Monday, March 28, 2011

Recall the Europlus?

What would Euro plus Pact look like if the initial "Eurozone Competitiveness Pact" (now re-branded Euro Plus Pact after the March 11 Eurozone Summit and the March 24-25 European Council) had been an SPD & Greens + Sarkozy design instead of a Merkel/CDU + Sarkozy one?

It's not too late, yet!

A different kind of Contagion (Part 2)

1) Elections results, Germany over the weekend (2 states) seem to indicate that:
a) Germans do not want nuclear plants
b) the CDU/FDP austerity dogmata are not that popular, even in Germany!

2) March 26: So it seems that social contagion has reached the UK

Therefore which Contagion is stronger in the Eurozone (and the EU)?
a) The financial or
b) the socio-political?

Sunday, March 27, 2011

Post EUCO Europlus considerations: A European model of the social partners or the central bankers?

1) Europlus Pact: Which autonomy is more important, policy-wise: a) the autonomy of the central bank or b) the autonomy of the social partners? IMO, (b).

2) After EUCO, ie the European Council of 24-25 March (and the Europlus Pact of the 23), I pose again the strategic-policy questtion: Who understands the real economy better? a) the central bankers or b) the social partners? IMO, again (b).

3) Thus the crucial IMO Trade (growth (and competitiveness and export?)) Policy question: What are the effects on Eurozone exports from a 1.4-1.42 USD/Euro rate? (for background info see the Bloomberg article "Euro Falls From 4-Month High Reached on ECB Rate Speculation" by Allison Bennett, Mar 26, 2011)

Friday, March 25, 2011

A different kind of Contagion

14 of 27 EU members use nuclear energy.

The other 13 share the risks.

Which "contagion" is more dangerous to our health?

a) Financial, or
b) Radiation

And now they are 23 (the EU's Europlus Pact)

Last night, after the 1st day of the European Council, its President announced that
in addition to the Eurozone 17, 6 more EU member states have agreed to join the Eurozone Competitiveness Pact, now know as the Europlus Pact.

The 6 are: Poland, Bulgaria, Denmark, Romania, Lithuania and Latvia

So the Europlus Pact participants are 23 (17+6), ie the EU 27 minus the following:
1) UK
2) Czech R.
3) Hungary and
4) Sweden

Here is a composite political map of the 4 EU member states that are not joining the Europlus Pact (Sweden, UK, Czech R., Hungary):

The 4 governments include 9 parties:

a) 2 are members of the AECR European political party
b) 4 of the EPP and
c) 3 of the ELDR

Map by country:

1) Czech Rep.: ODS (member of the Alliance of European Conservatives and Reformists (AECR))

2) Hungary: Fidesz-KDNP (both members of EPP)

3) UK: The Conservatives (members of Alliance of European Conservatives and Reformists (AECR)) & the LibDems (ELDR)

4) Sweden The Alliance ("Alliansen") hold minority gov at 2010 election. 4 parties in it, 2 EPP, 2 ELDR members


1) Of the countries that participated in Cameron's UK-Nordics-Baltics Forum a few weeks ago, only the UK and Sweden did not join the Euro Plus Pact!
2) Of the Nine EU governments that submitted the "post-crisis growth plan" (Denmark, Estonia, Latvia, Lithuania, Finland, Poland, the NL, Sweden , the UK) only 2, UK and Sweden, decided to keep their countries outside the Euro Plus Pact.

Monday, March 21, 2011

In these austere times: sensualité contre .....

sensualité contre l'austérité * sensualidade contra a austeridade * sensualidad en contra de la austeridad * sensualità contro l'austerità

Friday, March 18, 2011

Is it a plane, a UFO or the EU (finally) moving forward?

Is it a plane? Is it a UFO? Is it a mirage? No, it is the EU (finally) moving forward, albeit in a clumsy (and confusing) fashion!

In effect, part of what is happening at the moment in the EU is a move to break away from the UK's "union-blocking"! In the midst of quite complicated systemics and dynamics that do contribute to the difficulty and confusion, but also make ever closer ie deeper union in Europe even more of a must.

More specifically, as I tweeted last Friday, there is an urgent need for a sovereign EU in:
a) energy
b) defense
c) economics (internal market)
d) foods, especially staple ones
yet open to the world (eg with a more "open" policy re immigration, be it of asylum seekers or the so called "economic immigrants")

Part of the world systemics and dynamics are:

1) In recent years the US has left a gap that can best be filled by the EU rather than China, provided the EU evolves into a US of E or a Fed Rep of Europe.

Eg the US was a beacon and a magnet for all people who were suffocating in their natives parts of the planet and who wanted to strive for a better future in an environment where it mattered more where you wanted to go and become and less your background or class or birth rights. IMO after the closing of Ellis Island, that US started to wane. And has become immigrant hostile in recent years. Many more examples of the gap, but not to be discussed in this analysis.

So, a fully united, independent and sovereign EU would be a positive factor in world affairs instead of the current situation (see rise of xenophobia, nationalism, grand standing by France, Germany or the UK, a stance that the American diplomat whose cable was leaked eloquently described (referring to the UK, France and Germany) as Europe's dwarves (see "Manipulating the Political Dwarves of Europe" by Gregor Peter Schmitz in Spiegel International 12/10/2010)

2) China's 2001 WTO entry and its policies have caused major systemic quakes in US & EU, as I tweeted on Saturday.

They have even been a factor in the Euro's probs, IMO.

2 of the interesting articles/analysis that have appeared in recent days are:

"Nine EU countries set out post-crisis growth plan" reported on Friday, March 18, Andrew Rettman in the EUOberver.

"Prepare for a Euro Zone Divided in Two" is the title of an interesting opinion article by Irwin Stelzer, director of economic policy studies at the Hudson Institute in Washington, in the WSJ (March 21).

They both merit reading as valuable food for thought.

Regarding the topic in Irwin Stelzer's analysis, IMO of the 10 non-Eurozone EU members, 3 of the old EU15, the UK. Denmark and Sweden have willingly chosen to be marginalised by staying out of the Euro. The other 7 are still relatively new EU members (5 since 2004 and 2 since 2007) thus have more "excuses" for not having joined the Euro yet (of course at least 1, the Czech Rep., especially under its current President, seems unlikely to want to join, for ideological (libertarian?) reasons).

But the rapid EU enlargement from 15 to 25 then 27 was not meant to be at the expense of deepening, although it did, but the delay has been long enough that a dynamic even somewhat "clumsy" move forward, had become overdue. Not that the delay was a fault of the new members that after all were "owed" EU membership for the suffering they endured by communism (and for what happened back in Yalta and Potsdam). It gave others the excuse to slow the EU's deepening down. But no more, especially after Cameron's UK Sovereignty Bill. As the governor of the Bank of England reportedly told the Americans (according to the famous leaks), the Euro crisis was bound to accelerate the move towards federal Europe. After all, IMO as well as others', the current Euro crisis is caused by the fact that Monetary Union was not preceded or at least accompanied by not only Economic but Political (federal) union as well (as I said, causality in our times is very complex and not open to simple analyses, so bear with me)

So if Sweden and Denmark find themselves left out of key meetings of EU interest as The Economist notes, according to Irwin Stelzer (in effect the Eurogroup meetings that take place 1 day before each ECOFIN Council of Ministers of Finance and the recent first ever Eurozone Summit), they should recall that the Euro was not decided in 1991/92 (Maastricht) as an optional (buffet) feature of the EU, but as the vehicle for a) making the EU common then single market (by 1/1/1993) more effective and b) moving the EU forward!

And I agree with the view expressed by many that non-Euro membership of an EU country/economy, gives that economy an unfair trade advantage inside the Single Market of the EU. Of course, with life on Earth systemics nowadays being complex and in any case not uni-variable, the insistence of Eurozone monetary policy to focus on inflation only (with the dogmatic 2% target) that has led to many periods of expensive Euro vis-a-vis not only the Yuan and the USD but also the Pound etc, has also contributed to the current Euro crisis (and other factors as well).

