Reflections on Charleston and Terrorism

Terrorism has firmly cemented itself as part and parcel of the geopolitical landscape post-9/11. Yet for all the attention that has been brought to it, the difficulties in defining it still remain numerous. This month was marked by a series of events that, on the outset, might seem different but fundamentally share the same characteristics.

The June 17 Massacre of innocent churchgoers was met with shock and condemnation around the world. The brutal attacks at a beach in Tunisia and a factory in France were met with similar emotions; the latter, however, were quickly characterized as terrorism while the former hovered in the nebulous territory of “mass shootings.”

While all events are tragic, understanding and defining them is important. If a young Muslim who professed his hate for Christians had undertaken the events in Charleston, how would the press have reacted? This is not a question of race, but it is a question of motivations.

The fundamental link between the three attacks is quite simple: hate. When hate leads a person, regardless of age, sex, religion, socio-economic background, or citizenship, to kill, this is an act of terrorism. Terrorism is not the sole proprietorship of ISIS, or Al Qaeda, terrorism is the translation of ignorance, hatred, and insanity into violence. Whenever that barrier is crossed, it is our duty to recognize it for what it is.

The Boston Marathon bombings – one of the most recent cases of Islamic extremism terrorism in the United States – led to the deaths of five innocent people. In Charleston, the total was nine. The truth is, hate expressed through violence, no matter the cause, can have horrific effects. Both events are tragic, but one is not accentuated by the origins of the perpetrators. The only thing that matters is that they wanted to commit harm out of a deep feeling of hatred toward others. This characteristic should be the sole variable in our examination of these events.

Ultimately, the reasoning for our collective reticence to label these events as terrorism may stem from a desire to avoid the true issues underpinning these attacks. While it may be easy to label the actions of ideologues from foreign lands with a foreign religion, by doing so we are succumbing to ignorance. Their actions are undoubtedly horrendous, but so too are those carried out by the racist, the xenophobe, or any other kind of human who is driven not by rationality, but by an insatiable feeling of hatred.

Accepting this fact means that we have to face our own problems as societies. In France, in the United States, in the United Kingdom, and in countless other countries, when atrocities take place, we must recognize that they represent a fundamental flaw in the precious constructions of our communities. While they may be the crazed acts of madmen, they are also a glaring reminder that we are not always the harmonious and inclusive lands that we claim to be. This is a tough realization, but admitting it can help move us all in the right direction.

In the final analysis, if we manage to call these actions what they truly are, we are showing that we recognize our own problems and can take the steps needed to prevent such atrocities from happening. Hatred knows no borders or religion, and so to should our understanding that when it drives people past the brink of madness, their actions all carry the vile mark of terrorism.

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François Fillon Spreads His Wings

During his five-year term, President Nicolas Sarkozy grabbed headlines for both his controversial policies and his polarizing persona. In the stoic and often-bland world of French politics, Sarkozy was not merely an anomaly – he was an outlier. In many ways, his defeat in 2012 by the uncharismatic François Hollande – who made his “normal” demeanor a key electoral asset – was sown well before he even stepped into the Elysée Palace.

When Nicolas Sarkozy first broke onto the national scene as the ambitious mayor of Neuilly-Sur-Seine, an elegant western suburb of Paris, his style was lauded for its freshness and authenticity. The ebullient Sarkozy shattered the traditional banality of French politicians – contributing to his meteoric rise from mayor to President of the Republic. Despite his considerable charisma and charm, Sarkozy’s personality quickly alienated and polarized not only from the political class, but the electorate as a whole. Many in the French public viewed with disdain his penchant for tailored suits, expensive watches, and lavish vacations. While his supermodel wife solicited admiration from the international press, the sentiment in France was that of a President detached from the realities of every day life.

Sarkozy’s character was both his greatest asset and his fatal flaw, yet throughout his five years in power, his mild mannered Prime Minister, François Fillon, tempered his excessive effervescence. While Sarkozy was audacious and ostentatious, Fillon was cautious and reserved. The governing tandem complemented each other beautifully, despite the very public distaste that existed between the two men.

By design, French Prime Ministers are expendable. They carry out the controversial reforms while the President assumes an almost regal position – detached from the violence and controversy of day-to-day politics. When divisive issues are met with resistance from the public or the legislature, Prime Ministers will resign – effectively shielding the Presidency of any criticism. For this reason, Prime Ministers tend to have a relatively short shelf life. Since the inception of the Fifth Republic, there have been 21 Prime Ministers, compared to merely 7 Presidents; a staggering three Prime Ministers per President. In his 3 years in office, François Hollande is already on his second head of government.

Among the plethora of politicians who once occupied the seat of Prime Minister at the Hôtel Matignon, François Fillon stands out as being the only person to have served concurrently for the entire term of a President. Additionally, Fillon is the second longest serving Prime Minister in the history of the French Republic trailing only Georges Pompidou – Charles de Gaulle’s longtime Prime Minister and eventual successor in the Presidency.

