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How the world sees Greece
Monday, July 23, 2012
Former US president Clinton calls for support to Greek economy
Former US President Bill Clinton, who paid a short visit to Athens on Sunday to address an event organized by Greek- American entrepreneurs, called for support to the ailing Greek economy.
Greece schools considering changes to Code of Conduct
Greece schools considering changes to Code of Conduct Rochester Democrat and Chronicle Students in the Greece Central School District could be allowed to use their cell phones, tablet computers and e-readers in certain areas of their schools, if the school board approves proposed changes to the mobile device policy. But, they won't be ... |
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Greece Seeks Cuts Ahead of Troika Visit
Greece is seeking billions of euros of additional budget cuts and looks poised to announce the first steps toward streamlining its bloated public sector ahead of the return of a troika of international inspectors to Athens this week.
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Talk of Greece Exit From Euro Resurfaces
 AFP | Talk of Greece Exit From Euro Resurfaces Businessweek Greece's troika of international creditors -- the European Commission, the European Central Bank and the International Monetary Fund -- will arrive in Athens tomorrow amid doubts the country will meet its commitments and reluctance among euro-area ... Roesler questions if Greece can fulfil bailout conditions German Econ Min: Greece Likely Unable To Fulfill MoU Commitments German vice chancellor says idea of Greek euro exit has 'lost its horror' |
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Greece Back at Center of Euro Crisis as Exit Talk Resurfaces
 Telegraph.co.uk | Greece Back at Center of Euro Crisis as Exit Talk Resurfaces Bloomberg Greece's troika of international creditors -- the European Commission, the European Central Bank and the International Monetary Fund -- will arrive in Athens tomorrow amid doubts the country will meet its commitments and reluctance among euro-area ... Germany's Roesler Says 'Very Skeptical' Greece Can Be Rescued Roesler questions if Greece can fulfil bailout conditions German Econ Min: Greece Likely Unable To Fulfill MoU Commitments |
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Markets fear for Spanish economy as local governments seek financial aid
ECB president insists the eurozone will not collapse as Murcia becomes latest region to request funding
Spain's regional woes are expected to weigh on financial markets this week after a second local government in three days asked for state aid, increasing fears that the eurozone's fourth largest economy will be forced to seek a full-blown rescue.
On Sunday Murcia became the latest region to admit it needed central government help, after European finance ministers waved through a €100bn (£77.8bn) recapitalisation of Spanish banks on Friday. Several other regions are expected to follow, with Catalonia reportedly unable to pay the interest on €48bn of borrowings.
Murcia's president, Ramón Luis Valcárcel, said he expected the south-eastern region to ask for up to €300m from Madrid as it struggled to refinance debt and cover its deficit.
"Don't imagine they are going to simply make a present of the money," he said, warning that Spain's prime minister, Mariano Rajoy, would impose strict conditions.
Murcia joins the far larger region of Valencia – which flagged up a cash shortage on Friday – on the list of regional governments that have said they will tap an €18bn liquidity fund set up by the central government just 10 days ago.
Several others among Spain's 17 semi-autonomous regions are expected to follow. They include the two biggest regions, Catalonia and Andalucia, as well as central Castilla La Mancha.
Valencia's announcement that it would seek money from the fund, which an increasingly desperate Spanish government has had to partially finance with a loan from the state-owned lottery company, helped send the country's sovereign bond yields soaring on Friday.
New government GDP projections also pushed up yields by forecasting that the Spanish economy would not grow before 2014. Ten-year bond yields rose to a new euro-era record of 7.25% on Friday, a rate widely seen as unsustainable and pushing the country closer to a bailout from the European Union and the International Monetary Fund.
Markets also reacted sharply to the news. On Friday, the Madrid stock market suffered its biggest one-day fall for two years, while markets in London, Paris and Frankfurt also slipped, with the FTSE 100 falling 1% to 5651.
The coming wave of regional bailouts may add further pressure to Spain's bond yields as they threaten to spiral out of control and drive Spain towards a full rescue.
