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France: ‘Brussels’ 10 commandments to Hollande’

30 May 2013
Presseurop Le Figaro


Le Figaro, 30 May 2013
The European Commission has granted France two more years to bring its public deficit to below 3 per cent of GDP on condition that the government accepts far-reaching reforms to curb public spending and to spur competitively. The announcement is in line with statements made by the Commission in early May.
Cleaning up public finances and lowering labour costs are at the core of the "requirements" the Commission sent to Paris, says Commission President José Manuel Barroso.
In a leader article, French daily Le Figaro writes –

Although you get used to anything, there are some sights that are disconcerting. Not least among these is that of France sitting side by side with Spain, Poland and Slovenia on Europe's dunce bench and being dictated a list of reforms to accomplish!

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Eurozone: Merkollande takes the controls

31 May 2013
Presseurop Les Echos, Le Monde, Handelsblatt, Frankfurter Allgemeine Zeitung

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Petar Pismestrovic
German Chancellor Angela Merkel and French President François Hollande want to install a government for the Eurozone. This could change the EU's structure, according to the press in both countries, but only if the leaders' understanding is sustainable.

Angela Merkel and François Hollande have made up. The "Franco-German contribution," announced on May 30, shows that the German Chancellor now supports the French President's proposals concerning the governance of the Eurozone. French financial daily Les Echos notes that –

This is the first time that Angela Merkel is clearly adopting the French position that political cooperation is necessary to better ensure economic convergence.

In a leader article, French daily Le Monde explains some of the measures proposed –

The Eurozone will acquire a full-time president responsible for coordinating budget and social policies for the 17 members of the European Monetary Union. This is a step towards greater integration of the Eurozone. This will provide the "second leg", dear to [former EU Commission President] Jacques Delors. But each country has an ulterior motive. For Germany, this change must favour structural reforms aimed at improving European competitively. For France, the Eurozone government must act as a counterweight to the European Central Bank (ECB).

Reaction in the German press was mixed. Spiegel Online notes that the French President is now "getting all cosy" with the German Chancellor. The web site of the weekly magazine, however, remains sceptical that the "turning point" is genuine, even if Hollande is "making efforts to establish a Franco-German entente".
For business daily Handelsblatt, Angela Merkel and François Hollande's wish to put in place a full-time president and an independent budget for the Eurozone gives the impression of "the Eurozone seceding in secret from the rest of the EU"

The biggest scoop is that a commission specific to the Eurozone will be established within the European Parliament and it will be responsible for democratically monitoring the new structures of the monetary union. On the whole, the Eurozone is taking a giant step towards cutting the umbilical cord with the EU. British Prime Minister, David Cameron, who tried as hard as he could to avoid such a change, probably would describe this Thursday as a Black Thursday.

As for daily Frankfurter Allgemeine Zeitung it says that François Hollande has long been a "master of duplicity" –

On the European stage, he swears he has the will to implement reforms and budgetary rigour but once back home, he will not tolerate the advice of the European Commission. In the long term, this will not work. Hollande's European offensive will only be crowned with success once he becomes a reliable partner.

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31 May 2013 Last updated at 12:24

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Eurozone unemployment reaches new record high in
April


Comments (456)



The BBC's Jamie Robertson says the employment figures show
"disparity across Europe"

Continue reading the main story
Related Stories

• Spanish firms push to boost exports Watch
  
• Dreams on hold among young Greeks
  
• OECD cuts eurozone growth forecasts
  

Unemployment in the eurozone has
reached another record high, according
to official figures.

The seasonally-adjusted rate for April was 12.2%, up from 12.1% the month
before.

An extra 95,000 people were out of work in the 17 countries that use the
euro, taking the total to 19.38 million.

Both Greece and Spain have jobless rates above 25%. The lowest unemployment
rate is in Austria at 4.9%.

The European Commission's statistics office, Eurostat, said Germany had an
unemployment rate of 5.4% while Luxembourg's was 5.6%.

The highest jobless rates are in Greece (27.0% in February 2013), Spain
(26.8%) and Portugal (17.8%).

In France, Europe's second largest economy, the number of jobless people rose
to a new record high in April.

"We do not see a stabilisation in unemployment before the middle of next
year," said Frederik Ducrozet, an economist at Credit Agricole in Paris. "The
picture in France is still deteriorating."
'Social
crisis'
Youth unemployment remains a particular concern. In April, 3.6 million people
under the age of 25 were out of work in the eurozone, which translated to an
unemployment rate of 24.4%.

Figures from the Italian government showed 40.5% of young people in Italy are
unemployed.

Continue reading the main story
Analysis



Andrew Walker BBC World
Service Economics correspondent

---

Europe's already dismal jobs situation has deteriorated further. If we needed
a reminder of the lingering effects of the eurozone financial crisis, it is to
be seen in the jobs data.

The general pattern is that the largest increases in unemployment over the
last year were in countries at the centre of the crisis - Greece, Cyprus, Spain
and Portugal. There was also a sharp increase in Slovenia, a country seen as a
possible future candidate for a financial rescue.

The main exception to the pattern was Ireland, another country receiving a
bailout, where unemployment nonetheless fell by almost one and half percentage
points in twelve months.

The figures also highlight the "lost generation" concern that is, or should
be, causing some lost sleep for political leaders. Unemployment among young
people is approaching one in four across the eurozone and it is 40% or higher in
a few countries - Greece, Spain, Portugal and Italy.


"We have to deal with the social crisis, which is
expressed particularly in spreading youth unemployment, and place it at the
centre of political action," said Italy's President Giorgio Napolitano.

In the 12 months to April, 1.6 million people lost their jobs in the
eurozone.

While the jobless figure in the eurozone climbed for the 24th consecutive
month, the unemployment rate for the full 27-member European Union remained at
11%.

The eurozone is in its longest recession since it was created in 1999. At
1.4%, inflation is far below the 2% target set by the European Central Bank
(ECB).

Consumer spending remains subdued. Figures released on Friday showed that
retail sales in Germany fell 0.4% in April compared with the previous month.

Earlier this week, the Organisation for Economic Co-operation and Development
(OECD) predicted that the eurozone economy would contract by 0.6% this year.

According to Carsten Brzeski, an economist at ING, in the past, the eurozone
has needed economic growth of about 1.5% to create jobs.

ECB action?
Some consider that the ECB needs to do more than simply cutting interest
rates to boost economic activity and create jobs.

Earlier this month, the ECB lowered its benchmark interest rate to 0.50% from
0.75%, the first cut in 10 months, and said it was "ready to act if needed" if
more measures were required to boost the eurozone's economic health.

In its report earlier this week, the OECD hinted that the ECB might want to
expand quantitative easing (QE) as a measure to encourage stronger growth.

Nick Matthews, a senior economist at Nomura International, said: "We do not
expect a strong recovery in the eurozone.

"It puts pressure on the ECB to deliver even more conventional and
non-conventional measures," he added.

The European Central Bank is due to meet next week.

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BMW IS TO HIRE PEOPLE FROM DIFFERENT EU COUNTRIES LIKE SPAIN TO COME TO GERMANY

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BMW IS TO HIRE PEOPLE FROM DIFFERENT EU COUNTRIES LIKE SPAIN TO COME TO GERMANY

Germany's economy is slipping a bit .

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Eurozone crisis: The Great Depression

3 June 2013Do Rzeczy Varsovie

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Arcadio
European leaders seem unable to break the cycle of recession and unemployment, despite public pressure to abandon the austerity regime imposed under German rule. Meanwhile, the EU’s influence in the world is on the slide.

