EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
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Re: EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
Panda Fri 30 Dec - 18:53
30 December 2011
Last updated at 15:23
Spain sets out 8.9bn euros of new austerity measures
Spain has seen a number of large protests against the government's austerity measures
Continue reading the main storyEurope's four big dilemmas
Last updated at 15:23
Spain sets out 8.9bn euros of new austerity measures
Spain has seen a number of large protests against the government's austerity measures
Continue reading the main storyEurope's four big dilemmas
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Re: EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
Panda Sat 31 Dec - 7:48
As Spain Acts to Cut Deficit, Regional Debts Add to Woe
Marta Ramoneda for The New York Times
The new prison in Figueres, in northeast Spain, sits empty, evidence of questionable regional spending.
By SUZANNE DALEY
Published: December 30, 2011
RES, Spain — Facing a wider than expected budget deficit, Spain’s new government announced a $19.3 billion package of tax increases and spending cuts on Friday and admitted that the country’s finances were probably even worse because of overspending by the autonomous regions.
Follow @nytimesworld for international breaking news and headlines.
Enlarge This Image
Marta Ramoneda for The New York Times
Julia Fernández, a nurse near Barcelona, is putting in extra hours, unpaid.
Spain’s new prime minister, Mariano Rajoy, said the austerity package was needed to maintain the confidence of European bond markets after it became clear that the budget deficit was expected to reach 8 percent of gross domestic product this year — two percentage points above the government’s target.
And while Spain’s overall fiscal status is nowhere near as dire as Italy’s, it has another problem all its own, as the new budget minister, Cristóbal Montoro, made clear Friday: serious budget shortfalls in its 17 autonomous regions, which have spent recklessly in the past decade.
Evidence of the regional profligacy dots the countryside. On the top of a hill here in the birthplace of Salvador Dalí, in northeastern Spain sits a giant, empty penitentiary.
But even without a single prisoner in residence, the prison is costing Spain’s heavily indebted regional government of Catalonia $1.3 million a month, largely in interest payments. If prisoners were actually moved in, it would cost an additional $2.6 million a month.
So it sits empty, an object of ridicule around here, often referred to as the “spa.”
Analysts say the mistakes are adding up. The Bank of Spain announced this month that regional debt had surged 22 percent, to $176 billion in September from $144 billion the year before. And some experts say that there remain tens of billions of dollars in “hidden” regional debt yet to be discovered.
The financial state of the regional governments is so bad, in fact, that some may be willing — maybe even eager — to shed some of their wide-ranging and costly responsibilities, like health care and education.
Much as the debt crisis is forcing the European Union to refashion its relationship with its member countries, stepping up oversight and control, some experts believe that some of Spain’s autonomous regions may be less so in the future.
“Whether publicly or not, some of the regional governments are saying: ‘Take this away from me. I didn’t realize how difficult it would be,’ ” said Ángel Berges Lobera, an economist at the Universidad Autónoma de Madrid and an expert on regional debt.
In recent years, the regions and municipalities have racked up debts, offering generous public services and investing in a wide range of projects, some of them bordering on the ridiculous, critics say.
Castilla-La Mancha, for instance, an agricultural region bordering Madrid, built itself an airport complete with a runway big enough for jumbo jets. But it may close soon, as no airline — even with smaller planes — is interested in flying there.
Municipalities have not done much better. They have also been accumulating debt, a total now of about $48 billion.
One town, Alcorcón, about 10 miles southwest of Madrid, spent $150 million on a cultural center, complete with a permanent circus and free birthday parties for its children.
“It’s been chaos out there,” said Lorenzo Bernaldo de Quirós, an economist who has been critical of Spain’s system of autonomous regions, a structure developed after Gen. Francisco Franco’s dictatorial rule ended in 1975.
And there is that “hidden debt,” most of it in unpaid bills, which is not included in Spain’s total national indebtedness of $915 billion. That could easily amount to $25 billion to $40 billion more, experts say.
And the bad news probably is not over. Some experts believe that as newly elected members of Mr. Rajoy’s Popular Party take control of some regional administrations, they are sure to unearth even more financial excesses. That is what happened in Catalonia, where the “hidden debt” problem first popped up this year. When elections were held there in 2010, the ratio of debt to regional G.D.P. was believed to be less than 2 percent. But after the vote, the departing government disclosed that its full year deficit could be 3.3 percent. The new government later revised that figure again, to 3.8 percent.
Rachel Chaundler contributed reporting.
A version of this article appeared in print on December 31, 2011, on page A1 of the New York edition with the headline: Regional Debts Add Woe in Spain.
Marta Ramoneda for The New York TimesThe new prison in Figueres, in northeast Spain, sits empty, evidence of questionable regional spending.
By SUZANNE DALEY
Published: December 30, 2011
RES, Spain — Facing a wider than expected budget deficit, Spain’s new government announced a $19.3 billion package of tax increases and spending cuts on Friday and admitted that the country’s finances were probably even worse because of overspending by the autonomous regions.
Follow @nytimesworld for international breaking news and headlines.
Enlarge This Image
Marta Ramoneda for The New York Times
Julia Fernández, a nurse near Barcelona, is putting in extra hours, unpaid.
Spain’s new prime minister, Mariano Rajoy, said the austerity package was needed to maintain the confidence of European bond markets after it became clear that the budget deficit was expected to reach 8 percent of gross domestic product this year — two percentage points above the government’s target.
And while Spain’s overall fiscal status is nowhere near as dire as Italy’s, it has another problem all its own, as the new budget minister, Cristóbal Montoro, made clear Friday: serious budget shortfalls in its 17 autonomous regions, which have spent recklessly in the past decade.
Evidence of the regional profligacy dots the countryside. On the top of a hill here in the birthplace of Salvador Dalí, in northeastern Spain sits a giant, empty penitentiary.
But even without a single prisoner in residence, the prison is costing Spain’s heavily indebted regional government of Catalonia $1.3 million a month, largely in interest payments. If prisoners were actually moved in, it would cost an additional $2.6 million a month.
So it sits empty, an object of ridicule around here, often referred to as the “spa.”
Analysts say the mistakes are adding up. The Bank of Spain announced this month that regional debt had surged 22 percent, to $176 billion in September from $144 billion the year before. And some experts say that there remain tens of billions of dollars in “hidden” regional debt yet to be discovered.
The financial state of the regional governments is so bad, in fact, that some may be willing — maybe even eager — to shed some of their wide-ranging and costly responsibilities, like health care and education.
Much as the debt crisis is forcing the European Union to refashion its relationship with its member countries, stepping up oversight and control, some experts believe that some of Spain’s autonomous regions may be less so in the future.
“Whether publicly or not, some of the regional governments are saying: ‘Take this away from me. I didn’t realize how difficult it would be,’ ” said Ángel Berges Lobera, an economist at the Universidad Autónoma de Madrid and an expert on regional debt.
In recent years, the regions and municipalities have racked up debts, offering generous public services and investing in a wide range of projects, some of them bordering on the ridiculous, critics say.
Castilla-La Mancha, for instance, an agricultural region bordering Madrid, built itself an airport complete with a runway big enough for jumbo jets. But it may close soon, as no airline — even with smaller planes — is interested in flying there.
Municipalities have not done much better. They have also been accumulating debt, a total now of about $48 billion.
One town, Alcorcón, about 10 miles southwest of Madrid, spent $150 million on a cultural center, complete with a permanent circus and free birthday parties for its children.
“It’s been chaos out there,” said Lorenzo Bernaldo de Quirós, an economist who has been critical of Spain’s system of autonomous regions, a structure developed after Gen. Francisco Franco’s dictatorial rule ended in 1975.
And there is that “hidden debt,” most of it in unpaid bills, which is not included in Spain’s total national indebtedness of $915 billion. That could easily amount to $25 billion to $40 billion more, experts say.
And the bad news probably is not over. Some experts believe that as newly elected members of Mr. Rajoy’s Popular Party take control of some regional administrations, they are sure to unearth even more financial excesses. That is what happened in Catalonia, where the “hidden debt” problem first popped up this year. When elections were held there in 2010, the ratio of debt to regional G.D.P. was believed to be less than 2 percent. But after the vote, the departing government disclosed that its full year deficit could be 3.3 percent. The new government later revised that figure again, to 3.8 percent.
Rachel Chaundler contributed reporting.
A version of this article appeared in print on December 31, 2011, on page A1 of the New York edition with the headline: Regional Debts Add Woe in Spain.
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Re: EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
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Spain cuts E11.5 billion in spending as taxes boosted income.
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Hungary"s chance of a bail-out has weakened as Lawmakers snub the IMF and EU over Central Bank.
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Euro heads for back to back decline since 2001 debt crisis.
French Corporate bond sales slide.
Germany may speed up payments for those in most need.
U.K Bonds prove best in the World as Cameron sidesteps Euro issue.
Hungary"s chance of a bail-out has weakened as Lawmakers snub the IMF and EU over Central Bank.
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EU leaders address their Citizens
Panda Sun 1 Jan - 6:56
3:30am UK, Sunday January 01, 2012
Simon Newton, Sky News reporter
As the troubled euro celebrates its 10th birthday, European
leaders have used their New Year's addresses to stress the need for
closer union to tackle the eurozone crisis.
In a televised New Year's speech, German Chancellor Angela Merkel
said Europe must co-operate more closely if it wants the euro to
succeed.
"Today you can be sure that I will do everything in my power to
strengthen the euro, but this will only work if Europe learns from its
mistakes," she said.
"One of these is that a common currency can only really be successful
if we in Europe co-operate more than we have done. Europe is growing
together in the crisis."
In a grave New Year's message, French President Nicolas Sarkozy
pledged to find ways to pull the economy out of stagnation in the four
months left before a presidential election.
Mr Sarkozy told the nation that the worst economic crisis since the Second World War would continue to hurt households in 2012.
Sarkozy faces a struggle to hang on to his job
"I know that the lives of many of you, already tested by two
difficult years, have been put to the test once more. You are ending the
year more worried about yourselves and your children.
"The only way to preserve our sovereignty, to control our destiny, is
to choose... the route of structural reforms rather than that of
impulsive actions which only add to confusion and chaos without
restoring confidence."
Mr Sarkozy is due to meet Mrs Merkel in early January to push forward a European Union agreement for a new fiscal compact.
The eurozone's third largest economy, Italy, sparked fears in 2011
that its toxic mix of low growth, high debt and spiralling borrowing
costs could force it to seek a bailout like fellow eurozone members
Greece, Ireland and Portugal.
In his New Year address, President Giorgio Napolitano called on
Italians to make sacrifices to prevent the "financial collapse of
Italy".
Greek Prime Minister Lucas Papademos
"Sacrifices are necessary to ensure the future of young people, it's our objective and a commitment we cannot avoid.
"No-one, no social group, can today avoid the commitment to
contribute to the clean up of public finances in order to prevent the
financial collapse of Italy."
