hms iron duke

hms iron duke

Friday, 30 January 2015

Churchill: With Us But Not Of Us


Alphen, Netherlands. 30 January. It is not often I can say where I was standing exactly fifty years ago but today is one of those days.  At 2pm on a freezing 30 January, 1965 aged seven I was standing with my parents and a multitude of other Britons alongside the Waterloo to Reading railway line at Feltham in the county of Middlesex. We were awaiting the arrival of Winston Churchill’s funeral train as it made its laurel-laden way towards the great man’s final resting place at Bladon in Oxfordshire close to the mighty Blenheim Palace, his ancestral home.  Having left Waterloo Station at 1.30pm half-an-hour later Feltham Station’s massive wooden level crossing gates began to swing shut on their iron-fisted hinges.  In the distance came the doleful, respectful sound of a steam whistle. In no time at all Battle of Britain class steam locomotive No 34051 Winston Churchill flashed by in charge of six Pullman coaches the second of which contained Churchill’s coffin draped appropriately in the Union flag.  Even today I can still remember “V for Victory” made out on the front of the locomotive and the people all around me dipping their heads in deep, reverential, albeit momentary respect.

Fifty years on from Churchill’s passing what if anything remains of his legacy?  Certainly, the country and indeed the Europe he helped free from the threat of Nazi tyranny would be unrecognisable to him. He would probably have been grateful for the adulation he still receives in many quarters but equally wary of it.  Churchill became progressively aware of his own failings and was haunted by the 1915 disaster at Gallipoli when his massive gambit to end World War One by removing Turkey from the war ended disastrously in the loss of tens of thousands of lives.

And yet it was precisely the kind of big thinking that made him a successful war leader.  He was able to imagine the most grand strategic of grand strategic pictures and act on the decisions he believed necessary.  He could be ruthless when he believed demonstrations of power were necessary. For example, there is no evidence he objected to the February 1945 obliteration of Dresden by 800 RAF  and RCAF Lancasters.  Given the attack’s proximity to the Yalta Conference it is likely Churchill wanted to demonstrate the power of RAF Bomber Command to Stalin.

Equally, that very ruthlessness was applied to his own analysis of Britain, however hard the conclusions for a patriotic Englishman and imperialist.  In February 1946 Churchill even admitted to US President Truman that Britain’s day was done and that had he been born then he would have preferred to have been born American.  Through his mother he was already half-American.

Churchill was also capable of real political vision. In September 1946 in a speech to the University of Zurich Churchill called for the creation of a “kind of United States of Europe”.  Euro-federalists have suggested Churchill would have been a fan of the EU and a European super-state.  Far from it!  What he foresaw was what he said, a united STATES of Europe.  In May 1953 Churchill rejected British membership of the first attempt to create a European Army.  “We are with Europe, but not of it”, and, “We are not members of the European Defence Community, nor do we intend to be merged in a federal European system”. That said, today’s Europe would have thrilled him even if Russia’s aggression against Ukraine would no doubt have elicited a very Churchillian growl.

Churchill was ultimately a political realist.  Even in 1940 he knew Britain possessed the finest air defence system in the world, the world’s pre-eminent navy and an empire that promised almost boundless reserves.  However, he also knew the war would end Britain as a major world power even if victorious.  And, as World War Two dragged on he saw at first hand Britain’s steady marginalisation at the hands of Roosevelt’s America and Stalin’s USSR.  It pained him deeply and led at times to errors of judgement of which he was more than capable.  The infamous “Naughty Note” scribbled during a meeting with Stalin in Moscow in late 1944 imagined the respective influence of the West and the Soviets in post-war Central and Eastern Europe.  It was wrong and he knew it even as he scribed the note,

In fact Churchill had no illusions about Stalin and wanted to constrain the Soviets.  That it proved futile became obvious at the February 1945 Yalta conference at which Churchill fought for hour after hour for a free Poland only to be over-ruled by an ailing Roosevelt who really cared little for the fate of Central and Eastern Europe and simply wanted to “bring the boys home”.  Then US Chief of Staff George C. Marshall acknowledged after the Summit that Churchill was right.  It is therefore scandalous that Britain and Churchill should be blamed by so many for Yalta even today.  

