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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p style=\"text-align: justify;\">The West should not isolate Hungary\'s Viktor Orban. While some of his instincts are deeply undemocratic, he is also a pragmatist, capable of adjusting course.</p>', created = 1508712997, expire = 1508799397, headers = '', serialized = 0 WHERE cid = '3:a66609ba2b0acfca65e54a88b7de0111' in /home/cer/staging/includes/cache.inc on line 112.
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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p style=\"text-align: justify;\">The Kremlin may be playing realpolitik and taking pride in blocking the West in Syria, but it has drawn attention to some weaknesses in Western diplomacy.</p>', created = 1508712997, expire = 1508799397, headers = '', serialized = 0 WHERE cid = '3:de63772a912dfad7e87b5768e152e64d' in /home/cer/staging/includes/cache.inc on line 112.
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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p>Beijing and Moscow share the goal of curbing US power, but will not become allies. Moscow rejects a junior role, while China sees Russia as a fading power. </p>', created = 1508712997, expire = 1508799397, headers = '', serialized = 0 WHERE cid = '3:b39672e8772dd5f7d4f7fc71b0dee324' in /home/cer/staging/includes/cache.inc on line 112.
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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p style=\"text-align: justify;\">France has its economic weaknesses. But in some important respects its model holds out better prospects for a return to economic growth across the eurozone than does Germany\'s.</p>', created = 1508712997, expire = 1508799397, headers = '', serialized = 0 WHERE cid = '3:2a0ba9041ae9073759d7001c0da89b28' in /home/cer/staging/includes/cache.inc on line 112.
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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p style=\"text-align: justify;\">Our annual report looks at key changes in the EU: Germany\'s rise, France\'s decline, Britain\'s marginalisation and the Commission\'s loss of influence.</p>', created = 1508712997, expire = 1508799397, headers = '', serialized = 0 WHERE cid = '3:7e753c202360b6aece1f8c934a107172' in /home/cer/staging/includes/cache.inc on line 112.
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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<P style=\"TEXT-ALIGN: justify\">Greece\'s new bail-out package needs less austerity and more structural reforms. A bloated and immobile public sector remains a drag on growth.</p>', created = 1508712997, expire = 1508799397, headers = '', serialized = 0 WHERE cid = '3:b9b6fa6b2159f2d2055b857871790928' in /home/cer/staging/includes/cache.inc on line 112.
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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p style=\"text-align: justify;\">France has sent a clear message by withdrawing its troops early from Afghanistan: NATO is failing to meet its objectives. The problem lies in Kabul not Paris.</p>', created = 1508712997, expire = 1508799397, headers = '', serialized = 0 WHERE cid = '3:b465ed3eef2c57dc945d3954c2d69629' in /home/cer/staging/includes/cache.inc on line 112.
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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p style=\"text-align: justify;\">The struggle to address the eurozone crisis means that Europe\'s unprecedented economic malaise is receiving far too little attention. To the extent that the EU has a growth strategy it relies heavily on the adoption of structural reforms in the crisis-hit eurozone economies. But such reforms alone will not drive economic recovery in the short term, however important they could be in the long term. Demand is also crucial, and this requires more expansionary macroeconomic policies. Without them, the European economy faces economic stagnation, which threatens to exacerbate fiscal pressures (especially inside the eurozone), discredit economic reforms, and open the way for a surge in political populism.</p><p style=\"text-align: justify;\">There is no doubting the depth of Europe\'s economic crisis. Output in both the eurozone and the EU is still around 2 per cent lower than before the crisis. Even the supposedly booming German economy grew by only 0.4 per cent between the first quarter of 2008 and the final quarter of 2011 (and hence by less than the 1 per cent managed by the US). The Spanish and UK economies are still almost 4 per cent short of their pre-crisis peaks, the Italian one nearly 5 per cent and Greek and Irish economies anywhere between 10 and 15 per cent. Moreover, both the OECD and the IMF expect the EU economy to stagnate at best in 2012. If a further intensification of the eurozone crisis is avoided – an admittedly big assumption – some member-states may eke out a little growth. But others, such as Spain and Italy, face deep recessions.