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9:15pm UK, Wednesday April 11, 2012

Anthee Carassava, in Athens

Greece will go to the polls on May 6 in elections deemed to the most decisive and uncertain in decades.
The elections will be the first since the country's debt-mired economy fell into crisis in late 2009, sinking the Mediterranean state into its worst recession since World War Two.

Prime Minister Lucas Papademos, a strong-nosed former European banker appointed at the helm of a coalition government last November, publicly revealed his election bid during a cabinet meeting on Wednesday.

The 64-year-old technocrat was appointed premier after rival socialist and conservative party leaders concocted a back-room deal five months ago in order to push through extreme reforms, negotiate a new 130bn euro bailout and torturously difficult debt restructuring plan.



"The main goals of our government have been achieved," Mr Papademos told the cabinet meeting, according to a transcript released by the Prime Minister's office.

"Still, to secure and complete the effort to right the economy, important decisions have to be taken immediately."

That's diplomatic shorthand for added budget cuts totaling 11.2bn euros, which Athens has committed to taking by June as part of a 2012-2015 new austerity programme.

It won't be an easy task.

For starters, pollsters say the outcome of the election is far from clear.

While Antonis Samaras and his conservative New Democracy party look certain to win, a flurry of surveys show he could fall well short of forming a majority government.

Adding to that uncertainty, Mr Samaras warned this week that he may force Greeks to another trip to the ballot box if his party failed to win control of parliament.

"I am entering the field, just as all major league teams do: to win. Not to get a tie, not to lose," he told Mega TV on Monday.

"If a government cannot be formed… we will have to go to elections again."



The austerity cuts in Greece have sparked a series of riots

Opinion polls suggest the conservatives could gather between 18% and 25% of the vote, well ahead of the 11% to 16% predicted for the socialists who have seen their political fortunes plummet to record lows since their return to power in 2009.

Although both socialists and conservatives back the controversial bailout, pollsters predict the elections will yield a fractured result with as many as eight parties, mostly small, fringe movements resisted added austerity policies, entering parliament.

"It is the first time in decades that we are documenting such a fragmented political landscape," said Elias Nikolakopoulos, a professor at the department of social theory and sociology at Athens University and among Greece's top pollsters.

"The last time we saw anything like this was in the 1950s, after a devastating civil war."

While Mr Papademos' election announcement marks the official start of campaigning, the prime minister - under pressure from international lenders - reassured markets that government would not let up in its work during the three-week long campaign period.

"Dissolution of parliament does not mean dissolution of the government," he said.

"We have an obligation to onpass a government in full operation… and completed work and plans to the next administration."

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Monti to Tackle Italy Corruption as Scandals Topple Politicians

By Marco Bertacche and Chiara Vasarri - Apr 12, 2012 12:01 AM GMT+0100
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Prime Minister Mario Monti is shifting his focus from overhauling Italy’s economy to tackling corruption, a problem highlighted by the recent resignation of one of the country’s best-known political leaders amid a party- financing scandal.

Monti’s government is readying a package of anti-corruption measures, including broadening the criminal definition of corruption to include cases in the private sector and tightening procedures to prevent failed prosecutions due to the statute of limitations, said a person with knowledge of the proposals, who declined to be identified because an official announcement hasn’t been made yet.

Officials from the nation’s three biggest parties met last night to draft a joint bill that would make the use of public funding for political parties more transparent. Justice Minister Paola Severino said April 7 the government is “ready to intervene” on party financing unless Parliament takes action.

The Council of Europe’s Group of States Against Corruption, known as GRECO, called on Italy yesterday to amend its criminal code in areas such as party financing and corruption penalties. That came after Umberto Bossi resigned as head of the Northern League April 5, caught up in the biggest wave of corruption scandals since the “Bribesville” cases in the 1990s led to the demise of Italy’s dominant political parties.

Fighting fraud “is a priority for the Monti government,” Democratic Party Deputy Donatella Ferranti said in an interview yesterday. “It weighs on the economy, on the recovery, but also on the credibility of our country abroad.”

Attracting Investment

The Democrats, the People of Liberty and the centrist Third Way are the three main parties in a broad coalition set up when Monti, 69, took over as unelected prime minister in November.

Monti said March 17 that Chancellor Angela Merkel told him increased efforts to fight corruption would lure more German investment to Italy. “It’s essential for the government to attract foreign investment,” he said.

Corruption in Italy amounts to a “hidden tax” of 1,000 euros ($1,310) to 1,500 euros per person each year, Ferranti said. Italy scored the worst of all euro-area countries except Greece in Transparency International’s global corruption ranking last year. Corruption accounts for 1 percent of the European Union’s gross domestic product, which would amount to 16 billion euros for Italy, the European Commission said in a June 6 report. That compares to damages of 90 million euros won by Italy’s state audit court in corruption rulings last year, according to a Feb. 16 report.

Berlusconi

While the media has focused mostly on Prime Minister Silvio Berlusconi’s legal battles, including a case with corruption charges, allegations have been leveled against officials from all of the country’s main parties this year.

Ten of the 80 legislators in Lombardy’s regional assembly are being probed, several for alleged kickbacks, including Speaker Davide Boni. Berlusconi has maintained his innocence of all charges in cases against him. Boni said March 20 he’s “totally extraneous” to any alleged wrongdoing.

Bossi’s son Renzo resigned from the regional legislature April 10 amid a criminal investigation that led to allegations that Northern League funds were siphoned off to the Bossi family. Neither Umberto Bossi nor Renzo Bossi is under investigation and both have denied using party funds for personal expenses.

There are “critical shortcomings in the party funding system of Italy which must be addressed as a matter of priority,” GRECO said yesterday. Italian parties spent 570 million euros from 1994 to 2008 out of 2.25 billion euros of public financing, the GRECO report said.

Influence Peddling

While Italy signed the Criminal Law Convention on Corruption in 1999, Parliament hasn’t fully ratified it. GRECO has recommended that Italy classify private-sector corruption and influence peddling as crimes, and lengthen the statute of limitations for corruption offenses.

One of Monti’s first tasks when he took office was to clean house at state-controlled defense company Finmeccanica SpA (FNC), whose chairman and other officials were involved in corruption probes. Chairman Pier Francesco Guarguaglini quit in December amid a probe involving a company unit run by his wife. Guarguaglini and his wife Marina Grossi have repeatedly denied any wrongdoing. Finmeccanica isn’t under probe.

“Illegality, corruption and graft are widespread and their size is much larger than what comes to the surface,” Luigi Giampaolino, chairman of the state audit court, said Feb. 16.

Italy came in 69th in the Corruption Perceptions Index ranking, Berlin-based Transparency International said Dec. 1, placing the country level with Ghana and lower than Saudi Arabia. Seventeen percent of Italians said they were asked to pay a kickback in the previous 12 months, a Eurobarometer poll in 2009 showed, almost double the European average.

The government plans to present an amendment on April 17 to address the GRECO recommendations, the person familiar said.

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Europe & the World



Debate

Mars and Venus, 10 years on


11 April 2012
El País Madrid Comment7


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Mars and Venus. School of Fontainebleau, 16th century.


Americans believe in the god of war, while Europeans are inspired by the goddess of love, wrote American thinker Robert Kagan in 2002. But after Iraq, Afghanistan and the European crisis, this controversial thesis reveals a surprising reversal of perspectives.

José Ignacio Torreblanca

It is time to acknowledge that we are different, Robert Kagan wrote ten years ago, provoking a considerable controversy. In his article (“Power and Weakness”, Policy Review 113/2002), Kagan wrote that Americans are from Mars (the God of War), while Europeans are from Venus (the Goddess of Love).

