Croatia and Turkey today took steps towards eventual EU membership. Croatia wrapped up accession talks in two policy areas - right of establishment and freedom to provide services, and social policy and employment - while Turkey opened talks on the environment chapter.

Both countries began membership talks at the same time, October 2005, but while Croatia is poised to become an EU member state in 2012, Turkey's membership appears far more distant. A third membership candidate, Macedonia, has not even begun accession talks because Greece objects to its name.

Gordan Jandroković, Croatia's foreign minister, told reporters after today's meeting that Slovenia was still blocking three chapters that Croatia had hoped to open today, and for which it has fulfilled all preconditions.

The European Court of Human Rights has ruled that provisions in the constitution of Bosnia and Herzegovina reserving certain offices of state for members of Bosnia's three `constituent peoples' are discriminatory and unlawful.

The case had been brought in 2006 by Dervo Sejdić, a Roma, and Jakob Finci, who is Jewish. The court today (22 December) ruled in their favour by 14 votes to three.

Bosnia's constitution was drafted as part of the 1995 Dayton peace accords, mostly by lawyers from the US Department of State with input from EU diplomats. It established a three-member presidency with one representative for each of Bosnia's `constituent peoples' - Bosniaks (Bosnian Muslims), Serbs and Croats.

The CIA used at least two secret detention centres in Lithuania after the 11 September 2001 terror attacks on the US, a Lithuanian inquiry has found.

The report by a Lithuanian parliamentary committee says that in 2005 and 2006 CIA chartered planes were allowed to land in Lithuania.

It says that no Lithuanian officials were allowed near the aircraft, nor were they told who was on board.

Poland and Romania hosted similar CIA "black sites", media reports say.

The people of Romania are marking the 20th anniversary of the 1989 revolution which brought down Nicolae Ceausescu.

Small commemorations have been held at cemeteries and sites associated with the revolution in several cities, including Bucharest and Timisoara.

President Traian Basescu referred to more than 1,100 people who died during the revolution, as he was sworn in for a second, five-year term in office.

Latvia's constitutional court has ruled against government pension cuts, drawing a question mark over the country's ability to meet the terms of an international lending programme.

"The decision to cut pensions violated the individual's right to social security and the principle of the rule of law," the court said in its judgement, which cannot be appealed, on Monday (21 December).

The pension cuts - in place since July - formed a vital part of the Latvian government's list of austerity measures, as it struggles to bring down its ballooning budget deficit and comply with terms under an EU and IMF-led bailout.

A third credit ratings agency has downgraded Greek government bonds over concerns about the country's ability to reduce its high levels of debt.

Moody's is the third of the three major international agencies to downgrade Greece, following similar moves by Fitch and Standard & Poor's.

Analysts reacted positively to the downgrade, to A2 from A1, which was not as severe has some had expected.

Polish police have taken three men who admitted stealing the "Arbeit macht frei" sign from Auschwitz back to the site to re-enact its theft.

Police found the metal sign cut into three pieces on Sunday and arrested five men in northern Poland.

Three of the five have confessed to the theft from the site in southern Poland.

Much of Europe continues to face severe transport upheaval as a cold snap sweeps the continent.

More than 80 people have died across Europe, including at least 42 in Poland and another 27 in Ukraine who have frozen to death.

Another 13 people died in car accidents in Austria, Finland and Germany, where temperatures dropped well below zero.

Air, rail and road transport has been severely disrupted across northern Europe and more snow is expected.

Serbia formally applied for European Union membership on Tuesday in a major effort to turn its back on the war, poverty and international isolation of the 1990s.

President Boris Tadic submitted the application to Sweden, holder of the rotating EU presidency, a decade after the end of the Balkan wars that tore apart the former Yugoslavia and kept it outside mainstream Europe.

Serbia's failure to arrest Ratko Mladic, the Bosnian Serb ex-general indicted for genocide by the UN war crimes tribunal, has been a major barrier to Belgrade's EU ambitions, and its bid is likely to make little further progress while he remains free.

Economic growth was weaker than expected in the third quarter, the government said Tuesday, held back by soft business construction and dwindling inventories.

While the results tempered some of the expectations about the pace of a recovery, analysts still foresee steady, and stronger, growth in the fourth quarter.

[...]

