IN JUNE 1963 John Kennedy brought hope to a divided city at the frontline of the cold war with the words “Ich bin ein Berliner”. When Barack Obama visits Berlin next week, half a century later, he will find it a very different place. United, strong and rich, Germany is Europe’s hegemonic power. France, the other half of the partnership at the European Union’s core, is weak and badly led; Britain is distracted by a debate about its EU membership. Nothing can happen in the EU without the active support of Germany’s chancellor, Angela Merkel.Mrs Merkel is Europe’s most impressive politician. Many times, during the past five difficult years, she has used her power for good. But she is a naturally cautious woman who faces a potentially tight election in September. And, as our special report makes clear, her reluctance to lead Europe is widely shared by her compatriots.As a result, Europe is drifting towards disaster. Although markets are calmer than last year, euro-zone GDP is shrinking, unemployment is over 12%,...

AFRICAN economies are rising steadily, but in the Democratic Republic of Congo life for many is as bad as ever. Armed men rape and plunder with impunity. Rebel groups terrorise vast stretches of land rich in minerals and agricultural potential. Millions have died as a result. And for years the outside world has done little more than shrug. Its main effort—a 14-year-old UN peacekeeping mission—has failed to end “Africa’s world war”, which started as an ethnic conflict sparked by the genocide next door in Rwanda before descending into murderous anarchy farther afield.Now things are changing. The Rwandan government backed Congolese rebels until recently but, shamed by their cruelty and by international outrage, it has abandoned them. That presents an opportunity too good to waste, so the UN Security Council is trying a new tack (see article), deploying 3,000 troops to fight at least some of the rebels. Soldiers from South Africa, Tanzania and Malawi wearing UN insignia will take on the irregulars who sow mayhem in Congo’s...

JERRY BROWN, the veteran governor of California, is basking in glory. The golden state, once described as America’s Greece because of its fiscal woes, is reporting a $1.2 billion budget surplus (see article). But the euphoria is premature. California still has a mammoth long-term pension gap. If it used the same pension accounting standards as private companies must, its total debts would be a terrifying $1 trillion.California is far from alone. Few fiscal problems are as grave, or as little understood, as underfunded state and municipal pensions. The funding gap for all state schemes is estimated at $4 trillion—25% of GDP.Politicians long ago realised that if you offer public-sector workers bigger retirement benefits, they vote for you today and the bill does not arrive for years. Some states have allowed staff to “spike” their final-salary pensions by racking up lots of overtime in their last year on the job, vastly increasing their retirement payouts. Some retire with packages worth millions. The states...

EARLIER this year Shinzo Abe, Japan’s prime minister, unveiled the first two “arrows” of his three-point economic plan—monetary easing and fiscal stimulus—and hinted at structural reforms to come. Japan’s stockmarket soared by 80% in six months. Mr Abe’s approval rating soared, too. Then, after months of euphoria, at the end of May, bond-market jitters about the radical easing plans helped to spark a sell-off in shares. Now Mr Abe’s eagerly awaited “third arrow” of structural reforms has fallen well short of the rings, let alone the bull’s eye. Indeed, it is so wide of the mark that one is left wondering if Abenomics has failed before it even properly began.The disappointment is all the greater because Mr Abe’s first two efforts were so successful. A weaker yen has boosted exports. The first signs of inflation are appearing in Tokyo—a good thing, given the years of stagnation. The economy grew at an annualised rate of 4.1% in the first quarter as consumers regained confidence. In April Mr Abe signed up to talks on the Trans-Pacific Partnership (TPP), a regional free-trade area, committing Japan to opening up uncompetitive industries. He also promised to overhaul the...

BROKEN heads, tear gas, water-cannon: it must be Cairo, Tripoli or some other capital of a brutal dictatorship. Yet this is not Tahrir but Taksim Square, in Istanbul, Europe’s biggest city and the business capital of democratic Turkey. The protests are a sign of rising dissatisfaction with Recep Tayyip Erdogan, Turkey’s most important leader since Ataturk. The rioting spread like wildfire across the country. Over 4,000 people have been hurt and over 900 were arrested; three have died.The spark of protest was a plan to redevelop Gezi Park, one of the last green spots in central Istanbul. Resentment has been smouldering over the government’s big construction projects, ranging from a third bridge over the Bosporus to a crazy canal from the Black Sea. But only after this first protest was met by horribly heavy-handed policing did the blaze spread, via Twitter and other social media. A local dispute turned national because its elements—brutal police behaviour and mega-projects rammed through with a dismissive lack of consultation—serve as an extreme example of the authoritarian way Mr Erdogan now runs his country (see...

