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Monday, February 27, 2012

Historical Cycles Series: FT News on HU

More info on Hungary:

Strictly for educational purposes for the Occupy movement, Daily Postings

February 22, 2012 8:36 pm
Hungary hits at Brussels funds threat

By Stanley Pignal in Brussels and Kester Eddy in Budapest

Hungary condemned as “unfounded and unfair” European Commission plans to suspend funding worth nearly €500m next year because of an excessive budget deficit.

The sharp response came after Brussels warned on Wednesday that Hungary would lose up to €495m of European Union funds if it failed to cut public spending in the coming months – the first time the Commission has suggested such penalties for a country in breach of EU budgetary rules.
On this story

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* Danube blues
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* Interactive PMI tracker

On this topic

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* Comment Orban and the EU
* Hungary's leader ready to back down in EU dispute
* Brussels poised to step up action on Hungary

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Olli Rehn, European commissioner for economic and monetary affairs, said Budapest had failed to curb its budget deficit enough to comply with EU rules designed to avert a repeat of the eurozone crisis.

In reply, Peter Szijjarto, the Hungarian prime minister’s spokesperson, said: “It is unfathomable why the European Commission has ignored the facts: Hungary’s budget deficit was, for the first time since we joined the European Union in 2004, below 3 per cent in 2011, and will remain so this year as well, which makes it the country with the eighth-lowest deficit in the European Union.”

Brussels contends that many of the measures taken by Budapest will have a one-off positive impact on its public finances, but that its budget deficit remains structurally too high.

The rightwing government of Viktor Orbán has made controlling the deficit and reducing state debt a priority since coming to power in May 2010. But it has used “unorthodox” and one-off measures including “crisis” taxes on certain sectors, and renationalising contributions to a compulsory private pensions system, which have unsettled investors and failed to satisfy Brussels.

The Commission stressed that the penalties, which would have to be approved by a majority of European finance ministers to come into force, could still be averted if Hungary offered tangible evidence of spending cuts by the autumn. Failing that, about a third of the €1.7bn EU cohesion funds Hungary is expected to tap next year would be withheld from January, amounting to a fine of about 0.5 per cent of Hungarian gross domestic product.

“This decision today is to be regarded as an incentive to correct a deviation, not as a punishment. It is a fair and proportionate measure of a preventive nature,” Mr Rehn said.

EU rules governing public debt were strengthened in the wake of the eurozone crisis, giving the Commission and member states more powers to punish profligate governments. Annual budget deficits must not exceed 3 per cent, excluding one-off measures.

Mr Szijjarto underlined that, in response to the European Commission’s forecast of a 3.25 per cent budget deficit in 2013, Budapest had taken further steps to shave another 0.4 percentage points of GDP off the deficit. Mr Rehn said he had yet to see “tangible” evidence of the latest cuts.

Budapest feels it is being unfairly singled out by the Commission, perhaps because the budget fight comes on top of a wide-ranging spat between Budapest and Brussels over a new constitution adopted by Mr Orban’s government last year.

Brussels contends some of the measures brought in would fall foul of European norms on independence of public bodies such as the judiciary or the central bank. It has threatened Hungary with legal action in European courts.

The Hungarian authorities queried the legality of the Commission’s move, saying it contradicted the spirit of EU treaties since it imposes sanctions in response to a “pre-supposed future event”.

Analysis of Wikileaks Disclosures this Week

From Stratfor; typical analysis, info that would spark some bad ideas in most of the enemies of the U.S.

Our enemies numbers have shrunk, but there are still theatres of operation for jihadis to train on, esp. in Syria.

We love when journalists disclose their names: good practice. Learn you faux journalists from sighet online some healthy western practices:

Jihadist Opportunities in Syria

By Kamran Bokhari | February 14, 2012

In an eight-minute video clip titled "Onward, Lions of Syria" disseminated on the Internet Feb. 12, al Qaeda chief Ayman al-Zawahiri expressed al Qaeda's support for the popular unrest in Syria. In it, al-Zawahiri urged Muslims in Turkey, Iraq, Lebanon and Jordan to aid the Syrian rebels battling Damascus. The statement comes just days after a McClatchy report quoted unnamed American intelligence officials as saying that the Iraqi node of the global jihadist network carried out two attacks against Syrian intelligence facilities in Damascus, while Iraqi Deputy Interior Minister Adnan al-Assadi said in a recent interview with AFP that Iraqi jihadists were moving fighters and weapons into neighboring Syria.

