January 2012| 5.

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Our World in 2012

NEW EUROPE

Issue # 967

A New Europe Special Edition

Featuring:

Joseph E. Christine Nouriel Lagarde Roubini Stiglitz

George Soros

Tsvetan Jean-Claude Javier Vassilev Trichet Solana

Theodoros Roussopoulos

More than 70 leading thinkers visualise our world in 2012

Peter Hustinx

Tony Blair

John Peter Sutherland Vassallo

Janez Tony Athanasios Paul Graziano Kotsis Dembinski Potocnik

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The economic imperatives of the Arab spring

OUR WORLD
Leaders-cum-losers of 2011 Our world is not for sale, but it may be for rent

17 18 19 20 21 22 23 24 25

OUR WORLD IN 2012 30

More pro-active transparency in the EU administration

04

Disaster can wait

31

Europes challenges in 2012

GLOBAL PERSPECTIVE
The year of rational pessimism

Invest in youth: It's time to act

32 for the EU? 33 34

A new diplomacy

06 07 08 09 10 11 12

Guns and beer will get us through 2012

European maritime and fishing economy towards sustainability and new growth

Reinvigorate the rich to help the poor

Between Iraq and a hard place

Any hope for Europe?

Fragile and unbalanced in 2012

Interlocking effect on co-operation with NATO to be stronger in 2012

35 an Iolaus strategy 36 37 38

Fight the Hydra with

After the promised land

Industrialisations second golden age

The domino effect

Obama the statesman

The Balkans in 2012: A year of hopes and challenges

2012, the year of the new euro

Russias botoxic president returns

Gold up, Dollar down in 2012

The sovereign debt crisis and the need for a political vision

Taking faith seriously

EUROPEAN FUTURE
The new international economic disorder

39 yet accomplished
Mission not

13 14 15 16

26

Europes year of indecision

40
Europe: Any light

So what happens next?

South Eastern Europe in 2012 - Contrasts in troubled waters

27 at the end of the tunnel? 28 29

Greece under siege

41 diplomacy in 2012

Upgrading EU commercial

We must revisit democracy

42 in 2012:The challenges ahead

The European brewing sector The Europe of the future

Occupy the government

OUR WORLD IN 2012

LIFE & SOCIETY
The renaissance of hope

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ENVIRONMENT & ENERGY

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Ensuring stronger, more effective and more consistent protection of personal data in the EU

43 44 45 46 47

54 55 56 57 58

Gazing into the energy crystal ball for 2012

ETHICS IN FINANCE
A contract with the future Timely reminders The global message of the Robin Cosgrove prize

66 67 68 69 70 71 72 73 74 75

Looking for the constant in an ever-changing environment

New energy resolutions for the New Year

When ethics conflicts with interest

Wine in moderation a balanced approach to reduce harmful drinking

Europes energy debate in 2012 Ethics or How to cure financial markets

The role of sport in 2012

Saving energy: A sensible response to the economic and climate crisis

Worlds at war, how to reconcile finance with ethics

RISING ASIA
Asia enters the storm

OUR DIGITAL WORLD

Derivatives and responsibility: Guidelines for dealing with risk

48 49 50

59 60 61 62 63 64

Three things I have learned in 2011: A New Year's message An analysis of the origins, problems and future perspectives

What China wants in 2012

The future of machines lies in the most advanced technology: YOU Financial solidarity and the democratisation of money

Asian women on top

Fuelling the European economy in 2012 A critique of the financial sector and people's behavior

ENDING EXTREMISM
Countering extremism by empowering individuals in local communities in EU

2012: Time to untap the potential of digital data Kotsis Reflection and action, ethics and ethical behavior

51 52 53

The year of the broadband The citizen bank

A global culture to fight extremism

Internet freedom: A fight beyond boundaries

KASSANDRA
Greece: Between a chaotic government from the 'barricades' and the Deus ex Machina

In tough times, why do Europeans always turn to the Right?

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OUR WORLD IN 2012

In last years Our World In 2011, I suggested that the next revolution would be the information revolution. I wrote : The internet as a platform is one that lends itself to a large public forum with no borders, boundaries, and no problems with distance; in fact, it is the perfect platform for starting a revolution. However, platforms do not start revolutions; information does. And we are in an era where critical information is becoming more accessible, less obscure and can be found in abundance. We certainly witnessed the power of information in this respect. Access to and sharing of information changed the world in 2011 and, as my only prediction for the coming year, I have no doubt that it will continue to do so. This year, I offer a few observations of failures in leadership. In this issue: Barack Obama, George Papandreou, and Dominique Strauss-Kahn. All three leaders have virtues that have elevated them, and are not the villains of history, but all three must share responsibility for the shattered pieces of the 2011 puzzle. The terrorist, the precedent and the deconstruction of justice One of the most notable events of the past year was the successful operation to gun down Osama bin Laden. In a mission sanctioned and obsessively observed by the US President and leadership, a human being was denied justice. The terrorist was gunned down, with no attempt to take him alive. America was at war with terror, and OBL was a casualty of war. Sadly, this was not the last such case in 2011. Congratulations world, the USA has begun a vendetta while we were watching. Congratulations to the US administration for supporting vigilantism. If you are a fan of the death penalty, there is no doubt that you would want OBL to be executed; if you are not a fan, then life behind bars in solitude would do. In both cases, the question would not be the outcome but the system in which he was tried. Coulda, Woulda, Shouldathe world is a better place without him, voices echoed while Obama raised his middle finger to the principle of justice, hiding behind its shadow of war.

The Greek hero-to-be who became the village idiot With a country in debt and nearing bankruptcy, George Papandreou decided that the citizens should take part in a referendum and collectively decide on the future of Greece as part of the Eurozone. The referendum never took place, and Papandreou was essentially forced to resign over the backlash. In the hours leading up to his public announcement for a referendum, the-then Greek prime minister found himself in a unique situation. He was about to make a statement to the press, that would temporarily rock world markets. This moment, this critical moment, was one that could have made him a hero. Papandreou had all the time in the world to make sure that Greek money would be invested in the right places. It was one of those rare moments when a politician was about to say something that would have a significant impact on markets. By strategically investing Greek resources, Papandreou could have singlehandedly taken Greece out of crisis, made himself the hero and remained as Greeces leader for the rest of his life. There is no doubt that Greek money was made on the announcement of the referendum, but such insider trading was certainly not to the benefit of the state. The man who would be president, if it wasnt for his sex drive Dominique Strauss-Kahn, who graced us with his presence last years edition, is certainly a man with quirks. Months after the DSK incident in New York, I am quite certain that the case was a set-up. DSK, who had a good chance of being the next French president, lost it all in a few minutes of naivety (to say the least). With his implied absence from the political mainstream for the time being, the man changed the future of France, Europe, and the world with his shortcomings. On the flipside, thumbs-up to conspiracy theorists around the world. The biggest failure of all The tragedy that shrouds the world like a dark cloud is not just the sum of the individual errors made. It is the lack of leaders in our world. We have become surrounded by leaders-by-teleprompter, leaders without initiative, leaders without principles. Gone is the era of real leaders. Our world is not for sale, but it certainly feels that some can rent it by the hour. A Happy New Year to you all may it bring you health, happiness and prosperity.
EDITOR

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ISSN number: 1106-8299

2011 New Europe all rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic or otherwise, without the permission of New Europe.

OUR WORLD IN 2012

January
2011 started with Estonia becoming the 17th country to adopt the euro and with a referendum in South Sudan, which voted for independence and the Tunisian government fell after a month of increasingly violent protests, causing President Zine El Abidine Ben Ali to flee to Saudi Arabia after 23 years in power.

05

May
Osama bin Laden is killed in Pakistan by American Special Forces. Former Bosnian Serb Army commander Ratko Mladi, wanted for genocide, war crimes and crimes against humanity, is arrested in Serbia. The EU agreed a 78 billion rescue deal for Portugal.

September
India and Bangladesh sign a pact to end their 40year border dispute and floods in Pakistan kill 434. A Zanzibar ferry sinks off the coast, losing 240 people. Approximately 100 Kenyans die after a petrol pipeline explodes in Nairobi.

It is a small step for the Eurozone and a big step for Estonia
-Prime Minister Andrus Ansip welcomes the new currency

For God and country-Geronimo, Geronimo, Geronimo. Geronimo E.K.I.A. Enemy killed in action
-Unnamed Navy SEAL announces his shooting of Osama bin Laden to his commanders

Now I won't have to see Abba being used in a TV commercial

-Bjorn Ulvaeus is delighted that the EU extended copyright from 50 to 70 years

February
The Arab Spring gained momentum as Egyptian President Hosni Mubarak resigned after widespread protests calling for his departure, leaving control of Egypt in the hands of the military until a general election can be held. Uncertainty over Libyan oil output causes crude oil prices to rise 20%.

June
Yemeni President Ali Abdullah Saleh travels to Saudi Arabia for treatment of an injury sustained during an attack on the presidential palace. Syrians flee to Turkey as Syrian troops lay siege to Jisr ashShugur. Chile's Puyehue volcano erupts, causing air traffic cancellations across South America.

October
Gilad Shalit is released by Hamas in exchange for Palestinian and Israeli-Arab prisoners. 100 people are killed in a car bombing in the Somali capital Mogadishu. Gaddafi is killed in Sirte by rebels. In Spain, ETA ends its 43-year campaign of political violence. EU leaders agree a 50% haircut of Greek bonds.

I would like to tell you as the president of the republic, I am not embarrassed to listen to the youth of my country and to respond to them
-Egyptian President, Hosni Mubarak declines to step down

Don't be afraid of making an ass of yourself. I do it all the time, and look where I got
-William Shatner advises Canadian students

This has all been invented by pornobsessed prosecutors. It's all the work of their fevered imaginations
-Silvio Berlusconi is outraged

March
A 9.1-magnitude earthquake and subsequent tsunami hit the east of Japan. Emergencies are declared at four nuclear power plants affected by the quake. Hamad bin Isa Al Khalifa, King of Bahrain declares a three-month state of emergency as unrest spreads. The UN voted for a no-fly zone over Libya.

July
Following the January vote, South Sudan becomes the worlds newest nation. Goran Hadi is detained in Serbia. Anders Behring Breivik kills 76 people in Norway and the UN declared the first famine in southern Somalia for 30 years.

November
The Mars Science Laboratory rover Curiosity, the most elaborate Martian exploration vehicle to date, is launched from the Kennedy Space Center. It is slated to land on Mars on August 5, 2012.

People laughed at us for using the word magical. But you know what? It turned out to be magical
-Steve Jobs, Apple CEO, unveiling new iPad

This is one of the most humble days of my life

-Rupert Murdoch describes being forced to testify on phone hacking to the UK parliament

There is no racism, but maybe there is a word or gesture which is not the correct one. The one affected by this should say 'this is a game' and shake hands
-FIFA President Sepp Blatter leaps from one scandal to another

April
Former Ivorian President Laurent Gbagbo is arrested in his home in Abidjan by supporters of elected President Alassane Ouattara with support from French forces. An estimated two billion people watch the wedding of Prince William and Catherine Middleton at Westminster Abbey in London.

August
In the Battle of Tripoli, Libyan rebels took control the nation's capital effectively overthrowing the government of Muammar Gaddafi. In space, NASA announced that they may have found evidence of liquid water on Mars and launched Juno, the first solar powered spacecraft, heading for Jupiter.

December
The United States formally declares an end to the Iraq War. Tropical Storm Washi hits the Philippines causing flash floods, causing at least 1,010 fatalities, and 46 people are officially listed as missing.

As President, I refused to wait for the images of slaughter and mass graves before taking action
-Barack Obama decides on military action in Libya

My friends and I have been coddled long enough by a billionaire-friendly Congress

-Warren Buffett said in the Wall St Journal.

Europe is undergoing an economic and financial crisis, which is ultimately based on the ethical crisis looming over the Old Continent
-Pope Benedicit reflects.

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OUR WORLD IN 2012

2012 could prove to be the year in which the experiment with the euro, the culmination of a 50-year process of economic and political integration in Europe, comes to an end

Someone recently quipped that the best thing about 2011 was that it was likely better than 2012. By the same token, while there has been much concern about Americas political gridlock, something worse for America, and for the world, could have happened: the Republicans could have prevailed in their program of austerity-cumredistribution to the wealthy. Automatic cuts wont happen until 2013, which means that the economy in 2012 will be spared, ever so slightly. Two more positive notes for 2011: America seems finally to have awakened to the yawning gap between the rich and the rest between the top 1% and everyone else. And youth-led protest movements, from the Arab Spring to the Spanish indignados and the Occupy Wall Streeters, have made clear that something is very wrong with the capitalist system. The likelihood, though, is that the economic and political problems that were so manifest in the US and Europe in 2011 and which have so far been tremendously mismanaged will only grow worse in 2012. Any forecast for the coming year depends, more than usual, on politics on the outcome of the US gridlock, and on European leaders ability to respond to the euro crisis. Economic forecasts are difficult enough; but when it comes to political forecasts, our crystal balls are even cloudier. That said, here is my best guess. European leaders repeatedly proclaim their commitment to saving the euro, but those who could have repeatedly said that they are committed to not doing what is needed. They have recognized that austerity will mean slower growth indeed, a recession is increasingly likely and that, without growth, the eurozones distressed countries will not be able to manage their debts. But they have done nothing to promote

growth. They are on a death spiral. The only thing saving the euro in the short term is the European Central Banks purchases of sovereign bonds, which have kept interest rates from soaring. Like it or not, the ECB is effectively financing the sovereigns. German leaders have frowned on this, and the ECB has felt uncomfortable, limiting its purchases and saying that political leaders, not central bankers, should save the euro. But the political response has been too little, too late, to say the least. The most likely scenario is more of the same: austerity, weaker economies, more unemployment, and continuing deficits, with European leaders doing the minimum to fend off crisis for the moment. In short: more turmoil. The day of reckoning when the euro breaks up or Europe takes the kind of definitive action that would make a single currency work may come in 2012, but, more likely than not, Europes leaders will do whatever they can to postpone that day of reckoning. Europe will suffer, and so will the rest of the world. The United States had hoped for an export-led recovery, but, with economic growth slowing in Europe, its largest customer (and impeding growth in much of the rest of the world), that is unlikely. And, with the worst effects of spending cuts potentially still to come, gridlock and Republican spite may mean that the Obama administrations payroll-tax cut will not be extended, weakening

household consumption. That, combined with cutbacks at the state and local level, means that the first real manifestations of austeritys impact will appear in 2012. (Already, though, public employment is around 700,000 below its pre-crisis level; government, rather than acting counter-cyclically, offsetting weak private demand, has been acting pro-cyclically, exacerbating the economys problems.) Meanwhile, the consequences of failure to deal with the housing crisis which triggered financial markets near-meltdown in 2008 are continuing to be felt: further decline in real-estate prices, more foreclosures, and thus even greater stress on US households. No one in either US political party seems willing to face the fact that fixing the banking system, though necessary, was not sufficient to restore the economy to health (or that the financial system was never really fixed). The American economy before the crisis was being maintained on artificial life support by a housing bubble that led to unsustainable consumption. There is no way back to 2007. But neither party has been willing to admit what is really wrong, or advance an agenda that would address the underlying ills. Platitudes and placebos vapid calls for more job creation, fiscal restraint, reining in entitlement programs, and so forth will characterize Americas election year.

Neither side will step forward with a program for restructuring the economy and reducing the inequality that is sapping the countrys strength. I have been a big critic of markets, but even Americas market participants now sense that political leaders are not up to the task. If investors suffered from irrational exuberance in the 1990s, they are likely to suffer from rational pessimism in the coming year. After all, Americans will have to choose between a leader who has proven that he cant lead the US out of its economic morass, and one who has not yet proven his inability to do so but who could make matters even worse through policies that increase inequality and slow growth. I hope that events prove me wrong, and that my pessimism turns out to have been excessive. But I am afraid that the risks are more on the downside. Indeed, 2012 could prove to be the year in which the experiment with the euro, the culmination of a 50-year process of economic and political integration in Europe, comes to an end. In that case, rather than bringing the hoped-for end of the Great Recession of 2008, a downturn that has lasted too long and caused too much suffering, 2012 may mark the beginning of a new and more frightening phase of the worlds worst economic calamity in three-quarters of a century.

OUR WORLD IN 2012

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For the third time in five years, the worlds poorest countries are at risk of being hit by a crisis not of their making a prospective downturn brought on by financial turmoil in the worlds most advanced economies. Having gone through the food and fuel shock of 2007-2008 and the global financial crisis that followed, low-income countries may now face even larger disruptions in 2012. And, given the interdependence of todays globalized world, poor countries distress will invariably have unwelcome consequences for everyone, rich and poor alike. At the height of the global crisis in 2009, many low-income countries experienced a slowdown in growth marked by falling exports, lower remittances from expatriate workers, and subdued foreign investment. The social consequences were severe: the World Bank estimates that an additional 64 million people were left in extreme poverty by the end of 2010. Yet it could have been much worse. Thanks to greatly improved policy performance over the previous decade, low-income countries entered the crisis far better positioned to withstand shocks than in the past. They had smaller fiscal and current-account deficits, lower inflation, larger international reserves, and thanks in part to debt relief lower debt burdens. As a result, most countries were able to maintain or even increase spending, despite

A key priority for 2012 and subsequent years must be to build increased resilience against shocks
lower revenues, and allow fiscal deficits to widen. This propped up economic growth, while also boosting outlays for critical investments and social programs needed to lessen the hardships faced by the poorest people. The downturn was also relatively short-lived, partly as a result of the greater openness to world trade that lower-income countries have embraced over the past decade. But these countries are still highly vulnerable. Many have not had sufficient time to rebuild the policy buffers that served them so well. There is less ammunition left in the fiscal arsenal, current-account deficits have widened, reserves have declined, and debt levels have risen significantly in some countries. Moreover, with the advanced economies facing budgetary pressures, foreign aid may be severely constrained for some time to come. Under these circumstances, it is by no means certain that low-income countries will have access to additional concessional financing. As a result, a new global downturn would hit low-income countries hard. Simulations by the International Monetary Fund suggest that a decline in global growth of 1.5 percentage points could, owing to its impact on trade and financial flows, generate a $27 billion gap in additional external financing in 2012 alone. That would also push 23 million more people most of them in Sub-Saharan Africa and Asia into poverty. What can countries do to help themselves? The scope for fiscal stimulus is more limited than in 2009, but countries with sufficient fiscal room and available financing should maintain spending levels and preserve critical social and infrastructure programs. Countries with moderate inflation could be more assertive with monetary and exchange-rate policy. A key priority for 2012 and subsequent years must be to build increased resilience against shocks. Low-income countries should boost their revenue bases to reduce reliance on external financing, while improving the efficiency of spending. In particular, improving the scope and targeting of social safety nets would go a long way toward protecting the poorest in the event of a further global downturn. Several countries, including Armenia, Burkina Faso, Sierra Leone, Ghana, and Kenya, have already made successful strides in this direction, using means-tested food-voucher programs, maternal and family benefits,

school-based social services, and conditional cash-transfer schemes targeting the most vulnerable groups, such as orphans. Over the longer term, low-income countries would benefit from diversifying their economies and avoiding over-dependence on a few products and trading partners. More diversified economies are also likely to deliver more inclusive growth growth that creates jobs for more people, and that distributes its benefits more widely. In order to boost longterm growth prospects and productivity, lowincome countries will also need to meet huge infrastructure needs, especially in the area of electricity generation and transportation. What can we do to help? The IMF is ready to assist with policy advice, financial support, and technical assistance. We have boosted our concessional lending capacity to $17 billion through 2014, and doubled the amounts countries can draw. We have also cut interest rates on all concessional lending to zero through 2012. We have made our lending instruments more flexible, so that financial support can reach our members quickly, leaving sufficient room for high-priority spending to support growth and protect the most vulnerable. Ultimately, the best way that the international community can help the low-income countries is for the advanced economies to get their houses in order and restore strong and sustainable global growth. That will help to ensure that low-income countries remain on track to consolidate and extend the impressive achievements of the last decade.

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OUR WORLD IN 2012

Inequality fuels popular protest around the world

The outlook for the global economy in 2012 is clear, but it isnt pretty: recession in Europe, anemic growth at best in the United States, and a sharp slowdown in China and in most emerging-market economies. Asian economies are exposed to China. Latin America is exposed to lower commodity prices (as both China and the advanced economies slow). Central and Eastern Europe are exposed to the eurozone. And turmoil in the Middle East is causing serious economic risks both there and elsewhere as geopolitical risk remains high and thus high oil prices will constrain global growth. At this point, a eurozone recession is certain. While its depth and length cannot be predicted, a continued credit crunch, sovereign-debt problems, lack of competitiveness, and fiscal austerity imply a serious downturn. The US growing at a snails pace since 2010 faces considerable downside risks from the eurozone crisis. It must also contend with significant fiscal drag, ongoing deleveraging in the household sector (amid weak job creation, stagnant incomes, and persistent downward pressure on real estate and financial wealth), rising inequality, and political gridlock. Elsewhere among the major advanced economies, the United Kingdom is double dipping, as front-loaded fiscal consolidation and eurozone exposure undermine growth. In Japan, the postearthquake recovery will fizzle out as weak governments fail to implement structural reforms. Meanwhile, flaws in Chinas growth model are becoming obvious. Falling property prices are starting a chain reaction that will have a negative effect on developers, investment, and government revenue. The construction boom is starting to stall, just as net exports have become a drag on growth, owing to weakening US and especially eurozone

demand. Having sought to cool the property market by reining in runaway prices, Chinese leaders will be hard put to restart growth. They are not alone. On the policy side, the US, Europe, and Japan, too, have been postponing the serious economic, fiscal, and financial reforms that are needed to restore sustainable and balanced growth. Private- and public-sector deleveraging in the advanced economies has barely begun, with balance sheets of households, banks and financial institutions, and local and central governments still strained. Only the high-grade corporate sector has improved. But, with so many persistent tail risks and global uncertainties weighing on final demand, and with excess capacity remaining high, owing to past over-investment in real estate in many countries and Chinas surge in manufacturing investment in recent years, these companies capital spending and hiring have remained muted. Rising inequality owing partly to jobslashing corporate restructuring is reducing aggregate demand further, because households, poorer individuals, and labor-income earners have a higher marginal propensity to spend than corporations, richer households, and capitalincome earners. Moreover, as inequality fuels popular protest around the world, social and political instability could pose an additional risk to economic performance.

At the same time, key current-account imbalances between the US and China (and other emerging-market economies), and within the eurozone between the core and the periphery remain large. Orderly adjustment requires lower domestic demand in over-spending countries with large current-account deficits and lower trade surpluses in over-saving countries via nominal and real currency appreciation. To maintain growth, over-spending countries need nominal and real depreciation to improve trade balances, while surplus countries need to boost domestic demand, especially consumption. But this adjustment of relative prices via currency movements is stalled, because surplus countries are resisting exchange-rate appreciation in favor of imposing recessionary deflation on deficit countries. The ensuing currency battles are being fought on several fronts: foreign-exchange intervention, quantitative easing, and capital controls on inflows. And, with global growth weakening further in 2012, those battles could escalate into trade wars. Finally, policymakers are running out of options. Currency devaluation is a zero-sum game, because not all countries can depreciate and improve net exports at the same time. Monetary policy will be eased as inflation becomes a non-issue in advanced economies (and a lesser issue in emerging markets). But monetary policy is increas-

ingly ineffective in advanced economies, where the problems stem from insolvency and thus creditworthiness rather than liquidity. Meanwhile, fiscal policy is constrained by the rise of deficits and debts, bond vigilantes, and new fiscal rules in Europe. Backstopping and bailing out financial institutions is politically unpopular, while near-insolvent governments dont have the money to do so. And, politically, the promise of the G-20 has given way to the reality of the G-0: weak governments find it increasingly difficult to implement international policy coordination, as the worldviews, goals, and interests of advanced economies and emerging markets come into conflict. As a result, dealing with stock imbalances the large debts of households, financial institutions, and governments by papering over solvency problems with financing and liquidity may eventually give way to painful and possibly disorderly restructurings. Likewise, addressing weak competitiveness and current-account imbalances requires currency adjustments that may eventually lead some members to exit the eurozone. Restoring robust growth is difficult enough without the ever-present specter of deleveraging and a severe shortage of policy ammunition. But that is the challenge that a fragile and unbalanced global economy faces in 2012. To paraphrase Bette Davis in All About Eve, Fasten your seatbelts, its going to be a bumpy year!

OUR WORLD IN 2012

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At the height of the Arab uprisings last spring, many Europeans were gripped by nightmare visions of a tsunami of migrants crashing against the continents shores. The wave never hit, but its specter fed a tenacious anti-immigrant populism that has concealed an important new trend: migration to Europe and to the United States has largely stalled. In many countries, more immigrants are leaving than are arriving, owing mainly to the economic crisis that has drained jobs in the West. That reversal is one of the great under-reported stories of 2011 (and of the preceding two years), and the numbers are startling. Consider Spain, which is on track to lose more than a half-million residents by 2020. By contrast, between 2002 and 2008, Spains population grew by 700,000 a year, driven largely by immigration. The trends are similar elsewhere in Europe. While this fact alone will not quiet opponents of immigration, it does give countries more breathing room to repair and strengthen badly broken systems for receiving and integrating newcomers. Although rapidly aging Western countries are unable to attract the immigrants they need, they allow millions who are already there to suffer discrimination and abuse. Detentions and deportations take place under sometimes terrible conditions. Meanwhile, the international community collectively fails to protect vast populations of vulnerable migrants, such as the millions stranded by the recent conflicts in North Africa. Undoubtedly, rising anti-immigrant populism must be confronted. While polling suggests that attitudes are influenced more by ethnicity than religion, both help to define identities and mindsets. Political parties in France, Switzerland, and the Netherlands (to name a few) have run successful campaigns that scapegoat immigrants. Moreover, governments from Alabama to Hungary are passing laws that undermine what should be migrants rights. Italy recently adopted harsh emergency decrees that target migrants by making undocumented entry and residence a criminal offense. Anti-immigrant rhetoric from the political extremes has fed into mainstream political discourse. European leaders trip over themselves to declare, one more forcefully than the next, that multiculturalism is dead. Dutch politician Geert Wilders, whose Freedom Party is informally part of the governing coalition, did them one better by being charged with incitement to anti-Muslim hatred. In the US, alligatorfilled moats and electrified border fences have featured in the current presidential campaign.

Such attacks on immigration might offer some instant political gratification, but their net result is to cleave societies whose cohesion is already seriously challenged by the economic crisis. Growing discrimination in employment, housing, and education affects not just immigrants and their children; it harms our societies as a whole. With the lull in net immigration, we now have a window of opportunity to address these shortcomings. Debunking the myths about migration that most immigrants enter unlawfully, for example, or that immigration displaces existing workers would be a good place to start. It would also be useful to explain that immigration is necessary for prosperity and growth in almost all OECD countries. If aging societies in the West and elsewhere (like Japan) fail to get immigration right, they will be woefully unprepared when they confront the real tidal wave: the retirement of baby boomers in the coming two decades. The gaps in these countries labor markets from software specialists to physicians to home health aides will be immense. The European Unions labor force will decline by almost 70 million workers in the next 40 years; in the absence of significant net immigration (combined with a much higher retirement age), European economies and social safety nets will shrivel. The priorities are clear. We need to understand better how our economies will evolve in the coming decades, and to redesign our educational systems to produce workers with usable skills. And, where it is

The reason for growing international cooperation is simple: countries everywhere are affected by migration, and, increasingly, they are experiencing immigration and emigration simultaneously
clear that immigrants will be needed, we must be able to identify, welcome, integrate, and protect them. Meanwhile, our most fundamental institutions schools, police, and the courts must be re-engineered to reflect and respond to the diversity of our communities, which is now a fact of life. Countries must learn to work together to achieve these goals, few of which can be reached by going it alone. If our toolbox were empty, our inaction might be understandable. But examples of smart migration practices abound. Canada and the Philippines, for instance, have a well-functioning accord that protects the rights of temporary workers. Sweden has developed legislation that minimizes bureaucracy for companies that need foreign workers. And important advances have been made in ensuring that immigrant children receive the education that they need to become full members of society. Progress is being made on the global level as well, despite the economic crisis and populist headwinds. In June, the International Labor Organizations member states overwhelmingly approved the Domestic Workers Convention, which will significantly increase protections for a vulnerable group of workers the majority of whom are migrants. Meanwhile, the Global Forum on Migration and Development, established in 2007, has quickly become an important means of fostering knowledge and partnerships. The reason for growing international cooperation is simple: countries everywhere are affected by migration, and, increasingly, they are experiencing immigration and emigration simultaneously. Indeed, roughly one-third of migrants nowadays move between developed countries; one-third move between developing countries; and only one-third move from the developing to the developed world. Highly skilled workers, such as bankers and engineers, are flocking to China. Mexico, known primarily as a country of emigration, is home to millions of migrants from Central America. Millions of people in Southeast Asia venture to the Middle East to work, but millions more cross borders within the region. The list goes on. When it comes to migration, we are all in the same boat and that boat is leaking. Starting in 2012, countries should redouble their efforts to fix it.

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The world may see Barack Obama as a leader weakened by the intractability of American domestic politics, but, as the 2012 presidential campaign heats up, the American public still sees him as a strong, capable leader in foreign affairs. Some 49% of Americans approve of his overall handling of foreign affairs, with 63% approving of his approach to terrorism and 52% approving of the withdrawal from Iraq. Contrast that with the 30% of Americans who approve of his handling of the economy, or the scant 26% who back his approach to the federal budget deficit. With numbers like that, it would hardly be surprising if Obama tried to keep voters focused on foreign affairs in 2012, with high-profile initiatives like Secretary of State Hillary Clintons trip to Burma (Myanmar), carefully brokered diplomatic deals, and important international conferences at home, such as the NATO summit in Chicago in May. But presidential trips overseas in the coming election year are likely to backfire at home, particularly with unemployment above 9%. The Obama administration knows the iron law of American politics Its the economy, stupid as well as anyone else. Nevertheless, highlighting Obamas ability to get things done abroad is more than an attempt at distraction; it also sends the message that the domestic-policy impasse is not his fault. So expect plenty of foreign-policy news in the coming months. Election-year tactics aside, American voters are right. Obama has performed much better in foreign policy than in domestic policy, which is all the more surprising given the weak hand that he was dealt: an America that had lost its moral authority, its military invincibility, and its credibility as an economic model. It is easy to focus on what has not been achieved, because Obama raised high expectations and then failed to deliver. On his second day in office, he appointed two Special Representatives: George Mitchell for Middle East Peace and Richard Holbrooke for Afghanistan and Pakistan. A month later, Dennis Ross was named Special Adviser for the Gulf and Southwest Asia (read: Iran). Three years later, Ross and Mitchell have resigned, with no agreement in sight in the Middle East, and Holbrooke died unexpectedly, without having brought the Taliban and the Afghan and Pakistani governments to the negotiating table. Relations between the United States and Iran are frostier than ever. But none of Obamas predecessors achieved any of these goals, either, whereas

he can claim credit for the killing of Osama bin Laden and more than half of al-Qaedas top leadership. Indeed, it is now believed that al-Qaeda could fragment and cease to exist as a military organization within two years. Obama has also improved relations with Russia and negotiated a major armscontrol treaty with the Kremlin. Moreover, Obama has dramatically increased Americas presence in Asia, including signing a Treaty of Amity and Cooperation with ASEAN and joining the East Asia Summit, and moved quickly and flexibly in response to the revolutions across the Middle East. He changed a 30year relationship with Egypt in a week; helped to convince the Egyptian military not to fire on citizens in the first stage of the revolution; assembled and enabled a successful coalition to intervene in Libya; worked closely with Turkey, the European Union, and Saudi Arabia to increase pressure on Syria; cooperated with Egypt to broker a settlement in Yemen; and worked behind the scenes to convince Bahrains government to investigate its own violence against Shia protesters. Moving south, Obama dedicated considerable resources to ensuring that the Comprehensive Peace Agreement, which ended Sudans civil war, was actually implemented, allowing South Sudans peaceful secession. Although engagement with Iran and North Korea may have failed, Obama did help to engineer a historic breakthrough with Burma. Finally, the US Senate ratified freetrade agreements with South Korea,

Obama has performed much better in foreign policy than in domestic policy
Panama, and Colombia, clearing the way for the new Trans-Pacific Partnership. The common thread in all of these achievements is old-fashioned diplomacy. In choosing Clinton as Secretary of State, Obama appointed one of the worlds most admired women. She has lived up to her reputation. Similarly, Susan Rice has been a remarkably successful US ambassador to the United Nations, consistently delivering votes in the Security Council. Obama is pursuing a coherent grand strategy what he called in his 2009 inaugural address a new era of responsibility. On the international side, his national-security strategy holds that the burdens of a young century cannot fall on American shoulders alone. The US strategic is committed to an international order based on rights and responsibilities, including a broader voice and greater responsibilities for emerging powers, and the imposition of real consequences on countries that violate their international obligations. Within two years of taking office, Obama helped to transform the G-8 into the G-20, secured the re-weighting of votes on the International Monetary Funds board away from Europe and toward new economic powers, and committed to supporting the candidacies of India and Japan for membership of a reformed UN Security Council. His administration also devoted enormous energy to building and strengthening regional institutions. For the first time, the Arab League is playing an active role in addressing political upheaval and government brutality in its midst, as is the Gulf Cooperation Council. The African Union helped to restore democracy in Madagascar, aided in forcing Cte dIvoires president to leave office after losing an election, and sent troops to Somalia. The East Asian Summit is becoming a forum for region-wide security discussions, from the resolution of maritime disputes to fighting pirates. Obamas Republican opponents love to hammer home the phrase leading from behind. But they miss the point, for they imagine leadership as the equivalent of a nineteenth-century cavalry charge, in which the general is either out front carrying the flag or following along in the rear. Obama is actually far in front in terms of shaping the worlds norms and expectations. He leads from wherever he needs to lead in order to get results. And hes gotten plenty.

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When a tsar is treated with mockery, rather than regarded with awe, it is time for him to consider retirement, or to prepare for a palace coup. Russian Prime Minister Vladimir Putin, who intends to stage a glorious return to the Kremlin as President in the election scheduled for March next year, should reflect on that choice. This year began with a vigorous (by Russian standards) Internet petition urging Putin to take the first option. Then the whole country laughed when, during his customary visit to a patriotic summer camp run by Nashi (a pro-Putin youth movement), he demonstrated his physical prowess by scaling a rock-climbing wall, only to find that he couldnt climb down. Now Russians wonder what has happened to their leaders face. His new smooth-faced appearance has sparked rumors of Botox, or even plastic surgery. Vampire jokes abound. Recently, during a dive in the waters at Krasnodar, in southern Russia, Putin miraculously salvaged two ancient Greek urns. Russians laughter turned Homeric when Putins spokesman, Dmitry Peskov, inexplicably announced that the urns had been placed there to give Putin a sense of importance. If I didnt take the incompetence of the Russian state at face value, I might suspect a conspiracy to discredit Putin. For, make no mistake: Putin has been discredited. After a recent martial-arts match between an American and a Russian, Putin, a

Russians heckle Putin not because he has turned Russia into an industrial banana republic, where exports of oil and other commodities sustain a quasi-authoritarian state, but because he no longer inhabits his role convincingly
judo enthusiast, stepped into the ring to congratulate the Russian victor, a member of his United Russia party. The audience screamed wildly, Putin, go home! until he did. Politics, the crowd seemed to say, should be taken out of sports and Putin out of politics. Putin thinks that his stunts are essential to governance. He has kissed dolphins and babies, saved tigers and journalists, and posed bare-chested on horseback and on foot in the Siberian wilderness. But Putin the performer cannot abide a bad review. Embarrassed by the judo fiasco, he canceled all of his subsequent unscripted public appearances. In fact, since that incident, Putin has attended just one event the Congress of United Russia where 600 delegates voted unanimously for his nomination as the partys presidential candidate in 2012. But the parliamentary elections held on December 4, which gave barely 50% to United Russia (Putin used to be able to guarantee about 70%), had to be fiercely controlled, with an overwhelming police presence. Observers were harassed and obstructed, and monitoring Web sites were shut down or hacked by the government. An electionsobserving mission of the Organization for Security and Cooperation in Europe noted that most parties have expressed a lack of trust in the fairness of the electoral process. Putins extravagant vanity has severely undermined the strongman image that he has spent the last 12 years building. After all, narcissistic publicity stunts and facelifts which worked well for his friend Silvio Berlusconi in Italy (until they didnt) dont inspire fear, or even respect, among Russians, where an iron-fisted ruler is always the preferred choice. So now Putins image as the hard man of politics has been lost forever. It is difficult to assume a despotic countenance when you cant move your eyebrows. Indeed, Russians heckle Putin not because he has turned Russia into an industrial banana republic, where exports of oil and other commodities sustain a quasi-authoritarian state, but because he no longer inhabits his role convincingly. All the same, the origin of discontent with Putin is irrel-

evant; the desire for freedom has to start somewhere. So long as Russians feel empowered to confront the regime, even if only with contempt and laughter, there is hope for change. And now, with the election results inciting the largest protests since the collapse of the Soviet Union, that hope is growing. When a tsar loses his image of omnipotence, he eventually loses his grip on authority. After Putins long-running melodrama, the Kremlins options for a sequel are quite limited. Everyone expects that the current president, the puppet Dmitry Medvedev, to switch roles with Putin after the March elections. But waiting in the wings is former Finance Minister Alexei Kudrin, who could replace Medvedev should Russia need a factotum of sincerity about economic reform. Kudrins reputation for placid competence might just buy Putin some extra time. But, in Putins eyes, this is an unlikely scenario. The once and future president argues that he has already made Russia stronger, and that, as financial uncertainty grips much of the developed world in 2012, the country has become an island of stability envied by many. Perhaps, but it is difficult to be a heroic leader and the butt of popular jokes simultaneously. Putin is often compared to Joseph Stalin, but nowadays, as the 20th anniversary of the Soviet Unions collapse at the end of 1991 approaches, he looks increasingly like Leonid Brezhnev the symbol of a political system that is well past its expiry date. All that is missing are the jowls.

