Surprising Flat Tax Support

30 augusti 2005

Wahlkampf: SPD konzentriert sich auf Kirchhof – Politik – SPIEGEL ONLINE – Nachrichten

It’s astonishing how the flat tax concept has become a central issue in the German election campaign.

The SPD are now training all the guns they have on Professor Kirchhof and his 25 % flat tax idea.

But so far it does not seem to be working. Representatives of the so called social wing of the CDU have now said that they find a 25 % tax paid equally by all better than the present system where all sorts of deductions means that the better off at the end of the day probably pay less.

And an opinion poll by the Der Spiegel magazine revealed that while 39 % opposed the idea, it was supported by no less than 48 %.

Big Iraqi Battle Coming

29 augusti 2005

UK EU Presidency 2005 Foreign Policy Statements

Like everyone else, the European Union has officially welcomed the publication of the draft for the new constitution of the new Iraq today.

But beneath the official statements there is a deep uneasiness over what will happen next. The constitution undoubtedly represents great progress for both Iraq and the region, but it’s essence seems to be a deal between the Shiites and the Kurds at the expense of the Sunnis.

This is not really what the United States sought. One gets the impression that even the high-level interventions by President Bush fail to achieve a more balanced outcome.

Now, this draft constitution should be the subject of a referendum in all of Iraq in October.

That will be a critical and in all probability fiercely contested battle.

Accordig to the Transitional Administrative Law, the constitution can be defeated by a two-thirds majority in three of the provinces of the country.

This was a provision written originally to defend the Kurds by giving them the de facto power to defeat any Iraqi constitution they did not like.

But now it’s the Sunnis that will be in focus. Sunnis make up a sizeable majority in two provinces, Anbar and Salahuddin, and a slim one in Nineveh, which also has a large Kurdish population.

So we should expect the critical battle to be played out in the province of Nineveh, centered around the city of Mosul.

Flat Tax Debate Continues…

29 augusti 2005

CDU Deutschlands

In the German election campaign, the flat tax issue has suddenly become one of the most discussed questions. I’m sure it wasn’t planned that way, but that’s the way it has turned out.

When the CDU meet in Dortmund yesterday for their election campaign congress, it was obvious that the selection of tax expert Paul Kirchhof for the Merkel team had very strong support from the CDU grassroots.

Different grandees – notably Bavaria’s Edmund Stoiber – have made clear that they have no love lost for the Kirchhof idea of a 25 % flat income tax for Germany. But this hasn’t stopped the debate.

In Dortmund, Angela Merkel praised Kirchhof as a man of courage without going into any details on the tax issue. But the message was clear enough.

And Kirchhof notes that the announced CDU/CSU plan for tax cuts in the years ahead will be his priority, and what he is discussing is what would be desirable thereafter. CDU financial expert Friedrich Merz has joined in and said that it should certainly be both possible and desirable to move in that direction, although the timing will be a difficult issue.

For Paul Kirchhof it is the tax competition coming from the Baltic countries, Slovakia and others and the success these countries have had that makes it imperative for Germany to move forward more radically.

The CDU/CSU plans already foresees lowering the top tax from 42 to 39 %, but that’s clearly not enough in the present sitiuation. Europe is changing fast.

It will take time for Germany to change, but the Kirchhof debate has certainly injected a new urgency in the debate.

In the meantime we might well see Poland taking a big jump in the same direction after its September election…

A Changing Baltic World

28 augusti 2005

The other day I was in Helsinki discussing business developments in our rapidly changing part of the world.

Little more than a decade and a half ago I remember how there was an empty and drab Soviet vessel going from Helsinki harbour to neighbouring Tallinn in the then Soviet Estonian Republic three times a week or something of that order.

Contacts were nearly non-existent. Business did not exist. Controls were extremely strict.

Now things are – mildly speaking – somewhat different.

Any given day there are now in the order of forty (40) departures by different forms of ships from Helsinki to Tallinn.

Add to that the helicopter service several times every hour between the city centres. The journey itself takes 17 minutes. And then there is of course the regular air services for those interested in connecting primarily with Helsinki Airport and the route network there.

