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We can’t wave goodbye to the euro crisis just yet
Since last summer, the euro crisis has apparently abated. Optimists have believed that it has finally been laid to rest.

Peripheral eurozone countries are "in a bad way". Photo: REUTERS/Yannis Behrakis
By Roger Bootle
8:00PM BST 07 Jul 2013
156 Comments
The more cynical among us have thought this particular parrot was merely sleeping. All along, despite the markets’ quiescence, the fundamental economic problems which underlay the crisis have failed to improve.

And then last week the crisis flared into life again. Portugal’s finance minister resigned, citing, among other things, a decline in public support for the austerity policies the government has adopted in return for its bail-out. He was followed by the foreign minister.

While the coalition government will probably hold together, the latest developments have highlighted growing rifts over austerity policies. The chances of the government lasting until the end of its term (October 2015) seem pretty slim. More importantly, these events reduce the chances of the government successfully exiting its bail-out.

Meanwhile, it has become clear that Greece is in trouble again. Actually, the economic numbers have recently improved. The reduction in the budget deficit even appears to be running a bit ahead of schedule.

But the Troika (the IMF, the ECB, and the European Commission) is, once again, increasingly concerned that Greece is failing to implement the reforms demanded of it. In particular, that it is backsliding on the targeted reductions in public-sector employment.

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If it remains dissatisfied with Greece’s progress, then at today’s Eurogroup meeting, eurozone finance ministers will be unable to sanction the release of the next loan payment from the European Stability Mechanism (ESM).

Since eurozone finance ministers are not scheduled to meet again until September, a failure to sign off the latest loan disbursement could mean that Greece has to wait another three months until its next ESM loan is disbursed, potentially leaving her unable to meet a €2bn (£1.72bn) bond redemption in August.

What’s more, the IMF has voiced concerns that the current bail-out may not fully cover Greece’s financing needs for the next 12 months. Unless this hole is filled, either by Greece or the eurozone, the Fund could also suspend its loan payments.

Even if Greece bows to the Troika’s demands, the government’s wafer-thin majority in parliament suggests that it may struggle to implement these measures.

Now both Portugal and Greece are relatively small economies. Although their economic position is dire, it is quite easy to imagine some sort of euro fudge which enables them to get their money somehow, thus postponing the denouement. The German chancellor, Angela Merkel, calls the shots. For her, it is most important to put any crisis off until after the elections in September.

Meanwhile, the other peripheral countries remain in a bad way. Italy is deep in recession. In the first quarter, GDP was 2.3pc lower than a year earlier and 8.7pc below its Q3 2007 peak. It looks as though the economy will contract further this year.

Last year, the Italian budget deficit was just 3pc of GDP. Based on misleadingly optimistic GDP forecasts, the government expects the deficit to edge down slightly this year. By contrast, I expect it to rise to about 4pc of GDP. By 2015, public debt will probably exceed 140pc of GDP.

Admittedly, at just over 12pc, the unemployment rate is low by the standards of other peripheral economies. But, if anything, the labour market downturn appears to have intensified recently.

Spain shows some definite signs of improvement. Since the beginning of 2010, exports have risen by 18pc, as fast as exports from Germany. But unemployment is almost 27pc. Moreover, public debt, at 84pc of GDP last year, looks set to rise above 100pc by the end of 2014. Further sharp falls in domestic spending seem likely and banks’ bad loans look set to rise, too.

Ireland, the poster boy for the euro-zone’s austerity drive, has recently suffered something of a relapse. In Q1, GDP fell for the fourth time in five quarters. The main reason behind the recovery fizzling out has been a slowdown in the external sector.

This suggests that Ireland’s apparent improvement in competitiveness – whole economy unit labour costs are 16pc below their peak – has either not been quite what it appears, or the benefits have been swamped by a slowdown in demand in its major export markets. The unemployment rate is still over 13pc. What’s more, with the budget deficit over 7pc of GDP last year, yet more austerity is to come.

Although there have been improvements in some of the peripheral countries, the most striking recent development has been the deterioration in France, which has officially re-entered recession after 18 months of stagnation. Moreover, it has recently lost a good deal of competitiveness, not just against Germany but also against the peripheral countries. And the continuing high budget deficit implies the need for more austerity.

What we are witnessing across the eurozone is the reassertion of economics over euro-politics and the power of the fundamentals over Draghi’s clever wheeze of so–called Outright Monetary Transactions (OMTs).

Some wag once quipped about the Holy Roman Empire that there were only three things you really needed to remember about it: that it wasn’t Holy, it wasn’t Roman and it wasn’t an Empire. Similarly, OMTs are not Outright, they are not Monetary and they are not Transactions.

Draghi has not bought a single bond under the OMT programme.

What’s more, as the OMT facility is currently set up, the ECB is unable to buy the bonds of Spain and Italy, the two largest peripheral countries and the ones which could pose the greatest trouble for the eurozone, because it is a condition of the programme that to be eligible a country must be in a bail-out programme, subject to tight external budgetary constraints and oversight.

It cannot even buy Greek bonds, and probably not Irish or Portuguese bonds either, because they are currently unable to issue bonds to the markets – a further condition for the use of OMTs.

Meanwhile, the domestic political limits to austerity are becoming evident. The electorates of countries in the grip of austerity are close to breaking point. Although dramatic developments this week remain possible, it would be wrong to expect them: more fudge and mudge is more likely. Doubtless the saga has many more acts to run. But those who think that the euro crisis is all over are in for a rude awakening.

Roger Bootle is managing director of Capital Economics. Contact him at roger.bootle@capitaleconomics.com

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EU-US trade negotiations: Talking terms on the deal of the century



8 July 2013
The Daily Telegraph London

The EU-US trade talks, which begin in Washington on July 8, could unlock tens of billions of euros worth of savings and cut away needless bureaucracy. But a lack of trust after the recent US eavesdropping scandal is only the first of many hurdles to be overcome.

