Somewhat More Dire Than Usual:
"Warning Global Systemic Crisis"
First Quarter 2011:
"Breach of the Critical Threshold of Global Geopolitical Dislocation”
by LEAP/2020
“As the LEAP/E2020 team anticipated in its open letter to the G20 leaders published in the international edition of the Financial Times of 24 March 2009, on the eve of the London Summit, the question of a fundamental reform of the international monetary system is central to any attempt to solve the current crisis. But sadly, as was demonstrated again at the failure of the G20 summit in Seoul, the window of opportunity for achieving such a reform peaceably closed at the end of summer 2009 and will not open again before 2012/2013 .
The world is indeed in the throes of the global geopolitical dislocation that we had announced as beginning at the end of 2009 and which can be seen, less than a year later, in the proliferation of movements, the economic woes, the fiscal deficits, the monetary disagreements, all setting the scene for major geopolitical shocks. With the G20 summit in Seoul, which signalled to the planet in its entirety the end of US domination of the international agenda and its replacement by a generalized mood of “every man for himself”, a new phase of the crisis has begun, prompting the LEAP/E2020 team to issue a new warning. The world is about to breach a critical threshold in this phase of global geopolitical dislocation. And as with every breach of threshold in a complex system, this will generate, as from the first quarter of 2011, a suite of non-linear phenomena: developments that do not conform to the usual rules and the traditional projections, be they economic, monetary, financial, social or political.
In this GEAB N°49, in addition to the analysis of the six main steps marking the breach of this critical threshold of the global geopolitical, our team presents numerous recommendations to help cope with the consequences of this new phase of the crisis. They address, for example the currency/interest rates/gold and precious metals group; wealth preservation and the replacement of the US dollar by another measure of net worth; the bubbles in asset classes denominated in US dollars; and the stock markets and the most vulnerable corporate categories in this phase of the crisis. The LEAP/E2020 team also presents the “three simple reflexes” to adopt to understand and anticipate better the new world taking shape. Also in this issue, our team describes the double Franco-German electoral shock in store for 2012/2013. And we also present an excerpt from the Manual of Political Anticipation, written by the president of LEAP, Marie-Hélène Caillol, and published by Anticipolis in French, English, German and Spanish. In this press release for the GEAB N°49, our team chose to present three of the six steps that characterise the critical threshold that the world is about to breach.
The crisis that we are experiencing is characterized by developments on a planetary scale, taking place at two levels that, while correlated, are different in nature. On the one hand, the crisis is symptomatic of the profound changes to our world’s economic, financial and geopolitical reality. It accelerates and amplifies the underlying trends that have been at work for several decades, trends that we have described regularly in the GEAB since its launch at the beginning of 2006. On the other hand it reflects the steadily increasing collective awareness of those changes. This growing awareness is in itself a phenomenon of collective psychology on a global level and it influences the way the crisis develops and triggers sharp bursts of speed in its evolution. Several times in recent years, we have anticipated “inflexion points” in the crisis, corresponding to “sudden leaps” in this collective awareness of the changes under way. And we consider that all the pre-requisites for “rupture” crystallized around the G20 summit in Seoul, enabling a crucial advance in collective awareness of the global geopolitical dislocation. It is that phenomenon that led LEAP/E2020 to identify the breach of a critical threshold and to issue a warning about the consequences of that breach as from the first quarter of 2011.
Around the date of the G20 summit in Seoul, LEAP/E2020 identified a build-up of events likely to lead to “rupture”. Let us examine the main events concerned and their chaotic consequences. The Federal Reserve’s decision to launch “QE2” (by purchasing USD 600 billion of US Treasuries from now to 2011), triggered an outcry, for the first time since 1945, amongst almost all the other global powers: Japan, Brazil, China, India, Germany, the ASEAN countries. It is not the Fed’s decision that marks a rupture: it is the fact that for the first time, America’s central bank had its ears boxed by the rest of the world, and in a very public and determined manner. This is certainly not the cozy atmosphere of Jackson Hole and the central bankers’ meetings.