But given the systemics and the dynamics not only inside the EU and the Eurozone, but the world (Earth) as a whole, what is happening now is probably the most feasible (but maybe not the best) way for Europe to move forward!

As for the 4 proposals of growth after the crisis put forward by 9 EU member states, allegedly with Cameron's leadership, they seem to make worthwhile reading.

They are the proposals of 9 governments of EU member states, not the 9 states. 3 are Eurozone members (NL, Finland, Estonia). The 9 are basically most of the members of the forum UK-Nordics-Baltics Cameron organised a few weeks ago plus the NL. I should also note that at Davos this year there was an attempt to present and market a Nordic Capitalism model as a model for others, in Europe and the world, to "follow"/copy/be inspired by.

So while the 4 points of the 9 sound in principle good, IMO the Tories must realise that

a) regulation driven burden to SMEs comes from national & local regulations too, not just EU ones! And one could argue that national and local ones are more of a burden than the EU ones (ie the regulations and the directives transposed into national laws).

b) that SMEs need EU-wide uniform regulations, rules, etc, which affects the Sovereignty Tories say that they care so much for!

c) Doha completion within 2011 IMO highly unlikely. Inter alia, Obama has no "fast track".

Now, some relatively harsh reminders for the mostly conservative or liberal governments of the other 8 that submitted the 4 points:

As I tweeted on Friday, the pro open-market govs of Denmark, Estonia, Latvia, Lithuania, Finland, Poland, the NL, Sweden (& the UK) must realise that "open market" means not only mobility of capital, goods - and services as they recommend (agreed) - but also workers/labor and humans in general. Because labor needs as much mobility as possible in order to "compete" in relative value to the other factor of production, Capital! Oh yes!

Those nations that wish to conserve their "national" (altho the UK is a mini-EU) "sovereignty" are to miss out on the benefits of EUropean sovereignty

Angela Merkel decided to abstain (along with Russia and China in the Security Council of the UN) from the UN vote on Libya. The issue is out of my areas of experience and activity so I will not comment. After all, from what I read the SPD and the Greens did not take a clear stand on the same matter either. The issue I feel competent (as an MBA and as a public policy analyst) to comment on is whether it is indeed electoral concerns in state (laender) elections (one more took place this weekend and 2 crucial ones next weekend) that affect to a large extent the German government's demands on the other 16 of the Euro (and especially the GIIPS (I refuse to use the PIIGS acronym)) in the "Competitiveness Pact". We know of the hardcore austerity hawkish POV of the FDP. But as far as I know, the SPD is not exactly austerity hawkish. So how would a less hawkish stance by Angela Merkel in the Pact cause her to lose votes to the SPD?
Ah, c'est l'Europe!

Wednesday, March 16, 2011

Nationalism vs Cosmopolitanism or Earth Sovereignty

"May you live in interesting times" was actually an Ancient Chinese curse! These days, since Friday, we are all Japanese (to paraphrase JFK's "Ich bin ein Berliner"). Shocking events since Friday, the earthquakes, the tsunamis and last but not least, radiation! News these days are more dramatic than most scary film scenarios.

Among many other things, they have prompted protests re the use of nuclear energy in France, stress tests of the plans in Germany demanded by Angela Merkel and an EU stress test of nuclear plants initiative.

Can the EU work as "one" on this? Or is it losing whatever community spirit it had in previous decades due to the emergence of nationalism in recent years?

National vs Natural:

"Splitting up? The re-nationalization of Europe" is the topic of a most interesting article in Eurozine based on a discussion between Andriy Shevchenko and David Van Reybrouck. A must read, IMO!

1-2 points from the article (which I fully recommend as food for thought):

1) On the 23 languages in the EU: "And it means that there is no common forum. There is no European public space"
2) Also read how France managed to create French identity in less than 64 yrs!
Via the imposition of French as the single/only language in France, in the 1850s!

IMO, Cosmopolitanism will be "enforced" in EUrope and the rest of the world by Earth's Nature & its "events", ie Nature will defeat nationalism. Because earthquakes (like the ones the Japan) and the resulting tsunamis, volcanos (eg as the one in Iceland and its recent effect on most of Europ), birds (that the flu they may carry), CO2 and radiation pollution etc do not require passports or visas, they have no "respect" for national borders, sovereignty or identities. They remind us that we all 6.9 billion live on the same vessel. These realisations will defeat nationalism and re-activate universalism or cosmopolitanism (citizenship of the world).

Plus what good is one country's no nukes policy if a few miles across the water or land, its neighbour has located one of its own nuclear energy plants?

Plus IMO the issue of use of nuclear energy in the EU could be the topic of the first ever EU citizens initiative. The kind of topic that will unite the EUropean public opinion or Society. Energy: The answer is in the wind and under the sun!

Real catastrophes:

On Monday, FN President Marine Le Pen toured a centter for illegal migrants on Italy's Lampedusa island. "I have come to express my real concern on the ground. The European Union does not have any solution. We are going to see a real catastrophe and the EU is impotent" she said, inter alia (Yahoo! xtra news, AAP).

My comment re "real catastrophe": The ageing EU has capacity & wealth enough for citizens & immigrants. Real catastrophes are earthquakes, volcanos, nuclear pollution etc!

Real internationalists:

"Euroscepticism: liberal, modern, internationalist, moderate and cross-party" is the title of Daniel Hannan's opinion piece in the Telegraph on March 15! For sure!!!!

According to tweet today by the EU Commissioner Mrs Viviane Reding, there are about 16 million international couples (13% out of 122 million couples) in the EU. Maybe they and their children are the main drivers of EUropean identity.

In the meantime, "World braces for Japan economic hit" is the title of an insightful article by Ben White in Politico ( today. Inter alia, he points out that in January Japan held nearly $886 billion in Treasury securities while China $1.2 trillion US (some 4 times the ones held by UK investors). But IMO this is no time for Economics. As humans, we must focus on Japan and the Japanese people and all others in Japan, the heroes working inside the tainted plants, and maybe also think how some technology is good for humankind whereas other is not. And how for an economy to exist, humans are needed. IMO our era is too financial. Is it also too technological?

Only one economics piece: According to RTE Business today, "The European Commission has proposed a common system of working out the tax base of businesses operating in the EU".
Plus also today, the ratings agency Noddy's downgraded Portugal's sovereign debt rating from A1 to A3.

Not very human-centered times!

Approx. 205 million of the world's population were out of work in 2010, according to recent figures from the United Nations. This means that the EU has 11% of the world's unemployed while it has 7% of the world population (0.5 vs 6.9 bn)

Recent Eurostat stats:
Eurostat 1st estimate: Q4 of 2010 Eurozone and EU employment up by 0.1% vs Q3 2010. +0.3% in both vs Q4 of 2009.

Eurostat: January 2011 compared with December 2010 Industrial production up by 0.3% in Eurozone. Up by 0.6% in EU

Industrial Relations, what Industrial Relations?

The Industrial Relations in Europe Conference. The conference, 17-18 March in Brussels, aims to present and discuss the issues raised in the 2010 Industrial Relations in Europe report with an audience of social partners, academics and representatives of the Member States.

Every two years the European Commission produces an Industrial Relations in Europe report, which provides an overview of industrial relations developments in Europe for the previous two-year period. The 2010 edition is the sixth report in the series.

Around 150 participants will be invited to the event, which will consist of four panel sessions each devoted to one aspect of the report:

Session I - Industrial Relations in Europe in the 21st century's first decade
Session II – Negotiating the crisis: the actors of social dialogue
Session III – Industrial relations outcomes: overcoming the crisis
Session IV – The possible contribution of social partners to the Europe 2020 strategy

The conference, as the report itself, will focus on a review of industrial relations in times of economic crisis and on the role of social dialogue in achieving the objectives of the Europe 2020 strategy for smart, sustainable and inclusive growth.

