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To be expected, amid flybys and chalet meetings, Brexit hung over the Farnborough International Airshow like a tethered aerostat (of which there were none, if you were wondering). Government officials and company executives chatted over coffees or champagne flutes about what the potential ramifications would be of a European Union that did not include one of its most powerful members. Multinational defense collaboration could suffer, some said; new trade laws could harm export opportunities, others said.
And then there was news of the political reshuffling by Theresa May on her first day as prime minister. In the words of the Telegraph, it was “one of the most brutal reshuffles in modern British political history.” How might this new leadership approach defense? How long will it take to establish a defense strategy and procurement priorities? Program delays, at the very least, are likely, many said.
But such conjecture was countered by rather encouraging news. British Defence Secretary Michael Fallon is to remain in post as part of the reshuffle.
And the UK confirmed a plan to purchase nine P-8A maritime surveillance aircraft, worth around $4 billion, while also announcing a $2.3 billion deal to secure 50 AH-64E Apache helicopters.
Said Fallon in a statement: The P-8A aircraft “are part of our plan for stronger and better defence, backed by a budget that will rise each year of this decade. That means more ships, more aircraft, more troops available at readiness, better equipment for special forces, more being spent on cyber — to deal with the increased threats to our country.” Encouraging words.
And then there are the comments of Frank Kendall, the Pentagon’s top weapons buyer, speaking in London ahead of the air show: “I don’t see right now any reason why it should fundamentally affect our relationship with the UK or our business deals with the UK.”
So then, much ado about nothing?
The one statement made time and time again post-Brexit, including at Farnborough, is that there remains much we don’t yet know. And that indeed can cause harm — as government and industry alike go into something of a holding pattern as they figure out how to proceed.
The air of uncertainty is reminiscent to what Washington and the US at large experienced in 2013, with the budget sequestration and more temporarily the government shutdown. Most regarded both as bad government and potentially crippling, but few knew fully what the near-term or long-term effects would be. What we found in sequestration, what we are still finding, is the effects are gradual as stakeholders grasp implications, establish new procedures, prioritize requirements and learn to function in this so-called new normal. Brexit is far different from the mandated, across-the-board spending cuts that define a sequester. But requirements for moving forward will likely be quite similar. So then, keep calm and carry on.
by The Extinction Protocol 16-Jul-16 [Well perhaps not quite so long ago!! Don]
The country of Italy, home to one of the most famous volcanic disasters in history, is showing signs that another massive eruption is brewing, according to a new study published in the journal Geophysical Research Letters. Almost 2,000 years after the burial of Pompeii and nearby Herculaneum during the eruption of Mt. Vesuvius in 79 A.D., an ancient volcano near Rome is rumbling to life, say scientists. About 19 miles away from the heart of Rome, an ancient volcanic district called the Colli Albani is stirring. The Colli Albani, a 9-mile-long semicircle of hills on the outskirts of Rome, last erupted 36,000 years ago, so geologists had classified it as extinct – until about 20 years ago.
In the early 1990s, the area around the Colli Albani Volcanic District began showing geological indicators of a future explosion: ground levels shifted, steam vents opened, and earthquakes shook the hills around the site. Since that time, scientists have used these symptoms, along with satellite data and information about the volcano’s previous eruptions, to evaluate the risk that the Colli Albani poses to the surrounding region.
The increase in earthquakes (many of which occurred during an “earthquake swarm” between 1991 and 1995) and ground level changes in the region indicate the presence of a magma bubble forming beneath the earth near Colli Albani, pushing upwards until it can erupt. Using historical data, researchers determined that Colli Albani is not extinct, as was long believed – it merely operates on a 31,000-year cycle of dormancy and wakefulness. And when the volcano is awake, scientists say, it is dangerous.
Over the last 200,000 years, scientists say that the region surrounding the Colli Albani has risen by 164 feet, and it continues to rise by nearly an inch per year, indicating that the magma bubble is still growing. For thousands of years, the magma bubble has been trapped by pieces of land that have now begun sliding against each other. If those pieces shift enough, Colli Albani will erupt.
When conditions are right (or, from a human perspective, terribly, terribly wrong), Colli Albani can produce eruptions similar to the one that destroyed Pompeii and Herculaneum in 79 AD. Like Vesuvius, Colli Albani could erupt with a towering cloud of burning ash and showers of heated “lava bombs” that could damage or destroy nearby towns. Past eruptions have also seen swift streams of lava, scientists say, where Roman suburbs now cluster. A future eruption could devastate them. Rome itself would be safe from such an eruption in all but the very worst of circumstances. If the wind is blowing in the right direction, it could steer an ash cloud from Colli Albani towards the heart of the city.
