Launch of the Darfur Regional Authority: a step forward?

Sudanese President Omar al-Bashir

Last week Sudan’s President Omar al-Bashir inaugurated the Darfur Regional Authority (DRA), a body intended to kick-start post-war reconstruction  and facilitate the peace process in the war-torn region of Darfur in western Sudan. The launch of the new body marks an important milestone in the implementation of the Doha Document for Peace in Darfur (DDPD), the peace agreement signed in Qatar last year between the Sudanese government and one of Darfur’s rebel groups, the Liberation and Justice Movement (LJM).  The deal has been rejected by other rebel groups, including the Justice and Equality Movement (JEM), which holds parallel talks with the Khartoum government.

President Al-Bashir announced the creation of the DRA on Wednesday in the region’s capital Al Fasher as well as a general amnesty for the prisoners of the LJM. He also urged the rebel movement to ensure that the security arrangements of the deal, which would envisage the integration of LJM fighters into the Sudanese Armed Forces (SAF), are correctly implemented. This would avoid a repeat of the failed 2006 Abuja agreement in which Minni Minnawi, the one rebel signatory, went back into rebellion after having rejected the security arrangements. Mr Bashir stressed the importance of repairing the social fabric of local communities after the nine-year war and bringing criminals to justice all the while inviting the non-signatory rebel groups to join the peace accord.

UN Secretary-General Ban Ki-moon welcomed the inauguration of the DRA, recommending that the parties “take all necessary measures to equip the authority to fulfil its responsibility to promote reconciliation, early recovery and development so that peace dividends are realized by and equitably shared among the population of Darfur”. Ban Ki-moon further urged the rebel groups who have not signed the peace accord and the government to enter into negotiations for a final agreement immediately so as to pave the way for a comprehensive peace process.

Similarly the President of Chad, President Idriss Deby, who is believed to have supported the JEM during the war because he belonged to the same ethnic group as its former leader Khalil Ibrahim, pledged to put his country’s resources at the disposal of Sudan to aid the peace process and stressed the importance of dialogue as the only conduit for the resolution of problems.

Behind the bullish talk however lies a formidable task in ensuring that the Qatar peace process is actually implemented successfully. The appointment of an LJM member, Tijani Sese, as head of the DRA marks an important step in fulfilling a power-sharing arrangement, along with the inclusion of LJM ministers in the federal government. However it is as yet unclear how the DRA’s executive body will work with other authorities such as the state governors, who will probably be loath to accept a reduction in their powers. Whilst the launch of the DRA is no doubt a significant development in the long peace process in Darfur, the exclusion of other rebel groups and other unresolved issues presage a long road ahead.

Egypt's revolution: one year later

Father and boy celebrating the one year anniversary

“Mubarak was the head of a pyramid and what we find is that while he has been toppled, the rest of the pyramid is still there.” These words, spoken by a protester on Tahrir Square who gathered with thousands of fellow Egyptians to commemorate the first anniversary of the revolution that toppled Hosni Mubarak’s regime, encapsulate the ambivalent feelings surrounding the revolution. On the one hand are those who see the 25^th of January as a celebratory day, which saw Egypt break free from the shackles of decades of authoritarian rule under Mubarak. In the words of Wael Ghonim, the young Google executive who became the face of the revolution after creating a Facebook page for the protesters, “a psychological barrier of fear has been broken”. On the other side we have the invigorators who cast doubt on the achievements so far. Shaimaa Zain descended onto Tahrir Square a year ago to demand change and claims the reason she has returned is that “things haven’t improved. In fact they got worse”. She echoes the fears of many other compatriots in in saying there is a conspiracy between the military and the extremists.

The parliamentary elections saw the overriding victory of the Muslim Brotherhood, long smothered under Mubarak’s rule, and the more extreme Salafists who together control a majority of seats in parliament. Some worry that the Islamists will not challenge the power of the military, which still sits comfortably at the top of the pecking order and has been keeping the democratisation process going at a leisurely pace. The fear is that the Islamists will not mobilise their popular support to displace the military’s coddled position of strength because the current democratic process has paved their way to power; similarly the military will ensure the process ratchets ahead in such a way as to favour the Islamists. However some have dismissed such fears as unfounded. Egypt’s political class is divided in a triangular contest for power between the military, the Islamists and the revolutionaries.  Roger Hardy explains that the military and the Islamists are actually wary of one another, despite having been forced into “tactical accommodation” by events in the past.

Roger Hardy further claims that the army has unwittingly found itself in the limelight of the revolution, and is eager to return to the sidelines. Provided, of course, that its core interests are not threatened, such as its budget and perks and privileges. However this is probably an excessively sanguine view of the situation. Whilst a seamless transition like that in Tunisia was perhaps a bit elusive for a country like Egypt, the military certainly seems to have embraced its newfound position of power with gusto. The statement on its Facebook page for the eve of the one year anniversary emphasised its prominent role in the revolution: “the military protected the revolution, stood with its objectives, embraced its demands and promises to fulfil it”. The revolutionaries and liberals thus find themselves in an awkward position where they need the military to guide the delicate political process whilst simultaneously calling for its exclusion from the political scene.