Rajoy's ministers have urged the European Central Bank (ECB) to buy the country's bonds in order to relieve pressure, but ECB president Mario Draghi told Le Monde on Sunday that it had no plans to buy Spanish sovereign debt. He also insisted that the eurozone was "absolutely not" in danger of breaking up.
"We see analysts imagining the scenario of a eurozone blow-up. They don't recognise the political capital that our leaders have invested in this union and Europeans' support. The euro is irreversible," he told the French newspaper.
"All movement towards financial, budgetary and political union is, for me, inevitable and will lead to the creation of new supranational bodies."
Spain's regional bailouts come as senior figures in Catalonia and Murcia admit they will have trouble meeting the 1.5% deficit target they have been set this year by central government.
"There are reasons to doubt how we will be able to reduce the deficit from 4.4% to 1.5% this year," Valcárcel admitted.
Senior figures in Catalonia have also privately admitted that, although they are making every effort to meet the 1.5% target, the region will also struggle to make it. Strict regional deficit targets are a major part of Spain's strategy as it tries to meet the national deficit target it has been set by Brussels, which wants Spain's overall deficit down from last year's 8.9% of GDP to 6.3%.
Last year's high deficit was mainly due to regional governments which, despite demands from central government that they cut back, increased their joint overspend. They run health, education and social services – accounting for 37% of public spending.
Rajoy has introduced tough new laws and designed the liquidity fund in a way that allows it, if necessary, to take direct financial control of regions that fail to curb their deficits – imitating the control Brussels now exerts over southern European economies.
Artur Mas, the nationalist president of the independent-minded Catalonia region, has warned that full intervention would be unacceptable and has threatened to call regional elections if that happens.
"All regional governments run the risk of being intervened by central government, given that, if you do not meet the deficit target, the state will force you to take measures – that is intervention," Valcárcel explained.
Refinancing regional debt does not add to Spain's overall debt, but covering regional deficits does.
There were fresh protests at the weekend as several hundred demonstrators travelled to Madrid from many parts of Spain to protest over the country's near 25% unemployment rate, as well as the stinging austerity measures introduced by the government in a bid to avoid an international financial bailout. Protesters, many of whom were unemployed, carried banners saying "No cuts" and "United, that's enough".
As well as on Spain, markets' eyes will be on the Greek government and banks this week, analysts at Capital Economics note, following the news that the ECB will stop accepting Greek bonds as collateral for its refinancing operations pending a review by the troika.
"Greek banks can still use these bonds to access funds from the Greek National Bank's emergency liquidity assistance," said Jennifer McKeown at Capital Economics. "But such loans are more costly and this development will clearly add to the already intense pressure on the Greek banking system."
The Greek prime minister, Antonis Samaras, said on Sunday that Greece was now in a "Great Depression" similar to the American one in the 1930s. His comments, made to former US president Bill Clinton, who visited Greece as part of a delegation of Greek-American businessmen, came two days before a team of Greece's international lenders arrive in Athens to push for further austerity cuts.
Germany's economy minister, Philipp Rösler, questioned whether Greece could fulfill the conditions for receiving further international aid and said that the idea of the country leaving the euro had "lost its horror."
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Sunday, July 22, 2012
Across Europe, nations are turning in on themselves | Karel Williams
Within countries, local nationalisms are taking hold, with richer regions demanding to pay less to their poorer neighbours
On the surface, the eurozone crisis appears to be all about the fallout between national governments. It is creditor v debtor, north v south. At the last EU summit, the standoff between Germany and Spain seemed to epitomise that divide.
But there is another, under-reported story here. It's less about nation states than about regions within European countries being pulled apart through internal north-south conflicts. In Italy, prime minister Mario Monti has talked up his "grave concerns" about the default of Sicily, which the Fitch ratings agency believes is not "imminent". Monti's statement is part of an internal political attack on regional spending and the size of the government payroll in the mezzogiorno, the Italian south.