Greece's Prime Minister Lucas Papademos said the country faced
another tough year in 2012 but must stick to its programme of austerity
and reform.
"A very difficult year is ahead of us. We must continue our efforts
with decisiveness, to stay in the euro, to make sure we do not waste the
sacrifices and do not turn the crisis into an uncontrolled and
disastrous bankruptcy."
The Greek economy is set to contract for a fifth year in a row in
2012 with record rates of unemployment as it battles a debt crisis that
has spread turmoil across the eurozone.
Athens is struggling to agree a deal with banks on a debt swap deal
meant to slash its debt mountain - a key part of a second, 130bn euro
(£109bn) bailout package.
Greece, which faces bond redemptions of 14.5bn euros (£12bn) in March, needs to seal the deal to avert a costly default.
"We will defend our position in Europe," said Mr Papademos.
"The euro is our currency. The Europe of developed countries is our common home."
Reco
Simon Newton, Sky News reporter
As the troubled euro celebrates its 10th birthday, European
leaders have used their New Year's addresses to stress the need for
closer union to tackle the eurozone crisis.
In a televised New Year's speech, German Chancellor Angela Merkel
said Europe must co-operate more closely if it wants the euro to
succeed.
"Today you can be sure that I will do everything in my power to
strengthen the euro, but this will only work if Europe learns from its
mistakes," she said.
"One of these is that a common currency can only really be successful
if we in Europe co-operate more than we have done. Europe is growing
together in the crisis."
In a grave New Year's message, French President Nicolas Sarkozy
pledged to find ways to pull the economy out of stagnation in the four
months left before a presidential election.
Mr Sarkozy told the nation that the worst economic crisis since the Second World War would continue to hurt households in 2012.
Sarkozy faces a struggle to hang on to his job
"I know that the lives of many of you, already tested by two
difficult years, have been put to the test once more. You are ending the
year more worried about yourselves and your children.
"The only way to preserve our sovereignty, to control our destiny, is
to choose... the route of structural reforms rather than that of
impulsive actions which only add to confusion and chaos without
restoring confidence."
Mr Sarkozy is due to meet Mrs Merkel in early January to push forward a European Union agreement for a new fiscal compact.
The eurozone's third largest economy, Italy, sparked fears in 2011
that its toxic mix of low growth, high debt and spiralling borrowing
costs could force it to seek a bailout like fellow eurozone members
Greece, Ireland and Portugal.
In his New Year address, President Giorgio Napolitano called on
Italians to make sacrifices to prevent the "financial collapse of
Italy".
A very difficult year is ahead of us. We must continue
our efforts with decisiveness, to stay in the euro, to make sure we do
not waste the sacrifices and do not turn the crisis into an uncontrolled
and disastrous bankruptcy.
Greek Prime Minister Lucas Papademos
"Sacrifices are necessary to ensure the future of young people, it's our objective and a commitment we cannot avoid.
"No-one, no social group, can today avoid the commitment to
contribute to the clean up of public finances in order to prevent the
financial collapse of Italy."
Greece's Prime Minister Lucas Papademos said the country faced
another tough year in 2012 but must stick to its programme of austerity
and reform.
"A very difficult year is ahead of us. We must continue our efforts
with decisiveness, to stay in the euro, to make sure we do not waste the
sacrifices and do not turn the crisis into an uncontrolled and
disastrous bankruptcy."
The Greek economy is set to contract for a fifth year in a row in
2012 with record rates of unemployment as it battles a debt crisis that
has spread turmoil across the eurozone.
Athens is struggling to agree a deal with banks on a debt swap deal
meant to slash its debt mountain - a key part of a second, 130bn euro
(£109bn) bailout package.
Greece, which faces bond redemptions of 14.5bn euros (£12bn) in March, needs to seal the deal to avert a costly default.
"We will defend our position in Europe," said Mr Papademos.
"The euro is our currency. The Europe of developed countries is our common home."
Reco
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Re: EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
Panda Sun 1 Jan - 14:05
1 January 2012
Last updated at 12:21
Share this page
This is the youtube video link, but it"s in German and I can"t translate.....can some clever person translate or find an English Version. There is one in the
Telegraph but you have to have adobe flash to play it. Apparently, the video has already had 500,000 hits.!
Thanks.
Merkel and Sarkozy in reworking of sketch Dinner For One
The original sketch is one of the world's most repeated shows - but little known in Britain
Continue reading the main story Related Stories
A
1963 British comedy sketch which is cult New Year's Eve viewing in
Germany has inspired a YouTube hit featuring Angela Merkel and Nicolas
Sarkozy.
The heads of the German Chancellor and the French President
have been superimposed on to the two characters in the 18-minute sketch
Dinner For One.
Ms Merkel "plays" 90-year-old Miss Sophie whose butler, "Mr Sarkozy", impersonates her imaginary friends.
The original is hugely popular in Germany but is little known in Britain.
It is traditionally broadcast by several different German TV
stations on New Year's Eve, and its popularity in both Germany and
Scandinavia has made it one of the world's most repeated television
shows.
During the routine, British comedienne May Warden plays
upper-class Miss Sophie who is hosting a dinner for her four close
friends to mark her birthday.
But because she has outlived them all, her butler James -
played by Freddie Frinton - impersonates each guest, getting more drunk
with each toast.
'Triple A'
In the YouTube version, Angela Merkel's "guests" include
former Greek Prime Minister George Papandreou, former Spanish PM Jose
Luis Rodriguez Zapatero and British PM David Cameron - all impersonated
by "Nicolas Sarkozy".
"Mr Sarkozy", pretending to be Mr Cameron, tells "Mrs Merkel"
in English, "You are looking younger than ever", before switching to
German and saying, "You look richer than ever".
"Mrs Merkel" tells "Mr Cameron" during a toast: "Don't forget we speak German in Europe".
As "Mr Sarkozy" scurries around the table in an ever more
drunken way, the narrator says: "This is what happens every euro rescue
summit, whether or not anyone else is there, it is just these two doing
everything themselves".
The parody ends - like the original - with the butler taking
the old lady up to her bedroom. In the original, James asks Miss Sophie
whether it will be the "same procedure as last year" then promises to do
"his very best".
In the YouTube version, "Mr Sarkozy" tells "Mrs Merkel" he will give her his "triple A".
The sketch, made for German broadcaster ARD and entitled "The
90th euro rescue summit or euros for no-one", has been viewed on
YouTube more than 200,000 times in the last week.
Last updated at 12:21
Share this page
This is the youtube video link, but it"s in German and I can"t translate.....can some clever person translate or find an English Version. There is one in the
Telegraph but you have to have adobe flash to play it. Apparently, the video has already had 500,000 hits.!
Thanks.
Merkel and Sarkozy in reworking of sketch Dinner For One
The original sketch is one of the world's most repeated shows - but little known in Britain
Continue reading the main story Related Stories
A
1963 British comedy sketch which is cult New Year's Eve viewing in
Germany has inspired a YouTube hit featuring Angela Merkel and Nicolas
Sarkozy.
The heads of the German Chancellor and the French President
have been superimposed on to the two characters in the 18-minute sketch
Dinner For One.
Ms Merkel "plays" 90-year-old Miss Sophie whose butler, "Mr Sarkozy", impersonates her imaginary friends.
The original is hugely popular in Germany but is little known in Britain.
It is traditionally broadcast by several different German TV
stations on New Year's Eve, and its popularity in both Germany and
Scandinavia has made it one of the world's most repeated television
shows.
During the routine, British comedienne May Warden plays
upper-class Miss Sophie who is hosting a dinner for her four close
friends to mark her birthday.
But because she has outlived them all, her butler James -
played by Freddie Frinton - impersonates each guest, getting more drunk
with each toast.
'Triple A'
In the YouTube version, Angela Merkel's "guests" include
former Greek Prime Minister George Papandreou, former Spanish PM Jose
Luis Rodriguez Zapatero and British PM David Cameron - all impersonated
by "Nicolas Sarkozy".
"Mr Sarkozy", pretending to be Mr Cameron, tells "Mrs Merkel"
in English, "You are looking younger than ever", before switching to
German and saying, "You look richer than ever".
"Mrs Merkel" tells "Mr Cameron" during a toast: "Don't forget we speak German in Europe".
As "Mr Sarkozy" scurries around the table in an ever more
drunken way, the narrator says: "This is what happens every euro rescue
summit, whether or not anyone else is there, it is just these two doing
everything themselves".
The parody ends - like the original - with the butler taking
the old lady up to her bedroom. In the original, James asks Miss Sophie
whether it will be the "same procedure as last year" then promises to do
"his very best".
In the YouTube version, "Mr Sarkozy" tells "Mrs Merkel" he will give her his "triple A".
The sketch, made for German broadcaster ARD and entitled "The
90th euro rescue summit or euros for no-one", has been viewed on
YouTube more than 200,000 times in the last week.
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Re: EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
fuzeta Sun 1 Jan - 22:43
Just been watching today's sombre little speeches from Sarkozy and Merkel. They both spoke as though they had plague and pestilence visited upon them through no fault of theirs,
Well their nations are the frankensteins that created the beast ' the euro currency' The fact that they cannot now control it lies completely at their door. No good blaming everything and everyone else for their folly Grrrrrrr
Loved the youtube video
Well their nations are the frankensteins that created the beast ' the euro currency' The fact that they cannot now control it lies completely at their door. No good blaming everything and everyone else for their folly Grrrrrrr
Loved the youtube video
Last edited by fuzeta on Sun 1 Jan - 22:55; edited 1 time in total (Reason for editing : correction)
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Re: EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
Panda Sun 1 Jan - 23:52
fuzeta wrote:Just been watching today's sombre little speeches from Sarkozy and Merkel. They both spoke as though they had plague and pestilence visited upon them through no fault of theirs,
Well their nations are the frankensteins that created the beast ' the euro currency' The fact that they cannot now control it lies completely at their door. No good blaming everything and everyone else for their folly Grrrrrrr
Loved the youtube video
Hi fuzeta, is there any way you can translate and put the english version on here?
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Re: EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
Panda Mon 2 Jan - 0:12
1 January 2012
Last updated at 09:41
Europe leaders warn of difficult 2012
Comments (523)
German Chancellor Angela Merkel heads Europe's largest economy
Continue reading the main story
Global Economy
European leaders have warned of a difficult year ahead, as many economists predict recession in 2012.
German Chancellor Angela Merkel said Europe was experiencing
its "most severe test in decades" but that Europe was growing closer in
the debt crisis.
France's President Sarkozy said the crisis was not finished, while Italy's president called for more sacrifices.
Growth in Europe has stalled as the debt crisis has forced governments to slash spending.
The leaders' new year messages came as leading economists polled by the BBC said they expected a return to recession in Europe in the first half of 2012.
