The depths of the Eurocrisis became more apparent with the latest unemployment numbers for the 17-nation common currency zone, the highest since the currency was created 17 years ago.
That much-heralded deal we were assured would tame the euro crisis, at least in the short term, is running in to some challenges, some political and others legal.
We’ve got lots more, including the latest refusals to modify the terms of the Greek bailout, more troubling economic news from the birthplace of democracy, hints of austerity to come in France, and more.
Legal challenges face the eurodeal in Germany
The impetus for the still-nebulous came agreement to cede more national financial sovereignty came from Berlin, but that doesn’t mean everyone in Germany’s signed on.
And now they’re challenging the legal framework in court.
From Daphne Grathwohl of Deutsche Welle:
More than 12,000 German citizens have joined “Mehr Demokratie” [“More Democracy”], the “Alliance for Constitutional Objections to the ESM and the Fiscal Pact”.
They plan to file suits with the German Constitutional Court in Karlsruhe against the instruments being deployed to save the euro. Christoph Degenhart, a Leipzig-based expert on constitutional law, and Herta Däubler-Gmelin, a former federal justice minister, are spearheading the alliance, which also includes some of Germany’s smaller political parties.
Another prominent critic is Peter Gauweiler, a parliamentary representative of the conservative Christian Social Union who has experience with lawsuits against euro bailout funds. He is fighting the bailout on two fronts: with a constitutional complaint, and with legal action against the federal government. He says, to date, parliament has not discussed the bill because important passages on the ESM are missing.
The Left party has launched a similar action against the government, and its delegates have also lodged constitutional complaints.
More on the legal campaign from Spiegel:
The German parliament had barely approved the permanent euro rescue fund and the fiscal pact on Friday when opponents of the measures filed requests for a temporary injunction with the German constitutional court. On Monday, the court announced it will hear the complaints on July 10.
The plaintiffs, who oppose Germany transferring more power to European institutions, are trying to obtain a temporary injunction against the two laws to stop them entering into force until the court has addressed the main complaints against the measures at a later date and ruled whether the laws in question are constitutional. It is highly unusual for the court to hold a hearing on requests for a temporary injunction. The fact that it is doing so is regarded as a sign of the importance of the issue.
In the runup to Friday’s vote, the Karlsruhe-based court had asked German President Joachim Gauck to refrain from signing the laws into force until it had decided on the requests for a temporary injunction. That has already delayed the start of the permanent rescue fund, the European Stability Mechanism, which was supposed to enter into operation on July 1. If the court grants a temporary injunction, it would push the start date back even futher.
Several complaints were filed with the court late on Friday after the measures were passed in the two houses of the German parliament, the Bundestag and Bundesrat. Among the plaintiffs are the parliamentary group of the left-wing Left Party, the conservative Bavarian politician Peter Gauweiler and an association called “More Democracy” which has 12,000 co-plaintiffs. Gauweiler even dispatched a courier around midnight on Friday to personally deliver his request to Karlsruhe.
Finns, Dutch raise their own objections
Their objections focus on the use of the money they cough up to buy bonds to prop up so-called secondary markets through bond purchases.
From Terhi Kinnunen of Reuters:
Finland and the Netherlands, the euro zone’s most hardline creditor states, cast the first doubts on Monday on a European summit deal designed to save Spain and Italy from being engulfed by the currency bloc’s debt crisis.
The Finnish government told parliament that Helsinki and its Dutch allies would block the euro zone’s permanent bailout fund buying bonds in secondary markets, despite an agreement among leaders’ last Friday that the fund could be activated to stabilize markets.
ESM bond buying in secondary markets would require unanimity among euro zone members and that seems unlikely because Finland and the Netherlands are against it, the Finnish government said in a report to a parliamentary committee.
That is essentially true but there is a get-out clause in the ESM’s rules which states that if the European Central Bank and European Commission feel the euro zone was under threat, then the rescue fund could act on the basis of an 85 percent majority vote to do so.
That would leave the Finns and Dutch unable to block.
Dutch Prime Minister Mark Rutte said last Friday he was not in favor of using limited rescue fund resources, which run to a maximum of 500 billion euros, to try and turn the bond market.
And then there’s a Greek court verdict
That memorandum? It’s illegal, a Greek court has ruled — specifically the provisions mandating layoffs and pay and benefits cuts for remaining state workers.
From Greek Reporter’s Areti Kotseli:
An unprecedented verdict of the political courts in Greece changes the story as we know it so far. The two memorandum laws (3833/2010 and 3845/2012) that imposed reductions in salaries, benefits, etc. of the state sector employees were found unconstitutional and inconsistent with the European Convention on Human Rights and the applicable law regarding International Employment Contracts.
