Eurocrash: "no German money for bankrupt states" Thursday 2 August 2012  The picture shows the bank president last March being presented with an 1871 Prussianpickelhaube, as "a reminder of strict Prussian discipline against inflation". If he does not play ball, the paper wants its helmet back. This lead item in a popular tabloid illustrates once again the deteriorating sentiment in Germany, where the euro has completely lost its shine. Bild also notes that Italy and Spain will need €1 trillion new money to cover ongoing costs up to 2014, and will have to sell government bonds to cover the debt. But, it says, ordinary investors like banks and insurance companies no longer trust the paper – hence the pressure for the ECB to step in. But Germany would have to cover 27 percent of the debt, and Socialist party general secretary, Alexander Dobrindt is recruited to say that if the ECB provides the money, it threatens the 70-year inflation record. Nevertheless, from the more sober Handelsblatt, we learn that Draghi is to propose massive bond purchasing by the ECB, followed by the ESM when it starts operating, all at a fixed long-term interest rate. The ECB has already "invested" €211 billion in bonds from failing eurozone countries, which hasBundesbank president, Jens Weidmann, stepping in to counter today's agenda, saying that ECB's independence "requires it to respect and not overstep its own mandate". This move puts Germany at odds with the US, Britain and the ailing southern states, which are argue for a massive intervention by the ECB. Strong countries in central and northern Europe, such as Germany, the Netherlands and Finland, are opposed to the idea, but Handelsblatt reminds us that the ultimate decision must wait until the Karlsruhe judgement on 12 September. Drahgi and his council, therefore, remain limited as to what they can do, reinforcing yet again the theatrical aspects of this drama, where talk rather than action is the dominant activity. COMMENT THREAD Richard North 02/08/2012 |
EU payments: the bacon buttie test Thursday 2 August 2012  The government's Pink Book for this year has been published, detailing in 280 scintillating pages the UK balance of payment figures.The document has special interest as it sets out the amount we pay to the EU, by way of membership contributions, with the last eleven year's gross and net payments shown (see below). The last published figure (2011) shows us putting £19.2 billion into the kitty, with a net payment of £10.8 billion. The Wail is already on to this, telling us that we are now sending to Brussels a "whopping £53 million per day", which is a useful propaganda figure. The paper also tells us that the 2010 bill was £18.2billion, making the £1 billion increase "an inflation-busting five per cent rise". It also means that every Briton is contributing £300 a year to Brussels. Earlier comparisons are also interesting. In 2001, we were paying £11.1 billion while out net figure was just over £3 billion. The implementation of Blair's rebate surrender thus means that our net payments have increased more than threefold.  Perversely, while we deplore the £9 billion spending on the limpiks, for the price of our current EU gross contribution,we could pay for two of these sports-fests every year. More importantly, over the last eleven years, where gross payments total £172.7 billion, we could have bought enough bacon butties to reach 16 million miles, circumnavigating the earth nearly 700 times or – if you prefer – travelling to the moon and back 34 times. Compared with what we are actually getting, there can be little argument about what would constitute the best value. COMMENT THREAD Richard North 02/08/2012 |
Eurocrash: an accelerating timetable Wednesday 1 August 2012  Thus, says Reuters, the relatively relaxed timescale is being ramped up. Officials, we are told, are to finalise plans for "uber-watchdog" by September. This is the EU banking supervisor and they are talking about this operation getting the power to order the closure of any lending banks that get into trouble. The plan remains subject to intense debate between the ECB, the EU Commission and member states, but officials and policymakers are telling Reuters that they have a framework of how an ECB-sponsored uber-watchdog could work. Originally, the idea was to rein in the eurozone's 25 top banks but, says one official: "If you have something [just] for 25 banks, you do not address the issue". So the net widens to cover all banks, and in addition, the new unit is to take over as supreme regulator. This "blueprint" is central to building a banking union but, although Reuters makes no reference to it, there is not way this can fly without treaty amendments. This is especially so as the supervisory powers also unlock the possibility of direct aid to banks from the ESM. And that most certainly is in new treaty territory. In what might be seen as a snub to the German, there is a proposal being aired to locate this new agency away from Frankfurt. Moving it away from Germany's financial capital, home to the ECB, could help win broad backing, but will add to German suspicions that they are being rolled over. That ECB President Mario Draghi seems to approve of this new arrangement will not soothe theBundesbank worries, and the final word may rest with Karlsruhe. But the fact that the ideas are being publicly aired does suggest that the pace of change is speeding up. COMMENT THREAD Richard North 01/08/2012 |
Olympics: money for hubris Wednesday 1 August 2012  One should draw a veil over the source of many of these "overblown warnings", but also note that the effects observed are entirely predictable, commonly affecting Olympic venues throughout the world. A very adequate analysis of this can be found in The Daily Beast and there is no value in reinventing the wheel here. Among the gems is the observation that the impact on tourism during an Olympic year for a host city is not much more than negligible; often it is negative. In 1996 in Georgia, home state of host city Atlanta, hotel occupancy rates fell from 73 percent in the previous year to 68 percent. Sydney 2000 saw hotel occupancy fall steadily as the Games approached, from 83 percent in March to 68 percent in July and August, before a modest recovery to 80 percent during the Games themselves. The European Tour Operators Association (ETOA) established that Peking in 2008 recorded a drop of 30 percent in tourism during the July of the Olympic year compared with the same month in 2007. There was five percent decline year-on-year for August when the games were taking place, and 25 percent below in the following months through to December. The ETOA points to a rarely mentioned consequence of hosting the Olympics: "Olympic visitors effectively scare other visitors away. Regular tourists assume that congestion and increased prices are a feature of mega-events". With a cost of well over £9 billion, this works out at roughly £30 million each for the 302 events – four times the original budget. It was never going to be the case that the overall economic impact was going to be positive. Despite the hubris of vacuous politicians, taxpayers in general and Londoners in particular are going to be paying off the bills for decades to come. The important thing though is that this does not take account of the opportunity costs. As we watch India struggling to recover after two days of blackouts, one might ask how much electricity generation capacity could have been bought with £9 billion – and how much it is going to cost the nation when our lights go out. COMMENT THREAD Richard North 01/08/2012 |
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