Business of all sorts is booming. Just one example of interest.

The Finnish air carrier Finnair has put all its turboprop domestic traffic in a separate company which it has registred in Estonia and based in Tallinn. Not only are the costs significantly lower, but I was told that the work ethic has also improved markedly.

It must be unique for a flag carrier of this sort to offshore its domestic operations to a nearby country.

But this is the new Europe emerging in the Baltic world. At the end of the day, we are all the winners.

Dubious Letter on Turkey

26 augusti 2005

05_08_26_Brief_Tuerkei.pdf (application/pdf Object)

With the German election now officially set for September 18, the battle is starting to heat up.

Opinion polls continue to show that it will be extremely tight between a majority for a centre-right coalition between CDU/CSU and liberal FDP and a situation in which a great coalition with the SPD would be the only viable option.

Suddenly, CDU/CSU has decided to insert the issue of Turkey in the campaign.

In a letter today to the centre-rights heads of government in the European Union, Angela Merkel and Edmund Stoiber argue that the mandate for negotiations with Turkey should include also the option of what they call a priviliged partnership. In their opinion, the inclusion of Turkey in the Union would overburden it in political, economic and social terms.

You can look at this letter in different ways.

One is obvious. It could be seen as a blatant attempt to play on the anti-Turkish and anti-Muslim sentiments that are undoubtedly there in significant parts of the German electorate. The nuances in the letter are certain to be lost in the more simplistic debates around the ”stammtisch” in the local hang-outs around the country.

Another is to look at these nuances. The letter does not oppose the opening of accession negotiations with Turkey on October 3rd. Its key demand is that in addition to the aim of membership of these talks there should be another option included.

The one way or the other there is likely to be some reference of some sort to some such other option. The informal meeting of EU foreign ministers in Britain at the end of next week is likely to discuss some phrases along those lines.

But what it will mean remains unclear in the extreme.

While membership is well defined by the different articles of the different treaties as well as the commitment in all the so called aquis communitaire, no one really knows what the so called privilgied partnership means.

It can be argued that this is what Turkey already has. It is part of the customs union of the Union, and is thus more closely integrated than Switzerland, although less than Norway. Through the so called Berlin Plus arrangement between the EU and NATO, it is closely affiliated with much of the operations of the common security and defence policy.

The more priviligied a partnership becomes, the more complex will it be to sort out all the issues of co-decisionmaking. As the example of Norway shows, these issues are nearly impossible to sort out, and one tends to end up in a situation where the country in question is far more of a satellite than a partner.

A negotiation has to be between two parties. It remains to be seen if Turkey is interested in negotiating something that no one really seems able to define and which seems designed more to keep them out than to help them in.

I consider that less than likely.

In addition, the letter suddenly raises the Cyprus issue in a way that is just uninformed and wrong. Again, one gets the impression that its authors are just searching for ways to keep Turkey out.

I belong to those that hope that there will be a clear majority for a new government in Berlin. As Chancellor Schröder explained himself as he asked the Bundestag to vote his government out, the red-green majority has lost the ability to reform and to govern.

But I say this with the great reservation that there is a clear risk that such a new government in Berlin will mess up a most important part of the European efforts to create peace, stability and prosperity in our part of the world.

After the Boer War…

26 augusti 2005

Guardian Unlimited | Guardian daily comment | Stagger on, weary Titan

Timothy Garton Ash sees the Washington of today in the perspective of London in the aftermath of the Boer war a century ago – and the powers of the United States in the world today in the perspective of the powers of Britain in the world then.

Iraq is America’s Boer war, in his perspective. A war that turned out to be more complicated than anticipated, and drain the resources also of the global superpower of the day.

And if Britain then saw the gradual emergence of a Germany that was preparing to challenge its global supremacy, there is the feeling in Washington that the rising Asian power of China will change the equation in an equally fundamental way.

But Timothy Garton Ash has words of warning and caution:

If you are, by any chance, of that persuasion that would instinctly find this a cause for rejoicing, pause for a moment to consider two things: first, that major shifts of power between rising and falling great powers have usually been accompanied by major wars; and second, that the next top dog could be a lot worse.

