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Germany’s economic myth will not help the eurozone




By Bruno WaterfieldLast updated: September 24th, 2013

2 CommentsComment on this article


Amid all the self-congratulation over the slight upturn in the eurozone’s fortunes and Angela Merkel’s personal election triumph it is worth taking a look at Germany’s economy.

Germany is held to be the eurozone’s economic model, certainly in terms of public finances, balanced budgets and unit labour costs.

It is the German austerity and low wage model – enshrined in EU fiskalpakts and treaties – that is the one imposed on countries such as Greece and Portugal.

Today a European Commission vice-president popped up in Finland to tell us all is well in the eurozone based on unit labour costs (Chancellor Merkel’s favourite metric).


“Ignore the doom-mongers. Europe is being fixed: Unit labour costs are falling in countries like Greece, Spain and Portugal,” said Viviane Reding.

The project of driving down unit labour costs by a historic onslaught on living standards in countries such as Greece and the wider eurozone is very much at the sharp end of eurozone and German policy. For a razor sharp dissection of the argument read here.

“So what?”, you might say, “the German economy works and is still the model for the eurozone”. But does the German economy work, especially in terms of increasing production (wealth) instead of merely pushing down wages or balancing budgets?

In its August bulletin, the Deutsches Institut für Wirtschaftsforschung (DIW or German Institute for Economic Research) is not convinced that Germany is doing all that well.


“Since 1999, the beginning of the European Economic and Monetary Union, the German economy has been lagging behind the euro area average in many respects. The average annual growth of GDP between 1999 and 2012 was only very moderate at 1.3 per cent; up until the financial crisis, it was even 0.4 percentage points below average growth in the euro area. Although the unemployment rate in Germany, which was very high at the beginning of the millennium, has been continuously falling, real wages stagnated at the same time, however. It is only since the financial crisis that these have been developing more positively than in the euro area overall.”

As the two tables below show, Germany’s low wages do not make it a productivity giant on the key measure of GDP. Its wages are low and it's GDP performance is no better than average.

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A “purge” that’s making teeth grind in Brussels



2 October 2013

Presseurop
Die Welt


On October 2 the European Commission is to submit a working paper on the “purging of European legislation”, reports Die Welt, which was able to get an advance copy of the text. The proposal is to make the drafting process and content of the rules laid down by Brussels more fluid and logical — and less sensitive to pressure from lobbies. For Commission President José Manuel Barroso, “de-bureaucratisation” offers a response to persistent criticisms of regulations deemed excessive and, above all, to the success of Eurosceptic parties in many countries. As the German daily explains, the Commission “now wants to do a clean-up and examine precisely what, in their eyes, is meaningful regulation and what is bureaucratic nonsense”.

It’s a “major project” without precedent that has nevertheless sparked resistance in the ranks of the institution chaired by José Manuel Barroso, the paper continues:


Unprecedented and driven by an admirable ambition, this project breaks with the long tradition of the legislative authority of regulating everything that can be regulated at the European level — hence the lively controversy. José Manuel Barroso's “de-bureaucratisation” project has provoked a series of showdowns: involving European Commissioners, the political leadership of the Commission [the office of the Commissioners] and influential officials, as well as putting the head of the Commission at odds with some elements of the European Parliament. Several months ago, departments were tasked with identifying what they consider superfluous in their areas of competence. At the beginning of August the first reports were handed in. After examining the results, the project leaders drew up a list that fuelled the controversy: almost all of the Commissioners and Directorates-General are affected, and nearly all areas of European legislation will have to be thinned out. However, regulation is at the very heart of the Commission — and for a number of people, it would be a mistake to declare “unnecessary” projects that are the bread and butter of their own offices.

Some Commissioners have also already made it clear to Barroso that they are not going along with his project, writes Die Welt. “In the face of opposition,” the newspaper writes, “proposals sink into oblivion. It remains to be seen,” the daily adds, “what will still remain on the long list of ‘de-bureaucratisation' projects when all is done.”

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Banking crisis: ‘Draghi, prepared to expand ‘lending lifeline’. . . and Merkel to maintain her European policy’



24 September 2013

Presseurop
Cinco Días
Cinco Días, 24 September 2013

Speaking before the European Parliament on September 23, European Central Bank President Mario Draghi said he was willing to consider additional stimulus measures to banks to keep short-term market interest rates in check and safeguard the bloc’s fragile recovery, reports Cinco Días.

Since December 2011, the ECB has funneled over a trillion euros to eurozone banks.

According to the daily —


Two years later [...] Draghi may use the same formula to make money flow to small businesses and the real economy, instead of leaving it in the ECB’s coffers.

On a related issue, Merkel is to maintain her pro-austerity European policy in the wake of German elections. However, Brussels foresees that a grand coalition with the SPD would result in a more constructive leadership, remarks the Spanish daily.

======================================================
This is a comment on the article translated from the German....just what I was thinking,!!!


Ach so, da steht ein Safe. Man muss das Geld nur herausnehmen. Da bin ich beruhigt. Wie im Schlaraffenland. Ein Märchen.

Eine Billionen. Wer hat diesem Mann nur solch eine Macht verliehen? Wer gebietet ihm Einhalt?



[Quoted phrase]

Oh, there is a safe. You just have to take out the money. Since I am reassured. As in the land of plenty. A fairy tale.

A trillion. Who has this man just gave such power? Who commands him stop?

"

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EconomySocial Issues

Social Issues: ‘EU leadership aims to establish Eurozone unemployment fund’



3 October 2013

Presseurop
Der Standard
Der Standard, 3 October 2013

In the wake of elections in Germany and Austria, “the European Commissioner for Employment and Social Affairs, László Andor presented [on October 2] proposals to add a “social dimension” to the monetary union”, which include the creation of a European unemployment benefit system, reports Der Standard.

The measures, which have been approved by the Commissioner for Economic and Monetary Affairs Olli Rehn and by Commission President José Manuel Barroso, will allow for the creation of fund to enable crisis stricken countries to pay unemployment benefit, explains the daily —


The Commission aims to counter the decline in purchasing power caused by austerity measures, which has resulted in a downward spiral.

However, the daily remarks that the implementation of such a measure would require modifications to EU treaties and the unanimous support of the European Council, which is why experts believe that the project is unlikely to succeed

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European elections 2014: Fears of a growing protest vote



7 October 2013
Le Monde Paris

The success of Europhobic parties in member states will likely pave the way for a surge in support for Eurosceptics in next May’s European elections. Their favourite topics — immigration, austerity and the rejection of Brussels — already dominate the campaigns.

Alain Salles

The breakthrough by Germany’s anti-euro party, the far right push in Austria, the pressure exerted by Nigel Farage’s Europhobes on the British Conservative party, and the anti-austerity drubbing sustained by the ruling party in Portuguese local elections: all of these amount to a preamble for May 2014 European elections in which hostility to Brussels’ orthodoxy will likely have a major impact.

In addition to the traditional anti-immigration and anti-Brussels votes, which have fed Euroscepticism in previous elections, anti-Merkel and anti-troika groups, which have thrived amid the euro crisis and repeated austerity programmes, stand to make a strong showing. Different political strands are often intertwined on these "protest" fronts. The eurosceptics are worried about growing immigration, while austerity has encouraged rejection of Europe ruled by liberal economics.

In a context where ruling parties are more concerned by national votes than by low-turnout European ballots, the protest parties are counting on the elections on May 22 and 25, 2014, to establish their influence. What is more, the surge in their support will come at time when the European parliament has won greater powers, notably with regard to its choice of the president of the future Commission.

Brussels’ battle of wills

All of these groups are hoping to be the focus of a protest vote, which is more pronounced in EU polls

The leader of the UK Independence Party (UKIP), Nigel Farage, has made European elections a priority in his bid to impose his views on the United Kingdom, which will open a new chapter in the battle of wills with Brussels. They are also a key objective for the True Finns and France’s Front national (FN), as they are for Beppe Grillo in Italy, and SYRIZA, Greece’s main opposition party. All of these groups are hoping to be the focus of a protest vote, which is more pronounced in EU polls. "European elections have traditionally favoured marginal parties,” explains political scientist Dominique Reynié.

“They are characterised by proportional representation and a high level of abstention, especially among moderate voters."

The ingredients of the protest cocktail are well known: immigration, bureaucracy and austerity. And at times they can form a highly volatile mix. The controversy in France over the Roma has shown that immigration – to Europe and also within the EU – will figure large in the campaigns. The question of migration is the stock and trade of the far right in countries as far apart as Denmark and Greece, as well as in the Netherlands, Austria and France.

Romanian and Bulgarian workers have come to represent a threat that used to be embodied by the dreaded Polish plumber

The issue has also been enthusiastically adopted by the Eurosceptics of UKIP and Germany’s newly created, anti-euro party Alternative for Germany (AfD). For a section of the European population that is apprehensive about the crisis, free movement of labour is seen as menace to employment. Romanian and Bulgarian workers have come to represent a threat that used to be embodied by the dreaded Polish plumber.

Blame game

Euroscepticism stands to benefit not only from attacks on Brussels bureaucracy, but also from criticism of the poor management of Europe’s financial ills. "Ever since the onset of the debt crisis, the countries of the south have been convinced that what is happening to them is Berlin’s fault, while the countries of the north believe that they have to bailout the south because of Brussels," explains European People’s Party (EPP) MEP Alain Lamassoure. The True Finns view aid to Greece as a justification for their Euroscepticism, as does Geert Wilders’ Party for Freedom which scored 30 per cent in the polls.

Alongside these traditional opponents, the crisis has paved the way for the emergence of anti-Merkel and anti-troika groups which are thriving both on the left and the far right in Southern Europe. In Greece, SYRIZA and the populist Independent Greeks are counting on the widespread rejection of measures imposed by Brussels and the International Monetary Fund (IMF) to gain ground in Strasbourg. In Spain, the Indignados movement has promised to present lists for the May vote.

