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Merkel: France is Europe’s “Biggest Problem Child” (Not with a Bang but a Whimper, Part 2)

Hol­lande and Merkel: “What we have here is fail­ure to communicate.”

Dave Emory’s entire life­time of work is avail­able on a flash drive that can be obtained here. (The flash drive includes the anti-fascist books avail­able on this site.)

Joseph Goebbels, Hitler’s pro­pa­ganda chief, once said: ‘In 50 years’ time nobody will think of nation states.’

. . . At the moment the so-called “Euro­pean Eco­nomic Com­mu­nity” is not yet fact; there is no pact, no organ­i­sa­tion, no coun­cil and no Gen­eral Sec­re­tary. How­ever, it is not just a part of our imag­i­na­tion or some dream by a politi­cian — it is very real. . . .
. . . . Its roots are in the eco­nomic co-operation of the Euro­pean nations and it will develop after the war into a per­ma­nent Euro­pean eco­nomic community. 

Gus­tave Koenigs, Third Reich Sec­re­tary of State at a 1942 con­fer­ence about the Euro­pean Eco­nomic Community.


COMMENT: Pre­vi­ously, we have noted how the euro­zone cri­sis is pre­cip­i­tat­ing a stun­ning, unprece­dented dis­so­lu­tion of national sov­er­eignty and integrity, as one after another of the afflicted nations of the EMU are sub­jected to Ger­man eco­nomic and (con­se­quent) polit­i­cal hegemony.

With social­ist Fran­cois Hol­lande in power in France and hav­ing called for more Key­ne­sian eco­nom­ics in response to the continent’s austerity-driven, German-mandated depres­sion, the French leader is in the crosshairs.

Pro­ceed­ing with next to no crit­i­cal com­men­tary, this imbroglio is very, very sig­nif­i­cant. What we are talk­ing about here is one sov­er­eign nation attempt­ing to dic­tate to another (allegedly) sov­er­eign nation what their eco­nomic pol­icy should be!


Aus­ter­ity advo­cates on a roll.

Inter­est­ingly, the French center-right is accus­ing Hol­lande of “Ger­manopho­bia.” As dis­cussed in numer­ous posts and pro­grams, the French right wing has main­tained pro­found links to Ger­man indus­try, as well as the Third Reich in its above-ground and under­ground phases. 

That center-right solid­i­fied as the Vichy after the fall of France, and con­tin­ued to dance to the Ger­man tune after the war.

One should also note that Ger­man work­ers aren’t happy about their mea­ger wage increases. Cor­po­rate Ger­many has prof­ited enor­mously. Those prof­its haven’t been shared with the major­ity of Ger­man work­ers, whose dis­sat­is­fac­tion is being manip­u­lated skill­fully by Merkel and company.

Although they haven’t shared the mis­ery of their coun­ter­parts in other coun­tries, they are feel­ing pinched and their ire is being delib­er­ately directed toward the “lazy Greeks,” “cor­rupt Cypri­ots,” “lazy AND cor­rupt Ital­ians” etc.

Ger­man banks “poured the drinks” for this party, very long in the plan­ning. After the Ger­man banks helped finance the hous­ing bub­ble in the afflicted coun­tries, the “bailout” monies have been used to shore up the Ger­man banks.

It will be inter­est­ing to see what hap­pens in France. Will they see the French bud­get reviewed by the Ger­man gov­ern­ment before the French leg­is­la­ture gets to review it, as recently hap­pened in Ire­land? It will be inter­est­ing to see what hap­pens to Hol­lande, as well.

Note in this con­text that France is mil­i­tar­ily engaged against jihadist forces in North Africa, whose ascen­dance is due in con­sid­er­able mea­sure to the “Arab Spring!”

“Ger­many Accuses France of Being ‘Europe’s Biggest Prob­lem Child’” by Jee­van Vasagar and Henry Samuel; The Tele­graph [UK]; 4/20/2013.

EXCERPT: A leaked inter­nal brief­ing from Angela Merkel’s coali­tion part­ners refers to Pres­i­dent Fran­cois Hol­lande as “mean­der­ing” and draws atten­tion to France’s “highly reg­u­lated labour mar­ket and highly devel­oped social secu­rity system”.

Details of the brief­ing note were pub­lished along­side an inter­nal assess­ment from the Ger­man eco­nom­ics min­istry, which listed the French economy’s failings.

The ministry’s paper said: “French indus­try is increas­ingly los­ing its com­pet­i­tive­ness. The relo­ca­tion of com­pa­nies abroad con­tin­ues. Prof­itabil­ity is meagre.”

Rela­tions between France and Ger­many are chilly after Mr Hollande’s Social­ist party accused Mrs Merkel of “ego­tis­ti­cal intran­si­gence” and called for “demo­c­ra­tic con­fronta­tion” with Berlin.

