EU runs out of patience, money and options

Greek Prime Minister Papendreou may have been writing his epitaph by calling a referendum on the bail-out package.

If so, he clearly knew how he wanted it to read. That, in the face of an imminent takeover of his country by foreign forces, he at least turned first to the people to allow democracy a final say before Greece as an independent nation was wiped out.

For this, I give Papendreou credit, even if such actions could spawn a progressive collapse of the euro, and an end to collective Europe as we know it.

We now learn, of course, that Papandreou's commitment was not as strong as it seemed. Or rather, that EU blackmail was stronger and - in the time-honoured tradition - a national referendum has been overruled by the EU in order to get the right result.

Given all this, I suggest even eurosceptics trembled somewhat at the potential outcome if Papandreou had been allowed his last stand. An ugly exit of Greece from the eurozone, without the calming effects of a managed withdrawal, would spook the markets no end.

Next in line for the battering ram would be the teetering financial walls of Spain and Italy. If the EU can't shore up these walls in the way it has attempted - but so far failed - in Greece, then they too will collapse. And the painful truth is, the EU cannot afford to prop up these countries.

The only possible salvation would be to turn to the international community. These days, that means not the US, as banker of last resort, but China, the world's new global banker.

It would be playful to consider China agreeing to help out Europe in return for each EU country regaining its WTO seat and Britain being handed back its fishing rights! However, any deal China cuts is likely to be far less sanguine than that.

It's ironic that Edward Heath, Britain's most fervent EUphile, was also one of China's most ardent supporters. For Heath, the world consisted of just three blocks - the US, the EU and China. Was it always his one-world plan that China should eventually rule the roost?

As the eurozone collapses, and the US buries itself under its own debts, only China now has the potential - or is that the threat - to sort out the world's financial mess.

Perhaps the greatest irony today, nevertheless, is that the first country the EU has destroyed by its over-centralising aims is the mother of European democracy itself. And, as such, a fitting EU target some sceptics might say.

Greece can regain its democracy - in a way - if it reinstates the drachma. But being in pawn to international bankers won't be a pleasant or a recognisable form of freedom. After its euro adventure, Greece could lie in ruins for another two decades.

Qaddafi's Libya

For a madman, Qaddafi displays surprisingly subtle strategic skills. He is, of course, an Army colonel (even if his stars are self-appointed) and armies are not known for subtle acts. But the strategy Qaddafi has adopted to counter Libya's popular revolution is worth study, not just by other military dictators but equally by chairmen of besieged corporations trying to salvage damaged brands.

While his first reactions, through surprise and shock, displayed a typical bunker mentality, he has now adopted all the skills of a modern marketer — going on the offensive with openness and some frank admissions and calling in the world's media to prove, or rather disprove, the international community's condemnatory case.

We shouldn't be surprised that the Libyan revolt has not followed the rapid path of those in Tunisia and Egypt. Qaddafi's Libya has always been prepared to be a thorn in the side of all others — often just to assert the uniqueness of its revolutionary status. In addition, Qaddafi has always been a showman.

His apparent rapprochement with the West in recent years gave him the symbolic opportunity to plant his simple bedu tent beside the extravagent richness of the meeting houses of the world's most influential leaders. He gained financially and politically by seeming to come in from the cold. But he could never change his beliefs that his Libya is a singularly revolutionary nation that can stand alongside others, but will never be subsumed.

To Qaddafi — who has long spent his nights in a desert tent surrounded by armed loyalists — the methods used to intimidate and eliminate circling opposition demonstrators seem perfectly logical and justified.

Now he has co-opted the international media to endorse his position. The scattered nature of the opposition and their geographical dislocation enables him to present himself — as 42 years ago — as the nation's natural revolutionary leader fighting reactionary forces. Now these forces are armed, media coverage simply bolsters his story.

Libya's future today is unclear. But one thing seems certain. There will be many twists and surprising turns before the country's latest revolution ends. And the media, which has now (perhaps unfortunately) become part of the story, is likely to play a significant role in its resolution.

Viktor Orbán: Centre Stage at the EU

Hungary's accession to the rotating EU Presidency in January has thrown up the sort of political contradictions that may cause reflection by Europe's right-of-centre parties.

This Presidency is personified by the robust figure of prime minister Viktor Orbán, the 47 year-old, chairman and co-founder of Hungary's centre-right Fidesz party. Fidesz stormed back into power at Hungary's National Assembly elections last May, gaining a two-third's majority and becoming the first Hungarian party since the Soviet era to win outright election victory.

In Orbán's maiden speech to the EU Parliament, heading the latest Presidency to carry forward the EU's political agenda, he presented all one might expect from someone who has gained a rebellious political reputation, but it was far from what most MEPs wanted to hear.

