Panama Papers: Further revelations about New Zealand’s role as a tax haven

Tom Peters & Sam Price

Reports published last week, based on the Panama Papers, cast further light on New Zealand’s role as a location where wealthy individuals around the world are able to hide their fortunes.

Last month the International Consortium of Investigative Journalists released millions of leaked documents revealing that Panama-based Mossack Fonseca, the world’s fourth largest trust law firm, established secret trusts for wealthy clients in more than 200 countries. The firm facilitated money laundering, tax avoidance and criminal activity, including drugs and arms dealing.

Radio NZ and TVNZ journalists and investigative journalist Nicky Hager analysed links to New Zealand in the documents. The number of foreign trusts registered in New Zealand has exploded over the past decade, from nearly 2,000 to more than 10,500, or 12,000 according to some reports.

Mossack Fonseca (MF) established its New Zealand branch in December 2013. The local director is trust lawyer Roger Thompson, co-founder of Auckland accountancy firm Bentleys. Thompson and his colleagues acted as “directors for hire,” enabling MF’s clients to stash hundreds of millions of dollars in anonymous companies and trusts.

MF told its clients that New Zealand’s unregulated environment allowed “for the speedy formation of appropriate mechanisms for wealth protection, inheritance and tax planning.” An MF memo said 95 percent of the company’s work was “selling vehicles to avoid taxes.”

A small group of politically-connected lawyers worked with MF to ensure no restrictions were imposed on foreign trusts. Radio NZ reported that “representatives of five New Zealand law firms met with the then Revenue Minister Todd McClay at the end of 2014” to lobby against any move by the Inland Revenue Department to shut down the industry.

One lawyer who has had dealings with MF is Ken Whitney, who for several years handled Prime Minister John Key’s personal legal matters. Key stated in April that Whitney assured him he had no links to MF. Journalists have since revealed that, until 2014, Whitney was a director of Rothschild Trust (NZ) Limited, which owned two companies registered in the British Virgin Islands that had MF as their agent.

According to Radio NZ, typical clients of the Panamanian firm’s New Zealand branch “are an Ecuadorian banker, two Colombian car dealers ... a Mexican film director, and wealthy Mexican society figures.”

One client is Asaf Zanzuri, the Israeli chief executive of Balam Security, a company whose dealings include a multi-million dollar sale of Dominator XP surveillance drones to the Mexican government. Balam established two trusts in New Zealand via MF last year.

The Australian Financial Review reported that Mexican construction tycoon Juan Armando Hinojosa Cantu, known as “The Duke of Influence” because of his close ties to Mexican President Enrique Peña Nieto, used MF to place approximately $US100 million in three New Zealand trusts.

Other clients include Carlos Dorado, CEO of Venezuela’s bank Italcambio, and Brazilian mining engineer Bruno Lima.

According to NBC News, the Panama Papers show that Canadian-born billionaire Calvin Ayre established a trust in New Zealand, and also moved money to the British Virgin Islands, the Cayman Islands and Liechtenstein. Ayre founded the gambling web site Bodog.com and is wanted by US authorities after being indicted in 2012 for money laundering and illegal gambling charges.

The papers also reveal that MF provided a New Zealand address for GETR Iraq Limited in October 2011, owned by Basil Al Jarah. A Fairfax Media and Huffington Post investigation published in March this year said Al Jarah, the Iraq country manager of Monaco-based company Unaoil, “cultivated an astonishing web of influence in the upper echelons of Iraqi power—all based on the simple expedient of bribing the right man at the right time.”

The report, subtitled “How the West Bought Iraq,” explained: “Al Jarah and Unaoil were at the heart of a global bribery operation funded, sometimes wittingly, by dozens of US, British, European and Australian multinationals. These firms paid huge sums to Unaoil. In return, Unaoil used its friends in high places to win billions of dollars’ worth of government contracts.”

More revelations from the Panama Papers are likely to be released in coming days. There is already ample evidence that New Zealand is a major tax haven for the world’s elites, including some accused of illegal activities and Al Jarah, who assisted the looting of Iraq by Western imperialism.

Prime Minister Key has continued to assert that New Zealand is not a tax haven. In several media interviews he absurdly tried to dismiss the latest revelations by denouncing journalist Nicky Hager as a “left-wing conspiracy theorist.”

Key was the only world leader to be named in a “manifesto” published this month by “John Doe,” the anonymous source for the Panama Papers leak. Doe said Key “has been curiously quiet about his country’s role in enabling the financial fraud Mecca that is the Cook Islands.” The islands are a semi-colony of New Zealand, with only limited independence. Niue and Samoa, both former New Zealand colonies, are also tax havens that have been used by thousands of MF clients.

Key told the media: “I have as much responsibility for tax in the Cook Islands as I do for tax in Russia.” In reality, Wellington exercises considerable economic and political influence in all these small Pacific countries. Business columnist Fran O’Sullivan noted on TVNZ that “most of the key tax lawyers who ... set up those tax mechanisms [in the Cook Islands] are New Zealanders. New Zealanders are in the thick of this industry worldwide.”

Responding to the latest revelations, opposition Labour Party leader Andrew Little said in a statement on May 10: “Foreign trusts in their current form cannot continue to operate in New Zealand and John Key has many more questions to answer.”

However, the transformation of the country into a tax haven is the outcome of policies implemented by successive Labour and National Party governments. The current foreign trust laws are essentially the same as those introduced by Labour in 1988. New Zealand achieved notoriety in the 1980s as the “wild west” of international financial deregulation, due to Labour’s right-wing “reforms,” including massive tax cuts for corporations and the privatisation of several state-owned companies.

From the mid-1980s to the mid-2000s, social inequality in New Zealand widened faster than in any other developed country. While the working class faces ongoing job cuts and austerity, and there is “no money” for decent healthcare, education and housing for the growing number of homeless families, the country has become a hive of parasitism, speculative activity and tax avoidance by the rich.

Teachers in widespread walkouts in Mexico

Don Knowland

The National Coordinator of Education Workers union (CNTE) on Tuesday, Teachers Day, called a nationwide strike of indefinite duration of public teachers. The strike represents a continuation of teachers’ opposition to regressive 2013 federal education reform.

Among other things, the education law revoked teachers’ rights to control hiring and firing and gave this power to the government. The “reform” plan established a mechanism for testing teachers to facilitate mass firings and created a system of government supervisors to monitor and report on teachers.

The work stoppage Tuesday closed thousands of schools in the southern states of Guerrero, Oaxaca, Chiapas and Michoacán, long bastions of militant teacher action.

In Chiapas, the union said that 90 to 95 percent of the state’s 75,000 education workers went out on strike. The head of the state’s education department claimed that only 10 percent of schools had closed, however.

