January 2010 No 2 ISSN 1422-8831 Current Concerns PO Box CH-8044 Zurich Phone: +41 44 350 65 50 Fax: +41 44 350 65 51 E-Mail: [email protected] Current Concerns Website: www.currentconcerns.ch The international journal for independent thought, ethical standards, moral responsibility, AZB and for the promotion and respect of public international law, human rights and humanitarian law 8044 Zurich English Edition of Zeit-Fragen

Iceland and the Demonic Nature of Money How one of the world’s richest countries collapsed over night – and what we can learn from it by Dr Bruno Bandulet When I was flying to Iceland in summer 2006 when other countries are no longer willing to in order to visit the economic miracle near accumulate dollars. the Arctic Circle and to talk to people of the This explains sufficiently why Iceland was Issue Bank and of Kaupthing, the biggest pri- so vulnerable. But they did not plunge into vate bank, it was utterly unimaginable that ruin by themselves, they had to be pushed. this high developed national economy would Anglo-Saxon hedge funds and the govern- collapse within a few days in October 2008. ment of Gordon Brown, the perfidious Albi- Measured against its per capita income Ice- on, saw to that. How the drama was staged land was then richer than the US, Germany is subject of a book by Ásgeir Jónsson, chief and Great Britain. They had an exemplary economist of the meanwhile nationalised pension system with capital cover, the state Kaupthing bank. The book is well written, debts amounted to only 27% of GDP, the gov- well translated and reads like a thriller. The ernment’s budget showed a surplus, the cred- author manages to present complicated mat- itworthiness of state securities was AAA [tri- ters in a comprehensible way. ple A, highest creditworthiness], and the low Interestingly enough, they succeeded only taxes an example for the whole of Europe. at the second try. The hedge funds started their first attack in winter 2005/2006, when Iceland – laboratory and writing the Icelandic krona had become the darling on the wall of carry traders, while the central bank was Although in 2006 some risks and dark sides standing on the sidelines looking on while were looming due to the private sector’s for- money creation was speeding up and when eign debts and an enormous current account economy and stock market were already pre- deficit (compare Gold&Money Intelligence, cariously overheated. Jónsson vividly ex- August/September 2006), aggravating factors plains in his book how the hedge funds were were necessary that the financial- and eco- hunting in a pack, how the attack was worked nomic system was going to collapse in the out by an informal club of 50 similar funds following two years. In 2008 the small island (minimum member fee 50 000 dollar), how turned into a laboratory and the writing on Reykjavik, Capital of Iceland. (photo zvg) the krona and bank shares were short sold, the wall for the entire western system, which and at the same time the fall was being heat- was based on artificial money without cover- and produce a successful balance as clever in- rencies; and second, when it became tough, ed up by using credit default swaps. A “triple age. The question arose whether other nations vestors.” there was no “lender of last resort”, i.e. a cen- play”, in which one effect is reinforced by would experience anything similar in future. As always in such cases, the catastro- tral bank. In 2008 the central bank (the Sedla- the other two. This worked for a few months However, the three big Icelandic banks had phe was caused by a combination of per- banki) did not have the necessary foreign ex- until the Icelandic government started a not been involved in the dot.com bubble, sonal and third-party negligence. Kaupthing change reserves. They could not print dollars counter-attack, in one case they lodged an which burst in 2000, nor had they invested and the others had bought so many interests or euro, only Icelandic kronas, which were official complaint, until the US house Mor- in real estate junk bonds and securitizations and shares in companies in Scandinavia and of course inacceptable for paying back any gan Stanley recommended their customers to which were responsible for the crash in Eu- Great Britain (of course on the nod) that just foreign debts. Therefore the first lesson is: buy Icelandic bank shares again because the rope and America in 2008. On a list com- before the collapse their assets had climbed when a nation affords a high current account country “could not be driven into a collapse.” piled by management consultants Arthur D. to 200 billion dollar, i.e. eleven fold the Ice- deficit and thereby runs into massive foreign At the end of May everything was over – at Little in 2006, about the most efficient Euro- landic GDP. The relation was similar to the debts (which is applicable to the US as we least for the time being. pean banks, Kaupthing was number 2. And one in Switzerland – but with two significant all know), they should have sufficient inter- As it turned out in 2008, the so-called in November 2007 the UBS wrote about the differences: first of all, two thirds of the debts nationally acceptable currencies, which they “Geyser-crisis” of 2006 had been just fore- same money houses that was going to col- accumulated by the Icelandic private sector can produce themselves if necessary. There- play and a last warning. If the banks, accord- lapse in 2008 “The banks are well managed (not by the government) were foreign cur- fore the game will end for the USA only ing to Jónsson, had drawn their consequenc- es, they would have been able to sell their foreign equity investments with “enormous Iceland’s President has Exposed Anti-Democratic EU profit”. However, the tragic end became ob- by William A. M. Buckler vious on 31 January 2008, when a dubious group of hedge fund managers followed an Actually, Iceland is not “inside the European and the UK, Germany and the Netherlands international shock and outrage was instant invitation by the US banks Merrill Lynch and Union” (EU) as yet. Iceland certainly wants chipped in with a further 5 billion euros. For and palpable. Britain and the Netherlands im- Bear Stearns and met at Hotel 101 in Reykja- membership in the EU, but the granting of this, Iceland paid a very steep price. Official mediately warned that Iceland would be fro- same was delayed by the small matter of a interest rates were immediately raised to 15.0 zen out of the EU with the financial services continued on page 2 banking crisis in September/October 2008 percent. The future was made harder as all minister, Lord Myners warning that the na- and is now being even more adversely threat- the ratings agencies instantly downgraded tion risked “pariah status”. The ratings agen- ened by a decision by the President to give Iceland’s sovereign debt. The Icelandic kro- cies instantly downgraded Icelandic debt to the Icelandic people a direct say on wheth- ner plunged. And the Icelandic stock markets, junk status. Warnings about the IMF bailout er and how its failed banking sector is to be which had already fallen by 30 percent since proliferated. Two days later, on 7 January, the bailed out. the start of October 2008, were shut down. Icelandic President spoke up again. “Iceland When they re-opened on 14 October, 2008, fully recognises its obligations and respon- The background the immediate fall wiped out another 77 per- sibilities to pay ... (what) will be put to a ref- In September/October 2008, Iceland’s three cent. The Privateer had warned of the like- erendum is simply in what way and in what largest banks effectively collapsed after being lihood of this collapse six months earlier – forms and on what terms.” In an interview caught up in the worldwide lending freeze in issue number 600 published on 30 March, with the UK “Financial Times”, Mr Grimm- which threatened to take down the global fi- 2008. After describing the situation, this son went further: “I hope that the people of nancial system. These banks found it impos- was our conclusion: “The US is Iceland writ these two countries and their political leaders sible to roll over their short-term debt and, at large.” And so it remains, the single differ- will, in keeping with the long-standing dem- the same time, were faced with full-fledged ence being that the US (and the other G20 na- ocratic traditions of Britain and the Nether- bank runs on their overseas branches – mainly tions) can still sell their sovereign debt both lands, acknowledge that a referendum is a in the United Kingdom. The Icelandic banks domestically and internationally. democratic way of making a decision.” (em- threatened with collapse dwarfed the Icelan- phasis by The Privateer) dic economy and the Icelandic central bank. The latest twist – It is, of course, the baldly stated policy of Iceland’s 50 billion euro external debt was “Let my people decide” the US Fed and the unspoken but obvious 80 percent of which was held by the banking The loans extended to Iceland at the height policy of almost all global governments that system. Iceland’s annual GDP was the equiv- of the October 2008 crisis were expected to the “people” should have absolutely no say alent of 8.5 billion euros. Iceland was faced be repaid by the usual method. On 5 January, whatsoever in the measures employed to pull with imminent sovereign bankruptcy. President Olaf Grimsson stunned the global their nations out of the global financial crisis. The banks were duly nationalised. And the financial system by refusing to rubber stamp Iceland’s president has exposed that fact very IMF and Europe stepped in. The IMF loaned the repayment schedule into law. Instead, he neatly. • Asgeir Jonsson. Why Iceland? How One of the 2.1 billion euros, Iceland’s Scandinavian announced that it would be put to Iceland’s Source: The Privateer, Mid January Issue, Number World’s Smallest Countries Became the Meltdown’s neighbours lent another 2.5 billion euros, 243,000 voters by means of referendum. The 645, 2010, page 8. Biggest Casualty. ISBN: 978-0-07-163284-3 Page 2 Current Concerns No 2 January 2010

DECLARATION by the President of Iceland, Ólafur Ragnar Grímsson

The collapse of our banks and the dif- that the President has received from in- conditions for this recovery. The solution ficulties following in the wake of the dividual Members of Parliament indicate of the Icesave dispute is a part of such a world economic crisis have created pro- that the majority of the Members are in harmonious process. It is also a prerequi- found difficulties. Although the Icelan- favour of holding such a referendum. site for the nation to be able to regain its dic state has undertaken various liabili- Since the new Act was passed by the former strength as soon as possible and ties of a magnitude greater than those Althingi, the President has had extensive embark, in collaboration with others, on involved in the Icesave case, the debate discussions with Ministers in the Govern- a programme of recovery which will se- on this case has become the focus regard- ment of Iceland: the Prime Minister, the cure the welfare and prosperity of all Ólafur Ragnar Grímsson ing how we deal with the challenge of Minister of Finance, the Minister for For- people in Iceland. In the President’s dec- the past and also of the future. eign Affairs and the Minister of Econom- laration of 2 September 2009, it was stat- thingi passed on 28 August, on the basis The Althingi has now again passed leg- ic Affairs. ed that the solution would have to “take of the agreement with the Governments islation on this matter. This amends the It is the cornerstone of the constitu- account of the fair rights of the nation, of the United Kingdom and the Nether- current law, the Act No. 96/2009, which tional structure of the Republic of Iceland Iceland’s interests in the years ahead and lands, will continue to be law, recogniz- the Althingi passed on 28 August and that the people are the supreme judge of a shared international responsibility.” ing that the people of Iceland acknowl- which was based on agreements with the validity of the law. It has steadily become more apparent edge their obligations. That Act was the Governments of the United Kingdom Under the Constitution, which was that the people must be convinced that passed by the Althingi with the involve- and the Netherlands. The President ap- passed on the foundation of the Repub- they themselves determine the future ment of four of the parliamentary par- proved that Act on 2 September, with a lic in 1944, and which over 90% of the course. The involvement of the whole na- ties, as stated in the President’s declara- reference to a special statement. nation approved in a referendum, the tion in the final decision is therefore the tion of 2 September. Following the passing by the Althingi power which formerly rested with the prerequisite for a successful solution, rec- Now the people have the power and of the new Act on 30 December, the Pres- Althingi and the King was transferred to onciliation and recovery. the responsibility in their hands. ident has received a petition, signed by the people. It is then the responsibility of In the light of all the aforesaid, I have It is my sincere hope that this decision about a quarter of the electorate, call- the President of the Republic to ensure decided, according to Article 26 of the will lead to permanent reconciliation and ing for the Act to be subjected to a refer- that the nation can exercise this right. Constitution, to refer this new Act to the prosperity for the people of Iceland, at endum. This is a far larger proportion of At this crucial juncture it is also impor- people. As stated in the Constitution, the the same time laying the foundations for the electorate than the criterion that has tant to emphasise that the recovery of the new Act will nevertheless become law good relations with all other nations. been referred to in declarations and pro- Icelandic economy is a matter of vital ur- and the referendum will take place “as posals from the political parties. gency. Clearly, agreement with other na- soon as possible.” Bessastaðir, 5 January 2010 Public opinion polls indicate that the tions and good cooperation with interna- If the Act is approved in the referen- Ólafur Ragnar Grímsson overwhelming majority of the nation is tional organizations and all other parties dum then naturally it will remain in force. of the same opinion. In addition, decla- that have an influence on the country’s If the referendum goes the other way, rations made in the Althingi and appeals economy and financial standing are pre- then the Act No. 96/2009, which the Al-

