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Sunday, 28 February 2016

“It’s OUR party and you’re not invited!” Conspiracy by “The Balkan Bunch” and Austria was a knife in the back of Greece and the EU as a whole! It was also a gross undervaluation of the current, desperate Greek struggle against refugees...

‘At this very moment, the European Union is its own worst enemy’
Ernst Labruyère – February 2016

Last week the world saw an extremely rare and unheard of event within the European Union: Greece withdrew its Austrian ambassador.

This happened when the country learned that Austria, together with Slovenia, Croatia, Bulgaria, Albania, Bosnia Hercegovina, Kosovo, Macedonia, Serbia and  Montenegro, had organized a ‘private’ meeting to discuss stricter border controls with respect to the Greek borders.  Greece had NOT been invited for this meeting and was extremely angry about this insult.  

Such expulsion politics within Europe can act as a fission fungus inside the EU, as it acted as a knife in the back of Greece and its struggle with the large influx of refugees. As a matter of fact, it was a knife in the back of the European Union itself and therefore it should be stopped immediately.

It must have been a very interesting view: the look upon the face of Greek PM Alexis Tsipras, when he learned about the private meeting that Austria held with Slovenia, Croatia, Bulgaria, Albania, Bosnia Hercegovina, Kosovo, Macedonia, Serbia and Montenegro.

This meeting was organized by Austria and this ‘Balkan Bunch’, in order to discuss the influx of refugees from Greece into their countries and – even more important – to find ways to diminish or stop this influx. And oh yeah... Greece was NOT invited to it... and neither was the European Commission, or The Netherlands as chairman of the EU.

I think that we can safely summarize the events with respect to Greece by stating that Alexis Tsipras was ‘not amused’. In fact, he was so little amused that Greece withdrew its ambassador from Austria, as main organizer of the event. Tsipras did so to express his heartfelt anger and dismay about this blunt shutting out of Greece from a meeting that dealt with Greece’s main concern at this moment: the refugee crisis. The NOS wrote the following about this event:

The Balkan countries will possibly close their borders with Greece. The Greeks are outraged about the plans and call it a ‘hostile’ action. PM Tsipras stated that he will obstruct every European decision until there is a ‘decent and fair’ redistribution of refugees in Europe. Today [Thursday, February 26 – EL] the European leaders will discuss the refugee issue.

The Greek minister of Foreign affairs Nikos Kotzias, states that Europe cannot solve these big issues with a “mentality, originating from the Nineteenth Century”.

There was not a single unclear word within this Greek statement. And Het Financieele Dagblad also wrote a few must-read statements about this issue:

The impotence of the EU, regarding the refugee crisis, got a new chapter with the decision of the Austrian government to invite countries from the Balkan region, in order to search for solutions on a smaller scale. The European Commission, the advocate of all EU countries was not invited. Greece, in fact the country of first arrival for the vast majority of the refugees, was also not welcome at the party. This led to a fierce diplomatic conflict, in which Greece withdrew its ambassador in Vienna and accused Austria and the Balkan countries to not act in the spirit of the European cooperation of the last decades.

The refugee crisis deals with a fierce problem, uncomparable with the financial crisis that has lasted for eight years. ‘Migration hits the identity of society’, according to a European diplomat once.’This is about something that changes the villages, the neighbourhoods and the streets...”

European countries will increasingly seek refuge in national limitation measures to control the influx of refugees. With as a major blow for the Pan-European refugee issue, that German has become fed up with the lack of European cooperation and plans to abolish its culture of ‘welcoming the refugees’. When Germany closes its borders just as Greece’s neighbours intend to do, Greece will become the victim of this. And then the European Commission can do little more than facilitating the aid for refugees on Greek shores at the islands or the mainland.

This statement in this excellent article by Jeroen Segenhout is so true.

Greece was right to withdraw its ambassador from Austria, as very a powerful signal of discomfort and malcontentedness.

This “conspiracy” of the Balkan Bunch and Austria was not ‘just about something unimportant’, but about one of the main challenges that the European Union is currently dealing with: the refugee crisis. By shutting out Greece – and as a matter of fact, the European Commission – this reckless group of countries has cornered, offended and (even) betrayed both Greece and the European Commission.

By doing so, the Balkan Bunch has planted a fission fungus into the heart of the European Union: an action so reckless and blunt that it could have been inspired by ‘the capo di tutti capi – President Vladimir Putin of Russia.

There is no way in hell in which a structural solution can be found for the refugee crisis without the help and involvement of Greece, as the following Google Maps Chart shows:

Greece, as the pivotal country in the refugee crisis and the
country of choice for refugees from Libya, Egypt, Syria and Turkey
Picture courtesy of: Google Maps
Click to enlarge
Greece exists of over 6000 islands, of which more than 227 are inhabited, and it lies at a pivotal position between Turkey, Syria, Egypt and Libya. This means that Greece is the natural gateway to the “Schengen zone” of Europe. This circumstance, as well as the fact that the borders of all these islands can hardly be controlled by one country, makes it the landing point of choice for refugees from all these four aforementioned countries.

To make things worse, Greece is struck hardest by the enduring economic crisis that emerged in 2008 and the country is only removed from defaulting by a whisker.

What Austria and the Balkan Bunch now express, is that they don’t give a rat’s behind about the fact that Greece is flooded by refugees. And that Greece does not know what to do about them and where to go with them, stuck as it is with nearly endless, wide open borders with Africa, the Middle-East and Turkey and – at the same time – more and more closing borders in the north of their country.

Or according to Austria and the Balkan Bunch, in words that they could have expressed: ‘It’s their problem and we don’t want to be involved in that. Therefore we are developing a scheme to close our borders with Greece, so that they stay behind with their own misery, instead of bothering us with it’.

This is not only betrayal of Greece, but also a betrayal to the ideas and the ‘raison d’etre’ of the European Union. Instead of European countries helping other countries to solve their problems for the benefit of the whole Union, the Balkan countries and Austria sought refuge in the most narrow-minded reflexes of nationalism and mutual national egoism: ‘Everybody for themselves and God for us all’.

The only thing that Greece could do, is express their discontent about these events in the strongest words and act as they indeed did. This is something that the European Commission and the leadership of the European Union should also do. 

Unfortunately, we know that PM Mark Rutte of The Netherlands – currently chairman of the European Union – is not the man he needs to be to send such a strong signal to the Balkan Bunch and Austria. And now these countries all hope that the refugee problem will vanish from the face of the earth, when they close their borders and put their heads in the sand together.

