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Germany has asked a panel of top economic advisers to examine France's economic problems, amid concerns that weaknesses in Europe's second largest economy could spread to Germany and the rest of the Continent.









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Finance minister Wolfgang Schaeuble (pictured, below) has asked its panel of economic advisers, known as the "wise men", to look into France's reform proposals, amid concerns that weaknesses could spread to Germany and the rest of Europe. Photo: Getty Images

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German risks rift with France over economic healthcheck demands


Germany's finance minister has reportedly asked a panel of top advisers to examine France's economic problems amid concerns that weaknesses could spread to the rest of Europe.








Mr Schaeuble's request denotes growing concern in Berlin and among private economists over the health of the French economy, which is set to miss a European Union goal for reducing its public deficit next year. Photo: PA





By Telegraph staff and agencies

4:36PM GMT 09 Nov 2012

Comment




Wolfgang Schaeuble has asked the distinguished "wise men" panel, which advises the government in economic matters, to examine possible reform proposals for France, according to German daily Die Zeit.


Although a spokesman for the council dismissed the claims as outside "the council's legal remit," Lars Feld, an economist who sits on the panel, told Reuters: "Concerns are growing given the lack of action of the French government in labour market reforms."


Two officials also told Reuters that Mr Schaeuble had asked the advisers to consider drafting a report on what France should do.


Die Zeit and Mr Feld said that the discussions remained informal, but if agreed, it would be the first time in 49 years where the panel has compiled a report on any other country but Germany.


Mr Schaeuble's request denotes growing concern in Berlin and among private economists over the health of the French economy, which is set to miss a European Union goal for reducing its public deficit next year.



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If the EU has any sense it will forget the austerity demand until the World recession is over.!!!

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German Coalition Cuts 2013 Net Borrowing in Final Draft


By Brian Parkin - Nov 9, 2012 8:33 AM GMT

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German coalition lawmakers sealed a 2013 federal budget plan that shaves a third from a net new borrowing tally originally expected this year, a draft obtained by Bloomberg News shows.

In fine-tuning the 2013 plan before it becomes law, members of the parliament’s budget committee set net federal borrowing at 17.1 billion euros ($22 billion), about 1.7 billion euros less than in a previous draft and a third less than the 28 billion euros anticipated this year. Spending will total 302 billion euros in 2013, or about 3 percent less than this year.

The coalition made a “major effort” to cut planned borrowing, Norbert Barthle, budget spokesman for Chancellor Angela Merkel’s Christian Union bloc, said in an e-mailed statement. “This is a great success and an important step” on the way to a budget without new debt.

A constitutional “debt brake” obliges the government to rein in spending in stages to ensure the budget is in balance without net new borrowing by 2016. The brake was implemented in 2011 and requires that net borrowing not exceed 41.4 billion euros in 2013, showing that the new plan is within target.

Germany’s debt brake is the model for the European Union’s future “Fiscal Pact.” While Merkel’s government may be on track to fulfill the adopted fiscal goals earlier than expected, her partners in the single currency including France are struggling to satisfy laxer targets set by the euro’s decade-old Stability and Growth Pact.

TLG Sale


Coalition parties, which dominate the budget committee, achieved the planned new savings in borrowing in part by booking 800 million euros in anticipated gains from the sale of the TLG GmbH property unit, Green Party committee member Priska Hinz said in an interview yesterday. The division is being split into its commercial and housing parts, while a portion of the gains from the former will be carried forward into the 2013 budget, Hinz said, citing the Finance Ministry.

The sale of the commercial unit will probably be completed this year and accounted for in the 2012 budget, while the housing asset will be wrapped up next year and accounted accordingly, Hinz said.

Coalition lawmakers are due to brief journalists about the completed 2013 budget draft in Berlin at 12:30 p.m. today

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Last chance” vote a Pyrrhic victory

8 November 2012
PresseuropTo Vima, To Ethnos, I Kathimerini

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Greek PM Antonis Samaras addressing parliament, November 7.

AFP

Greece's MPs have passed the new austerity plan the country needs before a new tranche of aid is transferred. But this vote, following lengthy negotiations in a parliament besieged by protesters, will not save a country that is sinking into political crisis, writes the Greek press.


It was the “last chance,” says To Vima. On 7 November the Greek Parliament approved the 18 billions in savings contained in the third memorandum signed by the coalition government of Antonis Samaras and the Troika of the EU, ECB and the IMF. Of the 299 deputies present, 153 deputies voted for the savings, and 128 against. Athens should now receive 31.5 billion euros from the EU and IMF and so avoid defaulting at the end of the month. “A Pyrrhic victory”, writes the weekly on its website –

It is obvious that the government has been wounded by this vote. The Socialist PASOK has lost six members, and New Democracy one. Both parties do have the assurance that the third party supporting the coalition, the Democratic Left under Foris Kouvelis, will continue to back the government's decisions. [...] Armed with the MPs' vote, the government can now go to the EU for help and ask that the promised tranche be released as soon as possible. This “final vote” and this “last chance” it gives should not be squandered – for the simple reason that, considering the great sacrifices the Greek people have made, it would amount to a crime.

“A thriller vote” for “A day of shame”, sums up To Ethnos in a pair of headlines. The vote was held late in the evening after long negotiations and with a crowd of more than 70,000 milling outside Parliament to protest against the new austerity measures. In his column, editorialist George Delastik takes offence at the spectacle put on by Greek democracy –

A few hours before the vote, Finance Minister Yannis Stournaras had proposed adding to the vote a slash to the wages of Parliamentary employees. Clearly, the latter protested, mobilised, and came together in the emergency to call a strike. They mobilised the police [normally mobilised against protesters] who blocked the entrance to the office of the Prime Minister. Under pressure, the Minister of Finance was forced to withdraw his project. But it shows what a circus Parliament has become.

Whatever the conditions under which it was obtained, the "yes" vote solves nothing, warns Kathimerini–

Greece cannot be saved by a single act like the vote on a law. Saving Greece can only be a lengthy process that will demand that the people play an active role in it. [...] Greek politicians must stop relying on a shift in the balance of power in Europe and should stop blaming ‘conservative forces’ of being socially insensitive. They must stop hoping for a show-down between Washington and Germany under Merkel. [...] Greece is a vestige of the Ottoman Empire's collapse about a century ago. Once again, an effort is being made to Westernise. This will require more than introducing or imposing a new political economy.

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Spain: Suicide Death Jump As Bailiffs Move In


Spanish authorities are urged to overhaul strict mortgage laws after a woman apparently leapt to her death as eviction loomed.


3:13am UK, Saturday 10 November 2012

A picture of Amaia Egana outside the building where she lived

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A mother in Spain jumped to her death as bailiffs approached to evict her from her fourth-floor flat, officials have said.

Amaia Egana's death was the country's second apparent suicide linked to evictions, with authorities under mounting pressure to ease tough mortgage laws.

Around 500 evictions are being carried out each day across Spain, which is beset by a sinking economy.

Mrs Egana reportedly jumped from the balcony of her home in Barakaldo, in the northern city of Bilbao. She worked at a local bus depot, was married to a former town councillor and had a 21-year-old daughter.

While protests against Spain's mortgage rules took place in Madrid, neighbours of the 53-year-old held a vigil outside the building.

One of them, Francisco Algazira, said: "Shame on the government for these things."

"They are cutting and cutting and we can't live anymore. The same thing that happened to that woman could happen to me tomorrow."
A woman passes a Madrid bank painted with graffiti reading: 'Assassin'
Jose Luis, a 52-year-old former teacher, said: "They need to stop rescuing the banks and start rescuing people because we are heading nowhere and the loan sharks must have a limit."

Local judge Juan Carlos Mediavilla told reporters at the scene that it was "necessary to amend current mortgage legislation" to prevent a recurrence of such events.

And employment and social security minister Fatima Banez said the government deeply regretted Mrs Egana's death.

On Thursday, the European Court of Justice's advocate general, Juliane Kokott, handed down a non-binding legal opinion that criticised Spanish legal rules regarding evictions.

In October, Jose Miguel Domingo, 53, was found dead in the courtyard of his building in Granada moments after bailiffs appeared to evict him.

A day later, another 53-year-old man who had been unemployed for four years jumped out of his apartment window in the eastern town of Burjassot as eviction loomed. He survived but with injuries.

Spain's unemployment rate stands at 25% and the government predicts its economy - which is now in recession - will not grow until 2014.

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10 November 2012 Last updated at 01:44









EU budget talks for 2013 collapse


British Conservative MEPs clashed with Martin Schulz over a 9bn euro request for 2012
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Talks to agree the EU's 2013 budget have collapsed, after negotiators from the EU and member states were unable to agree on extra funding for 2012.

The EU Commission and European Parliament had asked for a budget rise of 6.8% in 2013.

But most governments wanted to limit the rise to just 2.8%.

The failure of the talks will dent hopes of agreement on the 2014-2020 budget, which is up for discussion later this month, correspondents say.

Friday's dispute was over an extra 9bn euros (£7bn; $12bn) in "emergency funding" for 2012, to cover budgets for education, infrastructure and research projects.

But Germany, France and other governments questioned the funding, and eight hours of talks produced no agreement.

"Under these conditions, we felt that negotiations which hadn't really begun by six o'clock in the evening couldn't reasonably be expected to finish during the night," said the parliament's lead negotiator, Alain Lamassoure.

At the European parliament, UK Conservative MEPs clashed with Parliament President Martin Schulz, a German Social Democrat, over the extra 9bn euros shortfall for 2012.

In 2012 the budget was 129.1bn euros, a 1.9% increase on 2011.

'Life-changing experience'

Among the schemes facing a shortfall this year is the Erasmus student exchange programme.

It has allowed nearly three million young Europeans to study abroad since it was launched 25 years ago.

In an open letter to EU leaders on Friday more than 100 famous Europeans, including film directors and footballers, warned that "thousands could miss out on a potentially life-changing experience".

Friday's talks did produce a declaration of political will to provide 670m euros to earthquake victims in Italy, but no agreement on how to finance it, the European Parliament said.

It said that if no agreement on the 2013 budget could be reached in the next 21 days, the European Commission would look to revise its budget proposal.

The UK's Financial Secretary to the Treasury, Greg Clark, said the EU needed to practise "fiscal discipline".

"The UK and a number of other countries were very clear from the outset that the Commission and the European Parliament should not be asking taxpayers for billions of extra euros when the spending in member states is being reduced," he said.

The UK government, led by the Conservatives, has also objected to a proposed increase in the multi-year budget for 2014-2020, threatening a veto if necessary.

An EU summit aimed at reaching a deal on that budget will be held on 22-23 November.

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Germany’s government bonds rose for a third week as data showed the economic slowdown is spreading to Europe’s largest economies, underpinning the case for the region’s central bank to cut interest rates to boost growth.

Ten-year bund yields dropped to the lowest level in two months yesterday as data showed industrial production slumped in France, Italy and Finland. European Central Bank President Mario Draghi said the euro-area economy was expected to “remain weak” after policy makers kept the main refinancing rate at a record low of 0.75 percent on Nov. 8. German two-year note yields were below zero every day this week. Spain’s bonds fell as optimism waned that the nation will ask for a bailout.

“The data, particularly industrial production, was disappointing, which is causing concern that Germany is being dragged down toward recession,” said Nick Stamenkovic, a fixed-income strategist at RIA Capital Markets Ltd. in Edinburgh.“Accordingly, 10-year yields have dropped.”

