We open with a dramatic and thoroughly admirable rebellion, then move on to the long-anticipated revelation of the proposla for a European banking regulatory system based in Frankfurt.
That boind buying scheme integral to the More Europe agenda is getting mixed reviews, with praise from Britain and France, some notable resistance in Spain, a great deal of opposition in Germany, and an ominous warning from the economist known as Dr. Doom.
Spain’s economy continues to contract, while Britons are growing skeptical and their own central bank, and a French union is calling for more austerity.
A magnificent rebellion by Spanish doctors
We’ve been documenting the ongoing victimization of immigrants during the economic, both by overt racists on the political margins and by governments desperate to cut budgets and targeting those least able to resist.
So it’s with great admiration that we note a singular act of rebellion against the Lords of Austerity.
From Matt Carr’s Infernal Machine:
Spain’s conservative Partido Popular government has decreed that approximately 150,000 undocumented migrants will no longer receive free medical treatment, regardless of their medical condition or their ability to pay.
To their immense credit, 1,650 Spanish doctors and health professionals in five of Spain’s autonomous regions, including Catalonia and Galicia, have declared that they will not obey the new law. These refuseniks have called for an extension of their ‘objection campaign’ in this wonderful video, which brilliantly illustrates the inherent barbarity of the PP’s legislation law through an ironic inversion of the Hippocratic Oath:
Carr translates:
I swear that I will use my medical knowledge for the benefit of Spaniards and legalized foreigners.
I swear that I will put aside my ethics and morals en periods of financial crisis.
I swear that I will not allow human rights to get in the way of austerity measures and the maximization of profits
I swear that I will not use the facilities of the state to diagnose undocumented migrants.
I swear that I will not refuse health care to anybody, except those who don’t have a Foreigner’s Identity Card or a National Identity Card.
I swear that I will not prescribe medicines for AIDs to anyone without social security.
The video closes with this magnificent declaration:
But I swear that we will never comply with everything that we have just said. The Health Reform asks us to leave undocumented people without treatment.
But health is a universal right. Therefore we have sworn to provide care without discrimination and we are going to continue to do so.
Because curing people is our obligation and also our right.
The bank regulatory scheme revealed
It took an Italian newspaper to get ahold of the document.
From Reuters:
The European Central Bank will have full supervisory power over all euro zone banks from January 1, 2014, according to a draft European Commission proposal published by Italy’s Il Sole 24 Ore newspaper on Friday.
Reuters“The ECB should be able to exercise supervisory tasks in relation to all banks,” officials write in the draft, a copy of which was posted on the internet.
“Safety and soundness of large banks is essential to ensure the stability of the financial system. However, recent experience shows that smaller banks can also pose a threat to financial stability.”
The Commission is firm in believing that the ECB should have oversight of all 6,000 euro zone banks as it looks to build a ‘banking union’ across the region, the first step towards deeper fiscal and economic integration.
More from Louise Armitstead of the London Telegraph:
Trade bodies in London, including the Association for Financial Markets in Europe (AFME), back the idea of a bank union to restore stability to the single currency.
But experts fear the rules could pose a danger to the City of London if they make it hard for non-bank union members to operate within the eurozone.
Mats Persson of the think-thank Open Europe said: “The proposal has merits, but make no mistake: this is setting up the ECB to become a powerhouse in supervising and regulating financial markets…Under this structure, the eurozone will have huge incentive to take common positions on most matters of financial regulation, with the risk being that it starts to write the rules for all 27 member states using an inbuilt majority in EU’s voting structure.”
He added: “The UK Government must push for a far clearer division between the banking union and the EU single market – the property of all 27 countries – than what is offered in this proposal.”
Capital.gr reports that one country has reservations, and we suspect you know just which one:
Germany has said it believes the ECB should only have oversight of the largest, systemically important banks, concerned that having too much responsibility will dilute its monitoring powers. Germany is also concerned that its Landesbanken regional banks could fall under the ECB?s watch.
The draft said the ECB would start the process of overseeing euro zone banks from January 1, 2013, with a year long phase-in.
“The phasing-in process should be completed within one year from the entry into force of this regulation at the latest,” the document said.
“The ECB shall assume in full the tasks conferred on it by this regulation on January 1 2014 at the latest.”
The full document is posted online here [PDF].
Hollande, Cameron praise bond-buying scheme
The other big news of the week was the declaration of the European Central Bank boss that he’s ready to embark on an plan to buy up an unlimited amount of bonds from troubled economies — so long as the submit the full austerian agenda.
From Agence France-Presse:
French President Francois Hollande on Thursday welcomed a move by the European Central Bank to introduce exceptional bond-buying measures to shore up the troubled eurozone.
The ECB had “acted in line with the mandate it has been given” to encourage growth in Europe and ensure the stability of prices, Hollande said after talks in London with British Prime Minister David Cameron.
Cameron also praised the ECB’s action.
“I have said for two years now that we need an ECB that stands firmly and squarely behind the currency of the euro and that is prepared not just to make those statements, but to back those statements with real financial muscle and a clear plan.