The cost of borrowing for some of the eurozone's largest
economies, including Italy and Spain, has shot up in recent months as
lenders fear governments will not be able to pay back money they have
already borrowed.
With growth stalled, the pressure is on governments across
Europe, not just ones using the single currency, to cut spending in
order to meet debt obligations.
Fears are now focusing on a potential second credit crunch,
triggered by the exposure of banks across Europe to Italy's huge debt.
Euro defended
In her TV address, Chancellor Merkel said that despite
Germany's relatively good economic situation, "next year will no doubt
be more difficult than 2011".
Continue reading the main story
“Start Quote
Paul Mason Economics editor, Newsnight
"The road to overcome it [debt
crisis] remains long and not without setbacks, but at the end of this
path Europe will re-emerge stronger from the crisis than it was when it
entered it."
She defended the euro, saying it had made "everyday life
easier and our economy stronger... and protected from something worse"
in the financial crisis of 2008.
Heading into an election year trailing his Socialist rival
Francois Hollande in the polls, French President Nicolas Sarkozy said
structural changes to the economy were needed in order to return to
growth.
"I know that the lives of many of you, already tested by two
difficult years, have been put to the test once more," he said in a
televised address.
French President Nicolas Sarkozy faces an uphill battle to be re-elected in April
"You are ending the year more worried about yourselves and your children," he said.
But after having already pushed budget cuts in order to
forestall a downgrade of France's treasured AAA sovereign credit rating,
he promised there would be no more budget cuts.
"What was to be done was done by the government," he said.
Mr Sarkozy is due to meet Mrs Merkel in early January to push
forward a European Union agreement in December for a new fiscal
compact.
'Unavoidable' sacrifices
The president of Italy, the eurozone's third-largest economy,
urged people to make sacrifices to prevent the "financial collapse of
Italy".
President Giorgio Napolitano said: "Sacrifices are necessary
to ensure the future of young people, it's our objective and a
commitment we cannot avoid."
Government austerity has undermined growth and caused a great deal of anger around Europe
Fears that Italy might need a Greek-style bailout that Europe
would have difficulty dealing with have forced the government's
borrowing costs up and led to the replacement of Silvio Berlusconi by
Mario Monti, leading a cabinet of unelected experts.
"No-one, no social group, can today avoid the commitment to
contribute to the clean-up of public finances in order to prevent the
financial collapse of Italy," President Napolitano said.
"The sacrifices will not be in vain, especially if the economy begins to grow again."
Greek Prime Minister Lucas Papademos, another technocrat who
was appointed to lead an interim coalition government after the debt
crisis forced George Papandreou to resign, also warned of a difficult
year ahead.
"We have to continue our efforts with determination, so that
the sacrifices we have made up to now won't be in vain," he said in a
televised address.
His government has imposed harsh austerity measures in order to ensure Greece continues to receive an international bailout.
The austerity measures, begun in 2010 by the previous
government, have led to mass protests and riots as high unemployment,
raised taxes, salary cuts and reduced government services take their
toll.
Your comments (523)
Last updated at 09:41
Europe leaders warn of difficult 2012
Comments (523)
German Chancellor Angela Merkel heads Europe's largest economy
Continue reading the main story
Global Economy
What caused the eurozone crisis?
How will the euro crisis end?
Crisis jargon buster
Europe's four big dilemmas
European leaders have warned of a difficult year ahead, as many economists predict recession in 2012.
German Chancellor Angela Merkel said Europe was experiencing
its "most severe test in decades" but that Europe was growing closer in
the debt crisis.
France's President Sarkozy said the crisis was not finished, while Italy's president called for more sacrifices.
Growth in Europe has stalled as the debt crisis has forced governments to slash spending.
The leaders' new year messages came as leading economists polled by the BBC said they expected a return to recession in Europe in the first half of 2012.
The cost of borrowing for some of the eurozone's largest
economies, including Italy and Spain, has shot up in recent months as
lenders fear governments will not be able to pay back money they have
already borrowed.
With growth stalled, the pressure is on governments across
Europe, not just ones using the single currency, to cut spending in
order to meet debt obligations.
Fears are now focusing on a potential second credit crunch,
triggered by the exposure of banks across Europe to Italy's huge debt.
Euro defended
In her TV address, Chancellor Merkel said that despite
Germany's relatively good economic situation, "next year will no doubt
be more difficult than 2011".
Continue reading the main story
“Start Quote
The most likely outcome in pure
economic terms is a moderately bad fiscal crisis, a survivable sovereign
debt event and a sharp growth downturn, all in the first half of the
year”
Paul Mason Economics editor, Newsnight
"The road to overcome it [debt
crisis] remains long and not without setbacks, but at the end of this
path Europe will re-emerge stronger from the crisis than it was when it
entered it."
She defended the euro, saying it had made "everyday life
easier and our economy stronger... and protected from something worse"
in the financial crisis of 2008.
Heading into an election year trailing his Socialist rival
Francois Hollande in the polls, French President Nicolas Sarkozy said
structural changes to the economy were needed in order to return to
growth.
"I know that the lives of many of you, already tested by two
difficult years, have been put to the test once more," he said in a
televised address.
French President Nicolas Sarkozy faces an uphill battle to be re-elected in April
"You are ending the year more worried about yourselves and your children," he said.
But after having already pushed budget cuts in order to
forestall a downgrade of France's treasured AAA sovereign credit rating,
he promised there would be no more budget cuts.
"What was to be done was done by the government," he said.
Mr Sarkozy is due to meet Mrs Merkel in early January to push
forward a European Union agreement in December for a new fiscal
compact.
'Unavoidable' sacrifices
The president of Italy, the eurozone's third-largest economy,
urged people to make sacrifices to prevent the "financial collapse of
Italy".
President Giorgio Napolitano said: "Sacrifices are necessary
to ensure the future of young people, it's our objective and a
commitment we cannot avoid."
Government austerity has undermined growth and caused a great deal of anger around Europe
Fears that Italy might need a Greek-style bailout that Europe
would have difficulty dealing with have forced the government's
borrowing costs up and led to the replacement of Silvio Berlusconi by
Mario Monti, leading a cabinet of unelected experts.
"No-one, no social group, can today avoid the commitment to
contribute to the clean-up of public finances in order to prevent the
financial collapse of Italy," President Napolitano said.
"The sacrifices will not be in vain, especially if the economy begins to grow again."
Greek Prime Minister Lucas Papademos, another technocrat who
was appointed to lead an interim coalition government after the debt
crisis forced George Papandreou to resign, also warned of a difficult
year ahead.
"We have to continue our efforts with determination, so that
the sacrifices we have made up to now won't be in vain," he said in a
televised address.
His government has imposed harsh austerity measures in order to ensure Greece continues to receive an international bailout.
The austerity measures, begun in 2010 by the previous
government, have led to mass protests and riots as high unemployment,
raised taxes, salary cuts and reduced government services take their
toll.
Your comments (523)
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Re: EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
Panda Mon 2 Jan - 11:05
Euro Chiefs seek to buy time as E203 billion debt loans become due.
ECB appointments set off German and French rivalry for appointment of Chief Economist.......don"t the other Euro Countries get a vote?
Eurozone is in recession and analysts forecast it will remain so for the whole of 2012
Britain is facing a weak period for a long time.
U.S. seen to be the only Western Country that will grow because consumers are still spending.
The Asian Countries are doing better than Western Countries and it is hoped they will weather the storm .
Apparently it was the EU Deauville Agreement in 2010 to relax the rules which was the start of the market rout .
According to the Treaty a no bail out clause is enshrined but this might have to be flouted by the likes of Greece and a couple of other Countries if
they cannot sell their Bonds because there is growing criticism from some non EURO Members that the ECB has strayed from it"s remit .
ECB appointments set off German and French rivalry for appointment of Chief Economist.......don"t the other Euro Countries get a vote?
Eurozone is in recession and analysts forecast it will remain so for the whole of 2012
Britain is facing a weak period for a long time.
U.S. seen to be the only Western Country that will grow because consumers are still spending.
The Asian Countries are doing better than Western Countries and it is hoped they will weather the storm .
Apparently it was the EU Deauville Agreement in 2010 to relax the rules which was the start of the market rout .
According to the Treaty a no bail out clause is enshrined but this might have to be flouted by the likes of Greece and a couple of other Countries if
they cannot sell their Bonds because there is growing criticism from some non EURO Members that the ECB has strayed from it"s remit .
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Re: EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
fuzeta Mon 2 Jan - 11:21
Panda wrote:fuzeta wrote:Just been watching today's sombre little speeches from Sarkozy and Merkel. They both spoke as though they had plague and pestilence visited upon them through no fault of theirs,
Well their nations are the frankensteins that created the beast ' the euro currency' The fact that they cannot now control it lies completely at their door. No good blaming everything and everyone else for their folly Grrrrrrr
Loved the youtube video
Hi fuzeta, is there any way you can translate and put the english version on here?
I don't know Panda I am useless at anything like that. I hope that somebody on youtube gets it translated or subtitles. I hope so.
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Re: EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
Lillyofthevalley Mon 2 Jan - 11:27
Hi Panda Happy New Year to you and your family!!
Slightly off topic....I dont know if in the last 50+ pages Ive ever thanked you for this very useful and interesting Euro Crisis Thread, whenever I want to find anything out about the Euro, I just come on here and I find out all I need to know.
Thanks
Slightly off topic....I dont know if in the last 50+ pages Ive ever thanked you for this very useful and interesting Euro Crisis Thread, whenever I want to find anything out about the Euro, I just come on here and I find out all I need to know.
Thanks
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Re: EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
Panda Mon 2 Jan - 11:28
,fuzeta wrote:Panda wrote:fuzeta wrote:Just been watching today's sombre little speeches from Sarkozy and Merkel. They both spoke as though they had plague and pestilence visited upon them through no fault of theirs,
Well their nations are the frankensteins that created the beast ' the euro currency' The fact that they cannot now control it lies completely at their door. No good blaming everything and everyone else for their folly Grrrrrrr
Loved the youtube video
Hi fuzeta, is there any way you can translate and put the english version on here?
I don't know Panda I am useless at anything like that. I hope that somebody on youtube gets it translated or subtitles. I hope so.
O.K. thanks, let"s hope some cleverclogs sees this and obliges.
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Re: EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
Panda Mon 2 Jan - 11:36
Lillyofthevalley wrote:Hi Panda Happy New Year to you and your family!!
Slightly off topic....I dont know if in the last 50+ pages Ive ever thanked you for this very useful and interesting Euro Crisis Thread, whenever I want to find anything out about the Euro, I just come on here and I find out all I need to know.
Thanks
Thanks Lilyofthevalley, same to you and yours.
As regards this thread there has been up to 100 hits overnight at times, some from nonmembers I suspect and what is going on in the Eurozone and around the World fascinates me and it pleases me that others are interested and appreciate the thread.....thanks.
