(NSI News Source Info) TEL AVIV, Israel- May 19, 2010: Israel, denied offensive weapons since January 2009, has sought aid from the United States for the development and procurement of defensive systems. Officials said the Israeli Defense Ministry has been discussing a range of projects that would enable Israel to withstand missile and rocket attacks by Iran and its proxies. They said the plan called for a significant increase in U.S. aid for missile and rocket defense over the next three years. "Missile defense allows for efforts to reach peaceful resolutions," U.S. Deputy Assistant Secretary for Defense Policy Frank Rose said. The latest Israeli missile defense request comes amid a policy by the Obama administration to deny offensive weapons to the Jewish state. Over the last 16 months, Obama has either rejected or withheld approval for Israeli procurement or upgrades of such platforms as attack helicopters. Israel has received $2.55 billion in defense aid in 2010. Officials said the administration of U.S. President Barack Obama has approved $205 million for the Israeli procurement of at least 10 Iron Dome batteries. They said the U.S. assistance for the Israeli-origin Iron Dome short-range missile and rocket defense system would be secured over the next few weeks in talks by visiting Israeli Defense Ministry director-general Udi Shani. "The United States and our ally Israel share many of the same security challenges, from combating terrorism to confronting the threat posed by Iran's nuclear-weapons program," White House spokesman Tommy Vietor said on May 13. "The president recognizes the threat missiles and rockets fired by Hamas and Hizbullah pose to Israelis." In April, Israeli Defense Minister Ehud Barak discussed missile and rocket defense with the administration. Officials said Barak asked Defense Secretary Robert Gates for U.S. help to bolster the Jewish state's multi-layered rocket and defense system with funds for development and procurement. "Not a week goes by when there is no security-related interaction [between Israel and the United States]," Israeli Deputy Chief of Staff Maj. Gen. Benny Gantz said. One proposal stipulated U.S. funding for Israel to produce and procure Iron Dome, scheduled for initial deployment in mid-2010. The Israeli Finance Ministry has allocated funding for two Iron Dome systems, but the military has set a requirement for another dozen batteries for protection of northern and southern Israel from Hamas and Hizbullah missiles and rockets. "This funding will expand what they can produce and deploy, and how quickly they're able to do it," Pentagon spokesman Bryan Whitman said on May 13. The Pentagon has been lobbied by at least one U.S. defense major for joint production of Iron Dome. The U.S. company was identified as Raytheon, the leading U.S. missile producer and Israel's partner in the David's Sling tactical missile defense system. "The ideal would be a project that would produce Iron Dome for both the U.S. and Israeli militaries, with the prospect of upgrades, but the Americans are not interested in acquiring Iron Dome," the official said. In April 2010, the administration approved the launch of the first major military project for Israel under Obama. The Pentagon awarded Lockheed Martin a $98 million contract for one C-130J air transport to Israel. The Israeli request was approved by then-President George W. Bush in mid-2008. On May 17, the Pentagon awarded its second defense contract for Israel under the Obama administration. The $20 million contract called for an engine upgrade of an Israeli armored personnel carrier that had been deployed in the 2009 war in the Gaza Strip. "This [U.S. refusal to supply weapons to Israel] will become a major problem over the next few months," another official said.
Tuesday, May 18, 2010
DTN News: U.S. Department of Defense Contracts Dated May 18, 2010 Source: U.S. DoD issued May 18, 2010 (NSI News Source Info) WASHINGTON - May 19, 2010: U.S. Department of Defense, Office of the Assistant Secretary of Defense (Public Affairs) Contracts issued May 18, 2010 are undermentioned; CONTRACTS AIR FORCE ~Northrop Grumman Systems Corp., Integrated Systems Air Combat Systems, San Diego, Calif., was awarded a $303,337,052 contract which will provide production of two Global Hawk Block 30 air vehicles, two Global Hawk Block 40 air vehicles, and related program sustaining support efforts. At this time, $17,681,554 has been obligated. 303 AESG/SYK, Wright-Patterson Air Force Base, Ohio, is the contracting activity (FA8620-09-C-4001 P0004). ~Northrop Grumman Systems Corp., Integrated Systems Air Combat Systems, San Diego, Calif., was awarded a $287,449,968 contract which will provide two in-line airborne signals intelligence payloads (ASIP) and three ASIP retrofit kits. At this time, $82,318,446 has been obligated. 303 AESG/SYK, Wright-Patterson Air Force Base, Ohio, is the contracting activity (FA8620-10-C-4007). ~Northrop Grumman Systems Corp., San Diego, Calif., was awarded a $30,000,000 contract which will provide for congressionally mandated advance procurement long-lead associated with two Block 30 and two Block 40 Global Hawk air vehicles; two in-line airborne signals intelligence payloads; two multi-platform radar technology insertion program sensors; two in-line sensors; and other items and activities required to protect the production schedule for Lot 10. At this time, the entire amount has been obligated. 303 AESG/SYK, Wright-Patterson Air Force Base, Ohio, is the contracting activity (FA8620-10-C-4000). ~Raytheon Co., Tucson, Ariz., was awarded an $11,184,558 contract which will provide for 136 enhanced Paveway II and 100 enhanced Paveway II with height of burst guided bomb conversion kits. At this time, the entire amount has been obligated. 784 CBSG/PKB, Hill Air Force Base, Utah, is the contracting activity (FA8213-10-C-0038). ~Agbayani Construction Corp., Daly City, Calif., was awarded a $5,572,266 contract which will provide maintenance for 1390 military family housing units. At this time, no money has been obligated. 