Friday 17 August 2012 Friday 17 August 2012 Friday 17 August 2012 Friday 17 August 2012 Thursday 16 August 2012 Thursday 16 August 2012 Thursday 16 August 2012 Thursday 16 August 2012 Thursday 16 August 2012 Wednesday 15 August 2012 Eurocrash: a matter of political willpower
According to figures released by Greece's Finance Ministry, the peak debt was reached in the fourth quarter of last year, when it stood at an all-time record of €367.9 billion.
Despite the bailouts, despite the austerity programme, despite selling off government assets, therefore, debt is going back up again. No wonder the German papers yesterday were screaming that Greece must go bankrupt, with earlier sentiment telling us that that the Greek austerity plan was not realistic.
Nor is the grief confined to the Hellenic Republic. According to the paper, nearly ten percent of loans in Spain have gone "bad".
The Spanish National Bank has announced that, at the end of June, 9.42 percent of all borrowers - from private citizen to companies - were at least three months in arrears. These loans amounted to more than €164 billion, eight billion more than in May.
Small wonder, then, that Spanish banks want €100 billion in refinancing, while in Brussels, officials are already preparing the upcoming weeks for what Die Welt calls a "hot autumn". This will start, says the paper, with the next troika report, which will be relentless in exposing the Greek fiasco.
In the first week of September, auditors of the EU commission, the ECB and the IMF will travel to Athens again and, if the expected testimony from them is as devastating as feared, payment of the next €31-billion tranche of the bailout to Athens is questionable.
Even before the troika report, there is the widespread reported funding gap of €20 billion, although some are saying it could be twice as high. And yet, despite all that, we get Reuters reporting that growing numbers of economists have changed their minds and conclude that the country's fate lies inside the currency union rather than out.
Greece's future in the eurozone is no longer an economic question but one of political willpower, which remains firm in Athens and Brussels, in spite of opposition from politicians in Germany, the agency reports.
So there we are – exactly what we've been saying all along – this is a political rather than an economic issue. But it would be unwise to under-rate the Germans. They will have the final say.
COMMENT THREAD
Richard North 17/08/2012 Eurocrash: making mischief out of mistakes
What is wrong here is the "also". Finland, in the form of Erkki Tuomioja, has not actually warned about a eurozone break-up. Unfortunately, the paper has relied on a wildly inaccurate report inReuters, rather than the Failygraph original, which wrongly attributes a quote from Timo Soini, the True Finn leader, to Tuomioja.
Despite that – if correctly reported – the Polish report stands up on its own, having the country appealing to the eurozone members to prevent a collapse of the monetary union.
The debt crisis is the biggest crisis in Europe since the Second World War, Polish finance minister Jacek Rostowski (pictured) is cited as saying after a meeting with German economics minister, Philipp Rösler, in Warsaw.
This endangers not only the eurozone countries, but the entire EU, Rostowski says: "A break-up of the eurozone has catastrophic consequences for all European countries". The world economy would suffer damage and this dangerous situation would have political as well as economic consequences, he adds.
In response, Rösler is cited as saying: "We agreed that we must do everything we can to stabilise the eurozone," Germany is aware of its responsibility. But, he added: "There can be no solidarity without responsibility … We call it: no power without compensation".
Here, Rösler is very much on-message with his chancellor, but it is worth noting, after recent statements from the vice-chancellor, that he is regarded by Die Zeit as something of a busted flush.
Philipp Rösler, it says, is the failed president of the FDP and within the party the question is no longer whether he can hold the key position but when he will step down. With Rösler leading the FDP, the conviction among most liberals is that their party will not get any seats in the Bundestagelections in 2013.
A conversation between Rostowski and Rösler, therefore, may not be of earth-shattering importance, especially as Poland still holds to its intention to join the euro "as quickly as possible" - albeit only if the debt problems are resolved. But, at least, it adds to the corpus of discontent, which is no bad thing.
COMMENT THREAD
Richard North 17/08/2012 Eurocrash: dog bites man in Finland
Low debt, a stable economy and low unemployment in many ways made Finland a model euro-student. But the common currency has a price. And more and more Finns seem to regard that price as too high, ran the report.
Meanwhile, having virtually ignored the growing political crisis in Germany, the Failygraph has despatched Ambrose Evans-Pritchard to Helsinki to offer a new euro story that wasn't about Greece, to keep the declining readership entertained.