Gross domestic product in the third quarter -- the total value of goods and services in the economy -- was 2.2 percent from July through September, revised down from 2.8 percent last month and 3.5 percent in October.

Gordon Brown received a twin blow today when a leading ratings agency warned Britain to get a tighter grip on its record budget deficit and figures revealed that the slump of the past 18 months was now officially the deepest since the second world war.

Fitch said that the UK - along with France and Spain - needed to "articulate more credible and stronger fiscal consolidation during the course of 2010 to underpin confidence in the sustainability of public finances".

Failure to do so, the ratings agency added, would greatly increase the chances of a debt downgrade, which would increase the cost of servicing the national debt.

The warning came within hours of data from the Office for National Statistics showing that Labour's attempts to boost growth took the edge off the recession in the third quarter but were not enough to prevent the slump extending into a record-breaking sixth quarter.

Train C2019 covers the 120 kilometers between Beijing and Tianjin in 30 minutes, passing peasants in fields burning corn stalks and warrens of shacks occupied by people who aren't sharing in China's economic boom.

The line is part of China's 2 trillion yuan ($292.9 billion) investment in a nationwide high-speed passenger-rail network that may be too much train, too fast.

The time savings that the new system delivers may not justify the cost, creating a potential drag on long-term growth, said Michael Pettis, former head of emerging markets at Bear Stearns Cos. The losers are Chinese consumers, who will have to wait for new health-care and old-age benefits while the government focuses on public-works spending, he said.

While the expanded service will be a "trophy" for China, the country "already has probably the best infrastructure in the world for its level of development," said Pettis, now a finance professor at Peking University.

Ministers from the European Union's member states today backed a proposal by the European Commission to extend existing EU import duties on certain types of footwear produced in China and Vietnam.

The extension by 15 months, starting in January, was possible after Austria, Germany and Malta dropped their opposition. In November, EU trade diplomats rejected the Commission's proposal.

Senator David Vitter submitted one of my questions to Federal Reserve Chairman Ben Bernanke, as part of his reconfirmation hearings, and received the following reply in writing (as already published in the WSJ on-line).

   Q. Simon Johnson, Massachusetts Institute of Technology and blogger: Andrew Haldane, head of financial stability at the Bank of England, argues that the relationship between the banking system and the government (in the U.K. and the U.S.) creates a "doom loop" in which there are repeated boom-bust-bailout cycles that tend to get cost the taxpayer more and pose greater threat to the macro economy over time. What can be done to break this loop?

    A. The "doom loop" that Andrew Haldane describes is a consequence of the problem of moral hazard in which the existence of explicit government backstops (such as deposit insurance or liquidity facilities) or of presumed government support leads firms to take on more risk or rely on less robust funding than they would otherwise. A new regulatory structure should address this problem.
    A. (continued) In particular, a stronger financial regulatory structure would include: a consolidated supervisory framework for all financial institutions that may pose significant risk to the financial system; consideration in this framework of the risks that an entity may pose, either through its own actions or through interactions with other firms or markets, to the broader financial system; a systemic risk oversight council to identify, and coordinate responses to, emerging risks to financial stability; and a new special resolution process that would allow the government to wind down in an orderly way a failing systemically important nonbank financial institution (the disorderly failure of which would otherwise threaten the entire financial system), while also imposing losses on the firm's shareholders and creditors. The imposition of losses would reduce the costs to taxpayers should a failure occur.

This answer misses the central issue.  Haldane's argument (and our point) includes "time inconsistency" - i.e., you promise no bailouts today but, when faced by an awful crash, you provide a massive set of bailouts.  There is nothing in Mr. Bernanke's statements, here or elsewhere, that addresses this concern.

His hope is that current proposed changes in regulation will make a crash less likely.  This is a strange assertion, given current market conditions: e.g., the Credit Default Swap (CDS) spread for Bank of America now hovers just 100 basis points above that of the US government, despite BoA having a very risky balance sheet.  Creditors apparently believe they will not face losses - and the same is true for people lending to all our big banks. This is exactly the kind of thinking that produces reckless lending (and borrowing).  Will Bernanke really disappoint them in our next crash?

Until markets price "small enough to fail" risk into our biggest banks, the time inconsistency problem is alive and well - and threatening.