“Iceland and the Demonic Nature …” who did not trust their bank notes any more, they did before, but the latter have soared in continued from page 1 bought luxuries such as Bordeaux wine, co- the course of this crisis and, from a present- Article 26 gnac or Rolex watches. It was a panic which day perspective, will reach a peak of 140% vik. Their conversation became increasingly almost broke out in Europe as well and the of the GDP by 2010. Approximately, half ac- of Iceland’s Constitution sneering, Jónsson remembers, when the man- US, a reminder that acceptance of uncovered count for Icelandic krona, the other half are If Althingi has passed a bill, it shall be agers boasted with their short sellings, and paper currency is solely a matter of trust. foreign currencies. At the behest of London submitted to the President of the Re- then went on to the bar where the wine flowed and exerting brutal pressure, the EU is trying public for confirmation not later than freely until the first of them keeled over. Their Abroad: Denied Support to make the Icelandic government, and thus two weeks after it has been passed. tactics were the same as in 2006, but the irony and Disgraceful Consequences their tax-payers, liable for their debts, to an Such confirmation gives it the force of of it was that some of the involved American The Federal Reserve, the Bank of England extent no other sovereign state would accept. law. If the President rejects a bill, it shall banks fell even before the Icelandic. and the European Central Bank left the Ice- Comparisons with the Versailles dictation and nevertheless become valid but shall, as After the crash of Lehmann Brothers in landers out in the rain. Moreover, the British its financial consequences are not far fetched. soon as circumstances permit, be sub- September 2008 and the collapse of the inter- financial services authority confiscated their Apparently, they want to use the Icelanders as mitted to a vote by secret ballot of all bank-market, the Icelandic institutions could deposit business with Kaupthing, and drove a warning – a whole generation would be fi- those eligible to vote, for approval or re- not hold on any longer. On 6 October the its subsidiary Singer&Friedländer into bank- nancially enslaved. Meanwhile the pressure on jection. The law shall become void if re- government announced an emergency law, ruptcy, although in September it had almost the krona has subsided due to capital controls. jected, but otherwise retains its force. on 7 October Glinir and Landsbanki, and on rolled in money. Other Icelandic assets were On the peak of the catastrophe it had fallen Source: www.government.is/constitution/ 9 October Kaupthing were nationalised. In frozen by the Brown government on the basis to 300 Euro; lately the onshore exchange rate the first days in October there was a bank- of the anti-terror-law from 2001, and also on (in Iceland) was at 184 and offshore (in Lon- run which was reminiscent of the 30s. People 8 October prime minister Gordon Brown had don) about 220. While their economy is still The Petition were queuing in front of the banks in Reyjk- the Icelandic central bank and the Icelandic shrinking, the balance of trade in Iceland is „I call on the President of Iceland, Mr. javic, who emptied their accounts until only Treasury put on the same terror list with al- in the plus again, so that they will have good Ólaf Ragnar Grímsson, to veto the Ice- a few 5000 krona bills (the biggest bills) were Qaida and the Taliban. Since then London’s prospects to get back on their feet in the near save legislative bill. I consider it to be a left. The government had new money print- reputation as a bastion of legal security has future – provided the EU and the IMF deign reasonable demand that the economic ed abroad, but in the eastern part of the island been severely tarnished. In addition, Gordon to fair conditions with regard to debt repay- burden placed on the current and fu- there were small riots among Polish migrant Brown declared Iceland “insolvent”, which is ment. Why should the Icelanders pay for the ture generations of Icelanders, in the workers, grocery shops were crowded with as incorrect today, as it was then. The govern- foreign indebtedness of Landsbanki/IceSave, form of a State guarantee for Icesave customers stockpiling supplies, and some ment in Reykjavik is clearing their debts like which amount to 60% of the annual econom- payments to the UK and Dutch govern- ic performance? The British demands are dis- ments, be subject to a national referen- graceful and immoral. dum. “ History Is Important to the Icelanders But even at best it will take a few years to stabilise the economy and the financial sys- “The dominant culture in the new coun- es of Icelandic policemen in the present tem. The real income and therefore standard The online petition was started on 25 Novem- try would become distinctively Nordic day. […] of life have taken a tumble, and unemploy- ber 2009 at the InDefence website (www.in- ment has reached the German level. Those defence.is). The resulting number of bona though the Celtic element in the popula- To Icelanders, the ancient founders of fide signatories was 56,089, with 55,160 signa- tion would be manifested in an odd ten- their nation are gone but never forgot- who possessed financial assets suffered most. tures from Icelanders of voting age, or in other dency toward literacy and storytelling. ten. Most of them are known by name, The share market lost 95%, there are now words 23,3% of all voters in Iceland. Icelanders became bards of the Viking and all living Icelanders can trace their hardly any Icelandic titles traded on the stock Source: www.indefence.is world and witnesses to history. […] bloodline to them through genealogi- market. But also the real, i.e. inflation-adjust- The same instincts that had made the cal records and a family tree that is root- ed house prices fell by 20% in 2009. Accord- chiefs flee Norway contributed to the ed in the days of the original settlement. ing to a prognosis by the central bank they foundation of a parliament in 930 – the […] will lose another 25% in 2010. If you do not expect the worst for Western Eu- Althing. […] Iceland has never excelled at collec- In case an Icelandic retail investor held cor- rope in the coming years, you should study the The Icelandic republic was simple tive, elaborate planning, discipline, or porate bonds, he lost practically everything in case of Iceland. A number of useful lessons and effective. The country was divided attention to detail. It has never need- the collapse. Whoever had parked money in a can be drawn from that example. into 39 constituencies (Godord), each ed a strong central command to organ- bank did not have a nominal loss, but would And the hedge funds? After satisfying their of which elected a single representative ize for war or national defence, and be- have suffered a loss of purchasing power due greed with their short sellings of krona and (Godi) to the national assembly. This po- cause of its diminutiveness, it has never to a temporarily very high inflation, which bank shares, they changed their position on litical system, much like Jeffersonian de- required the construction of a sophisti- is meanwhile regressing. Safest investments the peak of the crisis, bought bank bonds very mocracy in the united States, was built cated bureaucracy. In the Icelandic mind, would have been inflation-indexed bonds, so- cheaply and managed to increase their stakes from a yeoman class of free, independ- success is the reward for personal dar- called HFF bonds. Also pension funds sur- six fold. As soon as the insolvent banks are ent farmers who could switch their al- ing, ingenuity, improvisation, and an eye vived the crises relatively undamaged, because wound up, they will be owned by foreign legiance to a different Godi whenever for the main chance – just as it was in the half of their capital is invested in inflation-in- creditors, i.e. bond owners. One always wins. they chose (women could act as Godis Viking times.” dexed krona bonds (and only a small amount The Icelanders are closing ranks, they prefer as well as men, provided they had a man Source: Ásgeir Jónsson: Why Iceland? How in foreign shares). Far and away the best in- buying home products to foreign ones, they who spoke for them in the Althing). The One of the World‘s Smallest Countries Be- vestment would have been gold. However, be- are reading more books than ever before, and motto of the commonwealth was “with came the Meltdown‘s Biggest Casualty. fore the crisis nobody in Iceland thought of are responding to the collapse with a surpris- the laws we shall build our country,” MacGraw-Hill 2009, buying coins and bars – and now gold is not ing baby boom. This is the reaction of a peo- words that are inscribed on the badg- ISBN-13: 978-0-07-163284-3 available on the island, due to capital controls, ple that has some faith in its future, despite of although possession has not been forbidden. everything.” • January 2010 No 2 Current Concerns Page 3 Iceland: “The EU Mobbed Too Hard!” Why Switzerland needs an aggressive economic diplomacy … by Beat Kappeler If you listen to the people in our country, a lot who hide behind their old wooden desks in encouragement. That would give cohesion The other departments did not like this co- of them suffer from the Federal Council, who the Federal Council chamber. The trendy to the EFTA. This free trade area is vital, it ordinating BAWI because it interfered. Fur- is being double-crossed all the time regarding new years photograph seem like a propagan- settles agreements all over the world, and thermore, it was a cadre-training unit for state foreign policy. Particularly foreign economic da lie. Switzerland must not let it further crumble. and economy. However, the BAWI succeed- foreign policy has become short of breath. Three examples of a good economic for- Last week the Swiss TV in its “Tagesschau” ed in bringing about this cohesion of foreign In two cases there has been criticism here. eign policy are to be lined out in the follow- prophesized the end of the alliance within 50 economic policy, which the Federal Council It was slavish to let themselves be reject- ing: years, instead of giving information. Further- was not able to create. ed by the G20 but to grant 10 million to the At present Iceland quarrels with Great more, Councilor of State Sommaruga once Professor Dieter Freiburghaus, who also International Monetary Fund immediately Britain and the Netherlands about their bil- more offered the EU as an alternative with- complained about the BAWI’s dismantlement afterwards.,No tax without having a say in lion euro credit by means of which Iceland out any contradiction. points to a second aspect of international dip- it, that had been the slogan of the American was demanded to reimburse all depositors of A help for Iceland could also show the lomatic successes – cross compromises. If Revolution and this would aptly fi t the Swiss the bankrupt Icelandic banks. Iceland’s Pres- British and the Dutch that Switzerland on her Federal Councilors negotiate only for their diplomacy. Furthermore, nobody reminds the ident blocked, fi rst of all the Icelanders will part is well able to become disagreeable. In own department, they may never connect two French and US Americans of the fact that as go to the ballots, possibly they will reject the the end there will be an agreement but on a issues – as was the case with the G20 and the well may order our warplanes elsewhere, e.g. payment and simultaneously the access to the better level. Be obstructive and you will be IMF billions or with taxes and combat jets. in Sweden; if they want to continue pester- European Union. somebody. Inquiries, however, at the three re- President Vaclav Klaus gave an example ing us. The EU mobbed too hard – a feeling that sponsible departments