Eurocrash: a war of nerves
Friday 22 March 2013
In an unprecedented move, Handelsblatt is running a live blog as its lead item, dedicated to the Cyprus crisis. The fate of the country, it says, is "on a knife edge", the rescue a "war of nerves". It's like a poker game, says the paper. At the table: Cyprus, the euro countries, the ECB and Russia. But in the end it's probably not about who wins, but who loses.
The eurogroup has made it clear that it will not accept Nicosia's "Plan B", and its so-called "solidarity fund". The Cypriot parliament has adjourned, and a government spokesman has said, "the next few hours will decide the fate of Cyprus".
If nothing changes, says FDP Bundestag member Frank Schäffler, "the unification of Europe will be destroyed". He is right in the sense that the "colleagues" have far more to lose than Cyprus. This is a huge game of "chicken". Who will swerve first?
Die Welt thinks Cyprus will be first. It looks more and more as if it will slide into national bankruptcy, it says. For the eurozone, the consequences would probably be controlled. On the island, however, chaos would erupt within days.
But I think the paper is being a little optimistic. There are over a million people on the island - three times the population of Iceland. The EU is not going to be able to walk away from economic chaos, and continue as before, business as usual. Banking - as we all know - relies on trust, and reputation. But so does government. The reputational risk to the EU is as great as any physical effects, and the prospect on the second-largest economy on earth being unable to solve the problems of a small island nation is one that will have massive ramifications. Die Welt says that Cyprus, after bankruptcy, would have no other choice than to print its own money. The departure from the eurozone would be sealed. But the country would have to formally announce its withdrawal from the EU, because leaving the euro is not in the European Treaties. The damage that would cause to the psyche of the EU would be incalculable. However, the trauma dopes cut both ways. Even if the EU takes a trouncing, Cyprus can still get hurt. And, if Berliner Zeitung reads the runes correctly, the Cypriot government is not getting it all its own way. It has been accused of a devious strategy, playing Moscow and Brussels off against each other. But now, says the paper, the strategy has failed. Russia does not want to play the saviour, and the euro partners resent the game playing. With their "irresponsible act", says BZ, the government in Nicosia has not strengthened its bargaining position. "This is perhaps the only good thing about the disaster of the last few days". But this seems to be far from the only "irresponsible act". From the Deutsche Wirtschafts Nachrichten emerges the news that as much as €4.5 billion was withdrawn from Cypriot banks and taken out of the country in the week before the announcement of the compulsory levy. Overall, since the beginning of the year, €20 billion has been "invested abroad". In Germany, they are applauding the belated move by the ECB to impose massive restrictions on the movement of capital from Cyprus. "After the stupidest economic decision recently to levy a tax on all Cypriot savers, says Gustav Horn, Director of the Institute of Macroeconomic Research, "the financial system is once again on the brink". For that reason, the temporary introduction of capital controls is a "well-justified emergency measure", he says. And the emergency continues. At the end of the day, a dramatic day by some accounts, there is no a solution, but there is another package on the table. The compulsory levy is back, with a high rate - as much as 15 percent on balances of more than €100,000 euros. And with that, the Cyprus crisis lives to see the next day. COMMENT: CYPRUS COMBINED THREAD Richard North 22/03/2013 |
Energy: the fast approaching crisis
Friday 22 March 2013
 I do not think we could have made it clearer for longer that this crisis was coming. It was predictable and it was predicted, and now galloping down the high street, ready to afflict us all. Rarely have we seen such a serious, collective failure of policy, across the board, encompassing politicians of all colours. When we end up shivering in the dark, it will be entirely due to the incompetence of our leaders, with the complicity of our media which, despite its preening and posturing, has never properly held them to account. We have been governed by fools, in the company of charlatans And there are no excuses. They got it wrong. COMMENT THREAD Richard North 22/03/2013 |
EU regulation: the sledgehammer to miss the nut
Friday 22 March 2013
