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 British taxpayers liable for £800m of misspent EU funds

British taxpayers are liable for over £800 million of misspent EU funds as Brussels error rate increases by 23 per cent





British taxpayers are liable for over £800 million of misspent EU funds as Brussels error rate increases by 23 per cent

Photo: EPA







Bruno Waterfield
By  Bruno Waterfield, Brussels

4:02PM GMT 05 Nov 2013

 

Comments798 Comments





The European Union wasted almost £6 billion last year - including £800 million from British taxpayers - on fraudulent, illegal or ineligible spending projects, official auditors have found.


At a time of unprecedented European-wide austerity, the EU mis-spent almost 5 per cent of its budget in 2012 on projects that should never have received any of its money.

his so-cTalled ‘error rate’ in Brussels spending was up from 3.9 per cent the previous year, according to the auditors. It meant that for the 19th year in a row, they refused to give the EU’s accounts a clean bill of health.


EU bureaucrats were accused of “shambolic” mismanagement yesterday in the wake of the report, with Conservative MEPs suggesting it appeared as though Brussels simply had a licence to Carry on Squandering’.


The European Court Auditors (ECA) found that 4.8 per cent of the EU’s £117 billion budget in 2012 - £5.7 billion - was spent in “error”, on projects that were either tainted by fraud or ineligible for grants under Brussels’ rules. This meant British taxpayers saw up to £832 million of their contributions to the EU wasted at a time of deep public spending cuts domestically.


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The EU spending watchdog found that supervision and control of Brussels spending was only “partially effective in ensuring the legality and regularity of payments underlying the accounts”.

“All policy groups covering operational expenditure are materially affected by error,” the auditors concluded.

“For these reasons it is the ECA’s opinion that payments underlying the accounts are materially affected by error.”

A British Government spokesman yesterday described the findings as “unacceptable and undermining the credibility of EU spending”.

“When countries across Europe are taking difficult decisions to tackle their deficits, Europe’s taxpayers need to have confidence that every effort is being made to improve the way EU spending is managed,” she said.

Included among the “errors” discovered by the auditors was a Polish landowner paid almost £80,000 a year to maintain 350 acres of grassland to help preserve uncut grassland for the protection of endangered bird species. In fact, the farmer had only met the agreed funding requirements for 14 per cent of the land and the payments.

“Similar cases of non-compliance with agri-environment requirements were detected in the Czech Republic, Germany , Greece, France and the United Kingdom,” found the auditors.

The EU’s regional policy spending had an error rate of 6.8 per cent, or £2.4 billion, of the £34 billionn spent in 2012. Most ineligible funding followed a failure to follow EU laws on public procurement and issuing of contracts.

The error rate in “external relations, aid and enlargement” spending overseen by Baroness Ashton, the EU foreign minister, totalled 3.3 per cent, or £169 million of £5 billion in spending.

In one case, the European Commission paid £14 million for a programme to support female teachers in rural Bangladesh but over half the money was given with “no documentation”.

Philip Bradbourn MEP, the Conservative spokesman on EU budgetary control, described the latest audit as “another year, another story of lax monitoring and shambolic control”.

“If you found misappropriation and misspending on this scale in a commercial business — or in a properly-accountable public administration — there would be sackings all round. In Brussels, it’s ’Carry on Squandering’,” he said.

Vitor Caldeira, the president of the EU auditors, warned that poor financial planning by the European Commission for “will put added pressure on EU cash flows and may increase the risk of error over the next few years”.

“Europe’s citizens have a right to know what their money is being spent on and whether it is being used properly,” he said.

Meanwhile, EU funds worth £418 million intended to help rebuild the Italian city of L’Aquila and the Abruzzo region after an 2009 earthquake have been mired in suspected corruption, a separate European Parliament report has found.

Serious allegations have surfaced that part of the money spent on building new accommodation for the earthquake’s victims was paid to companies with “direct or indirect ties” to organised crime because it was paid in breach of public procurement rules.

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By Ambrose Evans-Pritchard ...The Telegraph

7:28PM GMT 05 Nov 2013



Comments192 Comments





The European Commission has warned Germany it could face disciplinary action for running excess trade surpluses at the expense of EU partners, joining the US Treasury in criticising Berlin for doing too little to help lift Europe out of its slump.


“We will discuss this question next week,” said EU economics chief Olli Rehn after releasing the commission’s Autumn report. The text said Germany’s current account surplus will remain far above tolerable levels into the middle of the decade.


Mr Rehn said Berlin had been told by EU leaders at a summit in June that Germany has a duty to help boost demand and “create sustained conditions” for German wage rises. This would help rebalance the EMU system and lift pressure off the crisis states in the South.


The report said Germany’s surplus will narrow slightly from 7pc of GDP this year to 6.6pc in 2014 and 6.4pc in 2015, but this still breaches the EU’s new “macro-imbalances” rules. It could ultimately lead to sanctions, with a vote taken by a qualified majority of EU states. Such a dispute would in effect be a court of judgment on Germany by EU peers.


While a confrontation is unlikely, the tougher talk from Brussels raises the political temperature in Europe. An attempt to indict Germany would prompt fury in Berlin, where politicians rejected US criticism last week that the country was acting as a free-rider on scarce global demand and creating a “deflationary bias” for the whole world. Berlin has called such attacks “incomprehensible”, insisting that export success helps the whole of Europe and should be prized.


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The Commission's report cut the eurozone growth forecast for next year from 1.2pc to 1.1pc, and said a “sudden stop” in emerging markets is now the biggest potential threat to recovery.

“It is too early to declare the crisis over. Risks and uncertainty remain elevated,” it said. The report predicted a “subdued recovery” as banks continue to shrink their balance sheets to meet tougher EU rules, curb lending in the process. Unemployment will remain at a record 12.2pc until 2015. “The norm for the eurozone is still pretty dreadful. Even these forecasts are still likely to be too optimistic,” said Jonathan Loynes from Capital Economics.

Mr Rehn brushed aside warnings that Europe is sliding into a Japan-style deflation trap, insisting that inflation will rebound after sliding over recent months and stabilise near 1.5pc next year. “Although there is a lot of slack in the economy, the risk of deflation seems remote at the current juncture,” he said.

Lars Christensen from Danske Bank said the EU authorities are repeating mistakes made in Japan in the early 1990s when deflation became lodged in the system. “Several eurozone countries are already in outright deflation, and that is making it even harder to deal with banking problems and the debt trajectory. There is no growth in the money supply, so this is going to get worse, not better.

"This is just like Japan. The central bank thought money was easy when in fact it was much too tight. But effects could be much worse in Europe because unemployment is so much higher."

The commission slashed its growth estimate for Spain from 0.9pc to 0.5pc in 2014, and warned that the structural budget deficit will rise instead of falling, reaching 4.2pc in 2014 and 5.8pc in 2015. This will push public debt to 104pc of GDP.

“Things are going from bad to worse and any talk of recovery is woefully misplaced,” said sovereign bond strategist Nicholas Spiro. “What is so shocking is the number of countries where public debt is going above 100pc of GDP.”

Slower growth could cause several states to miss their budget deficit targets again, creating pressure for further austerity cuts in a vicious cycle. The EU Fiscal Compact allows some leeway for missing targets but remains rigid.

Italy will contract 1.8pc this year, before eking out 0.7 growth in 2014. The turnaround is based on hopes of resurgent investment - from -5.2pc to +2.7pc - a forecast described as “Panglossian” by analysts, given the pervasive credit crunch among small firms.

Cyprus is in the eye of the storm, facing economic contraction of 8.7pc this year after its banking collapse, and 3.9pc next year. Investment dropped 19.6pc last year, and will fall 29.5pc this year and 11.9pc in 2014.

The report said the new risk is an upset in Asia, Latin America and Africa as the US Federal Reserves prepares to withdraw dollar liquidity from the global financial system.

It stated: “The external environment for the EU economy has become more challenging. Growth in some key emerging market economies has slowed down: triggered by the anticipation of less expansive monetary policies in the US. Many emerging markets appear vulnerable to sudden stops of external financing. The over-reliance of the Russian model on commodities does not appear sustainable.”

Emerging markets have rebounded from their May to June sell-off. This is chiefly because the Fed has delayed plans to wind down stimulus. This is a reprieve, not a pardon. Trouble could return once the Fed turns hawkish again

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This morning's News says Hollande is very unpopular and after 18 months Presidency all he has done is raise Taxes. There are protest marches planned over the latest tax rise on tomatoes.

