Sameh El-Shahat’s Blog

The Financial fallout has provided an excellent opportunity for little countries in Europe to show the big players, humbled by the global recession, who’s boss.

This is a salutary tale of how and why you should think carefully before badly treating a small country, however harmless it may seem. Not so long ago, 65million years to be exact, the dinosaurs thought they had the Earth to themselves and  thought nothing of riding roughshod over little creatures called mammals that were all to intents and purposes insignificant. Then came the Asteroid (the precursor to the sub-prime crisis) and wiped out the big dinosaurs leaving the meek to inherit the earth. History could be repeating itself.

Here are two sobering tales from our times:

How Switzerland Turned on Germany To Teach The Americans A Lesson

This is a truly bad time for Germany. In classical Götterdämmerung style, it is being assailed by its friends and allies for money.

Only yesterday, I wrote about how its Euro-area partners are trying to fleece it, so that they may carrying on living way beyond their means. To fill up its rainy day chest, beleaguered Germany is being forced to turn on small tax haven Liechtenstein to claw back some of the money stashed away there by its rich barons.

Don't Mess With UBS!

And now, in a typical kick’em-while-they’re-down fashion, Switzerland has entered the fray as the latest country asking Germany to bail it out, and it is doing so in a very imaginative fashion. We’ve been dumping on the Swiss for a while now about their banking secrecy laws, so it seems that they are fighting back to secure a future in a rather bleak financial future.

The Swiss are neither in the Euro nor in the EU. They also have no natural resources to speak of, aside Milka cows, fresh air and great scenery. For their fabled chocolate, they have to depend on some pretty dodgy African countries for supply, and for their legendary timepieces, they need a constant supply of people with at least two free wrists to wear them, if the business is to remain sustainable.  So they had to be resourceful. First, they invented secret numbered bank accounts where, behind the façade of respectable cute family-owned banks that looked like something out of Legoland, anyone could hide their money and have access to it with no questions asked. But then the Americans and the Germans turned on them to try to get them to divulge the assets of their nationals. And so, in an attempt to show they are still in control, the Swiss have unveiled their new and deadly weapon.

Swiss Chocolate may be innocent for children,but the Swiss secret service has been using it as their weapon of choice for seduction and espionage for centuries. Ever wondered how a country could live off chocolate?

The Swiss Gigolo.

The Swiss Treasury, together with their fabled Nestle-fed Secret Services have sent their best agent first to seduce and then blackmail Germany’s richest woman who is heiress to the BMW fortune. The Swiss Secret services must have planned this operation very carefully, and they counted on certain German national proclivities. For example, they Swiss are obsessive about time-keeping, and so are the Germans. And so it was most natural that Ms Susanne Klatten, a member of the reclusive Quandt dynasty, and a major shareholder of BMW, would fall for suitor whose charm lay, largely, in being punctual and arriving on time for their secretive trysts. If there is one thing the Germans love, it is punctuality. A punctual yet unimaginative lover from the clock making Germanic  races could easily trump a constanly late but more ardent latin lover. If there are two things the Germans and the Swiss adore in a partner, they would be constancy and punctuality. The Swiss then asked their chocolatiers to produce to the most aphrodisiacal confectionaries for their man to ensure that his prey would offer no resistance.

He is considered "good-looking" by German matrons, and she's a good catch if you're a nerdy looking Swiss spy on the make. But he always "came on time", and that's what really made her fall for him. She became his "Swiss Made"

Having sold her some cockamamie story about running over some US mafia kid and the mafia dad asking for EURO10 million to care for his daughter. He would put up EUR3m and she the remaining EUR7m, which she did. Then he asked for her to leave her husband and place EUR290m into a trust fund for their future lives together. When she refused, he threatened to show intimate videos of them making love (punctually, of course). She reported him to the police, he was arrested and just sentenced to six years imprisonment by a Munich court.

It turned out that Ms Klatten was nothing more than the fourth wealthy woman he had seduced then conned and duped into coughing up the cash. He had been practicing for his big hit. While this may seem like a failed mission by the Swiss secret service, it is in fact a very successful mission. The Swiss wanted the Germans to know that they can strike at the heart of the industrio-financial complex. BMW had been penetrated (excuse the pun). What of Mercedes?