The yield on Germany’s 10-year bund fell 10 basis points, or 0.10 percentage point, this week to 1.35 percent at 5 p.m. London time yesterday, after declining to 1.31 percent, the lowest since Aug. 31. The 1.5 percent bund due in September 2022 gained 0.935, or 9.35 euros per 1,000-euro ($1,272) face amount, to 101.39.

Two-year yields declined four basis points to minus 0.033 percent. A negative yield means investors who hold the security until it matures will receive less than they paid to buy it.

Output Data


French industrial production shrank 2.5 percent in September from a year earlier, after slipping 0.9 percent in August, the national statistics office said yesterday. Factory output slid 4.8 percent in Italy and 1.7 percent in Finland, reports showed. In Germany, production dropped 1.2 percent from a year earlier when adjusted for working days.

A euro-area report due next week is forecast to confirm the region’s economy slipped into another recession in the third quarter.

Gross domestic product in the 17-member euro area fell 0.1 percent in the second quarter, after sliding 0.2 percent in the first three months of the year, data from the European Union’s statistics office will show Nov. 15, according to the median prediction of 44 economists in a Bloomberg News survey.

Spain’s 10-year yields climbed 16 basis points this week to 5.82 percent, while similar-maturity Italian rates were three basis points higher at 4.97 percent. Spanish yields have increased for the past three weeks as the nation’s government refrained from asking for financial assistance from the ECB’s Outright Monetary Transactions program.

Germany is scheduled to sell 5 billion euros of two-year notes on Nov. 14, while France will auction securities maturing between 2014 and 2017, as well as inflation-linked bonds due from 2016 to 2027 on Nov. 15.

German bonds returned 4 percent this year through Nov. 8, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish securities gained 2.1 percent, while Italy’s earned 17 percent.

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   EU: funding crisis as talks collapse
   

The European Union faces a full-scale funding crisis after talks in Brussels aimed at settling next year’s budget ended in acrimony and walkouts.








Financial Secretary to the Treasury Greg Clark said the European Commision's actions were 'breathtaking' Photo: LNP






By Patrick Hennessy, and Bruno Waterfield

9:00PM GMT 10 Nov 2012





MEPs led a walk-out of three-way talks in which the European Commission and European Parliament were attempting to secure billions of pounds in extra funding for this year and next year from national governments, claiming there was a cash shortfall.


MEPs quit the talks at the attempt to secure a total of £13.8 billion in spending this year and next, a move fiercely opposed by the British Government.


Ministers have formed an alliance with other EU nations including Germany, the Netherlands and France to block the demands.


The failure of the talks casts a fresh doubt on whether a major summit to agree to the EU’s future funding from 2014 to 2020, scheduled for later this month, can go ahead.


There had already been claims that the Brussels gathering would be cancelled because David Cameron was refusing to drop his threat of using Britain’s veto to block any future increase above the level of inflation for the seven-year period.



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Greg Clark, the Financial Secretary to the Treasury, said it was “frankly breathtaking” that the Commission was asking member states to stump up more cash at a time when national governments were reining in spending and the EU’s economy was likely to contract by 0.3 per cent by the end of next year.

“Ordinary working people, whether in the UK or elsewhere, cannot be asked to pay more to Europe when they are enduring cuts at home,” Mr Clark added.

Friday night’s deadlock – at the end of eight hours of talks – was over demands by the European Commission for a £7.3 billion spending increase by the end of this year to meet an alleged funding shortfall, figures that are disputed by Britain and other governments.

At the same time, the European Parliament wants to reinstate over £6.5 billion in funding that had been cut by governments from next year’s budget to reflect national austerity programmes.

The two demands, for this year and next, would increase Britain’s EU contributions by £1.6 billion at a time of deep cuts to public services domestically.

Treasury sources said MEPs led the walkout because they had “felt let down” by the Commission’s tactics. Sources also hailed the “very strong like-minded group” of national governments which they said had held firm against extra spending – including Britain, the Netherlands, Germany, France, Sweden and Finland.

Mr Clark added: “Unbelievably this proposed amending budget is much more even than the budget increase originally proposed by the Commission last year. What is the point of having a negotiation if an amending budget makes it irrelevant?

“The UK and a number of other countries were very clear from the outset that the Commission and the European Parliament should not be asking taxpayers for billions of extra euros when the spending in member states is being reduced.

“The negotiations broke down when the Commission’s figures, on which the talks depended, turned out to be “not solid” in the words of the parliament’s chief negotiator.

“When the negotiations resume we will continue to work with like-minded countries to press for budget discipline and fairness for taxpayers in the UK and Europe.“

Alain Lamassoure, the French MEP who heads the European Parliament’s budget committee, said that governments “were unable to negotiate so the negotiations were suspended”.

“The European Commission will now have to present a new proposal to enable talks to resume,” he said.

Jeroen Dijsselbloem, the new Dutch finance minister, said he did not believe the Commission’s claim that the EU would be unable to pay its bills without the extra money.

“I’d question that very much. The Commission has to re-prioritise, that’s just the way it is. Budgetary discipline is not just for the member states,” he added.

The negotiations for 2012 and 2013, which no country can veto and on which can be taken according to qualified majority voting, are likely to begin again on Tuesday.

At the same time, the prospect of a successful deal on the 2014-20 spending package looks remote. Reports this weekend from Italy suggested the summit, scheduled for 22-23 November, might not go ahead because of Mr Cameron’s refusal to back away from his threat to veto any deal which would see spending rise by more than inflation.

A deal on the seven-year package can be vetoed by the individual countries’ heads of governments, unlike Friday night’s negotiations for 2012 and 2013 which involved finance ministers. The Prime Minister first made his veto threat, to which he says the Liberal Democrats are fully signed up, in an interview with this newspaper before last month’s Conservative Party conference.

Last month a vote in the Commons saw 51 Tory rebels join Labour and defeat the government with a demand that the 2014-20 budget be reduced in real terms – an even tougher stance than Britain’s official position and one which has no chance of succeeding.

The vote was not binding on the Government but was seen as embarrassing for Mr Cameron because of the high number of Tory rebels indicated once again that he is out of step with large sections of his party on Europe.

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Cyprus
EU bailout for Russian oligarchs?



7 November 2012Der Spiegel Hamburg

A yacht off the Cypriot coast.

Philip Squires

The EU, the IMF and the government of Cyprus are negotiating a 10-billion euro bailout for the country’s ailing banks. Brussels doesn’t want to let the country go bankrupt. But there is a danger that the financial injection could be used to launder dirty money that passes through financial institutions on the island. Excerpts.

Markus Dettmer | Christian Reiermann

Last Friday, the sun was shining in this paradise for Russians. The sky was a deep blue and the palms along the beach promenade swayed in a light breeze as the temperature climbed to 29 degrees Celsius before noon. No doubt Limassol offered a welcome relief from the cold and wet autumn weather of Moscow. Russians appreciate this spot on the southern coast of Cyprus.

The city park has a bust of Russian poet Alexander Pushkin, there's a Russian radio station, Russian newspapers, a Russian Orthodox church, private schools offering Russian diplomas and signposts in Cyrillic writing. The mayor of Limassol himself speaks fluent Russian and studied in Moscow during the Soviet era.

There's something that is probably a cause for concern for the Russians of Limassol, though. They are at risk of losing their paradise because Cyprus is virtually bankrupt. The island's economy has been dragged down by the recession ravaging Greece, with which it has close business ties. In addition, Cypriot banks bought billions of euros in Greek government bonds that are practically worthless now. The banks have already had to write off large portions of their investments, and are in trouble as a result.

This prompted the government of President Dimitris Christofias to make a pre-emptive application for EU aid in the summer. Russia had already provided a loan of €2.5 billion. That money has been used up and Russian President Vladimir Putin is reluctant to provide a further €5 billion.

Now the euro countries, and especially Germany, will have to step in with a €10 billion aid injection to prop up the island's banks. That will confront German Chancellor Angela Merkel, Finance Minister Wolfgang Schäuble and their European colleagues with a major dilemma because a secret report written by the German foreign intelligence service, the Bundesnachrichtendienst (BND), outlines who would be the main beneficiaries of the billions of euros of European taxpayers' money: Russian oligarchs, businessmen and mafiosi who have invested their illegal money in Cyprus.

The Russians don't just love Cyprus for its great climate. The shell companies here are conveniently anonymous, the banks discreet and the taxes are low. Dirty money bestowed a lasting boom on Cyprus and the inhabitants of "Limmasolgrad" are still doing well.

The European aid will help the country stabilize its controversial core industry and keep it going for the next few years. In Brussels and in the EU capitals, the Cypriot financial sector doesn't enjoy an especially good reputation. Cyprus and its banks are widely seen as a tax haven and a money-laundering base.

Read the rest of this article at Spiegel Online International…

On the web

• Original article at Der Spiegel de
  
• Politis article el
  

From Cyprus
A 10-billion euro endgame



"For the IMF, Cyprus' debt is not sustainable," says Cypriot daily Politis. Meanwhile, the "troika" of representatives from the International Monetary Fund (IMF), the European Commission and the European Central Bank is expected on the island on November 8. Their talks with the Cypriot government will centre on an offer of aid of about 10 billion euros in exchange for cuts in public spending and a hike in taxes. If the two sides reach an agreement, the aid could be confirmed as early as November 12, at the upcoming Eurogroup meeting of finance ministers from Eurozone countries. But Politis wonders –

For the government, Cyprus is being dragged down by its close ties to Greece and must conclude a bailout plan as quickly as possible. But will 10 billion euros be sufficient to make the debt sustainable?

In reaction to the Der Spiegel article, Politis says that a secret report by German Intelligence which claims that "European aid to Cyprus would mainly benefit Russian oligarchs and underworld figures who launder money on the Mediterranean island may be slanderous, but one thing is sure: the IMF is reluctant" to help Cyprus.

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Greece approves 'last spending cuts' in 2013 austerity budget


Greek lawmakers approved the country's 2013 austerity budget early Monday, an essential step in Greece's efforts to persuade its international creditors to unblock a vital rescue loan installment without which the country will go bankrupt.








Striking municipality workers demonstrate in central Athens to protest new austerity measures and expected layoffs in the public sector on November 10. Photo: LOUISA GOULIAMAKI/AFP/Getty Images





3:56AM GMT 12 Nov 2012




The budget passed by a 167-128 vote in the 300-member Parliament. It came days after a separate bill of deep spending cuts and tax hikes for the next two years squeaked through with a narrow majority following severe disagreements among the three parties in the governing coalition.


Prime Minister Antonis Samaras pledged that the spending cuts will be the last Greeks have to endure.


"Just four days ago, we voted the most sweeping reforms ever in Greece," he said. "The sacrifices (in the earlier bill and the budget) will be the last. Provided, of course, we implement all we have legislated. "


"Greece has done what it was asked to do and now is the time for the creditors to make good on their commitments," he stressed.


Athens says that with the passage of the two bills, the next loan installment, worth 31.5 billion euros (about $40 billion), should be disbursed. Without it, the government has said it will run out of cash on Friday, when 5 billion euros ($6.35 billion) worth of treasury bills mature.



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Finance ministers from the 17-nation eurozone are meeting in Brussels later Monday, with Greece high on the agenda. However, German Finance Minister Wolfgang Schaeuble has indicated it is unlikely that the ministers will decide on the disbursement at that meeting.