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The term Arab Spring is already highly disputed. Do the revolutions across the Arab world presage the glory days of summer, or a passage through a bleak winter? One thing is certain: the influence of religion and faith in determining the outcome. Consider the scale of what is now happening. Across the Middle East and North Africa, Islamist parties are ascendant. Sunni/Shia divisions are also at the fore. Terrorism, based on a perversion of religion, is disfiguring politics not only in familiar places, but also in Nigeria, Russia, Kazakhstan, the Philippines and elsewhere. More than half of todays conflicts in the world today have a predominantly religious dimension. Most (though not all) religious faiths today contain extremist groups, all capable of producing discord among previously settled communities. True, much of this extremism is based on a perversion of Islam; but such perversions of faith are also often directed against Muslims. In parts of Europe, Islamophobia now rivals anti-Semitism and has potent and dangerous political appeal. In short, religion matters. Three and a half years ago, when I started a foundation dedicated to improving interfaith relations, some thought it quixotic, or plain weird: Why would a former prime minister want to do that? I did it for a very simple reason. My experience as Prime Minister taught me that none of the problems of the Middle East and beyond including Iran, Afghanistan, Pakistan, and Somalia can be understood unless we comprehend the importance of religion. I dont mean the politics of religion, but religion as religion. We cannot treat the influence of religious faith in purely secular terms. We must address it also as a genuine issue of faith. In fact, a fundamental foreign-policy weakness, especially in the West, is the assumption that political solutions alone provide a sensible path to the future. They dont. Those who feel that their faith compels them to act in a way destructive of mutual respect must be persuaded that this is a wrong reading of their faith; otherwise, such a faith-based compulsion will always trump secular political arguments. Consider the Middle East and North Africa today. Like it or not, the Muslim Brotherhood and other religious parties will possibly dominate. They are longstanding, well organized, deep rooted in communities, and, above all, highly motivated a winning combination anywhere. Arrayed against them are the discredited politics of the old regimes and wellmeaning, often numerous, but highly disorganized liberal-minded groups. The risk we face is easy enough to describe. The challenge for these emerging democracies is to remain democratic through the traumas of comprehensive change. In particular, their economies need to reform, open up, and grow in order to meet their citizens rising expectations.

In fact, a fundamental foreign-policy weakness, especially in the West, is the assumption that political solutions alone provide a sensible path to the future
Indeed, the region has some of the worlds youngest populations, with the average age often below 30. Egypts population was around 30 million in the 1950s; today it is 90 million. Young, aspiring populations, whose criticism of the old regime was at least as much economic as political, need their tourist industry back on its feet, their business entrepreneurs feeling confident, and eager foreign investors. They need fundamental education and welfare reforms. And the new political masters need to know that if they dont succeed, it is the right of the people to vote them out. But democracy is not just about the free elections and the constitutional rule of the majority the freedom. It is about freedom of expression, freedom of religion, and markets that, albeit regulated, also are free and predictable. In other words, democracy is not just a system of voting, but an open-minded attitude. That distinction open versus closed is as politically salient today as traditional left-right distinctions. Do we view globalization with technology, communication, migration, and travel pushing us closer together as something to be embraced but made to work fairly, or as a threat to our traditional way of life that must be resisted? I believe that the future belongs to the open-minded. But the closed-minded have a powerful gut appeal, and religion pays into it. There are two faces of faith in our world today. One is seen not just in acts of religious extremism, but also in the desire of religious people to wear their faith as a badge of identity in opposition to those who are different. The other face is defined by extraordinary acts of sacrifice and compassion for example, in caring for the sick, disabled or destitute. One face is about service to others; the other face does not accept them. One recognizes that equal dignity should be accorded to all human beings, and seeks to build bridges of understanding between faiths. The other regards those who do not share their faith as unworthy unbelievers, and seeks to build a protective wall around it, or even to be actively hostile to outsiders. All over the world, this battle between the two faces of faith is being played out. What is needed are platforms of understanding, respect, and outreach in support of the open-minded

view of faith. Education has a vital role to play. How many Christians know that Jesus is revered by Muslims as a prophet, or that it was through Islam that Christian thinkers in the eleventh century relearned the importance of Aristotle and Plato? And how many Muslims understand fully the Christian Reformation and what it taught believers about philosophy and religion? How much do either Muslims or Christians really know of their debt to Judaism? And have we in the West any real appreciation of the true nature of the Hindu or Buddhist faith? Do we understand how Sikhism developed its extraordinary openness to all faiths, or who the Bahais are and what they believe? The point is that faith is culture; and, in todays world, people of different cultures are coming into contact as never before. Whether this produces harmony or discord depends our frame of mind open or closed. Can strong religious faith coexist with such pluralism? This is a key question of our time. Yet many open-minded people remain curiously passive in the face of religious extremism. Sometimes we ignore it, hoping we can treat it as something other than religion. Sometimes we just give up and embrace secularism. The first ignores the essence of the problem; the second undermines faith, which still has a hugely important role to play in civilizing globalization and infusing it with spirit. In short, we need religion-friendly democracy and democracy-friendly religion. At this time of Christian celebration, that is an important message, of which Jesus Christ, I believe, would have approved.

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A new economic order is taking shape before our eyes, and it is one that includes accelerated convergence between the old Western powers and the emerging worlds major new players. But the forces driving this convergence have little to do with what generations of economists envisaged when they pointed out the inadequacy of the old order; and these forces implications may be equally unsettling. For decades, many people lamented the extent to which the West dominated the global economic system. From the governance of multilateral organizations to the design of financial services, the global infrastructure was seen as favoring Western interests. While there was much talk of reform, Western countries repeatedly countered serious efforts that would result in meaningful erosion of their entitlements. On the few occasions that such resistance was seemingly overcome, the outcome was gradual and timid change. Consequently, many emerging-market economies lost confidence in the pooled insurance that the global system supposedly put at their disposal, especially at times of great need. This change in sentiment was catalyzed by the financial crises in Asia, Eastern Europe, and Latin America in the late 1990s and early 2000s, and by what many in these regions regarded as the Wests inadequate and poorly designed responses. With their trust in bilateral assistance and multilateral institutions such as the International Monetary Fund shaken, emerging-market economies led by those in Asia embarked on a sustained drive toward greater financial self-reliance. Once they succeeded in overcoming a painful crisis-management phase, many of these countries accumulated previously unthinkable levels of international reserves as precautionary cushions. They extinguished billions in external indebtedness by generating and sustaining large current-account surpluses. And they increased the scale and scope of domestic financial intermediation in order to reduce their vulnerability to external storms. These developments stood in stark contrast to what was happening in the West. There, unprecedented leverage, massive debt creation, and a seemingly infinite sense of credit entitlement prevailed. Financial excesses become the rule rather than the exception, facilitated by financial innovation and the erosion of lending standards and prudential regulation. Suddenly, the world turned upside down: rich countries were running large

deficits and, in some cases, tipping from net creditor status to net indebtedness, while poor countries were running surpluses and accumulating large stocks of external assets, including financial claims on Western economies. Little did these countries know that their divergent paths would end up fueling large global imbalances, and eventually trigger a financial crisis that has shaken the prevailing international economic order to its foundations. There is no restoring fully that order. Rather than recovering strongly, sluggish Western growth is periodically flirting with recession at a time of high unemployment and multiplying debt concerns, particularly in Europe. In an amazing turn of events, virtually every Western country must now worry about its credit ratings, while quite a few emerging economies continue to climb the ratings ladder. We can now consider the image of Western delegations heading to emerging countries to plead, cap in hand, for financial support, both direct and through the IMF. At first blush, this unusual convergence between Western and emerging countries seems to reflect what advocates of a new international economic order had in mind. But appearances can be misleading, and, in this case, they are misleading in a significant way. Advocates envisaged an orderly process in which economic convergence accompanied and facilitated global economic

Rather than exhibiting enlightened leadership, Western policymakers have consistently lagged realities on the ground

growth. They foresaw a collaborative process guided by enlightened policymaking. But what is occurring is far different and more unpredictable. Rather than exhibiting enlightened leadership, Western policymakers have consistently lagged realities on the ground, with a bewildering mixture of denial, misdiagnosis, and bickering undermining their responses. Rather than proceeding in an orderly manner, today's global changes are being driven by the disorderly forces of de-leveraging emanating from a Europe in deep financial crisis and an America seemingly unable to restore sustained high rates of GDP growth and job creation. Multilateral institutions, particularly the IMF, have responded by pumping an unfathomable amount of financing into Europe. But, instead of reversing the disorderly deleveraging and encouraging

new private investments, this official financing has merely shifted liabilities from the private sector to the public sector. Moreover, many emerging-market countries have noted that the policy conditionality attached to the tens of billions of dollars that have been shipped to Europe pales in comparison with what was imposed on them in the 1990s and early 2000s. Fortunately, despite having lagged rather than led this process of consequential (and increasingly disorderly) global change, it is not too late for policymakers to catch up. But doing so requires more than just better national policymaking in Europe and America; it is also time for urgent and deep reform of the multilateral system and its main institutions. That process requires joint leadership by the emerging world as a true equal and partner of Western powers.

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- With every turn of the year over the recent period it has repeatedly become routine to draw a scoreboard of developments in South East Europe, in particular its core area of Western Balkans, by using a convenient term contrast. No exemption this year, as successes are again followed by failures and achievements by stagnations. Indeed, the year that is getting to a close was broadly characterized by tremendous contrasts, whilst the year ahead is most likely to continue the trend. Illustrations are easy to find. The South East Europe scoreboard for 2011 marks, for example, a remarkable success of Croatia completing its long EU accession negotiations with full membership only a step away, thus changing the strategic map of the region. In a contrasting manner, other aspiring countries are set for additional check-ups, prolonging a strategic impasse in parts of the region. Serbia has been offered an additional time to prove its true European capacity as well as a general political and social consensus over the goal. Montenegro will have to be ready by the next summer if it is to continue on the EU path. The Former Yugoslav Republic of Macedonia is still no closer to the EU. Albania, Bosnia and Herzegovina, Kosovo one can only lament and hope for the better, relying on the persistency of Stefan Fule and his team at no easy times for them either whilst urging political leaders in the

region to respond with urgency and vision before the region slips even lower down the agenda of the remaining interested friends and partners. The contrast is obvious the region is moving towards the European and EuroAtlantic integration, with Croatia confirming to the region and to the EU that it is worthy of the membership even at the most difficult period for the Union itself. But the strategic picture remains incomplete. Moreover, with several frustrating trouble spots in the region, from northern Kosovo to a range of destabilizing issues in Bosnia and Herzegovina, even the peace may not be considered completed yet. Indeed, the waters are still troubled. The biggest political challenge in 2012 for the region, but also for Europe and beyond, will be to avoid strategic imbalances and, more challenging, not to allow cementing a protracted strategic vacuum in this corner of Europe. In this sense, the EU enlargement dynamics will continue to be of crucial, if not historical importance. Again, Brussels will be appraised to keep the engine of enlargement running; the region will be urged to resolve its residual open issues. Anything else, after Croatia's accession, may only be an invitation for the Balkans to become, sooner or later, a trump card in a broader geopolitical tradeoffs. The global crisis will continue to shape and design the international relations, options and models may differ from today's ones; the times of post-Wall honeymoons may well be expiring, while new alliances, new divisions

Brussels will be appraised to keep the engine of enlargement running; the region will be urged to resolve its residual open issues
may be in the offing. History teaches that such a course is not the best one for the Balkans. There is yet another contrast and another kind of troubled water economy. The region in general is witnessing the harshest economic slowdown in decades, spiralling towards a protracted recession, whilst some economies are propelling in an unprecedented way. Turkey is telling a different story then the neighbouring Greece, but almost no other economy in the region Croatia, Serbia, Bosnia and Herzegovina, The Former Yugoslav Republic of Macedonia, etc. is spared from a syndrome of deep structural weakness in a long run or from a lack of investment to rewind production. These countries are forced to choose between the austerity strangling consumption and suffocating production. With the European economic crisis most probably to remain a prolonged one, and with the economies in the region deeply linked and dependent on flows within the EU markets, in 2012 the economic check-up in South East Europe will have to tackle the very sustainability of many of regional economies. Against the backdrop of unavoidable social consequences and with a handful of unresolved political issues simmering across the region, it will be of a paramount importance to invest, politically and financially, to avoid that Balkans slips away from political to security challenge again. And it is not so much about the money, Greenfields or Instrument for Pre-accession Assistance (IPA). First and foremost, it is about the investment into a political stability and economic recovery through preservation of the enlargement dynamics and full consolidation of regional cooperation. The aim is to avoid unproductive loss of time and recycled blame games across the border, and respond to the crisis with a number of strategically important jump start trans-national projects of a New Deal type: infrastructure building, rehabilitation and modernization of transport sector, waterways, etc. In general, broadly unused natural potentials and geo-economic position of South East Europe between the EU, Russia and Asia markets continue to be the most potent answers to the current economic slowdown and looming depression. And, they may as well be the best answers to other possible slowdowns, after Croatia joins the European Union.

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Everyone at the moment is talking about the crisis, everyone is talking about the difficulties facing the globe, but I believe that the Crans Montana Forum represents an alternative point of view and our work has in fact not become more difficult in the context of the global crisis, but rather there appears to be a renewed sense of positivity with our efforts to make the world more impartial and humane during 2011, we greeted more than 77,000 international personalities during our events, namely hundreds of heads of state and government, thousands of ministers and tens of thousands of business people. I still believe that the real added value of joining the Crans Montana Forum is to become part of a coherent group of personalities who are meticulously chosen for their importance and influence. It is the question of good governance that will dominate our agenda during 2012 even more so during times of international crisis, as we are now, it must be recognised that only good, human and stable governance can help economies to climb out of the situation into which poor governance and financial mismanagement has placed them. Of course, it is impossible to say that Crans Montana is near to achieving its

The present crisis has come about as the result of irresponsibility by business enterprises and banks
ambitions, for the simple reason that each day, particularly during the global financial crisis, presents new challenges, owing to the changes that are taking place on a near-daily basis globally and how these affect our goals and working methods. However, we must constantly be renewing our efforts simply because there is no discernible end point in sight does not mean that we stop trying to get there! The challenges that we face today have changed enormously, are in fact even bigger, than Crans Montana was facing when it began back in 1986, which was still three years before the fall of the Berlin Wall and the end of the Cold War. Globalisation has proved to be a very seductive mirage for many countries and, as a result, injustices are being committed in its name it must be remembered that the world is not composed solely of good and honest people, but also those who have little or no social responsibility. The present crisis has come about as the result of such irresponsibility on both a public and private level, from business enterprises to banks it is comparable to an individual spending, month in and month out, more than he or she is actually earning, and we all know what such behavior will eventually bring. The public debt crisis is the result of deficient and incompetent management at a governmental level, and also by populist leaders who think of nothing more than being popular with their people and being re-elected. What is required I believe, therefore, is a fundamental change to the way that our democratic system works during 2012, we will be looking to encourage the investigation of whether it is possible to prohibit the re-election of a particular

leader after one term. That is to say, there must always be variety and, after one (sufficiently long) term in office, there must be an alternative offered. This way, leaders will no longer be seeking to make themselves popular, but will rather concentrate only on making the correct decisions for their countrys population during their term in office, which they do not do at present, because all they are concerned about is securing their re-election. We must revisit democracy to prohibit all re-elections is, I believe, the best way for our world to escape the financial crisis. As an Honorary Member of the Paris Bar Association, Ambassador Carteron has been awarded with the highest honours in France (Chevalier de la Lgion dHonneur, Chevalier de l Ordre National du Mrite, Conseiller du Commerce Extrieur de la France), in Europe (Medal of the President of the European Commission, Medal Pro Merito of the Council of Europe) and from around the World with numerous off icial distinctions. Amb. Carteron has also been appointed ISESCO Ambassador in charge of the Dialogue among Cultures and Civilizations and is responsible for relations between the Islamic World and UNESCO. He was talking to New Europes Online Editor James Drew.

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Recent rebellions worldwide show that some citizens recognize that they are being offered false choices, often no more meaningful than the choice between brands of toothpaste

Too much of the talk nowadays about how social media haves affected politics focuses on awareness: people adopt social media, discover that they are not alone, start to protest, and eventually their Facebook revolution overwhelms those in power. But, even if such a revolution succeeds, that is only the beginning. What happens next? As an angel investor in start-up companies and a sometime philanthropist, I have the luxury of traveling the world and talking with articulate people who give me an unofficial, clear-eyed view of how most countries actually work. It is a depressing picture. I have been to roughly 70 countries, and have discovered roughly 70 different ways to run things badly. Many of these countries have elections; but, as has been said of Russia, while the candidates may surprise, the outcome is predictable. Often a single individual or a small group has almost absolute power. Seemingly independent businesses are mostly beholden to government supporters, who typically take a cut of the proceeds. Even in real democracies, where people vote freely, things are going badly, as in Greece. Elsewhere, as in Egypt, democratization incites further protests, or even violence. Yes, things seem to be improving in Burma, and Zimbabwe appears quiet; but Hungary and, more recently, South Africa has enacted laws to suppress in-

formation that might prove damaging not to government in general, but to those in power. Riots and protests are erupting around the world. In the United States and elsewhere, elected governments used to take care of the people, but now, like companies colluding against their customers to keep out disruptive newcomers, they have become a separate interest group. Political parties exchange benefits and ignore those who elected them. The power to tax, for example, is often used more to employ civil servants or workers in favored companies than to provide services the people want. Lacking competition, inefficient bureaucracies focus more on maintaining jobs than on serving putative customers. One part of the problem is how money stacks the deck, not just for dictatorships that wield de facto control over the economy, but also in democratic countries, where business is free to use its resources to influence government. Political parties claim to embody ideas and worldviews, but in many ways they are simply self-perpetuating money machines. Recent rebellions worldwide show that some citizens recognize that they are being offered false choices, often no more meaningful than the choice between brands of toothpaste. Social networking has given them new tools of protest to topple governments, but what is also needed are new ways to make government operate effectively and accountably.

I don't know what should be done, but I am supporting one effort, called Americans Elect, to push for radical change in the US. Perhaps it can be a model elsewhere. The groups first task is simply to win the right to put a candidate on the ballot in all 50 US states to run against the conventional slate of one Democrat and one Republican. That has not been easy, and the fight continues state by state. Rules and regulations in most states protect the two parties that have held sway in US politics for more than a century. It turns out that most state bureaucracies, theoretically accountable to the public, in fact are accountable to the parties, and do everything they can to keep Americans Elect from claiming its right to a spot on the ballot next fall. Many commentators claim that Americans Elect will simply take votes from the incumbents but have no lasting impact. But I am hoping that widespread frustration will leverage the groups ability to encourage a genuine shift towards a new approach. Americans Elect will use a long series of competitions and online and offline convocations to select a candidate who will be beholden to millions of people at large, rather than to a smaller group of big donors whose interests the candidate must serve. Its plan is cunning: the original funders are being asked for loans, not dona-

tions; that way, they will have no further claim on Americans Elect after they are repaid. (Obviously, they will be a natural source of money for the next round, so the group has to become self-sustaining on the basis of small donations, or it will become beholden as well.) That money is supposed to go toward reaching a broad public who will respond via the Internet, making small donations and joining in a national effort to suggest and choose a third candidate for president. This candidate will not try to divide and polarize the country, but rather will unite it around common-sense approaches to fiscal policy, education, health care, and other long-term issues. In the end, people do not want to be sold the same old toothpaste when what they really need is serious dental work. Americans Elect is not the only organization with this vision, but it is the only one with the necessary scale. I recently saw a presentation by a company called 5ivePoints, which helps people running campaigns, often volunteers, reach out to their Facebook, Twitter, Google+, and other friends. Of course, 5ivePoints will be going after the established parties as customers, but my hope is that groups like Americans Elect, and eventually protesters in other countries, will start to use it (or something similar). If the point is to replace our current governments with more accountable models, we need to use new online tools not only to throw out the old, but also to bring in the new.

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While a truly competitive private sector has to be unleashed, the state must not be weakened but transformed, to become one that is at the service of citizens

Almost a year has passed since revolution in Tunisia and protests in Cairos Tahrir Square toppled ossified authoritarian regimes and ignited a much wider and still raging storm in the Arab world. No one can safely predict where these events will eventually take the Arab people and nations. But one thing is certain: there is no turning back. New social and political movements and structures are emerging, power is shifting, and there is hope that democratic processes will strengthen and spread across the Arab world in 2012. Events in the Arab world in 2011 recall other far-reaching regional transitions, such as in Eastern Europe after the fall of the Berlin Wall in 1989. There are differences, of course, but the upheavals sweeping and contagious nature is strongly similar to that of the revolutions that brought communism to an end in Europe. So, too, is the debate about the relative contributions of political and economic factors to the eventual eruption of popular protest. While the yearning for dignity, freedom of expression, and real democratic participation was the driving force underlying the Arab revolutions, economic discontent played a vital role, and economic factors will help to determine how the transition in the Arab world unfolds. Here, three fundamental and longer-term challenges are worth bearing in mind.

First, growth will have to be much more inclusive, especially in terms of job creation. The youth employment-topopulation ratio was about 27% in the Arab countries in 2008, compared to 53% in East Asia. Moreover, income inequality has widened, with the global phenomenon of increasing concentration of wealth at the top very pronounced in many Arab countries. Top incomes in these countries have resulted largely from political patronage, rather than from innovation and hard work. While Tunisia was an extreme case of a regime furthering the economic interests of a small clique of insiders, the pattern was widespread. That is why a knee-jerk, simplistic Washington Consensus prescription of more liberalization and privatization is inappropriate for the Arab world in 2012. There is a clear political need for a growth strategy in which inclusion is the centerpiece, not an afterthought. Neither the old statist left, nor the rent-seeking, crony-capitalist right had policies to respond to the yearning for inclusion. New political forces in the Arab world, Islam-inspired or social-democratic, will have to propose policies that do not just perpetuate rent-seeking capitalism or reliance on a discredited state bureaucracy. It will be necessary to harness grass-roots dynamism and entrepreneurial potential to achieve social solidarity and equity.

While a truly competitive private sector has to be unleashed, the state must not be weakened but transformed, to become one that is at the service of citizens. Generous but targeted and performanceoriented social transfers, conditional on participation in health and basic education programs, will have to replace the old, largely untargeted subsidies. Public development finance will have to focus on large-scale access to housing and a people-oriented infrastructure. All of this has to be achieved within a sustainable budget framework, requiring both funds and comprehensive administrative reforms. Accompanying inclusive growth, the second challenge is skill development, for which a performance-oriented education system must become a top priority. Many Arab countries have spent huge sums on education; the problem is that the return on these investments has been dismal. Arab students, for example, score well below average on international mathematics and science tests. Deep reforms focused on quality and performance, rather than on enrollment and diplomas are needed to transform the learning process and unleash the productivity growth that a young labor force requires. The third challenge, instrumental to meeting the first two, will be to strengthen regional Arab solidarity. Many outsiders underestimate or pur-

posefully minimize the Arabness of the Arab world. But the revolutions of 2011 demonstrated that a strong sense of identity, a common language, and much shared history bind Arabs together, despite huge differences in natural-resource endowments, political circumstances, and average per capita incomes. How else can one explain that an act of revolt in Tunisia led to popular revolts from North Africa to the Arabian Peninsula? One implication of this is that the oilrich states and leaders cannot expect to remain isolated and protected from the unfolding events. The future of the region is also their future; the transition that started in 2011 unleashed forces that cannot be stopped. But the transition can be more orderly, more peaceful, and less disruptive if states that command immense resources and wealth generously support the poorer countries and back the reforms that all Arab countries need. Existing institutions with proven track records, such as the Arab Fund, can help, but this requires scaling up their funds dramatically. Prosperity and peace in the region will depend on thinking big and acting fast. The revolutions of 2011 are a historic opportunity for all Arabs. Making the most of it will require realism, courage, willingness to change, and a readiness to support change, particularly among those who have the greatest means to do so.

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OUR WORLD IN 2012

Nowadays there is no shortage of pundits, economic or otherwise, warning of impending disaster. If right, they are hailed as seers; if wrong, chances are that no one will remember. So heres a forecast: there will be no shortage of predictions that 2012 is shaping up as a disastrous year. My view is different: 2012 will not be a year of crisis, but nor will it bring an end to our current economic troubles. Rather, it will be a year of muddling through. Many people think that 2012 will be the make-or-break year for Europe either a quantum leap in European integration, with the creation of a fiscal union and the issuance of Eurobonds, or the eurozones disintegration, igniting the mother of all financial crises. In fact, neither scenario is plausible. The collapse of the eurozone would, of course, be an economic and financial calamity. But that is precisely why the European Central Bank will overcome its reluctance and intervene in the Italian and Spanish bond markets, and why the Italian and Spanish governments will, in the end, use that breathing space to complete the reforms that the ECB requires as a quid pro quo. To be sure, Europe will not be spared the pain of a recession. A botched bankrecapitalization plan and the cloud of uncertainty hanging over the euro mean that recession is already baked in. Moreover, the pro-growth reforms needed in countries like Italy will almost certainly make things worse before they make them better. The initial effect of reducing hiring

and firing costs, for example, will be layoffs of redundant workers. But investors look ahead, so reforms that promise an eventual return to growth should reassure them. While the eurozone is unlikely to collapse in 2012, there will be no definitive answer to the question of whether the euro will survive, because there will be no quantum leap in European integration. Treaty revisions take time to draft and more time to ratify. Efforts to strengthen Europes fiscal rules, for example, will take the form of bilateral agreements between governments, rather than changes in the European Unions Lisbon Treaty. It is a sad state of affairs when a recession qualifies as muddling through. But such is the European condition. Consider next the United States. While recent data suggest that the economy is doing better all signs are that GDP will have expanded at a 3% annual rate in the fourth quarter of 2011 it is important not get carried away. Fiscal support for the expansion will continue to be withdrawn. And, while the housing market shows some signs of stabilizing, prices will remain weighed down by the large shadow inventory of homes in foreclosure and held by banks. These considerations suggest that the acceleration of US growth that began in the third quarter of 2011 is unlikely to be sustained. At the same time, if growth slows significantly, the US Federal Reserve will undoubtedly respond with an-

While the eurozone is unlikely to collapse in 2012, there will be no definitive answer to the question of whether the euro will survive

other round of quantitative easing QE3 by another name. Thus, while growth next year is likely to fall well short of 3%, the US should be able to avoid a double-dip recession. Finally, China should grow by 7.5-8% in 2012. This is muddling through, Chinese style considerably slower growth than the double-digit rates of the past, but not the hard landing that purveyors of doom and gloom warn is inevitable. I am more pessimistic than institutions like the World Bank and International Monetary Fund, which anticipate Chinese growth in 2012 of 8.5-9% forecasts that do not take into account the sharp cooling of Chinas housing market. Although weakening housing demand has not yet shown up in lower prices, the volume of transactions has fallen off dramatically. And where volumes lead, prices eventually follow. Fortunately, China is still enough of a planned economy that officials can mobi-

lize policies to cushion the impact. If construction plummets, for example, the authorities can reduce reserve requirements, as they recently did, thereby encouraging banks to lend to other sectors. And, if the European and US economies avoid the worst, Chinese exports will hold up. Thus, if all of the global economys largest pieces fall into place, there is no reason why 2012 should be a disaster. But muddling through cannot continue forever. Europe needs to draw a line under its crisis and figure out how to grow. The US needs to overcome its political polarization and policy gridlock. And China needs to rebalance its economy shifting from construction and exports to household consumption as the main engine of growth while it still has time. Of course, if none of this happens or if not enough of it does 2013 could turn out to be the annus horribilis of the perma-bears dreams.

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- Over the space of a few short years, the world has become an undeniably different place for young people, and the pace of change appears to be growing. YouTube was created in February 2005 and by May of this year, was capturing three billion views a day, and 48 hours of new video were being uploaded each minute. In December 2006, Facebook had more than 12 million active users. Almost five years later, it has more than 800 million active users an increase of more than 6,000 percent. Earlier this year, an Egyptian man named his newborn daughter Facebook. Extraordinary change has also been incurring in the global economy. In 2006, the investment firm Lehman Brothers reported a net income of $4 billion, on assets worth more than $500 billion. Several years later, the firm declared bankruptcy. Lehmans North American holdings were purchased by Barclays for $1.3 billion; its assets in Europe and the Middle East were purchased for $2 by Nomura Holdings of Japan. Lehmans assets in 2008 were worth less than one-half of one percent of their value just two years earlier. These are fundamental changes to the way the world and the global economy work, especially for young people. Messages, democratic ideals, information and misinformation can travel across borders and spread across populations far more quickly and efficiently than in the past. Think of the role of social media IN the events of the Arab Spring. Reports of joblessness and disaffection among young people are growing throughout the world, from China to Egypt to London to New York. There are growing populations of ninis (ni trabajar ni estudiar), hittistes (a portmanteau word from French and Arabic meaning those who lean against a wall), or NEETS (the English term for not in education, employment, or training). Does this mean that unemployed young people are prone to violence to achieve their goals and redress grievances? Frustration and anxiety yes, but in spite of the popular conjecture, there is no evidence that youth unemployment necessarily leads to violence. So why is it so important that young people have jobs? It matters hugely for welfare, for equity, for productivity and growth, and for personal and collective identity, and for social cohesion. These are some of the profound reasons why governments, employers, development partners, and others must

spur opportunities for the millions of young men and women around the world who have problems negotiating their transition to adulthood and joining their local communities. The costs of prolonged unemployment in young people are potentially enormous in terms of lifetime earnings. In the Middle East and North Africa, there are countless stories of unemployment leading to delayed marriage and staring families, delays in achieving the productive identity which marks the successful transition from youth to adulthood. How is the World Bank responding to this crisis? Bank financing for children and youth development work tripled in the ten years from 2000 to 2010. The value of that loan portfolio grew from $950 million in 2000 to over $4.8 billion in the same period. There are now youth employment and empowerment projects in every region even in Eastern Europe and Central Asia, where the share of young people in the population is declining. The World Bank has joined forces with the Nike Foundation and other donors to set up the Adolescent Girls Initiative to pioneer employment projects for girls in post-conflict and fragile environments around the world. The Bank is also preparing large youth development programs in countries as diverse as Mexico, Sierra Leone, El Salvador, Papua New Guinea, and Nepal to enhance the opportunities available to young people and the employability of young people who enter the labor market. The Bank is also working in partnership with the International Labor Organisations (ILO) Youth Employment Network, with leading NGOs and Civil Society organizations, and with the broader donor

Young people today constitute the largest youth population in human history more than one billion people between the ages of 15 and 25 the vast majority of them in developing countries
community to improve our global knowledge on effective youth employment interventions that will succeed even after the crisis has subsided. We know that countries that invest in their young men and women end up with greater economic growth and social cohesion. Governments that encourage their students to stay in school see significant national returns on each additional year of schooling. This is especially true when countries invest in educating their adolescent girls to secondary school level and beyond. Governments are working more intensively with the international donor community, NGOs and corporate sponsors to champion new models of youth employment programs that focus on a more comprehensive market-driven approach with relevant job and life skills training, internships, and job placement opportunities. Governments are also forming partnerships with private companies to finance and expand effective job-training programs which can groom young people for the demands of a global economy that requires more highly skilled workers. For example, in the Dominican Republics Juventud y Empleo project, comprehensive job training has increased young peoples salaries by as much as 10 per cent. The returns on the investment in the young beneficiaries are expected to exceed the program costs within two years of their graduation. Such returns are observed in youth employment programs around the world. To be sure, the global recovery is taking longer than anticipated. It will take time for countries to restore confidence and encourage trade and investment, to create jobs, enhance productivity and spur renewed growth. But we cannot wait until the crisis ends to pay serious attention to the plight of todays young people. Young people today constitute the largest youth population in human history more than one billion people between the ages of 15 and 25 the vast majority of them in developing countries. Sub-Saharan Africa, according to the US-based Population Reference Bureau, is home to the worlds largest population of young people and is projected to stay this way for decades. If we do nothing to address these issues, the consequences will be severe. Even if there is no violence, too little investment in young people costs countries as much as 2 per cent of their GDP every year, even at the best of times. As a result, fewer young people will be able to contribute to the economic growth that will fuel a widespread and sustainable global recovery. Now is the time for governments and donors to act. Young people must be empowered to take charge of their own lives and discover their full potential. Whether they succeed has everything to do with whether we succeed as a world, and as a society. But they cannot do so alone.

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- Writing this in the closing days of the year, it is apparent that any preparations for 2012 should involve finding a remote mountain refuge, stocking up with bottled water and tinned food and acquiring a range of armaments. This isnt because of the deranged pronouncements of Mel Gibson or those who think the Mayans predicted the end or worlds, but because the fallout of the financial crisis has yet to really bite. Part of the reason for that lies with our political leadership who reacted with their usual sluggishness, spending more time squabbling between themselves and with more regard for their electoral prospects than the prospects of their citizens. By any standard they are all guilty of gross dereliction of duty. This will not change in 2012. There are two major events next year, all for the benefit of business, who have to try and drag the long suffering public with them. The first is the US Presidential election. Obama got elected on a promise of Change and then didnt change anything, leaving his supporters increasingly angry, but he might get away with it as the Republican contest to find a challenger has been little more than a freak show, geared towards finding the most unelectable candidate. This is the result of letting the Tea Party become the intel-

lectual force of the party. The breadth and depth of the challengers ignorance will alarm anyone who completed basic schooling. The independents are no better. Declared candidates include Roseanne Barr, Koran burning Pastor Terry Jones and The Naked Cowboy. The latter is claiming to represent the Tea Party. These elections are estimated to cost $6 billion and the candidates are busy fundraising from the only people who have cash to spare, the bankers. Theres no change like no change. The UK is hosting the Olympics, originally announced as the sustainable games which were to herald a bright new world, at least in London, but austerity and dubious planning has meant that there is likely to be little real legacy for the poor Londoners who are helping pay for this. Others are also contributing. Sponsors include the sort of people who have stuffed the Brit kids so full of fat and sugar that theyve become the shape and texture of medicine balls and have a life expectancy lower than their parents. The Brits have shown some interest, the tickets for the beach volleyball sold out immediately, although few purchasers have a detailed knowledge of the rules, or even scoring. Mystifying. Of course, holding such an expensive event is tricky in times of austerity. To guard against terrorist attack, and ab-

2011 can be summed up by the EU failing to get a grip on the approaching financial apocalypse, headquartered in a nation that just couldnt get a government formed
solutely not to control an increasingly angry populace, the UK is having 10,000 police patrolling and 13,500 soldiers, a figure higher than the current UK deployment in Afghanistan. London 2012: bringing Helmand to Hackney. The EU has declared 2012 as the Year of Active Aging and Solidarity between Generations. Im sure that Im not alone when I say that a little piece of me actively ages every time Van Rompuy or Barroso open their mouths. As for solidarity between generations, the EU has made great strides towards this. I lost count of the number of times I have seen a male middle aged official or deputy surrounded by a gaggle of young, attractive, female interns. Im told that discussions on this important issue often carry on all through the night. The poster boy for this initiative was Silvio Berlusconi, the Italian Carrion. Another school of thought suggests that the EU should declare 2012 as the Year of sitting in a dark room weeping quietly, hoping it all goes away. In Belgium, we will have our first full year of government for several years. The lack of one didnt really upset people and the Belgians took it all in their stride and many greeted the news that a cabinet had been formed, under the pressure of a total economic wipeout when the markets opened the next morning, with a vague feeling of disappointment and that a Golden Age had passed. Belgium is, without a doubt, the worlds finest failed state. To celebrate theyve declared a year of gastronomy, where Belgian food and beer is to be made available throughout the land. This is the only truly good thing about the coming year. Of course, this can only work if the nation can hold itself together for the next 12 months. 2011 can be summed up by the EU failing to get a grip on the approaching financial apocalypse, headquartered in a nation that just couldnt get a government formed. 2012 is going to be even worse. Im relying on large amounts of Belgian beer to see us through.