Marek Magierowski European leaders are great at introducing new laws, but for several years now they have been unable to resolve an economic crisis. Economic growth figures released recently by Eurostat sound like a death sentence; Europe, you are racing towards the abyss and the brakes have stopped working long ago.
In the first three months of 2013, the Eurozone economy shrunk by 1 per cent year-on-year, and the EU-27's economy contracted by 0.7 per cent. Virtually everyone is in the red: Greece down 5.3 per cent, Cyprus, 4.1 per cent, Portugal, 3.9 per cent, Italy, 2.3 per cent, Spain down 2 per cent. Finland and the Netherlands also saw negative growth, while Austria stalled. France is now officially in recession. German growth was positive, but only in quarter-to-quarter terms. It is all despair and misery.
Sparkurs vs. Austerity

While Europe is gnashing its teeth and crying, others are leaving the stormy waters. The United States, for instance, vilified in the past by many European politicians because it was there that the global crisis began, brought about by the greediness and irresponsibility of US banks. And today – what an ingratitude – the United States is growing while Europe is shrinking.
In the first quarter 2013, the US economy grew by 2.5 per cent, unemployment was its lowest in four years, and the stock market was buoyant. The European Union has always looked down on the US as a country of predatory capitalism and social injustice. Europe, in turn, has always had its “social market economy” that protects workers and grants them all kinds of nice rights.
For the last several years it had been the case of Europeans patronising the Americans on how to revive their economy. Now the roles have reversed. In a recent interview for the Spanish business daily El Economista, a high-ranking Treasury Department official suggested that the EU should follow the US example and stimulate the market instead of stubbornly clinging to the dogma of austerity and budget deficit reduction. Interestingly, many European politicians say the same but no one seems prepared to bang their fist on the table and oppose Berlin, for whom “demand stimulation” is tantamount to higher inflation (a taboo concept since the Weimar Republic’s hyperinflation) and more transfers from German taxpayers to the cash-strapped budgets of countries like Greece or Spain.
The southern countries are thus expected to tighten their belts and keep quiet. A chasm between Germany and the indebted southern EU member states is already evident on the level of language. In Ireland, it is austerity, in Spain, austeridad, in Italy, austerità, in France, austerité – all derived from the Latin austerus, meaning “strict, severe, ascetic”. A word of clearly unpleasant connotations. In Germany, in turn, it is Sparkurs – “savings course”. Something obviously reasonable, wise, and healthy. In Germany, if you manage your resources thriftily, you deserve utmost respect.
“Berlin’s policy is not motivated solely by pragmatism but also by fundamental values”, Ulrich Beck, a renowned German sociologist, explained in an interview. “Objections towards overspending countries are a question of morals. From the sociological point of view, such a position has its roots in Protestant ethics. But it is also a matter of economic rationalism. The German government adopts the role of a teacher who instructs the southern countries on how to reform their economies”.
Letters to Angela

Only this teacher is not much liked. To the extent that the last Eurovision contest saw Germany suffer a humiliating defeat: Natalie Horler, with Glorious, came only 21st among 26 contestants. Commentators at the German ZDF television channel had no doubts: “No one in Europe likes us anymore”. And they were probably not far from the truth.
The image of Angela Merkel dressed in an SS uniform has become a staple of Greek tabloid covers. But there has been a new trend too: politicians from certain countries have started writing letters to Chancellor Merkel, asking her to stop putting them through so many tests and exams. Begging her for understanding and leniency. But also suggesting that she is doing what she is doing to boost her chances in the Bundestag elections, scheduled for September.
Ms Merkel isn’t willing to mitigate the Sparkurs because that could alienate German voters. Duarte Marques, deputy of Portugal’s Social Democratic Party, argues in a letter to the German chancelor: “Germany is refusing to acknowledge the true consequences of austerity policy. It is an expression of opportunism, until now seldom encountered among the German elites. And unworthy of a country that once, under Helmut Kohl, had the courage to shoulder the responsibility for Europe – sometimes in defiance of its own public opinion. Mr Kohl belonged to a generation of statesmen that are hard to come by in Europe today”.
Shouldering European responsibility

“Now," Ms Merkel is likely to be thinking, “not only am I a mean person, I’m also inferior to Helmut Kohl. Great”. Such letters can only irritate Berlin and cause it to actually stiffen its position. The idea of Germany “shouldering responsibility for Europe” is invariably translated in Berlin as meaning “Germany should give us more money”.
But it won’t. Neither to Portugal, nor to Greece, nor to anyone else. Only the Sparkurs – so praised by Ms Merkel – isn’t producing the expected results either. A Portuguese newspaper recently published a comparison of economic indicators from two years ago – when Portugal found itself in the troika’s tender embrace and was forced to introduce austerity measures – and now.
The figures are telling: unemployment is up to 18.2 per cent from 12.9 per cent; budget deficit has risen from 4.4 to 5.5 per cent of GDP; public debt is up from 106 per cent to 123 per cent of GDP. Hardly an improvement at all. No wonder that an estimated 240,000 people – 2.5 per cent of the population – have left Portugal since 2011. The RTP public TV channel recently aired a feature about Portuguese immigrant workers in the United Kingdom. An architect, a dentist, two male nurses, two female nurses: all happy to have been able to get out of the quagmire.
One of the young women is so excited about the prospect of working in a hospital in Northampton, 100km north of London, she is literally jumping in front of the camera. No one is thinking about going back home. Some will say, “One day, perhaps”. A sociologist speaking on the programme speaks of depression among young people and a mounting wave of emigration not only to Britain but also to Portugal’s erstwhile colonies: Brazil and Angola. One could actually imagine a Eurozone-advertising poster: “We’ll find you a job. In Rio de Janeiro”.

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German 'Wise Man' says Italy, Spain could face downturn as severe as Greece

Italy, Portugal and Spain could face economic downturns as severe as that of Greece within a year as the combination of austerity and recession exacerbate Europe’s sovereign debt crisis, Peter Bofinger, economist and member of the German Council of Economic Experts, told RBS.
02/01/2013











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• German 'Wise Man' says Italy, Spain could face downturn as severe as Greece (PDF, 183 KB)
  

Bofinger said struggling European economies had been smothered by "wrong policies" forcing them to narrow fiscal deficits to qualify for European Union bailout funds. In the past three years, Greece, Ireland, Portugal, Spain and Cyprus have all slashed spending and increased taxes to meet targets for external aid. Such restrictive fiscal rules mean the situation will "get worse before it gets better", Bofinger said.
"In my view, these pro-cyclical policies are putting Europe on a downward spiral that is not only affecting peripheral countries, but more and more affecting core countries," Bofinger said at a meeting with RBS clients in the German industrial city of Dusseldorf. "We should stop austerity measures until the countries reach the bottom of the economic cycle; until we can see they are back on a growth path. Only then should we talk about consolidation but not under the current conditions."
The euro area contracted 0.1 per cent in the third quarter of 2012 from the previous three months, succumbing to recession for the second time in four years. Italy’s gross domestic product fell 0.2 per cent in the same period and the Spanish economy shrank 0.3 per cent, while Portugal completed its second year in recession.
Greece contracted for a 17th straight quarter in the three months to September, with unemployment at 25.1 per cent. By the end of this year, Greek output will have dropped by a fifth since it entered its recession in 2008.
Bofinger said the region is likely to experience a prolonged period of contraction and that this would spill over to countries such as France that had so far proved resilient to the region’s sovereign debt crisis.
French unemployment rose to a 13-year high of 10.2 per cent in the second quarter as the economy shrank for the first quarter since 2009, before rebounding. Germany, which sells about 60 per cent of its goods and services to European Union countries, could fall into negative territory in the fourth quarter and into 2013, Bofinger said.
Bofinger said the decision by European Union budget enforcer Olli Rehn in November that Spain will not need further spending cuts and tax increases even though it will miss its deficit targets is an encouraging sign that fiscal policy may take a new direction. However, he believes that any changes will come too slowly to help struggling eurozone countries return to economic growth.
"The recession makes the situation of the banks worse, the situation of government financing worse and, in my view, it doesn’t contribute to better competitiveness," Bofinger said. "Some economists believe that we have to go through short-term pain for long-term gain, but in such a recession a lot of production potential is also destroyed."







Disclaimer

The statements and opinions expressed in this article are solely the views of Peter Bofinger speaking at an RBS Insight Event in Dusseldorf on November 13 2012 and do not necessarily represent the views of the Royal Bank of Scotland
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European Commission: Who still listens to Brussels?

5 June 2013El País Madrid

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Falco
Over the years, the European Commission’s recommendations to member states on how to push through economic reforms have been proliferating. National leaders, though, bow more readily to market pressures and provisions of bailout plans, all of which undermines the authority and credibility of the EU executive.

Claudi PérezFiguring out what Europe needs is relatively easy: reforms in peripheral member states and growth plans to compensate for what comes out of Brussels, Berlin and wherever else; a full banking union; and a European Central Bank that could serve as lender of last resort. The European institutions have taken steps in that direction, but when it comes to enacting reforms, the question is how to bell the cat.
The Commission has just recommended that France reform its pension plans, that the Netherlands prick its real estate bubble, that Germany prop up domestic demand, that Belgium trim spending, that Slovenia fix its banks and that Spain continue to do almost all of the above at the same time, like a acrobat spinning twenty plates on sticks. It all makes sense, but there is just one problem: almost no one lifts a finger unless forced to do so by market pressure or by the terms of rescue plans.
Year after year, the desk drawers at the Commission have been filling up with similar advice. Despite rules and sanctions being stronger than ever before, no country has paid much attention to them. Member states know that, in the end, the decisions come down from the European Council – that is, from national leaders. In practice, serious political problems stand in the way of these reforms, considering the rising unemployment, worsening recession and growing unrest across Europe.
“Brussels has inherited a credibility problem from its distant past, when Berlin and Paris breached the stability pact,” says a French government source. “But its recent past is even worse: its recipes have been a disaster, its obsession with deficits has failed to address the real problem of competitiveness, and its excessive insistence on austerity has plunged the eurozone into recession. Why would leaders be in any hurry to bring in the reforms, considering the dissatisfaction coming out of this self-inflicted recession?"
Brussels is sending out a mixed message, calling for less austerity and more reforms. The Commission asserts its message lends flexibility to its economic policy; its critics argue that, in the absence of a clear direction, the message offers permissiveness. There is more leeway for countries that have made adjustments, but also considerable slack for those who have not.
And in any case, the flexibility comes as a trade-off for reforms that are difficult to push through and that have consequences for recovery. The Netherlands has delayed adjustments, citing a social pact not to worsen the recession. France, according to President François Hollande, does not take advice from Brussels. And in Germany, with the election campaign in full swing, not one of the parties has anything close to the recommendations of Brussels in its programme.
Reviewing recommendations from previous years, we see the degree of compliance is low, except in countries that were bailed out or that came under pressure from the market. Only France has brought in labour reform, after negotiations with employer and worker unions: the other reforms are still being inked in. Italy and Spain began to make adjustments, following an ultimatum from the ECB, but dragged their heels all the way: Berlusconi reversed tack, and Rajoy has reneged on four out of seven promised reforms. This time around is no different: “Countries are going to interpret these recommendations in the way that suits them best,” sums up Mujtaba Rahman of the Eurasia Group.
The reforms Germany carried out after unification came at the cost of betraying the stability pact and chipping away at the credibility of Brussels. Since then, the Commission has been trying to staunch the wound: “Brussels has opted for more stringent standards, but it’s not clear that this system is working. That’s what’s going on now, with the capitals blaming Brussels for everything,” says a European source.
Brussels as the dartboard: a year from European polling day, the Commission is practically on its way out, and its relationship with Paris and Berlin is not at its best. France and Germany have not been sparing in their criticisms of Brussels, and just a few hours after the recommendations they announced their own roadmaps for where Europe should head. The Franco-German axis is still revolving.
Translated from the Spanish by Anton Baer

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EU put eurozone safety before Greece during bailout, IMF report claims


The bailout of Greece was bungled because it was an attempt to save the
single currency rather than the debt-stricken country, according to a highly
critical IMF report.








The IMF also admits that the
impact of austerity policies in Greece was badly underestimated Photo: AP







By Bruno Waterfield

7:25PM BST 05 Jun 2013


170 Comments




The internal report on the handling of the Greek crisis has detailed a
catalogue of errors, which led to the IMF breaking three out of four of its own
rules relating to lending money to bankrupt countries.


It also admits that the impact of austerity policies in Greece was badly
underestimated as EU institutions and leaders tried to save their political
skins at the expense of the Greek economy.


The report, first leaked to the Wall Street Journal, explained that in
2010 the IMF lent €36bn (£30.5bn) to Greece despite a risk “so significant that
staff were unable to vouch that public debt was sustainable”.


While the IMF scaled back its contribution to a second Greek bailout in 2012,
amid growing concerns over whether debt could be paid back without devastating
economic consequences, its loan to Greece is the largest ever in the fund’s
history, relative to the size of the recipient country’s economy.


Most damaging of all is the IMF admission that the Greek bailout was not
drawn up to help Greece but was a “holding operation” that “gave the euro area
time to build a firewall to protect other vulnerable members and averted
potentially severe effects on the global economy”.



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The fund criticises the delay in restructuring Greece’s massive debt load,
which eventually came in May 2012, two years after Greece’s original bailout
deal.

The IMF document reveals that a decision write off the country’s debt, making
it more sustainable and reducing the economic impact of austerity, was delayed
because it was too “politically difficult” for countries whose banks held Greek
bonds.

"Not tackling the public debt problem decisively at the outset or early in
the program created uncertainty about the euro area's capacity to resolve the
crisis and likely aggravated the contraction in output," said the report.

"An upfront debt restructuring would have been better for Greece although
this was not acceptable to the euro partners. A delayed debt restructuring also
provided a window for private creditors to reduce exposures and shift debt into
official hands."

The prevarication also cost eurozone taxpayers dearly because during the
two-year period between May 2010 and the summer of 2012, when a “haircut” was
finally agreed, the debt burden had shifted from private banks to EU governments
and the IMF.

The failure to write down Greek debt while it was privately owned increased
the amount of money that Greece would have to pay back and led to a second
€130bn bailout that was larger than the first, in 2012.

However, the report fails to explain why, notwithstanding the problems, the
IMF agreed twice to bail out Greece, except to say that staff from the fund
“explicitly flagged” risks and were concerned about global financial stability.


The IMF report is scathing about the so-called “troika”, a body that was
created when the fund joined forces with the European Commission and the
European Central Bank to run the first €110bn Greek bailout in 2010.