Fillon’s longevity was hardly a foregone conclusion. Indeed, there was no love lost between Fillon and Sarkozy during their five years in power. The two men hailed from different wings of the center-right UMP: Sarkozy was an avid Atlanticist with explicit neo-liberal tendencies; Fillon represented the traditional Gaullist wing of the party. Historically, the two factions have been rivals, yet in the early days of the Sarkozy-Fillon tandem, the duo appeared to bridge their ideological differences and work toward a common objective.

This harmony was short-lived.

Just a few weeks after assuming office, the relations between the two men began to fray. Merely three months after his election, Sarkozy stated that he viewed his Prime Minister more as a collaborateur (member of his staff) than an equal partner in governance. This undisguised slight set the tone for the months and years to follow as the personal chemistry between the tenants of the Elysée Palace and Matignon deteriorated.

As their term in office progressed, the two leaders of France exchanged public criticism through the press with Sarkozy frequently belittling his own Prime Minister. In an unparalleled moment in the history of the Fifth Republic, President Sarkozy delivered an address to the joint houses of Parliament – a task historically reserved for the head of government – while his Prime Minister watched from the gallery.

Despite the palpable distaste between the two men, their destinies were intimately linked. The French public saw François Fillon as an even-tempered man capable of taming the erratic impulsions of their overzealous President. Yet they also saw in Sarkozy an ability to set a clear direction and implement his vision for the country – and to that end there was no better partner than François Fillon.

The ultimate irony of this unlikely duo was that neither would exist without the other. While Sarkozy’s approval rating plummeted, Fillon’s held steady, asserting the continued legitimacy of the French government. Similarly, Sarkozy’s energy and vision could only be implemented by a pragmatic and mild Prime Minister capable of curbing the Head of State’s penchant for recklessness.

Although this pairing was far from a match made in heaven, it worked. What’s more, given the unparalleled economic crisis that gripped France, the safety and stability of this split executive was key to the country weathering this financial storm. On three occasions, Sarkozy reshuffled his cabinet – each time with speculation mounting that Fillon was finally on the chopping block. Yet, each time, the unshakable Prime Minister remained. The truth was simple: the pair needed each other, even though neither of them cared to admit it.

Against all odds and statistics, this unlikely couple made it all the way to the end of a tumultuous five-year term. Although Nicolas Sarkozy left the Presidency defeated with record low popularity, his Prime Minister stubbornly retained a high personal approval rating and was widely seen as the future leader of the center-right: a welcome change from the visionary yet rambunctious outgoing President.

The Fall of the Statesman

Photo Courtesy UMP Photos Flickr

Photo Courtesy UMP Photos Flickr

Even within his own political family, Nicolas Sarkozy was a highly divisive person. His brand of politics ruffled many feathers in the party cadre, yet for all his detractors, Sarkozy managed to make the center-right UMP his own. Since 2002, the shadow of Nicolas Sarkozy hung over the party, first as a hugely popular and charismatic Interior Minister, and later as Party President. It was therefore of little surprise that his Presidential election loss to François Hollande and subsequent (although short-lived) retirement from politics created a leadership vacuum within the UMP.

Quickly, two contenders emerged to fill this gap. On one side was François Fillon; groomed by his five years in Matignon and applauded for his pragmatism, temper, and statesman-like qualities. Challenging him was Jean-François Copé, the leader of the UMP in the National Assembly and caretaker leader of the party during much of the Sarkozy presidency. In many ways, Copé was cut from the same cloth as Sarkozy: young, energetic, polarizingly ideological, and ruthless. For all the comparisons, however, Copé lacked the tact and political instincts of the former President. Sarkozy’s effusive charm – a weapon he leveraged to his advantage throughout his career – escaped Copé, who instead focused on fierce management of the party to maintain support. While Sarkozy inspired confidence, Copé instilled fear.

In the months leading up to the internal election to designate the new party chief, all commentators widely anticipated not only a Fillon victory, but a crushing defeat of his challenger. Poll after poll showed the soaring popularity of the former Prime Minister compared to the dismal numbers of Jean-François Copé, whose clan-like attitude alienated most of the party base. For many, not least of which Fillon, the race seemed a foregone conclusion.

Discounting Copé proved to be a grave error.

In a stunning upset on election night, Copé won with less than 100 votes out of over 150,000 cast. Fillon, unsurprisingly alarmed at the result after weeks of polls predicting his victory, challenged the results. The favorable projections of the election had made Fillon and his team complacent. Their campaign was lackluster and they failed to challenge a crucial provision: Copé, as interim party leader, would oversee the election. When the results were announced, both camps cried foul and hurled accusations of impropriety at each other.

The ensuing month only deepened this fracture. Fillon, feeling cheated out of the election, threatened to split the party and created a temporary splinter group in the National Assembly. With the party, and the entire opposition to the governing Socialists, teetering on the edge of collapse, a deal was brokered at the eleventh hour wherein both camps would share power. Fillon, left out of the executive team, had lost.

The even-tempered operator had lost his cool, and with it, his legitimacy. The statesman who just a few months prior was being tipped as a future Presidential candidate was disgraced. Although Fillon kept his seat in the National Assembly, he shrunk from the public eye leaving allies and foes alike to speculate about “what could have been” if this once lauded politician had met the destiny so many expected of him.

