EuroWatch: The crisis rapidly accelerates


It’s simply amazing watching as the great debt monster swallows up a continent.

The cause of the crisis is really quite simple: The exponential curve of ever-increasing interest on debt, and the submission of governments to banksters who demand they get paid, regardless of the inevitably ensuing violence.

Throughout history, governments have called debt jubilees whenever the burden of accelerating interest threatened social stability, but no more.

The 0.0001 percent are grabbing whilst the grabbing’s good, no doubt fully conscious that time is short.

The only question remaining is how long the peoples of the stricken nations will allow the game to continue.

Okay, on with the show. It’s a long post today, but then there’s so very much happening, ranging from new border controls in Spain and the impending collapse of yet another government to a massive selloff of Italy’s cultural heritage.

A Tory states the obvious

British Chancellor of the Exchequer George Osborne declares even more IMF money won’t end the crisis.

Duh.

We doubt, however, that he’s willing to consider the only possible solution.

From Larry Elliott of The Guardian:

George Osborne warned Europe that the boost to the financial firepower of the International Monetary Fund would not be enough to guarantee an end to the debt crisis that has bedevilled the eurozone.

As it became clear that it would be 2013 before Britain handed over its controversial £10bn share of the global fighting fund, the chancellor backed plans for closer integration of the eurozone through common euro bonds.

“Boosting IMF resources will not be enough on its own to secure the recovery,” Osborne told the fund’s key policymaking committee. “We also need a strong and co-ordinated global policy response if we are to exit the crisis.”

The IMF was bracing itself for the judgment of the financial markets on the agreement to increase the size of its firewall by at least $430bn (£267bn). Doubts remained about whether the leading developing countries – Brazil in particular – would deliver on their pledge to increase the resources available to tackle a fresh outbreak of global turbulence.

The so-called Bric countries – Brazil, Russia, India and China – have privately agreed that they will only make a decision on how much to contribute when the G20 group of advanced and emerging economies meets in Mexico in June. Sources said the Brics wanted to see hard evidence that they would have a bigger say in the running of the IMF before making firm commitments.

Read the rest.

Euro economic tanking continues

Here’s another of those “it’s worse than we expected” stories.

Worse than they expected? Really?

Certainly not worse than we’ve been expecting, as regular readers know.

From EUbusiness:

The eurozone’s business slump deepened at a far faster pace than expected in April, suggesting the economy will stay in recession at least until the second half of the year.

Chinese factories enjoyed their best performance this year, the latest purchasing managers indexes (PMIs) also showed on Monday, but economists focused on the eurozone’s grim outlook which was worse than any projection in a Reuters poll.

The Markit PMI fell to 47.9 from 49.2 in March, a five-month low and confounding the forecast for a rise to 49.3.

Optimism from this weekend’s deal to boost the International Monetary Fund’s crisis-fighting firepower quickly evaporated and worried investors sold the euro and bought safe-haven German and US government bonds.

“Today’s dismal PMI figures clearly indicate that the eurozone economy remains in dire straits,” said Martin Van Vliet, senior economist at ING.

Read the rest.

Another statement of the obvious

Peter Coy is Bloomberg Businessweek’s economics editor, and he rightly observes that it’s investors in financial instruments, not in plants and infrastructure, who are calling the shots these days:

The Keynesian solution for Europe’s crisis is government spending to rev up economic growth. Restoring growth will generate more tax revenue, the thinking goes, so the fiscal pump-priming will eventually pay for itself. But debt makes the Keynesian fix harder to implement. Heavily indebted countries can’t spend more for fear of losing the confidence of investors.

Debt, in short, takes away countries’ fiscal wiggle room.

That’s why the European Union’s report today on rising government debt in the single-currency euro zone is troublesome. The organization announced that the government debt-to-GDP ratio increased from 85.3 percent at the end of 2010 to 87.2 percent at the end of 2011. According to Bloomberg News, the 2011 ratio was the highest since the euro was introduced in 1999.