“And I think we are closer to that today than we have been for a very long time,” he told journalists.
“I warmly welcome that those steps were taken. It’s clearly important for the countries in the eurozone but also important for countries like Britain.”
Merkel’s muted bond-buying endorsement
The bond buying scheme is integral to the Iron Chancellor’s More Europe mandate, essential to keeping the game afloat while she pushes her political agenda.
That said, her political base — including those folks at the Bundesbank — is less than pleased with the costs entailed.
Hence, her muted response to Mario Draghi’s announcement.
From Agence France-Presse:
German Chancellor Angela Merkel believes the European Central Bank is acting within its mandate in relaunching its programme to buy sovereign bonds of strugging eurozone members, her spokesman said Friday.
“The ECB is acting independently and within its mandate,” Steffen Seibert told a regular government news briefing, a day after ECB chief Mario Draghi announced the plan to drive down borrowing costs.
Merkel already gave a muted reaction to the Frankfurt-based central bank’s action for dousing the eurozone crisis after her talks Thursday in Madrid with Spanish Prime Minister Mariano Rajoy.
“The ECB acts within its independence and within its mandate and is responsible for the stability of the currency, the value of the currency, and to take the appropriate decisions,” she said.
Most Germans oppose More Europe
Or at least they want less of it than Merkel does.
The latest poll numbers from Agence France-Presse:
The majority of Germans believe the country’s Constitutional Court should block two key anti-crisis tools next week, according to the results of an opinion poll released Friday.
In a survey carried out by YouGov for the German news agency DPA, 54 percent of Germans said that the Court should order a legal review of parliament’s recent approval of the eurozone’s ESM bailout fund and the EU fiscal pact.
Only 25 percent of those polled thought the court should reject temporary injunctions that would prevent President Joachim Gauck from signing the crisis-fighting tools into law.
The Court is to issue a ruling next Wednesday on whether Gauck can complete the ratification process for the European Stability Mechanism (EMS) and the European fiscal pact, both of which received a two-thirds majority in parliament at the end of June.
The far-left Die Linke party, a citizens’ initiative group called “More Democracy” and a well-known eurosceptic from Chancellor Angela Merkel’s CSU Bavarian sister party, Peter Gauweiler, have all filed a number of injunctions, asking the court to decide whether the two instruments are compatible with the German constitution.
For more on the political opposition, see this Deutsche Welle analysis.
German press sounds the opposition note
Capital.gr summarizes some of the criticism from leading conservative papers:
“Help without end for crisis countries,” said Bild on its front cover, adding that Draghi had signed a “blank cheque” and that his policy endangered the independence of the ECB. It cited German politicians saying the ECB had gone beyond its mandate of safeguarding the stability of the currency.
“Draghi sets off Germany’s alarm bell,” was the headline in the conservative daily Die Welt.
Business daily Handelsblatt, which often voices concern at the financial burden of the bailouts on German taxpayers and business, had a cover story on “the Rise, Fall and Resurrection of the Bundesbank” and gave prominence to Weidmann’s warnings.
>snip<
The Frankfurter Allgemeine Zeitung, a sounding board for Germany?s monetary hawks, wrote that “the border between monetary and fiscal policy has been blurred” and called the argument that bond-buying was within the ECB?s mandate “far-fetched”.
Draghi’s plan risks nationalist rage in the South
That’s the verdict of the New York University economist popularly known as “Dr. Doom.”
From the London Telegraph’s Ambrose Evans-Pritchard:
The European Central Bank’s ground-breaking plan for mass purchases of Spanish and Italian bonds is fraught with political risk and may soon be overwhelmed by nationalist anger in the crisis states, leading economists and statesmen warned at a gathering of the European policy elites in Italy.
“The ECB move is helpful but is not a game-changer. The eurozone is still in crisis,” said Nouriel Roubini, head of Roubini Global Economics.
“Unless Europe stops the recession and offers people in the peripheral countries some light at the end of the tunnel – not in five years but within 12 months – the political backlash will be overwhelming, with strikes, riots and weak governments collapsing.”
Professor Roubini said the German Bundesbank and will insist that “severe” conditions are imposed on Spain once the country requests a rescue from the eurozone EFSF/ESM bail-out funds and signs a memorandum ceding budgetary sovereignty.
>snip<
Mr Roubini said the eurozone is already disintegrating, with de facto capital controls as German regulators prevent Italy’s banks bringing money home from German subsidiaries.
“Plenty of accidents can still occur. There is austerity fatigue in the periphery and bail-out fatigue in the core. Eveybody is restless,” he said at the Ambrosetti forum at Lake Como.
Monti declares ‘reforms’ must continue after he’s gone
Marion “Three-card” Monti was the technocrat picked by the Troika to implement the austerian agenda, installed in office without benefit of election.
He’s not going to run for the office, but he wants to make sure than whoever follows him will continue to toe the line.
Others disagree.
From Barry Moody and Paolo Biondi of Reuters:
Speaking in the southern Italian city of Bari, Prime Minister Mario Monti said the next government must carry on the path of reforms.
