19th Year of Publication | Number 963 | November 27 - December 3, 2011 | 3.

50

NEWEUROPE
The Azores Goes Green, Even if the World Isnt|Page 13

NEW EUROPE
THE

www.neurope.eu

Youth EDITION

The future

wo

rkp

lace

The

gy chnolo The te

The culture

GREECE YOUTH EDITION

Inside
IN THIS ISSUE
EU Policy The wages of economic ignorance|Page 6 Euromapping 2011 report launched in the European Parliament|Page 10 Aid ambitions not diminished, insists Commission|Page 12 EU-World Turkeys democratic dusk|Page 9 MEP warns that 2014 may be too early to exit Afghanistan|Page 11 Energy & Climate Why wont Europe heed the doctors advice on climate change?|Page 4 Turkmenistan pushes gas exports to China, Europe|Page 13 Serbia launches gas-storage facility and eyes role as hub|Page 14 Country news Markets unimpressed by Spanish elections|Page 17 Bank of Greece: Last chance to stay in euro|Page 23 Gazprom, Belarus expected to reach agreement|Page 28 Lavrov calls for Trans- Dniester status within Moldova|Page 31 Editorial & Opinion Is Skidelsky right? Should Greece leave Eurozone?|Page 6

INTERVIEW
The European institutions are gearing up for a renewed ght on public access to documents, following the successful passage of a new European Parliament report through committee

EUROBONDS
The events of Wednesday 23 November in the Eurozone were a turning point in the history of the 17 member state economic and monetary union of the European Union

Tensions between Greek opposition leader Antonis Samaras and Eurogroup leaders have been signicantly, but not totally diffused after Samaras sent a letter to Eurozone authorities

Page 3

Page 7

Page 3

Rajoy: On Europe's centre-stage

Spain will implement the necessary measures

Spain's Prime Minister-elect Mariano Rajoy, left, with European People's Party Secretary-General Antonio Lopez-Isturiz White

FASHION & STYLE

Charm Offensive

Page 15

European Peoples Party Secretary-General Antonio Lopez-Isturiz White gives an exclusive interview to New Europe about the latest developments in Spain. Mariano Rajoy has already said, in his first statements after wining the elections, that Spain is firmly committed to Europe and the euro, said Lopez, adding that Rajoy wants to establish a good relationship with Brussels and with other EU governments. As the Partido Popular (PP) did in the past under the government of Jos Maria Aznar, Spain will again be an example of compliance with the rules and goals of the euro. Mariano Rajoy has a clear mandate and clear support received from the Spanish people to implement the necessary measures to solve the eco-

nomic crisis that Spain is suffering. In future negotiations, said Lopez, Rajoy will defend the Spanish interest but also the European interest because they both are linked Lopez concludes that Rajoy will implement the necessary measures to reduce unemployment, which is the most urgent problem in Spain, and to reform the welfare system in a sustainable way. Spain will have its own voice in Europe, but always co-operating with our partners. The role of Spain within the EU has been greatly reduced by the inefficiency and incorrect priorities of the socialist government led by Rodriguez Zapatero, as was proven during the EU Spanish Presidency of 2010. Spain is one of the EUs largest countries, and I am convinced that in the coming

months and years will play again an important role in the European project. Zapateros government chose the wrong allies: Castro, Chavez, MoralesI am sure that Rajoy will rebuild the strong relations that we used to have with the main Latin American countries. Obviously, the transatlantic relation with the US is also very important Zapatero made a huge mistake with the fast withdrawal of Spanish troops from Iraq in 2004, and the relationship remains cold with the Obama administration. Rajoy is well aware of the importance of the US and transatlantic relations in this globalised world and I think he will improve the SpanishAmerican relationship politically and economically.

Page 5

Page 2 | New Europe November 27 - December 3, 2011

NEW EUROPE

ANALYSIS

The Shooting Gallery

Will Berlin let ECB be a real central bank?
By Dionyssis Kefalakos
With Italy and Greece being governed by technocrats, seemingly upon directions and to the liking of the Frankfurt Group, and Spain on a seemingly more solid political course under new Prime Minister Mariano Rajoy and his Partido Popular, one may be tempted to say that the Eurozone now has a positive political environment in which to solve its burning sovereign-debt issue. In addition, Ireland and Portugal seem to have applied (more or less successfully) the financial salvation programme agreed with the EU-ECB-IMF troika. The only troubling exemption seems to be the stalemate between Greeces major opposition party New Democracy leader Antonis Samaras and Eurozone officials over demands for him to sign a document accepting the terms of the 26 October agreement. However, one might be forgiven for thinking that this is still not a major impediment to the Eurozone's determination to straighten out its over-indebted members. It was a near-outsider, British Prime Minister David Cameron, who set things straight for everyone, following last weeks meeting with German Chancellor Angela Merkel. Reading carefully what he said after this meeting concerning the Eurozone's efforts to manage the sovereign debt crisis, it was tantamount to stating that Germany was the only impediment to a swift solution to the ever-indebtedness crisis, and that Europe and the world would pay a very high price if Germany did not play ball. Berlin is still refusing to let the European Central Bank (ECB) act as all major western central banks would do in cases such as this one the Fed, the Bank of England and Bank of Japan have been amply financing not only their own countries banks but their governments as well, by directly buying new and old government bonds. Germany is refusing to let the ECB do the same, for two reasons. The first objection is a moral one, namely that sinners should not be so easily forgiven and refinanced and, second, over fears of hyperinflation, from which Germany has suffered grievously in the past. As far the moral argument is concerned, it is easy to make sinners pay yet also be refinanced, and Berlin knows this. However, when it comes to inflationary pressures, Berlin appears frozen. However, this stance is blocking the ECB from acting as a real central bank, in order to ensure that governments are not running out of cash. But again, with the Eurozone's inflation predicted to fall, a direct financing of governments through the purchase of state bonds would not necessarily mean that this would release inflationary pressures. In any case, accommodating the banks as the ECB is doing with ridiculously cheap money is even more likely to create inflationary pressure than financing governments, but Germany accepts this, because Deutsche Bank has said so. Yet Berlin will not allow the ECB also solve the sovereign-debt problem, arguing that in such an eventuality Germanys borrowing costs would inevitably increase. But is Berlin ready to bear the cost of a generalised Eurozone collapse and at the same time trigger uncharted contagion effects in London and New York? This is exactly what Cameron told Merkel last week, and suggested that she was the last EU leader to block the ECB from acting as a real central bank, meaning that French President Nicolas Sarkozy is of the same opinion. But what about the markets? Do they agree with Cameron? Last week, practically all world markets had a very bad time, with losses spreading, providing a fearsome indication of what might follow a Greek or Italian bankruptcy investors kept selling even Dutch and Austrian debt paper. It will thus be interesting to see if Berlin will find the courage to overcome what is in fact not a real impediment but rather a psychological fear of hyperinflation and deliver the rest of the world from the appalling prospect of an even worse crisis.

Medvedev said that after the election he would dedicate himself to fighting something he referred to as 'Magneto'
| MIKHAIL KLIMENTYEV/RIA NOVOSTI/KREMLIN POO

NE

15 YEARS AGO

Transforming the Russian and the other ex USSR member states economies from centrally panned into market led productive systems was not at all an easy task. Privatisations in the industrial sector ended up in creating new monopolies, private this time and in the hands of oligarchs, closely connected with the new power structures. In agriculture this passage was even more catastrophic.The transition from the old collectivist regime to private ownership of land was so obscure that grain production receded to unprecedented lows. The once bread basket of the entire European continent in Russia, Ukraine and Belarus barely produce enough grains to feed their own populations let alone export to the rest of the world. It took years for Russia to return to the wheat export markets.
EDITOR DIRECTOR Alexandros Koronakis akoronakis@neurope.eu MARKETING & ADVERTISING Panos Katsampanis pkatsampanis@neurope.eu EXECUTIVE LAYOUT PRODUCER Suman Haque suman@neurope.eu SUBSCRIPTIONS & DISTRIBUTION subscriptions@neurope.eu Subscriptions are available worldwide INDEPENDENCE BRUSSELS HEADQUARTERS Av. de Tervuren/Tervurenlaan 96, 1040 Brussels, Belgium Tel. +32 2 5390039 Fax +32 2 5390339 info@neurope.eu PUBLISHERS BRUSSELS NEWS AGENCY SPRL Avenue de Tervueren 96 1040 Etterbeek Belgium Tel. +32 2 5390039 info@neurope.eu EXTERNAL CONTRIBUTIONS

NEWEUROPE

Dennis Kefalakos dkefalakos@neurope.eu SENIOR EDITORIAL TEAM Kostis Geropoulos (Energy & Russian Affairs) kgeropoulos@neurope.eu Andy Carling (EU Affairs) acarling@neurope.eu Cillian Donnelly (EU Affairs) cdonnelly@neurope.eu Ariti Alamanou (Legal Affairs) aalamanou@neurope.eu Alexandra Coronakis (Columnist) acoronaki@neurope.eu Louise Kissa (Fashion) lkissa@neurope.eu ONLINE EDITOR James Drew jdrew@neurope.eu

Signed Contributions express solely the views of the writers and do not necessarily reflect the opinion of the New Europe is a privately owned independent newspaper. publication, and is not subsidised or financed in NE is printed on recycled paper.

any way by any EU institution or other entity.

ISSN number: 1106-8299

2011 New Europe all rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic or otherwise, without the permission of New Europe.

NEW EUROPE

New Europe |Page 3 November 27 - December 3, 2011

ANALYSIS
ECONOMY
New Europe content partner

A week that made Eurobonds inevitable

By Dionyssis Kefalakos
The events of Wednesday 23 November in the Eurozone were a turning point in the history of the 17 member state economic and monetary union of the EU. For one thing, it was the first time in the 11-year history of the common currency that an issue of German bunds (sovereign bonds), fell dramatically short of expectations. A 6 billion, ten-year bond issue was placed in the market by the German treasury. The result was that not only did it attract less money than the initial target, with only 3.6bn being offered; the average interest rate was also almost 2% (1.98%), more than in any other recent issue. Even worse, later unconfirmed reports suggested that even this poor result was helped by the country's central financial institution, the Bundesbank. During the same morning, the European Commission released a Green Paper, The structures and the political debate in the EU on the rationale, preconditions and possible options of financing public debt through Stability Bonds. This contained three wellstructured proposals for the introduction of a Eurobond, each one under different terms it is well known that the German government and the parties that constitute its political base in the Bundestag are for the time being strongly opposed the idea of a Eurobond, to cover the borrowing needs of all 17 member states in the single money zone. It is also known that the opposition parties in Germany, the SPD and the Greens, support the idea of a Eurobond, so it was quite understandable why German Chancellor Angela Merkel, speaking during the same morning in the Bundestag, expressed only negative sentiments about the European Commission's proposal for the issue of a Eurobond. Merkel's anger at the Commission proposal has a solid political background, with the German government coalition not yet being able to start a discussion about Eurobonds, while their opponents, the SPD and the Greens, have already incorporated the Eurobonds into their rhetoric. The chancellors aggressiveness towards Brussels also has very good economic foundations readers are reminded that it was on the same morning that the German bunds had their worst day in 11 years. Obviously, all the worlds markets heard the European Commission telling them solemnly that the Eurobond issue must be seriously discussed by the Eurozone, and sooner rather than later that issuing a single debt paper would be the only way out of the Eurozone's current and future sovereign-debt problems. And you do not need to be an economist to understand that Germany will bear most of the cost for this Eurobond, with its credit rating set to deteriorate and borrowing interest rate and costs to increase. So markets reacted accordingly in becoming sceptical about the future. It is not an overstatement to say that markets began treating Germany as if a Eurobond was about to be issued on top of this, it was also on Wednesday 23 November that Greek opposition leader Antonis Samaras chose to send his long-awaited letter, to reassure everyone, both inside and outside the Eurogroup that his party, New Democracy, will support the application of the 26 October Agreement, to provide a second support package for Greece. This development will entail the release of the sixth soft loan instalment to Greece of 8bn, a large part of which must be financed by Germany. In short, Wednesday 23 November made clear that the Eurozone will soon be issuing a Eurobond, a step that will add to the costs of German borrowing. It also made clear that Greece will continue to receive EU aid, which will be mainly financed by Germany. Really, Merkel did not need anything else to be angry about.

Chasing criminals across cyberspace with an octopus!

By Gutenberg
This morning I got glorious news by email that I had inherited a million dollars from a relative I never knew existed. My finger went straight to the delete button, wiping out my chances of a fortune, along with emails telling me my bank account details needed verifying (from the HSBC and Lloyds, with whom I have no accounts) and that my computer was about to come under attack from a (non-existant) virus. If I were as brave as writer Neil Forsyth, I would react. Under the guise of his alterego Bob Servant, he has taken on the hackers, bombarding them with increasingly bizarre replies until even the most persistent Nigerian prince has given up in disgust. His lone campaign against hackers is humourous and innovative but it underestimates how much we are all potential victims of cyberthieves. Anyone who uses the Internet is exposed to cybercrime and as the Internet grows, so does our vulnerability: 2008, for example, saw more online crime than the preceding five years combined. For every crime in the real world, there seems to be a shadow in the cyberworld. Petty thieves hack credit cards, mafia operatives launder huge amounts of money at the push of a button. The cyberworlds vandals carry out denial of service attacks and sex criminals trade child pornography. This is not science fiction, it is reality. In the home, in the office, our life is under attack. More than ten years ago, the Council of Europe launched the fightback, combining the forces of public and private sectors to put together the first and still the only internationally binding treaty on cybercrime. They called it the Octopus interface with its tentacles reaching out into the far networks of cyberspace to set traps for online criminals. Thanks to the convention, police have the means to investigate and prosecute efficiently, even across borders, and acts such as illegal access, data and system interference, computer related fraud and child pornography are now criminalised in many countries. Most importantly, it smooths international operations between different countries and binds together industry and governments solving a global problem globally. And it has been shown to work. There are tough new laws in many countries, succesful investigations and prosecutions, and much more public awareness of the need for security online Commenting at the London Cyberspace Conference recently, UK Foreign Secretary William Hague, whose country has just taken over the chairmanship of the Council of Europe with cybercrime amongst its priorities, held it up as a model. Moores law predicted that computer power will double exponentially every two years. Another safe prediction is that criminals will continue to exploit cyberspace for their own profit. Innovations are happening every day, and technical shifts such as cloud computing bring new challenges. One government cant challenge criminals alone. Only by combining forces, working across borders, and bringing together the industry, the law enforcers and the polciymakers do we stand a chance of combatting the new cybercriminals. If one man, with a sense of humour and persistence and a lot of time can upset the spoof Nigerian princes, imagine what a dent the international community can make with the power of international law behind it.

The Greek letter finally came

By Kassandra
Tensions between Greek opposition leader Antonis Samaras and Eurogroup leaders German Chancellor Angela Merkel and French President Nicolas Sarkozy have been significantly, but not totally diffused after Samaras sent last Wednesday a letter to Eurozone authorities, the European Central Bank (ECB) and the International Monetary Fund, giving in it assurances that the concomitant austerity and growth-enhancing measures of the 26 October Agreement would be applied in full. Both Berlin and Paris reacted positively to Samaras's letter, which was considered as acceptable - it is thus expected that Eurogroup will release the next payment to Greece in its 29 November meeting. Samaras declined the Eurogroup's request to co-sign such a letter with former prime minister George Papandreou and, to the best of New Europe's knowledge, did not sign any additional protocol or annex. Eurogroup explicitly demanded that Samaras's letter should not include the condition, agreed with other political leaders and the president of the Republic that elections would be held on 19 February 2012, a condition that was accorded by Samaras. Samaras tactic of sending a personal instead of a collective letter and the revelation by New Europe of the commitment of the previous prime minister to purchase military hardware worth 10.5 billion from France and Germany (a breaking news story which was widely reproduced in Greece and not denied by any of the involved parties) made the Greeks understand why Samaras was refusing to sign collectively - such a joint letter would have implied that Samaras recognised the previous commitments of Papandreou. Under the circumstances, political losses for the New Democracy group were minimised. The aim of the Eurogroup and Greeces lenders is to reduce the political strength of New Democracy under Samaras, so the coming election will produce no absolute majority and thus place Greece under a coalition government, which will be more susceptible to pressure in future negotiations.

Page 4| New Europe November 27 - December 3, 2011

NEW EUROPE

ANALYSIS
A Greek comedy that may have turned into tragedy
By Dionyssis Kefalakos
Greek sovereign debt is fast increasing, fed by the persistent deficits in the current fiscal exercise, which is expected to leave for this year a gap of around 9% of GNP that may very likely reach 10% at the end of December, almost exactly as it was last year, meaning that all the draconian measures taken by the Papandreou government over the past ten months have been completely ineffective, undermined by the larger-than-expected recession in the real economy. In any case, the restricted ability of Greece to control its fiscal deficits is quite worrying and the rest of the Eurozone is now trying to impose the strictest possible reassurances from Athens that the country will continue to do whatever it takes to zero its fiscal deficits and even produce a prime surplus (not counting interest payments) during 2012. Currently, under the June 2010 agreement with the EUECB-IMF troika, Greece is being financed with soft loans to pay its maturing debts and also to cover its new deficits, which brought the sovereign debt of Greece at the end of the third quarter this year to the stunning hight of 360.5 billion, or 165% of GNP. Obviously, this explosion of obligations means, among other things, that the country cannot service its debts. Athens is now expecting the EU-ECB-IMF to release the sixth instalment of soft loans under the June 2010 arrangement, in order for the country to pay back its maturing old debts and cover the new fiscal gaps. Without this money, the country will tumble into an uncontrollable bankruptcy, probably taking the credibility of the entire Eurozone down with it. Investors are already selling not only Italian and Spanish bonds, but also Austrian and Dutch debts, with the latter countries having no problems whatsoever in duly paying their obligations to the last eurocent. In this environment, the European Union leaders decided on 27 October to create a second salvation package for Greece, containing a 50% reduction (haircut) of its debts in the hands of private lenders (banks and pension funds) called Private Sector Involvement (PSI) to save the country, along with a new loan facility of 130bn to take good care of Greece's financial needs over the years ahead. For Athens, however, to receive the last 8 billion tranche of 2010 loans and be favoured by the new package, it must fulfil certain obligations, as was the case with the other two countries in the EU-ECB-IMF programmes, namely Portugal and Ireland. A key feature in this arrangement is that both major political parties of those countries signed a document undertaking the obligation to agree on the concomitant financial and structural measures that are to accompany the soft loans. In the case of Greece, however, major opposition party New Democracy leader Antonis Samaras was refusing until last Wednesday to sign such a document, demanded unanimously by the entire Eurogroup and also requested by Greeces new technocrat Prime Minister Loukas Papademos, himself a former vice governor of the European Central Bank (ECB). The fact that Samaras's party is backing the new Papademos government jointly with the until recently governing socialist Pasok party and the right wing Laos party is not a replacement for the obligation of political leaders to all sign the document as requested by the troika. Over the past seven days, the entire Eurozone has been losing its credibility in world markets, simply because Samaras was refusing for at least ten days to sign the document. The vast majority of Greeks are in favour of their country staying in the Eurozone and thus wanted Samaras to sign the letter the matter has acquired disproportionate dimensions, with the Dutch finance minister making derogatory comments about Samaras. In any case, the whole affair very much resembles a Greek comedy, which could have easily turned into a tragedy.

ENVIRONMENT

Why wont Europe heed the doctors advice on climate change?

By David Cronin
When you feel unwell, who do you consult? Your doctor, who has been trained to treat you? Or your boss, who hasnt? In a letter published by the British Medical Journal last month, numerous health professionals called for robust EU action against climate change. A 30% reduction in the EUs greenhouse gas emissions by 2020 (when compared to 1990 levels) would save more than 80 billion euros per year, the professionals said. These savings would result from both a fall in the numbers of people suffering from cardiac and respiratory diseases and from the increased productivity rate of a healthier workforce. While this would appear to be a far more sensible way to slash medical bills than through austerity, policy-makers are refusing to follow the advice. Rather than going to the doctor, they take their prescriptions from corporate interest groups. BusinessEurope, one of the most influential organisations in Brussels, has prepared a concise two-page briefing ahead of this weeks climate change negotiations in Durban. Its core messages are firstly that the Union should not go beyond its existing target of cutting emissions by 20% over the 1990 to 2020 period. And secondly, it warns that many companies will quit the EU if it unilaterally sets more ambitious reduction goals than the rest of the world. Nick Campbell, the chairman of BusinessEuropes committee on climate change, enjoys privileged access to the European Commission. A report by Carbon Trade Watch and the Corporate Europe Observatory has documented how he held discussions with EU officials preparing a roadmap for moving to a low-carbon economy in March this year. Campbell was exercised by proposals contained in a draft of that plan relating to the EUs emissions trading system, under which firms buy and sell permits to pollute. Because many energy-intensive industries had been granted a surfeit of emission allowances in the past, the Commissions draft recommended that 500 to 800 million should be set aside from phase three of the system (running from 2013 to 2020). After Campbell objected to that figure, it was deleted and the final version of the roadmap contained only a woolly commitment to consider the notion of setting allowances aside. Campbell is a busy chap. He is also a lobbyist for the European Chemical In-

Black smoke and fumes billow from a smokestack at the state-run lignite-fueled power plant of Aghios Dimitrios, which in 2005 ranked as Europe's dirtiest power plant on a World Wildlife Federation (WWF) report, Kozani, northern Greece, 05 February 2007. |EPA/CHRISTOS BLETSOS

dustry Council (CEFIC). As chemicals account for one-third of all industrial energy use in the Union, CEFIC should theoretically benefit from a shift towards electricity generation from renewable sources as they are less hazardous than coal, oil and nuclear power. Yet because the councils members include fossil fuel addicts such as Shell, BP and Total, it is resisting saner energy policies. Giorgio Squinzi, the councils president, recently contended that the EUs 20% target was adequate. Targeting greater C02 [carbon dioxide] reductions when other markets outside of the European Union are dragging their feet would be a lonely and bold move, he said. But it would not necessarily be the right one, and might achieve perverse effects. Squinzi went on to predict that chemical companies will have to move out of Europe if its policy-makers hug too many trees (not his exact words, I hasten to add). This is an old trick and it has worked wonders. Indeed, the trick has been played so many times that a concept called carbon leakage has emerged to describe industrial sectors considered at risk of financial loss from tougher climate change regulations. Those sectors are deemed eligible for higher numbers of free permits to pollute under the emissions trading scheme than other sectors. This concept has turned into a joke. I was astonished to hear an EU official state last week that the list now covers 169 sectors, including wine and bicycle production. Connie Hedegaard, the EUs climate action commissioner, appears to be using Twitter as a negotiating tool. In a tweet earlier this month, she vented her

frustration with India and the US for opposing legally-binding emission reduction targets ahead of the Durban conference. While Barack Obama should certainly be reproached for reneging on pre-election pledges to take climate change seriously, Hedegaard might contemplate sharing the blame around a bit more evenly. The truth is that the EUs own actions on climate change are not worthy of celebration. Speaking in Oslo last week, Hedegaard said that the EUs emissions have gone down by 17% since 1990. By 2020, according to forecasts that the Unions officials appear fond of citing, the EU is expected to account for 11% of all the worlds greenhouse gas emissions. By focusing so selectively on those apparent achievements, however, Hedegaard has glossed over Europes historical role as an environmental villain. The Third World Network, an anti-poverty group, has pointed out that industrialised countries have belched out over 70% of the worlds emissions since 1850, even though they host just 20% of the worlds inhabitants. Hedegaard continues to promote the emission trading system as the lynchpin of the Unions climate policy, despite how it has been plagued by fraud. Plans to bring aviation within that system will do no more than add two euros to the price of a trans-Atlantic air ticket, the Commission estimates. When emissions from aviation are projected to jump by 70% between 2005 and 2020, that step will clearly not bring the necessary reductions in air travel. Humanity will be let down in Durban. But I guess thats what happens when polluters are taken more seriously than doctors.

