Find the silver lining in this lot!

You’ll note that Spain which is in even more trouble than Britain has
instituted spending cuts of £16 billion and tax cuts too. This is
vital here too and the sooner it happens the less severe the effects
need be. So why do Cameron and Osborne for the Tories flatly refuse
to acknowledge the severity of the problem and persist in ‘promising’
or threatening [ ! ] to follow Labour’s spendthrift policies and
reckless taxation which have landed us in this mess?

Note that the Wall Street Journal blames the unexpected nose-dive ikn
Germany on the socialist policies which the coalition has produced
and suggests that its success to date has been built on the free-
market refors pof the previous government. In the same way in Spain
“ the Socialist government has also largely lived off the reforms of
its conservative predecessor.”
xxxxxxxxxxxxxx cs
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EUREFERENDUM Blog 17.8.08
Good news and bad news

The most important economic news of recent weeks, Irwin Stelzer tells
us in today's edition of The Sunday Times is the recovery of the long-
comatose dollar.

But what is good news for the US economy seems to be bad news for the
eurozone. Ambrose Evans-Pritchard reported earlier this week [SEE
“Global slump to cure inflation?” Sent by me to you 14/8/08 -cs]
that the ECB was taking a hammering for making a serious error by
raising interest rates a quarter point to 4.25pc last month.

It seems that it has misjudged the seriousness of the downturn in the
eurozone economy, which has seen a contraction of 0.2 percent in the
second quarter, compared with the first three months of this year,
with economies of Germany, France and Italy probably now in full
recession.

In Spain, the picture is darkening so fast in Spain that Prime
Minister Jose Luis Zapatero cancelled holidays and called his cabinet
back to Madrid mid-week for the first emergency session of its kind
since the Franco dictatorship. The crisis meeting agreed to a €20bn
(£16bn) blitz on public works, tax cuts, and a mortgage rescue to
halt the downward spiral.

Growth has also turned negative in Ireland, Denmark, Latvia, and
Estonia, while grinding to a halt in Sweden and The Netherlands.
Iceland contracted by a staggering 3.7 percent.

However, if Ambrose always has a "down" on the eurozone, and is thus
considered by some a little biased on the pessimistic side, [The pr
oof of the pudding’s in the eating they say. He’s been right! -cs]
now so the Wall Street Journal which yesterday took a swipe at the
"colleagues". [reproduced below -cs]

Throughout the depth of the financial crisis in the US, the Euros
have been warbling consistently about "decoupling" – arguing that the
mighty European economy is no longer a slave to the American economy,
and obeys its own rule. Europe would remain sound while the US would
sink into a bottomless pit.

And, says the WSJ, Euro-zone hopes about decoupling from the US
economy seem to have come true. But, in tune with the immutable law
that dictates that nemesis always follows hubris, this decoupling is
not quite as planned. While the eurozone contracted by 0.2, the US
posted second-quarter growth of 0.5 percent

Like US fears of a recession, says the paper, the eurozone's economic
resilience appears to be, if not mostly "mental," at least somewhat
exaggerated. Despite all the talk about a US recession, it concludes,
the economy may actually unravel faster across in Europe.

This is certainly what the markets think, for the moment, even the
Financial Times reporting that they are becoming increasingly
convinced that the US is best-placed to weather the global downturn.
But then, if you think about it, for an organisation that gave us the
Common Fisheries Policy, it never was a safe bet that the EU would be
any better at managing the eurozone economy.
=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-
Posted by Richard North
==================
WALL STREET JOURNAL- EUROPE 15.8.08
Contraction

Euro-zone hopes about decoupling from the U.S. economy seem to have
come true -- albeit not quite as planned.

Whereas the U.S. posted second-quarter growth of 0.5% compared to the
first three months of the year, the euro zone contracted by 0.2%
during the same period, Eurostat said yesterday. Like U.S. fears of a
recession, the euro zone's economic resilience appears to be, if not
mostly "mental," at least somewhat exaggerated.

Leading the downfall was Germany, heretofore considered resistant to
the triple threats of a global slowdown, a strong euro and record
energy prices. Its economy contracted by 0.5%. The French and Italian
economies followed closely, down 0.3% each. Growth in Spain, the euro
zone's fourth-largest economy, was flat at 0.1%.

In the wake of this bad economic news, expect louder calls for the
European Central Bank to follow the U.S. example of opening the
monetary spigots. Inflation is at around 4%, and some European
lawmakers suggested last month that the ECB's definition of price
stability (inflation rates of below but close to 2%) should be
"examined," i.e. notched up a little so that the bank could pursue a
looser monetary policy. That's like erasing poverty by reclassifying
the poor as rich. Euro-pols would do better to raise incentives to
work and invest. The outlook for such reforms, however, remains as
grim as for the economy.

In Germany, there's no sign that Berlin's "grand coalition" between
Social Democrats and Christian Democrats regrets having wasted its
first 1,000 days in office. It apparently had hoped to ride out its
term on the back of the previous government's market reforms and
strong global growth.

Instead, Chancellor Angela Merkel's government has reneged on its
reform promises. Rising mandatory health care contributions threaten
Berlin's pledge to cut nonwage labor costs significantly below 40% of
gross salaries. Instead of deregulating the labor market, it is
pushing for minimum wages in several sectors. Instead of cutting
income taxes, it implemented a three-percentage-point hike in the VAT.

Last month Economics Minister Michael Glos proposed income-tax cuts
to boost the economy only to see his suggestion immediately shot down
by Mrs. Merkel. Mr. Glos reiterated yesterday that "more growth can
only be generated by lower taxes and lower payroll taxes" -- but he
also conceded that such supply-side polices had no chance in the
current coalition.

In Spain, the Socialist government has also largely lived off the
reforms of its conservative predecessor. The government convened an
emergency meeting yesterday, agreeing on a yet another stimulus
package -- the third since Prime Minister José Luis Rodríguez
Zapatero's re-election in March.

Some of the measures fall into the category of dropping euros from
helicopters, such as injecting €20 billion into housing and financing
for small and medium-size businesses. Others may help lift growth
rates permanently, such as cutting administrative costs for companies
by 30%. The plan, however, is still too timid to counter the near
freefall of Spain's construction sector -- the engine of its previous
economic success.

Few in Europe, though, can compete with Silvio Berlusconi's economic
bungling. The Italian Prime Minister used his comfortable majority in
both houses of Parliament to raise taxes on oil and financial
companies this month. The proceeds from these "Robin Hood" taxes are
designed to help low-income families cope with higher energy prices.
If he's really interested in helping the poor, Mr. Berlusconi should
have honored his campaign pledge to reduce taxes.

Better economic news comes from Paris. Nicolas Sarkozy's reform
efforts have been erratic but generally in the right direction. He
has abolished the 35-hour workweek in all but in name, pushed through
some welfare-to-work reforms and cut red tape. Now that the economy
is facing stronger headwinds, perhaps he'll use the opportunity to
push through the kind of "rupture" with past policies that he has
been promising.

Yesterday's results mark the worst quarterly performance since the
common currency's launch in 1999 and suggest Europe may be heading
for a recession, meaning two consecutive quarters with negative
growth rates. Leading economic indicators, such as new industrial
orders and business sentiments, point to a sharp slowdown in the
second half and into next year.

Despite all the talk about a U.S. recession, the economy may actually
unravel faster across the Atlantic. It's not just France but all of
Europe that could use some rupture from its past ways.