36 CONS, APO, AP is the contracting activity (F64133-01-D-0017, P00060). NAVY ~Tybrin Corp., Fort Walton Beach, Fla. (N68936-10-D-0034); ~Lockheed Martin Corp., Lockheed Martin Information Systems & Global Services, Gaithersburg, Md. (N68936-10-D-0035); and ~L-3 Services, Inc., Chantilly, Va. (N68936-10-D-0036), are each being awarded cost-plus-fixed-fee indefinite-delivery/indefinite-quantity contracts for services in support of the Naval Air Warfare Center Weapons Division’s Combat Environment Simulation Division. Services to be provided include the acquisition and deployment of equipment or systems designed to provide a dense, realistic, and electromagnetic (encompassing radio frequency, infrared, electro-optic, and laser energy) environment to be used by the tri-service community for weapon systems development; training; test and evaluation; test and evaluation of defense suppression systems; electronic warfare systems; electronic countermeasures equipment; and electronic counter-countermeasures equipment. The estimated level of effort for these contracts over the five-year ordering period is 577 man-years. Tybrin Corp.’s ceiling is $241,540,417; Lockheed Martin Corp., Lockheed Martin Information Systems & Global Services’ ceiling is $207,806,616; and L-3 Services, Inc.’s ceiling is $210,998,077. Each company will have the opportunity to bid on each individual task order. Work will be performed in China Lake, Calif. (80 percent), and Point Mugu, Calif. (20 percent), and is expected to be completed in May 2015. Contract funds will not expire at the end of the current fiscal year. These contracts were solicited under a multiple award electronic request for proposals; 30 firms were solicited and three offers were received. The Naval Air Warfare Center Weapons Division, China Lake, Calif., is the contracting activity. ~Canadian Commercial Corp., General Dynamics Land Systems - Canada, London, Canada, is being awarded a $29,682,828 firm-fixed-priced modification under previously awarded contract (M67854-07-D-5028) for the procurement of 79 field service representatives to perform maintenance and repair services on the RG-31 Mine Resistance Ambush Protected vehicle fleet throughout the Afghanistan and Iraq areas of operations. Work is expected to be completed May 31, 2011. This contract modification was a sole-source procurement. Contract funds will expire at the end of the current fiscal year. Marine Corps Systems Command, Quantico, Va., is the contracting activity. ~Lockheed Martin Mission Systems and Sensors, Moorestown, N.J., is being awarded a $15,000,000 modification to previously awarded contract (N00024-03-C-5115) for engineering services for DDG 51 class and CG 47 class Aegis Combat System installation, integration, and test, and fleet life-cycle engineering support in support of the Program Executive Officer Integrated Warfare Systems. The required services for DDG 51 class ships and CG 47 class ships include program management and operation support; quality assurance; configuration management; ship design integration; fleet life-cycle engineering support; installation support; firmware maintenance; combat system test and evaluation; Navy furnished material support; special studies; and future-ship integration studies. Work will be performed in Moorestown, N.J. (50 percent); Baltimore, Md. (25 percent); Norfolk, Va. (8 percent); Washington, D.C. (5 percent); Akron, Ohio (5 percent); Mayport, Fla. (2 percent); San Diego, Calif. (1 percent); Oxnard, Calif. (1 percent); Bath, Maine (1 percent); Pascagoula, Miss. (1 percent); and Dahlgren, Va. (1 percent), and is expected to be completed by September 2010. Contract funds will not expire at the end of the current fiscal year. The Naval Sea Systems Command, Washington Navy Yard, D.C., is the contracting activity. ~CDWG Government, Inc., Vernon Hills, Ill., is being awarded a $9,345,894 firm-fixed-price delivery order under a previously awarded contract (W91QUZ-06-D-0003) for a quantity of 9,642 general purpose laptops for the Marine Corps operating forces computer refresh. This delivery order includes logistics support requirements, and a two-year extended warranty for a total of five years warranty service. Work will be performed in Vernon Hills, Ill., and is expected to be completed July 18, 2010. Contract funds will not expire at the end of the current fiscal year. A mini-competition was conducted for this delivery order between seven contractors via posting to the Army Computer Hardware Enterprise Software and Solutions Web site, Army Desktop and Mobile Computing contract holders, with four offers received. Marine Corps Systems Command, Quantico, Va., is the contracting activity. DEFENSE LOGISTICS AGENCY ~Sysco Eastern Maryland, LLC, Pocomoke City, Md., is being awarded a maximum $37,500,000 firm-fixed-price, indefinite-quantity, prime vendor contract for full food service. Other locations of performance are North Carolina. Using services are Army, Navy, Air Force, Marine Corps and Coast Guard job corps. The original proposal was solicited via the Defense Logistics Agency Internet Bid Board System with four responses. The date of performance completion is May 21, 2011. The Defense Supply Center Philadelphia, Philadelphia, Pa., is the contracting activity (SPM300-10-D-3126). ~Food Services, Inc.*, Mount Vernon, Wash., is being awarded a maximum $8,350,000 firm-fixed-price, indefinite-delivery, sole-source contract for full line food distribution. There are no other locations of performance. Using services are Army, Navy and Air Force. There was originally one proposal solicited with one response. The date of performance completion is May 20, 2011. The Defense Supply Center Philadelphia, Philadelphia, Pa., is the contracting activity (SPM300-09-D-3293). *Small business<>
DTN News: Israel Navy Drops LCS Buy In Favor Of Locally-Built Meko A-100 Warships
(NSI News Source Info) TORONTO, Canada - May 19, 2010: In a radical revamp of its surface fleet modernization program, the Israel Navy has shelved long-held plans to purchase Lockheed Martin-produced Littoral Combat Ships (LCS), as well as a fallback option involving corvettes built by Northrop Grumman.