"The European project is facing a very serious risk,” acknowledges, the Vice-President of the European Parliament and Greek socialist party (PASOK) MEP, Anni Podimata. Anti-European sentiment has got much worse. And this should encourage the parties to take responsibility for their European message."

To date, the widely divided Eurosceptic movements and far right parties have carried very little weight in the European parliament. MEPs representing France’s FN are not included in a parliamentary group, while the other movements form part of the Europe of Freedom and Democracy Group centred on Nigel Farage and the members of the Northern League. The FN’s dream is to create a group with the Austrian FPÖ, which recently scored more than 20 per cent in September 29 general elections.

"There will be a quarter to a third of MEPs who vote "no" to everything, but that will not prevent the parliament from functioning. The entente between the EPP and the social democrats will be even more necessary," points out Mr Lamassoure. The two parties have announced that they will conduct campaigns that oppose the right and the left, however, the launch of the social-democratic campaign has coincided with the SPD’s decision to consider participating in the Merkel government.

Translated from the French by Mark McG

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Eurozone crisis: IMF had doubts about Greek bailout



8 October 2013

Presseurop
The Wall Street Journal Europe


Almost a third of the International Monetary Fund’s (IMF) members raised doubts about the effectiveness of the Greek bailout at the meeting in which they agreed the deal on May 9, 2010. They criticised the plan for failing to include a debt writedown and passing the “painful adjustment on the Greeks while asking nothing of its European creditors,” writes the Wall Street Journal.

The financial daily, which has received a raft of confidential minutes from a meeting of the IMF’s Executive Board, reveals that contrary to public statements that it had no doubts about the bailout plan, a host of nations expressed concerns over the “immense risks” of the rescue package, reports the newspaper.

The leaks emerge ahead of the annual IMF meeting in Washington DC on October 11 and as the Fund ratchets up the pressure on European governments to forgive some Greek debt or risk losing IMF support for future bailouts. In June, the IMF admitted failures in its handling of the Greek rescue.

The Wall Street Journal writes that this IMF insistence stems from “bitterness” felt by many non-European member countries over negotiations at a 2010 meeting to approve the controversial deal, which included tax rises and huge public spending cuts for Greeks, but included no debt restructuring:


Some of the IMF dissenters at the meeting and some IMF staff believe the interests of the European powers were placed above those of Greece, which has seen its economy contract by a fifth since 2009 and its jobless rate reach nearly 28 per cent.

The minutes report some European member countries said debt restructuring was not included in the Greek bailout over fears that the contagion would spread to other countries such as France and Germany.

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elections 2014: Let’s vote for a European people



1 octobre 2013
El País Madrid

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Cristina Sampaio

Since there is no clear concept of solidarity among the nations of the European Union, it is time to create a nation based on a common political project, according to a Spanish philosopher. The 2014 European elections should be the first step. Extraits.

Mikel Arteta

Because Spain is not an ethnic nation, nationalism believes it has an open door for founding its own political nation. Similarly, we hear that, since there is no European "people", it would be better not to go any deeper into the project of the Union. Certainly, a state without a common language and culture will find it more difficult to govern itself; but to idealise a common language and culture to fever pitch was never a good idea.

To use in somewhat tortuous fashion the cosmopolitan image of concentric circles, nationalism would restrict solidarity to your own kind: through family, friends and acquaintances, sympathy would be limited to the “big family” of your fellow countrymen – to those who, sharing the same language, would shape a particular vision of the world.

In summary: the naturalist thesis that empathy/altruism develops in concentric circles is wrong and to extend/stop solidarity to and at the “people” who are with me is absurd. But all of this is based on a worse fallacy: “a linguistic community is so different from the rest that it must govern itself politically.” The lack of a shared language – in Europe, at least – makes fluid and instant public deliberation difficult. Well, we’re working on it. It is also true that we benefit from a language without which we cannot think about the world. But, more than conforming to a microcosm that fragments the social reality, language opens us up to language itself, that instrument that allows us to communicate and reflect on our many-faceted cultural conditioning. Learning second languages, translation, or honouring human rights prove that, in any language, we do think of a shared social world, because we all must cope with the practical problems that grow out of that world.

Now let’s tackle the corollary of the twice-flattened premise: as we are different and altruism is limited, we must restrict questions of justice to our own kind. This charade sidesteps all the democratic norms: if the problems affecting us are supranational, the politics to tackle them must be supranational.

Political integration

We can conclude that, to recover its battered popular sovereignty, the EU must integrate politically, artificially creating a new demos

We can conclude that, to recover its battered popular sovereignty, the EU must integrate politically, artificially creating a new demos. In turn, this should then lead to the cosmopolitanisation of international law; that is, the process by which international law ‒ which today is a match for the strongest states ‒ becomes a right that is also formed by and for the citizens of the world. But what to do with an EU that is going under for lack of foundations that would let a transnational democracy of quality emerge?

We resort to the law to shape the social reality intentionally. Habermas says that “every element of human culture, including speech and language, is a construction. Although most of it has not seen the light intentionally, (...) the legal agreements are the most artificial of those [constructions]”.

As well, to overcome the cultural structures that govern us (borders, institutions, codes, language, etc) and to arrive at transnational solidarity, it seems necessary to give more power to parliament – so promoting the citizenry to co-legislate together with the Council (States), and create true European political parties.

The influences of a burgeoning European civil society would help along this transnationalisation of the various public spheres, which will help amalgamate individual interests within a shared policy framework

We would thus resuscitate a shared project that we only look to today to see what advantage my country, or myself, can gain from it. To vote for European parties would lead to discussing and legislating democratically on the many common problems; the media would translate and broadcast into every public sphere the fundamental technical information and the interests that are at stake. The influences of a burgeoning European civil society would help along this transnationalisation of the various public spheres, which will help amalgamate individual interests within a shared policy framework.

Forging solidarity

Because Europeans will be the citizens with whom we will create this pact, along with accountability and responsiveness there will arise ties of solidarity, the sense of co-membership typical of all democratic self-government. It will not cost so much for those who already share a lot (from the world wars up to enlightened reasoning in facing problems in a practical way: tolerance, rule of law, democracy, etc), which is a basis on which to shape a broader and more abstract collective identity, one substantial enough for a German to pay the taxes of a Greek.

In addition, to vote for European parties with genuine legislative – and executive – capacity would quash criticisms that the EU must face up to today over its bureaucratic and mercantilist functioning; and by its intergovernmentalism (nationalism), which forces the weak to submit to the designs of the strongest. Only if there are alternatives and rotation will we see the EU not as an elitist project, but as a political project whose current drift we reject. A project that has not been kidnapped, but directed by a few parties that must be accountable to us if they do not wish to be relegated to the opposition benches.

Better redistribution and effective popular sovereignty will expand the demos. For that, the political left should oppose not the European political project, but its current monolithic character.

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sceptics forever bemoan Brussels’ bureaucracy, particularly since the October 15 release of a UK government report into the issue. But, not all bureaucracy is bad. People must distinguish between pointless “red tape” and effective regulation to protect workers.

The Guardian
Red tape or regulation? The two things are very different and the distinction between them matters. No one is in favour of red tape. That there is too much of it is hardwired into the very words. Regulation is different. Unlike red tape, regulation is not inherently one thing or the other. Some is good. Some is bad. Most is a mix of both. Everything depends on the regulation and on what is being regulated.

There is nothing wrong with a debate about regulation. But there will always be the suspicion that a debate framed in terms of red tape is partly a smokescreen covering an attempt to sweep away good regulation as well as bad.

Tuesday's British government report on EU red tape is a case in point. Since no one is in favour of red tape, the business taskforce's demands to slash the EU variety may seem at face value to be mere common sense. Once you start to dig down into the detail of the report, on the other hand, things get a lot more problematic.

The issues raised are less about red tape than about where to strike a balance between the economic interests of employers and the security interests of employees.

Read article in full at The Guardian en
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Europe's debt crisis credibility hangs on thin Irish thread

Whether Ireland or any other EMU victim state can claw its way back to viability depends on the actions of the ECB





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Whether Ireland or any other EMU victim state can claw its way back to viability depends on the actions of the ECB

The Celtic Tiger has never been seriously uncompetitive within the euro, and it needs no lessons on free markets from Brussels. It places 15 on the World Bank's ease of doing business index, the best EMU state after Finland, compared to: Portugal (30), Spain (44), Italy (73), and Greece (78).







Ambrose Evans-Pritchard
By Ambrose Evans-Pritchard, International Business Editor

8:35PM BST 16 Oct 2013

Comments252 Comments





Ireland has begun to say no. Its latest austerity budget -- the seventh in six years -- is a small act of defiance against the scorched earth policies of the EU-IMF Troika.


Labour leader Eamon Glimore has long been grumbling that EU ideologues treat his country like "some type of economic experiment for austerity hawks". He has prevailed.


Dublin will drain a further 1.5pc of GDP from the economy in fiscal cuts and taxes over the next year, not 1.8pc as demanded. Finance minister Michael Noonan told the Dail this week that the nation can take no more. "Too long a sacrifice can make a stone of the heart," he said, quoting WB Yeats from Easter 1916.


He picked a double-edged poem, deliberately no doubt. Yeats shuddered at the Easter Uprising of 1916, not least because Irish regiments were fighting in Flanders. Yet the myopic brutality of General Sir John Maxell destroyed the bonds of union. "All changed, changed utterly: A terrible beauty is born," runs the stanza.