The EU side of the "troika" is crticised by the IMF, with the implication
that it put secretive internal procedures and massaged figures to help meet
fiscal targets set out in the Maastricht euro treaty before the economics of
solving the Greek debt crisis.

"The Fund's program experience and ability to move rapidly in formulating
policy recommendations were skills that the European institutions lacked," the
report said.

"There were occasionally marked differences of view within the troika,
particularly with regard to the growth projections."

The indictment of the “troika” will have wider resonance because as well as
administering Greece it oversees the economies of the other bailed eurozone
countries - Ireland, Portugal and Cyprus.

For 18 months, until December 2011, the troika failed to revise Greek
austerity targets, effectively making them impossible to achieve as the economy
in Greece worsened much more than the official forecasts suggested, including
those by the IMF.

“The fiscal targets became even more ambitious once the downturn exceeded
expectations,” the report said.

"The preceding discussion has raised questions about whether the fiscal
targets should have been less stringent and whether less optimistic projections
should have been made about growth, deflation, privatisation receipts, and
regaining market access. Varying these assumptions would have materially
affected the outlook for debt sustainability."

The IMF report additionally criticises the commission at a time when the
Brussels-based EU executive has been given a beefed up role in managing eurozone
economies in the wake of the debt crisis.

"The European institutions brought an integrated view to studying the Greek
economy and emphasised the extent of possible spillover effects within Europe.
At least initially, this was not the perspective taken by the Fund which was
more accustomed to analysing issues with a specific country focus," said the
report.

"However, the EC tended to draw up policy positions by consensus, had enjoyed
limited success and had no experience with crisis management.

[Badboy]

SOUTHERN SICILY IS BENEFITING FROM THE MONTELBIANO(SP?) DETECTIVE SERIES IN THAT TOURS RELATED TO THE DETECTIVE SERIES HAVE INCREADED VISITOR NUMBERS.
INCREASED CULTURE(FILM MAKING ETC)SPENDING PAYS FOR ITSEL MANY TIMES OVER.

GEORGE CLOONEY WAS MAKING/FEATURING IN A FILM IN MY LOCAL DISTRICT AUTHORITY,MIGHT BE INCREASED TOURISM IN THE AREA.

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SOUTHERN SICILY IS BENEFITING FROM THE MONTELBIANO(SP?) DETECTIVE SERIES IN THAT TOURS RELATED TO THE DETECTIVE SERIES HAVE INCREADED VISITOR NUMBERS.
INCREASED CULTURE(FILM MAKING ETC)SPENDING PAYS FOR ITSEL MANY TIMES OVER.

GEORGE CLOONEY WAS MAKING/FEATURING IN A FILM IN MY LOCAL DISTRICT AUTHORITY,MIGHT BE INCREASED TOURISM IN THE AREA.

When I lived in Jersey Badboy, visitors to Jersey were interested in the locations they could identify with in the Detective Series Bergerac, but they didn't come over specifically for that, it was just part of their Itinerary.

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War in Syria: Major powers in a strategic deadlock

7 June 2013Gazeta.ru Moscou

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Haddad
To resolve the Syrian conflict, Europeans, Russians and Americans are reviving the time-honoured policy of promoting grand peace conferences. But this time, the local situation is beyond their control.

Fyodor LukyanovSome crises can turn out to be living textbooks for students of diplomacy and international relations. Syria is a case in point – especially now, when everyone is talking about the upcoming peace conference, a genre more typical of the classic diplomacy of the 19th and the beginning of the 20th Century than of the present.
Keeping with the well-known adage "If you want peace, prepare for war," weapons are being spread round everywhere in the lead-up to a hypothetical "round table" intended to bring all the parties together to decide on what comes next.
The European Union has decided not to renew the embargo on arms shipments to Syria (ie, to the insurgents). Although Britain and the France were alone in having actively worked to have it lifted, while the other countries of the Union expressed, to varying degrees, their doubts about the usefulness of a real commitment to the civil war, London and Paris achieved their purposes – at the price, though, of a yet another display of the European Union’s lack of unity on the international scene.
The inability to reach agreement due to differing interests is obvious. This is not about strategic calculations but about the will to take an interest in a problem. As they did in the past, Great Britain and France are playing at being great powers because they consider themselves obliged to participate in events of world importance. Other countries are either indifferent or afraid to get caught up in processes that, for the most part, do not concern them.
Threat to use force is real

Moreover, there is a political motive in the announcements of aid to the insurgents. The question of sending arms or not remains open. And the fact of announcing the lifting of the embargo means that the use of force remains a very real option. In other words, if there is no agreement during the Geneva-2, this will be a war fought until one side destroys the other. The main instigator behind the lifting of the embargo on the deliveries of weapons to the insurgents, William Hague, said that pressure must be put on the regime.
This is the same logic that drives Russia, in neither confirming nor denying it will give Damascus C-300 missiles and other sophisticated weapons. In short, the balance of power will be preserved. It is, therefore, useless to hope that the issue can be settled by military means if political negotiations fail.
In principle, such a tactic is not devoid of logic: the parties that have to be sat down around a table have to feel a sword hanging over their heads. Washington’s public reflections about possible no-fly-zones over Syria come from the same calculation. We already know from what happened in Libya what an air exclusion zone is and what this type of decision leads to. A repetition of that scenario is precisely what Russia is protesting, in promising to deliver (perhaps it already has) the air-defence missiles, which renders a hypothetical operation unnecessary. The United States will probably not prohibit overflights of Syria, but they have set the bar high, to make the parties more conciliatory.
All the same, the effect can be the opposite. At the moment it seems that the opposing sides are drawing the same conclusions from the various diplomatic games: whatever happens, they will be neither abandoned nor weakened; and so it’s worth holding out. Bashar Al-Assad and his opponents all grasp that their respective patrons, Russia and the West, cannot refuse their support without suffering a loss of face.
Battle of principles

Indeed, and for Moscow and Washington both, what is at stake in Syria is a matter of principle. Russia is defending the rulers of secular countries (regardless of their level of authoritarianism) and the principle of non-interference in the internal affairs of a third country, trying to forget the unpleasant Libyan precedent to which she contributed [Medvedev was still President when Russia, contrary to all expectations, abstained from the vote at the United Nations concerning Western air intervention]. On the Western side, the debate is torn between ideological blueprints, which see a "people in revolt" who have risen up against a "bloody tyrant” and the desire to consolidate the model of conflict resolution that gradually settled in place after the Cold War – namely, back the “good guys” and help them win power. And so the refusal to support “your own" isn't just a pragmatic way of guarding one’s back, but an ideological concession that wounds your self-esteem.
Past peace conferences, up to those at Yalta and Potsdam, focused on big business, namely the carving up of the world. The most recent conferences were those on the Balkans – the Dayton Agreement on Bosnia in 1995 and the Kosovo crisis in 1999. It is worth remembering these two experiments, since they offer two possible scenarios for Syria. The Dayton scenario is the positive one. The United States and the European Union, helped by the then weakened Russia, brought the belligerents together and forced them them to build a workable model for Bosnia and Herzegovina. This is an example of what the optimists who believe that "Geneva-2” can succeed envisage.
Pessimists will remember the beginning of February 1999, when the Rambouillet conference got underway, after enormous diplomatic efforts, to settle the Kosovo conflict. But nothing came of it: the mutual exasperation reached a peak of tension as the Kosovo Liberation Army, feeling the support of NATO at its back, decided to focus on a military victory, while Belgrade could not imagine sharing power with "terrorists". However, the conference ended without an open rupture. After it, the position of the mediators (mostly NATO members), however, turned hard and unyielding. Belgrade was given an ultimatum, and its refusal to comply triggered the launch of NATO’s military campaign, a month and a half after the start of the peace negotiations in France. While no drawing of any parallel with Syria is meant here, the scenario of a rapid escalation of violence cannot be ruled out if no progress is made (any progress at all is hard to imagine).
Incomprehensible interests

