Top of the Agenda: ECB Makes Concession Over Greek Holdings
The European Central Bank, one of Greece's largest creditors, agreed to exchange Greek government bonds it purchased on the secondary market last year at a price below face value (WSJ). The move follows increasing pressure by the International Monetary Fund on Greece's official creditors to alleviate some of Greece's debt burden. The ECB's decision could reduce Greece's debt by around $14 billion.
However, the concession is contingent upon the Greek government ratifying fresh austerity measures--a condition for a second $170 billion EU-IMF bailout--and agreeing to a debt write-down agreement with private creditors. Greek workers protested against new spending cuts and tax increases on Tuesday as Greek officials struggled to reach an agreement over the new austerity measures.
"It is time for politicians to admit that their carrot and stick strategy has failed. The idea that the country can be freed from its debt quagmire though austerity programs and aid pledges tied to conditions just isn't going to work. It won't even work if private creditors forgive part of the country's debt," writes Der Spiegel's Stefan Kaiser.
"It would be dangerous for the eurozone's highly indebted countries to abandon austerity now. Any country that enters a period of heightened risk aversion with a large debt overhang faces only bad choices. Implementing credible austerity plans constitutes the lesser evil, even if this aggravates the cyclical downturn in the short run," writes Daniel Gros at Project Syndicate.
"Before the ink of the Maastricht Treaty was dry, it was criticized for creating an incomplete monetary and fiscal construction. Maastricht provided for a single monetary policy but left economic, fiscal and social policies to national governments. The European Central Bank was put in charge of monetary policy, but the Treaty didn't create a fiscal counterpart," writes Viviane Reding in the Wall Street Journal.
South Korea, Saudi Arabia to Strengthen Defense Ties
South Korean President Lee Myung-bak and Saudi Defense Minister Salman bin Abdulaziz Al Saud agreed to develop a defense cooperation pact, which could include provisions for South Korea to export weapons to Saudi Arabia (Yonhap).
MYANMAR: U.S. CIA Director David H. Petraeus (NYT) indicated that he could visit Myanmar this year, in another sign of the United States' willingness to acknowledge recent democratic reforms by Myanmar's military-backed civilian government.
Myanmar's sudden transition from repressive pariah to potential democracy should be viewed through the lens of a military alarmed by revolts and by the country's increasingly shaky economic condition, says CFR's Joshua Kurlantzick in this Expert Brief.
SOUTH AND CENTRAL ASIA
Ousted Maldives Leader Criticizes 'Coup'
Former Maldivian president Mohamed Nasheed, who resigned Tuesday after police sided with anti-government protesters, said he was forced from office in a "bloodless coup" (al-Jazeera). Nasheed's former foreign minister accused Islamists of being behind the president's ouster.
PAKISTAN: Prime Minister Yousuf Raza Gilani filed an appeal with the Supreme Court (Dawn) over contempt of court charges that accuse the prime minister of failing to reopen a corruption investigation targeting President Asif Ali Zardari. The court said it will hear the appeal on Thursday.
U.S. to Cut Iraq Embassy Staff
The U.S. State Department is set to cut by half its diplomatic mission in Iraq (NYT)--the $750 million Baghdad embassy currently employs 16,000 people--despite a planned buildup following the withdrawal of U.S. troops at the end of last year.
SYRIA: The army continued to shell the city of Homs (al-Jazeera) with rockets and mortar rounds today, activists said, a day after Russian Foreign Minister Sergei Lavrov insisted Syrian President Bashar al-Assad was "fully committed" to ending the regime's crackdown against anti-government forces.
Amid increasing fears of a civil war in Syria following the failure of the UN Security Council resolution, analysts remain divided over the question of intervention and how best to address the crisis, explains this CFR Analysis Brief.
SOMALIA: As Somali pirates (Reuters) have pushed farther out into the Indian Ocean, preventive costs for the global economy--mainly for the shipping industry--have risen to around $7 billion per year, said a new report by the U.S.-based One Earth Foundation.
Italy Calls for Growth Policy
Italian Prime Minister Mario Monti proposed a strategy to open up the national industries of eurozone member states in order to spur competition and generate growth (WSJ), in conjunction with the strict austerity measures Italy and other countries are implementing.