of Foreign Policy, of when he signed the new EU treaty for the Such blunder comes about because the Switzerland is familiar with as well. How- Economics, and of Finances generated a de- Czech Republic only under the condition Federal Council does not act as a government ever, Switzerland and Norway should help plorable picture: “There was no request from that he was freed of the Sudeten Germans’ but as a stiff club of administration heads the Icelanders in this situation and give them Iceland”, was one answer. “One should en- demands. Swiss negotiators feel that such quire in the other department”, was another procedures are unfair. But in the tax quar- answer. In short: Passivity, surprise, but no rel, Germany, the EU and the US threatened policy planning. The second example of an Switzerland exactly with such chicaneries. economic foreign policy was the tax dispute Third, the Federal council has to become a with the EU. A negotiation detail with Italy government that will get together for half an at the last October gives a deep inside: Insub- hour every day or meets for telephone confer- ordinate Italian Minister of Finance Giulio ences. Even better would be a President in of- Tremonti wanted to be vice prime minister. fi ce for several years, without being head of This angered Silvio Berlusconi and made him a department and endowed with the right to express publicly that we would like to get rid set the agenda. of him. Just then the Swiss Department of Fi- Lacking all this, the Federal Council will nance declared they wanted to solve the dis- stay what it has been up to now in the eyes pute diplomatically and this way backed up of innumerable citizens: A major source of Tremonti. Had Switzerland brought the big irritation about the otherwise rather happy guns in immediately, Tremonti’s chair would country and its politics. Its behaviour is dam- have toppled and may be the archenemy had aging for the country. The future ambassa- tumbled. The big guns were brought in at dor to Berlin, Tim Guldimann, demanded the last, but four days later: the tax dossier was dismissal of the small-state-complex in the suspended. At that time, however, Berlus- same issue of the “Schweizer Monatshefte”, coni and Tremonti had already got together, in which Freiburghaus had published his arti- again, and Italy’s government was united – cle. Mores self-confi dence, that is correct, but and stayed rigid. also the suitable instruments. • What would a good foreign economic pol- Source: Sunday NZZ of 10 January 2010 icy look like? First of all it would require a certain structure, which was destroyed by re- Beat Kappeler was a freelance journalist from 1977 (photo zvg) signed Federal Councilor Pascal Couchepin to 1992, Secretary of the Association of Unions, then in 1999 – the Federal Department for Foreign team member of the Weltwoche and author for Sun- Economy (BAWI) . This department with a day NZZ since 2002. From 1996 to 2000, he taught special secretary of state as the highest trad- social policy as a professor at the university of Lausanne, in 1999 he was doctor h.c. at the university inging diplomatdiplomat waswas a centrecentre ofof competencecompetence of Basel and from 1998 to 2007 member of the Fed- Iceland, China and Russia Share Responsibility for the with their ownown expertsexperts in currency,currency, trade, de- eral Communications Commission. He has published velopment,velopment, agricultureagriculture andand energyenergy issues.issues. several books. World Economy, World Peace and International Security

The chargé d’affaires a. i. - Iceland declares its withdrawal from Mrs Olöf Hrefna Kristjansdottir, NATO and its future neutrality, First Secretary of the Embassy of the Re- therefore, Iceland waives on the desired The Crisis is Not Over Yet public of Iceland, membership in the European Union, - Iceland seeks the protection of the nucle- by William A. M. Buckler H. E. Mr Wu Hongbo, ar powers China and Russia, TheThe y yearsears f fromrom 1 1980–89980–89 w wereere n naturallyaturally points. It did not regain that level until Octo- Ambassador accredited and exraordinary - China and Russia errect a military base enoughenough knownknown asas tthehe ““Eighties”Eighties” aandnd ffromrom ber 2006. In the intervening period of nearly of the People‘s Republic of China, on Icelandic territory, 1990–991990–99 t thehe “ “Nineties”.Nineties”. T Thehe d decadeecade j justust seven years, the last vestige of fi scal or mon- - China and Russia pay for the use of their endedended couldcould havehave beenbeen calledcalled thethe “Zeroties”,“Zeroties”, etary sanity was jettisoned. US offi cial inter- H. E. Mr Vladimir Kotenev, Ambassador bases in Iceland an annual lease, which butbut tthathat hhardlyardly rrolledolled ooffff thethe tongue.tongue. ItIt mightmight est rates were hauled down by main force by Extraordinary and accredited of the Rus- will allow Iceland, to redeeem all short- havehave beenbeen ccalledalled tthehe ““Noughties”Noughties” oorr ““Naugh-Naugh- the Fed throughout 2001, the sequence accel- sian Federation term external debt after the banking cri- ties”ties” (“nought”(“nought” oror “naught”“naught” beingbeing thethe BritishBritish erating in the grim aftermath of 9/11. Federal sis. equivalentequivalent ofof zero)zero) – whichwhich itit waswas inin manymany budget defi cits, which had been all but elimi- Very dear Mrs chargé dáffaires Kristjans- The strategic and political benefi ts for all respectsrespects – bbutut tthathat wwasas ddeemedeemed iinappropriatenappropriate nated in fi scal 2000, soared back upwards. Fi- dottir, Excellency Wu, Excellence Kotenev, countries involved are so obvious that I do byby whoeverwhoever iitt isis thatthat ddecidesecides suchsuch things.things. nancial leverage blew out to levels never be- not have to discuss them at this point. Direct Instead, popular parlance has dubbed the fore so much as contemplated. New fi nancial I have the honor to inform you as follows: or indirect disadvantages are not apparent. decade 2000-09 the “Oughties”. instruments were invented and blown up into Your countries are peace-loving states which It would be extremely important to break This is a highly appropriate name for the multi $US TRILLION behemoths. Program bear a special responsibility for world peace up the NATO structure in this way, and to decadedecade jjustust eended.nded. TThehe llistist ooff tthingshings wwhichhich (read computer) trading took over. Asset pric- and contribute to international security. position a neutral Iceland under the protec- “ought” to havehave been done is endless. Need- ing became imaginary as the “derivatives” Nothing is more threatening to interna- tion of international nuclear weapons be- lessless toto say,say, nonenone ofof themthem actuallyactually waswas done.done. behemoth was fuelled without ever having tional peace and security than the dire straits tween the USA and Europe. In this sense, The result, especially in the US, is that manmanyy submitted to any type of market trading. of the global economy, the unfair distribu- I hope that Iceland does not do damage to politicalpolitical aandnd eeconomicconomic aanalystsnalysts hhaveave a ddif-if- Then, in mid-2007, the “GFC” (Global Fi- tion of wealth and poverty, and the pursuit its honor, its pride and sovereignty, in par- ferentferent nnameame fforor tthehe fi rrstst ddecadeecade ooff tthehe 221st1st nancial Crisis) hit. In the latter half of 2008 of unnatural alliances under the leadership ticular, by accepting the bad compromises century.century. TheyThey callcall itit thethe “lost“lost decade”.decade”. AndAnd - EVERYTHING collapsed. By early March of the United States for power, hegemony and coward conciliation proposals of the so it was.was. 2009, global fi nancial apocalypse loomed. As and domination. Former German minister Joseph Martin In the “developed world”, the vast majority a last gasp, the Bank of England (BoE) and The means of the United States, NATO, (aka "Joschka") Fischer, whose political ofof peoplepeople endedended thethe decadedecade worseworse offoff thanthan theythey the Fed announced in March 2009 that they and the European Union are economic and performances during his tenure in Germa- beganbegan it.it. That’sThat’s bbadad eenough.nough. WWhathat iiss ffarar wworseorse were going to save the (fi nancial) world by military wars, with the aim of suppressing ny, in Europe and the world only lead to un- isis tthehe ssimpleimple ffactact tthathat ggovernmentsovernments eevery-very- directly buying the debt paper their govern- all other nations and its geo-strategic inter- rest and have caused the maximum damage wherewhere decideddecided thatthat theythey werewere goinggoing toto makemake itit ments must sell in order to function. A failure ests. possible. asas hardhard asas possiblepossible toto allowallow anyone,anyone, includingincluding by these governments to do so was deemed Now, however, a situation has eveolved I take this opportunity to assure the em- themselves,themselves, toto learnlearn fromfrom theirtheir mistakes.mistakes. TheThe too big to contemplate. Instead, it was post- that could help to rearrange the confl ict- bassies of the Republic of Iceland, the Peo- “Oughties”“Oughties” waswas a decadedecade ofof fi nancialnancial boomboom poned. ing interests and the global distribution of ple’s Republic of China and the Russian andand bbustust unprecedentedunprecedented inin modernmodern history.history. We enter 2010 on a note of rising optimism power from scratch. Federation of my due respect. from offi cial circles – the most dangerous sit- When “failure” becomes too big Please imagine that the following points Réne Schneider uation there is. • are not a utopia but a reality: to contemplate www.schneider-institute.de OnOn 1144 JJanuaryanuary 2000,2000, almostalmost exactlyexactly tenten yearsyears Source: The Privateer, Mid January Issue, ago,ago, thethe DowDow closedclosed forfor thethe dayday atat 11722.9811722.98 No. 645, 2010, page 1 Page 4 Current Concerns No 2 January 2010 The “National Indebtedness” Project The situation of the European Union by Karl Müller, Germany Indeed – according to data of the Ger- finance industry. For a long time Wall Street man Bund der Steuerzahler (Federation of has been co-ruler in Washington. London is Taxpayers, a registered society), the public the second largest center of high finance next households paid 64.2 billion euro in interest to New York, and it will remain so, because rates in 2005, in 2006 they had already ar- the monster must not be angered with too rived at 64.9 billion euros, in 2007 at 66.1 bil- burdensome regulations.” lion euros, in 2008 at 67.9 billion euros, and in 2009 the sum will probably have amount- Now they are calling “Hold the thief!” ed to more than 70 billion euros (as was the On 5 January, the “Handelsblatt” published case on 19 January 2009). These interest pay- an interview with Joachim Fels, economist ments were mainly made to foreign financial with Morgan Stanley. Fels says, “Greece was establishments. In a press release of 16 De- only a foretaste for what will happen in other cember 2008, the Federal Republic of Ger- countries as well. The governments took over many’s financial agency (Deutsche Finanza- a great amount of of bad assets and debts gentur GmbH), which is responsible for the from an insolvent private sector, haven’t they. credit procurement of the federation, listed […]In 2010, the financial markets will play the first 10 creditors for the different kinds of the game national bankruptcy and thus in- government bonds. Among them were Bar- flation. […] The investors will demand pay- clays Bank, Deutsche Bank, Merill Lynch, ments of higher risk premiums and will push Spiegel online writes: “The governments in London and Washington have long since made their countries de- UBS, Morgan Stanley, The Royal Bank of up the long-term interests. That will force up pendent on the well-being of the finance industry. For a long time Wall Street has been co-ruler in Washington. Scotland, Société Générale, J.P. Morgan, the costs of new national debtsstarting from London is the second largest center of high finance next to New York, and it will remain so, because the monster Goldman Sachs and Citigroup. 