August 13, 2011

The Week in Review

August 12, 2011 | From
Animosity in America, burning Britain, China’s carriers, Deutschland on debt, Egypt’s emergency, and France’s ‘frantic’ financial fix.

Middle East
Israelis protest over living costs: For more than three weeks, waves of social unrest have swept Israel on a level not seen before, Haaretzreports. According to the liberal daily, Israel is “in the midst of what is increasingly shaping up to be an Israeli revolution.” As Israelis protest over the cost of housing and poor economic conditions, some analysts are asking whether Israel is facing its own Arab Spring. Hundreds of thousands of protesters have taken to the streets of Tel Aviv and other cities each of the past three weekends to “demand social justice,” and tent cities have sprung up across the country. What started out as demands for cheaper housing has developed into demands for sweeping changes to Israel’s economy and society such as a new taxation system, free education and privatization of state-owned companies. Despite strong economic growth and low unemployment, Israelis are discontented with the country’s high cost of living, high poverty rate and high income inequality. Some commentators in Israel believe the motive for the protests, however, is more political than economic, an effort by the Israeli left to take advantage of popular discontent. Whatever the factors stirring up the social unrest, any resultant political turmoil will only make Israel more inwardly focused and isolationist at a time when it is facing its greatest outside threats—an increasingly powerful Iran, the prospect of Islamists taking over Arab allies and the threat of a third intifada—not to mention the unseen threat from its seeming ally Europe.
Palestinians plan massive rallies: Meanwhile, the Associated Pressreported Wednesday that the Palestinian Authority (PA) is planning “calm” rallies for next month to coincide with its bid at the United Nations for recognition as an independent state. Last month, PA President Mahmoud Abbas called for Palestinians to take to the streets in massive rallies in support of the bid. According to the AP, demonstrations are to be carried out around the world as well as in the Palestinian territories. The call for “popular resistance” raises the specter of a new round of violence against the Jewish state. “Israeli officials disagree over what might happen in September,” the AP article says. “One study said the rallies will likely be peaceful, but Foreign Minister Avigdor Lieberman has predicted ‘unprecedented violence.’ Even the study forecasting peaceful demos recommended calling up Israeli Army reservists—just in case.”
Israeli intelligence: Egypt is “losing control over the Sinai”: One hundred masked gunmen attacked a police station in Egypt’s Sinai Peninsula on July 29, killing a policeman, a soldier and three civilians before going on to attack part of the cooling system of the pipeline carrying natural gas to Israel. Islamists have attacked the pipeline five times in the last six months. The head of Israel’s military intelligence recently observed that Egypt’s security forces “are losing control over the Sinai region.” The number of rockets in the Gaza Strip has doubled from 5,000 to 10,000 since the end of 2010. Smugglers this year have already taken in three times more standard explosives than they did in all of 2010. The attacks on the gas pipeline are part of a growing Egyptian hostility to Israel in general. As Courcy’s Intelligence Brief points out, this puts Israel in a catch-22 situation. Former President Hosni Mubarak controlled the Sinai through his police. Since his downfall, the Bedouins have thrown the police out, and chaos reigns. To try to stop these Islamist attacks, Israel could relax the Camp David accords that require the Sinai to be demilitarized and allow Egyptian troops in to restore order. But with Egypt on the brink of becoming an Islamic state, such soldiers could quickly become merely a more disciplined version of the Islamists.
OPEC’s radical new president: On August 3, a commander in Iran’s Revolutionary Guard Corps became the nation’s oil minister and the president of opec despite his being the target of international sanctions. Back in October 2010, Iran took over the rotating presidency of opec, so the appointment of Rostam Qasemi as the country’s oil minister automatically makes him the head of the powerful international oil cartel. Iranian President Mahmoud Ahmadinejad handpicked Qasemi for the position, and the Iranian Parliament made the decision official with an overwhelming 216 votes from the 264 deputies present. The Guardian said Iran’s national media have interpreted the landslide vote as “a reaction by Iran’s parliament to international sanctions against the country, especially those which have targeted the Revolutionary Guards and the country’s nuclear program.” With Qasemi in a position of power, we can expect already high gas prices to get higher, and for Iran’s defiance toward the West to grow.
