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Topic: European matters (Read 10459 times)
Re: European matters
Reply #100 on:
December 08, 2012, 01:01:40 PM »
Thank you for your on-the-ground report.
I know this is not your usual area of expression, but may I ask for your sense of what should be done?
Re: European matters
Reply #101 on:
December 09, 2012, 09:40:19 AM »
Quote from: Crafty_Dog on December 08, 2012, 01:01:40 PM
Thank you for your on-the-ground report.
I know this is not your usual area of expression, but may I ask for your sense of what should be done?
Before answering, it might be interesting to note that a few hours ago, I learned that in Athens, sales of heating fuel and natural gas to heat people's homes has fallen 80% (yes eighty) since last year.
As far as what should be done, my suggestions are as follows:
ensure that all money loaned to Greece is accounted for - have VERY strict controls on it, no matter how many howls of protest there may be by the Greek government that national sovereignty is being infringed upon
focus on growth - too much austerity is not helping - there is enough evidence for this already
give it time - two, even more additional years, if necessary - even if it means additional compromises by Greece's creditors
Greece itself must be encouraged (to the point of making it a condition for the bailout) to go after those rich Greeks who are not paying their taxes.This is a real problem - not just for the money, but because it undermines accountability and thus perpetuates the whole culture of corruption. The individuals whose names are on the Lagarde list should have been investigated, long ago. The Greek journalist who made it public is being hounded. What a sick SICK charade. I wish the foreign media would be more active in exposing, and shaming the corrupt Greek elite, since the Greek media itself (with the exception of two struggling TV channels) is basically owned and operated by these crooks..
End of rant...
Re: European matters
Reply #102 on:
December 09, 2012, 12:18:42 PM »
That 80% decline in heating fuel is a powerful number full of human meaning , , ,
What would be the best way to focus on growth?
Re: European matters
Reply #103 on:
December 09, 2012, 01:19:24 PM »
Quote from: Crafty_Dog on December 09, 2012, 12:18:42 PM
That 80% decline in heating fuel is a powerful number full of human meaning , , ,
What would be the best way to focus on growth?
Yes it is. Of myself and my three students/training partners, three of us (including myself) are making do without heat. So far its not been really cold, but it certainly makes one feel that things are indeed hitting "close to home"
I do not know what the best way would be to focus on growth. But I do feel that the well-off are not only more insulated, but are not being made to pay their fair share. By well-off I do not mean people who are doctors or layers, I mean people whose families are connected to some member of parliament, or to some rich business or media personality.
Also, I do not mean that the rich should be taxed so as to kill incentive for business growth. But there continue to be tax evaders who are not pursued. As I noted before, the Lagarde list was handed to Greek authorities over a year ago, and some minister I believe resigned exactly because it was being hushed up. Then there is the famous singer Tolis Voskopoulos who owes 5 million euro in back taxes and has not payed - in part because his beautiful wife is an MP.
Now getting the rich tax evaders to pay is not going to solve all of Greece's problems - but the austerity is disproportionately hitting those less able to pay. How is the economy ever going to get off the ground when many people can barely afford to heat their homes? There have also been record numbers who have had their electricity cut off because they can no longer afford to pay. The electricity bills keep going up. WHY ? people are hurting, so why does the power company (owned by the state), which has done everything to stifle competition from private firms, keep raising its rates?
Then there are the billions (yes BILLIONS, not millions but BILLIONS) of euros stashed away by rich Greeks in foreign accounts. As far as I know, if the political will was there, it is possible to go after them to pay taxes, but unfortunately, it is lacking.
It sounds like I keep going on about the rich are to blame, but the economy will never recover by getting those least able to afford it, to dig deeper into their empty pockets. It simply can not work that way.
Re: European matters the Lagarde list
Reply #104 on:
December 09, 2012, 01:29:04 PM »
I keep going on and on about the Lagarde list - here is an article from the respected British newspaper "The Guardian" about this matter. The bold emphasis is mine.
Greek editor Kostas Vaxevanis faces retrial over 'Lagarde list' revelation
A Greek journalist who published the names of more than 2,000 wealthy Greeks with Swiss bank accounts faces a retrial, barely two weeks after he was acquitted of breaking data privacy laws.
Kostas Vaxevanis was arrested, tried and found not guilty within days of the list's publication. But court officials said on Friday the verdict "lacked credibility". Vaxevanis told the Guardian he was "dumbfounded" at the news, and attributed the move to concerted efforts on the part of the judiciary to silence the press.
"It's absolutely unprecedented. The court has yet to even write up its decision finding me innocent and the prosecutor's office is already ordering a retrial," he said. "They not only acted illegally, resorting to violence when I was arrested last month, they not only ridiculed Greece internationally trying to censor the press, when I am found innocent they want to overturn the judgment, doing whatever they can to get the result that they want."
Vaxevanis, whose case has aroused international uproar over media censorship in the crisis-hit country, said he wanted the new trial to take place as soon as possible. Announcing that the acquittal on 1 November was erroneous, the Athens public prosecutor's office said the journalist should be retried by a higher misdemeanour court on the same charges.
"The prosecutor believes that the decision in favour of the journalist is legally wrong," a court official told Reuters.
Three people named on the list have also requested an appeal on the verdict, the official added. If found guilty, Vaxevanis could be jailed for up to two years or face a fine.
"No trial date has been set, as far as I know, but if I have to be tried again I want the hearing to happen straight away," he said.
"They clearly want to terrorise me, and in doing so shut up the press so, and I don't want to be their hostage. I want to get this over with as soon as possible."
Greeks were outraged by the initial decision to prosecute the reporter who published the so-called "Lagarde List" in his bi-monthly magazine Hoc Doc. In a nation hit by relentless rounds of austerity, many had publicly praised the editor for revealing the names of the 2,059 Greeks who had opened accounts at the Geneva branch of HSBC amid widespread speculation that the account holders were also suspected tax evaders.
Although successive governments had been in possession of the list – first given to Greek authorities by the IMF chief, Christine Lagarde, who was then French finance minister – it had never been acted on with one former finance minister, George Papaconstantinou, going so far as to had "lost" the catalogue of names.
"Instead of chasing tax evaders they are chasing me," said Vaxevanis, who had described his original trial as "targeted and vengeful". The journalist, who has become an unwitting international media star, has vowed to continue unveiling the truth in a country he insists is governed by a "corrupt clique".
"There's a huge problem in Greece, a problem of democracy and essence," he told the Guardian recently.
"The country is governed by a poisonous combination of politicians, businessmen and journalists who cover one another's backs.
Every day laws are changed, or new laws are voted in, to legitimise illegal deeds. Had it not been for the foreign media taking such an interest in my own story, it would have been buried."
Greece has so far failed to convict any big names of tax evasion
, fueling popular disenchantment with a political class that has promised but failed to force the wealthy to share some of the pain of the debt crisis that erupted in Athens three years ago.
Last Edit: December 10, 2012, 12:26:21 PM by Kostas
Re: European matters
Reply #105 on:
December 09, 2012, 01:37:35 PM »
Yet another article from the Guardian's site this time it is on the "Rich Greeks" I keep referring to.
Greece's super-rich maintain lavish lifestyles and low profiles
Scudding across the turquoise waters of the Argo-Saronic gulf, Ioannis Arnaoutis singled out the pearl-white sands of a little bay. The shore glistened in the midday sun. "It was especially imported from Asia by the owner of the mansion above the bay," said the boatman, one hand on the steering wheel of his water taxi, the other pointing in the direction of the cove. "It's a private beach, which is why there is only one umbrella on it."
Nearly three years into their country's worst crisis in modern times, life goes on as normal for Greece's super-rich. As the sun sets, oligarchs, shipowners, singers and media stars gather at the Poseidonion hotel on the island of Spetses opposite the little bay. They tuck into a menu that includes pasticcio laced with foie gras. Among them is a middle-aged man in a T-shirt proclaiming: "More is less".
Three days before Greeks cast their ballots in a make-or-break election, their country could not be more divided. Here there is no talk of the pain of crisis – the only topic of conversation elsewhere in Greek society. The destitution and despair of Athens is a world away – and for many quite clearly it is best kept that way.
"Greeks brought this crisis upon themselves," said a London-based shipowner upholding the sector's vow of silence by insisting on anonymity. "They allowed crooks and corruption to prosper."
Almost 100 years after it was built by a tobacco tycoon, the elegant Poseidonion remains the favourite playground for Athenian high society. The former King Constantine, who was schooled on the island, is a frequent visitor. Tonight, as the crowd sits on its terrace sipping cocktails, staff with long-handled brooms clean the bows of their mega-yachts moored in front of the hotel. A tiny pony takes their children – all guarded by nannies – around the plaza. While locals fret that Spetses, already known as the "new Monaco", is at risk of becoming a "club for the rich" there are also obvious payoffs.
Christina Ioannidis, who runs a high-end clothes shop on the island, says one of them is that the crisis has not affected her at all. "If truth be told, business couldn't be better," she says, knocking on wood. "I've had to employ an assistant all year round because there's such demand, even in winter."
Pumping money into the economy of Spetses – or the islands from which they hail – is a far cry from the world of philanthropy with which Aristotle Onassis and Stavros Niarchos and other fabled shipowners were associated. Known as the Golden Greeks, both men left large bequests in the form of charitable foundations. The Niarchos foundation recently gave €100m (£81m) to help civic society fight the crisis's many ills, with the aid including food vouchers for the children of the new poor and support for organizations dealing with the homeless.
But since the outbreak of Greece's runaway debt crisis, its moneyed class has been notable more by its absence than presence. Oligarchs, who made vast fortunes cornering the oil, gas, construction and banking industries, as well as the media, have been eerily silent – often going out of their way to be as low a profile as possible.
Greek shipowners, who have gained from their profits being tax-free and who control at least 15% of the world's merchant freight, have also remained low-key. With their wealth offshore and highly secretive, the estimated 900 families who run the sector have the largest fleet in the world. As Athens' biggest foreign currency earner after tourism, the industry remitted more than $175bn (£112bn) to the country in untaxed earnings over the past decade. Greece's debt currently stands at €280bn.
As ordinary Greeks have been thrown into ever greater poverty by wage and pension cuts and a seemingly endless array of new and higher taxes, their wealthy compatriots have been busy either whisking their money out of Greece or snapping up prime real estate abroad.