ALMOST exactly 20 years ago, in May 1993, Fernando Henrique Cardoso was named as Brazil’s 13th finance minister in as many years, a seemingly hopeless job in a country trapped in hyperinflation, debt and an anachronistic economic statism. Mr Cardoso’s Real Plan swiftly tamed inflation and took him to the presidency. There he laid the foundations for a new Brazil, of stability and liberal economic reform. This success was reinforced by his successor, Luiz Inácio Lula da Silva, a left-wing former union leader, whose government saw 30m Brazilians get out of poverty.The trouble is that in Lula’s second term (2007-10) and especially under his chosen successor, Dilma Rousseff, the formula behind Brazil’s success has been slowly abandoned. The policy secret was simple: inflation targeting by a Central Bank operating with de facto independence; transparent public accounts; a rigorous fiscal target, which brought down the public debt; and a much more open attitude to foreign trade and private investment.But the global recession of 2008-09 prompted Lula and Ms Rousseff to shrug at decadent liberal economics and ape Chinese state capitalism. The finance ministry wrote vast...

WHEN Mario Draghi unveiled his plan to do “whatever it takes” to save the euro, he sensibly combined carrot with stick. Countries that wanted the European Central Bank (ECB) to buy their debt in secondary markets would have to embrace a reform programme. Mr Draghi, the ECB’s president, was mindful of “moral hazard”: the danger that debtor countries would let discipline slip once the pressure was off.It turns out, though, that moral hazard affects creditor countries as well. The announcement of the Outright Monetary Transactions (OMT) programme last year helped euro-zone bond markets recover their poise. Despite short-sighted objections to the OMT programme from Germany’s Bundesbank, which will be aired in a constitutional-court hearing next week (see article), it has been a remarkable success. But it also eased the pressure on creditor countries to push ahead with the institutional reforms required to make the euro area stable.In June 2012 Europeans agreed to start creating a banking union to break the...

IN THIS election, more than 700 aspiring candidates have been barred from competing by a council of crusty clerics and lawyers. They are said to have failed to live up to the required standard of revolutionary and religious zeal, leaving just eight runners deemed worthy of the mantle being relinquished by Mahmoud Ahmadinejad. That may not seem like much of a choice to citizens of normal democracies. But in Iran it is the best on offer.The first round of the presidential election takes place on June 14th, with a run-off a week later if no one gets a majority. The candidates, pictured before a television debate, are a glum bunch, with Saeed Jalili the apparent favourite of the hardliners and the most moderate being another former nuclear negotiator, Hassan Rohani. There is the added twist that the final say in the gravest matters of state, including the nuclear programme, is the preserve of the supreme leader, Ayatollah Ali Khamenei, who has fallen out badly with Mr Ahmadinejad in the past few years. All the same, the election is a meaningful, even menacing, event—and one whose outcome, on past experience, cannot be predicted (see...

CHINA’S president, Xi Jinping, is unlikely to quote Thucydides when he meets his American counterpart, Barack Obama, at a summit in California on June 7th and 8th. But the spirit of the Greek historian will hover over the Sunnylands ranch. Chinese policy wonks are struck by his argument that it was the Spartans’ fear of the growing power of Athens that made war inevitable. Their insistence that China wants a “peaceful rise” is intended to calm such worries in America.The ploy is not working. China’s relations with America have deteriorated in recent years, raising the spectre of conflict in East Asia. Buoyed up by its own economic success and Western stagnation, China has been asserting its claims in the region more aggressively, sending the neighbours scuttling back to the American security umbrella. Barack Obama’s response has been a “pivot” towards Asia. In the absence of trust, both sides will build up their military strength and responsible defensive behaviour could spiral into conflict.Mr Xi has got at least one thing right. Last month he told Tom Donilon, America’s retiring national security adviser, that relations had reached a “critical juncture” and “a new type of great-power...

WHEN the Revolutionary Armed Forces of Colombia (FARC), as they grandly call themselves, took up arms to install communism in their country, Nikita Khrushchev was still running the Soviet Union. For half a century, the FARC have stuck to their guns, even as Colombia has become a more inclusive democracy. The cold war ended but the FARC kept going, through drug running, kidnapping and extortion. They twice used peace talks as a cynical tactic to regroup, only to try once again to seize power by force. No wonder many Colombians have been sceptical about the latest peace negotiations, launched by President Juan Manuel Santos in October. So it was welcome that on May 26th the government and the FARC announced a deal on rural development (see article).That is only the first of five points on the agenda. But it is confirmation that these talks, which take place in Havana, are largely free of the political grandstanding of the past and are aimed at ending the conflict. The difference this time is that the military balance...