It seems that Ben Bernanke’s threats to his colleagues, conveyed to our readers in GEAB No. 47, did not have the effect that the Fed’s chairman had hoped. The rest of the world made it clear in November 2010 that it had no intention of letting the US central bank continue printing US dollars at will in an attempt to solve America’s problems at the expense of every other country on the globe. The dollar is now getting back to being what every national currency is supposed to be: the currency and thus the problem of the country that prints it. In fact, in these last weeks of 2010, we have witnessed the end of an era where the dollar was the currency of the US and the problem of the rest of the world, as John Connally put it so neatly in 1971, when the US unilaterally terminated the convertibility of the dollar into gold.
Why? Simply because from now on the Fed must take into account the opinion of the outside world. It is not yet under guardianship, but it is under “house arrest”. According to LEAP/E2020, we can already anticipate that there will be no QE3 regardless of the US leaders’ opinions on the subject; or it will take place at the end of 2011 to the tune of major geopolitical conflict and the collapse of the US dollar.
From Paris to Berlin, Lisbon to Dublin, Vilnius to Bucharest, London to Rome… the protest marches and strikes are spreading. The social dimension of the global geopolitical dislocation is clearly visible in the Europe of end-2010. While these events have not yet managed to disrupt the austerity programmes planned by the European governments, they point to a significant collective development: public opinions are emerging from their torpor at the beginning of the crisis, suddenly aware of its duration and cost (social and financial). So the next elections should prove costly for all the current political teams who have forgotten that without fair treatment, austerity will never win popular support.
In the meantime, the teams in office are still applying the recipes of the pre-crisis period (i.e. neo-liberal solutions based on tax cuts for the richest households and an assortment of higher indirect taxes). But the rise in social disputes (inevitable according to LEAP/E2020) and the policy changes that will emerge in the next national elections, country by country, will lead to a questioning of those solutions; and a dramatic strengthening of the populist and extremist parties: Europe is going to get politically “tougher”.
In parallel, in view of what looks increasingly like an unconscious desire on the part of the baby-boomers to have younger citizens shoulder their costs, we can expect to see an increase in violent reactions from the rising generations. According to our team, they will probably become more radical if they feel that the situation is hopeless, unless a compromise can be reached. But without an improvement in tax receipts, the only compromise credible in their eyes would be cuts in existing pensions, rather than higher education costs. Today is always a compromise between yesterday and tomorrow, particularly when it comes to taxes. And the most likely fiscal consequences of these developments are higher taxes on high earnings and capital gains, a new bank tax and a new, community-wide drive to protect the borders. The EU’s trade partners should take rapid note.
For several weeks now Tokyo and Beijing have been locked in a diplomatic dispute of rare intensity. Under various pretexts (a Chinese trawler about to enter Japanese territorial waters, massive Chinese purchases of Japanese assets, causing the yen to appreciate) the two powers exchanged harsh words, suspended their high-level talks and appealed to international public opinion. To the countries in the region, the international visibility of this Sino-Japanese spat is especially revealing because of a glaring absence –that of the US. While these quarrels clearly illustrate Beijing’s growing determination to be recognised as the dominant power in East and South-East Asia and Japan’s bid to oppose that regional Chinese hegemony, there is no denying that the power supposed to dominate in this region of the world since 1945, namely the US, is strangely absent from table. We can therefore assume that what we are witnessing is a real-life test on China’s part to measure its new influence on Japan; and on Japan’s part to evaluate how much scope for action the US still has in Asia, faced with China. The events of recent weeks have shown that, hampered by political paralysis and its economic and financial dependence regarding China, Washington prefers not to get involved. No doubt throughout Asia this spectacle serves to accelerate the awareness that a new milestone has been passed in terms of regional order; and that in Japan, mired in an endless recession the economic interests linked to the Chinese market have not been strengthened by the experience.
In conclusion, this accumulation of events, centred round a G20 summit that was patently incapable of resolving the sources of economic, financial and monetary tension between its principal members, contributed to a decisive advance in the world’s collective awareness of the process of global geographic dislocation under way. And in its turn, this increased awareness will, as from the beginning of 2011, accelerate and amplify the changes affecting the international system and our various societies, generating non-linear, chaotic phenomena such as those described in this issue of GEAB and previous issues. As we emphasised in September 2010, we focus on the fact that chief among those phenomena will be the entry of the US into an austerity phase, beginning in spring 2011. But we also bear in mind that one of the surprises of the next eighteen months could simply be the announcement that the Chinese economy had overtaken the US economy as from 2012 as the Wall Street Journal of 10/11/2010 indicates in its report of the Conference Board’s analysis.”
