will not be able to stomach tough conditionalities imposed by the EU and IMF and cry uncle sooner rather than later. As with other probabilities of default, odds are being placed on how long Greece can stave off restructuring. What could a restructuring entail? These can range from comparatively mild measures such as lengthening the repayment period to those which can spook markets more such as unilaterally giving bondholders haircuts (e.g., a 30% haircut would mean reducing the amount owed to 70% of the principal).

For its part, however, IMF officialdom still believes that Greece can, presumably with a lot of perseverance and quite a bit of luck in improving background conditions, avoid a debt restructuring. While we of course wait for the fate of Greece, here are some arguments marshalled by the IMF as to why a restructuring at this point in time is inadvisable. What's more, the IMF still believes that its current conditionalities are kinder and gentler than before. In particular, it brings up the notion of "ownership" insofar as it says the current Greek government helped draw up the conditionalities it must meet. From an IMF Survey...
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Asked why Greece should not opt for restructuring its debt, [IMF First Deputy Managing Director] Lipsky said debt restructuring would create more problems than it could potentially solve, with a default making things much worse.
  • Restructuring debt would not help Greece’s capacity to grow. The type of fiscal and structural reforms being put in place under the Government’s program are designed to do that – to bring down costs, to make the labor market more flexible and to improve the business and investment climate.
  • The web of economic and political inter-linkages—including that Greek bonds are held by a wide variety of private investors and public entities—severely complicates alternatives to the program the government has put in place. Any perceived positive near term effects of a debt restructuring need to be weighed against contagion effects.
  • Most of the adjustment in Greece is needed to eliminate its large primary deficit (the deficit net of interest payments). This is the main issue for Greece, not the level of the debt.
But prudent debt management is part of the government’s strategy and it is updating its tools to ensure that risk is adequately managed.

Questions about conditions

Asked by reporters if the Greece Stand-By Arrangement marked a return by the IMF to earlier times of a “laundry list” of conditions attached to loans, Lipsky said that these were well targeted conditions that would help correct the imbalances in the Greek economy.
  • The program is focused on Greece's two key problems: high debt and a lack of competitiveness. Conditionality is very much focused on these issues.
  • The Greek authorities have strong ownership and leadership and it is their program.
  • The program includes measures to protect the most vulnerable, which are a critical component to effective implementation.
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Has this turn of events made John Lipsky more cautious in his assertions? I certainly hope so. Prior to the credit crisis--so very long ago when I was but a wee lad, it seems--there was no greater cheerleader for financial innovation than he was [1, 2]. Circumspection is now the order of the day as the euphorias of yesteryear have fallen by the wayside on the boulevard of broken dreams we call subprime globalization.

The Reactivation of US Federal Reserve Swap Lines

♠ Posted by Emmanuel in , at 5/10/2010 02:00:00 PM
Well here's some humbling news from those of us who believe the euro was becoming an alternative currency to the US dollar. At the start of the year, I wrote on how the swap lines that the Federal Reserve had opened to improve dollar liquidity as the US financial crisis was underway were due to be shut down. More precisely, they were opened on 12 December 2008 and closed on 1 February 2010. This closure was little noticed at the time, but it seems that the Americans have been as keen on mitigating the global financial markets' current bout of panic as a still-unattributed 1000 point drop in the Dow Jones Industrial Average occurred last week. When in doubt, blame "the speculators."

No matter; up on the Fed site is a press release detailing how the swap lines have been opened once again to ringfence Euro-troubles:
In response to the re-emergence of strains in U.S. dollar short-term funding markets in Europe, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank are announcing the re-establishment of temporary U.S. dollar liquidity swap facilities. These facilities are designed to help improve liquidity conditions in U.S. dollar funding markets and to prevent the spread of strains to other markets and financial centers. The Bank of Japan will be considering similar measures soon. Central banks will continue to work together closely as needed to address pressures in funding markets.

Federal Reserve Actions

The Federal Open Market Committee has authorized temporary reciprocal currency arrangements (swap lines) with the Bank of Canada, the Bank of England, the European Central Bank (ECB), and the Swiss National Bank. The arrangements with the Bank of England, the ECB, and the Swiss National Bank will provide these central banks with the capacity to conduct tenders of U.S. dollars in their local markets at fixed rates for full allotment, similar to arrangements that had been in place previously. The arrangement with the Bank of Canada would support drawings of up to $30 billion, as was the case previously.