</p><p style=\"text-align: justify;\">The reason for the anaemic economic recovery is the weakness of household consumption and business investment. The latter is still down 14 per cent in the eurozone compared with four years ago, and the picture across the EU as a whole is little different. The dearth of investment is most pronounced in the peripheral eurozone economies plus Italy and the UK, but even the German economy is yet to return to pre-crisis levels of investment spending. Household consumption across the EU fell less steeply than investment during the recession, but has not yet fully recovered.</p><p style=\"text-align: justify;\">In the early stage of the crisis, fiscal policy across the EU was ‘counter-cyclical\' (that is, most governments spent more in an effort to offset the weakness of consumer spending and business investment). However, policy has since become ‘pro-cyclical\': cutbacks in public spending are reinforcing the downturn, rather than countering it. Fiscal austerity in the troubled eurozone periphery is now being accompanied by austerity programmes in Britain, France and Italy. Even countries with relatively strong public finances such as Germany – the country\'s budget deficit fell to just 1 per cent of GDP in 2011 – are tightening fiscal policy. In so doing, European governments are standing conventional macroeconomic thinking on its head. Governments are withdrawing demand from their economies at a time of pronounced private sector weakness.</p><p style=\"text-align: justify;\">The fiscal stance is pro-cyclical for three reasons. First, there is continuing disagreement within the eurozone over how to address the currency bloc\'s sovereign debt and banking crises. The failure to progress towards a proper fiscal union based around debt mutualisation, the absence of a strategy to combat intra-eurozone trade imbalances, and the unwillingness of the ECB to act as a lender of last resort for eurozone governments mean that sovereign borrowing costs within the eurozone have become highly polarised. Germany\'s borrowing costs are at record lows while other member-states are paying punitively high real interest rates. This, in turn, is compounding the weakness of their public finances, and forcing them to impose ever greater degrees of austerity.</p><p style=\"text-align: justify;\">Second, policy across Europe – including in Britain – is being driven by a belief in so-called ‘expansionary fiscal consolidation\'. This assumes that cuts in public spending will improve household and business confidence and hence boost private consumption and investment. The empirical foundations for such a belief are weak. The pursuit of unprecedented austerity across much of the eurozone has hit household and business confidence hard, depressing economies and contributing to a dramatic rise in public debt. Weak investment has further eroded economies\' growth potential, and hence the sustainability of their public finances. In the current circumstances, contractionary fiscal policy has proved to be just that: contractionary.</p><p style=\"text-align: justify;\">The third reason why fiscal policy is so pro-cyclical is fear. Governments worry that if they do not cut spending, investors will punish them by shunning their debt. Governments are citing their worsening economic prospects as a reason for further fiscal tightening, which in turn is further weakening their economic prospects. The ratings agencies are right to highlight how self-defeating this is.</p><p style=\"text-align: justify;\">Not only is fiscal policy too tight, but monetary conditions remain restrictive, at least across much of the eurozone. Official interest rates are low, but this says little about the availability and cost of capital. Growth in the amount of money circulating in the eurozone economy has stalled and is contracting across the south of the currency union, pointing to a worsening credit crunch. The ECB has resisted pressure to employ unorthodox measures to boost the money supply, such as so-called ‘quantitative easing\'. This essentially involves central banks ‘creating\' money by buying assets such as government bonds. The ECB fears the inflationary impact of such measures, despite rapidly ebbing inflation pressures and the growing threat of deflation.</p><p style=\"text-align: justify;\">The current macroeconomic policy stance has far-reaching implications for the European economy and political stability. First, by further depressing demand, particularly investment, it is eroding economic growth potential and hence the amount of debt (both public and private) that countries can sustain. Second, it is damaging the political case for structural reforms. Governments will have a tough time maintaining support for reforms if their economies continue to contract and their borrowing costs remain prohibitively high. Third, it provides fertile ground for populism. Mainstream political parties across Europe are pursuing policies that are deepening the economic crisis. A rise of populist political forces would pose a threat to the survival of the eurozone and the cohesion of the EU.</p><p>&nbsp;</p>', created = 1508712997, expire = 1508799397, headers = '', serialized = 0 WHERE cid = '3:fb37516525a5829b514bfaa6ce2696a5' in /home/cer/staging/includes/cache.inc on line 112.