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Re: EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
Badboy Mon 2 Jan - 11:37
THERE WAS AN ARTICLE IN GUARDIAN TODAY CONCERNING EURO.
SAYING THAT IN ITALY AND GREECE THAT BANK CUSTOMERS HAVE BEEN WITHDRAWING THEIR DEPOSITS SINCE OCTOBER?,A SLOW MOTION BANK RUN,BANKS MIGHT FAIL NEXT.
SAYING THAT IN ITALY AND GREECE THAT BANK CUSTOMERS HAVE BEEN WITHDRAWING THEIR DEPOSITS SINCE OCTOBER?,A SLOW MOTION BANK RUN,BANKS MIGHT FAIL NEXT.
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Re: EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
Panda Mon 2 Jan - 11:46
Badboy wrote:THERE WAS AN ARTICLE IN GUARDIAN TODAY CONCERNING EURO.
SAYING THAT IN ITALY AND GREECE THAT BANK CUSTOMERS HAVE BEEN WITHDRAWING THEIR DEPOSITS SINCE OCTOBER?,A SLOW MOTION BANK RUN,BANKS MIGHT FAIL NEXT.
Yes Badboy, that"s why the non Euro Members are furious. The whole idea of the ECB lending at 1% for three years was to give the Banks some liquidity
and being able to lend to Businesses . Instead they have been buying bonds with a yield of 4 or 5 % . This will certainly cause some small Banks to fail
and the Chinese will be buying them to get a foothold in Europe.
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Eurozone manufacturing decline persists, PMI survey says
Panda Mon 2 Jan - 12:39
2 January 2012
Last updated at 11:00
Eurozone manufacturing decline persists, PMI survey says
Employment in German manufacturing picked up in December
Continue reading the main story
Global Economy
Activity
in the eurozone manufacturing sector fell for the fifth successive
month in December, but showed a slight improvement on the previous
month, a closely-watched survey suggests.
The Markit eurozone manufacturing PMI was 46.9, up from
November's 28-month low of 46.4. Any score under 50 represents a
contraction.
Markit said production levels and new orders fell in all 17 member nations.
Employment rose in Germany and France, but fell across the bloc as a whole.
Markit said manufacturing growth in the final three months of last year was the weakest since the middle of 2009.
"Eurozone manufacturing is clearly undergoing another recession," said Markit's chief economist Chris Williamson.
"Despite the rate of decline easing slightly in December,
production appears to have been collapsing across the single currency
area at a quarterly rate of approximately 1.5% in the final quarter of
2011."
No country in the eurozone saw an increase in manufacturing activity in December.
Continue reading the main story Eurozone purchasing managers' index
Austria recorded the highest score of 49, followed by France on 48.9 and Germany on 48.4.
The survey also found that input prices across the eurozone fell for the third straight month.
Many economists believe the eurozone economy as a whole is
heading for recession, after growing by just 0.2% between July and
September - the latest figures available.
"Eurozone manufacturers are now very much on the back foot
and finding life extremely challenging as domestic demand is hit by
tighter fiscal policy across the region, squeezed consumer purchasing
power, and heightened eurozone sovereign debt tensions leading to
tightening credit conditions and financial market turmoil," said Howard
Archer, of IHS Global Insight.
The research group believes the latest PMI data provides
"significant support" to the case for the European Central Bank to cut
interest rates again in the next few months.
A poll conducted among leading economists by the BBC last
week found that, of the 27 who responded, 25 forecast a return to
recession for Europe next year.
Continue reading the main story
Dax Index
Last Updated at 02 Jan 2012, 12:18
*Chart shows local time
Market boost
The latest data comes as Spain's newly
elected centre-right government said the country's deficit was worse
than previously forecast.
On Friday, the government said the deficit in 2011 would be
8% of GDP rather than the 6% predicted by the outgoing socialist
government.
On Monday, the country's new Finance Minister Luis de Guindos said the deficit for the year could be even larger.
However, European markets appeared prepared for the latest downbeat news.
By mid-morning, markets in the largest eurozone economies
were up by between 0.7% and 1.3%. Frankfurt's Dax index was the
strongest performer, up by 1.3%.
However, trading was very light, with UK markets closed for a
public holiday, which can mean share movements are unrepresentative of
general market sentiment.
Last updated at 11:00
Eurozone manufacturing decline persists, PMI survey says
Employment in German manufacturing picked up in December
Continue reading the main story
Global Economy
What caused the eurozone crisis?
How will the euro crisis end?
Crisis jargon buster
Europe's four big dilemmas
Activity
in the eurozone manufacturing sector fell for the fifth successive
month in December, but showed a slight improvement on the previous
month, a closely-watched survey suggests.
The Markit eurozone manufacturing PMI was 46.9, up from
November's 28-month low of 46.4. Any score under 50 represents a
contraction.
Markit said production levels and new orders fell in all 17 member nations.
Employment rose in Germany and France, but fell across the bloc as a whole.
Markit said manufacturing growth in the final three months of last year was the weakest since the middle of 2009.
"Eurozone manufacturing is clearly undergoing another recession," said Markit's chief economist Chris Williamson.
"Despite the rate of decline easing slightly in December,
production appears to have been collapsing across the single currency
area at a quarterly rate of approximately 1.5% in the final quarter of
2011."
No country in the eurozone saw an increase in manufacturing activity in December.
Continue reading the main story Eurozone purchasing managers' index
- Survey of 3,000 manufacturers updated monthly
- Includes questions on new orders, raw material prices and employment levels
- Considered by economists as useful snapshot of economic activity well ahead of official data
- Also compiled for other major economies around the world
Austria recorded the highest score of 49, followed by France on 48.9 and Germany on 48.4.
The survey also found that input prices across the eurozone fell for the third straight month.
Many economists believe the eurozone economy as a whole is
heading for recession, after growing by just 0.2% between July and
September - the latest figures available.
"Eurozone manufacturers are now very much on the back foot
and finding life extremely challenging as domestic demand is hit by
tighter fiscal policy across the region, squeezed consumer purchasing
power, and heightened eurozone sovereign debt tensions leading to
tightening credit conditions and financial market turmoil," said Howard
Archer, of IHS Global Insight.
The research group believes the latest PMI data provides
"significant support" to the case for the European Central Bank to cut
interest rates again in the next few months.
A poll conducted among leading economists by the BBC last
week found that, of the 27 who responded, 25 forecast a return to
recession for Europe next year.
Continue reading the main story
Dax Index
Last Updated at 02 Jan 2012, 12:18
*Chart shows local time
| 6006.61 | + +108.26 | + +1.84 |
| Top winner and loser | ||
Thyssen Krupp AG | ||
| 18.36 | + +0.63 | + +3.55 |
Deutsche Boerse AG | ||
| 43.00 | - -0.13 | - -0.29 |
Market boost
The latest data comes as Spain's newly
elected centre-right government said the country's deficit was worse
than previously forecast.
On Friday, the government said the deficit in 2011 would be
8% of GDP rather than the 6% predicted by the outgoing socialist
government.
On Monday, the country's new Finance Minister Luis de Guindos said the deficit for the year could be even larger.
However, European markets appeared prepared for the latest downbeat news.
By mid-morning, markets in the largest eurozone economies
were up by between 0.7% and 1.3%. Frankfurt's Dax index was the
strongest performer, up by 1.3%.
However, trading was very light, with UK markets closed for a
public holiday, which can mean share movements are unrepresentative of
general market sentiment.
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Who will make a mint out of a Euro collapse?
Panda Mon 2 Jan - 14:33
Who Will Make A Mint Out Of A Euro Collapse?
Ed Conway
December 21, 2011 2:43 PM
Are there hedge fund managers who know about top-secret plans to reshape the
euro?
I ask the question not because I myself know the details of any such plans
(though one should assume that at least some economic planning for worst-case
scenarios, including a currency zone break-up, has taken place at the highest
level) but because experience shows us that at key moments like this, there are
usually a handful of extraordinarily well-connected individuals who know the
outcome of key decisions at least marginally ahead of everyone else.
That was what may have happened in 1992. When Britain was ejected from the
Exchange Rate Mechanism, the event made George Soros a billion-pound fortune.
While his decision to short the pound was undoubtedly driven largely by
scepticism about the nature of the ERM, he was reportedly given a fair amount of
encouragement by policymakers themselves behind the scenes.
Indeed, an extraordinary recent obituary in The Times (here it is, sadly behind a paywall) said that his well-connected
advisor Richard Medley “acted as a crucial go-between with the German
Bundesbank, assuring Soros that Germany tacitly supported his attack.”
The obit added: Without the Bundesbank encouragement discreetly conveyed by
Medley, Soros might not have been quite so bold in making the unprecedented bets
against sterling that drained the Bank of England’s reserves. Medley’s knowledge
of German policies enabled Soros not only to make £1 billion from the
devaluation of sterling, but then even more profit by buying the French franc
alongside the Bundesbank, while other less informed hedge funds were still
betting against France. As Soros later told The Times, in the interview that
established his famous nickname: ‘I felt safe betting with the Bundesbank. The
Bundesbank clearly wanted the pound and lira devalued, but it was prepared to
defend the French franc. I did better than some others by sticking to the
Bundesbank’s side.’
Even now, there are some who also suspect Soros also had a mole in the Bank
of England, although nothing to this end has been substantiated.
Does this count as inside trading? It’s a grey area: usually successful
insider trading cases are those where there is a direct tip-off from a source
within a company about, for instance, a forthcoming takeover, that prompts an
investor to go out and buy a particular security, making themselves lots of
money. Soros – or someone betting on the collapse of the euro – could reasonably
claim their decision was based on an economic hunch rather than inside
information.
Moreover, insider dealing cases almost always concern private sector
decisions.
But undoubtedly it’s a smelly area. And not just limited to Europe.
There’s an excellent Wall Street Journal investigation (sadly also behind its paywall) into the privileged information
hedge funds can obtain over US government decisions through Washington lobbying
firms. It reveals that hedge funds and other investors paid for meetings with
key legislators which gave them critical steers over at least two of the most
significant regulatory changes in US legislation in recent years – the
healthcare and financial reform bills.
Again, it’s a grey area. It’s very difficult to pin down cause and effect: to
what extent did hints from policymakers make investors money? Moreover, is such
information really insider information if they hadn’t yet technically voted on a
bill?
And there are also very good reasons why policymakers talk to these
investors. Part of their job, after all, is to gauge the likely market reaction
to prospective decisions, and they will get the best sense of that by talking to
such investors. The Bank of England talks to hedge funds, asset managers and
other City bodies thousands of times a year, since it also has a duty to try to
glean what they are seeing in the market. One of their difficulties is
conducting these conversations without giving away privileged information which
the investors could trade on (but having said that often secretive hedge funds
will be similarly reluctant to engage, for fear of giving away their lucrative
trading positions).