Eventually, Churchill won the argument.  Less than a year later on 5 March, 1946 Churchill made his famous “Sinews of Peace” speech during which he warned of the “Iron Curtain” that was descending across Europe. Together with George Kennan’s analyses from Washington’s Moscow embassy that speech marked the start of the Cold War for it helped confirm in the American mind the need for a new defensive alliance in Europe.  In 1949 NATO was created.

Above all, Churchill was a politician who led by example and had the personal courage to lead from the front.  He had fought on the North-West Frontier at the height of Empire, taken part in the last great cavalry charge of the British Army at the Battle of Omdurman in 1898, been captured (and escaped from) the Boers in the South African War, and commanded a battalion in the Flanders trenches during World War One.  He can even claim to have invented the tank.

That courage was apparent even as ‘PM’. Churchill flew to Egypt on the eve of the Battle of El Alamein in 1942 to speak to the commanders and troops and only King George VI prevented him from landing with the troops on D-Day. His 1945 trip to Greece undoubtedly stopped the Communists from gaining power in Athens (which is not without some irony today).

However, it was his inspirational war leadership of the British people for which he is most remembered and rightly so.  Back in the dark days of 1940 victory over Nazi tyranny seemed impossible but he alone convinced the British to fight on.  His former political adversary Labour’s Barbara Castle said quite simply that Britain’s defiance was Churchill’s defiance. It was that defiance that stopped the rot and slowly at first created the political platform upon which the Grand Alliance that defeated Hitler was eventually stood up.

And yet Churchill’s relationship with the British people was a bit like his view of Britain’s relationship with the rest of Europe; he was with ‘us’ but not of ‘us’. Direct descendant of the First Duke of Marlborough, conqueror of Louis XIV’s French at the Battle of Blenheim in 1704 Winston Leonard Spencer Churchill was very much a product of the high Victorian age and his high Victorian class.  Born in Blenheim Palace in 1874 he was a scion of an aristocratic class in its last great age that simply assumed the right to rule. 

However, unlike many of his peers he could recognise change and adapt to it.  With studied practice he became a modern politician with a common touch, able to relate to and inspire ordinary people.  Indeed, it was his very (many) human foibles and peccadilloes that made his so appealing to so many.

Had World War Two not happened Winston Churchill would have counted for no more than a grumpy footnote in history.  However, World War Two did happen and cometh the hour the man came.  Passing before me on that grey, bitterly cold January day fifty years ago was not just another great man, but a pillar of civilisation and I was honoured to have been there, even if I little understood it at the time.


Julian Lindley-French 

Wednesday, 28 January 2015

EUCAP NESTOR: Closing the Strategy-Reality-Delivery Gap


Alphen, Netherlands. 28 January. Every now and then I get off my lofty strategic perch and venture down into the weeds of delivery for it is there that the gap between strategy, reality and delivery is at its most stark.

Take the EU’s mission in Somalia EUCAP NESTOR. EUCAP NESTOR was established in 2011 as part of a maritime security capacity-building and counter-piracy effort in the Horn of Africa and Western Indian Ocean.  The current focus is on re-energising the mission in Somali, including Somaliland.  The approach is twofold: establish a series of field offices across the region to promote dialogue with and support for local communities; and establish effective co-ordination with other members of the “EU family”, UN agencies and states with bilateral missions, such as China, France, Turkey, UK and US).

Here the problems begin.  Implicit in the presence of so many actors is the friction of the new geopolitics. In other words, the mission lacks strategic unity of effort and purpose with too many different actors wanting to do different things for different reasons.  And this is not just between China and the rest of the West.  There are also profound divisions between all the states present and between the institutions, and non-governmental actors, often about who gets the biggest slice of the funding pie. 

According to my friend much of the problem is in Brussels.  It concerns primarily the lack of consistent strategy and support for those in the field. This is a problem I saw for myself in Afghanistan and NATO’s stabilisation and reconstruction strategy.  Too often good practice and sound strategy in the field is sacrificed for politics in capitals which in turn undermines the ability of the people on the ground to ensure efficient and effective delivery.  This is particularly counter-productive given the very complex political and clan environment in which such efforts be definition take place.