Officials in Oaxaca said that 88 percent of the state’s 13,882 schools opened Tuesday and gave classes. However, the Guerrero teachers’ union claimed that over 70,000 of Oaxaca’s more than 80,000 teachers participated in a march to Oaxaca City, casting the government’s figures in substantial doubt.

The union set up a new plantón, or encampment, at the city’s central square, which until last year was a fixture in the city’s historic center. At last 800 teachers settled in, according to security forces. Demonstrations were held outside numerous government offices.

Teachers also sought to block key locations on roadways in Oaxaca City. Such blockages are likely to invoke repression by security forces. The spokesman for Oaxaca governor Gabriel Cúe on Tuesday said the government would not hesitate to use force to break up such actions.

There is a history to such threats. During a 2006 teachers’ strike in Oaxaca, police opened fire on strikers taking part in nonviolent demonstrations, provoking mass social opposition. The Mexican government organized death squads and called in the army to crush the strike, leaving 27 teachers and protesters dead.

Ominously, on Tuesday, the federal government said it was sending 500 federal police to Oaxaca to deal with the teacher unrest.

Teachers vow to continue with work stoppages until federal officials sit down with them at the negotiating table and meet their demands. Among them are abrogation of the education reforms, a 100 percent salary increase, and formal recognition of a bilateral relationship between the union and the federal government.

The federal education secretary, Aurelio Nuño Mayer, on Tuesday urged teachers in the country “not to fall into the trap” of participating in the strike convened by the CNTE, saying it only sought to blackmail the government “so its leaders continue keeping illegal privileges.”

Nuño Mayer said that teachers who participate in the strike would have their pay deducted, and that if they struck for four days they could face more severe sanctions.

On Wednesday, Nuño Mayer threatened to employ 16,000 newly credentialed teachers and 10,000 retired teachers to substitute for striking teachers. This was a thinly veiled threat to fire the teachers.

In response, the secretary general of section 22 of the National Union of Education Teachers in Oaxaca, an affiliate of the CNTE, said the teachers would continue on strike and urged parents not to send their children to school.

Nuño Mayer claimed that the government is “open to dialogue” provided the discussion is about how to start up education reform; but as long as the approach is scuttling reform or finding mechanisms to cut back the law and failure to comply with it, there will be no dialogue.

He specified: “If your request of dialogue is to ask for the repeal of the educational reform or to seek to implement exceptions such as [teacher] evaluations, or that there are no more tests, or to continue to give teachers automatic positions,” there will be no dialogue.

In other words, the federal government insists that teachers adhere to and not challenge any aspect of the federal education law, a law that subordinates education to the profit needs of big business, seeks to privatize education, and singles out and slanders educators for the supposed failures of public education.

Indeed, there can be no dialogue between public teachers and the working class as a whole with a government that imposes such measures by diktat.

However, the approach of the teachers unions, including CNTE, to the law is not to reject the reforms in their entirety, but to seek inclusion as partners in their implementation. The unions particularly want a seat at the table in teacher evaluations, hiring and firing. Through such arrangements, their membership’s militancy will be kept within acceptable limits.

The unions have sought political alliances with bourgeois politicians such as Manuel Lopez Obrador and his pseudo-left Morena party. Such political layers in reality serve as a lightening rod for social opposition in Mexico, and a means by which the ruling class seeks to diffuse social tensions and forestall social revolution.

In 2010, the CNTE endorsed Obrador’s Citizens’ Movement candidate Gabino Cúe, who won the Oaxacan gubernatorial election that year. Cúe has since played a key role in helping the federal government ram through its education reform plan in Oaxaca.

This week Cúe parroted the line of Nuño Mayer as to the strike, saying there would be no dialogue with teachers until they returned to the classroom and dropped their challenge to the federal law. The CNTE now calls Cúe a “traitor” in an attempt to cover up its own bankrupt politics.

Defeating the “reform” drive for privatization of education requires the development of a united political offensive by teachers and the entire working class of Mexico, independent of the bureaucratized trade unions and all of Mexico’s bourgeois political parties. It must be based on the demand for the material resources necessary for quality public education for all, as part of a revolutionary struggle against the capitalist profit system. Such a movement would find allies among teachers in the US facing the same kind of attacks.

Education unrest has also spilled over to the Mexico National Polytechnic Institute (IPN), an institution of 200,000 students. A strike has been going on for two months, led by student associations. The strike has protested fee increases, cuts to school programs and elimination of the school’s autonomy from government control.

On Monday, some 1,500 students marched to Los Piños, the presidential residence in Mexico City, delivering a letter addressed to President Enrique Peña Nieto from the general assembly of the school containing their demands. Students read from the letter, demanding that the federal government agree that any changes at IPN be based only on decisions taken by the IPN National Congress, which is in the process of being organized.

Later that day, Peña Nieto advised that he had instructed education secretary Nuño Mayer to provide an answer “as soon as possible” to the students’ demands and called for the return of all IPN schools to normal academic activity.

This was a slap in the face to the IPN marchers. “We marched today to Los Piños because the secretary of public education, Aurelio Nuño, did not want to talk with us,” the students said. In fact, just as with the national education reform, Nuño’s marching orders are to refuse all accommodation.

Many dead or missing after landslides in Sri Lanka

Oscar Grenfell

Sri Lankan government authorities confirmed yesterday that at least 37 people have perished in landslides and flash floods after monsoonal rains at the beginning of the week. There are reports that up to 220 families remain unaccounted for. Over 150 people are confirmed to be missing, sparking fears that the death toll will rise significantly.

As many as 220,000 people have been forced to flee their homes, in the worst floods and landslides sparked by annual torrential rains since 2010. At least 19 of the island’s 25 districts have been affected by floodwaters. Parts of the capital, Colombo, have been hit, with tens of thousands of homes damaged.

The states of Tamil Nadu and Kerala in southern India have also been impacted, with hundreds of houses damaged in Kerala, and further bouts of heavy rainfall are forecast.

The most affected areas in Sri Lanka were in the district of Kegalle, which is around 70 kilometres north of Colombo. Impoverished villagers, including subsistence farmers, have been hardest hit.

Three villages in Aranayake, a remote and mountainous area of Kegalle, located at different heights of one mountain, were engulfed by landslides on Tuesday, leading to mass casualties. Officials said the population sizes of the villages—Siripura, Elangapitiya and Pallebage—are unknown. According to some estimates, they may have been home to 1,000-1,500 residents each.

The villages were inundated by flows of muddy water, trees and other debris. Dozens of homes were destroyed. A.G. Kamala, a 52-year-old resident of Siripura, told the Associated Press that on Tuesday afternoon, she “heard a huge sound like a plane crashing into the Earth ... I opened my door. I could not believe my eyes, as I saw something like a huge fireball rolling down the mountain.” Siripura was buried under around 40 feet of mud. Witnesses said there are few traces left of the villages.

Media reports quoted a number of residents whose family members are feared to have lost their lives. One said 18 of his relatives were still missing while the nine children of one 70-year-old villager remained unaccounted for. Authorities said some of those missing may have fled the area.