"We all ... want to help Greece, but we won't be put under pressure," Mr Schaeuble told the weekly newspaper Welt am Sonntag.

Mr Schaeuble said the so-called troika of debt inspectors likely won't deliver their report on Greece's reform program by Monday. The creditors also want to see what the debt inspectors have to say about Greece's debt sustainability.

But speaking minutes before the vote, Mr Samaras pledged the bailout funds would be disbursed "on time."

Finance Minister Yannis Stournaras also stressed the precariousness of Greece's cash reserves, with the treasury bills due on Friday.

"Without the help of the European Central Bank, the refunding of these treasury bills from the banking system will lead the private sector to complete suffocation," Mr Stournaras said.

Disbursement of the next installment is essential "because the state's available funds are marginal, although better than expected because the 2012 budget is being executed better than expected," he said, adding that the funds are needed to pay salaries and pensions, as well as for the import of medicines, fuel and food.

Hours before the vote, 15,000 people converged outside Parliament in a peaceful demonstration. The crowd was far smaller than the 80,000-strong crowd which protested last Wednesday's austerity bill vote. That demonstration degenerated into violent clashes between riot police and hundreds of protesters.

Greece is mired in a deep recession heading into its sixth year, with more than a quarter of Greeks unemployed. Battered by a mountain of debt and a gaping budget deficit, Greece has been relying on international bailout loans from other eurozone countries and the International Monetary Fund since May 2010.

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The sick man of Europe is France



12 November 2012Les Echos Paris

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“The German model" — Angela Merkel as Marianne, symbol of France, as seen in its town halls.

Dilem

The German government is increasingly concerned as well as outspoken about France's economic situation and its inability to act. Authorities in Paris are aware of the slump in industry but nonetheless irritated by the German pressure.

Dominique Seux

We do not know if the German government discreetly tasked its five expert advisors to examine the situation of France, as the press on the other side of the Rhine has reported. The high-profile economists in the experts’ group have officially denied that any such initiative took place, while the insistence that there will be “No comment” from the Chancellor’s office nonetheless suggests that there is something to the story.

Be that as it may, the simple fact that such a request was not unlikely is a testament to Berlin’s concern about its neighbour. And sadly, it is a concern that is completely justified.

The initial French reflex in response to this state of affairs is one of irritation. That the Germans should assume that they can teach us lessons on how to reform France is both vexing and insolent. Ten years ago, the Federal Republic was the sick man of Europe, it has been consistently late in its management of the eurozone crisis, and no doubt it would be none too happy if it had to take advice from Paris on how to deal – to cite a random example – with its catastrophic demographic situation.

The second French reflex is to remark on the domestic political dimension of such an initiative. In answer to recent criticism of some of her decisions by the five experts, Angela Merkel remarked that you only had to compare the situations of Germany and France to see that German policy was better.


A major historical shift



Although understandable, these impulsive reactions should not be allowed to dissimulate the obvious point which is that Germany is concerned about the state of our economy, about its stagnation over the last three quarters, its deficits, and most importantly, the difficulty inherent in taking action to reverse a downward trend. Germany is right.

One single comparison is enough to highlight what is a terrible situation: according to Eurostat, the latest figure for unemployment in Germany is 5.4% whereas it stands at 10.8% in France. But the real difference is perhaps elsewhere: France, and it seems François Hollande, still consider that the current difficulties are temporary and that everything will improve when the traditional economic cycle is reversed in the latter half of 2013 and 2014.

In contrast, the Germans have long considered that what the French refer to as a “crisis” is in fact a major historical shift, which is why they have allocated themselves the resources they need to deal with it.

The reality is that we do not need the Germans to tell us that the Gallois report [on the competitiveness of French industry] and the government plan which followed it are first steps in the right direction, but only first steps. They are not enough to mark a turning point, and we will have to continue to work to acelerate change.

Translated from the French by Mark McGovern

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12 November 2012 Last updated at 18:41

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Greece bailout extension 'to cost 32bn euros more'


The Greek finance minister and the IMF's Christine Lagarde attended the talks in Brussels
Continue reading the main story

Eurozone crisis

• Q&A: Greek debt crisis
  
• Will vote secure Greece's future?
  
• What if Greece quits the euro?
  
• Are all summits a waste of time?
  

A draft document prepared for eurozone finance ministers suggests that Greece should be given two more years to meet budget goals, but that this will add 32.6bn euros ($41.4bn) to its bailout.

Eurozone finance ministers are meeting in Brussels to discuss new targets for Greece based on the report.

They will also discuss whether to release the latest tranche of funds but a decision is not expected on Monday.

Greece is pushing for the funds after passing a tough budget for 2013.

Greek PM Antonis Samaras has warned that without the new tranche of 31.5bn euros the country will run out of money within days.
'Smoother path'
The draft document on the pace of Greek economic reform was prepared by the so-called "troika" - the International Monetary Fund, the European Central Bank and the European Commission.

The troika has already pledged 240bn euros in bailout loans to Greece.

The two-year extension would give Greece time to achieve a primary budget surplus - a figure that would not include debt-financing costs.

Continue reading the main story
Measures in austerity package

• Retirement age up from 65 to 67
  
• A further round of pension cuts, of 5-15%
  
• Salary cuts, notably for police officers, soldiers, firefighters, professors, judges, justice officials; minimum wage also reduced
  
• Holiday benefits cut
  
• 35% cut to severance pay
  
• Redundancy notice reduced from six to four months
  

The document says: "Our revised fiscal programme targets the 4.5% of GDP primary surplus target by 2016, two years later than foreseen.

It adds: "The smoother path will help to moderate the impact of fiscal adjustment on the economy."

The extension would cost an additional 32.6bn euros and comes with "very large" risks, the report says.

Those risks include the uncertain political support for the programme within Greece, the possible negative effect on the economy of the fiscal consolidation and possible court challenges to the measures.

The BBC's Chris Morris in Brussels says the original intention was for debt to be reduced to 120% of GDP by 2020 but that this is no longer feasible and a new target needs to be agreed by everyone.

He says this means more uncertainty, at a time when many Greek citizens believe they have taken all the austerity they can swallow.
Market fund-raising
Eurogroup chief Jean-Claude Juncker had earlier expressed optimism about the troika report.

"The basis is positive, because the Greeks have really delivered," he said.

Greek MPs approved the 2013 budget, which includes further cuts to pensions and wages, in a vote on Sunday night.

PM Antonis Samaras (centre) saw MPs pass the budget on Sunday
More than 10,000 people joined demonstrations outside Greece's parliament to protest against the cuts.

The passing of the budget was a pre-condition for Athens to be granted the next tranche of 31.5bn euros of EU/IMF loans necessary to stave off bankruptcy.

Greece faces a repayment deadline for 5bn euros of debt on Friday.

However, German Finance Minister Wolfgang Schaeuble said it was unlikely the eurozone ministers would decide on the disbursement of the tranche at Monday's meeting.

The funding will have to be approved first by some parliaments, including Germany's.

"We all... want to help Greece, but we won't be put under pressure," Mr Schaeuble told the weekly newspaper Welt am Sonntag.

On Tuesday, Greece will make an urgent bid to raise funds from the financial markets in case it does not get the tranche of bailout money.

The national economy is expected to shrink next year by 4.5% and public debt is likely to rise to 189% of GDP, almost double Greece's national output.

This year, public debt stood at 175%.

The head of Syriza, a left-wing opposition party, said the budget cuts would leave Greeks unable to afford essential goods this winter

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Belgium’s Genk factory kicks off week of social unrest



12 November 2012
PresseuropLa Libre Belgique

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La Libre Belgique, 12 November 2012

Nearly 20,000 people demonstrated, on Sunday, November 11, against the closure of the Ford factory in Genk, Belgium. Announced by the US automaker on October 25, the closure, scheduled for the end of 2013, could destroy close to 10,000 jobs. The demonstration's large turn-out "illustrates Europe's social angst," explains Belgian daily Libre Belgique.

The paper notes that up-coming negotiations between unions and management aimed at designing a social action plan for the plant –

... will take place in a context that is doubly fraught: on the national scene, the government of [Socialist Elio] Di Rupo hopes to wrap-up, this week, a budget with a strong whiff of austerity. [...] On the other hand, at the European level, unrest against austerity is rising...

As witness by the call for a European Day of Action and Solidarity on November 14 launched by the European Trade Union Confederation (ETUC). "Forty organisations from 23 countries are participating," says Libre Belgique. These, the paper says –

... want to ask European leaders to act against soaring unemployment and to 'respond to the social angst of the citizens'. [...] This day will give rise to strike movements in Spain, Portugal, Greece and Italy, four countries hard hit by the crisis. Demonstrations are scheduled in Belgium [...], in France, in some Eastern countries such as Poland, Slovenia, and Romania as well as in front of the European Commission in Brussels.

This protest movement is evidence of the existence of a two-speed Europe, the paper says –

A recurring factor to be noted: the trade unions of Northern European countries are not taking part in the movement, at least not for the moment. This attitude is also evidence of the rift, which is becoming more and more clear, between the North of Europe which continues to argue for fiscal discipline and the countries of the South who fear 'suffocation' under the weight of austerity they must bear. [...] The protest movement will take place just 24 hours before the publication of Eurozone growth figures . These are expected to confirm its entry into recession for the second time in three years.

============================

It looks as though the EURO might well be in trouble the way things are going. Greece should have been allowed to default years ago, all it is doing is accumulating debt which can never be repaid .

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Angela Merkel sticks to austerity script in Portugal as revolt builds


German Chancellor Angela Merkel braved hostile crowds in Portugal on Monday to show unflinching support for the country’s austerity ordeal and plead for patience as social cohesion frays.








Angela Merkel praised the 'courageous actions' of Portugal's free-market premier Pedro Passos Coelho Photo: AFP






By Ambrose Evans-Pritchard

8:20PM GMT 12 Nov 2012

156 Comments




The flying visit came as trade unions led a protest march through Lisbon “in defence of national sovereignty” and the Left Bloc in parliament said its top priority is to “bring down the government” and forge a salvation front.


Swooping into Lisbon amid tight security, Mrs Merkel praised the “courageous actions” of free-market premier Pedro Passos Coelho and vowed do to “everything possible” to help the country through hard times. Yet she also insisted that there would be no renegotiation of the country’s €78bn (£62.5bn) EU-IMF Troika package or softer terms to alleviate the slump, saying austerity is the “only way forward”.


The tough love message comes as unemployment reaches 15.7pc, with 35pc among the young, and dole duration is slashed from nine months to four under Troika reforms.


Mr Passos Coelho has been able to count on a tacit support from opposition socialists but consensus broke down two months ago in a bitter clash over payroll levies.


Socialist leader António José Seguro said on Monday that Portugal is crumbling under the weight of debt service costs and “cannot endure any further austerity”. The Troika has warned of mounting political risk and “austerity fatigue”.



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  12 Nov 2012
  

German officials have cited Portugal as a success story, proof that Europe’s strategy of deep budget cuts combined with labour reform is paying off.

The country has complied with Troika demands – unlike Greece – becoming the pin-up country for advocates of fiscal shock therapy. But this means that any failure indicts the EU policy.

Raoul Ruparel, from Open Europe, said Mrs Merkel needs good news to mollify her fractious coalition and to keep alive hope that Greece is a one-off disaster. “They cling to the story that Greece is unique but Portugal has similar structural flaws and the same overvalued currency,” he said. Its stock of public, household and corporate debt is 370pc of GDP, the world’s second highest after Japan.