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ECB tests will prove challenging for 5 Italian banks-Moody's







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MILAN | Mon Oct 28, 2013 9:02am EDT

Oct 28 (Reuters) - A European Central Bank health check of euro-zone lenders is likely to reveal capital shortfalls at five Italian banks, raising the possibility they will need state aid, rating agency Moody's said in a report on Monday.

Moody's listed Banca Monte dei Paschi di Siena, Banco Popolare, Banca Carige, Banca Popolare di Milano and Credito Valtellinese as vulnerable lenders because of a low capital base or weak asset quality.

It said those banks would find it hard to meet an 8 percent capital benchmark set by the ECB last week as one of the requirements for lenders to pass its asset quality review exercise, due to be carried out over the next year.

"It will be challenging for these banks to close capital shortfall with private resources, which raises the possibility of a public intervention and ultimately a bail-in," Moody's said.

This in turn could be negative for junior bond holders in these banks, Moody's said, because they might be forced to shoulder losses arising from recapitalisation needs.

Banks that ask for state aid to boost their capital even as a precautionary recapitalisation will have to inflict losses on their junior bondholders under a new rule, dubbed "bail-in", agreed by the European Union earlier this year.

Monte dei Paschi, Italy's third-biggest bank, received a 4.1 billion euro ($5.7 billion) state bailout earlier this year.

Under a tough restructuring plan requested by the European Commission, from next year the payment of coupons to investors holding subordinated bonds will be possible only if the bank manages to carry out a 2.5 billion euro capital increase due in 2014. ($1 = 0.7250 euros) (Reporting by Francesca Landini; editing by Tom Pfeiffer)

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ECB Cuts Interest Rate To Boost Recovery

The core interest rate for the euro area is cut to a new record low of 0.25% while the Bank of England holds its base rate steady.

3:20pm UK, Thursday 07 November 2013



Mario Draghi

Video: Draghi Explains Rates Cut Decision

Enlarge




'89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13UK base interest rate (in %) since 198903691215 Base rate

Source: Bank of England

Graph: UK Base Interest Rate Since 1989

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The European Central Bank (ECB) has cut its core interest rate in a bid to boost flagging economic recovery in the euro area.

The bank lowered the benchmark refinancing rate to a record low 0.25% from 0.5% at a meeting of its 23-member governing council in Frankfurt.

The move startled many investors while most economists thought the bank would wait to offer more economic stimulus at least until December, when it will have new forecasts from its own staff.

The council was responding to a slump in inflation to 0.7% in October - way below its 2% target and threatening to choke the wider economic recovery.

In addition to the ECB cutting its main refinancing rate to 0.25%, it held the deposit rate it pays on bank deposits at 0% and cut its marginal lending facility - or emergency borrowing rate - to 0.75% from 1%.

EURO V POUND
Rate correct at 13.32 GMT

The surprise move underlined the bank's newfound flexibility under its president Mario Draghi.

A lower refinancing rate makes it cheaper for banks to borrow from the ECB, in hopes that that lower rate will be reflected in what companies pay for credit.

That would make it easier for them to expand and create new jobs and growth.

The ECB's UK counterpart the Bank of England had earlier confirmed no change to its own monetary policy - leaving the base rate of interest at 0.5% amid no pressure to raise it yet despite Britain's economic recovery gaining momentum.

The ECB's decision had an immediate effect on the markets - with many of Europe's major stock markets hitting fresh five-year highs while the euro was sharply lower.

The FTSE 100 swung from losses on the day back into the black near its own five-year high on the news.

David Bloom, global head of FX strategy at HSBC said of the ECB: "They want the double whammy of a lower euro on growth and (a boost to) inflation.

"We wanted a stronger response to the stronger euro/dollar and we've got it," he said.

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France’s 'AA' Hollande pays price for kowtowing to EMU deflation madness




By Ambrose Evans-Pritchard Economics Last updated: November 8th, 2013

193 Comments Comment on this article




Standard & Poor’s downgrade of France to AA is an indictment of Euroland’s entire contraction regime.

Yes, S&P says France has bottled it on reforms. Francois Hollande’s patchwork of measures – losing momentum anyway since early 2013 – will not be enough to pull the country out of sclerosis.

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It warns too that France is on borrowed time with a state sector over 56pc of GDP, now higher than Sweden, but without Swedish labour flexibility and free enterprise. We all know this.

But the deeper critique is that France has been set an impossible task.

1) Perma-slump is playing havoc with public finances, causing the budget deficit to stay above 4pc of GDP. “We believe lower economic growth is constraining the government’s ability to consolidate public finances,” it said.

France’s heroic fiscal squeeze of 1.8pc of GDP last year – in order to comply with EMU demands – was at best self-defeating, and arguably destructive. All France got was a double-dip recession. Some 370,000 people have lost their jobs. There is a proper therapeutic dose of fiscal austerity, and it should always be offset by monetary stimulus. Both rules were violated.



As S&P says, Hollande made matters worse by relying on taxes, not spending cuts. You don’t have to believe in the Laffer Curve to see that a country with a Leviathan state should not keep raising the tax share of GDP.

2) You cannot carry out deep reforms in a deep downturn. “Ongoing high unemployment is weakening support for further significant fiscal and structural policy measures,” it said.

This is the nub of the matter. The central tenet of EMU doctrine is that countries will not reform unless they face a crisis, and their feet are held to the fire. There is a near religious belief in Berlin – evangelised by Brussels, and the EMU gang of five – that any let up in austerity, any recourse to stimulus, let alone a new deal, is a gift to shirkers who want to dodge reform.

It is an elemental misjudgement. Yes, there may be small countries where this applies. They can hope to export their way out of trouble, if they have a high enough trade gearing. They may be able to overcome the debt deflation shock if their debt levels are low enough. If not, they can go to the IMF for a package of reform cushioned by debt relief, devaluation, and cheap IMF bridging loans.

None of this applies in southern Europe or to the quasi-EMU states in trouble in central Europe and the Balkans. If a region holding 300 million people tries to retrench at once, it causes a self-feeding downward slide for the whole system. That is exactly what we are seeing.

Euroland is relying on exports to the rest of the world, but that means it now has a huge trade surplus and risks becoming a trade violator. This will not be tolerated for long. The US Treasury’s warning shot last week is just the start of a nasty fight.

Besides, France, Italy, and Spain, are too big to be pushed around for ever. They have other options. They can fight back in all kinds of ways. It is inevitable that they will do so.

For Francois Hollande, it is a nightmare coming true. He asked to be judged on his success in “bending the curve of unemployment”, and judged he will be.

There is no recovery worth the name in sight. Industrial production fell 0.7pc in September, the fourth decline in five months. Annalisa Piazza from Newedge Strategy says there is now a risk that the French economy will contract again in Q3. That would be political dynamite.

Hollande campaigned in 2012 on a growth ticket. He dabbled briefly with a Latin Bloc alliance to force a change in EMU policy, but hid behind Italy’s Mario Monti (who tried to calibrate it), and never took the lead. It was doomed to failure.

Instead, Hollande lamely buckled to EMU-core demands, and split the French Left by going along with Angela Merkel’s catastrophic Fiscal Compact. This treaty is an infernal deflationary machine for 20 years to come, the ultimate culmination of German folly. Hollande was told by an army of French economists – including the excellent Observatoire, on the Left – that this would lead to depression and deflation, as it has.

Without wishing to cause too much offence, he risks becoming the Pierre Laval of 1935, the executor of deflation decrees that he does not really understand, the pacificist idealist (yes, Laval was, once) who lost his way trying to enforce the mad logic of the 1930s Gold Standard, the EMU of its day. (Laval lost his way further under Vichy, but that is another story).

It is not too late for Hollande to avoid this horrible political fate. He can at any time pluck up courage, forge a grand reflation coalition, and bring Brussels to heel. He is the elected leader of a great nation. EU officials are just civil servants.

This means confronting Germany, of course. But that fight has to come, as Paris Professor Steve Ohana lays out in his new book “Désobéir pour sauver l’Europe”. France must revolt to save Europe, and only France can lead such a coalition.

Let me be clear. The quarrel is not with the German nation, but with the 1930s policies being enforced on Europe by Angela Merkel and German political establishment. (Have they all forgotten – or never learned – that it was the Bruning deflation of 1930-1932 that destroyed Weimar?)

We can all agree that Germany has been a magnificent example to the world for sixty years. It is a thriving democracy under the rule of law. It has a constitutional court that really does defend liberty. Germany did not aspire to the hegemony it now has, and does not want to keep it. That is the strategic tragedy of EMU.

There is a near consensus view that Chancellor Merkel is an outstanding leader. I think this reflects a psychological defect in the press and the commentariat. We cleave to power. We adore it. We flatter it.