Therefore, if the goals of stable governance, sustained development and legitimate security and stability are to be realised the following strategy must be applied: ‘commitment’ must be measured in terms of funds delivered not funds pledged; ‘success’ must be measured by demonstrable outcomes not inputs; funds should be applied logically across the realm of nation and capacity-building, and the temptation to shift funds into one area or another simply to generate a headline avoided; both long-term presence and indeed consistency of application is vital; a proper balance of effort must be established (in the gobbledygook of aid speak) between so-called ‘Supported Implementers’ and ‘Supporting Implementers’, particularly those able to provide and deliver vital ‘niche expertise’; and the effort must develop a coherent identity with a spokesman able to speak with one voice on behalf of the majority of implementers to the recipients of aid.

Critical to progress is minimisation of the inevitable politics with a focus instead on sound project management.  In Somaliland that means bringing front and centre the reasonably well-developed National Vision and Development Plan and Somaliland Special Arrangement.  Thereafter, all efforts must be linked to the national vision and then planned and phased into a coherent sequence. This will ensure that all the initiatives can be digested and mastered by key personnel from the region and the effectiveness of said initiatives properly measured and assessed against the backdrop of sustainable strategy.

Therefore, for EUCAP NESTOR to work Brussels must also take a longer-view.  According to my friend Brussels too often seeks to measure inputs rather than outcomes by focusing on the quantity of those who are in receipt of EU aid and assistance rather than the quality of outcomes generated by the knowledge and capabilities generated. For example, when training is conducted the EU measures progress by the number who attend but avoids any real attempt to measure whether that knowledge is applied and to what effect. 

Much of this will look like capacity-building 101 for many practitioners.  Unfortunately, it is precisely because political and bureaucratic leaders repeatedly fail to heed such lessons that taxpayer’s money is wasted.  Indeed, too often such programmes generate more heat than light with the gap between strategy and delivery growing to the point of political failure.

However, the vital need is effective delivery.   The EU needs a far more agile funding system to enable practitioners to adapt their projects to local circumstances. Moreover, so that a box can be ticked back in Brussels too often people are despatched to the region who lack the appropriate skills, knowledge, commitment and experience to do whatever is necessary to succeed. 

EUCAP NESTOR will not of course ‘fail’. Some phoney narrative will be crafted back in Brussels to demonstrate what an outstanding success the effort has been for the EU and the people of Europe when in fact very little has changed on the ground for the better.  If and when that happens Somalia will continue to fall into the abyss and and very quickly yet another ungoverned space will pose a very real threat to Europe and the wider West.

As my brave and hard-working practitioner friend put it: “The centre stage in Somalia is not big enough for all the prima donnas”. It is too dangerous and too important for that.


Julian Lindley-French

Monday, 26 January 2015

Beware Greeks Seeking Gifts!


Alphen, Netherlands. 26 January. Mahatma Gandhi once said, “Freedom is not worth having if it does not include the freedom to make mistakes”.  Europeans have made a lot of mistakes these twenty-years past.  The victory of Alexis Tsipras and Syriza (Coalition of the Radical left) in yesterday’s Greek elections will reverberate far beyond Ekklesia where European democracy was born. Indeed, Syriza poses a challenge not just to Greece’s place in ‘Europe’ but to the entire European order.  As such Europe is a facing a series of power struggles no less important than the Peloponnesian Wars that decided the balance of power across the Adriatic in the fifth century BC.

Power struggle one will concern who pays. It will essentially be a struggle between the Northern and Western European taxpayers and savers of the eight or member-states that pay for the EU and much of Southern Europe.  With the Greek economy having shrunk by 20% since 2009 and with 25% of the population unemployed the frustration of the Greek people with austerity is understandable.  These past six years have indeed robbed Greeks of both “hope” and “dignity”, as Tsipras has said.  Tsipras also says that he will seek a 50% cut in Greek debt, re-employ large numbers of civil servants (in what was once an appallingly bloated public sector), raise salaries and pensions and offer free electricity.  In other ‘worlds’, Tsipras intends to pile on debt and return to the bad-old days when as a Dutch taxpayer I had to fund Greeks via spiralling, growth-killing Dutch debt.