The French Social­ists’ attack on the Ger­man chan­cel­lor, which was toned down after a draft was leaked to the press, brought accu­sa­tions from the French centre-right that Mr Hollande’s party had been gripped by Germanophobia.

The pub­lic response from the Ger­man gov­ern­ment was muted, with Mrs Merkel’s spokesman describ­ing the French den­i­gra­tion of the Chan­cel­lor as “back­ground music”.

How­ever, the memos – which were leaked to the finan­cial news­pa­per Han­dels­blatt – reveal Berlin’s harshly crit­i­cal pri­vate view of France’s eco­nomic woes.

The Ger­man eco­nom­ics ministry’s brief­ing draws atten­tion to France’s high wage costs. . . .

. . . .While France clings to its totemic 35-hour work­ing week, work­ers in Ger­many are increas­ingly dis­con­tented at hav­ing to endure years of low pay rises. . . .


6 comments for “Merkel: France is Europe’s “Biggest Problem Child” (Not with a Bang but a Whimper, Part 2)”

  1. Uh oh, the EU is forced to lower its eco­nomic fore­casts and France is now pro­jected to fall into a reces­sion. Per­haps “struc­tural reforms” (aus­ter­ity) isn’t work­ing and some­thing else should tried? Per­haps, but EU Eco­nomic and Mon­e­tary Affairs Com­mis­sioner Olli Rehn has another bold solu­tion: more “struc­tural reforms”:

    EU Low­ers Fore­cast as Euro Area Heads For Two-Year Slump
    By Rebecca Christie — May 3, 2013 6:42 AM CT

    The euro-area econ­omy will shrink more than pre­vi­ously esti­mated in 2013 as part of a two-year slump that has pushed up unem­ploy­ment to a record, accord­ing to the Euro­pean Commission.

    Gross domes­tic prod­uct in the 17-nation cur­rency bloc will fall 0.4 per­cent this year, com­pared with a Feb­ru­ary pre­dic­tion of 0.3 per­cent, the com­mis­sion said in a report issued in Brus­sels today. This fol­lows a 0.6 per­cent con­trac­tion in 2012 and shows the region headed for its first ever back-to-back years of falling output.

    France, now pro­jected to shrink 0.1 per­cent instead of grow­ing by the same amount, joined seven other euro-area economies expected to con­tract this year. Growth across the cur­rency bloc will return too slowly to reduce unem­ploy­ment, as the euro area remains depen­dent on exports to off­set the impact of the sov­er­eign debt cri­sis and bank­ing woes, the Euro­pean Union said.

    “In view of the pro­tracted reces­sion, we must do what­ever it takes to over­come the unem­ploy­ment cri­sis in Europe,” said EU Eco­nomic and Mon­e­tary Affairs Com­mis­sioner Olli Rehn. He called for the EU to under­take “struc­tural reforms” to bring back jobs and said bud­get con­sol­i­da­tion will con­tinue at a slower pace.

    For France and Spain, that may trans­late into two extra years to meet the EU’s deficit goals, Rehn told reporters in Brus­sels. Other nations, like the Nether­lands, Poland and Slove­nia, may get one addi­tional year.

    Record Unem­ploy­ment

    Five euro-area nations have so far sought inter­na­tional aid dur­ing a finan­cial cri­sis that has left 19.2 mil­lion work­ers with­out jobs and required tril­lions of euros in financial-sector assis­tance. The euro area’s response has focused on low­er­ing national debts and strength­en­ing bank­ing reg­u­la­tion, a strat­egy endorsed in today’s report.

    Unem­ploy­ment in the euro area is expected to climb to 12.2 per­cent in 2013, up from 11.4 per­cent last year. An “increas­ing labor-market mis­match” will keep the job­less rate high in the medium term and bodes poorly for those who have been out of work for extended peri­ods, accord­ing to the EU.


    France joins the Nether­lands, Italy, Spain, Por­tu­gal, Greece, Cyprus and Slove­nia as headed for con­trac­tion in the new fore­cast. The Cypriot econ­omy is now expected to shrink 8.7 per­cent, down from a prior esti­mate of 3.5 per­cent, in the wake of a euro-area bailout agree­ment that forced heavy losses on account-holders at the country’s two largest banks.

    Across the 27-nation EU, GDP is now expected to shrink 0.1 per­cent in 2013, com­pared to a Feb­ru­ary fore­cast of 0.1 per­cent growth. In 2014, the EU expects 1.4 per­cent growth, down from a prior esti­mate of 1.6 per­cent. EU-wide unem­ploy­ment is pro­jected at 11.1 per­cent this year and next.