On the capital of one of the small counties in the eurozone, Ambrose interviews Finnish foreign minister Erkki Tuomioja in Helsinki, thereby earning a report in the Helsingin Sanomat to the effect that Finland is prepared for the break-up of the euro.
"We have to face openly the possibility of a euro-break up", Tuomioja tells Ambrose. "It is not something that anybody - even the True Finns [eurosceptic party] - are advocating in Finland, let alone the government. But we have to be prepared".
So, after stories have been flying around the world for months, about the banks, the EU commission, virtually every member state, and professional groups openly talking about the possibility of a euro-break up, the observations of a minor politician in a minor country to the same effect are somehow news?
Interestingly, even the local Helsingin Sanomat doesn't make this dog-bites-man story its lead (pictured above), taking care to cite Tuomioja – the good European – saying that: "the break-up of the euro does not mean the end of the European Union. It could make the EU function better".
This is translated in Failygraph terms as, "The Nordic state is battening down the hatches for a full-blown currency crisis as tensions in the eurozone mount".
On the other hand, the WSJ goes one better than Ambrose, citing an interview from the prime minister, Jyrki Katainen, who expresses his dislike of the bailouts, telling us that: "That's why we want to actively participate in it [the eurozone], to solve the problems".
The conservative government under Katainen, we are told, remains committed to the euro, despite the prime minister's criticism of the bailouts. And a survey by the Finnish television station MTV3 showed that although half of the Finns would approve of a Greek withdrawal from the euro, only 17 percent want Finland to leave the EU.
To put the matter further in perspective, Katainen has also been speaking to der Spiegel telling it that two-thirds of Finns supported the euro. For those looking for a revolution, Finland is not the place to be.
COMMENT THREAD
Richard North 17/08/2012 Eurocrash: panic and other measures
Organised by the foreign ministry, this had actually been planned for some time, aimed at shining up the "tarnished image" of Europe in the wake of the debt crisis. The target was the 80 percent or so of Germans who worry that EU member states no longer have the debt crisis under control.
The campaign was supported by a network of eleven foundations, including the Robert Bosch Foundation and the Mercator Foundation, among the largest in Germany. Celebrities were to act as "ambassadors", together with athletes and entrepreneurs. And the gang of former foreign ministers were all to be photographed with Westerwelle.
But nobody seems to have told Fischer or, at least, secured his agreement. Having read with the "utmost astonishment" media reports what he was supposed to be doing, the Green politician refused to appear alongside Westerwelle. With the incumbent foreign minister thus humiliated, Handelsblatt is dismissing the whole thing as a "farce".
And, while the foreign minister was failing to get his act together at home, his boss fared little differently in foreign fields – Canada to be precise – where she met prime minister Stephen Harper for talks. The picture is not what it seems, much as many would wish it otherwise.
Even before her arrival, however, Jim Flaherty, Canada's finance minister, had shown dissatisfaction with the European approach to the debt crisis. "Europe has not done enough. You need to do more", he said.
Face to face with Merkel, Harper called on European states to tackle the debt crisis and to recapitalise their banks. The situation was frustrating, he said, because for many years was clear what needed to be done. However, because there was no common fiscal policy within the EU, the necessary steps had not been taken.
Merkel, in response, agreed that time was "of the essence" and then called in aid Mario Draghi, saying the ECB president's comments were "in line with what European leaders have been saying for a long time". She also said that the EU commission should have "stronger powers" to intervene on national budgets.
"It is a question of taking the steps that weren't taken when the currency union was created, namely a political union", she said. "Germany knows that in a common currency area political responsibilities need to be shared".
This is not Merkel's last word, by any means, as her Canadian visit is the open shot in what Reutersis heralding as a major round of shuttle diplomacy.
Greek prime minister Antonis Samaras will fly next week to meet the German chancellor and Hollande. Merkel and Hollande will meet next Thursday, a day before the Greek premier arrives in Berlin, Merkel then plans to visit Spain's Mariano Rajoy early in September, and Italy's Mario Monti says he expects to travel to Berlin before August is out.
And then, just to show how in touch the market is, with Greece on the verge of bankruptcy and the eurozone slipping into recession, the DAX stock market index finished the day just short of 7,000 points, not far off the previous-year high in March of 7,194 points.