This, then, is the time for critical solidarity.

Dangereous Constitution?

25 augusti 2005

Constitution Sparks Debate on Viability

Opinions are distinctly mixed on the draft for a new constitution for Iraq that seems to be emerging.

Apart from the issue of the role of Islam in Iraq – where the constitution seems to be along the lines that we previously saw emerging in Afghanistan – it is the division of powers between the centre and the different parts of the country in the emerging federal structure that leads to debate.

Anthony Cordesmann, who has been following Middle East issues closely for decades, says that ”rather than an inclusive document, it is more a recipe for separation based on Shiite and Kurdish privilege.”

If that is the case, there are clearly dangers ahead. A Sunni-based insurgency might accelerate rather than gradually die down. And any such insurgency risks triggering moves by the Shiites and Kurds that further endanger the unity of the country and brings it closer to a bloody civil war of disintegration and chaos.

The only long-term winners in such a situation would be Iran as well as the Islamic terrorists.

Nationalism and Militaristic Anti-Westernism?

23 augusti 2005

Hitting Political Turbulence

There is no doubt that the Putin regime in Russia is rapidly losing in both respect and popularity. The later is reported by those polling agencies able to do so, and the former is obvious in any conversation with any Russian citizen about anthing these days.

According to the constitution, Russia will have elections for a new Duma in 2007 and new presidential elections in 2008. Having then already served two terms, Vladimir Putin will have to step down and leave room for someone else, much like what is the case in the United States.

There are few that believe that this is what will actually happen. For some time, it’s been standard on the Moscow rumour circuit to speculate about different ways in which Putin and his entourage could remain in some sort of control.

But all those speculations have centered on 2008.

Now, things are changing. There are Western observers who don’t really see that the regime, on present trends, can last that long. The signs of decline, division and decay are simply too many, they argue. And there are certainly Russian observers that tend to agree.

So it’s hardly surprusing that one encounters speculations about possible Kremlin plans to engineer some sort of transition to a Putin 3 regime much earlier.

The linked article from Moscow Times notes some of the signs that can possibly be detected of such plans being prepared. And it notes that the political platform that then seems to be emerging is one of intense nationalism and discreetly anti-Western militarism.

These, one should note, are not speculations or comments originating in circles far away that could be expected to say something along these lines.

These are speculations from well inside the inner ringroad in Moscow.

And accordingly worth reading and contemplating.

The Polish August of 1980

22 augusti 2005

Welcome to NSZZ Solidarnosc Web Site!

History passes by very fast in our fast-changing world.

This month it is a quarter of a century since the wave of strikes on the Baltic coast of Poland that rocked that Communist country and played a key role in initiating the sequence of events that lead to the collapse of communism in Europe and the reunification of our continent.

These very days – a quarter of a century ago – representatives of 50 000 to 90 000 striking workers in some 260 enterprises along the entire Baltic coast come together to set up a committe that issued a 21-point manifesto with demands that challenged the very foundation of the regime.

Based also on the experience of the suppresed weave of strikes a decade earlier, the strikers this time decided to put forward demands that were also of an obvious political nature.

Apart from de facto demanding that free trades unions should be established, they asked for censorship to be abolished and political prisoners to be released.

Some of the demands made in August 1980 in Gdansk were very pragmatic and of an economic and social nature. Communism was characterized by constant shortages of consumer goods and bad management and as a result, workers’ protests in different countries of the communist bloc erupted. Previously, they had often been suppressed by a combination of force and promises of pay rises.

In Gdañsk in August 1980, the regime initially followed this pattern and agreed to significant pay increases for workers. But that wasn’t enough. The strike went on and grew in size and impact – and at the end the regime had little alternative than to agree to the 21 demands.

The immediate result of the acceptance of the demands was the foundation of the independent free trades union NSZZ Solidarnosc, which had more than 10 million members and became a massive social and political movement.

The political confrontation that followed between a retreating and desperate regime and the new aspirations of freedom brought Poland to the brink of Soviet military invasion and eventually the imposition of martial law, a brutal crackdown and the outlawing of Solidarnosz in December 1981.

