Tuesday, 25 January 2011

The not so innocent bombing of the Chinese embassy in Serbia in 1999!

The revelations that China has managed to produce a stealth fighter by reverse engineering parts of a downed f-117 US fighter in Serbia made me think.

I don't like conspiracy theories, but as a historian I can connect the dots to raise great suspicions about the total annihilation of the Chinese embassy in Serbia in 1999 by US ordinance. At the time president Bill Clinton first claimed it was accidental, but the guardian claimed that the bombing was deliberate claiming it was to stop the Chinese monitoring of US cruise missile capability and thus prevent them from developing counter measures.

At the hearing about the attack the head of the CIA has admitted that this was the only strike that was authorised and directed by the CIA in the whole conflict.

Even at the time it was considered that the Chinese were making deals with the Serbian government to acquire the parts of the US (no so) stealth fighter. We may never know the truth but circumstantial evidence seem to build a significant case that NATO intentionally bombed an embassy:
1) Downing of F-117 stealth plane March 28, 1999, using simple modification of 1960s SAM site technology
2) May 7, 1999 bombing of the Chinese embassy
3) Acceptance that this was the only operation made by the CIA
4) Acceptance that the story about having the wrong address were not accurate by the CIA
6) New smokescreen put up by the US army about Chinese relaying Serbian Military messages
5) Rapid development of Chinese Stealth fighter - based (apparently) on parts from the downed F-117

So it sees quite likely that the bombing was made by the CIA in an attempt not to allow China delicate technology. It seems very unlikely that this would have the go ahead of President Clinton as bombing an embassy is not to be taken likely.

No doubt this should be investigated further. Since Serbia and Nato were in an (undeclared) state of conflict, the Serbs had every right to sell any captured technology to the highest bidder. The bombing of the Chinese embassy is illegal and in violation of several international treaties, and raises the question about the morality of the US in War.

Thursday, 20 January 2011

Creating dangerous precedent to save an ailing airline

The government has recently announced plans to compensate Cyprus Airways for Turkey’s refusal to open its airspace to our former national carrier, in order to save it from bankrupcy. The amount of 20 million euro is not insignificant, especially when one considers that the government is facing a very real crisis of excessive borrowing, having very recently borrowed 60 million euro from domestic banks in order to cover its immediate cash needs.

I am not going to raise issues whether this is against EU rules that forbid aiding former state airlines (it clearly us), or if it is a wise use of government money at a time of necessary frugality. I am not even going to comment on how the airlines’ real issue has not been the closed airspace but rather the overstaffed and inefficient practises that it inherited in its days as a government company, and its continued unwillingness (or ineffectiveness) in tackling them.

What I want to raise is the fact that this decision, taken in order to save Cyprus airways from bankruptcy, undermines our position in the negotiation of the Cyprus problem. Our position has always been clear that compensation for the events since 1974 should not arise from those who suffered, but by those who caused it. As a result we have always insisted that Turkey should, in one way or another, shoulder the blame for the loss of the right to use properties in the occupied area.

Yet with the decision of the republic of Cyprus to compensate Cyprus airways for Turkey’s intransigence we set up the dangerous precedent, where we pay for Turkey’s decisions! At one stroke, a not well thought out decision made to save an ailing company has undermined our ability to ask turkey for any kind of compensation, since we have shown our willingness to pay for such costs ourselves. To save Cyprus airways, have unintentionally killed off our claims to any compensation for Turkey’s actions, since we are prepared to compensate the parties damaged by such actions ourselves.

Unfortunately this is not the only time where spasmodic decisions led to dangerous precedents. The decision by Greek-Cypriot insurance companies not to compensate for accidents in the occupied area, and the state’s acceptance of this, means that the Republic of Cyprus has tacitly and unintentionally accepted that there are two separate identities in Cyprus, since a purchased island-wide insurance document does not cover the occupied areas. We consonantly say the Cyprus problem is our first and foremost priority, but constantly undermine it unintentionally through badly thought out policies.

Lessons from 1929: Private Banks and Central government should not come any closer.

Kathimerini announced today that Cypriot banks will contribute 60 million Euro to the government’s “economic plan”, which effectively means that Cypriot banks will shoulder a great part of the state’s upcoming borrowing needs. As a result the Cypriot state will avoid borrowing money from the international community and thus spare the humiliation of much costly loans due to the continued downgrades of our credit worthiness, at least until after the parliamentary elections,

This is a very worrying development for Cyprus as a whole. The Cyprus banks, already battered by international concerns over their exposure in economies such as Cyprus and Greece, have opted to aid a government who is also battered by credit rating agencies for the failure of tackling its runaway wage bill. Each could separately tackle their issues with tough and painful decisions. But instead of the banks and the government will entwine their problems, creating the conditions for a potential economic meltdown.

The more the banking sector, which is under stress, is helping a government who is failing to put its finances in order, the more we run the risk of the financial system collapsing if (and thankfully it is still a very remote if) the government is unable to repay its loans.

Perhaps more subtly, this kind of close relationship of the banks’ and government’s balance sheets also raises other concerns. How can the state adequately monitor the banking sector, when it is indebted to the domestic banks for its immediate fiscal survival? We live in a country where bank changes are levied even in cases without any economic reasoning (such as having a pre-payment charge on a variable interest loan) but the state may be unwilling to ensure the rights of banking consumers if the sector offers relief to its immediate funding needs.

An example of the problems of such a close relationship was the situation with Greek banks to the Greek state during the Great Depression. As the banks became ever more exposed to covering the growing debt of the state, their executives took a greater part in running the economy, resulting to bankers controlling the most profitable aspects of the economy in the name of the government, resulting to a post-depression Greece that was oligarchical, cartelised and undemocratic.

Although we are far from this situation at the present, it would be preferable for both the Cypriot banks and the Cypriot government to tackle their separate issues individually and thus insulate the economy both from a (remote) economic meltdown and an excessive control of the economy by the banking sector.

We are Falling – but we refuse to open the parachute

First I wanted to apologise for not blogging for so long. The reason was that I was interviewed by the Economist, where I extolled the virtues of Cypriot banks and condemned the lack or any sense of urgency in actively tackling our economic crisis by our government.

The resulting article however focused more on the perceived difficulties of the banks and their exposure to Greece, and went so far as suggesting that we might be the next Iceland or Ireland in the making, which was completely contrary to my belief.

However such negative exposure has been our own fault. We have given the international community to doubt even wise investments and strategies because of the unwillingness in tackling with our current domestic problems.

I stated in the Sunday mail on the 22nd of Octomber 2010 that the first small downgrade of our economy and our banks was more a warning to our government that “Credit rating agencies will first wait to see the government reaction in the new budget before making further decisions” in regards to a deeper cut to our international standing.

The result: the downgrade seemed to spur the government in some haphazard measures to reduce the public deficit, measures that were then bogged down and diluted so much before passing through parliament that they bared no resemblance to the brave measures demanded by the global economic players. As a result further downgrades of our economy are expected and with it our banks ability to borrow also suffers a blow, to the detriment of all Cypriots.

However we must understand that we were not pushed out of a plane without a parachute: the government had the chance to significantly reduce government wages, and thus free up capital both for debt repayment and investment projects, but it chose not to do so. The analogy is of government economy falling out of a plane and choosing not to open the parachute in order keep a consensus with the major unions of the government sector. However the result is that the drastic measures needed will hurt now more that if they were taken a year ago. My greatest fear is that with each further downgrade the incentive to point to foreign “dark powers” will outweigh our desire to finally tackle the real problem in the Cypriot economy, which is the lack of any connection between the government wage bill and the country’s competitiveness.