Dozens of smaller landslides have been reported in other villages. Sixteen people are missing in the Bulathkohupitiya area of Kegalle. Six people are feared dead in the Aladuwatte village in the Kandy district. Survivors have been forced to seek shelter in overcrowded evacuation centres and Buddhist temples. There are mounting fears over access to clean drinking water, while a number of villages are reportedly suffering power outages.

Rescue efforts have been hampered by damaged roads and infrastructure. Without equipment, rescue workers were forced on Wednesday to dig through the muddy debris with their hands and with sticks. The government responded militarily, dispatching troops to Aranayake and other affected areas. The navy and air force were also mobilised.

Inadequate government warning systems and preparation contributed to the loss of life. The Red Cross reported that residents of the three villages buried by landslides in Kegalle complained they received no warning to evacuate.

Mahieash Johnney, a senior Red Cross Society manager, said the official Disaster Management Centre “relies on getting these messages across to residents at risk from landslides, by using loudspeakers and megaphones. These warnings don’t always get transmitted in time.” The centre did “not have the resources and manpower to go door to door in the endangered areas.”

On Tuesday, the Sri Lankan Sunday Times described the Disaster Management Centre as a “disaster in itself,” reporting that its emergency hotline was not working. The warning section of its official web site was also not functioning. According to the Times, one couple with an infant child, trapped in their Colombo home by three feet of rising floodwaters, were told by the centre that no help would be provided. There were people who “need our assistance more than you.”

On Wednesday, President Maithripala Sirisena visited affected areas in Kegalle, and the government has reportedly promised compensation of 100,000 rupees for loss of life and 250,000 rupees for destroyed homes. Energy Minister Ranjith Siyambalapitiya, a member of parliament for the Kegalle District, held a press conference declaring that “long term solutions” were required for the disaster’s victims.

The record, however, demonstrates that nothing will be done for the impoverished villagers and no measures will be put in place to prevent future tragedies. Successive governments have failed to mitigate the frequent death and destruction.

Sri Lanka is struck by southern monsoonal rains each year between May and September, while the northern monsoon usually spans from December to February. Scientists have suggested that the timing and severity of this year’s rains may be a result of the El Niño climate pattern. At the same time, deforestation and poorly-built housing have contributed to the deadly toll.

Seven people, including four children, died in the last major landslides, in September, 2015. Those affected were super-exploited tea plantation workers in the Nuwara Eliya central hills district. Their dilapidated and barracks-like homes were either destroyed or severely damaged and survivors were forced to shelter in overcrowded, unhygienic emergency accommodation.

In October 2014, 37 people were killed after landslides at the Meeriyabedda Estate in the central hills district, in one of the country’s worst disasters since the 2004 tsunami. In 2005, the Building Research Organisation had warned that the area was landslide-prone, and recommended that other accommodation be provided for the workers. Neither the government, nor the Maskeliya Plantation Company, which owned the plantation, took any action.

After the 2014 disaster, the then government of President Mahinda Rajapakse blamed the estate workers for the loss of life, falsely claiming they had been provided with land on which to build houses. The government then pledged to provide the survivors with permanent housing within three months of the disaster. In May 2015, the WSWS reported that seven months after the disaster, 100 tea plantation workers and their families were still living in overcrowded, makeshift accommodation.

Queen’s Speech 2016: UK Conservatives continue agenda of austerity and repression

Robert Stevens

Yesterday’s Queen’s Speech laid out 21 bills, containing further reactionary measures to be enacted out by the British Conservative government over the next year.

Prime Minister David Cameron claimed the legislative programme represented a “progressive, one nation, Conservative government” that was setting out a “series of bold choices that will improve lives across the country”.

This presentation was largely repeated by a complainant media with the Financial Times heralding a “social justice agenda” while the Guardian proclaimed, “David Cameron places social reform at centre of Queen’s speech”.

Nothing could be further from the truth. The speech set out a raft of measures attacking democratic rights and imposing privatisation policies in education and prisons as part of the government’s austerity drive.

The “war against terror” has been used by successive Labour and Conservative governments to establish the framework for a police state. This is to be accelerated through a Counter­ Extremism and Safeguarding Bill, which enacts a new “civil order regime” to restrict “extremist activity” and enable state intervention in schools “which teach hate”.

The definition of “extremism” now includes those who are “non­violent” and is so vague as to sweep up in its dragnet virtually anyone who criticises the government.

Cameron’s notes to the speech said, “[E]xtremists—both violent and non­violent—are trying to drive our country apart. So this Queen’s speech stands up for our liberal values by taking on the extremists with new powers to disrupt their activities, while protecting young people in unregulated schools from those who preach a message of intolerance and separatism ...”.

The government is also preparing to abolish the Human Rights Act, which incorporates the European Convention on Human Rights. The move is intended to placate those sections of the Conservative Party and the UK Independence Party who have long complained that the Act is an intrusion into “British sovereignty” by the European Union.

With an eye to the referendum on British membership of the EU on June 23, which is bitterly dividing the Conservative Party, the Act’s abolition is an olive branch to Cameron’s opponents in the Leave campaign.

The claim is that it will be replaced by a “British Bill of Rights”, but any such legislation would be largely meaningless as the bourgeoisie dispense with democratic norms.

It was only due to the provisions of the Human Rights Act that the families of the 96 Liverpool Football Club supporters, who died in a crush at Hillsborough football stadium 27 years ago, were recently able to have the original inquest verdicts of “accidental death” quashed and replaced with a one of “unlawful killing”.

The Act’s abolition threatens a constitutional crisis as it is embodied in the Scotland Act, under which the 1997 Labour government established the Scottish Parliament.

These moves are buttressed by plans to hand vast surveillance powers to the police and intelligence agencies. The speech noted that a bill will “modernise the law governing the use and oversight of investigatory powers by law enforcement, security and intelligence agencies”. This is a commitment to pass the Investigatory Powers Bill, introduced in March. The ITB is a far ­reaching attack on privacy and democratic rights, as it brings the current diverse rules governing state surveillance into one piece of legislation. It enshrines in law the previously hidden mass gathering of everyone’s Internet data by the Government Communications Headquarters (GCHQ) spying agency, as exposed by whistleblower Edward Snowden in 2013. The government also intends to bring forward what is described as the greatest prisons “reform” since the Victorian era.

Prison “governors will be given unprecedented freedom…” to establish “reform prisons”, with “old and inefficient prisons to “be closed and new institutions built where prisoners can be put more effectively to work”. Prisons will be modelled on academy schools (centrally funded but privately run) and rated via league tables. In a speech last month, Cameron declared that prisoners were “potential assets to be harnessed” for profit. The changes are to be trialled at prisons in the east Midlands, the north­east and London, including HMP Wandsworth.

