Balanta people:

The Balanta (meaning literally "those who resist", are an ethnic group found in Guinea-Bissau,Senegal, and Gambia. They are the largest ethnic group of Guinea-Bissau, representing more than one-quarter of the population. But despite their numbers, they have remained outside the colonial and postcolonial state because of their social organization.

 West Africa has a coup problem. Today, in the latest development in Guinea-Bissau's coup, the military said it wouldn't release the country's interim presidentuntil "conditions allow." Reuters also reports that the African Union has suspended the country's membership. Last month, another coup rocked neighboring Mali and the junta continues to cling to power.

"Although Mali and Guinea-Bissau are very close to each other geographically and they had coups within weeks of each other, their two upheavals are very different," writes Global Post's Andrew Meldrum. "In Mali, some mid-ranking military officers overturned an established democracy that had been functioning for 20 years. Guinea-Bissau, on the other hand, has had so many coups that no one of its presidents has completed a full term in office since the country became independent in 1974."

A second round of voting in presidential elections was scheduled to take place later this month, but on Friday, the heavy favorite, Prime Minister Carlos Gomes Jr., was in army custody along with other senior officials.

The military, which has dominated politics in the country ever since it fought its way to independence from Portugal in 1974, announced it did not intend to stay in power and called a meeting of political parties late Friday.

But military officials did not say what their plans were for the nation of 1.6 million people, which is heavily dependent on aid and considered a major transit hub for Latin American drugs. Once again, in a country long accustomed to coups, the trigger was apparently the army’s perception that its prerogatives were threatened, diplomats said.

On Friday, a self-proclaimed “military command” announced on the radio that it had deposed the prime minister because of what it said was a “secret” agreement between him and military forces from Angola aimed at suppressing Guinea-Bissau’s army. It offered no evidence of the agreement, and diplomats and analysts said it seemed likely that the army was simply trying to eliminate Mr. Gomes before his probable victory in the second round of the presidential election.

Africa’s best hope - Indian Express

Africa’s best hope - Indian Express

Not like Arizona - Indian Express

Not like Arizona - Indian Express

Unesco’s Convention on the Protection of Underwater Cultural Heritage

  It's an international treaty aimed at saving the underwater cultural heritage. 

  States Parties to the Convention pledge to preserve underwater cultural heritage for the benefit of humanity, and take action. 

  Furthermore underwater cultural heritage will be protected from being commercially exploited for trade or speculation.

  In-situ preservation

  Training and information sharing

   It was recently in news because, the legendary Titanic’s wreckage, which has remained at the bottom of the North Atlantic for 100 years, will now come under its protection.

Second "Heart of Asia" Meet

Second "Heart of Asia" conference aims at strengthening regional cooperation in fighting terrorism and implementing commitment made at the Istanbul summit held in Kabul.

With NATO’s combat mission ending in 2014, the region’s countries are being called on to help stabilize Afghanistan by joining forces to resolve regional problems such as extremism, drug-trafficking, poor coordination on economic issues and, most importantly, terrorism.

First Rimes Ministerial Conference held in New Delhi

•  Regional Integrated Multi-Hazard Early Warning System (RIMES) came in to existence to establish a tsunami early warning system in a multi-hazard framework for Southeast Asia and the Indian Ocean.
• It is an international and intergovernmental institution owned by the member countries.
• ,It consists of Afghanistan, Armenia, Bangladesh, Bhutan, Cambodia, Comoros, India, Kenya, Lao PDR, Maldives, Mauritius, Mongolia, Mozambique, Myanmar, Nepal, Philippines, Papua New Guinea, Seychelles, Sri Lanka, Tanzania and Uzbekistan.
  
  The objective of the meet was to build and sustain RIMES institutional and core operational activities through voluntary country contributions and mobilize financial support for implementation of the targeted activities of the RIMES Master Plan.
  India is working in collaboration with RIMES for its institutional development and providing resources for RIMES to meet the needs and demands of Member States.
  India expressed its desire to share its expertise to RIMES Member Countries in the following areas:
  
  • Expertise of India in building agro-meteorological advisory services to minimize the impact of adverse weather conditions on food production.
  
  • Fishing zone advisory system for the benefit of the coastal fishermen about fish abundance locations along with local weather conditions and sea state.
  
