Re: New EC Thread

[Badboy]

I TALKED TO MY BROTHER ABOUT SANTANDER BECAUSE HIS WIFE HAS AN ACCOUNT THERE.
SEEMS PROBLEM IS CONTAINED FROM A UK POINT OF VIEW,MY RBS BRANCH IS TO CONVERT TO SANTANDER.

Hi Badboy, did you see the Report I posted on Santander UK.....on the U.K. Thread.

YES I DID SEE,DID THINK OF REPLYING ON IT.

[Panda]

21 May 2012 Last updated at 07:56

Prime Minister David Cameron believes the Greek elections amount to a referendum on Greece's membership of the euro, sources close to him say.

He told the Nato summit in Chicago voters in Greece had to get a "clear message" that their vote on 17 June reflected their opinion on the euro.

He also denied the G8 summit was a failure after it did not deliver a plan to resolve Greece's debt problems.

It comes amid concerns that the crisis is being allowed to drift.

BBC chief political correspondent Norman Smith said the government fears that if no decision is taken in the aftermath of the election, the implications for the rest of the eurozone - and the global economy - could be much more profound.

Mr Cameron told the Nato summit: "We now have to send a very clear message to people in Greece: there is a choice: you can either vote to stay in the euro, with all the commitments you've made, or if you vote another way you're effectively voting to leave."

He warned that eurozone countries had to prepare "decisive contingency action" for a possible Greek departure from the single currency.

'Cranky extremists'

And, with reference to the G8 summit, the prime minister said: "I don't think it was a failure because I think it helped to crystallise the world's economic leaders and particularly crystallised the thinking of the eurozone leaders."

On Monday, Deputy Prime Minister Nick Clegg is expected to criticise the lack of leadership and "political paralysis" in Europe.

And his Cabinet colleague Justice Secretary Ken Clarke said the European banking system was already "in tatters".

He said Britain was "heavily exposed" to potential problems and could be among the next targets for market speculation.

The justice secretary said the consequences would be "serious" if the Greek people elected "cranky extremists" and defaulted on their debts as a result.

[Panda]

The Spanish Government has ordered an Audit of all small Banks in Spain .' these are the Banks with Mortgages on unsold Properties and Rajoy wants
a clear picture of their liabilities.

Greek and Italian Banks are still experiencing Customers taking their money out. Rich Greeks in particular are buying up Properties in the U.K..
G8 leaders urge Greece to stay in the Euro , and although the latest poll shows the Greek people for the most part do not want to abandon the Euro,
they know there is no way they can repay their indebtedness and maintain an austerity plan.

There is a meeting of the EU on Wednesday , Schauble says if Greece is allowed to default it means that other Countries could do the same and the
whole Eurozone collapse. How far is the EU prepared to go to keep Greece in the Eurozone? There is a murmur that perhaps Merkel is not the person to
be in charge of this very serious issue.

JP Morgan spokesman says it will be a disaster if Greece opts out of the eurozone and would probably lead to the breakdown of the Euro.

If and when this crisis , which has affected the rest of the World , is over, the EU cannot operate under the same Governance and Eurobonds is the
obvious answer . The problem there is German would be contributing the most because other Countries have smaller economies.

[Panda]

Schaeuble Seeks Crisis Resolution With France’s Moscovici

By Patrick Donahue - May 21, 2012 10:13 AM GMT+0100
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..
German and French leaders meet this week to map out a revised plan for the euro as the Group of Eight exposed disagreement on a rescue strategy, Greece lurched toward a possible exit and Spain’s budget deficit widened.

German Finance Minister Wolfgang Schaeuble will for the first time discuss the 17-nation currency with his newly installed French counterpart, Pierre Moscovici, in Berlin today as European Union leaders prepare for a summit meeting in Brussels on May 23. After three shorter meetings in the last week, Chancellor Angela Merkel and French President Francois Hollande will seek to balance France’s desire to jump-start growth with Germany’s preference for spending cuts.















Wolfgang Schaeuble, Germany's finance minister, said today that the downgrade warning should spur European leaders to ratchet up efforts to resolve the region's debt crisis. Photographer: Michele Tantussi/Bloomberg








May 21 (Bloomberg) -- German and French leaders meet this week to map out a revised plan for the euro as rifts are exposed within the Group of Eight over rescue strategies. Meanwhile, Greece lurches toward a possible exit and Spain’s budget deficit widens. (Source: Bloomberg)








May 21 (Bloomberg) -- David Owen, chief European economist at Jefferies Securities International, talks about German Chancellor Angela Merkel's austerity policy, the risk of contagion following a possible Greek exit from the euro and European Central Bank support for bond markets. He speaks with Mark Barton and David Tweed on Bloomberg Television's "Countdown." (Source: Bloomberg)








May 21 (Bloomberg) -- Tim Condon, chief Asia economist at ING Financial Markets in Singapore, talks about the political and economic situation in Europe and how Greece's potential exit from the euro zone would affect global markets. He speaks with Rishaad Salamat and Susan Li on Bloomberg Television's "Asia Edge." (Source: Bloomberg)





Play Video


May 21 (Bloomberg) -- Savanth Sebastian, an equities economist at Commonwealth Securities Ltd. in Sydney, talks about the implications of the European sovereign debt crisis for global financial markets, the U.S. economic outlook and investment strategy. Sebastian speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)























Chancellor Angela Merkel told reporters she was “very glad” that President Francois Hollande came to Berlin the day of his inauguration. Photographer: Michele Tantussi/Bloomberg



Enlarge image









German Chancellor Angela Merkel and French President Francois Hollande. Photographer: Michele Tantussi/Bloomberg













German Finance Minister Wolfgang Schaeuble. Photographer: Jock Fistick/Bloomberg
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“We’re all very pleased that France wants to offer new initiatives with its newly elected president,” Schaeuble told the Bild am Sonntag newspaper in an interview yesterday. “The German government is ready to talk about anything,” Schaeuble said, though he ruled out measures that would raise debt.

G-8 leaders on May 19 urged Greece to stay within the euro area as polls in the country showed a close race between parties supporting and opposing the EU’s bailout deal. The country is preparing for June 17 elections, following an inconclusive May 6 ballot. Spain revised its 2011 deficit upward -- even as its borrowing costs approached levels that prompted bailouts in Greece, Ireland and Portugal.

Two More Years

The euro has lost 3.5 percent against the U.S. dollar this month and almost $4 trillion has been wiped from equity markets amid concerns over Greece. Schaeuble said May 18 the turmoil could last another two years. Yields on Spanish 10-year bonds climbed to close at 6.27 percent last week. That figure slid to 6.26 percent at 10:56 a.m. Madrid time, while the euro traded down 0.01 percent to $1.2769 in Frankfurt.

President Barack Obama joined G-8 leaders including Hollande and Britain’s Prime Minister David Cameron in embracing a renewed focus on growth, underlining the isolation of Merkel, who maintained resistance to new spending. At the president’s Camp David retreat in Maryland, G-8 leaders said in their final statement that “the right measures are not the same for each of us.”

As EU leaders prepare for their informal dinner, French Prime Minister Jean-Marc Ayrault told Liberation that no potential solutions involving Greece should be rejected. Leaders shouldn’t rule out measures such as state borrowing from the European Central Bank, he said.

Greek Polls

Two weeks after elections in Greece yielded political deadlock and forced the once-taboo notion of leaving the monetary union into political discussion, euro leaders grappled with the possible fallout of such a scenario. Caretaker Prime Minister Panagiotis Pikrammenos will oversee a government that will prepare for a new election.

Opinion polls over the weekend gave a split message on the outcome, with two pointing to victory for New Democracy, which backs the international bailout program, and two favoring Syriza, which opposes it.

Syriza party leader Alexis Tsipras said yesterday in a speech in Athens that his faction’s opposition to the terms of Greece’s financial-aid program doesn’t mean the country would have to abandon the euro if the party forms a government.

Luxembourg Prime Minister Jean-Claude Juncker, who heads a group of European finance ministers, said a majority of his peers have doubts about Greece’s membership of the euro, Der Spiegel reported, without saying where it got the information.

Tsipras, who travels to Paris and Berlin beginning today, denounced such talk, saying it would involve “huge costs.”

‘Clear Message’

“We now have to send a very clear message to people in Greece,” Cameron said yesterday as he attended a NATO summit in Chicago. “You can either vote to stay in the euro, with all the commitments you’ve made, or, if you vote another way, you’re effectively voting to leave.”

European Central Bank Executive Board member Joerg Asmussen, speaking in Berlin today, said that policy makers should stick to “plan A,” keeping Greece in the euro. He said he didn’t want to speculate on a “plan B.”

“What’s the alternative? My preference is that Greece stay in the euro,” Asmussen said today.

The sensitivities surrounding an exit were illustrated May 19, when Merkel’s office dismissed a claim by the Greek government that the chancellor had called for a referendum to decide on the country’s membership in the monetary union.

Greek party leaders united in condemning any interference by the German chancellor on such an issue, with New Democracy leader Antonis Samaras, who heads the largest party, calling her reported comments “unfortunate.”

In Spain, the growth-versus-austerity debate took on a new dimension with the country’s revision of its 2011 deficit, undermining Prime Minister Mariano Rajoy’s battle to stave off a bailout and maintain access to capital markets.

