In Our Economic “New Normal” Chronic Under Performance Is OK

WASHINGTON – The most distressing outcome of the deep global recession of 2008-2009, and subsequent anemic recovery, is that now we have become accustomed to quasi-stagnation as the “new normal”. Indeed, feeble economic growth and historically high unemployment are considered ok. Not optimal, but tolerable.

4% second quarter growth

In the US we have saluted the second quarter (April-May-June) 4% GDP growth as some kind of historic turnaround, evidence that we are finally seeing a real American come back. Of course, 4% GDP growth is very good.

However, if you put this statistic in context, the overall picture is not that great. In the first  quarter, GDP was actually negative: -2%. So, if you average the two quarters and look at GDP growth for the first 6 months of 2014, you get +1%. Hardly spectacular.

Of course, if we could continue on a 4%, or at least 3% growth quarter after quarter, this would be an entirely different story. This would mean that we have reverted to the American 3% growth post war average.

America used to have a 3% growth

To most people all this may not mean much. However, the difference between 2% and 3% growth, year after year, is really significant. It means an economy that grows 30% less than it could, year after year.

You can understand that there is a huge compounded effect on profits, capital formation, investments, jobs creation, consumption and what not.

We can and should do better

But how do we go back to 3%? The most fundamental problem right now is recreating a pro-growth consensus. In other words, we need to recognize that we have a serious problem, and that it is entirely within our powers to fix it.

“No, America, 2% growth is not OK.”

Yes, we can go back to 3%. Yes, we have to look at what kind of public policies favor growth, and finally reach a political agreement about implementing the most suitable ones.

Getting used to mediocrity is psychologically dangerous, because it discourages new thinking and the generation of fresh ideas about what may help promote growth.

Mediocrity or worse the new normal in Europe

Do you want a cogent example of mediocrity or worse becoming the “new normal”? Well, look at Italy, the third largest economy within the Eurozone.

Today’s economic headline in Italy is that there is really good news about unemployment. Yes, unemployment in June was down, compared with May.

When bad is good

And how good are these numbers? Well, here we go. In June 2014 unemployment went down to (only?) 12.3%, while in May it was 12.6%. Youth unemployment is unfortunately a “lagging indicator”. Sadly it is still at 43.7%. (In the South of Italy it is actually about 60%).

But, overall, given this downward unemployment trend, Italy’s prospects have improved, right? And if you take into account that overall Eurozone unemployment has also declined, things look brighter for Europe as a whole. In fact, Eurozone unemployment has gone down to 11.5% in June, from 11.6% in May. Think about it.

So, cheer up! Unemployment in the Eurozone is on it way down, and in Italy it went down by a fantastic 0.3%, so that now it is only 12.3%.

Decline

Of course, nobody in Europe is really that happy contemplating economic stagnation and high unemployment. But since most Europeans in practice have accepted this dismal state of affairs as a permanent economic change, there is a sense of resignation. “This is how the economy is. Nothing that we can do about it”.

Bottom line: the Europeans have accepted slow but steady economic decline as an unstoppable historic trend.

America: focus on welfare programs, not on growth

Here in America, while our numbers compared with Europe’s are infinitely better, we have become accustomed to the new normal of chronic under performance.

Policy-makers are focused on beefing up social programs aimed at supporting those who have been left behind by a weaker economy, as opposed to ways to promote growth.

And this is a truly dangerous shift. The focus should be on devising more effective ways to help the economy. After all, by far the best social program we can come up with is a decent job for the millions who are seeking one.

We need to believe

However, more imaginative pro-growth policies can be hatched only by leaders who really believe that it is totally up to us to improve our economic eco-system, and that this is doable.

If we have given up, if we really believe that here in America 2% growth is ok and, that 6% unemployment is fine, then we are on our way to a Europe-like destiny.

 




After The Sanctions, Will Putin Blink?

WASHINGTON – America and the European Union finally came up with serious economic sanctions against Russia, as a way to force Putin to reconsider his critical support for the rebels in Eastern Ukraine.

Will Putin blink?