What’s doubly scary is that it’s not just the well-known problem children of Europe like Greece that are seeing government debt rise as a share of gross domestic product. Even the Netherlands, one of the four remaining AAA-rated countries in the euro zone, had an increase in its debt-to-GDP ratio from 62.9 percent to 65.2 percent, according to the European Union.

Read the rest.

What’s missing here is simple: Questioning the whole notion that money can only be created as debt.

And in a second story, Coy writes that Germany seems to think that its own economy can go it alone, a rather ominous and frankly idiotic notion.

The forces of finance have given us a globalized economy, and the idea that, over the long run. Germany can immunize itself from the crisis is on its face an absurdity.

Economic crisis unfold in patterns, that the ripples caused by a stone into a irregularly shaped pond, and sooner or later, the reach everywhere:

Today, Germany’s Ifo Institute reported that its business climate index rose to a nine-month high, beating expectations, as it has done each month since September. That could be a sign Germany is about to pull out of a brief and shallow slump, says Christian Schulz, an economist in London for Germany’s oldest bank, Berenberg Bank. Germany’s output fell at an annual rate of 0.2 percent in the last quarter of 2011.

Strangely enough, the European financial crisis has created favorable conditions for growth in Germany. The euro currency is lower than it would be otherwise, helping trade. Capital flight into Germany is keeping interest rates extremely low. And so far, debtor nations like Greece, Ireland, and Portugal are still making payments, notes Paul De Grauwe, a professor at the London School of Economics and associate senior fellow at the Brussels-based Center for European Policy Studies.

In some respects, “it’s the best thing that could happen to Germany, this crisis,” De Grauwe says. “So why worry?”

If Germany stops worrying about the fate of Europe—and there’s no evidence yet that it has—then the rest of the continent will be in a world of trouble.

Read the rest.

Spain institutes border controls

And unlike the ones sought by Germany and France, these aren’t designed to keep out Muslims and Roma.

The Spanish controls are designed to defeat democratic protest.

From EUbusiness:

Spain will re-establish checkpoints on the border with France this month in an effort to prevent violent demonstrations during a major finance meeting in Barcelona, the government said Monday.

It will temporarily suspend the open-frontier policy it respects as a member of Europe’s free-movement Schengen treaty by setting up controls on parts of the border from April 24 to May 4.

The re-imposed border controls will coincide with a meeting of the European Central Bank on May 3.

“Reports by the state security forces have detected the possibility that anti-establishment organisations or movements could come for this meeting,” an interior ministry official told AFP.

“This measure has been adopted as a precaution in case of disturbances by any anti-establishment group,” the official added. “We are talking about acts of violence.”

The bank’s governing council at the meeting is due to discuss monetary policy at a time when Spain is a major focus of concern.

Read the rest.

A call for inclusive globalization

And it comes from the U.N. Secretary General.

From Agence France-Presse:

Globalization must be reformed to achieve social equality for the poor nations in the wake of the world financial crisis, high-level speakers said Saturday at the opening of a U.N. trade conference.

“Globalization must be inclusive … Failure at this stage undermines the legitimacy of globalization,” U.N. Secretary General Ban Ki-Moon said at the opening of the U.N. Conference on Trade and Development (UNCTAD) in Qatar.

“Economic recovery (after the crisis) has been fragile at best … Inequality has reached a new high,” Ban said in a speech delivered on his behalf by his deputy, Asha-Rose Migiro.

Ban said protests in the Arab world that have so far toppled four regimes, show that “the lack of economic equality and political freedom is not sustainable.”

Read the rest.

Note especially that last sentence.

What’s missing is the call to a new localism to counter the adverse forces of globalism, including the development of measures ranging from community gardens and local currencies to pooling talents to provide needed services.

Bailing out Greek banksters

This one’s simply shocking.

