Roma

[This piece was largely written by my excellent colleague in Prague, Katerina Zachovalova. Any mistakes are mine]

The Roma in eastern Europe

Canada home and dry
Apr 30th 2009 | PRAGUE
From The Economist print edition


How Roma fleeing persecution win asylum in Canada


EMIGRATION to Canada was a well-trodden road for dissidents after the Soviet-led invasion of Czechoslovakia in 1968. It is 20 years since the country’s leaden communist regime perished in the velvet revolution. The Czech Republic is a regional success story. Yet rising numbers of Roma (gypsy) citizens are making the same journey to the same faraway country, because life at home is intolerable.

Around 250,000 Roma live in the Czech Republic. Their problems include poverty, lack of education, centuries of prejudice and, now, attacks by far-right extremists. According to the Canadian embassy in Prague, 861 Czechs applied for asylum in Canada in 2008, and 84 won it. Canada does not record their ethnic origin, but officials say most were Roma. That exceeds figures from countries such as Afghanistan (488 applicants) and Iraq (282). For communist Cuba, much scolded by the Czech government for its poor human-rights record, the figures were 184 applicants and 93 given asylum. The numbers for the first quarter of 2009 are even more startling: 653 applications, of which 34 were granted.

Admittedly, getting to Canada is easier for the Czech Roma than for Afghans or Iraqis (in October 2007 the Canadians lifted visa requirements for Czechs that had been imposed ten years earlier after a previous Roma exodus). But the figures are also higher than from other ex-communist countries with large Roma populations and visa-free travel to Canada. Last year only 288 Hungarians made applications, with 22 granted.



Some Canadian officials say asylum has become a business, with middlemen charging Roma to arrange it. But nobody has produced evidence of this, and the Czech authorities say they have seen no sign. Anna Polakova, who heads Romani-language public broadcasting in Prague, says the claims are absurd. She also questions the idea that Roma asylum applicants are motivated by Canadian welfare payments. “Even if you have little, your family has been here for two, three generations. You know the language. We have our graves here,” she says. In her view, it is middle-class Roma who are leaving in frustration. “Despite all the talk, the fascists are walking down the street.” She herself considered emigration after her son was badly beaten up by skinheads.

The Czech record is no source of pride. Not only has far-right extremism been rising, but so also is segregation. A government study in 2006 found that 80,000 Roma live in over 300 ghetto-like communities, four-fifths of which came into existence only in the previous decade. Roma activists blame Jiri Cunek, a Christian Democratic leader and former deputy prime minister, for making anti-Roma prejudice acceptable in mainstream politics. A mayor of Vsetin in the east, Mr Cunek ordered the eviction of dozens of Roma families from a run-down building in the town centre into containers on its edge.

Recently police blocked a confrontation between Roma activists and a neo-Nazi march in Krupka, in the north-west. Last November a similar event in Litvinov, in the north, turned into a riot, with police fighting 500 right-wingers trying to get to a Roma neighbourhood blamed as a hotbed of crime. A firebomb attack on a Roma dwelling in Vitkov, one of three in recent months, badly burnt a 22-month-old girl.

Roma are suffering in many other countries in the region. Hungary has witnessed a spate of especially nasty murders. But the rich, well-governed Czech Republic, which holds the European Union’s rotating presidency, can surely do better.

EU Cybersecurity (Europe View no 130)

Batten down the cyber-hatches
Apr 30th 2009

From Economist.com


Securing vulnerable networks across Europe

OVER the past ten years the European Union has failed to protect the continent’s energy security. Will it do any better when it comes to cyber-security?

At an EU conference on that subject in Tallinn on April 27th, participants wrestled with the need to act and the difficulty of deciding what exactly to do. The location was a suitable one: Estonia is the only EU member state to have suffered a full-scale cyber-attack, in April 2007. Amid a furious row with Russia about the relocation of a Soviet-era war memorial, a flood of bogus internet traffic disabled the country’s main websites, briefly shutting down vital public services and crippling businesses such as online banking.

Yet two years later, the EU and its member states are still wrestling with the issue. Knowing whether such attacks come from pranksters, hooligans, terrorists, criminals or an unfriendly government is difficult—sometimes impossible. But the potential damage is clear: everything from water and electric power to financial industries and retail distribution depends on the internet. The right combination of malicious code, stolen or hacked passwords and a badly designed system could mean catastrophe.

One temptation is to put lots of faith in expensive and gimmicky technical fixes. But as Scott Borg, an American expert attending the conference, pointed out, the starting point should be economics: without knowing the cost of, say, a 24-hour power shutdown as opposed to a six-hour one, it is hard to know what priority to give the means necessary to prevent it.

A simple form of defence is sharing information. But that requires trust. If news of a cyberstrike on a business leaks out, it can scare customers and send share prices plummeting. The last thing that business will want to do is announce that it has been attacked. Yet pooling knowledge strengthens everyone’s defences. Similarly, getting businesses and bureaucrats to share information runs into cultural barriers, as well as worries about confidentiality and legal liability.



So it is no surprise that countries with a high level of social trust are way ahead of the rest. Sweden, for example, will be staging its third bi-annual cyber-warfare exercise on May 6th and 7th, in which officials and businesses will practise coping with simulated attacks, some using live “ammunition”, and work out how they would keep the economy and public services going most effectively. Most EU member states are nowhere near that level. Some have yet to set up a national body, usually known as a computer emergency readiness team or CERT, to coordinate cyber-defences.

That makes a provisional plan to hold EU-wide cyberwar exercises by 2010 look ambitious. So is placing great hopes on a common regulatory framework to deal with cyber-security, for example setting clearer rules about identity on the internet. It is hard to imagine the “black hats” (the generic term for the bad guys) quaking at the thought of yet another fat document emerging from the Brussels bureaucracy.

One contentious idea discussed at the conference was whether to make internet service providers (ISPs) legally liable, at least to some extent, for the damage caused by the data they transmit. That might encourage them to police and protect their customers better. But given the scale of the potential risk, it is hard to see how any ISP could cope.

The best hope is that countries with the best cyber-defences keep innovating and coordinating their efforts, and that over time more states will join them. By most counts, they number roughly seven European countries, including non-EU Norway. For everyone else, some prudent supplies of bottled water, canned food and candles sounds sensible.

Europe view on Left/Right

Europe.view

Who's left? Who's right?
Apr 23rd 2009
From Economist.com


The enduring uselessness of traditional political labels

THE terms “left” and “right” and right don’t mean much in politics anymore and in the ex-communist world they are particularly confusing. Last week’s report in The Economist on Moldova described that country’s ruling Communists as a “centre-right” party, which attracted some sharp feedback. At first sight the idea of centre-right communists sounds as odd as “moderate Trotskyites” or “secular jihadists”. But most other conventional labels would fit the ruling crowd in Moldova worse.

The lamentably crude but sometimes convenient conventional political spectrum counts “left” (or sometimes “liberal”) as egalitarian, and thus sceptical of bankers and rich people, pro-social spending, pro-gay and dovish in foreign policy. “Right” (or sometimes “conservative” is pro-business, pro-family, and patriotically hawkish on defence and foreign affairs. That misses out whole chunks of the political debate. Are civil liberties a “left” or “right” issue? Cynics would say that it depends who’s in jail: Nelson Mandela drew most (but not all) of his support from one crowd, Aleksandr Solzhenitsyn from another.

The extremes still hold. It remains a safe assumption that ultra-leftists will sport the tattered remains of communist iconography (hammers, sickles, stars, AK-47s and the like). They will have complicated but enthusiastic views about Marxism and will hate everything America stands for. At the other extreme, ultra-rightists usually nurse sympathies for the Third Reich, hate Jews and most foreigners and want to restore their nation’s past glories. Both lots of extremists are riddled with squabbles and attract loonies.



The problem comes as you get closer to the middle. The political arguments in post-communist countries are not easily reducible into the classic left-right split. What do you call a party such as Vladimir Putin’s United Russia? In one sense it is profoundly conservative, in that it reveres the Orthodox church, dislikes public protest and hits every patriotic button in sight. But it has spawned a monstrous, predatory state bureaucracy and also shows a sweeping contempt for the rule of law. That is reminiscent of previous Kremlin tenants, one of whom, the arch Bolshevik and priest-murderer Vladimir Lenin, remains unburied on Red Square. Contemporary Russian history books even sanitise the Stalin legacy.

Similarly, the Moldovan Communists support business (particularly bits that benefit them) and have dumped Marx. They are keen on a strong Moldovan national identity (arguably another “conservative” point), and they certainly don’t want redistribution of wealth.

The ex-communist countries seem to need a different political grid, perhaps with multiple axes, rather than just the single one running from left to right. One axis on this grid would show whether the party defends or wants to change the status quo. Most Estonian political groupings are status-quo parties, for example. The Moldovan parties that want reunion with Romania clearly are not.

A second would concern rejection or nostalgia about the communist past. At one extreme would be, say Poland’s Law and Justice party, which affects to regard everything in and about the People’s Republic as a complete and utter sham (though this does not, it seems, include the academic qualifications that its leading members gained under that regime). Against that are parties that think that not everything that happened before 1989 was worthless. Hungary’s Socialists are a moderate example of that, the ruling party in Belarus a more extreme one.