Unbeknownst to a German car manufacturer with a similar logo, this the coat of arms of the Swiss secret service. It stands for Blackmailing Married Women

This was also a shot across the American bow. UBS, the Swiss bank has been forced to hand over a few hundred client account details under duress by the US with the threat of criminal action. The Americans want details of 52,000 more clients who, they say, are flouting America’s stringent tax laws. For the Swiss, banking is their means of survival and they will defend it at any cost. Is it any coincidence that the Sgarbi case has been made public now? No, they Swiss are simply warning the Americans. Every American leader of industry, major banker, or politician, must now be wondering if his wife is currently being seduced by a suave, charming, and very punctual Swiss agent masquerading as an “attentive” lover, as Ms Klatten touchingly described Mr Sgarbi. Every package of Swiss chocolate entering the US can now justifiably be considered a tool of industrial espionage, aimed at giving the Swiss an unassailable advantage over the Americans.

How The Central Europeans Finally Got To Screw Austria

Up until less than a century ago, Austria had reigned supreme for over a thousand years over large swathes of Central Europe. The Holy Roman Empire, in the hands of the Hapsburg dynasty, kept a tight rein over the whole area. From 962 to 1806 (when it was dissolved by Napoleon). Then it was revived again briefly and managed to keep going till WWI when it was finally laid to rest.

So it was quite big, as you can imagine.

The Holy Roman Empire would eventually become a Wholly Austrian Mess

The Austrians, in typical Imperial fashion, lorded it over the Central Europeans and treated them like they were some oafish backward louts. They did have a favourite in Hungary, but generally treated the whole area with the disdain reserved for exotic diseases. They waited and bided their time, these Central Europeans, and they knew that eventually, they would have the last laugh.

The WWII came and went, and they all fell under the Soviet Yoke and got even more abused. Then the Iron Curtain fell and they were free again for a while, and then they saw their opportunity. Austria was so near, and yet so far.

In 2004, a whole bunch of them joined the EU where Austria had found refuge. A rump state and a far smaller one, but still a haughty one, all the same. Their revenge would be sweet.

http://www.eurointelligence.com/Article3.1018+M545e0be824a.0.html

They all then secretly agreed to start building shakiest and most advanced banking system that money could buy, and they made sure that they didn’t use their own money. In effect, the Central Europeans got Western Europeans, with Austrians at their forefront, to buy them a banking system from scratch. Then, in a concerted action that History will remember as the true end of the Hapsburgs, they encouraged their citizens to borrow their mortgages in Euros and Swiss francs, where the rates were lower than local currency banana republic rates. The Central Europeans then went on the kind of profligate shopping spree that one only does with other people’s credit cards! When the financial downturn came, all the local currencies collapsed, and all the mortgage repayments became huge as the local currency value of the foreign currency loans shot up sky high.

When people talk of the banking system of Hungary being screwed, they are in effect saying that Austria’s banking system is screwed. That is because Austria, in a last fit of imperial grandeur, thought it its god given right to recreate a financial Holy Roman Empire all over again. They fell into the Central Europeans’ trap. Austria got burned badly and the Central Europeans know that the Austrians, much as they would love nothing better than see them go to hell, must now bail them out as that’s the only way to save the Austrian banking system.

“After leading the way in providing credit to the eight former communist nations that joined the European Union in 2004, Austria’s banks are now on the hook for 201 billion euros ($254 billion) in loans, equal to about 71 percent of the nation’s gross domestic product. International investors rank Austria’s bonds as less safe than those of Italy, Spain or even Slovakia”. ©Bloomberg 2009

http://www.bloomberg.com/apps/news?pid=20601085&sid=aSskJbEPpc4A&refer=europe

Who’s having the last laugh now??

© Sameh El-Shahat 2009

Imagine the following scene. Two parents, one strict and one indulgent having to deal with a bunch of spoiled kids. The strict one (mum or dad, couldn’t tell nor care, this is not a gender column) always finds that the kids will ultimately side with the indulgent partner. This ultimately causes friction between the parents to the point that it may put their marriage under considerable strain. Nobody loves to be constantly portrayed as the boring disciplinarian one.