Sunday, 21 February 2016

Message from ‘Natacha’: “The corruption in Russia is sickening and I don’t think I can stand it anymore!”

A few months ago our dear friend ‘Natacha’ (not her real name) went back to Russia ‘foregood’; away from The Netherlands, where she had lived for the last 15 years.

After falling in love with an old Russian schoolfriend, with whom she got a baby, and after her divorce from her Dutch husband with whom she lived in The Netherlands, she decided to return to Moscow for what had to become a new phase in her life.

Initially she was full of optimism about her new step in life. Through her mother and stepfather, her Russian boyfriend had found a sponsor, who gave him a job as an engineer. At the same time her stepsister would help hér with finding a new job. The ‘young’ couple and their baby would find a new life in the country she had missed dearly, since she lived in The Netherlands.

Now, a few months later everything is slightly different. Although the couple itself is still happy together fortunately, life in Russia had been disappointing for – especially – her.

The new job that had been promised to her, did not exist in reality... On top of that life in the economically shell-shocked and very expensive city of Moscow was far harder and much more expensive than she had anticipated.

And there was one particular Russian problem that she had forgotten about, during her fifteen years in the fairly honest and incorruptable country The Netherlands: the inevitable kickbacks at ALL levels of Russian society.

In general, the Russian kickback system works like this: 

on behalf of your boss in the company where you work, you order for €150,000 in lightbulbs for a certain office building. The company where you order the lightbulbs, agrees to pay you a €30,000 kickback for the favour of delivering your order. From the €30,000 you earned in kickback fees, you pay roughly half to your boss, who gave you the initial order to provide the company (i.e. the office building) with the lightbulbs.

The lightbulb company must order components to manufacture the lightbulbs necessary for your €150,000 light bulb order (i.e. they have about €75,000 in expenses on components). For this order the lightbulb company itself expects €15,000 in kickbacks from the component company. 

And so virtually everybody in Russia sponsors each other with kickbacks, paid or asked for everything that they want to do themselves or ask somebody else to do: 
  • There is no such thing as doing eachother a favour just for the sake of it;
  • There is no such thing as being loyal 'for free' to people, who have helped you in the past, as loyalty is a good that needs to be bought time and time again;
  • Or for something like simple honesty, decency or trustworthiness.

And in spite of the basic rules of Newtonian gravity, all the corruption money flows ‘uphill’: from the bottom to the top, where the greatest robber barrons sit.

The Russian in the street, who simply goes with the flow because he can't do anything else, is the victim of this ubiquitous corrupted behaviour: he lives in a country where nothing goes normal and where nobody can earn a really honest income and a decent life, without having to sponsor 'everybody and their sister' from his already quite poor income.

At the same time, this Russian must toothgrindingly observe: 
  • How his daily groceries and essential consumption goods get more and more expensive by the day, as a direct consequence of boycotts between Russia and the Western world; 
  • How it became harder by the day to find a decent and honest job, in order to make money for his family and loved ones, due to the economic boycotts and the dire situation in the whole Russian economy, now that the oil prices have plummeted; 
  • How museums and city monuments are robbed from their priceless paintings, their statues, jewels and other national treasures by their management and influential local hotshots, against whom almost nobody dares to protest. And the few ones who do, are simply taunted away and even threatened when they keep protesting;
  • How everybody profits from state maintenance and investment money in Russia, except for the objects-to-be-maintained and the to-be-investments themselves. And how in general maintenance money for the city is abused as a source for kickbacks and other payments of officials; 
  • How buildings and flats are robbed from their maintenance money, by flat supervisors of whom nobody knows who appointed them in the first place. And how the homes in these blocks of flats thus become dangerous traps for their inhabitants, due to elevator accidents, fires and collapses, caused by poor maintenance and consequentially diminishing building quality; 
  • How decent owners of small shops in Moscovian metrostations are suddenly forced out of their small businesses, without prior warning, on behalf of the owners of fancy supermarkets and department stores who sponsor the robber barrons in the Kremlin and the State Duma; 
  • How billions and billions of oil and gas proceeds have landed in the pockets of political officials and ‘oligarchs’, without anything good happening with it within the Russian economy; 
  • How ‘friends’ of the ‘capo di tutti capi’ get appointed as ministers and political officials, without having any sheer talent whatsoever, simply for the fact that they are friends of the ‘boss’; 
  • How the common Igor-in-the-street is brainwashed by the state media via the evening news and the officially endorsed newspapers, without even being aware of it, because the capo-di-tutti-capi nearly owns all the news media and thus totally controls the news;
  • How the enemies of the 'capo di tutti capi' are ridiculized and displayed as idiots and fools in these national news media or even end up being murdered, when they become too dangerous;
  • How the World Championships football of 2018 and earlier the 2014 Olympic Games have turned into an orgy of corruption, in which billions and billions of dollars have vanished from the face of the earth. 
And our Dutch/Russian friend? She has become so disappointed about life in Russia, that she considered returning to The Netherlands, while hoping she can take her Russian boyfriend with her. Her own words: ‘The corruption in Russia is just sickening and I can’t stand it anymore...’ 

Unnoticedly she had become used to living in a quite honest country, where things just happen by themselves without her having the need of paying kickbacks to everybody. And where people just can live decent and honest lives, without being part of a totally corrupted system that sponsors ‘the rich, the powerful and the influential...’. 

We must hope that Russia will ever reach this state of life. Now, unfortunately, that moment is still far away...

Saturday, 20 February 2016

The approaching Ukraine referendum in The Netherlands is a travesty of democracy as it should be. Yet, the cabinet of PM Rutte should finally start to take it seriously!

The referendum in The Netherlands about the Association Agreement of the EU with the Ukraine is a democratic monstrosity. The whole situation regarding this Association Agreement is much too complicated to decide about this with a simple ‘yes’or ‘no’, not even to mention the political implications of this event within Europe and outside.

Nevertheless, I despise the different attempts of the Dutch government and especially PM Mark Rutte to downplay this referendum now that it will be organized, by spreading a lot of political fog, while hoping to get an invalid referendum due to an insufficient attendance of the Dutch voters. 

It is the umpteenth proof that PM Mark Rutte acts like a political clown, who does not take his work, the European Union or his grassroots seriously at all.