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- After the withdrawal of all U.S. combat troops from Iraq the visible occupation the country has come to an end. However, the true struggle for the future of Iraq has begun, in fact the struggle for the survival of Iraq as one entity has begun. Also, as the visible occupation comes to an end, the invisible occupation is still very strong and it is menacingly threatens the future of Iraq and of the whole Iraqi people regardless of ethnic or sectarian group that they belong to. To understand the statement above we first need to understand the history of the recent past. Iraq was ruled by Saddam Hussein a vicious tyrant for 35 years, both as Vice-President and from 1979 as President, where no one was safe, more than 4 million Iraqis were exiled. His killing machinery and torture chambers were unrivalled in the history of Iraq. Also, Iraq was embroiled in many adventurous wars for the benefit of other countries and not for the benefit of Iraq or the Iraqi people. A million more Iraqis died as a result of these foolish wars. In addition, Saddam began a concerted campaign against the Kurds and other ethnic groups in the north, culminating in the gassing of Halabja and the Al-Anfal Campaign and the destruction of hundreds of Kurdish, Assyrian, Turkoman, Shabak, Armenian and Yazidi villages and their mass killings. He set upon a policy of settling Arabs in the formerly Kurdish area, copying the Stalins Soviet Union. Many Kurdish, Assyrian, Turkoman, Shabak and Yazidi villages and towns were destroyed or forcibly resettled with Arabs from the south of Iraq. The United States of America promised Iraqis Freedom, Democracy and Respect for Human Rights. Then they invaded Iraq in March 2003 with the help of the main Iraqi opposition parties that are in power now. But soon it turned out that Iraq jumped from frying pan directly into fire, because neither USA nor Iraqi opposition parties had any plans to stabilise Iraq after the invasion. The Liberation turned into occupation, the country was looted and more than 500000 innocent Iraqis have lost their lives and many more were injured as a direct or indirect result of the occupation. Another 4 million Iraqis were displaced both inside and outside the country with their Human Rights flouted on daily basis. Also, many thousands of Iraqis were incarcerated for indefinite periods and without any trial by the liberators. Terrorism, secret prisons, kidnappings, torture and serious abuses of Human Rights flourished in new democratic Iraq which culminated by the abuses of Iraqi prisoners in the infamous Abu Ghraib prison in Baghdad. Finally the defender of freedom and Human Rights has betrayed its main principles and stabbed the lady liberty in the back and raped her when they abused and raped men and women in Abu Ghraib prison. As for the promise of Democracy and prosperity it turned out to be the most hollowest of

all promises, because after the invasion the USA created a flawed political structure and divided the Iraqi society along ethnic and sectarian lines (i.e. Shia, Sunni and Kurds) which was and still is a recipe for disaster. The minorities such as the Turkomen, Christians, Yazidis, Shabaks, Assyrian and other groups had virtually no voice or they had minimal representation in the new democratic Iraq. In the drafting of the new constitution the majority were ignored or sidelined by the two main groups. One cannot say Iraq is democratic just because it holds elections which many knows the elections in Iraq had many fundamental flaws that rendered the whole election undemocratic and put into doubt the legitimacy of the government. We must not forget that many dictators around the world hold elections to legitimise their rule and we all know that they are not democratic. Also, in democracy we can setup systems and political structures that are undemocratic too and in the same fashion as the ones under the dictatorship, which renders the whole system illegitimate. We can safely say that the new political structure in Iraq falls under such a corrupt or inept system. Unfortunately, this inept system will always result in weak and ineffective governments that will continuously fuel instability, but it also contributed to inactivity in relation to implementing reforms and taking measures that protects human rights or the Iraqi population. We saw in the last election that this inept political structure resulted in inconclusive election that led to a long process of government formation which was not concluded until December 2010 and left the ordinary people without government and paralysis

This inept system will always result in weak and ineffective governments which fuels instability
of the institutions. As for the prosperity we have widespread corruption, poverty, economic stagnation, unemployment and absence of basic services. The corruption in Iraq is allowed to become entrenched and spread throughout its institutions and it is now interwoven into the fabric of the society. This corruption has contributed to a severe decay in public services and it is so widespread that even jobs in ministries of Defence and Interior are sale for thousands of dollars. This flaw in political structure discussed above together with the government interference in anti-corruption cases, manipulation of investigations to frame rival political opponents and intimidating and silencing critics to prevent uprising in Iraq has exacerbated the problem even further. The recent event with the issue of arrest warrant for the Vice-president Tariq Al-Hashimi (Sunni Arab), the fragile Iraqi political structure the US military has left behind is beginning to fall dangerously apart and it will head the country for either a Civil War or the brakeup of the country, which cannot be done without a Civil War. Obviously this move by the government is designed to strengthen the grip of Shia power in the country to protect Iran from the shockwave of the collapse of the regime in Syria. Also, it is designed to force the creation of regions along the Sectarian lines which they were prevented from accomplishing this goal in 2006 by the American. In addition the nature and the composition of the current Iraqi political parties that arrived with the Americans to power are such that they can only survive if there are sectarian and ethnic tensions. But the majority of the Iraqi society is aware of this ugly intention. In conclusion we in the Peoples National Democratic Liberation Movement of Iraq believe that 2012 will see a dramatic change in the Middle East and in Iraq in particular and we either create an Iraq based on Citizenship, Equality and true Democracy or stay on the current path that leads to disaster and mass uprising. We must all work for Iraq and the Iraqi people or we are all doomed to years of instability or civil war. We as a movement have been warning of such a fate from the outset and we have a detailed plan to take Iraq to safety and establish a Democratic Iraq based on Freedom, Democracy, Justice and Equality with full adherence to principles of Human Rights.

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The most crucial event for Ukraine in 2012 is the Parliamentary elections. Their result will indicate who will be the next President, which, in turn, may lead to changes in the security orientation and change of mood in the society regarding Euro- Atlantic ideas. Linked to foreign policy, main national security threats come up before election in both Russia and Ukraine
- Peal of the bells on New Years Eve will notify not only about the beginning of 2012, but also about the intrigues that will accompany important events expected in Ukraine and Russia. Ukraine, with its strategic and delicate geopolitical position as an independent state, finds itself again in the situation of choice between two neighbours, EU and Russian Federation. Ukraine, due to this condition and especially due to its energy-dependent economy and fragile energy security, is not able to conduct an independent foreign policy. Kyiv will have to operate according to the neighbours interests and actions. The discussion about Ukraine joining Customs and Eurasian Union has been in the shadow of the possible ratification of the Association Agreement with the EU. The debate will definitely revive again, since the expected Agreement was not signed during the recent Summit in Kyiv. Russias interest and its foreign policy will most likely remain unchanged as Putin, after his presidential bid announcement, may serve his third and fourth term as President of the Russian Federation. Russia will continue to pull the strings, influencing the process of the European integration of Ukraine, which also includes partnerships in the area of security and defence area. At the same time, it will provide its own interpretation of the story, like it is sometimes done by the comments of the Russian officials

on the case of Ukraine not being member of NATO by now thanks to the diligent work conducted by the Russian security services. Moscows attempts to effect Ukraine- NATO relations will escalate together with the talks around European Missile Defence System. As it was in the past, NATO will claim that Ukraine is one of its major partners within the Partnership for Peace. The position of Ukraine towards Allies is predicted by the law of 2010 about Ukraines neutral status and non- affiliation with military unions. Nevertheless, according to the Ministry of Foreign Affairs in Kyiv, the new cooperation plan with NATO is soon to be announced and mutual Ukraine-NATO agenda is getting broader. NATO is willing to continue and expand mutual aid for the operation in Afghanistan together with possible tenders in the process of operation withdrawal, co-operation in the cyber defence and the disposal of ammunition. A Ukrainian ship may take part in combating piracy in Somalia. Moreover, NATO proposed to contribute in providing security during the Euro2012 football championship next summer. And it is recommendatory by nature that the Ukrainian side should react positively and use the Western experience, as until the beginning of 2012

the government seems to have poor understanding of the importance of law enforcement training for an event of that level. Despite of some efforts, the Soviettype police approaches still prevail in Ukraine. Thus no kind of action plan or Ukrainian campaign for NATO will enhance political dialogue. The context of the relationship is marginally deepening; and one may question whether it is a quality difference or is just a set of additional measures which preserve the state of the relationship on the same level. Since NATO Secretary General Anders Fogh Rasmussen invited Ukraine to partnership in locating objects of the missile defence, and by his words Ukraine shares the interest, Russian opposition will continue to grow. Russia is uncertain whether it will participate in Chicago Summit in May, because of the bilateral contradiction issues over ballistic missile defence system. Russia will use the time until spring to provide with the preparation on response reactions. Instead of bargaining with Moscow and Brussels, Ukraine will be in a hostage situation, hoping for compromise between Russia and NATO in the name of a stronger global security. Despite the diplomatic efforts to smoothen the situation, the statement of President Yanukovych that Ukraine has

no intention to participate in the process, may leave the country on the outskirts between two other competitors. It will be up to the diplomats to try and find a place for Ukraine in the project. The most crucial event for Ukraine in 2012 is the Parliamentary elections. Their result will indicate who will be the next President, which, in turn, may lead to changes in the security orientation and change of mood in the society regarding Euro- Atlantic ideas. Linked to foreign policy, main national security threats come up before election in both Russia and Ukraine. Presidential elections in Russia in March and Parliamentary in Ukraine in October are most likely to become an attempt to the current governments to remain in power, while they lose the vote of confidence within their countries and beyond their borders. As shown in the recent parliamentary elections in Russia, social and political injustice can increase tensions in the societies and may lead to social movements that will be hard to control in the used authoritarian force-based manner. Reactions of the other interested parties, who say they share common security interests based on the values of the fundamental freedoms, human rights and democracy, are to be expected...

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The imminent golden age of industrialization in developing countries will help to create jobs and spur recovery in advanced countries

The golden age of finance, the economist Barry Eichengreen has said, has now ended. If that is true and let us hope that it is what follows will most likely be a new golden age of industrialization. Historically, except for a few oil-exporting economies, no country has ever become rich without industrializing. Thus, all eyes nowadays should be on our economies real sectors. Confronted by the global financial crisis that looms over Europe, political leaders around the world are waking up to a stark new reality: unless the developed countries stop relying excessively on financial deal-making and start to rebuild from the ground up, they will lose their current standard of living. The global community must look beyond the eurozone and sovereign-debt crises and pay attention the opportunity of structural transformation in the developing worlds real sectors. By structural transformation, I mean the process by which countries climb the industrial ladder their workforces move into higher value-added manufacturing sectors as their sources of production advance. Throughout 2011, I was struck by the potential for less-developed countries including in Sub-Saharan Africa to emulate successful industrializing East Asian countries such as Japan, South

Korea, Singapore, Malaysia, China, and Vietnam. Indeed, by focusing development efforts on the comparative advantages of poorer countries, we can rebuild confidence in the business sector and reinvigorate investment in job creation not only in developing countries, but also in advanced economies. The current global financial crisis, which is rooted in the advanced countries structural problems, requires investment and innovation policies, in addition to monetary or fiscal measures. In advanced countries, research and development costs are quite high, because their technologies and industries are already in the vanguard. By contrast, developing countries, including those in Sub-Saharan Africa, have the potential to expand their industrial sectors rapidly, because they can borrow technology from the advanced countries with little risk and at low cost. So developing countries backwardness in terms of technology and industry means that they can grow for decades at an annual rate several times that of highincome countries before they close the income gap. This May, in Maputo, Mozambique, I delivered the United Nations Universitys annual WIDER lecture on development. I explained how the winning formula for developing countries is to build up the same tradable industries that have been growing for decades in wealthier countries that have endowment structures

similar to their own. The pattern of flying geese is a useful metaphor to explain this idea. Beginning in the eighteenth century, the less-developed West European and East Asian countries followed their more successful neighbors: emulating a flyinggeese pattern, they benefited from the leaders tailwind as they first industrialized and then became advanced countries themselves. Large, dynamic emerging-market economies (particularly Brazil, Russia, India, China, and South Africa) that have industrialized quickly offer unprecedented opportunities for other developing economies to emulate their success and thus to jumpstart their own industrialization processes. China once a follower goose is on the verge of becoming a leader, with the potential to relocate 85 million lowskilled manufacturing jobs in the coming decade. The scale of this shift is huge when compared with the 9.7 million jobs that Japan created in the modern sector in the 1960s, or South Koreas 2.3 million modern jobs in the 1980s. And a similar trend will arise in other emerging-market economies. In fact, it is already happening: Chinas outward foreign direct investment reached $68 billion in 2010, exceeding that of Japan and the United Kingdom. India, Brazil, Russia, and South Korea are not far behind.

Moreover, Indias outward FDI is heavily concentrated in the manufacturing sector, accounting for 42.7% of the total in 1999-2008. For developing countries to benefit fully from industrial upgrading in China and other large emerging-market economies, their governments must identify tradable industries that are consistent with their latent comparative advantage. They also must help private firms to resolve information, coordination, and externality issues in the process of industrial upgrading. Rapid industrialization in developing countries will require large imports of capital equipment from advanced countries. Given that developing countries have accounted for as much as two-thirds of global growth in GDP and imports over the past five years, focusing on how to foster development in their industrial sectors could benefit advanced countries by helping to boost demand, thereby pulling the world out of its economic malaise. In short, the imminent golden age of industrialization in developing countries will help to create jobs and spur recovery in advanced countries. The benefits of this new era will be two-pronged: it will contribute to the achievement of the UN Millennium Development Goals the plan to cut world poverty in half by 2015 and also will help to drive a global recovery. Then, we may see a golden age for all.

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- As with every year during the past couple of decades, 2012, just like 2011 was, has been widely announced as a year of great expectations and no lesser challenges in the Western Balkans. However, for the first time since the term has been coined (as a designation for a group of non-EU countries bound to join the Union as soon as they fulfil the criteria, located in the same region), at least by the type of challenges each is facing, we can clearly distinguish the regions countries. Croatia, since 9 December 2011 when the Accession Treaty with the EU was signed, has a distinctly different set of challenges compared with its neighbours. The newly formed government inherited the completed EU integration project and, in 2012, needs to see the accession referendum and ratification process through. However, running an institutionally and socially sound country means that the new prime minister and his cabinet will have to tackle an array of 'bread and butter' issues, from unemployment to debt and deficit. The governor of the central bank has already warned that the keywords for 2012 will be 'spending cuts'. With Croatia's accession scheduled for July 2013, responsibility for the enlargement engine seems to be placed on the shoulders of the smallest of all the countries in the region Montenegro. With merely 625,000 inhabitants and already prepared translations of the EU's acquis (courtesy of their Croatian neighbours) the infamous 'EU absorption capacity' and harmonisation of legislation should not present major obstacles. However, the new praxis of the enlargement, introduced this year starting with the most challenging chapters of negotiations (23 and 24 rule of law and fight against corruption and organised crime) has already delayed the decision on beginning negotiations for June 2012. The start of the 'real' accession process is no clearer to the Former Yugoslav Republic of Macedonia, whose dispute with Greece over the name is still deadlocked. Although the European Commission sends regular recommendations to open negotiations with the country, each year new reasons are found for why it should be postponed. It does provide authorities in Skopje with necessary time to conduct much-needed reforms, improve standards of living and political actions, as well as deal with smouldering ethnic tensions, but equally is creating a strong sense of frustration, especially among younger generations. It seems as if the longer the solution is delayed, the less likely it becomes. Serbia is faced with a similar challenge as its southern neighbour, namely the in-

compatibility of internal political issues with the country's European aspirations. Historic first rejection of the European Council to grant a candidate status to a country following the positive recommendation from the Commission and additional personal lobbying by Commissioner Fle is clear evidence that Serbia's path to the EU's stars will be longer and tougher than expected. Serbia's authorities are facing a virtually impossible task of balancing two seemingly contradictory policies towards Kosovo and the EU. It is hard to imagine that, with the elections due to take place in the spring of 2012, the government will be able to fulfil the Kosovo-related requirements set up by the Council in time for the March summit, when the candidacy will be reconsidered. With the highly likely possibility of there being a tight result in the election, and another lengthy process of government forming, it is not unrealistic to expect that Serbia could miss the train for the June Council as well. And the candidacy itself means little in practical terms, as Belgrade's counterparts from Skopje can witness, at least from the EU's perspective, whereas it could be (or perhaps 'could have been') a lifeline for Serbian society, which is rapidly radicalising and turning anti-EU. In addition, existence of the EU's 'twin-track' approach with Kosovo reminds of the situation with Montenegro, within then-state union of

2012 will obviously bring many (different, yet somehow similar) challenges to the region
Serbia and Montenegro. Albania for its part has passed through a tough period of high political instability, opposition boycott of the Parliament and negligible progress towards the EU, a situation its leadership is looking forward to overturning in 2012. The country recorded a decent economic growth of nearly 3.5% in 2011 and, aside from institutional challenges, the main objective will remain the eradication of poverty and further strengthening of the economy. Political volatility and divisions along the political lines will, however, remain the main stumbling blocks for the country. When it comes to divisions, the situation hardly gets worse than in Bosnia and Herzegovina. The country is in perpetual existential perplexity, divided between two entities and three nations, each more concerned about the well-being of its respective group than the country as a whole. Bosnia and Herzegovina is seriously challenging the Belgian record for the longest period without a government, at now more than 400 days since the last federal elections and with little hope of reaching consensus. The deadlock of the executive will have major ramifications on the country, both politically and economically. Issues of reform of the constitution (enshrined in Dayton peace accords, without necessary consideration or even usual constitutional principles), functioning of federal institutions and even the territorial integrity of the country are deemed to top the agenda in 2012 without a clear solution to any of them. 2012 will obviously bring many (different, yet somehow similar) challenges to the region, complementary to the overencompassing economic crisis of the entire continent. Hope still remains and it even has a symbolic emanation (a blue flag with 12 yellow stars) and embodiment (Croatia's accession ratification and bits and, potentially, pieces of candidacy hereopening of negotiations there), but the question remainshow realistic is that hope?

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According to Clem Chambers, CEO of leading stocks and shares information website ADVFN.com 2012 will see markets continue this years rocky ride. Here are his seven best guesses for market events in 2012:

Gold will go through $2000 an ounce

Gold is down in the dumps right now. This is partly due to the general Christmas wind-down in levels of general trading, as well as concerns about EFT which may or may not hold Gold. Nothing goes up in a straight line hence the current correction in the yellow metal. Meanwhile, Europe and the US are on the path to inflation. The printing presses of the worlds biggest economies are churning away QEing. Whether this will result in hyperinflation or a more manageable 510% rate is yet to be seen. Gold will appreciate in 2012, however. New highs will be reached. Gold will get over $2000 with a chance of run at $2500.

Euro will fall below 1.10 to the dollar

The euro is saved its also doomed to devaluation. Without Germany on the inflation bandwagon the euro was strong. This was because weak members were set to fall out of the zone, leaving behind Germany and other stronger economies. Now the latest Euro-fix is in, Europe will print and print and print. This will take the form of lending money to the IMF who will lend it back; buddy deals with the US - anything to not appear to be merely printing euro notes. In any event, money supply will be expanded to bail out the Eurozone and inflate away the vast, accumulated debts of the governmental wastrels. we are likely to wake up from in 2012 with a nasty jolt. There are 3-5 years of economic lumps and bumps to get through and a US/ UK stock market crash is likely to be one of those bumps. bull market, so if you have made a packet in a big rally dont think it was because you were smart. Emerging markets have been the recipient of huge US largesse. Like an attached sea cucumber, America has expelled its economic stomach to buy off trouble. The EU has not been any less saintly, maintaining huge trade deficits to BRIC countries. That river of money is about to be choked off. As the first tightening starts in the developed world, so the BRICs are already folding. The emerging market bubble will begin to collapse in 2012. Nonsensical valuations in emerging markets will vanish, just as they did in the Dotcom crash. Overleveraged businesses will fold. Developed world austerity will be a hammer blow for the developing markets: Game Over. soned chalice for the politicians but they love to meddle. Having banks to tinker with will be just the temptation they need to sweep up a large chunk of Europes financial infrastructure.

Inflation in the US and Europe will rise but will be flat in the UK
Inflation will zoom in Europe, hitting levels now seen in the UK. The US is following. Inflation is standard treatment for state debt. Its the only way out of the fiscal dead end Europe and the US are at. Even though its enshrined in the mandates of central banks, 5-10% inflation is the only solution to clearing up the mess left behind by binge-spending governments. Expect plenty of denials and lame explanations and price rises on the shop shelves. The age of price stability is rapidly coming to an end.

Sarkozy, Merkel and Obama all re-elected

Sarkozy and Merkel should, of course, carry the can for Europes problems. Where were they when Europe was getting high on spending? Like any US CEO hauled up in court, they were elsewhere with no idea of the terrible crimes going on below. Out with them?! No chance - the respective electorates will be impressed by their leaders crisis management skills - even though said leaders helped create the crisis. Obama, on the other hand seems set to be a tragic Jimmy Carter, a one- term President ground down with nothing to boost his popularity. Yet he, too, will be re-elected. The Republicans simply do not have a candidate to beat him. 2012 will see the US economy magically blossom. Deep in the underbelly of America, things have been picking up. 2012 will see this comeback break the surface and give Obama the tail win he needs to have his final four years.

The market in UK/US will crash

Germany, France and Italy crashed in 2011. The US and UK didnt. The FTSE and Dow teetered and tottered but didnt fold. In 2012 they will. Maybe it will be in April/May when giant developing world countries bloated with western currency put on their hedges and readjust their vast stashes of cash, or maybe it will just kick off randomly. To avoid a crash, the whole sorry credit crunch saga will need to be over. That seems like a dream

Bank nationalisations in Spain, France and Germany

Banks are getting direct access to the printing presses of the US and Europe. This should keep most of them in business. However, some will fail stress tests and be nationalised in the same way banks were swallowed up in the UK in 2008. Its a poi-

BRIC nations will suffer more hard landing

Dont confuse your brains with a bull market, the old market saying goes. Meaning: Even an idiot will do well in a

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The dire economic situation in which most of the rich world found itself in 2011 was not merely the result of impersonal economic forces, but was largely created by the policies pursued, or not pursued, by world leaders. Indeed, the remarkable unanimity that prevailed in the first phase of the financial crisis that began in 2008, and which culminated in the $1 trillion rescue package put together for the London G-20 meeting in April 2009, dissipated long ago. Now, bureaucratic infighting and misconceptions are rampant. Worse still, policy disagreements are playing out more or less along national lines. The center of fiscal conservatism is Germany, while Anglo-Saxon countries are still drawn to John Maynard Keynes. This division is complicating matters enormously, because close international cooperation is needed to correct the global imbalances that remain at the root of the crisis. Doubts about sovereign debt in Europe have revolved around the euro to such an extent that some now question whether the single currency can survive. But the euro was an incomplete currency from the outset. The Maastricht Treaty established a monetary union without a political union a common central bank, but no com-

mon treasury. Its architects were aware of this deficiency, but other flaws in their design became apparent only after the crash of 2008. The euro was built on the assumption that markets correct their own excesses, and that imbalances arise only in the public sector. As it happened, some of the largest imbalances that fueled the current crisis arose in the private sector and the euros introduction was indirectly responsible. In particular, sovereign debt in the eurozone was deemed riskless: banks had only to hold minimal reserves against member countries bonds, which the European Central Bank accepted on equal terms at its discount window. Member countries could borrow at practically the same interest rate as Germany, and banks were happy to earn a few extra pennies by loading up their balance sheets with the government debt of the eurozones weaker economies. For example, European banks hold more than a 1 trillion ($1.3 trillion) of Spanish debt, with German and French banks holding more than half of that sum. Instead of the convergence prescribed by the Maastricht Treaty, the radical narrowing of interest-rate differentials generated divergences in economic performance. Countries like Spain, Greece, and Ireland developed real-estate bubbles, grew faster, and developed trade

deficits with the rest of the eurozone, while Germany weighed down by the costs of reunification reined in its labor costs, became more competitive and developed a chronic trade surplus. The convergence of interest rates was broken when a newly elected government in Greece revealed that the deficit incurred by the previous government was much larger than had been reported. European authorities were slow to react, because member countries held radically different views. Germany, traumatized by runaway inflation in the 1920s, and its dreadful political consequences, adamantly opposed any bailout. Moreover, it was heading into an election cycle, which increased the rigidity of its position. With German leaders insisting on charging penalty rates for providing assistance, the crisis festered and the rescue costs continued to grow. Indeed, as eurozone members inability to print their own money effectively relegated them to the status of less-developed countries that must borrow in a foreign currency, risk premiums widened accordingly. The authorities, seeing no solution, kicked the can down the road an approach that usually works, because problems become easier to solve when markets calm down. But, in this case, the crisis kept growing

bigger, and the authorities ran out of road when Germanys Constitutional Court ruled out additional guarantees beyond the European Financial Stability Facility (EFSF) without the consent of the Bundestag. At the European Unions December 9 summit in Brussels, the eurozone countries agreed to establish a closer fiscal union. But, by the time this decision was taken, it was no longer sufficient to bring the financial crisis under control. The measures introduced by the ECB went a long way toward relieving banks liquidity problems, but nothing was done to reduce the large risk premiums on government bonds. Because the premiums are intimately interconnected with the banks capital deficiencies, half a solution is not good enough. Unless the sovereign debt of the rest of the eurozone is successively ringfenced, a Greek default could cause a meltdown of the global financial system. Even barring such a nightmare scenario in 2012, the summit sowed the seeds of future conflicts over the emergence of a two-speed Europe and the false economic doctrine guiding the eurozones proposed fiscal pact. That doctrine, by imposing austerity in a period of rising unemployment, threatens to push the eurozone into a vicious deflationary debt spiral from which it will be difficult to escape.

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- The global financial crisis which began in 2008 marked the end of the romantic neo-liberal capitalist model. It is clear that contradictions accumulated over the years, though long cloaked by abundant and cheap money, swelled to the point of forcing a search for new workable paradigms. The situation was greatly complicated by the fact that the corporate finance crisis coincided with a public finance crisis made most apparent in the comprehensive inability of a large number of countries (mainly European) to service their debts. The need for a drastic tightening of government financial discipline additionally hit demand, in freefall due to both economic and purely psychological factors. The consequences of the Great Depression in the Thirties are sufficiently well-known not to warrant comment in this rather brief analysis. Most likely, the current crisis will also lead to significant geopolitical developments. Undoubtedly, the problems of united Europe are the gravest, mainly because the systemic factor amplifies the financial crisis, attenuating its effects. Entropic processes in a none-too-balanced economic and financial system threaten to become endemic. If the consequences fail to be controlled in good time, they could impact the entire world economy, bearing in mind Europes place and role in it. The hawking of lateral and occasionally rather exotic solutions additionally heightens uncertainty and buttresses panic and fear of the unknown. It is clear that the problems of the worst-hit European countries stem both from the manner in which they managed their economies, and from factors specific to the European Union. The gravity of the current situation is reinforced by an all-too-probable chain reaction to crisis which could affect the largest European economies: Germany and France. It is well known that those countries exports depend greatly on the afflicted markets of other European counties, greatly increasing the likelihood of a recession in Europes leading economies. The reasons for this situation are many, yet could be systematised thus: Global: stemming from the overall state of the world economy expressed in gravely restricted manufacturing and consumer demand. Naturally, this impacts the open economies of developed European countries which depend on international commercial and economic exchange for a significant part of their national income.

An additional problem is that European banks hold significant volumes of still-underprovisioned US bonds, further constraining their already rather conservative lending policies. The effect is clear: yet another closing of the vicious circle of low demand and budget deficit. Systemic: mainly stemming from omissions in Europes currency and economic system. Hasty wholesale expansion involving the close intertwining of economies at diverse stages of development and without safeguards against negative influences resulted in systemic entropy. Moreover, the egocentricities of the most developed economies prevented them from going further in forming the new European economic union than the mere creation of additional and relatively captive markets for their companies. The availability of cheap resource in European structural funds, mainly earmarked for financing less developed counties infrastructures, created the illusory impression of great growth in the latter, alongside great export opportunities for the former. The problem with this model of systemic development was that it failed to boost European competitiveness vis--vis the rest of the world. Economic discrepancies between the former and latter not only failed to reduce, but grew in certain cases. A number of countries debt grew in some cases, through debt issues to cover budget deficits; in others, though chronic

Scant attention was paid to fostering growth, productivity, and technological development in lessdeveloped countries
current account deficits. Defence spending, generously financed through national debt issues, was an added burden for some countries. At the same time, scant attention was paid to fostering growth, productivity, and technological development in lessdeveloped countries. It was clear that these countries were unable to divert sufficient own resource for R & D. It took the 2008 crisis to show that, after sharp drops in direct investment and tourism revenues, countries like Greece, Spain, Portugal, and Italy had no alternative revenue sources. In the circumstances, it seems that the creation of a single financial platform to control individual countries fiscal frameworks was greatly delayed. To top everything, the moment is not very propitious in view of growing nationalism in a number of countries. All the same, this is the sole route to saving the European system. A vicious circle, indeed! I feel that the only way of resolving the problem is to show greater solidarity in tackling the issues particularly from the developed countries. These countries politicians ought to display leadership and convince their public that restrictions must bind not only those guilty and naughty, but them themselves. For everyone is equally guilty and everyone must taste the bitter pill. This is not all; continuing with pro discriminating moves in their favour and to the detriment of the less-developed countries can only hasten the systems collapse. We must not consider this an automatic resolution of German and French problems: quite the reverse! This is why these two countries haughtiness ought to give way to a constructive stand for a united Europe. Only such a stand will benefit both the dimwits and those at the top of the class.

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He is Greek. Scrutinise him. Kristallnacht began somewhat like this

- I have long been watching the international trial that my country is undergoing, and I am protesting. Everyone is laying siege to Greece the story begins with Greek former prime minister George Papandreou who, in a crescendo of political foolishness, defamed my country abroad, to build on his image of being the good guy and gain the grace and favour of European leaders for himself. Whats more, in an attempt to show how good a learner he was, he classified the Greeks as a nation of charlatans. At first, they slapped him on the back, congratulating him on his bravery and then, as expected, they drove him into the corner. However, Greek pensioners and employees are set to be clobbered for many years to come. Nevertheless, there is something called national dignity. I cannot have any other countrys finance minister point the finger at me because he allegedly does me the favour of lending, when he has in fact been paid off during past decades, at very satisfactory rates of interest. In fact, interest rates are even higher now. I cannot allow, and neither have any previous leaders allowed, anyone who is a stranger to this country to humiliate Greece by discrediting it. With our words and deeds, we have given the country a chance to rank among the wealthiest countries in the world, to have much lower unemployment rates than those prevailing in other southern countries and to enjoy the right of having its voice heard on its own national issues. A pointed example is our refusal to have our neighbour, the former Yugoslavian Republic of Macedonia (FYROM) admitted to NATO, unless the issue of its name is resolved for good. I know that some of you may perhaps smile when reading about FYROM maybe its because you have forgotten the last time that some of your own neighbours tried to steal and misappropriate a part of your own history. It is typical for us Greeks to always be reminded of the past some lay additional blame on us, as they believe that in a world dominated by markets, cultural history is of no value. It is like enjoying the fruit of a tree and forgetting that its roots go deep down into the Earth.

We keep our past alive, but we do not live therein. Some might say that we do not honour our past. That we are not worth being the deserving descendants of prominent ancestors. I believe that such oversimplifications and generalisations are harmful, not only for Greece, but for humanity as a whole. Not all Greeks created miracles in the past, and its not just Greeks who are responsible for the current European mess. On the contrary, modern Greeks have decisively contributed

to the formulation of a new Europe and to its rescue from totalitarianism. Am I going too far back in time? You, our dear German partners, also go back in time when you claim that you built the modern economic miracle in Europe and you actually did. You forget, however, that you accomplished this with the solidarity of other people who suffered much at the hands of your ancestors. There are many Greeks living today, such as Manolis Glezos and Mikis Theodorakis, currently into the ninth decade of their lives, who stood up against Nazism and all kinds of fascism and still talk about World War II. They remind us of Winston Churchills phrase: Hence, you will not say that Greeks fight like heroes but that heroes fight like Greeks. One might ask when all is said and done, why I bother to recall all this and that besides, during the past 70 years, Alsace and Lorraine have heard gunfire only from hunters, not from war rifles, thank God. Greece, on the other hand, was hearing gunshots even during the 1990s from its neighbouring Balkans and even to this day from its neighbouring countries of North Africa. Do you remember the economic decay that my country suffered because of the Balkan War during the 1990s? Have you forgotten the millions of illegal immigrants who rushed into Greece, and were not removed to other Eurozone countries? I am not looking for excuses, I do not need them I am only citing facts that are already known. Greece had the average debt and deficit levels of most European countries (see Eurostat announcement 22.04.10), although it represents only 2% of the European economy a very low figure to have everyone laid siege to it. Of course, my country does not have the power to threaten foreign rating agencies with public prosecution, as was recently done by France and the US, when such agencies dared to downgrade their own banking systems. In the case of my country, foreign rating agencies simply said that it was a technical mistake.

Why all the fuss about Greece? Of course, I do not embrace the justification being spread by some of my countrymen that we are envied because we have the best beach-front land in Europe with plenty of sun. No. We have also made our own mistakes, we were the first to admit this and it would be unacceptable for us to claim that it is all someone elses fault. However, there should be a measure for everything the defamation of Greece is disproportionately huge, if compared with the actual problems that it is causing to Europe. Only idiots can smile at the gross propaganda of the press with the Parthenon sinking into a sea of debts and Aphrodite de Milos sodomising Greeks with her pointing finger. True Europe lovers are aggrieved at this kind of defamation, because they know that the Parthenon and Aphrodite shall modestly stand as magnificent monuments of culture for thousands of years to come. I am not enjoying my country being made to stand trial, no one would. To be accurate, in the Greek case, sentence was imposed before the hearing began. In this trial, those who are responsible and those who are not responsible, take the blame.The other day, I was informed by a friend that a Greek national who has been professionally active in Germany in transport business for 15 years has been subjected to ruthless financial control on his company premises and his family house, as if he were a common thief. Nothing blameworthy has come out of his business, as has been the case for 15 years. However, it was the first time that a control was carried out with the controllers suspiciousness overflowing. He is Greek. Scrutinise him. Kristallnacht began somewhat like this I am implying nothing concerning the leaders of France and Germany. They are democrats who have fought, on a personal level, to climb their way up democratic systems. Their recent behavior, however, towards all other EU countries goes beyond the limit. They accuse my country of having breached the rules of the

Eurozone but, at the same time, they themselves are breaching EU rules. Which treaty provides that France and Germany can jointly decide on the future of Europe and announce a new treaty to partners for their consent? Is such behavior not a breach of the fundamental principles of the European Union?

They blame my country for its financial collapse, when the same leaders in all their meetings with Greek prime ministers, have been pushing my country to buy their own super-armaments, priced at many billions of euro. They muttered when they heard the Greek prime minister responding that the economy is not in a good enough situation to procure new armaments, but kept on pushing and pushing. We have now reached the point where Greece ranks between the top three countries of the world in the armaments market in proportion to its population those leaders pretending to be ignorant and surprised by the drift of Greeces economy and the same in Europe are therefore partners in crime. I understand that they are accountable to their own people. However, they have made a fundamental mistake their populism has destroyed a Europe of solidarity and fostered ethnicism once more, which ruled during the mid-war and the Cold War periods. They have pushed Europe decades backwards. And something more with their indecisiveness, backsliding and procrastination, they have allowed anonymous markets to determine the destiny of European people and pull the strings out of the stock-exchange markets and bank institutions. Todays European leaders are not leading people; they are following markets and turning bankers into peer partners in decision-making. Instead of inspiring optimism in the hearts of European citizens and markets, they strike fear. Even Margaret Thatcher, a deeply anti-European leader, would be angered by such incompetence and lack of sound leadership in Europe even she would become a Europeanist.

