- The Washington Times - Wednesday, February 6, 2002

NATO a case of rewarding failure?

Helle Dale acknowledges that in today's war on terrorism, NATO has been sidelined by Washington ("Yesterday's alliance?" Op-Ed, Jan. 30). She has her doubts about NATO's revitalization, reckoning that the Europeans are not willing to pull their weight, but even if they were, have the right lessons been drawn from NATO's Kosovo campaign?

The bombing of Belgrade, far from being a success, made matters worse. It escalated what had been an admittedly nasty but little insurrectionary war into one that triggered the mass exodus of Kosovo's Albanians and, worse still, led to further humanitarian disasters.

After NATO's occupation of Kosovo, the Kosovo Liberation Army (KLA) expelled most of the province's Serbs, Romany and other non-Albanians. Then the supposedly "disarmed" KLA used NATO-occupied and United Nations-administered Kosovo as a base to make war on neighboring Macedonia. Far from rushing to confront the KLA insurrectionists, as was its legal obligation, NATO responded with an effort for appeasement. Skopje was duly pressured to make concessions. The victims were further humiliated.

The lax stewardship of Kosovo by NATO (and a compliant United Nations) constituted, from Macedonia's point of view, a threat to international peace. It warranted a condemnatory Security Council resolution. The harsh truth is that the world's mightiest military alliance, dogged by its body-bag complex, rendered itself impotent to confront the KLA. Nor, for that matter, did NATO want to take away the blank check it foolishly bequeathed to the KLA before the Rambouillet 'diktat.' Better, apparently, to compound error than to acknowledge one's fallibility.

The latest installment in this sorry saga is the sudden and unexplained resignation at Christmastime of Hans Haekkerp, the U.N. chief in Kosovo. He was, so rumor has it, made to feel "uncomfortable" by certain sections of Kosovar society.


YUGO KOVACH

Twickenham, United Kingdom

Czech government broadcasts wrong message

Ambassador Martin Palous and Vladimir Kabes, in their Feb. 1 letters to the editor, surely protest too much ("Radio Free Europe, Radio Liberty not to be evicted from Czech Republic"). In my Jan. 25 Op-ed, I commented on the Czech government's reported decision to evict America's Radio Free Europe and Radio Liberty from their broadcast center in Prague, for fear that broadcasts to Afghanistan might trigger terrorist attacks in Prague itself ("A victory for terrorism"). I suggested that such a move by the Prague government would send the wrong signal to the terrorists. Ambassador Palous says that I should have checked the facts, but the facts he gives are no different from those I used. He says there is no intent to move the radios out of the Czech Republic entirely, but that, of course, is not the point. The debate is over whether they should be forced to move out of the broadcast center.

The broader issue, which he does not discuss, is the dangerous path that European governments will be taking if they start evacuating buildings and institutions now, out of fear of possible terrorist attacks some time in the future. As I suggested, such fear-generated moves play right into the hands of Osama bin Laden and his accomplices. If Radio Free Europe and Radio Liberty are evacuated, will the American Embassy have to go next? Where would it stop? With all due respect to the desire to prevent possible damage to Prague's monuments, I believe there is a more important issue here that should be of as much concern to the United States and its allies as it should be to the Czech government.


JAN NOWAK

Annandale

Avoiding extreme prescriptions for Argentina

Extremism in defense of virtue is no vice, but international financial issues are usually too delicate to accommodate extreme approaches.

Some of Ian Vasquez's prescriptions for Argentina must be considered extremist, especially his suggestion that the International Monetary Fund (IMF) write down its exposure in Argentina "as it is now urging private creditors to do" ("Debt reduction for Argentina?" Commentary, Jan. 28).

First, private creditors do not need to be urged to write down their claims. They have no other choice, and they know it.

Second, it would be nice for some benevolent authority to decree a haircut for all creditors that, with the benefit of hindsight, engaged in imprudent lending to Argentina. Including the IMF, the World Bank and the Inter-American Development Bank in such an edict would mean that, other things equal, private creditors (negotiating debt relief in the London Club or an equivalent forum) and bilateral agencies (negotiating in the Paris Club) would not have to suffer as deep a haircut to produce the same total amount of relief. Spreading the pain could contribute to a speedier recovery.

There are good reasons, however, for treating the IMF as "a preferred creditor," which means repaying IMF loans in full in default situations. In corporate bankruptcies, for example, new lenders provide "debtor in possession" financing that is senior to old debt and is close to being risk-free. This financing enables the failed company to avoid a meltdown while it renegotiates a write-down of its old debt. No new lender would provide this emergency financing without getting senior status. Absent the new money, more employees would be laid off sooner and the secondary effects on the economy would be worse.

The IMF exists to perform a similar function and can only do so with the assurance that it will not be exposed to haircuts. Advocating IMF write-offs is an extreme position because it implies a fundamental change in the IMF's character. Either the IMF would end up never lending to any country or, to avoid running out of money, it would have to be recapitalized by its shareholders after accepting a loss.

Don't mistake these comments as an argument that the IMF has done everything right and will continue to do so. The point about radical solutions applies equally to the IMF. Specifically, the recent IMF proposal to create a "Sovereign Debt Restructuring Mechanism" (SDRM) could upset the delicate balance between debtor and creditor interests that is embedded in today's complex international financial system.

In theory, the SDRM would function like the "benevolent authority" mentioned earlier, but there are reasons to doubt that such a mechanism would contribute to greater stability or better private capital flows. A more modest and, therefore, less risky step would be to create special "windows" in the World Bank and the regional development banks for loans that could be rescheduled or reduced along with other Paris Club debts in cases where the country's recovery path has not met expectations (sometimes for reasons beyond its control).

Returning to Argentina, Mr. Vasquez is certainly correct in placing the blame for the Argentina crisis at the doorstep of the Argentine government and not the IMF, but neither President Eduardo Duhalde nor IMF Managing Director Horst Kohler has a set of easy decisions to make at this stage.

Crisis management is an art, not a science. Every possible choice has pros and cons, and no one can be certain about the result of any action. When Argentina and the IMF reach agreement on a new program to be supported with new IMF lending, outsiders should hope for the best and give the program a chance to work. They would wish for the same positive attitude if they were making the hard choices.


LEX RIEFFEL

Adjunct professor

Nitze School of Advanced International Relations

Washington

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