In a few months, on 6 April 2016, the Dutch government will organize a referendum on the Association Agreement of the EU with Ukraine.

This referendum has been enforced by a pressure group called GeenPeil –closely connected with the extremely popular, rightwing, youth-oriented, provocation-journalism website GeenStijl – that managed to collect more than 400,000 signatures of Dutch citizens, who are – for various reasons – against this association agreement with Ukraine.

Their goal is to collect a Dutch democratically founded ‘No’ against the association agreement. Thus they will force the Dutch government and, as a matter of fact, the whole European Union to postpone the association agreement with Ukraine to eternity: an agreement which has already partially come into effect on January 1st, 2016.

GeenPeil reckons that a clear 'No' from a qualified majority of the Dutch population (i.e. more than 30% of the Dutch voters cast a vote in the referendum, of which more than 50% is against the treaty) will force the Dutch government to speak out a ‘veto’ against the agreement with Ukraine.

However, the Dutch government is in favour of this treaty, for reasons of new trade and cooperation with Ukraine and for the sake of not making a total fool of themselves in the European Union. In a way to put pressure on the Dutch debate, Jean Claude Juncker, the chairman of the European Commission, warned that a Dutch No-vote ‘would lead to a continental crisis within the EU’

This was an opinion that I dismissed as clear fearmongering and that will absolutely not help to change the opinion of the Dutch population in favour of the association agreement; rather to the contrary.

Nevertheless, the association agreement with Ukraine is a complicated political instrument with far-stretching implications, for both the EU, Ukraine and – on the other hand – Russia: 
  • For the EU the Association Agreement is like ‘lending a hand to Ukraine’ and opening the gates for cautious political and economic cooperation with that country, without directly offering a ‘one way street’ to full EU membership in due course;
  • The unstable political situation in the Ukraine, the strong influence from extremist rightwing parties and the ubiquitous corruption in that country make a stronger cooperation than the current association agreement virtually impossible at this moment, Yet, the EU does not want to offend Ukraine, by bluntly saying 'No' to increased cooperation;
  • On top of that, the EU does not want to dismiss the Ukraine as a political and economic partner for the future and it feels that it has obligations towards the country, since the radical events at Maidan square happened, in which some EU representatives – Dutch MEP Hans van Baalen and Belgian MEP Guy Verhofstadt – played a somewhat dubious role. 
  • At this moment the EU – and especially The Netherlands – is heavily involved in a war of nerves with Russia, about all the events that happened with respect to Crimea, the Donbass region and the terrible MH17 airplane attack. Therefore the EU is not averse of a certain amount of agitation against Russia, in order to show President Putin that his ‘sphere of influence’ is diminishing,in favour of the European Union;
  • This feeling that President Putin should be ‘put back in his kennel’ is shared and even reinforced by the Americans, who see the connection between the EU an Ukraine as a strategic interest, part of their strategy, which is strongly akin to ‘divide and conquer’; 
  • The Ukraine, on the other hand, seems to look at the Association Agreement as step one in an irreversible process towards full membership of the EU and – perhaps - the NATO;
    • With this step, it cocks a snook at ‘big brother’ Russia, which considers Ukraine to be its own ‘backyard’: a vassal state that should obey to the directives from Russia and the Kremlin. Besides that, Ukraine wants to be taken seriously itself; 
  • Russia sees Ukraine’s association agreement with the EU as a violation of their political and strategic claims on Ukraine. The country feels therefore increasingly isolated by the actions of the EU.
    • For the currently “propagandized”, suspicious and distrusting people in Russia, with on top of that their paranoid and power-hungry leader Vladimir Putin, it is hard to see the difference between the EU as a purely political/economic organization without imperialistic views and the NATO as a political-defense organization, which is actively looking for new friends and members among the former Soviet and Warsaw Pact states, in order to diminish the Russian Sphere of Influence;                     
  • This is the reason that Russia sees all advances between the EU and Ukraine as a political and (almost) personal feud against the Kremlin, which should be challenged at all costs.

The effect of all these different positions and conflicting interests is that there is a full-blown propaganda war going on between the United States and Russia over this doomed referendum. A referendum, which has exceeded its initial purpose as ‘a simple decision about the Dutch stance regarding the association agreement of the EU with the Ukraine ’ and turned into a strategic political battlefield for the former superpowers.

That you can take this propaganda war very serious, is proven by the fact that the United States have organized – via the CIA and the American Embassy in The Netherlands – special press trips to Ukraine in the past months. Columnist Dirk-Jan van Baar  who was a participant in one of these trips – wrote this (translated) snippet about it in The Volkskrant:

In the beginning of February, I was on a press trip to Kiev and Lviv, on invitation of the American Embassy. This brings the score [for the Kremlin in this propaganda war – EL ] to 2-0. Yet, my experience with this kind of trips is that they bring you to places  where you never would have gone otherwise.  

And reputedly the Kremlin has even subsidized GeenPeil in its battle for the ‘No’ vote in The Netherlands. The following snippets come from HP/De Tijd:

The investigation follows on earlier statements of British government officials, who spoke of ‘a new cold war’ due to Russian interference on a scale formerly unheard of. An interference which is broader, deeper and more far-stretching than has been considered possible until know. The Russians wanted to gain political influence in France, The Netherlands, Hungary, Austria and the Czech Republic. The latter country is popular among Russian spies as entry to the European Schengenzone.

An anonymous source spoke towards the British Telegraph, and stated that among the suspects [of having received Russian payments – EL] there are the initiators of GeenPeil, who achieved to organize a referendum about the association agreement.

When this story is indeed true, the Kremlin must have recognized the full potential of this firebrand club GeenPeil (with in the background GeenStijl) and their grassroots of angry youngsters and worried elder citizens, who regard the association agreement, but also the EU as a whole, as dangerous with respect to their slightly nationalistic [and to these eyes very narrow - ELvision on The Netherlands.

And so it happened that what started as a referendum against the association agreement with Ukraine, turned soon into a referendum against the European Union as a whole, in which the association agreement was nothing more than a trigger.

Personally, I consider this referendum a travesty of democracy. As the different political positions and conflicting interests in the aforementioned bullet list already show, the whole situation surrounding the Association Agreement is really complicated and politically extremely sensitive (even explosive), with large implications for all parties involved.

One simply cannot decide upon a very complicated situation with large, political consequences with a simple ‘yes’ or ‘no’, without simplifying the problem definition and the whole political environment of it beyond recognization. 