But Solidarnosz survived as an underground organization and formed a team of negotiators, who held talks with the government at the so-called round table in 1989. The communist party was forced to make new concessions, which led to the first democratic elections in the communist bloc. Subsequently, the elections became an impetus for other countries of the Soviet bloc to fight for freedom and fostered the collapse of the Soviet empire from 1989 and onwards.

When the striking workers at the Lenin Shipyards in Gdansk challenged the authorities, they paved the way for the development that would not only lead to the collapse of the Soviet Empire in Europe, but also to their country Poland today being a proud and important member of both the European Union and NATO.

It is certainly an event both remembering and celebrating.

Sharon The Right Man

21 augusti 2005

Israel Policy Forum

The Israeli disengagement from Gaza has been completed. All in all, the complex process worked out better than expected.

In the linked letter, the chief analysts at the Israel Policy Forum in the US applauds the statesmanship of Ariel Sharon in carrying out this fundamental shift in his and in Israels policy.

The continuation of disengagement will of course be far more difficult, but that there has to be a continuation is beyond doubt. Israel must change course in order to be able to make peace and survive as a democracy.

Maneuvering Against Turkey

21 augusti 2005

EU Enlargement: Cyprus Is a Poor Excuse for Turning Away Turkey

As the politics of Europe is starting to come back from vacation, Turkey is one of the issues looming large on its agenda.

On the one hand there is the decision to start accession negotiations with Turkey on October 3rd. On the other, there are the different maneuvers by those not really wishing this to happen.

At the moment it seems as it is France that is intent on throwing sand in the machinery. President Chirac has certainly been in favour of opening up for Turkish membership of the European Union, but suddenly they seem to be having cold feet in Paris.

Prime Minister de Villepin has been making different noices, putting up new conditions relating to Cyprus that are both unfair and impossible for Turkey to meet. There are rumours of Paris trying to encourage Athens to take as hard a line as possible. And Athens has been lining up with Nicosia to produce a list of different new demands they want to insert into the process.

Phil Gordon of the Brookings Institution in Washington is a knowledgable observer of the European scene, and commented on these different maneuvers in the linked piece in the International Herald Tribune.

We’ll see what happens. A critical meeting of COREPER – the powerful Committee of Permanent Representatives – that was supposed to have been held in Brussels August 24 has now been postponed for a week to make room for more bilateral diplomacy.

The UK Presidency is firm to secure an opening of the accession talks on October 3rd. And the European Commission seems to be of the opinion that all the relevant criteria for that has now been met.

So we’ll see what happens.

In the meantime it is important to notice how the European urge continues to change Turkey, now clearly manifested in Prime Minister Erdogans ground-breaking visit to the Kurdish-dominated Southeastern provinces of the country.

Flat Tax in Germany?

20 augusti 2005

Steuerreform Deutschland Politik FOCUS Online in Kooperation mit MSN

It will certainly not happen in the immediate future, but the fact that the man that’s been assigned the portofolio of economy and finance in opposition challenger Angela Merkel’s team has spoken out in favour of a flat tax is significant in itself.

Professor Paul Kirchhof is a recognized expert in his field. His appointment to the team has been widely applauded.

And then suddenly he has said that his vision is a flat income tax of 25 %. That’s a fairly radical departure, also fron the more modest ambitions of the common CDU/CSU platform. Accodingly, Angela Merkel has said that it is the platform that applies and nothing else.

But the genie of a more radical reform is out of the bottle, and it can’t be brought back into it again.

It’s as sure a sign as you can ask for that times are really changing.

Base Camp Transfer

17 augusti 2005

Don’t count on me posting comments here during the next two or three days, since I will be busy transferring ”base camp” from the Dalmatian coast of the Adriatic in Croatia back to Stockholm up by the Baltic Sea.

But after that I’ll certainly be back. Europe is slowly returning to business after the summer of 2005.

The Asian Age Coming

17 augusti 2005

Chart: Reshaping The Global Economy

Although I belong to those that believe that we will see a revival of the larger European economy in the years and decades ahead due to the restructuring now going on, there is no doubt that it is the Asian age that we are entering.

