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Showing posts with label EU. Show all posts
Showing posts with label EU. Show all posts
Prediction: France's economy will worsen relative to the rest of the EU

Prediction: France's economy will worsen relative to the rest of the EU

With Krugman and other Democrats claiming that austerity policies have been the problem in Europe, we will soon have a big test.  Just like Germany's and Poland's policies have been a big test that restraining government spending has worked well and Greece, Spain, and Portugal have provided excellent tests for the opposite, France will now provide another test.  Does raising government spending, increasing deficits, taxing the wealthy sound familiar?


Here are some articles on topics that we will hear more about:


From the Financial Times:

. . . . François Hollande, the Socialist candidate who leads the presidential race after the first round of voting last week, wants to impose a tax rate of 75 per cent on income above €1m and at the launch of his bid in January said: “My true adversary in this battle has no name, no face, no party ... It is the world of finance.”Inquiries from French clients had risen by roughly 40 per cent since the speech, says David Blanc, a partner at Vestra Wealth, a London-based wealth manager.
“I have definitely seen strong interest in what could be done to protect assets both for people resident in France but also for French nationals who are UK resident,” said Mr Blanc, a former UBS executive.
The prospect of a Gallic diaspora of high earners was backed up by Knight Frank, the property agent, which said numbers of French web users searching online for its prime London properties online in the past three months had risen 19 per cent compared with the same period last year. The equivalent figure for Europe as a whole fell 9 per cent.
“The election seems to have pushed a growing number of wealthy French to consider their options for where they are likely to base themselves in the future,” says Liam Bailey, head of research at Knight Frank. . . . 
From the UK Independent:

France will be waking up today to its first Socialist President for 17 years – and bracing for radical change. There are all kinds of reasons why one might fear a François Hollande presidency, especially if you are a prosperous French person.The 57-year-old Socialist has openly admitted that he "does not like the rich" and declared that "my real enemy is the world of finance". This means taxing the wealthy by up to 75 per cent, curtailing the activities of Paris as a centre for financial dealing, and ploughing millions into creating more civil service jobs.Add an explicit threat to renegotiate the euro pact to replace austerity with "growth-creating" spending, and you have one of the most vehemently left-wing programmes in recent history.German Chancellor Angela Merkel – the woman at the centre of the Franco-German economic powerhouse which has dominated Europe – was at one stage even threatening to campaign for her conservative ally, Nicolas Sarkozy, against Mr Hollande.Caution is justified, though one thing Mr Hollande will not repeat is the disastrous tax-and-spend policies introduced by France's last Socialist President, François Mitterrand, in 1981. He was soon forced into a humiliating U-turn, and into sharing power with the right as the Communists quit his cabinet in protest. . . .

Not as radical as Mitterrand? Well, who in the US is advocating these types of policies?

Will Greece continue to repudiate any notion of fiscal responsibility and continue the Keynesian path it has been on?  Can the anti-bailout parties in the EU form a minority government with some help from the Communists on issues with which they agree?  From Reuters:
Greece's Left Coalition called on Sunday for an anti-bailout coalition, saying the country's general election showed that austerity policies had been soundly defeated and a peaceful revolution ushered in.
The Communist KKE - which believes Greece should abandon the euro - immediately rejected Tsipras's call for a leftist alliance.
"Mrs Merkel needs to understand that austerity policies have suffered a huge defeat," said Left Coalition leader Alexis Tsipras, referring to German Chancellor Angela Merkel. . . .



European Central Bank warns against higher taxes

European Central Bank warns against higher taxes

With the leading French presidential candidate calling for higher taxes, this warning is unlikely to be heard. From the NY Times:

Ahead of crucial elections in France and Greece, Mario Draghi, the president of the European Central Bank, warned governments on Thursday that opting for the “easier road” of raising taxes to fill public coffers would not solve Europe’s problems.
Mr. Draghi said it was understandable that governments would be tempted to raise taxes “under extreme urgency,” but he emphasized that “past the urgency, this should be corrected,” especially in a European environment with “a high level of taxation.” . . . 
School shooting in France

School shooting in France

Four dead
UPDATE: From the WSJ:

A French police official says the gun used to kill four people at a Jewish school Monday was the same gun used in attacks on three French paratroopers last week.
Police had been investigating a connection between the attacks after a gunman opened fire outside Ozar Hatorah school in the southwestern French city of Toulouse, killing a rabbi, his two sons and one other child, according to the prosecutor's office.
Prosecutor Michel Valet said a 30-year-old rabbi and his 3-year-old and 6-year-old sons were killed in the attack just before classes started at the Ozar Hatorah school.
Another child, the 8-year-old daughter of the school principal, was also killed, school officials said. Valet said a 17-year-old boy was also seriously wounded and in the operating ward of a city hospital.
"The drama occurred a bit before 8 a.m. A man arrived in front of the school on a motorcycle or scooter," Valet said, adding that the man got off his scooter outside the school and opened fire.
"He shot at everything he had in front of him, children and adults," he said. "The children were chased inside the school." . . .