The Fed's continuing refusal to confront this point directly - even as other major central banks shift their public positions (and more are moving in private) - is alarming and disconcerting.   The Fed is falling far behind.  This will have much broader consequences for its credibility and independence down the road.

by Kipper Williams at the Guardian

Much is being made of Bernanke's program of quantitative easing, which is nothing more than an extreme form of artificially low rates of interest in the aftermath of a financial crisis. The current program of quantitative easing is not only no miracle cure, it will not work at all, will not 'fix' the problems that are plaguing the American economy in any substantial manner. Quantitative easing would only be a cure if the crisis had been caused by an exogenous credit shock, a sudden withdrawal of liquidity due to an event unrelated to the workings of the domestic economy like a war or an act of nature.

But this is clearly not the case. For the cause of the financial crisis was in fact a lengthy period of artificially low interest rates under the chairmanship of Alan Greenspan, which allowed all manner of financial excess and malinvestment and even fraud to fester in the real economy for a protracted period of time until it became embedded, and one might even say a dominant force, in the economy.

Applying quantitative easing may relieve the symptoms of the credit crisis but is merely a palliative, not a cure. It is similar to the case of a debilitated addict who being denied his marcotics goes into shock and suffers a heart attack. Yes, a resumptio of the drug will relieve the short term symptoms perhaps but will do nothing for the underlying deterioration which will continue to worsen.

The very low rates of interest have 'cured' the short term credit seizing in the financial markets, thereby providing time and opportunity to engage in real systemic reform and rebalancing to fix what caused the crisis in the first place: an outsized and corrupt financial sector, and a system of global trade that is freakishly imbalanced and manipulated by command economies and multinational corporations.

Until those reforms are made, the US economy will experience a series of bubbles and crisis that through the US dollar reserve currency system will shake the governments of the world to their foundations.

In the 19th and 20th centuries we made stuff: corn and steel and trucks. Now, we make protocols: sets of instructions. A software program is a protocol for organizing information. A new drug is a protocol for organizing chemicals. Wal-Mart produces protocols for moving and marketing consumer goods. Even when you are buying a car, you are mostly paying for the knowledge embedded in its design, not the metal and glass.

Yup. Everything's a protocol.

IMHO we are about to see the viral spread of interactive, consensual protocols which will make existing one way protocols redundant.

Probably worth a Diary.

Modern conservatives engage in one of man's oldest exercises in moral philosophy: the search for a superior moral justification for selfishness.Galbraith

The German-ordered air strike that led to civilian casualties in Afghanistan in early September was more than an aberration by a Bundeswehr officer. The German government and the military leadership have long supported taking a tougher approach against the Taliban.

He said nothing about the crux of the matter. German Defense Minister Karl-Theodor zu Guttenberg was standing in the German parliament, the Bundestag, giving a speech that was filled, as usual, with well-made sentences, and yet it resolved nothing.

His appearance in the Bundestag last Wednesday had been preceeded by reports that morning that Wolfgang Schneiderhan, the former inspector general of the German armed forces, the Bundeswehr, had accused the defense minister of "not telling the truth."

Monday saw tens of thousands of regime critics marching in Iran for the funeral of a senior dissident cleric. Mourning turned to chants of "death to the dictator," and German commentators believe there is more to come.

Tens of thousands of anti-regime protestors marched through the streets of Iran's holy city of Qom on Monday. They had gathered for the funeral procession of Grand Ayatollah Hossein Ali Montazeri, the most senior of the regime's critics, who had died in his sleep Sunday at the age of 87.

The event reportedly turned into the largest civil protest since those that followed the contested re-election in June of President Mahmoud Ahmadinejad, which left an unknown number of protestors dead. In Monday's demonstration, protestors chanted "death to the dictator" and carried slogans voicing their support for the opposition leaders to whom Montazeri had given his support. Mir Hossein Mousavi, the head of the opposition Green Movement, and Mahdi Karroubi, a prominent protest leader, also took part in the demonstration.

Even as the Senate took a significant step toward passing its version of a sweeping overhaul of the health insurance system before Christmas, Democrats were grappling Monday with deep internal divisions over abortion, the issue that most complicates their drive to merge the Senate and House bills and send final legislation to President Obama.

