It takes (at least) two to tango

Will the EU take on its responsibility of stable development and peace in Kosovo? The international troops are now withdrawing , but many problems remain. Poverty, corruption and organized crime are some factors, but also it is a fact that this is an area that has recently been part in a conflict with religious/ethnical attributes. While Kosovo may have only recently won its independence, the idea of joining a Greater Albania is backed by a growing number of people – underlining the importance of the EU’s role in the region.

When visiting the center of Kosovo’s capital Pristina last year, it is impossible not to notice the many references to Albania. The six-starred, European Union-like flag adopted by Kosovo in 2008 is rarely seen, while the double-headed eagle of the Albanian banner is displayed proudly at every corner. The souvenir stalls in the main tourist streets sell t-shirts evoking Albania rather than Kosovo.  The EU´s role in the region is of great importance – yes Kosovo has recently got its independence, but the idea of joining the Greater Albania is supported by an increasing number of people. This is not a new idea, actually it was created in the Kosovar town Prizren in the 19th century in order to advance Albanian independence from the then ruling Ottoman Empire. After the long battle for independence from Serbia, the youngest state in Europe is already tempted by the idea of giving away its sovereignty to enter a new marriage with its neighbor Albania. But the poor economic state of the landlocked country – devastated by corruption and frequent ethnic clashes with Serbian minorities – has gradually erased the will to join its bigger neighbor.

But it looks like Albania is at least not openly, not showing so much will to join such a project that will be of interest both in Washington DC as well as in Brussels. It takes two to tango.

It is of great importance for the region that the EU continues to give Kosovo a clear EU perspective. The  Stabilization and Association Agreement, currency, national laws available in English, favoring harmonization with EU rules and foreign investors’ understanding of the country’s legal environment – some examples of what could be of importance. But the ride will be bumpy. Only 22 of the 27 EU member states have so far recognized the new country. Some of them, Cyprus and Greece, having done so out of a fear of a Greater Albania.

One way to calm the potential for a Greater Albania is for Brussels to keep alive the EU perspective for Albania proper – this needs to be done even if the country still falls seriously short of meeting basic requirements. The warm hug of the EU has prevented the breakup of many European countries for years – including Belgium and Spain. For Albanians this embrace needs to work in the opposite way, to avoid a marriage that would be unpopular with too many parties. The question is, will the prospect of a common house convince those in favor of marriage to refrain from union?


Basel III

Today the excellent Nicolas Véron, Senior Fellow at Bruegel (Brussels) and a Visiting Fellow at the Peterson Institute for International Economics (Washington DC), writes about the lack of global leadership in the adoption of the Basel III accord. His point is that it is in the EU’s best interest to revise its Capital Requirements Regulation to make it fully compliant with Basel III, particularly as regards the definition of common equity capital. Read more on Nicolas Véron´s own blog here.

Still in Sweden, the crew of The Golden Hinde look upon it from the Swedish perspective: The countercyclical capital buffer and leverage ratio in Basel III are “good instruments” for managing systemic risks. But limited – as they could not be targeted to specific areas of the economy. Two more adaptable possibilities are the variable risk weightings and the ceiling on household borrowing, both of which would allow regulators to cool certain sectors of the economy without impacting areas with more normal levels of activity. The Riksbank and Finansinspektionen, the Swedish financial regulator, would need to work together. The competence and experience of these authorities will have to be utilised if macro-prudential policy is to be effective in Sweden. The biggest risk to the Swedish economy and the risk to most ordinary Swedes, is probably, as mentioned before at this blog, the raising household borrowing levels.

The Dragon, the Bear and the Swedish Lion

Last week, the Swedish Parliament had its annual Foreign Policy Debate. As usual, too little focus was still on how the development in Asia is affecting the Swedes. Trading with Asia and China is one thing. Turning the focus on Asia in the Swedish political debate seems harder. But what happens in Asia actually matters in Swedish security policy. Asia, with China as the main factor, is increasing its strength, not just when it comes to trade. The US “Pivot to Asia” will result in a heavier US military focus on Asia and the Pacific. The US military involvement in Europe is declining. This fact will affect security strategies in Sweden and the other Nordic countries.

In the Scandinavian neighboring area, it is now obvious that Russia is increasing its military capability. The wish of Russia to be seen as a global super-power is obvious and the holding of nuclear weapons is decisive in that strategy. The country’s capability to handle conflicts in its neighboring area, for instance in relation to former Soviet republics, is conclusive in that strategy. Strengthening the Armed Forces is of prior in the Russian budget. Within ten to fifteen years, an increased military capability in all Russian defence branches is expected. Two geographic areas of strategic interest could be highlighted: Firstly, the situation in the Baltic Sea especially around the Swedish island of Gotland. Secondly, the development it the Arctic, so as to Cap of the North. Promoting and safeguarding the peace and security is about cooperation through both soft- and hard security. To promote intergovernmental connections of trade, cooperation, diplomacy, to include instead of exclude, is of great importance.

