We got the latest bad numbers [steel, cars], another euroministerial meeting on the Spailout, a downbeat IMF forecast with a call for a euroTARP, German doubt and electioneerring, a Spanish TV jobs massacre, a pair of Italiam downgrades, a fascinating collection of stories from Denmark, and lots from Greece, including another austerity suicide, a Troika visit delay, busy cutting sessions, pension cuts for the mentally ill and nursery downsizings, and a tourism book from Merkel-land.
Another warning, from the steel industry
The ongoing economic crisis is making itself felt in Europe’s basic industries, the processors of the basic goods on which other manufacturing depends.
The steel industry fell off as demand dropped, and they’re predicting no major recovery for at least another nine months as consumption continues to decline.
From Deutsche Presse-Agentur:
The European steel industry warned Monday that the current market trough could last longer than previously forecast with steel consumption set to fall 5 per cent this year.
Releasing its latest report on the sector, the EUROFER steel industry association said it was not expecting any improvement in steel demand across the European Union until the second quarter of 2013.
“With global economic growth currently hitting a soft patch, export growth is also cooling down, despite the weaker euro,” said EUROFER director general Gordon Moffat.
“This is bad news for the manufacturing sector and for steel consumption in the EU,” he said.
A steel dependent industry declines
One major consumer of steel is car manufacturing, and Opel, Peugeot, Ford and other carmakers are continuing to decline.
From Deutsche Welle:
New registrations for cars in the European Union dropped by 2.8 percent to just over 1.2 million vehicles in June, constituting the ninth consecutive month of declining sales in the 27-nation bloc, the European Automobile Manufacturers Association (ACEA) said on Tuesday.
The month-on-month decline added to a sharp 6.8 percent fall in European car sales in the first six months of 2012, resulting in 6.64 million fewer new cars being registered compared with the same half-year period in 2011.
However, the pace of the slump in Europe’s car markets was slowing, ACEA said, as June’s registration figures had been the best in eight months.
According to the ACEA figures, markets shrank most dramatically in debt-hit eurozone countries such as Greece and Ireland. Sales there were down by more than 41 percent – in Portugal, sales dropped by 37 percent, registrations in Italy slumped by one-fifth.
Crisis meeting downgraded to teleconference
While finance ministers were supposed to meet in person to discuss the latest bailout, the Friday session originally planned as a head-to-head sitdown has been reduced to screen time.
At issue is that document integral to all eurobailouts these days, the memorandum spelling out the austerian mandate to which the latest victim, Spain, must swear fealty.
From Alvise Armellini of Deutsche Presse-Agentur:
The Eurogroup panel of eurozone finance ministers will discuss the upcoming Spanish bank rescue via teleconference and not in person, Eurogroup President Jean-Claude Juncker said in a statement Tuesday.
The Eurogroup was expected to hold talks on July 20, but until Juncker’s announcement it was unclear whether it would actually meet in Brussels and whether it would discuss other crisis matters, such as Italy’s struggle with high bond yields or bailouts for Greece and Cyprus.
Juncker said “the only item on the agenda” for Friday was “the (memorandum of understanding) for financial assistance to the Spanish banking sector.”
Ministers are expected to give their final nod to a eurozone loan of up to 100 billion euros (122.8 billion dollars), in return for strict conditions on the reform of the Spanish financial system.
IMF blames eurocrisis for global woes
So it’s not just Barack Obama, although, to be fair, the International Monetary Fund is a creation of Washington, along with its companion, the World Bank.
And the solution, the IMF says, is to fire up the printing presses with a euro version of America’s own Troubled Assets Relief Program.
From Valentina Pop of EUobserver:
The euro crisis continues to weigh down the global economy, the International Monetary Fund said Monday (16 July), putting pressure on the European Central Bank to lower its interest rate even further and issue more cheap loans to the banks.
“There is room for monetary policy in the euro area to ease further. In addition, the ECB should ensure that its monetary support is transmitted effectively across the region and should continue to provide ample liquidity support to banks under sufficiently lenient conditions,” the IMF said in its annual World Economic Outlook.
>snip<
The specific reference to the ECB is meant to increase pressure for the Frankfurt-based body to turn on the printing presses via cheap loans, low interest rates and “some form of quantitative easing”, meaning direct or indirect bond purchasing aimed at lowering governments’ borrowing costs.
More from Capital.gr:
Europe needs to adopt a massive EUR700 billion Troubled Asset Relief Program, or TARP, style policy as seen in the U.S. to shore up the region’s banks, said a senior official at the Organisation for Economic Co-operation and Development on Tuesday, Wall Street Journal reported.