The EMU commissars must bite their lips. They have been praising Ireland for so long as the poster child of "internal devaluation" that they cannot now risk a showdown. The credibility of EMU debt policy is at stake. Ireland must become the first rescued state to exit the Troika regime and return to the markets this year.


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It is of course a fallacy to claim that Ireland's ability to survive the poisonous 1930s prescriptions imposed by Brussels proves that austerity "works", and a second fallacy to claim that Spain, Italy, Portugal, and Greece can therefore pull off the same feat.

To the extent that Ireland is recovering, this is because its people are formidably enterprising and have an ultra-open economy with a high enough trade gearing to withstand the combined shock of a fiscal squeeze equal to 19pc of GDP and a double-digit collapse of the money supply.

The Celtic Tiger has never been seriously uncompetitive within the euro, and it needs no lessons on free markets from Brussels. It places 15 on the World Bank's ease of doing business index, the best EMU state after Finland, compared to: Portugal (30), Spain (44), Italy (73), and Greece (78).

Note that Ireland has slipped from 7th place since it submitted to EU suzerainty three years ago. As the Irish trade unions have said all along, Troika medicine is brutish austerity and nothing else. Not only is reform a sham, but the lost skills and hysteresis effects of mass unemployment have cut Ireland's future growth rate for 20 years to come. The brightest are leaving. Net emigration is 33,000 a year, a quarter to the UK, 17pc to Australia.

What Ireland had was a calamitious property bubble caused by interest rates set in Frankfurt that were far low for a tiger economy, and which became ever lower in real terms as the blow-off spiral reached a crescendo -- eloquently analysed by central bank governor Patrick Honohan in "What Went Wrong in Ireland".



Ireland made awful mistakes, yet is more sinned against than sinner. The European Central Bank forced the country to take over the €60bn liabilities of five Irish banks during the white heat of the crisis in 2008, in order to protect Europe from a chain reaction. "German banks would have suffered massive damages if Ireland had done an Iceland and walked away. The decision was a disaster for Ireland and the whole burden fell on the Irish people. There is a moral issue here," said Megan Greene from Maverick Intelligence.

EU leaders recognized a special duty of care to Ireland at the June summit in 2012, promising to mobilise the ESM bail-out fund to clean up the banks. The text is crystal clear. Yet the creditor core has since resiled from this promise. Germany's Wolfgang Schauble repeated this week that Ireland can expect no help on legacy assets. "Ireland did what Ireland had to do and now everything is fine," he said.

Whether everything is fine is a matter of dispute. Ireland's budget deficit is still 7.3pc of GDP. Public debt is 123pc, near the point of no return. "The debt is massive. There is almost no domestic growth. In the end they are going to need debt restructuring," said Ms Greene.

US investor Franklin Templeton made a fortune buying up a tenth of Ireland's debt stock in the dark days, and so have others. Ireland's 10-year yields are down to 3.67pc. Kudos to them, but Moody's still rates Irish debt as "junk", citing the risk of economic stagnation for the debt trajectory.

Household debt is still 200pc of income (IMF), while the assets that underpin it are greatly shrunken after a 57pc fall in house prices. Mortgages in arrears by 180 days are at a record 17pc.



Whether or not Ireland can pull through depends on trade, and in this respect the country tells us nothing about prospects for Club Med. Irish exports of goods and services are 108pc of GDP, compared to: Portugal (39pc), Spain (32pc), Italy (30pc), and Greece (27p).

In other words, it is three times easier for Ireland to claw its way back to viability through trade, and even so it has not been easy. The 'patent cliff' -- as Viagra and Lipitor go generic -- has cut exports by 17pc over the last year. Yet the country at least has a current account surplus of 2.3pc of GDP. Its great gamble two decades ago has paid off. The niche industries of IT, pharma, and financial services have all reached critical mass.

No doubt large pockets of Spain can replicate this feat. The Basque country comes to mind. But Spain has a much bigger hill to climb. It has turned a deficit of 10pc of GDP five years ago into a 1.3pc surplus this year, but chiefly by crushing internal demand. The export surge has tapered off.

The IMF says gains in Spanish unit labour costs (ULC) are a productivity illusion caused by mass unemployment. The harsh reality is that Spain's net international investment position is still minus 90pc of GDP and even in depression with a jobless rate of 26pc the country still imports too much to cover this imbalance.

Nothing is written in stone. Whether Ireland or any other EMU victim state can claw its way back to viability depends on the actions of the ECB. If Frankfurt reflates aggressively, Ireland can undoubtedly make it, and perhaps Spain as well in an ideal world. If it continues to let debt-deflation run its course, even the poster child is doomed.

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Greece: ‘Sudden winter’
17 October 2013PresseuropTa Nea Ta Nea, 17 October 2013
The International Monetary Fund's (IMF) representative in Greece, Poul Thomsen, cast a chill over Greece on October 16 when he icily demanded the government push through an additional €2bn of cuts in 2014.

Thomsen “is playing the hard man,” remarks Ta Nea, which notes that —

… the extortion of further measures could delay the new cycle of negotiations with the EU-ECB-IMF troika for the release of a further €1bn tranche of aid, which may not begin before early November.

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European elections 2014: Europe could face its own shutdown
21 October 2013The Guardian London Tools
Send
Kazanevski Europeans have been stunned and dismayed by the gridlock that brought the US government to a near-default. But should the anti-EU parties make a breakthrough in the upcoming European elections, the Union would face a similar situation, writes a German political scientist.

Jan-Werner Müller
Europeans have been stunned and dismayed by the shutdown and near-default of the United States. Perhaps they even felt some schadenfreude. After all, European leaders have been held to ridicule and contempt for their global brinkmanship over the dysfunctional eurozone in recent years – time and again taking their economies to the cliff, only to pull back just before the markets opened.

Yet Europe might be in for its own version of a shutdown – less dramatic than the US government one, to be sure, but with similar causes. Just as the Tea Party has turned Congress into a paralysed, self-hating institution, an alliance of anti-European Union parties could give Europe its own version of "gridlock" if they win enough of the popular vote in next year's European elections. European elites – and any citizen who cares about the fate of the EU – better start thinking about that scenario.

The US and the EU share one characteristic: they are, in the jargon of political science, "mixed regimes", with a strong separation of powers and numerous checks and balances. This is good news for those who want laws to be based on broad consensus and generally to avoid what James Madison called "public instability". Unlike the Westminster model mixed regimes make it easy for a relatively small number of political players to veto change. They are also less transparent; plus it is harder to hold anyone clearly accountable – blame for politicking can always be shifted around.

Read article in full at The Guardian

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BRUSSELS (AP) -- The European Union's top court has upheld a law giving a German government authority a say in the running of Volkswagen AG, Europe's largest carmaker.

The Court of Justice on Tuesday dismissed a lawsuit against the rule brought by the European Commission, the 28-nation bloc's executive arm that also acts as the antitrust watchdog.

The German state of Lower Saxony's 20 percent stake in Wolfsburg-based automaker Volkswagen gives it the right to block actions — a lower threshold than the 25 percent blocking minority for all other German public companies. But the court ruled the law still meets the relevant European requirements.

Germany amended the law after the court in 2007 ruled against parts of it. The Commission still claimed it inhibits the free movement of capital within the EU.

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European Budget: ‘EU runs out of money’
23 October 2013PresseuropNovinar Novinar, 23 October 2013
“Brussels could stop European fund payments,” announces Novinar, which reports that “with a shortfall of €2.7bn, the European Commission budget is insufficient to cover its expenses.”

On October 22, the European Parliament agreed to present an adjusted budget to avoid default on EU commitments. However, the daily also quotes Bulgarian MEP Ivaylo Kalfin who warns that “from next year, the threat to EU payments could have a considerable impact on citizens and local governments."

The socialist parliamentarian points out that if the 2014 budget is subject “to cuts of €8bn,” there will “serious consequences for research and innovation, youth mobility and new technologies”.

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Europe already has one foot in 'Japanese’ deflation grave

Europe is sliding into a deflationary trap, displacing Japan as the world's epicentre of policy error. The effect is already causing debt ratios in half a dozen countries to ratchet upwards to the point of no return, making a mockery of the EMU debt crisis strategy.





Melted euro coins



Image 1 of 4

Once total debt exceeds 300pc of GDP, deflation becomes lethal. That is now the case across most of western Europe Photo: Reuters

















Europe's company debt has surged since 2007, while America's has fallen






















Ambrose Evans-Pritchard
By Ambrose Evans-Pritchard

8:40PM BST 23 Oct 2013

Comments45 Comments





The EU authorities would do well to study Professor Irving Fisher's seminal paper from Econometrica in 1933, The Debt Deflation Theory of Great Depressions. The central argument should by now be self-evident, though a certain sort of mind had trouble grasping it then, just as it does today. If the price level is falling - the "swelling dollar" in Hoover's America - the real burden of the debt keeps rising.


Deflation may seem relatively benign in "low-debt" countries at certain times, though less benign than claimed by a rentier class that lives off coupons. People forget that it was a major cause of the American Revolution, since British-imposed monetary contraction after the Seven Years War caused an economic depression, crippling Virginia planters like Thomas Jefferson. It was also the cause of the US agrarian revolt of the 1880s and 1890s, culminating in William Jennings Bryan's plaintive cry: "We shall not be crucified upon a cross of gold."


What is clear is that once total debt exceeds 300pc of GDP, deflation becomes lethal. That is now the case across most of western Europe.


The headline inflation rate for EMU understates the risk, especially for countries in the eye of the storm. A Eurostat index called "HICP inflation at constant taxes" that strips out distortions created by austerity itself - chiefly VAT rises and other taxes - shows that inflation dropped to 0.9pc for the eurozone as a whole in September. This is the lowest since the Lehman crisis and far below the European Central Bank's target of 2pc.