IMO, with a conservative majority in the European Parliament (EPP plus the ECR (Tories etc)) & the EU Commissioners' College and the various deficit and inflation hawks around Europe (not least in Germany), industrial relations are bound to be suffering in the EU and many national levels these days. See also the Eurozone "competitiveness pact".

Saturday, March 12, 2011

Eurozone Summit: Falls short of what is needed: Economic & Political Union (at last)

Angela Merkel wants to export the German #economic model to the rest of the Eurozone and beyond (other EU members). But how many Germans like this model in the first place?

Which economic model is suitable for the Eurozone? IMO a single but diversity & pluralism based one! Not a static - simplistic one!

In other words, an economic model for the Eurozone is possible as long as it is based on understanding of all parts of the Eurozone, not mainly a few.

The conclusions of today's (March 11) Eurozone Summit (heads of state and government of the 17 Eurozone members) - see the text and my initial comments in another post on this blog - IMO fall short of what the Eurozone and the EU need:

Economic and Political Union! Either at EU (minus UK and Czech Rep.?) or Eurozone17+ level.

Because Tthe fundamental flaw in the Euro was/is that there is no Economic and more importantly, Political Union among its members

IMO most political leaders, opinion leaders and other thinkers in EUrope and around the world realise that a United States of Europe or a Federal Republic of Europe is the inevitable endgame of the EU (minus a few members maybe). Yet today's Summit of the Eurozone 17 was very timid re this goal.

Unless the 17 are dragging their feet until the inevitabilty is undisputable (because many do not have the grit to propose it (now) to their public opinions?)

US energy policy: Nuclear for oil?

President Obama has today (March 11) warned out the US's dependence on oil.

But, how is the US going to reduce its dependence on oil? Not via nuclear energy, I hope. Especially after the events in Japan today!

March 11, 2011: A Dire Reminder and a Call for Unity

11/3/2011: The mega earthquake in Japan, the resulting Tsunamis, the radiation concerns: A dire reminder we all (6.9 bn) live on the same vessel & that borders are mere artificial construits. A call for world unitY

Plus: A shocking reminder why No to CO2 does not mean Yes to nuclear energy.

Eurozone Summit conclusions & Pact (and some initial comments)


The text and my comments (including emphasis via bold):

The Heads of State or Government of the Euro area adopted the following conclusions:

1) Next Steps
a) The Pact will be presented to the European Council of 24/25 March 2011 with a view for (10, ie 27 minus 17) non-Eurozone EU member states to indicate whether they intend to participate in the Pact (or not)
b) At the same time (24-25/3 European Council) Eurozone members shall indicate first measures they pledge to implement under the Pact for the next year.

2) Their comments re Greece, Ireland and Portugal
a) They welcomed the progress made in the implementation of the on-going IMF/EU programs in Greece and Ireland,
b) and the strong commitments by Greece to rigorously continue structural reforms, increase capacity building for their implementation, fully and speedily complete the € 50 bn privatization and real estate development programme it has announced and to introduce a strict and stable fiscal framework with the strongest possible legal basis to be decided by the Greek
c) (by) Ireland to introduce a strict and stable fiscal framework, with the strongest possible
legal basis, and to stick to fiscal targets through expenditures decreases and revenue
increases as foreseen in the programme.
d) They welcomed and supported the package of far-reaching measures announced today by Portugal concerning fiscal, financial and structural reforms.

3) From Eurozone Summit 11/3 to EUCO 24-25/3:
a) The Heads of State or Government of the Eurozone invited the Ministers of Finances to complete their work on the ESM and the EFSF in time for the European Council of 24/25 March 2011.
b) This work should strictly adhere to and fully implement the European Council conclusions of
December 2010 and the Eurogroup statement of 28 November 2010, which define the key
features of the ESM (see annex II).

c) The following conclusions have been drawn from the discussion:
Financing capacity
The ESM will have an overall effective lending capacity of 500 billion euros.
During the transition from EFSF to ESM, the consolidated lending capacity will not exceed this
The ESM effective lending capacity will be ensured by establishing the appropriate mix between paid-in capital, callable capital and guarantees.
A timetable for the gradual paying in of capital will be established, fully respecting national
parliamentary procedures.
Until the entry into force of the ESM, the agreed lending capacity of 440 billions euros
of the EFSF will be made fully effective.

1) They recalled that the ESM will provide financial assistance when requested by a Euro area member and when such intervention is deemed indispensable to safeguard the stability of the Euro area as a whole.
2) Any decision to that effect will be taken by unanimity on the basis of a debt sustainability analysis of the Member State concerned conducted by the Commission and the IMF, in liaison with the ECB.
3) Financial assistance will be subject to strict conditionality under a macroeconomic adjustment programme.
4) Financial assistance from the ESM and EFSF will take the form of loans. However, to
maximize the cost efficiency of their support, the ESM and the EFSF may also, as an
exception, intervene in the debt primary market in the context of a programme with strict conditionality.

Financial conditions
1) Pricing of the EFSF should be lowered to better take into account debt sustainability of
the recipient countries, while remaining above the funding costs of the facility, with an
adequate mark up for risk, and in line with the IMF pricing principles. \
2) The same principles will apply to the ESM.
3) Minus 100 points in the loans to Greece: Against this background and in view of the commitments undertaken by Greece in the context of its adjustment programme, the interest rate on its loans will be adjusted by 100 basis points.
4) Maturity of loans to Greece to 7.5 years: Moreover, the maturity for all the programme loans to Greece will be increased to 7.5 years, in line with the IMF.
5) Finance Ministers will specify modalities of implementation of these decisions.

4. Banks stress tests in the Eurozone by the summer:
All Member States will ensure that concrete plans, compliant with EU State aid rules, are in
place to deal with any bank that demonstrates vulnerabilities in the stress tests that will be
completed by the summer.

5. The 6 legislative proposals on Economic Governance (drafted by the European Commission)
a) They called on Finance Ministers to finalize their work on the Commission six legislative proposals on economic governance and to reach, before the end of March, a general approach ensuring full implementation of the recommendations of the Task Force.
b) In this context, they agree that the setting up of a numerical benchmark of 1/20 for debt reduction, to be assessed taking into account all relevant factors, as outlined in the
Commission proposal, should be fully part of this package.
c) They all support the adoption of the draft directive on national fiscal framework. In deciding on the steps in the SGP the Council is expected to, as a rule, follow the recommendations of the Commission or explain its position in writing.

6. Financial Transaction Tax to be explored (Eurozone, EU and international levels)
They agreed that the introduction of a financial transaction tax should be explored and developed further at the Euro area, EU and international levels.



1) Pact focuses primarily on areas that fall under national competence and are key for increasing competitiveness and avoiding harmful imbalances.
2) Competitiveness is essential to help the EU grow faster and more sustainably in the medium and long term, to produce higher levels of income for citizens, and to preserve our social models. 3) Non-euro area Member States are invited to participate on a voluntary basis.

3) 4 Guiding Rules (and 4 Goals)
This renewed effort for stronger economic policy coordination for competitiveness and convergence rests on four guiding rules:

I). It will be in line with and strengthen the existing economic governance in the EU, while
providing added value. It will be consistent with and build on existing instruments (EU 2020
European Semester, Integrated Guidelines, Stability and Growth Pact and new macroeconomic surveillance framework).
(My comment: To what extent is the above compatibility realistically possible in full?)
It will involve a special effort going beyond what already exists and include concrete commitments and actions that are more ambitious than those already agreed, and accompanied with a timetable for implementation.
These new commitments will thereafter be included in the National Reform and Stability Programmes and be subject to the regular surveillance framework, with a strong central role for the Commission in the monitoring of the implementation of the commitments, and the involvement of all the relevant formations of the Council and the Eurogroup. The European Parliament will play its full role in line with its competences. Social partners will be fully involved at the EU level through the Tripartite Social Summit.

