French government forces through austerity measures without vote in parliament

Alex Lantier

French Prime Minister Manuel Valls’ government yesterday forced through an unpopular bill imposing large-scale liberalization of the French economy without a parliamentary vote. Instead, Valls used the anti-democratic provision 49-3 of the French Constitution, which allows the executive to force the National Assembly to either adopt the bill or bring down the government.

A motion of censure to bring down Valls’ government, a coalition of the Socialist Party (PS) and the small Radical Left Party (PRG), will go to a vote on Thursday. Its sponsors—the right-wing Union for a Popular Movement (UMP) and Union of Democrats and Independents (UDI), together with the Left Front—reportedly do not expect it to pass. The PS-PRG coalition controls 306 of the Assembly’s 577 seats, with 288 seats from the PS and 18 from the PRG.

Valls resorted to this move after discussion with President François Hollande, as it became clear that even the PS delegation was hesitating to vote for the law, named after PS Economy Minister and former investment banker Emmanuel Macron. Sources at the Elysée presidential palace told Reuters that they wanted to avoid failure of the bill, a risk that “the executive did not want to take given the bill’s importance for our economy.”

The Macron Law is a major attack on the working class. Its more than 200 provisions include making it harder for workers to sue for wrongful dismissal; letting employers demand increased working hours on Sunday without overtime pay; a comprehensive overhaul of fees for various legal and medical services; and numerous privatizations of public firms.

The proposed law led to numerous protests last year by service workers opposing Sunday work without overtime pay, as well as by medical and legal professionals opposed to the liberalization of their professions.

Valls said the decision was taken to avoid fatally undermining Hollande, whose wars and austerity measures have made him France’s most unpopular president since the end of World War II. “Right now as we speak, the bill would not pass,” Valls told deputies at the National Assembly. “We are at a time when we cannot, in good conscience, weaken the head of the state and the government.”

The government’s resort to provision 49-3 underscores the fact that the austerity program of the PS and the European Union (EU) lacks any political legitimacy. A poll last year found that Hollande’s economic policy has only a 3 percent approval rating, reflecting rising outrage in the working class over unemployment and economic stagnation. The PS therefore pushed through its reactionary policies, with total contempt for the population, without even the fig leaf of parliamentary support.

The PS hypocritically denounced the government the last time 49-3 was used. This was in 2006 by then-UMP Prime Minister Dominique de Villepin, as he sought to impose his unpopular First Job Contract (CPE) in the face of mass youth protests. “49-3 is an act of brutality, 49-3 is a denial of democracy, 49-3 is a way of blocking or preventing parliamentary debate,” Hollande declared at the time.

As for the parties in the Assembly who are now criticizing the PS government—led by the UMP and also the Left Front, a coalition of long-time allies of the PS—their opposition is no less hypocritical. They have all designed and helped impose social cuts against the working class for decades. Their decision not to vote for the Macron Law, like that of the sections of the PS itself, is only a cowardly attempt to hide their support for unpopular austerity measures.

Marine Le Pen, the leader of the neo-fascist National Front (FN), responded to the use of the 49-3 provision by calling for the dissolution of the parliament and new elections, in which the PS would stand to lose heavily and fall from power, and the FN to make substantial gains. Valls “should present the resignation of his government ... The government itself is admitting that it no longer has a parliamentary majority,” Le Pen said.

The PS government is clearly calculating that the 49-3 maneuver will shore up its parliamentary majority, and give political cover to factions of the PS closer to pseudo-left organizations, including the Left Front and the New Anti-capitalist Party (NPA).

“Rebel” (frondeur) PS factions associated with former Industry Minister Arnaud Montebourg, who criticized PS economic policies last year and might feel politically exposed if they openly voted for the Macron Law, will now be able to instead vote confidence for the Valls government. Such a vote would not only preserve the government and their own seats, but also allow the “rebels” to cynically justify their vote as necessary to stop the rise of the FN.

The only way forward for workers is a broader mobilization of the working class in political struggle against the EU and the Hollande government. Such a struggle has been consistently blocked by the Left Front, the NPA and the trade unions, who supported the election of Hollande in 2012 and continue to support the PS government. They isolated protests by sections of workers and of the middle classes against the Macron Law, seeking to prevent these protests from developing into a broader struggle against the government and the entire capitalist system.

As the bourgeoisie works out its strategy for imposing continued austerity despite mass popular anger, a reactionary political division of labor has emerged. While pseudo-left and PS “rebel” forces block a united struggle of the working class and encourage illusions in parliamentary opposition to the PS, PS factions closer to Hollande and Valls work directly with the EU to prepare and justify further attacks on the working class.

EU Economics Affairs Commissioner Pierre Moscovici, who previously served as Hollande’s finance minister, demanded that the French government develop a more ambitious liberalization and austerity agenda, going beyond the Macron Law. “France can and must have this,” he declared last week.

Nigeria 2015: Has the Rubicon Been Crossed?

Anayo Unachukwu

The embryos of growth that initially attended Nigeria’s fourth republic and its accompanying orchard of hope withered and mottled prior to maturity. In the aftermath of this blight--at a very nascent stage of the democratic process--it gave rise to a mutant that neither coheres with nor conforms to the spirit and the letter of democracy. Notwithstanding this fundamental flaw, the overly optimistic and forever hopeful Nigerians chose to keep faith with this form of government rather than the alternative.

Is all this about to change, given the recent postponement of its election, reported rigging of Ekiti state election and pronouncements made by major political stakeholders? Is faith in this form of government a miscast judgment--judging by the unedifying conducts of its main political actors and their handlers in the run up to the presidential election?

The current cognitive dissonance confronting the average Nigerian electorates--who have a choice to make between a present that is not too dissimilar from a distant past--may drive them to forget and hanker after yesterday. Some have gone beyond the competing charms of different types of government as they hanker for a complete dismembering of the country.

The Nigerian political elite, over the years, has transformed the country and its society into a Byzantine edifice of corruption where everyday hope and honest aspiration have become something to sniff at and ridicule--as a clear evidence of lack of ambition and gumption on the part of its ordinary citizen. To further compound the lot of its teeming population who are economically disenfranchised, the elite stir and stoke up their contrived ethnic and religious differences; without learning from history about the lethality and the irredeemable end-point of such irresponsible goading.

History, Cicero said, is the great instructor of public life. But history is not the strongest suit of Nigerian political elite (only last year, the current leadership, in its inimitable style and wisdom championed the removal of history from the school curriculum.) History, as an eccentric educator tends not to make available its wisdom to us pre-packaged. Christopher Clark put it succinctly: lessons are “oracles whose relevance to our predicament have to be puzzled over.” Is the current leadership pondering and paying significant attention to historical lesions? Judging by its reckless conduct before and in the run-up to the forthcoming election, the answer is pretty obvious.

Given the development that presaged the Nigerian civil war--concatenation of events in the political process and its wider ramifications on the civil society--it is perilously possible to safely assume that the politics of immediacy has not changed in the country. In fact, it has intensified. Primordial political interests hold sway over enlightened collective interest of common good.

