A cacphonous clanging crecendo of alarm bells sounds across Europe, with worried banks readying trucks to haul cash out of Greece as fears of a eurozone exit — even an end to the euro itself — hit a new peak. Meanwhile, rising foiod prices across the globe are raising anxieties in the G20 and eurozome manufacturing dropping again, with Germany taking a major hit.
From a Cassandran musing about too little, too late, there’s a German pension system in peril, more layoffs for Opel, and more spats in Merkel’s party over bond buying.
Lots of alarms in Spain, where the government’s now acknowledged they’re working out their Spailout proposal, fervent hopes of an eurobank response, and the provinces are sinking, their cash running out, while the much-merged Bankia spirals into bakruptcy and the prime minister postures.
France gives us another bank collapse, more spiking jobless numbers, a furious effort to control the political base, and some presidential junketeering.
Italy offers more junketerring, ten cities on the verge of bankruptcy and the threat of a school shutdown, and the impending collapse of one of Europe’s oldest banks.
From Ireland, we’ve got a threatened recall and a falling beerometer, while the British cabinet faces a shakeup as a battle over taxes brews, and grownups move back in with their parents, while the Portuguese government prepares for the Portout and a Fozzie bear rises to the heights of Danish politics as unemployment rises, and Cyprus may join the PIIGS.
We conclude with three stories on car sales and some Polish good sense.
Banksters get ready for the Grexit
They’re fine-tuning their systems, readying fleets of trucks to carry cash, and doing everything necessary for the return to the drachma.
It’s all in preparation for the Grexit, but the measures they’re taking will be in place in the event Spain and/or Italy get the boot — or in the event of the end of the euro itself.
From Nelson D. Schwartz of the New York Times:
Bank of America Merrill Lynch has looked into filling trucks with cash and sending them over the Greek border so clients can continue to pay local employees and suppliers in the event money is unavailable. Ford has configured its computer systems so they will be able to immediately handle a new Greek currency.
JPMorgan Chase, though, is taking no chances. It has already created new accounts for a handful of American giants that are reserved for a new drachma in Greece or whatever currency might succeed the euro in other countries.
Greece’s abandonment of the euro would most likely create turmoil in global markets, which have experienced periodic sell-offs whenever Europe’s debt problems have flared up over the last two and a half years. It would also increase the pressure on Italy and Spain, much larger economic powers that are struggling with debt problems of their own. “It’s safe to say most companies are preparing,” said Paul Dennis, a program manager with Corporate Executive Board, a private advisory firm.
In a survey this summer, the firm found that 80 percent of clients polled expected Greece to leave the euro zone, and a fifth of those expected more countries to follow.
G20 prepares for global food summit as prices soar
The combination of drought and heavy speculation of the commodities market has sent food prices soaring across the globe.
August was the second month in a row that profits from commodities beat the bond and stock markets, as investors sought refuge in the safety tangible goods — which is good news for them but bad for the rest of us, who are paying more for life’s necessities.
With the global economy in crisis, the G20 nations are under intense pressure to convene a major conference on food prices.
From Tom Bawden of The Independent:
The G20 is under growing pressure to call an emergency food summit after the price of essentials jumped by ten per cent on average in July.
New research shows prices are at a record high following “an unprecedented summer of droughts and high temperatures”. Cereal prices were particularly hard hit, with maize and wheat rising by a quarter and soybeans by 17 per cent, as poor weather decimated harvests in the US, Russia, Ukraine and Kazakhstan, according to the World Bank. The average global food price in July stood six per cent higher than a year earlier.
“Food prices rose again sharply threatening the health and well-being of millions of people,” said World Bank Group President Jim Yong Kim. “Africa and the Middle East are particularly vulnerable, but so are people in other countries where the prices of grains have gone up abruptly,” he added.
The World Bank report also warned that prices could continue to rise this year. “Negative factors – such as exporters pursuing panic policies, a severe El Nino, disappointing Southern hemisphere crops or strong rises in energy prices – could cause significant further grain price hikes,” the report said.
Eurozone manufacturing records another decline
While the whole common currency area has been in decline, the latest numbers show a particularly sharp decline in the zone’s industrial giant, Germany.
From the Financial Times via CNN:
Eurozone manufacturing contracted for the 13th consecutive month in August, as exports in Germany, the bloc’s main engine of growth, fell at the steepest rate in three years, according to a purchasing managers’ index.
The Markit manufacturing PMI for the 17-country euro bloc was revised to 45.1 from the initially estimated 45.3. Although above July’s 37-month low of 44.0, it still remained significantly below the 50 mark, which indicates a contraction.
The figures contrasted with more encouraging manufacturing numbers from the UK, also released on Monday, which showed a bounce to 49.5 from 45.2 in July. But Markit, which compiles the data, emphasised a grim underlying picture for the country’s manufacturing sector, while disappointing PMI data from China at the weekend pointed to a more serious downturn than Beijing had been anticipating, economists said.
