Lots of political posturing, with the upcoming banking regulations the current focus of theatrics. German Chancellor Angela Merkel’s warning of a long, slow recovery while ramping up the pressure for More Europe, Denmark’s got reservations on the eurobanking regulations. The European trade surplus increased even though exports fell, and banksters warn that memoranda can spoil the new bailout machinery.
Italy got some high praise from Merkel, and Italians like the Prime Minister she helped instal [but they don’t like what he’s doing], the “auctioneer index” warns of more Italian woes to come, and higher fuel prices are keeping Italians closer to home.
Spain’s under lots of pressure to take the Spailout while their bond prices are rising again as investors see greater risk the longer the country takes to ask for the damn money, a transit strike brought chaos to the country, and deregulated tuition hikes are causing their own chaos.
Cyprus is ready for a bailout, a new British political party wants a referendum on European Union membership, Britain faces a housing shortage, and a Chinese bank is ready to buy a European bank.
Britain, France agree on bank regulatory plan
That’s the latest about the move now underway to transfer ultimate banking regulatory authority from nation states to the European Central Bank.
The government of French President François Hollande and the British conservative coalition government are agreed on the plan that’s a key part of German Chancellor Angela Merkel’s More Europe agenda.
British Prime Minister David Cameron has made it clear that the new regulations mustn’t put any strings on the banksters of The City, London’s financial district.
So this latest story raises more questions about just what common agenda is shared by the French “socialist” and the British Tory.
From the BBC:
France and the UK broadly agree on the EU plan for the European Central Bank (ECB) to supervise all eurozone banks, the French finance minister says.
Pierre Moscovici also said the UK “will be part of the decision-making process” on bank supervision, even though the UK is outside the 17-nation eurozone.
He was speaking in London after talks with UK Chancellor George Osborne.
On whether to provide a bailout for Spain, Mr Moscovici said “the tools exist” but Madrid would have to decide.
“This is a matter of sovereignty and we do not decide for the Spanish government,” he said.
Merkel casts a damper on the quick fix
The German chancellor says there’s even with the rush to adopt her More Europe agenda, a European economic recovery isn’t coming any time soon.
In addition to being a realistic prognosis, it’s also a prime talking point for commanding compliance were her push to shift banking oversight to the Frankfurt-based eurobank and national budgetary authority to the eurocrats of Brussels.
From Deutsche Presse-Agentur:
German Chancellor Angela Merkel warned Monday that Europe faced a long battle to overcome the financial crisis despite recent decisions that helped eased market pressure.
Speaking at her annual press conference, Merkel said Europe had “some way to go” to solving the crisis.
In addition to calling on governments to press on with rigorous economic reforms, the chancellor stressed during her more-than 90-minute press conference the need for greater political integration in the currency bloc.
The crisis, she said, would be solved step by step rather than through a “big bang”. With this in mind, she also warned against any rapid moves to create the proposed new pan-European supervisory authority.
Merkel also went on to reaffirm her support for European Central Bank (ECB) chief Mario Draghi’s plans to launch a new bond-buying programme aimed at driving down borrowing costs in countries at the centre of the eurozone crisis.
Merkel ups the volume on the More Europe agenda
The German chancellor raised an interesting argument.
More Europe is needed, she says, because while the world population is growing, Europe’s growth isn’t keeping pace, so only by uniting can Europe’s influence be maintained.
There’s an interesting but unspoken subtext: Merkel’s implication is that a shift to regional rather than national governance is an inherent force arising out of globalization and free trade agreements.
What role do national governments have when all their powers are a;lready signed away in economic treaties, agreements that benefit banksters and corporateers over citizens and that favor the global over the local.
From Agence France-Presse:
Europe can only exert an influence on the world stage if it speaks with one voice, solves its debt crisis and bolsters its own economic power, German Chancellor Angela Merkel said on Monday.
Speaking to the Berlin press corps, Merkel noted that Europe’s percentage of the world population had shrunk dramatically in the past 60 years, reducing the influence of individual EU countries at a global level.