    ‘Overly Opti­mistic’

    The euro area as a whole is expected to post a bud­get deficit of 2.9 per­cent in 2013, accord­ing to the EU report. France, where Pres­i­dent Fran­cois Hol­lande has tus­sled with EU calls for more aus­ter­ity, is pro­jected to post a 3.9 per­cent deficit in 2013 and a 4.2 per­cent gap in 2014, assum­ing no changes from cur­rent policies.

    Rehn said France’s own growth fore­cast is “overly opti­mistic” and called for under­ly­ing eco­nomic changes to bol­ster growth.

    “France badly needs to unblock its growth poten­tial and cre­ate jobs,” Rehn said. The coun­try needs to “put a renewed and strong empha­sis on struc­tural reforms in the labor mar­ket, in the pen­sion sys­tems, by open­ing up closed pro­fes­sions and ser­vices markets.”

    Spain is fore­cast to show a 6.5 per­cent deficit in 2013. The Span­ish econ­omy is now pro­jected to shrink 1.5 per­cent in 2013, down from a pre­vi­ous fore­cast of 1.4 per­cent, with unem­ploy­ment ris­ing to 27 per­cent. Greece faces the same expected level of 2013 unem­ploy­ment, accom­pa­nied by a 4.2 per­cent GDP decline that was improved slightly from a prior fore­cast of a 4.4 per­cent fall.

    Posted by Pterrafractyl | May 3, 2013, 6:53 am
  2. Uh oh, Moody’s down­graded Slovenia’s bond rat­ing last week and now it looks like Slove­nia is fol­low­ing the expan­sive aus­ter­ity guide­book. They’re con­sid­er­ing some pre­emp­tive “reforms” (aus­ter­ity) in order to reduce their deficit in order to avoid an EU “bailout” (more aus­ter­ity). Slove­nia is about to learn the harsh real­ity that shake­down artists can smell fear:

    EU’s Rehn Says Too Soon to Say If Slove­nia to Need Bailout
    By Jonathan Stearns — May 7, 2013 3:42 AM CT

    Euro­pean Union Eco­nomic and Mon­e­tary Affairs Com­mis­sioner Olli Rehn praised Slove­nia for tak­ing steps to bol­ster the econ­omy while say­ing it’s too early to know whether the nation can avoid becom­ing the sixth euro-area mem­ber to need a finan­cial rescue.

    “We first want to ana­lyze the pro­grams before com­ment­ing,” Rehn said in an inter­view today in Brus­sels. “Slove­nia is inten­sively prepar­ing a sta­bil­ity and reform pro­gram that will tackle the prob­lems they are fac­ing and reverse the neg­a­tive trend in the economy.”

    Slove­nia plans to increase taxes to make up for a swelling bud­get short­fall as the coun­try works to recap­i­tal­ize its banks. The Adri­atic nation’s over­haul pro­gram and bank-recapitalization plan, which will be pre­sented to the Euro­pean Com­mis­sion, are meant to show Slove­nia can avoid request­ing out­side assistance.

    “In these days we are expect­ing that they will present the sta­bil­ity and reform pro­grams to the com­mis­sion,” Rehn said. “We will then assess them and pro­vide our analy­sis of the sit­u­a­tion shortly.”

    Since the Euro­pean debt cri­sis broke out in 2009, Greece, Ire­land, Por­tu­gal, Spain and Cyprus have sought inter­na­tional emer­gency aid. Pledges from the euro area and the Inter­na­tional Mon­e­tary Fund have totaled 496 bil­lion euros ($649 billion).

    Yes, inter­na­tional cred­i­tors can smell fear, and it smells deli­cious. Mmmmmm...privatizations. Slove­nia is notable in Europe for avoid­ing the mass pri­va­ti­za­tions that took place fol­low­ing the col­lapse of com­mu­nism so this could be a par­tic­u­larly tasty treat for inter­na­tional investors. The NY Times has a piece on what went wrong in Slove­nia in recent years. It sounds like it was the ol’ credit-boom pump-and-dump:

    The New York Times
    Slove­nia Falls From Eco­nomic Grace, Strug­gling to Avert a Bailout

    Pub­lished: May 5, 2013
    LJUBLJANA, SLOVENIA — Only a few years ago, Bine Kordez was feted as Slovenia’s star entre­pre­neur. After trans­form­ing a home-improvement chain, Merkur, into a regional giant, he drew on easy credit from state-run banks to help orches­trate a €400 mil­lion man­age­ment buy­out of the com­pany, the largest in the country’s history.

    The rewards of suc­cess included an impos­ing moun­tain­side retreat and fre­quent men­tion of his name as a pos­si­ble future finance min­is­ter of this small, idyl­lic Alpine country.

    Now, though, Mr. Kordez stands con­victed of forgery and abuse of office for finan­cial deal­ings as Merkur strug­gled under a moun­tain of debt.