  • The totally indigenous and environmental friendly Low Temperature Thermal Desalination (LTTD) technology for conversion of sea water into potable safe drinking water.
  
  • Various satellite based multi-sensor payload based products over the data sparse regions of Indian Ocean, Arabian Sea and Bay of Bengal for enhancing the quality of meteorological and oceanic services rendered to various sectors of the economy.
  
  • Providing satellite derived products for real time monitoring of adverse weather conditions.

Ethnic disturbances in Northern Myanmar

Moving to end 50 years of military rule and isolation, Myanmar is being roiled by sectarian violence on its western coast, the latest upsurge in one of the many ethnic divides that run deep in the country. At least 20 people have been killed and homes of several hundreds torched in ethnic clashes between Buddhists and the stateless Rohingya Muslims in the Rakhine State or the former Arakan, washed by the Bay of Bengal in the west and stretching up to Chittagong division in the northwest. As Rohingyas flee the fighting in Rakhine and the UNHCR urges Bangladesh not to close its borders, here is a look at the problem.

Who are the Rohingyas?
The Rohingyas are Sunni Muslims, one of the many ethnic minorities who live in Rakhine State where the majority population follows Theravada Buddhism. The Rohingya population is estimated at over 700,000. Of South Asian descent, Rohingyas stand out among people of East Asian stock.

Where did they come from?
Some accounts say the Rohingya forefathers were sea traders. But the Burmese military points to history, maintaining that the Rohingyas crossed over from present-day Bangladesh. Chittagong was under the Arakanese till it was lost to the Mughals in 1666. And in 1826, Arakan and Tenasserim were ceded to British India under the Treaty of Yandabo that ended the First Anglo-Burmese War.

How have the Rohingyas been treated?
The Pinlon Agreement of 1947, signed a year before Burma’s independence, included Rakhine in the new union but the Rohingyas were kept out of nation-building. After a military crackdown in 1978, Rohingyas fled in thousands to Bangladesh. Under world pressure, the military agreed to their repatriation. Another crackdown in 1991 again sent Rohingyas across the border. Some 30,000 still live in two refugee camps in Bangladesh and many others have found their way overseas. A few hundred showed up in New Delhi last month to seek refugee status.

How did the Rohingyas become stateless?
The Burma Citizenship Law of 1982, which repealed the 1948 Union Citizenship Act, sought to deny citizenship to people of Indian and Chinese descent and also targeted the Rohingyas. Under the law, full citizenship could be granted to people of 135 national races who lived in Burma before 1823 — i.e. before British colonisation. The Rohingyas did not figure in this list. One clause in the new law was very clear: “The Council of State may decide whether any ethnic group is national or not.” Clauses in two other categories — associate and naturalised citizenship — were of no help to the Rohingyas either.

What is the stand of Aung San Suu Kyi’s NLD on the Rohingyas?
In the 1990 general elections — nullified by the military after the NLD won by a landslide — Rohingyas had backed Suu Kyi’s candidates. Four months after her release from house arrest in November 2010, Suu Kyi met Rakhine state representatives. An NLD statement quoted her as saying that the “spirit of the Union is rooted in the heart of people from Rakhine and Chin State although they love their own ethnicity”. A month earlier, the NLD had released a statement, underlining that the Pinlon Agreement had made it clear that “Citizens of the Frontier Areas shall enjoy rights and privileges which are regarded as fundamental in democratic countries”.

***What is India’s interest in the Rakhine State?***
India and Myanmar are working on the Kaladan multimodal transport project. It involves construction of a deep-water port at Sittwe, capital of Rakhine State, dredging of the Kaladan river to let cargo vessels move from Sittwe to Mizoram, construction of a river port and upgradation of roads. Once complete, it will connect India’s Northeast to the Sittwe port. The road component is delaying the project, targeted for completion in 2013.

Why is Rakhine State important to China?
China has started work on twin oil and natural gas pipelines, stretching 1,060km from the Rakhine port of Kyaukpyu to Kunming, capital of Yunnan. Once complete, these pipelines will allow China to bring home fuel supplies from the Middle East and Africa without taking the long route via the Strait of Malacca.

