Lithuania and Russia: Can energy be a weapon?

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Lithuania is seeking more independence from Russia in energy supply. Moscow, so the accusation, uses supplies of gas and electricity as leverage. A planned Akw in Belarus see the Lithuanians with concern.

Lithuania’s perhaps biggest problem right now is close to the border of the Baltic state. Only 50 kilometers from the capital Vilnius, a new nuclear power plant will be built in neighboring Belarus. The Lithuanians are worried about the project, says Energy Minister Rokas Masiulis. “We lived in the Soviet Union. We know the quality of construction in such projects. “Unfortunately, that is not much different in Belarus today, emphasizes the Minister. The small neighboring country was alarmed by reports of accidents on the construction site.

At the Astrawez site, the 330-ton reactor shell collapsed to a height of two to four meters in July. For more than two weeks, the Belarus authorities did not disclose the incident. It was only after an opposition politician reported that the government in Minsk admitted the incident, and it was only after numerous media reports that it was decided to exchange the reactor shell. Many felt reminded of the information policy of the Soviet authorities after the nuclear disaster in Chernobyl. Lithuania is now calling on the EU to demand compliance with standards for the construction of the nuclear power plant in Minsk.

But the Lithuanians are by no means solely concerned with security concerns: “We feel treated unfairly,” says Energy Minister Masiulis with a view to the European Union. Because of pressure from the EU, the new member had shut down the only own Akw in Ignalina at the end of 2009. Now, on the other side of the border, a new facility is emerging that nobody in the EU seems to care about, criticizes Masiulis.

Dependent on electricity imports

With the shutdown of Ignalina Lithuania suddenly had to rely on electricity imports. This increased dependence on Russia dramatically. The then government in Vilnius therefore wanted to build a new nuclear power plant as soon as possible. But as soon as Lithuania’s ideas became known, both Russia and Belarus announced plans for their own Akw. Lithuania’s construction project was rejected in 2012 in a referendum by a majority of the population. The project has since been on ice.

However, should the Akw in Belarus go online as planned in 2019, the Lithuanian market could be flooded with cheap electricity, says Lithuania’s Energy Minister. Then the generation of own electricity would be hardly worthwhile for the country. The government in Vilnius sees in this Akw therefore not only a danger to the environment. “Russia uses energy as a political tool,” says Masiulis. Behind the project in Belarus is the Russian state-owned company Rosatom, which not only supplies the technology, but also gives cheap loans. “Rosatom is the new Gazprom,” warns Masiulis – alluding to the role of the Moscow-led company as a tool of Russian politics. Even more obvious is Romas Švedas, a former member of the Government and a diplomat and today a lecturer in international relations at the University of Vilnius: The Akw project in Belarus is “a deliberate aggression against an independent country that uses energy as a weapon”.

All too well, the Eastern Europeans still remember how in the winter of 2008/2009, due to a conflict between Moscow and Kiev over supply contracts, suddenly no Russian gas came through the Ukrainian pipeline. Since then, especially in Eastern Europe, there are fears that such a scenario could be repeated. Indeed, there is once more a dispute between Moscow and Kiev over gas supplies: Russian President Vladimir Putin criticized Tuesday in a telephone conversation with German Chancellor Angela Merkel that Ukraine is avoiding an agreement with Moscow on the purchase of Russian gas this winter. At the same time, Putin warned that this constituted a “threat to transit to Europe”.

Unforgotten in Vilnius is the case with the oil pipeline “Druzhba”, which brings Russian oil to the west. The section that led to Lithuania, was surprisingly shut down in 2006 – according to Russian information for a leak. Shortly before that, a refinery that was supplied with oil from the pipeline was not sold to Russian bidders, but to Polish bidders, says Svedas. To date, the operation of the pipeline has not been included.

Energy policy in Lithuania today is understood as a question of national security. Hardly any other country in the European Union was as dependent on Moscow as the Baltic state. All of the natural gas consumed in the country came from Russia, and the electricity has been largely imported from Belarus and Russia since the shutdown of the Akw. Diplomats still remember that the head of the Lithuanian government used to travel to Moscow to discuss the price of gas with the Gazprom boss. For both gas and electricity, Lithuanians paid significantly more than, for example, their neighbors in Belarus, which continues to maintain a good relationship with Moscow. By contrast, the relationship between Lithuania and Russia has been tense at the latest since NATO accession.

Liquefied gas from Norway

Within only two years, the situation has changed radically. Lithuania wanted to get out of dependence on Moscow and build bridges to Europe. At the end of 2014, a liquefied gas terminal went into operation in the port city of Klaipeda, the first in the three Baltic states. The floating terminal is called “Independence” – the country sees much more in it than a project in the field of energy. Lithuania is no longer dependent on Gazprom supplies, said President Dalia Grybauskaite. “No one will be able to blackmail us or force us to pay a political price.” Liquefied gas for Lithuania comes mainly from Norway. In addition, a pipeline will be built in the coming years, connecting Lithuania and Poland.

The terminal has actually brought the country the hoped-for independence: Today, not more government members, but business representatives in Moscow negotiate delivery prices, as in other countries too. For gas imports from Russia, the Lithuanians now pay significantly less than two years ago, as the competition by the – but also not exactly favorable – liquefied gas effect. “Gazprom was forced to lower the price,” says Švedas.

