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Archives for January 2011

Notes on revolutions

Gavin Hewitt | 10:20 UK time, Monday, 31 January 2011


I digress from Europe. I was going to reflect on the torrent of words that cascaded from Davos, but I have been distracted by the events in Egypt. I will return to what we learnt from Davos in a couple of days.

The turmoil in Egypt is likely to be concentrating minds at an EU foreign ministers' meeting on Monday.

Some observers are drawing parallels between the protests in Cairo and the revolution that overthrew the Shah in Iran in 1979. Iranian leaders are calling the uprising in Egypt "the revolution of the noble".

I got caught up in the tail-end of the Iranian revolution. President Mubarak is not Mohammad Reza Pahlavi. There are many differences between Iran and Egypt, but it is worth re-reading notes from an earlier revolution.

Back then I watched Washington's agony; to abandon their ally or to stick with him. They could not even decide whether to give him hospital treatment. To this day they live with the consequences of their support for the Shah.

Once again you can detect acute anxiety from the White House over the events in Egypt. President Obama is being briefed several times a day. This time the Americans have distanced themselves from President Mubarak. They have spoken out in favour of reform and universal rights. But will it prove too late? Will America be branded the backer of a tottering authoritarian regime and so see its influence in the Middle East decline?

Egyptian tank/demonstrators in Tahrir Square, Cairo, 30 Jan 11

An authoritarian regime depends on fear. A security machine can appear all-powerful, all-seeing, all-knowing. But, in the face of a popular revolt, can disintegrate swiftly. The sheer numbers on the streets of Cairo have given people a sense of their own power. Their fear of the regime has gone.

One of the best books on the Iranian revolution was written by Ryszard Kapuscinski. In Shah of Shahs he describes the moment when a regime becomes vulnerable.

"The policeman shouts, but the man doesn't run. He just stands there, looking at the policeman...he doesn't budge. He glances around and sees the same look on other faces. Nobody runs though the policeman has gone on shouting. At last he stops. There is a moment of silence. We don't know whether the policeman and the man on the edge of the crowd already realises what has happened. The man has stopped being afraid - and this is precisely the beginning of the revolution."

In Egypt that moment came when the police tried to disperse the crowds and failed. Shortly after they melted away; they had not the heart to face the people down. In such circumstances authoritarian regimes have a few choices. They can try making concessions or order troops to fire on unarmed demonstrators.

It has been said before that the most dangerous time for an authoritarian regime is when it begins to reform itself. When President Mubarak asked his cabinet to resign it solved nothing. It was seen as a sign of weakness. The crowd want his resignation and is unlikely to be satisfied with less because it has tasted its own strength.

Military force can succeed. It ended the protests in Tiananmen Square in China. A sudden, brutal use of violence can reinstate fear. But sometimes, as happened in Iran in 1979, the people continue to protest even though thousands have been killed. Gradually soldiers lose the will to fire on their own people and the revolution succeeds.

In 2009 in Iran, after the disputed elections, the protesters never lost their fear. And crucially the regime never blinked. The Basij militia and the Revolutionary Guards never showed uncertainty. And the so-called green revolution was crushed. If some units had refused to turn on the protesters the outcome could have been different.

In Egypt the protesters have tried to befriend the soldiers. They have ridden on some of the tanks, trying to enlist the men as protectors of the Egyptian people. In other revolutions the crowds have placed carnations in the barrels of the rifles.

Ultimately the military will decide the outcome of these events. If Egypt descends into anarchy then the soldiers could present a clamp-down as defending the people. But so far the army has seemed reluctant to confront the protesters. They will know that some of those on the streets are their brothers, sisters, family and friends.

If the military decides it can't use force then it may fall to the generals to tell the leader his time has passed.

As a regime sees its authority crumbling it often tries to negotiate, to identify a "moderate" opposition leader it can talk to. The hope is that through such compromise some of the old order can be preserved. In Egypt Mohamed ElBaradei may emerge as the negotiator. But in revolutions such figures often only hold the ring for a short time.

In Iran in 1979 Shahpour Baktiar became the prime minister and offered free elections. He was swept aside by supporters of Ayatollah Khomeini. One of the traits of a revolution is that the true winners often emerge only later.