Hyogo Framework of Action (HFA)

• The Hyogo Framework of Action (HFA) approved in 2005 by  UNISDR (United Nations International Strategy for Disaster Reduction) to  which  India  is  a signatory, advocates mainstreaming disaster risk reduction into socio-economic  development  planning and  activities  by  adopting  five priorities  for  action  through  a fivefold  process.
1. Political process  requiring  countries  to develop  policies  and  legislative and  institutional  frameworks  for disaster risk reduction and commit resources  for  their  prevention, mitigation  and  preparedness;
2. Technical  process  which  calls for  application  of  science  and technology  for  assessment , identification and monitoring of disasters  and  enhancing  early warning  of  system;
3. Socio-educational  process  aiming  at increasing citizen’s understanding and  skills  to  build  a  culture  of safety and resilience at all levels;
4. Development  process  seeking  to integrate disaster risk in all relevant sectors  of  development  planning and programmes; and
5. Humanitarian process  which  requires  factoring disaster  risk  reduction  in  disaster response and recovery.

• {UNISDR is the United Nation's office for disaster risk reduction. It was created in December 1999 as part of the UN Secretariat with the purpose of ensuring the implementation of the International Strategy for Disaster Reduction.} 

UN Human Rights Council approves for an investigation into Houla Killings in Syria

The UNHRC (United Nations Human Rights Council) approved an investigation into the mass killing of civilians at Houla, Syria. UNHRC also objurgated Syria for the mass murder of about 100 civilians.

UNHRC, the 47-nation body sanctioned the resolution with  41 votes in favour and 3 against it. This was
the fourth emergency session meeting called by UNHRC in order to discuss the situation Syria.

Houla: Located in the north of the city Homs in Syria.

What was the stance of various nations on this resolution by UNHRC (including India)?

• Russia, China and Cuba voted against the U.S.-backed resolution.
• 2 countries abstained and one member did not vote.
• India voted in favour of the UNHRC resolution.

200 US Marines arrive in Australia as part of defence deal

About 200 U.S. Marines arrived in Darwin in the north of the country as part of a defence deal between Australia and the United States. US and Australia will hold joint training and exercises in Darwin and the U.S. Marines would be stationed, on rotation basis here. The new plan would intensify the 60 year military alliance between the two countries.

Why Darwin?
Darwin has a close proximity with Asia which makes it an important gateway. Thus it is strategically an
important position.

Are the Alarm bells ringing for China?
Yes. China's Heart Beat is rising now!!!
The move is largely seen as a response to the rise of China, which is boosting its military spending and capabilities. China is also becoming increasingly assertive on the high seas, where it claims sovereignty over essentially all of the South China Sea, a key global trading route. The move represents a potentially significant geo-strategic shift, which is said to have been under consideration for some years as US aims to boost its Pacific Command. A new base will not be built in Darwin, instead the marines will use the existing Robertson Barracks nearby.

At which locations the US Military already has its presence in the region?
U.S. Marines are already based at Okinawa in Japan, and on Guam, a U.S. territory 1,500 miles north of
Papua New Guinea, as America's chief combat force in the Pacific theatre.

GCC states & US agree to build a regional missile defence shield

The GCC (Gulf Cooperation Council) states and the US have decided to build a regional missile defence shield. Details of the agreement are being worked out. The final decision by the 6 members of the Gulf alliance (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE) and the US will be taken in June 2012. US Secretary of State Hillary Clinton pushed the missile shield idea at the first Strategic Cooperation Forum in Riyadh lately.

What is the objective of this Missile Shield?
The 6 states members of GCC (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE) and the US have decided to build a regional missile defence shield aimed at protecting the oil wells and ports in the region from attacks.

ECOWAS likely to suspend Mali following coup

    An emergency meeting of Economic Community of West African States (ECOWAS) being held in Ivory Coast to discuss political crisis in Mali following the military coup there. ECOWAS likely to consider suspending Mali's membership from the 15-member sub-regional bloc.  ECOWAS Vice President Toga Gayewea McIntosh held that ECOWAS group is concerned with preserving peace, stability and democracy in Mali.