Taken together the forgoing, the pessimistic proposition that Nigeria has eventually crossed the Rubicon may be a safe assumption by political pundits. By gauging the mood and the recent postponement of the presidential election from 14 February 2015 to 28 March, such a pronouncement may not be completely out of kilter. But is this right?

My analysis and writing on Nigeria is an admixture of paranoia and optimism. Paranoia because Nigeria as an entity is facing an existential threat--from Boko Haram, the Islamist terrorist group which has largely gone unrecognised and unacknowledged by the current leadership. Besides, the declines in oil prices as a result of supply shock and its wider ramifications, extreme hardship and a bleak future in an already economically challenged population are real source of concern in a country with a significant proportion of unemployed youth. Optimism because, although the political elite has refused to learn from history, the average Nigerians that bore the brunt of the civil war have the vestiges and scars etched on their mind. Further, over time, this group has realised that the political class and their diehard claque are riveted by the oil resources with absolutely little or no interest in the call to public service. Moreso, the resilience and irrepressible nature of the average Nigerians who look beyond the fog of political confusion and chaos are reasons for optimism.

All things considered, Nigeria is needed more than ever, notwithstanding the popular saying about Nigeria dividing the world into two camps: 80% does not care about what happens to it; and the remaining 20% is of the view that whatever happens to it, it probably deserves it. Regardless of what anyone may say, if Nigeria were to unravel, the ripples and ramifications will be felt not just in the sub-region but further afield. Further, within the financial industry, Nigeria has provided the fillip in the broader optimism that has serenaded Africa over the last 15 years. Its continued existence will continue to provide the bulwark for economic growth and development in the sub-Saharan sub-region.

The next few weeks to the elections will be difficult. The momentum is with Mr Muhammadu Buhari and his All Progressives Congress (APC). However, there are worrying signs and development that the ruling party and the incumbent president may not be in a hurry to oblige the electorates with its swan song. In Nigeria, when psephologists talk about the power of incumbency, it invariably means a sub-audition for manipulating state institutions to perpetuate the government in power.

It would be disrespectful, disheartening and dangerous if the People’s Democratic Party (PDP) formed the view that it would use Ekiti state election as a template for the presidential election (“2015: Reading The Political Leaf,” The Guardian, 06 July 2014). This temptation will always be there for the PDP stalwarts and its ardent supporters, given its squandered goodwill and pauperisation of Nigerians since it came to power in 1999, makes its legitimacy and claim to government untenable.

In order to forestall further declension and potential descent to chaos and confusion, the military and the police must restore their  tarnished image by steering clear from the murky waters of politics. The two national parties and their supporters must refrain from activities and pronouncements that would worsen the already fragile state of the nation. Further, the leadership at the centre and its party ought to reciprocate the confidence reposed on it by Nigerians--for the past 15 years--by desisting from the use of federal institutions to legitimise its hold on power. A free and fair election is imperative. Nigeria can still survive this trying period in its history. To paraphrase Immanuel Kant as regards the crooked timber of humanity in this context would read like this: out of the rotten timber of Nigeria, oddities and peculiarities proliferate but should not perpetuate ad infinitum.

The previously silent drumbeats of change have become audible, and its rhythm is in lockstep with the direction and the march of the people; a march not in the direction of the Rubicon, but towards a most needed recovery.

Minsk cease-fire verging on collapse as fighting continues in east Ukraine

Niles Williamson

Fighting escalated in the eastern Ukrainian city of Debaltseve on Tuesday, as the cease-fire negotiated last week in Minsk has failed to take hold.

There was street-to-street fighting in Debaltseve, as pro-Russian separatist militias moved to consolidate control over the city, where at least 5,000 Ukrainian troops are trapped. The separatists aim to reinforce their strategic position by seizing the city—a key rail hub connecting the rebel-controlled cities of Donetsk and Luhansk—from the NATO-backed Kiev regime.

Eduard Basurin, spokesman for the Donetsk People’s Republic’s (DPR) Defense Ministry, told reporters that the separatists controlled “eighty percent” of Debaltseve on Tuesday.

Ukraine’s Defense Ministry reported that a group of soldiers had been ambushed and taken prisoner by the pro-Russian separatists. While Kiev did not confirm how many were captured, separatists claimed that they had captured as many as 300 soldiers.

Ukrainian President Petro Poroshenko phoned German Chancellor Angela Merkel on Tuesday and denounced the separatists’ attempt to consolidate control over Debaltseve as a “cynical attack” on the cease-fire agreement. In the same call, he reportedly appealed to the UN Security Council to “prevent further violations...and full-scale military operations in the heart of Europe.”

Separatist leader Aleksandr Zakharchenko said over the weekend that the rebels do not consider Debaltseve to be covered by the terms of the cease-fire and called on the encircled Ukrainian forces to lay down their weapons and surrender. “Any attempt of the Ukrainian armed forces to unblock Debaltseve will be regarded as a violation of the Minsk agreements; such attempts will be suppressed, adversaries will be eliminated,” Zakharchenko said.

In another sign that the Minsk agreement is breaking down, both sides stated that they would not remove heavy weapons, including artillery, from the front lines as long as the other side continued fighting. Last week’s agreement stipulated the pull back of all heavy equipment from the front lines beginning Tuesday, two days after the cease-fire went into effect.

Ukrainian military spokesman Andriy Lysenko bluntly stated that “there is no ceasefire, and so there is no precondition for a pull-back of heavy weapons.”

Separatist leaders also announced they would not begin to pull back heavy equipment until the Kiev regime did the same. “We will not do anything unilaterally. That would make our soldiers targets,” Denis Pushilin stated.

The continuing fighting makes clear that the recent Minsk agreement has done nothing to end the bloody proxy war being waged between NATO and Russia in eastern Ukraine, or the danger that this conflict could escalate into total war between NATO and Russia, a nuclear-armed power.

Tensions remain extremely high. This is above all because Washington, which triggered the conflict by installing a right-wing regime in Kiev last February through a fascist-led putsch, has made clear that it intends to continue escalating the conflict.

The Minsk deal was negotiated between the governments of Germany, France, Russia and Ukraine, amid fears that US plans to directly arm the Kiev regime could trigger continent-wide war throughout Europe.

On Tuesday, State Department spokesperson Jen Psaki told reporters that the Obama administration was still prepared to arm the Ukrainian regime with lethal military equipment. “We certainly believe that a diplomatic approach and a political approach is the right approach here, but the same options that were on the table a week ago or two weeks ago remain on the table,” she told reporters.

If Washington has not yet openly repudiated the Minsk deal, this is largely because the military situation facing the pro-Kiev regime forces in eastern Ukraine is desperate. After the last failed Ukraine ceasefire, also negotiated in Minsk last September, the Kiev regime refused to remove its troops and artillery from positions in the east, and fighting continued.

Kiev is again responding to the Minsk agreement by trying to buy time on the ground and strengthen itself in preparation for a renewed offensive against the separatists. On Tuesday, Poroshenko authorized a timetable through the end of the year for the call-up of men up to the age of 27.

Tensions between Russia and the United States are also escalating, as Moscow and Washington trade accusations that they are arming their proxies in Ukraine in violation of the cease-fire.