A third axis would show corruption at one end and public-spiritedness at the other. Alina Mungiu-Pippidi, a Romanian scholar at the Hertie School in Berlin, compares parties in the eastern part of the region to medieval armies that “support themselves by plunder” by capturing state resources.

With five notches on each axis that makes 125 possible combinations. One of them should fit the Moldovan Communists.

Polish economy

Poland's economy

Not like the neighbours

Apr 23rd 2009 | WARSAW
From The Economist print edition

Most east European economies look sickly, but not Poland—so far

A LOT like South Korea, a bit like Mexico and not at all like its neighbours. That is how Poland wants to be seen after it set up a $20.5 billion credit line from the IMF. This was not a bail-out like those for Ukraine, Hungary and Latvia. It was a precautionary and unconditional overdraft offered only to top-quality borrowers, say officials. The only other country to get similar treatment is Mexico.

A more flattering comparator is South Korea which, like Poland, has let its currency slide, while shunning the deficit-swelling policies of Britain and America. The zloty has fallen by 30% from its peak. The central bank has cut interest rates from 6% in October to 3.75%. Poland faces the crisis in a stronger position than many. Krzysztof Rybinski, a partner at Ernst & Young in Warsaw, points to consumption of 61% of GDP in 2008, close to Western levels. Rapid wage growth and low debt make consumers more robust.

This is partly luck. An overly tight monetary squeeze early in this decade headed off an asset-price bubble. Bureaucratic government checked the property boom; so did tough bank regulation that restrained the borrowing, chiefly in foreign currency, that plagues Hungary. “The things that you criticised Poland for in the past are now proving a blessing,” says a senior official.

The government’s gloomiest forecast is of a rise in GDP this year of 1.7%. Neil Shearing of Capital Economics thinks GDP is more likely to fall by 3%. Unemployment, swollen by returning migrants from western Europe, is already 11.2%. Exports have stalled. Industrial production in the first quarter was down by a tenth on a year ago. Ill-considered currency hedges have hit some firms. Tax revenues are sagging. The government’s efforts to prepare for euro entry by 2012 look “fairly futile”, says Mr Shearing. He thinks 2015 is more realistic.

Yet firms that survived the bureaucratic and other problems of the past 20 years are a resilient lot. Krzysztof Sklorz, whose Katowice-based company exports bricks and tiles, says zloty instability is a problem. But, he adds, “I took out a loan in euros and that’s what my clients pay me in as well, so that’s all right.” Unconsciously echoing Schumpeterian notions of creative destruction, Jozef Przyblya, a hotelier in another Silesian town, Pszczyna, says the crisis has weeded out the “weak and reckless”. The strong euro brings new guests from Germany and even Slovakia (now in the euro). One survey found that over 60% of big firms plan new investment this year. German subsidies to car buyers have stoked demand at Polish factories.

Unlike others in eastern Europe, Poland’s government is strong and stable. But its main contribution, says Marcin Piatkowski, a former IMF economist now at Warsaw’s Kozminski Academy, has been “brilliant PR”. Downplaying the crisis has been good for confidence, but doesn’t help promote much-needed reforms, he notes. One such is of bureaucracy: Poland comes 76th in the World Bank’s ranking for ease of doing business, below Kazakhstan. Mr Rybinski calls this “shameful”.

At least limited reforms to health care, pensions and the labour market are under way. One excuse is that President Lech Kaczynski vetoes laws put forward by a government he detests. Yet by the standards of the region, both Poland’s politics and its economy look pretty good.

europe view on mediocrity

Europe.view

Inconvenient truths
Apr 16th 2009
From Economist.com


Why mediocrity flourishes and will only thrive further
POLITICAL freedom means that rulers tremble when voters grumble. Fine. But a healthy political system also needs an opposition that is able and willing to take power.

On that score, the outlook in post-communist countries looks rather bleak. Few have what sport journalists call a “long bench”—meaning a plentiful supply of substitutes who can take the field when the first lot of players are injured, exhausted or overwhelmed.

Hungary’s ex-communist rulers, for example, were dire, and a caretaker prime minister, Gordon Banjai (pictured below, foreground) has now taken over. But it requires quite a leap of faith to think that the likely winners in next year's election, the right-of-centre politicians of Fidesz, led by the volatile and idiosyncratic Viktor Orban, will be much better.


The same goes for the Czech Republic, where what should have been six months of glory running the EU has turned into a farce that disgraces everyone. In Latvia, almost all competent politicians (and some incompetent ones) are deployed on the pitch already. If the economic collapse overwhelms them, who will take their place?

Even countries with talented individual personalities in public life cannot necessarily say that they have a strong, credible opposition. Latvia has excellent journalists, NGO-niks and civil servants—but none of them are warmed up and ready to play on the political field. And individuals, even fit and ambitious ones, don’t make a team. Georgia’s opposition leaders are seasoned and eloquent. They have all, for reasons good and bad, quarrelled with the headstrong president Mikheil Saakashvili and want him to step down. But little else unites them.



So far, political systems across the post-communist world have done a poor job of ventilating pressing political issues, such as sharing the pain of the economic downturn. What will happen to firms and households in, say, Hungary or Romania, who have borrowed in euros and Swiss francs, and now cannot repay their loans? Should governments force foreign banks to reschedule the debts? Will taxpayers help? Or will the market and the legal system be left to take their course? If responsible politicians don’t discuss this, then irresponsible ones will.

Public figures in or close to politics who could credibly run the country are easy to spot in the biggest and the smallest of the new EU member states. Some of them, such as Leszek Balcerowicz or Mart Laar (ex-Polish finance minister and former Estonian prime minister respectively) even have international reputations. They may be the most conspicuous figures, but other impressive potential players are lurking near the substitutes’ bench, their kit already packed in their sports bags. Poland has heavyweight regional politicians, such as the mayor of Wroclaw, Rafal Dutkiewicz; Estonia has a crop of top-quality serving and former public officials, the fruit of the modernisation of public administration in the 1990s.

But for the most part, in most countries, the ebb and flow of sleaze, cynicism and apathy over the past ten years has washed talent out of the political system, while mediocrity has flourished.

Now the downturn makes the political game look even less attractive: bruising economic misery may be a fine spectacle, but it is not particularly tempting for participants. It is a good time to have a sinecure in academia, in a think-tank, or (best) in an international bureaucracy. But taking office means taking responsibility, at a time when even the most inspired political leadership may not bring much in the way of results. Fancy explaining to bewildered and resentful voters that their savings, jobs and hopes for the future are imperilled and that nothing much can be done about it? Please form an orderly queue.

Moldova/Georgia

Protests in Moldova and Georgia

Street scenes
Apr 16th 2009
From The Economist print edition


Moldova’s crackdown, like Georgia’s standoff, leaves protesters fuming

IDEALISTIC youngsters demanding their country’s faster integration with Europe were a rarity even before the Moldovan authorities beat and jailed hundreds, and killed two, after a spree of protests against electoral fraud. But the limp European Union reaction to the crackdown will not encourage others to follow in their footsteps.

Few emerge with credit from the protests. Some participants rioted, storming and burning public buildings. The opposition parties loosely linked to the protesters are a lightweight lot with some questionable leaders. What unites them is anger over alleged ballot-rigging in the April 5th parliamentary election. The ruling Communists (in reality, a centre-right party) would probably have won even without bullying their rivals, skewing media coverage and inflating voter lists. With half the vote, they took 60 of the 101 seats in the unicameral parliament. This week, the government began an election recount.




Although the government consists mainly of competent technocrats, the crisis has shown that real power lies with President Vladimir Voronin, who is due to step down soon, and his cronies. The official reaction was striking, both in its brutality and in the contempt it showed for the EU, a large donor to Moldova, Europe’s poorest country. The authorities barred Western diplomats from visiting detainees. A limited UN-led investigation of 90 people in one jail found evidence of severe beatings and “inhuman” conditions. The corpse of Valeriu Boboc, a 23-year-old protester, was returned to his parents covered in bruises; the authorities say he was poisoned. A Moldovan journalist, Natalia Morar, is under house arrest. Amnesty International is championing her cause.

On April 15th Mr Voronin called unconvincingly for an amnesty for the protesters. In fact he blames foreigners, particularly Romania, which before the war included most of present-day Moldova. A vocal minority in Moldova wants reunification, partly for nationalist reasons and partly to speed up progress towards entry into the EU. The Romanian president, Traian Basescu, has ordered an acceleration in the issue of passports to Moldovans. The mutual hatred between him and Mr Voronin (who sees dual citizenship with Romania as treason) is intense. Moldova has brought in visas for Romanians, expelled the Romanian ambassador and stopped Romanian journalists entering the country. The (Latvian-born) director of the National Democratic Institute, an American outfit, faces deportation.

The EU is quietly trying to act as an intermediary, but some diplomats say its intervention could make things worse. Russia is dangling a deal over Moldova’s most industrialised region, Transdniestria, whose separatist regime it sponsors. This is meant to encourage Mr Voronin to lean east. Against this background, Moldova’s pro-Western camp finds the EU’s reaction to the attack on the protesters spineless.