In other words, this whole darn referendum should have never been organized in the first place, in my humble opinion. Yet, the referendum is now a fact of life and as a consequence of that sheer fact, it should be taken seriously by the Dutch government. It is a testcase for the Dutch cabinet Mark Rutte II to prove that it is indeed capable of managing such an important and politically flammable process as the referendum at hand.

Unfortunately, in the past Prime Minister Mark Rutte has not exactly excelled in valuing the political weight of situations correctly, in my humble opinion. With his carved out grin, his forced optimism and his platitudes often echoing the ‘vox populis’, he gained a lot of popularity among his liberal-conservative grassroots. Yet,his political gutfeeling and instincts seemed virtually non-existent in too many situations [I must admit that I’m ‘slightly’ biased against Mark Rutte – EL].

The most blatant example of Rutte’s lack of political sensitivity and instinct was his cooperation with Geert Wilders’ Party for Freedom as silent partner in Cabinet Mark Rutte I, that should have never happened at all. 

In this cabinet, PM Mark Rutte was constantly trivializing the sometimes vicious attacks of Wilders against various minorities and political groups in The Netherlands, giving some of them the idea of being second rate citizens. In fact Wilders had Rutte on a leash in some situations, forcing Rutte to say things on behalf of Wilders that he did not want to say himself in those words.

And there are few signs that Rutte’s instinct has improved a lot since then.
Also in the case of the referendum upon the assocation agreement with Ukraine, the first signs with respect to the Rutte cabinet have not been very promising yet.

At first the Rutte Cabinet has tried to ignore the establishment of the referendum by GeenPeil. 

And after it became a fact of life – by reaching the 300,000 autograph threshold within the legally ordered period of time – he tried to downplay it by:
  • Not organizing a national debate about the association agreement and its consequences for The Netherlands and the European Union;
  • Not administering clear answers to the questions from the Second Chamber of Parliament about the consequences of a No-vote by The Netherlands, or at least by making the impression that he had seriously thought about the consequences of this topic;
  • By spreading a lot of political fog about the referendum itself and its importance for the European Union;
  • By not ordering equal facilities for this referendum, as normal national or regional elections would have had, leading to:
    • a strongly diminished number of open polling-stations on referendum day;
    • virtually no budget for public information
    • no govermental advertisements about the referendum on national television.

By doing so, Rutte made the impression that he hoped that the people would forget about the referendum on April 6, leading towards a lower attendance than the 30% threshold that is required to make the results of the referendum count.

The latest action of the Cabinet, which has leaked to the general public through commercial tv-station RTL, was the internal distribution of the cabinet’s strategy with respect to the referendum. I print here the pertinent snippets of this strategy.

The referendum is really not about the argument with Russia and Vladimir Putin. And don’t dare to use the referendum to utter your dissatisfaction about the EU or the flawed cabinet policy. This referendum is not meant for that. No: the Assocation Agreement is especially good for Dutch trade and the ‘common’ citizens of the Ukraine. That is the tendency of the leaked communication strategy of the cabinet with respect to the coming referendum.

“This cooperation agreement is in the interest of The Netherlands and Ukraine. It deals with easier trade and a democratic, free Ukraine”.  According to the communication strategy of the cabinet, it is about a normal trade agreement with a neighbour of the EU: Ukraine. Nothing more and nothing less. A ‘yes’ vote opens the door to ‘a market of 45 million people’ and hence, it is good for our economy.

The document contains ‘ready to take away’ answers to about every question that one can think of. “What will the cabinet do in case of a No?”. The standard answer that all politicians and spokespersons should administer is: "In case of a valid ‘No’, the cabinet will think about the road ahead and will speak about that with the parliament. The contents of the societal debate will play a key-role in that discussion’".

On the notoriously difficult if/then answers, like ‘What will happen when The Netherlands does not ratify the agreement, the standard diverting reaction is formulated:"This situation is unknown territory". This precooked answer appears no less than seven times in the 46 prepared queries and answers in the leaked communication strategy.

Dozens of famous Dutch people and opinion makers, who could convince people to vote ‘yes’, have been ‘mapped’ by the Cabinet. These people are called ‘relay stations’.  When you encounter formerly Ukrainian actress Viktoria Koblenko or football-player Evgeniy Levchenko: know that they are offering a favour to the Cabinet.

[Evgeniy Levchenko, by the way, adamantly denied in the media that he was such a relay station on behalf of the cabinet policy - EL]

According to GeenPeil, the association agreement is the beginning of a Ukrainian membership of the EU. PM Rutte is going to emphasize the opposite in the coming weeks:"I know the aspirations of some Ukrainian / European politicians, but The Netherlands is against a membership of Ukraine and has veto rights. The word ‘EU membership is nowhere mentioned in the agreement and is also not the goal of it”.

Everybody and their sister – including the cabinet – feels that the referendum can be used by the Dutch voters to utter their dissatisfaction with the EU and/or the cabinet policy. That is not for which it is meant, of course: “The referendum is about the association agreement with Ukraine. Not about the modus operandi of the EU. The voter and the referendum are both not helped with a discussion about a different topic. For what is your vote than anyway?!”

I don’t know what is worse: this crippled media strategy by the cabinet itself or the circumstance that it has leaked to the media in a matter of days (or even hours)? 

The fact is that this strategy is never really serious about what is at stake with that referendum, including the geopolitical consequences and the position of The Netherlands within the EU. The given that the Cabinet rather prefers the expression 'cooperation agreement' than association agreement, "because association is such a difficult word" (see the whole text behind the link), is a tell-tale signal  of the disdain of the cabinet for both the association agreement and their grassroots.

For me that is really a confirmation of the fact that it is impossible for Mark Rutte to shake off his clown costume and start with being a serious prime minister. That is worrisome in the current very tense geopolitical situation.

Even though I was against this referendum – for the aforementioned reasons – I hope that everybody will cast a vote with his heart and brain, to show that the Dutch population takes politics more serious than their Prime Minister does. 

In this way we will force the PM to finally stop with spreading fog and start governing the nation, like he is supposed to be!

Tuesday, 16 February 2016

Endgame for the EU, now that a Brexit is looming and the dividedness within the EU seems bigger than ever? Or perhaps the starting point of something new and better?!

The real fans of the European Union are currently going through a very rough time. In the prelude to a possible Brexit of the United Kingdom, the internal dividedness among the other members seems bigger than ever.

