The German chancellor presses harder for a New European Order with a little help from a French friend, but her own country may be a major obstacle — and Germany’s latest economic numbers are getting worse as Third World marketing comes to Europe.
From Spain, the latest bailout numbers, the profits of drug subsidy cuts, and woes for a royal, and Britain’s on track to fail its deficit targets.
Drive for ‘more Europe’ intensifies
Conservative German Chancellor Angela Merkel, once so worried about the loss of then-French President Nicolas Sarkozy that she offered to come to France to help him campaign against Socialist [sic] challenger François Hollande. Has not become Hollande’s BFF.
The pair are united in their push for a new European Union constitution that would strip member states of much of their autonomy, all in the name of saving the euro.
Rainer Buergin of Reuters reports on the latest display of Franco-German cordiality:
Germany and France agreed to drive ahead measures on closer European integration in a renewed show of unity by the region’s two biggest economies to fix the crisis in the euro zone.
German Finance Minister Wolfgang Schaeuble, speaking after talks in Berlin today with his French counterpart, Pierre Moscovici, said the two countries will create a working group to advance European Union cooperation on banking union, fiscal union and the strengthening of monetary union.
“We’re having to deal with a phase of weakening growth in the global economy but also in Europe,” Schaeuble told reporters. “We want to take joint decisions” to counter that. French President Francois Hollande said later in Paris that Franco-German ties are key to Europe’s reorientation.
The common French-German action signals a turnaround in relations after Hollande led a revolt at a June summit against Chancellor Angela Merkel’s austerity-first doctrine for combating the financial crisis. It builds on a visit to Berlin by Hollande last week when he and Merkel agreed to stand behind the Greek government as it strives to overhaul its economy.
Merkel’s draft constitution plans take shape
But just how ready are other countries to sign on remains an open question.
Chancellor Angela Merkel’s plans for a new treaty governing the European Union are becoming more concrete. SPIEGEL has learned that the German leader wants the EU to begin working on a draft this year, with the aim of providing Brussels with greater power to monitor budgets. But many countries are deeply opposed to the idea.
Germany is pushing for a new treaty governing the construction of the European Union, and it is calling for a convention to draft the pact to be convened before the end of the year. The treaty would pave the way for deeper European integration and would create a new legal foundation for the bloc. Chancellor Angela Merkel’s European Union policy adviser, Nikolaus Meyer-Landrut, has expressed this desire in discussions with high-level EU officials in Brussels, SPIEGEL has learned.
A date for the beginning of the convention is expected to be fixed at an EU summit in December. Merkel has been pushing for some time now to complement the recently approved fiscal pact, which harmonizes budget policies within 25 of the EU’s 27 countries, with a political union. Germany would like to see, for example, a legal basis that would give the European Court of Justice the jurisdiction to monitor the budgets of member states and to punish deficit offenders.
So far, though, the German proposal has found few supporters in the other EU member states. During a meeting of the so-called Future Group, an informal gathering of 10 foreign ministers from EU countries, the majority opposed a call by German Foreign Minister Guido Westerwelle for a new treaty convention. Other countries, including Ireland, do not want to take the risk of a national referendum, which a new EU treaty would entail in some member states. Poland, a close partner of Berlin, also believes there is currently little chance of finding a compromise among the 27 member states.
When Merkel previously brought up the subject during a December EU summit meeting, many people reacted with indignation. Initially, the other EU countries were unwilling to go along with the calls from Merkel and then-French President Nicolas Sarkozy for automatic sanctions for repeat offenders of budget rules. In the end, the Germans and French found a common position, saying they would push forward with a new EU treaty — either with the entire bloc or with the 17 members of the euro zone if other countries were unwilling to go along with it.
And another take from The Guardian’s Hans Kundnani:
Supporters of “more Europe”, such as Jürgen Habermas, would use the process to argue for changes that could overcome the limitations set by the courts on debt mutualisation. Their opponents would see it as a chance to block further European integration.
Even with Merkel’s plan to accelerate the timetable for a new treaty, there is a big question mark over whether an as yet undefined form of political union can be agreed quickly enough to save the euro. Just as Germany has sought to impose its economic preferences on the rest of the eurozone, it is now also likely to seek to impose its political preferences, based on the lessons it has drawn from its own history. In other words, it will seek to reshape Europe as a larger version of its own federal system, which has a relatively weak executive constrained by strict rules and a strong parliament and judiciary.