So me let dissent, since power is not my cup of tea. I think that current German policy across a wide range of economic and foreign policy issues (Libya, Mali, Syria, Russia) are destructive and potentially dangerous, especially for Germany in the end. Angela Merkel has her qualities but she is a very poor leader indeed. History will judge

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http://www.presseurop.eu/en/content/press-review/4307011-what-s-come-over-ecb


I left the translation because there is a nice cartoon about Draghi dressed like Superman , trying to catch the falling Euro. 

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Reports of the survival of the eurozone may have been greatly exaggerated

Last week’s surprise interest rate cut by the European Central Bank (ECB) was largely a response to the looming danger of deflation in the eurozone





one Euro coin stands on a map of Brussels on December 9, 2011 in Berlin, Germany

Economists said that while there was evidence banks had used ECB funds to buy government bonds, they were still not lending to businesses and households Photo: Getty Images



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Roger Bootle
By Roger Bootle

9:30PM GMT 10 Nov 2013

Comments22 Comments





Just when you thought it was safe to go back into the water… Last week’s surprise interest rate cut by the European Central Bank (ECB) may have been taken as good news by the markets, but it was largely a response to the looming danger of deflation in the eurozone. And that is not good news at all.


It is a severe problem of economic forecasting that if you manage to identify a major force that is going to have significant effects, you are rarely able to see quite when these will occur. You can give up, retire or die before the forecast events finally come to pass.


The long-running crisis of the euro is a case in point. Like Mark Twain’s death, forecasts of the euro’s demise have proved premature. Yet at the heart of the simmering crisis lie two debilitating problems with the potential for a devastating interaction. The first is a loss of competitiveness by the peripheral countries, that has left them with depressed levels of GDP and high rates of unemployment. The second is appallingly high government debt.


The response of the eurozone to the debt problem has been to enforce austerity in the form of cuts in government spending and increases in taxes. That has been successful in reducing the size of the deficits in the peripheral countries. The policy for regaining competitiveness has focused on so-called internal devaluation, whereby the peripheral countries force their inflation rates to low levels. Deflation – that is to say, falling prices – if it occurs, would simply be a continuation of this policy. The faster prices fall, the sooner the affected countries will return to full competitiveness.


At first sight, it seems as though these two policies are consistent with each other. After all, the austerity drive helps price and wage increases to moderate because it depresses aggregate demand and releases resources, including labour.


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But when you look at the feedback loop from prices to the debt problem, things look much worse. For if prices fall then, even if real GDP is static, its money value would fall.

Meanwhile, the money value of government debt would remain constant. This means that the ratio of government debt to GDP would rise.

As it happens, the ratio of debt to GDP has recently been on a rising trend even without deflation because, although government deficits have fallen in the peripheral countries, any deficit at all means that the stock of debt is rising. Meanwhile, until recently anyway, the GDP of the peripheral countries has been falling.

So what are the chances of deflation happening in the eurozone? Very high. The latest inflation figure showed a drop from 1.1pc to 0.7pc. Nor was this simply the result of a statistical quirk. The core rate of inflation also dropped to only 0.8pc. And in Greece, prices are already falling. The latest inflation figure was minus 1.9pc. Meanwhile, the price index is roughly flat in Ireland, Spain and Portugal. Inflation is stronger in the core countries, but it is still very low – about 1pc in France and 1.3pc in Germany.

What’s more, in September producer price inflation for the eurozone was minus 0.9pc. And wage inflation is very low, too. In the second quarter of this year, hourly wage costs rose by only 0.9pc year on year. In Greece, pay has fallen by about 10pc over the year.

Wage growth may well get weaker across the eurozone as a whole. Unemployment has started to rise again. In September, it stood at 12.2pc, a record high. In Spain and Greece, the rate is more than 25pc.

If external price pressures turn negative because commodity – and especially energy – prices fall, then a drop into deflation would come sooner. This is where the exchange rate of the euro is critical. It has been extraordinarily strong. When it was launched in 1999, the euro traded

at an exchange rate of $1.17. Subsequently, it fell to below parity against the dollar. Yet it has recently been trading at well over 1.30 against the dollar. The strong euro is directly reducing the cost of imports into the eurozone and it is making it more difficult for the zone to export.

The ECB has indicated that it has more ammunition to deploy if things worsen. It may start to impose negative interest rates on banks for making deposits at the ECB. This, plus the threat of quantitative easing or QE, which the Bank has so far shunned, at least in the pure form, may serve to bring down the exchange rate and thus avert the deflation danger.

But I would not bank on it. Divisions in the ECB council will continue to make ECB action hesitant. Germany is not keen on more stimulative measures and it would surely oppose outright QE.

And as we know from the Japanese experience, a hesitant central bank has great difficulty in effecting the all-important psychological changes necessary to stop prices from falling. For deflation is just like inflation. It is at its most dangerous and is most difficult to dislodge when it gets into the mind. Deflation has been lodged in the mind of the average Japanese person for the best part of 20 years.

Germany holds the key to this problem. What is needed for the eurozone is a combination of a weaker euro and stronger growth of German domestic demand, perhaps facilitated by looser fiscal policy. This would mean Germany putting up with a somewhat higher rate of inflation.

Yet there seems no sign of Germany embracing either a weak currency or a boost to demand.

The result is that the eurozone faces many years of grinding austerity, continuing catastrophe in the labour market and a period of very low inflation, or even deflation. As debt ratios continue to rise in the peripheral countries, at some stage the financial markets may come to worry again about their ability to stay in the euro. At that point bond yields will rise, thereby making the fiscal position worse.

The crisis of the euro is a slow-burning affair. Just like Japan. Of course, the eurozone problems are different from Japan’s but they are just as deep-seated. As I argued a few weeks ago, Japan may seek escape from its debt problem though higher inflation. The troubled peripheral countries of the eurozone cannot do that on their own.

They could only do it if the ECB – and Germany – agree. And that looks unlikely. The risk of some countries defaulting, and/or leaving the euro, is still very much with us.

Roger Bootle is managing director of Capital Economics. Email him on roger.bootle@capitaleconomics.com

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German 'wise man' says Italy, Spain could face downturn as severe as Greece
02/01/2013

Italy, Portugal and Spain could face economic downturns as severe as that of Greece within a year as the combination of austerity and recession exacerbate Europe’s sovereign debt crisis, Peter Bofinger, economist and member of the German Council of Economic Experts, told RBS.
German 'wise man' says Italy, Spain could face downturn as severe as Greece (PDF 212.1 KB)
Bofinger said struggling European economies had been smothered by "wrong policies" forcing them to narrow fiscal deficits to qualify for European Union bailout funds. In the past three years, Greece, Ireland, Portugal, Spain and Cyprus have all slashed spending and increased taxes to meet targets for external aid. Such restrictive fiscal rules mean the situation will "get worse before it gets better", Bofinger said.
"In my view, these pro-cyclical policies are putting Europe on a downward spiral that is not only affecting peripheral countries, but more and more affecting core countries," Bofinger said at a meeting with RBS clients in the German industrial city of Dusseldorf. "We should stop austerity measures until the countries reach the bottom of the economic cycle; until we can see they are back on a growth path. Only then should we talk about consolidation but not under the current conditions."
The euro area contracted 0.1 per cent in the third quarter of 2012 from the previous three months, succumbing to recession for the second time in four years. Italy's gross domestic product fell 0.2 per cent in the same period and the Spanish economy shrank 0.3 per cent, while Portugal completed its second year in recession.
Greece contracted for a 17th straight quarter in the three months to September, with unemployment at 25.1 per cent. By the end of this year, Greek output will have dropped by a fifth since it entered its recession in 2008.
Bofinger said the region is likely to experience a prolonged period of contraction and that this would spill over to countries such as France that had so far proved resilient to the region's sovereign debt crisis.
French unemployment rose to a 13-year high of 10.2 per cent in the second quarter as the economy shrank for the first quarter since 2009, before rebounding. Germany, which sells about 60 per cent of its goods and services to European Union countries, could fall into negative territory in the fourth quarter and into 2013, Bofinger said.
Bofinger said the decision by European Union budget enforcer Olli Rehn in November that Spain will not need further spending cuts and tax increases even though it will miss its deficit targets is an encouraging sign that fiscal policy may take a new direction. However, he believes that any changes will come too slowly to help struggling eurozone countries return to economic growth.
"The recession makes the situation of the banks worse, the situation of government financing worse and, in my view, it doesn't contribute to better competitiveness," Bofinger said. "Some economists believe that we have to go through short-term pain for long-term gain, but in such a recession a lot of production potential is also destroyed."
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German coalition talks split over call for EU referendum

Angela Merkel's allies dismiss calls for the Germans to be given a popular vote on the European Union





Angela Merkel has distanced herself from referendum talk by coalition partners

Chancellor Merkel will kick off negotiations towards treaty change at a Brussels summit in late June 2014 Photo: AP







By Louise Barnett, Berlin and Bruno Waterfield in Brussels

3:56PM GMT 12 Nov 2013

Comments20 Comments





Divisions have emerged between German political parties in talks to form a government coalition over the question of giving Germany a referendum on future transfers of power to the European Union.