Americans, Kagan continued, live in a Hobbesian world ruled by force, while Europeans live (or pretend to) in a Kantian world, governed by law and institutions. Thus, while Europeans do everything possible to disburse themselves of their own power and might, Americans wield both instruments to shape the world in their own image.

With the end of the Cold War, said Kagan, Europeans were ready to live in a happy world. September 11, 2001, though, showed that the world had not changed in the way the Europeans wanted it to. Rather than face that reality, however, Europeans are determined to deny it.

New liberal interventionism

Kagan’s article led to a book by the same name – and to rivers of ink and criticism. Today, ten years on, the magazine that originally published the article (Policy Review) has published an interesting retrospective, led by the same author, Robert Kagan (“A Comment on Context”, Policy Review 172/2012) and followed by a highly interesting article (“Hubris and False Hopes”) by Robert Cooper, one of the intellectual architects of European foreign policy.

Kagan tells us several things we did not know and that help us better understand his article. First, the text was conceived of before 9/11 and, of course, before the war in Iraq, and so in no way was intended as a justification for that war or for Bush’s policies. The differences between Europe and the US, Kagan argues, are structural, and could already be seen in the Clinton era. The Bush administration would go on to exacerbate these differences, but in no way did it create them, says Kagan.

Kagan also tells us that his biggest influence when writing the article came in fact from a European, Robert Cooper, the British diplomat who for a decade advised Javier Solana at the European Union [High Representative for Common Foreign and Security Policy from 1999 to 2009] and who also authored a controversial text entitled “The Postmodern State” (2002), which advocated a “new liberal interventionism”. European democracies, Cooper argued, had to overcome their fears of intervening militarily abroad to defend the values of liberal democracy. The world out there, Cooper said, not only had post-modern entities like the EU, but also modern states and failed states, which are governed by classical parameters such as strength and power.

Humility on both sides

That Kagan’s critique of European attitudes towards the use of force was shared within Europe itself is extremely interesting, because it challenges his argument about the enduring and even irreconcilable character of these alleged differences between Europeans and Americans.

More interesting is the conclusion that Cooper himself presents a decade later on the outcome of this “clash” between Mars and Venus. After the mistakes of Afghanistan and Iraq, the US has fallen victim to the “weakness of power”: America’s immense military power has done it very little good, and it has been taught a hard lesson in humility.

America has learned that it needs to focus on policies, legitimacy, state building, and the rule of law – and not just on strength. Meanwhile, across the Atlantic, the post-modern Kantian world that the Europeans believe in has also stalled. Humility on both sides. A scoreless tie between Venus and Mars, against a background of a booming China?

Translated from the Spanish by Anton Baer

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Greece

Most crucial elections in Greek history


12 April 2012



The countdown has begun. In 25 days, on May 6th, the Greeks will be called to the ballot box for decisive legislative elections. The date of the election was set on Wednesday April 11 by Greek Prime Minister Lucas Papademos, who has headed a coalition government since November 2011. For Greek daily To Ethnos, these elections are no less than "the most crucial early elections in modern Greek history."


The message sent to the nation by Lucas Papademos was expected in recent weeks. The May 6th date is not a surprise but the stakes will be decisive.

According to the latest opinion polls, the right-wing New Democracy Party is the frontrunner. But with voting intentions hovering between 13% and 20%, it would be forced to form an alliance with the socialist PASOK or other smaller parties.

Athens daily Ta Nea writes -


We must decide if we will vote reasonably or if we prefer political chaos. All the polling institutes agree that a coalition government will have to be formed because no party will have a sufficient majority to govern. The populist parties are rising in the polls, riding on an anti-austerity wave and Europe is watching us. This time, there is no place for campaign promises and political instability, a result of an exhausted two-party system, is a reality.

Source profiles
To Ethnos
Ta Nea

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Eurozone crisis

Schadenfreude, mon amour


13 April 2012
El País Madrid Comment1



Arcadio


The financial crisis is at Spain’s doorstep, and all the other European countries can do is rejoice that this fate has not befallen them. This sentiment, so well expressed by the German word Schadenfreude, puts Europe itself at risk, warns a Spanish political scientist.

Fernando Vallespin

Now that all of Europe is speaking German, learn this word “Schadenfreude”. It means the “malicious enjoyment of someone else’s pain,” and because it has no translation in almost any other language, the other languages have adopted the original. This feeling is clearly not unique to the Germans. In fact, it is dominant throughout this sad Europe these days.

As recent statements by Mario Monti [declaring that he is “enormously preoccupied” with developments in Spain] and Nicolas Sarkozy [declaring that Spain has been “swept up in a crisis of confidence” and using it in his election campaign] have revealed, the misfortunes of a country bring substantial joy to others, who believe they can exorcise their own miseries this way.

We are not free of it either. Remember the relief we felt when the Italian risk premium rose above the Spanish, or when we thought that Greece’s misfortunes pushed us back from the abyss? Rather than look at our interdependencies, at what unites us, we are being led more by a push for narcissistic differentiation and by our emotions than by our heads.

Anger is more than justified

The negative feelings we are dumping onto the European Union are isolating us from what would have to be the logical reaction to a situation like this: to cooperate as effectively as possible in order to come up a joint solution. In this, Rajoy’s reaction to the statements of the leaders mentioned above has been the correct one.

The important thing is the euro, and great caution must be exercised when it comes to public declarations. Let everyone do their duty, and we will work out solutions for everyone. And, it should be added, there can always be disagreement over what the right measures are or how we’ll have to implement them. What we cannot afford, however, is to give free rein to the passions.

If there is anything that sparks a panic in politics, it is the subordination of politics to the emotions – and, moreover, to the darkest, like schadenfreude or the irresponsible desire to shift blame onto some for the evils of all. We apparently still need scapegoats for our misfortunes, something that comes almost naturally when we give in to nationalist self-absorption, so prone to playing the victim card. It is a constant of our European history.

At other times it was the source of almost all the wars on the continent, and it now threatens to wreck an inspiring project – perhaps because it tends to feed, as populist leaders well know, the most primal and radical reactions. It’s not a good sign that Marine Le Pen is, according to surveys, the candidate attracting a greater number of young French voters, and nor does it bode well that appeals to the “grandeur de La France” stand high on political platforms for the upcoming presidential elections.

In a way, it is logical that emotional resistance arises, even if only as compensation for the coldness of the markets, insensitive as they are to the social wounds they cause, and as a reaction to powerlessness in face of the unilateral nature of the apparent solutions. Under the current circumstances, a feeling like anger is more than justified; and it will always be better than fear, the ruling passion.

A European demos

What seems unacceptable, though, is that these passions cloud our faculties for deciding on the right action. Usually we end up doing better when a sound grasp of where our interests lie temper our passions. And no one doubts where, at this critical crossroads, our interests lie: more Europe and less statist solipsism.

It’s precisely the opposite of what, in our perception, prevails among European public opinion, urged on by irresponsible politicians and by a section of the media in many countries that believe they have struck a gold-bearing vein in this constant stimulation of the supposed national grievances. It’s also there in the preaching of catastrophe by some opinion leaders. A few days back, for example, Wolfgang Münchau wrote in Der Spiegel that Spain now is where Greece was two years ago. This amounts to laying the foundations for a self-fulfilling prophecy.

Under these conditions, one blinds oneself to all reasonable ways out of the crisis. There will be no more Europe if we do not walk resolutely towards the construction of a European demos, a goal we have slipped back from by several kilometres. It may be that the idea leaves us cold, that we will never feel “European” in the same way that our national ties warm us. Never before, however, has the need to temper our emotions under the imperative of self-interest been more clear. Passions and interests: life itself!