The feeble international response to the behaviour of the Moldovan authorities contrasts with events in another ex-Soviet republic, Georgia. Opposition demonstrators there have been demanding the resignation of President Mikheil Saakashvili. Having blundered in a heavy-handed crackdown against similar protests in November 2007, the Georgians handled this week’s demonstrations with punctilious attention to outside opinion. That cuts little ice with the opposition, which believes that Mr Saakashvili is authoritarian, nepotistic and incompetent. The main evidence for this last charge is his disastrous war with Russia last summer. But by ex-Soviet standards, Georgia’s economy is strong and its political system free and open.

The Georgian opposition has several heavyweight ex-allies of Mr Saakashvili. They include a former speaker of parliament, Nino Burjanadze, a former foreign minister, Salome Zourabichvili, and a former ambassador to the United Nations, Irakli Alasania. Even if they squabble, that is a galaxy of talent compared with Moldova. Many of Georgia’s foreign well-wishers are fed up with the erratic behaviour of the president. But for now at least most Georgians prefer imperfect stability to revolutionary upheaval.

Europe View 125 The West's Transdniestria

Europe.view

Leave no stone turned
Apr 9th 2009
From Economist.com


Microstates flourish because big countries need them

RICH and powerful people in Russia and Ukraine clearly find the “Pridnestrovian Moldavian Republic”—more commonly known as Transdniestria—a useful entity. If they didn’t, they would close it down. That is something that the European Union, the Organisation for Security and Cooperation in Europe and others like to point out in a finger-wagging kind of way. The puppet states of South Ossetia and Abkhazia are the same. A flick of the switch would turn off the power. A turn of the tap would stop the gas. A telephone call would close the border. And the regimes would fall soon afterwards.

It would be nice to think that dodgy microstates are strictly a post-Soviet phenomenon. In the law-governed space east of the pre-war Soviet frontier, all countries, surely, are real. Their financial systems are transparent. They abide by their international obligations. Their political systems are accountable.


Yet look closely at the three European countries still listed as “non-compliant” (in other words, tax havens) by the Organisation for Economic Cooperation and Development (OECD), and some striking features emerge. Andorra, Liechtenstein and Monaco have a combined population of about 130,000—rather more than South Ossetia, but far less than Abkhazia or Transdniestria. Liechtenstein’s Prince is the last secular feudal ruler in Europe, with the right to veto legislation he doesn’t like. The Vatican, of course, is not a democracy at all (but as it is not a financial centre either, it escapes any criticism on that front).



Clearly, if countries such as France and Germany offered simpler and user-friendlier tax and legal regimes, some of the microstates’ advantages would diminish. But the real point is the symbiotic relationship between the microstates and the big countries. Liechtenstein depends entirely on Switzerland and Austria, Andorra on Spain and France, and Monaco on France alone. None of the three tiddlers would survive for a minute without the cooperation of their neighbours.

It is encouraging that the authorities in all three microstates now profess great eagerness to sort out their remaining misunderstandings with the OECD and get their countries off that organisation’s bad books. But it is troubling that it has taken a decade to bring them this far. Part of the reason may be that Switzerland and Austria themselves are not wildly enthusiastic about tax compliance. But what explains the curious benefits enjoyed by Monaco, which enjoys its charmed life thanks only to the cooperation of France?

Casting an eye further afield, it is also interesting that Britain’s offshore islands (Guernsey, Jersey and the Isle of Man, as well as the Caribbean crown dependencies such as the British Virgin Islands) have managed to develop as financial centres so easily, despite the losses to the exchequer in London. Suspicious minds might wonder if these places are so useful to British business that no government wants to go to the trouble of closing the loopholes they provide.

On tax transparency at least, the tide now seems to be turning against countries that are, in some respects, western versions of Transdniestria. On the equally important question of ownership, it is far from clear that real change is afoot. It is still possible to use a web of companies in these places to deter nosey outsiders wanting to know who owns what. Such anonymous entities may soon be forced to pay more tax, but it will not be any clearer who owns them. That scandal erodes the moral authority of the West in demanding that corrupt elites in places such as Russia and Ukraine bring their offshore entities into the light of day.

Eichmann book review

Adolf Eichmann

Manhunt
Apr 2nd 2009
From The Economist print edition



Hunting Eichmann: How a Band of Survivors and a Young Spy Agency Chased Down the World’s Most Notorious Nazi
By Neal Bascomb



Houghton Mifflin Harcourt; 400 pages; $26. To be published in Britain by Quercus in September
BRINGING old Nazis to justice was not a priority in the immediate aftermath of 1945. The three Western powers wanted to turn their zones of Germany into the Federal Republic, a functioning cold-war ally. Justice was delayed, denied or tied up in bureaucratic knots. But did that shabby, perhaps shameful compromise justify Israel’s action in kidnapping Adolf Eichmann from Argentina in 1960 and putting him on trial in a country that did not exist at the time when he was planning and executing the Holocaust?

The unspoken assumption of Neal Bascomb’s book is that the Israeli secret service’s daring and risky plan was not only heroic and skilful, but also justified. It starts by retelling the long and frustrating hunt for Eichmann, whom sympathisers had helped flee to Argentina after the war (a shocking tale in itself). It was a chance remark by one of his sons to a girlfriend who, unknown to him, was half-Jewish, that gave the first clue. Even so, it took years to follow up.

Those who like to believe that Mossad, the Israeli secret service, is the epitome of spookish efficiency may find themselves blinking at some of the mishaps and near-disasters that its posse encountered in Argentina. Clumsy snooping alarmed the Eichmanns, though not enough to prompt them to go into hiding. Having caught their quarry, the Israeli spy chiefs risked detection by ordering a further, madcap attempt to find another fugitive Nazi, Josef Mengele, a doctor responsible for hideous experiments at Auschwitz.

Nonetheless, the operation was both daring and brilliant. Eichmann was snatched from the street on his way home from work. One of the kidnappers—in an unplanned move—managed to persuade him that it would be to his advantage to stand trial in Israel, and put his side of the story. He boarded an El Al plane without protest, disguised as a crew member.

Mr Bascomb’s understandable distaste for his subject does not prevent him giving a good flavour of Eichmann’s slippery arguments once he went on trial: sometimes denying that he did anything wrong, sometimes saying he was only obeying orders, sometimes pleading other extenuating circumstances. He brings out well the paradox of Eichmann’s genuine interest in Jewish history and culture (he greeted his captors with a Hebrew prayer), and the abominable crimes he committed.

Argentina, in those days infested with Nazi sympathisers, was furious at Israel’s action. So were some other countries. Israel was unrepentant. The book spends a bit too long on the minutiae of the hunt and skates rather too quickly over the legal and ethical issues that it raised. Was it really so impossible to put Eichmann on trial in West Germany? The book criticises the prosecution’s conduct at the trial, but with a frustrating lack of detail. A bigger flaw is the re-creation of dialogue 50 years on, a trick that gives the narrative immediacy but erodes the credibility that the author’s research has earned.

Eichmann himself comes across as a pathetic figure, dwarfed both by the evil he committed and the efforts made to catch him. Like most of his fellow Nazis, he was monstrous only when fate gave him power. Without it, he was just a crotchety émigré with unpleasant views on Jews. Yet the story remains a gripping one: the shadowy world of ex-Nazis hiding away in a far-off continent, Germany’s own struggle of memory against forgetting, and a young country’s clamorous desire for justice.

Hunting Eichmann: How a Band of Survivors and a Young Spy Agency Chased Down the World’s Most Notorious Nazi.
By Neal Bascomb.
Houghton Mifflin Harcourt; 400 pages; $26. To be published in Britain by Quercus in September

Baltic economics

[sorry for lack of activity. I am taking longer than expected to get over my hospital excursion]

The troubled Baltics

Still afloat in the Baltic, just

Apr 8th 2009 | TALLINN
From The Economist print edition

The three Baltic economies face a spiralling economic downturn

ONCE the fastest-growing economies in Europe, the three Baltic countries are now the opposite. Latvia, which in December received a €7.5 billion ($10 billion) bail-out led by the International Monetary Fund, is basing its budget on a 13% decline in GDP. Estonia and Lithuania expect a decline of a tenth. A conventional response might be devaluation and fiscal stimulus. But the Baltics’ currency pegs to the euro are a matter of national pride. Moreover, most private borrowing is in euros, so devaluation would mean beggary for many. Instead, the response has been wage cuts meant to regain competitiveness.

Fiscal stimulus is tricky too. Estonia ran a budget surplus during the boom, so has some room for manoeuvre, but even it can risk only a deficit of 3% of GDP permitted by the rules for joining the euro. All three countries want to adopt the single currency as soon as possible, though not by bending the rules: the whole point is to gain credibility, not to enter the club “on a stretcher”, as one official puts it. But as economies shrink, it gets harder to meet deficit targets. Latvia’s new government has been haggling over a 5% ceiling agreed with the IMF, missing last month’s €200m instalment of the bail-out as a result.