Speaking after a meeting with Hungarian Prime Minister Viktor Orban on Tuesday, Russian President Vladimir Putin accused the Western powers of supplying the Kiev regime with arms. “According to our data, weapons are already being supplied [to Kiev],” he told reporters. “This is not surprising. I am convinced that whoever is supplying the weapons, the number of victims may grow, but the outcome will not change.”

The US State Department released a statement Monday that placed blame on Russia for the continued fighting. It warned that ongoing hostilities between Ukrainian armed forces and pro-Russian separatists “threaten the most recent cease-fire and jeopardize the planned withdrawal of heavy weapons.”

The State Department reported that it was “closely monitoring reports of a new column of Russian military equipment moving toward Debaltseve.” The statement concluded by calling on “Russia and the separatists it backs to halt all attacks immediately,” and “fully implement their September 5 and 19 Minsk commitments.”

Continuing its part in escalating political and economic pressure on Russia, the European Union announced new sanctions targeted at those in Russia and Ukraine accused of supporting the separatists. The EU announced on Monday 19 additions to the list of individuals in Russia and eastern Ukraine subject to asset freezes and travel bans, including Russia’s deputy defense minister.

European Union gives no quarter in war against Greek workers

Christoph Dreier & Barry Grey

On Monday, the finance ministers of the Eurogroup, meeting in Brussels, made it clear they would not budge from the brutal austerity policies that have plunged Greece into an unprecedented social catastrophe.

Taking their lead from Germany, the finance ministers unanimously rejected proposals from the Syriza-led Greek government for largely symbolic modifications of the debt repayment plan imposed by the European Union, the European Central Bank and the International Monetary Fund. The leader of the Eurogroup finance ministers, Jeroen Dijsselbloem of the Netherlands, handed Greek Finance Minister Yanis Varoufakis a draft statement at the beginning of the meeting that amounted to an ultimatum: Sign or face a cutoff of loans and state bankruptcy!

The statement declared that Greece would dutifully implement the current debt repayment program, including its provisions for new and even deeper cuts in jobs, pensions and social services and a fire sale of public assets to the banks and hedge funds.

German Finance Minister Wolfgang Schäuble expressed the arrogance of the European and international ruling elites and their contempt for the suffering of the Greek masses, calling the Greek government’s pleas for a measure of relief “irresponsible” and a “waste of time,” and accusing Syriza leader and Greek Prime Minister Alexis Tsipras of “insulting those who have helped Greece in the past few years.”

The “help” provided by the German and European ruling classes since the Wall Street crash of 2008 has consisted of reducing millions of Greek workers to unemployment and poverty, gutting the country’s health care system, and producing a plague of homelessness and hunger in order to make the working class pay for the multi-trillion-euro bailout of the banks. Similar “help” has been extended to other highly indebted countries such as Spain, Portugal and Ireland, with similarly catastrophic social consequences.

The austerity offensive against these countries has been used to set a precedent for unprecedented attacks on working class living standards and social services in Britain, Italy, France, Germany and throughout Europe.

The European Union governments evidently decided to use Monday’s meeting to make an example of Greece. Their contemptuous treatment of Syriza was meant to be an object lesson lest others think they can resist the power of capital.

They had taken the measure of Syriza, viewing it not as the representative of insurgent masses, but rather as a supplicant speaking in behalf of failing Greek capitalists. This assessment was borne out by Syriza’s entirely predictable response to Monday’s provocations.

Varoufakis balked at signing the draft statement, complaining that he had agreed to sign a somewhat different text that signaled acceptance of the existing debt repayment scheme, but with certain unspecified differences in wording.

He protested against the refusal of the finance ministers to give the Syriza-led government some wiggle room as it went about reneging on its campaign promises and implementing the austerity program. Nevertheless, he declared after the abortive meeting, “I have no doubt there is going to be an agreement in the end.”

On the eve of the meeting, he had told the Guardian newspaper, “We are a party of the left, but what we are putting on the table is essentially the agenda of a reformist bankruptcy lawyer from the City of London.” He went so far as to call Schäuble the “only European politician of intellectual substance” and laud German Chancellor Angela Merkel as the “most astute politician in Europe.”

It evidently took little more than 24 hours for Syriza to complete its capitulation. The Wall Street Journal reported Tuesday afternoon that Greek officials would seek an extension of the current debt repayment program on Wednesday.

Syriza’s entire approach has been based on the notion that it could somehow schmooze the European ruling classes into slightly modifying their policy. Tsipras hoped to find support among sections of the European bourgeoisie that have expressed certain differences with Germany. He also banked on leveraging economic policy differences between the United States and Germany.

The charm offensive Tsipras and Varoufakis undertook in various European capitals following Syriza’s election victory last month was pitched entirely to the economic and political elites. There was no appeal to the working class.

The leaders of Syriza have never questioned the legitimacy of the capitalist system. On the contrary, they have repeatedly declared their support for the banking system and their determination to fully repay Greece’s debts to the financial elite. The centerpiece of their program is support for the European Union, the political and organizational framework for the bankers’ offensive against the European working class.

Like all petty-bourgeois parties, Syriza’s politics are embedded in the notion that great historical and political questions can be dealt with through evasions, maneuvers and clever tactics. In Syriza’s case, this has included forming a coalition with a right-wing chauvinist party, the Independent Greeks.

It has taken less than four weeks of a Syriza-led government to thoroughly expose the bankruptcy of a middle class reformist outlook in a period of revolution or counterrevolution.

The offensive of the ruling class can be defeated only by revolutionary means: the independent political mobilization of the working class across Europe and internationally against capitalism. Syriza and the various pseudo-left parties that support it are obstacles to this struggle. The building of a new, revolutionary leadership of the working class must be carried out in a struggle against them.

Cerro León: Ayoreo Indigenous Territory Threatened by Government Prospecting in Paraguay

Paola Canova

By early December of 2014, in the northern Chaco region of Paraguay, bulldozers from the Ministry of Public Works and Communications (MOPC) were scheduled to open their way through the thick forest into Cerro León, a unique geological formation at the center of the Defensores del Chaco National Park, the largest protected forested area in the country. Encompassing 780,000 hectares, the park is home to an array of ecological diversity unique to lowland South America, including numerous animal and plant species in risk of extinction. Known by the Ayoreo Indigenous peoples asCucarani, Cerro León extends for about forty kilometers in diameter and is comprised of a succession of hills located within their ancestral territory. According to local NGO Iniciativa Amotocodie, some of the last Ayoreo in so-called voluntary isolation continue to inhabit part of this area. 

The project, entitled "Geological Prospection of the Defensores del Chaco National Park,"  calls for extraction and analysis of rock samples with the goal of evaluating the possibility of using Cerro León as a source of stone materials for pavement.  Ultimately seeking to convert part of the area into a rock quarry, this project violates national laws as well as international treaties ratified by the Paraguayan government.  Its launch was scheduled not only lacking the environmental permits required by the Secretary of the Environment (SEAM), but  also obviating the requisite process of consultation, which, according to Convention 169 of the International Labor Organization, is a fundamental right of  Indigenous peoples affected by such undertakings in their territories.