Katherine Rushton

Washington DC is not a city that lacks for bureaucrats. This week there will be even more of them than usual. The US capital is about to play host to the first round of the bilateral trade talks between America and the European Union, a sweeping set of negotiations, the ultimate aim of which is to reduce the obstacles to the two economic blocs doing business with each other.

In broad terms, the two sides will try to eliminate import duties on goods traded between the economic giants. They will also battle to reduce red tape, so that international businesses can expand more easily.

The sheer scale of America’s commercial relationship with Europe means that even minor improvements will have a major impact on the economies either side of the Atlantic.

As Europe faces another year of stagnation and economists obsess about the growing clout of emerging economies such as China, India and Brazil, the trading relationship between the US and EU remains the biggest in the world.

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Greece: Bungled reforms



9 July 2013
To Ethnos Athens

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The eurozone and the IMF decided on 8 July to hand Athens a new tranche of aid in exchange for the sacking of 15,000 civil servants. If they want to lose the support of the population for the necessary reform of public services, that’s the best way to go about it, a Greek columnist complains.

Panos Panagiotopoulos

The in-depth reform of Greek public administration is urgently needed and a priority for the country. The assessment of structures and personnel, as well as their mobility, should be a permanent feature of how the public service is run.

This is the only way that we can we build a modern, productive, efficient state. And it should be a feature of all reforms. If they are to benefit the Greek people, the reasoning goes, they ought to have a positive impact. But as they are sometimes pushed through in a desultory fashion, they make the people who should back them mistrustful.

Take how changes are rung in within the public service. The primary goal, for example, is to lay off 15,000 civil servants. To avoid upsetting the public, the talk is of “assessment” and “mobility”. In short, whatever it takes to achieve a goal that has already been set – the lay-offs. This belittles the importance of the Greek public service and breeds mistrust and a negative political and social climate just when modernisation is vital.

Unable to pick up the pieces

And this is all the more the case, because there is no prospect of any structural benefit that will ensue from this "emergency procedure". So, in reality, a very serious procedure has been devalued, all because the troika continues to pile on pressure with its weird ideological obsessions. The danger of such a procedure, however, is that it runs the risk of jeopardising the functioning of town halls, schools, hospitals and other public services. The manner in which the implementation of reforms is managed has a major impact on their chances of success; when almost everyone is against the reformers, reforms are very difficult to push through. Indeed, we have seen how the closure of Greece’s public radio and television was bungled. Now the members of the government have been wrong-footed and they are incapable of picking up the pieces.

Unfortunately, despite the last three and a half years of endless rhetoric about ‘reform’, it has become clear that the public service is getting worse every day, and it is citizens who are paying the price. As a result the Greek population is even more mistrustful...

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El País editorial es


From Madrid

“A perverse pattern”

The agreement for an additional €6.8bn euros for Greece is nothing short of a "recidivist spiral", writes El País. For the Spanish daily —


… the Greece-EU pattern continues: failure to meet commitments, further compromises and the disbursement of aid.The recurrent script consists of three phases. Firstly, the troika concludes that a government subject to intervention has failed to honour agreed conditions. Secondly, the concerned government seeks a compromise in which it pledges to compensate for tasks that have not been completed with other measures – cuts, reforms or both – or it proposes a scheduling modification with the objective of facilitating the handover of EU aid. [...] There is no disguising the reality of this perverse pattern: countries in receipt of bailouts are forced to submit to huge pressure that aggravates their tendency to welsh on their commitments (Greece) and/or undermines governments that implement required cuts (Portugal). We should also bear in mind that the position of those supplying aid is contradictory: on the one hand they insist on austerity measures in rescued countries, on the other, they conclude, as the IMF has done, that their problems have been made worse austerity.

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Europe gears up for a final, toxic confrontation



10 July 2013
Financial Times London

Despite encouraging signs, there is no evidence that the crisis is fading, writes Tony Barber.

Tony Barber

One month before their annual August holidays, Europe’s leaders doubtless would like, for the first time in four years, to enjoy the sun without dreading that all hell is about to break loose in the eurozone. Events over the past week offer certain grounds for optimism.

After a crisis flared in Portugal last week with the finance minister’s resignation, it took just seven days for the nation’s leaders to bring it under control and calm financial markets. In Greece, which like Portugal survives on international life support, lenders are finding a way to keep the emergency funds to Athens flowing in return for admittedly incomplete reforms.

On a wider front, Croatia’s entry into the EU, the decision to start membership talks with Serbia and the approval of Latvia’s request to join the eurozone illustrated the continuing appeal of European unity. Finally, latest purchasing managers’ indices, which measure the outlook for private companies, were the most buoyant since March 2012. Europe should haul itself out of recession in the second half of this year.

These signs are encouraging but provide no real evidence that the crisis is fading, merely that it is entering a different phase. The next 12 months will throw up political, social and financial market challenges that will once again test Europe’s crisis management skills.

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Home»Finance»Comment»Ambrose Evans-PritchardThe wheels are coming off the whole of southern Europe
Europe’s debt-crisis strategy is near collapse. The long-awaited recovery has failed to take wing. Debt ratios across southern Europe are rising at an accelerating pace. Political consent for extreme austerity is breaking down in almost every EMU crisis state. And now the US Federal Reserve has inflicted a full-blown credit shock for good measure.

A leaked report from the European Commission confirms that Greece will miss its austerity targets yet again by a wide margin Photo: Reuters
By Ambrose Evans-Pritchard
8:50PM BST 10 Jul 2013
218 Comments
None of Euroland’s key actors seems willing to admit that the current strategy is untenable. They hope to paper over the cracks until the German elections in September, as if that is going to make any difference.