Translated from the Spanish by Anton Baer

On the web
Original article at El País es

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The European Central Bank will restart its controversial government bond purchases rather than offer banks another round of unlimited three-year loans as the sovereign debt crisis worsens, a survey of economists shows.

Of 22 economists polled this week, 17 predicted the ECB will be forced to resume the Securities Markets Program (ECBCSMP), while only one forecast it will offer another batch of three-year cash. Nine said the central bank may consider shorter maturity loans of one or two years.










Play Video


April 13 (Bloomberg) -- Thomas Mayer, chief economist at Deutsche Bank AG, talks about the prospect of the European Financial Stability Facility purchasing bonds to help ease the region's sovereign-debt crisis. He speaks from Frankfurt with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)





Play Video


April 13 (Bloomberg) -- Justin Urquhart Stewart, director and co-founder of 7 Investment Management, discusses the Chinese economy, Federal Reserve monetary policy and the outlook for the European Central Bank to restart its government bond-purchase program. He speaks with Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)



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A one euro coin is pictured alongside a British one pound coin in London. Photographer: Simon Dawson/Bloomberg
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“Market stresses will eventually force the ECB to restart the bond program, but it’s not imminent,” said Ken Wattret, chief euro-area economist at BNP Paribas in London, who participated in the survey conducted April 11-12. “Trying to get consensus on the council for it will be difficult.”

The bond purchases have split the ECB’s Governing Council, with German policy makers in particular arguing they blur the line between monetary and fiscal policy. The program was mothballed a month ago after the ECB’s 1 trillion euros ($1.3 trillion) of three-year loans reversed a sell-off in Italian and Spanish bonds that threatened to splinter the 17-nation euro region.

With tensions returning and driving up borrowing costs again in Spain and Italy, some economists say the so-called Longer Term Refinancing Operations aren’t the game-changer they were hailed to be.

‘Toxic’ Loans

“There is mounting evidence that the LTRO is pretty toxic for banks and isn’t working,” said James Nixon, chief European economist at Societe Generale in London and a former ECB official. “I don’t think there will be another one.”

Spain’s 10-year yield jumped to 5.99 percent earlier this week, nearing levels that prompted Greece, Ireland and Portugal to seek bailouts. Italian three-year borrowing costs rose more than 1 percentage point at an auction yesterday.

Debt markets rallied after the ECB’s three-year tenders in December and February as banks used some of the cheap cash to buy government bonds. Investment in government debt by Spanish banks climbed to a record 246 billion euros in February, an increase of 20 percent from December, ECB figures show.

The effect on bond markets is waning now and banks are left with assets that investors are increasingly wary of, said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc (RBS) in London.

‘Something is Wrong’

“Something is wrong when you load up on assets that were considered risky in November and deemed un-risky in January,” he said. “Now we’re seeing the worst you could have hoped for. As soon as the situation of the sovereign worsens, banks will come under additional market pressure. That’s extremely negative.”

Shares of Bankinter SA (BKT), a Madrid-based mortgage lender that used three-year funds from the ECB to acquire short-duration government bonds, have plunged 26 percent this year.

Intesa Sanpaolo SpA (ISP), which snapped up 36 billion euros in three-year cash and partially used the money to buy Italian debt, has dropped 7.3 percent. By contrast, the Bloomberg Europe Banks and Financial Services Index of 43 companies has gained 7 percent this year.

ECB Executive Board member Benoit Coeure suggested on April 11 that the bank could resume its bond purchases, prompting Spain’s 10-year yield to retreat more than 10 basis points.

‘Testing the Waters’

“The crisis will force the ECB to intervene again and I suspect Coeure’s comments were testing the waters a bit,” said Carsten Brzeski, senior economist at ING Group in Brussels. “The reaction showed that even verbal intervention helps at this stage.”

Spanish “market conditions are not justified,” Coeure said at an event in Paris. “Will the ECB intervene? We have an instrument, the securities markets program, which hasn’t been used recently but it still exists.”

ECB board member Jose Manuel Gonzalez-Paramo told reporters late yesterday in Madrid that “the program of asset purchases remains in place.”

Still, ECB council member Klaas Knot said today that policy makers are “very far” from reactivating the SMP. “The instrument hasn’t been used for some time” and “I hope we never have to use it again,” he said in Amsterdam.

‘Not a Fan’

Since the bond program began in May 2010, the ECB has spent 214 billion euros on debt from Greece, Ireland, Portugal, Italy and Spain. The purchases prompted the resignation of ECB chief economist Juergen Stark at the end of last year.

Bundesbank President Jens Weidmann said in December that he’s “not a fan of the SMP” and that other ECB policy makers were “becoming increasingly skeptical” about its efficacy. The buying dwindled after that and only 27 million euros of purchases have been settled in the past two months.

“There is no evidence that the SMP is the tool that brings about a sustained decline in yields,” said Cailloux. Spain’s 10-year bond yield surged to more than 6.6 percent in November after the ECB began to intervene in Spanish markets in August.

The ECB may be inclined to wait as long as possible on further measures given its previous activism reduced pressure on governments to push through reforms, Wattret said.

“If the crisis has shown us one thing, it’s that market pressure will move governments to act,” he said. “So the ECB has good reason to wait.”

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C. E. of Nordea Bank in Sweden said his bank did not take up the ECB Loans because they felt the facility did not offer enought benefit. Sweden has a tougher regulatory requirement but pouring money into ECB Banks , increasing quantitive easing, no one knows where it will all end.

EURO Banks have to raise E100 billion by the end of June. Spanish Bonds sold did not reach the target and the yield was down.

Italian secondary bond market will have few sponsors.

Investors too wary of the Eurozone and investing more in emerging Markets.

The Japanese are shunning EuroBonds and it is felt the ECB has not been the panacea that was hoped. There is a danger that with the austerity
measures affecting Spain, Portugal, Belgium, Italy and Greece and the lack of growth, the ECB 3 yr lending to the EURO Banks will not be repaid in
full in the 3 yrs .

Eurozone and U.K. Stocks end the week with a loss.

Mr Buik of BG Partners says the debt crisis hangs over Europe like a cumulus cloud. He feels it is time that a couple of the serious problem Countries
are allowed to fail.

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14 April 2012




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Switzerland

Anti-Roma front page provokes controversy


13 April 2012

Presseurop
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, 13 April 2012

The picture made the front page of the Swiss weekly Weltwoche. A boy is pointing a gun at the reader. He is a Roma, and the title that accompanies the image is: “The Roma are arriving. Criminal expedition to Switzerland.”

A week after its publication, this cover, along with an accompanying article that is discriminatory and racist, continues to provoke widespread criticism in the international press. The Central German Council of Sinti and Roma has complained of demagoguery and has demanded the weekly be withdrawn from newstands.

In Berlin, the Tagesspiegel has investigated the story behind the photo and discovered that Weltwoche, reputedly close to the populist Swiss right, took the picture out of its original context. The intention of the Italian photographer, Livio Mancini, Tagesspiegel writes, was to demonstrate the plight of Roma families in Europe -


Mancini photographed Roma children in the slums of the city of Gjakova in Kosovo, where their families washed up after the war. Their hovels are built on a toxic landfill, where they live off what they can find in the garbage to eat or to sell.... The series of photos of these children at the landfill is not depicting an isolated tragic case. The ten to 12 million Sinti and Roma are the biggest minority in Europe and live in the worst conditions. The majority are poor and threatened by pogroms. [...] Mancini’s photographs criticise this situation. (In Weltwoche) they were just twisted around to make the victims into perpetrators.

