Re: New EC Thread

[Badboy]

I SAW A SMALL ARTICLE ON FRONT OF ONE NEWSPAPER TODAY(EXPRESS/MAIL?) THAT SAID THAT A FINANCE EXPERT? WARNED BACK IN 2006 THAT THE HOUSING BOOM ETC MIGHT LEAD TO A CRISIS BUT CIVIL SERVANTS IGNORED HIS ADVICE.

[mara thon]

I'm no financial expert but can anyone tell me why countries, such as UK, owe so much money but never pay it, yet continue to throw money about everywhere except where it should go?


http://www.bbc.co.uk/news/business-15748696

I think you'll find the answers you seek here, mara thon.

well it all makes sense now...........I think

[Panda]

Dutch PM Mark Rutte 'to deliver resignation'
Dutch Prime Minister Mark Rutte will submit his government's resignation to Queen Beatrix today, reports say, paving the way for early elections.

The government was plunged into crisis when Geert Wilders' Freedom Party pulled out of talks aimed at slicing 16bn euros (£13.1bn) from the budget.

Mr Wilders said he would not accept austerity demands to bring the budget deficit in line with EU rules.

His party was not part of the coalition but supported the minority government


The defeat of Sarkozy in the first round voting has affected the Stock Market .

China and Europe faced lower growth in the last quarter, stocks down as Investors run for cover.

Spanish 10 yr Bond reaches 6% yield and Spain admit the deficit increased in the last quarter.

The Netherlands and France are cause for concern., One in 10 unemployed in France.

Debt soars in Europe , even more than when it was a single currency.

TherIMF says the Euro Zone must make sweeping reforms to combat this crisis.


Stocks all over Europe and the U.K. opened lower today.

[Panda]

European shares fall as anxiety returnsContinue reading the main storyMarket DataLast Updated at 15:26

Market index Current value Trend Variation % variation
FTSE 100 5642.51 Down -129.64 -2.25%
Dax 6511.31 Down -238.81 -3.54%
Cac 40 3096.67 Down -91.91 -2.88%
Dow Jones 12856.25 Down -173.01 -1.33%
Nasdaq 2951.13 Down -49.32 -1.64%
BBC Global 30 5901.04 Down -71.52 -1.20%
Marketwatch ticker
Data delayed by 15 mins
Continue reading the main story
Global EconomyQ&A: Pain in Spain
Spain 'has to bite the bullet'
What is the euro bailout fund? Watch
Crisis jargon buster

Stock markets have fallen after weak manufacturing data and political uncertainty in France and the Netherlands hit investor confidence.

France's Cac 40 and Germany's Dax indexes were down about 2.5%, while the UK's FTSE 100 was about 1.5% lower.

On Sunday, President Nicolas Sarkozy narrowly lost to socialist rival Francois Hollande in the first round of France's presidential election.

The collapse of budget talks in the Netherlands added to market nerves.

The closely-watched Purchasing Managers Index (PMI) survey suggested manufacturing activity in Germany fell to an almost three-year low of 46.3 in April. Any figure below 50 suggests contraction.

Figures for the wider economy, both in Germany, France and the wider eurozone, also showed a deeper contraction.

"The flash PMI signalled a faster rate of economic contraction in the eurozone during April, extending what appears to be a double-dip recession into a third consecutive quarter," said Chris Williamson, chief economist at survey-compiler Markit.

Earlier, HSBC's PMI reading for China improved slightly in March to 49.1, up from 48.3 in the previous month.

To compound the gloomy mood of investors, the Bank of Spain estimated that the Spanish economy shrank by 0.4% in the first three months of this year, pushing the economy back into recession after it contracted by 0.3% in the final quarter of last year.

Spain's official GDP data is published on 30 April.


--------------------------------------------------------------------------------

In the French presidential election, Mr Hollande won 28.6% of the votes with Mr Sarkozy taking 27.1%. It is the first time a sitting president has lost in the first round of a presidential election.

The two will go head-to-head in a second round of voting on 6 May.

While Mr Sarkozy, along with the rest of Europe, has stressed the need for austerity to bring down high levels of debt, Mr Hollande has said stimulating growth is the more effective option.

This has raised fears among investors that France would struggle to control its debts should the socialist candidate replace Mr Sarkozy.

Markets were also unnerved by the failure of the Dutch government to agree on austerity measures, raising the prospects of fresh elections in the country.

"The Netherlands could be a problem because, up until now, it was a stable partner in the eurozone; this shows the problems and increasing tensions within the area," said Christian Stocker at UniCredit Global Research.

"It's definitely a problem for the market

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Christine La Garde says she has pledges for $430 million but would have liked $600 Billion and again stressed the need for the Euro Countries to
stay with the austerity plan.

The resignation in Holland has rattled Europe and another Election is not going to stabilise Europe.

The EUro GDP is 87% , Estonia being the lowest at 6%

Holllande, if he wins the next Vote and becomes President is very inexperienced and says he is looking for growth but will try to come up with a Policy
which satisfies France and the EU.

Murdoch says he cannot understand why George Osbourne has donated £10 billion to the IMF when he has just taxed hot food.

Europe's austerity backlash could scupper Merkels plan, too many young people, many Graduates, are leaving Portugal and Greece to find work in other Countries and this is very serious. Families affected and and a loss of Labour when Economies improve.

[Panda]

French elections

The tide has turned in Europe


23 April 2012


Financial Times Deutschland, Rzeczpospolita, El País, To Vima Comment1



Joep Bertrams


For the European press, the first round of the French presidential election has one winner – Marine Le Pen of the far-right Front National and two losers, the incumbent Nicolas Sarkozy and Germany.

The runoff election which pits Socialist François Hollande and conservative incumbent Nicolas Sarkozy was long anticipated by opinion polls, which, in recent days placed Hollande as the frontrunner. The high score of the far-right National Front candidate, Marine Le Pen, however, came as a surprise. With nearly 20% of the vote, Le Pen will weigh on Sarkozy's campaign.


For the Financial Times Deutschland, Nicolas Sarkozy's second place score is a "humiliation" which shows the "brutal rejection" to which he is subjected. The German daily says that the first round is "not just a result, it is a verdict against a president unable to accomplish the necessary reforms". Convinced that the French want to get rid of Sarkozy at all cost, the FTD notes that François Hollande could have just the pragmatic skills essential to getting out of the crisis -




The results of this first round brings a major opportunity and, at the same time, a greater risk. Paradoxically, this opportunity is hidden behind Hollande's bland appearance and his un-dynamic personality. If there is no miracle in the next two weeks, France will get a boring president to replace someone who is constantly self-promoting. But with his reserve and his lack of determination, Hollande may be more capable than his predecessor at launching a pragmatic policy of necessary reforms to lift the country out of the debt crisis and of its economic misery.


In Warsaw, Marek Magierowski, leader writer for Polish daily Rzeczpospolita, says that "Nicholas Sarkozy is tottering". The incumbent, he writes -




... will have trouble rallying supporters of Marine Le Pen, most of whom will probably abstain in two weeks' time. If Sarkozy wants to dream of re-election he must put everything at stake and move further to the right. Considerably more to the right. If he wants to win, he must become a lepenist, if only for a while.


Spanish daily El País, for its part, says that the effects of the French vote go beyond the country's borders. According to the paper -




... all of Europe is concerned by this election which opposes two different conceptions of integration at the continental level. Although in the final stages, Sarkozy's position was closer to Hollande's regarding the need to develop growth policies and not only asphyxiating austerity measures, they are separated by other issues such as the control of immigration in the European Union. It would be paradoxical if [conservative Spanish Prime Minister Mariano] Rajoy's main ally within the EU ended up being a Socialist in the Elysée [the French presidential mansion]. Even if only for appearances as was the case with Sarkozy and [former Spanish PM, Socialist José Luis] Zapatero.


Greek daily To Vima sees the French vote as "a lesson for Germany". "Nicolas Sarkozy's defeat is not just his defeat, but also that of German policies," the paper says. "Policies that he faithfully supported ". This first major election since the signing of the EU Budget Pact sends two messages, To Vima explains -




First, that Germany's role as leader in Europe is the central theme that divides the French electorate. Then that the French people are feeling the consequences of the policies imposed on Europe by Germany, even if it is less hard hit [...] If a Sarkozy defeat is confirmed by the runoff and if France changes president, that does not mean that the new head of state will actually react to Germany's European dictates. Particularly because the financial markets will soon threaten France with high interest rates if it does not adapt to German policies [...] Europe is thus turning against Germany. Because it is possible to scare governments but not the people. That is why, whether or not François Hollande is elected, it is the beginning of the end for German dictates.