The ‘fission fungus’ is the refugee crisis, that puts the relations between the Southern and Western countries at one hand and the Eastern European countries at the other hand, on the edge.

The southern countries want to be partially freed from the influx of African and Middle East refugees that reach their shores on a daily basis, the western countries want to have a viable solution for the fair redivision of these refugees, in which everybody gets an appropriate share of the pain.

And the Eastern European countries?! Their statement is: ‘Not in our backyards! We don’t want to welcome refugees in our countries and we don’t want to be forced to accept Muslim people as new inhabitants.We are Catholic / Russian Orthodox countries and we are not prepared for giving shelter to people of other religions, as there is no infrastructure for their particular religion in our countries! And by the way, we are not willing to create such an infrastructure at all, so forget whatever you are planning about redivision of refugees!

The discussion between these three factions – Northwest, South and East – within the EU is executed in an increasingly shrill tone-of-voice and the willingness to listen to and consider each other’s arguments is rapidly diminishing.

These mounting differences led to the reinforcement of a pseudo EU-within-the-EU that had formed earlier: the so-called ‘Visegrad’ countries, consisting of Poland, the Czech Republic, Slowakia and Hungary.

These countries are all adamant about not accepting refugees from Africa and the Middle East; not even at gunpoint. On top of that these countries are willing to help with the installation of reinforced gates at the borders between the Balkan countries and Southern European countries (read: Greece), in order to stop the influx of refugees at the source. This leads to further division within the European Union and especially within the Schengen Zone, which now threatens to become a ‘container without any real contents’.

And at the same time PM David Cameron of the United Kingdom  is playing a game of ‘divide and conquer’ with the rest of the European Union, in order ‘to prevent a voluntary Brexit from the EU from happening’. Of course PM Cameron is willing to stay in the EU, but at conditions which are as favourable for his country as possible.

That this ‘status aparte’ for the United Kingdom could turn out bad for the rest of the Union and could put the London City in the driver’s seat, at the expense of Paris, Brussels, Amsterdam and Frankfurt? David Cameron could not care less!

Rik Winkel, the distinguished and well-informed EU reporter of Het Financieel Dagblad, made an inventory of the current situation within the EU. I print here the pertinent snips of his article:

The contrasts between the EU countries ran high in the prelude to the European Council at the end of this week. After a visit to Bucharest, EU Chairman Donald Tusk warned that the negotiations with the British were reaching a critical phase: ‘There is a realistical chance for a breach within the EU’.

At the same time the gap between the East and the West regarding the migration policy runs deeper and deeper. Officials from Germany, Luxemburg and current EU chair The Netherlands reacted annoyedly at the plans of the Visegrad countries to withdraw themselves from the ‘mandatory’ redivision of refugees and to help at the same time the Balkan countries with the close-down of their borders [with especially Greece – EL].

‘We strive for protection of our outer borders and repeat our negative stance with respect to a mechanism for automatical, permanent replacement [of refugees]’, was the challenging statement that was published by the Visegrad countries last Monday, after a summit in Prague.The redistribution policy of the EU is standing legislation. For Germany it is a litmus test for the current status of the European solidarity.

In Prague the four countries were making plans, together with the Bulgarian PM Boiko Borissov and the President of Macedonia, to help Macedonia with closing down its borders with EU member state Greece. According to the Czech PM Bohuslav Sobotka, ‘the EU policy failed’.

‘This kind of unilateral declarations and measures does not help’, according to Foreign Minister Bert Koenders in Brussels. ‘National measures are not the solution for the current conundrum’. And his German colleague Frank-Walter Steinmeier: ‘We cannot just redraw the borders of the EU, formally or informally. Greece is a EU member state!‘

Jean Asselborn from Luxemburg, Koenders’ predecessor as EU chairman, branded the Visegrad countries as an ‘association of renegades’ and reminded them that they themselves enjoyed much solidarity from the other European countries in the past.  

Also in the negotiations with the British the Visegrad countries lay down new obstacles. The main suppliers of cheap labour on the British market only want to approve of reductions on wage supplements and child allowances for foreign employees, when the current generation of labour migrants in the United Kingdom is lifted out of the target group.

In that case the positive impact of these agreements on the British social security framework is strongly reduced, which makes it harder for PM Cameron to present them to his grassroots as a positive negotiation result.

On Tuesday February 16, Cameron at first would have had a non-public meeting with the leaders of the fractions in the European Parliament, but he cancelled it unexpectedly due to ‘problems with his agenda’. Cameron would not have known in advance that Nigel Farage, the eurosceptical UKIP leader, was also part of the Council of Chairmen.

The last minute cancellation was received poorly in the Parliament. The PM would organize separate meetings with ‘friendlier’ fraction leaders after all. And as an exception to the usual habits, Martin Schulz would be present at the negotiations between the government leaders. The Parliament is much needed in a later stadium to approve of the designated agreements between the leaders. Cameron can only make his cuts in the social benefits for European migrants when the EU legislation has been altered first. Such a change requires approval of both the Ministers’ Council and the European Parliament.

In earlier articles I compared the EU with 28 frogs in a wheelbarrow, but it seems that I was mistaken.

At this moment the EU reminds me of 28 adolescent male lions during the mating season: all members are ‘in it to win it‘ and keep on looking for each other’s weak spots and points for the attack, in order to win the hearts of the available female lions (i.e. their grassroots). Some of these lions work together, while others go solo...  No lion, however, seems to think in the interests of the whole group. This behaviour puts the group as a whole under attack from the ‘elephants’ from Russia, China, Turkey and the United States or the ‘herds’ from the Middle East.

When this counterproductive and self-destructive behaviour of the EU members continues, this could very well be the end for the European Union as we know it.

At this moment I consider the chances that a Brexit can be averted (see the four gambles of David Cameron) by either David Cameron or the EU (i.e. Jean Claude Juncker) as quite dim. And even when this succeeds, the current British blackmail will have dire consequences for the internal cohesion of the EU.

Other countries will have learned from Cameron’s trick and will put it into practice when their domestic political situation requires that. To that respect, the current stance of the Visegrad countries is a tell-tale signal that other countries are also willing to forget the mutual interests within the EU and play the card of blackmail and/or internal division. When all member states continue on the current path, this could mean that the endgame for the EU has already started; a game that will not have a favourable outcome.