Handelsblatt is running a piece about fund managers and other "experts", headlined, "Wir erleben erschütternde Ahnungslosigkeit" - "We are seeing staggering ignorance".
I suppose that's better than panic, but only just.
COMMENT THREAD
Richard North 17/08/2012 Tory europhilia: dealing with an inconvenient truth
This is fait enough, except that Marina (as she likes to be called) goes on to ask: "Why does the EU insist on departing from its original goal of establishing a community of trading nations by imposing a federal EU identity, especially in the field of sport?"
The answer to why the EU seeks to use sport to further an EU identity is, of course, given in theAdonnino Report of 1985, which we discussed here. But the really fascinating aspect of Marina's complaint is her assertion about the EU's "original goal of establishing a community of trading nations".
This is classic Tory mythology, which gets them round the inconvenient truth that we were taken into the (then) EEC by a Tory prime minister, with the original treaties further expanded under the reign of the Tory High Queen, Margaret Thatcher and her protégé, John Major.
By convincing themselves that the treaties started off with the idea of creating a "free trade area", rather than the declared intent of "ever closer union" leading to full political union, the Tories can excuse the fact that their party has been responsible for getting us into the mess that is the EU.
They thus seek to present us with the myth that it all started out with the best of all possible intentions, and somehow went wrong – usually on the Labour watch - ending up heading towards a "federal superstate".
By this means, they can also justify their emphasis on renegotiation, arguing that all they are trying to do is restore the original direction of common market that they thought they had joined in the first place, but which has been swept off course by those wicked continentals.
One might have thought that Mrs Yannakoudakis ought to know better, her having studied government, politics and modern history at Brunel University in Uxbridge and received an MA in Education from the Open University. But there is nothing like wilful ignorance when one needs to whitewash those inconvenient truths which so afflict the Tory Party.
As to the medals, the EU claims a total of 306, putting it at the top of the medal league. But, as Booker points out, there is another claimant for the pole position.
Between 1952 and 1988, the Soviet Union dominated the Olympic medals count on almost every occasion. And the final medal count for London 2012 shows that the 15 countries formerly making up the USSR would again have topped the table, with a combined total of 164 medals (47 gold), putting them well ahead of the USA with 104 medals (46 gold).
Unlike the EU, the USSR can at least once claim to have been a single sporting entity, although that did not do it much good in the longer term. The EU should perhaps take note … and Mrs Yannakoudakis should take some time out to learn some history.
COMMENT THREAD
Richard North 16/08/2012 Eurocrash: I wish I'd known that
I wish I had known that, as it would have saved me a great deal of writing about diverse subjects, with more to come.
However, in the same site, we are also told:One of the reasons that Europe is so difficult to assess is the tremendous amount of jargon and hype that comes pouring out from all across the Continent. Each separate nation sends out stuff and then Brussels sends out their fluff and then the ECB makes proclamations and there is no harmonization as each group has its own distinct platform. We are bombarded daily with national interests, Federal interests and finally an ECB that supposedly is beholden to no one but is, in fact, beholden to everyone and especially Germany as the paymaster. Almost every day there is a new bandwagon to jump on and a new disappointment to be found some days later as one plan after another does not come to fruition. So to make sense of it all you have to stop, come to a full halt and give due consideration to the totality of what is happening in Europe.
Quite.
COMMENT THREAD
Richard North 16/08/2012 Eurocrash: Lisbon treaty goes missing
The report starts by telling us that preservation of price stability is "the core mission of the European Central Bank (ECB)". But the debt crisis has changed its role, forcing the Bank to intervene massively to ensure the liquidity of the banking system and to cushion the costs of refinancing states.
The Bank, we are then told, could again be active, especially after president Mario Draghi had recently declared that he would do whatever it takes to defend the euro, which gives rise to the question of whether the tasks the ECB has taken over are still covered by its mandate.
According to Bundesbank chief Jens Weidmann, the ECB is being used for purposes which increasingly do not comply with its mandate, so much so that politicians of the CDU and FDP now hold that a fundamental reform of the Bank is necessary.
Within the report, though, multiple references are made to the "independent" role of the ECB, and concern is expressed that the proposed role of the Bank as a supervisory body would "undermine its independence".