Over the past three months the trend has intensified. France, Italy, Spain, Portugal, Greece, Cyprus, Ireland, Slovakia, Slovenia, Estonia and Latvia have all seen price falls, and already have one foot in deflation. Much the same is happening in the EMU sphere of Bulgaria, Romania, Hungary and the Czech Republic. Poland is at zero. Denmark is close, and so is Sweden, prompting the angry resignation of Riksbank deputy governor Lars Svennson, one of the world's great monetary economists. He too has been citing Irving Fisher's debt-deflation theories in disputes with colleagues.

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Citi forecasts Greek devastation, unstoppable debt spirals in Italy and Portugal




By Ambrose Evans-Pritchard Economics Last updated: October 24th, 2013

387 Comments Comment on this article




If Citigroup is right, the slight rebound in Europe over the summer will not be enough to stop Club Med going from bad to worse, with a string of soft defaults/restructurings.

I pass their latest forecasts on to readers. I do not endorse them.

Italy will bounce along in near-permanent recession with growth of 0.1pc in 2014, zero in 2015, and 0.2pc in 2016. The debt will punch above 140pc of GDP, beyond the point of no return for a country with no economic growth or sovereign currency.

"We do not expect the public debt ratio will enter a downtrend in coming years, and we suspect that some form of debt restructuring (maturity lengthening and/or coupon reductions) may be likely eventually," said the bank.

Portugal is in an even worse state, with growth of: 0.6pc, 0.0pc, 1.0pc, over the next three years, with debt hitting 149pc of GDP by 2015, and unemployment rising again to 18.3pc:


Given the fiscal tightening still to come, ongoing private deleveraging and ensuing poor nominal GDP growth prospects, doubts still exist about the sustainability of the Portuguese public debt in our view."

A second full bail-out programme remains a clear risk in the event of market sentiment deteriorating. In any case, we think a Greek-style public debt restructuring unlikely in the near future, but a restructuring of some government contingent liabilities is still possible.

Greece continues to be a catastrophe. The alleged stabilisation will prove to be a false dawn. The economy will contract by a further 2.9pc in 2014, and 1.4pc in 2015, pushing unemployment to 32.4pc, and the debt to 201pc of GDP.

Spain will not default or need debt restructuring, which looks to me like a change in forecast. However, growth will be just 0.1pc next year, 0.3pc in 2015, and 0.7pc in 2016, not enough to stop unemployment rising yet further to 27.9pc.

Ireland will make it. The country is highly competitive and has little in common with the others.

If Citigroup is broadly correct, Europe faces a lost decade that is far worse than anything suffered by Japan, which will render the region marginal in coming world affairs, and is likely to have non-linear political consequences. The lesson of the 1930s is that you have to discredit both the moderate Left and Right in turn before voters turn to extreme parties en masse.

I cannot see how perma-slump and rising unemployment can continue through to 2017 without patience snapping. But such judgements are entirely political, and therefore intuitive. You have to speak the languages of these countries and know them very well to have any useful insights.

Citi's team is headed by ardent euro-federalist Willem Buiter, and most of his team are from eurozone countries, so this is not an Anglo-Saxon report.

Of course, there is always the possibility that they are completely wrong. They had better be wrong.

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EU-US: The real transatlantic confidence crisis
28 October 2013Il Sole-24 Ore Milan Tools
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Tjeerd Viewed from Europe, the NSA spying scandal is eroding US credibility and standing. But from the other side of the Atlantic, it is the EU’s continuing inability to solve the crisis that is worrying American decision-makers.

Alessandro Plateroti
The European outcry over the US intercepts case is embarrassing Washington. However, in New York, where the line between pragmatism and cynicism is extremely thin, the echo of the diplomatic crisis smashed against the walls of Wall Street: among traders and investment bankers, many of whom have studied at West Point or served in the Marines and the US intelligence before joining the financial industry, the new debate against America is not only considered “useless” (there is no government in the world that is not trying to spy on its neighbours), but as the umpteenth falsification of the true European problems.

“What are they afraid of in Germany?" a trader at a global brokerage firm asked yesterday. "Are they worried that, after listening to [German Chancellor, Angela] Merkel on the phone about the prospects of the euro, the US Treasury orders us to immediately sell our government bonds?”

Among the speculators but also the economists and Wall Street analysts, there is a growing belief that Europe is again losing directionThis is just a joke, of course. But behind the cynicism there is an objective reality which — from our point of view — would deserve the same concerns prompted by the US spying case. Among the big portfolio managers in the US finance, among the speculators but also the economists and Wall Street analysts, there is a growing belief that Europe is again losing direction, that the Eurozone is lacking its former drive towards a political union and the wind of the structural reforms, which allowed peripheral countries to start an economic and institutional modernisation, is blowing out for lack of interest.

The equation is known: where governance problems exist, the earning potential is always higher. But the problem is that those who pay the bill are always the weaker ones. In this situation, one of the big issues is that this game, played on the sorts of governments and of money savers in Europe, does not have a jury to set the rules as well as a referee to enforce them.

Survival of the fittest
The European market, contrarily to the US market, today looks like a no-man’s land where only the rule of the survival of the fittest applies. Let’s take the Tobin Tax: only 11 countries in the Eurozone, including Italy, have decided to approve a tax on financial transactions, opening a new competitive gap in a financial market which, on paper, operates as a single market.

But we could also mention the euro: if on one side the US financial industry believes that the euro currency risks to derail again by the next summer, on the other side, the operation coordinated by the US Federal Reserve and the US Treasury to support a weak dollar allows currency traders to speculate, with reasonable expectations of gaining, on a strong euro, which is kept artificially higher by the conditions of the European economy and the analyses depicting Europe in a deep political crisis.

If a system is about to collapse, usually the currency (or debt) falls: in this case the natural order of things is reversed. The trend of the US T-bonds reflects this situation: the more people talked of a US default in the past weeks, the more the US bonds gained strength, as if the risk of insolvency did not concern them.

With this scenario before our eyes and on our computer screens, it comes as little surprise if the European markets—and in particular the fragile ones like Italy—become a place for the most unscrupulous investors. But the most interesting fact is how all these financial events are mixed with political and diplomatic facts and then presented to the American public opinion: while the front pages of the European newspapers attack the US for the revelations on the systemic spying by the CIA, in the front pages of the American newspapers — starting from the Wall Street Journal — a bigger space is given to the analyses on the return of the euro crisis, on the end of a project of political union and finally on the unreliability of Europe as political and financial partner of the world’s biggest economies.

Collapse of the old system
The consequence of this new governance fracture is not only political but also financial: the German halt to the banking surveillance, emerged on the eve of the new European stress tests, immediately legitimised the alarms raised by the Wall Street analysts on the precarious health of the European credit.

It is now evident that we are moving in a scenario where globalisation prevents unilateral measuresIt is now evident that we are moving in a scenario where globalisation prevents unilateral measures, but where opposing interests condemn us to the paralysis. The old system of rules and certainties is collapsing, nobody is able to see or wants to build the new because everything is intertwined with the crisis and the threat of a worsening of the financial and economic situation.

Everybody lives day by day—operators, governments, transnational institutions—and is afraid of planning the future. It seems that in the world a new disease is spreading, which we believed was only Italian: chasing the present to become its prisoners.
On the web
Original article at Il Sole-24 Ore it
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European leaders must educate their public
The outrage surrounding allegations that the National Security Agency (NSA) tapped the phone of German Chancellor Angela Merkel is nothing more than a “fit of European pique,” writes the assistant books editor at the Wall Street Journal Sohrab Ahmari.

Despite the rhetoric, Merkel is fully aware of how intelligence agencies operate and must balance a need to reflect German and European outrage without irreparably damaging ties with the US – Berlin's most vital ally, he writes, adding –

The Chancellor and her colleagues don't need a lesson in the birds and the bees of statecraft, but they must appease the cries of domestic anti-American outrage. Lost in all this is the obligation of political leaders to educate the public, even in a general way, about the facts of life regarding intelligence and the needs of national security in a dangerous world.

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EU institutions: Angela Merkel plots European reform
29 October 2013Der Spiegel Hamburg Tools
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Patrick Chappatte The German chancellor finally seems ready to take control of – and responsibility for – Europe. But as her proposed reforms are in line with the Social Democrats, she needs an ally: the President of the European Parliament, Martin Schulz. Excerpts.

Christoph Pauly | Christian Reiermann | Michael Sauga | Peter Müller | Christoph Schult
It was during dinner in the Brussels Council building. Dessert had just been served, shortly before midnight, when Angela Merkel did what leaders in Europe have been asking her to do for months: show a desire to lead. The Eurozone countries would have to become more competitive, the Chancellor demanded. The previous inspections of the Commission had not been enough; from now on, there would have to be “a tougher commitment”. The “social dimension”, however, should be not ignored, the CDU Chief had realised. Europe needs a “qualitative leap”.

Merkel is determined to become the Chancellor of Europe in her third term of office. In the recent election the Germans gave her more votes than ever before; she is “the most important politician on the continent," according to The Economist, and she will soon be governing in Germany in a coalition with the second-largest party. It’s a propitious starting-line, Merkel is convinced, to push on with the project that will be her political legacy: the reform of the European Union. Indeed, the danger that the common currency will quickly collapse has been banished for the time being, and the Eurozone economy is showing renewed signs of life after a long dark spell. All the same, Merkel knows that the crisis can flare up again at any time. From France to Italy, the Euro-sceptic parties have the wind in their sails, the reforms in many of the indebted countries are faltering, and banks are hesitating to give out loans.

And so the Chancellor is preparing an offensive for European reform, and she has also grasped how the project can be moved ahead: together with the likely new coalition partners, the SPD, she wants her policy on Europe to be given a more social gloss. That gloss centres on programmes to combat youth unemployment and tax evasion and a Eurozone budget to kick-start growth. In exchange, Brussels should get more powers to oversee the financial and economic policies of the member states.