Instead, sources say, the Navy is pushing to establish a combat shipbuilding industry through customized, locally built versions of a German corvette design.
Now in an exploration phase, the concept calls for a stretched, approximately 2,200-ton version of the Meko A-100 built by ThyssenKrupp Marine Systems (TKMS), the Hamburg-based consortium building two Dolphin-class submarines for the Israel Navy. Countries that are building or now operating the 1,650-ton German-designed corvette include Malaysia and Poland.
Defense and industry sources said Navy discussions with TKMS about a possible licensed co-production deal began in January and have steadily expanded to involve Israel's Ministry of Defense, Treasury, relevant lawmakers and industry executives. Under the plan, at least two ships would be produced at Israel Shipyards in Haifa, with state-owned Israel Aerospace Industries (IAI) a likely candidate for lead systems integrator. Each ship, and anticipated options for follow-on builds, would be integrated "with the maximum amount of local capabilities specifically designed to our operational requirements," said an Israel Navy flag officer.
"One of the things we put on the table is how to vector our urgent operational needs into a project that can support local industry," the officer said. "We believe a strong case can be made for making this into a national project that fosters self-sufficiency and provides all the economic benefits that come with creating a military shipbuilding industry."
In an interview earlier this month, the senior naval officer said the revamped acquisition concept was driven by the prohibitive price tag of its preferred LCS-I (Israel) option.Military, defense and industry sources here noted that since the Navy began pursuing LCS, unit costs surged from $220 million to $375 million to current U.S. Navy estimates, presented to the U.S. Congress in May, of $637 million. And while U.S. Navy and Lockheed Martin officials repeatedly maintained that rising U.S. costs for the full multimission system would have only a marginal impact on the Israeli program, which focused primarily on HM&E (hull, mechanical and electrical) equipment, experts here concluded otherwise.
10 Years of Study, No DealThe naval officer acknowledged frustration at the millions of dollars and nearly a decade of study invested by Israel, the U.S. government and prime contractor Lockheed Martin to adapt the 3,300-ton system to local requirements.
"As much as we sought commonality with the U.S. Navy, it became much, much more expensive than planned. At the end of the day, we had no choice but to face the fact that, for us, it was unaffordable," he said.
When asked about the status of the Israeli LCS program, Fred Moosally, president of Lockheed Maritime Systems and Sensors, replied, "Israel decided they didn't need any more work in that area."
Similarly, Israeli naval experts concluded that a Northrop Grumman-proposed package for two Sa'ar-5Bs - an approximately 2,300-ton design based on the service's current operational Sa'ar-5 fleet - also exceeded projected budgets. U.S. and Israeli sources said rough estimates for each Sa'ar-5B were about $450 million; but HM&E unit costs could have been reduced by more than $100 million had the Navy conducted a contract design.
"When Northrop Grumman makes a fixed-price offer, it's the result of an organized and serious process that allows the company to honor all of its commitments," a company representative said. "Without conducting a contract design - which eliminates most of the uncertainties that drive up price - NG couldn't offer the unit costs we all believed we could have delivered to the Israel Navy." In a Feb. 12 letter, the director of naval procurement at MoD's purchasing mission in New York informed U.S. parties of the prospective change in acquisition strategy. "In the event this option turns out to be more suitable both in terms of our operational and budgetary requirements, the [multimission ships] will be built in Israel."
High-Risk Program Despite widespread interest in the Navy-spearheaded effort, huge budgetary, political and technical uncertainties still threaten the ambitious program, sources here warn.
Assuming the customized Meko-100 meets naval requirements, and that MoD can conclude a deal with TKMS and the German government that allows Israel to leverage its investment beyond the planned domestic buy, it remains unclear how Israel intends to fund the program.
Unlike most major military acquisitions, which are based on U.S.-built platforms and funded through U.S. military grant aid, Israel will have to fund the bulk of the estimated $600 million program on its own.
"We're looking at all kinds of funding options, which do not necessarily have to come from MoD or [U.S. Foreign Military Financing] FMF accounts," another senior naval officer said. "If the political leaders determine that this is a critical national program, then it's reasonable to expect significant funding to come from the Treasury." A Finance Ministry official confirmed that experts from the two ministries are examining how the establishment of a military shipbuilding industry would concretely contribute to the Israeli economy.
