Tag Archive: Cameron


Deadline set for Greek solution


Crunch time for Eurozone leaders

In an information light announcement at a bilateral summit in Berlin, President Sarkozy and Chancellor Merkel set October as a deadline to reach agreement on a package of measures to stabilise the Eurozone. This will include a recapitalisation of European banks if required. After months of dithering over the politics and ignoring the economics, their hand is clearly being forced by growing international pressure for action as the announcement will come just before November’s G20 summit.

Whilst detail is thin on the ground it does seem that recapitalisation of banks will be at the forefront of any announcement. For weeks there has been talk of a boost to the European Financial Stability Fund (EFSF) with figures as high as €2tn being discussed in order to offer liquidity to member states. But after the break up of the Belgian bank Dexia and downgrade in credit rating of 12 UK financial firms, attention has moved to avoiding a repeat of 2008’s banking crisis.

The international pressure for Europe to find a resolution is enormous. Today in an interview with the Financial Times Mr Cameron urged the euro membership to accept collective responsibility and backed an increase in the eurozone’s €440bn (£378bn) bailout fund. The hope is that decisive action will bring an end to the uncertainty that is currently destroying confidence in the markets.

But how will the cards fall for Greece? Whilst the current Prime Minister has refused to speculate on a Greek default, former PM John Major made it clear yesterday in an interview with the BBC that Greece would have to default.

“In the short term the banks need to be recapitalised and Greece needs to default, the sooner that happens… the sooner you remove something from the overhang in the markets.”

In this scenario banks would take a big haircut and if they weren’t sufficiently capitalised it would spark another banking collapse. But it seems increasingly likely that this will be the course of action as the German news agency DPA has reported a discussion between Eurogroup senior officials about a potential haircut of up to 60 per cent on Greek bonds’.

Reassurances by Sarkozy and Merkel that recapitalisation is on the table and banks would be given all the support they needed add weight to this likelihood.

A default would badly damage banks that are exposed to the Greek debt and would set a dangerous precedent to other heavily indebted economies. At the moment Italy and Spain are not insolvent but have liquidity problems that would not be helped by the drying up of lending likely to occur if banks take a haircut over Greece. But banks may be prepared to accept this so long as they are sufficiently recapitalised. The time for leadership and the use of EFSF funds has come and perhaps an acceptance of a default will end the uncertainty.

Advertisements

The President needs to step up to the Libya challenge

 

Legitimacy is key

Gaddafi’s brutal regime has been murdering the Libyan people for weeks as the dictator took advantage of the outside world’s reluctance to step in. Despite requests from the rebels themselves for an implementation of a no-fly zone, world leaders (particularly in America) were keen to distance themselves from thoughts of intervention. The protests began in Benghazi and overturned the government nationwide to within thirty miles of the capital city, Tripoli. The west has been keen to provide vocal support to the rebels and advised the Libyan Dictator of forty two years, Colonel Muammar Gaddafi, to stand down in the hope that the transition would progress like the stepping down of President Zine El Abidine Ben Ali in Tunisia and President Mubararak in Egypt. But in Gaddafi the world had underestimated the will and insanity of a determined dictator who, amongst other ridiculous statements, claimed that he had the full support of his people and that the protestors were all drugs addicts.

Since then the Libyan loyalists have retaliated with vengeance sweeping aside an unorganised and ill-equipped rebel ‘army’ and almost reaching the epicentre of unrest Benghazi. Gaddafi has stated that the rebels will be severely punished and there have been numerous reports of bloody violence. Yet until now the international community had not stepped in.

The problem is history. The normally trigger happy Americans are currently embroiled in two unpopular wars with the conflict in Iraq in particular being a publicity disaster. The US is incredibly unpopular in the Middle East and after claims of an illegal invasion, the blight of continuing military losses, civilian deaths and terrorism there was not much appetite for war.

In the beginning David Cameron was a lone voice in calling for a no-fly zone over Libya. Despite an increasing humanitarian crisis and human rights violations the international community continued in its laissez faire approach. But now, with French and British leadership, the UN has finally given its backing to military action and suddenly America is right at the forefront.

The shift in position is a stark one and it reflects the difference between how the American government wanted to act and the awareness of its largely negative perception abroad.

The problem was legitimacy. Iraq was quite possibly an illegal war sold to the public on false information about nonexistent WMD’s. There is a strong argument that President Bush and Prime Minister Blair were looking for a reason to remove Saddam Hussein partly to right the wrongs of the first Gulf War and possibly to secure oil resources. It is an argument historians of the pessimistic and optimistic inclinations will debate for years and one I shan’t dwell on now. The Iraq war was not backed by the UN not even independently supported by France or many other nations and was unpopular in Britain. As a result the already negative public image of the west was worsened in the Middle East and Obama’s administration did not feel confident enough to push the debate on Libya.

President Obama’s election represented a realisation of optimism in the United States. His rise to power was seen to represent ‘change’ and brought a belief that things would get better. This was not just a domestic hope. Across the globe his appointment was welcomed and on his Presidential visits he has been welcomed with ringing endorsements from a world that needs a strong America but also one that engages with its neighbours rather than independently doing as it sees fit. Obama was wary of this position and he didn’t want to do anything to jeopardise it. Forcing the issue on Libya could have backfired at that early stage and trying to convince the UN to go along with another American led campaign may have appeared to be an unnecessary headache.