The Long March to Redemption

The "triumvirate" Jean-Pierre Raffarin (left), Alain Juppé (center left), Luc Chatel (center right), François Fillon (right) - Photo Courtesy UMP Photos Flickr

The “triumvirate” Jean-Pierre Raffarin (left), Alain Juppé (center left), Luc Chatel (center right), François Fillon (right) – Photo Courtesy UMP Photos Flickr

There is no institution that can bring people back from the dead quite like French politics. While the system itself is incestuous and horrendously difficult to break into, once a person has obtained status in this exclusive club, it is very difficult to revoke. While American and British politics has a ruthless finality to it, French politics has the tremendous capacity to resurrect even the most tarnished careers.

In this world, the center-right shines as a system continuously repopulating itself with the same leaders. As this perpetual cycle goes, François Fillon eventually clawed his way back from the abyss of the Fillon-Copé disaster.

Ever the pragmatist, Fillon’s strategy was to lay low. While Copé led the UMP with a nearly Mafia-like brutality, Fillon concentrated his efforts into growing his own think tank and support network Force Républicaine. With a sizable following of loyal party cadres and active members, Fillon was able to leverage Force Républicaine into a crucial fundraising and thought-leadership nexus. The Prime Minister recognized for his calm demeanor and talents as a manager was doubling down on a winning strategy.

Concurrently, Copé’s world was falling to pieces. Revelations that the party, under his leadership, had hidden disguised costs from the 2012 Presidential campaign to skirt campaign finance laws forced the President of the UMP to resign in disgrace. Similarly, the finances of the party were in complete disarray. The situation was becoming so dire that many suggested the party sell its elegant Parisian headquarters to reduce the staggering debt.

Jean-François Copé had exploded in midair, and François Fillon was there to pick up the pieces. Along with two other former Prime Ministers Alain Juppé and Jean-Pierre Raffarin, Fillon participated in a caretaker leadership for the UMP dubbed the “triumvirat.” The trio had a clear mandated goal: move on from the disastrous Copé years, fix the party’s finances, and prepare for new internal leadership elections.

These tasks were far from easy. The political infighting of the Copé years lingered on, worsened still by the looming presence of Nicolas Sarkozy who persistently hinted at his return. The task of rebuilding the party, as unenviable as it may have seemed, gave Fillon the opportunity to reestablish his credentials. Since the Fillon-Copé fiasco, Fillon’s popularity had slipped over 15 points. Slowly, however, he was reasserting his place on the political right with his eyes firmly fixed on one goal: the 2016 Presidential primary election.

The Return of Sarkozy and the Rebranding of Fillon

Despite the implosion of Jean-François Copé, Fillon’s return to the front of the French political scene remains a slow affair. His brief stint in the triumvirat helped rebuild his legitimacy, but did not catapult his career back to the levels he once enjoyed. If anything, his role as a caretaker leader of the UMP served only to condition the much-anticipated return of Nicolas Sarkozy.

There is a bitter irony in Sarkozy’s return. Upon leaving the presidency, he pledged to retire from politics and give way to a new generation of leaders. In true Sarkozy style, the lure of power and his insatiable ambition drew the former President back to his usual hunting grounds. The disastrous state of affairs in the party presented the perfect opportunity for Sarkozy to paint himself as a messianic figure: returning only out of benevolence without a shred of ambition.

Fillon, as an interim party leader, had both the unenviable task of plugging the holes in a sinking ship while planning the very election that would coronate his once and future nemesis. What’s more, the public’s opinion of the UMP caved following the Copé-Fillon disaster – making Sarkozy’s comeback all the more powerful. As was the case throughout the Sarkozy Presidency, Fillon again found himself facilitating the rise of the man standing between him and the Elysée Palace.

Such is the relationship between the two men.

This time, however, Fillon appeared to be fighting back. In a shocking book last November, two journalists from Le Monde alleged that Fillon asked the secretary general of the Elysée Palace Jean-Pierre Jouyet (himself a former minister under Fillon) to speed up legal investigations into Nicolas Sarkozy’s role in the campaign funding scheme. Fillon virulently rejected these claims however the nature of these tactics cast another shadow on his slow comeback.

Yet, for all the intrigue, Fillon’s personal quest for redemption does not stop at the return of the ex-President. While Nicolas Sarkozy easily won election as the new party president – an election Fillon judiciously avoided – the former Prime Minister focused on building his own brand: one that could make him a legitimate contender for the 2017 Presidential election.

For the first time in the history of the center-right in France, the main leaders of the UMP agreed to select the party’s representative for the 2017 elections through an open primary process where rank-and-file members, rather than party cadres, would select their champion. From the onset, Sarkozy was the clear favorite, followed closely by Alain Juppé – also a former Prime Minister and the popular mayor of Bordeaux. From the announcement of Sarkozy’s return, this race has been seen as a contest between the two men. Yet within this seemingly rigid race, François Fillon discovered his niche – one, he hopes, will propel him to the highest office in France.

Through his think tank Force Républicaine, Fillon began touring the country – giving speeches and listening to the concerns of average French voters. Detaching himself from Paris and the elite echelons of power, Fillon began a quest to construct a personal brand that would resonate with voters. One of the most tenured French politicians was seeking to win an election by touting himself as a bona fide anti-establishment candidate.

