Winnipeg Free Press

Winnipeg Free Press (Newspaper) - June 09, 2012, Winnipeg, Manitoba C M Y K PAGE A16 EDITORIALS WINNIPEG FREE PRESS, SATURDAY, JUNE 9, 2012 Freedom of Trade Liberty of Religion Equality of Civil Rights A 16 COMMENT EDITOR: Gerald Flood 697- 7269 gerald. flood@ freepress. mb. ca winnipegfreepress. com EDITORIAL T HERE was a time when an act of war was as apparent as a bombed- out building, or the streams of armoured vehicles rolling across the border. In the rapidly emerging world of cyber- weapons, however, it is less clear what might constitute an act of aggression that requires an armed response, assuming the origin of such an attack could even be proven. The U. S. Defence Department has been deliberately vague about what kind of computer attack might constitute an act of war, saying only it would have to cross a certain undefined threshold before it would retaliate, either with old- fashioned guns and bombs, or with their new arsenal of digital weapons. The United States and Israel are believed to have been behind the cyber- attack that disrupted Iran's nuclear development two years ago, as well as the deployment of a super- worm that spied on Mideast countries for several years. No one was hurt in those intrusions, but there is a real potential to inflict cataclysmic damage to economies and human life. The personal and professional lives of most people today are completely dependant on the Internet, but so also are the complicated networks of power grids, water services and corporate activities, from banking and farming to operating a newspaper. It's an open question whether a devastating cyber- attack that affects mainly civilians would be considered a war crime, as opposed to an act of war recognized under international law. In 2007, Canadian online sales were estimated at $ 63 billion and nearly 90 per cent of Canadian firms relied on the Internet for at least some aspect of their business. A massive attack that interrupted or destroyed critical services would cause a temporary or complete collapse of computerdependent societies, with long- term consequences that are hard to imagine. The digital arms race is not the first military competition to threaten humanity. The growth of nuclear weapons during the Cold War also carried with it warnings of Armageddon and mutually assure destruction, a risk that is still with us, despite a string of non- proliferation treaties. The difference between the nuclear threat and the new weapons of mass destruction was that the development of nuclear weapons required significant infrastructure, technology and raw materials, putting it out of the reach of many countries. Nuclear plants were also relatively easy to destroy, as both Syria and Iraq discovered when Israel bombed their facilities. Iran has moved its plants underground, but not out of reach of cyber- invasions. The question today is how, or even if, the weaponization of cyberspace can be controlled to increase collective security. A significant amount of computer attacks involves espionage against both corporate and state secrets. Criminals have also discovered a motherlode of opportunities in identity theft, fraud and hacking into online bank accounts. The real threats, however, are those that could turn out the lights and turn off the taps, while closing banks and stock exchanges. The UN Charter says states have a right to go to war if they come under " armed attack," a definition that is now clearly out of date. It is unrealistic to expect states to halt the development of cyber- weapons, but new laws of war are needed to determine when their use might be illegal and when they might constitute a war crime or even a crime against humanity. Of course, laws are not a guarantee of compliance, but at least they provide a method for accountability, assuming, once again, that the origin of any attack can always be determined. Since technology moves inevitably forward, nation states also need to do more to increase their own defences, while preparing for the worst. The United Nations has declared access to the Internet a human right, but in the wrong hands, it can also be a gun pointed at all our heads. S INCE the massacre of more than 100 people in Houla on May 25, talk of setting up buffer zones on Syria's border has grown louder in western government circles. Reports on June 6 of a similar slaughter of at least 78 villagers near Hama have turned up the volume still more. Hitherto, all western governments agreed direct military intervention, which would almost certainly have to accompany the creation of those zones, was out of the question. That is changing. Military planners are now pondering in detail the prerequisites for securing a buffer zone. Officials in Britain, France and the United States have all said military intervention " cannot be ruled out" in due