The linked graph from the latest issue of Business Week illustrates the conventional wisdom on how the global economy will change during the first half of this century. It’s dramatic.

Things might develop differently, of course. China faces major challenges, and the weaknesses in its system are often overlooked. India, with its enormous potential, could face ethnic strife and political paralysis if things get really bad.

But overall the trends that we see in the graph are likely to endure over the coming decades.

After the first phase of globalisation with a European face, and the second phase with an American facee, we will surely enter a third phase of globalisation with an Asian face.

160 000 Dead in Chechnya

16 augusti 2005

Death Toll Put at 160,000 in Chechnya

A recent report estimates that app 160 000 people have died in the two conflicts in Chechnya since late 1994. It’s a number higher than previous estimates.

There are no entirely reliable estimates available yet on how many died in the decade of war in the Balkans during the 1990’s. Frequently stated figures are in all probability too high.

My semi-informed guess is that when we know those numbers we will find that the number of deaths as now reported from Chechnya will be higher than in all of these Balkan wars taken together.

Horrible. In both cases.

Important Battle over Internet

16 augusti 2005

Internet Stability, Security Must Be Maintained, U.S. Says- U.S. Department Of State

The managment and governance of the Internet is again becoming a not insignificant international issue.

There is considerable pressure from some countries for that entire issue to be taken over by some multilateral international body. After all, mail issues are coordinated by the International Postal Union (IPU), and telephone and telegraphd dito by the International Telephone and Telegraphy Union (ITU), the one in Berne and the other in Geneva.

Many of the corresponding issues for the Internet are however dealt with by the non-governmental ICANN organisation, headquartered in California and operating under US laws. In the background howevers a certain role of the US government, reflecting a part of the history of the origin of the system.

Now, a UN panel has issued a report with a series of alternatives for the future, and the US government has issued its position in a rather extensive paper.

In essence, the US position comes down more in favour of the ICANN than of the ITU.

I have a fair amount of experience of both UN organisations and of ICANN, and I have to say that I see much greater flexibility and transparence of these issues remain with ICANN than if they disappear in a gigantic office building and multilateral organisation in Geneva.

The issue is important. Those that take an interest in the future of the Internet and what it represent should take an interest and try to influence the outcome.

Europe for Peace

16 augusti 2005

85995.pdf (application/pdf Object)

It is highly significant that former President of Finland Martti Ahtisaari has succeeded in forging a peace deal between the Government of Indonesia and the Free Aceh Movement.

It brings the prospect of peace to that troubled province after 30 years of more or less intense fighting, and should also have an effect on other potential troublespots in the vast archipelagoe of Indonesia.

The implementation of the agreement will now be monitored by an EU-led Aceh Monitoring Mission.

Both the way in which this agreement has been negotiated – by a non-governmental organisation under Martti Ahtisaari – and the way its implementation will now be assisted shows the way in which Europe can play a constructive role in trying to solve different conflicts also in more far-away regions of the world.

The world is likely to take note.

Wise Words on Iran

16 augusti 2005

Talk to Tehran

Fareed Zakaria has some wise reflections on how to deal with the Iranian nuclear issue that goes along the same lines as I have been advocating here.

With the military option de facto a non-option, there has to be an intense efforts to develop the political option. As this is unlikely to lead to a rapid solution of all issues, it’s a question of managing the issue over time in such a way that the incentives for the Iranian leadership to go nuclear are gradually diminishing.

There are examples of this succeeding in other cases in the past, although there are of course also examples of it failing. Both Pakistan and India went nuclear in spite of intense pressures to prevent it.

It’s time for faresighted statesmanship on a very critical issue.

Goodbye to ‘Greater Israel’

15 augusti 2005

Why ‘Greater Israel’ Never Came to Be – New York Times

With the beginning of the evacuation of the settlements in Gaza and the north of the West Bank, Israel passes a milestone in its history. It’s a deeply controversial one, and we are likely to see a substantial drama played out in the coming days.

In essence, it means that the dream of a Greater Israel is being abandoned. And it is being abandoned by one of those that championed it strongest, namely Ariel Sharon.

