Αρχειοθήκη ιστολογίου

Τετάρτη, 25 Μαρτίου 2009

US stimulus plan one way ticket 'to hell'

The European Union presidency has slammed the United State's extravagant stimulus package saying such plans are 'a way to hell.'

Czech Prime Minister Mirek Topolanek, whose country currently holds the EU presidency, told the European Parliament on Wednesday that President Barack Obama's massive stimulus plan and banking bailout 'will undermine the stability of the global financial market.'

Topolanek's remarks come a day after his government collapsed because of the Czech parliament's vote of no-confidence. His comments would now place the European Union presidency on a collision course with Washington over how to cope with the world financial crisis.

British, French and other European leaders will meet at the London G20 Summit on 2 April to discuss the EU's EUR 200 billion (USD 256 billion) economic stimulus plan amid suggestions of a rift with Germany over the viability of the package.

The package focuses on accelerating EU-wide investments in transport, information technology, and energy.

The London meeting threatens to be overshadowed by the absence of German Chancellor Angela Merkel, with some pundits believing that she had been snubbed by Brown and Sarkozy -- who support stimulus -- over her lack of enthusiasm for the EU plan.

Merkel, leader of Europe's biggest economy, is under fire from some EU nations and domestic lawmakers for what they describe as 'a dithering and isolationist approach to the financial crisis.'

They are angry, in particular, over her reluctance to embrace the EU approach, although her coalition has pushed through a national stimulus package it says is worth EUR 31 billion.

World leaders are divided over whether to provide more economic stimulus or to tighten regulation of the system, with Europe seen as being less keen than the United States on further stimulus splurges.

News Europe

Czech PM: US bailout 'way to hell'

Mirek Topolanek said the 'biggest success of the EU' was to refuse Washington's economic policies[AFP]

Mirek Topolanek, the Czech prime minister, has described the United States' stimulus packages as a "way to hell", one week before he is due to meet Barack Obama, the US president, at the G20 summit.

Topolanek, whose country holds the European Union presidency, told the bloc's parliament in Strasbourg that Obama's plans to stimulate the US economy would "undermine the stability of the global financial market".

His comments, which come a day after the Czech government collapsed after a no-confidence vote in parliament, highlight growing differences between the EU and Washington on how to deal with the global economic crisis.

Several European leaders, including Nicolas Sarkozy, the French president and Angela Merkel, the German chancellor, are in favour of tighter financial regulation, while the US is pushing for larger economic stimulus packages.

Fiscal restraint

Referring to Obama's high-spend plans to lift his country out of recession, Topolanek said: "The United States did not take the right path. All of these steps, these combinations and permanency is the way to hell.

"We need to read the history books and the lessons of history and the biggest success of the [EU] is the refusal to go this way".

The US plans to pump $1trillion into its financial system by buying up treasury assets and mortgage securities, along with a $787bn economic stimulus package of tax rebates, health and welfare benefits.

But many EU leaders have urged member states to exercise fiscal restraint on government spending, rejecting calls from the US for more stimulus deals.

There is speculation that the contrast between European and US economic policies could come to a head at the G20 summit in London next week.

Obama has insisted that his massive budget proposal is moving the nation down the right path and will help the struggling economy grow again.

Gordon Brown, the British prime minister and host of the conference, is unlikely to add to the number of critics, after praising Obama for his willingness to work with Europe on reforming the global economy.

On Tuesday, Mervyn King, the governor of the Bank of England, cautioned Brown against further significant government spending to stimulate the economy.Al Jazeera

Czech woes deepen EU leadership dilemma

Wed Mar 25, 2009 9:50am EDT

By Mark John - Analysis

BRUSSELS (Reuters) - A no-confidence vote in the Czech government during its first spell as EU President is a new blow to reforms designed to bolster the bloc's global clout, analysts and politicians said.

Not only could Prague be distracted from the job of running everyday EU business, there could also be a delay in Czech ratification of the Lisbon Treaty, which supporters say will create a more efficient, enlarged Union of 27 states.

"It is no longer only Ireland that is unlikely to ratify the Lisbon Treaty," British Liberal Graham Watson told a European Parliament session briefly attended by Czech Prime Minister Mirek Topolanek, referring to the other wavering EU state.

"See to it that domestic difficulties do not sap your stride," he advised Topolanek before the Czech leader dashed back from Strasbourg to Prague.

The Treaty needs to be ratified in all 27 member states before it can enter force. The vote of no-confidence undermines Topolanek's leverage over backbenchers in his party and so makes the backing of the Czech upper house uncertain. Topolanek may decide to postpone any vote rather than risk losing it.

The Czech government parliamentary defeat late Tuesday by Prague's leftist opposition and a band of center-right defectors could scarcely have come at a worse time for the EU's image.