But the gas consumption of the Baltic country had also fallen. Because when Russian gas was still expensive, heating plants in particular looked for cheaper alternatives and switched to biomass. Today, 60 percent of the heat is extracted by wood pellets from Lithuanian forests. Gazprom forced the country to look for alternatives, says Energy Minister Masiulis. In 2014, Lithuania was the first country in the EU to implement the requirements of the so-called third energy package in the gas market, according to which grid operators, utilities and suppliers may not be identical. Gazprom had to sell its stakes in Lithuanian energy companies.

However, the government in Vilnius has failed in its attempt to counter the inflated gas prices of previous years. The country claimed $ 1.5 billion from Gazprom in a four-year legal dispute before a Stockholm arbitral tribunal. But the tribunal saw no breach of contract and gave Gazprom right. After this defeat, Lithuania now wants to have the arbitration award, against which no appeal is possible, annulled in court.

This year, for the first time, the country could import more gas from Norway than from Russia. The Baltic states are also relying on Moscow independence for electricity imports. Only a few years ago, the Baltic States paid the highest electricity price in Europe. However, a year ago, the first electricity connection, which connects Lithuania to the EU network, went into operation: in December 2015, the route from Lithuania to Poland was completed. Again, President Grybauskaite spoke of a “strategic achievement”. Other lines connect the country with Sweden since February.

More than a billion euros have cost both projects in total, about one third of which was paid by the European Union. “Today, electricity prices are 23 percent lower than in 2014,” says electricity utility Litgrid in Vilnius. Only 30 percent of imports come from non-EU countries, ie from Belarus and Russia. However, Lithuania’s power grid still hangs on the Russian, because both are synchronized. The Baltic states are aiming for a synchronization with the European network, but this project is costly and can take time, especially since it is not clear what happens to the Russian exclave Kaliningrad. The EU Commission has begun consultations with Russia on behalf of the Baltic States on this issue.

While Lithuania has made good progress in trying to become less dependent on Russia within two years, there are other concerns about energy security. Shortly before Christmas 2015, electricity was lost in western Ukraine, affecting some 700,000 households. Security experts later stated that it was not a technical glitch, but that hackers had intentionally caused the blackout – the attack is the first known case of its kind in Europe.

Center of Excellence of NATO

The Lithuanian electricity supplier Litgrid now wants to better protect itself against possible dangers and has therefore agreed to a cooperation and an exchange of experience with the Nato Center of Excellence for Energy Security in order to better protect its own network “from any disturbances”. The center is housed in a nondescript two-storey building on the premises of the Military Academy in Vilnius. In front of the house flutter the flags of the NATO states that carry the center. The centers of excellence of NATO are not part of the command structure of the Alliance and are primarily intended to provide expertise, so rather resemble small think tanks. Germany also wants to participate in the center from the spring of next year, as a spokesman for the Ministry of Defense confirmed.

The center has analyzed the hacker attack on the Ukrainian electricity supplier and tries to learn from it how countries can protect themselves from similar attacks. “Our biggest concern at present is cybersecurity,” says the Director of the Center of Excellence, Lithuanian Colonel Gintaras Bagdonas. The protection of critical infrastructure is, however, a matter for national governments, not NATO, he emphasizes. “We can not impose any rules on the private sector either.” The Center wants to raise awareness among Member States about risks to their energy systems.

In the Baltic States and in Poland, the planned pipeline Nord Stream 2 is also considered to be a potential source of energy for parts of Eastern Europe, supplementing the existing pipeline from Russia to Germany. The fear is that Russia could then shut down the connection through Ukraine. “Nord Stream 2 may seem like an economic project in the beginning – in the end it will turn out to be a political project,” says Lithuania’s energy minister Masiulis. For Ukraine, Nord Stream 2 could also be a reason to look for alternatives to Russian gas. “We have found a solution, and the Ukrainians will do that.”

Funeral service in Phoenix: Ex-Vice President Biden honors McCain as a “giant”

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In a moving funeral speech, former US Vice President Joe Biden honored the late US Senator John McCain . “My name is Joe Biden, I’m a Democrat, and I love John McCain,” Biden began his speech at the memorial service in a church in Phoenix, Arizona, on behalf of the late Republican on Thursday. McCain was like a brother to him, their attachment had outweighed political differences .

McCain was a “giant” whose character, courage and integrity inspired the nation, Biden said. During his speech, the ex-vice-president wiped tears on several occasions when he looked back on his friendship with McCain, which marked a past era of US-Republican cooperation between US and US Democrats. Thursday’s funeral service was attended by around two dozen senators from both parties, as well as McCain’s children and his wife Cindy .

Democrat Biden, who had long been in the US Senate with Republican McCain, regretted that the search for political consensus had taken a back seat. “All we are doing today is attacking the opposition in both parties, their motives, not the content of their arguments,” he said. “John understood that America was above all an idea. Daring and risky. Do not organize around tribes, but ideals. “

Biden was convinced that McCain’s political work would have a major impact on his death. “John’s legacy will inspire and challenge generations of leaders,” Biden said. “John McCain’s influence in America is not over.”

Funeral in Washington takes place Saturday

Already on Wednesday, thousands of mourners in Phoenix had said goodbye to McCain. With the service on Thursday, the funeral ended in McCain’s home state of Arizona. The US Senator would have turned 82 last Wednesday. Last Saturday, he died of a brain tumor.