 Most of us are familiar with the EU's waste electrical and electronic equipment (WEE) directive, aimed, or so they say, at reducing the quantity of electrical and electronic waste produced, and to promote reuse, recycling and other forms of recovery.One wonders, though, whether this regulation is not a little misplaced, when – according to an intriguing piece in Saarbrücker Zeitung, much of the equipment would not need to be discarded, if it wasn't for the deliberate strategies of consumer goods manufacturers. The paper rehearses a familiar scene: the warranty expires and the machine breaks down. Everyone has experienced it but consumer experts believe that this is not accidental. They suspect there is a system to this, in order to force customers to buy new products. Jocularly, I have many times suggested that certain equipment is fitted with a "self-destruct" chip, programmed to make an appliance break down the moment the warranty ends. And now, a Green parliamentary group commissioned study effectively conforms the suspicion that things lasted longer in the past. Whether printers, headphones, washing machines, coffee machines or electric toothbrushes, manufacturers build weaknesses into the designs and use materials of poor quality to ensure that their products break or wear out faster. The authors of the report estimate that artificially reducing the usable life of equipment could cost Germans as much as €137 billion, assuming that households spend about a tenth of its budget for wear-prone devices. The existence of this scam was demonstrated in one type of computer printer. The manufacturer had incorporated a counter and a system to cripple the machine after a certain number of pages had been printed. After resetting the counter, the printer worked perfectly again. Electric toothbrushes were another example. They often contain batteries that cannot be replaced and the charging function is rapidly exhausted. The device must be discarded and a new one purchased. With laptop computers, the researchers found that housings and built-in components were often glued, making repairs so difficult and expensive that they were largely uneconomic or impossible. Headphones are yet another example. Cable breaks due to inferior workmanship are now common under normal use, to the extent that they have become the norm. Washing machines suffer broken heaters because of fatigue, which is now the most common cause of breakdown, the frequency of that defect having risen significantly in recent years. Rigging spares availability is also practised. For instance, door handles for appliances are often not available separately; when they break, the customer has to buy the whole door. Zippers, shoes, textiles, office chairs and many other consumer items are designed not to be capable of economic repair. My particular bête noir is electric kettles (pictured). Heating elements seem to last no time at all and cannot be replaced – even if spares were available, which they are not. Consumers, therefore, are forced to replace otherwise perfectly good kettles. And the point that the Greens make – rightly for once – is that this planned obsolescence creates huge piles of unnecessary rubbish. However, where we depart from the Greens is in suggesting that, rather than pursuing laws to deal with the discarded product, it might be better to address this issue. Doubling the average life of consumer products would, perforce, halve the waste. The Greens are calling for clear guidelines "for the reparability and interchangeability of parts", but another strategy would be to devise statutory minima for warranties. For most products, it would be relatively simple to ascertain a reasonable life, and if manufacturers were obliged to replace short-life machines, free of charge, we might see a change of attitude. Unspoken, but nonetheless implied, is a rebuke to those who argue for light-touch regulation. We all have our stories to tell, and in addition to the kettle sage, I recall having to spend several hundred pounds replacing an undamaged windscreen wiper assembly, simply because a small but vital rubber grommet had perished. Then there was the computer monitor which failed because a simple component overheated, but which cost more to replace than the cost of a new monitor. When I took it to a specialist in the hope of repair, he guessed what was wrong, before even opening it up. As always, therefore, the corporates rob you blind. Slick PR presents them as the consumer friend, but their ultimate objective is to take as much money from us as they possibly can, in return for as little as the market will allow. Where price competition is strong, they simply find other ways of rigging the market. Between them and us stand the regulators, but it is our misfortune that we are saddled with the EU as a regulatory body. It seems to have a genius for making the wrong sort of regulation, to cover the wrong contingencies. Theirs is the doctrine of the "sledgehammer to miss the nut", so that we end up paying for the regulatory costs as well as being cheated by our suppliers. Leaving the EU would not guarantee us sensible (or even better) regulation, but at least it would enable us to try a different tack. Richard North 22/03/2013 |
Eurocrash: the irrelevance of the budget
Thursday 21 March 2013
