Massenbach-Letter: NEWS 05/02/16

Massenbach-Letter. News

· Italy’s Bad Bank Deal

· Why Iraqi Kurdistan Is Struggling to Pay Its Bills

· Cicero: 10 Jahre Merkel – Wohlstandsvernichtung wohin man blickt

· Report counts some 2,300 journalists killed in past 25 years

· Richard Trumka (President of the AFL-CIO): TPP – A new low.

· Malaysia: Swiss Authorities Discover Mismanagement Of State Funds

· The Clinton Family

Mecklenburg-Vorpommerns Innenminister Caffier warnt vor "erheblichen Problemen" infolge des Flüchtlingsstroms. Die Zahl der Asylanträge von Flüchtlingen ungeklärter Herkunft nimmt dabei deutlich zu. Der Anteil der Asylanträge von Flüchtlingen ungeklärter Herkunft hat in den vergangenen Monaten deutlich zugenommen. Im Juli vorigen Jahres waren es nur 705 Personen, im November aber bereits 1618 und im Dezember schon 3349 Anträge. Sie stellten damit nach Informationen der "Welt am Sonntag" im vergangenen Monat die größte Gruppe nach Syrern, Irakern und Afghanen. Besonders die Zahl der kurdischen Asylbewerber in Deutschland stieg stark an. ( http://www.msn.com/de-de/nachrichten/politik/es-ist-als-ob-mekka-in-deutschland-w%c3%a4re/ar-BBoUx4b?ocid=spartandhp )

Kommentar UvM: Kurdisch? a) Türkischer Nationalität, b) Irakischer Nationalität, c) Syrischer Nationalität!

4. Russland-Konferenz "Markt. Modernisierung. Mittelstand" 19. Februar 2016.

Massenbach* Friedensgespräche zu Syrien: Christen erleben Alptraum

Nun nimmt sie doch teil an den Friedensgesprächen in Genf. Die syrische Opposition hat nach langem Zögern ihre Teilnahme zugesagt und wird am Sonntag in Genf erwartet. Zuvor hatte ein Oppositionsbündnis in der saudischen Hauptstadt Riad über ihre Teilnahme an den Friedensgesprächen beraten, bei denen auch Vertreter des Regimes von Präsident Assad teilnehmen. Während all dieser diplomatischen Bemühungen der Vereinten Nationen ist die Lage der Christen in Syrien nach fünf Jahren Bürgerkrieg immer schwieriger: Sie erleben einen Alptraum, wie Patriarch Ignatius Joseph III. Younan gegenüber Radio Vatikan berichtet. Patriarch Joseph residiert in der Nähe der libanesischen Hauptstadt Beirut, doch die meisten der Gläubigen seiner Kirche leben in Syrien.

Doch Younan setzt einige Hoffnung in die in Genf angelaufenen Friedensgespräche. Nach fünf Jahren Massaker, Hundertausenden von Toten und Millionen Flüchtlingen begännen die westlichen Länder endlich eine Haltung einzunehmen, um diesen Krieg zu beenden. Das sei nötig, denn es stehe einiges auf dem Spiel, betont Younan. „Auf dem Spiel steht unsere Existenz, denn wenn wir von den orientalischen Kirchen sprechen, dann sprechen wir nur von kleinen Teilen dieser Länder, und wenn diese Krise weiter andauert, bedeutet das für die Christen, dass sie fliehen müssen, und wenn sie nicht gehen, dann leiden sie weiter unter der Verfolgung, unter der die ganze Gesellschaft leidet. Es wird ein großer Verlust für die orientalische Kirche sein, nein für die gesamte Weltkirche, denn hier ist unser Glaube geboren! Jesus sprach aramäisch, nicht griechisch oder lateinisch. Also, eine religiöse Kultur wird durch den Bürgerkrieg verschwinden.“

Der Patriarch geht davon aus, dass im Irak schon zwei Drittel der Christen geflohen sind. Das sei noch eine optimistische Schätzung. In Syrien sei die Situation anders einzuschätzen, da viele Christen in Syrien geflohen seien. „Aber die großen Städten wie Aleppo haben sicherlich fünfzig Prozent ihrer Christen verloren. Die Situation ist wirklich dramatisch: Nahrung ist teuer, es gibt keine Heizung, kein Wasser, kein Strom. Seit drei Jahren sind die Menschen in dieser Situation, und es wird noch nicht genug drüber geredet,“ klagt Younan an, der in diesen Tagen für eine Reihe von Konferenzen von „Kirche in Not“ in Italien ist.

http://de.radiovaticana.va/news/2016/01/30/syrien_christen_erleben_den_alptaum/1204869

Remarks at the Ministerial Meeting of the Small Group of the Global Coalition to Counter ISIL

Remarks

John Kerry
Secretary of State

Italian Foreign Minister Paolo Gentiloni

Ministry of Foreign Affairs

Rome, Italy

February 2, 2016

http://www.state.gov/secretary/remarks/2016/02/251992.htm

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Cicero:10 Jahre Merkel – Wohlstandsvernichtung wohin man blickt.

Energiewende, ungelöste Eurokrise, marode Infrastruktur und fehlgesteuerte Sozialpolitik der Regierung Merkel kostet die Republik Billionen. Die Regierung betreibt die Aufrechterhaltung einer Wohlstandsillusion, in der Konsum vor Investition steht.

Bundeskanzlerin Angela Merkel ist angeschlagen. Die bayerische Schwesterpartei CSU meutert, die Umfragewerte sinken und die ersten Partei-„freunde“ gehen auf Distanz. Plötzlich sind alle schon immer der Meinung gewesen, die Kanzlerin würde die Probleme der Immigration kleinreden und die Leistungsfähigkeit Deutschlands überschätzen. Offensichtlich brauchte es für diese Erkenntnis erst die Ereignisse von Köln. Denn für einen kritischen Beobachter mit ökonomischer Brille ist das „Wir schaffen das“, mit dem die Bundeskanzlerin die Flüchtlingskrise bewältigen will, nur eine recht konsequente Fortsetzung ihrer generellen Wirtschaftspolitik: Die Aufrechterhaltung einer Wohlstandsillusion, in der Konsum vor Investition steht.

Fangen wir mit der Energiewende an. Ich will jetzt gar nicht in die Diskussion einsteigen, wie sinnvoll es ist, bei uns fern ab von jedem Erdbeben- und Tsunami-Gebiet Atomkraftwerke abzuschalten, wenn in Japan ein Unglück passiert. Ich will auch nicht groß hinterfragen, ob wir wirklich umso sicherer sind, wenn andere Länder um uns herum dafür mehr auf Atomkraft setzen. Problematisch sind aber Umsetzung und Folgekosten. Der Kurswechsel über Nacht hat volkswirtschaftliches Vermögen in Milliardenhöhe vernichtet.

Nun mag dies nur für die Aktionäre der Energiefirmen unmittelbar relevant erscheinen. In Wirklichkeit schwächt diese Vermögensvernichtung eine ganze Branche und erschwert mehr als es den Übergang zu wirklich neuen Technologien erleichtert. Die gleichzeitige Förderung der alternativen Energien war nichts anderes als ein gigantisches Subventionsprogramm, von dem vor allem die chinesischen Solaranbieter profitiert haben. Für den Standort Deutschland bedeutet sie dauerhaft deutlich höhere Energiekosten. Die Belastung für Unternehmen und Verbraucher wird von einigen auf eine Billion Euro geschätzt. Auch wenn diese Zahl umstritten ist, bleibt festzuhalten: Dieses Geld ist Konsum und fehlt an anderer Stelle. Wie weit Industrien für erneuerbare Energien davon wirklich profitieren, vor allem am Standort Deutschland, bleibt abzuwarten.