McCain’s body was scheduled to be taken to Washington by a government machine in the afternoon (local time). On Friday the dead should then be laid out in the Capitol in the US capital Washington. As in Phoenix, there citizens will have the opportunity to say goodbye to McCain.

On Saturday there will be a memorial service in the National Cathedral in Washington. There, among others, the ex-Presidents Barack Obama and George W. Bush give speeches. Bundestag President Wolfgang Schäuble (CDU) is expected from Germany.

US President Donald Trump – whose opponent was McCain – does not attend the event. After McCain’s death on Saturday at his ranch in Arizona, Trump had come under pressure to pay tribute to the merits of the war veteran and senator – which Trump finally did on Monday. On Sunday, the war veteran McCain is to be buried on the grounds of the Naval Academy in Annapolis, Maryland.

McCain’s ex-vice-candidate Palin not invited

McCain’s former vice-candidate in the 2008 US presidential election, Republican Sarah Palin, is, according to media reports, not invited to the memorial service for the deceased senator. The reports commented on a Source close to the Palin family on Thursday (local time) with the words: “Out of respect for Senator McCain and his family, we have nothing to add here.” Also had a longtime friend of the McCain family The magazine “People” confirmed that no invitations had been issued.

Preliminary Police Attempt: Nearly 13,000 Right Acts in 2018

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The police have already detected 12,791 neo-Nazi crimes and other rights in the first three quarters of this year. In 698 cases, the perpetrators were violent , more than 300 people were injured. This is based on information from the daily mirror from the responses of the federal government to monthly requests from Bundestag Vice President Petra Pau and her left-wing group. The numbers for the months of January to September are likely to rise, as the police experience shows many acts. In the current balance sheet, only late entries until July are included.

A comparison to the right-wing crime last year is therefore only possible to a limited extent. However, the figures available now suggest that this year could come close to the 2017 level. At that time, the police had counted a total of 20,520 crimes as “politically motivated crime – right”. That was more than half of all the crimes committed by extremists in Germany.

In 2017, the police had counted 1504 anti-Semitic offenses

Bundestag Vice-President Pau now also has the government’s answers to anti-Semitic crime in the three quarters of 2018. Accordingly, the police registered 1075 offenses of hatred of Jews, including 33 acts of violence. In the attacks of anti-Semites 18 people suffered injuries. The police found 554 suspects, 15 were arrested. In custody, however, came no one.

The alleged perpetrators are above all right-wing enemies of the Jews, well ahead of Islamists and other perpetrators. The numbers also include already reported offenses. For the past year, the police had reported a total of 1504 anti-Semitic offenses.

Ruthenium-106: Tracking down a radioactive cloud

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A year ago, scientists noticed increased radioactivity in Germany. Several European measuring stations recorded unusual values ​​of the chemical element ruthenium-106. The source, indicative of this, could be in Russia . But until today an established investigation commission has not been able to determine the origin. And answers are hardly expected. The Greens now demand a stronger use in the search for clues.

Sylvia Kotting-Uhl, chair of the Environment Committee in the Bundestag, complains “a lot of open questions and a pending commission of inquiry”. The Russian Nuclear Regulatory Commission and the government in Moscow are in their eyes “little interested in education,” said Kotting-Uhl the Tagesspiegel.

Just a few weeks ago, the federal government warned that it was “impossible to take appropriate measures to avoid comparable incidents, as long as the origin and causes of the accident of September 2017 are unclear,” said a small request from the Greens.

What happened? In September 2017, monitoring stations had slightly increased radioactivity levels. According to information from the Federal Office for Radiation Protection (BfS), ruthenium traces were registered in Germany, for example in Görlitz in Saxony. A health hazard did not exist, it said. Ruthenium-106 is used, inter alia, in cancer therapy or in the power supply of satellites.

The trail leads into the Russian Urals

The origin for the increased radiation dose is not yet known. However, evidence points to the southern southern Ural, where the plutonium factory and the Mayak reprocessing plant are located. In a neighboring town, the Russian meteorological service had measured a dose 986 times higher than normal. In addition, the Mayak plant is notorious: in recent decades, there have been several mishaps and accidents, including 1957 the first serious accident in the history of nuclear energy. To date, people around the plant are affected by the consequences. The Soviet Union concealed the incidents for a long time.

Even after the ruthenium leak last year, official Russian authorities did not contribute to building confidence. The Kremlin and the Rosatom Federal Atomic Agency , which also run the Mayak, initially gave themselves up in ignorance , then explained that all the equipment routinely worked, everything was safe. Russian experts called a collapsed when entering the Earth’s atmosphere satellite as an alleged cause of the increased ruthenium concentration. A version that was soon refuted.

In January, the Russian Institute of Nuclear Safety of the Russian Academy of Sciences set up an international commission of experts to look for clues. Experts from France, Sweden, Finland, Norway and Germany evaluated data in Moscow, which included Rosatom, the Weather Service and the Mayak itself. “We had the feeling that there was a strong effort on the part of the Russian side to support the work seriously,” says Florian Gering, who heads the “Radiological Situation Picture” department at the BfS and was at the two meetings in the Russian capital. There were no independent measurements of international researchers. The radiation source could not be determined by the researchers. None of the measurements presented suggest that it was made near the release, says Gering.