Once the two ministries can agree on benchmarks, he said, more detailed discussions will begin over how, if at all, the Treasury can contribute some advanced funding."The idea is to find a formula whereby the Treasury can provide upfront funding in the form of a no-interest loan to MoD," an industry executive in Tel Aviv said.
Merkava-Based Funding ModelMeanwhile, Navy and civilian defense officials have started to explore ways in which U.S. FMF funding can be applied to the program.U.S. regulations allow Israel to convert some 26 percent of its annual aid into shekels to finance local projects. But most of those funds over the next several years already have been earmarked for high-priority programs, including the Barak-8 air and ship defense system and the MF-STAR multifunction radar planned for the new ships.
Sources here cite Israel's indigenous Merkava main battle tank as a prospective acquisition model. Although the tank is built in Israel from locally developed technologies and subsystems, hundreds of millions of FMF dollars have been used over the years to finance the program.Items purchased with U.S. aid include steel, other raw materials and the German-designed diesel engine co-produced in the United States by General Dynamics Land Systems and MTU. MoD is exploring a similar U.S.-based co-production arrangement that would allow FMF funding of the Meko ship's MTU1168 engine, sources here said."It's doable," a Pentagon source said. "Direct Commercial Contract guidelines allow them to use FMF to fund U.S. content on non-U.S. platforms."
A U.S. export license official noted, however, that as with the export-restricted Merkava, U.S. content gives Washington control over export sales.
■ Christopher P. Cavas contributed to this report from Washington.
*This article is being posted from Toronto, Canada By DTN News ~ Defense-Technology News, contact: firstname.lastname@example.org
DTN News: Germany, Greece And Exiting The Eurozone
(NSI News Source Info) TORONTO, Canada - May 19, 2010: Rumors of the imminent collapse of the eurozone continue to swirl despite the Europeans’ best efforts to hold the currency union together. Some accounts in the financial world have even suggested that Germany’s frustration with the crisis could cause Berlin to quit the eurozone — as soon as this past weekend, according to some — while at the most recent gathering of European leaders French President Nicolas Sarkozy apparently threatened to bolt the bloc if Berlin did not help Greece. Meanwhile, many in Germany — including Chancellor Angela Merkel herself at one point — have called for the creation of a mechanism by which Greece — or the eurozone’s other over-indebted, uncompetitive economies — could be kicked out of the eurozone in the future should they not mend their “irresponsible” spending habits. Rumors, hints, threats, suggestions and information “from well-placed sources” all seem to point to the hot topic in Europe at the moment, namely, the reconstitution of the eurozone whether by a German exit or a Greek expulsion. We turn to this topic with the question of whether such an option even exists. The Geography of the European Monetary Union As we consider the future of the euro, it is important to remember that the economic underpinnings of paper money are not nearly as important as the political underpinnings. Paper currencies in use throughout the world today hold no value without the underlying political decision to make them the legal tender of commercial activity. This means a government must be willing and capable enough to enforce the currency as a legal form of debt settlement, and refusal to accept paper currency is, within limitations, punishable by law. The trouble with the euro is that it attempts to overlay a monetary dynamic on a geography that does not necessarily lend itself to a single economic or political “space.” The eurozone has a single central bank, the European Central Bank (ECB), and therefore has only one monetary policy, regardless of whether one is located in Northern or Southern Europe. Herein lies the fundamental geographic problem of the euro. Europe is the second-smallest continent on the planet but has the second-largest number of states packed into its territory. This is not a coincidence. Europe’s multitude of peninsulas, large islands and mountain chains create the geographic conditions that often allow even the weakest political authority to persist. Thus, the Montenegrins have held out against the Ottomans, just as the Irish have against the English. Despite this patchwork of political authorities, the Continent’s plentiful navigable rivers, large bays and serrated coastlines enable the easy movement of goods and ideas across Europe. This encourages the accumulation of capital due to the low costs of transport while simultaneously encouraging the rapid spread of technological advances, which has allowed the various European states to become astonishingly rich: Five of the top 10 world economies hail from the Continent despite their relatively small populations. Europe’s network of rivers and seas are not integrated via a single dominant river or sea network, however, meaning capital generation occurs in small, sequestered economic centers. To this day, and despite significant political and economic integration, there is no European New York. In Europe’s case, the Danube has Vienna, the Po has Milan, the Baltic Sea has Stockholm, the Rhineland has both Amsterdam and Frankfurt and the Thames has London. This system of multiple capital centers is then overlaid on Europe’s states, which jealously guard control over their capital and, by extension, their banking systems. Despite a multitude of different centers of economic — and by extension, political — power, some states, due to geography, are unable to access any capital centers of their own. Much of the Club Med states are geographically disadvantaged. Aside from the Po Valley of northern Italy — and to an extent the Rhone — southern Europe lacks a single river useful for commerce. Consequently, Northern Europe is more urban, industrial and technocratic while Southern Europe tends to be more rural, agricultural and capital-poor. Introducing the Euro Given the barrage of economic volatility and challenges the eurozone has confronted in recent quarters and the challenges presented by housing such divergent geography and history under one monetary roof, it is easy to forget why the eurozone was originally formed. The Cold War made the European Union possible. For centuries, Europe was home to feuding empires and states. After World War II, it became the home of devastated peoples whose security was the responsibility of the United States. Through the Bretton Woods agreement, the United States crafted an economic grouping that regenerated Western Europe’s economic fortunes under a security rubric that Washington firmly controlled. Freed of security competition, the Europeans not only were free to pursue economic growth, they also enjoyed nearly unlimited access to the American market to fuel that growth. Economic integration within Europe to maximize these opportunities made perfect sense. The United States encouraged the economic and political integration because it