A leaked coalition negotiating text had proposed a British-style "referendum lock" giving Germans a popular vote over any new EU treaty or eurozone measure that reduced Germany's sovereignty.


"We want to give our citizens the possibility to also influence decisions in-between general elections. The population should be asked directly on European policy decisions of special importance," said the document by Hans-Peter Friedrich, Germany's interior minister and Thomas Oppermann, a senior Social Democrat.


"This would apply in particular when new member states are added, when important powers are to be transferred to Brussels, or in regard to German finances being committed at EU level. We want to allow nationwide referendums in these cases."


Angela Merkel's Christian Democratic Union (CDU) has quickly distanced itself, and the Chancellor, from the proposals that have long been the policy of Bavarian conservatives, such as Mr Friedrich, who hails from the Bavarian Christian Social Union.


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"As before, there are serious doubts about the introduction of referendums at the national level," said Guenter Krings, deputy leader of CDU in parliament. "Representative democracy has proven itself in Germany, including on European decisions, and we want to stick with this."

The proposal underscores growing concern, particularly in the Bavarian Christian Social Union (CSU), which is in government with Chancellor Merkel, over a number of recent decisions to give budgetary and economic powers to the EU following the eurozone crisis.

Mr Friedrich's conservative CSU party had pledged to introduce referendums on important EU issues as part of its campaign ahead of the German elections in September.

The election left the conservative bloc of Mrs Merkel's CDU and its Bavarian sister party the CSU just shy of the overall majority they needed to take the reins of power, hence their current bid to form a grand coalition government with the centre-left SPD.

The Social Democrats have argued that the country's constitution needs to be changed to allow popular plebiscites in order to reflect the desire of many Germans for a greater say in key constitutional decisions.

Mr Oppermann, the Social Democrat speaker in the German parliament, distanced himself from any suggestion that referenda could be used for Eurosceptic purposes, but defended the principle of popular votes on specific policies.

"A grand coalition is a unique window of opportunity to modernise our democracy," he said. "I'm advocating a cautious entry into direct democratic decision-making. But one thing is clear: we will not be curtailing EU decisions."

Mr Friedrich and Mr Oppermann are leading coalition talks on the topics of justice and home affairs. Their suggested change to the German constitution would also give citizens the power to call for referendums on laws backed by the Bundestag, a development that would almost certainly quickly give rise to an EU vote.

Under the proposal a referendum would be called within six months of a law being passed, such as decision to hand over cash or budgetary decisions to Brussels, if a million signatories backed a referendum.

Germany's post-war "basic law" only permits national referendums in the circumstances of radically changing the Federal constitution itself or changing German borders.

However, Germans were not given a vote on reunification with East Germany in 1990 and, in face of opposition to the EU single currency, they were also denide a vote to replace the Deutsche Mark with the euro.

Amid the eurozone crisis, opinion polls have shown large majorities of Germans in favour of a referendum on deeper EU integration but Mrs Merkel has remained opposed on the grounds that a popular vote could become the rallying point for populist or extremist German nationalists.

"A German popular vote on the euro or a eurozone related policy is the nightmare. If Germany had held a referendum there would be no euro. Everyone is profoundly aware of that fact," said an EU offical.

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European Council A lack of openness in Brussels negotiations is often cited as a cause of the EU’s democratic deficit. But for the “Brussels' ultimate insider”, historian Peter Ludlow, behind-closed-doors meetings are a cornerstone of EU leaders’ decision-making.

Marc Peeperkorn
Thatcher gives him her best smile every day, as do Kohl, Adenauer, Monnet, Schuman and Mitterrand. From his wall-to-wall bookshelves obviously, as even Peter Ludlow – the man dubbed “Brussels' ultimate insider” by the Financial Times – does not have direct contact with the afterlife. However, what he does have is unique access to key European players, both in Brussels and the national capital cities. From his study, complete with Persian carpet and ubiquitous stacks of paper, Ludlow, 74, has for many decades, been the sole chronicler of EU summits. Chunky reports of 40-50 pages, full of relevant details and anecdotes that are eagerly read by normal insiders: the prime ministers of smaller countries, Brussels diplomats, EU civil servants and journalists.

How exciting are the EU summits?

"Some summits can bore you to death, especially the tour de tables, the compulsory table rounds in which each prime minister has to have his or her say. Not all leaders are gifted speakers. But a summit remains a major event. When some 30 prime ministers, presidents and other European leaders come to Brussels they don't spend two days lounging around. Sometimes the debate is furious and it becomes apparent how Merkel and ECB President Mario Draghi lay down the foundations for policy. And of course there are more private meetings in the corridors, in which leaders come to agreements among one another."

The most important part of a EU summit – the leaders’ dinner – is a closed affair. No minutes secretaries are present to take notes of the debate, as that would only make the leaders wary and frustrate negotiationsThe most important part of a EU summit – the leaders’ dinner – is a closed affair. No minutes secretaries are present to take notes of the debate, as that would only make the leaders wary and frustrate negotiations. While there are personal notes from a prime minister, confidential text messages and emails from the dining hall via smartphones to close colleagues, a literal record of the dinner debate, on the basis of which a leader can be held accountable, does not exist.

Openness isn't much better in the government leaders’ formal working sessions (before dinner). However, minutes secretaries from the Secretariat of the Council of Europe, which organises the summits, do attend these sessions. They report almost verbatim and take turns in walking to an adjacent room where they are eagerly awaited by the advisors to the ambassadors of the EU countries. What happens then is much like the old game of Chinese whispers: The minutes secretary tells the advisor, who tells his own top diplomats, who then inform the diplomatic rank and file, after which the press can start spinning. Just as with the game, the final message differs considerably from the original. The only public document is the conclusions agreed during the summit, which includes the decisions.

Is it not strange that decisions that have consequences for 500 million Europeans are made behind closed doors?

“Well, I actually consider it very open and accessible. A good journalist finds a way. Naturally, at the end of the summit, Rutte will attempt to sell the Dutch story and Holland the French, but you can shop around freely and easily.”

The impression is given that every summit is a success and every leader the winner. That is far from the reality, though.

“But that happens at national level, too. In London, during the last Labour government, you got the impression that Prime Minister Blair and Chancellor Brown were in totally different meetings. Of course, all 28 EU leaders want to show how important they are. But there is no lack of openness in Brussels. So many interests, so many leaks. When I arrived in Brussels in the late 1970s, a colleague said to me, “If it says ‘confidential’ on a memorandum, that’s rubbish. If it says ‘highly confidentially’, then you can be sure that everyone’s got it. What you want is the documents that say nothing. That takes good sources, and time. That’s my advantage: I’ve got three, four weeks for my story; a journalist three, four hours.”

Again: Why are the EU summits not public?

“The seclusion is part of the set-up; it’s intended to make it clear to the leaders that they – and they alone – are responsible for the decisions. No ‘Help from mummy!’”

Very exceptionally, they are allowed to call in an advisor for one or two minutes. British premier Major, who was not exactly overflowing with self-confidence, never lived down the fact that he once had his advisor hidden under the table . A little man. Physically, at any rate. The other leaders were furious when they found out.

Confidentiality is necessary to arrive at decisions. You can’t rule a country, let alone the EU, entirely publicly“Apart from that, confidentiality is necessary to arrive at decisions. You can’t rule a country, let alone the EU, entirely publicly. It doesn’t work if you have cameras; politicians have to be able to negotiate unhindered. The EU summit is not a parliament; it’s Europe’s government.”

Is there a big difference between the premiers’ press conferences at the end of the summit and your reconstruction?

“Absolutely. If you listen to Cameron, or Hollande or his predecessor Sarkozy, then you get the impression that he was the most important man in the room, that everyone was dancing to his tune. That’s the image they want to show at home. It’s unbelievable how those vain little men inflate themselves, followed and believed by journalists they have carefully selected, who are allowed to sit in the front row and ask them questions. A well-known French journalist once wrote that Sarkozy had saved the euro and Merkel did everything he told her to. Well, if you believe that you’ll believe anything. Merkel’s press conferences are more useful. Merkel is so much smarter than all those men around the table; she really knows her dossiers. She doesn't have to brag about having won. She simply won.”

