The 'i's Economics Editor - Ben Chu - dismisses the Merkel-Sarkozy 'plan' as displacement activity, since it fails to address the role of French and German banks in causing the crash.   [MKP]

David Cameron was educated at Eton and Oxford where he gained first class honours in PPE ...

His tutor, Professor Vernon Bogdanor, described him as "one of the ablest" students he has taught, with "moderate and sensible Conservative" political views.

Guy Spier, who shared tutorials with him remembers him as an outstanding student;

"We were doing our best to grasp basic economic concepts. David - there was nobody else who came even close.

"He would be integrating them with the way the British political system is put together. He could have lectured me on it, and I would have sat there and taken notes.."    [Wiki]

You might therefore think that a man of this background would have been able to approach the problems posed by the euro crisis with a more critical, analytical, frame of mind than the negative, short-termist approach which has left Britain without economic influence within the EU.

Many, of course, will applaud his stance, and with it the possibility that Britain might leave the EU before it is kicked out.

Contrast this with George Osborne's warning that a collapse of the euro "would cause 'enormous' damage to the UK economy".   [Tel]

You wouldn't need a first class honours in PPE to have pointed out that a single currency needs a single finance ministry: a point overlooked by the Merkozy twins despite much vacuous chatter about a 'fiscal union'.

Cameron might have pointed out, as Larry Elliott did in an earlier piece on the crisis, that a fiscal union as also a transfer union.    [NYT]    [Gdn]

He could also have pointed out that a single currency needs a central bank acting as the lender of last resort.

This is the last thing Angela Merkel wants, since, currently, it would be financed by the country which has benefitted from the 30% competitiveness differential between the northern countries and the PIIGS group of nations, ie the two groups of nations which needed different interest rates, another fact which the Merkozy plan conveniently ignores.   [Gdn]   [EC]

By this time the rest of the EU might have been starting to question their turn-up-and-ratify approach to the Merkozy plan.   [EC]

Instead Cameron chose to reprise the role Nikita Khrushchev played at the UN - 'Mr Nyet' - except that Cameron did not take his shoe off and hammer the table with it.   [Wiki]

Cameron missed the opportunity, in other words, to demonstrate a critical understanding of where the euro is headed under the Merkozy twins "displacement activity", and try to warn the other leaders as to its defects.

The Irish Times reports that ...

The question of a possible referendum was one that many countries would have to consider ... [Mr Kenny said] ...

“There is a great deal of technical and legal work that needs to be done. Ireland is not alone in that.”

The Government fears defeat in any referendum, which would be required if the treaty proposal was deemed to alter the essential scope or objectives of the EU communities.

A high-level EU source who was deeply involved in preparations for the summit said Irish officials repeatedly argued against treaty change, saying any vote would be doomed to rejection ...    [IT]

On the last occasion the Irish people voted "the wrong way", they corrected their "mistake" in a get-it-right-this-time repeat referendum.

It's possible, of course, that they might now be less accomodating, less servile.

In which case, watch out for a means being found to avoid a referendum altogether.

Meanwhile back in 'basket case' Britain, chauvinism has taken over, as illustrated by the blogs in reponse to a piece by Mary Dejevsky arguing that Britain should join the euro.   [Ind]

A carefully argued case simply provoked a barage of abuse.

Cooler heads may prevail when the Merkosy displacement plan unravels, and exports to Europe go into further decline.

A Three-Pronged House of Cards

A Two Speed Europe

EU Home Page

EU: Social or Social Darwinist?

House of Cards about to collapse

Rebooting for the Global Economy

The UK and the eurozone in the shifting global economy

In which blogger PhilipD explicates the problems posed by LSE professor Danny Quah's prescription for growth

We can't mistake a short-term boom fuelled by exigent government actions for sustained long-term growth ...

How would I propose to change matters?

My suggestions at the event were general and therefore impractical. But here they are again:

• Reboot the UK economy: Take the pain and turn around to engage fully with the emerging economies; do business with them as economic partner — no more, no less. The emerging economies are now the world's engine of growth: Deal with it.

• Unleash our universities and other thoughtful, creative industries. This is NOT to raise government spending, but just to free up extant restrictions on their operations. UK higher education is hugely in demand by the emerging economies. If there's anything that's going to help re-balance the global economy, this is it.

• Throw out long-standing aesthetics and principles – they're also called prejudices. Become enamoured of what works — whether it's guided capitalism under a bit of state control or anything else we previously thought completely nuts (ie outside the Washington consensus). Celebrate the virtues of working hard, raising productivity, saving for the future – not revile them as many do today for Germany or used to do most obviously recently only for China (and yet might come back to doing so again soon).

PhilipD 13 January 2012 5:19PM

Reboot the UK economy: Take the pain and turn around to engage fully with the emerging economies; do business with them as economic partner — no more, no less. The emerging economies are now the world's engine of growth: Deal with it.

The problem as I see it with this analysis and recommended solution is that it is failing to see the reasons for the 'developing world' being the 'engine of growth'.

Historically, there are only two ways in which countries can achieve very high levels of growth over a significant period of time:

1. Strike oil.

2. Start from a low base, then adopt the technology and know-how of more advanced countries in order to catch up.

Currently, China and India are doing #2. This inevitably means that growth will slow down as they use up the low hanging fruit of borrowed technology, and start having to develop their own ways of achieving productivity growth.

South Korea and Taiwan succeeded in this (as did many countries in the past, including the USA which started slow before accellerating past the first adopters of the industrial revolution). But even in doing so, their growth rates have significantly slowed down - in fact, more or less to the rates of the slow growing countries - otherwise known as the technologically advanced nations.

Japan and Ireland, to pick just two, showed the problems that can arise, as they confused all growth with productivity growth, and so blythly ignored bubbles that did enormous damage to their economies.

All the evidence suggests that China in particular, and probably India too, are likely to fall into the same trap.

As for the other fast growing countries, those like Brazil are heavily dependent on commodity prices staying high. They might... or they might not.

Its very easy, when looking at the current situation, to see being locked into exporting to 'slow growing' economies like Europe and the US as a problem.

But for the foreseeable future, these are the biggest economies in the world and will likely remain so. The slow growth is as much caused by the necessity of these countries to engage in the hard work of creating new forms of productivity and innovatory improvements, which is inevitably much harder than simply copying other more advanced countries.

For all the praise given to Germany recently, we forget that as recently as 5 years or so ago everyone was criticizing it for its slow growth and scoleric political system, while the anglo saxon system was supposedly wonderfully dynamic.

Before that, everyone was in thrall to the supposedly unbeatable Japanese model. And so on and so forth.

The lesson therefore, is that any policy recommendations that relies on leaping on the current world economic star horse is likely to fail.

For the UK (or the rest of Europe for that matter) to succeed, a number of things need to be recognised:

1. High sustainable economic growth over a long period is not possible for advanced economies. The pie is largely fixed, and policy should focus on making the best social use of this pie.

2. The economic growth that will occur will only occur through technological innovation and its real world applications. The current financial system has proven useless at funding this. You either fundamentally reform the financial system, or the government should lead directly on this. Anything else is BS.

3. It may not appear in economics textbooks, but really, the laws of thermodynamics apply to economies too.

There is simply not enough available energy in the world for the population of the planet to achieve western living standards.

As a matter of urgency, there must be an absolute focus on making more with less energy. The countries that lead on this will lead the world.

Gdn  13 Jan 2012

Eurozone crisis: thanks to globalisation, we really are all in it together

Goldman's analysts identify two other ways in which the crisis that has spiralled out from Greece and Portugal to plunge the German economy into the red in the final quarter of 2011 will hit scores of other countries.

First, "deleveraging" – the process of struggling banks withdrawing assets to get their balance sheets back in shape – will squeeze the flow of credit and make it harder for businesses in many emerging countries to raise capital from foreign investors ...

Goldman identifies a disturbingly long list of economies that could be in the firing line.

Turkey, Colombia, Hong Kong, Peru, Indonesia, Russia and Poland ... may now be heavily exposed to the sharp change in mood in Brussels and beyond ...

Gdn  12 Jan 2012    Alternatives to the Corporate Capital Economy    Global Risks 2012    The End of Growth

Alternatives to fossil fuels

French Rating Cut; More Debt Downgrades Are Expected

Eurozone thrown into new crisis as France loses AAA credit rating

Eurozone's Friday the 13th

Eurozone ministers back 130bn-euro bailout for Greece

It's a bailout for bankers, it's a bailout for German exports ...

Greece is to receive loans worth more than 130bn euros (£110bn; $170bn).

In return, Greece will undertake to reduce its debts to 120.5% of its GDP by 2020 and accept an "enhanced and permanent" presence of EU monitors to oversee economic management ...

Analysis
Gavin Hewitt
BBC Europe editor
--------------------------------------------------------------------------------
Among European officials and ministers, there is a huge sigh of relief. The country that has been at the heart of the eurozone's debt crisis has, for the moment, been taken off the critical list.

But it comes at a price. Permanent monitors from the EU, the IMF and the ECB will be placed on the ground in Athens to ensure there is no back-sliding. It is a humiliating and unprecedented intrusion into Greece's sovereignty.

To the question of whether growth will return to this battered economy, there is a shaking of heads. Perhaps in a decade, I am told. The risk is that the new cuts will only deepen an existing recession.

And the question remains: is Greece's future secure, or has this deal just bought time for the eurozone to build greater protection around its banks and around potentially vulnerable countries like Spain and Italy?

BBC NEWS  21 Feb 2012    Global Risks    Government by Corporate Technocrats    IMF    Pawns or Players?

EU Should Admit Greece is Bankrupt

German economy: Optimism amidst the slowdown

A Financial Coup d'etat ...

EU Should Admit Greece is Bankrupt

This commentary has a clear and simple message: The second Greek bailout of €130 billion ($172 billion) that euro zone finance ministers are expected to agree on Monday afternoon should not be paid out ...

The mistake isn't the size, but the construction of the bailout package.

It isn't geared to the requirements of the people of Greece but to the needs of the international financial markets, meaning the banks ...

In truth, Greece has of course been bankrupt for a long time. The country doesn't need debt forgiveness of 70 percent, it needs a 100 percent debt cut if it is ever to recover ...

If the European politicians have a shred of faith in all the work they've done in the two years since the breakout of the euro crisis, they should now admit what everyone already knows: Greece is bankrupt and all the country's debts should be forgiven.

Greece should nevertheless get the €130 billion. But the money should be paid in another form.

