The Euro crisis is not over. After more than 17 emergency summits, France and Germany agreed to modify the Treaties and apply sanctions to Member States who stray from the Maastricht criteria. They could have spared themselves the effort.Back in 1997, I worked at the Dublin summit. That is when France obtained from Germany to water down the automatic sanctions they are trying to enforce today. Unfortunately, it will take many months before such a treaty is elaborated and then ratified. Political Time is much slower than the Time at which markets function. And democratic Time is even slower. By the time the Europeans have their ducks in a row, Greece, Italy and Spain will have defaulted , and rating agencies will have degraded the rest down to junk bonds. The only solution is an accelerated federalization of Europe with executive powers to the Commission. Unfortunately, the many european peoples do not feel european. And the more Germany asserts its muscle, the more the rest of Europe is remembering WWII.
Seen from Europe, nobody understands the gridlock in Washington. Obama is still very popular over there. He has forestalled a Depression that could have come from the recession given to him by George Bush. He saved the auto industry and Wall Street and the stimulus money is starting to work. By the time the election comes, the health care reform will slowly enter into force and it will be very difficult for the Republicans to take it down. Besides, republican candidates are hostage to the Tea Party and are so far right that they might very well be unelectable. In France, the population barely feels the economic crisis because of "automatic stabilizers", aka social cushions which provide a soft landing for the most affected.

Euro-tragedy

I just finished working for the Annual Meetings of the IMF and the Worldbank. Just before that, I accompanied Mr Baroin, the French Finance Minister in his visit to Washington. We visited Ben Bernanke at the Federal Reserve, Tim Geithner, in his office at Treasury and Barney Frank, author of the Dodd-Frank act. I have become a frequent visitor to these offices because I have often accompanied Commissioner Barnier in his regular trips stateside. The sick patient, object of worries in Europe and in the US is the Euro. The Greek debt situation is but a symptom f a greater problem. The Europeans, in their wisdom, had, long ago, decided to build an "ever closer union". The decision to pool European coal and steel markets, later to pool agricultural, transportation, fisheries, trade, and other ressources, was as courageous as it was necessary. If the initial idea of Jean Monnet and Robert Schuman had been conceived on the smoking ruins of Europe after WWII, it has become even more urgent in a globalized worls, where France, to take an example, represents less than 1% of the world population. But a funny thing happened on the way to the forum and the ever closer union. Installed in relative comfort, the Europeans forgot all about 20 centuries of mutual destruction and , lulled by cushy welfare sttes, lost track of the European ideal. The Greek cheated in a big way, they took advantage of a strong euro to give free rein to corruption , and plain laziness. To a certain degree, the same can be said of Portugal, Italy and Spain. Now Europe is face with one of the graves decisions of its existence: Either it will disintegrate under the shock of multiple bank collapse, or it will take a mighty step forward, a leap of faith, and move resolutely toward Federalization. Only a federal state will have a federal finance ministry, a federal tax authority and a federal budget. On the minus side, the 27 Member States will lose a lot of sovereignty. On the plus side, the euro will survive, stronger, and Europe will finally be able its real weight around the global table. I remember participating , in the Borschette building of the European Commission, in the creation of the Euro, in its most minute details. What a great achievement. Unfortunately, subsequent heads of state, have been reluctant to draw the natural conclusions and go for the federal option. In order to go federal different nations should bury their pride as a small country and exchange it for the pride of belonging to one of the great actors in the world. But the Lisbon Treaty had made a great step backwards when it reduced the powers of the Commission and strenghtened those of the Council, where nation-states are busy pulling the blanket their way. This re-nationalization of the EU is at the root of today's euro-tragedy. It was no different for the young United States in 1776. And the discussions about the relative weight of the Federal and the States is far from over. The Tea Party , in the US wants to strip the Federak Gouvernment of its powers to give it back to the 50 states. (Note that, in 1972, if the States had been more powerful than the Federal gouvernment, schools would still be segregated and black and white people could not get married.) What we need are courageous politicians who put Europe above their petty glory. To quote Benjamin Franklin: "If we do not hang together, will hang separately" . And I bet the hangman will come from China.

L'économie américaine

Au vu des grands titres, on aurait presque l'impression que ça va trés mal aux USA, qui seraient tombés aussi bas que la Grèce.En fait si on y regarde de plus près, rien n'est plus faux. Ce qui fait les grands titres, c'est le défaut de payment. A l'encontre des pays Européens, les USA se sont imposé un plafond à leur dette et il faut un acte du Congrès pour le relever. Ce plafond a été relevé 66 fois depuis 1917, 10 fois sous Georges W. Bush. Mais cette fois-ci, alors que la dette US n'est qu'à 65% de son PIB (Grèce 120 %, France 100%), soit 14 mille milliards$ sur 800 mille milliards d'actifs),ce plafond artificiel a été atteint. Et, au lieu de le relever comme d'habitude, le parti Républicain, au pouvoir à la chambre des députés mais pas au Sénat, exige la suppression de tous les acquis sociaux depuis Roosevelt, sans augmenter les impôts. Comme la date fatidique se rapproche, les agences de notations et les milieux financiers internationaux s'inquiètent du défaut de payment du pays de réfèrence. Une minorité chez les Républicains, le Tea Party, composé d'ignares, de racistes et de réactionnaires revanchards, profitent de la grande faiblesse du premier président noir pour arriver à leurs fins. Mettant ainsi en danger, non seulement les USA avec une économie en grande convalescence, mais aussi toute l'Europe qui en dépends largement. Les fondamentaux américains sont sains, mais une bataille idéologique sur un détail technique leur fait courir un grand risque.