Mutti’s masterplan
Merkel intends to pursue her controversial doctrine in social-democratic garb, and the most important ally in the Chancellor's Office has already been picked outMoney for reform: Merkel intends to pursue her controversial doctrine in social-democratic garb, and the most important ally in the Chancellor's Office has already been picked out. Merkel wants to push her projects through in a duo with EU Parliament President Martin Schulz, who not only heads the SPD delegation in the coalition negotiations on European policy but has his eye on his next career move. First, he wants to be the lead candidate of the Socialists for the European elections in May. Then, provided he marshals enough votes, he intends to go after the presidency of the powerful Commission in Brussels. Merkel would finally be free of the man she once sponsored, the now unpopular incumbent José Manuel Barroso, and in tandem with Schulz she could get reforms for growth and competition underway.

The line of the new Berlin government is predictable: no Eurobonds, but more money for growth programmes and additional powers of inspection for Brussels. To push through with the new plan, Merkel, amiably referred to as “Mutti” in her own circles, has chosen a new favourite in the President of the EU Parliament – Schulz. Publicly, the SPD politician says “Angela Merkel is not my best friend.” When the microphones are turned off, though, the two speak of each other in tones of great respect.

Schulz regularly meets the German Chancellor in Berlin. They exchange SMS messages and hammer out compromises, most recently over the supplementary budget for the EU. Both, however, are against everything being regulated at the EU level, and they largely agree on the path towards to a stronger currency and economic union.

German ‘Schulz-pah’
For the Grand Coalition with the Social Democrats, Schulz would be an important link. He is close friends with SPD Chief Sigmar Gabriel, and Merkel can use him in Europe as well. The coming year’s elections to the European Parliament will be the first to be held under the terms of the Treaty of Lisbon. Consequently, the result must be taken into account in the nominations for Commission President put forward by the 28 leaders of the member states.

The 57-year-old Schulz has a good chance of landing the job, as over the years he has been assiduously acquiring allies, and he is counting on wide-ranging support in the European Parliament and the European Council, far beyond the ranks of his own Social Democratic Party. Merkel knows this, and she could get on well with Martin Schulz as the President of the Commission – not least because the SPD politician enjoys the confidence of French President François Hollande, which could help get the stuttering German-French motor back up and running.

Merkel has just one problem: as Chairman of the CDU, she cannot openly support an SPD candidateMerkel has just one problem: as Chairman of the CDU, she cannot openly support an SPD candidate. In the European election campaigns, the two future coalition partners, the CDU and the SPD, will therefore pull in separate directions. Merkel, however, is striving to avoid stirring up any unnecessary confrontations with the Social Democrats. Last Thursday, at a meeting of the heads of the conservative European People's Party held to discuss the upcoming European elections, many argued that they should send a conservative candidate of their own to run against Schulz. Merkel, however, together with EU Council President Herman Van Rompuy, expressed great concern. The Chancellor has yet to declare her favourite for the influential post of President of the Commission to be filled following the election. Could it even be the SPD politician Schulz?

What is certain is that Angela Merkel could really use the help of the German Social Democrats if she wants to push ahead with her agenda in Europe.

Translated from the German by Anton Baer

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Libor Scandals: ‘Manipulation deals cost European banks billions’
30 October 2013PresseuropDer Standard Der Standard, 30 October 2013
“Major European banks are paying dearly for their alleged participation in the manipulation of interest and exchange rates,” reports Der Standard.

On October 29, in the Netherlands Rabobank has announced that it has reached an agreement with US authorities, under the terms of which it will pay a fine of €774m for its involvement in the manipulation of the Libor and Euribor interest rates.

In response to the prospect of similar fines, Germany’s Deutsche Bank has set aside €4bn and Swiss bank UBS, which has already been forced to pay out more than €1bn, has prepared a provision of €500m, explains the daily. All of these sums will weigh heavily on the banks’ balance sheets.

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By Ambrose Evans-Pritchard

9:07PM GMT 30 Oct 2013



Comments324 Comments





Italy remains stuck in depression. We now know that the spectacular spike in consumer confidence in June was a ruse, a white lie to talk up prospects and hold back the debt-deflation tide.


Hedge funds, banks and investors from around the world poured into Italian assets without reading the fine print. They made quick money, of course. Yields on 10-year Italian bonds fell 40 basis points within a week. Milan's MIB index of stock touched bottom near 14,860 just before the release. It then surged, reaching 19,496 this week.





The euphoria was understandable. The economy component of the confidence index jumped miraculously from 71.7 to 91.6 in one month. If Italy really was turning the corner so dramatically after a peak-to-trough fall in GDP of 9pc and two years of double-dip recession, it would indeed mean that Europe's crisis was behind us. We could breathe a little easier about Italy's €2 trillion debt, the world's largest after the US and Japan.


In reality, Italy's data agency Istat changed the survey. It looked at a different "socio-demographic structure" and "sample structure". Istat quietly revealed some details a month later, but only a handful of Italian economists were paying attention. "They played with the data and I am shocked," said one.


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He described the episode as an attempt to talk up momentum and lift growth to "escape velocity". Italy's authorities - in thrall to the Bocconi Boys, free-marketeers from Milan's Bocconi University - give great weight to theories that confidence alone can overpower fiscal austerity, an overvalued currency and tight money.

And money is certainly tight. Italian M3 has contracted over the past five months (falling from €1.329 trillion to €1.312 trillion). Simon Ward from Henderson Global Investors says his gauge - six-month real M1 - has rolled over. "Italy is flashing red," he said.

It is true that market confidence can grease the economic wheels in certain circumstances. But to rely on morale alone to pull an economy out of full-blown depression is like a bayonet charge into Krupp guns, the St Cyr spirit of "elan vital" in 1914, so brave and yet so futile. Nobel laureate Paul Krugman derides this sub-branch of economics as the "confidence fairy".

The hard data catch up soon enough in any case. Industrial production fell 4.4pc in August, and new orders fell 6.8pc. The Bank of Italy said credit to non-financial firms fell 4.6pc in August (year-on-year), worse than in July. Business confidence fell back to 79.3 in September and is now at post-Lehman crisis levels. Istat said this week that the economy is weaker than previously thought. GDP will shrink yet again in the third quarter.



"The recession has flattened, that is all," says Antonio Guglielmi from Mediobanca. "The debt-to-GDP ratio has risen by 15 percentage points [to 133pc] over the past 15 months because there is no growth. It is all because of the effects of austerity and the fiscal multiiplier. We are making the same mistake they made in Greece."

Mr Guglielmi said the government has pencilled in growth of 1pc next year, rising to 1.7pc, 1.8pc and 1.9pc thereafter. It is make-believe. (Citigroup said it would be closer to zero all way to 2017). "We barely grew 1pc a year during the best years of the global boom. How are we going to do this now in much harder times?"

Professor Giuseppe Ragusa from Rome's Luiss Guido Carli University said the government is clutching at straws, hoping that a world recovery will somehow lift Italy out of the slump. "They are not doing anything. The policy is completely passive but it is not going to work because we are in a debt trap, and unlike Spain we have continued to lose labour competitiveness against Germany over the past three or four years."

Prof Ragusa calculates that the debt will jump by another 5pc of GDP each year even if growth returns to pre-crisis level of around 0.6pc. This would send the ratio spiralling up to nearly 150pc, beyond the point of no return for a country with no sovereign currency .

He said the European Central Bank's rescue policies have induced the Italian treasury to borrow on short maturities, since the ECB-backstop only covers debt up to three years. This has cut the average debt maturity from 7.6 to 6.4 years, storing up ever greater "roll-over" risk. "I fear that all of this is going to be tested by the first quarter of next year," he said.



The exchange rate is bringing matters to a head. The euro has has risen almost 8pc against the dollar - and therefore the Chinese yuan - since June. This is a bizarre state of affairs for a region mired in record unemployment and likely to trail the rest of world yet again next year by wide margin, according to the EU authorities themselves.

Austria's ECB governor Ewald Nowotny says there is little Frankfurt can about this. Yet the Bank of Japan has just driven down the yen some 22pc by embarking on a massive reflation strategy. The Swiss National Bank is holding the franc at €1.20, vowing to defend it against the entire world. It is very easy to weaken a currency. What Mr Nowotny means is that the EMU is politically incapable of mounting such a campaign.

For Italy this is excruciating. Mediobanca says Italy economy's has 67pc "gearing" to the exchange rate due to the kinds of products it makes (price sensitive), compared with 40pc for Germany. Its latest report traces how Italy's productivity growth and competitiveness has faltered each time it pegged its currency to Germany over the past 40 years, and how it roared back with each devaluation.

The report said EMU had allowed a "Chinese-like" Germany to lock in trade advantage, accumulating a surplus of €1.4 trillion, or 50pc of German GDP, and that this amounts to "a dangerous ‘beggar-thy-neighbour’ zero-sum game for the eurozone".

It said Italy entered a "negative productivity spiral" only after it fixed the pre-EMU exchange rates in 1996. Refusing to acknowledge this "means denying the evidence". It accused the EU authorities of forcing the entire burden of post-crisis adjustment on the weaker Club Med states, of refusing to see the risk of a "negative recessionary spiral" in the South, or to see that these countries cannot stabilise their debt trajectories with a minimum of growth. The North must "meet the periphery halfway".

The report said the risk is a repetition of Argentina's fate as the dollar-peg fell apart in 2001. It cited the so-called "Frenkel Cycle" as it moves into its final seventh phase of "collapse", the brutal denouement of every fixed-exchange rate system and every monetary union that fails to meet the four basic conditions of an optimal currency area. These are labour mobility across borders, wage and price flexibility, fiscal transfers and aligned business cycles. The euro area meets none of them.