Today, of course, Russia is playing a very different role. In 1999, Moscow also protested strongly, but did not actually offer any opposition. Today, the Kremlin has made it clear that it will play its part in the balance of forces and will not allow any campaign against its protege to succeed.
That is a critical difference between the situation in Syria and what came before it, including Yugoslavia. In organising the peace process, in meddling in local conflicts, the major powers have always pursued concrete interests, with a clear idea of their own advantage. The states of western Europe, actively backed by the United States, have reshaped the European strategic landscape in accordance with their notions about the post-Cold War era. And the Yugoslavia of Milosevic was clearly an obstacle to this reshaping.
Apart from the issues of status mentioned above, the direct and concrete interests of the United States, Europe and Russia in Syria are incomprehensible.
The idea of expanding spheres of influence into the Middle East of today is almost utopian. All the outside powers are trying frantically to come up with an adequate response, but always after the fact. They adapt to the events without being able to enforce their will or desires, far less any strategy. It is notable that those who do have interests in the conflict, namely Syria’s neighbours, from Iran to Saudi Arabia and the Qatar, are saying nothing about the Geneva conference. And yet, ultimately, the ability of the enemies to engage in dialogue depends on them.
In another era, the games of the great powers were indissolubly linked to the petty intrigues of local players, who remained secondary figures. Now, the opposite is true. The “local” processes follow their own logic and the involvement of the “big powers” proceeds on a parallel plane, where the powers are constantly scrambling ahead of and dropping behind the other. For future historians, what is currently being played out is an inexhaustible lode to be mined. For diplomats, it’s an almost impossible task.

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EconomyTrade and industry

Economy: Brakes fail on European car industry decline



11 June 2013


Der Spiegel


“This year risks being a rough one for European carmakers,” announces Der Spiegel. The weekly reports on a recent study published by the Centre for Automotive Research at the Universty of Duisburg-Essen in the Ruhr the region, which is home to many of Germany’s car factories. According to the study, this year’s sales in western Europe could be down by as much as 5 per cent compared to 2012.

Only 11.9m cars are expected to be sold in Europe’s 27 member states and neighbouring free trade countries, which will make 2013 “the worst year in three decades for the European car industry,” points out the magazine.

The worst affected countries are in southern Europe, with production in France, Spain and Portugal set to decline from 62 per cent of capacity to 58 per cent between 2012 and 2013. The outlook is even worse for Italy, which is expected to reach just 49 per cent of its planned level of production for 2013. According to Der Spiegel, the long-term picture is also grim, with no improvement in prospect within the next two years.

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Greek Broadcaster Defies Shutdown With Sit-In

Staff at Greece's state broadcaster stage a sit-in and demand a rethink over the government's desire to cut "incredible waste".

11:04am UK, Wednesday 12 June 2013

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Journalists fired from Greece's state TV and radio as part of the government's austerity cuts have spent the night in their offices in a show of defiance.
Workers refused to leave all ERT buildings after the conservative-led government announced on Tuesday that it would be temporarily closing all state-run broadcasts, with the loss of about 2,500 job cuts, as part of its cost-cutting drive.
It cited the need to cut "incredible waste" and said the broadcaster would reopen "as soon as possible" with a smaller workforce, although it was not immediately clear when that would be.
Staff were joined by thousands of supporters outside the broadcaster's giant headquarters, north of Athens.
Television, radio and newspaper journalists from across the country took part in a 24-hour strike.
Private TV stations took their live shows off air for six hours in a display of solidarity, replacing them with re-runs and adverts.
Protesters remained outside ERT's headquarters through the night as journalists continued a live broadcast, which was streamed online.
Riot police were deployed to stations in several parts of Greece, but no clashes were reported.
The three domestic television channels, along with regional, national and external radio stations, cost Greece 300 million euros (£255m) a year.
The government's centre-left coalition partners have demanded a rethink.

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House price falls worsen in Greece and Spain
A world league table of property markets has shown values are falling fastest in southern Europe, as a recovery gathered pace in major markets across the globe.

The price of property in Greece tumbled by nearly 12pc in a year




By Andrew Oxlade
11:41AM BST 10 Jun 2013

78 Comments

Prices in Greece, where the economy has been crippled by the weight of government debt and by austerity measures, fell by 11.8pc in the year to the end of March, according to estate agency Knight Frank.
The rate of decline worsened from 9.8pc a year earlier.
Other countries in the so-called PIIGS countries - Spain (-7.9pc), Portugal (-6.9pc), Italy (-4.1pc) and Ireland (-3pc) - were also among the weakest markets (see the table below).
The fall in the value of Spanish propery was marginally worse than the year before when it was 7.3pc.
Ireland's fall, however, was a vast improvment from a 16pc plunge the year before.
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Unemployment has soared in many of the eurozone economies while wages have stagnated or fallen in real terms, putting pressure on property valuations. In Spain, further ill-effects have been imposed by changes in tax rules, according to experts.
A new law in April required residents to declare any overseas asset worth more than €50,000, sparking fears that their may be a future Cyprus-style money grab.
However, Knight Frank's experts have said a decision by the Spanish government to grant residency to non-EU nationals who buy property in the country costing more than €500,000 would offer some support.
The rule is expected to be enacted into law in coming months.
Global property prices changes

Hong Kong, in contrast to Europe, posted gains of 28pc, followed by China at 23.8pc and Dubai at 21.1pc.
Thirty five of the 55 housing markets analysed, or 63pc, registered gains.
South Africa was also singled out by report author Kate Everett-Allen as a strong performer, with prices up 11.3pc - a turnaround form a 3.2pc fall the year before.
She said: "South Africa’s momentum is linked to an increasingly wealthy middle class who are tapping into the rising confidence of the wider African continent, keen to get on the property ladder."
A similar pattern of recovery was seen in the US. Values for the year were up 10.2pc after a 1.9pc fall the year before.
Last month, the Standard & Poor's/Case-Shiller home price index showed the market was rising at its fastest level in seven years, fuelled by cheaper borrowing costs, rising consumer confidence and a shortage of properties to buy.
The recovery in the market has helped pull as many as 1.7m American households out of negative equity, which could help underpin further gains. Some economists have warned that rising mortgages rates in the US, which are influenced by the yield on US government bonds, could hamper the recovery. The average 15-year mortgage fixed rate in the US has risen above 3pc and is at its highest level since March 2012.
Prices in the UK, according to Knight Frank were up by just 0.2pc over the year - the same as the previous year. Demand has been propped up by various Government-backed schemes. The Funding for Lending Scheme, launched last summer, has helped push the best mortgage rates down to just 1.7pc with experts predicting a drop below 1.5pc in coming months.
Chancellor George Osborne's Help to Buy scheme, which offers interest-free loans and guarantees from taxpayers to buyers, has also increased buyer interest, according to estate agents.