The good news, according to researchers, is that time is on Rome’s side. The study’s lead author, Fabrizio Marra, a volcanologist at the National Institute of Geophysics and Volcanology in Rome, told the American Geological Union that he does not expect the Colli Albani to erupt for another 1,000 years. “We expect for sure some initial stages which may not be so explosive,” said Dr. Marra, “but it may evolve in time.” -Christian Science Monitor
Australia has called for a free trade deal with the United Kingdom following its exit from the European Union, Australian Prime Minister Malcolm Turnbull said, BBC reported July 17. British Prime Minister Theresa May described the move as “very encouraging” and insisted it showed Brexit could work for Britain. Liam Fox, the new British international trade secretary, said he was already “scoping about a dozen free trade deals.” But the United Kingdom cannot sign any deals while it is still an EU member, which may make trade deals take a long time to negotiate. Still, there will likely be numerous informal discussions taking place leading up to the Brexit date, which could be in late 2018 or early 2019. Turnbull’s calls for free trade deal with Britain also follow parliamentary elections in Australia, which will likely create more political gridlock in the country.
Russian President Vladimir Putin and Turkish President Recep Tayyip Erdogan may meet in August, Kremlin spokesman Dmitry Peskov said in a statement July 17 following Turkey’s failed coup, Reuters reported. Putin called the Turkish president after the July 15 coup attempt and said he hoped Russian tourists would be protected. Erdogan pledged to do so. The statement quoted Putin as telling Erdogan that Russia found anti-constitutional acts and violence unacceptable and was hoping for the restoration of order and stability in Turkey. Relations between the Kremlin and Erdogan remain strained over the Syria crisis and Turkey’s shooting down of a Russian fighter jet in Syria in November. However, Erdogan apologized to Putin in June over the downing of the plane, agreeing to resume bilateral cooperation. The Kremlin had responded to the incident by imposing restrictions on trade with Turkey.
Wall Street Journal 17-Jul-16
Much of the success of Britain’s giant financial services industry is relatively recent and owes a lot to the U.K.’s EU membership, Simon Nixon writes
The political crisis that engulfed the U.K. after its decision to quit the European Union in last month’s referendum may have come to a remarkably swift conclusion. But the political challenges facing new Prime Minister Theresa May are awesome. She must now fashion a new foreign, commercial, security, scientific and agricultural strategy for the country that meets the high expectations of those who voted for Brexit and her own promise upon taking office to “make a success of it.”
One of her biggest challenges is to find a Brexit deal that preserves the success of the U.K.’s giant financial services industry, which is so central to the country’s economic fortunes. Much of this success is relatively recent and has owed much to the U.K.’s membership in the EU. For several decades after World War I, the City of London was primarily a domestic capital market. Its modern revival only began in the late 1960s with the creation of the Eurobond market, which recycled offshore U.S. dollars, and the Thatcher reforms of the 1980s, which swept away restrictive practices, abolished exchange controls and exposed domestic firms to foreign competition.
But what really transformed the City was the creation of the EU single market and, subsequently, the euro. This turned London into Europe’s financial center, home to vast new pan-European markets for equity, bonds and derivative-based hedging products. Thanks to the EU’s commitment to the freedom of movement of capital, services and people, financial-services providers from all over the world could use London as a hub to serve customers across the entire continent.
Today, the U.K. is home to 78% of European foreign-exchange trading, 74% of interest-rate derivatives trading, 85% of hedge fund assets under management and 35% of all EU wholesale financial services, according to TheCityUK, a London-based trade body. The U.K. in 2014 had a £72 billion ($95 billion) trade surplus with the rest of the world in financial services, of which £18.5 billion was with the EU. There are 489 foreign banks registered in London, of which 183 are from the EU.
How much of this success is at risk from Brexit? Certainly, some sectors should be unaffected, including those focused on the domestic and non-EU markets and activities such as insurance, where there is only limited cross-border activity. Some sectors such as hedge funds may consider Brexit a benefit if it allows them to escape what they consider to be unnecessary and costly EU regulation.
The bigger questions surround the future of cross-border banking services: Will EU supervisors allow banks to continue to maintain systemically important businesses and assets offshore in London operating under potentially different regulatory rules?
For many banks, the ideal Brexit outcome is a deal that maintains as much as possible the status quo by keeping the U.K. in the EU single market.
But this seems unlikely since it would require the U.K. to accept EU rules without having any say over them—at a time when financial regulation is constantly evolving. What banks fear is that EU supervisors will revoke the “passport” that allows U.K.-based firms to offer financial services directly to EU customers and insist instead that all banks wishing to do business in the EU maintain separately capitalized and funded onshore subsidiaries under their supervision.
This doesn’t mean that London would cease to be Europe’s financial center. EU regulators would likely insist that new EU subsidiaries are more than mere brass-plate operations and that banks install sufficiently senior locally based management, operational infrastructure and assets. That could include a requirement that EU-based banks clear EU-denominated trades via onshore clearing houses.
But there is no reason why the bulk of traders wouldn’t continue to operate out of London, not least because many traders like living there. As one veteran City adviser puts it, “no banker would willingly relocate to any city where he wouldn’t be happy to spend the weekend.”
Even so, there are three risks to the long-term prospects of the U.K.’s financial-services industry. First, establishing new EU-based subsidiaries would impose substantial costs on the industry when its profitability is already weak. That could cause banks to accelerate existing plans to cut costs, including by transferring back-office and administrative jobs offshore to cheaper locations, including Eastern Europe. That would hit wider U.K. financial-services jobs and revenues. Second, and conversely, the cost of establishing separately capitalized, UK-only subsidiaries could push up the cost of financial services in the U.K., which would have an impact on the wider economy.
