It’s getting so that it seems European governments are falling before austerity mandates on a regular, even routine basis, and there was another one this week.
There’s another warning about a collapse of the euro, plans for a new rating agency to challenge the lethal dominance of American firms, new signals of collapse from Spain, the accelerating pace of austerity suicides in Greece, and much more.
Another European government falls
This time it’s Romania, and the trigger was outrage over the sale of a national asset.
From New Europe:
Romanian Prime Minister Razvan Ungureanu’s government collapsed on 27 April after a successfully carried out no-confidence vote demanded by the opposition.
236 lawmakers voted in favour of the opposition’s proposal following the government’s decision to sell the country’s largest copper company and energy firms to foreign investors and departure of six deputies from the ruling majority.
President Traian Basescu will now attempt to nominate a new prime minister from the orders of his Liberal Democratic Party (PDL), which with its coalition partners still has a slim majority. Ungureanu’s government lasted mere 76 days and was formed after previous administration led by PDL chairman Emil Boc collapsed.
Cameron warns of a eurozone collapse
The British prime minister becomes the latest European figure to speculate that the euro may not be long for the world.
From The Guardian’s Hélène Mulholland:
David Cameron has warned that the eurozone debt crisis is not “anywhere near halfway” to being resolved, and blamed it for Britain’s double-dip recession.
Pointing to the recent economic woes in Spain and the Netherlands, Cameron indicated that eurozone countries would have to decide whether they wanted to continue with a single currency and economic policy.
“I don’t think we are anywhere near halfway through it because what’s happening in the eurozone is that there is a massive tension between a single currency that countries are finding very difficult to adapt to.
“I think it’s going to be a very long and painful process in the eurozone as they work out do they want a single currency with a single economic policy and all the things that go with it or are they going to have something quite different. That’s what they have to decide.”
Spain trembles as the crisis deepens
The words “huge” and “terrible” used by two of the nation’s leading politicians hint of what’s unfolding on the peninsula as Spain heads deeper into the crisis that could be the trigger for much worse to come for the rest of Europe.
From Nigel Davies of Reuters:
Spain’s sickly economy faces a “crisis of huge proportions”, a minister said on Friday, as unemployment hit its highest level in almost two decades and Standard and Poor’s downgraded the government’s debt by two notches.
Unemployment shot up to 24 percent in the first quarter, one of the worst jobless figures in the developed world. Retail sales slumped for the twenty-first consecutive month as a recession cuts into consumer spending.
“The figures are terrible for everyone and terrible for the government … Spain is in a crisis of huge proportions,” Foreign Minister Jose Manuel Garcia-Margallo said in a radio interview.
Recovery and job creation are still two years off, Economy Minister Luis de Guindos said on Friday in a news conference where he forecast 0.2 percent growth in the gross domestic product next year and 1.4 percent growth in 2014.
De Guindos also said Spain would increase the value-added tax and other indirect taxes next year, but would seek to reduce payroll taxes. Spain has a low VAT compared with other European countries even after raising it in 2010.
Time for a European rater?
The U.S.-based rating agencies have played a leading role in the European crisis, with investors eagerly awaiting the latest designations they’re assured represent accurate readings of national economies.
The move by a German corporation to launch a European equivalent strikes us as interesting, but what will the real impact be?
The best we see coming out of the idea is a real public discussion of the raters, and a closer look at how they come up with their fiscal auguries, designations which can make or break governments.
From Keep Talking Greece:
Standard & Poor’s, Moody’s and all the other kids, that is the American rating agencies are about to get a European rival. German corporate consulting firm Roland Berger developed a plan to challenge the dominance of American firms that have thrown quite some euro zone member countries into deep red by downgrading them and forcing them into the arms of bailout. However Roland Berger needs to raise a start-up capital of 300 million euro. Financial Times Deutschland expressed doubts on whether the European rating agency will manage to raise the necessary budget aas there is allegedly lack of interest from the side of investors.
Who audits the auditors?
Or, as the Romans used to say, Quis custodiet ipsos custodes?
The latest bizarre tale from Brussels raises the old question first posed by Juvenal.
From Valentina Pop of euobserver:
The secretary general of the European Court of Auditors used public funds to hire lawyers and to sue the EU’s anti-fraud office (Olaf) over an inquiry into how he hired security guards. He lost the case, but no action was taken against him.
A ruling by the European Court of Justice dating back to 28 February dismissed Eduardo Ruiz Garcia’s claim for Olaf to withhold publication of a report into alleged irregularities regarding the security tender he had overseen.
It also dismissed his claim for the EU commission, which is the over-arching body Olaf is part of, to pay €6,000 in damages plus legal costs.
The Spanish auditor, in charge of administration at the Luxembourg-based EU body, earns over €16,000 a month. Still, his private legal action was paid for by his institution and he did not have to reimburse the money after losing the case.
And €16,000 a month?
Suicide wave troubles Greece
The growing epidemic of austerity suicides added at least three more victims this last week to the list of Greeks who have seen no other way out of the crisis than to end their own lives.
From the BBC:
On Monday, a 38-year-old geology lecturer hanged himself from a lamp post in Athens and on the same day a 35-year-old priest jumped to his death off his balcony in northern Greece. On Wednesday, a 23-year-old student shot himself in the head.