An estimated €8bn flowed out of the Greek banking system in May as speculation over the country's possible exit from the eurozone mounted. Another €4bn was reported to have been withdrawn in the last two weeks – on top of an estimated €20bn since the start of the crisis
in late 2009. Stories of rich Greeks sending their wives and best friends on "shopping missions" to remove secret hoards kept in banks in Switzerland and Cyprus are legion.
"At a time when Greece, more than ever, needs symbolic gestures from its rich citizens, they seem to be doing practically nothing to help their country," said Theodore Pelagidis, professor of economic analysis at Piraeus University.
"We need to see cool-headed entrepreneurs not only complain about bureaucracy and corruption but do something for Greece."
In an atmosphere that has become increasingly aggravated between the haves and have-nots, displays of wealth are clearly being downplayed, especially in Athens, where the majority of the 11 million-strong Greek population lives and which has been worst hit by the belt-tightening.
Over the past year, Pelagidis said a growing number of very wealthy Greeks had even taken to inviting academics, like himself, to their mansions, in the capital's leafy northern suburbs, to be apprised of the situation. Lectures in particular demand were political, economic and historical in nature.
"They are so cut off they know nothing," he said. "I'm not sure whether it's a case of the spoiled and uneducated rich trying to overcome their remorse, or a case of them simply wanting to fight their boredom but after going once I decided never to go again. I came away thinking it was like a form of psychotherapy for them."
What is sure, however, is that the super-rich appear to have come up with contingency plans to disperse their wealth as the crisis deepens. In recent months,
acting on a trend that began soon after Greece's debt woes erupted, a growing number have been snapping up property in London
. Increasingly, many have made their way to the door of 88 (London) Ltd, a high-end property brokerage run by Panos Koutsogiannakis. Suddenly the Greek Australian has found himself investing in properties worth £5m and more.
"We're talking about blue-chip areas such as Mayfair," said Koutsogiannakis, who frequently flies to Athens to meet clients. "Shippers, bankers, entrepreneurs all want to buy properties with many now looking at fantastic office blocks in central London. The demand is just huge."
Greece's wealthy have long cited their country's crushing bureaucracy as preventing them from investing in their homeland.
But it has not been lost on ordinary Greeks that those who benefited most from the crooked system that has brought Greece to its knees – starting with the construction firms that had contracts with the state – are now leading the exodus as the ship sinks.
Last Edit: December 10, 2012, 12:24:45 PM by Kostas
Fortune Magazine: France is in Free Fall
Reply #106 on:
January 15, 2013, 02:38:31 PM »
Why are we emulating them?
The euro crisis no one is talking about: France is in free fall
By Shawn Tully, senior editor-at-large January 9, 2013: 9:26 AM ET
The euro zone's second-largest economy is suffering more than any other member from a shocking deterioration in competitiveness. And it's doing nothing to stop it.
FORTUNE -- Given investors' confidence in its sovereign debt, and its image as Germany's principal partner in the sturdy, sensible "northern" eurozone, you'd think that France endures as the co-guardian of the endangered single currency. Indeed, the rate on France's ten-year government bonds stands at just 2%, just a few ticks above Germany's. From a quick look at the headline numbers, France doesn't appear nearly as stressed as the derisively titled "PIIGS," Portugal, Ireland, Italy, Greece and Spain. So far, the trajectory of its debts and deficits isn't as distressing as the figures for the PIIGs, or even the U.K. and the U.S.
France's vaunted role in the creation and initial success of the euro enhances its aura of solidity. It was President Francois Mitterrand who in 1989 persuaded Chancellor Helmut Kohl to back monetary union in exchange for France's support for German reunification. In fact, France and Germany, along with the Netherlands, dramatized their commitment by effectively uniting the franc and deutschemark in a currency union that held their exchange rates in a narrow band, and heralded the euro's birth in 1999. In the boom years of the mid-2000s, France virtually matched Germany as the twin growth engine of the thriving, 17-nation eurozone.
A deeper look shows that France is mired in no less than an economic crisis. The eurozone's second-largest economy (2012 GDP: 2 trillion euros) is suffering more than any other member from a shocking deterioration in competitiveness. Put simply, France's products -- its cars, steel, clothing, electronics -- cost far too much to produce compared with competing goods both from Asia and its European neighbors, including not just Germany but even Spain and Italy. That's causing a sharp and accelerating fall in its exports, and a significant decline in manufacturing and the services that support it.
The virtual implosion of French industry is overlooked by analysts and pundits who claim that the eurozone had dodged disaster and entered a new, durable period of stability. In fact, it's France -- not Greece or Spain -- that now poses the greatest threat to the euro's survival. France epitomizes the real problem with the single currency: The inability of nations with high and rising production costs to adjust their currencies so that their products remain competitive in world markets.
So far, the worries over the euro have centered on dangerously rising debt and deficits. But those fiscal problems are primarily the result of a loss of competitiveness. When products cost too much to make, the economy stalls or actually declines, so that even modest increases in government spending swamp nations with big budget shortfalls and excessive borrowings. In this no-or-negative growth scenario, the picture is usually the same: The private economy shrinks while government keeps expanding.
That's already happened in Italy, Spain and other troubled eurozone members. The difference is that those nations are adopting structural reforms to restore their competitiveness. France is doing nothing of the kind. Hence, its yawning competitiveness gap will soon create a fiscal crisis. It's absolutely astonishing that an economy so large, and so widely respected, can be unraveling so quickly.
The world's investors and the euro zone optimists should awaken to the danger posed by France. La crise est arivée.
France's decline is best illustrated by the rapid deterioration in its foreign trade. In 1999, France sold around 7% of the world's exports. Today, the figure is just over 3%, and falling fast. The same high costs that are pounding exports draw an ever rising flow of goods from Germany, China and even southern Europe. Those imports are taking an increasing share of sales from pricier French-made products. In 2005, France's trade balance was a positive 0.5% of GDP. Today, it stands at minus 2.7% of national income, meaning imports now far exceed exports, turning trade from a growth-generator into a major drag. An excellent illustration of the competitiveness gap is the chasm between German and French exports to China. Germany sends $70 billion in cars, machine tools and other products to China each year, seven times the figure for France.
Even tourism is suffering because of the France's high prices. France is now struggling clientele from a surging, bargain-seeking tranche of the market, travelers from Asia, Brazil, India and Russia. In the mid-2000s, foreigners spent 15 billion euros more visiting the Champs Elysees and the Riviera than the French paid to vacation abroad. That surplus has since fallen by one-third, to around 10 billion euros.
The main reason for France's cost disadvantage is the burden of labor, a factor that typically accounts for around 70% of all corporate expenses worldwide. In France, the problem comprises a both high wage and social costs, and rigid laws, including a 35-hour work week that allows French employees the lowest number of working hours in the developed world. An astounding 86% of all wage earners enjoy "contrats a durée indéterminées," permanent contracts that make layoffs extremely expensive and time-consuming.
In France, 42 euros for every 100 euros in total expenses go to social charges, versus 34 euros in Germany, 26 in the UK, and 20 in the US.
Obviously, the restrictive laws and hostile unions are nothing new. What's causing the crippling malaise is the recent rapid rise in labor costs when rivals are lowering or moderating the weight of weight of their workforces.
Since 2005, France's unit labor costs -- the expense of producing a single car or steel beam, for example -- has jumped 17% compared with 10% for Germany, 5.8% for Spain, and 2% for Ireland. Today, French workers earn an average of 35.3 euros per hour, compared with 25.8 in Italy, 22 in the UK and Spain.
The result is a steep fall in French manufacturing and the services that support it, everything from consulting to logistics. Corporate profits have plunged to 6.5% of GDP, about 60% of the euro zone average. That's because French exporters are losing market share, and the ones that survive must lower margins to charge competitive prices. As a result, they lack the funds to invest in new plants and technologies. France now has half as many exporting companies as Germany and, amazingly, Italy. German industry benefits from 19,000 robots, five times the number in France. As for R&D spending, it's dropped 50% in the past four years.
Remarkably, the Hollande government is raising revenue by heightening the burden on business. In September, France announced new laws that limit deductions for interest payments and loss carry-forwards, effectively heaping higher taxes on business. Those measures will shrink already meager profits, and crimp future investment.
The cost-gap wouldn't be so damaging if France specialized in sophisticated, high-margin products. Indeed, the nation remains strong in fashion, luxury goods, and pharmaceuticals. But though those offerings symbolize France's economic élan, the nation is heavily dependent on autos, textile, steel, telecom equipment and other mid-to-low margin products that are extremely price sensitive on world markets. "France has never been strong in high-end, sophisticated products like machine tools or high-end computer equipment," says Jean-Christophe Caffet of Flash Economics in Paris. "And even in the high-end, it's lost a lot of market share to Germany."
Germany, for example, specializes in fancy cars, Audis, Mercedes and BMWs that folks are willing to keep buying if prices rise a bit. By contrast, France makes cheaper Renaults and Peugeots that risk losing sales to Ford or Fiat unless manufacturers hold down prices -- or settle for puny or non-existent profits.
Nor is France reacting to the looming crisis by following its neighbors' campaign to lower labor costs. Germany made big strides in the mid-2000s with its Hartz IV reforms that lowered the social charges on businesses. Spain recently raised the retirement age for full pensions from 65 to 67 and allows wage negotiations at the company level, a departure from the centralized system of imposing mandatory nationwide increases in pay. Italy is gradually raising the retirement age for women from 60 to 66 over the next six years.
But Francois Hollande, elected president in May, is taking far more tepid steps. The government is pledging to modestly lower social charges on businesses, but the reforms don't start until 2014, and last just two years.
It's the prospect of a future without growth, a direct legacy of the competitiveness problem, that could unleash a fiscal crisis. It's remarkable that in the mid-1990s, France had a lower unemployment rate than Germany, smaller deficits, less debt to GDP, and approximately the same growth rate. All of those measures have now totally reversed.
In 2012, the French economy expanded at just 0.2%, and its real growth rate for the past three years averaged 1.2%, less than half Germany's 2.7% performance. For 2013, France's ODDO Securities makes a persuasive case that the economy will actually shrink. The unemployment rate stands at a 14-year high of 10.9% and rising, compared 6.7% for Germany. Debt to GDP is nearing the danger zone of 90%, and could hit 97% in 2013.
