The IMF and US both praised a Eurogroup deal giving Spain a lifeline of up to €100 bn ($125 billion) to save its stricken banks, with International Monetary Fund Managing Director Christine Lagarde calling it a “credible back stop” for the banking system.
(Read more)
Tag Archives: European Union
German opinion poll shows majority believe euro membership carries more disadvantages than advantages
From Open Europe:
New German opinion poll shows majority believe euro membership carries more disadvantages than advantages;
In an interview with Leipziger Volkszeitung, German Interior Minister Hans-Peter Friedrich reiterated that German assistance for Greece was not unconditional, arguing that: “We’re not willing to pour money into a bottomless pit… Anyone who wants to see help and solidarity from us has to accept that we expect a certain amount of seriousness and a certain amount of reasonableness”. An opinion poll commissioned by German state TV ZDF published on Friday showed that 79% of respondents rejected eurobonds as a solution to the crisis. Support for euro membership appears to be waning as 50% of respondents (up from 43% in February) say they believed Germany’s euro membership carried more disadvantages than advantages. According to the poll, 45% took the opposite view (down from 51% in February).
EU = all 17 countries can print money at the expense of others
Re: Spain Pours Billions into Bank
The central bank of Spain accepts Spanish debt and uses that debt as collateral at the European Central Bank for euro loans. So, all seventeen countries of the European Monetary Union have a back-door method for monetizing government debt. This is the structural flaw in the European System of Central Banks–there is no real, enforceable prohibition to massive printing of euros, as we see here. The other sixteen members of the EMU had no say in the matter. Each member can counterfeit euros ’til the cows come home. There is talk of a one trillion euro bailout of European banks.
Greek Politicians speak disaster and more free stuff
From Patrick Barron:
From today’s Open Europe new summary:
Former Greek PM warns of “vortex of self-destruction” if Greece leaves the euro
The FT reports that former Greek Prime Minister Lucas Papademos has warned that Greece would enter a “vortex of self-destruction” if it left the euro. Papademos suggested inflation could hit 50% while real national income could fall by a further 20%. Separately, Syriza leader Alexis Tsipras said yesterday that if he wins the next election he will not fire any civil servants, scrapping the current pledge to cut 150,000 public sector jobs by 2015, agreed under the bailout programme.
There is no better illustration of the destructiveness of the European common currency, as currently constructed, than these statements. One Greek politician predicts chaos in Greece if the euro subsidies stop, and the other states that he will do nothing to reform the Greek economy. These statements expose the destructive forces of what can only be described as a socialist currency–the euro.
EU takes aim at Israeli settler products
EU foreign ministers have “warned” Israel they will take a tougher approach to exports originating in illegal settlements on Palestinian land.
The ministers in a statement on Monday (14 May) detailing Israel’s long-term campaign to expropriate Palestinian farmers in the West Bank said: “The EU and its member states reaffirm their commitment to fully and effectively implement existing EU legislation and the bilateral arrangements applicable to settlement products.”
Under EU law settler products are excluded from preferential import tariffs in the 12-year-old EU-Israel association agreement. (Read more)
New French president Francois Hollande, who claims to ‘dislike the rich’, has THREE homes on French Riviera
“Across Italy police are cracking down on Ferrari and Lamborghini drivers [because they are rich]”
Across Italy police are cracking down on Ferrari and Lamborghini drivers, but not because they are driving too fast. Italy, like so much of southern Europe, is drowning in debt, so police are pursuing drivers to make sure they are declaring – and therefore paying taxes on – earnings that would allow them to afford cars worth as much as half a million dollars.
The targeting is part of an ongoing war on tax cheats, an attempt to shore up $2.5 trillion of the country’s public debt and change a culture that has often prided itself on avoiding taxes. Tax authorities have long carried out much-publicized checks on owners of luxury cars, yachts, even nightclubs that don’t issue proper receipts. But since the unelected, technocratic government took power in November, it has made enforcing tax collections a priority. (Read more)
Atlas will shrug.
Europe’s worst fear: Spain and Greece spiral down together
In a season of nightmare projections for Europe, this one could be the scariest: Greece leaves the euro currency union at the same time that Spain’s banking system is collapsing.
In many ways, the market convulsion last week was a test run for those crises, as political deadlock in Greece and mounting fears over the health of Bankia, one of the largest consumer banks in Spain, converged. . . .
The money available to Europe within its main bailout fund, about 780 billion euros ($997 billion) would not be enough to handle the twin calamities of a Greek euro exit and a Spanish banking implosion.