Analysts said although the eurozone’s PMI rate of decline was easing, eurozone gross domestic product was likely to contract in the third quarter, which would mark the euro region’s second recession in three years. GDP for the single-currency area shrank 0.2 per cent in the second quarter.
More on the German numbers from Spiegel:
Exports are a major pillar of the German economy, but now the sector is starting to feel the impact of the euro crisis and the global economc slowdown. German export orders fell in August by the highest rate in more than three years, the Markit financial information company announced Monday after conducting a survey of 500 industrial firms.
“Survey respondents commented on a general slowdown in global demand and particular weakness in new business inflows from Southern Europe,” the institute said. The firms hardest hit by declines are manufacturers of machinery and other investment goods as well as producers of intermediate goods such as chemicals.
In the first half of 2012, German exports had still grown thanks to demand from Japan, the United States and Russia. But it was already evident then that exports to crisis-hit countries were falling sharply, and that trend is now continuing.
Markit economist Tim Moore said the German industrial sector is going through its worst quarter — the three months to the end of September — in more than three years.
And more from Jonathan Cable of Reuters:
In Italy the main index (43.6) has now been below the break-even point for over a year and was worse than economists had predicted while in Spain it has been sub-50 since May last year.
The latter two countries are deep into austerity programs which are aimed at bringing their debt piles under control but also keep their economies stuck in recession.
They are looking for the European Central Bank help them escape this vicious circle by buying debt issued by their governments to bring down borrowing costs.
“The national picture remains one of widespread contraction, only Ireland saw manufacturing output rise. The situation in Italy is also becoming more of a cause for concern, as it falls further down the PMI league table,” [Markit senior economist Rob] Dobson said.
Merkel and the reign of bean counters
Is the new European regime, pushed by Angela Merkel, doomed to failure?
And, if so, why?
Consider this from New Europe’s pseudonymous Kassandra:
The late interest of Angela Merkel for “more Europe” unveils the German agony after it realised that, in retrospect, things are not developing in the direction it would like.
Germany now asks for a new Treaty that will function as a Constitution with the focus on a common budget centrally controlled from Brussels (write Frankfurt or, better, Berlin). Member states will be offered in return Eurobonds and other ephemeral facilities. Yet the “patent” is unlikely to work as it seems to be late overdue by two or three years. A midsummer night dream as William would have said but the summer is already gone.
For any major or even minor change in the Union, the French agreement is necessary. It is a “sine qua non” prerequisite. Europe without France would only be a complex of barracks and camps with German commanders. Four and a half years ago, October 12, 2008, the then-powerful Nickolas Sarkozy gave to Angela Merkel the great opportunity to reshape Europe, secure the euro and save all economies, now collapsing. Greece, for instance, could have been saved with €20, maximum €30 billion. Now the salvation of Greece (and soon of several others) may well be history. Why it was not done four and a half years ago? Because then (and now), Europe was ruled by accountants.
Perhaps the writer, whose pseudonym comes from the princess of Troy granted the boon of foretelling the future along with curse that none would believe her, is correct.
We think the real problem is enslavement of debt itself and the concomitant for endless growth contained within it.
So long as the present system endures, cycles of boom and bust, accompanied by the upward transfer of wealth in a globalized financial regime, will continue to inflict misery on billions.
German pension system in peril
Pension systems in both Europe and the U.S. are premised on the accumulation of interest, since companies and government put away insufficient wealth to fund them.
That means times of low interest imperil pensions, dependent as they are on the inflation that comes from debt-based financing.
Now, with interest rates in Germany at or near zero, the government’s pension plan is in crisis, and a political debate over funding is shaping up.
From Michael Gessat of Deutsche Welle:
German Labor Minister Ursula von der Leyen tells today’s workers that they may face poverty upon retiring. But her proposed fix for the pension system has drawn criticism. The opposition demands more rights for workers.
“The New Pension Shock Table” stared down at readers from the headline of the weekend edition of “Bild am Sonntag.” The newspaper presented dire numbers and models from Germany’s Federal Ministry of Labor and Social Affairs: Those who currently earn 2,500 euros ($3,145) per month before taxes and work full time for 35 years will earn a pension of 688 euros starting in the year 2030. That corresponds almost exactly to today’s poverty line for elderly people. Older Germans who receive less money than that per month qualify for an extra subsidy for living expenses, funded by taxpayers.
Poverty in old age is now a threat not only to demographics including housewives, part-time workers and low earners – but to everyone, said Labor Minister Ursula von der Leyen.
“Germans desperately need a reliable pension system in order to avoid poverty upon hitting retirement age,” she said.
However, the problem von der Leyen is calling attention to is hardly new. And at “fault” is, in fact, the rather good news that people in Germany are living longer on average. But that means that pension payments must be made longer. As such, the federal government would like to begin sinking pension rates in relation to income levels – from a current rate of 51 percent to 43 percent by 2030.