A leaked report from the European Commission confirms that Greece will miss its austerity targets yet again by a wide margin. It alleges that Greece lacks the “willingness and capacity” to collect taxes. In fact, Athens is missing targets because the economy is still in freefall and that is because of austerity overkill. The Greek think-tank IOBE expects GDP to fall 5pc this year. It has told journalists privately that the final figure may be -7pc. The Greek stabilisation is a mirage.

Italy’s slow crisis is again flaring up. Its debt trajectory has punched through the danger line over the past two years. The country’s €2.1 trillion (£1.8 trillion) debt – 129pc of GDP – may already be beyond the point of no return for a country without its own currency.

Standard & Poor’s did not say this outright when it downgraded the country to near-junk BBB on Tuesday. But if you read between the lines, it is close to saying the game is up for Italy.

Its point is that if “nominal GDP” remains near zero, Rome will have to run a primary surplus of 5pc of GDP each year to stabilise the debt ratio. “Risks to achieving such an outturn appear to be increasing,” it said.

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Indeed. The International Monetary Fund has just slashed its growth forecast for Italy this year to -1.8pc. The accumulated fall in Italian output since 2007 will reach 10pc. This is a depression. Yet how is the country supposed to get out of this trap with its currency overvalued by 20pc to 30pc within EMU?

Spain’s crisis has a new twist. The ruling Partido Popular is caught in a slush-fund scandal of such gravity that it cannot plausibly brazen out the allegations any longer, let alone rally the nation behind another year of scorched-earth cuts. El Mundo says a “pre-revolutionary” mood is taking hold.

A magistrate has obtained the original “smoking gun” alleging that Premier Mariano Rajoy accepted illegal payments as a minister. The Left is calling for his head but so are members of the Consejo General del Poder Judicial, the justice watchdog.

“Citizens cannot tolerate a situation where the prime minister has received undeclared payments,” said José Manuel Gómez, a Consejo member. Much of the ruling party appears tainted by a network of covert funding. If proved, said Mr Gomez, it poses a “very grave” threat to Spanish democracy.

Portugal is slipping away. Professor João Ferreira do Amaral’s book - Why We Should Leave The Euro – has been a bestseller for months. He accuses Brussels of serving as an enforcer for Germany and the creditor powers.

Like Greece before it, Portugal is chasing its tail in a downward spiral. Economic contraction of 3pc a year is eroding the tax base, causing Lisbon to miss deficit targets. A new working paper by the Bank of Portugal explains why it has gone wrong. The fiscal multiplier is “twice as large as normal”, or 2.0, in small open economies during crisis times.

What is new is that Vitor Gaspar, the high priest of Portugal’s shock therapy, has thrown in the towel. He blames the fainthearted for refusing to slash with greater vigour. Needless to say, he still refuses to accept that a strategy of wage cuts and deflation in a country with total debt of 370pc of GDP was always likely to fail.

If Portugal does pull off an “internal devaluation” within EMU it will shrink the economic base. Yet the debt burden remains. This is the dreaded denominator effect. Public debt has jumped from 93pc to 123pc since 2010 alone.

The Gaspar exit has closed a chapter. The junior coalition partners are demanding a change of course. I write before knowing whether President Anibal Cavaco Silva will call a snap election, opening the way for a Left-leaning anti-austerity government.

The Portuguese press is already reporting that the European Commission is working secretly on a second bail-out, an admission that the wheels are coming off the original €78bn EU-IMF troika rescue.

This is a political minefield. Any fresh rescue would require a vote in the German Bundestag, certain to demand ferocious conditions if this occurs before the elections.

Europe’s leaders have given a solemn pledge that they will never repeat the error made in Greece of forcing an EMU state into default, with haircuts for banks and pension funds. If Portugal needs debt relief, these leaders will face an ugly choice.

Do they violate this pledge, and shatter market confidence? Or do they admit for the first time that taxpayers will have to foot the bill for holding EMU together? All rescue packages have been loans so far. German, Dutch, Finnish and other creditor parliaments have never yet had to crystallize a single euro in losses.

All this is happening just as tapering talk by the Fed sends shockwaves through credit markets, pushing up borrowing costs by 70 basis points across Europe. Spanish 10-year yields are back to 4.8pc. These are higher than they look, since Spain is already in deflation once tax distortions are stripped out. Real interest rates are soaring.

By doing nothing to offset this, the ECB is allowing “passive tightening” to occur. Mario Draghi’s attempt to talk down yields with his new policy of forward guidance is spitting in the wind. The ECB needs to turn on the monetary spigot full blast – like the Bank of Japan – to head off a slide into deflation trap and enveloping disaster by next year. This is not going to happen.

Der Spiegel reports that the German-led bloc fought vehemently against a rate cut at the last ECB meeting, even though Germany itself has slowed to a crawl as China and the BRICS come off the rails.

Markets have reacted insouciantly so far to these gestating crises across Club Med. They remain entranced by the “Draghi Put”, the ECB’s slowly fraying pledge to backstop Italian and Spanish debt, forgetting that the ECB can only act under strict conditions, triggered first by a vote in the Bundestag.

These conditions can no longer be fulfilled. The politics have curdled everywhere.

Sooner or later, this immense bluff must surely be called.

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European Union: Help, Juncker is leaving



12 July 2013
Frankfurter Allgemeine Zeitung Frankfurt

Comment

Jean-Claude Juncker arriving at an EU summit in Brussels, 2012
AFP

Senior European leader Jean-Claude Juncker resigned as prime minister of Luxembourg on July 11. Frankfurter Allgemeine Zeitung asks how the EU would be able to function without this figure, who embodies the key elements of European unification.

Günther Nonnenmacher

The resignation of Luxembourg prime minister Jean-Claude Juncker is primarily an internal matter for the Grand Duchy. Luxembourg’s secret service, an agency that reportedly has five dozen employees, is alleged to have been living a “life of its own”, or at least one over which the prime minister failed to exert sufficient control.

