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Spain’s Unemployment Reaches Record as Bailout Looms


By Angeline Benoit - Oct 26, 2012 10:08 AM GMT+0100



Spanish unemployment climbed to a fresh record in the third quarter as a deepening recession left one in four workers jobless, adding pressure on Prime MinisterMariano Rajoy to seek a second European bailout.

Unemployment, the second highest in the European Union after Greece, rose to 25.02 percent from 24.6 percent in the previous quarter, the National Statistics Institute said inMadrid today. That is the highest since at least 1976, the year after dictator Francisco Franco’s death led Spain to democracy.





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Spain’s Unemployment Breaches 25%, Adding to Bailout Pressure




Angel Navarrete/Bloomberg

Jobseekers stand and wait for an employment office to open in Madrid.

Jobseekers stand and wait for an employment office to open in Madrid. Photographer: Angel Navarrete/Bloomberg




7:09
Oct. 26 (Bloomberg) -- Fitch Ratings Director Douglas Renwick discusses the economic outlook for Spain, Italy and Belgium. He speaks with Francine Lacqua on Bloomberg Television's "On the Move." (Source: Bloomberg)

Nearly three months after the European Central Bank offered bond buys to lower its borrowing costs, Spain is still playing for time. Rajoy is ignoring pressure to seek more European aid even as the country’s recession worsens and banks report decreasing third-quarter earnings following an increase in provisions for souring real-estate assets. Spain’s Ibex 35 stock index has dropped 10 percent this year, the only decline among major European equity markets.

“The situation is serious,” said Ricardo Santos, an economist at BNP Paribas SA in London. “There is still room for a deterioration in unemployment. Activity is weak and the government will reduce jobs as there are strict targets to adjust the number of public-sector temporary workers, especially in health and education.”

Stocks Down


The Stoxx Europe 600 Index dropped 0.6 percent at 10:56 a.m. in Paris, with the Ibex down as much as 1.5 percent. The euro traded at $1.2937, little changed on the day.

Spain’s government bonds declined, with 10-year yields heading for their biggest weekly increase since August. The yield pared its gains after today’s unemployment data before climbing as much as seven basis points, or 0.07 percentage point, to 5.69 percent.

The yield on Spain’s 10-year benchmark bond has dropped more than 200 basis points from a July 25 euro-era high of 7.75 percent since the ECB announced its bond plan. The spread with similar German maturities was 412 basis points today, compared with a 650 basis-point record in July.

Still, ECB Executive Board member Joerg Asmussen said in a speech in Kronberg, Germany, today that tapping Europe’s bailout fund won’t automatically trigger the bond program.

A government’s application for aid is “a necessary, but not a sufficient condition for us to become active,” he said.“The ECB council independently decides in each case to what extent and for how long an intervention on monetary policy grounds is necessary.”

Spanish Contraction


In line with a 25 percent median forecast in a Bloomberg News survey of 7 economists, Spanish joblessness has nearly tripled since 2007, before a real estate-fueled boom ended. The euro-area average is 11.4 percent, a record high.

The Bank of Spain forecast earlier this week that the euro region’s fourth-largest economy will continue to slump following a fifth straight quarter of contraction in the three months through September.

“Unemployment is one part of a multifaceted problem in Spain,” said Justin Knight, a European rate strategist at UBS AG in London. “Problems are very deep and wide ranging in the banking system and haven’t been sorted out in a timely fashion,” Knight said.

CaixaBank (CABK) SA, Spain’s third-largest lender, said today third-quarter profit dropped 42 percent to 7 million euros ($9 million) from a year ago as it provisioned for real estate losses. Its bad loans ratio climbed to 8.42 percent from 5.58 percent in June. Banco Popular Espanol SA (POP) said profit fell 23 percent to 75.6 million euros in that period.

In the coming days, the government is expected to unveil details about the creation of a bad bank, a condition included in the memorandum of understand Spain signed in July to obtain a 100 billion-euro credit line to recapitalize the sector.

Investors’ Perception


BNP Paribas’s Santos said the government is giving mixed signals about its implementation such as on ownership, the assets to be transferred and their price, as well as haircuts to be imposed on junior bondholders of banks that receive aid.

“Any backtracking would be negative for Spain, it would lead to question the government’s intention to solve problems in the banking sector and in general,” he said.

Economy Minister Luis de Guindos said the improvement in funding conditions shows they depend on investors’ perception of the euro’s future rather than domestic issues.

“That is because the government is doing what it has to do and because we are all acting to dissipate doubts on the euro’s future,” de Guindos told lawmakers in Madrid on Oct. 24.

Japan’s Risks


Elsewhere in the world, governments are also seeking ways to revive their economies. Japan announced 750 billion yen (9.4 billion) of stimulus with some of the extra money coming from tapping discretionary budget funds, the government in Tokyo said today. Economy Minister Seiji Maehara told reporters that the measures would boost gross domestic product by 0.1 percentage point, without specifying over what period.

Japan has the highest debt load among developed nations and an economy at risk of contracting. The government this month downgraded its economic assessment for a third month, the longest streak since the 2009 global recession.

In South Korea, Asia’s fourth-largest economy, GDP rose 1.6 percent in the third quarter from a year earlier, the weakest since 2009, data showed today.

U.S. data due later today may show that the world’s largest economy expanded an annualized 1.8 percent in the third quarter after growing 1.3 percent in the previous three-month period, according to a Bloomberg survey. That would be the first back-to-back readings lower than 2 percent since the U.S. was emerging from the recession in 2009.

‘Temporary Increase’


While Rajoy this week praised the ECB’s proposal as “an important step forward,” he stopped short from applying for aid. After a summit with European leaders in Brussels, Rajoy said on Oct. 19 that he feels no pressure to make a decision and that aid for Spain wasn’t discussed.

Still, Sara Balina, an analyst with Madrid-based consultant firm Analistas Financieros Internacionales that counts public administrations among its clients, said it’s “unlikely” that the government will meet its 2013 forecast.

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Grannies and grandads fighting the crisis



26 October 2012Le Monde Paris

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In Gijón, Asturias, June 2012.

Delaville

Picking up grandchildren from school, donating cash to balance their children’s household budgets, and taking time to demonstrate against the austerity policies advocated by Brussels: Spain’s abuelos have emerged as a pillar of strength in a faltering society.

Sandrine Morel

With her reading glasses swinging around her neck, Pilar Goytre, age 65, races after her two-year-old grandson. She grabs his hand to stop him getting too close to the road, then starts walking again towards the playground on the banks of the Manzanares. Every Friday, this active grandmother, whose greying blond hair is cut boyishly short, picks up Mario from the nursery in Puerta del Angel, a working-class neighbourhood in southwest Madrid. As always, she is one of the many abuelas (grandmothers) who wait outside the gates.

According to a survey conducted by the Ministry for Health and Social Policy, close to half of Spain’s grandparents look after grandchildren on a daily basis, while close to 70% take charge of them during the school holidays. In Spain, grandparents have always played an important role, but now with the crisis, their help is needed more than ever. A study by the Spanish Social and Economic Council (CES), which represents both unions and employers, estimated that 422,600 of Spain’s 17 million households depended on cash from grandparents’ pensions in 2011 – an increase of 21% on the figure for the previous year.

Pilar, who retired in March, travels for 45 minutes on the Madrid metro to look after Mario until her son Miguel and daughter-in-law Virginia come home from work. At age 37, both of them are mileurists (earning only 1,000 euros a month. He works as a travel agent, she as a laboratory quality controller. On such low pay, employing a full-time nanny is out of the question. However, Pilar is not unhappy with the situation. "I’m in love with my grandchildren", she announces, as she offers little Mario a dinosaur shaped biscuit.


In the frontline of demonstrations



In Spain, there are more than 1.7 million households in which no one is earning a wage, and close to 300,000 families have lost their homes since the start of the crisis. So why has the country not exploded? Economists and sociologists both offer the same answer: "the extensive informal economy", which accounts for 20% to 25% of national GDP.

And even more importantly, "family solidarity", which acts as a critical safety net in hard times. The expression understates the role played by grandparents in the current crisis. An essential element in society, they compensate for the inadequacies of the national welfare system: in particular for the lack of places in state-run nurseries and their timetables, which are out of tune with lives of working parents. They are also there to provide accommodation for adult children who have lost their homes, and funds to cover the cost of holidays or necessities when unemployment benefit runs out.

