We open with some global news, a general slowdown in the G20 economies, a push for More Europe, Germany’s growing debt, a German populace increasingly worried about their pensions, and a pro-euro victory at the Dutch polls.
Britain’s unhappy with those proposed banking regulations, Ireland’s prime minister doesn’t like some of his own government’s proposed cuts, an Irish hotel is profiting mightily off austerity, and the country is targeting engagement rings.
The German finance minister pans the Spailout while the eurobank warns Spain of the dangers of growing debt, Bankia gets its bailout cash and the government targets shady stock sales, while the IMF warns Portugal not to cut too much, inflation hits Italy and the country goes after art galleries of money laundering and such.
A moment of context: G20 growth slows
The slowdown isn’t just European, and back in the U.S., the Fed is resulting to its usual gimmick, another round of quantitative easing, even though a corporate survey shows companies won’t spend any more even with a new flood of cheap cash.
But the slowdown is global, as the latest numbers from G20 nations reveal.
From the London Telegraph:
Economic growth in the top G20 countries slowed to 0.6pc in the second quarter of 2012 from 0.7pc in the first quarter, with slow and weak growth set to continue, the OECD said on Thursday.
In Britain output contracted for the third quarter running, to minus 0.5 percent from minus 0.3 percent, and in Italy for the fourth quarter, which showed minus 0.8-percent growth in the last two quarters.
The Chinese economy picked up but output in the eurozone, Japan and South Korea slowed sharply. Britain and Italy also showed shrinking output data.
Von Rompuy launches his More Europe agenda
The financial crisis is being used to push for revision of the European Union, with powers flowing out of member states and into the offices of the good gray eurocrats of Brussels and the banksters of Frankfurt.
Now the EU’s president is setting out to sell the sceme.
From Agence France-Presse:
EU President Herman Van Rompuy said Thursday he wanted to begin consultations next week on reforms to the bloc, including a centralised budget and shared debt, two hugely controversial issues.
Van Rompuy, in an ‘Issues Paper on Completing the Economic and Monetary Union,’ said the aim was to have the power to deal with problems in member states and “to prevent contagion, possibly through a central budget for the euro area.
“This in turn, could involve limited common debt issuance,” he said, raising a proposal opposed notably by Germany, Europe’s paymaster, which rejects any idea that weaker eurozone states should be able to borrow on the back of stronger ones.
Van Rompuy said the paper built on a breakthrough June 28-29 EU summit which agreed a series of moves on tighter EU economic and political integration to better tackle the eurozone debt crisis.
Germany’s debt grows again
Hardly a surprise. And the number can only grow.
From Deutsche Welle:
Germany’s sovereign debt remained above two trillion euros ($2.58 trillion) in 2011, despite additional revenues on the back of robust economic growth. And the national debt clock is bound to keep ticking away.
At the end of 2011, Germany had accumulated exactly 2,025,400,000,000 euros in sovereign debt, which was 0.7 percent more than in the previous year, according to data published by the German Federal Statistics Office, Destatis, Thursday.
In broken down figures, this amounted to 24,771 euros of debt for every German, Destatis said.
The debt of the national government was by far the highest, standing at 1.28 trillion euros, even though Berlin was able to reduce its debt by 0.6 percent last year.
However, the country’s regional governments, as well as local municipalities were adding 2.5 percent and 4.9 percent respectively to the national debt mountain in 2011, Destatis said.
Germans’ future dreams turning into nightmares?
The scenario is familiar to any reader in the U.S.: An aging Baby Boom generation meets underfunded pensions.
But the scare is new for Germans, and the prospects are growing dimmer.
Ever since German Minister of Labor and Social Affairs Ursula von der Leyen recently published alarming figures on the future level of German pensions, there has been widespread concern over the looming danger of old-age poverty.
Von der Leyen, a member of Chancellor Angela Merkel’s conservative Christian Democratic Union (CDU), released data showing that, in two decades, the statutory pension will only be enough to guarantee a life on the edge of poverty, even for average earners. To make matters worse, what Germans have managed to save during the course of their working lives is in danger of evaporating in the chaos of the global financial and debt crises. Investment magazines and bank brochures warn of a “pension trap” and, in the insurance industry, there is talk of a “rude awakening.”