“Taking the banking system problem off the table requires a massive TARP style capital injection using equity warrants which would end up costing the tax payer nothing,” said Adrian Blundell-Wignall, deputy director, financial and enterprise affairs at the Paris based think tank.
Under the U.S. Federal Deposit Insurance Corporation definition of a 5% liquidity ratio, “you need about EUR700 billion to EUR750 billion to be well capitalised. I’m saying that’s the amount that would make the financial sector sit up and take notice,” the OECD official said.
Launched during the depths of the 2008 financial crisis, the US administration set up TARP to capitalise banks which was initially estimated to cost around US$700 billion but only around US$431 billion was disbursed to banks, much of which has since been paid back. The U.S. government still holds stakes in around 350 lenders.
“The way the US handled the banking crisis is going to be the way the history books say you should do it,” said Mr. Blundell-Wignall.
Europe’s leaders have so far struggled to contain the region’s debt crisis. An agreed EUR100 billion bail out of Spain?s banks has done little to win back market confidence and yields continue to remain elevated on Spanish and Italian bonds.
Merkel plans ahead for next election
And for German voters, she says, next years elections will be all about the fate of the euro and the fate of the European Union.
From Honor Mahony of EUobserver:
Next year’s federal elections in Germany will be about Europe, said Chancellor Angela Merkel, who has spent the past two years shaping the eurozone’s answer to its debt crisis in the face of scepticism at home.
“Next year’s vote will also be about the situation in Europe and what expectations we have for Europe,” the chancellor said in an interview with public broadcaster ZDF.
She said her own personal vision of the EU was of a “stability union” that has a presence on the world stage.
“Without Europe we would no longer be able to represent our values, our ideas, our ideals together.
Another reason for Mekelian concern
While Germany has been thre economic standout during the latest round of the crisis, selling billions in no-interest bonds to investors desperate to park cash in safe havens, it’s still part of an ailing continent, and that’s beginning to sink home in the minds of the investing class.
From Andrew McCathie of Deutsche Presse-Agentur:
German investor confidence dropped in July as the eurozone debt crisis appeared to dampen the economic mood in Europe’s biggest economy, a key survey released Tuesday showed.
The Mannheim-based ZEW economic research institute said its index, which measures the mood among analysts and institutional investors, fell to minus 19.6 points this month after it posted its biggest drop in 14 years in June when it fell to minus 16.9 points.
The July fall was in line with analyst’s forecasts.
Massive downsizing at Spanish TV
This time it’s a regional network that’s the target of the austerity ax.
From euronews:
Angry workers interrupted the midday news bulletin at Valencia’s regional TV channel on Monday as RTVV became yet another example of Spain’s debt crisis.
The regional government – run by Prime Minister Mariano Rajoy’s PP party – is almost bankrupt and the channel accounts for roughly one billion euros of its debt. Now it has announced plans to save 54 million euros by laying off three quarters of the channel’s workforce – almost 1,300 people.
One worker complained: “It’s not the workers who are guilty. Those responsible are the management that over recent years got the company into this terrible mess and social disgrace.”
The network’s not universally admired, and it’s been called a self-serving power of Rajoy’s party, but that’s not the fault of workers.
And on to Italy. . .
Another downgrade for Italian institutions
Not only banks, but utilities, the postal services, and more.
And the timing’s interesting, coming just as moves toward another bailout are already underway.
But it gives the investors a rationale for making the inevitable memorandum even more extortionate.
From Deutsche Welle:
Seven of Italy’s banks have been dropped by one notch and six others have been downgraded by two notches, Moody’s Investor Service said on Monday.
Two of the country’s largest banks, Intesa SanPaolo and Unicredit, went from an A3 credit rating to a Baa2 with a negative outlook. Major utilities companies, including the country’s largest postal service Posta Italiane, energy giant Eni and energy and water services provider Acea, as well as a number of local government authorities also saw their ratings cut by Moody’s on Monday
The move comes just three days after Italy’s sovereign debt rating was reduced to Baa2 – just two notches above junk status over fears that a possible Greek euro exit and a Spanish banking collapse could drive Italy further into crisis.
“Along with the increase in the risk of sovereign bond defaults, the downgrade of Italy’s long-term ratings to Baa2 also indicates a similarly increased risk that the government might be unable to provide financial support to its banks in financial distress,” the ratings agency said in a statement.