‘Serious Risk’

Rajoy, who on May 16 asked for EU help to access capital markets even as he said the country faced a “serious risk” of being shut out, is struggling to convince investors he can cut the deficit during a recession while shielding public finances from banks’ real-estate losses.

The deficit amounted to 8.9 percent last year, 0.4 percentage point more than previously estimated, Spain’s Budget Ministry announced at 10 p.m. local time Friday. That’s down from 9.3 percent in 2010, following government austerity measures including cuts to public workers’ wages, a freeze on pensions and a tax increase.

Spanish Economy Minister Luis de Guindos rejected EU pressure this week to take an International Monetary Fund credit line to help shore up the nation’s lenders, the Madrid-based ABC newspaper reported. A ministry spokesman in Madrid declined to comment on the report in ABC, which cited people present at a meeting of EU finance ministers.

[Panda]

10:55am UK, Monday May 21, 2012

The Prime Minister has warned Greece that its new round of elections must be a vote about staying in the eurozone.
David Cameron insisted failure to provide clarity at the ballot box on June 17 could prove disastrous for the world economy.

His message came as his Cabinet colleague Ken Clarke said the European banking system was already "in tatters".


There is a choice, you can either vote to stay in the euro with all the commitments you have made, or, if you vote another way, you are effectively voting to leave.

David Cameron's warning to the Greek people
Mr Clarke also warned that Britain was "heavily exposed" to potential problems and could be among the next targets for market speculation.

The warning from Mr Cameron comes while he is in America for back-to-back G8 and Nato summits, where talks with fellow world leaders have "crystallised" the problems.

"We now have to send a very clear message to (the Greek) people," Mr Cameron said.

"There is a choice, you can either vote to stay in the euro with all the commitments you have made, or, if you vote another way, you are effectively voting to leave.

"The crucial thing is that eurozone leaders have to put in place contingency plans for both of those eventualities - really clear plans to keep our economies safe and stable."



Nick Clegg has warned of the risk of rising civil unrest

He added: "What I think would be bad for Greece, bad for Europe, bad for the world would be if we just allowed the can to be kicked down the road with an inconclusive outcome," he said.

"It has just got to try and make sure that this is a moment of clarity and decisiveness for the eurozone."

Mr Cameron indicated that German Chancellor Angela Merkel - who has driven the demands for austerity and fiscal discipline within the eurozone - had shown signs of a willingness to compromise.

"I think she did show some flexibility in terms of what more can be done on the growth agenda and also what more can be done to handle the risks inside the eurozone," he said.

"The fact that you have got countries like Japan, America, Canada round the table, as well as Britain, who are outside the eurozone but affected by what happens inside the eurozone, I think, was helpful in bringing that important pressure to bear."


greek mp: yes to eurozone, no to austerity
Mr Merkel's softening approach comes after new French President Francois Hollande stood firm on his election promise of avoiding more austerity cuts in France.

Deputy Prime Minister Nick Clegg also criticised the lack of leadership on the eurozone crisis, saying it risked a rise in extremism and civil unrest.

He said: "This cannot carry on, because the combination of economic insecurity and political paralysis, we know this from the history of our continent, is the ideal recipe for an increase in extremism and xenophobia.

"Some of the answers are under our nose. Some of the answers - about creating more jobs, more prosperity, more competitiveness by completing the single market - is something we should have done 20 years ago.

"It is unforgivable that European leaders still meet every few weeks and issue declarations about completing the energy market, energy liberalisation, completing services liberalisation; and they don't do it."



Mr Hollande's first foreign meeting was with Germany's Mrs Merkel

Meanwhile, Justice Secretary Mr Clarke, a former chancellor, said that Greek voters had to "face up to reality".

"These are hardships inflicted on them by the irresponsibility of their former politicians," he said.

"But they cannot just vote for saying 'Could people just carry on giving us some money so we do not have to change anything.'"

Mr Clarke said the consequences would be "serious" if the Greek people elected "cranky extremists" and defaulted on their debts as a result.

"No-one knows exactly what will happen in the rest of Europe. But the banking system is in tatters. It is weak in very many places," he went on.

"We don't know what the knock on effects would be, they could be very serious and of course people will start barking at the door of Portugal, Ireland, Italy and here in Britain.

On Sunday, the shadow chancellor Ed Balls told Sky's Dermot Murnaghan that it would cause "huge damage" if Greece made a disorderly exit from the eurozone.

Mr Balls said: "Greece needs to stay in for at least as long as the eurozone needs to sort its act out - and I am afraid that is taking a very, very long time."

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Robert Nisbet
May 21, 2012 11:45 AM

Recommend post (1)


You're going to hear a lot about the European Investment Bank this week as EU leaders try to add a peppering of growth to the gruel of austerity.


It's likely that this Wednesday's informal leaders' summit in Brussels will result in an agreement to boost the cash line to the EIB together with the issuance of EU backed bonds for specific large-scale projects.


Although it's not obviously the most thrilling aspect, it'll be interesting to see how these proposals are worked into the stability pact: will they slide in a 'growth' clause, build another separate growth treaty or will they opt for a less forceful non-binding protocol?


President Hollande says he's not looking for a full-scale renegotiation, but he'll want to ensure this is portrayed as a victory for the French people and an early success in Brussels for the new kid on the voting bloc.


The UK will also want to claim some of the success: its team is at pains to point out the government has been consistently touting growth as a solution to the Eurozone's ills, rather than taxing its way out of the crisis with, say, a financial transaction levy (the French are still keen on this).


So what is the EIB? Officially it's the 'long-term lending institution of the European Union' and is owned by all 27 members. Last year it supplied 61 billion Euro in financing to what it deemed to be worthy causes.


The problem is this: its rules prevent it from lending to areas in financial turmoil, so if it were to lend money to a Greek start-up for example, those funds would have to be underwritten.


For critics of course, pumping a few billion into the EIB and setting up project bonds is just tinkering around the edges.


They argue growth is better encouraged by preventing a credit crunch, and that can only be achived by restoring confidence in the European banking system, which may mean unlocking the vaults of the Central Bank and the ESM (the permanent bailout fund) to unclog the pipes, which are starting to fur once again.


That of course will prompt a 'nein' from Germany.

[Panda]

3:39pm UK, Monday May 21, 2012

Nick Pisa, in Italy

A cash-strapped father threw his two young children to their deaths from a balcony before leaping off himself, Italian police have said.
Marco Turrini, 41, had been unemployed for 18 months after the advertising firm where he worked was hit by the economic crisis and cut back his hours.

Neighbours said he had grown increasingly depressed as he struggled to find a new job, and feared losing his wife and his home as the family's situation worsened, according to police.

The tragedy happened in the northern Italian town of Brescia and is thought to be the latest in a string of suicides by people who have been hit by the downturn in the economy and the ongoing eurozone crisis, which has increased unemployment.

A police spokesman said Mr Turrini died instantly.

The Italian's 14-month-old girl Benedetta and four-year-old boy Samuele initially survived the fall from the sixth-floor balcony, but later died in hospital from their injuries.

The spokesman added Mr Turrini's wife had been in the flat at the time and the couple had argued before he grabbed his son and daughter and threw them to their deaths.

She is in hospital being treated for shock.

A neighbour, who was identified only as Elisabetta, told Italian media: "They were a very happy family. I had known them for about four or five years. I saw the children born and watched them grow up.

"This morning I heard some shouting and when I came downstairs to see what had happened I saw him on the floor. He was barely alive.

"He was just about breathing. The little girl's heartbeat was very weak."

Later Mr Turrini's cousin, Maurizio, revealed that the late man's father had committed suicide a year ago.

He added: "I can't believe it. I am in shock. I knew he wasn't working but I didn't think things were this bad. What did the children have to do with this?"

The ongoing economic crisis has been blamed for a spate of suicides across Italy in recent weeks.

The most dramatic incident was in March when a man set fire himself outside a tax office in Bologna.

:: Samaritans is available 24 hours a day on 08457 90 90 90 in the UK or in the Republic of Ireland on 1850 60 90 90. Samaritans can also be found online.
++++++++++++++++++++++++++++++++++++++++++++++++++++
A man committed suicide on the steps of the Greek Parliament a couple of months ago, in this case the Father was wrong to take his childrens lives as well. Italy currently has a 120%GDP so has no chance of reaching the 3% GDP for several years. Greece has a .137%GDP and owes much more money than Italy. The EU must stop fiddling around , the situation is critical and this crisis shows just how much the EURO and EU are incapable are unable to
cope and so divided .

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Madrid stock exchange 18/05/2012

Bloomberg via Getty Images


Faced with a further worsening of the financial crisis, Mariano Rajoy's government tries to give pledges to markets while demanding EU support. But when comparing his situation to those of Portugal and Greece, we realize that there is no alternative, says El Mundo.

Exactly one year ago today, on May 17, 2011, Portugal was bailed out by the EU and the IMF, which came up with 78,000 million euros for the Socialist government of Jose Socrates. The government had asked on April 7 for the intervention, in return for which it undertook a rigorous plan of adjustment and reform. A month later Socrates was voted out and the incoming centrist Pedro Passos Coelho, with the support of the opposition, prepared to honour the bailout terms. Since then Portugal has increased direct and indirect taxes, cut the salaries of public employees by over 15 percent, reduced expenditures on health and education and slapped a freeze on new infrastructure. In consequence, unemployment hit a record high at 14.9 percent of the workforce.