NEW EUROPE

New Europe |Page 5 November 27 - December 3, 2011

ANALYSIS
INTERVIEW

Spanish prime minister-elect, an insiders perspective on Rajoy

European Peoples Party (EPP) SecretaryGeneral Antonio Lopez-Isturiz White offers his perspective on Spain's Mariano Rajoy, who will make his world debut as prime ministerelect at the EPP Congress in Marseille, France on 7-8 December. Rajoy will meet with Sarkozy, Merkel, Barroso and other centreright colleagues to prepare the crucial European Council meeting of 9 December. New Europe: Spain appears now to be politically much more solid than its southern peers Greece and Italy. Will new Prime Minister Mariano Rajoy, following his election triumph, try to capitalise on this fact in his relations with Brussels? Mariano Rajoy has already said, in his first statements after winning the elections, that Spain is firmly committed to Europe and the euro. He wants to establish a good relationship with Brussels and with the other Governments of the European Union (EU). As the Partido Popular (PP) did in the past under the government of Jos Maria Aznar, Spain will again be an example of compliance with the rules and goals of the euro. The unprecedented extent of the electoral win of Mariano Rajoys Partido Popular gives him an advantage in relations to Brussels bureaucrats. Is he ready to use this advantage in financial or other negotiations with the European Union? The big advantage of Mariano Rajoy is the clear mandate and the clear support he received from the Spanish people to implement the necessary measures to solve the economic crisis that Spain is suffering. In the future negotiations, I am sure that he will defend Spanish interests but also European interests, because these are linked. Political stability also has a very positive effect on financial markets. How does Spain plan to take advantage of its present sound political position in managing and dealing with the current financial crisis? What new economic policies are on the agenda of the new government? We need to wait until the formation of the new government in order to know in detail its programme, but I am sure that Mariano Rajoy will implement the necessary measures to reduce the unemployment rate, which is the most urgent problem in Spain, and to reform the welfare system in a sustainable way. Is the new government planning to do whatever it takes in order to make sure that Spain is being treated differently from Italy and Greece in financial markets? To this end, what kind of austerity or other kind of economic measures of Spanish troops from Iraq in 2004, and the relationship remains cold with the Obama administration. Rajoy is well aware of the importance of the US and transatlantic relations in this globalised world and I think he will improve the Spanish-American relationship politically and economically. The EPP will have a Congress in Marseille in the coming days. What do you expect from this meeting? It will be the 20th EPP Congress. It comes at a moment when the EPP is peaking we now have 17 out of the 27 EU prime ministers, in addition to the presidents of the three main EU institutions. It will be important to debate on the formulation of the right solutions for the current economic crisis and, in this context, we will prepare the important European Council meeting of 9 December. We will also finalise our Congress document, Moving Europe Forward. We are expecting the participation of more than 1,000 delegates from our 72 member parties and many EPP prime ministers and leaders such as Nicolas Sarkozy, Angela Merkel, Mariano Rajoy and many others.

Spanish Prime Minister-elect Mariano Rajoy, left, with EPP Secretary-General Antonio Lopez-Isturiz White

are contemplated? Is it likely that a similar long-term severe austerity programme such as in Greece and Italy will be applied? The situation of Greece, Italy and Spain are not comparable. Spain didnt need a rescue plan and the change of government happened through an election, not through market pressures. Rajoy has said that he will respect the commitment of reducing the public deficit and that means austerity. I am sure that this will be accompanied by measures to reactivate economic growth and to create jobs. Do you think that Spain has more to gain or lose if it tries to differentiate its position from the rest of the south European member states of the EU? Can Madrid ask and work for a new and much more important position within the EU pantheon, where Berlin and Paris reign at present? How possible would such a repositioning be? Spain will have its own voice in Europe, but always co-operating with our partners. The role of Spain within the EU has been greatly reduced by the inefficiency and incorrect priorities of the socialist government led by Rodriguez Zapatero, as was proven during the EU Spanish Presidency of 2010. Spain is one of the EUs largest countries of the EU and I am convinced that in the coming months and years will again play an important role in the European project. South America has always been of particular interest to Spain. What does the new government have in mind about this issue? What about the relations with the United States? Will the new government seek a different positioning of Spains relations with the US? Zapateros government chose the wrong allies:

Castro, Chavez, MoralesI am sure that Rajoy will rebuild the strong relations that we used to have with the main Latin American countries. Obviously, the transatlantic relation with the US is also very important Zapatero made a huge mistake with the fast withdrawal
ADVERTISEMENT

Page 6 | New Europe November 27 - December 3, 2011

NEW EUROPE

ANALYSIS
Eleftherios Venizelos - The reformer from outside the system
By Jorgo Chatzimarkakis
100 years ago, Venizelos reinvented Greece and laid the foundations of a modern state. But the subsequent politicians wasted his heritage. Greece has to start the same reforms over again. What would Venizelos do today? Veni, vidi, vici He came, saw the problems and started working on them. In 1910, a Cretan lawyer became Prime minister of Greece. The country was in a similar mess as contemporary Greece: the state was not functioning, the political system and ruling parties were delegitimized within the people, the economy was in dire straits. Venizelos wanted to fundamentally change politics as they had been run. In a speech he gave in September 1910, he stated that he was not just another Archegos (leader). Rather, he was coming as the bearer of a new political idea. This idea was the ideological ground for his Liberal Party Komma Phileleftheron. During the parliamentary election in December 1910, this party won 300 out of 362 seats in the Greek Parliament. The election was a fundamental renewal of the political class: Only 45 of the newly elected representatives had been members of parliament before. Venizelos' political agenda as Prime Minister could be summarized as "a program of reconstruction." He based his reform program on two pillars: tax reform and economic productivity. Venizelos reformed the tax system by introducing an income tax to provide the state with a solid financial foundation. He also reformed the agricultural sector, back then one of the most important pillars of the state. Also, Venizelos stopped the inflation of the state apparatus with unqualified people: candidates had to submit to a public inquiry, prior to taking up their functions. With Venizelos, a new type of politician emerged in Greece: A politician as in the days of the Athenian Democracy, such as Perikles, who was driven by the search of the common good for the state. A politician driven by a new political ethos. The years 1910-15 are widely considered as a Greek "golden age of domestic reforms and foreign policy successes. His native Crete for example could get rid of the Ottoman rule and join the motherland. After years of political chaos and stagnation, Venizelos gave Greece a new momentum and spirit of optimism. He united the country behind a common idea. A contemporary Venizelos would have to tackle exactly the same problems as in 1910: The public sector needs to be curbed. Taxes need to be collected and reformed in a fair system. Politics need to serve the citizen - and so does economy. As any modern statesman, he would have realized that good politics sets the legislative framework to ensure economy is working properly. And only a working economy provides a state with the means to satisfy citizens' demands. Greece has a new government now. Some of the reforms Papandreou ushered in are in line with what a Venizelos would have done. We have to be very careful: the path of reforms is narrow and sticky. Some old-style politicians are waiting for their turn to continue the old-style system. They should not be given the opportunity to do so. Venizelos laid the foundations for modern Greece but the successive politicians wasted his heritage. A reinvention of Greece has to come again from outside the system. Venizelos was able to bring a new perspective to the country because he was not part of the political establishment at the time. He could see things differently and propose his solutions. Jorgo Chatzimarkakis is a MEP (Germany), Group of the Alliance of Liberals and Democrats for Europe

ECONOMY

The wages of economic ignorance

By Robert Skidelsky
LONDON Politicians are masters at passing the buck. Everything good that happens reflects their exceptional talents and efforts; everything bad is caused by someone or something else. The economy is a classic field for this strategy. Three years after the global economys near-collapse, the feeble recovery has already petered out in most developed countries, whose economic inertia will drag down the rest. Pundits decry a double-dip recession, but in some countries the first dip never ended: Greek GDP has been dipping for three years. When we ask politicians to explain these deplorable results, they reply in unison: Its not our fault. Recovery, goes the refrain, has been derailed by the eurozone crisis. But this is to turn the matter on its head. The eurozone crisis did not derail recovery; it is the result of a lack of recovery. It is the natural, predictable, and (by many) predicted result of the main European countries deliberate policy of repressing aggregate demand. That policy was destined to produce a financial crisis, because it was bound to leave governments and banks with depleted assets and larger debts. Despite austerity, the forecast of this years UK structural deficit has increased from 6.5% to 8% requiring an extra 22 billion ($34.6 billion) in cuts a year. Prime Minister David Cameron and Chancellor George Osborne blame the eurozone crisis; in fact, their own economic illiteracy is to blame. Unfortunately for all of us, the explanation bears repeating nowadays. Depressions, recessions, contractions call them what you will occur because the private-sector spends less than it did previously. This means that its income falls, because spending by one firm or household is income for another. In this situation, government deficits rise naturally, as tax revenues decline and spending on unemployment insurance and other benefits rises. These automatic stabilizers plug part of the private-sector spending gap. But if the government starts reducing its own deficit before private-sector spending recovers, the net result will be a further decline in total spending, and hence in total income, causing the governments deficit to widen, rather than narrow. True, if governments stop spending altogether, deficits will eventually fall to zero. People will starve to death in the interim, but the budget will be balanced. That is the crazy logic of current economic policy in much of Europe (and elsewhere). Of course, it will not be car-

French President Nicolas Sarkozy (C) holds hands with German Chancellor Angela Merkel (L) and Italian Prime Minister Mario Monti during a press conference in Strasbourg, France, 24 November 2011. They should start thinking about spending money themselves. |EPA/ROLF HAID

ried through to the bitter end. Too much will crack along the way the banks, the monetary system, social cohesion, the legitimacy of the political regime. Our leaders may be intellectually challenged, but they are not suicidal. Deficit reduction eventually will be put into cold storage, either openly, as I would prefer, or surreptitiously, as is politicians way. In the United Kingdom, there is already talk of Plan A +. Those who see the need for such a growth strategy, but who also want to help their friends, like the idea of tax cuts especially for the rich. This knocks a hole in current deficit-reduction plans, but, provided government continues to cut spending, it has the benefit (from a conservatives point of view) of shrinking the states role over time. Apart from questions of fairness, cutting top tax rates is an inferior way to increase spending, because the rich have a higher propensity to save. Tax reductions should be targeted specifically at the poor if one wants the money to be spent to stimulate the economy. In fact, the best option of all is for the government to spend the money itself. Governments can do this consistently with a medium-term deficit-reduction plan by making a crucial distinction between their budgets current and capital accounts. The current account covers spending on services and perishable goods that produce no assets. The capital account is for buying or building durable assets that give a prospective future return. The first is a charge on taxation; the second is not. If todays accounting rules are too insensitive to make this distinction, a separate entity could do the investing. A national investment bank would be capitalized by the government, borrow from the private sector, and invest in infrastructure, housing, and greening the economy. This would simultaneously plug a hole in demand and improve the

economys long-term growth prospects. There are signs that officials in the UK and the United States are starting to move in this direction. If nothing works, it will be time to sprinkle the country with what Milton Friedman called helicopter money that is, put purchasing power directly into peoples pockets, by giving every household a spending voucher with an expiration date. This would at least keep the economy afloat pending the development of the longer-term investment program. It would be better if such schemes could be agreed upon by all by G-20 countries, as was briefly the case in the coordinated stimulus of April 2009. If not, groups of countries should pursue them on their own. The European Union desperately needs a growth strategy. Its current bailout schemes only help countries like Greece and Italy to borrow money cheaply in the face of prohibitively high market interest rates, while the schemes insistence on more budget-deficit reduction in these countries will reduce European purchasing power further. The recipient governments will have to cut their spending; the banks will have to take large losses. In the long run, the eurozone must be recognized as a failed experiment. It should be reconstituted with far fewer members, including only countries that do not run persistent current-account deficits. Everything else that has been proposed to save the eurozone in its current form a central treasury, a monetary authority that does more than target inflation, fiscal harmonization, a new treaty is a political pipe dream. Robert Skidelsky, a member of the British House of Lords, is Professor Emeritus of Political Economy at Warwick University. Copyright: Project Syndicate, 2011. www.project-syndicate.org

NEW EUROPE

New Europe | Page 7 November 27 - December 3, 2011

ANALYSIS
INTERVIEW | MICHAEL CASHMAN
EVERYTHING BUT ARMS

European institutions in battle over document access

By Cillian Donnelly
The European institutions are gearing up for a renewed fight on public access to documents, following the successful passage of a new European Parliament report through committee on 23 November. The civil liberties committee in parliament passed the report on the public access to documents through by 33 votes to 17, with two abstentions. All of those voting against the report belonged to the centre-right EPP group.The group will shortly be issuing a minority report outlining its reasons for voting as it did. The report, authored by British MEP Michael Cashman, is set to go before the full parliament in December, but the European Commission, which is not happy with its contents, as is the European Council, is angling for it to be pushed off the agenda. It aims to grant equal access to documents from all EU institutions, bodies and agencies, and has looked jurisprudence from the European Court of Justice, and amalgaADVERTISEMENT

mated those recommendations. While it does not cover individuals with those introductions, it also seeks to balance privacy, documents relating to all other working business, including accounts, are included. The commissions bone of contention is that the report, which is an amalgamation of two previous reports, does not, according to the commission, explicitly reference itself in a post-Lisbon context. According to the parliaments legal service, this is unnecessary. Michael Cashman does not buy into the Lisbonisation argument, which the commission has consistently and sadlytried to argue on primarily. He told New Europe that he believes it amounts to little more than a trick or a ploy to get the parliament to negotiate or concentrate on one aspect of the report, which will most likely lead to its falling. Ultimately, he says, the commission is baulking at the idea of expanding on its original vision of document access, as laid out in the 2008 revision proposals, which, he says, had a

rather meagre, miserly approachto information. It doesnt help that the council now wants to protect itself from increasing citizen demands for more openness and transparency, he adds. According to Cashman, the institution is trying to claw back its 2001 position.The commission and the council are trying to diminish this,he says.For example, with the definition of what is a document. They want it only to apply to a document that is officially sent. Can someone then send a file, but label it as not official? Whole files would be exempt. When asked about the possible EPP motives for rejecting the report, Cashman says he cannot speak for the group, but suggests pressure could be coming from EPP governments in certain member states not usually known for high levels of open government. They believe, I think, that access to documents will go too far, and drown people in the weight of information, he says of the argument against opening up the process, an argument he rejects.

Furthermore, he says, there has been untoward pressure from the commission to try to prevent the report been discussed and voted at the Strasbourg plenary in December. According to the MEP, Commissioner for Inter-institutional Relations and Administration, Maro efovi, wrote to the parliaments conference of presidents arguing it is wrong to try and deal with the issue by amalgamating two proposals. He also contacted member states, saying that the commission was getting no solidarity from the rapporteur. Basically, says Cashman, the commission is trying to prevent this from going to plenary. efovi says he wants both parts of the report dealt with separately, but if it is so urgent to deal with the second part, the Lisbonisation part, then isnt it better to have it at the December plenary, and get the Danish presidency to steer the negotiations in the new year? The insistence by the commission, he says, that it is vital the report is presented in a post-Lisbon context, seems somewhat contradictory.If it is so important, why has it taken them 14 months to work it out? Normal practice is for it to be worked out in about two weeks. Besides, he emphasises once again, our legal advice says this is not necessary. Are they seriously trying to say that we have to mention Lisbon in every report we bring out? Despite current problems, Cashman says that the progress of the report through committee stage represents a very good day for openness and transparency. He also suggests more openness of this sort can make citizens more aware of the workings of the EU institutions, particularly how member state governments interact at council level.Of all the institutions, he says, the council is the least understood part of the equation. The wider we open it, the more democratic accountability we have, and citizens can see what their governments agree to at council meetings, to see what they have voted for,and why they voted that way. Governments and ministers often claim back home that they are being undermined by Brussels, but right now, Brussels is undermining itself.

Lack of top level ambition undermining EU commitment to climate change

By Cillian Donnelly
Ireland, apparently, isnt concerned about climate change; the government has abandoned a bill that would have set binding targets for an 80% reduction in net carbon emissions by 2050, established a national climate change strategy and introduced annual carbon budgets, all of which have now been jettisoned. In some quarters it has been suggested that the abandoning of the climate change bill amounts to a solo-run from Environment Minister Phil Hogan, oddly suggesting that it is not actually government policy, but the actions of a rogue; defiance that would, surely, bring about a serious rebuke. As it stands, Fine Gael, in its government manifesto promised such a bill, but now it has gone. Not that the government has entirely abandoned its commitments to the environment, it has still promised to increase its carbon tax to 30 by 2014, which is expected to bring in savings of 330m, according to government analysis. The tax covers many sectors, gas, diesel, kerosene, for example, but not electricity. Of course, the typical excuse for this is cost, government cutbacks. The bailout deal agreed in December 2010 (under the previous government ) allowed for an 85m rescue package in return for Ireland agreeing to a 3% cut in deficit by 2015, which is expected to total 2.2bn of savings. Of this 8m is expected to come from the department of communications, energy and natural resources, and 84m from the department of the environment, heritage and local government. All this comes as the EU is about to travel to Durban to reestablish its environmental credentials. Following the failure of Copenhagen, when EU expectations of a global deal were so high, such hubris was almost predestined to failure, there has been a renewed, but cautious, optimism this time around. Various noises at various levels have been made. Its the usual push-and-pull. The EUs position can conceivably as being pre-negotiation expectation management mode, where things are downplayed in the hope that those reduced expectations are met, and spun accordingly. Thats the worstcase scenario, of course. Still, a lack of ambition prevails. While not directly related to the EU negotiating position, the Irish example does still exemplify the confusion, and , in some cases, downright opposition to the environmental argument in these post-crisis times. Energy efficiency, which could generate a new economy itself, is consistently being lost amid a sideways argument about cost (by, for example, local authorities, who fret about the possibility of renovation costs for public buildings, without taking into account the accumulative benefits of ongoing efficiency improvements). Added to this, is the general reluctance not to upset the US or that any second commitment to Kyoto must include reciprocal agreements from economies like Russia, and at least one MEP has suggested that current tactics of the European commission on this are confusing, with arguments have been made that by pandering to the bigger economies, the EU risks losing its natural allies in the developing world, those countries who Europe have made so many promises to, and who look to the EU for leadership. But, it is not enough to deceive the public, those with expectations, by obfuscation. There are many levels here, and it is no wonder that individual member states are abdicating their responsibilities if the supposed top-level of EU cannot, when stepping up the global challenge, canot themselves get it together. CDonnelly@NEurope.eu

Page 8 | New Europe November 27 - December 3, 2011

NEW EUROPE

ANALYSIS
New Europe content partner

ECONOMY

A start up Nation
By Francisco Jaime Quesado
The example of Israel as a Start Up Nation is becoming a fashion idea through Europe and some countries, like Portugal, are developing effective public strategies towards the launching of a national project with this objective. A Start Up Nation must be a commitment between Government and Civil Society, with a primal role to universities, companies and centers of innovation as the active drivers of competitiveness in the system. More than ever, we need to focus on added value as the basis of a new society, more equal and more competitive. The answer for this challenge is strongly based in this Start Up Nation challenge. The Start Up Nation must confirm itself as an enabler actor in a very demanding world, introducing in the society and in the economy a capital of trust and innovation that is essential to ensure a central leadership in the future relations betwen the different social and economic players. These new actors should be more and more global, capable of driving to the social matrix a unique dynamic of knowledge building and selling it as a mobile asset on the global market. Universities and Companies have a central role in this new Start Up nation. They must perform a new strategic partnership centered in the objectives of the added value, creativity and knowledge. This is the basis for a future effective implementation of the EU 2020. Most of the countries still a strong opportunity to implement an agenda of innovation the opportunity is more and more know and it cant be lost. The Start Up Nation is the key to the future, centered in a new agenda of value promoted by the social and economic actors. The Start Up Nation must also be based in central projects like the Poles of Competitiveness, Clusters of Innovations and Knowledge Cities and Regions. These projects are the effective confirmation that the basis for a new agenda depends on the capacity of universities, companies and centers of innovation developing a new strategic agenda of excellence. A Start Up Nation is more and more the confidence of the development of new solutions based in new products, new services, more connected with the new challenges of a more global and complex society. The Start Up Nation allows people to know who they are and have a strong commitment with the values of freedom, social justice and development. In times of Change and Uncertainty, Nations must regain its Strategic Competitive Advantage but at the same time must be able to reinforce its Social Dimension. In this way its essential to learn the lessons that more than ever emerge from a world that is trying to rebuild its competitive advantage and to reinvent its effective place in a complex and global network of relations. In the New Global Economy and Innovation Society, people and companies have a central role to play towards a new attitude connected with the creation of value and focus on creativity. Francisco Jaime Quesado is the General Manager of the Innovation and Knowledge Society in Portugal, a public agency with the mission of coordinating the policies for Information Society and mobilizing it through dissemination, qualification and research activities. It operates within the Ministry of Science, Technology and Higher Education

Protecting investments or ramping up risk Credit Default Swaps?