Now let’s replace the cast of actors in this fractious domestic scene with something closer to home. So the members of the Euro family are:

·         Mama Euro: Germany. Strict. Thrifty, dull, dependable

·         Papa Euro: France. Loose. Drama Queen, profligate and loves nothing better than maxing out credit card at Maxime’s

·         Spoiled Euro brats:

o   Greece. Taramasalata economy with too much olive oil and precious little to show for it. Believes herself a descendent of the Ancient Greeks and spends like Midas

o   Spain. Snorting too many tapas and a predilection for excessive property speculation

o   Portugal. Where’s the money gone? Always looking a mess despite excessive cosmetic surgery

o   Ireland. Affable but ended up falling for its own blarney. Wants money for an abortion of a baby nicknamed Success, that’s not its own

o   Italy. Stylish, peacock-like and utterly self-obsessed to the point of being vacuous. Doesn’t care about debt, so long as she looks good, bella figura style

This is Bacalhau or dried salted cod. As I write this, it is the only reason why Portugal got into the EU and the EURO. But if the reason for them being there is the need for having some Portuguese speakers for a spot of diversity, then why not let in Brazil. Their women are beautiful, their dialect is sexier, and they have a space program of their own. They also know how not to treat fish so it tastes like salty carpet.

This is the Euro family and the Euro brats are all after more pocket money to bail them out of the mess they’re in. They look to France to lean their way, as they have some of the largest public debts within the larger EU clan. The public deficit of Greece, this year, is expected to reach 100% of GDP. Italy, on the other hand, is happily looking forward to public deficit of 110% of GDP by next year and intends to have a party to celebrate! Italy does nothing by halves.

After the collapse of the Spanish economy, the national sport will now only use bears...

Mama Euro, played by the very able actress Angela Merkel, has no intention of throwing the family fortune (she’s the moneyed one in the marriage) on a increasingly ineffective husband and even more useless brood. So she refuses to hold big family meetings anymore, because she finds she comes under too much pressure from hubby and kids and ends up looking like shit. That is why Merkel has resisted Sarkozy (Papa Euro)’s calls for a Euro-Zone summit where she will probably be shamed into opening her purse.

http://www.iht.com/articles/2009/03/04/europe/letter.php

Mama always lost at SCISSORS, PAPER, STONE, but surely there are better ways to takes decisions on the family budget

Mama Europe has some allies, like the Netherlands, Sweden, Denmark, Finland, Luxembourg, the Czech Republic and Poland. They are all very ascetic rational types with very low debt. But sadly they cannot come to her immediate help as, with the exception of the Dutch, Finns and Luxembourg, they are not Euro family members. Yet another reason why Mama Europe would rather not have Euro family meetings too often.

The EU family has good candidates to replace some of the EURO junkie kids. The Czechs won't be asking for too many cheques, unlike greasy Greece

http://www.economist.com/opinion/displaystory.cfm?story_id=13184594

There was a time when the Euro family was the star of the EU clan, and in fact, there was talk of the EURO famille moving out of the ancestral lands into better accommodation leaving the non-EURO bunch behind. But now that the EURO family is in trouble, the whole EU grand plan looks like the world seen through a very bad hangover after a night of serious excess.

May be we should ask the question of whether we should consider letting Morocco or Egypt into the EU. If the answer seems a complete and utter “NO WAY, JOSE”, as it rightly should be, then may be we should be asking what Greece and Portugal are doing inside the EU in the first place.

While an excellent appetizer, the taramasalata alone cannot replace prudent fiscal policies, let alone a functioning economy, come to think of it!

Greece and Portugal don’t have to leave the EU. After all the Greeks supposedly gave us culture, although the only culture in Greece to speak of at the moment is their delicious yogurt. And Portugal, well, I don’t know what exactly what it is, or does for that matter. But Papa and Mama Euro may get on a lot better if some of their hopeless brood are kicked out to fend for themselves. There are better kids out there to adopt, like Poland and the Czecks. Yes, that would mean Greece and Portugal defaulting on their Euro debt obligations and being considered pariahs for  a while, but at least the whole family won’t be declared bankrupt.