Portugal began its austerity after Greece, so the real test comes now. Exports have done well – growing faster than Germany’s – but gains have slowed and the current account deficit is still 3pc of GDP.

Dmitris Drakopoulos, from Nomura, said Portugal has avoided the sort of panic that tipped Greece over the edge: “There has been no massive capital fight. Some companies have been able to roll over debts so I don’t think we will see the real problems until the middle of next year.”

Nomura expects the economy to contract by 2.8pc in 2013, far higher than the official 1pc estimate. The Troika said credit is contracting at a 5pc rate and money is “very tight” for small firms.

The IMF has revised its public debt forecast to 124pc of GDP next year, chiefly due to the “protracted recession”. This is up from 118pc just months ago.

“The IMF is admitting that austerity is doing more damage than thought,” said Marchel Alexandrovich, from Jefferies. “They underestimated the fiscal multiplier and there is a risk that Portugal will go down the same route as Greece.”

The Troika said Portugal’s external debt has risen from 196pc to 239pc of GDP over the past five years and has yet to stabilise. While unit labour costs have begun to fall – plummeting 5pc over the past year – this is entirely due to pay cuts for public workers. Manufacturing wages have continued to ratchet up, casting doubts on claims that Portugal is really clawing back lost competitiveness within EMU by an “internal devaluation”. This is in stark contrast to the Baltics.

The Troika says there is no margin for error. If the slump drags on and there are any more shocks, Portugal’s debt dynamics will become “unsustainable”. That is a message that Mrs Merkel does not want to hear.

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Greece has been given two years extension but a Bail-out has not yet been agreed.

The IMF says some of loans to other EU Countries should be written off, Juncker disagrees.

There was tension at the Meeting and the IMF could pull out of the Troika. The IMF has already lent E150 million to EU

Countries and has very little left to lend to poor Countries . The IMF wants to have a once for all decision on Greece, the

EU disagrees and insists Greece must stay in the Euro Zone.

There is no real understanding about why ALL Banks should be monitored and non Euro Countries are objecting , but the ECB says smaller banks are just as vulnerable as the big banks and must be included.

Merkel faces re-election next September and does not want to approve any contraversial rules and regulations until after then. Seems as though Merkel will not enjoy the Bonhomie with Hollande that she had with Sarkozy and has openly criticised France's financial situation.

How long this Euro crisis can go on is anyone's guess and Countries around the World are very critical of the EU being unable to find a solution .

Bond sales yields have risen in France, Spain and Italy .

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Debate
All of Europe’s misfortunes



12 November 2012Polska The Times Warsaw

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Nicolas Vadot

The Old Continent is grappling with a moderately severe economic crisis, a severe political crisis, a critical civilisational crisis, and perhaps a deadly spiritual crisis, argues a Polish philosopher.

Marcin Król

We know that Europe used to be almost always in a state of crisis. … The difference between a constant risk of crisis and the present situation, however, is that Europe had always retained a capacity for self-reflection, and thus for self-criticism, which was creative, so the successive crises were always overcome. Today Europe has lost this ability. Without constant self-criticism there will be no change, no growth, and no stability. The Europe-until-now is all but gone.

We can hardly imagine a future world without Europe, not as a leader perhaps, but as a provider of fundamental norms and standards binding us and the generations to come. Europe is our form of existence and we have no other. This is not so much a matter of choice as a fact. That’s why we don’t know what to do when Europe is becoming elusive, vanishing, weakening to the point of non-existence.


An intellectual and spiritual fear



Three answers have been most frequently given. The first one appeals for a return to time-tested policies, usually various forms of a welfare or social-democratic state.

The second type of answer, given by authors who are aware that the crisis is not only, and not mostly, economic in nature, urges political reforms. Most characteristic of those is the vision of federal Europe bound by strong internal ties. However, this nice vision is as old as Europe and has always proved fruitless. Its main flaw is that no European society wants a federal Europe, because such a Europe – provided it could be made real, which is unlikely – would be completely different from the one we consider, or used to consider, as the form of our existence.

Finally, the third answer, most primitive albeit most widespread, is that when the economy recovers, so will the other important spheres of European life.

All these answers have one thing in common: they all seek solutions in the present. This is a line of reasoning that we often follow when in trouble. We wish to solve the issue here and now, possibly by using familiar means, but using them more effectively. …

We use familiar means not because we lack imagination or courage, but because we don’t know what else we could do. Come to think of it, one might say that Europe’s prevalent mood today is one of anxiety. This is not an anxiety about the possible collapse of a currency, but an intellectual and spiritual one. An acute fear of the shadows of the past and the looming threats of the future, which means that we start running around in circles, because choosing a way out requires a decision, which fear prevents us from ever making..


Present crisis was long seen coming



Four great splits in modern Europe’s spirituality and philosophy have led to the present state of helplessness. These are: religion and mystery as key to understanding the world versus religion as superstition; nationalism and the nation state versus universalistic values and practices; utilitarianism, that is a pursuit of pleasure, versus limited and reasonable goals adopted by individuals; and finally democracy, that is community, versus liberalism as an epitome of private freedom.

The present crisis was actually long seen coming. … Prudent economists realised that the public debt levels were unsustainable, that Greece had gone way too far, that virtually unregulated financial speculation would inevitably lead to a disaster.

The falling birth rate was no secret either, nor were imminent catastrophes in pensions, healthcare and education. It was also clear that the dispute between religion and the post-Enlightenment tradition would not die a natural death, that the decline of philosophy would undermine the quality of the humanities and human thought in general, that the domination of electronic media would result in such forms of political fighting as we witness today. All that was known, though politicians would often not listen, or be intellectually incapable of grasping those issues.

Any serious reaction would require making unpopular decisions, and this is something the actors of today’s democracy fear the most. Suffice it to say that the pension reforms recently introduced in virtually all European countries should have been introduced a decade ago to be successful. And that the EU experts in charge of education are pushing the European education sector towards replacing universities with vocational schools, demonstrating their utter failure to understand the fact that the humanities are based on philosophy, and the exact sciences on mathematics. These disciplines are least subsidised today.


Defining the common interest



What we saw, therefore, was not so much an inability to foresee as an unwillingness to do so. To make matters worse, numerous economists suggested purely technical methods of battling the crisis, methods that were not only economically unsuccessful but also, far more importantly, far from addressing its fundamental, spiritual and intellectual, causes.

After all, if four hundred Americans own as much wealth as the rest of the nation, then something is fundamentally wrong. I am not saying this to postulate socialist equality, but out of an elementary sense of decency. Democracies that have allowed this to happen have no reason to exist. As a fundamentally collective idea, democracy has to apply to all citizens of the given political organism. This means its nature must not be elitist, but also that it has to account for both individual- and collective-level irrationalism. Reconciling these themes requires either explaining to the democratic community what its collective interest is, or generating such a level of collective emotions where this interest is clear for all to see (this used to be called patriotism). Common interest, unlike common welfare, is great at uniting citizens despite their often conflicting views.

James Madison knew this perfectly well. But in order to define what common interest is we first need to understand what our group or particular interests are. We also need to be able to set priorities, that is, define a hierarchy of goals. Only the necessarily difficult consensus on such a hierarchy will facilitate a move forward that will be more than just a correction of the present condition. Today this is impossible.

Translated from the Polish by Marcin Wawrzyńczak

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Germany's finance minister risks widening the rift with the IMF over Greece, as he ruled out official sector writedowns and described Greece's 2020 debt sustainability target as "possibly a little too ambitious".








Luxembourg Prime Minister and Eurogroup president Jean-Claude Juncker (L) speaks with International Monetary Fund Managing Director Christine Lagarde before a meeting on Monday. Photo: AFP






By Szu Ping Chan

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• IMF chief and EU clash over Greek debt
• Germany rules out official sector Greek haircuts
• Shock jump in UK inflation to 2.7pc
• Greece holds short term debt auction to avoid default
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13.31 Catalonia would consider pursuing independence even if it’s denied entry into the EU, according to its regional government’s chief of staff.


Joan Vidal de Ciurana told Bloomberg TV:


If all doors are closed, maybe we should have a meeting in the Catalan parliament between Catalan parties to find the best way to continue this process [...] If the majority considers that the process should continue, we will continue, because it’s the mandate we’ll have been given by the people.


Artur Mas, the president of Catalonia announced in September that the region would hold early elections on November 25.


The vote is widely seen as a de facto referendum on his demands for greater independence for the region.



13.05 Pressuring British banks to lend will lead to a rise in defaults because borrowers will not be creditworthy, a regulator at the Bank of England has said.

Michael Cohrs, a member of the Financial Policy Committee, said that creditworthy households and companies were currently "gett[ing] their house in order [...] to protect themselves from the storms we currently are feeling" and that pushing banks too hard would only lead to a rise in default levels. Speaking at the University of the West of England, he said:

In order to get the right regulation we must know what we want from the financial industry. Given the macroeconomic situation many countries find themselves in there has naturally been a massive effort to create the right conditions for banks to increase the size of their loan books to stimulate economic activity. But a bit of caution here is useful. Leverage, or borrowing too much money, whether within a financial institution or a corporate or at the household level, is a depressingly common cause of financial crises. The current low levels of lending are partially because creditworthy companies and households have decided to either get their house in order or deleverage to protect themselves from the storms we currently are feeling or they see coming in the next few years. The importance of lending to stimulate economic growth is clear.

However it is rational and prudent for companies and households to take debt levels down in times like this. If we push too hard on the lending theme we will simply raise default levels, as more of the borrowers will not be creditworthy. There is no silver bullet to quickly fix the current economic situation.



12.15 Germany could bundle Greece's next three aid tranches into one payment of more than €44bn, according to reports.

Bild said that the government was considering adding Greece's latest €31.3bn tranche with further tranches of €5bn and €8.3bn for the third and fourth quarters.

A German finance ministry spokeswoman told Reuters that no final decision had yet been made on next loan payments to Greece.

12.01 Jean-Claude Juncker has attempted to allay fears of a growing rift between the IMF and EU over Greece's debt sustainability target.

Speaking in Hingene, Belgium, the head of the Eurogroup said that there was "no real dispute" with the IMF, and that any disagreement was just part of an "ongoing debate" on Greece's adjustment programme. He said:

The IMF is in its right to be asking Europeans to bring the necessary attention to the debt- reduction problem.

We think that the debt reduction has to be of a magnitude of 120pc in 2020, or as some of us believe that this 120pc level could be postponed to the year 2022. This is no major set of disagreement.



11.48 Commenting on this morning's market movers, Alastair McCaig at IG, said:

Red screens greeted European traders this morning as markets showed a decisive risk-off attitude.

Last night’s news that the Troika had approved Greek politicians' austerity efforts, granting them another two years of fiscal assistance, has done little this morning to lift the sense of pessimism that traders feel when discussing Greece. and at 10am (London time) the FTSE is down 55 points at 5719. In Europe, markets had been waiting for the 10am (London time) ZEW confidence figures for both the EU and Germany, and reacted badly to the terrible figures – confirming that today's pessimism is not solely confined to the cynical Brits.

Vodafone’s Italian and Spanish arms have dragged the telecommunication company into a six-month loss. Even with a very healthy $8.5 billion extra dividend from its 45% stake in Verizon, Vodafone posted a first-half loss of £ 1.98 billion. The substantial drop from last year’s £6.68 billion profit saw Vodafone shares down 3.81% – which thanks to the company's hefty weighting on the FTSE 100 contributed 12.55 points (approximately a quarter) of the blue-chip index's losses so far today.