The Baltics have no shortage of external support. The European Bank for Reconstruction and Development this week agreed to bail out Parex, a Latvian bank. The IMF has more money to help. But the economic adjustments are still unimaginable in old Europe. Having soft-pedalled reform after joining the European Union, the Baltics now have to make up for lost time, in a climate where they are perilously exposed to the global downturn.

Belatedly, some progress is visible. Inflation and current-account deficits are falling. Latvia has begun unpicking a network of sinecures in nationalised industries. But overdue reforms such as simplifying local government in Estonia are still on hold. Yet compared with the polarised politics and debt-soaked economy of Hungary, the Baltics’ outlook is not bad. None of the three is much exposed to the international financial markets. Their stocks, bonds and currencies are thinly traded. Most of their external debt is owed by local bank branches of Swedish parents. Bits of those loan books have soured, particularly in property and construction. But other parts are still sound. So long as the Scandinavian banks stand by their investments, the Baltics should be all right.

Public protests have been muted and peaceful except for two bust-ups in Lithuania and Latvia. Estonia’s politics look the most solid, with a well-regarded coalition government. Latvia’s government, in office for just a month, is more broadly based than its predecessor and has shed some incompetent figures. Lithuania faces a presidential election in which the front-runner is the EU budget commissioner, Dalia Grybauskaite. Her financial skills may soon be tested, since after the election Lithuania may well turn to the IMF for help.

Belatedly, some progress is visible. Inflation and current-account deficits are falling. Latvia has begun unpicking a network of sinecures in nationalised industries. But overdue reforms such as simplifying local government in Estonia are still on hold. Yet compared with the polarised politics and debt-soaked economy of Hungary, the Baltics’ outlook is not bad. None of the three is much exposed to the international financial markets. Their stocks, bonds and currencies are thinly traded. Most of their external debt is owed by local bank branches of Swedish parents. Bits of those loan books have soured, particularly in property and construction. But other parts are still sound. So long as the Scandinavian banks stand by their investments, the Baltics should be all right.

Public protests have been muted and peaceful except for two bust-ups in Lithuania and Latvia. Estonia’s politics look the most solid, with a well-regarded coalition government. Latvia’s government, in office for just a month, is more broadly based than its predecessor and has shed some incompetent figures. Lithuania faces a presidential election in which the front-runner is the EU budget commissioner, Dalia Grybauskaite. Her financial skills may soon be tested, since after the election Lithuania may well turn to the IMF for help.

Moldova latest from Economist website

Protests in Moldova

Moldova burning

Apr 8th 2009
From Economist.com

Violent protests erupt against the government of Moldova

THE poorest country in Europe is used to being neglected by the rest of the world. But protests against vote rigging in elections held on Sunday April 5th brought Moldova some attention this week. In the past few days youthful demonstrators, who were organised via Twitter and other social-networking sites, stormed parliament and the presidential offices in the capital city, Chisinau. Some threw rocks, broke windows and started fires. As the police belatedly tried to restore order, scores were injured and one person died. Nearly 200 people had been arrested by Wednesday. Amid allegations of foreign mischief-making, Moldova expelled the Romanian ambassador.

The immediate issue is the election result, in which the ruling Communists won a majority in the single-chamber parliament. The election was declared fair by outside monitors, who assessed what happened on the day, but the composition of electoral registers looks dodgy, as does the overwhelming support that the Communists enjoyed from the main media.

The protesters are loosely tied to established opposition parties. They are cross about the election and even more annoyed by the outgoing president, Vladimir Voronin. Mr Voronin has stated that, although he would step down in accordance with the constitution’s term limit, he would stay in politics as a “Moldovan Deng Xiaoping”. That seemed to suggest no change from the economic and strategic failures of the past two decades, which have seen Moldova’s 4m population languish in a geopolitical limbo between Russia and the European Union. Most Moldovans favour Europe but the political elite, mainly Soviet-trained and Russian-speaking, has found it hard to break old ties and habits.

Mr Voronin has wobbled in both directions. Of late he has seemed to favour ties with Moscow, chiefly because a deal with the Kremlin seems to offer the only hope of solving the frozen conflict with the self-declared state of Transdniestria. This densely populated and industrialised sliver of land on the eastern bank of the Dniester river has maintained an unrecognised independence since a brief civil war that finished with Russian intervention in 1992. Western attempts to resolve that debilitating impasse have got nowhere, whereas Russia has kept up a stream of initiatives.

With decent leadership and goodwill on all sides, it would be possible to have friendly relations with both Russia and the EU. But Moldova’s leaders have ended up with the worst of both worlds, ignored by the EU and bamboozled by Russia.

The most divisive question is relations with Romania. The Moldovan Soviet republic, which gained independence in 1991, was carved out of pre-war Romania in 1940, as a consequence of the Hitler-Stalin pact; Transdniestria, always in Russian hands, was bolted on. Nico Popescu, of the European Council of Foreign Relations, says that demands for closer ties with Romania have strengthened in recent years, as that country’s EU membership has contrasted ever more sharply with Moldova’s status as a “semi-failed state”. As well as EU flags, some protesters this week carried Romanian ones.

That has infuriated the Moldovan authorities. They find it much easier to fight the bogeyman of Romanian revanchism and chauvinism than defend their own dismal record in office. Andrei Popov, of the Foreign Policy Association, a Moldova-based think-tank, believes that the authorities may even be exaggerating the pro-Romanian element in the protests in order to discredit the opposition’s wider political demands.

There is little evidence that Romania has made a big effort to undermine Moldova. Romanian politicians, notably the president, Traian Basescu, have made grandiloquent and tactless statements. The mutual detestation between him and Mr Voronin is legendary. One practical Romanian policy has proved controversial: allowing Moldovans with roots in the pre-war Romanian state to apply for passports.

The political upheavals cry out for attention from the EU, which has failed to get to grips with Moldova’s ills. As with Ukraine’s orange revolution five years ago, it may take a heavyweight outsider to get talks going between entrenched but discredited authorities and an enthusiastic but incoherent opposition. If Europe cannot solve Moldova’s problems, it is hard to see much future for the trumpeted “Eastern Partnership” which is meant to reinvigorate EU policies towards the six ex-Soviet countries on its eastern borders.

Europe view 124--time to boycott France?

Europe.view

Plus rien de français?
Mar 26th 2009
From Economist.com


Skoda, blancmange and the price of principle

FRENCH politicians seem to see no benefit from economic integration with eastern Europe. The industry minister wants to “repatriate” jobs from Slovenia. President Nicolas Sarkozy says it is unacceptable that French manufacturers make cars for the French market in the Czech Republic.

That may just be rhetorical pandering to the protectionist views of the French public. But it is still offensive to the east Europeans, and could prompt a severe response—such as a boycott of French-made products.

Since 1989, the ex-communist countries have played by western rules. They have stabilised, privatised, liberalised, and opened up—the kind of wrenching economic reform that is the stuff of nightmares for the cosseted workers of old Europe. True, the easterners could have gone further (especially in reforming public finances, state bureaucracy and education). With pitifully little debate, they had to swallow a colossal (and largely French-drafted) European rulebook, with an array of stupid and unpleasant rules and penalties for breaking them, on everything from sugar prices to school kitchens.



While countries such as Britain sit neurotically on the sidelines, the new members yearn to gain admission to EU clubs such as Schengen (visas), Prüm (policing) and of course the euro zone.

That was in these countries’ own interest. Paying a price to be in the clubs that matter was better than staying outside. Yet the easterners’ feel their enthusiasm and cooperativeness have met little gratitude in the west. Their occasional bouts of chippiness and clumsiness are blown out of all proportion. The failure of Romania and Bulgaria to meet anti-corruption targets has tainted the whole region’s image. The Atlanticist loyalties of the new members have been mocked and distrusted.

France was in the forefront of such criticism, and also led the resistance in “old Europe” to the extension of the single market to labour and services. The new member states are still second-class citizens of Europe when it comes to working abroad or exporting their brainpower.

Now France is close to a head-on clash with the fundamental principles of the single market in goods. The next stage could be preferential treatment of domestic producers in government tenders. After that, it is easy to see a slide towards real protectionism in Europe. With the economic glue that holds the EU together weakening, the political links will fray too. In a race to the bottom, the biggest and richest countries will do best (or least badly). The poorer and smaller ones will be left humiliated, impoverished and resentful.

It would be rash to rely on the competition directorate and EU law to stop this dangerous drift. Much better would be to apply a sharp dose of economic pressure. Stroppy French workers may not realise it, but the ex-communist countries are one of their country’s biggest export markets. Renault, for example, sells more than 1m vehicles in eastern Europe. In 2008, France exported €21 billion ($28.5 billion) to the new member states of the EU (compared with €23 billion to the United States).

Boycotting all “French” goods would be a blunt instrument. Many French-badged cars are actually made in places like Poland. And many French-made products are not easily substitutable (Lithuanian šampanas has its charms, but even its die-hard fans don’t quite consider it an alternative to champagne).