By Justin A. Urquhart Stewart
LONDON - Credit Default Swaps (CDS) are one of those technical financial terms that are bandied around, apparently more often to confuse rather than to clarify. Here is a great example of where our industry goes out of its way often to create private expressions, keeping the knowledge of what they are up to within the coven and not for the broader masses. Heaven forbid that we should actually be using the same language as the rest of the population. Such practice is common in many professional areas where "technical expertise" is often a great excuse for using obscure terms and obfuscation lawyers, please stand up. The truth is that actually a CDS is just a form of insurance, but rather than being on a house or a car or even an individual (as in life assurance) it is on a specific financial instrument like a bond or a mortgage. A CDS reflects the annual cost of insuring against the default of the borrower: the higher the likelihood of default, the higher the CDS price. Now there is nothing wrong with insurance - in fact it is a vital part of the economic and financial structure of the capitalist world. However, like any product, if taken to an extreme it can have some rather strange and generally unwanted consequences. An example of this would be the growth in trading in these insurance policies CDS such that they almost have a greater importance than the underlying asset that is being covered. Trading in CDS on, say, Italian government debt reflects the risk of default on the bonds. The more fearful markets get and they more they fear default, the more CDS or insurance will be bought - driving bond yields up to (theoretically) reflect the level of default that the CDS is implying. Higher bond yields are bad news for countries because they make the cost of borrowing higher which then increases the risk of default: the tail wagging the dog. Others are concerned about the complex web of counterparty relationships and obligations that has been built up with CDS trading: you can buy a CDS contract to be protected if the underlying borrower defaults, but someone else usually an investment bank has underwritten that CDS contract and has the obligation to pay you if the borrower defaults. But how credit-worthy is the bank that has underwritten the CDS contract? What other CDS have they underwritten? Can the CDS buyer really rely on them to pay out? These questions are complex and hard to answer and, in the event of a major default, these uncertainties could lead to paralysis in markets and banks mistrusting each other and refusing to trade. So, instead of acting as a safety net, the Credit Default Swap market may in fact be increasing the risk and the potential collateral damage in the event of default. Investors are completely justified in taking insurance on assets they own insuring against default of the UK government because they have a large holding in UK Treasury bonds, perhaps. Companies and investors are also justified in taking insurance on other firms with strong links to their business key suppliers or customers, whose demise would be detrimental to their own business. But what about betting on the failure of another firm, or the default of a government, for a speculative profit? An example everyone can relate to is life insurance. We may take out a policy on ourselves in order to maintain family security. We may even take out insurance on a parent, perhaps to cover any inheritance liabilities. However no one sets up an open market trading on their mother's life. By having all sorts betting on her demise, you could end up with the illogical (not to mention undesirable) result that there are more people with an interest in ensuring her departure than preventing it! However, this is exactly the situation we are seeing in current CDS markets - we have created a mechanism which in some ways encourages betting on a default. Instead of a guy rope of stabilisation, the CDS has become a lever of instability. So what can be done? A system to allow insurance of your assets and investments is perfectly logical. A system allowing speculators to insure assets they do not actually own is patently not. In effect, it creates a submarket trading in the insurance, which puts a greater, but less visible burden upon the underlying asset and creates far larger risk if it were to collapse. This would become an inverted house of cards all balanced on one single card at its base. Call time on these unnecessary sub markets: CDS should be allowed but only for assets you actually own, or have some tangible connection with. They should not be used as a trading instrument for market punting. On another note, three years ago we had banks like Lehmans, Bear Stearns and of course our own Northern Rock getting into trouble as a result of their dependence for funding on the short-term money markets. Once these seized up, this dependency became their fundamental flaw as they lost their ability to refinance by rolling over debt. Three years on and we are in a similar position - this time not with banks but with Italy. She cant print any more currency not her decision and needs to refinance significant debt, with 350billion coming due over the next year. The key issue here though is size I am sure you will remember that Lehmans bond debt was a mere $150bn, whereas Italys total debt is around $2,500bn. Gosh! Maybe the eye-watering size of this will finally mean that we are going to see some movement, not to resolve the symptoms of bank and government debt, but to address the cause in the underlying operation and disciplines of the Euro currency itself. One path of possible direction has been suggested by the five wise men (although only three will be needed next month) who advise the German government, presumably on their way to Bethlehem. They are suggesting a debt redemption fund which would fund any sovereign debt above 60% of GDP under some strict rules and conditions and potentially be the path for the introduction of a far closer fiscal and currency union at least for the core of the nations involved. Such a move wouldnt immediately solve all the problems, but at least would demonstrate some leadership and hopefully restore some confidence. That alone could ease some of the fears over the spreads for Italy. However, every day that goes by in the current stasis of fear just erodes confidence, and such erosion weakens economies and growth. Its like standing on the flanks of Vesuvius you can feel the ground shaking and you know that something is going to blow, but nobody wants to believe it! And finally, an exhausted Turkish man living in Germany has asked the police to protect him from his sex-mad missus, Bild reports. The bleary-eyed victim of his wife's "voracious embraces" walked into a police station in the south western city of Waiblingen recently to explain he'd spent four years kipping on the sofa in a vain attempt to get some sleep. Police explained: "He has decided to get a divorce and to move out in the hope of finally getting some rest, particularly as he is anxious to arrive at work well rested. At the moment this is impossible because he says his wife keeps coming into the living room demanding that he perform his marital duties. He asked for police help in getting some sleep at night." Time to buy some headache pills I would suggest. Justin A. Urquhart Stewart is the Director of Seven Investment Management Limited in London

NEW EUROPE

New Europe | Page 9 November 27 - December 3, 2011

ANALYSIS
POLITICS

Turkeys democratic dusk

By Dani Rodrik
CAMBRIDGE When questioned recently about a constitutional law professor who was arrested for lecturing at an institute run by the countrys main pro-Kurdish political party, Turkeys interior minister, Idris Naim Sahin, couldnt hide his irritation: I am having a hard time understanding those saying a professor should not be arrested while thousands of other people are being arrested in Turkey. Presumably, Sahin meant to say that a professor cannot claim special treatment under the law. But his remark inadvertently underscored Turkeys new reality, in which any perceived opponent of the current regime can be jailed, with or without evidence, for terrorism or other violent acts. Special courts, tasked with prosecuting terrorism and crimes against the state, have been working overtime to produce charges that are often as absurd as they are baseless. For example, journalists have been imprisoned for producing articles and books at the behest of an alleged terrorist organization called Ergenekon, whose existence has yet to be confirmed, despite years of investigation. Likewise, military officers have been charged on the basis of blatantly fraudulent indeed, amateurishly produced documents containing obvious anachronisms. A senior police commissioner is currently languishing in jail for allegedly collaborating with far-left militants he spent his entire career hunting down. These prosecutions have cast an ever-widening net, ensnaring scores of journalists, authors, and academics, hundreds of military officers, and thousands of Kurdish politicians and activists, among others. Self-censorship has become routine. Media bosses anxious to retain Prime Minister Recep Tayyip Erdoans favor have fired many of those journalists who continue to criticize his regime. And government control now extends beyond the media, judiciary, and academia to the worlds of business and sports. Previously autonomous regulatory bodies (such as the competition authority) have been quietly subordinated to the government, with no debate or discussion. Even the Turkish Academy of Sciences has been targeted. A recent decree, widely condemned abroad, allows the government to appoint two-thirds of the Academys members, thereby ending even the semblance of scientific independence. Erdoan seems immune to criticism. His success at expanding access to health, education, and housing has enabled him to win three general elections

CONSTRUCTIVE AMBIGUITY

Bringing it all back home

By Andy Carling
Theres always been something surreal about hosting the EU in Belgium, but the last year has not only seen the gradual build up of what can only be called a psychosis, it has also revealed the EU as being the empire with no clothes. This is about to get even weirder. A lifetime ago, in 2009, Lisbon arrived to great celebration. Heres what Barroso said, Europe is ready to move ahead. We have the weight and momentum provided by a truly continental scale, the ability to use our rich diversity to pursue our common goals. And we will have the tools needed to deliver a Europe fully grounded in a firm democratic basis, a Europe with the right mix of institutions to realise change, and a Europe able to play its full role on the global stage. It took less than two years for the EU leadership to turn a grand vision into a nightmare, which is an achievement of sorts, but it is about to get worse. The financial crisis is about to hit Belgium. This fine nation, the obverse of the EUs motto, United in Diversity, has been unable to form a government from their internationally renowned politicians. Speaking of whom, which imbecile thought it wise to give Leterme, a man whose career is the very embodiment of the word dismal the chair of the OCSE? As for Van Rompuy, he unveiled an official portrait this week in which he is just about visible. He doesnt even stand out in his own bloody portrait. The Chinese are laughing at us, America has given up on us and the larger member states appear to be re-drawing the union into some kind of re-creation of the Coal and Steel Community, only with a shared bank account. Now, Belgium, a nation that appears intent on geographical suicide is about to go under. A combination of EU dithering, narrow minded politicians and financial pressure has left the home of the EU without a government and none in sight. This means that theres nobody to take any responsibility for the 11.2 billion of cuts needed for next year alone. This means that the markets are walking away and a Greece/Italy style collapse is imminent. Naturally, the eurocrats have responded by threatening strike action in a dispute over keeping their perks, their free schools and, of course, the right to go parttime whenever they want, for whatever reason. Now, I support workers rights, but I cant see how this can succeed. The member states want them to work under hours and conditions closer to everyone else, knowing how austerity at home is going to hit. It doesnt take a crystal ball to understand that when Belgium gets the cold blast of austerity and is under the thumb of the Commission and the Goldman Sachs advisors, the Belgians arent going to look kindly on the pampered eurocrats and we could easily see life getting uncomfortable for the civil servants, who will face the scorn of the locals every time they set foot outside their doors. Their campaign for keeping their conditions is going to set them at odds with their neighbours who lack the ability to protect themselves from austerity. In the meantime, the game of rearranging the deckchairs on the Titanic continues. ACarling@NEurope.eu

President of the Republic of Turkey Abdullah Gul speaks during the Confederation of British Industry (CBI) conference, at the Grosvenor House hotel, in central London, 21 November.|EPA/DOMINIC LIPINSKI

each with a greater share of the popular vote than previously. He has broken the power of the military old guard and the hold of its stale Kemalist ideology the secular nationalism introduced by Turkeys first president, Mustafa Kemal Atatrk thereby permanently altering the makeup of Turkish politics. He has presided over the emergence of a vibrant new class of Anatolian entrepreneurs. And, under his rule, Turkey has become a regional power. Yet, while Erdoan may appear to be at the pinnacle of power, it is his governments Glenist allies who have grown increasingly powerful. Members of the transnational Glen movement inspired by followers of Fethullah Glen, a Pennsylvania-based Muslim theologian are staffing Turkeys police, judiciary, bureaucracy, and universities. The Glenist media now set the countrys new ideological tone, producing a steady stream of disinformation in their vocal support of the countrys show trials. These trials are, in fact, often staged to serve Glenist ends specifically. Prominent detainees, such as the journalist Nedim Sener and police commissioner Hanefi Avci, landed in jail after exposing the wrongdoings of Glenist police and prosecutors. Editorials in Zaman, the Glen networks Turkishlanguage daily newspaper, no longer mince words: a new Turkey is being created; those who stand in the way are getting what they deserve. Erdoan has benefited greatly from Glenist support, yet he detests sharing power and remains suspicious of the movement. Early on, he successfully exploited the Glenist-supported political trials in order to demonize the opposition. But, as the charges have increased in scope and implausibility, the trials have complicated his relationships with the military, domestic liberals, and outsiders such as foreign media and the European Union. Moreover, individuals close to him and his administration have recently become entangled in the

net of judicial manipulation, which suggests that he may be losing control over the police and the special courts. Given that the fight against the common enemy, the secularist old guard, has been decisively won, an eventual break between Erdoan and the Glenists is perhaps inevitable. Unfortunately, regardless of which side emerges victorious, the outcome will not be good news for Turkish democracy. For Turkeys friends abroad, it is time for some tough love. So far, the European Union and the United States have reacted to Turkeys descent into authoritarianism with little more than vague statements of concern. No official has offered criticism analogous to Swedish Foreign Secretary Carl Bildts condemnation of former Ukrainian Prime Minister Yuliya Tymoshenkos show trial in that country, or US Secretary of State Hilary Clintons frank statements about Russian Prime Minister Vladimir Putins erosion of the rule of law. Incredibly, the EUs progress reports on Turkey have continued to call the Ergenekon trials, which are heavily supported by the Glenists, an opportunity to strengthen the rule of law. It wasnt long ago that Turkey appeared to be a bright beacon of democracy and moderation in a region accustomed to autocracy and radicalism. Now it looks more like a country heading towards authoritarianism at home and embracing adventurism abroad. It is understandable that Europeans and Americans do not want to offend a regional power. But playing Erdoans game only reinforces his sense of invincibility. It does not advance the cause of democracy in Turkey; nor does it make Turkey a more reliable ally. Dani Rodrik, Professor of International Political Economy at Harvard University, is the author of The Globalization Paradox: Democracy and the Future of the World Economy. Copyright: Project Syndicate, 2011. www.project-syndicate.org

Page 10 | New Europe November 27 - December 3, 2011

NEW EUROPE

ANALYSIS
EUROPEAN PARLIAMENT

Euromapping 2011 report launched in the European Parliament

By Neil Datta & Karen Hoehn

The developing worlds women are under attack: attack from their own poverty, growing government austerity and policy neglect. Euromapping, a report published last week, reveals just how little our governments care about the vital right that all women in the developing world require: the right to have a healthy family and the number of children they want. The developing worlds women are under attack: attack from their own poverty, growing government austerity and policy neglect. Euromapping, a report published last week, reveals just how little our governments care about the vital right that all women in the developing world require: the right to have a healthy family and the number of children they want. At the end of October 2011 for the first time in human history the worlds population reached 7 billion. At this landmark moment in human history the global population is growing faster than ever before, at a speed which many demographers have calculated will never be surpassed. And 95 per cent of this record population growth is happening in the developing world, where nearly half of all women giving birth do so without a skilled attendant, over 200 million women still lack access to contraception and the single greatest threat to any young womans health is childbirth. A great deal of this record population growth, therefore, is a direct consequence of women being denied the right to be able to choose their family size. Meanwhile the global economic slowdown has ushered in an era of austerity, with donor countries moving to cut their national expenditures, and development budgets are being threatened more than ever before. Worse, a small but vocal minority of politicians are aggressively trying to limit womens access to family planning and other measures that help them gain either an understanding or control of their fertility. The need for Europe to help empower the developing worlds women in their reproductive choices has therefore never been either more urgently required or more under threat than now. Population assistance - funds made available to protect and empower the worlds most disadvantaged people in their sex lives and

Women of 'Lacan Pe Nino' (The poor do not sleep) group perfom the Bwola dance during the International Women's Day, 300km west of Kampala, Uganda|EPA/STR

reproductive choices - is the central element of development assistance that sets out to do this. The initiatives funded by population assistance include (amongst others) the provision of education, services and supplies for family planning and the fight against HIV / AIDS, the training of midwives, the provision of medical services for pregnant women and newborn babies, and scientific research in the field. All these activities help ensure that future generations in some of the worlds poorest countries will be created healthily and by choice, born to families that are able to determine their family sizes according to their wishes and the resources they have available to them. Population assistance therefore also helps to prevent many of the greatest problems that are facing the developing world at present, which range from chronic shortages of water, food or natural resources to intolerable pressure placed on health and education systems. These are all problems that can be reduced if women are able to decide on how many members of their family can live healthily and happily in the conditions they are faced with. Over the past year the European share of Official Development Assistance in

this field has decreased. Whilst European donors (European countries and the EU institutions) provide over 60 per cent of the worlds development assistance, they provide less than 40 per cent of all the funds that are devoted to either health or population assistance. Meanwhile, although only giving a fifth of the worlds development assistance, the US gives more than half of all the funds that are devoted to either health or population assistance. This reversal of global leadership is due in part to consistent increases in US health and population assistance spending and budget cuts throughout the whole of Europe. And it clearly illustrates a dichotomy between Europes ambition and action in the global development sector. It is therefore time for the actions of Europes donors to match their words. We are pleased that Euromapping 2011 can add to the wealth of information that is available about the development assistance that is being dedicated to population issues, reproductive health and family planning by the international community. We hope that the attention generated by this publication within the international development community will empower advocates and decision makers alike to report accurately on their

development spending, identify shortfalls in national and international pledges, fill the gaps that exist in the assistance that partner countries receive, and ensure that our governments are held accountable for the commitments they have made - both individually and collectively. And here in Brussels we hope that it can help the EUs policy-makers, decision-makers and representatives of civil society gain an understanding of an issue that is central to the future wellbeing of humanity, and act decisively to bring about this change. Neil Datta & Karen Hoehn Neil Datta is the Secretary of the European Parliamentary Forum on Population and Development: www.epfweb.org. Karen Hoehn is Vice Executive Director and Director for International Affairs of DSW (Deutsche Stiftung Weltbevlkerung): www.dsw-online.org. To obtain a copy of Euromapping 2011 please go to: http://www.euroresources.org/euromapping. Euromapping is published annually by the European Parliamentary Forum on Population and Development and Deutsche Stiftung Weltbevlkerung with the Netherlands Interdisciplinary Demographic Institute: http://www.nidi.nl.

NEW EUROPE

New Europe | Page 11 November 27 - December 3, 2011

EU WORLD
AFGHANISTAN

MEP warns that 2014 may be too early to exit Afghanistan

Nikki Sinclaire talks to New Europe about her recent visit to ISAF troops
The independent MEP has just returned from a visit to Afghanistan, where she visited British forces at Camp Bastion, and was briefed by ISAF officers. The visit was organized by the RAF Parliamentary scheme. What is the situation on the ground right now? There has been a marked improvement over the last year and the main role of the forces now is to build up the infrastructure, so that when the bulk of the forces depart in 2014, the Afghan nation can sustain itself. Is there a coherent withdrawal strategy? Not really. There are talks about it and the biggest fear seems to be that there shouldnt be a rush to the exit. There has been so much blood and treasure spent in Afghanistan that it has to mean something, there has to be a lasting legacy that will sustain an ongoing Afghanistan so that the Taliban wont return and take over. How well are we doing at building civil society? Thats one of the biggest challenges facing Afghanistan. Its fantastic that theres much more democratic representation in Afghanistan. Under the Taliban there was no representation at all and theres now 27% female representation in the lower house, which isnt bad. Theres only 37% in the European Parliament. A lot of time and effort in governance, crime and justice still needs to be done, because people do need to feel that theyre being treated fairly. It will be a huge task, in my opinion, to put that together in two years. A major fear is about the economy. Most of the jobs are as a result of the ISAF forces and what is going to happen after they leave. The big crop in the country is the poppy and if people cant feed their families, where are they going to get their money from? The Taliban will utilize that as a way to get back in. The international community needs to look at that. My fear is that the European Union cant look after itself, so what are they going to do with Afghanistan? China and India will also become very important. Weve never really known what to do about the poppy The people see it as a natural resource, thinking I can make money out of that, so when its clamped down people are angry. There is an example in Helmand Province, where the locals dont consider the local Governor as the police, they consider How capable is the Afghan government and army. I met Brigadier-General Shah and he was very impressed. The Afghan army has a drop out rate of 30%. The real reason is that many are dropping out in training, because if youre training and not actually fighting. Thats been stopped. One Governor also mentioned people leaving at harvest time, but we all know what theyre harvesting! Thats a worry but the 2014 elections, when Karzai is standing, is also a concern. Theres a lack of political parties, without an infrastructure of political parties, are you building up civil society? Thats why I think the call for withdrawal in 2014 may be a bit premature. We need to be fluid. If you do as we did in Iraq and announce a date, youre telling enemy forces what youre doing, we need to be fluid and withdraw when we have safeguarded the blood and treasure by building a sustainable future for Afghanistan.

Nikki Sinclaire at Camp Bastion, Afghanistan.|NIKKI SINCLAIRE

ISAF as the police. So, when the local Governor went round pulling up poppy fields, the locals went to the gates of Camp Bastion and complained to the British forces about the governors actions. This shows the mindset of the people, they are saying I just want to feed my family. If the Taliban offer to pay them, theyre going to take that money. Ive seen some figures that show the improvement since the Taliban. Since 2001, healthcare reaches 60%, there are 3.2 million women in education, thats positive and theres tens of thousands of roads being built. But do I see that infrastructure being sustained past 2014? No. Are the Taliban just waiting for troops to go home? I think theyre on the back foot, because the locals are being persuaded by the positive actions. When youre getting better healthcare, getting fed and theres jobs. There is a fear that theyre just biding their time knowing the political pressure on Obama and Cameron to bring the troops home, and thats scary. This rush to the exit is a very scary option and we should be very careful in what we do. Id be amazed if the majority of the forces were home in 2014. What impressions did you get? When you see it on the ground, we think of an army having a military duty, but they are there to build the infrastructure as well as bring security. Their professionalism is incredible. They want to succeed because of the blood and treasure and believe if

they fail, that cost will have been for nothing. Theyre using their skills to train and develop the Afghan army and people.

NEW EUROPE
SUBSCRIPTION ORDER FORM
Annual subscription fee (52 issues) EU 350, Others 395
MAILING & INVOICING DETAILS

Name: - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Position: - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Company: - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Address: - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - City: - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Post Code: - - - - - - - - - Country: - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - VAT No. - - - - - - - - - - - Tel.: - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Fax: - - - - - - - - - - - - - - E-mail Address: - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - PAYMENT DETAILS

Check to New Europe enclosed / Please charge my credit card: VISA Master AmEx
Number: - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - CVC No: - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (The 3 digit number on the back of the credit card) Expiration Date: - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Card Holder: - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Date: - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Signature: - - - - - - - - - - - - Fax to + 32 2 5390339 or mail to Avenue de Tervuren 96, 1040 Brussels, Belgium 963

Page 12 |New Europe November 27 - December 3, 2011

NEW EUROPE

EU WORLD
AID PROGRAMMES

Aid ambitions not diminished, insists Commission

By Cillian Donnelly
As the fourth OECD High level forum on Aid Effectiveness gets under way, the European Commission continues to push for more streamlined, accountable aid programmes, while critics accuse the EU of watering down its ambitions for development. The forum (HLF4), which takes place in Busan, South Korea, between 29 November and 1 December, will, in addition to addressing the general effects of aid effectiveness in the developing world, will also seek to strengthen partnerships between developing countries, emerging economies, donor countries, NGOs and the private sector. As well as being billed as the most important international development for some time, the commission is also keen to highlight its inclusiveness. According to the commission, two main points will dominate the agenda: a refocus on commitments already made to aid effectiveness, and ensuring democratic ownership. The first looks at improving the impact of aid and deliver accountability to the taxpayer, seen as increasingly important in these economic times, while the second aims to guarantee transparency, and the predictability of assistance. In these difficult financial times, aid effectiveness is more important than ever. It is vital that taxpayer's money goes to where it is needed most in the most efficient way. That is why were doing all we can to work closely with developing countries and other partners on the ground, the spokesperson for Development Commissioner, Andris Piebalgs, told New Europe, while behind the scenes there is cautious optimism that the commission can contribute positively to the ongoing debate, and reduce the fragmentation of aid, by broadening the agenda and actors taking part to tion to maximise the development impact of their aid, read the letter. Such action must of course focus on making aid programmes more transparent and effectively scrutinised... it must also focus on tackling a range of practices that undermine aids long term impacts and potential for helping countries to end their dependence on it. These include tied aid, unpredictable aid, inappropriate use of conditions, the bypassing of local systems and approaches to aid that fail to strengthen democratic ownership and gender equality. Unfortunately, it continues, the EUs common position for HLF4 contains few concrete proposals in these areas. In addition a number of EU member states have been prominent in opposing ambitious proposals made by others on these issues, using a lack of ambition from the likes of new donors such as China as an excuse. This lack of political leadership is in stark contrast to that displayed by the EU at the Accra HLF in 2008 and is likely to undermine the success of HLF4. The commission, however, is standing on its record as the worlds largest overseas aid donor, and insists that ambition has not been diminished. The European Commission is already amongst the most transparent and effective donors. says Piebalgs spokesperson. We help to reduce poverty in over 150 countries. Yet better coordination amongst European donors could help to save around 5 billion per year. In Busan, [the commissioner] will be calling for donors to better coordinate their actions to avoid duplication, fragmentation and to achieve better impact. With just over three years left to meet the Millennium Development Goals, time is running out. Busan will be a key opportunity for all donors to act together to improve the efficiency of aid.

Andris Piebalgs speaks to journalists in Haiti, April 2010. As the international community gathers in Busan, South Korea for a major conference on international aid, the Development Commissioner has insisted that the EU will continue to work effectively and efficiently with its international partners in the fight against global poverty.

the widest possible variety of partners. This approach is not without its critics, who see private sector involvement as counterproductive, and who demand to know exactly who speaks for the big corporations, however the commission is keen to have as wide a partnership base as possible (although there has been mixed success with getting some of the foundations on board); insisting that we are trying to get them round to our agenda, and that no one gets to the table without having established a firm corporate social responsibility (CSR) programme first. Perhaps more controversially, the commission is also keen to enhance, as it puts it, democratic ownership of aid by continuing to peruse its policy of budget support, and the use of country systems. Essentially, this means providing money directly for governments to work on specific proj-

ects, for example, in education. Recipients are only eligible for this kind of support upon provision of thorough plans and the guarantee of transparent auditing procedures, however, not everyone is convinced, not least within the commission itself; Piebalgs is said to be more cautious than predecessor Louis Michel about the policys possible success rate. Despite the apparent confidence, not everyone is convinced that the EU is in a position to deliver on its promises. A recent open letter sent by CONCORD, the European development NGO confederation, accused member states of weakening their collective ambitions. EU member states provide around half of global aid and the world's poorest people and EU citizens will therefore rightly be looking for EU Governments to lead donor efforts at HLF4 to agree to ambitious ac-

ENVIRONMENT

EU set to lose to China in climate action

By Cillan Donnelly
Europe will lose its global lead in the fight against climate change to China unless it reaffirms its oncestrong credentials at the upcoming climate summit in Durban, MEPs are warning. China is set to take over the lead in areas such as solar and wind technology," MEP Bas Eickhout, who will be in Durban as part of the Greens official delegation to the climate talk, told the press at the European Parliament on 23 November. It is in the interest of Europe to step up its own technology. Whoever steps up will be leading the world. The latest round of UN climate talks (COP 17) are due to take place in Durban, South Africa, between 28 November-9 December, and is seen by many as an opportunity for Europe to regain some of the ground it has lost since the failure of the Copenhagen talks in 2009. Back then, said Greens Co-Chair Rebecca Harms: The EU was one of the model regions, but, if you look at the emerging economies, it hasnt brought around a transition to sustainable economies. This is not the good example we wanted to set. The Greens are pushing for the EU to set a strong example this time around, committing to a second period under the Kyoto Protocol, with new targets and with a clear timetable of commitments, to be implemented by 2015. The EU, she added, should also stress the link between combating climate change and economic recovery. The EU is in a position to get that message across, she said. Connie Hedegaard has made some inroads, but I hope the Polish presidency wont bring her down. If the commissioner takes on board the wishes of the European parliament, she said, there will be more promising times ahead, for climate finance. According to Eickhout, who admits that the EU is currently in expectation management mode, it is probably unrealistic to expect a lot of numbers being pledged at the conference. However, he believes that some progress on innovation will most likely take place. Earlier in the week, he suggested that an agreement on technology transfer may be one way to come to bring China closer to the European position. On Kyoto, Eickhout said that the EU should immediately pledge to a new commitment, adding that, as one of the regions that helped set the rules, Europe is in a position to change them again, this time removing any loopholes that continue to exist in the current protocol. If that is the outcome of Durban, he said then at least we can save Kyoto. We have to make sure that together we have a very clear mandate with a timetable of legally-binding outcomes with more countries participating in a global deal. With the US being just not there, he added that it was important to get the emerging economies, which he described as Europes natural allies, on board. China, as current leader of the G77 group of developing nations, was important as a country he said that could show a lead to the least developed nations. China is vital.