Ryszard Kapuscinski noted how quickly the optimism and hope of an uprising can disappear. A revolution, he wrote, "demolishes so ruthlessly that in the end it may annihilate the ideals that called it into being". It was not that way in Eastern Europe. The people yearned for civil society and to belong to the West. The communist regimes were tired. Even the apparatchiks no longer believed in the party line.

In Egypt these are days of rage. Inchoate. Leaderless. No one knows what the mob will settle for, what society they want. There is a dangerous vacuum.

Soon after he returned to Iran I remember seeing Ayatollah Khomeini in the holy city of Qom. I wrote about it later.

"Through the outstretched arms I saw one of the most famous faces on the planet; the man who had launched a revolution which would be as far-reaching as the Soviet revolution sixty years before... it was like seeing Lenin in 1918. I just wanted to study this man who was shaking the world. His face was expressionless. He saw the crowd but never acknowledged it. He just stood there with a forbidding glare. Dark beetle brows under a black turban. I never saw a trace of a smile and neither was it expected. The men around me wanted an ascetic. The sterner the face the more they trusted him....."

I recall in Iran meeting protesters who wanted freedom. Some were liberals; some were Marxists; some were students who just hated the gilded corruption of the Shah. They had battled on the streets, faced the tanks, but finally they lost ownership of their own revolution.

The eurozone crisis and the voters

Gavin Hewitt | 13:05 UK time, Tuesday, 25 January 2011


The Irish government is the first casualty of the eurozone crisis. Talks continue, but it is almost certain that parliament will be dissolved and next month the Irish will be heading for the polls.

The bail-out by the European Union and International Monetary Fund will dominate the campaign. It has been - and continues to be - the gravest crisis for the Republic of Ireland since it became an independent nation.

For the first time since Dublin was muscled by the European Central Bank into accepting an 85bn-euro (£72bn; $116bn) bail-out the voters will have their say.

Voters never get a perfect choice. They may like none of the parties, nor any of the leaders. They may want to punish the government, but the largest opposition party also supported giving blanket guarantees to the creditors of Ireland's banks. They may hate austerity but may fear the alternative.

But an election campaign, at its best, can spark a great national debate - with the rest of Europe at the ringside.

Irish PM Brian Cowen - file pic

Some of the questions will be specific to Ireland, but some will resonate across Europe.

It will surely be debated whether Ireland is paying a fair rate for the loans arranged under the bail-out deal. The rate is around 5.8%. Sure that's less than what the markets were offering, but some regard it as punitive. And crucially, are the rates so stiff that it will prevent the country growing itself back to economic health?

Should the basic terms of the bail-out package be renegotiated? That may well turn out to be the key platform of the opposition and if they have the voters behind them it will strengthen their hand with Brussels.

What do the people feel about the blanket guarantee given to the creditors of Ireland's banks? Should the bondholders who leant to the banks have taken some of the losses? Was it right that the debt of the banks was taken onto the government's books and so became the responsibility of the taxpayer?

Will the voters demand that, even at this late hour, investors take a hit?

Austerity will never be popular, but the election will give some indication of how much pain people are prepared to take. Ireland embraced austerity early in order to try and stave off a bail-out. It was heralded as the poster-boy for austerity. In the end it wasn't enough, because of the losses in its banks.

The Germans, in particular, wanted the terms of the bail-out to be tough to dissuade others.

A new finance bill is about to be passed as a condition for getting the funds under the bail-out. There will be further savings and further cuts. Will the voters accept this as a painful necessity or will they indicate there is a red line beyond which they won't go? (Voters in Greece, Portugal, Spain, Italy etc will be watching.)

Some may raise a wider question. Was the euro a trap for Ireland, which has ended up undermining its independence? Certainly Ireland benefited from low inflation and low interest rates that the eurozone provided. But the flow of cheap capital fuelled an unsustainable property bubble that has led to outsiders essentially running the Irish economy. Emigration - the scourge of previous generations - has returned.

Back in November the Irish Times caused much debate and some uproar when it asked "was it for this?" - taking a line from the WB Yeats poem September 1913.