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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p style=\"text-align: justify;\">Ever since it was first mooted in the 1970s, a financial transactions tax (FTT) has often been thought of as an interesting idea that cannot work in practice (because it needs to be adopted universally if it is not to be undermined by tax arbitrage). In other words, the difficulty of implementing the FTT has often been an excuse for not taking a view on its underlying substance. However, the terms of the debate have now shifted. Many EU countries want to adopt an FTT, whether others do or not. All of which raises two questions: what explains the political momentum behind an FTT; and is it a good rather than just interesting idea?</p><p style=\"text-align: justify;\">The politics of the FTT are not hard to understand. Public finances across the EU are weak, and governments are looking for new sources of tax receipts. The financial sector is deeply unpopular and is an obvious target to tax. Opinion polls consistently show that there is a strong democratic demand for an FTT: around two-thirds of voters across the EU (including in the UK) would support one. Against this backdrop, pressure to introduce an FTT has grown. So the European Commission, strongly encouraged by the European Parliament and individual countries such as France, submitted a proposal for an EU FTT in September 2011.</p><p style=\"text-align: justify;\">On the face of it, the tax treatment of the financial sector looks ripe for change. The financial sector is under-taxed (because it is exempt from value added tax). Parts of it enjoy an implicit but egregious state subsidy (because of the \'too-systemic-to-fail\' problem). Some of the income of the financial sector is generated by rent extraction, rather than wealth creation. And while it performs a key function in a market economy, it is also a pollutant – as the vast costs of the financial crisis (in terms of output and jobs lost, as well as taxpayer support) testify. In principle, it is no less legitimate to tax financial than environmental pollution.</p><p style=\"text-align: justify;\">For many of its proponents, the case for an FTT rests on a vague sense that it would strike a blow against bad things like \'bankers and speculators\', while contributing to good things like financial stability and greater social justice. The European Commission makes similarly ambitious claims. It argues that an EU FTT would, among other things, discourage risky trading activities, increase financial stability, raise extra tax revenue (partly to fund the EU budget), and ensure that the financial sector pays “its fair share” of the costs of the financial crisis. But would an FTT help to meet the objectives that its proponents invoke to justify it?</p><p style=\"text-align: justify;\">The most plausible claim is that an FTT would curb the volume of financial transactions in the EU, and activities that Lord Turner, the chairman of the UK\'s Financial Services Authority, has called “socially useless”. Some \'high frequency trading\' (the computer-aided exploitation of tiny, fleeting information advantages in financial markets) would become uneconomic, and wasteful investment \'arms races\' in the computer infrastructure that supports such trading would be checked. But an FTT that was adopted by a sub-group of EU countries might simply encourage trades to be conducted by firms incorporated elsewhere.</p><p style=\"text-align: justify;\">Even if an FTT caused a reduction in trading volumes, moreover, it cannot be casually assumed that asset prices would become less volatile as a result. Since markets would be less liquid, asset prices might become marginally more, not less, volatile. At best, evidence for the impact of lower transaction volumes on price volatility is mixed. Besides, it is misguided to suppose (as some politicians appear to) that by curbing \'speculative activity\', an FTT could be a weapon in the fight to save the eurozone: a modest transaction tax will not stop investors from reducing their exposures to banks and governments that they believe to be at risk of insolvency.</p><p style=\"text-align: justify;\">An FTT, moreover, would not necessarily fall on \'economic polluters\' in the financial sector. Not only is an FTT a blunt instrument that would hit all sorts of financial institution – from highly leveraged banks that pose a major threat to systemic stability, to unleveraged money market and mutual funds that pose none. But much of the bill for the tax would simply be passed on to consumers – that is, businesses and companies. An FTT, in other words, might do as much to punish virtuous behaviour among non-financial agents (individuals saving for their retirement) as to discourage economically polluting behaviour by financial intermediaries.</p><p style=\"text-align: justify;\">Nor, finally, is it clear that an FTT would actually raise much revenue. The European Commission argues that it would, and that the receipts could become a new \'own resource\' for the EU budget. Projections for the tax receipts generated by an FTT are fraught with uncertainty. However, there is one reason to think that the Commission\'s forecasts of around €50bn may be too optimistic: it estimates that an FTT would lower GDP (because of higher financing costs), but it does not factor in the revenue lost from other taxes as a result of lower GDP. A study by Ernst &amp; Young estimates that this effect could more than offset the revenue raised by the FTT.</p><p style=\"text-align: justify;\">Popular as it is with many across Europe, an FTT is a bit of a red herring. The real scandal of the financial crisis is that many institutions became too highly leveraged, were bailed out when they ran into trouble, and imposed intolerable costs on society at large. A good way to tackle these problems was outlined by the Commission in a Communication in 2010. It is to make sure that countries implement special \'resolution regimes\' to make it possible for banks to fail; and to discourage excess leverage by introducing a \'pollution tax\' (or bank levy) on short-term debt.</p><p style=\"text-align: justify;\">So far, just over a third of EU countries have implemented resolution regimes and bank levies. Political energies would be better devoted to making sure that other member-states follow suit than to pushing for divisive distractions such as an EU FTT.</p><p style=\"text-align: justify;\">&nbsp;</p>', created = 1508712997, expire = 1508799397, headers = '', serialized = 0 WHERE cid = '3:8c2fbad81bf7229051d2d3e4d78505cf' in /home/cer/staging/includes/cache.inc on line 112.