In the House, advocates and opponents of abortion rights and conservative Democrats have made clear that they object, for different reasons, to the Senate's compromise language on abortion. Interest groups on both sides of the spectrum -- Planned Parenthood on the abortion rights side, Catholic bishops for the anti-abortion rights camp -- also oppose the abortion provision in the Senate bill, leaving Speaker Nancy Pelosi with a challenge in rounding up the votes she needs in the House.

Ms. Pelosi's room for maneuvering is limited because any changes to the language in the Senate bill could unravel the deal that provided Democrats with the 60 votes they need to get the legislation through the Senate.

Dutch Socialist MP Harry van Bommel has claimed that US spy planes are using an airbase on the Netherlands Antilles island of Curaçao.

Mr Van Bommel has asked Foreign Minister Maxime Verhagen whether he is aware that a Boeing RC-135 aircraft has been making regular reconnaissance flights from the Caribbean island's Hato airport over the past few weeks.

Israel will find itself diplomatically sidelined and militarily muzzled as the United States pursues a nuclear deal with Iran next year, according to a closed-door wargame at Israel's top strategic think-tank.

Not even a warning shot by Prime Minister Benjamin Netanyahu -- the simulation featured an undeclared Israeli commando raid on Iran's Arak heavy water plant -- would shake U.S. President Barack Obama's insistence on dialogue.

Israel's arch-foe, meanwhile, will likely keep enriching uranium, perhaps even winning the grudging assent of the West.

"The Iranians came out feeling better than the Americans, as they were simply more determined to stick to their objectives," said Giora Eiland, a former Israeli national security adviser who played Netanyahu in the November 1 wargame at Tel Aviv University's Institute for National Security Studies (INSS).

Seventy-three Saudi soldiers have been killed, 470 wounded and 26 are missing since fighting broke out in November between Saudi forces and Yemeni rebels, a Saudi minister said Tuesday.

"The confrontation on the southern border" has resulted in "73 martyrs and 26 missing" soldiers, said Saudi Deputy Defence Minister Prince Khaled bin Sultan in comments broadcast on television from a media conference in Al-Khoba in the southern Jizan province.

"We believe that 12 of (the missing soldiers) were killed, while we do not know about the fate of the other 14," Prince Khaled said.

Killings of anti-government protesters perpetrated by Guinean security forces in Conakry in late September amount to "crimes against humanity," according to a report by a UN inquiry panel released Monday.

The commission said it was able to confirm the identity of 156 people killed or missing and said at least 109 women were subjected to "rapes and other sexual violence, including sexual mutilations and sexual slavery."

"It is reasonable to conclude that the crimes perpetrated on September 28 and the following days can be described as "crimes against humanity," it noted.

DR-CAFTA's progress amid recession
November 26th 2009
ECONOMIST INTELLIGENCE UNIT

The Dominican Republic-Central America Free Trade Agreement (DR-CAFTA), which has the goal of expanding free trade and facilitating trade flows between the US and Central America as well as within the sub-region, has had a generally positive impact on economic growth. Increased trade and foreign direct investment (FDI) have been the most obvious benefits of the trade agreement. Inward FDI as a percentage of GDP in the sub-region rose from 3.4% in 2005 to almost 5% in 2008, while increased remittance inflows and tourism arrivals from the US have also played a role in raising incomes and economic growth.

On the negative side, a reliance on the US for a majority of trade, investment and remittance inflows has increased the vulnerability of the DR-CAFTA countries-Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua-to the US recession. These countries are bearing the brunt of the US economic downturn. They are also suffering from rising crime and violence (mainly related to the spread of drug trafficking and organised crime); weakening democratic institutions (highlighted by the recent coup in Honduras and political scandals in Guatemala); and a lack of competitiveness (which could worsen as a result of lower government revenue and slowing progress on reform).

However, only 39 Republicans voted against passage. Sen. James Inhofe (R-OK) was the Republican who missed the vote.

On C-Span this morning, a caller wondered if perhaps Coburn's prayer request had "backfire[ed]" against his own party:

CALLER: Yeah doctor. Our small tea bag group here in Waycross, we got our vigil together and took Dr. Coburn's instructions and prayed real hard that Sen. Byrd would either die or couldn't show up at the vote the other night.

How hard did you pray because I see one of our members was missing this morning. Did it backfire on us? One of our members died? How hard did you pray senator? Did you pray hard enough?