Finally, a British exit from the EU risks setting in reverse the network effect that has until now been such a crucial factor in London’s success. Once firms were forced to unbundle some activities currently located in London, others might follow. European banks in particular might choose to relocate more than just management and operational functions, especially if a post-Brexit U.K. made it harder for EU citizens to work in the U.K. Over time, the U.K. could find itself losing market share to other financial centers—and the lucrative tax revenues that flow from it.
How Mrs. May squares this circle is unclear. But the success of Brexit may depend on it.
When the chips are down in Europe, everyone turns to Angela Merkel for a solution. But the German chancellor often sits on her hands until the last minute, then does the minimum necessary to keep the show on the road.
Since last month’s shock British referendum vote to leave the European Union, all eyes have been on Berlin to indicate a way out of danger for the 27 members who will remain.
As usual, Merkel, the continent’s most powerful and experienced leader, is biding her time and letting underlings air their differences without tipping her hand before she departs for her three-week summer break this week.
Votes had barely been tallied in Britain when her vice-chancellor, Sigmar Gabriel, leader of the center-left Social Democrats, and European Parliament President Martin Schulz rushed out a 10-point plan for a “refoundation” of Europe.
Lamenting that ever more citizens doubted Europe’s ability to deliver a better future, they called for a more federal Europe with the European Commission as its government, and a more flexible, growth-friendly economic policy turning away from austerity to investment in an “industrial renaissance”.
Finance Minister Wolfgang Schaeuble rapidly shot down those ideas, rejecting any need for economic stimulus spending and reaffirming his balanced budget target up to 2020 at a time when many in Europe are pleading with Berlin to borrow money free of interest and invest massively in infrastructure.
He refuses to accept that surplus countries like Germany, which has a giant current account surplus of eight percentage points of GDP, should help poorer deficit countries adjust by spending more on public investment and boosting consumption.
Furthermore, Schaeuble said those calling for a bold federal leap forward in integration had failed to understand the public disenchantment with the EU that fueled the British vote and is driving nationalistic euroskepticism elsewhere in Europe.
Rather than give more power to Brussels, the veteran conservative, who once advocated a federal “core Europe”, said it was time for national governments to take matters more into their own hands if the Commission was unable to do the job.
Schaeuble is blocking the next steps forward in euro zone risk-sharing – the creation of a European bank deposit insurance system and of a fiscal backstop for the currency area’s single resolution fund to help wind down failed banks.
The 71-year-old finance minister has also managed to delay any debt relief for Greece until after next year’s German election in September and maneuvered to delay public support for Italy’s ailing banks, saying there was no acute crisis.
Even the German head of the euro zone’s rescue fund, Klaus Regling, argued last week that Berlin and its partners needed to go further to make the currency area less vulnerable to shocks.
Restructuring Italian banks’ bad loans and forcing investors including retail savers to take losses before any public money can be injected under the EU’s new bank recovery and resolution rules could trigger precisely that kind of post-Brexit shock.
Regling called for completing European banking union by phasing in a deposit insurance scheme after a transition period. He also advocated a limited budgetary capacity for the euro area to cushion economic shocks hitting only some countries.
Both proposals have so far been anathema to Schaeuble, who speaks for a school of German fiscal hawks in warning that such steps would lead to unacceptable permanent north-south transfers inside the monetary union.
At least there is debate in Germany about what the EU should do to regain momentum and overcome the trauma of losing Britain, its second largest economy, even if much of it resembles shadow boxing before next year’s German elections.
In many EU countries, politicians have simply fallen back on blaming Brussels, with some demanding the scalp of European Commission President Jean-Claude Juncker as a scapegoat.
To be sure, Juncker has contributed to the sense of disarray by first trying to rush an EU trade deal with Canada through the European Parliament without letting national lawmakers have a say, then reversing himself under pressure from governments.
The result is that the Canada deal could be bogged down for many months, perhaps indefinitely, and the chances of getting a bigger and more sensitive trade and investment partnership with the United States wrapped up and ratified seem even more remote.
No progress on monetary or banking union, deadlock on trade – that doesn’t leave much scope for restoring public and financial market confidence in Europe.
The German and French foreign ministers, both social democrats, have issued more modest joint proposals for the EU to focus on internal and external security, managing migration and refugee flows, and boosting the economy and job creation.
Their nine-page paper, which would not require changing the EU’s founding treaty with the risk of more referendum defeats, called for a European Security Compact with a more integrated foreign and security policy and a permanent civil-military chain of command for crisis management operations.
But when it came to the euro – the economic heart of the European project – their suggestions of investment-boosting measures by surplus countries and a common fiscal capacity(budget) for the euro zone, ran into the same stonewall in the German Finance Ministry.
Merkel has broadly welcomed the Franco-German paper and broadly adopted its focus on three main themes – migration, security and growth/jobs. Whether she is willing to overrule Schaeuble and take political risks before next year’s federal elections is highly doubtful.
Yet without some initiative to provide fresh wind after the Brexit blow, the EU looks highly vulnerable to the next external shock, whether from Islamist militants, Italian banks or another surge in migration.