It is the first such verdict that the political courts found to directly contradict the decision of the Plenary of the State Council which found memorandum cuts in salaries and benefits compatible with the Greek Constitution and the European and International law.
The court verdict outlines that the measures imposed on state employees violate the collective agreements thus breaching Articles 22 and 23 of the Greek Constitution and moreover are not combined with balancing measures, such as tax or price reductions. On the contrary, taxes have spiked, which is unacceptable, according to the verdict. Article 4 of the Greek Constitution (in regard to equality) is also violated by the above mentioned memorandum laws, as salary cuts were imposed on both high- and low-salaried personnel as well.
Now for the numbers. . .
eurozone jobless rate hits 11.1 percent
Manufacturing’s also down.
From the BBC:
A total of 17.56m people are now out of work marking the highest level since records began in 1995, according to EU statistics body Eurostat.
Meanwhile, the manufacturing Purchasing Managers’ Index (PMI), compiled by Markit, was stuck at 45.1 in June.
Any reading below 50 indicates contraction.
Joblessness in the eurozone has risen for the past 14 months.
In Spain, which has the highest unemployment rate in the 17-bloc nation, one in four people is now out of work.
The downturn in employment is reflected in the eurozone’s manufacturing sector. The closely-watched manufacturing PMI’s unchanged reading of 45.1 in June means it remains at its lowest reading for three years.
More from the Associated Press:
The highest unemployment rate across the eurozone was recorded in Spain, where 24.6 percent of people were out of work in May. Even more dramatically, 52.1 percent of the country’s youth were unemployed.
Other countries in the eurozone, particularly those in the north, are faring better.
Germany’s unemployment rate stood at only 5.6 percent. However, a raft of economic indicators in recent weeks have shown that Europe’s biggest economy is not immune to the problems in the rest of the region. Germany’s exports to other countries in the eurozone are under pressure and business confidence is waning.
Across the wider 27-country European Union, which includes non-euro countries such as Britain and Poland, unemployment edged up to 10.3 percent in May from 10.2 percent the month before.
The exceptions, all in the east
From New Europe:
The unemployment rate fell in eight member states, increased in eighteen, and remained stable in Hungary. The largest drops in unemployment, or the largest increases in employment were recorded in the Baltic states, Estonia (from 13.6% to 10.9%), Lithuania (15.7% to 13.7%) and Latvia (17.1% to 15.3%). The highest increases of the joblessness rate were registered in Greece (15.7% to 21.9%), Spain (20.9% to 24.6%) and Cyprus (7.5% to 10.8%).
Unemployment hits the young hardest
And the worst numbers are in the countries you’d suspect, Greece and Spain, but the overall total are very, very high.
Unemployment figures for Greeks under 25 years of age reached 52.1% in March, up from 42.9% the previous year, according to figures released by Eurostat.
This is the same unemployment figure reached in Spain in May, up from 45.4% the previous year.
Also in May, the EU numbered 5.517 million unemployed youths under 25, or 22.7%, of which 3.412 million, or 22.6%, are within the euro zone. This is an increase of 282,000 people in the EU-27 and of 245,000 people in the euro-zone over May of last year, where the unemployment rates were 21% and 20.5% respectively.
Still more from New Europe:
Unemployment equally affected men and women, but youth were disproportionately severely affected, with more than 5.5 million youngsters under the age of 25 unemployed in the EU, more than 3.4 million of which in the Eurozone. Total youth unemployment rate reached 22.7% in the EU and 22.6% in the Eurozone, about 2% increase compared to the last year.
The lowest rates of youth unemployment were in Germany (7.9%), Austria (8.3%) and the Netherlands (9.2%), and the highest in Greece and Spain (52.1% each).
Greek jobless rate to hit 24 percent this year
That’s the number predicted by the Greek labor confederation’s research arm.
From Greek Reporter’s Areti Kotseli:
Scientific director of the GSEE-ADEDY Institute of Labor, Professor Savvas Robolis predicts that the unemployment rate in Greece will climb to a staggering 24% by the end of this year.
As he stated on radio station “Vima 99.5,” the unemployed are expected to exceed 1,200,000 in 2012, and calculates that the non-registered unemployed, who amount to approximately 6%, will reach 1,400,000.
According to professor Robolis, the real available income of employees, what is left after taxes and cuts in wages, decreased by 50% since 2009, the year when the financial crisis broke out.
He also said that unitary labor costs have declined by 8% over the last two years and that the memorandum mandates will trigger an additional 15% reduction in the two years to come.