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- Whenever people seek a justification for European integration, they are always tempted to look backwards. They stress that European integration banished the specter of war from the old continent. And European integration has, indeed, delivered the longest period of peace and prosperity that Europe has known for many centuries. But this perspective, while entirely correct, is also incomplete. There are as many reasons to strive towards ever closer union in Europe today as there were back in 1945, and they are entirely forwardlooking. Sixty-five years ago, the distribution of global GDP was such that Europe had only one role model for its single market: the United States. Today, however, Europe is faced with a new global economy, reconfigured by globalization and by the emerging economies of Asia and Latin America. It is a world where economies of scale and networks of innovation matter more than ever. By 2016 that is, very soon we can expect eurozone GDP in terms of purchasing power parity to be below that of China. Together, the economies of China and India could be around twice the size of the eurozone economy. Over a longer time horizon, the entire GDP of the G-7 countries will be dwarfed by the major emerging economies rapid growth. So Europe must cope with a new geopolitical landscape that is being profoundly reshaped by these emerging economies. In this new global constellation, European integration both economic and political is central to achieving an ongoing prosperity and influence. Like individuals in a society, eurozone countries are both independent and interdependent. They can affect each other both positively and negatively. Good governance requires that both individual member states and EU institutions fulfill their responsibilities. First and foremost, every eurozone country needs to keep its own house in order. This means responsible economic policies on the part of governments, as well as rigorous mutual surveillance of those policies not just fiscal policies, but also measures affecting all aspects of the economy by the Commission and member states. In a society, law-enforcement institutions can ultimately compel a citizen to abide by the rules. In the eurozone, a framework based on surveillance and sanctions has, until the most recent decisions, depended on offending states willingness to comply. But what can be done if a member state

cannot deliver on its promises? For countries that lose market access, the approach of providing aid on the basis of strong conditionality is justified. Countries deserve an opportunity to correct the situation themselves and to restore stability. This approach nonetheless has clearly defined limits. So a second stage is now envisaged for countries that persistently fail to meet their policy targets. During this second stage, eurozone authorities would play a much deeper and more authoritative role in the formulation of countries budgetary policies. This moves us away from the current framework, which leaves all decisions in the hands of the country concerned. Instead, it would be not only possible, but in some cases compulsory, for the European authorities to take direct decisions. Implementing this idea also implies embracing a new concept of sovereignty, given the complex interdependence that exists between eurozone countries. But it is ultimately in the interests of all eurozone citizens that these changes be made. It is my firm conviction that the Europe of the future will embody a new type of institutional framework. What might it look like? Would it be too bold to envisage there being an EU finance ministry one day? Any future European finance ministry would oversee the surveillance of both fiscal policies and competitiveness policies, and, when necessary, impose the second stage. Moreover, it would carry out the

The European Council might evolve into the EU Senate, with the European Parliament becoming the lower house
usual executive responsibilities regarding the supervision and regulation of the EU financial sector. Finally, the ministry would represent the eurozone in international financial institutions. Recent events have only strengthened the case for pursuing this approach. Europes leaders are discussing a Treaty change to create stronger economic governance at the EU level, and eurozone citizens are themselves calling for better supervision of the financial sector. And I know that our partners in the G-20 look to Europe as a whole, rather than to individual member states, for solutions. So, increasingly, it seems that it would be too bold not to consider creating a European finance ministry at some point in the future. But an EU finance ministry would be only one component of Europes future institutional framework. One can imagine that, as various elements of sovereignty come to be shared, the European Council might evolve into the EU Senate, with the European Parliament becoming the lower house. Similarly, the European Commission could become the executive, while the European Court of Justice takes on the role of an EU judiciary. And, given European countries long and proud history, I have no doubt that subsidiarity will play a major role in the future Europe significantly greater than in current models of federation. Mine are the personal views of a European citizen. The future of Europe is in the hands of its democracies, in the hands of Europes people. Our fellow citizens will decide the direction Europe is to take. They are the masters. But, however Europes institutions take shape, a truly panEuropean public debate is essential. As Europeans, we identify deeply with our nations, traditions, and histories. These are Europes roots. But we also need to extend our branches more widely. So, today, we should not look back. We must look forward to opportunities of collective betterment, and to every countrys potential to be stronger and more prosperous in a well-functioning union.

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Every year, the European Ombudsman receives around 3,000 complaints from citizens, businesses, NGOs, civil society organisations, and associations, and opens hundreds of inquiries into alleged maladministration by the EU institutions. In 2010, by far the most common allegation examined by the Ombudsman was lack of transparency in the EU administration. This allegation arose in 33% of all closed inquiries and included refusal to provide information or access to documents. The European Parliament and the Ombudsman recently commissioned a Special Eurobarometer survey in which 27,000 European citizens were asked about their perceptions regarding citizens' rights and the performance of the EU administration. Of the persons who responded to the survey, 42% were not satisfied with the level of transparency in the EU administration. Only 9% stated that they were satisfied. I remain very concerned about some of the key messages conveyed by the survey and about the consistently high number of transparencyrelated complaints, since an open and accountable administration is key to building citizens' trust in the EU. I am aware that the EU institutions and bodies have done a great deal in recent years to improve their openness and I am constantly in touch with them to give constructive advice and recommendations on how best to achieve this goal. More needs to be done, however.

A significant proportion of the transparency complaints I receive are related to the EU administration's refusal to give access to documents. In my view, there are several ways to improve the procedures for dealing with such requests in the EU administration. I sometimes have the impression that no one in the EU institutions thinks about public access until they actually receive an application for access. Good administration includes having public access in mind at the moment documents are drafted. The drafting process should aim to ensure that citizens, organisations, and businesses can have the widest possible access to documents. If a document must contain confidential information, then that document should, as far as possible, be drafted so as to facilitate partial disclosure. That can be done by putting the confidential material in a separate section of the document, preceded by a non-confidential explanation of why the material is exempt from disclosure and, wherever possible, a nonconfidential summary. If documents were drafted in this way, less time would be needed to deal with applications, fewer confirmatory applications would be required, and the institutions would be better able to respect the deadlines. To facilitate public access to documents, I have repeatedly called for the appointment of information officers in the EU institutions and bodies. Their role should be to se-

Only if European citizens feel that the EU administration is transparent, accessible, and accountable will they develop the necessary trust and willingness actively to participate in the democratic life of the Union
cure citizens' rights of access to EU documents by encouraging the institutions to adopt a proactive approach, as well as ensuring that they react correctly to requests for access. In practice, this would mean providing advice and training to ensure that the right of public access is taken into account at the stage when documents are being drafted. them in such a way that they can be easily identified and accessed. The creation and maintenance of such a register is an essential aspect of engaging with citizens. Such engagement should be seen as part of the core business of every institution, in order to help the Union to fulfil its promises of transparency, participation, and good administration. The aim should be to ensure that, unless there are valid reasons to restrict access, people can immediately obtain the documents they need through the register, without having first to submit an application. Any restriction of access should be properly justified on a case by case basis. Only if European citizens feel that the EU administration is transparent, accessible, and accountable will they develop the necessary trust and willingness actively to participate in the democratic life of the Union. When it comes to the European citizens' right to access EU documents, a lot remains to be done. I hope that some of my proposals will help to stimulate the debate about possible improvements in the EU administration.

Another important consideration when we talk of pro-activity is the need to create useful, citizen-friendly, online registers of documents that not only inform citizens of the documents available, but, wherever possible, make those documents directly accessible through a link. In this way, the citizen can obtain the document directly, without having to make an application for access. To be sure, the EU institutions already make a vast number of documents accessible online. But mere quantity is not enough, however. Good administration in this field involves making available the documents that people actually want and presenting

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Traditional system of international relations. The existing multilateral institutions were designed for a vanishing Western-centric world
For more than six decades, Europes integration process has been steadily evolving. Each step, from the European Coal and Steel Community to todays European Union, was taken with the common good in mind, and was based on shared values (democracy, human rights, and social justice) and goals (economic growth, prosperity, and the consolidation of Europes international prestige). In the coming year, the result the common rules and institutions that we Europeans have painstakingly forged will be tested like never before. In 2011, Europes foundations began to tremble, as the eurozones sovereign-debt crisis, set in motion by the global financial and economic crisis that erupted in 2008, moved from the eurozones periphery to its core countries. The EUs resilience indeed, its very survival is being called into question at a time of profound geopolitical transformation, in which a stronger Europe is essential. Global power is shifting towards Asia and the Pacific. New and newly influential non-state actors have appeared, in some cases (for example, terrorist organizations) jeopardizing states capacity to guarantee national security. Nuclear proliferation is a growing menace, as shown by the International Atomic Energy Agencys recent report on Iran. Progress on other crucial global issues particularly energy security and climate change has been disappointing. And the scourge of poverty and famine most vividly urgent today in Somalia continues to offend the very idea of civilization. All of this stands in stark contrast with the predictions of a peaceful, predictable, and safe post-historical world that were popular at the Cold Wars end. The Arab revolts, unthinkable a year ago, now challenge a regional order that has prevailed for more than a half-century. The Japanese tsunami has called into question the future of nuclear energy worldwide. And, perhaps most remarkably, the relative global decline of the United States, the worlds economic and security anchor since 1945, became unmistakable in 2011, reflected in political

polarization and paralysis and punctuated by a credit-rating downgrade. So the strategic challenges facing the EU are vast. To meet them, it must first restore its international credibility. Since the adoption of the Lisbon Treaty in 2009, great advances have been made and should continue to be made toward reform and regulation of the financial system. But many decisions came too late or have not gone far enough, with farreaching consequences, because current tools are inadequate to address the seriousness of the crisis. As the sovereign-debt crisis has proven, the euro requires mechanisms to confront asymmetrical shocks, which implies the creation of a common treasury. An important first step in confronting the speculative attacks that eurozone economies suffer today is a commitment to greater risk-sharing and greater authority for the European Central Bank. Confirmation of a stricter and more rigorous Stability Pact is also imperative to achieve greater integration. Here, the EU summit in December was an important step forward in terms of deepening political union and strengthening governance among the eurozones member states. Nevertheless, more will be needed to restore financial stability, such as enlarging the total firepower of the European Financial Stability Facility. Moreover, if we want the EU to emerge strengthened from the crisis, it must also strike a better balance between austerity and pro-growth policies, because, without

growth and higher employment, the eurozones problems cannot be resolved. More importantly, the EU must tie its economic strategies to long-term competitiveness, which is ultimately determined by the value added to goods and services. China and India have learned that lesson well. In less than 15 years, they will account for 20% of global spending on investment in research and development, more than twice their current share. Meanwhile, the EU will run up against serious demographic constraints: in 2025, Europe will represent just 6.5% of the worlds population, compared to Asias 61%, and its average age will be 45, compared to 28 in India, 37 in China, and 38 in the US. In the absence of adequate strategies for immigration, integration, health care, education, and much else, Europes growth and competitiveness will decline, and social tensions will worsen and multiply. Europe must also contribute to reforming the traditional system of international relations. The existing multilateral institutions were designed for a vanishing Western-centric world. At the same time, the dispersion of power, the degree of interdependence, and the sheer dimension of the challenges confronting the world require effective, accountable, and legitimate global governance. The inability to achieve a consensus on acute issues, such as Syrias internal repression, or on chronic problems, like climate change, highlights the (increasing)

complexity of global governance and responsibility. Accommodating todays institutions to the new global powers is a key challenge that cannot be postponed further in 2012. An example is the IMFs general revision of quotas, due in 2014. Here, no one is better positioned than Europe to advocate for effective multilateralism and facilitate agreement and adjustment, by adopting a common position to correct todays overrepresentation. Speaking clearly will enable us to promote our interests more successfully by developing partnerships not only with traditional allies, like the US, but also with new leaders, like China and Brazil, and strategic players, like Turkey and Russia and with the increasingly important regional blocs that are forming around them. In the Middle East a region that, unlike Eastern Europe, has no landing strip our support is essential to the construction of a new regional framework. No one claims that meeting all of these challenges will be easy. All roads have ups and downs, just as every crisis imparts a lesson. In 2012, the lesson should be the need for greater political integration and financial regulation, a legitimate and transparent institutional framework, and consensus. All problems can be worked out if we keep the lights on high and analyze the situation with a clear strategic vision.

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- London cabbies are a great source of received wisdom. Over the past several years I have had occasion to focus test some members of this select group. I queried them about the reputation of diplomacy in general, and their impressions of diplomats in particular. Their verdict? Reduced to its most essential iteration: Dithering dandies, hopelessly lost in a haze of irrelevance somewhere between protocol and alcohol... For diplomatic practitioners, exposure to the mainstream view of cartoon caricatures in pin stripes or pearls riding high at public expense serves as a sobering reminder that any vestigial prestige and mystique once associated with the profession has worn long since off. More worrisome still, since at least Chamberlains ill-starred visit to Munich in 1938, diplomacy has come to be associated with weakness and appeasement, with caving in to power. In other words, diplomacys debilitating image problems are matched by serious misunderstandings concerning the substance of the work. That said, however misleading the archetypes, popular perceptions of diplomacy are not entirely unfounded. Neither the profession nor its institutions have adjusted well to the exigencies of the globalization age. It doesnt help that so few diplomats have a clear sense of just how their work fits into the bigger picture. Simply put, diplomacy is a non-violent approach to the management of international relations which relies upon dialogue, negotiation and compromise. Doing it well requires empathy and understanding, a keen intellect, a capacity for political communication, and a very particular set of personal aptitudes. Book learning may be necessary, but it is by no means sufficient. Adaptability, self awareness and life skills, most more easily acquired through world travel than over the course of years of formal education, are crucial. Diplomacy matters now more than ever, but it is in crisis. Western political leaders have developed an unfortunate habit of reaching for the gun - think Iraq, Afghanistan, Libya - as the policy instrument of choice. Defence departments receive the lions share of international policy funding, while foreign ministries and development agencies struggle. In the world we live in, not only does this make no sense, but it gives rise to serious distortions and misallocations. Our governments seem to have failed to learn the main lesson of the Cold War, namely that militaries work best when they are not used. Take the sword out of the scabbard, and it makes a dreadful mess.

Defence is primarily about power. Diplomacy is about influence. The most profound threats and challenges engendered by globalization - and in my view religious extremism and political violence do not make the A-list - are not amenable to coercive military solutions. Generals and admirals, bombs and guns have their place, but at this point in the 21st century, it should not be centre stage. The best army cannot stop pandemic disease. Air strikes are useless against climate change. Alternatives to the carbon economy cannot be occupied by expeditionary forces. The unresolved, transnational issues that today imperil the planet are neither territorial nor ideological. Diminishing biodiversity, resource scarcity and a collapsing physical environment affect us all. In contrast, the probability that anyone reading this article will be caught up in an international terrorist incident is slightly lower than that of drowning in the bathtub. Bottom line? Security is not a martial art. The military is both too sharp, and too dull an instrument with which to respond in the prevailing circumstances. Diplomacy, in many cases linked integrally to development, is our best hope. Diplomacy can produce results by fostering genuine dialogue. That is exactly how the EU has been constructed. When fed back into decision-making loops, the sorts of inputs generated by meaningful exchange can affect behaviour at both

Diplomacy matters now more than ever, but it is in crisis

ends of the conversation. That capacity to resolve differences and forge agreements non-violently is diplomacys most formidable advantage over the alternatives. But that advantage is being squandered. In most EU countries, if not in complete disrepair, diplomacy is under pressure. Foreign ministries, often more than other departments of government, are being cut back. Foreign services are facing hiring freezes and layoffs. Mission closures have been widespread. It is certainly not an auspicious moment in which to get the European External Action Service (EEAS) up and running. It is no small achievement that amidst the adversity afflicting the diplomatic profession - not to mention the euro debt crisis, faltering economies, and political differences - the administrative and budgetary wheels have finally been bolted on to that very large cart. Moreover, there are all sorts of practical arguments which can be convincingly adduced to justify the EEASs creation. None of this, however, likely to capture anyones imagination. It may therefore be time to turn from the plumbing to the poetry, and to fashion for the EEAS a compelling narrative and a strategic vision. My advice? Europes ability to act effectively as a player on the international stage will never be based upon the threat or use of armed force, or the ability to cobble together a common defence policy. The Unions strength resides in its abundant soft power, which is to say the appeal generated by liveable cities, quality public education and government services, a rich cultural and artistic tradition and an abiding commitment to social democracy - even if not referred to as such. A supple, connected and innovative EEAS would do well to build upon that foundation. Leave behind work on files better handled by specialized departments located elsewhere within the EU apparatus in order to focus on the large, cross-cutting issues such as climate change, distributive justice and management of the global commons. By rising up a couple of levels of analysis to serve as a catalyst, entrepot and network node equipped to manage the complex challenges of globalization, the EEAS could do something that is no one elses job, including the foreign ministries of member states. Such a formula just might help define the basis for a new diplomacy, and in so doing contribute both to a higher level of European integration and to a better world.

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- 2011 has indeed been an exciting and challenging year in my area of responsibility: maritime affairs and fisheries. Here are some highlights from the past year and some of the challenges we will have for next year. Reform of the Common Fisheries Policy his year I presented the Commission's proposals for a root-and-branch reform of the Common Fisheries Policy. The package of proposals is now in the hands of the European Parliament and the Council for final adoption. This does not mean, however, that my role and that of my staff is played and over. I will be following this process closely over 2012 and will do all I can to facilitate a smooth negotiation and adoption process so that the final agreement can be reached end of 2012. The ambitious reform plan consists of three pillars; Sustainability, Efficiency and Coherence. Sustainability requires longterm solutions, and our proposals contain a number of elements in this sense. All fish stocks have to be brought to sustainable levels by 2015 through long-term management plans based on the best available scientific advice. The practise of discarding will be phased out. The new policy also: l introduces individual transferable fishing concessions for trawlers and all vessels more than 12m long, l supports measures for small-scale fisheries, l improves data collection and l promotes sustainable aquaculture in Europe. In terms of efficiency, the policy creates a new simplified framework for decisionmaking. Member States will be able to devise their own fisheries management regime according to their own regional specificities and with the help of the industry itself. These regimes will naturally have to tally with the general objectives set at EU level. Finally, Coherence means that all other instruments, from market organisation to financial support, will be aligned to both Sustainability and Efficiency. At international level, all our actions must match our domestic goals and our environmental commitments while at the same time ensuring a level playing field between our own fishermen and those from other countries which export fish to us. Consumers are a big part of this reform and our proposals on labelling will assist them in making sustainable choices. In fact in 2011, in parallel with the CFP reform, I also launched a consumer awareness campaign, which your readers can check out at http://chooseyourfish.eu/ To make the new CFP a success story we need more than action at political level. We all need to work together: decision-

makers, fishermen, coastal populations, retailers and consumers all have to play ball with us. It is the right thing to do and it is in everybody's interest: only by addressing the challenge of sustainability can we save our seas and give a future to the fishing community.

If we don't act now, only a handful of fish stocks out of more than a hundred will be healthy by 2022

In 2011 we also adopted the implementing rules which made the 2010 Control Regulation fully applicable and which guarantee proper control "from the net to the plate". These implementing rules cover all stages of the supply chain and contain concrete mechanisms to ensure a level playing field for fishermen, other operators and the Member States. They also promote new technologies and simplify some previous control and enforcement rules.

Early December, I put forward a new funding mechanism for fisheries and maritime policy for 2014-2020, the European Maritime and Fisheries Fund. This new fund, which will replace the current European Fisheries Fund, will finance the transition of EU maritime and fisheries policy towards environmental and economic sustainability and social cohesion by supporting conservation, innovation and smart growth in coastal areas. Our proposal will be discussed with Member states and the European Parliament during next year, and I look forward very much to these discussions.

In the context of our Integrated Maritime Policy work progressed on several fronts during 2011, culminating with the adoption late November of a Maritime strategy for the Atlantic. Work will now go on during the next year to further shape the implementation of this strategy through an Action Plan. The Commission will facilitate the development of this Action Plan through a series of workshops and discussion groups that will be open to a wide array of participants - the 'Atlantic Forum' In 2012, I also intend to present a legislative proposal on maritime spatial planning. The proposal will aim at ensuring that Member States provide a stable, reliable and future-oriented integrated planning framework to optimize the use of marine space in order to benefit economic development and protect the marine environment. Next year, I will also present a new initiative called Blue Growth. The aim of Blue

Growth is to identify and unlock new sources of growth from oceans, seas and coastal regions. The proposals will build on the findings of an on-going study exploring sustainable growth and employment in established, emerging and prospective maritime sectors based on the innovative use of marine and coastal resources as drivers for innovation and competitiveness.

If we don't act now, only a handful of fish stocks out of more than a hundred will be healthy by 2022. A 'business as usual' scenario would make us lose one fish stock after another, with heavy repercussions for the ecosystem and of course for the fishing industry itself. So the challenges for the future are far from negligible. There are major hurdles that we need to overcome to get there. But I am confident that we will manage to achieve these ambitious objectives if we all act together.

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- The European continent looks solid, geologically. The European Union may well plod on, give or take a few countries. The euro area and currency are less safe bets. We can be almost sure of European countries and banks being downgraded, of high borrowing costs for most governments and of recession compounding the problems. We can also see that a number of European summits have failed to catch up with the markets. Few international partners are going to fill the empty coffers, even for political gain. The latest European Council gave us a roadmap to the closest lamp post, but no more. Much blood and tears may flow under the bridges before the next powwow in a month and a half. I am as much for hair shirts and self-flagellation for my neighbours as the next man, but afraid that penance for the sinners falls short of the solutions needed. Is it possible that repentance and atonement are needed more widely, perhaps even more profoundly? Let us return to the birth of European integration and to the creation of the euro. Are there original sins we have not as yet faced up to? Have we committed transgressions on the road? The European Union is still basically owned by the member states, subject to unanimity and national ratifications, thus

almost impossible to reform. Britain last week, next week another member state... The euro area has even less in the way of solid structures, despite being recently topped up by monthly summits between national leaders. A currency area can hardly be described as ideal, if almost half of the people carry the cross of mortification and more than half of the population sees its liabilities growing sky-high, both groups without real choice in the matter. When democracy comes into play, it is seen as a danger instead of an opportunity, because it takes place in a national setting where every misstep can bring down the whole house of cards. Creating the euro currency without a sovereign was a mistake, but persisting is a mortal sin. I am not wise enough to know if the eurozone will split, or the euro crash, or even magically survive intact, but I am deeply worried. I feel reasonably sure that much more is needed, if we want the euro area to return to growth and prosperity in a foreseeable future, possibly ever. Are we beyond absolution? This brings us back to the roadmap. The new one has to achieve two things: remedy the fundamental flaws of the current currency, and show the destination and the stations in between. We really have to leave the old quarrels between intergovernmentalists and feder-

A currency area can hardly be described as ideal, if almost half of the people carry the cross of mortification
alists behind us. We have already seen where intergovernmental solutions lead, and there is little time left to create credible structures. Why do countries with high debt levels and deficits, such as the USA and the UK, have much lower borrowing costs than the comparable basket cases in the eurozone? The main difference seems to be that the euro is a zombie currency, without a sovereign. The euro, like all currencies, needs a sovereign. We in Western and Central Europe are past the ages when a sovereign could be instituted by or between princes or dictators. This means that the new polity at European level has to be based on its citizens, with a politically accountable government, respecting fundamental rights, providing good governance and acting transparently. The Basic Law must provide for proportional representation through free and fair elections, robust structures and sufficient powers, including a real federal budget and taxes, determined according to majority rule. The people is sovereign, in short. Foreign policy, security and defence, seem natural tasks for the European level, while we are at it. Federal Europe has to start as a coalition of the willing, among the electorates voting for a common future. Referendums would apply in states joining later, as well. When a credible polity has been outlined enough to put it on the drawing board, our leaders can trace the necessary steps along the route. In the short term the European Central Bank and eurobonds are needed to prevent meltdown. Preserving something akin to the existing benefits and responsibilities for EU members remaining on the outside is going to prove tricky, but hardly insurmountable. European level democracy may look like a stark choice, but it should not. It only represents an new level and ... we just need to contemplate the alternatives. Continuing to make more wrong decisions in the short term, as if there wasn't time for the right choices, is dangerous. Your choice: credible Utopia or worsening Dystopia?

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- In a recent report by OECD, the public administration in Greece received a dismal assessment. Greek EU functionaries could help Hellas to get ahead with necessary reforms. Public servants that don't communicate with each other, total lack of coordination, ghost units, and a prevalence of the tunnel perspective: A report by the OECD, that has just been issued, finds the current system of Greek public administration unfit to get the country on the growth track. The report has been finalised in 2011 by a team of OECD officials, in joint collaboration with the Greek Ministry of Administrative reforms. The report is very substantial and the findings cannot be ignored. According to the report, the underlying problem is that there is no central or strategic leadership setting the parameters of policy and controlling them. Concretely speaking, in the reports own words: "A major finding of this report is that monitoring, co-ordination and in-

Without substantial reforms, competitiveness will not be restored and the crisis will not be overcome
formation-sharing mechanisms are extremely weak throughout the central administration, which makes it very difficult for individual ministries to supervise and control public sector entities effectively." The report concludes that the public sector at large was affected by the "inadequate capacity of ministries to carry reforms into the implementation stage." Everybody knows that without substantial reforms, competitiveness will not be restored and the crisis will not be overcome. Nowadays, too many parts of the Greek public administration resemble a multi-headed Hydra. Of course, there are committed and qualified people in the administration, but they have to fight the system in case they want to make a difference. The report judges: "In cases where co-ordination does happen, it is ad hoc, based on personal initiative and knowledge, and not supported by structures." My conclusion, after having read the report: We have to support the willing and committed public servants in Greece. They need to be supported by Greek EU functionaries. According to estimates, there are around 2,500 of them all over Brussels. They are excellently qualified, committed to good governance, and mourn the state their home country is in. Ever since the crisis broke out, I met a lot of these functionaries. Many are ready

to go to Athens and help to implement the reforms. Technically it is easily feasible. The EU can provide financial support via "technical assistance" to member states and can delegate staff to member states. Hence, they stay on the payroll of the EU institutions. This is what I propose: The EU forms a special "Iolaus team", a task-force of 500 delegated Greek EU functionaries, which directly reports to the Prime Minister and is vested with the power to enforce reforms of good governance? The Iolaus team focusses on tax collecting, control of public funds, and the management of EU-funds. Why do we call it "Iolaus"? There is an episode from Greek history that came to my mind reading the article. When Heracles was confronted with the multiheaded monster Hydra, he got essential help from his nephew Iolaus. Some even argue that without his nephew, Heracles could not have done the job. Drawing the analogy, I would like to call this strategy "Iolaus strategy". Let us face the Hydra. Its heads have had enough time to grow.

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- The first big news story of 2011 actually had its beginnings towards the end of the previous year. On 17 December 2010, Tunisian market stall owner Mohamed Bouazizi set himself on fire in front of the Sidi Bouzid town hall after been publicly harassed by the police; the reason, apparently, was that he didn't have a license to sell vegetables. Bouazizi suffered burns all over his body, and died later in hospital, but not before he received a visit from Zine El Abidine Ben Ali, Tunisia's autocratic ruler, who, photo evidence records, did not receive a sympathetic welcome from the dying man. The Arab Spring had begun. The Arab Spring, its optimistic, somewhat depoliticised name given by the western media to indicate a tide of blooming democracy, had breathless commentators swarming over North Africa and the Middle East in the first half of the year. It was, they said, history in the making; ruler after ruler would fall, country after country would change. It was popular democracy in action. The prediction, however, turned out to be only half right. The popular protests that led to the downfall of Ben Ali inspired similar protests in Egypt, where the three decade rule of Hosni Mubarak was brought to an end. In Morocco, pro-democracy stirrings led the king to usher in reforms to quell any further civil disturbances. But elec-

tions in Tunisia and Egypt have not proved to be wholly satisfactory, and both saw Islamist parties gain ground. Elsewhere, the hoped for democratic revolutions never materialised in Morocco, Bahrain, Yemen and Syria, which by the year's end was still experiencing violent crackdown on suspected dissidents as President Assad desperately tries to hang on to power. Following the departures of Ben Ali and Mubarak, eyes turned to the equally despotic rule of Colonel Maummar Gaddafi in Libya. As protesters took to the streets, and government loyalist countered with waves of violent suppression, it soon became obvious that change would not happen smoothly. The country soon descended into a nasty civil war, and while it ended with the death of Gaddafi, his bloodied corpse paraded through the streets evidence that any kind of judicial process for the former dictator was never really on the cards, the country still faces an uncertain 2012. In Europe, EU leaders debated how best to deal with all this. No doubt with one eye on the presidential elections due in the new year, Nicolas Sarkozy was the first to call for air strikes and supply military aid to the rebels, something the British Prime Minister, David Cameron, was wary of doing. It wouldnt be the only time the two men would fail to agree during the course of the year. The EU was suffering its own crisis;

The EU was suffering its own crisis; namely the possible collapse of the Eurozone. The buzzword was contagion, and the fear of declining economies infecting one another
namely the possible collapse of the Eurozone. The buzzword was contagion, and the fear of declining economies infecting one another. As country after country introduced austerity measures to protect their ailing finances, angry protesters took to the streets in widespread displays of dissatisfaction. Indeed, Time magazine even made the Protester, an abstract figure that encompasses everyone from the Arab Spring dissenters to members of the global occupy movement to disaffected youths who protested budget cuts, it's prestigious Person of the Year. EU leaders, especially French President Nicolas Sarkozy and German Chancellor Angela Merkel, feared the demise of the single currency above all, and rescue efforts dominated the latter half of the year. In Italy, Silvio Berlusconi finally left office to be replaced by the so-called technocrat, Mario Monti, a former European Commissioner. Greece, too, received a similar fate. In Ireland, the government of Enda Kenny, which came to power at the end of February on a tide of massive anger at the previous administration's handling of the economy, has been forced to introduce severe cuts and tax hikes in a bid to shore up its economy and gain the approval of the EU's financial watchdogs. Other European economies, such as Belgium and Spain, will have to make similar adjustments in the coming months. The year ended with an inevitable spat, and all but one of the EU member states agreeing to a pact designed to save the troublesome euro. It was the UK, much to the chagrin Merkel ans Sarkozy, who stopped short of giving unanimous support for a rescue plan, citing insignificant protection for the City of London's financial sector. It led to insults and accusations, a split in the ruling coalition government in the UK, and renewed talk of a two-speed Europe. Swift action on implementing the agreement has been promised, but with possible constitutional problems in Ireland, and parliamentary ones expected in the likes of Denmark, Czech Republic Finland and Hungary, no one is declaring this crisis to be over just yet.

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- Even before the physical appearance of the euro, a large number of mainly English language analysts and economists predicted a brief life. Now, ten years after its introduction, in the peak of a crisis, the new currencys parity with the American dollar is in the region of 130 US cents, having reached peaks as high as 159 cents. Incidentally, the Eurozone is now going through its worst crisis ever but the euro is, nevertheless, far above the initial parity with which it first appeared. Let's not forget that the fundamentals of the euro area are positive, with its overall trade balance always leaving positive reserves, powered mainly by German exports. That is why it gained all that ground with the dollar after the American credit melt down in 2008. Currently, it is the turn of the Eurozone to pay its dues to the credit and casino markets, with the rating agencies now trying to regain, at the expense of the Eurozone, the prestige they lost during the 2008 New York tsunami. All those are, however, well known facts and world markets have highly valued the export dynamism of the surplus Eurozone countries, ensuring that throughout the ten year life of euro the overall trade balace of this common money zone has been positive. One question still remains, though; how the Eurozone is to deal with the sovereign overindebtedness of a small number of its members? At this point it should be noted that Italy and Ireland are strong export powers leaving only Greece, Portugal and probably Spain in the problematic area of large trade deficits, unfortunately accompanied in these latter cases by large fiscal deficits too. In this respect, Spain, a country featuring both large fiscal and trade deficits, is now blessed with a very low government debt, around 60% of its GNP, much lower than Gernmany or France. At this stage, it is worthwhile making an analysis of what happened in the Eurozone over the past year. Undoubtedly the gravest problem has been the contagion fears from the Greek and the Irish crisis. In these two countries however, there are distinct differences both in the causes and the policy measures to remedy the illnesses. In the case of Ireland the problem was the overexposure of its banking sector to toxic assets of the real estate sector, both at home and in the US. Now, however, the Irish efforts to overcome these problems is already paying dividends and the country is regainig its export dynamism, leaving Greece as the only patient still needing special treatment. As for Portugal, the tiny size of its economy and its more or less successful efforts to reduce budget deficits and debts have kind of insulated the Eurozone from any spill-over effects from this source. Con-

cerning Italy and Spain, in the first case the countrys economy is not only outward oriented but has been blessed with large internal savings traditionaly directed to support governmnet deficits. In the case of Spain indebtedness is very low, as already mentioned, and the new Rajoy governmnet has announced severe austerity measures for 2012. Last but not least France and Belgium, the two central Eurozone economies with large state debts and govenment deficits are to apply adequate policies to take care of their problems.

Let's not forget that the fundamentals of the euro area are positive
kets change their evaluation of the Eurozone, now differantiating completely their attitude towards the debt paper of the deficit countries on the one hand and the surplus Eurozone countries on the other? Let's follow the facts. lion, plus at least 200 billion through the IMF. All that money will be used to counter the possible default of Greece or Italy. No other country of the 17 Eurozone member states is running such a danger any more. Ireland is contemplating a return to markets within this year, while Portugal is more or less successful in applying its programme and Spain under Rajoy is to implement a severe austerity policy package to abandon the danger region. On top of this, the IMF 200 billion fund is already attracting support from non Eurozone but EU member countries, like Sweden along with contributions from non EU counties like Russia. By the same token Germany and France have definitevely abolished the possibility of Eurobond issuance, a decision drastically blocking the probability of a domino effect. In short, during this year, the Eurozone is to build a fire wall, making sure that a Greek bankruptcy will not reach the core of the Eurozone. All that together with the new fiscal union, which is to make sure that overindebtedness will never again happen in the Eurozone, will turn the year 2012 into a new landmark in the history of the common European currency.