“We can only have a say in the world if we are united in the European Union. And we can only have a say if we are economically successful. Not at the cost of other regions but in fair competition with other regions,” said Merkel.
“It is extremely important that Europe pulls closer together because individual countries cannot have as big an influence with their own voices as when we act together,” added the chancellor.
“Luckily we are united and now we have to make sure that what we have agreed on — for example the common currency — actually works.”
Danish give qualified endorsement to banking oversight
Basically they’re saying its fine for countries using the euro, but not for those, like Denmark, that retain their own sovereign currencies.
From Peter Stanners of the Copenhagen Post:
Nils Bernstein, CEO of Denmark’s national bank, Nationalbanken, stated in a press release that he supported the proposal for a transnational supervising body for the banking sector.
Danish economy minister Margrethe Vestager (Radikale) said that while many non-Euro countries were considering joining the union, it was not obvious how it would work.
“It’s actually rather tricky,” Vestager told Ritzau. “The way that the proposal has been made means it follows the ECB’s rules. This means that only Euro countries have influence. And they actually cannot simply invite us to have influence.”
According to Vestager, it would not be acceptable for Denmark to join a union without having influence over how it is run. And despite initial fears that non-Euro countries would have no influence, there are indications that a compromise could be found to allow influence by non-Euro countries – a move which would benefit everyone, according to Vestager.
“We have to consider the ability for Danish banks to compete,” Vestager told Jyllands-Posten. “If we don’t join then we risk higher interest rates that would be passed onto consumers.”
European trade surplus increases
One of those good news/bad news stories.
While an increasingly favorable balance of trade is good for the bottom line, the decline in imports is a sign that Europeans aren’t buying all those electronic goods and other consumer items produced in other parts of the world.
And note that exports themselves actually decline — meaning that overall trade is down.
From Deutsche Press-Agentur:
The eurozone’s trade surplus widened in July as imports fell, data released Monday showed.
The European Union’s statistics office Eurostat said eurozone exports exceeded imports by 15.6 billion euros (20.48 billion) compared with a surplus of 13.6 billion euros in June.
At the same time, Eurostat said seasonally adjusted exports fell by 2 per cent in July compared with June, while imports dropped by 1.2 per cent.
In a separate release, Eurostat said hourly labour costs in the second quarter grew by 1.6 per cent compared with the same period last year. This compared with a 1.5-per-cent increase during the first quarter.
Helping to lead the strong wage growth in the eurozone was a pickup in labour costs in the region’s biggest economies, Germany.
But while costs in Germany rose by 2 per cent in the three months to the end of June, labour costs fell in countries at the centre of the eurozone debt crisis.
Drawing the obvious, correct conclusion
If you’re countries in financial trouble and you feel the need of a bailout, you may be less likely to make the request if you know that the loan will come with strings certain to create more unrest and misery within your own borders.
That’s the conclusion of the Institute of International Finance, the organization of major banks created in 1983 in response to that decade’s financial crisis and that represented private sector holders of Greek bonds during their haircut session.
Requiring bailout conditions on ailing euro-zone countries may prevent activation of the European Central Bank’s bond-buying program meant to calm financial markets, the Institute of International Finance said Sunday.
“Conditionality required by the Outright Monetary Transactions (OMT) program — while desirable and necessary to spur needed reforms — could appear as an obstacle to some countries in need, deterring them from requesting support,” the IIF’s Market Monitoring Group said in a statement, according to Dow Jones Newswires.
The IIF represents more than 400 of the world’s largest private financial institutions, including banks and insurers.
The group said markets have already priced in strong support from the ECB bond-purchasing program, and “any delay in activating the OMF could lead to disappointment.”
“Moreover, termination of bond purchases if a country is perceived to be not in compliance would likely result in a “cliff effect” and an abrupt market correction,” the group said.
And on to Italy. . .
Merkel hails Italy’s courageous austerianism
In effect, heaping praise on the wisdom of the Troikarchs who put the unelected technocrat in power after forcing out Silvio “Bunga Bunga” Berlusconi.
Italy has taken “courageous steps and made progress” with economic reforms, German Chancellor Angela Merkel said on Monday.
