April 25, 2014

Tapui Raunio on the LSE blog concludes that the Eurosceptic Finns party is unlikely to get significant support in EP elections and that the Socialists have no European project to present to their voters ;
  • Yosef Bhatti and Kasper Møller Hansen find that turnout at European Parliament elections is likely to decline in the coming decades;

April 25, 2014

0

Tapui Raunio predicts Finns party to fare bad in the EP polls

Tapio Raunio on the LSE blog writes that the Eurosceptic Finns Party is unlikely to gather significant votes in the upcoming European elections. The reason is that EP elections are traditionally highly ‘candidate centred’ due to the use of open party lists and that without their charismatic leader Timo Soini the Finns party has not much to offer. Soini declared that he focusses on national politics, and without a leader in the European election it could cost the party its one seat out of 13 they have in the EP. The other reason is that most Finnish parties are internally divided over Europe and this is reflected in the composition of their lists including candidates with different views on Europe. While this causes problems for the party leaderships, it controls tensions within the parties and probably increases their vote totals. In terms of politics it is the left that will find it the hardest to convince, with Europe’s policies mostly about competitiveness, there is not much content Socialists could use in the campaign. 

In another LSE blog posting, Yosef Bhatti and Kasper Møller Hansen look at the likely development of overall voter turnout in EP elections. Turnout levels at elections to the European Parliament have fallen since the 1970s, and likely to fall further. How do they know? Voters turnout is especially low among young voters this appears to be a permanent generational effect. The rest is math.

Show Comments Write a Comment
To write a comment, please login first. Your can log in here: Login
Hide Comments

April 24, 2014

Renzi's political reforms meet serious obstacles as majority appears to be forming against Renzi's Senate reform proposals;

    April 24, 2014

    0

    Renzi's political reforms meet serious obstacles

    La Repubblica leads this morning's paper with the news that a majority has formed in the Senate against Matteo Renzi's proposed Senate reforms, without which the already agreed electoral reforms cannot proceed. The article said that there was a coalition between Forza Italia and the left of the PD, opposed to the abolition of the Senate as an elected chamber and its transformation into a regional assembly. The article quotes the head of the Forza Italia Senate group as saying there was now a great deal of consensus of members in the constitutional affairs commission, but also in the plenary. We note that the situation is probably serious because of the nervous reactions by government ministers. Constitutional reform minister Elena Boschi accused the left of her party of boycotting the legislation. Renzi himself accused the opponents of posture ahead of the European elections. The article quotes Stefano Fassina, a former deputy finance minister and outspoken oppenent to Renzi inside the PD, as saying that the issue was not the boycott of the reforms, but the change of their direction. 

    The Italian press has been full of stories about tensions inside the Renzi coaltion, somewhat complicating the task of filtering the noise from the signal. This revolt appears to be of more than average importance, but we should bear in mind that much of the noise we hearing now is related to the European elections. There is still time for a compromise on the Senate reforms, but Renzi is adamant not to give up the key principle of the Senate becoming a non-elected chamber without the right to pass a vote of confidence in the government. That threshold should be seen as a test for his ability to push through difficult reforms.
    Show Comments Write a Comment
    To write a comment, please login first. Your can log in here: Login
    Hide Comments

    April 24, 2014

    Easter vacation occupancy figures improve in Spain from the previous year, but the effect is masked by lower spending on shopping and eating out;

      April 24, 2014

      0

      Spain’s domestic tourism Easter recovery – of sorts

      Spain’s domestic tourism numbers improved this past Easter relative to last year, but the way in which the Spanish press fished for positive news to tout the economic recovery is almost comical. For instance, Europa Press headlines that 8% of Spaniards spent more this Easter than last, only to report in the body of the article that 52% reduced their spending. El País (English edition) writes that Easter hotel occupancy improved from the previous year. The effect of Easter is so large that yoy comparisons involving the months of March and April are useless when Easter moves from one to the other month, so tourism minister José Manuel Soria reported only on occupancy numbers from the Easter period proper which were 76% for hotels and 89% for vacation rentals, up from the historical lows of 71% and 57% respectively in 2013. Buried in the article we find a reference to the reduction in the total number of beds on offer, which explains a small part of the increase in occupancy rates. The longer Spanish version of the story shows the tourism industry is not as satisfied as the minister, and continues to ask for a VAT reduction for tourism, which Soria said would not be forthcoming. One of the problems is that, despite the improvement in vacation occupancy rates, domestic tourists are spending less on ancillary shopping and restaurants.

