Author Archives: Doug Merrill

About Doug Merrill

Freelance journalist based in Tbilisi, following stints in Atlanta, Budapest, Munich, Warsaw and Washington. Worked for a German think tank, discovered it was incompatible with repaying US student loans. Spent two years in financial markets. Bicycled from Vilnius to Tallinn. Climbed highest mountains in two Alpine countries (the easy ones, though). American center-left, with strong yellow dog tendencies. Arrived in the Caucasus two weeks before its latest war.

And Over to You, Too, Mr Socrates

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Portuguese Prime Minister José Sócrates Carvalho Pinto de Sousa will need all of his namesake’s wisdom, and none of his taste in last drinks, as he takes over the rotating presidency (careful, the page has an annoying soundtrack) of the European Council this weekend.

Chancellor Merkel’s quiet persuasion has brought the EU much closer to a renovation of its institutions than seemed likely at the beginning of 2007. The governments now have a mandate to negotiate the details and prepare, by the end of the year, a treaty revision that can be ratified in 2008, or at the very latest in early 2009.

This half-year will also be a test of the “trio” approach to the rotating presidency. Starting this year, groups of three presidencies will work together to present a common agenda for the 18 months of their collective tenure. Anything increasing continuity in an office that countries can expect to hold about once every two decades (a far cry from the period when the rotation principle was established) is good news. Germany, Portugal and Slovenia worked together to set things up; now is the first actual transition within a trio.

The Portuguese don’t plan on wasting any time, and the intergovernmental conference will begin in late July. Coming just three weeks after the mandate, this is something like record time for the EU. And the plan is to wind it up by the end of the year. Given that past IGCs have tended to sprawl over about 18 months, this would be quite the accomplishment as well. Coming up with a Treaty text will, of course, be no small task, even with the former constitutional draft to serve as a basis.

On the other hand, there’s this “In addition, other priorities urgently deserve our attention.” That’s the horse’s nose under the tent. There follows a long list of things Portugal wants to do, including summits with Africa and Brazil, to say nothing of following up on the Lisbon Agenda (which to my thinking is what one should say at this point). The country’s leadership has limited personnel and resources. Taking their collective eye off the ball of institutional reform is asking for trouble on the Treaty front. It’s an accident of the calendar that Portugal has ended up with this responsibility for the Union, and that its more self-interested topics ought to take a back seat, but on the other hand, it’s an opportunity for a small state to have a historic achievement. Word to the wise, Mr S.

Over to You, Mr Brown

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Remember when Labour couldn’t win an election and the UK’s Conservatives made much of their reputation as “the natural party of Government”? Remember when all that changed? Eppur si muove.

Daniel Davies got the timing almost exactly right when his model showed that the greatest gap between the incentive for MPs to keep Blair and to push him out in favor of Brown would be in July 2007. For the record, DD made the prediction in April 2006. You’ll have to ask him whether he jiggered the model to max the value close to the ten-year anniversary. Economists can be that way sometimes. (Josh Marshall asked today whether there’s a similar time frame for Republicans to abandon Bush over Iraq. Maybe DD could gin up a new model? Or maybe another economist will?)

The BBC, as one would expect, are all over the changeover story. Links by the metric boatload at that page.

Now, none of the governments in the EU’s three largest countries is more than two years old. It’s a new era.

PwC Makes a Funny

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PwC was auditor for what was then one of Russia’s largest oil companies, Yukos. The Russian government took a serious disliking to Yukos and its then-president Mikhail Khodorkovsky, eventually putting the company effectively out of business (with key bits sold off to state-owned or state-controlled companies) and Khodorkovsky in jail. Now the Russian government is pursuing another case against Khodorkovsky, and it does not want PwC’s audits to be usable in his defense. So the Russian authorities claim that PwC has not been diligent in paying its own taxes. It has raided various offices and threatened to pull the company’s license to operate within the country.

Yesterday, PwC said that it was withdrawing its audits of Yukos from 1995 to 2004, after “new information came to light.” New information provided by the government. Will PwC say what that information is? It will not. Its management did offer an opinion on a related question:

PwC’s management said yesterday the decision to withdraw the audits had nothing to do with this pressure

That’s from the first page of the second section in yesterday’s FT. (Electronic version is in pay-per-view.) The reporter did not indicate whether it was said with a straight face or not. More here here here and here.

At any rate, the message is clear: Audits of businesses that are important to the Russian state will say what the state wants them to say. Caveat lector.