But a slogan on the lines of “Aux armes, citoyens de la nouvelle Europe! Plus rien de Français!” would deliver a timely message. Georgian wine, Hungarian foie gras, Polish salami, Skoda cars, Italian fashion and skiing in Slovakia are all alternatives to the French-made offerings. Even—if you want to be really insulting—British cuisine.

BBC Radio 4 programme "Decision Time"

I can be heard discussing Russia with Sir Roderick Lyne, Sir Malcolm Rifkind and others here

Europe.view no 124

Fit as a Finn
Mar 19th 2009


What the rest of Europe can learn from the Nordic countries

IMAGINE some mythical countries called Badland, Eastland, Rohan, Northland, Southland and Midland. At the end of the 1990s, say, oil is found off the shores of Midland. A number of ethnic Northlanders live in the area of the oil find, and hence Northland claims the right to the oil. This leads to a conflict between Midland and Northland.

The conflict simmers for a few years, and escalates when Northland attacks Midland, conquering large swathes of land and sea, among them those containing the oil. Outsiders intervene and a United Nations force called UNMIMA (United Nations’ Mission in Midland) is created. UNMIMA successfully brokers a cease fire deal, and Northland withdraws. But the vacuum is filled by an irregular military force.

The UN Security Council then requests that NATO lead a multinational peacekeepng force to the conflict area.

That is the scenario for Cold Response, the annual military exercises in Norway that are running until March 25th of this year. Around 7,000 soldiers from 14 countries are participating. Some are part of the NATO-led peacekeeping force. Others will be part of the forces of other countries, such as defeated, resentful Midland and the irregulars from Northland.



Clearly, this scenario is not a template for a real conflict, unlike in cold-war days. Then NATO’s military exercises in Germany were broadly based on one central scenario: a huge Soviet conventional attack, and a desperate attempt to hold it back long enough for reinforcement from America to arrive. Nobody worried about Austrian nationalists seizing bits of northern Italy, or a reopening of the Schleswig-Holstein question.

The Cold Response scenario is clearly hypothetical. It has elements of last summer’s Georgian war, but with a Baltic flavour. Leave out the oil (and call it a fight over a port or a pipeline) and allow for Midland to be more like neutral Moldova than NATO-member Latvia.

In real life, if Russia was Northland (or supporting it) it is hard to see how the UN Security Council would be able to mandate any kind of intervention. Cynics might also wonder how enthusiastically Germany would support a NATO mission to quash an insurrection connected with Russia.

Cold Response is interesting not as futurology, but for what it reveals about Nordic defence planning now. Norway, a NATO member, is hosting an exercise in which non-aligned Sweden and neutral Finland are participating in force. It is the clearest sign so far of the burgeoning defence-and-security cooperation between the three countries. Denmark and France also have battalion-strength contingents.

The exercise comes on the heels of the much-delayed report by Thorvald Stoltenberg, a former Norwegian foreign minister. Published in February, it recommended much closer defence cooperation between the five Nordic countries in the Arctic region. It contained no fireworks, concentrating instead on search-and-rescue, and other uncontentious issues. It did not mention Russia as a threat. Countries such as Finland are keen to portray Nordic cooperation as cost-saving exercise, rather than anything more strategic.

Nonetheless, the Cold Response exercises in Norway send some interesting signals, not only to the counterpart countries in the region of the notional “Midland”. It also highlights the distance NATO still has to travel in contingency planning and exercises aimed at bolstering the alliance’s territorial defence, rather than just fighting wars in distant places.

Cold Response is just an exercise. But it is exercises that keep people fit. The Nordics are looking trim, while much of Europe is still flabby.

europe view column

Europe.view

Put the beam before the mote
Mar 12th 2009
From Economist.com


Eastern Europe should not be tempted by paranoia

WAS it all a conspiracy? It is not the first time in east European history that the question has been asked. Wicked western manipulators were a staple of communist-era propaganda. Before that, anti-Semitic politicians used to blame Jews (and Freemasons) for manipulating the destiny of other countries. In the 19th century, the German, Austro-Hungarian, Czarist and Ottoman empires kept almost the whole region from the Baltic to the Black seas divided up between the great outside powers.

Now the conspiracy theory is back again. Somebody was spreading rumours. Somebody with foreknowledge or malevolent intent was shorting currencies, stocks and bonds. Someone was using sinister-sounding financial instruments such as credit-default-swaps so that whatever happened, they would profit from a panic. These somebodies could be anywhere, but they are certainly foreign.

Or maybe it is all a plot by Germans to push the Austrian banks into bankruptcy so that they can buy them up cheaply. Or maybe it is a means for “old Europe” to destroy the competitive threat from the unloved “new Europe”. Or a French-German plan to create a core Europe round the euro zone, excluding the troublesome countries farther east. Or it is all some super-clever plot by the ex-KGB regime in Russia, details to be announced later. All that is missing is hook-nosed men in ringlets drinking the blood of Christian children.

The truth is more prosaic. Financial markets are usually wrong, often hugely so. When greed trumps fear they are over-enthusiastic, believing all kinds of positive nonsense and pouring money into dodgy companies and countries. Then the tide turns and they overreact, dumping perfectly good assets in an attempt to get their books in order.

Anyone tempted by the idea that outside conspiracy is to blame for eastern Europe’s woes should first reflect on the past. Was it an outside conspiracy that led supposedly sane Western institutions to lend tens of billions of dollars to Russian companies notable for their weak corporate governance and cash-splattered business models? Was it a western conspiracy that made supposedly sane people buy homes in derelict rural slums in Bulgaria in the belief that it was the new Dordogne? Was it a Western conspiracy that equated the reforms that were promised in the run up to European Union membership with actually making government transparent and efficient?

The right word for this is not “conspiracy”. Something like “groupthink” or the “madness of crowds” would be a better term. In any market movement, there will always be people who profit by betting against the herd. The wise investors who bailed out of the Russian short-term treasury bill market in early August 1998 made a packet. Those who stayed in lost a fortune. They left for the airport, in one case vowing that they would rather “eat nuclear waste” than invest in Russia again.

Conversely, savvy investors who bought at the bottom of the market in late 1998 have done well. A few years later nuclear waste was back on the menu, as investors praised the stability and prosperity of Vladimir Putin’s regime and guzzled anything in sight. Anyone who said that the good times came from rising oil prices rather than real reform was drowned out in a chorus of hurrahs. Again, some people sold their Russian assets in time. No conspiracy there, just foresight, or luck.

As so often with market downturns, the pain and unfairness now seem intolerable. It may perhaps be some consolation that the gloomiest and most ignorant outsiders are those most likely to lose out.

Warsaw Ghetto book review

The Warsaw ghetto

From beyond the grave

Mar 12th 2009
From The Economist print edition

A remarkable secret archive tells the story of life in the Warsaw ghetto

Who Will Write our History? Rediscovering a Hidden Archive from the Warsaw Ghetto By Samuel D. Kassow Vintage; 522 pages; $16.95. Allen Lane; £10.99 Buy it at Amazon.com Amazon.co.uk

THE Nazis succeeded in exterminating millions of Jews. But they did not succeed in extinguishing their history. That is the story told by Samuel Kassow, an American historian, in a poignant and detailed account of the secret archive of the Warsaw ghetto.

In the autumn of 1940, Warsaw’s Jewish population, swollen by forced immigration, amounted to nearly 450,000 people, all of them walled into an area covering less than four square kilometres. By early 1942 about 83,000 had died from hunger. That summer 300,000 were sent away to death camps, mostly to Treblinka. In April and May 1943 the remaining 60,000 were killed, or captured and deported, in the Warsaw ghetto uprising, during which the Germans levelled that part of the city.

Mr Kassow starts his story amid the passionate arguments among Jews in the declining days of the three great empires: the German, the Austro-Hungarian and the Russian. Was the great dream to be integration? Was it in identification with the surging national consciousness of countries such as Poland, at that stage still partitioned? Was it emigration to a Jewish state in Palestine? Or in the hope of a socialist paradise based on a brotherhood of man rather than ethnic, religious or national affiliation? Or some mixture of the above? Was Hebrew the real language of Jews, or a snooty, artificial distraction? Was Yiddish a degenerate linguistic compromise, or the essential literary and political medium?

After the first world war, those arguments became more pressing. A Jewish state was taking embryonic form in Palestine. The Soviet authorities launched a rival Yiddish-speaking Jewish homeland, Birobidzhan, in a desolate corner of the Russian far east. The newly reborn Polish republic offered the chance of partnership with gentile Poles in a common homeland, albeit one marred by prejudice and discrimination.

The task for Jewish historians in those years was finding an account of their past that would help make sense of the arguments about the present. What role, for example, had Jews played in the Polish monarchy before its dismemberment in 1795? Was the Polish-Lithuanian Commonwealth really a paradise of tolerance, or was that just another myth among so many others? Gentile historians’ accounts were inevitably partial. The Jewish collective memory, with its colourful, folkloristic stereotypes of poor beggars, rich merchants and pious rabbis, was a help, but not an answer. Documents were scanty or missing altogether.

