Will Putin"s Gamble Backfire?

WASHINGTON — It’s a stunning comparison that, in some ways, explains everything about the crisis in Ukraine. Back in 1990, average per-person incomes in Poland and Ukraine were roughly equal, about $ 8,000 in each country. By 2012, they no longer were, reports economist Anders Aslund of the Peterson Institute.

Poland’s per-capita income had jumped to about $ 18,000; Ukraine’s had dropped to $ 6,000.

These figures make it easy to understand why so many Ukrainians want closer ties with Europe — and why Vladimir Putin feels threatened. It’s not just geography and history. The hope is that adopting Europe’s more open economic and political system will promote faster economic growth and more freedom. If this happens, Russia might suffer by comparison. Poland is again instructive. In 1990, its per-capita income was a third less than Russia’s; by 2012, it was one-fifth greater.

Putin’s successful campaign to persuade deposed President Viktor Yanukovych to reject a sweeping trade agreement with the European Union — which seemed a done deal — involves far more than trade. For Putin, it’s an act of political self-preservation. The point is to keep Ukraine weak and thereby prevent it from embarrassing Russia. But, ironically, Putin’s aggressive response may ultimately backfire.

Although Russia may acquire Crimea, Putin may not be able to keep Ukraine in Moscow’s economic orbit. Just the opposite: The crisis may have accelerated efforts to reorient Ukraine westward. For starters, the European Union decided to go ahead and give Ukraine the trade concessions in the agreement trashed by Yanukovych.

The EU estimates the annual benefits for Ukraine at 500 million euros ($ 700 million). Meanwhile, the severity of the crisis is forcing Ukraine to address comprehensive reforms sooner rather than later.

The economy is dismal. It’s been in recession since mid-2012. Last year’s budget deficit was about 9 percent of the economy (gross domestic product), and “we believe they may be hiding some losses in off-budget accounts and state enterprises,” says economist Ondrej Schneider of the Institute of International Finance, a think tank funded by banks and financial service firms. The current account deficit — a broad measure of trade — also reached roughly 9 percent of GDP last year. To pay for imports, Ukraine is draining its foreign exchange reserves of dollars and euros. They may be as low as $ 13 billion, says Schneider. That’s down from $ 38 billion in 2011 and equals only a few months of imports.

Ukraine desperately needs a loan to cover imports, including for Russian natural gas, and to make international debt payments. Putin initially pledged $ 15 billion, but now Russia probably won’t lend any more than it already has ($ 3 billion). Although the United States has pledged $ 1 billion and the European Union at least $ 15 billion, most of that money would require Ukraine to reach an agreement with the International Monetary Fund. The IMF would insist on policy changes before giving approval and contributing its funds to the pot.

One target would be lavish energy subsidies. In 2012, they reached 7.5 percent of GDP, reports the IMF.

These huge government subsidies bloat both the budget deficit and the current account deficit, because low prices “encourage one of the highest energy consumption levels in Europe,” as the IMF notes.

What really needs transforming is Ukraine’s economic culture. Corruption is said to be endemic, from getting a driver’s license to signing major business contracts. The Peterson Institute’s Aslund says that the “Yanukovych family” may have diverted as much as $ 10 billion for themselves. Ukraine also needs to modernize its economic base. It remains excessively dependent on communist-era heavy industry, particularly steel.

It’s a tall order that may not succeed. Many vested interests have a stake in the status quo. But the crisis that stalks Ukraine also creates pressures for fundamental change. There’s a short and long game here. Putin may win the first. It’s less clear that he’ll prevail in the second. 

RealClearPolitics – Articles

Will Putin"s Gamble Backfire?

Will abortion backfire on GOP?

By Michael O’Brien, Political Reporter, NBC News

Republicans may be tirelessly working to rebrand their party since losing last year’s race for the White House, but a recent slew of state initiatives to restrict access to abortion isn’t doing this effort any favors – and may only widen the party’s so-called “gender gap” in attracting women voters.

Indeed, while conservatives celebrate Texas’ early-morning passage of a high-profile bill that bans most abortions after 20 weeks of pregnancy and places new requirements on which facilities can perform the procedure, liberals are once again railing against the party for its so-called “war on women.”