Instead of rewarding financial speculators for their high-risk deals, the money should flow into the reconstruction of the Greek economy.

A new Marshall Plan is needed, rather than a manic insistence on debt repayments.

Der Spiegel  20 Feb 2012    Government by Corporate Technocracy

Germany Has Been the Winner ...

'Restructuring Greece Within the Euro is Illusory'

Germany's smear campaign against Greece

Michael Theodorou, head of the Evangelismos public hospital in Athens, told me that his budget had fallen from €149m in 2009 to €112m last year, even though the number of patients had risen from 82,000 to 99,700, due to the reliance of the newly pauperised middle class on public health as they lose their private insurance.

This was achieved by slashing drug costs – switching to generics – and cutting the salary of nurses to the bone ...

The single greatest cause of the missed budget targets is the collapse of the Greek economy. GDP contracted 6.8pc last year, accelerating to a 7pc rate in the last quarter.

That is the main reason why tax revenues have fallen off a cliff.

The Greek Labour Institute ... expects the economy to contract by another 7pc this year. This will take the combined slump to 22pc.

Debt is compounding exponentially on a shrinking base.

I notice that failure to meet the privatisation schedule of €5bn by the end of 2011 and €50bn by 2015 is widely cited as an egregious case of Greek foot-dragging ... how on earth is Costas Mitropoulos from the Hellenic Republic Assets Development Fund supposed to attract buyers until the threat of Greek default and euro exit – or "Grexit", in the jargon – is taken off the table? ...

Tel  16 Feb 2012    Corporate Technocracy    Third Meltdown Log

Greece can slay its financial demons – but will it spare the euro?

Portugal’s Debt Efforts May Be Warning for Greece

Unlike Greece, Portugal is a debtor nation that has done everything that the European Union and the International Monetary Fund have asked it to, in exchange for the 78 billion euro (about $103 billion) bailout Lisbon received last May.

And yet, by the broadest measure of a country’s ability to repay its debts, Portugal is going deeper into the hole.

The ratio of Portugal’s debt to its overall economy, or gross domestic product, was 107 percent when it received the bailout.

But the ratio has grown since then, and by next year is expected to reach 118 percent.

That’s not necessarily because Portugal’s overall debt is growing, but because its economy is shrinking.

And economists say the same vicious circle could be taking hold elsewhere in Europe ...

NYT  14 Feb 2012    Corporate Technocracy

EU: Social or social Darwinist?

'New Poor' Grows from Greek Middle Class

Athens has always had a problem with homelessness, like any other major city.

But the financial and debt crises have led poverty to slowly but surely grow out of control here.

In 2011, there were 20 percent more registered homeless people than the year before. Depending on the season, that number can be as high as 25,000.

The soup kitchens in Athens are complaining of record demand, with 15 percent more people in need of free meals ...

Der Spiegel  14 Feb 2012    Corporate Technocracy    Third Meltdown Log

EU: Social or social Darwinist?

Moody's Delivers Damning Verdict on Euro Zone

Greece passes crucial bailout vote as country burns

Goldman Sachs 99 - 1 Greek People

The 199-74 vote was passed amid some of the most serious violence seen on the streets Athens and spread to other Greek towns and cities, including the holiday islands of Corfu and Crete.

More than 45,000 protesters, many facing steep cuts in pensions, wages and a bigger fall in living standards besieged the Greek Parliament in two demonstrations.

A minority were met with tear gas by the 4,000 policemen after throwing fire bombs.

The controversial loan and austerity package sets out €3.3bn in wage, pension and job cuts for this year alone, adding to the pain of years of recession ... lower wages and high unemployment ...

Tel  13 Feb 2012    Global Risks 2012    Gov't by Corporate Technocracy    Third Meltdown Log

Brussels welcomes austerity vote

'Merkel Is Leading Europe in the Wrong Direction'

European Doubts Growing ...

As Greece stares into the abyss, Europe must choose

As Greece stares into the abyss, Europe must choose

Europe's problem summed up in 68 words ...

... what's really at stake here is not Greece's identity but Europe's.

All eyes are fixed on Athens, but the way out of the crisis requires a choice about what kind of Europe we want.

The one we have now, with its deep structural inequalities and its rigid adherence to a failed economic ideology, protects neither democracy nor human rights.

Stiff-necked and punitive, it prefers to eat its children.

Gdn  12 Feb 2012    EU: Social or Social Darwinist    Government by Corporate Technocracy

Merkel has herself to blame if Greece defaults

Contingency plans for a return to the Drachma have been drawn up in Athens, Berlin and Brussels ...

In a note last week, Willem Buiter, Citigroup’s chief economist, said: "In early September 2011, we argued that the cost of Greek exit to the rest of the world would be very high.

We now consider these costs to be much lower because the 'exit-fear-contagion’ could be contained."

Instead, rescuing Greece look far more risky. The IMF believes Athens could need a further €250bn of support over the next 10 years.

And the prize, beyond eurozone integrity, is just 2.5pc of the area’s economy.

Weighed up, surely Merkel wouldn’t mind the Greek exit so much after all. The German taxpayers might even reach for the ouzo.

For Greece, there’s little to hope for from today, which ever way it goes. The austerity package looks tough: 20pc reduction in the minimum wage; 15,000 public sector jobs losses; pension and spending cuts.

But it’s probably irrelevant anyway. While Merkel and other leaders have focused obsessively on numbers, forcing Greece to reduce its debts and repay Brussels for its folly, they appear to have missed the country’s alarming economic, political and social collapse.

On Thursday, the Hellenic Statistical Authority said Greece’s manufacturing output contracted by 15.5pc in December from a year earlier and industrial output fell 11.3pc, having fallen 7.8pc in November.

Unemployment jumped to 20.9pc in November, up from 18.2pc in October - a rise of 14pc in a month ...

Tel  11 Feb 2012    Government by Corporate Technocracy

Greece now needs €145bn bailout to avoid collapse

Greece

'Without a New Beginning, Athens Is Lost'

The center-right Frankfurter Allgemeine Zeitung writes:

" ... Greece presents a desolate picture, in terms of its economic structures, competitiveness, social cohesion and political system.

"In other parts of the world, it would be called a failed state. It is time that the Europeans admit that fact and take the necessary action ...

"It must be ended quickly."

The Financial Times Deutschland writes:

"Greece is currently trying to do something impossible: which is to reform the economy in the midst of a deep depression. That simply doesn't work." ...

The center-left Süddeutsche Zeitung writes:

" ... if the country can't be saved by turning the thumb-screws, then what?

Then the only alternative is radical debt relief on the part of the major private creditors, the banks and the hedge funds.

The European Central Bank would probably also have to write down some of its holdings of Greek debt.

Then, Greece would need a Marshall Plan on top of that. All of this is expensive, and progress will not happen overnight.

But there are no longer any real alternatives." ...

The financial daily Handelsblatt writes:

" ... The only way to 'save' Greece is through an orderly national default.

Without such a new beginning and a long-term strategy for growth, Athens is lost."

Der Spiegel  10 Feb 2012

European Union Keeps Pressure on Athens

Economists have long pointed out that Greece cannot solve its vast problems through austerity alone.

Rather, the government must finally address the sources of its debt problem -- such as its enormous current account deficit of 9 percent.

That, though, can only be solved by way of a massive investment program and the resuscitation of Greek industry ...

Der Spiegel 

Is Portugal Next?

The European Union passed a €78 billion bailout package for Portugal last May to help the country stay afloat until it could return to the international financial markets by the end of 2013.

That deadline, though, has looked increasingly untenable in recent weeks as yields on 10-year Portuguese sovereign bonds exploded to over 17 percent in January before falling back to their current levels of around 13.5 percent.

Anything over 7 percent is considered to be unsustainable in the long term ...

Der Spiegel     Government by Corporate Technocracy

Alternatives to Borrowing    Contesting Neoliberalism

Greece Puts Off Decision on Austerity Moves ...

Someone's forgotten the lessons of the 1930s, haven't they Mrs M?

With Athens shut out of the private lending markets, Greece’s so-called troika of official creditors — the European Commission, European Central Bank and International Monetary Fund — have repeatedly criticized the government for failing to make structural changes in its economy.

But their plan of tax increases, spending cuts and now wage cuts has not only helped push the country into a deep recession, but has also stripped Greece’s political center, weak to begin with, of its last shreds of political legitimacy.

With unemployment at 19 percent, businesses closing, credit scarce and the proposed new wage cuts expected to further decimate the shrinking middle class, the hard left and extreme right are rising ...

NYT  08 Feb 2012    Government by Corporate Technocracy

Greeks Reach Deal on Austerity

Greece: 'There's no more left to cut'

'The Greatest Danger to Merkel Bears the Name Hollande'

I suppose if you expect Germany to bail you out, you cannot complain if they demand a say in who you elect as leader.

Perhaps it's time for Brussels to run a 'Goldman Sachs' candidate in every euro state's elections?

Following Chancellor Angela Merkel's controversial pledge to back fellow conservative French President Nicolas Sarkozy on the campaign trail ahead of elections there this spring, Germany's opposition Social Democrats have said they will throw their support behind ... Socialist Francois Hollande ...

Jürgen Trittin, parliamentary floor leader for the Green Party, said that Merkel campaigning on behalf of Sarkozy could "damage German-French ties," ...

Sigmar Gabriel, head of the center-left SPD, called Merkel's move "rather embarrassing."

The comments came on the heels of a joint television interview given by Merkel and Sarkozy in the Élysée Palace in Paris on Monday afternoon ...

Merkel ... dodged questions about her demurral regarding a proposed Berlin visit by Hollande. "We haven't decided yet," she said ..

Merkel is concerned that, should Hollande take over the reins in Paris, her efforts thus far to stabilize the euro could be endangered.

He has said he is in favor of introducing euro bonds, which Merkel is adamantly opposed to, and would like to renegotiate the recently signed fiscal pact, a central pillar of Merkel's approach to solving Europe's debt crisis.

Hollande's substantial lead in the public opinion polls over Sarkozy has allowed him to be philosophical about Merkel's support for his rival.

"The fact that Nicolas Sarkozy needs Ms. Merkel says a lot about his situation," Hollande said during a Monday campaign appearance in Dijon.

"That's some task she's taken on." ...

Der Spiegel  07 Feb 2012

Why Germany Isn't Benefiting from Euro's Woes

"Germany is currently living at the expense of the other euro-zone countries," says Theodor Weimer, head of the board of the HypoVereinsbank bank.