It's not that France has been raising government spending at an outrageous rate. The issue is that a nation with already high spending levels and no growth has run out of room to keep lifting spending, and debt, at all. It's extraordinary that from 2004 to 2012, the private sector in France showed no growth whatsoever, adjusted for inflation. The entire rise in GDP, a mere 7.3% over eight years, came from government spending. It's the private economy that supports that spending, and it will keep dwindling, driving France further and further into debt.
Government spending now accounts for 57% of GDP and increasing, 12 points higher than Germany. By the way, Germany's private sector is growing briskly as public expenditures drop as a share of national income. The opposite dynamic is plaguing its long-time partner.
It's totally implausible to blame "austerity" for France's poor growth. Austerity is generally defined as large reductions in budget deficits, mainly driven by falling government spending. But France's spending has increased in real terms, and its deficits have been remained at a substantial 5% or so of GDP in 2011 and 2012, with the same figure likely for this year.
It's unclear when the crisis that's going mostly unacknowledged by investors and the Hollande government will erupt into a panic. The chance that France will lower labor costs by the 20% to 30% needed to restore growth is practically zero. Reforms can only happen when the economy is expanding and citizens feel good about the future, the antithesis of the gloom now enveloping France.
France is heading towards an economic Bastille. The longer it stays on that path, the more possible that the eurozone regime it labored so hard to create will crumble.
Scientific eurosocialism on the march!
Reply #107 on:
January 19, 2013, 04:36:23 PM »
Hotel Mama: Bad Economy Has Young Europeans at Home
Young Europeans in countries hit hardest by the Continent's economic crisis are finding it difficult to move out of their parents' home. Data shows that over 50 percent of those aged 25 to 34 in some countries have yet to move out.
Young people in Southern and Eastern Europe live at home longer.
Most young adults are eager to leave home to start independent lives. But in those European countries where the economic crisis has hit hardest -- particularly in southern and eastern EU member states -- that appears to be a difficult move to make.
ANZEIGEIn 2011, more that 50 percent of the 25- to 34-year-olds in Greece, Bulgaria, Slovakia and Malta still lived in their parents' homes, a SPIEGEL analysis of information from the European Commission statistics division Eurostat has revealed.
In Portugal, Italy, Hungary and Romania more than 40 percent of those in this age group remain in the nest (see graphic).
Nations with a high percentage of Catholics show a particularly high number of young adults who have yet to move out of their parents' home. This is also the case in Eastern Europe, where working conditions for entry-level workers are particularly precarious.
These numbers are in stark contrast to those in the EU's most northerly member nations, where less than 5 percent of 24- to 34-year-olds in Finland, Sweden and Denmark continue to enjoy the luxuries of Hotel Mama. In Germany, the level is 14.7 percent.
A similar phenomenon, dubbed the "boomerang generation," has been identified in the United States, which is suffering from a long recession. The Pew Research Center reports that some 29 percent of Americans in the same age have had to return to their parents' home in recent years. And some 78 percent of them say they are happy with their living arrangements.
Re: European matters
Reply #108 on:
January 19, 2013, 07:43:26 PM »
Apart from the economics of this, IMHO multi-generational family structures have a lot of merit.
Stratfor: UK moving away from EU
Reply #109 on:
January 22, 2013, 10:44:39 AM »
United Kingdom Moves Away from the European Project
January 22, 2013 | 1000 GMT
By Adriano Bosoni
British Prime Minister David Cameron will deliver a speech in London on Jan. 23, during which he will discuss the future of the United Kingdom's relationship with the European Union. Excerpts leaked to the media suggest that harsh EU criticism will figure prominently in the speech, a suggestion in keeping with Cameron's recent statements about the bloc. But more important, the excerpts signal an unprecedented policy departure: renegotiating the United Kingdom's role in the European Union. London has negotiated exemptions from some EU policies in the past, even gaining some concessions from Brussels in the process; this time, it is trying to become less integrated with the bloc altogether.
Cameron has pledged to hold a referendum after 2015 on the United Kingdom's role in Europe. He has also said he would reclaim powers London surrendered to the European Union. While they no doubt reflect similar anxieties across the Continent, such statements are anathema to the European project, and by making them, Cameron could be setting a precedent that could further undermine the European Union.
Cameron's strategy partly is a reaction to British domestic politics. There is a faction within the ruling Conservative Party that believes the country should abandon the European Union entirely. It was this faction that pressed Cameron to call a referendum on the United Kingdom's EU membership. Some party members also fear that the United Kingdom Independence Party, the country's traditionally euroskeptic party, is gaining ground in the country.
Such fears may be well founded. According to various opinion polls, roughly 8-14 percent of the country supports the United Kingdom Independence Party, even though it received only 3.1 percent of the popular vote in the 2010 elections. These levels of support make the party a serious contender with the Liberal Democrats as the United Kingdom's third-largest party (after the Labour Party and the Conservative Party). Some polls show that the United Kingdom Independence Party already is the third-most popular party, while others suggest it has poached members from the Conservative Party, a worrying trend ahead of elections for the European Parliament in 2014 and general elections in 2015.
Its growing popularity can be attributed to other factors. Beyond its anti-EU rhetoric, the United Kingdom Independence Party is gaining strength as an anti-establishment voice in the country, supported by those disappointed with mainstream British parties. Similar situations are developing elsewhere in Europe, where the ongoing crisis has weakened the traditional political elite.
The debate over the United Kingdom's role in the European Union is also causing friction with the Conservatives' junior coalition partner, the Liberal Democrats. Party leader and Deputy Prime Minister Nick Clegg has repeatedly criticized the Conservatives' push for a referendum, arguing that the proposal is creating uncertainty in the country and by extension threatening economic growth and job creation. Several of the country's top businessmen share this belief. On Jan. 9, Virgin Group's Richard Branson, London Stock Exchange head Chris Gibson-Smith and eight other business leaders published a letter in the Financial Times criticizing Cameron's plan to renegotiate EU membership terms.
British citizens likewise are conflicted on the subject. In general, polls have shown that a slight majority of Britons favor leaving the European Union, but recent surveys found that opinion was evenly split. Conservative Party voters particularly support an EU withdrawal.
Given the issue's sensitivity, Cameron has sought to please everyone. He said there would be a referendum, but it would entail the United Kingdom's position in the European Union, not British membership. Despite his criticisms of the bloc, Cameron has said he does not want to leave the European Union outright; rather, he wants to repatriate from Brussels as many powers as possible. Cameron believes the United Kingdom still needs direct access to Europe's common market but that London should regain power regarding such issues as employment legislation and social and judicial affairs. Most important, the referendum would take place after the general elections of 2015.
London's Costs of Membership
London also believes that the United Kingdom has surrendered too much of its national sovereignty to supranational EU institutions. The United Kingdom is a net contributor to the European Union, and London feels that the costs of membership exceed the benefits. The Common Agricultural Policy, which subsidizes agricultural sectors in continental Europe, does not really benefit the United Kingdom, and the Common Fisheries Policy has forced the United Kingdom to share its fishing waters with other EU member states.
Yet the United Kingdom is a strong defender of the single market. Roughly half of its exports end up in the European Union, and half of its imports come from the European Union. While the United States is the United Kingdom's single most important export destination, four of its five top export destinations are eurozone countries: Germany, the Netherlands, France and Ireland. Germany is also the source of about 12.6 percent of all British imports.
Some critics suggest that the United Kingdom could leave the European Union but remain a part of the European Economic Area, the trade agreement that includes non-EU members, such as Iceland and Norway. However, the country would still be required to make financial contributions to continental Europe and adapt its legal order to EU standards, but it would not have a vote in EU decisions. According to Cameron, the United Kingdom must be part of the common market and have a say in policymaking.
The issue points to the United Kingdom's grand strategy. Despite an alliance with the United States, the United Kingdom is essentially a European power, and it cannot afford to be excluded from Continental affairs. Throughout history, London's foremost concern has been the emergence of a single European power that could threaten the British Isles politically, economically or militarily. Maintaining the balance of power in the Continent -- especially one in which London has some degree of influence -- is a strategic imperative for the United Kingdom.
The United Kingdom's Strategic Dilemma
The United Kingdom's push to renegotiate its status in the European Union threatens the European project. In the past, the bloc granted special concessions to the British, such as allowing them to keep the pound sterling during Maastricht Treaty negotiations. These concessions inspired other EU members to ask for similar treatment -- most notably Denmark, which also managed to opt out of the euro.
However, this is the first time that London has openly demanded the return to a previous stage in the process of European integration. At no other time has a country tried to dissociate itself from the bloc in this way. The decision not only challenges the Franco-German view of the European Union but also makes a compromise extremely difficult and risky between France and Germany and the United Kingdom.
Most important, Cameron is framing his proposals not in terms of national sovereignty but in terms of social well-being. In doing so, he acknowledges the social implications of the European crisis. Cameron has even said that the European Union currently is hurting its citizens more than it is helping them. According to leaked portions of his upcoming speech, he believes that there is a "growing frustration that the EU is seen as something that is done to people rather than acting on their behalf" and that the issues are "being intensified by the very solutions required to resolve the economic problems."
The excerpts also cite Cameron as saying "people are increasingly frustrated that decisions taken further and further away from them mean their living standards are slashed through enforced austerity or their taxes are used to bail out governments on the other side of the Continent." This rhetoric could become highly attractive in Europe, where people from Germany to Finland believe that taxpayers' money is being used to bail out inefficient peripheral countries. And many Greek, Spanish and Portuguese citizens probably would sympathize with the notion that austerity is worsening their quality of life. Cameron's rhetoric suggests that he is positioning the United Kingdom to be the leader of a counternarrative that opposes Germany's view of the crisis.
But this strategy is not without risks for the United Kingdom. In recent years, the country's veto power in the European Union has been reduced substantially. With each reform of the European treaties, unanimous decisions were replaced by the use of qualified majority. Even in cases where unanimity is required, Berlin and Paris have managed to bypass London when making decisions. For example, Cameron refused to sign the fiscal compact treaty in 2011, but Germany and France decided to proceed with it, even if only 25 of the 27 EU members accepted it.