2011.” Costs, which in the end – whether with must not be angered with too burdensome regulations.” (photo ef) or without inflation – can only be settled by How will the states react? the taxpayer. • On 10 September 2009, the German financial follows “The job market dampens the mood, But what will happen, if the initially speci- paper “Handelsblatt” shocked its readers with and the distribution fight becomes more heat- fied prognoses on the coming national debts 1 Data taken from Hans-Ulrich Thamer. Verführung the headline “Exploding National Indebted- ed” and the same newspaper reported on will come true? How will those responsible in und Gewalt. Germany 1933 – 1945, 1994, p. 470 ness”. According to an unpublished study Great Britain on 30 December “Warning of the EU and in the states react? Will more and 2 Other authors go even further than Sutton. Thus F. William Engdahl writes in his 2009 book “Der by the European Commission, national in- further decay of the British pound”. German more EU states have to explain their financial Untergang des Dollar-Imperiums. Die verborgene debtedness will enormously rise in some EU citizens will have to face rapidly rising num- bankruptcy? Will more and more EU states Geschichte des Geldes und die geheime Macht des member states until 2020 due to the world- bers of unemployed, too, and higher wages be downgraded by the rating agencies in their Money Trusts” (ISBN 978-3-938516-89-8): “Long wide financial crisis. For Great Britain, an in- for the working part of the population will creditworthiness due to their high debts – as before the victory of the United States in World creasein debt to 180% of the gross domes- hardly be likely in 2010. has already happened in some cases – and War II it was clear to the Rockefellers and the ex- ecutive committees of the largest American enter- tic product (GDP) was forecast. At the end of Obviously the theory that higher public ex- then charged with even higher interest rates prises and banks that the American market was 2008, the indebtedness in Great Britain had penditures will lead to more prosperity, does by the financiers? Will the powerful states in much too small for their ambitious plans. In their “only” reached about 50%. not work anymore. Whether it has ever func- the EU put even more pressure on those states opinion America had to proceed globally in order In other EU countries, the article claims, tioned effectively is very questionable. The with little influence so that they have to sub- to reach the ‘Manifest Destiny’ mentioned before, national indebtedness will also rapidly rise: much-praised “new deal” of US-American mit to the financial interests of the larger ones the boundless expansion of American power. […] On reflection, the extensive and little known partic- in France for example to 125%, in Germany president Franklin D. Roosevelt in the thirties and mutate even further toward a “directo- ipation of the families Rockefeller, Harriman and to somewhat more than 100% of the GDP. of the past century had notched up an unem- rate of the big ones and some of their vassals” Bush in the vital support for the war preparations At the same time, the study dampened all ployment rate of 26,4% after 5 years – ensu- (Jean Asselborn)? Will the EU become an in- of the third Reich had more ambitious goals than too euphoric growth expectations: “In the ing some short term illusory successes.1 And creasingly blatant instrument of redistribution the mere sympathy for the philosophy and methods foreseeable future the EU will have to cope Hitler’s “German economic miracle” – just in favor of the high finance? Will increasingly of Hitler Germany, as for instance the gagging of workers and the organization of a command econ- with growth rates of less than 1.0%.” like the US American miracle later on – could sumptuous interest payments to the financiers omy. Their goal was not to support victorious Ger- If the economic situation should resurge, only be achieved by grasping the wealth of eventually replace the actual state operations? many but they wanted a world war, from which an the states would have to reckon with distinct- other peoples, at the expense of peace and Will more national services be privatized – so American century, more exactly said ‘a Rockefeller ly higher interest rates and thus higher inter- millions of victims. that public interest becomes an even smaller century’, should emanate after 1945. Bush, Rock- est obligations. and profit an even bigger criterion for state efeller, Harriman, DuPont and Dillon were con- But who is making the profit? expenditures? Or will the governments of the siderably involved in granting the Third Reich im- “Exploding national indebtedness” portant support in its early phase, as it was part of Antony C. Sutton drew the attention to some EU member states try their luck with a value- their large geopolitical plan to make the Europe- According to the available information, a fur- interesting aspects in the third volume of his destroying inflationist policy? an great powers, Russia and Germany in particular, ther increase of the national indebtedness in Wall Street Trilogy “Wall Street and the Rise The “Neue Zürcher Zeitung” attached a destroy each other. As mentioned a British strat- the countries of the EU (as well in the USA of Hitler” (Buccaneer Books Inc, 1999, ISBN- supplement to its edition of 5 January called egist spoke of these two powers that they should make each other bleed to death, and that should and in Japan) is likely indeed – far beyond 13: 978-1568497266): “Looking at the broad “The financial year 2009”. There you could pave the way for the hegemony of the American any reasonable limits. On the basis of num- array of facts presented in the three volumes read, “The financial year 2009 might have century.” (pp 165 and 192) bers provided by the European Commission, of the Wall Street series, we find persistent made many investors happy. After the dramat- Engdahl explains that under the leadership of the the EU statistics authority Eurostat as well recurrence of the same names: Owen Young, ic losses in 2008, things were going uphill last Council on Foreign Relations (CFR) and in close as OECD and the Austrian Chamber of Eco- Gerard Swope, Hjalmar Schacht, Bernard year starting from March onward. Prices of agreement with the Rossevelt administration, the money from the Rockefeller Foundation was used nomics prognosticated an increase of the en- Baruch, etc.; the same international banks: many raw materials such as oil and gold re- to set up a War&Peace Study Group during the war tire national indebtedness of all 27 EU mem- J.P. Morgan, Guaranty Trust, Chase Bank; covered soundly, and corporate bonds paid as – and then kept secret – which presented a number ber states from 61,5% of the EU’s GDP in and the same location in New York: usual- well as shares.” As early as 22 December a of studies whose ideology reminds of Nazi Ger- 2008 to 83,8% in 2011, in the Euro-12-Zone ly 120 Broadway. This group of internation- Spiegel online headline read: “Capitulation to many: “The American bank and industry heavy- even up to 88,2%. The permitted upper limit al bankers backed the Bolshevik Revolution the Monopoly Monster. It is the scandal of the weights had to conquer new markets, more space or what was considered to be the ‘Grand Area’ by according to the Euro Stability Pact is how- and subsequently profited from the establish- year: the investment bankers who had near- the War&Peace Study Group. […]Isaiah Bow- ever at a 60% national indebtedness and will ment of a Soviet Russia. This group backed ly torn the world into the financial abyss, use man, founding member of the CFR and head of even now (estimation for 2009) exceed the Roosevelt and profited from New Deal social- their billions to play Monopoly. […] Absurd the War&Peace Study Group at CFR, who during limit with its 78,7% on the average in the ism. This group also backed Hitler and cer- that the perpetrators of the crisis are the big World War II had been known as ‘America’s geo- Euro countries. 8 of the 12 Euro countries tainly profited from the German armament winners. They benefit from the central bank politician’, used another term for the envisaged ‘Grand Area’. Following the example of Hitler’s are indebted by more than 60% of the GDP. in the 1930s. When Big Business should have money for which they virtually paid nothing.” geographic term that justified the German expan- Only Finland, Luxembourg, The Netherlands been running its business operations at Ford Toward the end, the article mentions some of sion on the economic level, Bowman spoke of the and Spain can comply with the conditions of Motor, Standard of New Jersey, and so on, we the background: “The governments in London ‘American economic lebensraum’.” (pp 171) the Stability and Growth Pact. find it actively and deeply involved in polit- and Washington have long since made their For Great Britain the national indebtedness ical upheavals, war, and revolutions in three countries dependent on the well-being of the (Translation Current Concerns) is to rise to 88,2% of the GDP until 2011, for major countries.” (cf. http://reformed-theol- France to 87,6% and for Germany to 79,7%. ogy.org/html/books/wall_street/index.html, However, for the first three quarters of chap. 12)2 2009, the current financing deficit of the pub- Dieter Meyer, a former German head of Germans Sense the Enormous Extent of the Crisis lic households in Germany had risen to 96.9 department in a ministry, operates an internet km. On 7 January “Financial Times” re- year, three times more than in 2008, are billion euros on 29 December 2009, 79.6 bil- site on the national indebtedness in Germa- ported that a German sovereign bond looking for investors. lion euros more than in the comparable peri- ny and in EU-Europe (www.staatsverschul- auction failed at the beginning of The majority of Germans are quite aware od last year, the Federal Bureau of Statistics dung-schuldenfalle.de). He writes that 2008 2010 as the government could not find of the extremely tense situation the Ger- reported. And for the years 2010 and 2011, “scarcely every 8th Euro of the tax revenues enough investors. On 6 January, a fi- man state finances are in. According to approximately 240 billion euro of further in- of the overall public budget” was spent on nance agency, entrusted by the German the Infratest institute’s January poll on debtedness are to be expected, the German interest spending. “On the level of the over- government, had tried to find investors behalf of “ARD-Deutschlandtrend” (po- Institute for Economic Research DIW prog- all public budget from 1965 to 2008, the sum for the 10-year bonds but they failed to litical trends for German public TV chan- nosticated in its latest investigation (press re- of all new indebtednesses and/or deficits attract enough bids to reach the 6bn the nel), a majority of the interviewees – lease of the DIW of 7 January). reached approx. 1,339.9 billion euros and the German government wanted. Analysts right across all parties – rejected plans for amount of all interest spending was appropri- say that trust in the German sovereign further tax reductions (58%), although No contribution to a greater public good ate with approximately 1,514.5 billion euros bonds, one of the world’s most liquid 44% of the Germans feel that their per- These rapidly growing national debts do not […] Credit financing of the public house- and safe assets, is diminishing. Moreo- sonal tax burden is too high. 64% of the lead to increase the common good. On the holds degenerated to a fiscally useless end in ver, there are far too many state bonds interviewees, i.e. 8% more than in the contrary, the news is not very good here, ei- itself. It does not cover the actual costs any offered on the worldwide markets. A last poll, expressed fears that the worst ther. On 24 December, the “Neue Zürcher longer, but finances the self-made repayment total estimated $3,000bn in debt this part of the crisis is yet to come. Zeitung” reported on France, for example, as and interest rates.” January 2010 No 2 Current Concerns Page 5 Switzerland: Closing the Ranks ous on the subject. They did not only want to trol. The question remains, however, whether “We must reckon with rising unemployment solve a few cases, but they wanted a funda- a state should take legal action in order to di- this year, and unemployment leads to aggres- mental re-organization in this field between minish the size of such banks. Forcing them sion. I do not mean in a physical sense, but Switzerland and the USA. That was certain- to found a holding or to take other measures with regard to social and economic questions. ly not foreseeable, it certainly happened as a can do this. We are now examining those dif- That is to be expected. […] result of this UBS history. Together with the ficult questions. We have a team of experts, We may not forget one thing: This country economic difficulties, in which the countries consisting of approximately 10 people, each already has had more than 200 votes, refer- needed money, this led to the fact that we of whom has a lot of experience. This sum- endums on federal level since World War II. were under enormous pressure in the course mer they will publish a report called “Too big That means that contrary to nearly all other of the last winter. It culminated in Febru- to fail?” The answers will be given, but they countries we repeatedly submit – fortunate- ary 2009, and the peak – if we can say so – are very difficult. You cannot decide on these ly – even inconvenient issues to the people. Hans Rudolf Merz, was of course, when we had to decide on 13 problems while sitting in your armchair, Those who have to submit inconvenient is- President of the Swiss Federal Council in 2009 March in the Federal Council in agreement without destroying the rights of proprietors, sues to the people must also count on incon- with other financial centers such as Singa- shareholders and competitors. The solutions venient answers. Now we have one of these Shortly before his time as President of the pore and Hong Kong, Luxembourg and Aus- must be thoroughly worked on.” answers, giving us additional tasks to be Federal Council expired, Hans Rudolf Merz tria and others, that