Category Archives: Economy

Don’t believe the IMF; it’s as neoliberal as ever


Yep, all that recent rhetoric about a “new and improved” IMF, an institution more congenial to people rather than banksters and neoliberal doctrine, is just a load of hogwash.

That’s the finding of a new study from University of Cambridge researchers who dove beneath the superficial rhetoric to find the same old beast lurking in the shallows.

From the University of Cambridge:

A new study, the largest of its kind, has systematically examined International Monetary Fund (IMF) policies over the past three decades. It found that – despite claims to have reformed their practices following the global financial crisis – the IMF has in fact ramped up the number of conditions imposed on borrower nations to pre-crisis levels.

The crisis revived a flagging IMF in 2009, and the organisation has since approved some of its largest loans to countries in economic trouble. At the same time, IMF rhetoric changed dramatically. The ‘structural adjustment programs’ of austerity and privatisation were seemingly replaced with talk of the perils of inequality and the importance of social protection.

Researchers from the University of Cambridge’s Department of Sociology collected archival material on the IMF’s lending operations and identified all policy conditions in loan agreements between 1985 and 2014 – extracting 55,465 conditions across 131 countries in total.

They found that structural adjustment conditions increased by 61% between 2008 and 2014, and reached a level similar to the pre-crisis period.

The authors of the study, which used newly-available data and is published today [open access] in the Review of International Political Economy, say their findings show that the IMF has surreptitiously returned to the practices it claims it has abandoned: encroaching on the policy space of elected governments by enforcing free market reforms as conditions of lending. This is despite the IMF Managing Director Christine Lagarde rejecting concerns over the return of structural adjustment: “We do not do that anymore”*.

“The IMF has publicly acknowledged their objectives to include creating breathing space for borrowing countries, and economic stability combined with social protection,” said lead author Alexander Kentikelenis. “Yet, we show the IMF has in fact increased its push for market-oriented reforms in recent years – reforms that can be detrimental to vital public services in borrowing countries.”

Although the IMF claims its programs can “create policy space” for governments, structural adjustment conditions can reduce this space as they are often aimed at an economy’s underlying structure: privatising state-owned enterprises and deregulating labour markets, for example.

There’s more, after the jump. . .

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Massive protests over labor law sweep France


We begin with a video report from euronews:

France: Strike raises stakes in showdown over labour reforms

Program notes:

With pumps at more than 4,000 petrol stations in France now partially or fully dry, the showdown between the government and the hardline CGT union over contested labour reforms intensified on Thursday.

Nationwide blockades and rallies, travel disruption and a strike at the country’s nuclear power plants are putting more pressure on Socialist Prime Minister Manuel Valls who insists the law won’t be withdrawn.

From Sputnik, raw footage of confrontations today in Paris between activists and police:

French Protest Against Labor Reform

Program notes:

France’s trade unions took to the streets of Paris once again to voice their opposition to French labor reform. Almost 19,000 French nationals have participated in a nationwide rally in Paris. The protest turned violent as police clashed with mask-wearing young demonstrators.

The reason for the massive action is a set of labor “reforms” imposed by the socialist-in-name-only government of French President François Hollande

BBC News summarizes the main point of the government’s new rules:

  • The 35-hour week remains in place, but as an average. Firms can negotiate with local trade unions on more or fewer hours from week to week, up to a maximum of 46 hours
  • Firms are given greater freedom to reduce pay
  • The law eases conditions for laying off workers, strongly regulated in France. It is hoped companies will take on more people if they know they can shed jobs in case of a downturn
  • Employers given more leeway to negotiate holidays and special leave, such as maternity or for getting married. These are currently also heavily regulated

The Deutsche Presse-Agentur covers the government’s response to the strike:

[Prime Minister Manuel] Valls said there could be some changes to labour legislation, which is aimed at easing employment regulations on issues such as dismissal practices and negotiating rules. But he rejected the possibility of entirely withdrawing the reforms as national strikes drew out fuel blockages and disrupted traffic across France.

“I am always open when some aspect should be improved, but on the main lines of the text, particularly article 2, there is no question of touching it,” said Valls on broadcaster BFM-TV. “We cannot cede to a desire to make the government fold by blocking the economy.”

Article 2 of the legislation changes the labour code to give working hours agreements at company-level greater clout than those made by unions at industry-level.

French President Francois Hollande, in Japan for the G7 summit, was quoted by French media voicing his support for Valls’ position.

Members of the umbrella CGT union, one of the seven unions that called for the nationwide strike, have called for a complete withdrawal of the legislation. Secretary General Philippe Martinez called for Hollande to live up to promises he made while a candidate.