In this context, Spain’s grandparents have been doubly affected by the crisis, first and foremost in their role as citizens who are subject to the government’s austerity policy: pensions were frozen in 2011 and increased by a meager 1% in 2012, far less than the cost of inflation which is close to 3%. They have also been put under strain by contributions for various types of medication that used to be free for seniors. Secondly, seniors have suffered in their role as parents, who struggle to help out when the crisis impacts their children and their families, who look to them for economic and also moral support.

“I am convinced that my children’s generation will not live as well as we do", says Pilar, who is saddened by sliding conditions in her country. Angered by the downturn, she has decided to fight against the crisis "by helping the family and also by protesting in the streets". Like many other abuelos, she is in the frontline of demonstrations against social injustice and cuts in education and health.


“Those who sow outrage will reap revolution”



She is one of the yayoflautas, a term that has been coined for the seniors in the indignados movement, which was born in the spring of 2011. “Yayo” is Castilian for granddad, “flautas” (flutes) refers to “perroflautas” (dog-flutes), an expression invented by the former president of the Madrid region, Esperanza Aguirre, who described the indignados as hippies who played the flute for their dogs.

The yayoflautas, however, do not look like hippies. Distinguished by their grey hair, spectacles and wrinkled faces, thirty of them have turned out in Puerta del Sol square, as they do every Monday at 7 PM, to protest against the policies adopted by Mariano Rajoy’s government. Around his neck, Martos Ruiz-Gimenez, age 74, wears a sign which reads: "Those who sow outrage will reap revolution".

The bright-eyed, round-faced grandfather, who sports a white peaked cap, proudly explains: "My granddaughter wrote it for me." With his small pension of 700 euros, Martos has to support his wife and also one of his granddaughters, Marta, who has resumed her biology studies and prefers to live with her grandparents rather than her parents who are divorced.

Since 2008, Martos has also provided a roof for his son, Marcos, age 44, in the family home which “thankfully” he has finished paying for. An independent craftsman who makes window shutters, a lucrative business during the construction boom which is now in decline, Marcos does not have the funds for a home of his own. "Don’t ask me how we get by. My wife is the one who looks after the accounts, and she doesn’t give me a euro...", affirms the jocular grandfather, before returning to the demonstration.

Translated from the French by Mark McGovern

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Debate
Europe’s future lies in much-maligned South



18 October 2012Financial Times Deutschland Hamburg

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Vasquez

Ever since the euro crisis broke out, the Mediterranean has been portrayed as nothing but a hotbed of problems. That’s a monumental error, writes German political scientist Claus Leggewie, who shows the way towards a new federal Europe oriented towards its southern shores.

Claus Leggewie

“When we dream of human accomplishment, of the pride and joy in being man, our gaze turns to the Mediterranean,” wrote French historian Georges Duby long ago. Well, that era is over. Today, many in the north of Europe would prefer to be rid of the PIGS, as Portugal, Italy, Greece and Spain (Spain) have been mockingly labelled, as soon as possible. In the South, where a similar mood reigns, they want to “cut ties with Brussels.”

The periphery of Europe, from Portugal to Greece and passing through North Africa, is considered a focus of threats almost as worrisome as the Eastern bloc was during the Cold War. Today it is in the South – a cardinal map point that once upon a time had positive associations – where politicians and public opinion perceive the gravest security risks, from Islamist terrorism, the crash of the euro and waves of refugees.

To bring meaning back to the term “Mare Nostrum”, or “Our Sea”, the South should regain its place at the historic heart of Europe – but freed from imperialist attitudes and the desire to exploit that is the hallmark of short-term thinking. And there, in the South, we can build a project of peace and development that will be both contemporary and sustainable.

Four areas of action and competence seem, to me, to take priority, and they can be coordinated with each other. They would start with a “energy union” that would take in the north-west of Europe, the Mediterranean basin and sub-Saharan Africa – a “European Coal and Steel Community” for a new era, which would also help integrate the entire region in the way that the ECSC helped core Europe come together in the 1950s. The energy oligopolies of the North would become as obsolete as the pension regimes in the South.


An alternative development path



For this to happen, the economic division of labour and migration between the North and the South should be revised. For many decades, trade has been dominated by the flow of agricultural commodities and minerals from the South to the North, in return for consumer durables and capital goods with high added value. At the same time, transnational migration streams have carried Southern “immigrant workers” in search of work and refugees in search of protection into the North, where they cross paths with Northerners – tourists, early retirees and businessmen – heading to the South for a little sunshine.

Fair trade, decent work for all and social justice that does not stop at national borders should replace this insidious dispossession of the South, from which, ultimately, very few have benefited. To begin with, it the inhumane refugee policy implemented by Frontex [the European Union Agency that monitors the external borders of the Union] for purposes of deterrence, and to which hundreds of boat people and illegal immigrants fall victim each year, should be overhauled from top to bottom. Northern Europe needs immigrants and should be greeting them with open arms. The Berlin Wall did not fall in 1989 to be rebuilt in the Mediterranean.

The transition to a mass tourism that is economically viable, socially acceptable and that does not despoil the natural environment can finally be made, while oblivious sun-worshipping vacations in a deckchair can be transformed into respectful intercultural exchanges.

European public opinion has so far largely ignored prospects of this kind and has drawn up no scenarios beyond Grexit – the ejection of Greece and the other PIGS states from the eurozone. The caricature that we paint of the Mediterranean basin – a bad learner, hotbed of threats and candidate for expulsion from the Union – is deep-rooted. The North neither desired nor actively supported the “Arab Spring” of 2011. As Islamist governments came to power in Tunisia, Libya and Egypt, the idea was reinforced in fortress Europe, as it was in Israel, that the “Arab Winter” is a threat to our security. Stability still handily trumps freedom.

The areas mentioned above by way of example – the energy union, fair trade, eco-tourism and mutual intercultural learning (others may be contemplated) – can be joined up to give birth to an alternative development path that the North could profit from as well.

This “Herculean project” must be accompanied by the constitutional evolution of the entire EU. The “problem countries” would lose some of their national sovereignty, but they would not be alone: Germany will also in the future be just one province of a “United Europe”. Germany can no longer, with or without the complicity of France, enjoy hegemony over the Union.


A political alternative to Chinese imperialism



Such contemplations would no doubt be hard to swallow in Paris and Berlin, as in London and Warsaw, were the nation states and their popular sovereignty to be weakened without creating a new kind of space for them at the same time in a flexible and original form of federalism and subsidiarity. The United Europe must be built of its strong core countries and vital peripheries, bound to one another via subregional federal cooperation.

The Baltic Union – an informal grouping of the Baltic States and Scandinavia, Poland and Germany – the Alps-Adria-Union (joining Austria, Italy, and Slovenia), the union of the Balkans, and even the privileged partnership between the EU and Russia and Turkey are the beginnings of such regional groupings – like the Mediterranean Union, which, recast, can serve as a model for a federal and trans-boundary order within Europe and even beyond the borders of the current European Union.

Today, the “Europe of regions”, till now an expression of the linguistic and cultural diversity of the continent and the defence of the rights of ethnic minorities in the various nation-states, must leave behind its provincialism and take the form of a loosely bound association for “cross-border cooperation” which, alongside the parliaments and civil society organisations, will be able to stand up to the “super-state” rooted in Brussels and confer democratic legitimacy on supranational decisions.

Only on these new roads opening up in the tumult of the crisis can there emerge a diverse European society and public opinion, a European citizenship worthy of the name, and supranational democracy. Only by taking these new roads can Europe once more be a player on the international scene. A Europe that offers a political alternative to Chinese imperialism in the commodity trade, to the ideological self-destruction of superpowers in decline – the United States and Russia – to the disastrous domination of out-of-control global financiers, and to the growing threat of political violence exported from failed states.

Translated from the German by Anton Baer

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Wednesday, July 25, 2012



Feldstein: A Rapid Fall in the Euro can Save Spain




Martin Feldstein calls for a fall in the value of the euro:

A rapid fall in the euro can save Spain, by Martin Feldstein, Commentary, FT: The possible breakup of the eurozone is now openly discussed... The declining value of the euro holds the key to the eurozone’s survival. ...