The whole “haircut” imposed on Greek banks is a farce, unlike the very real and deadly wage, pension, and social service cuts imposed on the Greek people — the cuts that have led an increasing number of Greeks to chose suicide as their only option.

From Keep Talking Greece:

After imposing mandatory losses of up to 74 percent on its own banks, Greece is ready to give it all back through a plan to recapitalize them with $64.4 billion, a bailout paid for by the taxpayers. Greeks who’ve seen their pay cut up to 30 percent or more, taxes hiked, pensions slashed and are going to be fired by the scores of thousands will get nothing, and instead are being pressed to pay back all their loans in full.

Here’s a better idea: when you can’t pay because you’ve had your pay cut, are out of work and have seen your unemployment benefit cut to $500 a month – before taxes – or are one of the 500,000 people in Greece with no income at all, make the bank an offer they can’t refuse. It works like this: tell them you want the same deal the government first forced on them, cut what you owe by three-fourths, get a 3.8 percent interest rate on the rest, and 30 years to repay it.

If that doesn’t work, tell them you want the government – through the bank which is getting all its money back anyway – to recapitalize you so that you can go out and spend again and try to reverse the recession of 21.8 percent unemployment and keep businesses open and thriving. It’s too late for the 111,000 that have already closed because of the austerity measures imposed by the government in return for $325 billion in two bailouts from the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) Troika.

Read the rest.

Greek economy gets worse

Again, no surprise, but telling nonetheless.

From Athens News:

The economy will contract by a steeper-than-expected 5 percent this year, the central bank chief said in a speech to the bank’s shareholders on Tuesday.

Last month, the bank in March had forecast a 4.5 percent contraction in the economy this year.
Bank of Greece governor Yiorgos Provopoulos said the country must stick to its reform and fiscal adjustment commitments under a bailout plan agreed with its euro zone partners and the IMF to return the economy to growth.

He also warned that the country’s membership in the eurozone was at stake if it failed to follow through on its pledges to reform, especially after national elections on May 6.

Read the rest.

More misery imposed on Greek citizens

Every day seems to bring some new harsh measure imposed on the Greek public to insure that the banksters get their money.

The latest austerity measures will hit especially hard, given that Greeks have seen their salaries slashed by a quarter.

From Keep Talking Greece:

While the incomes decrease and wages undergo more and more cuts of 20-30%, prices keep going higher and higher. As if the 40% hikes in heating oil were not enough, prices for public transport and utilities are expected to rise at 25%. Greek media report that public transport tickets will be up, the same will happen with electricity and water consumption.

Tickets for one public transport mean (bus, trolley and tram) will increase from €1.20 to €1.50, while tickets for the metro and combined for all transport means will reach €1.75 -from €1.40 today. Increases of 25% will also affect the fares for trains and Proastiakos.

Electricity bills for households and small enterprises are expected to rise with the arrival of 2013, while water bills will see hikes within 2012.

According to the Greek media, the administrations of the state-run enterprises are on ‘reorganization tour’ as dictated in the second loan agreement between Greece and its lenders: The plans include these 25% hikes, further decreases in wages and operating costs. And getting ready for privatizations.

Read the rest.

Greek wiretapping scandal deepens

in 2004 and 2005, officials of at least tow Greek wireless phone service providers were involved in monitoring the phones of at least 100 Greek politicians and civil servants.

Much mystery surrounds the case, including the identities of the perpetrators. U.S. spying agencies are among the leading suspects, though no official blame has been laid at the feet of anyone other than the cell service providers.

One of the key figures in the taps died mysteriously, though the death was ruled a suicide. Now the case is being thrown open once again.

From Ekathemerini:

A prosecutor is set to ask for the exhumation of the body of Costas Tsalikidis, the Vodafone software engineer who allegedly hung himself due to concerns about being implicated in a wiretapping scandal, sources told Kathimerini on Monday.

First instance prosecutor Haralambos Lakafosis is expected to reopen the case into the 39-year-old’s death, several months after experts suggested he may have been murdered.