Ungelöste Eurokrise

Zweites Beispiel: die Verschleppung der Eurokrise. Es ist bekannt, dass die Schulden von Staaten und Privaten in der Eurozone zu einem guten Teil nicht mehr tragfähig sind. Statt dieses Problem anzugehen und über Schuldenschnitte und eine echte Reform der Eurozone zu beraten, hat die Bundesregierung immer auf Zeit gespielt. Dabei läuft die Zeit gegen den Gläubiger Deutschland: Die Reformbereitschaft der anderen Ländern sinkt, je länger die Krise andauert, und der Berg an faulen Schulden wird immer größer. Bis jetzt haben deutsche Sparer rund 200 Milliarden Zinsverluste erlitten, weil die EZB mit immer billigerem Geld das Versagen der Politik kompensieren muss. Vorsichtig geschätzt dürfte uns die „Rettung“ des Euro mindestens eine weitere Billion Euro kosten.

Nicht zuletzt wegen der völlig verfehlten deutschen Europolitik ist in den letzten Jahren in Europa viel politischer Goodwill verloren gegangen. Seit die Flüchtlingskrise die Gewichte verschoben hat, können nicht wir den anderen sagen wie es geht, sondern wir brauchen die Kooperation der anderen an den Außengrenzen Europas. Griechenland wird den Schuldenschnitt bekommen, im Gegenzug für Auffanglager auf den Inseln. Europa wird die Schuldenunion bekommen, die teuerste für uns denkbare Variante. Gemeinsam werden wir die Politik des Sparens endgültig beerdigen für ein weiteres Leben auf Pump. Kombiniert mit der Bankenunion wird das für uns ein teurer Spaß.

Unterschätzter Strukturwandel

Der VW-Skandal sollte es dem letzten Skeptiker vor Augen geführt haben: Die deutsche Wirtschaft ist dominiert von der Automobilindustrie, und die steht vor erheblichen Herausforderungen. Technologischer Fortschritt, neue Wettbewerber und verändertes Konsumentenverhalten sind eigentlich die üblichen Treiber stetigen Wandels. Doch seit ein weltweit führendes Unternehmen wie VW zur Manipulation gegriffen hat, können wir nicht mehr sicher sein, dass die technologische Herausforderung auch zu bewältigen ist. Selbstfahrende Autos und der Verlust der Rolle als Statussymbol bei künftigen Generationen können die Industrie mehr als erschüttern. Zeit, neue Branchen zu entwickeln. Doch damit tun wir uns schwer. Stammen doch fast alle Industrien, auf die wir uns stützen, noch aus dem Kaiserreich: Maschinen und Anlagenbau, Chemie, die bereits zitierten Automobile. Neue Industrien stehen woanders.

Was wir bräuchten, wäre eine Investitionsoffensive von privater und öffentlicher Seite. Stattdessen fallen die Ausgaben für Investitionen seit Jahren kontinuierlich. Unternehmen investieren lieber in den Märkten der Zukunft außerhalb Deutschlands, der Staat konzentriert sich auf Konsum statt Investition. Der Verfall des Bildungswesens tut ein weiteres.

Fehlende Generationengerechtigkeit

Weitere Billionen wird die Versorgung einer immer älteren Gesellschaft verschlingen. Nirgendwo wurde für diese Kosten vorgesorgt. Studien rechnen vor, dass es enormer Kraftanstrengungen bedarf, um die Staatsfinanzen unter Kontrolle zu halten. Noch stehen wir in Deutschland im Vergleich zu anderen Ländern recht gut da. Wenn wir unsere Ausgaben für Renten, Pensionen und Gesundheitsleistungen für Alte auf dem derzeitigen Niveau der BIP einfrieren, können wir eine Explosion der Staatsschulden vermeiden. So die Berechnung der Bank für Internationalen Zahlungsausgleich (BIZ), angestellt vor der Rentenreform der großen Koalition.

Statt dieses Problem zu verkleinern, wurde es unter Kanzlerin Merkel deutlich vergrößert. Obwohl jeder wissen müsste, dass längere Lebenserwartung, frühere Renteneintritte und weniger Kinder mathematisch einfach nicht zusammenpassen, gibt es nun die Rente mit 63 und die Mütterrente. Dieser Rückwärtsgang der Regierung Merkel kostet unmittelbar 300 Milliarden Euro. Und gibt ein fatales Signal für die drohenden Verteilungskämpfe, wenn die Babyboomer-Generation in den Ruhestand tritt.

Hinzu kommt der Raubbau an der Infrastruktur Deutschlands. In den letzten 15 Jahren sind die öffentlichen Investitionen nach einer Auswertung der KfW preisbereinigt nur um 7,8 Prozent gestiegen, im Verhältnis zum BIP sind sie gefallen. In den Kommunen, eigentlich die Hauptträger der öffentlichen Investitionen, sind sie nach einer Studie des DIW seit 2003 per Saldo negativ. Dabei braucht gerade ein Industrieland gute Schulen, erstklassige Forschung und funktionierende Verkehrssysteme.

Effekte der Zuwanderung
Nicht wenige Politiker und Ökonomen sehen im Zustrom von Millionen mehrheitlich jungen Menschen eine Lösung für die ungedeckten Versprechen der alternden Gesellschaft. Damit wird ein Nutzen suggeriert, wo es eigentlich um eine humanitäre Aufgabe geht, die per Definition dem Teilen des eigenen Wohlstands mit Dritten entspricht.

Damit die Zuwanderung einen positiven Wohlstandseffekt für uns hat, müssten die Migranten auf Jahre hinaus einen produktiven Beitrag zu unserer Industriegesellschaft leisten. Idealerweise also jung, leistungsbereit, gut gebildet oder bildungsfähig und integrationswillig. Der entscheidende Hebel ist, den Anteil der produktiven Flüchtlinge möglichst hoch zu bekommen.

Setzen wir die Vollkosten pro Flüchtling mit 25.000 Euro an, ein Betrag der neben den direkten Kosten (Verpflegung, Unterbringung und Schulbesuch) auch die indirekten Kosten (Verwaltung, Infrastruktur) mit umfasst, müsste mindestens die Hälfte der Flüchtlinge einer Beschäftigung nachgehen und dabei im Schnitt 40.000 Euro pro Jahr verdienen, damit es sich für die hiesige Bevölkerung rechnet. Arbeiten weniger oder liegen die Gehälter unter diesem Niveau, bliebe eine Nettobelastung. Über Jahrzehnte gerechnet können die Kosten mit über einer Billion Euro denen der deutschen Einheit entsprechen.

Investitionsmaßnahmen für Integration

Damit Migranten überhaupt einen positiven Beitrag leisten können im System Deutschland, müssten wir heute massiv investieren. In Deutschkurse, die Vermittlung der Werte des Grundgesetzes und in Berufsausbildung. Nichts davon passiert und schon gar nicht im erforderlichen Umfang. Heinz Buschkowsky, der ehemalige Bezirksbürgermeister von Berlin Neukölln rechnet vor, dass es alleine an 20.000 Deutschlehrern fehlt.

Angesichts geringer Qualifikation dürfte eine weitere Errungenschaft aus den zehn Jahren Merkel´scher Kanzlerschaft – der Mindestlohn – für eine schnelle Integration wenig hilfreich sein. Mit 8,50 Euro schon immer recht hoch für relativ unproduktive Tätigkeiten, ist er nun völlig illusorisch. Kein Unternehmer kann es sich leisten, zu diesen Kosten Mitarbeiter ohne Sprachkenntnis und mit unklarer Qualifikation zu beschäftigen.

Zwar werden die Ausgaben für Verpflegung, Kleidung und Unterkunft der Flüchtlinge tatsächlich die Wirtschaftsleistung steigern; die Wirtschaftsforschungsinstitute erwarten dadurch in 2016 eine Steigerung des BIP um bis zu 0,5 Prozentpunkte. Doch auch dies ist nur Konsum und ein weiteres Beispiel für kurzfristige Optimierung zu Lasten künftiger Generationen.