Prior to the speech, the Labour Party and the unions declared that Cameron had been forced to retreat on his government’s plans to force all schools to become academies.

Academisation involves giving individual schools control of their budgets, in an effort to drive down wages and conditions and encourage the further marketisation of education. Earlier this month, the government said academy status would no longer be compulsory, in the face of significant protests by parents, teachers and governors.

But the Queen’s Speech set out that this is to continue in another guise. Instead of all schools being forcibly converted, “new laws to expand the academies programme in the poorest performing local authority areas” will be implemented. Legislation is also slated to make it easier for other schools to become academies.

The speech inaugurated a National Funding Formula for schools, which imposes the biggest real-terms cut for school since the 1970s.

Massive attacks on higher education are outlined in the programme, with legislation to be introduced “to support the establishment of new universities and to promote choice and competition across the higher education sector”. The aim is to allow private institutions to be given university status.

While not announced in the speech, central to the Tories plans is its announcement this week allowing universities in England to increase tuition fees above £9,000 from autumn 2017. Based on their offering “high quality teaching”, based on inspections, with academics compelled to provide more teaching, select universities will be allowed to increase fees. This will exclude even more people from a working class background from a university education.

This is especially the case under conditions in which the government committed to continuing its austerity measures in order to “bring the public finances under control so that Britain lives within its means...”. The aim is to establish a “lower welfare economy where work is rewarded”. Despite the ongoing offensive against the working class and young people announced in the speech, sections of the Tory party immediately aimed their fire at Cameron for “watering down” its legislative programme.

Iain Duncan Smith, a prominent supporter of the campaign to leave the EU, complained that “Many Conservatives have become increasingly concerned that in the government’s helter-skelter pursuit of the referendum, they have been jettisoning or watering down key elements of their legislative programme. Whether it is the trade union bill or the BBC charter proposals, it seems nothing must stand in the way of winning the referendum”.

Prior to the Queen’s Speech the government, in collaboration with the trade unions, amended some sections of the Trade Union Act, to ensure it was passed.

The new anti­-union law illegalise strikes if fewer than 50 percent of union members, and 40 percent in “important public services”, vote for action. It also enables the use of agency workers as strike breakers and makes picketing a criminal offence.

But the government retreated from plans to abolish the “check-­off” system, where union subscriptions are deducted automatically from wages. This was the quid pro quo required for the unions and their allies in the Labour Party to pledge their support to Cameron’s pro-­EU campaign. Labour won the support of nine million voters at the last general election and the Party’s support is seen as critical to securing a vote to Remain in the referendum.

Commenting on the speech, the Financial Times warned that such were the divisions within ruling circles over Europe that “If Mr Cameron survives the result of the referendum, regardless of what decision voters take, his main preoccupation will be putting his party back together”.

It added, “mutterings continue on the Conservative backbenches that Mr Cameron is a lame duck and there will be a swift challenge to his position after June 23. If the result is close, Brexit or no Brexit, disgruntled Eurosceptic MPs will probably do their utmost to eject him from Downing Street and bring in a new leader”.

NATO rearmament in Eastern Europe increases danger of world war

Johannes Stern

In the run-up to the NATO summit in Warsaw in early July, the Western military alliance is building up its military might in Eastern Europe, heightening the danger of a nuclear conflict with Russia.

On Tuesday, the new NATO rapid intervention force, the Very High Readiness Joint Task Force (VJTF), began manoeuvres in Poland. As part of the “Brilliant Jump” exercise that will last till May 27, 1,500 soldiers from the VJTF land component, including the Spanish brigade BRILAT as the core of the VJTF, are practicing a rapid deployment to Eastern Europe.

The VJTF is aimed directly against Russia. Its establishment had been decided at the NATO summit that took place in Wales after the pro-Western coup in Ukraine in September, 2014. The VJTF belongs to the NATO Response Force (NRF), the rapid reaction force of NATO, whose troop strength in February last year was doubled to 30,000 soldiers. In an emergency, the 5,000-strong “spearhead” of the NRF can be operational within 48 hours.

“Brilliant Jump” is just one of many NATO exercises that are currently taking place in Eastern Europe. The manoeuvre “Spring Storm” in Estonia, which runs until May 20, will be held in close proximity to the Russian border. According to a press release of Germany’s Federal Armed Forces Association, “around 6,000 soldiers from several countries,” including “professional and volunteer Estonian troops, conscripts and reservists” and “units of eight NATO countries and Finland” are participating. From Germany, “a company of the Bundeswehr [Armed Forces]” is taking part.

From June 7 to 17, one of the largest exercises will take place this year in Poland, with the “Anaconda” manoeuvres. The script foresees an Article 5 scenario, with a NATO counterattack following a fictitious attack on NATO member Poland. The scale of the exercise is enormous. According to NATO officials, about 25,000 soldiers will participate in “Anaconda.” In addition, 250 armoured vehicles from the US Army will be used, including more than 90 Abrams M1 battle tanks.

The Bundeswehr is increasingly taking on a leading role in this massive NATO deployment against Russia. At the end of April, after a meeting with Latvian Prime Minister Maris Kucinskis, Chancellor Angela Merkel confirmed government plans to move German troops to Lithuania. “Some reinforcements are possible here, we will also consider these at the moment,” said Merkel. Specifically, the Bundeswehr could take the lead in building a NATO battalion in Lithuania.

In February, on his blog “Eyes Front,” the military journalist Thomas Wiegold provided a “first impression” regarding the “various exercises and the permanent, revolving presence in NATO’s east, in which Germany is participating with a total of 5,000 soldiers.”

As well as the manoeuvres already mentioned, the following are also taking place: “Persistent Presence,” a continuous presence of German units of company strength in the Baltic countries and in Poland from April to June; “Baltops,” a naval exercise in the Baltic; “Iron Wolf,” a defensive and offensive exercise by multinational fighting units in Lithuania in June; “Sea Breeze,” from July 11 to 21 in the Black Sea; and “Flaming Thunder,” an artillery exercise using live ammunition from August 1 to 12 in Lithuania.

In the autumn, there follows the engineers’ exercise “Detonator” in Latvia, and the full force exercise “Silver Arrow” (also in Latvia), “Borsuk (Poland), and “Iron Sword (Lithuania), in which a German tank company and sections of a motorised artillery battalion will participate with Howitzers.

Germany is also involved in the military upgrading and rearmament of the Baltic states, whose extreme right-wing and anti-Russian governments are playing a key role in the NATO aggression against Moscow.

For example, the German government will provide Lithuania with twelve self-propelled armoured Howitzers from the Bundeswehr. This was announced by Defence Minister Ursula von der Leyen on April 15 as part of her visit to the Lithuanian capital Vilnius. Lithuania should also receive weapons fire control systems and the means for artillery observation.