In an email to the Tagesspiegel Mancini denounces the “abuse of my photograph.” Weltwoche has responded to the harsh criticism by defending its “facts”. “The abuse of children for criminal purposes”, the magazine declares, has been obscured by the controversy, but it avoids discussing its lack of “visual ethics”. Livio Mancini, nevertheless, is pleased that the theme of the poverty of the Roma has been brought to public attention

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global economic recovery is slowing.


Irish ‘Yes’ Vote on Treaty Would Boost Investment, Gilmore Says
Updated 23 minutes ago
Irish voters approval for the European Fiscal Treaty would help boost investment in the country, Deputy Prime Minister Eamon Gilmore said in an interview with RTE today.


IMF May Not Decide on Europe Crisis Cash Till June, Spiegel Says
Updated 1 hour, 8 minutes ago
The International Monetary Fund may not decide until June whether to provide more money for the European bailout fund, Spiegel reported, citing an interview with Paulo Noguiera Batista, who represents Brazil and eight other South American countries at the IMF.

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UBS Wealth Management says ECB will have to buy Bonds instead of lending to Banks for 3 years.E 200 billion bought already. The Bundesbank is
against this
The European Banks are reluctank to take on any more Loans for fear they will not be able to repay within the 3 years.

The ECB has already lost money on the Bonds already puchased , particularly with the Greek writedowns

Adam Cole of RB of Canada says the Firewall of E800 billion is O.K. for now but problems will come back . The Eurozone unemployed is 10.9% which is the
worst since before the Euro was introduced.Germany has only 5% unemployed mainly because exports vastly exceed imports and the German Government is unwilling to use it's Current account to buy European Goods. He says the Euro will trade lower over the coming months .

Ken Pruitt and Tom Keen, Investment Managers say Spain has a E1.5 Trillion gap this year and Banks in Europe holding Sovereign Dbt need to deal
with this.

Eurobonds are necessary to stabilise the Euro and EURO Countries but Germany is waiting for all Euro Countries to be more stable before committing.
this seems to be a long way off at the moment .

The Germans are highly confident that eventually stability will be achieved in the Economies of Europe but the Spanish Debt is starting to affect Italy
where Monti had little success at his recent meeting with the Unions to change the Labour Laws.

The tension in Europe is caused by Countries trying to meet the austerity rules which are causing much social hardship and inrest to the affected
Countries . This must be eased to give growth a chance.

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Illustration by Bloomberg View

By the Editors Apr 13, 2012 12:00 AM GMT+0100
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The euro area’s financial troubles appear to be flaring up again, as this week’s gyrations in the Spanish bond market show. In reality, they never went away. And judging from the flood of money moving across borders in the region, Europeans are increasingly losing faith that the currency union will hold together at all.

In recent months, even as markets seemed calm, sophisticated investors and regular depositors alike have been pulling euros out of struggling countries and depositing them in the banks of countries deemed relatively safe. Such moves indicate increasing concern that a financially strapped country might dump the euro and leave depositors holding devalued drachma, lira or pesetas.















Capital flight in the euro zone (selected countries, cumulative since Feb. 2010) Source: National central banks. Data for Italy include balances related to the issuance of euro banknotes.
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The flows are tough to quantify, but they can be estimated by parsing the balance sheets of euro-area central banks. When money moves from one country to another, the central bank of the receiving sovereign must lend an offsetting amount to its counterpart in the source country -- a mechanism that keeps the currency union’s accounts in balance. The Bank of Spain, for example, ends up owing the Bundesbank when Spanish depositors move their euros to German banks. By looking at the changes in such cross-border claims, we can figure out how much money is leaving which euro nation and where it’s going.

Capital Flight

This analysis suggests that capital flight is happening on a scale unprecedented in the euro era -- mainly from Spain and Italy to Germany, the Netherlands and Luxembourg (see chart). In March alone, about 65 billion euros left Spain for other euro- zone countries. In the seven months through February, the relevant debts of the central banks of Spain and Italy increased by 155 billion euros and 180 billion euros, respectively. Over the same period, the central banks of Germany, the Netherlands and Luxembourg saw their corresponding credits to other euro- area central banks grow by about 360 billion euros.

The seven-month increase is about double the previous 17- month rise, and brings the three safe-haven countries’ combined loans to other central banks to 789 billion euros, their highest point on record. In essence, the central banks of the three countries -- and, by proxy, their taxpayers -- have agreed to make good on about 789 billion euros that were once the responsibility of Italy, Spain, Greece and others.

The worries about Italy and Spain reflect the inadequacy of Europe’s efforts to stem what has become a combined banking, sovereign debt and economic crisis. The European Central Bank’s efforts to prop up bond markets with more than 1 trillion euros in emergency bank loans have only encouraged Italian and Spanish banks to buy more of their governments’ bonds, tying their fates to those of the afflicted sovereigns. The harsh austerity measures required by Europe’s new fiscal compact are making things worse by stunting the economic growth needed to help the countries reduce their debt burdens. Should markets balk at lending to Italy and Spain, Europe’s bailout fund -- with only about 600 billion euros in spare capacity -- remains far too small to cover the two countries’ financing needs, which amount to more than 1 trillion euros over the next five years.

If Europe’s leaders want to stop the rot, they’ll have to change their approach. The least bad solution, as Bloomberg View has argued, is a combination of overwhelming force and deeper integration. Together with the European Union and the International Monetary Fund, the ECB would provide large enough guarantees -- more than 3 trillion euros, by our estimate -- to erase any doubt that solvent governments such as Italy and Spain can cover their financing needs and banks can raise capital. If the amount pledged were big enough to tame markets, it wouldn’t have to be spent.

Fiscal Union

Aside from adopting tougher fiscal rules to get government debts under control, the euro area should also forge a closer fiscal union to provide some support for struggling countries, much as federal transfers in the U.S. cushion downturns in individual states. This could help Greece, Portugal, Ireland, Spain and Italy extract themselves from the downward spiral of budget cuts and weakening economies.

The idea that Europe’s current incremental approach has the advantage of saving money is an illusion, and not just because the disintegration of the currency union could trigger a global financial meltdown. As the capital flight figures demonstrate, the stricken nations of the euro area are bleeding private money and becoming increasingly dependent on taxpayers. In all, the debts of struggling banks and sovereigns to official creditors such as the EU, the ECB and national central banks now exceed 2 trillion euros, much of which would be lost if the debtor nations dropped out of the currency union.

Hopefully, Europe’s leaders will recognize that it would be a lot cheaper to put up the money needed to restore confidence in the common currency. If they wait too long, the cost of the crisis could prove to be more than their taxpayers can bear.

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Spain bond yields jump above 6%, raising bailout fears If Spain wanted to borrow for 10 years today, it would pay considerably more than Germany Continue reading the main story
Global EconomySpain unveils 27bn euros of cuts
Q&A: Pain in Spain
Spain 'has to bite the bullet'
What is the euro bailout fund? Watch

The cost of borrowing for Spain has jumped above 6%, raising again the prospect of a bailout.

The yield on Spain's 10-year bonds reached 6.1%, ahead of auctions of debt on Tuesday and Thursday that could be increasingly expensive for Spain.

The nation's cost of borrowing has been rising steadily over the past four months.

Investors have been worried by data showing Spain's banks are entirely dependent on emergency ECB loans.

The yield suggests that if Spain wanted to borrow for 10 years today, it would pay more than 6%.

In comparison, the yield on 10-year bonds from Germany, the eurozone's strongest economy, is 1.73%.

Recession

Spain is suffering from a deep economic slump brought about by a bust in its property and construction markets.