      Show Comments Write a Comment
      To write a comment, please login first. Your can log in here: Login
      Hide Comments

      April 23, 2014

      Valls received Socialist opponents to his austerity plans yesterday, and signals compromise on pension freeze but not on the overall spending cut target;

        April 23, 2014

        0

        Valls signals concessions to Socialists

        France projects its public deficit to come in at 3.8% this year, instead of 3.6% envisaged earlier. In the stability programme Manuel Valls is expected to forecast that the deficit is expected to reach 3% in 2015 (instead of 2.8%). Valls spent his day yesterday talking with the representatives of 100 Socialists who openly called for a change in policies. While the €50bn in savings was apparently not up for negotiation (the group wanted to cut it down to €35bn), Valls seems open for concessions with respect to pensions, Les Echos reports. Discussions included a compensation for small pensions, a lower cap for the freeze and a review clause offered to public service employees, a payment freeze in accordance with economic growth. More salary revaluations Valls will receive the Greens and the Radical Left today.  The plan is up for a vote in parliament on April 29.

        The reaction among a small yet vocal group of Socialist lawmakers increases the risk that Hollande will have to water down his deficit-cutting plans, rely on opposition votes or -- more damaging yet -- face an election if a vote on the package fails, writes Bloomberg. Gerald Grunberg says the group is “unpredictable, malcontent and disoriented.” Though a no-confidence vote is unlikely, it cannot be excluded. The French Socialists never revised its ideology and the left wing feels lost intellectually and politically in today’s globalised world.

        Stéphane Dupont argues that the sceptics offer no real alternative and that there is really not much choice either: Pressed to counter-finance every measure they object to, they cannot propose to raise taxes as the electorate is fed up with tax increase, and also given Hollande’s promise to reduce tax charges for households until 2017. Also the majority of the French support Valls savings plan, except for his pension cuts.

        Show Comments Write a Comment
        To write a comment, please login first. Your can log in here: Login
        Hide Comments

        April 22, 2014

        Pier Carlo Padoan has a long list of proposals to improve a monetary union between a Calvinist North and a Catholic South, including the construction of a genuine banking union;

          April 22, 2014

          0

          Padoan’s ambitions for Italy’s EU presidency

          We are not holding our breath for the Italian EU presidency and its stated ambitions to change the way the EU and the eurozone in particular are working. This would require a confrontation, for which the Italian political system never had the stomach. And we simply do not believe that the Italian government will put a fight at a time of a cyclical upturn and improved political fortunes for the PD.

          Nevertheless, we were struck by the frankness with which Pier Carlo Padoan analysed the EU’s policy mistakes and some of the conclusions he drew. As he writes in La Repubblica, he is seeking a grand bargain between the Calvinist states of the north and the Catholic states of the south, to undo some of the mistakes that were made. He writes the US had focused on getting the balances of the private sector in order while Europe imposed austerity, which has produced a credit crunch and delayed the recovery. He makes the following proposals: 

           

          • A stronger banking union with adequate common resources; 
          • A fiscal strategy oriented towards growth and social stability;
          • structural reforms to stimulate growth and innovations;
          • a reallocation of EU funds towards growth and innovations;
          • service liberalisation;
          • completion of TTIP.