- http://www.leap2020.eu/
The coming hardship is already becoming apparent in places that will feel it first, like California -- where services are axed, the government worker has to take a pay cut, but rest assured Our Terminator is worth the money he's getting. Of course. It is a reflection of his innate worth that the desk barely good enough to hold up the heels of Arnold's expensive shiny dress shoes was made for dollars a day by prison inmates. They took a break to eat that disgusting prison bologna food-log. Their environment was inhumane physically, socially, and spiritually. Must be they all deserved it. Like those wannabe homeowning deadbeat posers who can't pay their bills. Like those lazy welfare moms who mooch off the state. Like those ragheads who hate us for our freedoms. Like....
Global bond rout deepens on US fiscal worries
By Ambrose Evans-Pritchard for the Telegraph.co.uk
Agreement in Washington on a fresh fiscal package has set off dramatic rise in yields of US Treasuries and bonds across the world, threatening to short-circuit any benefits of stimulus. The bond rout raises concerns that the US authorities may be losing control over eventsThe yield on 10-year Treasuries – the benchmark price of money worldwide and the key driver of US mortgages rates – has rocketed to 3.3pc, up 35 basis points since President Barack Obama agreed on Monday to compromise with Senate Republicans on tax cuts.The Treasury sell-off has ricocheted through the global system, triggering bond sell-offs...Read more
" US Municipal Bonds ": The inevitable major shock of the second half of 2010
- Excerpt Recommendations GEAB N°46 (June 16, 2010) -
The US municipal bond market (« Munis ») which supplies the finance for the local infrastructure for transport, health, education, sewage,…. is on the edge of imploding as a consequence of the growing inability of US local authorities to handle their indebtedness.
It is originally a very « subprime » (or very « Greek ») case, because information on the actual financial health of US local authorities is largely defective and the credit rating agencies have rated these bonds in a completely arbitrary fashion, therefore well adapted to all the disappointments possible for those who own them. The crisis is indeed in the course of ruining a number of these authorities who don’t have the means to raise taxes much (when they simply can despite the opposition of their fellow citizens). The end of Federal stimulus (1) and exhaustion of financing facilities related to «Build America Bonds » (benefitting from Federal aid to reduce their cost), presages a very dangerous second half of 2010 for this particular financial market as a consequence of the relapse of the US economy (so, a worsening fiscal shortfall), the new international trend towards budgetary austerity and the fear of public over- indebtedness.
For LEAP/E2020, there is no doubt that we will soon see the « monoline insurers », like Ambac which specializes in « Munis », in the financial media headlines again. Since November 2007, our team has been one of the first internationally (GEAB N°19 ) to flag Ambac’s, MBIA’s, and other monoline insurers’ upcoming problems which were also first in line over the « subprime crisis » (2). One can count on them being first in line at the next crisis of « Munis ». The size of this particular financial market implies that such a crisis would be as destructive at international level as the « subprime » one.
That said, an insurer warned being worth two, as the proverb says, one must take note that the proportion of insured US municipal bonds has gone from an average of 60% for the last fifteen years to 8.5% in 2009, which speaks volumes on the state of the insurers and probably too on the degree of risk of the « Munis » themselves (3). In short, get away from US municipal bond markets… and expect a new financial explosion particularly devastating for the US. It will drag along itself a large part of US banks and pension funds into the debacle.
US municipal bond issuance - Source: BondInvestor, 05/2010
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Notes:
(1) The US states have a cumulative fiscal deficit of almost 130 billion USD for the fiscal year beginning 01/07/2010. The end of the stimulus is going to oblige them to reduce their expenditure even more and resort to even riskier contrivances to enable them to continue operating. The re-imbursement of their debts on the terms foreseen in the auspicious years of 2000/2006 risks trailing far behind other priorities which are more profitable electorally. In any event, considering the weakness of actual issuance, they don’t even envisage refinancing, which will rapidly pose problems. Source: Bloomberg, 06/13/2010
(2) It was even the third factor of the four mentioned in GEAB N°19 leading to the « black hole » of the US financial crisis … which materialized less than a year later in September2008.
