April 14, 2014

The UMP is to decide on its position on Europe this week, amid rising euroscepticism inside the party;

    April 14, 2014

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    The resurgence of euroscepticism inside the UMP

    The Journal du Dimanche and Cecile Cornudet in Les Echos find a rise of eurosceptic voices in the UMP ahead of its meeting this week to adopts its position on Europe and it is not yet clear how it will play out. Two former ministers under Nicolas Sarkozy now came out in clear language against the current EU setup. Both are self-declared pro-Europeans, who now want Europe to change. Laurent Wauquiez in his new book evokes a core Europe with six countries and harmonised tax policy. Xavier Bertrand speaks clearly against the Franco-German couple in his interview with the JDD saying it prevents another ECB policy, one that is clearly favourable towards growth and employment. He considers Europe at the source of France’s problem. Francois Fillon and Allain Juppe and AlainLamassoure come out in favour for the Franco-German special relationship. Fillon is expected to give a speech in the following days favouring social and economic ‘rupture’ at home rather than blaming the EU. UMP leader Jean-François Copé remains silent for now, caving the image of a ‘rassembleur.’

    The Front National continues to lead in the polls  (24% against 22,5% for the UMP) for the European elections.

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    April 14, 2014

    Former European Commissioner Frits Bolkestein spoke at an anti-euro conference in Italy, saying that monetary union was a failed project;

      April 14, 2014

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      Bolkestein says euro has failed

      There was, apparently, a conference going on in Italy over the weekend “Un’Europa senza euro”.  Frits Bolkestein attended it, and is quoted by the blog l’Antidiplomatico as saying that the monetary union had failed. He said eurobonds would not work. They would dilute responsibility, and would create a permanent dysfunctional transfer mechanism similar to that of Italy. His prediction was that the deficit countries will not be able to sort out their problems on their own. 

      Not much more detail, but we thought it was noteworthy that a former European Commissioner from a eurozone member country is now criticising the euro has a failed project. Also noteworthy that anti-euro conferences are hosted in Italy these days.
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      April 11, 2014

      Sapin said he was misunderstood and that France will stick to reduce deficit below the end of 2015;

        April 11, 2014

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        France will stick to deficit target by 2015 after all…

        France will stick to the EU deadline to reduce its budget deficit below 3% by the end of 2015, Michael Sapin told a news briefing on Thursday according to Reuters. This a departure from earlier comments, in which he suggested to reopen the debate about the “timing” with the EU. Sapin said he has been misunderstood by the media. "What is written about me in the press is not necessarily what I said. We I have talked about is a rhythm, about a pace, and people immediately think that means slower. Well, not at all," he said.

        That is quite a lame excuse. Does he suggest he wanted to talk about a faster pace to reduce the French deficit? The message to take away from this is that after his visit to Germany Sapin now turns out to be the conservative guarantor the EU wants to see as finance minister in France.
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        April 11, 2014

        Former PP treasurer Luis Bárcenas tells judge Pablo Ruz the party kept shadow cash accounts at every level for the funding of elections with the knowledge of party presidents and secretary generals, one of which personally handed him the “cash box” in 1990;

          April 11, 2014

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          Bárcenas tells judge PP funded elections illegally since at least 1990

          Appearing in court for the 12th time since 2009, former PP treasurer Luis Bárcenas told investigative judge Pablo Ruz that the PP had a system of parallel accounts not only at the national level, but in every province and region of the country, and that the “cash boxes” were under control of the respective treasurers for use in funding election campaigns, writes El País (English edition). Bárcenas, who had last month written to the judge offering to make a statement and provide additional information, said that the secretaries general had control of the shadow finances, and that all party presidents were aware of them. To buttress his case, he said that in 1990 as then party treasurer Rosendo Naseiro was arrested over corruption charges, then secretary general Francisco Álvarez Cascos handed Bárcenas “the key to the cash box” of the national party. Sources close to Álvarez Cascos consulted by El País denied the veracity of the story and referred back to Cascos’ witness statement before the same judge last August when he denied any knowledge of the allegations coming from Bárcenas.