However, reports such as the WSJ and Times ones compound the sense that there
is a privileged elite who consistently use their wealth to buy access to
influential decision-makers, which in turn reinforces their capacity to make
money. As Ken Rogoff said in a recent column, there is no doubt part of the rise in
inequality recently is connected to the challenges of globalisation and the
difficulty of adapting to new technology – but part of the divide is undoubtedly
due to these avenues which allow the rich to become richer.
Which brings us back to the original question: if the euro collapses next
year, who will be the Soros of 2012? And to what extent will their bets be based
on nudges and winks from policymakers as opposed to pure conviction and
excellent timing? We’re unlikely to find out for some years to come, but you’d
be a fool to assume it isn’t already happening.
PS It's probably worth adding that for every hedge fund manager who does very
well out of a crisis, there are usually one or perhaps two who do equally badly.
So there are likely to be a fair few investors who are getting, and will get,
seriously - seriously - burned by the euro crisis.
This is one of the comments, quite clever I thought.
Posted by: AA2004ROAD-ATLAS on December 21, 2011 10:44 PM
.
Ed Conway
December 21, 2011 2:43 PM
Are there hedge fund managers who know about top-secret plans to reshape the
euro?
I ask the question not because I myself know the details of any such plans
(though one should assume that at least some economic planning for worst-case
scenarios, including a currency zone break-up, has taken place at the highest
level) but because experience shows us that at key moments like this, there are
usually a handful of extraordinarily well-connected individuals who know the
outcome of key decisions at least marginally ahead of everyone else.
That was what may have happened in 1992. When Britain was ejected from the
Exchange Rate Mechanism, the event made George Soros a billion-pound fortune.
While his decision to short the pound was undoubtedly driven largely by
scepticism about the nature of the ERM, he was reportedly given a fair amount of
encouragement by policymakers themselves behind the scenes.
Indeed, an extraordinary recent obituary in The Times (here it is, sadly behind a paywall) said that his well-connected
advisor Richard Medley “acted as a crucial go-between with the German
Bundesbank, assuring Soros that Germany tacitly supported his attack.”
The obit added: Without the Bundesbank encouragement discreetly conveyed by
Medley, Soros might not have been quite so bold in making the unprecedented bets
against sterling that drained the Bank of England’s reserves. Medley’s knowledge
of German policies enabled Soros not only to make £1 billion from the
devaluation of sterling, but then even more profit by buying the French franc
alongside the Bundesbank, while other less informed hedge funds were still
betting against France. As Soros later told The Times, in the interview that
established his famous nickname: ‘I felt safe betting with the Bundesbank. The
Bundesbank clearly wanted the pound and lira devalued, but it was prepared to
defend the French franc. I did better than some others by sticking to the
Bundesbank’s side.’
Even now, there are some who also suspect Soros also had a mole in the Bank
of England, although nothing to this end has been substantiated.
Does this count as inside trading? It’s a grey area: usually successful
insider trading cases are those where there is a direct tip-off from a source
within a company about, for instance, a forthcoming takeover, that prompts an
investor to go out and buy a particular security, making themselves lots of
money. Soros – or someone betting on the collapse of the euro – could reasonably
claim their decision was based on an economic hunch rather than inside
information.
Moreover, insider dealing cases almost always concern private sector
decisions.
But undoubtedly it’s a smelly area. And not just limited to Europe.
There’s an excellent Wall Street Journal investigation (sadly also behind its paywall) into the privileged information
hedge funds can obtain over US government decisions through Washington lobbying
firms. It reveals that hedge funds and other investors paid for meetings with
key legislators which gave them critical steers over at least two of the most
significant regulatory changes in US legislation in recent years – the
healthcare and financial reform bills.
Again, it’s a grey area. It’s very difficult to pin down cause and effect: to
what extent did hints from policymakers make investors money? Moreover, is such
information really insider information if they hadn’t yet technically voted on a
bill?
And there are also very good reasons why policymakers talk to these
investors. Part of their job, after all, is to gauge the likely market reaction
to prospective decisions, and they will get the best sense of that by talking to
such investors. The Bank of England talks to hedge funds, asset managers and
other City bodies thousands of times a year, since it also has a duty to try to
glean what they are seeing in the market. One of their difficulties is
conducting these conversations without giving away privileged information which
the investors could trade on (but having said that often secretive hedge funds
will be similarly reluctant to engage, for fear of giving away their lucrative
trading positions).
However, reports such as the WSJ and Times ones compound the sense that there
is a privileged elite who consistently use their wealth to buy access to
influential decision-makers, which in turn reinforces their capacity to make
money. As Ken Rogoff said in a recent column, there is no doubt part of the rise in
inequality recently is connected to the challenges of globalisation and the
difficulty of adapting to new technology – but part of the divide is undoubtedly
due to these avenues which allow the rich to become richer.
Which brings us back to the original question: if the euro collapses next
year, who will be the Soros of 2012? And to what extent will their bets be based
on nudges and winks from policymakers as opposed to pure conviction and
excellent timing? We’re unlikely to find out for some years to come, but you’d
be a fool to assume it isn’t already happening.
PS It's probably worth adding that for every hedge fund manager who does very
well out of a crisis, there are usually one or perhaps two who do equally badly.
So there are likely to be a fair few investors who are getting, and will get,
seriously - seriously - burned by the euro crisis.
This is one of the comments, quite clever I thought.
Posted by: AA2004ROAD-ATLAS on December 21, 2011 10:44 PMWell
when an economic zone decides its somehow a great idea to incorporate
stone-aged economies of Eastern Europe and the Siesta economies to its
South within its sphere; Then does that sound like the recipe for
economic might and success?
No!
It's like sticking a caravan onto the back of a F1 car...
Seriously disadvantageous to performance!
I'm sorry but that caravan has detuned the engine and has caused significant damage to the bearings...
The package simply dont work, and it is far too late to do anything about it now!!
The car need s a new engine, gearbox and that caravan unhitching fast...
Even if that means losing some of the friendly support crew.
.
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Austerity Reigns Over Euro Zone as Crisis Deepens
Panda Mon 2 Jan - 15:21
Austerity Reigns Over Euro Zone as Crisis Deepens
Petros Giannakouris/Associated Press
In Athens, homeless people have a New Year’s Day meal. Prime Minister Lucas Papademos has warned of a “very difficult year.”
By NELSON D. SCHWARTZ
Published: January 1, 2012
Europe’s leaders braced their nations for a turbulent year, with their beleaguered economies facing a threat on two fronts: widening deficits that force more borrowing but increasing austerity measures that put growth further out of reach.
Multimedia
Interactive Feature
Tracking Europe's Debt Crisis
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Nicolas Bouvy/European Pressphoto Agency
French President Nicolas Sarkozy will meet on Jan. 9 with German Chancellor Angela Merkel to discuss a new fiscal treaty intended to impose stringent budget requirements on European Union nations.
Saying that Europe was facing its “harshest test in decades,” Chancellor Angela Merkel of Germany warned on New Year’s Eve that “next year will no doubt be more difficult than 2011” — a marked change in tone from a year ago, when she praised Germans for “mastering the crisis as no other nation.”
Her blunt message was echoed in Italy, France and Greece, the epicenter of the debt crisis, where Prime Minister Lucas Papademos asked for resolve in seeing reforms through, “so that the sacrifices we have made up to now won’t be in vain.”
While the economic picture in the United States has brightened recently with more upbeat employment figures, Europe remains mired in a slump. Most economists are forecasting a recession for 2012, which will heighten the pressure governments and financial institutions across the Continent are seeing.
Adding to the gloomy outlook is the prospect of a downgrade in France’s sterling credit rating, a move that analysts say could happen early in the new year and have wide-ranging consequences on efforts to stabilize Europe’s finances.
Despite criticism from many economists, though, most European governments are sticking to austerity plans, rejecting the Keynesian approach of economic stimulus favored by Washington after the financial crisis in 2008, in a bid to show investors they are serious about fiscal discipline.
This cycle was evident on Friday, when Spain surprised observers by announcing a larger-than-expected budget gap for 2011 even as the new conservative government there laid out plans to increase property and income taxes in 2012.
Indeed, even in the country where the crisis began, Greece, the cycle of spending cuts, tax increases and contraction has not resulted in a course correction, and the same path now lies in store for much larger economies like those of Italy and Spain.
“Every government in Europe with the exception of Germany is bending over backwards to prove to the market that they won’t hesitate to do what it takes,” said Charles Wyplosz, a professor of economics at the Graduate Institute of Geneva. “We’re going straight into a wall with this kind of policy. It’s sheer madness.”
Rather than the austerity measures now being imposed, Mr. Wyplosz said he would like to see governments halt the recent tax increases and spending reductions, and instead cut consumption taxes in a bid to encourage consumer spending. More belt-tightening, he said, increases the likelihood that Europe will see a “lost decade” of economic torpor like Japan faced in the 1990s.
In fact, economists and strategists on both sides of the Atlantic have been steadily ratcheting down their growth expectations for 2012.
“Europe is likely to have a meaningful recession in 2012,” said Tobias Levkovich, Citigroup’s chief equity strategist. While Mr. Levkovich does not see that as a significant threat to the bottom line of most American businesses — he estimates that Europe accounts for about 8.5 percent of sales for the typical company in the Standard & Poor’s 500-stock index — the psychological effects on global markets will be magnified if political opposition to austerity increases.
“Powerful street protests could bring it back to the front pages,” he said. “We’ve seen episodic crises in Europe over the past two years. It’s a recurring event.” He expects Europe to remain a key worry for investors worldwide in 2012.
Neville Hill, head of European economics at Credit Suisse, expects gross domestic product in the euro zone to shrink by 0.5 percent in 2012, with the worst of the pain being felt in the first quarter. At the same time, borrowing needs will remain elevated, with Italy and Spain planning to raise more than 100 billion euros in the first quarter alone.
“We shouldn’t underestimate the scale of the challenge the euro zone faces in early 2012,” Mr. Hill said. “Italian and Spanish sovereign borrowers are at the foot of the mountain, rather than the top. The first quarter is a crunch point.”
The Continent’s economic outlook will take center stage on Jan. 9, when Mrs. Merkel and President Nicolas Sarkozy of France will discuss a new fiscal treaty intended to impose stringent budget requirements on European Union nations. Then on Jan. 30, European Union leaders will gather in Brussels to discuss ways to spur growth.
Melissa Eddy contributed reporting.
Petros Giannakouris/Associated PressIn Athens, homeless people have a New Year’s Day meal. Prime Minister Lucas Papademos has warned of a “very difficult year.”
By NELSON D. SCHWARTZ
Published: January 1, 2012
Europe’s leaders braced their nations for a turbulent year, with their beleaguered economies facing a threat on two fronts: widening deficits that force more borrowing but increasing austerity measures that put growth further out of reach.