New Europe 07-Jul-16
Last week the International Momentary Fund signaled out Deutsche Bank as the most dangerous bank in the world. In banking danger stems from business, size and linkage. All three are a problem for the firm, the German and the European economy.
Too big to fail
First of all, it is too big to fail. In February the executive Director of the Bank, John Cryan, was assuring Bank employees that the bank is “rock solid” and the German Finance Minister, Schaeuble, was saying that “I have no concerns about Deutsche Bank.”
The latter was a political assurance, not a matter of fact statement. Schaeuble was in fact linking German state credibility with Deutsche Bank’s credibility, in a national version of Mario Draghi’s “whatever it takes.”
Deutsche Bank became gigantic in the evil 1990s, when other behemoths like Leman Brothers were surging in size. It gradually started accumulating skeletons in its closet. In April 2015, the Bank was fined $2,5bn for its role in manipulating the Libor interbank offered rate; and it set $1,5bn on reserve to pay for anticipated costs. In time, the “setting aside” became €5,5bn.
The size of the problem
2015 closed with over €8 bn in litigation costs. That is a lot.
Deutsche is a bank with €1,64 trillion liabilities and €1,58 trillion in assets. In sum, it is a few billion in the red and could be worth very little if its share value continues to fall. Its book net value now is little over €20bn. The bank costs twice what it paid in fines and lawyers last year.
On Wednesday, the banks stock tumbled to levels unseen since 1989. It is conceivable that the bank could fail.
It all started when the bank announced 2015 annual earnings report and it did not look good. In fact, it was the worse report in seven years with net losses of €6,8bn. In February, the markets were panicking.
Then came the Schaeuble statement, which everyone takes with a pinch of salt. The bank has a €9,6 trillion exposure in government bonds and is seating on trillions of derivative bets that are multiple times over the size of the German GDP. So, Schaeuble’s word is good as gold, but not quite as good.
Too big to bail?
Although it has an overall capitalization of 11%, the bank is also exposed to dangerous assets. It does not do retail, which some consider less risky. Since the beginning of the year its share value fell by 50% since the beginning of 2016 and an overall 70% year on year.
Credit rating agencies are not trusting DB as much as the German economy. In May Moody’s downgraded the ratings of DB across the board, long term and short term. Moody’s also downgraded the ratings of US–based Deutsche Bank Trust Corporation.
Deutsche Bank failed the US stress tests earlier this year.
The cost of going down does not come merely from direct investor exposure, but also from the networking effect. The interconnection with other financial institutions and the state is rarely transparent or easy to risk assess.
The problem with Deutsche Bank is that it is cornered in a position in which its fate is not absolutely in its hands.
It is undergoing “structural reform” which mean pain, pain, and pain. It is simplifying investment portfolios, fortifying controls, bolstering capital buffers, and strengthening its balance sheets to stabilize earnings.
However, Deutsche Bank’s performance over the last several quarters is weak, because the global economy is weak. Brexit did not help; Chinese growth deceleration and the collapse of the commodities market did not either. DB cannot control economic climate.
And so there may come a time when the German government may need to extend a hand. The cost of Lehman falling ensured that no government will make that mistake again, one would think. When it comes to bailing out, impossible is nothing. But, at what cost?
The NATO Warsaw Summit has decided to deploy four battalion combat groups in Poland and in three Baltic states to reassure these countries against the threat of a hypothetical Russian invasion. Moscow has expressed its reaction in the words of Maria Zakharova, spokesperson for the Russian Ministry of Foreign Affairs.
“NATO must stop reacting to the non-existent threat,” Zakharova wrote, following the summit. NATO’s “overreaction” and “provocative troops deployment” were a central topic for Russia during Wednesday’s meeting of the Russia-NATO Council. No breakthrough occured, and NATO was not persuaded to believe Russia’s claims it posed no threat. Here is why.
One should probably keep in mind that the “threat” to which NATO is responding is deemed such by Russia’s neighboring NATO member states. Poland and the Baltics—they are the ones feeling threatened. What the Russian Foreign Ministry’s spokeswoman is telling them is that there are absolutely no reasons for them to feel threatened. Really? Pieces can so easily be assembled to produce the full picture—and that is a rather threatening picture indeed.
Firstly, the recent developments in Russian society and the Russian military build-up look worrying. How can they not? One can recall the inscriptions “Na Berlin!” (“To Berlin!”) on the practical bombs Russian jets were broadcasted dropping at the Volga region proving range during exercises last year. In the run up to Russia’s Victory Day celebrations—commemorating the Soviet Union’s victory over Nazi Germany—last May Russian authorities could not resist allowing widespread displays of “patriotic” bumper stickers reading “We can repeat it!” (“Mozhem povtorit!”), the undisguised hint for a new military campaign to come again to the heart of Europe. If those are not the threatening statement of possible intentions—what are those?