we would withdraw a res- completed. This is true with regard to other was a guest with Emil Lehmann on the pro- ervation in the OECD draft agreement and When asked about the new problems with countries and now also concerning the mina- gram “Tagesgespräch” on Swiss Radio DRS thus in future would facilitate administrative France, which may have obtained data of ret initiative. That is a task and a core of our and delivered a summary on his double task cooperation. That was a very drastic decision, French customers at Swiss banks through democracy, which we may not deplore, but as a chief of the Federal Department of Fi- because it macerated the banking secrecy in shady means, Federal Councilor Merz ex- regard as a characteristic, almost a quality of nance and as Federal President. He took relation to a foreign country. […] plains: our country.” stock of a year, in which Switzerland had to The OECD agreement provides that under “I cannot comment on this as it concerns facts master severe attacks and challenges. We are certain conditions administrative and legal whose details we do not yet know. It is abso- In connection with the discussion about Swit- printing some larger parts of his statements cooperation must be granted. These condi- lutely understood that the Federal Council zerland’s relationship with the European below.1 tions include the individual case, informa- will only comment on these questions if there Union, raised by various parties, Emil Leh- The interviewer Emil Lehmann raised tion about the accounts, about the names of is sufficient certainty on one or the other side; mann finally asked Merz: “What is your per- the question whether Switzerland was still the banks and the obligation to meet addition- and so far this has not been the case. sonal stance?” the same as a year ago – he asked what had al demands. We are not talking about a self- “From the outset I was a vehement proponent been unexpected and what was to follow, and service shop; instead, foreign states in special As a further topic, Lehmann addressed the of bilateralism. It is out of the question that where Merz would put the emphasis when re- cases, have the right to require our legal co- decision of the voters to prohibit the build- we are a country, which strongly depends on viewing his year in office. Hans Rudolf Merz operation for which they have to appeal. This ing of minarets. When asked, if his statement export. 70 per cent of our products go abroad. answered as follows: legal assistance must at first be internally set- that the government had to be in touch with I often say that our watches do not grow on tled with us. By no means do we give free the people meant that the government had trees, but we have to import the raw materi- “Switzerland is no longer the same. At the reign to foreign taxation offices; the proceed- failed to do so, Hans Rudolf Merz answered als, we must have the expertise, the precision, end of a year, however, Switzerland has never ings are bound to strict rules. frankly: in order to produce a good watch and then we been the same as before, fortunately not. We “That is exactly what I meant. Not only the can export that product. That is just the way it are a country that is continuously setting ob- As a further part of the problem, the size and government, but also the political parties. is and therefore we cannot isolate ourselves. jectives – in economy, in society, in politics – the speculation affairs of two Swiss major Fortunately, the government is not alone in We must try to keep these markets open. You we want progress, and I believe, that was the banks were addressed. The two banks are so this country. We really have a marvelously can only keep these markets open by regu- same last year. […] large – their size is about three times the democratic country, which consists of differ- lating them, and this will only work by con- If we judge a year, we have to look at the gross domestic product – that their situation ent mosaic stones, of which the government tracts. And therefore I am convinced that we entire period, at the result, and I believe that can affect the country as a whole. Emil Leh- is one. It is an important one, I admit. Now must follow the bilateral path, in an honest there are positive and negative aspects in this man therefore wanted to know whether a rel- it has become clear that in the sociological, way – a contract is a fair contract, as long as result. The negative ones were certainly all evant solution is in sight. in the social range, something has devel- there is a balance of give and take.” those events, which hit us from the outside, in “First of all, the federation indeed helped out oped; but something has also developed con- particular the pressure on our financial cen- by pumping capital into the UBS balance in cerning the attitude towards foreigners and As to the issue of hostages held in Libya and tre and our banks and the ensuing pressure order to stabilize the bank and concomitant- others in our country. We do not yet know his personal commitment in the affair, Fed- on our banking secrecy. That is something, ly the financial centre Switzerland. The bank exactly what it is. But possibly some uneas- eral President Merz refers to the greater con- which we have had to reckon with for a long is so big that in case of a failure, it would in- iness, which has primarily nothing do with text and the actual position of Switzerland in time. Nevertheless, when the economic crisis deed threaten our national economy. The 1.2 minarets in general neither with religions, the international community of nations: expanded and large countries required large billion profits, which we earned in the end, but perhaps with lifestyles and with foreign- “Of course, we find ourselves in an asym- amounts of capital, the pressure on the finan- are nevertheless a success of this year. It is ers in general. I think we must have a closer metrical situation. That is, we ourselves are a cial centers suddenly increased, among oth- not that – as has repeatedly been claimed – look at that now, before we draw rash con- democratic constitutional state; we essential- ers also on Switzerland. Within a few weeks that the state simply pumped billions à fonds clusions. I am quite aware that it is not only ly respect the constitution and our partners. or months, it was beginning to show dramat- perdu into a bank, but the money flowed back about having minarets as buildings. Behind As far as Libya is concerned, the constella- ically. […] into the Federal Treasury, and we have even are a certain uneasiness, fears, difficulties tion is a different one. And the means and I had to fulfill two tasks this year. One was obtained a large profit, which is now at our which we were too little aware of. And we possibilities are not equally distributed there. to lead the Department of Finance, whose disposal. must ask ourselves the question, whether However, this does not concern my country chief I had been already for six years. In ad- On the one hand, a condition had been that we succeeded in sufficiently integrating the alone. Look, at Iran, how Ahmadinejad deals dition, there was the Federal Presidency. In we could take the money back and that the many foreigners we have in Switzerland – with Russia and America. He promised that the Department, this year has successfully state rendered this help to the banks. The en- we are at the top of the list in Europe with the processing of uranium would be done passed; if we look at the results we can say suing question is ‘how will it continue’? In over 20 per cent. We must ask ourselves if abroad. And now, when it comes to a deci- that we operated in the black at the end of the the meantime, we have to admit that the bal- we succeeded in integrating them into eve- sion, he turns his back on the two world pow- year. Look around and tell me who can still ance of UBS has enormously declined. The ryday life, into society, into the schools, the ers. It is not only Switzerland, which is occa- say so; I believe that there is nobody all over bank has experienced a substantial scaling- professions, and whether we have to do even sionally confronted with such things; it can be Europe. We have passed the taxation bills this down by the events on the market. It is by far more in order to prevent the uneasiness from observed everywhere. We must watch out as year – all three of them. One was a simplifi- no longer as big as it once was. However, it spreading and becoming manifest on anoth- well, how things are going abroad. But in the cation of the value added tax. The second was is still a big bank. er occasions.” long run I must say: For us it is important that a better taxation for families with children. Therefore, further measures are neces- the two men, who are held in Libya, can re- And the third was the removal of cold pro- sary. Parts of these measures have already In a further statement, Federal Councilor turn to Switzerland. That is the first objective. gression. We succeeded in bringing about a been taken, and another part is under way. Merz puts this problem in the larger context I believe they are really poor guys. Imagine new start-up for the debt brake. We have ex- It was decided that we want to strengthen of globalization, whose effects have not be- the situation: They were held for months in panded it on the extraordinary budget. We ac- the investors’ protection. That means if such come manifest in Switzerland alone: Libya without any charge being raised. That tually obtained very good results in our own an event is about to happen and such a bank “I believe that in the course of globalization is showing contempt for humanity, and we department, and I am proud of this, indeed.” goes bankrupt, the investors will be better other countries have similar problems. They mustn’t take that. We have to try by all means protected than they are today. This is a case compete with each other, which is called glo- a constitutional and democratic state has at its Regarding the situation of the financial cen- in which the bank must furnish billions. Sec- balization in economy, and they compete with disposal. I did it, I took the risk, and I am con- tre Switzerland, the interviewer came back ondly, certain regulations for the manage- each other in politics, because politics also vinced that I could not have acted differently. to a statement by Bundesrat Merz and insist- ment of a bank were intensified. On the one become internationalized. This is where the We must now follow that path; we owe it to ed, whether – with respect to the attacks on hand, a bank must have more own resources, interests must be balanced. Not only Switzer- the two men. We also owe it to all enterprises Switzerland , in the context of which Feder- in order to guarantee its liquidity, and credits land is under this pressure, but if we look at that have to send Swiss people abroad, so that al Councilor Merz had referred to the finan- must be better secured with the so-called lev- the European Union we realize the same ten- they can work for our export. It should also cial demands of foreign countries – imminent erage ratio. Those are measures in the range sions. Therefore, there is no reason to lose be a signal that we support this export. And problems could not have been recognized and of capital, which are nevertheless substan- one’s self-confidence. Quite the contrary, I secondly: We are a country, which has good judged and countermeasures taken earlier. tial and demand appropriate means from the believe, we have a great many qualities; the relations to all other countries. We have in- “I believe, an important cause was the situa- bank.” country is on a very high level and also sets ternational organizations in Geneva; we have tion of the UBS in the USA. The American itself very high standards. And I hope that the Red Cross, we occasionally took over the authorities, in particular the Treasury and the Nevertheless, National Councilor Merz does will remain so, because only if we remain role as mediators. That should stay the same Department of Justice, reasserted last summer not rule out the possibility of a further UBS ambitious and set ourselves high standards, in the future.” – last summer means the summer of 2008 – case. Therefore, he refers to further meas- we will get international attention.” that UBS aided and abetted tax evasion to ures, which have been initiated: Asked for his personal balance concerning a large extent. That was first pendent at the “No, this cannot be excluded. Also measures Asked about possible further debates, Hans his presidency and the question, whether he UBS. There it was neglected for some time. in the field of bonuses are envisaged in order Rudolf Merz refers to basic problems in eco- believes to have done a good job, Hans Ru- In summer 2008, it finally landed in my De- to ensure that compensation and the incen- nomically difficult times, which not only dolf Merz explains: partment of Finance. We immediately estab- tives for those, who manage the bank, stay Switzerland has to face, but for which it is lished a crew, started to handle the cases and reasonable. I mean, this is also part of the well prepared due to its political system of di- realized that the Americans were very seri- measure