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Greece: Closure airs party splits
13 June 2013
I Kathimerini Athens

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Nicolas Vadot
The sudden closure of state television channel ERT has split the fragile governing coalition and set the troubled country on the path to fresh elections. But a new vote could leave the nation even more divided and just as deadlocked.
Costas Iordanidis
The unity of Greece’s power-sharing administration is under severe strain and the country could possibly be heading toward general elections. If political memory went no further back than a year ago, it would be clear to everyone that the outcome of the May and June 2012 elections effectively derailed the nation’s fiscal adjustment programme, added more debt to the country’s empty coffers, and exacerbated recession and unemployment.
On a political level, the outcome of those two ballots was the election of leftist SYRIZA as main opposition, the emergence of Golden Dawn as the most vigorous party in the existing Parliament, the near-elimination of PASOK from the political map and growing tension within New Democracy.
There is little love for PASOK or its current leader, Evangelos Venizelos. Democratic Left leader Fotis Kouvelis may be irritating in the same way that the leader of a debating society can be annoying. Having been away from the country’s executive powers – barring some very short breaks – the Left has a rather theoretical understanding of politics.
But these are the only politicians Prime Minister Antonis Samaras can depend on at the moment. And he has an obligation not to insult their dignity, not to present them with tough dilemmas – regardless whether the issue at stake is a serious or an insignificant one and whether they beg to differ on certain issues.
Primative political leadership
The crisis has underscored the primitivism of the Greek political leadership. The politicians of the European north tend to work for the stability of the system and its adaptation to the needs of a constantly evolving environment. In the minds of the Greek political leader it is all about self-affirmation and survival. He is allergic to others. He is the provincial man on the European stage.
New Democracy could well win the next election but neither PASOK nor Democratic Left would again join hands with Samaras, leaving the country in a deadlock. Even if a government were formed, the prime minister would be different, so the risk of a deeper conservative break-up is evident. But even if ND were to achieve a full majority in Parliament, on the back of Greece’s electoral law, it would find it impossible to govern as it would face all opposition parties given the absence of a rigid state apparatus and generalised corruption.
For better or for worse, the country’s two-party system is no more. Voting for Golden Dawn is a political act and expresses the will to destroy the political system – Valhalla on fire, Wagner’s twilight of the gods, not on the safety of the stage but in society.
It’s questionable if we should cry over the death of political dwarfs at a time when the country is in risk of going up in flames.

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• Original article at I Kathimerini el
  
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Elections – collective suicide

Giorgos Delastik, one of the most prominent leader writers in Greece, does not believe that Prime Minister Antonis Samaras' decision to shut down the public radio and TV outlets – against the advice of his coalition partners – means that "the collapse of the ND-Pasok-Dimar [coalition] is imminent,". Writing in Greek daily To Ethnos, Delastik notes that –

The only red line for [Pasok leader] Evangelos Venizelos and [the leader of Dimar] Fotis Kouvelis is participating in the government! The only thing they do not mention is leaving the government! Everything else is negotiable. A withdrawal of Pasok and Dimar from the government would signify the toppling of the Samaras government and early elections. [...] Are Venizelos and Kouvelis crazy enough to willingly leave the government when that will lead them to the political guillotine known as elections? [...] Samaras knows that he holds Venizelos and Kouvelis in his power and that is why he is unscrupulously blackmailing them.

By brandishing the threat of early elections, Samaras also wants to "scare the people," adds Delastik, "because only fear and violence ensure that citizens submit to the order established by the memorandum" providing international financial aid.

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‘The reluctant hegemon’
14 June 2013
Presseurop
The Economist
The Economist, 14 June 2013
Germany must start taking the lead if Europe’s battered economies are to recover, says The Economist, but is unwilling, due to the weight of history, the perception that the “laziness of southern Europeans” is the cause of the eurozone crisis, and the strategic approach of guiding “from the rear”.
However, this combination of barriers does the continent’s economy and politics more harm than good, says the British economic weekly: “Across southern Europe austerity policies are associated with Mrs Merkel,” it argues, citing a recent survey finding 60 to 78 percent of populations in southern states believe European integration has harmed their economies.
The Economist argues that now that fiscal austerity is being “grudgingly” relaxed, Merkel could work to establish a “proper banking union” and take “a host of pro-growth reforms” to encourage privatisation and boost public and private investment in southern Europe.

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Draghi Says ECB Has ‘Open Mind’ on Non-Standard Measures
By Jeff Black & Stefan Riecher - Jun 18, 2013 9:46 AM GMT+01





European Central Bank PresidentMario Draghi said the central bank is considering further non-standard monetary policy tools and will deploy them if circumstances warrant.
“We will look with an open mind at these measures that are especially effective in our institutional setup and that fall within our mandate,” Draghi said today in a speech inJerusalem. “Some of those measures may have unintended consequences. This does not mean that they should not be used, but it does mean that we need to be aware of those consequences and manage them appropriately.”

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ECB President Mario Draghi

Martin Divisek/Bloomberg
Mario Draghi, president of the European Central Bank.
Mario Draghi, president of the European Central Bank. Photographer: Martin Divisek/Bloomberg
Draghi has in recent months held out the possibility of charging lenders to hold cash at the Frankfurt-based central bank by introducing a negative deposit rate. The rate has been at zero since July. That’s one of a range of tools, including further long-term lending operations and adjusting collateral requirements, that the ECB is mulling as the 17-member euro area remains stuck in its longest-ever recession.
“There are numerous other measures – standard interest rate policy and non-standard measures – that we can deploy and that we will deploy if circumstances warrant,” Draghi said.
The euro fell as much as 0.3 percent to $1.3326 after Draghi’s comments. It later reversed its decline to trade at $1.339, up 0.2 percent, at 10:41 a.m. in Frankfurt. The euro has strengthened 1.5 percent against the dollar in 2013 and 4.5 percent, the most among 10 developed-market currencies, according to Bloomberg Correlation-Weighted Indexes.
Recovery Threat
The euro’s rise this year shows that some investors are confident Draghi and government officials are doing enough to hold the currency union together. It also threatens the ability of member nations to export their way out of recession after six quarters of economic contraction. While the ECB doesn’t target the exchange rate, Draghi has said that it is “important for growth and price stability.”
Domestic demand in the euro area should benefit from the ECB’s monetary policy, lower inflation and confidence as well as wealth effects from gains in financial markets, Draghi said today. The bank on May 2 cut its benchmark interest rate by a quarter point to a record low of 0.5 percent
“The ECB’s Governing Council has stressed that monetary policy will remain accommodative for as long as necessary and let me say very clearly: we are far from any exits,” Draghi said.
Save the Euro
The ECB President also reiterated the central bank’s mission to save the common currency. Policy markers will do“whatever it takes” to keep the euro, Draghi said today, referring to his comments from a speech in London on July 26.
“In the period ahead, we will monitor very closely all incoming information on economic and monetary developments and stand ready to act if necessary,” he said.
The ECB’s Outright Monetary Transactions bond-purchasing program, which has yet to be used, has caused a significant decline in financial-market tension since its introduction last year, according to Draghi.
In setting up a banking union, the European Union is moving toward a longer-term solution to the crisis, he said, while calling for further reforms by national governments.
The banking union “should provide an answer to many of the challenges currently facing the euro area, including uneven credit conditions and the fragmentation of financial markets,”Draghi said. “Much work remains to be done for economic policy makers across Europe. Reforms need to continue.”

[Badboy]

NOT SURE WHICH THREAD TO PUT THIS IN.
IT IS BEING SAID THAT IN TRYING TO SOLVE THIS PRESENT ECONOMIC CRISIS,WORLD LEADERS MIGHT BE LAYING THE FOUNDATION OF THE NEXT ECONOMIC CRISIS IN ABOUT TEN YEARS.