Power struggle two will be about who is in charge. This will concern primarily (but not exclusively) the relationship between Chancellor Merkel, the Germans and the Greeks.  Both the Greek Left and Right shamelessly painted their greatest benefactor – the German people - as Nazis for insisting on cuts and reforms in return for large injections of German money.  This was outrageous and unfair. Yes, Germany had to bear some responsibility for Greek debt.  Indeed, if the Euro helped to lower the cost of borrowing for Greeks it also offset the cost of German production. Taken together low borrowing costs and low productions costs fuelled export-led German growth for almost a decade. 

However, implicit in the German view of ‘austerity’ is simply the belief that a state must live within its means and generate economic growth via an efficient and competitive economy.  That is why last week at German behest 80% of the risk of Mario Draghi’s massive €1.1 trillion of quantitative easing bonds will be borne by national central banks.  This is not without political irony. The Euro-evangelising Germans are indicating they will not accept debt mutualisation and thus a move towards a European super-welfare-state.  The Greeks on the other had are betting that there will be such a move, that their debt will become someone else’s problem and their vision for the EU is precisely a European super-welfare-state in which they are forever drawing welfare.

Power struggle three will concern the importance of ‘rules’ in the EU.  It will concern primarily the relationship between EU citizens, member-states, and distant Brussels and Frankfurt-based EU institutions.  In the absence of political union, monetary union was established on a set of principle, rules and practices enshrined in the Stability and Growth Pact. Sadly, the French and the Germans were the first to break the key rule that fixed the debt-to-GDP ratios.  By so doing they established a precedent for rule-breaking whenever politically-convenient that has ripped credibility from the heart of the single currency rendering the Euro what markets term a ‘soft’ currency. 

With the Syriza victory Europe is about to witness a game of chicken for the future of Europe and it will start next month.  Greece must repay €6.7bn to the IMF and ECB at the end of February if the next tranche of my money (Emergency Bail-out) is to be triggered.  If Syriza defaults on the debt Greek banks could soon collapse and the country go bankrupt.  A stand-off is clearly in the offing as German lawmakers are this morning threatening to block the money. 

The key issue will be the nature and extent of the inevitable compromise.  Will the so-called (and much hated) Troika really ensure Greece continues with reforms within the bounds of the so-called ‘Framework’?  Or, will the Framework be abandoned thus in effect opening the door to full debt mutualisation?  Of course, whatever happens Brussels propaganda will present the latter as the former but the truth will out.

Like many Europeans I am willing to make sacrifices for Greece because I have no wish to see fellow Europeans suffer. However, if I make such sacrifices I want to see Athens making the necessary reforms so that Greece and other Southern European can face the same reality I must in the competitive world of the twenty-first century. And yet I see no such reforms and instead I am continually lectured about the need for ‘European solidarity’ as the EU becomes ever more a mutual impoverishment pact and drags me and my family down with it.  

Perhaps the safest thing for Greece to do now is to exit the Euro, return to a devalued Drachma (with all the necessary social support from the rest of us), recover and reform.  That would, of course, pose another challenge to Brussels.  What is Greece were to do far better outside the Eurozone than within it?

In any case, to caricature Odysseus - beware Greeks seeking gifts!


Julian Lindley-French

Friday, 23 January 2015

Taking Liberties


Alphen, Netherlands. 23 January. Simon de Montfort, 6th Earl of Leicester, is regarded as the father of the English Parliament. Seven hundred and fifty years ago this week he said, “You can maintain power over people as long as you give them something. Rob a man of everything and that man will no longer be in your power”.  The January Parliament sat on 20 January, 1265 some fifty years after the 1215 signing of Magna Carta that in time became the font of all English liberties.  Indeed, for the first time a Parliament comprised not just nobles but the knights and burgesses of the English shires.  De Montfort’s aim was to confirm his power and constrain that of King Henry III after the latter’s defeat at the Battle of Lewes.  However, the January Parliament also confirmed the two principles of freedom of conscience and freedom before the law established by the great William Marshal in the aftermath of Magna Carta.  Over centuries the great political shifts of the thirteenth century established the very idea of freedom which England gave to much of rest of the world – government by the people, for the people and of the people.  Today, those freedoms and liberties are under threat across Europe at several levels as freedom is traded in the name of security, function and ‘efficiency’.
 