In addition, the Lithuanian army has expressed an interest in the Boxer armoured transport vehicle. Von der Leyen also promised her support in this matter. She will “work to ensure that Lithuania receives a slot in the OCCAR.” OCCAR (Organisation de Coopération en Matière d’Conjointe Armament), is the joint organization of the Boxer beneficiary states.

The permanent presence of Western troops in Eastern Europe, and the massive rearmament of the Baltic states are not routine exercises. NATO is putting into practice war plans that its military and geostrategists have elaborated behind the backs of the population.

“The Alliance must act with a sense of urgency when it comes to reinforcing its deterrence posture in the Baltic states, where NATO is most vulnerable. … A general change in mindset is needed—a culture of seizing the initiative and actively shaping the strategic environment should become the Alliance’s modus operandi,” states the recently published paper in Tallinn, Estonia, “Closing NATO’s Baltic Gap.”

The authors are the former leader of US forces in Europe (SACEUR) and Commander of NATO forces in the Kosovo war, Wesley Clark, the former commander of the Allied Joined Force Command of NATO, Egon Ramm, the former director of the International Centre for Defence and Security, Jüri Luik and the former NATO Deputy Supreme Allied Commander Europe (DSACEUR), General Sir Richard Shirreff.

The detailed paper recalls the war plans that the generals of the imperialist powers designed before the First World War. As a particular challenge, Clark and Ramm identify the closure of the “Suwalki-gap,” the narrow land bridge between Poland and Lithuania, close to the Polish border town of Suwalki.

According to Clark and Ramm, in an emergency, the VJTF is neither fast nor large enough to rush to the aid of the enclosed Baltic states over this bottleneck. They therefore argue for an “effective deterrence strategy” that includes not just another upgrade of conventional forces in the East, but also a “reinforcement” in the field of nuclear weapons and cyber defence.

The war fantasies of the NATO generals knows no bounds. At one point, they write: “NATO must signal to Russia that, in case of aggression against any NATO Ally, there is no such thing as a limited conflict for the Alliance, and that it will contest Russia in all domains and without geographical limitations.”

In the case of the German General Ramm, this blatant threat of a new “total war” leaves a particularly nasty aftertaste. June 22, marks the 75th anniversary of the German invasion of the Soviet Union, in which up to 40 million Soviet citizens were killed. Ramm’s father, Egon Wilhelm Ramm, who later was a Free Democratic Party parliamentary deputy in post-war West Germany, was a direct beneficiary of the terrible foray conducted by German imperialism. In 1941, he participated in the territories occupied by the Wehrmacht (Nazi Army) in Poland in establishing German shipping companies on the Vistula. From 1939 to 1940, and from 1942 to 1945, he fought as a soldier in World War II.

Slouching Toward Washington

James McEnteer

The corrupt, interminable 2016 presidential primary process has revealed terrible flaws in United States democracy. The biggest takeaway is that our two-party monopoly system is outmoded and inadequate to represent our diverse U.S. population. We need a fresh start, with more, and more open, parties, more closely resembling other western democracies. Too many Americans are now excluded for various reasons, with no say in their own governance.

It is clear that our two major parties are actually four. The Trump faction of Republicans, the latest incarnation of the Know Nothings, is the feral flowering of inchoate frustration. In Paddy Chayefsky’s prophetic 1976 movie, Network, newscaster Howard Beale voiced Trump’s sentiments: “I’m as mad as hell and I’m not going to take it anymore.”

That’s how Trump’s followers feel. They favor anger and emotion over any actual policies. That anger is all Trump has. It doesn’t matter that he waffles or fails to address most major issues facing the nation and the world. He’s pissed off and dares anyone to fuck with him. That’s his entire campaign and it suffices for those – mainly bitter, lower-income white males – who feel as he does.

Establishment Republicans, dumped in the dust by Trump’s angry followers, have nothing to offer but their time-worn obstruction of whatever might disturb their corporate patrons. These Radical Reactionaries oppose most social or political changes, especially those proposed by the Black President. What the Reactionaries have in common with the Trump Know Nothings is a rabid racism and blind distrust of all ethnic and religious Others.

The Republican Reactionaries – fronted by fossilized hacks like McConnell, Grassley, Hatch, McCain, Graham et. al. – are a persuasive argument for Congressional term limits. Two terms for senators, four for representatives. And while we’re at it, one ten-year term for Supreme Court justices, with the possibility of a second and final ten-year term upon proof of rationality. This would have shaken out Scalia before Bush v. Gore and would long since have sent Thomas packing. Not just dead wood. Downright harmful to the country.

We don’t need a professional political class, dedicated to their own political survival. The Founders envisioned citizen-legislators taking turns in government for the common good, then returning to their useful lives outside the federal establishment. Modern U.S. politicians do not – cannot – know the problems of “average” citizens, since they do not suffer them. They have no useful lives outside (and in many cases, inside) politics.

The Democrats are also divided. Party Regulars have rigged the outcome for their long-time stalwart, Hillary Clinton. The voice of the people matters less than the confidence of Goldman Sachs and Citibank. Clinton has networked, paid off and otherwise made enough people beholden to her to ensure her ascendance. Debbie Wasserman Schultz, Clinton’s 2008 campaign head, now runs the Democratic nominating show. No one really trusts Hillary Clinton, but that does not matter. Only the presidency does.

Bernie Sanders entered the Democratic race because he knew with the current two-party monopoly of the primary process he had no chance as an independent outsider. The enthusiastic response to his Progressive ideas has surprised the Democrats and perhaps even Sanders himself. People still want hope and change, now more than ever.

Despite the opposition of the mainstream press – with especially shameful treatment by The Washington Post and The New York Times – Sanders has drawn the hopes of young people with his promises to address income inequality, abolish student debt, tackle climate change, etc. He’s the only candidate running a campaign based on actual issues. But that will not be enough to win him the nomination or perhaps even a voice in the party platform, despite his demonstrably large constituency. “Socialist” is a dirty work for many people, who cannot look beyond it to hear anything Sanders says.

Progressives need to work harder to incorporate the values of “green” environmentalists and racial and religious minorities into their platform proposals. Hispanics, African Americans and religious minorities, including Muslims, need stronger recognition of their signature issues, such as voting rights, law enforcement equity, immigration reform and justice in the court system. The Progressives are the only group with the will and ability to accommodate them.

Parties of Know-Nothings, Radical Reactionaries, Dem Regs and Progressives would make for a more accurate political landscape than the phony, megalithic duopoly we have now. We need to end the exclusive two-party control of the primaries. All forms of voter suppression, including restrictive registration procedures and bullshit I.D. obstructions, must be outlawed and strictly enforced. Such restrictions only serve the entrenched powers. We need a more dynamic system, responsive to our evolving values.

Can we expect such changes from our current political parties or the federal government? No way. They’re too heavily invested in the status quo. Such changes will have to percolate up from the state level. Electoral reform is a populist idea, like marijuana legalization, death with dignity and other issues too hot for Congress, pushed up to the national level state by state.