Yet despite the risk of alienating female voters, the campaigns have undoubtedly energized conservatives, particularly opponents of abortion rights who compose a cornerstone of the Republican base. And conservatives argue that polling suggests that most Americans – including most women – favor limiting late-term abortions.

Despite Wendy Davis’ dramatic filibuster delaying Texas’ abortion bill, the Republican-dominated Texas legislature is expected to support the measure which would ban most abortions for women more than 20 weeks pregnant. Just this year, 17 states passed new measures impacting abortion. NBC’s Kate Snow reports.

“Rhetorically, this can be really hard,” said Liz Mair, a Republican strategist. For the efforts to work to their benefit, party leaders need to “figure out what [they"re] going to say, and test it out in advance,” she said, “and not by talking to committed pro-lifers.”

The wider movement, reignited in part by the murder conviction of Philadelphia abortion provider Kermit Gosnell, has found Republicans on Capitol Hill and across the country looking to follow Texas’ path in restricting access after 20 weeks.

“I think [the push] in fact helps, because one of the reasons Republicans haven’t done well in the past few cycles is because the base hasn’t turned out and been energized,” said Sarah Huckabee Sanders, an Arkansas-based Republican strategist. 

The challenge of wooing women voters

Conservative enthusiasm aside, the movement comes in the face of a real, proven struggle for the GOP to attract women voters. For as much hand-wringing consultants did after the 2012 election about Republicans’ deficit among Hispanic voters, the party’s struggles with women were nearly as damaging. President Barack Obama beat rival Mitt Romney by 11 points among women voters, who made up 53 percent of the electorate, according to national exit polls.

Democrats drove that wedge in part by successfully seizing upon examples – a bill in Virginia to require transvaginal ultrasounds before an abortion, or Missouri Rep. Todd Akin’s comments about “legitimate rape” – of Republicans seeming hopelessly out-of-touch with women.

The experience prompted Republicans to vow to speak more softly on social issues and promote women within the party. House Majority Leader Eric Cantor, R-Va., crafted a series of legislative proposals that seemed poll-tested to appeal to suburban soccer moms.

But some House conservatives balked at Cantor’s measures, forcing the No. 2 Republican to shelve some of his initiatives. And the talk about a softer tone toward social issues gave way to the new abortion restrictions in some states – North Carolina, Ohio, Wisconsin and Texas – and in Congress, where the House passed a law to effectively ban most abortions after 20 weeks of gestation. (There are rumblings that Florida Sen. Marco Rubio may champion a similar measure in the Senate.)

Senator Wendy Davis (D-TX) speaks at a women’s rights rally before a Special Session of the Texas Legislature, telling the crowd, “I don’t regret for one minute my decisions about my daughters, my education, or my direction in life … and that’s what we are fighting for now.”

Three of the states that have passed new abortion measures were swing states that were heavily contested in the 2012 presidential election. And the fourth state, Texas, has attracted widespread attention for the actions of state Democratic Sen. Wendy Davis to initially block the Lone Star state’s proposal.

The attention these battles have generated has made Democrats downright giddy.

“These are like layups on a five-foot rim,” said Brad Woodhouse, the president of the liberal advocacy group Americans United for Change. “I think the way that they’re conducting themselves gives me more hope for the immediate political consequences than I’d had they followed through on what they said they’d do after the election.”

Can the GOP change its face?

The prevailing fear among some Republicans is that these measures make the GOP seem unduly focused on abortion. And moreover, the party has too often relied on old, white men as their messengers in these fights.

Huckabee Sanders, the Republican strategist who favors the legislation passed by the varying states, warned against letting “old, white guys” become the face of the abortion argument.

“I think that people like me and my peers need to be more aggressive about getting out there and talking about the issues,” she said.

And conservatives also argue that concerns about their legislation closing most abortion clinics are largely overstated anyway.

It’s also important to note that these fights are playing out early in 2013; Akin and Mourdock’s impolitic comments came at the height of a presidential election season, when even the most benign remark can be instantaneously amplified into a national controversy.