Opel cuts shifts, temporaily closes a plant
We’ll have more on Europe’s faltering car sales toward the end, but here’s the latest bad news for GM’s German arm.
From Deutsche Welle:
German carmaker Opel has stopped production at its factories in Rüsselsheim and Kaiserslautern. At the Eisenach plant, working hours were reduced in line with company plans to cut overcapacity.
At Opel’s main factory in Rüsselsheim, some 3,500 workers were idled under a work stoppage that had been planned for Monday.
In addition, the German carmaker’s components’ plant in Kaiserslautern completely stopped manufacturing lines on the day, sending its entire workforce of 2,500 employees home.
At Eisenach, early and late shifts were cancelled, Opel spokeswoman Johanna Lomp-Knetsch told journalists in Rüsselsheim on Monday. Night-shift employees have already been working reduced hours since spring of this year.
Lomp-Knetsch said that work at the three plants would be halted Mondays and Fridays over the next three weeks. Work is also scheduled to be halted for the entire final week of September.
Merkel’s economy minister sides with bankster over bonds
The battle inside the German chancellor’s government over the proposed eurozone bond buying plan is heating up.
Germany’s economy minister threw his weight behind Bundesbank chief Jens Weidmann’s opposition to the European Central Bank’s plans to buy debt of euro zone countries with high borrowing costs, saying that they could not replace economic reforms.
Philipp Roesler was quoted in a newspaper to be published on Monday that Weidmann, who has made no secret of his displeasure with the strategy to lower Italian and Spanish borrowing costs by buying bonds, was right to make his opposition heard, Reuters informs.
“Bond purchases cannot remain a permanent solution as they drive the danger of inflation,” Roesler was quoted in a pre-publication release of Monday’s Rheinische Post newspaper.
“ECB President Mario Draghi has pointed out himself that only structural reforms in individual countries can secure the competitiveness and stability of our currency, not bond purchases. That must be the course.”
Merkel is having real troubles selling her constituents on the plan, along with the mandate to strip the country of budgetary autonomy.
With the crisis accelerating, Merkel’s in for a bumpy ride.
Yet another German word of warning
This time from the finance minister.
From Emma Rowley of the London Telegraph:
German finance minister Wolfgang Schaeuble indicates that investors could be left disappointed as they this week look for the European Central Bank to take action to tackle the eurozone debt crisis.
Investors risk being disappointed as they hope for the European Central Bank to this week unveil emergency measures to tackle the eurozone debt crisis, the German finance minister warned.
Wolfgang Schaeuble sounded a note of caution ahead of Thursday, when markets expect ECB president Mario Draghi to announce a massive bond-buying programme to shore up struggling nations.
“We have to be very careful that we don’t raise false expectations,” he said. “It has to remain very clear, state debt can’t be financed through monetary policy. Therefore we can’t have a decision — we would think it very wrong — that’s not covered by the ECB mandate.”
But Merkel had some words in response
The Iron Chancellor tried to strike the middle ground.
From Tony Czuczka and Patrick Donahue of Bloomberg:
German Chancellor Angela Merkel told her domestic critics that bailouts are here to stay, even as her finance minister warned against placing too much faith in the European Central Bank’s ability to stop the crisis.
Merkel made a foray away from crisis fighting today as she traveled to a traditional political gathering in a packed beer tent in southern Germany to confront anti-bailout critics in her government coalition. Countries such as Greece “deserve our solidarity” as long as they meet commitments for overhauling their economies, she said.
“We need Europe, but we need a strong Europe,” Merkel told members of her Bavarian Christian Social Union sister party in the town of Abensberg, northeast of Munich. “We can’t take up so much debt that tomorrow we won’t have anything left and we’ll be at the mercy of the financial markets.”
And on to Spain. . .
Spain wants Spailout, but no new memorandum
As we suspected, the Spanish Prime minister was implementing all those new austerity measures in hopes that the next Spailout wouldn’t come with one of those nasty memoranda attached.
Spain will consider seeking extra aid from Europe on top of a 100 billion rescue of its financial sector but does not see any need for new conditions, Prime Minister Mariano Rajoy said in an interview published in European newspapers on Sunday.
Rajoy said he wanted to see details of the European Central Bank’s (ECB) program to buy debt of euro zone countries with high borrowing costs before deciding whether to proceed with a request.
“If I believe it is good for Europe as a whole, for the euro, and for Spain, I will do it, and if not, not,” Spanish daily ABC quoted him as saying, regarding seeking more aid for Spain.
ECB board member Joerg Asmussen said on Thursday the ECB should only buy sovereign bonds of troubled euro zone states if the International Monetary Fund was involved in setting conditions.
As hopeful as Roy sounded, we suspect no cash comes without strings.