There are already growing regional wealth disparities within all the high-income countries of Europe. Now they are being driven apart further by the new problem of declining ex-industrial regions, such as the West Midlands in the UK or Walloon Belgium. Some countries are still struggling with the old problem of their laggard agricultural regions, such as Puglia or indeed Sicily in Italy.
Research shows that, on some measures, the internal inequalities are greater in northern countries such as the UK than in southern countries such as Italy. If one looks at GDP per head for the most affluent region with more than 10% of the population (London, including outer London, in the UK, and Lombardia, including Milan, in Italy), the top to bottom inequality is worse in the UK. In Italy the poorest regions, such as Calabria and Campania, have half the income of top regions, while UK regions such as Merseyside or south Yorkshire, do relatively worse. And 63% of the Italian population attain the mean national GDP or better, compared with 32% in the UK. These inequalities are growing, despite substantial internal transfers, and are driving the rise of a new regional nationalism all over Europe.
Countries in Europe have always been unhappy in their own way. What's new is that it is no longer the poorer regions who ask for more, but the richer regions who demand to pay less. This "can pay, but won't pay" politics was invented in two wealthy regions, Padania in northern Italy, and Flanders in Belgium. Insurgent populist parties Lega Nord in Italy and Vlaams Belang in Belgium mix regional identity politics with electoral opportunism. But their economic agenda is consistently against metropolitan political elites, and against redistributive tax policies.
As austerity bites, internal distributive conflicts are now spilling over into mainstream politics, especially in federal countries such as Spain, where 17 regional governments manage schools and hospitals and account for more than half of public expenditure. In January this year the centre-right Spanish government made an €8bn advance so that the regional governments could carry on paying their bills; by April, prime minister Mariano Rajoy was threatening to seize budgetary control of recalcitrant regions that were now being told to halve their deficits.
There are echoes of this tension even in Germany, where the regionally based centre-right Christian Social Union party (CSU) in affluent Bavaria is learning the new rhetoric. German politics is about coalitions and consensus, which has encouraged external scapegoating of the Greeks. That same tendency has, in the past, discouraged any questioning of internal distribution to the formerly communist east: an issue that is now being raised noisily by the leader of the CSU, who challenges the legality of internal "solidarity transfers" that supposedly cost Bavaria €7bn a year.
Britain looks out of step with the trend towards regional nationalism. But that may only be because our own populist right (UKIP and the Tory back benches) is fixated on repatriating powers from Brussels, while coalition expenditure cuts are already stripping out public employment and welfare benefits and thereby undermining New Labour's de facto regional policy. But if the Treasury presses for another £10bn in welfare cuts, how long will it be before an ambitious Tory populist, maybe someone like Boris Johnson, starts to make speeches about feckless Geordies?
The emerging pattern of the new regional nationalism is profoundly depressing if we set it in a broad historical perspective. Right across western Europe, one postwar legacy of the economically catastrophic 1930s was a reinvention of the nation through social settlements, underpinned by new policies of economic management, regional aid and social welfare (which in the UK meant Keynes plus Barlow plus Beveridge).
Now what remains of those settlements is being attacked by a new regional nationalism of the privileged, often in alliance with the central state. We must begin to understand that governments are not just sites where regional problems are solved, but also where they can be created or aggravated from the centre.
This then sets the nationalism of peripheral regions in a new context where again the UK has been slow to catch up with emerging realities. The old framing of the issue is about whether any peripheral region has the cultural identity and economic strength to benefit by cutting loose; and in the UK that makes regional government and devolution mainly a Scottish issue, divisively tied to the electoral fortunes of a nationalist party.
But the aggressive final dismantling of the postwar settlement in the UK (and elsewhere) reframes the issue. It should put regional nationalism on to a new agenda about defensive options for all centre-left parties in the economically weaker regions. The Scots will rehearse old arguments in their upcoming referendum, but it is time for a new argument from Wales, Northern Ireland and English regions such as the north-east and the West Midlands.
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