“We know midterms are different than presidential elections. So there may be a strategy related to this based on what voters they think might turn out in the midterm,” Woodhouse conceded. That’s not to mention that many of the Senate seats Democrats must defend in 2014 fall on more reliably Republican turf, and House seats have largely been drawn to protect GOP incumbents.

But, he added: “If they weren’t already shrinking at a party based on where they were on immigration and other issues, they’re certainly not doing any favors.”

Related:

• House passes ban on abortions after 20 weeks of pregnancy


• Texas Senate gives final passage to abortion bill delayed by filibuster


• North Carolina Republican governor threatens veto of abortion curbs

This story was originally published on Sat Jul 13, 2013 12:58 PM EDT

Will abortion backfire on GOP?

Germany Warns Against "Silvio the Savior" (And That May Backfire); Fake Horse Race Odds Get Around Blackouts

Tweet

Italians head to the polls on February 24-25 to replace the technocrat government of prime minister Mario Monti.

Pier Luigi Bersani, who heads the centre-left Bene Commune (Common Good) coalition was considered a shoo-in a few short weeks ago, at least in the Chamber (the lower house of parliament).

It’s all up in the air now as Silvio Berlusconi, head of the centre-right Il Popolo della Libertà (the People of Freedom) has staged a massive rally in the polls (now blacked out). Berlusconi has been on a rampage lately blaming Germany and Chancellor Angela Merkel for the unemployment problems in Italy. It’s a populist message that is resonating well with voters.

Beppe Grillo’s Movimento 5 Stelle (Five Star Movement) has been largely ignored in the Italian press, yet Grillo has been wildly popular at rallies. Grillo has a chance to come in second, and I would not be surprised by a first place finish.

Mario Monti, who heads the centrist Con Monti per l’Italia (With Monti for Italy) coalition, is running a very distant 4th.

“Fare per Fermare il Declino” (literally “Act to Stop the Decline”, acronym FiD), is a primarily Libertarian party founded less than a year ago but until a recent stumble had been gaining enough steam to possibly overtake Monti.

For further analysis of FiD and the other parties, please see European Reader Offers Insights on Upcoming Italian Election

Poll Blackouts

Officially, pollsters cannot post poll results in a blackout period before the election. That blackout period started February 9. Here is a snapshot of the polls on February 8.

Those results are misleading because they do not include undecided voters, and the undecided vote is a whopping 20-25 percent!

With such little difference between Berlusconi and Bersani, and with huge rallies for Beppe Grillo and Berlusconi, any outcome is possible. Will Grillo take votes from Berlusconi or Bersani (or both). If enough of both I could even envision a win. If he takes more votes from Bersani, then Berlusconi is likely to win.

From my experience, late deciders break in a massive way for one candidate or the other (and in the US election I predicted for Obama). Here, it appears against Bersani (to who is more uncertain).

Fake Horse Race Odds Get Around Blackouts

Adding more confusion rather than clarity, Yahoo!News reports Fake horse racing blog dodges Italy’s election polls blackout

A blog appears to have found a way around a publishing ban on polls in the two weeks before the vote by writing up the results of pretend “underground horse races”, which appear to reflect each party’s standing.

On the final day polls could be published before the blackout fell, bloggers Andrea Mancia and Simone Bressan posted “The illegal races return!” on their site Notapolitica.it setting out the main “stables” and “jockeys” competing.

In line with the last published official polls, the winning horses of Tuesday’s “San Nicola Racetrack” came from the “Bien Comun” stables, a thinly disguised name for the centre-left “Italia Bene Comune” coalition.

The centre right of former Prime Minister Silvio Berlusconi was shown coming in just 3.5 “seconds” behind.  Using a mix of puns and French, Notapolitica.it renders centre-left leader Pier Luigi Bersani as jockey “Pier le Smacchiateur” and Mario Monti as “Mario de la Montaigne”. Berlusconi is dubbed “Burlesque”.

Horses representing Beppe Grillo’s 5-Star Movement are referred to as “stellar”, while the names of races allude to different pollsters. “San Walter Giuliano Racecourse”, for example, appears to refer to research group SWG.