 Part of that is simply a measure of George Osborne. I have never been able to take him seriously as a chancellor and, on the basis of his current performance, my cynicism is perfectly justified. He never looked as if he was going to get a grip on the economy and, with debt spiralling out of control, there is no indication that he ever will. The other part rests with a position of the United Kingdom, discordant and fractured, as a satrapy of the European Union, where so much of our fate depends not upon the actions of our own politicians, but on events elsewhere. Currently, the situation in Cyprus has potentially a greater impact on our wellbeing than the mouthings of the vacuous Osbone. The very event of the budget, however – and this one in particular - highlights the failings of our system of government, and its inherent lack of democracy. Here we have a coalition government, for which no one voted and which holds office without an electoral mandate. It is represented by an appointed chancellor who on the day stood up to tell me (and my fellow citizens) what I would pay his government by way of taxes and other charges, irrespective of whether I approve, or can even afford to pay. This is many things, but it is not democracy. It does not even bear any semblance to democracy, and will not until the people of Britain – like the people of Cyprus – stand in the streets with "no" painted on the palms of their hands, and mean it. But then, when the people in this instance, do take a stand, the bully-boys move in. With an impasse over the so-called "rescue" (others call it theft), the European Central Bank is telling Nicosia it has until Monday to agree a bailout with the EU and IMF. Failing that, it will cut off funding from the "Emergency Liquidity Assistance" (ELA), an ultimatum which, if enforced, could see the island's banks driven into bankruptcy, crashing the local economy and causing untold misery. For the ordinary citizens of Cyprus – and the many thousands of British and other expats – this must be both confusing and alarming. Events seem to be spiralling out of control and they are the flotsam cast on the beach by the storm. In fact, though, they are more powerful than they think. Already, they have stopped one attempt at grand larceny, and while the big brave ECB might be throwing its weight about from the comfort of its air conditioned offices in Frankfurt, it knows full well that if Cyprus goes down, the shock waves will reverberate around the world, causing untold damage to the EU's single currency. Much of the bully-boy tactic, therefore, is bluff. Something of that comes over in the latest piece from Reuters, which talks of eurozone officials acknowledging that they are "in a mess" over Cyprus, and discussed imposing capital controls to insulate the region from a possible collapse of the Cypriot economy. That, in itself, would be a colossal admission of failure. It would breach one of the core principle of the EU treaties – the free movement of capital. Whatever the hurt to the people of Cyprus, the damage to the eurozone would be far greater. Which external investors are going to leave their money in peripheral euro countries, when there is a risk of having their funds frozen? And, while the markets appeared sanguine about the collapse of the Cypriot economy – which, after all, is only worth about €17 billion a year – they will be less happy about the prospect of capital flight from Italy and Spain. That is where the real risk lies. No sooner, therefore, did we get the blood-curdling threats from the ECB, then Spiegel announced a new deal in the making. More details come from Die Zeit. The political parties, it seems, have agreed on the formation of a fund to rescue the island from bankruptcy. This is a "solidarity fund", comprising a pooling of assets from pension funds and the Church, with the idea of the levy discarded completely - or maybe just applying to larger (€100,000-plus) accounts. On this basis, the people have prevailed, from which there are important lessons. Firstly, our rulers cannot be trusted to properly manage their respective economies and, secondly, when push comes to shove, the people have to take to the streets to put them in their place. Thirdly, when they do, the politicians cave in. In Britain, we are very far from sorting out our own, but anyone who believes that the economy here is any better managed than it was in Cyprus is really not of this world. So, where Cyprus leads, we will undoubtedly be following. If nothing else, arithmetic is on our side. There are more of us than there are of them. COMMENT: CYPRUS COMBINED THREAD Richard North 21/03/2013 |
Media: more "accuracy" from the Mail
Thursday 21 March 2013
 Witnesses report that the first Super Puma helicopter landed smoothly on the snowy Maifeld. Shortly thereafter, the second Puma landed at a distance of about 30 meters. The pilot had waited until the whirling snow had settled. The third pilot, flying the Eurocopter, had apparently not as much patience. His aircraft crashed into the still-rotating blades of the first Puma. This, however, is translated by the Daily Mail into a crash between two Puma helicopters - each with 25 police officers in them - even though the photographic record clearly shows one of the stricken machines to be a very much smaller Eurocopter. This brings us back again to Leveson telling us that mainstream journalists have "a powerful reputation for accuracy" while bloggers and tweeters were "no more than electronic versions of pub gossip". Once again, though, the Mail offering is another powerful reminder that you simply cannot take anything the legacy media tells you at face value. At the very least, you need to triangulate, referring to independent sources, before an account can be accepted. Then, one has to observe, if a newspaper cannot even get a simple account of an accident right, what reliance can be placed on accounts of more complex events, where technical issues are involved, and a degree of understanding is required?
Sadly, the answer is all too obvious. Nothing, but nothing should be entirely trusted, not blogs (including this one), not tweets and most certainly not the legacy media.