At the oligarchic high bureaucratic level freedom is under threat from a European caste that believes they know best and that the over-concentration of power in a bureaucratic few is in the best interest of all.  Yesterday’s decision by the European Central Bank to print €1.1 trillion may or may not help to stimulate dormant growth, although in the absence of structural reforms it looks an increasingly desperate measure by the European Mutual Impoverishment Pact (formerly known as the EU).  Critically, there is no democratic oversight of the ECB and little accountability. Time will tell but Mario Draghi’s actions look very much like those of a man who is looking after his friends in southern Europe at the expense of the taxpayer’s and savers of northern and western Europe.

At the security level the threat posed by Islamic State to Europe is dangerous and growing.  One reason for that threat is the utter irresponsibility of liberal elites in allowing such extreme beliefs to use liberal societies as incubators in the name of multiculturalism and political correctness.  Now, be it the European Arrest Warrant or the sweeping new powers of surveillance demanded by states, elites are in a desperate game of catch-up to both mask and deal with the consequence of their own irresponsibility.  Yes, the threat is such that the state and the super-state may indeed need new powers but who, how and what is going to hold that power to account.

Even at the popular level basic rights and freedoms are being eroded as power is ever taken ever more distant from the people in Europe.  Politicians still routinely trot out the mantras that they are defending free speech and democracy but are they? Political machines seem far more interested in defending themselves, hence the almost universal obsession with the short-term by elites.  Je Suis Charlie many be an emotive slogan but make so mistake the French state was uncomfortable with Charlie Hebdo.  In England, the font of liberty, it is questionable whether the newspaper would have been even able to publish much of its work under the onerous hate laws that have been introduced in the past decade to mask the consequences of government responsibility.

Under pressure from above and without European society is increasingly self-censoring.  Naturally, liberty also implies responsibility in what one says and does.  However, there is a growing tendency to appease extremism on the grounds that it shows cultural sensitivity or because the Internet mob-rule, much of it generated by the sneering, censorious political Left, that is intimidating any dissent from their imposed ‘convention’. A mark of the extent to which British society is retreating from responsible liberty is the extent to which British police (yes, British police) now police thought as well as actions.  Indeed, there was a time when English law could distinguish between criminals and idiots, but not it seems any more.

Eight hundred years on from Magna Carta and seven hundred and fifty years on from the January Parliament it is as vital as ever that responsible citizens challenge over-mighty oligarchies. Sadly such oligarchies are the stuff of power in Europe today with parliaments reduced to being little more than impotent fig-leaves for over-mighty executives.

Simon de Montfort lost his life on 4 August, 1265 at the Battle of Evesham slain by royalists.  The absolute power of the King was restored and would not be so directly challenged until that great dissenter Oliver Cromwell established the principles of parliamentary democracy that endured until the 2007 Treaty of Lisbon.  In 1654 Cromwell said, “In every government there must be somewhat fundamental, somewhat like a Magna Charta, that should be standing and unalterable”.

Power is again taking liberties and it must again be held to account.


Julian Lindley-French

Wednesday, 21 January 2015

Chilcott: In Defence of Tony Blair

Alphen, Netherlands. 21 January.  Britain is as usual these days all a cafuffle.  The latest cafuffle concerns the delay in the publication of the Chilcott Inquiry into the Iraq War.  Professor Sir Lawrence Freedman is on Chilcott's team and he is also one of my mentors and a friend.  Any inquiry of which Lawry is a part will be conducted to the highest standards of public ethics and standards. Therefore, I have no doubt that the delay is due to the very great importance that Sir John Chilcott and the team place on fairness and accuracy.  The inquiry into Britain's role in and conduct of the 2003 Iraq War is of such importance that it must be right in tone, analysis and conclusions.

The media is publicly blaming former Prime Minister Tony Blair for the delay, which he has denied.  Coincidentally, I have spent the past year closely examining Blair's role in the Iraq War using both primary and secondary sources and I can find no evidence to suggest Blair acted in any way that was incompatible with what he saw as the national interest at the time.  There is some evidence that the culture of 'spin' which his government employed at the time to cajole a reluctant public into the conflict over-reached itself.This was primarily because Blair was under intense pressure from Washington, Paris and Berlin as well as his own Labour Party. However, Prime Minister Blair clearly believed that committing British forces to the removal of Saddam Hussein was the correct thing to do for Britain, the Middle East and for the security of the wider world.