(3) Source: GoldmanSachs, 02/2010
Thanks everyone. More LEAP as I come across it.
update:
of possible interest
During two days, French and Russian academics and experts met in the framework of the EU-Russia 2015 seminar on the topic « What can be the contribution of Franco-Russian relations to EU-Russia strategic partnership and the holding of a BRIC-EU meeting by 2015? » jointly organised by the Laboratoire Européen d’Anticipation Politique (LEAP), the Institute of European Studies of Moscow’s State Institute of International Relations (MGIMO) and the University of Nice/Sophia-Antipolis, in partnership with the Europe 2020 network, the Peoples’ Friendship University of Russia and the network of Jean Monnet Chairs
The seminar focused primarily on three key strategic fields:
1. How to contribute to build a new and sustainable economic and financial global order?
2. How to initiate 21st-century Europe security architecture and launch common leads in the field of global security?
3. How to invent a global governance matching 21st-century needs: what could be the agenda of an EU-BRIC summit?
The following aspects of the international situation justified the meeting:
The world is still going through a historic crisis putting an end to the specific systems and power relations which prevailed worldwide since the end of the second world war. The dynamics at play in the processes of accelerated globalization and unbridled market expansion in the past twenty years have just collapsed. In every field (finance, economy, currency, strategy, diplomacy…), international relations are subject to unprecedented rebalancing. This being said, as in any crisis, the current global systemic crisis also represents a positive change for some global players such as China, Russia, Brazil or India, for instance.
The new global context places the EU-Russia partnership in an entirely new perspective. Whether for a peaceful management of the tensions that will inevitably emerge between two geopolitical entities of this magnitude or for their contribution to rebuild a system of global governance in line with 21st requirements, the European Union and Russia are aware that they are two of the central players expected, not only by their own populations but by many other regions of the world, to reinstate elements of stabilization in the current global chaos which became so obvious since the failure of the Summit on global warming. Given the new global context, and in continuation with the work achieved in the previous three GlobalEurope EU-Russia seminars (Warsaw 2004, Moscow 2005 and Moscow 2008), this fourth seminar, organized in the framework of the France-Russia year, aimed at identifying the guidelines of what could be the contributions of Franco-Russian bilateral relations to two components of the future global balance: EU-Russia Strategic Partnership and Europe’s participation to an upcoming BRIC summit.
The following recommendations, formulated by the organizers on the basis of the excellent contributions and debates that took place during the meeting, are meant as decision support tools for the intention of French, European and Russian policy-makers with a view to help them taking these perspectives into account in their strategic choices. The increasing scope and speed of the current global crisis imposes to be innovating when it comes to major diplomatic orientations.
Russia and Euroland: Two renewed players at the heart of the global systemic crisis
In the context provided by the global systemic crisis, it has become essential to try and find new global equilibriums reaching beyond past bilateral relations. Thus each day, for the leaders of the major powers, the central question becomes less the positioning relative to the United States (the dominant theme in recent decades) than the ability to defend its own interests and contribute to shape the world after the crisis. In this game of historic transition, the participants agreed on the idea that, between 2011 and 2014, two very particular players are preparing to play crucial roles at the heart of this transition which must succeed in order not to open the door to a decade of world conflict: Russia and Euroland (emerging entity bringing together countries sharing the Euro, taking on increasing importance at the EU core since the beginning of the global systemic crisis, and which especially brings together all the founding countries of the European Community project).
Russia can be seen as the first global player to have completed the transformation from a world power constituted after 1945, which it was, to a power in the world after the global systemic crisis that we are currently experiencing [1] and which is closing the fate of the previous system. This unique characteristic is probably the reason why it is the first “on deck”, as seen with the BRIC countries, to try and influence the organization of the world after the crisis.