© Sameh El-Shahat 2009

The Eagles, in “Hotel California”, made a whole song and dance about how you can “Check out, but you can never leave” some nightmarish hotel. We beg to differ. You can Czech out AND leave the EU, an equally freaky place, in fact we can all do so and end this whole EU charade, if the Czechs and other New Europeans have their way. The current crisis helps. Read on…

In 1618, a bunch of Protestant grandees gathered in Prague Castle to try two representatives of Holy Roman Emperor. At the time, Bohemia (Czech Republic of today, more or less) was part of the sprawling Hapsburg Empire. The Protestants were worried that the Catholic Emperor was going to take away their religious freedom rights. It was the little guys standing up to the big bully of a super-state under which they had been enduring one ridiculous demand after another. If this sounds familiar, read on. The Imperial representatives were found guilty and summarily thrown out of the windows of the Bohemian Chancellery. This famous event became known as the Defenestration of Prague and led to the Thirty Years war. This eventually led to the 1648 Treaty of Westphalia which triggered a long series of events that led, eventually, to the breakdown of the Holy Roman Empire, an early and rather more primitive form of the European Union. The idea of a super-state would enter a steady decline until the Treaty of Rome of 1957 which would revive it give birth, eventually, to the European Union.

It is standard EU policy that EU officials never meet alone with Czech officials in rooms with windows that can be opened from either the inside or the outside. The 1618 events, above, may well be the cause, but this has never been confirmed.

Fast forward to January 2009. When President Vaclav Klaus ended up being in charge of the EU rotating presidency on 1^st January 2009, all he could do was growl. In doing so, he was actually following an age old tradition of big unwieldy empires coming to a sticky end in Prague due to its unruly (and Sarkozy would even call them ungrateful) denizens.

It's Central Europe, but it's becoming Central to the End of Europe, according the Brussels Bible

You see, Vaclav hates the EU. And rightly so. It is a huge, doctrinaire, undemocratic, demagogic, and totally superannuated organisation that will stifle all free expression. That didn’t stop the Czechs begging, crawling and promising to do triple somersaults backward to be allowed into it. But then, after being for so long in the deep embrace of the Big Soviet collective, they saw in the EU a saviour. They would have joined the African Union if it meant it got rid of their Soviet past in one fell swoop. In effect, their reasons for coming into the EU were self-serving and selfish. Which was very honest of them, and the best part of it all, is that they never stopped being honest. The Czechs never deluded themselves with the EU’s Utopian carrot. They see it for what it is. Their choice of an art piece commissioned to celebrate their arrival to the top job said it all. It was an installation that represented most of the EU members with 3D representations of an honest caricature nature.

This for example below was what they thought of Bulgaria:

I thought these squat toilets were a French idea...In any case, impressive plumbing, I thought it was a gas pipeline

That was Bulgaria as a toilet, in case you were wondering. Other countries didn’t fare much better.

http://www.telegraph.co.uk/news/worldnews/europe/eu/4250933/Czech-EU-presidency-apologises-for-artwork.html

Now, they are in charge of it, they are making sure they are not cooperating except to do the minimum to get by. The financial crisis has forced them to adopt a more involved attitude, but the Czechs’ heart is not really in it. If the Czechs manage to infect more EU countries with their scepticism, it is safe to say that it would be CZECH MATE for the EU! Hurrah!

Here are a few reasons why central and eastern Europe (oh, and the Baltics too) can bring down the entire sorry excuse for a super state that is the EU

·         Economically

They large part of them rushed their entry procedures, often fudging their EU entrance requirements to satisfy zealous Brussels demagogues intending on placing everything west of the Urals in the EU before noon, so they can go have a long subsidised lunch. Attracted by the prospect of big budgets for all sorts of development programs, a whole bunch of deficit-creating flaws were papered over in the name of European harmony. Expecting a happy ending (because the EU always goes one way, towards more integration, except for the odd hiccup, irrespective of the people’s view), these countries expected their economies and currencies to converge happily with the Euro area. So countries like Hungary started offering mortgages in Euros and Swiss Francs which had lower rates. Then came the financial crisis and the local currencies all plummeted. Suddenly all these foreign loans looked so expensive to service that some central European countries had to be saved by the IMF from bankruptcy.
These clever East and Central Europeans had managed to convince Austrian, French, German and Italian banks to provide them with a ready-made banking sector. Now if their economies go down, they take down West European economies down with them by wiping out their banks…