That effort gathered pace after Poland regained its independence in 1918. A pioneer was the young Emanuel Ringelblum, a passionate activist in the left-wing Poale Zion movement. Starting as a student in 1920, he was to become one of his country’s best historians, up to his death in the ruins of the Warsaw ghetto in 1944. Ringelblum is the central character in this book; although it is not a formal biography, the author does an excellent job of accumulating the scraps of information and recollection that have survived the human and archival destruction of the war.

With fine Yiddishist instinct, Mr Kassow does an excellent job too of evoking the atmosphere of those years, particularly the YIVO institute in Wilno (now Vilnius), which was founded in 1925 to give class and clout to Jewish scholarly efforts. The early chapters of the book, full of hope and productive energy, make the final ones all the more effective. The hugely subtle, interesting and complicated world of Jewish thought and culture boiled down to a bitter fight over bread or over scrappy permits; either might hold off death for another few days.

The Jews of the Warsaw ghetto could not prevent their own murder. But thanks to the Oyneg Shabes, the secret archive organised by Ringelblum and other historians, at colossal personal risk, they were at least able to record what they thought, felt and saw. The archive ranged from raw eyewitness accounts to scholarly histories, such as Ringelblum’s own lengthy analysis of Polish-Jewish relations. About 35,000 pages (only a fraction of the whole) survived the war, buried in milk churns and tin boxes. Some were carefully soldered shut; others had leaked, leaving an illegible soggy lump requiring painstaking conservation work. That the documents came to light at all is thanks to the persistence of Rachel Auerbach, one of only three survivors of hundreds of people involved in the project. It was she who went to Warsaw in 1946 and demanded that the cold and hungry survivors of the city’s destruction make the effort to dig out the caches from the ruins.

Locked up for years in the Jewish Historical Institute in Warsaw, the documents have only recently been substantially restored. A full catalogue has yet to be made, but the papers about Ringelblum that Mr Kassow has studied give a vivid, sometimes unbearable, picture of the ghetto’s destruction at the hands of the Nazis, and of the efforts made to preserve a semblance of civilised life that had succumbed to the elemental desire for survival.

The archive also illustrates the tension that exists between the Jewish and gentile experience of the war in Poland. The summer of 1939 had aroused a remarkable sense of solidarity between both peoples; that soon gave way to harsher feelings. Some Polish gentiles outside the ghetto taunted its inmates for their passivity (while at the same time grudging them supplies of arms and ammunition). Nazi anti-semitic propaganda about “Judeo-Communism” had some effect. So did self-interest; dead Jews were unlikely to want their pre-war property back. A poignant short piece by a Jewish poet, Wladyslaw Szlengel, an ardent Polish patriot, sums it up. With no gentile Polish friends left to talk to, he takes comfort in telephoning the speaking clock.

How great it is to talk to you
No quarrels, no words
You are nicer, my little time clock
Than all my former friends.

It is a pity that the author does not give a little space to the view of the ghetto from the outside. And the use of “Pole” as the antonym for “Jew” may jar with some. Many of the people he writes about would have said they were both. But the book remains an informative and moving reminder of what was lost in the Holocaust and the ingenuity and heroism of those who tried to frustrate its perpetrators.

Ruthenia

I am still deluged with work involving the libel case so my journalistic output is very restricted. Sorry


Ruthenia

A glimpse of daylight

Mar 12th 2009
From The Economist print edition

Ruthenia was once independent, for one day. Now Ruthenes are getting restive

FOR connoisseurs of obscurity, the Republic of Carpatho-Ruthenia takes some beating. Seventy years ago, on March 15th, it enjoyed its sole day of independence—declared in the morning amid the Nazis’ dismemberment of the then Czechoslovakia, snuffed out in the evening by an invasion from neighbouring Hungary. Its leader, Avhustyn [Augustin] Voloshyn, died in a Soviet jail in 1945; so did many others. Before the world had even noticed its existence, independent Ruthenia disappeared into first the Nazi, then the Soviet empires.

Ruthenians have had little joy since. A list of famous Ruthenes begins and pretty much ends with Andy Warhol: the artist did not himself speak Ruthene, though his parents did. He once said he had “come from nowhere”. Many Ruthenian activists feel that way, too.

A million-plus by the most generous count (but far fewer according to sceptics), Ruthenians are scattered through the Carpathian regions of Slovakia, Poland and Ukraine, with another bunch in former Yugoslavia. Some are Orthodox, but most are eastern-rite Catholics. That prompted savage suppression in the communist era.

Many doubt the Ruthene claim to any form of national identity. Even the placename is disputed. Czechs and Slovaks, looking east, tend to talk of “Sub-Carpathia”; Ukrainians, looking west, talk of “Trans-Carpathia”. Communist rulers denied Ruthenes existed at all. Ukraine recognised them as an ethnic minority only in 2007. The language—sometimes called Rusyn—is dismissed as a mere dialect of established Slavic tongues, even by some who speak it.

But the Ruthenian cause is stirring. In western Ukraine, Ruthenian revivalists have demanded self-determination. One group has even declared independence. Their self-proclaimed prime minister, Petr Getsko, told a Russian government newspaper in December that the “lion’s share” of Russian gas exports to Europe pass through pipelines across Ruthenia.

In Slovakia, self-declared Ruthenians are more numerous, but shun the separatist strivings across the border. Overshadowed by Slovakia’s much larger Hungarian and Roma (Gypsy) minorities, they would be happy with just a little more schooling and broadcasting in their fragile language.

Hermann Simm

A spy scandal in Estonia

How many more?

Feb 26th 2009 | TALLINN
From The Economist print edition

A senior Russian spy in NATO is convicted

Get article background

WHY he did it is still unclear. But the “how” is leaking out. Hermann Simm, a former Estonian official who was one of Russia’s highest-placed spies in NATO, pleaded guilty to treason on February 25th and was jailed for 12½ years. The Estonian authorities have released some details of a case that has had the spook world buzzing for the past year.

Yakovlev, the man who ran Simm

Russia’s foreign intelligence service, the SVR, recruited Mr Simm on his holiday in Tunisia in 1995. He was a prime catch. He had finished a stint as a top policeman, and was starting a new security job at the defence ministry. The approach was made by Valery Zentsov, once a KGB officer in Soviet-occupied Estonia. Mr Simm was neither blackmailed nor, at first, bribed; he just wanted his Soviet-era rank of colonel back. At a third meeting he was put on the payroll, receiving just over $100,000 in all.

Mr Simm betrayed every secret that crossed his desk. There were plenty: as the man in charge of Estonia’s national security system, he organised the flow of all classified military documents in the country and abroad. Once Estonia joined NATO in 2004, he acted as the Kremlin’s eyes and ears on the alliance too (although his poor English, say some, may have limited his usefulness). He also tried but failed to get hold of secrets from Estonia’s security and intelligence services, which are separate from the defence ministry.

In 2002, say Estonian officials, Mr Zentsov was replaced by another Russian handler. Sergei Yakovlev worked for the SVR’s elite S-directorate, which runs “illegals”: spies who acquire a genuine identity in a foreign country. Mr Yakovlev, a near-native speaker of Portuguese, appears to have acquired Portuguese citizenship illegally, gaining a passport in the name of Antonio de Jesus Amurett Graf. Travelling as a business consultant, he met Mr Simm every three months or so, in at least 15 countries in the EU and elsewhere.

The plan came unstuck because of poor spycraft. According to spycatchers elsewhere, Mr “Graf” tried to recruit a senior official in another country, who reported the incident to his own counter-intelligence service. Under scrutiny, the Portuguese was seen meeting Mr Simm. That set alarm bells clanging across NATO. The difficulty was to observe Mr Simm closely enough to build a criminal case without sparking his suspicion. Estonia’s security service is getting many plaudits for this, which culminated in his arrest last September. In a separate prosecution, Mr Simm was ordered to pay 20m Estonian kroons ($1.7m) for the cost of new security systems. The SVR did not immediately reply to a request for comment.

Mr Simm is not the only Russian spy at high level in NATO. Several other countries are apparently following up five leads arising out of Mr “Graf’s” activities. The results are unlikely to become public. The way in which Estonia put Mr Simm openly on trial is striking. In other countries, those caught spying for Russia tend to be eased out discreetly rather than being brought to justice in the painful light of day.

europe view

Europe.view

Insult and penury

Mar 5th 2009
From Economist.com

Responding to western neglect and ignorance

THE economic crisis is still unfolding across the ex-communist world. Amid the genuine worries about jobs and savings are some other concerns—less substantial, but more toxic.

The biggest is resentment of the outside world’s neglect and ignorance.

How can western commentators lump Slovenia together with Tajikistan as “ex-communist countries”? Why do people confuse Poland’s sound public finances with Ukraine’s catastrophic ones? Why do the frugal Czechs with their solid banking system get lumped together with spendthrift Hungarians? Why does nobody give the countries any moral or political credit for what they have achieved? If any west European country faced the kind of jarring adjustment now being experienced in, say, Latvia, it would expect political upheavals.

Even those political protests that have bubbled up have been hugely exaggerated. It is quite reasonable—even responsible, one could argue—for the public in Latvia, Lithuania, Bulgaria and other countries to feel a bit cross with the politicians who led them into this mess. Isn’t that what political freedom is about?