As for Euroland, it’s an effective player, directly rooted in the desire to exit the world order created after 1945. Indeed Euroland has allowed the founders of the European community project to regain the initiative in European activities after two decades of stagnation under American-British control, and reconnect with the community project’s original idea of liberating Europeans from the tutelage of two foreign powers - the United States and the USSR. Far from being an alternative to the EU, Euroland is in fact the mould of an EU able to act proactively on an international level, "currency oblige". This new player is in the course of asserting itself before our eyes on the basis of its monetary identity and which, de facto, increasingly guides decisions throughout the EU knowing that most EU countries are intent on joining Euroland.
Therefore, both, Russia and Euroland are part of what we might call the first global players "renewed" by the crisis. And under the growing pressure of the global crisis, these two players are now discovering that they share a capacity to set a common international agenda, namely the identification of key issues and challenges and the willingness to take action to confront them. As a matter of fact Euroland has every interest in strengthening partnerships with players which, like Russia, can contribute to lower the fragility of the single currency.
The Russian participants in particular wished to insist on the fact that, beyond the agenda, even in the approach, Russia and Euroland will find themselves followers of the same operational pattern, namely the activation of networks that can effectively bring together like-minded players whilst avoiding the creation of hierarchical relationships; and operational pattern which everyone agreed to find especially suited to a world in transition where power relationships will become very fluid.
Overcoming prejudices to build a modern and sustainable Euro-Russian relationship
Most difficult in a period of transition is to extract oneself from the world which is disappearing and its already moribund ideas. If they want to be weighing significantly on global orientations by the middle of the coming decade, Russians and Eurolanders, these two « renewed » players, have two years in order to take up one major challenge: to recognize each other for what they are.
From the European side, it is a matter of understanding that Russia is not the USSR and the current Russian leadership, though inherent to the twenty-first century, should be seen as their predecessors of before 1917, that’s to say partners structuring a Eurasian continental balance, with a capacity for global action, but without an ideological vision of the objectives and methods (contrary to the USSR). From the Russian side, it is necessary to "decipher" the complex progression of the European side recognizing that between the often slow and disappointing European Union in its search for a strategic partnership and the traditional bilateral attraction of France, Germany and Italy who, though Moscow claims them as its EU partners of preference, cannot play the role of strategic engines at global level, there is now another level of strategic action, i.e. Euroland, a country still emerging but already very really tangible because Moscow, Beijing and the rest of the world hold its currency in billions in their foreign exchange reserves. Clearly, Russia’s European partner is completely different in its nature, structure and concerns from what it was in 2005/2006, for example, at the time of first EU-Russia GlobalEurope seminars.
This mutual recognition is, therefore, a real emergency that requires the proliferation of articles, reports and meetings, such as this one, on this topic. In this regard, the participants were eager to remind that the abolition of visas between EU and Russia is becoming a requirement to facilitate human and intellectual mobility between the two players and increase the ability to forge joint initiatives (in the scientific, technical, industrial, commercial and cultural fields).
Russia-Euroland : A self-imposing strategic partnership
Little by little, despite institutional vagaries in this field, reality is leading the two players to de facto begin their strategic partnership. Thus, during the "Euro crisis" of Spring 2010 set to music by the City of London in particular, Moscow came to the rescue of the single European currency (as did Beijing for that matter) by recalling Russia’s confidence in Euroland and never ceasing its diversification out of the US dollar in favor of the Euro. Meanwhile France, Germany and Italy (the Euro heavyweights) have directly contributed to the rapid resumption of normal relations between Europeans and Russians after the Georgia crisis, while asserting their opposition to NATO’s objectives of future extensions to the East. On this point, if Washington seems surprised to discover that the question of European security now seems to concern Moscow more than Washington for an increasing number of Europeans, a simple re-reading of history schoolbooks would reveal that Washington’s disproportionate role in the affair is an historical interlude which is coming to an end, like many other things as well, at the time of this global crisis of historic proportions.
With NATO in complete disarray (defeat in Afghanistan in 2011 and major budget cuts now and to come), the issue of European defense will become increasingly similar to that of the security of the European continent, and for this reason take place by way of close cooperation between Russians and Europeans which can give birth to a treaty on European security between now and 2014. Euro-Russian cooperation in the fight against piracy already provides a good model of the potential for such a partnership in the fight against terrorism, wished to highlight participants.