According to calculations performed by the Cologne Institute for Economic Research (IW) ... the low bond rates will translate into savings of €45 billion ($59 billion) in the medium term for the German Finance Ministry.

As a result, the German government is under growing pressure to contribute even more money to efforts to rescue the euro ...

This supposedly logical argument is currently widespread throughout Europe. But there is just one problem: It's a myth.

Any examination of how the euro crisis affects German government finances quickly reveals that the costs far outweigh the benefits ...

The countries in the monetary union have already lent insolvent Greece more than €50 billion, with the largest share -- €15 billion -- of these bilateral loans coming from Germany ...

"If Germany ultimately emerges from the crisis in the black," says euro expert Clemens Fuest, "it would be a great miracle."

Der Spiegel  07 Feb 2012    Government by Corporate Technocracy

Eurozone bail-out funds not enough, warns OECD

The EU remains fixated on austerity, in order to ensure that bankers get their money back. Unemployment? Who cares!

... the Organisation for Economic Co-operation and Development (OECD) said the emergency bail-out funds are not big enough.

The international think-tank said the European Financial Stability Facility’s (EFSF) €440bn (£366bn) firepower “is not enough” to support the lending requirements of indebted countries, particularly given that it “has not found it easy to raise funds with low yields”.

Greece, Portugal, Italy, Ireland and Spain need to repay a total of €700bn this year and €400bn next year ...

The OECD argued that the “only plausible mechanisms” were to give the EFSF a banking licence; to allow the European Central Bank (ECB) to lend funds to the IMF to distribute; or to see if “sovereign wealth funds could be cajoled with appropriate guarantees [possibly via the IMF] to provide the funds” ...

Tel  03 Feb 2012    Global Risks 2012    IMF    

For Greek Tax Reformers, Good Ideas Aren’t Enough

EU summit edges towards new eurozone treaty

The prospect of 'President' Hollande casts a shadow over Mrs Merkel's plans

The view in Brussels and other EU capitals is that Merkel needs the new euro regime to demonstrate to German public opinion and parliament in Berlin that the rest of the eurozone has adopted sound and strict rules before she can sanction increased aid for Greece.

She is also keen to get the new system established before the decisive round of the French presidential elections in May since the leftwing frontrunner, François Hollande, has pledged to renegotiate the pact while outlining public spending plans that could put France in breach of the new rules.

Victory for Hollande could yet upset the calculations in Berlin since France is unlikely to ratify the new deal in the National Assembly before the presidential contest is settled.

Gdn  30 Jan 2012 Gdn  30 Jan 2012

The eurozone: Another step

Locked into decline?

The new pact should be signed in March although there may be arguments in countries like Ireland over whether the people should get to vote on what is a significant step towards a fiscal union.

Much energy and argument has been spent on this agreement. It is questionable, however, whether it will have much influence on the immediate crisis.

Sony Kapoor of the Re-Define think tank says that "to the extent the fiscal compact may help increase support for tackling the euro-crisis amongst Germans and at the ECB, it may serve a useful role. In actual economic terms, it is largely irrelevant" ...

One final thought on the new fiscal pact.

There is an irony here: it enforces restrictions on spending just when the EU is beginning to question whether austerity risks tipping countries into a spiral of decline.

Growth is the new watchword.

Leaders like Mario Monti are challenging the German orthodoxy but, in the future, countries that are tempted to borrow more will have their hands tied ...

BBC NEWS  31 Jan 2012

This was not the crisis summit... the worst is yet to come

The reality is that this new pan-European architecture falls well short of the sort of fiscal union that markets want to see.

It promises to be a system of fiscal rules, without the promise of money transfers to struggling states to help them deliver on their commitments.

It is all stick and no carrot – and thus lacks credibility ...

Ind  31 Jan 2012

Feeling more positive about the eurozone crisis? Don't

Maybe, once the French election is out of the way, the German treasury will back cheaper interest rates for indebted countries through eurobonds.

Maybe higher fiscal transfers will be forthcoming, which will add up to bigger debt write-offs.

But the magnitude of the debt write-offs needed for Ireland and Portugal, as well as Greece, have yet to be factored into the euro equation.

Gdn  30 Jan 2012    Global Risks    Government by Corporate Technocracy

For Greek Tax Reformers, Good Ideas Aren’t Enough

Europe May Be Planning 1.5 Trillion Euro Backstop Fund

EU Summit Marred by Fears of German Domination

European Politicians in Denial as Greece Unravels

Germany wins battle on tighter fiscal rules

Greek shoppers look but don't buy

Miles to go before the Euro Crisis is resolved!

European Financial Stabilisation Mechanism

Germans want EU budget commisioner for Greece

Perhaps the Bundeswehr might also patrol the streets to prevent any more riots, Mrs M?

The Financial Times, which has a copy of the plan, calls it an "extraordinary extension" of EU control.

Greek Education Minister Anna Diamantopoulou called the German plan "the product of a sick imagination".

The European Commission said the budget "must remain the full responsibility of the Greek government".

A German official told the Associated Press eurozone finance ministers were discussing the plan ...

Under the German proposal, a budget commissioner would have veto powers over Greek budgetary measures if they were not in line with targets set by international lenders ...

BBC NEWS  28 Jan 2012    Government by Corporate Technocracy

IMF pushes Greece over budget

Greeks reject German plan for EU budget commissioner

Critics Question Merkel's Fiscal Pact Proposal

... the high expectations awakened by Merkel are unlikely to be fulfilled.

Several elements in the agreement are of questionable legality. It can't be written as an EU treaty because Great Britain won't sign it ... the European Commission's hands are tied, because it can only act on behalf of all 27 EU members ... the Commission cannot legally take those that violate budgetary rules to the European Court of Justice ... national governments can only do this among themselves ...

The treaty proposal states that the Luxembourg judges can impose fines of up to 0.1 percent of a country's GDP if they don't properly anchor the debt brake in their national law.

But these sanctions aren't actually provided for by EU law. In fact, they deviate from Article 126 of the Lisbon Treaty ... (but) for most observers of the EU summit, the fiscal pact is only interesting as a side issue ...

For many, the much more pressing issues are finding a solution to Greece's problems and bolstering the European Stability Mechanism (ESM), the permanent euro backstop fund set to replace the temporary European Financial Stability Facility on July 1.

The latter camp also includes British Prime Minister David Cameron ...

Der Spiegel  27 Jan 2012    A Two Speed Europe

Spain's unemployment total passes five million

The fruits of austerity ...

The National Statistics Institute said 5.3 million people were out of work at the end of December, up from 4.9 million in the third quarter.

The rate rose from 21.5% in the third quarter to 22.8% - the highest rate in nearly 17 years.

The new figures show more than half of all 16-24 year-olds are jobless - 51.4% compared with 45.8% before ...

The Bank of Spain predicts the country's economy will shrink by 1.5% this year, saying the eurozone debt crisis has destroyed business confidence and closed off bank credit, causing a large drop in domestic demand.

BBC NEWS  27 Jan 2012    Global Risks    Is capitalism the only show in town?

Saving the Euro with Fiat Money     Government by Corporate Technocracy

Spain demands new 'realism' from EU ...

Iran Set to Turn Off Oil Supply to Europe

Many members of the EU are now heavily dependent on Iranian oil.

Some 500,000 barrels arrive in Europe every day from Iran, with southern European countries consuming most of it.

Greece is the most exposed, receiving a third of all its oil imports from Iran, but Italy too depends on Iran for 13 percent of its oil needs.

If this source were to dry up abruptly, the economic conditions in the two struggling countries could become even worse.

Already on Wednesday, the International Monetary Fund (IMF) warned of the economic consequences of the EU's planned embargo.

Stopping deliveries from the world's fifth largest producer could drive up the price of oil by 20 to 30 percent ...

Der Spiegel  26 Jan 2012    Iran    Peak Oil    War on Terror Log

Hedge Funds Bet on Profits from Greek Debt Talks

For some hedge funds, the fight over interest rates has given them more incentive to push for a breakdown of the proposed plan.

Officially, they are in the same boat as the banks and insurance companies. But in reality their interests are vastly opposed.

"Hedge funds don't need to worry about their public image," one banker says.

Their reputation has already been destroyed. Therefore, they can be relatively cavalier in gambling with the possibility of a Greek bankruptcy ...

Things look different for the hedge funds if an agreement breaks down. In this case, the threat of insolvency exists.

The chance that the bondholders would get their money back would dramatically decrease.

The bonds would have less value than before, and would no longer be worth €30 million, but say just €10 million. And the CDS guarantees would be due.

The hedge funds would, depending on the arrangement of the CDS, receive up to 100 percent of the bonds' nominal value, or €100 million.

Under this scenario, the hedge fund that invested €60 million would get €110 in return - a profit of almost 100 percent ...

As Greece's financial situation worsens, there have also been calls for greater efforts from Athens, which has failed to meet the budgetary and reform targets agreed upon in exchange for aid.     Der Speigel

Der Spiegel  25 Jan 2012    Corporate Sociopathy    Hedge Funds    The Third Meltdown

The Social Darwinist EU

Bank Bondholders to Be Paid While Irish Public Howls

The European Central Bank put Ireland on notice last week that defaulting on payments to the bondholders could lead to dire financial consequences, the equivalent of a financial “bomb” in the Irish economy ...

But that has not quelled a public debate about whether taxpayers should pay bondholders who bet on investments in a bank that was bailed out and nationalized in 2009 after the collapse of the Irish real estate market.

In general, unsecured bondholders reap a higher return because the bonds are not guaranteed and therefore carry a higher risk.

The critics — among them labor unions, opposition parties and a newly formed coalition of social justice groups — are incensed that the corporation is about to pay out more than 1.25 billion euros on Wednesday and then a promissory note payment of 3.1 billion euros in March ...

Repayment is a divisive issue because Irish taxpayers face years of austerity to pay for the bailout of Anglo Irish and other Irish banks.

Measures include budget cuts like the elimination of hundreds of nursing home beds, teacher layoffs and the closing of rural post offices and police stations.

Ireland’s current government rose to power with pledges to impose losses on bondholders in Irish banks, but it changed course under pressure from the European Central Bank to pay off the bonds ...

NYT  24 Jan 2012    Bankocracy Log    Government by Corporate Technocracy

Financial Terrorism

Merkel's Fiscal Pact a 'Waste of Time and Energy'

Luxembourg's Foreign Minister Jean Asselborn is sharply critical of German Chancellor Angela Merkel's push for an EU fiscal pact.