Yet, I have only one – increasingly dim – glimmer of hope about the future of the EU: when we will finally be able to leave this all behind us, I hope that the whole EU has learned the lesson that a combined future requires closer cooperation and more understanding for each other... not a looser connection and more independence within the EU. The EU is too valuable to treat it as a free-trade zone on steroids, existing of 28 selfish countries with only their own agenda to keep in mind. 

After this enormous crisis we must reinvent the EU and make it even stronger, better and more democratic than today. Otherwise the chaos and despair of the interbellum might loom again for the European Union and its inhabitants...

Monday, 15 February 2016

Russian stealth boycott is undoubtedly ‘throwing it all away’ for the Turkish All-Inclusive beach hotels and many, many other hotels in this country. Would these hotels have survived and flourished without the current Russian boycott? Or were they just shaky investments to start with?!

Throwing it all away
Is there nothing that I can say
To make you change your mind

Almost every European from the north-western region, as well as a lot of Russians, knows them: the Turkish five-star, all-in mega hotels at the Mediterranean coast near Alanya, Antalya and elsewhere.

These hotels are so big that they are akin to small cities with their thousands of guests, their private beaches and sunny piers and their vast indoor and outdoor swimming pools sizing to hundreds of meters in length. Not even to mention their mini shopping mall, or their (at least) four different a la carte restaurants with different tastes and flavours and their enormous dining-hall where hundreds of guests can have breakfast, lunch or dinner together at the same time without anybody bothering.

These Turkish mega hotels became the proverbial figureheads for what seemed to be the unbeatable success formula of the Turkish tourist industry and they placed severe attacks against especially Greece and Spain as former tourist magnets, taking them by storm.

Especially in the earlier years of this century, these hotels tried to conquer new ground by welcoming guests against accomodation prices that were seemingly below the cost price (my presumption – EL). The hotels wanted to gain market share at any price, hoping to make up for the initial losses they suffered, by slowly increasing their prices to more profitable levels, once their guests were ‘hooked’ to their hospitality and service levels.

By doing this, the owners hoped that the sky would be the limit for these hotels with their spotless white walls and endless swimming pools, their charisma of affordable-luxury-for-the-masses and their hundreds and hundreds of hosts and hostesses, ready to meet every wish and demand of all guests who visited their micro-cosmos.

Having been a ‘one off’ guest of one of these hotels, together with my family, I always wondered how these hotels could cope with the gargantuous spillage and waste of food and drinks and the enormous expenses that their service level required.

You can reckon: all day, every day these hotels served thousands and thousands of meals and snacks to their guests. Every day the vast buffets were 3 times per day filled to the brim with fresh fish, fresh meat, fresh vegetables and salads and fresh pastries and bakery products.

Very often customers, who had left all good manners at home and were attracted by the free food and free drinks, filled their plates with king size portions, only to leave them nearly untouched after a few bites. On their way to the next king size portion, but than with different dishes. Their earlier filled plate could only be tossed away in the food waste container.

Spoilt children grabbed four or five cakes and a massive amount of ice cream from the buffet, only to decide that they were not hungry after all. The food waste container would become the bitter end for this delicious pastry and lovely ice deserts, as nobody bothered to eat it anymore.

Different snack parlors all over the hotel gardens served fresh-made pizza’s, kebabs, hamburgers, french fries and other snacks from the early morning until late in the evening to their guests, who thought that three abundant regular meals per day were still not enough to satisfy their immediate needs. Yet so many pizzas and other snacks ended untimely in the waste containers, as their ‘buyers’ decided that they were full of food after all.

Food waste like this was not an incident, but a structural and integral part of the ‘all in’ formula of these hotels. This was for the simple reason that this formula pushed people to eat more than they wanted and needed and order even more food than they would eat. There were no penalties at all for undesirable behaviour and waste of precious food.

Personnel accepted the repulsive spillage – sometimes toothgrindingly and with their ‘professional smile’ carved out in their faces – as the customer was king and one dissatisfied customer could theoretically make or break a hotel, through bad reviews on social media and the internet.

The free drinks for all guests of the resort did the rest, as they invited to binge drinking and bad behaviour, “because it’s free... and hey, we’re having a holiday, aren’t we?!”

On top of that, these hotels were often in an regional competition for the best entertainment, as they were often laying in ‘no man’s land’ with very little natural sources of entertainment and sightseeing possibilities in the neighbourhood. Good entertainment shows would attract new customers, while poor entertainment would be shared through the ubiquitous social media and internet: also that could mean the untimely end for such a hotel.

Still, like with everything else, the best entertainment shows and the best entertainers were of course much more expensive than poor, but cheap entertainment.

All these circumstances put together, it meant that operating such a five star all-in hotel profitably would be extremely hard and only possible for ‘the creme de la creme’ in the hotel business. And for every successful all-in hotel, there would probably be at least nine unsuccessful hotels, that could either hardly keep their heads above water or would even default in the process.

To make things even harder, these hotels were probably all built at the expense of nearly infinite amounts of debt and borrowed money from Turkish banks and investors.

I estimate the average investment in such a large scale holiday hotel to be around €500 million euro for ground, buildings and swimming pools, but I would not be surprised when these investments would even be much higher. And on top of the vast initial investments, there are the gargantuous costs of operation, caused by the tremendous amounts of necessary personnel, food and energy.

The involved investors all want to make a decent profit on their multi million euro investments of course and in order for such cash flow payments to be structurally sound, the operation of such hotels must be an indisputed success. Personally, I really doubt whether one of these debt-laden hotels was already able to diminish its indebtedness. Probably not, as far as I’m concerned.

Summarized, I do hardly see a way to operate such hotels in a structurally profitable fashion, unless all the prices would go up dramatically and the amount of spillage and waste would be strongly reduced. And then these hotels probably need to have an average occupation degree close to 90% throughout the year, in order to afford the interest payments on the outstanding debt. However, higher prices and reduction of spillage would scare away the spoilt charter travellers, coming in from the North-European countries and Russia, who wanted to have much bang for only a few bucks.

And that was only the situation before the Turkish president Recep Erdoğan decided to ‘keelhaul’ a Russian fighter plane, which allegedly crossed the Turkish border during a bombing raid on Syria. With this action President Erdoğan provoked the wrath of his Russian partner in crime, President and ‘Capo di tutti Capi’ Vladimir Putin, who immediately declared a stealth boycott of Turkey.