Yeats asked "was it for this the wild geese spread?" It may seem strange the paper accepted to use a question about what the men of 1916 died for. But it pointed to a much deeper anxiety about the consequences of the bail-out. "There was the shame of it all," the paper wrote. " Having obtained our political independence from Britain to be the masters of our own affairs, we have now surrendered our sovereignty to the European Commission etc...."

In the heat of an election campaign the Irish people can debate what has been lost and what has been gained in Dublin's relationship with Europe. Has European solidarity proved to be Ireland's friend in its time of need? Are the people prepared to go further, to accept that Brussels will have oversight of its national budget with the threat of sanctions? Will it be be prepared to take a significant step towards fiscal union, if that is what is decided?

I was reminded of the debate that has been missing during an exchange at the European Parliament in Strasbourg last week. The Irish MEP Joe Higgins took to the floor and said of the bail-out: "it is a mechanism to make working-class people throughout Europe pay for the crisis of a broken financial system."

This stung Commission President Barroso into a response. He sounded irritated when he said: "let me tell you; the problems of Ireland were created by the irresponsible financial behaviour of some Irish institutions."

It was just a moment, an unscripted exchange, but it was a glimpse of what has been absent from the year-long fight to save the euro: a full-throated debate involving Europe's people. The Irish may now provide it.

The Berlusconi show

Gavin Hewitt | 15:12 UK time, Thursday, 20 January 2011


Each day Italian politics blends with reality TV with participants discussing their sex lives.

So Karima El Mayroug, an 18-year-old dancer, appears on primetime TV to explain that the Italian prime minister had never "put a finger on me".

The Prime Minister, Silvio Berlusconi, releases a taped message denying there had been any sexual contact with the dancer.

Silvio Berlusconi (18 Jan 2011)

In a career studded with risk-taking these are dangerous days for the Italian leader. The prosecutors are investigating whether he had sex with an under-age prostitute and whether he abused his power in trying to cover it up.

The accusation is that he had sex with Karima when she was 17 and then, when she got into trouble with the police, he intervened to get her released.

The threat lies in the wire-taps that the Milanese prosecutors have been collecting for months. "A significant number of women" are said to have been recorded describing orgies at Mr Berlusconi's villa at Arcore.

Karima, also known as "Ruby the heart-stealer", remains the key. Crucially she denies she has ever been a prostitute. If that is true, half the case falls away because whereas sex with a 17-year-old prostitute is an offence, sex with a 17-year-old isn't.

Ruby herself says that "I meet him, he gives me 7000 euros and he doesn't put a finger on me". The Italian public may need some convincing that such payments were for an evening of conversation. Later reports said she was angling for much larger sums.

The picture that emerges from the dossier sent by the magistrates to a parliamentary committee is of various women using the prime minister as a kind of cash machine in exchange for coming to his parties.

Ultimately this is less a battle over sex and more about power and accountability.

Nightclub dancer Karima El Mahroug, also known as Ruby

The prime minister's defence is that this is the 25th time in 17 years that the Milan judges have gone after him. He paints them as left-wing and politically motivated.

So he declines their summons to appear before them. "I would like to go on trial immediately," he said last night, "but with impartial judges, not with prosecutors who want to use this case as a means of a political fight".

In explaining his defiance he goes further. He is proposing new laws to prevent magistrates from pursuing elected officials.

In his long-standing row with the judges he presents himself as victim. A recent poll suggests a significant number of people - although not a majority - have some sympathy with that.

So will Mr Berlusconi survive this latest storm? Obviously if details emerged that disproved the prime minister's version of events that could prove fatal to him.

He and his lawyers know how to prolong and to side-track an investigation with legal arguments. He will laugh off the suggestion there was a ring of prostitutes and show-girls put up in apartments at his expense. "I'd be better than Superman if I'd had parties with 24 girls," he quipped.

There has been a chorus of calls for his resignation but mainly from opposition figures. His own party continues to back him, however increasingly there are voices claiming that this entire episode is damaging Italy and its reputation. The Catholic Church, through one of its papers, has described the scandal as like a "damaging tornado". The Italian president has called for the investigation to be settled quickly.

