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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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