On top of outsiders’ neglect and hypocrisy comes abandonment. Having painfully climbed into western clubs after five decades of communist captivity, the most advanced ex-communist countries now feel patronised and excluded. If feckless Greece, stagnant Portugal and overheated Ireland look like going bust, the rich countries of the euro zone will bail them out. But the rules for ex-communist countries wanting to join the single currency are arbitrary, and harshly imposed. Lithuania missed eurozone entry by seven-hundredths of a percentage point. Now Poland and Hungary want accelerated entry into at least the waiting room for the euro, and are snubbed.

It is much the same in NATO. Signals that the new American administration may be thinking of a bargain with the Russians over missile defence (you stop or slow down the Iranians, we stop or slow down our new bases in the Czech Republic and Poland) cause even more twitchiness. So new member states feel that they are in the second class compartment in matters of economic and military security.

Such feelings are understandable, but they are a poor basis for action. It was a similar story 20 years ago, when incredulous Sovietologists had to accept that something called “Ukraine” might become a real country and that the “Soviet Baltic Republics” were actually occupied territories on the verge of regaining their freedom. The West had to wake up rather uncomfortably to the news that tens of millions of people who had once been behind the Iron Curtain were now on their doorstep, eager to compete and integrate. It took several years to get the maps right, let alone to work out how to deal with the countries they depicted.

Gaining membership in the EU and NATO, the great achievement of the past decade, took years of hard slog for the countries concerned. The aim then—at least for the most ambitious applicants—was not just to meet west European standards, but to beat them. That happened quickly in some bits of the business world, but the same transformation often lagged in public administration, education, health and transport.

None of that mattered much in boom times. But it meant the ex-communist countries entered the current stormy weather in less than top condition. All too often, their public finances were soggy, bureaucracies unreformed and politicians complacent. The best way to change perceptions is to make them utterly inaccurate, not blame people who hold them for their ignorance, however galling it is.

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earlier leader (editorial) piece on CEE

Eastern Europe

Argentina on the Danube?
Feb 19th 2009
From The Economist print edition


Europe is facing nightmarish problems in its east. With help from the West, meltdown can be avoided

Correction to this article

IF YOU mix East Asia from 1997 with Latin America in 2001, do you get eastern Europe in 2009? Already worried, financial markets are pricing in the likelihood that one or more of the ex-communist countries in the region will default on its debt.

The biggest weakness lies in a financial system that has combined badly run local banks with loosely overseen subsidiaries of Western ones. During the boom years, this system gobbled up credit from abroad, leading to yawning current-account deficits. Both kinds of banks now have souring loan books—the result of reckless lending, often in foreign currencies. Some local banks have failed; many of the foreign-owned ones now depend on their parents’ willingness to keep financing them—and those parents have plenty of problems at home. The Greek government has told its banks to draw back from their lending in the Balkans. Austria’s lending to eastern Europe is equivalent to about 80% of its GDP.

If finance is the immediate worry, the global downturn is causing plenty of other problems. Exports of manufactured goods to western Europe have plummeted; remittances from migrant workers employed there will also surely fall. Ukraine, dependent on exports of steel and coal to Russia, seems to have abandoned the deal it struck with the IMF only three months ago as part of a $16.4 billion bail-out. Latvia, also rescued by the IMF, is expecting a 12% fall in GDP this year. The collapse in output is likely to be as big as Asia’s ten years ago—but with a twist. The Asian countries recovered thanks to export-led growth. Now the whole world is in a mess.



What can the governments do? In many places the policy levers look flimsy. Countries such as Poland and the Czech Republic have cut interest rates to help ease the pain—but this has sent their currencies tumbling, increasing the agony for households that have mortgages in Swiss francs or euros [bad wording here--I meant for Hungarian and Polish households, not Czech ones.EL]. Some countries have an extra problem of big external government debts (in Hungary’s case, the gross figure is near 100% of GDP)[another mistake, I meant gross as in private and public combined]. Even those that could perhaps afford to run a counter-cyclical policy to offset the effects of the downturn are squeezing public finances—in part because they think that cutting deficits will help them reach the (presumed) safety of the euro zone.

For four countries—the three Baltic states plus Bulgaria—the strong euro is a problem; they have pegged their currencies to it. Some fear a repeat of the doomed struggle to keep Argentina’s currency board afloat in 2000-01; or perhaps worse if one currency’s collapse swamps others. As for help from abroad, the IMF can give instructions to individual countries, but it cannot run the whole region. The European Central Bank, which is not a lender of last resort even to banks in the euro zone, has been sniffy about lending to countries outside it.

Worse for some, much worse for others

A very nasty recession is inevitable, but regional catastrophe is not. For a start, talk of “eastern Europe” is imprecise. The woes of Kazakh banks or of Ukraine’s public finances have little to do with the countries, mainly smaller, richer and better governed, that are already in the EU. If Ukraine defaults or (more likely) is forced to restructure its debt, it need not hurt others. Though the region has allowed startling imbalances to develop, foreign-exchange reserves are generally stronger than in Asia ten years ago; and there is less light-footed “hot money”.

For the new EU members, there is also the prospect of help from the West. Their banking systems are far more intertwined than Asia’s were—and the foreign banks are less likely to walk away (see article). The Baltic countries have been bolstered by a Swedish guarantee covering Swedish banks that operate there. Although the EU and the ECB may not want to get involved in bigger bail-outs, they will have to. Even the most short-sighted west European politician will surely not send his neighbours into economic and political anarchy.

This is the most perilous period for east European countries since the collapse of the Soviet Union. People there are going to be a lot poorer and (justifiably) crosser. But it would take a bout of wilfully destructive protectionism and the demise of the EU’s main institutions to turn that into disaster.

Briefing (three-pager) on CEE Economies

Having dropped everything because of the libel suit, I undropped it all briefly to write this piece which actually came out a week ago. Sorry for not posting it earlier

Ex-communist economies

The whiff of contagion

Feb 26th 2009
From The Economist print edition

Eastern Europe’s woes are not unmanageable. But they are not being managed. The result could be catastrophe

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Correction to this article

Sarah Hanson

AMID the wreckage of Latvia’s retailing industry, which has declined 17% year on year according to the latest figures, one item is selling well: T-shirts with seemingly mysterious slogans such as “Nasing spesal”. Latvians are glad to have something to laugh about, even if it is only their finance minister, Atis Slakteris. In an ill-judged foreign television interview, using heavily accented and idiosyncratic English worthy of the film character Borat, he described his country’s economic problems as “nothing special”.

Put mildly, that was an original interpretation. Fuelled by reckless bank lending, particularly in construction and consumer loans, Latvia had enjoyed a colossal boom, with double-digit economic growth and a current-account deficit that peaked at over 20% of GDP. Conventional wisdom would have suggested applying the brakes hard, by tightening the budget and curbing borrowing. But the country’s rulers, a lightweight lot with close ties to business, rejected that. Fast economic growth made voters feel that European Union membership was at last producing practical benefits, after a disappointing start when tens of thousands of Latvians went abroad in search of work, leaving rural villages and small towns depopulated.

The central assumption, in Latvia and many other countries in or near the EU, was that convergence with rich Europe’s living standards and other comforts was inevitable. Lending in foreign currency went from 60% of the total in 2004 to 90% in 2008. Why pay high interest rates in the local currency, the lat, when the cost of a euro loan was so much cheaper? In a few years Latvia would surely join the euro anyway. Similarly, worries about financing the inflows were dismissed: Swedish banks would no more abandon their subsidiaries in Latvia than they would pull out of, say, southern Sweden.

Last year tested those assumptions nearly to breaking point. First, Latvia’s housing bubble popped. Then the main locally owned bank, Parex, went bust and had to be nationalised, amid fears that it could not pay two syndicated loans due this year. In December Latvia accepted a humiliating €7.5 billion ($9.56 billion) bail-out led by the IMF.

The big cuts in social spending that the package entailed led to vigorous public protests. Now the government has resigned. At a time when strong leadership and public trust are needed more than ever, the country’s squabbling and discredited politicians look hopelessly out of their depth. Latvia is an economic pipsqueak, with just 2.4m people. But the rest of the region is watching nervously, fearful that more bad news from the Baltics could bring others crashing down too.

It is easy to be pessimistic. This is indeed the worst economic crisis since the collapse of the communist planned economies and the wrenching process of privatisation, liberalisation and stabilisation that followed. The main ex-communist economies are likely to contract by 3% this year, according to Capital Economics, a consultancy. Yet the picture is not uniform.


Only a few countries have needed an IMF bail-out. One is Latvia, whose economy is set to contract by at least 12% this year, and whose credit rating has just been downgraded by Standard & Poor’s to junk. Another is Hungary, burdened with a larger debt-to-GDP ratio than almost any other new EU member. It received $25 billion in October and faces a contraction of up to 6%. A third is Ukraine—chaotically run, corrupt and badly hit by the slowdown in its main export market, Russia. Ukraine’s IMF deal brought it $4.5 billion in November. But a second tranche of $1.9 billion is stuck; the deal is unravelling as politicians squabble over spending cuts. Its economy is likely to shrink by 10% this year. Other countries with IMF packages agreed or pending include Belarus (a Russian ally which is still expected to see growth this year), Georgia (which was bailed out after last year’s war with Russia) and Serbia.

