Europe follows America’s lead on FIFA, VW scandals

First world soccer, now the world’s top automaker. The US has taken the lead in prosecuting trans-Atlantic white collar crime. Has Europe dropped the ball? Spencer Kimball reports from Chicago.

FIFA’s leadership has been decimated since the US Justice Department charged world soccer with racketeering and money laundering last May.

Sepp Blatter, FIFA’s long-time president, and two of his deputies have been banned from the organization for 90 days. Powerful sponsors such Coca Cola, McDonald’s and Visa are calling on Blatter to step down immediately.

Volkswagen is next in the firing line. Last month, the Environmental Protection Agency revealed that the automaker had been cheating on US emissions tests. Volkswagen’s stock value has plummeted and its chief executive, Martin Winterkorn, has resigned. The Justice Department is now investigating and criminal charges could be brought against Germany’s largest company.

Both FIFA and Volkswagen are based in Europe. Yet US regulators and investigators have been at the forefront in pursuing these white collar criminal cases. According to William Black, a former bank regulator, the US simply has more tools at its disposal than Switzerland, Germany or the EU.

“The United States, despite this record of catastrophic failure in responding to the white collar epidemics that drove the financial crisis, still has vastly better laws for regulating and prosecuting, and still has vastly greater willingness to take on powerful folks than is true in many places,” Black told DW.

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Why Greece won’t trigger a global crisis

(By Deutsche Welle) Limited private sector exposure and massive public sector intervention means little risk of financial contagion spreading from Greece. But there is one area of uncertainty: European politics, says DW’s Spencer Kimball.

Financial contagion is normally preceded by a surprise.

Take the 2008 Wall Street meltdown as an example. The US housing market had experienced a boom. Seeking to profit from the bonanza, private financial institutions the world over purchased securities issued by the mortgage lenders Fannie Mae and Freddie Mac.

Fannie and Freddie are government-sponsored enterprises. As a consequence, investors implicitly assumed that securities issued by the two mortgage lenders were backed by Uncle Sam. But their assumption was wrong, at least initially.

Fannie and Freddie’s securities did not have the same backing as US Treasury bills and when the boom went bust, financial institutions were exposed to more risk than they had anticipated. As the crisis spread through the US and global financial systems, the federal government was ultimately forced to intervene and bail out Fannie and Freddie.

“Financial institutions had wildly underestimated the riskiness of these assets, which made for really fast and furious contagion,” Carmen Reinhart, an economist who researches financial contagion at Harvard’s Kennedy School of Government, told DW.

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View from the US: Greece is no Lehman Brothers

(By Deutsche Welle) US markets will likely face little long-term fallout if Greece defaults on its debt. Policymakers in Washington are more concerned about the security implications of Greece exiting the eurozone. Spencer Kimball reports.

US President Barack Obama has been making phone calls. In conversations with his French and German counterparts, the president emphasized the importance of keeping Greece in the eurozone.

By most accounts, the US will not face a serious economic blow back if Greece defaults on its debt obligations this week, though the Dow Jones Industrial did drop by two percent on Monday, its biggest decline in two years.

US-based fund managers like Axel Merk actually believe that a default could serve as a healthy wake-up call to complacent investors, who’ve been shielded from risk by the intervention of central banks in financial markets over the years.

“This does not mean that if Greece defaults it’s like Lehman brothers in 2008, where there was potential threat of a meltdown of the financial system,” Merk, president of San Francisco-based Merk Investments told DW. “We’re in a very different situation from 2008 or even 2012 in the eurozone.”

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Spy scandal: ‘An awful lot of this is a show’

(By Deutsche Welle) Washington is doing diplomatic damage control after revelations the NSA spied on three French presidents. But Reginald Dale, formerly of the International Herald Tribune, tells DW that the outrage is mostly for show.

DW: Paris has summoned the US ambassador over allegations that Washington eavesdropped on the conversations of three French presidents. In 2013, Der Spiegel claimed that German Chancellor Angela Merkel’s cell had been tapped. How have the reactions of France and Germany differed?

If you wanted to distinguish between the French and German reactions to this sort of thing, I would say the French reaction is basically cynical and hypocritical, whereas the Germans tend to be neurotic and distressed. It’s a totally different cultural reaction to these allegations or revelations.

What makes you say the French response is cynical and hypocritical?

The French response is cynical in the sense that they know their country does a lot of spying, in fact they would want it to. They think it should. They understand in the world we live in today, the Americans spy on them. That’s the way the world is and they don’t find it particularly reprehensible.

On the hypocritical side, the French are well known as the leaders in industrial espionage in Europe, particularly against the United States. There are lots of instances of the French obtaining information, secrets from the American defense and aerospace industries in particular.

In the 1990s, the French were supposed to have bugged the seatbacks in business class on Air France in the hope of picking up a confidential chitchat among American businessmen. That was of course denied, but it became a widespread – almost a joke.

Why do you say the German response is neurotic?

On the German side there is a deep neurosis for historical reasons because of the traumas resulting from the activities of the Gestapo and then the Stasi in eastern Germany. That’s always said to have bred a neurotic fear of any sort of snooping, particularly on individuals, which is why there was such a reaction when one of Chancellor Merkel’s cell phones was apparently bugged.

I think the Germans, unlike the French, feel a sense of betrayal about this. They spent all these years after World War Two rehabilitating themselves to become a model nation on the world stage, and they wanted approval from everyone, and they wanted particularly the friendship of the United States.

They believed they had won that approval and friendship, and then when they find they’re being spied on – the sense of betrayal like a stab in the back.

