Bulgarian blockade

More than 100 MPs have been escorted out of the Bulgarian parliament after being trapped inside by protesters

Spending the night trapped at work. It is not how most people would like to enjoy their evening but for scores of MPs in the Bulgarian capital, Sofia, that is exactly how they passed Tuesday night. Anti-government demonstrators besieged their building in a show of anger against what they see as their corrupt leaders.  There have been regular mass demonstrations in Bulgaria throughout this first half of the year and the protesters have already secured one major victory, as the previous centre-right government headed by the GERB party quit in February.

But times have not got any easier for the current ruling Socialists as they, too, are facing calls to leave office. The tipping point for the protests was the appointment of Delyan Peevski to lead the national security agency. A colourful media mogul, many people seem to have felt this was a shady move that illustrated the winks and nudges that they believe characterise the relationship between politicians and businessmen in the Eastern European country.

The protesters have several grievances: along with Mr Peevski’s appointment, the demonstrations are in opposition to electricity price rises and have grown into more general laments against a corrupt political class. Bulgarian politics is not usually on a news editor’s list of hot topics that will set the audience or readers’ minds alight. But what happened overnight was an interesting spin on a more widespread public anger and distrust towards their politicians. Yes, it’s a good story and there are good pictures but there will be some who simply ask…isn’t it really a case of ‘same old EU’?

Calling for your government to resign is a popular chant throughout the continent, with Greece, Portugal and Italy still wavering, leaders such as Mariano Rajoy (Spain; alleged slush fund payments) and Francois Hollande (France; plummeting opinion poll ratings) under intense domestic pressure. Moreover, the lead beacon of monetary stability, Germany, is set to induce a new nervousness across the eurozone when elections are held there in the autumn. The continent has seen two years of marching, burning, rioting (everywhere), new governments, ousted governments, planned technocratic governments (Italy, Greece), countries about to leave the euro (Greece, eternally), others joining the single currency (Latvia) and so on. When you bear all this in mind, maybe it’s no surprise and maybe it does, in fact, speak volumes about the European malaise that the barricading of Bulgarian MPs in parliament by anti-corruption demonstrators only months after previous demonstrations got rid of the previous government was a story that many people missed.


Moody standards

How influential are ratings agencies and their downgrades?

The weekly circus of ‘will they, won’t they’ always seems to end in ‘yes, they will’ as another country suffers another rating downgrade somewhere in the world. The three major agencies, Moody’s and Standard and Poor’s of the US and the majority-French Fitch, take it in turns to lower debt and credit in a not-so-merry-go-round of economic crises.

The three agencies named above control nearly all the market between them. They rate risk and assess the strength of structures and values of various institutions. They analyse any entity, from a local council in the UK to a multi-national bank. And, of course, governments.

Politicians in those governments get worked up by unhelpful negative rating and downgrading of countries’ rescue and bail-out plans. While Greece lies on a hospital bed and European doctors argue outside the room, the credit rating warnings and negative updates are like secret turns of the key in the lock, cutting Greece off even further from hopes of a recovery. But swifter action in the first place from the EU and more attentive ears to the words of the agencies could well have led to a more positive situation than the current atmosphere.

Some politicians, such as Italian PM Silvio Berlusconi, have reacted with shrugs and finger-pointing to downgrades. Certainly, after one of the big three lowers a rating there is at times a complacent attitude displayed when the other two come knocking later.

Prime ministers and bankers can work themselves into a fever trying to avoid the haunting removal of letters from a rating. The agencies hold immense power – the decision by Standard and Poor’s to take away the US’s AAA rating in August was seen as a major decision for consideration in the 2012 elections, despite the votes being 18 months away.

It has seemed in the past that patronising and slavish attitudes has been misplaced –  the agencies infamously failed to forecast the first tremors of the 2007-2008 credit crisis; indeed, those tremors were hidden below the masses of top ratings the agencies were mistakenly handing out.