My analysis will not chime with the fashionable view that Tony Blair is a warmonger and was a puppet of the Bush regime in Washington. So be it.  The purpose of this blog is not to kow-tow to fashion but to confront strategic reality, however uncomfortable that may be.  Nor am I an apologist.  For a time I went through a period of profound estrangement from Blair, partly because I had so believed in him back in 1997 when he came to power and partly because the costs of the Iraq War were so great for the people of the region and for the families of service personnel in Britain.

However, my personal study has revealed to me a man who believed in his country, wanted to do the right thing and found the tide of history against him.  I can only imagine the loneliness of power he must have felt at times for the evidence suggests a deeply moral man who thought long and hard about his decisions, his actions and their consequences.  The simple truth is that leading a great, powerful country means that one must at times have the courage to take decisions in pursuit of what one believes to be the greater good. That is why the rest of us pay leaders to lead so that the rest of us may have the luxury to comment.

Whenever the Chilcott report is released and whatever its findings it will still not answer the seminal question which both British and other European leaders will again at some point be asked to answer.  Do you have the political and moral courage to act in a dangerous strategic environment when for all the intelligence at your disposition the choice to be made can only at best be charged with political and moral ambiguity and people will die.  Welcome to geopolitics!

In defence of Tony Blair.

Julian Lindley-French


  

Tuesday, 20 January 2015

How Do We Defend Baltic Freedom?


Tartu, Estonia. 20 January.  Thirty-five kilometres from Estonia’s border with Russia freedom has a particularly sweet taste like a good, young wine.  It is as yet not full-bodied and has some noticeable flaws and vulnerabilities but it is clear that over time if left to rest a distinct flavour will emerge that will make it a vintage to remember.  How do ‘we’ defend Baltic freedom?

Latvia, Lithuania and Estonia are important to me because they are the conscience of freedom.  We in Western Europe have become old, slow and complacent about the liberties and freedoms which we take for granted.  This is somewhat ironic given that today is the seven hundredth and fiftieth anniversary of Simon de Montfort’s first truly English parliament which set so much of the world on the long path to democracy.  Sadly, whilst the Paris attacks may have finally awoken us to the very real dangers posed by those who despise liberty and democracy it is unlikely to have really shaken our ever-so-little, all talk no action Western European leaders out of the torpor of denial that is helping to make Europe and the world a more dangerous place. 

Contrast Lithuania.  The Baltic States may be small but their leaders tend not to be, even if the politics of the region is not for the faint-hearted.  Last Thursday in Vilnius I met the impressive Lithuanian President Dalia Grybauskait├ę at the hugely important annual Snowmeeting at which I had also the honour to speak.  Today, I address the equally important Baltic Defence College, a model of defence integration and NATO’s most easterly command. My message to both was direct; all of the complacent assumptions you hold about the defence of freedom will be destroyed unless ‘we’ as the community of freedom stop talking and start acting.

In his seminal book “The Great Crusade” H.P. Willmott said of Hitler’s Blitzkrieg attacks, “German success between 1939 and 1942 owed as much to the German armed forces’ better understanding of the balance between offensive and defensive firepower as it then existed as to any material consideration.  Opposed by a number of enemies of limited military resources and inferior doctrine, the Wehrmacht had been able to defeat opponents lacking adequate anti-tank and anti-aircraft defences and – crucially – the space and time in which to absorb the shock of a Blitzkrieg attack”.  That pretty much describes the correlation of forces between NATO and modernising Russian forces and doctrine today in and around the Baltic region.

Now as then, NATO would not be able to defend the Baltic States against a surprise attack by an unstable, despotic and probably desperate Russia regime. Now as then, NATO would need to trade space for time until the West’s massively better fundamentals could generate the forces and resources to blunt and then repel a Russian lunge.  Now, unlike then, an aggressive Russia would make it perfectly clear that it has treaty-breaching short and intermediate range nuclear weapons to deter such a NATO counter-attack. Stalemate!

When I rose to speak at the Snowmeeting I simply tore up my prepared remarks and went for the jugular of complacency.  No, I did not believe Russia is about to attack NATO allies.  Yes, I am fully aware of Russia’s military shortcomings revealed during “Operation Russian Spring” in Ukraine.  However, “proval blitzkriga” is still at the heart of Russian military doctrine albeit leavened and reinforced by the use of proxies in conflict and destabilising disinformation designed to keep potential targets divided and their potential defenders politically off-balance. 