Not so bad, afterall

This first quarter, however, has surprised everyone with a drop in GDP of only 0.1 percent, much lower than expected thanks mainly to the foreign sector. Portugal is still in recession, but its citizens have begun to detect at least that the decline is being braked. Greece is the opposite case: after two years of a rescue plan, it has made little progress on reforms. Its political class is showing signs of severe irresponsibility, while its citizens are growing exasperated at seeing their sacrifices come to nothing. And while Portugal has stepped out of the sights of the markets for now, Greece is keeping the entire European Union in suspense.

The two countries perfectly illustrate the difference between complying and not complying with one’s obligations. The path of adjustment and reforms chosen by the Mariano Rajoy government since taking power is the only path possible, though the swings of the markets do sometimes place it in doubt – which is just what is happening now, as uncertainty over Greece’s future in the eurozone has driven the risk premium up past the 500 mark for the first time in history and the stock market has sunk back to mid-2003 levels.

A “loud and clear” message

In Congress yesterday, Finance Minister Cristobal Montoro repeated that “either we make the adjustment or the markets will make them for us.” There is nothing else, and above all, there is no going back. Only this way can we expect help from the EU and the ECB. This is the context in which we must understand the complaints of Montoro and of Rajoy himself in demanding more decisiveness in Brussels and Frankfurt in defending Spain. The Prime Minister yesterday called on the EU for a “loud and clear” message in defence of the euro and of the “soundness of sovereign debts.” Specifically, he referred to the “serious risk” that the markets would stop lending to Spain or lend only at “astronomical” rates, which would paralyse the financing of the country and of some companies and financial institutions that are already having a hard time getting credit.

The government’s message to the markets, in effect, was that the ECB will act to defend Spanish debt only when the premium exceeds 500 points. This prompted a swift fall in the price, which closed out the day at 482 points. The Executive is right to complain, since the Spanish economy cannot possibly cope with such a high spread with German bonds over a longer time.

At the same time, however, the government must recognise that having such a high risk premium is still our own fault, and it will not fall until markets feel that the reforms are having an effect. In this sense, the forced nationalisation of Bankia has been a step backwards since it has revived doubts about Spain’s financial sector. Today, though, we may be able take a leap forward if Spain’s Fiscal and Financial Deficits Council reveals that the regions are truly beginning to get a handle on their deficits.

Translated from the Spanish by Anton Baer

On the web
Homepage of El Mundo es
Original article in Jornal de Negocios pt

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Debate

Europe’s new soft right is winning


21 May 2012
Aftonbladet Stockholm Comment8


Vlahovic


Triumphant a decade ago, today social democrats have been voted out office in most European countries — a change that is due to a lack of new proposals, but also and more importantly to the right’s appropriation of the language and ideas of social democracy.

Katrine Kielos

Once upon a time there was a drinking yoghurt manufacturer. Like most prosperous companies, it was hoping to do even better, so it asked customers how it could improve its products. The customers gave this question their sincere consideration, and the company changed its recipes to take into account their answers. However, there was no improvement in sales. Why? One day, the company’s managers decided to conduct an unprecedented experiment.

They asked their customers what was their objective in buying their product. In other words, what did they think was the advantage of drinking yoghurt? It rapidly emerged that most people who bought drinking yoghurt did so when they were preparing a long car journey. They were looking for a food product that was long-lasting and did not leave crumbs. Thereafter the company understood what should be improved. It was not a matter of producing a better taste, but of developing practical product features which contributed to the convenience of consuming drinking yoghurt in a car. The main priority for consumers was not a product, but a solution to a problem.

The New Yorker recently published an interview with Clayton Christensen, one of the world’s best known corporate gurus who studied the reasons why thriving major companies, which are dominant in their industry sectors, sometimes lose entire markets to new competitors. What Christensen demonstrated was that the new products which replaced those produced by the industry leaders were not better, but, on the contrary, almost always of lesser quality. How could this be?

Although it may be a different world, this phenomenon also applies in politics. Ten years ago, Europe was almost entirely dominated by social-democratic governments: with Tony, Gerhard and Göran [Blair in the UK, Schröder in Germany and Persson in Sweden] leading the way. Then something happened: a new player entered the market.

Last week, the Norwegian conservative party, Høyre, launched a new web domain [arbeidspartiet.no] "working party", which is confusingly similar to the name of the Norwegian Labour Party [Arbeiderpartiet]. Over the last few months, Høyre’s leader Erna Solberg has taken to banging on about "human beings before billions", while the party’s rising star Torbjørn Røe Isaksen has declared that Høyre no longer wants to deregulate the labour market and that it has nothing against trade unions.

All of this is designed to combat a perception of Høyre as a heartless club for rich people. The strategy is obviously outright copied from Swedish Prime Minister Fredrik Reinfeldt. So you want to copy the Swedes? say the Norwegian social democrats, who are quick to point out that in the wake of six years under the Reinfeldt’s conservative government, unemployment in Sweden now stands at 8%.

In spite of this performance, Fredrik Reinfeldt and his centre-right Alliance for Sweden has proved to be a remarkably successful export. From David Cameron’s Great Britain to Angela Merkel’s Germany, Europe’s destiny is now in the hands of a soft modernised right. David Cameron speaks of “progressive conservatism”: a term that is every bit as contradictory as "peacekeeping missile" or "environmentally friendly dry cleaning", but he is the one who is prime minister. And you would be forgiven for thinking that he is Fredrik Reinfeldt’s public-school educated twin brother.

At the same time, Europe’s most powerful woman, Angela Merkel, has staked her claim on a platform of pragmatism and watery centrism. Needless to say, the German social democrats are none too pleased. If Angela Merkel agrees to a compromise with socialist François Hollande, how can they vote against such a proposal? And let’s not forget that that the growth pact was their idea.

So there is no easy response to a new soft right, which apes social-democratic politics, steals its slogans and does an even worse job of government than the social democrats themselves, but nonetheless wins elections. Why vote for a copy when you can have the original? Social democrats all across Europe are asking this question in the hope that they can convince voters of the absurdity of this situation. But what they have not realised is the fact that copies have an effective advantage. When dominant companies are driven out of markets by the competition, the spoils go to producers of products that are almost always of lesser quality, but nonetheless more innovative.

In the 2006 campaign, the Swedish social democrats were offering better reimbursement for dental care. In 2010, they proposed to reduce the tax burden on pensioners. But they lost. Instead of focusing on improving a system that they themselves established, European social democrats would do well to ask themselves what is the problem that people are seeking to solve. Somewhere along the way, this is the question that disappeared from view, sometime back in the heyday of Tony, Gerhard et Göran.

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Euro Zone
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Euro Zone News

U.K. Needs More BOE Stimulus and Possible Tax Cuts, IMF Says
Updated 3 minutes ago
Britain requires further monetary easing to aid the economy and Chancellor of the Exchequer George Osborne should prepare for temporary tax cuts, the International Monetary Fund said.


Europe Futures, Metals Gain on Stimulus Signs; Euro Drops
Updated 11 minutes ago
Stocks gained for a second day on speculation European leaders will join China in stepping up efforts to support global growth. Spanish bonds rose after a bill sale, while German bunds fell and the yen weakened.

Italy to Contract More Than Government Forecasts, Istat Says
Updated 26 minutes ago
Italy’s economy will contract this year more than the government forecasts as falling domestic demand and investments extend the country’s fourth recession since 2001, the national statistics institute said.

Mauritius Has Room for ‘Smaller’ Rate Cut, Absa’s Markus Says
Updated 29 minutes ago
Mauritius’s central bank has limited leeway to cut its benchmark interest rate, said Ridle Markus, a strategist at Absa Capital.

Crude Falls on OECD Forecast Cut, Iran Inspection Accord
Updated 1 hour, 8 minutes ago
Crude in New York slipped after the Organization for Economic Cooperation and Development trimmed economic growth forecasts in the euro area and Iran agreed to let western nuclear inspectors into the country.

Greek Euro Exit May Put U.K. in Recession, Chote Says
Updated 2 hours, 11 minutes ago
A Greek exit from the euro threatens to send the U.K. into a recession equal to the downturn in 2008 and 2009, Robert Chote, chairman of the U.K.’s Office for Budget Responsibility, told the Guardian in an interview.


Merkel Heads for Debt Showdown With Hollande at EU Summit
Updated 12 minutes ago
Germany and France, the biggest euro economies, are headed for a showdown at tomorrow’s European Union summit over their views on how to stem a debt crisis that threatens the single currency’s survival.


U.K. Inflation Slows as IMF Sees Need for More Stimulus
Updated 38 minutes ago
U.K. inflation slowed more than economists forecast in April, cooling to a level that relieves Bank of England Governor Mervyn King of the task of writing a letter to the government.

Asia Stocks Rise as Germany, China Vow to Spur Growth
Asian stocks rose for a second day on speculation China and Europe will do more to bolster economic growth, boosting the outlook for the region’s exporters.