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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p style=\"text-align: justify;\">The Pentagon\'s \'strategic guidance\', released on January 5th, makes three key changes: it establishes Asia as the focus of US military efforts, with the Middle East a close second. It foresees fewer \'nation-building\'<br />missions such as the one in Afghanistan, and more strikes from afar and from the air, sometimes in cyberspace. And the guidance strongly implies that the US military will have to prioritise: regions such as Europe, which the US regards as peaceful, will see fewer American troops. The Pentagon is under orders from the White House to save at least $450 billion over the next ten years.</p><p style=\"text-align: justify;\">There will be three different sorts of reaction in Europe. First, some NATO governments will be privately relieved. Whenever the US commits to a nation-building mission it expects its allies to participate. But the most recent such war, in Afghanistan, has proved expensive and more dangerous than initially thought; it also failed to establish order in the country. The allies are exhausted. The fewer such missions the US conducts, the better, many will quietly conclude. European contributions to the sort of wars on which America expects to focus – especially the high-tech, clandestine and remote struggles fought in Iran or Pakistan\'s frontier provinces – will be symbolic at best: they are beyond the technical abilities of all but a very few European militaries.</p><p style=\"text-align: justify;\">However, without common missions, the transatlantic alliance may wither. If the Americans cannot count on Europe to come to its aid, they may be less inclined to intervene when their European allies need help.</p><p style=\"text-align: justify;\">Second, the UK and France, Europe\'s leading military powers, will interpret the new guidance to mean that the US – now busier in Asia than elsewhere – will expect them to lead future missions on Europe\'s periphery. They will want the US to at least support such missions, as it did in the Libya operation, with the kinds of capabilities that they are short of – such as those required to suppress air defences. In theory, the new guidance makes the Pentagon better able to provide such support – the emphasis on striking enemies from afar and from the air will require more drones and anti-air defence weapons of the sort that Europeans will occasionally want to \'borrow\'. But the US may be less willing to lend such weapons than it has been.</p><p style=\"text-align: justify;\">Third, the Central Europeans who fear a possible conflict with Russia will wonder if the new US focus on Asia, combined with the expected large-scale cuts in US forces in Europe, will leave them vulnerable. The strategic guidance merely states that the US plans to retain sufficient forces to deter enemies from attacking America\'s friends, without explaining how many forces or of what sort. Moreover, in a barb at the European allies (who spend far too little on defence, the Americans believe), the guidance states that the primary mission of the remaining US troops in Europe will be to help to improve allies\' militaries; in effect to \'help the Europeans help themselves\'. But it is unlikely that the allies, in the midst of the worst economic crisis in living memory, will spend more on defence. More plausibly, the Central Europeans will continue to press the US to keep its tactical nuclear weapons on the continent, and to shift the shrinking US conventional presence from Western to Central Europe.</p><p style=\"text-align: justify;\">Whatever the Europeans say, the US will persist with troop cuts in Europe. It believes that it can handle the remaining problems in Europe through diplomacy. And that may be the greatest flaw of the new US defence strategy. The assumption that Europe is free from violence seems unduly optimistic. While the Pentagon may be right that \'old\' dangers such as instability in Ukraine or the unpredictable strategies of Russia\'s rulers require talks, not force, a new danger is emerging. The increasingly severe economic crisis may have strategic consequences.</p><p style=\"text-align: justify;\">As voters lose faith in their governments\' capacity to halt the decline in living standards, xenophobia and nationalism may become widespread in some countries. A \'Balkanisation\' of parts of Europe, with a government becoming a threat to its citizens and possibly neighbours, cannot be excluded. Nor can the collapse of a democratic government and the restoration of authoritarian rule. If any of these scenarios came to pass, and if lives were in danger, the US would be under tremendous pressure to intervene, as it did in the Balkans in the 1990s. In complete contradiction to its new strategic guidance, the Pentagon\'s attention could once again shift to Europe, though for all the wrong reasons.</p><p style=\"text-align: justify;\">&nbsp;</p>', created = 1508712997, expire = 1508799397, headers = '', serialized = 0 WHERE cid = '3:3662ed888361d6a8a4a358e783708f5f' in /home/cer/staging/includes/cache.inc on line 112.
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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p id=\"yui_3_7_2_1_1357477427311_12428\" class=\"yiv903558805MsoNormal\">The EU would have more influence in China if its governments were more willing to work together and if it focused on a few key objectives.</p>', created = 1508712998, expire = 1508799398, headers = '', serialized = 0 WHERE cid = '3:0b4a8a8d11942938621ed73857eb5485' in /home/cer/staging/includes/cache.inc on line 112.

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