About ECOWAS:-
The Economic Community of West African States (ECOWAS) is a regional group of fifteen West African countries. Founded on 28 May 1975, with the signing of the Treaty of Lagos, its mission is to promote economic integration across the region. The ECOWAS consists of two institutions to implement policies, the ECOWAS Secretariat and the ECOWAS Bank for Investment and Development, formerly known as the Fund for Cooperation until it was renamed in 2001.
Headquarters: Abuja, Nigeria
Current members
1. Benin
2. Burkina Faso
3. Cape Verde
4. Côte d'Ivoire
5. Gambia
6. Ghana
7. Guinea
8. Guinea-Bissau
9. Liberia
10. Mali
11. Niger
12. Nigeria
13. Senegal
14. Sierra Leone
15. Togo

“BALIKATAN”: US, Philippines hold joint military exercises in South China Sea

Named “Balikatan”, the annual Joint military exercises b/w the US and the Philippines are getting under way in the South China Sea, even as Manila remained locked in a stand-off with Beijing over a disputed shoal. The yearly exercise, will continued till April 27, 2012.

What is the strategic element behind this year’s exercise?
The exercise takes place every year but, this year they are different because the context within which they are taking place has changed. This year the Exercise Balikatan is taking place off Palawan, near parts of the South China Sea, which both Philippine and China claim. The games are happening at a time when tensions are already high between China and the Philippines over disputed territorial rights in the South China Sea. So, Mutual Military Exercise by US and Philippines in the disputed region b/w Philippines and China!!! Thus, China’s eyebrows raised…

What is the issue?
         6 countries claim competing sovereignty over areas in the South China Sea, which is believed to contain huge deposits of oil and gas. They are China, the Philippines, Brunei, Malaysia, Vietnam and Taiwan. That has led to occasional flare-ups and to competition to occupy islands, reefs and sandbars.
China - Its maritime power is growing. China's claim includes almost the entire South China Sea, well into what the UN Convention on the Law of the Sea recognises as the 200-mile-from-shore Exclusive Economic Zones of other claimants.
Philippines – It along with many other small countries in the region are worried due to growing Chinese maritime Power. Thus, Philippines wants to bolster its own defences and underline its growing ties with US. The Philippines knows it needs help and support from the US, but at the same time, it is acutely aware that its relationship with China is equally important. Philippines must therefore walk a tightrope between these two major world powers.
US - It sees these exercises as an opportunity to demonstrate its renewed interest in Pacific security. It also wants to make sure that the South China Sea, which carries about half the world's total trade, remains free for navigation.
        China believes the South China Sea issue is only a regional concern and therefore US should not get involved. But since 2011, the US has been doing the exact opposite - refocusing its military attention on Asia and strengthening ties with the Philippines, negotiating an increase in troop numbers and more frequent joint exercises. So given all this, the presence of thousands of US and Philippine troops holding exercises in Palawan, not far from the Spratly Islands - one of the main disputed areas - is hardly likely to be welcomed in China.

Nuclear Security Summit 2012, Seoul (Little bit exhaustive))

        The leaders of more than 60 countries of the world gathered in Seoul, Republic of Korea on March 26-27, 2012, for the 2nd Nuclear Security Summit. This summit follows the 2010 Washington Nuclear Security Summit.

The objectives
To work toward strengthening nuclear security,
Reducing the threat of nuclear terrorism,
Preventing terrorists, criminals, or other unauthorized actors from acquiring nuclear materials.

Relevance

         Nuclear terrorism continues to be one of the most challenging threats to international security. Defeating this threat requires strong national measures and international cooperation given its potential global political, economic, social, and psychological consequences.

         Further, noting the Fukushima accident of March 2011 and the nexus between nuclear security and nuclear safety, sustained efforts are required to address the issues of nuclear safety and nuclear security in a coherent manner that will help ensure the safe and secure peaceful uses of nuclear energy.

Events like the Nuclear Security Summit provide an occasion to reaffirm the globally shared goals of nuclear disarmament, nuclear nonproliferation and peaceful uses of nuclear energy.

This way, the Nuclear Security Summit is a valuable process at the highest political level.

The main points of the Communiqué

It is the fundamental responsibility of States to maintain effective security of all nuclear material, which includes nuclear materials used in nuclear weapons, and nuclear facilities under their control.
The States are also required to prevent non-state actors from acquiring such materials and from obtaining information or technology required to use them for malicious purposes.
It is also a fundamental responsibility of States to maintain effective security of other radioactive materials.
The measures to strengthen nuclear security will not hamper the rights of States to develop and utilize nuclear energy for peaceful purposes.