Questions You Don’t Want to Hear in Financial Markets

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From Bloomberg, via Calculated Risk and Brad DeLong:

“How many other hedge funds are holding similar, illiquid, esoteric securities? What are their true prices? What will happen if more blow up?”

When London owes its place as financial capital of the world at least in part to a slightly looser regulatory structure than New York, and things like this are happening in New York…

Going Down to the Wire

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No smoke signals from Brussels, but that isn’t surprising.

I suppose the various issues could be kicked down the road another six months and still be sorted out in time for the elections to the European Parliament in June 2009. That would leave a smaller window for ratification in the second half of 2008 and the first quarter of 2009. That might actually be marginally better, as it would allow for a closer focus on the unconstitution. On the other hand, if anything goes wrong during that period, the next Parliament gets elected under the old approach, and the EU’s institutional shortcomings become more apparent in practice.

Better to placate Poland with something workable, if illogical, and Britain with something that appears to cover their concerns. And that’s the way I’m still betting.

Potatoes are Root Vegetables

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Though not a square-root vegetable, at least not a square-root or death vegetable when you get down to it at the Brussels bargaining table.

The Kaczynski twins are providing some sparks in the run-up to this summit, and they are every bit as ham-handed as noted below and by Henry over here. One level of the game is to try to get Poland permanently into the EU big leagues with a prominent display of obstreporousness. This has a long, if not entirely honorable, history within the European institutions. See chair, empty and handbag, Thatcher’s. But what these episodes cost France and the UK in long-term ill will may well have been greater than the headline gains they resulted in. At any rate, the current potato casserole shows that Polish politicians have mastered the EU skills of brinksmanship, populist posturing and feather ruffling. Whether they have mastered the more productive arts is yet to be seen.

On the other hand, there really isn’t much time left to get an unconstitution (my word for the next EU treaty) rolling. Elections to Parliament are in 2009. Almost all of 2008 will be required for ratification. That leaves the second half of 2007 to fix the details. The Portuguese presidency, as worthy as it assuredly will be, won’t have the resources to put behind a treaty push that the German one has. And Merkel’s background has made her an honest broker on Central European issues in a way no other current leader I can think of could match. She’s been good enough at cajoling that Germany’s role as largest contributor has almost never been mentioned. But there’s that, too.

Anyway, as almost always in things EU, compromise at the last possible moment remains the way to bet.

Immigration and Germany, a Continuing Story

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The German newspaper whose web site is now marginally better organized reports that Germany will offer a legal means to regularize the residence status of people who have lived in the country for several years without having, shall we say, dotted all the i’s and crossed all the t’s at the local immigration office. State governments have also agreed to give some preference in civil service hiring to people from immigrant backgrounds. The federal change had been agreed to by the current grand coalition, and the agreement of the states obviously includes those with governments of many different stripes.

This is all to the good. Every step that has been taken away from the late Kohl government’s position that “Germany is not a destination for immigration” has been a step in the right direction. In recent years, the number of German citizens has held steady mainly because of people taking on citizenship, as deaths continue to outpace births. The head-in-the-sand view that there aren’t immigrants in Germany is steadily retreating to the margins, and rightly so. (In practice, according to the newspaper, the new regulation affects about 100,000 people who have been denied asylum over the years.)

One criterion is that the foreigner should not “have come into serious conflict with German laws.” I hope they don’t mean like this or this. On the other hand, Americans and Australians are apparently exempt from the language requirement for getting residence permits for family members. Jawohl, fair dinkum, guys.

Standing Watch in the Balkans

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As big-media Matt says, it’s all over the net already, but the question of whether Bush’s watch was stolen in Albania is a convenient hook to link to this hilarious but tasteless guide to what various groups of Europeans think about one another. Albania is near the end, in the Balkan section.

I have a friend in the US Embassy in Tirana, but she’s probably sworn to tell only the official line. Alas.

Update: Commenter FF points us to the reverse angle on the play. Interestingly, the current administration is telling the truth. And speaking of Albania, can I just say that Wag the Dog was a hell of a lot funnier during the Clinton years?

Simple Answers to Simple Questions

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Ron Asmus, of the German Marshall fund, asks

“Is this president and Administration capable, in its last 18 months in office, of using this new lineup [of leaders] in Europe to begin to lay the foundation for a new relationship for his successor?”

No.

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Concept of simple answers gleefully lifted from Atrios.