From France 24, an interview with a representative of the union organizing the massive job action:

France Labour Law strike chaos: “We want more social rights for the workers”

Program note:

Benjamin Amar, member of the General Confederation of Labour, CGT – Val de Marne, came to the studio to explain his organization reaction while the strikes and demonstrations continue in the country.

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Chart of the day: Living with parents, new norm


From For First Time in Modern Era, Living With Parents Edges Out Other Living Arrangements for 18- to 34-Year-Olds, a revealing new report from the Pew Research Center:

BLOG Lifestyle

Today in Euroausterity: € for Greece, Spain warned


First, the good news for greece. . .

Following adoption of yet more pay and pension cuts plus some take hikes and the promise to sell off more of the national resources, the Troika finally coughs up the cash.

From To Vima:

After an 11-hour meeting in Brussels, the Eurogroup finally concluded and came to a decision regarding the bailout review, funding and Greece’s debt.

According to the Eurogroup chairman Jeroen Dijsselbloem, 10.3 billion euros will be paid out to Greece in two installments; one for 7.5 billion euros in June and one after the summer, when a number of prior actions have been implemented.

In relation to Greece’s public debt, the Eurogroup chief stated there was an agreement for a solution in three stages, with short and long-term measures, as well as a long-term mechanism.

eKathimerini covers the downside for the coalition government:

[G]overnment officials admitted in private that the deal fell short of what they had been hoping for, particularly because the eurozone had resisted the IMF’s call for immediate and unconditional debt relief for Greece over the course of the program.

Another concern for the coalition is the lenders’ demand that it make changes to the legislation passed through Parliament on Saturday, such as lifting the restriction on the sale of nonperforming loans that are backed by state guarantees, before any funds can be disbursed.

Athens was also told that it would have to reach reform milestones in the fall before it could receive the second tranche of bailout funding. The first installment, which is set to be released in the coming weeks, will be 7.5 billion euros, while the second one will reach 2.8 billion.

The prospect of having to vote through more measures was not at all well received by SYRIZA MPs as they feel they have already taken on a considerable burden over the last few weeks, when they passed two multi-bills containing a wide range of measures.

Then on to Spain and that warning, via El País:

As if the European economy did not have enough to deal with, with stunted growth levels, a seemingly endless crisis in Greece and a global slowdown, the European Central Bank (ECB) has detected another risk: the populist movements mushrooming across the continent.

In its latest Financial Stability Review, the agency headed by Mario Draghi has alerted that growing popular support for these movements could delay what it views as necessary reforms. And the three countries where the political risk is higher are Spain, France and Greece.

“Reform implementation may have become more difficult, as political risks have increased considerably in almost all euro area countries since the onset of the global financial crisis,” reads the report, which was released on Tuesday.

“These rising political risks at both the national and supranational levels, as well as the increasing support for political forces which are seen to be less reform-oriented, may potentially lead to the delay of much needed fiscal and structural reforms,” adds the document.

Map of the day: Metro area income changes


And they’re mostly not looking very good.

From America’s Shrinking Middle Class: A Close Look at Changes Within Metropolitan Areas[PDF] a new report from the Pew Research Center:

BLOG Income

El Nino brings a massive famine to Africa


The same temperature changes in east/west ocean currents that bring heavy rains to the Western Hemisphere bring drought to Africa and Southern Asia.

And as India swelters under record heat, Africa has been suffering from heat and drought, and with them, crop failures and livestock death on a massive scale.

The end result is famine.

From the Observer:

The scale of the crisis unfolding in 10 or more southern African countries has shocked the United Nations. Lulled into thinking that Ethiopia in 1985 was the last of the large-scale famines affecting many millions, donor countries have been slow to pledge funds or support. More than $650m and 7.9m tonnes of food are needed immediately, says the UN. By Christmas, the situation will have become severe.

Malawi, Mozambique, Lesotho, Zimbabwe, Namibia, Madagascar, Angola and Swaziland have already declared national emergencies or disasters, as have seven of South Africa’s nine provinces. Other countries, including Botswana and the Democratic Republic of the Congo, have also been badly hit. President Robert Mugabe has appealed for $1.5bn to buy food for Zimbabwe and Malawi is expected to declare that more than 8 million people, or half the country, will need food aid by November.

More than 31 million people in the region are said by the UN to need food now, but this number is expected to rise to at least 49 million across almost all of southern Africa by Christmas. With 12 million more hungry people in Ethiopia, 7 million in Yemen, 6 million in Southern Sudan and more in the Central African Republic and Chad, a continent-scale food crisis is unfolding.