Germany wants unelected council to oversee national budgets: The European Union needs a “stability council” to ensure nations stick to their budgets and impose sanctions should they stray, German Economic Minister Philipp Rösler said August 9. The council would be independently run and would determine how aid money is spent. “A stability council wouldn’t mean ‘you’re not getting any money,’ but rather ‘we’ll apportion it for you,” said Rösler. Nations would face “competitiveness tests” to measure how well they are managing their budget. “If you fail them, there should be consequences,” Rösler said. He also said that Europe should pass a “debt brake” law, similar to the one Germany has. In Germany, this law forbids the government from borrowing more than 0.35 of gross domestic product. Rösler said he would present this proposal at the next EU finance ministers meeting. However, a government official told the Financial Times Deutschland: “This is an opinion of the ministry and not a government position.” Rösler’s statements come as members of German Chancellor Angela Merkel’s own coalition party are criticizing her for agreements she made at the eurozone summit on July 21. Some members of the Christian Democratic Union have called for an emergency party conference to debate the government’s eurozone policy. To win German approval, the eurozone’s bailouts must give Germany a level of power over the nations it is bailing out. Without that, German politicians do not dare back them. Watch for the other eurozone nations to be forced to cede more of their sovereignty to Germany.
France next in the firing line: French President Nicolas Sarkozy announced that the nation will introduce more austerity measures in order to cut down the nation’s debt, as its aaa credit rating is at risk of getting lowered because of the economic turmoil in Spain and Italy. During an emergency meeting held August 10 Sarkozy told his ministers they have one week to draft the new measures. “The schedule for the announcement of new measures is frantic,” reported the EU Observer.
Slovakia threatens the new bailout: One of the members of Slovakia’s ruling coalition promised to derail Europe’s new bailout agreement, decided upon on July 21. Parliamentary speaker and head of the Freedom and Solidarity party Richard Sulik said on August 8: “We will do everything we can in order for the parliament not to approve it.” For the new agreement to go into effect it must be ratified by all eurozone members. Without Sulik’s support, Slovakia’s main political party would require the help of the opposition party, which has been fiercely critical of the government. This type of holdup to the bailout deal shows that for the eurozone to stave off disaster and make decisions quickly, more national power needs to be taken away from the member states. Watch for eurozone leaders to wrestle further power away from national parliaments.
European Central Bank dictates terms to Italy: Head of the European Central Bank (ecb) Jean-Claude Trichet and his successor Mario Draghi wrote a letter to Italian Prime Minister Silvio Berlusconi August 5 that reportedly imposes conditions upon Italy in exchange for financial support from the ecb.The German daily Handelsblatt wrote: The contents were strictly confidential. In Rome the rumor spread that the ecb’s willingness to buy Italian government bonds imposed certain conditions on the Italian government. Milan’s Corriere della Sera today, citing the secrecy of the secret letter, confirmed the rumors of recent days. Trichet and Draghi, according to Corriere quasi, have written a ‘government program’ specifying in detail what the government must do: the actions, timetable and the legislative decisions that must be addressed.” This is just further proof that whoever has the money in Europe has the power.
Shifting ties in Asian waters: As the U.S. works to cut between $400 billion and $1 trillion in defense spending, the Chinese military is intensifying its large-scale military buildup, which includes new conventional and strategic missiles, anti-satellite weaponry, new ballistic missiles for targeting ships at sea and, most recently, the development of aircraft carriers. On Wednesday, China’s first aircraft carrier left its shipyard in the northeast of the country to begin its first sea trial, the state news agency Xinhua reported. Chinese military sources say the trial for the revamped old Soviet vessel will not take long. Last month, amid concerns over China’s military buildup and its rising assertiveness in territorial disputes, Beijing downplayed the capability of the aircraft carrier, saying the ship would be used only for “scientific research, experiment and training.” But the old Soviet ship is not the only aircraft carrier in the works for China. Last week, an unnamed Chinese official told Reuters that Beijing is also developing additional carriers of its own design. “Two aircraft carriers are being built at the Jiangnan Shipyard in Shanghai,” the official said. China’s People’s Liberation Army (pla) is the world’s largest armed force and is extremely secretive about its rapidly expanding defense programs, which are fueled by the country’s steady economic growth. China views aircraft carriers as key symbols of global power projection, and many analysts say it is unlikely the pla will stop after the development of just two or three such warships. The aircraft carriers are compounding concerns among other Asian nations that are afraid China will use the ships to bolster its control of disputed international waters.
