This morning's key headlines from GenerationalDynamics.com:

• Japan scrambles F-15 jets to challenge Chinese surveillance plane
• China commemorates the 1937 Massacre at Nanking (Nanjing)
• Russia admits that opposition may win in Syria
• Greece finally gets its bailout commitment
• Europe kicks the can down the road again

Japan scrambles F-15 jets to challenge Chinese surveillance plane

According to China: 

"Chinese and Japanese aircraft were involved in a standoff in the skies above the [Senkaku/Diaoyu] Islands on Thursday.

The situation remains under control, but Tokyo seems intent on upping the ante, observers said.

A Chinese marine surveillance plane, B-3837, was sent to join vessels patrolling the territorial waters around the islands, which belong to China, on Thursday morning, said a statement issued by the State Oceanic Administration on its website.

The plane arrived in the area at about 10 am and conducted joint patrols with a fleet of four surveillance ships.

The fleet ordered the Japanese ships that had entered China's territorial waters to leave the area immediately, the statement said.

Warned by the Japanese coast guard, the Chinese aircraft responded that it was flying in Chinese airspace, Japan's JiJi Press quoted the coast guard's 11th regional headquarters in Naha, Okinawa Prefecture, southern Japan as saying.

The Japanese Air Self-Defense Force scrambled F-15 fighter jets to the area, Japan's Kyodo News Agency reported.

Japan's Defense Ministry accused the air patrol of an "airspace intrusion"."

According to Japan: 

"Chief Cabinet Secretary Osamu Fujimura says the jets were sent in response to a Chinese Oceanic Administration airplane that was spotted near the islands. He said Japan has lodged an official protest and summoned the Chinese ambassador in Tokyo.

"It is extremely deplorable that China's official airplane conducted an airspace invasion of Japan's territory today, on top of their intrusion of territorial waters for three days in a row, as of today, despite our repeated warnings."

A spokesperson for the Japanese prime minister's office confirmed to VOA that in addition to the F-15s, a E-2C "Hawkeye" observation aircraft was also scrambled from Naha, Okinawa.

The Japanese government described the incident as the first ever "intrusion" by a Chinese plane into what Japan considers its airspace.

Chinese Foreign Ministry spokesperson Hong Lei said the plane's mission was "completely normal." "The Diaoyu Islands and affiliated islands have been part of China's territory since antiquity," said Hong. "China's surveillance plane flying in airspace over the Diaoyu Islands is completely normal. China calls on Japan to halt illegal activities in waters around Diaoyu islands and airspace.""

It's very hard to get past the feeling that China is planning something major very soon. In the South China Sea, China has established a strong military presence, and has threatened to board and seize foreign ships that enter its "territorial waters" -- which they claim are the entire South China Sea, even areas that historically belonged to other nations. And now China has escalated the confrontation in the Senkaku/Diaoyu islands with a surveillance plane. The amount of escalation seems to increase every week, and China may be preparing for much more in the next few months.

China Daily and Japan Times / Kyodo and VOA

China commemorates the 1937 Massacre at Nanking (Nanjing)

The confrontation between Chinese and Japanese aircraft occurred on the 75th anniversary of the December 13, 1937, start of the "Massacre at Nanking (Nanjing)," during which Japanese soldiers allegedly raped, massacred and killed some 300,000 Chinese civilians. The Massacre at Nanking is the most potent symbol of today's Chinese nationalism and hatred of the Japanese. On Thursday, 10,000 people attended a ceremony at the Nanking massacre memorial hall, built on a pit where thousands of victims were buried. South China Morning Post (Hong Kong)

Russia admits that opposition may win in Syria

In what some people are describing as a major reversal of position by Russia, Russia's Deputy Foreign Minister Mikhail Bogdanov said: 

"We have to face up to reality: The trend is that the Syrian regime, the government is increasingly losing control, losing more and more territory.

Sadly, a victory by the Syrian opposition cannot be ruled out. ...

[Syria's Opposition Coalition] are saying that victory is just around the corner: ‘We will soon take Aleppo and then we will take Damascus,’ and saying they are in control of 60 percent of territory."

It's worth noting that in the last few days, the U.S. administration made an important concession to Russia's point of view, by designating Jabhat al-Nusra as a foreign terrorist group in Syria, as we reported. Russia is plagued by al-Qaeda linked terrorists in its own North Caucasus southern provinces, it was concerned that an opposition victory in Syria would put additional al-Qaeda linked terrorists in power, further threatening Russia in the Caucasus. Ria Novosti (Moscow) and Telegraph (London)

Greece finally gets its bailout commitment

A summit of European financial ministers agreed to release some 50 billion euros in bailout loans in the next few months, allowing Greece to pay meet its immediate debt payments and avoid going bankrupt. According to Greece's Prime Minister Antonis Samaras: 

"Over the next few months, we’ll get 52.5 billion euros, which is something nobody had expected. About 40 billion of this will stay in the country [to recapitalize the banks and pay money owed to suppliers], and the rest is being used to reduce our debt. 'Grexit' [the slang term for 'Greek exit from the eurozone'] is dead, Greece is back on its feet.