But he has to make the effort, giving the rising discontent, ranging from cross-country marches to grocery store raids.
And the weekend implementation of that hefty sales tax boost has already ruffled plenty of feathers, as indicated in this clip from euronews:
Economy minister predicts eurobank action
Perhaps the most astounding comment from the esteemed gentlemen is his declaration that folks should just stop worrying and trust the Frankfurt banksters.
From Agence France-Presse:
Spain’s economy chief said Monday he believes the European Central Bank will act over the euro crisis, which has sent borrowing costs spiralling and put Madrid on the brink of a bailout.
“I think the ECB knows perfectly well what the problem is with the euro and that it will act in consequence,” Economy Minister Luis de Guindos told Onda Cero radio.
De Guindos noted that the bank for the 17 nations in the single currency had already said it could intervene on the open market to buy the sovereign bonds of troubled member states such as Spain.
In early August, the ECB suggested it could start unlimited buying of stricken member states’ bonds to drive down their crippling borrowing costs, following trouble in Spain and Italy.
Andalusia begs Madrid for a cash advance
As the Spanish debt crises deepens, the country’s regional governments are running out of cash and turning to the national government for help.
Now two governments are saying the crisis is critical and they needed that cash now, sooner than the government has indicated.
From the London Telegraph:
Spain’s indebted Andalusia region is to seek central government aid with a €1bn (£791m) “advance” to provide liquidity.
Andalusia, the most populated of Spain’s regions, reached out for the rescue as it buckles under heavy debts and struggles with a towering 33.9pc unemployment rate.
Spain’s government has said it plans to set up within weeks an €18bn liquidity fund for troubled regions, which suffered an explosion of debt after the 2008 property crash.
As interest rates spiral higher, some of the 17 regions are struggling to meet debt repayments, AFP reported.
While waiting for conditions of the regional rescue fund to be established, Andalusia government official Susana Diaz said it would require an “advance” of €1bn so as to provide “liquidity”.
The latest developments from Dani Cordero of El País:
Andalusia and Catalonia on Monday said they would have to ask for a bridge loan from the central government to cover their liquidity requirements until Madrid formally sets up the Regional Liquidity Fund (FLA).
The Andalusian commissioner for the premier’s office, Susana Díaz, said the region would ask Madrid for an advance of one billion euros, while it weighs up whether to tap the FLA.
“While the Spanish government proceeds to defining the conditions under which regions can tap the FLA, and given that other regions will ask for funding from it, the Andalusian administration has asked for this advance because we need liquidity,” Díaz told reporters.
Díaz pointed out that Valencia had already received a 300-million-euro advance from Madrid in June to cover its funding needs. Valencia recently increased the amount it plans to seek from the FLA by one billion euros to 4.5 billion. Murcia wants 300 million euros.
Catalonia intends to ask for 5.023 billion euros from the FLA liquidity fund
Meanwhile, the Catalan economic commissioner, Andrew Mas-Colell, said Spain’s most important region economically would have to ask for a bridge loan from Madrid if the FLA was not set up this month.
Bankia spirals deeper into bankruptcy
Bankia, created less than two years ago from the merger of seven busted-out banks, is sliding further into a financial black hole, having just recorded the largest banking losses in the country’s history.
Call it a case of failing upward.
From Deutsche Presse-Agentur:
Spain’s government was scrambling to shore up the country’s fourth-largest bank after it announced half-year losses of 5.6 billion dollars Friday.
The losses reported by Bankia were the highest in the history of Spain’s banking industry.
The government said the emergency injection would come from a fund established to help the troubled financial sector and avert the need to seek an advance from the European Union’s bailout funds.
Officials did not specify the amount of capital to be injected. The government took over Bankia in May.
Prime minister takes the heat
Inflicting all that pain is about restoring Spain as a “serious country” in the eyes of the world’s money masters.
Call it a case of fiduciary machismo.
From Charles Penty of Bloomberg:
Spanish Prime Minister Mariano Rajoy said the country is unable to fund itself at the current cost of borrowing and needs sacrifices such as higher taxes to restore its national standing.
“If we do this we will start to recover confidence as a serious country that does what it says,” Rajoy said today in a speech to members of his People’s Party at Soutomaior Castle in Galicia. “At the moment we can’t finance ourselves at the prices of the market.”
Rajoy was addressing supporters in his home region on the same day that increases to value-added tax take effect. Spanish households already are squeezed by unemployment at close to 25 percent and austerity measures that will be equal to 15 percent of gross domestic product by 2014.
“This is a sacrifice that comes at a very difficult time for very many Spaniards,” said Rajoy, referring to the sales tax. “If there had been any other alternative, does anyone think that I would not have been the first one to adopt it?”
Does he seriously think that restoring Spain’s role as a “serious” player means that much to people struggling to feed their families and roofs over their heads?
And on to France. . .
