Monday, September 15, 2014

Europe Fears Scottish Contagion, 1937 Parallels For Today's Global Economy




Europe Fears Scottish Contagion


The prospect of Scottish independence is raising fears in Europe that it could inflame other separatist movements at a time when the continent's unity and even its borders are under threat, analysts say.

While nationalists from Catalonia to Flanders will watch Scotland's referendum with hope, Brussels is nervous about the possibility of a major European Union member like Britain falling apart.

The fear of contagion spreads as far as the EU's eastern frontier, where the Baltic countries worry that Moscow will back their ethnic Russian citizens who could then claim more autonomy.

"It is a very difficult situation for the EU if Scotland becomes independent, it really is," Pablo Calderon Martinez, Spanish and European Studies fellow at King's College London, told AFP.
The EU already has a lot on its plate as it tackles a stalled economy and high unemployment, and has insisted in recent days that the Scottish vote is an "internal matter."
But European Commission chief Jose Manuel Barroso made the position clear in 2012: any newly independent country emerging from an EU nation would no longer be part of the bloc, and would have to reapply for membership.

Barroso outraged nationalists in February when he said it would be "extremely difficult" for Scotland to gain automatic membership, comparing it to Kosovo, which broke away from Serbia.
European Council president Herman Van Rompuy meanwhile weighed in on Catalonia in December, saying he was "confident" Spain would remain "united and reliable."
Van Rompuy is a former premier of Belgium, which is deeply divided between his own Flemish -speaking north and a Francophone south.
Independence movements are a threat to the nation states that "fund the activities of the EU," said Montserrat Guibernau, professor of politics at Queen Mary University of London.

Crimea's Kremlin-loyal leader twisted the knife Wednesday, saying that if the world recognises an independent Scotland it should also acknowledge the peninsula's disputed March referendum to join Russia.
Calderon-Martinez said there was "obviously that concern that with the further break-up of states, the independence movements are going to be taken advantage of in the east (of Europe)."



The depression that followed the stock-market crash of 1929 took a turn for the worse eight years later, and recovery came only with the enormous economic stimulus provided by the second world war, a conflict that cost more than 60 million lives. By the time recovery finally arrived, much of Europe and Asia lay in ruins.
The current world situation is not nearly so dire, but there are parallels, particularly to 1937. Now, as then, people have been disappointed for a long time, and many are despairing.
They are becoming more fearful for their long-term economic future. And such fears can have severe consequences.
For example, the impact of the 2008 financial crisis on the Ukrainian and Russian economies might ultimately be behind the recent war there.
According to the International Monetary Fund, both Ukraine and Russia experienced spectacular growth from 2002 to 2007: over those five years, real per capita GDP rose 52% in Ukraine and 46% in Russia.
That is history now: real per capita GDP growth was only 0.2% last year in Ukraine, and only 1.3% in Russia. The discontent generated by such disappointment may help to explain Ukrainian separatists' anger, Russians' discontent, and the Russian president Vladimir Putin's decision to annex Crimea and to support the separatists.
There is a name for the despair that has been driving discontent – and not only in Russia and Ukraine – since the financial crisis.
That name is the "new normal," referring to long-term diminished prospects for economic growth, a term popularized by Bill Gross, a founder of bond giant PIMCO.
The despair felt after 1937 led to the emergence of similar new terms then, too. "Secular stagnation", referring to long-term economic malaise, is one example. The word secular comes from the Latin saeculum, meaning a generation or a century.
The word stagnation suggests a swamp, implying a breeding ground for virulent dangers. In the late 1930s, people were also worrying about discontent in Europe, which had already powered the rise of Adolf Hitler and Benito Mussolini.
The other term that suddenly became prominent around 1937 was "underconsumptionism" – the theory that fearful people may want to save too much for difficult times ahead.
Moreover, the amount of saving that people desire exceeds the available investment opportunities. As a result, the desire to save will not add to aggregate saving to start new businesses, construct and sell new buildings, and so forth.
The downside of the sanctions imposed against Russia for its behaviour in eastern Ukraine is that they may produce a recession throughout Europe and beyond.
That will leave the world with unhappy Russians, unhappy Ukrainians, and unhappy Europeans whose sense of confidence and support for peaceful democratic institutions will weaken.
While some kinds of sanctions against international aggression appear to be necessary, we must remain mindful of the risks associated with extreme or punishing measures. It would be highly desirable to come to an agreement to end the sanctions; to integrate Russia (and Ukraine) more fully into the world economy; and to couple these steps with expansionary economic policies.




A number of questions have been coming in about Scotland. Yes, it has the capacity to become the real Switzerland of Europe where capital would be attracted if they are out of the UK and the EU. Why? The EU is looking to more than just tax financial transactions, they are looking to even outlaw short-selling thinking they can support the Euro and their economy that way. They cannot get it through their heads that if you prevent people from selling, you will prevent people from investing.