They do perform good work and their advisory and analytical roles on government policies, particularly the eurozone’s measures, are seen as critically useful. But they are for-profit organisations and some economic commentators feel there is a conflict of interests in their actions. They can deal heavy blows to economies and send markets into frenzies with their decisions and so, at this crucial time – especially for the euro – there is a serious need for more calm negotiation with finance ministries (who themselves must stop fudging the issue and get on with sorting out Greece). Missing the first part of this credit crisis doesn’t mean the agencies have to make up for it by being overly critical now.

You can’t have your pierogi and eat them

Poland is treading water at home and abroad

Sitting in the sun in the Rynek Glowny (Main Square) in Krakow a couple of weeks ago, large cheese pretzel in one hand and newspaper in the other, I revelled in the Polish summer. The young workers I spoke to, however, presented me with a slightly gloomier view. Their excitement for politics (if it ever existed) is waning. Donald Tusk, the current Polish prime minister, is also the present leader of the EU, after taking over the rotating six-month chair last month. It should be a chance for Warsaw to press home significant continental plans, especially in the security and regional development sectors. But the country is at a crossroads and unsure which road to take.

It is hard to manage being both national leader and head of the EU successfully and Mr Tusk has at least one eye on the general elections due in October. The EU is meant to be a discursive meeting-point for cross-border agreements and joint directives. Overly competitive states are often sidelined. The UK is a prime example with one foot in (membership) and one foot out (eurozone). Poland is doing the same dance at the moment: happily striding forth in the presidency but with the zloty still the only tender in its tills.

Raising the issue of the single currency brings shakes of the head and frowns among the twenty-somethings, though these negative opinions may be a snap reaction to the current financial crisis. The zloty itself is putting young Polish workers at a fork in the road of their own. Many have headed over to the UK to earn more for their work than the rates at home will offer. However, the global downturn, the following recession and subsequent US debt arguments, slow growth and eurozone crisis have led to many Poles returning home. One Polak I spoke to in London told me that public works projects and general urban construction plans in Poland are suffering – all the architects, surveyors and builders have gone to the UK. According to the UK’s Office for National Statistics, “immigration was highest in 2007 at 96,000 Polish citizens, but this declined to 39,000 in 2009”.

Mr Tusk has reassured Brussels his country will join the single currency despite that move probably being several years away. He has high European ambitions but must not neglect the opportunity to use domestic development to make Poland a regional leader. Young Poles seem bored by their politics: opposition leader Jaroslaw Kaczynski was scoffed at; Tusk himself dismissed as a lightweight; the sudden death of Andrzej Lepper came as a shock but he was seen as an outcast. Mr Tusk has the chance to be a progressive reformer driving business and education reforms at home and his energy, security and development policies in Europe but it seems that, with concern in Brussels and apathy at home, he needs to decide which side of the fence to come down on first.

Building the foundations

Domestic success for the BRICS countries backs up their global posturing

Following on from a recent update post about where Brazil, Russia, India, China and South Africa are on the world stage at the moment, (see ‘A fortress made of BRICS‘– 08/06/11), it is worth taking a moment to look at the foundations of their international acclaim.

This week, the Brazilian Department of Work and Business released encouraging figures showing that the economy added 252,067 net payroll jobs in May. Despite some financial woes at the start of her presidency, Dilma Rousseff is clearly focused to try to continue the boom at home that her predecessor, Luiz Inacio Lula da Silva, kick-started.

India has become a hotbed for foreign firms basing themselves in the country or outsourcing many of their operations there. This expansion of the boundaries of domestic business, be it through Indian or overseas companies, allows India to move out itself. A report by US congressman Jim McDermott last year showed how Indian firms created nearly 60,000 jobs in the States between 2004-09 in deals worth $26.5 billion.

There is no doubt that a shift in the global circles of dominance is underway. Commentators in the US believe that, despite the lack of credible Republican candidates, Barack Obama may still lose next year’s election because of one main issue: domestic economic problems. The eurozone is also worryingly wobbly. Greece has to match China’s growth just to get itself out of what is fast becoming a deepening hole from which the only exit seems to be through a door marked ‘Drachma this way’. In contrast, as the Chinese deputy bank governor said in March, his country has the ‘market depth, liquidity and safety’ to see the Chinese yuan replace the US dollar as the major world reserve currency.