Considerable discontent exists in the EU parliament over measures introduced in Hungary since Orbán's election. Aware of this, he chose to focus on defending his national position before MEPs rather than on the Presidency programme. And he did so not by explaining his legislation, but by accusing his critics of being anti-Hungarian and anti-Fidesz (because his governing party enjoys a freedom from coalition denied to others).

What has particularly upset liberals in the EU is Orbán's revision of Hungary's media laws, ostensibly to introduce EU compliance. However, additional requirements will compel all publishers, including those online, to register with a Fidesz-dominated media council and comply with legal requirements to reveal sources if required and to provide objective, balanced and 'moral' reporting, with threats of suspension or fines for non-compliance.

This is not only viewed as an undemocratic measure for an EU state, it is also seen to undermine the EU's ability to support press freedom within non-EU countries that exercise illiberal sanctions against media and journalists.

The conundrum that particularly now faces right-of-centre parties in the EU is the attitude to strike towards their nominally centre-right Hungarian partner. Uncertainty lies not just over Orbán's media laws, but also over his steps to reduce Hungary's budget deficit by nationalising the country's private pension funds and applying seemingly protectionist turnover super-taxes to many of the largest foreign companies operating in Hungary.

These are not the kind of measures one would naturally expect from a centre-right Christian Democrat party, of which EU group Fidesz is indeed a member. Yet, other legislation introduced by Orbán might provide succour even to economists of the Austrian School. Income tax has been levelled to a flat rate of 16 percent and ordinary corporate taxes also cut to 10 percent. By these tax-cutting measures, and provision of preferential loans to SMEs, Orbán hopes to raise employment and stimulate growth in Hungary's stagnant economy.

Overall, however, Orbán's economic package – the New Széchenyi Plan – distinctly departs from the response of most western economies facing excessive debt – plus, in Hungary's case, the pressures of repaying a $25 billion IMF loan. Hungary's treasury will be temporarily boosted by embracing private funds but deep and meaningful balancing cuts in government expenditure have yet to materialise.

The contradictions inherent in Viktor Orbán's conservatism confuse western observers, but they are better understood by Hungarians themselves. Since the 1980s, Orbán has followed a very public political journey, from an aggressive ultra-liberal to an ultra-conservative. As a radical liberal he became a natural activist against the elitist form of capitalism introduced by the 1990 election of the first post-communist HFD government. In this same year, Orbán placed his Fidesz party under the umbrella of the Liberal International. But over the following decade he took political advantage to change Fidesz into a right-wing conservative party. After winning the party's first election into government in 1998 he immediately switched political allegiance to Europe's Christian Democrats.

In this final guise, Orbán has led his party into representing itself as a pillar of traditional – though some would say authoritarian – Hungarian values. (Online blogs speculate he could apply his media laws to impose respectable family values on Hungary's most popular reality TV show!) In practice, Fidesz has polarised Hungarian politics, unifying the right against all the rest, who are roughly dismissed as "Liberalbolsheviks".

Yet, isolating Hungary's liberal SZDSZ party is an ambition shared with Fidesz' main opposition, the socialist MSZP. And between Hungary's two major competing parties there is evidence of even more co-existence of otherwise 'rightist' and 'leftist' policies.

The MSZP-led governing coalition ousted by Fidesz last year advocated free market economics and replacement of universal benefits with the targeting of social needs. In contrast, Fidesz has favoured state intervention in the economy, including potential ownership of significant economic enterprises. Fidesz' critics suggest the party shows too much support for favoured businesses. It has appointed party supporters to supposedly independent public bodies. Doubts are also expressed over the party's reluctance to introduce fundamental economic reforms, relying instead on the financial largesse of EU grants.

Contradictions concerning the political direction of Fidesz, and its outspoken leader, will therefore certainly remain. To many conservatives, Orbán's bold, plain-talking, and lack of inhibition in supporting national identity, are qualities to admire. And moderate Conservative parties facing similar budget issues, such as Poland's Civic Platform, will certainly offer Orbán support where they can. But he is likely to continue to be viewed as a controversial and divisive figure from the liberal-minded, cooperative ethos that predominates in the institutions of the EU.

Now at EU centre stage, Orbán will hope to separate his approach to domestic economic management from his wider EU responsibilities: namely, to secure the economic governance and crisis management reform programmes that have been outlined for the EU by the Belgian Presidency. Fortunately, he is not a newcomer to the EU, nor to the practice of adapting policy to secure political ends.

Orbán must hope to employ the charm and resolution he undoubtedly possesses to win the consensus needed from his European colleagues to be able to claim a successful Presidency. But, over the coming months, many in Brussels will surely experience anxious moments in expectation of Orbán-style departures from the conventional harmonised EU script.

N.B. Since this piece was first written in January, Orbán has somewhat modified his media law proposals at the behest of the European Commission. Private online bloggers, for one, will not now be required to register with the State.