course. Though almost no one thinks it will happen soon, calls for intervention are growing, especially in Washington. Two main arguments against intervention still prevail. The first is it would require the endorsement of the United Nations Security Council, which Russia and China still show no sign of giving. The second is that Syria, whose 23 million people far exceed Libya's seven million, would be a hard nut to crack militarily - and the ensuing bloodshed would be on a far bigger scale than now. On the first score, western governments could conceivably in the end bypass the Security Council, as they did in 1999, when NATO set about bombing Serbia under Slobodan Milosevic to the annoyance of Russia. But it is barely conceivable they could undertake similar attacks against Syria without the close co- operation and public endorsement of both Turkey and the Arab League. Once those conditions are met, however, a buffer zone could be secured quite fast. " People exaggerate and overestimate the power of the Syrian army," says Riad Kahwaji, a military analyst based in Dubai. " Syria has a sophisticated anti- aircraft system, but most of its equipment is from the Soviet era and could easily be out- powered." Any western- cum- Turkish decision to set up a buffer zone would require air raids on Syrian defences. There are reports of flagging morale in the 300,000- strong Syrian army. Many conscripts have absconded. Rebel attacks by the ragtag Free Syrian Army have been increasing, and in a recent ambush more than 100 Syrian soldiers are said to have been killed. Most soldiers are Sunnis, less loyal to the ruling Assad regime than is the Alawite minority to which the Assads belong. The army's elite squads - led by Assad's hawkish brother Maher, now a cult figure among his men - are still fiercely loyal. The shabiha, drawn mainly from the Alawite community, are carrying out many of the atrocities. " Assad is ultimately responsible for creating the conditions for these paramilitaries to operate," says Emile Hokayem, another analyst. " But no one thinks he picks up the phone to order every attack. These groups may act on their own initiative too." " T O the lifeboats!" That is the stark message bond markets are sending about the global economy. Investors are rushing to buy sovereign bonds in America, Germany and a dwindling number of other " safe" economies. When people are prepared to pay the German government for the privilege of holding its twoyear paper, and are willing to lend America's government funds for a decade for a nominal yield of less than 1.5 per cent, they either expect years of stagnation and deflation or are terrified of imminent disaster. Whichever it is, something is wrong with the world economy. That something is a combination of faltering growth and a rising risk of financial catastrophe. Economies are weakening across the globe. The recessions in the eurozone's periphery are deepening. Three consecutive months of feeble jobs figures suggest America's recovery may be in trouble, and the biggest emerging markets seem to have hit a wall: Brazil's GDP is growing more slowly than Japan's, India is a mess and even China's slowdown is intensifying. A global recovery that falters so soon after the previous recession points toward widespread Japan- style stagnation. That looks like a good outcome, however, compared to the growing danger of a fracturing of the euro. The European Union, the world's biggest economic area, could plunge into a spiral of bank busts, defaults and depression, a financial calamity to dwarf the mayhem unleashed by the bankruptcy of Lehman Brothers in 2008. The possibility of a Greek exit from the euro after its election on June 17, the deterioration of Spain's banking sector and the rapid disintegration of Europe's cross- border capital flows have all increased this danger. And this time it will be harder to counter. In 2008, central bankers and politicians worked together to prevent a depression. Today the politicians are all squabbling. Even though the technocrats at the central banks could - and should - do more, they have less ammunition at their disposal. Nobody wants to test these various disaster scenarios. It is now up to Europe's politicians to deal finally and firmly with the euro. If they come up with a credible solution, it does not guarantee a smooth ride for the world economy - but not coming up with a solution guarantees an economic tragedy. To an astonishing degree, the fate of the world economy depends on Chancellor Angela Merkel of Germany. In one way it seems unfair to pick on Merkel. Politicians everywhere are failing to act, from Delhi, where reform has stalled, to Washington, where partisan paralysis threatens a lethal combination of tax increases and spending cuts at the end of the year. Within Europe, as Germans never cease to point