Moreover, the "enhanced cooperation mechanism," the system by which EU members can make decisions without the participation of other members, increasingly has been used to move forward with European projects. Currently, the EU's Financial Transaction Tax is being negotiated under this format. In recent times, London has been able only to achieve exemptions without real power to block decisions.
Meanwhile, the ongoing crisis has compelled the European Union to prioritize the 17 members of the eurozone over the rest of the bloc. This has created a two-speed Europe, where core EU members integrate even further as the others are neglected somewhat. London could try to become the leader of the non-eurozone countries, but these countries often have competing agendas, as evidenced by recent negotiations over the EU budget. In those negotiations, the United Kingdom was pushing for a smaller EU budget to ease its financial burden, but countries like Poland and Romania were interested in maintaining high agricultural subsidies and strong development aid.
The dilemma is best understood in the context of the United Kingdom's grand strategy. Unnecessary political isolation on the Continent is a real threat to London. The more the European Union focuses on the eurozone, the less influence the United Kingdom has on continental Europe. The eurozone currently stretches from Finland to Portugal, creating the type of unified, Continental entity that London fears.
For the British, this threat can be mitigated in several ways, the most important of which is its alliance with the United States. As long as London is the main military ally and a major economic partner of the world's only superpower, continental Europe cannot afford to ignore the United Kingdom. Moreover, London also represents a viable alternative to the German leadership of Europe, especially when France is weak and enmeshed in its own domestic problems. And even if the United Kingdom chooses to move away from mainland Europe, its political and economic influence will continue to be felt in the Continent.
The United Kingdom's grand strategy has long been characterized by balancing between Europe and the United States. Currently, London is not so much redefining that grand strategy as it is shifting its weight away from Europe without completely abandoning the Continent.
Read more: United Kingdom Moves Away from the European Project | Stratfor
French pol accidentally tells the truth
Reply #110 on:
January 30, 2013, 07:34:09 PM »
France 'totally bankrupt', says labour minister Michel Sapin
France's labour minister sent the country into a state of shock on Monday after he described the nation as “totally bankrupt”.
The comments came as President Hollande attempts to improve the image of the French economy Photo: AFP
By Graham Ruddick
8:00PM GMT 28 Jan 2013
Michel Sapin made the gaffe in a radio interview, which left French President Francois Hollande battling to undo the potential reputational damage.
“There is a state but it is a totally bankrupt state,” Mr Sapin said. “That is why we had to put a deficit reduction plan in place, and nothing should make us turn away from that objective.”
The comments came as President Hollande attempts to improve the image of the French economy after pledging to reduce the country’s deficit by cutting spending by €60bn (£51.5bn) over the next five years and increasing taxes by €20bn.
Data from Banque de France showed earlier this month that a flight of capital has already left the country amid concerns that France’s Socialist leader intends to soak the rich and businesses. The actor Gérard Depardieu has renounced his French citizenship and decamped to Russia in protest, while David Cameron said Britain will “roll out the red carpet” to attract wealthy individuals.
Pierre Moscovici, the finance minister, said the comments by Mr Sapin were “inappropriate”.
He added: “France is a really solvent country. France is a really credible country, France is a country that is starting to recover.”
Re: European matters
Reply #111 on:
January 31, 2013, 09:11:08 AM »
We don't need a separate "European" thread anymore. Just include into the government programs thread.
Re: European matters
Reply #112 on:
February 19, 2013, 09:35:35 PM »
Crafty wrote recently: "I note how hard the first Euro downturn hit the US markets."
That was back in the good old days when the European problem was Greece. Then Ireland, Portugal, Spain, Italy.
Now we have France making Obama look like a supply-sider and Germany shutting down all nuclear and choking itself over energy:
Germany is facing rapidly climbing energy costs after turning away from nuclear power following the Fukushima disaster, instead relying increasingly on renewable energy. Meanwhile, its neighbors are building nuclear power stations on its doorstep.
Who holds up Europe when France implodes and the German economy stalls? The steady UK economy where they raised tax rates from 40% to 50% and panicked and lowered them to 45%, all since 2010.
UK set for low GDP growth for at least two years, Bank of England warns.
The problem with socialism is that you eventually run out of other people's money.
Eurosocialism continues to demonstrate it's scientific superiority
Reply #113 on:
March 01, 2013, 04:34:10 PM »
Yikes: Eurozone’s unemployment rate hits a new high
posted at 5:21 pm on March 1, 2013 by Erika Johnsen
As Ed mentioned in his rundown of the Eurozone’s systemic problems earlier this week, Italy as a country just resoundingly voted in rejection of fiscal austerity, and their financial and economic outlook is looking pretty bleak — an outlook just made even bleaker by January’s record-high unemployment numbers released today. Via Reuters:
Italy’s seasonally adjusted unemployment rate jumped to 11.7 percent in January from 11.3 percent the month before to hit its highest level for at least 21 years, data showed on Friday.
The figure was above all forecasts in a Reuters survey of analysts which pointed to a marginal uptick to 11.3 percent. …
Both overall unemployment and youth unemployment were the highest since the current statistical series was begun in 1992.
And that’s not all. Italy’s increasingly poor economic performance combined with all of the Eurozone’s continued economic doldrums has pushed the 17-member bloc’s collective unemployment rate into new territory:
The unemployment rate in the euro zone edged up in January to a new record, official data showed Friday, as the ailing European economy continued to weigh on the job market. …
Unemployment in the 17-nation euro zone climbed to 11.9 percent in January from 11.8 percent the previous month, according to Eurostat, the statistical office of the European Union.
For the 27 nations of the Union, the jobless rate in January stood at 10.8 percent, up from 10.7 percent in December. All of the figures were seasonally adjusted. …
The jobless data “suggest that wage growth is set to weaken from already low rates” and further depress consumer spending, which has already been damped by government austerity measures, Jennifer McKeown, an economist at Capital Economics in London, wrote in a research note.
Europe did pretty well at convincing themselves that the worst of the European debt crisis was over, but was it really just the eye of the storm? These unemployment rates and the recently revised economic growth forecasts for 2013 aren’t going to make austerity measures any more welcome in the eyes of voters — and if Italy and Spain, the bloc’s third and fourth largest economies end up needing bailouts, it could very well spell extended troubles for the eurozone’s prospects, says Robert Samuelson:
The euro crisis is back. Actually, it never left. But there was an extended period, beginning last summer, when Europe’s political, business and media elites convinced themselves the worst had passed. The European Central Bank (ECB) — Europe’s Federal Reserve — had tranquilized jittery bond markets. …
But Italians did send a message. “The election wasn’t just anti-austerity. It was also anti-German,” says David Smick, editor of The International Economy magazine. “Berlusconi’s rhetoric was very anti-German. In Italian politics now, it’s dangerous to appear being the lapdog of [German Chancellor] Angela Merkel.” In one dazzling stroke, Italian voters rejected both Europe’s main response to high government debt — cut spending, raise taxes — and the policy’s most powerful architect, Germany’s Merkel. If Italy needs to be bailed out, the negotiations already look tortuous. …
The amounts required would dwarf the rescues of Greece, Portugal and Ireland. Agreement would be hardly guaranteed. As conditions for aid, the ECB and Germany have insisted on precisely the austerity and structural changes that Italian voters just rejected. Could Italy, backed by other debtor nations, force changes in old policies and, if not, what happens? Europe’s future remains in play.
Dangerous Times: How Euro-socialism Set off a Fascist Bomb
Reply #114 on:
March 02, 2013, 05:09:48 PM »
Dangerous Times: How Euro-socialism Set off a Fascist Bomb
By James Lewis and Justine Aristea
In the terrible economic crisis of 1922 Benito Mussolini got 25% of the vote in Italy. Two years later he had more than a majority.
You know the rest.
In the economic crisis of 2013, Beppe Grillo received 24% of the vote (see last week's analysis of Grillo's political beliefs). This week he blocked a government from forming. Grillo now controls the Senate, but he is going for a majority in both houses in the upcoming vote in June.
That's in Italy, but in Greece the Golden Dawn party is following the same path. So is the new Hungarian fascist resurgence. In Germany it's called the "Pirate Party."
Europe's political class is shocked and panicked. They are pretending Grillo is just a "populist" and a "reformer" -- but he also wants to "process" all the Jews in the world, who are responsible for all the evil. Grillo wants to nationalize the banks and abolish interest rates, "just like the Islamic Development Bank."
To understand the new upsurge of European fascism, you have to imagine what it's like to live in Rome.
Imagine the US government being sunk in red ink. The United Nations suspends the US Constitution and compels us to adopt a new UN currency called the UNO, designed to favor other countries. The United States no longer runs its own currency. Our economy tanks and our deficit keeps getting worse.
Therefore the UN unilaterally appoints a caretaker president for the US named Monti, who imposes radical budget cuts on our dependent welfare state.
1. Social Security is cut by half. People have to live on 700 euros per month.
2. ObamaCare is cut by half. Two hospitals in Rome do not pay their medical staffs for six months.
3. Taxes on income and sales are raised to an average of 50%.
4. Small business taxes are increased -- but big businesses taxes are lowered, "because big business is more efficient." (Meaning it has bigger unions).
5. Politicians and bureaucrats get major pay raises. The figurehead President of the US doubles his salary.
Government at all levels is corrupt. It's the only way people can survive. Everybody is playing double games. People are doing two jobs and running their own businesses out of government offices. Everybody cheats on taxes. The mafia controls half the country. Survival depends on the black market, the black economy. The currency is kept artificially high, so exports crash.
It's happened to Italy under the European Union. Don't think it can't happen here. Obama is a Euro socialist, representing faculty lounge socialism in America, so completely arrogant and cocksure that Paul Krugman just knows how to run the trillion-dollar US economy. Nobody else can figure it out, but Krugman knows that he knows. Our new rulers are control freaks, just as free market economists have said since Adam Smith. They are six year olds steering the family car and thinking they are in control until...
... until it all blows up.
This week Europe blew up. The media haven't caught up yet, because they are what they are. But the markets are catching up fast.
This is a huge event for the United States, because our political elite is bound and determined to turn us into Europe. Hasn't the EU found the answer to war and peace and prosperity forever?
Our Democrats believe it. Europe is their model. Every batty new idea they have is copied from the glorious European Union. Twenty years ago they still celebrated the Soviet Union, until that house of cards crumbled. Now they have shifted their fantasy paradise to Europe.