Mr Berlusconi was able to shrug off the Wikileaks revelation that an American diplomat had found him weary due to all his partying.

But, internationally, stories of embarrassment do the circuit. In Brussels officials recount how at a council meeting in the past year-and-a-half, Mr Berlusconi spoke to the German Chancellor and said: "Angela you should do like I do. Have a girlfriend in Brussels. Don't do a press conference and then you'll have a popularity rating of 64%."
It was obviously intended as a joke but the exchange is remembered.

I hear the word "shame" used much more often. Many Italians are clearly embarrassed by this harlequinade of allegations.

Shame may weaken him but so too might scorn. Two young women who went to his parties are heard saying "he's fatter than before, more dead than alive...". Even Ruby detected a vein of sadness.

"I don't think he can be very happy," she said. "I think he suffers a lot of loneliness." And some of the papers are painting him as an old fool who was being used as an ATM machine. One headline referred to the "tragedy of a ridiculous man."

Some of these articles are written by Berlusconi's opponents but a politician who becomes a figure of fun is rarely re-elected. As recently as last Friday I was speaking to a woman in the Italian government. She maintained, like others, that despite all these scandals, he remained the only person to run Italy. The opposition was weak and divided. But slowly - in the face of drip by drip revelation - that claim to be an efficient reforming leader is being undermined.

When I was in Rome in December I walked with a man who knows Rome, its history and its secrets well.

Our route took us from the parliament in Piazza Montecitorio, past the column of Marcus Aurelius to Via del Corso.

He said to me that I had to remember that the city had seen it all. It took a great deal to surprise the populace. He spoke about the Emperor Tiberius who moved to Capri and held "dinner parties to which he invited prostitutes".

He was a leader of whom it was said that "he would have sex with people of all ages and sexes. " Suetonius saw him as a man powerful enough to go beyond "good and evil."

The Italians - with their rich history - have a great facility to understand power and human weakness. But shame and mockery can be as dangerous to a leader as the long arm of the Italian magistracy.

Europe and democracy

Gavin Hewitt | 09:21 UK time, Monday, 17 January 2011


Last week in Portugal I was discussing the plight of the euro with the head of equities at an international bank. In her view the only answer lay in progressing towards fiscal union. I questioned whether such an important step would need the active backing of the voters. She looked at me and said "you're British aren't you?"

Her response reminded me of a dinner in Brussels a few months ago. I was sitting next to a smart economist and the same subject came up. She felt that monetary union without fiscal union didn't make any sense. I wondered out loud whether Europe's voters would support such a change. Her immediate response, like that in Portugal, was to seek confirmation that I was British.

It is true that in the salons of Europe Britain is sometimes regarded as having a rather quaint view of democracy and sovereignty. It is almost an article of faith in Brussels that a shrinking world, with its common problems, requires supra-national solutions that the nation state cannot deliver.

But this question of what democracy in Europe means may soon migrate from casual conversation to centre stage.

For increasingly influential voices are advocating deeper integration as the only way to save the euro. It was spelt out last week, in great clarity, by the French Prime Minister Francois Fillon on a visit to London.

European Central Bank HQ in Frankfurt - file pic

In an interview he said that "in order to consolidate the euro we will need gradually to harmonise our economic, fiscal and social policies, hence we are going towards greater integration. We are going to need to put in place an economic system of governance for the eurozone." Europe, he said, was at "a historic turning point".

Recently David Marsh, one of the authors of the euro, was quoted as saying that "in the euro area, no government is completely in control of its economy. They have progressively handed it over. The euro is at a cross-roads - it either has to go down the road of more solidarity or more chaos."

Even though the eurozone countries can have good weeks it is widely believed that the current medicine is not working, that forcing countries to cut wages will neither reduce their overall debts nor make them more competitive. Greece and Ireland have been given a line of credit, but the markets see them and other vulnerable countries as risky investments. So their cost of borrowing is close to unsustainable.

