In April, the green shoots turned brown

 

After the terrible export figures from Korea and Taiwan for April, Germany’s export figures underline the trend that the recovery is still some time away.  After exports stabilised in March, they got worse again in April, much worse. German exports declined by 4.8% month on month during April, and by 28.7% year-on-year, which the FT points out is the worst fall since the 1950s. Industrial production also fell in April, by 1.9%. These are really terrible figures. No green shoots here.

 

IMF calls for bank rescue strategy and further interest rate cuts

The IMF has emerged as the most consistent critic of economic policy in the euro area. In the article IV consultations with leading representatives from the euro area, the IMF severely criticised the euro area’s economic policy. It called for urgent action on banking, the establishment of stress tests and coherent ring-fencing strategies for bad assets in particular. Without such policies in place, the effect of the monetary and fiscal stimulus would be much reduced. The IMF said there remained a risk of significant feedback loops between the financial sector and the real economy, and the Europeans should get used to the idea that the financial sector may stay on a public drip feed for a long time to come. The IMF also pleaded for an overhaul of the stability and growth pact. In particular, the IMF wants the European countries (having failed to co-ordinate their stimulus programmes in the downturn) to co-ordinate their exit strategies once the recovery gets going. The best source on this story is the IMF’s website.

 

A German bankruptcy

The German government’s bailout of Opel predictably led to a moral hazard situation as others also started to line up to ask for government help. But when it came to the rescue of Arcandor, which owns the Karstadt  department store chain, the government stayed tough. Yesterday, Arcando filed for bankruptcy, a decision that send literal shockwaves through German industry, as so many of Germany’s best know industrial families are linked to this company. FT Deutschland has a nice story on those ripple effects, a reminder just how (near) systemic some of those large companies are in Germany.

 

Now Schulz gets tough

Martin Schulz, the parliamentary leader of the Socialists, yesterday announced that the Socialists would not support Jose Manuel Barroso for another term of the Commission, citing policy disagreements. This comes after the Socialists failed to put their own candidate. FT Deutschland has an article suggesting that Schulz needs to secure his own re-election (It is now widely seen that his tactic to molly-coddle Barroso contributed to the Socialists’ dismal election results. Schulz had hoped until not long ago that he might be the next German EU commissioner, but his prospects are fading).The paper says that Barroso’s reelection is more difficult without Socialists support, as he now relies on support from a disparate group of conservatives. There is also disagreement among governments, some of which want to wait until after the Irish referdendum. The article quotes Angela Merkel as saying that a number of complicated talks will have to be led.

 

Tito Boeri on the Socialist

Writing in Lavoce, Tito Boeri notes that the Socialists in Europe are incapable of winning even in a recession. He says the reason are the 26m immigrants, which entered the EU in the last few years. The citizens are concerned about the sustainability of the European welfare state. The centre-right offers a seemingly simple solution by limiting immigration. But this is not a sustainable policy in the long run either. He is advocating a number of alternative policies without sacrificing the principle of redistribution.

 

 

Munchau on the Socialists

In his column in FT Deutschland Wolfgang Munchau says the decline of socialism in Europe is predominantly due to intellectual laziness. The Socialists had some talented leaders in the past, Schroder and Blair in particular, but they largely failed to present a coherent post-communist economic strategies which ordinary people could buy into. They either positioned themselves as better managers of the current capitalist system, or as reformers, but when capitalism hit its fundamental crisis they were out of their dept, and offered no perspective. Munchau also writes that the failure by the Socialists to nominate their own candidate was a grave tactical error, which the Socialist leader Martin Schulz deserves most of the blame.

 

 Centre-right romps home in Italy’s local elections

This was a bad night for Italy’s left not only in the European elections, but also in local elections. Il sole 24 ore has a summary of the main results. The centre-left won in its strongholds, in particular in Florence and Bologna, but lost heavily in the North and the South.  The centre-right won Milan and Naples. In Lombardy, the centre-right and the Lega Nord are the strongest force, in Piemonte several districts changed from the left to the right. This was a good election for Silvio Berlusconi.

 

Pisani-Ferry on what the EP should do

Jean Pisani Ferry in Le Monde lists the main challenges for the European Parliament in the next five years: Orchestrating the reconstruction of the banking sector despite a tendency towards renationalisation; drafting EU regulation for financial supervision amid strong resistance from nationalists and libertarians; and complementing the EU’s institutional set up with a coordination device for crisis management. It’s not modesty, but audacity that will be required from the new MEPs and the next Commissioners.

 

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