gave a political underpinning to a security alliance it imposed on Europe, i.e., NATO. Thus, the European Economic Community — the predecessor to today’s European Union — was born. When the United States abandoned the gold standard in 1971 (for reasons largely unconnected to things European), Washington essentially abrogated the Bretton Woods currency pegs that went with it. One result was a European panic. Floating currencies raised the inevitability of currency competition among the European states, the exact sort of competition that contributed to the Great Depression 40 years earlier. Almost immediately, the need to limit that competition sharpened, first with currency coordination efforts still concentrating on the U.S. dollar and then from 1979 on with efforts focused on the deutschmark. The specter of a unified Germany in 1989 further invigorated economic integration. The euro was in large part an attempt to give Berlin the necessary incentives so that it would not depart the EU project. But to get Berlin on board with the idea of sharing its currency with the rest of Europe, the eurozone was modeled after the Bundesbank and its deutschmark. To join the eurozone, a country must abide by rigorous “convergence criteria” designed to synchronize the economy of the acceding country with Germany’s economy. The criteria include a budget deficit of less than 3 percent of gross domestic product (GDP); government debt levels of less than 60 percent of GDP; annual inflation no higher than 1.5 percentage points above the average of the lowest three members’ annual inflation; and a two-year trial period during which the acceding country’s national currency must float within a plus-or-minus 15 percent currency band against the euro. As cracks have begun to show in both the political and economic support for the eurozone, however, it is clear that the convergence criteria failed to overcome divergent geography and history. Greece’s violations of the Growth and Stability Pact are clearly the most egregious, but essentially all eurozone members — including France and Germany, which helped draft the rules — have contravened the rules from the very beginning. Mechanics of a Euro Exit The EU treaties as presently constituted contractually obligate every EU member state — except Denmark and the United Kingdom, which negotiated opt-outs — to become a eurozone member state at some point. Forcible expulsion or self-imposed exit is technically illegal, or at best would require the approval of all 27 member states (never mind the question about why a troubled eurozone member would approve its own expulsion). Even if it could be managed, surely there are current and soon-to-be eurozone members that would be wary of establishing such a precedent, especially when their fiscal situation could soon be similar to Athens’ situation. One creative option making the rounds would allow the European Union to technically expel members without breaking the treaties. It would involve setting up a new European Union without the offending state (say, Greece) and establishing within the new institutions a new eurozone as well. Such manipulations would not necessarily destroy the existing European Union; its major members would “simply” recreate the institutions without the member they do not much care for. Though creative, the proposed solution it is still rife with problems. In such a reduced eurozone, Germany would hold undisputed power, something the rest of Europe might not exactly embrace. If France and the Benelux countries reconstituted the eurozone with Berlin, Germany’s economy would go from constituting 26.8 percent of eurozone version 1.0’s overall output to 45.6 percent of eurozone version 2.0’s overall output. Even states that would be expressly excluded would be able to get in a devastating parting shot: The southern European economies could simply default on any debt held by entities within the countries of the new eurozone. With these political issues and complications in mind, we turn to the two scenarios of eurozone reconstitution that have garnered the most attention in the media. Scenario 1: Germany Reinstitutes the Deutschmark The option of leaving the eurozone for Germany boils down to the potential liabilities that Berlin would be on the hook for if Portugal, Spain, Italy and Ireland followed Greece down the default path. As Germany prepares itself to vote on its 123 billion euro contribution to the 750 billion euro financial aid mechanism for the eurozone — which sits on top of the 23 billion euros it already approved for Athens alone — the question of whether “it is all worth it” must be on top of every German policymaker’s mind. This is especially the case as political opposition to the bailout mounts among German voters and Merkel’s coalition partners and political allies. In the latest polls, 47 percent of Germans favor adopting the deutschmark. Furthermore, Merkel’s governing coalition lost a crucial state-level election May 9 in a sign of mounting dissatisfaction with her Christian Democratic Union and its coalition ally, the Free Democratic Party. Even though the governing coalition managed to push through the Greek bailout, there are now serious doubts that Merkel will be able to do the same with the eurozone-wide mechanism May 21. Germany would therefore not be leaving the eurozone to save its economy or extricate itself from its own debts, but rather to avoid the financial burden of supporting the Club Med economies and their ability to service their 3 trillion euro mountain of debt. At some point, Germany may decide to cut its losses — potentially as much as 500 billion euros, which is the approximate exposure of German banks to Club Med debt — and decide that further bailouts are just throwing money into a bottomless pit. Furthermore, while Germany could always simply rely on the ECB to break all of its rules and begin the policy of purchasing the debt of troubled eurozone governments with newly created money (“quantitative easing”), that in itself would also constitute a bailout. The rest of the eurozone, including Germany, would be paying for it through the weakening of the euro. Were this moment to dawn on Germany it would have to mean that the situation had deteriorated significantly. As STRATFOR has recently argued, the eurozone provides Germany with considerable economic benefits. Its neighbors are unable to undercut German exports with currency depreciation, and German exports have in turn gained in terms of overall eurozone exports on both the global and eurozone markets. Since euro adoption, unit labor costs in Club Med have increased relative to Germany’s by approximately 25 percent, further entrenching Germany’s competitive edge. Before Germany could again use the deutschmark, Germany would first have to reinstate its central bank (the Bundesbank), withdraw its reserves from the ECB, print its own currency and then re-denominate the country’s assets and liabilities in deutschmarks. While it would not necessarily be a smooth or easy process, Germany could reintroduce its national currency with far more ease than other eurozone members could. The deutschmark had a well-established reputation for being a store of value, as the renowned