France forced to take over major lender
The takeover of Credit Immobilier de France, which specialized in mortgages for blue collar workers, follows a Moody’s downgrade.
French jobless pass three million mark
And it’s going to keep rising, said the country’s labor minister.
From Agence France-Presse:
French Labour Minister Michel Sapin said Sunday that the country’s unemployment had passed the symbolic number of three million registered jobseekers and would keep rising.
Asked on Radio J about the number of jobseekers hitting 2.99 million in July, Sapin said there was no doubt the number had risen beyond that.
“What will next year’s unemployment rate be? Nobody knows. We have already hit three million. The numbers you are talking about, which are the numbers for July, are already outdated,” Sapin said.
“The question is will it rise by very much? Yes, it will rise. At some point will we be able to reverse it? Yes,” he said.
Prime minister struggles to control the base
Rising unemployment is one thing certain to rouse those in the ruling party who take its Socialist name with any seriousness at all.
Now the prime minister is backing and filling in an furious effort to gather parliamentary support for his boss.
French Prime Minister Jean-Marc Ayrault sought to rally a divided left behind the European Union’s fiscal compact, arguing that anything but a strong endorsement would weaken President Francois Hollande and France itself.
The Socialists have a majority in both houses of parliament, so the treaty, which ties governments to deficit-cutting plans and is a condition of further steps to resolve the euro zone debt crisis, should pass.
But the vote could be tight, with at least one coalition member – the Green party – threatening to abstain and others on the left ambivalent about the pact, which Hollande himself once opposed.
“If we want Francois Hollande – because he will be returning this week to talk to our partners – to be strong, we must keep giving him strength,” Ayrault said in an interview with France Inter radio.
“The slightest sign of parliamentary weakness, which would consist in not giving him a wide majority to ratify this new stage of integration, would mean weakening France itself.”
Something has to rankle the vestige of real socialists in the party about supporting an internationalism not of labor but of money.
And Hollande sets out on his own trek
In advance of off those major meetings this month when Spailouts, the More Europe Enabling Act, and other such trivial matters will be decided.
From Agence France-Presse:
French President Francois Hollande will meet with British Prime Minister David Cameron in London on Thursday, two days after meeting Italian Prime Minister Mario Monti in Rome, his office said.
The visit is one of a series of meetings between European leaders as they try to grapple with an aggravation of the eurozone debt crisis.
The French head of state was already scheduled to be in London to attend the Paralympic Games being held there.
And on to Italy. . .
Italy’s prime minister does a three-card shuffle
While Hollande is off on his trek, Mario Monti, the unelected technocrat picked by the Troika to implement the austerian agenda on The Boot, is doing his own peripatetic thing.
Sarah Delaney of the Los Angeles Times reports:
As Italians are easing back into workaday life after August vacations, Monti is already in full swing dealing with challenges on both the domestic and European fronts. On Wednesday, he is scheduled to meet with German Chancellor Angela Merkel in Berlin to discuss the long-running euro debt crisis and Italy’s worryingly high long-term borrowing costs.
Monti is facing pressure from Germany and other northern European countries to buckle down with austerity measures, while critics at home blast him for focusing on cost-cutting and taxes rather than growth.
In his meeting with Merkel, Monti is likely to make the case for spending measures to stimulate production and employment, and to ask Berlin to ease up on its demands that Italy and other financially troubled countries, such as Spain and Greece, slash their budgets. All three Mediterranean nations are in recession; Greece has already received two international bailouts, and there is fear that Spain and Italy may have to do the same if their borrowing rates don’t come down.
“Everything is difficult now,” said Gianfranco Pasquino, a political scientist at the Johns Hopkins University School of Advanced International Studies in Bologna, Italy. “He’s got to work with two contrasting problems: reducing spending and the deficit, and defining measures for growth.”
Monti has seen his once-high approval ratings fall as he tries to implement unpopular economic reforms, such as modifying Italy’s labor laws.
Gee, busting union-won protections and inflicting other sundry miseries is making him unpopular.
Ten Italian cities on brink of bankruptcy
And it’s so bad schools may not open.
From Ireland’s Independent:
Italy’s financial outlook darkened today amid warnings that 10 cities are at risk of bankruptcy and schools may not be able to open in the autumn because of drastic spending cuts.
The cities at risk of running out of money include Naples, Palermo in Sicily and Reggio Calabria, on the toe of the Italian boot, according to the Italian press.
“The situation is becoming worse by the day,” said Graziano Del Rio, the president of a national association of municipal councils.
The warning came just days after Mario Monti, the prime minister, expressed fears that Sicily, which has a high degree of fiscal autonomy, was on the brink of a default.