Translated from the Dutch by Kelly Boom

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

Apparently Merkel is finding it hard to form a coalition with other Parties and the German people are not so enamoured of the EU since they have been prime lenders with the ECB and the Bundesbank is not willing to lend any more.

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Tjeerd The European Commission has opened a “thorough investigation” into Germany's export surpluses, which stand accused of damaging the Eurozone's balance. However, working towards banking union would be wiser, writes Diario Economico's director.

António Costa
European solidarity is certainly one of weakest elements of the European project, but no solution will be found if we continue to undermine the project's virtues and fail to address its flaws.

The idea is simple: the Germany must spend more so that the countries of the south, such as Portugal, can expand their markets and sell their products. The idea is noble-minded, and it’s based on a conviction that the Germans are taking advantage of the Eurozone.

Why? Because if they had the German mark instead of the euro, their currency would be even stronger, which would undermine their competitiveness – their exports. What’s more, due to the financial fragmentation of the euro, the German banks and the state itself have become the refuge of international investors capable of paying the high price of enjoying the security of the largest economy in the single currency.

Yes, solidarity is being demanded from Germany, particularly as some countries, such as Portugal, must adjust their economies the hard way and do it quickly. The question is: what should Germans do to promote the economic power of Europe and a project that they claim they want to defend?

Merkel Plan for infrastructure?
At the risk of being accused of a lack of patriotism, I do not believe that the solution involves an increase in spending in GermanyAt the risk of being accused of a lack of patriotism, I do not believe that the solution involves an increase in spending in Germany. Firstly, there’s the question of who must spend more: businesses or the state? It is difficult, if not impossible, to impose on German companies salary increases that would eat away at their competitiveness. Therefore, only intervention by the government could guarantee that they would do that.

As we have been seeing in Europe, this solution is not possible. This leaves the state. Is that the idea? To take advantage of historically low interest rates – and even lower for Germany – to inject liquidity into the European economy, putting in place for example a kind of Merkel Plan for infrastructure? Is this the right answer? The recent past advises us against these practices, because the results will certainly be just as bad.

We live in a single monetary zone, stamped by large disparities in the financial blueprints. It is here, at this level, where Europeans should demand another type of solidarity from Germany, to rebalance the external imbalances within the euro. If a deficit of 6 per cent in the balance of current transactions is bad, a surplus of 6 per cent in another country of the same monetary area is not desirable either. How to correct these imbalances?

For example, by putting in place a genuine economic government of the Eurozone, in which more sovereignty would be shared, and by establishing a true banking union, which has not yet seen the light of day. These are the two aspects that the European Commission and the leaders of the countries of the south should focus on, instead of wasting their time asking the Germans not to be German.
On the web
Original article at Diário económico pt
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“Brussels accuses Germany of exacerbating the crisis,” headlines Le Monde, in the wake of the November 13 decision by the European Commission “to open a comprehensive investigation of Germany’s current account surplus [due to its high level of exports].” Brussels believes that this year the surplus will amount to 7 per cent of GDP, as it did in 2012: “that is to say that it will be over the 6 per cent threshold identified when this macroeconomic monitoring instrument was established in 2011.”

“This is a major first for Germany,” notes the daily.

For its part, Il Sole 24 Ore explains that the imbalance undermines the single currency, because it gives Germany a competitive advantage over other Eurozone countries which is not offset by a re-evaluation of its own currency. The procedure launched by Brussels will not be completed before the spring of next year, remarks the Italian daily, adding —

Some economists believe that the reduction of the imbalance should come from Berlin, which ought to increase imports from Eurozone countries in difficulty or increase wages. […] But it seems that Germany is not keen to embark in this direction: the main German industrial firms are targeting alternative prospects to Europe, which currently accounts for around half of the trade surplus.

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http://www.telegraph.co.uk/finance/business-news-markets-live/10448462/Business-news-and-markets-live.html

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SOMEONE IN THE GUARDIAN SUGGESTED EC COULD BE HIT BY DEFLATION.
EC OFFICIALS ARE LOOKING INTO GERMANY'S TRADE SURPLUS.

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Spain To Make Clean Exit From Bank Bailout

Spain decides to follow Ireland's lead and make a clean exit from its bank bailout, eurozone finance ministers say.

8:46pm UK, Thursday 14 November 2013

Spain
Spain's aid programme will end in January












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Spain's decision to make a clean exit from its bank bailout has been welcomed by Eurogroup, which is made up of finance ministers from euro-using countries.

It said it showed the effectiveness of steps to deal with excessive government debt.

Earlier, it was announced that Ireland's aid programme will end in December. Spain's wraps up in January.

Jeroen Dijsselbloem, who chairs Eurogroup, said: "These economies are back on the road to recovery."

In 2012 Spain tapped €41bn (£34.5bn) from the eurozone countries' bailout fund to recapitalise banks that faltered after a property boom collapsed.

EU Economy and Euro Commissioner Olli Rehn told a news conference that the Spanish financial market had stabilised, liquidity of banks had improved and deposits were rising.

He said the key now lay in the restructuring of Spain's local savings banks.

But the Eurogroup said Madrid still had work to do.

"We call on the Spanish authorities to rigorously continue the reform momentum to address any remaining challenges regarding the economic and fiscal situation, including the high unemployment rate and the vulnerabilities stemming from the still high private and external debt," the group said in a statement after talks in Brussels.

Greece, Portugal and Cyprus remain on bailout support as a result of troubles with too much debt.

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

This suggests a lot of banks will go to the wall in Spain.

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PresseuropDie Welt Die Welt, 14 November 2013
“The European Commission has joined in the chorus of [critcism of German export strength]”, remarks Die Welt, in the wake of Brussels’ announcement of a “comprehensive investigation” of Germany’s export surplus.

For the daily, the Commission’s criticism is “dangerous”, “not just for economic reasons but also for political ones” —

Small fragile economies in Europe should also profit from global demand [says the Commission]. For this to happen, Germans will have to exercise restraint. This demand means that we should not be too serious about the drive to consolidate [European debt]. It also means that Germany should make an effort to increase wages, to ensure greater demand for Portuguese shoes and Greek wine. In so doing, Germany will weaken its international competitiveness. There has hardly ever been a more inappropriate time to voice such a false message, regardless of whether it is addressed to Germany or crisis stricken countries.

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German exports: Don’t lash out at ‘Made in Germany’
13 novembre 2013Diário económico Lisbonne Outils
Partagé 56 fois en 10 languesEnvoyer
Tjeerd The European Commission has opened a “thorough investigation” into Germany's export surpluses, which stand accused of damaging the Eurozone's balance. However, working towards banking union would be wiser, writes Diario Economico's director.

António Costa
European solidarity is certainly one of weakest elements of the European project, but no solution will be found if we continue to undermine the project's virtues and fail to address its flaws.

The idea is simple: Germany must spend more so that the countries of the south, such as Portugal, can expand their markets and sell their products. The idea is noble-minded, and it’s based on a conviction that the Germans are taking advantage of the eurozone.

Why? Because if they had the German mark instead of the euro, their currency would be even stronger, which would undermine their competitiveness – their exports. What’s more, due to the financial fragmentation of the euro, the German banks and the state itself have become the refuge of international investors capable of paying the high price of enjoying the security of the largest economy in the single currency.

Yes, solidarity is being demanded from Germany, particularly as some countries, such as Portugal, must adjust their economies the hard way and do it quickly. The question is: what should Germans do to promote the economic power of Europe and a project that they claim they want to defend?

Merkel Plan for infrastructure?
At the risk of being accused of a lack of patriotism, I do not believe that the solution involves an increase in spending in GermanyAt the risk of being accused of a lack of patriotism, I do not believe that the solution involves an increase in spending in Germany. Firstly, there’s the question of who must spend more: businesses or the state? It is difficult, if not impossible, to impose on German companies salary increases that would eat away at their competitiveness. Therefore, only intervention by the government could guarantee that they would do that.

As we have been seeing in Europe, this solution is not possible. This leaves the state. Is that the idea? To take advantage of historically low interest rates – and even lower for Germany – to inject liquidity into the European economy, putting in place for example a kind of Merkel Plan for infrastructure? Is this the right answer? The recent past advises us against these practices, because the results will almost certainly be just as bad.

We live in a single monetary zone, stamped by large disparities in the financial blueprints. It is here, at this level, where Europeans should demand another type of solidarity from Germany, to rebalance the external imbalances within the euro. If a deficit of 6 per cent in the balance of current transactions is bad, a surplus of 6 per cent in another country of the same monetary area is not desirable either. How to correct these imbalances?