However, even if it is successful in doing this, it is by no means clear that the German people would vote in favour of accepting full liability for eurozone debt. Influential figures such as economist Otmar Issing are opposed to political union, and some polls suggest a majority of Germans are opposed to further integration and even want Germany to leave the euro altogether.
What some in Germany see as a way to enable “more Europe” may turn out to be the catalyst for the disintegration of the EU.
German business confidence takes another dive
And not good news for Merkel’s agenbda for all the obvious reasons.
From Deutsche Press Agentur:
German business confidence fell for the fourth consecutive month in August, amid concerns about the impact upon Europe‘s biggest economy of the eurozone‘s long-running debt crisis, a key survey released Monday showed.
The Munich-based Ifo economic institute said its closely watched business climate index dropped more than forecast from 103.2 points in July to 102.3 points in August – its lowest point since March 2010.
“The Germany economy continues to weaken,” said Ifo President Hans-Werner Sinn.
Analysts had predicted that the indicator, which is based on a survey of 7,000 executives, would post a more modest fall to 102.7 points. The July reading was slightly revised downward from the originally reported 103.3 points.
More from Deutsche Welle:
While current business was seen “deteriorating only slightly,” managers expressed greater pessimism regarding future business developments, as the barometer on this score fell by 1.3 points to 94.2 points in August.
Hans-Werner Sinn noted that exports were expected to “contract for the first time in three years,” adding to the already existing gloom in the building, services and retail sectors.
However, confidence in the manufacturing industry was improving slightly after three months of decline, he added.
In recent months, German exports as well as industrial output and new orders have decreased at a pace that forced the German central bank to predict a stagnating German economy for the second half of 2012.
And more from Xinhua:
Meanwhile, the anxiety over future economic prospect has been aggravated with Greece bidding for more time to meet its bailout terms and European leaders failing to show powerful approaches to control the contagion of debt crisis to bigger economies like Spain and Italy.
“The euro crisis is gnawing away at German growth,” said Ifo economist Klaus Wohlrabe. As well as the negative expectations for exports, whole-sale and retail expectations also slumped.
Bringing Third World marketing to Europe
A giant British-Dutch corporation responsible for making everything from household cleansers to ice cream is bringing the same packaging strategies it uses in the developing world to Europe.
The reason? People are getting so poor they can only buy their products in smaller quantities.
From Szu Ping Chan of the London Telegraph:
Unilever will adopt marketing strategies used in developing countries in order to drive future growth in Europe, as the head of its European business warned that poverty will rise in the region as a result of the debt crisis.
The company behind Persil, PG Tips and Flora said it will apply lessons from its Asian business as consumers change their shopping habits amid a financial crisis that has left Greece mired in recession for the past five years and Spain with the highest unemployment rate in the industrialised world.
“Poverty is returning to Europe,” Jan Zijderveld, the head of Unilever’s European business told the Financial Times Deutschland in an interview.
“If a consumer in Spain only spends €17 when they go shopping, then I’m not going to be able to sell them washing powder for half of their budget.”
Unilever has already started to change the way it sells some of its products. In Spain, the company sells Surf detergent in packages for as few as five washes, while in Greece, it now offers mashed potatoes and mayonnaise in small packages, and has created a low-cost brand for basic goods such as tea and olive oil.
Spain’s short-term bank needs less than thought?
Before they go for the full-blown Spailout, Spain’s going to ask for cash to bailout its ailing banks, and the sum is reported to be smaller than originally suspected.
From Deutsche Welle:
The Spanish government is confident that it will not have to use to the full a 100-billion-euro ($125-billion) loan that euro area partners are theoretically willing to grant to banks still suffering from a 2008 real estate crisis.
Economy Minister Luis de Guindos told Monday’s edition of the International Herald Tribune that his country was likely to need only about 60 percent of the promised credit line to get ailing domestic banks on their feet again. This corroborated European estimates prior to the approval of the loans, with leaders at the time saying they wanted to send a positive message to the markets with a potential sum thought to be larger than the required amount.
The minister’s assessment was based on two studies ordered by the government to estimate the needs of the banking sector. He said Madrid was still waiting for the results of two independent audits. “But I don’t think they’re going to be very different,” de Guindos said.