And despite recent statements from Germany and leaders of the Group of Eight industrialized nations to encourage economic growth in the eurozone, Europeans may have little desire to continue financing the debt disasters of other countries.
“When you have Greece and Spain happening at the same time, the problem becomes exponential and very, very dangerous,” said Stephen Jen, a former economist at the International Monetary Fund who runs a hedge fund in London. “So far, the policy has been to buy time and build a firewall – but that just makes the cost bigger. There is just no good ending here.”
The numbers do look dire. (Read more)
Let the banks who made bad loans fail!!!!
Danger lies in that they made the bad loans to governments, and government have a lot of guns.
Is Austerity to Blame for Europe’s Economic Woes?
The fact that his argument even needs to be made is pretty depressing.
“strengthen its monetary union by giving European politicians the power to declare a sovereign state bankrupt and take over its fiscal policy, the former head of the European Central Bank said”
Terrifying! Absolute madness!
Europe could strengthen its monetary union by giving European politicians the power to declare a sovereign state bankrupt and take over its fiscal policy, the former head of the European Central Bank said on Thursday in unveiling a bold proposal to salvage the euro.
The plan offered by Jean-Claude Trichet, who stepped down last November as ECB president, would address a fundamental weakness of the 13-year-old single currency [EUR= 1.2647 -0.0039 (-0.31%) ], the survival of which is threatened by the Greek crisis.
The monetary union has always defied economic principles, because the euro was launched ahead of European fiscal or political union. This has caused strains for countries running huge budget deficits – namely Greece, Portugal, Ireland, Spain and Italy – that have led to financing difficulties and over-stretched banking systems. (Read more)
Give Greece What It Deserves: Communism by Bill Frezza
I’m much more optimistic. Once Greek gets off the cocaine of the Euro and defaults on its debt, and works from a local currency, the have a good chance of being free and prosperous.
It must be dawning on all but the most obtuse member of the banking elite that they can’t possibly steal enough money from German taxpayers to save the Greek government from default. Put it off, maybe, but collapse is inevitable.
Once this happens, what is the purpose of casting Greece into some selective temporary financial purgatory where the irrelevant Greek economy can continue embarrassing anyone foolish enough to lend their dysfunctional government a dime? Why not go all the way and give the country what many of its people have been violently demanding for almost a century?
Let them have Communism.
Hard as it is for young people to believe, Communism was once a major historical force holding billions of people in thrall. Outside the halls of elite universities, who still takes it seriously? Sure we have Cuba, where the Castro deathwatch is the last thing standing between that benighted penal colony and an inevitable makeover by Club Med. Then there is Venezuela, though hope is fading that Hugo Chavez will carry the Bolivarian banner much longer now that he’s busy sucking down FOLFOX cocktails while checking for signs that his hair is falling out. And frankly, a psychopathic family dynasty ruling a nation of stunted zombies hardly makes North Korea a proper Communist exemplar.
What the world needs, lest we forget, is a contemporary example of Communism in action. What better candidate than Greece? They’ve been pining for it for years, exhibiting a level of anti-capitalist vitriol unmatched in any developed country. They are temperamentally attuned to it, having driven all hard working Greeks abroad in search of opportunity. They pose no military threat to their neighbors, unless you quake at the sight of soldiers marching around in white skirts. And they have all the trappings of a modern Western nation, making them an uncompromised test bed for Marxist theories. (Read more)
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See also: Greeks apologise with huge horse
Once poster child of crisis, Iceland recovers
While much of Europe wallows in recession, the economy of this volcanic island in the mid Atlantic is growing at a clip that has surprised many people, thanks to a currency fall – in which the crown lost almost half its value to the euro – an export and tourism boom as well as growing consumer confidence.
. . . .
Only a few years ago, a banking boom in which the sector’s assets grew to 10 times the country’s GDP lured many of Iceland’s 320,000 population from traditional industries into the world of finance. Fisherman got into banking and sailors speculated on booming real estate.
Those heady days have gone. Gas-guzzling Land Rovers have been replaced with fuel-efficient Volkswagens, a sign perhaps of a more sober consumer mood in which economic growth is based on a steady expansion of exports rather than flash-in-the-pan speculation.
The wounds that sparked massive street protests against the financial elite are slowly healing. Even the then prime minister has been tried by a special court, closing one chapter.
Granted, there is still a long way to go, but many see Iceland as offering a lesson particularly to European countries such as Greece and Spain, stuck with shrinking economies and lacking the option of devaluing to boost their international competitiveness.
Iceland’s GDP growth estimated at some 2.6 percent this year will outshine even powerhouses like Sweden. (Read more)
What Iceland did, was tell the banks that irresponsibly lent to their irresponsible politicians to shove it. Expect Iceland’s story to be relegated to back pages.