[Panda]

Bundesbank’s Weidmann Says What No EU Politician Wants to Hear

By Jeff Black and Tony Czuczka - Apr 23, 2012 12:00 AM GMT+0100
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..
Jens Weidmann is no longer his master’s voice.

Almost a year into his new job as the head of Germany’s Bundesbank, Weidmann, 44, has matured from Chancellor Angela Merkel’s discreet right-hand man at global economic meetings into one of the few European policy makers warning that governments are failing to do what’s needed to rescue the euro.


















The German central bank is campaigning against “indefinite expansion” of the money supply and seeking to limit losses it would face if the euro splintered. Photographer: Hannelore Foerster/Bloomberg
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Weidmann’s public criticism of measures such as the “fiscal compact” -- hailed by its architects as the first step to economic union -- has pitted him against Merkel and European Central Bank President Mario Draghi as they struggle to hold the 17-nation euro region together. With Europe in recession and rising Spanish bond yields threatening to reignite the debt crisis after a three-month lull, the Bundesbank’s youngest-ever president says greater fiscal and monetary rectitude is the only way to win back investors’ trust.

“When he was appointed, the press pounced on him and cried ‘Merkel’s man’ because he had worked for her for a few years,” said Manfred Neumann, the professor of international economics at Bonn University who supervised Weidmann’s 1997 doctoral thesis and says he still talks with his former student. “He has shown that he isn’t.”

Weidmann’s arrival on the 12th floor of the Bundesbank’s landmark building in Frankfurt on May 1, 2011, may have been more of a homecoming than a departure.

‘Culture of Stability’

From 2003 to 2006, he led the central bank’s monetary policy and analysis division, serving under presidents Ernst Welteke and Axel Weber, one of his former professors and the man who recommended Weidmann to Merkel. He shared what he learned on his first day in charge, referring to the historic German anxiety about inflation that still stokes public mistrust of the joint currency.

“First of all, the Bundesbank stands for a culture of stability,” Weidmann said during his inauguration speech. Welteke, accepting the same post 12 years earlier in the infancy of the euro, said the Bundesbank’s job was to bring that culture to the rest of Europe.

For Weidmann, that has often meant saying no. With Spanish government officials and French presidential candidates pressing the ECB for additional help as borrowing costs increase, his stand may be tested.

Political Pressure

Francois Hollande, who is leading incumbent French President Nicolas Sarkozy in opinion polls before elections that conclude May 6, said April 20 that the ECB should cut interest rates and begin lending directly to governments to promote growth. In Spain, where bond yields are soaring, officials have started to call for the ECB to resume its asset-purchase program.

Governments have consistently looked to the ECB to battle the debt crisis and Weidmann has consistently been the man in the way. When the crisis spread last year to Italy and Spain, the euro area’s third- and fourth-largest economies, Weidmann opposed the ECB’s decision to intervene in bond markets and publicly slammed a proposal to allow the region’s bailout fund to borrow from the central bank.

“The idea that the required money will be created through the printing press should finally be brushed aside,” he said in a speech in Berlin in December. “Doing that would threaten the most important foundation for a stable currency: the independence of a price-stability focused central bank.”

He hasn’t spared Draghi or Merkel, who has vowed to prevent a breakup of the currency union and put the most money on the line for bailouts and financial backstops.

Fiscal Compact

When European leaders agreed on the fiscal compact championed by Merkel in late January, Draghi said it was “the first step toward the fiscal union” and would “strengthen confidence in the euro area.”

Weidmann said it fell short.

“Obviously in the negotiations, as often in the past, things were watered down,” he said on Feb. 1. “It’s clear that the cornerstone for a real fiscal union hasn’t been laid here.”

For Weidmann, putting Europe’s monetary union on a sound footing involves governments either giving up some sovereignty over national budgets or setting stricter fiscal rules and ensuring they’re enforced.

Neither has happened yet, he said during a March 28 speech at Chatham House in London. While charming his audience with humor and a down-to-earth style, Weidmann offered a sobering assessment.

“The time has come to move from containing the crisis to resolving it,” he said. “If we have the will to make the right choices, we will be able to rebalance Europe and lay the foundation for a stronger, more stable monetary union.”

Skilled Negotiator

A graduate of the 193-year-old Friedrich Wilhelm University in Bonn who spent time in France, Africa and at the International Monetary Fund, Weidmann was lauded for his “firmness and negotiating skills” by then French Ambassador Bernard de Montferrand when he was awarded France’s Legion of Honor at a ceremony in Berlin in 2009.

Yet his habit of serving unpalatable truths to former political masters and fellow monetary policy makers isn’t winning him friends, said Nick Kounis, head of macroeconomic research at ABN Amro in Amsterdam.

“I don’t really think that fellow policy makers are happy that he’s coming up with this,” said Kounis. “Disagreements on the Governing Council, especially between the Bundesbank and the president, can create a lot of uncertainty about the future course of policy. It can also lead to credibility issues for the central bank.”

Critics of Weidmann’s approach include billionaire investor George Soros, who said rising tensions in financial markets reflect concern that the Bundesbank is preparing for the end of the euro.

‘Self-Fulfilling Prophecy’

The German central bank is campaigning against “indefinite expansion” of the money supply and seeking to limit losses it would face if the euro splintered, Soros said in a speech in Berlin on April 12. “This is creating a self-fulfilling prophecy.”

Things have not gone Weidmann’s way as the debt crisis presented the ECB with challenges few foresaw.

He was outvoted on Aug. 4 when soaring yields in Italy and Spain prompted the ECB to resume and expand its bond-purchase program, a decision that prompted chief economist Juergen Stark, a former Bundesbank vice president, to quit.

Weidmann later insisted the ECB should reduce its exposure to risky assets, which it was accumulating after allowing banks to use lower-quality collateral for central bank loans.

Bank Loans

“The balance sheet of the Eurosystem is burdened with considerable risks,” he said on Sept. 13. “I am of the conviction that these should now be reduced and under no circumstances expanded.”

Six months later, the ECB’s balance sheet had swollen by almost 40 percent to 3 trillion euros ($3.9 trillion) after policy makers flooded the banking system with more than 1 trillion euros of three-year loans to help avert a credit crunch.

Now there are calls for the ECB to again come to the rescue as concerns about Spain and Italy mount. Spanish 10-year bond yields have risen more than a percentage point since the start of March to 5.9 percent, and Italy’s have climbed to 5.6 percent. Germany’s 10-year borrowing rate has dropped to 1.7 percent.

The ECB “should step up purchases of bonds,” Jaime Garcia-Legaz, a deputy minister in Spain’s Economy Ministry, said in an interview published April 14.

Weidmann is meanwhile pressing the ECB to come up with an exit strategy for its stimulus measures and shift the burden of crisis-fighting back onto governments.

He seems to be winning that battle for now, said Christian Schulz, an economist at Berenberg Bank in London who worked at the ECB from 2008 to 2011.

“In the short term, the Bundesbank can create enough fear of humiliation within the ECB that it leaves the pressure on the governments,” he said. “But the crisis has reared its head again and eventually, that might force the hand of the ECB.”

[fuzeta]

Well it is all very interesting! Merkel is losing her favourite puppet Sarkozy. where else is she going to find such a lapdog, also one as good at insulting the UK as he is?

The Dutch situation is interesting as when we were in Portugal earlier in the year, we met up with our lovely Dutch friends. They said how happy they were with everything in Holland, that everything was going fine and that they thought we had isolated ourselves.

Well things are not looking so rosy there now, I have to say that I do not wish it on them but it is as it is.

IMO the whole thing is going to come tumbling down they are just making it a long painful process.

I just hope that in the UK we have had the time to make sure that the fall out does not affect us as badly as it would have done, fingers crossed. What worries me is that we are still throwing money at the IMF without knowing what it will be used for. The IMF say they are not to support a currency but nations in trouble . Well that is an open cheque book in my opinion!!