As EU president-in-office, Topolanek will welcome U.S. President Barack Obama's trip to Prague on April 5 for what was planned as a photogenic affirmation of a transatlantic partnership of equals together tackling everything from the economic crisis to climate change.

Instead, Obama will be posing for photographs with a lame duck leader at the mercy of Eurosceptic Czech President Vaclav Klaus, who has sole right to appoint a new prime minister.

Days before that, the Czechs will officially represent the EU at the Group of 20 summit of leading and emerging economies in London where the bloc wants to lead calls for more regulation to rein in the market excesses that led to the credit crunch.


"The Czech presidency will do its business as usual and I'm sure we'll cope," Topolanek insisted to deputies in Strasbourg.

But for backers of the Lisbon Treaty, "business as usual" under the Czech Republic, a small ex-communist country outside the euro single currency zone, has left something to be desired.

After the action-packed EU Presidency of France's Nicolas Sarkozy, Prague took the helm in January and struggled to get to grips with the dual "gas and Gaza" crises of a Russian-Ukraine gas dispute and Israeli incursions into Palestinian territory.

Shuttle diplomacy by Topolanek between Kiev and Moscow helped end the gas row and silence his critics. But everyone in Brussels knew the fragile Czech government was a time bomb that could explode -- and few are genuinely surprised it has.

While the European Commission rushed out statements saying it still trusted the Czechs' ability to carry on the presidency, the fate of the Lisbon Treaty is now more open then ever.

Cobbled together as a replacement to the EU "constitution" rejected by French and Dutch voters in 2005, the Lisbon Treaty provides for a more permanent, high-profile EU "president" figure intended to be the bloc's face to the world.

It also sets out tweaks of decision-making structures in Brussels that will be needed for the bloc to continue its expansion and take in new members from the Balkans and beyond.

Until now, attention focused on whether Irish voters would later this year give the treaty their backing the second time of asking after rejecting it over sovereignty concerns last year.


But with Klaus now calling the shots in Prague, Czech politics have emerged as the main threat to its survival.

"We have been working on this for ten years," European Parliament President Hans-Gert Poettering said. "We want the last difficult steps to be taken so this treaty can come into force at the start of 2010."

While few would dare predict whether the Treaty comes out of the coming tests in Prague and Dublin unscathed, analysts see others within the Union using the uncertainty to flex their muscles and wield more influence.

"The situation in the EU is so grave that Europe was never relying totally on the Czech Presidency to get the economy going," said Katynka Barysch of the London-based Center for European Reform (CER) think tank.

"I presume life will go on," she said, noting that the leaders of states such as Germany, France and Britain would in any case expect to take the lead in the G20 process where they, rather than Topolanek, are the big shots.

In Washington -- where the official line has long been to welcome anything that ends the EU's current institutional limbo -- reaction to the Czech upset was guarded.

While officials stressed that the EU would remain a natural partner on financial issues, Afghanistan and Iran, one U.S. official said there was mild concern the Czechs would be "distracted" from EU business.

(Additional reporting by Darren Ennis in Strasbourg, Jeremy Smith in Brussels and Sue Pleming in Washington)

© Thomson Reuters 2008. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.

EU presidency: Obama policies "road to hell"

I've spent another day in Prague, talking to some fine and inspiring journalists and people I have known from my college years. One of the advantages of being an alumnus of the Department of Maths and Physics of the Charles University is that Prague seems to be covered by a rather high density of familiar buildings whose restrooms can be used rather freely and naturally. ;-)

In ice-hockey, Pilsen lost another match against Slavia Prague and our chances for the finals are becoming somewhat hypothetical.

Back to the Obama policies

Today, the foreign media have written a lot about the "political crisis" in the Czech Republic. Well, there's no "crisis".

The government just failed in a no-confidence vote which is a standard (and somewhat unsurprising, in the long run) situation described in the constitution. The constitution is being followed literally and the president seems to be pretty happy about the no-confidence vote, probably more so than your humble correspondent. ;-)

Václav Klaus, who is just another guarantee that nothing really bad can happen, will accept Topolánek's resignation tomorrow and he will have the right and the pleasure to choose a new prime minister who will try to pass another confidence vote in the Parliament. That's a standard sequence of events that is not surprising in our political system in any sense. Also, it is completely unrelated to the current global economic havoc, despite loads of stupid or downright dishonest journalists who suggest otherwise (a full-fledged journalistic waste: they must know very well that they're making this bullshit up).

The socialist opposition has tried to do the same thing 4 times in the last two years and the reason why they succeeded this time is related to some very local and personal issues and individuals who are not known outside the Czech Republic. The no-confidence vote has reduced the odds that the Czech senate will pass the Lisbon Treaty (expected revenge of the conservative Senate to the pro-Lisbon socialists!) but that's surely not a disaster by itself. By the domino effect, the events may also stop the U.S. radar system (which is facing tough hurdles in the U.S, too).

