The French Constitutional Court ruled that nothing bars implementation of that give-the-power-to-Brussels financial regime agreed to by finance ministers back in June.
We’ve got more proclamations and pronouncements from the eurobanksters in Frankfurt, the crisis as creator of generational schisms, an Old Blighty falling deeper into recession, Tony Blair worries about a British/European Union divorce, and the silver lining [?] in the German economic slowdown.
From Spain, we’ve got bailout promises boosting a Spanish bank stock, a n unemployment payment glitch, and promises of more grocery store raids.
We’ve got Cypriot Russian bailout hopes, the threatened flight of the wealthy French, two wealth tax stories, and a German tax cut with a difference.
French high court clears europact path
One of the two major legal challenges confronting plans for a new European order with national financial autonomy ceded to the eurocrats of Brussels and Frankfurt has been decided: France can sign the agreements.
That leaves the final legal say to a German court, which will rule later this month on whether the German president has the constitutional authority to sign agreements that cede power to a supranational financial authority.
François Hollande scored a major win when the court held the pact constitutional, thereby sparing the “socialist” the misery of a fight within his own party and the parliamentary left.
Agence France-Presse reports on the French ruling:
Following the vote Hollande “asked the government to rapidly prepare a law for the ratification” of the pact, his office said in a statement.The fiscal pact sets strict limits on governments running deficits — the so-called golden rule — and is aimed at tackling the debt crisis that has engulfed the eurozone and threatened the global economy.
Signed in March, the pact must be approved by 12 of 17 eurozone members, and France is hoping to follow Italy, Germany and others by ratifying the accord in September, ahead of it taking effect at the start of next year.
The pact requires countries with high debt to keep their structural deficits below 0.5 percent of gross domestic product or face stiff penalties.
The Constitutional Council has previously required amendments to the constitution to take account of European treaties, but it ruled that France had already made similar commitments to limit its budget deficit under the Maastricht and Lisbon treaties.
So the robed ones have had their say, and the deal’s as good as done. And once again, François Hollande follows down the same path trod by Nicolas Sarkozy.
And we’d also argue that such decisions should be left to a referendum.
Eurobank declares high bond interest ‘unacceptable’
And the euro’s here to stay, declare the folks in Frankfurt.
The European Central Bank on Thursday said the interest rates that the countries at the centre of the eurozone debt crisis are currently paying are “unacceptable” and stressed that single currency is here to stay. “Risk premia that are related to fears of the reversibility of the euro are unacceptable, and they need to be addressed in a fundamental manner. The euro is irreversible”, the ECB said in its monthly bulletin after last week’s meeting of its governing council.
The eurozone will not pull out of the current downturn quickly, the ECB also forecast. “Looking beyond the short term, the Governing Council expects the euro area economy to recover only very gradually, with growth momentum being further dampened by a number of factors. In particular, high unemployment is expected to weigh on the underlying growth momentum, which is also affected by the ongoing global slowdown. “The risks surrounding the economic outlook for the euro area continue to be on the downside”.
The ECB said the eurozone’s GDP growth was flat in the first quarter of 2012 after dropping 0.3% in the last three months of 2011. It added that economic indicators pointed to weak economic activity in the second quarter of this year and at the beginning of the third quarter, “in an environment of heightened uncertainty”. The European Central Bank also warned that any non-standard measures it may decide to adopt to combat the eurozone debt crisis can only have a temporary impact. It said, therefore, that eurozone states must accelerate structural economic reforms to restore health to their national budgets and be ready to concede sovereignty to achieve greater financial union to protect the single currency.
In other words, austerity’s here to stay.
A second ANSAmed story reports that the European Central Bank is ready to intervene to help ailing economies, but only if austerity plans are fully implemented:
The European Central Bank reiterated on Thursday that it is ready to support the bonds of eurozone states facing high borrowing costs if EU rescue funds are also being used to the same end. “Governments must stand ready to activate the EFSF/ESM (rescue funds) in the bond market when exceptional financial market circumstances and risks to financial stability exist,” the ECB said in its monthly bulletin after last week’s meeting of its governing council.