A lower value of the euro would reduce the prices of eurozone exports and raise the cost of imports, reducing or eliminating the current account deficits of the peripheral European countries... The weaker euro would also boost Germany’s net exports, raise German wages and prices and reduce the trade imbalance within the eurozone.

The increase in peripheral country net exports would also raise their gross domestic product and so reverse their recessions that were caused by higher taxes and cuts in government spending. That would make it politically easier to achieve the needed fiscal consolidations. And shifting from recession to growth would raise business incomes and employment, reducing the volume of bad loans and mortgage defaults now hurting the banks. ...

The continuing decline of the euro reflects the market’s perception that the euro must fall or the eurozone will collapse. ... The decline of the euro can therefore occur without specific action by the European Central Bank. But a further shift by the ECB toward a looser monetary policy would speed the euro’s decline. ...

I believe now, as I did 20 years ago, that imposing a single currency on a heterogeneous group of countries is a mistake. ... But while the creation of the eurozone was an economic mistake, allowing it to dissolve now would be very costly to governments, investors and citizens. ... A new start for the euro is still well worth trying.

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Europe's cash machine to start spewing money


Christmas is no longer cancelled in Dublin, Lisbon and Athens – even Madrid could celebrate

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Chancellor Angela Merkel has established an unassailable position in German public life. Photograph: Thomas Peter/Reuters

In the austerity wracked eurozone, the cash machine is about to start spewing money. Yes, we've heard the promises of ending the crisis before. But this time, something, at least, is happening.

Christmas is no longer cancelled in Dublin, Lisbon and Athens. Even Madrid could celebrate should its procrastinating PM Mariano Rajoy put his hands out to catch some of the falling euro notes.

Not only has the European Central Bank (ECB) said it will supply unlimited loans to replace debts held in private hands, the German chancellor, Angela Merkel, has joined in.

Why has she changed her mind? Several reasons.

1. The economic situation is getting worse. Austerity is driving the countries worst affected by high debt levels further into recession.

2. Social unrest is tearing at the fabric of Portugal and Greece.

3. Regional separatism is gaining ground in Spain.

4. In Ireland, emigration and a prolonged banking crisis is crippling the economy.

5. And Merkel has established an unassailable position in German public life, allowing her to marginalise hardline MPs and the previously influential Guido Westerwelle, her free market, austerity-loving coalition partner and foreign minister.

Merkel has told the Irish, Greeks, Portugese and Spanish, don't worry what austerity does to your economy and the short-term hit to growth. Keep with the programme and you'll get all the money/loans you need.

In the last couple of days Antonis Samaras, the Greek PM, has assured his own MPs that the money promised for November by the country's lending "troika" – the EU, the International Monetary Fund and the ECB – will arrive on time.

It's just as well, given that the Greek finance ministry reported on Monday that its annual deficit is rising again and the overall debt pile jumped. The prospect of restricting the mountain of loans to 120% of GDP by 2020 now looks fanciful.

Enda Kenny has likewise told his parliament that Merkel agrees Ireland is a special case. And consequently, desperately needed funds for the banking sector will find their way from ECB headquarters in Brussels and Frankfurt to Dublin, probably never to return, except in some de-valued form in 50 years.

Spain was nervous about asking for a bailout in case Germany inflicted all manner of extra austerity measures on its weak economy. A recession this year and next is already in prospect so deeper cuts would be particularly unwelcome.

The nerves are still jangling in Madrid, as an effective vote for independence in the Basque country looks like being replicated next month in the more politically significant region of Catalonia.

Yet Rajoy, like the other leaders, has had all the reassurances he needs that he will need only to pursue existing spending cuts to open Brussels' fighting fund.

So can this policy become a platform for lasting prosperity? Unfortunately, the omens are not good.

Merkel is also demanding closer regulatory and fiscal ties as a price for the loans, which is throwing up all kinds of problems. Not least that some aspects of regulation cover the 27 members of the EU, while others only affect the eurozone 17.

Yet even if there is a way to gain the agreement of Britain and Sweden to rules made largely for the eurozone, there is still the issue of social unrest.

It seems implausible that leaders in the peripheral countries can mask their financial problems with more and bigger loans from Brussels and the ECB. With an exchange rate dictated by the German economy, these countries face years struggling to export their way out of recession. Their main problem is that the debts left over from the crisis are too big. Without debt forgiveness in some form, the Merkel sticking plaster will peel away while the wound remains unhealed.

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Angela Merkel's Christian Democrats' support climbs to three year high in latest German opinion poll




German Chancellor Angela Merkel

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By Erik Kirschbaum


Friday October 26 2012

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CHANCELLOR Angela Merkel's conservatives climbed to their highest level in more than three years in a leading opinion poll published on Friday, but the results pointed to no outright winner emerging from next September's election.

The closely watched Politbarometer for ZDF TV indicated neither Merkel's centre-right coalition nor a centre-left alliance would be able to win a majority.



The ZDF poll also showed a 48 to 44 percent majority of Germans now believe Greece should remain in the euro zone, up two points from the previous poll. Earlier polls showed a large majority in favour of Greece leaving the euro zone.



Merkel, who has in general been praised in Germany for her leadership in the euro zone crisis, has campaigned more vocally on behalf of Greece staying in the euro zone in recent weeks.



Merkel's Christian Democrats and the Bavarian sister party, the Christian Social Union (CSU), rose 1 percentage point to 39 percent in the ZDF Politbarometer poll - their highest level since 40 percent in September 2009 just before the last election when they won 33.8 percent.



But support for her Free Democrat (FDP) coalition partners remained stuck at 4 percent, one point short of the 5 percent threshold needed for seats in parliament. The FDP won 14.6 percent in the 2009 election.



The main centre-left opposition Social Democrats (SPD) fell 2 points to 29 percent in the ZDF poll while the Greens, the SPD's preferred coalition partners, rose 1 point to 13 percent. With 42 percent the two parties would fall short of a majority.



The SPD had jumped to six-year highs in early October after naming former Finance Minister Peer Steinbrueck as their candidate to run against Merkel next year. In an October 10 Forsa poll, the SPD climbed to 30 percent.



The Left party were unchanged at 6 percent, the ZDF poll showed. It also found that the Pirates party would win only win 4 percent, down 1 point from the last poll.



The Pirates - self-confessed nerds campaigning on an eclectic platform of free Internet downloads, data protection, free underground rounds and legalising drugs - had surged into double digits earlier this year, reaching as high as 13 percent.



But they have dropped in polls as doubts about their seriousness and ability to come up with constructive solutions grew. The Pirates are also wracked by in-fighting. Two party leaders announced their resignations on Friday: executive board members Julia Schramm and Matthias Schrade.



The poll results would mean only four parties would be in the next parliament with the FDP and Pirates falling short.



That would mean Merkel's CDU/CSU could form another "grand coalition" with the SPD, the same constellation that ruled from 2005 to 2009, or a new coalition with the Greens, which has so far only been tried in one state, Hamburg.



Political analysts, and Greens leaders, believe it would be difficult if not impossible to bridge some of the wide gaps between the conservatives and the pro-environment Greens.



The SPD and Greens could in theory form a coalition with the Left party, but many SPD leaders on the party's centrist wing are opposed to that. Many SPD leaders also are against a repeat of being junior coalition partners in a grand coalition.

- Erik Kirschbaum

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The only reason Merkel wants Greece to stay in the Euro is because she knows the catastrophic affect this would have around the Worlds economies if Greece defaulted.

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28 October 2012 Last updated at 00:05
Spain austerity: Thousands join new budget cuts protest



Thousands of people flocked to Spain's parliament building, chanting anti-austerity slogans

Continue reading the main story

Eurozone crisis

• Eurozone inches towards bank plan
  
• Euro action gives breathing space
  
• Do summits work?
  
• Q&A: Bailout fund
  

Thousands of people have joined fresh protests in the Spanish capital, Madrid, angered by budget cuts and calling on the government to quit.

Demonstrators held a minute's silence with their backs to parliament, then shouted "resign" with fists clenched.

Parliament was guarded by hundreds of police officers.

PM Mariano Rajoy's government plans spending cuts of about 40bn (£32bn) euros for next year as it tries to prevent the need for an EU bailout.

The Spanish government has found itself in financial difficulty since the 2008 global financial crisis caused a big crash in the country's over-heated property market.

New figures this week showed about a quarter of working-age people in Spain were now unemployed.
'Taking everything'
Saturday's protesters came from all over the country and were met by vans of riot police, says the BBC's Pascale Harter in Spain.