There are very solid reasons for this. As the linked article from Sunday’s New York Times point out, the contradiction between the facts of demography and the principles of democracy made it necessary for Israel to re-define itself:

On Thursday, the newspaper Haaretz reported that the proportion of Jews in the combined population of Israel, the West Bank and Gaza had dropped below 50 percent for the first time. This means, many Israelis argue, that unless they yield territory, they will have to choose a Jewish state or a democratic one; they will not be able to have both.

Israel has deceided that it would like to remain a democracy. That should be applauded and supported by the world.

The evacuation from Gaza is a first step. It’s fiercely opposed by those extremists that see Israel not as a state based on democracy but as based on religious and national myths that today leads to occupation and tomorrow will lead to massive ethnic cleansing and conflict in the region for generations to come.

Today, the leaders of Israel need our support as they face down the fundamentalists and extremists in their own nation.

War Card Again in Germany?

14 augusti 2005

Kanzler-Wahlkampf: Schr�der startet Kampagne mit Bush-Kritik – Politik – SPIEGEL ONLINE – Nachrichten

Although the election hasn’t been officially set yet, the campaign for the German election already seems to be in full swing.

It was to be expected that there would be a certain decline in the very high support for the CDU/CSU and a certain revival in the figures for SPD.

But even if this has happened, the distance between them is so substantial that it is virtually inconceivable that the SPD will be able to catch up with its chief opponent. The latest opinion poll figures gives app 42 % for CDU/CSU and app 28 % for SPD. They are in different leagues.

Nevertheless, the CDU/CSU seems to have had a less than stellar start to its campaign. The proposal to increase VAT was unlikely to be an instant crowd-pleaser, but neither does it seem to have developed into a major burden. Instead, it’s different verbal gaffes by different leading persons – now the CSU leader Edmund Stoiber – that has caught the attention and put the party somewhat on the defensive.

In itself, this might be more good than bad at this early stage of the campaign. A victory was taken too much for granted. Now it’s obvious that it will be a fight, and that concentration is necessary in order to truly win it.

For the SPD, the strategic dilemmas are very great indeed.

On the top level, it is flatly refusing to consider any “red-red-green” coalition that includes the leftist alternative that is essentially based on the old structures of East German communists, although now dressed in the clothes of general leftist populism. But there are dissenting voices, and so far the SPD has yet to find a consistent way of dealing with this new and strong threat to part of its electoral base.

Neither is it willing to consider the possibility of a big coalition with the CDU/CSU. Although such coalitions do exist on the state level, any discussion on it at the federal level is likely to play into the hands of the leftist. Influential figures in the present government are however indicating that they do see a grand coalition as a viable – perhaps even desirable – alternative.

Thus it isn’t easy for the SPD to get a clear line on one of the key issues of the campaign. And the problem is most unlikely to go away.

But suddenly Gerhard Schröder is back on a beaten track. In Hanover yesterday, he brought up the Iran issue, repeated the importance of denying Iran access to nuclear weapons, but stressed that there is no military option, saying with a very clear reference to Iraq and his opposition to the Iraq war that we have seen that it doesn’t work.

He is of course right in that there is no credible and effective military option in this case. But when President Bush indicated in an interview to Israeli television that all options are open, I think it should rather be seen as an attempt to reinforce the diplomatic track. There is no eagerness for new wars in the region in Washington.

But for Gerhard Schröder belligerent rhetoric over Iran in Washington is of course a gift from heaven in his campaign. Opposition to war is a strong feeling in German society, not the least in the important elderly part of the electorate.

Policy towards Iran will have manifold repercussions during the months to come. It’s unlikely that Schröder can use even very misplaced words in Washington to such effects as he did in the 2002 election campaign, but the issue is certainly worth watching carefully.

War is not a popular thing in present-day Europe. Some might think that is a sign of weakness. Others might see it as a source of strength after the centuries of war that Europe itself has seen.

Diplomacy backed by force is sometimes necessary.

But it must be handled with the utmost care. Otherwise it just carries failed diplomacy by transmission belt into failed wars.

That’s really something we can’t afford.