In most cases, this strategy would be foolhardy. However in this election, Fillon’s two main opponents also happen to be the most tenured politicians on the French right.

Fillon’s strategy was therefore to differentiate himself enough to appeal to voters who were unenthused by the prospects of a Juppé or Sarkozy presidency. The difficulty was, Fillon could not compete with Sarkozy’s charisma and panache. Similarly, his moribund statesman figure was dwarfed by the affable and dignified Alain Juppé. The only recourse was to focus on one area where little separated Sarkozy and Juppé: their policies.

François Fillon’s formative years in politics were marked by the tutelage of Philippe Séguin – a leading voice in the Gaullist movement. Under Séguin, Fillon joined the ranks of the militant Gaullists in the National Assembly. In 1992, Séguin and Fillon led the campaign against the ratification of the Maastricht treaty. In doing so, Fillon went against Jacques Chirac – then party leader – who campaigned for the ratification of this seminal European text.

Throughout his career, Fillon’s solid Gaullist position often separated him from others in his party. The French right has always been torn between its neo-liberal, reformist wing and the traditional Gaullist wing. Both frequently spar over the role of the state in economic and social affairs. In recent times, François Fillon has staunchly stood on one side of that debate. It therefore came as a surprise to many when the protégé of Philippe Séguin rebranded himself as the champion of liberal economic reforms in the run-up to the 2016 Presidential primary.

Indeed, in the release of his pre-election manifesto, Fillon shocked most political observers by calling for deep cuts in public spending, profound reforms to political and economic institutions. Comparisons to former British Prime Minister Margaret Thatcher immediately circulated. The relative intensity of Fillon’s program is crystalized by his desire to repeal the controversial 35-hour work week – a policy he actively shied away from in government.

For all the appearances of opportunism, Fillon’s reemergence as an economic reformer is not simply a political ploy. France is in dire need of a leader willing to make tough, and often unpopular decisions in order to fix the broken economy. Neither Sarkozy nor Juppé – both fixated on their political legacy – would dare approach such controversial subjects. For Fillon, this is not only the right path for the country, but is his only way out of the political graveyard.

Fillon Spreads his Wings

Fillon at a campaign rally - Photo Courtesy UMP Photos Flickr

Fillon at a campaign rally – Photo Courtesy UMP Photos Flickr

With the UMP primary a year away, François Fillon stands as the only candidate embracing the kind of radical change France most desperately needs. This is a political positioning which has already begun to bear fruits. In May, Fillon began to claw his way out of the abysmal polling numbers that had plagued him since his failed bid for the Presidency of the UMP. What’s more, this month saw the allegations of political impropriety in the Jouyet affair be dropped by French courts.

Currently, Alain Juppé and Nicolas Sarkozy are still tapped as the two likeliest candidates to represent the UMP, but this has neither deterred nor discouraged François Fillon. In recent months, he has increased his trips across the country to nearly once per week – banking on his direct contact with the French people and his courageous economic program to begin his slow but steady march back to legitimacy.

This strategy is far from flawless. Fillon is still painted by the mainstream French media as a failed opportunist whose pettiness in defeat will forever mark him. Others will never forgive the near-fratricidal brawl between Fillon and Jean-François Copé. Despite this incessant stream of criticisms, the former Prime Minister continues his road to political redemption undeterred.

François Fillon’s political career is profoundly enigmatic, yet rife with untold potential. From his rise to the second-longest serving Prime Minister to his incessant battles with Nicolas Sarkozy, Fillon has been both lauded and misunderstood by the French public. With his final challenge – and with it, his last chance at political redemption – merely a year away, François Fillon is betting that his focus on reforms will be enough to woo the French electorate. This strategy may yet prove effective.

Fillon has emerged from his self-imposed exile a new man. Armed with an audacious plan to invigorate France and finally win the elusive Presidency, the former Prime Minister has spread his new political wings. Now he must fly.

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Article of the day: “Is This Ship Sinking?” Inside the Collapse of the Campaign Against Netanyahu

“Is This Ship Sinking?” Inside the Collapse of the Campaign Against Netanyahu

 

Israel’s parliamentary election — and the eventual reelection of Prime Minister Benjamin Netanyahu — was undoubtedly the marking moment of the month of March. Although I, like many others, expected a close race or perhaps even a slight victory from Isaac Herzog, the outcome may actually be unfavorable to Mr. Netanyahu.

Yes, Likud’s strong man did win reelection, but at what cost? His stigmatization of Arab-Israelis and his vow to never allow a Palestinian state has drummed up immense resentment among Israel’s staunchest supporters. Most notably, President Obama is considering lifting the United States’ unconditional protection of Israel in the security council. This coupled with growing anger from European leaders at the treatment of Palestinians and an effort by Mahmoud Abbas to gain international recognition spells more trouble for Mr. Netanyahu.

More interestingly, however, is the complete disintegration of the Israeli left. From one day to the next they went from virtual front runner to perennial loser. This article does a great job of dissecting the reasons for Herzog’s loss and how Israeli politics work in general!