Multimedia
Interactive FeatureTracking Europe's Debt Crisis
Related
- Future in Mind, E.U. Plans for Less Unanimity(January 2, 2012)
- No Fireworks for Euro as It Reaches the 10-Year Mark(January 1, 2012)
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Nicolas Bouvy/European Pressphoto Agency
French President Nicolas Sarkozy will meet on Jan. 9 with German Chancellor Angela Merkel to discuss a new fiscal treaty intended to impose stringent budget requirements on European Union nations.
Saying that Europe was facing its “harshest test in decades,” Chancellor Angela Merkel of Germany warned on New Year’s Eve that “next year will no doubt be more difficult than 2011” — a marked change in tone from a year ago, when she praised Germans for “mastering the crisis as no other nation.”
Her blunt message was echoed in Italy, France and Greece, the epicenter of the debt crisis, where Prime Minister Lucas Papademos asked for resolve in seeing reforms through, “so that the sacrifices we have made up to now won’t be in vain.”
While the economic picture in the United States has brightened recently with more upbeat employment figures, Europe remains mired in a slump. Most economists are forecasting a recession for 2012, which will heighten the pressure governments and financial institutions across the Continent are seeing.
Adding to the gloomy outlook is the prospect of a downgrade in France’s sterling credit rating, a move that analysts say could happen early in the new year and have wide-ranging consequences on efforts to stabilize Europe’s finances.
Despite criticism from many economists, though, most European governments are sticking to austerity plans, rejecting the Keynesian approach of economic stimulus favored by Washington after the financial crisis in 2008, in a bid to show investors they are serious about fiscal discipline.
This cycle was evident on Friday, when Spain surprised observers by announcing a larger-than-expected budget gap for 2011 even as the new conservative government there laid out plans to increase property and income taxes in 2012.
Indeed, even in the country where the crisis began, Greece, the cycle of spending cuts, tax increases and contraction has not resulted in a course correction, and the same path now lies in store for much larger economies like those of Italy and Spain.
“Every government in Europe with the exception of Germany is bending over backwards to prove to the market that they won’t hesitate to do what it takes,” said Charles Wyplosz, a professor of economics at the Graduate Institute of Geneva. “We’re going straight into a wall with this kind of policy. It’s sheer madness.”
Rather than the austerity measures now being imposed, Mr. Wyplosz said he would like to see governments halt the recent tax increases and spending reductions, and instead cut consumption taxes in a bid to encourage consumer spending. More belt-tightening, he said, increases the likelihood that Europe will see a “lost decade” of economic torpor like Japan faced in the 1990s.
In fact, economists and strategists on both sides of the Atlantic have been steadily ratcheting down their growth expectations for 2012.
“Europe is likely to have a meaningful recession in 2012,” said Tobias Levkovich, Citigroup’s chief equity strategist. While Mr. Levkovich does not see that as a significant threat to the bottom line of most American businesses — he estimates that Europe accounts for about 8.5 percent of sales for the typical company in the Standard & Poor’s 500-stock index — the psychological effects on global markets will be magnified if political opposition to austerity increases.
“Powerful street protests could bring it back to the front pages,” he said. “We’ve seen episodic crises in Europe over the past two years. It’s a recurring event.” He expects Europe to remain a key worry for investors worldwide in 2012.
Neville Hill, head of European economics at Credit Suisse, expects gross domestic product in the euro zone to shrink by 0.5 percent in 2012, with the worst of the pain being felt in the first quarter. At the same time, borrowing needs will remain elevated, with Italy and Spain planning to raise more than 100 billion euros in the first quarter alone.
“We shouldn’t underestimate the scale of the challenge the euro zone faces in early 2012,” Mr. Hill said. “Italian and Spanish sovereign borrowers are at the foot of the mountain, rather than the top. The first quarter is a crunch point.”
The Continent’s economic outlook will take center stage on Jan. 9, when Mrs. Merkel and President Nicolas Sarkozy of France will discuss a new fiscal treaty intended to impose stringent budget requirements on European Union nations. Then on Jan. 30, European Union leaders will gather in Brussels to discuss ways to spur growth.
- 1
- 2
Melissa Eddy contributed reporting.
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Iceland is our modern Utopia
Panda Mon 2 Jan - 17:02
Eurozone crisis
Iceland is our modern Utopia
23 December 2011
Público
Madrid
Reykjavik. The Town hall and the old city from the Tjornin lake.
Mariusz Kluzniak/Getty Images
In rejecting by referendum a bailout for their toxic
banks and the repayment of external debt, the citzens of Iceland have
shown it is possible to escape the laws of capitalism and take control
of one's destiny, writes a Spanish historian.
Miguel Ángel Sanz Loroño
Since the times of Oscar Wilde it has been known that a map
without the island of Utopia on it is a map “not worth even glancing
at”. Despite that, the journey of Iceland from the darling of late
capitalism to a project in true democracy suggests that a map without
Utopia is not only unworthy of our attention, but is also a hoax
conjured up by a defective cartography. Whether the markets like it or
not, the lighthouse of Utopia has begun flashing faint warning signals
to the rest of Europe.
Iceland is not Utopia. It is known that there can be no kingdoms of
liberty within the Empire of necessity of late capitalism. But it is a
recognition of a dramatic absence. Iceland is proof that capital does
not own all the truth there is to this world, even when it aspires to
control all the maps we can lay out.
With its decision to halt the wheel of tragedy of the markets,
Iceland has set a precedent that could threaten to break the back of
late capitalism. For now, this small island, which is doing what was
claimed to be too unreal to be possible, does not seem to be sinking
into chaos, though it does seem to be sinking into an information
blackout. How much information are we getting from Iceland and how much
on the loans to Greece? Why has Iceland gone off the pages of some of
the media that should be telling us what is happening out there in the
world?
A constitution drafted by citizen assemblies
So far it has been the birthright of those in power to define what
is real and what is not, what can be thought and done and what can not.
The cognitive maps deployed in order to understand our world have
always had obscure corners where lies the barbarism that upholds the
dominions of the elites. Those unmapped shadows of the world usually go
with the elimination of their opposite, the island of Utopia. Walter
Benjamin has already put it in writing: There is no document of
civilisation that is not at the same time a document of barbarism.
These elites, aided by theologians and economists, have been
defining what is real and what is not: what is realistic, according to
this definition of reality, and what is not and therefore an aberration
of thought that cannot be taken into account. That is, what can be
done and thought and what can not. But they have done it, in accordance
with the basis of power and its violence: the dreaded concept of
necessity. One must make sacrifices, they say with a stricken gesture.
Either adapt, or face the unimaginable catastrophe. Late capitalism has
exposed its logic in a perversely Hegelian way: all that is real is
necessarily rational, and vice versa.
In January 2009, the Icelandic people rebelled against the
arbitrariness of this logic. The peaceful demonstrations of the crowd
brought down the Conservative cabinet of Geir Haarde, and running the
country fell to a left-leaning parliamentary minority, which called
elections for April 2009. The Social Democratic Alliance of Prime
Minister Jóhanna Sigurðardóttir and the Left-Green Movement renewed
their coalition government with an absolute majority. In autumn 2009,
by a popular initiative, a Constitution began to be drafted by citizen
assemblies. In 2010, the Government proposed creating a national
constitutional council whose members would be chosen by lot. Two
referenda (the second in April 2011) refused to rescue the banks and
pay the foreign debt. In September 2011 the former Prime Minister, Geir
Haarde, was put on trial for his role in the crisis.
Every map of Europe should have Iceland at its vanishing point
To forget that the world is not a Greek tragedy in which the wheel
of fate or of capital turns without regard to human reason is to deny
reality. It is obvious that the wheel is moved by human beings. All
that we can imagine being possible is as real as what the markets tell
us is the reality. A sense of possibilities and the human imagination
itself, recovered in Iceland, teach us that they are as true and real
as the gargantuan necessity of capitalism. We just have to heed this
call to discover the trap that is trying to make us believe in that
necessity. There is no alternative, they declare. Perhaps some of those
announcing sacrifices to us have bothered to check their map of the
world?
Iceland has shown that our cartography contains more than they are
telling us. That it is possible to dominate – and therein lies the
principle of freedom – that ‘necessity’. Iceland, however, is not a
model. It is one of the possibilities for doing things differently. The
intent of the crowds in Iceland to build the future with their
decisions and their imagination shows us the reality of an alternative.
Because the possibility of doing things differently as proclaimed by
the crowd is as real as the need to carry on doing things the same way
that is demanded by capital. In Iceland they have decided not to let
the shape of tomorrow be dictated by the tragic wheel of necessity.
Will the rest of us continue permitting what is real to be defined by
capital? Will we continue to surrender the future, the realm of the
possible, and our imaginations to the banks, the corporations and
governments that claim to be doing everything that can possibly be
done?
Every map of Europe should have Iceland at its vanishing point. This
map must be constructed with the certainty that what is possible is
built into the real just as deeply as is the necessary. The necessity
is just one more possibility of what is real. There is an alternative.
Iceland has reminded us of it by proclaiming that the imagination is
part of humane reasoning. It is the crowd that will define what is real
and realistic, using the possibility of doing things differently. This
way, we are not cheering ourselves on with the consolations of
dreamers, but are settling on a part of reality that the map of capital
wants to wipe out completely. The existence of Utopia depends on it.
And with this, the concept of a life worth living.
Translated from the Spanish by Anton Baer
Iceland is our modern Utopia
23 December 2011
Público
Madrid
Reykjavik. The Town hall and the old city from the Tjornin lake.Mariusz Kluzniak/Getty Images
In rejecting by referendum a bailout for their toxic
banks and the repayment of external debt, the citzens of Iceland have
shown it is possible to escape the laws of capitalism and take control
of one's destiny, writes a Spanish historian.
Miguel Ángel Sanz Loroño
Since the times of Oscar Wilde it has been known that a map
without the island of Utopia on it is a map “not worth even glancing
at”. Despite that, the journey of Iceland from the darling of late
capitalism to a project in true democracy suggests that a map without
Utopia is not only unworthy of our attention, but is also a hoax
conjured up by a defective cartography. Whether the markets like it or
not, the lighthouse of Utopia has begun flashing faint warning signals
to the rest of Europe.
Iceland is not Utopia. It is known that there can be no kingdoms of
liberty within the Empire of necessity of late capitalism. But it is a
recognition of a dramatic absence. Iceland is proof that capital does
not own all the truth there is to this world, even when it aspires to
control all the maps we can lay out.
With its decision to halt the wheel of tragedy of the markets,
Iceland has set a precedent that could threaten to break the back of
late capitalism. For now, this small island, which is doing what was
claimed to be too unreal to be possible, does not seem to be sinking
into chaos, though it does seem to be sinking into an information
blackout. How much information are we getting from Iceland and how much
on the loans to Greece? Why has Iceland gone off the pages of some of
the media that should be telling us what is happening out there in the
world?