    “My mis­take and the mis­take of the banks was to vastly under­es­ti­mate the risk,” Mr. Kordez, 56, said in a recent inter­view at his home near the pic­turesque town of Bled, with a view of Slovenia’s high­est peak. He awaits a deci­sion later this month on an appeal of his con­vic­tion, which could send him to prison for five years.

    As fears grow that Slove­nia could fol­low Cyprus and become the sixth euro zone coun­try to seek a bailout, his rise and fall have come to sym­bol­ize the way easy and cheap credit, com­bined with Balkan-style crony cap­i­tal­ism and cor­po­rate mis­man­age­ment, fueled a bank­ing cri­sis that has unhinged a coun­try pre­vi­ously praised as a regional model of peace­ful prosperity.

    The recent bailout of Cyprus at a cost of €10 bil­lion, or $13 bil­lion, which included strin­gent con­di­tions forc­ing losses on bank depos­i­tors, has focused minds in Ljubl­jana, the Sloven­ian cap­i­tal. Slovenia’s strug­gling bank­ing sec­tor is sad­dled with about €6.8 bil­lion worth of non­per­form­ing loans, about one-fifth of the national econ­omy. Slove­nia is now in reces­sion, and the gloom across the euro zone shows lit­tle sign of abat­ing. A Euro­pean Com­mis­sion fore­cast released Fri­day said that France, Spain, Italy and the Nether­lands — four of the five largest euro zone economies — will be in reces­sion through 2013.

    Last Thurs­day, Slove­nia bought time by bor­row­ing $3.5 bil­lion on inter­na­tional mar­kets. That was two days after Moody’s Investors Ser­vice cut the country’s credit rat­ing to junk sta­tus, cit­ing the bank­ing tur­moil and a dete­ri­o­rat­ing national bal­ance sheet. Ana­lysts said the bond sale would prob­a­bly enable the gov­ern­ment of the new prime min­is­ter, Alenka Bra­tusek, to stay afloat at least through the end of the year.

    The Cypriot deba­cle has shown how bail­ing out even a small coun­try can dam­age the cred­i­bil­ity of the euro cur­rency union. But Slove­nia, with two mil­lion peo­ple, insists that it is not Cyprus and will not seek emer­gency aid.

    “For the time being, I have a sound sleep,” Ms. Bra­tusek, the 42-year-old prime min­is­ter, said in a recent interview.

    This week, on Thurs­day, Ms. Bra­tusek, only a lit­tle more than a month in office, is expected to present a finan­cial turn­around plan to the Euro­pean Com­mis­sion, the exec­u­tive arm of the Euro­pean Union. She said that pri­va­tiz­ing Slovenia’s largely state-owned bank­ing sec­tor was a pri­or­ity, along with cre­at­ing a “bad bank” to take over non­per­form­ing loans.

    Her gov­ern­ment, she said, will also unveil plans by July to sell the country’s second-largest bank, Nova Kred­itna Banka Mari­bor, along with two large state com­pa­nies that she declined to spec­ify. The sales could raise up to €2 bil­lion, she said.

    Ms. Bra­tusek, who once headed the state bud­get office at the Finance Min­istry, said Slovenia’s gov­ern­ment debt, which ana­lysts say rose from about 54 per­cent of gross domes­tic prod­uct to around 64 per­cent with last week’s bond sale, still ranked at the lower end of that scale in the euro area.

    But the 6 per­cent inter­est rate Slove­nia offered on the 10-year bonds in last week’s debt sale, at a time when some euro zone coun­tries are enjoy­ing his­tor­i­cally low bor­row­ing costs — Germany’s equiv­a­lent bond is trad­ing below 1.2 per­cent — might only add to the country’s finan­cial problems.

    Mujtaba Rah­man, direc­tor of Europe at Eura­sia Group, a polit­i­cal risk con­sult­ing firm, said the new financ­ing could back­fire if it lulled the gov­ern­ment into lax­ity about mak­ing vital struc­tural changes.

    “The new financ­ing was not a vote of con­fi­dence in the Sloven­ian gov­ern­ment or in the econ­omy, but rather reflects investors attracted by high bond yields,” Mr. Rah­man said. “A bailout could still prove inevitable.”

    What went wrong in Slove­nia? The coun­try, wedged between Italy, Aus­tria, Hun­gary and Croa­tia, was con­sid­ered the most promis­ing among the 10 new Euro­pean Union entrants when it joined in 2004. That was 13 years after it declared inde­pen­dence from Yugoslavia, avoid­ing a bloody Balkan war that had swept up other coun­tries in the region.