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Article of the Day: Two false paths for Europe — and a new third way

Two false paths for Europe — and a new third way – Financial Times

Those of you who know me well are familiar with the fact that I have a deep respect for Tony Blair and “third way” ideology in general. In today’s Financial Times, the former Prime Minister wrote an excellent piece about the need for a bargain between debtor and creditor countries in the EU. I find his solutions particularly pragmatic and certainly worth examining.

I got in a bit of a spat on twitter with a gentleman who disliked my use of the word “brilliant” to describe Tony Blair, because of his role in the Iraq War. I think that criticism is fair, but if we judge a man only on his failures, I’m pretty sure no one in this world would be considered brilliant. Tony Blair’s brilliance stems from his remarkable ability to coalesce people around his message – a feat that cannot be understated in a democracy. Certainly his record governing isn’t immaculate, but I would challenge you to find one leader who’s is! Even great lauded leaders like Roosevelt, Churchill, De Gaulle, Napoleon, and Bismarck had failures. Now while I don’t presume to conflate Tony Blair with these titans of history, I do think that the emulation of his tactics to this very day by high level politicians in Italy and France is proof of his enduring legacy and, I would venture as far as to argue, his brilliance.

Enjoy the article!

Link to article

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My Take on the Greek Elections

Hey Everyone!

So first off, my apologies for falling off the face of the earth for the past few months: the combination of a new job, the holiday’s, and just transitioning into a new type of post-college life have had made me neglect my duty to this blog. No excuse, just a fact.

Anyway, I fell like I’m at a point where I can start writing again, albeit on a far less ambitious scale than before. Nevertheless, this blog remains a true passion of mine and I don’t intend to make my busy schedule get in the way of me sharing my ideas – rather I think this is a healthy medium for me.

To start off, I would like to share with you a piece that I wrote for my company’s blog on the Greek elections. It has a bit of a more specific slant to accommodate for the type of work I do now, but I think the insights are interesting nonetheless, particularly in light of the crucial negotiations going on this week! You can also check out the post by clicking on the link in the title of the article!

Thanks for reading!

Guillaume

Of Myths and Legends: The Role of Narratives in the Greek Elections

This month’s legislative elections in Greece were anything but a domestic leadership contest. The announcement in December of the early Hellenic elections cemented the broader implications of this vote for Europe. This entire saga came to a head at the conclusion of a large campaign rally in Athens Thursday, January 22. Proudly beaming and waving to an ecstatic crowed, Alexis Tsipras, the leader of Greece’s far-left Syriza party, was joined on stage by his Spanish counterpart Pablo Iglesias, the controversial leader of Podemos with ties to Hugo Chavez’s Venezuela.

The two leaders and icons of Europe’s resurgent far-left joined hands and waved at the hordes of supporters as Leonard Cohen’s “First We Take Manhattan” boomed from the stage’s speakers. Given the charged context of the election, a more appropriate song would undoubtedly have been “First We Take Brussels.”

As the polls closed on Sunday night, not only had Syriza won its long speculated victory, but it did so in an unpredictably overwhelming manner. With initial estimates giving the party 149 seats in Greece’s parliament – two short of an overall majority – the specter of a Syriza-led Greece has become reality.

The Greeks have spoken, but this election was never fully about the fate of Europe’s perennial sick man. Fundamentally, this was a contest between the two leading narratives about the future of Europe and the Euro. On one side, outgoing Prime Minister Antonis Samaras and his New Democracy party championed the kind of fiscal rigor and economic reform that led to Greece becoming one of the fastest growing countries in the Eurozone. On the other side was Tsipras, the charismatic young leader who pinned the total of Greek ills on “austerity politics” dictated by German Chancellor Angela Merkel.

The fundamentally opposed narratives of “austerity” versus “growth” have become entrenched in the European political psyche. Greece, as the hardest hit country in the Eurozone, has been particularly susceptible to a rejection of EU policies, or at least what they perceive to be EU policies. In recent opinion polling, 79 percent of Greeks stated that the EU should have less authority over the domestic budgetary and economic policy. Similarly, 42 percent of Greeks believe that EU Membership has not helped the country. Although this view is still in the minority, it was the highest prevalence of such positions of all polled countries.

Yet, in a seemingly paradoxical situation reversal, a majority of Greeks (over 60 percent) express support for a European economic union punctuated by the Euro. Most Greeks therefore believe that the European Union should have less control over their budgets but want a common economic policy with the Euro. This incongruence can only be understood in the context of the two predominant narratives.

Greece’s much-needed bailouts, which prevented default on the country’s debt, were given on the condition of strict economic reform. The liberal overspending the Greek government had undertaken since the 2004 Athens Olympics on artificially low interest rates was halted and a rigorous plan of spending cuts and tax increases were enacted. Although these policies were needed to prevent imminent crisis, they failed to address Greek society’s biggest problem: the unemployment rate.

Today, unemployment in Greece still hovers around 25 percent: more than two and a half times the EU average. More striking still, this number skyrockets to over 50 percent for young Greeks. Although both indicators have fallen slightly over the past few months – thanks largely to the policies undertaken by Prime Minister Samaras – the level remains alarmingly high.

