Category Archives: EUropean Union

Today’s #EU Summit – IMPORTANT!

jean-claude-juncker

 

Apparently, the #EU Summit is opened by President of the European Council , Donald Tusk who always begins the meeting with a prayer, then asks for the lights to be dimmed as he invites the spirits to join the circle. He then asks everyone present to join hands and close their eyes and recite selections from the Maastricht Treaty.

The group then attempts to contact those on the ‘Other Side’ – for instance the United Kingdom and others who have ‘crossed over’. This is followed by pre-prepared questions about all sorts of important-sounding stuff.

Then it’s lunch.

After lunch the meeting continues (This is known as the ‘Graveyard Session’). Those still sober enough to vote for something which was agreed at the previous meeting, raise their hands – or have their hands lifted for them by a flunkey.

Meanwhile, The European Commission President, Jean-Claude Juncker staggers around the table, kissing every delegate, telling them that he REALLY loves them and that they are his best friend.

Then a group photo is taken and Mr Tusk presides over the Ceremony of the Communique (written last month) as he reads out the traditional Holy Positive Words about the future of the European Union.

Then they all fly home.

 

The Ugly Spectre of EU Self-interest……

burning euro

A recent survey has indicated that most companies based in the eurozone believe a British decision to leave the European Union would hurt the region as it struggles with a sluggish economy and a migration crisis.

79%  of firms based in the eurozone said a Brexit would be bad for the area, with less than 4% saying it would have a positive impact, according to the report from accountants Grant Thornton.

“What’s abundantly clear from our research is that European business leaders overwhelmingly view a Brexit as a negative development for the EU,” Francesca Lagerberg, a senior tax partner at Grant Thornton, said.

She said business confidence was strong considering the various potential threats the region faced from low growth, high unemployment, migration and a potential Brexit.

“Any one of these flaring up over the next few months could see that optimism wobble if the economic shocks undermine business leaders’ ability to plan and invest,” she added.

The survey was based on interviews with more than 2,500 senior executives conducted in January and February.

The result is in keeping with the view of senior business leaders in Britain who are largely in favour of Britain staying in the EU. Most economists expect an exit would deal a blow to Britain’s economy in both the short- and longer-term.

The Grant Thornton report showed 68 percent of British-based firms believe Brexit would have a negative impact on Europe.

Parts of the eurozone have struggled with a debt crisis in recent years which, on the heels of the global financial crisis, has stifled growth and left many unemployed. Unfortunately, quite a high percentage of Europe’s unemployed appear to be headed for the UK.

In addition, many recent migrants to the EU stated their first choice of refuge as the UK. Many of those will be arriving here in a few years….when Germany and other states hand them EU citizenship.

The region as a whole remains at odds over how to contain the continuing flow of migrants to the region.

It is regrettable that neither the UK political leadership, nor the Brussels Commissars have any idea about Managing Change on a macro scale because the sociological change within the #EU is probably they biggest issue that will need to be addressed within the next five to ten years.

Both sides are doing their best to frighten the electorate into voting for their point of view. There has also been an attempt at what can only be described as The Blackmail of a Nation – especially by the IN camp and the leadership’s foreign banking and political friends..

The fact is that BOTH sides have valid arguments but instead of helping the average UK citizen to make a reasonable choice whilst at the same time preparing for change, BOTH sides prefer to persuade through the medium of fantasy rhetoric, insinuation and slur.

Meanwhile, mainland Europe, surrounded by the Ring of Chaos, which encompasses Ukraine, then east to Turkey and south to North Africa,  sits and waits for more handouts and UK opportunities for its unemployed.

 

EU Brexit

 

chipsDC
Poisson Tempura al fresco

Believe it or not, I have no particular view as to whether or not we should remain within the European Union but if we are minded to believe the sharp suited Westminster Europhiles (and Jeremy Corbyn), we should not take what is looking increasingly like the foolhardy and dangerous option of Brexit………. Of course, the other team is busy painting a picture of an economic Utopia, unencumbered by the tyrannical drag-chute of EU integration.

The only unsurprising phenomenon about the whole debate is that because we know of no other way, two teams were hastily put together and, as is the case with every other debate, confrontation has been the order of the day.

I would have considered David Cameron far more statesmanlike had he addressed the nation in a far more neutral way, outlining the pros and cons for both possible outcomes. Unfortunately, we only know one way and that is through the medium of opinion-fuelled conflict. Hence the Boris and Cameron camps both treating the debate more like a prizefight rather than what could have been a comradely discussion.

The most outrageous claims have come from the ‘stay in’ camp.

‘Each family will be £4300 per year worse off’, ‘mortgage rates will increase’, ‘house prices will fall’, ‘we are safer within the European Union.’ etc. are all no more than conjecture.

The fact is that whether we are in or out will make little difference to the average man in the street and given the politicians’, pollsters’ and economists’ track records on any sort of prediction, we should all be wary of all the nonsense which has been produced as implied ‘fact’.

Sadly, most of the United Kingdom’s voting population is not very ‘politically-bright’  – hence the outrageous claims made by both sides. It is the only way that they are able to communicate with the slack-jawed Mr and Mrs Average because proper economic and sovereignty arguments are far too complicated without being reduced to single sentence soundbites.

If only the government had had the foresight to produce a single ‘for and against’ document, clearly showing that the argument is largely opinion rather than fact-based, Mr and Mrs Average would not have to be subjected to the  increasingly hysterical rhetoric of the Westminster wide-boys.

However, tell someone that their property value is going to fall and contrary to world trends, interest rates are mysteriously going to increase, you begin to understand that scaremongering by both sides is the only way forward.

What is it that we are being asked to keep or abandon?