Bundesbank directed Germany’s monetary policy. If Germany were to reintroduce its national currency, it is highly unlikely that Europeans would believe that Germany had forgotten how to run a central bank — Germany’s institutional memory would return quickly, re-establishing the credibility of both the Bundesbank and, by extension, the deutschmark. As Germany would be replacing a weaker and weakening currency with a stronger and more stable one, if market participants did not simply welcome the exchange, they would be substantially less resistant to the change than what could be expected in other eurozone countries. Germany would therefore not necessarily have to resort to militant crackdowns on capital flows to halt capital trying to escape conversion. Germany would probably also be able to re-denominate all its debts in the deutschmark via bond swaps. Market participants would accept this exchange because they would probably have far more faith in a deutschmark backed by Germany than in a euro backed by the remaining eurozone member states. Reinstituting the deutschmark would still be an imperfect process, however, and there would likely be some collateral damage, particularly to Germany’s financial sector. German banks own much of the debt issued by Club Med, which would likely default on repayment in the event Germany parted with the euro. If it reached the point that Germany was going to break with the eurozone, those losses would likely pale in comparison to the costs — be they economic or political — of remaining within the eurozone and financially supporting its continued existence. Scenario 2: Greece Leaves the Euro If Athens were able to control its monetary policy, it would ostensibly be able to “solve” the two major problems currently plaguing the Greek economy. First, Athens could ease its financing problems substantially. The Greek central bank could print money and purchase government debt, bypassing the credit markets. Second, reintroducing its currency would allow Athens to then devalue it, which would stimulate external demand for Greek exports and spur economic growth. This would obviate the need to undergo painful “internal devaluation” via austerity measures that the Greeks have been forced to impose as a condition for their bailout by the International Monetary Fund (IMF) and the EU. If Athens were to reinstitute its national currency with the goal of being able to control monetary policy, however, the government would first have to get its national currency circulating (a necessary condition for devaluation). The first practical problem is that no one is going to want this new currency, principally because it would be clear that the government would only be reintroducing it to devalue it. Unlike during the Eurozone accession process — where participation was motivated by the actual and perceived benefits of adopting a strong/stable currency and receiving lower interest rates, new funds and the ability to transact in many more places — “de-euroizing” offers no such incentives for market participants: **The drachma would not be a store of value, given that the objective in reintroducing it is to reduce its value. **The drachma would likely only be accepted within Greece, and even there it would not be accepted everywhere — a condition likely to persist for some time. **Reinstituting the drachma unilaterally would likely see Greece cast out of the eurozone, and therefore also the European Union as per rules explained above. The government would essentially be asking investors and its own population to sign a social contract that the government clearly intends to abrogate in the future, if not immediately once it is able to. Therefore, the only way to get the currency circulating would be by force. The goal would not be to convert every euro-denominated asset into drachmas but rather to get a sufficiently large chunk of the assets so that the government could jumpstart the drachma’s circulation. To be done effectively, the government would want to minimize the amount of money that could escape conversion by either being withdrawn or transferred into asset classes easy to conceal from discovery and appropriation. This would require capital controls and shutting down banks and likely also physical force to prevent even more chaos on the streets of Athens than seen at present. Once the money was locked down, the government would then forcibly convert banks’ holdings by literally replacing banks’ holdings with a similar amount in the national currency. Greeks could then only withdraw their funds in newly issued drachmas that the government gave the banks to service those requests. At the same time, all government spending/payments would be made in the national currency, boosting circulation. The government also would have to show willingness to prosecute anyone using euros on the black market, lest the newly instituted drachma become completely worthless. Since nobody save the government would want to do this, at the first hint that the government would be moving in this direction, the first thing the Greeks will want to do is withdraw all funds from any institution where their wealth would be at risk. Similarly, the first thing that investors would do — and remember that Greece is as capital-poor as Germany is capital-rich — is cut all exposure. This would require that the forcible conversion be coordinated and definitive, and most important, it would need to be as unexpected as possible. Realistically, the only way to make this transition without completely unhinging the Greek economy and shredding Greece’s social fabric would be to coordinate with organizations that could provide assistance and oversight. If the IMF, ECB or eurozone member states were to coordinate the transition period and perhaps provide some backing for the national currency’s value during that transition period, the chances of a less-than-completely-disruptive transition would increase. It is difficult to imagine circumstances under which such support would not dwarf the 110 billion euro bailout already on the table. For if Europe’s populations are so resistant to the Greek bailout now, what would they think about their governments assuming even more risk by propping up a former eurozone country’s entire financial system so that the country could escape its debt responsibilities to the rest of the eurozone? The European Dilemma Europe therefore finds itself being tied in a Gordian knot. On one hand, the Continent’s geography presents a number of incongruities that cannot be overcome without a Herculean (and politically unpalatable) effort on the part of Southern Europe and (equally unpopular) accommodation on the part of Northern Europe. On the other hand, the cost of exit from the eurozone — particularly at a time of global financial calamity, when the move would be in danger of precipitating an even greater crisis — is daunting to say the least. The resulting conundrum is one in which reconstitution of the eurozone may make sense at some point down the line. But the interlinked web of economic, political, legal and institutional relationships makes this nearly impossible. The cost of exit is prohibitively high, regardless of whether it makes sense.
