The euro faces ‘disintegration’ unless European governments do much more to work together, the European Commission has warned.
Olli Rehn, the economics commissioner, gave the warning as Mario Draghi, the head of the European Central Bank, criticised national leaders for a “lack of action” to help the single currency out of its crisis.
All eyes were fixed Wednesday on Spain, as the country’s borrowing costs showed no signs of slowing their climb amid nervousness about the health of the banking sector and the possibility of the crisis spreading to other euro countries.
Europe’s economic stagnation and continuing financial turmoil in the euro zone have weighed on confidence, the European Commission said Wednesday. The commission’s indicator of business sentiment in the 17-nation euro zone fell in May to 90.6 from April’s revised 92.9. The decline, it said, “was driven by falling confidence in all business sectors, especially in industry and retail trade.”
Jonathan Loynes, an economist in London with Capital Economics, noted that the sentiment data showed “acute weakness across the peripheral economies,” but that the Dutch, French and Germans were also less optimistic. He described it as “overall, an unambiguously weak picture which only looks likely to get worse as the debt crisis continues,” and predicted that euro zone gross domestic product would decline by 1 percent this year, with 2013 “likely to be much worse.”
Read it all. Also, if you want a single picture to keep an eye on, it is the Spanish German 10 year spread which you may see there (yes, that is correct, it is at all all time high).
Russia is “categorically against” foreign intervention in Syria and believes any new steps by the UN Security Council would be “premature”, its deputy foreign minister has said.
Gennady Gatilov’s remarks to Interfax news agency come amid international outrage over a massacre on Friday.
Women and children made up the majority of the 108 victims in Houla.
Syria on Sunday strongly denied U.N. allegations that its forces killed more than 90 people in one of the deadliest events of the country’s uprising, and diplomats said the Security Council met in an emergency session to discuss the massacre.
The killings in the west-central area of Houla on Friday brought widespread international criticism of the regime of President Bashar Assad, although differences emerged from world powers over whether his forces were exclusively to blame.
What will become of the European Union? One road leads to the full break-up of the euro, with all its economic and political repercussions. The other involves an unprecedented transfer of wealth across Europe’s borders and, in return, a corresponding surrender of sovereignty. Separate or superstate: those seem to be the alternatives now.
For two crisis-plagued years Europe’s leaders have run away from this choice. They say that they want to keep the euro intact””except, perhaps, for Greece. But northern European creditors, led by Germany, will not pay out enough to assure the euro’s survival, and southern European debtors increasingly resent foreigners telling them how to run their lives.
This has become a test of over 60 years of European integration….
Over the past 28 months, assassins have targeted at least five Iranians scientists or engineers, men linked by Western intelligence agencies to the country’s controversial nuclear program.
One was Darioush Rezaeinejad, an Iranian electrical engineer working at a national security research facility. Last July, he was driving home with his wife after picking up their daughter from kindergarten. Outside the front gate of the family home, two gunmen in sunglasses approached, pulled out handguns and opened fire.
In brutally poor neighborhoods and mansions alike, this city choked by military checkpoints seethes with rumors, paranoia and conspiracy theories. Even academics like to assert a favorite: The homegrown Islamic extremist movement that is terrorizing northern Nigeria is a CIA creation.
Others are convinced that the extremist group known as Boko Haram is a plot by the southern-led Nigerian government to create an eternal crisis in the north.
How else to explain Boko Haram’s transformation from a group of bearded radicals stashing homemade weapons to an organization that has half the country on military alert and U.S. lawmakers warning of threats to American interests?
Western nations are pressing for a response to the massacre in the Syrian town of Houla, with the US calling for an end to what it called President Bashar al-Assad’s “rule by murder”.
UK Foreign Secretary William Hague has called for an emergency meeting of the UN Security Council this week.
The UN has confirmed the deaths of at least 90 people in Houla, including 32 children under the age of 10.
Watch it all.
The basic problem is that many people won’t keep their euros in a Greek bank, and perhaps not in a Spanish bank, either, when those euros can be moved to Germany or some other haven.
Yet German citizens do not appear ready to guarantee Spanish banks or, by extension, the whole credit system of Spain and the other periphery nations. Guarantees of that scope are probably impossible and may also require constitutional changes in some nations.