·         Politically

Central and Eastern European countries have always been part of enforced political clubs like the Soviet Union and the Hapsburg Empire. Their attraction to the EU has always been the better economics and quality of life, not the political integration as only they know only too well how it all ends in tears. It’s like a person who has a history of repeated bad marriages, getting divorced and now just wanting to enjoy the going out and sleeping around without the marriage.

Old Europe fell asleep, dejected. New Europa was only offering him wild sex, several times a night, but no chance of ever accepting his marriage proposals...And to think he had thought Britannia a cold bitch...

Continuing with the analogy, the relationship between East Europe (or New Europe) and Western Europe (or Old Europe) is one of clashing ambitions. Old Europe has been single for far too long and wants to settle down and have kids to compete with China and the US, and New Europe has just escaped from a long dysfunctional and often violent marriage to a certain Mr Boris Soviet and now just wants to be courted by us, have us buy her  flowers and chocolates, even sleep with us, but forget marriage.

·         Culturally

My experience of Central and East European people is that they are a no-nonsense hardworking people with a strong family ethic.

They are often portrayed as racists. That is no more true than Western Europe being racist. They are not politically correct, that is far truer and why should they be? Political correctness towards other races as we exemplify in the West, is really nothing more than a form of condescension and hypocrisy based on some vague sentiment of colonial guilt, often of the synthetic variety. In so far as I know, the Slovaks, Czechs and the Poles never had African Empires.

Nobody would ever sue Mr Topolanek or his daughter in their home town for racial incitement. So the EU Courts took up the case and sent them to the Hague for not insulting a sinple person in Prague. Rather, this being the EU, they are now serving time in prison for a upsetting a couple of white people in the UK who felt "emotionally distressed at their actions". Non PC World was fined for selling the most popular Patrice Lumumba punchbag in its history.

If anything, they had always been forced into other people’s empires. First, it was the Hapsburgs, under the Austrian yoke, then after a short breather, under the Soviets. Then, in an enforced experiment of camaraderie with the unwashed and the oppressed, they were forced to feel spontaneous solidarity with such places as the Congo, Mozambique and Angola, hence the unusually high preponderance of universities called Patrice Lumumba.

But when the Soviets left, so also did enforced marriages with other races. Not for the central and East Europeans our often guilt-based multicultural sensibilities. In any case, each one of these countries had at least one minority problem of its own, before worrying about more exotic minorities whom they had to love, or at least pretend to love, when the EU knocked on their doors with a whole bunch of demands.

But you can just imagine the Poles and the Czechs and the Hungarians laughing all the way to the bank when they were told by, by of all people the French and, wait for it, the Austrians, their old slave masters, that they had to be kinder to such people as gypsies, blacks and Arabs (that may include me, when I’m not feeling English, British, Egyptian or Pharaonic), Indians, Inuits and Bengalis in order to get their hands on billions in EU cohesion funds. The Soviets had forced them to fraternise with far worse and even forced them to pay for it.

Let’s now go back to the events of Defenestration of Prague of 1618. The two Imperial representatives were unceremoniously thrown out of the window and landed in a pile of manure. With a little bit of luck, Prague can manage to get another super state in deep shit.