The debt

The debt has many causes: The Bush tax cuts, the 2 Bush wars, Afghanistan and Irak to name the main ones.The Obama administration added 1 T$ in a stimulus plan and almost as much as a bank and auto companies bailout. Therefore the remedies are rather simple: Repeal the Bush tax cuts, stop all 3 wars ( Is Libya a war?). I would add stop the futile 30 years war on drugs and tax the illicit product, thus emptying jails, cutting down on police spending and giving back felons the means to have a proper job. We could also pare down the defense budget. The cold war is over. The Pentagon has a budget equivalent to that of the total budget of FRance. It is larger that the sum total of all the military budgets in the world.
Besides, the debt has ballooned because of a huge revenue decrease caused by unemployment. When the historically high number of the unemployed returns to work and starts paying taxes again, revenues will flow in federal coffers again.
Also, it is time to make corporations pay taxes (GE pays o$). They have hired armies of lawyers to exploit or create (lobbies) loopholes a mile wide that exempts them of any contribution to the public good. And finally, a huge myth on the debt: China only owns 9% of our debt. The US public owns 47 % through the purchase of T Bills and other financial vehicles.
So conservatives are using this crisis to exaggerate a perfectly explainable situation (the recovery of the worst financial crisis in 80 years!) and excluding the normal tools to remedy it. It is a war on the poor and disenfranchised, a class war that dares not say its name.
And for those who fear the impending doom predicted by the reactionaries: US Treasury Bills still command a 3.7% interest rate , whereas Greece is now at 14%.

There are many social needs in the US. Now is not the time to repeal the 20th Century and go back to the 1890s. I think that when the voters understand Mr Ryan's budget, there will be a Conservative Waterloo in November 2012.

Waste

Rahm Emmanuel is famous for having said that a good crisis should not be wasted. Conservatives have at first criticized him and then decided to embrace his philosophy. Under the cover of Tea Party intransigence, they have seized upon the debt crisis and used it as vehicle to push extreme reactionary policies down our throats.Of course there is a debt. It amounts to 4 % of GDP, which is a far cry from the 111% of GDP of Greece or Portugal. Let us come back to reality: The agregate assets of the US are around 144 Trillion $. The debt is about 14 T $ We are far from bankruptcy. (Standard and Poor tried to scare us in threatening downgrading the US notes from AAA to AAa, but isn't it the same S&P which contributed to the Wall Street meltdown in 2008?)
There are many causes to the debt problem.

Bruxelles

BFM a une rubrique bien nommée: ``C'est la faute à Bruxelles``. Nos dirigeants français, imbus de leur pouvoir qui rétréci en peau de chagrin, s'accrochent à leurs prérogatives nationales et font porter le chapeau de leur bévues à ``Bruxelles``. Si le point de vue de la France l'emporte, à la Commission, au Conseil ou au Parlement Européen, c'est une victoire DE LA FRANCE. Si, au contraire nos vues ne percent pas, c'est la faute à BRUXELLES. Pas étonnant que le citoyen moyen voit L'UE comme une couche supplémentaire, voire inutile du joug administratif. Ou sont les cours d'instruction civique en France sur l'Europe? Qui, en France, peut expliquer correctement le fonctionnement des Institutions? Sait-on que des pans entiers de la politique, l'agriculture, l'industrie, les transports, la pêche, les finances, la monnaie, les douanes, et jusqu'à la défense, sont maintenant décidés à Bruxelles. 75% de nos lois viennent de Bruxelles. Et c'est une bonne chose. Quel poids la France peut elle bien représenter face à la Chine, l'Inde, le Brésil, ou les USA? Croit-on vraiment qu'avec nos 65 millions d'habitants et une langue en voie de disparition, nous sommes entendus dans le concert des nations?
En fait, la tension qui existe entre le niveau national et le niveau fédéral existe aussi aux USA et ce, depuis leur création. En ce moment,le président Obama veut faire intervenir l'État fédéral pour améliorer l'éducation, construire des lignes de TGV ou se doter d'une sécurité sociale. La droite, aux USA, au contraire, insiste sur le droit des États à régler leurs affaires et rejette l'intervention de Washington. Notons qu'en Virginie, par exemple,ce n'est que grâce à l'intervention de l'État fédéral en 1972, que l'on mis fin à ségrégation contre les noirs.
Ca me rappelle étrangement le différend qui oppose Mme Redding,, la Commissaire de l'UE et M. Sarkozy sur les Roms!

Tunisia

Few Americans know anything about Tunisia. A small North African country of 10 million people (half of them under 25!), just started a domino effect that will totally change the face of arab countries. Tunisia was colonized by France in the late 19th century. My grand-father, victim of the long French compulsory dratf at the time, 7 years , found himself in a zouave uniform, in the army that conquered Tunisia. Ever since, Tunisia, even after its independence in the 50's, has been close to France. French remains the official , and even the street language. But the dictatorship of president Ben Ali, following the dictatorship of the founder-president Bourguiba, proved too much for the mass of unemployed educated Tunisian youth.The French, coddled president Ben Ali under the threat of Islamic terrorism: "either me or Al-Qaeda". President Obama, to his credit, had warned the Maghreb dictators that their system had to change. On January 4th, a young Tunisian committed suicide by fire. It triggered riots that toppled the regime. The Pentagon communicated very effectively with the Tunisian armed forces and helped kick Ben Ali out of the country ( He fled with 1 and 1/2 tons of gold and found refuge in Saudi Arabia.
All over the arab world, ruling potentates, in power for ever, must tremble on their throne and know that their days are counted. What Georges W. Bush attempted with his invasion of Iraq , the democratization of muslim countries, might be achieved thanks to the sacrifice of a fruit seller whose death put an end to a tyrant.