This  impending advance on Cerro León and the park where it is located only came to light following a recent newspaper investigation which appeared on December 26 in Paraguay’s most widely circulated newspaper (ABC Color). In a quick move, the Ayoreo organization Union de Nativos Ayoreo del Paraguay(UNAP) organized a two-day road blockage to protest the threat to their territory. Simultaneously, another Ayoreo organization,  Asociacion Garaigosode del Paraguay (AGPA), with the support of local NGOs Tierraviva and Sobrevivencia, advanced a precautionary writ of amparo against the MOPC and SEAM opposing any exploitative activity in the park. In a positive turn for the Ayoreo, by January 14, 2015, a judge had approved the amparo.

An environmental impact report for this project, a legal prerequisite for obtaining an environmental license, was drafted by the MOPC and designates provision for specific tasks as well as a timeline. Curiously, however, there is no official date on this document. The indiscretion of the MOPC is further highlighted by the fact that, in the report, initial advancement into Cerro León is scheduled for December 1, although the SEAM only officially acknowledged receipt of the report ten days later. It is clear that the MOPC had begun, at the very least, to plan action before being granted the necessary license. During this time both institutions also sidestepped the required consultations with the Ayoreo. Moreover, they audaciously appealed the writ of amparo only a day after the Minister of SEAM visited the Ayoreo to negotiate lifting the blockage -- assuring the Ayoreo protection of their territory and their involvement in a process of consultation.The supporting lawyers for the Ayoreo responded to the appeal requesting the ratification of the writ of amparo. Despite compelling evidence of actions taken by both governmental institutions involved (which included the promulgation of a law modifying the use of the protected area for economic purposes), the Cartes administration publicly denied intentions of accessing inexpensive raw materials. Acquisition of these raw materials would eventually benefit private construction firms for roadworks in the Chaco region.

In a somber precedent for the protection of the Indigenous rights and the environment in Paraguay, on February 9, 2015, the national court of appeals  revoked the amparo promoted by the Ayoreo and their lawyers which was temporarily protecting Cerro León. This is an undeniable message that the current administration will push aside the rights of Indigenous peoples, their territories and the environment if  they obstruct economic development and private lucrative interests. The ongoing events at Cerro León further expose the vulnerability of the Chaco region, especially its Indigenous peoples, to a  resurging wave of looting and frontier-style development which has historically characterized this region. Several additional NGOs have added their support to the Ayoreo by forming a coalition to defend Cerro León. The decision to preserve it or release it to imminent depredation  now rests, ironically, in the hands of the Secretary of the Environment.

South Africa: ANC provincial premier renounces electronic-tolling populism

Thabo Seseane Jr.

Having reached the limits of his populist pretenses, Gauteng province Premier David Makhura of the African National Congress has called on motorists to pay the widely hated electronic tolls introduced on the province’s roads in December 2013.

Gauteng has the smallest land area and the largest population of any province of South Africa, with more than 12 million people, and includes both the country’s largest city, Johannesburg, and the national capital, Pretoria.

In comments later denied by his office, the Saturday Citizen quoted Makhura as saying, “We have to respect the government’s decision for it has the upper hand. If I was to advise anyone in Gauteng, I would say, ‘Please continue to pay.’”

He was speaking at a meeting on February 6 to discuss the recommendations of a panel set up last year to review the socioeconomic impact of e-tolls. Makhura himself appointed the panel amid a faction fight which pitted a group of Gauteng ANC leaders including Makhura and ANC Provincial Chairman Paul Mashatile against members of the party’s national leadership, particularly Transport Minister Dipuo Peters. (See: “South Africa: ANC and unions exploit popular anger over electronic toll collections”)

ANC top brass are seen as unsympathetic to the 10-percentage-point drop suffered by the party in Gauteng provincial assembly representation in elections last May. With metropolitan elections looming in 2016, Gauteng party leaders felt compelled to adopt a populist posture. They denounced e-tolling “in its current form” in an attempt to deflect widespread disgust with ruling party arrogance and corruption, including more than US$20 million unlawfully spent on “security upgrades” at the private country home of President Jacob Zuma.

The February 6 meeting discussed recommendations from the review panel which included a hybrid funding model. This would rely in part on increasing fees for tyres and vehicle license fees, funding from provincial taxation as well as reduced-cap e-tolls. Makhura said all that is still to be decided is how the e-tolls will be paid, the tariff rates and who will be exempted.

Last November SANRAL, an agency of the national government tasked with implementing and overseeing the e-toll system, raised only R415 million (US$35.96 million) in a bond auction, or R100 million less than it was hoping for. At a bond auction on February 4, SANRAL raised just two thirds of the R600 million it was targeting. This is roughly the monthly amount the agency needs for debt servicing, road maintenance, operating costs and the refinancing and repayment of maturing bonds. Business Day editorialised that the turf war between the Gauteng ANC and ANC national leaders “has now become a critical operational issue [for SANRAL] that is a matter of weeks away from developing into a full-blown crisis.” The newspaper observed that the lukewarm response to the latest two bond auctions is despite SANRAL debt being guaranteed by the Treasury.

As far as international financiers are concerned, the problem is that the Treasury also guarantees such ill-managed or unprofitable entities as the power utility ESKOM, the Land Bank, South African Airways and the South African Post Office. Every time the national government issues a guarantee allowing some state-owned entity to borrow funds needed to stagger on, the international credit rating agencies record the amount as a minus on the South African sovereign balance sheet, thereby potentially lowering the credit rating of the country as a whole.

Having imposed rolling blackouts on the country throughout the first week of February, ESKOM raised US$1.25 billion in its first international bond sale in nearly two years. Since then Moody’s and Standard & Poor’s have downgraded the company’s credit rating amid a R225 billion funding shortfall in the five years to March 2018. Finance Minister Nhlanhla Nene is expected to give details in his budget speech later this month of how the government intends to raise the R20 billion it has pledged to ESKOM.

The utility is increasing charges to consumers to help plug the gap, beginning with a 12.69 percent increase in April. Nomura economist Peter Attard Montalto said annual tariff increases of as much as 25 percent may be necessary to keep ESKOM viable.

This is the backdrop against which Makhura’s comments should be read. Given a choice between meeting the needs of Gauteng’s people and pandering to the greed of international finance, Makhura will toe the line and choose financiers.

The ANC has no perspective independent of the demands of finance capital. As expected of it, it now seeks to strong-arm Gauteng road users into meeting the demands of ruthless bondholders who are already cutting SANRAL off from funding because public opposition to e-tolls threatens their bond income.

Only three bidders participated in the last SANRAL auction. The agency has lost six bidders since the Gauteng government set up the e-toll review panel in June. SANRAL chief financial officer Inge Mulder said the lack of liquidity in the market as a result of the collapse of mass-market lender African Bank—forcing a rescue underwritten by the central bank—had also contributed to higher bond spreads for most state-owned companies.

SANRAL has the equivalent of US$350 million of bonds maturing by September.

Malaysia’s highest court jails opposition leader on trumped-up charge

John Roberts

A five-judge panel of the Federal Court, Malaysia’s highest judicial body, on February 10 upheld a Court of Appeal decision to overturn a High Court acquittal of opposition leader Anwar Ibrahim in 2012 on the trumped-up charge of sodomy. Anwar was immediately consigned to jail to serve out his five-year sentence.