It is a cycle which allows an non-stop wheel of development for the BRICS countries. Their success at home breeds success abroad and the rising powers feel confident to challenge established countries on the world stage. By ensuring domestic growth, they can back up their international vision with internal achievements.

Who’s your international money on?

Emerging markets have wasted their chance to come together to challenge Europe over IMF leadership

Even if Agustín Carstens is selected by the International Monetary Fund by the end of the month to become the organisation’s new chief, the celebrations would be muted. Developing countries would have been able to hold a louder party if they had rallied around a single candidate.

In the shortlist run-off the IMF is considering at the moment, Christine Lagarde holds all the aces. Amongst the cards in the French Finance Minister’s hand are the fact that she has a steady domestic economic record; she has been at the heart of the EU as it has tried to stabilise itself; and she is a woman. Mr Carstens has a reputation as a pragmatist and is currently the governor of Mexico’s central bank. He is also in a strong position as he is from a country that is outside the cosy club of economically powerful nations but still inside the wider G20 grouping.

This battle could be billed as a ‘First Division Lagarde v Second Division Carstens’ match. The leading First Division sides have all leant their support to the fellow top-flighter but, crucially, other teams in the lower leagues have not be able to decide whom to back. And even now that Mr Carstens has been selected for the play-off final he is short on patronage. He has had a lot of training and experience but this is a fight in which the judges concentrate on the strength and number of your seconds and supporters outside the ring, rather than simply the calibre of the pugilist in the ring.

Mr Carstens should be able to land a few punches on Madame Lagarde. She is representing the eurozone, an economic region plagued by budget deficits, cross-border bailouts and raging disagreements over defaulting and restructuring. But so far she has used her nous and charm and been able to dodge the weak attempted jabs. Mr Carstens would be in a much stronger position if developing nations had whole-heartedly plumped for him in the first place.

Dominique Strauss-Kahn, (a man from the cosy club), has been unceremoniously dumped from the throne of the world’s piggy-bank and this is a chance to engineer a shift away from what has been perceived as the natural order of things – having a European leading the IMF. This ought to be an opportunity to deliver a positive window to the emerging markets from which they could challenge other nepotistic hierarchies, (such as always having an American run the World Bank), but the lack of organisation points towards a defeat.

Policing the protests

As this blog noted at the start of October, (see ‘Europeans having to swallow some tough medicine – 09/10/10’) an autumn of strikes and public protests was just beginning in Europe. Italy, the UK and Greece have borne the full force of mass demonstrations and France and Spain have suffered large-scale strikes.

On Wednesday 22 December, more protests went ahead in Rome with demonstrators campaigning against cuts to the education budget. There have been nationwide demonstrations across Italy since November in response to the new education bill.

Students are up in arms, as they have been in Britain.The recent student demonstrations across the Channel were a reaction to the coalition government’s decision to raise the upper-limit of tuition fees which universities can charge from £3,000 to £9,000. Greece has also seen widespread protests; reactions to the economic austerity measures announced by Athens.

But eyebrows have been raised over the way that the police have managed the protests. Tear gas has been used in Greece to disperse the protestors and the UK has employed water cannon before in Northern Ireland. The tactic of ‘kettling’ was controversial. The police have a hard enough job to do already, but over-zealous baton-wielding has sparked a number of inquiries. In Italy there has been fierce parliamentary debate over the idea of preventative arrests of possible trouble-makers.

With Spain and Portugal not entirely economically secure yet, and after a year of intense pressure for the eurozone, internal departments in governments across the continent will have to investigate their chosen methods of dealing with protestors. As education budget cuts, austerity measures, pension reforms and the effects of weak currencies bite, strikes and widespread demonstrations will continue. Many of the campaigners have declared war on their respective governments; the police must be ready and prepared to uphold the peace.