to have a certain amount under con- rect democracy: continued on page 6 Page 6 Current Concerns No 2 January 2010 World Agriculture Report – Drawing Conclusions A democratic decision made by every single country for its own form of agriculture thk. The result of what more than 500 inter- for their agriculture. Central to this is each no way solve the great problem of hunger – Putting agricultural policy under demo- national researchers have been compiling in single country’s democratic decision for its meanwhile one million of human beings are cratic control is basically an improvement painstaking detail work and with great re- own form of agriculture. This means that suffering from acute malnutrition with all its and an advance for all countries, and of spect for the different cultures, religions, food sovereignty is more than just reaching health, cultural, economic and political conse- course also for their populations. The inhab- and national particularities of the individual as high a level of self-sufficiency as possible, quences, not to mention the mental and corpo- itants of the respective country must be able states during five years was made available it means that every country may decide on its ral misery caused by these conditions. On the to comment on the future of their own coun- to the global public as the “World Agricul- very own form of agriculture and that in no contrary, it only shovels huge yields into the try’s agricultural policy and to shape it ac- ture Report” in 2008. This report shows the case it may be constrained by international agro-industry’s and the speculators’ coffers. cording to their tradition and their culture, tremendous significance of agriculture, not treaties and forced into subjection beyond re- According to the findings of the over 500 in- taking into account ecology and the findings only as a guarantor of food security, but also call. This aspect is so important because poli- ternational researchers, the future of agricul- of scientific research. In this way, the diktat in the cultural and political field. The range ticians, and especially the agro-industry, most ture and therefore of man lies in small-scale via the WTO, where mainly the big nations of topics dealt with in this report touches life notably in the industrial nations, are pressing and regionally anchored production units and with their industrial agro-businesses deter- fundamentally, especially human life, in all for a total free trade with agricultural goods in the associated democratic organization of mine the negotiations, is reduced to absurd- its facets: From the topics of hunger right up via the WTO. agriculture. This does neither amount to a ity and thus the decision about its econom- to genetic engineering, all the current deep prohibition of agricultural trade across the ic activity is given back to each individual concerns about food production are covered. Clear refusal to WTO and agro-industry borders as it used to be; nor is it a step back- state. The World Agriculture Report final- What makes the report so valuable, apart The World Agriculture Report shows quite wards into the last century, as the trade be- ly pulls the plug on an economic policy en- from its clear analyses and its dignified ac- explicitly that this aimed-at free trade can in tween states is not to be impeded. forced from above, and not orientated to- count of the extensive complex of themes, is wards human needs. With this approach the the way it approaches solutions how to ad- World Agriculture Report goes far beyond dress the urgent problem of feeding humanity. agriculture and opens up new perspectives Thereby the responsibility of each and every for human coexistence. human being becomes evident, because only thus the future of mankind can be shaped in Agricultural policy on a democratic basis a positive way. There is an important insight here: The small- er the national units, the greater the demo- Self-determined agriculture on a demo- cratic scope. An agro-industry concentrated cratic basis in every country on export and world trade and set on size and Beside the multitude of factors determining business across the borders is not orientated a man-orientated agriculture, one central as- towards the common weal but towards the pect is to be looked at more closely here, be- global market, and that is determined mainly cause, even in this country, it is included too by speculators and stock market prices. little in the political debate about the future If we study the World Agriculture Report of agriculture, namely the opting out of free in detail, we cannot pick out aspects that fit trade with agricultural goods. The world ag- into our own ideological concept, but we ricultural report gives a decisive answer to must rather reflect upon the whole issue se- this question, an answer which is contrary riously, and we must draw the conclusions to the opinions of the deregulators of econo- from it. There is urgent need for a public and mies or internationalists: The world agricul- democratic discussion about how we want tural report emphasizes the food sovereign- to shape agriculture and our food security in ty of the individual countries as sine qua non future. •

“Switzerland: Closing the ranks” federal presidency, Hans Rudolf Merz de- Accordingly clear was the answer to the We will have to consider for example, how continued from page 5 clared: question whether he would remain Federal we can consolidate Switzerland as a financial “This question must of course be asked. Of Councilor until the elections in 2011: centre again. It is an important pillar of our “I think in view of the possibilities at my dis- course, it would be a pity. I had a number of “I have been elected until the year 2011, and national economy which has suffered in the posal, I would like to say ‘Yes’. If I consider meetings as I mentioned before. Even other I do not have any intention to step down, not course of this year, among other things also the results, I must say that above all, we suc- personalitiess visited us: Viktor Yushchenko even under pressure. On the contrary: I stem from the effects of the banking secrecy affair. ceeded in handling the state visits well – we was here or Boris Tadi etc and I met presi- from the Canton of Appenzell, and if some- Now we have to look for new perspectives. I have not spoken about them here, they were dent Obama in Washington. Of course, it is one provokes me, it makes me even more de- believe, these branches wait for new perspec- numerous. These state visits also served to a pity that you have to interrupt all this after termined to stay.” tives, they have a claim to it, and we should deepen the relationships, also in economic only one year; and next year someone com- grant it to them.” • circles. The Chinese Prime Minister Wen Jia- pletely new will be in office. A certain con- When asked whether he would like to return bao visited us for example, and the Russian tinuity is missing. We should consider that in to the “sunny side of politics”, he refers to 1 Source: Swiss radios DRS 1, Tagesgespräch of 10 President Medvedev was here. I myself trav- case we want an extension of the presidency the projects that are waiting on his agenda: Dec 2009, 1 pm. The complete discussion can be elled to the Middle East; we had the Presi- to a two-year period. Moreover, we must also “I think so. There will be some possibilities listened to at www.drs.ch/www/de/drs1/sendun- dent of Azerbaijan with us, who plays a very ask ourselves whether it wouldn’t be better to do so. There are fascinating projects ahead. gen/tagesgespraech/2782.sh10112055.html important in the context of energy questions to combine the presidency with the Depart- and so on. And I am convinced that all these ment of Foreign Affairs, especially in view visits went well, we did not make a mistake of the globalized world and the international in all the contacts. We reacted correctly alto- movements. These two questions must be dis- Current Concerns gether, we could resell the shares, we made a cussed, and since we announced a state man- The international journal for independent thought, ethical standards, moral responsibility, contract with the USA; in September we had agement reform for next year, there is an op- and for the promotion and respect of public international law, already concluded twelve treaties on double portunity to do so.” human rights and humanitarian law taxation. All in all, I must say that if we look at the results – and the difficult circumstanc- Hans Rudolf Merz was elected member of es throughout the past year – we have accom- the National Council in 2003 as successor of Subscribe to Current Concerns – The journal of an independent cooperative plished our goals.” Kaspar Villiger; in December 2008, he was The cooperative Zeit-Fragen is a politically and financially independent organisation. 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We warmly recommend our model of free and independent press coverage to other journals. zerland was still the same – he was asked a nection with Libya, which had been raised in more personal question whether he was still the course of the year, he answered as fol- Order form the same compared to the beginning of the lows: Subscription details: published regularly annual subscription rates SFr 72.– (incl. postage and VAT) year: “There were certainly some critical voices. £ 28.– (incl. postage and VAT) “Of course, you naturally develop; and the In particular, there was a newspaper, which € 45.– (incl. postage and VAT) older you become, the more mature you be- launched a real campaign. On the other hand, US-$ 66.– (incl. postage and VAT) come. Having achieved a certain maturity I must say that I received thousands of letters, Subscription for (in block capitals please): you often realize that if something starts at which encouraged me, which supported me, this point it will end at another point. This which said that it is right to have the courage Name: ______has to do with life experience. And as far as to handle certain taboos or make certain de- Address: ______that is concerned, I did not change. I believe, cisions, so, I cannot share this “condemna- ______with my life experience I look at things in tion”. […] ❑ Cheque enclosed (payable to Current Concerns) approximately the same way, and if I could It is not yet over. The Libya affair has have a second presidency I would act the speeded up since then. After all, the two ❑ Credit card details: ______same way.” Swiss had the possibility of making a state- Date: ______Signature: ______ment to a court. They were confronted with Please send a specimen issue to: In its goals for 2010, the Federal Council a charge and the facts were disclosed. That Name: already announced an additional message had not been the case before, when they were of the Federal Council concerning the state simply kept under lock and key. Now the af- Address: management reform and a discussion on fair has been furthered. Let us see how things Send to: Current Concerns, P.O. Box, CH-8044 Zurich, tel +41-(0)44-350 65 50 fax +41-(0)44- that issue. Asked for possible conclusions will proceed. I am still convinced that the 350 6551 from his own experiences concerning the Libya problem can be solved.” January 2010 No 2 Current Concerns Page 7 Bundesrat Hans Schaffner – Father of the EFTA Designer and pioneer of economic cooperation and integration in Europe by Dr rer publ Werner Wüthrich