           

           

          The problem with list is that it is too long. You end with a foul compromise of the kind we have just seen on banking union where the purpose of a long list was to conceal the fact that you cannot agree the one or two points that really matter. In Padoan’s list, the only two points that matter are a genuine banking union and a change in the fiscal strategy. But Italy is party to the recent agreement on the SRM. He could make a start by blocking the ratification of the intergovernmental treaty – but that won’t happen. He would also need to seek a complete renegotiation of the fiscal compact to get this second point across, which is not going to happen either. So we will all end up agreeing on the importance of structural reforms.
          Show Comments Write a Comment
          To write a comment, please login first. Your can log in here: Login
          Hide Comments

          April 22, 2014

          Finland’s economy minister Jan Vapaavuori declares candidacy to succeed Jyrki Katainen when he steps down in June;

            April 22, 2014

            0

            Vapaavuori has good chances to become Finland’s prime minister

            Finland's economy minister Jan Vapaavuori will seek to become leader of his party, he said on Monday, a move that would enable him to take over as prime minister from Jyrki Katainen who plans to step down in June. Members of Vapaavuori's conservative National Coalition party would back him as their leader, a recent poll by broadcaster MTV showed, making him the head of the five-party government until the next general election in April 2015. Vapaavuori is expected to guide his party further towards the political right if he takes over from Katainen, according to Reuters. Katainen surprised Finns earlier this month by announcing he was stepping down in June with a view to taking a senior European Union post. Other names mentioned as possible candidates to succeed Katainen were Petteri Orpo, the National Coalition party head in the parliament, and ministers Paula Risikko and Alexander Stubb. The party will vote on the issue on June 14. 

            Show Comments Write a Comment
            To write a comment, please login first. Your can log in here: Login
            Hide Comments

            April 17, 2014

            Manuel Valls announces general freeze on pensions, benefits and public sector pay until October 2015;
            • Socialists on the left of the party said they will oppose measure if it is not amended;

            April 17, 2014

            0

            Left mobilises as Valls announced general pay freeze

            Manuel Valls announced on television last night an 18 month freeze for pensions and benefits as well as the extension of a ban on cost-of-living increases for public sector workers. Pensions, benefits -including support for the young and long-term unemployed - as well as housing, family and invalidity allocations, will be frozen until October 2015. A pay freeze for France's five million public sector workers has been in place since 2010 and will also be extended.

            Never before has a prime minister dared to impose such a broad based freeze, writes Les Echos. While quite unpopular with the left, it would bring in €2bn, of which €1.3bn is from the base pension alone. On top of this, the announced further cuts in family benefits, and expects social security services to cut their administration costs by €1.2bn, while complementary health and unemployment insurance, both run by trade unions and employers together, are to realise cost savings of €4bn.

            Valls said that more than 40% of the €21bn in savings envisaged will come from cuts in social benefits and healthcare. Another €18bn is to be trimmed from government ministries and the remaining €11bn will come from a rationalisation of local government.

            Christian Paul, a lawmaker on the left of the party, said he and fellow Socialist deputies had been "floored" by the announcement of the freeze, AFP reports. Paul said he and some other Socialist deputies would be unable to support the government if the package was not amended. Many Socialists were not briefed before the declaration on television, the JDD reports. Trade unions already talk about strike actions.

            The measures are to be examined by the cabinet next week and presented to parliament on April 30.

            Show Comments Write a Comment
            To write a comment, please login first. Your can log in here: Login
            Hide Comments

            April 17, 2014

            The EU Commission will ask the Andalusian government whether any European Social Fund money was involved in the unemployed training programme which allegedly suffered massive misappropriation;