In an interview with SPIEGEL ONLINE, he says it won't hold up.

Furthermore, big countries like Germany and France threaten the currency union with their egotism ...

SPIEGEL ONLINE: What could have moved Chancellor Merkel to so massively invest in a project with a highly questionable outcome?

Asselborn: I think the German chancellor was led by two very different motivations with this proposal. On the one hand it is certainly about more stability in the crisis-stricken currency union. On the other hand, questions that have more to do with Germany than Europe could have played an important role. But the foreign minister of little Luxembourg shouldn't get mixed up in German domestic politics.

SPIEGEL ONLINE: Many countries have for years spent far more money than they brought in, amassing huge mountains of debt. Now they need to save. But are the radical austerity measures that Berlin suggests the right recipe?

Asselborn: Both are needed. Saving and living off less credit is important. But Europe can't starve itself to death. Right now we need growth above all. One shouldn't forget that the EU has 27 million unemployed ...

Der Spiegel  24 Jan 2012

Angela Merkel casts doubt on saving Greece from financial meltdown

IMF slashes global growth forecasts

• Eurozone GDP expected to fall 0.5% during 2012
• UK set to grow 0.6% – sharp fall from earlier 1.6% estimate
• World growth downgraded from 4.1% to 3.3%

Gdn  24 Jan 2012

Today's forecast, tomorrow's chip wrapper. The IMF is integral to the problem, not it's solution.

In his review of Steve's Keen's, Debunking Economics, Jasper Z offers a succinct commentary on the Ponzi economics systemic to 'free market' capitalism, under which previous controls - such as Glass-Steagall - have been removed:

A crucial part of the book explains that the root of both the Great Depression of the 1930s and the crisis we are in today is a result of the fact that aggregate demand in the macro-economy is composed of income plus the change in debt.

Prof. Keen explains (as has long been understood in specialist circles, and every central banker knows) that when banks make loans, they are actually creating new money, not merely redistributing money from depositors to borrowers.

When too many loans are issued and a debt mountain gets too great (as it has recently throughout the OECD, driven by enormous quantities of "Ponzi debt", i.e. debt-money created by banks by loaning to each other and to non-bank financial companies for speculative investment in asset bubbles), then private citizens, as well as governments, begin "deleveraging" en masse, i.e. paying down debt instead of spending on consumption or investment in real-economy infrastructure.

As a result, the economy goes into a tailspin. The only way to get out of this mess is either to default on much of the accumulated debt, or to endure lower standards of living and a depressed economy for a decade or so, as the debtor class (the great majority) attempts to pay down debt, to the benefit of the creditor class ...

Global Risks 2012    IMF

Alternatives to Borrowing    Alternatives to Fractional Reserve Banking    Positive Money

All Fiat Money Collapses

Fiat Money Systems

Positive Money

'Europe Mustn't Just Focus on Austerity'

Belgium's new prime minister, Elio Di Rupo, met German Chancellor Angela Merkel on Monday on his first official visit to Germany.

In an interview with SPIEGEL ONLINE, the Socialist voices doubts about German ideas for solving the euro crisis, such as introducing balanced-budget laws across the EU, and argues for more efforts to boost growth ...

SPIEGEL: Do you think the rigid austerity programs underway in Greece, Spain, Italy, Portugal and Ireland are the right approach?

Di Rupo: Financial markets and governments, not citizens, are responsible for the euro crisis. The most important thing, apart from conducting a strict budget policy, is to strengthen growth in Europe and create new jobs. We mustn't just focus on austerity and sanctions, we must also strengthen demand and purchasing power. Of course it is also necessary to reduce budget deficits and cut debt. But it must be done in a tolerable rhythm that doesn't choke off growth ...

Der Spiegel  23 Jan 2012

Merkel's Increasing Isolation

Europe’s Transition ... to Oligarchy

France and Germany plan for EU-wide tax regime

The text also links existing European Commission proposals on energy taxation and a common method for calculating corporate tax to the push for new EU powers, heralding a major battle over sovereignty this spring.

"European institutions and member states should accelerate the process of tax co-ordination," the Franco-German paper argues.

"In particular the negotiation of the European Commission proposals on energy tax directive, common consolidated corporate tax base and common system of financial transaction tax should be accelerated." ...

"In order to set the stage for enhanced tax co-ordination, France and Germany express their support for the European Commission's proposal on a common system of financial transaction tax," the paper said.

In order to push the EU towards greater tax "harmonisation", Germany and France will, later this month, announce proposals to harmonise their corporate tax rates ...

Tel  20 Jan 2012

The IMF is no longer serving its purpose

... the IMF is lending to one of the world’s biggest and wealthiest economic regions. The sums involved are consequently much larger.

The $30 billion Greek programme alone is already the biggest the IMF has ever conducted. There are surely still bigger ones to come.

And while the bail-outs may buy a little time, they do not provide solutions.

With devaluation closed off, the eurozone periphery will struggle to return to growth, a key prerequisite in a country’s ability to honour its debts.

But never mind the risk of default: it is morally repugnant that relatively poor countries such as India and China are being asked to lend to the IMF to sort out a mess that the eurozone is easily rich enough to clear up itself ...

Tel  19 Jan 2012    Global Risks 2012    IMF

Greek rescue blocked by hedge fund greed

... fears have grown in recent weeks that the hedge funds that are blocking the deal – which have been identified as including Vega Asset Management, Och Ziff, York Capital, GreyLock Asset Management and Marathon Asset Management – do not consider the prospect of a disorderly default by Athens as a financial incentive to allow a voluntary writedown deal to proceed.

This is because these funds are believed to have purchased insurance policies on their holdings of Greek bonds, known as Credit Default Swaps (CDS).

If Athens fails to pay its maturing debts in March, that would trigger large CDS payouts to these funds from the large financial firms that sold them the insurance ...

However, a hedge fund source denied that the behaviour of small investment funds was frustrating a voluntary deal – and possibly even forcing a default – arguing that the voluntary basis of the restructuring deal being pushed by the IIF and European leaders was "crony banking".

"Who will lose out if the insurance is paid out?" he said.

"The two biggest issuers are Goldman Sachs and AIG. They are effectively being given a bailout by not allowing Greek debt to default.

"Seven Goldman Sachs ex-employees are in European Union governments. This is crony banking at its worst." ...

Ind  18 Jan 2012    Bankocracy Log    Corporate Technocracy    'Doing God's Work'

Goldman Sachs enters £8bn 'parallel pay universe'

UK faces request for £19bn as IMF boosts bailout fund to $1tn

The IMF confirmed on Wednesday that it was looking to boost funding from $400bn (£260bn) to $1tn, a shift that would require as much as £19bn on a proportional basis ...

The scale of the UK contribution is unclear, but Britain traditionally contributes 4.5% to any IMF funding, and in this case the Americans have said they will not contribute.

It is almost impossible to conceive of a situation in which Britain will not be asked to provide more than an extra £10bn, so requiring an extra vote in the Commons some time in the spring ...

(Ed) Balls said of Labour's stance:

"We will have to look at how we vote. We are supporters of the IMF, but what we could not support in the Commons is extra money being given to the IMF without there first being serious action by the European Union itself in terms of a bailout fund, and strengthening the role of the ECB to help solve these issues.

"My other worry is that the EU is collectively committed to austerity, rather than growth, as the way to deal with the sovereign debt crisis".

Gdn  18 Jan 2012    Ed Balls    George Osborne    IMF

Trouble ahead for Cameron

Doubt over IMF's eurozone lifeline

George Osborne faces battle over giving billions to IMF

IMF push for $1 trillon rescue fund to cost UK £15bn

IMF 'planning $1trn funding boost'

... the International Monetary Fund is reportedly planning a "$1 trillion boost" to its resources.

Bloomberg is quoting an unnamed official from "a Group of 20 nation", who says the increased funding would be used to 'save the eurozone'.

However, any deal would not be agreed until the EU had agreed its new 'fiscal compact'.

Last night ... Christine Lagarde announced that the IMF was ready to start looking for more funding. She said:

"I welcome the recognition of the importance of ensuring adequate Fund firepower to help defuse the current global economic weaknesses and regional challenges.

"To this end, Fund management and staff will explore options for increasing the Fund's firepower, subject to adequate safeguards ...

Gdn  18 Jan 2012    Global Risks 2012    IMF

Doubt over IMF's eurozone lifeline

After downgrades, all eyes on ECB

Britain may have to pay billions more into IMF

SPIEGEL Interview with Linde CEO

'I Don't Believe the Euro Should be Rescued at All Costs'

In a SPIEGEL interview, top German industrialist Wolfgang Reitzle argues that Germany should withdraw from the currency union if Europe's crisis-ridden countries fail to push through reforms ...

Reitzle: The capital markets moved away from the subject of Greece a long time ago.

Italy will be the litmus test. If Italy makes it, Spain will have a role model, and then perhaps even France may be able to push through reforms, which doesn't seem likely at the moment.

Italy now has a government containing leading experts. The question will be whether they manage to implement the necessary reforms in a way that has the desired effect.

SPIEGEL: What can the government do?

Reitzle: I see four problems that must be solved in Italy.

First there is the bureaucracy, which paralyzes the entire country.

Second, the labor market has to become more flexible. Together these two things create the conditions for growth.

Third, tax evasion has to be fought and, fourth, the retirement age has to be raised gradually.

But all of this takes time, which is why the crucial year for the euro is not 2012. It will actually come three or four years later ...

Der Spiegel  16 Jan 2012

EU: Social or Social Darwinist

Rome Demands German Help in Refinancing Debt

Don't blame the ratings agencies for the eurozone turmoil

Why ECB's Tricks Won't Solve the Crisis

The rising costs of eurozone rescues

IMF warns of catastrophe as EC rebukes S&P

Debt Crisis: Live

Don't blame the ratings agencies for the eurozone turmoil

... the eurozone countries need to realise that its Friday-the-13th misfortune was in no small part their own doing.

First of all, the downgrading owes a lot to the austerity-driven downward adjustments that the core eurozone countries, especially Germany, have imposed upon the periphery economies.

As the ratings agencies themselves have often – albeit inconsistently – pointed out, austerity reduces economic growth, which then diminishes the growth of tax revenue, making the budget deficit problem more intractable.

The resulting financial turmoil drags even the healthier economies down, which is what we have just seen ...