The ruling, enforcing Malaysia’s reactionary anti-homosexual laws, was a political one. It underscored the continued subservience of the courts to Prime Minister Najib Razak’s United Malays National Organisation (UMNO), which has autocratically ruled for 58 years since the country’s formal independence from Britain.

A large riot police contingent was present outside the Kuala Lumpur court to control hundreds of supporters of Anwar and his opposition People’s Alliance (PR). Inside the court, the five judges left as the 67-year-old Anwar denounced the verdict. Anwar told the judges that “in bowing to the dictates of your political masters, you have become partners in the murder of the judiciary.”

The judges heard the case over eight sitting days last year then took more than two months before delivering last week’s verdict. Despite their declaration last year that the case was a complicated one, and the delay in issuing their ruling, the judges provided no written judgments outlining their reasoning, which would be normal in a major case.

The court dismissed Anwar’s contention that he was the victim of a political conspiracy involving Najib and the government. Without any examination of the prosecution case, the judges simply declared that there was overwhelming evidence for the conviction and that the claim of a conspiracy was “a mere allegation unsubstantiated by any credible evidence.”

As soon as the decision was announced, the prime minister’s office issued a statement declaring that the courts were independent and calling for the verdict to be accepted. The police have begun to use the county’s anti-democratic laws to crack down on critics. Cartoonist Zulkiflee Anwar Alhaque was detained last Tuesday for a series of allegedly seditious tweets on the case and police named two opposition parliamentarians for investigation under the Sedition Act.

The only legal option left to Anwar is to appeal to the King for a pardon. Such an application would involve an admission of guilt. The verdict will exclude Anwar from any participation in the next scheduled national election in 2018, which was the government’s intention all along. By removing Anwar from political life, it hopes to destabilise the opposition coalition.

In the original trial and subsequent proceedings, the prosecution relied on one witness, Saiful Bukhari Azian, a former Anwar aide, who claimed that Anwar had sexual intercourse with him in June 2008. The prosecution maintained that DNA evidence collaborated Saiful’s statements.

The defence presented evidence that Najib, who was then deputy prime minister to Abdullah Badawi, and his wife and senior police officers, met with Saiful two days prior to the alleged sexual encounter. These meetings with senior UMNO figures continued after the alleged act, before Saiful formally reported it to police.

In attendance at Saiful’s meeting with Najib was the chief prosecutor in Anwar’s trial, Muhammad Shafee Abdullad, who also happened to be Najib’s lawyer. Anwar’s defence lawyers called on the court to force Shafee to step down as prosecutor and for Shafee, Najib and his wife to be called as witnesses, but were repeatedly turned down.

The High Court trial judge, Mohamad Zabidin Mohd Diah, ruled that Saiful was a credible witness in May 2011, but seven months later acquitted Anwar as the prosecution case crumbled when it was clear that the DNA evidence was corrupted.

The DNA sample was supposedly obtained in a medical examination more than two days after the alleged act. The sample had not been frozen initially as required and prosecution witnesses admitted there were up to 10 other DNA profiles in the sample. At least one police officer was proven to have tampered with the sample. Expert forensic testimony discredited the evidence.

A major factor in the Najib government’s ability to jail Anwar on a trumped-up charge is the acquiescence of Washington, which is intent on establishing closer economic and strategic relations with Malaysia.

This was evident in the aftermath of the 2013 national election, which the Najib government would have lost but for a widespread gerrymander. The opposition won 51 percent of the vote to the government’s 47 percent, but only 89 parliamentary seats as against 133 for the ruling coalition.

Hundreds of thousands of Malaysians took part in the largest demonstrations in the country’s history, denouncing the anti-democratic character of the election. Anwar and other opposition figures used the mass protests to appeal to the “international community”—that is, particularly Washington—to intervene.

However, Obama congratulated Najib on his election “victory,” effectively giving Najib the green light to crack down on the rallies. The US State Department issued a pro-forma statement raising concerns about election irregularities, then buried the issue. Anwar, who was always concerned to ensure that the rallies did not spiral out of control, promptly called them off.

At the time of the election, the Brookings Institute, a US think tank, noted that the Obama administration’s relations with Najib’s government were warming. “Najib has fundamentally repositioned Malaysia internationally,” it stated. “He has moved away from the old UMNO policy of seeking to divide Asia from the United States and has seen the United States as an important partner for Malaysian and ASEAN.”

Last April, Obama made the first trip to Malaysia for an American president since 1966 and signed a “Comprehensive Partnership” with Najib, but pointedly refused to meet with Anwar. To emphasise the closeness of their relationship, Obama and Najib both holidayed in Hawaii last December, played golf together and reportedly discussed the international situation.

Malaysia, which sits adjacent to the Malacca Strait, is strategically vital for the Obama administration’s “pivot to Asia” and its preparations for war against China, which include the ability to mount a blockade of Chinese shipping through South East Asia.

It is not surprising that the US issued only a perfunctory statement on the Federal Court decision. National Security Council spokesperson Bernadette Meehan told the media that the US was “deeply disappointed” in Anwar’s conviction and that the case raised “a number of serious concerns about the rule of law and fairness of the judicial system in Malaysia.” Undoubtedly the issue will be quickly buried.

The response is in marked contrast to Anwar’s arrest and frame-up on bogus charges of sodomy and corruption in 1998, when US Vice President Al Gore strongly supported Anwar and condemned his persecution. Amid the 1997–98 Asian economic crisis, the US was pressuring the Malaysian government to implement the International Monetary Fund’s far-reaching pro-market prescriptions to open up the country to foreign investment. As finance minister, Anwar agreed with the IMF’s demands, but was sacked, arrested and charged by UMNO Prime Minister Mahathir Mohamad, who was intent on imposing capital and currency controls to protect UMNO-related companies.

Both then and now, Washington’s attitude has not been determined by concerns over legal and democratic rights, but rather US economic and strategic interests in Asia.

New revelations in the 1980 Munich Oktoberfest bombing

Dietmar Henning

On February 4, the German ARD television channel broadcast the documentary “Assassins—A Single Perpetrator? Latest revelations about the Oktoberfest bombing,” by Daniel Harrich. It uncovers how government authorities stymied investigations into the worst terrorist act in postwar German history and suggests intelligence agents could have been involved in the attack.

On September 26, 1980, a pipe bomb explosion at the main entrance of the Munich Oktoberfest killed thirteen people and injured another 211, 68 of them seriously. Although the bomber, Gundolf Köhler, who was killed in the explosion, was in contact with the far-right Wehrsportgruppe Hoffmann (Armed Sports Group Hoffmann), and there was plenty of evidence of his complicity in the crime, the Bavarian State Criminal Investigations Office and federal prosecutor Kurt Rebmann rapidly committed themselves to a sole perpetrator thesis, terminating the investigation after two years.

Investigations into the case resumed last December, due primarily to the persistent research of journalist and non-fiction author Ulrich Chaussy and efforts of the victims’ attorney, Werner Dietrich, to prevent the nearly 35 year old case from disappearing from the public eye.

The ARD documentary is based on their findings. The evidence and leads that they unearthed, point “to the existence of a complex, extreme right-wing network and an act planned well in advance, in which Köhler was only the last link in a deadly chain of events,” the documentary reports.