“The adherence of governments to their commitments and the fulfilment by the EFSF/ESM of their role are necessary conditions. “The Governing Council, within its mandate to maintain price stability over the medium term and in observance of its independence in determining monetary policy, may undertake outright open market operations of a size adequate to reach its objective. “Furthermore, the Governing Council may consider undertaking further non-standard monetary policy measures according to what is required to repair monetary policy transmission. Over the coming weeks, the Eurosystem will design the appropriate modalities for such policy measures”.
Eurocrisis creates intergenerational conflict
It’s pitting the young against the old, writes economics correspondent David Böcking in a commentary for Spiegel:
Intergenerational equity — measured among other things by levels of direct and hidden debts and pension entitlements — is particularly low in Southern Europe. In a 2011 study of intergenerational equity in 31 countries by the Bertelsmann Foundation, Greece came in last place. Italy, Portugal and Spain didn’t do much better, landing in 28th, 24th and 22nd place respectively. Currently, the unequal distribution of income and opportunities is particularly distinct:
- The employment market collapse has hit young Europeans much harder than older generations. In Greece and Spain more than half of those under age 25 are unemployed — twice the rate of older workers. Things are even worse in parts of southern Italy, where youth unemployment has risen above 50 percent.
- One reason for this situation is unequal employment circumstances. Older Spaniards and Italians, for example, profit from worker protection laws preventing them from getting fired that are quite strong by international comparison. But almost half of young Italians and 60 percent of young Spaniards are on temporary employment contracts and can easily lose their jobs.
- The burdens and risks of the euro bailouts are also mainly borne by young people. Ultimately, growing national debts and bailout funds worth billions will be financed through bonds that won’t be due for many years to come.
One might argue that transforming anger rightly directed at profligate investors and corrupt politicians and bureaucrats into a generational conflict is fiendishly brilliant, given that both the young and the old share a common enemy, a system that robs both of their common heritage and their hope for the future.
Britain dives deeper into recession
The country’s exports have collapsed, making recovery all the more difficult.
From the London Telegraph’s Angela Monaghan:
The trade in goods deficit jumped to £10.1bn in June from £8.4bn in May after an 8.4pc fall in exports far outpaced a 1.2pc fall in imports, the Office for National Statistics said.
Economists had forecast a far smaller rise in the goods deficit to £8.7bn.
Chris Williamson, chief economist at Markit described the data as a “huge disappointment”.
The figures will come as a major blow to the Chancellor and other policymakers who have been hoping that a renewed focus on exports will drive recovery in Britain.
Tony ‘Poodles’ Blair fears Britain will quit the E.U.
The former prime minister and archetypal neoliberal has picked up the meme that’s suddenly grown very popular in the British Press.
From New Europe:
Former British premier, Tony Blair has told the German Die Zeit that he is “Deeply worried” that the UK may leave the EU in a referendum that could be triggered by a transfer of powers from London to Brussels as the union reconfigures in response to the Eurozone crisis.
Blair said, “If more competences are transferred to the EU, then its democratic legitimacy must be built up too,” he added. “Britain must play a strong role in this. Because we need a balance between European institutions and the nation states. If this is done wrongly, we could create a political crisis that could become just as a big as the euro crisis. People will not go along with the abolishment of the nation state.”
Blair noted that calls for a tighter union would lead to “powerful political change of the EU.” He continued, “And on this point, I am deeply worried that Britain could decide by referendum to leave the whole process.”
Political insiders in Labour and the Conservative party believe that it is more likely than not, that a commitment to an in/out referendum of the EU could be in the party manifestos for the 2015 UK General Election.
What a curious line: “People will not go along with the abolishment of the nation state.”
But what is a nation state deprived of its ability to have the final say on how it spends the taxes collected from its citizens?
German slowdown could help Merkel’s agenda
The export decline noted in yesterday’s EuroWatch may have a silver lining, at least for those backing more aggressive intervention in crisis-hit countries to the south, reports Bloomberg’s Christopher Power:
“It’s obvious the exports are being affected by the problems of Europe, especially on the periphery,” says Gilles Moec, co-head of European economic research at Deutsche Bank (DB). Germany derives 50 percent of its gross domestic product from exports: The euro area is Germany’s biggest export market. “It’s another signal that no one is immune,” says Moec.
It’s scary to see Europe’s biggest economy start to slow down, since no other economy in the region can pick up the slack. Moec points out, though, that Germany’s public finances are in good order and it won’t have to go through the painful exercise of budget-slashing to make it through a downturn.