Gdn  15 Jan 2012    Global Risks 2012    

EU: Social or Social Darwinist

The rising costs of eurozone rescues

IMF warns of catastrophe as EC rebukes S&P

Debt Crisis: Live

Eurozone's fate hangs on whether French humiliation turns to anger

The downgrades deal a heavy blow to the pride of political leaders, not least Sarkozy, who had hoped to show his electorate that he had insulated them from the crisis, before the French elections later this year.

But they will also make it harder to build a financial firewall around Greece.

The €440bn European financial stability facility (EFSF), the single currency's bailout fund, is only as strong as the governments underwriting it, and its own AAA rating now looks under serious threat ...

"This will make the task of leveraging the EFSF, to the extent that was still feasible, even harder," says Sony Kapoor of Brussels-based thinktank Re-Define ...

Nick Dearden, of the Jubilee Debt Campaign, which was founded to fight unsustainable debts in the world's poorest countries, said the hard-nosed behaviour of hedge funds and other so-called "vulture" investors – some of whom bought Greek debt long after it became clear that the country was in difficulty – was exacerbating the pain.

"The Greek economy has been destroyed and it is shocking to see the vultures diving in for the remaining pickings.

"It is imperative for the whole world that Greece and other debt-laden countries demand and receive broad debt cancellation, combined with strict regulations on the activities of vultures." ...

Gdn  14 Jan 2012

The parties of 'austerity' are downgrading us all

Across Europe, governments have provided direct funds and subsidies to banks, taken equity stakes in them and even nationalised them.

The central bank is also a public body and it is cackhandedly coming to the rescue.

But Europe's politicians as well as the EU commission and IMF are determined to compensate the private sector for this unspeakable incursion in their domain.

While the losses of the private sector are absorbed, the successful public sector is being stripped of assets in health, energy, transport and other sectors and handed over to the inherently unstable private sector ...

"Austerity" is the transfer by the government of household incomes to the business sector.

It is not working in any part of Europe, in or out of the eurozone area. It prolongs the investment strike rather than ending it.

The whole of Europe needs investment, not cuts.

Gdn  13 Jan 2012    Alternatives to Corporate Capital    Global Risks 2012    Labour's Dilemma

The incredible shrinking UK economy

Joseph Stiglitz

Jubilee Debt Campaign

Fourth Reich facing Economic Stalingrad

Can the euro survive another year?

The critical question for this year has long been whether that's the point at which the remedies required become too difficult for policymakers to agree, and the single currency therefore unravels, or whether a more robust band-aid solution emerges that allows for more stable conditions.

The obstacles to such solutions are as daunting as ever.

According to the last IMF Fiscal Monitor, euro area governments have €1.6 trillion of debt to issue over the coming year, and that's on the heroic assumption that deficit reduction targets are met.

The eurozone banking sector faces a similar funding cliff, with €500bn of new market funding to find by the end of the year and not much less the year after.

Joint Eurobonds would certainly resolve the problem, temporarily at least, but there is no possibility of such debt mutualisation being agreed any time soon.

Nor does there appear much chance of the European Financial Stability Facility being expanded to a size that would underwrite Italy and Spain ...

Tel  09 Jan 2012

Busy agenda for EU's core couple

German Chancellor Angela Merkel and French President Nicolas Sarkozy ... are Europe's indispensable couple.

They are the eurozone's crisis managers.

The other nations that use the single currency have become onlookers, summoned to summits to give their signatures to the latest Franco-German initiative.

Never have smaller nations in the EU had less influence ...

... the core of the eurozone crisis is revealed in all its stark details on almost a weekly basis - and many of these problems are slow in being addressed.

The imbalances between the strong and weak European economies are growing, increasing the strains of belonging to a single currency ...

BBC NEWS  09 Jan 2012

Germany and France Warn Greece on Bailout Money

There are increasing signs that Greece will fail to make the structural changes to its economy that its leaders have promised.

Greece’s prime minister, Lucas Papademos, warned last week that without deeper spending cuts a disorderly default was a possibility, and could result in Greece leaving the euro.

Mr. Sarkozy said that “our Greek friends must live up to their commitments,” while Mrs. Merkel said that if those commitments were not met by the Greek government, “it will not be possible to pay out the next tranche” of the bailout money ...

NYT  09 Jan 2012    Global Risks 2012

Alternative to Borrowing    A Faustian Pact    Government by Corporate Technocracy    The Merkozy Plan

Italy and France Team Up against Germany

Merkel warns Greece

It's time to cancel unpayable old debts

Angela Merkel has the whip hand in an orgy of austerity

Greek economic crisis turns tragic for children abandoned by their families

Desperate families give up children as Greece's financial crisis hits home

Angela Merkel has the whip hand in an orgy of austerity

The notion that economic pain is the only route to pleasure was once the preserve of the British public school-educated elite, now it's European economic policy

The language of S&M is also now part of the eurozone discourse.

The joint letter sent last month by Sarkozy and Angela Merkel to Herman van Rompuy, president of the European Council, explaining the Franco-German plans for future governance of the single currency stressed "fiscal discipline" and the need to "detect and correct departures from sound economic and fiscal policies long before they become a threat to the stability of the euro area as a whole" ...

Spain is perhaps the best current example of the predilection for pain.

The new conservative government of Mariano Rajoy has inherited a budget deficit running at 8.7% of GDP in the first nine months of 2011 and has set a target of reducing it to 4.4% of GDP in 2012 and 3% in 2013.

This involves taking €40bn (£33bn) out of the economy this year by a combination of tax hikes and spending cuts ...

Yet as Jamie Dannhauser of Lombard Street Research notes, Spain's real problem is the overhang of private sector debt from the housing bubble, which has left the banks in a precarious state.

To the extent that there are concerns about the solvency of the state, they are due to fears that lenders will go belly-up leaving Madrid to pick up the pieces.

Spain is uncompetitive internationally and has a dysfunctional labour market, but compared to Greece, Italy and Portugal it has a relatively low level of public debt ...

Gdn  08 Jan 2012    Government by Corporate Technocracy

A Faustian Pact    The Merkozy Plan

Eurozone unemployment stays at record high

The jobless rate in the 17 nations that use the euro was 10.3% in November for the second month in a row, according to the Eurostat statistics agency.

There were 16.3 million people in the bloc out of work ...

Spain's unemployment rate was highest at 22.9%, accounting for more than a quarter of the total eurozone unemployment figure ...

BBC NEWS  06 Jan 2012

How Europe's year of indecision sowed the seeds of future conflict

The euro was built on the assumption that markets correct their own excesses, and that imbalances arise only in the public sector.

As it happened, some of the largest imbalances that fuelled the current crisis arose in the private sector – and the euro's introduction was indirectly responsible.

Instead of the convergence prescribed by the Maastricht Treaty, the radical narrowing of interest-rate differentials generated divergences in economic performance ...

Gdn  06 Jan 2012    Global Risks 2012

Eurozone strains increase with grim new economic data

Desperate families give up children as Greece's financial crisis hits home

If surpluses cause as many problems as debts, maybe we need to tax creditors

Philip Inman explains the Keynes solution to the current imbalances ...

They get richer and we get poorer ... because they have artificially low exchange rates.

The Germans have profited vastly from a lower euro than they would have enjoyed had the Deutschmark remained valid currency.

The Chinese keep pumping out goods at a dollar-pegged rate. Should the yuan be floated freely, we would all be paying much more for our flat-screen TVs ...

... floating exchange rates and a tax on surpluses would help adjust the imbalances.

Robert Skidelsky ... has documented how John Maynard Keynes, who wrestled with this problem in the depression of the 1930s, put forward just such a solution.

"Keynes sought to secure creditor adjustment without renouncing debtor discipline.

"To this end, his scheme aimed to bring a simultaneous pressure on both surplus and deficit countries to 'clear' their accounts ...

China will not write off anyone's debts – it is hooked on being a surplus country. The Germans should know better.

And if they refuse to write off other nations' debts, it is they and not the Greeks who should be thrown out of the euro.

Gdn  03 Jan 2012    China    Global Risks 2012    Globalization Log

Rebalancing the Global Economy

In Greece’s Sour Economy, Some Shops Are Thriving

With all the contraction in the Greek economy ... it might seem odd that new shops are springing up like mushrooms in Athens and other cities.

But the stores — pawnshops and gold dealers — are thriving as Greeks who are short of cash give up jewelry and other valuables to make ends meet and pay new taxes.

The authorities reported a veritable explosion in the sector, with 90 percent of the nation’s 224 officially registered pawnshops having opened in the past year ...

Although most traders are reluctant to talk, those who do say they are just seizing an opportunity created by hard times and the high price of gold, roughly $1,600 an ounce.

“Gold is strong — so there’s a lot of interest in selling,” said Yiannis Spiratos, manager of a pawnshop in central Athens. “We’re just serving that interest.”

He said that 8 in 10 customers sold their goods outright, rather than pawning them.

“Some sell their jewelry because they never wear it; many say they need the money to pay the emergency tax,” he said, referring to a new tax on property owners ...

NYT  03 Jan 2012    Global Risks 2012

Greece Urgently Requests Clarity on Bailout Deal

Greece will leave euro if second bailout fails

Austerity Reigns Over Euro Zone as Crisis Deepens

The first test for the Continent will come this Thursday, when France is expected to raise as much as 8 billion euros.

On Jan. 12, Spain plans to auction 3 billion euros worth of euro debt, followed by Italy the next day with 9 billion euros.

Along with governments tapping the market, European banks are also expected to keep borrowing heavily as loans come due.

In the first quarter of 2012, about 215 billion euros worth of euro zone bank debt must be rolled over ...

NYT  02 Jan 2012    Global Risks 2012

The Lies that Europe's Politicians Tell Themselves

New Greek Government Runs Out of Steam

Tories say they want to leave EU and prefer Boris to Cameron

Some 54 per cent of Tory members say their ideal vision of the relationship is for the UK to leave the EU and sign up to a free trade agreement ...

Meanwhile, 24 per cent of Tory members favour a more flexible relationship with the EU, with continued co-operation on key policy areas.

Some 10 per cent say the UK should maintain its current relationship but ignore European laws which are not in the country's interests, while 5 per cent believe Britain should leave the EU and not seek any agreements with it.

Another 3 per cent think the Government should maintain the current relationship but not sign up to any more changes, and 2 per cent favour further integration with the EU while keeping the pound.

Only 1 per cent want to join the euro and hand tax and spending powers to the European Parliament.

Ind  28 Dec 2011    Thatcherite Britain    Whither Britain? Log

The Lies that Europe's Politicians Tell Themselves

Fiscal Crisis Takes Toll on Health of Greeks

Communitarian Citizenship? R.I.P.