The situation in the Russian society is getting harder. Power is getting more centralized. The possibility of the opposition to act is limited. The parlance of the Russian State leadership, both in relation to domestic opposition as to the world around is getting more aggressive. Nationalism plays an active role, when building the new national identity after the fall of the Soviet Union. To keep the Russian federation together and to guarantee the security for trade with oil and gas is one of the main tasks. That relates to the situation in the Baltic Sea, as it is an important thoroughfare, and its importance for Russia is increasing. When it comes to the Arctic, it also is of importance when it comes to transports as well as the possibility of future obtaining of natural resources.

The best basis for building both soft- and hard security in Sweden, is upon the country’s Non-allied status, which has a strong support among the public. After the Swedish Empire fell with King Charles XII in Halden 1718, the Swedish state luckily replaced its lust for warfare with an interest for quality education and later democracy and building the modern welfare state. The last Swedish war was with Norway in 1814. Since that time, most of two centuries, Sweden has stayed neutral in wartime. Some claim because of luck, some other it is because of the Swedish mentality: Be pragmatic, and at the same time try to avoid conflicts. Among Swedes, this mentality is obvious both on the macro and micro level.  But you need to prepare for the future, and a country need to maintain its capability.

To be Non-allied is not about isolation – it is about building good relations with others. Sweden co-operates with EU, OSCE, and UN as well as with NATO within the frame of Partnership for Peace, etc.  But Sweden could do more. Strengthening the Nordic Defence Cooperation is a concrete example. Nordic countries could complement each other, for instance when it comes to strategic development of capabilities, human resources, education, exercises and operations. This is more realistic for the Nordic countries than supporting the upcoming thoughts of a future EU-defence. But to make this reality, a strong political effort is crucial.

Make it jazzy

Yesterday and the day before, we were visited by the UK Party Leader Ed Miliband, and today Australia’s Defence Minister Stephen Smith is anchoring in the cold north. Small countries are especially in need of getting global influences and securing their network. Protectionism and to just get stuck with heads down in ideologies doesn’t bring the world forward.

Miliband´s thoughts of “One Nation” have a fragrance of “Folkhemmet”, the vision of former Swedish Party Leader and Prime Minister Per-Albin Hansson. A strong speech and perhaps a platform of revealing how the UK Conservatives have lost their grip on what their ideological gamble hangs on to – economic credibility. These Miliband thoughts are for sure interesting but it also focuses on the crucial dilemma to solve in a globalized world:

How do we create unity within a society, which is a base for security, and at the same time promote diversity and seek how to benefit from globalization? (Not just seeing globalization as a challenge to handle) Is it really possible? How could diversity and unity work together side by side?

One aspect of it is trying to take on the challenge from the philosophical view. “Pluralism” and “diversity” are sometimes used as if they were synonyms, but diversity is just plurality, plain and simple — splendid, perhaps threatening. Pluralism is the engagement that creates a common society from all that plurality, which also requires engagement and participation. Whilst diversity instead often is put on the same footing as sub-culture, isolation and creation of physical or virtual ghettos. The dynamics of pluralism are instead two-way communications, exchange, and meeting. Like going to a good jazz concert: No totally set music when it starts and in the end good interaction between the different instruments, the singer and the audience has been achieved. Everyone mustn’t play the trumpet.

Debts across the globe

Happy to read that the battle of sharing best practise goes on instead of just getting stuck to one’s own domestic problems. Sweden and Australia are two different countries in different locations on the globe. Yet, there are much in common. For instance when it comes to the housing market. In today’s Canberra Times, Leith van Onselen, highlights the Swedish example. His focus is on the fact that Finansinspektionen, Sweden’s financial regulator, the Financial Supervisory Authority (FSA) in October 2010, capped mortgage loan-to-value ratios (LVRs) at 85 per cent, a move that helped slow annual mortgage growth from more than 10 per cent between 2004 and 2008, to 4.5 per cent in December 2012. This has made it harder for especially young people to enter the Swedish housing market, especially in the very expensive Stockholm region.

But – it must been seen as positive itself that there are concerns about the debt situation of the Swedish households. The debt situation of the Swedish households is worrying, said former Social Democratic Prime Minister Göran Persson in late 2012. Persson was in charge of the Swedish budget consolidation during the 1990´s. In its Economic Outlook of December 1994 the OECD projected that the Swedish public debt would explode. By the year 2000 the public debt was expected to hit a record 128 percent of GDP2. Today we know that thanks to Göran Persson, the gross debt for 2000 turned out to be less than half that figure at 53 percent. And within a few years the budget deficit, from a high of over 11 percent of GDP turned into a large surplus. If you are I debt, you are not free, was Göran Persson´s mantra. This might sound like a quote from the Bible, but it is not. As the former State Secretary Jens Henriksson once put it in his excellent essay “Ten lessons on budget consilidation”: “It is politics, and it is economics!”