II) It will be focused, action oriented, and cover priority policy areas that are essential for
fostering competitiveness and convergence.
It will concentrate on actions where the competence lies with the Member States.
In the chosen policy areas common objectives will be agreed upon at the Heads of State or Government level. Participating Member States will pursue these objectives with their own policy-mix, taking into account their specific challenges.

III) Each year, concrete national commitments will be undertaken by each Head of State or
Government. In doing so, Member States will take into account best practices and benchmark
against the best performers, within Europe and vis-à-vis other strategic partners.
The implementation of commitments and progress towards the common policy objectives will be monitored politically by the Heads of State or Government of the Euro area and participating countries on a yearly basis, on the basis of a report by the Commission. In addition, Member States commit to consult their partners on each major economic reform having potential spill-over effects before its adoption.

IV) Euro area Member States are fully committed to the completion of the Single Market which is key to enhancing the competitiveness in the EU and the Euro area. This process will be fully in line with the treaty. The Pact will fully respect the integrity of the Single Market.

Our (four) goals
Euro area Member States undertake to take all necessary measures to pursue the following
* Foster competitiveness
* Foster employment
* Contribute further to the sustainability of public finances
* Reinforce financial stability

Each participating Member State will present the specific measures it will take to reach these goals.
If a Member State can show that action is not needed on one or the other areas, it will not include it.
The choice of the specific policy actions necessary to achieve the common objectives remains the
responsibility of each country, but particular attention will be paid to the set of possible measures mentioned below.
Concrete policy commitments and monitoring
Progress towards the common objectives above will be politically monitored by the Heads of State or Government on the basis of a series of indicators covering competitiveness, employment, fiscal sustainability and financial stability. Countries facing major challenges in any of these areas will be identified and will have to commit to addressing these challenges in a given time frame.

Goal 1: Foster competitiveness
Progress (re competitiveness) will be assessed on the basis of wage and productivity developments and competitiveness adjustment needs.
To assess whether wages are evolving in line with productivity, unit labour costs (ULC) will be monitored over a period of time, by comparing with developments in other Euro area countries and in the main comparable trading partners.
For each country, ULCs (unit labour costs) will be assessed for the economy as a whole and for each major sector (manufacturing; services; as well as tradable and non-tradable sectors).
(My comment: Are these ULC assessments too dependent on national statistics especially sectoral ones? Is the approach too micro-economic and not strategic enough, ie is it a narrow approach to competitiveness?)
Large and sustained increases may lead to the erosion of competitiveness, especially if combined with a widening current account deficit and declining market shares for exports. Action to raise competitiveness is required in both all countries, but particular attention will be paid to those facing major challenges in this respect. To ensure that growth is balanced and widespread in the whole Euro area, specific instruments and common initiatives will be envisaged to foster productivity in regions lagging behind. (My comment: What do they mean/envisage?)

Each country will be responsible for the specific policy actions it chooses to foster competitiveness, but the following reforms will be given particular attention:

(i) respecting national traditions of social dialogue and industrial relations, measures to ensure costs developments in line with productivity, such as:

• review the wage setting arrangements, and, where necessary, the degree of centralisation
in the bargaining process, and the indexation mechanisms, while maintaining the
autonomy of the social partners in the collective bargaining process;
My comment: How can this autonomy of the social partners be maintained since in some member states it is the national social partners that negotiate and decide minimum or other wage increases?
Will member states be expected to legislate against the national collective bargaining wage negotiations and agreements by the national social partners?

• ensure that wages settlements in the public sector support the competitiveness efforts in
the private sector (bearing in mind the important signalling effect of public sector

(ii) measures to increase productivity, such as:

• further opening of sheltered sectors by measures taken at the national level to remove unjustified restrictions on professional services and the retail sector, to foster
competition and efficiency, in full respect of the Community acquis;

• specific efforts to improve education systems and promote R&D, innovation and

• measures to improve the business environment, particularly for SMEs, notably by
removing red tape and improving the regulatory framework (e.g. bankruptcy laws,
commercial code).

Goal 2: Foster employment

A well functioning labour market is key for the competitiveness of the Euro area. Progress will be
assessed on the basis of the following indicators: long term and youth unemployment rates, and
labour participation rates.
Each country will be responsible for the specific policy actions it chooses to foster employment, but the following reforms will be given particular attention:

• labour market reforms to promote “flexicurity”, reduce undeclared work and increase
labour participation;
(My comment: Which type of flexucurity? Eg the Danish one?)
• life long learning;
• tax reforms, such as lowering taxes on labour to make work pay while preserving overall
tax revenues, and taking measures to facilitate the participation of second earners in the
work force.

Goal 3: Enhance the sustainability of public finances

In order to secure the full implementation of the Stability and Growth Pact, the highest attention
will be paid to:
Sustainability of pensions, health care and social benefits

This will be assessed notably on the basis of the sustainability gap indicators

These indicators measure whether debt levels are sustainable based on current policies, notably pensions schemes, health care and benefit systems, and taking into account demographic factors.
Reforms necessary to ensure the sustainability and adequacy of pensions and social benefits could include:

• aligning the pension system to the national demographic situation, for example by aligning the effective retirement age with life expectancy or by increasing participation

• limiting early retirement schemes and using targeted incentives to employ older workers (notably in the age tranche above 55).
National fiscal rules
Euro area Member States commit to translating EU fiscal rules as set out in the Stability and
Growth Pact into national legislation. Member States will retain the choice of the specific national
legal vehicle to be used, but will make sure that it has a sufficiently strong binding and durable
nature (e.g. constitution or framework law). The exact formulation of the rule will also be decided by each country (e.g. it could take the form of a "debt brake", rule related to the primary balance or an expenditure rule), but it should ensure fiscal discipline at both national and sub-national levels.
The Commission will have the opportunity, in full respect of the prerogatives of national
parliaments, to be consulted on the precise fiscal rule before its adoption so as to ensure it is
compatible with, and supportive of, the EU rules.
The sustainability gap are indicators agreed by the Commission and Member States to assess
fiscal sustainability.

Goal 4: Reinforce financial stability

A strong financial sector is key for the overall stability of the Euro area. A comprehensive reform of the EU framework for financial sector supervision and regulation has been launched.
In this context, Member States commit to putting in place national legislation for banking
resolution, in full respect of the Community acquis. Strict bank stress tests, coordinated at EU level, will be undertaken on a regular basis. In addition, the President of the ESRB and the President of the Eurogroup will be invited to regularly inform Heads of State or Government on issues related to macro-financial stability and macroeconomic developments in the Euro area requiring specific action. In particular, for each Member State, the level of private debt for banks, households and non-financial firms will be closely monitored.

In addition to the issues mentioned above, attention will be paid to tax policy coordination.
Direct taxation remains a national competence. Pragmatic coordination of tax policies is a necessary element of a stronger economic policy coordination in the Euro area to support fiscal consolidation and economic growth. In this context, Member States commit to engage in structured discussions on tax policy issues, notably to ensure the exchange of best practices, avoidance of harmful practices and proposals to fight against fraud and tax evasion.
Developing a common corporate tax base could be a revenue neutral way forward to ensure
consistency among national tax systems while respecting national tax strategies, and to contribute to fiscal sustainability and the competitiveness of European businesses.
The Commission intends to present a legislative proposal on a common consolidated corporate tax base in the coming weeks.

Concrete yearly commitments
In order to demonstrate a real commitment for change and ensure the necessary political impetus to reach our common objectives, each year Member States of the Euro area will agree at the highest level on a set of concrete actions to be achieved within 12 months. The selection of the specific policy measures to be implemented will remain the responsibility of each country, but the choice will be guided by considering in particular the issues mentioned above. These commitments will also be reflected in the National Reform Programmes and Stability Programmes submitted each year which will be assessed by the Commission, the Council, and the Eurogroup in the context of the European Semester.

