Best of the Blogs – 29/05

Every month, the Stockholm Network summarises some of the best pieces from the blogs of our network member think tanks, including English and foreign language articles.

NATO ponders austerity and US ‘pivot’
From the Centre for European Reform blog

In this post, the Centre for European Reform’s Tomas Valasek explores the future prospects for NATO, as leaders gather in Chicago for an important meeting. The post argues that the alliance between Europe and the US could come into question, with the US beginning to pivot its military focus on the Pacific region and Asia. Similarly, it suggests that the US has begun a retrenchment of military spending and is looking to use more diplomacy within the Atlantic region instead of military force. Valasek says that European countries should be buying more weapons and increasing spending on the military, as a way to reduce the gap that is being created by this US ‘pivot’, but acknowledges that, since Europe is in the midst of an economic crisis, many countries are currently taking measures to cut defence spending instead.

Valasek foresees three impacts as a result of this. The first is a reduction in America’s ability to come to the defence of the continent with the Pentagon instead shifting the burden of defence onto European militaries. The second is that operations based on humanitarian grounds rather than self-defence will less likely to be led by the US, for example, when US forces turned Libya over to the UK and France after destroying Gaddafi’s air defences. The third is that NATO will be likely to participate in fewer wars, as the human and political costs will rise for European nations as the result of a smaller US military presence. As a result, Valasek suggests NATO may need to consider reducing its future ambitions.

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Unexpected pieces of good news indicate more positive scenario for eurozone
From Business for New Europe blog

In this Business for New Europe blog, Phillip Souta discusses three new pieces of economic news that may paint a different picture for the future of the eurozone than is characterised throughout the media at present. He points out that the eurozone is not in a recession, driven by Germany’s 0.5% growth in Q1. This contrasts with the UK which, although experiencing good employment numbers, is technically in recession. The second piece of information comes from a report put out by Bank of America/Merrill Lynch, which reported that 60% of fund managers believe the ECB will keep liquidity taps open, whilst acting to stabilise markets and serve as a push on inflation. The third piece of news is that German policymakers have hinted that they may be willing to accept inflation of 2%, following the election of François Hollande in France.

Going along with these pieces of news, the unexpected move by Greece to repay a €450 billion bond may signal a turning point if Greek citizens decide to vote for a pro-euro party in June. Souta suggests that the outlook for the eurozone may not be so stark, although a lot is riding on the Greek elections to come.

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UK Government To Merkel: Move To Fiscal Union Or Else…
From Open Europe Blog

In this blog, Open Europe points to the trend of UK politicians voicing their opinions on the eurozone. In particular, it points to their statements that the eurozone needs to move towards full fiscal integration to prevent a full-blown economic crisis in Europe, which could potentially spread across the globe. It suggests that there seems to be a cross-party agreement in the UK that there needs to be full fiscal integration.

In doing so, it highlights the UK deputy prime minister Nick Clegg, a Liberal Democrat, expressing the need for eurozone countries to either “share debt or deal with shocks in one part of the system through fiscal transfers”; the chancellor of the exchequer George Osborne, a Conservative, emphasising burden-sharing through possibly issuing Eurobonds; the UK prime minister David Cameron stated that the Greek people need to vote to stay in the eurozone and fulfil the commitments they have already made; and shadow chancellor Ed Balls, from the Labour Party, expressing the view that countries like Germany will need to bail out countries like Greece and Italy to prevent a crisis. The post goes on to say that German politicians and the press have remained fairly silent on the issue and have not responded to the lectures thrown out by politicians in the UK.

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Acropolis Now: reaching the point of criticality in the Eurozone
From Centre for Policy Studies blog

In this post from the Centre for Policy Studies, James Conway compares the current eurozone crisis to ‘criticality’, the term used by physicists to describe the process by which material attains critical mass to bring about a nuclear reaction. Conway suggests that the chain reactions have already begun and may be leading to the point of no return within the eurozone. He argues that there are no longer any right moves to be made by European policymakers, only less-wrong ones that will either lead Europe into a depression or create huge inflation, although the scope and depth of these may not be immediate.

Conway calls for action now and says decisions need to be made very soon in order to prevent a global financial crisis, suggesting that the eurozone crisis will be likely to have future implications for the global economy. In doing so, he highlights the need for strong leadership and decision-making for the future of the eurozone, and possibly the world economy, to be saved.

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Europe wants to grow
From Ökonomen Blog

In this post on the German Ökonomen Blog, Markus Mill discusses how François Hollande has stated that the EU fiscal pact, which has already been proposed, and ratified by some countries, must be renegotiated to include more plans for growth within in EU countries. The post is part of a series of posts on the Ökonomen Blog that looks specifically at growth and is hosted on a special “Wachstumsblog” (Growth Blog).

The post discusses Hollande’s insistence on including better mobility programs, to allow European citizens to move to different countries for work more easily, as part of the pact. It says that the widely-held view is that labour mobility between EU countries is too rigid in comparison to other regions, prompting Hollande’s calls for these programs. The development of incentives for young people to find employment is also something that Hollande calls for, as well as reforms to education and training policies to ensure that future generations can find employment. Mill concludes by arguing that Hollande is offering a fair compromise in regards to his growth pact, allowing German chancellor Angela Merkel to get her fiscal pact, whilst the hope is that the chaos in Greece will cause Greek citizens to elect a government that will fulfil its debt obligations.

To read the full post (in German), please visit: