Re: New EC Thread

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Spain's Jobless Rise 'Worse Than Feared'


The unemployment crisis in Spain accelerates as the
country's battles to avoid a sovereign bailout take their toll.


9:01am UK,
Thursday 25 April 2013

More than six million people are now without work in
Spain

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Spain's unemployment rate soared to 27.2% in the first quarter of
the year, worse than economists had predicted.

The official figures revealed that the number of those without jobs surpassed
six million for the first time - with 237,400 people added to the grim
unemployment statistics over the period taking the total to 6.2 million.

Economists had expected the unemployment rate to grow from 26% in the final
quarter of 2012 to 26.5%.

The figures were released by the country's National Statistics Institute
against a backdrop of recession, which is expected to continue throughout
2013.

The Spanish economy, the eurozone's fourth biggest, contracted by 1.4% last
year, the second worst yearly slump since 1970

The Bank of Spain has predicted a 0.5% fall in GDP during the first three
months of 2013 while the International Monetary Fund's recent World Economic
Outlook report expects a contraction of 1.6% over the 12 months.

Spain's problems stem from the collapse of its once-booming real estate
sector in 2008, which resulted in a facility of up to 100 billion euros (£85bn)
in rescue funds being made available by its eurozone partners.

The government has launched a series of financial and labour reforms and
pursued a raft of spending cuts and tax increases that have managed to reduce a
swollen deficit but been blamed for choking economic growth.

Despite the measures, Spain had the highest budget deficit among the 17
European Union countries that use the euro in 2012.

Its Budget, due to be announced on Friday, is expected to focus less on
austerity and include more measures to stimulate activity in the economy.

A key fear behind Spain's soaring unemployment crisis is that it is damaging
the country's prospects by consigning a generation of young people to financial
hardship.

The official statistics agency for the European Union, Eurostat, said earlier
this month that youth unemployment in Spain had topped almost 56%.

Analysts expect the Budget to try and address the issue, despite the spending
constraints faced by Mariano Rajoy's government, as he took office in December
2011 on the back of a core pledge to create jobs.

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Euro may only last five years, says senior German government advisor


The euro has a “limited chance of survival” and may only endure another five
years, Kai Konrad, one of the German government’s closest economic advisers, has
claimed.









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“Europe is important to me. Not
the euro," said Dr Konrad.



Image 1 of 2
Angela Merkel finds herself
under fire from European partners and the centre-left opposition at home for
continuing to insist that euro members 'do their homework' Photo: AFP












By Jeevan Vasagar, Berlin

3:15PM BST 24 Apr 2013

411 Comments




In notably outspoken remarks for a senior German figure, Dr Konrad, chairman
of a scientific council that advises the finance ministry, said: “Europe is
important to me. Not the euro. And I would only give the euro a limited chance
of survival.”


Asked whether he thought the single currency would last five years, the
economist said: “A concrete period is hard to identify as it depends on so many
factors. But five years sounds realistic.”


This pessimistic judgment by a senior adviser runs counter to the official
German government view that the euro must be held together for the sake of unity
in Europe. Dr Konrad’s remarks came in an interview with the newspaper Welt
am Sonntag, on the debt crisis in Europe.


The economic adviser warned that: “No country can pile up debt without
running the risk that their investors will pull the plug. It’s in each
[country’s] interests to keep their own debts as small as possible.


"Where the limit lies has to be individually decided. That depends among
other things on economic growth and the growth of population.”



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Dr Konrad said that countries should have the freedom to get into debt,
provided they carried the “sole responsibility” for these debts. He made his
blunt remarks about the future of the euro, when the interviewer suggested that
he was advocating a return to the nation state,

The German chancellor Angela Merkel has always insisted that she wants to
preserve the single currency and maintain the eurozone in its current form.

In a speech to the Bundestag two years ago, she told German MPs: "Nobody
should take for granted another 50 years of peace and prosperity in Europe ...
that's why I say: If the euro fails, Europe fails.”

The German government's official line is that the euro is essential for the
prosperity of an export-oriented nation.

Rather than accept the break-up of the euro, the German government is
demanding tighter, Europe-wide controls over national budgets.

Finance minister Wolfgang Schaeuble recently warned against increasing
liquidity to promote economic growth, though he has also acknowledged that the
soaring unemployment of southern Europe needs to be addressed.

Mr Schaeuble said in an interview for the economic weekly Wirtschaftswoche:
“We are dealing with almost an economic schizophrenia. Everyone says we have
deficits that are too large and a high level of liquidity would make everything
more dangerous. And then some say, but we have too little growth, and so we need
more liquidity

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What happened to the European dream?

25 April 2013Kultura Sofia

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Lichuan
Amnesia, recession, the failure of political elites, divided societies… The free and caring Europe that was the dream of oppressed peoples no longer exists, it is just that European leaders lack the courage to admit it, says a Bulgarian political analyst.

Ivan KrastevThe European Union no longer exists, at least not as we know it. And the question is not what will be the form of the new Union, but rather why this Europe, which was the focus of so many of our dreams no longer exists. The answer is simple: today, all of the pillars that served to build and justify the existence of the European Union have collapsed.
Chief among these was the memory of the Second World War. A survey of German secondary school students in the 14-16 age bracket, which was published a little over a year ago, showed that a third of these young people did not know who Hitler was, and 40 per cent were convinced that human rights had been respected to an equal degree by every German government since 1933. This in no way implies that there is a nostalgia for fascism in Germany. No, it simply means that we now have to contend with a generation that has nothing to do with this history. Today the conviction that the EU continues to derive legitimacy from its roots in the war is in an illusion.
The second element that facilitated the geopolitical emergence of to the Union was the Cold War: once again, a phenomenon that no longer exists. Today, the EU does not have – and cannot have — an enemy that can justify its existence in the same manner as the post-1949 USSR. In short, allusions to the Cold War can in no way contribute to the resolution of the EU’s problems of legitimacy.
The third pillar that has crumbled is prosperity. The EU continues to be very rich – even if this observation does not apply to countries like Bulgaria. However, 60 per cent of Europeans believe that their children will not live as well as they do. With this in mind, the problem is not how we live today, but what kind of life can we expect in the future. The positive prospect constituted by faith in a better future, which was a powerful source of legitimacy, has also disappeared.
Convergence myth

Another source of legitimacy was a belief in convergence, which led poor countries joining the EU to expect that they would progressively acquire advantages in tune with membership of a rich man’s club. This still had some basis in fact a few years ago, but today, if the economic forecasts for the next 10 years are to be believed, a country like Greece is likely to remain as poor in comparison to Germany as it was on the day of its accession to the Union.
Everyone says that the EU is an elitist project. It’s true. Today, the problem is not that elites have become anti-European, but that they no longer carry any weight in national debates. The fact that all of them are fundamentally in favour of a united Europe is of no consequence, because no one listens to them anymore; they have lost touch with the people. Take a close look at sociological surveys, and you will see that the legitimacy of the EU has different explanations depending on whether you are in the north or the south of the continent.
In countries like Germany and Sweden, people have confidence in the EU because they also believe in the good faith of their own governments. In Italy, Bulgaria and Greece, people do not trust their own politicians, and that is why they believe in the EU. The logic of this position is that “even if we do not know them, the politicians in Brussels could not be worse than our own.” However, the latest crisis has shown this sentiment is beginning to crumble, and this confidence has been undermined.
Europe is aging

Last but not least, the final pillar is the welfare state. There is no denying that the existence of a strong welfare state is an integral part of the identity of the EU. As it stands, however, the issue is not whether this welfare state should be viewed as good or bad, but whether it can continue to be viable in a context that is not only marked by global competition, but also by major demographic changes in Europe. The problem is that the Europeans are melting away like snow in a hot sun. By 2060, 12 per cent of the EU’s population will be over 80 years old. Europe is aging. So perhaps the fact that the Union often behaves like a senile pensioner in the international arena is not a coincidence. And from whom should we borrow to keep this welfare state which is so vital to the elderly up and running? From future generations? Unfortunately, they are already being tapped to pay for the accumulation of public debt…
Another consequence of the crisis has been the emergence of new divisions on the continent. Within the EU, there is no longer any separation between the West and the East, but other more critical distinctions have taken its place.
EU is not the Eurozone

First and foremost, there is the distinction between Eurozone countries and other states. Very often, when they speak of the EU, the French, the Germans and the Spanish are really thinking about the Eurozone. However, this division will remain irrelevant while strategically important countries like Sweden, Poland and the UK are not included in the euro. The other major division is the one that exists between creditor and debtor countries. When Greece wanted to organise a referendum on the country’s bailout, Berlin made the following objection: “You want to hold a referendum about our money!” There is some sense to this remark … No country should be held hostage by the Eurozone. But that is precisely the problem when you have a currency without a common policy.
How should the crisis be tackled? On close examination, some EU countries are in crisis, while others are not — or are at least not as badly affected. At the same time, in some cases, the crisis has had a positive impact on certain practices. From this standpoint, the main outcome of every policy is that there are winners and losers. This is something that the politicians have been careful not to tell us. However, it is not so much a problem, because it is always the case: there are always winners and losers. The devil is in the detail: how should people be compensated and how should others be convinced that it is in their interest to adopt such a policy in the first place.
We continue to be convinced that win-win policies do in fact exist. Given the current situation in the EU, however, this amounts to wishful thinking, because the natural solidarity that exists in nation states has yet to be established on the level of the Union. Worse still, EU countries do not all share the same history or the same language. It is not unusual to speak of “we” in reference to Europe, but what does this mean exactly? If the EU is to function correctly, the absolute need to define what is meant by “we” in the context Europe will have to be addressed.
From a speech delivered at a seminar on “Europe in Crisis,” held at Sofia University in late March.

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You say...

Greece's trade deficit could have been resolved by limiting foreign imports, or by imposing an import duty, or by limiting foreign money transfers. It is a problem that could have been addressed.

acstamos on Three years of collective failure

In the end, monetary union will become a gigantic blackmail manoeuvre... If the Germans call for fiscal discipline, other countries will say that it is precisely this discipline, and Germany, which are responsible for their financial difficulties. Germans may once again become the most hated people in Europe.

ichzahldannmal on Stalled and in crisis

I would say that France is among the countries of the Eurozone where Germanophobia is least strong. Decades of exchanges, twinning, ARTE, the AbiBac [an academic qualification recognised in both Germany and France] and a political desire to make peace, have all done their work.

Pangloss on Of Germany – and of misunderstandings
===========================================
These are comments from some recent highlighted articles. It's obvious the EU is in crisis and Merkel could well be defeated in Germany's Election in September.

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Portuguese Banks Need Extra 8 Billion Euros: Moody's



Text Size Published: Wednesday, 10 Apr 2013 | 10:33 AM ET

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Ilan Arad | Getty Images
Banks in bailed-out Portugal need an extra 8 billion euros ($10 billion) in capital, based on conservative tests of their financial health, Moody's Investors Service said on Wednesday.
Pepa Mori, the rating agency's lead analyst for Portuguese banks, said non-performing loans had risen more than expected because of the country's deepening recession, justifying a gloomier set of assumptions.
(Read More: Portugal Fires Warning Shot for Austerity in Europe)
"We have identified, according to our stress tests, capital needs of 8 billion euros for the Portuguese system as a whole. This is according to our more conservative scenario," she told Reuters.
That would be 2 billion euros more than what remains of the funds earmarked for recapitalizing the banks in Portugal's 78-billion-euro EU/IMF bailout.
Kathrin Muehlbronner, an analyst with Moody's sovereign risk group, said last week's rejection by the constitutional court of some austerity measures was a setback for Portugal's deficit reduction program, but it was premature to judge its full implications.
"It is probably a bit too early to make definite statements on whether in September Portugal can regain market access," she told Reuters. "Lots of things can happen in a few months' time."
The government launched its first bond since the 2011 bailout in January and has been looking at further issues to regain full access to financial markets before the bailout ends in mid-2014. Portugal's financing needs are fully covered by the bailout until at least September.
(Watch: Portugal Situation Is 'Contained': Expert)
"We have to see how that is taken up by investors, but I think that everyone is aware - and surely the government is aware - of the constraints that they face," Muehlbronner said.
Portugal's bailout had allocated 12 billion euros for bank recapitalization. About half of that money has been used so far.
"What is positive is we know that 6 billion euros is available to recapitalize the banking system in case of need," Mori said.
Asked whether banks could obtain financing via debt issuance after Banco Espirito Santo returned to the bond market late last year, Mori said it could not be ruled out.
"It's true that the appetite for seeking capital in the market seems to be limited, but it has happened, so we cannot say that there is no possibility at all for banks to obtain capital in the markets."

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New Government Ends Political Deadlock
Weeks after an inconclusive vote, Italy gets a government
led by leftist moderate Enrico Letta and backed by Silvio Berlusconi.


4:56pm UK,
Saturday 27 April 2013

Enrico Letta, 46, is the new Italian PM

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Weeks of political deadlock have ended in Italy as Enrico Letta
of the centre-left becomes the new PM and forms a government.

Mr Letta, a 46-year-year-old leftist moderate, leads a broad-coalition
government backed by his own Democratic Party and the conservatives of former
prime minister Silvio Berlusconi.

The government will be sworn in on Sunday and then faces votes of confidence
in both houses of parliament, possibly as early as Monday.

A general election in February proved inconclusive, with the electorate split
among three main blocs and no party winning enough of the vote to muster
majorities in parliament.

Since then a political stalemate had paralysed Italy, unnerving markets at a
time of deep economic crisis.
Silvio Berlusconi is backing the new
government
Mr Letta is a pro-European, reform-oriented politician who has served as a
minister in previous centre-left governments. Viewed as a bridge-builder, he is
a nephew of Mr Berlusconi's long-time right-hand man, Gianni Letta.

The prime minister has said he wants to move quickly to tackle the economic
problems plaguing Italy, the eurozone's third-largest economy.

The country is mired in its worst recession in decades and austerity measures
pushed by the previous technocratic government led by Mario Monti have stirred
anger across the nation.

"It's the only possible government at a time when Italy couldn’t afford to
wait any longer," said President Giorgio Napolitano, who earlier this week asked
Mr Letta to form a government.

The new government includes some of Mr Berlusconi's closest allies, including
the secretary of his party Angelino Alfano, who will serve as deputy premier and
interior minister.

Bank of Italy director general Fabrizio Saccomanni will take the powerful
economy ministry and former European Commissioner Emma Bonino will be foreign
minister.
Mr Letta (R) shakes hands with President
Giorgio Napolitano
The third-largest force to emerge from the Italian election, the
anti-establishment Five Star Movement led by comic Beppe Grillo, has demanded
change and ruled out any alliance with the traditional political parties.

It will remain outside of the government.

Mr Grillo has said the coalition government "is an orgy worthy of the best
bunga bunga" - a reference to Mr Berlusconi's infamous parties.

The government was formed after days of tricky negotiations with all
political forces - most notably with members of Mr Berlusconi's People of
Freedom party.

Mr Letta faced some dissent within his own party from critics who did not
want a deal with the scandal-tainted billionaire.

Some analysts say the new government will be short-lived and will be brought
down by irreconcilable differences that can only be resolved through another
general election.

Mr Letta vows to promote reforms to kick-start the economy and rejuvenate a
political class tainted by scandal and despised by many in Italy for its
privileges and perceived impunity.





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Berlesconi will be running the Country behind the scenes and Italy will be in a worse state than it it now.

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Greece: Three years of collective failure

25 April 2013I Kathimerini Athens

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Former prime minister George Papandreou asking for financial help in 2010, and now on the lucrative international speech circuit .
Ilias Makris
On 23 April 2010, the prime minister of the day George Papandreou appealed for international help to prevent Greece's collapse. But the three years that followed saw a series of blunders by the Troika and the Greek state, according to a series of economic analyses.

Nick MalkoutzisThree years ago, then Prime Minister George Papandreou stood on Kastelorizo’s harbour as the Aegean glistened in the background and children yelped with joy. The ensuing period has proved anything but sun-kissed child’s play for Greece. The appeal made by Papandreou to the Eurozone and the International Monetary Fund that day has set the tone for almost everything that has happened in Greece over the past three years. Where it will lead is far from clear.
Even though the European Commission, the European Central Bank and the IMF make up the troika of lenders that have provided Greece with some €200bn in bailout funding during the last 36 months, the Washington-based organisation’s role has grabbed the attention of most Greeks. Even now, April 23, 2010 is referred to by many as the day Papandreou “sent Greece to the IMF”. Even though the Fund has provided only a fraction of the loans disbursed so far, its actions often come under the greatest scrutiny.
Although there has been a growing realisation that some of Greece’s partners in the Eurozone and the ECB have been behind some of the troika’s toughest demands, the IMF continues to be a regular target for critics.
IMF Trojan horse

The problem is that these often indiscriminate attacks, dismissing the IMF as Trojan Horse for neoliberalism, mean that proper analysis of the troika’s three elements is pushed aside. In this fog, it has become difficult to work out where there are grounds for genuine criticism of the IMF. In this respect, an op-ed by Mohamed El-Erian, the CEO of PIMCO investment firm, on the Fund’s shortcomings is timely and extremely useful.
El-Erian stresses that the IMF’s key weakness has been its susceptibility to political manipulation. The PIMCO chief is also critical of the Fund’s role in the Cyprus bailout. El-Erian’s firm was responsible for auditing Cypriot banks ahead of the loan package being agreed between Nicosia and the troika. He said the aborted initial solution and the revised plan showed “insufficient understanding and analysis of the complexities of the country’s problems.”
“In both cases, and in other similar circumstances elsewhere in Europe (including Greece), I suspect that the IMF felt it had no choice but to succumb to pressure by European politicians,” adds El-Erian. “But in doing so, it has risked more than its credibility and standing.”
These are all issues – particularly the matter of credibility – that are picked up on by Gabriel Sterne, the chief economist at Exotix. Sterne, a former IMF employee, published last week probably the most comprehensive assessment of where the Fund has got it wrong over the last three years. His policy discussion paper has some extremely salient points for Greece.
Off-target analysis

Sterne begins by pointing out that the IMF's analysis, which El-Erian correctly lauded, has been somewhat off target in Greece's case.
"Greece has endured the largest but by no means the only forecast errors; errors which can be explained by the dismal algebra of credit crunch + austerity = output collapse," writes Sterne, underlying the fact that the Greek programme has not just gone awry because of what has – or hasn’t – happened in Athens over the last three years.
The troika persistently argues that the slow pace of reforms has been at fault for the deeper-than-expected recession, while consistently side-stepping questions about whether the rapid pace of fiscal adjustment has pulled the rug from under the Greek economy.
Sterne argues that a failure to address Greece's towering public debt from the start has proved a damaging miscalculation and one not in keeping with the IMF's credo. Soon after Papandreou's Kastelorizo speech, the IMF projected that Greek debt would reach 139 per cent by the end of 2011 but by the time of the troika's fifth quarterly review, Greek debt had reached 160 per cent of GDP, despite the fact that more than €100bn in loans had been disbursed.
"There is a strong case to be made that the bailout, by prolonging the crisis without taking firm action, did more harm than good and an equally strong case that this was to be expected,” writes Sterne, who adds that the Fund “broke one of its most essential rules by supporting a programme in Greece in May 2010, which was inadequate to secure sustainability."
Biting the bullet

Greece and the troika would have been much better off biting the debt restructuring bullet from the start rather than addressing the issue in 2012, the analyst argues. Crucially, Sterne points out that some profited from the decision not to tackle Greek debt, much of which was in the hands of European banks, right from the start.
The economist's concluding verdict on the “pretend and extend” strategy that followed Papandreou's speech is damning. “Ultimately, the Greek procrastination was fruitless. Private lenders to Greece suffered a scalping, Greece has not had a bank that lends since mid-2011, youth unemployment is 60 per cent and the ECB had to intervene massively to keep swathes of the European banking system afloat."
Like El-Erian, Sterne says the IMF buckled in the face of political pressure from Eurozone countries and made a series of diagnostic errors.
Three years on from Kastelorizo, there is still much for Greece to do. It has executed the most dramatic fiscal adjustment in OECD history but some desperately needed reforms are still in the works. This, however, does not take away from the fact the Greek programme was ill-conceived and badly implemented by all sides.
In this respect, it is vital to understand the roles that each of the three elements in the troika have played and where their weaknesses and stubbornness may lie. Launching indiscriminate attacks on the IMF or the others simply allows the troika to hide behind the received wisdom that the programme's shortcomings were only down to Greece's slow implementation.

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Spain: Six million reasons for another policy

26 April 2013El Periódico de Catalunya Barcelona

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Queuing at an employment office in Burgos (northern Spain). February, 2013.
AFP
With the number of unemployed over six million, the economic and social disaster has continued to worsen despite the EU-prescribed shock therapy applied by the Government of Mariano Rajoy. Just how bad do things have to get before there is a change in policy? wonders El Periódico.

El Periódico de CatalunyaThe staggering unemployment figures in Spain are the clearest indication yet of the depth of the euro crisis and its consequences. At the same time, it dramatically confirms that the measures being pushed through, in Brussels and here in Spain, with all the sacrifices they demand, are not bearing fruit. On the contrary, things are getting steadily worse for us. The survey of the active population (EPA) published yesterday threw up the worst data ever: for the first time more than six million Spaniards are without a job. Of them, nearly two million have been without work for more than two years, which means that they have, at most, only the 400 euros of the minimum income allowance. The picture is a bleak one.
Till now, the directives the European Union has been issuing in its fight against the crisis have referred to large public finance ratios, a party line that aims to avoid distorting the financial balances to allow the markets to do their business without interference. Beyond that, there’s very little else. The President of the European Central Bank (ECB) has just claimed that the bank is taking vigorous action against failure to respect deficit targets, but has not said a word about what should be the objective of the economy and economic policy: the well-being of citizens, the first and key manifestation of which is employment – especially when the dearth of it becomes chronic, which is what is happening in Spain, where the lack of a job is beginning to be synonymous with social exclusion. Among the major international institutions, only the IMF, through its Managing Director, has alluded to the dramatic level of unemployment in Spain to suggest changes, if not to the measures themselves, then at least to the pace at which they are being applied.
Spain is being driven into a corner

The government’s reaction to yesterday’s numbers, which makes the absence of a coherent discourse abundantly clear, was to highlight how job losses in the first quarter of last year compared with the figures for this year, without taking into account that this year Easter fell in March. Emphasising that fewer jobs were lost between January and March of 2013 than in the same period in 2012, it has offered a discreet defence of the labour reform it launched last year. But the data are stubborn: even though the cost of labour has been reduced, the economy is still hemorrhaging jobs. The EPA reveals that, as feared, the erosion of temporary employment has been followed by an erosion of fixed contracts, which has been facilitated by the new law. The official line, which no longer says that when recovery does come the reform will trigger job creation, but limits itself to expressions of faith that there is light at the end of the tunnel, suggests that the new legislation has not yielded the intended results.
The EPA from the first quarter is the main argument that the government should put forward to justify a change in economic policy. The prolongation of the crisis is adding millions of people to the ranks of the chronically unemployed, who may not be able to re-enter the labour market on their own. Faced with this prospect, any structural reform of the economy or changes to the pension system will be for nothing. The country will not be able to take it. A man as orthodox and prudent as Andreu Mas-Colell, the Minister of Economy of the Generalitat in Catalonia, called yesterday for a "turning point" in European policy. From his point of view, the European Union has an excessive obsession with austerity, which is not backed up by results: European GDP is falling, unemployment is rising, and in Spain is being driven into a corner from which it will be very difficult to escape.
In the light the experience of recent years, we can expect Brussels to stick to its official doctrine, although deadlines for fulfilling the deficit targets are being extended, and only implement real change if the problems of unemployment and poverty in the south of the EU affect the economies of the north. Some signs already suggest that they are. However, when this happens, in all likelihood it will be too late for us.
On the web

• Original article at El Periódico de Catalunya es
  
• EPA survey es
  
• Article in Le Soir (fr)
  
• Labour Force Survey en
  

European Union Un(der)employment underestimated

According to statistics published by Eurostat, 26.3 million Europeans were unemployed at the end of February, 19 million thereof in the euro area, which corresponds to jobless rates of 10.9% and 12% respectively.
But according to Le Soir, this figure “significantly underestimates the scale of underemployment”. The level of underemployment is calculated by Eurostat’s Labour Force Survey, whose Annual Results for 2012 have just been released. If to the unemployed one adds “discouraged workers”, “the potential supplementary labour force” (people who’d like to work but aren’t immediately available) and “involuntary part-timers”, notes the Belgian daily

45.4 million Europeans are actually suffering from the job shortage, i.e. 19% of the workforce. Nearly double the official jobless rate. So we can guess why the ‘underemployment’ rate is not published.

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European integration: Britain and EU close to point of no return

20 September 2012The Guardian London

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British Prime Minister David Cameron
Rainer Hachfeld
José Manuel Barroso, Herman Van Rompuy, and now a group of 11 foreign ministers: everyone in the EU seems to be proposing greater integration as a way out of the crisis. But Britain continues to stand apart and the divide may soon become unbridgeable, writes The Guardian’s Europe editor.

Ian TraynorThere's no knowing how and where it will all end. But it is clear with every week that passes in Europe's biggest crisis that Britain and the rest of the EU are heading in starkly different directions. Minds concentrated by almost three years of euro crisis, Berlin for months has been demanding to reopen the EU treaties to facilitate a big pooling or surrender of – depending on your point of view – national sovereignty to facilitate a federalised eurozone, with what amounts to a core European government of an expanding 17 countries that would take on prerogatives over tax-and-spend powers. Britain is well out of that. Last week the European commission signed up to the German blueprint, while unveiling problematic EU legislation making the European Central Bank the policeman of the eurozone banking sector. Britain will have no part of that, either. On Tuesday the German foreign ministry extended the federalising economic policy-making to foreign and defence, along with 10 other EU foreign ministries carefully chosen to reflect the non-UK EU mainstream – small countries, big countries, single currency members and those outside the euro, core western states and newer east European countries. The likelihood is that the 11-country consensus will swell into a majority among the EU's 27. Britain also stands apart from this. The 11 include Germany and France, the big ones, plus Italy, Spain and Poland – after Britain the biggest EU countries. In short, Britain's isolation becomes more fixed, while the cross-Channel gap widens to become less than bridgeable. More in sorrow than in anger. There is ample support and sympathy for Britain's role in Europe, for the quality of its contribution in foreign, security and defence policy, for its pragmatic liberalism, its role in upholding the freedoms of the single market, its anti-protectionist instincts, the relative quality of its shrinking army of eurocrats.

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Religion: Divided EU to preach religious freedom abroad

30 April 2013Trouw Amsterdam

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Vlahovic
The EU is preparing guidelines for European diplomats on how to advance religious freedom and the separation of church and state when working abroad. The mission has its share of pitfalls, since the EU itself is divided and ambiguous when it comes to the subject.

Leonoor Kuijk Not many EU countries are neutral when it comes to religion. The Queen of England is head of the Anglican Church, the Dutch euro coins bear the text “God be with us”, and the European Court of Human Rights does not object to crucifixes in Italian public schools. Despite much tolerance for the strong links between the Church and member states, EU diplomats visiting foreign countries will soon have to observe a set of guidelines aimed at promoting religiously neutral government that safeguards religious freedoms. Various participants concluded yesterday that a debate on religious freedom in the European Parliament was an exercise in sanctimony.
First define the European identity

"We must first define a European identity before trying to export it", said Lorenzo Zucca, a legal expert connected to King's College in London, who was invited to the debate. "Everyone knows how difficult it is to talk about religion at a European level." The current uproar concerning the Hungarian government, which has imposed Roman Catholicism on public institutions, and the emotional debate about the reference to the 'Jewish–Christian tradition' of Europe in the rejected European constitution, are prime examples of this.
Robert-Jan Uhl, human rights adviser of the Organisation for Security and Co-operation in Europe, cautions the EU to adopt a very practical approach. "This concerns fundamental rights, for example, that people may import and distribute religious literature and that prisoners receive meals that comply with their religious beliefs." He says that vegetarian meals were initially not available to Buddhist prisoners in Poland. "The case was referred to the European Court of Human Rights. The court ruled that their religious dietary practices must be respected."
The right to not believe

Mr Uhl points out another problem whereby many nations are only prepared to protect a minority religion if people are actually prepared to officially register as believers. "That is absurd. You should be able to worship with whoever you like, without having to register in advance. The EU should criticise this practice."
Two Dutch MEPs lobbied hard for the guidelines, which are expected to be passed by the EU ministers in June. Peter van Dalen (Christian Union) and Dennis de Jong (Socialist Party) compiled the draft, which is currently being elaborated by the European External Action Service.
"The right to change religion or become non-religious is also crucial. And while this would undoubtedly lead to exclusion in certain countries, freedom of religious belief applies just as well to the right to not believe."
EU will also look at itself

Jean-Bernard Bolvin of the European External Action Service, recognises that religious wrongdoing also happens within Europe. The European Commission has almost no authority in this area, and rulings by the European Court of Human Rights often follow extensive periods of deliberation before handing down rulings that are not always observed. "This in no way alters the fact, however, that we could indeed devote attention to the matter within the context of our foreign policy. It is certainly not our intention to argue that only a secular state is entirely moral. However, if certain sections of the population are discriminated or people are hanged for their beliefs, then it is good for people to know what sorts of legal objections they might raise." He also thinks that debate on the subject would prove effective within the European Union. "This would prompt the EU nations to also look more closely at themselves," he argues.

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European Union: Prisoners of the Eurobabel

29 April 2013The Guardian London

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Kopelnitsky
Translation within the EU is a laborious and costly business. So why not save billions and make English the Union’s official language? Unfortunately, the price would be a loss of democracy and integration, not to mention a lot of angry Frenchmen.

Philip OltermannMoney talks, especially in Brussels. A billion euros are usually "mil milhoes de euros" in Portuguese, or a thousand million. In Spanish, likewise, "billón" means a million million, so billion is "mil millones de euros". Confusingly, "billion" translates as "milijarde" into Croatian, or "miljard" into Dutch. When the French talk of "un billion", they are referring to what Britons call a trillion. Oh, and a German "Billiarde" is a French "quadrillion". Of course.
Translation in the EU's headquarters is a complicated – and often costly – business. The European Commission has three official "procedural languages": German, French and English. But with the Union expanding and 23 languages now spoken in member states, the number of translators has ballooned from 200-300 to 2,000-3,000. It is estimated that the EU produces 1.76m pages of translation work a year, costing €300m (£257m). As of July 1, when Croatia joins the EU, there will be one more language to add to the pile.
In these austere times, national governments are eager to trim the EU budget, which is one reason why a recent speech by the German president was welcomed with such enthusiasm. In a keynote speech on the future of European integration in February, Joachim Gauck suggested English should become the EU's official language: "It is true to say that young people are growing up with English as the lingua franca. However, I feel that we should not simply let things take their course when it comes to linguistic integration." It was music to the ears of federalists and fiscal hawks: with English spoken in the corridors of Brussels, the EU would become more streamlined and more efficient.
Read article in full at The Guardian en

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Portugal: ‘Government increases the retirement age’

2 May 2013
Presseurop Diário económico


Diário económico, 2 May 2013
The retirement age will no longer be set at 65 and in future will depend on the sustainability of the social security system under new plans to be discussed on May 2 at a meeting of Portuguese government ministers.
Pedro Passos Coelho’s government has pledged to the EU-IMF-ECB troika that it will cut €4.7bn from public spending between 2014 and 2016. It is expected to adopt a set of sweeping measures to reduce the deficit to 5.5 per cent of GDP this year, 4 per cent in 2014 and 2.5 per cent the following year.
The state is preparing to cut 20,000 civil service jobs over the next three years. Part of the overall public spending cuts in 2014 will include a €1.3bn cut from social security benefits, including pensions.

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ECB Cuts Interest Rates To Aid Euro Recovery


The European Central Bank bows to pressure to reduce
borrowing costs as the eurozone remains mired in recession.


7:42pm UK,
Thursday 02 May 2013



Video: Draghi Explains Interest Rate
Cut
Enlarge


Ken Wattret, Chief Euro-area economist at BNP Paribas
tells Jeff Randall the ECB stalled on cutting its main interest rate and needs
to consider adopting unconventional methods to try and turn the eurozone's
economy around.

Video: Economist: ECB Should've Cut Rate
In December
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The European Central Bank (ECB) has reduced a number of its
interest rates to aid the drive towards economic recovery.

The benchmark interest rate was cut by 25 basis points to a new record low of
0.50% amid signs the Euro area is struggling to overcome recession with
unemployment still rising and economic surveys suggesting weaker than expected
growth.

Inflation within the eurozone fell to 1.2% in April, clearly undershooting
the ECB's target of below but close to 2%, easing one potential obstacle to a
rate cut.

The move, which represented the first rate drop by the ECB in 10 months, was
widely expected after its president, Mario Draghi, said last month that the bank
stood ready to act despite his insistence that governments did more.

At his regular monthly news conference, Mr Draghi said the governing council
had been keen to extend the provision of credit.

"The cut in interest rates should contribute to support prospects for a
recovery later in the year," he said, while pledging monetary policy would
remain accommodative.

In theory, the cut will help companies by lowering borrowing costs for banks
that have borrowed from the ECB so they can loan more.

Economists, however, warned it may not have much direct effect since banks
are not passing on low rates in indebted countries that need help the most.

In Germany, the ECB had also faced resistance to a rate cut with even German
Chancellor Angela Merkel suggesting the ECB would have to raise rates if it were
looking at Germany alone.

German insurers and the county's dominant savings and cooperative banking
sector also joined up to speak out against looser ECB monetary policy, saying it
would have little economic impact and undermine savings needed to protect the
country's rapidly ageing population.

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Textile industry: Bangladeshi blood on EU shoppers’ hands?

3 May 2013NRC Handelsblad Amsterdam

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Tom Janssen
The death of more than 400 people in a Bangladeshi clothing factory once again highlights the appalling conditions in factories where western manufacturers produce clothes. The EU is right to pressure local authorities, but should also probe other countries.

NRC HandelsbladA disaster that is increasing in scale every day: the collapse of the Rana Plaza building in the city of Savar in Bangladesh, which according to the most recent reports has cost more than 500 lives. The count started, more than a week ago, at 87 dead and 1,000 injured. Another ominous figure now making the rounds is the number of people missing: 1,000, although this includes double counts.
The eight-storey complex, three of which were illegally added, housed different businesses, including a textile factory. The employees had told their boss about cracks in the walls, but he forced them to show up for work – otherwise he would withhold part of their meagre wages.
Importers have responsibility

The owner of the building was arrested. This is only right as he has primary responsibility, but this is far from the end of the matter. For example, it would have been a good deal better if the authorities had taken preventative action to deal with the precarious state of the complex. And not just there, but elsewhere in the country too, as the collapse of this building was not an isolated incident. Abominable working conditions all too often result in victims in Bangladesh.
The drama has a flipside – the price of clothing in some western shops. This means T-shirts or bikinis that only cost a few euros. This should make the consumer think, but responsibility cannot be passed on to the consumer. Rather, it lies with the importers [such as Mango and Benetton], who should better inform themselves as to the conditions in which their clothing is manufactured.
The European Union is Bangladesh’s biggest trading partner. The threat by foreign policy chief [Catherine] Ashton and Trade Commissioner [Karel] De Gucht this week in a statement might help. They warned Bangladesh that it may lose the advantages which it enjoys as a developing country, such as the exemption from import duties in the EU.
Income threat for Bangladesh

The problem with this kind of measure, and certainly with a boycott, is that it could cause Bangladesh to lose its most important source of income. In addition, the work will then be continued in another poor country, under the same, if not worse, conditions.
The EU rightly asks Bangladesh to comply with the internationally recognised standards of Corporate Social Responsibility (CSR). But this must also be demanded of other countries. In less diplomatic wording the angry workers who took to the streets in Bangladesh are demanding the same. It is the Bangladeshi authorities who must put an end to these scandals.

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Debt crisis: Irish president condemns ‘hegemonic’ EU

3 May 2013
Presseurop Financial Times, The Irish Times



Irish President Michael Higgins is under fire following an interview with the Financial Times in which said that the EU was “hegemonic” and faces a “moral crisis” as much as an economic one. He also urged the European Central Bank to reform or risk social upheaval and a loss of popular legitimacy. He has attracted the ire of critics who say he has overstepped the constitutional limits of his office. But this should not lead Irish Taoiseach Enda Kenny to reach “for his censor’s pencil”, writes the Irish Times:

In articulating the case for a social Europe and a rejection of orthodox neo-liberalism, perhaps the President, in his inimitable way, is straying beyond the ideological horizon of the government. [...] Mr Higgins, in pushing boundaries and urging that we develop a new vision of the EU and our place in it, is playing an essential role in stimulating, without deciding, a debate that is necessary and overdue.

The constitutionality of Higgins’ comments should be left to Ireland to debate, notes the Financial Times editorial. But “the issues he addressed are precisely those we should want elected politicians to grapple with publicly.” The economic daily continues –

Mr Higgins may think that the moral arguments stack up against austerity. But it also matters morally if borrowing today burdens future generations; and if public borrowing is spent on privileged insiders’ interests. He is, however, right that the debate must be had.
===========================
Hegemony:- Leadership by one Country especially by one State of a Confederacy.....I looked it up in my Oxford Dictionary.

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Enrico Letta: A new player, hardly a new game

2 May 2013
Presseurop La Stampa, Il Sole-24 Ore, Die Zeit & 2 others

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Angela Merkel and new Italian PM Enrico Letta at the Chancellery in Berlin on April 30
AFP
The day after he started work, Italian Prime Minister Enrico Letta went to Berlin, Paris and Brussels to pledge his commitment to Europe and voice his belief that austerity must be eased. But he may not be able to make himself heard, according to the European press.
It was a “debut with no inferiority complex,” writes La Stampa after Enrico Letta’s first European diplomatic tour. The Italian Prime minister, sworn in on April 29, met German Chancellor Angela Merkel on April 30 then French President François Hollande and European Commission President José Manuel Barroso on May 1.

He had to “make himself known in Berlin and Paris, where Italian destiny is decided much more than some think”. Despite his young age – only 46 – he “put on the shoes of a chief of government in a few hours”, notes the daily. But Europe’s confidence will prove much harder to win, adds the daily in an editorial

In this most difficult of moments, when Europe’s internal political relations are exceptionally troubled by the ever-growing clash between France and Germany. [Letta’s tour] is the first of a series of meetings in which Italy will have to raise the problem of the difficult – if not impossible – balance between austerity and growth. [...] Italy will forcefully try to get what has been granted to Spain, Portugal and Ireland – a two-year delay of the balanced budget goal set for 2013 [...], that could bring in a €10-20bn bonus to help the economy overcome its current impasse. Italy is now in an absurd position: it contributed massively to the ESM to save struggling countries like Greece, but is not allowed to spend a single billion to jump-start its own economy.

Letta’s early diplomatic tour was “a good idea”, estimates Il Sole 24 Ore, not only to underline “Italy’s more political stance on the continental stage,” but also to consolidate his position in the face of the disputes – namely on the refund of the housing tax asked for by PDL leader Silvio Berlusconi – that are already shaking the grand coalition supporting his government. The newspaper continues that Letta

laid his cards on the table, resurrecting the long-forgotten objective of a political Europe. Now the chancellor knows that the tune has changed and the new majority’s goal is to retake possession of the European ideal with economic development as a priority. [...] The 25 per cent of the vote taken by the anti-establishment Five Star Movement is a bell that didn’t ring only in Italy: the menace of populism threatens all of Europe and must be fought also by rebuilding the traditional Italian-German axis.

From the German side, Die Zeit reflects on the "smart boy" who has succeeded the “smiling charmer" Berlusconi and the "courteous professor" Monti.

Letta wishes to establish a relationship of trust with the German chancellor. As relations with Germany are of decisive importance for his government [...] Letta needs strong cross-party legitimacy in Europe. Because without it, he will fall victim to the whims of his government partners.

As for the idea of an alliance with France’s François Hollande in order to "seek a relaxation of the stability pact and [...] deficit targets," Der Standard finds this "completely exaggerated." The Austrian daily says that

countries like Italy and France, which are the most vocal critics of the austerity policies, are far from having explored all means [of reducing their deficits]. On the contrary, the French government has lowered the retirement age [...] from 62 to 60 last year [...] and the Rome government – under pressure from “the Cavalier” Silvio Berlusconi, is in the middle of unpicking the reforms of the former cabinet.

Enrico Letta’s European trip, in the end, amounts to no more than a “pious pilgrimage”, considers ABC’s columnist Alfonso Rojo. Visiting Berlin first, the new Italian PM simply showed he knows who is in charge in the EU –

Some people say sarcastically that instead of an official visit, it seems to be a ‘pious pilgrimage.’ A pilgrimage because it is a compulsory trip to make in search of salvation. Pious because it looks like European leaders approach Angela Merkel almost on their knees. […] After the meeting with the chancellor, and in the press conference afterwards, Mr Letta did not seem so fierce. […] Chancellor Merkel repeated the motto that Europe “has to leave the crisis stronger than when it entered” and everyone smiled, although the game is clear. Enrico Letta, as François Hollande learnt and Mr Rajoy made clear, does know who is in charge in the EU.

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Economy: There is no euro crisis

3 May 2013Lidové noviny Prague

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Arcadio
Don’t believe this “modern myth” that the single currency is teetering on the edge of disaster. The real problem is that the losers – the less competitive countries – are growing in number day by day

Pavel Kohout The crisis has become part of everyday life. It can also be looked on benevolently: behold, fellow citizens, the worst economic crisis in history – and the euro is holding firm, our superb politicians are capable of decisive and effective action: they are saving us! Let us all respond to their urgent cries and give them more power: more Europe, more Brussels, more European Commission, more European Parliament and even more institutions. Only a United Europe is able to stand up to the challenge posed by the euro crisis. We must see the integration through!
But all of this is nothing more than contemporary myth-making to justify the expansion of state power both for unelected authorities in Brussels and for elected governments of the nation states alike. A modern-day fairy tale to justify the continued centralisation of power.
The euro crisis, though, is no fairy tale, some may argue. Or is it?
Yes, it is: the euro crisis is 100 per cent pure synthetic fabrication in crystalline form. In the first place, the currency itself is not suffering from the crisis. It could suffer from high inflation, but that is not the case for the euro, and it never has been. It may suffer currency rate fluctuations on international markets, which, far from signifying a crisis, is merely normal. All modern currencies in a free-floating regime show volatility, from the US dollar to the Japanese yen, from the British pound to the Swedish krona and the Czech crown.
There are no signs of crisis in inflation rates, nor in the evolution of the euro exchange rate, which has been strong and steady in recent years – for the layman, surprisingly strong and steady. No mystery there: a robust balance of trade for Germany, the superpower of world trade, keeps the euro in fine form. Crisis? Nonsense.
Euro death rumours are exaggerated

Is the euro at risk of disintegration, then? Haven’t eurosceptics been warning of the collapse of the single currency for years? Is it not vital that we all join forces, to turn the I-told-you-so smiles on the faces of the killjoy doomsayers into scowls?
No. The Eurozone is not threatened with break-up. It never has been, not even for a second. We have to look at how the mechanism of the Eurozone actually works. No country can be excluded from it, and no member state can be evicted against their will. Not even if they faked the statistics, not even if they go bankrupt, not even if their people paint a Hitler moustache on Angela Merkel (which already happened in Greece, and Greece is still using the euro). Eurozone member states may leave voluntarily, but none so far have grabbed the chance. Leaving the Eurozone would apparently be tantamount to departing the EU as such. That would mean shutting the doors on the zone of free movement of goods, persons and capital – that is, the loss of a few real and uncontested benefits of belonging to the union. No state will risk re-establishing tariffs against its exports to the EU countries. Who, after all, would voluntarily want to cope with the de facto trade sanctions?
Of course, one can argue that free trade and similar freedoms existed before the euro was introduced. At the moment, however, there is no way to withdraw from the Eurozone without exiting the EU entirely. We cannot expect Eurozone member states to allow an exit that would maintain the benefits of membership while getting rid of the drawbacks.
That’s why not even Greece wanted to get out. Nor Cyprus.
Nothing to fear

No one wants to kick anyone else out of the Eurozone, and no one wants to leave. End of story. No collapse looms up over the horizon. Eurosceptics rejoice in vain, and the euro-optimists have nothing to be afraid of. The euro will still be in business for a long time yet. How long we cannot say, but monetary unions of the 19th Century worked for decades, until the First World War put an end to their normal existence.
The authors wanted it that way, but the story does not end there. The euro is not in crisis, but a good many of the EU member states who use it certainly are. Many, in particular the economies of the Latin states of the union, need a weaker currency to make their products more competitive and to attract more tourists. France’s trade balance is sinking into the depths day by day. Its trade with the other Eurozone states last saw positive figures in March 2000. We could continue in this vein for some time.
Unlike the monetary unions of the past, the euro rules out the possibility for member states to devalue their currencies. The creators of the common European currency, after all, wanted it that way. The politicians that dominated their numbers saw currency devaluation not as a standard tool of economic policy, but almost as a tool of unfair competition for their neighbours with stronger currencies.
According to the vision of the fathers of the euro, member states should compete with each other in hard work, productivity, quality and innovation. It was a nice idea, but no one thought of what to do when someone loses.
And now most of the Eurozone is losing. The Germans, who are used to a strong currency and whose banks never blew a credit bubble, are the winners. The same is true for Austria, and for Luxembourg, the financial centre of the continent. Malta, another financial centre, is doing well. For Slovakia, which joined the Eurozone recently, it is too early to say. But with that, the list of winners is practically exhausted. Not even Finland is in great shape these days.
Translated from the Czech by Anton Baer

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German euro founder calls for 'catastrophic' currency to be broken up


Oskar Lafontaine, the German finance minister who launched the euro, has
called for a break-up of the single currency to let southern Europe recover,
warning that the current course is "leading to disaster".








Mr Lafontaine said on the
parliamentary website of Germany's Left Party that Chancellor Angela Merkel will
"awake from her self-righteous slumber" once the countries in trouble unite to
force a change in crisis policy at Germany's expense. Photo:
Reuters






By Ambrose Evans-Pritchard,
International Business Editor

9:30PM BST 05 May 2013

240 Comments




"The economic situation is worsening from month to month, and unemployment
has reached a level that puts democratic structures ever more in doubt," he
said.


"The Germans have not yet realised that southern Europe, including France,
will be forced by their current misery to fight back against German hegemony
sooner or later," he said, blaming much of the crisis on Germany's wage squeeze
to gain export share.


Mr Lafontaine said on the parliamentary website of Germany's Left Party that
Chancellor Angela Merkel will "awake from her self-righteous slumber" once the
countries in trouble unite to force a change in crisis policy at Germany's
expense.


His prediction appeared confirmed as French finance minister Pierre Moscovici
yesterday proclaimed the end of austerity and a triumph of French policy,
risking further damage to the tattered relations between Paris and Berlin.



"Austerity is finished. This is a decisive turn in the history of the EU
project since the euro," he told French TV. "We're seeing the end of austerity
dogma. It's a victory of the French point of view."



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Mr Moscovici's comments follow a deal with Brussels to give France and Spain
two extra years to meet a deficit target of 3pc of GDP. The triumphalist tone
may enrage hard-liners in Berlin and confirm fears that concessions will lead to
a slippery slope towards fiscal chaos.

German Vice-Chancellor Philipp Rösler lashed out at the European Commission
over the weekend, calling it "irresponsible" for undermining the belt-tightening
agenda.

The Franco-German alliance that has driven EU politics for half a century is
in ruins after France's Socialist Party hit out at the "selfish intransigence"
of Mrs Merkel, accusing her thinking only of the "German savers, her trade
balance, and her electoral future".

It is unclear whether the EU retreat from austerity goes much beyond
rhetoric. Mr Moscovici conceded last week that the budget delay merely avoids
extra austerity cuts to close the shortfall in tax revenues caused by the
recession.

The new policy allows automatic fiscal stabilisers to kick in, but France
will stay the course on the original austerity. "It is not about relaxing the
effort to cut spending. There will no extra adjustment just to satisfy a
number," he said.

Mr Lafontaine said he backed EMU but no longer believes it is sustainable.
"Hopes that the creation of the euro would force rational economic behaviour on
all sides were in vain," he said, adding that the policy of forcing Spain,
Portugal, and Greece to carry out internal devaluations was a "catastrophe".


Mr Lafontaine was labelled "Europe's Most Dangerous Man" by The Sun
after he called for a "united Europe" and the "end of the nation state" in 1998.
The euro was launched on January 1 1999, with bank notes following three years
later. He later left the Social Democrats to found the Left Party.

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Europe Gauge Shows Contraction as Retail Sales Decline


By Scott Hamilton - May 6, 2013 10:36 AM GMT+01

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Euro-area services and manufacturing output shrank for a 15th straight month in April and retail sales fell in March as the 17-nation economy struggled to emerge from recession.
A composite index based on a survey of purchasing managers in the manufacturing and services industries increased to 46.9 last month from 46.5 in March, London-based Markit Economics said in a report today. While above an initial estimate of 46.5 published on April 23, it was still below 50, indicating contraction. Retail sales declined for a second month in March, another report showed.





Enlarge image
Euro-Area Services, Manufacturing Shrink Less Than Estimated



Balint Porneczi/Bloomberg
An employee uses scissors to cut a section of leather hide used during the manufacture of handmade luxury gloves at the Causse Gantier factory in Millau, France. A measure of euro-area manufacturing output released on May 2 showed the industry contracted for a 21st straight month in April.
An employee uses scissors to cut a section of leather hide used during the manufacture of handmade luxury gloves at the Causse Gantier factory in Millau, France. A measure of euro-area manufacturing output released on May 2 showed the industry contracted for a 21st straight month in April. Photographer: Balint Porneczi/Bloomberg




7:08 May 6 (Bloomberg) -- Christian Schulz, senior European economist at Berenberg Bank, discusses France's deficit and the outlook for the euro-zone economy. He speaks with Manus Cranny on Bloomberg Television's "On the Move." (Source: Bloomberg)




9:04 May 6 (Bloomberg) -- Kit Juckes, global strategist at Societe Generale SA, discusses the U.S. economy, Federal Reserve monetary policy and austerity measures in Europe. He speaks with Anna Edwards on Bloomberg Television's "Countdown." (Source: Bloomberg)
The euro-area economy will shrink more than previously estimated in 2013 as part of a two-year slump that has pushed unemployment to a record high, the European Commission said on May 3. The European Central Bank last week reduced its key interest rate to an all-time low after confidence was shaken by political turmoil in Italy and a bailout of Cyprus.
“The financial markets appear to have survived the government debt crisis, but the leading economic indicators have recently declined,” said Joerg Kraemer, chief economist at Commerzbank AG in Frankfurt. There is “a significant risk that, contrary to analysts’ expectations, the economy will not pick up in the spring,” he said.
Stocks Decline

The euro pulled off its lows against the U.S. dollar after the PMI data. The European currency traded at $1.3107 at 11 a.m. in Brussels, down 0.1 percent on the day, after trading as low as $1.3093 earlier. The European stocks fell, with the Stoxx Europe 600 Index down 0.1 percent.
The euro-area services PMI rose to 47 in April from 46.4 in March, improving on an initial estimate of 46.6. Still, themanufacturing PMI released on May 2 showed the industry contracted for a 21st straight month in April, with the gauge declining to 46.7 from 46.8 in March.
Today’s report “suggests that, having eased in the first quarter of the year, the euro zone’s economic downturn is likely to have gathered momentum again in the second quarter,” Chris Williamson, chief economist at Markit, said in the report. “The PMI is broadly consistent with GDP falling at a quarterly rate of 0.4 percent to 0.5 percent in April.”
Retail Sales

Euro-area retail sales fell 0.1 percent in March after a 0.2 percent drop in February, the European Union’s statistics office in Luxembourg said in a separate report today.
The euro economy has contracted for five quarters and the trend is forecast to continue into 2013. Economists in a Bloomberg survey published on April 11 estimated that euro-zone gross domestic product shrank 0.1 percent in the first quarter. The GDP data are due on May 15.
Air France-KLM Group (AF), Europe’s largest airline, said on May 3 that it was operating in a “difficult and uncertain environment” and refrained from giving an earnings outlook. Carrefour SA, France’s biggest retailer, on April 18 reported weaker first-quarter sales amid cold weather and slow consumption in Europe.
Growth in China’s services industry slowed in April, according to a separate report compiled by Markit. The HSBC China Services PMI fell to 51.1 last month from 54.3 in March. The April reading is the lowest since August 2011.
Asian Data

Elsewhere in Asia, Australian retail sales unexpectedly fell in March and job advertisements dropped for a second month, sending the currency lower as traders see a 50-50 chance the central bank will resume cutting interest rates tomorrow.
Indonesia’s economy grew at the slowest pace in more than two years last quarter as weaker exports and government spendingcountered gains in consumption and investment.
In Europe, the Brussels-based commission now forecasts euro-area GDP will fall 0.4 percent this year, compared with a February prediction of a 0.3 percent drop. That would follow a 0.6 percent contraction in 2012 and shows the currency bloc headed for its first back-to-back years of falling output since the euro made its debut in 1999.
Unemployment is expected to climb to 12.2 percent in 2013 from 11.4 percent last year, according to the commission’s May 3 forecasts.
The weakness in Europe’s economy prompted the ECB’s Governing Council to cut its benchmark rate on May 2 to a record low 0.5 percent from 0.75 percent, the first rate reduction since July last year. ECB President Mario Draghi said the risks to the economic outlook for the region are “on the downside.”

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Will Angela Merkel have to choose between Germany and Europe?


As Angela Merkel faces elections, voices from both Left and Right are
calling for an end to the euro. Jeevan Vasagar reports from Berlin.








Angela Merkel governs a country
torn by contradictory impulses Photo:
AP





By Jeevan Vasagar

6:56AM BST 07 May 2013

172 Comments




In the heart of Berlin’s prime shopping district sits the ruined spire of the
Gedächtniskirche, the church built by Kaiser Wilhelm II and shattered by Allied
bombing in 1943. Left standing as a memorial to Europe’s last disintegration, it
is a constant reminder of why Germans cherish European unity, and why they fear
a continent of competing nations.


But as the quarrelling voices in the eurozone grow louder, Germany once again
finds itself at the centre of conflict. From Italy, where voters have
resoundingly rejected austerity measures, to Greece and Cyprus, where Angela
Merkel has been caricatured as a Nazi, to Paris, where members of François
Hollande’s party accuse the German chancellor of “selfish intransigence”, the
project intended to bring Europe together has been stirring up animosity.



The latest voice to join the chorus is that of Oskar Lafontaine, who served
as Germany’s finance minister when the euro was first introduced. He has called
for the single currency to be broken up to help southern Europe recover.
“Germans have not yet recognised that southern Europeans, including France, will
sooner or later be forced by their current misery to put up a fight against
German hegemony,” he warned.


From a British perspective – where much of what Mr Lafontaine says will sound
like basic common sense – it is hard to credit quite how rare a voice his is
within Germany, Indeed, the country’s leaders still believe that, far from
unravelling the European cause, the crisis has helped to advance it.


Mrs Merkel’s finance minister, Wolfgang Schäuble, argues that Europe will
emerge from the crisis with the single currency intact, and stronger mechanisms
with which to preserve it. In a lecture at Oxford University last year, he
pointed out that when Europe brought in the euro, there was “no fiscal union, no
supranational control over national budgets, and no European regulation of
banks”. Little wonder, then, that the crisis put the currency under such strain.




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Germany wants a more powerful Europe to have the last word on national
budgets. But other countries are giving this short shrift. This new tension was
evident when Italian prime minister Enrico Letta made his first official visit
to Berlin last week. With furious voters at his back, Mr Letta insisted: “I’m
not here to justify domestic choices… We know German citizens have no intention
of telling us what we have to do.”

In this showdown over austerity, it is Germany that has blinked first.
Berlin, which has overseen Europe’s austerity policy since the start of the debt
crisis, is now indicating that it is relaxed about eurozone countries failing to
hit their deficit-cutting targets. In the case of France – Germany’s key partner
in Europe – Mrs Merkel is now offering an alternative prescription: economic
reforms that will reduce labour costs in the long term.

The move is a necessary recognition of the deep unpopularity of insisting on
spending cuts at a time of acute pain; the average unemployment rate in the
eurozone is now 12.1 per cent and will remain at that level until at least 2014,
according to European Commission predictions. In Greece and Spain, youth
unemployment is over 50 per cent.

But the pain has only been deferred. Germany has made no secret of its view
that the French workforce, in particular, is far too cossetted. A briefing drawn
up by the German economics ministry points out that France has the
“second-lowest annual working time” in the EU, while its welfare spending is the
most generous in the eurozone.

Such criticisms only strengthen the German public’s reluctance to bail out
other European nations. Their country went through its own belt-tightening 10
years ago under Gerhard Schröder – including the Hartz IV benefits reform, which
obliged jobseekers to accept offers of work. At the time the measures were
introduced, Germany’s joblessness rate was 11.6 per cent. It seems deeply unfair
to ordinary Germans, who have put up with a decade of modest pay rises, that
they should now be asked to pay for the rescue of fellow Europeans who kept
living beyond their means.

So even though Mrs Merkel is comfortably placed in the opinion polls ahead of
September’s federal elections, the country is torn by contradictory impulses. On
the one hand, voters want to keep the euro together: hence Germany’s
contributions to bail‑out deals. On the other, there are limits to their sense
of solidarity, as graphically demonstrated by the draconian terms that Berlin
sought to impose on Cyprus earlier this year. German analysts make a moral case
against countries like Cyprus and Ireland – such grasshopper nations, they
argue, can’t be allowed to reap the benefits in the good times, then let the
ants pay the bills in the bad times.

The same dilemma applies to banking reform – one of the key planks of the
eurozone’s crisis-management strategy. The flipside of common banking regulation
is the mutualisation of debt, so that troubled banks across the Continent can be
rescued, or simply closed, in order to protect the system as a whole. But that
reform, proposed by Germany’s opposition Social Democrats, is now off the table.
Instead, the consensus is that taxpayers must be protected first.

The forthcoming election campaign, then, will be rather unusual. For the
first time, there are loud voices from both Left and Right calling for an end to
the euro. Chief among them is the new Eurosceptic party, Alternative für
Deutschland, which is at 5 per cent in the polls and stands to gain from any
unwarranted generosity towards the rest of Europe.

Until now, Mrs Merkel has thrived by selling German voters an image of
frugality. Her party’s MPs are fond of saying that hardworking Germans can’t be
asked to pay so that spendthrift Greeks can go to the beach. That image is a
little disingenuous. After all, Germany has profited mightily via its exports,
chiefly to the eurozone, and has saved itself a lot of money during the crisis
thanks to reductions in the cost of its borrowing. That’s before you consider
the role that banks from northern Europe played in fuelling the credit boom in
the south. Still, the image of the “frugality chancellor” is one that Mrs Merkel
stuck with – and one that her opponents can use to limit her room for manoeuvre.


For many in Germany’s political elite, the abiding fear is over how
inward-looking Europe’s squabbling seems. As national rivalries resurface on
this continent, giant new powers like China and Brazil are accelerating away.
The worry is that in a world of global trading blocs, a divided Europe will
quickly become irrelevant.

Mrs Merkel has compared the current peril facing Europe to East Germany’s
decline under Communism. The Chancellor, who grew up in the East, said recently:
“I’ve experienced the collapse of a country. The economic system failed under
the aegis of the Soviet Union. What I really don’t want is to look on, eyes
open, as Europe as a whole slips back.”

Germany has benefited greatly from globalisation. The supply chains of its
big manufacturers source parts from cheaper workforces abroad, combine them with
more expensive German labour, then export the finished articles around the
world. As unemployment has soared in southern Europe, it has seen an influx of
highly educated Greeks, Italians and Spaniards. This wave of crisis-driven
migration has halted a decade of population decline.

But its policies during the debt crisis are fuelling a revival of nationalism
elsewhere in Europe – and within Germany itself, from taxpayers alarmed at the
mounting costs of rescuing the euro. As a result, a country desperate to keep
Europe together, in order to escape the ghosts of its own history, is now
risking the prospect of a European departure from the global stage.

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Mr Normal has become the Pitiful President


One year in, François Hollande has alienated most voters, antagonised Angela
Merkel, driven droves of French into exile and presided over a worsening economy









President François Hollande with
his partner Valérie Trierweiler, who is even more unpopular than
him Photo: Getty
Images





By Anne-Elisabeth Moutet

7:31PM BST 02 May 2013

111 Comments




With hindsight, it seems as if François Hollande’s troubles started the day
he was inaugurated, on May 15 2012. First he was drenched by a surprise storm as
his open Citroën drove up the Champs-Elysées. Then, the very same day, his
Falcon plane was hit by lightning on the way to Berlin, where he was scheduled
to meet Angela Merkel – making it possibly the first and last time the German
Chancellor has felt unreserved sympathy for him.


The new president had to turn back before travelling to Berlin in another
aircraft. When he got there – in more pouring rain – he missed a turn on the
airfield red carpet while reviewing German troops, and had to be steered back in
the right direction by Mrs Merkel’s firm grip on his elbow, a moment that
presciently symbolised their future relationship.


And everything went downhill from there.


One year later, the man who had billed himself as the “normal president”
during his victorious campaign against Nicolas Sarkozy is breaking records for
unpopularity. With 75 per cent against him, Hollande is scoring the lowest
approval ratings of any president of the Fifth Republic since the country
started conducting polls. Unemployment has risen by 11.5 per cent since his
election, reaching an all-time high of 3.2 million. An estimated 150,000 young
people have left the country in search of better prospects abroad: the only jobs
created in France have been in the public sector, usually in fields such as
teaching that are solidly controlled by Socialist voters.


Despite a widely touted “austerity” drive, public spending stands at 57 per
cent of GDP – the figure in Britain is 45 per cent – and the country’s public
debt is about to reach 94 per cent of GDP. The largest street demonstrations
since 1984 – when the country also had a Socialist president, François
Mitterrand – have brought more than a million people on to the streets of Paris
on two occasions (and more are planned), to protest against justice minister
Christiane Taubira’s new law on gay marriage and adoption: given that France is
a fairly tolerant society, these were effectively a street referendum against
Hollande.



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France’s very visible spat with Germany is a good example of how Hollande
manages to make a bad situation worse. It is hardly new for French and German
governments to disagree on economic issues; nor is it unusual that its leaders
belong to different political parties. Yet, mindful of the European leverage
afforded by the French-German axis, Valéry Giscard d’Estaing, a conservative,
was excellent friends with the Social Democrat Helmut Schmidt, while the
Socialist Mitterrand spoke in almost Gaullian terms of his German counterpart,
the Christian Democrat Helmut Kohl. Even Jacques Chirac never clashed with
Chancellor Gerhard Schröder in the way he did (as PM) with Margaret Thatcher.


Hollande, however, still seems to manage France the way he managed rival
“currents” during his long tenure as Socialist Party leader, trying to play one
against the other while trying to keep everyone happy by granting them some sort
of concession. This was in evidence at last year’s European summit, where
instead of sitting down with Mrs Merkel to hammer out a viable compromise, he
tried to rustle up an alliance with Spain and Italy behind her back, thinking
this would be enough to counter the German position.

“This may work in Corrèze [Hollande’s constituency in central France]; it
doesn’t in the real world,” a French diplomat commented at the time. “At the end
of the day, the Germans were annoyed, the French line was all but absent from
the final communiqué – and Mrs Merkel and David Cameron found themselves in
closer alliance than they’d ever been.”

Recently, a trio of ministers including the flamboyant Arnaud Montebourg,
minister for industrial recovery, started making increasingly belligerent
statements about “German-imposed austerity”, accusing Mrs Merkel of “egotistical
intransigence” and calling for “a democratic confrontation with Germany”,
without being taken to task by the president.

It didn’t take long for Mrs Merkel’s entourage, who are much savvier in the
ways of French politics than the French are about Berlin affairs, to counterleak
a memo – plausibly produced by the Chancellor’s coalition partners, the Free
Democrats – on France being “Europe’s biggest problem child”, with a stalled
economy and a “meandering” reform programme. Mrs Merkel then gave a perfunctory
denial that she thought anything of the kind.

The truth is that she is incensed with Hollande, not least because of her
growing conviction that the French president and his spin doctors allowed the
German-bashing because they felt that it would displace domestic dissatisfaction
with Hollande on to Germany.

Even the notoriously complacent French press is now giving the president a
hard time. “Is 'GrandPa’ [one of Hollande’s mildest nicknames] really up to it?”
asked the news magazine L’Express on a recent cover. Le Point called him
“Monsieur Faible” – Mr Weak – after Hollande confessed that he hadn’t believed
the economic crisis would “last so long”.

No relief was to be expected after the announcement yesterday that Arnaud
Montebourg had scuppered a deal by which Yahoo had agreed to acquire 75 per cent
of Dailymotion, a successful French internet video site, valuing it at $300
million. “Yahoo wants to devour Dailymotion, but we told them no and that it had
to be a 50:50 split,” the avowedly anti-American Montebourg boasted to Europe 1
radio. Whereupon Yahoo called the whole thing off.

Similar grandstanding by Montebourg had already driven the Indian tycoon
Lakshmi Mittal from the Florange steelworks in Lorraine, and the American
company Titan International from a floundering Goodyear tyre plant in northern
France.

“The country is drowning in an ocean of discouragement,” said Christophe
Barbier, the influential editor of L’Express. “It’s not just the tax-avoiding
rich, artists like Gérard Depardieu, businessmen – everyone is now tempted to
leave for a better life elsewhere. Young people feel they will never get a
break, a job, a sign of trust. Entrepreneurs have to fend off red tape, rising
costs and levies.”

In April, to add to this toxic climate, came the Cahuzac scandal: France’s
budget minister, the man in charge of fighting tax fraud, was revealed to have a
secret bank account in Switzerland – and in all likelihood another in Singapore
– and to have lied to the president and parliament about it.

In the past week, polls have given Marine Le Pen, the far-Right National
Front leader, record numbers in a hypothetical presidential election – 23 per
cent, well above Hollande at 19 per cent, while Sarkozy scored 34 per cent. Were
Sarkozy to stand, he would beat Le Pen easily in the second round but the talk
in France has been of the dangers of Fascism, beginning with the very real
distrust of all politicians and of the ruling class.

It says a lot about Hollande’s tin ear that he chose that very moment to
compel ministers to disclose their personal assets, arguing for the virtues of
“transparency” against corruption. This may work in the United States, where
personal success is admired: but in France, a country where unregenerated
Marxist thought still largely holds sway, overlaying a centuries-old Catholic
mistrust of money, it prompted Claude Bartolone, the Socialist Speaker of the
National Assembly, who is fighting suggestions of a similar obligation for MPs,
to talk of “voyeurism and envy”.

Embattled in the Élysée Palace, where at times it seems his only remaining
supporter is his partner Valérie Trierweiler – a woman so unpopular that
Hollande has to fend off unpleasant remarks about her during his rare walkabouts
– the president is now mulling a cabinet reshuffle as a way of signalling to the
French that he has taken their displeasure on board.

But whom to choose to replace his weak prime minister, Jean-Marc Ayrault, a
former German language teacher? The 2007 Socialist presidential candidate,
Ségolène Royal, is unacceptable to Mme Trierweiler. The former Socialist leader
Martine Aubry, Jacques Delors’s daughter and the artisan of the rigid 35-hour
working week, may be unacceptable to Mrs Merkel. François Mitterrand’s former
PM, Laurent Fabius, now the foreign minister, is hampered by having just been
revealed to be the richest man in the Cabinet.

Hollande’s instinct is probably to try to trundle along with the same tired
team. His latest attempt to show that the presidency is doing its part to
relieve the public debt has been to announce that he will sell part of its
cellar of fine wines, lovingly accrued since the Vincent Auriol presidency in
1947.

On May 30 and 31, 2,200-euro bottles of 1990 Pétrus and Château d’Yquem will
be auctioned off, “to be replaced by more modest vintages”, according to the
president. So speaks a self-proclaimed modest man, who may be feeling that he
has a lot to be modest about

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Society: Why have the Spanish people not revolted?

6 May 2013Infolibre Madrid

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A banner showing the number of unemployed, at a protest in Madrid on May 1, 2013.

Five years of crisis, 6 million unemployed and thousands driven from their homes: Despite the heavy social toll, Spaniards suffer their fate without rebelling against the government or against the EU because they fear losing what little they have left, argues a sociologist.

Ignacio Sánchez-CuencaThe fifth year of the crisis is upon us. Unemployment, poverty and social exclusion are all on the rise; reports of malnutrition in children are cropping up; tens of thousands of families have been evicted from their homes; and wages continue to fall, which can’t be said for the costs of goods and services.
What’s more, people have grasped that this situation is not a passing phase and can still stretch on for a few years yet. Given all this, why has there been no social explosion? Why has the system not collapsed? How much can Spanish society endure without an uprising?
It is hard to think of a combination of conditions more favourable for bringing about an explosion. First, the effects of the crisis are terrible. How can a population survive with 6 million unemployed? The worst is that unemployment will keep growing as domestic demand is depressed. The savings and the subsidies that have kept many going so far are being depleted. Among those who do have work, many are earning subsistence wages in the underground economy.
Second, the savage austerity policies that Spain and the European Union are pursuing are only pushing the country onto the scrap heap and putting off the day of recovery. In place of consumption and state investment combatting the fall in household demand, the government is cutting administrative expenses across the board. This is not only worsening the crisis, but decreasing social coverage for the unemployed and the poor.
‘Internal devaluation’

Although it sounds a little brutal, the EU and the government have deemed that the road out of the crisis passes through the general impoverishment of the majority of the Spanish people. “Internal devaluation” does not mean anything else.
Third, there is a growing perception that way the sacrifices are being shared out is enormously unfair. The bloodiest case, but certainly not the only one, is the evictions. The state handed out generous aid packages and is getting dangerously into debt to restructure the banks, but has no solution for all those who have been trapped by the mortgage crisis. The insensitivity to this situation of the public authorities and of the two big parties has helped fuel the sense of outrage across much of society.
Fourth, at the moment there is no light at the end of the tunnel. Despite the propaganda of the government about the upcoming recovery, the people have grasped that we are in the midst of a very long process of stagnation and the government is failing to anticipate the very difficult years ahead of us.
Finally, we are suffering from a corrupt and astonishingly inefficient party in power. Incredibly, at a moment as serious as the present, the head of the government is being blackmailed by charges of illegal financing of the political party that he leads.
Few alternatives

Despite all these calamities that I have listed, the people are not rising up. What exactly is going on here?
On the one hand, there are no longer any alternatives. There is no ideology today that proposes a path distinct from the one we are on and that can marshall an effective resistance. The people are dominated by rage, which translates into rejection of and alienation from the economic and political system – but that rage has failed to crystallise into a movement that amounts to a collective threat to that system.
On the other hand, despite the widespread impoverishment, Spain continues to enjoy a considerable level of development. Developed democracies, as we know, are extremely stable and put up with almost anything. The stability is astounding: never has there been a democracy with a higher per capita income than the Argentina that collapsed in 1976.
Even after the crisis of these past years, Spain has a per capita income well above that. Tensions and violent episodes are therefore expected, but no widespread collapse. This is partly because the state is very powerful and can put a brake on protests, and partly because many families own their flats or have their savings in stocks and are unwilling to set out on adventures of uncertain outcome. At all levels, development brings in its train a higher level of political conservatism.
The clearest symptom that the people, no matter how angry they are, are averse to risks is the absence of a public debate in Spain about the wisdom of staying in the euro. Despite the fact that the monetary union has turned out to be a mousetrap, almost no one wants to assume the short-term costs of leaving the currency. Strangely enough, people are directing their criticism at the parties and institutions of Spain when much of the problem is higher up, in the rules for the functioning of the euro and in the policies set by the northern countries. True, the European Union institutions have lost much of their status in the eyes of the public, but without too many consequences: the support for the euro continues to be massive. And it’s that support that is key to understanding why there has been no collapse

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Eurozone: ‘Rajoy and Letta warn Merkel of the risk of social unrest’

7 May 2013
Presseurop La Vanguardia


La Vanguardia, 7 May 2013
Meeting in Madrid on May 6, Spanish Prime Minister Mariano Rajoy and his Italian counterpart Enrico Letta agreed to "pressure" the EU to approve a youth unemployment plan at the European Council summit in June.
The two leaders also emphasised the need for new policies to combat populism and anti-European sentiment, which is increasingly prevalent in all EU countries.
La Vanguardia remarks that the "Italian-Spanish front is still alive", and eager to exert pressure on northern countries and German Chancellor Angela Merkel to proceed with the implementation of measures decided at the Rome summit in June 2012. These include the progressive introduction of a banking and budgetary union in the EU.

[Panda]

Youth unemployment: Germany’s unique key to success


8 May 2013Die Welt Berlin

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Martirena
For the five million young unemployed Europeans, Germany, where the rate of youth joblessness is the lowest in Europe, looks like a promised land. While its system of dual training at the core of this success seems like a model for crisis-hit countries, it is not easily exported.

Stefan von BorstelMore than 5.5m young Europeans are without jobs. In the crisis countries in southern Europe, a generation is coming of age with few prospects: one in two Spaniards and Greeks under 25 are unemployed, and it's one in three in Italy and Portugal.
To them, Germany must look like an island of the blessed: youth unemployment here is below 8 per cent. In none of the other 27 EU member states is it this low. Only Austria is anywhere close (8.9 per cent).
How do they do it, our European neighbors ask – and even make pilgrimages to Germany to research the phenomenon. What they discover is our dual vocational training system – going to school (theory) and working (practice) simultaneously rather than consecutively. For most Europeans, that’s new: learning and working, instead of learning then working.
The European Commission has praised the German model as a "guarantee against youth unemployment and shortage of skilled labour." Even US President Barack Obama praised the German model in his 2013 State of the Union address: “Right now, countries like Germany focus on graduating their high school students with the equivalent of a technical degree from one of our community colleges, so that they're ready for a job."
Slow-changing opinions

For a long time, other countries criticised Germany for this approach – in fact, the OECD regularly upbraided us for having too few university graduates. For many international education experts, a university education – bachelor or master’s degree, doctorate – is the measure of all things. German “Meister” (master) certification is seen as rather exotic.
Practical training is considered to be notches below academic training. Equating an apprenticeship diploma with a high school degree, considering master certification to be on a par with a bachelor’s degree, is inconceivable for many Europeans. But slowly, word is getting around that German industry’s ability to innovate – and indeed its success as measured by the success of its products worldwide – might have something to do with the sound training German workers receive.
Even within Germany there are critics of the dual system. It has been said that the training is too specialised, too tailored to the specific needs of certain industries, and that the number of different specialties (more than 300) that kids can train for is way too high. Doubts have also been expressed as to whether dual-system qualifications can keep up with fast-changing economic times in our Internet era.
Becoming an export hit

The system came under a lot of pressure about a decade ago when there was mass unemployment in Germany, and tens of thousands of young people were unable to get apprenticeships. In 2004, the red-green (Social Democrat/Green Party) government was even pushing for a training levy to force the economy to create more apprenticeships.
But then in June 2004, the German government joined with employers and business associations in pushing through the national Vocational and Educational Training Pact, which helped reverse the situation: now, supply is greater than demand.
The global economic crisis has turned the German model into an export hit. Germany has signed a training cooperation deal with six EU countries, and German companies are playing a pioneering role by training staffers in their subsidiaries abroad according to the German model.
Expectations are high – also for the Germans. Germany doesn’t only want to export a winning system, it’s hoping for dynamic, motivated southern Europeans to occupy all the apprenticeship slots that aren’t presently being filled – and who once they’ve got their qualification don’t head back home but stay in Germany to fill out the growing shortage of skilled workers.
Sceptics are quick to point out problems, like language barriers, and say they doubt whether migrants can play a determining role in alleviating the shortage of apprentices in Germany.
And it is true that the time-frame may not be ideal, as the German system is strongly dependent on the economy. The market, not education experts, is ultimately what determines the number of apprenticeships available. It is companies that decide how many positions requiring which qualifications they will need in the future; that is the basis for the number of apprenticeship positions they open up.
So the big advantage of the German vocational training approach is also its biggest drawback. The system is contingent on the economy – and in bad times, such as the crisis countries in Europe are currently experiencing, demand for apprentices will be lower.
Sign of desperation

That southern Europeans are looking for an answer in the dual system shows how desperate they are. They not only lack companies willing to create apprenticeship positions, and patient “masters” happy to pass on their know-how to “their” apprentices, but also the institutions, and close-knit cooperation that is required between employers, politicians, unions and other players to implement the dual training system successfully.
Even in Germany, where this collaboration is so well established, the system is still not without its own setbacks, such as the conflict over the Training Pact and the resistance from the unions.
So southern Europeans adopting the German system have undertaken something highly ambitious. But it’s better to push for courageous structural reform rather than opt for the simpler solution of giving young unemployed people senseless occupational training just to keep them busy – and quiet. That deserves our support. As do young southern Europeans who are leaving home to come to Germany to find a job or receive vocational training. We should welcome them with open arms.
Translated from the German by Gail Mangold-Vine/Worldcrunch

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I suggested a couple of days ago that out of work qualified people should be training young unemployed people NOW , ready for the upturn .

Afew years ago many Brits worked in Germany helping to build houses, they are not needed now because German has their own experienced workers now.

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