At the root of the matter is an affair that goes back to the 1980s, but it is not clear whether Juncker’s resignation means he will disappear from Luxembourg’s political scene. He wants to lead his Christian Social People’s Party into the election campaign, and it is quite possible that the still-popular politician, who has been prime minister since 1995, will be heading up the next government.

The tremors in Luxembourg will not rattle Europe, even if Juncker has played a prominent role in European politics over the past decades. As early as 1991, he was chairing the Council of Economic and Financial Affairs (ECOFIN) and was thus significantly involved in the drafting of the European economic and monetary union, and from 2005 until the beginning of 2013 he chaired the Eurogroup of eurozone finance ministers. His resignation is not only symptomatic, but also highly symbolic.

Equal footing at the negotiating table

Juncker is living proof of the new and altered roles that small states can play in European post-war politics, moving along the path from the European Economic Community to the Commission and up to the present-day European Union (EU). Small states are no longer the provinces of European imperialism, but sit at the negotiating table on an equal footing with the French president, the German chancellor and the British prime minister. Their leaders speak on equal footing, in a European capacity, with Russian president Vladimir Putin and his American counterpart Barack Obama.

At that negotiation table, the smaller member states have never questioned the leadership role of the bigger states that comes with their greater economic weight and political power. But they do want to talk and to have a say in the decisions, and Juncker has proven that they can bring intelligence and skill to bear as well.

Juncker embodies another core element of the European project: the basic European Christian Democratic consensus that has shaped unification through the founding fathers Schuman, de Gasperi and Adenauer. This is based on a balance between capital and labour, and on a social (and socio-political) consensus that a social democrat, former German chancellor Gerard Schröder of all figures, captured in a pithy phrase: “If things go well for German industry, things go well for the German workers, too.”

A man past his prime?

This foundation has been shaken and battered by the winds of globalisation, but Juncker believes in it firmly, not only as an objective of national policy, but as a condition of European unification. As a result, some people consider him old-fashioned.

Some also find his commitment to a federal vision of Europe old-fashioned as well. Towards the end of his own political career, former German chancellor Helmut Kohl, who respectfully called Juncker “Junior”, renounced the dream of the “United States of Europe”.

But neither is Juncker a utopian, even if he would probably agree with Swiss writer Max Frisch’s quip that “one is not a realist just because one has no ideas”.

Juncker knows that an EU with 28 members will no longer fit into the mould that was formed for the six European states of the period immediately following the Second World War. For him, federalism has remained something like a regulative idea in the Kantian sense: any decision at European level must be judged by whether it is, in the long run, compatible with the aim of supra-nationality or an obstacle to it.

Sceptical and suspicious, Juncker has questioned whether national interests and egoisms are not becoming stronger in the wake of the euro crisis as deals are hammered out between the leaders of the large states at the expense of the European institutions. Furthermore, he considers these deals soberingly incompetent and politically mistaken, which is why he started an argument with German chancellor Angela Merkel and fell out with former French president Nicolas Sarkozy.

Donald Rumsfeld, the former United States Secretary of Defense, would probably have seen Juncker as the prototype of the “old European”. Indeed, he probably is. But one may doubt whether an EU in the process of renewal can remain on course so long without the commitment of politicians like him.

Translated from the German by Anton Baer

[malena stool]

I don't see a problem, the EU can never succeed while there are dozens of different languages and the same  Euro buys less in one country than in another and poor or failing economies are penalised at the expense of the poor in that community, not the rich nor the banking system.

The quicker the whole rotten edifice collapses the better allowing each state to revert to its own currency and its economy and future is directed by their elected leaders, not a faceless foreign billionaire.

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I think the Northern Cointries will want to keep the Euro but there is no way these bailouts can be repaid malena and the World economy is very fragile , only needs one small thing to tip us into depression.

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Europe’s misplaced arrogance



15 July 2013
Knack Brussels

Comment11




Ahead of this month’s meeting of G20 finance ministers in Moscow, Europe is waving an admonishing finger at the United States, Japan and China. A very misplaced act, given the fact that the eurozone crisis is far from over.

Johan Van Overtveldt

There looks to be no summer holidays in the plans for Europe’s finance ministers. Having just completed the Ecofin meeting, preparations are in full swing for their G20 summit gathering in Moscow on July 19-20, and policy initiatives to stimulate worldwide economic growth are at the top of the agenda.

The documents adopt a remarkably aggressive tone towards the United States, Japan and China

Bloomberg News has acquired and published excerpts of a planning document for the meeting that was drawn up in the European Union. The documents adopt a remarkably aggressive tone towards the United States, Japan and China: “The absence of a credible budgetary recovery plan in the medium-term in the US forms a significant downward risk for global recovery”, warns the document, which also urges the US to “make progress in addressing the medium and long term fiscal challenges it is facing, and deal with the debt-ceiling issue”.

The EU shakes its finger

The EU document has the following message for Japan: “We expect that Japan will put in place a credible medium-term fiscal consolidation plan to address its possible spillover effects on the domestic and foreign financial systems from its policy program to end deflation.” According to the document, China for its part should “speed-up structural reforms” and bring its exchange rate in line with market reality.

What we would give to be a fly on the wall in Moscow to witness the reprimanded countries’ response to the EU criticism. If the contentious document does indeed make it to the negotiating table, EU representatives should prepare themselves for a snide riposte. Despite the undeniable logic behind the recommendations made by the EU, the fact that Europe is doing the preaching is very odd.

The euro crisis is far from over

French government officials in particular are proudly proclaiming that the euro crisis has come to an end. That, of course, is abject nonsense. Portugal, Greece and Cyprus are facing a social catastrophe, guaranteed to require additional help before the end of the year. The [Enrico] Letta government in Italy appears to be both crumbling and paralysed at the same time. The French government under President François Hollande is as vocal as it is passive. Banks in Spain are sitting on toxic portfolios, while the health of the financial sectors in France, Germany and the Netherlands still gives reason for concern.