Next steps
The Pact will be formally adopted at the EC on 24 March by Euro area Member States and those Member States non participating in the euro which wish so.
Those MS in a position to do so should announce already on 24 March the concrete commitments to be achieved in the next 12 months.
In any event, concrete commitments should be included in the National Reform and Stability Programmes to be submitted in April and will be presented to the June European Council.



"The recent events have demonstrated that financial distress in one Member State can rapidly
threaten macro-financial stability of the EU as a whole through various contagion channels. This is particularly true for the Euro area where the economies, and the financial sectors in particular, are closely intertwined.
Throughout the current crisis, Euro area Member States have demonstrated their determination to take decisive and coordinated action to safeguard financial stability in the Euro area as a whole, if needed and return growth to a sustainable path.
In particular, the European Financial Stability Facility (EFSF) has been set up to provide for swift and effective liquidity assistance, together with the European Financial Stabilisation Mechanism (EFSM) and the International Monetary Fund, and on the basis of stringent programmes of economic and fiscal policy adjustments to be implemented by the affected Member State and ensuring debt sustainability.
On 28 - 29 October the European Council agreed on the need to set up a permanent crisis
mechanism to safeguard the financial stability of the Euro area as a whole. Eurogroup Ministers
agreed that this European Stability Mechanism (ESM) will be based on the European Financial
Stability Facility capable of providing financial assistance packages to Euro area Member States under strict conditionality functioning according to the rules of the current EFSF.
The ESM will complement the new framework of reinforced economic governance, aiming at an
effective and rigorous economic surveillance, which will focus on prevention and will substantially reduce the probability of a crisis arising in the future. Rules will be adapted to provide for a case by case participation of private sector creditors, fully consistent with IMF policies. In all cases, in order to protect taxpayers' money, and to send a clear signal to private creditors that their claims are subordinated to those of the official sector, an ESM loan will enjoy preferred creditor status, junior only to the IMF loan.
Assistance provided to a Euro area Member State will be based on a stringent programme of
economic and fiscal adjustment and on a rigorous debt sustainability analysis conducted by the
European Commission and the IMF, in liaison with the ECB.
On this basis, the Eurogroup Ministers will take a unanimous decision on providing assistance.
For countries considered solvent, on the basis of the debt sustainability analysis conducted by the Commission and the IMF, in liaison with the ECB, the private sector creditors would be encouraged to maintain their exposure according to international rules and fully in line with the IMF practices.
In the unexpected event that a country would appear to be insolvent , the Member State has to negotiate a comprehensive restructuring plan with its private sector creditors, in line with IMF practices with a view to restoring debt sustainability. If debt sustainability can be reached through these measures, the ESM may provide liquidity assistance.
In order to facilitate this process, standardized and identical collective action clauses (CACs) will be included, in such a way as to preserve market liquidity, in the terms and conditions of all new Euro area government bonds starting in June 2013. Those CACs would be consistent with those common under UK and US law after the G10 report on CACs, including aggregation clauses allowing all debt securities issued by a Member State to be considered together in negotiations. This would enable the creditors to pass a qualified majority decision agreeing a legally binding change to the terms of payment (standstill, extension of the maturity, interest-rate cut and/or haircut) in the event that the debtor is unable to pay. Member States will strive to lengthen the maturities of their new bond emissions in the medium term to avoid refinancing peaks.

Monday, March 7, 2011

Eurozone: One issue, many perspectives

1) "Socialist leaders demand 'huge progress' in financial regulation": The article by paints a good picture of the current row, after the Helsinki and Athens meets of the EPP and the PES re the "German-French competitiveness pact" on the road to next Friday's (March 11) 1st ever Eurozone Summit (in Brussels)

2) "Banks? What banks?" in an article that appears today on, an official reprint of a very interesting article by Christian Siedenbiedel in the Frankfurter Allgemeine Sonntagszeitung (ie on Sunday).

Among other things of this must read article, Irish economist Edgar Morgenroth is quoted arguing ".... That's why other countries should now grant some concessions to Ireland in the negotiations for lower interest rates." And the author of the article concludes: "We Irishmen, the thinking goes, have rescued your own banks. Now it’s time to show us some gratitude".

IMO, the Eurozone and the German-French competitiveness pact debate has become much more "interesting", with more POVs now on the "table" of the European public opinion - media than was the case months or even weeks ago!

3) "Caught in the Euro Trap: Internal Opposition Grows to Further Bailout Measures" is another must read article today, this one in Spiegel Online International (in English).
My comments:
What CSU, FDP & others "forget" to tell the German taxpayer is what his/her cost would be to help German banks if X or Y Eurozone member decided to give haircuts (w/o leaving the Eurozone of course, because there no such EU rule).
Plus, to explain to the German taxpayers and voters the German role and benefits in reaching the crisis, from 2002 to 2009.

4) Food for thought: China joined the WTO on 11 Dec 2001. The Euro notes & coins were introduced on 1 Jan 2002. Consider the combined effect since then. Especially the dynamic presence of cheap Chinese products under "WTO free trade" terms affected the systemics and dynamics of the Eurozone and of the EU Single Market. As well as particular economies of the Eurozone that did not specialise in products of low price/value-quality ratio

A CNN brief report, on Nov. 10, 2001: "China officially joins WTO" makes good, ex post facto, reading especially re the benefits the US and the EU expected from China's WTO membership. Compare them to what actually happened.

5) In UK affairs:
Does PPE include entrepreneurship studies?

6) On the lighter (?) side: To go where it has never gone before (maybe) the EU needs a Captain Kirk and a Vulcan (Spock)!

7) The second and fuller part of "Eurozone Systemics" (see yesterday's "Diary of a Policy Analyst" on this blog) will be posted hopefully tomorrow, because there are more hand calculations to be made in order to present a systemic view of the Eurozone and its dynamics.

Eurozone systemics: GIIPSB 44% of pop 39% of GDP!

Recent ECB Pres & some BoD members' comments re rate hike potential raise IMO the issue of what kind of economic governance the EA17 need & by whom!

Eg. see "ECB's Gonzalez-Paramo: April rate hike possible" and note the argumentation:

"... Asked about the impact of a rate hike for Spain, whose economy is recovering at a slower pace than others in the euro zone, Gonzalez-Paramo said the ECB must think about the euro zone as a whole rather than individual countries. ..."

The Eurozone as a whole? This prompted me to table some insightful Eurozone statistics & systemics.

Today, I present the first part, that covers Italy, Spain, Ireland, Greece, Portugal as well as Belgium:

Country ... % pop .... % GDP (1) ...... Q4 growth (2) .. Inflation (3)
Italy ......... 18.21% .... 16.94% .......... +1.3% ............... 1.9%
Spain ...... 14.25% ..... 11.71% ......... +0.6% ............. 3.0%
Greece .... 3.41% ........ 2.64% ......... -6.6% ............... 4.9%
Portugal ..3.22% ....... 1.83% .......... +1.2% ............... 3.6%
Ireland .... 1.37% ........ 1.82% ........... N/A ................. 0.2%

% of Eurozone population: 40.46%
% of Eurozone GDP: 34.84%

Belgium .... 3.25% .......... 3,76% ................. +1.8% ............... 3.7%

% of Eurozone population: 43.71%
% of Eurozone GDP: 38.60%

So PIIGS + BEL: 43.71% of the Eurozone population, 38.6% of nominal 2009 GDP! Quite larger than most would expect or think off hand!

Thus the strategic policy question: Do economic conditions in Spain + Portugal + Italy + Greece + Ireland + Belgium (6 Euro members, 43.71% of the Eurozone population and 38.6% of Eurozone's nominal 2009 GDP) justify Euro rate hike "thoughts" recently expressed by some central bankers in the EZ?