Unemployment is the highest in Europe, with a record 4.75 million out of work. Half of Spain's under-25s are unemployed.

The Bank of Spain said recently that the county's economy contracted in the first quarter of the year - but it did not say by how much. The economy shrank by 0.3% in the three months to December, so this additional contraction implies that Spain's economy is in recession.

The country's economy minister said on Monday that in the first three months of the year the country had probably contracted by as much as the last quarter of 2011 again, but added this was actually better than expected.

"If you had asked me two months ago, I would have expected the first quarter of 2012 to be much worse than the last quarter of last year," Luis de Guindos told the El Mundo newspaper.

"But that's not going to be the case."

Too reliant?

On Friday, the Bank of Spain - the central bank - said its net lending to its banks in March had risen to 228bn euros ($298bn; £188bn), up from 152bn euros a month earlier.

The big jump was mainly due to a second auction of three-year emergency loans carried out by the European Central Bank, which has given 1tn euros to banks since December.

This money was intended to be lent by the ECB to national central banks, which is turn lent to commercial banks who would buy their country's debts and bring borrowing costs down.

While this happened initially, investors are afraid of just how much the Spanish banks are relying on cheap ECB loans to stay afloat.

Since 2010, Greece has been bailed out twice and the Republic of Ireland and Portugal also needed bailouts to stay afloat.

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Euro crisis invites political extremism in French voteBy David Frum, CNN Contributor
April 16, 2012 -- Updated 1225 GMT (2025 HKT)
Jean-Luc Mélenchon of the Left Front gestures before a campaign stop in Pau, France, on Sunday. STORY HIGHLIGHTS
France, voting next week in first round for president, sees growth of fringe parties
David Frum says the extremists are gaining due to disastrous economic policy
He says preserving the Euro is forcing leaders to cut spending in midst of recession
In France, National Front and Left Front are gaining, though neither will win, he says
Editor's note: David Frum, a CNN contributor, is a contributing editor at Newsweek and The Daily Beast. He was a special assistant to President George W. Bush from 2001 to 2002 and is the author of six books, including "Comeback: Conservatism That Can Win Again."

Washington (CNN) -- The French will vote next week to elect a new president.

The April 22 election pits incumbent Nicolas Sarkozy against challenger Francois Hollande. Sarkozy, a conservative, argues that France did well compared with other European countries in the Great Recession. Hollande, on the left, urges a more expansionary program of government spending to create jobs.

Normal politics, in other words.


David FrumBut the vote to watch is not Sarkozy v. Hollande. It is Sarkozy plus Hollande.

The French constitution establishes a two-round voting system. The idea is to ensure that the ultimate winner obtains an outright majority of all votes cast. The system's side effect is to invite the French to use their first ballot as a protest vote.



French elections down to the wire Thus in 2007, the nominees of the two big parties won 57% of the vote between them in Round 1, with the remainder scattered among the hard-right National Front and various categories of radical left-wing parties.

It is that small party vote that is the vote to watch in 2012.

Sarkozy and Hollande disagree on much but not on the euro. Both support the currency, despite the terrible economic toll it has put on the economies of Europe.

To sustain the euro, the countries of southern Europe are cutting government expenditures and raising taxes in a futile effort to balance their budgets in the throes of a worsening recession. The euro is doing to Europe in the 2010s what the gold standard did to the United States in the 1930s: magnifying an ordinary downturn into a social catastrophe.

Unemployment has risen past 9% in Italy, to 15% in Portugal, 22% in Greece and 23% in Spain. In the past, generous European social networks cushioned unemployed. Those out of work might suffer anxiety and depression, but they need not fear material deprivation. But that's changing as radical budget cuts bite.

Portugal, for example, has slashed government spending by the equivalent of 7.5% of GDP over the past two years. How much is 7.5% of GDP? To achieve a similar cut in the United States, we'd have to abolish Social Security and the defense budget.

So you can see why the euro project might begin to provoke public discontent. European elites have met that discontent by silencing it. When Greece proposed to hold a referendum on budget cuts, the EU authorities forbade it. When Italy needed aid to remain in the eurozone, the EU authorities forced distrusted Prime Minister Silvio Berlusconi to resign and installed in his place an economist prime minister without an intervening election.

Yet discontent will emerge somewhere. Radical parties are now rising across Europe. In France, polls show more than one-third of the public now supports radical alternatives to the two big traditional parties. About 16% support the far-right National Front and about 17% the neo-communist Left Front (Front de Gauche).

The National Front and the neo-communists disagree on issues such as immigration and law enforcement. Yet on economics, the two parties sound increasingly similar. Both want radical change in the European Union. Marine Le Pen, the National Front candidate for president, has voiced sympathy for outright exit from the Euro currency. Jean-Luc Mélenchon, leader of the Left Front, wants to assert political control over the independent European Central Bank.

As they attack the EU and the euro, the far left and the far right are gaining supporters they never previously could have hoped for. One poll shows 25% of French young people supporting the National Front.

The National Front is also making inroads in the traditional heartland of French social democracy, the industrial northeast.

As Sarkozy and Hollande campaign from TV studios, the neo-communist Mélenchon is exciting frenzied rallies in France's poorer neighborhoods. When Sarkozy and Hollande belatedly staged public meetings on Sunday, Mélenchon mocked them for imitating his accessible style of campaigning: They "will now also occupy the streets and risk appearing in public squares."

Neither Le Pen nor Mélenchon has any hope of winning the presidency, nor even very much of a hope of making it to the second round. What they are doing, however, is giving expression to public distress that is going unexpressed by the mainline parties. They may not win enough votes. But they are exerting enough political force to reshape French politics and possibly the politics of all Europe.

The euro was a terrible mistake. It is failing now in exactly the way predicted by its critics: a credit boom followed by a depression. The present policy response offers the people of Europe no hope at all, opening a political opportunity for extremists and demagogues. On April 22, the voters of France will tell us just how large that political opportunity has grown

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Ed Conway
April 16, 2012 10:47 PM

Recommend post (0) Meetings of the International Monetary Fund used to be reassuringly dull affairs.

Every six months, the finance ministers and central bankers of all major nations would meet in Washington (or, occasionally, a more exotic host city), interminable meetings were held, brows were furrowed at one or two weaknesses in the global economy, a dry statement was issued promising to sort them out, and everyone went home.

But ever since 2008, they've been anything but dull. Every six months since then seems to have brought a new crisis - the kind that can't be wished away with a three page communique. In 2008 the world's banks needed to be recapitalised; then their parent countries needed a co-ordinated dose of fiscal stimulus; the IMF needed to have its war-chest bolstered; then came the euro crisis and bail-outs of Greece, then Ireland and Spain.

So while there were some bureaucrats who were no doubt hoping for a quiet week in Washington this week, they will probably be disappointed. The euro crisis may have quietened down since the European Central Bank pumped 1trn euros into the continent's banking system, but certain member countries seem already to be relapsing.

The cost of borrowing for Spain has risen above 6% for the first time since the ECB showered money on its banks. The country may have to be bailed out - if not its government then almost certainly its banks, which look deeply vulnerable to an essentially inevitable property slump (prices still have further to fall). Its Iberian neighbour Portugal may have to return to the IMF, ECB and European Commission (the so-called Troika) for a second bail-out.

These issues will hang heavy over the meetings, though an even more immediate issue is the question of how much extra cash the IMF will need in its tank to deal with the fall-out from the euro crisis. Until recently, the Fund had been aiming to raise its total resources to $1trn (they are currently about half that) - but last week the managing director, Christine Lagarde, hinted that it might settle for less.