Such long overdue adjustments to our ossified system can help to make our democracy more equitable for everyone. Damn the oligarchs. Full speed ahead.

UN officials say torture is “common practice” in Sri Lanka

Minusha Fernando

Interim reports by United Nations special rapporteurs this month confirm that torture and other human rights abuses by Sri Lankan police and security forces have continued unabated since the end of three-decade war against the separatist Liberation Tigers of Tamil Eelam (LTTE) in May 2009.

Juan E. Mendez, the UN’s top official on torture and other cruel, inhuman treatment and punishment, and Monica Pinto, the UN special rapporteur on the independence of judges and lawyers, released their findings at a Colombo press conference on May 7.

The reports followed a nine-day visit to Sri Lanka, during which the UN representatives met with Sri Lankan government officials, interviewed torture victims and visited prisons and detention centres. The UN rapporteurs will present full reports to the UN Human Rights Council (UNHRC) in March and June next year, respectively.

Mendez told the press that based on testimonies he took from victims and current detainees “torture is a common practice inflicted in the course of both regular criminal and national security-related investigations...

“Severe forms of torture continue to be used, although probably less frequently [since the end of the war], while both old and new cases of torture continue to be surrounded by total impunity,” he said.

Mendez noted that between 16,000 and 22,000 people had gone missing during the war and its aftermath, describing the disappearances as the “torture of the most horrifying kind.”

The interim reports revealed that:

* Torture and other forms of physical and mental coercion are a “routine method of work” by police investigators to obtain confessions. The abuse can include punches, slapping and blows with objects, such as batons or cricket bats, as well as suspending handcuffed prisoners for hours, asphyxiation using plastic bags drenched in kerosene, hanging people upside down, applying chili powder to face and the eyes. Interrogators also sexually violated detainees, including genital mutilation or the application of chili paste and onions.

* Confessions obtained under torture are used as evidence against victims.

* The Prevention of Terrorism Act (PTA) has been used for arbitrary arrests and detention without trial for prolonged periods of up to 18 months. Under the PTA, “magistrates essentially rubber-stamp detention orders made by the Executive Branch and do not inquire into either conditions of detention or potential ill-treatment in interrogation.”

* Police officers are given wide powers to routinely arrest people, with no judicial oversight of police methods.

* No clear procedures to inform detainees that they must have access to a lawyer as soon as they are arrested.

* Detainees are held incommunicado to prevent disclosure of where they are imprisoned.

* There is seriously deficient prison infrastructure and severe overcrowding. This included, “acute lack of adequate sleeping accommodation, extreme heat and insufficient ventilation,” as well as limited access to medical treatment.

Mendez reported that the Vavuniya remand prison held 170 prisoners in less than 100 square metres, or 0.6 metres per person. Terrorism Investigation Division (TID) jails, he said, lacked ventilation and had only limited access to daylight. “Some inmates spend about 12 hours a day in the dark.”

Mendez and Pinto said there are long delays of trial in all cases, including those arrested for “armed conflict” or for political reasons, with some detained for 15 years without trial.

While the interim reports provide a limited account of the ongoing human rights violations, the revelations are a damning refutation of claims by President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe that their government defends democratic rights and reveal the hypocrisy of the US, and the UN itself.

Following the Sirisena-Wickremesinghe government’s alignment with Washington’s foreign policy aims and its “pivot” to Asia, senior US officials, including Secretary of State John Kerry, began hailing Sri Lanka as a defender of basic rights. Last month, US ambassador to UN Samantha Power declared that since January 2015 Sri Lanka has become a “global champion of human rights and democratic accountability.”

These claims are blatant lies. Sirisena became the Sri Lankan president in January 2015, following a Washington instigated regime-change operation. The US seized on human right violations by former President Mahinda Rajapakse during the war against LTTE as a weapon to isolate him and rally sections of the Sri Lankan ruling elite and upper middle class to oust him.

The US had turned a blind eye as the Rajapakse government trampled on basic democratic rights, imprisoned its opponents and killed thousands of Tamil civilians during the last months of the war.

Washington only began criticising these crimes when China emerged as the main supplier of military hardware and finances to Colombo. In the UN, the US pushed through a resolution calling for an international inquiry into Sri Lankan war crimes.

These “concerns” had nothing to do with defending human rights but were to pressure Colombo into lining up with Washington’s “pivot to Asia,” a military agenda to encircle China.

After Sirisena was elevated into the presidency, Sri Lankan foreign policy shifted in favour of Washington and India, the US’s strategic partner in the region.

Last August the US dropped its calls for an international inquiry into Sri Lankan war crimes and helped secure the passage of a resolution in the UNHRC allowing Sri Lanka to hold a so-called domestic inquiry. These manoeuvres were yet another demonstration of how US imperialism uses “human rights” to advance its strategic interests.

Responding to the UN rapporteurs’ interim reports, Sri Lankan Health Minister Rajitha Senaratne told the media that the cabinet had discussed the claims and would investigate the revelations. This, of course, will be another cover-up.

The military-police apparatus and repressive methods developed during the civil war against workers and poor, Tamil, Sinhala and Muslims alike, will be maintained. Mired in economic crisis, the government is committed to implementing the sharp austerity measures demanded by the International Monetary Fund and will increasingly use these methods to suppress the inevitable eruption of mass opposition by workers and the poor.

One third of London renters sinking into debt

Allison Smith

One third of London renters sinking into debt

Over the past five years, London rents have risen by 20 percent, while average pay has risen by just two percent. This is forcing many London renters to borrow money from friends, family, banks, credit cards or payday loan firms to cover housing costs.

Nearly 55 percent of 739 households surveyed by YouGov for housing charity Shelter said they struggled to pay their rent from “time to time” or constantly.

Campbell Robb, chief executive of Shelter, said, “With rents rising relentlessly, far too many Londoners are having to fight hard to keep their heads above water. Tens of thousands of people are being pushed out of the city, or are spiralling into debt just to be able to keep a roof over their heads.”

London’s private renters are more than twice as likely to have to move home than private renters in the rest of the country. Last year, one in five families was forced to move, creating a nomadic culture for many in the capital.

Map shows unaffordability of rent in London

Housing charity Shelter has published a London Underground Tube map showing how unaffordable most of London is for the average private renters.

The report, which breaks down affordability by the percentage of affordability relative to the average income for a two-person household, shows that only 15 of London’s 270 Underground Stations have affordable private rental housing.

In zone three of the Shelter affordability map, “the average cost of a two-bed private rental property is between 35 percent and 50 percent of the combined take home pay of a two-wage household.”

Last month, Conservative Prime Minister David Cameron announced government plans to demolish England’s worst council estates, many of which are located in and around London. Two of the worst affected London boroughs under the plans will be Hackney Council, which expects to lose more than 915 social homes and Southwark, which is set to lose 2,051 social rented homes. The destruction of council housing coupled with planning policies favouring private developers have left fewer and fewer truly affordable units.