11.45 European stock markets are down this morning.

The FTSE 100 in London is down 0.84pc at 5,719.00, while the CAC 40 in Paris has slipped 0.9pc to 3,381.09 and Frankfurt's DAX 30 index is down 0.84pc at 7,108.90.

11.27While Nicholas Spiro at Spiro Sovereign Strategy, says:

Athens' creditors' ability to kick the Greek can further down the road knows no bounds.

[...] Eurozone members, led by Germany, want to have their cake and eat it too: they want Greece to remain in the eurozone (at least for the time being) but are politically unwilling to accept losses on their loans to Athens.

All solutions to ease Greece's financial plight are on the table except the one that is most likely to put the country's finances on a more secure footing and help keep Greece in the eurozone: the forgiveness of official loans. Rescue fatigue on the part of Greece's creditors, coupled with persistent doubts about Athens' ability to implement reforms in the face of a seemingly never-ending recession, are conspiring to keep Greece in limbo: in the eurozone but economically and financially crippled.

While fears of an imminent Greek exit from the eurozone have receded, the Greek tail is beginning to wag the eurozone dog once again - although mounting concern about the US fiscal cliff and Spain's own woes are also contributing to the deterioration in risk sentiment.

Greece remains a cancer on the eurozone economy which the bloc's leaders have yet to treat effectively. The most competent doctor, meanwhile, the IMF, is losing credibility.



11.19 The FT's Alan Beattie has posted a blog on the EU-IMF spat, where he writes that the trouble in t'troika had been brewing for some time:

Reports of discord within the troika over Greece’s financing gap and who is going to have to fill it are hardly new: it’s now more than a year since the IMF started to dig in its heels over the Greek rescue, at least behind closed doors, and point out the Panglossian nature of the troika’s forecasts for debt and deficits.

Yet the fund was still rolled into supporting a clearly unsustainable revised bailout for Greece back in March, signing up to a debt sustainability analysis over which its staff had grave doubts and warning that any slippage from the targets was going to mean Greece and the eurozone/ECB having to come up with new austerity measures and fresh cash respectively. As its report at the time concluded (page 38):

It should nonetheless be stressed that this assessment leaves little to no margin in case policy implementation and economic and financial variables do not evolve in line with program assumptions and projections, in which case continuing to meet the substantive exceptional access criteria in future reviews may require additional efforts by the [Greek] authorities and/or their European partners.

The only real import of Monday’s 2020 vs 2022 disagreement is that, by publicly drawing a line, it will be more obvious – and more damaging to what remains of the IMF’s reputation as a speaker of truth to power – if it is forced to give way.

11.05 Jennifer Mckeown at Capital Economics added:

November's renewed fall in German ZEW investor sentiment suggests that financial markets' optimism about the prospect of ECB bond purchases is fading...

Meanwhile, there have been clear signs of a downturn in the German economy itself, with business surveys weakening further in October and industrial production falling sharply in September. For now, the ZEW looks broadly consistent with economic stagnation in Germany. But we think the economy will slide back into recession next year as the peripheral debt crisis intensifies and business and consumer confidence weaken further.



10.57 Commenting on the survey data, ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz (yes, he does have all those titles), said:

Since mid-2012 the economic expectations of the financial market experts move more or less sideways while remaining in the negative territory. Prevailing recessionary developments in the Eurozone impact the German economy via foreign trade and a lack of confidence. This is likely to be a burden for economic growth in Germany during the next six months.

10.55 From the eurozone's weakest nation, to its strongest.

German investor sentiment unexpectedly fell in November, as the eurozone crisis weighed on confidence.

ZEW's monthly survey of 263 analysts and investors showed that economic sentiment fell to -15.7 from -11.5 in October.

Analysts polled by Reuters had expected a reading of -9.8 (the number reflects the difference between positive and negative assessments).



10.40 According to Bloomberg, Greece may issue a further €637.5m of 4-week T-bills and €300m of 3-month bills in a second auction this week.

This will allow the country to redeem a €5bn bond that matures on Friday.

10.36 Greece has got its debt auction away, where it has sold just over €4bn of short term debt.

It sold €1.3bn of three month debt at average yields of 4.2pc, according to country's debt management agency. This compares with 4.24pc at a similar auction last month.

There were 1.66 bidders for every bond on offer (v.1.9).

It also sold €2.762bn of 4-week Treasury bills at average yields of 3.95pc.

10.27 I will be keeping a close eye on events in Brussels. This Greek deal is far from signed, sealed and delivered.

Follow our Brussels correspondent Bruno Waterfield on Twitter for more live updates.

10.25 He added:

There are no considerations to top up the programme. We must find ways to close the gaps without using this path. That's not trivial, but it is also not beyond imagination. Then we presume the programme will function, so in the end it will be all about guarantees, not transfer for Greece.

But it may be that we take some measures to reduce interest rates that will have an immediate effect on the budget. That's true, but that's about forgoing of profits or marginal changes.

Apart from that, we expect that the problems will be solved within the financial framework of the second programme by allowing more time with additional measures.

10.20 More from Mr Schaeuble, courtesy of Reuters:

We know that the worsening economy in Europe... leads to Greece reaching debt sustainability in 2020... as being possibly a little too ambitious.

We will need to find solutions on some difficult points in the coming days, but given the progress made we are confident we will manage that together.



_{German Finance Minister Wolfgang Schaeuble (L) and French finance minister Pierre Moscovici (R), arrive to give a join press conference during a Ecofin European finance minister meeting in Brussels on Tuesday (Photo: EPA)}

On official sector involvement (OSI), he said:

I am very happy that in retrospect we are getting so much support for the PSI (private sector writedowns on Greek debt) by the IMF. It's a good sign that proposals developed by France and Germany together are usually so good that they can be accepted by others. For private creditors there is no opportunity of a second haircut anymore.

What can be done is a debt buy, and that's being talked about. There's a debate about a haircut for official creditors.

On that I will say, and most countries have said so in the past few weeks, that that's legally not possible. And to reiterate the position of the ECB is not the job of the German finance minister, but if you ask the president of the ECB you get a clear answer.

Without speculating, I believe we should in future concentrate on other solutions.

10.15 The Economist newspaper examines what it calls the "Battle of the (third) bailout" in a blog this morning:

...extending the bailout by two more years means Greece will need to borrow some €32.6 billion more from its euro-zone partners. That amounts to a third bail-out.

Even if this extra help is agreed somehow, Greece will be far from safe. The previous bailout, which included a big haircut on private bondholders (aka Private Sector Involvement, or PSI), was supposed to bring Greece's debt below 120% of GDP by 2020. That will be missed by a wide margin.

Quite how wide is still a matter of dispute. The “debt sustainability analysis” has been omitted from the troika's report. But sources say the IMF reckons Greek debt will be around 160% of GDP in 2020, while the European Commission puts it lower at about 140% of GDP. Massaging of the figures, which are sensitive to forecasts of the rate of economic growth (or Greece's case, of shrinkage) and the interest rate should eventually reconcile the two.



10.12 Back to Greece, where Wolfgang Schaeuble, Germany's finance minister, risks widening the rift with Christine Lagarde by describing Greece's 2020 debt sustainability target as "possibly a little too ambitious".

He also said that the €32.6bn (£26bn) funding gap created by the two year extension should be plugged by lowering the rate that Greece pays on its loans, NOT via governments taking a writedown on their holding of Greek bonds, something that the IMF has long advocated.

Oh dear, this could get nasty.

09.53 Ross Walker at RBS, added:

They are a little bit disappointing, higher than expected, above the range. Ironically, we had the tuition fee increases that are roughly what we expected and the surprise for us was the extent of the food price increase and also to some extent the transportation numbers.

Half the rise is an administered price increase if you like, it reflects a legislative change in terms of university fees... I don't think it's a game changer, I don't think it's going to alter the policy outlook, they [the Bank of England] seem to be pausing on QE or further loosening anyway.

09.46 The Bank of England will publish its latest inflation report tomorrow. Commenting on the data James Knightley at ING, said:

We expect to see further increases in the annual rate of inflation given that agriculture prices have been rising sharply while utility providers have announced steep rises in gas and electricity prices, the majority of which will come into effect in early December. As a result, we could see inflation moving back up to 3pc by January.

[...] So with medium-term inflation prospects likely to remain non-threatening, the Bank of England can continue to offer policy stimulus... We expect the Bank of England to expand its Asset Purchase Facility again, with 1Q13 our favoured timing point, but the tone of tomorrow's BoE's Inflation Report press conference will allow us to firm up our expectations for the timing a little better.

09.40 RPI inflation (a wider measure, that includes mortgage interest costs) rose to 3.2pc last month, from 2.6pc in September.

09.33 UK inflation jumped to a five-month high in October, official data show.

Consumer price inflation jumped to 2.7pc in October, from 2.2pc in September, according to the Office for National Statistics.

The rise was largely driven by a jump in air fares, food costs and university tuition fees, the ONS said.



09.10 This morning, Greece will sell €3.125bn of short term debt to avoid defaulting on a €5bn bond that is due for redemption on Friday.

We'll bring you the results at around 10am.

09.04 Translation: Greece has done well. It should get more time. But we still need to get the OK from individual governments.

This means that we will have another meeting once governments have had their own meetings provided that the meeting between European debt inspectors and Greece produces a positive report.

Pretty straightforward then.

You can watch last night's press conference in full here:



08.56 Here's what Mr Juncker had to say last night:

...the Eurogroup concludes that the revised fiscal targets, as requested by the Greek government and supported by the Troika, would be an appropriate adjustment for the further path of fiscal consolidation in view of recent economic developments. The Eurogroup looks forward to the adoption of the related legal texts by the Council.

The Eurogroup calls on the Greek authorities to implement the few remaining prior actions as a matter of urgency so as to allow for a swift conclusion of the review.

Together with the review of the Greek adjustment programme, the Eurogroup will further discuss financing needs and debt sustainability, at an extraordinary meeting that will be convened on 20 November. The Eurogroup expects that by that time, the necessary elements will be in place for Member States to launch the relevant national procedures required for the approval of the next EFSF disbursement, subject to the Troika's final positive assessment of all prior actions by the Greek authorities.

08.51 It's far from happy families in Europe this morning. Last night, Christine Lagarde, the managing director of the International Monetary fund, clashed with EU leaders over Greece's debt sustainability target. Bruno Waterfield reports:

Jean-Claude Juncker, president of the Eurogroup of finance ministers, announced Greece would be given an extra two years to meet its debt reduction target of 120pc of GDP by 2022 instead of 2020.

“The target, as far as the time-frame is concerned, has been postponed to 2022,” he said.

A visibly angered Mrs Lagarde, the managing director of the IMF, shook her head and rolled her eyes at the announcement that breaches the Washington-based fund’s condition that Greek debt must become sustainable by 2020.

“We clearly have different views,” she said. “In our view the appropriate target is 120pc by 2020. It is critical that the Greek debt be sustainable."

The 2020 “debt sustainability” target was agreed as the condition for the IMF’s involvement in the second Greek bail-out agreed in March this year and an EU decision to breach it could jeopardise the whole international package.