Structural solutions for attacking the euro crisis are, in fact, far from operational. And to make matters worse, the European continent, with the exception of a few countries, is still seeking to tackle the problem with higher taxes and a hostile business climate. A greying population will cause to huge rise in costs and ever-greater budget deficits. It is not a smart move for Europe to read the riot act to others. One can only wonder whether the three other major powers will be content to dismiss the criticism, or whether their reaction will be more fierce.

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Eurozone: Europe gears up for a final, toxic confrontation



10 juillet 2013
Financial Times Londres

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Despite encouraging signs, there is no evidence that the crisis is fading, writes Tony Barber.

Tony Barber

One month before their annual August holidays, Europe’s leaders doubtless would like, for the first time in four years, to enjoy the sun without dreading that all hell is about to break loose in the eurozone. Events over the past week offer certain grounds for optimism.

After a crisis flared in Portugal last week with the finance minister’s resignation, it took just seven days for the nation’s leaders to bring it under control and calm financial markets. In Greece, which like Portugal survives on international life support, lenders are finding a way to keep the emergency funds to Athens flowing in return for admittedly incomplete reforms.

On a wider front, Croatia’s entry into the EU, the decision to start membership talks with Serbia and the approval of Latvia’s request to join the eurozone illustrated the continuing appeal of European unity. Finally, latest purchasing managers’ indices, which measure the outlook for private companies, were the most buoyant since March 2012. Europe should haul itself out of recession in the second half of this year.

These signs are encouraging but provide no real evidence that the crisis is fading, merely that it is entering a different phase. The next 12 months will throw up political, social and financial market challenges that will once again test Europe’s crisis management skills.

Lire l'article intégral – Financial Times en

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Señor Rajoy, it is time to give answers



16 July 2013
El País Madrid

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Implicated in his party’s secret funding scandal, Spain’s prime minister has chosen to say as little as possible. Rajoy must cease his attempts to buy time and explain himself before Parliament, just as he would be expected to do in other European countries, argues El País.

El País

Mariano Rajoy responded with a resounding “no” to opposition calls for him to resign. But he did not give it in his parliamentary headquarters, nor while offering any detailed explanation of the [former People’s Party (PP) treasurer Luiz] Bárcenas case; he gave it as an aside [on July 15] during a press conference with the Polish prime minister and through a statement prepared in advance. [Rajoy] knows very well that what we heard yesterday was not the explanation that is being demanded, and that he will not get off so easy before Parliament.

This happened on the same day the former head and treasurer of the PP confirmed his change of strategy before a judge. From originally denying the authorship of the accounting records published [by El País] on January 31, Bárcenas has not only moved on to acknowledging them, but is presenting them as evidence of an established system of bonuses and busy trail of slush fund money moving in and out of PP headquarters. He has struck [former prime minister] José María Aznar off the list of recipients and fingered Rajoy and [PP secretary general] María Dolores de Cospedal, giving the concrete amounts they received, although he also says he did not keep the corresponding messages. Indeed, he did come up with a document on the transfer of €200,000 in 2007 to the PP’s manager at the time in Toledo, allegedly in exchange for a cleaning contract, when Cospedal was president of the PP in Castilla – La Mancha. Cospedal denies the accusation and describes the Bárcenas’s other claims as a heap of “slander and lies”.

A useless attempt

The court must pursue its investigation firmly, but the explanations that the citizens need do not end there. The unknowns are multiplying following Bárcenas’s declarations and highlight even more the degree of the former treasurer’s implication, as well as the grave suspicions about a system of revenues and irregular payments into the party. To argue there is no collusion with Bárcenas because he is in prison is not only simplistic; it is a dangerous argument in the mouths of political leaders, because it suggests that the executive branch can decide who goes to jail and who does not.

Rajoy is grasping for political stability

Rajoy is grasping for political stability, implying only stability will see through his government’s reform agenda. By doing so, he seeks to throw the debate into the classical exchange between government and opposition. But he is avoiding doing so in Parliament, the natural meeting place of majorities and minorities and the seat of Spanish sovereignty. Rajoy is right to not discuss the matter in public, with the former treasurer or his entourage. But to make it acceptable for the Spanish people, he must answer to the parliamentary caucuses, as he would be required to do in the countries neighbouring Spain.

The problem continues to be posed in the same terms as before yesterday’s press conference, and the only temporary advantage that Rajoy can count on is the split in the opposition regarding the strategy to be followed. The head of the government is trying to dig in and win a few weeks or months of political life by putting off the problems until later. It is a useless attempt, considering the severity of the allegations and what they mean for citizens.

Translated from the Spanish by Anton Baer

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Original article at El País es
Article in ABC es


Counterpoint

This “Blackmail” threatens a country in crisis

“Rajoy will not give in to the blackmail from Bárcenas and his accomplices,” headlines ABC. The conservative daily deplores what it considers a campaign to bring down the prime minister, orchestrated with the complicity of certain newspapers including rival conservative daily El Mundo.

For one thing, ABC reports that El Mundo director Pedro J. Ramírez met with Luis Barcenas and helped him find a new lawyer.

But above and beyond this polemic, remarks ABC columnist Ignacio Camacho —


… the problem for the nation is that the siege of Rajoy is undermining institutional stability at a critical moment. It is impossible to govern under such conditions. If the cabinet falls, the resulting earthquake will have geopolitical implications. At a time when Europe has been bled dry by structural weakness, Spain is the only country in the south of the Union whose government has the benefit of an absolute majority. The consequences of this upheaval, which could destroy the government, look to be disastrous

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Greece Passes Job Cuts As Thousands ProtestThousands take to the streets ahead of a parliament vote that saw Greece pass new austerity measures.5:55am UK, Thursday 18 July 2013 Video: Greece Protests As Bill Passed
EmailGreece's parliament has narrowly approved a new batch of austerity measures that will see thousands of public-sector job cuts.

