What Egypt Could Learn From Romania's Ceausescu

What is happening now in Egypt reminds me in an eerie way of the Romanian revolution in 1989. The internet is already abuzz with speculation that Egyptian president Hosni Mubarak might end up like his late friend, former communist dictator Nicolae Ceausescu, who was executed after a very short trial. It’s all down to what the army will do – will it side with the people or continue to protect an increasingly alienated dictator?

I really hope, for the Egyptians’ sake, that the similarity stops here. What happened in Romania after the revolution and the execution of the Ceausescus is a sad reminder that good times do not necessarily begin once the revolution is won, protesters are back from the streets and the dead are buried. Blaming only one person for the evil that has penetrated a country is an easy, but dangerous path to take.

In 1990, after the Ceausescus were gone and the Communist Party supposedly outlawed, the second ranks of his loathed secret police – the Securitate - quickly became the new ruling elite. Without a law preventing them from taking public office, former Securitate agents, informers and collaborators became politicians and created a powerful network of corruption and influence peddling that has engulfed the country ever since.

There have been various attempts to save the Romanian revolution and return its results to the original intended purpose – an end to the corruption that the communist system had encouraged – but they were all stifled by force, the most famous being the two-month long protest in Bucharest and the subsequent bloodshed caused by the miners’ descent on the capital. 

21 years after Romania’s revolution, corruption is omnipresent in the country, to such an extent that more than 10 percent of the population has emigrated in search of opportunities that are denied to them in their home country. 

Social and economic inequality has deepened, the health system is full of doctors that are so callous they would let patients die unless they receive substantial bribes and many teachers in state schools give grades to young pupils based on the “presents” they receive from pupils’ parents rather than on the pupils’ own knowledge.

On many occasions, employment is subject to bribe giving or “knowing” somebody in the right place, rather than depending on the candidate’s real abilities. The media is made up almost exclusively of local moguls who use the TV channels, newspapers and news agencies they own to blackmail, influence and pressure politicians or companies to do various things that benefit a small and corrupt elite.

Ironically, Romanians are nearly back where they started: 21 years after their own revolution, they don’t have a free media, corruption is as rampant (if not even more) as it was under the communists and the rift between the privileged, ruling elite and its cronies and the anonymous masses who barely make ends meet is deepening. 

Sure, they have freedom of speech and freedom of travel, and they take advantage of both. But I doubt that the more than 1,000 people who died in December 1989 sacrificed their lives so that the survivors can emigrate more easily.

That’s one lesson Egyptians could learn from the Romanians’ experience: once the Cairo revolution is over and Mubarak is out, don’t rely on the new people who come in to reform the system all by themselves. You must always be on guard and ready to defend democracy and the rule of law.

Does Freedom of Speech Lose You Money?

China has passed legislation dictating that only journalists with experience or qualifications in the business sector may write about stock and futures exchanges, Zinhua reports.

Now, in a democracy such a law would not really be possible nor, I should add, desirable. After all, freedom of speech is what allows each of us to write about whatever we want – and it’s up to the readers to make up their mind if they believe us or not.

But what about when those readers are traders who are making or losing millions of euros (dollars, yen, whatever free currency – not yuan, obviously, as that’s still tightly controlled) based on what’s written in the press and on the internet?

The Swiss Knife

Case in point: Portugal debt got hammered on Friday and the euro got hit by news reports that the Swiss National Bank had excluded Portuguese debt as collateral eligible for repos. 

The context of that story is that on Wednesday the Swiss National Bank confirmed it excluded Irish sovereign debt from the list of instruments it accepts as collateral for its repo operations.

(With repos, banks in need of cash can sell securities to the Swiss National Bank, committing to buy them back at a specific time for a higher price. By excluding Irish debt from the list of selected instruments for such operations, the SNB effectively reduced availability of cash to banks with high exposure to Ireland.)

The Irish news was first reported by an Irish blogger on January 4 but the exclusion actually happened in December 2010, when the SNB published the adjustments it made to the basket of instruments it accepts as collateral.

Portugal Shoots Itself in the Foot

On Friday, riding on the success this story had in spooking markets, Lisbon newspapers apparently reported that Portuguese debt had also been excluded by the SNB from its list of eligible collateral for repos. This scary piece of news was quickly re-printed by other media.

What few media reported, though, is something they could have found out by making a phone call to the SNB: a spokesperson told the few curious hacks who called that the Swiss central bank had stopped accepting Portuguese debt as collateral more than a year ago, because it no longer fulfilled the rating criteria.