Al Qaeda's long-term goal has been to oust Arab governments to facilitate the return of a transnational caliphate. Its tactics have involved mainly terrorism intended to cause U.S. intervention in the region. Al Qaeda has hoped such interventions would in turn incite popular uprisings that would bring down the Arab regimes, opening the way for the jihadists to eventually take power. But the jihadist network's efforts have failed and they have remained a marginal player in the Arab world. By addressing Syria, al Qaeda hopes to tap into the past year of Arab unrest, a movement in which it played little to no part.

The region's regimes have been on the defensive due to the rise of political Islamism, growing public disillusionment and the sectarian Sunni-Shiite split, though foreign military intervention has been required to actually topple them, as we saw in Libya. Growing uncertainty in the region and the gradual weakening of these regimes gives jihadists an opportunity to reassert their relevance. Al-Zawahiri's statement, however, represents a continuation of the central leadership's inability to do more than issue taped statements from its Pakistani hideouts, much less engage in strategic planning.

Jihadists and the Middle East Unrest

Al Qaeda's extreme transnational agenda always has had limited appeal to the Arab masses. Popular unrest in Arab countries and the empowerment of political Islamists via elections in Egypt and Tunisia have underscored the jihadists' irrelevance to societies in the Islamic world. The jihadists have failed to oust a sitting government anywhere in the Islamic world, even in Afghanistan, where the Taliban's rise to power in the mid-1990s occurred in a power vacuum. Recognizing their limitations, jihadists have focused on conducting attacks intended to create crises within target countries and in those countries' external relations -- as is the case in Pakistan and Yemen. The jihadist hope has been to create enough disorder that they would eventually be able to seize power.

This approach has proved difficult because Arab governments (despite their weaknesses) have been resilient and societal fragmentation has not worked to the advantage of jihadists. A second option has been to try to take advantage of power vacuums that were created by other forces. Iraq presented one such opportunity when U.S. forces ousted the Baathist regime in 2003, allowing for the emergence of al Qaeda's then-most active node. In Iraq, the country's Shiite majority posed a daunting obstacle to the jihadists even before the jihadists alienated their Iraqi Sunni allies to the point that they began siding with the Americans, which led to a degradation of the jihadist network in Iraq. By contrast, post-Gadhafi Libya, with its proliferation of militias -- some of which have both Islamist and jihadist tendencies -- could become a more welcoming place for jihadists. But even if Libya were to descend into Islamist militancy, geography would most likely prevent it from spreading too far beyond Libya's borders.

However, given Syria's strategic location at the crossroads of so many key geopolitical fault lines, the meltdown of the Syrian state could easily result in a regional conflict. Most stakeholders oppose foreign military intervention in Syria for this very reason. Many states are eyeing the strategic goal of weakening Iran geopolitically through the ouster of the Alawite regime in Syria, but even that prospect may not be enough to offset the potential costs.

Jihadists' Prospects in Syria

With or without foreign intervention, jihadists in the region have ample room for maneuver in Syria. The most significant regional jihadist presence lies across the Syrian border in Iraq. These forces benefited from Damascus' decision to back Sunni insurgents from 2003 to 2007. The consolidation of Shiite power in Iraq greatly weakened these forces. Now that Syria is unraveling and armed resistance to the regime is shaping up, the jihadist flow is reversing direction, with jihadists now entering Syria from Iraq.

Al Qaeda in Iraq sought to channel Sunni disenfranchisement at the hands of the Shia, but now the group is looking to help Syrian Sunnis empower themselves at the expense of the Iranian-backed Alawites. Jihadist forces within striking distance of Syria are likely trying to exploit the unpopularity of the Alawite regime among Sunnis as a way to gain a foothold in Syria.

The level of factionalization among the Syrian rebels works to the advantage of jihadists. Just as Iraq's Sunni tribal forces, Islamists and Baathists cooperated with the jihadists against U.S troops and the country's new Shia-dominated security forces, many elements within Syria's Sunni population would be willing to align with jihadists given the constraints they face in battling the well-armed Alawite-dominated Syrian military.

Complicating matters, the Syrian intelligence apparatus has long cultivated ties with jihadists to insulate Damascus from jihadist attacks and to use jihadists in proxy wars with Syria's neighbors. As the state gets more and more embroiled in the internal conflict and the intelligence apparatus gets bogged down with rising distractions at home, these jihadist elements who have been on the payroll of Syrian intelligence can turn against their former handlers along the lines of what has happened in Pakistan and Yemen.