The question now is: “Will Putin blink?”  Will Putin conclude that, since the West is getting serious about inflicting real economic damage to Russia, may be it is time to stop this Ukraine adventure, drop the rebels, and get back to business as usual with Washington and Brussels?

Honestly I do not know. I do know that, if Russia decided to prolong this conflict, it could do so. Russia has a bigger army and more resources already deployed just across the border with Ukraine.

The cost of continuing this war

However, in order to prevail, Russia would have to show its hand. Until now it managed to obfuscate its role by sending hardware and Russian agents across the border, while consistently denying any direct involvement in the civil war.

But this level of engagement has proven insufficient to win. Contrary to most prognostications, the Ukrainian armed forces are prevailing against the rebels, while world opinion condemns Russia’s support for the secessionists.

Real sanctions

Now, after the Malaysia Airlines disaster, Europe seems to have found the resolve for enacting real, as opposed to symbolic, economic sanctions against Russia.

In conjunction with similar moves just announced by President Obama, this new sanctions regime may begin to hurt Russia. It will certainly encourage more capital flight, while strongly discouraging new foreign investments.

The natural gas issue

Sure enough, sanctions can hurt both ways. Everybody knows that Europe needs Russian natural gas. On the other hand, Russia needs the cash generated by the sale of its gas to Europe. Interrupting sales to Europe in retaliation for the sanctions will hurt both sides.

The open question is: “Which side is more fragile?” The Russians who needs cash derived from gas sales to pay for all the imported goods they need? Or the Europeans who do not want to face power shortages this coming winter?

This is murky. However, to the extent that Europe will not blink if and when the sanctions imposed on Russia begin to hurt at home, it is possible that Russia will reconsider its ill-advised Ukraine adventure and back off.

Putin is an opportunist

I for one never believed the story that Putin is animated by a grandiose design to reconstitute a “Greater Russia” and that he will not relent until he fully accomplished his goal. I see Putin as a shrewd opportunist. Clearly he wanted to bring an independent Ukraine back into Russia’s orbit. That plan failed, unexpectedly and in a rather humiliating way.

But Putin saw the state of chaos in Kiev as a golden opportunity for grabbing Crimea. And he dis so, swiftly and without firing a single shot. Remarkable success. But that was relatively easy, given the generally pro-Russian sentiments shared by the Crimeans, most of them ethnic Russians.

Eastern Ukraine was going to be a bit more complicated. However, Putin decided to try nonetheless. Now he is in a difficult situation. His ethnic Russian rebels are not winning, while world public opinion, after the Malaysia Airlines disaster, has turned against Russia, because it is obvious that the missile used to shoot down the civilian airliner was provided by Russia.

Where to now?

So, where to know? Putin may reconfirm his penchant for reckless adventure by deciding that Obama and the EU are just bluffing. Whatever they say now, deep down they do not have the will to keep the sanctions going.  And so he may decide to double down and try to win the war he started in Eastern Ukraine, come what may.

Or he may decide that this is getting a bit too expensive, and that gaining control over a chunk of Eastern Ukraine is not worth all this trouble.

Costly victory for Ukraine

Having said all that, even assuming that Ukraine wins on the ground, this way re-establishing full sovereignty over its entire territory, (minus Crimea I would add), this will be an extremely expensive victory. Ukraine is totally broke. This long war can be financed only by going deeper into debt.

Therefore, at the end of all this, even if he gave up the idea of controlling a piece of Ukraine, Putin may still win something important. Consider this. With the secession he inspired and funded, Putin managed to turn already troubled Ukraine into an economic basket case.

No alternative model

And the West will have to pay for reconstruction and economic revitalization. Therefore, no way that Ukraine can become a vibrant, west-leaning economic power any time soon. No way that a prosperous and self-confident Ukraine will be able to create an alternative model to authoritarian Russia, something that could trigger the spreading of dangerous ideas about reform and greater freedom within Russia itself.

After all, who wants to emulate a semi-bankrupt state?

 




American Exports Cannot Replace Russian Gas To Europe

WASHINGTON – America’s ability to exploit and use abundant domestic energy –shale oil and gas– has to be celebrated. Energy self sufficiency –now a fact in natural gas and a reachable goal (when combined with imports from Canada and Mexico) in oil– is the best economic news we have had in at least a decade.

