The List

Checkbook Diplomacy

In shopping for hearts and minds in Iraq, the State Department made some bizarre impulse purchases.

In 2009, the State Department sent me to Iraq for a year as part of the civilian surge deployed to backstop the more muscular military one. At the head of a six-person Provincial Reconstruction Team (PRT), I was assigned to spend U.S. government money creating projects that would lift the local economy and lure young men away from the dead-end opportunities of al Qaeda. I was to empower women, turning them into entrepreneurs and handing them a future instead of a suicide vest. This was newfangled hearts and minds, as practiced with a lavish checkbook and supervised by a skittish embassy looking for "victory" anywhere it could be found. We really did believe money could buy us love and win the war.

The work was done by amateurs like me, sent to Iraq on one-year tours without guidance or training, and eager to create photogenic success stories that would get us all promoted. No idea was too bizarre, too gimmicky, or too pointless for us hearts-and-minders: We actually preferred handing out croissants and children's calendars to tackling tough issues like health care or civic services. One month it might be guaranteed-to-fail small businesses like car washes and brake repair shops in an economy struggling just to take a breath; the next, an Arabic translation of Macbeth, with some of Saddam Hussein's henchmen in bad-guy roles. As one Iraqi told me at a U.S.-funded art show in Dora, one of the most violent suburbs of Baghdad, "It is like I am standing naked in a room with a big hat on my head. Everyone comes in and helps put flowers and ribbons on my hat, but no one seems to notice that I am naked."

Here are some of the wacky ideas we came up with to rebuild Iraq, and remember: These are the wacky ones that actually got U.S. taxpayer funding.

French Pastry Classes
Cost: $9,797

In the hands of one PRT in southern Baghdad, our instructions to help female entrepreneurs translated into pastry classes for disadvantaged Iraqi women who presumably could then go open cute little French cafes in their city's bombed-out streets. In the funding request, the PRT stipulated that "a French Chef with experience in both baking pastries and in teaching pastry classes internationally" would volunteer to teach. So, you may ask, if the French chef was volunteering le time, what was the $9,797 spent on? Well, some was certainly spent on paying students to attend. It was almost impossible to get Iraqis to show up for these things (as they had to, if you wanted your photos of the event to look good) without offering a free lunch, taxi fare, and a stipend. Needless to say, I never heard of any pâtisseries sprouting up on the road to Baghdad's airport.

Play About Donkeys
Cost: $22,500

How to convince the Iraqis to abandon several thousand years of ethnic and religious sectarian hatred? One Baghdad PRT's solution was to pay the local Iraqi artists' syndicate to produce a play, Under the Donkey's Shade. "The play focuses on an uproariously funny legal dispute that splits the people of a town into two groups," the description in the funding report boasts. "The matter in dispute is the value of shade cast by a donkey. The message is clear: Don't quarrel over minor differences. Those who see the play will get the message that political reconciliation is critical as we head into national election season." The production was staged at least once to my knowledge, with some coerced locals in reluctant attendance; political reconciliation did not spontaneously flower.

Road to Nowhere
Cost: Unknown

In 2009, the U.S. Army hired a contractor to pave a short stretch of dirt road near the city of Salman Pak, with the idea of increasing commerce between two nearby neighborhoods. The contractor, however, took the money and laid down only gravel -- which made the road just passable enough that insurgents started to use it as a transit route. The local residents appealed to the police, who set up barricades, ending what little commerce the original dirt road had sustained.

Musclemen Mural
Cost: $22,180

One PRT hired a local artist to paint a mural on the side of a gym near Sadr City. The purpose was to "provide an aesthetically pleasing sight upon entry, helping to bring a sense of normalcy for the citizens in the area and for those passing through." What we ended up with instead was a group of oiled, homoerotic Steve Reeves musclemen.

Bikes for Tykes
Cost: $24,750

At one point the State Department bought 225 children's bicycles from a Jordanian middleman, some with training wheels, to give away near Sadr City, an impoverished Shiite area of Baghdad. The idea was to replace streets filled with trash, pockmarked with shell craters, and ruled by wild dog packs with kids biking to each other's houses, a sort of Mayberry on the Tigris. But it was quickly clear that riding the bikes would be impossible on the destroyed and dangerous roads. Later, I saw some wheels from the bikes being used on wheelchairs for injured Iraqi kids.