Beijing: Down with the dollar: On Saturday, the leader of one of China’s top credit rating agencies said the U.S. dollar’s status as the world’s reserve currency is set to sharply decline as policymakers all over the world examine the implications of S&P’s decision to remove the U.S.’s aaa rating. In an e-mail sent to cnbc on Saturday, Guan Jianzhong, chairman of Dagong Global Credit Rating, said the greenback is being “gradually discarded by the world” and that the “process will be irreversible.” Washington “should get a clear understanding that the continuous decline of the debt service capability will inevitably result in the outbreak of sovereign debt crisis,” he wrote. Dagong made international headlines last week when it became the first rating agency to reduce the U.S.’s credit score following the failure of officials in Washington to come to a timely decision regarding America’s mushrooming debt crisis. Guan’s observation, made just hours before S&P’s historic downgrade of the largest economy on the globe, now seems remarkably prophetic. Guan also called for “international supervision over the issue of U.S. dollars” and the implementation of “a new, stable and secured global reserve currency.” He said that since China is the U.S.’s largest creditor, Beijing has every right “to demand the United States to address its structural debt problems and ensure the safety of China’s dollar assets.” As China’s military might expands, watch for its criticism of the U.S.’s fiscal negligence to proportionately intensify.
Africa/Latin America
Mugabe thanks China: Zimbabwean President Robert Mugabe on Tuesday thanked the Chinese government for extending a loan to build his nation’s first National Defense College. “I wish to take this opportunity to extend my sincere gratitude to the People’s Republic of China for extending an amount of $97 million loan towards the construction of the college,” he said, speaking at the celebration of the 31st anniversary of the Zimbabwe Defense Forces Day. The college, currently being constructed by a Chinese company, will have university status and be the Zimbabwe Defense Force’s highest institution of academic instruction. As Zimbabwe’s economy plummets to new lows, expect the government of Robert Mugabe to turn increasingly to dictatorial regimes like China for funding.
Agricultural emergency in Chile: Four districts in the extreme south of Chile were recently declared to be in an agricultural emergency due to the effects of devastating snow storms. According to the first reports released, an estimated 27,000 sheep and 4,000 cattle are isolated and suffering from lack of food and shelter. Chilean Minister of Agriculture Jose Antonio Galilea has said that he is in permanent contact with regional officials in Punta Arenas and would fly to the region, if needed. Weather-related disasters such as this are increasing in frequency the world over.
Britain shocked by riots: Riots broke out across England, dominating the news this week. Twenty-six police officers were injured Saturday night as a mob rampaged through the Tottenham district of London, burning buildings and cars and looting shops. Dramatic pictures showed buildings bursting into flames and debris littering the streets. The riots came after police shot black Tottenham resident Mark Duggan, a suspected gangster, on August 4. Police claim that he fired at them, but his family disputes that. Protesters gathered outside Tottenham police station on Saturday night, which they tried to storm with improvised weapons like baseball bats and Molotov cocktails. What started out as an isolated race riot escalated into something much more extensive. On Sunday and Monday nights, hundreds came onto the streets smashing stores and stealing whatever they wanted. A massive police presence quelled the riots in London Tuesday—only for riots to break out across England, in Birmingham, Manchester, Nottingham, Liverpool and other cities. The riots exposed that there is something deeply wrong with British society. “There are pockets of our society that are not only broken, but frankly sick,” said British Prime Minister David Cameron on Wednesday. The Bible shows he is right, declaring that “the whole head is sick, and the whole heart faint” (Isaiah 1:5-6) and that this state will lead to more widespread rioting.
Race violence in Milwaukee: As America and Britain grapple with the worst economic downturn since the Great Depression, anxieties are escalating and tempers are flaring. This combination of stress and desperation too often leads to violence—often along ethnic lines. The worst race riot in Wisconsin state history occurred on August 4, during the opening night of the Wisconsin State Fair. As darkness fell over the fairgrounds, hundreds of black youths swarmed out into the parking lot, seeking out Caucasian fairgoers. According to news reports, they rampaged through the district, smashing car windows, throwing rocks and beating passersby with whatever blunt instruments were available. Twenty-four people were arrested. We can expect race relations to deteriorate and crime to further increase as the economy worsens.

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