Secure receipts are missing

Most likely, explains the German physicist, was a release in the southern Urals, just to prove it was certainly not. Gering therefore suggests measurements in the northern Urals as the next step. If there are also increased values ​​there, then the Mayak should be excluded as a source. However, such a survey is currently not planned. The work of the Commission is not officially over. However, the prospect of progress is low.

The Federal Environment Ministry speaks of an “unsatisfactory situation with regard to available measurement data”.

“From the Commission you may well expect no impulse, which could move Russia to further clarification,” criticized Kotting-Uhl. “Russia has a duty to initiate further environmental measurements and should invite the members of the Commission of Inquiry.” The Greens MP hopes for an impetus “enlightening states” with the aim as soon as possible in the regions concerned to make further measurements.

Information exchange should be better

At the same time, a possible improvement of the international early warning system is discussed. At the suggestion of the German side, the international information exchange should be improved and accelerated in the future, says Gering – beyond the existing information requirements of the IAEA’s Early Warning Convention. Thus, countries should warn each other in future even at lower readings.

Formally was not violated the convention, shares a spokeswoman for the Ministry of the Environment. “Nevertheless, the Federal Government, in the interest of building confidence, is internationally campaigning to also notify events below this threshold.”

Kotting-Uhl is clearer: The recent incident revealed a vulnerability in the early warning system, criticized the MPs and speaks of a “too much room for interpretation, when an accident in the sense of the Convention must be considered radiologically relevant” and an international message is necessary. “This ambiguity should be eliminated,” says Kotting-Uhl.

The matter also shows that the world is overwhelmed with nuclear power, says the Green politician. “In addition to further measurements and a rapid reform of the global early warning system, we therefore need a European nuclear phase-out, ” she says, “before the next nuclear accident happens.”

Speech in front of EU Parliament: Merkel calls for “real European army”

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In her speech to the European Parliament in Strasbourg, Chancellor Merkel called for the introduction of a European army. Merkel said, “We must work on the vision of creating a true European army.” In response to this announcement, many MPs gave long-lasting applause – but also many boos and noises. “A common European army would show the world that there is never again war between the European countries,” said the Chancellor.

Merkel also said that such a step was not a departure from NATO. It could not see any contradiction if a European army were to operate within NATO. In addition, such a structure could lead to efficiency gains if Europeans reduced the large number of different weapon systems through the joint forces.

The boos for Merkel came, according to deputies in the room mainly from right-wing parliamentarians. Members of the EU-critical British UKIP also participated, participants reported. Merkel only said: “The fact that I hit the core is shown by the protest. That is beautiful and honorable. “Parliament Speaker Antonio Tajani asked rhetorically,” Do we need a veterinarian in this room? “

France’s head of state, Emmanuel Macron , once again launched a ” real European army ” last week for more independence from the US, repeatedly criticizing US President Donald Trump. Last spoke also SPD leader Andrea Nahles and Merkel’s possible successor in the CDU chairmanship, Annegret Kramp-Karrenbauer, for a European army from.

Structure of the army so far completely unclear

What a European army might look like is so far unclear. According to France, a small group of states could, as a first step, build up a powerful intervention force for crisis operations, for example in Africa. Only in the next stage would the project of a “real European army” be tackled. However, the Federal Government views this critically, because Macron wants to build the intervention force outside the EU framework in order to include the British who are leaving the EU.

“A European army must be established within the European Union and not outside. That’s what we created the European Defense Union a year ago, “said Defense Minister Ursula von der Leyen last week. She also repeatedly made it clear that responsibility for troop missions must remain with the states and parliaments. Instead of a European army she spoke on Monday of an ” army of Europeans “.

The EU has had crisis response forces since 2007. However, the so-called battlegroups have never been used, among other things, because the troop contributors would have to bear the cost of the operation itself.

Trump is against European army

US President Trump had recently spoken out against the idea of ​​a European idea. Europe should first pay “its fair share of NATO,” he criticized. Macron, on the other hand, openly demands that Europe become less dependent on the US. “What I do not want to see are European countries that increase their defense budget to buy (US) American or other weapons,” he told CNN on Sunday.

Then Trump tweeted on Tuesday: “Emmanuel Macron proposes to build up his own army to defend Europe against the US, China and Russia. But it was Germany in World Wars One and Two – how did that go for France? They started learning German in Paris before the US passed. Pay for NATO or not! “

Further topics: Economy and Migration

In addition to foreign and security policy Merkel went into two other fields: In economic and financial policy, she appealed to the euro countries to abide by the rules. Anyone who insists on solving problems solely through new debts and disregards previous commitments would question the euro area, Merkel said on Tuesday in the European Parliament in Strasbourg. The euro can only work if each member fulfills the responsibility for sound finances.

Merkel did not name a country by name. However, the EU Commission is currently arguing with Italy about the state budget 2019, which provides for a much higher debt than previously agreed.

Merkel called for a strengthening of European institutions in the field of flight and migration. Europe must find common ways of dealing with flight and migration, she said about the future of Europe. If everyone keeps their national jurisdiction and no one wants to give responsibilities to the European border patrol, “then no matter how big and good, they will not be able to carry out their work”. Here, Member States would have to do without national competencies.

She called for a common European asylum procedure. If everyone made their decisions differently, the affected people would immediately know that they would then move on within the EU. Without joint action it would not be possible to cope with the task, she added under applause as well as boos to parliamentarians.

