Monday, September 17, 2012

Europe on the Mend

Dutch national elections do not normally excite much interest outside of Europe, but on this occasion they were closely watched and the outcome hailed as a sign that the continent is at last coming to grips with its four-year economic and political crisis.

With all votes counted, Prime Minister Mark Rutte was returned with an increased number of seats for his centre-right Liberal Party. While Mr Rutte talked tough during the campaign when it came to more bailouts for the tottering Greek economy, he is certainly in favour of keeping the Netherlands in the Eurozone and the European Union itself.

The man who campaigned on an exit from both, Geert Wilders, of the far right Freedom Party, took something of   bath from the electorate, losing nine seats, and can now expect to be left out of any governing coalition. His views are widely considered to have been far too radical for the conservative Dutch and he has been punished accordingly.

So is this the first indication that Europe generally is turning the corner? Not in itself perhaps, but the signs are increasingly encouraging. Germany’s Constitutional Court has declared legal a move by Chancellor Angela Merkel to make contributions to the European Stability Mechanism, a permanent bailout fund that will be able to put out small economic fires before they become all-consuming blazes.

At the same time a decision by the European Central Bank to re-start its bond-buying program had the required effect of lowing interest rates on Spanish and Italian bonds.

Europe has a long way to go, but the so-called experts who grabbed headlines a few weeks back with their warnings of an imminent collapse of the euro and perhaps the EU itself have gone strangely silent.

The world needs a strong and prosperous EU, one that can play its full part in world affairs and especially in a surging Africa where its traditional ties, dating back to colonial days, can do much to counter the growing influence of China.

As billionaire business investor George Soros said during a recent interview with the International Herald Tribune newspaper, the EU is about more than deficits, currencies and bonds. Europe is also a political and moral idea – one worth preserving.  

Thursday, September 13, 2012

Missed chances on the Korean peninsula

It seems the West has lost the chance to ease North Korea out of its Stalinist straightjacket.

Earlier this year I wrote an article in On Line Opinion suggesting that with the accession of Kim Jong-un to the leadership there might open a window of opportunity to promote reform

This was not based on any fanciful notion Kim, with his background of study in Switzerland and his apparent liking for Walt Disney characters, was going to lead a movement out of the shadows, but that there might be others in the Pyongyang who could be encouraged to do so.

The theory was that if Kim, still in his late 20s, became entrenched in power, it was likely to be another 40 years at least before another change in leadership, something that might exercise the minds of others in the North Korean hierarchy who would like to see a move towards a more accommodating stance to the outside world in their lifetimes.

However, it appears policymakers in Western capitals have put too much faith in Kim himself – that the fact he likes fast food outlets, mini-skirts and American basketball meant he was ready to open North Korea to the world and perhaps even abandon his reckless policy of intimidation against his closest neighbours.

It was quite obvious earlier this year when North Korea negotiated a food-for-nuclear-missile-freeze with the United States and then almost immediately launched a test missile that it was business as usual. The Obama Administration immediately cancelled the deal perpetuating the one-step-forward-one-step-back situation that has existed for decades.  

So if the opportunity for some quiet undermining of Kim’s nascent regime has been lost, what next? The signs are that South Korea is losing patience with the continual provocations from the North which in recent times has torpedoed a South Korean navy ship and shelled an island with the loss of civilian and military lives.

The South Korean command structure is outraged by these acts and wants a re-write of the rules of engagement to allow a more aggressive reaction than occurred after these incidents. An election in December is quite likely to result in an administration more sympathetic to these attitudes. The possibility of an all-out war cannot be discounted.

In the meantime floods and famine continue to ravage North Korea, food shortages are worsening, and Kim perpetuates the methods employed by his father and grandfather of removing anyone who is a threat, or a perceived threat, to his regime.

There may yet be people within the palace guard who are sickened by these antics and are prepared to act, but the chances of this happening are lessening by the day.

Sunday, September 9, 2012

Gas finds put spotlight on an old crisis

Cyprus, the little problem in the eastern Mediterranean that the world would rather forget, surfaced again recently in a dispute over who controls potentially rich natural gas fields offshore from the divided island.

That division resulted from an invasion by Turkish forces 38 years ago in support of the Turkish minority in Cyprus and to stop a possible attempt to unite the island with Greece. A ceasefire was negotiated that left Turkey in control of roughly one third of the country and there, despite numerous attempts at a resolution, the situation has rested.

Complications have been created by the proclamation of the Republic of Northern Cyprus – an entity recognised only by Turkey - and Cyprus’ entry into the European Union. Brussels has made it clear that any progress on Turkey’s own long held ambition for EU membership is contingent on a settlement on Cyprus. For the Government in Nicosia, that settlement must include Turkish withdrawal and reunification, albeit with guarantees and some autonomy for the Turkish Cypriots.

Any resolution would also have to take into account demands by the Greek Cypriots who fled their homes in the north that they recover their property. The Government of Northern Cyprus has made a good income from selling these dwellings to wealthy Europeans as holiday and retirement homes. A settlement will depend on a ruling of who owns what and what compensation should be paid.

Opinion is divided over whether the latest gas finds will bring the two sides together or exacerbate tensions. An American company, Noble Energy, based in Houston, is leading the exploration along with Israeli partners. So far the consortium has been dealing only with the Greek Cypriot Government which considers it has the sole right to issue drilling licences

This is now contested by the northerners, backed by Turkey, who say they also have a claim on the waters surrounding the island. They have demanded the consortium stop drilling and that Nicosia put a freeze on issuing licences.

The United Nations, which has manned a buffer zone between the two parties since 1974 is hailing the gas discoveries as a wealth generator that could help solve the compensation problem and lead to reunification. Less optimistic observers see them as just another resource to be squabbled over with the United States and Israel now also involved. Only time will tell who is right.  

Saturday, September 1, 2012

When 70 is still too young to retire

Those of us of a certain age are well aware that the traditional retirement age of 65 is often no longer an option thanks to the global financial crisis and the likelihood many of us will live into our 80s and beyond. However, the conventional wisdom was that another few years of full-time earning would repair the damage and at least allow us to enjoy life by the time we reached 70.

A new study in the United States claims that even this later retirement date will be optimistic for many, especially those in low-paid jobs.

The Employment Benefit Research Institute, using 2007 as a benchmark, estimates that no more than 52 per cent of people aged 50 to 59 then would be able to have an adequate retirement income by the time they reached 65.

But this figure rose only to 64 per cent if they worked on until 70.

Of course these figures apply to the US, which has a different (and many would say highly inferior) superannuation regime to the compulsory superannuation system that operates in Australia.

We should be thankful for the fact that compulsory super exists in Australia. It would have been even better had the Howard Government not canned a contribution rise from nine to 10 per cent of income when it took office in 1996 and there is a compelling case for that figure to be raised to 12 per cent now.