_{Greek Finance Minister Yannis Stournaras (L) chats with International Monetary Fund (IMF) Managing Director Christine Lagarde at the start of a Eurogroup finance ministers meeting in Brussels on Monday (Photo: EPA).}

08.45 Good morning and welcome to another day of live coverage of Europe's debt crisis.

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Greece
Aid is fine, but ideas would be better



13 November 2012I Kathimerini Athens

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Shooty

Its European partners have given Greece’s government two more years to lower the deficit, but Greece will still have to wait on the 31.5 billion euro aid tranche. Once these negotiations are over, though, the groundwork for a new economic development must be built – not the easiest task awaiting the country.

Nikos Chrisoloras

Despite the endless nights, the marathon negotiations, the comings and goings of legislative amendments, the race to get the aid tranche [31.5 billion euros from international lenders] and the endless cuts, the truth is that Yannis Stournaras, Minister of Finance, has the easiest job in the Greek government. The job of every minister in a bankrupt state is a thankless one, and the decisions they are called upon to take are painful – but at least, in the framework that it is evolving in, the situation is known in advance. A bankruptcy remains a bankruptcy, as does the inability to borrow from somewhere else.

However, the challenge facing the other ministers and deputy ministers, as well as the government leadership outside of the Ministry of Finance, is much more significant.

Their duty does not stop at managing the current reality, but involves ushering in a new reality.

Greece’s provisional survival in the developed world depends on the ability of those people to lay the groundwork for new prosperity to be created – and all this in the environment that has sprung up in the wake of the collapse of Lehman Brothers and the shutting down of the financing channels, which is what dragged the Greek economy into recession in late 2008.

That job is much tougher and more complex than seeing through the spending cuts and tax hikes. The fact that the resistance against the austerity is greater than the resistance to the reforms themselves shows the truth of that.


Greece has highest rate of physicians per patient



Many will say that it is impossible to rebuild the Greek state and create the ideal setting for development when the Minister of Finance keeps slashing the funds. But experience shows that it’s not always money that’s the problem. Greece has the highest rate of physicians per patient and teachers per student in the developed world. Even before the crisis, though, the level of educational services and care provided to citizens was so low that it pushed anyone who could pay for them to the private sector. Before the crisis, social spending in Greece was at the European standard, yet its impact on reducing poverty was less that what similar spending attained in Western Europe.

In addition, the European Commissioner for Regional Policy, Johannes Hahn, said on Sunday that the country has not achieved its objectives in the use of EU funds, owing to the weakness of the public administration and poor coordination between services.

In international surveys of competitiveness, the complexity of Greece’s tax laws is more likely to be mentioned by investors than the tax scales themselves. Even today, after so many facilities have been put in place, like the “one-stop shop” and accelerated procedures, one of my friends who tried to set up a health sector company in the Cyclades had to tour the Aegean Sea three times, running from one service to the next for two months, before ultimately giving up.

This fiasco gets little publicity, both in government and in the opposition. Their silence shows that our greatest deficit at the moment, Mr. Stournaras, is not the public deficit but the lack of proposals for tomorrow.

[Badboy]

I BELIEVE THERE WERE PROTESTS AGAINST AUSTERITY IN PLACES LIKE SPAIN TODAY AND SEVERAL OTHER COUNTRIES

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Germany
Goodbye euro, hello recession



14 November 2012Die Zeit Hamburg

The 18th century architect Balthasar Neumann, once portrayed on German 50 mark notes, surrounded by characters from other former national currencies.

Antonio

What would happen if Germany left the euro? Economist Gustav Horn of the Hans-Böckler Foundation, which has close ties to trade unions, speculates on what would happen in the days following a German exit from the euro – and on what Germany's most popular euro-critic, Thilo Sarrazin, might also say. Excerpts.

Gustav Horn

A what-if: What would happen if Germany were to leave the euro, as the investor George Soros is calling for?

Let’s say that, by a two-thirds majority, the German Parliament votes to leave the euro and reintroduce the German mark. Only the Greens vote against it. The exchange rate is set at one to one. The Bundesbank president leaves the ECB’s Governing Council with immediate effect.

The financial and foreign exchange markets are the first to react to Germany’s decampment. From the remainder of the monetary union, a great amount of liquidity flows into Germany. The new currency abruptly appreciates by 50 percent against the euro, and one mark now costs 1.50 euros.

The assets invested in Germany lose – in euro terms – much of their value. At the same time, the value of German state guarantees for the euro rescue fund sharply decreases. Initially, the risks to the public finances recede.

Around 200 German economists celebrate Germany's regained freedom. Thilo Sarrazin goes on a popular TV political talk show hosted by Günther Jauch to explain that Germany does not need the euro.

In the rest of the eurozone, the financial market are rocked by turmoil. The ECB, which has relocated its headquarters from Frankfurt to Paris immediately after Germany’s withdrawal, announces unlimited bond purchases, which allows the ECB bankers swiftly to reassure the stock markets.


German cars become too expensive



At the same time, they will pay back Germany’s deposits in the ESM with printed euros. Calculated in marks, these meanwhile have lost a third of their value. The Bundesbank therefore takes some hefty losses, and German government debt balloons accordingly.

After a few weeks of relief over the escape from the crisis, several major car manufacturers declare that their sales figures in the new eurozone have nose-dived. German cars have become too expensive for the other Europeans. The automakers bring in short-time work and cut jobs.

A little later, the Confederation of Employers declares that Germany's economy is no longer competitive and urges wage restraint on the German unions. After one quarter, the Federal Statistical Office announces that Germany's current balance of payments surplus has halved because exports to the remaining eurozone have plunged. Thilo Sarrazin goes on the popular TV political talk show hosted by Anne Will to say: “Germany is doing well even without the euro. Its revenues have not dropped.”

In the rest of the eurozone, the countries in crisis gain more time to build up their savings. The other countries also increase their deposits in the ESM bailout fund to compensate for the absence of Germany.


Sharp rise in unemployment



The fiscal pact is suspended and replaced by a stability pact. This commits the countries to comply with an inflation target in order to avoid current account imbalances. The ESM is transformed into a European Monetary Fund (EMF). Countries that record large current account surpluses or deficits must cede a portion of their income tax revenue to the EMF.

Germany's current account balance has now evened out, thanks to the sharp decline in exports. Germany's economy is going through a sharp slump. The export industry finds itself in recession and pushes though sweeping job cuts. Domestically, the economy, hit by higher interest rates, also begins to lose momentum. In the remainder of the eurozone, however, the economic situation gradually stabilises. Thilo Sarrazin goes on the political talk show hosted by Frank Plasberg to say: “That has nothing to do with the euro.”

Volkswagen announces that it is shifting much of its car production to the remainder of the eurozone, saying “The German market is too small for our production, and we need greater exchange-rate security.” The value of VW stock jumps steeply. BMW and Daimler confirm similar plans. Against a backdrop of falling tax revenues, the debt brake forces job cuts in the public sector. Wage negotiations lead to an increase of just half a percent.

A year after leaving the euro, Germany has landed in a deep recession with a sharp rise in unemployment. Meanwhile, domestic demand is plummeting, as the low wage increases and the job cuts are now pushing down consumption. At the same time, more and more companies are announcing job relocations to the eurozone, the U.S. or Asia.


Greece and Spain are on the go



The Frankfurt Stock Exchange has lost much of its significance; the Paris Stock Exchange, in contrast, has gained in influence. Financial capital is flowing out of Germany. The rise in the value of the mark has come to a standstill.

The eurozone has now stabilised and shows at least weak economic growth. In particular, exports from the crisis countries – to Germany, above all – have risen. VW is planning to expand its facilities in Spain and is contemplating building another plant in Greece.

After two years, the growth in the remaining eurozone is once again significantly higher than two percent. The economic output in Germany, however, has stagnated, and unemployment stays high.

Around 200 German economists publish a dramatic appeal for Germany to increase its competitiveness. The German labour market is too inflexible, the wages too high and the benefits far too lavish. Two years after exiting from the euro, write the economists, Greece and Spain are on the go, while the German economy is limping.

Thilo Sarrazin goes on the TV political show hosted by Maybrit Illner to explain, “I never recommended getting out of the eurozone, but you will allow that I did have the right to say that we do not need the euro.”

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I BELIEVE THERE WERE PROTESTS AGAINST AUSTERITY IN PLACES LIKE SPAIN TODAY AND SEVERAL OTHER COUNTRIES

Badboy, Unions from some EU Countries .......Spain, Italy, France and Portugal have joined together to strike on the same day and the situation is critical now. Truth to tell, three years down the line the EU is devoid of any ideas to stabilise the economy. The World is in recession but Merkel was wrong to demand austerity now, should have waited until the economies around the World picked up.

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560
315
TelegraphPlayer_9679103













By Szu Ping Chan, and Andrew Trotman

9:59PM GMT 14 Nov 2012

957 Comments




20.09 German newspaper Handelsblatt is claiming that the EU won't take a final decision on Greek aid next week.

19.35 Chanting, whistling and setting off fireworks, those Spanish protesters have swamped the centre of the capital.



19.16 There are reports that the number of protesters in Madrid has swelled to hundreds of thousands.

18.40 In Portugal, police have charged demonstrators who had gathered in front of Lisbon's parliament building.

Police dispersed the protesters with baton blows after demonstrators threw stones and rubbish at them for more than an hour.

18.39 Spanish government has said 118 people have been arrested today. 74 people have been injured, 43 of those are police officers.

18.36 A shocking video reportedly showing Spanish riot police chasing and hitting protesters, including the 13-year-old boy that Fiona Govan mentioned earlier:



18.19 More from Telegraph reporter Fiona Govan in Madrid:

Tens of thousands of protesters are now gathering in Madrid to march against austerity. Police vans are lined up in anticipation in Tarragona in the northeastern region of Catalonia, where a 13-year-old boy was hit over the head with a baton by police during a protest. Protesters are already complaining about incidents of police brutality claiming officers are too quick to attack during peaceful demonstrations.

18.15 The Spanish government has raised the number of arrests in Madrid to 110. Forty people have now been injured, including 18 police officers.

17.46 Ireland's credit outlook has been revised to "stable" from "negative" by rating agency Fitch, meaning that it is unlikely that the country faces a downgrade over the next 18 months.

In a statement, Fitch said:

Fiscal consolidation remains on track, broadly in line with the original trajectory of the EU-IMF programme, which envisaged a 120% debt/GDP ratio in 2012, peaking in 2013-14 before declining. So far, Ireland has met all the quarterly fiscal targets of the programme. Fitch expects the 2012 deficit to be close to the target of 8.6% of GDP, implying a primary deficit of 4.5%, despite some expenditure overruns. More fundamentally, fiscal policy has so far successfully managed to meet the fiscal targets without excessive adverse impact on economic growth in 2011-2012. Nevertheless, significant further adjustment is needed to bring the deficit below 3% by 2015 as required under the EU-IMF programme and the Excessive Deficit Procedure.

Although Fitch forecasts GDP growth at 0% in 2012, down from 1.4% in 2011, this would still be better than the eurozone average, which Fitch forecasts at -0.5%, and significantly better than other so-called peripheral eurozone countries, highlighting Ireland's progress towards returning to economic growth.



