Tag Archive: Europen Union

May 09 2012

So Goes Greece, So Goes the Euro?

Greek, French and German voters went to the polls this past weekend and rejected pretty much told the European leaders they were very unhappy with the austerity measures that were being forced on them to bail out European banks. It took until yesterday for the world markets to react to this new reality with the Dow closing below its inflated 13,000 mark. Germany, the chief cheerleader for austerity, is not happy with France and very displeased with the new Greek leadership that blithely told Germany what to do with its austerity measures:

Alexis Tsipras, whose bloc came second in Sunday’s vote, said Greek voters had “clearly nullified the loan agreement”. [..]

The European Commission and Germany say countries must stick to budget cuts.

European Commission President Jose Manuel Barroso said on Tuesday: “What member states have to do is be consistent, implementing the policies that they have agreed.”  [..]

Mr Tsipras made his position clear to reporters in a five-point plan:

 

  • Cancelling the bailout terms, notably laws that further cut wages and pensions
  • Scrapping laws that abolish workers rights, particularly a law abolishing collective labour agreements due to come into effect on 15 May
  • Promoting changes to deepen democracy and social justice
  • Investigating Greece’s banking system which received almost 200bn euros of public money
  • Setting up an international committee to find out the causes of Greece’s public deficit and putting on hold all debt servicing

It looks increasingly like the Greeks will be abandoning the Euro, it’s just a matter of when:

“Germans are now predominantly of the opinion that they would be better off if Greece left the euro zone,” said Carsten Hefeker, a professor of economics and an expert on the euro at the University of Siegen. “If the country really is continuing on the path they are taking now, it would be hard to justify keeping them in. How do you deal with a country that says we don’t want to keep any of the commitments we have made?” [..]

Perhaps the one card Greece has to play is the danger its exit could pose to other, much larger members like Spain and Italy, with far greater consequences. If Greece were pushed out, Mr. Hefeker said, the bond markets would start betting on the next country to be kicked out. “Then Spain or Italy would be put under pressure, and the danger would be of the whole euro zone collapsing,” he said.

There are few options are open for the European Union, the European Central Bank and the International Monetary Fund which is holding most of Greece’s debt and easing the threat to the banks.

First, the so-called “troika” could release just enough funds to keep the government running until the political situation stabilizes;

The terms of the agreement could be renegotiated with the creditors:

Or, lastly, the “troika” could just refuse to give Greece any money, as the IMF did over 10 years ago when Argentina faced similar economic crisis. This actually turned out well for Argentina over a shorter recovery than is predicted for Greece under the current terms.

Perhaps it is past time for Greece to go it on its own and let the Eu continue the blood letting without them.

May 06 2012

François Hollande Est le Président de France

“Europe is watching us, I am sure that when the result was announced, in many European countries there was relief, hope and the notion that finally austerity can no longer be the only option.

“And this is the mission that is now mine — to give the European project a dimension of growth, employment, prosperity, in short, a future. This is what I will say as soon as possible to our European partners and first of all to Germany, in the name of the friendship that links us and in the name of our shared responsibility.”

“We are not just any country on the planet, just any nation in the world, we are France.”

~François Hollande, President-elect of France~

François Hollande is the new President of France defeating Nicholas Sarkozy. With half the votes counted, M. Hollande won a narrow victory with 50.8% to Sarkozy’s 49.2%, as per the French Interior minister. According to exit polls, the vote is closer to 52% for M. Hollande.

Crowds roared at the center-left candidate’s campaign headquarters as the exit poll results came out Sunday evening.

“Many people have been waiting for this moment for many long years. Others, younger, have never known such a time. … I am proud to be capable to bring about hope again,” Hollande said in his victory speech.

Celebratory car horns blared along the Champs-Elysees in Paris.

“It’s a great night, full of joy for so many young people all across the country,” said Thierry Marchal-Beck, president of the Movement of Young Socialists.

Hollande will be the nation’s first left-wing president since Francois Mitterrand left office in 1995.

His victory and the elections in Greece and Germany are sending economic shock waves through Europe:

François Hollande’s election threw down the gauntlet to Angela Merkel, the German Chancellor, who has railroaded the eurozone into agreeing a new “fiskalpakt” treaty enshrining Germany’s austerity doctrine.

The economic doctrine of austerity, to cut the burden of state spending to free up the economy, has ruled supreme with the support all of Europe’s leaders, the European Union and financial markets.

But political leaders were on Sunday night conceding the consensus had been shattered beyond repair.

