Sovereign nightmares

The New Year brings back the sovereign debt question as the most urgent issue for the EU member States. Now that it is clear that Greece and Ireland have reached unsustainable levels of debt, all the attentions are moving to Portugal. On Wednesday next week, Lisbon will be again in the market to try to place Treasury paper. There is deep anxiety in Brussels and other capitals about the investors' response to that move.

The Portuguese government has shown they prefer to pay very high rates of interest to making use of the EU/IMF financial facility. This option is politically expedient in the short run. It delays the moment for hard decisions, particularly at a time when the presidential elections are around the corner, on 23 January, and the government's candidate is lagging behind in the polls. But, sooner or later, the moment of truth will come. The poor performance of the country's economy will then hit the wall.

In support of the European project

Both Chancellor Merkel's and President Sarkozy's New Year messages had strong words in support of the European project. They should be acknowledged. This is what I call leadership. It is important to set the path, particularly at times of confusion and hesitation.

Chad on its own

This evening I had a brief discussion with the Chadian leadership. They think the international community is not doing enough to assist the country on the road to peace and progress. They also believe Chad has been a barrier against the expansion of religious fundamentalism in the Sahel but that role is not fully appreciated by the key donor countries in the West.

Chad is again at a critical juncture, with the situation in South Sudan having an impact on the fragile relations between Chadians, Northerners and Southerners. Furthermore, the country is preparing for presidential and parliamentary elections, which should take place within the first semester of 2011. The preparatory work is of poor quality and nobody seems to link that with the potential for troubles down the line. On top of everything, one cannot forget that the democratisation process is still an infant.

The donors are not properly represented in N'Djaména and the dialogue between them and the government is not productive. There has been no real dialogue with Brussels either.

France, the key Western partner, has been without a proper ambassador for several months. The outgoing envoy said good bye at the beginning of summer and then, after a short while in Paris, came back, in a very strange diplomatic situation. He is around but as a weakened player.

The EC has been represented by someone who has little sense of diplomacy and a very unique way of looking at strategy. He was supposed to leave long back, but has delayed his departure. He is not happy with the parking lot that waits for him in Brussels. And the new lady keeps waiting somewhere in the clouds of EU bureaucracy.

The US had a good ambassador in N'Djaména. But he has been sick since the beginning of the year. The new ambassador has only recently been confirmed. The interim chargé d'affaires did a good job, but it is not the same as being the susbtantive head of mission.

And that's very much it, on the side of Western missions in Chad.

The question is then obvious: Are we sure we have our African priorities right?

The Berlaymont ghost

These days, there is a ghost walking the corridors of the Berlaymont building. People talk about him, give him a name, put a French accent in his voice, as they also put words and comments on his mouth, compare him with the present tenant, and feed the malaise.

The current tenant is the one that fears most this strange ghost. He gets very annoyed when he hears his name, and mad when people draw comparisons. He then asks his advisors to talk to the friendly media hacks. The point is to get a favourable press, to show that the ghost is from another time and circumstances. And that, in any case, when he was real, a few decades ago, he was no better then today's man.

Shut up, the big boys are cutting the EU budget!

The UK Prime Minister has drafted a letter to state his government's position regarding the EU budgets for the next years. Basically, David Cameron would see the budgetary appropriations that finance the functioning of the European institutions and the solidarity funds being capped at the level of the 2013 budget. Even the inflation figures would not be fully taken into account.

The PM has convinced France and Germany to support his demarche.

One understands budgets are being cut all over Europe, in each member state. Therefore, there is no political excuse to let the EU allocations, in the years to come, to follow a different course. That's the bright side of this initiative. The darker side is that the cuts will take place, if the will of these three governments prevails in Brussels, in the wrong accounts. The Common Agricultural Policy, for instance, which is an archaic compensatory system that benefits above all the French, German and British owners of very large farms,will remain untouched. No reduction, there. On the other side of this story, the cohesion funds, that are supposed to bring poorer European regions closer to the Union's wealth average, will see significant cuts.

Tant pis, as President Sarkozy would say. Only the weaker states need such cohesion mechanisms. Their voice can somehow be ignored.

The euro's value

The principle of a permanent stabilisation mechanism has been approved. The goal, as presented by the European leaders, is to save the euro as a currency. But was the euro under serious threat? Is it the euro as a currency that has been under attack, or something else? Or is it just the market playing with a currency that is overvalued?

Obviously overvalued, particularly if one takes into account the economic situation of some EU countries.

Wouldn't it be better for everyone, including for strong outlooking economies such as Germany, to have a currency that is closer to the value of the dollar?