Just hours earlier, she says, 300 police had staged their own protest in the capital, setting off fire crackers and blowing police whistles over the same issue - budget cuts.

One banner read: "The police can't take it any more."

Austerity protests also took place in Barcelona, Valencia and other cities.

One protester in Madrid, Sabine Alberdi, told Agence France-Presse: "I came to demonstrate because they're taking everything away, our health, our education, our houses."

Mr Rajoy's programme will require spending cuts of 150bn euros between 2012 and 2014.

Having spent almost a year in office, Mr Rajoy has tried to head off a full-blown EU bailout by introducing tax increases, labour reforms and public sector cuts.

However, output has now contracted for five quarters in a row

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Spain is considered one of the Countries too big to fail, but Rajoy is only doing what the "austerity" measures demanded by Merkel would be. I know it's tough on the Spanish people but the world is now in recession and to borrow more money makes matters worse.

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Greece arrests journalist over 'Lagarde List' banks leak





As police arrived at Mr Vaxevanis' home he said: "I did nothing more than what a journalist is obliged to do"

Continue reading the main story

Greek crisis

• Greeks hear call of soil and sky
  
• Can new government survive?
  
• Greek austerity targets
  
• Mason: Challenges ahead
  

A Greek journalist has been arrested after publishing a list of about 2,000 Greeks who hold accounts with the HSBC bank in Switzerland.

Kostas Vaxevanis has been charged with breach of privacy.

Mr Vaxevanis says the list he published is the same one that was given by the then French finance minister Christine Lagarde to her Greek counterpart.

Some of those named, said to include many prominent Greeks, are suspected of using the accounts for tax evasion.

The list was originally leaked by an HSBC employee and then handed over by Ms Lagarde to Greek authorities two years ago, according the the AFP news agency.

Since then, successive Greek governments have been accused of trying to cover it up.

"Instead of arresting the tax evaders and the ministers who had the list in their hands, they're trying to arrest the truth and freedom of the press," Mr Vaxevanis said.

The "Lagarde List" has angered Greeks hit by austerity measures
He is due in court on Monday to answer the charges after publishing in the names in his Hot Doc magazine.

"The prosecutor issued a warrant for Vaxevanis's arrest because he published a list of names without special permission and violated the law on personal data," a police official told Reuters.

"There is no proof that the persons or companies included in that list have violated the law. There is no evidence that they violated the law on tax evasion or money laundering."

The names on the list are said to include politicians, businessmen and others, sparking fury among ordinary Greeks as they are hit by deep austerity measures, says the BBC's Mark Lowen in Athens.

The issue has reignited claims that tax evasion remains rife in Greece, and that the authorities still are not serious about tackling it, our correspondent adds.

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"There is no proof that the persons or companies included in that list have violated the law. There is no evidence that they violated the law on tax evasion or money laundering."........

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   Germany rattled as taxpayer losses loom in Greece
   

The EU-IMF Troika of inspectors in Greece has called on European bodies and official creditors to write off a chunk of their loans, opening the way for first taxpayer losses since the sovereign debt crisis began.








Riot police clash with protesters during a recent 24-hour nationwide general strike in Athens Photo: AP Photo/Petros Giannakouris






By Ambrose Evans-Pritchard

7:46PM GMT 28 Oct 2012

257 Comments




A draft version of the Troika report obtained by Spiegel magazine said EMU governments and the European Central Bank must accept their share of losses in order to bring Greece’s public debt back to 120pc of GDP by 2020, deemed the sustainable level.


Greece must carry out a further 150 reforms, some involving a drastic loss of sovereignty. Troika payments will be held frozen in a special account under creditor control.


The Troika will have power to raise taxes automatically. There must be new laws to make it easier to fire workers and adjust the minumum wage.


In exchange, Greece should be given two extra years until 2016 to meet budget targets, costing up to €38bn.


German finance minister Wolfgang Schauble said over the weekend that taxpayer "haircuts" were unthinkable. "The question has very little to do with the reality in eurozone member states," he said.

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Eurozone nears Japan-style trap as money and credit contract again


All key measures of the eurozone money supply contracted in September and private credit fell at an accelerating pace, dashing hopes of a quick recovery from recession.








The disappointing data came as the International Monetary Fund said Portugal faces "increasingly difficult" choices and may have to push through another round of austerity cuts. Photo: Bloomberg






By Ambrose Evans-Pritchard, International business editor

8:00PM BST 25 Oct 2012

125 Comments




Data from the European Central Bank show that the tentative rebound in the money supply over the summer may have stalled again in September.


The broad M3 gauge -- watched by experts as an early warning signal for the economy a year or so ahead -- shrank by €30bn and is now down by €143bn since April. This is highly unusual.


The narrow M1 gauge watched for signals of activity six months head has held up better but also contracted in September, falling by €16bn.


"The message is clear," said Lars Christensen from Danske Bank. "The ECB needs to stop obsessing about fiscal issues and do real quantitative easing (QE) if it wants to stop the eurozone going the way of Japan."


Loans to firms and households fell 1.3pc as banks continue to shrink their balance sheet to meet tougher rules. Private bank lending has been falling almost continuously since April.



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The ECB’s €1 trillion lending blitz to banks last Winter helped shore up Spain, Italy, and other sovereign states but has not filtered through into private lending as originally hoped.

"This credit contraction is what happened in Japan in the early 1990 and we have to be careful not get into deflationary spiral," said Prof Richard Werner from Southampton University, a Japan expert. "They to need to launch true QE or an expansion in broad credit creation, and it cant be done easily."

The disappointing ECB data came as the International Monetary Fund said Portugal faces "increasingly difficult" choices and may have to push through another round of austerity cuts.

The IMF approved the next €1.5bn tranche of rescue loans for Portugal but warned that "adjustment fatigue" has become a serious problem. "Risks to the attainment of the programme’s objectives have increased markedly. Social and political resistance to adjustment has heightened," it said.

Portugal’s public debt will reach 124pc of GDP next year. Economists say there are echoes of the debacle in Greece, where austerity eroded the tax base so badly that it became impossible to meet the deficit targets. The country then had to cut deeper, causing a vicious circle.

The eurozone's credit contraction helps explain the shift in rhetoric on Wednesday by the ECB’s president, Mario Draghi, who told the Bundestag that Euroland risks sliding into deflation.

He said the ECB’s plan for unlimited bond purchases -- known as Outright Monetary Transactions (OMTs) -- was necessary to stop a destructive dynamic taking hold in the crisis-stricken economies. "The greater risk to price stability is currently falling prices in some euro-area countries. In this sense, OMTs are not in contradiction to our mandate: in fact, they are essential for ensuring we can continue to achieve it," he said.

The IMF has warned that much of the apparent inflation in southern Europe is a statistical illusion, largely due to rises in VAT and other consumption taxes. The EU institutions do not adjust for this, a fact that has been widely criticised by outside economists.

The Fund warned that the underlying pressures are deflationary, and this process can be hard to reverse once it sets in. Officials in Frankfurt say Mr Draghi has been fully aware of this for a long time but has only recently won over the ECB council’s to his point of view.

"Draghi’s comments are a very big deal. We are clearly heading towards QE," said Marchel Alexandrovich from Jefferies Fixed Income.

There was some good news in the ECB data. While the eurozone core is sliding into a deeper downturn, the periphery is stabilizing and Italy’s monetary figures are springing back to life.

Simon Ward from Henderson Global Investors said the current 270 basis point spread in 10-year yields between Italy and France can no longer be justified, an argument also made by HSBC.

Italy will have a large primary budget surplus next year. Most of the country’s belt-tightening will be out of the way by mid-2013. It has already done much of the hard work that lies ahead in France. "Italy is a much better credit than people realize," said Andrew Roberts from RBS.

Spain is a different story but even there bank deposits have begun to rise again as the Draghi bond plan eliminates the risk of the eurozone break-up in the foreseeable future.

The Bank of Spain said deposits jumped €15bn in September, though the system has still haemorrhaged €153bn over the last year.

Inigo Fernandez de Mesa, the treasury’s secretary-general, said foreign investors have bought 50pc to 80pc of Spain’s debt at the most recent auctions. The country is now 95pc funded through the year, greatly reducing the need for a full rescue before Christmas.