NEW EUROPE

New Europe|Page 13 November 27 - December 3, 2011

ENERGY & CLIMATE

ENERGY|GAS

Turkmenistan pushes gas exports to China, Europe

On 23 November, Beijing and Ashgabat signed agreements on a gas pipeline and a dozen other deals including gas supply, loans for oil and gas equipment, following talks between the two countries' presidents. Chinese President Hu Jintao and Turkmen President Gurbanguly Berdymukhamedov attended the signing ceremony following their talks, Xinhua reported. The agreement is expected to increase the annual capacity of the pipeline from a previously announced target of 40 billion cubic metres by 2015. The 1,800-kilometre gas pipeline runs from Turkmenistan to north-western China via Uzbekistan and Kazakhstan. It started trial operations last year and supplied about 50% of China's natural gas imports in the rst half of this year. The China National Petroleum Cooperation said in June that it planned to expand annual imports via the pipeline to 30 billion cubic metres by mid-2012. Turkmenistan has repeatedly said that it wants diversication of routes to supply its energy resources to world markets. Ashgabat is also eyeing European markets, which has drawn the ire of Moscow. Turkmengaz Chairman Amanali Khanaliyev has stated that the East-West gas pipeline in Turkmenistan would allow the Central Asian states to supply 30bn

ENERGY INSIDER

The Azores goes Green, even if the world Isnt

By Kostis Geropoulos
PONTA DELGADA, AZORES As climate change talks are set to begin this week in Durban, nine islands in the middle of the Atlantic are in a prime position to study those effects, but also in the first line to suffer from them. Watching waves spray against the volcanic rock on the coast of So Miguel, only a few hours after landing on the wind-whipped island, it is clear that the Azores have great renewable energy potential. The Azores are nine islands, 1,500 kilometres from the continental coast of Europe, we have 600 kilometres of ocean between these nine small islands so we have a huge economic exclusive maritime zone of one million square kilometres and we are particularly interested in renewable energy and climate change issues, Rodrigo Oliveira, Regional Undersecretary for European affairs in the Azores government, told New Europe on 24 November on the sidelines of a conference organised by the Assembly of European Regions (AER) in Ponta Delgada. We are volcanic islands so geothermal energy is very important. We started using geothermal energy in the 80s and now on this island, which is the biggest island and has half of the population of the Azores, we produce almost 50% of the energy by alternative energy, namely geothermal that represents 40%, Oliveira said. The population of So Miguel totals a little over 130,000. Each island represents a huge potential in the use of energy, he said, adding that the Azores are working together with the Massachusetts Institute of Technology (MIT) on a project called Green Islands, experimenting on new technologies on the islands isolated markets. Geothermal energy is clean, less expensive than importing oil and is better for the environment, Oliveira said, adding that fewer and fewer oil tankers have to come to the Azores. It is even economically sustainable to have alternative methods of producing energy here on this island, the Azores government official said. The government aims to have 75% of all the energy produced on the nine islands by the end of this decade from alternative sources. The investment is very high, the initial costs are also very high, but we are having a very important bet on that issue and everything related to sustainable development for example tourism is very linked to nature, he said. The Azores, which has a specific status within the European Union as an outermost region (OMR), has a strong strategy for energy approved by the Assembly not only in producing renewable energy but promoting efficiency, Oliveira said. Wind energy is also very important, especially on the island of Terceira, Oliveira said. Also, Corvo, the smallest of Azores islands with a population of approximately 400, is now in the process of replacing gas in household heating and cooking appliances with alternative energy sources so that we wont need to import gas to that island, Oliveira said. Moreover, a German company plans to launch a test project on Graciosa, the second smallest island of the Azores, aimed to supply its entire population of 4,500 with renewable energy. So next time you see a tanker on the Azores, you cant help but wonder if it will be a thing of the past. KGeropoulos@NEurope.eu follow on twitter @energyinsider

Chinese President Hu Jintao, left, walks with President of Turkmenistan Gurbanguly Berdimuhamedov during a welcoming ceremony at the Great Hall of the People in Beijing, China, 23 November 2011. |EPA/DIEGO AZUBE

cubic metres of natural gas annually to Europe via a route bypassing Russia. Meanwhile, Ashgabat has issued an angry response to Russian scepticism over the size of Turkmenistans natural gas reserves, saying it is bewildered by Russian gas monopoly Gazprom's "utterly tactless" remarks, news agencies reported. Auditor Gaffney, Cline & Associates has ranked the South Iolotan natural gas eld as the world's second-largest after South Pars in Iran, saying in October it could

contain between 13.1 trillion and 21.2 trillion cubic metres. It also said the Minara and Yashlar deposits, previously thought to be separate elds, were actually part of the same giant structure, whose combined reserves could now total a maximum of 26.2 trillion cubic metres. But Gazprom Deputy Chairman Alexander Medvedev called these estimates into question, saying that seismic studies conducted in Soviet days pointed to much smaller reserves.

ENERGY|SUSTAINABILITY

Covenant of Mayors promotes sustainable policies

Janez Potocnik, Regional Policy Commissioner Johannes Hahn, and mayors of European cities, including Warsaw, Riga, Bucharest, Manchester, Genoa,Tbilisi and Sarajevo. Signatories to the Covenant of Mayors undertake to improve their citizensquality of life through the implementation of sustainable energy policies that create jobs and foster local economic development, the press release read. The example of the Covenant of Mayors signatories is all the more inspiring in todays context of mounting public deficits and financial market turmoil. While national governments are set for the 17th COP round in Durban, leaders of Europes cities and towns take bold decisions and undertake local action, the release read. Three years after its start in 2008, the Covenant of Mayors engages more than 3,000 towns and cities mainly from the 27 EU member states - representing over 144 million citizens. Each outlines its vision and actions in a sustainable energy action plan (SEAP).To implement the plans, local authorities allocate public funds to their SEAPs. The combined potential of all SEAPs makes up a staggering 40 billion of local investments in sustainable energy actions mobilised by Covenant signatories. The EU helps local authorities through the structural funds and the ELENA facility. The latter alone has helped unlock 2 billion of local investments by towns and cities in just one year, leading to new jobs and liveable urban environments.

A day after climate negotiations are expected to start in Durban, the 3rd Covenant of Mayors Ceremony will hold its annual meeting in Brussels on 29 November at the European Parliament in Brussels with the theme Covenant of Mayors: restoring faith in Europes future. Confirmed speakers include: European Parliament President Jerzy Buzek, Committee of the Regions President Mercedes Bresso, EU Environment Commissioner

ENERGY|SHALE GAS

Polands shale exploration gathers momentum

San Leon Energy, an Irish company associated with financier George Soros and BlackRock Investment and its Canadian oil and gas exploration partner Talisman Energy, announced recently it had successfully completed its first shale gas exploration well in Pomorskie province in northern Poland. Drilling to a depth of 11,800 feet through middle and lower Silurian, Ordovician and Upper Cambrian shales, San Leon officials said they encountered "continuous gas shows" consisting of methane with a small percentage of ethane, propane, butane and pentane at its Lewino 1G2 well in the Gdansk W Concession.

Page 14 | New Europe November 27 - December 3, 2011

NEW EUROPE

ENERGY & CLIMATE

ENERGY|GAS

Serbia launches gas-storage facility and eyes role as hub

By Kostis Geropoulos
On 21 November, Serbia launched its first natural gas underground storage facility in the northern town of Banatski Dvor to help cut reliance on gas deliveries that arrive via Ukraine and boost the countrys role as an energy hub. The reservoir is the first facility within the planned Russian-backed South Stream gas pipeline project. Attending a ceremony with Gazprom CEO Alexei Miller, Serbian President Boris Tadic said that by opening the Banatski Dvor reservoir with the Russian gas giant, Serbia had drawn nearer to becoming an important energy junction in Southeast Europe. Putting gas storage Banatski Dvor into operation confirms the fact that our decision on partnership with Gazprom was a correct one as it will provide security in gas supplies, Tadic said. Russian gas supplies to Serbia were disrupted in 2006 and 2009 during a dispute between Moscow and Kiev. The problems highlighted the importance of energy storage capacities. Every time there is a dispute between Russia and Ukraine that disrupts supplies, Serbia suffers the consequences, a Serbian diplomat, who experienced firsthand the 2006 gas crisis, told New Europe on 22 November, reminding that the Balkan country relies on Russia for its gas.
ADVERTISEMENT

Serbian President Boris Tadic said that by opening the Banatski Dvor reservoir with the Russian gas giant, Serbia had drawn nearer to becoming an important energy junction in Southeast Europe. |EPA/FILIP SINGER

Tadic said that Serbia suffered damages because it did not have full gas storage capacities at the time. Now we do. We promised our citizens we would complete the job and we have, in co-operation between Srbijagas and Gazprom," Tadic said. The Serbian president expressed his hope that Srbijagas would manage to overcome the economic difficulties and in the coming

period there will be new investments in development, not only in the field of oil and gas, but also in the production of electric energy". Miller stressed that the construction of South Stream would begin in 2013 and end two years later. The 400-kilometre South Stream arm through Serbia, estimated to cost 1.38 billion, will have a transit capacity of 34bn cubic metres of gas a year. Serbia hopes work will begin before the end of 2011. There is no question that Russian Prime Minister Vladimir Putin is determined to build the South Stream pipeline, Chris Weafer, chief strategist at Troika Dialogue in Moscow, told New Europe on 22 November. The Serbian storage facility is to be part of the project and a regional hub for the gas network. Putin is in a hurry to have all the

agreements in place to start South Stream so as to protect Russia's market share in European gas ahead of the possible emergence of competition from shale gas, LNG or pipelines from North Africa, Weafer said. Firming up South Stream will almost certainly pull the plug on the Nabucco lifesupport machine. There is simply no way for it to get gas directly from Turkmenistan without an agreement on the status of the Caspian and neither Russia nor Iran are in any hurry with that issue, he added. Gazprom is also interested in investing in gas power plants in Serbia, Miller said. Long-term supplies of Russian gas to Serbia at a reduced price will be discussed, the Gazprom CEO said, adding that an interstate agreement between Serbia and Russia on gas supplies to the Serbian market should be previously signed. Russian Gazprom Bank is ready to open a branch office in Serbia to financially support big investments in the energy sector. Serbia began work in 2009 on the reservoir with an active capacity of 450m cubic metres and a maximum productivity of extracting five million cubic metres of gas a day. This is one of the biggest investments in the Balkans, Miller said. An upgrade of the Banatski Dvor reservoir was part of a wider energy agreement between Serbia and Russia, under which the Balkan country sold a 51% stake in its oil and gas monopoly Naftna Industrija Srbije AD to Russias GazpromNeft, with Belgrade receiving a pledge to be included in the South Stream gas pipeline. Miller also attended the opening of a new command room at the Pancevo refinery, the bigger of Serbias two crude oil refining facilities. The refinery upgrade, which is due to be completed in 2012, will allow more exports to neighbouring markets in the Balkans.

ENERGY|GAS

Turkmenistan slams Russian doubts over reserves

Ashgabat has issued an angry response to Russian scepticism over the size of Turkmenistans natural gas reserves, saying it is bewildered by Russian gas monopoly Gazprom's "utterly tactless" remarks, news agencies reported. Auditor Gaffney, Cline & Associates has ranked the South Iolotan natural gas field as the world's second-largest after South Pars in Iran, saying in October it could contain between 13.1 trillion and 21.2 trillion cubic metres. It also said the Minara and Yashlar deposits, previously thought to be separate fields, were actually part of the same giant structure, whose combined reserves could now total a maximum of 26.2 trillion cubic metres. But Gazprom Deputy Chairman Alexander Medvedev called these estimates into question, saying that seismic studies conducted in Soviet days pointed to much smaller reserves. "I believe that there are no grounds ... and no reason to make such statements that there is such a natural deposit with reserves of this scale," Medvedev Russia's Vesti-24 channel quoted Medvedev in an interview. Turkmenistan's Foreign Ministry said in the statement that Medvedev's remarks were "yet another clumsy attempt to distort the real situation regarding Turkmenistan's resource potential, in particular its gas reserves". Earlier, Turkmengaz Chairman Amanali Khanaliyev has stated that East-West gas pipeline in Turkmenistan would allow the Central Asian states to supply 30bn cubic metres of natural gas annually to Europe via a route bypassing Russia. Fighting with Moscow over pipeline routes, Turkmenistan has repeatedly said that it wants diversification of routes to supply its energy resources to world markets.

NEW EUROPE

New Europe | Page 15 November 27 - December 3, 2011

FASHION & STYLE

ABOUT JEWELRY DESIGN

Charm Offensive
also used in contemporary visual arts in the same spirit. Todays ambient desire for authenticity has been duly captured by jewelry/fashion designers who make the most of the precious vs non-precious codes. To begin with, Pradas Spring 2012 catwalk jewels seem to mock a little girls idea of ladylike accessories. Earrings with big coral roses attached to blue fake glass pendants, all excessively artificial and candy-like, remind us of the princess in our childhood dreams. Similarly, Chanels Fall 2011 necklace has a spectacular opera shape, which is toned down by the cold and moody mineral colors of its enamel pebbles or raindrops. On the other hand, Givenchys Fall 2011 outr retro-futuristic black metal and resin necklace plays with the too-massive-to-beprecious aspect of cartoon toysCatwomans latest frenzy. Falsely non-precious are also technology and mechanic-inspired jewels. Balmains Spring 2012 cuffs, which seem to be made of battery pieces and rivets,

DELFINA DELETTREZ 'Addolorata Collar' 'Love is in the Hair' collection, 2011 Delfina Delettrez

MAWI Spring/Summer 2012 Mawi

PRADA Ready-to-wear Spring/Summer 2012 photo: Chris Moore/Catwalking Getty Images

ewelry design is undoubtedly one of the most dynamic and innovative fields of our time as jewels are no longer mere accessories, created and picked to match an outfit, but as all art objects, have a life of their own. In fact, you can hardly visit the hobby/leisure section of any bookstore without coming across home guides offering to teach dummies the secrets of jewelry-making with the help of kitchen accessories, of-

fice supplies, tree ornaments or sewing kits. This Do-It-Yourself concept dates back to a subculture born with the punk movement in the 70s, which promoted improvisation and individualism, and believed that all materials at hand, mass-produced items or junk, were creatively resourceful. The safety pin, for instance was subverted from its original meaning to become a decorative element before being turned into a favorite fashion and jewelry symbol. Mixed media techniques were

reflect the perfection mania of standardized production, while London-based Mawis provocatively luminous techno jewel collection flickers like digital machinery and gives us a taste of our mini robot future. Furthermore, jewelry designers felt the current urge for self-fulfillment and wellbeing as well as the return of mysticism. For example, folk art and ethnic jewelry values old crafts like hand beading or weaving, in an attempt to reunite us with nature and bring us wisdom. New York City-based Lizzie Fortunatos mixed media

photo: Lulu/Imagezoo Getty Images

Danger Island necklace evokes rich tribal traditions that protect us against occult powers. Italian jewelry designer Delfina Delettrezs Addolorata or Our Lady of Sorrows collar also resembles a talisman or personal memento, mixing precious rubies, plated gold and silver, with organic, common leather. Suspended from the collar is a heart-shaped pendant, pricked by many Cupids arrows and dripping blood. Within is a more anatomical version of the heart organ cut with scissors a surrealistic black humor reference to the crudeness of crime series or meat-asmaterial Art. In this case the jewel acts as a diary, telling the intensely personal story of the wearers broken heart, while trying to ward off ill fortune. Indeed, jewelry is effective in conveying messages about ones inner self fragments of everyday life that would otherwise be difficult to display. Louise Kissa lkissa@neurope.eu

CHANEL Fall/Winter 2011-2012 Chanel

BALMAIN Spring/Summer 2012 Balmain

GIVENCHY Fall/Winter 2011-2012 Givenchy

LIZZIE FORTUNATO 'Danger Island necklace' Spring/Summer 2012

Page 16 | New Europe November 27 - December 3, 2011

NEW EUROPE

ARTS & CULTURE

Cezanne and Paris
made portraits of an art dealer or a critic and often his wife. He was no longer the young man eager to conquer Paris, wanting to be admitted to the fine art school and show his works in the Salon. In Paris, he came up against both tradition and modernity. He worked out formulas that he later used in Provence. He shuttled back and forth between Provence and the Ile de France although the rhythm of his journeys changed. After 1890, critics, art dealers, and collectors started to take an interest in his work. Czanne longed for recognition which could only come from Paris. More than any other artist, he left his stamp on modern art: avant-garde artists from the postimpressionists to Kandinsky looked on him as a forerunner, the father of us all as Picasso said. The exhibition of about 80 works is divided into five sections: 1- Following Zola to Paris 2 - Paris, the City beyond the Walls, near Auvers 3 The Temptation of Paris 4 Pose like an Apple. Still Lifes and Portraits 5 The Paths of Silence

Tatjana Gerhard - RANDLAND

Les Toits de Paris, 1881-1882

France - Paris - Muse du Luxembourg- until 26 February 2012 Although Czanne (1839-1906) is usually associated with Provence, he cannot be confined to the south of France. He spent more than half of his time as a painter in Paris and its environs. He travelled between Aix en Provence and Paris over twenty

times, although, of course, not for the same reasons when he was twenty as when he was sixty. When he was already an elderly man and still racked with doubts (I am making slow progress, he wrote at the end of his life) he painted in secluded spots on the banks of the Marne or near Fontainebleau, or

Switzerland - Zurich - Rotwand - Sabina Kohler & Bettina Meier-Bickel - until 17 December 2011 It is with great pleasure that we announce our second solo exhibition with Tatjana Gerhard (*1974 Zurich) at Rotwand. In her painting, Tatjana Gerhard sets out to find solutions to heighten the tensile qualities of the final image. The creation of an artwork, for her, is a quest; not knowing in advance where the act of painting will lead her, occasionally losing herself in the throes of a painterly plot, until an unexpected solution presents itself. It is primarily an intuitive feeling that guides her through this process and not a lazy routine of sorts. Hence, the paintings of Tatjana Gerhard cannot be considered as illustrations or pictures of some other thing, but are to be experienced as a plastic adventure.

Simbolismo in Italia
Maria Vittoria Marini Clarelli the art manager of Galleria Nazionale dArte Moderna in Rome. The subject and the theme are known: between nineteenth and twentieth century the unconscious breaks into the arts and nothing will be the same again. This is the discovery of another fascinating and scheming world, a new way to see the changes of reality, from physical landscape to a souls movement. It is the story of a movement that spreads quickly in Europe scale and, for the first time in this Art Exhibition, it is deeply investigated in his Italian history. In this exhibition the comparison with the foreign art and in particular with the Austrian movement does not miss: two famous masterpieces as Giuditta Salome, by Gustav Klimt, or Il Peccato, by Franz von Stuck are worth the visit to the exhibition.If international comparisons are so important for the highest quality, the eight Italian sections of this exhibition are certainly no less.

Lineart 2011
enthusiasts and collectors will find 20th and 21st century work and are assured that they are buying from professionals, since all exhibitors are art galleries or dealers. Project leader Ward Caes is at his post again this year. This 30th edition signals a new phase for Lineart: the introduction of a carefully selected group of art galleries to the exhibition. For this, Ward Caes has called in the help of a number of experts from the art world. The step will be further developed in the 2012 exhibition, and will be clearly noticeable in the art on show.This means that the 2011 exhibition is very beginning of an evolutionary process that will steadily raise the level of quality of the current sales platform to new heights! Photography is experiencing an international breakthrough as an art form in its own right. The 30th edition of Lineart is the best possible place for a first spotlight view of photography, with a brand new section at the centre of the exhibition hall.

Italy, Padua - Fondazione Bano, Palazzo Zabarella- until 12 February 2012 Federico Bano announces Il Simbolismo in Italia. The unmissable art exhibition is located in Palazzo Zabarella,

Padua and it will be present from October 1st to February 12th.To realize this new venture Fondazione Bano, is once again with Fondazione Antonveneta, with Fernando Mazzocca, Carlo Sisi and

Belgium - Gent - Lineart until 6 December 2011 Lineart is the most important art exhibition in our country and has been taking place longer than any other. This years edition is a special one: Lineart is celebrating its 30th anniversary! And it promises to be an unforgettable year.

From 2 to 6 December, art lovers and collectors will be welcomed to the central hall of the Flanders Expo exhibition centre in Ghent, where they can expect to be treated to a wealth of new sights! Lineart is an international exhibition sale for ethnic, modern and contemporary art. Art

arts@neurope.eu

THE EUROPEAN UNION

New Europe | Page 17 November 27 - December 3, 2011

FRANCE GERMANY SPAIN PORTUGAL

SPAIN ECONOMY SPAIN|BANKING

Markets unimpressed by Spanish elections

Spanish conservative leader Mariano Rajoy on 21 November came under pressure from financial markets immediately after his election victory, with analysts urging him to act quickly to ward off an eventual bailout. Markets were unimpressed by Rajoy's absolute majority on 20 November night, with the yield on Spanish 10year bonds going up. The Madrid stock exchange's Ibex 35 main index was down nearly 2% at midday on 21 November. Rajoy needed to dispel the ambiguities of his election programme and to appoint an economy minister as soon as possible, the daily El Pais and other commentators said. The formalities of transferring powers to a new government should be accelerated in Spain's "unusual" situation, said Soraya Saenz de Santamaria from Rajoy's People's

EU approves emergency bailout of Banco de Valencia

On 22 November, the European Commission gave temporary clearance to the emergency public bailout of troubled Spanish lender Banco de Valencia, but warned that its final approval depended on a long-term restructuring plan for the bank. Spanish authorities will have to submit the plan "within six months," the Commission said in a statement. The document "will need to demonstrate the bank's return to long term viability, an appropriate sharing of the rescue burden and measures to address distortions of competition," it added. Banco de Valencia, which represents less than 1% of the assets of the Spanish banking sector, was granted 21 November a cash injection of up to 1 billion and access to a liquidity facility worth up to 2bn. It was the first Spanish non-savings bank to collapse since the start of the global financial crisis in 2008. Previously, three saving banks were rescued by the Spanish Central Bank.

GERMANY|AIRLINES INDUSTRY
Prime Minister elect Mariano Rajoy, right, shakes hands with former Prime Minister Jose Maria Aznar, Madrid, Spain, 21 November 2011. |EPA/KIKO HUESCA

Party (PP). The PP took 44.6% of the vote and 186 seats in parliament, the best result in its history, in elections held four months ahead of schedule. The socialists of Jose Luis Rodriguez Zapatero

only took 28.7% and 110 seats, their worst result ever. The elections pitted Rajoy against Zapatero's former interior minister, Alfredo Perez Rubalcaba, after the premier decided not to seek a third term.

Emirates to renew SV Hamburg sponsorship deal

Airline Emirates will renew its sponsorship contract with SV Hamburg until 2015, the chairman of the German Bundesliga football club said on 23 November, Deutsche PresseAgentur (dpa) reported. Chairman Carl-Edgar Jarchow said that the three-year extension deal also includes an option for another year until 2016. Emirates have been shirt sponsors of the northern German club since 2006, the current deal expiring in 2012. Jarchow did not want to comment on financial details given by the Bild daily, which said that Hamburg will rake in 7.5 million per season from Emirates. The Dubai-based airline also sponsors other big football clubs including Arsenal, Paris St Germain and AC Milan.

GERMANY AUTO INDUSTRY

EU calls for action against Germany over VW law

On 24 November, the European Commission asked the bloc's court to impose a multimillion-euro fine on Germany for its failure to amend an illegal law that grants regional authorities special shareholders' rights over the Volkswagen (VW) car group, Deutsche Presse-Agentur (dpa) reported. The European Commission said in a statement that it asked the Court of Justice of the European Union to impose a 31,114.72 daily fine on Germany, starting from 23 October, 2007 date when the EU court struck down the so-called VW law. To date, the bill would run to about 46.5 million. The commission said the daily fine should increase until the day Germany complies with the EU ruling.