Global Nuclear Security Architecture: There is an importance of multilateral instruments to address nuclear security. Such instruments include the Convention on the Physical Protection of Nuclear Material (CPPNM), as amended, and the International Convention for the Suppression of Acts of Nuclear Terrorism (ICSANT). The Summit calls for a universal adherence to these Conventions.

Role of the UN: The Summit acknowledges the important role of the United Nations (UN) in promoting nuclear security and supports the UN Security Council Resolutions 1540 and 1977 in strengthening global nuclear security.

On combating nuclear terrorism: The Summit recognized the contributions of international initiatives and processes such as the Global Initiative to Combat Nuclear Terrorism (GICNT) and Global Partnership against the Spread of Weapons and Materials of Mass Destruction, within their respective mandates and memberships. It calls for a wider participation in the GICNT and the Global Partnership and value its extension beyond 2012.

Role of the IAEA: The Summit reaffirmed the essential responsibility and central role of the IAEA in strengthening the international nuclear security framework. It also recognized the value of the IAEA Nuclear Security Plan 2010-2013. The States agreed work to ensure that the IAEA continues to have the appropriate structure, resources and expertise needed to support the implementation of nuclear security objectives.

Nuclear Materials: Recognizing that highly enriched uranium (HEU) and separated plutonium require special precautions, the Summit reemphasized the importance of appropriately securing, accounting for and consolidating these materials.

Radioactive Sources: Taking into account that radioactive sources are widely used and can be vulnerable to malicious acts, the Summit urged States to secure these materials, while bearing in mind their uses in industrial, medical, agricultural and research applications.

Nuclear Security and Safety: Acknowledging that safety measures and security measures have in common the aim of protecting human life and health and the environment, the Summit affirmed that nuclear security and nuclear safety measures should be designed, implemented and managed in nuclear facilities in a coherent and synergistic manner. There is also a need to maintain effective emergency preparedness, response and mitigation capabilities in a manner that addresses both nuclear security and nuclear safety. In this regard, the Summit welcomed the efforts of the IAEA to organize meetings to provide relevant recommendations on the interface between nuclear security and nuclear safety so that neither security nor safety is compromised. It also welcomed the convening of the High Level Meeting on Nuclear Safety and Security initiated by the UN Secretary-General, held in New York on 22 September 2011.

Transportation Security: the States will continue efforts to enhance the security of nuclear and other radioactive materials while in domestic and international transport, and encourage States to share best practices and cooperate in acquiring the necessary technologies to this end.

Combating Illicit Trafficking: There is a need to develop national capabilities to prevent, detect, respond to and prosecute illicit nuclear trafficking. In this regard, the Summit encourages action-oriented coordination among national capacities to combat illicit trafficking, consistent with national laws and regulations. The leaders have agreed work to enhance technical capabilities in the field of national inspection and detection of nuclear and other radioactive materials at the borders.

Nuclear Forensics: The Summit recognized that nuclear forensics could be an effective tool in determining the origin of detected nuclear and other radioactive materials and in providing evidence for the prosecution of acts of illicit trafficking and malicious uses. In this regard, the Summit encourages States to work with one another, as well as with the IAEA, to develop and enhance nuclear forensics capabilities.

Nuclear Security Culture: Recognizing that investment in human capacity building is fundamental to promoting and sustaining a strong nuclear security culture, the Summit encourages States to share best practices and build national capabilities, including through bilateral and multilateral cooperation

Information Security: The Summit recognized the importance of preventing non-state actors from obtaining information, technology or expertise required to acquire or use nuclear materials for malicious purposes, or to disrupt information technology based control systems at nuclear facilities. It therefore encourage States to: continue to develop and strengthen national and facility-level measures for the effective management of such information, including information on the procedures and protocols to protect nuclear materials and facilities; to support relevant capacity building projects; and to enhance cyber security measures concerning nuclear facilities, consistent with the IAEA General Conference Resolution on Nuclear Security.