Over there, fifty years of increasingly centralized control have made it impossible for voters to be heard. The political parties are stuck in GroupThink. Only the fascist "protest" parties agitate for reform. The ruling class doesn't listen. They don't have to -- they don't have to run for election.
So European voters fled to the fascists to express their rage and despair. Imagine one out of four US voters going for Lincoln Rockwell, and you get the idea.
In Italy, Beppe Grillo the Clown just received 24% of the vote, the biggest percentage a single party has received since Benito Mussolini, Il Duce, in 1922, another economic crisis year.
The Italian vote gives the Clown control of the Senate, and the biggest voice in the lower house. The Grillini now speak for the capital city of Rome. Since fascism is illegal in Italy, the Five Star Party pretends not to be fascist; but scratch the surface and that old grinning ghost stares back at you.)
The EU and US media are still in denial, but Italian party politicians instantly flew to Berlin to talk with Angela Merkel, and came back to build a common front against Grillo the Clown. But the Joker refused to play. He wants another election in June.
Currency markets are signaling panic. Don't believe the media. Believe the markets.
Europe is our future. It's Obama style of Chicago "governance," and as long as the people were inundated by EU propaganda they believed that Europe had discovered the secret of peace and welfare forever. Talk to any European and that's what you hear. They keep wondering why we don't follow them to Never-Neverland. If you tell question them they turn a deaf ear. They're mentally stuck.
As long as America defends Europe, they will keep hating us and pretending they are running the ocean liner, like kids with plastic steering wheels.
The key to the whole farce is Europe's "democracy deficit," which means that the people can vote for the European Parliament -- but it has no legislative powers at all. The Parliament is a Potemkin front. It has no power to pass binding laws.
On the other hand, the unelected ruling class has centralized more and more power in "Commissions" -- which is what the word "Soviets" used to mean. But the EU has no electoral legitimacy. Nobody votes for the people who really run the place. That means the EU receives no feedback about the impact of its cult-like policy fantasies. When the people wanted a public referendum on the EU, the political class arrogantly told them to go... yes.
In France, the Grand Corps of the State ("Enarques") run the government. Germany and Britain are similar. Together they appoint the European ruling elite. This is the EU socialist Apparat, the Political Machine that controls everything. And yes, there are capitalists, but they work hand-in-glove with the Apparat. It's Crony Social Capitalism (technically the same as fascism).
As a result normal people feel totally powerless. As long as the Ponzi scheme lasts, the victims loved it. The media churned out neo-imperialist propaganda about how Europe had finally discovered peace and welfare forever, and everybody wanted to believe.
Today, southern and eastern Europe are running into a brick wall, designed by Europe's ruling class in its delusional way. The north blames the south, and vice versa. Nobody can stop the ruling class from its mad rush to destruction, so we are seeing a 'protest vote" in Germany, Poland, eastern Europe, and the PIIGS -- the Mediterranean coastal countries plus Ireland.
The only protest party people can vote for are barely disguised fascists: The Five Star party in Italy, Golden Dawn in Greece, Pirate Party in Germany, and fascist insurgents in Hungary.
Here's how it's done. In Italy Beppe Grillo ran as a sly comedian, spinning off conspiracy theories about 'chemtrails" (jet contrails) that poison the Italian people, the Rockefellers, Rothschilds and Illuminati who run the world to oppress the poor, and all the usual paranoid fantasies. But he also attacked massive corruption (which is true) and self-serving politicians (also true), and the euro currency that killed Italian exports (also true). Grillo voiced criticisms that other politicians avoided. Everybody knows about massive corruption, for example. Grillo said it.
Now the Clown has his own sources of money and ideology, which lead straight to Tehran, as we have pointed out. The Clown hates the Jews, and his website mentions "Jews" 2,500 times, and "Iran" 2,500 times. The Islamic Development Bank doesn't charge interest, the Clown tells us. This is pure Islamic fascist propaganda. Banks that loan free money don't exist in the real world, because they can't survive. But demagogues tell sucker lies, and this is a good one. Beppe tells his followers that he will nationalize the banks (like Il Duce) and give away free loans. It's like Obama phones, straight from Obama's stash. The suckers love it.
The Jews run the world by charging "usury" (this is an old, old story in Europe). In Beppe's Fantasyland money comes free, exactly what Islamist propaganda says. Beppe tells the world that "Everything I know about the Middle East I've learned from my father-in-law" Parvin Tajik, who runs a major construction business in Tehran, and therefore has to be in cahoots with the super-corrupt mullahs.
Guess who plays the scapegoat in this age-old drama? Yup.
People laughed at old Beppe the Clown for fifteen years.
Today the joke's on them.
Diifering views of the EU
Reply #115 on:
March 13, 2013, 01:06:59 AM »
DANIEL ROLAND/AFP/Getty Images
The euro sign in front of the European Central Bank building in Frankfurt, Germany
Since the onset of its economic crisis, Europe has been marked by widening divides over the eurozone's goals and structure. In recent months, a new split has emerged: The populations of countries on the eurozone's periphery -- those feeling the sharpest sting of austerity measures -- still widely support the common currency. Meanwhile, euroskeptic narratives that reject some of Europe's fundamental structures -- namely the free movement of people, goods and services -- have been gaining support in Europe's wealthier core countries.
But peripheral support for the currency bloc is likely shaded by hopes of a return to Europe's pre-crisis environment. And the core's insistence on austerity measures and economic reforms makes such a return unlikely in the near future. Such conflicting views appear likely to undermine policies designed to deal with the crisis and threaten the very foundations of the European Union.
On March 10, an opinion poll was published in Italy suggesting that, despite the country's political and economic crises, more than 70 percent of Italians support membership in the eurozone. The dynamic in Italy resembles those in other peripheral countries such as Greece and Spain, where opinion polls have consistently revealed strong support for the currency bloc, despite the crisis. In contrast, recent German media attention has been focused on Alternative for Germany -- a new political party proposing that countries should be allowed to leave the eurozone and create smaller currency unions with fewer members.
In the peripheral countries, support for austerity measures implemented by Brussels has waned, while discontent with the political elites who support such policies has become widespread. The 2012 elections in Greece and elections in Italy in February 2013 confirmed this trend, with anti-system parties in both countries performing strongly. Indeed, rejections of austerity policies in Europe have often been accompanied by strong criticism of the bureaucracy in Brussels -- and even Germany's leadership during the crisis -- as well.
Reasons to Remain
However, few Italians wish to return to the lira and even fewer Greeks want the drachma. There are some concrete economic explanations for this sentiment. For example, a strong currency allows peripheral countries to sustain their energy imports. There are also less-quantifiable reasons to remain in the eurozone, such as a sense of belonging to Europe. In peripheral countries -- states that might otherwise be isolated internationally or subjugated by other external actors -- EU membership and the euro have high symbolic value.
This sentiment partly explains why, for example, Latvia still hopes to join the eurozone by Jan. 1, 2014, and Croatia is seeking to join the European Union in July. Moreover, Portugal, Greece and Spain each joined after the fall of a dictatorship, and each believed that EU membership would expedite integration with the West and invite investment and funding from Europe and the broader international community. In Italy, the anti-establishment Five Star Movement has gradually softened its criticism of the eurozone and centered its campaign on a criticism of the country's political elites. None of these countries want to risk being isolated from the rest of Europe.
However, the evident desire to remain in the eurozone, and even in the European Union, is likely affected by hopes that Europe will return to its pre-crisis environment. In other words, it is a desire for the Continent to return to the days of cheap credit, low unemployment and high social spending. In essence, the European periphery wants the benefits of the eurozone without most of the costs. Opinion polls can be misleading if questions about remaining in the common currency are not linked to austerity measures.
For peripheral countries, a return to pre-crisis Europe will likely be hindered by conflicting visions of the eurozone between the bloc's core and peripheral countries. Governments in core countries tend to view peripheral countries critically and, for example, believe that they should implement austerity measures and economic reforms to clean up their balance sheets and avoid sparking a repeat crisis.
Such views have often been even more pronounced among local populations. While national governments accept the idea that peripheral members should receive bailouts eventually to prevent the crisis from deepening, such rescues often are unpopular among voters. Thus, governments in core countries have been forced into a sort of balancing act: To maintain domestic support, they have attempted to appear inflexible toward peripheral countries in pressuring them to apply economic reforms. But to prevent the financial crisis from spreading, core governments have still been willing to dole out rescue funds.
Cracks in the Eurozone's Foundation
VIDEO: The Eurozone's Political Challenge (Agenda)
This dynamic has created a significant political problem in Europe's core, where the strongest opposition to some of the fundamental principles of the European Union have emerged. Among core political parties and governments, discontent has been especially strong about issues such as immigration, the Schengen area, the common currency and even the free movement of goods.
As a result, Northern Europe is currently facing the real possibility that euroskepticism gains enough popularity to become an issue capable of swinging elections. Even leaders who recognize the benefits of EU membership may become euroskeptics if they perceive a change in the social mood. The growing criticism of the European Union by the British government highlights this possibility.
One of the main causes of the crisis in Europe -- and probably the biggest obstacle to implementing the policies needed to escape the crisis -- is the difference in visions held by Europeans about the bloc's function and objectives. These rifts remained dormant during the prosperous period that followed the creation of the European Union. But the European crisis has allowed these issues to reemerge, and it is threatening the European project at its foundations.
Read more: Differing Views of Eurozone Membership | Stratfor
Re: European matters, tax policy, climate? EU to suspend aviation carbon tax
Reply #116 on:
March 15, 2013, 11:26:26 AM »
EU to suspend aviation carbon tax
That scientific marxism should be kicking in anytime now....
Reply #117 on:
March 18, 2013, 07:26:27 PM »
S&P Warns of Socially Explosive Situation in Euro Zone
Published: Monday, 18 Mar 2013 | 6:15 AM ET
Standard and Poor's sees a high risk that Spain, Italy, Portugal and France will not be able to carry through necessary reforms as the unemployed become less willing to put up with austerity, S&P's Germany head Torsten Hinrichs told a newspaper.
"The high unemployment in Spain, Italy and France is socially explosive," Hinrichs was quoted as saying in Monday's Neue Osnabrcker Zeitung.
"There has to be a social consensus for saving measures. High unemployment ... does not help."