But beyond the "traditional" Euro-Russian agenda (neighbourhood, defense, energy, science / technology cooperation, investments), the global systemic crisis increasingly imposes on the two global players - Russia and Euroland, a common agenda and timetable to facilitate a peaceful transformation of global governance. For these two "renewed" powers, it’s going to be a question of their own strategic interests in the short and medium term as well as their respective abilities to influence the world’s long term progress.
Russia-Euroland: Avoiding the emerging of a world of conflicting blocs
Due to their respective historical experiences, the two regions share the aspiration for a balanced multi-polar world. Consequently do not want a Chinese hegemony to-be to replace the US hegemony which is breaking up. They want a reorganization of the global monetary system to prevent currency wars as well as the structural instability of the current system of floating exchange rates. Taking note of the lessons taught by the current monetary system, they do not want one national/regional currency to replace the US Dollar as standard-currency of the next international system. They are in favor of a deep restructuring of the governance of major international institutions (UN Security Council, IMF, World Bank ...). Euroland is by nature adept at international relations operating in a network, without hierarchical powers; Russia has recently become adept at the same operational rationale as shown by its advocacy for BRIC country structuring.
Indeed, contrary to the dominant discourse in the European or US media, the participants wished to remind that the BRIC countries are more than a vague concept formulated by a Wall Street banker. In fact, since 2006 (the year of the first BRIC ministerial meeting) at the initiative of Vladimir Putin, Russia has been very proactive in bringing relations between these four powers (Brazil, Russia, India and China) to fruition. This has allowed the creation of cooperation mechanisms between the four countries on most major global issues including regular foreign ministers and finance ministers’ meetings (this BRIC network encourages, by example, the steady progress of trade in national currencies amongst the four countries to the detriment of the US dollar), monthly consultations of ambassadors to the United Nations, coordination of G20 positions and summits at Head of State level (Yekaterinburg in June 2009, Sao Paulo in April 2010). As Dmitry Medvedev recalled recently, for Moscow the BRIC network has officially become the second priority of foreign policy after the partnership with the EU. By simultaneously implementing this pro-BRIC and pro-Euro diplomacy, Russia appears as one of the great champions of a post-crisis world that is not composed of blocs in various conflicts with each other.
And this is also an aspect that joins Euroland’s basic objectives (like the EU’s): to avoid a world of conflicting blocs that would lead straight to the worst post-crisis scenario. Meanwhile, every quarter that goes by forces Euroland leaders to note that China, India, Russia and Brazil are key partners over almost all major global issues whilst, from the Middle East to Afghanistan via the Dollar, Washington seems incapable of solving the problems that are gathering on its table.
Russia-Euroland - China, WTO, neighbourhood: still some points of divergence?
Of course, in this context of general convergence Russia and Euroland have several specific issues where differences exist that the continuation of the crisis could well mitigate significantly:
The Chinese case: threat and partner at the same time
As reminded by some speakers, relations with China follow two very different rationales according whether one stands from the Russian or from the European point of view. Indeed, though Moscow of course doesn’t wish a future Chinese hegemony, it wants to maximize its cooperation with its big Asian neighbour. Russian-Chinese solidarity is thus exemplary in monetary affairs: both countries are calling for a restructuring of the global monetary order and reject any central responsibility of the Yuan in contemporary monetary disorder, pointing out that it’s the Dollar at the heart of the current system which creates instability. While for now, the EU remains loyal to the old order based on the Dollar and tends to follow Washington on this issue. However, from Paris to Berlin (and Frankfurt, with the ECB) since the crisis in Spring 2010, we are beginning to see the dawning of a different opinion which now wants to ask the question of the international monetary system as a whole. The next two years, because of the inevitable weakening of the US currency based on the monetization of US debt under the guise of successive ineffective boosts by the Fed, will no doubt harden Euroland’s position here, allowing Russia and Euroland to hold a similar position. This in depth convergence on the monetary issue should allow both entities to open a very candid discussion with China on the trade issue which interested the European participants especially (thus including the issue of exchange rates and their growing opposition to a Chinese “monetary dumping”) and on the security issue (which is a major Russian concern). Russia has thus cooperated effectively with China since 2001 as part of the Shanghai Cooperation Organization, which quite simply aims to prevent any future NATO incursion (or the United States alone) in Central Asia. But at the same time Moscow is very concerned about China’s rise in power with whom it shares a 4,300 kilometer border and can’t forget that the only successful invasions of Russian territory always came from the East! Russia is therefore, de facto, very open to any European cooperation which would allow it to enhance the international framing of emerging Chinese power and equally upgrade/strengthen its ability to promote/defend the wealth and economic potential of Siberia. In this regard, there is a promising convergence of the imperatives of security and the economic and financial interests of a Russia-Euroland strategic partnership.