For example, by putting in place a genuine economic government of the eurozone, in which more sovereignty would be shared, and by establishing a true banking union, which has not yet seen the light of day. These are the two aspects that the European Commission and the leaders of the countries of the south should focus on, instead of wasting their time asking the Germans not to be German.
Sur le web
Article original – Diário económico pt
Le Monde article fr
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“Brussels accuses Germany of exacerbating the crisis,” headlines Le Monde, in the wake of the November 13 decision by the European Commission “to open a comprehensive investigation of Germany’s current account surplus [due to its high level of exports].” Brussels believes that this year the surplus will amount to 7 per cent of GDP, as it did in 2012: “that is to say that it will be over the 6 per cent threshold identified when this macroeconomic monitoring instrument was established in 2011.”

“This is a major first for Germany,” notes the daily.

For its part, Il Sole 24 Ore explains that the imbalance undermines the single currency, because it gives Germany a competitive advantage over other eurozone countries which is not offset by a re-evaluation of its own currency. The procedure launched by Brussels will not be completed before the spring of next year, remarks the Italian daily, adding —

Some economists believe that the reduction of the imbalance should come from Berlin, which ought to increase imports from Eurozone countries in difficulty or increase wages. […] But it seems that Germany is not keen to embark in this direction: the main German industrial firms are targeting alternative prospects to Europe, which currently accounts for around half of the trade surplus.

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EU uses new budget powers to demand more austerity in Italy and Spain

The European Commission has exercised historic new EU powers allowing it to revise national budgets for the first time





A one euro coin is melted with a welding torch in this photo illustration

Italy and Spain, the third and fourth largest economies in the 17-strong eurozone, were upbraided for breaking debt reduction targets Photo: Reuters



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Bruno Waterfield
By Bruno Waterfield, in Brussels

5:49PM GMT 15 Nov 2013



Comments217 Comments





Spain and Italy have been warned that their budgets for 2014 are in breach of European Union rules as Brussels uses new powers to force governments to revise spending plans before national parliaments vote on them.


France was also cautioned that plans for painful economic reforms represent only "limited progress" as the European Commission exercised new eurozone powers in a historic shift of sovereignty away from elected governments.


"Because in an economic and monetary union, national budgetary decisions can have an impact well beyond national borders, member states have given the commission the responsibility," said Olli Rehn, the commission vice-president in charge of the euro.


"I trust that they will thus be taken on board by national decision makers."


Germany, Europe's largest and most successful economy, was also criticised for making "no progress" in following EU recommendations to help its eurozone neighbours by spurring domestic demand and imports.


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Despite disappointing growth figures and mounting concern that eurozone austerity policies are killing off recovery and locking southern European countries into protracted slump, the commission ruled that "further consolidation in euro area countries is necessary".

For the first time, the EU's Brussels executive has reviewed draft national budgets before national legislatures have voted on them, flexing political muscles aimed at preserving stability for Europe's single currency and at preventing a future eurozone debt crisis.

"This a historic moment," said an EU diplomat. "One has to ask whether the eurozone's voters yet appreciate what a huge shift in sovereignty this is away from national parliaments to conclaves of finance ministers and commission officials."

Italy and Spain, the third and fourth largest economies in the 17-strong eurozone, were upbraided for breaking debt reduction targets in breach of spending caps that are enshrined in the Maastricht Treaty that created the euro.

Backing off demanding the revision of budgets or penalties for now, Mr Rehn said he was "inviting" governments and parliaments to bring their budgets for next year into compliance with the rules as interpreted by the commission. "This exercise is much more about partnership than penalties," he said.

The commission's Italy verdict is political dynamite in a situation where Enrico Letta, the country's prime minister, is besieged in parliament by coalition disputes over tax reductions and Left wing opposition to austerity cuts.

Italy has the second-highest level of gross government debt in the eurozone, which is projected to rise to 133pc of the economy, second only to Greece, but it is in line with an annual target requiring annual debt to be under 3pc of annual GDP.

"We count on strong and effective delivery of these commitments by the government and parliament," said Mr Rehn. "Every day this year has been a politically sensitive moment in Italy. We just have to do our job."

Fabrizio Saccomanni, the Italian finance minister and a technocrat imposed on the Italian government at the behest of EU officials, could be fatally weakened by the Brussels intervention, especially after Mr Rehn ruled out an exempting €3bn in investment spending that the Italian government has included in its 2014 budget.

Mr Saccomanni warned that Italy could not take the investment spending from the national budget to meet EU rules because the cut would threaten the country's already weak economic recovery and inflame opposition to austerity.

"We could have taken even more restrictive measures to reduce our public spending, but I imagine there would be even more cries of pain. I believe our approach is balanced," he said. "It is not necessary to change the budget."

Spain was told that its "draft budgetary plan is at risk of non-compliance with the rules, as the headline deficit target may be missed and the recommended improvement in the structural balance is currently not expected to be delivered".

France was given the green light on its budget but the commission warned that next year's budget leaves "no margin" for deviation and reforms "constitute limited progress" in addressing structural targets.

"A significant set of measures on top of those already specified will be needed to ensure that the target for 2015 is reached," said the commission.

The commission also cautioned Finland, Malta and Luxembourg, asking the three countries to review their 2014 budgets to ensure that they meet eurozone targets.

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"Spain and Italy have been warned that their budgets for 2014 are in breach of European Union rules as Brussels uses new powers to force governments to revise spending plans before national parliaments vote on them"

Another exemple of the dictatorial powers of the EU, I can see the Euro folding the way things are going .

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Vlahovic

Whether it be in the form of taunts against French and Italian ministers, monkey cries directed at footballers, Islamophobia, or discrimination against the Roma, unabashed racism is increasingly common. Author Tahar Ben Jelloun warns against making any concessions on an issue that must be tackled by more education.

Tahar Ben Jelloun
Racism is part of human nature. We should bear this in mind so that we can prevent it, and fight against it with laws. But that’s not enough. We must also dismantle its mechanisms and demonstrate the absurdity of its foundations by educating people, and remaining vigilant.

These days, French society is perceived as virulently racist, but on a fundamental level it is no more racist than others. The rejection of the foreign, that which is different, that which is considered to be a threat to our security, is a universal reflex that leaves no society untouched. Racism can in some cases focus on one community, but this does not mean that others will not also be affected by it. There is no discrimination in the exercise of hatred. Everyone has to endure it.

Today in Europe we are witnessing incidents that are serious, because racism which begins with words can also be implemented by crematoria. To refer to [French Minister of Justice] Christiane Taubira as an “ugly female ape” in a demonstration against gay marriage late in October is just the beginning. If left alone, it is a short step from insults to physical punishment, then to torture (the case of the young Ilan Halimi and to murder. That’s why it’s wise to remember that there is no racism “lite”, nor is there a decaffeinated version. Mrs Taubira can regret that no political leaders spoke out against the racism to which she had been subjected. Another minister suffered the same treatment in Italy, where Minister of Integration Cecile Kyenge, originally from the Congo (Kinshasa), was insulted by high-level members of the Northern League, who are known for their racist views. Black football players are also the target of entrenched racism. When a head of government sets out to obtain a cheap laugh by referring to “Obama’s tan", he is effectively encouraging those who would otherwise not dare to speak out to unburden themselves and give free rein to their rank ideas.

An easy attitude to adopt
The fact that Europe has gradually lost its prominence in the world, not only economically but culturally, promotes an acrimony that is likely to transform into a contempt of everything that is different. Spain has not yet cleaned up its relationship with Islam. Immigrants from the Maghreb are called "Mauros", a pejorative term that recalls the sad episode of the Inquisition. The economic crisis has not improved matters. People are always suspicious of those who are poorer or more foreign than themselves. That is what makes racism an easy attitude to adopt in dealing with the hardships of life: a reflex that finds someone to blame. It used to be Jews; now it is Muslims.

Racism is mental laziness and a refusal to thinkWhile racism has always existed, there are plenty of politicians today who use it to serve their own interests. It is easier to spread hatred of foreigners than respect for difference. Humankind has a tendency to indulge its baser instincts, especially in situations where it is undermined by an inability to cope. Racism is mental laziness and a refusal to think. There will be always someone to think for you, and to make noxious software much easier to parse.

We are told today that not all members of the National Front are racist. Perhaps. But all racists are surely welcome within the party, provided that they are discreet about their beliefs. As long as the main concern of the politicians is to ensure their re-election, we will continue to see the most disgraceful degradations. Add to that the effectiveness of the new make-over of the National Front, to make it respectable and even banal. The attempt to shake off the party’s label as “far right" is an interesting signal. If it were only a matter of words, one could admit that the extremist aspect has been replaced by something deeper and more dangerous: the trivialisation of prejudice and xenophobia.