Consider the case of one city, whose debts include a very pricey truffle bestowed on the Bunga Bunga man:
From Struggles in Italy:
After Sicily’s initial fears of bankruptcy which were settled with extraordinary state funding, for the first time an Italian city went bankrupt. Alessandria, in the northeastern Piedmont region, has 100 million euros of deficit. The missing money wasn’t spent on extraordinary investments, but for ordinary expenses: 600.000 euros in flowers, a trip to Moldavia, private jet flights, promotional videos, a 12.000 truffle given to ex-PM Berlusconi and 34 people hired in a state funded company without any sort of competitive entrance examination, just few months before the local elections.
The ex-mayor Piercarlo Fabbio (PDL), that run the city in the last 5 years, and some ex town Councillors are now under investigation for tax fraud (“Danno erariale”) and state treasury fraud (“Truffa ai danni dello Stato”). On the 27th of June the city was officially declared bankrupt and state insolvency inspectors has been appointed to manage the city finances.
The crucial point of the issue is the crackdown imposed on the state owned (but locally managed) companies in charge of garbage collection and disposal, public transport and other services (school canteens, tax collection etc); a total of 500 public workers that the city can’t afford to pay anymore. The new mayor Rita Rossa(PD) asked for state aid, and after the refusal she thought of starting a hunger strike. Her final solution was a partnership with Legnano Bank, that would give to the workers 3 monthly wages, with the possibility of a monthly renewal. The bank only imposed two conditions: that the workers open a free bank account at their bank, and that if the city doesn’t pay the debt, the workers will, including interest but after the 6th month.
This plan caused massive strikes in the city: initially only by the waste collecting company, on the 28th of August, and joined by the other workers from transport and multi-service companies the following day. On the 29th the train station was occupied and trains were not permitted to enter or leave by strikers lying on the rails.
Even if the city administration passed to the state inspectors, the mayor managed to unfreeze 650.000 euros from special funds to pay August salaries. On the 31st the transport and waste companies were back in service.
One of world’s oldest banks threatened
And one of Italy’s largest, too.
And it’s all because they bought government bonds.
From the Washington Post’s Michael Birnbaum:
The 540-year-old Monte dei Paschi Bank, Italy’s third-largest, is on the ropes as it struggles to deal with holdings of Italian bonds, once considered a prudent place to tuck cash.
The euro crisis upset that calculation. Across Europe, banks are confronting the same problem as seemingly safe bets that governments would repay their debts turned out to have been major gambles.
At the heart of the crisis, the tangled relationship between governments and the financial sector amplifies the financial problems on both sides. And in Siena, bountiful profits that once poured from Monte dei Paschi’s treasure-filled Gothic palazzo have dried up. Last week, the bank announced that it had lost $2 billion in the first half of 2012.
Analysts and the bank’s current management say a long-prudent institution — based in the same building since 1472 — got caught up in the froth of the cheap-credit years before the crash and then made poor decisions about how to recover.
And on to Ireland. . .
Irish health minister faces a recall
It’s the sort that happens in parliaments, a no confidence motion.
And it’s all because they think he was taking austerity a little too far.
From Lyndsey Telford and Sarah Stack of Ireland’s Independent:
Health Minister James Reilly faces political exile after Opposition parties announced plans to table a motion of no confidence in him.
Fianna Fail and Sinn Fein both criticised the minister’s controversial proposals to slash €130m from services.
Elsewhere, Labour councillor Paul O’Shea, who resigned from Ennis Town Council over the weekend because of the cuts, warned of further resignations from the party if Cabinet approves the measures.
Several TDs with the coalition also hit out at the minister’s proposals to scale back frontline services.
Fianna Fail health spokesman Billy Kelleher accused the minister of targeting the most vulnerable.
Ireland’s economic beerometer is way, way down
If there’s any country that likes to down a brew in a congenial setting, it’s the Emerald Isle.
So when folks are drinking less to commiserate, it’s a sign that things are truly bleak, as the numbers confirm.
From The Irish Times:
Sales in Irish pubs have fallen 34 per cent below the levels recorded before the State’s property bubble collapsed in 2007.
Bar sales declined 8.2 per cent in volume terms from January to July compared with the same period a year earlier, according to the Drinks Industry Group of Ireland (DIGI).
The group said sales in July were down by 11.4 per cent.
“The weakness in the domestic economy and the continued pressure on discretionary income are clearly having a negative effect on the drinks sector with the pub trade suffering disproportionally,” it added.
And on to Britain. . .
Taxes on rich threaten Cameron’s cabinet
Tory British Prime Minister David Cameron’s coalition junior partner may calling for boosting taxes on the richest Brits, while his own party was to cut taxes.
Makes for an interesting conflict.
First, the tax-the-rich agenda from Jacey Fortin of International Business Times:
Great Britain, whose economy is even worse than that of the United States, is desperate to break free of its years-long, double-dipping recession. This week, new taxes on the UK’s wealthiest emerged as a potential plank in the official platform of the Liberal Democrats, who share a coalition government with the Conservative party at Westminster.