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NOT SURE WHICH THREAD TO PUT THIS IN.
IT IS BEING SAID THAT IN TRYING TO SOLVE THIS PRESENT ECONOMIC CRISIS,WORLD LEADERS MIGHT BE LAYING THE FOUNDATION OF THE NEXT ECONOMIC CRISIS IN ABOUT TEN YEARS.

Hi Badboy , I presume the World leaders, like G8 are obviously worried that there is no end in sight in the current Crisis there will be new rules and regulations to stop it happening again. Monitoring the Banks closely would be a start.

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European Union: Reducing the democratic deficit
19 June 2013
The Guardian London

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Kazanevsky
Big decisions affecting how EU member states function are taken by top ministers and heads of government, and handed down by the unelected “troika” of the European Commission, European Central Bank and International Monetary Fund. But national parliaments can help make European institutions more accountable.
Charles Grant
The European Union has long suffered from a lack of legitimacy, but the euro crisis has worsened the problem. There is no silver bullet that can suddenly make the EU respected, admired or even popular among many Europeans. Its institutions are geographically distant, hard to understand and often deal with obscure technicalities.
Unless EU leaders can become more credible and legitimate in the eyes of voters, parts of the union could start to unravel. For example, at some point Eurozone governments may seek to strengthen their currency by taking major steps towards a more integrated system of economic policy-making. But then a national parliament, general election or referendum may block those steps and so threaten the euro's future.
Political institutions gain legitimacy from either “outputs” or “inputs”. The outputs are the benefits that institutions are seen to deliver. The inputs are the elections through which those exercising power are held to account. The euro crisis has weakened both sorts of legitimacy.
The outputs are hardly impressive. Economic growth is negative across much of Europe, unemployment in the Eurozone is above 12 per cent and youth unemployment in Spain and Greece is over 50 per cent. For many citizens, it is not evident that either the EU or the euro are delivering a great deal in terms of benefits.

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07.43 Britain's banks have been found wanting by stress tests carried out by the Bank of England's PRA. As Harry Wilson reports, five of Britain’s biggest lenders have been told by the Bank of England they must raise more than £13bn between them to close a £27bn blackhole in their balance sheets.

Lloyds Banking Group was found to have the largest individual shortfall of £7bn, more than double the £3.2bn Royal Bank of Scotland has been told it must raise, while Barclays will have to find an additional £1.7bn of new capital and Co-op Bank £1.5bn.

The capital raisings follow a stress test exercise on the lenders conducted by the Prudential Regulation Authority (PRA), which found a total capital shortfall in the British banking system of £27.1bn.

RBS was identified as having the largest capital shortfall of £13.6bn, however the bank has already put in place plans to raise £10bn.

Lloyds’s had the second largest overall shortfall of £8.6bn and currently has plans in place to raise an additional £1.6bn of capital this year.

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A good deal for Cameron and Obama
18 juin 2013
Presseurop
The Wall Street Journal Europe, Die Welt, Frankfurter Allgemeine Zeitung, Die Tageszeitung

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Nicolas Vadot
The EU-US trade deal mostly benefits David Cameron and the United States: for the UK prime minister, it’s a crucial part of his plan to win support to keep Britain in the EU. For the Obama administration, it’s an economic victory that will boost jobs and exports, believes the Wall Street Journal and the German press.
For The Wall Street Journal, the announcement of trade talks is the result of months of backroom wrangling by British diplomats, both to secure support for the trade deal and in order to ensure a diplomatic coup for UK Prime Minister David Cameron, as he hosts the G-8 leaders in Northern Ireland. The economic daily writes –

For Mr Cameron, the Transatlantic Trade and Investment partnership (TTIP) is far more than just a trade deal. It is central to his campaign to reconcile the UK to its membership of the EU before his promised referendum in 2017. [...] Mr Cameron is betting that a successful TTIP will substantially reduce the pressure on him to deliver a comprehensive renegotiation of the terms of British membership before 2017. [...] The TTIP offers a politically palatable way for Mr Cameron to put the UK squarely at the heart of Europe, his enthusiastic backing for such an ambitious project helping to undo some of the mistrust caused by his past mishandling of key European relationships.

For Die Welt the agreement on a free-trade zone between the EU and the United States will “mainly be of benefit to the US.” According to a study commisioned by the Bertelsmann Foundation and conducted by the Ifo Institute, which probes the consequences of the the implementaion of a free-trade agreement on 126 states —

for the United States the creation of such a zone will generate 1.1m extra jobs and increase per capita GDP by 13.4 per cent. However, it could be detrimental to non-member countries, because member countries would import less from them. This would harm traditional US trade partners, such as Canada and Mexico, which could see a decline in average per capita income of 9.5 per cent and 7.2 per cent respectively.

Frankfurter Allgemeine Zeitung points out that a further result of an agreement would be reduced trade within the EU —

The volume of trade would decline by 30 per cent between Germany and the countries of southern Europe [...] and by 23 per cent between Germany and France [...] while increasing by a factor of two with the United States. [As a result] the customs union [established by the EU in 1968] would be devalued.

For its part, Tageszeitung shares the concerns voiced by an association of 22 NGOs, which has pointed out that safeguards for consumers will be undermined when European markets are opened up to the US.

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Another shameful day for Europe as EMU creditor states betray South
So much for the denials. The Cyprus "template" for banking crises is to be eurozone policy for other countries after all.

The creditor states of the North are still calling all the shots, and presumption remains that the countries in trouble are victims of their owns failures, fecklessness and folly Photo: Getty Images