But that is not my essential point.  Russia forces may still be short of the fully-professional army they are seeking to achieve by 2020. However, the increasingly militarised Russian state will continue to drive towards such a force and Moscow will study carefully how to improve their military performance as well as the paucity of Alliance forces and resources in the Baltic region.  The essential strategic truth is that Russian military weaknesses would likely be less critically decisive at the point and moment of engagement than NATO military weaknesses. 

Therefore, due to European defence slashing and increasing American military overstretch that essential correlation between Russia and NATO forces in the Baltic States is only likely to favour Russia unless Alliance leaders do something about it rather than simply talk about it.  In other words, current analysis suggests within four to five years the conditions will be favourable for a desperate Russian regime to act and impose a new/old ‘buffer zone’ via a military fait accompli.  

The Ukraine crisis is as much a crisis of Russian weakness as Russian strength and that makes it all the more dangerous.  My sincere hope is that Russia will demonstrate the very real greatness of which it is capable by stopping the military logic of Moscow’s current strategic and political nonsense.  However, my fear is that a regime that is lost in the wilderness of romantic Russian nationalism and which is now undertaking all the necessary analyses and assessments of Alliance weakness will at some point reach all the wrong conclusions and be tempted to take all the wrong actions.

How do ‘we’ defend Baltic freedom? Not like this.

Julian Lindley-French

Monday, 12 January 2015

Eurozone 2015: Act or Crash


Alphen, Netherlands. 12 January. John Maynard Keynes once said, “…the oppression of the taxpayer for the enrichment of the rentier is the chief lasting result [of deflation]”. On 7 January the Eurozone tipped into deflation when it was announced by the European Central Bank that year-on-year prices had fallen by 0.2%. This is the first time the Eurozone has dipped into deflation since the height of the financial crisis in 2009.  Some economists (dismal scientists) suggest that ‘temporary’ factors such as the collapse of the oil price, the weakening Euro and stable European consumer confidence mean this latest deflationary dip will be temporary.  However, many indicators suggest otherwise.  The Eurozone economy is bereft of economic growth (Italy has not grown since 1999), few of the vital structural political, economic and regulatory reforms necessary to render the single currency credible or the Eurozone economy world competitive have been made, there is over-reliance on Germany as the engine of growth and both consumer and bond market confidence is fragile in the extreme.  Even the slightest shock could tip the Eurozone into a full blown deflationary crisis that could in turn tip much of Europe into a full-blown depression. That trigger may well come this month with the 25 January Greek elections and the prospect of the fiscally ill-disciplined Syriza party gaining power.  It is that prospect which saw German Chancellor Angela Merkel scurry to London last week for talks with David Cameron.  Even though the UK is outside the Eurozone such a crisis would need Europe’s two strongest economies to act closely together.  It would also need an awful lot more, which is why 2015 is a tipping point and why Europe needs a game-changer.

In a 1933 Econometria article economist Irvine Fisher established a proper understanding of the dangers of deflation.  Entitled, The Debt-Deflation Theory of Great Depression the article demonstrated just how dangerous structural deflation can be for both economies and societies.  During a deflationary spiral, which the Eurozone is in or very close to entering, the value of assets and incomes shrink rapidly pushing up the real burden of personal and corporate debt.  Soon debts can no longer be repaid which weakens vulnerable, debt-exposed banks some of which suddenly collapse.  Such a collapse effectively destroys confidence in the entire banking sector as investors and depositors rush to withdraw their cash and governments are forced to borrow and use the money of already hard-pressed taxpayers in an effort to prop up the banking sector.  A bond market crash then ensues as the cost of government-borrowing soars and confidence further evaporates leading in turn to emergency asset sales and the further driving down of confidence, hoarding and the effective end of normal economic activity with catastrophic social and political consequences.