America exporting natural gas? 

That said, at least in the short-term, America’s ability to alter energy flows to Europe through the export of our own natural gas is negligible. The notion that US exports would be able to replace all or most of the natural gas that Europe imports from Russia is a mere fantasy.

Therefore it is really surprising to read in a WSJ op-ed by Senators John Hoeven and John McCain, (Putting America’s Energy Leverage to Use, July 29, 2014), that: “Today the US has the leverage to liberate our allies [in Europe] from Russia’s stranglehold on the European natural-gas market”.

American exports cannot replace Russian gas

To put it mildly, this is really a stretch. In fact, it is a fantasy. The US has no such capabilities. Sure enough, as the two Senators argue, the US could produce even more shale oil and gas. Through new legislation they are co-sponsoring, it could be possible to streamline regulations in order to drill more wells in a shorter period of time. It could be possible to expedite the vetting process necessary to authorize the construction of additional Liquefied Natural Gas (LNG) terminals, so that US produced natural gas could be exported. All this is possible.

And there is no doubt that, in the long run, the addition of US natural gas exports to total energy supplies would alter global supply and demand dynamics, therefore improving Europe’s prospects by creating additional sources that could be tapped, as opposed to being forced to buy Russian gas, simply because this is the only game in town.

Europe’s needs

However, the fact is that Europe’s energy needs are colossal. Even if we did  –in record time– all the things that the two Senators recommend, a few years down the line America would be able to supply only a modest percentage of what Europe needs. In other words, we have no way to create –today, or in the near term– an alternative to Russian gas.

Energy policy coordination

Sure enough, if we had a solid transatlantic energy plan (the two Senators support this) that would include new supplies from America, a vigorous European push (aided by US know how) to develop the Old Continent’s substantial shale gas reserves, plus additional imports from Africa, Azerbaijan and other sources, then it would be possible, may be in a decade or more, to create a viable alternative to Russian gas for Europe.

But to say that if America would quickly build a few LNG terminals, then we could ship to Europe all the gas it needs is just not true.

Best export markets in Asia, not Europe

Besides, we have to consider that the most lucrative markets for future US gas exports are in Asia, (where natural gas is much more expensive), and not in Europe. Once the LNG terminals are built, unless McCain and Hoeven plan to have a legal mandate that will force companies to sell to Europe, US LNG exports would go where prices are higher, and that is to Asia.

Therefore, this whole idea that we should push for additional US production so that we can sell to Europe all the gas it needs just does not make a lot of sense.

Use LNG as transportation fuel

There may be other good reasons for streamlining permits and regulations so that it will be easier to bring to market abundant US shale gas supplies.

I for one strongly support the idea pushed by T. Boone Pickens (www.pickensplan.com) of using domestic and relatively cheap US natural gas as transportation fuel, especially for heavy trucks. LNG for trucks is a cost-effective alternative to much more expensive diesel made with imported oil.

However, the idea of boosting US natural gas production so that we can supply Europe all the energy it needs is a dream.

 




Israel and Palestine: Mutually Exclusive Interpretations, Peace Impossible

WASHINGTON – Sadly, there is a hopeless circularity in the reasons produced by both sides for the never-ending Israeli-Palestinian conflict. Regarding the current invasion of Gaza, with all the accompanying misery for civilians trapped in the crossfire, Israel argues that it is acting in self-defense, in order to stop Hamas rocket attacks and the terror group use of sophisticated tunnels to infiltrate Israel.

Palestinians perennially aggrieved

The Palestinians, even the supposedly moderate and reasonable leaders from the West Bank paraded on western TV stations to make their case, essentially tell us that we should give Hamas a pass.

Case in point, Dr. Hanan Ashrawi, a Christian Palestinian, with a Ph.D. in medieval and comparative literature from the University of Virginia, repeated the same story during a recent interview on Fox TV.

it is all about the Israeli occupation

At the source of all the problems, including Palestinian violence, you will always find Israeli oppression, she argued. She would not say openly that Hamas is justified in launching rocket attacks against Israeli civilians. But she did say that at the root of any and all Palestinian reactions, including terrorism, you will find the Israeli inhumane occupation. End the occupation, and the violence will also end.