Hinrichs said the people of Spain and Portugal had already proven they were willing to bear with austerity measures, but "this cannot continue forever".
In Italy, there was the further danger that "a new government may not be strong enough for the still necessary reforms to strengthen growth," he said.
Hinrichs said S&P still rated Germany as a triple A with stable outlook and did not see any reason for concern: "It is one of the few AAA and stable countries that we still have in Europe".
The weak profitability of the banking sector due to the profusion of banks was the only problem in Germany, he said, although he saw positive changes in the sector in terms of equity capital and refinancing.
Re: European matters
Reply #118 on:
March 20, 2013, 12:01:27 AM »
On the roundtable of the Bret Baier Special Report someone (Krauthammer?) said that the Russians have offered to bail out Cyprus in return for the rights to the huge natural gas field in Cyprian waters , , ,
Stratfor: EU's disturbing precedent in the Cyprus bailout
Reply #119 on:
March 26, 2013, 08:02:06 AM »
Europe's Disturbing Precedent in the Cyprus Bailout
March 26, 2013 | 0900 GMT
By George Friedman
Founder and Chairman
The European economic crisis has taken different forms in different places, and Cyprus is the latest country to face the prospect of financial ruin. Overextended banks in Cyprus are teetering on the brink of failure for issuing loans they cannot repay, which has prompted the tiny Mediterranean country, a member of the European Union, to turn to Brussels for help. Late Sunday, the European Union and Cypriot president announced new terms for a bailout that would provide the infusion of cash necessary to prevent bankruptcies in Cyprus' banking sector and, more important, prevent a banking panic from spreading to the rest of Europe.
What makes this crisis different from the previous bailouts for Greece, Ireland or elsewhere are the conditions Brussels has attached for its assistance. Due to circumstances unique to Cyprus, namely the questionable origin of a large chunk of the deposits in its now-stricken banking sector and that sector's small size relative to the overall European economy, the European Union, led by Germany, has taken a harder line with the country. Cyprus has few sources of capital besides its capacity as a banking shelter, so Brussels required that the country raise part of the necessary funds from its own banking sector -- possibly by seizing money from certain bank deposits and putting it toward the bailout fund. The proposal has not yet been approved, but if enacted it would undermine a formerly sacred principle of banking in most industrial nations -- the security of deposits -- setting a new and possibly destabilizing precedent in Europe.
For years before the crisis, Cyprus promoted itself as an offshore financial center by creating a tax structure and banking rules that made depositing money in the country attractive to foreigners. As a result, Cyprus' financial sector grew to dwarf the rest of the Cypriot economy, accounting for about eight times the country's annual gross domestic product and employing a substantial portion of the nation's work force. A side effect of this strategy, however, was that if the financial sector experienced problems, the rest of the domestic economy would not be big enough to stabilize the banks without outside help.
Europe's economic crisis spawned precisely those sorts of problems for the Cypriot banking sector. This was not just a concern for Cyprus, though. Even though Cyprus' banking sector is tiny relative to the rest of Europe's, one Cypriot bank defaulting on what it owed other banks could put the whole European banking system in question, and the last thing the European Union needs now is a crisis of confidence in its banks.
The Cypriots were facing chaos if their banks failed because the insurance system was insufficient to cover the claims of depositors. For its part, the European Union could not risk the financial contagion. But Brussels could not simply bail out the entire banking system, both because of the precedent it would set and because the political support for a total bailout wasn't there. This was particularly the case for Germany, which would carry much of the financial burden and is preparing for elections in September 2013 before an electorate that is increasingly hostile to bailouts.
Even though the German public may oppose the bailouts, it benefits immensely from what those bailouts preserve. As I have pointed out many times, Germany is heavily dependent on exports and the European Union is critical to those exports as a free trade zone. Although Germany also imports a great deal from the rest of the bloc, a break in the free trade zone would be catastrophic for the German economy. If all imports were cut along with exports, Germany would still be devastated because what it produces and exports and what it imports are very different things. Germany could not absorb all its production and would experience massive unemployment.
Currently, Germany's unemployment rate is below 6 percent while Spain's is above 25 percent. An exploding financial crisis would cut into consumption, which would particularly hurt an export-dependent country like Germany. Berlin's posture through much of the European economic crisis has been to pretend it is about to stop providing assistance to other countries, but the fact is that doing so would inflict pain on Germany, too. Germany will make its threats and its voters will be upset, but in the end, the country would not be enjoying high employment if the crisis got out of hand. So the German game is to constantly threaten to let someone sink, while in the end doing whatever has to be done.
Cyprus was a place where Germany could show its willingness to get tough but didn't carry any of the risks that would arise in pushing a country such as Spain too hard, for example. Cyprus' economy was small enough and its problems unique enough that the rest of Europe could dismiss any measures taken against the country as a one-off. Here was a case where the German position appears enormously more powerful than usual. And in isolation, this is true -- if we ignore the question of what conclusion the rest of Europe, and the world, draws from the treatment of Cyprus.
A Firmer Line
Under German guidance, the European Union made an extraordinary demand on the Cypriots. It demanded that a tax be placed on deposits in the country's two largest banks. The tax would be about 10 percent and would, under the initial terms, be applied to all accounts, regardless of their size. This was an unprecedented solution. Since the global financial crisis of the 1920s, all advanced industrial countries -- and many others -- had been operating on a fundamental principle that deposits in banks were utterly secure. They were not regarded as bonds paying certain interest, whose value would disappear if the bank failed. Deposits were regarded as riskless placements of money, with the risk covered by deposit insurance for smaller deposits, but in practical terms, guaranteed by the national wealth.
This guarantee meant that individual savings would be safe and that working capital parked by corporations in a bank was safe as well. The alternative was not only uncertainty, but also people hoarding cash and preventing it from entering the financial system. It was necessary to have a secure place to put money so that it was available for lending. The runs on banks in the 1920s and 1930s drove home the need for total security for deposits.
Brussels demanded that the bailout for Cypriot banks be partly paid for by depositors in those banks. That demand essentially violated the social contract on the sanctity of bank deposits and did so in a country that was a member of the European Union -- one of the world's major economic blocs. Proponents of the measure pointed out that many of the depositors were not Cypriot nationals but rather foreigners, many of whom were Russian. Moreover, it was suggested that the only reason for a Russian to be putting money in a Cypriot bank was to get it out of Russia, and the only motive for that had to be nefarious. It followed that the confiscation was not targeted against ordinary people but against shady Russians.
There is no question that there are shady Russians putting money into Cyprus. But ordinary Cypriots had their money in the same banks and so did many Cypriot and foreign companies, including European companies, who were doing business in Cyprus and need money for payroll and so on. The proposal might look like an attempt to seize Russian money, but it would pinch the bank accounts of all Cypriots as well as a sizable amount of legitimate Russian money. Confiscating 10 percent of all deposits could devastate individuals and the overall economy and likely would prompt companies operating in Cyprus to move their cash elsewhere. The measure would have been devastating and the Cypriot parliament rejected it.
Another deal, the one currently up for approval, tried to mitigate the problem but still broke the social contract. Accounts smaller than 100,000 euros (about $128,000) would not be touched. However, accounts larger than 100,000 euros would be taxed at an uncertain rate, currently estimated at 20 percent, while bondholders would lose up to 40 percent. These numbers will likely shift again, but assuming they are close to the final figures, depositors putting money into banks beyond this amount are at risk depending on the financial condition of the bank.
The impact on Cyprus is more than Russian mafia money being taxed. All corporations doing business in Cyprus could have 20 percent of their operating cash seized. Regardless of precisely how the Cypriot banking system is restructured, the fact is that the European Union demanded that Cyprus seize portions of bank accounts from large depositors. From a business' perspective, 100,000 euros is not all that much when you are running a supermarket or a car dealership or a construction company, but this arbitrary level could easily be raised in the future and the mere existence of the measure will make attracting investment more difficult.
A New Precedent
The more significant development was the fact that the European Union has now made it official policy, under certain circumstances, to encourage member states to seize depositors' assets to pay for the stabilization of financial institutions. To put it simply, if you are a business, the safety of your money in a bank depends on the bank's financial condition and the political considerations of the European Union. What had been a haven -- no risk and minimal returns -- now has minimal returns and unknown risks. Brussels' emphasis that this was mostly Russian money is not assuring, either. More than just Russian money stands to be taken for the bailout fund if the new policy is approved. Moreover, the point of the global banking system is that money is safe wherever it is deposited. Europe has other money centers, like Luxembourg, where the financial system outstrips gross domestic product. There are no problems there right now, but as we have learned, the European Union is an uncertain place. If Russian deposits can be seized in Nicosia, why not American deposits in Luxembourg?
This was why it was so important to emphasize the potentially criminal nature of the Russian deposits and to downplay the effect on ordinary law-abiding Cypriots. Brussels has worked very hard to make the Cyprus case seem unique and non-replicable: Cyprus is small and its banking system attracted criminals, so the principle that deposits in banks are secure doesn't necessarily apply there. Another way to look at it is that an EU member, like some other members of the bloc, could not guarantee the solvency of its banks so Brussels forced the country to seize deposits in order to receive help stabilizing the system. Viewed that way, the European Union has established a new option for itself in dealing with depositors in troubled banks, and that principle now applies to all of Europe, particularly to those countries with financial institutions potentially facing similar problems.
The question, of course, is whether foreign depositors in European banks will accept that Cyprus was one of a kind. If they decide that it isn't obvious, then foreign corporations -- and even European corporations -- could start pulling at least part of their cash out of European banks and putting it elsewhere. They can minimize the amount of cash on hand in Europe by shifting to non-European banks and transferring as needed. Those withdrawals, if they occur, could create a massive liquidity crisis in Europe. At the very least, every reasonable CFO will now assume that the risk in Europe has risen and that an eye needs to be kept on the financial health of institutions where they have deposits. In Europe, depositing money in a bank is no longer a no-brainer.