MAY was not the merriest month for electric cars. On May 1st Coda, an American maker of battery-powered cars, declared bankruptcy; on the 26th Better Place, a much-hyped promoter of cars with swappable batteries (which raised nearly $1 billion in 2007), filed for liquidation in Israel. Fisker, another American electric-car maker, which is partly financed by taxpayers, teetered on the brink of collapse, having made no vehicles since its (also state-financed) battery-maker, A123, collapsed last year. Fiat-Chrysler’s boss said during the month that it will lose $10,000 on every 500e battery car it sells. The car costs $32,000, double the price of the petrol version, but Fiat has to try to sell them because California is imposing quotas on sales of “zero-emission” vehicles on carmakers.The news has not all been bad. Tesla, a Californian maker of battery-powered sports cars, recently declared its first quarterly profit, and repaid its $452m of government loans early. But overall, electric cars, whether purely battery-powered or hybrids that use petrol engines as backups, have been a flop. They are expensive, even with state subsidies, and the all-battery ones have a limited...

IN THE year since Vladimir Putin returned to the Kremlin as president his rule has become increasingly repressive. He has harassed or shut down non-governmental organisations, put opposition leaders on trial and had pop-star protesters jailed on flimsy charges. Corruption is entrenched, the judiciary has been nobbled and critics are routinely branded as treacherous foreign agents. The evidence is clear; the question is how the West should respond.So far, there has been a curious inversion of past practice. European countries, led by Germany, which is Russia’s biggest trading partner, have long been in favour of a soft approach. Their argument used to be that stability mattered more than democracy in such a vast and unruly country, that Europe needed Russian oil and gas, and that criticism from outside was unlikely to make much difference. The Americans, in contrast, mostly preferred a tougher stance, insisting that the West should support human rights and democracy everywhere and firmly denouncing the slide towards autocracy. These days, however, Barack Obama supports the pragmatic approach that underpinned the “reset” of his first term, arguing that he needs Russian...

FOR the past 170 years The Economist has consistently advocated free trade, punctured government bloat and argued for the protection of individual liberties. It has also been consistently disappointed. Irksomely, political parties tend to plump either for economic liberalism or for social liberalism. Sometimes a small party boldly tries to combine the two—and is rewarded by becoming even smaller. In the United States our creed is so misunderstood that people associate liberalism with big government, when it advocates the opposite.Yet now Britain, The Economist’s home, the land of Adam Smith (on lead guitar), John Stuart Mill (bass) and William Gladstone (vocals), there is reason for hope. Young Britons have turned strikingly liberal, in a classical sense (see article).They are relaxed, almost to the point of ennui, about other people’s sexual preferences, drug habits and skin colour. Although, like older Britons, they do not think much of mass immigration, they are...

IN HIS inaugural address in 1949 Harry Truman said that “more than half the people in the world are living in conditions approaching misery. For the first time in history, humanity possesses the knowledge and skill to relieve the suffering of those people.” It has taken much longer than Truman hoped, but the world has lately been making extraordinary progress in lifting people out of extreme poverty. Between 1990 and 2010, their number fell by half as a share of the total population in developing countries, from 43% to 21%—a reduction of almost 1 billion people.Now the world has a serious chance to redeem Truman’s pledge to lift the least fortunate. Of the 7 billion people alive on the planet, 1.1 billion subsist below the internationally accepted extreme-poverty line of $1.25 a day. Starting this week and continuing over the next year or so, the UN’s usual Who’s Who of politicians and officials from governments and international agencies will meet to draw up a new list of targets to replace the Millennium Development Goals (MDGs), which were set in September 2000 and expire in 2015. Governments should adopt as their main new goal the aim of reducing by another billion...