GERMANY|METALS

FRANCE ENERGY

IG Metall forges industrial wage deal

Germany's giant IG Metall union said on 22 November it had struck a deal with employers for a 3.8% pay rise for industrial workers that should serve as a model for the rest of the German economy, the biggest in the European Union, The Local reported. IG Metall said that 75,000 workers in the west of the country would receive the rise, effective 1 December. The new deal is valid until at least the end of February 2013. The union had initially demanded a 7-per cent pay rise. The agreement with steel companies also ensured that, except for in a few limited exceptions, trainees will be offered permanent positions.

Greens ratify pact with Socialists on nuclear

The leadership of France's ecologist party has ratified an election pact with the opposition Socialists, after the Socialists agreed to dramatically reduce France's nuclear activity if they win next June's general election. In a vote late on 19 November, 74% of delegates at a Europe Ecology-Greens conference voted in favour of the deal, under which the Socialists have agreed to close 24 out of 58 reactors by 2025 and end the production of MOX, a recycled nuclear fuel. The Socialists also agreed not to compete with the Greens in around 60 out of 577 constituencies, giving the Greens a chance to boost their presence in the National Assembly, where they currently have four seats. The Greens, for their part, agreed to drop their insistence that a future Socialist government shut the new-generation nuclear reactor being built at Flamanville in northern France. The deal does not cover next year's presidential election, which takes place in April, with a possible runoff in May. The Greens are running their own candidate, former investigating magistrate Eva Joly, against Socialist candidate Francois Hollande and incumbent President Nicolas Sarkozy.

FRANCE|LABOUR

PORTUGAL ENERGY

Areva to cut 1,300 German nuke jobs

France's nuclear giant Areva will cut 1,300 jobs in Germany and close down two of its sites after Berlin's decision to abandon nuclear energy, The Local reported on 20 November. The firm will slash its workforce by around 20% at its main site in Erlangen in central Germany, as well as making cuts at other sites across the country. The extent of the job cuts would be nearly twice as high as the 800 redundancies cited in the French press. The company is expected to announce the move on 13 December in Paris. In the wake of the Japan nuclear disaster in Fukushima, the German government decided to shut down all of its nuclear reactors by the end of 2022. Previous week, EON, Germany's biggest power supplier, said it would file a complaint with Germany's highest court, demanding compensation.

Fitch maintains EDPs rating at BBB+

Fitch Ratings has maintained EDP Energias de Portugals (EDP) and EDP Finances long-term Issuer Default Ratings (IDR) and senior unsecured ratings at BBB+ and kept them on Rating Watch Negative (RWN). EDPs short-term IDR is also maintained at F2, on RWN. Additionally, the agency has maintained Hidroelectrica del Cantabrico's Long-term IDR at BBB+ and its Short-term IDR keeps at F2, both remain on RWN. According to Fitch, in the nine months ended in September 2011, EDP's performance demonstrated a good degree of resilience to macro-economic conditions with an EBITDA improvement of close to 5%. The RWNs reflect the possibility of a downgrade in the near term as a result of a potential downgrade of Portugals sovereign rating. However, the agency notes that the notching difference between EDP and the sovereign may widen beyond the current two notches in the case of a further sovereign downgrade.

New Europe | Page 18 November 27 - December 3, 2011

THE EUROPEAN UNION

AUSTRIA SLOVENIA ITALY MALTA

AUSTRIA|FINANCE

Raiffeisen mulls partial exit from Eastern Europe

Austria-based Raiffeisen Bank International (RBI) announced that it might pull out of several Central and Eastern European countries. The bank is a major provider of financial services in the region, with subsidiaries in 16 countries. Chief Executive Herbert Stepic did not name countries, but said the move would affect the subsidiaries with small returns and little growth potential. It is "quite possible that we will retreat from one or the other country in the future," he said. The announcement came after Austria's financial regulators drew up stricter rules on lending and capital quotas in Central, Eastern and south-eastern Europe last week, to protect Austrian banks against a possible crisis. RBI said its consolidated profit fell 4.8% to 745 million in the first three quarters year-on-year, as poor performance in Hungary weighed down the overall result. However, Stepic said this subsidiary would not be offloaded "from today's perspective." Provisions for bad loans in Hungary had to be doubled to 373m, amid mounting economic problems in the country. RBI's parent company, Raiffeisen Zentralbank, confirmed that it will have to raise some $2.5 billion of capital to meet the European Union's capital requirements for banks by June.

AUSTRIA BUSINESS

Taxi rms le lawsuit over anti-app sackings

Two leading taxi companies may be forced to brace for a court case, Austrian Independent reported. The Federal Competition Authority (BWB) announced last Monday it started checking complaints by two start-up companies against Viennese market leaders 40100 and 31300. The businesses drivers face the sack if they use a new kind of smartphone apps. The programmes provided by Get A Taxi and My Taxi enable customers to get in touch with taxi drivers directly instead of being forced to ring a call centre when trying to get a cab. Viennas strongest taxi enterprises, 40100 and 31300, force drivers to sign contracts which feature clauses enabling to fire them if they "enable competition". Die Presse reported that Get A Taxi and My Taxi decided to lodge complaints against the market leaders. A spokesman for the BWB confirmed that the institution started investigating the issue and made clear that cartel authorities could become active. A cab driver dismissed by 40100 based

ITALY|BUSINESS

Industrial chief denies role in graft scandal

The chairman of Italian industrial conglomerate Finmeccanica denied any complicity in a graft scandal which has engulfed the state-controlled military and defence sector company. Pier Francesco Guarguaglini "has never created illegal funds nor has he ever paid or ordered anyone to pay money to politicians or political parties," Finmeccanica said in statement. Guarguaglini also said that Lorenzo Cola, a suspect under arrest in the investigation, had never been a close adviser. The remarks came after reports that a director at the company was arrested in an investigation into kickbacks, bribes and other illicit payments in a case involving Italy's civil aviation authority, ENAV. Guarguaglini and his wife, Marina Grossi, who heads Fineccanica's Selex Sistemi Integrati unit at which the arrested director worked, were placed under investigation, Italian media reports said. Some of the politicians mentioned in the reports as possible beneficiaries of kickbacks included Altero Matteoli, the infrastructure and transport minister in former prime minister Silvio Berluconi's government. Matteoli denied the accusations as "false and obviously the fruit of fantasy" adding that he had instructed his lawyers to act against attempts to defame him.

Taxi dispute? Theres an app for that.| Ben Fredericson

on the controversial labour contract paragraph also plans legal action against the firm, according to the daily. Around

half of the Austrian capitals 4,500 taxi drivers are currently cooperating with 40100 and 31300.

MALTA AVIATION

Air Maltas restructuring set to toll 20 million

Air Malta last week published its initial estimate on the restructuring of the ailing carrier. According to revelations made in local media reports, the airline would need to dole-out around 20 million to finance voluntary redundancy and early retirement schemes for its employees. However, the Air Malta authority noted that the figure might swing either ways depending on the number and mix of voluntary applications. The carrier thus far published three schemes aimed at cutting its workforce by at-least half. Also it had reportedly been confirmed by one spokesman for the carrier that the airline itself would be shouldering the expenses, turning down rumours that the amount may in some part be subsidised by the government. The plans tabled hitherto included one voluntary redundancy scheme for employees with seven years or more of service with the company and two early retirement schemes for employees aged 50 and over. Workers who take up the voluntary redundancy scheme will receive a non-taxable lump sum equivalent to six weeks pay for every year of service including a 12% upgrade. The rescue package proposed by Air Malta also includes new working conditions for employees who are retained by the airline, including a more flexible working arrangement. The airline is proposing a one-off taxable bonus of 4,000 spread over two years and a 3% salary increase backdated to January this year for workers who stay on. The airline spokesman clarified that the 4,000 bonus would only apply to those employees represented by the General Workers Union because they did not benefit from a collective agreement in recent years. He added that the voluntary redundancy and early retirement schemes were available to all employees whose position or grade is covered by a union collective agreement, provided the union and its members have voted to accept their restructuring agreement. Employees not covered by a collective agreement, the spokesman said, were also eligible to participate in the company schemes. On 22 November, the GWU announced that 92% of its members at Air Malta had approved the companys restructuring package. The Union of Cabin Crew said that 70% of its members had approved the package. The Maltese government already had agreed to provide about 200 job placements in departments and public entities as alternative employment to workers who do not qualify for the schemes. The airline, which was last year bailed out to the tune of 52 million by the government.

ITALY|EU

Reprieve from EU fine over "golden share" law

Italy won a one-month reprieve from the European Union's executive from the hefty fines it risks paying for failing to amend a law on its so-called "golden shares," which gives the Italian state veto powers over large privatised companies. In a statement, the European Commission indicated that it would take Italy back to the Court of Justice of the EU for not complying with a previous ruling outlawing the public "golden shares" in energy firms Enel and Eni, Telecom Italia and defence conglomerate Finmeccanica. But "the execution of this referral" was postponed by one month because "latest contacts with the Italian authorities suggest that compliance can be envisaged in the very short term," the EU executive said in a statement.

Joze Pucnik Airport will get new terminal

The new terminal at Ljubljana Joze Pucnik Airport will be opened in May 2015, CEO, Zmago Skobir said on 22 November, Balkans reported. Construction work is set to begin in 2012. Despite a difficult year for the Slovenian aviation industry, Skobir said that the current 13, 000 square metre terminal, built back in 1973, does not have the capacity to handle new passengers. The brand new terminal, which will cost 70 million, will be able to handle 1, 800 passengers per year and will stretch over 31, 200 square metres.

SLOVENIA AVIATION

THE EUROPEAN UNION

New Europe| Page 19 November 27 - December 3, 2011

UK BELGIUM NETHERLANDS LUXEMBOURG

UNITED KINGDOM BUSINESS BELGIUM|FINANCE

Thomas Cooked

Government Debt over 355 billion

The Belgian Federal Government Debt amounted to 355.65 billion euro as of end October 2011. Debt issued or taken over by the federal government amounted to 355.27 billion and the institutions for which the federal government supports the debt service registered a debt of 0.38 billion. In net terms (i.e. deducting financial deposits and investments, as well as securities owned by the Treasury), the Federal Government Debt amounted to 344.61 billion.

NETHERLANDS|ECONOMY

House prices drop 2.8%

Prices of existing owner-occupied houses were on average 2.8% lower in October 2011 than in October 2010. According to the price index of existing residential property a joint publication by Statistics Netherlands and the Land Registry Office the price drop is slightly less substantial than in September, Statistics Netherlands reported. All types of dwellings were cheaper in October 2011 than in the same month last year. With 4%, prices for semi-detached houses declined most. Prices of flats declined the least (2.4%). Prices rose only in Flevoland (by 1.4%). Prices dropped in all other provinces, most notably, by approximately 4%, in Friesland and Overijssel. Prices of existing residential property units declined by 0.4% relative to September 2011. The price drop was marginally smaller than in August and September. Nearly 9,500 existing owner-occupied houses changed hands in October, almost 5% below the level recorded in October 2010. Over the first ten months of this year, more than 98,000 houses were sold, a decline by nearly 4% from the same period last year.

Its not love all as Thomas Cook delays its annual results| JULIEN WARNAND

Shares in British tour operator Thomas Cook took a battering on the London stock market on 22 November as the firm said it would delay the publication of annual results until the completion of fresh cashflow talks with banks, dpa reported. The group said plummeting consumer confidence and the ongoing turmoil in North Africa and the Middle East had hit business harder than expected. Shares in Thomas Cook fell by more than 70%, giving the firm a market value of less than 100 million ($156 million). Sam Weihagen, Thomas Cook interim chief executive, said the company was a "robust business that has a great future." However, delaying the publication of annual results, which had been due on 24 November, was a "prudent move" ahead of the traditionally slower winter business, he said. The latest comments came just four weeks after the travel firm obtained an additional 100 million in loans from banks. The company said it was seeing a "deterioration of trading

in some areas of business" amid declining consumer spending and an increase in online bookings. In other moves to turn around the UK business, the group has announced plans to reduce its current fleet of 41 aircraft by six to better meet capacity, while it is also reviewing call centre rostering to improve efficiency. In addition, the company is looking to raise 200 million from the sale of assets such as hotels and its stake in Britains air traffic control service. The group said it had suffered from the impact of the Arab spring, which had hit winter bookings to Tunisia and Egypt, as well as by the recent floods in Thailand. Thomas Cook said its French and Belgian markets had seen bookings fall by up to 20%, while its recent move into the Russian market had "got off to an extremely slow start." Thomas Cook, Europe's second-biggest tour operator after TUI Travel, sells more than 22 million holidays a year in Britain alone.

LUXEMBOURG|FINANCE

Luxemparts assets fall slightly

According to the Luxembourg-based investment company, Luxemparts interim management statement as at 15 November 2011, Luxemparts consolidated net assets totalled 850 million euro compared with 857 million euro as at 31 December 2010. This slight reduction of less than 1% is demonstrative of the good performance of the portfolio values despite the global financial and economic crisis. The Groups cash position as at 15 November 2011 amounted to 165 million compared with 215 million as at 31 December 2010.The variation in the cash position reflects the cashing in of dividends from primary holdings, the investment of 30 million in an asset portfolio and investments in Pescanova (30 million) and O3b ($7.25 million not yet fully paid up) in addition to payment of dividends to Luxempart shareholders (15.69 million). The estimated value of consolidated net assets per Luxempart share as at 15 November 2011 stood at 35.50 compared with 35.78 as at 31 December 2010 (-0.8%). Luxemparts stock market share price as at 15 November 2011 was 21.63 compared with 22.21 as at 31 December 2010 (-2.6%). Luxempart is continuing to consider several investment opportunities, notably in Germany. Cashing in of the total amount of dividends from portfolio investments already received indicates that a recurring profit for 2011 higher than that of 2010.

UNITED KINGDOM BUSINESS

Nationwide sees uncertainty continuing

British building society Nationwide said it expects market conditions to remain difficult due to Europe's ongoing debt crisis, RTE Ireland reported. Nationwide, which specialises in mortgages and savings, said its underlying pre-tax profit for the six months ending September had risen 17% from a year ago to 172 million. "Market conditions are likely to remain difficult until the economy in the UK is more certain and the financial crisis in the euro zone is resolved," Chief Executive Graham Beale said in a statement. "Despite the uncertainties, I am confident that we can continue to invest in the business, deliver more products and services to more customers and deliver our strategic vision of being the UK's leading provider of retail financial services," he added. Nationwide expects UK interest rates to remain on hold for an extended period, with any increase in rates not expected until 2013.

BELGIUM FINANCE

Bekaert bond issue successful

Bekaert, a Belgium-based steel cord provider and a global technological leader, announced on 15 November that it would issue, through NV Bekaert SA, a dual tranche bond: one tranche with a tenor of 5 years and one tranche with a tenor of 8 years, for an expected total minimum amount of 200 million in the form of a public offering in Belgium and the Grand Duchy of Luxembourg. As a result of major success of this issue, the subscription period has been early terminated on 17 November, as agreed between the issuer and KBC Bank, global coordinator and joint bookrunner, BNP Paribas Fortis, joint bookrunner, and ING Belgium, co-manager. The aggregate nominal amount of bonds to be issued on 6 December 2011 has been fixed at 400 million (205 million for the 5-year tranche and 195 million for the 8-year tranche). In the event that the total amount of subscriptions received by the participating banks exceeds the amount of bonds that were allotted, the subscriptions will be reduced proportionally.

NETHERLANDS|BUSINESS

Achmea Holding NV and Eureko BV merge

Further to the announcement made on 30 August 2011, Eureko confirms that the merger deed between Achmea Holding NV and Eureko BV, assigning all the former's rights and obligations to the latter, was signed on 18 November 2011. Also as from 18 November, Eureko BV's name has been changed to Achmea BV and its registered office has been relocated to Zeist.

Page 20 |New Europe November 27 - December 3, 2011

THE EUROPEAN UNION

POLAND HUNGARY CZECH REPUBLIC

CZECH REPUBLIC | ECONOMY HUNGARY AVIATION

Economic sentiment drops in November

The Czech Statistical Office (CSO) published a new set of survey data which showed Czech economic confidence plummeted significantly in November. The data showcased that the confidence level of both entrepreneurs and consumers were down in the month. The index measuring the confidence data dropped to 0.2 points in November from 4.5 points reported for the preceding month. The business confidence index, which measures sentiment among entrepreneurs, came in at 7.5, down from 10.9 points in October. Likewise, sentiment among consumers declined to -29 from -21.3 in the prior month. The Czech consumers were found to be wary of the ongoing economic turmoil in Europe and they now expect even deteriorating situation both in the national economy and their personal finances. Also, the share of respondents expecting rises in unemployment increased in November which carried a clear indication that the Czech households would further tighten their purse strings to rebut the challenges which in turn would affect the overall business environment.

Malev to get HUF 4.2 billion loan

Hungarian national carrier Malev will get a HUF 4.2 bn owner loan to cover its short-term financing, the Hungarian National Asset Management Company (MNV), Budapest Business Journal reported. The three-year loan must be repaid in a single lump sum upon maturity. A general meeting of Malev shareholders last Monday was suspended at the request of the MNV before settlement of the airlines capital position, an item on the agenda, could be discussed. The meeting was scheduled to reconvene on 21 December, 2011. Malevs capital was last raised, by HUF 18.5 billion, on a decision taken at a general meeting on 23 August. The raise involved the conversion of HUF 9.98 billion of debt from 2010 into equity and a further HUF 8.52 billion in cash from the budget allocation for "extraordinary government measures". The capital raise was necessary because Malev closed 2010 with negative

POLAND|ECONOMY

Moody's: PMs ambitious reform agenda positive for Poland

The reform package proposed by Prime Minister Donald Tusk is considered positive by the Moody's Agency, "The measures are forward-looking and the Polish government is tackling structural issues voluntarily from a position of strength, rather than being forced into action". Moodys in its Weekly Credit Outlook said, the proposed measures, which include raising the retirement age, support Polands creditworthiness as they address concerns regarding structural rigidities and competitiveness issues with a view to boost Polands potential growth. In his maiden speech to parliament, the newly re-elected prime minister broke with his previously cautious approach to reform and vowed to tackle the politically sensitive issues he shied away from during his first term in office. The reform agenda he put forward includes unpopular measures, such as gradually raising the retirement age to 67, up from 60 for women and 65 for men, repealing special pension privileges for farmers, miners, soldiers and the police, and cracking down on tax evasion. If implemented without changes, the reforms will boost Polands potential growth, by increasing the labor participation rate and lowering tax rates, enhancing competitiveness. Polands economy grew by an average of 4.7% in 2006-10 because of robust domestic demand and was the only European Union member not to experience a recession in 2009 during the global financial crisis. However, its growth potential is constrained by the labor market rigidities and competitiveness issues Mr. Tusk is now seeking to address. Furthermore, the proposed measures support the governments commitment to fiscal consolidation. Polish authorities aim to lower the government deficit to 3.0% of GDP by the end of 2012, down from our forecast of 5.6% of GDP in 2011. Mr. Tusk reiterated these objectives in his speech, announcing a series of revenue-augmenting measures that aim to ensure fiscal sustainability.

Emergency cash for the airliner after negative assets.| EPA/ZSOLT SZIGETVARY

net assets of HUF 22.5 billion. In 2011, Malevs capital was raised by HUF 2.5

billion in April and by HUF 4.5 billion in June.

CZECH REPUBLIC EMPLOYMENT

Employment agencies face ban of non-EU nationals

A Czech amendment to the countrys labour legislation has raised eyebrows of the experts with many of them predicting that the measure would have dismal affects on the Czech economy. The amendment has been set to bar the Czech employment agencies to find jobs for non-EU nationals in the country as of 2012. This, according to industry experts, would result in a notable shortage of labour force, particularly in large manufacturing and high-tech facilities. Most major Czech manufacturers rely of the supply of non-EU labour force which is provided by these employment agencies. The qualified laborers from outside the EU are recruited mostly on a temporary basis. The Czech labor and social affairs ministry, albeit the concerns, last week advocated in favour of this amendment which they say is necessary to counter exploitation. According to the ministry, the new measure will affect only the 1,500 non-EU nationals currently on the books of employment agencies. The agencies, however, contradicted the view claiming the measure would lead to a shortfall of manpower in the manufacturing sector. Some employment agencies even expressed concern that the change would make the foreign job seekers end up on the street. The companies like the high-tech manufacturers are likely to be the worst sufferers as personnel requirements in these facilities fluctuate seasonally and they hire temporary workers from agencies to fill gaps. The ministry admitted that a minor shortfall in skilled labor may arise as a result of the new rule, but stressed that it has taken measures to minimise this eventuality. That risk will be offset by the fact that work permits in these cases (of those currently in temporary employment) will be valid until their expiry date (irrespective of the amendment), ministry spokeswoman Tana Svrckova was quoted as having said to journalists. Otherwise, Czech law stipulates that temporary work permits for non-EU nationals expire upon the termination of a work contract. There are currently more than 256,000 non-EU nationals living in the Czech Republic legally.

CZECH REPUBLIC ECONOMY

Ination increased in October

On 22 November 2011, the National Bank of Poland (NBP) published data on core inflation in October. Compared to September, all four core inflation indices increased. Inflation net of administered prices (subject to state control) amounted to 3.9%, as against 3.5% in September and 3.9% in August; inflation net of the most volatile prices stood at 3.7%, as against 3.5% in September and 2.7% in August; inflation net of food and energy prices amounted to 2.8%, as against 2.6% in September and 2.7% in August; the so-called 15-percent trimmed mean inflation (eliminating the impact of the 15% of the prices recording the highest and lowest growth) amounted to 4.3%, as compared to 4.2% in both September and August. Core inflation indices rose following the increase in CPI inflation which amounted to 4.3% in October, as against 3.9% in September and 4.3% in August. The National Bank of Poland calculates, on a monthly basis, four core inflation indices which provide a good background to understanding movements in the CPI. This is because the CPI on its own shows the average change in the prices of a whole range (basket) of basic commodities. By calculating core inflation indices, it is possible to capture price changes in particular segments of the basket.

HUNGARY|BANKING

Government to inject capital into state development bank

The government will inject HUF 60 billion in capital into the state-owned Hungarian Development Bank (MFB) to help the bank and MFB group carry out their operations, a government resolution, Budapest Business Journal reported.

THE EUROPEAN UNION

New Europe | Page 21 November 27 - December 3, 2011

SWEDEN DENMARK FINLAND IRELAND

IRELAND FINANCE FINLAND|TELECOMS

AIB to sell investment arm to SA rm

Nokia raises Finnish job cuts to 1,700

Finnish mobile phone maker Nokia concluded statutory cooperation procedure talks in Finland previous Thursday, with the number of job cuts going up to about 1,700 from 1,400, a preliminary figure the company had announced in April, News room Finland reported. Nokia said the cuts would be carried out in stages by the end of next year.

SWEDEN|AUTOS

Volvo starts process for sale of Aero unit

Swedish truck maker Volvo AB said it has initiated a process aimed at divesting its Volvo Aero subsidiary, Market Watch reported. Volvo would require that the buyer of the unit is in a position to "enhance the company's opportunities for further development in its sector," Chief Executive Olof Persson said in a statement. Volvo said in a statement it was in talks with a number of potential buyers for the aero business, but that they were still at an early stage. Volvo Aero develops and produces components for aircraft, rocket and gas turbine engines, and has a related service and maintenance business. Volvo Aero has been a part of Volvo since the 1940s. Since the late 1990s, Volvo has been increasing its focus on its truck business, highlighted by the sale of its car business, Volvo Cars, to Ford Motor Corp. F +0.10% in 1999. In 2010, Volvo Aero's net sales amounted to 7.7 billion Swedish crowns ($ 1.1 billion), or 2.9% of Volvo's total revenue.