Unemployment is an oddity in the world of economic statistics. Unlike the GDP growth or borrowing costs, unemployment exacts a great human toll. In the context of Greece, the abnormally high unemployment rate, particularly among the country’s youth, presents a tangible example of failed economic policies. It is therefore no surprise that over 95 percent of Greeks claim they have personally felt the toll of the economic crisis. This human dimension has personalized the crisis for many Greeks, creating a fertile breeding ground for narratives loosely based in political realities.

In the case of Greece, the policy recommendations of foreign creditors have combined with the social unrest driven by high unemployment to create the narrative of “austerity politics.” According to this narrative, austerity policies are the major source of problems within the Greek economy. An analogous counter-narrative has concurrently grown, which claims that a return to deficit spending will lift the Greek and European economies out of crisis.

Although both views are deeply flawed, they dominated and shaped this weekend’s legislative elections. Syriza’s main platform rests solely in a rejection of austerity and finding an elusive return to growth. Economists and political scientists alike have copiously criticized these policies, but the party’s resounding victory demonstrated its ability to leverage the austerity narrative to its advantage.

Syriza’s victory confirmed how effective distilling human emotions, aspirations, and sentiments can be. Unfortunately, the true test in governance is not merely appealing to the passions of the electorate, but creating effective policies that will address these concerns. Tsipras and Syriza are now faced with the difficult and unenviable task of delivering on their numerous campaign promises. Doing so will naturally place the new Greek cabinet on a collision course with major EU partners and creditors. On this new stage, the same narratives that swept the party to power have the potential to irreversibly damage the Greek economy and society. Syriza must now adapt campaign narratives to governing. Inevitably, this dichotomy will give rise to numerous problems as the economic and political realities become clear. This time, however, the stakes far exceed those of a Greek legislative election.

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It’s time for a European Grand Bargain

Entrenched economic positioning can only hurt the region’s economy and embolden the growing Eurosceptic movements

The power paradigm in Europe is rapidly changing, and Germany isn’t happy. The days when the Nicolas Sarkozy – Angela Merkel axis both dictated and drove European policy are behind us and have given way to an unlikely new pair: the dynamic Italian Prime Minister Matteo Renzi and the affable, but highly unpopular, French President Francois Hollande. Although independently, neither of them had the political capital to loosen the grip of the German chancellor, their cooperation is an unquestionable force that is likely to upend the prevailing austerity rhetoric in Europe.

As the second and third biggest countries respectively, France and Italy hold considerable influence in European affairs. Their combined economies account for roughly 40% of the total GDP of the Eurozone. Their coupling in EU matters should not be overlooked and should certainly not be dismissed, as is too often the case when confronted with Germany.

Rome and Paris have pushed the envelope in European politics last month by submitting controversial budgets that violate the famous 3% deficit and 60% debt limitations set forth by the stability and growth pact. From the perspective of Renzi and Hollande, deficit reduction without growth will perpetuate the cycle of stagnation that has gripped the Eurozone. They propose instead a short-term fiscal stimulus that will boost growth and increase tax revenue.

Although this argument is compelling, it goes against the very nature of the rules established in the EU post-crisis. Thrusting them aside so soon after they were implemented is an obvious affront to economic unity and runs the risk of further undermining the bloc’s credibility. What’s more, any mention of expansionary demand-side policies draws a visceral reaction from Berlin and naturally upsets other Eurozone countries who implemented the tough reforms needed to harmonize their budgets.

From a political standpoint, this new rift between Brussels and two major member states will fan the flames of Eurosceptic extremism. As is too often the case with European affairs, the budgetary restrictions (which, it’s worth noting, were agreed to by all Eurozone states) are instrumentalized to justify politically tenuous decisions. This narrative plays into the hands of Eurosceptics who are quick to bemoan the erosion of sovereignty and the bureaucratic wizardry of Brussels. Nowhere is it mentioned that member states are only implementing decisions they themselves took!

Regardless, as this debate rages and both sides retreat into their entrenched positions, the perception of Brussels as a weak and overly technocratic institution is perpetuated. Such a view not only degrades the EU, but destabilizes the region’s economy by highlighting the deep divisions and childish stubbornness of the continents supposed leaders. Although both sides make good arguments, no winner can emerge from the current squabbling. It is time for the EU and its member states to embrace its credo of “unity in diversity” and come to an agreement that can boost growth in the short term while addressing budgetary and structural issues in the long term. The EU needs, in short, a grand bargain that will not only address the vital economic questions but also cement the unity of the Eurozone and reaffirm the relevance of Brussels in the lives of all Europeans.

Between Keynes and Friedman: Debunking the myth of a singular approach to fiscal policy

The current debate in the Eurozone has long been interpreted as an ideological clash between demand-side and supply-side fiscal policies. Although Germany is quick to rule out the merits of a stimulus package, budgetary considerations alone do not justify austerity politics. The markets remain willing to let France and Italy borrow at particularly low rates with ten year bond yields at 1.28% and 2.55% respectively. Despite the alarmingly slow pace of reforms in these countries, the protective and aggressive actions of the European Central Bank (ECB) continue to guide the investment decisions of markets. As the ECB continues to ramp up its asset buying program, with the potential of a full blown quantitative easing scheme looming, the markets are unlikely to suddenly worry about the stunning ineffectiveness of the Hollande government or the slow pace of reforms in Italy.