What is in place at the moment is a self-amplifying bureaucracy which has arrived at the stage where it exists to perpetuate itself rather than be there for the good of the European Community. We have a European legal system whose main function appears to be to impose itself on EU member states plus a European economy which continues to be in terminal decline. There is a massive migration problem-without-end, with the prospect of an increased internal EU migration issue as a result of the proposed future membership of Turkey and Albania. That is the organisation of which we are currently a member.

The question is very straightforward: Do we want to belong to a totally unaudited association of failing and near bankrupt economies, overrun by unwanted (yes!) migrants and presided over by an inwardly-focused, self-amplifying bureaucracy – or should we be looking outwards to the rest of the world whilst maintaining relations only with the European states we can and WANT to do business with – without worrying about regulations governing what we eat or the amperage of our hairdryers and toasters!

The MOST frightening aspect of leaving the European Union is no more than a quite natural fear of CHANGE.

With very few exceptions, politicians have clearly demonstrated that they are incapable of preventing crises and they are certainly very frightened of being accused of creating a crisis such as they imagine might occur if we left the EU.

They surmise, quite correctly, that they would not be able to deal with it, and it is no accident that both David Cameron and George Osborne are at the desperate forefront of trying to keep us in the European Union because they would be the ones expected to deal with any Brexit fallout for which they are not professionally equipped.

Their motivation is fear, whereas the leaders of the Brexit campaign are driven by no more than a misplaced ambition to rule.

The stakes within the EU debate have very little to do with pragmatism or principle. They are to do with power and we as voters would do well to remember that.

The subtext of the Brexit debate is a battle for the leadership of BOTH of our main political parties.

 

 

Osborne’s Crassness and Stupidity

All that Chancellor Gideon has achieved by stating that if the UK leaves the #EU, MORTGAGE RATES will increase, has been to highlight his stupidity and total lack of understanding of the mortgage market. Presumably he is implying that if we remain in the EU, mortgage rates will NOT go up?

However, it was good to see that in preparation for any backlash, he made the point that his weasel words were, in fact, quoting what “The Americans” said.

The Greeks – they’re just like us!

First published  17th March 2015, The News Hub…. www.the-newshub.com

The relationship between the European Union, the Eurozone and Greece is no different to the relationships between many governments and their own citizens. The EU-Greece relationship is no more than a macro model of what is currently occurring, for instance, in the United Kingdom.


Let’s face it since the Greek crisis started a few years ago, in the main, the Greeks have been caricatured as lazy, workshy and the architects of their own misfortune. That naturally led to the assumption that they didn’t ‘deserve’ support from their richer European cousins unless they changed their ways.

Here in the United Kingdom, the scrounging working classes, just like the Greek nation, have really been clobbered over the last few years. They have been characterised as lazy, workshy and sitting back, as hard-working richer people fed them undeserved benefits. Government slogans such as “The workshy”, ” Abuse of the system” and “Benefits Culture” became common.


The government not only blamed them for a poorly designed welfare system by cutting benefits but humiliated the sick and disabled by forcing them to undergo questions and tests to ascertain whether they were deserving of government support.
Welfare benefits were even reduced if the State decided that they had more bedrooms than they really needed!
This was forced austerity without purpose.

The Greeks are taking the rap not just for their own economic shortcomings but for a very badly conceived and designed Eurozone. Their punishment too was humiliation through austerity.


Poor Brits had the state machinery and official interrogation to contend with whilst the Greeks were humiliated by the fiscal police known as ‘the troika’. Same principle, different scale.


The EU continues its slogan of “We want Greece to remain within the EU”, when all the evidence so far, is to the contrary.
The equivalent UK slogans are all about those ubiquitous ‘hard-working people’ and being ‘In it together’, which just like the EU – is supposed to be a club that everyone needs to belong to.

The oppressed eventually find a hate figure. The Greeks have found themselves the Nazis and poor Brits have found themselves ‘the toffs’ and the bankers. The Greeks want reparations for the damage done during WW2 and the Brits are enjoying bankers forgoing their comedy bonuses. The oppressors (real or imaginary) also need to be punished – an economic quid pro quo!


The Eurozone’s motives in not being too overt in helping the Greeks are very straightforward.


They say that they want to avoid a possible Greek exit from the Eurozone but in fact, it’s much more than that. There are other states within the European Union which are just below the radar and could potentially be in just as much trouble as the Greek economy. Spain and Portugal immediately spring to mind.


If Eurozone officials were not seen to dispense a certain amount of punishment to the Greeks before helping them, or if Greece decided to leave the Eurozone as a result of not being able to stand any more EU humiliation, others would doubtless follow . That means that Greece can only be helped by being thrown the occasional EU morsel, preceded by a public serving of abuse or austerity.

In the United Kingdom, the poor are being kept in line by also being thrown the occasional morsel such as an increase in minimum wage, a meaningless shift in tax bands or mini handouts which no doubt will be expressed by the Chancellor of the Exchequer in this week’s Budget.
It’s all about keeping the poor in check without giving others any ideas.

The Little Englander v The Europhile

Whilst cocky Nigel Farage is looking increasingly like a pink Kermit the Frog, EU-enthusiast Nick Clegg retains the boyish charm and earnestness which won him so many plaudits after the 2010 “I agree with Nick” pre-election debates with Cameron and Brown.

Nowadays, Farage’s studied arrogance and increasing belief in his own publicity is beginning to water-down both his image and the argument. I say THE argument because he is also coming across as a one-trick pony and thus in danger of being perceived as the head of a right-wing pressure group rather than the Leader of a bona fide Political Party. I am not saying that he’s not a good bloke  but had he debated Britain’s Defence system or the changes in Education, he would have gained more credibility. Instead, we had yet more déjà vu!