Allied Irish Bank has disposed of its investment arm.| EPA/ANDY RAIN

AIB has agreed to sell its asset management business which includes AIB Investment Managers - to South African financial services group Prescient Holdings, RTE Ireland reported. The bank did not say how much the deal was worth. It is understood, however, that the sale price is in the region of 20 million to 30 million. AIB said the impact on its overall financial position was "not material". AIBIM employs around 100 people in Dublin and New

York. A statement from Prescient said the business would continue to be managed by the existing management team. Prescient, which already has a presence in Dublin, said it was building a global business and saw Dublin as a "springboard" into Europe and the US. The sale is expected to be completed during the first quarter of 2012. The deal came as part of a deleveraging, or sell-off of assets, by the Irish banks agreed under the EU/IMF programme.

IRELAND BUSINESS

DENMARK|SHIPPING

Aviva to close all Irish branches

Insurance company Aviva, which last month announced it was shedding between 950 and 1,250 jobs, plans to shut down its entire network of 26 branches around the country by June of next year, RTE Ireland reported. The revelation emerged as Aviva appointed a new chief executive, Sean Egan, for the Irish operation. Aviva's strategy for Ireland known as "Accelerate" involves moving the company's business to a combination of online delivery and sales through brokers - with Aviva in Ireland operating as a branch of the UK. Last month Aviva announced that around 950 staff would be made redundant, with a further 300 facing outsourcing of their jobs. Since then the company has been in consultation with unions - but this document reveals the company's strategy for reducing its cost base here. All existing Irish business would gradually be transferred to branches in the UK over a year as they came up for renewal. UK products will be adapted for sale in the Irish market, with limited deviation from UK standards. The 26 branch network will be shut down by the end of June 2012 with the loss of 120 jobs. 70% of that business will move to brokers, with 30% going to direct channels. 126 jobs will be cut in direct sales and service as they move to web selfservice. Claims will lose 107 jobs. The team of business development managers will fall from 55 to 26. Commercial underwriting will lose 39 jobs and Finance will lose 20. The Irish executive management team will be cut from seven to one. By June 2013, the independent Irish entity will be shut down though over 1,000 jobs will remain in Ireland. A call centre will be established in Galway to deal with claims, direct sales and support. Aviva forecasts that 91% of sales and 61% of service could be done online. Under its 'Club 110 proposition', Aviva will target the top tier of critical brokers that deliver most revenue for access to preferential services and business placement facilities. They will take advantage of existing UK relationships with international brokers such as Aon and Willis.

Maersk preparing for growth

The worlds largest shipping firm is gearing up to capture an even larger share of the global container shipping market, Copenhagen Post reported.AP Moller-Maersk (APM) managing director Nils Smedegaard Andersen said previous week during the presentation of the companys third quarter report that despite an industry-wide problem of overcapacity, the company was ready to grow. These are hard times for shipping, he said. But there are also good opportunities to improve our market share. One sign of the companys positive outlook was that it plans to expand capacity by 30%, despite a current overcapacity. The increase in capacity also comes as APM said it expects downward pressures on freight rates and uncertain income levels to continue during the next few years. During the third quarter, APM outpaced the market with a 16% increase in shipping activity. The company is already taking market share away from its competitors, but Andersen underscored that it had not done so by lowering its rates. Much of the success of APMs container unit, Maersk Line, is due to its ability to maintain one of the best profit margins in the industry. In the third quarter report, the company stated that it aims to maintain a profit margin five percent over the industry average.

DENMARK SOCIAL

Denmark says I do to same sex church weddings

The Danish government said it wants to change the country's marriage laws to allow gay couples to have full wedding ceremonies in church, dpa reports. In 1989, Denmark became the first country to allow civil marriage for same-sex couples. The state Lutheran Church, to which 80 percent of Denmark's 5.6 million citizens belong, has been offering short blessing ceremonies for gay couples at the end of the regular mass, despite opposition from some clergymen. The government plans to introduce the amendment to the marriage law early next year. "The first same-sex weddings will hopefully become reality in spring 2012," Danish news websites quoted Church Minister Manu Sareen as saying. However, according to Sareen, Danish clergy would keep the right to refuse to wed gay couples.

FINLAND|JOBS

UPM-Kymmene launches layoff talks

Finnish paper maker UPM-Kymmene said it planned to lay off workers at a number of mills across Finland, citing low demand, News room Finland reported. The affected mills employ about 2,900 people between them.UPM-Kymmene said the layoffs would last up to 90 days.

Page 22 | New Europe November 27 - December 3, 2011

THE EUROPEAN UNION

LATVIA LITHUANIA ESTONIA SLOVAKIA

SLOVAKIA|BUSINESS

Johnson Controls gets 5.7 mln from government

The Slovak government approved state aids of 45.8 million for Johnson Controls and eight other manufacturers investing in the eastern European country, it was reported on 23 November. After a meeting in the Slovak capital Bratislava last Wednesday, the government granted Johnson Controls tax breaks and cash subsidies worth 5.7 million in exchange for expanding production capacity in Namestovo, in the north of the country.The US-based supplier of auto interiors, which has created 251 more jobs in the Slovak plant, will invest about 19 million in the project. Slovakia is seeking to attract foreign investment to preserve jobs at a time when economic growth is slowing as the euroregions debt crisis is spreading. The projects that were granted aid last Wednesday are mainly in the electronics and car making industries, the countrys key export sectors.

LITHUANIA DIPLOMACY

Vilnius, Kiev eyeing closer co-operation

SLOVAKIA|IT

Four Slovak IT companies to visit Silicon Valley

Four Slovak companies will have the possibility to win recognition in the mecca of IT, Silicon Valley, as winners of a competition within the three-month project for new companies called Plug-and-Play, Slovak spectator reported on 21 November. Silicon Valley is a place where the financial capital as well as the headquarters of many international companies and universities meet, said Martin Jerkovic, one of the founders of Studentive company, as quoted by Hospodrske Noviny, adding that for his company it is a way to gain the know-how and response from their future clients which can help them to improve their production and adjust the products to the needs of customers. Together with the other three winners, Monogram, Nicereplay and WorkInField, the firms will meet US investors and present their projects.

Ukrainian President Viktor Yanukovych, left and his Lithuanian counterpart Dalia Grybauskaite hold glasses with champagne during their meeting in Kiev, Ukraine, 22 November 2011. |EPA/SERGEY DOLZHENKO

Lithuania recently inked a number of bilateral agreements with Ukraine covering various aspects. A memorandum of understanding has been inked between the ministry of infrastructure of Ukraine and ministry of transport and communications of Lithuania, which is focused on

improving the efficiency of using combined transport train Viking. Both sides want to increase traffic between the Baltic and Black Seas. The agreements followed a meeting between Lithuanian President Dalia Grybauskaite and her Ukrainian coun-

terpart Viktor Yanukovych.The sides also signed a program of co-operation in science and technology between the ministry of education and science of Lithuania and the state agency for science, innovation and informatization of Ukraine, for 2011-2015.

LATVIA BANKING

Tallinn: EU members should balance their budgets

Latvian bank Latvijas Krajbanka emerged last week as the latest victim of the ongoing fiscal woes in Europe. On 21 November, the Latvian authority officially suspended operations at Krajbanka which ranks among the first ten largest banks in Latvia in terms of assets. The revelation indeed was another bad news for investors and had its affects on the market, but it was presumable because Krajbankas majority stakeholder Snoras was taken over by the Lithuanian authority week before last. The control of Snoras Bank had been taken up by the state amid allegations of fraud. It ranks as the fifth-biggest bank in Lithuania and owned 68 percent of Krajbanka. Regarding the fate of Krajbanka, local media revealed that the Latvian government was mulling the option to have shut down the mid-sized bank. Both Latvia and Lithuania had reassured their people that the bank problems do not constitute any systemic risk, but people in Latvia were reported to have queued up to take small sums from Krajbanka. The authorities allowed people to withdraw a maximum 50 lats ($95.5) a day from 23 November. Banking supervisor FKTK informed on 22 November that 100 million lats was missing from Krajbanka. "Krajbanka will, in all likelihood, have to be liquidated," Janis Brazovskis, an FKTK official, was quoted as having said. "To put it simply, I and my colleagues in Krajbanka cannot fulfill all the obligations that Krajbanka has to fulfil," Brazovskis, who has been put in charge of the bank, said in a televised interview. Krajbanka has a significant volume of depositors among pensioners and in small towns and rural areas. During the 2008 financial crisis, Latvia had to rescue its second-largest bank Parex, which led to the Baltic state taking a 7.5 billion international bailout. On 22 November, Latvia cancelled a debt sale due to increased investor nervousness. Snoras and Krajbanka are counted among the main banks owned by non-Nordic investors in Latvia.

SLOVAKIA|ENERGY

Two bio-gas power stations to be constructed in Ozdany

A company called Lexus Bratislava plans to build and operate two biogas stations to generate electricity in Ozdany in Banska Bystrica Region, Slovak spectator reported on 21 November. The estimated cost of each station is 4 million. They are designed to produce electricity from renewable sources - maize silage and sorghum. A by-product will be a type of organic fertiliser. The electric generators of each station will produce 990 kW of electricity and 985 kW of heat energy. The construction work is set to begin in Q2 of 2012 and is expected to be completed in Q2 of 2013.

SLOVAKIA|GOVERNMENT

Cabinet not to alter funding of local authorities

Rules governing the distribution of tax revenues for local authorities will not change after all, after the cabinet withdrew a legislative proposal aimed at altering the pattern, Slovak spectator reported. The law has already passed its first reading in parliament; a final vote was expected to take place in late November. If the law had passed its second reading, municipalities would have received income from a mix of taxes as of 2012 rather solely from income tax on individuals. The initiative was criticised by the Slovak Towns and Villages Association (ZMOS) and, following a series of talks with the government, it has now been dropped.

ESTONIA EU AFFAIRS

Tallinn: EU members should balance their budgets

The EU members now should act more responsibly as the situation demands a long-term outlook and stringent measures which might be painful and unpopular, Estonia's Finance Minister Jurgen Ligi said. "General rules have to be followed all over Europe. You need a balanced budget," Ligi said at the Baltic Economic Forum in the Latvian capital. He also welcomed EU proposals to increase surveillance of national economies. "Europe tends to think a three% deficit is good and we can live in deficit all the time," Ligi underlined. "Crisis management hasn't convinced the markets so far," he said, adding: "We need balanced or surplus budgets for everyone." Estonia joined the European Union in 2004 and adopted the euro in January this year. With 1.3 million people, the former Soviet-ruled republic is one of the eurozone's smallest members. The country was hit hard by the global crisis, plunging into a double-digit recession in 2009, but is enjoying a robust recovery. Estonia's centre-right government, which held to conservative fiscal policies even before the slump, slashed public spending to confront the crisis and maintain the drive to adopt the euro.The 2009 deficit was 1.7% in 2009. Last year, Estonia posted a 0.1% surplus, and forecasts a 0.2% surplus this year. However, revived spending in 2012 is expected to bring a 2.1% deficit.

THE EUROPEAN UNION

New Europe | Page 23 November 27 - December 3, 2011

GREECE CYPRUS
GREECE ECONOMY CYPRUS|ENERGY

Bank of Greece: Last chance to stay in euro

Gas find could transform geopolitics of the region

Cyprus President Demetris Christofias visits the Homer Platform, where exploration drilling for hydrocarbons is taking place off the coast of Cyprus.

By Nathan Morley
Cypriot President Demetris Christofias has said that efforts by his country to locate hydrocarbons in the Mediterranean are progressing well, despite continued objections from Ankara. Speaking from a floating platform operated by US firm Nobel Energy, Christofias told officials that his visit offshore underscores Cyprus sovereign rights, adding that the issue of natural resources is of national importance. Our actions are strictly within the bounds of international legitimacy, and this is what we are doing with Noble and any other partners. I therefore hope that Noble will give us the best possible results as soon as is possible. This is a very important issue. There are issues which will come up when gas reaches the land. A team of experts has been set up, a team of technocrats, and a strategic plan is being drafted which we will have to examine cautiously and discreetly, he said. Christofias' remarks are directed at Ankara which disputes Cyprus' oil and gas search because it doesn't recognize the island as a sovereign country. The government spokesman Stefanos Stephanou described the visit as a symbolic gesture of political dimensions adding that a second licensing round for hydrocarbons exploration will soon be announced. Relations between Turkey and Cyprus have soured increasingly after the internationally-recognized Greek Cypriot government started drilling off the south coast of the island in September. The work is being conducted by Noble Energy, which has said that according to early data gas deposits under the drilling hole are estimated at between 3.5 and 9 trillion cubic feet, however the government has estimated the figure to be 8 trillion cubic feet and has said that it would await official results expected in mid-December. In response to the Cyprus drilling, Ankara recently signed a maritime accord with the break-away Turkish Cypriots and said it would pursue its own drilling which Christofias denounced as "actions outside international law." Commentators say if gas riches are discovered, it will transform the geopolitics of the Middle East, with Turkey determined to be part of any energy bonanza. In a separate development, the Foreign Minister Erato Markoullis has said that Turkey will not be allowed to use the Cyprus issue as an obstacle on the way to the successful completion of the Cyprus EU rotating Presidency. Despite Turkeys efforts and threats, the Cyprus issue did not become an obstacle to Cyprus EU accession and we will not allow Turkey to use it now as an obstacle for the effective completion of our Presidency, she stressed. Turkey has said it will freeze contact with the EU during the Cyprus Presidency, which starts in July 2012.

Unemployed citizens wait in a long line at a state labour office to collect benefit checks in Athens, Greece. |EPA/ALKIS KONSTANTINIDIS

Greece has one last chance to reshape its economy and stay in the euro region, the countrys central bank said. A 130 billion bailout approved by EU leaders on 26 October represents a milestone on the adjustment path of the Greek economy, the Bank of Greece said in its interim monetary policy report on 24 November. "The present juncture is the most critical period in Greece's post-war history. What is at stake is whether the country is to remain within the eurozone," the bank said. According to the report, "the country must avoid any further delays or deviations from targets at all costs." "In order to consolidate confidence in the prospects of the economy, the convergence of political forces reflected in the

formation of the new government must become more substantive," the bank report warned. "There are two national objectives which we must now pursue at all costs, first to generate primary surplus...second, to speed up recovery," the central bank said. It said the economy would contract by about 5.5% or more in 2011, with the recession continuing in 2012, when the economy would contract by 2.8%. In addition unemployment is expected to hit 17% this year and may exceed 18% next year, according to the report. Half a million Greeks are living in a household that has no source of income because all of its members are unemployed, according to figures released from

the Bank of Greece. Statistics show that this accounts for 12.9% of the labour force, up from 9.8% last year, the central bank said, adding that gross incomes have dropped by 6.3% this year compared to 9.1% in 2010. Greece's total population is 11 million. The Bank of Greece also criticised the previous Socialist government for failing to meet the targets it had agreed with the European Union and the International Monetary Fund (IMF). It recommended a change in the growth model, for faster economic recovery and a lightening of the tax and social security burdens on enterprises, with an eye toward creating more labour market flexibility and more jobs.

GREECE ENERGY

Hellenic Petroleum net income at 121mn

On 24 November, Hellenic Petroleum Group (ELPE), Greeces top refiner, reported adjusted net income of 121 million in the first nine months of 2011, against 171mn in the corresponding period last year. Hellenic Petroleum recorded a positive underlying performance in 3Q, with operating improvements partly offsetting the adverse impact from weak margins and sales volume, the company said in a press release. September cracking margins were down to multi-year lows and domestic economic conditions continued to be difficult. Group Quarterly Adjusted EBITDA reached 70m (-14% vs 3Q10) on account of weak domestic fuels demand, planned refinery shutdowns and the impact of declining PP prices. Supply & Trading contribution and sustained performance from International Marketing supported Group results. Group associates in Gas (DEPA) & Power (Elpedison) improved performance with quarterly contribution to Group results increasing to 12mn. The impact of US dollar loan revaluation at the end of September led to reported losses for the quarter. The Thessaloniki refinery started commercial operations in September, following the upgrade and scheduled maintenance shutdown. The Elefsina refinery upgrade progress reached 93%. Full mechanical completion of the new upgraded refinery, which will significantly improve Hellenic Petroleums competitiveness and net cash margin, is expected by year-end with commercial operation in 2Q12. The West Obayed farm-out received final regulatory approval by the Egyptian Authorities, while the Georgia business divestment was completed this quarter. In November, Greek Parliament passed a law lifting a 20-year ban on diesel-run private vehicles in Athens and Thessaloniki. Furthermore the Group agreed during this quarter to refinance a 400mn revolving credit line extending maturity from 2Q12 to 3Q13. Commenting on the results, Hellenic Petroleums CEO, John Costopoulos, said: 2011 remains a challenging year due to the volatile international environment and continuing recession in the domestic market. Within this difficult environment our underlying performance remains positive.

Page 24 | New Europe November 27 - December 3, 2011

THE EUROPEAN UNION

BULGARIA ROMANIA
BULGARIA|IMMGRATION BULGARIA ENERGY

Bulgaria stops 16 illegal migrants

Bulgarian border police stopped 16 illegal migrants from crossing the country's border with Greece and Turkey, the Interior Ministry said on 23 November. One group of 12 men from Afghanistan, Iraq and Algeria was caught near the Kulata crossing to Greece. One Polish national, apparently the guide, was arrested. Another group, three women and a man, all from Afghanistan, were caught after entering from Turkey. Their guide managed to flee back across the border. Bulgaria joined the European Union in 2007 and became the bloc's south-eastern frontier.

EU to provide more funds to close Kozloduy NPP

The European Commission will propose this week to provide additional financial aid of 500 million for the de-commissioning of old Soviet-era nuclear reactors in Bulgaria, Lithuania and Slovakia, news agencies reported. Bulgaria closed four of its six power units at the Kozloduy nuclear power plant in 2007, which was one of the conditions for becoming a member of the European Union. Bulgaria is to receive 185 million to decommission the four reactors in Kozloduy, the European Commission said in a statement. The money comes on top of the over 2.8 million that the EU has already pledged in nuclear decommissioning aid for the three former Soviet-bloc countries, whose accession to the EU in 2004 was conditioned on them shutting down unsafe reactors.

ROMANIA|HEALTH

Flextronics opens 3.6mn medical unit in Timisoara

Electronics manufacturer Flextronics has recently expanded its site in Romanias Timisoara with a new unit for medical operations, according to the company.The investment, covered by the companys own funds, amounts to 3.6 million and covers the refurbishment of the infrastructure module and two clean rooms with an area of 1,300 square metres. Around 350 people will work in the new unit and the growth rate in the medical segment in Timisoara should be around 40 percent in the next two years. The new medical unit in Romania is the most modern manufacturing unit of medical components in Eastern Europe, according to the company. Our investment reflects the expansion of the customer base in the medical segment, but also the growth opportunities in emerging markets for medical equipment and consumables, said Bill Flaherty, President Flextronics Medical. Flextronics site in Timisoara was founded in 1998 and has a total of 42,000 sq m of manufacturing area. It has 2,600 employees and it serves four market segments, namely medical, automotive, industrial, and telecommunications and networking. Flextronics Romania has an annual turnover of around $600 million, according to the estimations made by Radenko Prjna, Vice President and General Manager of Flextronics Timisoara.

A staff member stands at the newly built storage facility for dry storage of spent nuclear fuel at the Bulgarian nuclear power plant in the town of Kozloduy some 200 kilometres from Sofia, Bulgaria. |EPA/VASSIL DONEV

BULGARIA AUTO INDUSTRY

BASF mulls Bulgaria as possible hub for new plant

German chemicals group BASF is looking at five countries in eastern and central Europe, including Bulgaria, for the construction of a new plant for manufacturing cathalitic converters for cars, Capital Daily reported on 23 November. Currently, BASF is present in Bulgaria only through its subsidiary in the country. Representatives of the German company have already made several visits to Bulgaria. Among the potential hubs for BASF's plant are also FYROM, the Czech Republic, Slovakia and Romania. "It is absolutely possible for BASF to invest in Bulgaria. However, this is a matter of comprehensive assessment. We can not create expectations, which may not be fulfilled," said Valentina Dikanska, head of finance and administration at BASF Bulgaria.

ROMANIA|BUSINESS

Sumitomo buys Romanian business Alcedo

Japanese company Sumitomo has bought 90% in Romanian plant protection products distributor Alcedo for some 53 million, Romania Insider reported on 21 November. Sumitomo is also present on the Romanian market through Sumitomo Electric Wiring Systems (SEWS), a 179 million business. Alcedo, previously owned by Romanian individual investors, posted a turnover of 64.3mn in the first nine months of this year, up 38% from the same period in 2010.

SAP to expand Romanian operation

SAP Romania, a subsidiary of SAP AG, on 23 November announced the opening of a nearshore delivery centre in Romania, which will provide worldclass consultancy services to customers across Europe, the Middle East and Africa (EMEA), Romania Insider reported. SAP plans to hire 400 consultants in Romania for the SAP Consulting division until 2014. SAPs structure in Romania will also include two more offices in Timisoara and Cluj Napoca. The company announced that it will invest between 30 million and 40 million into the centre, which is the overall investment that will go into training programs for employees and the cost of the headquarters. The nearshore centre in Romania and the upcoming one in Portugal will be SAPs first units of this kind, working with clients in various areas of Europe. The centre will deliver its services primarily to the mature markets of Western and Central Europe to support customer projects in Austria, Belgium, Germany, Luxembourg, the Netherlands and Switzerland. Nearshore centres significantly contribute to supplying services with lower total costs, while improving the quality, speed and scalability, said Franck Cohen, president of SAP EMEA. With revenues of 12.5 billion for the year 2010, SAP has more than 54,000 employees and sales and development locations in more than 50 countries worldwide.

ROMANIA BUSINESS

ROMANIA|ELECTRONICS

Samsung opens the largest service centre in Romania

Samsung Electronics together with Electronics Support Division (ESD), a company specialized in after-sales services, opened last month in Bucharest Samsung Plaza, the largest service centre in Romania, that spans on a surface of 1,200 square metres, news agencies reported.The centre was opened following an investment of 200,000.The new centre is based on the all-in-one concept offering a complete range of services for products in the Samsung portfolio such as mobile phones, notebooks, television sets and home appliances. Samsung Plaza also includes a showroom where it sells products and accessories in the premium range where clients can test the latest Samsung technologies. This is only the first step in the collaboration between Samsung and ESD.

OMV Petrom takes 930 mln renancing syndicated loan

Romanian oil and gas company OMV Petrom has taken a 930 million syndicated loan from 14 local and international lenders, to finance earlier loans that were due in 2012, it announced on 23 November, Romania Insider reported. BNP Paribas, BRD Groupe Societe Generale, Raiffeisen Bank International and UniCredit arranged the loan. The credit will cover general corporate purposes including financing the current investments program. As of 23 November, 2011, the unused committed facilities, which are available to the Petrom Group, amount to about 1 billion, the company said. By extending the financing maturity we maintain our strong financial position in a highly volatile environment. We are the largest investor in the Romanian energy sector with annual investments of more than 1bn per year for the last six years; our investments weighed a considerable 3-4% of the total investments in Romania in 2010.

ROMANIA ENERGY

PARTNERS

New Europe | Page 25 November 27 - December 3, 2011

NORWAY ICELAND SWITZERLAND

NORWAY ENERGY

Statoil and Centrica sign major gas sales agreement

Norway's energy producer Statoil and UK-based Centrica have entered into a long term gas sales agreement for the delivery of 5 billion cubic meters (bcm) per year from 2015 to 2025 to the UK market, Norway Post reported. This new long term gas sales agreement follows an existing agreement between Statoil and Centrica that expires in 2015. The agreement demonstrates that natural gas is set to play an important role in the UKs long term energy mix, said Statoils President and CEO Helge Lund, adding that: Natural gas has all the features needed for the UK to reach its long term energy policy goals of affordability, security of supply and CO2 emissions reduction. Chris Huhne, UK Secretary of State for Energy and Climate Change, said: This is good news for Britain. Today gas powers almost half of our electricity, and nearly 70% of our heating. It is reliable, flexible and competitive, and helps power our economy. Gas has a long term role to play in keeping our lights on and our homes warm, as part of an increasingly low carbon energy portfolio. This agreement will help to deliver that gas securely and cheaply,

ICELAND|AVIATION

Iceland Express to deploy newer aircraft on London route

Iceland Express (IEX) is to provide newer Airbuses on its London-Keflavik routes following an aircraft lease deal with Czech Airlines subsidiary CSA Holidays. The agreement will see the airline use two Airbus A320 on the route and replaces its previous deal with UK-based Astraeus. The carrier is now working towards gaining its own operating licence by the end of 2012, having submitted forms to Icelandic officials. We are pleased to be working with CSA Holidays and are looking forward to moving the airline into the future with a modern fleet which will provide a better service for our passengers, said Heimir Mar Petursson, public relations manager at IEX. Weve experienced tremendous growth over the last year and we are confident this new relationship will allow us to continue this growth and expand our network of destinations.