In addition to the jihadists based in Iraq and those who have long worked with the Syrian regime, neighboring Jordan and Lebanon host jihadist forces that also see opportunities in the Syrian unrest. Saudi Arabia also has Sunni militants angered by the killing of Sunnis at the hands of what they call the "infidel" Alawite regime. Just as the Saudis redirected their own jihadists toward fighting in Iraq instead of Saudi Arabia, Riyadh could encourage jihadist non-state actors to fight in Syria. A recent fatwa from a number of top Sunni religious scholars (including some prominent Saudis) forbidding membership in the Syrian security forces would help in this regard.

Regional stakeholders are reluctant to see foreign military intervention, leaving the option of covert support in the form of supplying weapons to the Syrian rebels. Jihadists can be expected to make use of such covert support as they work to insert themselves in Syria. Even if weapons aren't intended for jihadists, the increased flow of weapons and training into Syria provide an additional opportunity for jihadists to build on this support by offering more battle-hardened experience to a still disorganized armed resistance.

But while neither the domestic opponents of the Syrian regime nor the international stakeholders have an interest in seeing Syria collapse into sectarian conflict, jihadists want just that. As in Iraq, we could see bombings against Alawites and other non-Sunni groups, including Iranian and Hezbollah targets. This could be extended to attacks in Lebanon in an attempt to stoke a regional sectarian conflict.

The jihadists could well succeed in sparking a regional sectarian conflict that would involve multiple state and non-state actors and would see Iran and Saudi Arabia locked in an intense proxy war. Western or Israeli involvement in the conflict would please the jihadists even more.

It is therefore in the jihadists' interest to thwart a negotiated settlement in Syria. Though it is still unclear who was responsible for the Dec. 23, 2011, and Jan. 6 suicide attacks targeting Syrian intelligence, they served the jihadists' purpose as they forced the regime to crack down even harder on opponents (both armed and unarmed).

As the rebels and their supporters respond in kind, the jihadists can thus instigate a cycle of violence leading to an intensely polarized environment. The net result of such a process could be a meltdown of the Syrian state and the rise of multiple armed factions, including jihadists.

The collapse of the Syrian state in turn would allow the jihadists a wide arena in which to operate, stretching from Lebanon to Iraq and putting them very close to Jordan, Israel and the Palestinian territories -- the best theater a jihadist could ask for. However, the nature of their capabilities, which will determine the extent of damage they can cause in the Levant and the surrounding area, remains unclear.

It is by no means inevitable that jihadists will flourish in Syria and use it as a launching pad to undermine regional security. The Syrian state is still very much holding, and rebel forces remain divided and do not appear capable of serious advances against the government.

The Risk of Regional Sectarian War

The Syrian upheaval takes place at a time of heightened geopolitical and sectarian tensions in the region, where Iran and its largely Arab Shiite allies are seeking to make inroads into the largely Sunni Arab countries.

For Tehran and its main non-state proxy, the Lebanese Shiite Islamist group Hezbollah, the survival of an Alawite regime in Syria that owes its survival to Iran is critical. Tehran and Hezbollah both have a military presence in Syria, which is assisting Damascus in its efforts to contain the uprising. This is a major cause of concern for international stakeholders, especially Saudi Arabia. Riyadh is the regional player most enthusiastic about seeing regime change in Syria to counter the threat from Iran.

For its part, the Iranian-aligned government in Iraq has a strong incentive to make sure that jihadists in Iraq are not able to relocate to Syria. Baghdad knows all too well that a collapse of the Syrian regime would lead to a revival of Sunni resistance against the Shia, the last thing the Iraqi Shia wish to see.

The United States and Turkey want to ensure that al Qaeda is unable to hijack the Syrian uprising. But neither Washington nor Ankara has the tools to ensure that jihadists don't make their way through Syria's borders with Iraq, Jordan, and Lebanon. The Saudis share this viewpoint, but because they are somewhat insulated they would not mind just enough chaos to bring down the Syrian regime, the closest Arab ally of Iran.

Jordan is already deeply fearful of the fallout from Syria while it deals with growing unrest at home, and has a strong interest in making sure Islamist militants on its soil do not use enter the Syrian conflict. Meanwhile, Lebanon could descend into sectarian strife, especially as the Syrian state's ability to maintain control there erodes, the Saudis see an opportunity and the Iranians feel their position becoming vulnerable.

Just how the many moving parts in this dynamic interact will determine the extent to which Syria and its environs become a jihadist playground. A potential collapse of the Syrian state greatly increases the risk of a regional sectarian war that al Qaeda could greatly benefit from. The challenge for those seeking regime change in Syria is thus how to rid the country of Iranian influence while not opening the door to transnational jihadism.

Send them to


The World's Worst-Paid Central Bank Director in the World

Should the Director be Changed?