International Cooperation: The Summit encourages all States to enhance their physical protection of and accounting system for nuclear materials, emergency preparedness and response capabilities and relevant legal and regulatory framework.

Further the nations agreed to continue to make voluntary and substantive efforts toward strengthening nuclear security and implementing political commitments made in this regard.

The next Nuclear Security Summit will be held in [the Netherlands] in 2014.

U.N. adopts norms against land grabbing

         The U.N. has adopted global guidelines to defend the land rights of poor farmers and recognise informal indigenous claims. Because these proposals are guidelines, they will act as voluntary rules.

Background

     The rights groups have previously alleged that rich investors and the governments of the developing countries have forcibly or deceptively acquired land from the poor people. This has led to massive displacement and large scale violation of human rights. Subsequent to these allegations, three years of negotiations took place to bring in place these guidelines.

The key proposals

• Private companies to be transparent in the matters of land acquisitions
• Private companies to consult local populations
• Recognition of customary tenure systems by indigenous populations
• Governments should ensure a fair valuation and prompt compensation for farmers
• Governments should expropriate only when the land is needed for a public purpose
• Governments to safeguard legitimate tenure rights against threats and infringements
• Governments to provide effective and accessible means to resolve tenure disputes

Importance

Protection of land rights of the poor,

Prevention of forcible eviction, displacement, loss of habitat and livelihood and gross violation of rights especially in poor countries,

Enhancing global food security by improving secure access to land, fisheries and forests

Comment,

The guidelines are an important step towards a more equitable and hunger-free world. The guidelines reaffirm the human rights of those living on the land and clearly underline the need for consultation and participation of communities affected by land investments. However, what remains for the world is an even greater task: implementation of the guidelines.

'Wreckage of Titanic' to come under "UNESCO's Convention on the Protection of Underwater Cultural Heritage"

           The remains of the Titanic’s which are lying at the bottom of the North Atlantic Ocean will now come under the protection of under UNESCO’s Convention on the Protection of Underwater Cultural Heritage.

Why the Titanic’s wreckage was NOT under this protection till date?
Until now, remains of the Titanic were not eligible for protection under UNESCO’s Convention on the Protection of Underwater Cultural Heritage, as it applies only to the remains that are submerged for at least 100 years. Titanic struck an iceberg in the North Atlantic on its maiden voyage and sank on the night of April 14, 1912. Thus on April 14, 2012 it will be 100 th anniversary of the lugubrious event of the sinking of the Ship.

What is this convention all about and will it mean now for the Titanic’s remains?
 As we know that the remains of the Titanic lie at a depth of 4,000 m off the coast of Newfoundland. Thus, no single nation can claim the site as the wreck is in international waters and the states only have jurisdiction over wrecks lying in their own waters and flying their flag. But as Titanic completes 100 years of its sinking, it comes under the UNESCO’s Convention on Protection of Underground Waters. This convention was adopted in 2001 by the General Conference of UNESCO. Up to now, 41 states have ratified the Convention for the Protection of Underwater Cultural Heritage, which entered into force in January 2009.

Objective of the Convention:
To ascertain better protection of wrecks, sites, decorated caves and other cultural relics underwater. Thus from now on states parties to the UNESCO convention can outlaw the destruction, pillage, sale and dispersion of objects found at this site. Now on, they can take measures within their power to protect the wreck and ensure that the human remains there are treated with dignity. The UNESCO convention provides for a system of co-operation b/w states parties to prevent exploration deemed unscientific or unethical. In conformity with the convention, they also have the authority to seize any illicitly recovered artefacts and close their ports to all vessels undertaking exploration that is not done agreeing to the principles of the treaty.

Behind the eurozone crisis (from IE)

What is the eurozone crisis?

The European sovereign debt crisis is one that has made it nearly impossible for the economically weaker countries in the eurozone to refinance their debt without assistance. In the aftermath of the US sub-prime mortgage meltdown in 2008, European banks fled to what they saw as safe — bonds from countries in Europe’s ostensibly solid monetary union. The European sovereign debt problems’ progress into the new subprime crisis is a result of governments borrowing beyond their means, regulators permitting banks to treat the bonds as risk-free, and investors failing to make a distinction between the bonds of troubled economies like Greece, Portugal and Italy and those issued by stronger ones like Germany and France.