Russian people were free to go to Turkey after the boycott had been declared, but there were unfortunately no charter flights to the Turkish tourist hotspots anymore: these flights just vanished into thin air. And the Russians themselves were bombarded with the habitual vitriol and cheap propaganda about Turkey, administered by the daily news and current affairs programs on Russian state television.

“Who talks about ‘room for nuancing and balanced reporting on the Turkish situation’ anyway?! We’re not! We Russians are all very angry and hurt by this Turkish act of war and we want Erdoğan and his countrymen to suffer for our pain and harmed national pride!” Or something like that...

What the results of these counterproductive actions between Turkey and Russia were, became clear a few weeks ago, when the Dutch newspaper Algemeen Dagblad printed the following story:

At this moment there are 1300 beach hotels for sale in Turkey, as the Russians are currently boycotting Turkey as a holiday resort. This boycott has been established after Turkey downed a Russian fighter jet, that would have violated the Turkish airspace during a bombing raid. Moscow and Ankara publicly quarreled about this event and mutually declared economic sanctions against each other.

One of those Russian measures now hits the Turkish tourist industry, according to Turkish newspaper Today’s Zaman. Last year more than 3 million Russian tourist visited the Turkish cities and beaches, or 15% of the total numbers of visitors.

Today’s Zaman states that many hotels at the Black Sea are nearly bankrupted. The total book value of the hotels currently for sale is about €12 billion.

Of course these 1300 hotels now for sale are not all belonging to the famous five star, all-in hotels. In that case the damage would be much, much higher than the average €10 million per hotel mentioned in the article. Probably a lot of these hotels for sale are small ‘mom and pop’ family hotels around the Black Sea and the Mediterranean Sea with room for about 50 – 100 guests and not the giant white palaces in Alanya and Antalya, for which Turkey is now so renowned.

Nevertheless, it can be expected that also these five star, all-in hotels are not doing very good currently. Also these hotels were very dependent on the wealthy Russian guests, in order to reach their occupation rates of roughly 90%. Those 3 million visitors per year will be dearly missed at this moment.

Yet, I don’t think that the stalling influx of Russian hotel guests is the main responsible for the dire situation of many Turkish hotels. This Russian influx falling through is perhaps a strong catalyst for the demise of such Turkish hotels, but it will definitely not be the only reason.

No, as I said in the first parts of this article, the main reason for the possible future demise of these large five star, all-in palaces will prove to be that they were never profitable to begin with.

These hotels have been established with a lot of ambitions and dreams about major profits for the investors. I am simply afraid that these ambitions will prove to be a mirage in the end, as the expenses of running such hotels are simply too high and the revenues will be too low to make a structurally profitable operation possible. 

In the end, when these hotels will indeed go down, it will seem like a bad dream for the hard-working owners: success was so close and yet so far away.

Tuesday, 9 February 2016

Does all the American and European QE and near-zero interest rate money in the world end up in Silicon Valley? As it does not trickle down to the real economy, seemingly.

Last week was a normal week in The Netherlands, without very conspicuous news. 

ING bank, one of the so-called 'Global Systemically Important Financial Institutions' or GSIFI banks – and on top of that one of my former employers – presented its Q4 quarterly report with a summary of the annual results. These results were seemingly outstanding, with an annual profit for the bank for 2015 of more than €4 billion euro.

Curious about the data behind the balance data I browsed briefly through the Q4 report and ran into this table of the ING Loan Book:

ING Loanbook from the Q4 Quarterly data
Chart courtesy of:
Click to enlarge
The first thing that struck me was how enormously important the residential mortgages still are for ING, with over €277 billion in residential real estate (RRE) loans on a total loan book of €593 billion. Even though the Dutch housing market suffered from more than 30% in price drops during the crisis years, residential mortgages are still a large cash cow for ING.

And then I looked at the amounts for Business Lending in this chart. I am always extra interested in business lending, as this was a department where I spent six very informative and pleasant working years and where I learned a lot about banking,  loans and credit lines for Small and Medium Enterprise companies.

The second thing that struck me, was how relatively unimportant financing of SME companies (i.e. business lending) is for the bank as a whole, in comparison with the amount in RRE loans: only €94 billion of the total loan book is spent on business lending.

And the third thing that struck me in the aforementioned chart was that ING’s domestic market, The Netherlands, was ‘fobbed off’ with ‘only’ €25 billion in SME loans; almost €10 billion less than Belgium (€34 billion), a country with 6 million inhabitants less than The Netherlands (respectively 11 million inhabitants for Belgium and 17 million for The Netherlands).

I even would not be surprised when these loans for Belgium are actually deployed in Flanders alone in most cases, the Dutch speaking part of the population, including Brussels: a part of the country which has only 7.4 million inhabitants. 

In my opinion, it can be expected that people and companies in Wallonia – the French speaking part of Belgium – will rather do business with French-oriented banks, like Société Générale or Crédit Agricole, than with the Dutch-oriented ING bank, even if I can’t prove that.

This would mean that roughly 8 million inhabitants of Belgium received €34 billion in SME loans from ING, against the €25 billion that 17 million Dutch inhabitants received in total.

Probably one of the reasons for this conspicuous phenomenon – one that I already heard back in 2014 – was that the risk management of SME credit for the Belgian market stood at a higher level than risk management for SME credit in The Netherlands. 

Roughly translated, this means that the risk that banks suffer from under-performing and non-performing loans is substantially lower in Belgium than in The Netherlands. What surprises me, however, is that this phenomenon did not change in the two years after I heard it first. And that the situation with SME and retail companies is still below par in The Netherlands, seemingly.

On the other hand, this news is perhaps not so surprising after all. In contrary to The Netherlands, where wages have been on a virtual stand-still for more than a decade, there has been a healthy wage development in Belgium:

The inflation and wage development in Belgium
Chart by: Ernst's Economy for You
Data courtesy of: Eurostat
Click to enlarge

The inflation and wage development in The Netherlands
Chart by: Ernst's Economy for You
Data courtesy of: Eurostat
Click to enlarge
Belgium is one of the few countries where the indexed wages (red line) between 2005 and 2015 have actually risen considerably. Except for the categories with low price elasticity Energy and Food, there has not been a considerable inflation for the other categories. Particularly in Belgium, one can see clearly that the dropping energy prices of 2015 will have a strong downward effect on the Belgian inflation rate.