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          April 11, 2014

          Le Monde, meanwhile, lists the depressingly long ist of 12 the French European affair ministers over the last 12 years;

            April 11, 2014

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            12 French European ministers in 12 years

            Le Monde looks through France’s history of European affairs ministers, finding that there had been twelve in the last twelve years. Since Pierre Moscovici who was a European minister for five years until 2002, none of his successors were in place longer than 2 years. For many, this was their first ministerial post. With Bernard Cazeneuve the Ayrault government even nominated a representative from a camp that supported the No in the 2005 referendum on the EU constitution, for purely internal considerations. Now, with Harlem Desir, the French government nominated someone who failed at chairman of the Socialist party and who he has a poor attendance record in the European parliament, to say the least.  What signal does this send to France and the EU two months ahead of the European elections, asked Nathalie Kosciusko-Morizet. 

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            April 10, 2014

            Francois Hollande nominates Jean-Pierre Jouyet as his chief of staff and reshuffles the office coordinating European affairs among ministries;
            • Harlem Desir is to the new European affairs minister, replacing Thierry Repentin;
            • New Socialist party leader is Jean-Christophe Cambadelis, an ally of Martine Aubry;

            April 10, 2014

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            Hollande reshuffles his office to tighten reign on European policy

            Francois Hollande did surprise once again with 14 new nominations in the government, his own office and to the party leadership. He appointed a close friend and former European affairs minister Jean-Pierre Jouyet as his chief of staff on Wednesday and reshuffled his private office to tighten relations with Brussels. Jouyet, 60, director-general of the state-owned bank Caisse des Depots (CDC), is a well-connected political operator with deep European experience. "Jean-Pierre Jouyet has a lot of tricks up his sleeve, including on financial matters, which are also important now," Reuters cites a source. The nomination was also to ensure better coordination with the government of new Prime Minister, Hollande told the daily Le Monde.

            The president also reorganised the government office in charge of coordinating European policy among ministries, making the General Secretariat for European Affairs (SGAE) report directly to himself instead of to the prime minister.

            At its head, he appointed his European adviser, Philippe Leglise-Costa, in a move to mirror a similar structure in German Chancellor Angela Merkel's office.

            Leglise-Costa is to travel to Brussels on Thursday to brief European Commision President Jose Manuel Barroso's staff on France's deficit cutting plans and the implementation of the "responsibility pact", a presidential source said.

            Socialist Party Secretary Harlem Desir was ‘demoted’ to run the European Affairs ministry. It was the first government post for Desir, who has struggled during his 18 months at the helm of the Socialist Party to hold back dissent. He has been a member of European Parliament since 1999. He replaces Thierry Repentin, who acknowledged he had little knowledge of EU affairs. Naming Desir to a ministerial post avoids having to hold a party congress to choose a new party head. Jean-Christophe Cambadelis, an ally of Martine Aubry, is be named the new secretary.

            Les Echos writes that Hollande showed his decisiveness with this reshuffle and also his intention to strengthen his role vis-a-vis Manuel Valls.

            Francoise Fressoz in her blog on Le Monde writes that it took a municipal elections for Hollande to start through. He now fights for his survival choosing a strategy of opposites: the serious and well respected Jean-Pierre Jouyet and Michel Sapin to represent France vis-a-vis the European partners, the loud Arnaud Montebourg, Claude Bartolone and Jean Christophe Cambadelis to lead the campaign in the European elections, promising a rude confrontation between liberals and social democrats.