Two previous attempts by Dietrich to have the trial reopened were unsuccessful. New witnesses, coming forward after the airing of the feature film The Blind Spot, finally induced the federal prosecutor’s office to resume investigations. The Blind Spot, also scripted and directed by Daniel Harrich, deals with the Oktoberfest bombing, the suspiciously lopsided investigation and Chaussy’s research. Chaussy is played in the film by Benno Fürmann. It was premièred at the Munich Film Festival in July 2013, and initially shown on the Arte public television channel on October 10, 2014.

Since then, an increasing number of witnesses who saw Köhler arguing with a stranger before the explosion have come forward. A female witness had already testified to the police about this in 1980. In 1983, she meticulously described to Chaussy the course of events leading up to the explosion, but allowed neither film nor sound recordings of her statement, fearing reprisals from the people behind the attack. Only now, 35 years later, was she willing to be interviewed on camera.

Someone who apparently knew in advance about the bombing was also able to be traced. Just one day after the attack, he was found in possession of leaflets, hailing the bomber Köhler, although his name had still not been released to the public at the time. This right-wing suspect then fled to Argentina but is now back in Germany. His whereabouts are known to the authorities and an initial hearing has allegedly been held.

Another witness, who has now reported to Chaussy, claims to have seen Köhler talking intensely to the occupants of a car in front of the entrance to the festival site. He says Köhler then put a bright plastic bag into a rubbish bin. The witness states that he smelled fireworks and, shortly after, the bomb exploded. He says he reported this to the investigators a few days after the attack, but his statement was never subjected to further investigation.

A key piece of evidence in the case was a severed hand that did not come from any of the victims and was attributed to the bomber, Köhler. The documentary film now includes the statement of a certain Gerd Ester, who was involved as a Federal Criminal Investigation Agency (BKA) explosives expert in the 1980 investigation. Ester claims he reconstructed the bomb and concluded that the hand could have not come from Kohler, because Kohler was bending over the bomb when it exploded and his hands would have been “atomised”.

Chaussy concludes that it was the hand of an accomplice. A female witness, who worked in Oststadt Hospital in Hanover in 1980, has also recently come forward. After the attack, she treated a patient who had lost an arm. She says he had been sitting upright in bed with “a proud glowing look on his face” and was visited by some men who were obviously right-wing radicals.

The young man had refused to explain how he came to be injured, but he apparently told someone that he had been playing with explosives which caused the accident. He disappeared after a few days, before the stitches were removed.

Finding this man today would be a difficult task. In 1997, the prosecutor general allowed all evidence retained by the Criminal Police Office (LKA) in Munich to be destroyed due to “lack of [storage] place”. Among the destroyed evidence were cigarette butts from the ashtrays in Kohler’s car, possibly smoked by his accomplices. The butts were discarded the very year that DNA analysis was first officially approved as courtroom evidence.

Chaussy and Dietrich had originally assumed the hand was destroyed after its discovery. Chaussy now claims he knows this was not the case. The severed hand was never delivered to the Office of the Federal Prosecutor General in Karlsruhe. After the bombing, the Bavarian LKA had initially sent it on to the forensic institute in Munich for serological (blood serum) examination.

There, Chaussy found a form with a stamped reception date and other documents, stating it had been impossible to verify that the hand was part of Köhler’s corpse. Apart from this, there was no trace of the missing hand. Prof. Dr. Wolfgang Eisenmenger, former head of forensic medicine at Munich University, says: “Strangely enough, we’ve compounded a large number of laboratory records over many years, but we have no records covering this particular time. We don’t know where the hand could have ended up. We don’t know whether it was incinerated, or whether it was returned. We have no firm evidence about what happened to it.”

Records of the Bavarian LKA, however, indicate that the hand was returned to the LKA. All traces of it ends there. The LKA is subject to the control of the Bavarian interior ministry, which—as Chaussy demonstrates—pressed the investigators to adhere to the solo perpetrator theory.

Max Strauß, son of former Bavarian Prime Minister Franz Josef Strauss [Christian Social Union, CSU], comments on this in the documentary: “Of course, if they uncovered something there internally, they would have taken swift action to cover for themselves in the old CSU way. It was the usual practice.” At the time, Franz Josef Strauß was the leading candidate for the Christian Democratic Union [CDU] and CSU coalition in the federal election, which took place just 10 days after the Oktoberfest bombing.

Köhler’s connection with Wehrsportgruppe Hoffmann indicates the possible involvement of intelligence agencies in the Oktoberfest bombing. This paramilitary organisation was founded in 1973 by Karl Heinz Hoffmann, and was able to train neo-Nazis in the use of weapons and guerrilla warfare in Bavaria for six years, unimpeded by the authorities. Gundolf Köhler participated in such exercises in 1976 and 1977. This was known to the Baden-Württemberg Office for the Protection of the Constitution (intelligence service).

Only on January 30, 1980, eight months before the Oktoberfest bombing, was the outfit banned by the current liberal federal interior minister, Gerhart Baum. At the time, the militia had 400 members. Two-and-a-half months after the Oktoberfest bombing, another member of the paramilitary group, Uwe Behrendt, killed Jewish publisher Shlomo Levin and his partner Frieda Poeschke in Erlangen.

Hoffmann and his closest associates moved to Lebanon after the ban. Chaussy is sure there were several undercover agents in Wehrsportgruppe. The files remain unopened, but two names are now known: Walter Ulrich Behle and Odfried Hepp.

Behle, who checked into a hotel with Hoffmann in the Syrian capital of Damascus in October 1980, told a bartender at the time about the Oktoberfest bombing, boasting: “That was us.” He said they had put one bomb in a garbage bin and another in a drainage gutter.

A new witness supports the claim that there was a second bomb. He says that on the day of the attack, he saw a flame coming from a bomb that had failed to explode. He also says it was lying in a drain or street gutter.

The bartender at the hotel in Damascus immediately reported Behle’s statement to the German Embassy. When he was interrogated in Germany in July 1981, his statement was deemed to be “alcohol-related bragging”.

On August 2, 1982, Wehrsportgruppe member Stefan Wagner, who was on the run from the police, also told someone he had been involved in the Oktoberfest bombing. After the police arrested him, he was sentenced to a minimum of 10 years in prison. He then shot himself. Since Wagner allegedly could not have been at the scene of the crime on the day of the bombing, investigators called off any further investigations. Nor did they consider whether Wagner might have been involved in preparations for the bombing.

The testimony of a police officer who has now turned to Chaussy is noteworthy. It establishes a connection between Wehrsportgruppe Hoffmann and the Thüringer Heimatschutz (Thuringian Homeland Security) organisation, from which the National Socialist Underground (NSU) extreme right-wing terrorist group emerged. Another lead points to the possible involvement of NATO’s secret Gladio forces, which have committed terrorist acts in Italy, Luxembourg and other countries.

According to the police officer who carried out investigations in the Thüringer Heimatschutz milieu, the organisation’s paramilitary exercises in the 1980s were conducted together with the Bavarian militia group. Two years before going into hiding in 1998, NSU terrorists Uwe Mundlos and Uwe Böhnhard were photographed at the trial of far-right terrorist Manfred Roeder. In 1980, Roeder founded the German Action Groups, which, among other things, carried out bomb attacks on the homes of refugees.