A court ruled in 2006 that Tsalikidis committed suicide in March 2005 because he allegedly helped hack the phone of then-Prime Minister Costas Karamanlis and more than 100 others. But the Tsalikidis family and their legal team have challenged this version of events.

Read the rest.

Spain imposes massive education, health cuts

No wonder the Spanish government wants to keep other angry Europeans out of the country during that financial summit. They’ve already got plenty at home. And they’re about to get angrier.

From Valentina Pop of EUobserver:

Spain has approved €10 billion of spending cuts and higher fees for education and health in a bid to show investors it is getting its deficit under control.

Speaking on the eve of the cabinet decision on Friday (20 April), centre-right Prime Minister Mariano Rajoy said he does not have enough money.

“It’s necessary, imperative because at this moment there is no money to pay for public services … There’s no money because we have spent so much over the last few years. So we have to do this so that in the future we can get out of this situation,” he told national media.

Rajoy said people will have to pay “just a few euros a month” more for medication than they do now. The wealthy will pay more than the poor, while those who do not have a job and do not qualify for state aid will be exempt.

In addition, regions will be allowed to make students pay 25 percent of the cost of their studies, compared to 15 percent before.

Read the rest.

Spain: Officially back in recession

What’s amazing is that modern economist considered Spain out of recession at a time when youth unemployment was already over 50 percent.

From Daniel Woolls of the Associated Press:

Spain slipped back into recession as the country’s economy contracted for the second quarter in a row, the central bank said Monday.

A Bank of Spain monthly report recorded that economic output shrank 0.4 percent in the first quarter of the year, following a 0.3 percent decline in the last quarter of 2011. A technical recession is commonly defined as two consecutive quarters of economic contraction.

The news of recession comes as no surprise, however—the new conservative government has previously warned the economy is shrinking and forecasts it will contract 1.7 percent this year.

Prime Minister Mariano Rajoy has already pushed through a series of labor market and financial sector reforms, taken drastic deficit-reduction measures, and warned Spaniards to that things will get worse before they better. The jobless rate is nearly 23 percent and expected to rise.

Read the rest.

Massive anti-austerity protest in Prague

Another European government is on the brink of collapse, and once again austerity is the responsible culprit.

From Agence France-Presse:

Tens of thousands of protesters gathered in Prague on Saturday for an anti-government rally as the centre-right ruling coalition was teetering on the verge of collapse.

Unions, pensioners, student associations and other groups angered by austerity cuts and graft scandals teamed up for what they said would be the biggest protest yet against the cabinet of right-wing leader Petr Necas.

“I’m fed up with this government. It doesn’t do anything for ordinary people,” Jana Sizlingova, a visibly angry pensioner from Prague, told AFP as she marched to the central Wenceslas Square with other protesters.

“I’m upset with corruption, non-transparent procurement, the health system, the social system — simply, there’s nothing good about this government,” she added.

The protest comes as the cabinet, in power since mid-2010, is scrambling for a parliamentary majority following the split-up of a junior coalition party this week.

The government — comprised of Necas’ right-wing Civic Democrats, the rightist TOP 09 and the centrist Public Affairs parties — had 118 seats in the 200-seat parliament when it took office.

Read the rest.

Older Brits face massive mortgage crisis

The housing bubble that brought down the global economy is about to pounce on large numbers of Britain’s older population.

From The Independent’s Julian Knight:

More than quarter of a million interest-only borrowers could reach retirement age by the end of the decade while still owing substantial sums on their mortgage, an Independent on Sunday investigation has found.

An analysis of Financial Services Authority (FSA) figures shows that of the 150,000 interest-only mortgages a year that are due to mature in the next eight years, 60,000 are likely to be in shortfall. Of these 42,000 will be in the names of people over the age of 60 either at or close to retirement.