The country has been kept out of bankruptcy since it started receiving rescue loans in 2010 from the International Monetary Fund and other euro nations.

However austerity measures demanded in return have caused a dramatic increase in poverty and unemployment.

The new legislation will put 12,500 public-sector staff, mostly teachers and municipal workers, in a program that subjects them to involuntary transfers and possible dismissals.

It will also pave the way for 15,000 layoffs by the end of next year.

City halls across the country have been closed this week, with uncollected rubbish piling up on the streets, and unions held a general strike on Tuesday against the proposed cuts.


Thousands of protesters chanted slogans before the vote

"I fully understand the hardship the Greek people are going through during the great crisis," Finance Minister Yannis Stournaras said during the debate.

"But I am fully convinced that the path we have chosen is correct."

Some 3,000 people protested outside Parliament in central Athens ahead of the vote, chanting anti-austerity slogans in a third straight day of protests.

The crucial vote came hours before a visit to Athens by German Finance Minister Wolfgang Schaeuble, planned amid security measures that Greece's left-wing main opposition party denounced as "fascist and undemocratic".

The measures include a ban of all demonstrations in the city centre, including the area outside Parliament that has been the focus of past violent protests.

It was the first major test for conservative Prime Minister Antonis Samaras since a left-wing party abandoned his coalition government last month.

The government claims it has already made progress in stabilising the shattered economy.

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Greece’s former Finance Minister George Papaconstantinou will face a panel of judges after lawmakers voted in favor of indicting him over his handling of a list of Greeks with bank accounts in Switzerland.

A majority in Greece’s 300-seat parliament voted early today to ask a panel of judges to determine if Papaconstantinou, a former finance minister in the government of George Papandreou, should be tried on charges including criminal breach of trust and falsifying a document.

Papaconstantinou is being investigated for allegedly removing relatives’ names from a list of Greeks with accounts at a branch of HSBC Holdings Plc (HSBA) in Geneva. The so-called Lagarde list is an electronic file of 2,062 people with deposits at the branch that was given to the government in 2010 by France’s then-finance minister, Christine Lagarde.

Papaconstantinou, who negotiated Greece’s first bailout by the European Union and the International Monetary Fund in 2010, denied the charges speaking in parliament yesterday.

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Editorial


Being top of the class is not always easy. A founder member of the European Union and home to its largest population and most powerful economy, Germany sits at a crossroads between Northern, Southern, Western and Eastern Europe. In the current period of economic crisis and amid fears about the future of the euro, it has also become the main pillar of the EU, whose support is critical for every decision, and whose funds are essential to any effort to bail out weaker member states.

However, notwithstanding its pivotal role, the idea that Germany has a problem with the EU is increasingly gaining ground. Berlin has been criticised for a lack of solidarity towards countries in difficulty, its reluctance to take incisive action, and its desire to impose on other nations the austerity model that it has implemented with such apparent success.

One political figure in particular has become the focus for many of these reproaches: Chancellor Angela Merkel. Powerful but on occasion too mild-mannered, indecisive but inflexible, dominant but also constrained by a complex political system, she has now come to symbolise the Germany of today in Europe. And let’s not forget her occasionally troubled alliance with French President Nicolas Sarkozy, which has highlighted the insufficiencies of a relationship that is critical for Europe.

At a time when claims that Germany wants to dominate Europe are clearly informed by a vision of history that no longer holds sway, the articles gathered in this briefing explain why she is now the somewhat reticent leader of a Europe where idealism has been superseded by pragmatism.

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By Ambrose Evans-Pritchard
7:54PM BST 18 Jul 2013
131 Comments
“Greece must stop lobbying for a second restructuring of its debt. We have to stick to what has been agreed. Anything else is not in the best interest of Greece,” he said, during a day of political clashes in the capital. “If you take guarantees and then you are discussing a haircut, you are a liar. You will destroy any confidence.”

Mr Schauble admitted that Greece may ultimately need a second bail-out package as public debt spirals to 176pc of GDP this year, higher than when Greece first defaulted. The privatisation plan intended to chip away at the debt has stalled. Russia’s Gazprom has pulled out of a deal to buy Depa, the Greek gas utility.

But Mr Schauble insisted that talk of writing off loans from EMU bail-out funds or imposing losses on northern eurozone taxpayers would have a devastating impact on support for Greece.

The warnings came a day after the Greek parliament cleared the way for 25,000 state workers to lose their jobs over the next two years – the condition for €6.8bn (£5.9bn) in fresh loans from the EU-IMF-ECB Troika. The lay-offs risk pushing the unemployment rate towards 30pc.

Demonstrations were banned on the main road to Athens airport, while Syntagma Square was closed to prevent anti-German protesters wearing Swastikas and carrying Nazi banners approaching parliament.

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Schäuble opens window to debt reduction’



19 July 2013

Presseurop
I Kathimerini
I Kathimerini, 19 July 2013

On a visit to Athens on July 18, Wolfgang Schäuble ruled out the hypothesis of a further restructuring of Greece’s debt, notes I Kathimerini.

However, the German finance minister did not exclude the possibility of more reforms starting at the end of 2014 to reduce the country’s debt if Greece proves to be unable to cut its spending.

On the occasion of Schäuble’s visit, Greece and Germany concluded an agreement on the establishment of an investment fund for Greece with the goal of providing loans to SMEs, which is to be based on the model of Germany’s publicly owned KFW development bank. The daily welcomes the initiative, which it describes as a “relief" for the relaunch of the Greek economy.

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20 July 2013 Last updated at 02:54 Share this pageEmail Print Share this page

ShareFacebookTwitter.Portugal political crisis talks break down Socialist leader Antonio Jose Seguro said his party's proposals were rejected Continue reading the main story
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A week of talks by Portugal's three main parties on how to end a political crisis has broken down, leaving the country's bailout programme in doubt.