Greeks Too Western to Pull Off Baltic Rebound, SEB Says
Greece is too used to western living standards to endure the austerity needed to emulate the success of the Baltic region’s rebound, said the head of Estonia at SEB AB, the second-largest bank in the three former Soviet states.
Better Off Outside Euro Zone

Papaioannou Says Greek Euro Exit Dangerous

Cadman Says Greek Exit Increasingly Probable

Lombard Street’s Dumas Says Euro Must Be Devalued

Fels Says Greek Exit Would Be a `Train Wreck'

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Greek crisis

“Geuros” to save Athens


22 May 2012

Presseurop
EUobserver.com Comment


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The chief economist of Deutsche Bank, Thomas Mayer, speaking at a symposium organised by the German daily Die Welt, has proposed introducing a "Geuro" for Greece – a parallel currency to replace the euro," allowing Greece to devaluate while staying in the eurozone," explains the EUobserver–


If the radical left-wingers win the 17 June elections and stick to their promise of scrapping the €130 billion bail-out and its austerity requirements, Greece could still stay in the eurozone without financial aid if it introduced a parallel currency. The "Geuro" would come as promissory notes, a form of government-issued debt that can be sold on. It would devaluate sharply against the euro but would allow the government to buy itself some more time to carry out reforms and pass budget cuts... [...] One pre-condition for the scenario to work would be that aid would still come from other euro-countries and the International Monetary Fund [...] Cash-strapped Greek banks would also need to be rescued by creating a European "bad bank" – according to the Deutsche Bank projection.

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22 May 2012 Last updated at 13:34 Share this pageEmail Print Share this page

1KShareFacebookTwitter.Eurozone biggest threat to global outlook, OECD says The crisis in the eurozone has been on the radar for some time Continue reading the main story
Eurozone crisisWhat if Greece leaves the euro?
Q&A: Is Santander UK safe?
Greece's shattered recovery hopes
Spain's blame game

The eurozone crisis is the single biggest threat to the global economy, according to the Organisation for Economic Co-operation and Development.

The economy of the 17 nations that use the euro will shrink 0.1% this year, before rebounding to 0.9% growth next year, the OECD predicts.

By contrast, the US economy will expand by 2.4% this year and 2.6% in 2013.

The OECD also seemed to back calls by some Europeans to combine spending cuts with measures to boost growth.

"The crisis in the eurozone remains the single biggest downside risk facing the global outlook," said OECD chief economist Pier Carlo Padoan.

In November last year, the organisation warned of a "deep recession with large negative effects for the global economy" if the eurozone did not tackle the crisis.

On Tuesday, it said: "The immediate dangers of such developments have receded somewhat since last autumn, although... the dangers have not disappeared.

"Failure to act today could lead to a worsening of the European crisis and spillovers beyond the euro area, with serious consequences for the global economy."

The OECD predicted that the UK would grow by just 0.5% this year and by 1.9% in 2013. This comes after figures showed that the UK had returned to recession in the past two quarters.

'Growth-friendly'

Ahead of an informal summit of European Union leaders in Brussels on Wednesday, the OECD seemed to back calls from the new French president to enact measures such as "increasing European Investment Bank funding for infrastructure projects".

Continue reading the main story
“
Start Quote
Reform fatigue is increasing and tolerance for fiscal adjustment may be reaching a limit”
End Quote
Pier Carlo Padoan

OECD

It also said that "better use" could be made of the European Central Bank's balance sheets and called for "a further easing in the euro area".

"Fiscal consolidation and structural measures must proceed hand in hand, to make the adjustment process as growth-friendly as possible," the OECD said.

The organisation expects the unemployment rate to stay high in the euro area - 10.8% this year and above 11% next year.

The jobless rate is currently 10.9%, the highest since the euro was formed in 1999.

Mr Padoan also noted the backlash against austerity measures across Europe, which has seen street protests and led to the election of Francois Hollande.

In elections earlier this month, the majority of Greeks voted against those parties backing the drastic austerity measures that had been agreed with the EU.

"Elections in a number of euro-area countries have signalled that reform fatigue is increasing and tolerance for fiscal adjustment may be reaching a limit," he said.

"Rising unemployment and social pain may spark political contagion and adverse market reaction", with countries outside the euro also at risk of being hit, he added.

The OECD is an organisation that consists of 34 countries, including the US and Western European nations.

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ATHENS — For the last couple of weeks, the phone at Tasos Ioannidia’s five-star hotel on the breezy island of Mykonos has been ringing steadily, but not with the types of inquiries he wants to field.

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“People are saying they don’t want to confirm a stay or make deposits,” said Mr. Ioannidia, who owns the luxurious Belvedere Hotel, perched on a cliff over the Aegean Sea. “They are afraid of what could happen to their money if Greece leaves the euro and returns to the drachma.”

Worries that Greece might default on its debts or even leave Europe’s currency union have deepened since May 6, when Greeks voted in shocking numbers for a left-wing party willing to tear up Greece’s $170 billion international bailout agreement. These days, even though 80 percent of Greeks say they want to stay with the euro, talk of “drachmageddon” can be heard in conversations all around Athens — in executive suites, at mom-and-pop shops and even in nightclubs.

“A return to the drachma would be a nightmare,” said Mr. Ioannidia, whose bookings began to trail off a few months ago and slumped badly after the election. “It would create a panic for businesses and also for people wanting to do business with Greece.”

Any departure from the euro, if it did occur, would not come quickly, even if a new government repudiates Greece’s bailout terms; orchestrating the exit would be legally complicated and lengthy. European leaders may also move to prevent a Greek default or exit at the 11th hour, considering the almost unending uncertainties.

But these days, few people are taking chances.

Big tourism operators like TUI of Germany and Kuoni of Britain are demanding the addition of so-called drachma clauses to contracts with Greek hoteliers should the euro no longer be in use here. British newspapers are filled with advice columns for travelers worried about the wisdom of planning a vacation in Greece, or even Portugal and Spain, should the euro crisis worsen. Large multinational companies like Vodafone Group, Reckitt Benckiser and Diageo have taken to sweeping cash every day from euro accounts back to Britain to limit their exposure.

But coming up with a Plan B is proving difficult for Greek businesses, especially smaller ones. There are so many unknowns involved that many of them cannot even conceive of how they would cope. Economists say the drachma would be devalued by an estimated 50 to 70 percent compared with the euro.

“How do you prepare for the apocalypse?” asked Dimitrios Manolis, the owner of AlfaSolid, a small company that makes design software. He has had to whittle his staff of six engineers down to two, as firms he did business with have collapsed amid a credit squeeze. “If Greece leaves the euro, there will be no work for me,” he said.

Dimitris Mamoglu, the owner of a fine-jewelry store near Syntagma Square, said small businesses had “absolutely no plans” to handle a return to the drachma. “Nobody can calculate how much money or time it would take to change over,” he said.

Tens of thousands of Greek businesses could collapse from one day to the next, said Constantine Mihalos, the president of the Athens Chamber of Commerce and Industry. Around 85 percent of Greek companies employ fewer than 10 people, and many are already near bankruptcy as the Greek economy nose-dives and bank credit dries up.

With a devalued currency, inflation would rise rapidly, and Greek companies would struggle to pay the euro-denominated bills of their suppliers. Trade with other countries would slow sharply for a while, as suppliers halted deliveries, further crippling Greek businesses that depend heavily on imports.

Even large Greek exporters that might benefit from a devalued currency are opposed to a return to the drachma, fearing damage to the country’s image as a place to do business.

The troubled Greek banking system, which is already running on fumes, would face a serious run as depositors pulled their funds. An estimated 250 billion euros, or about $315 billion, has already left Greek banks since the crisis first broke open three years ago. In the days after this month’s elections, more than 700 million euros, worth about $890 million, were pulled, a pattern that Greek bankers expect to continue until greater political and economic certainty is restored.

The International Monetary Fund estimates that a Greek exit from the euro would lop more than 10 percent from Greece’s gross domestic product for at least the first year after a return to the drachma.

After that, the thinking goes, a new dawn would break, as the weakened Greek currency lowers the cost of Greek labor and products like olive oil. As was the case in Argentina, businesses and consumers in other countries would eventually start buying Greek goods and services once they improved in value.

That may help the tourism industry as vacation-seekers come seeking bargains. But hopes of a broader export-led recovery may be little more than a chimera, said Mr. Mihalos, the chamber of commerce president.

Aside from shipbuilding, most of Greece’s industrial base has eroded in the 30 years since the government nationalized large areas of industry. Wealth-generating businesses diminished, and tens of thousands of laid-off workers were absorbed by the state to reduce unemployment.

Today, Greek exports of manufactured products account for only 10 percent of gross domestic product, compared with a 30 percent average for the rest of the euro zone. In addition, Greece’s adoption of the euro hastened a steady shift away from agricultural production. Today, Greece imports nearly 40 percent of its food, most of its medicine and almost all of its oil and natural gas, a situation that may lead to shortages if international suppliers halt business for a period.

Should that happen, observers say Greece may need to prepare for civil unrest.

“If we go to the worst case, and I pray that we don’t, it’s going to be a complete Greek tragedy before normalcy is restored,” Mr. Mihalos said.

A version of this article appeared in print on May 23, 2012, on page A4 of the New York edition with the headline: Businesses In Greece Fear Switch In

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18 May 2012 Last updated at 12:50 Share this pageEmail Print Share this page

442ShareFacebookTwitter.Spanish economy: Who is to blame for its problems?By Laurence Knight

Business reporter, BBC News

How will Spain's economy get back on its feet? Continue reading the main story
Eurozone crisisWhat if Greece leaves the euro?
Q&A: Is Santander UK safe?
Greece's shattered recovery hopes
Greek euro exit and you

Once again, markets are becoming nervous about lending to a eurozone government. This time it's Spain's turn.