Das ist das eigentliche Defizit zehn Jahre Merkel´scher Kanzlerschaft: Wir verteilen unseren vorhandenen Wohlstand freimütig und versäumen es, die Grundlagen für den zukünftigen Wohlstand zu legen. Wenn man es versucht zusammenzurechnen, kommen mehrere Billionen Euro an Wohlstandsverlusten als Folge der verfehlten Politik zusammen.

Das Erwachen aus der Wohlstandsillusion wird hart werden und massive Verteilungskonflikte zur Folge haben.

http://www.cicero.de/kapital/10-jahre-merkel-wohlstandsvernichtung-wohin-man-blickt/60423

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From our Russian news desk:

What should Russia do to Solve the Syrian Crisis? (att. “Russia and the Syrian Crisis”)

Russia: all Syrian opposition groups can join Geneva talks

DEBKAfile February 2, 2016, 7:55 PM (IDT)

During a visit to Abu Dhabi on Tuesday, Russian Foreign Minister Sergei Lavrov said that Moscow now agrees on the participation of all Syrian rebel groups, with the exception of ISIS and Al Qaeda affiliate the Nusra Front, in the Geneva talks on ending the Syrian war. He cited the Army of Islam and Ahrar al-Sham as two extremist groups that could join the talks. Moscow had previously opposed their participation.
DEBKAfile’s Persian Gulf sources: Russia’s step was a compromise with Saudi Arabia and the UAE, which support the two groups.

http://www.debka.com/newsupdate/14865/Russia-all-Syrian-opposition-groups-can-join-Geneva-talks

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RUSSIAN INTERNATIONAL AFFAIRS COUNCIL

Joseph Dobbs: Why Russia Needs Europe

22 January 2016 … There is little point in arguing for a return to the idea of Greater Europe. The collapse of Russia’s relationships with its fellow European states has made this dream impossible to pursue. But it is clear that some people in Russia want to go a step further: they no longer believe cooperation with the EU is necessary or beneficial, and that Asia is the answer to Russia’s problems. Those people are wrong … problem is how to benefit from integration into Asia while growth in the region slows and political tensions … perhaps biggest crack, is how Russia can reorient its economy towards Asia. Lack of capital is already delaying the development of its pipelines in the region, and the anticipated period of low global commodities prices will make things even more difficult … symptomatic of a wider problem facing Russia, namely that it cannot replace Europe with non-Western partnerships … Russia’s alternatives to Europe aren’t quite as safe a bet as Moscow might have hoped … In terms of Russia’s national security, turning its back to Europe is equally puzzling. Three regions of critical concern to Russia in the coming decades are regions in which Europe has significant influence. Both sides have currently wildly diverging approaches, but Russia can ill-afford to antagonize its European partners … Russia is right to pursue closer relations with Asia, as the rest of the world must too. The 21st century will be increasingly multipolar, and Moscow in many respects stands to benefit from its geography and position in the international system but will do so only if it positions itself as an essential bridge between east and West rather than seeking to choose between them. 80% of Russians live in Europe and it is in Europe that a great number of the critical issues facing Russia will be decided upon and influenced. Europe can offer the tools Russia needs to grow its economy and secure many of its interests. Strong ties with Asia will leave Russia in a stronger position in Europe, but so too will stronger ties with Europe give Russia more weight in Asia and in the 21st century.

http://russiancouncil.ru/en/inner/?id_4=7154#top-content

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4. Russland-Konferenz "Markt. Modernisierung. Mittelstand" am 19. Februar 2016 in Berlin.

Michael Harms Vorstandsvorsitzender, Deutsch-Russische Auslandshandelskammer (AHK)

Dr. Martin Wansleben, Hauptgeschäftsführer ,Deutscher Industrie-und Handelskammertag e.V.

Matthias Machnig, Staatssekretär im Bundesministerium für Wirtschaft und Energie

Alexej Uljukajew, Minister für wirtschaftliche Entwicklung der Russischen Föderation

Dr. Rainer Seele, Präsident, ,Deutsch-Russische Auslandshandelskammer, Vorstandsvorsitzender OMV

u.a.

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Policy= res publica

Freudenberg-Pilster* Report counts some 2,300 journalists killed in past 25 years.

AP, Sunday 31 Jan 2016.

Journalists hold a picture of Associated Press photographer Anja Niedringhaus, 48, who was killed April 4, 2014 in Afghanistan. (AP).

In the last quarter century, at least 2,297 journalists and media staff have been killed for doing nothing more than trying to inform the world on war, revolution, crime and corruption. And killers continue to act with impunity, the International Federation of Journalists announced in a new report.
The annual total stood at 40 in the federation’s first year of counting, 1990, but has not dipped under the 100-mark since 2010.
"The last ten years were the most dangerous," said IFJ General Secretary Anthony Bellanger in an interview, with 2006 the worst year of all with 155 killed.
And despite vows of protection from as high as the United Nations, the IFJ said it produced the report "25 years of contribution towards safer journalism" to underscore a worsening climate of impunity which has helped killers get away with murder and turn journalists into soft targets.
"The IFJ estimates that only one of ten killings is investigated," the report said, with actual convictions lower still.
"That is the diplomatic issue. Let’s stop the impunity that protects the killers," Bellanger said.
The 79-page report will be made public next week, but The Associated Press obtained a copy ahead of a debate Monday at the British Parliament on "deaths of professional and citizen journalists in conflict zones." The IFJ will also take the report to a major UNESCO meeting in Paris next Thursday devoted to the same issue.
"We bring this report to show to all that it really is time to do something about it," said Bellanger.
Last year stood out for the attacks on the Paris office of the satirical weekly Charlie Hebdo, where two Islamic extremists killed 12 people at the satirical newspaper’s office. The IFJ’s total tally of the year stood at 112.
The IFJ says it bases its information on a variety of sources, including national affiliates in about 140 nations, police sources and political reports. It has published annual reports since 1990, focusing on the killings of journalists and media staff in work-related incidents. The totals center on deaths of media professionals in targeted assassinations, cross fire incidents and bomb attacks.
Beyond the sustained high totals, Bellanger said that there is also a disturbing trend in which kidnappers who seize journalists kill them, all too often without even seeking ransom.
The targeting of journalists has continued unabated this year too. Earlier this month, a suicide car bomb attack in the Afghan capital, Kabul, targeted a bus owned by Afghanistan’s biggest media organization, Moby Group and a Taliban spokesman claimed responsibility saying Moby’s Tolo TV was the target. Seven media workers were killed.

Over the past 25 years, Iraq has topped the list of most dangerous countries, the scene of 309 killings, the overwhelming majority of them since the 2003 US led invasion and war.
In second place is the Philippines, with 146 killings, while Mexico and its drugs-related violence is third with 120. Those two nations also underscore the IFJ’s "recurring finding of our reports that there are many more killed in peacetime situations than in war-stricken countries."

http://english.ahram.org.eg/News/186336.aspx

****************************************************************************************************************** Politics: From Vision to Action

Barandat* Malaysia: Swiss Authorities Discover Mismanagement Of State Funds.

Situation Reports -January 30, 2016 | 16:26 GMT

Swiss authorities allege that around $4 billion has been misappropriated from Malaysian state-owned enterprises, according to the office of Switzerland’s attorney general, Reuters reported. The office is in the midst of a criminal investigation into alleged corruption in the 1Malaysia Development Berhad (1MDB) sovereign wealth fund, including bribery of foreign officials, money laundering and criminal mismanagement. Malaysia’s attorney general concluded Jan. 26 that Malaysian Prime Minister Najib Razak was not guilty of misappropriating $681 million from the fund, and directed Malaysia’s top anti-graft agency to close its investigation into the embattled prime minister. With Razak still under fire, Malaysia’s carefully balanced status quo, which has enabled the Malaysian economy to flourish for decades without communal disruptions, is at risk.

https://www.stratfor.com/situation-report/malaysia-swiss-authorities-discover-mismanagement-state-funds

Malaysia’s Eventual Fall From Grace.