3 of the PIIGS plus Belgium have a January inflation rate above the 2% ECB target: Greece 4.9%, Belgium 3.7%, Portugal 3.6% and Spain 3%. The Greek rate that comes in spite a 6.6% reduction in nominal GDP in Q4 of 2010, is probably driven by new taxes (raises in VAT, etc) part of its budget consolidation effort.

Tomorrow: The full picture of the Eurozone 17 and more insightful data and syllogisms!

(1) Nominal GDP (2009), Source World Bank
(2) Q4 2010 GDP compared to Q4 GDP 2009. Source: Eurostat. Estonia and NL based on not seasonally adjusted data

Sunday, March 6, 2011

EPP vs PES = ?

(this is the second and final edition of this post)

German-French Competitiveness Pact: EPP & Socialist summits in Helsinki and Athens

1) As the following text from "Athens VS Helsinki – two opposite ways for Europe",, 24/02/2011 explains re the EPP Helsinki "Summit" and the PES Athens Leaders Meeting:

"... However, the agenda set by the two parties reflects two opposite visions concerning EU’s future. While PES leaders will focus on a presenting a new growth model, based on fairness, jobs and growth, the EPP will keep the debate around the 'Competitiveness Pact' – a way to push Europe deeper into the crisis, by cutting wages, unemployment benefits and public services. .."

2) On Saturday morning the news from Helsinki from Friday's intra-EPP discussion (see Bloomberg's "Merkel Rebuffs Bid by Ireland's Kenny to Cut EU Bailout Costs") showed that A. Merkel has the choice: a) Win next fed election or b) Make European history but of course there exists the possibility A Merkel, via her tactics, will lose next German fed election as well as "destroy" EUrope!

3) The EPP Press Release re the Helsinki meeting is out: EPP's 5 points to bring forward a competitiveness pact

It seems that the gloves are off:

“I also hope that the Socialist Prime Ministers in the EU will be willing to consider our proposals, since they opted not to endorse (by their absence, minus the host) the populist positions announced at the meeting of second-tier Socialist politicians in Athens yesterday,” Martens added.
(my bolds)

In IV I note: "We need to ensure fiscal discipline and address excessive imbalances within the EU"
My comment: Then they should "dare" propose Economic & Political Union, IMO.

IMO, the 5 points are a conservative proposals by Conservatoves for a "conservative" European Union.

I also note in point IV:
"... Improving competitiveness is key to future economic growth, which means that the euro area. Member States must be ready to put all their measures up for analysis, even if they fall within national competences. This shall be achieved through both structural reforms and fiscal consolidation, in order to improve our competitiveness and strengthen the prospects for economic growth. .."

In point I:

"... Member States need to continue to make efforts to return to sustainable public finances. We encourage a periodical re-evaluation of EU and international assistance, which may lead to possible amendments of the packages in place. This can be pursued upon reaching agreed benchmarks. Possible measures to ensure the continued successful implementation of the Greek and Irish programmes should also fall under this category. We recognize that measures taken as part of consolidation plans need certain adjustments at national levels"

"The PES in Athens call for new EU economic direction" that contains their declaration.

It also has an intro that includes:

PES President, Poul Nyrup Rasmussen welcomed the strong declaration. He stated that; "The people of Europe deserve to understand that there is a clear choice in how the European Union develops. Our plan will create 8 million jobs. The Conservative plan will only increase unemployment. People should remember, it is not Europe that is to blame, it is the Conservative majority".
(my bolds)

The PES declaration (PDF) starts with: "“Europe is in the wrong hands. Our alternative to a Conservative Europe: a strategy for jobs, fair growth and social progress"

5) The "Community method" and the European Commission

The participation of EU Commissioners in party political events (eg Helsinki & Athens yesterday) of the political parties/groups that nominated them (and often come from):

a) Emphasizes the political nature of the "College" but
b) IMO also undermines the role of the European Commission in the pact/reform process, esp the so called "Community method".

Come to think of it, the EU Commission's College of Commissioners is like a wide coalition government (the members belong to and in any case were nominated from at least three political groups - EU political parties or coalitions thereof, the EPP, the S&D coalition (or its main member, PES) and the ALDE coalition (or its main member, ELDR). Is that good or bad, policy proposing and policy administration wise?

6) On multiple-speeds in the EU

It is kind of obvious that no matter what the decision reached in the 1st Eurozone Summit on 11/4 or the European Council a few days later, not all of the 27 will be moving with it. It may be the Eurozone 17 or more than the 17 or fewer than the 17.

Will that mean a multi-speed EU?
Well, EMU and Schengen, as well as the Social Protocol of the Maastricht Treaty (that applied to 11 of the then 12 members) already set up multi-speeds.
And alas, IMO, more multi-speeding will continue. Eg as long as the UK remains (alas) Eurosceptic or in the EU and many other factors.

Saturday, March 5, 2011

Why a 2% inflation target for the Eurozone and other myths & realities!

1) With February Eurozone inflation at 2.4% (Eurostat flash estimate & 2.3% in Jan 2011), above the traditional 2% fixed (ie permanent) target of central banks, the potential for a rise in the ECB interest rate in April exists (with many side-effects for EZ economies & firms).

But is a fixed inflation target the best policy?

a) See "Rethinking Macroeconomic Policy", by Olivier Blanchard, Giovanni Dell’Ariccia, and Paolo Mauro, Feb. 12., 2010.

b) What really bothers me about all that can be described in the following (part of which I mentioned before recently):

How many policy makers at the EU and the 27 national levels really care about what happens to the micros & SMEs? Especially, the Eurozone ones?

If the EU or the Eurozone has a higher propensity than the UK & US for inflation then consider that maybe that is because of its incomplete single market & union! Then rather than monetary policy, the solution, albeit not of immediate application should be more focused towards making the single market more real and in deciding to move to political union (at EU or EZ level)!

But who has the "nerve" to propose that and tear down many myths?

So why this monolithic fear/phobia of inflation? (1A) should shed some light into that!

Note that for a long time now the ECB rate is 1%, the UK 0.5%, the US 0.0-0.25%! To my MBA and policy mind that means that the Eurozone needs (?) to maintain a higher interest rate than the US and the UK in order to be in equilibrium. Or is it something else? Eg the result of economic dogma? Who's dogma?

I would urge policy makers in Brussels and acroos the Eurozone and the rest of the EU to consider the effect on Eurzone firms' ability to a) export b) defend their markets since the Euro will rise vs USD, Yuan, Pound etc. And the effect on jobs.

PLus: If the ECB interest rate goes up next time (because of what I dare call "inflation-phobia" by some) what will be the effect on financing cost & access to funding of SMEs & of the GIIPS?

Who realises that the EU;s micros & SMEs (and ppl) need EU-wide single laws in everything for the EU to work and provide jobs? I do think that a key part of the EU and EZ problems in insuffcient integration. Another reason why sovereignty IMO can only be achieved at EU level instead of UK, French, German, etc levels. The other has to do with systemics and dynamics outside the EU (see developments in China, USA, SE Asia, Russia, South America, Africa, etc).

Finally, for now, there is a way for the German taxpayer (some like to call Germany the "paymaster of Europe", yikes) to bear less burden in the financing of the EU - Eurozone:

A US-style EU or Eurozone "federal" income tax!
Then instead of Germany or the German taxpayer being the "paymaster" of the EU/EZ, the high income earner in the EU or EZ will! Only fair! Right> So, who is in favor of an EU/EZ federal income tax?
A Catch 22? A Gordian Cord? Who will be/prove Europe's Alexander the Great?

2) German-French Competitiveness Pact: EPP & Socialist summits in Helsinki and Athens

It is Saturday morning and news from Helsinki from Friday's intra-EPP discussion (see Bloomberg's "Merkel Rebuffs Bid by Ireland's Kenny to Cut EU Bailout Costs") show that A. Merkel has the choice: a) Win next fed election or b) Make European history but of course there exists the possibility A Merkel, via her tactics, will lose next German fed election as well as "destroy" EUrope!