[Badboy]

DIDN'T I READ SOMEWHERE THAT GEORGE SOROS IS BETTING THAT THE EURO WILL COLLAPSE.

[Panda]

23 April 2012 Last updated at 12:51 Share this pageEmail Print Share this page


Eurozone governments managed to cut sharply their budget deficits last year, but overall debt levels continued to rise, official figures have shown.

The deficit to GDP ratio for the bloc as a whole fell to 4.1% from 6.2% in 2010, Eurostat said. The overall debt to GDP ratio rose to 87.2% from 85.3%.

The Republic of Ireland, Greece and Spain had the highest deficits.

Eurozone governments have introduced far-reaching austerity measures designed to cut deficits.

The deficit ratio is the difference between a government's annual expenditure and its revenues, expressed as a percentage of its annual GDP. The official deficit target, as laid down in the Maastricht Treaty, is 3% of GDP.

Following the financial crisis of 2008, a year in which the eurozone's deficit ratio stood at 2.1%, budget deficits increased significantly as governments spent billions of euros on bail-out packages and stimulus measures.

More recently, governments have cut spending in order to reassure international lenders of their credit worthiness and bring deficits back towards target.

The Irish Republic reduced its deficit from 31.2% in 2010 to 13.1% last year; Greece from 10.3% to 9.1% and Spain from 9.3% to 8.5%.

However, the Irish government says its deficit last year was 9.4%, beating the target of 10.6% set as a condition of its international bailout, when the money it injected into its banks is taken out.

Germany cuts its budget deficit from 4.3% to 1% of GDP.

Outside the eurozone, the UK saw its deficit fall from 10.2% to 8.3%.

However, overall debt levels across the eurozone continued to rise last year.

The debt ratio is a country's total stock of debt expressed as a percentage of its total annual economic output.

The debt to GDP ratio in the Irish Republic rose from 92.5% to 108.2%, in Greece from 145% to 165%, and in Portugal from 93.3% to 107.8%.

The UK's debt ratio rose from 79.6% to 85.7%.

By contrast, Germany managed to cut its debt ratio from 83% to 81.2%.

[Panda]

Britain’s IMF Contribution is Least Generous of All Share
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Britain’s IMF Contribution is Least Generous of All

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Ed Conway
April 21, 2012 6:02 PM

Recommend post (1) Was George Osborne’s decision to provide $15bn (£10bn) to the International Monetary Fund designed to prevent him having to go to Parliament to vote it through?

The Chancellor is adamant that it wasn’t. I asked him precisely that question when I spoke to him here in Washington. He said the following:

I think the $15bn is a significant loan, I think it is proportionate to what other countries are doing… if I felt it needed to be more, then I would be very happy to go to Parliament and seek authority.

But is the contribution really proportionate to what other countries are doing? Treasury sources insist that if you include all the potential non-euro IMF donors (standard IMF methodology, they say) Britain’s contribution is about average. However, that calculation is skewed drastically by the fact that the US (by far the biggest donor) is not giving any new money at all.

Compare Britain’s contribution to the other non-euro members who have actually put their hands in their pockets and you’re left with a pretty stark picture: Britain’s $15bn is comfortably the least generous of all the new IMF commitments.

The average non-euro donor country gave around 1.4% of their annual economic output. Britain’s $15bn represents a mere 0.2% of its annual output. To prove the point, here are all the major non-euro contributions to the IMF’s new $430bn pot, and alongside them is what that represents as a percentage of that country’s GDP (the best way to compare like-for-like).

Japan - $60bn – 1%
South Korea - $15bn – 1.4%
Saudi Arabia - $15bn – 2.6%
United Kingdom - $15bn - 0.2%
Sweden - at least $10bn – 1.9%
Switzerland - $10bn – 1.6%
Norway - $9.3bn – 1.9%
Poland - $8bn – 1.6%
Australia - $7bn – 0.5%
Denmark’s Nationalbank - $7bn – 2.1%
Singapore - $4bn – 1.5%
Czech Republic - $2bn – 0.9%

Now, one can quibble with a few things here: these figures are in relation to GDP rather than each country’s IMF quota (though the difference won’t be enormous). The Treasury will say it’s unfair to disregard those countries that didn’t contribute when calculating the overall proportion. Moreover, here in Washington the Fund is grateful to have received any money at all from Britain - the Chancellor could easily have refused to have provided anything.

But the fact remains that compared to those who put forward new contributions, Britain has been strikingly stingy.

If Mr Osborne had increased Britain's contribution in line with the other non-euro members who stumped up, it would have meant providing about $35bn (about £23bn) rather than $15bn (£10bn). That would have meant putting the new contribution to a Parliamentary vote, since it's above the £10bn headroom the Government gave itself the last time it upped its IMF loans.

Which brings us back again to the prickly question: why did the Chancellor choose such a low figure? Was it because if he had given in line with the other countries who provided new cash, he would have had to put the contribution to a Parliamentary vote and avoid another rebellion?

IMF george_osborne fund euro crisis ECONOMY
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Posted by: Raymond Vermont on April 23, 2012 11:30 PMIf Greece, Hungary or Portugal etc etc were to default and then leave the eurozone, then those countries would be not euro users but still would need finance and credit, therefore the IMF loan would not be a eurozone loan and NOT propping up a currency...

Maybe the IMF BIG bazooka is to allow the 'default' to occur and in an orderly fashion?

[Panda]

Francois Hollande, the winner of the first round of France’s elections, said Europe’s austerity drive fueled despair and created conditions for the record-high score for anti-euro National Front leader Marine Le Pen.

Le Pen, the leader of the nationalist, anti-immigrant party, won 17.9 percent, or 6.4 million votes, surpassing poll estimates with the highest tally for the National Front created by her father Jean-Marie Le Pen in 1972. Hollande, the Socialist candidate, got 28.6 percent in the April 22 ballot, leaving him to face President Nicolas Sarkozy in next month’s runoff. Sarkozy won 27.2 percent.








April 23 (Bloomberg) -- Thomas Klau, senior policy fellow at the European Council on Foreign Relations, talks about Germany's reaction if Francois Hollande is elected as the new French president. He speaks in Paris with David Tweed on Bloomberg Television's "The Pulse." (Source: Bloomberg)
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“It’s this austerity everywhere that brings desperation to people and leads them to vote for the far-right,” Hollande said yesterday in a speech in Quimper, in Brittany, where the National Front almost doubled its score from 2007.

Europe’s front against austerity has expanded in recent weeks after Spain struggled to meet European Union-imposed deficit targets, election campaigns in Greece faced anti- austerity rumblings and a revolt against extra spending cuts in the traditionally budget-conscious Netherlands propelled Prime Minister Mark Rutte’s coalition toward an early breakup.

Anti-austerity views have boosted anti-European sentiments that play into themes at the core of Le Pen’s campaign. Le Pen, a member of the European Parliament, focused a large part of her campaigning against Europe, calling for France to exit the euro. She has repeatedly criticized the close relations between Sarkozy and German Chancellor Angela Merkel.

No Tidal Wave

Hollande’s call for growth measures may generate fresh doubts about the German-driven strategy for coming to grips with the more than three-year-old European debt crisis.

Still, the imposition of fiscal discipline hasn’t resulted in “a tidal wave of far-right, anti-European, xenophobic parties,” Thomas Klau, a senior policy fellow at the European Council on Foreign Relations, said in an interview with Bloomberg Television in Paris. “Voters haven’t returned extreme parties to the government.”

The euro-area crisis in Europe has resulted in the ouster of leaders in Ireland, Portugal, Greece, Italy, Spain, Slovenia, Slovakia and Finland.

The European Commission “often calls on the region’s leaders not to give in to the temptation of populist speeches and to continue to move on with a Europe of peace and growth,” Olivier Bailly, a spokesman for its president Jose Manuel Barroso said, Agence France-Presse reported. The remarks echoed concerns across Europe after Le Pen’s record-high vote.

Protective Europe

“A Europe that doesn’t defend its citizens is finished, a Europe that doesn’t defend its borders is finished, a Europe that opens its markets without reciprocity is finished,” Sarkozy said at a campaign rally near Tours in the Loire valley yesterday.

Hollande has criticized Sarkozy for seeking to lure Le Pen voters, saying, “no doubt he will use all the elements of fear” to win them over.