Despite all that, during this past year the Eurozone was under heavy pressure from the fear that the contagion effect of a potential financial failure in Greece could be exported to Italy, then to Spain and Portugal and finally to the core economies of Germany and France. Capital markets adopted this logic after Ireland, towards the end of 2010, arrived at the point which Greece had reached in May of the same year, and the two were soon to be followed by Portugal. Then in 2011 capital markets and investors feared that Italy and Spain will follow the other three in asking for help. In such an environment the domino effect became a distinct possibility, potentially reaching Germany and thus bringing down the euro. This logic prevailed and on certain occasions affected the creditworthiness of the bunds, the German bonds. Not any more however. What happened to make the mar-

Towards the end of last year, especially after the EU leaders Summit of 8 and 9 December, investors started thinking differently. In the week after that summit, Germany and Italy simultaneously issued their bonds and markets made Rome pay 6.5% for its new debt, while Berlin was charged only 0.29%. This huge difference of risk premiums between German and Italian bonds means that Berlin and Rome would have under whatever circumstaces quite different prospects. Not to mention anything about Greece. During 2012 we are going to see more of that. The idea is that the EU 26 decided to create a new union within the EU, to be followed probably by Britain in the future. In any case, the image of the Eurozone will drastically change before the end of 2012. Towards the middle of the year, the ESM will be in force with a dowry of 600 bill-

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OUR WORLD IN 2012

- 2011 is definitely a year to forget, as financial turmoil struck Europe once again; or a year to remember for the lessons this turmoil has offered. It has certainly been one of the most tiring for European leaders, who have faced many a sleepless night. In December, the Brussels summit demonstrated the EUs will to act toward a stable and trustworthy eurozone. The new decisions are an indication of movement to greater integration in the EU. However, Angela Merkel has rightly pointed out that there is no quick way out of the crisis, and this was evident in the summit. The current financial and sovereign debt crisis in Europe cannot be viewed independently from the economic model that Europe has followed for the preceding decades. Analysts have also drawn the conclusion that the problem lies in the architecture of the eurozone. But is this financial giant what Monnet and Schumann, the founders of the European Coal and Steel Community (ECSC) originally had in mind? When signing the Treaty of Paris in 1951, the founders of the ECSC wanted in principle to achieve long-term peace in Europe. One of the aims of the treaty (in Article 2) was to contribute to economic expansion, employment growth and a rising standard of living by creating a common market for coal and steel. Almost 60 years later, the continuation of

the ECSC, the EU, is struggling to remain united under the euro. The picture in many EU countries certainly cannot be described by rising standards of living. Rather the opposite; especially when looking at southern European economies. At the moment, the euro is conversely associated with unemployment and limited or zero economic growth. There are large asymmetries between the economies of the sovereign nations within the euro. These asymmetries were evident to the founders of the eurozone, but they turned a blind eye to them. Along with this also comes an asymmetrical interdependence, where the more powerful European nation-states set the rules of inter-state bargaining. Debt and contagion issues are not the only problems. The citizens of Europe are also dissatisfied about the level of democracy of the EU and also have a certain discomfort with the power wielded by its leading nation, Germany. These doubts about Germanys role are also heard from within Germany itself. Recently, Helmut Kohl quoted the famous Thomas Mann phrase: "We do not want a German Europe, but a European Germany". Unfortunately for the peoples of Europe, especially in the south, they are obliged to pay for those debts not created by them but simultaneously they must play the role of scapegoat. Greece is paying the heftiest price through unprecedented austerity measures, wage cuts and heavy taxation. The greatest concern is the consequence of the

The future of the EU is undoubtedly in jeopardy. This is not only due to the potential failure of the euro; it is the democratic deficit. Citizens distrust the Union and their own parliaments. At 2012, the European project has reached a fork in the road. We will either see wider integration or its collapse
contagion effect on larger economies such as Spain and Italy. The way that the leaders of the powerful EU states have chosen to solve this sovereign debt crisis underlines the fact that the EU remains a financial coalition, which claims to be a political one as well. But should we not also have a firm action plan to combat unemployment and stimulate growth, alongside the new financial mechanisms and the pain of austerity? And why have current European leaders fallen deaf to voices like that of Jacques Delors and Helmut Schmidt? It appears that the end state of this project will result in unhappier European citizens, less well paid workers and youth unemployment. Day by day, Europeans also feel they are losing what they have gained over the past fifty years; their political voice and social benefits. Now it is all about rescue of the banks and the stability of the common currency. It is no longer about people; this is the reason why everyone across Europe is marching on the streets carrying placards with anti-capitalist slogans. The future of the EU is undoubtedly in jeopardy. This is not only due to the potential failure of the euro; it is the democratic deficit. Citizens distrust the Union and their own parliaments. At 2012, the European project has reached a fork in the road. We will either see wider integration or its collapse. It remains to be seen whether political integration will be impacted by the spill over from increased fiscal consolidation and the debated eurobonds. The least one can hope for in 2012 is a more democratic and humane approach to resolving the current crisis. Without a forward looking political vision for Europe, monetary strictness alone cannot offer longevity in the dream of European stability and unity. Nor can it offer certainty that it will restore the trust of the markets.

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- An exceptionally multidimensional economic crisis - nurtured by fiscal, balance of payments, financial, sovereign debt and recession problems - has developed into a political and confidence crisis. All these dimensions mutually reinforce each other and make effective response a challenging task. A lot has been done over the last three years to combat the roots of the crisis and its wild spreading capacities. Reforms that were unthinkable not so long ago have been designed, adopted and implemented, bringing more Europe into such areas as financial supervision, integration of the financial sector, economic governance and the single market. Fiscal consolidation - unfortunately not at all growth friendly - and structural reforms have become our religion through austerity packages. The latter have been seen as a mechanism to trigger growth through stability and confidence. Unfortunately, so far there has been no evidence of any expansionary outcome of these packages as they seem to completely ignore extraordinary economic and financial circumstances in EU member states' economies in distress; for example, the fact that the banking sector is practically dysfunctional in these economies. Confidence, especially that of financial markets, continues to be a moving target for policy makers whose decisions cannot

compete with the extraordinary short-termism of market behaviour. The Summit of 8-9 December was seen by many as a chance to announce a sweeping set of further reforms that would add a subsequent step to the reform path that is already behind us. The lack of strong - positive or negative - reactions of the market demonstrates that we might be close to a kind of compromise between political delivery and market expectations. We might be very close to what markets need and each new piece of promise coming from decision makers if well-designed can get us closer to the critical mass of change needed to trigger market confidence. It is true, however, that the major novelty that had been expected by markets and did not appear in the summit outcome was an openness towards more aggressive involvement of the ECB in curing the European crisis. We continue without clarity on what role the ECB will play now. The ECB is the only institution that can impact financial markets and that can influence member states through strategic bargaining while purchasing sovereign bonds. Fiscal integration, that has been launched as a reaction to the crisis and that requires many further steps, including the preparation, adoption and implementation of the new intergovernmental fiscal treaty, is a long term process that

While working on the intergovernmental treaty, we cannot afford to do nothing

might still face unpredictable hurdles. It will not reach its fully fledged efficiency without such tools as eurobonds or the role of the ECB or another financial institution as a lender of last resort for the euro area. In the near future, the Union will need both reflection and action on those lacking elements fundamental for a fiscal union. For the time being, Europe has offered itself a fiscal stability union that, hopefully, will take us closer to a compromise with markets, provided they translate recent advances in euro area fiscal governance into the beginning of investors' confidence in government bonds. What makes me sceptical is that under strengthened fiscal rules, countries in distress will have to continue austerity and internal devaluation. Without moving decisively to the second edition of austerity packages - a growth friendly version - it is rather unlikely that investors will shift their interest towards those economies. A long term austerity trap is looming on the horizon. What has, however, to be excluded from the list of possible scenarios for Europe is the breakup of the euro. Risks, costs and losses across all dimensions of the economy would be unimaginable. We know today what went wrong and we have enough imagination to understand the implications of such a breakup. The only potential benefit - "having own monetary policy" - would be devoured by losses on cross-border capital flows, on introducing capital controls, on lack of credit, on bank runs, on protectionism, etc. In short, it would be a problem, not a solution. While working on the intergovernmental treaty, we cannot afford to do nothing. The economic governance six-pack must be rigorously implemented, macroeconomic and budgetary surveillance must be effectively carried out, debt above 60% could be pooled and quickly reduced in line with the German redemption fund proposal, the idea of fully fledged eurobonds could be elaborated, EFSF could be offered a banking license and immediate growth strategy could be put into motion. It is imperative that Europe acts boldly and that it acts now.

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OUR WORLD IN 2012

- It hasnt been a good year for anyone really, except for the odd Cassandra. Even for UKIP and the cause of democracy and independence it hasnt been marvelous. The fact that over the last twelve month our opinion poll ratings have doubled (despite a late year dip caused by the British Prime Ministers phantom veto of a phantom Treaty) is neither here nor there. The fact that euroscepticism is a growing phenomenon across the European continent gives me no pleasure. That UKIP are regularly challenging the main British parties in by-elections across the UK is OK but nothing to get excited about. That the population of Britain is getting very restive with our membership of the EU, and that even the dormant drive for national liberty is slowly waking in the House of Commons where 81 MPs of all parties rebelled against their whips in order to speak up for their constituents and called for a referendum is just so so. How can anybody in all conscience by happy with any of this in the light of the slow motion B Movie disaster sweeping across the European Union? Millions of jobs are under threat from North to South. The under 25s unemployment rate in some EU countries is pushing 50%. Services are being decimated and taxes are rising. For every lost job another life is blighted, more hopes are crushed, and the

future is impaired. Families are put under massive pressure and the civilising bonds that make our societies enjoyable are torn apart. Worse still the very systems in which we, in liberal Europe place our trust and faith are being undermined. Democracy itself is under serious threat. Take a look at the Economist Intelligence Units report produced this December. The report, an annual study of the global state of democracy has this to say, Seven countries in western Europe had a decline in their democracy score in 2011; none had an increase. The main reason has been the erosion of sovereignty and democratic accountability associated with the effects of and responses to the euro zone crisis (five of the countries that experienced a decline in their scores are members of the euro zone--Greece, Italy, Portugal, Spain and Ireland). Most dramatically, in two countries (Greece and Italy) democratically elected leaders have been replaced by technocrats. The nearterm political outlook for Europe is disturbing. The European project is under serious threat and disputes within the EU are ever sharper. Harsh austerity, a new recession in 2012, high unemployment and little sign of renewed growth will test the resilience of Europes political institutions. That all this is coming to pass as I have long predicted gives me no pleasure. It increases my anger, true, but that is cold

For the elite to improve matters they would have to admit fault, and that is something they just cannot do
comfort. And I am angry, angry at the pampered ignorant arrogant political class that in the capitals of the member states of Europe, and co-ordinated by the Brussels Euro-elite have, despite warning after warning, done nothing to mitigate the forces unleashed by the financial crisis of 2008, but instead have dithered and dithered, compounding the problem and piling on the pain on their citizens. They have done this because, despite knowing full well that their dream of a country called Europe, reality has stepped in. If, as they say to destroy us, first the gods make us mad. Then the collective delusion that has struck those in power is pernicious in the extreme. Because of course it is not they driving down the Zil lanes, to summit after summit, council meeting after council meeting to rearrange their deck chairs one more time that suffer. Not a bit of it. It is the little man and women powerless, inconsequential and friendless that bear the brunt. Not for him and he the guaranteed pensions and comfortable old age. Why are the normal hopes and dreams of our citizens being sacrificed on the megalomaniacal fantasies of those who think they are our betters? Because for the elite to improve matters they would have to admit fault, and that is something they just cannot do. My predictions for the year? That in the end reality will bite and the edifice will start to crumble, people will rediscover that they matter, and their hopes count. The elite will get the rudest wake up imaginable. Sadly I fear that there will be more pain and more destruction of lives wrought before this happens, but happen it will. I return to the EIU study for a pointer, in it 5 of the top seven countries in their Democracy Index are European (with New Zealand and Australia taking 5 and 6). They are Norway, Iceland, Denmark, Sweden and Switzerland. What unites these pillars of democracy? None are Euro area members, and three are not in the EU at all. Does this point to a better future by any chance?

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The investment in securityrelated resources will follow a downward trajectory in 2012

- One of the EUs main challenges for 2012 will be that of international geo-economics. The euro crisis and shifts in global power require a more assertive focus on immediate economic interests. Geo-economics is an increasingly important shaper of EU external policy. The external dimensions of the euro crisis merits far greater attention in 2012. Geo-economics denotes the use of statecraft for economic ends; a focus on relative economic gain and power; a concern with gaining control of resources; the enmeshing of state and business sectors; and the primacy of economic over other forms of security. There is consensus that the ongoing economic crisis renders more pre-eminent the geo-economic dimension to international power and presence. Refining its geoeconomic focus is widely seen as pre-requisite to the EU recovering ground lost as a result of the crisis. Geo-economics is also widely seen as a more central underpinning of the emerging non-Western world order. But what form of geo-economics will EU member states pursue? It appears clear that geo-economics must be factored in as a significant influence over crisis-afflicted EU strategy. But, geo-economics can assume different degrees and shapes. Geo-economic power can mean different things to different actors What will be its defining contours in European policies as 2012 unfolds? What exactly does geo-economic prevalence mean for EU polices in particular regions and issue areas? What type of geo-economic power is the EU becoming and what type should it aspire to be? European member states have become strikingly more active in chasing investment deals. This trend is likely to become even more marked in 2012. Several governments have explicitly committed themselves to a more assiduous pursuit of exports, investment contracts and very direct national material interests. In several regions, European

external funding and development cooperation appear to be aligning more with the private sector. In at least some places, the danger is emerging of the EU becoming a mere supplicant for commercial contracts. This may produce important and immediate material gains, but also breeds a perception that the EUs external vision is increasingly and unduly constricted. As a result of the crisis and intense competition from rising powers, in 2012 the focus on geo-economics will tip the scales even more towards bilateralism and away from common EU approaches. Competition is increasing between member states for commercial access to emerging markets. This has not been accompanied by coordination measures of equal weight at the EU level. Despite enhanced commercial diplomacy, in most markets European companies are struggling to hold-off stiff competition across all sectors from non-Western producers. In 2012 the EU will face decisions over whether its plethora of initiatives from outstanding free trade talks in Asia and Latin America, to energy projects in the Caspian and recently formulated strategic policy frameworks in the southern Mediterranean and sub-Saharan Africa can move forward in more tangible and substantive terms. It would be premature to conclude that geo-economics are entirely suffocating other dimensions of EU policy. Political and security policies in some circumstances still prevail. Relative to internal EU flows,

European global trade and investment remains modest. If there has been something of a geo-economic stampede to Asia, the economic aspects of EU policies have if anything weakened in Latin America. In the Middle East and sub-Saharan Africa, trade and investment efforts have intensified but still underplay these regions full potential. The investment in security-related resources will follow a downward trajectory in 2012 and the EUs foreign policy centre of gravity will tilt towards geo-economics. Nonetheless, in most areas the concern will not be with economics completely emasculating politics, but with insufficient priority being attached to conjoining these two strands of policy. The need is for a changed approach to diplomatic and security issues as a means of underpinning geo-economic interests. This is most clearly seen in the ferociously competitive energy politics of the Caspian region. Arguably, geo-economics should play to the traditional EU strength of being an 'economic giant, but political dwarf '; but in many regions it also reveals its Achilles Heel of an abiding disconnect between economic and geopolitical interests. It is emblematic that foreign ministers have been largely absent in the management of the economic crisis. Geo-economics does not mean the EU has abandoned rules-based multilateralism. The EU is suspended somewhere in between enthusiastic reliance on liberal interdependence and zero-sum survival mode.

While EU member states are more aggressively pursuing investment and bilateral trade deals, they are not approaching geoeconomics in the same kind of direct way that China and, to a lesser extent, the United States plan for control over strategic resources and transport nodes of the global system. Yet, with most multilateral bodies struggling to retain traction, the EU will need to boost its commitment to multilateralism at key summits and key decision-moments scheduled for 2012, if it is to hold geo-economics back from more deleteriously eating into rules-based governance. European approaches to geo-economics seem to take some of the priority away from issues of political governance and multilateral cooperation, but without encouraging member states to marshal all their resources to the purist form of realpolitik control. The positive interpretation is that this could eventually constitute a well-balanced form of geo-economics: a firmer and more results-driven search for commercial gain, without the excesses of rules-weakening statecraft. But this mix will need to be pursued in a far less ad hoc and expedient fashion in 2012. A long-term exit from crisis can best be driven by external EU policies based on material interest but within a framework that dovetails far more tightly with the broader gamut of geo-strategic objectives. Key choices in 2012 will have a bearing on how benign a form of geo-economics takes shape.

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- European beer is a diverse and traditional product, rooted in agriculture. In fact, we shouldnt really talk about beer, but beers, with Europe being the home to a hundred plus different beer styles and forty thousand different beers. Brewing in every EU Member State, Europes three and a half thousand breweries are rooted in their local environments, often producing a beer to meet local tastes and contributing socially and economically to their communities. European beers are also famous the world over, with not just our products, but our brewing expertise, exported to all four corners of the planet. As President Barroso stated in 2011: More than ever the brewing landscape across Europe combines deeply rooted multinational companies as well as myriads of small and medium sized companies sometimes at community level. This combination is the key source of dynamism for Europe's economy. Ernst & Youngs latest snapshot of the EU brewing sector showed that approximately two million jobs in the EU are created by beer, whilst brewers contribute fifty billion euros in taxes to EU governments each year. Brewers furthermore spend one billion euros annually supporting activities in communities across the EU. In the words of the President of the European Council, Herman Van Rompuy, addressing Beer Serves Europe 2010: Beer is part of our common European heritage and culture. Beer is culture and tradition. But beer is also economy. However, the brewing sector has been hit

European beers are also famous the world over, with not just our products, but our brewing expertise, exported to all four corners of the planet
hard during the economic crisis, with knockon effects notably on employment. For every job that we create in our sector, we generate eleven in the hospitality sector. Falling beer consumption and particularly the increasing number of people put off by the costs of going out, have had a major impact on the profits, jobs and taxes generated by beer sold in bars and restaurants. Whilst the declines were biggest in the first two years of the crisis, 2012 is looking like it will remain a very challenging one for Europes brewers, particularly with further tax increases planned on beer. What has been shown is that these tax hikes even lead to less government revenues. With taxes pushing prices up in the hospitality sector, where the majority of the jobs and tax revenues are made, in just two years twelve percent of beer-generated jobs and six percent of government tax revenues from beer were lost. In this regard it was heartening to hear President Barroso say to brewers in November that the Commission greatly values an open dialogue with The Brewers of Europe, and fully recognises their important contribution to the European economy, both as job providers and as important revenue contributors to national budgets. Of course, not all the challenges in 2012 will be purely economic. With changing expectations on business and diminishing natural resources, Europes brewers are also keen to reduce their impact on the environment. Also a clear business case can be made for reducing energy and water usage, with such costs and the price of raw materials increasing, whilst the economic crisis continues to bite. This will thus increasingly be an area where Europes brewers strive to do more, and better in 2012. When the EU Strategy to Support Member States in reducing alcohol-related harm was adopted in 2006, an Alcohol and Health Forum was set up to support it. Europes brewers over the past five years have come to the fore contributing, often in partnership with governments, civil society and NGOs, over a third of the two hundred voluntary commitments to action made by Forum members. The EU however faces a challenge in 2012 assessing the impact the EU Strategy has had on reducing alcohol-related harm. Evaluations demonstrate not just a high level of local activity from brewers, but also clear results from some of the activities in terms of targeting and reducing harm. The Brewers of Europe will therefore as-

sist the Commission in demonstrating how these activities have contributed to helping the EU achieve its aims, and how the Forum model is one that should be further encouraged as a means for fostering and sharing effective activities, not just at EU level but also at national level. Undoubtedly, Europes 2020 Growth Strategy and the way Europes brewers contribute to its success, are key to confronting the challenges in 2012 and beyond. This blueprint for growth and recovery offers an opportunity to further align the European brewing sectors ambitions with the EUs, creating smart economic growth and jobs, responding to consumer expectations and ensuring a sustainable brewing sector. President Barroso himself said in 2011 that he wishes the Commission and brewers to work in close cooperation so as to face current challenges and find appropriate responses to the crisis which is affecting Europe. To meet the challenges in 2012 Europes brewers will continue to pursue smart growth through innovation in the sector and will foster inclusive growth by boosting employment as the sector recovers from the economic crisis, including in vulnerable communities which often depend on the local brewery as the primary employer. Brewers will pursue these issues whilst also continuing to meet the growing expectations of policymakers and citizens. The Brewers of Europes strong wish is that the beer sector can help to re-establish confidence in European business in 2012. Beer serves Europe and The Brewers of Europe is convinced that Europe can serve beer.

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- It wasnt supposed to happen this way. For generations, a comfortable marriage of convenience between politics, big business and entrenched institutions ensured a playing field tilted in favour of the rich, powerful and well-connected. Change wasnt supposed to happen. But it did happen. During the past year, millions have taken to the streets demanding a fairer world and challenging the people who misuse and abuse power. The actions of the Middle East and North Africa protesters, the anti-corruption campaigns in India, China and other countries, and the many occupy movements have captured the worlds attention and imagination. People across the world, particularly young people, have begun to believe the unbelievable. More importantly, they have begun to hope again. The growing clamour for a fairer system one based on public human rights for all seems to have caught the political and corporate establishment by surprise. Governments have been left scrambling to regain both control and their moral authority as old institutions crumble around them. Not surprisingly, they have dismissed calls for change, disrupting demonstrations, often violently, by-passing democratic processes through legislative fiat or by installing technocratic governments or

introducing draconian emergency measures. But it has had little effect. Momentum is building. Things have changed. During our 50-year history, Amnesty International has watched this happen before. The collapse of Communism in the late 1980s offered an opportunity to create accountable governments and systems which respected the full range of civil, cultural, economic, political and social rights. That opportunity was squandered. Instead, western governments promoted the market under the guise of promoting democracy. Strong trading partners and resource-rich countries were valued regardless of their human rights record. Similarly, in the wake of the 9/11 attacks and revelations about the state-sanctioned atrocities committed during the so-called war on terror, the conduct of countries seen as strategic allies was largely ignored. This misjudged and myopic approach to world affairs has eroded the Wests moral authority to press for human rights and undermined its position in the political arena. In its place, a rising quartet of powers Brazil, Russia, India and China is flexing its muscles, and a host of other nations Turkey, South Africa, Indonesia, Mexico and Nigeria are poised to follow. However, the human rights report cards of these nations do not show uniformly good scores. There have been some huge steps forward since the Universal Declaration of

There have been some huge steps forward since the Universal Declaration of Human rights was adopted on 10 December 1948, but many of the promises and policies have since rung hollow
Human rights was adopted on 10 December 1948, but many of the promises and policies have since rung hollow. Six decades on, we live in a world where the divide between rich and poor is wider than ever. More than 2 billion people are still trapped in a desperate, downward cycle of marginalisation, disenfranchisement and poverty. Large sections of society are shut out of the political process. Women are still seen as second-class citizens. And millions are dying every year because they cant access medical care, clean drinking water or cheap, life-saving drugs. But this year has been different. Something has changed. This year, there is hope. From the streets of the Middle East and North Africa to city centres around the world, people are demanding action. They are questioning the very foundations of the systems that have governed their lives. They are harnessing the power of technology mobile phones, social media, YouTube to build solidarity. They are sensing that they hold the real power, and that they can shape a better world. To reclaim their legitimacy as leaders, businesses and governments both in the West and in emerging economies in Latin America, Asia and Africa must listen. They must cast aside the politics of the past. They must rein in the unaccountable governance of countries and businesses which have blighted lives and left so many people behind. And they must put respect for human rights, particularly of vulnerable groups, above political and economic gain. As part of the growing peoples movement for public accountability, we have seen protesters showing the world that change is possible. By bravely facing down rifles and tanks, by bringing down entrenched regimes and by challenging powerful companies, they have shown that ordinary people can do extraordinary things. They have shown that people do matter, and that treating others with dignity and respect is fundamental for a better world. Most importantly, they have shown that hope can be re-born out of the ashes of indignity, injustice and despair.

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- The New Year is above all a contract with our individual and collective future. The future is not determined by law but all of us have a strong responsibility in constructing the pillars of a more positive and innovative society. Back to the future, without forgetting the experience of the past, we as individuals that have a responsible role in a more demanding society are giving a central contribution to a better world. This is the most interesting challenge we face the next years. We must be able to have success in such a tremendous challenge. Today we are already the future. Our contract with the future must be supported by the values of freedom, social justice and development. This is the reason to believe that a new standard of Democracy, more than a possibility, is an individual and collective necessity for all of us, effective global citizens. Karl Popper is more than ever present the difference of this new world will be in the exercise of the capacity of the individual participation as the central contribution to the reinvention of the collective society.

Society must be able to be the real Platform of a more entrepreneurial attitude

Our contract with the future is not determined by law. It is effectively constructed by all the actors in a free and collaborative strategic interaction. The Reinvention of the world is the reinvention of its people and institutions. An active commitment, in which the focus in the participation and development of new competences, on a collaborative basis, must be the key of the difference. This is purpose of the New frontiers. Our contract with the future must also be developed by a permanent flow of ideas. Ideas demand a permanent colaboration between the different actors, with the strategic challenge of reinforcing the central competences of society and qualifying them as the unique ways of cre-

ation of value and modernity. Europe is facing also a unique opportunity. The ideas must be the difference of a proposal we must be aware that is the best key for our ambition of excellence. Our contract with the future demands also a commitment of partnership in order to build a real Strategy of Confidence in the implementation of the different policies. The focus on Innovation and Knowledge as the drivers of creating added value with international dissemination is a unique challenge that may be the answer to a new way of interaction between those who have the responsibility of thinking and those that have the responsibility of producing goods and services.

Our contract with the future demands also a new competitive attitude. We need people to have a new challenge. Society must be able to be the real Platform of a more entrepreneurial attitude, centered in new areas of knowledge and new sectors of value. In a Modern and Active Society, the key word is Co-creation. To promote a dynamic and active creation process involving each citizen is the big challenge for the next years in the future. The future is the right place to say we are in, we want to be in, we want to be the right solution to the global problems we face. Our contract with the future must be a confidence in Excellence. Excelence must be the new competitive advantage of a new society of the Ideas pushed by the enablers of Modernity, Added Value and Excellence. A very clear idea that suits the big challenge that our society really faces and that requires new answers for different questions. The act of global participation in such a demanding society is an exercise of commitment between the individual creativity and the collective cooperation. This is our contract with the future.

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In the past, the slower pace of life would forgive our flawed way of managing things, todays fast pace of life does not

- The world we live in today has become high pressure and very fastpaced to the point where we need to optimize our way of managing our lives. People often forget that many of the objects we use daily are less than 100 years old. The car started to replace the horse in the early 1900s. Another landmark in our history is the first commercial flight that took place in the early 1930s only 80 years ago. The first television broadcast was only 70 years ago. Apple released its first personal computer 30 years ago. Mobile phones started to become widespread in the mid to late 90s at the same time as the internet and this is only 15 years ago. Smart phones started appearing around the year 2000 and now tablets are starting to become more popular. Can you imagine your life today without these inventions? In the last 100 years, society has changed faster than ever before. In many ways, these inventions have optimized and accelerated mobility, flow, and quantity of information. The accelerated rate of change has accelerated the pace of life in an exponential way and this trend is expected to continue in the coming years. Aside from the many benefits these technological advances have offered, many have become overwhelmed and are unable to manage this very fast pace of life. This is true on at least two levels. Firstly, the pace of life is affected by the compression of time. In the past one would send a letter and the exchange would take weeks. Today, we send an email which is received within five minutes and a response is often expected within the hour, considering that the

email reaches the desired person anywhere and at anytime. This means that the pressure on people has increased due to the elimination of the time constraint. Since people are no longer protected by the time it took for things to get done, they are exposed to increased pressure which can lead to an array of anxiety disorders if mismanaged. Today one needs to replace the old time constraint with the recognition of ones own limits. Secondly at a more cognitive level, since more is done in less time, many find themselves overwhelmed by an accumulation of unaddressed thoughts that spillover and create difficulties such as insomnia, heightened stress levels, panic attacks, and burnout which are demobilizing. A good analogy of todays society is the 80s game of Tetris. This game consisted of the simple task of aligning blocks horizontally without gaps. When such a line was created, it would disappear, and any block above the deleted line would fall. As one progressed through the levels, the game would accelerate and this simple task of aligning blocks would eventually become unmanageable. Being in-tune with the environment we live in is a statement that is not new, but there is a big distinction that one can make between today and 100 years ago. 100 years ago, many aspects of the environment in which people lived in were relatively constant with a very slow rate of

change. Today the rate of change is so rapid that the environment has become a very dynamic variable which leads people to seek other constants or anchor points to have a sense of security and stability. The illusion of obtaining full control over the outcome of things is a popular and an enticing belief to have. It gives short-term reassurance but results in long-term anxiety and helplessness as one realizes that their constant, their lifesaver in a sea of turbulent water is in reality not there. Another important constant that also became a variable is the sense of family, community and the wider social network. A solid family and community structure creates an interdependence which leads to the creation of a mutual support network. When people find themselves abroad away from their families this support network is very loose and sometimes even inexistent. This can lead to a feeling of loneliness and insecurity. Looking at the characteristics of society today, one quickly realizes that most people are not equipped to deal with todays reality. In the past people naturally adapted to their environment over time, today people need to actively adapt and re-adapt to the continuously changing environment. To accelerate adaptation one needs to constantly expose themselves to the environment, so as to be up to date with its fast changing characteristics as well as to accept its features. Having discrepancies

between the environment and your beliefs will result in an anxious state caused by this incoherence. Being in-tune with the environment also means developing skills that improve our management of life and therefore improve our quality of life. One such skill is learning to manage our thoughts. A thought is just a thought nothing more, nevertheless, a thought can have a significant effect on our emotions whether it is true or not. This is why it is so crucial to learn to evaluate thoughts, to see if these thoughts are true or false, important or not. Not all thoughts deserve our full attention; many thoughts do not deserve any attention at all. Learning to filter and let go of thoughts allows us to streamline our thought process which allows us to function in the fast pace world. Just as we prioritize and filter thoughts we also need to do the same with daily tasks while taking into account the amount of time we have at our disposal as well as other constraints and limitations. This way we can defuse a significant part of the pressure we experience. In the past, the slower pace of life would forgive our flawed way of managing things, todays fast pace of life does not. When managing ones environment and self well, one feels empowered and confident which leads to feeling secure and stable. This way, one becomes the constant and is able to live optimally in the rapidly changing environment of our time.

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Three years after the launch of the WINE IN MODERATION program and the commitment to deliver the WIM message across Europe, the EU wine sector has made recognized progress in implementing this ambitious contribution to the EU Strategy to support Member States in reducing alcohol related harm. The objective set in 2005 was to unite the wine filire in a project that would make a significant and measurable contribution to the reduction of alcohol related harm, and yet secure the future of the wine sector through the development of responsible business. The recognition that the EU Wine sector had an important role to play in reducing alcohol related harm led to a cooperation between the three major wine growing and making areas; -producers (Copa-Cogeca), independent growers (CEVI) and winemaking companies (Comite Vins) - formulated in the WINE IN MODERATION program launched in 2008 as the EU Wine sectors commitment to the European Alcohol & Health Forum, which has recognized it as a significant contribution. Taking the more than 3 million people involved in the growing and making of European wine, the WINE IN MODERATIONART DE VIVRE program builds on three main pillars; education about moderate and responsible wine drinking, self-regulation of commercial communication and development and sharing of science based information. There are two key underlying aspects to the WIM program; it is based on the principles of the European wine culture which is inherently moderate and linked to local gastronomy, and it respects local and regional culture and is implemented in line with this. This adaption to national culture has the effect of giving WIM much greater relevance and impact in each area. However the need for consistency across the Europe has also been respected. The creation of a single WIM Common Message ensured that the principles of WIM were correctly interpreted as the basis of each local program. The three support pillars were developed as independent, but interlinked, tools which could work at different speeds according to the national needs. Thus, WIM ART de VIVRE provided an educational tool based on the key message of: 1. Savour the wine you drink : understanding the distinctive flavours of your wine, but never exceeding the guidelines for low-risk moderate consumption of wine (or other alcoholic beverages)

European wine culture is inherently moderate and linked to local gastronomy, and it respects local and regional culture
2. Wine drinking requires maturity : consumers under legal age should not drink 3. Women should avoid drinking wine and other alcoholic beverages during pregnancy 4. If you drive avoid drinking. If you do drink never exceed the legal BAC (blood alcohol concentration) set for drivers And, of course, consult your family doctor in case of any doubts or questions This key message is included in all WIM brochures, presentations, education and information. In Portugal, where there are 125 wine sector signatories of WIM, it is projected to tourists within the audiovisual presentations when visiting the winery. In Italy it included in a pilot project in cooperation with educational authorities in Verona. Commercial communication and promotion must be responsible and honest and should not induce consumers to

abuse wine. The WIM WINE COMMUNICATION STANDARDS are self-regulatory guidelines which members of WIM are committed to abiding by. In Spain they have become the official standards monitored by Autocontol, responsible for all types of consumer advertising. The importance of understanding the science of moderation and abuse cannot be underestimated as a tool. The commitment of WIM is to provide balanced, science based information which will allow consumers to make informed decisions. The WIM WINE INFORMATION COUNCIL (WIC) unites a pool of scientific experts under the chairmanship of Prof. Nicolai Worm (Nutritionist) and the coordination of Germanys Deutsche Weinakademie. The specific role of WIC is to gather evidence-based scientific information on wine and share all best-practice initiatives which have been shown to successfully promote responsible drinking patterns. An example of the cultural adaptation in implementation can be seen in France, where the WIM program appears within the VIN ET SOCIET program launched by the sector to educate and familiarize consumers, restaurants and retailers about moderation and responsibility The WIM Implementation Report 2008-2010 details the results of the first 3 years of the program, reporting on the work carried out in the 9 countries where WIM has been introduced. The statistics cite that 100% of the relevant European organizations are committed to working together on this first pan-European program to promote moderation and responsibility, over 250,000 visits have been made to the WIM Website (over half a million page views) and there have been over 30 Million consumer impacts. While the achievements to date are important they are just the first steps. On November 24th, the creation of a nonprofit association Wine in Moderation Art de Vivre (WIM) Aisbl, with the support of the national constituencies, took WIM into a second phase. Despite the particularly difficult economic conditions, the wine filire is committed to build on the recognized success of WIM and meet the challenge of securing the central place of wine in European culinary and cultural heritage, reinforcing its legitimate contribution across Europe WIMs future actions will focus on consumer communication, through traditional methods, through wine tourism, on labelling and in the new social media to establish moderation as a culture and responsibility as a trend in support of the EU Strategy to reduce alcohol related harm.

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Sports programs are a cost-effective way of bringing together marginalised and hard-toreach groups
- Is there a risk of sports taking a back seat in 2012? Amid pressing issues like the global financial crises, food insecurity in developing countries and climate change, what role will sports play? As CEO of the Sochi 2014 Winter Games, my experience has shown me that the significance of sports grows in parallel to broader challenges. Sport is a fundamental way to lower social barriers and promote cooperation among nations. Indeed, over the past year, there were several examples of sports being recognised and used at an international level as a tool for peace. The world community recognises sport as a universal language, which can be a powerful tool to promote tolerance and understanding by bringing people together across boundaries, cultures and religions. Its intrinsic values such as teamwork, fairness, discipline, re-

spect for the opponent and the rules of the game are understood all over the world and can be harnessed in the advancement of solidarity and social cohesion. In 2011, a significant agreement was reached between 193 countries across the world to cease hostilities and observe a truce during the 2012 Olympic Games in London. And in 2012 we will see the UEFA European Football Championship in Poland and Ukraine, the first major footballing event held in Eastern Europe since Yugoslavia hosted the European Football Championships in 1976. This will boost cooperation between the two countries and help solidify their close relationship across borders. Similarly, holding the FIFA World Cup in Qatar in 2022, although a relatively small country with a population of just 1.7 million, will help build bridges of understanding between the Middle East and the rest of the world. Advancing social goals through sports is something we are driving in my home town of Sochi, Russia, as we prepare to greet the world community at the next Winter Games. In 2011, for the second year in a row, we organised a camp for Generations For Peace, an international non-governmental organisation founded by HRH Prince Feisal Al Hussein of Jordan. We welcomed delegates and Peace Pioneers from countries around the world, including Georgia, Serbia and Zimbabwe, and provided training modules for peace-building and working with youth. Volleyball, basketball and football skills were taught as a

means of strengthening cooperation, teamwork and solidarity between groups. In addition, I was proud to present the Sports Event for Peace of the Year to the East Africa Cup, a sporting event that brings together young people from 11 to 16 years from eight countries in East and Southern Africa. Through the organisation of football, volleyball and wheelchair volleyball tournaments, the East Africa Cup engaged young people in their communities and provided information on topics such as HIV-AIDS and conflict resolution. Building on this success, Sochi will host the 6th Peace and Sport Forum in 2012. And we will welcome Generations for Peace, which operates local sports-based projects in crisis regions around the world. These are both important platforms that strengthen cooperation between governments, sports regulating bodies, international organisations, the private sector and international sports champions. But much more can be done to advance social goals through sports. For example, the private sector should become more involved by increasing their corporate social responsibility initiatives in this area. In line with the concept of smart philanthropy, it is not the amount of money or resources provided by a corporation but instead having a clear strategy, with measurable results and feedback. This is often best carried out by working with local associations that have relevant experience with social, cultural and geographical factors in order to maximise the results of a peace through sports program.

Furthermore, and building on the successes of the 2011 European Year of Volunteering, I encourage governments and international organisations to ensure that volunteerism remains high on the political agenda in 2012. Sports volunteering in particular can transform the pace of peaceful development between communities, transcending language, cultural and financial barriers. It is a unique and rewarding experience for individual volunteers that they can apply in their future personal and professional life. Certainly, the next twelve months will be busy for Sochi 2014 volunteers, who are reaching out to the 2012 Winter Youth Olympic Games in Innsbruck and partnering with the London 2012 volunteers to help with the organisation of the Olympic and Paralympic games. Lastly, I would highlight that investing in peace through sports programs makes sense even in economically challenging times. Sports programs are a cost-effective way of bringing together marginalised and hard-to-reach groups in a fun and supportive environment, communicating key messages and integrating them into their community. The founder of the International Olympic Committee and pioneer of the modern Olympic Games, Pierre de Coubertin, noted on his travels through England in 1886 how organised sport can create moral and social strength. It is in this spirit that we prepare for Sochi 2014. And, I hope, one that others around the world will embrace.