In the end of 2012, the former Prime Minister of Sweden claimed that if you take the debts of all the individual households under consideration and add them to the deficit, Sweden is actually now in more debt than for instance Italy. Göran Persson warned for a possible situation where this maladministration could effect the Swedish housing prices. The housing situation and housing market are a hard thing to handle so many needs from different groups could be taken under consideration. Especially in expensive cities that are in need of a vital housing market in order to increase growth and welfare. In Stockholm as well as on the other side of the globe.  If you are in debt, you are not free.

Who is hacking who?

In anonymous hacker attacks, hundreds of terabytes of data have been affected from at least 141 organizations across a diverse set of industries beginning as early as 2006. Most of the victims were located in the United States, with smaller numbers in Canada and Britain. The information stolen ranged from details on mergers and acquisitions to the emails of senior employees.

The company Mandiant, identified the People’s Liberation Army’s Shanghai-based Unit 61398 as the most likely driving force behind the hacking. Mandiant said it believed the unit had carried out “sustained” attacks on a wide range of industries. Mandiant is one of a handful of U.S. cyber-security companies that specialize in attempting to detect, prevent and trace the most advanced hacking attacks, instead of the garden-variety viruses and criminal intrusions that befoul corporate networks on a daily basis.

You find the report here

Is it a secretive Chinese military unit behind a series of hacking attacks, as a U.S. computer security company claims, or should we believe the Chinese who claims it is actually them being the victim from US hacking? Well, the Chinese track-record isn’t really the best on this topic. In end of January this year, international survey has named China as the origin of a third of the world’s cyber attacks. Akamai Technologies’ third quarter “State of the Internet” report showed China remained the biggest source of computer attacks globally. In analyzing Web attacks from 180 countries or regions, Akamai said China remained the single largest source, with 33 per cent of all attacks originating within its borders. The United States accounted for 13 per cent, followed by Russia at 4.7 per cent.

What is sure is that more powerful legislation domestic and international is needed, citing Chinese penetration not just of the largest companies but of operations essential to a functioning country. Full press in the WTO could be a legal answer.

Closing the gender gap – an ongoing global challenge

Just back from an interesting  trip to Australia. Got an email from a friend living far away from the policymaking in the political jungle. “Did you get to see that great red-haired politician who figuratively pulled the pants off that male in the debate?”. What he meant was of course the globally well distributed sequence when Australia’s current Prime Minister Julia Gillard addressing opposition leader Tony Abbott on the topic of misogyny. At least in rhetoric’s, feminism got a face in that sequence – but as in many other well-developed countries, there is never time to lean back and claim that the job has been done. Not in Sweden, nor in Australia, even if PM Gillard now has became the feministic Heroine of a male Swede far up in the North. Compared with South Africa, Canada, US and the UK, Australia for instance still has the lowest percentage of Executive Key Management Staff personnel. It will be interesting from aside to follow Australia’s upcoming election debate and see if the gender issues will play any role.

Too often, gender equality is seen as something apart from what creates responsible economics. But gender matters in Macroeconomics. Failing in promote gender equality is denying the freedom and rights of both men and women, and also damages a country’s long-term productivity.

Some weeks ago, The Economist had a salutation to the Nordic Model, pictured by a hairy male Viking under the headline “The next Supermodel of the World?”. From my view, far too little on these 14 pages is focused on the fact that the Nordic countries are those in top when it comes to gender gap, and that this fact itself actually could be one of the keys to the countries’ success stories. The fact that if you improve the gender balance, it improves economic social conditions for everyone. Or relating it to what World Economic Forum points out: “The most important of a country’s competiveness is its human talent – the skills, education and productivity of its workforce.”

Countries achieving gender equality maximize their competiveness and economic potential. So maybe the front cover should have pictured a female Viking instead. The tradition of strong women is long in the Nordic countries, relating back to the old ages. While the male Vikings were out trading and rioting, their wives were in charge of the mansions: women played an important role in the Viking society. For instance when they married, they were still part of their old family and related to that they had more legal rights than other free women in Europe at that time. The efforts of closing the gender gap are not just about rhetoric’s. It is not just about freedom and wealth of women, related to as “women’s issues”. It is about building stability in a society in society on a solid and equal ground for all of us. It is a misunderstanding that some will loose from it, if countries making efforts to close the gender gap. There will be just winners.