“This is a vote of crisis,” Sarkozy said. “Political leaders, not just in France, but around the world, must see this rise of a vote of crisis.”

Merkel, who has dominated Europe’s crisis response, said debt reduction is the best route to economic health.

“Solid budget management is a factor for producing growth, but of course not the only one,” Merkel said yesterday at the Hanover trade fair, a showcase for high-tech products. “We’re still in the process of overcoming this crisis.”

Isolating France

Hollande’s repeated his criticism of the German-advocated austerity and said the European Central Bank needs to do more to support Europe’s growth, comments that may put him at odds with France’s neighbor and Europe’s biggest economy. One month before the first-round vote, Merkel ally Peter Altmaier warned him of a risk he could create for his own country.

``I hope that Mr. Hollande won't place himself outside the broad consensus,'' Altmaier said. ``He would isolate France in Europe and that can't be in anyone's interest.''

The French Socialist lawmaker has said he would seek to add growth and investment measures to the fiscal treaty signed by its European partners.

Hollande’s support ranges from 53 percent to 56 percent, while Sarkozy’s backing is at 44 percent to 47 percent, recent polls showed. The surveys were conducted after first round voting ended by pollster CSA, BVA, Ifop and Ipsos.

Hollande said, if elected, he would send a draft proposal of the changes he would like to see to the treaty to the 25 EU leaders who signed the German-inspired treaty on March 2.

“If we win, France will refocus European construction and put growth, industry, sustainable growth (…) at the center,” said Hollande in the Brittany town of Quimper yesterday.

[Panda]

Trade and industry


Industry

Car makers at a dangerous crossroads


23 April 2012
Gazeta Wyborcza Warsaw Comment13



The automotive industry, a crucial sector of the European economy, is suffering the consequences of the economic crisis. Forced to alter their production output, different groups are choosing different strategies to combat the tough economic climate.

Andrzej Kublik

With the opening of a brand new Mercedes-Benz plant at the end of March in Kecskemét, near Budapest – the first such facility in Europe outside Germany – the Hungarians have reason to celebrate.

The plant, which cost around 800 million euros to build, is expected to initially produce up to 120,000 cars per year, before later doubling its production. It is also creating about 2,500 new jobs. On March 28, while the Hungarians were ready to party, the atmosphere was much less festive in Russelsheim, near Frankfurt, where Opel's supervisory board was considering development prospects for the firm, a European subsidiary of General Motors (GM).

The German press was full of alarmist articles on the alleged intentions of GM to close its Opel factory in Bochum, Germany, and its facility in Ellesmere Port in the UK. The supervisory board did however not rule on the future of the European plants and has pledged they will remain open until the end of 2014. The festivities in Kecskemét and the tension in Rüsselsheim reflect the divergent views on the future of the European automotive industry.

Are there too many factories in Europe?

Sales of new cars in the EU is clearly dropping, with only 13.1 million cars sold in 2011 and even lower sales in 2012. Many European plants are running well below production capacity, resulting in losses to manufacturers. The firm Pricewaterhouse-Coopers has estimated the excess capacity at 4.4 million vehicles a year. This problem, typically European, is not seen in any other market in the world.

The automotive sector is a critical element in the battle for jobs. According to data from the Association of European Car Manufacturers, some 2.3 million people work in factories making cars, engines and spare parts, representing 7% of all people employed in the industrial sector throughout the EU, not counting the 10 million people in sub-contracting businesses.

The industry is also an important source of innovation. European investment in automobile research and development hits 22 billion euros, which is greater than investment in the pharmaceutical sector.

The second wave of crisis

During the first wave of the crisis in 2008 and 2009, many EU governments set up car scrappage systems, allocating financial assistance to buyers who replaced older vehicles with new cars.

But with the first wave of the crisis over, the time came to restructure and adapt European plants to meet current market needs. A need that is all the more important due to the drop in demand for new cars in Europe as a consequence of the eurozone debt crisis.

Several European plants have already shut up shop. Opel closed its Antwerp plant two years ago. As for the Swedish manufacturer Saab, it has not been producing vehicles for almost a year. The situation at Peugeot-Citroen’s factories is thought to be just as delicate, after the firm signed a strategic alliance agreement with GM, which may see the closure of the group’s French factories.

The Panda case

"Today, very few automobile makers are managing to make money in Europe. This is untenable and must change," said Fiat boss and current head of Association of European Car Manufacturers, Sergio Marchionne, on the sidelines of the last Geneva Motor Show.

He has urged European authorities to implement a policy to support the development of a European automotive industry capable of competing globally. He has also invited car manufacturers to address the problem of excess production potential, particularly exacerbated by the intervention of "member states which, under political pressure, have disrupted the balance of the common market".

While criticizing interventionism, Marchionne has praised Fiat’s decision to shift production of its new Panda car from its plant in Tychy, in Poland, to a factory in Naples, suggesting it is an example other manufacturers should follow. "The decision to bring the new Panda to Italy, was not based solely on rational grounds. We took it because of historical ties and close relations that bind Fiat to Italy," he said.

Christian Klingler, who sits on the Board of Volkswagen, believes that the real debate is not one of excess capacity in factories, but one of competitiveness. He believes it was correct in terms of competitiveness that the German company chose to produce its new city car Up! in a factory in Bratislava, in central Europe, rather than adopting a Fiat-style approach. For Mercedes, now located in Hungary, the calculation was a quick one: production costs are 30% lower there than in Germany.

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Merkel Stands Firm on Crisis Austerity, CDU Ally Altmaier Says

By Tony Czuczka - Apr 24, 2012 10:48 AM GMT+0100
.




..
German Chancellor Angela Merkel won’t budge from her insistence on budget austerity in Europe as unavoidable to resolving the debt crisis, a senior lawmaker in her party said.

“The chancellor is pretty resistant to pressure,” Peter Altmaier, the chief whip of Merkel’s Christian Democratic Union, said in an interview today in Berlin. France’s presidential vote and the Dutch government’s fall don’t change the fact “there’s no money in Europe, only deficits everywhere you look.”












German Chancellor Angela Merkel. Photographer: Michele Tantussi/Bloomberg
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Socialist challenger Francois Hollande, who leads President Nicolas Sarkozy in polls for France’s runoff election on May 6, said yesterday that austerity measures across Europe are leading to “desperation” and that he will refocus the euro area’s second-biggest economy on growth.

Altmaier warned that Hollande risked alienating investors if he were to divert from the course of austerity.

“If Mr. Hollande were to say that he wants to increase government spending and save less, he’ll lose the confidence of the financial markets,” Altmaier said. “The same financial markets that say they’re concerned about austerity will say, ‘My God, this is not serious,’ if Hollande stops austerity and does deficit spending.”

Merkel will await the election outcome in France and then “try to come to an understanding with the new government, regardless of who leads it,” Altmaier said. “We will stick to our fundamental principles because there’s really no alternative.’”

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Christine La Garde wass hoping for $600 Billion , whether this is enough is debateable'

Wilbur Ross of WBR says Europe is in recession and the 3% GDP will not bre realised .

George Soros says the Euro is coming to the end and Germany is preparing for the end, Deutchebank says "rubbish".

60% of Germans would like to go back to the Mark.

Weidman, Head of Bundesbank says the Euro Countries have to ensure price stability . He also says the ECB should not lend any more money because it
stops the Governments making the tough decisions to be made to reduce their Debt. He didn't want to comment on the U.S. refusal to contribute to the
IMF . He is young to have such a high position but considered very able. He is also an ECB Commitee Member , very affable but with a heart of steel.
He believes austerity with the minimum aid is the only way so Merkel has an Ally when she has to face more problems with Holland and France.

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Debt crisis

End of the road for European austerity?


24 April 2012



Vlahovic


With France likely to vote in a socialist president critical of her fiscal pact, and a Dutch government collapsing on the issue of social reform, German Chancellor Angela Merkel’s austerity model is taking a battering.

Europe is on the move. The Merk in the Merkozy "austerity" pact is about to lose its back wheels. Other conservative or technocratic cheerleaders of austerity are all fighting to keep this hybrid on the road. Poor handling is making the passengers in the back – Spain, Italy, Portugal Greece – car-sick. Even co-drivers like the Dutch, who railed against a short haircut for Greece's private financiers, are finding it hard to steer in the Netherlands, where the roads should be smoother. On Monday their government collapsed.