Children must be taught
Children must be taught, while their spirit is still reachable, what racism is based onTo combat the ideas of this party, there should be a systematic response every time one of its leaders proclaims false truths or proposes a programme that is not only unworkable but can be disastrous for our country. Besides this vigilance, which is sorely lacking in all the opposing political parties, there is a need to push on in schools with in-depth education over the long term. Children must be taught, while their spirit is still reachable, what racism is based on; they should be taught its history, its devastation, its inhumanity. We must say and say again that fear and ignorance are the two sources that nourish this scourge, and that with knowledge and intelligence, through debate and by breaking down taboos, it is easy to take apart its mechanism. There is a need to tackle all subjects and not to turn a blind eye to the excesses of those who, reacting to the stigma they encounter, also become racist.

Asserting and proving that races do not exist will not of itself eliminate racism, obviously, but at least it is a truth that will shake some certainties.

Often, when the annoyances are at their worst, racist tendencies seem to be proliferating and racism to be on the increase; the reality, though, is that it has always been among us, lurking in the mind, ready to catch its breath when we sense a threat to our well-being and the arrogant need to feel alive – and above all, to think we are superior to others.

Translated from the Italian by Anton Baer
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http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100026079/bundesbank-says-italian-and-spanish-banks-still-hooked-on-home-state-debt/

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Greece: ‘The shameful list to the Troika’
18 November 2013PresseuropEleftherotypia Eleftherotypia, 18 November 2013
Negotiations between the Greek government and the Troika of international creditors (European Union, European Central Bank and International Monetary Fund) are scheduled to resume on November 18 in Athens.

The talks were suspended last week before an agreement, which will be needed needed if a new tranche of aid is to be released, could be reached. The two sides must hammer out a plan to reduce the budget deficit by at least €1.3bn before the next Eurogroup meeting scheduled for December 9.

The government has made a list of additional austerity measures which, it says, would achieve this goal, reports Eleftherotypia. It includes —

… cuts in government spending, the merger or dismantling of some state agencies along with spending cuts in others, and a drive to fight tax evasion and welfare fraud.

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Angolan investment in Portugal (1/2): Lisbon closes its eyes to ‘dirty money’ from Luanda
19 November 2013Mediapart Paris Tools
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Une affiche du président angolais José Eduardo Dos Santos, à Luanda.
Une affiche du président angolais José Eduardo Dos Santos, à Luanda.

AFP Battered by the crisis, the ancient city has become a “supermarket” where the new fortunes of the former colony, beginning with the family of President Dos Santos, are increasing their stakes in banks and real estate. In Lisbon, the dubious origin of some of the capital has caused concern, reveals Mediapart. We are publishing the news website’s investigation in two parts.

Ludovic Lamant
Operation appeasement in Luanda: fourteen Portuguese MEPs travelled in early November to the capital of Angola in an attempt to defuse tension in relations between Lisbon and its former colony.

The Portuguese foreign minister thought it best, in mid-September, to make “diplomatic apologies” to Angola for an ongoing investigation of Angolan officials in Portugal, but the unexpected release of the report has had the opposite effect, complicating matters between the two capitals. The Angolan president, José Eduardo Dos Santos, in office continuously since 1979, declared in his October 15 State of the Nation speech the conditions for a 'strategic partnership' were no longer in place.

In an October 21 editorial entitled “Farewell Lusophony”, the Journal of Angola, the official newspaper of the Luanda regime, denounced what it called “intolerable aggression”. It had already declared, several weeks earlier, that Portugal should not “give lessons” to its former colonies.

The news prompted an immediate scandal in Lisbon, where politicians and editorialists were outspoken in their criticism of the submissive attitude adopted by the minister. It also backfired on the government in Luanda, which now feels “under assault” in an explosive debate about the relationship of dependency that connects the former metropolitan power, on the brink of bankruptcy, to its former colony, which is enjoying a rapid economic ascendancy.



Switch of roles
Some media commentators have remarked that the brutal mismatch between the two countries today is a kind of “revenge” for the history of AngolaSome media commentators have remarked that the brutal mismatch between the two countries today is a kind of “revenge” for the history of Angola. With an unemployment rate of around 17 per cent and an entrenched recession (a contraction of -1.8 per cent expected for 2013), exacerbated over the short-term by a tough austerity policy, Lisbon seems willing to do anything to attract foreign investment. Luanda, in contrast, is posting impressive growth rates (close to 15 per cent in the early 2000s), thanks to soaring oil prices and diamond sales, and is being wooed by investors from China and Brazil. Symptomatic of this switch of roles, Portugal’s trade balance with Angola, still positive in 2012, plunged into the red over the first six months of 2013. Lisbon now imports more Angolan oil that it can pay for with exports to its former colony. At the same time, Angolan investment in Portugal, which is difficult to quantify, has been on the increase since the start of the 2000s.

All of this would be well and good were it not for the fact that Angola is not just a former Portuguese colony, with a population of 19 million, which has been scarred by a long civil war that only ended in 2002: it is also one of the most corrupt authoritarian states on the planet, ranking 157 (out of 176) in Transparency International’s assessment. It is also governed in an entirely murky fashion by the Dos Santos family and the president’s MPLA party.

The “Revenge of the Colonised” is more than ambiguous. A good many Angolan “investments” in Portuguese luxury real estate and banks are suspicious in as much as they only benefit a small circle of entrepreneurs close to the centres of power in Luanda. Several Lisbon sources contacted by Mediapart describe a dizzying system in which Portugal serves as a hub for laundering dirty money for the country’s nouveaux riches.

Portuguese journalist Pedro Rosa Mendes, now teaching at EHESS (Ecole des Hautes Etudes en Sciences Sociales in Paris), says that the money-laundering began well before the current crisis. It started, in fact, towards the end of the 1990s, when Angola, in the midst of its civil war, granted new concessions for its petroleum reserves. The decision sparked an explosion in oil production in the country, which rapidly filled the state’s coffers and strengthened its influence on the international stage. The recession, which subsequently engulfed the countries of southern Europe in 2008, only served to speed up the great transformation of the relationship between Angola and Portugal.

A creature invented for the clan
How many people have managed to get their hands on the jewels of the ancient metropolitan power? A number of families close to the presidency in Luanda – several hundred people in all – went on the offensive, armed with Angolan and Portuguese visas. “The newspapers write about ‘presidential circles’. But it’s mostly Dos Santos himself and his own family at the front of the queue,” says Pedro Rosa Mendes.

Ms Dos Santos is one of the key figures in this steamy post-colonial sagaHis “own family”, and above all his eldest daughter. Isabel Dos Santos, aged 40. A graduate of King's College in London, and the only female billionaire in Africa, Ms Dos Santos is one of the key figures in this steamy post-colonial saga. According to the official Angolan press, she is living proof that Angola, a country where 70 per cent of the population lives on less than two dollars a day, can also be home to success stories in the world of international finance. The heiress, from an earlier marriage of Dos Santos, holds a breathtaking portfolio of assets in Portugal. In just a few years, she has taken over half the capital of the telecom giant created by the merger between ZON and Optimus, and a good chunk of Portuguese bank BPI, in which she is the second-largest shareholder with a stake of 19.4 per cent. She is also on the board of directors of another financial institution, BIC Portugal, and has shares in Amorim Energia, which controls nearly 40 per cent of Galp, one of Europe’s leading petroleum and gas groups.

Based on the value of her holdings, “the Princess” is currently the third-wealthiest person on the Lisbon stock exchange. With a fortune estimated at $1.7 bn, she has become indispensable to the Portuguese economy. At first glance, it’s difficult not to welcome the massive inflow of fresh capital, given that Portugal is slowly bleeding money… However, the issue becomes complex if you look into the dubious origins of the Ms Dos Santos’ fortune. This is what the American magazine Forbes set out to do in an investigative probe published last September, which caused a huge stir in Lisbon – but less of a commotion in Luanda. The probe’s conclusion was irrefutable: “Daddy’s girl” is a creature invented from scratch by her father in order to skim off, for the benefit of his “clan”, public revenues from petroleum and diamonds, before stashing the money abroad – in other words in Portugal

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I do sympathise with Portugal, initially they were one of the first Countries to get its economic house in order. They got dragged down by the domino effect of other EU Countries as well as Greece needing financial bail-outs. The unemployment in Portugal soared and young Graduates went to former Portugese colonies to find work. The result is an aging population left in Portugal giving cause for concern.