Long live the Czech Republic!

http://www.economist.com/world/europe/displaystory.cfm?story_id=12724780

http://blogs.telegraph.co.uk/bruno_waterfield/blog/2009/01/14/no_to_an_eu_ban_on_czech_art_exhibit

http://www.economist.com/world/europe/displaystory.cfm?story_id=13209335

© Sameh El-Shahat 2009

After the UBS debacle, The Smurfs took advantage of the vacuum in the market, and entered the market with their own brand of private banking. Private will soon mean "UNDER YOUR BED"

As an ex-UBS man, I am distraught. These are dark days for UBS and the Swiss banking sector in general. First, we had UBS’s dalliance with the US market end in utter betrayal. UBS, an essentially conservative private bank at heart, wanted a piece of the global investment banking action. They ploughed money into building a huge US network and got into all kinds or risky endeavours. The only thing they forgot to pack before they set off on their endeavour, was a modicum of good risk management. It is a well known fact that the Swiss are an admirable nation whose sense of probity, austerity and realism is peerless. They are however not known for taking risks, hence their excelling in private banking. It therefore stood to reason that a risk-taking swashbuckling UBS US investment banking operation would be akin to a thin crust Italian  pizza put together by a sauerkraut chef from Leipzig, namely without soul.

For UBS, falling back on its private banking expertise and experience would make more sense. Then, to add insult to injury, or in Swiss terms, to rub salt into their chocolate, the US government takes action against UBS over the fact that the latter allegedly helped US citizens evade taxes in the US.

http://www.iht.com/articles/2009/02/20/business/ubs.php

Reading some of the details, I am really at a loss as to what some of my ex-colleagues (I was at UBS, but not private banking, as I was considered neither obsequious nor sycophantic enough) were thinking when they engaged in some of the acts they are accused of. Apparently, Swiss private bankers created a code to deal with their client in their communications so as not to leave incriminating evidence should the US authorities get hold of the documents. So “orange” stood for the Euro currency, while “blue” stood for sterling. A “nut” apparently stood for USD250,000. Now if I remember right, you have to have many multiples of that amount to be accepted by UBS private banking as a client. This would render both the clients and their bankers technically “nuts”. In fact it makes me wonder whether the Swiss were ever good at secrecy, if these laughable attempts at code and cypher were their idea of subterfuge. The secret services of Smurfs (an equally small nation) would have done a far better job.

Bond never trusted the Swiss bankers with his money, opting to leave hazelnuts and other dried fruits in his Swiss deposit boxes as decoys...

http://www.ft.com/cms/s/0/df3eeb9c-feb7-11dd-b19a-000077b07658.html

UBS has agreed to settle with the US government, in return for paying a USD870m fine and surrendering account details for 250 US citizens. The government wants the details of 52,000 US citizens. UBS says it will fight these ludicrous demands. However, UBS and the Swiss banking secrecy system that has made Switzerland what it is were effectively dead from the moment UBS agreed to surrender the details of the first client.

http://www.businessweek.com/ap/financialnews/D96FIN4O0.htm

The only thing that set Switzerland apart was their code of secrecy in banking. Without it, Switzerland relative advantages become chocolate-making and watch-making. A Swiss Account had become the byword for wealth and exclusivity. Now it will just mean that you are a tax dodger. Swiss chocolate still has a great cachet, and the Swiss would do well to start switching from being private bankers, to being private chocolatiers. You can have your own personal chocolate maker, confectioning the most delectable sweet mouthfuls of that brown paste for your private pleasure. I am not sure how that this will help the Swiss economy, though.

Without Swiss banking, the Swiss can go back to being successful mercenaries. They were the best in the world and that is why the Pope will only have Swiss Guards protecting him (unless they are all his private bankers). Switzerland will have to revoke its neutral status and get its hands dirty in all the world’s conflicts. They are already the most military-trained people in Europe, if not in the world, per capita. There’s always money in guns.

Realistically speaking, without secret private banking, Switzerland will have no reason to exist as an independent nation with national values worth preserving. Chocolate and cuckoo-clocks can no longer justify a serious European nation unless you’re Latvia, in which case you’d be lucky to have chocolate to stave off economic meltdown. So either Switzerland joins Africa, where it will become the most powerful nation there at a stroke with such amazing assets and where wars abound, or it can join the EU. When you’ve become an economic and political basket case, the EU means being in good company and also safety in numbers for the mediocre. Which brings me back to UBS. On my first day there, I was reminded that the acronym UBS stand for U’ve Been Screwed. How sadly true…

© Sameh El-Shahat 2009