              April 17, 2014

              0

              Commission to probe Andalusian government

              The European Commission will ask the Andalusian regional government to investigate whether any of €1.1bn from the European Social Fund were affected by the alleged fraud in training for the unemployed which hit the news over the weekend, a spokeswoman for Audit and Anti-Fraud Commissioner Algirdas Šemeta said on Wednesday. According to El País, after contacting the region in January to inquire whether ESF money was being used for such courses as reports of irregularities has surfaced, the Commission had concluded the investigation needed only be of national scope. Vozpópuli, which broke the story last Friday, writes that the former Andalusian premier José Antonio Griñán had decided in April 2013 to strip his economy department of the responsibility for the courses in question, transferring them to the education department. In February, the Andalusian government’s economy department had issued a statement that the courses had been given without incident and with external controls, this in reaction to a report from the Andalusian court of audit relative to the years 2009 and 2010 claiming the subsidies had been given without a public tender. The police has filed a report with the anti-corruption prosecutor but the case is not yet in the hands of a judge. Público writes that the Andalusian regional government has accused the central government of leading an “inquisition” on the Andalusian government. Interior Ministry sources deny a leak of the police investigation, which has been running since last May under the auspices of the anti-corruption prosecutor in the province of Málaga.

              Show Comments Write a Comment
              To write a comment, please login first. Your can log in here: Login
              Hide Comments

              April 17, 2014

              Wolfgang Munchau, meanwhile, writes that the eurozone crisis is not fundamentally about spreads, but about deep-seated imbalances that are very unlikely to be resolved.

                April 17, 2014

                0

                The euro crisis – a long game

                We liked George Magnus’ (?@georgemagnus1) observation on Twitter about the future of the euro debate, who summed it up like this:

                “… euro sceptics still waiting for euro to break. Euro philes still waiting for it to work. Long game."

                In his Spiegel column, Wolfgang Munchau also takes stock of the debate, observing that the most dangerous moments of the crisis have been those when policy makers were becoming complacent, which is what is happening again now. The euro crisis was not primarily a crisis of sovereign spreads, but one of fundamental economic imbalances that are bound to arise in an imperfect monetary union. Austerity has suppressed the current account imbalances for now, but has not resolved them. As Magnus above, Munchau writes this is a long game, to be decided on the political battlefields. He wonders whether the Greeks and the Italians will continue to support moderate political parties of the centre in five years’ time unless there is a fundamental shift in their well-being. And he does not see that fundamental shift occurring in an environment of extremely low inflation rates, and continued budgetary consolidation.

                Show Comments Write a Comment
                To write a comment, please login first. Your can log in here: Login
                Hide Comments

                April 16, 2014

                Spain’s economic police is said to be investigating a €2bn fraud case involving subsidies for the training of the unemployed, implicating unions, firms, employers’ associations and those in charge of oversight at the Andalusian regional government;

                  April 16, 2014

                  0

                  Massive fraud uncovered in Andalusian unemployed training schemes

                  Spain’s police unit in charge of economic and fiscal crimes (UDEF) is investigating fraud in training courses for the unemployed worth €2bn, writes El Confidencial. Quoting “sources close to the investigation”, the paper says the Andalusian regional government channelled €3.7bn in subsidies for training schemes of which more than half may have been fraudulently used. The regional government advanced 75% of the cost of the courses to the unions, firms or employers’ associations organizing the courses and the remaining 25% was subject to an audit. The allegation is that either the audits were not carried out or, if irregularities were found the regional government didn’t usually demand the return of the subsidy, and thus the UDEF suspects that high ranking government officials must have been involved in the fraud. To avoid statute of limitations, the UDEF is investigating the period 2009-2011 although the fraud presumably extends further back. Also, to keep the size of the case manageable the investigation is focusing on only one of the 8 Andalusian provinces, Málaga. The case appears to have been initiated on a complaint by the Social Security.

                  The scale of the fraud, if confirmed, is staggering and dwarves any other case of misuse of public funds. For instance, in past months we reported on a high-profile case involving training courses in Madrid in which a “mere” €15m were defrauded. The new case is over 100 times larger. El Confidencial at one point speaks of “a blow to the Andalusian unemployment industry”, a turn of phrase that should give everyone pause about “active employment policies”.
                  Show Comments Write a Comment
                  To write a comment, please login first. Your can log in here: Login
                  Hide Comments

                  April 16, 2014

                  a German program intended to subsidize unemployed youth coming to Germany’s sectors in need of workers has been mothballed after being overwhelmed by demand;