Mutual respect and solidarity always means to overcome national egoisms, stressed Merkel and acknowledged that Germany “did not always behave perfectly”: So you have in the years before the escape and migration movement of 2015 “much too long needed “To accept the refugee issue as a pan-European task.

Speech in the EU Parliament: Merkel in Strasbourg determined and without pathos

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No, pathos is not her thing. Anyone who believed that Angela Merkel would now use her performance before the European Parliament in her last chancellorship to formulate a political legacy was disappointed. It was not a vision she proclaimed. No signal for departure shook up the largest democratic parliament in the world, almost half of its members did not even appear. Did those who did not come want to document that for them the era of the leader Merkel was coming to an end?

That would be a mistake. How big this mistake is documented, somewhat surprisingly in the concluding debate just the Polish PiS deputy Ryszard Antoni Legutko. The clever man noted that Merkel’s speech could just as well have put forward a European Social Democrat – the positions between the major European parliamentary forces were somehow confused.

The Chancellor quotes verbatim from the coalition agreement

Legutko was right. But he was wrong too. What Angela Merkel recounted was actually – if you take the vote for a European army – almost exactly what is in the coalition agreement of the CDU, CSU and SPD. In this the terms “Europe” and “European” occur more than a hundred times. In part, the Chancellor even quoted literally from him.

But Ryszard Antoni Legutko erred at the same time because there is now in fact an all-democratic consensus on the future and the opportunities of the European Union. This unity may sometimes be more theoretical. But sometimes the practice is lagging, because the normative power of the objective takes time to assert itself.

Everyone has responsibility for the community

Solidarity is a universal value, especially in difficult times, Merkel said. Every individual decision of a country has a positive and a negative effect immediately on the neighboring states. If one deals lightly with the economy, with the independence of the judiciary, with the freedom of the press, that radiates. There is a connection between solidarity with Africa and dealing with migration.

Tolerance is the soul of Europe , formulated the German Chancellor. The responsibility of all for the community also requires respect for the fact that, for example, every country has its own way of dealing with refugees because of its traditions – even though 2015 all took too long to see the refugee issue as a task to be solved in common. Although they included Germany and their own government late, but nevertheless in the criticism – no one in Europe have seen that the need in the Middle East refugee camps was so great that people, driven by hunger, on the way to Europe made.

In her speech, she seeks the bridge to Macron

Without economic success and without a common foreign and security policy, Europe has no voice. Such a thing did not please the right-wing extremists in the house, they booed obtrusively. In the end, Angela Merkel sought the bridge to France , to Emmanuel Macron. Here the commemoration in Compiègne and Paris resolutely sounded, and the message: nationalism and selfishness must never again have a chance after two world wars. One sensed: Merkel’s chancellorship is not over yet.

“New York Times” columnist calls on Merkel to resign

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In 2016, the renowned New York Times proclaimed Angela Merkel the “leader of the free world”. Now the Pulitzer Prize winner Bret Stephens calls in the same newspaper for the resignation of the Chancellor.

Contrary to all forecasts, Donald J. Trump won the election in November 2016 in the United States, calling the German Chancellor the last ” leader of the free world “. Now, in the largest newspaper in America, there is also a voice that calls for the resignation of the Federal Chancellor. The conservative Pulitzer Prize winner and columnist Bret Stephens, in his article ” Why Merkel must go “, takes a tough stand with the Chancellor and explains why it would be better for Merkel to step down.

Stephens describes the long road of wrong decisions in Europe, which has led to the current state of the European Union and its problems. Merkel and other heads of state of the European Union had thus ignored the referendums in France, the Netherlands and Ireland when they spoke out against a European constitution. Then the debt crisis and the refugee crisis had broken over Europe. The massacre at Bataclan in November 2015 and Brexit in the summer the following year have also been turning points, according to Stephen, that would have fueled EU skeptics and right-wing parties.

Merkel responsible for the shift to the right in Europe

Main responsibility for this – it sees the columnist – is Angela Merkel. The Chancellor, with her policy of national unilateralism in the refugee crisis, favored the electoral successes of the xenophobic FPÖ, the Lega Nord and the Swedish Democrats. The FPÖ and the Lega Nord are now involved as coalition partners in Austria and Italy in the government. The Chancellor also bears the main blame for the rise of the AfD, the author claims. The alternative for Germany lay in the surveys before Merkel’s decision to open the border in late summer 2015 at only three percent. Meanwhile, she is on par with the SPD in a recent survey . According to Stephens, Brexit was also a logical consequence of Angela Merkel’s inadequate communication with the European partners and their “chaotic refugee policy”. Overall, Stephens blames Merkel for laying the foundation for the shift to the right in Europe.

The rise of the AfD and the asylum dispute between the two sister parties CDU and CSU explains the columnist of the New York Times above all that the Christian Democrats had driven their Bavarian sister party by the political course of Angela Merkel too far to the left. The AfD therefore finds it easy in Bavaria to chase away parts of the conservative electorate from the CSU, who would no longer feel that they were represented by Merkel’s course. The CSU describes Stephens in his column as distinct from the CDU as the party of the middle. In addition, he accused Angela Merkel, she had long since stopped being a conservative.