We thus face the danger that the euro, the world’s No. 2 reserve currency, could implode. Such an event wouldn’t be just another depreciation or collapse of a currency peg; instead, it would mean that one of the world’s major economic units doesn’t work as currently constituted.
The U.K. is calling for a “strong international response” following reports of a massacre of civilians by Syrian forces in a town in Homs province.
More than 90 adults and children were killed during shelling and shootings by government forces in Houla in the past 24 hours, the U.K.-based Syrian Observatory for Human Rights said in an e-mailed statement. Explosions were also heard in the city of Homs, it said. British Foreign Secretary William Hague called the killings “an appalling crime” and said the U.K. would be calling for an “urgent” meeting of the UN Security Council.
…while this might come as a surprise to Greeks suffering under extreme austerity, some say Lagarde’s approach to the eurozone is less draconian than the IMF’s traditional policy towards developing world economies. Is it easier to impose harsh demands upon small economies, but much harder to tell difficult truths to the big ones ”“ particularly fellow Europeans? “No,” she says firmly. “No, it’s not harder. No. Because it’s the mission of the fund, and it’s my job to say the truth, whoever it is across the table. And I tell you something: it’s sometimes harder to tell the government of low-income countries, where people live on $3,000, $4,000 or $5,000 per capita per year, to actually strengthen the budget and reduce the deficit. Because I know what it means in terms of welfare programmes and support for the poor. It has much bigger ramifications.”
So when she studies the Greek balance sheet and demands measures she knows may mean women won’t have access to a midwife when they give birth, and patients won’t get life-saving drugs, and the elderly will die alone for lack of care ”“ does she block all of that out and just look at the sums?
Pakistani lawyers will appeal the conviction for treason handed to Shakeel Afridi, the surgeon recruited by US intelligence to help find Osama bin Laden.
The archaic form of justice that governs Pakistan’s semi-autonomous tribal belt on Wednesday jailed Afridi for 33 years for agreeing to try and collect DNA for US intelligence in their bid to locate bin Laden.
Afridi ran a fake vaccination programme designed to collect bin Laden family DNA from the compound in the town of Abbottabad, where the al-Qaeda leader was shot dead in a US raid in May 2011.
Ãngel de la Peña, a Spanish government worker, is seriously considering the once unthinkable: converting some of his savings from euros to British pounds.
Alvaro Saavedra Lopez, a senior executive for I.B.M. in Spain, says many of his corporate counterparts across the country are similarly looking for safer havens by transferring their spare cash to stronger euro zone countries like Germany “on a daily basis.”
It is only a trickle so far, and not nearly enough to constitute a classic bank run. But these growing transfers of deposits out of troubled Spanish banks reflect a broader fear that the country’s problems could make it hard for Spaniards to get to their money if banks fail and cannot be supported by the government. In a worst case, some even worry their money will be worth substantially less if Spain is forced to leave the euro currency zone and re-adopt its old currency, the peseta.
A Senate panel expressed its outrage Thursday over Pakistan’s conviction of a doctor who helped the United States track down Osama bin Laden, voting to cut aid to Islamabad by $33 million ”” $1 million for every year of the physician’s 33-year sentence for high treason.
The punitive move came on top of deep reductions the Appropriations Committee already had made to President Barack Obama’s budget request for Pakistan, a reflection of the growing congressional anger over its cooperation in combatting terrorism. The overall foreign aid budget for next year had slashed more than half of the proposed assistance and threatened further reductions if Islamabad failed to open overland supply routes to U.S.-led NATO forces in Afghanistan.
With Greece’s membership in the euro zone teetering, fears of bank insolvency rising and Europe’s leaders bickering about what to do, the euro crisis is once again intensifying and threatening to undermine fragile growth globally.
At a summit meeting in Brussels on Wednesday, regional leaders failed to signal any significant new steps to stimulate the sputtering regional economy or resolve the competing agendas of President François Hollande of France, who favors stronger action to spur growth, and his German counterpart, Chancellor Angela Merkel, who has opposed aggressive moves to ease the pressure on Europe’s weakest economies.
Yet, the urgency for a solution to the region’s debt crisis, now in its third year, may never have been greater.
On the eve of international talks in Baghdad over Iran’s disputed nuclear program, the leader of the United Nations nuclear monitoring arm announced what appeared to be a significant concession from Tehran, saying that, despite unspecified differences, he expected a deal “quite soon” on arrangements for an investigation into potential military applications of the program.