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            April 10, 2014

            José Carlos Díez finds Spain’s labour market reforms are hurting productivity and public finances through increased temporary, part-time and unqualified employment, and blames Eurozone policymakers for providing the impetus for the reforms;

              April 10, 2014

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              The negative effects of “reform” on Spain’s labour market

              Blogging in Cinco Días, economist José Carlos Díez analyses the evolution of Spain’s labour market over the crisis years and concludes that long-term employment is being replaced with temporary employment, experienced workers are being replaced by trainees, and full-time employment is being replaced by part-time employment. As a result, productivity is down and so are wages and social contributions. This means not only is Spain not transitioning to a higher value-added economy after the construction binge of the past decade, but also that the sustainability of the social security is threatened. Díez holds European policymakers (“Merkel-Juncker” and the ECB with its letter to Zapatero) responsible for pressuring Spanish governments to adopt legal reforms encouraging this evolution of the labour market, and says it is all liable to get worse if the “neocon” win the European elections again.

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              April 10, 2014

              Wolfgang Munchau says an environment of persistently low real rates could raise sustainable sovereign debt thresholds, but would lead to even great debt divergence in the eurozone;

                April 10, 2014

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                On the consequence of low real rates

                In his Spiegel Online column, Wolfgang Munchau discusses a chapter in the IMF World Economic Outlook on why real interest rates have fallen, and why real rates are likely to remain low for some time. In addition to the arguments made in the article (see also Gavyn Davies’ excellent discussion) Munchau makes two additional points. The first is that if interest rates were to remain low, sustainable debt ratios may be higher than generally thought. And the return to easy financing of sovereign debt will reduce the incentive by eurozone member states (except Germany of course) to consolidate their fiscal position in line with the fiscal rules and the fiscal compact, which might lead to political and economic tensions in the eurozone.

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                April 09, 2014

                Kenneth Rogoff has an intellectually lazy essay on German surpluses;

                  April 09, 2014

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                  Rogoff says German surpluses are ok

                  Having provided the now intellectually bankrupt case for austerity with his discredited 90% debt rule, Ken Rogoff is now riding to the defence of intra-eurozone imbalances. In a Project Syndicate column, he makes the following points – if you want to call them that. First, he says, the proportional scale of German surpluses are not higher than US deficits (which is factually not true. They will have risen to over 7% in 2013). Then he says, surpluses are really complex, and in Germany’s case not primarily due to fiscal policy. And it’s not just Germany but other countries, too. And Germany is certainly right to claim that its strong balance sheet underpins European stability today. Would Draghi have ever launched OMT in this case? 

                  We are not sure whether he wrote that essay in two minutes, or in five minutes. In any case, it is truly awful. Defending German surpluses on the (false) premise that they are no greater than the US deficit, is entirely mischievous, given the role those deficits played in the last financial crisis. It is a very weak argument to say German surpluses do not matter since other countries have them too. Nobody denies that the causes for German surpluses are complex, and nobody claims that they are primarily fiscal. He is also wrong on the idea that German surpluses are underpinning the eurozone’s financial stability. Investors are not piling into Greece because of German surpluses, but because of Greek surpluses. And he also wrong on OMT. The German current account surplus was not an issue for Draghi at the time. Why should a balanced Gemran current account have stopped Draghi? It is one of the most awful essays on the eurozone we have ever read.
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                  April 08, 2014

                  Spanish family businesses are sceptical of the economic and political outlook, though the perception is improving;
                  • Mariano Rajoy lets in that Luis de Guindos will try to chair the Eurogroup;
                  • Spanish finance minister Cristóbal Montoro announces a new tax credit for working mothers, then takes it back within 30 minutes as it’s already in the books;

                  April 08, 2014

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                  Spanish family businesses are becoming less sceptical of the future

                  A poll of participants in the general meeting of the Family Business Institute IEF revealed an improved but still negative economic outlook, writes El País. Small business owners also have a very negative opinion of the political situation and of the government, which scored lower than the European Commission and the ECB (which still got a failing grade). Nevertheless, the business cycle appears to be turning as 60% of those polled intend to increase investment and a majority expect increased sales. Higher sales and investment have a weaker effect on employment, as only 21% intends to increase their staff.