He is probably regretting the fact than post-January 1st 2014 we are NOT being overrun by screaming hairy hordes of Romanians and Bulgarians heading over the hill from Newhaven to the nearest Benefits Office. David Cameron has been very quick to respond to Nigel’s xenophobic hysterics and has an ongoing charm-offensive in place, aimed at the “at-risk” Nutty Right Wing of the Conservative Party. DC and Nigel both know that come the General Election, the many who have dallied with UKIP will retake their rightful place and step back into the Conservative thin blue line.

Nigel’s task of criticising the EU gravy train whilst simultaneously immersing himself in the gravy makes some of his arguments appear both hypocritical and increasingly valueless. He was obviously VERY uncomfortable when being asked about paying his wife a salary and lapsed into his usual defence of turning an attractive shade of fuschia accompanied by bluster and large numbers.

Nick Clegg, on the other hand, was a tad patronising and appeared to lack conviction – although he is doubtless a committed Son of Brussels. He too made the usual points and counterpoints and one could argue that he cheapened himself by even appearing on the same platform as the UKIP Commandant.

The upcoming MEP elections will demonstrate quite clearly that as far as Europe is concerned, the British public fits neatly into the “don’t care” camp….

As to who “won” the debate…If you measured it on well-known points and statistics repeated yet again…it was a draw.

2014 Predictions – PART ONE

Predicting the future has always been a mug’s game. For instance, I continue to believe that the markets are all in the wrong place and overpriced and I predicted the FTSE at about 4500 – but then again, I could not have predicted the collective madness of Quantitative Easing and the real fear that politicians have of the banks. I used to understand investment…but not any more. Cheap virtual cash continues to fund the markets and to keep them artificially high.

The politicians feel that they have to please the banks first and only then the voter. Governments are no longer in control of events. Nowadays, finance drives politics and politicians have become the bankers’ lackeys.

For as long as banks and governments continue to mutually gorge themselves on virtual cash and governments do not have the courage to increase interest rates and taxes in order to join us in the real world, there is a very real possibility that the current economic situation will become the status quo.

These predictions are in no particular order.

1. The disconnect between economic data and the quality of life is fueling populism. It is also fueling right-wing extremism and anti-government sentiment. I fully expect the equivalent of the Arab Spring sometime during 2014 , in the UK and some other European states.

2. South Sudan will provide the next African bloodbath.

3. The Scots will vote “No” to independence.

4. The recently-adopted self-congratulatory air will desert both UK and European politicians as it is realised that the “virtual” economic recovery is unsustainable.

5. There will be a substantial increase in China’s birth rate (the new “one child plus” policy), contrubuting TWO MILLION children to the 2014 economy, boosting consumer motivation.

6. China will continue to build and accelerate its natural resource monopoly in Africa. (One million Chinese already live there).

7. As the West cuts its military budgets, China will continue to do exactly the opposite.

8. David Cameron will continue to tell us what MUST and SHOULD be done, one a whole range of issues.

9.  Anaemic growth in the advanced economies will see government debt continue to climb.

10. The US $ will continue its decline. Instead of Quantitative Easing Infinity accelerating economic growth, its effect will be to shrink the $’s buying power.

11. The sudden (and unexpected) pick-up in UK growth, followed by the indication of a reversal in the final quarter of 2013 suggests that businesses were adding to their inventories rather than selling their goods. Expect the reversal to continue in 2014.

12. Germany currently represents approximately 30% of the Eurozone economy and will continue to enjoy the fruits of a weak euro and ramp-up exports.Germany has the world’s highest current account balance as a percentage of GDP. During 2014, Germany’s economic success will continue to accelerate and will represent over ONE THIRD of the Eurozone’s output.

13. Japan will continue to prosper. Its economic output is not 75% of China’s. although it is 4% of China’s size with 9% of China’s population. “Abenomics” has provided the “jump-leads” which Japan needed.

14. The USA will enter another recession in 2014. Currently it is still on “below-2%” growth.

15. A Populist movement will become increasingly vocal here in the UK (and in certain Eurozone countries), with sudden impetus being generated AFTER the European Parliamentary Elections when the main traditional parties will be decimated by the Left and Right.

16. In spite of the Eurozone’s economic “recovery”, unemployment will remain at current record heights (Over 12%).

17. Deflation will accelerate within the Eurozone and economic forecasts will once again be downgraded.

18. The European Court of Auditors (ECA) will publish the 2013 EU accounts and once again, confirm that the continuing “errors” in all of the EU’s spending  areas have finally crossed 5%(!) of expenditure.

19. The UK government will do well to prepare for the possibility of social unrest which is driven by the rapid growth of the “have nots”. The financial hangover caused by  Christmas 2013 will be far more extreme than in previous years.

20. The Federal Reserve will announce and implement the end of its  massive bond-buying programme. This will have a substantial effect on the markets.

21. The full-extent of the banking industry’s Pension and Life Assurance mis-selling will become apparent.

22. There will by an explosion in Teacher Militancy as the government continues to fiddle with our childrens’ education.

23. The price of Crude Oil will fall to about $75 per barrel. The decrease will be primarily caused  by oversupply as a result of new production methods.

24. The European Union will fail to deal with its members’ collective debts. Again.

25. The Global Recovery will falter.

26. On January1st, Greece will take over the Presidency of the EU – at a cost to itself of €50 MILLION. This exemplifies the madness of the European Union when a de facto bankrupt state with zero clout is allowed to be burdened such a “spend”. Prediction: Greece will make a “pig’s ear” of its Presidency. Hopefully Subway and MacDonald’s are bidding for the catering contract.

27. Twitter, Amazon etc will be recognised as part of yet another totally unsustainable bubble.

28. In the UK, there will be yet more calls for House of Lords reform. Hopefully, as more and more of their Lordships’ financial “indiscretions” come to light, the debate will snowball, eventually leading to an elected Upper House. Turkeys may well HAVE to vote for Christmas.

29. Once South Africa has recovered from Mandela’s death, there is a real danger of  a return to what I can only describe as “Reverse Apartheid”. Violence.