“There needs to be an elected and long-lasting government,” said Monti, who heads a government of unelected technocrats and will not stand for office next year. “Growth will come if we can change people’s mentality.”
As if to underline the risks, Italian center-right politician Renato Brunetta, who is close to former premier Silvio Berlusconi, denounced Monti’s economic policies and said they must immediately be changed.
“We have suffered a mistaken policy for the last year. We must change it, and immediately, and return to democracy with politicians running the country,” Brunetta, a minister in Berlusconi’s last government, told reporters at the conference.
Spain remains reticent to seek the Spailout
That’s because they feel they’ve taken all the needed austerity measures and they don’t want additional terms laid out in one of those memoranda that Draghi says must accompany any major bond buys.
From Reuters:
Spain said it would discuss conditions attached to the European Central Bank’s new bond-buying program with euro zone finance ministers next week, but insisted it was still in no hurry to seek international aid.
As Spain’s 10-year debt yields fell below 6 percent for the first time since May, Deputy Prime Minister Soraya Saenz de Santamaria stuck to the government line of recent weeks, saying Madrid would look carefully at the ECB offer before making any move.
>snip<
“I believe that matters which are so relevant for the general interest and the future of the Spanish people should be analyzed calmly and carefully. These decisions can’t be taken overnight,” Saenz de Santamaria told a news conference after the weekly cabinet meeting.
She said questions over a possible program of purchases of Spanish debt would be discussed during a meeting of euro zone and European Union finance ministers in Cyprus on September 14 and 15.
“I think that it is important to respect these proceedings, which will also give us more certainty about what we are talking about,” she said.
More from Agence France-Presse:
Spain wants to know the conditions it must submit to before requesting any sovereign bailout, Foreign Minister Jose Manuel Garcia-Margallo said Friday.
“We have to know the conditions, analyse them and then it will be decided,” he said in Paphos, a coastal resort in Cyprus where European Union foreign ministers are gathering.
The European Central Bank announced Thursday a scheme to purchase as many government bonds as needed on the open markets to curb punishing interest rates throttling stricken states.
>snip<
After the announcement, Spanish 10-year bond yields dropped below six percent for the first time since May.
“The fact that those words alone have brought back calm shows that it was what had to be done, that we just needed the courage and political decision,” Garcia-Margallo told reporters.
“Now we have to hope that (the measures) are put into practice as soon as possible,” he said.
Spain’s industry contracts one again
The latest figures are for July, and if August shows the same decline, it’ll be a full year since Spain’s factories showed an increase in production.
From ANSAmed:
Spain’s industrial production fell for the 11th consecutive month in July by 5.4% compared to the same month last year, after the reviewed 6.1% drop in June, according to data released today by the National Statistics Institute.
In the first seven months of the year, the industrial production index fell on average 5.8%, the statistics bureau said.
British approval of Bank of England falls
It’s at the lowest since polls started 13 years ago.
From Jamie Dunkley of the London Telegraph:
Satisfaction with the Bank of England’s handling of inflation and interest rates has fallen to its lowest level on record, a central bank survey has revealed.
Although Britons’ are now more confident that inflation will fall closer to the BoE’s 2pc target, almost a third of people surveyed claimed to be dissatisfied when asked whether the Bank was “doing its job to set interest rates to control inflation”.
The BoE has committed to pump £375bn into the economy through its asset purchase scheme and last month marked the start of a new scheme to reduce the cost of bank credit.
However, this was not enough to stop net satisfaction with the bank falling to its lowest since the survey started in 1999.
Just 35pc of Britons surveyed said they were satisfied with the BoE’s use of its powers, while 29pc said they dissatisfied – giving a net balance of +6, down from +11 in May.
French union wants more austerity
It’s a classic case of splitting what should be a united labor movement.
Basically, one of France’s largest unions wants to reduce the rights of those at the low end of the pay scale to shore up their own base.
Shame on them.
From Kumaran Ira of World Socialist Web Site:
France’s French Democratic Labour Confederation (CFDT) is pressing the Socialist Party (PS) government of President François Hollande to accelerate its social cuts.
It is demanding that Hollande rapidly carry out labour market reforms—easing restriction on hiring and firing and cutting labour costs—to restore the competitiveness of French companies and formally adopt the European Union (EU) fiscal pact to impose sweeping austerity measures.
In an interview Sunday with Le Journal de Dimanche, CFDT leader François Chérèque said that “the government must accelerate reforms” beyond the existing timetable. He explained, “Our country’s economic situation is bad, because France is not well adjusted to the challenges of globalization. … We must begin negotiations on labour market reforms as fast as possible, to finish as soon as possible.”
Chérèque praised labour market reforms made in Germany a decade ago by the Social Democratic government of Chancellor Gerhard Schröder that led to the creation of a low-wage sector, facilitated sacking, reduced labour costs, and boosted German exports. To promote French firms’ competitiveness, Chérèque noted that the labour costs should be cut: “I say this clearly—the cost of labour is also a factor in the loss of competitiveness.”