One answer - increasingly being touted - is eurobonds. The interest rates would reflect the health of the European economy as a whole and would be guaranteed by the EU. The strong would see their borrowing costs go up and the weak would pay less. But eurobonds would be a stepping stone towards fiscal union. Already there exists what they call an EU semester, which is an attempt to co-ordinate economic policies before national governments set their budgets.

If these policies extend towards forming a common treasury that co-ordinates tax and spending then, as the French prime minister says, Europe it will be at a "historic turning point".

For it would raise very fundamental questions. If key decisions - and as far as most voters are concerned you can't get much more important than tax and spending - are being taken outside state borders, who would be accountable? In the film Network, Howard Beale famously shouts "I'm mad as hell and I'm not going to take this anymore". In a world of monetary and fiscal union where would the enraged citizen direct his or her frustration?

If the eurozone group of countries heads towards fiscal union then a further question will surely follow. Can you have fiscal union without political union?

Slowly the public is being softened up for historic change. President Sarkozy was not a lone voice when he said recently "the end of the euro would be the end of Europe". Whether that is true, of course, is open to question. But it prepares the ground for explaining that after the Lisbon Treaty, which was intended to settle the dividing line between what belonged at national and EU level, another shift in where power lies is being contemplated. It is worth recalling that Jean Monnet, one of Europe's founding fathers, once said that Europe would be "forged in crisis".

We have not yet reached that point of another giant leap towards further integration. Much of this belongs in policy papers and in the ferment of ideas that a crisis produces. What is unclear is whether, if there were a lurch towards fiscal union, voters would get a say.

When at the end of last year a permanent bail-out mechanism was being discussed, Chancellor Merkel insisted that the new structure had to be supported by treaty changes. Huge effort went into ensuring they could be called "limited" to avoid referendums; vox populi is seriously mistrusted in Brussels.

But what if the elites get it wrong? Some believe that the rise of populist parties across Europe is a direct result of leaders and officials ignoring the public mood towards immigration.

The economist Paul Krugman, who is a great admirer of what Europe has achieved, also notes that some of the mistakes made over the euro were because the architects of the single currency were engaged in "magical thinking".

On the streets of Europe young people are frustrated and bitter, particularly over unemployment. Many see a lost generation without any certainty of work and facing the prospect of a future less prosperous than their parents experienced. Their protests are currently directed at their governments, although I have heard voices raised against the EU and the IMF. It is an interesting question what democracy would mean to them in a Europe of "ever closer union".

Now, as I said, we may be getting ahead of ourselves. Only a couple of months ago Mrs Merkel's office said "there are no plans and there is no desire for a joint fiscal policy".

But the story of this crisis is how quickly lines in the sand are ignored. As Europe's paymaster, Germany will have the decisive voice. They have, at the last moment, accepted the bail-outs of Greece and Ireland, but they don't like it. It breaches a promise made that a single currency would not lead to bail-outs.

But say the current policy of enforcing discipline and austerity on Europe's weaker economies fails. At that point Germany could face a historic choice. To allow a possible break-up of the single currency or back closer integration, which almost certainly would involve more German treasure being used to keep the euro intact and Europe afloat.

The German people, I suspect, will want their say.

The argument over how to save the euro may become a question about the quality of democracy in Europe. Is this a peculiar British concern? I doubt it, but we shall see.

Small victory for the euro

Gavin Hewitt | 14:40 UK time, Wednesday, 12 January 2011


This day in Portugal had been signposted in advance as the first test for the euro this year. The country needed to raise funds by auctioning bonds.

Late last week every indication was that Lisbon would have to pay above 7%. One Portuguese official had said that borrowing costs like that were "unsustainable".

Brokers in Lisbon follow Wednesday's bond auction

Many saw the country teetering towards the bail-out emergency ward. Well, the worst didn't happen. In the event Portugal raised just over 1.25bn euros at a cost of 6.7%. That is still a very steep figure, but it provides the eurozone a small breathing space.

What it shows is that there are still buyers - many of them foreign - for the bonds of vulnerable eurozone countries. Enthusiasm may well have been boosted by pledges of support from Japan and China.

The reality for Portugal remains daunting, however. Yesterday the central bank in Lisbon predicted that the economy would contract by 1.3% this year. The austerity measures to reduce the deficit will likely have a "severe impact on the economy, tipping Portugal" into another recession. So the key question remains unanswered: how will Portugal find the growth to reduce its total debt?