October 22, 2015 | 09:31 GMT

Forecast

  • In the near term, Malaysian Prime Minister Najib Razak will survive efforts to oust him over mounting corruption allegations.
  • Whether or not Najib holds onto power longer, the years leading up to the next general elections will be turbulent ones.
  • Political stability, crucial to Malaysia’s economic rise, will be challenged by demographic changes that stress the country’s delicate ethnic balance.

Analysis

A deepening political crisis in Malaysia is highlighting the country’s longstanding ethnic divides and its uncertain road ahead. Since early this year, Prime Minister Najib Razak has been caught in a scandal surrounding the heavily indebted 1Malaysia Development Berhad (1MDB) sovereign wealth fund. Among other points of controversy, Najib is struggling to explain the source of nearly $700 million deposited in his personal account.

This week, with Malaysia’s parliament back in session, the opposition is renewing its efforts to oust the prime minister through a no-confidence vote — a measure that will succeed only in the unlikely event that Najib’s tightly consolidated party apparatus comes apart. Indeed, Najib is likely to remain entrenched in power for the foreseeable future. In the process, however, the political crisis in Kuala Lumpur will both expose and exacerbate broader challenges confronting Malaysia, particularly regarding divisions between the politically influential "Bumiputera" (the umbrella term for ethnic Malays and indigenous groups) and the economically powerful ethnic Chinese and Indian populations. At risk is the carefully balanced status quo that has enabled the Malaysian economy to flourish without communal disruptions.

A Well-Entrenched Man

On the surface, at least, the hits keep piling up for Najib: A steady drip of leaked documents has magnified scrutiny on the prime minister and spawned official investigations both in Malaysia and in countries where 1MDB has been active, including Switzerland and the United States. Najib, who also serves as finance minister, has come under fire from the country’s central bank chief, powerful figures from within his own ruling United Malays National Organisation (UMNO), and Malaysia’s nine state sultans — whose power is largely ceremonial but who are perceived as guardians of Malay heritage and religion. Most notably, longtime Prime Minister and UMNO boss Mahathir Mohammad, Najib’s former mentor, has gone on the warpath. Since publicly withdrawing support for Najib in mid-2014, Mahathir, who governed for 22 years, has called for more intensive probes, joined a major opposition rally in August, and urged his former adversaries in Malaysia’s long-beleaguered opposition to table a no-confidence vote. (Najib’s predecessor, Abdullah Badawi, resigned in 2009 at Mahathir’s behest.)

But the opposition, with just 87 of the parliament’s 221 seats, does not have the numbers to muster the two-thirds majority needed to remove Najib, even if it peels off disaffected lawmakers from the ruling Barisan Nasional coalition’s ethnic Chinese and Indian parties. Moreover, the opposition alliance collapsed this summer, and certain factions are noncommittal at most about ousting Najib — particularly the conservative, Malay Muslim-dominated Pan-Malaysian Islamic Party, which sat out the anti-Najib rally in August.

UMNO is similarly divided. Several powerful party leaders who have publicly criticized Najib’s role in the 1MDB scandal and expressed concern about damage to the party’s credibility still oppose the no-confidence vote. Even with the opposition at odds with itself and its charismatic leader, Anwar Ibrahim, behind bars, UMNO does not want to chance a snap election with the 1MDB affair still unresolved. It narrowly held onto power after losing the popular vote in 2013, after all. Whatever the prime minister’s sins, UMNO lawmakers naturally do not want to see the party fall as a result. The leaked documents have implicated essentially Najib and his wife alone, largely sparing other major UMNO figures. This suggests an orchestrated effort designed to oust the prime minister without sinking the entire party.

An internal putsch against Najib is more likely sometime after the parliamentary session ends. But even this is unlikely. Earlier this year, Najib postponed the next party elections to 2018 and purged some of his most powerful detractors. An emergency vote would take two-thirds of UMNO’s Supreme Council or a majority of the party’s 191 divisional chiefs, and Najib reportedly maintains strong support in both of these blocs. Nearly all UMNO lawmakers and leaders have benefitted from his largesse, and the fact that Najib’s political machine has proved resilient testifies to the power of his patronage network. Party dissent will need to reach a much higher pitch to oust him. Despite Mahathir’s best efforts, this has not happened — yet.

Economic Complications

The crisis in the capital comes at a particularly bad time for Malaysia. With or without Najib at the helm (but particularly if he holds on), the years leading up to next elections, currently expected to take place in 2018, will be turbulent. In particular, an array of challenges is threatening Malaysia’s economic dynamism and the delicate ethnic balance that has undergirded the country’s remarkable rise. The political uncertainty is likely to exacerbate both issues, and vice versa.

A leading concern is that the scandal is diminishing Malaysia’s credibility with investors and driving down the value of its currency, the ringgit, which hit a 17-year low this month. Investors reportedly pulled around more than $4.5 billion from Malaysian stocks and bonds in the third quarter of 2015, while approved foreign direct investment declined by more than 40 percent through the first half of the year. Currencies have been racing downward across Southeast Asia, but the ringgit has performed worse than its regional counterparts — despite Malaysia having generally more favorable economic fundamentals and substantial foreign exchange reserves available to buoy it.

The country’s economic woes cannot be blamed solely on the political uncertainty. Even without the political crisis, Malaysia is facing economic headwinds because of low commodity prices and a looming interest rate hike by the U.S. Federal Reserve. But the scandal is certainly playing a role. Malaysia’s once globally esteemed financial institutions are now in question, and 1MDB is involved in nearly every key sector of the Malaysian economy, including energy, agriculture, tourism and real estate. Meanwhile, Najib’s influence over those purportedly investigating the sovereign wealth fund (in July, for example, he fired the Attorney-General) has raised questions about regulatory transparency and rule of law in the country.

Moreover, Malaysia’s reliance on semi-conductors and commodities such as oil, natural gas and palm oil leave it fairly vulnerable to global shifts. State investment funds like 1MDB and Khazanah Nasional Berhad (which Najib also chairs) were designed, in part, to give Malaysia additional economic buffer and allow it to use capital in a manner similar to neighboring Singapore. The success of such investment vehicles will become particularly important as China begins to focus on higher-value exports such as semi-conductors. Inversely, the economic woes have magnified the scandal. The commodities collapse, for example, has inflated 1MDB’s debts and shrunk the revenues available for UMNO to dole out to keep the coalition more firmly intact.

There is reason for optimism. Malaysia has relatively low debt and inflation, as well as a healthy resource base on which it can continue to build. Its membership in the Trans-Pacific Partnership would, at minimum, help the country diversify, gain an edge over rising regional competition, and position it at the center of global trade flows. So Malaysia’s economic slump alone may not be prolonged enough to sink the ruling party — UMNO survived even the 1997 Asian financial crisis. Nonetheless, Malaysia’s underlying strengths have given traction to the opposition’s assertion that graft and mismanagement must then be playing a singular role in dragging down the economy. This argument will gain strength if the slide continues.

UMNO’s Ethnic Gamble

More problematic over the long-term is the ongoing shift in Malaysia’s ethnic demographics. As in Singapore, Malaysia’s favorable investment climate has long relied on the country maintaining at least superficial political harmony. This is an innate challenge for a geographically fragmented country where the Bumiputera, or "Sons of the Soil," have stood in contrast to the ethnic Chinese and South Asians, who wield economic influence disproportionate to their numbers.

Malaysia’s political stability has revolved largely around the dominance of the UMNO-led coalitions that have ruled every year since independence in 1957. These coalitions have ensured high-level representation from all major ethnic groups and the farther-flung regions of Sarawak and Sabah on the island of Borneo, facilitating flows of patronage to all corners of society and preventing a repeat of the 1969 communal riots or revival of pre-independence racial strife. The effective one-party rule has generally enabled policy continuity and targeted infrastructure and industrial development, minimizing uncertainty for investors and giving Malaysia a leg up over regional rivals. This environment, combined with Malaysia’s resource abundance and fortuitous position as a trade hub in a high-growth region, fueled a steady economic rise and the growth of a robust middle class.