In part these diminished ambitions owe something to the ECB's medicine having helped at least soothe the euro's pain. Its heavy lifting may only be temporary (that 1trn euros has a three-year maturity) but it means the IMF and others might not have to do so much. European finance ministers' own bail-out fund is smaller than was previously thought acceptable, so why not allow the IMF to do the same?

The smaller increase owes almost as much to political expediency. While some IMF members have already volunteered some money, most of the big ones are vocally reluctant. Britain is a case in point. Chancellor George Osborne would like to do everything within his power to avoid having to spend more than £10bn on new IMF resources.

Anything bigger would involve him having to go back to Parliament to seek approval (and, lest we forget, the last time that happened it provoked a rebellion from Conservative MPs). It so happens that the IMF's original planned increase would have implied about £15bn worth of extra resources from the UK. A scaled-down war chest would mean Osborne could avoid that Parliamentary vote.

But Britain is hardly the only reluctant donor: the US hasn't even properly signed off the last resource increase for the IMF. Canada is sceptical about the extra funds going into a potentially doomed currency union. Even Japan, which has given most freely and willingly in the past, has signalled its concern about providing extra cash.

The emerging powerhouses such as Brazil and China have money but are gently exploring whether to set up a rival fund to the IMF.

After all, why give your money to an institution under European leadership, which has done everything it can (including offering unprecedented scales of loans without the usual IMF conditions) to ensure the survival of the currency?

Particularly when you're not even sure you'll get your money back.

The IMF is very proud of saying its members have never lost money through any of its emergency loans. But this is mildly disingenuous: it has, in certain cases, not been paid back by recipient countries. However, because the shortfalls have generally been small, it has been able to make good to its members by falling back on its copious reserves (largely gold but also other investments).

This is the biggest sovereign debt crisis since before the IMF was founded (which was in 1944 - it wasn't around in the 30s). Many economists I speak to doubt the Fund will receive back all of the money it has lent to Greece - perhaps also other euro members.

Which brings us back to this week. There will be an almighty push from Mme Lagarde to get new donations firmed up; but it's hardly a foregone conclusion that she'll be able to announce, with fanfare, that the Fund has enough commitments to take it up to $1trn, or even its revised target.

For that kind of commitment you need finance ministers to feel really, really panicked. The euro crisis is bubbling again; the fear is rising. But it would take quite something to get us to panic stations by the end of this week.　

IMF ECB Euro Crisis Christine Lagarde Spain Portugal

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Economy



Portugal

Billions in debt on the island of Jardim


16 April 2012
The Daily Telegraph London Comment3





Resort near Funchal, Madeira

S Tauqueur


Despite a tiny population of 250,000, the Portuguese holiday island of Madeira has a massive debt of €6 billion euros, a legacy of the long and eccentric rule of local President Alberto João Jardim.

Colin Freeman

Tucked beneath towering cliffs on Madeira's storm-battered west Atlantic coast, the €50 million Marina do Lugar de Baixo aimed to provide the perfect welcome for super-luxury yachts.

Unfortunately, thanks to the huge waves that have fractured the harbour wall three times since it was built in 2005, not even the more adventurous yachtsmen have often been tempted, never mind passing billionaires in floating palaces.

Today it lies abandoned, a chain blocking the road where an Oleg Deripaska or Roman Abramovic might have strode ashore, the white clubhouse empty as the Marie Celeste.

Just as spectacular as the ocean breakers off Lugar de Baixo, however, are the waves of European Union cash that have been splashed around Madeira, a Portuguese-owned island better known for sweet wine and winter sun.

While the marina was financed mainly by the semi-independent Madeiran local government, €3.5 million came from Brussels, which, like the other backers, did not heed warnings that a stretch of coast popular with hard-core surfers might be less ideal for yachters.

Similarly, at the nearby promenade and restaurant complex at Frente Mar Madalena, where a rusting plaque marks a €1.2 million EU grant, developers overlooked the risk of rockfalls from the cliffs. Until, that is, a boulder tore a hole through the restaurant's roof two years ago, since when it too has been empty.

The real big hole though, is the one that such rampant, publicly-backed development has torn in the island's finances, as it has transformed itself into a resort similar to the Canary Islands further south.

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Senior EU Members want IMF War Chest increased because of fear of Spanish crisis.
Rajoy say he must act more quickly than envisaged when he took office. Spanish Bond yields continue to rise.

Sweden , one of the stronger EU economies financially says it is disappointed at its latest figures.

Blackrock Advisor says investors are testing political action in the Euro crisis.

IMF Brazil Director says EU must not rely on any more bailouts . A meeting will be held on Friday but it is less than certain that the EU will receive more Funds.

More criticism of the way Angela Merkel is adopting such stringent control, German are not like other Nations and it is in a strong financial position.
It is becoming more apparent that turmoil in Europe is a direct result of the austerity measures when growth should come first.

Hollande at the moment in the lead over Sarkozy in the French election to take place on 20th April, says if he is elected an enquiry about the Euro will be held. French Banks not doing very well and now Sarkozy is saying he will evaluate entry conditions of Treaty.

The IE Business School, MADRID spokeswoman says if Spain or any other Country left the Euro what would happen? How could anyone sort out all the muddle with Banks, interbank loans, the ECB ?

Japan is reported to be willing to lend to the IMF .

Marshall of Smith and Williams Investments says the EURO ZONE will not work and it is inevitable that Greece, Spain and Portugal will leave, but not in
the immediate future. The problem is there is no competition between the EURO Countries and and no Country has the ability to control it's currency.

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17 April 2012 Last updated at 11:52 Share this pageEmail Print Share this page



France's former centre-right president, Jacques Chirac, will vote for Socialist Francois Hollande in first round of presidential elections on Sunday, a close aide says.

Writer Jean-Luc Barre told a newspaper that remarks to that effect by Mr Chirac last year had not been a joke.

Mr Hollande has a double-digit poll lead over centre-right President Nicolas Sarkozy for the 6 May run-off.

Mr Chirac has criticised party colleague Mr Sarkozy in his memoirs.

Last July, he said he would vote for Mr Hollande, but later implied he had been joking, following criticism from political associates.

At the time, analysts suggested Mr Chirac was taking revenge for perceived slights.

"Jacques Chirac is true to himself when he says he will vote for Francois Hollande," Mr Barre, who helped Mr Chirac write his memoirs, told the Le Parisien newspaper in remarks published on Tuesday.

Continue reading the main story “
Start Quote
At the start of the campaign President Sarkozy was all for having German Chancellor Angela Merkel campaigning for him. You do not hear that anymore”
End Quote
Gavin Hewitt

Europe editor

--------------------------------------------------------------------------------
Read more from Gavin
France elections: EU at arm's length

"I visit him frequently; we have lunch and dinner together. After four years of discussions, I believe I'm one of those who knows best how he thinks."

A report in Le Parisien suggests the issue has divided Mr Chirac's family. The former president's son and daughter are reportedly following their father in leaning towards Mr Hollande, while his wife, Bernadette, has appeared at rallies in support of Mr Sarkozy.

Strained

Relations between Mr Chirac, who was president from 1995 to 2007, and his successor and one-time ally, Mr Sarkozy, are long thought to have been strained.

Mr Chirac is thought to resent Mr Sarkozy, whom he knows since his days as mayor of Paris, for failing to support him in the 1995 election in which he became president.

For his part, Mr Sarkozy, after his re-election in 2002, made fun of the older man's love of Japan and sumo wrestling.

Mr Sarkozy was seen surreptitiously slipping his watch into his pocket while shaking a supporter's hand
An Ipsos poll published on Monday had both Mr Sarkozy and Mr Hollande neck-and-neck on 27% for Sunday's first round.