Germans are afraid that their dream of a golden retirement could turn into a nightmare. For decades, one of the certainties of life in Germany was that the next generation of retirees would be better off and live a more secure existence than the preceding one. It was viewed as a sign of economic success when Germany’s senior citizens thronged the luxury decks of international cruise ships and were wooed by the advertising industry as an affluent consumer group. No other segment of the population currently has a lower risk of falling into poverty than pensioners.
But now even well-paid skilled workers and employees are afraid that this could change in the future. They see that the nation’s falling birth rate has resulted in a dwindling number of employees who pay into state retirement funds. And they have noticed that inflation and low interest rates are eating away at their assets. Indeed, Thomas Meyer, the former chief economist at Deutsche Bank, recently wrote in the Frankfurter Allgemeine Sonntagszeitung that the effects of the crisis threaten to reduce the purchasing power of private pension plans by one-half.
Pro-euro parties capture lead in Dutch elections
The genuinely leftist Socialist Party, while briefly capturing first place in pre-election polling, came in third, and the hard right Freedom Party came in fourth.
But there’s still the need to form a coalition, and it’s likely the final government will be a center/right mix headed by the current prime minister.
From Deutsche Welle:
Prime Minister Mark Rutte’s Liberal party appears to have won the most seats in general elections in the Netherlands. The margin over the Labor party was just two seats, and both groups are well short of a majority.
Labor party leader Diederik Samsom phoned Prime Minister Mark Rutte in the early hours of Thursday morning to concede defeat. With 96 percent of votes counted, Rutte’s Liberal party looked set to win 41 of 150 available seats in the lower house – just ahead of Labor on 39 seats.
Both of the two largest parties are therefore well short of a majority in the house, meaning Rutte will have to secure a coalition in order to govern.
The left-wing Socialists came in third place with 15 seats, the same result they secured in 2010.
The big loser was far right Freedom Party headed by Geert Wilders, whose views on Muslims earned him the support of American Ziocons. Wilders’s party dropped a dozen seats down to 13, and placed it fourth behind the Socialists.
Britain en route to an EU collision?
That’s because Britain has great misgivings about Angela Merkel’s More Europe agenda, particularly the new banking regulations.
From Bruno Waterfield of the London Telegraph:
Britain has pushed for Brussels’ new banking regulator to supervise all 6,000 eurozone banks – including Germany’s Landesbanks – in a move that puts London on a collision course with Berlin.
In a secret British negotiating document, seen by The Daily Telegraph and distributed in Brussels, the Treasury has argued that leaving smaller German banks outside the proposed bank union would “pose significant risks to euro area financial stability”.
Britain has made it clear that it will not join a bank union but backs the broadest plan for the sake of achieving stability for the single currency.
The British paper said: “Seeking to limit the banking union merely to the largest banks, or cross-border banks could lead to gaming behaviour and other distortions.”
An Irish rebellion over austerity?
The prime minister [Taoiseach] has taken note of the latest round of austerity measures endorsed by the government’s financial panel and he doesn’t like what he sees.
The cuts they want are above and beyond what the Troika demands, and they’re all in the name of reducing the deficit.
Harry McGee and Dan O’Broen of The Irish Times:
Taoiseach Enda Kenny has indicated the Government may not follow the advice of the Fiscal Advisory Council to impose €1.9 billion in cuts between now and 2015, in addition to those already provided for in the Troika bailout programme.
The Irish Fiscal Advisory Council (IFAC) today urged the Government to be more ambitious in tackling the budget deficit over the next three years. The new independent watchdog is tasked with overseeing the management of the public finances.
In his first response to the report by the panel of independent economists established by the Coalition, Mr Kenny said the report was not binding on Government but could reflect on any issues that were appropriate.
The Taoiseach said the Government’s medium-term economic programme had won the support of the Troika, a comment that suggested that neither Mr Kenny nor his ministerial colleagues were minded to contemplate further cuts over and above those already agreed.
The cut’s he’s resisting don’t include all those just laid out by the IMF, including implementing tuition at Ireland’s universities, along with those noxious student loans that are turning a generation of young Americans into debt serfs.