Merkel, speaking at a press conference in Berlin, referred to a telephone conversation between her and Italian Premier Mario Monti.
“We spoke of the general situation and how to best help develop the eurozone, but not of the possibility that Italy could ask its European partners for assistance,” Merkel said. Merkel added that Germany is ready to help Greece remain in the eurozone. The German chancellor said that she hoped Greece would press ahead and respect their obligations because “it is in the best interest of all” that they continue to be euro partners.
While the chancellor expressed Germany’s availability to help the indebted eurozone partner, she underlined that they must respect the “clearly outlined” European Central Bank reform measures required.
Italians schizoid on Three-card Monti
According to the latest national polling figure, Mario Monti, the prime minister installed by the Troika to inflict austerian discipline, is growing in popularity, while the policies he pushes are losing support.
So they seem him as a congenial victimizer?
From Agence France-Presse:
Italian Prime Minister Mario Monti’s ratings rose again this month to 52 percent from 49 percent in July and 46 percent in June, according to a poll published by La Repubblica daily on Monday.
Monti’s popularity had fallen for five months between February and June when it dropped from 59 percent to 46 percent, according to the monthly poll by IPR Institute which said the current rise was “very positive at a time of crisis”.
The ratings of the government as a whole fell to 37 percent in September.
“On the one hand people respect the figure of Monti, his experience and his will to save Italy, on the other hand they are negative on the measures taken by the government, the rise in social tensions and unemployment,” IPR said.
Guess that makes him the Italian Obama.
Auctioneer “index” predicts Italian malady
When construction equipment shows up on the auction block, it’s a bad augury for the country of origin, according to a leading Irish auctioneer.
From Henry McDonald of The Guardian:
Economists have long tried to perfect the art of forecasting recessions, but others believe there are straightforward warning signs that have nothing to do with algebra or computerised modelling. For Jonnie and Derek Keys, two Irish brothers who run a vehicle and machinery auction company in Co Tyrone, Northern Ireland, the canary in the coal mine is the spike in construction equipment leaving a country at knockdown prices.
From the Euro Auctions headquarters set amid the verdant drumlins and mountains of rural Tyrone, Jonnie Keys has noticed a recent increase in the purchase of diggers, loaders, lorries and other mechanical equipment from Italy.
“We are already familiar with a surplus of vehicles, diggers, trucks and generators in Spain. Now we have noticed a large amount of kit for sale coming out of Italy at low prices. It’s a sure sign of a slowdown, a warning light that things are about to get much worse, especially in the country’s construction industry. That is what is now happening in Italy,” Keys says as he surveys his enormous auction yard.
We suspect they’re on to something.
Fuel prices keep Italians at home
But the kicker is that a big price of the increased fuel costs that kept a fifth of Italians staying closer to home was an increase in taxes at he pump.
Those taxes, of course, are part of Monti’s austerity agenda, and another form of regressive taxation that grabs a higher percentage of the earnings of the poor than of the rich, just as with the other value-added taxes.
The high cost of fuel has kept families from travelling this summer, according to a study released Tuesday.
Almost one Italian family in four decided to take vacations close to home this year, to avoid the high costs of filling up the family car, says the study by consumer group Coldiretti.
It found that 22% of those surveyed cut down on driving because of higher petrol and diesel costs – fuelled in part by rising taxes.
Italians cut their consumption of petrol and diesel by 9.3% in the first eight months of this year, according to a separate study that concluded Italians still spent almost 3.4 billion euros more on fuel than in the same period last year.
And on to Spain. . .
French minister tells Spain to take the damn bailout
Since the eurocrats and eurobanksters have already agreed to give the money, they’re stepping up pressure on Spain to take it — and this, presumably, easing uncertainty on the markets.
Spain’s waiting to ensure that any money they do take doesn’t require any more austerity measures beyond those extensive cuts and restructuring the government has already taken.
From Deutsche Presse-Agentur:
Pressure was mounting on Spain Monday to clarify whether it will seek a market intervention from the European Central Bank, with European Competition Commissioner Joaquin Almunia warning against the risks of uncertainty.