Moec’s more intriguing point is that Germany’s difficulties may make it easier for the European Central Bank to act boldly. If Germany had continued its strong pace of growth from the last two years, it would be running the risk of overheating. That would require a hawkish response from the ECB, to the detriment of Greece, Spain, Italy, Ireland, and Portugal, which need loose monetary policy to get back on their feet. With Germany’s economy slowing some, the ECB is freer to pursue its all-out rescue plan for the euro zone, a plan that probably involves aggressive purchases of sovereign bonds.
He’s makes a critical point: Crisis furthers the agenda. That, in turn, raises a legitimate question: Just how of the current mess was facilitated by well-placed people eager to see their agenda fulfilled? It’s the very first question an investigator asks: Cui bono? Who benefits?
And on to Spain. . .
Imminent bailout boosts Spanish bank stock
Nothing like the promise of a coming cash infusion to get an investor’s juices flowing.
And the promise of more money for a busted-out bank formed a merger of other busted-out banks had the buy order flowing.
From El País in Madrid:
Spanish lender Bankia, which is due this week or the next to receive a European rescue package, closed up 24 percent on Wednesday, the highest rise since it debuted on the Spanish bourse in 2011.
The gains are explained by the imminent release of the funds, designed to shore up the troubled lender, which was partly nationalized in May due to its huge exposure to Spain’s real estate market.
Bankia is expected to receive 30 billion euros from the European Financial Stability Facility to clean up its balance sheet. The government is hoping this will dispel further doubts about the solvency of the bank, which was formed after the merger of seven savings banks, including Caja Madrid.
Glitch stalls Spanish unemployment payments
Given the name of the program, there’s a certain irony that will be lost of those who’re left wondering where their next meal is coming from.
From Manuel V. Gómez of El País:
Around 200,000 of the more than five million people who are currently out of work in Spain have been left without the June payment of a 400-euro state subsidy, due to what the government has called “an accounting problem.”
Those who form part of the so-called Plan Prepara are yet to receive the funds, which should have been paid at the end of July. Participants in Plan Prepara are among the neediest in terms of state support, given that to qualify for the scheme they must have already exhausted their regular unemployment benefit, and have annual income of less than 75 percent of the minimum wage (7,696 euros). In exchange, recipients join a program aimed at getting them into the job market.
According to the Employment Ministry, the problem has arisen given that the new budget for 2012, which was approved on June 29, has now come into force. Such changes to the budget, the ministry said, cause delays to the administrative processing of payments such as Plan Prepara.
Mayor promises more grocery store raids
Like those raids featured in yesterday’s EuroWatch.
From Lourdes Lucio of El País:
The mayor of the Seville town of Marinaleda, Juan Manuel Sánchez Gordillo, promised on Wednesday a repeat of the extraordinary scenes he orchestrated the day before, when he led hundreds of members of the Andalusian Union of Workers (SAT) in robbing products from two supermarkets. The Robin Hood-style escapade was carried out, Sánchez Gordillo explained, because “someone has to do something so that families can eat.”
The politician, who has been mayor of Marinaleda for 33 years and is also a deputy in the Andalusia regional government for the left-wing grouping United Left (IU), spent Wednesday on a Seville estate that belongs to the Ministry of Defense. Sánchez Gordillo and his supporters occupied the land just over two weeks ago.
While the media was there in force, given the furor over the supermarket thefts the day before, there was no sign of the authorities, despite the fact that the interior minister, Jorge Fernández Díaz, ordered the arrest of the perpetrators of the theft.
Sánchez Gordillo did not take part in the robbery of goods at the Mercadona supermarket in Écija, but was outside the store, directing the operation with the use of a megaphone. At the same time, the general secretary of SAT, Diego Cañamero, entered a Carrefour store. Each group took around a dozen shopping carts filled with sugar, oil, milk and other staples, and left without paying.
Cyprus banks on a Russian bailout
Though they’ve still got an application pending with the Troika, the government of Cyprus is pinning a lot of its hopes on another bailout, this one from Moscow:
Cyprus is hoping for a 5 billion euros bailout package from Russia, an aide to the country’s leader said the day after President Vladimir Putin spoke to his counterpart on the Mediterranean island, as Cypriot media report today quoting The Moscow Times.