The Eurozone: A Moral-Hazard Morass by Philipp Bagus
Very comprehensive & insightful:
The Misconstruction of the Euro
In the eurozone, there are fiscally independent sovereign governments coexisting with one (central) banking system. This is a unique construction as normally there is one government with its own banking system.
Governments can finance their deficits through the banking system and money creation. When governments spend more than they receive in tax revenues, they typically issue government bonds. The financial system buys an important part of these bonds by creating new money. Banks purchase these bonds because they can use them as collateral for new loans from the European Central Bank (more precisely the European System of Central Banks).
New money flows to governments that monetize their deficits indirectly. The cost of the indirect monetization is born by all users of the currency in the form of a reduced purchasing power, i.e., inflation. If there is one government per central-banking system, the whole nation bears the cost of the deficit monetization. However there are in the eurozone several governments running their own budgets.
Imagine that all governments but one have a balanced budget. The one deficit government can then externalize onto other nations part of the costs of its deficit in the form of higher prices. This monetary redistribution is the already-existing transfer union in the EU.
A government like the Greeks’, with high deficits, prints government bonds bought and monetized by the banking system. As a consequence, there is a tendency for prices to rise throughout the monetary union. The higher the deficit of a government in relation to the deficits of other countries, the more effectively it can externalize the costs of a deficit. The incentives of this setup are explosive as governments benefit from deficits higher than those of their eurozone neighbors.
The Stability and Growth Pact designed to contain these incentives utterly failed because governments themselves judge whether sanctions are imposed on them.
. . . .
The EMU provokes conflicts between otherwise peacefully cooperating nations. Redistribution is always a potential cause of social stress. The monetary redistribution in the EMU was not understood by the bulk of the population and, thus, did not cause conflicts. The bailouts, the rescue fund, and the interventions of the ECB that were ultimately caused by the setup of the EMU have made the redistribution between countries more obvious.
Murphy, Robert P.
$25.00 $22.00
Germans do not like maintaining the Greek welfare state. In the German media Greeks are called “liars” and “lazy.” The Greek media, in turn, demanded reparations for World War II. While the Germans do not like paying for the periphery, people in peripheral countries blame Germans for austerity measures. They feel that the unpopular measures are imposed on them by foreign (German) pressure. Within the EMU, these clashes and conflicts will continue and probably increase. Remaining in the EMU implies living in such an atmosphere and the risk of escalation.
To make an understatement, the costs of the Eurosystem are high. They include an inflationary, self-destructing monetary system, a shot in the arm for governments, growing welfare states, falling competitiveness, bailouts, subsidies, transfers, moral hazard, conflicts between nations, centralization, and in general a loss of liberty. In addition, these costs and risks are rising day by day. Considering all this, the project of the euro is not worth saving. The sooner it ends, the better. Alternatives exists. A return to sound money such as the gold standard would boost responsibility, harmony, and wealth creation in Europe. (Read more)
“Germany will bleed for the Euro”
From today’s Open Europe news summary:
Benoît Coeuré, ECB executive board member, hinted yesterday that the ECB could renew its purchases of eurozone government bonds if fears over Spain continue to spread, although Jorg Asmussen, another member of the ECB’s executive board, insisted that the ECB “has done its part”, following its unlimited long term lending operations. Meanwhile, a leader in Wirtschaftswoche argues that Germany is facing inflation as a result of the ECB’s actions, concluding that “Germany will bleed for the euro”.
France tightens grip on super rich
The French public are resoundingly in favour of tightening the grip on the mega-wealthy. François Hollande, the Socialist frontrunner who polls say would win the second-round vote in May, has promised a 75% tax bracket on earnings after €1m. More than six out of 10 French people approve. Jean-Luc Mélenchon, the fire-brand leftist backed by the Communist party, has surged to third place in the polls with his promise to cap fat cat salaries at €360,000 (£300,000), after which income tax would be 100% and the state would “take it all”.
Even Sarkozy, known as “president of the rich” for his generous tax breaks to the wealthy, has restyled himself as “president of the people”, offering to cut tax loopholes and make French tax exiles who flee abroad pay back the difference to the French state.
The French people are more distrustful of capitalism than the Chinese, polls show. Two-thirds agree with the concept that the state should take from the rich to give to the poor. But many question whether the election rhetoric will succeed in rooting out a deeply unfair French system where the super-rich often manage to pay barely any tax at all, conducting startling tax dodges by hiring top accountants to pick through the myriad legal loopholes in their favour. (Read more)