Bottom line: the Palestinians are a perennially aggrieved people, treated as second class citizens by the brutal Israelis. If Hamas engages in terror tactics, these are caused by Israel’s state terrorism.

Terror attacks are the problem

On the other side of the divide, the Israelis gloss over the occupation and its effects on the Palestinians and focus only on the threat represented by indiscriminate attacks perpetrated by Hamas.

So, Israel justifiably reacts to the current violence. Hamas, according to the official Palestinian narrative, reacts to perpetual violence, against which all means are justified.

The two positions are well entrenched. I doubt that they can be replaced by a more constructive approach.

The settlements

Related to all this, there are the Israeli settlements in the occupied territories. Israel may consider them as insurance, as a way to expand its extremely thin defense perimeter, if and when there will be a real Palestinian state.

The Palestinians see the settlements as an obvious sign of Israeli bad faith. How can you talk about recognizing a Palestinian state when you are slowly but systematically chipping away at Palestinian territory? And even in supposedly “free” Gaza, they claim that the local Palestinians live in a de facto state of permanent siege, with Israel controlling what goes in and out.

Land for Peace?

In the end, here is the depressing scenario. The Israelis do not trust that there will ever be a truly peaceful Palestine that will see to it that no terror threat will originate from within its territory.

Trust Israel?

The Palestinians, including the highly educated and articulate Dr. Ashrawi, do not believe that the Israelis will ever treat them as equals, with the respect and deference that this status would entail.

Until this frame of mind changes, on both sides, this old conflict will continue.




No Peace Until Hamas Rules Gaza

WASHINGTON – In a recent editorial, (Stop the rockets, but lift the siege, July 20th, 2014), The Economist provides  thoughtful suggestions about how to end the current Israeli invasion of Gaza, while creating the foundations for serious negotiations leading to a final settlement of the perennial conflict between Israel and the Palestinians.

What about Hamas?

What I find baffling, however, is that there is nothing in this piece about Hamas radical intransigence, and about its refusal to finally recognize Israel’s right to exist.

I fully appreciate that there are equally intransigent factions within Israel that want to hang on the occupied territories, because they believe that the whole of Palestine is part of the Promised Land.

Israeli fundamentalists are a real obstacle to serious negotiations, that is negotiations aimed at reaching a final, equitable and sustainable peace agreement.

Israeli intransigence is the problem

Still, to say, as The Economist does, that the only obstacle to peace “stems fundamentally from the refusal of Israel to negotiate in good faith to let the Palestinians have a proper state encompassing both Gaza and the West bank” is a huge misrepresentation of reality.

While it is proper to question Israel’s good faith and real intentions, I see nothing in this analysis and list of recommendations about the role of Hamas. The Economist says only that, in order to move forward towards peace, “Hamas must promise not to fire its rockets into Israel”. That’s it?

Stop launching rockets

Let me say that this is a ridiculously low bar. Based on this, if Hamas, for the time being, stops launching rockets –as opposed to a solemn, public pledge to give up all terror attacks and all violence, especially violence aimed at Israeli civilians, while recognizing Israel’s right to exist–  the organization is immediately recognized as a legitimate political entity that should be fully engaged in future negotiations?

And why does Hamas have all these rockets? And why did Hamas use its limited financial resources to construct a vast network of tunnels reaching into Israel? And –most fundamentally– is it a good idea to negotiate with a counterpart that is unwilling to recognize Israel’s right to exist?

Not to mention the destructive role played by outside parties in the rest of the Arab world, eager and willing to fund and supply Hamas knowing full well how their aid will be used.

Silence on Hamas betrays an anti-Israel bias

These are well-known issues. But, according to The Economist, they do not play any role. Just get Hamas to promise that it will stop attacking Israel, (for how long? A month? A year?), and all will be well.

This silence on Hamas’ intransigence, stemming as we all know from deeply rooted ideological biases, is completely disingenuous, betraying an anti-Israel bias.