However, in asserting this, commentators and critics seem to have forgotten that, under the Lisbon Treaty, the ECB lost its independence and became a fully-fledged institution of the European Union.
As such, under Article 13 of the consolidated treaty (p. 23), the Bank, along with the other institutions, is told that it: "shall aim to promote its (the Union's) values, advance its objectives, serve its interests, those of its citizens and those of the Member States, and ensure the consistency, effectiveness and continuity of its policies and actions".
While there are specific duties allocated to the ECB, they do not transcend these more general duties, which are so wide-ranging as to encompass virtually anything the "colleagues" might demand of it.
In that context, not only is the ECB very far from being independent, its mandate is far wider than is generally believed, covering anything that might serve the interests of the EU – however those might be defined.
The crucial thing to understand, therefore, is that the ECB is a political structure, set up to perform political tasks under the leadership of a man bound by political objectives. Its behaviour will not be the same as that which one could expect of an independent institution, charged exclusively with managing economic issues. To expect otherwise would be absurd.
COMMENT THREAD
Richard North 16/08/2012 Eurocrash: a dagger at the heart of the project
Interestingly, I left last night's piece with the Irish Times saying that Greece had to drop out of the euro, but this takes it a stage further.
I know we've said it before, but this really is end game territory. And young Daniel says that Britain should capitalise on this, leaving the EU to set up "a looser association of peripheral countries, linked to the core by free trade and inter-governmental collaboration rather than common political structures".
As always, he's behind the curve. It is the core which is collapsing and soon there will be nothing to coalesce around. Merkel was right when she said that the end of the euro is the end of "Europe". In the not too distant future, we will be looking at re-drawing the post-war settlement – the changes are going to be that profound.
The deepest of all ironies, though, is that it will be Germany, not Britain, which drags the project down. And the proximate cause will be the German Basic Law, which was drafted after the war with the help of British lawyers.
Central to the issue, as Deutsche Welle points out, is the "eternity clause" - a legal colloquial name for Article 79, paragraph 3 – which clearly limits the transfer of authority to a European level.
This clause stipulates which regulations in the Basic Law may not be changed, including the provisions in Article 20, which declare: "All state authority emanates from the people".
In our Harrogate Agenda, this is exactly where we are with our first demand, where we state: the people in their collective form comprise "the ultimate authority of their nations and the source of all political power".
And now, that provision is the Basic Law is going to prevent the German europhile élites handing over the last of the sovereignty to the EU, in the form of a fiscal and final political union. The power isn't theirs to give away.
Such issues were explored in detail in Frankfurter Allgemeine Zeitung over the weekend, where it was concluded that further demolition of the sovereignty of nation states was not the answer to "the state of emergency in Europe". On the contrary, what was needed was "its sharpening".
This is the dagger at the heart of the project. This is why we see a rush of politicians calling for a referendum. They need the people to assent to the transfer of power before fiscal union can go ahead - and it is doubtful even if that can be permitted.
Short of that, the dream is over. There is a lack of a European sovereign, and it is going to stay that way.
COMMENT THREAD
Richard North 16/08/2012 Eurocrash: Germany's trillion-euro liability
Throughout its brief life, what has sustained the euro has been the doctrine of ineivitability, but all that has gone, lost in the recriminations and squabbling of (largely) German politicians who dared to question the great secular religion of the age.
Latest of those trying to shore up the breach, however, is a blast from the past in the form of Gerhard Schröder, one time chancellor and earnest supporter of the project.
Bringing him out of retirement are the attacks of the FDP and the CSU against Greece. The "bashing" must stop immediately, he says. This is not conducive to the European idea and will not help the euro. "The continuation of Greece in the euro area is not easy but is possible, provided that there is solidarity and common effort", he insists.
In the German mainstream, though, a battle is shaping up between Merkel's coalition and the SPD, the representatives of the one arguing for a "stability union" while accusing the Socialist challengers of favouring a debt or "liability" union.
Enter SPD budgetary policy spokesman of the parliamentary group, Carsten Schneider, who is trying to turn the argument by suggesting that, whether left, right or centre, all parties are already lumbered with a debt union.
Says Schneider, talking to the Berliner Zeitung, the total exposure far more than the €310 billion Greek bailout funds, as the operations of the ECB have to be underwritten as well – the so-called "target II" balances, which Germany stakes to the tune of 27 percent. And there, Schneider estimates, the German liability now stands at a "breathtaking" €1 trillion.