Children's Art Calendar
Cost: $18,375

Tasked with community-building on Baghdad's outskirts, my PRT decided to publish a calendar illustrated with Iraqi children's art. First, a local women's association was paid to conduct an art contest for the area's children. Refreshments were served, and the 12 best works were printed on the 1,000 calendars made and distributed -- some within the neighborhood, but most to other State Department officials. I left mine behind in Baghdad.

Vets for the Baghdad Zoo
Cost: Unknown

As part of a joint effort with the Army and the U.S. Agriculture Department to revitalize Baghdad's zoo, the State Department paid for computers and Internet service, ostensibly so that the zoo's veterinarians could establish online relationships with vets in the United States but also so that people could be shown on TV going to the zoo, sending a message that life was returning to normal.

For the same reason, Gen. David Petraeus sponsored a million-dollar Baghdad water park, unusable ever since the water pumps broke down. At the zoo, the now-defunct website's chat room and Skype-like features devolved into a series of absurd internal discussions among the vets: Issues included whether to keep providing alcohol to the bears (it kept them docile) and whether to continue the daily throwing of live donkeys into the lions' cage.

Baghdad Yellow Pages
Cost: $7,000

In a country with few land-line phones and a seriously toxic business environment, some Green Zone genius decided that economic success hinged on producing the first-ever Baghdad Yellow Pages. Even under pressure, we could come up with only 250 businesses that had permanent phone numbers in a city of several million people. My PRT was saddled with hundreds of copies of the finished product. We could not safely go door-to-door and so hired a local contractor, at seven bucks a copy, to give the books away. He dropped off a few copies here and there and likely dumped the rest behind some abandoned building.


The List

The Sick Men of Europe

A checkup on the continent's crisis-ridden economies.


Greece continues to be ground zero for the European financial crisis. Experts from the European Union, the International Monetary Fund, and European Central Bank are in Athens this week to test whether the country is complying with the terms of its EU bailout package. German Chancellor Angela Merkel has suggested that the rescue might need to be renegotiated based on their findings. At stake is whether the country will receive its latest 8 billion euro tranche of the 110 billion euro bailout -- though most analysts agree it's a Band-Aid, at best. Germany's parliament is voting on Thursday on whether to approve enhanced powers for the eurozone's bailout fund -- known as the European Financial Stability Facility -- thought critical to ensuring Greece's solvency going forward.

Prime Minister George Papandreou was in Germany this week to plea for more aid from the German government and business leaders, describing his country's recent efforts to cut debt levels as "superhuman." He pledged a budget surplus by 2012.

In order to plug a budget gap that would have put the latest bailout tranche at risk, the government passed a controversial new property tax this week. Further austerity measures could include an additional 20 percent wage cut for various segments of the public sector (on top of the 15 percent cut they've already absorbed), a 4 percent reduction of pensions, and more tax increases. Greece is aiming to reduce its deficit to 7.5 percent of GDP by the end of this year from 10.5 percent last year.

With the new measures, Greece appears to have avoided a default for now, but possibly at risk of further damage to the country's social stability: A new round of strikes and demonstrations has swept through Athens with more planned for next month.


The Portuguese government got an unwelcome surprise this week when it was discovered that the regional government of the Madeira Islands, a North Atlantic archipelago considered part Portuguese territory, had failed to report roughly $1.4 billion in debt. The islands may now need a $6.9 billion bailout from the central government at a time when Lisbon is desperately trying to get its own house in order.

Portugal received a $116 billion bailout from the EU and IMF in May. The country has undergone a painful series of austerity measure since then, including freezing salaries for state workers, raising taxes, and selling stakes in some of the country's biggest companies. Further measures could include cutting more than 1,700 government jobs. The measures are intended to cut the deficit to 5.9 percent of GDP this year from 9.2 percent last year. Thus far, Prime Minister Pedro Passos Coelho has had strong support for the cuts from parliament.