Mediobanca is Italy's second biggest bank. It does not call for a withdrawal from EMU and a return to the lira, stocially accepting that discipline is the only way forward. Yet the logic of their Magnum Opus is that Italy would be far better off outside EMU, and the implicit threat is that Italy will have to do so if the Northern creditor powers persist with their destructive regime.

Italy is not a basket case. Its net international investment position is -30pc of GDP, compared with -92pc for Spain, and -100pc for Portugal. It has very low mortgage debt. Their median wealth is €173,500, making them four times richer than Germans at €51,400.

It is the most virtuous of the big EMU states, with a primary surplus of 2.5pc of GDP. This of course means it can leave the euro whenever it wants without a funding crisis, and it is big enough to weather the shock.

Everything comes down to the national mood in the end. There was a time when the cause of Europe was unquestioned in Italy, but the long slump has taken its toll. An Ipsos poll this week found that a record 74pc of Italians are dissatisfied with the euro. It is a loveless marriage now. One more spat with Berlin and it will turn acrid.

Europe's leaders can stop the rot at any time by embarking on a reflation strategy that entirely changes the contours of the crisis and lifts the South off the reefs. But if they do not do so - and there is no sign yet - Italians will be forced to take back their own sovereign destin

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European Union: The EU would be better led by Angela Merkel and Christine Lagarde
31 October 2013Financial Times London Tools
Shared 33 times in 10 languagesSend
Christine Lagarde and Angela Merkel at the Federal Chancellery in Berlin. October 2011.
Christine Lagarde and Angela Merkel at the Federal Chancellery in Berlin. October 2011.

Bloomberg via Getty Images Second-best seems good enough when it comes to deciding on Europe’s top jobs, says Tony Barber.

Tony Barber
Imagine an EU led, 12 months from now, by Angela Merkel and Christine Lagarde That would catch the world’s attention. Is Europe at last getting its act together, the Americans and Asians might wonder.

Regrettably, it will not happen. Under the EU’s eccentric methods of allocating its top jobs, it cannot happen. With their muddy and contradictory notions of Europe’s international role, it is a fair bet the EU’s 28 national leaders would not even want it to happen.

What a wasted opportunity. In Ms Merkel, fresh from her victory in Germany’s parliamentary elections, and relishing her responsibilities as the pivotal decision maker in the eurozone crisis, there is a supremely well-qualified candidate to replace Herman Van Rompuy as president of the European Council, which groups the EU’s heads of government.

In Ms Lagarde, managing director of the International Monetary Fund and a former French finance minister, there is an excellent choice to fill the shoes of José Manuel Barroso as president of the European Commission, the EU’s executive arm.

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Politique La vie des 28 EU institutions: Angela Merkel plots European reform
29 octobre 2013Der Spiegel Hambourg Outils
Partagé 321 fois en 10 languesEnvoyer
Patrick Chappatte The German chancellor finally seems ready to take control of – and responsibility for – Europe. But as her proposed reforms are in line with the Social Democrats, she needs an ally: the President of the European Parliament, Martin Schulz. Extraits.

Christoph Pauly | Christian Reiermann | Michael Sauga | Peter Müller | Christoph Schult
It was during dinner in the Brussels Council building. Dessert had just been served, shortly before midnight, when Angela Merkel did what leaders in Europe have been asking her to do for months: show a desire to lead. The Eurozone countries would have to become more competitive, the Chancellor demanded. The previous inspections of the Commission had not been enough; from now on, there would have to be “a tougher commitment”. The “social dimension”, however, should be not ignored, the CDU Chief had realised. Europe needs a “qualitative leap”.

Merkel is determined to become the Chancellor of Europe in her third term of office. In the recent election the Germans gave her more votes than ever before; she is “the most important politician on the continent," according to The Economist, and she will soon be governing in Germany in a coalition with the second-largest party. It’s a propitious starting-line, Merkel is convinced, to push on with the project that will be her political legacy: the reform of the European Union. Indeed, the danger that the common currency will quickly collapse has been banished for the time being, and the Eurozone economy is showing renewed signs of life after a long dark spell. All the same, Merkel knows that the crisis can flare up again at any time. From France to Italy, the Euro-sceptic parties have the wind in their sails, the reforms in many of the indebted countries are faltering, and banks are hesitating to give out loans.

And so the Chancellor is preparing an offensive for European reform, and she has also grasped how the project can be moved ahead: together with the likely new coalition partners, the SPD, she wants her policy on Europe to be given a more social gloss. That gloss centres on programmes to combat youth unemployment and tax evasion and a Eurozone budget to kick-start growth. In exchange, Brussels should get more powers to oversee the financial and economic policies of the member states.

Mutti’s masterplan
Merkel intends to pursue her controversial doctrine in social-democratic garb, and the most important ally in the Chancellor's Office has already been picked outMoney for reform: Merkel intends to pursue her controversial doctrine in social-democratic garb, and the most important ally in the Chancellor's Office has already been picked out. Merkel wants to push her projects through in a duo with EU Parliament President Martin Schulz, who not only heads the SPD delegation in the coalition negotiations on European policy but has his eye on his next career move. First, he wants to be the lead candidate of the Socialists for the European elections in May. Then, provided he marshals enough votes, he intends to go after the presidency of the powerful Commission in Brussels. Merkel would finally be free of the man she once sponsored, the now unpopular incumbent José Manuel Barroso, and in tandem with Schulz she could get reforms for growth and competition underway.

The line of the new Berlin government is predictable: no Eurobonds, but more money for growth programmes and additional powers of inspection for Brussels. To push through with the new plan, Merkel, amiably referred to as “Mutti” in her own circles, has chosen a new favourite in the President of the EU Parliament – Schulz. Publicly, the SPD politician says “Angela Merkel is not my best friend.” When the microphones are turned off, though, the two speak of each other in tones of great respect.

Schulz regularly meets the German Chancellor in Berlin. They exchange SMS messages and hammer out compromises, most recently over the supplementary budget for the EU. Both, however, are against everything being regulated at the EU level, and they largely agree on the path towards to a stronger currency and economic union.

German ‘Schulz-pah’
For the Grand Coalition with the Social Democrats, Schulz would be an important link. He is close friends with SPD Chief Sigmar Gabriel, and Merkel can use him in Europe as well. The coming year’s elections to the European Parliament will be the first to be held under the terms of the Treaty of Lisbon. Consequently, the result must be taken into account in the nominations for Commission President put forward by the 28 leaders of the member states.

The 57-year-old Schulz has a good chance of landing the job, as over the years he has been assiduously acquiring allies, and he is counting on wide-ranging support in the European Parliament and the European Council, far beyond the ranks of his own Social Democratic Party. Merkel knows this, and she could get on well with Martin Schulz as the President of the Commission – not least because the SPD politician enjoys the confidence of French President François Hollande, which could help get the stuttering German-French motor back up and running.

Merkel has just one problem: as Chairman of the CDU, she cannot openly support an SPD candidateMerkel has just one problem: as Chairman of the CDU, she cannot openly support an SPD candidate. In the European election campaigns, the two future coalition partners, the CDU and the SPD, will therefore pull in separate directions. Merkel, however, is striving to avoid stirring up any unnecessary confrontations with the Social Democrats. Last Thursday, at a meeting of the heads of the conservative European People's Party held to discuss the upcoming European elections, many argued that they should send a conservative candidate of their own to run against Schulz. Merkel, however, together with EU Council President Herman Van Rompuy, expressed great concern. The Chancellor has yet to declare her favourite for the influential post of President of the Commission to be filled following the election. Could it even be the SPD politician Schulz?

What is certain is that Angela Merkel could really use the help of the German Social Democrats if she wants to push ahead with her agenda in Europe.

Traduction : Anton Baer

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Pavlos lives, crush the fascists". Event in memory of Pavlos Fyssas in Athens on September 25

AFP In the early hours of September 18, Greek rapper Pavlos Fyssas was murdered by a Golden Dawn activist. It was one killing too many, which heralded the fall of the neo-Nazi party, whose implicit collusion with the state and ties with powerful figures are now coming to light. Excerpts.

Maria Malagardis
The photos on the living-room sideboard form a small shrine in memory of a lost son: Pavlos at his sister’s wedding, Pavlos in concert, Pavlos as a teenager... He was a fine looking boy with immense dark eyes, and a nice smile. “Above all he had a big heart. Everyone took to him immediately,” murmurs his mother Magda, who appears hypnotised by these images of happy times. Behind her, Pavlos’ father, Panagiotis, remains immured in grief and does not respond.

Two knife wounds to the heart transformed their son into a symbol for the descent into criminality of far right party Golden Dawn, a movement which entered the Greek parliament for the first time in 2012. Thirty-four year-old rapper Pavlos Fyssas would certainly have preferred to rise to fame with his music, but he became front-page news as a martyr: stabbed in the early hours of September 18 by activists from the political group which has since been widely characterised as neo-Nazi. In just a few days, the death of a young man in a working class suburb on the night of a football match triggered a political earthquake and became an affair of state. For the first time since the restoration of democracy in 1974, the leadership of a party represented in parliament faced very serious criminal charges.

In the wake of the crime, many people remarked on the role played by “one killing too many,” which came as a wake-up call for public opinion and state authorities. Unlike the previous and almost exclusively immigrant victims of Golden Dawn, Pavlos Fyssas was Greek. However, this observation begs another question: what brought Golden Dawn, a party which claimed to be fiercely nationalist that was exclusively open to “native born Greeks,” to take a step too far with the public murder of a young Greek? Who guided the hand of the killer: an otherwise unremarkable 45-year-old lorry driver and father of two, who had everything to lose from his involvement in the crime?