This old conflict between Israel and the Palestinians is difficult enough. There will be no meaningful steps towards its resolution if we purposely ignore the actual role played by key actors.




White House: Putin “Culpable” For Malaysia Airlines Disaster

WASHINGTON“We have concluded that Vladimir Putin and the Russians are culpable for this tragedy”. This is how White House press secretary Josh Earnest described Putin’s role in the shooting down of the Malaysia Airlines Boeing 777 that was flying over Eastern Ukraine.

Putin is culpable

Well, this is pretty strong language.

The White House spokesman did not just say that “Russia”, or “the Russian Government” are culpable. He did say “Vladimir Putin” is culpable. In other words, Putin is deemed to be personally responsible for the death of almost 300 passengers and crew who were on that plane.

It does not matter who pulled the trigger

And there is more. Earnest added that: “Whether it is the Russians themselves who pulled the trigger or Russian separatists trained by Russians, it’s all the same; it all goes back, ultimately, to Vladimir Putin”.

So, there you have it. No more hesitation. No more waiting for conclusive evidence (witnesses, documents, recorded phone conversations) that would stand in an American or international court of justice. Here is the story. Putin is in charge. This is his war. Therefore he is culpable for what happened. Period.

Pentagon describing Russian supplies to the rebels

And now look at this unusually strong language, (remember, this is coming from the White House), in conjunction with other allegations coming from Colonel Warren, a Pentagon spokesman: “We know that they [The Russians] have transferred [to Ukraine] tanks, artillery, multiple lunch rocket systems. We have indications that the Russians intend to supply heavier and more sophisticated multiple launch rocket systems in the near future…We believe that they are able to transfer this equipment at any time, at any moment”.

Straight talk

So, the US Government, after having already told us that the Russians are firing with their own artillery across the border into Ukraine –an act of war, according to any definition– now say plainly that Russia is giving the separatists heavy equipment, while Russia’s president is personally responsible for the shooting down of the Malaysia Airlines aircraft.

I applaud this clarity. I really do. Finally the Obama administration is talking straight.

And, in response, America will…

However, what I do not see is the obvious conclusion. Something like: “Given all this, given this irresponsible behavior on the part of the Russian Federation, the United States Government will do…this, and this…and that….” 

May be there is a major surprise in store. May be Obama is cooking up something really big. I hope so.

But “taking action” would be entirely out of character. And, please, do remember that we are going to have national elections in America at the beginning of November –and that is practically tomorrow.

The notion that America will choose this politically sensitive moment to engage in a major international confrontation with Russia on Ukraine –an issue that most Americans do not even begin to understand, let alone feel strongly about it– looks preposterous.

More empty threats?

But then, if real action is not coming soon, what is the point of using such strong language to describe Russia’s role in this Ukraine mess?

Unless America is prepared to take serious countermeasures against Russia –countermeasures that really, really hurt– all this name calling reminds me of many empty threats issued in the past. (Remember “Assad has to go?”).

I hope to be wrong; but I just do not see any effort to prepare the Nation for a major confrontation.

Well, if it is indeed so, if in the end there is no will to seriously engage, then it would be more prudent to be quiet.




Israel Will Be Forced To Stop Its Offensive Against Hamas

WASHINGTON – Predictably, Israel’s offensive against Hamas in the Gaza strip has been loudly condemned by international public opinion. The news coverage is only about the large number of Palestinian civilians killed or wounded by Israeli fire. It is about the destruction of homes, schools and hospitals. 

Cruel Israelis

So, there you have it. The cruel Israelis used a pretext to invade Gaza in order to inflict horrible pain on poor and defenseless Palestinians. This is the official, universally accepted narrative; and there is no way of changing it.

To the extent that the world acknowledges that there are Hamas hostile actions against Israel, they are immediately condoned on the basis of the fact that people under perennial military occupation are driven to take desperate counter measures. Yes, Hamas launches a few rockets here and there into Israel. But who wouldn’t, under the circumstances?

The broader context does not matter

Never mind that Israel does not occupy Gaza, having withdrawn from the area years ago. Never mind that Gaza was supposed to be demilitarized. Never mind that the Gaza Palestinian population created the preconditions for this state of permanent warfare with Israel by voting for Hamas, a terror group, (with a political wing), openly committed to the destruction of Israel.