It is difficult to say if those are official polling results or fictional. Assuming the polls are accurate (not an assumption I am ready to make), it is still difficult to know how undecided voters were handled.

Germany Warns Against Berlusconi

Of potentially more importance, Berlin Warns Italians against Berlusconi

Here are a few examples from the story.

German Finance Minister Wolfgang Schäuble reportedly said (but later denied) “Silvio Berlusconi may be an effective campaign strategist, but my advice to the Italians is not to make the same mistake again by re-electing him.”

Polenz, a senior member of Chancellor Angela Merkel’s Christian Democrats, said: “Italy needs political leaders who stand for the future. Berlusconi is certainly not one of them.”

One Italian bank even went so far this week as to issue a report arguing that a Berlusconi election would almost certainly force the country to apply for emergency bailout aid from the EU. Mediobanca, Italy’s largest investment bank, wrote that “a last-minute Berlusconi victory would scare the market sufficiently to put pressure on the spread.”

“Silvio the Savior”

In Italy, the opposite is happening. Spiegel reports Berlusconi’s Faithful: ‘Only Silvio Can Save Italy’

Adoration of Berlusconi in Italy remains widespread. In the parallel universe occupied by his followers, there is no room for doubt about Berlusconi and lines are clearly drawn. Silvio is good and the others are bad.

These fans gather at his speeches, like the Saturday rally in Palermo, where thousands crowded into the venerable Teatro Politeama. There were women in long fur coats and fine gentlemen in three-piece suits. Dock workers like Ferrante squeezed with them through the entrance, everyone pushing and shoving each other like adolescents at a rock concert. The hundreds who didn’t make it in must stand outside.

Silvio the Savior

Fans of the 76-year-old ex-premier see him as more than just a beacon of hope. “Berlusconi will now start a revolution,” says teacher Marinella Romano. She confesses “I have always loved Silvio.” Donatella Catalano, a friendly retiree, gushes, “He stands for everything that is good in the world.” The unemployed Ferrante says that “only Silvio can save Italy, he will bring us much good.”

Fully a quarter of Italians are prepared to vote for Berlusconi again. It is an astounding degree of homage paid to man who faces allegations of abuse of power and bribery; who faces the scandal surrounding the underage escort Karima el-Marough, alias Ruby Rubacuori; who has been blasted for blatantly misogynistic comments; and who broke many promises as prime minister. Instead, the opposition, left-leaning judges and even the Germans are blamed for all that is not right with Italy.

“It was Merkel who toppled him,” says retiree Catalano, referring to the German chancellor. She then turns to her neighbor and says: “It’s better not to tell the man anything, because the Germans always write negatively about Berlusconi.” Another voice yells: “First World War II and now attacks against Berlusconi!”

The comments are not surprising. In almost every campaign speech, Berlusconi rails against Germany. “Should we continue to allow Germany to dictate policies that ruin Italy?” he calls out. “Nooooo!” scream his followers.

Election Predictions

It’s difficult to judge from this side of the Atlantic, but things do not look good for a viable center-left coalition. At best, Bersani will win the Chamber and lose the Senate. That would likely result in a hung parliament.

Anti-German sentiment in Italy is high already. The entrance of German politicians into the battle may fuel that sentiment in a major way.

It is conceivable “Silvio the Savior” pulls off a stunning upset win in both the Chamber and Senate, but a Senate victory would still require a coalition (no party will come close to a majority).

In theory, Movimento 5 Stelle and Silvio Berlusconi could form a nice anti-Euro coalition and put the Euro to a vote, but given the anti-political party platform of Movimento 5 Stelle it’s hard to see that coalition forming.

Indeed it may be difficult if not impossible for any party to form a Senate coalition if Monti’s party does poorly enough (as I expect it will).

The most likely outcome once again is a hung parliament, and the next most likely outcome may very well be a return of Silvio Berlusconi (rather than a weak center left coalition of some sort that most seem to expect).

Regardless, Berlusconi is no savior (nor is there one to be found in the entire group). There are no good outcomes for Italy.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Mish’s Global Economic Trend Analysis

Germany Warns Against "Silvio the Savior" (And That May Backfire); Fake Horse Race Odds Get Around Blackouts