The extreme right is on the rise again in France, where the Front National, whose image has been detoxified by the daughter of its founder, got its highest score. The Front National's score has steadily been rising and what made 2007 different was Mr Sarkozy's ability to capture much of its vote. This he has now lost and if he is to win it back in two weeks, he will have to turn ugly again. Either way, the French incumbent becomes steadily less attractive as a partner for Ms Merkel.

As Angela Merkel is racing against time to lock the austerity measures into EU law, institutions, and its executive, the politics of key member states are moving in the opposite direction. Whether it is from the extremes or the centre, from left or right, the popular message is similar: German-led austerity diminishes our sovereignty, wrecks the prospects for our youth, and – if anyone from the centre to the left is talking – fuels the rise of the neo-fascist right.

Merkollande, if it emerges, is a concept for a silent, less flashy, electric family car. But there is no design, let alone something ready for the test track, and batteries could still be a problem. Nicolas Sarkozy did not take up Angela Merkel's offer to campaign on his behalf and one senses now a certain amount of relief on the German chancellor's behalf that she was not asked. If Mr Sarkozy, who is known in Germany as a divider and a polariser, has every interest in dramatising the choice before the French electorate in the next two weeks before the second round, Ms Merkel, who is facing important elections of her own, may have different political goals.

Opinion in the German social democrats SPD on Hollande's 60-point programme of reform is divided. Some leading voices, like the former finance minister, Peer Steinbrück, have called Hollande's demand for a renegotiation of the austerity pact naive. While others, like the SPD leader Sigma Gabriel, are in lockstep with Hollande's attempt to exit the eurozone debt crisis by encouraging growth. Together, they said in a joint interview, they can "move things".

That will almost certainly include Ms Merkel herself, who is nothing if not a pragmatist. Time and again the argument is made why Germans should throw their good, hard-earned money after southern Europe's bad. The counter argument – that if the single market fails, its single biggest provider of goods will fail with it – has yet to be made with sufficient force. But when it does, Ms Merkel will move with the prevailing wind. The only real question in Ms Merkel's mind is whether she has a majority. This most cautious of political animals will move where her majority takes her.

Anyone serious about the European project should take the message of the first round to heart. Persist with an economic programme that diminishes sovereignty, consigns youth to high levels of unemployment, and steers Europe towards a decade of stagnation, and you will destroy trust in social solidarity, the bedrock on which the EU lies. Economically the case for stimulus at the risk of stoking inflation has still to be won. Politically, it's becoming a no-brainer.

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EU officials to propose 6.8% budget increase for 2013 Some member states are expected to demand that the Commission scale down the budget increase Continue reading the main story


Officials from the European Commission are due to outline proposals on Wednesday for a 6.8% rise in the EU's budget for 2013.

The proposals are expected to be a starting point for talks with the EU's 27 member states.

But some EU governments have consistently urged the Commission to scale down its spending plans.

However, Commission officials are expected to argue the budget increase is needed to meet prior EU commitments.

The BBC's Nigel Cassidy says the Commission has to pay for a string of long-term projects, such as infrastructure and research programmes, that it is legally obliged to cover.

The Commission will risk accusations of double standards as it has been leading calls for budget discipline throughout Europe, our correspondent adds.

The British government is thought to be among those who would oppose any increase.

"The UK has been consistent that at a time when member states are tightening their belts, the EU must show budgetary restraint," a British government spokesman in Brussels told Reuters news agency.

Poorer member states are meanwhile expected to lobby to keep the regional spending they say is essential for growth and creating jobs.

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Immigration

Work in Germany – a nightmare for Bulgarians


25 April 2012
Frankfurter Allgemeine Zeitung Frankfurt Comment11




Ajubel


With the promise of jobs and income, more and more Bulgarians are being lured to Germany. There, however, they run into race-to-the-bottom wages and illegal accommodation. Frankfurt has become the centre of the so-called “Bulgarian industry”.

Katharina Iskandar

Perhaps it was the car. It had been there for weeks, a grey model from twenty years back with rust spots on the hood, looking somewhat lost among the neatly parked limousines, and the only one with a Bulgarian license plate in the whole neighbourhood. And there were the signboards on the mailbox with ever changing names, which eventually roused suspicion among the residents of the street.

The two-family house stands in the leafy middle-class suburb of Sachsenhausen in the south of Frankfurt. The front door of the house stands open. Stale heated air smelling of mildew wafts through the door of the flat and into the stairwell. Inside the musty flat, the Petrova family (their name has been changed) sits on mattresses in front of a small table in a room where the first thing that leaps to the eye is a huge mould stain in the corner.

About three weeks ago the family packed up and left their house in a village near the Bulgarian city of Varna. Father, mother and the three children got in their car and drove through almost the whole night. A man had called them up and said he had work and a place to live for them if they could make it to Frankfurt.

On arriving, after nearly twenty hours in the car, they had just to pick up the key. Since then, every month a kind of caretaker comes to the flat and collects the €600 in rent in cash. Sometimes, the Petrovas say, another man they know as “Micki” comes and takes the father and son to work on a construction site. With no contract. With no insurance. With no prospects of work the next day.

Most Bulgarians are not willing to testify

The Petrovas are one of thousands of Bulgarian families lured to Germany to work. Agents, especially in the construction industry, are looking specifically for young men from eastern Europe, either through the internet or through acquaintances. The middlemen usually work for subcontractors. They set the workers up as (falsified) “self-employed”, then offer them around as cheap labour in the construction or cleaning industries, paying them just a fraction of what they would normally be entitled to. Germans call it “wage dumping”.

Although the practice is found in all big German cities, Frankfurt is now considered the capital of the “Bulgarian industry”, which is squeezing out those companies that do insure their workers and pay their taxes. The enlargement of the European Union made it very easy to abuse the system, and on such a scale that, according to customs investigators, it’s hard to get an overview of it. So advanced has the “Bulgarian industry” become that even the customs officials find it difficult to detect the bogus “self-employed” papers. They know they are almost all falsified, but lack the personnel and the resources to prove it.

One case of abuse was revealed in Frankfurt by the Migrant Counselling Centre of the German Trade Union Confederation when Ali S. and D. Hyusein, two Bulgarians of Turkish descent, stepped forward. They had worked for six weeks at a construction site, they reported, and part of their salary was still being withheld. From early March to mid-April, each of them had worked 349.5 hours. They should have received €4,526.03 gross, but were paid only €1,200.

Only rarely, though, are such cases ever fought in the Labour Court or even pursued by police and prosecutors. Most Bulgarians are not willing to testify against those who give them work – out of fear.

How advanced the market in Bulgarian workers has become has also been noted by the municipal housing authorities. Several years ago the Frankfurt Housing Agency observed that landlords were renting more and more rooms in flats to Romanians and Bulgarians. The often substandard dwellings were rented out at lucrative rates, exploiting the vulnerable south-eastern Europeans in need.

The prosecution in Frankfurt is currently investigating whether this doesn’t also involve larger-scale fraud. At the end of January about a hundred police officers visited an entire block of flats in a raid that went on until dawn. In the end, suspicions were confirmed that a 48-year-old German-Turk had collected nearly a million euros over the years from illegally housing Bulgarian workers in 39 apartments where social welfare claimants were supposed to be living.

Intermediaries and behind-the-scenes organisers

For a fee, those claimants had been persuaded by Duran Ö. to move out and stay with friends. Their flats, paid for by the Job Centre, Duran Ö. then rented out to the workers from south-eastern Europe for €210 monthly each. Into the two-bedroom apartments he packed up to eight and, in some cases, 14 tenants.

Duran Ö. acquired business registration forms for the Bulgarians that let them work as pseudo-self-employed workers in the construction or cleaning industries. In one of the apartments Duran Ö. set up an office, from which he controlled his lucrative enterprise. Because of their poor knowledge of German, the Bulgarians also paid him for other services.

Right afterwards the authorities also began to look into the Petrova family. So far, they have no specific information on intermediaries and behind-the-scenes organisers. The Petrovas are staying quiet about the people who gave them work. “We’re living well here,” says the eldest son. “We do everything. Everything that comes along.” The municipal regulatory agency and the housing agency will be inspecting the dwelling soon.