Growing evidence of slum conditions in east London

In the latest incident confirming slum conditions in parts of east London are worsening, Labour Party-run Newham Borough Council recently issued a probation notice to a Manor Park landlord who was found illegally renting an unsanitary and unsafe apartment to a family of four for £700 per month.

The property was dirty throughout and has no hot water at the kitchen sink, exposed electrical wires at risk of fire, no ceiling, and no supporting beams around the missing chimney breast in the bedrooms, threatening collapse.

Former prison inmates provided with tents after release

A new report reveals that female prisoners with no fixed address on their release from London’s HMP Bronzefield prison were given tents to live in because officials were not able to secure permanent accommodation.

As a direct result of the lack of social housing in 2014, the percentage of inmates lacking housing on release was 4.5 percent in 2014 and 16.3 percent in 2015, almost quadrupling.

A Women in Prison charity spokesperson explained, “The fact that Bronzefield is resorting to issuing tents to women leaving prison with nowhere to live does not highlight a problem evident within that one prison. Instead it is a reflection of how chronic the housing crisis has become...”

London railway arches to be converted to private housing

The dire shortage of new housing completions in London is driving property prices sky high, sending developers and property investors scrambling to find commercial spaces to convert into housing.

Near the Elephant & Castle area in Central London, estate developers have been granted permission to convert two railway arches into homes. The railway arches, currently being used as storage, are unsuitable for housing as the sound from passing trains overhead are more than double the current standard for noise levels. Twelve trains per hour for 19 hours per day pass overhead. Additionally, natural light will be very poor because of the inability to fit windows around all sides of the “property”.

The government has made it much easier to convert commercial buildings to residential use. But according to most estimates, levels of house building are far behind what is needed to meet demand. Converting commercial properties into homes will not keep pace with the vast number of properties needed to address the crisis.

London public toilets for sale and rent

A London estate agent is selling a former public toilet facility for £1 million in the east London Spitalfields neighbourhood, marketing the facility as perfect for a new nightclub or other trendy establishment.

Spitalfields, once a working class district, now boasts some of the highest home prices in England as social landlords sell off valuable properties to private developers.

In 2015, Brick Lane residents learned that social landlord EastendHomes are planning to sell off a former council estate, leaving more than 600 residents fearing eviction because the new homes will likely be too expensive to buy or to rent. The landlord has already torn down some of the estate’s tower blocks at Denning Point and the new build units are selling for £600,000 for a one-bedroom flat.

In Highgate, north London, a local builder is renting a public toilet for £3,000 per month, saying that it would be perfect for bus drivers needing a loo to relieve themselves during their break time.

Referring to the Council’s plans to close the only public toilet in the area, the builder told Camden New Journal, “I hope they don’t shut the public toilets in Pond Square because they are needed, but it would be good news for me in a business sense.”

UK: Gap in life expectancy between rich and poor widens for first time since 1870

Trevor Johnson

The gap in life expectancy between the rich and the poorest in the UK has increased for the first time since the 1870s.

A recent report by the Cass Business School (part of London's City University) and the International Longevity Centre-UK shows that after a long period in which the effect of social inequality on life expectancy had fallen, this trend has been thrown into reverse. While the population as a whole has a longer life expectancy, the extent to which people have benefited from this is highly dependent on their social class.

Based on a survey of the Human Mortality Database, professor of statistics Les Mayhew and Doctor David Smith measured the differences in age of death between the 10 percent of adults who died youngest and the longest-lived 5 percent. The report concentrates on adults who survive past the age of 30.

Mayhew said, "We found that since the 1990s lifespan inequalities in men have actually worsened in England and Wales. This is partly due to some men now living to exceptionally old ages and in many cases equaling women, but at the other end of the distribution there has been a lack of progress."

In the first half of the last century, life expectancy grew and the gap between the richest and poorest narrowed as the majority of the UK population benefited from improvements in clean drinking water, better housing, higher incomes and better health. Following that was a long period in which the differences of life expectancy between rich and poor remained constant.

This continued until 1993. Between 1993 and 2009, however, differences between men in the top 5 percent and bottom 10 percent have increased to a staggering 33.3 years—with the gap in life expectancy between rich and poor growing by 1.7 years.

The growing discrepancy in life expectancy between the rich and poor is the result of decades of attacks on jobs, wages and living standards, as well as cuts in the National Health Service and the benefits of low-income households. Successive Labour and Conservative governments carried these out. While the rich have access to the best healthcare money can buy, the majority rely on a health service that has been the object of a feeding frenzy by profit-making concerns, causing standards of care to plummet.

The report tries to blame the growing gap in life expectancies on the “lifestyle choices” of the poorest men. The introduction berates the poorest men for putting “themselves in harm’s way on average more than women do… they smoke more, drink more and there are periods in their lives when they partake in riskier activities.” Nowhere do they consider what it is about the lives of men “in lower socio-economic groups” that causes them to do these things.

Millions of people in the UK suffer from food insecurity. Oxfam reported in 2014 that more than two million people in the UK are malnourished and three million were at risk of becoming malnourished. One in five people live below the official poverty line. Nearly 13 million people do not have enough money to live on because of unemployment or wages that are not sufficient to provide for necessities. More than a million people relied on food parcels from charities in the year to April 2015. One in six parents has gone without food in order to feed their children.

Save the Children reports that in 2012, there were 3.5 million children living in poverty in the UK, with the number expected to rise to almost four million.

These processes were accelerated by the 2008 financial crisis, as first Labour and then Conservative governments gave billion to the banks that caused the crisis, and paid for the bailout by raiding the services and benefits of millions of the most vulnerable people. Central and local government slashed a million jobs, while private firms responded by destroying millions of fulltime, better paid jobs and replacing them with low paid temporary and zero-hour contract jobs in which workers are forced to work only when required. Private companies have also been put in charge of reducing the bill for disability and other welfare benefits. Their profits come directly from their persecution of the most vulnerable—in some cases driving them into an early grave.

A recent report by the Joseph Rowntree Foundation revealed that in 2015, 1.25 million people in the UK could be categorized as destitute, “the most extreme form of poverty in the UK,” leaving them unable to afford essentials such as food, toiletries or heating.

Another report by Glasgow University’s Institute of Cancer Sciences revealed the shocking statistic that in the most deprived parts of Scotland’s largest city, men have a life expectancy of 54 compared to richer areas just a few miles away where people live well into their 80s.

Professor Paul Shields, who authored the report, said people living in poverty have bad diets because their poverty prevents them from eating healthier foods. “It’s poverty, it’s not a personal choice,” he said. “Addressing poverty is the route to tackling this properly. You need to be able to afford to buy good-quality food.”