All the same, unemployment is at its highest rate since 1983, and the economy is expected to remain in recession for at least two more years. The country's credit rating was downgraded to junk status in July. More people are also leaving Portugal than at any time since the end of dictatorship in 1974, mostly to the former Portuguese colonies of Brazil, Angola, and Mozambique. In a striking role reversal, Angola's state oil company and the family of its president have invested heavily in Portugal. Former Brazilian President Luiz Inacio Lula da Silva also toured Portugal, urging Brazilian companies to invest in their former colonial master.


According to the latest Spanish central bank  figures, the country's economy grew at an anemic 0.4 percent in the first quarter of 2011 and only 0.2 percent in the months after that, putting the government's goal of 1.3 percent growth for this year in serious doubt. The unemployment rate remains stubbornly high at nearly 21 percent, and the Spain's public debt has climbed to a 14-year high of 65.2 percent of GDP. The Spanish housing market, where rampant speculation was among the initial causes of Spain's debt crisis, is also still in disarray, with mortgage approvals falling to record lows.

To reassure markets that Spain will avoid the fate of Greece and Portugal, Spain's parliament this month narrowly passed a constitutional amendment, which will restrict annual deficits to 0.4 percent of GDP except during times of crisis. Another law will require the government to curb the accumulated debt to below 60 percent by 2020. The government is also raising money by forcing companies to pay some taxes earlier and requiring hospitals to buy cheaper generic drugs. These measures followed harsh austerity cuts last year, which included freezing pensions, cutting public-sector wages, and raising the retirement age.

The constitutional amendment, supported by Spain's ruling Socialist Workers' Party, was met with street protests throughout the country and prompted a walkout in parliament from leftist and regional parties. Prime Minister José Luis Rodríguez Zapatero dissolved parliament on Sept. 26 and has called for early elections within the next few months. Polls show the Socialists trailing the conservative People's Party.


If you're looking for a glimmer of hope on Europe's periphery, it's probably Ireland, which grew by a stronger than expected 1.6 percent in the second quarter of this year, the second-highest rate in the eurozone, driven largely by export growth. Industrial and agricultural output was also up. Some commentators are suggesting that this could be a sign that the harsh austerity measures instituted by Ireland (contingent on the $113 billion bailout it received last year) -- which included raising taxes, lowering the minimum wage, and cutting the government's payroll -- are working.

But Ireland is certainly not out of the woods. Under the terms of the bailout deal, Dublin needs to draw up more austerity plans in the next few months to reduce its budget deficit to 8.6 percent of GDP, which will necessarily take capital out of the fragile economy. Ireland's export-driven growth is also highly sensitive to conditions in the global economy, so Europe's sluggish 0.2 percent growth is hardly good news for the Emerald Isle. Unemployment remains at 14.5 percent and would be even higher if the emigration rate weren't at a 20-year high.


Bleak as the European economy is at the moment, what really keeps EU leaders up at night is the rapidly deteriorating situation in Italy, which has a nominal GDP almost seven times the size of Greece's. It's widely accepted that a bailout -- if it comes to that -- would overwhelm the eurozone's resources. Italy's debt currently stands at 120 percent of GDP. Standard & Poor's downgraded the country's credit rating from A+ to A in a surprise move on Sept. 21, putting the world's eighth-largest economy below Slovakia and on a par with Malta. Consumer confidence is at a three-year low.

This month, Italy pushed through a package of tax hikes and spending cuts aimed at achieving a balanced budget by 2013. But this isn't going to solve the underlying problem of sluggish growth. The government's forecasts were revised down this week, with only 0.7 percent growth expected this year and 0.6 percent next year.

As it did in the U.S. downgrade in August, Standard & Poor's also based its assessment on Italy's fractious political system, predicting "continuing future political uncertainty about the means of addressing Italy's economic challenges." Not that it needs saying, but having a prime minister embroiled in a series of increasingly explosive legal and personal scandals doesn't help matters.

FILIPPO MONTEFORTE/AFP/Getty Images; LLUIS GENE/AFP/Getty Images; Sean Gallup/Getty Images; LEON NEAL/AFP/Getty Images; ALBERTO PIZZOLI/AFP/Getty Images