New Actions against the EU's democratic principles:

I am posting the entire article from Financial Times, January 24, 2012. The PM is not thinking much of the repercussions of his actions against the Central Bank of Hungary.

It is an acerbic analysis of major mistakes of the actual PM in Hungary:

Hungary’s central bank head offers to work for a forint a month
February 27, 2012 5:02 pm by Kester Eddy

Hungarians love to tell you about their innovators in science, engineering and maths. Now, it seems, we have a new Magyar trailblazer – the world’s worst-paid banker.
And not just any banker, but the head of the National Bank of Hungary (MNB) – the central bank itself.
András Simor, who’s been in the wars with Viktor Orbán’s Fidesz government from the start, has offered to work for Ft1 per month – that’s about 1/3 of a euro cent, which wouldn’t get you the skin off a salami past its sell-by date in even the remotest part of the puszta.
And what’s more, in modern Fidesz tradition (the government is fond of retroactive measures), he’ll make back-date the deal, donating all the money he has made since September 2010 to help support economics+ students from under-privileged families.
The offer, made in a letter to Orbán last Friday and since made public is designed help break the deadlock with the European Union and get talks on a standby loan with the EU-IMF sooner, rather than later, says Simor.
And how come this is important?
Well, Orbán and his key henchmen were sharpening the knives for Simor even before the elections. Simor, appointed during a previous Socialist regime, failed the Fidesz test at several hurdles.
He was criticised for owning a stake in an off-shore company and accused of “doing nothing” to prevent commercial banks flogging controversial foreign currency loans to the Magyar public. But more to the point, in the Fidesz view, he earned far too much money; at approximately Ft8m – close to €30,000 – a month, it amounted to nearly 40 times the average Hungarian salary.
It didn’t matter that the formula setting the governor’s pay had been introduced in 2001, under the previous Orbán government (and applied to Zsigmond Járai, an Orbán appointee); after early political pressure failed to shift the stubborn Simor, the government slashed his salary to Ft2m from September 2010.
Unsurprisingly, the move did not go down well in Brussels or at the ECB – who, like Simor himself, saw it as blatant interference with the independence of the central bank.
Had he stopped there though, Orbán might have got away with it. Instead, from the EU’s point of view, he ploughed on – to the point where the EU famously walked out of preliminary talks on a new EU-IMF loan in December after the government had pushed a controversial new central bank law through parliament – against the express wishes of both Brussels and the IMF.
The result is that Brussels insists that as one precondition to begin loan talks, Orbán must remove the salary cap.
And since that seems a bit hard for prime minister to swallow, Simor has stepped in – insisting that for him the issue is “not about money” but about central bank independence – to help Orbán save face.
As Simor’s letter reads:
It is Hungary’s vital interest to amend the provisions on the remuneration of the MNB’s decision-makers, adopted in violation of the Central Bank Act, and respect central bank independence. Although the Magyar Nemzeti Bank is the object rather than a party of the legal dispute between the Hungarian Government and the European Union, as a central banker and a citizen whose primary consideration is the best interests of Hungary, I would like to support the Government with my own contribution in resolving the current situation.”
Simor’s announcement is “clever PR” that now puts the pressure on the government to make compromises with the EU and IMF in order to reach the much-needed agreement, András Bíró Nagy, co-director, of Policy Solutions, a Hungarian think-tank, told beyondbrics.
“Debates about his salary cannot be blamed by the government as an obstacle of any EU-IMF deal anymore. His willingness to work for free and support talented young economists allows him to show it as the example to follow: if the stakes are high, generous moves are needed,” says Nagy.
Simor, however, is not so generous as to let Orban off the hook scot-free. As he notes higher up in the letter, the move on the governor’s salary was discriminatory:
“I would like to emphasise that the change to the remuneration of the MNB’s decision-makers is also discriminatory, as the employees of the Magyar Nemzeti Bank are neither public servants nor civil servants, but rather the senior officers of a limited liability company owned by the Hungarian state. The measures adopted to introduce a cap on decision-makers’ remuneration do not apply to senior officers of other state-owned companies or state-owned banks.
As Mujtaba Rahman, of Eurasia Group says, this is another smart move on Simor’s part, revealing the real motivation behind Orban’s legislation.
“By emphasizing the issue of discrimination vis-à-vis other state institutions, Simor has been able to highlight how Orban’s moves against the central bank are politically, and not substantively, motivated.”
Simor is now awaiting Orbán’s reply.
Related reading
Orban and the EU, FT

This publication of this material on my blog is intended only for educational purposes.

I know most eastern Europeans do not have money to subscribe to the Financial Times; therefore I decided to inform the public, by posting the entire article here.