30. Syria will continue to generate substantial profits for the world’s Arms producers as it has become increasingly apparent that there is NOT the political will to even attempt to end this butchery.

(I am NOT a Global Warming mullah but the image above shows all the world’s water and air to scale.)

Economic “Growth”?

Politicians are currently gadding about, scattering statistics like confetti and pointing everyone at figures which are not preceded by a minus sign!

It’s time we paused, drew breath and took a closer look at the figures. Before we do, let’s have a go at putting some general perspective on the numbers. In Europe, it is being reported that the E17 (Eurozone) and the E27 (EU) have “grown” by 0.3% and that the figures signal a recovery!! A few points about what 0.3% actually means.

3% means THREE parts in a HUNDRED, so 0.3% means Three parts in a THOUSAND……but there’s more! The percentage change being quoted is the change in nothing more than the PREVIOUS QUARTER (see the top of the table above). That means that even if the figure was -100 and it changed to -99.7, THAT would be a POSITIVE growth of o.3%.

However, if you look at the PERCENTAGE CHANGE COMPARED TO THE SAME QUARTER LAST YEAR (the right-hand column above), the figures remain negative ( -o.7% and -o.2%).

France returned to growth in the second quarter of 2013, boosted by stronger domestic demand, after two straight quarters of decline. However, France’s reported increase in consumer spending is largely as a result of increases in energy prices. It was not an “en-masse” dash to the shops!

Meanwhile, Germany’s economy grew 0.7% in the second quarter (compared to the previous quarter), and when annualised, it was the fastest growth of all the world’s advanced economies.

The Netherlands, whose government has been a strong supporter of austerity, reported a a second-quarter contraction of 0.2%, confirming its fourth straight quarter of negative growth. It remains in recession.

Portugal reported a quarterly growth of 1.1%,  Spain -0.1% and Italy -0.2%.

Compared with the same quarter of 2012, the United Kingdom is showing a growth of 1.4%, the same as the United States.

These figures are NOT a sign of the end of the Financial Crisis. That crisis remains firmly in place, with many of the figures indicating little more than the continued recovery from a particularly bad  and exceptionally long winter……………… a weather-related catch-up.

European unemployment figures are being reported with just the tiniest amount of “spin”. This is the whole story:   In June 2013, Unemployment continued at record highs in the 17-nation Eurozone but there was some hope of an improvement as the numbers of those out of work fell slightly. The official Eurostat data was published yesterday. The overall Eurozone jobless rate came in at 12.1 per cent, unchanged from May. The jobless numbers, however, fell by 24,000 to 19.26 million. BTW, Europe’s population has increased by about 5 MILLION since the crisis began – perhaps THAT’S what is confusing the statistitians.

Immigrants – we NEED them!

According to the Office for Budget Responsibility (OBR), the UK needs SEVEN MILLION migrants over the next 50 years to help keep down national debt levels.

The OBR warns that the UK’s ageing population was squeezing public finances and said there was “clear evidence” that migrants, who tend to be working age, have a “positive effect on the public sector’s debt dynamics”.

The OBR has also warned that increasing pensioner numbers and a strained healthcare system means an extra £19 BILLION of spending cuts or tax increases  are needed to combat an “unsustainable” pressure on the nation’s public finances.

It IS possible that while we continue to live too long and not produce enough, those much maligned  immigrants could be the solution to our economic problems.

That should please UKIP!

HERE’S the Executive Summary of the OBR’s Fiscal Sustainability Report.

Brussels Pass-the-Parcel

There’s a European Summit in Brussels. This is when the EU leaders tell everyone what MUST be done.  It’s a sort of Brussels Pass-the-Parcel but the music is on a perpetual loop and never stops.

Here’s the AFP report on the game so far:

BRUSSELS — European leaders on Thursday tried to come up with new measures to tackle the crisis-hit continent’s soaring jobs crisis, but the head of the European Parliament warned that the plans were “a drop in the ocean”.

“We’re here to fight youth unemployment, a most urgent concern for our societies,” European president Herman Van Rompuy said as he opened the summit to which trade union leaders had also been invited to attend for the first time.

Shortly before the Brussels summit began, the European Union clinched a deal on its trillion-euro budget, which opens the prospect of the 27-nation bloc being able to quickly disburse billions of euros to help the one in four young Europeans currently out of a job.

“Today we have agreed on this budget that will make investment in Europe possible,” EU Commission president Jose Manuel Barroso said of the compromise that still needs to be approved by EU lawmakers.

“This is the growth fund for Europe,” Barroso said.

The talks were briefly held up by Britain’s demand for clarification on a rebate from farming funds — an issue already agreed in February, EU diplomats said, with one source saying the issue “has all been sorted.”

British Prime Minister David Cameron’s reiteration of the rebate issue ruffled a few feathers but most leaders said the fallout of Europe’s devastating economic crisis should take centre stage at the summit.

Prime Minister Antonis Samaras of Greece, which has the highest unemployment rates in Europe, said as he arrived for the summit that the key aim for the leaders was to come up with “drastic measures”.

“Unemployment in countries like mine has sky-rocketed,” Samaras told reporters.

The jobless rate for young Greeks is the worst in Europe — at 62.5 percent — followed by Spain at 56.4 percent, Portugal at 42.5 and Italy at 40.5.

Analysts warn the unemployment rate will continue to rise as the eurozone recession grinds on and that there is little the European Union itself can do, with much of the burden shouldered by national governments.

Among the measures being considered is a proposal to speed up disbursement from next year of a 6.0-billion euro ($7.8-billion) fund for young unemployed.

Other EU funds could also be tapped for such projects.

But European Parliament chief Martin Schulz played down the proposals being discussed.