                    April 16, 2014

                    0

                    Germany suspends international youth employment program

                    Germany has suspended a youth employment programme initiated amid much fanfare less than a year ago and geared towards bringing foreign trainees into German sectors lacking manpower, writes The Local (Germany). Although the program was recently extended to run until 2018, it has run out of money and suspended new applications. The original budget was €48m for this year, but the programme has already used up the entire €400m earmarked for the duration of the program, though money to pay the subsidies already pledged will be forthcoming. A German labour ministry spokesperson said they could not cope with the demand, which had exceeded expectations as nearly 9,000 people had from across the EU had applied, particularly from Hungary and Spain with the latter leading with over 5,500 applicants.

                    Show Comments Write a Comment
                    To write a comment, please login first. Your can log in here: Login
                    Hide Comments

                    April 16, 2014

                    Silvio Berlusconi receives a surprisingly mild sentence of social services, but the chances of an eventual return to Italian frontline politics, and the outlook for his party, remain bleak;

                      April 16, 2014

                      0

                      The future of Silvio Berlusconi and Italian politics

                      The Italian papers are naturally full of the reports of Silvio Berlusconi’s sentence of four hours of community work per week in a nearby old peoples’ home for ten month. The interesting political question is how do the various scenarios affect Italian politics? La Repubblica has an article looking at various scenarios for Berlusconi. In the best case scenario, he would be a free man March 1, 2015, when he will be 78 years old. This would allow him, health permitting, a full political comeback ahead of the next elections, which would have to be held before February 2018. His political ban would have expired by then. The article then discusses how the various other legal cases could impinge on that scenario, most importantly the case involving sex with an underage prostitute, for which he was already found guilty and received a seven-year sentence in a first ruling. That, in turn, could also impinge on the current sentence itself. The maximum sentence he could expect is four-years of house arrest (which would take him beyond the election and out of politics altogether). Even a lower period of house arrest would freeze him politically, as he would no longer be able to have external contacts. 

                      Forza Italia does not have an obvious successor. With Berlusconi out of politics, the party might implode. The share of the vote of Beppe Grillo, meanwhile, has been holding up steadily at 25% - despite various party scandals and serial blunders – the latest being a tasteless parody in his blog of Primo Levi’s poem This is a Man, based on his experiences in the holocaust. If Berlusconi ends up in house arrest and thus kept out of politics for a few more years, Grillo would be the main beneficiary – and a serious challenger to Renzi in the next election. It looks to us that Renzi – and the Establishment that now supports him - need Berlusconi to hang on in there (which is why we would expect to see continued legal lenience).
                      Show Comments Write a Comment
                      To write a comment, please login first. Your can log in here: Login
                      Hide Comments

                      April 15, 2014

                      Eurozone Blog: Sweden is now in full-fledged deflation. Good comment by Lars Svensson.
                      • Lars Svensson says Sweden was now in full-fledged deflation due to policy errors by the Riksbank;

                      April 15, 2014

                      0

                      Sweden is now in full-fledged deflation

                      Definitely off our reservation, but highly relevant nevertheless, is the Swedish experience, which may be a pointer to where the eurozone is headed. Lars Svensson, the economists who was also a former deputy governor at the Riksbank, writes that Swedish inflation was hovering around zero since November 2012 and turned negative in January 2014. He blames the failed policy of the Riksbank, which started to raise rates in the summer of 2010, then at 0.25%, to 2% in 2011. The real rate went up by 3.5pp, which constitutes a huge shock. He says Sweden is in serious danger of getting trapped in a deflationary spiral, and urges the Riksbank to take rates back to low or even negative levels, and if necessary adopt QE.