Scotland would be entitled to the North Sea Oil. It could actually end up with a surplus budget – one of the few around in the world. It would also be interesting but separating from the UK would disrupt the bond markets for the question would then turn to who get the debt. Traditionally, it belongs to the UK and if Scotland leaves the UK it belongs to England.
If Scotland were to recognize that being outside both the UK and EU would act as a magnet for capital if it does not join the paranoid Anglo-Saxons respecting privacy then this could be a real economic boom. They would be clean or past problems with the banks regarding Germany and the USA so you could actually have a real banking system emerge that once existed in Switzerland.
There is no doubt an incredible opportunity for Scotland under independence. Of course, human nature and politicians being what they are, will eventually muck up the whole thing given time. But in the short-term, if Scotland actually took the high road here, they could set the model for the rest of the world.
Scotland could set off a contagion. The vote is due the 18th of September – this week. Many markets have shown the week of 09/15 as a turning point including the metals. This is also coming the week after the turning point of the ECM.




Although a war is unlikely at this time, the IDF is preparing to fight Hezbollah, which has developed new offensive cross-border capabilities alongside its massive arsenal of rockets and missiles, a senior military source said on Sunday.


Hezbollah plans to send dozens and perhaps hundreds of terrorists into Israel in any war, while targeting the home front with many projectiles, in a conflict that could last as long as four months, according to the officer.

The Shi’ite group’s focus will be to rain rockets and missiles down on Israel, but it also plans raids based on lessons it has learned from its intervention in the Syrian civil war. A preemptive Israeli ground offensive could prevent such raids, he said.

“Hezbollah’s confidence is growing, along with its combat experience in Syria,” the officer said. “The battlegrounds of Syria have enabled Hezbollah to upgrade its capabilities. Hezbollah plans to send many combatants into Israeli territory near the border and seize it.” This has prompted Israel to make “dramatic changes” to its border-defense plans, he added.

“We understood that Hezbollah is thinking offensively.

It is gaining experience in Syria where it is initiating assaults in built-up areas, and attacking cities. It is learning about subterranean warfare from the perspective of the attacker...
and [its officers are] learning more about themselves as the defenders in Lebanon... They are learning about controlling hundreds of fighters, coordinating intelligence, firepower, and command and control. This is a serious development that requires us to prepare accordingly,” the officer said.

Hezbollah has built an extensive network of tunnels and underground bunkers in southern Lebanon and, together with Iran, instructed Hamas on how to do so in the Gaza Strip.

Combat with Hezbollah will be very bloody and Lebanon would sustain heavy damage in any war, the officer warned. “They [Hamas fighters] are in all of the [south Lebanese] villages.

“It could be very long. Part of this depends on how quickly we launch a ground offensive. The faster we launch an aggressive ground offensive, the more dramatic the effect it will have,” he said.








Nato countries have started an annual military exercise in west Ukraine, with Kiev saying some Nato states have also begun to ship weapons.
The exercise - “Rapid Trident” - began on Monday (15 September) in Yavoriv, near the Polish-Ukrainian border.
According to a Nato statement, the 11-day drill will practice “peacekeeping and stability operations”, including “countering improvised explosive devices, convoy operations, and patrolling”.
It includes 200 US soldiers from the 173rd Airborne Brigade, based in Italy.
It also includes 1,100 troops from Bulgaria, Canada, Germany, Latvia, Lithuania, Norway, Poland, Romania, Spain, and the UK and from former Soviet republics Azerbaijan, Georgia, Moldova, and Ukraine itself.
Rapid Trident is taking place at the same time as “Maple Arch” - another Nato drill involving Canandian, Lithuanian, and Polish soldiers in Poland.

For his part, Ukrainian defence minister Valery Heletey told press in Kiev on Sunday that some Nato countries have also started delivering arms to Ukraine in line with a deal at the recent Nato summit.
“In order to stop [Russian leader] Putin, we need weapons. And they [some Nato states] have listened to me - as of today, the process of delivering arms is being realised”, he noted.
"I have no right to disclose any specific country we reached that agreement with. But the fact is that those weapons are already on the way to us - that's absolutely true, I can officially tell you”.
Ukraine and Russia agreed a ceasefire on 5 September.
But Heletey said 3,500 Russian troops are still inside Ukraine, while 25,000 more are parked on the Russia-Ukraine border.
Pro-Russia rebels at the weekend also tried to seize Donetsk airport in east Ukraine despite the peace deal, while Russia sent what it says are 220 "aid" trucks over the border to Luhansk without letting Ukraine or the Red Cross see what is inside.