With Europe’s economies plunging further into recession and as unemployment in the eurozone breaks record levels, voters demands for a new approach had finally become to great to ignore.

The popular backlash to EU imposed austerity to the centrist New Democracy and Socialist parties in Greece threatens the existence of the euro itself.

While in Germany, Chancellor Merkel was sent a message from German voters:

Exit polls by German broadcaster ARD put Mrs Merkel’s Christian Democrats at 30.5 per cent, just one per cent more than the left-wing Social Democrats.

But the Free Democrats, Mrs Merkel’s ailing coalition ally, scored a lowly 8.5 per cent, meaning that the coalition that has ruled the rural state on the Danish border since 2009 faces the prospect of being unseated.

Experts predict that the Social Democrats will try to cobble a coalition together with the Greens, the third biggest party, in order to take control of the state. [..]

While the Free Democrats appears to have avoided the humiliation of being wiped out all together in Schleswig-Holstein the continuing unpopularity of the party could force Mrs Merkel to search for a new coalition partner come next year’s federal elections.

I don’t think this is a surprise to most Europeans. It should be a clear message to the leaders of countries who are considering only austerity measures as a solution to debt.

May 04 2012

The French Presidential Election 2012: A Pause Before the Vote

The French Presidential election will take place this Sunday, May 6. Meanwhile, the campaigning has ended Friday evening with the Socialist challenger, François Hollande, still predicted to defeat current President Nicholas Sarkozy:

The last Ipsos poll for French television and Le Monde puts Hollande on 52.5% with Sarkozy closing the gap but still behind on 47.5%. The poll was taken before the dramatic decision by centrist François Bayrou to throw his weight behind Hollande in the second round.

The vast majority of voters appear to have made up their minds, with 92% saying they know who they will vote for, and 82% saying they will definitely turn out.

Many are seeing this as not just a referendum about Sarkoszy’s “hyperactive” style but the start of a revolt against austerity which many now believe has slowed the recovery from the recession. Wolfgang Münchau wrote in the Financial Times that Hollande is start of progressive insurrection:

. Nicolas Sarkozy does not look like a president, talk like a president, or act like a president. But there is a better reason why he deserves to be ejected. He won the 2007 campaign with a promise of ambitious economic reforms. He was one of the few European politicians with a mandate for big changes. He flunked it for a reason that already became apparent during the 2007 campaign: he was hyperactive. Reforms are for boring politicians. [..]

The main reason why I look forward to a Hollande presidency is for its impact on Europe. At present, all the large, and many of the small, eurozone countries are governed by centre-right governments. Angela Merkel is their undisputed queen. Mr Hollande is not going to be a comfortable partner. On some issues, such as the fiscal pact, he will challenge her outright.

I would welcome a Hollande presidency on the grounds that it would introduce a much needed shift in the toxic narrative about the eurozone crisis and its resolution. According to this narrative, the crisis was caused by fiscal irresponsibility. Its prescription is austerity and economic reforms. The tool to achieve the former is the fiscal pact, which Mr Hollande has said he will not sign unless it is complemented by policies to boost economic growth.

I wish that Mr Hollande would go further because austerity will snare countries in a low-growth trap. No set of structural policies will change this. I understand the political reason why he does not want to go further. He does not want his presidency to start with an existential fight with Germany – and the dreaded prospect of another panic attack by global investors.

While, as Paul Krugman as noted, the prospect of a Hollande presidency has generated some “hysteria” in the financial world:

Today’s FT is all Hollande, all the time. Some of it is sensible; some of it is like, well, this piece by Josef Joffe, which declares that Hollande’s likely victory is “a bleak prospect for all but new Keynesians and old socialists.” [..]

Joffe is, however, useful as a guide to the German view, which is basically that we got ourselves competitive and restored growth, so why can’t everyone else. Somehow he never mentions that Germany’s recovery in the 2000s was driven by a huge move into trade surplus; is everyone supposed to do the same thing, all at once? What’s the Germany for “fallacy of composition”?

The voting ends at 8 PM Paris time and the results will be reported here Sunday afternoon around 2 PM EDT.

Apr 26 2012

The French Presidential Election 2012: A Rejecting of Austerity?

With the first round of elections over, the campaign for the Presidency of France between the two top candidates, François Hollande and Nicholas Sarkozy begins under the cloud of most of Europe in economic recession. Just how much the latest news of England slipping back into recession under the weight of the Cameron government’s austerity measures along with increased taxes, remains to be seen but there are signs that it is already having an impact:

To the left: a likely new direction for France and Germany

If a new austerity-sceptic alliance emerges across the Channel, will Cameron and Osborne end up as Europe’s last deflationists?