Secondly, as if oral threats were not enough, some of the Russian military’s activities suggest it is not defensive tactics they are pondering. This year Moscow highly symbolically reestablished its 1 st Guards Tank Army. Tank armies are not the best instrument of defense by themselves. A tank army is much better suited for offensive operations. Just recall what one German tank army nearly did to the Allies in Ardennes in December 1944. And the 1 st Guards tank army is a very special symbol. It was not only the unit which assaulted and finally captured Berlin in April 1945 but the 1 st Guards was also to develop a strategic breakthrough deep into West Germany at the infamous Fulda Gap (accompanying the 8 th Guards army) during the Cold War era.
Russian tanks Russian servicemen drive battle tanks during a parade to mark the 70th anniversary of the end of World War II in the Far Eastern city of Yuzhno-Sakhalinsk, Russia, September 2, 2015. Russia is prioritising reinforcement of the region by 2020. Sergei Krasnoukhov/Reuters
Another re-established formation—the 150 th motorized-rifle division in Novocherkassk near Rostov-Don—is equally symbolic. The 150 th was the division whose men hoisted upon the Reichstag the red Soviet flag which is still the official symbol of the Red Army’s triumph over Germany. In military terms, intentions, defensive or offensive, are supported by material means. And these means don’t end there.
The 237 th Guards air assault regiment is to be re-established within a 20-minute helicopter flight from the Russo-Estonian border. What on the Earth should Estonians think it is designed to assault, if not their homeland? After all, the very name of the regiment assumes it is not intended for defense. Three more regiments of the 76th Guards air assault division are sitting in Pskov just 30 kilometers from the border and they do not spread calm in Estonia either. Keep in mind these regiments were the ones that “gloriously” participated in the “liberation” of Crimea and the “defense” of the “Russian world” in the east of Ukraine.
Two heavy motorized-rifle brigades relocated in a hurry to Russia’s western border several months before Warsaw Summit, along with a dozen of specialist brigades (near the western border), and the 11 th Army Corps (in Kaliningrad) is undergoing re-establishment now—all just additional elements of the “peaceful” preparations on the Russian side. Can’t those impressive new formations be seen by Poles and Balts as a bit excessive for a hypothetical counter-balancing of just four NATO battalions planned for deployment since 2017?
Threats to “turn the U.S. into radioactive ashes,” aim “nuclear missiles” or to treat Poland and Romania as “targets” seemingly should help East Europeans feel reassured. And the recent exercises held in June this year in Russia to practice full-scale mobilization—are those exercises, combined with nuclear threats, also seen as reassuring for the NATO states by Moscow?
There are those in the West who insist that the door should be kept open for Russia to resume cooperation. Proponents of cooperation are absolutely right—cooperation is always better than confrontation. But the Kremlin has so heavily invested into the infrastructure of confrontation that one cannot help but ask these ‘cooperativists’: what makes you believe that Russia really wants cooperation?
From Russia’s perspective, it tried the cooperative approach under Mikhail Gorbachev, Boris Yeltsin, and during Putin’s early years—resulting in complete failure to retain influence. If everyone in the Kremlin is convinced that cooperation does not bring “fair” treatment to Russia, after all isn’t it time for them to play “bad cop” and try confrontation, Moscow ponders?
It is not difficult to recognize that Russian spokepersons just articulate the Kremlin’s quite Orwellian line—”war is peace”, “threat is the extended friendly hand.” That is why it is very important to scrutinize reasons behind the opinion that it is better not to react to threats. Otherwise it might be that those who call for cooperation unintentionally sing from the same songbook as the Kremlin: “Don’t worry, be happy—and stop reacting to the non-existent threat!”
Igor Sutyagin is senior research fellow, Russian Studies, Royal United Services Institute.
Former Turkish Air Force Commander Akin Ozturk reportedly confessed to plotting the July 15 failed coup attempt, CNN Turk and Anadolu Agency reported July 18. In Turkey, arrests and dismissals continue in the fallout from the attempted coup. It will take years for the Turkish military to recover.
UK-EU:160718:(20-JUL-16):U.K.: Defense Secretary Says More Effort Needed To Maintain Influence Following Brexit
U.K. Defense Secretary Michael Fallon said on July 18 that the United Kingdom will have to work harder to maintain its global political and military influence following the Brexit referendum, the AP reported. Leaving the European Union means the United Kingdom will have to strengthen both bilateral relationships with other countries and its participation in alliances like NATO, he said. Fallon said his country would need to “double down” on commitments to NATO to demonstrate its lasting leadership. The secretary added that he had put in place a small committee to examine defense issues related to leaving the European Union, including the United Kingdom’s future role in EU missions in which it participates.
TU-RU-NATO:160709:(20-JUL-16):Nato’s united front under threat after Greece signs arms deal with Russia
Daily Telegraph 09-Jul-16
Nato’s united front under threat after Greece signs arms deal with Russia Senior Nato officials have raised concerns that attempts by Greece to forge a defence pact with Moscow could seriously undermine efforts to present a united front against further acts of Russian aggression.
Maintaining security in eastern Europe and former Soviet Union states is likely to dominate the Nato summit when leaders of the 28-member alliance meet in Warsaw on Saturday.
The summit is the first meeting of Western leaders since Britain’s Brexit vote in last month’s referendum, and Nato leaders are keen to demonstrate the vote does not signal divisions in Europe that could be exploited by the Kremlin.