COMMENT THREAD Richard North 21/03/2013 |
Eurocrash: "all the mistakes that were there to make"
Thursday 21 March 2013
 Nevertheless, the world is full of people wise after the event, and one would never take Russian politicians at face value. They are hardly paragons of virtue. However, even the venerable Handelsblattis counting the mistakes. The cardinal error, it says, was the intended compulsory levy on deposits of less than €100,000. This error is attributed partly to German Finance Minister Wolfgang Schäuble, who called for Cypriots to make personal contributions to the bailout, totalling €5.8 billion, but left it open as to how the money should be collected. It was then Cypriot President Nikos Anastasiades who proposed charging depositors with less than €100,000. By this means, we are told, he protected higher level depositors, but was thus seen as penalising small savers. There may, though, have been more to this than meets the eye. Doubtless, a large number of offshore "investors" place their cash via resident nominees, disguising their true origin. And there has been some suggestion that they use multiple accounts, keeping each deposit below the €100,000 level in order to take advantage of the deposit guarantee scheme. Whatever the real reasoning, the blame-game is in full spate, along with the usual crop of statements of the obvious. Says Berenberg chief economist, Holger Schmieding: "The real Achilles heel of monetary union is that it is not yet sufficiently well-established for there to be confidence in the future of the euro". You can see why this man is a chief economist. One is not sure quite how Cyprus could leave Cyprus but, in the world of the Guardian, I suppose anything is possible. There again, she might just be referring to Cyprus leaving the euro, in which case, I wish I could get paid for writing that "this would have implications for the EU". You have to be a real expert to work that one out. Nevertheless, Moore too thinks it all a "fiasco", and when the europhile luvvies in this newspaper allow that sort of thing to be said, we are at last getting somewhere. Closer to the ground, Kurt Kister comments for Sueddeutsche.de, telling us that, despite the apocalyptic scenarios, a Cypriot bankruptcy is quite unlikely. There will be a kind of bridging solution, he says. Hardly anyone in Brussels, Berlin, Paris and Nicosia itself has a real interest in making Cyprus leave the euro or even the EU. So you will probably find a compromise, with perhaps even loans from Russia or elsewhere, says Kister. For all the pyrotechnics, that is probably the truth of it. A ten billion euro loan, and change, does not threaten "Europe". The situation will be resolved. But things will never be quite the same again. COMMENT: CYPRUS COMBINED THREAD Richard North 21/03/2013 |
Media: freedom of the press is undeserved
Wednesday 20 March 2013
 Many, including Jenkins, write about the importance of investigative journalism, although that argument is much overcooked. Newspapers themselves have slashed editorial staffing levels, and massively increased workloads, to the extent that this form of journalism is a shadow of what it once was. What the government has done or proposes to do is nothing compared with what the newspapers have done to themselves. This aside, the main purpose of newspapers is to provide news - particularly on what our governments are doing. The essence of a supposed democracy is that we should be informed about such things, good and bad, routine and exceptional, interesting and boring. On the other hand, if the newspapers don't report the news, or miss out on hugely important issues, then it is fair to ask why there should be such a thing as "freedom of the press". If it is, as it is turning out to be, freedom to peddle soft porn, celebrity gossip, the political soap opera, the lurid, the exceptional and the bizarre – all in the interests of maximising advertising revenue - then that freedom isn't worth having. For all their bleating, newspapers have no right to special treatment or privileges. And here we confront reality. For the last two days (Monday and Tuesday), agriculture ministers from the 27 EU members states have been meeting in Brussels to hammer out a "common position" on CAP "reform". And what happened is important on several levels. Firstly, still after all these years, CAP spending is the largest single component of the EU budget, amounting to 40 percent of expenditure. Secondly, the policy has a major effect on our countryside, its health, its economy and its visual amenity. Thirdly, Britain always tends to do badly out of the negotiations, and we have our new man out there – Owen Paterson - trying to make the best of it. Those reasons and many more suggest that the press should be following the issues and reporting in detail. But, unless I have missed something, I cannot find a single report of the meetings in the current online editions in any of the major British newspapers. Away from the specialist farmig media, one ends up with the Irish press or the likes of theRheinische Post in Germany before one finds a simple report of the proceedings. Bluntly, the performance of the British media on this and so many other issues is a disgrace. The industry is falling down on its most basic tasks, failing to perform the core functions for which it is supposed to exist. It deserves no favours from us. COMMENT THREAD Richard North 20/03/2013 |
Climate change: look out the window
Wednesday 20 March 2013
The wuzzies are getting seriously upset about the removal of explicit references to global warming from the national curriculum, up to the age of 14. The loss-making Guardian, exhibiting its usual lack of perspective, goes so far as to call this a "betrayal".
Meanwhile, on the day of the Spring equinox, we gaze upon a white-clad world, for the second time this week, as the global warming descends from the Heavens. So who would want to be a teacher preaching about global warming in this weather? They have enough problems as it is without trying to explain to street-wise kids that the planet is heating up.
Better to let sleeping snow lie.
COMMENT THREAD Richard North 20/03/2013 |
Friday, 22 March 2013
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