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As 2011 draws to a close, there are growing signs that Asia is becoming caught up in the global slowdown, dashing hopes that the regions economies would decouple from the prolonged recession in Europe and Americas lackluster recovery. Chinas export growth is slipping, owing to faltering demand in Europe, which has surpassed the United States as Chinas largest foreign market. Indeed, Chinas manufacturing activity is contracting for the first time in almost three years. Reverberations are already evident in other emerging Asian economies that depend on exports both to China-based manufacturers and to the US and Europe. Decoupling did not occur in 2008, when exports accounted for about 45% of panAsian GDP (excluding Japan) and every emerging country in the region experienced a sharp contraction in growth as world trade plummeted. Nor is decoupling likely today, because exports still account for about the same share of the regions GDP, and about 50% of these exports are still headed to developed countries. So the idea of decoupling appears to be a chimera. Even if the euro crisis is resolved, austerity in Europe, along with anemic growth or worse in the US, will mean a slowdown in export-dependent Asia. But Asias economies can still grow much faster than the developed West if they respond to prolonged stagnation by rebalancing their growth toward internal demand, especially household consumption. The good news is that these economies have substantial room for such rebalancing, as well as the policy flexibility to accomplish it. The share of consumption in GDP in these economies fell from more than 60% in the early 1980s to less than 50% today. In China, it is less than 40% far below the norm for the worlds major economies and for other Asian economies at a comparable stage of development despite nearly 7% annual average growth in Chinas per capita consumption in recent years. The Asian economies are home to 3.5 billion consumers, but their share in global consumption remains small much smaller than their share in global GDP. China alone accounts for 20% of the worlds population, nearly 11% of global GDP, but only 3% of global consumption. China and most of the other emerging Asian economies have strong government balance sheets the GDP shares of their budget deficits and public debt are relatively small. As a result, they have the fiscal firepower to boost consumption in order to mitigate the effects of declining exports. True, many local governments in China are saddled with debt, some of which may need to be restructured. But the central government enjoyed a 28% increase in rev-

enues over the last year, and has more than $3 trillion in foreign-exchange reserves. In addition, the moderation of inflationary pressure as a result of slower growth and cooling global commodity markets will allow Chinese and other Asian policymakers to shift their focus from containing economic overheating to rebalancing growth. In China, where inflation is falling sharply, monetary policy has already begun to ease. Even with significant policy support, however, most of the smaller Asian economies Taiwan, Thailand, Singapore, and even South Korea will not be able to replace external demand with internal demand to the same extent that China can. So, even with rebalancing, exports will remain a significant determinant of their growth, and China is already their major export market. That is why Chinas rebalancing is so important not only for its own economy, but for all of China-centric Asia. Intra-regional trade flows have surged during the last decade, but they have been concentrated in parts and components that go into finished products assembled in China for export to developed countries. With depressed markets in the developed world, intra-regional trade in the future will depend more on exports to satisfy Chinese domestic demand. Again, there is cause for optimism: Chinas imports from Asia have been growing faster than Chinas exports to the US for the last several years. China responded to the 2009 global slowdown with dramatic fiscal and mone-

China responded to the 2009 global slowdown with dramatic fiscal and monetary stimulus, which fuelled a rapid investment-led recovery at home and throughout Asia
tary stimulus, which fueled a rapid investment-led recovery at home and throughout Asia. Investment, mainly by local governments and state-owned companies with easy access to bank financing, soared to more than 45% of GDP, and, consistent with Chinas long-run urbanization strategy, was concentrated in infrastructure and property-development projects. Over time, much of the expansion in capacity will be absorbed, as an estimated 15 million people move from rural to urban areas each year over the next decade. But, for now, many investment projects are not yet generating enough income to service their debts (some of them never will), and there is significant spare capacity. Confronted with another global slowdown that could depress its export markets for years, China needs to boost consumption even as it cools investment. And it needs to so in ways that do not rely on excessive credit expansion. Chinas 12th Five-Year Plan, which will take effect in 2012, recognizes these policy imperatives and calls for several measures to fulfill them, including wage increases for urban workers; income support for rural households; enhanced access to capital for small businesses, especially in the underbuilt services sector; and more generous social-welfare programs, which would reduce Chinese households high levels of precautionary saving. All of these measures are already underway, and Chinese leaders appear committed to embracing a new growth strategy that will benefit both Chinas population and Asia as a whole. The Asian economies should not count on being able to decouple from the economic woes of Europe and the US in the short run. But there are promising signs that, over time, the advanced countries difficulties will trigger a healthy, if belated, shift in Asias development strategy, with China leading the way.

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With economic globalization and the advent of a multi-polar world, China and other emerging countries are clearly set to play much more important roles not only in 2012, but in the coming decades. As Chinas economic power and influence in the world economy have increased following the financial crisis of 2008, the idea has been floated that China and the United States should co-lead the world under some sort of G-2 arrangement. But such a G-2 framework is not consistent with Chinas independent foreign policy, nor with the general trend towards wider dispersion of geopolitical power within the international community. Although Chinas senior leadership will change this year, this position will not change. Indeed, when Chinas Premier Wen Jiabao visited Prague in May 2009 for the 11th China-European Union summit, he explained that China is opposed to the G-2 concept. It is Chinas firm intention never to seek hegemony, nor to support global domination by a small minority of countries. What China does believe in is deepening cooperation with all of the worlds major regions. Consider Europe a splendid and time-honored civilization, and now a major player on the world stage. The progressive deepening of EU integration has brought dynamic vigor to the European continent; despite Europes current difficulties, it still boasts extraordinary overall strength and in-

ternational influence. China has always supported European integration, and hopes that the EU will become a pillar of international order. In the wake of the global financial crisis and the eurozones sovereign-debt crisis, China has bought government bonds, made direct investments, and sent business delegations to Europe. During Spanish Prime Minister Jos Luis Zapateros visit to Beijing in April 2011, Wen reaffirmed Chinas willingness to continue purchasing Spanish government bonds as a further demonstration of our support for Europes efforts to emerge from its crisis. Moreover, Chinas huge market and labor pool have created important opportunities for Europe. In this new multi-polar era, China and Europe must work together, and they are now at a critical moment if they are to deepen their cooperation. What we do to share opportunities, meet challenges, and pursue development will be directly relevant not only to our own peoples welfare, but also to the worlds future. China-EU cooperation will be essential to maintaining global peace and stability. We share a commitment to resolving international issues through political means, and both sides have already played a constructive role in addressing global challenges such as climate change, terrorism, and the proliferation of weapons of mass destruction. The parallel launch of Chinas 12th FiveYear Plan and Europes 2020 Strategy has also helped to deepen our cooperation.

It is Chinas firm intention never to seek hegemony, nor to support global domination by a small minority of countries China-EU cooperation will be essential to maintaining global peace and stability
China and Europe worked together after 2008 to prevent a global financial meltdown, oppose protectionism, and promote reform of the international financial system, thus facilitating worldwide economic recovery. China also takes its relations with the US very seriously. Indeed, our bilateral relationship is among the most important in the international community. That relationship has gone through some rough patches since diplomatic ties were established in 1979, but, overall, it has continued to grow and benefit both sides. Today, China and the US share more interests than ever, and there are encouraging prospects for still broader cooperation. When President Hu Jintao visited Washington, DC in January 2011, he and President Barack Obama agreed to build what Hu referred to as a China-US cooperative partnership based on respect and mutual benefit. They reaffirmed their deference for each others sovereignty and territorial integrity, and reached agreements on major strategic issues, including efforts to strengthen cooperation in the Asia-Pacific region and in multilateral institutions, and to respond jointly to regional and global challenges to peace and stability, for example, on the Korean Peninsula. China is the worlds largest developing country; Europe is the largest bloc of developed countries; and the US is the largest single developed country. Together, we account for nearly a third of humanity and two-thirds of the world economy. As the three major global powers, China, the EU, and the US must strengthen their cooperation, and must work with the rest of the world to face the complex international issues that challenge us all. Together, we must shoulder the great task of upholding world peace and promoting common development. While China is committed to its own independent foreign policy, it cannot achieve development in isolation. Likewise, the world cannot develop without China. Hu once said that the twenty-first century should be a century of peace, development, and cooperation. China is willing to join with the EU, the US, and the rest of the world to realize the potential of a truly harmonious world.

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Unlike the first generation of Asian women leaders, who gained power primarily because of their familial connections, the emerging crop are strong, confident, and ready to take on the challenge of leading their nations on their own terms
Indias Indira Gandhi, Sri Lankas Sirimavo Bandaranaike, Pakistans Benazir Bhutto, Sheikh Hasina of Bangladesh, Corazon Aquino of the Philippines, and Megawati Sukarnoputri of Indonesia these women leaders dominated South and South East Asia for much of the past four decades. Each belonged to a special class of women whose husbands or fathers were their countrys recognized founding father or longstanding political leader. But, while their dynastic links brought them to power, they were not the sole factor keeping them there. When first elected, none of these women had any serious professional or political qualifications. For some, this shortcoming was seen as an advantage, enabling some of them to project an image of innocence and purity, even martyrdom, as they stood in the place of their deceased husbands or fathers. None was particularly focused on a womens agenda (at least not in their first terms in office), and studies show that rural women did not fare particularly well under their rule. But something very different emerged in Asia in 2011. We still have women leaders who came to power at least partly because of their family ties. But they now seem to use their positions with far more confidence in putting women and their concerns squarely at the center of their agendas. And perhaps more importantly, a growing number of women are reaching for the highest political echelons in their countries by dint of their political talents alone. Sonia Gandhi, the Italian-born wife of former Prime Minister Rajiv Gandhi and daughter-in-law of the late Indira Gandhi, became Indias most powerful woman for dynastic reasons but she has consistently demonstrated that she is a shrewd behind-the-scenes political operator. For her, the main task at hand is to strengthen the Congress Party, which in early 2011 she was elected to lead for an unprecedented fourth term. But she has also expended considerable energy on promoting women, particularly their representation in politics. Indeed, she pushed

hard in backing Pratibha Patil to become Indias first woman president. Similarly Sheikh Hasina, Bangladeshs prime minister, who carries the mantle of her assassinated father, has become a keen advocate of development issues, with a special emphasis on women and their needs. That agenda, missing in her first term, has dominated her current period in office. In East Asia, too, women are on the rise politically. Park Geun-hye, daughter of Park Chung-hee, President of South Korea from 1961 to 1979, is now one of the two likely candidates to succeed President Lee Myung-bak. While Park derives some of her power from her family pedigree, she has proven to be an astute and seasoned politician one who climbed the Grand National Partys leadership ladder over the last two decades to emerge as a national figure. Her role in championing an inclusive agenda for women provides a new lens through which to assess the power of Asias new leaders. Compare Park to Corazon Aquino, who, when elected President of the Philippines, famously remarked that she was simply a housewife, not a professional politician or an experienced leader. It was clear that voters elected her because she was the widow of the slain opposition hero Benigno Aquino. By contrast, no one would deny Parks professional credentials. She is taken seriously more for her own experience and political power than

for her family connections. Even in Japan, a similar change is in the air, but with no hint of dynastic trappings. Yuriko Koike, a former defense minister and national-security adviser, is one of the countrys most powerful figures; indeed, she could become Japans next prime minister. Unlike many other leaders of her Liberal Democratic Party, Koike has no real family connection to any major political figure. Instead, her standing reflects her unique political talents: an academic background in Arabic studies (she studied at Cairo University) and fluency in English, which give her a global perspective that most of her male colleagues lack. Koike is not the only Asian woman without family ties forging a political career that may lead to the top. Indonesias Sri Mulyani Indrawati, a former finance minister and currently a managing director of the World Bank, is often mentioned as a leading presidential candidate in her country. Indeed, a party has been formed specifically to entice her to run for president in 2014. In Taiwan, Tsai Ing-wen, is making a sustained and powerful challenge to the incumbent president in the election due in January 2012. Having helped to draft Taiwans special state-to-state act that regulates relations with China, and then having headed the countrys Ministry for Mainland Affairs Council, she is well positioned to manage the thorniest issue any Taiwanese leader will face: the relationship with China.

Another newcomer to political leadership is Yingluck Shinawatra, Thailands Prime Minister. Clearly, one reason she swept to power this year were her ties to her brother, exiled former Prime Minister Thaksin Shinawatra, who controls the countrys strongest political party. But she made it clear during the campaign that she is her own person, a seasoned business leader with appropriate professional degrees. Then, of course, there is the Burmese Nobel Peace Prize laureate Aung San Suu Kyi. The daughter of the founder of independent Burma, Suu Kyi is now engaged in perhaps the most delicate task of her remarkable political career trying to engineer a true democratic transition from decades of military dictatorship. Unlike the first generation of Asian women leaders, who gained power primarily because of their familial connections, the emerging crop are strong, confident, and ready to take on the challenge of leading their nations on their own terms. Their followers appear to see in them harbingers, unjaded by history, of the change for which their societies are clamoring. At a time when, despite economic growth in Asia, there is much social and income inequality, as well uncertainty about the durability of peace in the region, the desire to find fresh solutions to problems has given a powerful boost to women leaders. They are poised to take their seats at the top table and perhaps to change its shape.

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They work primarily alone, unaware that there are many like-minded individuals in other countries working on similar issues, sharing the same values and ideals for a free, open and tolerant society

- O ver the past ten years, significant efforts have been made globally to identify and understand the root causes of extremism. In Europe, national governments and the EU institutions have worked closely with counter-terrorism experts, law enforcement agencies, faith-based groups and Muslim community leaders with a view to understanding and preventing the phenomenon of home-grown extremism and radicalisation leading to terrorism. It has become increasingly evident that recruitment, particularly - but not exclusively - of young people, is often the result of longer-term, and sometimes undetected, radicalisation processes. The factors contributing to radicalisation are manifold, complex and often not completely understood. Extremist propaganda diffused through the media and particularly the internet, the preaching of radical individuals within communities and the use of religious-based arguments to foment violence are contributing factors. Additionally, discrimination and marginalisation combined with the lack of access to liberal religious and other rolemodel figures contribute significantly by creating a fertile ground for extremism to spread and have an impact. Within this context and as part of our work at the European Foundation for Democracy (EFD) in Brussels, we have come across a number of inspirational individuals - European citizens of Muslim and/or immigrant backgrounds - concerned by the polarisation of the broader debate across Europe. They are frustrated by the attention

and importance that both policy makers and the media continue to give almost exclusively to self-appointed spokespersons and radical elements who claim to represent Muslim communities or to speak in the name of Islam. They feel equally threatened by the spread of extremist narratives within their own communities and witness first-

hand the way in which radical individuals and group pressure contribute to the emergence of virtual parallel societies in which a different set of values, freedoms and laws apply. In these societies, we often see that the rights of individuals are sacrificed in the name of the rights of cultures. Some of these individuals work against

forced marriages, others on honour crimes and honour violence; some are journalists working on radicalisation issues and others are local government officials, film-makers, academics and researchers. But they are all Europeans who firmly believe in the principles enshrined in the EU Charter of Fundamental Rights: respect for the rule of law and fundamental rights. All are united in their desire to change the current status quo, as they see firsthand that the results of various government policies on integration over the years continue to fall short. The disconnect between government and citizens, particularly those within immigrant communities, has grown ever greater thus creating a gap filled by extremists, who are connecting with and offering an alternative to disaffected youth in societies right across Europe. It is through working with these people that it has become increasingly evident that voices such as theirs are not being heard mainly because they lack the means and access to policy makers, media and funding sources. All of them are active in their respective capacities in their own countries but they work primarily alone, unaware that there are many like-minded individuals in other countries working on similar issues, sharing the same values and ideals for a free, open and tolerant society. They represent a significant opportunity as a resource for European and national authorities in their efforts to fight and prevent radicalisation within immigrant and Muslim communities. They are true to the democratic values on which Europe was founded and they need to be supported, nurtured and empowered to ensure that they can develop into the alternative role models they are and inspire their peers within their communities. They are passionate about playing a stronger and more effective role in countering extremist narratives and rhetoric that for too long have been perceived as the de facto views from their communities. They are a tremendously motivating group of people and deserve to succeed. It will take a few years for their efforts to bear fruit though I am in no doubt that this will occur in the not-too-distant future. With the support of institutions such as the European Commission, these individuals could make a hugely valuable contribution by mobilising individuals within their communities to help them take control of their lives and those of their families and friends. The successes of empowerment networks such as this surely benefit all Europeans.

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- It is my belief that hatred has become as global as positive activism. Globalisation has made it easier to hate as well as to love. The fringe has become viral, and localised parochialisms are in danger of becoming new inter-connected pockets of the mainstream, through globally connected social movements. Though such movements heavily influence national political agendas, by their very character, they transcend politics. Social movements are defined as an ideas based phenomenon, are spread across societies and connected via loose networks, and are needed as part of the global culture to fight extremism. What is required are inter-connected democratic social movements akin to a democratic internationale to act as a truly global phenomenon, to create a global culture with which to fight extremism. But social movements are not new. It is simply that western societies have so far not actively helped to create organised demand on the ground for democratic cultures, even sensitively, because it has not been defined as a good cause. Social activism is the idea that I believe will carve out not merely political change, but civilisational change in the near future across the world. Muslim-majority nations happen to be those that currently sit on the precipice of such change. Spreading posi-

Social activism is the idea that I believe will carve out not merely political change, but civilisational change in the near future across the world
tive ideas and combining them with providing social services must be recognised as a good cause in itself, just as building schools and hospitals is. Policies, resources and focus must be invested in developing real demand for democratic culture onthe-ground in the country, and it is this that sets these trends for the region, Egypt, and in the country that most needs this new trend for democratic youth activism, Pakistan. Indeed, for the last three years, my team in Pakistan has been slowly working on beginning this process with as broad as possible a collation. The recent success of the Arab uprisings indicates that a new phenomenon is on the rise. Egypt has tended to set the trend in Arab social movements. In the 1950s and 60s, Egypt witnessed the rise of Arab Socialism, which then spread across the MENA region and beyond. The 70s saw a decade in transition. The 80s and 90s in Egypt were decades of Islamism which again spread across the region and beyond. The 2000s saw a decade in transition. 2010s and 20s could usher in a new era of democratic aspirations in Egypt, which could also spread outwards. To get it therefore right in Egypt is crucial, and perhaps a pre-requisite for this to succeed is for democratic youth to go through a period of opposition facing Islamist regimes. Though these Arab uprisings were necessary for the chances of a pro-democracy social movement to emerge; though they were indigenous; though they were not sparked by extremists; though they focused on internal reform and not external conspiracies, the uprisings themselves are no guarantee that the call for a democratic culture will take root in the form of a trans-national social movement. Transitioning from this loose coalition to a transnational social movement will require some effort, and some civilisational not political leaders to make this effort. But, without these uprisings, even this would have been impossible to contemplate.

Unless a general agreement can be agreed upon in developing societies about the civilisational direction they wish to see their nation headed in, these societies will be unable to agree on the fundamental legitimacy of any system, and conflict will continue. It is my belief that the best civilisational consensus that human kind has so far arrived at is the democratic culture. The democratic culture is necessarily more than merely elections. It entails a respect for human rights and the freedoms we take for granted. Without freedom of speech, there can be no free campaigning for votes; without freedom of belief, there can be no free right to form parties and so on. Our challenge is to help sow the seeds of these movements, and to make a transition from their political goal or removing leaders to one where they strive in the long term in their societies to create buy-in for the civilisational choice of democratic culture. We can only move forward when all forms of extremism are challenged by activists from across the political spectrum. I believe it is important for pro-democracy and anti-extremism activists to build effective trans-national networks in order to counter the threat posed by all forms of extremism. These networks should promote liberal democratic values and an inclusive sense of citizenship, enabling people from all backgrounds to feel accepted with their rights and responsibilities respected and acknowledged.

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The rabblerousers and their supporters must be proven to be nothing more than a temporary blot on the political landscape
New Europes online editor examines, as the Eurozones financial crisis looks set to continue and even deepen during 2012, why citizens are responding by voting for parties that seemingly only apportion blame and offer quick-fix solutions. During only the past five years, ten murders have been blamed on a neo-Nazi underground cell in Jamel, Germany and, just this year, far-right extremist Norwegian Anders Behring Breivik went on a killing spree, shooting dead 69 people at a youth camp near Oslo, Norway, in July. The far-right is rising again in Europe, with a new generation of young, web-based supporters embracing hard-line nationalist and anti-immigrant groups, a recent study by British think-tank Demos has revealed, after the group persuaded more than 10,000 followers of 14 parties and street organisations in 11 countries to fill in detailed questionnaires on Facebook. Of course, there are many precedents for such behaviour in Europes history, with Adolf Hitlers exhortation of the German people to remove the Jewish problem being

the most horrifying during the past century. Now as then, a deep cynicism concerning governments and their established leaders would appear to be turning (mostly young men) against traditional societys norms and values, and such direct action is further accentuated by more generalised fears focused on cultural identity, with immigration particularly the perceived spread of Islam the leading concern. Emine Bozkurt, a Dutch MEP who heads the anti-racism lobby at the European Parliament, told the BBC: "We're at a crossroads in European history. In five years'

time we will either see an increase in the forces of hatred and division in society, including ultra-nationalism, xenophobia, Islamophobia and anti-Semitism, or we will be able to fight this horrific tendency." And, while the mass-killer Anders Breivik was disowned by the parties with which he was affiliated, a police investigation into his contacts highlighted the Europe-wide online discussion of anti-immigrant and nationalist ideas. There can be no doubt that, during the Eurozone crisis, there is a growing prevalence of anti-immigrant feeling, which manifests itself in particular in suspicion of Muslims, and parties that support anti-immigrant and Islamophobic ideas and ideals have spread beyond their traditional established strongholds in France, Italy and Austria to the traditionally liberal Netherlands and Scandinavia, and now have significant parliamentary blocs in eight countries. Other nations have seen the rise of nationalist street movements such as the English Defence League (EDL). On one side are political parties such as France's National Front, a significant force in the country's politics for 25 years, which is seen as being a realistic challenger in next year's presidential election, while on the other are semi-organised street movements such as the EDL, which struggles to muster more than a few hundred supporters for occasional demonstrations, or France's Muslim-baiting Bloc Indentitaire, best known for serving a pork-based "identity soup" to homeless people. According to Demos, youth was a com-

mon factor of the almost 450,000 supporters of the 14 organisations involved in the survey, nearly two-thirds were aged under 30. Three-quarters of respondents were male, and more likely than average to be unemployed. So, what can be done? While the poll appears to indicate that economics play a minimal role, analysts nevertheless believe that the Eurozone crisis is likely to boost recruitment to anti-EU populist parties that are keen to play up national divisions even in traditionally liberal countries, such as Sweden and Finland, the Sweden Democrats and True Finns are growing ever-more popular, and there is a resurgence in support for the radical right in the Netherlands. Simply, this author believes that the only way to stem the rise of parties such as the British National Party and their ilk, which have seemingly ever-more candidates, increased media attention and rising number of votes, and are capitalising on the disengagement, disenfranchisement and fear that many voters in more deprived communities feel, is by progressive politics the rabblerousers and their supporters must be proven to be nothing more than a temporary blot on the political landscape, one that can be eroded only by strict adherence to values such as honesty, decency and non-violence on the part of those who vehemently (and rightfully) oppose this disturbing trend. Historys lessons demand that this is the path that we take or else the new year, and the years to follow, may see brutality and persecution on the streets of Europe that it was long hoped had been banished forever.

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- Hoo-hah! Yet another year wrapping up -- time for some Energy Crystal Ball Gazing for 2012: The Scent of Fear! There are ongoing issues: oil prices in the context of global recession and tensions in the Middle East, the Russo-Ukrainian gas tango and gas supplies to the EU as Russia tightens its grip on Ukraines transit pipeline. Oil prices for Brent crude in 2012 are likely to remain around $100 a barrel or a little lower as the world economy slows unless there is a major conflict in the Middle East or elsewhere in the world that disrupts supply, and as the dollar becomes stronger compared to the euro the price of oil will weaken. Manouchehr Takin, Senior Petroleum Upstream Analyst with the Centre for Global Energy Studies (CGES) in London, told New Europe that, in general, oil wouldnt fall that much. The average probably would be something about $100 a barrel because if it falls to $90 and below to $80, Im sure OPEC ministers would get together and they would do something to reduce (oil supply), Takin said, adding that oil would also not climb above $110-120 a barrel because of the economic slowdown around the world. Fadel Gheit, a senior energy analyst at Oppenheimer in New York, told New Europe that oil prices will be flat to slightly lower, barring any conflict in the Middle East or any event that will disrupt supply. We think that there is ample supply and, believe it or not, led by non-conventional oil production growth in North America. And the resumption of drilling and production in the Gulf of Mexico will accelerate in 2012 to 2013-2014, Gheit said. He cited an outlook from Oppenheimer, saying that governments in OPEC fear the Arab Spring may also spread to their countries. He said increased social unrest in most oilexporting countries, especially in the Middle East, has forced many governments in OPEC to increase social spending, which we think added about $10 to the $70 per barrel price considered fair by OPEC only two years ago. London's Seven Investment Management Limited Director Justin A. Urquhart Stewart told New Europe that political elements could increase oil prices. Syria is the biggest concern at the moment because if that turns unstable and thats next to Saudi Arabia, then we could be having all sorts of other problems and if Iran has any issues with Israel trying to do something about their nuclear plants, he said. But leaving those aside you should actually see an oil price at these levels, maybe slightly lower even if the world economy is slowing up lower and slower is most likely. Chris Weafer, chief strategist at Moscows Troika Dialogue, told New Europe that he

Increased social unrest in most oil-exporting countries, especially in the Middle East, has forced many governments in OPEC to increase social spending

sees an average oil price for 2012 at $120 p/bbl for Brent. That said, he expects to see the price drop back towards $90 p/bbl in the first quarter before recovering strongly in the late second quarter and through the second half of the year. The oil market in 2012 will face a conflict between the fear of demand decline and escalating political stability risk across the Middle East and Iran. The reason for the first quarter weakness will be because of deterioration in Europes economic outlook and the fear that a recession in the eurozone might have a knockon effect to Chinese economic growth. That will raise the fear that China oil import demand will fall. But, I believe that China will be able to manage a soft landing for its economy in 2012 especially because the ruling elite need to maintain stability ahead of the leadership changes in the autumn, Weafer said. He said he expects that there will be a steady increase in actual instability and the fear of even greater instability across the Middle East and the Gulf countries. The return to prominence of the Muslim Brotherhood in Egypt has clear stability concerns for Israel. Syrian violence certainly has the capacity to get much worse and to be a destabilising factor in the region, Weafer said. Iran faces parliamentary elections in late April and that may again be an opportunity for a second attempt for a Persian

Spring. Crude oil prices recently surged on threats by Iran to block the Straits of Hormuz. Gheit said any such action would trigger a severe response by the West that could destabilise the Iranian regime. Tehran needs higher oil prices to offset the impact of declining export as a result of declining domestic consumption which, coupled with the lack of capital spending and economic sanctions, could cut Irans exports by half in seven years, the Oppenheimer analyst said. Things are changing in my view in the right direction or more positively than we had anticipated a few months ago in terms of supply and availability of oil. But in the meanwhile, we have increased tension around the world because of economic sanctions in Iran, because of threats by Iran to retaliate by blockading the Straits of Hormuz, which we dont think is very likely at all, Gheit said. But what happens if NATO, the US or Israel attacks Iran? Nobody is going to attack anybody in my view unless there is clear provocation, Gheit said. If Iran is attacked, obviously Iran will try to desperately retaliate by doing something that will hurt whoever attacks it, but I dont really think that they have the means to exact any revenge or to retaliate, he said. But it will definitely increase tension and would boost oil prices significantly and that is going to

sink the economy even further. Regarding gas supplies, Russian gas monopoly Gazprom has ruled out signing up to new commitments on the supply of natural gas to Ukraine before the New Year. Gazprom has been holding out the prospect of significant gas price cuts in exchange for a full control over Ukraine's gas transportation system. Essentially, Gazprom has no other reasoning to lower the price for Ukraine unless the country provides some benefits or preferential treatment for acquisition of Ukraines gas transit system. I see almost zero chance of a material conflict, i.e. one that results in a disruption of gas flows, between Moscow and Kiev, Weafer said. Ukraines bargaining position is much weaker today as a result of the opening of the Nord Stream pipeline and the conviction of former prime minister Yulia Tymoshenko. The danger for Ukraine from Nord Stream, and especially as Russia presses ahead with plans for South Stream is that it might end up with a very underused rusting pipeline and a significant fall in income, Weafer said. The Tymoshenko case has soured UkraineEU relations and makes it difficult for Kiev to pursue its previous ambition to create a closer economic and political relationship with Brussels. The Troika dialogue chief strategist said that he believes that a new deal over the ownership of the Ukraine pipeline will be struck in 2012. I expect Gazprom to acquire a 25% stake and the EU (via some corporate or state structures) to also acquire a 25% stake. The deal mechanism will allow Gazprom to eventually raise its stake to 50% over time. Allowing Gazprom a 50% stake upfront would not be politically acceptable to Ukrainians, Weafer said, adding that the deal will be part of a new deal between Russia, Ukraine and the EU to invest in upgrading the capacity of the Ukraine pipeline to take both more Russian gas and also gas from Azerbaijan via the Black Sea link. That should then kill off both South Stream and Nabucco. This is the sensible outcome and least expensive option, which is also the flaw in the argument, he said. Overall, there are many areas now around the world where there is a lot of uncertainty. There is disruption in Kazakhstan, for example. Unrest in Kazakhstan is threatening oil supply so that could definitely push oil prices higher, Gheit said, referring to unrest in the former Soviet Republic where at least 13 people were killed and another 86 were wounded in clashes between striking oil workers and national police. Basically oil prices will continue to reflect global tension and there is no shortage of global tension. There is no shortage of oil but there is no shortage of global tension either. Whoooaaaa!

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- So much to do and so little time. I am sure this is a problem for many people, but with environmental issues I am acutely aware of the urgency of the need to put things right or at least to stop things getting dramatically worse. Our wildlife is disappearing before we can discover the full richness of it, we are using up precious resources at rates that will leave future generations deprived, and we are using increasing areas of land to feed our growing populations. And the climate is changing ever faster. Fundamental changes in our attitudes and behaviour are needed quickly. It is not surprising that I keep hearing clocks ticking! When I became Environment Commissioner, five years seemed a generous period of time to tackle Europes problems, but now that the halfway marker is in sight, I am very conscious of how much there is left to do. I am proud of what we have achieved to date, particularly this year's biodiversity strategy, which is designed to halt and reverse the decline in the EU's natural heritage, and the Roadmap to Resource-Efficient Europe, which plans out a route to long-term sustainability. But now we need to prioritise the areas where we will focus our attention. Resource efficiency has been much in the spotlight this year. It's a broad theme that encompasses all material and natural resources, from food, timber, and biodiversity in the widest sense, to energy, metals, soil, water, minerals, our atmosphere and land. All of these are being used up at an unsustainable rate. There is now a clear need to move to a green economy,

decouple economic growth from the use of natural resources and stimulate markets through both regulatory and market-based instruments. The private sector will have a key role to play, delivering green growth through trade, investment, research and development, innovation and resource efficiency. If we can help them to be more efficient in their use of resources it will quickly pay off: a one percent gain in resource productivity can save European businesses up to 23 billion a year and could help them create 150,000 jobs. The agenda that we are pursuing internally in the EU, with our Europe 2020 strategy for smart, sustainable and inclusive low-carbon growth and our recently adopted Roadmap on Resource Efficiency, is particularly important in this connection. It is an agenda for jobs and growth which deserves to be taken up with enthusiasm by leaders everywhere to solve our economic problems. Resource Efficiency isn't a choice it's a necessity, around the globe. The only choice we really have is whether to change our ways now, or wait until we are forced to. Not much of a choice really. One essential resource that deserves special attention is water, and I am making that my priority for 2012. Nearly all member states suffer water stress, with shortages and droughts, or flooding, and climate change is making the situation worse. Concerted action at European level could actually save 40% of our water through improvements in efficiency. We need to tackle production losses, leaks in supply systems, and unnecessary waste by industry and consumers. And this is a world-wide issue - the recent 'Resource Revolution' report by McK-

We cannot accept that leaders decide to postpone important decisions or "try again next year"...with the world environment, that is a luxury we cannot afford
insey estimates that eliminating water leakage in towns and cities is worth $167bn by 2030. My other big priority for the rest of my mandate is to improve implementation of our environment legislation. The EU leads the world in setting high environmental standards and we now have the measures in place to ensure that they are met. However, performance in applying those laws varies considerably across the EU, and our environment suffers as a result, with poor air quality in many cities and biodiversity under threat. We also miss opportunities: if member states just applied the current rules on waste legislation, then they could make cost savings of 72bn per year and create 400,000 jobs by 2020. As I try to look ahead, I realise more and more the price that our environment and economy pays for short-term decision-making in finance, industry, and politics. Major environmental challenges require a sustained effort over a long period, yet politics has a horizon only as far as the next election. Parliaments have been reluctant to take action that will really last and benefit future generations. But people are beginning to realise that the current financial and economic crisis was caused by an extreme form of short-term thinking that we can no longer afford sustainability is coming back ! World leaders will get their chance to show long-term thinking and vision at the Rio+20 Conference next June. This is the United Nations Conference on Sustainable Development, a unique opportunity for countries around the world to address today's interlinked economic, environmental and social challenges, and to work together to achieve ambitious goals for sustainable development. The EU set out its hopes for the conference in a recent submission to the UN Secretariat. For the green economy theme, we are focusing on the sustainable management of key natural resources like water, land, and biodiversity, on helping countries to build capacity, and on devising indicators to measure progress towards a greener economy. The conference needs to agree on a number of global actions in these areas to complement bottom-up actions at national level. We cannot accept that leaders decide to postpone important decisions or "try again next year". We have had our share of tough decisions while establishing our European Union, and there have been critical moments when the only way to break deadlock was to "stop the clock". But with the world environment, that is a luxury we cannot afford.

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- With the end of the year approaching, it is time to take stock, look ahead and hope for a better future. At a global level, 2011 will go down on history as the year we realised we could no longer take energy for granted. With the United Nations poised to launch the International Year of Sustainable Energy, we can already foresee that in 2012 discussions will focus on clean energy and sustainability. As we get closer to 2020, the need to cut down on energy expenditure mainly by increasing energy savings is becoming even more pressing. If we look even further, we should already start laying the foundations for smart cities which are able to maintain and increase the level of comfort of their inhabitants while significantly cutting energy. But the 20-20-20 reductions target is nothing new. In fact, that clock started ticking long ago. However while the deadline may seem well into the future, it is just eight years from now. Will the EU be ready to achieve a 20% cut in emissions of greenhouse gases, a 20% increase in renewables and a 20% reduction in energy consumption in eight years time? If so, how? The future lies partly in technology. In this case, however, there is one important caveat. The technology able to contribute to energy efficiency gains is not a thing of the future; it already exists. We just have to implement it. The energy citizen In the quest to empower consumers to control their energy consumption, we need to provide them with the device which will allow them to effectively understand their use patterns and energy expenditure. As Dr. Sarah Darby, re-

search fellow at the Environmental Change Institute at Oxford University in the UK said, we are saying goodbye to the energy consumer and encouraging the energy citizen. While consumers will be the bearers of change, if we are to achieve a safe, secure, sustainable and affordable energy supply for Europe regulatory support is paramount. Europe will not unleash its full energy potential until Member States modernise the energy infrastructure and take concrete actions such as accelerating smart metering roll out. The reasoning is simple: the achievement of all of these ambitious energy and environmental policy goals relies on the grid. The transformation into a truly smart grid depends on inserting intelligence to those sections that need it the most. Right now, the distribution network is blind from the substation to the home or building, yet everything that will allow us to achieve those 20-20-20 targets depend on having information and control exactly there: micro-generation, electric vehicles, and demand response The Energy Efficiency Directive proposal is a good start, but it needs to be more concrete in the areas of metering and consumer information. The proposal says that energy efficiency and consumer benefits should be taken into consideration when establishing minimum functionalities and deploying smart meters, but this is still too vague. European policymakers should take a practical approach and remove ambiguity. Legislation ought to ensure that the smart metering systems installed in Europe have the appropriate functionalities to promote and achieve energy efficiency increases. Otherwise, the maximum benefits from deploying this technology will

Legislation ought to ensure that the smart metering systems installed in Europe have the appropriate functionalities to promote and achieve energy efficiency increases

never be achieved. That is the beauty of smart metering, that as long as the system is equipped with the appropriate functionalities, benefits occur all along the value chain, from the generator, the network to the consumer. Regulators should continue pressing for technology which enables people to take an active role in controlling their consumption. Latest figures from a VaasaETT Global Energy Think Tank study on pilot projects around the world indicate that the display of almost realtime energy consumption data on inhome devices led on average to an 8.7% reduction in energy consumption. Lower but still significant reductions of 5%-6% on average were achieved through enhanced, more informative bills and access to usage data on websites. The different types of dynamic pricing mechanisms used in the pilots and rollouts have all shown that energy loads up to 16% can be shifted (peak clipping) for the benefit of consumers and utilities. To make a real difference when it comes to reducing consumption and empowering consumers, the European Par-

liament and the Council should make the necessary changes to make the energy efficiency directive truly effective. Firstly, there should be a clear definition of smart metering and the functionalities that benefit consumers and facilitate energy efficiency. The current EU legislation put requirements in place for Member States with regard to smart metering, but lacks a clear definition of what exactly is needed. Also, based on the information gleaned from the VasaaETT study, the requirements for consumer feedback on energy use and costs need to be sharpened. Feedback should be, as the EU regulators recommend, from two sources, but one of these should be direct feedback in the form of an In-Home Display, that gives accurate and timely information on energy consumption and costs. All these changes will help towards meeting the 20-20-20 goals. If reducing energy consumption is one of our New Year resolutions, we need the necessary tools to keep them warm all year round and not just when such pledges are in season.