                  At the event, Spanish PM Mariano Rajoy delivered what is becoming a standard message of optimism and pride for steering Spain out of the crisis, with the obligatory admission that the unemployment situation is unacceptable. According to the paper, Rajoy admitted for the first time in public that he will lobby for his economy minister Luis de Guindos to become president of the Eurogroup. Rajoy said he was worried about the low inflation and high Euro exchange rate, and criticised the ECB’s inaction. On fiscal matters, he said his government will meet the deficit targets without raising taxes or further spending cuts but gave no details of the upcoming tax reform.

                  Speaking of tax reform, finance Minister Cristóbal Montoro put his foot in his mouth at a separate event. After announcing that the government would introduce a tax credit for working mothers like they did last time the PP was in power, an aide pointed out that the tax deduction was still in force, and half an hour later he apologised saying “I am hopeless”, reports El País.

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                  April 08, 2014

                  the Catalan Socialists PSC have reportedly offered Catalan Premier Artur Mas support to serve his full term until 2016, as a way out of the looming showdown between his regional government partners of ERC and Rajoy’s PP;

                    April 08, 2014

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                    Catalan Socialists to offer deal to Mas

                    As the Spanish parliament prepares to debate (and reject) the Catalan regional parliament’s request for a referendum on independence to be held on November 9, the self-described Catalan National Assembly prepares a road map including a mass mobilization on September 11 (Catalonia’s national day) and culminating with independence on Sant Jordi (April 23) next year. In this context, Vozpópuli writes that Catalan premier Artur Mas feels overwhelmed as he’s caught between two incompatible and uncompromising nationalisms, that of his Catalan regional government partner ERC and that of the PP in the central government in Madrid. According to Vozpópuli, the leader of the Catalan Socialist party PSC, Pere Navarro, has offered Mas support to serve his full term until 2016 in case his agreement with ERC breaks down in the face of insurmountable legal difficulties. The PSC has itself fractured and tensions with the national PSOE have mounted as a result of ambiguity around the so-called “right to decide”.

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                    April 07, 2014

                    Jyrki Katainen is to resign as Finland’s prime minister in June;
                    • Katainen is potential candidate to succeed Jeroen Dijsselbloem, Herman Van Rompuy, or even as a compromise candidate for head of the commission;
                    • Finnish press names finance minster minister Jan Vapaavuori or European affairs minister Alexander Stubb as favourites for the PM job;

                    April 07, 2014

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                    Jyrki Katainen resigns as PM to get EU job

                    Yle reports that Jyrki Katainen is to resign as Finland’s PM this summer, and will also give up the chairmanship of the National Coalition party. Katainen said he would be interested in becoming Finland's next EU commissioner after the European elections in May. The FT writes that he is a potential candidate also to succeed Jeroen Dijsselbloem, head of the European Council to replace Herman Van Rompuy, or even as a compromise candidate for head of the commission.

                    Katainen’s resignation, however, further unsettles the fractious coalition that has governed Finland since 2011. The second governing party, the SDP, also faces a leadership election in the coming, with Jutta Urpilaihnen currently trailing in the polls of SDP delegates, Yle reports. Katainen’s move appears to have been well prepared for a long time in advance, Yle writes, though the announcement was made in a hastily prepared conference in Brussels and came as a surprise at home.

                    Timo Soini, head of the EU-sceptic opposition Finns party, told Finnish television: “This amounts to the government declaring [itself] bankrupt. They either run off to Europe or quit, like the Left Alliance did. If the prime minister quits in the middle of the term, it’s hands up.”

                    Finland’s government is increasingly seen inside the country as having achieved little in its three years in power with the economy contracting in both 2012 and 2013 as the coalition pushed through spending cuts.