    When Slove­nia was admit­ted to the euro club in 2007, the sin­gle cur­rency helped fuel easy credit and a con­struc­tion boom. It was the same sort of heady access to cheap money that led to eco­nomic dis­as­ters in Ire­land and Spain. But econ­o­mists say the Sloven­ian vari­ety of euro-euphoria hang­over can be traced to a failed tran­si­tion from com­mu­nism to a fully func­tional mar­ket economy.

    After gain­ing inde­pen­dence in 1991, Slove­nia — con­di­tioned by cen­turies of for­eign sub­ju­ga­tion — was deter­mined to retain local con­trol of its prized assets. It embarked on a spree of man­age­ment buy­outs of par­tially state-owned com­pa­nies, over­seen by exec­u­tives who in many cases were uncom­fort­ably close to peo­ple run­ning the gov­ern­ment and the state banks.

    “After the tran­si­tion in Slove­nia, the state retained a stran­gle­hold over the econ­omy,” Mr. Rah­man said, “and the coun­try today is suf­fer­ing the consequences.”

    Bine Kordez at Merkur was not the only head of big Sloven­ian com­pany whose involve­ment in a bank-aided man­age­ment buy­out ended badly, or whose access to easy credit back­fired. Two of Slovenia’s biggest con­struc­tion com­pa­nies, Veg­rad and SCT, are now in bank­ruptcy pro­ceed­ings. Istra­benz Hold­ing, a sprawl­ing food, tourism and energy con­glom­er­ate that once owned a vast swath of Slovenia’s econ­omy, is under­go­ing a court-mandated debt restructuring.

    Igor Bav­car, Istrabenz’s for­mer chief exec­u­tive, was charged with money laun­der­ing, and Bosko Srot, for­mer chief of the big brew­ing com­pany Pivo­varna Lasko, with abuse of author­ity, in con­nec­tion with a 2007 deal. Pros­e­cu­tors say Mr. Bav­car attempted to buy a stake in Istra­benz from Lasko through a series of shady inter­me­di­aries. Both deny any wrongdoing.

    A big provider of buy­out loans was Slovenia’s largest state-owned finan­cial insti­tu­tion, Nova Ljubl­jan­ska Banka, or N.L.B. The gov­ern­ment installed new man­age­ment late last year, as the bank’s lend­ing port­fo­lio turned increas­ingly sour.

    Janko Medja, N.L.B.’s new chief exec­u­tive, said that the rush to pri­va­tize Sloven­ian state-controlled com­pa­nies, com­bined with the money cours­ing through Europe before the 2008 finan­cial col­lapse, had prompted banks like N.L.B. to prac­ti­cally give money away “for free.


    Posted by Pterrafractyl | May 7, 2013, 10:46 am
  3. Well this is quite a devel­op­ment: The euro­zone appears to be mov­ing towards shift­ing the IMF out of the eurozone’s decision-making process. One pro­posed option involves the IMF being replace be the new Emer­gency Sta­bi­liza­tion Mech­a­nism Fund (ESM).

    Addi­tion­ally, another insti­tu­tions that has had infor­mal input in the EU’s “crisis-response” arena — the Eurogroup — is also being dis­cussed as a tar­get for insti­tu­tional over­haul. They’re talk­ing about switch­ing its decision-making process away from requir­ing a unan­i­mous vote and into a sim­ple major­ity vote. But there are con­cerns that small coun­tries could still gang up to over­rule the larger, wealth­ier coun­tries. So the plan appears to involve using a model like the ESM’s vot­ing sys­tem that fac­tors in both the pop­u­la­tion of the coun­try and the size of the national econ­omy. More fun changes on the way for the EU:

    Cyprus chaos sparks calls for EU over­haul
    5:23 a.m. EDT May 18, 2013

    BERLIN (AP) — Engi­neer­ing a finan­cial bailout for Cyprus in March was such a chaotic process that top Euro­pean offi­cials say it is time to rethink how the region man­ages its cri­sis — and who should be involved.

    Offi­cials say the Inter­na­tional Mon­e­tary Fund, which has con­tributed finan­cial exper­tise and bil­lions in emer­gency loans, may no longer be needed as a key decision-making part­ner. And they say that the euro­zone would be able to make deci­sions and take action more quickly if it wasn’t bound by the need for unan­i­mous agree­ment among its 17 mem­ber coun­tries.

    Ana­lysts and law­mak­ers out­side of Europe have voiced these con­cerns before. Now two of the region’s lead­ing finan­cial decision-makers have said pub­licly that some­thing needs to be done. Olli Rehn, the top eco­nomic offi­cial at the Euro­pean Com­mis­sion — the Euro­pean Union’s exec­u­tive arm — and Joerg Asmussen, who sits on the Euro­pean Cen­tral Bank’s six-member exec­u­tive board, said at a hear­ing last week that the eas­ing of the finan­cial cri­sis presents an oppor­tu­nity to fix what is bro­ken.