While Glasgow is often picked out as the worst case of the rich and poor areas being so different in their life expectancies, this is only an example of a wider trend. Most cities in the UK today have poor neighborhoods a few miles away from areas of luxury, and would – if studied – yield similar statistics.

Proving that this tendency in the UK to greater class polarisation is part of a global phenomenon, a recent report published in the Journal of the American Medical Association states that US men in the poorest one percent have life expectancies similar to those of men in developing countries such as Sudan and Pakistan. The top one percent, men outlived those in the bottom one percent by 14.6 years, while for women it was 10.1 years. The average lifespan of both men and women in the top 5 percent went up by more than two years between 2001 and 2014, while for those in the poorest 5 percent life expectancy hardly improved at all.

Growing warnings over Chinese debt

Nick Beams

While the turbulence that hit global financial markets in the early part of this year has subsided somewhat, at least temporarily, the underlying recessionary trends continue to intensify. These trends are clearly seen in the world’s two major economies, the United States and China.

Earlier this week, the Financial Times pointed to the flattening of the yield curve, which measures the difference between the interest rates on higher yielding long-term 10-year treasury bonds and two-year debt, noting that it was down to its lowest level since December. A flattening of the curve, when long- and short-term rates start to converge, signals lack of investor confidence about the long-term outlook for the economy. The yield curve has not inverted—a situation which is regarded as indicating a recession—but there are other indications of slowing growth.

American corporations are in an earnings recession, with profits down for the fourth straight quarter in a row. This is the longest period of lower profit growth since the financial crisis of 2008–2009, with US firms described as struggling under the weight of a strong dollar and “sputtering growth in other developed and emerging markets.”

In the wake of the global financial crisis, the spending and credit stimulus initiated by the Chinese government provided support for the global economy, particularly for emerging markets. But the Chinese economy is now experiencing much lower rates of growth—down from levels of 10 percent a few years ago to below 7 percent—and the expansion of credit has brought fears of a financial crisis.

Earlier this month, CLSA, a leading Hong Kong based brokerage and investment firm, warned that Chinese bad debts were reaching a “crisis level.” The company has released research showing that China’s non-performing loans are as high as 19 percent of bank assets, compared to the official figure of 1.6 percent, with most of the bad debts on the books of loss-making companies. The difference is accounted for the by fact that CLSA used international standards when calculating non-performing loans, rather than looser Chinese benchmarks.

The International Monetary Fund has said that $1.3 trillion of corporate debt in China, around one sixth of business loans made by banks, has been incurred by companies that are bringing in less revenue than they owe in interest payments.

In the first three months of the year, the government and financial authorities undertook a further expansion of credit in order to try to boost the economy in the wake of the stock market crisis of last year and fears that growth could fall sharply.

But these measures appear to have set off a conflict within the ruling Communist Party regime. Earlier this month the official People’s Daily featured a front-page interview with an “authoritative figure” who said that soaring debt levels could lead to a crisis.

“A tree cannot reach for the sky,” the “figure” was quoted as saying. “Any mishandling will lead to systemic financial risk, negative economic growth and evaporate people’s savings. That’s deadly.”

The official also warned that China’s growth rate, which has fallen from 12 percent in 2010 before dropping to 8 percent in 2013 and is now down to below 7 percent, will not return to the previous levels.

The interview is being interpreted in some quarters as part of a conflict between Chinese President Xi Jinping and Chinese Premier Li Keqiang, who is regarded as the leading proponent of increased credit.

In any case, it is clear that credit expansion is not bringing the boost to the Chinese economy it once did. In the year to November 2009, total credit was expanded by an amount equivalent to 34 percent of gross domestic product. This lifted the growth rate from 6.1 percent in the first quarter of the year to a full-year level of 9.2 percent. In the year to February, credit was increased by 40 percent of GDP, but the growth rate has only barely been maintained at the official level of between 6.5 and 7 percent.

Further evidence of the ongoing slowdown in China was provided in the trade figures for April that showed a decline in both imports and exports. Exports fell by 1.8 percent year on year, following an 11.5 percent surge in March. Imports were down by 10.9 percent compared to the same month a year ago, following a 7.6 percent decline the previous month.

The contraction in global markets resulting from the China slowdown is fuelling tensions over currency values. Japan is at the centre of this growing global conflict. Despite the move by the Bank of Japan to introduce negative interest rates at the end of January in the expectation that this would start to bring down the value of the yen, the Japanese currency has risen by around 13 percent so far this year.

This prompted a warning last week from the Japanese finance minister, Taro Aso, that a persistent “one-sided” yen could lead to intervention. “We are determined to stop it,” he said, without proving any specific details as to how that might be achieved.

In an interview with the Financial Times on Monday the vice-minister for finance and international affairs, Masatsugu Asakawa, said the government regarded selling yen in international markets as a legitimate part of its policies. This was despite the commitment at the G20 meeting earlier this year that countries would not resort to devaluing their currencies in response to the downturn in global markets—a move regarded as a return to the kind of beggar-thy-neighbour policies that characterised the 1930s. The US has now put Japan on a watch list of countries that may be seeking to push down their currencies.

This move, however, was dismissed by Asakawa who told the Financial Times that Japan had not been singled out and so “we do not see this as having an immediate impact on Japan’s currency policy.”

Major Japanese manufacturers, including Toyota, which are adversely impacted by a rising yen, have issued warnings that profit levels are falling at the fastest rate since Prime Minister Abe came to power in late 2012 with promises to boost the economy through so-called Abenomics, based on central bank purchases of financial assets and an implicit commitment to ensure Japan remained competitive.

Monetary policy is also the subject of conflict in Europe, where German financial authorities are continuing their opposition to the quantitative easing and negative interest rate policies of the European Central Bank (ECB) under president Mario Draghi. Earlier this year, German Finance Minister Wolfgang Sch uble said Draghi was at least 50 percent responsible for the rise of the right-wing German populist party, the AfD.

The chief economist at Deutsche Bank, David Folkerts-Landau has written a comment for the Financial Times comparing the ECB measures to the German Reichsbank, which printed money to finance government spending in the 1920s, leading to hyperinflation.

“Today the behaviour of the European Central Bank suggests that it too has gone awry,” he wrote. When reducing interest rates to historically low levels did not stimulate growth, the ECB began purchasing sovereign debt and when that did not work, the ECB went to the next extreme and introduced negative interest rates with the result that almost half European sovereign debt is trading at negative yields.

Six years after the financial crisis, European debt keeps rising, the eurozone is as fragile as ever, insurance companies, pension funds and savings banks barely have a positive spread, growth is anaemic and debt levels in some countries, such as Italy, is not sustainable. “Monetary policy has become the number one threat to the eurozone,” he concluded.

The worsening global economic outlook will be one of the key issues at the meeting of the G7 major economies later this month, at least in closed-door discussions. While there will no doubt be efforts made to prevent divisions from erupting into the open, they will be very much present.