But the prospect of ethnic strife and resentment fueled by Malaysia’s affirmative action policies has continued to pose a risk to the country’s economic success. Mahathir, when still in power, tried unsuccessfully to peel back these policies, and it is unlikely that others will be able to do so. And throughout Southeast Asia, economic turmoil tends to lead to a push back against the ethnic Chinese populations. In Indonesia, for example, this has often led to violence. This issue is part of why Singapore is not still a part of the Malay Federation.

Malaysia’s Geographic Challenge

The ethnic balance underpinning Malaysia’s stability began to noticeably unravel in the 2008 general elections. Ethnic Chinese and Indian voters began to defect from the ruling coalition, upset with ossifying policies meant to cement the pre-eminence of Malays in political and economic life, as well as anti-minority rhetoric and occasional violence. Barisan Nasional lost 58 seats and its seemingly perpetual two-thirds majority. The shift became more pronounced in 2013, when a multi-ethnic opposition coalition won the popular vote. Today, the main Chinese party in the ruling coalition, the Malaysian Chinese Association, holds just seven seats (down from 31 in 2008) and no Cabinet posts. The main Indian party holds four.

Najib has increasingly sought to frame the 1MDB affair in ethnic terms. In this he has taken a cue from Mahathir, whose own rise was fueled by exploiting Malay and indigenous fears of, for example, "the Chinese tsunami." UMNO has funded and helped organize the Malay nationalist "Red Shirt" movement, whose mass rally in September was narrowly prevented by police from storming a prominent ethnic Chinese business district in Kuala Lumpur. As political strategies go, this may appear exceedingly base, but it also reflects a recognition that Malaysia’s fundamental demographic makeup is changing, most notably among the Chinese. Since 1983, their share of Malaysia’s total population has dropped more than 8 percent, and birthrates among ethnic Chinese are by far the lowest of Malaysia’s main ethnic groups. For political purposes then, rather than wooing back minority voters, UMNO will increasingly work to secure its base and keep the opposition divided along ethnic lines.

This heralds a widening of ethnic divisions — punctuated by growing public unrest more common to Malaysia’s northern neighbors Myanmar and Thailand — that will challenge the core integrity of what is a particularly manufactured form of the modern nation-state. Lacking geographical or ethnic coherence, Malaysia’s solidarity has long stemmed from shrewd, inclusive policymaking, with plentiful resource wealth available to grease away any frictions. A broad remaking of this political system — if it fails to preserve the ties binding Malaysia’s far-flung and disparate parts to the state — would thus prove unsustainable. To a degree, this risk will limit how far Najib and UMNO will be willing to push their ethnic advantage. But with the 1MDB scandal and the economic stresses drawing the ruling party into a protracted fight for survival, Malaysia is likely to slip further into an environment of new uncertainties.

https://www.stratfor.com/analysis/malaysias-eventual-fall-grace

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hillRichard Trumka (President of the AFL-CIO): TPP – A new low.

Francis Rivera

By Richard Trumka – 02/02/16 06:00 PM EST

As a dozen nations gather in New Zealand this week to officially sign the Trans-Pacific Partnership (TPP), working families in the United States are sounding the alarm on a deal that would lower wages and ship even more jobs overseas.

The final text of the agreement, released in November, is even worse than we imagined, with loopholes in labor enforcement and rewards for outsourcing. Like its predecessor agreements NAFTA and CAFTA, the TPP is a giveaway to big corporations, special interests and all those who want economic rules that benefit the wealthy few. It is no wonder the presidential front-runners from both political parties oppose it.

It didn’t have to be this way. The labor movement supports trade. We know that opening up new markets to American products the right way can create jobs and lift up working people. But trade must be done under a fair set of rules that puts people ahead of profits. The TPP fails that test miserably.

From the outset, the AFL-CIO provided detailed and substantive suggestions for improving this agreement and evidence to support our positions. On everything from labor enforcement to investment rules, we offered a path forward. Unfortunately, our policy recommendations were ignored, as were those from the environmental, consumer, public health, global development and manufacturing sectors. That’s what you get from secret
negotiations driven by corporate and investor interests.

There are countless ways the TPP would be disastrous for working people. Here are a few of the most egregious.

After much talk about labor standards, the TPP falls woefully short. It retains the totally discretionary nature of enforcement and does nothing to streamline the process so labor cases will be addressed without delay, leaving workers with no assurance of improved conditions. The “consistency” agreements negotiated with Vietnam, Malaysia and Brunei don’t add any responsibilities beyond the current labor chapter and give Vietnam five years to come fully into compliance, even though it will receive the benefits of the TPP immediately. There is no deal to address longstanding labor problems in Mexico that have not been remedied despite 20 years of efforts to enforce NAFTA.

The TPP would take a sledgehammer to American manufacturing. The auto rules of origin are so weak that a car or truck made primarily in China or another non-TPP country would still qualify for trade benefits. Popular “Buy American” rules are watered down, requiring the U.S. government to treat bidders from every TPP country as if they were American. Finally, the lack of any enforceable currency manipulation rules means foreign nations can continue to cheat U.S. companies and workers. These features make the TPP an outsourcing deal, not a trade deal.

To add insult to injury, more than 9,000 new foreign companies will be empowered to bypass U.S. courts and access a private justice system — investor-state dispute settlement — that allows them to hold U.S. federal, state and local government decisions ransom. Let that soak in for a minute. Wal-Mart’s Japan subsidiary could sue Seattle for denying a building permit. ExxonMobil’s Vietnamese affiliate could come after the United States for rules and regulations that protect our air and water.

The TPP is also a giveaway to Big Pharma, expanding monopoly rights that will allow drug companies to further drive up costs for patients. These rules are far worse than the ones in the Peru, Colombia and Panama deals negotiated by former President George W. Bush. Doctors Without Borders says the TPP would “jeopardize people’s access to affordable medicines.”

We’ve been down this road before. The Wall Street and Washington elite always tell us that this time will be different. The truth is these trade deals have ripped apart the fabric of our nation. We see the shuttered factories. We visit towns that look like they are stuck in the past. We talk to the workers who lost everything, only to be told they should retrain in another field — but Congress has been slow to fund and authorize those programs. From NAFTA to CAFTA to Korea and now the TPP, these agreements have continually put profits over people. By driving down our wages, they make our economy weaker, not stronger.

In many ways, the TPP is a new low. A quick search of the agreement shows no mention of the terms “raising wages” or “climate change.” And by ramming through fast track legislation earlier this year, Congress effectively barred itself from making a single improvement to the TPP.

Working people deserve a better process and a better product. We understand better than anyone that the TPP is just another tool to enrich corporations at the expense of everyday families. We cannot and should not accept it.

Because it can’t fix the TPP, Congress has to take the step of saying to 11 other countries, “No, not this TPP.” Taking that brave step is necessary to create trade rules that lift people up, not crush them under crony capitalism.

Trumka is president of the AFL-CIO.

http://thehill.com/opinion/op-ed/267968-tpp-a-new-low

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Middle East

Why Iraqi Kurdistan Is Struggling to Pay Its Bills.

Forecast

  • Despite the success of the Kurdistan Regional Government (KRG) in exporting oil independently of Baghdad, low oil prices have kept Kurdish energy revenue from rising alongside output.
  • Even though its weak financial situation probably is not sustainable, the KRG will prioritize making consistent payments to international oil companies to keep production from declining, although it likely will not be able to start paying off its outstanding debts to these firms.
  • Persistent financial strain will continue to drive the Arbil government closer to Turkey, whose infrastructure is crucial to the KRG’s ability to export its oil.
  • Many of the legal threats to the KRG’s independence from the government in Baghdad will remain unresolved for the foreseeable future.

Analysis

Low global oil prices are wreaking havoc on Iraqi Kurdistan’s finances. Although the cash-strapped Kurdish government has managed to export oil independently of Baghdad since June 2015, it will increasingly rely on foreign support the longer oil prices remain depressed, regardless of how much control it has over its oil export revenue. The Kurdistan Regional Government (KRG) will rely heavily on Turkey to keep oil exports and revenues flowing as it struggles to address both its own disintegration and the profound effect that the financial strain is having on the morale of peshmerga fighting the Islamic State.