Yet low borrowing costs should evidently not be an invitation to perform an unrestricted stimulus that would further balloon deficits. Instead of focusing exclusively on implementing Keynesian or Friedmanite policies, a grand bargain should balance the two: incentivizing structural changes that liberate the economy while boosting growth and decreasing unemployment. The first step in this process has to be a recognition by both sides of the limitations of their respective policies. In France for instance, further government spending is not a panacea, in fact reducing the role of the state in the economy is central to long-term recovery.

Government spending in France currently accounts for roughly 57% of GDP. For the sake of comparison, this figure puts France at the eighth rank worldwide for spending as a proportion of GDP. As shown below, the only countries with a greater percent of government spending include small countries (Kiribati, Micronesia, Lesotho) or largely failed or closed states (Libya, Cuba). Denmark is the only developed country with a higher ratio and even then, their public finances are very healthy with a deficit hovering around the 1% of GDP mark and debt at around 40% of GDP.

Chart 1 TC 2311

When comparing France to its EU and Eurozone partners, the results are similarly dismal. France is the leader in government spending to GDP in the Eurozone. Both France and Italy are far above the EU and Eurozone averages and it is likely that further unchecked spending will exacerbate this figure. When government spending is an inordinately large share of GDP, it crowds out opportunities for investment and growth in the private sector. What’s more, unlike Denmark, the huge government bill in France and Italy are not exclusively the source of a social contract that values government provision of services in return for high taxes. Rather, government spending is financed through unchecked deficits that have translated into an untenable debt for both countries.

Chart 2 TC 2311

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This situation may seem like a paradox, and in many ways it is. From one side, low borrowing costs should incentivize an increase in spending to boost growth, yet from the other further government spending will crowd out investment and exacerbate the deficit problem in both countries. This paradox is only valid if fiscal policy is interpreted through a purely demand-side or supply-side model. In reality there are many ways to leverage cheap capital to boost the economy while fixing the structural issues in both countries – such is the purpose of a grand bargain.

Looser capital restrictions tied to a reform schedule

Any potential deal will be met by resistance on both sides, it is therefore important to give major concessions to both sides that can be used, both politically and pragmatically, to sell the deals in their respective countries. Before any negotiations are to start, both sides should delineate their precise concerns and expectations. From the German perspective, France and Italy need to reform their labor markets and rethink their welfare systems. Rome and Paris argue that the ability to conduct a stimulus to boost growth will lower unemployment and increase government tax revenue.

With those goals in mind, one possibility for the accord would be to grant extensions in meeting the EU-mandated 3% deficit-GDP ratio on reforms. In other words, France and Italy would have access to a stimulus of a certain size depending on the economic reforms, in line with the opinions of Brussels that they are able to implement. Such a schedule would presumably incentivize French and Italian leaders to accelerate the pace of reforms to a get access to larger stimuli.

Although it’s possible for such a scenario to work, it has evident drawbacks. To begin with, Rome and Paris would likely argue (as they have been) that reforms without stimulus would plunge the two countries into (or deeper into) recession. This agreement would also place a great deal of trust in the willingness, and perhaps even the ability, of both countries to enact changes. As President Hollande has shown time and again, talking about reforms is one thing, but actually going about implementing them is another entirely. If his approval rating in the low-teens isn’t enough to compel action, it’s hard to see why the promise of somewhat looser finances would.

A bargain under this form would follow the mold of traditional EU deals: very ambitious with the potential for high results, but ultimately killed by dubious political will. This model is certainly doable, but a stronger deal would focus on compelling action rather than hoping for it. Overall, a reforms schedule linked to a stimulus could be a part of a functioning agreement, but it would need to do more to entice spending and investment to boost something other than government spending.

Free tax cuts, a supply solution to a demand problem

The strongest form that a potential deal could take would be if Brussels agreed to remove any additional borrowing used for the sole purpose of funding tax cuts from the calculation of a country’s deficit. Obviously, this would contribute to higher deficits, but if the EU agreed that any tax reduction would not count against the 3% deficit rule, France and Italy would be foolish not to lower taxes.

To assuage German fears, the tax reductions can only be counted for 50% of their value or some other percentage so as to not give a free pass to France and Italy. Perhaps the total break can even be capped so as to ensure that real deficits do not exceed a certain level. If these taxes were to be targeted in an intelligent way (IE in capital gains or in business income tax) this would create a massive jump in investment, with further incentives for foreign investment in France. What’s more, any tax cuts for households would increase consumption, even if savings increase at a higher proportion. Even if a majority go into savings, this would free up liquidity for banks to lend more and hopefully have a ripple effect on investment. Either way, this policy is both politically popular and economically reasonable.

Another way to make this policy work is to attach it to decreases in government spending. Perhaps for every euro cut from the state’s budget, two euros could be decounted from the deficit for the purpose of tax cuts. There are many ways to go about implementing such a policy, and surely some of them would be acceptable to both the Germans and the French/Italian.