This after two different public shootings in France last week:

A gunman on a motorbike opened fire on three French paratroopers at a bank machine Thursday in southern France, killing two and critically wounding one, officials said. It was the second such attack in a week targeting French soldiers. . . .
On Sunday, a 30-year-old paratrooper was fatally shot near a gymnasium in the southern city of Toulouse by an unidentified attacker. . . . .


UPDATE: This is an interesting new twist on the case. From the WSJ:

The man who gunned down four people at a school in this southern French city apparently filmed his attack, further convincing authorities that they are searching for a merciless killer who meticulously planned the shooting that has sparked horror and outrage across the country.

Investigators said Tuesday they fear the shooter, who may be connected to two recent attacks in the area that left three soldiers dead, could strike again.

Prosecutors say they have dispatched more than 200 specialized investigators, from anti-terrorist police to profilers to Internet experts, to Toulouse to help identify the shooter, who opened fire Monday at a private Jewish school, killing a father and his two young sons as well as an 8-year-old girl.

Prosecutors have said gunpowder was found on the heads of all the victims, suggesting they were shot at point-blank range. Interior Minister Claude Guéant, who is helping coordinate the hunt for the killer from Toulouse, said all the witnesses to the shootings at the school said the man "was cold and determined and showed great cruelty." . . .
Here is my bet: Britain's financial sector will do better than the EU's in the future

Here is my bet: Britain's financial sector will do better than the EU's in the future

For those who blame private financial institutions and not the government for the recession, the EU is offering them what they want. The problem is that they have the government to blame and more government isn't the solution. It should be a pretty simple test to see who is right. From Reuters:

At that point, the British prime minister set out two concessions he wanted in exchange for Britain's support on treaty change. "One was a safeguard on the internal market ... but that was not the problem," the official said. "Then he launched the idea on financial services."

Financial services account for about 10 percent of Britain's economy and the government has been at pains to shield the sector from regulation emanating in Brussels. Britain had shared the outlines of its thinking with some of its partners, officials said, but it hadn't circulated anything approaching a document sufficiently detailed to form the basis of discussion. For that reason, the demands were news to many of the people around the table. But it wasn't just the way Cameron went about it, it was the substance of the demands. He was effectively asking for a softening of regulation on Britain's financial sector at a time when many voters and politicians believe banks are largely to blame for the crisis Europe is suffering and want tighter regulation on the sector.

"Politically speaking, when the banks are considered the enemy and the root of all the problems we have today, Cameron's arguments were the wrong arguments at the wrong time for the wrong people," the official said. "Politically, he was dead from the start." . . .

Some useful data on Euro Zone Debt crisis


The data on ratings downgrades and bailout help is available at the WSJ here.
Greece Debt deal will only reduce Debt as a percent of GDP by 12 percentage points

Greece Debt deal will only reduce Debt as a percent of GDP by 12 percentage points

Kicking the debt can slightly down the road? From the WSJ:

The first attempt to share the burden on Greece's €360 billion ($500.62 billion) of debt was deeply flawed, doing virtually nothing to restore the country's debt sustainability. The second, a 50% reduction in the face value of private investors' bond holdings, goes a lot further. But even after this level of debt relief, Greece will remain heavily indebted.

The proposed July 21 deal involved a bond swap and debt buyback. In theory, bondholders were to take 21% haircuts, but in reality the deal only reduced Greek debt ratios upfront by 12 percentage points of gross domestic product. That was a drop in the ocean: The International Monetary Fund's most recent debt sustainability analysis saw debt peaking at 186% of GDP. Investors were to receive bonds backed by triple-A-rated collateral, effectively capping their losses. . . .
Greenspan confuses Euro with EU

Greenspan confuses Euro with EU

Greenspan says that northern Europe subsidizing southern Europe probably can't last. Fine. But those transfers are done by the EU. A single currency doesn't have anything to do with those wealth transfers. The US had a common currency from the beginning of the country, but our Federal government didn't transfer much wealth. From CNBC:

"At the outset of the creation of the euro in 1999, it was expected that the southern eurozone economies would behave like those in the north; the Italians would behave like Germans. They didn’t," Greenspan said. "Instead, northern Europe fell into subsidizing southern Europe’s excess consumption, that is, its current account deficits."

Greenspan predicts that as the south's fiscal crisis deepens, the flow of goods from the north will stop altogether and southern Europe's standard of living will go down.

"The effect of the divergent cultures in the eurozone has been grossly underestimated," he added. "The only way to have several currencies from divergent nations lumped together is if they are culturally close, such as Germany, the Netherlands and Austria. If they aren’t, it simply can’t continue to work. . . .

European Countries Debt as a percentage of GDP


While Greece and Italy are in trouble with debt to GDP ratios over one, Spain is roughly similar to the US. In just a few years on its current path, the US will end up being similar to Greece.