YOU may have missed it, but the European Union held a summit this week. Taking in a nutritious working lunch, Europe’s prime ministers, presidents and chancellors devoted half of Wednesday to weighty issues of energy and taxation. Gone are the panic-stricken sessions of last year, dogged by talk of the euro’s imminent failure. Today, Europe’s leaders note, reform is under way across most of the euro zone and some southern European countries are regaining their competitiveness. The government-debt market is back in its box, where it belongs. And over the past year share prices are up by a quarter. Nobody could pretend that life is easy; Europeans understand that hard work and sacrifices lie ahead. But the worst of the crisis is now safely in the past.It is a reassuring tale, and those worn down by the Wagnerian proportions of the euro saga (who isn’t?) are eager to believe it. Unfortunately, the idea that the euro is yesterday’s problem is a dangerous figment. In reality, Europe’s leaders are sleepwalking through an economic wasteland.Someone call a somnambulance, quickThe euro-zone economy has just endured a sixth successive quarter of shrinking GDP. The malaise...

PRESIDENTS often have no choice but to react to events. When a giant tornado struck a suburb of Oklahoma City on May 20th, Barack Obama declared a disaster and ordered the federal authorities to help search for survivors. As emergency workers pulled children from the rubble, the mudslinging in Washington, DC, paused. But only for a moment. Mr Obama is still beset by scandals. Republicans berate his administration for a “cover-up” after terrorists murdered diplomats in Benghazi; for snooping on journalists; and for letting the Internal Revenue Service (IRS) hound conservatives.Not all these scandals are real. In Libya the administration failed to anticipate an attack or to protect its staff: a tragic failure, but not a crime. Spin-doctors tied themselves in knots to avoid saying anything that might hurt the president’s re-election campaign, but that is what spin-doctors do. The snooping scandal is murkier, and seems to have involved an abuse of power. But the IRS scandal is unambiguously outrageous.Tax officials singled out the president’s opponents for extra scrutiny. Conservative groups seeking tax-exempt status were subjected to long delays and intimidating...

WHEN Thein Sein was picked by his fellow generals to lead Myanmar a little over two years ago, the country was a pariah state, ostracised by the West, shut off from the mainstream of Asian prosperity and ground down after decades of brutal, corrupt and inept military rule. Yet this week Mr Thein Sein was welcomed to the White House, chatting with Barack Obama and soaking up the American president’s praise for Myanmar’s bold and fast-moving reforms.The top-down transformationAs our special report this week shows, Myanmar has undergone a remarkable transformation. Ruled by the generals, the country, which many know as Burma, was a blank space. Now it is finding its place again at a nexus between China, the Indian subcontinent and South-East Asia. The neighbours are pouring in with road- and port-building projects to reconnect Myanmar to its region. And now that they have lifted nearly all sanctions, Europeans and Americans are also excited, sizing up a country of 64m people that is rich in resources and...

CRICKET is like a religion in India, it is said—especially by Indians, who take almost as much delight in their love of the sport as in the contest between bat and ball. Nothing, they suggest, unites their vast and varied country so much as its devotion to what was once an English summer game. That is one reason why the epic mismanagement of Indian cricket matters. The other is that it gets to the heart of the cronyism and high-level abuse that plague India more widely.Every cricket season brings news of a fresh scam or intrigue including, on May 16th, the arrest of three cricketers and a dozen bookmakers for alleged match-fixing in the country’s most popular domestic tournament, the Indian Premier League (IPL). Investigators in Delhi hint that the players were paid indirectly to underperform by the Mumbai gangsters who control much of India’s enormous illegal gambling industry (betting on cricket is against the law in India). If they are right, the nexus between racketeers, bookmakers and greedy cricketers, exposed in 2000 in one of the biggest scandals in modern sport, remains in place. This would not be surprising: India’s government and the men who run cricket there...

A YEAR ago, when Jim Yong Kim was appointed president of the World Bank, this newspaper had doubts about the choice. Mr Kim, then head of Dartmouth College, was a health expert who had run innovative AIDS projects in poor countries, but had no background in economics or finance. He once wrote that the “quest for growth in GDP” had “worsened the lives of millions of women and men”. For the boss of the world’s premier development bank, this was a curiously sceptical view of what economic growth might do for the poor.Mr Kim has since assuaged some of those doubts. He has focused the bank on eliminating extreme poverty and has promised that the sprawling organisation will be more “scientific” in delivering its services. But a big test lies ahead: a showdown over the “Doing Business” report, one of the bank’s most successful research products, but one which some shareholders would like to see watered down or scrapped. How Mr Kim handles this will show whether he understands the importance of growth, has a sensible idea of the bank’s role in supporting it—and is a strong leader or a supine one.Since 2003 “Doing Business” has shone an annual spotlight on regulations. Now...