 Europe’s anti-austerity day
Labour day is a bank holiday in most parts of the eurozone – usually an occasion for trade unions to press home their demands. Yesterday it turned into a day of mass protests against austerity all over southern Europe. May protests also in Greece, where several thousands marched through the streets of Athens to protest against austerity measures that have pushed their country further into recession. Even Germany’s trade union boss said this was not time for austerity, but stimulus. Reuters reports that Italian demonstrators had clashed with police in riot gear in Turin, while French trade unions organised about 290 demonstrations all over the country.
Austerity, meanwhile, continues…
Italy uses labour days to kickstart next austerity phase At a special cabinet meeting on Monday night, the Italian government decided to implement savings cuts of €4.2bn that were recommended in a spending review, according to Il sole 24 ore. The meeting ended with the decision to entrust Enrico Bondi, an administrator who restructured Parmalat, as an extraordinary commissioner to oversee the implementation of the cuts. The article says the exercise will involve a lot of ministries and aims at improving spending efficiency of the public sector.
Fiscal Treaty campaigning started in Ireland
Campaigning for the fiscal treaty has started in Ireland ahead of the referendum on May 31. Opposition MPs from Sinn Fein and the Socialist party accused the government of holding a gun to voters’ heads to force them into a Yes vote in the referendum, the Irish Independent reports, after Finance Minister Michael Noonan issued a stark warning that refusing to accept the European fiscal treaty would result in a much tougher budget next year. The Referendum Commission will launch its public information campaign on Thursday, which will include TV adverts and leaflets outlining the facts of the treaty.
The austerians strikes back
In his Financial Times column, Gideon Rachman says there is no alternative to austerity. He says the market reaction to the collapse of the Dutch coalition shows that even the richest countries are not in a position to spend their way out of the crisis. There is simply no alternative to austerity as the markets won’t lend to the countries otherwise. He says even the left understands this, as Francois Hollande’s main disagreement with Nicolas Sarkozy seems to be over the speed of deficit reduction, not the fact itself, similar to the British Labour Party’s criticism of UK fiscal austerity as “too far, too fast”. “This is small-scale quibbling – masquerading as a major doctrinal dispute.”
Writing in the Irish economy blog, Philip Lane makes the following points in defence of the fiscal treaty. He writes that eurozone countries will get out of this crisis with high debt level. This can be destabilising in itself, and is best addressed by cyclically-sensitive fiscal rules. Second, high public debt and high deficits are a barrier to the development of a truly European banking system; third, each flavour of a eurobond (that might result from the fiscal pact later) would require fiscal discipline at national level; fourth, national governments are more likely to yield revenues to a central budget if national fiscal positions are stable; and fifth, national fiscal discipline means that backstop funding can be reserved to deal with shocks rather than fiscal malfeasance. The Fiscal Treaty thus provides one pathway to a more stable European system.
More details on that “Marshall Plan” The EU member states are preparing a growth pact of which a capital increase of the EIB by €10bn is a key element, Süddeutsche Zeitung reports. Such a capital increase would enable the EIB to grant credits over €60bn which in turn could stimulate investments of an even much larger scale. Angela Merkel supported the initiative. „It is important that we don’t fall for the idea that growth always costs a lot of money and can only be the result of expensive stimulus programs“, she told Hamburger Abendblatt.
On top of the EIB capital increase the chancellor pleads for opening the labour markets in Europe, for lowering the entrance barriers for young workers and for using money out of the EU’s structural fund in a more focussed manner. Herman Van Rompuy is planning a dinner by the end of May to prepare for an EU growth summit in June. According to SZ earlier reports were denied by the German government according to which the EU was preparing a „Marshall plan“ in the magnitude of €200bn.
EU to start discussions on implementation of Basel III rules today Reuters has a curtain raiser on today’s Ecofin, which will discuss the difficult issue of implementing the Basel III capital adequacy rules into European legislation. Britain and Sweden are not yet on board, both insisting on more domestic flexibility to raise capital standards above the minimum if needed. France wants a single regime, also to prevent a situation in which the UK government forces London-based banks to cut back on eurozone lending to meet capital standards. The article says no agreement is likely to be reached today.
Greek retail plunged 11.8% in February The Wall Street Journal writes that more than one in five Greeks is now jobless, and more than 60,000 retailers have closed in the past two years. On Monday, the latest data showed retail sales volumes in February plunged 11.8% in inflation-adjusted terms as consumer spending slumped and the Greek economy continued its decline. Other data showed bank lending shrinking 4% in March. The cutbacks have also led to steep reductions in pensions and public service salaries, crimping consumer spending and pushing many Greeks to the verge of outright poverty.
Samaras promises to half unemployment in three years
These are the last days of campaigning ahead of the elections on May 6, where the leaders of the main parties focus on growth and employment issues, Kathimerini reports. Antonio Samaras promised that with ND’s growth strategy, Greece would reduce its unemployment rate to less than 10% within the next three years, down from currently 21%. Samaras suggested that the economy, currently in its fifth year of recession, could grow by 9% over this period. He said that by using just half of the €14bn in European Union structural fund due to Greece, the country could boost the economy by 7% of GDP and create 300,000 new jobs. Evangelos Venizelos also pledged to focus on job creation in the private sector. Sources said that Venizelos would this week stress the need for the next government to have at least 50% of the vote as he attempts to deter traditional PASOK supporters from voting for other parties.
Irish house prices undervalued
House prices in Ireland were undervalued by 12-26% as of the end of last year according to a study of the Irish Central Bank cited by the Irish Times. The bank’s researchers used four models to assess property prices. One model found prices were 26% below what economic fundamentals in the economy would suggest. Two other models found prices were undervalued by 16-18%. A fourth model suggested they were undervalued by 12%. The Central Bank researchers analysed the period up to the final quarter of last year. More recent figures show the decline in prices continued into 2012.The authors attributed the continued decline in house prices to a lack of investor confidence, negative future house-price expectations and an uncertain macroeconomic outlook. The deleveraging in the economy has also a significant effect on the decline.
Merkel provokes FDP by proposing minimum salary
Despite the explicit objection of the FDP, Angela Merkel proposed to set up a commission with union and employers to discuss a nationwide minimum salary, Financial Times Deutschland reports. On May 1st the chancellor said she „wanted to end those white spots on the map where workers had to live on low wages“. She pointed out that she was not in favour of a national legal minimum salary but she asked that minimum salaries should be fixed for yet unregulated sectors. FTD points out that those remarks were timed with next weekend elections in Northrhine-Westphalia and Schleswig-Holstein in mind. The chairman of Germany’s trade union federation DGB, Michael Sommer, said the unions want a national minimum wage of €8.50.
New Cyprus central bank president backs off German euro exit demand
Panicos Demetriades, the new president of the Central Bank of Cyprus backed off his earlier demand on Germany to leave the eurozone in order to solve the currency union’s problems, Financial Times Deutschland reports. As an economics professor at the university of Leicester, Demetriades had written a letter to the FT a year ago in which he said: „The departure of Greece and Portugal is not the best solution to the currency union’s troubles. In my view, the rebirth of the D-Mark makes more sense.“ Asked whether this was still his view, Demetriades told FTD that he had made those comments as an „independant academic”. Demetriades will take over from the current central bank governor Athanasios Orphanides, who failed to secure political support for a second term.
10-Y Spreads, Forex, ZC Swaps and Euribor-Ois
A little better on Friday, getting worse again.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