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DTN News: Malaysia Confirmed Acquiring Turkish Designed 8x8 Pars APCs
(NSI News Source Info) KUALA LUMPUR, Malaysia - May 19, 2010: Today, Malaysian Defense ministry confirmed the Malaysian company DRB-Hicom Defence Technologies (Deftech) a prime contractor to locally produce and supply 257 armored personnel carriers based on the Turkish 8x8 Pars wheeled armored vehicle, subject to cost review and effective APC in the same category.
The Pars has a modular design and can include various armament fits such as external and turret mounted weapons. The vehicle can accommodate single- or two-man turrets as well as remotely operated weapon stations and specific mission equipment. The vehicle is normally operated by a crew of two and can carry up to 12 troops or eight tons of payload. An advanced, active hydropneumatic suspension system, with electrically controlled variable height enables adjustable ground-clearance and a central tire inflation system. Pars is powered by the Deutz 530hp diesel engine, which producers claim has a 1500km unrefueled operating range. The vehicle can be airlifted inside C17 or future A400 transport aircraft.
The Pars, developed and produced developed by the Turkish company FNSS is based on a design made by the U.S. company GPV. The value of the Malaysian 'letter of intent' is worth over worth about US$2.5 billion. Deliveries will span over seven years. The prototype APC is expected to be delivered for testing to the Malaysian Army by 2011. Deftech is to build 12 variants from the base vehicle, including personnel carrier, anti-tank weapon carrier, command and control and anti-aircraft weapon vehicles.
The Malaysian Defense ministry has asked Deftech to review cost factor as advised earlier in the media, cost of the new vehicle seems excessively high - about $9.8 million per unit
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DTN News: BAE Systems Announces Agreement to Acquire Atlantic Marine
(NSI News Source Info) ARLINGTON, Virginia- May 19, 2010: BAE Systems today announced it has entered into a definitive agreement to acquire Atlantic Marine Holding Company (Atlantic Marine) from JFL-AMH Partners, LLC, a portfolio company of the private equity firm J.F. Lehman & Company for a cash consideration of $352 million. Atlantic Marine is a privately held vessel maintenance, repair, overhaul and conversion (MROC), marine fabrication, and ship construction services provider with operations at Mayport and Jacksonville, Florida; Moss Point, Mississippi; and Mobile, Alabama. The acquisition does not include Atlantic Marine's Boston and Philadelphia operations, which will be retained by JFL-AMH Partners, LLC. The acquisition will be funded from BAE Systems' existing cash resources. "BAE Systems' strategy for our ship repair business is successfully growing marine sustainment activities in surface ship repair, as well as migrating our capabilities into naval modernization and upgrade. The acquisition of Atlantic Marine's operations, highly skilled workforce, and marine fabrication capabilities will enhance BAE Systems' ability to serve customers in the naval support and upgrade sector," said Linda Hudson, President and CEO, BAE Systems, Inc. Atlantic Marine employs approximately 1,000 people and will become part of BAE Systems' Ship Repair business. The acquisition will complement BAE Systems' existing ship repair and upgrade capabilities to further serve the U.S. Navy and other maritime customers. The acquisition is consistent with BAE Systems' strategy to address anticipated growth in Readiness & Sustainment activity within its home markets. The addition of Atlantic Marine will enhance BAE Systems' ability to support current and future U.S. Navy home-porting strategies and broaden its customer base. The proposed acquisition is conditional, among other things, upon receiving certain U.S. regulatory approvals and is expected to close in the third quarter of 2010. About Atlantic Marine Atlantic Marine is a privately held company that provides MROC, marine fabrication, and ship construction services. Founded in 1964, Atlantic Marine has expanded its operations and capabilities to meet the vessel MROC and marine fabrication needs of a diverse customer base including Navy Surface Combatants, as well as the commercial, offshore, other government ship-types and mega-yacht segments. About BAE Systems BAE Systems is a global defense, security and aerospace company with approximately 107,000 employees worldwide. The Company delivers a full range of products and services for air, land and naval forces, as well as advanced electronics, security, information technology solutions and customer support services. In 2009 BAE Systems reported sales of £22.4 billion (US$ 36.2 billion). For further information, please contact Mark Phillips, BAE Systems (UK)
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DTN News: France Frets Over Fighter Sale To Brazil
* Sarkozy anxious to wrap up sale of Rafale jets to Brazil
* Race for $6 billion arms deal ahead of October elections
* U.S., Sweden still in the frame to sell their models