Now we must ask ourselves why the Germans would have created this risk. One answer is that they were confident they could convince depositors that Cyprus was one of a kind and not to be repeated. The other answer was that they had no choice. The first explanation was undermined March 25, when Eurogroup President Jeroen Dijsselbloem said that the model used in Cyprus could be used in future bank bailouts. Locked in by an electorate that does not fully understand Germany's vulnerability, the German government decided it had to take a hard line on Cyprus regardless of risk. Or Germany may be preparing a new strategy for the management of the European financial crisis. The banking system in Europe is too big to salvage if it comes to a serious crisis. Any solution will involve the loss of depositors' money. Contemplating that concept could lead to a run on banks that would trigger the crisis Europe fears. Solving a crisis and guaranteeing depositors may be seen as having impossible consequences. Setting the precedent in Cyprus has the advantage of not appearing to be a precedent.
It's not clear what the Germans or the EU negotiators are thinking, and all these theories are speculative. What is certain is that an EU country, facing a crisis in its financial system, is now weighing whether to pay for that crisis by seizing depositors' money. And with that, the Europeans have broken a barrier that has been in place since the 1930s. They didn't do that casually and they didn't do that because they wanted to. But they did it.
Read more: Europe's Disturbing Precedent in the Cyprus Bailout | Stratfor
Behind the curtain-- the Emminger Letter:
Reply #120 on:
April 02, 2013, 07:07:14 AM »
The ‘Emminger letter’ forms one of the more obscure parts of the history of the German Bundesbank. It is also one of the most chilling. And, in the hard-line negotiations over the latest Cyprus bail-out package, 35 years after it was written, it has just made a singular re-entry.
The document, drawn up in secret in 1978, gave the German central bank the power to side-step formal obligations to support weaker countries via foreign exchange intervention during European currency turmoil. Emminger was one of the most influential figures rebuilding German post-war central banking from the 1950s.
He was a member of the board of the Bundesbank and its forerunner, Bank deutscher Länder, for 26 years, finishing as Bundesbank president from 1977 to 1979. Emminger died in 1986. But his spirit lingers on.
The European Central Bank (ECB) ultimatum delivered to Cyprus on 21 March, giving the country until the following Monday to agree a lending deal with the International Monetary Fund and the European Union or risk bankruptcy, bore the Emminger hallmarks. The ECB governing council said its Emergency Liquidity Assistance (ELA) to Cyprus would not be renewed unless an official programme was in place – sparking frantic diplomatic action that led finally to a deal closing down the island’s second biggest bank and imposing swingeing write-offs on large depositors.
The ultimatum marked a dramatic change of ECB tactics. In previous action, the ECB had maintained generous ELA assistance for Ireland and Greece, under lending that is deemed semi-automatic unless the governing council (currently 23 people, all men) decides with a two-thirds majority to close it down. The lending has attracted great displeasure in Germany and other current account surplus countries.
With Cyprus, the hard currency central banks behind the ECB, led by the Bundesbank, decided they had had enough. By ensuring its habitually tough line unreservedly became ECB policy, the Bundesbank – without needing to act in public – strode to the front line of the debate over the future of economic and monetary union (EMU).
The Emminger episode bears resemblance to this because, in the 1960s and 1970s, the Bundesbank was perennially haunted by the fear that its efforts to control the German monetary base and hence German inflation would be compromised by commitments to buy large volumes of foreign currencies to maintain exchange rate stability. These obligations were imposed first by the Bretton Woods fixed exchange rate agreements and then by various European currency arrangements.
In EMU, the Bundesbank is highly wary of the risks caused by the build-up of its assets with the ECB reflecting the ECB’s lending to hard-hit peripheral countries, which includes borrowings under the ELA. The Bundesbank’s assets under the so-called Target-2 system for short term liquidity transfers were €613bn as of end-February, up from €547bn in February last year, making up roughly two-thirds of the Bundesbank’s balance sheet. The Target-2 total has declined by around €140bn since the peak in August last year, but greatly exceeds the Bundesbank’s gold stocks worth €132bn as of end-February as well as its €29bn of foreign exchange reserves.
The significance of the Emminger letter is that he wrote it at a similarly fraught time of skirmishing over Europe’s monetary framework. Emminger sent the missive to Helmut Schmidt, then West German chancellor, on 16 November 1978 to register the Bundesbank council’s approval of most of the elements of the prospective agreement setting up the European Monetary System (EMS), which developed later into EMU.
However, Emminger and his council colleagues disagreed with the feature of the EMS agreement that the Bundesbank would be forced to intervene with unlimited amounts of D-Mark sales and foreign currency purchases whenever European partners’ currencies reached their floor in the EMS’s exchange rate mechanism (ERM).
The letter made clear the Bundesbank’s desire to be freed from this obligation to intervene during monetary crises. Schmidt sent Emminger a telex message signalling agreement on all the outstanding issues apart from the intervention exemption.
On 30 November Schmidt attended a lengthy Bundesbank council meeting in Frankfurt to clinch agreement on the EMS details. Schmidt pointed out, to Emminger’s evident satisfaction, that – in relation to the intervention exemption – he had annotated the Bundesbank president’s letter of 16 November with an ‘r’ to indicate ‘richtig’ (‘right’ in German) or, as he said, ‘factual agreement’.
This deviation, Schmidt told the council, was allowable under the classical legal exemption clause ‘clausula rebus sic stantibus’ (‘Treaties may become inapplicable because of changes in circumstances’). However, he affirmed that the modification should remain secret and could not be part of a formal agreement. ‘Let us imagine that this appeared in a French or Italian newspaper tomorrow,’ Schmidt told the council, according to official documents that were published only 30 years later. ‘The editorials would criticise their own governments for believing such a shallow promise from the Germans. A [German] government promises to intervene to uphold certain rules of the game, but then writes in an internal paper that it intends to act differently at times of emergency.’
The Emminger letter was brought into play, with great effect, 24 years later on Friday 11 September 1992, a day after the Banca d’Italia, the Italian central bank, publicly complained about ‘excessively high’ Bundesbank interest rates, when the lira fell to its lowest permitted point in the exchange rate mechanism, triggering enormous obligatory intervention from the Bundesbank and Banca d’Italia. In the light of massive inflows of liquidity threatening to disrupt German monetary policy, the Bundesbank invoked the Emminger let-out clause to free it from the constraint of making unlimited lira support purchases.
The news shocked the Italians. Carlo Azeglio Ciampi, governor of the Banca d’Italia, was conferring with prime minister Giuliano Amato and finance minister Piero Barucci at the prime minister’s office in Rome when Ciampi was called to the telephone to be told that the Bundesbank would stop intervening on Monday. ‘When he came back, he was pale, almost white,’ Amato recalled later. The episode forced a lira devaluation over the weekend and helped sparked a run on the British pound on Wednesday 16 September (known later as ‘Black Wednesday’) when both the UK and Italy had to leave the ERM.
The Bundesbank carefully avoided having to resort to the Emminger letter that day because it intervened to buy Dutch guilders, forcing the guilder rather than the D-Mark to the top of the ERM intervention framework against sterling and therefore avoiding any Bundesbank obligation to undertake unlimited purchases of sterling.
The Emminger letter was also invoked later that month in a furious battle with the French government and the Banque de France to prevent the French franc from devaluing within the ERM. A top French official Guillaume Hannezo reiterated Paris’s surprise over the discovery of the Emminger letter limiting the Bundesbank’s intervention obligations. ‘This is singular: a treaty from state to state can be repudiated by an independent public organ.’
The various intrigues surrounding the Emminger letter are shadowy and somewhat convoluted. Jens Weidmann, the current Bundesbank president, who has been known to cite Emminger approvingly in his speeches, was 10 years old when the document was written.
However, there is one man to whom it is not a mystery. Mario Draghi, the ECB president, and the man who authorised the 21 March Cypriot ultimatum, was head of the Italian Treasury during the September 1992 encounters with the Bundesbank.
Draghi has been on the receiving end of the Bundesbank’s power. And he could be excused for now thinking he can unleash some of it in the service of the ECB.
Eurozone unemployment hits a record 12 percent
Reply #121 on:
April 02, 2013, 12:33:57 PM »
Eurozone unemployment hits a record 12 percent
posted at 12:01 pm on April 2, 2013 by Erika Johnsen
Yikes. The end of 2012 marked a collective economic contraction in the eurozone for the fifth straight quarter, and the 17-member currency bloc is well on track to logging their sixth:
Official figures for first-quarter economic activity won’t be released until May 15, but the monthly Eurocoin measure of euro-zone output released Friday signaled a contraction for March, having earlier signaled declines in activity in January and February.
The measure, which is compiled by London-based Center for Economic Policy Research and the Bank of Italy, also showed a drop in gross domestic product in each of the three months of the fourth quarter, an indication borne out later when official data showed the euro-zone economy shrank by 0.6%.
That dreary outlook is further corroborated by the revised January and today’s February jobs reports, which reported eurozone unemployment coming in at a whopping 12 percent — the highest figure since the currency was first launched in 1999.
The number of people unemployed in the 17 member states rose by 33,000 during [February], to hit 19.07 million, the statistics agency Eurostat said. …
The jobless figures from Eurostat also showed that Spain’s unemployment rate hit 26.3% in February, while the rate in Portugal remained stable at 17.5%.
The lowest rates were recorded in Austria (4.8%) and Germany (5.4%), both unchanged from January. The overall unemployment rate for the eurozone in January was revised up from 11.9% to 12%. …
The fresh high in the unemployment rate “is further confirmation of the underlying weakness of the economy”, said Jennifer McKeown at Capital Economics.
“The rise in unemployment was the 22nd in a row, making this labour market downturn the most prolonged since the early 1990s.”
And this is all from February, before the Cyprus situation even got started — it’s relative impact might not be huge, but I’d doubt that that chaos and the accompanying market-jitters are going to do anything helpful for business confidence or the labor market, nor for the EU’s long-term stability.
These are just more reminders of what happens after repeated failures to substantively deal with brewing debt crises and practice fiscal responsibility — but hey, it’s cool, because “we don’t have an immediate crisis in terms of debt” and “for the next 10 years, it’s gonna be in a sustainable place,” or something.
D. Gradner: No tears for Cyprus
Reply #122 on:
April 08, 2013, 07:48:22 AM »
"Shed no tears. Cyprus reaps the foreseeable consequences of a deliberate plan, hatched 40 years ago, to create a lightly-regulated financial centre and capture restless offshore money. Finance moved en masse from Beirut to Cyprus when Lebanon collapsed into civil war. Milosevic’s Serbia banked and traded through Cyprus to evade sanctions during the Yugoslav wars. Russian billions round-tripped through Cyprus to evade tax. Real earnings in Cyprus quadrupled in 1975-2011. Victims? Hardly."