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Court of public opinion clashes with US over FIFA head Sepp Blatter

(By Deutsche Welle) A US investigation into alleged corruption at FIFA devastated the world’s most powerful sports organization in a week. Sepp Blatter’s backers have cried foul. But experts question why Europe didn’t act much earlier.

Sepp Blatter defied the world’s only superpower – for three business days.

While his handcuffed associates were hauled away from their five-star hotel in Zurich to face extradition, Blatter was re-elected to another term as FIFA’s head last Friday. He subsequently lashed out at the United States, implying that the Justice Department’s investigation into alleged corruption within global soccer was misguided and a case of poor sportsmanship.

“There are signs that cannot be ignored,” Blatter said. “The Americans were the candidates for the World Cup of 2022 and they lost. The English were the candidates for 2018 and they lost, so it was really the English media and the American movement.”

The Swiss soccer baron had powerful backers. According to the “Guardian” newspaper, Russian President Vladimir Putin accused the US of “illegally persecuting people,” questioning why the Justice Department would seek to arrest foreigners conducting business in Switzerland.

Russia will host the World Cup in 2018. Swiss authorities are now investigating whether or not corruption played a role in awarding the global tournament to Russia as well as Qatar in 2022. On Wednesday, former FIFA executive committee member Charles Blazer admitted in a US federal court to accepting bribes for the 1998 and 2010 World Cups.

“It’s another clear attempt by the USA to spread its jurisdiction to other states,” Putin said. “And I have no doubt – it’s a clear attempt not to allow Mr. Blatter to be re-elected as president of FIFA, which is a great violation of the operating principles of international organizations.”

But it didn’t really matter who supported Blatter in the end. Though re-elected to a fifth term in a landslide vote, the FIFA head announced his resignation on Tuesday, amid reports that he too is under investigation by the Federal Bureau of Investigation. Blatter will remain in his post until an extraordinary FIFA congress elects his successor.

“There’s no question that many people will be implicated in things that will not pass muster in court,” said Stefan Szymanski, author of “Money and Soccer” and a sports governance expert at the University of Michigan.

“However, to refuse to cooperate with the US Justice Department is a pretty risky thing,” Szymanski told DW. “Particularly if you want to go to the United States or a country that has an extradition treaty with the United States.”

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Proposed US weapons deliveries to Ukraine raise fears of further escalation

(By Deutsche Welle) Calls in the US to supply Kyiv with weapons have been met with deep skepticism in Western Europe. As rebels in Ukraine gain ground, NATO is divided over how to prevent a broader conflict.

Two of Washington’s key European allies have rejected calls in the US to supply Kyiv with lethal military assistance, exposing potential fault lines within NATO as the war in eastern Ukraine continues to escalate.

The White House’s pick for defense secretary said on Wednesday that he was “inclined” to support supplying Ukraine with “lethal arms.”

“We need to support the Ukrainians in defending themselves,” Ashton Carter said during a Senate confirmation hearing on Wednesday.

White House Deputy National Security Adviser Ben Rhodes told CNN earlier in the week that the administration was reviewing the question of arms deliveries.

Opposition within NATO

But across the Atlantic, major European allies have been frank in their opposition. French Defense Minister Jean-Yves Le Drian told reporters that Paris has “no intention of delivering weapons at this stage to Ukraine.” His comments echoed the long-standing German position, which Chancellor Angela Merkel reiterated during a visit to Budapest on Monday.

“Germany will not support Ukraine with weapons,” Merkel told reporters. “I am firmly convinced that this conflict cannot be resolved militarily.”

Berlin’s opposition to weapons deliveries could play a critical role in White House deliberations. White House adviser Rhodes has called Merkel the “most important international partner on Ukraine.” He said that Obama and the chancellor would discuss Ukraine face-to-face during a “very important meeting” at the White House on February 9.

Kimberly Marten, an expert on Russian foreign policy at Columbia University, said that the reservations in Europe were well founded.

“There does not appear to be an endgame in the weapons proposal,” Marten told DW via email. “What will the US do if the fighting becomes worse and expands to more Ukrainian territory if we send in weapons?”

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Eastern Europe expert: Ukraine faces a frozen conflict

(By Deutsche Welle) Ukrainian government troops and pro-Russia separatists have created a buffer zone as part of a ceasefire agreement. Expert Joerg Forbrig tells DW that Kyiv now faces an unresolved, frozen conflict in its eastern region.

What does the buffer zone in eastern Ukraine do?

At the moment, it’s just trying to spatially separate the two sides. The agreement is that both sides would withdraw by 15 kilometers, so there would be a 30-kilometer corridor between the two warring sides, between the Ukrainian government’s army and the separatists and their supporters from Russia.

Who does the buffer zone benefit?

There are a number of factors here. There is a degree of exhaustion both on the part of the Ukrainian government forces and on the part of the separatists in eastern Ukraine. There’s a momentum both in Russia and in Ukraine that speaks in favor of a ceasefire at this stage.

On the Ukrainian side, there’s obviously the understanding that they cannot defeat Russia and the separatists militarily. There’s an election schedule of course, with the parliamentary elections in September. There’s an issue still about the gas talks between Russia and Ukraine.

On the Russian side, there’s also an understanding that, at this stage, it might be best to pause the conflict and perhaps even freeze it. The favorable outcome of this military conflict for Russia would only be possible if Russia engaged even more openly.

The Russians are also well aware that the European Union has set a deadline until the end of the month to review the sanctions in light of developments on the ground. So, if there was some form of a more positive dynamic in east Ukraine, the Russians are probably holding out hope that at least some of the sanctions would be lifted. All of this resulted in what seems to be a pause, not a resolution to the conflict, but a pause at least.

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