The explosives were supplied to them by Heinz Lembke, who lives in Uelzen near Hannover, where the alleged accomplice was treated in Oststadt Hospital. Swiss historian Daniele Ganser, who researches NATO’s Gladio forces, assumes Lembke was a member of these paramilitary underground armies, because he was known to be stockpiling and managing weapons and explosives from military reserves.

Lembke probably provided Köhler with the explosives, but investigators also failed to act on this clue. Lembke was found hanging by a cable in his cell in late 1981, shortly after he announced his intention to lodge a comprehensive testimony with the federal prosecutor.

Marginal notes in relevant files led attorney Dietrich to suspect that Lembke was either a confidential informant or an employee of a state or federal intelligence agency. Important files relating to him are still under wraps.

Chaussy has raised the question of whether Bavarian head of state security Dr. Hans Langemann [CSU], who previously worked for the foreign intelligence service (BND), had at that time built up a similar network of undercover agents in the radical right-wing milieu, comparable to the one later associated with the NSU. This might explain why he leaked sensitive information about Köhler to the press and thus warned the bomber’s possible accomplices. Langemann died in 2004.

Chaussy suspects that the informant network organised by Langemann proved a failure in the 1980s, as did the one involving Thüringer Heimatschutz at a later stage. Chaussy’s work on the Oktoberfest bombing and revelations about the NSU and its supporters also suggests a different conclusion: that German secret service agencies virtually amount to a state within the state, which collaborates with right-wing extremists.

SPD victory in German state election conceals growing gulf between political establishment and population

Dietmar Hennings

At first glance, the results from Hamburg’s state election on Sunday appear contradictory.

The Social Democratic Party (SPD), which is languishing in polls at 25 percent nationwide, emerged from the election victorious, with 45.7 percent of the vote. The party only missed its 2011 election result high point by 2.7 percent, when the vote took place in the wake of the failure of a Christian Democratic Union-Green Party coalition.

The CDU, whose leader Angela Merkel regularly receives high poll ratings, achieved the worst result in its history with 15.6 percent. Eleven years ago, the party garnered 47.2 percent of the vote.

The contradiction is reconciled, however, by the recognition that the politics of the SPD and CDU are virtually identical. Leading SPD candidate Olaf Scholz, who remains the city’s mayor, has played a similar role in Hamburg as Merkel has at the federal level. He is supported by bourgeois and petty bourgeois forces, who in the face of deepening social tensions and international crises, view him as a conservative force for stability. Spiegel Online commented, “In Hamburg, a masculine Merkel was victorious.”

Behind the relatively high result for the SPD, there are signs of a growing gulf between official politics and the population in Hamburg, as has been seen in several other elections in recent years.

Voter participation reached a new low. By far, the largest party was the party of non-voters. Only 56.6 percent of the 1.3 million electorate went to the polls, in an election in which young people from the age of 16 could vote for the first time. In 2001, election turnout was 71 percent.

At the same time, the new Hamburg senate is more deeply divided than ever. Along with the SPD and CDU, the Greens, at 12.2 percent, the Left Party, at 8.5 percent, the Free Democrats (FDP), at 7.4 percent and the rightward-leaning Alternative for Germany (AfD), at 6.1 percent, will all be in the new senate.

For the first time in several years, the FDP managed to surpass the five percent hurdle and celebrated the result as their rebirth. Along with representatives in three state parliaments in eastern Germany and the European parliament, the AfD is now entering a state parliament in western Germany for the first time. The party received a large number of protest votes. According to a survey, 71 percent of AfD voters voted for the party out of disappointment with the other parties, while only 26 percent did so out of conviction.

The SPD, which previously formed the government on its own, is now dependent on a coalition partner. The party lost four seats in the 121-seat senate, only controlling 58 seats. Scholz announced, prior to the elections, that he would first speak to the Greens. The FDP has also offered its services to the SPD as a coalition partner.

The AfD addressed conservative business circles during the election campaign, as well as anti-immigrant sentiments. Until December 2013, their leading candidate, Jürgen Kruse, was a professor of political economy at Hamburg’s Helmut Schmidt University. Together with the deputy chairman of the federal party, the Hamburg-born former head of the German confederation of industry, Hans-Olaf Henkel, he supported measures to benefit the Hanseatic aristocrats.

At the same time, the AfD appealed to the right with its complaints over immigration, Islam and the threats to internal security. Kruse described veiled women as “black monsters.” Bernd Baumann, number two on the party’s candidate list, agitated against immigrants from Syria and Ebola victims, according to Spiegel Online. Third-placed Dirk Nockemann maintains contacts with the extreme right. He was a member of the Constitutional Offensive Party (PRO) of jurist Ronald Schill, who was a former interior senator for Hamburg.

Hamburg has previously served as a testing ground for a diverse range of coalitions. For years, the SPD ruled alone or in a coalition with the FDP, then later with the Greens or occasionally with the STATT Party, a split-off from the CDU. The CDU governed alone and in coalitions with the FDP and Schill’s party. In 2008, the CDU and Greens formed their first coalition at the state level.

When Scholz subsequently won the election, the World Socialist Web Sitewrote, “In Hamburg, the political parties are changing, but not the politics.”

In this year’s election, the parties’ programmes were also interchangeable. In one way or another, they all called for the consolidation of the budget and the strengthening of the police. They were thereby speaking to the wealthiest elements who want to be left in peace to enjoy their yachts, polo and golf clubs—and there are plenty of those in the city. Nowhere in Germany is the concentration of millionaires as high as in Hamburg. Some 42,000 millionaires and 18 billionaires reside there.

The SPD has maintained close ties for decades with these business owners, bankers and managers. “The Hanseatic Social Democrats have a pragmatic understanding with the most important businessmen in their realm,” theSüddeutsche Zeitung wrote.

The head of the powerful Hamburg industrial association (IVH), Michael Westhagemann, said in an interview with the Hamburger Abendblatt, “We would like the current responsible policies of the SPD senate to be continued. That’s why as an industry we are absolutely in favour of a majority for Olaf Scholz rather than the unstable coalitions after the February 2015 election.”

Along with “reliable,” the press always uses such adjectives in conjunction with Scholz’s as “aloof,” “pragmatic,” “inconspicuous” and “dispassionate.” As SPD General Secretary, he earned the nickname “Scholz-o-mat,” as someone who was a technocrat and unerringly stuck to a right-wing course.

Several media outlets published pre-written commentaries shortly after the first projections on Sunday, praising Scholz and presenting him as a future SPD candidate for Chancellor. The Frankfurter Allgemeine Zeitung asked, “Election winner Scholz: could he be Chancellor?” And answered yes. Die Zeit wrote, “The right-wing Hamburg SPD, as they were often called in Berlin, could emerge as the model. And if so, why not with the originator at its head?”

The SPD’s proximity, to the Hamburg rich, the so-called moneybags, has been connected with massive social attacks. Poverty in Hamburg has risen rapidly over recent years. The wealthy districts, like the area of Nienstedten, with an average annual income of €170,000, are only a few kilometres away from the poor districts.