And a downgrade from an Italian bank
The Italian bank itself, downgrading its economic forecast, a perfect companion to that rater downgrade — a duet about gape expectations.
From Agence France-Presse:
The Bank of Italy on Tuesday downgraded its official forecasts for the recession-hit economy, saying that gross domestic product (GDP) will shrink by 2.0 percent this year.
The central bank said Italy’s recovery would “depend on the cohesion shown by the European Union and on the normalisation of the financial markets.”
Implementation of the measures agreed at an EU summit last month to help vulnerable eurozone economies will be “crucial,” it added.
The Bank of Italy also said the unemployment rate would continue rising to more than 11 percent next year from 10.1 percent currently.
Prime Minister Mario Monti’s reforms will help boost the growth potential of the economy “above all in the medium term,” it added.
It praised the reforms saying they had “introduced structural changes.”
And for a change of pace, Denmark. . .
$126 billion lost in Danish housing bubble
The figures are actually in Danish kroner, since Denmark isn’t a member of the common currency eurozone.
But in any currency, the problem’s the same one confronting Spain, Ireland, and the U.S., a massive real estate bubble fueled by a Byzantine welter of speculative investor instruments.
From Politiken.DK:
Overall equity among homeowners in Denmark has dropped some DKK770billion since the housing bubble burst after 2007, with the average home owner having lost some DKK540,000 [$88,371] in positive equity, according to a Nykredit Markets analysis.
According to the calculations, based on figures from the Mortgage Council, Statistics Denmark and the central bank Nationalbanken, detached home owners have been hardest hit.
In the first quarter of this year alone, positive equity among these home owners has fallen by over DKK25,000 compared to an average for all types of housing of DKK17,000.
Danish economy, still strong and social
Denmark’s one country that’s still been able to hold onto a strong social support system, and the economy’s considered so strong that investors are willing to take a loss on their cash for parking it there.
From Christian Wienberg, Frances Schwartzkopff, and Tasneem Brogger of BloombergBusinessweek:
Plenty of central banks around the world have cut rates almost to zero. Denmark has been even bolder: On July 5 the central bank cut deposit rates to minus 0.2 percent (that’s the rate offered to banks that want to park their funds at the central bank). Earlier, in June and July, Denmark had sold two-year debt with negative yields ranging from minus 0.05 percent to minus 0.08 percent. The country is making banks and investors pay for the privilege of converting their money to kroner.
>snip<
Denmark’s economic virtues have gotten it into this peculiar situation. “This is good; we have a luxury problem,” says Jacob Graven, chief economist of Sydbank (SYDB). The economy is diversified: Denmark sells pharmaceuticals, farm products, green technology, shipping services, and more, so it’s not reliant on only one or two industries. Although unemployment has crept up to 6 percent because of trading partners’ woes, that’s far below the double-digit rates in Spain, Ireland, and Greece. Its sovereign debt, at 40 percent of gross domestic product, is less than half the average for member states of the euro area. While the country’s budget deficit this year is expected to be just over 4 percent of gross domestic product, the European Commission has estimated it will drop to 2 percent in 2013. A recent banking crisis has been limited to regional lenders, and its impact pales in comparison with the pain Spain and Ireland have undergone from their own banking travails.
One of the strongest factors in Denmark’s stability is its tax system, which taxes individuals heavily according to income. Danes, thinking they get a good deal in terms of social services, pay up. The result: Denmark’s tax burden, including sales tax and other levies, is 48.2 percent of GDP, the world’s highest rate, but its budget is sound.
In Denmark, the Left is really Left
Consider the folks at Enhedslisten, who’d abolish the military and classes.
And with such a program, they’ve got the support of one voter in nine.
From Peter Stanners of the Copenhagen Post:
If there were to be an election today, at least 12 percent of Danes would vote for Enhedslisten, a political party that hopes to abolish the military and establish a classless society.
Enhedslisten’s radical socialist ideology is hardly a secret and in its party manifesto it calls for the dismantling of the EU and a strengthening of trade unions. But yesterday’s announcement in Berlingske newspaper by one of its MPs, Per Clausen, that a revolution could happen in the next 20 years, has provoked warnings from its political opponents and allies alike.
Speaking to Berlingske, Clausen argued that the current economic crisis would help bring about the revolution.
“We can just look at what is happening in southern Europe right now. Things can also break down in Denmark through an economic collapse that will lead the population to realise that our politicians lack legitimacy. I don’t know anyone in Enhedslisten that does not believe in the revolution.”