13 years in office are truly enough

Already two weeks ago, the long-time ARD correspondent Malte Pieper had demanded in a commentary in the news that the Chancellor should vacate the Chancellery to make room for a successor whose name was not burdened with the current disagreements within the European Union. Pieper accused Merkel, by their policy problems just auszusitzen and on “view to drive” and thus accept the division of the EU approvingly. In Europe, the Chancellor left “scorched earth” in many European countries.

Austria: Woman at the helm of the Social Democrats

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A message for a new beginning is to be sent by the Austrian Social Democrats, the largest party to the Austrian opposition – which until last December led Austrian governments over the past ten years – from their two-day Congress starting in Velles in Western Austria on Saturday and during which, for the first time in 130 years of their history, they will elect a woman as their leader, 47-year-old former Health Minister, Pamla Reddie-Wagner.

The 650 delegates will elect both the governing committee and the party bureau, in addition to the new leader, who will succeed the former Austrian chancellor (until last December) Christian Cern, who had surrendered the past September of all his posts.

At the Congress, entitled “New Power, New Courage”, outgoing Christian Cern, who originally opposed (but later withdrew his intentions) to lead the party’s candidates in the European elections, as well as being the head of his candidates Of the European Socialist Party, is expected to officially announce its definitive withdrawal from politics.

The delegates, as well as the 800 guests, including many party representatives from abroad, are waiting for the announcement of the new leader’s program, Pamla Reddy-Wagner, while the Congress is about to vote on the party’s new program that has been under way for months, and a series of decisions on suggestions made by representatives of party organizations from all over Austria.

One of the main contributions is to introduce a week of 35 working hours as a first step for a 30-hour week, as well as the request for a six-week annual leave. The suggestions will reiterate the demand that has been made for years in congresses by the Austrian Social Democrats for the imposition of inheritance and wealth tax.

In the preface of the Congress there will be reports and assumptions about the failure of the party to adapt to changes in the voter turnout, the loss of prosperity and the challenges of immigration.

Pamela Rendi-Wagner, the new head of the Austrian Social Democrats, with an urban-liberal background and a “brilliant” career as a doctor and senior official of the Austrian Ministry of Health before taking his leadership a year and a half ago, will be head of the Austrian opposition in the future.

The new leader will face the political coalition government of the conservative People’s Party of Chancellor Sebastian Kurtz and the far-right Nationalist Liberal Party.

It is believed that she will continue the line of her predecessor to the Social Democrats Christian Kern, who did not have much political experience in the past, but had taken over in May 2016 the party leadership and the post of Chancellor as a successful technocrat, having previously served as General Manager of the Austrian Federal Railways.

Their support for the new leader – as the tenth post-war leader – of the Austrian Social Democrats, who joined the party just one and a half years ago, assured the Congress of the Congress that the party organizations from both the nine Austrian Länder and its trade unions who welcomed the fact that, with Pamella Renti-Wagner, for the first time in the 130 years since the founding of the party, she took over a woman as its leader.

Political analysts have long criticized the Social Democratic Party for its partial alienation from its voters, for repeated adjustments to its policies in recent years and for its gradual shift to the center and the right.

As a consequence of these developments, they are considered by themselves to be the constant contraction in the number of members of the party who continue to pay their contributions, which have fallen by 20,000 in the past two years and now their total number is just over 200,000.

The Austrian Social Democratic Party had experienced its greatest boom in the era of the historic Chancellor of Austria, Bruno Kraishki, who had ruled for 13 years with self-governing governments, giving Parliament an absolute majority of more than 50% between 1971-1983 and the Its Socialist Party – and later Social Democratic – numbered more than 730,000 members in 1980.

His successors, party leaders and chancellors, Fred Zinovac, Franz Vranitzski, Viktor Klima, Alfred Gusenbauer, Werner Fehman, and Christian Cern, with only the relative majority, were headed from 1983 to 1999, and – Austrian-right-right rift between 2000 and 2006 – from January 2007 to December 2017, coalition governments in Austria with the People’s Party.

In the last parliamentary elections of 15 October 2017, the Austrian Social Democrats found themselves second, losing their first position in elections for almost half a century – with the exception of the 2002 elections – with 26.9% against 26.8% in the previous elections September 2013.

Sebastian Kurtz’s People’s Party was the first political force with 31.5% (24% in 2013), who has been head of the coalition government chancellor since last December with the far-right Nationalist Liberal Party, % (20.5% in 2013).

A Problem with “Austrian Economics”

The Austrian Theory of the Business Cycle is just one element of “Austrian Economics.” Unfortunately, in the context of the Great Recession, “Austrian Economics” has become short hand for that one aspect of the contributions of Menger, Mises, and Hayek and those working in their tradition.

As with most perspectives on the economy, I believe there is an important element of truth in the theory, but I believe that even otherwise sound economists are led astray by an excessive focus on the approach. In particular, there is too much focus on the thought experiment of an increase in the quantity of money given the demand to hold money, the supply of saving, and the demand for investment.

In that circumstance, the natural interest rate is given (coordinating saving and investment) and any increase in the quantity of money is an excess supply of money. There is usually a plausible institutional assumption that the increase in the quantity of money is lent into existence. Given all of these assumptions, the expansion in bank loans results in the market interest rate decreasing. Given even more assumptions, the lower interest rate impacts the composition of demand across industries, and leads to specific investments that depend on this lower level of the interest rate. These are malinvestments. Ceteris paribus, they will generate losses in the long run.