President Anibal Cavaco Silva is seeking a "national salvation" deal to back austerity policies demanded by EU and IMF lenders.

But opposition leader Antonio Jose Seguro said the governing coalition had rejected most of his party's proposals.

He said it was now up to the president to decide how to end the crisis.

It began nearly three weeks ago with the resignation of the finance and foreign ministers.

Foreign Minister Paulo Portas was unhappy with the extent of the austerity measures needed to comply with the conditions set in the 78bn euros ($102bn; £67bn) bailout received in May 2011.

Finance Minister Vitor Gaspar - seen as the architect of austerity - quit because of a lack of support for his approach.

Lisbon has had to request a delay in the eighth review of the bailout by its creditors. The review was due to start last Monday but has been put back until the end of August or early September.

Coalition parties made no comment in the immediate aftermath of the talks on Friday.

However, socialist leader Mr Seguro told reporters: "There were two different visions to exit the crisis. That being clear, it made no sense to continue negotiating for the sake of negotiating."

Analysts say the president could still avoid an escalation of the crisis by keeping the governing coalition in place rather than calling a snap election.

The austerity cuts are widely blamed for keeping Portugal in recession over the past two years, angering trade unions and left-wing parties and causing a wave of street protests.

On Friday, Portuguese government bonds had outperformed others in Europe on hopes of a deal.

The BBC's Alison Roberts in Lisbon says there are now fears that the markets will take a tumble on Monday.

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Home»Finance»Financial CrisisBrussels faces off against Berlin with plan for failing banks
The European Commission has faced off against Germany by tabling proposals to give itself the power to overrule national financial supervisors and shut down failing banks in the eurozone.

Michel Barnier, the EU commissioner responsible for financial services, insisted the new powers were needed to make “banking union” work Photo: EPA
By Bruno Waterfield
3:06PM BST 10 Jul 2013
34 Comments
As well the power to “pull the trigger” on a troubled bank, the commission’s new “single resolution mechanism” (SRM) will eventually be able to draw on a common EU fund, paid for by banking levies, to pick up the bill for failed financial institutions.

Michel Barnier, the EU commissioner responsible for financial services, insisted the new powers were needed to make “banking union” work in the eurozone and to prevent a repeat of the banking crisis.

“We need a system which can deliver decisions quickly and efficiently, avoiding doubts on the impact on public finances, and with rules that create certainty in the market,” he said.

“By ensuring that supervision and resolution are aligned at a central level and backed by an appropriate resolution funding arrangement, it will allow bank crises to be managed more effectively in the banking union and contribute to breaking the link between sovereign crises and ailing banks.”

Germany is unhappy with the plan to give the EU the power to kill off failed banks because, via the “single resolution fund”, German banks, and possibly taxpayers, will be forced to foot the bill for the rescue or winding up of banks in weaker eurozone countries.

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Germany responded to the plan by attacking the commission for trying to take “a competence”, or powers, “which it cannot have based on the current treaties”.

“We think the EU commission's proposal would stall the route to banking union rather than accelerate it,” said the government’s spokesman.

A German government source involved in banking union negotiations added: “The process should be European but we want the competence to take individual decisions to rest with the member states, at least those who are most affected and who give the money. On the basis of this criticism, we must significantly modify the proposal.”

The proposals are politically toxic during a German election period where the issue of increased eurozone liabilities for Germany are controversial and sensitive question for Angela Merkel, the country’s leader.

The German Chancellor has warned the commission that the proposal is illegal because it will lead to “fiscal transfers” across the eurozone, in breach of the EU treaty.

Alexandria Carr, regulatory lawyer at international law firm Mayer Brown, described the proposal as “arguably the greatest transfer of sovereignty in the history of the EU”.

“From a legal point of view, it is dubious whether the EU’s existing legal architecture is sufficient to support the commission being given such a power or the establishment of what is effectively debt mutualisation in the shape of a resolution fund,” she said.

Alongside a new supervisor under the aegis of the European Central Bank the SRM will have power to shut down any of the eurozone’s 6,000-plus banks, including the right to override national authorities.

The commission argues that the SRM has no right to incur “fiscal charges” on eurozone countries and accuse Germany of raising “purely political not legal objections” in order to protect German banks.

In a bid to soothe German opposition, the commission has allowed for a “transition” between 2015, when the SRM is created and 2018 when the new fund and rules for bank “bail-ins” enter into force.

During that three year period, any country that faced having to draw on public funds as a result of an SRM decision would be given a veto.

The commission also tabled new state aid rules that will enter into force automatically at the start of August setting a common, compulsory framework for dealing with all the EU’s failing banks, including in Britain.

The guidelines will be used to deal with the aftermath of European Central Bank’s next priority as eurozone banking supervisor of cleaning up bank balance sheets after stress tests next year.

Any bank in the EU that needs help from the state will first have to present a detailed restructuring plan to Brussels that ensures its viability before any aid can be disbursed. Currently, aid comes before a restructuring plan.

The new rules will force shareholders and junior creditors to take bank failure costs, even if the government can afford to bailout banks.

Under the new regime, the commission will first require shareholders to be wiped out and then for and losses to be imposed on junior creditors.

“Bank owners and junior creditors will need to contribute before any more taxpayers' money is spent on bank bailouts,” Joaquin Almunia, the European competition commissioner.

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EC takes Spain to court over European Health Insurance Card
A European Health Insurance Card gets you free emergency care in the EU - or does it?

Complaints against the Spanish government – spreading over three years – involve foreign patients in possession of the European Health Insurance Card (Ehic). Under reciprocity rules, member states must provide free emergency care to EU citizens Photo: ALAMY
By Peter Pallot
10:03AM BST 16 Jul 2013
2 Comments
A dispute between Madrid and the EU over the rights of EU citizens to use local health care services in Spain brings into focus discrepancies across Europe.