 Having achieved their unifying goal, namely the end of Mubarak’s regime, the revolutionaries have failed to coalesce into a credible political force that can counteract the strength of the military and the Islamists through the normal political channels.  They have largely failed to translate their effervescent moral force into an efficient election-winning machine. For now the world waits with bated breath to see whether political Islam will indeed prove to be the democratic model for the Arab world. Revolutions, by their very nature, are rarely predictable. Egypt has been no exception.

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A contested nationhood

Giuseppe Garibaldi

Compared to France’s exuberant fireworks on July 14^th to celebrate Bastille Day, Italy’s 150 year anniversary was a paltry affair. The Northern League opposed the very idea of celebrating an event it regards as a catastrophe; one of its mantras is that it was not so much a unification as a division of Africa. The party believes that the Risorgimento (as the unification process is known) forever glued the parasitical south of the country to the vibrant north, draining the state coffers. However the south also holds its reservations about the benefits of unification; Naples, once the third-largest city in Europe after London and Paris, is now arguably part of Italy’s periphery, making the headlines only for its rampant crime or stagnating piles of rubbish. The central government transfers to the south have done little to ameliorate its dire economy and thus give its inhabitants something to be grateful for.

Despite Italy’s booming growth after the Second World War, the north-south divide has been stubbornly persistent, and today GDP per person in the south is over 40% lower in the south than in the rest of Italy. This has been the case for the past 30 years, demonstrating the poor effort successive governments have invested in bridging the gap. Mario Draghi, the Bank of Italy’s former governor, noted that the south of Italy was the “largest and most populated underdeveloped region in the euro area”, given that a third of the country’s population resides there.

It is no wonder then that the Risorgimento is often pinpointed as the moment in which all of Italy’s travails started. Forget the euro crisis, the 2007 crash or even the advent of Silvio Berlusconi; Italy was doomed from the start. David Gilmour, in his book “The Pursuit of Italy”, argues that the crisis started on the 17^th March 1861, when Italy was unified. He points to Italy’s frail national identity and the lack of consent to the unification which have produced a succession of weak and dysfunctional governments. Had Fascism succeeded, Italians might have had a patriotic ideal to look up to which would have stoked their sense of identity. However governments have merely taken to steering the economy, without guaranteeing political stability, fighting corruption and organised crime or lifting the south from poverty. The latest economic crisis has revealed that the government is not even capable of managing the economy, further denting Italians’ faith in their country.

Moreover, the unification process was largely driven by a political elite in the North, inspired by the Republican ideals of Giuseppe Mazzini and cunningly engineered by Camillo Benso, the Count of Cavour, whose agile execution of realpolitik statecraft ensured foreign help, without which the Risorgimento most probably would not have succeeded. David Gilmour compares the case of Anglosaxon Britain, which required around 400 years to be unified, with that of Italy, which was rushed through in two measly years. Giuseppe Mazzini, Italy’s hero of the Risorgimento, did not so much liberate the south of Italy but conquer it and subject it to the rule of the north.

As The Economist points out however, “inventing nations, along withspurious myths and traditions to anchor them, was a popular recreation amongeducated Europeans in the 19th century”; to claim that Italy’s nationhood is in a parlous state because it was created by a northern elite when the rest of the population spoke forty different languages is perhaps to overstate history. Simply because Italy was unified in a relatively short period of time does not mean that it is fundamentally flawed as a country and that it cannot emerge from the current crisis in its present state. The Northern League is not, unfortunately, a minor aberration on Italy’s political scene. But neither is it about to create a permanent chasm that will rip the country apart. It is precisely in times of economic and political uncertainty that extremist parties seize upon the population’s malaise to stoke a sense of patriotism, however Italy’s experience with Mussolini demonstrates the iniquitous side of nationalism.  Pointing to an historical event to illustrate the roots of Italy’s problems is to recognise their intractability, but to brandish it excessively as the “real” cause of the crisis is to exonerate Italy’s politicians from renovating their rather antiquated country. 

What went wrong?

Source: The Economist

In the night between the 8^th and 9^th December the European Union took a step closer towards becoming a fiscal union. Or rather a “fiscal compact”, as it has been called. Or perhaps a “stability pact on steroids” as Wolfgang Münchau referred to Angela Merkel’s proposals before the summit. However you decide to call the fledgling product of an intense night of fraught negotiations, there is no doubt that the 26 countries who signed up to it ceded a hefty chunk of their national sovereignty to the European machinery. Tax and spending plans will now be supervised at the European level and automatic sanctions will be triggered by profligate government spending.