When the theory is used to interpret history, like the housing boom of the last decade, the assumptions, given demand for money, given supply of saving, and given demand for investment, are imposed, so that a decrease in observed market interest rates is taken to be a sign of an excess supply of money. The problem is less with complaints about interest rates in a boom, but instead with a completely wrongheaded notion that because the problem was interest rates that had fallen too low during the boom, recovery should be associated with higher interest rates.

The problem is a confusion of the thought experiment of a given demand for money, supply of saving, and demand for investment and the real world. In the real world, the demand for money, the supply of saving, and the demand for investment are all subject to change. First of all, suppose the demand for investment is rising and the demand for money is falling. Even if the market interest rate is rising and the quantity of money is falling, it would be possible for there to be an excess supply of money, and a market interest rate below the natural interest rate. Malinvestment would be generated even though observed interest rates rose and the quantity of money fell. The problem would that interest rates failed to rise enough and the quantity of money failed to fall enough.

Now, if the demand for money remained low, and the demand for investment remained high, then as the purchasing power of money falls, the real supply of credit decreases along with the real quantity of money. The market interest rate will rise to meet the natural interest rate and any malinvestents will lose money and be liquidated.

More importantly, suppose there was a boom generated exactly according to the traditional assumptions. The quantity of money rose, the demand for money was given as was the supply of saving and demand for investment. The market interest rate did fall too low, and malinvestment was generated. In the “long run,” the purchasing power of money would fall, reducing the real quantity of money and the real quantity of credit. Other things being equal, the market interest rate would rise. The malinvestments would lose money. Remarkably low interest rates in 2002 results in too many single family homes being built, and when the purchasing power of money falls, interest rates rise and the housing construction industry must shrink. Sawmills lose money.

But, suppose, during this period, the supply of saving rose or the demand for investment fell, or both. While one can imagine that these would be indirect effects of problems associated with losses on malinvestment, they don’t have to be. Things happen. The natural interest could fall. While it would be true that the problem is that interest rates fell during the boom, it would be wrongheaded to assume that during the recovery interest rates should be at pre-boom levels.

It is true, of course, that if an excess supply of money is created, this would push the market interest rate below the natural interest rate. But the natural interest rate could be below the level of market interest rates that existed during the boom.

Similarly, there is no way to look at any measure of the quantity of money and use that to determine whether malinvestments are being generated. In particular, if the demand to hold money rises, the supply of saving rises, and the demand for investment falls, then an increase in the quantity of money and a reduction in market interest rates maintains monetary and credit market equilibrium. While too much money and excessively low interest rates might create malinvestments, malinvestments can also be generated by too little money and excessively high interest rates. The particular capital goods appropriate to the resulting pattern of demand may be in appropriate to the pattern that will exist when the purchasing power of money adjusts, the real quantity of money rises to meet the demand, the real quantity of credit rises, and the market interest rate falls to the natural interest rate.

And, of course, it is possible that in the period after a boom, a decrease in the supply of saving, an increase in the demand for investment and a decrease in the demand to hold money would require that market interest rates rise and the quantity of money fall. Perhaps market interest rates must rise to levels higher, and the quantity of money should fall to levels below, those that prevailed during the boom.

In my view, the solution is simple in abstract. Keep the quantity of money equal to the demand to hold money, and let market interest rates adjust. Don’t impose preconceptions based on history. Prices and quantities can and should change–and that certainly includes market interest rates, and I believe the quantity of money too.

Another “Austrian” Critique of Market Monetarism: Part 2

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Shawn Ritenour critiqued Market Monetarism on the blog.

I responded to what he sees as our theoretical shortcomings here.   He goes on to critique the Market Monetarist view of expectations:
For example, the market monetarists claim that it is expectations about future NGDP that solely determine present investment decisions and hence the direction of the economy. This claim fails to recognize that recessions are not merely the result of decreases in aggregate spending following a boom. They are the result of entrepreneurial error (Hulsmann 1998; Rothbard 2000, pp. 8-9). It is possible, for example, for entrepreneurs to reap profits even in an environment of declining total spending. What matters is not aggregate spending, but the spread between the price of products and the sum of the prices of the factors of production. If the total quantity of all spending in the social economy falls and overall prices fall, firms can still reap profits as long as they identify those projects at which the factors are underpriced relative to the future price of the product they can be used to produce. Market Monetarist do not claim “that it is expectations about future NGDP that solely determine present investment decisions and hence the direction of the economy. It is rather than we think that expectations about future NGDP are a very important influence on current spending decisions, which determine current NGDP. We believe that both investment and consumption decisions are influenced by expected NGDP, but we don’t claim that nothing else influences them.

Most Market Monetarists are skeptical that entrepreneurial errors in investment decisions lead to recession. They rather lead to losses for the particular entrepreneurs that made errors and are usually combined with profits for those entrepreneurs who made correct judgements. For example, an entrepreneur who continued committing resources to maintain the production of CD players loses money while the entrepreneur developing the ipod reaps great profits.

Ritenour argues that it is possible for entrepreneurs to reap profits despite reductions in nominal expenditure.   This is true, of course.   For example, it is possible for nominal expenditure to fall in aggregate, while nominal expenditure on some particular product rises.   However, expectations of reduced nominal expenditure in the future would still result in reduced expenditure now.