The free clinic here opened about a year ago to serve illegal immigrants.

But these days, it is mostly caring for Greeks like Vassiliki Ragamb, who was sitting in the waiting room hoping to get insulin for her young diabetic son.

Four days earlier, she had run out of insulin and, without insurance and unable to pay for more, she had gone from drugstore to drugstore, pleading for at least enough for a few days.

It took her three hours to find a pharmacist who was willing to help ...

NYT  27 Dec 2011

Health effects of financial crisis

Overall, the picture of health in Greece is concerning.

It reminds us that, in an effort to finance debts, ordinary people are paying the ultimate price: losing access to care and preventive services, facing higher risks of HIV and sexually transmitted diseases, and in the worst cases losing their lives.

Greater attention to health and health-care access is needed to ensure that the Greek crisis does not undermine the ultimate source of the country's wealth—its people.

The Lancet  22 Oct 2011    Third Meltdown Log

EU: Social or Social Darwinist?

The euro crisis deepens

"If the euro fails then Europe fails," Angela Merkel has said.

But is this version of continental union worth saving? Northern European governments frozen before an existential threat.

Southern European regimes forcefed a diet of IMF-style austerity. And hardly any institutions to bolster or stand behind its currency.

When people think about the euro they often think about expensive buildings in Brussels or Strasbourg.

But the 17-state eurozone has no international bank regulator, no common treasury and hardly any budget.

All it has is a central bank and big capital markets.

Businesses and financiers can move easily, but for workers the euro is a battering ram against their standards of living.

Playing out in western Europe right now is the kind of race to the bottom people normally associate with Latin America ...

Gdn  26 Dec 2011

Treasury plans for euro failure

The Treasury is working on contingency plans for the disintegration of the single currency that include capital controls ...

Britain’s top four banks have about £170bn of exposure to the troubled periphery of Greece, Ireland, Italy, Portugal and Spain through loans to companies, households, rival banks and holdings of sovereign debt.

For Barclays and Royal Bank of Scotland, the loans equate to more than their entire equity capital buffer ...

Tel  26 Dec 2011    Global Risks 2012    George Osborne

Nervous banks deposit record €412bn with ECB

ECB reports record cash deposits from banks

Nervous banks place record €411bn with ECB as eurozone woes continue

ECB's €489bn will 'buy valuable time' but is no eurozone debt bazooka

American Firms See Europe Woes as Opportunities

The sales are being spurred on because European banks are scrambling to raise capital and shrink their balance sheets, often under orders from regulators.

European financial institutions will unload up to $3 trillion in assets over the next 18 months, according to an estimate from Huw van Steenis, an analyst with Morgan Stanley.

This month a team of three bankers from the London office of the buyout giant Kohlberg Kravis Roberts headed to Greece to examine a promising private company that cannot get Greek banks to provide credit for future growth.

The Blackstone Group agreed to buy from the German financial giant Commerzbank $300 million in real estate loans that are backed by properties, including the Mondrian South Beach hotel in Florida and four Sofitel hotels in Chicago, Miami, Minneapolis and San Francisco ...

... American institutions remain stronger than their European counterparts, said Christopher Kotowski, an analyst with Oppenheimer.

“Everyone is going to be cutting staff and shrinking capital commitments but the Europeans are doing it more,” Mr. Kotowski said.

In large part, that’s because earlier in the United States financial crisis, Washington forced American banks to take huge write-downs, while raising tens of billions in fresh capital and halting dividends to conserve cash.

European banks have been much slower to take those steps ...

NYT  26 Dec 2011    Bankocracy Log    Globalization Log    Private Equity

In Europe, Juggling Image and Capital

In which the insanity of fractional reserve banking is demonstrated

Stung by souring loans and troubled government bond portfolios, many European banks are being forced by regulators to raise money to build up their cash cushions against future losses ...

... why, then, is Santander still planning to pay its shareholders 2011 dividends worth at least 2 billion euros in cash and even more in stock? ...

To preserve their allure as global brands, while trying to compensate for their battered share prices, big European banks like Santander remain intent on maintaining rich dividend payouts to shareholders.

At the same time, they are selling assets, curbing lending and taking other belt-tightening measures to satisfy regulators’ demands for more capital ...

The European Banking Authority, after a third round of stress tests in October, has ordered Europe’s fragile banks to raise more than 114 billion euros in fresh cash in the next six months.

By June 2012, the region’s financial institutions will need to increase their so-called core Tier 1 capital ratio — the strictest measure of a bank’s ability to resist financial shocks — to 9 percent of assets ...

NYT  23 Dec 2011    Bankocracy Log    Corporate Sociopathy

ECB reports record cash deposits from banks

Nervous banks place record €411bn with ECB as eurozone woes continue

ECB's €489bn will 'buy valuable time' but is no eurozone debt bazooka

When British thieves and French thieves fall out

Michael Burke explains the real facts behind the 'war of words' ...

... Noyer is looking in the wrong place for the determinants of bond yields.

Bond yields are not primarily determined by the nominal level even of important economic variables.

Ultimately the price of any given financial market asset is determined by the real level of savings that are directed towards it.

In countries such as Britain, the US and Japan the very high level of corporate savings must ultimately be held in some financial asset, and in the current circumstances of weak or stagnant growth government bonds have looked far more attractive than their only main alternative, which is stocks.

10 year debt yields are currently below 2% in the US and below 1% in Japan.

This is true even though government debt and deficit levels are even higher in the US and Japan than either France or Britain.

UK companies cannot invest in financial instruments in another currency without exposing themselves to exchange rate risk ...

French and British Both Wrong

[France and Britain] have both also invested an enormous political capital in the maintenance of the AAA rating for their government debt and argued that their policies would reduce their budget deficits.

As we have seen, both governments debt ratings are likely to be downgraded in 2012.

And both countries are projected to have a deficit in 2013 which, five years after the recession began, is still double the level it was in 2007, before downturn began ...

SEB  22 Dec 2011    Cutting the Deficit    George Osborne

Herr Draghi or Signor Draghi, and the ECB's Santa Rally

The ECB’s back-door bail-out for Italy, Spain, Belgium, and… France? ... is €489bn.

Roughly €300bn of today’s eagerly awaited LTRO tender is recycled old money from earlier support operations.

The new money is €200bn. This alone is not going to shore up the sovereign states of southern Europe as they grind deeper into recession/depression.

Enjoy Mario Draghi's Santa Rally while it lasts. The euphoria is likely to dissipate once markets remember the sheer scale of the task at hand.

The banks are under massive pressure to raise their core Tier 1 capital ratios to 9pc by next June.

This requires a €2.5 trillion adjustment according to the BIS’s Global Stability Board.

Most of that is going to be done by slashing loan books – deleveraging in the jargon – since they cannot raise fresh capital at a viable cost and don’t wish to be nationalised ...

It always come down to the same question.

Can the ECB doves engineer enough stimulus to head off disaster in Club Med, without causing a disgusted Germany to pick up its marbles and walk out.

Probably not.

And can any level of stimulus ever close the 30pc structural gap in labour competitiveness between North and South, still growing wider by the day?

Tel  21 Dec 2011

ECB's rescue of eurozone banks is temporary

... the dependence of some eurozone banks on loans from these central banks can be seen as evidence that these banks have already failed, in that they would be bust if it weren't for massive loans from these taxpayer-backed institutions ...

BBC NEWS  21 Dec 2011    Global Risks 2012    Saving the Euro

Argentina's Lessons for a Crisis-Ridden Europe

European banks borrow record €489bn from ECB

Tax avoidance trade puts Square Mile in spotlight again

Some of the city of London's biggest banks are behind a huge tax avoidance trade "cheating" European countries of hundreds of millions of euros a year, in a development that sheds fresh light on David Cameron's decision to wield Britain's EU veto to protect the Square Mile.

A two-month study by the Bureau of Investigative Journalism has uncovered a £65.7bn market in European equity dividends whose "central" purpose is tax avoidance ...

Dividend arbitrage is complex.

But at its heart, a bank or hedge fund lends equities in often high-yielding French, German or Italian companies to another institution.

The receiving institution then passes the equities through a network of low- or no-tax jurisdictions, before returning the equities to the original owner using a subsidiary in another tax haven.

In this way, banks can avoid the 15% average "withholding tax" levied on dividends in European countries ...

Lord Oakeshott called for the Financial Services Authority (FSA), the Treasury and the European commission to launch an investigation to ensure full disclosure of all dividend arbitrage transactions ...

Icap, the brokerage run by the former Conservative party treasurer and outspoken critic of the EU's financial transaction tax proposal, Michael Spencer, is the broking firm most used by banks to buy and sell equities for the purpose of "dividend washing", as the trade is more commonly known, according to four well-placed City sources ...

Obs  18 Dec 2011    Bankocracy Log    Corporate Sociopathy Log    Hedge Funds    Tax Dodgers

Icap

Michael Spencer

Revealed: how City fees are eating into our pensions

The Pitfalls of the Merkozy Fiscal Pact

There is to be no fiscal union, the EU will continue as a shambolic confederacy.

Those who sign the treaty will pledge to keep their own budgets in order, with a maximum structural deficit of 0.5 percent of gross domestic product per year and so-called "debt brakes" anchored in national constitutions to automatically correct any violations of that limit.

Those who sign up will also agree to subject themselves to a tough sanctions mechanism if their budgets get out of control, with the European Commission required to impose harsh penalties on states that violate the terms of the pact -- unless a qualified majority of EU members supports making an exception in a particular case.

In return, crisis-stricken countries that apply for an EU bailout will be obliged to submit their national budgets to Brussels for approval.

But is that all even possible? Can a majority of EU states simply bow out of a common EU treaty and agree on something new instead? ...

Der Spiegel  16 Dec 2011

Debt Crisis

Euro Zone Deal Runs Into Second Thoughts

The European Central Bank continued to face pressure to step up its purchases of euro zone government bonds.

But the head of Germany’s central bank, the Bundesbank, Jens Weidmann, repeated that his country opposed using the European Central Bank too rashly to back up governments that need to reform themselves first.

Mr. Weidmann also said the Bundesbank would provide new money as a loan to the International Monetary Fund only if countries outside Europe did so as well ...

Ireland’s European affairs minister, Lucinda Creighton, said in Paris on Wednesday that the European Central Bank should become a lender of last resort for the euro zone.

“Having a fiscal compact in place by March is desirable, but I don’t think it’s going to save the euro,” she said ...