(NSI News Source Info) PARIS, France - May 18, 2010: France is mounting a last-ditch bid to prevent another fighter sale slipping from its grasp as upcoming Brazilian presidential elections threaten to spoil its hopes of winning a first foreign sale of its Rafale combat jet. After setbacks in Morocco and Asia, French President Nicolas Sarkozy is leading a campaign for a $6.3 billion deal to sell 36 warplanes to Brazil, but some French arms industry executives are worried the talks could stall ahead of elections in October. Sarkozy is expected to discuss the latest stage in an expanding global race for air power when he meets his Brazilian counterpart Luiz Inacio Lula da Silva on the sidelines of a European-South American summit in Madrid later on Tuesday. The French leader trumpeted an imminent deal during a trip to Brazil in September but Latin America's biggest power has yet to narrow down a field of three bidders from France, the United States and Sweden amid reports of a split over procurement. "Every week bringing us closer to the election is worrying us a little more", a source familiar with the French bid said. With Lula prevented from standing for re-election, some experts believe the country's next president could order a pause in negotiations or restart the lengthy process from scratch. Built by family-controlled French aerospace firm Dassault Aviation (AVMD.PA), the twin-engined Rafale is locked in competition with Boeing's (BA.N) dual-engined F-18 Super Hornet and Saab's (SAABb.ST) single-engined Gripen. Brazil says it will pick one of the three by end-July as the basis for exclusive negotiations on the renewal of its fighter fleet which includes Dassault-built Mirages. However industry sources note such deadlines have been delayed in the past. "Even if the Rafale gets picked and a negotiation starts in a few days, it won't end before the handover of power," a French industry source said. Some Brazilian top brass are reported to favour the Gripen, while Lula and his defence minister openly back the French. "There is tension between the Air Force and the civil government," said Richard Aboulafia, aerospace and defence analyst with the Teal Group in Washington. "Lula has expressed a choice for technology transfer and industrial relations with France and Dassault but the Air Force seems to have other ideas of what it wants to fly," he said. STRATEGIC PRIZE To make its bid more attractive, France has promised what it describes as a bold technology transfer deal favouring Brazil's Embraer (ERJ.N) but is said to be taking a harder line on price. "Contacts between the Brazilians and the French have progressed well on technology transfer and maintenance, but Dassault doesn't want to cut prices and the Rafale is the most expensive plane," a French defence industry source said. Boeing and Saab both say their planes are more competitive than Dassault's but give no further details. Analysts say fully equipped fighter planes sell for some $100 million each. "Boeing has provided the Brazilian government with a detailed Super Hornet offer that we are confident best meets the technical and offset requirements of the competition" a Boeing spokesman said. Dassault and Saab both declined to comment. The contest is part of a struggle for strategic advantage in one of the world's fastest growing regions, where the United States, Russia and Europe are all seen as vying for influence. The U.S. navy aircraft carrier Carl Vinson made a trip in January to Rio de Janeiro with F-18s on board and a defence pact was signed a few weeks ago between Brazil and the United States, echoing a pact signed between Brazil and France last year. Defence analysts say the United States faces some political barriers but is determined to remain in the race. "The Gripen or the Rafale would be much easier for public opinion and Brazil's neighbours," said Francois Heisbourg, chairman of the International Institute for Strategic Studies. The winner is also likely to get better access to South American defence contracts and would gain a symbolic victory ahead of a much bigger contest for 126 combat planes in India, one of the most sought-after contracts in the global arms trade. Sakozy ordered a rethink of the way France, the world's fourth largest exporter, handles big arms deals after its former colony Morocco stunned Paris by shutting the door on the Rafale and buying the F-16 built by Lockheed Martin (LMT.N) instead.
(Additional reporting by Andrea Shalal-Esa and Eduardo Simoes; Editing by Tim Hepher and David Holmes)
DTN News: Heroux-Devtek Lands $16 Million In U.S. Military Landing Gear Contracts Source: DTN News / By The Canadian Press (NSI News Source Info) MONTREAL, Canada - May 18, 2010: Canadian aerospace manufacturer Heroux-Devtek Inc. has landed $16 million in new contracts from the U.S. air force and navy for landing gear components. The orders are mainly for five aircraft, including the B-1B, C-130 Hercules transport, C-5 transport and P-3 surveillance planes. Production will be spread out over the next four years, with deliveries starting in fiscal year 2011. The Montreal-area company (TSX: HRX.TO) said Tuesday the orders demonstrate the strength of the military aerospace market. Chief executive Gilles Labbe said "is a major constituent of our ability to efficiently service the needs of the global military aerospace market." Heroux-Devtek's aerospace segments supplies the commercial and military sectors with landing gear systems and airframe structural components. About 65 per cent of the company's sales are outside Canada, mainly in the United States. The company also has an industrial products segment that makes large power generation components.