Greek retail sales plunge
And the biggest drops were in goods people need simply to keep their lives together, a real signal of how deep austerity is cutting.
But when you sell of lives and infrastructure to bail out investors, that’s the inevitable result.
Greece’s retail commerce returned to its southbound course in April on an annual basis after posting a brief rise in March, according to figures released on Friday by the Hellenic Statistical Authority (ELSTAT) and reported by daily Kathimerini. After the small increase in the year’s third month attributed to pre-Easter purchases, the sales volume index dropped in April by 13.5% compared to the same month in 2011. Still, it climbed 8.7% from March, as it usually does every year. In the first four months of the year retail turnover shrank by 13.2% from the same period last year. What is more remarkable is the decline in turnover at gas stations and supermarkets, which points to recession-hit households cutting back majorly on expenses and only buying the mere basics: The volume index for supermarkets dropped 8.8% annually while that of fuel stations fell 11.6%. Predictably, apparel sale volume suffered the most, going down by 27.2%.
Other food stores, not including supermarkets, saw turnover shrink by 20.5%.
Sorry, Greeks, too late for you
While the latest bailouts to Spain and Italy stick banks rather than national governments with the obligation for repayment, the Greek national government is on the hook for the tab in Greece.
And no use trying to rewrite the deal, the Greeks have been told.
From Athens News:
The Italian-Spanish solution for direct recapitalisation of banks cannot be applied to Greece at present, since the country has already signed a Memorandum of Understanding for its bailout loans, Eurogroup chairman and Luxembourg Prime Minister Jean-Claude Juncker clarified in an interview with the AMNA webTV internet service on Friday.
He noted, however, that Europe had to take into account the impact of the austerity measures, especially on low income groups, and had no right to trigger a humanitarian crisis.
And the money quote:
I believe that a strict budget must continue to be applied in Greece because Greece must definitely reform its public finances, it must improve its falling competitiveness and [correct its] weaknesses. That said, I do not overlook that living conditions, especially for those on low incomes, are making it ever more difficult to live, and all Europeans must take this situation into account. We do not have the right to provoke a humanitarian crisis in Greece.
But that won’t stop them from asking
According to Kathimerini, the government is considering to ask for the European Council recent agreement for banks to get direct funding from the European Financial Stability Facility (EFSF) to apply to Greece, too, even though the recapitalization of local lenders was agreed to be included in the state’s bailout agreement.
The issue was discussed, according to reports, during a meeting at the Prime Minister’s residence in Athens on Saturday evening, ahead of a troika visit today or Tuesday. The meeting also examined the government’s programmatic proposals that will be presented to Parliament probably from on coming Thursday, July 5.
As protothema.gr writes, the government is feverishly preparing for the meetings of the next few days, which will lay the foundations for the economic development of the country, the opportunity to renegotiate the memorandum and the ability of Greece to benefit from the significant changes in the Eurozone economic policy that resulted from the last summit in Brussels.
More voices join the No chorus
The message: It’s all there in the memorandum, so deal with it.
The European Central Bank told Greece on Monday not to waste time trying to renegotiate its international bailout as government ministers hashed out a plan for easing its punishing terms before a review by the country’s lenders.
Echoing Greece’s euro zone partners, ECB policymaker Joerg Asmussen signalled that Prime Minister Antonis Samaras was unlikely to win much leeway in imposing austerity measures demanded by the European Union and IMF under its bailout programme.
“The first priority for the new Greek government has to be getting the programme back on track,” Asmussen, an ECB Executive Board member, said in a speech in Athens. “The new government should not lose precious time looking to avoid or loosen the programme.”
Facing huge public pressure, Samaras wants more time to meet targets and to dilute the austerity measures that have helped condemn Greece to a fifth year of recession.
Ministers from the conservative-led coalition were huddled in talks on Monday to work out the plan before “troika” inspectors from the EU, ECB and IMF begin their review of Greece’s faltering progress in fiscal adjustment and reforms.
Greece gets the another billion euros
Greece received the remaining one billion euro portion of its latest bailout tranche which will provide some comfort to cash strapped state coffers, a senior government official said on Monday.
The disbursement came from the European Financial Stability Facility (EFSF), the eurozone’s temporary bailout fund, as was agreed on by finance ministers in May, Reuters reported.
“We received one billion euros and out of this we have already paid 450 million to the EFSF,” the official said on condition of anonymity.
Greek expats create their own bailout fund
And it’s based in the U.S.