Enhedslisten’s revolution would end the current capitalist structure by nationalising banks, closing stock exchanges, moving control of businesses into the hands of workers while also abolishing private property and equalising salaries.
And now, to Greece. . .
Another austerity suicide in Athens?
We’ve seen three stories about Monday’s suicide of a recently retired doctor, and while austerity and depression are cited as the likely causes, we’ve not seen definitive evidence.
Here’s an account from Greek Reporter’s Areti Kotseli:
A pensioner doctor in the central Greek city of Lamia jumped to his death from a windowsill of the city’s main state hospital, despite extensive efforts by family, colleagues and police to talk him out of it, Monday morning July 16.
The 64-year-old retired radiologist was seemingly visiting his mother-in-law who was a patient at the hospital when he stepped out of the window of her fifth-floor room onto a ledge shortly after 6 a.m. and threatened to jump.
Former colleagues, trying to prevent him from committing suicide, called his wife and daughter, as well as the police to the scene. Despite the combined efforts of hospital staff, family and a police negotiator who tried to convince the man not to take his own life for over two hours, he jumped, suffering an instant death.
Some yet unconfirmed sources suggested the man suffered from clinical depression, while others said that he had not received a pension since filing his retirement papers six months ago and had severe financial problems.
More here.
Troika’s visit dates in doubt
Troika minions and sundry eurocrats have been pouring over the Greek national books, in search of proof of compliance with the bailout memorandum and drawing up lists of things to cut and sell.
Their top-level bosses were scheduled to arrive 24 July for a first-hand look, but now the date’s in doubt.
From Keep Talking Greece:
While the Greek government struggles to find ways – read: austerity measures cuts – and save 11.5 billion euro for the next two years, the Troika representatives seem to take their time. While it was expected that Greece’s lenders representative would start their visit to Athens on July 24th 2012, a spokesman from the European Commission refrained on Tuesday to give exact dates.
European Commission’s spokesperson for economic and monetary affairs and the euro, Simon O’Connor, said he had no knowledge of how long the mission would stay in Athens or of when the troika’s report on Greece’s fiscal adaptation program would be completed. The Troika inspectors are set to return to Athens in the coming days, O’Connor said however.
A delay in Troika’s report would delay also the release of the bailout tranche, originally set for August. “No Troika money, no wages and pensions” is the usual blackmailing formula Greeks have been hearing since May 2010, when the country sought the aid of IMF and the EU.
Coalition draws up its designated cuts
The Troika meeting’s largely about cuts, and the coalition government headed by New Democracy Prime Minister Antonis Samaras is busy drawing up its multi-billions in cuts for submission to the Troika entourage.
From Athens News:
Finance Minister Yannis Stournaras resumed his meeting with cabinet members on Tuesday in order to finalise the proposal for 11.6bn euros in cuts.
During their meeting on Monday, Stournaras and his colleagues had not managed to fully agree on the details of the cuts that need to be made. Less than 6bn euros in cuts were agreed on, 3bn of which will be cuts in social benefits.
Following Tuesday’s meeting and after encountering resistance by some ministers to proceed with further cuts to their department budgets, Stournaras met with the prime minister ahead of their pre-planned Wednesday meeting, in order to brief him on the issues that have arised.
According to sources of newspaper To Vima, the prime minister was dissatisfied with the Cabinets’ reluctance to proceed with the necessary cuts. Samaras insists that the government needs to prove that it is fully determined to implement changes in order to restore the country’s credibility and proceed to negotiations.
A second Athens News story reports on some of the likely cuts:
Antonis Samaras has requested a listing of all the ministries’ property holdings, including those of organisations and agencies they supervise.
In a letter to Cabinet members, government secretary general Panayiotis Baltakos requested on behalf of the prime minister that the ministers make up their lists within a week.
The move aims at cutting the cost of housing state services, which for the most part are housed in rented premises owned by private concerns and could be housed in buildings owned by the state instead.
Capital.gr offers the most detailed listing of likely cuts and policy changes, with wages and pensions high on the list for the fiscal slicers.
Also proposed is a 30 percent reduction in state expenditures, massive closing of agencies, cutbacks in social support programs, increased fees for would-be immigrants, and higher municipal taxes.
One of the more interest proposals amounts to a major concession for developers, a practice widely echoed here in California.