17.34 Today's protests have also reached London. Demonstrators have gathered outside Smith Square - the European Commission's outpost in the capital. Charlie Kiss, a Green Party activist, tweets:

Twitter: Charlie Kiss - Getting busier in Smith Square. Anti European Austerity demo # Europe http://t.co/d90u3Bag

17.24 I don't fancy my chances against these chaps:



_{Riot police march down the street during a 24-hour nationwide general strike at Sants station in Barcelona (Photo: Reuters).}

This would probably happen:



_{Police apprehend a protester in Valencia (Photo: AP).}

17.10 David Madden at IG comments on today's market movers:

Equities were already in negative territory before Sir Mervyn King spoke today, and after he cut the Bank of England's UK growth forecast for next year to 1%, they continued on their downhill journey. Ordinarily any hint of more QE would send stocks higher, but today's suggestion was shrugged off by investors - it's almost like markets are now immune to QE. Meanwhile, rising Portuguese unemployment and higher Spanish bond yields have helped to push European benchmarks into the red.

EU commissioner Olli Rehn today said that Spain has taken adequate action to deal with its fiscal problems, but members of the Troika can hold all the talks they want; it's up to the Spanish government to decide if they want a bailout or not. My guess is the bond markets will eventually force Madrid to seek a bailout, but while Spanish yields are under 6% Mr Rajoy will hold out as long as he can.

16.51 A few more pictures from today's protests.

16.39 Spain has welcomed the EC’s support for its deficit reduction measures, and reaffirmed its commitment to targets for future years.

The economy ministry made the comments in a statement.

16.21 Our video team have compiled a few more clips of the violent clashes between police and demonstrators in Spain and Italy:










16.03 Here's Bruno Waterfield's analysis of Mr Rehn's statement:

Well amid violent anti-austerity protests in Madrid that was about cutting Spain some slack but with some steel under the velvet glove.

Rehn praised the effectiveness of Spanish austerity measures and took his foot off Madrid's throat.

But that is only as regards any sanctions against Spain for breaching the nominal 3pc of annual GDP debt rule.

He warned that the EU was watching like a hawk and would assess Spain again in early 2013.

Hinting at toughness ahead he criticised overly optimistic Spanish growth forecasts and said measures for 2014 "fall short".

For any other countries hopeful that the European Commisison has shifted to use longer-term structural deficit measures, rather that the 3pc nominal rule, Rehn offered little comfort.

"It's case by case," he said.



15.53 Mr Rehn repeats that only Spain can decide if it will request a bail-out.

15.52 Mr Rehn says that there are still risks surrounding the country's nominal budget target, and that the country's "optimistic" growth projections mean that there is a risk of "budgetary slippages" in the future.

...there are risks to achieving the nominal targets for next year 2013. They stem partly from an optimistic macroeconomic scenario underlying the 2013 budget and partly from the optimistic projections for social security. There are also risks of more budgetary slippages in the Autonomous Communities.

He also says that the measures announced so far for 2014 fall short of what is required, "therefore we will closely monitor budgetary developments".

However, he adds that the country has been able to restore the sustainability of public finances for the next two years via the action it has taken, and therefore "no further steps are needed at present".

The Commission will reassess the situation next February, "when we will have a better view of the outlook of the Spanish economy."

15.40 Spain has received a big pat on the back from the European Commission for taking "effective action" to reduce its structural deficit. Olli Rehn said:

We know that Spain is undergoing a very difficult re-balancing of its economy after many years of unsustainable policies. The government and the Spanish people are making significant efforts to ensure the sustainability of public finances. This involves hard choices, and sacrifices for many parts of the population. Progress is being made, even if the situation faced by many Spaniards remains very difficult.

Mr Rehn says that in order restore to confidence to public finances, Spain has taken measures that amount to 5.25pc of GDP in 2012, and 2.25pc in 2013.

He says that the EC now estimates that the annual improvement in the structural balance for 2012 and 2013 is in line with requirements.

15.14 Olli Rehn will make a statement on Spain shortly. You can watch it live here.



15.13 More on today's violent clashes in Madrid from Fiona Govan:

Violent clashes have broken out in the capital when a group of protestors clashed with riot police in Madrid's Plaza Cibeles and rubber bullets

were fired on the crowd. The number of people arrested so far today has risen to 82 and at least 34 people have been injured, more than half of the them police officers. Spanish media are showing images from protests across the country in which police are seen baton-charging demonstrators. Traffic has been stopped on various main streets through ithe capital already but the biggest demonstrations are yet to come with marches called for 6.30 this evening.

Armoured vans of riot police line the streets in the heart of the capital in anticipation.

Unions are calling today's strike a success claiming some 78 per cent of workers have observed the 24-hour walkout and that the transport network, ports and industry have been virtually brought to a halt. Spain's government however have played down the strike insisting that it has had less support than the last general strike in March.

15.11 More from Nick Squires, who reports that 60 people have been arrested in Rome today:

The city is slowly returning to normal. Roads that were closed are being reopened but riot police remain stationed outside the Senate and other government buildings.

I saw hundreds of young students milling around the streets in the city centre and police helicopters monitoring the situation from above.

Police officers have been injured in clashes in Turin and Milan.

14.59 A few pictures are coming through from today's protests in Athens:



<sub>French nationals living in Greece protest outside the Greek parliament in Athens on Wednesday (Photo: Getty).



Protesters move a life-size puppet made of paper symbolizing a Greek citizen (Photo: Reuters).</sub>

14.49 Nick Squires sends this update from Rome:

As clashes break out between protesters and police in Rome, Milan and Turin, some remarks on Italy's predicament from Professor Christopher Duggan, the director of the Centre for Modern Italian History at Reading University and the author of several books on Italian history and politics.

He argues that while the attention of the EU is currently on Greece, Spain and Portugal, the problems facing the Italian government are considerable.

And with Italy the eighth largest economy in the world, the risk to the rest of Europe is high.

"The traditions of revolt are arguably stronger in Italy than in any other European country. Given the depth of the economic problems Italy faces, the scale and direction of its public anger merits close attention.

"The government is unlikely to fall imminently - mainly because there is no clear alternative to Prime Minister Mario Monti. At the moment elections are due to be held in the spring, but the great fear is that a weak coalition will emerge which will not give the country the stability the markets will be looking for. So the real concerns - in the absence of any significant growth - are what happens next year."



_{Riot police clash with students during a demonstration against austerity measures in downtown Rome (Photo: Reuters).}

14.37 So, probably no bail-out request - yet. Bruno Waterfield in Brussels tells me that it would be odd that someone like Mr Rehn would make such an announcement anyway, as bail-out requests come from governments first.

Open Europe tweets:

Twitter: Open Europe - Olli Rehn to make statement on Spain at 3.15pm (London time). Another relaxation of deficit targets on its way?

14.25 Olli Rehn will announce if Spain has done enough to bring its budget gap under control in his statement today, according to Bloomberg.

In July, Spain was was given three months to take “effective action” on its structural deficit (which excludes one-off revenues and expenditures). It needs to reduce the deficit by 2.7 percentage points this year and 2.5 points in 2013.

14.04 While, Fiona Govan, the Telegraph's correspondent in Madrid, reports on the escalating tensions in Spain:










13.56 Reuters now reports that 81 people have been arrested in Spain.

13.53 Italian journalist Fabrizio Goria tweets:

Twitter: Fabrizio Goria - DJ: EU's Rehn statement is said to be about Spain's excessive deficit procedure, according to sources

13.21 Hmmm....Olli Rehn, EU commissioner for economic and monetary affairs, will make a statement on Spain at 3.15pm UK time.



13.12 Mr Dallara sided with colleagues at the EU by suggesting that official sector participation should come via lower interest rates on Greece's loans, not another debt write-off.

He said that the IMF could increase its contribution by charging a lower rate on its share of Greece's bail-out loans - usually reserved for poorer countries.

12.58 Greece needs more lenient targets to reduce its budget deficit if it is to avoid a "protracted era" of recession or low-growth, according to the head of an international banking lobby.

Charles Dallara, managing director of the Institute of International Finance (IIF), which led bank negotiations for Greece's €100bn private sector debt write-off, said that eurozone countries should find a better balance between austerity and policies that promote growth. He told an audience in Athens:

It's my view that everything must be done to avoid this reality [of a deepening recession] What is needed instead in my view is to ease the case of fiscal adjustment.

12.49 Six Italian police officers have been injured amid clashes with protesters in Milan and Turin. AFP reports:

Around 20 activists beat a riot police officer with stick and baseball bats in Turin, while five officers were hurt during running street battles in central Milan.

12.34 A few more pictures from today's protests in Spain:



<sub>A woman walks past graffiti featuring Spanish PM Mariano Rajoy in the Andalusian capital of Seville. The graffiti reads, "Something more will have to be cut" (Photo: Reuters).



Police detain a man as protesters clash with police in Madrid (Photo: Reuters).



A car, set alight by protesters, cuts off access to the Lugo city CEAO's industrial estate (Photo: EPA).



Police clash with demonstrators in Madrid (Photo: AFP).</sub>

12.30 If you think things are bad in Portugal now, they're likely to a whole lot get worse.

Pedro Passos Coelho, Portugal's prime minister, told reporters that the country would need to reduce spending further in order to get the economy back on track. He said:

We are fulfilling a very tough adjustment process, not in order to show our obedience, but because this way we make our country recover [...] We have to lower our level of spending in line with our possibilities.

He said that today's GDP figures (see 10.08) were broadly in line with government expectations, and that he expected Portugal's austerity programme to end after three years as planned.

12.09 Citigroup economist Giada Giani comments on the Greek GDP data:

Given the worsening in 3Q, we think the just-revised 2012 Greek growth forecasts (the troika report foresees GDP falling by 6.0%) are likely to look, once again, excessively optimistic. We believe any improvement in 4Q is highly unlikely as the liquidity squeeze in the Greek economy probably worsened in the final months of 2012 due to the fact that the June and Sept bailout tranches were withheld and due to government arrears continuing to accumulate. The increased number of strikes in the past two months has also probably contributed to depress the GDP dynamic in 4Q. We expect Greek GDP to fall by at least 7 ¼% this year.

12.02 Mr Siebert added that no money would be paid to Greece until a completed report by European debt inspectors had been analysed by Berlin.

He said that states needed precise details from the "troika" on how Greece would implement cuts before the next tranche could be disbursed.

11.58 Big Brother could stay in Greece for some time, according to Angela Merkel's spokesman.

Steffen Siebert told reporters that European states including Germany were seeking improved controls to ensure that Greece played by the EU's rules and complied with the conditions attached to its bail-out.He said:

Given the extremely difficult record of the Greek program it is understandable that Greece’s partners have an interest in a strengthened monitoring of the program and more reliability in its implementation.

11.39 The Greek economy is now 7.2pc smaller than it was a year ago, official data show.

Greece, which is in its fifth year of recession, saw its economy shrink by 7.2pc on an annual basis in the three months to the end of September, according to the Hellenic Statistical authority.

The economy contracted by 6.3pc in Q2.



11.31 Protests in Greece are limited to a three-hour work stoppage across the country from 1pm and a rally in Athens.

Christine Lagarde, managing director of the International Monetary Fund, told reporters today that Greece needed a "real fix" to put its debt back on a sustainable path as quickly as possible.

Speaking to reporters in Malaysia, she said:

Obviously from the IMF's perspective, we expect a real fix, not a quick fix, and that means clearly debt that is sustainable as quickly as possible.

Earlier this week, a conflict between the EU and IMF erupted into the open after Ms Lagarde publicly clashed with eurozone finance ministers over a critical target for reducing Greek debt levels.



_{International Monetary Fund Managing Director Christine Lagarde gestures during a joint press conference in Malaysia on Wednesday (Photo: AFP).}

11.25 Meanwhile, things are getting heated in Madrid, where baton-wielding riot police continue to clash with protesters.