SWITZERLAND|BANKING

New accord signed on central bank profits

Sam Laidlaw, CEO of Centria and Helge Lund, CEO of Statoil shake hands in Downing Street, London, after British energy company Centrica announced a North Sea agreement with Norway's Statoil to protect Britain's gas security over a decade starting in 2015.|
EPA/JASON BYE

and further enhance our close relationship with Norway. Statoil the second largest supplier of gas to Europe - has long standing ties towards the UK gas market. The UK gas portfolio comprises long term gas sales contracts with major energy utilities and direct sales to large industrial

users. Statoil's market share in the UK gas market is approximately 16-18%, corresponding to about 20% of all gas Statoil exports from the Norwegian Continental Shelf. The gas is exported through the established pipeline infrastructure - Vesterled, Langeled and FLAGS via Tampen Link.

SWITZERLAND ECONOMY

Household wealth on the rise

The net worth of Swiss households in 2010 rose by 74 billion Swiss Francs ($81 billion) or 2.8% to 2,691 billion Francs, the Swiss National Bank (SNB) said, Swiss Info reported. The main reasons for the increase were the persistently high level of saving by households and a further advance in real estate prices. By contrast, currency movements reduced the growth in household wealth by some 25 billion Francs. Breaking down the figures, the SNB said financial assets held by households grew last year by 49 billion Francs (2.5%) to 1,958 billion, while real estate assets increased by 55 billion Francs (4.1%) to 1,415 billion. Consequently, total assets recorded a growth of 104 billion Francs (3.2%) to 3,373 billion. After taking liabilities into account (682 billion Francs), the central bank said net worth per capita increased by around 6,000 Francs (1.7%) to 341,000.

The Swiss government and Swiss National Bank (SNB) have concluded a new agreement on the distribution of the SNBs profit. The agreement will cover the financial years 2011 to 2015, Swiss Info reported on 21 November. The SNB said in a statement last Monday that if the distribution reserve is positive, it would make an annual distribution payment of 1 billion Swiss Francs ($1.09 billion) to the confederation and the cantons. However, the bank warned that it was unclear when the next distribution payment will take place, since this will depend on future developments in the financial markets. The new agreement covers the financial years 2011 to 2015, and stipulates that, before any distribution payments can be made, the distribution reserve must turn positive again. The previous agreement from 2008 needed to be reviewed since the SNB reported a substantial 21.5 billion Francs loss last year. That led to a shortfall of 5 billion Francs in the banks distribution reserve. If the financial situation were to improve greatly, leading to reserves of more than 10 billion Francs, the distribution payment would exceed 1 billion Francs, the statement added.

NORWAY|ENERGY

Statoil awarded operatorship in Indonesia

Statoil has been awarded the operatorship and a substantial working interest in a large offshore exploration licence on the Halmahera II block in eastern Indonesia, Norway Post reported on 22 November. The Halmahera II block is located in a frontier basin with no wells drilled nearby. Statoil will operate the licence with an 80% working interest. Niko Resources will hold the remaining 20%. The licence covers an area of more than 8000 square kilometres. The licence is subject to final governmental approval. We are very pleased about being awarded a large equity position in a promising frontier area in Indonesia states Pal Haremo, senior vice president in Exploration global new ventures in Statoil. He continued, Indonesia is an emerging focus area for Statoil and we have a material portfolio of frontier acreage in the country. The Halmahera II licence marks the sixth newly accessed licence in Indonesia during 2011 for Statoil and brings the total number of licences with Statoil interest in Indonesia to eight. The newly awarded licence is located adjacent to the Obi and Halmahera-Kofiau licences, accessed earlier this year. Statoil has been in Indonesia since 2007 and was then awarded the operatorship of the Karama licence and partnership with ConocoPhillips in the neighbouring Kuma licence, both located in the Makassar Straits.

SWITZERLAND CORRUPTION

Alstom faces possible bribery charges

French newspaper Le Monde reported on 18 November that Alstom was suspected by Swiss authorities to have paid, between 2003 and 2010, tens of millions of euro in bribes and kickbacks to public and foreign officials, Swiss Info reported. The Federal Prosecutors Office is preparing to charge French transport and engineering company Alstom with bribery as part of a corruption probe. The paper, which did not cite its sources, said the prosecutors office was on the point of issuing charges against Alstom Network Schweiz, the companys Swiss subsidiary based in Baden in north-east Switzerland. A spokesman for Alstom denied the allegations of corruption but refused to comment on the possibility of charges being laid by Swiss authorities. We absolutely contest [that there has been] a generalised system of corruption, the spokesman said.

SWITZERLAND BUSINESS

Nestle gets saucy

Swiss food giant Nestle said it had bought stocks and sauces business Oscar from Finland's Gustav Paulig, News room Finland reported. Nestle did not disclose the value of the acquisition. The purchase of the stocks and sauces business Oscar from the Paulig Group will boost Nestl Professionals presence in the culinary flavours sector. Part of Paulig since 1997, Oscar employs 85 people and had sales of about 28 million last year.

Page 26|New Europe November 27 - December 3, 2011

CANDIDATES

CROATIA ALBANIA SERBIA BOSNIA

CROATIA|ECONOMY BOSNIA UNSC

Croatia slow in recovery compared to other transitional states

In a newsletter, Croatian National Bank (HNB) had warned that Croatia is sluggish in recovery this year compared to other transitional states. HNB data showed that Croatia is the sole country in transition that had registered a negative GDP growth in the first quarter of this year, Javno reported. Although the scenario changed slightly in the second quarter when GDP increased 0.4%. However in the aforesaid period, Polands growth rate was triple compared to Croatia (1.1%). The Baltic states witnessed the biggest recovery but were also gravely affected by the crisis. Few of the transitional states managed growth bigger than one percent due to the slowdown of the recovery in Europes west, said HNB. As a result, it led to cuts in exports coming from transitional states including Croatia. Meantime, HNB data also unveiled that Croatia was also behind others in terms of fiscal consolidation. Croatia decided to increase its budget deficit while other countries planned to reduce it through cuts in public spending. The public debt of the country also seems to rise, said HNB.

EU peacekeepers' tour in Bosnia extended

The UN Security Council recently approved a year's extension to European Union peacekeepers stationed in Bosnia, Fars news agency reported. It should be noted that the European Union stabilisation force is tasked with ensuring all sides comply with the 1995 Dayton Peace Agreement that ended fighting in Bosnia and Herzegovina. In the unanimously adopted resolution the 15-member panel also plans to "consider the terms of further authorization as necessary in the light of developments in the implementation of the peace agreement and the situation in Bosnia and Herzegovina," the United Nations said in a release. Valentin Inzko, the high representative for Bosnia and Herzegovina, told the Security Council the country is still stagnant politically because of political squabbles and their reluctance to engage in dialogues. Inzko said it was critical that the European Union peacekeepers remain in place to assist his office and other international organizations fulfill their mandates. A continued commitment to and focus on Bosnia and Herzegovina is the way to get to the objective desired by all a Bosnia and Herzegovina that is stable, safe and solving its problems institutionally as it moves towards full Euro-Atlantic integration, he said. More than 12 months after the general elections, the State-level Council of Ministers of Bosnia and Herzegovina

An Austrian soldier gestures to a tank as German and Austrian NATO troops pull back after an attempt to pass through Northern Kosovo near the village of Cabra, Kosovo.| EPA/VALDRIN XHEMAJ

SERBIA|ECONOMY

Serbia, IMF tighten deficit target amid crisis

The International Monetary Fund says Serbia will aim to cut its 2012 budget deficit target to offset the negative effects of the eurozone crisis. IMF mission Chief Mark Allen says Serbia will aim to get the budget deficit next year down to 4.25 percent of GDP, from this year's 4.5 percent, Beta news agency reported. An agreement to this effect was also reached between Serbian government and IMF, Serbia's State Secretary of the Ministry of Finance Dusan Nikezic said at a meeting held after the completion of the first quarterly review of results in the implementation of the precautionary arrangement which Serbia made with this financial institution. After approving the first review of a precautionary loan deal for Serbia, Allen said that the new target is to accommodate the expected "slower growth caused by the turbulence in the eurozone." Serbia can draw on its 1.1 billion in rescue loans if needed. Officials say they don't intend to withdraw the first 190 million. IMF Resident Representative in Belgrade Bogdan Lissovolik predicts that Serbia will have modest economic growth in 2012 totaling 1.5 percent, as three of the country's main trade partners - Germany, Italy and Bosnia-Herzegovina, will face recession and economic stagnation next year. Prognosis for the countrys economic growth n 2012 is based on stagnation in revival in the entire eurozone and fractional recession in Italy. Lissovolik underlined that if the eurozone had negative growth rates and recession in Italy was deeper than expected, the prognosis for Serbia would become too optimistic. According to Lissovolik, the IMF will monitor the situation and analyze all developments. It is important for the creators of the economic policy in Serbia to react adequately and keep the fiscal situation under control, he added. The budget deficit in Serbia next year should be under 4.5 percent, which the maximum limit proscribed by the law, in case the economic growth is lower than expected, given that public finances have to be under control, Lissovolik said. He noted that the level of public debt in Serbia is quite high. If the economic growth is lower than expected, he said, We will have on one hand a formula which envisages an increase in deficit, and on the other a limit in financing and the level of public debt.

had yet to be formed, and the State-level budget for 2011 had yet to be passed. The European Union and Euro-Atlantic integration processes remained blocked and the countrys credit rating had been downgraded. It should be recalled that in July Inzko had intervened in the Central Bosnia Canton to address an attempt to ignore the constitution and form a government that triggered extreme tensions. He had also lifted sanctions following the capture and transfer to The Hague of Ratko Mladic. However he

congratulated Bosnia and Herzegovina on its tenure as a member of the UN Security Council which gave the country an opportunity to make new friends and gain respect of many countries. He also stressed that the country had a secure and safe environment and a positive security situation. Despite the difficult economic scenario due tot eh global economic crisis, Bosnia and Herzegovinas economic data for this year yield positive signs registering a rise in exports and production.

CROATIA POLITICS

Road privatisation could help Croatia

Radimir Cacic, a Croatian politician and businessman and the president of the Croatian People's Party Liberal Democrats recently announced that the centre-left Kukuriku coalition would privatise the Croatian roads if they win the upcoming elections. Out of 27 EU member states, 19 have privatised their highways completely, while Austria, Germany, Bulgaria, Czech Republic, Hungary, Romania, Slovakia and Slovenia have done so in part. Only Bulgaria, Romania and Slovenia fully finance their highways. Australian investment bank Macquaire group said that Croatia can expect 4 billion if it plans to privatise its highway networks, Javno reported. Gavin Winbanks, Macquaire group said that several parties would express strong interest in the tender irrespective of who forms the ruling party. For twenty years we have been successfully dealing with consulting and investment in infrastructure and I am sure that we could improve the quality of your road networks, Winbanks said. The Macquaire group participated as a consultant and investor in the sales of concession of Skyway in Chicago worth $1.8 billion. The Croatian government is expected to pay some 780 million to foreign banks for Croatian highways (HAC) loans and take out additional debt in amount of 894 million this year. Overall HAC debt stands at 3.5 billion. The privatisation of the highways would inject fresh investment capital from leading pension funds. This would entail the growth of the country's credit rating that would trigger fresh investment in production and industry without further debt.

ALBANIA ECONOMY

Strategic Planning Committee accepts EU package

The European Commission recently offered a package of 83 million as financial assistance to Albania. The fund which was approved by Albanias Strategic Planning Committee, would be utilised to implement reforms, upgrading infrastructure and the building and consolidation of institutions in the country, AENews reported. Albanian Prime Minister Sali Berisha, who chaired the committee, said the package includes important projects such as the construction of the Palace of Justice, conceived as a complex of buildings including the High Court, General Prosecution Office, Tiranas District Court and the Constitutional Court. The premier also mentioned other investments which cover the construction of Rrogozhina bypass, an important link of the future FusheKruje-Rrogozhine highway and construction of a new customs at Hani i Hotit similar to that of Muriqan, linking Albania with Montenegro.

CANDIDATES

New Europe |Page 27 November 27 - December 3, 2011

TURKEY FYROM MONTENEGRO

TURKEY DIPLOMACY

Ankara, Bogota to lift visas

Turkey and Colombia agreed recently to reciprocally abolish visa requirements in a bid to further boost swelling trade ties between the two countries. Holding a joint press conference with Colombian President Juan Manuel Santos Calderon in Ankara, Turkish President Abdullah Gul said that this was the first visit from Colombia to Turkey on presidential level. We attach importance in Colombia which is one of the most important countries of Latin America, said Gul, adding that Turkey declared 2006 as Latin America year, and opened embassies in many countries within that scope. Gul added that Turkish embassy to Colombia was opened last year, and Colombian embassy in Ankara opened on 18 November. Gul said they decided to develop Turkey-Colombia relations in every area, adding that lifting visa requirements is what he said one of the best signs of a will to improve ties. Gl said economic relations between the two countries are getting stronger and that the trade volume has already surpassed half billion dollars, adding that potential of both countries is high. Gul said that foreign trade agreement, military & defence cooperation agreement and tax exemption & investment incentives agreement between the two countries would be completed soon. Turkish president said they also dis-

MONTENEGRO|DIPLOMACY

Montenegro, Ukraine to sign free trade agreement

At a recent session of the Cabinet of Ministers of Ukraine, the government has authorised Vice PM and Economy Minister of Ukraine Andriy Kluyev to sign the free trade Agreement with the government of Montenegro, Montenegro Times reported. Montenegros Economy Minister Vladimir Kavaric and his Ukrainian counterpart Klyuyev signed on 21 November in Kyiv the free trade agreement between the two states, which will enable Montenegro to resume its accession negotiations with the World Trade Organisation (WTO) and join the organisation in the near future. The aim of the draft agreement is to improve mutual access to goods and services markets for both countries and deepen trade and economic cooperation. The Cabinet said in a statement that the inking of the pact will yield positive effects on the Ukrainian economy. According to Kluyev, among prospective trends of bilateral cooperation which trigger interest for Ukraine, are housing and industrial construction, modernisation of railway roads and ship building industry in Montenegro, supplies of city and long-distance buses, food supplies and its production in Montenegro.

Turkish President Abdullah Gul, left, and Colombian President Juan Manuel Santos, right, review a honour guard during an official welcoming ceremony in Ankara, Turkey 18 November 2011. |EPA/EVRIM AYDIN/ANADOLU AGENCY

MONTENEGRO|ENERGY

cussed regional affairs during their talks, including Israel-Palestinian conflict. Santos Calderon also hailed the decision to lift visa requirements and said it is a very important and symbolic step. He added that Turkey would undertake OECD's presidency in 2012, adding that Turkey's supporting Colombia's membership was important. We are on stage four in Free Trade Agreement with Turkey, said Calderon, adding that the two countries could cooperate in defence industry, infrastructure sector

and housing area. Calderon said that Turkey's experience in construction was important for Colombia. He added that the two countries could pursue joint projects in textile sector. Noting that Colombia targeted to be a member of OECD, Calderon said that Turkey would undertake OECD's presidency in 2012, adding that Turkey's supporting Colombia's membership was important. Calderon also invited Gul in Colombia.

Germany to help with energy efficiency

Montenegros Finance Minister Milorad Katnic and Regional Director of German Development Bank (KfW) in Southeast Europe Tina Babo recently inked a loan agreement, Montenegro Times reported. The total loan offered by the German bank amounts to 13 million of which 1.5 million is a grant, with two and a half year grace period and a fixed interest rate. The agreement envisages implementing the energy efficient reconstruction of education facilities in Montenegro. Some of the project activities includes the rehabilitation and modernisation of 30 schools, kindergartens and students homes in terms of energy efficiency, as well as trainings and raising awareness campaigns for staff and students, and consulting services. The project activities will be implemented the next two and a half years.

TURKEY BUSINESS

Chinese business to invest in Turkey

The Turkish Confederation of Businessmen and Industrialists (TUSKON) recently organised a meeting in Ankara which was attended by Chinese businesses from the banking, textile, auto supply and furniture industries. TUSKON Chairman Rizanur Meral, China Federation of Industry and Commerce Vice Chairman Song Beishan and Investment Support and Promotion Agency of Turkey President Ilker Ayci were present at the meeting. At the meeting, the Chinese business envoys expressed a strong interest to invest in Turkey, Zaman reported. TUSKON and the China Federation of Industry and Commerce (ACFIC) also signed a cooperation agreement Tuesday in Ankara. The agreement envisages an increase in trade ties between the two fast-growing economies. ACFIC represents 2.7 million businesses and 1.16mn companies from 3,345 local trade unions in China. Speaking at the signing ceremony of the agreement, TUSKON Chairman Rizanur Meral said that Turkish and Chinese entrepreneurs have realise the importance of cooperation in third countries in the past years. The business community of both countries expects the number of joint projects to rise in the upcoming years. Underlining that his federation placed heavy importance on Asian markets, Meral said they have organised a number of meetings to host business delegates from China in Turkey. He invited the Chinese entrepreneurs to invest in Turkey before turning their direction towards Middle East, Africa and EU markets.

FYROM|ECONOMY

Eurozone crisis to be felt in FYROM

Effects of the complex situation due to the eurozone will be felt in FYROM in particular the real sector, an expert said. However, he stated that the banking system of FYROM is stable any major crisis is not on the horizon. Speaking at an international conference held at the Faculty of Economy in Skopje, University professor Ljube Trpeski said that developments in the eurozone are not favourable for FYROM as its export is mainly linked to the European Union, MRTOnline reported. Trpeski suggested expansion of export simulations as solely export companies can help FYROM emerge out of crisis.

TURKEY LABOUR

Unemployment at 9.2% in August

According to data recently unveiled by the Turkish Statistics Institute (TurkStat), the number of jobless fell by 450,000 to 2.5 million in August. The rate of unemployment level in August stood at 9.2%, a decline by 2.2% compared to same period last year. In urban areas, the level of unemployment went down by 11.6% while in rural areas it declined 1.5% to 4.7%. The unemployment rate dropped 1.5% in June and 1.3 % in July, compared to the same period last year. According to observers, stable growth in the economy will help the unemployment rate to decline further through the end of the year. The number of employed soared by 1.7 million in August reaching 24.9mn. Of the total, the agriculture sector employed 526,000 people. It was reported that 29.5% of the unemployed search for jobs through relatives or friends and 85.4% have previously worked at another job. In August, over two million people found jobs or changed jobs, amounting to 8.1% of the total labour force.

FYROM|DIPLOMACY

Skopje, Beijing sign cultural agreement

FYROM and Chinese Ministers of Culture, Elizabeta Kanceska-Milevska and Cai Wu recently signed in Beijing a cooperation programme for 2012-2017. During the signing ceremony, the signatories stressed their good cultural between the two countries and are willing to boost their cooperation further, MRTOnline reported. The new programme envisage a sound base for developing cultural ties, Wu said.

Page 28 |New Europe November 27 - December 3, 2011

NEIGHBOURHOOD

UKRAINE MOLDOVA BELARUS

MOLDOVA|DIPLOMACY BELARUS ENERGY

Chisinau, Moscow discuss economic, humanitarian ties

On 22 November, acting President, Parliament Speaker Marian Lupu and visiting Russian Foreign Minister Sergey Lavrov discussed co-operation. Lavrov spoke in favour of consolidating and extending the good bilateral relations between the two countries, Moldpress reported. He informed the acting president about the extension of the agreement on friendship and cooperation between Russia and Moldova for another ten years. The document provides for cooperation in the macroeconomic and humanitarian sectors, in the fields of energy, agriculture and labour, as well as for regional cooperation. Lavrov said Russia declares for the resumption of talks on the Transnistrian issue. He recalled that representatives of the five-plus-two format took a decision on the need to restart the negotiations in Moscow two months ago. The first round of talks will be held in Vilnius in late November. The Russian minister said it is important to help unblock this situation, and focus efforts on identifying solutions to ensure a sustainable political settlement of the Transnistrian conflict, by observing Moldova's sovereignty and territorial integrity, as well as a guaranteed special status for Transnistria. Lupu reiterated the strategic character of the Moldovan-Russian bilateral relations. Lupu noted that the economic ties between the two countries have been developing dynamically, with Russia being Moldova's main trade partner. As for the Transnistrian conflict, the acting president reviewed the actions taken to resume the five-plustwo official negotiations on the Transnistrian issue. Lupu reiterated that Moldova sticks to its permanent neutrality status, and stressed the need to withdraw the Russian troops from Moldova's Transnistrian region. Lupu also said the discussion with Lavrov was comprehensive.

Gazprom, Belarus expected to reach agreement

On 24 November, Russian gas export monopoly Gazprom CEO Alexei Miller said his company will buy Beltransgas and sign a new gas deal with Minsk on 25 November, a move that will help to avoid potential gas supply cuts to Europe. "We will acquire 100% of (pipeline operator) Beltransgaz," Miller told reporters. Russia's biggest company already owns 50% of Beltransgaz and is prepared to pay $2.5 billion for the remaining stake. On 25 November, Russian President Dmitry Medvedev is scheduled to meet his Belarusian counterpart Alexander Lukashenko. Belarus is looking for a 50% discount on the price it pays for Russian gas. Minsk wants to sign a new agreement with Gazprom for the supply and transit of gas which would cost the country just $150 per thousand cubic metres. If Gazprom buys Beltranzgaz in return the Russian company will halve the price it charges Belarus for gas. The RussiaBelarus gas dispute es-

A compressor station of the Jamal-Europe gas pipeline in Nesvisg, Minsk region, Belarus. |EPA/MAXIM MALINOVSKY

calated in 2007 when Russian stateowned gas supplier Gazprom demanded an increase in gas prices paid by Belarus from $46 per 1,000 cubic metres in 2006 to $100 in 2007 compared to $290 per thousand cubic metres paid by Germany. The gas contract between Russia and Belarus expires on January 1, after which Belarus is due to

pay $300 per thousand cubic metres while Europe still has to pay the market rate of well over $400 per 1,000 cubic metres. Russian is the main energy supplier for Belarus given that each year Russia is exporting around 20 billion cubic metres of gas and 21.5 million cubic metres of crude oil.

BELARUS|HUMAN RIGHTS

UKRAINE HUMAN RIGHTS

UN: New laws in Belarus threaten basic human rights

On 24 November, United Nations human rights experts spoke out today against newly adopted legislative amendments in Belarus, warning that the changes could severely curtail basic rights such as those of freedom of assembly, association and expression. The three independent experts issued a joint statement in Geneva in which they said the amendments recently adopted by the Eastern European country's National Assembly could worsen the "current climate of fear and intimidation" in Belarus. Under the new laws, organizing public assemblies without the prior and explicit consent of the authorities is a criminal offense, and organisers also face reporting liabilities regarding the financial resources used for any assemblies. Public calls for initiating assemblies and disseminating information -- including through social media platforms -- about assemblies without permission is also banned. Non-governmental organizations (NGOs) are prohibited from storing funds in banks on foreign territory, and receiving foreign grants or donations could also be a criminal offense in some circumstances. One of the experts, Maina Kiai, the Special Rapporteur on the rights to freedom of peaceful assembly and of association, described the amendments as representing "a direct affront to the exercise of fundamental civil and political rights which are at the core of any democratic society." He noted that the changes to existing laws on public associations, political parties, public gatherings, the criminal code and the election code were done without proper consultation with civil society. Frank La Rue, Special Rapporteur on the right to freedom of opinion and expression, voiced particular concern with criminal sanctions for the "staging of seminars" or the distribution of "propaganda materials." He said the measures "will undermine the ability of all individuals to disseminate information and to express their legitimate grievances and concerns peacefully."