But in what will be US President Barack Obama’s last Nato summit before he leaves the White House, Nato officials are raising concerns about deepening defence ties between Greece and Moscow which they fear could undermine attempts by Nato to present a united front against Russia.
Nato’s concerns relate to last month’s announcement by Panos Kammenos, the Greek defence minister, when he unveiled a new partnership with Russia to manufacture Kalashnikov rifles.
The Greek government says the deal is vital to prevent the collapse of the country’s defence industry. But in order for the deal to go ahead Moscow is insisting that Greece must first persuade its Nato partners in Europe to lift the economic sanctions imposed after Russia’s illegal annexation of Crimea in 2014.
Mr Kammenos, the leader of the Right-wing anti-austerity Independent Greeks party, is viewed with suspicion by many Nato leaders following a series of outspoken comments.
Last year he threatened to unleash “a wave of millions of economic migrants” and jihadists into Europe unless the EU backed down on austerity demands, and caused deep offence to Germany by claiming “Europe is governed by German neo-Nazis”.
But it is Greece’s deepening defence ties with Moscow that are causing most concern for Nato officials.
One said: “It is essential that Nato leaders present a united front against Russia at the Warsaw summit if we are to deter further acts of Russian aggression in Europe.
“But the fact that a strategically important Nato country like Greece is trying to build its own relationship with Moscow could seriously undermine the alliance’s ability to present a united front to deter further acts of Russian aggression.”
Vladimir Putin, the Russian president, has made no secret of his satisfaction at Britain’s decision to leave the EU, which he hopes will lead to further divisions in Europe that will allow him to increase Russian influence over former Soviet countries in eastern Europe.
Mr Kammenos, whose party joined forces with the Left-wing Syriza party of prime minister Alexis Tsipras to form a coalition government, was the only Western politician to attend the 4th Moscow International Security Conference held in April, when he claimed the EU’s sanctions had “been a disaster both for Russia and the EU”.
The new Conservative prime minister faces huge challenges on Brexit and the economy. What will help her most is the turmoil in the opposition
SO IT was a coronation after all. On July 13th Theresa May, the home secretary, became Conservative Party leader and prime minister after her only remaining rival, Andrea Leadsom, the energy minister, pulled out of the race. Mrs Leadsom’s ostensible reason was that she had the backing of only 84 Tory MPs, against Mrs May’s 199. But what counted more was that, under pressure, she had shown her unfitness for the job, embroidering her financial career and hinting that, as a mother, she was better qualified than the childless Mrs May.
A new Tory prime minister is but one feature of the redrawn political landscape after Britain’s vote to leave the European Union. The opposition Labour Party has sunk into ever-deeper chaos under Jeremy Corbyn, who now faces a leadership challenge (see article). The populist UK Independence Party has a vacuum at the top following the resignation of its leader, Nigel Farage, on the completion of his career’s ambition. And although the Scottish Nationalists, the third-biggest party in Westminster, are united under Nicola Sturgeon, they are uncertain how and when to pursue independence post-Brexit.
Mrs May backed the Remain side in the referendum, unlike most Tory voters. Yet they welcomed her victory, if only because she has shown more political nous than her pro-Brexit opponents. Indeed, it is remarkable that the Brexiteers, having won a famous victory, have now largely fled the battlefield, leaving Remainers to sort out the mess. Mrs May was only ever lukewarm about the EU, and has promised that “Brexit means Brexit”. Still, she can expect cries of treachery if the process stalls.
As home secretary for six years, she built a reputation as a moderniser, picking fights with the police. She was quicker than most Tories to see which way the wind was blowing on issues such as gay marriage; in 2002 she warned that many voters saw the Conservatives as the “nasty party”. She is a child of England’s home counties, without the privileged background of the outgoing prime minister, David Cameron, and many of his circle.
Her first task was to form a cabinet. Philip Hammond, previously the foreign secretary, is to be the new chancellor. More surprisingly she gave the Foreign Office to Boris Johnson, a Brexiteer not noted for his diplomacy. (In May he won a magazine competition to write a poem about Turkey’s repressive president—“a young fellow from Ankara / Who was a terrific …kerer”, as he put it.) Liam Fox, a fellow Leaver who resigned from the cabinet in disgrace less than five years ago, will be trade secretary. David Davis, a veteran Eurosceptic, will take charge of a new Brexit department. Amber Rudd, the energy secretary, will become home secretary.
The next question will be whether Mrs May wants or needs a stronger democratic mandate. In 2007, when Gordon Brown assumed the premiership without any Labour challenger, she accused him of running scared by not holding an election to test his credentials. Yet she now insists that no election is needed before the current parliamentary term ends in 2020. The Fixed-term Parliaments Act of 2011 makes it harder than it used to be for prime ministers opportunistically to call early elections. But Labour’s disarray may yet tempt her to try, perhaps next year or in 2018.
Her biggest test of all will be Brexit. She has experience of Brussels, notably in skilfully negotiating Britain’s opt-out from most EU justice and home-affairs policies in 2014, while ensuring that it opted back in to 35 measures, including Europol (which assists members’ police forces), the European arrest warrant and the passenger-names directive. But she has not even met most EU leaders. No doubt they will give her a cautiously warm welcome (she has some affinities with Germany’s chancellor, Angela Merkel, including an upbringing as a pastor’s daughter). But they will also say it is for her to explain how she wants to proceed—and how fast.