[...]

When Coburn asked Americans to pray that a Senator miss these crucial health care votes, he never specified Republican or Democrat.

On December 14, 2009, an inauguration took place that deserves more attention than it received because it marks an economic power shift to the benefit of three Central Asian countries and China and to the detriment of Russia.  The presidents of China - Hu Jintao, Turkmenistan - Gurlanguly Berdymukhamedov, Kazakhstan - Nursultan Nazarbayev, and Uzbekistan -Islam Karimov, inaugurated the Central Asia-China gas pipeline that links Turkmenistan's natural gas fields on the Caspian Sea to the Western Chinese border in the Xinjiang province.

This pipeline then connects with the West-East Gas Pipeline that crosses China and supplies cities as far as Shanghai and Hong Kong. 13 billion cubic meters (bcm) are supposed to transit through this pipeline in 2010, 30bcm by the end of 2011 and over 40bcm by 2013. Ultimately that pipeline could supply China with more than half of China's present day natural gas consumption.

....

Turkmenistan is the big winner with this new pipeline as this new export route for its gas production frees it from the diktats of Gazprom: about 70% of its natural gas production used to exit the country through the Gazprom network. Turkmen President Berdymukhamedov stated, "The successful implementation of this project could become a prototype for all international energy partnerships," adding that "this pipeline will have a positive impact across the entire region and beyond, and it will become a major contributing factor to security in Asia." Other winners are Uzbekistan and Kazakhstan that will also be able to supply the pipeline with their own gas production, notably from the Karachaganak, Kashagan and Tengiz fields in Kazakhstan.

The Central Asia-China gas pipeline is a US$7.3bn project, 1,833 km long with 188 km going through Turkmenistan, 530 from Uzbekistan to Kazakhstan, and 1,115 km from Kazakhstan to China. The West-East Gas Pipeline crossing China is over 4,500 km long, making of the joint pipelines the longest in the world.

An American Airlines plane has overshot the runway on landing in the Jamaican capital Kingston, injuring more than 40 people, officials say.

Flight AA 331 from Miami, with about 150 people on board, is reported to have broken apart after the incident at Norman Manley International Airport.

Jamaican Information Minister Daryl Vaz said 44 people had been taken to nearby hospitals for treatment.

Despite the disappointing agreement reached at the climate conference in Copenhagen, the US seems to have joined the EU in its commitment to binding carbon dioxide reduction schemes. This guarantees climate change will remain at the top of the agenda in the Western world in the coming years.

In the Islamic world, however, this is not the case. Hardly any country has put climate change on the agenda at all. This is made all the more tragic because Islamic countries will face the brunt of a changing climate. Desertification is a major threat in North Africa and the Middle East, and rising sea levels are expected to have dire consequences for the worlds' poor in countries like Bangladesh and Indonesia.

The 1.2 billion Muslims of this world currently produce a relatively small amount of carbon dioxide emissions. Islamic countries are roughly responsible for ten percent of global carbon dioxide output, whilst 300 million US citizens alone produce more than 20 percent. But over the last ten years both energy consumption and carbon dioxide emissions have risen by 4.5 percent annually in the Islamic world.

India could improve upon its aims to slow the growth of greenhouse gas emissions by 2020, the environment minister said on Tuesday after returning from climate change talks in Copenhagen.

India said it was willing to rein in its "carbon intensity" -- the amount of carbon dioxide (CO2) emitted per unit of economic output -- by between 20 and 25 percent by 2020, from 2005 levels.

"(It) is not only eminently feasible, but can also be improved upon to the benefit of our own people," Jairam Ramesh, the environment minister, said in parliament.

The European Union called on the United States on Tuesday to play a bigger role in combating climate change, after Sweden described the Copenhagen summit last week as a "great failure."

Following a meeting in Brussels to discuss how to rescue the Copenhagen climate process, EU environment ministers emphasized the need for concrete, legally binding measures to combat global warming.

The European Union went to Copenhagen with the hope of achieving a broad commitment to at least a 20-percent cut in carbon emissions below 1990 levels within 10 years, but that and other firm goals failed to emerge in the final accord.

Save the world, build on water, that is Koen Olthuis' core business in a nutshell. His architectural studio Waterstudio.nl designs waterborne schools, parks, roads and houses, pretty much anything actually.