Tymoshenko to be allowed to see doctors outside jail

On 22 November, in a reversal of a previous hard line position on Ukrainian opposition leader Yulia Tymoshenko, President Viktor Yanukovych said that his political opponent will be allowed to see doctors outside prison. The exprime minister will receive treatment at medical centres in the capital Kiev because the prison she is being held at cannot provide a sufficiently high level of care, Yanukovych said, speaking at a Kiev press conference. Tymoshenko should be given "everything necessary for proper treatment," and prison officials have received his instructions to do so, Yanukovych said. The jailed politician is reportedly unable to walk due to back pain. Government spokesmen have said they believe she has a moderate back injury but that are not sure of its extent, because she was not allowing prison doctors to examine her. One of the leaders of Ukraine's 2004 pro-democracy Orange Revolution, Tymoshenko was sentenced in October to seven years on charges of abusing her power while in office, forcing the signature of a controversial 2009 gas deal with Russia. Her conviction drew widespread international criticism, and led the European Union to warn that a landmark free trade and association deal with Ukraine might not be concluded. In a bid to address EU concerns, Ukraine Deputy Prosecutor General Renat Kuzmin met a restricted group of European Parliament members in Brussels on 21 November, and journalists a day later. He told reporters that the verdict on Tymoshenko's appeal will be delivered "by December at latest," but could not indicate whether it would happen before 19 December, the tentative date for an EU-Ukraine summit in Brussels. Tymoshenko's legal team have claimed that their client's health was deteriorating and, though now being questioned by prosecutors on new tax evasion charges, she was being allowed access neither to lawyers nor non-prison doctors. Kuzmin retorted that he was not aware "of any information that would prevent lawyers, defence team members or doctors from meeting Mrs Tymoshenko" in prison.

UKRAINE ENERGY

Moscow, Kiev talks about gas prices slow down

Russian gas monopoly Gazprom Deputy Chairman Alexander Medvedev said recently that there is no reason to revise the gas contract with Ukraine. "I want to assure everyone that there is no risk of recurrence of events of 2006 and 2009. Fortunately, we now have a very good agreement with Ukraine, concluded in an international jurisdiction. This applies to both transactions to supply up to 2019 and the agreement on transit. It contains all the details on commitments," Russian media quoted Medvedev as saying. At the same time, Medvedev also said that "when the agreements were signed, the pricing formula consistent with market conditions, while the movement of prices within this formula reflects market conditions". Many experts believe that Russia will reduce the price of gas to Kiev before the elections in Russia only if it receives a stake in Ukrainian pipeline or Ukraine agrees to fully participate in the Customs Union.

NEIGHBOURHOOD

New Europe | Page 29 November 27 - December 3, 2011

KAZAKHSTAN TAJIKISTAN TURKMENISTAN

TURKMENISTAN SPACE KAZAKHSTAN|POLITICS

Turkmenistan plans to launch satellite in 2014

Eric Imbert, Senior vice-president for international sales FOR French company Thales Alenia Space recently paid a visit to Ashgabat to sign a contract with the Turkmen Ministry of Communications. The agreement envisage launch of the construction of a national satellite and ground-control systems, Turkmenistan.ru reported. The contract provides for launching a satellite into space, putting it into operation and maintaining high level around-the-clock operation of a satellite for 15 years as well as training highly qualified professionals. The construction work is expected to complete in August 2014. The Ministry of Communications of Turkmenistan will sign an agreement of lease of the orbital point with Space Systems International-Monaco SAM. The launch of the Turkmen satellite into orbit will accelerate the development of Turkmenistan's communications systems, internet and television and ensure successful implementation of environ-

Kazakh president calls early elections

Nursultan Nazarbayev, Kazakhstan's president, has issued a decree to dissolve parliament and call elections on 1 January 2012 that could pave the way for a multiparty legislature, Gazeta.kz reported. The move comes after Nazarbayev, who has ruled the oil-rich Central Asian state since its independence from the Soviet Union in 1991, said that the Kazakh parliament needed renewing to encourage the country's democratic development. Currently the countrys parliament is occupied exclusively by Nazarbayev's Nur Otan party, while Nazarbayev himself was re-elected earlier this year, winning 95% of the vote in an election boycotted by opposition and criticised by international observers. But under new election rules approved in 2009, the party that wins the second-largest number of votes will be allocated seats even if it fails to pass the 7% threshold required to get into parliament under normal procedures. In line with the law, 98 deputies of the 107-seat Mazhilis are elected on party lists on the basis of universal, equal and direct suffrage by secret ballot. Nine deputies are elected by the Assembly of People of Kazakhstan. Central Election Commission tasked to organize the preparation and conduct of extraordinary elections of deputies, the government and governors of regions and cities of Astana and AlmaAta "promptly take all necessary measures for organizational, logistical and financial support for early elections of deputies of the Majilis." The decree comes into force from the date of publication. Few weeks back, a group of Majilis deputies voiced an appeal to the head of state, which has asked to terminate the authority to appoint members of the House and early parliamentary elections. Elections had been scheduled to take place in August 2012 but 53 lower house members told Nazarbayev that it should be held earlier to avoid the campaign season coinciding with an anticipated global economic downturn. Kazakhstan, which could be affected, should hold elections prior to facing economic problems. In line with recent constitutional amendments, the next parliament should be formed from at least two political parties. The majority of respondents Kazakhstan (67.2%) support the initiative of deputies of the Majilis dissolve, follows from the case study "Socio-political mood of the population of Kazakhstan," conducted by the Institute of Parliamentary ruling party "Nur Otan".

Turkmenistan is planning to launch a satellite, similar to this Soyuz VS01, carrying a a comsat built by Thales Alenia Space.| EPA/STEPHANE CORVAJA - ESA/CNES/ARIANESPACE

mental programmes, improvement of the methods of exploration for new mineral deposits and monitoring of agricultural areas. It should be recalled that in May this year President of Turkmenistan Gurbanguly Berdimuhamedov signed a decree establishing the Na-

tional Space Agency under President of Turkmenistan. The agency was assigned to monitor the Earth's orbit, to establish satellite communications, to conduct scientific research, including research of outer space, as well as operation of a satellite from the territory of Turkmenistan.

TAJIKISTAN DEVELOPMENT

EBRD invests in new clean water projects

Tajikistan, a country rich in water resources but suffers from bad quality of water supplied to citizens which is dangerous leading to diseases. Many city residents as a result refuse o pay water bills. To resolve this problem, European bank for Reconstruction and Development announced a sovereign guarantee of $7 million to the State Unitary Enterprise Khojagii Manziliyu Kommunali. The fund would be utlised for on-lending to water companies in Gissar, Shachrinav, Somoniyon and Tursunzoda. Additional grants will provide cost of the project. The EBRD Shareholder Special Fund has approved a grant of $2.6 million for the project and the EU Investment Facility for Central Asia is considering a grant of $8.1 million. In addition, technical cooperation, funded by the EBRD and international donors, will help the water companies improve their performance. Lin OGrady, EBRDs Deputy Director for Municipal and Environmental Infrastructure said that the bank aims to bring innovation to Tajikistan in terms of financing, including financing municipalities in collaboration with other big international financial institutions and donors. She added that improved quality and supply of water will stimulate the payment of water bills, helping the water companies to become self-reliant. The EBRD aims to continue support to the cities of Tajikistan in their efforts to supply clean water to their citizens. After the successful refurbishment of the water supply system in the north and south of the country, EBRD has announced its participation in the Central Tajik Water Project to launch new clean water projects in four more cities upon the request of the central government. According to Alimurod Tagoimurodov, General Director of Khojagii Manziliyu Kommunali, EBRD is the strongest cooperation partner for Khojagii Manziliyu Kommunali, in the implementation of water supply improvement projects in the cities and rayons of the Republic of Tajikistan. He expressed hope that the Central Tajikistan Water Rehabilitation Project will be implemented successfully and yield fruitful results. He also expects EBRD to continue collaboration with Khojagii Manziliyu Kommunali in similar projects in order to improve water supply and wastewater systems in other cities and rayons of Tajikistan.

TAJIKISTAN|ECONOMY

Inflation for Jan-Oct 2011 estimated at 8.9%

According to data released by the Agency for Statistics under the President of Tajikistan, inflation in the country stood at 8.9% in January-October this year, Asia-Plus reported. Initially the government expected the year end inflation to stand at 7.0 % this year but in mid-year the year end inflation was revised from 7.0 to 11 %. According to an International Monetary Fund prognosis, the year-end inflation in Tajikistan will be to 13.5 %. Meantime, in the first 10 months of this year, prices of products of food industry went up by 9.9% while non-foodstuffs have risen in cost by 6.2 %. In the same period, prices and rates for services rendered to the population soared by 9.9 %. An average inflation rate in consumer sector has stood at 0.8 %. In the aforesaid period, the cost of the set of food products included in the consumer basket for actual consumption in prices as of the end of October 2011 was 121.00 somoni per one family member per month, and with the norm for a balanced diet it was 257.00 somoni.

TURKMENISTAN RESOURCES

UN studies water resources management

Ashgabat recently hosted the National Forum "Integrated Water Resources Management in Turkmenistan" within the framework of EU Water Initiative National Policy Dialogues (NPD). The forum was organised by the Water Economy Ministry and the United Nations Economic Commission for Europe, Turkmenistan.ru reported. It was attended by NPD national coordinators of the Central Asian countries, representatives of the German Society for Technical Cooperation (GTZ), International Fund for Saving the Aral Sea, as well as UNECE. The speakers at the forum spoke on protection and use of transboundary rivers and in general water consumption in Eastern Europe, Caucasus and Central Asia. It was learnt at the forum that international community endeavors at ensuring effective mechanisms of water resources management for hydropower and irrigation.

Page 30| New Europe November 27 - December 3, 2011

NEIGHBOURHOOD

UZBEKISTAN AZERBAIJAN KYRGYZSTAN

KYRGYZSTAN|BANKING AZERBAIJAN EU AFFAIRS

EDB to open mission in Kyrgyzstan

Kyrgyz First Deputy Prime Minister Omurbek Babanov and Eurasian Development Bank (EDB) Chairman Iqor Finogenov recently inked an agreement to launch EDB's mission in Kyrgyzstan, news agencies reported. Babanov said that the EDB member-states made immense progress in partnership development and achieved significant trade turnover between Russia, Belarus and Kazakhstan. He went on to say that deepening of beneficial trade and economic ties between the countries will benefit for both sides with further diversification of export-import operations through production facilities.

Baku, Brussels to expand ties

EU High Representative for Foreign Affairs and Security Policy Catherine Ashton and Azerbaijans President Ilham Aliyev discussed prospects for energy co-operation between Azerbaijan and European Union and exchanged views on the ways of settlement of the Armenia-Azerbaijan Nagorno-Karabakh conflict. I was very keen to come to Azerbaijan to develop further the bilateral relations between the European Union and Azerbaijan, Ashton said in Baku. Ashton said Azerbaijan is an important partner of EU in terms of energy. Azerbaijan is an increasingly important player in this region and close now in the United Nations, she said. According to Ashton, the Eastern Partnership is an important way which will demonstrate the closeness of EU-Azerbaijan relationships. She explained the importance of making sure that the EU-Azerbaijani relationships caters to the needs of support. "I also know what an important member of the Security Council of the United Nations Azerbaijan is going to be," she added.

AZERBAIJAN|DIPLOMACY

Azerbaijan, Morocco to co-operate within the UN

Azerbaijans Foreign Minister Elmar Mammadyarov recently met visiting Moroccan Secretary of State for Foreign Affairs and Co-operation Latifa Akharbach in Baku, news agencies reported. In the course of talks, Mammadyarov congratulated Morocco on election as a non-permanent member of the UN Security Council for 2012-2013. He expressed hope that Azerbaijan and Morocco would collaborate in a variety of fields within the UN Security Council. He also briefed the Moroccan Secretary of State on the peace talks on the Armenia-Azerbaijan NagornoKarabakh conflict. In turn, Akharbach also congratulated Azerbaijan on election as a non-permanent member of the UN Security Council for 2012-2013. Both sides discussed cooperation within international organizations and other issues of mutual interest.

EU High Representative for Foreign Affairs and Security Policy Catherine Ashton discussed bilateral relations between the European Union and Azerbaijan. |EPA/OLIVIER HOSLET

Citing the soaring and successful relations between the country and EU, Aliyev said there was multifaceted co-operation between Azerbaijan and the European Union. He stressed the importance of Ashtons

visit to the region and Azerbaijan. According to him, Ashtons visit to Azerbaijan would contribute to developing relationship between the country and European Union even further.

UZBEKISTAN ECONOMY

AZERBAIJAN|BUDGET

Parliament opens hearing on bill on 2012 budget

The parliamentary committees recently started discussing the Bill on State Budget of Azerbaijan for 2012, news agencies reported. The budget is being discussed at a joint meeting of the five committees of the Parliament - on economic policy, on social policy, on agricultural policy, on ecology, natural resources & energy, and on defence and security. The budget discussion involves Finance Minister Samir Sharifov, State Oil Funds head Shahmar Movsumov and other officials. During the hearing Azerbaijan Accounts Chambers chairman Heydar Asadov has said that developed budget for 2012 is in accordance to the Law on Budget System backed by the Accounts Chamber. The Chamber recommends the Bill on State Budget 2012 for discussion at the plenary session of Parliament, Assadov said.

IMF satised with Uzbek government programmes

An International Monetary Fund mission led by Veronica Bacalu, Deputy Division Chief in the IMF Middle East and Central Asia Department, recently concluded a visit to Tashkent. The aim of the visit was to discuss the context of the Article IV consultation. After the visit, the IMF said in a statement that Uzbekistan has witnessed robust growth since mid 2000s and performed well in tackling the global economic crisis, Uzbekreport.com reported. At 8 percent on average over the last five years, Uzbekistan's growth is higher than the average growth in Central Asia. Fiscal surpluses registered over the past years, high official reserves, low public debt, a stable banking system, and prudent borrowing from international financial markets have shielded the country from the direct impact of the global crisis, the bank said in a statement. The IMF said that last year GDP growth stood at 8 percent and 8.2% through this September. Services, transport and communication, trade, and agriculture registered a strong growth due to buoyant domestic consumption supported by large wage and pension increases. Besides the industrialisation programme under the government backed by higher foreign direct investment entailed further investments. The IMF noted this year important initiatives were undertaken to support small businesses and facilitate private sector development. IMF hailed the efforts of the government of Uzbekistan which included streamlining access to bank financing, simplifying registration and issuance of permits, extending the moratorium on tax inspections for newly created small enterprises from two to three years and simplifying customs certification procedures. Taking into account the soaring inflation in the country, IMF said that the government needs to alleviate it through effective macroeconomic and financial sector policies. Over the medium term, the main challenge is to further increase the real income per capita by raising productivity and ensuring sustainable and inclusive growth.

UZBEKISTAN|AGRICULTURE

Textile Expo Uzbekistan 2011 opens in Tashkent

The Textile Industry - Textile Expo Uzbekistan 2011 expo recently opened in Tashkent, Uzbekreport.com reported. The event was attended by more than 40 major companies from 11 countries such as Belarus, China, France, Germany, India, Kazakhstan, Latvia, Poland, Russia, Turkey and Uzbekistan. Official support is provided by the Ministry of Foreign Economic Relations, Investments and Trade of Uzbekistan, State Joint Stock Company O'zbekyengilsanoat, Association of fashion designers of Uzbekistan Osie Ramzi, SCO Secretariat, Tashkent city administration and the Chamber of Commerce and Industry of the Republic of Uzbekistan.

KYRGYZSTAN DIPLOMACY

China to render nancial assistance to Bishkek

Kyrgyz Minister of Natural Resources Zamirbek Esenomanov recently stated that China is willing to render financial aid to Kyrgyzstan for development of mining industry, news agencies reported. This is necessary, as outdated equipment does not allow us to carry out world-class certification of metals. We negotiate and seek for a solution apart from the budget costs. I participated in the summit of the 25 states in China, and there we agreed with the Chinese Minister of Land and Resources, said Esenomanov. He noted that the Kyrgyz President will visit China in March-April, 2012 to ink an agreement on technical assistance to the ministry of Kyrgyzstan. Some of the issues to be covered include upgrading of a laboratory, as well as providing three Kyrgyz northern expeditions with necessary equipment. Meanwhile, economy expert Zhumakadyr Akeneev, the head of the Oil Traders Association, said that Kyrgyzstan can no longer be an appendage of the Chinese economy. Speaking at the international conference Kyrgyz Parliamentary Democracy Development, he said that Kyrgyzstan re-exports a great deal of Chinese goods amounting to $10 billion. The country has stopped its own production in particular sugar factories do not work. Cheap Chinese fruits and vegetables push our agricultural products. We even buy artificial eggs in China, said Akeneev. He stressed that Kyrgyzstan needs to join the Customs Union, which could take two years.

NEIGHBOURHOOD

New Europe |Page 31 November 27 - December 3, 2011

RUSSIA GEORGIA ARMENIA

RUSSIA DIPLOMACY GEORGIA|DIPLOMACY

Lavrov calls for Trans- Dniester status within Moldova

On 22 November, Russian Foreign Minister Sergey Lavrov said during a visit to Moldova that the separatist region of Trans-Dniester, which is supported but not recognised by Moscow, should have a special status within Moldova, a former Soviet Republic of some 4.1 million. Lavrov called for a "long-term solution" for Trans-Dniester, which broke away from Moldova in 1990 and fought a war with Moldovan forces in 1992 that left 1,500 people dead. Negotiations on Trans-Dniester will resume this week in Lithuania, Moldova's Prime Minister Vlad Filat said on 22 November. His office said he and separatist leader Igor Smirnov decided to restart the talks after a meeting on 21 November in the separatist town of Bender, mediated by the Organisation for Security and Co-operation in Europe (OSCE). Russia, Ukraine, the European Union and the U.S. will also take part in the talks on 30 November. Talks stalled five years ago when Moldovan authorities and the separatists failed to agree on anything. Meanwhile, Lavrov reaffirmed his strong opposition to the nomination of

EU foreign policy chief visits Georgia, Armenia

EU High Representative for Foreign Affairs and Security Policy Catherine Ashton recently paid a visit to Georgia and Armenia. In Tbilisi, Ashton met with Georgian President Mikheil Saakashvili, Foreign Minister Grigol Vashadze and the Head of the EU Monitoring Mission in Georgia (EUMM) Andrzej Tyszkiewicz, according to news reports. It was Ashton's second visit to Georgia; she visited the country last July to open EU-Georgia Association Agreement talks. Prior her South Caucasus trip, Ashton said that the aim of his visit is to show the commitment of the European Union to the South Caucasus. Over the last year - in the context of the renewed European Neighbourhood Policy and Eastern Partnership - we have engaged in a process of significant strengthening of our relations with Armenia, Azerbaijan and Georgia, including through negotiations of Association Agreements. We are very keen to see the three countries progress with the necessary reforms, with European values as the guiding light. We also want to see steps forward in the resolution of conflicts, she said. According to Georgian Foreign Minister Grigol Vashadze, the recent visit of Ashton marks a new stage of Georgian-EU relations. The negotiations on deep and free trade agreement will definitely open before the end of this year, he said and added that launch of talks on visa liberalization would launch in the nearest future. In Armenia, Ashton was welcomed by Armenian Prime Minister Tigran Sargsyan. During the meeting, Sargsyan briefed Ashton the Armenian governments priorities and ongoing activities. The Armenian premier said that Armenias ties with the EU have entered a new development phase in recent times. As a result, Armenia has given a new impetus to its reforms.

Russian Foreign Minister Sergey Lavrov, right, and his Moldovan counterpart Iurie Leanca in Chisinau, Moldova, 22 November 2011. |EPA/DUMITRU DORU

Smirnov as presidential candidate in the upcoming elections, and his further tenure. I hope you have read the opinions expressed by journalists and political analysts, but also heard the opinions voiced by the Russian leadership. We have made our position extremely clear and it remains in force, Lavrov told a news conference in Chisinau when asked to speak about Russia's position on the upcoming

presidential elections in Transdniestr due to be held on 11 December. Earlier, the Kremlin chief of staff, Sergey Naryshkin, said that 70-year-old Smirnov, who has been in power for more than 20 years, is making a mistake in joining the presidential race. Unfortunately, in recent years he has built a climate of personal power around him, which resulted in a deep social and economic crisis, Naryshkin said.

ARMENIA|DIPLOMACY

RUSSIA DIPLOMACY

Yerevan, Bucharest to boost co-operation

Armenian Minister of Foreign Affairs Edward Nalbandyan met visiting Romanian Minister of Foreign Affairs Theodore Bakonski who was on a recent visit to Armenia. Nalbandyan said the traditional friendship between the two peoples creates a favourable ground for the further development of Armenian-Romanian relations. The Romanian minister thanked for the invitation to Yerevan and noted that his visit aimed to boost co-operation with friendly Armenia. They discussed a wide range of issues related to the cooperation in the political, economic, scientific-educational and scientific-technical fields and intensification of cultural ties. They also attached importance to the conduct of consultations between the Ministries of Foreign Affairs of the two countries, the cooperation within the framework of inter-parliamentary assemblies and the decentralised co-operation.

Moscow: New sanctions against Iran unacceptable

New international sanctions against Iran for its alleged efforts to develop a nuclear weapon are unacceptable and will only worsen chances of a negotiated solution, Maria Zakharova, a spokeswoman for Russia's Ministry of Foreign Affairs, said on 22 November. "Russia considers such extraterritorial measures as unacceptable and a violation of international law," she said. "This will seriously complicate efforts to develop a constructive dialogue with Tehran," Interfax quoted Zakharova as saying. On 21 November, the US, Britain, France and Canada announced tough new sanctions on Iran following a report by the International Atomic Energy Agency that Tehran was seeking nuclear warheads. Russia believes the sanctions, which would prevent energy industry companies from third party nations from doing business with Iran, will be counter-productive, Zakharova said. "An intensification of sanction pressure, which some of our (international) partners seem to want for its own sake, will not improve possibilities of bringing Iran back to the negotiating table," she said. Russia was also confused with US plans for Afghanistan. On 21 November, Russian Foreign Minister Sergei Lavrov said that Moscow has trouble understanding recent US policy announcements that it would pull its troops out of Afghanistan by 2014, but at the same time build new military bases there. "At least at the first glace, one contradicts the other," Lavrov said at a Moscow press conference. "We are trying to figure out what is going to happen." Interfax quoted Lavrov as saying it was important for the US and Russia to have a clear understanding of both countries' plans for Central and South Asia, particularly to coordinate efforts in countries with security problems like Afghanistan. "We need to understand what specific tasks these US bases in Afghanistan will have, once the troops leave," Lavrov said.

ARMENIA|BUDGET

RUSSIA ENERGY

PM: 2012 draft budget careful and realistic

Addressing the parliament, Armenian Prime Minister Tigran Sargsyan said that 2012 draft budget is cautious and realistic. There are two radical stances regarding the draft budget. One believes that the government will be unable to collect 101 billion drams in additional revenues while another sides says it can collect as much as 500 billion drams, Armenia Liberty.org reported. The premier acknowledged that that the shadow economy continues to comprise a large proportion of the economy. "We need to implement our policy in such a way as not create problems for businesses in terms of tax administration. This means that we must be extremely careful. Improvement of the tax administration is not a single day job, he said.

Gazprom sees slight fall in gas prices

On 21 November, Gazprom CEO Alexei Miller said in Serbia that the Russian gas monopoly expects a slight fall in prices paid by European consumers in the first quarter of 2012. "At the beginning of next year's first quarter we will have a small decrease of gas prices," Miller told reporters. He declined to say by how much he saw them falling. European consumers were paying an average of $446 per 1,000 cubic metres of gas in November. Total Russian exports to Europe are forecast at 152 billion cubic metres this year. "The level of export of Gazprom gas to European markets in 2012 will be higher than this year," Miller said, adding that the opening this month of the new Nord Stream pipeline under the Baltic Sea to Germany would play a part. "It will be influenced by the start of operations of the Nord Stream," he said. Miller also said that the construction of the planned South Stream gas pipeline will begin in 2013 and finish by the end of 2015, and there will be no delay in realisation of this project.