So, given all this, can Israel “win”, now or at any time in the future, against Hamas? I very much doubt it. Victory could be achieved only through the complete delegitimization of Hamas.

Hamas will stay in charge

In other words, the Gaza Palestinians –and the rest of the Arab world– would need to have the strength and the cohesion to say: “Enough. We want to live in peace. To the extent that Gaza is deliberately used as a staging area for rocket assaults against Israel and/or other aggressive actions, we shall never have peace. Hamas, you are out of here. No more money. No more weapons”.

Well, this change of heart would be nice. But I would not count on it. And do not count on Hamas all of a sudden becoming reasonable. Hamas leaders live in their own world in which there is only violence and conflict, until Israel is destroyed.

Israel cannot win

This being the case, Israel cannot win against a determined enemy that is totally embedded among civilians, in a densely populated area. Victory would be possible only through a prolonged and nasty fight that would entail the virtual destruction of Gaza, with thousands and thousands of civilian casualties.

And Israel simply cannot do this, because of the universal condemnation that such a campaign would provoke. (By the way, this is exactly how President Vladimir Putin won his war against the separatists in Chechnya in 2000. He destroyed the province, completely. Its capital, Grozny, was called by the United Nations in 2003 “the most destroyed city on earth”. But the international media did not tell us much about that ruthless campaign that costs thousands of Chechen lives. After all this was “just” a Russian internal matter, right?)

Tactical success, and then back to conflict

In the end, unless Israel wants total international isolation, the most that can be achieved through the current Israeli military invasion of Gaza is a blow to Hamas and the destruction of a few more tunnels that the terror group planned to use to infiltrate Israel.

Once a cease-fire is in place, you can count on Arab friends to resupply Hamas, so that it can start all over again.

 




The World Is In Crisis, But Obama Is Focused On The November Mid-Term Elections

WASHINGTON – If Obama were an American statesman, then he  would get seriously engaged in the foreign crises, from Gaza To the South China Sea, that are now threatening world order. But, in fact, Obama is mostly a politician. Therefore, he focuses only on the unfolding campaign for the mid-term elections and on the issues that will determine how people will vote in November. And international problems –he noted– are very low on the list. Therefore, why worry about them? 

Iraq out of control

As we know, there are plenty of international crises out of control.  Iraq, until recently the primary focus of US foreign and security policies, is almost falling apart, with a chunk of its territory now controlled by Muslim fanatics who may use this vast territory as a launching pad for new international terror operations. Meanwhile, the Kurds in the north of the country are moving towards de facto secession.

Post-Gaddafi Libya is now essentially a failed state. The Syrian civil war continues, with millions of refugees now in Lebanon, Jordan and Turkey. Vienna negotiations notwithstanding, Iran is well on its way to get a nuclear weapons capability.

Russia…and China

There is a serious probability that the Moscow-funded rebellion in Eastern Ukraine may escalate into a full-blown conflict between a weak and poor Ukraine and a much more powerful Russia.

China is flexing its muscles by attempting to establish legal claims on the territorial waters of neighboring states.

Terror groups are destabilizing parts of Nigeria and now Kenya.

Plenty to do for an American President who would want to lead the world.

Obama is focused on the November mid-term elections

But do not count on American leadership. Obama is not a leader. He is a politician mostly worried about the upcoming mid-term elections to be held in November. He has looked at how all these foreign crises poll. And he has noted, with great relief, that foreign crises do not move many votes.

Yes, Americans do say in various polls that Obama is not doing well in managing US foreign policy. But in the same polls they also indicate that they do not want America to get involved in any new conflict, no matter what may be at stake. Most fundamentally, foreign policy is not a key concern; and therefore it is clear that it will not influence how most people will vote in November.

The economy will decide the elections

The issues that people care about, as always, have to do with the economy. We are talking about jobs, financial security, the burden of student loans, health care costs. To the extent that America is doing a little better on the economic front, if your primary concern is the outcome of the November mid-term elections, then things do not look so bad.