Spoiling for a fight
The truth is that the assassination of Pavlos might very well have gone unnoticed, and the investigation of what could have been seen as a local murder might have been quickly abandoned. But on the night of the crime, thanks to the unexpected reaction of policewoman, this scenario did not play out.

On September 17, Pavlos met with his girlfriend, Chryssa, and a few friends to watch the match between Olympiacos and Paris Saint-Germain. Like all of the young people in the Piraeus area, Pavlos was an ardent Olympiacos supporter ready to howl at every missed penalty. “They arrived just before the start of the game. I remember very well because I knew Pavlos a little, even though I didn’t know he was a rapper. For me, he was just another youngster in the neighbourhood,” explains the owner of the Coralie Café, a Keratsini bar which has a covered terrace with a large flat screen TV. “Nothing happened during the game: Pavlos and his gang were drinking beer, there was a lively atmosphere, as there always is when Olympiacos are playing. But no misbehaviour.” The bar owner says he didn’t notice two or three men (there are different versions of the story) who, according to some witnesses, sent text messages while watching Pavlos during the match. “It was only at the end of the evening, when everyone was leaving, that I saw the gang, which appeared out of nowhere on the other side of the street,” says the owner.

Around 20 men who were already spoiling for a fight started shouting at the rapper and his friends, who were still in the street outsideAround 20 men who were already spoiling for a fight started shouting at the rapper and his friends, who were still in the street outside. The exchange quickly became heated. Three men broke away from the group and started pushing Pavlos. Chryssa, his girlfriend who had stayed out of all of this, became alarmed. She tried in vain to alert a group of police, who remained curiously passive while observing the scene from distance. She was still begging them to do something when a car suddenly drove up at high speed, and stopped just in front of the mob. A man got out, grabbed Pavlos as if he was going to kiss him and stabbed him twice in the heart. Before he collapsed, the young man just had time to point out his murderer to the police who had finally moved in.

It was at that moment, breaking with the inertia of her colleagues, that a policewoman suddenly pulled out her weapon, and aimed it at the murderer, who seemed so certain of his impunity that he stayed at the scene in his car, after having thrown his knife in the gutter. “Were it not for the courage of the policewoman who arrested the killer, we would still be speculating about the cause of a murder which would never have been seen as political. And some people still argue that it was just an after-match brawl that went wrong,” points out Pavlos Tsimas, a celebrated journalist for Mega TV, the country’s primary private channel.

Political dimension
Initially, this was the predominant view of the facts: a football related fight between suburban youths. But investigators quickly discovered that the man arrested for the murder, Georges Roupakias, was a member of Golden Dawn. And examination of his mobile phone revealed that he had called several party officials just before and just after the crime. A card-carrying member for just one year, he was on the party payroll and appeared in several photos of gatherings organised by the neo-Nazis — notwithstanding the denials from the leaders of Golden Dawn, who initially claimed they did not know him. Thanks to evidence compiled by the Greek secret service, which had monitored their communications for quite some time, the party leaders were soon arrested too.

The police already had enough evidence to put party officials behind bars… Why didn’t they take action earlier?It appears there is some positive outcome. But some commentators have been disturbed by the fact that the police already had enough evidence to put party officials behind bars… Why didn’t they take action earlier? “Golden Dawn played a very convenient role. The party rose to popularity on the back of claims that it was "anti-establishment" and opposed to a traditional political class that the entire country detested. But this was only window dressing. In parliament, Golden Dawn always voted with the government: for the layoffs, privatisations, and wage cuts.

The same logic applied for the attacks on foreigners, which helped to justify and minimise the impact of anti-immigration policies. By night, Golden Dawn orchestrated the pogroms; by day, the government encouraged the roundup and imprisonment of migrants in camps with inhuman living conditions,” explains Dimitri Zotas, a lawyer who represents several of the migrant victims of the neo-Nazi party, in his office in downtown Athens. “The problem was its creators finally lost control of Golden Dawn. Buoyed by their rising popularity, which was close to 15 per cent before Pavlos was murdered, and never troubled about their attacks on immigrants, the neo-Nazis felt they were invulnerable. They believed that they could even further, maybe even too far.”

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That's all Greece needs when the Country is in such a parlous state.

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Be careful what you wish for. The euro’s founding fathers dreamed of a superpower currency that could stand toe-to-toe with the dollar, freeing Europe from US monetary hegemony.


France’s Charles de Gaulle liked to grumble that America enjoyed an “exorbitant privilege” as holder of the world’s reserve currency, able to get away with economic murder. Now they have such a trophy themselves, only to discover what Washington learned the hard way: it is an exorbitant burden, and at times a curse.


China’s central bank has been buying fistfuls of euros as it accumulates a world record $3.7 trillion in foreign reserves, and its motives are not entirely friendly. So have the central banks of Russia, Brazil, and the Mid-East oil sheikdoms, all aiming to cut reliance on the US dollar, part of a $9 trillion build-up in reserves that has flooded into the euro with tidal force.


In China’s case, the government is deliberately driving down the yuan to capture export share. You could say China is exporting excess manufacturing capacity to Europe, or in plain talk exporting unemployment.


This is why the euro has long been too strong for its own good, though there are many other reasons. By forcing banks to raise capital buffers too quickly, in a pro-cyclical fashion at the wrong moment, the EU authorities are unwittingly causing many of them to sell assets across the world. It is hard to find figures on repatriation flows but Morgan Stanley estimates that the sums have been large enough to drive the exchange rate.


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The euro surged a further 9pc against the dollar from June to early October before hitting the wall this week. It has risen by 30pc against the Japanese yen in a year. This is a bizarre state of affairs for a currency bloc struggling to emerge from recession, badly lagging the rest of the world. Weak prospects normally mean a weak currency, but there is nothing normal about the mechanisms of Europe’s monetary union.



How the euro has performed against the yen in recent years

The euro exchange rate is too high for two thirds of the euro states that use it, and cripplingly high for a third of them. It is pushing Europe’s crisis economies into incipient 1930s deflation, making it almost impossible for Italy, Spain, and Portugal to dig their way out of debt traps. It is partly why unemployment keeps going up, reaching an all-time high of 12.2pc in September -- 26.6pc in Spain, and over 22pc in Italy if properly counted.

Note that unemployment in the US and the Eurozone were similar during the Lehman crisis. Both sides of the Atlantic had much the same credit shock in 2008-2009, yet the aftermath speaks of two different destinies. The Americans printed money a l’outrance, and the jobless rate has fallen steadily to 7.2pc. The Europeans let money atrophy, and have been paying the price ever since. Such is the power of central bank stimulus in a tight corner.



Eurozone (blue line) versus US unemployment

Some insist that the euro is not overvalued, citing the bloc's current account surplus, €53bn over the last quarter and heading for €200bn a year. But as the US Treasury said in its blistering critique on Thursday, this is largely due to crushed internal demand (austerity) and the structural "export dependence" of the German economy.

Washington said Germany now has a bigger surplus in absolute terms than China, reaching 7pc of GDP earlier this year. This has "hampered rebalancing" in the eurozone at a time when the South is being forced to slash demand. “The net result has been a deflationary bias for the euro area, as well as for the world economy,” it said.

"In 2012, the euro area, in aggregate undertook one of the most aggressive fiscal consolidations of the advanced economies despite having the smallest cyclically-adjusted fiscal deficits and weak growth prospects," it said. The US Treasury is being polite. What they really mean is that the pre-Keynesian, pre-monetarist, zero-sum Malthusians running EMU policy are a danger to the world.

Europe may not be a currency manipulator but it is most certainly a demand manipulator. This can be worse, even if Europe itself is the chief victim of its economic crime.

The IMF joined the fray on Friday, calling on Germany to cut is surplus to an “appropriate rate”. Germans tend to react with consternation to such criticism, asking why they are rebuked for being good exporters. But this is our old friend the "household fallacy", as if economies should somehow resemble hard-working thrifty families. The word used in the German political and media debate for fiscal cuts is "Sparen", meaning to save. The confusion is embedded in the language, and therefore by the 'Sapir–Whorf hypothesis' in German thought as well.

Whenever a country has a chronic surplus, there are always deep structural reasons. The legal and commercial system is invariably geared towards generating such surpluses, and over time this comes at the expense of workers in other countries. You don't have to scratch far below the surface in Germany to find such structures. Why do German households have to pay a premium on their electricity bills to cross-subsidise much cheaper energy for industrial exporters? Why is it even allowed under global trade rules? It obviously compresses internal demand.

Normally, we all turn a blind eye. But in a deformed world of deficient demand and excess capacity, a trade depression of sorts, such surpluses are a very sore subject indeed. This is what the 1930s was all about. Trade disputes were behind much of the conflict leading up to World War Two, especially in the Far East.

Let us hope that Europe is at last waking up to the dangers of its contraction policies after last week's shock, a fall in EMU-wide inflation for October to 0.7pc. This is worse than it looks. Once austerity taxes are stripped out, prices have been falling in ten of Euroland’s 17 states over the last four months, including Italy, France, and Spain. They are one shock away from outright deflation

France’s industry minister Arnaud Montebourg asks why Europe is permitting this euro asphyxiation, alone in refusing to protect its societies while rivals steal a march. The US Federal Reserve and the Bank of England have averted deflation traps by printing money, nudging down their currencies in process. The Bank of Japan has torn up the rule book altogether, and quite rightly so. The Swiss have quietly trumped them all, boosting the central bank balance sheet to 80pc of GDP to cap the franc.