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A note on justice in the US and Europe

A note on justice in the US and Europe

From the Economist magazine:

. . . Beyond such differences in legal cultures, one fact is inescapable. In America a modest African immigrant has obtained a swift response from the police to her complaint of sexual assault. Mr Strauss-Kahn’s innocence or guilt will be determined in court. But New York’s authorities have not shirked from arresting the head of one of the world’s leading international bodies, nor from demanding that he be kept in jail on remand. It is worth asking: would this have happened in Paris or Rome?
Nutsy EU consumer regulations: EU bans selling eggs by the dozen

Nutsy EU consumer regulations: EU bans selling eggs by the dozen

Despite the regulator's claims, this is not consumer friendly regulation. If this is the way that consumers wanted to buy their eggs, this is the way grocery stores would sell them.

British shoppers are to be banned from buying eggs by the dozen under new regulations approved by the European Parliament.
For the first time, eggs and other products such as oranges and bread rolls will be sold by weight instead of by the number contained in a packet.
Until now, Britain has been exempt from EU regulations that forbid the selling of goods by number. But last week MEPs voted to end Britain’s deal despite objections from UK members.
The new rules will mean that instead of packaging telling shoppers a box contains six eggs, it will show the weight in grams of the eggs inside, for example 372g. . . .

‘It is important that information is provided in a way that is meaningful and beneficial to consumers. This issue is still being considered by EU member states and it will be some time before the regulation is finalised.’
The move could cost retailers millions of pounds because of changes they will have to make to packaging and labelling, as well as the extra burden of weighing each box of food before it is put on sale. . . .
Has the Euro Zone failed?

Has the Euro Zone failed?

Václav Klaus, president of the Czech Republic, thinks so. At least, it hasn't obviously produced the promised increased growth. (Presumably, supporters could argue that the drop in growth would have been even greater, but they would have some explaining to do.)

It hasn’t delivered growth and the economies of member states have not converged. According to European Central Bank, average annual economic growth in the euro-zone countries was 3.4% in the 1970s, 2.4% in the 1980s and 2.2% in the 1990s. In the decade of the euro, from 2001 to 2009, it was just 1.1%. . . .
EU Levies Record $1.45 Billion fine in Intel Monopoly Case

EU Levies Record $1.45 Billion fine in Intel Monopoly Case

My own belief is that this is the European way of taxing American firms.

European regulators hit Intel Corp. with a $1.45 billion fine -- the largest ever assessed there for a case involving monopoly abuse -- and called for changes in the way the U.S. company sells the microprocessors at the heart of most of the world's PCs.

The decision, which Intel vowed to appeal, underscored the European Union's willingness to challenge the business practices of dominant U.S. technology companies like Intel, Microsoft Corp. and Google Inc. Though there are new signs the Obama administration will get tougher on antitrust abuses, rules enforced by European regulators are already having a big effect on Silicon Valley companies and leaders of other industries. . . . .
More on the Irish rejecting the EU treaty

More on the Irish rejecting the EU treaty

I was stunned to read that the EU "is the source of about 85 percent of the new laws passed in Europe every year. . . . " The piece in the International Herald Tribune noted that "many people feel, the Union is remote, undemocratic and ever more inclined to strip its smaller members of the right to make their own laws and decide their own futures." Given the first statement, that seems only natural and well justified. It appears to me that too much is being made of the fact that Ireland is the only country that has rejected the treaty. It seems pretty obvious that other countries have not put the new treaty up for a popular vote precisely because they feared that their voters would defeat the treaty. Indeed, the EU has long ago gone beyond being an organization for allowing free trade and gone on to reducing competition between the countries in the organization. Allowing competition over laws prevents any country from passing laws that can be too harmful.
Irish reject new EU Treaty

Irish reject new EU Treaty

The Irish were the only people allowed to vote on the new EU treaty (their constitution mandates it), and they have apparently rejected it. Personally, I think that this is good for the EU because the treaty was centralizing power even more than it otherwise is and that allowing competition between the different governments over policy is good. The BBC has an article here:

Under Irish law, any amendment to an EU treaty requires an amendment to the Irish constitution and all constitutional amendments require approval by referendum.

The official result is not yet in, but Irish Justice Minister Dermot Ahern says substantial vote tallies around the country show the Lisbon Treaty has been rejected.

"It looks like this will be a 'no' vote," Mr Ahern said. "At the end of the day, for a myriad of reasons, the people have spoken." . . .

UK Independence Party leader Nigel Farage, who campaigns for Britain's exit from the EU, said: "The only people to have a say on the treaty have kicked it into the long grass." . . .


This vote was supposed to finish the treaty, but you get this response from the EU president.

Despite pronouncements that the treaty would be shelved if the Irish voted against it, European Union President Jose Manuel Barosso said it is still up for discussion.

"Our position is this one; 18 member states have already approved the treaty. One, Ireland, voted no. We should go on now with the process. At the same time, the leaders should meet should meet and see what possibilities are there for a collective response to this issue, because there is a collective responsibility," he said. . . .


The final votes was 53 percent "NO" and 47 percent "YES."
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