Most other countries in the region are faring much better, though. Poland—by far the largest economy of the new EU members—is nowhere near collapse. Unlike its central European neighbours, it is big enough not to depend chiefly on exports to the rest of the EU. By European standards, its public finances are in fairly good shape. Its debt-to-GDP ratio is below 50%. Growth will be negligible, or slightly negative, but nobody is forecasting a big decline. Some Polish firms and households have taken out foreign-currency loans—but the figure is around 30% of all private-sector lending, compared with twice that in Hungary.

The second-biggest economy, the Czech Republic, is in good shape too. Its economy may shrink by 2%, but it has a solid banking system and low debt. Its neighbour Slovakia is in better shape still: it managed to join the euro zone this year. Like Slovenia, which joined two years ago, Slovakia can enjoy the full protection of rich Europe’s currency union, rather than just the indirect benefit of being due to join it some day.

Farther afield, the picture is very different. For the poorest ex-communist economies, the problem is not financial meltdown. They lack much to melt. Their exports are raw materials, agricultural products and people. In six countries, money sent home by foreign workers counts for more than 10% of GDP (in Tajikistan and Moldova it is more than 30%). Outsiders who agonise over the Latvian lat or Hungarian forint are rarely bothered with worries about the somoni (Tajikistan), leu (Moldova) or manat (Turkmenistan).

That highlights an important problem. Outsiders tend to lump “the ex-communist world” or “eastern Europe” together, as though a shared history of totalitarian captivity was the main determinant of economic fortune, two decades after the evil empire collapsed. Though many problems are shared, the differences between the ex-communist countries are often greater than those that distinguish them from the countries of “old Europe” (see table).

They range from distant, dirt-poor despotic places to countries in the EU that are not just richer than some of the old ones, but have better credit ratings, sounder public finances and stronger public institutions. In almost any contest for good government, stability or prosperity, Slovenia (under a sort of communism until 1991) looks better than Greece, which invented democracy and was never communist.

The thirst for capital

Historical and geographical quibbles aside, what the ex-communist countries have shared over the past decade is a mighty thirst for capital. Having missed out on decades of growth and integration with the outside world, almost all (a few oddballs in Central Asia aside) are trying to catch up. Money from abroad has come in from borrowing on the bond market, from foreign direct investment or from selling shares. Most often it has come through bank loans.

At one extreme is Russia, which enjoyed huge external surpluses thanks to its wealth of raw materials. But its big companies borrowed lavishly on the strength of that, creating a potential short-term debt problem. Russian corporate borrowers have to pay back around $100 billion this year. At the other extreme lie countries such as Slovakia. They attracted billions from foreign car manufacturers, drawn by a skilled workforce, low taxes and decent roads in the heart of high-cost Europe.

Countries that relied chiefly on foreign direct investment are the least vulnerable now. The new factories may shut down. But it is harder for that capital to flee. Those that rely on foreign investors buying their bonds, such as Hungary, are the most vulnerable: their fortunes vary with every twitch of a trader’s fingers. In the middle are those that rely on lending from foreign banks to their local subsidiaries. That looked solid in the boom years, as Western banks scrambled to win market share by offering good terms to borrowers and lenders in the fastest-growing bit of Europe. It is still highly unlikely that any Western bank will pull the plug on a subsidiary anywhere—even in troubled Ukraine.

But nerves are jangling. The ex-communist countries have survived the first phase of the crisis, thanks to their own policies and some external support. The second phase, in which the rich world is turning stingier and possibly more protectionist and lenders are scurrying to safety, may be harder. The ex-communist economies must repay or roll over a whopping $400 billion-odd in short-term borrowings this year. Coupled with the lazy but easy lumping of nearly three dozen countries together, that creates the region’s biggest danger: contagion (see article). In other words, failure in one place sparks a disaster in another, even though it may be far away and have the same problem in a far more manageable form.

Contagion could happen in many ways. One is if depositors lose confidence that their savings are safe. So far, Western-owned banks have enjoyed rock-solid credibility: more so, in many cases, than governments or other public institutions. But that confidence could be undermined. If only one foreign bank pulls the rug from under one local subsidiary, leaving depositors stranded, it will cloud perceptions of banks’ reliability across the region. The most dangerous kinds of bank runs would be those in which depositors try to pull out either their foreign currency, or local currency which they would then attempt to convert into hard currency. In some countries that could overwhelm the ability of the central bank to support the financial system.

Another weak point is where shareholders take fright. If a foreign bank with big exposure to the region—Swedish, Austrian or Italian—needs to raise more capital but finds that outsiders think its loan book is too risky, what happens? The price of rescue may be that it sheds a troubled foreign subsidiary. Signs of shareholder twitchiness are growing (see chart).

For now, the most likely source of contagion is collapsing currencies. The paradox is that for countries with floating exchange rates, an orderly depreciation would in normal circumstances be a good way of cushioning an external shock, such as the slump in export markets now hitting the ex-communist economies. It stokes competitiveness and, along with lower interest rates, it lays the foundations for a return to growth. Governments with sound public finances might also consider running a looser fiscal policy to counteract the downturn.

Propping up the currency

For most of the countries in the region, such a textbook response is out of the question. Some have currency boards, or pegged exchange rates. In the Baltic states these have been the centrepiece of economic policy for more than 15 years. Abandoning them would not only bankrupt big chunks of the economy that have borrowed in euros. It would also be a huge psychological blow to public confidence in the whole idea of independent statehood. These countries have suffered the most painful part of being in the euro zone—the inability to devalue and regain competitiveness—without getting all the benefits.

Countries with floating exchange rates have a bit more room for manoeuvre. Their problem (a big one in Hungary, a lesser one in Romania and Poland) is that falling exchange rates may bankrupt the firms and households which have, in past years, taken out unwise loans in foreign currencies, chiefly euros and Swiss francs. That was, in effect, a convergence play. If you believed your country was heading for the euro zone some time in the next few years, then why not take advantage of the low interest rates there, rather than suffer the higher ones in your domestic currency?

What seemed a minor risk back then now looks painfully mistaken. For those earning forints or Polish zloty, the big swings in exchange rates in recent weeks have sent the size of both loans and repayments spiralling upwards. The zloty has dropped 28% and the forint 22% against the euro since the middle of last year. If the East Asian crisis of 1997 is any guide, these and other currencies may yet have further to fall.

This risk of a currency collapse will limit these countries’ options. So far many big central European countries have cut interest rates heavily to try to boost their economies—Poland’s central bank cut its policy rate again this week. But currency weakness will limit their room for manoeuvre. The Czech, Hungarian and Polish central banks issued a co-ordinated statement this week hinting they might intervene to support their exchange rates. But that route is tricky. Russia has blown half its reserves in a series of unsuccessful attempts to try to prop up the rouble.

Spending and tax policies would be another way of dealing with a downturn. But these are constrained, too. Those countries with a chance of joining the euro are scrambling to cut their budget deficits to get them in line with the 3% of GDP target set by the EU’s Maastricht treaty. Yet that aggravates the problem. The danger for Latvia and Ukraine is a downward spiral, where cuts in public spending damage the economy in a way that helps to entrench the deficit.

So far, the economic crisis has not translated into populist or protectionist politics. It is the east European countries that have been demanding that the rest of the EU stick by the rules of the single market. Their development over the past decades has been thanks to the free movement of capital, goods and labour. They would like a lot more of it: in a contest to subsidise industries, rich countries always win.

But that stance will not hold indefinitely if things get worse. Willem Buiter, a prominent economist, believes it is only a matter of time before some of the ex-communist countries introduce capital controls. That, in theory, would allow them to concentrate on stabilising their economies without worrying so much about the external value of their currency. If voters find the economic pain of adjustment unbearable, politicians can pass laws that will make foreign-currency borrowings repayable in local currency. That would be met with fury by the foreign banks, who would in effect see their loan books expropriated. But it could happen.

Against that background, what can be done? The east European countries are, belatedly, co-ordinating their approach within the EU, holding their own mini-summit on March 1st. They want to embarrass countries such as France for what they see as its protectionist approach to the crisis. They are supporting each other: the Czech Republic and Estonia were among those contributing to the Latvian bail-out.

But even co-ordinated local efforts are unlikely to make much difference, given the scale of the problem. The real lead, and the real money, must come from outside the region. That brings into play a slew of political problems. Having trumpeted their free-market principles in past years, and dismissed the stodgy approach of countries such as Germany and France, the new EU members from eastern Europe are now turning to old Europe in the hope that it can hurry up the flow of EU structural funds to counteract the downturn, bail out or prop up over-exposed banks in places like Austria, and stretch the rules of the European Central Bank to let it provide support to countries outside the euro zone. The case for such measures is strong, and it is in the interest of all Europe that contagion is contained. But that does not mean that it will happen.