The interest rate demanded by markets from the Spanish government to lend it money for 10 years has risen well above 6% - not far short of the 7%-8% level that prompted Greece, the Irish Republic and Portugal to go cap in hand to Brussels for a bailout.

In comparison, the German government only has to pay an interest rate of 1.42% - which, by the way, is the cheapest cost of borrowing that Berlin has ever faced.

What the markets are saying is that they are afraid Spain may ultimately go the same way as Greece, and prove unable to repay its debts, so they are moving their money to the safety of German bonds.

Meanwhile, Spain's banks are also in trouble. A rumour - denied by the Spanish finance ministry - circulated on Thursday that nervous depositors had withdrawn a billion euros of cash from their accounts at Bankia, a bank that was created out of the merger-cum-rescue of seven small regional savings banks in 2010.

Fears are rife of a vicious circle. If more cash leaves the Spanish banking system, the banks may not have the money needed to keep lending to the government.

Spaniards might be all the more minded to transfer their money to the safety of a German bank account if they witness a traumatic exit of Greece from the eurozone - something likely to involve the freezing and forced conversion of ordinary Greeks' savings into severely devalued drachmas.

On the other hand, if the Spanish banks get into trouble then the government in Madrid may not have enough money to bail them all out.

Property bubble

But the problems faced by Spain's government and its banks are just symptoms. The real issue is the mess that is Spain's economy.

Believe it or not, before 2008 Spain's government was one of the least spendthrift in the eurozone - unlike Greece. Or Germany.

The Spanish government's debts were a mere 36% of its gross domestic product (GDP) (the output of its economy) in 2007, while the German government's were 65%.

What's more, Madrid was in the process of paying its debts off - it earned more in tax revenues than its total spending. In contrast, Berlin regularly broke the maximum annual borrowing level laid down in the Maastricht Treaty of 3% of GDP.

Evidently, this crisis has nothing to do with the recklessness of Spain's government.

Instead, it was other people in Spain who behaved recklessly.

Interest rates fell to historic lows when the euro was launched in 1999. So Spain's banks, property developers and ordinary home-buyers collectively borrowed and fuelled an enormous property bubble.

Continue reading the main story Crisis jargon buster
Use the dropdown for easy-to-understand explanations of key financial terms:
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Austerity
Economic policy aimed at reducing a government's deficit (or borrowing). Austerity can be achieved through increases in government revenues - primarily via tax rises - and/or a reduction in government spending or future spending commitments.
Glossary in full Between 1996 and 2007, Spanish property prices tripled - comparable to the price rises seen in the UK.

Now the bubble has popped. Those prices are steadily falling - and they look like they have a lot further to go.

The construction industry has collapsed, leaving hundreds of thousands out of work. Overindebted home-owners face financial misery and have cut back on spending. And the banks are staring at a mounting pile of bad mortgage debts.

All of which means that now - just like the UK - Spain's government finds itself borrowing and spending like crazy to stop its economy from collapsing altogether.

In Spain, unemployment has risen to 24% of the workforce - which means fewer people paying income taxes and more people demanding benefits from the government.

Spending habit

Unfortunately for Spain, a burst housing bubble isn't the biggest problem the country faces.

That's because Spain also experienced another bubble - in its labour markets.

Wages rose far too quickly during the boom years of the last decade. Labour unit costs - a measure of how internationally competitive a country's labour force is - rose 40% relative to levels in Germany during the past decade.

That loss of competitiveness has left Spain - not just the government, but the entire country - with a big overspending problem.

With imports so cheap, and Spanish exports so expensive, the country's economy as a whole found itself spending 10% more than it was earning from the rest of the world in 2007 and 2008.

Half of all Spaniards under the age of 25 who want a job cannot find one. Many are protesting.
Unfortunately for Spain, it shares a currency with Germany. That means Spain can no longer simply devalue the peseta - something that would automatically make its workers cheaper and more competitive in the world. There is no peseta to devalue.

It means that Spain will remain stuck in an overvalued currency - while Germany will continue to enjoy an undervalued currency - for many more years, until that gap in the relative competitiveness of their workers slowly closes again.

And this is where it gets really nasty. Because so long as Spanish workers remain uncompetitive in the world economy, it is inevitable that Spain as a whole - government and private sector - will continue to have to borrow from the rest of the world.

Despite having entered its second recession since 2008, even as of 2011 Spain's economy was still overspending at a rate of 5% of its GDP. To eliminate this overspending altogether may require a far deeper recession.

Fleeing

Which brings us to the big question: Who will lend Spain the money it needs to pay for this continuing overspending, and thereby avoid a total collapse of its economy?

In the boom years, it was Germany's (and France's) banks that did the lending.

But since last summer that has changed. These banks have started to ask for their money back.

Continue reading the main story IBEX 35 Index
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That's because, since last summer, a doubt has crept into the minds of Spain's lenders.

It is not merely that Spaniards - be it the government, the banks, property developers or home-buyers - have borrowed more than they can repay.

There is now a tangible risk, albeit small, that a country like Spain might go for the nuclear option and leave the euro altogether, because this might eventually prove to be the only way that Spain can regain its competitiveness and end its economic misery.

In that case it does not matter whether or not your Spanish borrower can repay their debts or not. The money you have lent could be frozen, forcibly converted into new pesetas, and then devalued against the rest of the remaining eurozone by perhaps 50% or more.

So, more and more people - not just French and German banks, but also many big investors and companies - have started pulling their money out of Spain and moving it to the safety of Germany.

All of which means that since last summer, Spain has not only needed to borrow to pay for its nasty overspending habit. Now it also needs to borrow to replace all of the money that is fleeing the country.

Bundesbank

What is the scale of this problem?

According to the Spanish central bank - which is subordinate to the European Central Bank (ECB) - by March its total lending to Spain's banks had increased to 264bn euros (£210bn; $335bn). That has risen from less than 50bn euros in June 2011.

Continue reading the main story
What really caused the eurozone crisis?

Spain's central bank in turn borrows most of this money from the ECB. It now owes the ECB 285bn euros, or 27% of Spain's GDP, and rising.

And it isn't just Spain's central bank. For similar reasons, the central bank of Italy has now borrowed about 279bn euros from the ECB, or 18% of Italian GDP, while those of France, Greece and the Irish Republic have taken about 100bn each.

And where has the ECB been getting all this money from? The answer is mainly from Germany's central bank, the Bundesbank.

The total lending provided by the Bundesbank via the ECB to its peers within the eurozone has risen and risen since the eurozone crisis began, reaching 644bn euros in April. That's 24% of Germany's GDP, and rising.

All of this is a convoluted way of saying that, as Germany's banks have steadily demanded the return of the money they lent to Spain, Italy and the rest over the past 10 years, Germany's central bank has had to step into the breach.

And these are not small figures. Compare them with the mere 130bn-euro second bailout package for Greece that caused so much hand-wringing by European politicians late last year.

Running out

But if the Bundesbank has come to the rescue, then why are markets getting in a tizz all over again?

Well, there are three reasons.

First of all, Spain's (and Italy's, Portugal's, Greece's and Ireland's) rescue lenders - namely the ECB, the IMF and the other eurozone governments - have all made clear that they expect to be repaid not only in full, but ahead of anyone else that these countries might happen to owe money to.

And that makes Spain's other lenders very uncomfortable, because it means that if Spain one day has to write off some of her debts, then they are the ones who will take all the losses.

Secondly, the supply of rescue loans is at risk of running out.

The Spanish central bank can only prop up Spain's banks if they provide security to back the emergency loans they receive (like when you offer your house as security for your mortgage).

That security - which is mainly Spanish government debt - is in short supply.

What's more, as the crisis has worsened again, the value of this security has gone down, reducing the amount that Spain's banks can borrow from their central bank.

Meanwhile, the political will of the eurozone's governments - the other main source of rescue loans - has been tested and found wanting.

The existing bailout facility - the European Financial Stability Facility - may still be too small to rescue Spain (especially if Italy also needs to be rescued).

But so far Germany and the few other stronger eurozone governments have been unwilling to put in more money.

'Economic suicide'

But the third, and most worrying, reason for the current market jitters are the economic policies being signed up to by the eurozone, which seem set to make the economic pain in Spain even worse.

Spain's government has agreed to one of the biggest programme of spending cuts and tax rises in its history.

That wouldn't be so bad if Spain could devalue her currency. Although the cost of imports like oil would soar, the pain of spending cuts would fall disproportionately on the incomes of foreigners who export goods to Spain.


But inside the eurozone, that is not an option.

What's more, it isn't just Spain. Every other member of the European Union including Germany - in other words Spain's main export markets - has also signed up to huge rounds of austerity over the coming years.

In the UK, we are also experiencing the pain of austerity. But the Bank of England has alleviated the pain of our austerity by cutting borrowing costs and printing money.

In the eurozone, the ECB has proved less willing to provide these painkillers. Indeed, twice - in 2008 and again last year - it has even shown itself willing to actually raise interest rates just months before a major financial crisis broke out.

The fear is that Spain could face horrendous economic pain over the coming months and years, comparable to Greece, that will sorely test its willingness to stay inside the eurozone.

The Nobel-winning economist Paul Krugman has called this combined policy prescription of austerity and hard money "Europe's economic suicide".

Europe's leaders will hope he is wrong.