NATO member states have started supplying weapons to Ukraine, the country’s Defense Minister said on TV. His comments came a few days after a similar statement by a Ukrainian presidential aide sparked a diplomatic scandal and a rash of denials.
In an interview with Channel 5, Ukrainian Defense Minister Valery Geletey said that he had held verbal consultations with the defense ministers of the “leading countries of the world, those that can help us, and they heard us. We have the supply of arms under way.”
“This process has begun, and I feel that this is exactly the way we need to go,” the minister said.
Ukrainian President Petro Poroshenko, who attended the Sept. 4-5 NATO summit in Wales, announced that he had negotiated direct modern weapons supplies with a number of NATO member states.

Poroshenko claimed that some of the NATO member states said during bilateral consultations they are ready to supply Ukraine with lethal and non-lethal arms, including “high precision weapons,” as well as with medical equipment.
NATO has had repeatedly said that the alliance is not going to supply any weapons or military equipment to Ukraine. At the same time, NATO Secretary-General Anders Fogh Rasmussen said that the alliance would not interfere if member states made decisions of their own regarding arms supply to Ukraine.
When Poroshenko’s aide Yury Lutsenko wrote on his Facebook page that the US, along with France, Italy, Poland and Norway, would supply modern weapons to Ukraine, the news prompted all the countries mentioned in Lutsenko’s post to say they had no information about supplies.
Last Sunday, US Defense Secretary Chuck Hagel was the first to deny the arms delivery, saying he was not aware of a secret deal to supply Ukraine with lethal weapons.




This time the threat of an eruption – potentially even more powerful than the one in 2010 – is posed by Bardarbunga, the biggest of Iceland's 30 or so volcanic systems. Located roughly at the country's centre, the volcano's 10-kilometre caldera lies several hundred metres beneath Vatnajokull, Europe's largest glacier by volume.

Scientists are taking the latest rumblings seriously: roughly 8000 years ago, after all, the volcanic leviathan let rip with the largest eruption of the past 10,000 years.

Radiating from Bardarbunga's crater is a fracture in the crust that trends towards the north-east, says another Monash earth scientist, Dr Patrick Hayman.
Initially, he says, magma moved from a depth of up to 15 kilometres below the crater, to the tip of this fracture – then pushed and shoved its way further north-eastwards.
"Many of the earthquakes recorded in recent weeks have been related to this movement of magma," Hayman notes. "The first eruption, last month, occurred about 5 kilometres north-east of the glacier's edge, forming what is known as a fissure eruption – a long, narrow crack from which magma erupts."
Because of the connection between the fracture and the volcano, the concern has been that magma will rise beneath the glacier between the fissure and the volcanic crater. "So there is a real possibility of a showdown between the magma and ice," Hayman warns.





People on Norway’s coast have reported a strong smell of sulfur in the air this week, and experts say it’s coming from a surprising source: Iceland’s Bardarbunga volcano, 800 miles away.
Bardarbunga sits about seven miles under the Dyngjuj√∂kull glacier, which is more than 800 miles west, and across the Atlantic, from Norway. But as Vibeke Thyness at the Norwegian Medical Institute told Norway’s public broadcasting radio station, NRK, weather, along with a very active few weeks at the volcano, have likely combined to push the sulfur into Norway’s air space.
“This is quite a large spill,” Thyness tells NRK. She explained that high pressure over Scotland, along with wind and only a little rain, has made it possible for the fumes to travel so far. While Thyness said the fumes themselves aren't something that will endanger the public in Norway, the Iceland Review said residents in eastern Iceland have complained about sore throats, stinging eyes and headaches. The news agency said families were told to avoid being outside for long periods of time, particularly children and people with respiratory illnesses. 
Bjorn Saevar Einarsson, a meteorologist at the Icelandic Met Office, points to a satellite image that clearly shows how far the concentration of sulfur pollution has traveled.
Sara Barsotti, a volcanologist with the Icelandic Met Office, told the Wall Street Journal gas emissions at the eruption site have measured very high this week. Workers there are now required to wear gas masks as well as personal gas monitors.
Volcanic activity at Iceland’s Bardarbunga volcano has escalated since mid-August, as increasingly powerful earthquakes shake the region. The lava eruption first started Aug. 31. Impressive photos from NASA and the Earth Observatory show the lava footprint at the Holuhran lava field has also continued to grow.
Scientists also noted several large new fissures had formed along the surface, as well as a telltale caldera. That caldera has been sinking beneath the surface as much as 3 feet a day.
The airline industry has kept close watch on the situation because the volcano sits in a vital flight path from the United Kingdom to America. No one wants a replay of 2010 when Iceland's Eyjafjallajokul volcano erupted and sparked a week of international aviation chaos, canceling some 100,000 flights and closing European air space for five days.
The current airline alert level remains at orange, as earthquakes continue to shake the region.










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