Behind the scenes at the G-8 and NATO summit meetings, some significant decisions were made that will impact over the coming weeks. The critical decision at the G-8 meeting and several of the bilateral meetings that took place on the sidelines of the Camp David gathering centered on the decision to plunge ahead with the bailout of the European banks in an effort to save the Euro system, with Greece still inside.
President Obama is terrified that a financial meltdown of the Euro system will spill over into Wall Street and result in his losing the November elections. Behind the scenes around Camp David, Christine Legarde put the IMF squarely behind a bailout of the European banks, with the full backing of the Federal Reserve and Treasury in the United States to boost the leveraged lending of the European Central Bank (ECB) to prop up the European banks. ECB will take junk bonds and other vastly over-priced assets as collateral for loans to the Spanish, Greek and other European banks. This will offset an additional estimated $500 billion in new write-offs by bondholders of Greek debt.
The bottom line is that if Greece leaves the Euro, the contagion will spread overnight to Spain, Portugal, Ireland, and, perhaps, even Italy. So, the IMF, the Obama Administration and the ECB are all on board to further delay the reality of the financial and banking crisis through hyperinflationary measures. The idea is that the situation will take many months to fully play out, and Obama and his reelection team hope that the system will hold together past the November elections.
In his sideline meeting with new French President Hollande, Obama reached a full agreement on this perpetuation of the Euro. This is an area where Hollande and Merkel will agree to disagree. They both want to defend the Euro, but Hollande will continue to insist that the austerity must be limited and a growth program initiated. This is actually impossible to accomplish, but this is the growing perspective of the Eurosocialists, including Hollande and his colleagues in Germany’s Social Democratic Party (SPD) and the Italian Socialist Party (PSI). A majority of Greek voters are in favor of staying in the Euro, so long as the austerity is reduced.
Hollande will make another effort this week at the European Monetary Union heads of state meeting to push for Eurobonds, as one way to implement this bailout plan. Merkel will likely oppose and block this latest Eurobond argument. The total amount of assets on the books of the US Federal Reserve and the European Central Bank fall far short of the currently estimated 4 trillion euro liability of the European private banks.
This was the single-most important decision taken at the G-8 meeting, and it was a deeply flawed decision that will have severe consequences. For Obama, the crucial question is: Will the consequences hit before or after the November elections in the United States? This may be the deciding factor in the outcome of those elections.
Russia’s Presence in Camp David and Chicago
On May 14, Russia’s Prime Minister Medvedev delivered a speech at an international law conference in St. Petersburg, Russia, just before departing for Camp David. In his speech, he announced the “Putin Doctrine,” opposing any attempts to use humanitarian intervention pretexts to violate the national sovereignty of any nation. US Attorney General Eric Holder was seated on the podium behind him when he delivered these remarks. Medvedev went so far as to say that the attempt to carry out humanitarian interventions without the prior full consent of the United Nations Security Council could lead to regional wars, and, ultimately could lead to thermonuclear conflict.
The US government was not surprised at the Medvedev speech, because Russian ambassadors around the world had been instructed to inform the host governments of the new “Putin Doctrine” of the inviolability of national sovereignty and the threat posed to the world order by attempts to violate that principle. Russia would organize resistance to any such efforts.
At a conference in Moscow on May 3, top Russian government officials, including the Chief of the General Staff Makarov, had warned that NATO’s decision to move ahead with the deployment of the European Missile Defense System could also drive Russia to launch pre-emptive attacks on components of the system, during a later stage when it would pose a threat to Russia’s second nuclear strike capabilities.
These two pointed warnings from Russia resonated at both the G-8 and NATO summit meetings, particularly since President Putin had told President Obama in a telephone conversation soon after the Moscow conference that he would not be attending the G-8 meeting, but would be sending Medvedev instead. The location of the G-8 meeting had been changed from Chicago to Camp David, after the cancellation of the NATO-Russia Council meeting, due to the conflict over the missile defense deployment in Europe.
As the result of the stark Russian warnings, there were two concessions made during the G-8 and NATO meetings. The language of the G-8 communiqué regarding Syria was altered to remove any implicit calls for regime change against the Assad government. At NATO, there was recognition that Russia has objections to the missile defense deployment, and that there will be efforts to reconcile those differences in negotiations that are already underway, between trusted Russian and American intermediaries.
However, another issue came up at the Chicago NATO meeting, at the initiative of David Cameron and with the full support of President Obama, which will emerge as a major controversy on both sides of the Atlantic. In May 2010, British Prime Minister David Cameron ordered a full strategic review of Britain’s military forces and doctrine. A year later, in April 2011, President Obama ordered the same kind of study. At Chicago, Cameron and Obama pushed for a similar NATO assessment study. The purpose is to present the case that NATO must be able to move more swiftly, particularly in cases of humanitarian interventions, without the delay of formal approval by the 28 parliaments of the 28 NATO member countries. In other words, NATO should have its own military assets and should be free to take action without approval of the sovereign parliaments, if the NATO heads of state reach a unanimous agreement.
This is a dangerous erosion of the sovereignty of all NATO countries, and will meet with serious opposition, once the implications of this move are fully understood. There will be serious resistance in the US Congress from both Democrats and Republicans.
This will also come in conflict with the new “Putin Doctrine” of Russia because it is indicative of further NATO “humanitarian interventionism” plans, based on last year’s Libya intervention.
The author is Senior Editor, Executive Intelligence Review