Analysts believe Spain will eventually seek a sovereign bailout as borrowing rates on financial markets remain stubbornly high and above levels that the country could afford in the long term.
Economy Minister Luis de Guindos said he was confident the European Central Bank (ECB) would intervene by resuming its bond-buying program. “The Spanish government would accept, though, that ECB intervention in secondary markets should not relax our fiscal consolidation effort,” de Guindos added.
Spain’s economy fares worse than predicted
After last year’s feeble spurt, 2012 looks to be considerably worse.
From Nigel Davies of Reuters:
Spain’s economy performed far worse than initially thought in both 2010 and 2011, data showed on Monday, suggesting the country may find it even harder to emerge from a recession that threatens to push it into seeking a sovereign bailout.
The economy shrank 0.3 percent in 2010 and grew 0.4 percent last year, according to the revised data from statistics institute INE.
The figures, respectively 0.2 percentage points and 0.3 points below preliminary estimates, prompted a short-lived selloff on Madrid’s IBEX share market.
This year, Madrid expects a deficit of 6.3 percent and a GDP contraction of 1.5 percent, which roughly tallies with the market consensus for both figures.
The International Monetary Fund expects Spain’s economy, which slipped back into recession in the first quarter of this year, to shrink by 1.7 percent.
Spain offloads drug costs onto patients
Another austerity measure that’s working just the way it was designed to do, by making people in a depressed economy pay even more for their medicine so that money can be sent to all those investors.
Pharmaceutical expenses in Spain have decreased by 24 percent in July, compared to the same month last year, to the lowest level since 1999, after the introduction of a ticket taxpayers need to pay according to their income, Health Ministry sources said in a statement.
The decrease in expenditure in prescription drugs was registered in all autonomous regions except for Basque countries where a measure to cut pharmaceutical spending by the central government has not been adopted.
Pharmaceutical expenditure totalled 702.867 million euros in July compared to 786.756 million euros the same month in 2011.
And the king’s son-in-law’s troubles deepens
After dictator Francisco Franco defeated Spain’s Republican government during the last Depression, he held office as Caudillo, followed by the return of the monarchy.
Now the king’s son is in trouble for some financial hanky-panky of the sort that often comes with being a professional relative.
From Andreu Manresa of El País:
The judge overseeing the investigation into whether Iñaki Urdangarin, husband of King Juan Carlos’ daughter Cristina, used a non-profit organization to siphon off funds from the regional government of the Balearic Islands has revealed Urdangarin tried to organize a third tourism conference in 2007.
Investigators charge that the Nóos Institute, run by Urdangarin, previously organized two tourism conferences for the Balearic Islands. As part of a broader investigation into political corruption in the region, prosecutors have been investigating whether he used his royal credentials to secure contracts for his foundation from the regional authorities to organize sports and tourism events and then siphoned off part of the contract fees to other companies and offshore accounts that he and his associates controlled.
King Juan Carlos has said that by 2007 he had told his son-in-law to distance himself from the Nóos Institute.
Urdangarin has already been questioned by Judge José Castro Aragón, and along with his business partner Diego Torres, will face trial in the coming months, once the police and court investigation is concluded.
Britain unlikely to meet deficit targets
Yep, the coalition government hasn’t managed to pare down the numbers sufficiently to meet its own targets, something even Greece has been able to do.
From the London Telegraph:
The Government is “most unlikely” to meet its target to eliminate Britain’s structural deficit by 2015, a think-tank has warned.
Chancellor George Osborne will also fail in his economic goal to stem the increase in public debt before the next general election, according to the Centre for Policy Studies (CPS).
In a report released on Monday, the CPS said: “The Coalition came into office in 2010 with the stated aim that it would eliminate the current structural deficit within five years and stem the increase in public debt as a proportion of GDP. It is not achieving these aims.
“Though it correctly asserts that the deficit has fallen by around a quarter since 2010, the cyclically-adjusted current deficit (the part it said it wanted to eliminate within five years), had only fallen by 13.2pc by the end of 2011/12.”
The study found that the the majority of the reduction in the deficit has come from cuts to investment spending and tax increases rather than public spending cuts.
It said that only 6pc of the Coalition’s planned cuts to current expenditure had so far been implemented.