Even if oil prices rise enough to enable the Arbil-based government to meet its spending needs — or even start to repay its estimated $14 billion in debt, $4 billion of which is owed to oil companies alone — many of the legal challenges to the KRG’s authority will remain. So far, Baghdad’s attempts to use legal claims to dissuade customers from buying the Kurdish government’s oil have been unsuccessful. However, Arbil’s recent move to sell Iraqi oil from Kirkuk, which lies outside the Kurdish autonomous region, will invite further legal disputes with Baghdad. These challenges will push the KRG even closer to Turkey, paving the way for a greater role for Ankara in Iraq’s Kurdish region.

An Unsustainable Drain on Finances

Arbil’s financial concerns are great and growing. At its heart, Kurdistan is a region that supports its people by putting them on the government’s payroll; roughly 1 in 6 Iraqi Kurds are considered employees of the KRG. Weighed down by a bloated public wage bill totaling $700 million to $800 million a month, Kurdish officials are struggling to find a way to pay the salaries of their peshmerga fighters, teachers, oil workers and other civil servants. At the same time, the KRG’s budget must somehow fund the patronage networks that form the foundation of Kurdish society. All told, Arbil’s spending commitments add up to about $1 billion to $1.1 billion per month (or $12 billion to $14 billion per year).

One way to pay this bill would be with financial assistance from Baghdad. During the first half of 2015, the Iraqi government had a deal with the KRG in place to provide just that. In exchange for Arbil’s export of 550,000 barrels per day of crude through Turkey’s Ceyhan port, where Baghdad’s oil marketing company would sell it to foreign customers, Baghdad would give 17 percent of its budget to the KRG — roughly the amount needed to cover Arbil’s monthly bill of $1.1 billion. Within the first month, though, the deal had fallen apart; Arbil delivered only 145,000 bpd of oil, and Baghdad reduced its payment to the KRG to $208 million. Still, Arbil managed to drag the arrangement out, arguing that the 550,000 bpd should be an average figure for the full year, until it decided in June to virtually halt oil transfers to the marketing firm entirely, cutting Baghdad out of its oil export process.

And so far, at least, the KRG seems to have had little trouble exporting oil by itself. Baghdad’s threats of legal suits have not hurt the KRG’s ability to find buyers. Since September 2015, the KRG has exported an average of 600,000 bpd. Between Nov. 1 and Jan. 17, some 43 percent of Kurdish oil exports from Ceyhan went directly to European customers, primarily in Italy. Another 17 percent transferred to ships off the coast of Cyprus, likely bound for other destinations on the Continent.

Arbil has already announced plans to continue the sales for the rest of 2016. But even if its recent successes continue, they might not be enough to fully fund the KRG’s budget. In 2015, Kurdish oil revenue averaged between $361 million and $406 million per month, a shortfall that has caused the KRG to fall behind on salary payments for the past four months. This has led to strikes and protests in Sulaimaniyah and other areas with weak support for the ruling Kurdistan Democratic Party.

Absent funding from Baghdad, the only way for Arbil to make ends meet is with oil revenue, which accounts for as much as 80-90 percent of the Kurdish government’s budget. Thus, ensuring that oil exports continue and, if possible, increase is a high priority for the KRG. However, this requires that Kurdish officials consistently make payments to the oil companies operating in the region so that upstream investment continues to flow into Kurdistan. But with oil prices at about $30 per barrel, the KRG’s payments to oil companies have been sporadic at best, and, at worst, nonexistent in the first eight months of 2015. If the KRG hopes to balance its budget and start paying off its debts to foreign oil companies, it needs oil prices to surge to somewhere between $60 and $70 per barrel or for production to ramp up quickly.

Funding Problems Strain the KRG’s Relationships

For foreign energy firms, operating in Kurdistan is no easy task. Arbil’s relationships with international oil companies have long been complicated by the fact that one of Baghdad’s core imperatives is to keep the KRG under its control. To this end, Baghdad has threatened to blacklist energy companies doing business with the KRG, refusing to recognize any contracts that Arbil has entered into. The Kurdish government has tried to counteract Baghdad’s efforts by presenting itself as a more attractive and stable partner for these companies, offering generous terms through its production-sharing contract model. The KRG also has the advantage of pointing to Kurdistan’s favorable geology, which in some places is cheap enough to develop that total break-even costs are below $10 per barrel.

Although a few major oil companies such as ExxonMobil have done some exploratory work in the region, the most successful foreign firms have been smaller companies that focus almost exclusively on Iraqi Kurdistan. These include Norway’s DNO, Turkey’s Genel Energy and the United Kingdom’s Gulf Keystone Petroleum, which operate three of Iraqi Kurdistan’s four largest producing fields: Tawke, Taq Taq and Shaikan. Together, they produce nearly 300,000 bpd, most of which the KRG exports and sells.

Arbil currently owes these firms quite a bit of money in back payments. Its debt to DNO stands at approximately $992 million; to Genel Energy, $378 million; and to Gulf Keystone Petroleum, $283 million. Each figure represents export revenue that Arbil should have transferred to the companies under the terms of production-sharing contracts during the ill-fated attempt to work with Baghdad’s marketing company. (The KRG has been able to meet its monthly payments to the firms since it began exporting oil on its own in September 2015.)

Despite its many other financial burdens, the KRG will make paying off oil company debts one of its top priorities. Toward the end of 2015, upstream activity began to decline, causing total production growth to taper off. DNO, Genel Energy and Gulf Keystone Petroleum have all announced that they will readjust their 2016 budgets if Arbil cannot make its payments consistently — a move that would likely lead to reduced output and drive the KRG’s revenue down even further.

Even though the Kurdish government has met its obligations over the past four months, Genel Energy has already revised its production estimates downward for 2016. Instead of producing 84,000 bpd, as it did in 2015, the company expects to produce 60,000-70,000 bpd in 2016. Its output has already begun to fall, indicating that the blocks Genel Energy is active in are not seeing the upstream activity needed to keep production figures up. Since Genel Energy is a leading partner in Kurdistan’s Tawke and Taq Taq blocks, the KRG could lose as much as 60,000 bpd of output from those two fields alone. Other KRG-controlled fields will probably see similar problems between now and mid-2017 as they struggle to keep output high.

Lawsuits Loom if Arbil Cannot Pay

Despite fulfilling recent payments to foreign oil firms, Arbil could still face legal action in the long run if it fails to make significant strides in paying off its outstanding debts to those companies. It has already been dragged into the courtroom for precisely that reason: Dana Gas, one of the earliest companies to enter Iraqi Kurdistan, has filed multiple lawsuits against the KRG, claiming it is owed more than $2 billion in unpaid natural gas invoices.

The London Court of International Arbitration has already ruled in favor of the Dana Gas consortium, ordering the KRG to pay $100 million and $1.98 billion in two separate cases. Enforcement in the first case was appealed to the High Court of England, which struck down the KRG’s defense based on sovereign immunity and reiterated that the Kurdish government must honor its payments. But the KRG refuses to accept the ruling, which may ultimately mean that it could fall to Turkey — the main conduit for Kurdish oil flows and the location where Kurdish revenues are deposited — to uphold and enforce the court’s decision.

The Dana Gas dispute is an important one to watch for both current and prospective investors in Kurdistan. One of the biggest selling points the KRG has in generating interest among international oil companies is its relatively attractive fiscal and contractual terms. But if other companies are forced to follow in Dana Gas‘ footsteps by taking the KRG to international courts to get the money they are owed, investors will likely become more reluctant to pump funds into Iraqi Kurdistan. To avoid this, Arbil will probably try to settle its disputes with Dana Gas and start repaying its debts to other firms sooner rather than later. However, it might not be able to do so until oil prices rise or it receives significant backing from foreign patrons.