Schneider also questions the assumptions on which the austerity programmes are based. If the Spanish package was transferred to Germany, he says, on a pro rata basis, that would require savings of about €250 billion, roughly the entire tax revenue of the federal government.
Such austerity would not be feasible for us, says Schneider. There would be a social uprising. The last major austerity package Merkel presented, in 2010, was only €80 billion, and that was spread over several years. And even now it has only been half implemented.
On that basis, the Spanish austerity plan is not realistic, and the Greek plan even less so, being much more extreme, at least on paper. To halt the death spiral, says the Irish Independent, Greece must leave the euro. The pain cannot go on much longer.
COMMENT THREAD
Richard North 16/08/2012 Eurocrash: "the current imbalances will blow Europe apart"
It was at that time that he admitted that a Greek exit from the euro had "lost its horrors", evoking a wry comment from Spiegel that some senior members in Germany's ruling coalition agreed with him. Now he's back, warning against "populism" in the euro debate, stressing the commitment of his party, the pro-business Free Democrats (FDP), to closer European integration.
He is also breaking ranks with the dissidents in the ruling coalition, picking on the likes of Markus Söder, Bavarian finance minister, who has called for a Greek exit. The Christian Social Union (CSU), Rösler says, needs either make party members moderate their views or it should isolate them.
This was after Söder had told Bild am Sonntag that "an example must be made of Greece … Everyone has to leave Mom at some point and that time has come for the Greeks". This had prompted from foreign minister Guido Westerwelle a warning: "The tone of the debate is very dangerous … We need to be careful not to talk Europe to death".
Rösler's comments also apply to the CSU general secretary, Alexander Dobrint, who is another to have called for a Greek exit. Rösler, himself no stranger to the genre, now echoes Westerwelle, declaring populism "extremely dangerous", contrary to European values, which include "the principle of give and take".
Nevertheless, Rösler concedes that, if reforms are not made Athens, there can be no third rescue package. We do not want Greece to become insolvent, he says, but if necessary we could deal with the consequences.
What has brought on this sudden outbreak of responsibility to this controversial politician is not clear, and nor is it clear that he is driven by electoral imperatives, even if next year's election is looming large and the FDP is not doing well.
There are indications, though, that the economy minister is adrift from the mainstream, as Greece has today announced truly appalling economic news, with the economy shrinking 6.2 percent in the last quarter, making this the fifth year of economic depression.
With nearly a quarter of the workforce (23.1 percent) unemployed, undermining efforts to meet revenue targets and reduce the budget, Athens is asking for more time to meet its austerity programme, evoking a favourable response from Westerwelle. He appears open to compromise, even if he is stating that there can be no substantial changes to the reform agreements.
On Monday last, Greece managed to sell €4 billion-worth of short-term (3-month) government securities, to meet its public sector payroll, but needs another €20 billion to keep it going. So it will all have to come out in the wash next week, when prime minister Antonis Samaras meets Merkel.
On the meantime, despite the political hyperactivity, the German people seem to be taking a relatively laid-back view of events. According to a TNS poll, eighty percent of the population want a "new economic order" and are not bothered by short-term goals.
People, we are told, have become accustomed to the crisis. Concerns triggered by the euro crisis are now replaced by other fears. "Health" is on the top spot, followed by "Satisfaction with personal life situation" and the "protection of the environment". Secure money and growth featured lowest on the list of wants.
Deutsche Welle however, doesn't share these priorities, asserting: "What we need is a new European economic policy, a new monetary union". "The current imbalances will blow Europe apart", it adds. "The deteriorating economic outlook is just a first small pointer. But there is still time to repair the damage. But the situation must be addressed decisively. And that is what is needed right now".
Richard North 15/08/2012
Friday, 17 August 2012
One should also be aware that the president of the Bank, one Mario Draghi, is also duty bound to serve the interests of the Union, to which effect he is working with Barroso, Rompuy and Juncker, with a view to drawing up a treaty on fiscal union. Draghi, therefore, cannot be considered an independent voice, when his current priority is to develop a template for further integration.
In the years to come, it would not surprise me if we looked back on this summer as the time when the single currency passed the point of no return in its journey to obscurity.
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