Switzerland joining the GATT organization. able to compete, for obvious reasons, with role of Switzerland regarding refugees, con- For more than a quarter of a century, Hans typical agricultural states like Canada or Aus- cessions to the Axis powers and the restitu- Schaffner was active in the frontline of Swiss tralia, but still is not willing to do without tion of assets after the war] refused to consult foreign trade, since 1961 as Bundesrat. its own agriculture. In 1958, Hans Schaff- this leading contemporary person. This arro- His work is little acknowledged in his- ner had almost reached his goal. Nearly all gance and know-it-all attitude grieved him tory textbooks. His marks, however, can be GATT members agreed to accept Switzerland severely. As many times before in his life, seen in many places. Many important docu- into the treaty, making some concessions in he became active. He expressed his indigna- ments on the OEEC, EWG, EFTA and GATT, agriculture. Nearly all – the two agrarian tion in an article “The Truth About Switzer- signed by the Bundesrat as a whole, bear his countries Australia and New Zealand vetoed land” in the New York Times of 6 April 1998. hallmark. His style and his values are distinc- against the admittance of Switzerland. [Failing to interview important witnesses] is tive. This rejection did not discourage Hans a blunder which should not occur to serious Schaffner. He accomplished that Switzerland researchers if they are lucky enough to find Examples from the works was admitted for three years as a provisional persons alive which have been active for a of Hans Schaffner member without the right to vote. This agree- long time in central positions. We present two episodes documenting the ment was prolonged twice. For a representa- This misconduct is in indication that these role and importance of Hans Schaffner: tive of a non-member state, Hans Schaffner “experts” were more interested in writing Hans Schaffner was amazingly active. Between May 16 and their own history than in really getting to the (photo zvg) 1. The “Officials’ Conspiracy” 21, 1963, he was heading the GATT minister bottom of things. After all, facts might have In 1958, Switzerland was threatened with iso- conference as a member of the Federal Coun- shaken prejudices. This may not really be so A few days ago, the former undersecretary lation when the EWG chose to go it alone and cil and prepared the most important round of surprising. However, it is incomprehensible Franz Blankart has criticized the Bilateral the OEEC was in danger of failure. On De- GATT negotiations after World War II, the so- that this controversial work has found a way Treaties between Switzerland and the EU (Bi- cember 1st, Hans Schaffner, then Bundesrat called Kennedy Round. Good contacts with into school textbooks. lateral Treaties I and II) which were signed delegate for trade agreements, invited seven many foreign politicians and a personal rela- in the past years. They did simply repro- representatives of the future EFTA states to tionship with the General Director of GATT Hans Schaffner as a visionary duce and accept things that have been decid- a meeting in Geneva. Talks were held at an made things easier. He achieved his goal with Hans Schaffner was member of the FDP (Lib- ed elsewhere. Participation is widely lacking. administrative level. Here, foundations and patience, perseverance and substantial nego- eral Democratic Party) and his basic attitude This was one of the main differences between contours of the future EFTA were drafted. tiation skills: On April 1st, 1966, Switzerland was liberal. His commitment to free trade these treaties and earlier treaties, Blankart Further talks followed in Oslo and Stock- was accepted as a full member – with a clause was not unlimited. A liberal market econo- writes (NZZ of Sunday, 10 October 2009). holm. These talks became part of the histo- on behalf of the farmers making it possible to my was necessary, but not sufficient. In ad- Those who look through the documents ry of EFTA under the nickname “Officials’ proceed with the independent Swiss agricul- dition, it needed spiritual and moral founda- from the founding time of the EFTA reach Conspiracy” (Beamtenverschwörung). Hans tural policy. Hans Schaffner commented the tions which the free market was not able to the same conclusion. Why this difference? Schaffner started the process and was hence- agreement as follows: our partners had produce. For Schaffner, this implies a tight Who formed politics in these times? What forth called Father of the EFTA. agreed, “because they did not want to block connection with his country, his direct dem- was the historical environment like? What In a way, Hans Schaffner was an opponent the way into GATT for a country of Switzer- ocratic, federalist structures and the people has changed since then? The 50th anniversary of Jean Monnet who is now called Father of land’s stature, in spite of its peculiarity not working in them. His politics was aimed at of the EFTA gives occasion to pursue these the EU. Both had in common that they had fitting into any schematics.” Hans Schaffner serving the needs of the people. All his nu- questions. been active in the administration for a long has left his mark on GATT. Article 10 of the merous negotiations with foreign states were It was Hans Schaffner who coined the time, carrying out important duties and ex- treaty was not followed so rigorously in the targeted at finding tailored solutions fitting negotiations leading to the founding of the erting substantial influence on politics. Jean following years. Agriculture was recognized the spiritual, cultural and economic peculiar- EFTA. He is called the father of the EFTA. It Monnet was working in the European Coal as a sensitive sector and – in a similar way as ities of the involved countries. This includes would, however, not do him justice to see him and Steel Community and later in the French in the EFTA – more and more exempted from also the farmers. The liberal from the Swiss only in this role. His work has been much government. However, he became never min- the global free trade. canton Aargau was a representative of the so- more comprehensive. ister or even president. His importance for the called Ordo-Liberalism as advocated by his During World War II, Hans Schaffner was Community was underlined when he was ap- Success as head of the department contemporary Wilhelm Röpke. I also like to head of the “Zentrale für Kriegswirtschaft” pointed to the only honorary citizen of the for national economy compare Hans Schaffner with Ludwig Erhard (Center for war economy) and ensured – in EG in 1976. From 1961 to 1969, Hans Schaffner was Bun- who is now considered as father of the social cooperation with Friedrich Traugott Wahl- Hans Schaffner has also spent most of desrat, heading the Department for Nation- market economy in Germany. en – that the Swiss population did not suffer his professional life in an administrative po- al Economy. Memorable was a moment in from hunger and cold in these hard times. In sition and substantially coined politics. In the Nationalrat [National Council, the Swiss And today? his obituary, Franz Blankart called Schaffner 1961, he was, after 20 years in the admin- Parliament] in 1962. He was able to tell the Current negotiations with the EU are unlike an “economy general” (“NZZ”, 23 Novem- istration, elected directly into the Bundesrat members of the Nationalrat that the economy those in the past. In many cases, legal norms ber 2004). without having been elected into any politi- was developing well – something not grant- are simply adopted in a passive way. The so- After the war, the Bundesrat (Swiss Feder- cal position or a parliament – an unprecedent- ed for the war and the post-war generation. called autonomous reproduction is in the al Council) appointed Hans Schaffner as del- ed process. Even more: With mixed feelings he stated focus. Those who object to this and complain egate for trade agreements. In this position, Both Monnet and Schaffner were support- that “with respect to exports, we fell victim to about the lack of participation often hear he contributed in the founding of the Organi- ing the cause of economic cooperation and our own virtue – our great competitiveness”. the argument that we cannot practice cher- zation for European Economic Co-Operation European integration. However, Hans Schaff- The economy was working to capacity and ry picking. In all the numerous documents (OEEC) and was engaged in the integration ner was convinced – unlike Jean Monnet – hardly able to fulfill all the orders. In contrast and reports from the times of the foundation of Switzerland and the European collabora- that supranational structures and power cent- to these days, it actually created too many of the EFTA, I have never read this argu- tion. At the same time, Hans Schaffner was ers often obstruct the development of states. jobs. They could only be filled with employ- ment. Also in the WTO negotiations, there is leading the negotiations which resulted in the Their bureaucracies have a tendency to grow ees from abroad – mostly from Italy. Conse- a different style now. Bundesrat Josef Deiss rampantly and are prone to corruption. His- quently, it was Schaffner’s aim during the fol- has been announcing since six years that tory has proven him right. Now, during the lowing years to curb the economy. However, the closing of the Doha Round was immi- economic crisis, Switzerland, having chosen with limited success only: When he finished nent. To prepare the farmers for open bor- a different path, is in a better situation than his time in office as Bundesrat, Switzerland ders and the global free trade, Swiss agricul- Current Concerns most EU states. had 46 registered unemployed persons and ture had to be restructured. The successor of The international journal for independent the Bundesrat hat to use emergency law to Deiss, Doris Leuthard, has proceeded with thought, ethical standards, moral responsibility, 2. Perseverance in the GATT negotiations and for the promotion and respect moderate the economy’s ardor. this politics in the last years. Borders would of public international law, human rights I am pointing out a document in which Hans Of course, we also have to mention the soon be opened [she said]. The WTO agree- and humanitarian law Schaffner describes, in a very personal way, downside of the boom like the pollution of ment was imminent. Last autumn she said: the progress of the negotiations with the goal the rivers and the housing shortage. The in- “The axe on agricultural tax will come; you Publisher: Zeit-Fragen Cooperative of Switzerland joining GATT. I am summing flux of foreign workers had to be controlled can bet your life on that.” (“NZZ”, 11 No- Editor: Erika Vögeli up a few paragraphs (Bundesblatt 1966, pp with quotas. Those of the older generations vember 2009). Address: Current Concerns, 713): will remember times when swimming in Lake The agriculture has been fundamentally re- P.O. Box, CH-8044 Zurich After World War II, Hans Schaffner wel- Zurich or in Lake Lugano was prohibited due structured; many farmers have given up – yet Phone: +41 (0)44 350 65 50 Fax: +41 (0)44 350 65 51 comed the efforts to revive world trade with to the precarious quality of the water. Later, there are many indications that the agreement E-Mail: [email protected] a multilateral agreement. As a Bundesrat del- sewage plants were built all over Switzerland expected since many years will not come. Subscription details: egate for trade agreements, he supported the so that the situation improved gradually. In the early 1960s, Hans Schaffner has published regularly efforts to join the GATT, founded in 1947. brought forward, into the EFTA as well as annual subscription rates: SFr. 72. – However, Schaffner was soon facing obsta- Rejection by the Bergier Commission into GATT, his resolution that the agriculture € 45. – / £ 28. – / $ 66. – (incl. postage and VAT) cles with respect to agriculture. In 1947, the in the various countries is a sensitive topic for Account: Postscheck-Konto: PC 87-644472-4 people had passed a constitutional amend- In his retirement, Hans Schaffner was very different reasons. This stands to reason: Printers: Druckerei Nüssli, Mellingen, Switzerland ment which commissioned the federal state not spared bitter experiences. As mentioned it does not make sense to measure its prod- The editors reserve the right to shorten letters to the editor. Letters to the editor do not necessarily reflect to develop measures towards the protection above, he had made important decisions in ucts by the same yardstick, to include them the views and opinions of Current Concerns. of a sustainable farming community (Art. 31 his position as head of the Zentrale für Krieg- with industry goods into the global free trade aBV). This goal was in clear contradiction swirtschaft during World War II. He had led and to give speculative forces a free hand in © 2010. All rights reserved. No reproduction, copy or transmission of this with article 10 of the GATT treaty. Immedi- the Swiss economy in a time of threat when this really sensitive area. In face of the cur- publication may be made without written permission. ate joining was out of the question. the country was closed in from all sides by rent crises, both in food supply and in fi- But it was not the style of Hans Schaffn- the Axis powers. In his obituary, the former nance, it is absurd that the architects of the Current Concerns is an independent journal produced er to complain about things or to accept them undersecretary Franz Blankart called him an WTO today are trying to roll back the wheels by volunteers that is not supported by advertising. idly. In the following years, he talked to all “economy general”. of history. Any financial contribution is greatly appreciated. GATT members to promote understanding In this context it is surprising that the Ber- An active participation of Switzerland in for a small mountainous state which is un- gier Commission [investigating the wartime the WTO process is not visible today. • Page 8 Current Concerns No 2 January 2010 If You Want to Cultivate Peace, Protect Creation Extracts of the Message of His Holiness Pope Benedict XVI. for the Celebration of the World Day of Peace on 1 January 2010 t the beginning of this New Year, I wish tion and generosity for the spread of ecologi- Ato offer heartfelt greetings of peace to cal responsibility, responsibility which should all Christian communities, international lead- be ever more deeply anchored in respect for ers, and people of good will throughout the “human ecology”. The media also have a re- world. For this XLIII World Day of Peace I sponsibility in this regard to offer positive and have chosen the theme: If You Want to Culti- inspiring models. In a word, concern for the vate Peace, Protect Creation. [...] environment calls for a broad global vision of the world; a responsible common effort to an’s inhumanity to man has given rise move beyond approaches based on selfish na- Mto numerous threats to peace and