Quite suddenly, there is talk of change in the eurozone’s economic strategy and, in particular, of the need for urgent action by the European Union to reverse the downward spiral of negative growth and rising unemployment. The likelihood that François Hollande will be elected as president of France next weekend has injected an important note of dissent into the pro-austerity consensus. Even more important than the French elections, however, may be the indications that even the political debate in Germany is now changing its tune.

The opposition German social democratic SPD hopes for election victory in the key state of North Rhine Westphalia on 13 May, as well as in the German general election next year. The SPD has already signalled that it will support the French Socialists in support of an investment-led EU strategy to boost growth and jobs. Moreover, the German social democrats and the German Green party also back the creation of euro-bonds and using the proceeds of a tax on financial transactions to finance a return to growth.

Chancellor Angela Merkel is a bit nervous about a Hollande government:

It is unclear at this time whether next year’s German general election will lead to an SPD/Green coalition government or to a “grand coalition” of the SPD and Chancellor Merkel’s Christian Democrats. But Angela Merkel has already sent some of her top advisers to Paris to explore the proposals of the French Socialists and to see to what extent she and a future President Hollande might be able to salvage a Franco-German partnership in the EU.

The conservative German government is resolutely opposed to any formal re-negotiation of the “stability and governance treaty” which has been cited to justify the crippling austerity measures imposed on Greece and other eurozone “peripheral” economies. But Hollande is now focussing on a series of “additional measures” rather than actual “changes” to the treaty. These additional growth measures would include a major boost to the resources of the European Investment Bank to allow it to put far more capital to work, especially in the hardest-hit economies. Second, the French Socialists would like to see the European stability mechanism given the status of a bank, so that it can receive funding from the European Central Bank and thus be better able to contain any future crisis affecting the euro. Third, they argue for widening the mandate of the ECB so that it is obliged to pursue growth objectives as well as price stability.

Unsurprisingly, a number of sympathetic noises off are being heard from Rome, Madrid and other EU countries, where centre-right governments which are struggling against economic suffocation by obsessive austerityitis.

President Nicholas Sarkozy, who is behind Hollande 54% to 46% in the polls, has said that there would be no coalition with the far right wing National Front Party, whose candidate, Marine Le Pen garnered 17.9% of the vote placing third:

“There will be no pact with the Front National,” he told France Info radio, adding there were too many issues on which they disagreed to imagine giving the party cabinet posts. The Front National has called for France to quit the euro and a hold a referendum on the death penalty, both far from Sarkozy’s manifesto.

“There will be no Front National ministers, but I refuse to demonise men and women who in voting for Marine Le Pen cast a crisis vote, a vote of anger, a vote of suffering and a vote of despair. I have to listen to their message and take them into account, and not think it’s time to hold my nose,” Sarkozy said.

Currently the National Front holds no seats in the French Parliament but hope to change that in the up coming national elections in June.

Geographically, Le Pen has broadened Front National support beyond her father’s heartlands in the south, and polled well in villages and rural constituencies across the country as well as on the outskirts of cities. She did well in the depressed former industrial areas of the north and east, but also saw increases in support in rural areas beyond Bordeaux and in Normandy. The prospect of Front National gains has left Sarkozy’s ruling UMP party, a broad coalition of centre right and rightwing factions, scrapping over what tack to take to hang on to their seats. The party is already divided and facing an internal battle over its future if Sarkozy loses the election

There will obviously be a battle for Le Pen’s 6.4 million voters with the far left accusing Sarkozy of drifting too far to the right, making some ugly comparisons:

The communist paper L’Humanité sparked a row with its front page comparing Sarkozy to Marshal Pétain, the leader of France’s Nazi collaborationist Vichy regime in the 1940s, who was convicted of treason after the second world war.

The paper said Sarkozy’s decision to hold his own Labour Day rally in Paris on 1 May to celebrate what he termed “real” work, as opposed to the traditional, trade-union-led rallies by the left, harked back to a Pétain-style discourse. Pétain – whose motto was “travail, famille, patrie” (work, family, country) – had aimed to reclaim 1 May for the right.

Max Staat wrote: “Sarkozy isn’t Pétain, happily, but the similarities point to the dangers for our country of the president-candidate adopting the theses of the extreme right.”

And you thought American political campaigns were ugly. Fortunately, the election is May 6, eleven days and all campaigning  ends on Friday May 4.

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