“Releasing 6.0 billion euros to fund this new youth employment initiative is a start; but, as we are all only too well aware, that six billion is just a drop in the ocean,” Schulz said.

German Chancellor Angela Merkel, who faces elections in September in a country largely weary of funding struggling southern European states, warned that budget discipline remained key.

“The main thing here is about improving our competitiveness,” she said. “It’s not about creating more and more pots of money.”

Europe-wide, talk of a “lost generation” and concern over popular discontent are feeding support for extremist political parties and fuelling animosity towards EU institutions.

A Pew Research survey last month branded the European Union “The New Sick Man of Europe”, showing favourable opinion of the EU slumping from 60 percent last year to just 45 percent now.

“The European project now stands in disrepute across much of Europe,” it said.

But Eastern European states continue to bid to join the bloc of 500 million people and Croatia on Monday will become the 28th EU member in the first accession to the club since Bulgaria and Romania in 2007.

Serbia is expected to win endorsement at the EU summit on Friday to begin membership talks no later than January after having agreed to tough conditions to normalise ties with its former province Kosovo.

Albania is also hoping its membership bid will win fresh support from elections over the weekend that were won by the opposition in a landslide in a vote that was being closely watched by the European Union.

But officials privately worry about including more troubled economies into the European system and citizens from the core EU states are increasingly opposed to enlarging towards the poorer east.

Eurozone Risks Return to Fore

By CHARLES FORELLE and MARCUS WALKER

The recent turbulence rattling global bond markets is unmasking an unpleasant notion in Europe: The eurozone’s problems aren’t solved.

imageReuters

A climb in Greek bond yields reflects renewed euro-zone caution.

Government bonds have recently taken a hit around the world, now that investors are preparing for the possible end of central banks’ boundless economic stimulus. And those bonds of the weakest euro-zone countries have shown some of the biggest drops.

That suggests that the bonds of Spain, Italy, Portugal and Greece might be susceptible to bigger swings in the future, as the flood of cash that has poured into financial markets recedes, leaving their economic warts more exposed, market participants say.

Thanks to the European Central Bank’s pledge to support markets—and to the ocean of cash from central banks—those bonds saw extraordinary rallies for the better part of a year. But in recent weeks, the course has shifted somewhat.

[image]

Yields on the 10-year Greek bond, which had strengthened remarkably since last summer, ended Thursday at 10.03%. That is two percentage points higher than where they stood on May 22, when the U.S. Federal Reserve signaled its giant bond-buying program might slow this year. At 6.47%, the Portuguese 10-year is more than one percentage point above its May low. Bond yields rise when their prices fall.

The 10-year Spanish bond, which was near 4% in early May, closed Thursday at 4.61%, flat on the day. The Italian 10-year, a hair stronger Thursday at 4.35%, also is off over the month. The spread—or the amount of additional yield investors demand, above that paid by benchmark Germany—also has risen for both countries over the period.

[image]

To a degree, the rising yields reflect the same tidal forces that once pulled them down: Easy money drew investors to those bonds; its possible end pushes them away. The rally was “more technical than fundamental,” says Carl Norrey, head of European rates securities at J.P. Morgan in London. “I can’t help but respect it, but I don’t see how Europe gets out of the crisis this easily.”

Behind the problem is a macroeconomic euro-zone picture that has deteriorated, not improved, during the period of falling yields.

“The liquidity dynamic is unfavorable, and you have to frame that in the context of these markets having extreme social, economic and political risk,” says Gregor Macintosh, head of global sovereign debt at Lombard Odier Investment Managers in Geneva, which has $42 billion in assets under management.

Mr. Macintosh has been paring his exposure to Europe’s weaker countries over the past month. “The reality is that the underlying fundamental situation is still gravely worrying in these countries,” he says. “In a crux, you have to be nimble.”

To be sure, the rally in weak-country bonds has been impressive, despite the slide of the past month. Last summer, Spain and Italy were facing a dire situation: so little demand for their bonds that they risked needing to turn to their euro-zone peers for help. The euro zone isn’t in that situation today, and the ECB’s summer pledge to step into markets if needed remains potent. The euro zone’s politics are still thorny—Germany holds elections in the fall, which have stirred up anti-euro sentiment—but the bloc’s crisis management is improved.

“German elections aside, things are far less bad than they’ve looked for some time,” says Bill Street, head of investments for Europe, the Middle East and Africa at asset manager State Street. He points to signs that trade imbalances are righting themselves and a possible plateau in the euro zone’s lofty unemployment rates. The debt of a weaker euro-zone country, with its extra yield, he says, “still holds a place in a diversified portfolio.”

But economic pressures, especially gross domestic product that has fallen faster than expected, have heightened concerns about the countries’ debt burdens. Debt that grows too fast, relative to the economy, is the principal risk for most of Europe’s weaker states—and for their bond investors.

“With Spain and Portugal, if you look at debt-sustainability models, you are going to need much higher growth,” Mr. Street says.

Italy, Portugal and Greece all have especially high ratios of debt to GDP. Spain, which began the crisis as a low-debt country, is on its way to being a high-debt one. By next year, Italy’s debt-to-GDP ratio will reach 132%, while Spain’s will hit 97%, according to the European Commission. That compares with 127% and 84% in 2012.

Arresting the rise is exceptionally hard in a shrinking economy, and European authorities have begun to reckon with this by slowing the pace of fiscal cuts, in the hopes of supporting economic growth.

But a larger problem may be looming: In order to restore their economic viability, weaker countries must improve their industries’ competitiveness by pushing down wages and other costs, relative to Germany and other northern countries. But the German economy appears to have settled into a pattern of low growth and low inflation.

That means Italy, Spain and the others need more of this so-called internal devaluation. And devaluation makes it harder to pay down debt.