“Every 10pc rise in the euro costs France 150,000 jobs,"said Montebourg. "Britain, the US, Japan, all have a strategy of monetary stimulus, but in the EU we have nothing but hard money and hard budgets. The currency doesn’t belong to bankers, and it doesn’t belong to Germany, it belongs to all members of the eurozone, and we have something to say about this,”

Is that a threat to invoke Article 219 of the Lisbon Treaty giving EMU ministers the final say over the exchange rate, a power that lets them dictate monetary policy by the back-door, provided the Commission plays ball?

A Deutsche Bank study said the euro “pain threshold” for Germany is $1.79 to the dollar. It is $1.24 for France, and $1.17 for Italy, a staggering difference. The euro ended last week at $1.35. This means Germany is sitting pretty, and it is Berlin that dominates the policy machinery. It has not felt much pain, though as you can see in the chart, it has not done that well wither. Its industrial output is still below its 2008 peak.



German industrial output

Meanwhile Italy is screaming with pain, its industrial output 26pc below the peak, a much bigger fall than during the Great Depression. I was in the room with a panel of Italian businessmen at Lake Como in September when Italy’s EU commissioner Antonio Tajani warned of “a systemic industrial massacre” and demanded immediate action to force down the euro. The hall erupted in applause.



Italian industrial output

The North-South split has many causes needless to say. Germany sells high-tech machines and prestige cars with a fat profit margin. They are not sensitive to price. Southern Europe competes lower down the chain, often in mass markets, against China, Turkey, or Poland.

Yet it is also because Germany screwed down wages in the early years of EMU -- when the world was booming, and such a feat was possible -- gaining 25pc in labour cost competitiveness against Club Med. Yes, Germany did carry out its famous Hartz IV labour reforms, but this tale is overblown. The gains were largely the result of an “internal devaluation” within the euro. Whatever the original intentions, it became a beggar-thy-neighbour policy over time.

How this happened is by now an old story. But the consequences are very much alive and toxic, so toxic that Francois Heisbourg, French head of the International Institute for Strategic Studies, is calling for the euro to be “put to sleep” in order to save the European Project. “We must face the reality that the EU itself is now threatened by the euro,” he said.

Mr Heisbourg is ardently pro-European. His point is that bitterly conflicting narratives of the crisis are emerging, pitting creditor and deficit states against each other. He compares this to the birth of black legends after World War One, when twisted views fed an ideological backlash. He fears it will end in “a nervous break-down and an uncontrolled disintegration of the euro ”.

This year’s burst of euro strength has baked a lot of future damage into the pie and brought that crisis closer. The European Central Bank has the apparatus to head off the deflation risk and force the euro back down at any time. All it needs to do is to end its contraction policies, meet its own 2pc inflation and 4.5pc M3 money targets, and fulfil its primary EU treaty obligation to promote "balanced economic growth", "employment", and "general interest" of the Union.

In my view, ECB is in breach of the treaties. It should be taken to the European Court. Its governors should be called to account by the European Parliament. If the Parliament cannot rise to the greatest and most urgent challenge since its creation in 1979, then we might as well dynamite the Hemicyle in Strasbourg and replace it with a monument to the millions of blighted lives in Mediterranean Europe.

The Latin governors and those of other states in various degrees of distress -- making up most of the eurozone population -- have so far been acting like the rabbits in the headlights, frozen as the juggernaut hurtles down upon them, unwilling to say boo to the German Bundesbank. We will find out this week if the ECB’s cowed majority is at last willing to take charge of monetary policy and act in the "general interest" of the Union.

Watching from the sidelines, you want to tear your hair out, whatever your views on the European Project. The debt-deflation crisis in Southern Europe could be so greatly mitigated by lifting EMU inflation to 2pc. A littler higher would be even better.

"We all know what has to be done, inflation in the periphery should rise to 1pc, and Germany should have a few years of 3pc inflation. That would change everything. It makes me angry that this is not happening," said an ex-ECB governor last week. Nothing could be easier, yet nothing is done, and the reasons are entirely political.

Let us praise Europe for carrying the exorbitant burden of reserve currency status. It has not intervened for trade advantage. But the effects of this good behaviour have been overwhelmed by the collateral ruin. The damage done from the triple shocks of fiscal, monetary, and exchange rate tightening is enormous, and it is Southern Europe that is bearing the full brunt.

We can only live in hope that the great, gallant, and generous nation of France will stop moaning, get a grip, assert leadership, and restore basic sanity to European affairs before it is too late. Only Paris has the moral command to pull this off.

Would the late Charles de Gaulle have stood so oddly passive if he were at the Elysee today? He may not have understood currencies, but surely he would have seen straight through the Maginot Line of EMU fiscal fortresses.

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European Elections 2014: Politicising the Commission is a risky idea
4 November 2013Le Monde Paris Tools
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Kazanevski European Parliament President Martin Schulz wants to succeed José Manuel Barroso at the head of the Commission. He has based his campaign on the idea that job should be handed to the leader of the party that wins the European elections – an idea that does not have everyone's backing.

Philippe Ricard
It’s hard to say whether Martin Schulz has the slightest chance of becoming President of the European Commission in the wake of the European elections in May 2014 [he announced his candidature on November 3]. But he is making a creed out of it. For the President of the European Parliament, the appointment of the successor to José Manuel Barroso must be “po-lit-i-cised”.

Letting the different parties personalise the campaign, the German Social Democrat is sure, would be the best way to make up for some of the democratic deficit that has seen so much criticism flung at the European Union. To choose a leader, or “top candidate”, capable of fighting in the four corners of the continent for a programme backed by his political grouping would, according to the “Mr Europe” of the SPD, turn out to be the panacea to try to appeal to voters at a time when the extremist parties are likely to make strong showings.

Putting his words into action, Mr Schulz has not waited long to engage in battle on behalf of the Socialists, for whom, if there are no surprises, he should be carrying the flag against the right and the populists of every hue. The Greens, which Daniel Cohn-Bendit is about to abandon, are also part of this logic. They are even trying to organise primaries on the Internet by the end of the year; to carry them out, José Bové of France has linked up with a German ecologist that he crossed paths with more than 30 years ago on the Larzac plateau. Meanwhile the radical left is contemplating choosing as their poster boy the Greek Alexis Tsipras, basher of austerity and the “Men in Black” of the troika sent to Greece by the moneylenders. Among the liberals, several candidates have been lined up, including Olli Rehn, Commissioner for Economic Affairs, and Guy Verhofstadt, one of the federalist figures of the outgoing Parliament.

Unpredictable future
In the European People's Party (EPP), the biggest group in the outgoing Parliament, there is some hesitation. Michel Barnier, the Commissioner for the Internal Market, and Viviane Reding, his colleague in Justice, would both love to receive their group’s blessing. For one as for the other, it would be difficult for the EPP group not to play the game of other European parties, by refusing to put forward a leader to head out on the campaign trail. On the right, however, there will be no decision about the idea before December. And the conservative candidate would, at best, be appointed only in March, a scant two months before the European elections – hence the conflicting opinions on what many regard as an “idea that looks good only at first glance."

Nothing says that the dynamic hoped for by Martin Schulz will run the course he expectsNothing says that the dynamic hoped for by Martin Schulz will run the course he expects. Certainly, on paper, the European Parliament is expected to elect the president of the European Commission, although it will do that based on a proposal emerging from the heads of state and governments when they meet within the European Council. The latter, though, and starting with Angela Merkel, have not agreed to share their own prerogative. Moreover, they fear losing the upper hand to the European Parliament.

From the ranks of the EPP himself, Herman Van Rompuy, the President of the European Council, misses no opportunity to criticise the parliamentary approach defended by Martin Schulz and a number of MEPs. For Van Rompuy it is up to the European Council to oversee the succession of José Manuel Barroso. Not in the running for any post himself, the former Prime Minister of Belgium is worried about a clash between institutions should one personality – Mr Schulz, for example – be able to put together a majority in the next Parliament but not in the European Council. Or vice versa.

Divided opinion
The “parliamentarisation” of European political life is far from meeting with a consensusThe “parliamentarisation” of European political life is far from meeting with a consensus. Should we further politicise, as Martin Schulz wishes, an institution such as the Commission, which is meant to work in the general interest, above partisan considerations? It’s not so clear. The European “Executive” is certainly in a paradoxical situation: marginalised by the chaotic management of the crisis by the Eurozone governments and the European Central Bank, at the same time it has gained new powers to better control the member states. The election of its chairman at the conclusion of a pan-European campaign could, suggest the backers of this idea, restore the legitimacy of an institution battered as never before.

However, the College of Commissioners is already a multi-party team, based on the balance of power of the forces in Europe today and on the political majorities in each of the member states. And it is meant to operate in the strictest neutrality. If overly politicised, its independence and its impartiality could not fail to draw serious criticism.

It is impossible to imagine a leftist government in France accepting unblinkingly the recommendations of a right-leaning Commission. That is already the case, and might be even more so if the dream of Martin Schulz, or of Michel Barnier, were to become a reality.

Translated from the French by Anton Baer

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Student Funding: ‘Education Ministry cancels thousands of Erasmus scholarships in mid-year’
5 November 2013PresseuropEl País El País, 5 November 2013
Funding for Erasmus university scholarships will be limited to Spanish students who already benefit from a scholarship for financial reasons, the Spanish Education Ministry announced on October 29.

This is "an unpleasant surprise" for the 40,000 Spanish students who study in another EU country thanks to an Erasmus scholarship, notes Spanish daily El País, especially since "the academic year has already begun".

These government funds, of between €100 and €180, are one of the three pillars of financing for Erasmus scholarships in Spain in conjunction with EU and regional funds, adds the paper.

Spain is the EU country that sends the greatest number of Erasmus students abroad as well as the country that welcomes the most foreign Erasmus students.

The government budget allocation for financial aid to students abroad has shrunk by 71 per cent since 2011, explains El País.

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