The great unknown is how long the Draghi balm can keep soothing markets. It is unclear whether the ECB really has the political licence to buy Spanish bonds on the scale needed to eliminate all doubts about Spain’s solvency.

Nomura warns that if the ECB repeats the sort of pin-prick bond purchases of past interventions, it will make matters worse. The effect will be to push private investors down the credit ladder, without restoring confidence -- the mistake made with Greece, Ireland, and Portugal before they crashed into full rescues.

The ECB has said it will take equal status -- pari passu -- in Spain and Italy but refuses to do so in Greece right now where the matter is being put to the test, arguing that this would amount to monetary financing of deficits and be illegal. Investors may hang back from Club Med debt until this is nailed down beyond any doubt.

Sovereign debt strategist Nicholas Spiro said Euroland is in a comfortable impasse. "A deceptive calm has descended over eurozone debt markets. The "Draghi effect" is sufficiently potent for some in the markets to claim that the eurozone crisis is nearing its end."

"We believe such claims are premature and belie the risks associated with the bond-buying programme, to say nothing of the deep-rooted political, economic and institutional problems that continue to bedevil the eurozone."

The twin problems of bail-out fatigue in the North and austerity fatigue in the South are slowly getting worse, not better. "We believe the biggest risks in Europe are now in the political arena," he said.

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The Robin Hood doctors of Greece



29 October 2012The New York Times New York

At the Didymóteicho Hospital, in Evros, north-eastern Greece, August 2012.

DR

Successive austerity budgets have left hundreds of thousands of Greece’s unemployed without health cover, or even the means to pay for life saving medicine, a desperate situation which an underground network of doctors is seeking to alleviate.

Liz Alderman

As the head of Greece’s largest oncology department, Dr. Kostas Syrigos thought he had seen everything. But nothing prepared him for Elena, an unemployed woman whose breast cancer had been diagnosed a year before she came to him.By that time, her cancer had grown to the size of an orange and broken through the skin, leaving a wound that she was draining with paper napkins. “When we saw her we were speechless,” said Dr. Syrigos, the chief of oncology at Sotiria General Hospital in central Athens. “Everyone was crying. Things like that are described in textbooks, but you never see them because until now, anybody who got sick in this country could always get help.”

Life in Greece has been turned on its head since the debt crisis took hold. But in few areas has the change been more striking than in health care. Until recently, Greece had a typical European health system, with employers and individuals contributing to a fund that with government assistance financed universal care. People who lost their jobs received health care and unemployment benefits for a year, but were still treated by hospitals if they could not afford to pay even after the benefits expired.

Things changed in July 2011, when Greece signed a supplemental loan agreement with international lenders to ward off financial collapse. Now, as stipulated in the deal, Greeks must pay all costs out of pocket after their benefits expire.

About half of Greece’s 1.2 million long-term unemployed lack health insurance, a number that is expected to rise sharply in a country with an unemployment rate of 25 percent and a moribund economy, said Savas Robolis, director of the Labor Institute of the General Confederation of Greek Workers. A new $17.5 billion austerity package of budget cuts and tax increases, agreed upon Wednesday with Greece’s international lenders, will make matters only worse, most economists say.

The changes are forcing increasing numbers of people to seek help outside the traditional health care system. Elena, for example, was referred to Dr. Syrigos by doctors in an underground movement that has sprung up here to care for the uninsured. “In Greece right now, to be unemployed means death,” said Dr. Syrigos, an imposing man with a stern demeanor that grew soft when discussing the plight of cancer patients.

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Athens refuses to buy file on tax-evaders



19 September 2012
Rzeczpospolita


The Greek government has rejected an offer by an unidentified whistle-blower to buy CD discs with names of tax evaders stolen by dishonest Swiss bankers, arguing it would constitute an act of “industrial espionage”. Thus, Greece is refusing to follow the example of Germany and other countries that bought several CD discs from Swiss whistleblowers in order to recover due taxes from their citizens. Warsaw daily Rzeczpospolita notes that “it is not a secret that for many years Greeks have deposited billions of euro in Swiss accounts”. According to Swiss broker company Helvea, the amount in question could be as high as 20 billion euros. Rzeczpospolita adds that –

The Greek revenue hasn’t the slightest idea about 99% of this money. So if that sum could be taxed once Greece and Switzerland signs a tax agreement, it could provide the Greek budget with at least 4 billion euro.

An agreement currently being negotiated by Athens would provide that deposits of Greek citizens in Swiss banks be taxed between 19% and 34% (depending on their duration) with the collected taxes then being transferred to the Greek revenue office. Recently, Germany, Austria and Britain have signed similar tax treaties with Switzerland.

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Debate
Federal Europe best cure for current gloom



29 October 2012Corriere della Sera Milan

Ruben L. Oppenheimer

For Italian writer Claudio Magris, the only way to dispel the dismay prompted by the European economic and political crisis is to create a strong, decentralised and respected federal state.

Claudio Magris

A few weeks ago, I was in Madrid on a day marked by anti-government demonstrations and clashes with police, whose scope and violence have been extensively reported by the media. Finding myself by chance in an area that was one of the hot spots, I experienced a feeling that was not fear – I could think of many riots that were much more frightening, like the ones that occurred in Trieste shortly after WWII and in the 1970s, or the battles that took place in the streets of Genoa in the 1960s and during the G8 in 2001 – but rather dejection. It was a dejection that little by little gave way to a vague consternation that went beyond the question of my own person and culminated in a full-blown malaise.

The very comprehensible reasons for the demonstration – the increasingly harsh living conditions experienced by more and more people, the growing difficulty posed by the fundamental needs of the population (health, social assistance, pensions, work) – induced feelings of sadness and confusion. There was a sense of the leaden weight of gloomy days in lives marked by poverty and humiliation, of everything that contributes to the experience of insecurity recently evoked by [the Polish born philosopher] Zygmunt Bauman.

The prospect of a frustrating and impenetrable future is not a direct concern for most of my generation. Our universe is the present, and we endeavour to seize the day and to take advantage of it, or to move on when it becomes a source of suffering. People of my age are not saddened by the uncertainty of a bleak future. Most of us have already played the cards in the hand we have been dealt, cards that have given us a good probability of doing reasonably well in the time that is left to us. But those who are entering the stage of life that determines the quality and meaning of existence feel that they are being hindered in their bid to develop, and prevented from building their own worlds or exercising the right to pursue happiness as proclaimed by the American Declaration of Independence.

And their sense of dismay has also spread to others who have no fear for themselves, and who could quite happily be sustained by their personal reserves, which would be more than sufficient if they alone were affected. If we are dismayed, it is not because we fear for those who are close to us – children and grandchildren – but because we all share a measure of responsibility for the destiny of everyone else, and because we cannot expect to be happy if we are to live surrounded by misery. Nor can we be truly alive in a world that is dead.


Absurd agitation



On that same day in Madrid, the newspapers were full of reports on the growing ferment of separatism in Catalonia, and the consequence of this involution which would be the political paralysis of the entire country – of the great vibrant country of Spain and of Europe in general. There was a sense that we were living through the twilight of Europe. The demonstrations – which were similar to those in so many other European regions – did not appear to be the expression of political rebellion or the demand for an alternative project, which might be controversial or even unacceptable, but which would at least be a project for the future. The demonstrators were not like an army marching towards an objective they were about to attack, but like detachments on their way to a ceremonial lowering of the flag.

The ever cautious European Union with its commissions, its hairsplitting procedures, its requirement for compromise, the tit-for-tat of paralysing member state vetoes, and the endless resumption of near deadlocked negotiations, appeared – and continues to appear – very far away, like the emperor in the Kafka short story, who has sent a message that is always on its way but never arrives. In its absence, we have to contend with the miasma of nationalism, particularism, and localism, which, along with vague desires for shortsighted and rancorous separatism, have been fueled by the economic crisis.

An absurd agitation has taken hold of every nation and ethnic group and convinced them that an economic solution can be obtained by the withdrawal into spiteful separatism and the establishment of an independent state – an argument which implies that Switzerland should separate to form four states, something the Swiss have no intention of doing.

The only possible reality that can guarantee security and stability is Europe. A genuine European state – one that is federal and decentralised, but also cohesive and sovereign like the United States of America – that will bring about a Europe where today’s nation states will be regions that are autonomous, but not to the extent that they have the right to veto the political decisions of an effective central government, or the right to draft laws – and particularly constitutions – that are contrary to the principles of the European constitution. A European state whose authority will be not expressed by warnings and admonitions, but by the application of a universally recognised European law.