to tionalistic interests towards a vision constant- authentic and integral human development ly open to the needs of all peoples. We can- – wars, international and regional conflicts, not remain indifferent to what is happening acts of terrorism, and violations of human around us, for the deterioration of any one rights. Yet no less troubling are the threats part of the planet affects us all. Relationships arising from the neglect – if not downright between individuals, social groups and states, misuse – of the earth and the natural goods like those between human beings and the en- that God has given us. [...] vironment, must be marked by respect and “charity in truth”. In this broader context one he environment must be seen as God’s can only encourage the efforts of the interna- Tgift to all people, and the use we make tional community to ensure progressive disar- of it entails a shared responsibility for all hu- mament and a world free of nuclear weapons, manity, especially the poor and future gener- Humanity needs a profound cultural renewal; it needs to rediscover those values which can serve as whose presence alone threatens the life of the ations. […] the solid basis for building a brighter future for all. Our present crises – be they economic, food-re- planet and the ongoing integral development lated, environmental or social – are ultimately also moral crises, and all of them are interrelated. of the present generation and of generations They require us to rethink the path which we are travelling together. Specifically, they call for a life- an we remain indifferent before the prob- style marked by sobriety and solidarity, with new rules and forms of engagement, one which focuses yet to come. Clems associated with such realities as cli- confidently and courageously on strategies that actually work, while decisively rejecting those that mate change, desertification, the deterioration have failed. (photo haro) he Church has a responsibility towards and loss of productivity in vast agricultural Tcreation, and she considers it her duty to areas, the pollution of rivers and aquifers, the official policies or to the pursuit of myopic of gradually adopting effective environmen- exercise that responsibility in public life, in loss of biodiversity, the increase of natural ca- economic interests, which then, tragically, be- tal measures and policies is incumbent upon order to protect earth, water and air as gifts tastrophes and the deforestation of equatori- come a serious threat to creation. To combat all. This would be accomplished more eas- of God the Creator meant for everyone, and al and tropical regions? Can we disregard the this phenomenon, economic activity needs to ily if self-interest played a lesser role in the above all to save mankind from the danger growing phenomenon of “environmental ref- consider the fact that “every economic deci- granting of aid and the sharing of knowledge of self-destruction. The degradation of nature ugees”, people who are forced by the degrada- sion has a moral consequence” and thus show and cleaner technologies.[...] is closely linked to the cultural models shap- tion of their natural habitat to forsake it – and increased respect for the environment. When ing human coexistence: consequently, “when often their possessions as well – in order to making use of natural resources, we should t present there are a number of scientific ‘human ecology’ is respected within society, face the dangers and uncertainties of forced be concerned for their protection and con- Adevelopments and innovative approach- environmental ecology also benefits”. Young displacement? Can we remain impassive in sider the cost entailed – environmentally and es which promise to provide satisfactory and people cannot be asked to respect the environ- the face of actual and potential conflicts in- socially – as an essential part of the overall balanced solutions to the problem of our rela- ment if they are not helped, within families volving access to natural resources? All these expenses incurred. The international commu- tionship to the environment. Encouragement and society as a whole, to respect themselves. are issues with a profound impact on the exer- nity and national governments are responsible needs to be given, for example, to research The book of nature is one and indivisible; it cise of human rights, such as the right to life, for sending the right signals in order to com- into effective ways of exploiting the immense includes not only the environment but also in- food, health and development. bat effectively the misuse of the environment. potential of solar energy. Similar attention dividual, family and social ethics. Our duties To protect the environment, and to safeguard also needs to be paid to the world-wide prob- towards the environment flow from our duties t should be evident that the ecological cri- natural resources and the climate, there is a lem of water and to the global water cycle towards the person, considered both individu- Isis cannot be viewed in isolation from other need to act in accordance with clearly-de- system, which is of prime importance for life ally and in relation to others. related questions, since it is closely linked fined rules, also from the juridical and eco- on earth and whose stability could be seri- to the notion of development itself and our nomic standpoint, while at the same time tak- ously jeopardized by climate change. Suita- ence I readily encourage efforts to pro- understanding of man in his relationship to ing into due account the solidarity we owe to ble strategies for rural development centred Hmote a greater sense of ecological re- others and to the rest of creation. Prudence those living in the poorer areas of our world on small farmers and their families should be sponsibility which [...] would safeguard an au- would thus dictate a profound, long-term re- and to future generations. explored, as well as the implementation of ap- thentic “human ecology” and thus forcefully view of our model of development, one which propriate policies for the management of for- reaffirm the inviolability of human life at every would take into consideration the meaning greater sense of intergenerational soli- ests, for waste disposal and for strengthen- stage and in every condition, the dignity of the of the economy and its goals with an eye to Adarity is urgently needed. Future gener- ing the linkage between combatting climate person and the unique mission of the family, correcting its malfunctions and misappli- ations cannot be saddled with the cost of our change and overcoming poverty.[...] where one is trained in love of neighbour and cations. The ecological health of the planet use of common environmental resources. “We respect for nature. There is a need to safeguard calls for this, but it is also demanded by the have inherited from past generations, and we here is a need, in effect, to move beyond the human patrimony of society. This patrimo- cultural and moral crisis of humanity whose have benefited from the work of our contem- Ta purely consumerist mentality in order ny of values originates in and is part of the nat- symptoms have for some time been evident poraries; for this reason we have obligations to promote forms of agricultural and indus- ural moral law, which is the foundation of re- in every part of the world. Humanity needs towards all, and we cannot refuse to interest trial production capable of respecting crea- spect for the human person and creation. a profound cultural renewal; it needs to re- ourselves in those who will come after us, to tion and satisfying the primary needs of all. discover those values which can serve as the enlarge the human family. Universal solidari- The ecological problem must be dealt with not or must we forget the very significant fact solid basis for building a brighter future for ty represents a benefit as well as a duty. This is only because of the chilling prospects of en- Nthat many people experience peace and all. Our present crises – be they economic, a responsibility that present generations have vironmental degradation on the horizon; the tranquillity, renewal and reinvigoration, when food-related, environmental or social – are towards those of the future, a responsibility real motivation must be the quest for authentic they come into close contact with the beauty ultimately also moral crises, and all of them that also concerns individual States and the world-wide solidarity inspired by the values of and harmony of nature. There exists a cer- are interrelated. They require us to rethink international community”. Natural resources charity, justice and the common good. […] tain reciprocity: as we care for creation, we the path which we are travelling together. should be used in such a way that immedi- realize that God, through creation, cares for Specifically, they call for a lifestyle marked ate benefits do not have a negative impact on t is becoming more and more evident that us. On the other hand, a correct understand- by sobriety and solidarity, with new rules living creatures, human and not, present and Ithe issue of environmental degradation ing of the relationship between man and the and forms of engagement, one which focus- future; that the protection of private proper- challenges us to examine our life-style and the environment will not end by absolutizing na- es confidently and courageously on strategies ty does not conflict with the universal desti- prevailing models of consumption and pro- ture or by considering it more important than that actually work, while decisively rejecting nation of goods; that human activity does not duction, which are often unsustainable from the human person. If the Church’s magisteri- those that have failed. Only in this way can compromise the fruitfulness of the earth, for a social, environmental and even economic um expresses grave misgivings about notions the current crisis become an opportunity for the benefit of people now and in the future. In point of view. We can no longer do without of the environment inspired by ecocentrism discernment and new strategic planning. [...] addition to a fairer sense of intergenerational a real change of outlook which will result in and biocentrism, it is because such notions solidarity there is also an urgent moral need new life-styles, “in which the quest for truth, eliminate the difference of identity and worth ad to say, it is all too evident that large for a renewed sense of intragenerational soli- beauty, goodness and communion with others between the human person and other living Snumbers of people in different countries darity, especially in relationships between de- for the sake of common growth are the factors things. […] and areas of our planet are experiencing in- veloping countries and highly industrialized which determine consumer choices, savings creased hardship because of the negligence countries: “the international community has and investments”. Education for peace must rotecting the natural environment in order or refusal of many others to exercise respon- an urgent duty to find institutional means of increasingly begin with far-reaching decisions Pto build a world of peace is [...] a duty in- sible stewardship over the environment. The regulating the exploitation of non-renewa- on the part of individuals, families, communi- cumbent upon each and all. It is an urgent Second Vatican Ecumenical Council remind- ble resources, involving poor countries in the ties and states. We are all responsible for the challenge, one to be faced with renewed and ed us that “God has destined the earth and process, in order to plan together for the fu- protection and care of the environment. This concerted commitment; it is also a provi- everything it contains for all peoples and na- ture”. The ecological crisis shows the urgen- responsibility knows no boundaries. In ac- dential opportunity to hand down to coming tions”. The goods of creation belong to hu- cy of a solidarity which embraces time and cordance with the principle of subsidiarity it generations the prospect of a better future for manity as a whole. Yet the current pace of space. It is important to acknowledge that is important for everyone to be committed at all. May this be clear to world leaders and to environmental exploitation is seriously en- among the causes of the present ecological his or her proper level, working to overcome those at every level who are concerned for the dangering the supply of certain natural re- crisis is the historical responsibility of the in- the prevalence of particular interests. A spe- future of humanity. [...] sources not only for the present generation, dustrialized countries. Yet the less developed cial role in raising awareness and in forma- From the Vatican, 8 December 2009 but above all for generations yet to come. It countries, and emerging countries in partic- tion belongs to the different groups present is not hard to see that environmental degra- ular, are not exempt from their own respon- in civil society and to the non-governmen- BENEDICTUS PP. XVI dation is often due to the lack of far-sighted sibilities with regard to creation, for the duty tal organizations which work with determina- © Copyright 2009 - Libreria Editrice Vaticana