If the Petrovas are in luck, by order of the city the landlord will have to remove the mildew stain in the corner of the room where the Petrovas sleep. Outside the door stand the muddy work boots of the father and son. Tomorrow morning they’ll be heading back to the building site.

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Candela Foto Art / Kreuziger / PE Sanchez


Now that the Dutch Prime government has fallen, with elections likely for 12 September, political commentator Les Oomkes argues that Wilders’ railing against Europe might prove fortuitous: leading to Europe as the central theme of the election campaign and a shift in the political balance of power.

Lex Oomkes

Should the forthcoming elections in the Netherlands have the effect of reducing both the fragmentation of political parties and the electorate’s inclination towards the left and right-wing extremities, then the current crisis may ultimately prove a blessing in disguise.

However, one would have to be a born optimist to consider this a genuine possibility. Unfortunately, the latest indications do not bode well. There is currently nothing to suggest that there will be prospects for the formation of a politically sound coalition with a logical composition following the elections. Quite the contrary, fragmentation and further instability would appear to be on the cards.

Since 2002, just a decade ago, the Netherlands has had a string of five governments. And the political middle ground has all but been abandoned during this period. In fact, the previously dominant three major parties, PvdA (Labour), CDA (Christian Democrat) and VVD (Liberal) may perhaps even fail to jointly secure a majority in the Lower House.

Europe as the root of all evil

In the meantime, however, the odd ray of hope has also been spotted. For instance, in a statement issued on Saturday with a view to explaining his rather curious behaviour during the recent Catshuis negotiations, Mr Geert Wilders claimed that the EU is the root of all evil. He appears to be suggesting that Brussels had put pressure on the minority government to withdraw to the Catshuis in order to negotiate further extensive cost-cutting measures.

While Mr Wilders’ statement was the most obvious nonsense, this by no means suggests that it is insignificant. His PVV (Party for Freedom) has declared the EU the ‘ogre’, against which it eagerly looks forward to campaigning during the next few months.

Based on the philosophy of PVV, this would appear an entirely logical strategy to pursue. The party’s highly peculiar blend of principles – extremely right-wing in its approach to social issues, yet leftist in its defence of the crumbling vestiges of the Dutch welfare state – would appear to have singled out the main threat: Brussels.

It is Brussels, for instance, which insists that we abide by agreements on the freedom of movement of employees. And PVV views these employees as a threat to the purely Dutch nature of society in the Netherlands, and therefore also a threat to the welfare state.

Mr Wilders appears to have come to the conclusion that his electorate might be more readily mobilised to combat the EU, rather than the envisaged Islamisation of the Netherlands.

For some (strange) reason, the future of the Netherlands in Europe has not been the central theme of an election n campaign since the referendum. Mr Wilders now appears determined to force the issue, however, and hopefully he will succeed.

How to proceed with Europe?

After all, the division of political strengths on issues relating to Europe is different to that on classic themes, such as the (national) economy. The classic contrast of left and right-wing views has more or less faded into oblivion.

Other controversies arise when the key issue is what we want from “Europe”. And it is high time that political emphasis were placed on this issue. Furthermore, the topic offers opportunities for an entirely different balance of political power.

Mr Wilders naturally envisages opportunities for himself. There is no reason why the other parties should not take up the gauntlet, however, to show that the only way forward for the Netherlands lies in the area of further increased European cooperation. This would also appear to be an excellent opportunity for those at the centre of the political spectrum to regain their relevance, thus promoting the governability of the nation.

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26 April 2012

The eurozone crisis as soap operaBy Colm O'Regan

Comedian and writer


The plot of the eurozone crisis thickened this week, as markets were rocked by France's presidential election, more bad figures from Spain, and signs that even the Dutch may say No to austerity. If this was a drama, what kind would it be?

Steve: We're going to be alright aren't we Susie?

Susie: What Steve? Uh Yeh. Of course…

Steve: And when this baby comes along, we're going to be a proper family.

Susie: Eh Yeh…A proper family. Look, Steve I think I'm going to have a lie-down, OK?

Steve: Yeah of course. You have to keep you strength up. You know what Susie, for the first time in years I think everything's gonna work out for us.

Continue reading the main story
“
Start Quote
Over the past three years, the eurozone has embodied the very best in soap opera writing”
End Quote
The camera focuses in on Susie's face. It's clear from her expression that everything is not gonna work out. Whatever happiness Steve's expecting is a sham. The baby is not his. He is headed for bitter disappointment.

The camera lingers for a moment and then the first bars of the signature tune play.

The Steve and Susie storyline is not lifted from any actual soap opera but it will be familiar to a lot of you. The maxim that the darkest hour is just before the dawn doesn't apply in Soapland. Rather it is twisted around to be: "The happier you are now, the worse it will be next week." Followed by "That's not the dawn! I smell smoke. Quick! Don Fisher's house is on fire."

Over the past three years, the eurozone has embodied the very best in soap opera writing. Every time the leaders announce a breakthrough, you just know it's merely a plot device for further chicanery next week.

ECB: We're going to be alright darling ain't we darling?

Spain: What?... Uh yeh.

ECB: And when this one-trillion Long-term Refinancing Operation comes along, we're going to be a proper family.

Members of the cast

Clockwise from top right: German Chancellor Angela Merkel, ECB chief Mario Draghi, Greek ex-finance minister Evangelos Venizelos and Italy's Silvio Berlusconi
The camera lingers on Spain's face and we think: "You're deluding yourself there ECB. Spain has a secret that's going to make next week very interesting."

The audience's interest never wanes because each eurozone country seems to take turns at the centre of the plot.

Ireland had a really enthralling storyline a few years ago. The child of an abusive parent who is adopted, is the perfect son for many years and then in adolescence becomes a Flash Harry, riding so high a fall is all but inevitable. After overdosing on houses, he's found sprawled in the kitchen by concerned neighbours, who forced their way in.

Things have been reasonably quiet since, but the headlines in the plot-spoiling glossy TV magazines are promising a "surprise in store" in May when "Ireland Has A Referendum And Gets A Nasty Shock".

Continue reading the main story
“
Start Quote
As in all soap operas, one character will play the role of the sometimes curmudgeonly moral centre - they don't do drugs, have affairs or swindle anyone”
End Quote
Greece is the almost archetypal villain, who returns every six months when audience figures need a boost and the writers can't be bothered to introduce a new, more layered plot. Greece then turns up at a family get-together. "Remember me? Thought you could get rid of me didn't you? Well I'm going nowhere. As you always say, 'We're family.'"

Comic relief was provided for a time by Italy, a lecherous grandfather uttering inappropriate comments from his favourite chair, but the actor playing Italy had to leave and it's just not quite the same.

This week was a bumper week in the soap-europera, with no fewer than three active story lines.

You knew Spain was going to feature because of the way they set it up a few months ago, and it was all over TV Now earlier in the week. France was also expected, but Holland? That felt a little out of place. It's like that moment as a viewer when you watch with increasing incredulity and think: "Don't tell me HE's having an affair now as well."

As in all soap operas, one character will play the role of the sometimes curmudgeonly moral centre - the Grace Sullivan, Annie Sugden, Alf Stewart or Miss Ellie. They don't do drugs, have affairs or swindle anyone. They lecture the other characters on their weaknesses or failings, while maintaining a stoical attitude themselves.

Apart from the occasional psychotic episode where they imagine they see their dead spouse they are a steadying influence all through.

The Alf Stewart of Europe is, of course, Germany. The longest-running cast member of Home and Away, he is conservative, permanently exasperated by the failings of others, and beset on all sides by the poor choices of "flaming gullas and mongrels" (as he would put it). But he needs his dysfunctional extended soap family because he is a businessman and a businessman needs customers.

Angela Merkel must feel the same exasperation but she cannot break the ties. The Surf Club of Europe still needs to sell milkshakes.

The main question for Eurozone fans now is how long can it go on. Every week there seems to be a cliffhanger. Surely the cumulative effect of so much drama must be so debilitating for the cast, it cannot continue indefinitely. So the writers may need to cross the soap opera rubicon: The Catastrophe.

Like the train crash on Coronation Street, a helicopter crash on ER or a collapsing roof in Neighbours, a game-changing plot twist is called for and some characters may need to be written out.