The comments by Yukiya Amano, the director general of the International Atomic Energy Agency, came after his first visit to Iran since his appointment in 2009. Iran’s invitation to Mr. Amano, announced unexpectedly on Friday, and the apparent shift by Tehran he announced on Tuesday, offered significant signals of Iranian flexibility.
…I do think that it would ultimately be better if the eurozone broke up. This might not involve a complete reversion to national currencies. A hard core of euro-users, centred on Germany, might survive. But the current euro will have to go.
It is true that the transition from here to there will be painful and dangerous. My colleague Martin Wolf laid out an updated version of the full horror scenario in Friday’s FT ”“ involving a breakdown of law and order in Greece, and financial collapse across Europe. How could anyone responsibly run that risk?
The answer is that the alternatives to eurozone break-up are inherently implausible and deeply unattractive.At the weekend G8 leaders called for Greece to stay in the eurozone. Their present plan seems to involve some magical mix of stimulus and austerity that restores both budgetary balance and growth. But even if they can agree a real plan and even if it works ”“ and neither outcome is likely ”“ the eurozone’s structural problems would remain…..
Read it all (requires subscription).
The leaders of the Group of 8, emphasizing growth as well as fiscal discipline at their meeting on Saturday, made a strong plea for Greece to stay in the euro zone and the European Union.
And no wonder.
Despite efforts at official reassurance, no one really knows the consequences of a Greek exit from the euro zone, or how rapidly big countries like Spain and Italy, and their banks, will feel the effects….
On April 12 the Pakistani parliament passed a 14-point resolution in response to the Salala checkpoint attacks. The resolution condemns the attacks, and includes demands for an unconditional apology from the US, an immediate cessation of drone attacks, and a stop to all transport of arms and ammunition through Pakistan.
The foreign policy review process was an attempt by the parliament to regain control over the country’s foreign policy, which has historically been set by the country’s military. It was passed after several months debate, and under a broad coalition of parties across the political spectrum.
“We need to make sure that we follow the recommendations of the parliament in our negotiations with the US. I am hopeful that we can come to a mutually satisfying agreement,” says Mr. Chaudhury.
The summit of the G8 group of major world economies is under way at Camp David, near Washington, with Europe’s debt crisis expected to dominate.
US President Barack Obama said all the G8 nations were “absolutely committed” to the goals of growth, stability and fiscal consolidation.
Germany, which backs austerity, is under pressure from the US and France for stimulus measures, analysts say.
Greece’s possible exit from the eurozone is high on the agenda.
Like the single market before, …[the Euro] was conceived primarily as glue to bind Europe more closely together, tie Germany’s prosperity to that of its neighbors and prevent a third world war from the Continent, which had brought us two. A few engineering flaws wouldn’t be allowed to get in the way of such an important project.
A little over a decade since the first euro bills hit the shops in Madrid and Berlin, the euro’s design flaws have pushed much of the European Union into a deep economic pit. And political imperative is again being deployed as a major reason to stick to the common currency. “This enormously important motivation is often underestimated by outsiders,” argued the Financial Times columnist Martin Wolf, the most sober analyst of Europe’s economic maelstrom….
The main problem is that while leaders eagerly embraced the monetary bond, they rejected its necessary complement: a central budget that would transfer money from successful regions to underperforming ones, as the United States government sends tax dollars collected in Massachusetts to pay for unemployment benefits in Nevada.
The euro fed the illusion that Greece, Spain and Italy were as creditworthy as Germany or the Netherlands, propelling a decade-long credit boom in Europe’s less-developed periphery. And it was spectacularly ill-designed to deal with the shock when capital flows to those nations suddenly stopped. Weak countries not only had to rely on their own devices; they had to do so without a currency or a monetary policy of their own to absorb the blow….
Homeward bound after the Trojan War, Odysseus of Greek myth had to pick a path through seas harboring a monster with six heads and a whirlpool that digested ships whole. Now, whether modern Greece exits the euro ”” potentially triggering global economic turmoil in the process ”” depends on the tough choices of Ivi Moreti and her 11 million countrymen.