Fight the evils of pessimism and weariness



The establishment of a real European state is the only way to ensure that we can look forward to a worthwhile future. The problems we face are not national, they are of concern to us all. It is ridiculous, for example, to have different immigration laws in different countries, just as it would be to have different rules on migration in Bologna and Genoa. Furthermore, a genuine European state would result in significantly lower costs by, for example, doing away with the expense of endless committees, agencies and parasitic institutions.

Europe is a great power, and it is painful to see it reduced to bickering, or worse still, to the timid powerlessness of a building residents’ meeting. If it is to really become an entity that is able to punch its weight, the European Union will have to establish a decisive and authoritative government, give up on wooly ecumenisms, and abandon any reluctance to confront those who keep their own houses in order by dumping rubbish on their neighbours. No doubt it will have difficulty assuming a role of unshakeable authority, but if the European Union continues on the dangerous course on which it is currently embarked, its days will be numbered.

For the first time in history, we are attempting to build a large political community without recourse to the instrument of war. However, the rejection of war implies the need for a functional authority, and it is in this context that hesitancy is not democracy, but rather its death. It is natural for believers in Europe to feel dejected and uneasy, as I did on that in evening in Madrid, when faced with the spectacle of a European unity that is crumbling and fading away. However, that does not mean that we should surrender to melancholy. We have not been brought into the world to indulge our moods, or to give into gloom like so many small-minded sufferers from indigestion. No matter how we feel, we must continue to work for what we believe to be right, or at least for options that we believe to be better, with the stubborn conviction of “non praevalebunt”, they shall not prevail.

We must be prepared to fight against the evils of pessimism and weariness, which are continuing to gain ground. However, that is not to say that we cannot acknowledge the discrepancy between our terrible era and the aspiration for unity in the great professions of faith written by Europe’s founding fathers. As Karl Valentin, the great cabaret artist who inspired Brecht, liked to put it: the future was better in those days.

On the web

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14.11 Ekathimerini, the Greek news site, has this take on Samaras' agreement with the Troika:


Samaras's office said the negotiations with the troika have been concluded "successfully" and that "significant improvements were made".


"Today we concluded negotiations over the measures and the budget," the statement read. "We did everything we could. We exhausted all the limits of pressure and time. We achieved significant improvements even in the final hour."


The draft budget for 2013 is due to go before Parliament on Wednesday, while the Eurogroup of eurozone finance ministers will be holding a teleconference on the same day to decide on the disbursement of a €31.5bn tranche of bailout funding for Greece as the Euro Working Group entered a second day of talks in Brussels on Tuesday over Greece.


"Provided that the deal is approved and the budget is voted through, Greece will remain in the euro," Samaras's announcement said.

Ekathimerini continues that Samaras' aides and ministers have been stepping up efforts to win round officials from junior coalition partner, Democratic Left, which continues to object to proposed changes to labor laws and the abolition of social benefits for families.

Samaras’s aim has been to win round Democratic Left so that Finance Minister Yannis Stournaras could present his eurozone counterparts on Wednesday with a deal on a €13.5bn austerity package and on a package of structural reforms that include the controversial labor laws.

The site cites Samaras saying:

The problem from this point on is not this or that measure. The problem is the exact opposite: what would happen if the deal is not ratified and the country is led to chaos, and how much more painful such a development would be for the Greek people; from an economic standpoint and - more importantly - from a political standpoint. These dangers must be averted, and this is now the responsibility of all the parties and each individual deputy.



13.48 Ekathimerini tweets that Syrzia, the main opposition party in Greece, is also opposed to the meas

ures:

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Greece agrees deal with creditors on austerity plan


Austerity cuts have already led to riots on the streets of Athens
Continue reading the main story

Eurozone crisis

• Eurozone inches towards bank plan
  
• Euro action gives breathing space
  
• Do summits work?
  
• Q&A: Bailout fund
  

Greece has reached agreement with its international creditors on new austerity measures necessary to release fresh bailout funds.

Parliament was due to vote on the package, plus a budget, on Tuesday, but this has been delayed a week.

Prime Minister Antonis Samaras said: "If this deal is approved and the budget is voted, Greece will stay in the euro and exit the crisis."

If passed, Greece will impose 13.5bn euros ($17.4bn; £10.8bn) of cuts.

Details of the budget cuts remain sketchy, but Mr Samaras is seeking broader powers to privatise public services.

However, there has been dissent among members of the three-party coalition government, and the delay in voting on the package will give Mr Samaras more time to reach a consensus.

He has warned that Greece will run out of cash next month unless it receives 31.2bn euros in loans from the EU-IMF bailout fund.

The prime minister said in a statement on Tuesday that he had "exhausted all the available time" to try and reach a consensus in parliament.

"The problem is not whether we (introduce) this measure or that measure," he said. "On the contrary, it is what we would do if no agreement is reached and the country is led into chaos."

But a coalition party, the Democratic Left, has refused to back the austerity cuts. The party said in a statement on Tuesday: "The Democratic Left has fought on the issue of labour relations, to protect workers' rights which have been already weakened.

"It does not agree with the result of the negotiations. The Democratic Left sticks to its position."

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We can’t export our way out of the crisis



30 October 2012

• 
  

The DP World Ltd terminal., at the port of Tarragona, Spain, August 2010.

Bloomberg via Getty Images

To come up with the money to pay for its crisis, the eurozone has decided to export at any cost, slashing wages across the union, and courting customers abroad. The problem: that’s exactly what the countries in the Americas and Asia are trying as well.

Stephan Kaufmann

Brian Hayes glows with quiet pride. Ireland could serve as an example for other states in crisis, the Minister of State at Ireland’s Department of Finance said recently in Berlin. Despite high deficits and debt, rising unemployment and falling wages, Ireland has in fact been getting pats on the back from all sides for months now. It has, after all, something going for it: export surpluses. Ireland is selling its wares around the world and putting its own house in order at the expense of other countries. And gradually, the other members of the eurozone are falling into step with Ireland. In the Americas and Asia, observers are watching this unfold with unease.

Pushing exports is at the very heart of the strategy for tackling the crisis. While eurozone bailouts, bond purchases by the central bank and savings programmes are intended to reassure only the financial market investors, the path to stability starts with economic growth through exports. The eurozone is changing its business model – and the model for that is far less Ireland than it is the export giant Germany.

To strengthen their positions on global markets, the crisis countries of the eurozone in particular are focusing on wages. These must sink, to make production cheaper. This works via three levers, says Christoph Weil from Commerzbank. Firstly, the recession and high joblessness have weakened unions’ bargaining power. Secondly, many peripheral countries have cut public employee salaries. And finally, labour market reforms, striking holidays off the calendar, lowering the minimum wage and other measures are also doing their bit to push down wages.

Result: “The peripheral eurozone countries are making great strides in competitiveness”, writes the Crédit Suisse economists. These great strides are making people poorer and eroding their purchasing power. In the southern countries of the monetary union, real domestic demand has contracted by 15 percent. Thanks to the crisis, imports into Greece during the first seven months of this year are down by 13 percent, into Italy and Portugal by six percent, and into Spain by three percent. Since exports have fallen at the same time, foreign trade deficits are melting away, and Spain and Italy are now back in the black. “The eurozone is becoming more like Germany,” says Credit Suisse.


The risk of trade disputes



Greece, Spain and Portugal will find it very difficult to pay off the debt within the eurozone in this way, however; Germany’s head start is just too big. Exporting countries like Germany and the Netherlands have responded to the falling production costs of the southern European rivals with price cuts of their own. And that is why eurozone countries are seeking their fortune far from home and targeting the markets in the Far East and the Americas.

The Asians and the Americans recognize this as a challenge. And they are pursuing a similar strategy there. U.S. President Barack Obama, for example, has announced that the U.S. intends to grow more by boosting its exports. This is not working out too well with the European business strategy. In August, U.S. exports to the Old World stagnated, and the story from China is similar. They are not the only ones who are worried: Japan has seen its exports to Europe fall by six percent this year, while imports from Europe have risen by 18 percent.