    “If the IMF can take deci­sions with an 85% major­ity and not with una­nim­ity, why on earth the euro­zone can­not do so?” Rehn asked, refer­ring to the IMF’s exec­u­tive board. “That would make our decision-making more effective.”

    And Asmussen ques­tioned whether help from the IMF — part of the “troika” of deci­sion mak­ers that also includes the ECB and the Euro­pean Com­mis­sion — is even needed any­more. In effect, he said it is time for Europe to han­dle its prob­lems with­out out­side help.

    Com­merzbank ana­lyst Christoph Weil says Euro­pean lead­ers are slowly wak­ing up to what has been evi­dent to finan­cial mar­kets for a long time. “The cur­rent deci­sion struc­ture is dys­func­tional,” Weil said. “It was born in the urgency of the cri­sis ... It needs to be overhauled.”

    The 17-country euro­zone has been severely tested by a three-year cri­sis over too much gov­ern­ment debt which has neces­si­tated bailouts for five mem­ber nations — Greece, Por­tu­gal, Ire­land, Spain and Cyprus.

    The “troika” arrange­ment to mon­i­tor the bailout process has been in place for euro­zone bailouts since Greece’s debt prob­lems began to unfold in 2010. The setup gives a promi­nent role to the Washington-based IMF — although it con­tributes much less money to bailouts than the euro­zone nations.

    Some euro­zone mem­ber coun­tries insisted on hav­ing the IMF on board for its expe­ri­ence in han­dling such crises around the world. Ger­many — Europe’s biggest econ­omy — also saw the fund’s pres­ence as a cru­cial check against polit­i­cal horse-trading that could have resulted in watered-down bailout con­di­tions.

    How­ever, the troika’s inspec­tion teams have been heav­ily crit­i­cized for their insis­tence on harsh aus­ter­ity mea­sures that have plunged coun­tries like Greece or Por­tu­gal into even deeper reces­sions and that they’re not account­able to vot­ers.

    “The Euro­peans wanted the IMF aboard for its exper­tise, even though many at the IMF thought that Europe is eco­nom­i­cally strong enough to solve its prob­lems on its own,” said ana­lyst Weil.

    “Now the Euro­peans feel stronger, and they real­ize that it would have been eas­ier some­times with­out the IMF, who insisted on rad­i­cal up-front mea­sures in Greece or Cyprus before grant­ing aid,” he added.

    This view was given a boost last week by the ECB’s Asmussen dur­ing a hear­ing at the Euro­pean Parliament’s eco­nomic com­mit­tee in Brussels.

    “I would not change the troika sys­tem in the midst of the cri­sis because we have no alter­na­tive avail­able right now but in the longer-term future ... we should return to a fully EU-based sys­tem,” he said.

    The IMF rec­og­nizes it’s up to the EU’s exec­u­tive arm, the Com­mis­sion, and the ECB whether it has plays a role in future bailouts, fund spokesman Gerry Rice said.

    “I under­stand from reports that Mr. Asmussen under­scored that he would not advise to change the troika sys­tem right now,” he said.

    In place of the IMF, Asmussen sug­gested the euro­zone could use the body set-up to man­age its per­ma­nent 500 billion-euro res­cue fund, the Euro­pean Sta­bil­ity Mech­a­nism. How­ever, the ESM’s makeup means it is tech­ni­cally out­side the EU’s sys­tem of insti­tu­tions‘.

    “The setup is a bit of a stranger decided in a cri­sis mood,” Asmussen said. “We had noth­ing else avail­able and it had to be done quickly,” he added.

    The end of the troika arrange­ment would come once the ESM will be fully turned into an insti­tu­tion of the 27-nation EU, he added. The ESM could then play its role as Europe’s IMF.

    As well as the IMF’s role in inter­na­tional res­cues, the Eurogroup — finance min­is­ters of 17 mem­ber nations, the IMF and the ECB — is com­ing under scrutiny.

    The Eurogroup was ini­tially planned mostly as a forum to exchange views on eco­nomic and finan­cial poli­cies — but the cri­sis has turned it into a major decision-making body. At the moment, una­nim­ity is required on deci­sions, a daunt­ing task.

    The cum­ber­some decision-making process reached its cli­max when the bloc fought bit­terly over a 10 billion-euro bailout for Cyprus.

    After marathon nego­ti­a­tions in March, the Eurogroup and Cyprus patched together a bailout agree­ment that shocked mar­kets and Cypri­ots. Cyprus’s banks had their assets frozen and a one-time levy on all bank deposits was imposed to help pay for the res­cue — a mea­sure that vio­lated EU deposit-insurance rules that backed all sav­ings accounts with fewer than 100,000 euros. Within 48 hours, that plan was scrapped.

