Euro Leaders Demand Austerity as Italy Moves Closer to New Vote - Bloomberg
Let the beatings continue
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“Now in Europe, after the Italian election, it seems to be a case of either austerity and savings programs or growth, but that’s a completely false premise,” German Chancellor Angela Merkelsaid at an event on March 1. EU Economic and Monetary Affairs Commissioner Olli Rehn echoed those comments this weekend, telling Der Spiegel magazine that there’s no scope for the bloc to let up on budget discipline.
Italian political instability, after last week’s election resulted in a four-way split, threatens to revive concern about the deepening of the debt crisis. Voters in the bloc’s third- largest economy revolted against German-inspired austerity measures, handing the party of comedian-turned-politician Beppe Grillo more than 25 percent of the vote with its anti-spending cut message and a call for a referendum on euro membership. — Bloomberg
How much more can Spain’s citizens, many who had no part in reckless lending and speculation, take?
The demonstrations yesterday tell us that they’re losing their patience.
German Chancellor Angela Merkel renewed her call for austerity as crucial to tackling financial turmoil in the euro area, praising Canada’s economic example as she returned to the crisis fight after her summer vacation. (via Merkel Cites Canada as Debt-Deficit Model in Europe’s Crisis - Businessweek)
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Austerity will likely continue and could further worsen an already fragile investor climate as austerity-wrecked periphery countries remain in the throes of a debt trap.
Samaras Secures Greek Budget Plan as Coalition Discord Grows - Bloomberg
“We should have avoided this new wave of wage and pension cuts, some 6 billion euros, which will keep the country in recession in 2013 and 2014,” Venizelos said. More time “would have allowed for a milder implementation of the measures.” — Bloomberg
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Bottom line: Austerity continues to be implemented in the face of a debt trap and increasing social tensions. It’s time to take a look at my blog’s motto:
“Common sense, why don’t our leaders have any?”
Greek Opinion Poll Shows Majority Want Revised Terms - Bloomberg
Most Greeks want to see the terms of an international financial rescue revised even as they acknowledge that not abiding by austerity measures required for the funds may lead to the country leaving the single currency, according to an opinion poll conducted weeks before a second general election on June 17.
Almost eight in 10, or 77 percent, of the 1,600 Greeks surveyed by GPO SA pollsters for the survey broadcast on Athens- based Mega TV today said the terms of the bailout should be revised. More than half, or 52.4 percent, said they should stay in the euro if they were forced to accept the current austerity measures accompanying the bailout while 44.5 percent said they shouldn’t. Most Greeks, or 81 percent, said they wanted to remain in the single currency.
— Bloomberg
(via Spanish Retail Sales Fall 9.8% In April - Business Insider)
Largest drop in its history.
While the anti-bailout SYRIZA party appears to be gaining support, the results of the election are anybody’s guess. Ultimately, the decision will rest on EU leaders ability to convince Greek voters that this is a vote for the euro and not for austerity, as analysts estimate that 70-80 percent of Greeks say they would like their country to continue to be part of the eurozone. (via IT’S OFFICIAL: Greece’s Fate Could Be Decided On June 17 - Business Insider)
Germany Chancellor Merkel Warns Against Abandoning Austerity Reforms « VOA Breaking News
German Chancellor Angela Merkel told parliament Thursday, the structural reforms supporting austerity measures are the only way for Europe to survive the current debt crisis.
Chancellor Merkel said countries using the euro should not scale back or abandon austerity measures now in place. She also said increasing debt to implement growth would plunge the economy back to the early stage of the financial crisis. She said there is no “miracle cure” and that the combination of debt reduction and growth are the two “pillars” to bring the European Union out of the current economic crisis. — VOA
(via Merkel resists calls to put growth before reforms - chicagotribune.com)
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Recent news; such as the Bundesbank softening its stance on inflation, the EU relaxing stringent deficit rules, as well as support for wage increases in Germany to support domestic demand, are signs that Germany is getting the message from the rest of Europe, growth must accompany austerity measures.
However, Merkel made clear again today that there will be no Eurobonds. As I said here, “we’ll budge here and there, but we’re not fundamentally changing our fiscal stance. No Eurobonds or a backtrack of austerity.”
Maybe it’s Germany sounding tough, but not backing it with action. In fact, we are seeing a trend of Germany extending more of a helping hand. The Bundesbank softening its stance on inflation is a big deal (a fundamental change in monetary stance). Perhaps this is setting the stage for monetary easing from the ECB while fiscal adjustments take place.
Furthermore Merkel is actually getting heat at home for not extending growth measures to the rest of Europe. The North Rhine-Westphalia election in 3 days will be interesting to see if Germans may be changing their mood to further austerity.
House GOP Budget Cuts Social Programs – Including Medicaid -- To Stave Off Pentagon Cuts - Kaiser Health News
I don’t like to engage in political debate, because when was the last time you changed someone’s mind in one?
However, cutting social programs while boosting defense spending is just downright stupid. Continued spending cuts, especially to social programs equals trotting down the same path as Eurozone austerity. Social unrest (ie. Occupy Movement) will only grow stronger if we continue these asinine policies.
“Greek political leaders will meet for a second day today in a bid to form a government, with the mandate for the task being handed to the second-biggest party after New Democracy leader Antonis Samaras said he failed to forge agreement after an election that raised questions about the country’s euro membership.
Samaras gave up his bid after nearly six hours of talks in Athens yesterday. The attempt to form a government will pass to Alexis Tsipras, the head of Syriza, the second biggest party, which has vowed to cancel the bailout terms. Tsipras will see President Karolos Papoulias today at 2 p.m. Athens time.” (via Greek Government Mandate to Pass to Syriza as Samaras Fails - Bloomberg)
Schaeuble Says Germany Will Negotiate With Hollande on Growth - Bloomberg
The German government will allow a victorious Francois Hollande to “save face” while expecting him to uphold French commitments to Europe’s budget treaty, Finance Minister Wolfgang Schaeuble said.
Schaeuble’s comments are the clearest indication yet that Chancellor Angela Merkel’s government is preparing for a Hollande victory at France’s presidential election May 6 after publicly backing Nicolas Sarkozy to win a second term. Earlier today, the German government said that diplomatic contact had been made with the Hollande camp.
“We’ve told Mister Hollande that the fiscal pact has been signed and that Europe works along the principle of pacta sunt servanda,” meaning agreements must be kept, Schaeuble said in a speech in the western German city of Cologne today.
“I’ve said that everybody who gets freshly elected into office must be able to save face,” Schaeuble said. “So we will discuss this with Hollande in a very friendly way. But we won’t change our principles.” — Bloomberg
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(RCS): “We won’t change our principles.” Ie. We’ll give away here and there, but no Eurobonds, nor a backtrack of austerity. That’s how I see Schaeuble’s comment.
Needless to say, eventually (and soon I believe), economic conditions will bring this fundamental difference in austerity vs. growth between Germany and France front and center.