Cyprus reaches end of a long and sleazy road
By David Gardner in Beirut
The island’s collapse is not really the result of a random lurch
The sudden tumble of Cyprus from sun-kissed prosperity into bleak penury must certainly have felt precipitate to many of its citizens – more like a scalping than a haircut
But the collapse is not really the result of a random lurch or shift in axis. It is the end of a path traced in a long, complacent arc of ease and sleaze that hit a wall.
It is almost 40 years since the east Mediterranean island was traumatised by partition. In 1974, an Athens-inspired coup aimed at unifying Cyprus with Greece led to Turkey’s invasion of the island, the northern third of which remains largely isolated under Turkish tutelage.
Yet it was not long after this that the Greek Cypriot south embarked on the economic course that would ultimately lead it to meltdown: to bet its part of the island on building a low tax, high-return, lightly regulated banking centre, with comfortable layers of ancillary services in auditing and law, “corporate formation” and shipping management, real estate and so on. For a long time, this worked exceptionally well.
Ordinary Greek Cypriots will now feel they are victims of brutal outside forces in a German-dominated Europe. But Cyprus was also the beneficiary of brutal outside developments. Cyprus grew rich on the misfortunes of its neighbours; its decision to do a certain kind of banking for a living was shaped by the disintegration of Lebanon, the former Yugoslavia and the Soviet Union.
Beirut was the unchallenged financial and services entrepôt between the west and the petrodollar-fired Middle East until Lebanon descended into civil war in 1975. As that tribal war ground on until 1990, with two further wars with Israel to come, Cyprus acquired bits of Beirut’s banking business, but seemingly little of the ostensibly free-wheeling Lebanese capital’s conservative banking habits – such as high levels of provisioning against bad loans and very high deposits to loans ratios.
One need go no further than compare Cypriot banks’ catastrophic exposure to Greek bonds, a market with which Beirut financiers were familiar, but cautious.
By the time the Lebanon war ended, the wars of the Yugoslav succession were getting underway. Bankers and politicians in Cyprus gave Slobodan Milosevic, the Serbian strongman, a lifeline by enabling him to evade western sanctions and prosecute the wars in Bosnia and Kosovo during the 1990s. By then, Cyprus had acquired critical mass as a banking destination sufficient for its close-knit elite to profit mightily from the collapse of the Soviet Union, the rise of Russia’s oligarchs, and then the uncertainties of doing business under Vladimir Putin’s unpredictable rules. Russian billions, round-tripping through Cyprus, gave the island’s economy a huge lift.
In per capita income terms, Cypriots quadrupled their real earnings, in constant money, between 1975 and 2011, according to the World Bank; in nominal terms, or current US dollars, the UN records a rise in earnings per head from $1,451 to $30,523 over the same period.
While Cyprus used the common ties of the Christian Orthodox religion to strengthen all these connections, it was received into the European Union (in 2004) and the euro (in 2008), was designated by the IMF an advanced economy (in 2011), and even became a modest net contributor to the EU budget, alongside the Germans and the Dutch. Times were sweet.
Nobody – including, until recently, the markets – appears to have suggested to the Cypriots that tax havens and brass plaque economies were falling out of favour; that giant financial bubbles attached to small islands (think Iceland) were falling into the sea; or that if politicians in the EU north were taking flak about “bailing out” the south they would certainly not form an orderly queue to aid wealthy Russian depositors.
Cyprus, moreover, has not made too many friends in the EU because of its obstructionism over the 2004 UN plan to reunify the island and over fraught relations with Turkey. An irony of its current drama is that one partial palliative – the discovery of rich hydrocarbons reserves in its coastal waters – will push Cyprus towards Turkey, the most easily accessible market for its gas when it desperately needs to find ways of replacing banking-generated wealth.
That has gone for ever.
And a response:
>>>> One need go no further than compare Cypriot banks’ catastrophic exposure to Greek bonds <<<<
There is only one serious question - WHY did the Cypriot banks invest so heavily into those Greek bonds? I'm willing to bet a $20 bill against a cup of Starbucks that it was related to political pressure. I expect that sooner or later the truth will emerge, and it will be similar to the way our politicians "encouraged" financial institutions to offer mortgages to people who clearly couldn't afford to pay them.
The talk about the "Russian mobsters" is smoke and mirrors, designed to make this bank robbery a little more palatable to the masses. This is a precedent which will damage the very foundations of Western society. If politicians can order appropriations of private funds from private banks - so, whom can you trust? Where are you going to keep your saving? The Caymans? It wouldn't take a single platoon of Marines to take full control of that country (if, of course, the UK is on on the deal).
Last Edit: April 08, 2013, 08:05:04 AM by Crafty_Dog
STratfor: The Crisis of the Euro Common Market
Reply #123 on:
April 11, 2013, 08:01:09 AM »
The Crisis of the European Common Market
April 11, 2013 | 0509 GMT
The European Union was founded on the free movement of people, goods, services and capital. All of these basic freedoms are inextricably intertwined with the European crisis. The free movement of people is being questioned in numerous countries, while the free movement of goods and services is in part responsible for the current crisis. The free movement of capital has forced EU leaders to face the consequences of different national banking regulations that allow capital flight and tax evasion. While better oversight and collaboration make tax collection across borders easier, they do little to stem capital flight, which weakens banking sectors in already struggling economies.
The creation of a common market where people, goods, services and capital could move freely was one of the main goals of the Treaty of Rome -- the agreement between France, West Germany, Italy, the Netherlands, Belgium and Luxembourg that created the European Economic Community in 1957. It took the four decades between the Treaty of Rome and the 1992 Treaty of Maastricht for the members of the European Union to develop the principles of the common market, and some gaps remain.
The free movement of people is the principle that allows EU citizens to travel to or live and work in any member country. It has come under threat from several governments and political parties in Europe. In the United Kingdom, the conservative government of Prime Minister David Cameron is analyzing ways to prevent the arrival of Romanian and Bulgarian workers, who will be allowed to work legally in the United Kingdom starting next year. According to the British government, those workers would collapse the British healthcare system. In countries such as France, Sweden, Finland and Denmark, parties that reject immigration are gaining ground.
The free movement of goods and services is fundamental to the customs union and a key component of the crisis of the eurozone. The creation of the eurozone put 17 countries with varying levels of economic development and competitiveness in a currency union. This has created significant trade imbalances between the less developed economies in the eurozone periphery and Germany, Europe's main exporter. Before the introduction of the euro, countries in the periphery could apply monetary policy to deal with growing current account deficits, but now the common currency has deprived them of that tool.
As the crisis deepens, the European Union has begun to pay more attention to the links between the crisis and the last founding principle -- the free movement of capital. The bailouts for Ireland, Greece and Spain highlighted the fragility of the banking sectors in the eurozone periphery and created fears of financial instability spreading to the rest of the members of the common currency. The bailout for Cyprus incorporated an additional element, due to the island's opaque banking sector, that forced depositors to take a hit. This decision brought uncertainty about the future format of EU bailouts. Even though the leaders of Portugal, Slovenia and Luxembourg said that Cyprus was an isolated issue, there is no way to be certain that this will not be the new norm for bailouts in the eurozone.
The European Union is trying to address the problems of its banking sector through the creation of a banking union -- a mechanism that would put all the eurozone banks under the supervision of a single entity, provide joint funds to rescue banks in distress and provide all banks with the common deposit guarantee. This idea has been controversial since the beginning. First, there was a debate regarding which banks should be supervised. In December 2012, the European Union agreed that only the largest banks in the eurozone would be put under supervision. Second, the idea of a joint insurance mechanism and bank resolution fund was highly controversial because countries with strong banking sectors refuse to take responsibility for failing banks. As a result, EU leaders decided to postpone the insurance mechanism's implementation.
With the first stage of the banking union projected to become operational in early 2014, EU leaders are dealing with another one of the eurozone's problems: the fight against tax evasion. Often, residents of EU countries are able to avoid taxation in their country of residence by having bank accounts in another member state. In 2003, the European Union tried to solve this problem by getting EU members to agree to implement an automatic exchange of information between states concerning interest payments.
But Belgium, Austria and Luxembourg objected to the disclosure of account holders' names, arguing that they would not be able to compete with non-EU countries with strong banking sectors such as Switzerland and Liechtenstein. As a result, they were granted exceptions to the system of information exchanging. In 2010, as the crisis on the Continent intensified, Belgium decided to comply with the exchange of information system, and now Brussels is pressuring Austria and Luxembourg to do the same. The issue has recently become particularly heated. Countries such as France and Spain have seen numerous corruption scandals in which public officials had secret bank accounts in other countries.
Under pressure from the European Union, the government of Luxembourg announced April 10 that it will implement rules on the automatic exchange of bank account information with the rest of the European Union beginning in 2015. The decision took place one day after the finance ministers of Germany, France, the United Kingdom, Italy and Spain sent a letter to the EU Commission proposing the creation of an information exchange system to fight tax evasion. In addition, Austrian Chancellor Werner Faymann said April 9 that his country is ready to discuss a more intensive exchange of information about its banking sector.
VIDEO: European Union's Push for Bank Transparency
While efforts to share banking information are moving forward, two problems remain. The first is enforcement. In their April 9 letter to the EU Commission, Europe's five largest economies (Germany, France, the United Kingdom, Italy and Spain) proposed to improve the current mechanisms of information exchange between banks in the European Union, admitting that the mechanisms in place are not enough to prevent evasion. Second, these information-sharing measures are not designed to prevent capital flight from countries in the periphery to countries in the core -- another significant problem based on the free movement of capital. In October, the International Monetary Fund warned that uncertainty is encouraging flights of money from the periphery to Northern Europe and to countries outside the currency union.
Leading up to the crisis, free capital mobility facilitated a credit boom in the eurozone periphery. With the crisis, this mobility has weakened the banking sectors of countries in the periphery because depositors face no hurdles in fleeing to more stable banking sectors in the north. Bank loans are the most important credit channel for companies in Europe, so the continued weakening of banking sectors in the periphery adds more problems to these already struggling economies, thus exacerbating the differences between the core and the periphery of the eurozone.
Read more: The Crisis of the European Common Market | Stratfor
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