Raise money for TV ads

And it is quite obvious that Obama is focused on the elections, not on US world leadership. Therefore, as a true politician, the President is doing his best to improve the chances of the Democratic Party in November by hopping from fund-raiser to fund-raiser across America, with the goal of getting more and more cash for his party.

He knows very well that the elections in most cases will be won or lost by the candidates who will spend more on TV spots. And TV political commercials cost a lot of money. The more money Obama raises, the better the chances for the Democrats to forcefully counter the attacks of Republican challengers.

Smart politician

In other words, Obama is behaving like a smart politician. Most Americans do not even know where Ukraine is. They will not decide how to vote in November on the basis of Obama’s decisive or weak leadership in that crisis.

Yes, all those who wonder about the consequences of America’s passivity on future world stability are genuinely worried. But they are not even a significant minority of likely voters.

Let’s be frank. The average American does not care about who controls Mosul in Iraq, or Donetsk in Ukraine. And, in fairness, it is very difficult to articulate compelling reasons for US engagement in far away crises that, for the time being, do not touch the lives of average Americans.

Most likely voters care about having a job, affordable housing and health care. As I said, on the domestic front, things are getting a bit better in America. And this may give renewed hope to the Democrats, as they are getting ready to fight for the November elections. Hence Obama’s focus on fund-raising events in order to improve his party’s chances to win.

Obama is a good politician, in fact a shrewd politician; but he is not a statesman.

 




“Self-Finlandized” Europe Afraid Of Getting Tough On Russia

WASHINGTON– Way back, during the tense years of the Cold War, some analysts, having noted with concern Europe’s policy to be extra accommodating towards the Soviet Union, coined the expression “self-Finlandization” to describe this self-imposed virtual neutrality.

“Self-Finlandization”, then…

Just like Finland after WWII had deliberately adopted a soft approach towards the Soviet Union in order to keep relations friendly with its mighty neighbor, Western Europe, notwithstanding the NATO shield and American protection, also adopted –without being forced to do so– a soft approach vis-a-vis Moscow.

The goal of a policy of “self-Finlandization” was to assuage the powerful and irascible Soviets, this way reducing the risk of unpleasant confrontations.

…and now

Well, what do you know, now there is no longer a Soviet Union; but we still have Europe adhering to its old “self-Finlandization” policy. Indeed, the Red Army, with its 30 plus armored divisions based in what used to be East Germany, is gone. The Warsaw Pact disappeared. The former “Satellites Countries” of Eastern Europe are now free. They are members of NATO and of the EU. In a word, today’s Russian Federation is a mere shadow of the former Soviet Empire.

But Europe, confronted with the reality of Russian aggression, (Georgia, Crimea, Eastern Ukraine), still behaves like a “self-Finlandized” Continent.

Timid German statements

For example, take this extra mild statement about the Russian engineered crisis in Ukraine, coming from Germany, arguably Europe’s most important power.

“Russia has not done enough to contribute to a de-escalation of the conflict [in Eastern Ukraine]”, said Frank-Walter Steinmeier, Germany’s Foreign Minister, according to an Associated Press report.

“Not done enough”, “contribute to a de-escalation”? Is this really the best way to describe Russia’s essential role in a civil war in Ukraine completely manufactured, funded and actively supported by President Vladimir Putin?

Is this the most accurate way to describe convoys of Russian supplies, armored vehicles, tanks, and surface to air missiles, plus Russian military advisers dispatched to Eastern Ukraine is order to assist the rebels?

Forget about serious sanctions

Well, talk about gentle euphemisms. If there is not even an attempt by mighty Germany to describe the crisis in Ukraine for what it is, you can quickly realize that there is very little enthusiasm for inflicting serious, (as opposed to cosmetic), economic sanctions against Russia, as punishment for such an open violation of the sovereignty of Ukraine.

Too much Russian money

The sad truth is that, even now, after the Malaysia Airlines tragedy, there is no stomach in “self-Finlandized” Europe for getting really tough on Russia.