If more journalists had made that call, this scary story would have looked totally different, with a headline saying something like “Old News: SNB Doesn’t Like Portugal’s Debt Either.” 

Swiss Precision?

But wait, it gets even better. It’s not just the journalists who sent out confused messages, it’s the central bank itself, apparently.

If initially it said it hasn’t accepted Portuguese debt as collateral for over a year because of ratings downgrades, later the SNB sent out a statement in which, according to Reuters, it said it actually never accepted it because of settlement issues.

Do we need a law like China’s in Europe? I don’t think so, seeing as we claim to be a democracy. But we do need authorities who promptly put out the correct message for markets. 

Oh, and journalists who think at least twice about the consequences of the stories they write – and about their accuracy, since they’re at it.

Eurozone Break-up May Lead to Third World War

Dismantling the eurozone may bring upon the world its third world war. WWI and WWII both started in Europe, so why should WWIII be any different?

According to the Maastricht Treaty, European Union member states must adopt the euro (with the exception of Britain and Denmark, which have negotiated an opt-out) as their currency at some point, if they fulfil the convergence criteria.

No timeframe is given for the adoption of the euro and this is how Sweden, without explicitly opting out of the monetary union, has deliberately avoided joining by failing to meet the convergence criteria.

The eurozone currently has 16 members (17 with Estonia joining on January 1, 2011) but, since the Greek crisis erupted in full early in 2010, chatter about countries leaving or the monetary union breaking up altogether has grown louder and louder.

But if the eurozone were to break up, the consequences may eventually lead to war because of the sheer depth of the resulting political, economic and social crisis and the lack of hope that would follow.

The EU treaties do not allow a member of the eurozone to leave the monetary union while staying in the European Union. It’s either the EU and the euro, or nothing.

Leaving the eurozone would mean leaving the EU – and all the advantages that it confers, such as selling goods in the rest of the 27 member states without having to face import duties, selling services freely to them, being able to access capital from these countries, freedom of movement of citizens within the area.

Fragmented Backwater

It may not seem like much, but it has brought on incredible economic progress, especially for the less advanced members, and it has been achieved after decades of patient diplomatic negotiations. It has also put a lid on various inter-ethnic conflicts in what is probably the world’s most divided continent.

Membership of the euro was regarded by some members as the ultimate proof that they have “made it” in a select group of economically-sound countries, with clear rules and advantages and part of a strong currency, without the often-painful fluctuations brought on by massive devaluations.

The euro also acted as a catalyst for lesser developed members of the EU, providing them with something to aspire to, an incentive for reform and economic progress.

The EU, as a whole, guarantees its citizens freedom of movement, freedom of speech, access to a clear justice system and the right to have their voice heard. Yes, I know that it doesn’t look like much has been achieved by the EU, but this is because citizens too often take these rights for granted and don’t even realise they are exercising them every day.

If the EU were to disintegrate, Europe would go back to being the fragmented, war-mongering little backwater it used to be. There would be no super-power on the continent, just a few big and strong countries trampling over the little ones in their fight for domination.

Let’s imagine this scenario: everybody goes back to their original currencies. What happens is that the German mark and the French franc appreciate strongly, while the Greek drachma and Spanish peseta plummet. What can countries do to counteract the negative effects?

What Could Lead to War

Without the legislative framework of the EU, which specifically prohibits it, protectionism would flourish. Germany and France may limit inward investment in their currencies to keep them from strengthening, while Greece and Spain may do the opposite and put limits on outward flows of capital.

Next, Germany and France may limit inward migration, to protect their rich economies from hordes of poorer Europeans looking for work, while massive unemployment in Greece and Spain may cause street riots the scale of which has not been seen in a long time.

Things would not be rosy for Germany and France either because, without the common market, they would find it harder and harder to sell their products and services abroad as import taxes in the poorer former member states and various regulatory restrictions on imported goods and services would take effect in an attempt to protect local economies.

Resource-rich countries – such as Russia – may see this as an opportunity to negotiate “preferential” tariffs for their energy exports with each country in the former union; thus, different energy prices would distort competition even further.

All this would throw the former EU back decades in time as it would stifle innovation, bring development to a screeching halt and increase social unrest to the point of boiling over.

It doesn’t take a lot of imagination to get from that to nationalist/extremist parties rising to power in many former EU states on hollow promises of better living and on blaming “others” for the country’s misfortune, and eventually sparking the third world war.

I know many people will accuse me of scaremongering. But if you think back to the history of this continent, the EU is the only form of union that has brought incredible peace and prosperity to millions of people, without making others suffer in the process. I believe that such a union must absolutely be defended.