The European Commission has launched legal action against the Spanish government, citing "hundreds" of cases in which foreign holidaymakers needing urgent medical care have been let down.

They have either been turned away from hospitals on the Spanish costas, been asked to pay cash, or to claim on their insurance.

Brussels enforces EU law through the sanction of fining offender states. It has asked the Spanish government for information, the first step in the process.

The complaints – spreading over three years – involve foreign patients in possession of the European Health Insurance Card (Ehic). Under reciprocity rules, member states must provide free emergency care to EU citizens.

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The offending hospitals have asked patients – in many cases, British holidaymakers – to hand over a credit card, which is then debited. Alternatively, the hospital demands to see the patient's insurance details, which, in emergency cases, should be irrelevant.

In one reported case, a fatally injured British boy was refused treatment. In another, a Briton needing emergency surgery for a twisted bowel was reportedly charged £21,000. A woman who suffered a head injury in Alicante was charged £2,500.

In a case reported by the BBC, a Spanish debt-collection agency tried to collect £54,000 from a British holidaymaker who spent a month in hospital – even though he was covered for the emergency under his Ehic.

In another case, a Briton, Ray Burton, was taken seriously ill while holidaying in Spain. He declined to show the asked-for credit card as soon as he entered hospital. He said: "They then asked for insurance details and were quite firm in not wanting the Ehic."

Spain may be the only country officially in Brussels' frame. But holiday spots elsewhere and some Alpine ski resorts are notorious for similar practices. Last January in Lech, Austria, I was among a group of Britons told bluntly on arrival by the tour operator: "The Ehic is not recognised here. You'll need a credit card and claim back on your insurance."

The EC's move against Spain highlights the need for a rethink on rules applying to other countries, according to the travel industry. Responsibilities towards patients are not clear cut, with exemptions effectively applied for private medical practices outside the state system.

Brussels requires that foreign nationals from within the EU are treated "on the same terms as nationals" of the host country. As the extent of private medicine and charges varies widely between countries, discrepancies arise.

Gillian Edwards, press officer for ABTA (abta.com), representing tour operators and travel agents, said: "It's an issue where there are not a lot of public hospitals. And where there are, circumstances can differ from what one gets under the NHS. For instance, some hospitals will charge for blankets and beds."

She added that while complaints about state hospitals centred on Spain, "there have also been isolated complaints across other Mediterranean countries".

The Ehic primarily covers emergency care only, but flare-ups of pre-existing conditions also qualify for treatment. Procedures such as kidney dialysis are also ruled in. This can create confusion, according to Kevin Melton, sales and marketing director of Axa PPP International, a major insurer in Spain.

He said: "We are using the current situation to highlight the importance of having medical insurance cover – whoever the provider – not just in Spain, but back in your own country. The Ehic was never intended for long-term residents abroad."

Melton, who has just returned from visiting brokers in Gibraltar and southern Spain, added: "The whole issue of hospitals insisting on a credit card is beginning to bite. While it's fair to say that a lot of people are not experiencing issues, it's become a conversation topic – there's something happening."

Most of the trouble seems to lie outside the extreme south, according to a Gibraltar-based insurance broker who covers the tourist area. Rachelle King, of Ibex Insurance (www.ibexinsure.com), said: "I haven't heard of any cases personally around here, but it's in Alicante and Almeria where it can be difficult.

"As long as you have the Ehic, they will see you. They will patch you up to the point that you can get back home. For example if you break your arm, they will treat you – set it in plaster, but don't expect physiotherapy

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Greece: ‘Greek market needs €20bn in cash’



22 July 2013

Presseurop
I Kathimerini
I Kathimerini, 21 July 2013

Greece needs €20bn to create a Greek investment fund, according to the Oliver Wyman consulting firm, financed by the Onassis Foundation, reports Greek daily I Kathimerini.

This is far short of the €500m start-up capital investment fund launched by the government in July 2012, of which €200m comes from EU structural funds, €150m from a public investment and €100m from the KFW German development bank. The German cash follows an agreement reached during a visit to Athens on July 18, this year by German finance minister Wolfgang Schäuble.

The fund is earmarked to finance infrastructure projects as well as small- and medium-sized firms in a bid to boost growth and employment. It is expected to be created in 2014 and headquartered in Luxembourg.

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Economy

Eurozone: ‘Europe powerless to halt soaring debt’



23 July 2013

Presseurop
Les Echos
Les Echos, 23 July 2013

"European states are letting their debt slide," due to insufficient growth, notes French financial daily Les Echos.

Public debt in the Eurozone increased by €450bn in the first quarter of 2013 compared with the fourth quarter of 2012, according to the latest figures released by the European statistics office Eurostat.

The Eurozone's debt ratio rose from 90.6 per cent of GDP to 92.2 per cent in the first quarter. Those countries with the highest debt to GDP ratio include Greece at 160.5 per cent, Italy at 130.3 per cent, Portugal with 127.2 per cent and Ireland at 125.1 per cent. Le Echos reports that –


although public deficits were slashed in half, on average, in Europe, the debt increased nonetheless and will only begin to shrink in the second half of 2014.

[Badboy]

MAYBE THE EC/EU NEEDS TO GET ITS CITIZENS HOMEWORKING,MAYBE A BOOKLET OF SUGGESTIONS TO EVERY HOUSEHOLD.
EC,ARE YOU READING THIS?                TO EU

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Portugal
Party performers
Jornal de Negócios
From what we hear in the media, everything is going well again. Truth is, it’s not. Italian cartoonist Altan sums it up perfectly in his drawing of one pig in a tie saying to another: “This crisis is here to stay.” His friend replies: “At long last. A little stability!”

[Badboy]

I READ A TWEET SAYING MANY GREEKS ARE TRYING TO START THEIR OWN SMALL BUSINESSES
GOOD FOR THEM TO TRY:Applaud:                                                                                             

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Have you been on the Pop again Badboy??? 

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