The first months of 2012 will be the real test: billions of euros of debt from euro-zone countries will come due and have to be refinanced ...

NYT  14 Dec 2011    Global Risks 2012

Confusion over Britain's £30bn share of IMF rescue for Europe

If the eurozone had a proper central bank none of this would be necessary.

The fund revealed in its official Survey Magazine that non-euro countries would put up a quarter of all new money under the EU summit deal.

“European leaders agreed to make bilateral loans to the IMF of as much as €200bn —with €150bn contributed by eurozone members and €50bn from other members of the EU,” it said.

The report relied on a briefing by IMF chief Christine Lagarde, who was in the room with EU leaders during last Friday’s summit talks.

Britain is the EU’s only large economy outside the euro.

The EU statement contained no reference to the €50bn figure for non-eurozone states.

“If Britain has really agreed to this, it is a huge deal,” said Julian Callow at Barclays Capital.

David Cameron gave no hint of such an obligation in his statement to the Commons on Monday.

“Alongside non-European G20 countries, we are ready to look positively at strengthening the IMF’s capacity to help countries in difficulty across the world,” the Prime Minister said.

“But IMF resources are for countries not currencies, and can’t be used specifically to support the euro.”

Germany’s Bundesbank has effectively endorsed the IMF version, stating that it is being asked to contribute €45bn to the bail-out scheme ...

“It is assumed that other EU countries contribute to the financing according to their IMF quota,” the bank said in a letter to Germany’s finance ministry, hinting that it would not take part unless London chipped in too ...

Tel  13 Dec 2011    Coalition Log    George Osborne    IMF

UK faces £30bn EU bailout demand

Dave Cameron

IMF slashes growth forecast for Greece

A warning to Merkozy and Sarkel ... and Osborne

The Fund said there was a "growing risk" that the outcome for Greece would be even worse than envisaged, especially if structural reforms were delayed, or the credit crunch further depressed confidence.

"Accelerated private sector adjustment, on top of fiscal retrenchment, would likely lead to a downward spiral of fiscal austerity, falling disposable incomes and depressed sentiment.

"In effect, the economy would rapidly work off its external imbalance through deeper recession and wage-price corrections rather than through productivity enhancing structural reforms."

In its analysis, the IMF said Greece's debts were still sustainable even with the gloomier economic backdrop, but only if the country's private sector creditors accepted a writedown of 50% and Athens received financial support on favourable terms.

"The previous 21 July financing package would not work. Public debt would peak at 187% of GDP in 2013 and fall to 152% of GDP by 2020.

"Net external debt would peak at 128% of GDP in 2012 and fall to 96% of GDP by 2020. These already weak downward trajectories would not be robust to shocks.

"Further progress in reducing the deficit is going to be hard to achieve without underlying structural fiscal reforms.

"Greece will not be able to undertake – in a socially acceptable manner – the large fiscal consolidation that still lies ahead without a much stronger resolve to tackle the problem of tax evasion."

Gdn  13 Dec 2011    Global Risks 2012

Alternatives to Borrowing    Contesting The Neoliberal Dystopia    What is to done?

Pondering a Dire Day: Leaving the Euro

Collect the evaded tax, avoid the cuts

Iceland's Way

European Commission Chief Assails Britain Over Treaty Veto

On Tuesday ... José Manuel Barroso, the president of the European Commission, told the European Parliament in Strasbourg, France, that Mr. Cameron had sought “a specific protocol on financial services, which, as presented, was a risk to the integrity of the internal market” — a reference to the vast European Union trade area.

“This made compromise impossible,” he said.

“All other heads of government were left with the choice between paying this price or moving ahead without the U.K.’s participation and accepting an internal agreement among them.”

... Mr. Barroso ... suggest(ed) that British refusal to give ground had left it standing alone, despite efforts by European officials to introduce compromise proposals to bridge the gap between the majority of European Union members and Britain ...

Olli Rehn, the European commissioner for economic and monetary affairs, said Britain could hardly wall off its financial industry ...

" ... If this move was intended to prevent bankers and financial corporations in the City from being regulated, that is not going to happen.”

NYT  13 Dec 2011

The British Euro Farce

" ... the Tory Euro-sceptic, the pinstriped effluence of an ex-imperial nation"

The Euro-sceptic wants less Europe not more. In the place of “ever closer union,” the Euro-sceptic wants ever looser union and, if possible, none whatsoever.

In his or her — and it’s overwhelmingly his — heart beats the spirit of Britain’s “finest hour” and the United Kingdom (with a little help from the Yanks) holding out against the Luftwaffe.

Only now the object of resistance is Germany’s glum Frau Merkel ...

NYT  12 Dec 2011    Coalition Log    Whither Britain? Log    

Backlash threatens British MEP

Barroso attacks Cameron as UK inflation dips

EU warns Britain: financial rules apply to you too

Britain is ruled by the banks, for the banks

Revolving-door culture ...

Chronic Pain for the Euro

At least four major issues still need to be resolved: how much money is needed to protect Italy now from speculative attack; whether banks will stumble because of the crisis; the isolation of Britain, which does not belong to the euro zone; and not least, whether the Brussels cure, prescribed by Germany, fits the disease ...

With mounds of European debt due to be refinanced early next year, the crisis is far from over ...

NYT  12 Dec 2011    Global Risks 2012

Boom-year debts could bust us

First half of 2012: Decimation of the Western banks

Merkel's Teutonic summit enshrines Hooverism in EU treaty law

Europe will now have its austerity union, a revamped Stability Pact.

Budgets will be vetted "ex ante".

Structural deficits will be capped at 0.5pc of GDP.

Sinners will be punished automatically once they break the 3pc limit, and submit to suzerainty.

Commissars will tell them how to treat trade unions, what to tax, and what to spend.

It is not remotely a fiscal union.

There will be no joint debt issuance, no EU treasury, no shared budgets, and no fiscal transfers to regions in trouble ...

Nor was there any change in the mandate of the ECB, not even a tweak towards growth, nor a hint that financial stability (not manipulating short-term prices) is the ultimate duty of a central bank.

They are rewriting the Treaties, yet still refuse to correct the most dangerous single failure in the construction of monetary union: the lack of a lender of last resort ...

Tel  11 Dec 2011    Global Risks 2012

Yes, Cameron got it right

MoS  11 Dec 2011

Europe is locked in a dance of death with its banks

... the summit made some progress by pledging additional resources to be channelled through the International Monetary Fund.

But these hardly cover the borrowing needs for Spain and Italy for a few months, so remain insufficient to convince investors.

Only the ECB, with its capacity to print euros, can provide the size of support needed, but it continues to play a game of chicken with EU leaders and is refusing to blink.

In the absence of sufficient public support, troubled EU economies continue to face gut-wrenching austerity.

Worse, even countries such as Germany, which can borrow cheaply, are also cutting public spending.

While austerity may help restore competitiveness for small, open economies ... it will fail when applied to an economic area the size of the EU.

We cannot export our way out of trouble and a collapse of confidence means that consumption and investment spending are both shrinking.

Only public spending can help kickstart growth under these circumstances.

Yet all the EU leaders spoke about was the need for even more austerity ...

Obs  11 Dec 2011

Firms fear Cameron's veto will steer UK into economic dead end

Sir Martin Sorrell, boss of the multinational advertising group WPP, summed up the concerns of many business leaders when he told the Observer:

"Intuitively, it can't be helpful. I'd rather be inside the tent." ...

Manufacturers, whose fortunes lie at the heart of the Cameron-Osborne plan for revitalising the economy, and many of whom are heavily reliant on demand from the EU, also express caution ...

In theory, decisions about trade rules, financial regulation and so on are meant to form part of the architecture of the single market, and therefore be decided by all 27 member states; but industry fears that, over time, the core everyone-but-Britain group will inevitably shape the direction of policy.

Julien Seetharamdoo of Coutts ... warns foreign direct investment might eventually suffer if Britain distances itself from the EU.

"The immediate impact won't be particularly significant; Europe will still be the UK's main destination for exports and we are still part of a free trade area," he says.

"But it could have an impact on the degree to which foreign companies will want to invest in the UK.

"Japan and the US have always viewed the UK as a springboard into Europe." ...

Gdn  10 Dec 2011    Coalition Log    Thatcherite Britain    Whither Britain? Log

Clegg rages at Cameron's 'spectacular failure''

Eurozone Crisis

Eurozone crisis: history has been made but it's too early to know the outcome

The longer-term problem is also well known: how do you rebalance demand within the single currency bloc?

At the moment, investment and cash tends to flow towards ultra-competitive Germany and the north and away from the Mediterranean.

That trend seems unlikely to be reversed by ensuring budgets of eurozone governments are "balanced or in surplus," which is the thrust of the new "golden rule."

As Trevor Greetham, a fund manager at Fidelity, puts it these are "fair weather policies not able to deal with current imbalances, which were not primarily related to government spending but to a lack of competitiveness" ...

Gdn  09 Dec 2011

Europe’s Latest Try

As the dust settles, a cold new Europe with Germany in charge will emerge

Eurozone banking system on the edge of collapse

Raft of new euro measures a 'confidence trick'

The Failure of a Forced Marriage

" ... a spanner in the works."

... the political classes in Britain never fully shared the Continental conviction that the European Union was an absolute political necessity following two destructive world wars in the 20th century.

They never fully believed that Europe had to grow together, despite all the cultural, linguistic and societal differences.

In the 1960s, the empire was history, with one colony after the other declaring independence.

But instead of turning toward Europe, Britain looked west to the US.

And to this day, the UK feels much closer to America than it does to the frogs and the krauts on the other side of the English Channel.

One could see the strength of that bond as recently as 2003, when then-Prime Minister Tony Blair joined President George W. Bush in his Iraq adventure despite grave misgivings on the Continent.

In Brussels, which has for decades been depicted in the British press as little more than a bureaucratic monster, London has mostly played but a single role from the very beginning: that of a spanner in the works.

There has hardly been a decision aimed at greater European integration that Britain hasn't sought to block ...

Der Spiegel  09 Dec 2011    Coalition Log    Whither Britain? Log

Bye Bye Britain

Eurozone countries go it alone with new treaty that excludes Britain

Cameron wielded the British veto in the early hours of the morning after France succeeded in blocking a series of safeguards demanded by Britain to protect the City of London. Cameron had demanded that:

• Any transfer of power from a national regulator to an EU regulator on financial services would be subject to a veto.

• Banks should face a higher capital requirement.

