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Some European officials oppose an approach exclusively based on negative incentives; they also underline the potentially harmful impact of an EU aid strategy limited to humanitarian assistance, as this might not suffice to prevent the collapse of public services, triggering greater humanitarian hardship, instability and attendant ripple effects. Others, including the E3, argue that the lack of guarantees that aid will achieve its intended purpose and not reinforce the regime, and no real political opening, prevents them from revising their stance and aid strategy.

This mismatch of expectations among principal actors has contributed to the current stalemate. This puts any prospect of stabilising regime-controlled areas into question. For Europe, investing fully in reconstruction may not help place the country on a better footing, but withholding reconstruction funds could hamper economic recovery and leave Syrians in enduring need. To escape this conundrum, Europe could consider moving beyond humanitarian aid and start providing funds for rehabilitation projects in regime-held areas that could help prevent the collapse of essential public services.

Initially this could be done on a small scale, such as repairing not just the broken windows of a hospital or school as some EU member states are already doing, but also rebuilding collapsed walls and roofs. It could do this on condition it can deliver funds independently, without regime interference. Of course, such a strategy is unlikely to improve prospects for long-term stability. Europe should continue its push for political change, however modest its progress. Europeans could test a phased and incremental approach toward reconstruction based on positive incentives — small-scale rehabilitation projects, a progressive lifting of sanctions, a gradual normalisation of relations and a staggered disbursement of reconstruction funds — in exchange for the regime, with Russian support, beginning to implement Resolution or taking concrete steps on other important issues relating to ongoing, systematic abuses of the security services including arbitrary arrest and torture , the internally displaced, property rights, military conscription, detainees and the disappeared.

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Such steps would not bring the horrendous Syrian conflict to a close, let alone a satisfactory one. But they might bring a modicum of positive change for the Syrian people. After more than eight years of war, the Syrian regime, supported by Russian airpower and Iran-backed ground forces, has retaken almost 70 per cent of the country. Hide Footnote.

The conflict displaced half the population and left an estimated Despite the need, regime investment in rebuilding, measured by official budget allocations to the reconstruction fund, has been limited. Crisis Group phone interview, person who travelled widely in Syria in June Countries that are or were opposed to the regime also have given no indication they will provide reconstruction funding.

Although some Gulf countries have begun to shift their position, until now they have held off on making financial investments, seemingly because of U. Bahrain kept its embassy open but at a lower level of representation. It is where ministers from each EU country meet to adopt laws and coordinate policies. Hide Footnote Both the U. The EU never closed its delegation to Syria — except during a short withdrawal to Beirut from December to April — but maintains local staff only.

They have no contacts with the Syrian authorities except with the Ministry of Foreign Affairs, and not above the level of vice minister. Crisis Group interview, EU official, July It is based on interviews between October and November with over 80 EU and European member state officials, current and former Iranian and Syrian officials, Russian diplomats and researchers, U.

Cities that became battlefields between the regime and the opposition, such as Aleppo, Douma and Deraa, or that experienced fighting against the Islamic State ISIS , such as Deir al-Zour and Raqqa, were worst affected. According to the World Bank, about 45 per cent of housing stock has suffered damage, with a quarter fully destroyed; more than half of health-care facilities have been damaged or destroyed; some 40 per cent of educational facilities have been damaged, destroyed or occupied used as shelters for the displaced or confiscated by conflict parties ; and the water and sanitation sector, which was additionally affected by damage to the energy infrastructure with 13 per cent of installations partially or fully destroyed , has suffered severely as well.

Aleppo has seen the greatest deterioration: only three of ten households has access to a functioning water network. A UN official specified that infrastructure damage was most severe in eastern Aleppo and the old city, areas long held by rebel groups. Crisis Group phone interview, July Yet a singular focus on physical infrastructure obscures the full scale of the disaster and will not suffice to resurrect the country.

The loss in human resources needs to be factored in as well. Crisis Group interview, June If reconstruction is not taking place to any significant degree, it is not only because the regime lacks financial capacity, but also because it does not consider it a sufficient priority to justify giving in to Western conditions. Its primary concern is to maintain and strengthen its hold on power and it is not prepared to take steps it was unwilling to take when military pressure was at its height for the sake of economic help. What it wants is a lifting of U. Damascus faces an economic and financial crisis that leaves prospects for recovery uncertain at best.

Crisis Group interview, Joseph Daher, September Crisis Group interview, May The government imposed a 5 per cent surcharge on all direct and indirect taxes in , except on income tax and electricity fees; it increased this to 10 per cent in In September , the Central Bank of Syria restricted the list of basic imports to thirteen items that it allows banks to finance.


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Local banks also have provided loans to the regime. Crisis Group interview, Beirut, May Crisis Group phone interview, Joseph Daher, September This makes it extremely difficult to assess precisely the impact of international sanctions. Crisis Group interview by remote messaging app, October American and European sanctions directly affect the availability of pharmaceutical products and drugs from these countries, because we cannot transfer money to their companies.