“Maintaining uncertainty creates the risk that tensions will rise again in the debt market,” Almunia said in Amsterdam.
Notwithstanding the fact that markets had stayed calm over the past week, the situation could change any time, Spanish media quoted the commissioner as saying.
And more pressure came from the French finance minister, as reported by Deutsche Welle:
Spanish borrowing costs rise again
And the reason is that reluctance to take the Spailout.
From Louise Armitstead of the London Telegraph:
Spanish borrowing costs rose above 6pc again as a continued stand-off between Madrid and Brussels fuelled fears that the European Central Bank’s bond buying programme pledge is not enough to stabilise the eurozone.
The yield on Spain’s benchmark 10-year bonds were pulled back just below 6pc at the close, but their steady rise all day reflected bets by traders that Madrid’s determination to resist a bail-out will cause more volatility. Some argued that optimism that followed the unveiling of the so-called “Draghi Plan” to buy bonds was already wearing off.
John Wraith, a fixed-income strategist at Bank of America Merrill Lynch told reporters: “It’s more a case of we are relieved about the bullet we dodged but we don’t necessarily find ourselves in a more stable footing. If you look at the actual sustainability of funding deficits at the sort of levels we are still at, it’s still very difficult to see how these weaker countries can survive long term.”
More pressure to take the Spailout
This time is the European Commission’s number two, himself a Spaniard and a former Socialist Workers Party [PSOE] member of the national parliament.
From Luis Doncel and Carlos E. Cué of El País:
European Commission Vice President Joaquín Almunia on Monday urged the government of Prime Minister Mariano Rajoy to make its mind up soon about asking for a second bailout.
“Uncertainty is a risk,” said the Spaniard, who is also the EU commissioner for competition. “Sometimes it is difficult to take a decision and this is a very complicated situation. Any alternative has its pros and cons, but to maintain uncertainty implies a risk that the debt market or another factor increases tensions again. We have learned in the past two-and-a-half years where these tensions could lead to.”
According to government sources, Rajoy wants to delay asking for a second bailout on top of the rescue package for the country’s banks and may even eschew the option if the economy improves sufficiently to avoid the political stigma involved.
However, Economy Minister Luis de Guindos is in favor of requesting a second intervention as soon as possible to ease market pressures. He would like to see one of the European rescue funds buying Spanish debt in the primary market to trigger purchases in the secondary market by the European Central Bank (ECB).
Public transit strike causes chaos
Monday marked another one-day strike called to protest an upcoming partial privatization of the national rail system
Public transport strikes in Spain have caused chaos for tens of thousands of commuters for the second time in a month.
Hundreds of high-speed and intercity services
operating in and out of the capital Madrid and Barcelona have been cancelled.
Rush-hour subway services in the two cities were also disrupted.
The strikes caused severe traffic jams in both cities.
Workers are angry at plans to restructure the rail network next year.
The government wants to sell off half the country’s rail sector in a drive to slash the public deficit .
And a euronews video report:
And for more on the government actions the rail unions were protesting, see this El País story.
Tuition hikes follow deregulation
Where once Madrid set university tuition rates on a national bases, a switch to regional government control has resulted in a a chaotic mix of charges across the country.
From J. A. Aunión of El País:
Differences in tuition fees at public universities across Spain’s regions have broadened ahead of the start of the new academic year with hikes ranging from almost nothing at colleges in Asturias and Galicia to 400 euros at faculties in Catalonia and Madrid.
Since the regions were given the authority to set their own tuition fees within a price range fixed by central government, differences had become as large as 100 percent. But from one year to the next, the divergence in what students pay in different parts of Spain has now risen to 136 percent in such fields as architecture and medicine, where the cost in Andalusia is 750 euros while in Castilla y León students have to pay 1,772 euros.
For master’s courses, students in some cases are paying 879 euros in the Basque Country while in Catalonia tuition fees have been set at 2,371 euros. Nevertheless, Catalonia has instilled a new policy where fees are based on family income with a maximum cost of 2,371 euros. Many regions are changing even higher fees for students who are repeating courses.