In many ways this pact seeks to address the woeful flaws in the original Stability and Growth Pact forced on the recalcitrant European Community members by Germany in 1997. The Pact was a classic example of the “turkeys don’t vote for Christmas” dilemma. Under its original rules, when a country exceeded the government deficit limit of 3% of GDP or the debt-to-GDP ratio of 60%, the Council of Economic and Finance Ministers could issue a warning to the offender on recommendation of the Commission. Should the country not mend its spendthrift ways, a name and shame policy would ensue whereby the warning would become public. In the event of public opprobrium not being sufficient to cajole the country back into the straitjacket of fiscal rigour, the Council had the option of applying sanctions. Herein lies the snag: the countries applying the sanctions are the same ones that could find sanctions being applied to them at some point in the future should they deviate from the road of fiscal discipline! There was no incentive to set a precedent by applying the sanctions and every incentive to close an eye on excessive spending. Thus in 2003 the excessive deficit procedure (as this rather convoluted process is known) was not enforced against, lo and behold, France and Germany, the latter having preached the mantra of fiscal rectitude since its macroeconomic policy was blighted by the woeful Weimar Republic.

Source: BBC

But despite what many believe, the original flaws of the euro lie not in fiscal profligacy alone. In fact, Greece was arguably the only country blithely throwing money around in the run-up to the crisis; Spain actually had a budget surplus on the brink of the crisis. There was a debt problem, but this was in the private sector. Fuelled by the low interest rates afforded by the introduction of the euro the private sector, most notably companies and mortgage borrowers, embarked on an unprecedented spending spree. Thus whilst Spain's government may have succeeded in not breaching the 3% deficit limit, it oversaw an unrestrained debt-fuelled boom. What's more, southern europe's debt-hungry markets were happy to buy up Germany's exports, thus  fuelling Germany's surplus. And to further compound the problem,  Germany's excess savings, as a result of its citizens' frugality, were  siphoned off into spendthrift countries.

Source: BBC

 Another phenomenon we have witnessed since the introduction of the single currency has been an asymmetric shock within the eurozone. According to two policy experts “Germany’s wage trends have been themost important cause of the euro crisis. Those wage trends created anasymmetric shock that destabilized Europe”. Since the euro’s introduction Germany “ruthlessly held down wages” in an attempt to boost its competitiveness, aided by the artificially low exchange rate, whilst other members, most notably the Mediterranean countries, let their wages rise excessively. Germany thus boosted its competitiveness at the expense of its southern European neighbours, creating an asymmetric shock that fed into the current economic crisis. Whilst to claim that “Germany adopted a beggar-thy-neighbour export model” is a bit excessive, the competitiveness gap is certainly at the heart of the euro’s travails.

Source: BBC

You might be forgiven for thinking the euro’s design flaws ended here. Alas, policy-makers overlooked another crucial aspect of monetary unions, namely that of some sort of fiscal stabiliser. In most successful monetary unions, there is also a degree of fiscal union to allow for diverging economic conditions in its constituent regions. In other words, a region as diverse as Europe ought to have allowed for some sort of stabilisation mechanism to allow its members to deal with asymmetric shocks. This would have enabled them to adjust wages and prices without the grinding recession that they are witnessing now. Such “cushioning” mechanisms can be achieved through a partially centralised budget (not a fiscal superstate as some commentators would have you believe), where falling tax revenues in an adversely affected region will be compensated by rising revenues in a boom region. However, the enormous political implications of even a minimal budgetary centralisation make it an unfeasible option, at least for now.

Source BBC

What ought to have happened then was a closer coordination of macroeconomic policies, i.e. a sort of fiscal union which would have prevented the asymmetric shock and thus not placed the eurozone in such a precarious position regarding the current economic crisis. Furthermore, the only mechanism that policy-makers did not fudge, the single monetary policy, has been rendered essentially useless as an adjustment mechanism because of the vast differences in the economic conditions of member states. As Paul Krugman writes, the competitiveness divergence has to be reversed, and there are no two ways about it. Either prices rise in the north, or they fall in the south. Obviously the first option would require higher inflation than the fiscal hawks in Germany or in the European Central Bank are prepared to accept. Inflation is anathema, as such they have forced swingeing cuts on their southern neighbours which is merely compounding their recession. In attempting to balance between the different needs of the eurozone member states, the ECB has arguably interpreted its mandate of price stability too narrowly, placing the burden of adjustment entirely on southern Europe.

Source: Cartoon Stock

Southern Europe ought to have tackled the competitiveness gap long ago, when the piercing eye of the markets was not focused on its every move. Now that the eurozone finds itself in the eye of the storm it ought to abandon its fixation with price stability and recognise that with no room for fiscal manoeuvring because of ballooning deficits, indebted states cannot keep forcing austerity on their economies when global demand is sputtering. The long-term adjustment ought to be coupled with a short-term loosening of monetary policy, even if this leads to slightly higher inflation.

When the euro was conceived twelve years ago policy-makers thought, naively, that they could divorce monetary and fiscal policy. In their blind pursuit of the European unification dream they blithely waved away economic and political practicalities, crossed their fingers and hoped that members’ fiscal policies would somehow align themselves automatically. Events of the past year have made that hope look like a forlorn pipedream.