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May 23, 3:10 AM EDT


Europe's leaders to tackle growth at summit

By SARAH DiLORENZO
AP Business Writer




PARIS (AP) -- The leaders of the 27 countries that make up the European Union are to meet in Brussels Wednesday to try and find a way to keep the debt crisis in Europe from spiraling out of control and promote jobs and growth.

On Tuesday the Organization for Economic Cooperation and Development warned that the 17 countries that use the euro risk falling into a "severe recession." It called on governments and Europe's central bank to act quickly to keep the slowdown from dragging down the global economy.

The electoral turmoil in Greece threatens to pull apart the eurozone. Borrowing costs are up for the most indebted governments. There is an increasing number of reports of worried savers and investors pulling funds out of banks that are seen as weak. Meanwhile, unemployment is soaring as recession grips nearly half the eurozone countries.

However, switching the conversation from slashing budgets to promoting growth won't be easy. And actually producing growth will be even harder.

WHAT'S ON THE AGENDA

For the past few years, fiscal austerity was all was all anyone ever talked about in Europe. That had a certain logic since governments were facing rising borrowing costs on bond markets, a sign that investors are nervous about the size of their ballooning deficits. Austerity was intended to address this nervousness by reducing a government's borrowing needs. For the people of Europe, austerity meant layoffs and pay cuts for state workers, scaled-back spending on welfare and social programs, and higher taxes and fees to boost government revenue.

At the height of the debt crisis last winter, the eurozone - led by Germany's Chancellor Angela Merkel - proposed a so-called "fiscal pact" that would tie member countries to strict fiscal and deficit targets.

But, as many economists had predicted, austerity has dragged down already fragile economies and, as economic output shrinks, the debt burden actually looks worse.

As a way out of this problem, economists and politicians have called for measures that would help a country's economy grow. France's new Socialist President, Francois Hollande, has led the charge, insisting during his campaign that he would not sign Europe's fiscal pact until it includes measures to promote growth.

Economists recommend pro-growth measures including reducing red tape for small businesses, making it easier for workers to find jobs across the eurozone and breaking down barriers that countries have created to protect their own industries. Some economists go a step further and say governments should actually increase spending while economies are so weak - and make reining in deficits a longer-term goal

However the question of how to produce growth for Europe is a sticky one. Germany, which led the push for austerity, insists that growth will be the product of tough reforms, like ones it undertook to liberalize its economy over a decade ago. Others say such reforms will take a while to bear fruit and more needs to be done right now - such as extending the deadline for deficit targets and waving through wage increases.

HOW DO YOU PROMOTE GROWTH?

Leaders at Wednesday's summit in Brussels - like the heads of the world's leading economies at the G8 meeting at Camp David last weekend - are expected to tread a fine line between talking about ways to promote growth and sticking to commitments to balancing budgets.

So where will the money to boost growth come from? One area could be the better use of the resources already at the European Union's disposal. The EU has a pot of so-called "structural funds", many of which are going unused even though several countries are in desperate need of cash. Putting those to use will be one topic Wednesday. Countries are also expected to discuss increasing the size of the European Investment Bank so that it can, in turn, lend more money to struggling small businesses.

Diplomats have already agreed to issue EU "project bonds" - debt issued jointly by the union - which can be used to fund major infrastructure projects. Hollande campaigned strongly on this idea, and even Germany, which was initially opposed to any jointly held debt, has softened its position. However, only a pilot phase of the project has been approved.

WHAT'S LIKELY TO BE CONTENTIOUS

The idea of project bonds are seen by many politicians and economists as a step towards so-called "eurobonds" - jointly issued bonds that could be used to fund anything and could eventually replace an individual country's debt. Eurobonds would protect weaker countries, like Spain and Italy, by insulating them from the high interest rates they now face when they raise money on bond markets. Those high interest rates are ground zero of the crisis: They forced Greece, Ireland and Portugal to seek bailouts.

EU President Herman Van Rompuy has encouraged participants on Wednesday to discuss "innovative, or even controversial, ideas." He has suggested that nothing should be taboo and that long-term solutions should be looked at. That seems to point to a conversation about eurobonds.

But Germany is still staunchly opposed to such as measure. On Tuesday, a senior German official stressed that despite the pressure from some other European countries, Merkel's government has not eased its opposition.

"You can wake me up in the middle of the night, at 3 a.m., and then I will tell you what our position is - also at 5 a.m., it doesn't matter. We think that eurobonds are not the right path for many reasons and in our opinion they cannot be part of a growth strategy," said the official, who briefed reporters on condition of anonymity in line with government policy.

What was needed instead, the official insisted, was work to eliminate the underlying problems by trimming the nations' high debt burden and restoring their competitiveness through structural reforms.

WILL ANY OF THE SOLUTIONS WORK?

The problem with many of the solutions on the table is that even if they are all implemented, they would likely take years to yield growth. And Europe needs faster answers.

To that end, many economists are pushing for a larger role for the European Central Bank - the only institution powerful enough to have an immediate impact on the crisis. If Europe's central monetary authority was given the power to buy up country's bonds, that government's borrowing rates would be pushed down to more manageable levels.

"In the immediate future, the ECB will remain the only institution with the resources, speed of action, and policy instruments necessary to shore up confidence in the single currency area, a role we expect it will play, should conditions necessitate," a Eurasia Group note said Tuesday.

WHY IT MATTERS

Taken together, the European Union is the world's largest economy. If it isn't growing, that weighs on everyone else. A lack of growth is also hurting the continent's efforts to rein in deficits and cut debts. When growth slows, so does tax revenue. That makes it harder for a government to balance their books - which can mean they have to make even deeper cuts. But the cuts themselves eat into growth: when government jobs and state investment projects are slashed, people have less money in their pockets to spend

Breaking that cycle will be key to getting European economies growing again.

---

Juergen Baertz contributed from Berlin

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed

[Panda]

Banks in Europe are unprepared if Greece leaves the Euro.

Goldman Sachs says polls in Greece suggest the Greeks do not want to leave the Euro and will vote accordingly. Suggests the EU will offer some
sweetener for Greece to stay in the Euro, but the debt will not go away so how can Greece repay? The crisis is in leadership and structure and there
must be changes to avert another crisis. Eurobonds is the obvious answer but the Euro Countries also need Political Union which at the moment is
hard to imagine.

The Centre for European Studies and BNP Paribas say this is a multi faceted problem and don't trust the EC to go for growth. Eurobonds are not
necessarily the answer and the GDP of Euro Countries is very different . A lot of negotiations need to be done and EU Leaders are very slow to see the dangers of the current system and after 2 years nothing has been acheived except more poverty and unemployment in several Euro Countries.

Italy has a 120% GDP, Banks are in trouble, Ireland, Portugal and Spain so this is no longer a Greek Problem. The EU needs to stop bickering , have more
meetings and make bold decisions.

The OECD says the World economy risks spiralling problems over the inability of the EU to act .

[Panda]

23 May 2012
El País Madrid Comment11



Nicolas Vadot


Let Greece leave the euro? Save Spain’s banks? Continue to stand fast on austerity, or give growth a chance? Plenty of questions that the leaders of the eurozone, meeting at the extraordinary summit on May 23, will have to find answers to if they want to preserve Europeans’ faith in the common project.

Claudi Pérez

Greece and the financial system of Spain, with the grotesque nationalisation of Bankia to cap it off, are the new bogeymen Europe is invoking to scare the children. What seemed impossible is now not only imaginable, but considered desirable by an increasingly vociferous chorus. Europe has never been so close to a rupture “from below” (Greece) or to the bailout of one of the major countries (aid to Spain’s banks).

Both options are extremely delicate. The most basic principle of prudence would urge one to avoid them – out of fear, because they could have potentially devastating contagion effects, and because there is still room to manoeuvre. Europe can still lift its foot off the austerity brake, and the European Central Bank (ECB) has tremendous leeway. Spain doesn’t need intervention quite yet.

In the end, something always comes up in extremis to cut through the Gordian knot of the crisis. But maybe not this time. Anything is possible after the breaking of the taboo: the French president, François Hollande, is all for a European rescue of the Spanish banks; Chancellor Angela Merkel has suggested a referendum on the euro in Greece and is determined to push through her contingency plans in the event the Greeks prove right the old adage that all major European crises start in the Balkans.

All this is forcing Europe to rewrite the script for the upcoming summit at the last minute. A few days ago that summit was to be focused on Hollande’s debut and on his ideas about shifting the debate towards growth, but the tension is now forcing a radical revamp of the agenda. Merkel and Hollande and company must answer two key questions: should Greece leave the euro, given that the bailouts are not working and the Greeks are disillusioned? And should Spain ask Europe for money to help Spanish banks shore up the gaping hole in the housing market, which may not be doable? Only the questions that are a little ingenuous are truly profound, which helps those questions get summed up in one: does Europe even believe in its own project?

All roads lead to Berlin and Frankfurt

There are only two ways to respond to that, neither of which is entirely convincing. On the one hand, with the by now habitual language of alarm and apocalypse, which is understandable given the gravity of what has happened in the past 15 days, though it’s open to criticism for its tendency to exaggerate that’s so typical of this Faustian crisis. The second option is denial – in other words, to do nothing, as the Commission turns into a pillar of salt while it waits for Berlin and Paris to decide what road to take.