But the survey gave Mr Hollande a 12-point lead over Mr Sarkozy for a widely expected second-round run-off between the two men.

On Sunday, both candidates held mass rallies in the capital Paris in a final push for votes a week ahead of the first round.

Mr Sarkozy promised economic growth if re-elected and warned that the alternative was "depression", while Mr Hollande told the crowd at his rally that it was time for change.

The president faced media criticism after a video emerged in which he is seen quickly slipping off an expensive watch while shaking supporters' hands at his rally.

Some commentators accused him of giving the impression that he feared someone would steal the timepiece, variously thought to be from the luxury brands Rolex or Patek Philippe.

'True statesman'

In memoirs published last year, Mr Chirac mocked Nicolas Sarkozy, who belongs to the same conservative UMP party. He described him "irritable, rash, overconfident and allowing for no doubt, least of all regarding himself".

"We do not share the same vision of France, we do not agree on the basics," Mr Chirac wrote.

Meanwhile, the memoirs described Francois Hollande as a "true statesman" capable of crossing party lines.

Both Mr Chirac and Mr Hollande have links to the department of Correze, in south central France. The former president's parents are from Correze, while the Socialist started his political career there.

Mr Hollande currently heads the department's General Council, and in 1981, he unsuccessfully stood for election to the National Assembly in the department - losing to none other than Mr Chirac.

If Hollande wins, expect Merkel and Germany to be more isolated in the EU for their despotic attitude.

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Elections take the pulse of a nation. They force leaders and candidates to address the concerns of the people who will hire and fire them. So with the French elections and Europe.

If the polls are right more than 30% of the French electorate will vote on Sunday for candidates who are openly hostile or critical of the EU. The far-right candidate Marine Le Pen wants to take France out of the euro. She believes that the European Union has not protected French jobs.

The far-left candidate Jean-Luc Melenchon appeals to many of the same blue-collar voters as Ms Le Pen. He fundamentally disagrees with the Berlin/Brussels approach to austerity. On the recent pact that enforces budgetary discipline in the eurozone he would put that to a plebiscite.

Mr Melenchon, far from accepting targets to rein in the French budget, would boost spending without looking over his shoulder at Brussels.

The Socialist candidate Francois Hollande - and the favourite to be the next French president - challenges what has become the German orthodoxy. He believes the focus must move away from austerity to growth. He is likely to challenge German leadership in the eurozone crisis. So - realistically or not - he would spend billions on hiring new teachers, on training young people and finding them jobs.

Mr Hollande will also try and renegotiate the pact enforcing budgetary discipline over eurozone budgets, although the expectation is that he might settle for an understanding on growth rather than opening up the whole negotiations again.

At the start of the campaign President Sarkozy was all for having German Chancellor Angela Merkel campaigning for him. You do not hear that anymore. The French president - on the stump - is now distancing himself from Berlin.

On Sunday he broke an agreement with Chancellor Merkel not to question the role of the European Central Bank. He and Chancellor Merkel had disagreed about it in the past. The French want the bank to act more aggressively, to relieve pressure on troubled governments and to pay more attention to growth.

The Germans will not countenance anything that in their view compromises the independence of the bank. President Sarkozy now favours changing the rules set out in the Treaty of Maastricht, to give the bank more flexibility. The Germans dismiss that as electioneering, but the president believes "there is a major problem for the future of Europe" in the way the bank operates. Under the treaty's no bailout clause the ECB is not supposed to buy debt directly from eurozone states.

Even though President Sarkozy accepts France must bring down its debts - and lambasts his main opponent for planning a festival of spending - he too has become an open doubter about austerity. "If Europe chooses deflation," he said at the weekend, "she will disappear".

On the campaign trail President Sarkozy has said he will freeze contributions to the EU budget; he will suspend membership of the Schengen agreement, which guarantees free movement of people in the EU, unless Europe's borders are better defended against immigration; and he openly favours a "Buy European Act", which would be strongly opposed by the European Commission.

In recent months Chancellor Merkel has been speaking of the need for "more Europe". She has taken to dropping into speeches the prospect of a political union. That would be a massive step, but none of this is mentioned at election time in France. There are no votes in a more closely united Europe.

The votes lie - and all candidates seem to recognise this - in France having greater control of its own affairs. As Francois Hollande said, "we are a great nation, a great country, whose choices are not made by the heads of state or governments of countries that are friendly but external to our democracy". That is the pitch at election time in France.

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European Commission

Target: 17 million jobs


16 April 2012


Süddeutsche Zeitung Comment8




Süddeutsche Zeitung, 16 April 2012

Responding to a record 10% unemployment in the EU, the union “is launching a programme for more employment,” leads Süddeutsche Zeitung. Faced with harsh criticism for its austerity policies, the European Commission is taking on what is usually considered a domestic issue: social policy and the labour market. The Commissioner tasked with the challenge, László Andor, is to present this week an “employment package” that aims to create 17 million new jobs by 2020.

The main measures of this plan are: complete opening up of labour markets, both private and public, to all European citizens – including Romanians and Bulgarians – “appropriate minimum wages” that will let employees live off their labour, mutual recognition of degrees, and lower labour taxes.

The Commission hopes the most potential lies in the health sectors, services for the elderly, development of a sustainable climate-friendly economy, and in IT, though it remains to be seen whether states will allow interference in their social affairs. The plan will be discussed at the EU summit in June.

On the web
L'article de la Süddeutsche Zeitung de

Source profiles
Süddeutsche Zeitung

==================
There is already much criticism of EU Bureaucracy wasting money on too many talking shops and interference in Immigration the Judiciary, Human Rights
and what we can grow and what we can't.Had it just stuck to a Common Market, this mess would have been avoided.

[Badboy]

I READ TODAY IN THE GUARDIAN THAT SPAIN AND GREECE HAVE OVER 50% YOUTH UNEMPLOYMENT WHERAS IN NETHERLANDS ETC IT IS 10%

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I READ TODAY IN THE GUARDIAN THAT SPAIN AND GREECE HAVE OVER 50% YOUTH UNEMPLOYMENT WHERAS IN NETHERLANDS ETC IT IS 10%

That is probably between them Badboy , I think Spain has 28%, However, there is so much Social unrest over the austerity measures forced on these
Countries that the only way out for the vulnerable in the end is to default which is what some analysts are forecasting will happen in Greece, Spain
and Portugal before the end of the Year,

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World Briefing | Europe

Greece: Ex-Official Is Detained

By NIKI KITSANTONIS

Published: April 16, 2012











.













Akis Tsochatzopoulos, a former defense minister, was detained Monday after testifying in connection with a money-laundering racket he is accused of using to conceal under-the-table payments from military-procurement deals. With elections on May 6, the authorities are eager to show foreign creditors that action is being taken to stamp out the corruption that contributed to Greece’s dysfunctional state. Mr. Tsochatzopoulos has denied any wrongdoing.








A version of this brief appeared in print on April 17, 2012, on page A6 of the New York edition with the headline: Greece: Ex-Official Is Detained.
.

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France-Germany

Merkozy is finished


17 April 2012
La Tribune Paris Comment2





Effigies of Nicolas Sarkozy and Angela Merkel parade at the Düsseldorf carnival, Germany, February 2012.

AFP


In opening the debate on the role of the European Central Bank, Nicolas Sarkozy aimed to obtain support from voters demanding a growth oriented economic policy. But in so doing, he attracted the ire of Angela Merkel, who needs to emphasise a rift with French President for domestic reasons.