The characteristics of incoming British prime ministers
Mrs May insists that there will be no attempt to remain inside the EU and there can be no second referendum. But she has also said she will not trigger Article 50, the legal route to Brexit, until she has fixed her own negotiating position. And, although as home secretary she was fiercely anti-immigration, she has been careful to insist only that free movement of people in the EU cannot continue as it currently operates. She knows the value of full membership of Europe’s single market, and she understands the trade-off that may be necessary between preserving this and setting limits on free movement.
It is within this framework that the hard bargaining with Britain’s partners will eventually take place. Many colleagues are floating ideas loosely called Norway-plus (or Norway-minus), which involve trying to keep as much as possible of Britain’s membership of the single market while being permitted to impose some controls or an emergency brake on free movement.
It will help that the recession that is now on the cards will have the side-effect of curbing immigration. But in other respects the economy will be the second big headache for Mrs May. She has sensibly junked her predecessor’s target of balancing the budget by 2020. She plans more investment in infrastructure, though she is against a third runway at Heathrow airport. She has evinced a surprising hostility to foreign takeovers of British companies; and she has moved to grab Labour’s territory in proposing that workers and consumers should sit on company boards, and that executive pay be limited. Mrs May’s declared goals of building an economy that works for everyone, not just for the privileged few, and of doing more to help the poor and disadvantaged who have suffered most in the past decade, are admirable. But she may yet need to curb her more interventionist instincts.
Her best asset, however, will be the chaos of the opposition. The Tories precipitated the Brexit vote for internal reasons and in doing so split their members and decapitated their leadership. It is extraordinary that they now appear the more united of the two main parties.
Catholic World News 18-Jul-16
The Catholic Church in Italy received $1.3 billion from income-tax returns, under a system that send 0.8% of tax payments to religious or charitable institutions.
Italian taxpayers are given the opportunity to designate the religious or charitable institution to which their portion of income taxes should be directed. However, most taxpayers do not make a selection. The law stipulates that 0.8% of the taxes collected from those who do not make a choice should be divided up proportionately among the institutions chosen by those who do make a selection. Because of that system of distribution, most of the income-tax receipts directed to the Catholic Church in Italy come from taxpayers who did not choose to make a contribution.
The “church tax” system, in which the government sends tax revenues to religious bodies, is common in Italy. The Catholic Church in Germany reaps the greatest rewards from the system, netting over $6 billion last year.
The decision to open two more “chapters” in Serbia accession talks on Monday (18 July) showed that EU enlargement policy is alive and well despite Brexit, the EU has said.
Speaking at a meeting with Serbian PM Aleksandr Vucic in Brussels, Slovak foreign minister Miroslav Lajcak said: “The UK might be on its way out, but there is strong support for enlargement in the EU. We want to maintain the credibility of the enlargement process and to make it tangible.”
Lajcak, whose country chairs EU Council meetings for the next six moths, added: “Once a candidate country delivers on the necessary commitments, the EU moves it forward.”
The EU enlargement commissioner, Austria’s Johannes Hahn, said that when German and French leaders met counterparts from the Western Balkans in Paris on 4 July they confirmed that EU expansion in the region was still their “strategic goal”.
Monday’s meeting saw the opening of chapters 23 and 24 of the EU legal codex, on judiciary and fundamental rights, and on justice, freedom and security.
The decision came after the opening of chapters 35 and 32 last December, on normalisation of relations with Kosovo and on financial controls on spending of EU funds.
Hahn said four more chapters could follow this year: on public procurement (chapter five), industry and enterprise (20), science and research (25), and education and culture (26).
“There should not be the slightest doubt about our strong commitment to welcoming Serbia in the EU family, where it belongs,” Hahn said.
Vucic, the Serbian PM, said the fact the UK, a leading supporter of EU expansion, was to leave the bloc changed nothing in terms of the EU’s attractiveness.
He said the UK decision was based on “emotions, not [its] strategic path”.
He said that “people in Serbia know” that their country could not have achieved economic growth, attracted foreign investment, or overcome the damage caused by last year’s floods without EU support.
He also said that Serbia was developing closer business ties with Albania, Croatia and Kosovo on the back of the EU process.
“The type of society we want to belong to is an EU society and that’s it,” he said.
Monday’s decision was made possible after Croatia lifted its veto on chapters 23 and 24.
Its threat came amid complaints that Serbia was unwilling to cooperate with war crimes prosecutors in The Hague, had plans to go after alleged Croatian war criminals, and had not done enough to protect the rights of the Croatian minority in Serbia.
Croatia would “closely and carefully monitor” Serbia’s behaviour, the Zagreb government said on Monday after its PM, Tihomir Oreskovic, met war veterans at a protest against lifting the veto also on Monday.
“That law [on Serbia’s jurisdiction over Croatian war crimes] will have to be changed as part of the European accession. We expect the Serbian top officials to voice a clear position on this,” Croatian foreign minister Miro Kovac said.