Waterborne structures are easy to move. Once they are required elsewhere, a push and a tug suffice for a change of scenery.

Olthuis has even coined a term for it: `scarless development.' A method of urban planning that makes for truly dynamic cities. Waterborne structures are not only useful to adapt to the fickle demands of citizens, they are also flexible enough to deal with the changing climate.

A 14-year-old Dutch sailor discovered on a Caribbean island after disappearing last week has been escorted home to the Netherlands.

Laura Dekker, barred from her attempt to become the youngest person to sail solo around the world, went missing last Thursday.

A Dutch court is expected to decide if the teen should be removed from her father's care after the incident.

It is still unclear how Miss Dekker managed to make the journey.

After Belgian newspaper tycoon Christian van Thillo in March obtained a majority share in Dutch publishing group PCM, he was told by anti-trust authorities to hive off one of its newspapers. NRC Handelsblad's management immediately said it would support its sale, as this would put an end to an undesirable situation where it was part of the same media group as its main competitors on the Dutch newspaper market.

Van Thillo's Persgroep accepted a bid by Egeria and Het Gesprek on Friday, after a controlled auction of NRC Media . The purchase amount has not been released but is estimated at about 70 million euros.

Egeria is a Dutch private equity investment fund set up by the wealthy Brenninkmeijer family, which made its fortune through the C&A clothing retail group. Het Gesprek is a commercial television channel focused on interviews. It was co-founded by Derk Sauer, who set up the Moscow Times and other publications in Russia.

Mexico City on Monday became Latin America's first municipality to approve gay marriage, an aide to a city lawmaker told AFP.

"It was approved overall by 39 votes in favor and 20 against, with five abstentions," said a spokesman for the bill's chief sponsor, assemblyman Davi Razu.

Spokesman Oscar Oliver said city legislators were now taking up a measure in the bill that would allow married same-sex couples to adopt children.

A ban on several drugs known as "legal highs" has come into force.

The substances, including GBL and BZP, become Class C drugs, with a possible two-year jail sentence for possession.

Ministers moved to classify them after a recommendation from the Advisory Council on the Misuse of Drugs and fears they are a threat to user health.

GBL was linked to the death of medical student Hester Stewart, 21, in Brighton last April. Her mother, Maryon, campaigned nationally for the ban.

So-called legal highs are typically man-made chemical substances designed to act like banned drugs.

The government is to cut university funding by £533m - from £7.81bn this year to £7.29bn for 2010-11, Business Secretary Lord Mandelson has said.

In a letter to the Higher Education Funding Council For England (HEFCE), he also asks universities to protect quality and access to higher education.

His letter confirms already announced cuts of £180m and £83m - and adds a further £270m budget reduction.

The Tories said they would make another 10,000 university places available.

The government also wants to see more degrees completed over two years rather than three as a way of easing the funding crisis and to broaden education to a wider range of students.

Lionel Messi became the first Argentine to win the FIFA World Player of the Year award on Monday.

The accolade came after the playmaker won four major titles with Barcelona -- the Champions League, the Club World Cup, La Liga and the King's Cup.

"This finishes a magnificent year for Barcelona, my team mates and for me," said Messi after receiving the trophy from UEFA president and former France international Michel Platini.

Two young men caught cycling with no clothes on have escaped charges of offensive behaviour, but received a warning to wear protective headgear.

Local policewoman Cathy Duder was unfazed when she came across the two nude men, both in their early 20s.

"They were more shocked than I was, trying to cover up their bits and pieces with their hands," she said.

The men were riding around the Coromandel seaside resort of Whangamata on the north-east coast of New Zealand.

When asked for an explanation, the pair replied that "they wanted to experience total freedom".

Seven-times Formula 1 world champion Michael Schumacher will come out of retirement to race for Mercedes next year, BBC Sport understands.

The German, who will be 41 on 3 January, has signed a contract and the deal will be announced imminently.

Schumacher will partner compatriot Nico Rosberg in the team that won the drivers' and constructors' titles in 2009 in its former guise as Brawn.

His spokeswoman Sabine Kehm said she could not make any comment.

The German newspaper Bild is reporting that Schumacher signed a one-year deal and it is likely he will have the option to continue beyond 2010 if his returns goes well.