In a country that has had one of the lowest suicide rates in the world, a surge in the number of suicides in the wake of an economic crisis has shocked and gripped the Mediterranean nation – and its media – before a May 6 election.
Greek media have since reported similar suicides almost daily, worsening a sense of gloom going into next week’s election, called after Prime Minister Lucas Papademos’s interim government completed its mandate to secure a new rescue deal from foreign creditors by cutting spending further.
Some medical experts say this form of political suicide is a reflection of the growing despair and sense of helplessness many feel. But others warn the media may be amplifying the crisis mood with its coverage and numbers may only be up slightly.
“The crisis has triggered a growing sense of guilt, a loss of self-esteem and humiliation for many Greeks,” Nikos Sideris, a leading psychoanalyst and author in Athens, told Reuters.
“Greek people don’t want to be a burden to anyone and there’s this growing sense of helplessness. Some develop an attitude of self-hatred and that leads to self-destruction. That’s what’s behind the increase in suicide and attempted suicide. We’re seeing a whole new category: political suicides.”
Police said the geology lecturer, Nikos Polyvos, who hanged himself, was distraught because a teaching job offer had been blocked due to a blanket hiring freeze in the public sector.
Greek shipping faces a loan crisis
The one solid area of the Greek industrial sector has been its merchant marine, the world’s largest and the source of 16 percent of the nation’s economic base.
But now the financial crisis is taking its toll .
From Greek Reporter:
Greece’s shipping industry, which pays no income taxes to its homeland, may find it difficult to get more financing from Greek banks because of the economic crisis that has created a deep recession and has threatened to push Greece out of the Eurozone, a research report has indicated. The problem could be especially troublesome for shipowners who want to finance higher-return businesses as the banks await recapitalization from the government which imposed losses of 74 percent on investors as part of a debt-write down deal to save the country $134 billion in debt.
The so-called Private Sector Involvement (PSI), which was implemented by former Finance Minister Evangelos Venizelos, now the PASOK Socialist party’s leader and its candidate for Prime Minister in the May 6 elections, was required by the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB), if Greece wanted a second bailout of $173 billion, to go along with a first series of $152 billion in rescue loans to prop up the country’s dead economy.
The PSI cut deep into the capital of Greek banks, leaving them with little resources for lending, and the Petrofin Research report said that could leave Greek shipowners unable to obtain money from banks in their own country. Greece’s sovereign debt crisis, recession, the high cost of liquidity, the PSI losses and the capital inadequacy of Greek lenders saw the value of loan portfolios to Greek shipowners fall 8.6 percent in 2011 to $15.9 billion, the Athens-based shipping research company said in a report published on its website.
Greek cabinet approves bank, utility bailouts
First, the scoop on the banks from Athens News:
Greece’s cabinet on Friday agreed a state bank support fund would provide the country’s four big banks with 18 billion euros worth of European bonds as an interim solution until they are recapitalised later in the year, a government official said.
Huge bond swap writedowns to cut the country’s debt nearly wiped out the capital base of National Bank, Alpha , Eurobank and Piraeus, which need to meet a 9 percent Core Tier 1 capital ratio target by September.
“The cabinet approved a legislative act, a bridge recapitalisation, to allow the Hellenic Financial Stability Fund (HFSF) to allocate EFSF bonds to banks to help them with their liquidity needs,” the government official said, referring to the European Financial Stability Facility.
Athens News also reports on the power sector bailout:
Greece will provide 250 million euros in emergency funds to its ailing electricity providers to prevent a California-style energy crisis, government officials said on Friday.
The liquidity injection removes the risk of a financial chain reaction which, according to regulators, was threatening to bring the country’s electricity system to its knees.
The temporary aid will shore up the accounts of main power utility PPC, allowing it to maintain operations and reimburse other suppliers of electricity and natural gas on whom the smooth functioning of the country’s energy system depends.
Note that reference to a “California-style energy crisis.”
That’s about the Enron-instigated looting of California rate-payers in 2000-2001, and a sharp reminder of the devastating impacts of the same kinds of financial games which have brought Europe to its knees.
Land-grabbers target Hungary
Land grabs are one of the hottest issues on the globalization agenda, with foreign buyers swooping in to buy up land, usually for industrial scale agricultural operations.
While the issue has been hottest in Africa, southern Asia, and Latin America, it was also a major issue in the American farm belt back in the 1970s and 80s, and when Dutch investors were buying up large swathes of farmland in Nebraska, state legislators passed a law banning the practice.
And now the same issue is plaguing Hungary, even after they passed a law much like Nebraska’s.
From New Europe:
Austrian officials will work with Hungary on the issue of illegal “pocket contracts” on the sale of farmland, Regional Development Ministry state secretary Gyula Budai revealed on 25 April.
This debate has been around since Hungary’s accession to the EU. The arguments against selling it to foreigners have been based mainly on national feeling, on the emotional relationship to the country and to the land of Hungary.
Before 1994, there was a legal opportunity also for foreigners to acquire property. Since then, the situation has been changed and now there is only the illegal way. Based on estimates, the area ‘acquired’ in this way is about 350-400 thousand hectares and even according to moderate estimates it is much more than 150-200 thousand hectares.
Hungary was, during the accession negotiations, granted a transition period of seven years concerning property acquisition by foreigners.
Such contracts – designed to circumvent the ban on the sale of farmland to foreigners – are now to be classified as a crime, Budai announced.