There is a view in Lisbon that today's auction buys some time - perhaps until after the presidential election in a couple of weeks. "This is one hurdle that has been overcome, but it's not the end of the problems for Portugal and the eurozone, " said Ian Stannnard, an analyst at BNP Paribas.

One indication that the eurozone still expects further bail-outs came in comments from Olli Rehn, the EU's top monetary official. Referring to the main rescue facility, he said it might need to be "reinforced and the scope of its activities widened".

There was a similar line from the President of the European Commission, Jose Manuel Barroso. He urged member states to increase the size of the crisis fund, saying "it is perfectly possible to take these decisions no later than at the next European Council in February." The urgency, of course, has its roots in the fear that if a large country like Spain got into difficulty the existing fund may not be big enough to support it.

The German government quickly said that such actions made no sense at the moment. The French too are mindful of their voters and taxpayers. They believe the current 440bn euros in the fund are sufficient for the time being.

The German Chancellor, Angela Merkel, said today "the volume (of the fund) is far from being exhausted". "We will do what is necessary," she went on, "everything else will be discussed step by step".

Berlin and Paris understand the political sensitivities involved in expanding a rescue fund. They were eloquently summed up yesterday by Otmar Issing, a former chief economist at the European Central Bank. Bail-outs risk leading to a "transfer union". Highly indebted countries could be encouraged to blackmail more solid member states and that could raise political anger that eventually would undermine support for the single currency.

The euro: fear returns

Gavin Hewitt | 09:17 UK time, Monday, 10 January 2011


Over the New Year I read several references to an "easing" of the crisis in the eurozone. I was curious as to what this was based on, as none of the fundamentals had changed.

As the chief economist at Deutsche Bank observed, "the euro crisis had a Christmas break, but it's back".

White knuckles have re-emerged in Brussels and other vulnerable European capitals. Portugal is in the firing line. Last week the markets pushed the interest rates on Portuguese debt (10-year bonds) above 7%.

Nobody believes that is sustainable. Portugal has to raise 20bn euros (£17bn; $26bn) this year - but not at those rates. Officials in Lisbon were privately conceding that.

An early test will come this Wednesday when Portugal auctions its first bonds of the year - in an effort to raise 1.25bn euros. What will it have to pay to attract investors?

Wednesday will reveal whether Portugal has a realistic chance of raising the funds it needs in 2011. If the price is too steep then the markets are likely to conclude the country is heading for insolvency or the bail-out club. Some analysts, I noted, were saying already that Portugal was "quietly insolvent".

A clear majority of economists who were sounded out in a recent poll believe a rescue package is inevitable. "Portugal will have to access the stability fund," said Colin McLean of SVM Asset Management.

In the meantime a by now familiar routine is being played out. The Portuguese Prime Minister, Jose Socrates, declared his country would meet its target for reducing its budget deficit in 2010. He insisted that Portugal could finance its debt.

Again - with echoes of what happened with Ireland - there are reports that Germany and France want Portugal to accept an international bail-out as soon as possible in order to limit contagion.

On Friday, as the bond markets showed chilling disdain for Portuguese debt, the European Central Bank - once again - tried to ride to the country's help by buying up Portuguese bonds.

What rattles investors is a diagnosis we have seen elsewhere. The Portuguese economy is spluttering with growth predicted at around 1%. Only this month it introduced a raft of austerity measures which will dampen down demand further. Its exports are uncompetitive. So where will the growth come from to pare down its debt? The markets don't see it. What it can't do, locked into monetary union, is devalue its currency. The alternative is years of brutal austerity combined, most probably, with a bail-out.

So many expect that Portugal will sooner or later have to draw on the European Financial Stability Facility for around £85bn. (The IMF and EU's emergency fund could also be used.) The figure is not in itself a problem. So far 200bn euros has been earmarked to keep Greece and Ireland from going under. There are sufficient funds left to help out a relatively small economy like Portugal.