                    The opposition Centre party is in the lead ahead of likely elections next year although Mr Katainen’s National Coalition party has narrowed the gap in the polls recently.

                    There are four favourites to succeed Katainen, according to this Yle article, economics minister Jan Vapaavuori, European affairs minister Alexander Stubb, Administration minister Henna Virkkunen and NCP parliamentary group chair Petteri Orpo. None of them has yet declared their intention to run.

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                    April 07, 2014

                    Spiegel has a report that the Russian/European business ties, including gas imports, are currently rising, contrary to the stated intentions by European politicians;

                      April 07, 2014

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                      Russian-EU business ties strengthen despite tensions

                      So much for reducing our dependence on Russia. Der Spiegel has some interesting statitics about gas sales, which show that Europe is currently increasing its dependence on Russian gas. Depsite the mild winter Gazprom increased its sales to Germany by 15% and to the UK even by 30%. There also seems to be no break in the negotiations by Rosneft’s proposed 13% acquisition of Pirelli, while RWE sold its oil and gas division DEA to a Russian consortium. 

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                      April 07, 2014

                      Angelo Baglioni dismisses the most commonly mentioned arguments in favour of a euro exit in Italy;

                        April 07, 2014

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                        Against a euro exit

                        Italy;

                        Angelo Baglioni has an article in Lavoce, in which he dismisses most of the anti-euro arguments. Here is his list of the argument, followed by his comments.

                         

                        1. The exit can be done in a week. Wrong, there will be huge and damaging capital flight.
                        2. The exit will increase production and employment. Wrong, except for a short period. Inflation will creep up and neutralise the gains.
                        3. The exit will reduce debt. Not really, except that external debt may be redenominated to lira.
                        4. The Bank of Italy could monetise debt. Sure, but that will drive up inflation and create moral hazard.
                        5. The euro is a failed economic project. No, the euro is a political project.
                        6. Europe is too far from its citizens. Correct. It is important to address the democratic deficit. 
                        We urge caution here. For example, the argument that the devaluation gains from a euro exit would be compensated by inflation depends very much on the post-exit institutional setup. For a country to achieve a lasting real devaluation, all it needs to do is to set up a credible monetary policy framework that operates from day one. If the new national central banks imposes a 2% inflation target, and if the labour market structure is sufficiently flexibile, there should be no reason to expect an increase in inflation. We think that if you want the euro to survive, you should try to make it work for its citizens, which is not the case today, rather than come up with scare stories, which may at one point no longer be believed.
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                        April 04, 2014

                        Michel Sapin wants a discussion in Europe over the “rhythm" of deficit reduction;
                        • Arnaud Montebourg says it is time to change some of the EU decisions;

                        April 04, 2014

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                        Sapin wants to discuss the rhythm of deficit reduction

                        France’s low growth prospects will give new munition to the French government in their quest to get more time for its deficit reduction. Michel Sapin, said yesterday he wanted to "discuss" the “rhythm” of how to reach the target of 3% of GDP. a request already rebuked by the ECB and Germany. Sapin said on Radio France Inter that "It is in Europe's interest to find the right timing ... "Europe will be better off when France is better off," he said, adding that there was a "thin line" between the budgetary rigour needed to bring public finances into line and an excess of austerity that would choke economic recovery, quotes Reuters. The article in Les Echos notes that while the CDU is deadly against any sort of prolongation, the SPD might be more receptive to French concerns. The article cites Ingrid Arndt-Bauer, president of the Budget committee in the Bundestag, saying that the French are right to ask for a delay and that Europe would not be served well if France is attaining its deficit target but with a worse off economy.

                        Arnaud Montebourg also did not miss the opportunity to call for change in Europe. "Everyone is worried, it is time to change a number of EU decisions" Montebourg said on television France 2 adding: "the French government wants sources of economic growth to be mobilised in Italy and in Germany, according to Le Monde.

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                        Renzi's political reforms meet serious obstacles

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

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