                      Show Comments Write a Comment
                      To write a comment, please login first. Your can log in here: Login
                      Hide Comments

                      April 15, 2014

                      On Macropolis Nick Malkoutzis writes that the momentum of Syriza seems gone, missed opportunities and only slight lead in the polls suggest they no longer are a credible alternative to Samaras;

                        April 15, 2014

                        0

                        Nick Malkoutzis concludes Syriza's momentum over

                        Nick Malkoutzis on Macropolis concludes that the Syriza moment has gone. The problem is that Alexis Tsipras tried to do both, open up to a wider audience by refining its message or it could remain faithful to its radical roots. Almost 24 months on since the last election, SYRIZA’s grand idea is still unclear about its position to the bailout programme and has yet to find allies in the EU in favour of a larger haircut. Their political handling remains immature and they missed out two golden opportunities they could have put the government under pressure with - after cabinet secretary Takis Baltakos was forced to resign over his secret contacts with Golden Dawn, and the new bond issue. A recent Public Issue poll put SYRIZA 3 percentage points ahead of New Democracy for the May 25 European Parliament elections but most other surveys indicate the gap is much smaller. It does not look like they will win by a landslide, and with only a small lead they will loose their momentum as a credible alternative to Samaras and it will lack the political legitimacy to push for national elections. 

                        Show Comments Write a Comment
                        To write a comment, please login first. Your can log in here: Login
                        Hide Comments

                        April 15, 2014

                        Klaus Kastner says that Greece faces a real choice between staying the course and default, while he himself has lost confidence in the success of the current policy;
                        • Keep Talking Greece says there is not enough political support for default, let alone euro exit, in Greece right now;
                        • Vanis Varoufakis says default not the best option – Greece has better means available to force a debt conference, for example by holding the EU ransom over banking union;

                        April 15, 2014

                        0

                        Should Greece default?

                        Wolfgang Munchau’s FT commentary on Greece has provoked some reactions. The argument of the column was not that Greece should default. It said the conditions for a default strategy to work well would be onerous, and would require much more in terms of real economic reform. But a primary surplus and a current account surplus both make a strategy of default a feasible option, leaving Greece with a genuine choice (when there was no choice before). A decision should be based primarily on which option yields the greatest likelihood of an increase in real investment and a return to full employment.

                        Klaus Kastner, who runs the Observing Greece blog, strongly agrees with the final conclusion of the comment, which is that there is now a choice available to Greece. He says the EU, and not a financial journalist, should be the one that tells the Greeks that they have a choice.

                        “When I started this blog 3 years ago and for the first couple of years, I was an adamant supporter that Greece could and should make it with the Euro. Nearly 28% unemployment and nearly 60% youth unemployment after 4 years of adjustment prove me wrong. Yes, Greece is now financially stable with both domestic and external accounts in balance (or rather: in surplus). But how long will Greece remain politically and socially stable with these kinds of unemployment ratios?

                        I cannot judge how quickly Greece's employment situation would improve if the country switched to a default/exit course but I am certain about the following: with the Euro, the Greek employment situation will not return to more or less satisfactory levels for a very long time.”

                        The Greek blog Keep Talking Greece suspects that there is a big plot behind this column, another German attempt to influence Greek voters. It said the option was politically unrealistic, as even Syriza would not advocate such a strategy.

                        Yanis Varoufakis agrees with the analysis, but not with the conclusion. He says default and exit were nuclear options that may not be needed. Instead Greece should adopt a strategy consisting of three prongs: first, refuse to ratify the SRM agreement; second, refuse to issue new bills or bonds until there debt relief is agreed; refuse a change of further elongation of official debt (with the goal to make debt relief the only option).

                        Show Comments Write a Comment
                        To write a comment, please login first. Your can log in here: Login
                        Hide Comments

                        Become a subscriber!

                        This has been Mario Draghi's most important policy statement so far - details and analysis on eurointelligence.com Professional Edition

                        Click here to subscribe!

                        AXA - Our Partner

                        Tapui Raunio predicts Finns party to fare bad in the EP polls

                        • Tapui Raunio on the LSE blog concludes that the Eurosceptic Finns party is unlikely to get significant support in EP elections and that the Socialists have no European project to present to their voters ;
                        • Yosef Bhatti and Kasper Møller Hansen find that turnout at European Parliament elections is likely to decline in the coming decades;

                        Further News