Hotel reaps profits from austerity
That’s because it’s the favorite campground for all those Troika slashers when the come to town, though a visit from a guy named Obama also helped.
From Gordon Deegan of the Irish Independent:
Dublin’s Merrion Hotel enjoyed a 40-fold increase in pre-tax profits last year as it played host to troika officials during their visits to the capital.
Profits at the Merrion Hotel in Dublin rose to €1.39m last year as sales jumped 12.5pc to €15.32m in the 12 months to the end of October.
The hotel made a profit of €34,599 in 2010 and losses of more than €500,000 in 2009 and 2008.
The boost in the hotel’s fortunes co-incided with President Barack Obama’s brief visit and the many lengthy visits by officials from the EU/ECB/IMF.
Gee, hard to imagine. Corporations profiting off the Troika. Yeah, right.
Engagement rings targeted in bankruptcy play
Once upon a time in Ireland you could keep your engagement ring if fate landed you in bankruptcy court.
But no longer, if the government gets its way. Only the cheapest of rocks will now avoid the grasp of creditors, though it’s predictably spun as aimed solely at women given jumbo stones.
From Mary Minihan of The Irish Times:
Minister for Justice Alan Shatter has ruled out exempting “€300,000 diamond bazooka” engagement rings from proposed personal insolvency legislation.
The legislation is designed to allow debtors to emerge from bankruptcy after three years instead of 12.
Mr Shatter said no one would be deprived of a modest engagement ring valued at “a couple of hundred euro”.
Labour TD Anne Ferris told him “most women would expect a lot more than a €100 ring”. She said during the so-called Celtic Tiger period a lot of expensive rings were purchased.
“It would break lots of hearts if they had to hand back their engagement rings,” she said.
And on to Spain. . .
A German urges no to the Spailout
Once again, it’s the finance minister, who’s made it abundantly clear that he wants his country to keep all those profits its made off the South.
From Rainer Buergin and Brian Parkin of Bloomberg:
German Finance Minister Wolfgang Schaeuble discouraged Spain from seeking a full international bailout, saying another request for outside aid risked a fresh round of financial-market turmoil.
“I’m not in the camp that says ‘take the money,’” Schaeuble said in an interview in Berlin today when asked about French moves to press Spanish Prime Minister Mariano Rajoy’s government to ask for more aid. Spain “would be daft” to ask for a bailout on top of the 100 billion euros ($129 billion) for its banks if it didn’t need it.
Another admonition, this time from Frankfurt
That’s the site of the eurobank, which has just given Spain another dose of the austerian gospel, warning of bad things to come unless obedience is total.
From Álvaro Romero of El País:
The European Central Bank estimates that Spain’s outstanding public debt could exceed 100 percent of GDP if the government fails to fulfill its fiscal adjustment commitments to bring the deficit back within the European Union’s ceiling of three percent of GDP.
In its monthly bulletin released Thursday, the ECB said if the austerity drive of the government of Prime Minister Mariano Rajoy delivers only half of what it promises to achieve, the debt/GDP ratio could rise to 104 percent of GDP in 2006, three times the level that existed before the current economic and financial crisis broke.
Spain has pledged to lower the public deficit from 8.5 percent of GDP last year to 6.3 percent this year and to 4.5 percent in 2013 before bringing it back within the EU cap the following year. The country will have to achieve these goals at a time when the economy is expected to shrink 1.5 percent this year and continue to contract in 2013.
Bankia gets its bailout cash
A too-big-to-fail creation forged from the ruins of seven failing banks less than two years ago, Bankia needed its own bailout, and now it’s got it.
From Deutsche Welle:
Stricken Spanish lender Bankia has been thrown a multi-billion euro lifeline from the Spanish state after reporting a huge loss for the first half of 2012. The bank is at the heart of Spain’s ongoing mortgage crises.
Bankia had received 4.5 billion euros ($5.7 billion) in the form of short-term government debt securities, Spain’s state-backed Fund for Orderly Bank Restructuring (FROB) announced Thursday.