The Eurozone today is full of individuals, corporations and governments with a high degree of personal debt.  It is unlikely Eurozone states would be able to stimulate or re-inflate the Eurozone economy as they are already dangerously indebted and their taxpayer’s effectively broke.  In such circumstances only external help from a rich, powerful state or other actor such as the International Monetary Fund or World Bank could help to stabilise the Eurozone economy.  Such ‘help’ would invariably come with political strings attached and calls for deep reform.  However, because so many Eurozone societies have been weakened by an economy now in its third recession in six years state institutions are possibly incapable of hard reforms for fear of social unrest.

The Euro itself is central to the problem.  Neither state nor super-state the EU lacks both the political and economic cohesion and fiscal and economic discipline to apply even the limited instruments possessed by the European Central Bank to effect.  In the end, the taxpayer’s of the eight member-states that actually pay for the twenty-eight member EU, led by Germany and to a significant extent Britain, are likely to be called upon to bail out the Eurozone by spreading the cost of Eurozone debt AND by stimulating the economy through counter-deflationary/inflationary measures such as the printing of money. 

The hope would be that the use of so-called Eurobonds and quantitative easing would help restore some semblance of economic confidence and all-important economic growth.  However, such is the fragility of the wider world economy, and the propensity for further geopolitical shock, the scale of the Eurozone debt mountain and resistance to reform in debtor states that any such stimulus by the ‘eight’ would in effect have to be permanent.  This situation would quickly lead to the complete and irrevocable bankrupting of the creditor states, the final crash of the Euro and with it the destruction of people’s hard-earned savings and pensions.  In other words deflation and depression could lead to a first order European political disaster.  

There are two immediate possible political steps that might buy European leaders some more time.  First, much deeper integration of fiscal and monetary policy could be pursued by the Eurozone in parallel with the sharing of sovereign and bank debt across all Eurozone and/or all EU taxpayers.  However, such a move would in effect entail the creation of a European super-state and almost certainly see Britain’s exit from the EU.  Second, those economies which bear too high a level of debt and refuse or are unable to reform their inefficient economies could be cut free from the Eurozone.  Greece is the obvious candidate. However, if a crash begins even Italy, Europe’s fourth largest economy, might be forced to exit the Euro.  That would either lead to a consolidated Euro focused on north and western European economies or simply mark the end of the Euro and with it Project Europe

There is a third game-changer option; move the strategic economic goalposts. Some economists believe a Transatlantic Trade and Investment Partnership (TTIP) with the US and Canada could boost trade and growth significantly.  Indeed, whilst TTIP could never resolve the Eurozone’s many structural contradictions it could act like a kind of economic NATO affording collective economic defence to its members against the kind of speculations and panics that might trigger a great European depression. 

TTIP would create a market of some 900 million people between the world’s most advanced economies and signal to the markets a willingness to take strategic steps to prevent deflation, TTIP could also help force Europeans become more competitive and re-inject meaningful growth into Europe, although to do so would mean Europeans abandoning the expensive social models to which they are so attached and which renders Europe so uncompetitive.  Above all, TTIP would buy European leaders time to undertake the reforms vital to prevent a depression which they have singularly failed to do since the 2010 Eurozone crisis.

There is of course at least one major caveat (and whole host of minor ones).  For TTIP to be successfully concluded American and Canadian politicians would need to be certain that they and their taxpayers are not being suckered into some kind of implicit, back-door Marshall Plan that would end up with them funding Eurozone debt.  Equally, it is not in the either the American or Canadian strategic or economic interest to see Europe fall prey to depression.

In an important article last week entitled A Comeback Strategy for Europe former Swedish Foreign Minister Carl Bildt and former EU foreign and security policy supremo and NATO Secretary-General Javier Solana Bildt and Solana called on Europeans to conclude a TTIP agreement quickly.  Critically, the high-some twosome said, “…TTIP’s goal is to unleash the power of the transatlantic economy, which remains by far the world’s largest and wealthiest market, accounting for three-quarters of global financial activity and more than half of world trade” However, Bildt and Solana contrasted the stalled TTIP talks with the progress being made in creating a Trans-Pacific Partnership or TPP and the very real danger of European economic decline in the absence of TTIP.  They also gave a stark warning: “If the TTIP stalls or collapses while the TPP moves forward and succeeds, the global balance will tip strongly in Asia’s favour – and Europe will have few options if any for regaining its economic and geopolitical influence”.

2015; the year Europe must act…or crash. There can be no more muddling through.


Julian Lindley-French