The UN Security Council voted in favour of Resolution 1973 despite abstentions from Germany, India, Brazil, China and Russia. But the fact that the African members Lebanon, Nigeria and Gabon were all in favour was a valuable coup for the pro action members and indicated that the intervention would be welcomed by the African people. Such support was markedly absent in the case of Iraq.

The initial details of putting the resolution into action seemed to involve Britain, France and their Arab allies leading the way. However the Americans were launching missiles on up to twenty locations yesterday as the US war machine was unleashed once more, this time with international backing.

The change in dynamic is an interesting one now that the US has been let loose. They are the ones now forcing the issue and talking about ground troops. On Wednesday evening the US Ambassador to the UN Susan Rice said: “the US view is that we need to be prepared to contemplate steps that include but perhaps go beyond a no fly zone.” She went further towards indicating the deployment of ground troops saying: “A no fly zone has inherent limitations in terms of protection of civilians at immediate risk.”

It is important to remember that the Defence Secretary Robert Gates was not so long ago decrying “loose talk” from David Cameron. Now it is the Prime Minister showing caution with the Chancellor George Osborne being far more hesitant about the possibility of soldiers during an interview with Andrew Marr. He said: “We are not considering ground forces at the moment…..we are enforcing the United Nations resolution and we are acting as part of an incredibly broad coalition of nations.”

The reason the American position has shifted so far in just a matter of weeks is due to external factors. They always wanted to act. They still see themselves as the great superpower that can save the world despite no one wanting them to. The political climate required that this time UN approval had to be gained and Britain and France ensured that this was achieved. Expect America to drive forward now that the difficult political machine has set the wheels in motion for action. America has an opportunity to enhance its position internationally, particularly in the Middle East, and President Obama will be keen to exploit it. It was foreign policy upon which Presidents Kennedy and Nixon based their legacies unfortunately the same can be said for the Bushs’.

The nature of this conflict could be a game changer in terms of Britain and America’s standing in the world. Mistakes made in Iraq have been learned from in this situation. The gaining of the UN backing has been put a requirement for action to be taken. Mr Cameron has announced that legal consultations will be published. It has been a smart play by the Prime Minister who has pumped up his leadership credentials when Obama has been lagging behind. The US are sending in the troops quickly and starting to talk big in order to regain the impetus and the glory. But Mr Cameron doesn’t need to do much more. By mobilising the UN he already has a victory. It’s now up to the UN and America as to whether this no fly zone replicates the capture of Milosevic or the failure of the Gulf War.

Beware Of The Right


Cameron's own party may be the problem

Analysis of the state of the Conservative Party in this coalition government has been pushed to the side as Nick Clegg’s Liberal Democrats have borne the brunt of the media’s gazing eye.

David Cameron has many reasons to be wary of his coalition being derailed. Liberal Democrats are coming under increasing pressure in the face of plummeting support in the polls and though they have held on so far there surely must be a breaking point. Whilst students saw the Tuition Fees as the beginning and end of the party, the other key Liberal principle was the voting change. And though they have just about survived the Tuition Fees debacle, if they lose on the forthcoming AV referendum then surely they can’t limp on any further in their current form. There is also the nagging threat of the Labour party’s intent to oppose the government through weaselling out Lib Dem MPs with deals as opposed to providing a better option to voters. However, the key danger to Cameron centres not on an external threat or even one from within his cabinet but, as so often in recent history, his right wing backbenchers.

The same internal divisions that ripped the party apart in the nineties over the European Union appear to remain. Issues such as the voting change, tuition fees and control orders show that whilst the leaders may be more liberal than we’re used to from a Conservative party, the grass roots remain firmly fortified upon the land laying to the right of centre. There is a constant undertone of grumblings within the party suggesting distaste towards sharing government with a group of Liberals. Yet it must be remembered that without them they couldn’t have formed as strong a government.

The Conservatives didn’t win the election. They didn’t gain the number of seats required to create a single party government, and they failed to do so despite their opposition boasting an unelected, disliked Gordon Brown with a party legacy whose main achievements were an illegal and deeply unpopular war and a global financial crisis. In fact pre election polls suggested that instead of voters flocking back to the Tories, it appeared that the people would turn on mass to Nick Clegg’s wandering band of nomads who until then were firmly placed in the political wilderness. As it turned out that didn’t happen but the whole saga shows a political sea change in the UK.

Liberalism is on the up. The Conservatives can no longer rely on the middle classes and their traditional support base to supply them with enough votes to win elections. Their right wing history is their weakness as attested to by the sheer failure to attract new voters. There were no big gains in Scotland, Northern England or Wales. The reason the Liberal Democrats failed was not as a result of their politics, it was their hopelessness. The old cliché that a vote for Clegg’s party was a wasted vote is still true, no matter how unpopular the big two are, regardless of performances on television debates, there was still no gain in backing the outsider as it could never win. If a dead horse comes back to life that doesn’t mean it will win the Derby. In the end, come Election Day the public stuck with what they knew.

Yet the result was a government that effectively mirrored the public state of mind. The Tories are in charge but they have to change. There is no longer a place in government for the likes of Widdecombe or Tebbit voting against civil marriages, decrying female priests and suggesting the unemployed should “get on their bike and look for work.” The current crop of Conservatives needs to step out of the shadows of those prominent figures. The public attitude is a more liberal one and old ideologies will not do. The right need to understand that they did not win the election and the Coalition Government is presenting them with the unique opportunity to reinvent itself whilst still in power.