The move was needed “urgently,” FROB said in a statement, and had come after Bankia reported a loss of 4.45 billion euros in the first half of 2012, which was a dramatic deterioration from a net profit of 205 million euros in 2011.
After the financial boost, Bankia said it had a capital base of 4.528 billion euros – a figure which suggests that the lender’s capital base had dwindled to just 28 million euros before the rescue.
Spain imposes bank sanctions in share sales
Their targets are banks that sold risky shares to investors without telling them what they were getting into — in many cases, major losses when the banks failed.
From David Fernández of El País:
The National Securities Commission (CNMV) has so far opened sanctions proceedings against seven of the 19 lenders that mis-sold preference shares to retail customers, the chairman of the CNMV, Julio Segura, said Thursday.
At a news conference on the balance of his stewardship of the CNMV before his mandate ends next month, Segura, said proceedings are expected to be initiated against another two banks at the end of this month, and two more before the end of this year. The banks have not been named.
Most of the files that have been opened against the banks concern alleged malpractice in the marketing of preference shares, a form of perpetual debt that normally yields higher interest rates than bank deposits but is a much riskier investment. The CNMV believes the banks failed to properly carry out tests designed to gauge the level of financial knowledge of potential clients and their level of tolerance to risk.
Many savers have seen the value of the preference shares they hold plunge in value and have found themselves locked into an investment with little liquidity. The CNMV also believes that some sales of preferred shares were carried out at their nominal as opposed to their market value.
And on to the other Iberian nation. . .
IMF gives a rare warning: Don’t cut too much
Yep, it appears Portugal has been overly zealous in the application of the austerian knife.
From Deutsche Presse-Agentur:
The International Monetary Fund (IMF) warned Portugal on Thursday against excessive austerity policies and counselled reforms to improve productivity.
If there were only budget cuts, “the economy will not survive,” said Abebe Selassie, who headed a recent IMF delegation to Lisbon.
The IMF is part of the “troika” with the European Union and European Central Bank, which assesses Portugal’s performance under its 78-billion-euro (100-billion-dollar) bailout programme.
The troika, which wrapped up its fifth visit on Tuesday, recommended relaxing Portugal’s budget deficit targets.
We suspect the subtext is a call to sell off more assets, rather than they to keep them while relying solely on cuts.
One of those damned if you do/don’t situations.
Good news and bad for Italy
Their deficit is down, but inflation’s biting.
From Deutsche Presse Agentur:
Italian inflation remains stubbornly high, while public debt is falling for the first time since February, official data showed on Thursday.
Istat, the national statistics office, said that prices rose by 3.2 per cent on an annual basis in August, 0.1 percentage points more than in July.
The increase was mainly because of rising fuel prices, with prices increasing year-on-year by 15.1 per cent for petrol and by 17.5 per cent for diesel.
Public debt fell to 1.96 trillion euros (2.54 trillion dollars) in July, down from a record 1.97 trillion euros recorded the previous month, according to figures from the Bank of Italy.
Italian tax cops zero in on art galleries
Faced with the possibility of another bailout, the Italian government is doing just what the Troikarchs like — they’re looking for taxes.
Unlike Greece, they’re not implementing new taxes on the poor, and their target’s a good one, given the long history of folks on the financial dark side using art to hide and launder their ill-gotten games.
From John Hooper of The Guardian:
The semi-militarised revenue guard said two “noted art galleries” in Rome and the north-eastern city of Padua had been temporarily closed as the result of a sweeping investigation into tax fraud and money laundering in the art world.
It said 24 galleries and auction houses had been targeted with help from the copyright office of Italy’s arts and entertainments industry. The revenue guard said it had succeeded in tracking down more than €2m of unpaid taxes on so-called artists’ resale rights (ARR).
Known in Italian as diritto di seguito, ARR entitles the creator of a work of art to a percentage fee each time it is resold by an auction house, gallery or dealer. The statement did not make clear whether the tax was payable on ARR paid to, or withheld from, the artist or artists in question.
The revenue guard said it had also uncovered illicit investments and evidence of money-laundering offences involving much bigger sums. It had tracked around €3m in cash payments above the permitted limit and suspicious transactions worth some €14m that had not been reported to the authorities by the auction houses that had dealt with them.