3) More on the inflation issue and the apparent willingness of some EZ central bankers to raise interest rates. All we know re February is a flash inflation estimate from Eurostat that puts Eurozone inflation at 2.4%. How about January? Back on Feb 28, Eurostat had published the inflation stats for January 2011. These do not show a significant impact of staple foods.
Read for yourselves:

Euro area annual inflation up to 2.3% , EU stable at 2.7%
Euro area annual inflation was 2.3% in January 2011, up from 2.2% in December 2010. A year earlier the rate was 0.9%. Monthly inflation was -0.7% in January 2011.
EU annual inflation was 2.7% in January 2011, unchanged compared to December 2010. A year earlier the rate was 1.7%. Monthly inflation was -0.4% in January 2011.

Inflation in the EU Member States (Jan 2011)
In January 2011, the lowest annual rates were observed in Ireland (0.2%) and Sweden (1.4%), and the highest in Romania (7.0%), Estonia (5.1%) and Greece (4.9%). Compared with December 2010, annual inflation rose in fifteen and fell in twelve Member States.
The lowest 12-month averages up to January 2011 were registered in Ireland (-1.4%), Latvia (-0.7%) and Slovakia (1.0%) and the highest in Romania (6.2%), Greece (4.9%) and Hungary (4.5%).

The main components with the highest annual rates in January 2011 were transport (5.1%), housing (4.5%) and alcohol & tobacco (3.7%), while the lowest annual rates were observed for clothing (-0.6%), communications (-0.2%) and recreation & culture (0.1%). Concerning the detailed sub-indices, fuels for transport (+0.58 percentage points), heating oil (+0.19) and electricity (+0.11) had the largest upward impacts on the headline rate, while garments (-0.14), telecommunications (-0.08) and rents (-0.07) had the biggest downward impacts.
The main components with the highest monthly rates were housing (1.2%), transport (1.0%) and health (0.6%), while the lowest were clothing (-13.3%), recreation & culture (-2.1%), household equipment and hotels & restaurants (-0.5% each). In particular, fuels for transport (+0.18 percentage points), electricity (+0.12) and restaurants & cafés (+0.07) had the largest upward impacts, while garments (-0.71), package holidays and footwear (-0.16 each) had the biggest downward impacts.

4) A key factor is rising prices of oil and many staple foods (a repeat of the 2008 crisis in the world prices of staple foods and oil or worse?)
A BBC News - Q&A (Feb 3): "Why food prices and fuel costs are going up" is insightful!
Note: According to the BBC "the FAO says speculators who trade commodities on the financial markets are not to blame for the huge rise in prices, but they have made matters worse".

5) Some more recent Eurozone and EU stats (from Eurostat), to get a better picture on dynamics & systemics:

5a) On March 3, Eurostat, published EU and Eurozone volume of retail trade stats (1st estimates):
In January 2011, compared with December 2010, the volume of retail trade was +0.4% in the Eurozone and +0.6% in the EU27
In December 2010, retail trade fell by 0.4% and 0.3% respectively.
In January 2011, compared with January 2010, the retail sales index increased by 0.7% in the Eurozone and 1.9% in the EU27.

Food, Drinks, Tobacco:
In January 2011, compared with December 2010, “Food, drinks and tobacco” gained 0.1% in the euro area, but fell by 0.3% in the EU27.
In January 2011, compared with January 2010, “Food, drinks and tobacco” fell by 0.8% in the euro area and by 1.3% in the EU27.

5b) One day before, on March 2, Eurostat had published industrial producer price stats
In January 2011 compared with December 2010, the industrial producer price index rose by 1.5% in the Eurozone and by 1.4% in the EU27
In December 2010, prices increased by 0.8% and 1.2% respectively.
In January 2011 compared with January 2010, industrial producer prices gained 6.1% in the Eurozone and 6.5% in the EU27. Why?

Monthly changes
In January 2011, compared with the previous month, prices in total industry excluding the energy sector increased by 0.8% in both the Eurozone and the EU27.
Prices in the energy sector rose by 3.2% and 2.5% respectively.
Among the Member States for which data are available, the highest increases in the total index were recorded in Spain (+2.4%), the Netherlands (+2.1%), Belgium and Portugal (both +1.9%). Decreases were observed in Sweden (-1.3%), Denmark (-0.5%) and Cyprus (-0.1%).
Annual changes
In January 2011 compared with January 2010, prices in total industry excluding the energy sector increased by 3.9% in the Eurozone and by 4.0% in the EU27. Prices in the energy sector gained 12.5% and 12.7% respectively.
Among the Member States for which data are available, the largest increases in the total index were observed in Bulgaria (+11.1%), Lithuania and the Netherlands (both +10.3%), and the smallest in Malta (+0.8%), Slovakia (+1.9%) and Sweden (+2.5%).

6) To what extent though is growth in some of the EU and Eurozone member states is pushing prices up?

+0.2% from Q3 2010 and +2.1% from Q3 of 2009

Eurostat 2nd estimates for Eurozone GDP Q4 2010:
+0.3% from Q3 2010 and +2.0% from Q3 of 2009

Let's see what the Q4 2010 GDP compared to Q4 GDP 2009 stats look like, ie how fast Eurozone and other economies are growing (source Eurostat data):

Eurozone 16 (whole) and Eurozone 17 (whole): both 2.0%
EU27 as a whole: 2.1%

Belgium 1.8%
Germany 4.0% (!)
Estonia 6.6%
Ireland N/A
Greece -6.6%
Spain 0.6%
France 1.5%
Italy 1.3%
Cyprus 2.2%
Lux N/A
Malta N/A
NL 2.4%
Austria 2.7%
Portugal 1.2%
Slovenia 1.9%
Slovakia 3.4%
Finland 5.0%

Estonia and NL based on not seasonally adjusted data

Thus only Estonia, Germany, Finland and Slovakia are growing (Q4 2010) at rates that are above 3%, a threshold many claim is needed for employment creation.

So is the Eurozone overheating with a 2.1% GDP growth rate (Q4 2010 vs Q4 2009)? To the extent that a 2.3% inflation in January and a flash estimate of 2.4% in February (against a traditional and somewhat "dogmatic" target of 2.0%) aided by global issues in the prices of some staple foods and oil justifies serious consideration by "some" central bankers in the Eurozone to raise the interest rate in the near future?

7) On Monday: Employment, Social Policy, Health and Consumer Affairs Council, 7 March 2011, Brussels. Read more via EUROPA - Press Releases

8) On Monday 7 March at 12.00 CET, the European Commission will issue a decision and press release concerning the historical aviation emissions

9) Antitrust: The European Commission closes probe into Hollywood studios after they change terms of contracts for digitisation of European cinemas.

10) Scottish parliament elections May 5. According to the Guardian, the LibDems are trailing very badly in the polls, as low as 8%!

11) Finally: BBC News reports that China says it will boost its defence budget in 2011.
Let me remind you that according to the CIA World Factbook (estimate) in 2006 China tied with Greece at No21 in military spending/capita, way above USA & all EU except Greece!

PS. So, what it is gonna be: pact or reform? EU27 or Eurozone17+? Schengen style or not?

Friday, March 4, 2011

Pact, reform, meetings, IP, jazz and inflation hawks

1) Some 36 hours before the EPP and Socialists' meetings in Helsinki and Athens to discuss the Merkel-Sarkozy competitiveness pact, a very important opinion article by Guy Verhofstadt, Jacques Delors & Romano Prodi re the pact appeared in the FT: Europe must plan a reform not a pact

One of the things that the Delors, Prodi & Verhofstad article misses IMO is that if European Commission is involved that means also UK & Czech Rep, ie won't lead to the type of breakthrough needed. But they are right that a pact is not enough!