From there on it all becomes more perilous. Sometimes in Brussels I detect that the fight is less to save Portugal but more to ring-fence Spain. It's the fourth-largest economy in the eurozone. If it needed rescuing the funds currently are probably not there. And then awkward questions would have to be asked - including whether Germans, in those circumstances, would commit further treasure towards what would be a giant bail-out.

Spain has made progress in reducing its deficit. Its target for 2010 was to get its deficit down to 9.3%. It says it has done "somewhat better" than that. It also says it is on target to have the deficit down to 6% by 2011.

They are also hoping to benefit from the warm embrace of China. The Chinese have been buying up Spanish sovereign debt. They may well now hold 10% of Spain's national debt.

(In a future blog I will examine China's growing influence in Europe.) But even with Beijing's actions the cost of servicing Spanish debt is rising.

What the markets worry about is the debt held by Spanish banks. Many are heavily exposed to the property markets. Spain's property crisis has not fully run its course. There are a million properties unsold and prices are still falling. They may go down a further 8% this year. There are over four million jobless.

So both sovereign debt and bank debt still unsettle investors. Some hedge funds don't want to touch the debt of the so-called European periphery countries. They believe sooner or later debt restructuring is inevitable.

In all of this never underestimate the determination of Europe's leaders to defend the euro. There are two scenarios, however, that they fear most: if the German people tire of bailing out others or if one of the rescued countries says years of austerity are too high a price to pay for defending the single currency.

We are at Week Two in 2011 and European nerves are jangling again.

Defending Christians

Gavin Hewitt | 14:15 UK time, Friday, 7 January 2011


For Coptic Christians this is Christmas Day. In Egypt it is being celebrated behind cordons of police and Christians are wearing black.

This sombre mood has its roots in an attack last week on the al-Qiddissin (All Saints) Church in Alexandria. Twenty-one people were killed and 100 wounded by a suicide bomber.

Militant websites have posted a list of churches to be targeted. There are "how-to" manuals with tips on "destroying the cross".

One site offered a reward to anyone who assassinated "a leading Church figure".

These incidents follow a recent trend of attacks on churches and Christians across the Middle East. In October in Baghdad nearly 60 people were killed when gunmen attacked the Syriac Catholic Cathedral. Only last week bombs were placed near the homes of 14 Christian families in the Iraqi capital.

Concern has been raised, but there has been an absence of international outrage. France is trying to change that. Its Foreign Minister, Michele Alliot-Marie, wants a European response. She has written to the EU's foreign affairs czar, Catherine Ashton, asking for the union to draw up a plan of action in response to what is happening to Christians in the Middle East. She is putting the defence of Christians on the agenda and specifically wants Europe's foreign ministers to respond. She said we had moved beyond the situation of being "simply sad and disturbed".

Her intervention has been followed up by President Sarkozy. He said Christian minorities are victims of "religious cleansing" in the Middle East. "We cannot accept," said the French president, "and thereby facilitate, what looks more and more like a particularly wicked programme of cleansing in the Middle East - religious cleansing".

Police outside Saint Mary and Saint Mark Coptic Church near Paris, 6 Jan 11

Even in Europe churches are having to be protected. In France, 19 were cordoned off by police during this period. Similar measures were taken in Germany. There were threats against St Mark's Church in Frankfurt.

Now I have received e-mails from Muslim groups appalled at what is happening. Al-Jamaa al-Islamiya in Egypt - an outlawed militant group - were among those who spoke out. "There is no justification for such a crime... because it contradicts the teachings of Islam," they said.

There are reports from Egypt of Muslims forming human shields to prevent further attacks on Christians. In one church prominent Muslims occupied the front pews to express their solidarity with those of another faith.

And yet many feel the outrage has been muted. Last May, after Israeli commandos intercepted a Turkish ferry carrying aid to Gaza and nine people died, there was international fury led by Turkey. My purpose is not to invite comparisons between events; it is rather to signal that pressure is growing for the international community to also make its voice heard over Christians being squeezed out of the Middle East.

And many are looking to the European Union to play a leading role. Yesterday the leader of the Copts in the UK, Dr Ibrahim Habib, was interviewed by the BBC and said "the EU has a duty to protect Coptic Christians". Others are calling on the EU to "defend religious freedom".