Spain and Italy “need prices to rise less rapidly than in Germany to rebuild competitiveness, but they need a measure of inflation to ensure debt sustainability,” says Simon Tilford, chief economist at the Center for European Reform, a nonpartisan London think tank. “Something has to give.”

Many economists say the solution will have to take the form of higher demand and inflation in Germany, large-scale debt restructuring in southern Europe, or sharing debts at the European level. But the euro zone’s creditor countries reject all of those options, leaving no clear way out of the debt crisis.


A version of this article appeared June 14, 2013, on page C1 in the U.S. edition of The Wall Street Journal, with the headline: “Rising Bond Yields Rekindle Euro Fears.”

Malta’s banking sector is eight times larger than its GDP; about the same as it was in Cyprus before the rescue. Nevertheless, the official line is that Malta unlikely to follow Cyprus, Ireland, Greece, Portugal and Spain into crisis. That’s a relief! ……NOTHING can possibly go wrong in Malta….Financial shocks?…..”We spit on financial shocks!” Remember…you read it here first. Malta is safe….(!)

Wars of the Rosettes: UKIP

It used to be said that one of the biggest corporate lies was “I like a man who speaks his mind!” Nobody likes someone who tells it straight – especially if there’s an element of implied criticism.

When a company director says to an underling “Tell me what you really think about our latest initiative” what should the response be? You honestly believe that it is a crock of shit but you also know that it was the directors “baby”. If you’re wise and familiar with office politics, you tell the director exactly what you know that he wants to hear. On the other hand, if you’re a highly principled idiot, you are likely to tell the truth (your truth). That sort of response can come under the heading of “a novel way to resign”!! It is not worth the risk.

UKIP leader Nigel Farage is a straight-talking man and tells us what we want to hear – but he is obviously no idiot. He tells it straight and his disciples continue to multiply. He has two things which give him a great advantage over other party leaders. Firstly, he has what Boris Johnson has – Charisma….a carefully-cultivated roguish old-school, charm……. and he smiles a lot. Yes…it’s THAT simple!

Of course, he has the added advantage of an Establishment-led Coalition government which gives the perception of being utterly incompetent. The Labour Opposition has no discernible “bite” and is led by yet another charmless product of Planet Politics. The other bit of the Coalition (the small bit) is already in terminal decline – a full two  years before the next general election. For our mate Nige, it’s like shooting fish in a barrel.

Nigel Farage can do or say whatever he damn-well pleases and there’s no-one around with the balls to censure him. He is the enemy of all the other political parties, and coincidentally they are also the voters’ enemy. But more importantly, he is the sworn enemy of the self-serving bureaucratic edifice that is the European Parliament.

His election campaign started not a few weeks ago but leapt into life months ago in Brussels as Farage demanded of Van Rompuy: “Who [the f***] are you…..?” That was the moment when many of us , whether we agreed with his politics or not, fell in love with Uncle Nigel. [The parentheses above and their content are mine!]

There was none of the political correctness which constrains David Cameron.  If pushed, you can imagine Nigel saying “Barroso! you’re a twat!”- not that he would….but he has imprinted his personality on the national psyche so powerfully….that we now believe that he WOULD say what many of us are thinking.

Farage’s other great plus-point is that although he is  the son of a stockbroker and attended Dulwich College, he went to work(!) (as a City commodities broker) at the age of 18. He has exactly the sort of background that the Conservatives would dearly love their leader to have.

So, as Nigel and his disciples march out of the wilderness into the political sunlight and as UKIP  party contributions and sponsorships accelerate, what’s the future for the other parties?

Make no mistake, the Tory Starchamber’s Illuminati are looking very closely at their own Party leadership, as are the Trade Union leaders who set the drumbeat for the Labour party.

In the first instance, we can expect a clumsy lurch to the Right from David Cameron in a desperate attempt to woo back former Conservative supporters and hopefully, the other Miliband bought a return ticket.

Whatever the mid-term future holds, we are in for a very interesting two years.

May 2015 will be upon us very quickly!

What’s happened to PROPER Investment Banking?

As recently as 2009, banks’  investment fees were higher in Europe than in the United States. Nowadays, Europe is delivering only about a quarter of total investment activity, with the corresponding collapse in fee income.

Mergers and Acquisitions (M&A) used to be the investment banker’s bread and butter but nowadays, European bankers appear to be either dozing at the wheel or they’ve left the building! Or perhaps they’ve forgotten how to do it!

In the last year American acquisitions were up by about a third whereas in Europe, they appeared to be too busy sitting on their cash, playing the markets and endlessly “rebuilding balance sheets”.

Before the 2007 crisis, the European dealmaking level was about three times as high as today. In the last year, only about $750 billion in deals was announced. Six years ago, it was over 2 TRILLION!

Europe’s global share of M&A activity is now less than one third – the lowest in 10 years. In fact NINE OUT OF TEN of the largest deals in the last 12 months have been executed by US teams.

Equity Capital Markets are showing the same trend.

In EMEA (Europe Middle East and Africa), issuance (offering securities in order to raise funds) over the last 12 months has been about $145 billion. That is well down on last year. Compare that to an increase of nearly 50% in the USA!

Even Asia has overtaken EMEA which is now delivering only about 20% of global issuance. As recently as five years ago, it was nearly 40%.

The conclusion? European Corporates are waiting (they do have cash) and the banks have become lazy and preoccupied with their political debt games.

So what are the politicians doing to make the banks on this side of the Atlantic more profitable? Very little.

Unsurprisingly, subsidiarisation (breaking up or threatening to break up banks), “ringfencing”, bonus caps and financial transaction taxes are all serving to make Europe a structurally much less profitable region.

You see, the banks too are being made to suffer their own kind of austerity by the politicians.

Add to all that the 2013 craze of blatantly robbing bank depositors and the  outlook continues to feel depressingly negative.

The Eurocrisis isn’t just Financial.