These swap arrangements have been authorized through January 2011. Further details on these arrangements will be available shortly.
In a context perhaps not so far removed from what we are experiencing now, Nicolas van de Walle once wrote about African Economics and the Politics of Permanent Crisis as African countries dealt with structural adjustment programmes--and not always in a positive manner. You can say we have similar politics nowadays, even if the countries undergoing crises and, yes, structural adjustment of their fiscal situations lie not in Africa but at the very heart of the Western world. The more things change...

Text on EU's Financial Stabilization Mechanism

♠ Posted by Emmanuel in , at 5/10/2010 01:45:00 PM
Continuing from the previous posts, here is the statement detailing what was agreed to by the EU finance ministers. While the fine detail is still lacking--who gets what when and where in terms of contributions--the European Council has nevertheless made a pretty impressive show of strength that is calming financial markets at the moment. From Reuters comes a copy of the entire text (there's another on the EU website as well):
"The [European] Council and the Member States have decided today on a comprehensive package of measures to preserve financial stability in Europe, including a European Financial Stabilization mechanism with a total volume of up to 500 billion euros.

"In the wake of the crisis in Greece, the situation in financial markets is fragile and there was a risk of contagion which we needed to address. We have therefore taken the final steps of the support package for Greece, the establishment of a European stabilization mechanism and a strong commitment to accelerated fiscal consolidation, where warranted.

"First, following the successful conclusion of procedures in euro area Member States and the meeting of euro area Heads of State or Government, the way has been cleared for the implementation of the support package for Greece. The Commission has signed today, on behalf of the euro area Member States, the loan agreement with Greece and the first disbursement will proceed, as planned, before 19 May. The Council strongly supports the ambitious and realistic consolidation and reform program of the Greek government.

"Second, the Council is strongly committed to ensure fiscal sustainability and enhanced economic growth in all Member States and therefore agrees that plans for fiscal consolidation and structural reforms will be accelerated, where warranted. We therefore welcome and strongly support the commitment of Portugal and Spain to take significant additional consolidation measures in 2010 and 2011 and present them to the 18 May ECOFIN Council. The adequacy of such measures will be assessed by the Commission in June in the context of the excessive deficit procedure. The Council also welcomes the commitment to announce by the 18 May ECOFIN Council structural reform measures aimed at enhancing growth performance and thus indirectly fiscal sustainability henceforth.

"Third, we have decided to establish a European stabilization mechanism. The mechanism is based on Article 122.2 of the Treaty and an intergovernmental agreement of euro area Member States. Its activation is subject to strong conditionality, in the context of a joint EU/IMF support, and will be on terms and conditions similar to the IMF.

"Article 122.2 of the Treaty foresees financial support for Member States in difficulties caused by exceptional circumstances beyond Member States' control. We are facing such exceptional circumstance today and the mechanism will stay in place as long as needed to safeguard financial stability. A volume of up to 60 billion euro is foreseen and activation is subject to strong conditionality, in the context of a joint EU/IMF support, and will be on terms and conditions similar to the IMF. The mechanism will operate without prejudice to the existing facility providing medium term financial assistance for non euro area Member States' balance of payments.

"In addition, euro area Member States stand ready to complement such resources through a Special Purpose Vehicle that is guaranteed on a pro rata basis by participating Member States in a coordinated manner and that will expire after three years, respecting their national constitutional requirements, up to a volume of 440 billion euros. The IMF will participate in financing arrangements and is expected to provide at least half as much as the EU contribution through its usual facilities in line with the recent European programs.

"At the same time, the EU will urgently start working on the necessary reforms to complement the existing framework to ensure fiscal sustainability in the euro area, notably based on the Commission Communication to be adopted on 12 May 2010. We underline the importance that we attach to strengthening fiscal discipline and establishing a permanent crisis resolution framework.

"We underlined the need to make rapid progress on financial market regulation and supervision, in particular with regard to derivative markets and the role of rating agencies. Furthermore, we need to continue to work on other initiatives, such as the stability fee, which aim at ensuring that the financial sector shall in future bear its share of burden in case of a crisis, also exploring the possibility of a global transaction tax. We also agreed to speed up work on crisis management and resolution.

"We also reiterate the support of the euro area Member States to the ECB in its action to ensure the stability to the euro area."
Meanwhile, among the other measures agreed to is ECB intervention in secondary markets for EMU countries' sovereign debt (and private issuance too) should the need arise. These are exciting times, eh?