A constitution drafted by citizen assemblies
So far it has been the birthright of those in power to define what
is real and what is not, what can be thought and done and what can not.
The cognitive maps deployed in order to understand our world have
always had obscure corners where lies the barbarism that upholds the
dominions of the elites. Those unmapped shadows of the world usually go
with the elimination of their opposite, the island of Utopia. Walter
Benjamin has already put it in writing: There is no document of
civilisation that is not at the same time a document of barbarism.
These elites, aided by theologians and economists, have been
defining what is real and what is not: what is realistic, according to
this definition of reality, and what is not and therefore an aberration
of thought that cannot be taken into account. That is, what can be
done and thought and what can not. But they have done it, in accordance
with the basis of power and its violence: the dreaded concept of
necessity. One must make sacrifices, they say with a stricken gesture.
Either adapt, or face the unimaginable catastrophe. Late capitalism has
exposed its logic in a perversely Hegelian way: all that is real is
necessarily rational, and vice versa.
In January 2009, the Icelandic people rebelled against the
arbitrariness of this logic. The peaceful demonstrations of the crowd
brought down the Conservative cabinet of Geir Haarde, and running the
country fell to a left-leaning parliamentary minority, which called
elections for April 2009. The Social Democratic Alliance of Prime
Minister Jóhanna Sigurðardóttir and the Left-Green Movement renewed
their coalition government with an absolute majority. In autumn 2009,
by a popular initiative, a Constitution began to be drafted by citizen
assemblies. In 2010, the Government proposed creating a national
constitutional council whose members would be chosen by lot. Two
referenda (the second in April 2011) refused to rescue the banks and
pay the foreign debt. In September 2011 the former Prime Minister, Geir
Haarde, was put on trial for his role in the crisis.
Every map of Europe should have Iceland at its vanishing point
To forget that the world is not a Greek tragedy in which the wheel
of fate or of capital turns without regard to human reason is to deny
reality. It is obvious that the wheel is moved by human beings. All
that we can imagine being possible is as real as what the markets tell
us is the reality. A sense of possibilities and the human imagination
itself, recovered in Iceland, teach us that they are as true and real
as the gargantuan necessity of capitalism. We just have to heed this
call to discover the trap that is trying to make us believe in that
necessity. There is no alternative, they declare. Perhaps some of those
announcing sacrifices to us have bothered to check their map of the
world?
Iceland has shown that our cartography contains more than they are
telling us. That it is possible to dominate – and therein lies the
principle of freedom – that ‘necessity’. Iceland, however, is not a
model. It is one of the possibilities for doing things differently. The
intent of the crowds in Iceland to build the future with their
decisions and their imagination shows us the reality of an alternative.
Because the possibility of doing things differently as proclaimed by
the crowd is as real as the need to carry on doing things the same way
that is demanded by capital. In Iceland they have decided not to let
the shape of tomorrow be dictated by the tragic wheel of necessity.
Will the rest of us continue permitting what is real to be defined by
capital? Will we continue to surrender the future, the realm of the
possible, and our imaginations to the banks, the corporations and
governments that claim to be doing everything that can possibly be
done?
Every map of Europe should have Iceland at its vanishing point. This
map must be constructed with the certainty that what is possible is
built into the real just as deeply as is the necessary. The necessity
is just one more possibility of what is real. There is an alternative.
Iceland has reminded us of it by proclaiming that the imagination is
part of humane reasoning. It is the crowd that will define what is real
and realistic, using the possibility of doing things differently. This
way, we are not cheering ourselves on with the consolations of
dreamers, but are settling on a part of reality that the map of capital
wants to wipe out completely. The existence of Utopia depends on it.
And with this, the concept of a life worth living.
Translated from the Spanish by Anton Baer
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Re: EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
Badboy Mon 2 Jan - 20:14
ONE HAS TO ADMIRE THE ICELANDIC PEOPLE FOR SAYING NO TO THE BANKS.
THEY HAVE TURNED AROUND THEIR BEAUTIFUL COUNTRY(POSSIBLY AMONG THE TOP TEN COUNTRIES FOR BEAUTY).
THEY HAVE TURNED AROUND THEIR BEAUTIFUL COUNTRY(POSSIBLY AMONG THE TOP TEN COUNTRIES FOR BEAUTY).
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Re: EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
Panda Mon 2 Jan - 20:41
Badboy wrote:ONE HAS TO ADMIRE THE ICELANDIC PEOPLE FOR SAYING NO TO THE BANKS.
THEY HAVE TURNED AROUND THEIR BEAUTIFUL COUNTRY(POSSIBLY AMONG THE TOP TEN COUNTRIES FOR BEAUTY).
One of their Banks was in trouble a while ago and went bankrupt and a lot of Brits who had invested because of the high interest offered lost all their
money. Gordon Brown was Prime Minister at the time and sequestered the Banks U.K. assets, much to the annoyance of the Icelandic Government.
I"m pleased they didn"t ask for a bail-out and have proved Capital is not the answer, not sure what they do for income though apart from exporting
fish...is it the Aurora Borealis which attracts visitors? A friend of mine went a few years ago and said it was very expensive there.
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Europe"s four big dilemmas
Panda Mon 2 Jan - 20:57
27 October 2011
Last updated at 11:04
Europe's four big dilemmas
By Laurence Knight
Business reporter, BBC News
Decision time for the euro is fast approaching
Continue reading the main story Related Stories
In
October, Europe's leaders reached yet another wide-ranging deal to
prevent economic problems from causing financial meltdown in the
eurozone.
For many onlookers, the issues they face may seem complicated and interconnected.
But essentially they boil down to four big dilemmas.
How these dilemmas are resolved will decide whether the
eurozone stays together, or ultimately unravels despite the latest
agreement.
Borrowers vs Lenders
What the market thinks of Greek government debt
Like the US and UK, Europe faces an enormous overhang of accumulated government and private-sector debt, much of which is now not repayable.
So the question is, how much gets written off, and who picks up the tab?
For the eurozone as a whole, the debt problem is comparable with that of the US, and potentially manageable.
The problem is that some eurozone countries are much more heavily indebted than others.
In October's deal some private sectors lenders have already agreed to write down the value of Greek debt by half.
Investors also think the Portuguese, Irish, and even the Spanish and Italian governments, may eventually follow suit.
But when bad debts get written off, someone has to take a loss.
While some of those debts are held in the US, UK or elsewhere
overseas, most of it is held by the European banks, and increasingly by
the European Central Bank (ECB).
Germany may end up footing much of the bill
This is the primary reason for the recent loss of confidence in the European banking system.
But while Germany can afford to rescue its banks, as the Irish Republic has already demonstrated, other countries may not be able to rescue theirs.
The October package calls for banks to invest more than 100bn
euros building up their capital, but it is not yet clear if they will
be able to do so without intervention from governments.
If other European countries join Greece in writing off their debts, banks may need even more money.
Ultimately Germany and other less-indebted countries may have
to bear much of the cost of rescuing the eurozone's banks as well as
its weaker governments.
Austerity vs growth
Like everywhere else, most European governments have seen their borrowing balloon during the recession and anaemic recovery.
At the same time, fears over southern European governments'
ability to repay their debts mean their borrowing costs have also gone
through the roof.
Under pressure from Germany and the ECB, all of these countries have been pushing through painful spending cuts and tax rises.
Continue reading the main story Diverging fortunes
Rate at which markets are willing to lend to governments for 10 years:
To set a good example, Germany has even donned the hairshirt itself, promising to eliminate its own modest deficit by 2013.
But here's the problem: austerity is killing growth throughout Europe.
And with less profits to tax and more dole cheques to write,
weak growth makes it even harder for governments to cut their borrowing
and repay their debts.
In order to turn the slowing eurozone economy around, the ECB now looks set to slash interest rates from their current 1.5%.
The central bank considered buying up more Italian and
Spanish debt, pumping cash into the financial system and easing the
pressure on those countries to slash their borrowing.
But this move has always been strongly opposed by German members of the ECB.
Another option to stimulate growth is for the few other
countries that markets are still willing to lend to to borrow and spend
more, offsetting spending cuts in southern Europe.
Yet for Germany, who can currently borrow at unprecedentedly cheap interest rates, borrowing is anathema.
Discipline vs Solidarity
Germany's view on the eurozone crisis is simple.
Southern European governments borrowed recklessly at the cheap interest rates available inside the euro.
Now they are being punished by markets, and must learn discipline.
Germany wants other governments to incorporate strict budget rules into their constitutions to stop such recklessness in future.
A 20% unemployment rate helped spark Egyptian-style mass protests in Spain
But rules, with penalties attached, may not be credible.
Imposing a fine on an over-indebted government is rather like kicking
someone when they are down.
Indeed, just such a "stability pact" of budget rules,
insisted on by Germany at the euro's creation, was quickly broken with
impunity by Germany itself.
Moreover, the focus on discipline misses a bigger point.
While Germany's view may be apt for Greece - whose government
cheated on its borrowing statistics to qualify for the euro in the
first place - it is grossly unfair for Spain.
Before the financial crisis, Spain's government had lower
debt levels than Germany's, and (unlike Germany) actually spent less
than it earned in taxes.
But the country experienced a property bubble that then burst spectacularly, leaving its economy high and dry.
Wages, inflated during the good years, are now uncompetitive, and unemployment has shot up to 20%.
Detroit, in Michigan, has suffered an economic disaster, mitigated by US government money
Yet, inside the euro, Spain cannot devalue to regain a price
advantage. Nor can it necessarily expect the ECB to cut interest rates
or buy up its debts.
Being put a fiscal straitjacket as well just makes things worse.
Compare this with the US state of Michigan, where the collapse of the US car industry has spelled disaster.
Unlike in Europe, the US has a federal government that can
tax other states in order to help out Michigan, by paying for
unemployment benefits and rehabilitating the big car companies.
If the euro is to function in the future, economists warn,
then a similar system of centralised fiscal transfers will be needed
there too.
And in the current crisis, again it is Germany that would foot much of the bill.
Europe vs the Nations
On the face of it, the big political standoff in Europe is one of paymaster Germany versus bankrupt southern Europe.
For German voters, their country's post-War economic miracle was built on a hard currency, prudent finances, and strong exports.
It is hard for German voters to fathom that these very virtues are at the heart of the current crisis.
But Germany has everything to lose if it does not help the south out, and the eurozone unravels.
If the Greeks, Italians and others default on their debts, German and French lenders would be the biggest losers.
As Greece's economy shrinks and shrinks, its people cry out. But can German voters hear them?
If they also leave the euro, it would be a legal and financial disaster for all concerned.
Moreover, German export success for the past decade has been
built on the weaker, more competitive exchange rate that came with
sharing a currency with southern Europe.
Without the euro, safe haven Germany could expect its
currency to shoot up, with devastating consequences for the country's
export-driven industry.