How did the debt pile up?

When the European economic and monetary union became operational from January 1999, all the peripheral eurozone economies experienced windfall gains from the sharp reduction in bond yields and resultant cost of borrowing. Over a four-year period from 1995, bond yields more than halved and converged around 4 per cent across most eurozone economies. Governments and corporates piled up debt, especially by way of borrowings from banks in core area economies, as they splurged on this sudden access to cheaper capital, triggering resource mis-allocation and asset bubbles. The boom also led to a rise in wages and input prices, and a decline in relative economic competitiveness.

How far is the Europen Union structure responsible?

The crisis was in some ways inevitable given the impossibility of managing a monetary union without some form of fiscal union and a fully committed central bank.

To understand the problem, a parallel can be drawn by equating the eurozone countries with the Indian states. Imagine that 28 independent states federate into a single country with a single monetary policy. They embrace a single currency, rupee, and monetary aggregates including interest rates are harmonised across all states. Trade barriers between states have been brought down. However, neither the central bank (RBI) nor the Union Government will make monetary and fiscal transfers to help any state with problems. All taxes are levied by the states with no revenue shares to the Centre; the RBI is averse to banking bailouts.

Consider that Maharashtra and Tamil Nadu are booming while West Bengal, Punjab and Kerala are in recession. The latter three have a competitiveness problem, since their wages have been driven up by a positive economic shock. All three governments have indulged in populist profligacy and run up huge debts, including from neighbouring states and their banks. Both now stand on the verge of sovereign defaults. Further, when the states formed the monetary union, their initial conditions varied; the weaker states have lower labour productivity, though wages and prices remain more or less the same. As the weaker states struggle, the competitive states prosper, partly by increasing their exports to the weaker ones, and in the process displacing local production and driving out local jobs. Maharashtra and Tamil Nadu are, at least partially, prospering at the expense of the weaker states. So if Punjab, West Bengal and Kerala were independent countries with their own currencies and interest rates, they would have responded by either devaluing their currencies or lowering interest rates or both, with the objective of lowering real wages and costs.

Now that these states are part of a monetary union, they do not have access to these traditional options. In the real world, India is a monetary and fiscal union. The only strategy to restore economic strength in these three states without compromising on the monetary union is for the Union government to provide fiscal transfers to these weak states and the RBI to open liquidity windows and ensure that the credit tap is kept open. Simultaneously, these states will have to undertake structural reforms to increase their medium- and longer-term competitiveness.

Replace West Bengal and Kerala with Greece and Italy, and Maharashtra and Tamil Nadu with Germany and France.

How have they tried to handle it?

Europe’s finance ministers in 2010 approved a rescue package worth 750 billion euros by creating the European Financial Stability Facility. In 2011 and 2012, leaders agreed on more measures to prevent the collapse of member economies. This included an agreement that banks would accept a 53.5 per cent write-off of Greek debt to private creditors, increasing the EFSF to about 1 trillion euros, and requiring European banks to achieve 9 per cent capitalisation. EU leaders also agreed to create a European Fiscal Compact including the commitment of each participant to introduce a balanced budget amendment. The countries most affected, Greece, Ireland and Portugal, account for 6 per cent of the eurozone’s GDP. But the real worry is if the crisis spreads to bigger countries such as Italy or Spain. The interconnection in the global financial system means that if one nation defaults on its sovereign debt or enters into recession putting some external private debt at risk, the banking systems of creditor nations face losses.

What has been the political fallout?

It has led to the premature end of a number of governments and impacted election results. The Greek election saw the collapse of the bipartisanship leadership that had ruled the country for over 40 years as a punishment for their support to the strict measures proposed by foreign lenders and the Troika (European Union, IMF and European Central Bank). The French presidential election marked the first time since 1981 that an incumbent failed to win a second term; Nicolas Sarkozy lost to Francois Hollande.

Is there an impact on India?

The crisis in Europe has fuelled a rush among major global investors to move to safer investment destinations such as the US. This has led to a flight of US dollars from emerging markets such as India, resulting in the rupee depreciating. Where the rupee is headed could depend on what happens in Europe, particularly Greece, because if Greece were to exit the eurozone, there is a distinct possibility that the rupee could move close to 60 to the dollar.