Conclusions

An uncounted decrease in taxes, coupled with a stimulus/reform schedule is a bold and aggressive plan to put Europe’s stray members back in line and continue its vital political and economic mission. Europe and the EU is at a key time in its history. In a speech before the European commission, Jean-Claude Juncker stressed that his commission represented what might well be the last chance for the success of Europe. Indeed, as Eurosceptics rise, the monetary union is still vulnerable, and the very idea of the European experiment is being tested. The argument for a grand economic bargain to both address structural issues but also give way for growth is vital.

For too long, the EU has been used as a scapegoat to justify tough economic decisions. If this grand bargain were to go through it could not only increase growth and decrease unemployment, but also remove the impression that the EU stands in the way of development.

It will be no small task to convince the entrenched positions to change, but doing so is vital not only for their own good, but also for that of the Union as a whole. The day will probably never come when Hollenzi rules with the same force as Merkozy, but showing that the EU can develop positive, pragmatic, and bold new policies would show that it is indeed a Union of 28 and not a cacophony of 28 views. Unity in prosperity should be the guiding mission for the EU, and with a grand economic bargain building a bridge between France, Italy, and Germany, the EU will find a new gust of wind in its sails.

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Article of the Day: Erdogan’s Unsung Victory

Erdogan’s Unsung Victory

 

Turkey is one of the more fascinating countries in the world: their economic dominance and rising stature in the international world is often juxtaposed with the perceived autocratic nature of President Recep Tayyip Erdogan.  This article does an interesting job of breaking down the history of his rise and examining how he has surpassed the decades of military rule.

I had an interesting debate with a colleague today around the direction of Turkey.  It’s better than it was, but is it moving in the right direction?  I would argue that it is.  There are undeniable setbacks, but a Turkey under democratic rule (albeit not fully liberal) is better than one under military rule.  The EU also remains a beacon for Turkey – a motivator to compel action.

Erdogan is far from perfect, but he has fundamentally changed Turkey for the better.  I think this point will become even more clear as time passes.

 

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Article of the day: The French far-right mayor, the pig fest and the halal butcher

The French far-right mayor, the pig fest and the halal butcher

First off, my apologies for the radio silence recently.  I’ve been very busy with work and am transitioning into a new job which is both exciting but time consuming.  I also have a very interesting article that I’ve been working on and am trying to get published – no easy task.  Regardless, here is a piece article about the FN that underlines their new communications strategy.

When the FN had a first wave of victories in municipal elections in the early 1990s, this was seen as a watershed moment in the history of the country and the party.  Yet, once their mandates actually began, most of these mayors had horrendous tenures and underscored the difficulties the far-right has in governing.  This time around, the FN has decided that a strong communication strategy is central to its governing.

This article highlights both the successes, but also the failures, of the FN’s message.  Instead of picking on all immigrants, he has chosen to pick on some.  Measures interpreted as discriminant towards Muslim immigrants are dismissed as cultural heritage.  Accusations of fraud are waved off as jealous dissent.  I think the FN has it all wrong, rather than dismiss, it should face head on, rather than wave off, it should embrace.  Sidestepping issues is never a solution.

His problem is the Kosovar and Albanian migrants housed in the town and living on benefits. They are, he says, a “new immigration”, families that produce five to seven children, feed off the French state and want to impose a “middle ages dogma and a religion that is not ours”. He likes the good immigrants, however: Italians and Portuguese, Serbs and Armenians who, he says, have fewer children and find jobs and housing on their own.

This article does a very good job of painting some of the major flaws in FN governance but also in sparking thought or discussion about what an FN would be like if given more power.  Must read!

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Article of the Day: When the Petrodollars Run Out

When the Petrodollars Run Out

This article was actually posted at the end of last week by Foreign Policy and I’ve been meaning to write about it since I first read it.  Energy politics are fascinating as they are both a source of short term restraint for importing nations and long term worry for exporter nations.  There is no question that Europe will be more belligerent toward Russia when half the continent is no longer solely reliant on Moscow for gas.  Certain alternatives are already emerging, but they are few and far between, and even the most realistic are still a number of years away.

That said, petrostates can’t afford to be complacent.  Qatar has clearly internalized this message and is massively diversifying its portfolio — including, to my dismay, the purchase of PSG (WHY DID PARIS HAVE TO GET A GOOD FOOTBALL TEAM THE YEAR I LEFT?!?!).  Obviously, many Qatari investments are far more prudent than that of a football team but the point remains that the Al-Thani’s have read the handwriting on the wall.

I’ve learned that those who make grandiose predictions about foreign policy tend to get them wrong more often than not, so I will reserve judgement about what the future holds for petrostates.  Yet, the fact that diminishing energy costs hurts them should help frame the argument on climate change for conservative’s.  Many legislators who are hesitant to push for alternative energy technology argue that it will undercut the vital energy sector.  Be that as it may, the search for a cleaner source of energy will naturally put more pressure on petrostates — a number of whom are not exactly best friends with western democracies.

This geopolitical narrative can be a source of mutual understanding between the right and the left.  What’s more, framing the climate change debate in such a way emphasizes the potential domestic economic gain as opposed to the destructive nature of moving away from fossil fuels.  Granted, in an ideal world the argument that curbing emissions is integral to saving the planet should be enough, but sometimes a little pragmatic thinking can go a long way!

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