Russia’s WTO membership… but does the WTO have a future?
Russia’s WTO membership is another area of divergence as Moscow’s candidacy is still pending, mainly because of energy prices (it’s the question of the alignment of domestic and external prices) and especially the agricultural component for which the Cairns group countries want Russian state aid to be three times less than that proposed by Moscow (9 billion USD per year until 2012). Affirmative action from Euroland could help unblock the situation. However, the crisis shines a new light on the issue of WTO entry. If between now and the end of 2011, the international monetary system continues to disintegrate, opening a period of currency wars and therefore of "monetary dumping" on which the WTO is powerless, the big question for many exporting countries becomes: is WTO membership necessary? The participants agreed on the idea that such a situation could lead to the establishment of a new international trade organization or at least a major overhaul of the WTO making Russia’s current candidacy null and void, or even pointless.
The issue of "neighborhoods: The Ukraine, the Caucasus and the Balkans
Finally, "common neighbors" and "Balkan accession to the EU" are two sides of another subject of disagreement. Moscow sees the Caucasus as a Russian question primarily, while Brussels sees the Balkans as a European issue. Yet, in both cases, the two powers are well aware that the other also has a word to say on current and future developments as well. Because of the crisis, the predictable weakening of the presence of the third player, namely Washington, in both regions should help the Russians and Europeans to make progress because they themselves, have a real interest in seeing the problems solved, and not kept alive. Besides the question of the Ukraine is already turning from an naturally divisive issue (NATO and EU enlargement) into a common problem (how to peacefully change the Ukraine?) because the two enlargements will not take place if the country’s domestic problems remain very real.
Conclusion: A “Partnership for the modernization of Russia” in exchange for a "Partnership for the emancipation of Euroland"
if the new (post-Georgia crisis) label of the EU-Russia partnership has become the "Partnership for the modernization of Russia", it seems certain that Russia has already begun (especially during the Euro crisis) what LEAP/E2020 calls a "Partnership for the Emancipation of Euroland." In the same way that the Russian party is very touchy in terms of advice over adapting its domestic governance to the twenty-first century, the European party is very sensitive over advice to adapt its foreign relations to the world after the crisis. However Russia like Euroland really are two of the major global players able to help a peaceful transition of global governance. Both also attach great importance to the cultural development of their societies, thus sharing another common value, prior to defining and implementing a common agenda on major issues of the coming decade. However, building a strategic partnership is not about listing the common problems of the day and saying it would be better to resolve them together, it is, above all, about identifying key challenges of the future and knowing that one can only solve them together. It is this gradual shift in perception that is underway, because of the global systemic crisis, for the greatest possible benefit of the Russia-Euroland partnership. One of the major stages on this strategic partnership’s path will undoubtedly be the organization of a first BRIC-Europe [2] summit so that these two major networks, these two groups at the heart of the future global architecture, openly and honestly discuss the challenges and issues which concern them.
[1] Of which the scenarios and risks for the 2010-2020 decade have been forecast in the book "The World Crisis – The path to the world after: France, Europe and the world in the 2010-2020 decade " published by Franck Biancheri through editions Anticipolis.
[2] The name "Europe" is deliberately vague because our team does not know at this stage if, between now and 2014/2015, the European element will be represented by the Franco-German pairing, Euroland or the EU. On the other hand, what seems clear to us is that by speaking frankly to all partners and especially the Chinese, Europeans have every incentive to act alone, without the Americans, who have lost all credibility in Beijing’s eyes. One doesn’t negotiate effectively in the company of someone whose fate is in the hands of the other party: which is now Washington’s case in dealing with Beijing.
Be seeing you.
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