Here’s the key excerpt:
The Interior ministry is examining other “patents”, as they have characteristically been called. Among other things, in cases of land expropriation the opportunity for people to receive a bigger building ratio, or other privileges for their remaining land or the one they are given, but always subject to environmental and other conditions for the region, rather than a compensation in cash that the municipalities cannot afford to pay.
Ekathemerini reports that the prime minister has issued an edict to all ministries: Either make the requisite cuts yourselves or I’ll do it myself:
Prime Minister Antonis Samaras has issued an ultimatum to his ministers urging them to come up with 11.5 billion euros in savings for 2013 and 2014 in line with the demands of Greece’s foreign lenders.
Should the ministers fail to deliver, the conservative leader warned, the responsibility will pass to the finance ministry and the premier who will decide where the cuts will be made.
The ultimatum also gave ministers one week to compile a list of all properties owned by their respective ministries.
The decision was made after talks Monday between Finance Minister Yannis Stournaras and cabinet colleagues failed to produce an agreement on the costcutting measures mandated by the European Union and the International Monetary Fund for the next two years.
Coalition cuts pensions for mentally ill
The target population: Psychiatric in-patients. The money saved would be diverted to clinic budgets.
From Keep Talking Greece:
Money-broke Greek Health Ministry is about to cut pensions of patients of psychiatric clinics and use the ‘saved’ money to bolster operating costs. The plan foresees the reduction of patient’s pensions on a sliding scale, with pension of 500 euros to be cut 50%, pensions of 700 euros by 70% and pensions of over 700 euro to be trimmed down by 80%.
Clinics personnel oppose the ministry’s plans saying that they’re asked to turn into revenue collectors as they will have to get the consent of these patients so that the sick health ministry puts its long arm into the income of such patients.
Open is the question what consent patients with heavy psychiatric illnesses will or could give or who will protect their rights.
Crisis hits Greek day care centers
Yet another class of the most helpless is feeling the austerian pain, along with parents desperate to hold on to jobs and burdened with the care of small children.
From Ekathemerini:
Hit by the financial crisis, many of the country’s state-run nursery day care centers are facing staff shortages while the number of children on waiting lists is growing, officials warn.
In an interview with Skai on Tuesday, president of the Confederation of Greek Municipalities (KEDE) Costas Askounis said that state funding for the country’s municipalities had been seriously reduced while the number of applications was rising. At the same time, he said, parents of children attending nurseries only pay a symbolic amount in fees.
Staff shortages are most acute at the nurseries of central Athens, Galatsi, Nea Ionia, Nea Philadelphia, Maroussi, Vyronas, Drapetsona, Kallithea, Peristeri, Dafni and Zografou.
“The municipality of Galatsi cannot meet some two thirds of the applications it receives,” mayor Kyriakos Tsiros told Skai on Tuesday.
Another creative response to crisis
With the state in near-collapse, Greek citizens are taking the lead in providing critical support for the victims of a crisis that has sent unemployment soaring.
From Ekathemerini:
A citizens’ solidarity network, based on the premise of bringing together the needy with those able to donate various basic goods, held its first distribution session on Monday in the old station house near the Larissis railway depot in central Athens.
The initiative, which is being coordinated by the City of Athens but involves volunteers, distributed food and other goods to more than 3,500 beneficiaries who had submitted their details to municipal authorities.
The list is open to individuals whose annual income does not exceed 7,000 euros and to families whose income is less than 12,000 euros. Would-be claimants must submit a copy of their tax declaration for 2010 or 2011 to secure a place on the list. The first step is to telephone the solidarity network on 15422.
On Monday hundreds visited Larissis Station but most did not have to wait in line as packages were distributed from 10 a.m. until 8 p.m.
Greek tourism registers an uptick
And guess where the tourists are coming from.
Yep, Germany.
From Reuters:
Tourism, an engine of the Greek economy, has started recovering, according to Thomas Cook Germany, a leading tour operator. ‘The booking trend runs parallel to what is in the papers,’ the company’s top executive says.
More Germans are booking holidays to Greece now that the debt-stricken country has not been in the headlines so much recently, the chief executive of a leading German tour operator said yesterday.
Tour operators and airlines in Germany had reported a slump of around a third in bookings to Greece this summer as Germans avoided the country, fearing they would not be welcomed after Chancellor Angela Merkel took a hard stance on the country’s debt woes.
Since Greece’s pro-bailout parties secured an election majority last month, bookings have picked up over the last few weeks, Thomas Cook Germany said.
New Europe has it’s own story on the German tourism boomlet, most notable for it’s headline: “It’s Acropolypse now!”
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