• The European Banking Authority should remain in London. There were suggestions that it might be consolidated in the European Security and Markets Authority in Paris.

• The European Central Bank be rebuffed in its attempts to rule that euro-denominated transactions take place within the eurozone.

Sarkozy, who had faced criticisms on Thursday evening that he was isolated after claiming that Britain was pushing for a complete opt-out from financial regulations, rejected the demands out of hand ...

The summit also agreed that:

• Eurozone countries will provide up to €200bn in extra resources to the International Monetary Fund to help countries in difficulty.

• The eurozone's two bailout funds, the European Stability Mechanism (ESM) and the European Financial Stability Facility (EFSF), will be managed by the European Central Bank.

Gdn  09 Dec 2011

The Birth of a Two-Speed Europe

Questions have already been raised over whether the construct of the new fiscal union can be legally reconciled with the Lisbon Treaty, which defines the governance of the EU and will still remain binding ...

Berlin and Paris haven't heeded the ground rules of diplomacy.

They didn't seek any compromise with the British and instead stuck the political equivalent of a knife right into his chest.

Were his demands really as "inacceptable" as Sarkozy portrayed them early Friday morning?

Or is it not a legitimate right that a country doesn't want to be overruled when it comes to issues pertaining to one of the main branches of its economy?

If Sarkozy's main intention was to save the financial transaction tax, then he certainly shouldn't feel victorious, because it is still not going to be implemented in London ...

The pact between the 23 states also represents a shift of power in their favor at the EU level.

The "economic government" would be able to take action via European Council summits of the heads of state and government, and would not need to seek the approval of the European Parliament.

Merkel and Sarkozy will likely view that fact as an additional benefit ...

Der Spiegel  09 Dec 2012

Has the eurozone flunked the market's test again?

... here's the scale of what's at stake.

Eurozone banks can't borrow in dollars ... from commercial sources.

They are more and more dependent on support from the European Central Bank and on funding themselves on a risky, short-term overnight basis.

A number of eurozone banks are as reliant on official central-bank funding as Northern Rock became in the autumn of 2007.

... what you see is exactly the conditions that prevailed before Lehman's demise ...

There is a danger that at some point a big commercial bank will run out of the collateral or assets needed for emergency borrowing ... said bank will go down, risking a domino effect of collapses throughout the financial system.

So in those dire circumstances, one and a half steps forward from eurozone government heads are almost as bad as none at all, when investors want the full two.

The full two steps include a proper, formal integration of decision-making on taxing, spending and borrowing within the eurozone - and not the complex, cumbersome mechanisms that have been agreed . . .

The necessary steps would also involve full "mutualisation" of eurozone sovereign debt, the pooling of sovereign liabilities, which would permit the European Central Bank to be the lender of last resort to the currency union ... when you see what's required by investors, it is difficult to be optimistic ...

BBC NEWS  09 Dec 2011

Brussels deal fails to end uncertainty over spreading crisis

The final destination for the euro area and the half dozen countries that want to join the single currency is still hazy, but it will involve much closer fiscal integration.

Cameron knows that would be anathema for his own MPs, and will be gambling that the Lib-Dem members of the coalition – deeply unhappy with the prime minister's negotiating stance in Brussels – will not jump ship ...

Is there any chance that what has been agreed overnight will prevent Europe from sinking into recession?

Sadly not. It is too late for that, and what is happening in Brussels amounts to damage limitation.

There will be a fresh downturn in 2012: all that's really at issue now is how deep and prolonged that downturn will be.

Gdn  09 Dec 2011    Coalition Log    Euro Crisis    Global Risks 2012    Whither Britain? Log

How to Forge a Common European Identity

Cameron has 'played a blinder', says Boris Johnson

European Banks Need 115 Billion Euros

Euro Crisis

Britain must join the euro – and Cameron is the man to do it

Britain's entry into the euro would, at a stroke, bring more money and – as the regulation of British banks improves – more financial stability into the European Central Bank, to mutual benefit.

Britain would retain, or even enhance, its position as Europe's financial centre – a price that could reasonably be exacted as a condition of entry.

Nor need there be complaints – as there were 15 years ago – that sterling would be entering the euro at too high a rate.

Thanks to Gordon Brown and the global financial crisis, the pound has been devalued by almost 30 per cent against the euro.

Cameron could thus boast that a key requirement set by the former, Labour, government had been met.

Not only does Cameron have all these arguments and more, on his side, but he has the political means to get his way.

He is not John Major, teetering on the brink of losing his majority and in hock to his Eurosceptics.

With Liberal Democrats and Europhile Labour MPs on his side, he could win a majority in Parliament and campaign country-wide for a referendum "Yes" as the only true representative of the national interest.

With his PR skills and his one-nation Tory credentials, Cameron is one of the few British politicians who could convince mainstream voters to accept the euro ...

Ind  09 Dec 2011
A free market train wreck    Blog    Coalition Log    Euro Crisis    Whither Britain? Log

How to Forge a Common European Identity

Changes do not take banking errors into account

Ben Chu
Economics Editor

The big day was supposed to be Friday.

But the euro-zone's Big Two seem to have decided that the Brussels meeting at the end of the week will be nothing more than a rubber-stamping exercise.

Angela Merkel and Nicolas Sarkozy announced yesterday that they had reached an agreement on how to stabilise the eurozone.

It would seem that the job for the rest of Europe's leaders is simply to turn up and approve it.

The deal seems to bear a deeper German, rather than French stamp.

There will be treaty change for the 17 nations of the eurozone and a new regime to limit borrowing by member states-both central demands of Ms Merkel's.

There will be automatic fines for fiscally lax states and the European Court of Justice will verify national budgets.

But there remains doubt about the extent to which the fiscal enforcement regime will be beefed up.

The European Court will not, we were told yesterday, be able to veto budgets.

Yet there is an absurdity about this whole exercise.

This is not a crisis driven by over-borrowing by states.

Yes, the former Greek government spent too much and deceived its eurozone partners about its finances.

But the governments of Ireland and Spain were running budget surpluses right up to the moment the roof fell in on them in 2008.

It was the banking sectors of those countries - facilitated by profligate financial institutions in France and Germany - that were out of control and effectively destroyed their public finances.

Ms Merkel's treaty changes will not address that fundamental flaw - and they will not help to alleviate the present crisis.

As such, the German Chancellor is engaged in elaborate displacement activity.

i  06 Dec 2011    Bankocracy Log    Global Risks 2012    Government by Corporate Technocracy

Reform the euro or bin it

Joseph Stiglitz puts people before "a flawed economic model"

Germany (like China) views its high savings and export prowess as virtues. But ... Keynes pointed out that surpluses lead to weak global aggregate demand – countries running surpluses exert a "negative externality" on trading partners. Indeed, Keynes believed it was surplus countries, far more than those in deficit, that posed a threat to global prosperity; he went so far as to advocate a tax on surplus countries.

The social and economic consequences of the current arrangements should be unacceptable.

Those countries whose deficits have soared as a result of the global recession should not be forced into a death spiral – as Argentina was a decade ago.

One proposed solution is for these countries to engineer the equivalent of a devaluation – a uniform decrease in wages. This, I believe, is unachievable, and its distributive consequences are unacceptable …

There is a second solution: the exit of Germany from the eurozone or the division of the eurozone into two sub-regions. ...

There is a third solution, which Europe may come to realise is the most promising for all: implement the institutional reforms, including the necessary fiscal framework, that should have been made when the euro was launched.

It is not too late for Europe to implement these reforms and thus live up to the ideals, based on solidarity, that underlay the euro's creation.

But if Europe cannot do so, then perhaps it is better to admit failure and move on than to extract a high price in unemployment and human suffering in the name of a flawed economic model.

Guardian  05 May 2010

exiledlondoner
6 May 2010, 8:40PM

When Wall Street thinks rigid austerity measures are not the way forward, then it's time to try a new approach.

Will the Eurozone countries allow themselves to be sacrificed one by one to maintain Germany's position?

The problem is that Greece, Spain and Portugal desperately need a devaluation - something that to the Germans is akin to heresy.

This was always going to happen sooner or later, when they fudged the convergence criteria - the Eurozone is not one economy.

Guardian  06 May 2010

Wall Street panic as Dow plunges on fears for financial system

Greece and the single currency: Europe's existential crisis

Argentina to repay 2001 debt as Greece struggles to avoid default

Maastricht madhouse fuels EMU-wide contagion

In a rational world, Brussels would tap the EU's AAA rating to issue cheap "Barroso Bunds" to cover rescue costs.

But we are not in a such a world.

We are in the Maastricht madhouse, a currency union without a treasury, ruled by the "no bail-out" clause of Article 125 of the EU Treaties.

Europe is at last paying the price for fudging the true implications of EMU ...

Four professors will launch a legal challenge in early May at the Verfassungsgericht (high court). Should they secure an injunction, EMU may fly apart.

The Court ruled in 1993 that Maastricht was constitutional only as long as EMU remains an area of monetary order.

"A 'transfer union' is a bottomless pit and is bound to threaten currency stability. That is what we are going file," said Tübingen Professor Joachim Starbatty.

When accused of consigning Greece to ruin, he told the Frankfurter Allgemeine that EMU exit and default is Greece's only salvation.

"The truth has to come out into the open. Greece is in no position to pay it debts," he said.

The EU-IMF "therapy" of deflation for Greece repeats the catastrophic errors of Chancellor Heinrich Bruning in the early 1930s and must lead to a depression, he said.

Yet that is what IMF chief Dominique Strauss-Kahn is preparing for Greece ...

"The only effective remedy that remains is deflation. That will be painful. That means falling wages, and falling prices. There is no other way."

Actually, the IMF pursues other ways often, last year in Jamaica. What Mr Strauss-Kahn means is that the EU will not tolerate any other way.

The Greek people must be sacrificed for the Project ...

Telegraph  25 Apr 2010

Greece wins widespread support for boldness of reform plans

Greece faces ‘big sacrifices'

Eurozone agrees €110bn Greece loan

Greece faces devaluation, default or deflation.
Next stop the IMF

We feel your pain. But not enough to put our hands in our pockets to help you. Behind the sham show of solidarity, the simple message for the troubled government of George Papandreou was that Greece is not Alabama and Brussels is not Washington.

In the United States, the federal budget is worth around 25% of national output each year. States where the economy is booming pay more in tax receipts to the Treasury than they take out in spending. Poor states receive more from Washington than they raise in taxes. The sun belt subsidises the rust belt.

Europe has no such mechanism ...

Guardian  11 Feb 2010