They'll need to do something. The ratings are plummeting.

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Eurozone

How do you say “basta” in German?


26 April 2012
El País Madrid Comment





Steve Bell


Notwithstanding its social and political consequences, the Bundesbank and Angela Merkel's government are still advocating the austerity, which has been in force in Europe for the last two years. It is high time we stopped the damage, argues Spanish political analyst José Ignacio Torreblanca.

José Ignacio Torreblanca

According to Jens Weidmann, the young economist who became President of the Bundesbank after a meteoric political career in the shadow of Angela Merkel and is surely the most influential member of the Governing Council of the European Central Bank (ECB), some types of interest at a rate of six percent are not "the end of the world" and therefore are not sufficient grounds for the ECB to mobilise to relieve the pressure on Spain in the debt markets. One is curious to know just how far Weidmann is aware that Spain and Germany are in a monetary union and also the extent to which he shares in the concern that such spreads in the interest rates call into question the ultimate meaning and existence of that union.

We might suppose that for Weidmann, whose mandate includes neither growth nor employment, merely price stability, it would be an inflation rate of six percent that would spell out the end of the world for sure. Fortunately, the President of the Bundesbank can sleep easy, as the average inflation in the eurozone is 2.7 percent. In Spain, moreover, for greater peace of mind for Weidmann, inflation is at 1.8 percent and in Greece at 1.4 percent, which is lower even than in Germany (2.3 percent).

The value of that statement by Weidman, so sincere and yet so clumsy, is that it explains with total clarity what is happening to Europe, and very directly and particularly to Spain.

German has yet to learn the lessons of Weimar

The lack of insight and sensitivity that is bogging us down dates back to the blindness of the French elites at the end of World War I, who stifled any chance of recovery and economic growth in Germany by imposing punitive war reparations. Some of the reparations, while fair, since Germany had started the war, gave way to a mixture of populism and irredentism that lit the fuses of Nazism and World War II. It’s still an irony that Germany, which has admirably overcome Nazism, could not do the same with the inflation that brought down the Weimar Republic. Undoubtedly, if the euro ends up collapsing or if the European Union itself falls apart, historians will reach for phrases like this to explain what went wrong in Europe and to describe the errors that were made.

With its blind spots and with a similar attitude (do the right thing though the world perish), the German government is not only endangering the European Union but is also encouraging the emergence of anti-German sentiment. One example: although in Spain the image of Germany as a country is still good, the most recent poll by the Real Instituto Elcano shows that three out of four Spaniards (73 percent) believe that Germany does not take Spain’s interests into account, and even more unanimously, 87 percent believe that "the country in command in Europe is Germany". Note: not the country that commands "more", but the country that commands, full stop.

France both weak and servile

Has the time come to say "enough" to Berlin? Yes, no doubt. How? By coordinating the national reform agenda with the European growth agenda – from Brussels. This requires the restoration of political and institutional balance in Europe, which has been blown sky high. On the one hand, the European Commission, which should speak for all the states, has been taken out of play as a political actor. At the beginning of his second and final term, the President of the Commission, Barroso, made out as if he would turn into a true leader. But when the going got tough he simply dropped the sustainable growth agenda that he had been pushing for years.

On the other hand, France, which has always served as a counterbalance to Germany, is for now in the hands of someone like Sarkozy, who compensates for the failure of his reform agenda at home with the unworthy and typical practice of the servility of the weak towards his betters (Germany) and the arrogance of the strong towards his inferiors (Spain). That France, unrecognisable, has become a problem for the future of Europe as serious as the rigidity that dominates the Bundesbank. Hollande may turn out to be a salutary shock: to France, to the Commission, and to Germany itself.

Translated from the Spanish by Anton Baer

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Debate

Let the Germans clean up Europe


26 April 2012
De Volkskrant Amsterdam Comment15



Walenta


Instead of dreaming about a federal union which would be at the mercy of countries that are democratic and economic underperformers, a Dutch political scientist argues that we would do better to reinforce the role of more efficiently functioning states and allow them to take care of business.

Alfred Pijpers

Now that the financial crisis has been provisionally banished from the horizon, we have been treated to a number of prudently voiced ideas about the future of the European Union. This is particularly the case in Germany where the debate appears to be well underway. Angela Merkel wants to replace the Lisbon treaty and implement “major structural reforms”, while Minister for Foreign Affairs, Guido Westerwelle, has announced that he is in favour of a new “European constitution” with reinforced integration.

At the same time, in the columns of De Volkskrant, MEP Sophie in't Veld [a member of the Dutch social-liberal party, Democrats 66] has argued for a “powerful political union”, an end to vetoes, and a European Commission president who is elected by direct suffrage.

All of these well-known recipes have been once again been whipped out of the old federalist suggestion box, at a time when it should really be stowed away in an attic somewhere. In the course of the financial crisis, Germany has effectively shown that that its economic and political might can be turned to Europe’s advantage. And it is for this reason that several of the principles which provided the basis for postwar European integration are largely outmoded.

The first of these is the idea that European integration is necessary to control Germany. This consideration was certainly legitimate in the immediate aftermath of the war; but we should also note that the control of Germany via supranational European institutions was primarily an expression of French economic interests.

Within the common market, the European treaties served to protect French agriculture and industry from the dynamism of German exports. For decades, in a bid to atone for its sins and under moral pressure from France, the Federal Republic consented to act as Europe’s purser.

Weaker member states

In the course of the financial crisis, it has been increasingly obvious that European leaders of national governments are the main decision makers in Brussels. In the European hierarchy, the European Council is Europe’s board of management, and Herman Van Rompuy is its secretary, while Commission President José Manuel Barroso is his assistant.

With this in mind, the suggestion that we should a elect a Commission President through universal suffrage, which has been put forward by the neo-federalists in Berlin and Strasbourg, is quite odd. It would be much more logical to continue to reinforce the European Council, while at the same time obtaining guarantees for smaller countries.

A “political union” may appear attractive, but it would inevitably include weaker member states, which have not distinguished themselves in the fight against fraud and corruption, or in the bid for greater pluralism, openness and press freedom. France and Italy, for example, the Eurozone’s major economies after Germany, have been described as “flawed democracies” rather than “full democracies” by the American NGO Freedom House.

In view of the conflict of interest between government and media in the country [under the rule of Berlusconi], Italy was rated as “partially free”, a category that included two other EU members Bulgaria and Romania, along with such countries as Indonesia and Bangladesh.

The ratings attributed to the Netherlands with regard to these criteria are significantly higher than the European average. According to Freedom House, we have the most effective parliamentary democracy in the 17-country Eurozone (the evaluation was conducted in 2010 and thus takes into account populist Geert Wilders’ support for the government). So it would not be tempting for the Netherlands to share power in Brussels with countries which are barely efficient in terms of democracy and the exercise of power.

Fewer federal elements

When the agenda is restricted to trade and the composition of chocolate bars, these differences do not amount to an insurmountable problem. But that would certainly not be the case if there was a fully fledged political union in which member states with democracies that leave much to be desired were in the majority and could thus impose their decisions on taxes, the budget and pensions.

And that is not to mention how such a situation might impact legislation on euthanasia, and other issues that are close to our hearts in the Netherlands, which could be easily be blocked by veto. In Berlin, there is a growing realisation that Germany can and should take on the role of European leader. Ulrike Guérot, of the European Council on Foreign Relations think tank has spoken of a German awakening and even of a German “catharsis”.

However, she shied away from drawing the logical conclusion: such a leadership would imply a new organisation for European cooperation, which would have to include fewer federal elements so as to allow greater space for the best qualified European states to combine their strengths in an open global economy.

We should not allow the political structuring of future cooperation to be sabotaged by allusions to Germany’s past during the war. Berlin and Strasbourg will have to wake up to this reality.

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Europe may add an annex to its budget treaty spelling out how countries can boost growth as the bloc shifts its emphasis on tackling the debt crisis, a German government official said.

Steps to raise competitiveness along with structural reforms are likely to feature in the prescriptions for growth, with a target date for completion by the June 18-19 Group of 20 leaders’ summit in Mexico, the official said on condition of anonymity because the discussions are private and not complete.