From Ben Vickers of Bloomberg:
Greeks living abroad are being asked to contribute to a charity domiciled in Delaware that plans to buy up and forgive Greek government debt. Greek shipping heir Peter Nomikos aims to tap the Greek diaspora to help reduce the Greek national debt with a US-based non-profit called “Greece Debt Free” — GDF will buy debt and cancel it or otherwise use it to lower the Greek government’s burden while allowing donors a deduction on their U.S. tax payments.
The math is simple: splitting Greece’s debt pile by the number of people in the country shows they owe about 25,000 euros per head, Nomikos says. As Greek debt is changing hands well below its face value, that amount of bonds can be bought for about 3,000 euros, Nomikos told Der Spiegel. So the plan is to collect donations to buy up as much debt as possible while the price remains low.
Austerity cripples Greek firefighting
Greece has already had one major wildfire, and Spain’s been burning up, so you think the austerians would spare firefighting.
And you’d be wrong.
From Marianna Tsatsou of Greek Reporter:
In 2011, Hellenic Air Force had 12 fire helicopters while a year later, they had less than half, down to only 5. Moreover, half of the 21 Canadair aircraft used to extinguish big fires by air have not yet conducted any flights while more than 62% of the fire brigade’s vehicles have been bought more than a decade ago, adding to the inventory of those bought over two decades ago!
This is Greek fire brigade’s general image while there are even greater defiencies in firefighting personnel. The Greek state, in a bid to cover these deficiencies in several regions all over Greece, has hired firefighters, some of whom are 58 years old, who will remain on duty for five years. It is worth mentioning that the average fireman retires at the age of 56.
Needless to say, there are no organized plans to tackle big fires. A week ago, there was a big fire in the Attica region. On day two, officials decided to call fire aircraft from Ioannina (a city in the north west of Greece, far away from Attica) to put out the fire. This amounted to the Greek state spending more on fuel costs to cover the 8-hour-long trip in a region totally unknown to them.
What about their equipment? There was none available. Greek firefighters “fight the fire” without any fire helmets.
As for those Spanish fires. . .
Wildfires are destroying tens of thousands of hectares of forest in east and north-eastern Spain.
Over 1,000 firefighters are working in the regions of Valencia and Barcelona to put out the flames, but the task has been made more difficult due to strong winds and high temperatures of around 40 degrees celsius.
In Cortes de Palla in Valencia, a blaze was started on Thursday during the installation of solar panels on homes in the area. Police have arrested two people.
Authorities have evacuated 700 people living in towns and villages near the danger zones. They are being housed in temporary shelters.
The fires follow one of the driest winters in the region in 70 years.
Austerity closes in on France
With Brussels setting deficit targets, François Hollande’s honing the budget knife, and it looks like cuts in welfare benefits and more gov ernment jobs are set for the slice.
France will have to find 6-10 billion euros ($7.6-12.6 billion) this year and a massive 33 billion in 2013 to meet its European deficit targets, or risk unnerving financial markets, the state auditor told the new Socialist government on Monday.
Responding to President Francois Hollande’s request for a thorough review of state finances, the Court of Auditors – a quasi-judicial body responsible for overseeing public accounts – said a revenue shortfall was threatening deficit goals.
While in line with economists’ predictions, the figures leave Hollande with the tricky task of explaining to voters, seven weeks after he took office promising an end to austerity, that sweeping costs cuts will be inevitable after all.
The government plans tax rises on the wealthy and on companies to adjust the 2012 budget, but unpopular welfare and civil service job cuts are likely next year.
Hollande’s approval rating has already slid by seven points to around 51 percent as the public fears more economic gloom.
The City of Not-So-Much Light
Visitors to the city of the Seine will find things a little dimmer during their nocturnal strolls, and it’s all about saving energy.
From Radio France International:
Sunday 1 July will mark the start of an initiative in France to turn out the lights at night. From 1 to 6 o’clock in the morning, everything from giant neon advertisements to blinking storefront lights must be shut off in an attempt to save energy.
Illuminated Christmas trees, which can often be found in town centres in France, will also be shut off during the evening hours.
Certain light installations will be exempt from the new measures, such as can be found at once-a-year festivities, like the Cannes Film Festival and Lyon’s Festival of Lights.
The decree will first target newer installations, before progressively turning out the estimated 3.5 million neon lights that cover storefronts across France, by 2018.
Lory Waks, in charge of the project at the Ministry for Sustainable Development, hopes to eventually move to turning off the lights in office buildings, storefront windows and businesses that leave their lights on all night.
The ministry says the measure will save around 1 terawatt-hour per year, which equals out to be the electricity consumption of around 370,000 households. This could reduce CO2 emissions by 120,000 tons.