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Euro plummets as ECB mulls negative deposit rate

European Central Bank policymakers reportedly discuss reducing the rate for lenders who deposit excess cash at the bank to -0.1pc, from zero, sending the euro down against the dollar and sterling





The European Central Bank is considering taking monetary policy into uncharted territory by introducing a negative deposit rate that would see investors pay to park money at the Bank.

ECB data showed that banks deposited €46bn (£38.3bn) at the ECB overnight on Tuesday, although this is well below the record high of €450bn at the height of the debt crisis. Photo: Bloomberg News



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By Szu Ping Chan, and agencies

5:39PM GMT 20 Nov 2013

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European Central Bank policymakers have discussed taking monetary policy into uncharted territory by introducing a negative deposit rate that would see investors pay to park money at the bank.


Policymakers have discussed reducing the rate for lenders who deposit excess cash overnight at the ECB to -0.1pc, from zero, according to Bloomberg, which cited two unnamed sources. Such a move would be the first time a central bank has adjusted interest rates by less than a quarter of a percentage point.


The euro plummeted by more than a cent against the dollar and sterling on the back of the report, to €0.7443 and €1.2011 respectively, while European stocks pared back some of their losses.





Euro in Wednesday's trading. Source: Bloomberg


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ECB data showed that lenders deposited €46bn (£38.3bn) at the ECB overnight on Tuesday, although this is well below the record high of €827bn seen at the height of the debt crisis.

A negative deposit rate is a potential tool for warding off deflation. Official data showed that inflation fell to 0.7pc in October, from 1.1pc in September, according to Eurostat.

However, a move to push deposit rates into negative territory would likely face fierce opposition from Germany. Jens Weidmann, the president of Germany's central bank, has has warned repeatedly against further loosening of monetary policy.

"I think the short-term knee-jerk reaction is really just a consequence of people thinking that there's going to be more cheap money sloshing its way around the market," said Matt Basi, head of sales trading at CMC Markets.

"The pull-back is a consequence of the fact that people recognise that such a drastic measure would only be taken in drastic circumstances, and the failure of the euro zone to pick up and start growing along with the rest of the world."

A move into negative territory would not be the first for a central bank. Last year, the Denmark cut its deposit rate to -0.2pc in the wake of an ECB rate cut to curb strength in the Danish currency.

An ECB spokesman declined to comment.

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Debt crisis: Greece sheds incentives for reform
21 November 2013Financial Times London Tools
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Patrick Chappatte Ever since the Greek financial crisis began, Athens has complied – grudgingly – with the troika’s austerity measures. However, an ever-shrinking parliamentary majority and a primary budget surplus is leading the government to recalculate it willingness to cooperate.

Peter Spiegel
What happens if a bailout country finally decides to just say No?

It is a question that some officials with the so-called “troika” of international lenders have started asking themselves about Greece. The Greek coalition government, following more than a year in office marked by increasing obstinacy towards reform demands, insists repeatedly that it will not countenance any more austerity measures.

In many ways, Greece has lost its ability to shock. Nearly all its debt is held by its official rescuers – European governments, Eurozone institutions and the International Monetary Fund – meaning the broader financial market pays it little attention.

And stand-offs between Athens and bailout monitors have become so commonplace that they have stopped registering on most official radars, even in places like Brussels and Berlin, where policy makers are most attuned to vagaries in Greek performance.

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Historic defeat for EU as Ukraine returns to Kremlin control

Ukraine bowing to pressure from Russia is the first major defeat for the EU in its eastward march since the fall of Communism





A magazine with the European Union logo lies in a street rubbish bin in Kiev.

A magazine with the European Union logo lies in a street rubbish bin in Kiev. Photo: Reuters



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Ambrose Evans-Pritchard
By Ambrose Evans-Pritchard

6:58PM GMT 22 Nov 2013



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Twenty years after the collapse of the Soviet Union, Ukraine is slipping back under Kremlin control. Ukraine’s shock decision to opt for Vladimir Putin’s Russia and pull out of EU talks on the eve of an historic deal is a dramatic upset to the European balance of power.


It is the first major defeat for the EU in its eastward march since the fall of Communism. While the region’s geo-politics remain fluid, the upset may prove as fateful as the move by the Kossack chief Bohdan Khmelnytsky to turn his back on the West and accept Tsarist suzerainty in the 1640s.


“Ukraine’s government suddenly bowed deeply to the Kremlin. The politics of brutal pressure evidently work,” said Sweden’s foreign minister Karl Bildt.


Ukraine’s prime minister, Mykola Azarov, told Ukraine’s parliament that the country has been forced to cancel its trade and pre-accession deal with the EU because Russian sanctions are strangling the economy, “pushing Ukraine to the brink of a huge social crisis.”


The accord was due to be signed at the EU’s Vilnius summit next week. The volte-face stunned EU officials, torn between fury over Ukraine’s conduct and deep alarm over what has happened. Kiev said it acted in the “national security interest”. It has emerged that President Viktor Yanukovych flew secretly to Moscow two weeks ago to see Mr Putin.


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The pro-Kremlin outlet Russia Today said Ukraine had wisely stepped back from the EU “horror show” and accepted the real worth of Russian ties rather than hot air from Brussels. Ukraine had dodged a “death spiral” by protecting its eastern trade flows.

Mr Putin has been tightening the screws for months, blocking shipments of goods and targeting heavy industry in the eastern region that depends on the Russian market.

A freeze on imports of railway carriages has hit 80pc of Ukraine’s carriage output. Another victim is Roshen chocolate, owned by Petro Poroshenko, a champion of the EU cause in Ukraine’s parliament. Roshen sales in Russia have been banned for “toxic impurities”.

The guerrilla warfare tactics have pushed Ukraine to the brink of financial collapse. Foreign reserves have fallen by 30pc this year to $20.6bn (£12.7bn).

This is just 2.3 months of imports, far below the “safe” cover level of six months. The economy contracted 1.5pc in the third quarter, pushing bad loans in the banking system have to 30pc. Total foreign debt has reached 77pc of GDP.

The country has to roll over or repay $10.8bn in foreign debt by the end of 2014, an almost impossible task given that capital markets are effectively closed.

The government has been trying to play off Russia against the EU and International Monetary Fund, but the strategy has blown up in their faces. The IMF suspended a $15bn stand-by credit in 2011 for non-compliance, and has continued to demand radical reforms before any more money is released.

Mr Azarov said the “straw that broke the camel’s back” on the EU deal was a fresh list of harsh demands by the IMF this week, including a 40pc rise in gas bills, a salary freeze, big budget cuts, and lower energy subsidies. “All they were willing to lend us is enough to pay them back again,” he said.

An IMF spokesman said Ukraine needs “deep-reaching structural reforms” and exchange rate flexibility, IMF code for a devaluation.

Liza Ermolenko from Capital Economics said the rupture with the EU is a grave blow to Ukraine’s long-term hopes, but averts an immediate crisis. “It might have been dangerous for them to sign the deal because Russia would have retaliated. That threat has been lifted,” she said.

Ukraine’s bizarre predicament was captured by Moody’s when it cut the country’s debt rating to C grade in September because of the forthcoming EU deal. “While Moody’s views this agreement as credit positive in the medium-term, given that it will support Ukraine’s institutions, the short-term impact of a negative reaction by Russia outweighs these benefits,” it said.

Russia’s Mr Putin has offered a three-way dialogue with the EU and Ukraine, hoping to repeat the diplomatic feat he pulled of with the West over Syria’s chemical weapons. “We are ready to participate in such talks. This is the test of how serious our European partners are,” he said.

Mats Persson from Open Europe said the collapse of talks is a major defeat for EU strategy. “The lesson is that EU’s soft-power diplomacy has hit its limits. Playing carrot and stick doesn’t work when you come up against a real hard power like Russia. This is a highly significant moment,” he said.

The problem is intractable because Ukraine has reneged on countless promises. The EU has accused the government of “selective justice” against opposition leaders, including former premier Yulia Tymoshenko, who is still languishing in prison after a hunger strike last year.

Germany has demanded her release as condition for any EU deal, but she is still viewed as a major political threat by President Viktor Yanukovych.

The EU says the door is “still open” for Ukraine but opinion is split. One official told the EU Observer that Mr Yanukovych should be left to stew in his own juice.

“We should make clear that Ukraine is not welcome. There should be no more phone calls. No more offers. Six months down the line, when left alone to deal with Russian pressure, he will come to us on his knees,” he said.

Yet for all the fury with Ukraine in Brussels, there is no disguising the damage done to EU prestige and power. It is an astonishing that this pivotal nation of 46m people should be returning to Russia’s orbit 22 years after breaking free from the Kremlin.

European statesman Jacques Delors once likened the EU to a bicycle that must keep rolling forward to stay upright. It has just toppled over.

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