The Eurozone crisis has managed to morph from a plain old currency crisis to a debt crisis, an economic crisis and now, a full-blown political crisis – although no-one seems to have noticed…….. and it’s not just the Eurozone:

In the United Kingdom, people are making increasingly indiscreet noises about the Prime Minister’s leadership capabilities and the Chancellor’s questionable competence, as the cold hand of political instability makes a (so far) half-hearted grab for No 10. Currently it looks as if there is already a swing to the right. Nigel Farage and UKIP no longer look like a bunch of extremist Right-wing loonies and as they gain respectability and seats, they will pose a genuine threat to the status quo.

Here’s a quick Grand Tour:

Greece’s political problems are well-documented and this is where the recent polarisation of national politics began with the success and increasing support of the right-wing Golden Dawn Party. Greece is on its knees.

In France  there’s the scandal of a Minister and his secret Swiss Bank account with the consequent  investigation of all Ministers – shades of the UK’s MP expenses outrage. President Hollande is keeping a very low profile because , let’s face it….he came to the table without any ideas. His mere presence has allowed Marine le Pen and her Right-wingers to re-emerge blinking into the sunlight, ready to build on her father’s legacy.

Germany’s Bundeskanzlerin Merkel is no longer odds-on to win her autumn election and so, in order to placate her detractors, countries such as Cyprus are being put through the debt-wringer and effectively having to bail themselves out! All in the cause of extra Brownie points for the Merkelator.

Many are anticipating more resignations from within the Cypriot government. Michalis Sarris, the Cypriot finance minister who negotiated Cyprus’s bailout agreement with international creditors has already gone.

Portugal’s Constitutional Court has kicked into touch some of the austerity measures imposed on the country by the Eurozone moneylenders. Now the politicians are wondering about how to plug the fiscal gap and Prime Minister Coelho may resign.

Belgium took 535 days to form a government after its last election and now has a 6-party Cabinet.

Italy is struggling to form a government and will most likely hold another election after President Napolitano comes to the end of his tenure as Head of State on May 15th. Goodness only knows what the reaction of not only the Eurozone but of the Markets would be  should Silvio Berlusconi (again) rise from the dead! Italy’s political scene has become so surreal that  ONE QUARTER of the vote in the recent election went to a protest movement headed-up by Beppe Grillo – a comedian!

Spain’s politicians, including its Prime Minister are mired in corruption scandals – and now there are anti-Royalist demonstrations as a direct result of the king’s daughter being implicated in a government financial rip-off. Mind you, affluent Spaniards have already pulled about $100 billion out of their Spanish bank accounts. They started running early. It’s only a matter of time before the Basques and Catalans start to make their separatist noises.

The difficulty is that one would normally expect the emergence of the Right to be counterbalanced by a strong showing from the political Left. But what Europe has are weak governments , compounded by even weaker oppositions. No European political party in government has over 50% of the vote……. and the less said about the European Union’s politicians, the better! They seem to have elevated ineptitude into an art form.

Currently, Britain’s Left is being driven by Ed Miliband and the New-Old-New-Who-Knows-Who-Cares Labour Party. They earn their salaries through the medium of being critical. They have shown themselves to be totally bereft of a coherent, cohesive strategy and will be directly responsible for the future success of UKIP.

Leadership (or a lack of it) within Germany’s Social Democratic Party will be the main factor which could give Merkel another few years of power. If that happens, the rest of the Eurozone should begin to consider itself as no more than a motley collection of Vassal States……there to do Germany’s bidding. Unless of course, Germany accepts George Soros’ advice and leaves the Euro.

France does not enjoy having a Socialist President and it is right to be sceptical. President Hollande is now totally ignored by Merkel and is doing what he does best – he keeps out of the way as Germany tightens its stranglehold.

Hollande could have been the Eurozone’s great hope but unfortunately is way out of his depth. France now has a negative bond rating  by all three rating services and has lost much of its international respect. It’s precarious banking system is just waiting (like many others) to go “pop!”

The Main Event this year will be Merkel’s re-election so the Eurozone states must not expect any major policy changes until then – and when she wins? More of the same – but without the compassion!

What of Europe’s medium to long-term future? Without some sort of political quantum leap, it will inevitably  descend into a collection of  Third World states but with running water, TV and a banking system totally independent of its economy and probably with its own flag.

Equity Euphoria. Why?

The Markets are in the wrong place. For about two years, I have been suggesting that market sentiment bears absolutely no relation to what is really happening in the real economy.

Yesterday’s Markit manufacturing figures clearly show that Europe’s manufacturing sector is in a mess. At 12% , Eurozone unemployment is at an all time high with further austerity measures to follow.

In spite of all that and with increasing hand-wringing from economists, the markets are buoyant at near-record and record highs, the euro is showing only modest losses and for Bond investors it’s business as usual!

19 million Eurozone unemployed with Germany’s PMI at 49.0,  France’s at  a three-month low of 44.0 ….which is even below Italy’s at 44.5 and Spain’s at 44.2! But the Markets grind on regardless.

What is going on?

One thing that we can see from the manufacturing figures is that there is quite a marked divergence between Germany and the rest. Although manufacturing activity is shrinking to 5-6 month lows, the so-called “financial fragmentation” across the Eurozone has become increasingly obvious. The Eurozone does NOT have a uniform monetary policy which means that Italian and Spanish banks, for instance, pay much higher funding costs than Germany. That means that certain manufacturers are paying much more than German ones for their cash. On the face of it, that seems to be anti-competitive – but that unfortunately is just one of the many anomalies of the Eurozone – in fact of the entire European Union.

The poorer you are, the more you pay for your heating fuel.”

This is the backdrop to a largely blinkered , almost “autistic” equities market where we appear to have reached the stage of self-amplification where , because of the abysmally low bank rates, EQUITIES is the only game in town. Self-amplifying? Yes – as more and more investors pile into stocks – mainly because they don’t want to lose out on a rally which they themselves are now fuelling.