Should the 60-year-old widow leave her nest egg of euros in a wobbly Greek bank and risk it being seized and converted into a devalued national currency? Or should she withdraw it all, joining what could become a panic forcing Greece out of the euro anyway by bringing down the financial system?
Who should she vote for June 17, when this nation mired in political chaos holds its second election in two months? A party willing to largely accept the crippling bailout conditions that have taken a bite out of her pension and run the economy into the ground? Or the rising rebels promising to buck the austerity imposed on Greece by its bigger neighbors, , a course that might cause total economic collapse?
Brussels is preparing plans for Greece to quit the euro, a senior official has revealed, as analysts warned that the country’s exit would cost European taxpayers at least €225bn (£180bn).
European Union trade commissioner Karel De Gucht said that both the European Commission and the European Central Bank (ECB) were working behind the scenes on contingency plans for a break-up.
“Today there are in the European Central Bank, as well as in the Commission, services working on emergency scenarios if Greece shouldn’t make it. A Greek exit does not mean the end of the euro, as some claim,” he said.
As Spain’s recession deepens, more workers like Juan are being shunted into an underground economy that amounts to as much as a fifth of Spain’s gross domestic product, according to some estimates, with broad implications as the country tries to revive itself, reform its labor market and keep at bay the kind of wrenching crisis that now threatens to push Greece out of the euro zone.
The happy news is that the size of the underground economy means that more Spaniards are working than it might seem, and that the official unemployment figure of 24.4 percent ”” the highest in Europe ”” may be overstated by as much as five to nine percentage points, economists say. That has given the Spanish government an important safety valve.
“Without the underground economy, we would be in a situation of probably violent social unrest,” said Robert Tornabell, a professor and former dean of the Esade business school in Barcelona.
French President Francois Hollande and German Chancellor Angela Merkel, who held their first meeting yesterday, might want to consider that they have been attacking the problems of Greece, the euro, Spain, Portugal, Italy, and even France backwards.
All the talk and all the effort has been aimed at keeping Greece and the others in the euro. But the real, ideal solution is to get Germany out.
The head of Greece’s radical left party””throwing down a gauntlet that could increase tensions between Greece and its frustrated European creditors””said he sees little chance Europe will cut off funding to the country but that if it does, Athens will stop paying its debts.
A financial collapse in Greece would drag down the rest of the euro zone, said Alexis Tsipras, the 37-year-old head of the Coalition of the Radical Left, known as Syriza, and potentially the country’s next prime minister. Instead, he said, Europe must consider a more growth-oriented policy to arrest Greece’s spiraling recession and address what he called a growing “humanitarian crisis” facing the country.
“Our first choice is to convince our European partners that, in their own interest, financing must not be stopped,” Mr. Tsipras said in an interview with The Wall Street Journal. He said Greece doesn’t intend to take any unilateral action, “but if they proceed with unilateral action on their side, in other words they cut off our funding, then we will be forced to stop paying our creditors, to go to a suspension in payments to our creditors.”
There would be massive global pressure on Europe to handle the exit in a grown-up fashion, with backstops in place to stabilize Greece. The IMF would step in.
The German finance ministry is already drawing up such plans, and quite correctly so (unfortunately roping in the British too to spread the losses, which is a thorny subject).
Needless to say, the real danger is contagion to Portugal, Ireland, Spain, Italy, Belgium, France, and the deadly linkages between €15 trillion in public and private debt in these countries and the €27 trillion European banking nexus.
Greece may be forced to leave the euro if the country refuses to implement spending cuts agreed with the European Union, Angela Merkel warned.
Raising the spectre of a Greek exit, the German chancellor said “solidarity for the euro” was threatened by the ongoing political crisis in Athens.
The euro crisis is entering its final stages. Economic pain is now interacting with political resistance to produce intense financial pressure. I expect Greece to leave the euro ”“ and perhaps very soon.
It could happen voluntarily, but both the Greek people and Greek politicians are still clinging to the idea that they can put an end to austerity yet still stay in the euro. In order to try to achieve that, a new government may call the eurozone’s bluff.
At that point, the other eurozone members would face an awkward choice. Doubtless there would be voices in favour of providing the money, willy nilly. That might well be the French position. But if the eurozone gives way on this, what chance would there be of painful austerity being continued, not just in Greece but also in Portugal, Spain, Italy and Ireland? The northern countries would face the prospect of pouring money into a bottomless pit.