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Both the European Commission and the European Parliament have been very active this year in terms of energy policy. Numerous own initiative reports and Commission communications or legislative proposals were presented, debated and some, like REMIT, also adopted. Currently work is continuing on the energy efficiency directive (more than 1800 amendments have been tabled!), the infrastructure package, external energy policy, offshore oil and gas drilling, ITRE will draft an opinion to MiFID, we are still awaiting the energy roadmap 2050. Next year we expect communications inter alia on the completion of the internal energy market and on renewable energies. At the same time, with an ever increasing amount of EU legislation and EU regulation, we need to pay more and more attention to unintended side effects and interactions between EU rules as well as between EU rules and national rules already in place. Let me provide just two examples. The Commission, in its reply to questions raised by ITRE members on the impact assessment admits that the modelling exercises carried out in preparation of the [energy efficiency directive] (...) were not (...) conclusive regarding possible impacts on the price of ETS allowances and thus intends to further monitor the situation. Thus we know that increasing energy efficiency will reduce energy consumption - and thus reduce CO2 emissions - but we do not know to what extent this will in return have an impact on emissions prices under the ETS directive. Indeed, one model comes to the conclusion that the impact will be dramatic. But then, what does monitoring mean? Does the Commission intend to set allowances aside and intervene in the market? Would such a policy driven interference undermine the trust into the Commission and the market instrument the EU has set up? What is the primary intention of the Commission? Is it to lower CO2 emissions or to secure high revenues for Member states? Such doubts of course have a negative impact on investment decisions in the EU and should therefore be dispelled as soon as possible. The second example concerns the interactions between national policies and EU instruments. The ETS directive allows trading in CO2 certificates. Thus if a Member state reduces its emissions quicker than others, it may sell the surplus certificates to others. Thus the very successful and expensive German support scheme for renewable energies has helped reduce CO2 emissions in Germany - but, due to the tradability of certificates, not necessarily in the EU! In a global ETS

system, that the EU is striving to, such interactions will be even greater. I firmly believe that it will be essential in the future that the Commission pays more attention to such interactions also with national or even global instruments in the impact assessments. Another question concerns the regulatory depth of EU legislation. From the current debate on the draft energy efficiency directive (EED) it is clear that Member states are not willing to accept mandatory targets and many also refuse to accept mandatory instruments. The debate on the EED is far from over of course and it is impossible to predict the outcome. But one option might be to rather impose binding targets and leave the choice of instruments to Member states in accordance with one of the main guiding principle of the EU: United in diversity. One of the central questions remains the one of our future energy mix. I am certain the energy roadmap will also touch upon this subject. Commissioner Oettinger, during his visit in the ITRE committee on 23.11.2011 made it very clear that increasing the target for renewable energies under the current treaty would require unanimity between the Member states - and that this was not realistic given the large differences in their energy mix and the different potentials. Gas then is said to play a vital role in the transition to a low carbon economy, replacing coal and oil. But without tapping the potentials of shale gas, this is likely to further in-

Consistency in energy regulation, a vision of the future that leaves room for new technologies, an open and rational debate on energy issues are key to ensuring an affordable and reliable energy supply in the future
crease our energy dependence. This leads me to another topic: Diversification. Diversification is not only about energy sources but also about supply routes. Now everybody has heard about Nabucco. The project has been advocated at EU level for many years and still encounters many problems, not least the unresolved conflict about the status of the Caspian Sea. But few are aware of the fact that we are to preclude the import of oil from Canadian tar sands. Alberta has however the second largest oil reserves in the world. In terms of security of supply such a ban would be nothing less than a fiasco. The completion of the internal energy market also encounters numerous problems that we need to tackle. The new Commission proposal on energy infrastructure for example foresees a dramatic reduction in time for authorisation procedures. Indeed, quite often they take more then years, far too long given the many challenges we face, not least the inclusion of intermittent renewable energies. Furthermore many Member states have yet failed to implement the third internal market package and thus deprive their citizen of numerous additional rights enshrined in this package. Parliament therefore presses the Commission to closely monitor the situation and, if necessary, to open infringement procedures. Consistency in energy regulation, a vision of the future that leaves room for new technologies, an open and rational debate on energy issues are key to ensuring an affordable and reliable energy supply in the future. Energy policy will surely contribute to climate protection but it is by no means a subtopic of climate policy. Security of supply issues and an affordable energy supply for example are core elements of energy policy at all levels. And their importance will grow in the future.

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Not only is energy efficiency the sensible thing to be focusing on at times of economic hardship thanks to the savings on energy use and energy bills, but it is also a key to stimulating the economy through investment and job creation
- One of the defining challenges of our century is how to achieve new and better economic growth which significantly reduces social, economic, ecological deficits, in particular by cutting resource use and GHG emissions. The EU has gone some way to reduce its GHG emissions, but this is not sufficient to tackle the deficits. It is importing over half of its energy and wasting about a of the energy it consumes. This comes with considerable costs: every year, the EU spends over 350bn on energy imports while wasting more than 110bn worth of energy [Note: EU is halfway]. The EU decided that by 2020 it would get 20% of its energy from renewable sources and save 20% of its energy. Binding targets help focus policy makers attention and shape investment behaviours: they can be true engines of economic growth. The European renewable energy sector with its binding target and comprehensive regulatory framework currently employs over 1.5 million people, annual investment in the sector averages 35bn and represent over 60% of investments in new power installations. This contrasts with the energy efficiency sector: with no binding target and a piecemeal regulatory framework, the sectors growth potential remains largely untapped and the EU is currently on track to achieve less than half of its energy savings target. In an effort to address this situation and make the case for an EU energy policy that puts equal weight on reducing energy use, energy efficiency stakeholders decided to join forces. They created The Coalition for Energy Savings , a gathering of 23 business, professional and environmental organisations. The Coalition believes that stepping up energy efficiency policy to deliver substantial energy savings is long overdue, and sees the new Energy Efficiency Directive as a unique opportunity for Europe to bring its 20% energy saving target within reach, putting it on course for a sustainable, efficient and renewable energy vision for 2050.

Indeed, the Energy Efficiency Directive proposal, which tackles many of the barriers that stand in the way of energy efficiency, is the right place to do so. But as the Coalitions assessment of the energy saving impact of the proposed efficiency measures, the Gap-o-meter, shows, the Directive as it stands would only close part of the remaining gap to the energy savings target (delivering up to 114.5 Million tonnes of oil equivalents (Mtoe) while the gap is 190 Mtoe). The Coalition believes that closing the gap is possible and that the energy savings target can be achieved if measures that will unlock investments are strengthened and binding national en-

ergy saving targets that provide predictability and investment certainty are set. There is often talk of energy efficiency being the low hanging fruit of the broader energy debate. While it is true, non-market barriers, like split incentives and perceived risks of upfront investments prevent energy consumers to pick the fruits Publicly organised financing and regulatory interventions have proven successful to overcome such barriers and leverage private investment. Efficiency obligations on energy suppliers as proposed in the EED generate stable investment and guaranteed energy savings by creating a market for energy efficiency

services and energy efficient goods. They are already being successfully implemented in 5 EU Member States, 3 States in Australia and 24 States in the US. The Coalition will build on its unique political and technical credibility provided by the cross-cutting nature of its membership to convince decision makers of the many benefits of energy savings and support policy makers in the design of policies that will save energy while stimulating growth. Throughout the legislative process around the Energy Efficiency Directive, The Coalition will organise a number of high-level events notably on the employment benefits and financial incentives of energy efficiency policies. It will act as a catalyst on behalf of its EU wide Members by raising awareness and building capacities to stimulate targeted regulatory action at EU level. Not only is energy efficiency the sensible thing to be focusing on at times of economic hardship thanks to the savings on energy use and energy bills, but it is also a key to stimulating the economy through investment and job creation. Earlier this year, the European Commission estimated that achieving the EUs 20% energy savings target by 2020 would generate financial savings of up to 1 000 per household every year, create up to 2 million jobs, and reduce annual greenhouse gas emissions by 740 million tonnes.

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As we all reflect on what we've learned in 2011, let me share with you three things I've witnessed this year, and why, even today, they give me hope for the future. First, I've seen some of the amazing people in Europe. A new generation of world class entrepreneurs, full of new ideas to make our lives better, fairer, more connected. People who know there are no limits to how modern technology can be applied; people who aren't afraid to try out innovation in every area, and see failure not as a deterrent, but as a way to learn. Meeting those people really inspired me. With a resource like this, I know we can innovate our way out of the current crisis. Second, I've seen some of the many ways that applying new technology can make our lives better. Helping people save money through instant access to price comparisons, and benefit from tailored, on demand service. Helping you to improve your public administrations whether it's crowdsourcing to tell your council about a pot-hole, or finding out about and accessing government services. And helping health and

social care - from social media platforms to show wheelchair accessible buildings, to technology that helps people with severe motor disabilities interact, communicate, and lead independent lives. Third, I've been all around the world, and seen how powerful and flexible a tool Information and Communications Technology can be; flexible enough to help people of all backgrounds. In Nairobi, Kenya, in some of the poorest slums in the world, I saw computers offered by private initiatives opening new horizons for the most disadvantaged children. People without bank accounts using mobile phones to transfer money cheaply and easily. Software used to train rural nurses - in a country plagued by medical shortages, HIV and malaria. All of this made me hopeful that Information and Communications Technology can give everyone, everywhere, the tools to change their lives for the better. Every person is unique, with unique hopes, and unique aspirations. But whoever you are, whatever you do, remember: you can achieve what you want to achieve. Technology does not achieve that dream for you, but it can help you get there. Because Information and Communications Technology gives you not just

Information and Communications Technology can give everyone, everywhere, the tools to change their lives for the better
new products, and new gadgets. But new tools to share, to refine, and to market your ideas. In every walk of life, any field you want. Not just information and entertainment, but education, transport, environment, or supporting democracy itself, you name it! I know that people have fears for the future. For the younger generation, the fear that the future will not offer high-quality jobs. While others may fear other things as they age - the prospect of isolation, loss of function, loss of independence. You can use Information and Communications Technology to overcome all these issues. To build future growth and jobs. And to develop smart care and independent living solutions, solutions capable of coming to market and making people's lives better. Next year I will be continuing my work to ensure we get this right. I want to deliver real innovations for the health and social care sector. I want to open up Europe's public sector, to unlock the treasure trove of public data. And I want to make the most of our single market. Both so our entrepreneurs can market to 500 million without dealing with 27 rulebooks. And so our citizens can use their mobile devices wherever they travel in Europe, with fair roaming prices. Because I want to put the powerful tool of Information and Communications Technology in your hands: so you can help change the world for the better. Even in this difficult time, we should not shield ourselves from the future, but embrace it, and invest in it. So wherever you are, whatever your ambitions in life, I know you can find the tools to achieve them.

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- Everyone is asking what's trending in the tech world, what the next big thing is. How technology will change in the year ahead and how the world will shape up in the next 12 months. Traditionally, this is the time of the year for your annual prediction fix. Well, not this time. Well, Ive got news for you. You know what's coming, because YOU are the most advanced and most powerful of any gadgets, the most amazing piece of technology. Year 2012 is going to look a lot like year 2020 or even 2050, and that's because YOU and I will still be around, maniacally trying out all sorts of gizmos. Like it or not, this is going to happen. The question is how much you are willing to blend with this kind of technology. Your phone is already called a smartphone. Not because it's particularly smart, but because the term smartphone sounds a whole lot better than computer. Can you imagine carrying a computer in your pocket or trying to make a phonecall using the computer? No one wants to drop his computer but scratching a phone's screen is something else. And, no one wants to wait for 45 seconds for the computer to boot up and make a call, but you've probably used Skype on your phone to call someone, right? Funny thing is, the dial-tone that you hear every time you call someone on Skype is actually a hoax. It's a pre-

recorded digital audio file planted there for no other reason than to make you feel like you're using a real phone it's just an illusion that everyone buys because it makes them feel better. Now that you know your phone is a computer, it's time to realise that this particular computer is nothing more than a gateway to the internet. It might be powerful enough to do all kinds of crazy things like 3D graphics and play games like Angry Birds and send messages on Facebook and read real-time news on Twitter, but think about it. How smart, really, is your phone without a connection to the internet? Smarter than a 500 brick, say? With the introduction of the iPhone 4S and Siri intelligent assistant, Apple has made it crystal clear as to what the role of smartphones will be. Siri is a piece of software that the user talks to in order to get things done. Instead of typing and looking into maps, Siri tracks your current position via GPS and answers questions such as Is there a Greek restaurant nearby? Although Siri is still available in beta and not advanced enough to answer more complex enquiries, this is the first mainstream example of humans connecting with machines using the most natural of all tools, the thing we all carry with us, our voice. Be sure that more companies will follow this example and start loading their devices, be it a smartphone or whatever, with software as smart as or even

Your digital ego will access everything you relate to it's up to you to decide if you are going to enjoy the ride or fight back
smarter than Siri. Theres no question about it. In the meantime, all sorts of gadgets will start flooding onto the market, measuring and monitoring the human body. Stuff like Fitbit, which counts steps and sleep patterns, Withings WiFi Body Scale, which tracks weight and body fat and monitors blood sugars. It's this kind of technology and connectivity thats going through your smartphone to the internet and beyond. It's the status updates on Facebook, the Likes and the photos combined with physical locations and soon other vital data from the human body. This huge amount of data will be analysed, put together and will represent our digital ego, which can be enhanced every day. Your house will know when you're about to arrive and if you need a cold or hot shower. Breakfast served will be high in carbs to kick off the day. Same with lunch, because your agenda will be full of meetings until eight in the evening, while at nine you are celebrating three years with your significant other. Be prepared to argue with your house about the shower's temperature. Get ready to eat veggies rather than your favorite rib-eye steak. In the distant future, all things will be connected to the network your shower, your food, your car, a pen, a bottle of water. Your digital ego will access everything you relate to it's up to you to decide if you are going to enjoy the ride or fight back with the most extreme technology ever, namely yourself. Between now and then, tech stories from Google, Microsoft, Apple, Amazon plus a few shiny new products and services will keep you busyand it all starts with a phone.

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While the debt crisis has clearly dominated headlines over the past year, from a technology point of view Europe saw its fair share of milestones and breakthroughs which have the potential to greatly contribute to the European economy. In 2011, the first two satellites in Europe's Galileo global positioning system (GPS) were successfully launched, marking the start of a high-precision positioning system independent from the US and Russia, which could bring in an extra 90 billion to the EU economy over the next 20 years. Also, the take-off of cloud computing, a technology solution that gives everyone access to scalable computing power and resources, was given a boost by Vice-President Kroes, who promised to make Europe cloudactive. In January 2012 Vice President Kroes is expected to come back with her cloud computing strategy for Europe. This strategy is eagerly awaited since research estimates that cloud computing in the EU could generate over 400,000 new SMEs, reduce the unemployment rate and increase GDP. But for that to happen, remaining barriers need to be removed. So in light of this potential- how will technology feature on the 2012 European agenda? I see the use of information communication technology (ICT) by governments during 2012 as a key factor in achieving European economic growth. As the largest consumers of IT services in Europe, government agencies and departments can lead by example. Europe is already reaping some of the dividends

of a decade of ICT investment, with ICT now driving 25% of GDP growth in the European Union (EU) and 50% of EU productivity growth, and seven of the ten most innovative ICT economies in the world operating here in Europe. In February 2011 a prominent study from the Centre for Economics and Business Research estimated that cloud computing could contribute 736 billion to major EU economies over the next five years. Through a smooth transition to the cloud the public sector can provide a blueprint for private sector counterparts, showcasing the cost savings, flexibility, productivity, and new means of communication and collaboration offered. Special attention here must also be paid to SMEs. They account for 99% of businesses and 80% of employment in the EU, but only use cloud services for 25% or less of core business applications. Establishing suitable framework conditions for the creation of a strong cloud eco-system for start-ups and SMEs in Europe will provide them with access to state-of-theart software and data storage, originally only available for large companies. In light of the potential for cloud technology to boost the European economy, the continued deployment of broadband infrastructure across Europe in 2012 is crucial. McKinsey & Company estimates that a 10 percentage point rise in broadband household penetration increases a countrys GDP from 0.9% to 1.5%. Likewise, a quantitative analysis conducted by the OECD indicates that the expansion of broadband significantly improves labour productivity. One of the reasons for this is remote working- where

Citizens want to be in charge of their personal data and we at Microsoft certainly support that
companies can source the best workers regardless of their location, whilst workers find it easier to balance their work and family life. And for those in the creative industries, ultrafast internet access through broadband will offer greater opportunities to generate content which can ultimately become a source of income. As such, the European Commission report on Member State progress in developing national broadband strategies that meet the coverage and speed targets defined in the Europe 2020 Strategy, due in 2012, will be a significant benchmark to assess future economic growth opportunities in Europe. Overall, I want to highlight the amazing changes to our everyday lives that have been introduced by the ICT sector. Taking just one example, in the last twenty years the mobile phone has progressed from a clunky means of making a phone call on the move, to second generation devices which could take photos and access media content, to the third generation which incorporated broadband high speed internet access, to the fourth generation which handles voice calls as just one data stream among many. During this technological journey, sectors have found innovative ways to bring their benefits to the widest audience- such as mobile banking and mHealth applications, while the devices themselves can improve the way we enact with our environment through RFID tags. Indeed, at the current rate of sales growth the expectation is that smartphones will be in use by half of the European population by the middle of 2012. I see a similar journey for cloud computing, though the trust and awareness factors relating to new technologies must be addressed. Data protection is among the key concerns. Microsoft believes that strong data protection and data security will build up consumer trust and therefore greatly benefit ICT growth in general and the uptake of cloud computing in particular. The EU Data Protection Directive revision, to be presented in January by Commissioner Reding, will go a long way to answer privacy concerns raised by consumers and businesses alike. Citizens want to be in charge of their personal data and we at Microsoft certainly support that. As history has shown, opportunities can emerge in times of crisis. My hope is that 2012 will be the year that the potential benefits ICT innovations can bring to society will be recognised and realised as a critical solution for sustained economic growth in Europe.

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Advances in our society during recent years have been largely boosted by great leaps in technological innovation, especially in the ICT sector. The technological race has proved to be catalytic for economic development and has transformed traditional business models; in addition, it has influenced our lives extensively. Certain technological breakthroughs from recent years will continue to drive business transformation during 2012. Indicative examples are cloud computing now entering a more mature phase the proliferation of broadband, the extensive use of smart devices gathering real-time data from the field, and the evolution of Human-Computer interaction involving new and innovative means and devices, such as mobile phones and TV sets. When brought together creatively, these innovations provide new applications that empower users in various domains and contribute to a more connected, digital world. One could consider these technologies as enablers for a leap forwards. They offer an opportunity to gather, transmit, store and manipulate vast amounts of heterogeneous data in a way that was previously unthinkable. But it is the utilization and efficient handling of these data that can give business insight, create substantial value and refuel technological advancements in a different context. Based on enabling technologies, the efficient use of data can make our world smarter, leverage knowledge and offer completely new opportunities in almost every individual economic sector. Nowadays, digital data is everywhere. Every single company is able to produce and store enormous quantities of information that exceed in size even the biggest traditional libraries. For instance, the healthcare industry and financial institutions are among the heaviest producers of digital data. Moreover, individuals are creating user-generated content at ever-increasing rates; it is worth mentioning that 35 hours of video are uploaded to YouTube every minute, while over 35 billion photos are added to Facebook each year. On the other hand, digital sensors, smart appliances and other end devices gather data from the field ceaselessly; manufacturing (e.g. production & supply chain) and utilities (e.g. smart metering) are indicative examples. Last but not least, public administrations and agencies are sitting on an unexploited wealth of digital information created every day through their transactions with citizens, as well as internal operations. Despite the vast amount of data being produced, human beings have definite limitations regarding their ability to combine them to create meaningful information and consequently turn diverse information into knowledge. Thus, being able to automate gathering, storing, aggregation and combination of huge quantities of data and then use the results to perform deep analysis will become a key dif-

ferentiator in everyday business. It can substantially improve decision-making, minimize risks, and unearth valuable insights that would otherwise remain hidden. In order to reach this target, a whole new world of technologies and practices is already present and continuously evolving; new forms of file systems and non-relational databases, distributed storage and computing techniques, in-memory computing, content aggregators and mush-ups, business intelligence and analytic tools, as well as deep vertical business knowledge are joining forces to tame the beast of large-scale data. It is hugely fascinating how many technological breakthroughs and discrete elements are needed as prerequisites, in order to effectively exploit all these data and produce meaningful results. But the results are compensation for the effort. Consider for example the new paradigm of computational biology: analyzing and understanding the patterns of the human genome is expected to soon offer new inroads to predicting diseases and providing a personalized, preventive and well focused treatment to every individual. Another impressive example comes form the energy domain: real time sensing and analysis of various parameters from the electricity network, as well as data related to weather conditions and consumer demand, will allow the seamless integration of Renewable Energy Sources into micro-grids. On the other hand, in the retail sector, segmentation and analysis of customer data from various transactions could provide valuable insight into price optimization, cross selling, location-based marketing etc. Regarding Europe, apart from any private initiative, the largest and perhaps the most valuable source of information is the public

Unveiling the prospects of large-scale data utilization represents a major challenge for the years to come. It constitutes an untapped potential for the European economy, which can provide substantial competitive advantage, both for its businesses and for its administrations
sector itself. Public data are produced at all levels of government national and at EU level. Examples are geographical information, statistics, weather data, data from publicly funded research projects, and digitized books from libraries. This information has a significant, currently untapped potential for re-use in new products and services, and for efficiency gains in administrations. In fact, Europes public administrations are sitting on a goldmine of unrealized economic potential: the large volumes of information collected by numerous public authorities and services. According to the Commission, opening up this resource could amount to an economic gain of 40 billion per year. In order to exploit this potential, the Commission has launched an open data strategy for Europe. The strategy is three-fold: firstly the Commission will lead by example, opening its vaults of information to the public cost-free through a new data portal. Secondly, a level playing field for open data across the EU will be established. Finally, these new measures are backed by the 100 million which will be granted in 2011-2013 to fund research into improved data-handling technologies. Through these initiatives, it is expected that the public sector will gradually undertake the role of content provider, while more and more private initiatives will emerge to carry out the role of service provider based on public content. When this comes true, it will have a remarkable impact on the overall e-Government landscape, transforming business models and the value chain of G2B and G2C services. I strongly believe that unveiling the prospects of large-scale data utilization represents a major challenge for the years to come. It constitutes an untapped potential for the European economy, which can provide substantial competitive advantage both for its businesses and for its administrations. It is quite impressive that even today digital data are not yet widely recognized as a key competitive asset by many business leaders and policy makers. As technology evolves and content is generated at even higher rates, more and more enterprises will understand the assets that they hold, or which they could have access to, and will adapt their strategy respectively.

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- Its after midnight and Im waiting to board my flight from Beijing to Brussels. Despite the hour, the airport is a hive of activity. All around me are people with smart phones arranging their lives at home, at work and on the move with the press of a button. Ive worked as an electrical engineer for longer than I care to reveal and have witnessed first-hand the ICT (r)evolution, but even I cant help but marvel at how far we have come from the first portable computers or mobile phones, or even since the world wide web emerged. In recent years, the world has seen a rapid convergence of media, models and behaviour governing the ICT sector, and the internet in particular. Indeed, 2012 is shaping up to be a big year for broadband. Super-fast and always on, broadband rollout has rightly been targeted by governments around the world as a way of boosting employment and economic growth. Broadband is an unparalleled equaliser of people, empowering everyone from village shop-keepers in Botswana to megafactories in Belgium. In a spirit of public-private partnership, ICT companies have invested time and effort into helping states realise their national broadband plans. The European Union recognised the importance of broadband a long time ago. It is a pillar of the EUs Digital Agenda which has set targets to be attained by 2020, such as broadband of at least 30Mbps for everyone. The developing world is also aware of the power of broadband and in many ways benefits from not having to deal with the diverse legacy systems in place throughout the industrialised world. My company, Huawei, is a technology company so our broadband initiatives make good business sense, but we also see it as an important tool for bridging the digital divide between the haves in much of the developed world and the have nots everywhere else. As a Chinese multinational company, it means more to us than simply exercising corporate social responsibility. Chinas rapid emergence as a global market player is living proof of the power of technology to create new opportunities. Just looking at our own portfolio, I see two products with the potential to be game-changers for the developing world in 2012: our Single RAN (radio access network) and IDEOS smart phone. Tele-

com operators in emerging economies struggle to afford the latest network equipment, but Single RAN is simple to install and maintain even in remote locations, and because it allows operators to receive and transmit across all mobile generations (2G, 3G and even 4G) it offers backward and forward compatibility for the price of one installation. We consciously developed a feature-rich but sub$150 smart phone (released in 2010) to stimulate take up in the developing world which, due to lack of telecom infrastructure, jumped straight to mobile broadband solutions. Access to low-cost smart phones has spearheaded a wave of innovative micro-businesses, micro-credit projects and apps. But providing the technology is only part of the contribution that ICT companies can make in emerging markets. I think we also have a responsibility to set up and run training programmes, like our Telecom seeds for the future scheme, which nurture talented youngsters in their quest for innovative solutions to their countries challenges. ICTs are also the backbone supporting e-government developments, which I believe are fundamental to bridging the digital divide. Through their policies, procurement and services, governments play a huge role in promoting development, in particular as a first adopter of innovative technologies that drive change. In todays financial situation, Europe and

Chinas rapid emergence as a global market player is living proof of the power of technology to create new opportunities
elsewhere will really benefit from the sort of streamlined internal processes and cost savings enabled by ICTs. There are many other hot topics for 2012 which can have a development dimension, too. Cloud computing, for example, is a paradigm shift in the notions of IT ownership. With broadband in place, any sized organisation, anywhere in the world can do serious computing tasks without expensive servers and IT teams. They just need a dumb terminal and something like our cloud office network solutions and the rest is downloadable or outsourced at a reasonable cost. Open source (OS), interoperability and standards are also important so that poorer countries dont get unfairly locked into a cloud silo, especially on the terminal/operating system side. Here, Im in favour of the market finding the most efficient solutions on a fair playing field along the whole value chain, backed by long-term vision and policy guidance from governments. Right now, the OS market is fragmenting between three main players. The Commission may seek industry agreements on a system of functional interoperability between these OS systems. Security is big challenge in the context of broadband, cloud computing and indirectly the digital divide. The benefits of ICTs and the whole notion of a future internet of things all linked up through sensors and smart mobile devices can come unstuck if security holes arent plugged. The internet is geographically agnostic so the developed world could find itself just as exposed. But Huawei believes that through regulation, standardisation and technological collaboration solutions can be found. I could also talk at length about the China/India equation and their emergence as major players in the IT world and how this works as a blueprint inspiring greater ICT literacy and take-up in that region and beyond. But thats perhaps something for a future contribution!

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December 1964, the Free Speech Movement (FSM) at the University of California at Berkeley was started by students who had participated in Mississippi's "Freedom Summer," and it provided an example of how students could bring about change through organisation. February 1965, the United States begins bombing North Vietnam. Students for a Democratic Society (SDS) organised marches on the Oakland Army Terminal, the departure point for many troops bound for Southeast Asia. April 1965, between 15,000 and 25,000 people gathered at the capital, a turnout that surprised even the organisers. Early 1976, several teachers ignored a law requiring that secondary education be conducted only in Afrikaans and were fired, prompting staff resignations. The students of one school after another went on strike. A protest march was organised in the black Soweto township just outside Johannesburg in June 1976. Over 20,000 students turned up to the march, always followed closely by police. December 2010, Mohamed Bouazizi self-proclaimed that there was police corruption and ill treatment in Tunisia. This sparked revolutions well into 2011 in Tunisia and Egypt, a civil war in Libya resulting in the fall of its government; civil uprisings in Bahrain, Syria, and Yemen, major protests in Algeria, Iraq, Jordan, Kuwait, Morocco, and Oman, and less in Lebanon, Saudi Arabia, and Sudan. The parallels between all three of these iconic uprisings are that the protests have shared techniques of civil response in sustained campaigns involving strikes, demonstrations, marches and rallies. All of them were based on a common ideal or symbol that led the way for organisation. All were themselves the epitome of the principle of freedom of expression. The difference among the three rests with the tools used to mobilise and organise. As the former two were based on word of mouth and media such as newspapers and TV, the latter one saw the largest uprising to have used the social media to communicate and raise awareness in the face of state attempts at repression and Internet censorship. It was truly a behemothic moment for the Internet, as its potential was finally reached. The Internet has become a phenomenon; a wave of untamed power that still has not revealed its full force. And, as people have increasingly turned to the Internet to conduct important aspects of their lives, the fundamental principle of freedom of expression with Internet censorship have become ever so delicately intertwined. The line between government censorship and respecting the right to ex-

press oneself online has become blurred on the cyberworld battleground. However, as Justice John Paul Stevens once said: ..the interest in encouraging freedom of expression in a democratic society outweighs any theoretical but unproven benefit of censorship. Activists are no longer only fighting for human rights on the ground, but now also online. Internet freedom goes beyond fighting for only a platform to freely express, practice one's faith, or peacefully assemble, but the benefits of the network itself grow as the number of users online grow. More and more now, governments are increasing their efforts to help and promote internet freedom throughout the world, but especially in regions where cyber dissidents and bloggers are being suppressed and persecuted. Take a look in Russia where prominent anti-corruption blogger Alexei Navalny was jailed for 15 days after taking part in anti-government protests over ballot-stuffing and other irregularities in the parliamentary elections. The Internet is currently on a trajectory of salvation. Although there are still paths that lead to dead-ends, users have found a way to band together, through new technologies and models that are used to connect to one another in a meaningful way. Even governments have seen that the users have become ubiquitous, and they themselves are the tools to take the Internet to a different path than it was heading. Ideas and ideals are now being formulated, discussed and defended online;

The fight will be for control versus freedom, and we will see more blurring of the lines between the protection and violation of fundamental rights online
there are no social barriers. The users have created online social structures that are being formed to provide solutions through true collaboration and creativity. This trajectory will continue in 2012 but with greater force. The scope of it will widen, bringing unprecedented change to our way of lives. With a year full of governmental elections globally, the Internet will provide a platform to influence our political outlook in the years to come through a steady stream of information; this may mean an increase in online organised and mobilised revolts. We will see less ground wars being waged on countries for the sake of imposing democracy. Although war will not be eradicated, governments, like the US and EU, which see the potential of making the Internet free in repressive locations, will use the citizens to instil democratic ideals and empower the people to demand for change. We may also see a major altering of our global economic system through online activism. The Internet will become the battleground of 2012; the new crude oil. The war will wage against the technology companies and repressive governments against online activists and supportive governments. The fight will be for control versus freedom, and we will see more blurring of the lines between the protection and violation of fundamental rights online. A friend told me that I was extremely fortunate to be able to share my thoughts and speak out without being restricted from any outside forces. Man's creative instinct yearns to break the chains of restriction on his very core of being. I have been given a key to unlock and free myself from these chains, and that is why my voice will join millions of others online speaking for those who have not yet been given a key.