out, investors are not worried about Merkel's prudent government, whose predecessor restructured the economy painfully 10 years ago. The problem is a loss of confidence in worse- run, unreformed countries. Do not get too sympathetic, though. To begin with, past virtue counts for little at the moment: If the euro collapses, Germany will suffer hugely. The downgrading of some of its banks this week was a portent of that. Moreover, the undoubted mistakes in Greece, Ireland, Italy, Portugal, Spain and the other debtor countries have been compounded in the past three years by errors in Europe's creditor countries. The overwhelming focus on austerity, the succession of half- baked rescue plans, the refusal to lay out a clear path for the fiscal and banking integration that is needed for the single currency to survive - these too are reasons why the euro is so close to catastrophe. And, since Germany has largely determined this response, most of the blame belongs in Berlin. Outside Germany, a consensus has developed on what Merkel must do to preserve the single currency. It includes shifting from austerity to a far greater focus on economic growth and complementing the single currency with a banking union with euro- wide deposit insurance, bank oversight and joint means for the recapitalization or resolution of failing banks. Also on the laundry list: to embrace a limited form of debt mutualization to create a joint safe asset and allow peripheral economies the room gradually to reduce their debt burdens. This is the refrain from Washington, Beijing, London and indeed most of the capitals of the eurozone. Why hasn't the continent's canniest politician sprung into action? Her critics cite timidity, and they are right on one count. Merkel still has never really explained to the German people they face a choice between the repugnant idea of bailing out their undeserving peers and the ruinous reality of the possible end of the euro. One reason why so many Germans oppose debt mutualization is because they wrongly imagine the euro could survive without it. Yet Merkel also has a braver twin- headed strategy. She believes, first, her demands for austerity and her refusal to bail out her peers are the only ways to bring reform in Europe, and second that, if disaster really strikes, Germany could act quickly to save the day. The first gamble can certainly claim some successes, notably the removal of Prime Minister Silvio Berlusconi in Italy and the passage, across southern Europe, of reforms that would recently have seemed unthinkable. The costs of this strategy are rising fast, however. The recessions spawned by excessive austerity are rendering it self- defeating. Across much of Europe, debt burdens are rising along with the appeal of political extremes. The uncertainty caused by the muddle- through approach is draining investors' confidence and increasing the risk of a euro disaster. As for Germany's idea it could all be saved at the last minute, by, for instance, the European Central Bank flooding a country with liquidity, that looks risky. Were Spain to see a full- scale bank run, even an emboldened Merkel might not be able to stop it. If Greece falls out, yes, the German public would be more convinced sinners would be punished. However, a " Grexit" would cause carnage in Greece and contagion around Europe. Throughout this crisis, Merkel has refused to come up with a plan bold enough to stun the markets into submission, in the way America's TARP program did. In short, even if her strategy has paid some dividends, its cost has been ruinous and it has run its course. She needs to lay out a clear plan for the single currency, at the latest by the European summit on June 28, earlier if Greece's election spreads panic. It must be specific enough to dispel all doubt about Germany's commitment to saving the euro, and it must include immediate down payments on deeper integration, such as a pledge to use joint funds to recapitalize Spanish banks. This would risk losing her support at home. With these risks, however, comes the possibility of rapid reward. Once Germany's commitment to greater integration is clear, the ECB would have the room to act more robustly, both to buy many more sovereign bonds and to provide a bigger backstop for banks. With the fear of calamity diminished, a vicious cycle would become virtuous as investors' confidence recovered. The world economy would still have to grapple with ineptitude elsewhere and with weak growth, but it would have taken a giant step back from disaster. Mrs. Merkel, it's up to you. Military intervention in Syria gaining momentum The Economist Something wrong in world economy The Economist Cyber- war tests our assumptions JENS MEYER / THE ASSOCIATED PRESS ARCHIVES German Chancellor Angela Merkel. A_ 16_ Jun- 09- 12_ FP_ 01. indd A16 6/ 8/ 12 11: 29: 44 PM ;