There is too much Russian money at stake. The wealthy Russians spend lavishly in Western Europe. They buy properties in France, the UK, Spain and Italy. They keep cash in London. Russia buys a lot of German technology. The French have a big contract to supply vessels to the Russian Navy. Not to mention the fear of losing deliveries of precious Russian natural gas, should things get really ugly with Moscow.

Indeed, the EU Foreign Ministers met again in Brussels to discuss sanctions; and they decided to do…well, almost nothing. Another few symbolic gestures against Russia, with the vague promise of doing more, if things do not get better in Ukraine. But nothing serious.

The message to Putin is: “Do not worry about us. Just for show, we shall take a few, harmless, steps. But what we all hope is for this dark cloud to go away as soon as possible, so that we can start doing business as usual with you”.

Baltic states leaders know what’s going on

Only leaders of (previously Soviet) Baltic countries, Latvia, Estonia and Lithuania, have the courage to tell the truth. President Dalia Grybauskaite of Lithuania said plainly that” [Putin] uses nationality as a pretext to conquer territory with military means. That’s exactly what Stalin and Hitler did. Such comparisons are spot on”.

Putin just like Stalin or Hitler? This is strong language.

In an interview on France 24 she also pointed out that EU timidity in its reactions to Russian aggression emboldens Putin. He sees that he has nothing to fear; and therefore he will simply continue with the war in Ukraine.

Unfortunately, the EU has 28 members. And most of them want peace and quiet, whatever the price.

Nothing will come out of the investigation

As for getting to the truth about who did what in relation to the destruction of the Malaysia Airlines Boeing 777 that was shot down with a surface to air missile by the rebels (with or without Russian direct assistance), and crashed on territory held by the rebels in Eastern Ukraine, I would not count on it.

By now, the Russia-supplied missile launchers have disappeared. And so (I imagine) have the crews that actually shot the plane down. And, as we know, the rebels and their Russian friends control the crash site.

Therefore, anybody expecting to have a proper investigation so that we shall find the “smoking gun” that directly links any specific individuals, let alone Russia itself, with this tragedy, is a fool.

 




Can Israel Win Against Hamas?

WASHINGTON – I do believe that Israel’s invasion of Gaza in order to destroy the tunnels that Hamas built as conduits for getting into Israel itself is fully justified.

End game?

That said, I fail to see a successful end game. First of all, Israel will pay a horrendous public relations price for this necessarily messy and bloody military operation.

As we know, Gaza is densely populated. Even with the best of intentions, there is no way to have a major military assault against Hamas positions, while avoiding or minimizing civilian casualties.

And how do you explain to the world that the death of hundreds of Palestinian women and children is really Hamas’ fault, as they purposely hide their facilities and command centers in the midst of the local civilian population?

How do you define victory?

That said, beyond this huge PR liability, how do you define “victory” here? The only real victory would be a defeated and discredited Hamas that will be finally rejected by the Palestinian people.

A real victory would be the end of the double talk and double standards whereby it is OK for Palestinians political leaders to negotiate with Israel, while Palestinian militants keep using terror tactics against the Jewish people. (And the world, mind you, is supposed to accept this modus operandi of negotiations plus terror as “normal”, because –you must understand– people under perennial military occupation will resort to desperate tactics).

Hamas likely to survive

This being the case, I wish Prime Minister Benjamin Netanyahu good luck, but I doubt that this major assault against Hamas will change much.

Destroying all or most of the tunnels built to get into Israel, while degrading Hamas’ missile launching capabilities, may amount to a major tactical victory for Israel.

But, as long as Hamas survives this onslaught, this is still only a tactical victory. Indeed, for the time being, Hamas is supported by other Arab states. This means money, weapons, and more.

Support for Hamas

To the extent that other players in the region continue to believe  that it is a smart idea to keep funding and supplying Hamas militants in Gaza, there will never be an end to this mess.

And funding Hamas is cynically viewed as a cheap way to keep Israel in a constant defensive mode, always worried about what may come next.

Real peace requires a change of heart

Real peace will not come because the Israeli army destroyed the tunnels. It will come after all the Arab players will finally decide that this endless fighting is fruitless, and that there is a lot more to be gained by establishing genuine peaceful relations with Israel.

But I am not sure that we will see this change of heart any time soon.