Hundreds of protesters have tried to block the main Gran Via avenue, according to AFP.

A Spanish interior ministry spokesman said that by late morning, police had arrested 62 people and 34 had been injured in "isolated incidents," 18 of them police.

11.19 While Nick Squires updates us from Rome:

Tens of thousands of protesters are taking part in marches and rallies in Rome, Milan, Turin, Bologna, Florence, Palermo and dozens of other Italian cities.

In Turin, demonstrators threw eggs at the office of a tax collection agency. In Rome, three police officers were injured by stone-throwing protesters who tried to force their way through riot police cordons to reach Palazzo Chigi, the official residence of the prime minister.

A general strike is underway, with hospital employees, teachers and transport workers staying away from work.

In Terni in Umbria a large protest was being led by Susanna Camusso, the head of Italy's powerful CGIL labour union.



_{Italian students paste posters at a bank branch building during a demonstration against the austerity policies in Milan (Photo: EPA).}

11.15 Back to Europe, where the protests are in full flow. Henry Samuel sends this update from Paris:

France’s five main unions are staging 130 marches around the country “for employment, solidarity in Europe and against austerity”, with the leaders of the two main unions, CGT and CFDT joining forces for the first time since Socialist President François Hollande took power in a Paris march this afternoon.

François Chérèque, head of the moderate CFDT union, said the protests were “directed against European heads of state to tell them: ‘You cannot impose this type of austerity, it’s too dangerous for the economy, and above all too dangerous in social terms and can create tragedies.”

The more militant leftist CGT said: “Let’s move from resistance to offensive action”.

"We are all Greek, Portugese, Italian and Spanish. We are all European and we must fight for another Europe," said the Solidaires union.

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EU tries to grab £6bn from Britain's EU rebate


EU: A cash-back rebate won by Margaret Thatcher from Britain's soaring contributions to the European Union is under threat and would be cut by £5.6 billion under proposals made by Herman Van Rompuy.








EU president Herman Van Rompuy Photo: REUTERS






By Bruno Waterfield, Brussels

12:10PM GMT 15 Nov 2012


187 Comments




In a secret paper, seen by The Daily Telegraph, the EU president has proposed cutting the annual refund, which is worth £3.2 billion a year, by 25 per cent during a seven year Brussels budgetary plan for 2014 to 2020.


The move would deprive the Treasury of £800 million a year at a time of deep cuts to Britain's public services and piles further pressure on David Cameron just one week before the Prime Minister faces his toughest battle at a Brussels summit that will determine the level of EU spending for seven years.


"The changes to the rebate would cost a significant amount of money. The lack of reform to the EU's budget means the rebate remains fully justified. We do not support any changes and have a veto," said a British diplomat.


Mr Van Rompuy's proposal would mean that Britain would no longer get a refund on rural development spending in the 12 EU countries that joined between 2004 and 2007, shaving around 10 per cent off the rebate. It would also mean that Britain would have contribute to its own refund, slashing another 14.7 per cent off.


"All corrections (the United Kingdom correction and the temporary lump sum corrections) will be fully financed by all member states based on the GNI key," according to the confidential negotiating paper.


The rebate was won for Britain by Baroness Thatcher at an EU budget summit in Fontainebleu in 1984 after she famously "hand-bagged" French and German leaders by vowing "not a penny more" for Brussels.

The refund was given because Britain receives disproportionately less in Brussels farm subsidies than French farmers, a situation that has persisted over 30 years by the EU's failure to modernise its budget.

Next week, Mr Cameron will confront a similar test to Baroness Thatcher after the political temperature at Westminster has risen following a House of Commons defeat for the government over the Brussels demands for steep increases to EU budgets at a time of national austerity.

Under Mr Van Rompuy's plan, Britain would also be "committed" to potential annual contributions to the Brussels budget of £14 billion a year, representing a bill an EU membership bill of over £900 a year for every British household.

While his figure of £784 billion is less than the "commitments" level for 200 to 2013 EU spending, is nowhere near the cuts to the ceiling of actual cash payments that Britain is seeking.

The new spending blueprint from Mr Van Rompuy, who chairs the European Council, the summits of EU leaders, is aimed at isolating Britain from Germany ahead of a major battle next week.

He is hoping that his proposed cut of £60 billion to the European Commission's original proposal will peel Angela Merkel away from supporting Mr Cameron's opposition to budget increases.

The level of reductions proposed by Mr Van Rompuy is less than half the level the Prime Minister must win at the summit next Thursday if he is not to suffer a defeat in a Commons vote.

Vincenzo Scarpetta, of the Open Europe think-tank, said the EU president's proposal would do nothing to avert Mr Cameron's threat of using his veto to block a decision on the spending plan.

"Although Van Rompuyﾒs proposal represents a cut and an improvement compared to the commission proposal, a cut to the UK rebate has been snuck in, meaning that the UK's net contribution to the EU budget would go up disproportionally," he said.

"Therefore despite the proposal representing a compromise, this could still make it unacceptable to the UK government from the outset, meaning a potential UK veto is still hanging in the air."

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Austerity sends Europeans marching in the streets



15 November 2012
PresseuropEl País, La Repubblica, Público & 2 others

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Demonstrators with the flags of the PIIGS, the EU's underperforming states, during the general strike in Lisbon on November 14.

AFP

Hundreds of thousands of people took part in protests against austerity policies organised in several European countries by the European Trade union Confederation. For the European press, this austerity fatigue should prompt a rethink on the drive to balance public accounts.

As strikes brought transport services to a halt in several countries, there were major clashes between protesters and security forces in Spain, Portugal and Italy.


For El País, which led with the “hundreds of thousands” who “took to the streets to demand that [Prime Minister Mariano] Rajoy correct his policy”, yesterday’s demonstrations were "a pan-European protest […] against the diktat of austerity" –

Several countries were affected by marches and demonstrations, which were reinforced by partial strikes in Italy and Greece as well as general strikes in Portugal and Spain — an Iberian reflex that implies a convergence in the social situation in both countries. In any case, the pan-European protests are the reflection of an unprecedented movement for solidarity that aims to combat the sacrifice of populations for deficit targets, which unions believe are directly responsible for recession and mass unemployment in Southern Europe. European institutions should also be concerned by yesterday’s protests. The proof of this is that Economic and Monetary Affairs Commissioner, Olli Rehn, who held an improvised press conference to dismiss the idea that the Spanish government would demand further belt-tightening from its citizens in 2013.

La Repubblica notes that –

For economists the protests first and foremost offer proof that a policy of indiscriminate cuts and sudden increases will likely backfire instead of restoring confidence. A squeeze in the form of tax hikes and public spending cuts undermines growth. Declining growth results in lower tax revenues, which in turn contribute to greater spending deficits and a repeat of the cycle. Over the last two years, the aggravation of the crisis in Greece has proved to be an extreme but also abundantly clear example of the vicious circle created by austerity at all costs. […] The impact on growth is also beginning to tell in countries that are not traditionally thought to be fragile. After the Netherlands, France is starting to run out of steam, and more importantly recession is closing in on Germany. […] In yesterday’s revolt against austerity, there were no strikes in Germany. Let’s see if this still holds true in a year’s time.

“Violence against austerity has come to Portugal”, laments Público, in the wake of the general strike which was marked by clashes between police and protesters near the parliament in Lisbon. Noting that 48 people were injured and 9 arrested, the daily wonders what it is that "motivates the protesters” –

What motivates the protesters, whether they be violent, peaceful, organised or wildcat, is the hopelessness of the situation affecting them. Falling wages, public service cuts and unemployment have always been and continue to be powerful sparks for social revolt. Without political answers, we will have to live with images of Athens-style conflict that until recently would have seemed impossible in the streets of our cities.

“People don’t want the government to cut social benefits and civil service wages while raising taxes”, writes Gazeta Wyborcza. “However”, points out the Warsaw daily –

… they do not say how the government is supposed to pay off debt that has been incurred by years of support for a generous system of social benefits. The idea that only the rich should pay for the crisis may make political sense, but it is economically unsound. In every country, the rich are only a small group, which is why state budgets are financed by average-income earners, who now have to bear most of the cost of the crisis. The European debt crisis is actually a crisis of the European welfare state model.

“Europe goes on strike while Germany looks on”, points out Tageszeitung, which ironically remarks that while “millions of workers have gone on strike to protest against the consequences of the European Union’s crisis management policy, their colleagues in the country that has actually benefited from the situation have sent a message of solidarity”.

Noting that the German unions have been criticised for failing to mobilise the country’s population, the alternative Berlin daily argues that Germans continue to believe that the crisis could be resolved by the proverbially thrifty “Swabian housewife” endorsed by Angela Merkel –

The impact of the crisis has yet to be felt in hearts and minds as well as wallets. Many workers are still convinced that a dose of Swabian housewife mentality is what is needed in the Southern Countries

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Markets slip on news of eurozone double-dip recession


European markets fell Thursday on news that the eurozone had fallen back into recession for the second time since 2009 and a lack of progress in the US over the fiscal cliff.








The eurozone slipped back into recession between July and September, contracting 0.1pc on top of a 0.2pc drop in the second quarter Photo: ALAMY





By Telegraph staff and agencies

1:00PM GMT 15 Nov 2012

15 Comments




The FTSE 100 in London finished down 0.8pc at 5,677.75, while the CAC 40 in Paris slipped 0.5pc to 3,382.40 and Frankfurt's DAX 30 fell 0.8pc to 7,043.42.


Although French and German growth proved resilient, the eurozone slipped back into recession between July and September, contracting 0.1pc on top of a 0.2pc drop in the second quarter.


Yesterday it was revealed that Greece's economy had shrank for the 17th consecutive quarter and is now 7.2pc smaller than it was at the same time last year, triggering fresh protests for austerity programmes to be overhauled.


Martin van Vliet at ING said: "The double-dip is a fact. The -0.1pc was not a surprise after the German and French numbers, it could have been worse. What you notice is that the recession in southern Europe is slowly creeping to other countries.


"Look at the Netherlands, with a strong contraction, and Austria, also with a small contraction. There was no contraction in Belgium and Finland but the second quarter was very bad. If you look at the indicators for the fourth quarter you see that even Germany may not grow again and that shows that the economy has an enormous need for a new impulse. My conclusion is that policymakers are not considering to take it easy with savings, so everybody is looking at what the ECB can do and what is happening to the euro."




"It's nothing to be happy about, especially if you see that other economies are growing, the United States as well. It's a wake-up call for policymakers to not lean back and think hard about where growth in Europe has to come from, if you're making so many cutbacks."

There was little reaction to UK data showing a bigger than expected fall in retail sales, which account for about a fifth of UK gross domestic product.

Interactive chart: GDP: percentage change compared with previous quarter

Paul de Grauwe of the London School of Economics said: "We are now getting into a double dip recession which is entirely self-made.

"It is a result of excessive austerity in southern countries and unwillingness in the north to do anything else. Countries in the south have to reduce their deficits, but they cannot if those in the north with a surplus are not willing to help with stimulus.

"This divide, even hostility, between countries is stronger than I have seen in the last 20 years. The degree of austerity has now put so many people in terrible conditions that they reject all of this. That's a very dangerous situation."

As US politicians geared up for a tough battle over the 'fiscal cliff' of spending cuts and tax hikes which could jeopardise growth, economically sensitive energy stocks came under pressure, dropping 0.5pc.


















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