“If we are going to ask people for more sacrifices over a longer period of time, a longer period of belt tightening as a country, then we just have to make sure that people see it is being done as fairly and as progressively as possible,” he said.
His plans involve taxing held wealth, not income — Clegg and fellow Liberal Democrats do not plan to raise the top-bracket tax rate of 45 percent.
This would be a temporary solution to address Britain’s double-dip recession. Belts are tight from London to Liverpool, and about to get tighter — this month, the Bank of England amended its growth forecast, predicting an even slower recovery than previously thought.
And with some of his his fellow Tories calling for tax cuts, Cameron sets out to reboot his cabinet.
From Kitty Donaldson of Bloomberg:
U.K. Prime Minister David Cameron is set to overhaul his government team this week as his own Tory lawmakers challenge his economic strategy, calling for tax cuts.
Cameron will announce changes to ministerial positions as early as tomorrow, in a set-piece event that seeks to stamp the premier’s authority on his party. More traditionalist Conservative lawmakers demanded today that he change course and cut taxes rather than increase spending on projects to boost the faltering economy. Their Liberal Democrat coalition partners are seeking to increase the tax burden on the better-off.
While stopping short of saying he will fund new infrastructure, Chancellor of the Exchequer George Osborne told BBC television yesterday that the government will announce proposals this week to guarantee investment finance and overhaul planning laws to accelerate the approval of projects.
“My view is that high taxes are the enemy of growth, not the answer,” Conservative lawmaker Mark Pritchard told BBC Radio 4’s “Today” program this morning. “The government needs to reward success, not penalize it.”
The London Telegraph’s Chris Hope offers his own suggestions:
Adults forced to move back home or share housing
There’s a certain irony in one ongoing result of the economic restructuring, to borrow from the neoliberal argot: people in the industrial world are going back to ways of living that were considered normal and healthy by most people for most of human history.
From Nicola Sullivan of The Independent:
The cost of living, a challenging job market, difficulties in obtaining credit and historically high house prices, mean many people in their thirties and forties are having to squeeze adult needs and intolerances into juvenile lifestyles.
Those that haven’t been able to get on the property ladder or struggling to pay astronomical rents in places like London are forced to return to the family home like prodigal teenagers, while others live in shared houses – perpetual ‘students’ squabbling over fridge space, cleaning rotas and toilet roll.
Figures from EasyRoomate show that the average number of renters living as flatmates or lodgers has increased to 2,851,000 from 2,749,000 a year ago. And during a six-month period the number of professionals over the age of 40 looking for rooms in a shared property increased by over 2,000 from 12,000.
Lisbon prepares for the Portout
In return, they vow audacious austerian discipline.
From Agence France-Presse:
Portugal is determined to press ahead with a rescue package designed to drag the country out of its debt crisis, Prime Minister Pedro Passos Coelho said Sunday, as international auditors visited.
The government would pursue the plan with “determination and audacity” he told members of his centre-right Social Democratic Party (PSD).
The plan includes controversial austerity measures designed to balance the country’s books, undertaken in return for an International Monetary Fund and European Union rescue package worth 78 billion euros ($98 billion).
But experts commissioned by parliament say that Portugal’s public deficit is expected to reach 6.7 to 7.1 percent of output for the first half of this year, far off the government’s target of 4.5 percent.
And unemployment hit a record level of 15 percent of the workforce in the second quarter. Critics fear that tightening the fiscal screws further will very likely push that even higher.
A Dutch Fozzie Bear opposed to austerity
Holland’s Socialist Party, headed by an avuncular ex-teacher dubbed aftrer a Muppet, is polling in second place, after a brief rise to the top.
Here’s a quick profile from The Guardian’s Julian Coman:
The Dutch Socialist party (SP) is an organisation once known for its Maoist sympathies and habit of throwing tomatoes at political opponents. It now finds itself within touching distance of becoming the biggest parliamentary force, eclipsing its more moderate rivals in the Labour party and on course to gain at least 30 parliamentary seats. Just as the unexpected success of the leftwing Syriza party in beleaguered Greece set alarm bells ringing in Brussels, the SP has become another surprise package of European politics at a time when more centrist politicians seem to lack ideas.
Anti-austerity and exasperated by endless eurozone bailouts, the SP’s leader, Emile Roemer, 50, has pledged to abandon the government’s plan to bring the budget deficit below 3% by 2013, largely through healthcare cuts and wage freezes, and face down German chancellor Angela Merkel and the European commission if they object.
Conservative plans to extend the retirement age from 65 to 67 would also be torn up. And in an echo of French president François Hollande’s intention to raise more money from the very rich, income tax would be raised from 52% to 65% on those earning above £119,000 a year. A public investment programme, partly financed by the proceeds, would be aimed at turning around the ailing Dutch economy.