    Mean­while, the ECB, seem­ingly fed up with the pol­i­tick­ing, set a dead­line for a deal after which it would cut off emer­gency fund­ing for Cyprus’ banks— a move that would have plunged the coun­try into chaos and out of the euro­zone.

    In real­ity, finance min­is­ters descended again on Brus­sels a week later. The sec­ond agree­ment saw Cyprus’ insured depos­i­tors pro­tected, but enforced a harsh restruc­tur­ing of the country’s outsized-banking sec­tor and heavy losses for those hold­ing deposits worth more than 100,000 euros.

    Another exam­ple of the Eurogroup’s cum­ber­some decision-making was seen this week at a meet­ing at which there was lit­tle head­way made thrash­ing out cru­cial details of the bloc’s bank­ing union — a com­plex project that’s seen as vital to help sta­bi­lize the EU’s finan­cial sec­tor and turn the tide on its cri­sis. At the moment, they can nei­ther agree how far-reaching the bank­ing union ought to be nor how fast they want to move to set it up.

    Ana­lysts main­tain a reform of the Eurogroup is long over­due, but it’s fraught with dif­fi­culty: A sim­ple major­ity vote could mean small coun­tries gang­ing up and over­rul­ing the few big ones while a sys­tem based on eco­nomic strength would mean Ger­many and France alone would hold almost 50 per­cent of the vot­ing rights.

    But the EU already has the answer. The ESM boasts a vot­ing sys­tem that com­bines both, the num­ber of coun­tries and their eco­nomic weight. That makes it dif­fi­cult to over­rule coun­tries but it is still pos­si­ble to reach a deci­sion if there are only few and small hold­outs.

    Europe’s cur­rency — used by more than 330 mil­lion peo­ple — is still a rel­a­tive teenager, it was launched in 1999, “but it has grown up rapidly amid the cri­sis,” Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble said.


    Posted by Pterrafractyl | May 18, 2013, 5:17 pm
  4. “the French right wing has main­tained pro­found links to Ger­man indus­try, as well as the Third Reich in its above-ground and under­ground phases.

    That center-right solid­i­fied as the Vichy after the fall of France, and con­tin­ued to dance to the Ger­man tune after the war.”

    A cou­ple of com­ments. The blame is to be shared equally between left and right in the deba­cle of France. It was a left-wing cham­ber who voted Pétain in. François Mit­ter­rand, François Hollande’s model, was a Vichy offi­cial and a late defec­tor. Hollande’s father is sus­pected to have been a col­lab­o­ra­tionist, same as for­mer social­ist PM Jospin. The elders in my fam­ily, his­tor­i­cal Gaullists — more about them below — had an unimag­in­able con­tempt for Mit­ter­rand and his ilk. And Hol­lande may talk but is doing noth­ing, doing noth­ing more than Merkel’s bid­ding. The role assigned to France by Ger­many is that of poster child for aus­ter­ity vis-a-vis the South­ern countries.

    As to the right, I know you wouldn’t make such an assess­ment lightly and I don’t ques­tion it upfront — I will look into your linked mate­r­ial right after I’m done with this mes­sage ; I want to find out more also about the reported murky record of Jean Mon­net, one of the “fathers of Europe” who has been all but can­on­ized, dur­ing WWII.

    BUT I know of at least 4 conservative-leaning gen­tle­men who hap­pened to be indus­tri­al­ists and hap­pened to be patri­ots and joined the Resis­tance instantly — unlike Mon­sieur Mit­ter­rand and the com­mu­nists. They were my grand­fa­ther and his three brothers-in-law. My grand­fa­ther was killed after four years com­bat­ting in var­i­ous net­works and later on in the 2nd Armoured Divi­sion, and his brothers-in-law stopped fight­ing ear­lier only because of grave injuries that left them invalids. They went on to live excep­tional lives. I’ve been think­ing about my grand­fa­ther every day those past two years; I’m sure he’d have a whole lot to tell in rela­tion to the sub­jects you cover. Did the Allies ever really win the war? I view this state of things as some­thing of a night­mare and feel totally pow­er­less. I miss his coun­sel. This is one thing wars do, break­ing con­ti­nu­ities in families.

    Posted by de_clerc | July 12, 2013, 3:18 pm
  5. More about the right. The French right as well as the French peas­antry were dec­i­mated in the pre­vi­ous Ger­man aggres­sion of WWI. A con­tribut­ing fac­tor to the dis­credit of the right which has been used ad nau­seam by the left to this day was the sup­port of Charles Mau­r­ras, the old chief of Action française, noted French monar­chist intel­lec­tual and poet, to Philippe Pétain. A per­plex­ing turn­aroud except that Action française was a shadow of its past self after the huge losses among its ranks in WWI and for the fact that Mau­r­ras was senile. Still, fig­ures such as Leclerc and De Gaulle clearly came from that same “milieu” of the old right. This was old France, a coun­try of old chivalry, the coun­try of Jeanne d’Arc.