If investors lose confidence in the KRG, it could begin to hurt the region’s prospects more broadly as firms pull out of larger infrastructure projects. For example, Genel Energy is lined up to be the primary financial backer and builder of a proposed natural gas pipeline connecting Iraqi Kurdistan to Turkey. (The pipeline would eventually send between 10 billion and 20 billion cubic meters of natural gas annually to Turkey.) The deal could be lucrative for Genel Energy if the KRG can guarantee that it will make its payments, but it would be even more important for Kurdish leaders because it would form another crucial energy link between Turkey and the KRG. As it stands, Arbil has little leverage over (and a heavy reliance on) Turkey, but a large natural gas pipeline would boost the KRG’s sway and finances — especially as Turkey comes to distrust Russia, its traditional energy partner.

https://www.stratfor.com/analysis/why-iraqi-kurdistan-struggling-pay-its-bills

Syria: Kurdish Forces Plan To Attack Border With Turkey.

January 28, 2016 | 16:54 GMT – Syrian Kurdish forces are planning a major attack to seize a 100-kilometer (60-mile) stretch of the Syria-Turkey border controlled by the Islamic State, potentially putting the U.S.-backed Kurds in direct conflict with Turkey, Reuters reported Jan. 28. The Kurdish People’s Protection Units (YPG) and its allies already control a wide swath of the border from Iraq to the Euphrates River, but Turkey has said it will not permit them to push west of the river. A YPG source confirmed that the plan involved attacks on the Islamic State-held towns of Jarabulus and Manbij, as well as Azaz, which is controlled by other rebel groups. Reports have also surfaced that Russia may aid the YPG in retaking Jarabulus. Any major attack by the YPG on the border with Turkey will complicate a potential U.S.-supported Turkish incursion into northern Syria.

https://www.stratfor.com/situation-report/syria-kurdish-forces-plan-attack-border-turkey

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*Massenbach’s

Recommendation*

STRATFOR: Italy’s Bad Bank Deal

Italy has struck a deal with the European Union to create a new system to manage its sizable nonperforming loan problem. Talks had been underway for a year with little progress, but in January the dramatic fall of Italian bank share prices added impetus to the negotiations. Talks finally concluded with an agreement between Italian Finance Minister Pier Carlo Padoan and European Commissioner for Competition Margrethe Vestager.

The question of whether to allow state aid to prop up banks was the most contentious point of negotiations. A country’s banking system acts something like its blood supply, so governments tend to be extremely motivated to quickly solve any problems that arise within it, often using public money. But the linking of government and bank finances was partly to blame for the 2011-2012 European sovereign debt crisis. Since then, the European Union has taken steps to avoid such hazardous linkages. New EU rules implemented Jan. 1 were supposed to make the investors for financial institutions suffer the pain of bank failure before taxpayers. Yet, as a result of this new arrangement, investors felt compelled to sell off their debt, which contributed to a drop in share prices that in turn reinvigorated negotiations.

Padoan arrived in Brussels hoping to secure an exemption from the EU rules against state aid. He wanted to be allowed to use government guarantees to help Italian banks sell off their bad loans, averting disaster in the process. Vestager arrived with a dilemma: Should she stick to the principles that were established after the 2012 crisis or bend them to prevent another crisis for the circulatory system of Europe’s third-largest and most indebted economy (in absolute terms)? The solution seems to be to do both.

The new deal will create not just one bad bank but a new system in which the government helps Italian banks bundle their loans into new parcels for sale on the open market. A key question during negotiations was whether the Italian government would be allowed to subsidize these bundles with taxpayer money to make them more attractive to potential buyers. This is an important consideration because the riskiness of these loans gives them a rather low market value, meaning that if Italian banks were to sell them at market rates they would have to absorb the loss, further damaging their shaky balance sheets. The new system, to be known as garanzia sulla cartolarizzazione delle sofferenze (or GACS for short), is a compromise in which the government plays a role in the bundling and selling and is allowed to use a 40 billion-euro ($44 billion) fund to guarantee the least risky parts of the bundled loans. The loans, however, will be sold at market prices.

That a deal was made, alongside the creation of a bad bank mechanism — however loosely that is defined — enables the two sides to trumpet the arrangement as a success. That the loans will still be sold at market prices lets Vestager claim that she did not waver on the EU ban on state aid. Thus, both sides are able to present the deal as a sort of miracle cure for Italian banks. But that is unrealistic. Difficult negotiations are made difficult because one side or both have to give up something for a deal to be struck. If a deal can be made without concession, it doesn’t take a year to come about. However, there is the possibility that the loser will be neither the banks nor the European Union but the market players who have been selling Italian bank shares. If the negotiations arrived at a compromise that hurts neither party yet satisfies the "audience" — those market players, speculators and observers — it may be the ideal situation for Brussels and Italy.

At first sight, this deal appears to change little. Before the agreement, Italian banks had been able to sell their nonperforming loans on the open market; the problem was that market prices were too low for them to do so. Now that an agreement has been made, they are still selling loans at the same prices. Only now the Italian government is guaranteeing the safest loans, which the banks could probably have received a reasonable price for anyway. This leaves the riskier ones unaffected. The hope appears to be that by making safer loans more attractive it will whet the appetites of investors, who will then be more willing to buy the riskier debt. If this is the case, the deal looks more like a showpiece for the markets — a reassuring meeting and a confident announcement that the problem is solved. Nevertheless, the performance appears to be working. After the news broke, shares for Monte dei Paschi, Italy’s most troubled bank, rose 4.5 percent, and Italian bond yields hit eight-week lows. This was slightly tempered later on, however, as the Italian banking sector index fell 2 percent by midday.

As we wrote last week, part of Italy’s problem has been timing. It caught global market attention just as uncertainty prevailed. Tuesday’s deal may not have greatly changed the actual situation, but it does have the potential to change market sentiment. This change of feeling is not guaranteed to last, however, and such showpieces tend to become less effective as details are scrutinized more closely. There are also more details yet to emerge, and it could still transpire that Vestager is the loser of the deal if the Italian government is able to vigorously intercede in the sale of nonperforming loans, undermining the new EU principles in the process. But as things stand, with both sides appearing to have won, the loser of the negotiations would seem to be the investors themselves. If that is the case, there is a strong possibility that the market will soon catch on, and it wouldn’t take long for incredulity to turn to fury. Under such circumstances, Vestager and Padoan would have little choice but to rush back to the negotiating table. And this time around, one or both of them would be forced to concede something that really mattered.

https://www.stratfor.com/geopolitical-diary/italys-bad-bank-deal

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Serbien

moderated by Srecko Velimirovic

EU Delegation hopes Russia will not undermine Serbia’s EU path

http://www.tanjug.rs/full-view_en.aspx?izb=226894

Serbia has no intention of joining Russia sanctions

http://www.tanjug.rs/full-view_en.aspx?izb=227011

Juncker and Vucic discussed last week the migrant crisis

http://www.tanjug.rs/full-view_en.aspx?izb=226455

Serbia to keep pursuing constructive regional policy

http://www.tanjug.rs/full-view_en.aspx?izb=227133

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Politico:Clinton White House passed up pardon for Chelsea’s father-in-law

Ed Mezvinsky asked Bill Clinton to spare him ‚a long prison term,‘ according to newly revealed records.

By Josh Gerstein – 02/03/16 05:24 AM EST

Encounters between potential in-laws can often be awkward, but this untold chapter in Clinton family history may take the cake.

President Bill Clinton once had the opportunity to save his daughter’s future father-in-law from spending five years behind bars, according to never-before-revealed White House files. But the asked-for reprieve never came.

In the waning days of Clinton’s presidency, federal prosecutors and the FBI were bearing down on former Rep. Ed Mezvinsky (D-Iowa), who had fallen for a series of Ponzi schemes and pulled in nearly $10 million money from other investors to cover his losses.

Mezvinsky would not be formally indicted until March of 2001, but records released last week by the Clinton Presidential Library in Little Rock and obtained by POLITICO show Mezvinsky and his then-wife — ex-Rep. Marjorie Margolies-Mezvinsky (D-Pa.) — pleaded with the former president for a presidential pardon to head off the looming federal case.