On the island in the Elbe, Weddel, residents earn an average of just €15,000 per year. Here, or in the high-rise-dominated districts like Mümmelmannsberg and Osdorfer Born, there are 180,000 claimants of Hartz IV welfare. Almost one-quarter of Hamburg’s 1.7 million population is considered poor, including 46,000 children. Those mainly affected by poverty, some 114,000 people, are immigrants.

While Scholz sought to win favour with the rich, the poor, migrants and demonstrators got a sense of his understanding of internal security. Under his leadership, the already right-wing state SPD has been transformed into a law-and-order party. Scholz persecuted immigrants just as harshly as demonstrators. Constitutional hindrances to his policies were brushed aside with arguments previously associated with dictatorial regimes.

It is no surprise that voter participation was at its lowest in the areas with he greatest social tensions—where the poor and unemployed live. In electoral wards like Hamburg Central, Harburg or Süderelbe, turnout was mostly under 50 percent. In the ward Billstedt- Wilhelmsburg-Finkenwerder, it was even lower, at 42 percent. In the electoral district of Billbrook, a formerly densely populated working class district and today an industrial area with a few dilapidated social housing blocks, only one-in-five voted. In the rich electoral wards, such as Rotherbaum-Harvestehude or Eppendorf-Winterhude, electoral turnout reached 68 percent. The poorer the electoral district, the lower the voter turnout.

Growing problems for Chinese economy

Oliver Campbell

Two sets of official data released earlier this month point to a significant slowdown in China which could have major implications for the world economy as a whole. Imports and exports both declined markedly in January, while price rises reached a five-year low, sparking fears that China could be entering a period of deflation, along with much of the rest of the world.

Exports fell by 3.3 percent compared to a year before while imports dropped by 19.9 percent. The fall in imports was particularly significant because China is at the head of a manufacturing chain which extends across much of Asia and its imports include part-finished goods that are assembled and then exported to their final markets in Europe and the US.

While some of the fall in the value of imports was the result of lower commodity prices, especially oil, coal and iron ore, it also reflected a downturn in manufacturing which contracted for the first time in two years. The trade figures were something of a surprise as Reuters had predicted a fall of just 3 percent in imports, and a rise of 6.3 percent of exports.

Price levels reflect the same trends. The consumer price index rose by only 0.8 percent on a yearly basis in January compared to 1.5 percent in December. It was the smallest rise since November 2009, in the immediate aftermath of the global financial crisis, when the index rose by only 0.6 percent. Producer prices, which record the price of goods as they leave the factory gate and which have fallen for the past three years, dropped by 4.3 percent on an annual basis in January, also the sharpest decline for five years.

These monthly figures form part of an overall pattern. According to official growth data released in January, the Chinese economy expanded by 7.4 percent in 2014, the lowest rate since 1990, and below the official forecast of 7.5 percent. The International Monetary Fund responded by cutting its growth prediction for China for next year to 6.8 percent.

Underscoring the industrial downturn, the official manufacturing purchasing managers index dropped to 49.8 percent in January, down from 50.1 percent in December, and the first time it has fallen under 50 percent since September, 2012. A figure below 50 percent indicates a contraction on the previous month. At the same time, the services sector, touted as a booming area of the economy, grew at its lowest level in a year.

Comments by Arthur Kroeber, head of an economics consultancy firm based in Beijing, cited in the Christian Science Monitor, point to the significance of the figures.

“The lower import volumes are a leading indicator of lower growth to come... So far it appears [to be] an orderly slowdown, not a jolting hard landing. But these things are very difficult to manage. It is quite easy to come up with scenarios of a hard landing,” he said.

The deepening crisis is a direct result of the global economic breakdown that began in 2008, and the measures carried out in its aftermath. With the onset of the financial crisis, the Chinese economy was hit by a contraction of markets, leading to some 20 million workers losing their jobs. The Chinese regime responded by launching a massive stimulus program, involving cheap credit being pumped into the economy by state banks.

This resulted in the development of a feverish real-estate bubble, and the growth of a “shadow banking” industry that has functioned as an intermediary between government banks, property developers, and highly leveraged businesses. The sector has also centred on financial products, such as derivatives, with the underlying value of the assets they represent often an entirely unknown quantity.

According to the most recent figures, China’s corporate, banking, government, and household debt now stands at 282 percent of gross domestic product, the vast bulk of it in the corporate sector, particularly property.

The oversupply in the property sector has led to the emergence of entire “ghost cities” of uninhabited housing blocks. According to official figures, the number of unsold houses nationally grew by 25.4 percent in 2014, with land sales slumping by over 10 percent. At 10.5 percent, the growth of property investment was at its lowest since 2009.

The slowing of the real estate boom, and fears of a collapse of the debt-laden financial sector, have prompted a major capital outflow, sparking fears of a liquidity crisis and a further fall in growth rates. According to the Financial Times (FT), capital outflows reached a record of $91 billion in the fourth quarter of 2014, following outflows of $56.7 billion in the third quarter.

The capital flight has prompted fears that the “carry trade”—whereby speculators take out short-term loans at low interest rates from foreign banks, and invest the funds in high-yielding Chinese assets, often in murky “shadow banks”—may be coming to an end. According to figures quoted in the FT from the Bank of International Settlements, outstanding debts of less than one year maturity skyrocketed from $121 billion in 2009, to $850 by September last year.

A study by Barclays and Ledbury Research late last year found that 47 percent of Chinese millionaires said that they planned on emigrating, with another 20 percent undecided. Some 73 percent of those planning to leave the country said they were doing so for reasons of “economic security”—an expression of the increasing nervousness in the ruling elite over the slowing economy, and the mass social struggles that it inevitably produce.

The unravelling of the contradictions of China’s economic development has produced a series of intractable dilemmas for the Chinese regime. Any attempt to rein in the massive accumulated debt could result in a further escalation of the flight of capital to foreign markets. However the continued growth of debt poses the risk of a deep-going, and sudden financial crisis. At the same time, any moves to depreciate the Chinese currency, while potentially boosting the value of exports, could result in further outflows, and a deepening liquidity crisis.

Thus far, the Chinese regime has proceeded cautiously. At the beginning of February, it cut the required reserved ratios for banks to free up deposits that had been effectively frozen, without lowering the interest rate. Beijing also lifted restrictions on trading companies in the Shanghai free trade zone borrowing in overseas markets. The pressure on the regime has been compounded by a new trade case launched by the Obama administration, against China’s subsidised exports.

Summing up the concerns of international finance a comment by Minxin Pei in Forbes late last month posed the question of how the Chinese government would respond to the prospect of years of subpar growth.

“Advocates of painful reform believe that the Chinese economy will not be able to return to a sustainable growth path unless the government aggressively tackles the interconnected mess of a real estate bubble, excess industrial capacity, and financial deleveraging (debt-to-GDP now stands around 250 percent, the highest rate of any emerging market economy).”

Any attempt to rein in credit and spending would likely lead to outright recession, rising social tensions and unrest which the Chinese government would do just about anything to avoid. Continuing stimulus, however, especially in conditions of falling growth, will only create more problems in the country’s financial system.