European Central Bank President Mario Draghi gestures during a meeting where he is to brief the European Parliament's economic affairs committee and its chief Sharon Bowles on the eurozone debt crisis on April 25, 2012 at the EU Headquarters in Brussels. Photographer: Georges Gobet/AFP/Getty Images
.
The change in tack was signaled yesterday by European Central Bank President Mario Draghi, whose call for a “growth compact” was quickly endorsed by German Chancellor Angela Merkel. Francois Hollande, the French Socialist presidential election front-runner, welcomed Draghi’s remarks as evidence of the need for treaty changes to boost growth, while questioning the means of getting there.

“It’s not the same idea of growth,” Hollande said in an interview on France Info radio today. Draghi is “adding even stronger competition, liberalization and privatization.”

That contrasted with Merkel’s reaction. Europe needs growth “in the way that Mario Draghi, the president of the European Central Bank, said it today, that is in the form of structural reforms,” the chancellor told a conference of her Christian Democratic bloc in Berlin yesterday.

Competitiveness Pact

“The ever politically adept Merkel recognizes the push toward a growth pact but will not allow Germany to be out- maneuvered,” Marc Chandler, chief currency strategist at Brown Brothers Harriman & Co. in New York, said in a note to investors. “While the growth pact may be on the agenda, she will aim to drive its shape.”

Euro leaders have struggled to find a common way to promote economic growth even as they have demanded budget cuts to satisfy German priorities and settle markets. At a March 2011 summit, they endorsed Merkel’s so-called competitiveness pact that set targets on issues including cutting labor costs and raising the retirement age.

Draghi used a speech in Brussels yesterday to urge European leaders to widen their crisis response beyond cutting debt and deficits, the goal of the German-led fiscal pact signed by euro- area leaders in March.

‘Too Much Smoke’

“We’ve had a fiscal compact,” Draghi said. “What is most present in my mind now is to have a growth compact.”

That may mean an announcement on European Investment Bank financing of region-wide infrastructure projects within a month, said Douglas Borthwick, managing director and head of foreign- exchange trading at Faros Trading LLC in Stamford, Connecticut.

“There is absolutely too much smoke here for there to be no fire,” Borthwick said in an e-mail. “The new European mantra is fiscal discipline and growth.”

Germany, Europe’s biggest economy and the largest contributor to bailouts for Greece, Portugal and Ireland, is facing demands from across the region to ease its emphasis on austerity as a $1 trillion firewall and unlimited ECB loans fail to stop the crisis from threatening Spain and Italy.

‘Main Risk’

Draghi’s comment “illustrates the depth of concern felt by the ECB about the weak outlook for the euro area economy,” said Julian Callow, chief European economist at Barclays Capital in London. “It perhaps could be a closet call for Germany to provide greater fiscal stimulus given its low budget deficit.”

Hollande called the remarks helpful and said France won’t ratify the fiscal pact in its current form if he is elected.

“The main risk at this time is that the European economy remains in a recession because not enough credit is provided to companies,” he told a news conference in Paris. For all the differences on how to spur growth, “he does say that we cannot just keep on with austerity, with sanctions, and he wants to add a growth pact to the budget pact. I have never stopped asking for that.”

The growth pact may take the form of an annex to the fiscal compact in which country-specific recommendations for growth- boosting measures would be made, the German official said. This does not include the option of deficit-financed growth packages, the official said, adding that the French government may see that differently after the election.

Draghi Remarks

“I see how, for example, the Socialists in France react to that, with triumphant cheers, because they interpret growth as debt-financed stimulus programs,” Christian Democrat budget spokesman Norbert Barthle said today in a speech in the lower house of parliament in Berlin, referring to Draghi’s remarks. “We understand that to mean a strengthening of competitiveness and that’s a fundamental difference.”

Setting his sights beyond France’s runoff vote on May 6 that polls suggest he will win, Hollande said yesterday that he’ll be “firm and friendly” with Merkel. “We’ll have to open the discussion. There’s no need to create a conflict, even if we’re not here to hide our divergences.”

The European Union’s head office asked yesterday for a growth-boosting 6.8 percent budget increase to 138 billion euros ($182 billion) for 2013, challenging contributor countries from Britain to Germany to put up more money at a time of austerity and recession.

Merkel, who spent months lobbying fellow leaders for the fiscal pact signed on March 2, said budget rigor isn’t the only solution to the crisis. “We need growth in the form of sustainable initiatives, not simply economic stimulus programs that just increase government debt,” she said in Berlin.

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27 April 2012 Last updated at 05:00
Greece should not have joined the euro, a former head of the German central bank, who was central to eurozone policymaking at the time, has said.

But Ernst Welteke, who was Bundesbank president from 1999-2004, told the BBC that none of the eurozone's problems would be solved if Greece left.

He added there should be greater transfer of wealth from richer parts of the eurozone to poorer parts.

He said he was confident measures were in place to ensure the euro's survival.

"The euro is not in as big a danger as is often recorded," Mr Welteke told Business Daily on the BBC's World Service.

"The euro has been stable [for] 10 years, inside and outside the European Monetary Union (EMU)."

Strong union

He said that, in hindsight, it was clear that Greece was not ready for the euro.

"We can say that Greece should not have joined the EMU, but that doesn't help."

He said Greece only accounts for 3% of the economic output of the eurozone, so "if Greece leaves the EMU then monetary union will still work."

"But I don't think Greece leaving will solve any problems."

The country's new currency would depreciate, meaning Greece would struggle to repay its euro-denominated debts, he said. This would cause big problems for Europe's banks that lent Greece the money.

Growth needed

Mr Welteke said the current problems facing the eurozone were due to a debt crisis in southern Europe resulting from the financial crisis.

He also highlighted deeper problems, such as trading imbalances, with some countries running current account surpluses and others running deficits.

"Austerity alone is not the solution... without more growth the problems cannot be solved," Mr Welteke said.

"There have to be structural reforms in all countries, not just in the labour market but in tax administration [for example].

"In the end... monetary union is a solidarity union; there is no question [there should be a greater transfer of wealth from Germany to struggling countries].

It was the job of politicians, not the European Central Bank (ECB), to resolve these problems, he said.

The ECB should go back to focusing on managing inflation after its recent moves to provide cheap loans to boost liquidity in the banking sector.

Bankers to blame

But Mr Welteke, who resigned from the Bundesbank in 2004 in a row over a luxury hotel bill, said it was important to remember who caused the crisis in the first place.

"The problems occurred after the financial crisis and the financial crisis was not the result of undisciplined politicians," he said.

"It was the result of people living, working and earning a lot of money in the financial centres.

"For 10 years, the financial markets did not differ between lending money to Germany or lending money to Spain, Portugal and Greece.

"If there is a creditor and a debtor, both are responsible for the credit."
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The ratings agency Standard & Poor's has cut Spain's credit rating and warned of risks to come.

S&P cut Spain two notches to BBB+, warning that the country could have to take on more debt to support its banking sector.

It has also placed Spain on negative outlook, meaning there is a risk of further downgrades to come.

S&P predicts the Spanish economy will shrink by 1.5% this year, having previously forecast 0.3% growth.

In 2013 it expects the economy to contract 0.5%, having previously predicted 1% growth.

S&P also gave a damning assessment of the situation in the rest of Europe, saying: "In our view, the strategy to manage the European sovereign debt crisis continues to lack effectiveness."

"We think credit conditions, and hence the economic outlook for Spain, could now deteriorate further than we anticipated earlier this year unless offsetting eurozone policy measures are implemented to support investor confidence and stabilize capital flows with the rest of the world."

The agency suggested such measures could include a pooling of resources and obligations between eurozone countries and policies to harmonise wages across the currency bloc.

'Unemployment to rise'

But there were some positive comments about the measures taken by the government.

"Despite the unfavorable economic conditions, we believe that the new government has been front-loading and implementing a comprehensive set of structural reforms, which should support economic growth over the longer term," S&P said.

"In particular, authorities have implemented a comprehensive reform of the Spanish labour market, which we believe could significantly reduce many of the existing structural rigidities and improve the flexibility in wage setting."

But S&P concludes that the labour market reforms will not create employment in the near term and predicts that "the already high unemployment rate, especially among the young, will likely worsen until a sustainable recovery sets in".

Spain has Europe's highest rate of unemployment at 23%, with more than half of young people out of work.

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