Unable to raise debt on international capital markets and heavily exposed to the financial woes of Greece, which is at the heart of the euro zone’s debt crisis, Cyprus also sees enormous volumes of transit money channelled through offshore companies set up for Russian businesses.
Cyprus is looking forward to a positive decision from Moscow regarding its appeal for aid, said Christos Christofides, director of the Cypriot president’s executive office, RIA-Novosti reported Wednesday. President Demetris Christofias, a Soviet-educated Russian speaker, held a telephone conversation with Putin on Monday, according to a statement on the Kremlin’s website. Cyprus received 2.5 billion euros of credit from Russia last year.
The question we’re left with is what conditions do the Russians want? Is there a memorandum in the works?
Some French consider an exodus
They’re the rich, doing what they do best: Dodging taxes.
Liz Alderman of the New York Times writes that President François Hollande’s proposal for a hefty tax on folks who make more than a million euros a year is prompting some of the country’s plutocrats to ponder packing up.
But is the measure simple that spoonful of sugar to make the bitter medicine of austerity for the masses go down easier?
A chill is wafting over France’s business class as Mr. Hollande, the country’s first Socialist president since François Mitterrand in the 1980s, presses a manifesto of patriotism to “pay extra tax to get the country back on its feet again.” The 75 percent tax proposal, which Parliament plans to take up in September, is ostensibly aimed at bolstering French finances as Europe’s long-running debt crisis intensifies.
But because there are relatively few people in France whose income would incur such a tax — an estimated 7,000 to 30,000 in a country of 65 million — the gains might contribute but a small fraction of the 33 billion euros in new revenue the government wants to raise next year to help balance the budget.
The French finance ministry did not respond to requests for an estimate of the revenue the tax might raise. Though the amount would be low, some analysts note that a tax hit on the rich would provide political cover for painful cuts Mr. Hollande may need to make next year in social and welfare programs that are likely to be far less popular with the rank and file.
German opposition pushes its own wealth tax
And compared to Hollande’s proposals, the German financial elite would be paying peanuts.
The opposition center-left Social Democrats and the Green Party are proposing that Germany reintroduce a wealth tax that the country eliminated in 1997. Under the proposal, a 1 percent annual tax would be applied to Germans with assets exceeding €2 million (about $2.5 million). The tax allowance would be double that figure for married couples, Norbert Walter-Borjans of the Social Democratic Party (SPD), who is finance minister for the state of North Rhine-Westphalia, said on Wednesday.
With the tax, the politician said, Germany’s wealthiest people would play a role in consolidating the country’s national budget. At only 1 percent, he added, the tax would not present a major burden on the rich. Walter-Borjans said his state, along with Rhineland-Palatinate, Baden-Württemberg and Hamburg — all governed by the SPD or Greens — planned to introduce an initiative in the Bundesrat, Germany’s upper legislative chamber representing the interests of the states, where the opposition also holds a majority of votes, after the summer recess.
The German Institute for Economic Research (DIW) think tank estimates that a wealth tax would provide an additional €11.5 billion annually for the federal budget. North Rhine-Westphalian Finance Minister Walter-Borjans says that estimate also takes into account the possible emigration of wealthy Germans to other countries. For his state alone, which is Germany’s most populous with nearly 18 million of the country’s entire population of almost 82 million, the tax could raise an addition €3.5 billion a year.
Germany votes to reduce some taxes
It’s the nature of the taxes that makes this both a social and an economic story.
Germany’s constitutional court has strengthened the rights of gay and lesbian couples, giving them a same tax benefit as heterosexual married couples.
The ruling, which came Wednesday, comes as the country is mired in an escalating debate on the status of homosexual partnerships.
The court ruled that gay couples who have entered into a “registered partnership,” the German legal phrase for relationships similar to marriage, must be exempted from the country’s land transfer tax just like straight married couples, according to a court news release.
The verdict comes as Germany’s politicians are generally debating taxation for same-sex couples.
Angela Merkel’s governing conservative Christian Democratic Union (CDU) has traditionally been against tax equality for homosexual partnerships.
But recently, 13 members of the party called for an expansion of tax rights for same-sex couples.