Romaric Godin

On Sunday, the entity known as Merkozy committed suicide at the Place de la Concorde, in Paris. It had been reported that he/she had been in poor health for several weeks.

Gone are the days when the indivisibly “merged” authority of the French and German government leaders ushered in the new Europe of “golden rules” and automatic budgetary sanctions, when Angela was expected to voice her support for her "dear Nicolas" at political meetings. Now the fate of the entity, which has fallen victim to its own internal contradictions, is inevitable.

In demanding a more active role for the ECB in the struggle against deflation, Sarkozy to all intents and purposes declared his intention to do battle with Germany to sustain his position in national politics.

The independence of the ECB is an indispensable condition for the presence of Europe’s leading economy in the euro zone. It is the one issue on which no compromise is possible, so announcing that the status of the financial institution ought to be changed was tantamount to firing a silver bullet to kill off Merkozy.

The French President was well aware of what he was doing. In the autumn of last year, he had already attempted to raise the question of making the ECB a European lender of last resort – a suggestion which received such an icy reception from the German government that he had no option other than to back down.

The rift between the couple

For Germany, the lessons of history are incompatible with candidate Sarkozy’s proposals for the way forward in Europe.

The view on the other side of the Rhine is that euro zone will only be viable if it embraces the principles of Ordoliberalism which paved the way for West Germany’s success in the 1950s and 1960s: a low-profile state, a conservative wages policy, rigourous budgetary discipline and a strictly independent central bank with a mandate that is limited to monetary policy and the fight against inflation.

Nicolas Sarkozy endorsed this Weltanschauung ("world view") when he accepted the fiscal compact proposed by Berlin.

The agreement was a second attempt to establish German-style competitiveness in the economic and monetary union, and it implied that certain countries would no longer use domestic demand subsidised by the state to shore up economic growth.

Furthermore, it was the price that had to be paid to save the euro. As it stands, it is no longer possible to adopt a position which demands that the role of the ECB be changed, and, at the same time, purports to safeguard the single currency. Germany will never agree to compromise the strict independence of this institution, which was one of the non-negotiable conditions for the creation of the single currency.

Berlin would prefer to exit the euro, and there are two reasons for this stance: one is the trauma of hyperinflation in the 1920s, and the second is a desire to avoid being a cash cow that will continually have to foot the bill for less competitive countries.

As a result, the rift between the couple which seemed so united in Deauville has continued to widen. On Monday, Angela Merkel was clearly intent on keeping her distance from the man who used to be "dear Nicolas", while a government spokesman dryly reiterated her government’s policy: "Germany’s position on the ECB and its independence is well known. And Paris is well aware of this position which is a longstanding one."

Key motive for the Merkozy suicide

In other words: we are not about to change and we have the merit of being coherent. It is difficult to see how Merkel’s response could have been different. Every week the Bundesbank (a.k.a the Buba), whose prestige on the other side of the Rhine is hard to imagine in France, criticises her budgetary and European policies.

A decision to overlook Nicolas Sarkozy’s speech would have been tantamount to ignoring this fact: and from the point of view of domestic politics it would have been a very dangerous move, because not only is Ms. Merkel’s party very sensitive to criticism from the Buba, but there is absolutely no doubt about the impossibility of acceptance for any initiative that would undermine the independence of monetary policy.

Here we are touching on the key motive for the Merkozy suicide: like her former friend, Angela Merkel wants to hang on to her post in elections slated for September 2013. Her chances of continuing as Chancellor depend on two factors: she must ensure that her mandate is not contested by her own camp, and, at the same time, she must be careful to avoid a clash with the social democrats who will feature in another "grand coalition," which she intends to lead.

With this in mind, a victory for Nicolas Sarkozy is no longer the imperative that it was two months ago. On the contrary, in distancing herself from the UMP candidate’s sabre-rattling, she has demonstrated her good will to the SPD (social democrats) and shown an unswerving adherence to Ordoliberalism that will be welcomed by her own camp.

So Merkozy has now been consigned to history. The only remaining hope for the special entity would be an election victory for Nicolas Sarkozy, in which case, the promises made over the last two months of the presidential race could, of course, be quickly forgotten.

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8:15pm UK, Tuesday April 17, 2012

Ed Conway, economics editor

The International Monetary Fund (IMF) has for the first time accepted the prospect of the euro breaking up.
In its flagship economic survey of the world economy, the IMF acknowledged there were fundamental "flaws" in the design of the single currency and said that one prospective "tail risk" is a "disorderly default and exit by a euro area member".

It is the first time the IMF has openly contemplated such an outcome.


IMF ECONOMIST TALKS EUROPE ECONOMY
Its previous forecasts disregarded such a scenario, and its managing director, Christine Lagarde, said earlier this month that it had no agenda to see the euro collapse.

The announcement comes amid growing consternation about the plight of Spain, which has suffered an exodus of bank deposits and is struggling to raise money at reasonable rates.

Many now believe that Spain could follow Greece, Portugal and Ireland in having an emergency bailout.

The IMF said it was impossible to quantify the impact of a country defaulting or exiting the currency union.

But in its World Economic Outlook, it added: "If such an event occurs, it is possible that other euro area economies perceived to have similar risk characteristics would come under severe pressure as well, with a full-blown panic in financial markets and depositor flight from several banking systems.



Only last month, IMF Chief Christine Lagarde said the euro would not collapse

"Under these circumstances, a break-up of the euro area could not be ruled out. The financial and real spillovers to other regions, especially emerging Europe, would likely be very large.

"This could cause major political shocks that could aggravate economic stress to levels well above those after the Lehman collapse."

However, the IMF's working assumption is that "policymakers succeed in containing the sovereign crisis through continued crisis management and further advancing measures toward its resolution".

Nonetheless, it raised its forecast for overall world economic growth this year by 0.2% points to 3.5%.

It also increased its economic growth forecast for the UK this year from 0.6% to 0.8%, the first such increase in recent years, which is likely to reinforce Chancellor George Osborne's insistence that he is following the right path.


Investigations Correspondent
However, it is the IMF's warning over Europe which is likely to disturb policymakers most profoundly.

It cut its economic growth forecast for Spain this year from -1.6% to -1.8%, which is lower than Madrid's official forecast and makes it harder to meet its deficit reduction plans.

That comes with Spain facing government borrowing costs of more than 6%, a sign that investors are fearful of buying the country's debt.

And in a further blow, the country has become embroiled in a row with Argentina, which is set to nationalise its oil company YPF, the majority stake of which is owned by Spanish oil group Repsol.

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Monti plans anti-corruption Laws , sentences for anyone found guilty of corruption will receive 5 yr Jail sentence. He wants to broaden aspects of corruption including backing for Political Parties.

Christof Schmidt, economic advisor to Merkel says German investor confidence is at a 2 yr high and sees no alternative to austerity and growth could
tip the balance. Fiscal and Monetary policy needs splitting and he says growth is not the remit of the ECB.

The Head of CBRE says inflation is very high and Businesses are moving from the High Street to out of town shopping malls.

The IMF which meets this Friday is concerned about the Debt crisis and will be calling on the G20 to increase the Fund. The maximum Britain could donate is £10 billion otherwise the Chancellor would have to go to his Party for approval.

The ECB will not lend to Banks and to be the lender of last resort will have to buy more Bonds which will upset the Bundesbank who may well not agree.
Given the write off of the Greek Bonds, Investors are not keen to jump in and Political solutions will have to be sought.

Carlo Cottarelli, IMF Member says Europe needs structural reform and a sizeable output gap is the answer . Some Countries will not be able to reach this
criteria . He believes austerity has worked but that fiscal tightening is not enough and reform is necessary and for some Countries this will be painful.

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