Ritenour has in mind a different scenario where firms invest today because they expect that resource prices will fall more than final product prices in the future.     In abstract, this is possible.   In practice, it would seem a bit difficult unless the shift in money supply or demand were permanent and the adjustment process swift.     While a firm spending now on relatively high priced capital goods would take a nominal loss after a general deflation of prices in the future, replacement costs of the capital goods and the real value of profits in terms of consumer goods would be the same.   However, if the deflation is temporary, wouldn’t the replacement costs be the same and the real profits permanently decreased?    Further, a firm using debt to finance investment in the face of an expected deflation of prices and wages is asking to have net worth stripped away by creditors, one way or another.

This sort of reasoning suggests that expectations of recession and deflation bring the recession and deflation right away.   If it is permanent, it causes whatever damage it will cause, and recovery, including real investment, can then begin in the context of lower prices and lower wages.    If the deflation is temporary, then expectations of the deflation move it to the present as before, though expectations of recovery and a return of  the price level to its previous value will also shift recovery nearer to the present.  

Ritenour accuses Market Monetarists of inconsistency:
Additionally, the form of expectations assumed is the source of a particular inconsistency in the market monetarist literature. This inconsistency, in turn, is also related to their failure to understand recessions as the result of a cluster of entrepreneurial error. Market monetarists assume that markets are efficient and forward looking. At the same time recessions are due to decreases in expected NGDP. If markets are efficient while forward looking, how can there be a cluster of entrepreneurial error? It seems that if market participants make efficient adjustments while looking forward, there should not be widespread mistakes made by entrepreneurs. If so, how can there be recession? Perhaps the response might be, as Christensen (2011, p. 5) implies, that although people have expectations that are indeed rational, they are not perfect. Even so, if market participants properly forecast that the Fed would not or could not continue to increase NGDP through 2008, why should there be a recession? If their forecast was correct, they should have acted accordingly and markets would clear, and at the very least there would not have been widespread persistent unemployment.
Market Monetarists, like most economists, don’t accept Rothbard’s assertion that recessions are about a “cluster of entrepreneurial errors.”   In my view, in a world of creative destruction, entrepreneurial error is rife.   Contemplation of the rate business failure and the number of workers that are laid off even when real output and employment are both growing strongly suggest that the market system is quite able to somehow manage massive entrepreneurial error, but also substantial variation in error without there being a recession.

How is that possible?   Here is one possibility.   In the context of growing aggregate spending on output, business failure results in lower supply, higher prices, and higher nominal and real profits.  This attracts more entry, allowing employment and production to recover, while reducing prices and profits return to their initial levels.    While real business cycles due to variation in entrepreneurial error would seem possible, it appears that the corrective process works quite well.

Market Monetarists believe that in fact expected expenditure on output influences current expenditure on output.   We also argue that a monetary regime that commits to return expenditure on output to a stable growth path as soon as possible will create expectations that will result in smaller decreases (or increases) of current spending on output relative to the target growth path than a regime where there is no such commitment.   Further, given any such deviation, the return to the target growth path will be more prompt.     A commitment to return nominal GDP to a target growth path will tend to keep spending on output on the target growth path.

Market Monetarists also believe that if prices and wages all adjusted more or less in proportion to the change in spending on output, real output and employment would not be much impacted by the change in spending on output.   However, Market Monetarists believe that in fact prices and wages are very sticky with respect to shifts in spending on output, not only in their levels but in their growth trajectories.

Market Monetarists don’t have any unusual explanation for sticky prices and wages.  Unlike new classical economists and apparently some Austrians, we are willing to accept the evidence we see rather than insist on theoretical arguments that markets must always clear.    My view is that the problem is one of coordination.   If there were a single firm making price and wage offers, it could more easily adjust to shifts in spending on output.   In the real world, the appropriate price and wage for each firm to set depends on what all the other firms will do.

I also recognize that this is true of spending on output.   How much it is appropriate (or possible) for any one firm or household to spend depends on how much other households and firms are currently spending.   But that doesn’t mean that expectations of future spending don’t directly impact spending now.   The Market Monetarist view isn’t that a commitment to keep nominal GDP on a target path is sufficient to keep nominal GDP on that path, it is just that it will do better than a monetary regime that makes no such commitment.

Of course, it is easy to find strong claims about rational expectations or efficient markets from Scott Sumner.    And perhaps the plain English meaning of those words would seem to require that prices and wages be perfectly flexible.   However, it is equally obvious that Sumner does not believe that wages are perfectly flexible.   Sumner’s use of those terms would imply that there is no contradiction in claiming that “markets” rationally and efficiently take into account that wages are in fact sticky.

On the other hand, I am a Market Monetarist and I am not at all comfortable with any strong statements about the efficiency of markets or rational expectations.   From my “Virginia School” perspective, the relevant question is what institutions, including what monetary regime, is the least bad approach for generating good results from markets that are inefficient from the standard of perfection and expectations that may be well short of “rational” by some objective standard.

In my view, the proper goal of a monetary regime is to provide a stable macroeconomic environment for microeconomic coordination.   This is in the context of constant change–creative destruction.   In my view, slow, steady growth in spending on output is the best (least bad) approach.   It isn’t perfect.  But a gold or silver standard, a fixed quantity or growth path of some measure of the quantity of money, or a stable price level or inflation rate are all worse.