"I have real reason to believe that without a pardon, charges will be brought against me in the very near future, and that I will then be faced with a long and difficult process of defending myself, and ultimately the prospect of a long prison term," Mezvinsky wrote. "I am humbled and saddened at having sullied my reputation and that of my family, and having disappointed the many honorable and decent people who had confidence in me. I am prepared to try to make amends as best I can."

Margolies-Mezvinsky’s missive to the president discusses her husband’s history of service in politics and for the community, but is vague about the nature of his alleged wrongdoing.

"He is a man who in public service and his private life has worked tirelessly as an advocate for the poor, the underprivileged, and underserved. But he is also a man who now finds himself in a precarious position, where a federal investigation has already blemished a stellar career, a life of high-minded public service dedication to humanitarian causes. It is for this reason that I write personally to you to seek clemency for Ed," Margolies-Mezvinsky wrote.

It is unclear whether Clinton ever saw the letters, which turned up in the files of the White House’s counsel’s office.

Asked about the letters, Margolies-Mezvinsky — now Chelsea Clinton’s mother-in-law — said this week that she doesn’t believe the Clinton White House ever acted on the request.

"No action was taken … which is a matter of public record. To my knowledge, we never received any reply from the White House," the former congresswoman said in an email to POLITICO.

A spokesman for the former president did not reply to a query Tuesday about whether the pardon request ever reached him.

Chelsea Clinton and the Mezvinskys‘ son Marc married in 2010. However, their families had been friendly since at least the early 1990s. The future couple first met in 1993 when both families were attending the prestigious annual Renaissance Weekend gathering in South Carolina.

When Chelsea was touring colleges in 1997, Marc Mezvinsky, then a sophomore at Stanford, showed her around the campus. Their friendship developed over their college years, though they didn’t start formally dating until she moved to New York after graduation.

Congresswoman Margolies-Mezvinsky achieved national prominence in 1993 by providing what was seen as the critical vote for President Bill Clinton’s budget and tax bill. Republicans chanted, "Good-bye, Margie," as she cast the high-profile vote.

Margolies-Mezvinsky’s first term indeed turned out to be her last. Despite significant efforts by Clinton to rescue her re-election bid, she lost to her GOP opponent by a 4 percent margin.

Bill Clinton has always seemed indebted to Margolies-Mezvinsky for the sacrifice she made. "I really didn’t want Margolies-Mezvinsky to have to vote with us," the former president wrote in his 2004 memoir. "She was one of the very few Democrats who represented a district with more constituents who’d get tax hikes than tax cuts, and in her campaign she’d promised not to vote for any tax increases … She had earned an honored place in history, with a vote she shouldn’t have had to cast."

After Mezvinsky’s defeat in 1994, Clinton named her as deputy chair of the U.S. delegation to the U.N. World Conference on Women in Beijing. First Lady Hillary Clinton wound up serving as head of the delegation, which made waves in China for its assertiveness.

The Clintons remained close to Margolies-Mezvinsky as she ran unsuccessfully for Lieutenant Governor of Pennsylvania in 1998 and for the U.S. House again in 2000. She dropped out of the latter race after filing for bankruptcy in the wake of the financial chaos resulting from her husband’s bizarre investment schemes, including one classic swindle that has been run out of Nigeria for decades. (In 2014, she again mounted a bid for Congress, but came up short in the Democratic primary despite strong backing from the former first couple.)

In the letters about the potential pardon, there are hints that Margolies-Mezvinsky was closer to the president than her husband was. His letter is signed, "Edward Mezvinsky," while hers is signed, simply, "Marjorie."

Whatever President Clinton’s inclinations towards the family, Mezvinsky’s pardon request may have simply come too late. A 22-page White House summary of pending pardon and commutation requests in early December 2000 makes no mention of Mezvinsky.

The pardon request reviewed by POLITICO is marked as received on January 12, 2001. The date, just eight days before Clinton left office, has been underlined.

Former White House officials say the pardon process descended into a degree of chaos in those final days. In his final hours in office, Clinton issued 176 pardons and commutations. Some went to individuals close to Clinton, like his brother Roger, and to people targeted in independent counsel investigations the president viewed as unfair. The most controversial pardons went to financiers Marc Rich and Pincus Green, who had been living in Switzerland for years to avoid facing a federal indictment.

Some of those pardons and commutations were issued even though individuals had never applied through the official process at the Justice Department.

It’s unclear whether Mezvinsky ever did so, but such an application would have been futile. Since he hadn’t even been charged, the Justice Department would have summarily rejected his application.

Clinton ultimately issued just one pre-trial pardon, blocking a prosecution of former CIA Director John Deutch for having classified information on his home computer. Deutch’s pardon also came on Clinton’s last day as president.

A federal prosecutor said in a 2007 interview that as Ed Mezvinsky swindled investors in the late 1990s he sometimes used his association with the Clintons as a talking point.

“When he thought it would help, he would call and say, ‘I’m spending the weekend with the Clintons,’ ” Robert Zauzmer told the New York Times.

The grand jury indictment filed in 2001 is a bit more vague, but hints at similar conduct. "Mezvinsky succeeded in defrauding others and gaining their confidence in part by stressing his lengthy experience in national and international affairs, and his acquaintance with prominent political figures," the indictment says.

Zauzmer told POLITICO this week that he was unaware of Mezvinsky’s pre-trial pardon bid. "It wasn’t brought to my attention," the prosecutor said. "I probably would not have any comment on it, even if it had been."

Mezvinsky’s pardon request parallels an argument he attempted to make after his indictment: namely that his judgment was clouded by his extensive use of the anti-Malarial drug Lariam while traveling to Africa.

"The long-term cognitive effects of this medication were devastating in how they affected my cognitive ability to absorb and evaluate information in a formal way and how I exercised my reasoning powers" he wrote to President Clinton.

In court, Mezvinsky’s lawyers argued that his exposure to the medicine and his affliction with biploar disorder so affected his thinking that he should be allowed to mount a "mental health defense." U.S. District Court Judge Stewart Dalzell, an appointee of President George H.W. Bush, rejected that effort.

"No expert on Mezvinsky’s behalf was in a position to say that at any given time during the twelve-year history of the alleged schemes to defraud that Mezvinsky did not have a capacity to deceive," the judge wrote. "People like Mezvinsky are not out of touch with reality."

A few months later, Mezvinsky pled guilty.

"Ed had a very, very bona fide psychiatric condition," said Bryant Welch, an attorney and psychologist on the defense team. "I had the head of Harvard bipolar disorder clinic and the head of the Penn bipolar disorder clinic who had both evaluated it and confirmed it and the judge just disallowed the defense."

Margolies -Mezvinsky’s decision to back her then-husband’s request for a pardon seems generous in light of some of the facts of the case. Her elderly mother, Mildred Margolies, was one of those Mezvinsky was eventually charged with swindling. The indictment claims he transferred more than $300,000 from his mother-in-law’s brokerage accounts for his own use.

The Mezvinskys divorced in 2007 while he was serving his sentence. Some of the restitution he owes remains unpaid.

Efforts to reach Ed Mezvinsky for comment were unsuccessful. An attorney for the 79-year-old ex-congressman, Stephen LaCheen, said he was not aware of any pre-trial pardon request.

Press reports said Mezvinsky planned to attend the wedding of his son Marc to Chelsea Clinton in 2010. However, Margolies—who dropped her former husband’s name after the divorce—reportedly walked her son down the aisle alone at the wedding. In an interview just before the event, the groom’s father said he was trying to put his legal troubles behind him.

"It was a terrible time, and I was punished for that and I respect that and I accept responsibility for what happened, and now I’m trying to move on," Ed Mezvinsky told the TV show "Inside Edition."

http://www.politico.com/story/2016/02/clinton-bill-hillary-chelsea-mezvinsky-pardon-218632

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