For an avuncular former teacher, known for a toothy smile and sometimes nicknamed “Fozzie Bear”, it adds up to an uncompromising platform designed to cause palpitations in both the Amsterdam stock exchange and European commission corridors.
Denmark’s jobless numbers keep rising
First, the numbers from Politiken.DK:
An increasing number of Danes are receiving unemployment benefits from the state. In just one year, the number of social security recipients has increased by 10 per cent to 103,800, according to the June figures from Statistics Denmark.
Since June 2008, the number has increased by 55 per cent.
The total number of recipients of unemployment transfer payments has also increased – by five per cent from June 2011 to June this year.
Overall, some 170,500 people receive some form of unemployment transfer payment from public coffers, an increase of 37 per cent since June 2008.
The figures show that the number of social security recipients in job-related activation has marginally increased. In June this year some 56,400 social security recipients were in job schemes, two per cent more than in June 2011 and an increase of 48 per cent since June 2008.
Peter Stanners of the Copenhagen Post reports on the government’s latest move to ease the growing unemployment numbers:
On Friday, the employment minister, Mette Frederiksen (Socialdemokraterne), announced that 332 million kroner would be made available to help unemployment insurers (A-kasser) and state-run employment centres help the unemployed find work.
“It’s a solution that takes finding work as its starting point,” Frederiksen wrote in a press release. “We should all agree that the best thing for the unemployed is to get them back into work rather than leaving them dependant on unemployment benefits.”
The deal means that extra help finding work will be provided to the 9,000 to 16,000 unemployed Danes that, according to the employment ministry, risk losing their unemployment benefit allowance (dagpenge) in January.
The money guarantees that each at risk unemployed person will be provided a personal job consultant that will help them find work experience, skills training or council-subsidised work.
Maybe we’ll have to call them the CPIIGS
That’s because Cyprus, with more banks failing and a bailout search already underway, came in third in its rate of unemployment increase over the last year.
The Republic of Cyprus recorded the third highest increase of unemployment in a year, according to new figures by Eurostat, the statistical office of the European Union. . .The highest increases were registered in Greece (16.8% to 23.1% between May 2011 and May 2012), Spain (21.7% to 25.1%) and Cyprus (7.7% to 10.9%).
Just show us the car facts
As the Opel layoffs story indicated, car sales are falling in Europe these days.
We have two stories from opposite ends of the continent, plus an Iberian anomaly.
We begin with a major decline in France, from Radio France Internationale:
French car sales fell by 11.4 per cent in August, following a drop of seven per cent the previous month.
The manufacturers’ organisation said the number of sales of new cars in France slipped to 96,115.
Over the first eight months of this year, the fall was 13.4 percent, it said, noting that the French carmakers PSA Peugeot Citroen and Renault suffered more last month than their foreign competitors.
The sector has been weak for several months owing to the end of a cash-for-bangers government bonus to support car sales at the height of the financial crisis.
Next, a slump in Serbia, reported by ANSAmed:
Car sales in Serbia were down 40% in the first seven months of this year compared to the same period last year, Serbian auto importers association president, Milos Petrovic, was quoted by local media as saying on Monday.
With 15,000 cars sold between January and July against 20,000 last year, the market has hit an ‘’all-time low,’‘ Petrovic said. But luxury car sales remained stable, he added.
‘’The haves continue having, the have-nots continue to be deprived,’‘ he commented. The outlook is negative on the auto market, which ‘’will continue to weaken,’‘ Petrovic said.
But car sales rise in Spain, for a reason.
That’s because buyers rushed to make their purchases before the draconian new sales tax [value added tax in Europeanese] took effect last weekend.
Spanish car sales rose in August for the first time in seven months, as customers brought forward purchases before a hike in value added-tax on Sept. 1, car manufacturers’ association ANFAC said on Monday.
Car sales rose by 3.4 percent in August on an annual basis, with a total of 48,820 cars sold. That was the first rise since January and came before a rise in VAT by three percentage points to 21 percent on Sept. 1.
ANFAC said that 10,000 private customers brought forward purchases of cars before the tax rise. Yet the overall trend was down, with a drop of 8.5 percent in sales in the first eight months of the year, and worse expected to come.
And to close, a Polish good idea
Considering the current plight of the euro and the general state of the European and global economies, we think Poland’s approach to entering the eurozone is a notably sensible.
From Agence France-Presse:
Poland’s foreign minister said his country will join the eurozone when the crisis-hit single currency bloc has resolved its problems, in an interview Monday with a German newspaper.
“We are ready to join when you have resolved your problems and when we can say to our people ‘we can now safely join’,” Radoslaw Sikorski told the Frankfurter Allgemeine Zeitung.
“You can hardly blame us for not wanting to enter while the eurozone is in a grave crisis,” he added.
Poland, which joined the European Union in 2004, has said it will meet Maastricht Treaty criteria for eurozone entry by 2015 but has refused to peg a date for abandoning the zloty because of the debt crisis.