“The two things – a Greek exit with serious consequences and an intervention in the Spanish banks – are increasingly likely,” warned Harvard professor Ken Rogoff, author of a monumental history of financial crises over the past eight centuries, by telephone from New York. “If they do happen and we see no tremendous intervention in the markets by the ECB, or by Berlin, Paris and the European institutions taking clear steps toward some form of political union, there will be bank queues, capital outflows from the entire periphery and a trail of national bankruptcies.”

Tano Santos, of Columbia University, describes intervention in Spain as “extremely dangerous”. “At the precise moment it happens, liquidity will dry up for the whole country, and there is not enough bailout money for a case the size of Spain.” The same holds true for Greece, which accounts for only two percent of European GDP but whose exit from the euro, according to Citi, would cost the financial system close to half a billion euros. The blow would be contained only by a flood of liquidity from the ECB, provided that the flight of bank deposits remained localised.

Just when the debate was getting back to austerity or growth, the situation has turned complicated in such a way that that controversy is now almost secondary. Once again, the banking sector is hanging by a thread, as it was in the most dire moments following the bankruptcy of Lehman Brothers.

All roads lead to Berlin and Frankfurt. A constellation of factors may force Germany to open its wallet to prevent Europe from being pushed into the worst of all worlds. “But there are also reasons to believe that Berlin has learned nothing from its history, and that the disciplinary approach it has imposed crosses all the red lines,” observes Paul De Grauwe of the London School of Economics. Rogoff sums it up harshly: “Either Germany accepts inflation (wage increases, incentives, an American-style ECB, whatever it takes) or we will see defaults and political casualties – and things will get extremely hard for the Germans themselves.”

Only a return to growth can help

Ultimately, the greatest risk is always political. Lack of leadership. Therein has lain the problem of Europe for some time. The solutions to the eurozone’s problems are not unimaginable, indeed they are possible, but the political will to get them off the ground is missing.

There is no obvious exit to the great problem afflicting the EU – public disillusionment, partly due to the democratic deficit, and partly down to the crisis of legitimacy of the Union. The EU has never been especially popular among the Nordic countries. What’s new, though, is that the euro crisis is sinking its popularity even south of the Pyrenees, where it once looked like the last feasible Utopia.

In the south more and more people are blaming the excesses of austerity on the EU and the ECB, while in Germany and the other northern countries people are blaming the Union for having forced them to help the slackers in the south. “Paradoxically, every solution consists of more Europe,” concludes Charles Grant of the Center for European Reform.

In the short term, that will be through the ECB (“only the central bank interventions have credibility,” explains analyst Juan Ignacio Crespo, “because they involve more than just words.”). In the medium term, only a return to growth can help: Paris and Berlin will have much to say on that this week in Brussels. And in the long term there is a need for something like a European debt agency, more fiscal union, and an EU that resolves to be more than just an economic club. For that we need leaders in Paris, Berlin, Brussels and Timbuktu. Where are those leaders?

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Spurring growth will be a huge task


21 May 2012
El País Madrid Comment40


Pismestrovic


At the G8 in Camp David, the richest countries have agreed to boost growth, particularly in Europe. This requires a radical change in tack from the austerity policies pushed so far. Are the leaders ready?

Joaquín Estefanía

In 1990 Sweden suffered a severe financial crisis provoked by the bursting of a housing bubble, which was sorted out to some extent by creating a “bad bank” for each entity in difficulty. The government took swift action to rescue troubled banks, whose losses came to 12 percent of GDP. After the financial crisis came a recession that saw real growth (adjusted for inflation) fall by four percent. It would be another four years before the Swedish economy returned to pre-crisis GDP.

History teaches that prosperity cannot be had without a financial system that works normally (generating credit to households and businesses), and that the mere fact of stabilising the financial system is no guarantee of prosperity. What is needed is a rescue plan for the real economy to boost production and create jobs that is at least as intense in its goals as the bailout.

This has been forgotten in Europe over the past two years, with results obvious to everyone: the risk premiums of countries in trouble have not dropped, nor have those states cut their deficits as expected. Almost all of them have increased the public debt and have seen rises in unemployment, in the impoverishment of the middle classes, and in business mortality.

The G-8 Summit at Camp Davis is now trying to stave off total collapse and generate support for banks and for citizens too. Is the intellectual climate of our times truly changing, shifting from austerity to growth? That's what the final communiqué of the meeting says. It is time to escape the Minsky moment (named after the economist of the same name) in which debtors cannot pay, creditors do not want to pay, and everyone is trying to write off the debt at the same time.

Two camps

The G-8 statement also recognises, in general terms, the distinct point of the cycle in which the different geographical areas of the planet are in: “We commit to take all necessary steps to strengthen and reinvigorate our economies and combat financial stresses, recognising that the right measures are not the same for each of us.” This applies to the U.S. and Europe, and even within the European Union, where Germany’s situation, for example, is quite unlike Spain’s.

The position of the G-8 must from now on be assumed both by each of the regions (the EU summit on growth will be held tomorrow, May 23) and by all of them jointly, including the emerging economies, at the G-20 coming up in June. The summit will be the seventh G-20 meeting since the beginning of the Great Recession. At the first three, in Washington, London, and Pittsburgh, the same common economic sentiment was defended: cheap money policies, fiscal stimulus and aid to banks to prevent a repeat of the general financial collapse of the early years of the Great Depression of the 1930s.

The political action, however, had nothing like the strength it needed to prevent the constant and intense rise in unemployment, fall in production and sudden slowdown in demand. At the G-20 meetings in Toronto, Seoul and Cannes the world, far from recognising the failure to respond and the lack of stimulus policies, split into two camps: those who understand that the absence of growth remains the key problem, and those who appeal to fiscal stabilisation policies and austerity for a return to macroeconomic equilibrium. The results are in. Proofs, not prejudices.

The G-20 will soon meet again, this time in Mexico. The question is whether the leaders will pursue the same Rooseveltian principle of determination (after Franklin Delano Roosevelt, American president who saved the world from the Great Depression) for the real economy that they have adopted for the banking system: the rounds of recapitalisation that are needed in order to save it. That principle is: if at first you do not succeed, just try again.

Translated from the Spanish by Anton Baer

On the web
Original article at El País es
Original article in Süddeutsche Zeitung de


From Germany

Angela Merkel against the world

"Europe remains the hot spot of the world economy. From the perspective of its most important partners, the solution can only come from Germany – and Merkel’s austerity is seen as a major error,” writes the Süddeutsche Zeitung. "Conflicts over austerity and growth remained unchanged after the Camp David summit: on one side stands Germany, and on the other the rest of the world," adds the liberal daily.


Merkel's policy may be popular in Germany, but outside the country – and this is most important – Germany is isolated. Germany and France must find a new political balance to be able to continue working as the motor of Europe’s crisis policy. It is not about coming up with a gigantic reflationary plan. But Berlin must make a growth policy in Europe possible. This is the message from Camp David.

[fuzeta]

All I can say about the Greek situation is that they had it good with the euro for a long time. Taking the money as if it was free to use as they wished without a thought of the day of reckoning. They themselves created massive inflation and paid out highly inflated wages and pensions in the public sector. They thought that the money that was being pumped into the country had no end to it.

I remember within a couple of months of them having the euro going to Greece and it costing an extortionate amount for a very simple plate of food. I noticed in the supermarkets massively inflated prices. They seemed to have priced what used to be 100 drachma to one euro and so on. 100 drachma was at the time around 30pence. What massive hikes. Did they really think that the pot of gold would be there forever and they could do what they liked.

They also lost massive amounts of tourism because the country became so expensive for very little value and they were just ripping people off. As I have said before the Greeks are the biggest tax avoiders on planet earth, fine when they had the drachma and all of them were living by the alternative economy that they had perfected.

I have sympathy , especially for the people that are really suffering from the terrible consequences of this complete and utter mess. I have to say though that a lot of it is very much of their own making. Best they do get out and start again. It will take years but IMO it is the only way.

[Badboy]

i saw on ch4 news that one place(chios?) has 40% unemployment,said germans gave them expensive loans,used to buy up property there but now there are no germans.

[Panda]

Hi fuzeta, the problem of Greece has been very badly handled by the EU, IMF and Merkel.

Had they allowed Greece to default two years ago the Country wouldn't have been in as much debt as it is now. If Greece votes to stay in the EU
after the General Election, they will receive another bail out , be worse off because they havn.t got much to sell and the rich are taking tneir money
out of Banks now .It's not just Greece now, it's Spain, Italy, Portugal , Ireland , Belgium and possibly Denmark.

I was just typing this and there was a black-out for the last half hour (It's 11.55pm) Anyway, whatever happens with Greece, the contagion is already there and the Firewall not high enough.

[Panda]

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Euro Summit: PM Angry At Failure To Agree
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6:39am UK, Thursday May 24, 2012

Robert Nisbet, Europe correspondent

A summit of European leaders has ended without clear agreement on how best to restore confidence in the euro, despite pleas from the British PM to get a grip on the crisis.
The informal dinner stretched into the night as the 27 leaders chewed on ways to boost growth.

These ranged from lending more money to small and medium businesses and redeploying structural funds to help generate youth employment.

The President of the European Council, Herman Van Rompuy, said the discussions were "focused and frank" and ended with broad agreement that in order for the single currency to survive, economic and monetary union needs to be taken to "a new stage".


At the heart of the eurozone crisis is a small country with a large debt problem.

Read business presenter Joel Hills' blog
Jose Manuel Barroso, the head of the European Commission stressed that everyone wanted Greece to remain in the euro but warned: "We will stand by Greece while Greece stands by its commitments" to international lenders.