With its export drive, Europe is trying to chip away at the growth rates of other states. “The rising current account surplus of the eurozone entails a negative shock to the global economy,” according to Credit Suisse.

This increases the risk of trade disputes. “Many industrially developed countries suffer from weak growth and high debt,” says Patrick Artus of the French bank Natixis. “This furnishes a strong incentive for a policy that eschews cooperation.” In essence, the major trade blocs are trying to unload the cost of the crisis onto each other.

Translated from the German by Anton Baer

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   French prime minister backs down in 35 hour work week row
   

France's beleaguered prime minister has been forced into an embarrassing climbdown after suggesting a change to the country's historic 35-hour work week, only to back track after being criticised by members of his own government.








In response to the ensuing outcry, Mr Ayrault was forced to back down from his comments Photo: Bertrand Guay/AFP





By Devorah Lauter in Paris

2:32PM GMT 30 Oct 2012

2 Comments




In an interview published on Tuesday with Le Parisien newspaper, Jean-Marc Ayrault, the Socialist prime minister, said the work week had "caused difficulties" for small businesses.


Popular with workers who are paid extra for working overtime, the 35-hour work week is a reform established by the Socialists in 2000. Conservatives however believe it is too rigid a policy that hurts business competition. During his victorious presidential election campaign, Francois Hollande vowed to protect the week that Nicolas Sarkozy had tried to break apart.


Asked by Le Parisien if he was prepared to return to a 39-hour work week, as the country faces rising unemployment, and pressure from businesses asking for reduced labour charges, Mr Ayrault said: "That issue will cause debate ... But why not? There's no taboo subject. I'm not dogmatic. The only thing that preoccupies me is that France has broken down, and we need to start up the engine again – all the way. But not so as to run into a wall. To get there, we need to find good compromises ... that's why I'm in favour of negotiation. That's how we'll get out of this."


Only hours after the article came out, Mr Ayrault's own labour minister dismissed the comment, while leading trade unions also voiced their opposition to any measure, with some hinting at action if it were touched.


Speaking to French RTL radio, Michel Sapin, said: "Work more to be paid less, is that what the French want? We must maintain the legal work duration to 35 hours," he said, adding the prime minister had intended he would merely listen to differing points of view on the issue.

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Spain sinks deeper into recession in third quarter


Spain has slipped deeper into recession as the financial crisis and austerity weighs on the embattled country’s economy.








Prime Minister Mariano Rajoy said on Monday that the country had no immediate need to ask for outside aid to help deal with its debts Photo: AFP






By Angela Monaghan

7:07PM GMT 30 Oct 2012


116 Comments




The Spanish economy shrank by 0.3pc between July and September, marking the fifth consecutive quarter of contraction.


Spain is buckling under the pressure of a large deficit and a property crash that has left its banks struggling under a mountain of bad loans.


Swingeing spending cuts and tax rises have stifled investment and have left consumers without the money or the will to spend.


The third-quarter data from Spain’s national statistics office was a first estimate of GDP with no detailed breakdown. Despite the decline, it reflected a slightly better performance than the 0.4pc fall in GDP economists had predicted.


However, economists said the figure was likely to have been flattered by consumers bringing forward purchases to beat the VAT rise in September, partly veiling a weak consumer backdrop.



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“Domestic demand likely contracted sharply again, despite some spending being pulled forward ahead of the VAT hike,” said Greg Fuzesi, economist at JP Morgan. “Our forecast anticipates an intensification of the Spanish recession at the turn of the year.”

Spain’s prime minister, Mariano Rajoy, has so far refused to seek a full-blown sovereign bail-out from its eurozone partners, despite a feeling among investors and policymakers that it is inevitable.

It emerged on Tuesday that Spain’s parliament will invite Mario Draghi, the head of the European Central Bank, to discuss details of a proposed bond-buying programme to help ease the country’s debt problems

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GM Slashes Jobs Amid Europe Car Downturn


Days after Ford announced a slash in its European vehicle production, key competitor General Motors reveals more job cuts.


3:33pm UK, Wednesday 31 October 2012

GM announced it would slash production at its German marque, Opel

• 
  
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• 
  
  
  
  
  
  General Motors has announced European job cuts amid the sales downturn in the foreign car market.
  
  The US parent firm of Britain's Vauxhall said it would aim to make $500m (£310m) in fixed-cost savings between 2013 and 2015.
  
  It added the company was planning further job cuts in Europe as it seeks to break even on the continent by the middle of the decade.
  
  GM said it will cut the shifts at its Opel plant in Eisenach, Germany, from three to two next year, according to a presentation made after the firm revealed its third quarter earnings.
  
  The Detroit-based car maker, which needed a US bailout after the global financial crisis, posted a surprisingly strong Q3 profit.
  
  However, it said the break even target in Europe comes as it plans to save as much as $1.8bn (£1.11bn) there this year.
  
  The proposed cuts come days after Ford announced major job losses as part of its plans to reduce production in Europe.
  
• ==================================
  

It's looking bad for Europe and if Merkel still thinks austerity measures are the only way out, she is wrong.

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The German bloc will have to take its bitter medicine in Greece



By Ambrose Evans-PritchardEconomicsLast updated: October 31st, 2012

451 CommentsComment on this article




Every detail of the Greek economy is worse than officially forecast just weeks ago.

The budget unveiled this morning estimates that public debt will reach 189pc of GDP next year (not 179pc).

The budget deficit will be 5.2pc (not 4.2pc).

The economy will shrink 4.5pc next year (not 3.8pc).

Unemployment is already 25.1pc and 55.6pc for youth.

Just for the record:

The EU-IMF Troika originally said that the economy would contract by just 2.6pc in 2010, before growing by 1.1pc in 2011, and 2.1pc in 2012.

In fact Greek GDP contracted by 4.5pc in 2010, 6.9pc in 2011, and will shrink 6.5pc this year, and now 4.5pc next year.
The cumulative error is colossal.

The IMF's former deputy chief John Lipsky told an HSBC forum in London earlier this month that it was impossible for the Fund to make any accurate forecast, given the crazy circumstances in Greece.

I don't wish to be unduly harsh on the IMF – a superb organisation – but actually the Greek Labour Institute and the think-tank IOVE did predict this level of contraction.

The IMF simply lost its political way in Greece. It knew – or should have known from dozens on rescue operations around the world – that Greece would crash into a self-feeding spiral without a rapid debt restructuring and a devaluation.

Both channels were blocked because of the sanctity of the EMU Project. (Though default would come later, in a capricious fashion, singling out pension funds, insurers, and private creditors only).

The policy never had any chance of working for Greece. The IMF under Strauss-Kahn went along with the EMU agenda, pretending all was well, sacrificing the Greeks to gain time for the European financial system to build up safety buffers.

Thomas Wieser, the head of the European Working Group handling Greece, said today that press reports of further debt restructuring and official "haircuts" in the current Troika talks are pure fantasy.

If that is so – and what he means is that Germany, Holland, Finland, and Austria will not tolerate a haircut on their holdings of Greek debt – then the creditor countries are trying to maintain a ridiculous illusion for their own internal political reasons.

Greece cannot claw its way out of a 190pc of GDP debt load. The official haircut is coming sooner or later, and it will be an explosive political moment.

Chancellor Angela Merkel will have to account for direct losses to the Bundestag. A line will have to be written into the German budget covering the X billions of euros. Other line items may have to be cut. Welfare support for Germans, perhaps.

Having insisted for over two years that German taxpayers face no risk of loss on the Club Med rescue packages – and having indeed told them it generated a profit – she will have to explain why this has gone horribly wrong.

No doubt she will try to delay this awful moment until after the German elections late next year. But the calendar of simmering revolt in Greece is not in her hands. One of the three parties in the pro-Memorandum coalition has already refused to go along with the budget plans. The Government majority is thinning fast.

My guess is that Mrs Merkel will be forced to admit to the German nation that contingent liabilities are turning into real liabilities long before her elections.

I leave it to German readers to tell us what the likely response be in the Bundestag and the German press.


Tags: euro crisis, eurozone, Germany, greece

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1. 
   Sweden pays jobless youth to move to Norway
   

A Swedish town has taken to paying people to look for work in Norway in an attempt to reduce soaring youth unemployment.