“There is a horrendous situation developing with tens, if not hundreds of thousands, of people getting to retirement age and being asked to stump up for a mortgage which may not have been sufficiently covered by an endowment investment or even capital growth,” says Stephen Lowe, the director of Just Retirement.

“The options will be stark: work on to repay the debt or find another way to use their home’s equity, even resorting to selling up,” Mr Lowe adds.

But many people in this position will find it hard to extend the term of their mortgage because of a recent move by banks to tighten the criteria on interest-only mortgages. In many instances providers are now restricting these products to 50 per cent loan to value.

Read the rest.

Selling and leasing the Italian historical commons

One major goal of the austerians is the capture of anything and everything that’s held in common by the citizens of Europe’s sorely compromised democracies, using debt as the lever of choice,

While much has been written about the sell-off of the Greek commons, the same process has been unfolding more quietly in Italy.

From Fiona Ehlers of Spiegel:

Since Rome radically cut its cultural budget and leaned on regional governments to make significant cuts of their own, provinces and cities have been plugging the holes in their budgets by selling off government-owned properties, including monasteries, barracks and Etruscan villas, and turning over the usage rights to private investors. They call it cultural sponsoring, an area in which Italy has long lagged behind the rest of Europe.

Culture is Italy’s natural resource, almost like oil for the Middle East. It is home to 44 UNESCO World Heritage sites, about 5,000 museums and 60,000 archeological sites, more than any other country in the world. But Italy’s treasures are not being kept up. Under former Prime Minister Silvio Berlusconi, the government’s cultural budget shrank by a third within three years. His finance minister defended the cuts by saying: “I don’t know what all the fuss is about. After all, you can’t eat culture.”

Today only €1.4 billion ($1.86 billion) is devoted to culture — less than 0.2 percent of the national budget. Author Umberto Eco calls it the “anorexia of culture.” It has been the Italian reality for years, and now Prime Minister Mario Monti is seeking to limit the damage.

>snip<

Venice has been something of a pioneer when it comes to cultural sponsoring. Companies in the luxury goods sector hope to use the city to polish their images, with fashion brand Diesel is reportedly paying for restoration of the Rialto Bridge. The Doge’s Palace and the Bridge of Sighs are draped year-round with giant panels covered with advertisements for banks and fashion retailers, like Bulgari and Guess. The city is pleased that the French luxury goods maker and art collector François Pinault built his own museum and that Miuccia Prada is exhibiting her collection in her palace on the Canal Grande. Venice is €400 million in debt, and most of its subsidies from Rome are tied up in the MOSE dam project, which will cost at least €5 billion and is intended to protect the city from floods.

But the Venetians began protesting when the Benetton Group acquired a railroad building and saw its bid approved to transform the Fondaco dei Tedesci, the old trade mission for German merchants like the Fugger family, into a giant shopping center designed by the architect Rem Koolhaas. Now citizens’ initiatives are criticizing the commercialization of the public cultural heritage and want to prevent the city from being turned into a commercialized version of its old self.

Read the rest.

A Brussels move to tighten control

Essential to the austerian agenda is centralization of control, stripping power from localities and bringing it back to a center, where it’s concentrated in ever-fewer hands.

In that light consider this from euobserver’s Andrew Rettman:

Ideas kicking around in a reflection group of select EU foreign ministers include merging the roles of the EU Council and European Commission presidents.

A senior EU source told this website following a meeting of the club in the Val Duchesse stately home in Brussels on Thursday (19 April) that the new supremo would have more power than either Herman Van Rompuy or Jose Manuel Barroso do today but also more “democratic legitimacy” because he or she would be elected by MEPs.

In other reforms, the new figure would “streamline” the European Commission into a two-tier structure.

Every EU country would still have its own commissioner with their own vote in the college of 27 top officials. But as in some national set-ups, some commissioners would have more than one dossier while others would be the equivalent of ministers without portfolio.

The new super-president would also chair General Affairs Councils (GACs) – monthly meetings of foreign ministers which discuss internal Union affairs.

Read the rest.

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