The only cautionary note should be for investors who are only just coming into the market to ask themselves “What is the real likelihood of me making a profit?”

When will it stop? History shows us that rallies such as the current one can stop pretty suddenly!

There will come a point at which traders, especially those with short positions will decide “Enough!” – in spite of the fact that currently, there is no obvious level at which to climb out and possibly take a loss.

Once one jumps, the rest are sure to follow.

We could go down so fast that you’ll get a nose bleed!

European stock markets slumped and the euro dropped under $1.28 for the first time in four months Wednesday owing to concerns over fallout from the Cyprus bailout and a disappointing bond sale in Italy, analysts said.

London’s FTSE 100 (FTSE: ^FTSE news) index of leading companies fell 0.69 percent to stand at 6,355.10 points in afternoon deals, as Frankfurt’s DAX 30 (Xetra: ^GDAXI – news) shed 1.44 percent to 7,766.11 points and in Paris the CAC 40 (Paris: ^FCHI – news) slumped 1.46 percent to 3,693.95 points.

Madrid tumbled 1.90 percent and Milan lost 1.59 percent. The Athens stock exchange, a low volume market, plunged 6.83 percent.

Italian borrowing rates fell slightly in a 10-year debt auction on Wednesday, but borrowing rates were higher for five-year debt and demand was weak amid concerns of political deadlock in the recession-hit country following inconclusive elections.

Stock indices were falling “as the ongoing issues in Cyprus continue to weigh on sentiment,” said Alpari trading group analyst Craig Erlam.

In foreign exchange deals, the euro dropped to $1.2751 — the lowest level since November (Xetra: A0Z24E – news) 21 — compared with $1.2861 late in New York on Tuesday.

Gold prices slipped to $1,591 an ounce from $1,598 Tuesday on the London Bullion Market.

The foreign exchange market “is concerned about medium-term contagion effects” of the Cyprus bailout, said Commerzbank (Xetra: 803200 – news) analyst Thu Lan Nguyen.

Troubled eurozone nation Cyprus on Wednesday scrambled to finalise capital controls to avert a run on banks, a day before they are due to reopen after a nearly two-week lockdown while the island secured a huge bailout.

Meanwhile there are fears that the controversial terms of the bailout could be mirrored in any future financial rescues of indebted eurozone members.

Nicosia early Monday agreed a last-minute deal with its international lenders that will see it receive a $13 billion rescue package to help pay its bills.

And while the decision to tax bank savings above 100,000 euros raised fears of a similar move in future rescues — reinforced by comments from the head of the Eurogroup of finance ministers — officials have since insisted that Cyprus is a special case.

“The negative sentiment is also enhanced by rumours that this format will be adopted as a template for any further bailout schemes,” said Currencies Direct trader Amir Khan.

“Although top officials deny any such move in the future, markets are still wary that this format will leave the banks with fewer deposits and in turn will allow them to lend less, shrinking growth.”

Elsewhere on Wednesday, in indebted eurozone member Italy there was weak demand at an auction of 5- and 10-year bonds, with bid-to-cover ratios of 1.2 and 1.3.

Ratios of above 2.0, where submitted bids are double those accepted, are considered strong.

The Italian treasury took in 3.91 billion euros at a rate of 3.65 percent, a five-month high.

However the yield on 10-year bonds dipped 4.66 percent, compared with 4.83 percent at the last similar auction on February 27, with three billion euros raised.

The European Commission meanwhile said its key business and consumer confidence index for the eurozone fell 1.1 points in March to 90 points, reflecting a downturn in the manufacturing and service sectors while consumer sentiment was steady overall.

Amid the gloom in Europe, US stocks moved lower Wednesday in early trading.

The Dow Jones Industrial Average gave up 0.33 percent, the broad-based S&P 500 sank 0.36 percent, while the tech-rich Nasdaq Composite Index dropped 0.26 percent.

The retreat followed strong gains Tuesday that resulted in a record high for the Dow and a near-all-time high to the S&P 500.

“Follow-through has been lacking this morning for reasons that are both convenient and clear,” Patrick O’Hare of Briefing.com wrote. “Headlines out of Europe are largely to blame.”

— Dow Jones Newswires contributed to this report —

CYPRUS: Help me to understand this : Bank Depositors are clobbered in one bank but not the other. Then, cross-border money movement is restricted as are withdrawals from individuals’ own accounts. Finally, a large swathe of the population is condemned to many years of unemployment and grinding economic austerity. My question is this: Why is it called “Monetary Union” ? Herman Van Rompuy believes that the Eurocrisis has been averted. IT HAS JUST STARTED.

Cyprus: A blessing in disguise?

The United States, the Eurozone and even our own administration here in the United Kingdom have shown us that we are fast approaching the time for a major rethink of the Democratic Model.

The Global Economy is becoming permanently unstable and  far too technical to be in the hands of gifted amateurs. Or, in the case of the United Kingdom:  the “Gentleman Politician”.

By all means, allow the Elected Ones to fanny about with the politics but sharp-end economics should now be in the hands of professionals who do not constantly keep one eye on the opinion polls and the other on their next election.

There have already been attempts to install  Technocrats, e.g. Italy and Greece  – but these were no more than economists dressed as politicians, who were then expected to play politics. Inevitably, they crashed and burned.

Cyprus is the latest to demonstrate that politics (of any flavour) coupled with an absolute inability to Manage at Macro level is slowly killing economies.

Some may repeat the “But it’s those bankers” mantra…. and to a certain extent they are correct. However, the Root Cause is the politicians’ inability and unwillingness to manage the banks, themselves and the economy.

Cyprus should not only be a very loud wake-up call but also a watershed moment for Western politics.