We have used third states to get around sanctions, like Lebanon, the Emirates, Iran, Russia and China. Between and , in particular, it was hard to import our pharmaceutical needs, but we made it through smuggling, mainly from Lebanon, but also from Jordan, Iraq and Turkey. And then there is inflation on top of that.

The pharmaceuticals we bring in are priced in dollars, and the value of the dollar rises every day. Yet Damascus does not seem to see reconstruction as a pressing priority. The reconstruction committee it established in to disburse funding for rehabilitation of destroyed infrastructure is not fully functional and its allocations are almost negligible compared to needs. Crisis Group interview, October During the August Damascus International Fair, Prime Minister Imad Khamis stated that the government was working on developing an economic vision to pave the way for reconstruction as part of a comprehensive development process.

It gathers a wide range of expert, businessmen and government figures. Some people with access to the regime attribute its approach to a lack of vision for the future. Of course they are in a deep trouble. To the extent the regime seeks to rebuild the country, its priority is to ensure reconstruction serves to strengthen its rule. This means it would want to control any potential external funding and shape the eventual return of the displaced.

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It has adopted a set of legal measures to this end. But international human rights organisations have expressed serious concerns regarding the law, alleging that it legalises expropriations without due process or compensation. Law 10 allows for the creation of development zones by decree all across Syria, [fn] Law 10 is a nationwide extension of Decree 66 of , which allowed the government to designate two informal not part of any planning process areas in Damascus around the Mazzeh district as development zones. Only the minister of local administration and environment can propose issuing a decree establishing a development zone.

Within one week of Parliament issuing such a decree, local administrative authorities must request the list of local property owners from the governmental Public Real-Estate Authority, which has to respond within 45 days, and publish it in at least one local newspaper. Owners whose property does not appear on the list must provide documented proof of ownership within 30 days if they wish to retain it. Persons unable to prove ownership will receive no compensation and their property will be transferred to local or national authorities.

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Persons whose names do appear on the list or are able to prove ownership will receive ownership shares in the development zone and will have the right to apply for financial compensation and alternative housing. Law 10 stipulates that, in the absence of legal documents, owners need to provide relevant information regarding their property, such as location, boundaries, type of property, previous lawsuits, etc. Law 10 was amended in November by Law 42, which extends the period for inhabitants to prove their ownership from 30 days to one year and establishes a dedicated judicial committee to process and adjudicate claims.

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Hide Footnote putting local councils in charge of managing construction projects in these zones, including by establishing private-sector partnerships. Partnerships with the private sector fall under Law 5 of This would create a significant obstacle to those displaced wishing to return home. Crisis Group phone interview, 17 April The governmental new elites who wrote the report concluded that they need to create conditions that will prevent the type of social cohesion that enabled the demonstrations, no matter how long it takes. Despite the financial and economic difficulties it faces, the regime is disinclined to offer any concession or pay any genuine political price for reconstruction money.

It has made clear it does not want Western support, which is conditional, but only funding and investments from what it considers friendly countries. However, the priority is for our friends that stood by us in our war on terror. To pursue its project, the government forced thousands of area residents to leave, with or without compensation. But Western sanctions stand in the way of significant unconditional investment, including from non-Western sources because of U.

A regime adviser said:. The regime is not interested in Western reconstruction money. It does not intend to allow the West to use reconstruction as a way to weaken its political grip.

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The general mood is: there is no need for reconstruction money; everything is going to get self-reconstructed. You need to forget about reconstruction in the way the West sees it. Our friends will help to rebuild Syria and this will be mutually beneficial. The only thing we need from the West therefore is the lifting of sanctions.

Moscow considers the war over and that the time for rebuilding has arrived. Assad, as they see it, has won, even if Idlib and the north east are not yet under his control. Crisis Group phone interview, Moscow, June In effect, no significant reconstruction funds have made their way to Syria so far, not even from Russia or Iran.

Iran and Russia seem rather more interested in the regime compensating them for their military support through lucrative contracts. While some of these contracts might contribute to the rebuilding of essential infrastructure, others offer almost exclusive rights to the exploitation of natural resources. The rush for access to natural resources has led to growing competition between Russia and Iran.

Damascus has enjoyed privileged cooperation with Russia so far. This has led to growing frustration in Iran, which has mainly invested in real estate and religious tourism. The business network between Iran and Syria consists of only five persons.

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We can build a power plant but what influence does that bring us? Crisis Group interview, Tehran, January Russia did not get anything economically from Syria. Iraq is much more interesting for Russian business than Syria. Stroytransgaz will invest half a billion dollar there. The company is already under U.


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Crisis Group phone interview, June For example, despite having signed memorandums of understanding with Damascus to rehabilitate the electricity sector in September and January , respectively, Tehran and Moscow pulled out in the absence of regime funding. Moscow has looked for alternate funding sources, especially without strings attached. In doing so, it wants to reduce its own financial commitment, encourage a process of normalisation that would re-legitimise the regime, and pave the way for its own military drawdown once it believes the regime is firmly back in the saddle, all of which would represent a diplomatic victory for Moscow.

Since the reopening of the UAE embassy in Damascus, it has resumed issuing business visas. Crisis Group interview, March Crisis Group interview, Washington, April On 27 August , the U.