A worse situation would occur if Mr Paroubek, the fat socialist opposition leader, would become the new prime minister. But such an event wouldn't be a "crisis" either. First of all, we have already survived a year or so when this idiot was the chief of our government. Second, it wouldn't be a "crisis" but rather a chronic, temporally distributed, persistent, but not lethal problem for our homeland.

At any rate, he is not becoming the prime minister yet and he has already declared that he wants the current or similar government to complete the EU presidency ("in the state of resignation") because his party (focusing on dodgers of payments and similar segments of the electorate, according to his own words) is understandably unable to fulfill any of these tasks.

Topolánek's words

Meanwhile, Czech prime minister Mr Mirek Topolánek has commented on the irresponsible policies of the Obama administration: see Google News or e.g. The New York Times.

First of all, a translator incorrectly translated Topolánek's sentence that originally said that "someone will always buy the U.S. bonds". The translator said that "someone would always buy the U.S. bombs and weapons in general". That was an amusing mistake that was corrected before the WW III began. :-) By the way, Czechia is among the world's top exporters of weapons, too.

More importantly, it has also been written that Topolánek considers Obama's policies to be a "road to hell".

Well, if you're reading this article with the goal of escalating the diplomatic tension between the EU and the U.S., or if you want to damage the influence of the Czech Republic in the international context, you should know that Topolánek has probably not used these words. And you should stop reading at this very moment.

If you're an open-minded reader who is actually interested in reality, you should know that Mr Topolánek probably didn't say that the policies were a "road to hell". I guess that at least in the private context, he may have said that the combination of the stimuli and the protectionist & "Buy American" policies (and their declared "permanency"!) repeat the mistakes of the 1930s and are a "road to the asshole" ("cesta do prdele") or "a way to the crapper" ("cesta do hajzlu"). And he's damn right! :-)

This is what I could predict based on my extended linguistic knowledge of the prime minister's opinions and colorful vocabulary. :-) Incidentally, Barroso's EU Commission seems to agree with Topolánek.

I am among the people who were already observing the state of economics and rhetorics about it during the previous recession, from the bursting dot-com bubble to the fall of Enron. The economy was being stimulated - mostly by modest tax cuts "for the rich" which was a relatively (in comparison with the present ideas) wise approach by George W. Bush. The idea has always been that the increasing debt can be paid back during the better years. Up to a certain amount, the economy can afford such irregular spending plans, whether they're wise or not.

However, there's another, bigger downturn which came about 7 years later. If you assume that this figure is a realistic estimate of the frequency of similar downturns, the rate with which the U.S. debt has been increasing was clearly above the long-term abilities of the U.S. economy to pay it back.

As the President of Harvard University, and even much more recently, Larry Summers gave many talks about the dangers of a growing U.S. debt. $400 billion was described as a gigantic deficit that was threatening the very health of the U.S. society. Quite suddenly, Summers is Obama's top economic aide who is overseeing a budget deficit that is bigger by a factor of five or so. And he has to shut up.

Richard Feynman was ahead of his time when he argued, in the 1980s, that numbers like one trillion should no longer be called "astronomical" because they're less than the U.S. deficit. They should be called "economic" numbers. :-)

You know, Larry, four years ago you coughed up $50 million to obnoxious and dishonest feminist bitches but now we're talking about trillions. The change in the order-of-magnitude estimate doesn't seem promising to me.

Is Dr Summers actually believing that these big numbers no longer matter? Does a factor of five change anything in his appraisal of the reality? Five years ago, the U.S. budget deficit was just another whip that various Bush-haters were using to "beat the dog". When Obama is in the White House, these people are suddenly silent even though the "sin" was multiplied by five. Is it fair to say that this hypocrisy is statistically significant even according to the particle physics standards? ;-)

What matters here is not the name of the U.S. president or his party but the ability of the country to stabilize the debt. Right now, the trade deficit (the other part of the "twin deficits") is reduced because the imports have shrunk dramatically. But this fact is linked to the equally reduced ability of the U.S. economy to produce things and pay the debt. When the GDP growth returns to the long-term values, the trade deficit will become huge once again (unless the dollar drops by a factor of two or more, which would lead to an exit from the bonds, too).

The frequency of economic events that are claimed to be "extraordinary" enough to justify extraordinary spending programs has become so high that it is no longer sane or honest to call these events "extraordinary". Responsible politicians should abandon these spectacularly inflated, misleading adjectives. It doesn't seem that it is politically correct in the U.S. to be a responsible politician these days. Instead, it is politically correct to endorse Obama's irresponsible policies because any other attitude is unfortunately viewed as a blasphemy, i.e. as doubts about the national messiah.