Within the next few weeks, we’ll complete the recapitalization of our banks, which will help liquidity and boost job creation, which is the top priority.

Some people expected us to be out of the euro and cannot believe that we are staying in. We have restored trust in Greece abroad; now we will restore the dignity of the Greek people."

The Europeans also announced a "banking union," which will bring control of national banks under the control of the ECB. After months of "kicking the can down the road," European officials are congratulating themselves and each other for finally solving the euro crisis. Kathimerini

Europe kicks the can down the road again

Over a year ago, I proposed the "Kick the Can Theory," which says that if you want to predict what Europe is going to do, always assume that they'll do the minimum possible to get through today's crisis, postponing the real underlying causes for a few weeks or months, after which the next crisis will be worse. The "Kick the Can Theory" has been proven true every single time so far, and the current agreement is no different. 

Here's a BBC interview with Peter Spiegel, Brussels Bureau Chief for Financial Times (my transcription). He was asked his opinion of Thursday's European agreements:

"To be perfectly honest, there are some deals that are done, but as usual, there are things left undecided. They're going to have to come back to Greece, they're going to have to come back to banking union in the new year, and to be honest, the most pressing issues in both places have not been dealt with.

On the Greece side of things - look they still haven't gotten Greece's debt level back to a sustainable level, a level where Greece can sustain itself. They postponed a huge chunk of that debt relief -- they're going to decide it next year, in some cases in 2014 because they didn't want to take the hard decision, of whether they're going to take haircuts on their own bailout loans, so real tough decisions postponed again on Greece.

And on banking union, yes, there was a major decision to set up a single supervisor. The problem is that's the easy part of this new banking union. The hard part is -- who's going to pay for it? If we're going to say that the euro zone is going to centralize control over banks, what happens when you have to bailout the Spanish banks again? Who pays for that?

And what is very clear from the words of both [German Chancellor] Angela Merkel and [German Finance Minister] Wolfgang Schäuble during the banking union debate -- they want to kick that can down as far as they can. It was originally going to be some time next year. It now looks like the middle of 2014.

That's a day that's way too late for some of these countries, particularly Ireland. Ireland's supposed to come out of its bailout program next year. It needs some certainty on what it's going to be doing with its 60 billion euros in bank debt that was supposed to be shifted away from the Irish sovereign and onto this new banking union.

So these are decisions that people felt as recently as June needed to be taken by the summit, by December. Clearly now the Germans, the Dutch, the Finns, some of these others are pushing that not into next year, but potentially into the year after that.

[Question: [France's president] François Hollande said the euro crisis is behind us. You don't think he's right?]

His predecessor, Nicolas Sarkozy, almost said the exact same thing a year ago today. If you remember, there was the ECB with its bazooka, came out with something called the LTRO which is basically cheap financing for Europe's banks. Everyone patted themselves on the back, said this crisis is over.

It is remarkable now, after another ECB intervention, that the French president is again patting himself on the back for resolving the crisis. I mean, call me skeptical. I've been covering this now for over two years. Every time the crisis is determined to be done, and called "over," it rears its bloody/ugly head again, and if you look at places like - not just Greece but Spain, where the economy is really in a tailspin, their banking sector's still in real trouble, their private ability to borrow in the private sector - there's a real credit crunch there. The real problem in Spain, a country that is much bigger than Ireland, than Portugal, than Greece, that haven't been dealt with. Call me skeptical. I've heard these declarations before, and I'm a cynical reporter, I guess, but I just don't think this crisis is done."

As I've said many times in the past, no solution exists for the Greece problem. It's not that there are three or four different solutions, and the different European factions simply can't agree which solution to implement. The actual problem is that there are zero solutions, so all they can do is kick the can down the road. 

The reasoning behind the repeated efforts to postpone the problem is that people believe that if they can stall long enough, then the real estate and credit bubbles of six years ago will return. They keep saying that the economy will start to grow again next quarter and it never does, because the bubbles are still contracting, and will continue to do so. There will be no real growth again until well into the 2020s.

So anyway, the "Kick the Can Theory" is proven correct one more time.

By the way, the "Kick the Can Theory" also applies to America's "fiscal cliff" negotiations. BBC Podcast (MP3)

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