“Food security across southern Africa will start deteriorating by July, reaching its peak between December 2016 and April 2017,” says the UN’s office for humanitarian affairs. The regional cereal deficit already stands at 7.9m tonnes and continues to put upward pressure on market prices, which are already showing unprecedented increases, diminishing purchasing power and thereby reducing food access. As food insecurity tightens and water scarcity increases due to the drought, there are early signs of acute malnutrition in Madagascar, Malawi, Mozambique and Zimbabawe.

More from Der Spiegel:

Meteorologists believe the natural disaster is linked to a climate phenomenon that returns once every two to seven years known as El Niño, or the Christ child, a disruption of the normal sea and air currents that wreaks havoc on global weather patterns. The El Niño experienced in 2015-2016 has been particularly strong.

The German news magazine also published a map of the affected regions:

BLOG Drought

Greece surrenders to the troika, more austerity


As thousands of Greeks demonstrated in Syntagma Square outside the national legislature, the national parliament drank the Kool-Aid and passed the austerity measures demanded by the Troika of international lenders, a move that may foreshadow the end of the Syriza Party’s term at the helm of the national government.

Alexis Tsirpras and his party emerged as the victors last year on a promise to overwthrow the yoke of imposed austerity.

Instead, they have embraced it.

From eKathimerini:

Greek MPs approved on Sunday night a multi-bill containing a range of measures, including another 1.8 billion euros in tax hikes and the framework for a vast new privatization fund, paving the way for the Eurogroup to release more loans to Athens.

Prime Minister Alexis Tsipras saw 152 of his 153 MPs back the controversial package of legislation, meaning the government’s slim parliamentary majority was not put at risk.

Vassiliki Katrivanou voted for the legislation “in principle” but against the articles regarding the privatization fund and an automatic mechanism applying fiscal cuts if the primary surplus target is not met.

Eurozone finance ministers are due to meet in Brussels on Tuesday to decide whether Greece has done enough to complete the first review of its latest bailout program. If the green light is given, Athens is set to receive a minimum of 5.7 billion euros in fresh funding. However, there are still questions regarding whether the eurozone creditors and the International Monetary Fund will agree on how to reduce Greece’s debt or whether this will prove an obstacle to the next disbursement.

Some of the reaction to the vote and more on the measures embraced from the Guardian:

“They are with the exception of the Acropolis selling everything under the sun,” said Anna Asimakopoulou, the shadow minister for development and competitiveness. “We are giving up everything.”

The multi-bill, which also foresees VAT being raised from 23% to 24%, is part of a package of increases in tax and excise duties expected to yield an extra €1.8bn in revenue. Earlier this month, Tsipras’s leftist-led coalition endorsed pension cuts that were similarly part of an array reforms amounting to €5.4 bn, or 3% of GDP.

At the behest of the EU and International Monetary Fund, the government has agreed to adopt tighter austerity in the form of an automatic fiscal brake – referred to as “the cutter” in the Greek media – if fiscal targets are missed.

Despite official claims that goals will be achieved, there is a high degree of scepticism as to whether this is feasible. The Greek economy has seen a depression-era contraction of more than 25% since the outbreak of the debt crisis in late 2009, and with high taxes likely to repulse investment, economic fundamentals are also unlikely to improve.

The Associated Press examines the causes and more of the effects:

Greece now hopes the creditors will complete the first assessment of its third bailout program, freeing loan disbursements that will allow Greece to meet its obligations and avoid default.

>snip<

[I]t will have to navigate differences between the International Monetary Fund, which call for a generous debt cut albeit with more austerity measures, and the Europeans, chief among them German finance minister Wolfgang Schaeuble, who want no such cuts.

At the end of an acrimonious four-day debate, including in committee, Prime Minister Alexis Tsipras blasted the main conservative opposition and other centrist parties for having supported last August’s third bailout deal, but not the laws that have been voted on as prerequisites for concluding the assessment.

Opposition leader Kyriakos Mitsotakis countered that the bailout terms never included the superfund, which will expire in 2115. He said the precise terms were the results of Tsipras’ failure to negotiate reforms he and his leftist party have never believed in. He said he would prefer spending cuts to higher taxes and would negotiate with the creditors for lower annual levels of budget surpluses (2 percent of GDP instead of 3.5 percent) from 2018 onward.

The government majority was momentarily shaken Saturday when the junior partner, right-wing Independent Greeks, objected to freezes in pay hikes for so-called “special categories” of civil servants, including military, police, diplomats, judges, public health service doctors and university professors.

The pay cuts, which would have saved about 120 million euros ($135 million), were shelved and will be partly replaced by bringing forward taxes on Internet users and beer.

There’s more, after the jump. . . Continue reading