    The French knight is not a mur­derer. Con­trast this with the murder-lust of, say, the Niet­zschean “aris­to­crat” (I men­tion that because of the rev­er­ence for Niet­zsche in some quar­ters of the French intel­li­gentsia which is another thing that makes me sick to my stom­ach, and I won­der where that came from; old Friedrich is nonex­is­tent in the works of pre-1930 writ­ers and thinkers such as Proust, Alain and Bergson).

    Posted by de_clerc | July 12, 2013, 3:45 pm
  6. Here’s a pre­view of the kind of business/economic news we’re going to be hear­ing from the euro­zone for years to come:
    Boy, it sure is unfor­tu­nate that all those pro-austerity treaties were signed and the euro­zone lead­ers philo­soph­i­cally rejected the valid­ity of non-export-oriented eco­nomic activ­ity because oth­er­wise there might be a real chance at a sus­tain­able recov­ery:

    The Wall Street Jour­nal
    Sep 23, 2013
    Cap­i­tal Mar­kets
    Wrong Kind of Growth for Euro Zone?
    By Alen Mattich

    The euro-zone econ­omy is pick­ing up. How long this lasts, how­ever, prob­a­bly depends on the degree to which coun­tries like Italy and Spain will be allowed to keep water­ing down austerity.

    The com­pos­ite euro-zone pur­chas­ing man­agers’ index posted a 27-month high in Sep­tem­ber, com­ing in at 52.1 from 51.5 in August.

    But this strength mostly came down to ser­vices. The ser­vices index was 52.1 against expec­ta­tions of 51.1 and from 50.7 in August. By con­trast, the man­u­fac­tur­ing num­bers were less bull­ish, reg­is­ter­ing 51.1 in Sep­tem­ber, a bit below both the fore­cast 51.8 and August’s strong 51.4. Man­u­fac­tur­ing out­put, mean­while, was 52.1 from 53.4 in August.

    On the face of it, this PMI sur­vey is heart­en­ing. But the detail is a bit wor­ry­ing. The euro zone’s belea­guered economies are expected to grow through exports–a rebal­anc­ing away from the domes­tic con­sump­tion and debt-driven growth of the pre-crisis years.

    But the man­u­fac­tur­ing num­bers sug­gest the export trend is flag­ging. The summer’s emerg­ing mar­kets cur­rency cri­sis no doubt had a role to play. Coun­tries like Brazil, Turkey, South Africa and India have been run­ning sub­stan­tial cur­rent account deficits, mean­ing they’ve been suck­ing in exports from abroad. As their cur­ren­cies col­lapsed, so too have demand for for­eign goods, includ­ing those pro­duced by euro-zone countries.

    But the slack here has been taken up by stronger ser­vices, which tend to be more domes­ti­cally ori­ented. Inso­far as this sug­gests domes­tic demand is pick­ing up in these strug­gling coun­tries, that’s good. Though here too the detail is less than bullish.

    So why’s domes­tic demand pick­ing up?

    In part it’s because some euro-zone coun­tries are back­slid­ing on aus­ter­ity. Italy’s gov­ern­ment had a deficit tar­get of 2.6% of GDP last year. The actual num­ber came in closer to 3%. Now it’s look­ing like this year’s 3% deficit ceil­ing could well be breached. Unless the gov­ern­ment insti­tutes some unpop­u­lar taxes, the debt to GDP ratio could well reach 3.1%, accord­ing to recent estimates.

    Spain, mean­while, was run­ning a cen­tral gov­ern­ment deficit of 4.4% of GDP dur­ing the first seven months of the year, against a goal of 3.8%. That’s not quite as bad as it looks–regional gov­ern­ment short­falls have been below tar­get. But Spain has yet to meet its deficit tar­get in five years and looks unlikely to do so in 2013 either.

    Now, as far as Key­ne­sian econ­o­mists are con­cerned, that’s just what the doc­tor ordered (only not enough of it). When there’s a short­fall of domes­tic demand, the gov­ern­ment has to make up for it with deficit spending.

    But in the euro zone, this type of pol­icy is com­pli­cated by region-wide pol­i­tics. Italy, Spain and other strug­gling coun­tries have agree­ments with euro-zone bodies–and thus other governments–about how and when they’ll achieve fis­cal probity.

    The degree to which they’ll be allowed to stim­u­late their domes­tic economies depends on the degree to which they’ll be allowed to ignore or fudge past agreements.


    Posted by Pterrafractyl | September 30, 2013, 11:39 am

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