IMO, and for political union! EMU of 17 or 27 cannot work w/o real single market & real federal budget - income tax! It's now or ....!

2) According to The National, the UAE and Qatar are to help out Spain

3) According to the CBI: UK IP is fundamental to growth.
IMO, Intellectual Property is the capital of the 21st century (as opposed to land & financial equity/bonds etc) but how does one defend it? Via ACTA??

4) The jazz (hype) re innovation reminds me of the jazz re HR (Human Resources & Human Capital etc) before the current crisis. All was forgotten when the crisis arrived!

5) According to France24 (EN) The French lament their shrinking role on world stage
C'est la vie? IMO only EU can play such a role anymore, not France, neither the UK or any other EU country on its own.

6) BBC News reports that the ECB said that Eurozone interest rates could rise in April
The inflation hawks are out! Oh my! Are some in the Eurozone trigger-happy re anti-inflationary measures (ie raising interest rates)? Can the Eurozone afford anti-inflation mania?

If the ECB interest rate goes up next time (because of inflation-phobia?) what will be the effect on financing cost & access of SMEs & the GIIPS (PIIGS)? What is the effect on Eurozone firms' ability to a) export b) defend their markets since the Euro will rise vs USD, Yuan, Pound etc? Effect on jobs in the Eurozone?

So why this monolithic fear/phobia of inflation? For a long time now ECB interest rate is 1%, UK 0.5%, US 0.0-0.25%! So policy-wise, if the EU has higher propensity than UK & US for inflation consider that maybe that is because of its incomplete single market & union! Who realises that the EU;s micros & SMEs (and people) need EU-wide single laws in everything for the EU to work and provide jobs?

Thursday, March 3, 2011

Doha, special rels, jobless and inflation, Marx, Lenin and the liberals

1) When will EUrope finally get it together? The (rest of the) world is turning!

2) Many politicians in many countries like to loosely use terms such as national interest and sovereignty, are they catchphrases of the political era?

3) IATA has cut its airline profits forecast due to high oil costs (BBC News)

4) Policy: What many forget (or choose to forget) is that competition law is the cornerstone of genuine "free market"

Most ideologies stand on good ideas. It is their application/practice that makes the difference.
Marxism was meant for industrially mature countries eg UK, Germany etc, instead it was practiced in agri/rural Russia et al & China!

IMO Marxism is an irrelevant in 2011 as Rand-ism. And a centrist mix of capitalism & social democracy seems best in practice.

On the other hand, it can IMO be said that China is extracting communism's revenge on capitalism nowadays, via its capitalocommunist (Frankenstein-like) model and its 2001 WTO membership (a major US & European mistake).

American & European greed led to China's 2001 WTO membership that has backfired on the US & EU! Maintenant c'est trop tard pour eux

By the way: What do the liberals and the Leninists have in common, in iterms of ideology? Their distaste for private monopolies & cartels. But whereas liberals think that they can be avoided via competition, anti-monopoly and antitrust legislation, Leninists prefer the state ownership model, for monopolies and business in general!

5) By the way, since I mentioned the WTO, according to BBC News:

"Doha Round: US presses China, India and Brazil"

It seems that the USTR is pushing the BRICs for more concessions on their part, in lower tariffs and better market access, for the ever lasting (since 2001) Doha Round of WTO trade talks to come,, at last, to a successful end. Let us be reminded that WTO rules based international trade is not tariff-free but that via GATT and since the mid 1990s its successor, the WTO, tariffs have been lowered considerably, globally, to to different degrees (less the developed the economy, the less the pressure to cut tariffs, generally speaking).

I should also note that as far as I know President Obama has not (yet?) been given by Congress the "fast track" powers that a Democrat-dominated Congress had given to GWB Jr. Fast track means that an WTO agreement among 170+ countries will then have to be either approved as is or rejected by the US Congress, ie there can be no proposals for amendments (which would render an agreement among 170+ virtually impossible).

Reminds one of the Sovereignty Bill that Cameron recently passed in the UK! If an EU regulation or directive that has been deliberated by the Council of the EU and the European Parliament (in co-decision) can then be amended by the UK Parliament or any national Parliament, then does that render EU lawmaking a joke or not?

6) On that special ... relationship:
My comments:
1) The ceremony gave awards did not crown anyone!
2) Does the EU need its own Hollywood (movie industry cluster) or not? And where (location)? Of course a Euro-Hollywood cluster should be a private sector matter, not a "Brussels" one (matter/funding)
3) A film's language (21+ languages in the EU) seems to be key factor in intra-EU & international success (esp US box office results)
4) The trans-national, even intra-EU view seems lacking, eg in topics & scripts. What is needed are more multi-lingual/national (intra-EUropean) stories & themes to attract EU-wide audiences. IMO "EU funds" should go to "multi/cross-national/lingual" film productions (ie from many EU states)
5) Sport is not affected significantly by languages. But music & film (& TV series) are highly dependent on language (in how many countries do foreign language films and TV programs play in VO btw?)
6) There is a special UK-US relationship but it is between Hollywood & royal film themes (Kings's Speech, The Queen, Elisabeth I & II, etc)

7) The European Commission's DG ECO & FIN's EU interim forecast: Recovery gaining grouund makes for interesting reading.

8) Eurostat: Inflation: Flash estimate for February 2011 for Eurozone: 2.4% vs 2.3% in Jan 2011
My comments:
1) Inflation hawks alert then?
2) IMO w/o a better Single Market. esp for SMEs and jobs, unemployment will remain high & structural in EU & Eurozone

9) Eurostat: Unemployment stats (seasonally-adjusted):
a) Eurozone unemployment 9.9% in January 2011 (vs 10.0% in Dec 2010 & 10.0% in Jan 2010)
b) EU27 unemployment 9.5% in January 2011 (vs 9.6% in Dec 2010 & 9.5% in Jan 2010

10) On a humorous note: Britain has no Euro vision! (see EU) That's why it cannot win the ESC either? Plus: Lots of "special relationships" (UK-US style) among the participating countries though! (sorry couldn't help the pun)

11) And finally, in case you missed it: According to Reuters, the head of the FDIC calls for big bank restructuring.
My comments:
1) While there was reportedly less pressure on Wall St firms et al at Davos (WEF) this year, the issue seems to remain hot in the public opinion domain
2) Seems that Hollywood did not buy into the "party line" either, it gave an Oscar to the telling Inside Job documentary! A huge global message!

Wednesday, March 2, 2011

Inflation etc!

1) Tomorrow is another day. But so is today. And so was yesterday.Uncertainlty & volatility abound. Are these the best of times or the worst of times for policy makers? Depends on the policy maker! It's in times like these in Europe, US, the world tht good (& proactive) policy making is most needed. But how many can rise to challenge?

2) Paul Krugman's NYT Op/Ed: Inflation Theorists
There are plenty of inflation hawks in the Eurozone as well!

3) According to the RTE, the Irish national totals stand at: FG 76; Labour 37; FF 20; SF 14; SP 2; PBP 2; Greens 0; Independents 15.
So: 166/2+1 = 84 so FG needs 8 more min majority? Labour's 37 would give it a +30 majority in the Dáil?

4) The EU Council conclusions on Energy 2020: A Strategy for competitive, sustainable & secure energy

5) According to the US DoL: Unemployment Insurance Weekly Claims:
In the week ending Feb 19, the advance figure for seasonally adjusted initial claims was 391,000, a decrease of 22,000 from the previous week's revised figure of 413,000. More

6) According to Reuters, the head of the US FDIC has called for big bank restructuring
Why am I so not surprised?
IMO an even bigger overhaul of the global financial system, as a whole, is needed. Do the US or the EU have the policy guts to do it? The public opinions seem to be ready for such bold policy changes after the events of that last 3 years!

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