So what will happen? France, as I said, is putting the defence of Christian rights on the agenda. Ms Alliot-Marie said 20,000 Christians had fled to Kurdish areas since 2003.

After the attack in October a further 1,000 Christian families left Baghdad. Christian towns on the West Bank are seeing their numbers decline. The French want Christians to continue to live in these countries.

But there are limits to what can be done - particularly in Iraq. Others want pressure to be put on countries to lift restrictions on the building of churches, to allow the opening of seminaries, to insist that each religion has equal rights.

We shall see how far this gets, but in the weeks ahead Europe will be asked to act in defence of the rights of Christians.

A concluding thought in relation to my previous blog. In discussing Hungary's new media laws someone pointed out that the BBC restricted comments on my blog. Yes, true. There are house rules. What we are trying to do is not stifle debate but to ensure, with some flexibility, that it is allied to the subject of the blog. We think that is fair and what most people want.

Europe and press freedom

Gavin Hewitt | 10:42 UK time, Tuesday, 4 January 2011


Welcome to 2011. The year begins with a question. Is Hungary fit to assume the rotating presidency of the European Union?

It may appear an arcane concern. The presidency is a less influential role than it used to be. Few voters understand its purpose beyond giving every country a six-month turn to be the face of the EU.

And then there is the muddle over Europe's string of presidents. (There is a President of the European Parliament, a President of the Council, a President of the Commission.)

Perhaps because of their number these presidents compete for attention. It is one of the certainties of covering Europe that when there is a significant international event my e-mail will ping into life as the various presidents vie with each other for attention.

Now for these officials Hungary poses a dilemma. Its leader is Viktor Orban, a populist politician who was once a fierce anti-communist. Last year he surfed to power on a wave of distaste for the self-confessed lies of the Socialist government and their mismanagement of the economy.

Hungarian PM Viktor Orban (left) and European Council President Herman Van Rompuy, 17 Nov 10

Mr Orban's party Fidesz controls a two-thirds majority in parliament. What this prime minister wants he gets.

His government has just passed a new media law which empowers a watchdog council to impose fines on coverage it considers "unbalanced" or offensive to "human dignity". This council has five members and is dominated by government supporters.

Journalists can be forced to identify their sources when they write stories about national security or public safety. The right to secrecy will only be upheld if it is in the public interest. There will be limits on "crime-related news". The fines can be close to a million dollars and have to be paid up-front before an appeal process can begin.

There is much that is vague and undefined about this legislation, but some of Hungary's papers have responded by publishing blank pages. One left-leaning paper this week declared on its front page that "freedom of the press in Hungary comes to an end".

Others, like the International Press Institute, warned that the new law is an attempt to "exert control over public broadcasters".

A prominent liberal MEP, Guy Verhofstadt, says "the time of Pravda is over - this new law is unacceptable. Hungary must explain and the [EU] Commission must act."

The Foreign Minister of Luxembourg, Jean Asselborn, questioned whether Hungary was fit to take on the EU presidency.

And most importantly, Chancellor Angela Merkel's spokesman said that "as a country that is about to take over the EU presidency, Hungary will have a special responsibility for the whole union's image in the world".

In the face of such criticism Mr Orban says he doesn't have wobbly knees. The law, his government insists, is to ensure balanced reporting. Budapest has hit back at the criticism. It says it "remains committed to freedom of the press and in no way wishes to stifle the opposition's views".

The EU - in a letter - has asked for clarification. But it has all come rather late. This week the EU caravan heads for Budapest to celebrate the start of the Hungarian EU presidency.

So here is the rub. What will the EU's various presidents, commissioners and High Representative say? How will they respond to the Luxembourg question - is Hungary fit to lead the EU? Or the implied German question - are these the values that the EU wants to present to the world?

There is another sore point. Hungary is targeting new taxes at foreign companies. Some are threatening to pull out. Others say that it is illegal to go after foreign investors in a single market.

In the end the tax issue is about rules and markets. Media freedom is more difficult to judge. But Hungary is in the spotlight and the awkward questions won't go away.

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