That was echoed by the German Chancellor Angela Merkel, who said after the summit: "We want Greece to stay in the euro but we insist that Greece sticks to commitments that it has agreed to."

Greek voters go back to the polls on June 17 after an election failed to produce a viable coalition.

But sources say the dinner exposed deep divisions between Germany and France over how to tackle the crisis.



The new French President Francois Hollande suggested so-called eurobonds, backed jointly by all 17 euro countries, would help bring down borrowing costs in troubled nations.

Ms Merkel remains implacably opposed to the idea, which she believes runs contrary to EU laws and would let governments off the hook in countries like Greece.

Mr Hollande also suggested that Europe's new permanent bailout fund should be allowed to dip into the European Central Bank's reserves and pump cash directly into the troubled banking sector.

He thinks that would help avoid another credit crunch, but Germany believes it would set a dangerous precedent.


With increasing pressure on Angela Merkel to do something (anything?) to try to resolve the euro crisis, the big topic of discussion is, once again, eurobonds.

Read economics editor Ed Conway on eurobonds
Also at the meeting, David Cameron delivered an uncompromising message to eurozone leaders: you must get a grip on the issues undermining confidence in the currency.

He told the 26 other leaders that no new money should be thrown at the crisis, but existing funds could be re-prioritised to kick-start growth and encourage youth employment.

Leaving the summit in the early hours, Mr Cameron said: "There were good innovative ideas that can help growth in Europe, but frankly there were some bad ideas too.

"A financial transactions tax is a bad idea, it will put up the cost of people's insurance, put up the cost of people's pensions, it would cost many many jobs, and it would make Europe less competitive and I'll fight it all the way."

Mr Cameron also said the European Central Bank should be "used" more effectively to deal with the crisis.

The Prime Minister is understood to have supported continued belt-tightening in countries such as Greece and Spain, but he has moved further away from the German stance that austerity measures should be the main response to the crisis.

Earlier in the Commons, the Labour leader Ed Miliband derided Mr Cameron as the "high priest" of austerity, who was losing the economic argument.

The Brussels summit was never designed to produce concrete proposals, but feed ideas on how to stimulate growth into a formal European Council summit on June 28.

However, the market reaction to continued stalemate in Greece, as well as problems with the banking system in Spain had put greater expectations on this gathering to produce a roadmap for growth.

Expectations which, once again, have been dashed.

[Panda]

It appears Merkel will not budge , she wants Greece to stay in the Euro....on condition it carries on with its austerity plan.

Cameron says this is the 18th meeting of the EU and still nothing is resolved, the Union MUST be decisive.

Hollande is not intimidated by Merkel and will not concede on the need for efforts to be made for growth.

Italy and Spain might need 5 trillion Euros between them to make a firewall safe, this cannot be met by Germany so who would help.?

The spanish Government is helping Spanish Bank Bankia which has a secvere liquidity problem.

The Bundesbank says Banks could handle Greece leaving the Eurozone and it could make the Euro strongeer.

Banks are not prepared for a Greek exit , the firewall is not high enough, Costomers are still taking their money out.

A Lombard Research Cheif Economist says Germany hasn't done what it was supposed to do , the Euro is the lowest for years which of course suits
Germany , but not the rest of the Euro Countries.

The ECB's main function was to monitor the Euro, seems Draghi has not kept his eye on the Ball. Unlikely the ECB will buy more Bonds because of the
danger that the ones they bought will not be repaid.

[Panda]

May 24, 4:16 AM EDT


EU leaders support growth, give few concrete plans

By RAF CASERT and SARAH DiLORENZO
Associated Press





Norway strike shuts hundreds of schools

German business confidence drops on eurozone fears













BRUSSELS (AP) -- European Union leaders concluded their latest summit early Thursday with few concrete steps to fix the continent's festering financial crisis even as the potential for a messy Greek exit from the euro appears to be rising. Some leaders stressed the importance of planning for just such an event but offered no measures that might help Greece avoid it.

Also left unresolved was what Europe should do to spark economic growth and restore the confidence of investors, who have driven some countries' borrowing costs to unsustainable levels. The fiscal austerity agenda that Germany has promoted as the solution to Europe's problem of too much government debt has been met with rising skepticism in other euro countries.

The leaders of the 27 EU countries agreed to give institutions such as the European Investment Bank the task of drawing up proposals for growth in time for another summit in June. But there was discord over more aggressive actions promoted by some leaders heading into the summit, such as issuing bonds jointly as a way of reducing borrowing costs for heavily indebted nations among the 17 countries that use the euro.

The perception that European leaders lack the political will to tackle the continent's financial and economic problems has left markets on edge for weeks. Recession is spreading. Banks are under pressure. The biggest fear is that if Greece cannot be saved, other larger economies - like Spain or Portugal - might face the same fate.

The euro countries "have to consider all kinds of events," Luxembourg Prime Minister Jean-Claude Juncker told reporters after a European Union summit, but insisted that "the working assumption" was that Greece would remain part of the euro. Leaders gathered in Brussels recognized that Greece had endured significant hardships and promised to release development funds aimed at spurring growth.

But the statement from Juncker, who also chairs meetings of eurozone finance ministers, was a frank admission that Greece could wind up abandoning the euro. The country's fringe political parties, which are threatening to renege on commitments made to secure bailout loans, saw their popularity surge in recent elections. No party has been able to form a government, and the country will vote again June 17.

Many analysts have said that Greece, already in its fifth year of recession, has no hope of recovery if it sticks to the spending cuts and tax hikes it agreed to in order to secure bailout loans.

"We want Greece to remain in the euro area," German Chancellor Angela Merkel said after the meeting. "We expect that they will stick to the commitments that they have entered into."

Political uncertainty in Greece is just one of the fires the Europe needs to put out. Leaders are also worried about rising borrowing costs in Spain and Italy that could force them to seek bailouts, just like Greece, Portugal and Ireland did.

Markets had expected the latest EU summit to disappoint and it did. Europe's stock markets had fallen heavily during trading on Wednesday and the euro hit a near two-year low against the dollar.

Asian stock markets retreated Thursday as the lack of a breakthrough in Europe unnerved traders. Japan's benchmark Nikkei 225 was down 0.5 at 8,514.53 and Hong Kong's Hang Seng slipped 0.6 percent to 18,682.38.

Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong, said Thursday: "Europe is not doing enough, and the market may not wait for them."

One of the biggest questions facing Europe is whether it's time to cut Greece some slack. Some European countries seemed ready to ease the pressure, and international organizations have called for the pace of austerity measures to be slowed in some struggling countries.

But Thursday's summit of 27 European Union leaders ended with no apparent concessions. A final statement said Greece had to respect its commitments and trumpeted the money the eurozone and the International Monetary Fund had loaned Greece as a sign of their "solidarity." It did say that funds for economic development would be sent to Greece - though it's unclear how much of an immediate impact on growth they would have.

Juncker insisted early Thursday that he had not asked the euro nations to prepare national contingency plans for a possible chaotic departure of Greece from the currency.

French President Francois Hollande said that to evoke the even the possibility was dangerous - and would send a signal to the markets that the eurozone wasn't standing behind Greece.

The debate reflects the fine line European leaders must walk between pressuring Greece to stick to a program of spending cuts and tax hikes that have exacerbated its economic slowdown and trying to ensure its presence in the eurozone.

Spanish Prime Minister Mariano Rajoy suggested the European Central Bank resume some of its emergency measures, such as buying the bonds of weak countries, which has the impact of lowering countries' borrowing rates. The ECB has suspended the purchases because, as an independent body, it does not want to be seen supporting governments directly. Instead, it has given European banks massive amounts of cheap loans to bolster confidence in the financial system and allow banks to buy up their country's debt.

Leaders on Thursday also addressed the contentious issue of whether the countries that use the euro should spread the risk and borrow money jointly - issuing so-called "eurobonds." This would mean every country could borrow funds at the same rate, substantially lowering the costs for the more indebted countries.

Hollande has pushed for them as an important way to ensure such a crisis never happens again, but Merkel has rejected them, fearing they would reduce the pressure on heavily indebted governments to heal their finances and force Germany to borrow at higher rates.

---

Don Melvin contributed to this story.

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Economy

China wants to invest €7.5 billion euros in central Europe


27 April 2012

Presseurop
Gazeta Wyborcza Comment14




China wants to invest $10 billion (€7.5 billion) in new technologies and the green economy in Central Europe, according to declarations made by Chinese Prime Minister, reports Gazeta Wyborcza. At a two-day summit of the region’s fourteen countries the Chinese head of government also said that China will double imports from Central Europe from today’s $50 billion (€37.8 billion) to $100 billion (€75 billion) within the next three years.

According to Polish experts, this is yet another indication that following massive investment in Africa, America and Asia, Beijing is now seriously considering expansion in Central Europe, including Poland, which may become its main partner among the “new” EU member states. But not everyone is happy about the prospect. According to the Warsaw daily -


“... some European experts believe that Beijing is deliberately undermining the EU’s role by building bilateral relations with different European countries. This weakens the EU’s cohesion in relations with China.”

And these have recently been strained. The European Commission is “trying to force” Beijing to open the Chinese public market to European companies, threatening otherwise to introduce regulations that will allow the EU to “retaliate by closing its public market” to Chinese companies.

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