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- The key instrument of the current EU legal framework for Data Protection and Privacy - the general Data Protection Directive 95/46/EC - was without any doubt a great achievement. It has an impressive history, building on human rights' protection. But, the truth is now that the Directive is starting to show its age. It is approaching its "final consumption date" and clearly not sustainable for a longer period. When the Directive was adopted in 1995, the Internet was still hardly visible and in any case far from its present highly dynamic reality. We now live in a world that is increasingly global, internet driven and dependent on the wide spread use of ICT in all areas of life, including the most private and intimate ones. That means that there is not only a need for modernisation, but also an urgent need to ensure that the principles of data protection continue to be fully effective in a changing world. "Effectiveness" is not only required in a legal sense, but also and most of all, in a practical sense: legal safeguards are only effective if they are applied in practice, and provide the required protection where it is really needed. Data protection has now become such a relevant factor for other important policy fields that it can somehow be described as a critical success factor for those other policies. Data protection plays a key role as a vital source of legitimacy, trust and confidence. It should be clear that this is not the time to reinvent data protection. It has been invented and is now recognised as a fundamental right in

The present diversity of national rules is not helpful for effective data protection, and even counterproductive
the Lisbon Treaty. Instead, much attention should be given to making data protection more effective in practice. This means a greater focus on implementation and enforcement of data protection principles and on the delivery of data subjects rights. A related concern is that some existing formal requirements should be simplified or abandoned, if they are no longer needed for effective data protection. Another point in this context is the need for greater harmonisation of rules across the EU. The present diversity of national rules is not helpful for effective data protection, and even counterproductive. A strong emphasis on the "internal market" perspective is not only good for international business and cooperating governments, but also for data subjects that increasingly move around the EU, and for the effectiveness of data protection in general. More effective data protection also requires that data subjects should be enabled to exercise their present rights more easily and should be given a few additional rights to protect their interests where needed. An interesting example is the right to require that personal data are deleted or transferred to another provider the "right to be forgotten" or the "right to data portability" which might be particularly useful in the context of social networks or other online services. Strengthening the rights of data subjects would also require a clarification of the situations where consent is required and the conditions that have to be met for valid consent. A lack of clarity about this often leads to a weaker position of data subjects, particularly in the online environment. Data controllers are now responsible for compliance with data protection rules, but in practice this often only leads to formal arrangements and responsibility "at the end" if something goes wrong. Instead, they should be mandated to be more active and to take all those measures which are necessary to ensure that data protection rules are complied with. This is referred to as the principle of "accountability" that would require data controllers to be able to demonstrate that they have taken all appropriate measures to ensure compliance. The principle of "privacy by design" would fit in the same approach: controllers should be able to demonstrate that appropriate measures have been taken to ensure that privacy requirements have been met in the design of their systems. Last but not least, supervisory authorities

should be given adequate resources and stronger powers of enforcement that are equivalent in all member states. They should also be allowed to use these powers more strategically, including the possibility to be more selective, in the case of substantial risks or systematic wrongdoing. At the same time, the conditions for "complete independence" should be equivalent in all member states. This means that data protection authorities should be free from any influence in the exercise of their duties. It is clear that complete independence is not inconsistent with the principles of democracy and legality. It only requires transparent procedures for appointment and annual reporting on activities, so as to ensure a structured dialogue between independent authorities and governments or parliaments. A legal framework that would provide all of the above elements would be much better in the position to deal with the challenges of new technologies and globalisation. At this stage, it is also important to clearly define the external scope of EU data protection law. The concept that EU law should not only apply when the responsible data controller is established in Europe, but also when EU consumers are "targeted" - regardless from where over the Internet - seems to attract more and more support. All this will be on the agenda of the European legislator further to a package of proposals from the Commission to be expected early in 2012. The results should be available by 2014, towards the end of the current mandates for the Commission and the European Parliament

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Robust ethical standards are critically important for the success of the finance sector,in Europe and throughout the world

- The most urgent issue in finance today is the ethical dimension of the recent failure of financial markets, to quote Jakub Kuriata, a Credit Analyst with BNP Paribas, London, and the winner of the 1st prize in the 2011 global Ethics in Finance Robin Cosgrove Prize competition. Robust ethical standards are critically important for the success of the finance sector, in Europe and throughout the world. Doing the right thing because it is the right thing to do may seem simple, but in complex financial transactions, all too often considerations of ethics and integrity may be squeezed. Ethics and integrity are the two pillars of trust and without trust, no financial organization can command confidence. We have seen the disasters than ensue when financial enterprises lose trust witness the collapse of Northern Rock Bank in England and before that, Lehmann Brothers in New York. The Ethics in Finance-Robin Cosgrove Prize launched a global debate on the role of ethics and integrity in all aspects of finance. Managed in Geneva at the Observatoire de la Finance and by myself, the goal is to use the fresh ideas and discussion that result from this dialogue to inspire the young finance community and to re-inspire the broader finance, regulatory and academic communities to respond in more sustainable ways to promote a healthy finance sector, so essential to economic growth and development. The Prize reflects the ideas of Robin Cosgrove, a successful young investment banker, who sadly died at age 31. Since 2005, well before the current financial crisis swept across the world, the Robin Cosgrove Prize has stimulated a global reflection on the role of ethics, integrity and trust in financial transactions and the means

to reduce corruption in financial firms and organizations. The first global Prize was launched in 2006, with money from Robins family, friends and former employers , with the goal of prompting focused debate among young finance professionals and advanced students of financial issues, encouraging them to submit their ideas for Innovative Ideas for Ethics in Finance. Papers were submitted in either English or French. In 2007 the Prize was divided between three young finance professionals from Australia, Singapore and Egypt. The initial success of the project led to the launch of a second edition of the global Prize in 2008 which was awarded in 2009. In addition, a regional Ibero-American Prize, supported by MAPFRE of Madrid, was launched to encourage contributions to the ethics in finance debate from young professionals writing in Spanish or Portuguese. These two editions of the Prize together truly ensured a global impact and during the increasingly rough financial crisis of recent years, more and more young finance professionals turned to the website and responded to the competitions. In 2009 the global Prize was divided five ways between young professionals from France, Singapore, USA and Ghana. The IberoAmerican Prize was divided between winners from Spain and Brazil. The third edition of the global Prize for Ethics in Finance was launched in April 2010 in London, at a ceremony hosted by Barclays Bank Plc .The second edition of the regional Ibero-American Prize was launched in May 2010 in Madrid, hosted by

MAPFRE, on the same theme as the global Prize but with a Latin American focus. The Prizes were awarded in November 2011 at a ceremony hosted by the State of Geneva, Switzerland. The Prize Winners in 2011 came from Poland, Madagascar, Germany and Argentine in the case of the global Prize, and from Argentina, Uruguay, and Mexico for the Ibero-American Prize. The exciting range of subjects addressed by the winning papers showed the depth of intellectual reflection stimulated by the competition, which attracted Expressions of Interest from more than seventy countries. [Copies of the best papers submitted for the Prizes are published by the Observatoire de la Finance, Geneva, in its Journal, Finance & the Common Good/Bien Commun, see www.obsfin.ch and are also available on the website of the Prize.] The vision of the Prize to stimulate a global reflection on ethics in finance through the competition and the website has resulted in the Prize is making a significant contribution to the sustainable future of the international finance sector based on strong ethical awareness and commitment to integrity among all stakeholders. The International Monetary Fund (IMF) promotes the Prize through its training programmes and some major banks (including Barclays, BNP Paribas, BNP Paribas Fortis, Citi) encourage their staff to take an interest in the global ethics in finance debate and the competition for the Prize., reinforcing greater confidence amongst stakeholders- investors, shareholders, customers, regulators and

hopefully creating dynamic corporate cultures based on honesty, mutual respect, and the added value of a clear commitment to ethics in finance. The Prize administration hopes that financial firms from across a broad spectrum will use the Prize as a tool to develop greater awareness of Ethics in Finance, and encourage their young professionals to submit papers for future editions of the Prize. As Clare Payne, then at the Integrity Office of Macquarie Bank, Sydney, wrote in her 1st prize winning paper in 2007: For ethics to catalyze and enliven the finance industry- essentially for ethics to become a living concept- the industry must move beyond viewing ethics as a matter for compliance and good marketing. Ethical thinking needs to be woven into corporate culture and hence the day-to-day business of the finance industry. Future editions of both the global Prize and the Ibero-American Prize, hopefully to be launched during the first half of 2012 and awarding the Prizes in fall 2013, will encourage young finance professionals to internalize their commitment to ethics in finance.. The International Jury will maintain the topic of Innovative Ideas for Ethics in Finance and the Prize Winners could gain USD20,000 for the global Prize and USD15,000 for the Ibero- American Prize for Ethics in Finance.

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- Drama and tragedies have been written and played for centuries. Many of them focus on scrutinizing the inner life of heroes thorn between conflicting loyalties and passions. Most of these heroes experienced solitude, confronted with impossible understanding by an external observer of the intricacies of their sentiments and emotions. Conflicting passions and emotions seem thus to be the daily bread of human being, and even more so in the era of almost absolute individualism. But neither economic life nor finance are supposed to be about sentiments, about passions, about loyalties but only about interests however difficult it might be to define what is precisely an interest . According to Albert Hirschman author in 1977 of the famous book Passions and Interests - two elements are present in any interested action : self-centredness and rational calculation in the sense of a cost-benefit analysis. Today, interested action is received by many as a dominant part of the ultimate genome and thus a major component of human nature, as epitomized by homo oeconomicus. If this anthropological vision is accepted without major qualifications, as it is the case in most of legal and regulatory discussions, the meaning of conflict of interests is very narrow. If, in any situation every agent is entitled and enabled by nature to take the decision that grants him the highest possible material benefits, the conflict of interests is reduced simply to a question of more or less informed choice. In case of asset management and investment advise the question thus is simply are the actors aware all along the chain from financial engineering centres and distributors of products to the ultimate holders of wealth of the incentive schemes under which the other party is acting in his or her rational interest. The conflict of interests issue boils then down to question of information. Is everyone in the chain in possession of all required elements to reach a rational, self-centred decision. In the case of retrocessions, it may be easily argued that the ultimate investor (holder of wealth) does not have all the relevant information to monitor if the asset manager or investment advisor is acting in the owners best interest. At this stage compulsory disclosure, transparency and additional information may then be called in by regulations in order to reduce this asymmetry of information . However, addressing conflicts of interest in fund management industry only through additional information requirements or through remunerations structures better aligned without tackling the ethical dimension of the problem is profoundly inadequate. Indeed asymmetry of information arguments stand on a major fallacy : the ultimate holder of wealth is seen as having all the professional competence, all the knowledge and all time required to cross-check

and verify the advice he is being given. In the last analysis, he does not in fact - need any advice at all. This may be true for institutional professional investors but, as we know from countless anecdotes, most of private clients of asset management boutiques are, to a large extend, persons only moderately illiterate in finance, as is the majority of adult population in OECD countries. Flooding these clients with additional highly technical information will not alleviate, but may even deepen the asymmetry of understanding . In other terms, in situations where advise , i.e. expert knowledge, is called in the diagnosis inspired by the asymmetry of information paradigm is either insufficient or simply irrelevant. If we consider that the investment advisor is clients only gateway to an alien field of expertise, then like in case of legal or medical advise, only the respect of his fiduciary obligation towards the client can prevent the advisor from exploiting his superiority. Money, and financial wealth unlike non-liquid assets and possessions, has a psychological, or even existentialist, dimension which relates on the clients side - more to passions and emotions that to cold rationality of interest. In this respect too, financial advise to private clients is similar to medical and legal practice. In all these decisions where emotions, not only interest, matter, trust in the practitioners skills and his professional agility is the clients response to the advisors fiduciary obligation. On such crossed loyalty architecture can in theory - a sane and balanced relation unfold based on the bilateral acknowledgment

Conflicting passions and emotions seem thus to be the daily bread of human being, and even more so in the era of almost absolute individualism
of asymmetry of understanding and asymmetry of emotions. In such a balanced relation there in no room either for conflict of interests as the advisor is being remunerated by the client to act fully in his best interest. Why is this idyllic picture of the client-advisor relation often contradicted by the every day practice of investment advice? One of the answers may be that the economic status of investment advisors is far from clear : are they a profession or are they just practitioners of a variety of business or trade ? Are they simple distributors or tradesmen or are they advisors in the noble and disinterested sense of the word. he term of profession is often used to refer to clearly defined activities that (1) are rooted in a specific knowledge transmitted by dedicated training institutions and sanctioned by relevant diplomas ; (2) are linked to higher (altruistic) aims such as health, justice or possibly in the case of financial advisers prosperity of the client; (3) have a rather strict deontology which also precisely defines their remuneration scheme (4) possible have a strong organisational base that is able to enforce discipline and deontology among its members. This being sad, such a profession may also be tempted to exert a market entry control and limit competition. In case of a profession potential conflicts of interest are supposed to be controlled by the higher aims deontology and the disciplining power of the professional organisation. If investment advisors do want preserve their trust capital which the retrocession story has undermined, they have the option to seek a public not necessarily official - acknowledgment of their professional status . This however may imply non-ambiguous deontology in terms both of fiduciary duty and remuneration and internal discipline. Possibly, practitioners may split on these issues which would leading to a double standard which will, undoubtedly, be properly advertised and exploited as an competitive advantage by those who will opt for tighter ethical standards.

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- The most recent financial crisis and the subsequent recession, which prompted a sovereign debt crisis in Europe, triggered a fresh wave of discussions about the failures of financial markets. In this context, it is particularly difficult to talk about ethics and finance. On the one hand, the financial sector and the majority of economists tend to see the crisis as a technical issue and underestimate its ethical dimension. On the other hand, the widespread moralistic narrative reduces, incorrectly in my view, to the greed of financial markets the crisis and its undesirable economic consequences. During the times of economic hardship, we forget that the consensus among the economists is that the development of financial markets has a statistically significant and positive impact on the pace of economic growth. In order to have a sound debate, we need to establish a common philosophical ground to think about the role of financial markets in the society. I argue that some essential building blocks of Aristotelian virtuous would acceptable for the largest possible audience. That is, each object/action must have a goal (telos) and life according to certain virtues is the definition of human flourishing. Economic theory provides us with

How to incorporate ethics into the reform of financial markets is a far more difficult question
a definition of what the goals of financial markets are, namely the distribution of available resources to their most productive uses and the redistribution of risks. Only markets fulfilling these objectives efficiently can make positive contribution the common good by enhancing economic growth and prosperity. Therefore, the application of teleological approach to judging the financial markets boils down to a response to the question: of whether or not the markets are fulfilling their economic objectives. I think that the short answer today is a simple no and that there is a broad agreement about the main fallacies of financial markets. The list may be longer, but should include disproportionate leverage, excessive risk taking and narrow focus on short-term profitability as its key issues. How to incorporate ethics into the reform of financial markets is a far more difficult question. Aristotle emphasized the need to exercise virtues because nobody is born with perfect moral character. Adopting an Aristotelian approach means primarily promoting virtuous behaviour among the market participants. This implies a major shift in the paradigm of thinking about ethics in finance. It would require from all the participants to think actively about the moral consequences of their actions instead of simply complying, with rules prescribed by regulators and lawmakers and as enforced by

compliance officers. I believe that financial institution should, in particular, encourage working on an adequate incentive structure by promoting responsible risk taking rather than short-term profit seeking and spend more on teaching risk-awareness to its employees. However, this is a long-term task and strong regulations of the financial markets are probably still essential to quickly address the most urgent issues. To cite an important example, the regulatory framework for banks, known as Basel III, is a step in the right direction but it is too prudent in terms of capital requirements and may not be enough to substantially reduce leverage. Another important area that needs further enhancements is to ensure that financial products are accordingly to the clients needs and that clients have an adequate level of understanding of the products. Although financial illiteracy is an important issue, it is ultimately the responsibility of financial institutions given the asymmetry of knowledge between them and their clients. These are not revolutionary solutions, but what financial markets do not need is a shock therapy which may spark another period of instability, but rather a careful treatment in which ethics may be the key ingredient.

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- During his keynote address at the Robin Cosgrove Prize ceremony, Lord Griffiths of Fforestfach, Vice Chairman of Goldman Sachs international, made a comment that caught my attention. He said We have the unfortunate tendency to tackle complex problems in a technical manner. His comment resonated with what I tried to convey in my entry for the Prize: during the last three centuries, we have come to master the exterior or technical dimension of reality at the expense of the interior dimension. Indeed, while we have no problems speaking intelligently about the quantifiable, we have not reached the same level of complexity in our interior dimension. To this day, we finance professionals lack words for these kinds of conversations. We are reduced to using terms such as life planning or soft side. My central argument is that this state of affairs the collapse of our financial systems, our focus on the exterior dimension can be traced back to what some prominent philosophers call the Disaster of Modernity. But before we investigate modernitys disaster, let us first acknowledge its dignity. The abolition of slavery, the rise of lib-

We have the unfortunate tendency to tackle complex problems in a technical manner

eral democracy, and the ecological sciences, are all part of the dignity of modernity. And this dignity is the direct consequence of the differentiation of art, morals, and science, because each domain was able to pursue its own knowledge without being oppressed by the other domains, meaning, that you were able to look through a telescope and pursue your scientific endeavours without being literally burned at the stake. Karl Popper refers to these domains as the Three Worlds: The physical or objective world investigated by science; the psychological or mental world of feelings, perceptions, and thoughts; and the cultural world of stories, myths and languages. Jrgen Habermas also divides reality into three worlds: the subjective world, the social world, and the objective world. However, at some point, the dignity of modernity began to turn into a disaster: The Three Worlds didn't just differentiate, they started to dissociate. And by the end of the eighteenth century, the spectacular development of science ignited by the discoveries of Kepler, Galileo, Newton et al. began to overshadow, and then to actually negate, the artistic and moral domains. The Three Worlds collapsed into a single flat world, the world of empirical science which proclaimed itself as the only valid view of reality. Linking back to Lord Griffiths comment, all problems in the aesthetic and moral domains were turned into technical problems. Science would literally solve everything. Unfortunately, this is where our modern civilisation still rests: a fragmented

world with art, ethics, and science at each others' throat. And so the task that lies ahead of us is not merely to promote ethics in finance. Our task is to reconcile these Three Worlds, thereby putting as much attention on ethics as we do on finance in the process. In practical terms, it means firstly that other kinds of talent than, say technical proficiency, need to be rewarded, and that other kinds of measures than, say profitability, need to be recognized in the marketplace. Secondly, business leaders and finance professionals need to revisit their territory of expertise, by complementing their core technical expertise with practices such as action inquiry designed to help them foster their ethical intelligence. And finally, it means that we have to look beyond rules and regulations to foster the development of ethical behaviours in the marketplace by investigating other tools of change such as inclusive decision making, organisational learning, trust building approaches, cooperative participation, and collective introspection. Only when our civilisation has accomplished the integration of the Three Worlds of art, morals, and science will we be able to weave ethical thinking into the day-to-day business of the finance industry.

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- The derivative market is one of the biggest in the world. At the end of June 2011, OTC (over the counter) contracts with a face value of $708 trillion were swirling around the worlds financial system, amounting to about $100,000 in derivatives contracts for every person on the planet (source: BIS). These numbers seem to speak for themselves. Financial derivatives serve several useful functions. They are, as the name suggests, derived from the value of other assets, historically commodities but also corporate shares, currencies, interest rates, etc. Derivatives such as futures, forwards, options and swaps (or a mixture of them) can be used for insuring against, transferring and dispersing financial risk. Thus, they give corporations and banks an ability to manage their business effectively by making decisions on risk. In addition to that, derivatives are often a cheaper alternative to investing in the underlying asset. Individual traders, companies and banks may benefit from derivate instruments. However, the impact derivatives have on the aggregate level of risk must be taken into account as well. From a sys-

We need guidelines which help prevent systemic crises by implementing precautionary methods
temic perspective, the risk transformed and transferred by individuals may threaten the whole financial infrastructure of the economy. As leverage is a key component of systemic risk, derivatives play their part in it. Derivative innovations make it possible to hedge risk, but they also make it possible to engage in highly leveraged speculation. In the boom preceding the financial crisis 2007/08, leverage increased massively along with the supply of illiquid high-risk derivatives. Derivatives also tend to strengthen linkages between market segments and institutions. With that, disruptions in one market are more likely to spill over to and affect other markets which may result in a domino effect. Additionally, banks have a strong incentive to create products so complex that they cant be sold on exchanges at all. Eighty percent of derivatives are now sold over-thecounter in non-transparent private deals. Concealing the risks that traders take and disperse adds opacity to the market and poses an unseen risk to the functioning of the financial system should the traders fail. When the risk materializes it may not be possible to prevent a system collapse. Therefore, we need to take over responsibility for the risk itself before it is too late before the risk materializes. We need guidelines which help prevent systemic crises by implementing precautionary methods both for the microand the macro-ethical level. First, we need macro-prudential insight which should focus on the financial system as a whole and which seeks to avoid and at least to minimize systemwide distress. We need to understand that

systemic risk can be catastrophic for an economy and for society as a whole. A well-functioning financial market is morally relevant as it is an indispensable element for the provision of basic goods and welfare. Therefore, the avoidance of systemic risk is of capital importance. Secondly, we need to develop methods to distinguish risk-generating from risk-dispersing derivative instruments. Whereas carefully chosen derivative deals may reduce the risk inherent in doing business, there are transactions which can provide powerful leverage mechanisms for creating risk with a negative influence on economic stability. Thirdly, we need to establish transparency through regulatory oversight. There is an ethical imperative to gather and share information and to set up regulatory institutions charged to monitor systemic risks. All in all, to fulfill these guidelines may not be an easy task. Still, this must not prevent us from trying. We need to examine these issues closely and develop differentiated regulatory strategies to address them properly. A framework for dealing responsibly with financial risk especially with derivative risk is indispensable for a healthy and stable financial market and for society as a whole.

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- The financial system emerged as the major player because it is due to its disorders that international society had to face numerous difficulties. The separation between ethics and finances is largely responsible for these problems. But this separation is not exclusive of the financial sector, rather it reflects the view that the economy in general has on ethical matters. From Aristotle to the first classical economists, matters of morality were always very closely linked to economy. However, the mainstream of modern economical thought expelled ethics from its field of study because it considers that an assessment of what is good, bad and mandatory goes against its scientific pretenses. By lacking ethical grounds, the dominant economic model built a biased view of man and how he relates to his peers. The basic message is that individuals, acting according to their own interests, find in the free market an efficient mechanism which is mutually profitable for everybody. This view exempts people from acting responsibly, worrying about others, since the market manages to au-

The defenders of the current model affirm that financial markets are working well and that the crisis constitutes only a cyclic fall
tomatically channel individual interests towards the improvement of the common well-being. From here we can deduce that a big part of the recent economic crisis respond, first and foremost, to a moral crisis. By internalizing the previously described view, people placed an excessive amount of trust in the markets, without taking into consideration that the actions performed there are not purely mechanical or technical. The excessive instrumental rationality of individuals ended up destroying the trust, which was the foundation of the initial progress, affecting not only economical issues, but also different areas of common good. Some authors call this situation the paradox of trust. The defenders of the current model affirm that financial markets are working well and that the crisis constitutes only a cyclic fall. They predict a rebound effect that, through the right economic policies, will bring the economy back to its normal growth tendency, along with a restoration of trust. Therefore, there is no need for any substantial changes to the system. However, the true solution to the problems of the financial system requires deep changes. The challenge lays in being able to maintain trust in the long term, even when the market seems to work perfectly and without any risks. In order to do this, there is only one alternative: that the fi-

nancial system (and the economy as a whole) acts on an ethical basis. A transcendental and responsible view about how our actions have an impact on the common well-being is necessary. This means to start incorporating other motives for action beyond personal benefit, like solidarity and gratuity. In a globalized world, the logic of two times where the market produces in an efficient way and the state equitably distributes, does not work anymore. Besides efficiency, individuals in the market must go after other objectives such as equity and social cohesion. Many current examples, such as the Economy of Communion companies, are proving that the market can start being distributive from its own functioning without losing economical efficiency. Education constitutes a fundamental tool in order to accomplish this humanization of economics. The challenge today is to give back to people their social dimension, their concern for others, and to reevaluate the importance of civil virtues. This is the only way to accomplish an economical, environmental, and above all, humane development that can be maintained in time.

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- We are convinced that Community Banks are a powerful tool of Solidarity Finance, because they propose a comprehensive system for women and men from poor neighborhoods to decide how to manage the surplus of the household economy. Many times we heard that impoverished communities rely exclusively on State funding, on international organizations, social organizations, and even on churches. That is true, but it is only one side of the complex and diverse reality. We believe that lower-income people also have the possibility of financing themselves through their savings. In general, the greatest difficulty is to count on a robust system for generating and managing those savings. As we do not want to reproduce an exclusionary and dehumanizing financial system, the challenge that we face is to ensure this system to be ethical and solidary: two values that may seem general and abstract, but that in the Communal Banks are critical to define criteria and modalities. If we believe that impoverished com-

munities have the possibility to finance themselves through savings, we have to go a step further and believe that they are capable of manage their own resources independently. That is why finance should leave its position of unfathomable complexity to translate itself to the language and codes of those people, protagonists of their own decisions. We find three values that are central to the arduous task of autonomy: First, transparency, which is the only way to generate trust and that people bet on collective construction. Secondly, democratic participation, because we know that in the spaces where we feel that our voice is heard and taken into account we can build the common good, the collective over the individual. Thirdly, the group monitoring, i.e., the need that each member of the Community Bank be responsible for constantly vigil for the values and practices that have been agreed, knowing that the natural tendency is to return to the old, known things. What is the place of organizations such as Nuestras Huellas in this process? We believe that two things should be very

We have the challenge of making the capital, the fruit of labor, a tool for life to grow and multiply in all its aspects
clear. The first is that we facilitate the process, i.e., we cannot offer formulas or recipes to the people, asking them to take and implement them, regardless of their history, their culture, their times and processes. The second is the responsibility of creating innovative mechanisms and tools, not adapting old recipes to the world of the poor, as we have often heard. It's about being bold, uniting all the efforts and expertise to take one more step in the innovation of social technologies. To conclude I want to echo the voice of so many women and men that daily seek economics and finance be at the service of the reproduction of life and not the reproduction of capital. We all should sweep away the lie that the unlimited search for growing capital will lead us to a happier life. We have the challenge of making the capital, the fruit of labor, a tool for life to grow and multiply in all its aspects, in all its dimensions and expressions. As we have strongly spoken in the recent International Forum on the Social and Solidarity Economy, which took place in Montreal, Canada, that ANOTHER ECONOMY IS POSSIBLE, today we want to reaffirm here that OTHER FINANCES ARE POSSIBLE and we are willing to invest all our energies to make them a reality.

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- The title of this article is the title of the essay that I wrote to participate in the Second Iberoamerican Edition of the Robin Cosgrove Prize held on 2010/2011. The essay was awarded with the Second Prize ex-aequo with other two essays. This article is a short comment of the essay and highlights the main findings and conclusions. First of all I may say that the essay was wrote on December of 2010 when the actual financial crisis was not in its worst stage but all the conclusions fits very well to some of the events that have happened in the last months and actually continue happening nowadays in financial institutions. My approach to this topic is made as an outsider actor of the financial sector since I do not work in a financial institution but during the exercise of my work as accountant in Guyer & Regules I have been advising many financial institutions (banks, stock brokers, representative offices of foreign financial institutions, and securities dealers) for many years and I found some issues related to the dynam-

Actually, the behavior of the people is a consequence of the behavior of the financial institutions

ics of the financial sector and some behaviors of financial institutions that affects the behavior of people and lead to the occurrence of unethical behavior of people. For instance I noted that some strategies of recruitment and reward, which are very common in the financial sector, may affect the behavior of the employees. Regarding the recruitment strategy, when an investment bank has the intention to expand its operations is very usual to hire brokers with portfolio that are working in other financial institution. They encourage employees of other institutions to join them with the promise of huge amounts in rewards, annual bonus, or promotion opportunities if they achieve some goals previously set by the institu-

tion. That issue is a part of the reward strategy that I understand leads to the occurrence of unethical behavior because if for any reason the employee do not achieve that goals perhaps this make the employee to lose the bonus or in the worst case he has to leave the company. There is no doubt that this behavior of the institutions affect the behavior of the employees and sometimes push them to behave wrong from an ethical point of view. Moreover, in recent years the behavior of individuals of the financial sector has been much questioned because sometimes they have acted improperly from an ethical point of view and motivated by personal interest against the institutions for which they work for and also against

the common good. Actually, the behavior of the people is a consequence of the behavior of the financial institutions, hence, it is very important for the employees to know the values of the institution that they work for and if they do not agree with this values they have two options: accept the rules or not, and in the last case they must get out or not even join the institution. Obviously is desirable that before being in an objectionable situation the person must prevent it and perhaps finds an alternative route that does not involve unethical behavior. At the end, let me say that financial institutions are the ones who must tackle the problem and lead the war against unethical behavior because themselves are those that, in one way or another, define the conditions which sometimes can encourage people to behave unethically. So, what to do? Once again let me highlight the importance of the person and his values as an essential element to deal with temptations and unethical behavior that the financial sector allows and even sometimes seems to encourage, and invite the institutions to take care of the problem.

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- The financial crisis and frauds that have occurred in the last decade have inspired an extraordinary wave of regulatory reforms and changes in corporate governance structures. However, I consider that all policies, procedures, controls and systems that might exist count for nothing if a decision maker doesnt know how to make consistent good decisions and continuously learn from them. Before going into details about how to improve decisions, it is important not to confuse good decisions with good results. None of us can know the future, which means that we can take a good decision that result in a bad outcome. A good decision qualifies as such when it carries out a procedure of analysis that takes into account certain principles. Therefore, having a tool which allows the analysis and comparison of information in a systematic way is of fundamental importance for decision-makers. After being immersed for almost a year in many decision making processes Ive realised that despite the amount of data and facts, most of the times decision makers need to make judgments based on intangibles values such as reputation, future product potential or customer satisfaction. These are the really good but

It is true that the learning and improvement of decision-making takes time, but it will not take place if the first step is not taken

really elusive stuff that makes decisions complicated. Ethics is of course one of these values, isnt easy to measure, monitor or evaluate. Therefore who can be surprised that this is an issue which makes directors and senior management face constant dilemmas? This kind of pressures could be alleviated if corporate employees had a tool to show to managers in a frank way the challenges involved in making decisions. My proposition is the use of Multi Criteria Decision Analysis (MCDA) to address these challenges faced while making strategic decisions, particularly when business need to decide where to allocate resources or prioritise projects. The methodology main features are : first it enables the inclusion of soft criteria translating ethics into meaningful values

and it answers key questions such as: what you value and how much you value the difference between alternatives, bringing to light the true motivation behind the investments. The first step required in the MCDA is to give clear meaning to ethics and translate this universal concept into a value or values which should be real business goals and explicitly relevant for the investors. Ethics is a wildly popular but vague term and decision criteria setting demands clarity about what a business mean by ethics. Since ethics means different things to different people in different contexts it is fundamental get this first step right. The rest of the MCDA steps allows capturing the context of each decision, and permits decision makers to look back and compare information, perceptions

and understanding of the reasons why certain courses of action have been chosen. This learning and continuous improvement cycle is achieved because there is real transparency in the evaluation of the options, and this goes beyond the simple formulation of possible business options. It means transparency in the participants, the inclusion of different points of view, trade-offs made and the information used to inform the decisions. The use of MCDA makes sure that the process which in many occasions takes place unconsciously it is done explicitly and following a defined sequence of steps. From this sequence is where Ethics can be promoted. The crucial factor is that the integrity of decision makers will emerge in the repetition of these rules, the result being a pattern of ethical decisions, while behaviour is not achieved by thinking or writing codes of ethics, but through actions. It is true that the learning and improvement of decision-making takes time, but it will not take place if the first step is not taken. Similarly to any addiction, the essential step is to accept the problem and recognize that ethical values are not very often put into practice and that for example, short term investors interests are consistently put in the first place.

OUR WORLD IN 2012

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NEW EUROPE

Soon after the financial crisis began in 2008, I was at a meeting in the United States where a senior White House economic adviser put a question to me: Do you think banks can be good citizens? As I started to answer Yes, he interjected: If your answer is yes, think about the fact that no one will believe you. His follow-up gave me pause. Ive thought a lot about it over the past three years, which have been so difficult for the world economy. The economic environment in which we are all living and working nowadays is particularly challenging. In Europe, the United Kingdom, and the US, we are feeling the effects of the unsustainable levels of public and private debt accrued in the years before 2008. Spending cuts are being put in place by governments and households alike, with varying degrees of public acceptance and social unrest. The single most important issue for banks and other businesses to focus on in 2012 is economic growth and job creation. But, to play their proper role in generating employment, banks need to rebuild the trust that has been decimated by the events of the past three years. That requires bankers to use the lessons learned from the crisis to become better and more effective citizens. Simply put, the private sector has an

Businesses must increase profits in a way that creates sustainable shareholder value, not just short-term gain

obligation to be the engine of growth and employment, and banks have a vital role to play in achieving that end. Frankly, though, banks have done a very poor job of explaining how we contribute to society. We need to fix that as part of the process of restoring trust in what we do. At the most fundamental level, banks are entrusted with deposits from individuals, businesses, and governments. We put that money to work by helping people to buy homes, for example, or by lending to growing companies. Banks also provide critical services to governments and business, by providing direct access to global buyers of debt and equity, and by establishing large, consistent markets of buyers and sellers. Some characterize these activities as speculative trading, and even caricature financial markets as casinos. In fact, these markets serve a fundamental client need. Of course, to meet these needs, banks must be safer and stronger than they were prior to the crises. The reality is that much is different in todays financial sec-

tor. Banks are not borrowing as much; they have more capital; and they have far more stable and liquid sources of funds to lend. Strong banks want strong regulation, and we believe that no taxpayer money should ever again be put at risk to rescue a failed or failing bank. But, three years on from the 2008 financial crisis, we still face considerable challenges, as the continuing eurozone crisis demonstrates. So its not surprising that many people doubt that anything has really changed. The only way that banks will win back the publics trust is to become better citizens. That starts with how banks behave, and in demonstrating that we act with trust and integrity. This means that the interests of customers and clients must be at the very heart of every decision we make. In 1970, the Nobel laureate Milton Friedman one of my favorite economists wrote an influential article arguing that the only social responsibility of business is to increase its profits. On that point, I disagree

with him. Businesses must increase profits in a way that creates sustainable shareholder value, not just short-term gain. This applies across industries, not just in banking. One sees the benefits of this approach in the paths that companies like Unilever, PepsiCo, and Nestle are forging. Banks can and should do the same by focusing on the interests of the customers, clients, and communities that they serve. The challenge is to balance our obligations to all of our stakeholders, both customers and shareholders, including the pension funds that help millions of people around the world save for retirement. That is not always easy, and the decisions that we just like any other business make every day are imbued with inherent dilemmas. But doing whats right for customers, clients, shareholders, and communities will ensure that we get those judgments right much more often than we get them wrong. That is why the answer to the question posed to me three years ago is that banks must be good citizens. I appreciate that persuading people of that concept will require that they see a visible difference in the way that banks participate in society. People may not recognize any difference right now; the change that is now taking place is in its early stages. But we are determined to keep working at it, and I am committed to making it happen.

NE | OUR WORLD IN 2012

Kassandra@NEurope.eu

KASSANDRA
Follow me on twitter @Kassandra_NE
just like the previous Papandreou administration? It is the same old Socialist government, in which the foreign affairs and defense ministries (which are not related to business) were given to leading New Democracy opposition party (EPP) while the public works ministry (which has no money for public works) was given to the government's third, far-right party. Papademos was until the day before his appointment the key economic advisor to former Prime Minister Papandreou so, for all practical purposes, nothing has changed in Greece except that the Socialists have managed to squeeze into the government with two conservative parboth the popular party and the far right party have been in decline since they entered the coalition government. In this context, unemployment is growing, salaries are being reduced every day and in many instances are not even paid, the middle class is rapidly being depleted and no government services work. This means that, among other things, no taxes are being collected, no social security contributions are being paid, nothing is paying for the medicines of insured employees or pensioners and the security of citizens is being dramatically reduced with the growing number of robberies and murders by the flourishing domestic and for-

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The Greek tragedy is about to reach the 'point of no return', and all attempts to avoid the worst-case scenario have so far have proven to be futile. On the contrary, any new effort made to rescue Greece seems to bring the country closer to collapse. A few months ago the George Papandreou government, desperately in need of cash, introduced another new tax on property based on immovable property surfaces and, since it was accepted that most people would not be able to pay because they were unemployed or their incomes were halved, the government ruled that the tax was to be collected via electricity bills; then it prohibited the partial payment of electricity bills (i.e. the user paying only for the electricity consumed and not for the new tax). Therefore, people were put into a situation in which either they paid the new tax, thus reducing their available income for food other essentials, or the power company would cut off their electricity. It should be noted that normally in Europe, if a consumer does not pay for electricity, the power supply is not cut off but reduced to a minimum to cover lighting and refrigeration needs. It is worth noting that this new tax was given a particular name, 'charatsi', a word that was used during the Ottoman domination for capital tax imposed in all citizens (harac). This was a tax that all Greek citizens had to pay, regardless of their income, for 400 years to the Sultan. Those who failed to pay the harac, regardless of the reasons, were decapitated. The Ottoman term is now in use in Greece for the new tax by all citizens, including MPs, the cabinet and even the prime minister himself, whatever it implies.

snd with Karamanlis speaking the truth, Papandreou easily won the election and went on a 'road-show' around Europe claiming that he ruled a 'corrupt' country. As a result the markets to increase spreads and Greece end up under IMF/EU control as Papandreou had committed with Strauss-Khan. Then Papandreou turned Greece into Guinea pig experimenting on a rescue mechanism that would be an efficient model for Europe in the future.

It is worth noting that it is not only Greece that is responsible for its pandemic corruption - a substantial share of the responsibility should be attributed to the European Commission, which encouraged corruption in order for major co-financed projects to be assigned at exorbitant costs to selected companies and in return ignored the false figures submitted to Eurostat in order to maintain Greece within the limits of the stability pact and enter the Eurozone. As an example, under the tolerance of Eurostat and with no consequence for Greece, between 2001 and 2009, the 'final' figures submitted to Eurostat for the Greek deficit and the Greek debt were revised 70 times while the entry of Greece into the euro, was allegedly based on incorrect assumptions, with full knowledge of Eurostat and happened when the present Greek Prime Minister Loukas Papademos (former deputy governor of the European Central Bank) was governor of the Central Bank of Greece and prepared all documentation for the acceptance of Greece into the Eurozone.

Greece's new Prime Minister Loukas Papademos, when asked what would he do about the harac since most of his people cannot pay it, simply said that it must be paid, full stop. Of course, Papademos could have gone the other way around in taking the political decision to abolish the harac and instead reduce the salaries of state companies' staff by around 20%. These people, the crme de la crme of the political nomenclature of the country, number around a few hundred thousand, and mostly do nothing. Despite the fact Greece is one step away from a total catastrophe, these lucky few still enjoy high salaries, but nobody dares to touch them because they are primarily active members of the Socialist party. So, what exactly is Greece's new 'coalition' government, and why it is behaving

ties. Just how long this trap will work is difficult to say, but certainly not for long. Indeed, the two parties that recently entered the socialist government have by now well understood and they already undermine the government in which they participate, to the best of their abilities.

Under the circumstances, the coalition government is proving a failure. Papademos's 90% score in the popular polls that he received upon his appointment on 11 November has dropped to around 20% in just one month, the country's two major parties are totalling less than 30% in the polls, the leftist parties led by the communists total more than 40% and

eign gangs. All this has happened in just two years of Socialist administration. Indeed, two years ago, then-prime minister Kostas Karamanlis lost the election when, in his electoral campaign, he said that the economic situation of the country was difficult and in order to secure jobs, salaries and pensions, sacrifices had to be made with a reduction in public-sector spending and the freezing of salaries. Papandreou won the elections, claiming that there was enough money for salary increases and that no sacrifices were required. At the same time before the election, Papandreou had confidentially agreed with former IMF director Dominique Strauss-Kahn to bring Greece to the IMF. After making such promises

Under the circumstances, it is highly likely that a general election will be called in Greece, soon. Such an election cannot provide anything else but a fresh coalition government, which will most probably be led by conservative leader Antonis Samaras. Yet all other parties, even before taking over, will undermine this government. At that point, Greece will have two options. Either the situation will spiral totally out of control and a far-left extremist government will emerge from the barricades leading Greece into chaos (with possible collateral damages to Europe), or a new election will be called before the collapse and from the new parties that will be formed, a strong credible leader accepted by all Greeks will emerge as the Deus ex Machina to safely navigate Greece to calmer waters. K