By Ambrose Evans-Pritchard
6:45PM BST 21 Jun 2013
453 Comments

Anybody with serious banking exposure to any EMU state on the front line of Europe's macro-economic crisis now knows what to expect.
The deal reached by EMU finance ministers on the use of the bail-out fund (ESM) to recapitalise distressed banks makes clear who will in fact suffer the real losses: first shareholders, then bondholders and then deposit holders above €100,000. They stand to lose almost everything, as we saw with Laiki in Cyprus.
Officials from the European Central Bank and the European Commission warned during the Cyprus crisis that it would be dangerous to set such a precedent, fearing contagion. The Portuguese were openly alarmed.
So has that risk of contagion since dissipated? One should have thought quite the opposite, given the yield spike in Portugal, Spain, Italy et al since the Bernanke Fed dropped its taper bomb this week.
Furthermore, as Yanis Varoufakis points here (http://yanisvaroufakis.eu/2013/06/21/the-death-of-direct-bank-re-capitalisation-europes-newest-day-of-shame/), the deal resiles from the solemn agreement by EU leaders in June 2012 to break vicious circle between crippled banking systems and crippled sovereign states, each dragging the other down.
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The states that are already in trouble will have to carry most of the burden of recapitalising banks, pushing them over the edge into actual insolvency. They will have to come up with the money needed to raise capital ratios to 4.5pc of assets.
Then come the private haircuts, which of course risk devastation for the host country, and the collapse of investor confidence. Only then does Europe step in to share part - not all - of any further recap needs.
The original promise of an ESM blanket to cover "legacy assets" has come to almost nothing. The vassal states may possibly get some relief later on the past losses from the EMU credit bubble, but only as a reward for good behaviour and on a case by case basis.
"Legacy losses will be used as a disciplinary device: Greece, Spain and Ireland will now have to tussle, beg and plead for debt relief regarding the funds already borrowed from the EFSF-ESM for their banks," said Dr Varoufakis.
"As the grand total for all bank recapitalisations, past and future, is to be limited to the puny sum of €60bn, Europe’s peripheral nations can only at best receive a tiny amount of debt relief; enough to ensure that Ireland, Greece and Spain are competing against one another as to which proud nation will be a better ‘model prisoner’ than the rest."
Indeed, it is an abject spectacle. Dr Varoufakis rightly calls it a "a truly shameful day for Europe".
The creditor states of the North are still calling all the shots, and presumption remains that the countries in trouble are victims of their owns failures, fecklessness and folly.
There is no recognition that this disaster was a joint venture, caused by the dysfunctional structure of monetary union; nor that Northern creditors and their banks share half the blame for flooding the South with cheap credit; nor that the ECB played a huge part in stoking unstable credit bubbles in Club Med and Ireland by gunning M3 money supply at double-digit rates to help nurse Germany through its slump. Nor is there even a sensible analysis of what is needed to solve the crisis.
One can understand why Germany, Holland, Finland and Austria do not wish to accept any mutualisation of EMU debt, or admit to their own taxpayers that the euro project costs real money. But what sticks in the craw is the relentless propaganda by EU leaders that they will stand shoulder to shoulder in solidarity with fellow members of EMU, and that they will do whatever it takes to uphold a project upon which the peace of Europe allegedly depends. Quite obviously they will do no such thing.
What sticks, too, is the oft-repeated claim that Anglo-Saxon outsiders failed to understand the degree of pan-European political will behind the EMU project.
This cliche is the opposite of the truth. Anglo-Saxon investors believed so gullibly in the total sanctity of EMU that they were willing to buy Greek 10-year bonds for a wafer-thin margin of just 26 basis points (bps) over Bunds (and Spanish debt for just extra 4bps). They believed the dream, too.
The reason why the EMU crisis metastasized - when debt levels were lower than in the US or Japan - was the horrible discovery that Germany might not stand behind the project after all, and certainly would not stand behind Greece. Those who stayed to the end lost 75pc (de facto) in Greek haircuts.
As for Greece, it is getting uglier by the day - as Open Europe puts it here http://openeuropeblog.blogspot.co.uk/2013/06/coalition-row-over-public-broadcaster.html?showComment=1371812801137.
The Democratic Left has pulled out of the coalition in protest over the shutdown of the ERT public broadcaster, reducing the Samaras majority to three seats. The privatisation programme is ruins. The National Healthcare Provision has a funding gap of €1bn. Not nearly enough public employees have been sacked to meet the Troika demands.
And now the IMF is threatening to pull out altogether unless the eurozone comes up with the €3bn to €4bn needed by next month needed to comply with bail-out terms.
It may not really matter that Greek bond yields are back above 11pc, but it certainly does matter that Spanish yields are once again nearing 5pc. Given that Spain is in deflation (once you strip out tax levies), and given that its nominal GDP contracted by 1.8pc last year, and will contract by as much this year, you can see the lethal compound effects on the debt trajectory. Ditto for Italy.
"The yield increase in the peripherals is becoming alarming," said Peter Schaffrik from the Royal Bank of Canada.
Indeed so. Nothing has been solved. The eurozone's creditor powers are playing a cruel game, doing just enough to keep this wretched entreprise alive and to protect their own commercial interests, but not enough to solve the crisis. The torture is endless. The cynicism plain to see. And the willingness of victim states to accept their plight so lamely is simply staggering.

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EU Battles Over Rules on Investor Losses When Banks Fail
By Rebecca Christie & Jim Brunsden - Jun 21, 2013 5:49 PM GMT+0100






European Union finance ministers are battling in Luxembourg over how they’ll set rules for assigning losses when banks fail.
The new rules will set standards for how to prop up or shut down failing banks, along with requirements for the kind of backstops each country must have in place. During staff-level talks this afternoon, nations were considering requiring a certain level of losses on bank creditors before they could shield specific investors from writedowns, according to two EU officials.

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EU Nations Battle Over Creditor Loss Rules for Failing Banks

John Thys/AFP/Getty Images
French Finance Minister Pierre Moscovici, right, speaks with German Finance Minister Wolfgang Schaeuble before an EU Economy and Finance Council meeting at the Kirchberg conference center in Luxembourg on June 21, 2013.
French Finance Minister Pierre Moscovici, right, speaks with German Finance Minister Wolfgang Schaeuble before an EU Economy and Finance Council meeting at the Kirchberg conference center in Luxembourg on June 21, 2013. Photographer: John Thys/AFP/Getty Images
Finance ministers also sought to bridge differences between countries inside and outside the 17-nation euro zone. Austriaand the European Commission sought common rules for all 27 EU members, while the U.K., Sweden and others argued for rules that grant more freedom to non-euro nations.
Lithuanian Finance Minister Rimantas Sadzius said there are“objective differences” between countries inside and outside the currency bloc. At the same time, there are banks that operate in both regions.
“If we want this so-called level playing field, or fair competition, we must look at what could distort this competition and somehow compensate for it,” Sadzius said in an interview. He said regulators must weigh methods of financing of lenders,“when they can have liquidity from the European Central Bank or must ensure liquidity from somewhere else.”
ECB Oversight
European leaders are struggling to reassure investors that they will break the cycle of contagion between banks and sovereign debt by creating a banking union. Five of the euro zone’s 17 nations have sought rescues during more than three years of financial crisis, prompting leaders to call for unified bank supervision within the currency zone.
The ECB, now slated to take up bank supervision powers next year, insists that nations need procedures to handle failing banks -- including financial backstops -- before the transition takes place.
One track of the talks involves how to allow the U.K. to pursue separate financing procedures for setting aside funds when banks fail. The U.K. already collects crisis-cleanup fees from its banks and has budget arrangements in place to handle banking-sector woes.
France and the U.K. want regulators to have broad powers to choose which investors should be protected when banks fail if wiping them out would spark contagion. Denmark, Finland and theNetherlands counter that all nations need to follow the same rules, or risk driving up funding costs for banks in nations with stricter procedures or weaker public finances.
‘Certain Limits’
“France wishes flexibility,” French Finance MinisterPierre Moscovici told reporters as talks began. “We are willing to consent to certain limits.”
Under drafts of the bank-failure rules, presented last year by Michel Barnier, the EU’s financial services chief, losses at a crisis-hit bank would be absorbed first by wiping out its capital, then writing down holders of unsecured debt in order of seniority.
Holders of secured debt, such as covered bonds, would be shielded. Finance ministers also are considering a full exemption for short-term inter-bank lending, a move supported by the ECB.
Swedish Finance Minister Anders Borg said that current bail-in proposals are “too rigid” and would create“illiquidity risks” for his country’s banks. Speaking to reporters at the start of today’s meeting, he called for a“dramatic increase” in the flexibility offered to non-euro countries.
Unsecured Debt
Governments are also split over whether the law should force systemically important banks to issue a minimum amount of unsecured debt and other liabilities that could be written down in a crisis.
While such an approach has been advocated by the U.K., Netherlands and Finland, on the grounds that it would make creditor writedowns more effective in practice, it faces opposition from a group of other nations led by Germany and France. Nations resisting the move argue that no assessment has been carried out of the impact the plan would have on bank funding costs, and also that different banks may require different targets.
Ministers are in for “a long day,” ECB Executive Board member Joerg Asmussen told reporters on his way into the meeting. EU Economic and Monetary Affairs Commissioner Olli Rehnsaid there was a “fair chance” of a deal while acknowledging the scale of the task ahead.

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