Cyprus bailout coming soon
Large investments in Greek bonds subject to those haircuts imposed as part of the last bailout agreement caused major losses for Cypriot banks, and the country needs a bailout — and soon.
There’s no mention in the story of earlier reports that Russia had agreed to cough up a major part of the cash.
From Deutsche Welle:
Cyprus’ Central Bank Chief Panicos Demetriades told the German business daily Handelsblatt that the eurozone country needs an EU bailout “as quickly as possible” to stabilize its ailing system.
Expressing his “strong hope” for bailout talks to be completed in October, Demetriades said in the interview published Monday that it is “extremely important” that the financial lifeline be provided by January 2013.
In June, the government requested assistance in efforts to shore up its struggling banks, which are hugely exposed to debt-stricken Greek lenders and suffered heavy losses in the wake of its neighbor’s debt haircut.
The government in Nicosia has so far kept the exact sum of money its banks need under wraps. But the credit ratings agency Standard & Poor’s estimated that the figure could amount to as much as 15 billion euros (about $20 billion).
New British party pushes for vote on EU membership
And it’s got a celebrity, too, one Katie Hopkins, whose main claim to fame seems to be her appearance on the on the third season of the BBC version of Donald Trump’s The Apprentice.
From Andy Carling of New Europe:
A new Eurosceptic party is putting the British Prime minister under increasing pressure to commit to a referendum on Britain’s EU membership ahead of the next UK general election in 2015, a year after the elections for the next European Parliament.
The party, ‘We Demand a Referendum’ was registered with the UK Electoral Commission in June this year and is the brainchild of Eurosceptic MEP, Nikki Sinclaire, who broke away from the UKIP co-led Europe of Freedom and Democracy over concerns that the group had, in her view, been associating with racists and homophobes.
Sinclaire visited 10 Downing St last week to drop off a 100,000 strong petition calling for a referendum, for the second time.
The party is based on Sir James Goldsmith’s old Referendum Party, a forerunner of Nigel Farage’s UKIP, which was set up to contest the 1997 general election, won by Tony Blair’s Labour party in a landslide victory. Goldsmith’s party failed to come anywhere near winning a seat.
Britain faces a major housing shortage
AN RT report featuring Shadow Housing Minister Jack Dromey:
British incomes rising again
The numbers are quite so good as they might seem, since incomes for the poor come from indexed increases to benefits and a minimum wage boost.
As for the better off, most of the gains will be offset by higher taxes.
From the London Telegraph:
Real incomes are set to grow again in 2013 after three years of decline as the economy pulls out of recession, with poorer families enjoying the largest gains.
The Centre for Economics and Business Research (CEBR) said disposable incomes will rise across the board. The poorest will enjoy a 1.5pc gain due to index-linked rises in benefits and the minimum wage, which are fixed by the Low Pay Commission.
Middle-income households with average earnings of £50,000 will gain 1pc in real terms. The rich will gain just 0.7pc despite the 5pc cut in the top rate of income tax to 45pc. The CEBR said a squeeze in top-end pay and bonuses will offset much of the windfall.
“There is finally a glimmer of light at the end of the tunnel for retailers,” said Daniel Solomon, the report’s author, “after four barren years. Conditions will still be tough, just slightly easier than before.”
Chinese bank looking to buy a European bank
It’s the country’s number two bank, and they got lots of cash to spend.
From Patrick Jenkins and Simon Rabinovitch of Financial Times via CNN:
One of China’s biggest banks is planning to make the country’s biggest foreign bank acquisition to date and has set its sights on potential targets in Europe.
China Construction Bank, the second-ranked Chinese bank by assets after Industrial and Commercial Bank of China, could spend as much as $15bn on a deal, according to Wang Hongzhang, the group’s chairman.
“Some of the banks in Europe have been put up for sale,” Mr Wang told the Financial Times in an interview. “Now we are looking for the right choice.”
He said CCB had Rmb100bn ($15.8bn) of capital available to acquire a whole bank or, at a minimum, to buy a stake of 30-50 per cent in a larger entity.