UK-IS:160719:(20-JUL-16):Theresa May joins club of female heads of state embracing Jews and Jewish values
JewishNewsService 19-Jul-16 [Just copied Teresa May section. Don]
The names of former Israeli Prime Minister Golda Meir and U.K. Prime Minister Margaret Thatcher are familiar as prominent symbols of strong female leadership in times when women heads of state were rare.
By 2015, however, the number of female leaders of nations reached 19, according to the United Nations. On July 13, British Home Secretary Theresa May joined the club by replacing outgoing U.K. Prime Minister David Cameron, becoming the U.K.’s second female prime minister after Thatcher.
As America waits to see if Democratic candidate Hillary Clinton becomes the country’s first female president in the November 2016 election, JNS.org provides eight examples of current and former non-Jewish female heads of state, their relations with Israel and the Jewish community, and how they embody tikkun olam—the Jewish value of repairing the world.
Before becoming prime minister last week, in her capacity as home secretary—a position responsible for the internal affairs of England and Wales—May had promised to defend the country’s Jewish community and wipe out anti-Semitism.
“No one wants the school where they send their child to need security guards, or have their place of worship be fitted with security alarms and blast-resistant glass. But until that changes, the government is clear—we will stand by the Jewish community,” May said.
May has also been known for supporting religious freedom, particularly the Jewish practices of shechita (kosher slaughter) and brit milah (ritual circumcision), and has advocated for greater British-Israeli ties in homeland security.
UK-EU:160719:(20-JUL-16):Lloyd Dorfman: Our exit from Europe gives UK Plc a chance to act on global stage
Evening Standard 19-Jul-16
When the 20th-century Chinese premier Zhou Enlai was asked about the consequences of the French Revolution, he famously replied: “Too early to say.” Similarly, the true economic and other impacts of Brexit will only be known in the years ahead.
I was strongly in the Remain camp in the referendum debate, so was disappointed by the outcome. Sixty per cent of Londoners shared the view that Britain should stay in the EU, but this unfortunately was not typical of the country.
Rather than engaging in recriminations, we must come together to chart a positive economic roadmap for London and the rest of the country.
In the 26 days since Brexit, while the economy has by no means collapsed, we have seen some worrying signs. The pound fell to a 31-year low against the dollar. It has achieved the unwanted distinction of being the worst-performing currency of 2016, overtaking the Argentinian peso. Investment and property decisions have been put on hold.
The long-term consequences will not be known for some time but it is hard to see it providing a boost this year for the UK economy. As well as posing challenges for our economy, Brexit will be detrimental for the EU itself, making it a less open trading structure.
Many foreign companies have invested in the UK because of the gateway it offers to the single market. In surveys, 75% of international investors have said access to the single market is the key reason they are here. Furthermore, EU countries account for almost 50% of our exports, and therefore it will remain a key market. Trade is closely intertwined with location, and our geography as a European nation will not change.
Alongside securing positive access to the single market, the Government will need to reach free trade agreements with countries around the world. Australia has been making positive noises and a recent ministerial visit to India included preliminary trade talks. Another global economic giant on the rise, China, has already indicated they are keen to do a deal with the UK.
In the next two decades, 90% of global growth is expected to come from outside Europe. The fast-growing economies of Asia, Africa, Latin America and elsewhere are ones we should court and cultivate relations with. The Government’s move to recruit 300 specialist staff to help with trade negotiations is welcome, as we will need to put our foot on the gas in this area.
As we come to negotiate the deals, we must approach this with confidence and positivity. The UK economy remains the fifth-largest in the world, and is responsible for 3% of global GDP and 4.4% of world trade (with just 1% of the world’s population). From a business point of view, we have outstanding companies across all sectors. Our corporation tax is one of the lowest in the G20. We are the top destination for foreign direct investment in Europe.
The financial services sector remains the jewel in the crown of our economy, representing almost 10% of the gross value add in UK economic activity.
At Travelex, the company I founded 40 years ago, we managed to grow our currency exchange business around the world. I have seen the strength of UK finance across the world. Of course, there are concerns about its continued success after Brexit, particularly for the City. It remains to be seen whether the passporting rights, enjoyed by UK firms through the EU, will endure. There have been some worrying signs that other financial centres, such as Paris and Luxembourg, see an opportunity to prise business away from London.
As we move forward, we must do what we can to protect and enhance financial services and other sectors at which we excel, like digital and the creative industries. Around the UK, there are 40,000 fast-growth digital tech companies and moreover, according to EY, London is the most likely European city to spawn the next tech giant.
A venture I backed called Polaroid Swing was launched last week by two young British entrepreneurs. It is an exciting new app that enables people to create moving photos.
As we digest the outcome of the historic referendum, it is indeed too early to say with confidence what it all means.
We have to do what we can, however, to make the best of the situation economically over the coming months. In time, the UK will reach a new strategic partnership with the EU. Of course, we will get a better deal if we are strong economically, as it will improve our bargaining position.
Above all, we must emphasise that the UK continues to be open for business, which is the core aim of the Mayor’s London Is Open campaign, launched yesterday. We all need to work together to encourage UK business to write a positive new chapter of trade, investment and engagement in Europe and the rest of the world.
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