In Italy, The Netherlands and Spain wage development between 2005 and 2015 was close to nought, while energy and food were nearly the only triggers for inflation.

Therefore one of the reasons for the circumstance that SME companies in Belgium are allegedly healthier than the Dutch ones, could be the fact that the purchase power of Belgian citizens remained better intact than that of their Dutch counterparts. People with their purchase power intact are of course more spending-happy than people who saw their purchase power erode during the last decade, due to a lack of wage increases and years of substantial inflation and strongly elevated taxes.

In my opinion, the macro-economic development of wages has everything to do with the general health of SME companies in a particular country and – consequently – the willingness of banks to invest money in such companies. Banks simply don’t want to invest money in SME companies, when they could lose that money easily: this makes their risk on substantial losses too high. Or in a clear paraphrase of the famous proverb about the horse and the water source:  “You can take a bank to an SME company, but you cannot force that bank to invest in it!”

Perhaps ING is an outlier regarding SME loans to domestic customers in The Netherlands. Perhaps the other large banks Rabobank and ABN Amro do lend more to Dutch small and medium enterprises and retailers. Yet, I would be really surprised when that would be true actually.

What may be the cause is not clear yet, but it is obvious that Dutch SME companies and retailers are not in such a good shape that banks actually like to lend money to them. The easiest and most convenient solution is to blame the banks for that, but in my opinion it is defensible to blame this partially on the stagnant wage development in The Netherlands and the consequential erosion of purchase power among Dutch middle class and lower class citizens.

And then – on Thursday February 4 – there was a business news broadcast on the Dutch financial-economic channel RTL Z that attracted my attention.

The Dutch trendwatcher Vincent Everts gave a lecture about the lending bonanza that is currently going on in Silicon Valley. For everybody who masters Dutch, there is this link to this hilarious, but yet very serious scene. For all others there is this rough translation:

Vincent Evers: The current hype in Silicon Valley, leading to start-ups getting outrageous market values, is totally ludicrous. Currently there are more than 151 start-ups with a market value of over $ 1 billion. The value of companies that everyone knows, like Uber ($51 billion), Spotify ($10 billion) and Airbnb ($25 billion), can more or less be defended. These are the champions in their respective markets and make everybody jealous of their success.

But what about SpaceX ($12 billion)? And have you ever heard of Xiami? Still this company has a market value of $46 billion! And what about Wework ($10 billion) or Zenefits ($4.5 billion). Have you ever heard of those start-ups?!

I have here a chart with three names on it:

Palantir – this company analyses data (i.e. big data)    
  • $20 billion in market value
Theranosa company that invented a new way to measure blood samples 
  • $10 billion

Stripe – this is a fintech company that created an API for electronic payments    
  • $5 billion

Everything that would have had a value of roughly $10 million in earlier years, has now a value of $100 million, $1 billion, $5 billion, $10 billion. The interest rates are currently so darn low that the money virtually flows into these companies through the trenches, holes and open windows. 

Everybody and their sister think that Silicon Valley is king. And Silicon Valley itself?! They think: ‘it’s partytime so let’s party for as long as the party lasts. But when the music stops, we run like hell’. 

The current situation in Silicon Valley remembers me of the situation in the movie The Big Short. Everybody is waiting when – not if – this bubble is going to burst. Yet, some people become shamelessly rich with this hype. And now the losers start to invest in Silicon Valley: the pension funds and the insurers that invest the hard-earnt cash of the teachers and hospital nurses, for which they must collect sufficient pension money. 

This must go wrong, but you don’t know WHEN this goes wrong. 

Everybody is putting his money in Silicon Valley. Silicon Valley is now totally overheated and must crash down. The only point is: I don’t know when that happens, otherwise I would become rich too.

Of course, Vincent Everts is totally right with this outcry. This 'ball of billions' can’t go on forever in Silicon Valley and therefore the whole hype there will crash and burn in the end.

Yet – and that is the game that everybody is playing currently –  every person or company who sells stock, bonds and other stakes in such companies for a higher price than for which he purchased them, is a winner. 

The sorry meatheads that get stuck in the end with overpriced stock and bonds or worthless interests in defaulted companies, are definitely the losers. And that group will probably not be the fancy business banks, the venture capitalists and private equity investors that currently pay the mega prices for unknown start-ups in Silicon Valley.

Todd Harrison (i.e. founder of Minyanville), one of the wisest and savviest investors and writers with whom I got acquainted during the last five years, used this beautiful proverb for such a situation: 

‘If you enter a high stakes poker game and you don’t know who the sucker is, it is probably you!’ 

I have little to add to that...

The million dollar question is however: how can it be that the whole SME industry of The Netherlands – the 17th strongest economy in the world – gets a total amount in loans from the leading Dutch banks, which is probably less than the alleged market value of Xiami ($46 billion), a company that no-one has ever heard of yet? Is this not the craziest situation?

And even the total amount of SME loans for Belgium, the 25th strongest economy in the world with a much healthier SME infrastructure nowadays, is less than the alleged market value of Xiami and one or two other start-ups in Silicon Valley combined.

The only explanation that I have for this conundrum is the so-called trickle-down effect. For this I created the following illustration

Quantitative Easing and the trickle down effect
Illustration created by: Ernst's Economy for You
Click to enlarge
This huge ‘swimming pool’ of liquidity that has been created by the European and American quantitative easing initiatives, as well as by the 'kamikaze', near-zero interest rates of nearly all the global central banks, does not trickle down at all into the real economy; except for a few droplets.

This is the reason that the middle and lower classes in f.i. Europe came almost to a total standstill with respect to their wage development. This is also the reason that countless SME companies and almost the whole retail industry everywhere are still having a very tough time after the crisis, even though the amount of globally available liquidity is nearly endless.

On the other hand, that enormous pool of liquidity is still trying to find a way out as the water tap only lets out a few droplets of liquidity to the real economy. And all that available liquidity should make a decent profit for its borrower anyway, in spite of the near zero interest rates.

And I suppose that this new-found, huge water outlet for the swimming pool of liquidity... is Silicon Valley these days.

That is not because all 151 multi-billion dollar investments in Silicon Valley will be hugely successful in the future; they almost certainly won’t be. Of these 151 companies, perhaps only 25 might turn out to be real winners in the end. The rest will default sooner or later...

No.. It is simply, because the people who are involved in these multi billion dollar investments in Silicon Valley seem to know who the sucker is. And it is certainly not them...