So far around 100 people have decided to leave Soderhamn Photo: ALAMY





By Matthew Day, Warsaw

4:20PM GMT 31 Oct 2012




Under a scheme organised by the local authorities in the town of Soderhamn and by Sweden's national employment office, anyone aged between 18 and 28 can volunteer to take a "Job Journey" to Oslo and attempt track down gainful employment.


Those who sign up get a ticket to the Norwegian capital and are put up in an Oslo youth hostel for a month, with Soderhamn council picking up the £20 a night bill. The package also includes on-the-spot guidance on how to get a job in Sweden's northern neighbour.


"We had an unemployment rate of over 25 per cent, so we had to find solutions," Magus Nilsen, the man in charge of the project at Soderhamn council, told the Daily Telegraph. "Going to Norway to find work has always been quite popular with young people, but sometimes they want to go but don't know how to find a job or accommodation so we thought we'd give them a bit of help with both."


So far around 100 people have decided to leave Soderhamn, a town of 12,000, 250 kilometres due north of Stockholm, to try their luck in the bright lights of Oslo, and some, at least, have struck gold.


After two years on the doll in his hometown Andreas Larsson opted for a "Job Journey" to Norway and now works as a lorry driver in Oslo.


"I came here on a Thursday and on Monday morning I had a job, so it was fast," he told Swedish Radio. "It almost felt a bit unreal, as if you have come to the promised land."

[fuzeta]

1. 
   

1. 
   Sweden pays jobless youth to move to Norway
   

A Swedish town has taken to paying people to look for work in Norway in an attempt to reduce soaring youth unemployment.








So far around 100 people have decided to leave Soderhamn Photo: ALAMY





By Matthew Day, Warsaw

4:20PM GMT 31 Oct 2012




Under a scheme organised by the local authorities in the town of Soderhamn and by Sweden's national employment office, anyone aged between 18 and 28 can volunteer to take a "Job Journey" to Oslo and attempt track down gainful employment.


Those who sign up get a ticket to the Norwegian capital and are put up in an Oslo youth hostel for a month, with Soderhamn council picking up the £20 a night bill. The package also includes on-the-spot guidance on how to get a job in Sweden's northern neighbour.


"We had an unemployment rate of over 25 per cent, so we had to find solutions," Magus Nilsen, the man in charge of the project at Soderhamn council, told the Daily Telegraph. "Going to Norway to find work has always been quite popular with young people, but sometimes they want to go but don't know how to find a job or accommodation so we thought we'd give them a bit of help with both."


So far around 100 people have decided to leave Soderhamn, a town of 12,000, 250 kilometres due north of Stockholm, to try their luck in the bright lights of Oslo, and some, at least, have struck gold.


After two years on the doll in his hometown Andreas Larsson opted for a "Job Journey" to Norway and now works as a lorry driver in Oslo.


"I came here on a Thursday and on Monday morning I had a job, so it was fast," he told Swedish Radio. "It almost felt a bit unreal, as if you have come to the promised land."

Yes that was what the UK was at one time and look at it now! Take heed Norway!!

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If successive Governments had put a hold on immigrants unless they had a job to go to, Britain wouldn't be in the State it is in. I am fed up with the "Human rights" excuse, what about the rights of the indigenous population and their progeny. Toughen up the youth of today who think they don't have to contribute , get them into apprenticeships.

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Britain shouldn’t jump the gun on leaving the European Union


Rather than rush for the exit, it would be better to allow the euro crisis to play out








Even among pro-Europeans, there is a growing sense of resignation. On the current trajectory, it now seems more likely than not that Britain will be out of Europe by the end of the next parliament. Photo: Getty Images





By Jeremy Warner

7:50PM GMT 01 Nov 2012

321 Comments




For many Eurosceptics, Wednesday night’s vote in Parliament was a watershed moment which unambiguously sets Britain on the road to eventual exit from the European Union. Even among pro-Europeans, there is a growing sense of resignation. On the current trajectory, it now seems more likely than not that Britain will be out of Europe by the end of the next parliament.


Almost everywhere, the Eurosceptic voice is in the ascendancy, so much so that hardly anyone dares put the other side of the case any longer. If there is any kind of an argument for inflation-busting increases in the EU budget, it’s virtually impossible to find those prepared to venture it in public.


Don’t worry, I’m not about to try, but the turnaround in thinking is nevertheless remarkable. Even Nick Clegg’s warning that “stamping your foot” over Europe risks further marginalisation sounded less than convincing. He too seems to recognise that there are few votes left in notions of European solidarity.


As little as two years ago, the consensus was that membership of the European Union, if not the euro, was still very much in Britain’s best interests. No longer is this the case. The eurozone crisis has changed the nature of the debate. To address the collapse, Europe has prescribed a loss of national sovereignty that goes way beyond anything we have seen before.


With their scope for fiscal discretion progressively removed, national governments within the euro area are being reduced to the role of little more than jumped-up local authorities. Most don’t yet seem to recognise this reality, to judge by the grandstanding of national politicians, but that’s the way they are heading. The freedom of policy action which is the basis of the nation state is being eroded as never before. Meanwhile, Britain is attempting to hare off in the other direction. As the rest of Europe cedes power to the centre, the Government is attempting to use the crisis to claw it back.



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One thing Mr Clegg did get right in his speech to Chatham House yesterday was to question how much longer our approach will prove tenable. So far, it’s been grudgingly tolerated, if only because Europe has got rather bigger problems on its plate than its relationship with Britain. There is a sense in which the UK is slipping under the radar. Nor has this manoeuvring been without its successes. Britain has opted out of 130 directives concerning home affairs and justice, and it’s also managed to wriggle out of participation in future eurozone bailouts. What’s more, it has ensured that the fiscal compact applies only to members of the single currency. But the big prizes on employment law, human rights and so on have yet to be won. It is by no means clear that these things are deliverable under the present framework.

Sooner or later, Britain’s relationship with Europe is going to have to change fundamentally if further progress is to be made. The question is whether it makes sense to pull the plug now, or whether there is more to be gained from a wait-and-see approach. I take the latter view, if only because it seems to me that the eurozone is on a path of almost wanton self-destruction, and we need to see how it plays out before rushing into actions we may yet regret.

A policy mindset which condemns large parts of Europe to more-or-less permanent depression is unlikely to be sustainable beyond the next couple of years. Eventually, something must snap. When that happens, it ought to give Britain all the opportunity it needs to pursue a new kind of relationship. Alternatively, if the eurozone does by any chance work things out, it will create a new Europe within Europe, and Britain will automatically assume a semi-detached role.

In any case, this is a long game in which it won’t help to so thoroughly alienate our partners that they want rid of us altogether. The single European market is still a considerable economic achievement, notwithstanding the fact that all the economic growth in the world is now taking place somewhere else. Much inward investment into Britain is made on the basis that it has open access to the single market. We don’t want to put this at risk. Nor do we want to follow the example of Norway, which in order to participate has to gold-plate rules it plays no part in formulating. This is plainly the worst of all possible worlds.

Switzerland offers a better template for an arm’s-length trading relationship with Europe, but negotiating such privileged status is unlikely to be helped by obstructive behaviour. It’s proving hard enough for Europe’s political elite to come to terms with the abject failure of their life’s work, the single currency. British triumphalism and hostility is scarcely going to help the process along. For those in distress, it is generally better to offer a sympathetic shoulder than a kick in the goolies.

In itself, Wednesday’s parliamentary vote is of little or no significance. For Labour, it was blatant political opportunism, and for many of the Tory rebels, just a passing shot across the bows. Such was the headroom in the EU budget recklessly agreed by the Blair government in 2005 that even if Britain does exercise its veto, it’s not going to make any difference. The budget will still carry on rising, and possibly by even more than the inflation-matching increases the Government is proposing.

None the less, it’s a powerful symbolic gesture. As far as Britain is concerned, political and national integration in Europe has gone far enough. Tory MPs are determined to hold their leaders to the promise of repatriating powers. But they need to be patient. The opportunity may arrive sooner than they think.

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De live bt crisis:





Jeremy Warner: the euro is headed for a permanent state of depression





Athens in flames






Merkel 'regrets' British veto decision

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Debt crisis: as it happened - November 1, 2012


Angela Merkel and Ireland's Taoiseach Enda Kenny met in Berlin today where Merkel said Ireland was an "excellent example" of reforms and said the country's respective finance ministers were working on specific Irish problems.








Angela Merkel and Enda Kenny at a press conference in Berlin after their talks.

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