Southern Europeans meanwhile would see their currencies
plummet outside the euro, leading to rises in inflation and their cost
of living as painful as the austerity they are protesting against.
Yet these stark realities are not widely appreciated in Germany or its neighbours.
Because the real problem is that there is nobody who can credibly speak for the common interest of Europe.
Since its inception in the 1950s, the European project has been run and controlled by a club of national governments.
The political process has been one of haggling behind closed
doors, with issues presented to electorates as a matter of competing
national interests.
But such haggling is dangerous in a financial crisis.
Jose Manuel Barroso: "The measures have taken too long and they have not been fully delivered"
Any solution must be agreed by 17 governments, and ratified by 17 parliaments, an impossibly slow process.
And the longer it takes, the more bitter each dispute risks
becoming, and the greater the market's loss of confidence in the euro
becomes, undermining Europe's fragile economy.
The European Commission president, Jose Manuel Barroso, has tried to speak for the common interest, pleading for the Commission to take the lead in solving Europe's problems.
But he is a political appointee, and as such, he is easily ignored by national leaders and scarcely noticed by the wider public.
Perhaps, if Mr Barroso were an elected leader, he could guide
European public opinion towards a comprehensive solution to the crisis
that balanced the interests of the different nations.
But as it is, the European public is very far from
understanding the issues, or agreeing to the greater economic and
political integration that may be needed to save the euro.
Sadly, this political dilemma is one that may not have a workable solution.
Last updated at 11:04
Europe's four big dilemmas
By Laurence Knight
Business reporter, BBC News
Decision time for the euro is fast approaching
Continue reading the main story Related Stories
In
October, Europe's leaders reached yet another wide-ranging deal to
prevent economic problems from causing financial meltdown in the
eurozone.
For many onlookers, the issues they face may seem complicated and interconnected.
But essentially they boil down to four big dilemmas.
How these dilemmas are resolved will decide whether the
eurozone stays together, or ultimately unravels despite the latest
agreement.
Borrowers vs Lenders
What the market thinks of Greek government debt
Like the US and UK, Europe faces an enormous overhang of accumulated government and private-sector debt, much of which is now not repayable.
So the question is, how much gets written off, and who picks up the tab?
For the eurozone as a whole, the debt problem is comparable with that of the US, and potentially manageable.
The problem is that some eurozone countries are much more heavily indebted than others.
In October's deal some private sectors lenders have already agreed to write down the value of Greek debt by half.
Investors also think the Portuguese, Irish, and even the Spanish and Italian governments, may eventually follow suit.
But when bad debts get written off, someone has to take a loss.
While some of those debts are held in the US, UK or elsewhere
overseas, most of it is held by the European banks, and increasingly by
the European Central Bank (ECB).
Germany may end up footing much of the bill
This is the primary reason for the recent loss of confidence in the European banking system.
But while Germany can afford to rescue its banks, as the Irish Republic has already demonstrated, other countries may not be able to rescue theirs.
The October package calls for banks to invest more than 100bn
euros building up their capital, but it is not yet clear if they will
be able to do so without intervention from governments.
If other European countries join Greece in writing off their debts, banks may need even more money.
Ultimately Germany and other less-indebted countries may have
to bear much of the cost of rescuing the eurozone's banks as well as
its weaker governments.
Austerity vs growth
Like everywhere else, most European governments have seen their borrowing balloon during the recession and anaemic recovery.
At the same time, fears over southern European governments'
ability to repay their debts mean their borrowing costs have also gone
through the roof.
Under pressure from Germany and the ECB, all of these countries have been pushing through painful spending cuts and tax rises.
Continue reading the main story Diverging fortunes
Rate at which markets are willing to lend to governments for 10 years:
- Germany: 2.05%
- France: 2.83%
- Spain: 4.95%
- Italy: 5.56%
- Irish Republic: 7.41%
- Portugal: 10.80%
- Greece: 22.14%
To set a good example, Germany has even donned the hairshirt itself, promising to eliminate its own modest deficit by 2013.
But here's the problem: austerity is killing growth throughout Europe.
And with less profits to tax and more dole cheques to write,
weak growth makes it even harder for governments to cut their borrowing
and repay their debts.
In order to turn the slowing eurozone economy around, the ECB now looks set to slash interest rates from their current 1.5%.
The central bank considered buying up more Italian and
Spanish debt, pumping cash into the financial system and easing the
pressure on those countries to slash their borrowing.
But this move has always been strongly opposed by German members of the ECB.
Another option to stimulate growth is for the few other
countries that markets are still willing to lend to to borrow and spend
more, offsetting spending cuts in southern Europe.
Yet for Germany, who can currently borrow at unprecedentedly cheap interest rates, borrowing is anathema.
Discipline vs Solidarity
Germany's view on the eurozone crisis is simple.
Southern European governments borrowed recklessly at the cheap interest rates available inside the euro.
Now they are being punished by markets, and must learn discipline.
Germany wants other governments to incorporate strict budget rules into their constitutions to stop such recklessness in future.
A 20% unemployment rate helped spark Egyptian-style mass protests in Spain
But rules, with penalties attached, may not be credible.
Imposing a fine on an over-indebted government is rather like kicking
someone when they are down.
Indeed, just such a "stability pact" of budget rules,
insisted on by Germany at the euro's creation, was quickly broken with
impunity by Germany itself.
Moreover, the focus on discipline misses a bigger point.
While Germany's view may be apt for Greece - whose government
cheated on its borrowing statistics to qualify for the euro in the
first place - it is grossly unfair for Spain.
Before the financial crisis, Spain's government had lower
debt levels than Germany's, and (unlike Germany) actually spent less
than it earned in taxes.
But the country experienced a property bubble that then burst spectacularly, leaving its economy high and dry.
Wages, inflated during the good years, are now uncompetitive, and unemployment has shot up to 20%.
Detroit, in Michigan, has suffered an economic disaster, mitigated by US government money
Yet, inside the euro, Spain cannot devalue to regain a price
advantage. Nor can it necessarily expect the ECB to cut interest rates
or buy up its debts.
Being put a fiscal straitjacket as well just makes things worse.
Compare this with the US state of Michigan, where the collapse of the US car industry has spelled disaster.
Unlike in Europe, the US has a federal government that can
tax other states in order to help out Michigan, by paying for
unemployment benefits and rehabilitating the big car companies.
If the euro is to function in the future, economists warn,
then a similar system of centralised fiscal transfers will be needed
there too.
And in the current crisis, again it is Germany that would foot much of the bill.
Europe vs the Nations
On the face of it, the big political standoff in Europe is one of paymaster Germany versus bankrupt southern Europe.
For German voters, their country's post-War economic miracle was built on a hard currency, prudent finances, and strong exports.
It is hard for German voters to fathom that these very virtues are at the heart of the current crisis.
But Germany has everything to lose if it does not help the south out, and the eurozone unravels.
If the Greeks, Italians and others default on their debts, German and French lenders would be the biggest losers.
As Greece's economy shrinks and shrinks, its people cry out. But can German voters hear them?
If they also leave the euro, it would be a legal and financial disaster for all concerned.
Moreover, German export success for the past decade has been
built on the weaker, more competitive exchange rate that came with
sharing a currency with southern Europe.
Without the euro, safe haven Germany could expect its
currency to shoot up, with devastating consequences for the country's
export-driven industry.
Southern Europeans meanwhile would see their currencies
plummet outside the euro, leading to rises in inflation and their cost
of living as painful as the austerity they are protesting against.
Yet these stark realities are not widely appreciated in Germany or its neighbours.
Because the real problem is that there is nobody who can credibly speak for the common interest of Europe.
Since its inception in the 1950s, the European project has been run and controlled by a club of national governments.
The political process has been one of haggling behind closed
doors, with issues presented to electorates as a matter of competing
national interests.
But such haggling is dangerous in a financial crisis.
Jose Manuel Barroso: "The measures have taken too long and they have not been fully delivered"
Any solution must be agreed by 17 governments, and ratified by 17 parliaments, an impossibly slow process.
And the longer it takes, the more bitter each dispute risks
becoming, and the greater the market's loss of confidence in the euro
becomes, undermining Europe's fragile economy.
The European Commission president, Jose Manuel Barroso, has tried to speak for the common interest, pleading for the Commission to take the lead in solving Europe's problems.
But he is a political appointee, and as such, he is easily ignored by national leaders and scarcely noticed by the wider public.
Perhaps, if Mr Barroso were an elected leader, he could guide
European public opinion towards a comprehensive solution to the crisis
that balanced the interests of the different nations.
But as it is, the European public is very far from
understanding the issues, or agreeing to the greater economic and
political integration that may be needed to save the euro.
Sadly, this political dilemma is one that may not have a workable solution.
Panda- Platinum Poster
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Number of posts : 30555
Age : 67
Location : Wales
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Registration date : 2010-03-27
Re: EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
fuzeta Mon 2 Jan - 21:10
Just found the dinner party on youtube one with subtitles ( I think) They are not great but you can get the jist. I hope it works. I will give it a go :-
https://www.youtube.com/watch?v=CC6f2RB9iO8&feature=related
fingers crossed
https://www.youtube.com/watch?v=CC6f2RB9iO8&feature=related
fingers crossed
fuzeta- Platinum Poster
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Number of posts : 4231
Location : Beautiful Staffordshire
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Re: EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
Panda Mon 2 Jan - 21:29
fuzeta wrote:Just found the dinner party on youtube one with subtitles ( I think) They are not great but you can get the jist. I hope it works. I will give it a go :-
https://www.youtube.com/watch?v=CC6f2RB9iO8&feature=related
fingers crossed
Hi fuzeta, no it didn"t work, it still speaks German but thanks for trying, I used to have a google translate on my task bar but it disappeared , how do I
re-instate it?
I came across this video browsing the link you gave...it"s good.
https://www.youtube.com/watch?v=6PRZzOTT0co&feature=related
Panda- Platinum Poster
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Number of posts : 30555
Age : 67
Location : Wales
Warning :
Registration date : 2010-03-27
Re: EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2
fuzeta Mon 2 Jan - 22:15
Panda wrote:fuzeta wrote:Just found the dinner party on youtube one with subtitles ( I think) They are not great but you can get the jist. I hope it works. I will give it a go :-
https://www.youtube.com/watch?v=CC6f2RB9iO8&feature=related
fingers crossed
Hi fuzeta, no it didn"t work, it still speaks German but thanks for trying, I used to have a google translate on my task bar but it disappeared , how do I
re-instate it?
I came across this video browsing the link you gave...it"s good.
https://www.youtube.com/watch?v=6PRZzOTT0co&feature=related
Hello Panda. I just tried it again clicking from here and it definately had english subtitles, still speaking German of course but the subtitles were there for me!!!! Try again and let me know. Very strange
fuzeta- Platinum Poster
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Number of posts : 4231
Location : Beautiful Staffordshire
Warning :
Registration date : 2008-07-24
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