Category : –European Sovereign Debt Crisis of 2010

(FT) Fears resurface of European Union Stagnation

…the ECB is split over whether to embark on full-blown quantitative easing as a way to achieve growth. Such a policy is strongly opposed by Bundesbank President Jens Weidmann and other hawkish members of the bank’s governing council.

They believe the central bank’s existing measures, which include buying covered bonds and asset-backed securities and auctioning cheap cash to eurozone lenders, are enough to lift inflation to the ECB’s target of below but close to 2 per cent.

But analysts think the disappointing take-up at Thursday’s auction has weakened their hand. “The result reduces the strength of the ECB hawks’ argument that existing policy measures are enough,” said Nick Matthews, economist at Nomura.

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Posted in * Economics, Politics, * International News & Commentary, --European Sovereign Debt Crisis of 2010, Consumer/consumer spending, Corporations/Corporate Life, Economy, Ethics / Moral Theology, Europe, European Central Bank, Foreign Relations, Politics in General, The Banking System/Sector, Theology

(Chiesa) What Francis really thinks about Europe

A Europe weary with disorientation. And I don’t want to be a pessimist, but let’s tell the truth: after food, clothing, and medicine, what are the most important expenditures? Cosmetics, and I don’t know how to say this in Italian, but the “mascotas,” the little animals. They don’t have children, but their affection goes to the little cat, to the little dog. And this is the second expenditure after the three main ones. The third is the whole industry to promote sexual pleasure. So it’s food, medicine, clothing, cosmetics, little animals, and the life of pleasure. Our young people feel this, they see this, they live this.

I liked very much what His Eminence said, because this is truly the drama of Europe today. But it’s not the end. I believe that Europe has many resources for going forward. It’s like a sickness that Europe has today. A wound. And the greatest resource is the person of Jesus. Europe, return to Jesus! Return to that Jesus whom you have said was not in your roots! And this is the work of the pastors: to preach Jesus in the midst of these wounds. I have spoken of only a few, but there are tremendous wounds. To preach Jesus. And I ask you this: don’t be ashamed to proclaim Jesus Christ risen who has redeemed us all. And for us too that the Lord may not rebuke us, as today in the Gospel of Luke he rebuked these two cities.

The Lord wants to save us. I believe this. This is our mission: to proclaim Jesus Christ, without shame. And he is ready to open the doors of his heart, because he manifests his omnipotence above all in mercy and forgiveness. Let’s go forward with preaching. Let’s not be ashamed. So many ways of preaching, but to mama Europe – or grandma Europe, or wounded Europe – only Jesus Christ can speak a word of salvation today. Only he can open a door of escape.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, * Religion News & Commentary, --European Sovereign Debt Crisis of 2010, Anthropology, Consumer/consumer spending, Corporations/Corporate Life, Economy, Ethics / Moral Theology, Europe, Labor/Labor Unions/Labor Market, Other Churches, Pastoral Theology, Pope Francis, Religion & Culture, Roman Catholic, Soteriology, Theology, Young Adults

(Economist) The world’s biggest economic problem–Deflation in the euro zone is all too close

The world economy is not in good shape. The news from America and Britain has been reasonably positive, but Japan’s economy is struggling and China’s growth is now slower than at any time since 2009. Unpredictable dangers abound, particularly from the Ebola epidemic, which has killed thousands in West Africa and jangled nerves far beyond. But the biggest economic threat, by far, comes from continental Europe.

Now that German growth has stumbled, the euro area is on the verge of tipping into its third recession in six years. Its leaders have squandered two years of respite, granted by the pledge of Mario Draghi, the European Central Bank’s president, to do “whatever it takes” to save the single currency. The French and the Italians have dodged structural reforms, while the Germans have insisted on too much austerity. Prices are falling in eight European countries. The zone’s overall inflation rate has slipped to 0.3% and may well go into outright decline next year. A region that makes up almost a fifth of world output is marching towards stagnation and deflation.

Optimists, both inside and outside Europe, often cite the example of Japan. It fell into deflation in the late-1990s, with unpleasant but not apocalyptic consequences for both itself and the world economy. But the euro zone poses far greater risks. Unlike Japan, the euro zone is not an isolated case: from China to America inflation is worryingly low, and slipping.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, --European Sovereign Debt Crisis of 2010, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, History, Stock Market, The Banking System/Sector, Theology

(CNBC) German think tank ZEW — European Central Bank creating ”˜dangerous’ bubbles

Clemens Fuest, from the Mannheim-based organization best known for its widely-watched economic sentiment index – told German business daily Handelsblatt that the euro zone region could be at a “turning point.”

“I’ve got a bad feeling about this…I am concerned by the danger that the ECB is producing new bubbles with its policy of cheap money,” he told the newspaper.

“We have all the ingredients of a bubble: The prices of real estate and stock markets continue to rise, and on the bond markets, yields are falling despite high risks.”

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, --European Sovereign Debt Crisis of 2010, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Europe, European Central Bank, Globalization, Psychology, Stock Market, The Banking System/Sector, Theology

(WSJ) Euro-Zone Economy Shows Weaker-Than -Expected Expansion

The euro zone’s economy expanded at a weak pace last quarter despite a strong recovery in Germany, putting added pressure on the European Central Bank to enact fresh easing measures to prevent the region from sliding into a lengthy period of low inflation and economic stagnation.

Gross domestic product grew 0.2% in the euro zone during the first quarter compared with the final three months of 2013, the European Union’s statistics agency Eurostat said Thursday, well short of the 0.4% quarterly gain expected by economists.

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Posted in * Economics, Politics, * International News & Commentary, --European Sovereign Debt Crisis of 2010, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Theology

(Telegraph) Top German body calls for QE blitz to avert deflation trap in Europe

A leading German institute has called for full-blown quantitative easing by the European Central Bank (ECB) to head off a deflation spiral, marking a radical shift in thinking among the German policy elites.

Marcel Fratzscher, head of the German Institute for Economic Research (DIW) in Berlin, demanded €60bn (£50bn) of bond purchases each month to halt the contraction of credit and avert a Japanese-style trap.

“It is high time for the ECB to act. Otherwise Europe risks falling into a dangerous downward spiral of sliding prices and declining demand”, he wrote in Die Welt.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, --European Sovereign Debt Crisis of 2010, Consumer/consumer spending, Corporations/Corporate Life, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Globalization, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, Theology

ECB Executive Board member Benoît Cœuré says ECB is "considering very seriously" negative rates

To help money flow more evenly across the currency area, Coeure said the idea of cutting into negative territory the rate the ECB pays banks to hold their deposits overnight was “a very possible option”.

“That is something we are considering very seriously. But you should not expect too much of it,” he said of a negative deposit rate.

The ECB left policy on hold last week but President Mario Draghi put markets on alert for possible action in March, saying the Governing Council would have more information at its disposal by then, including new forecasts from the bank’s staff that will extend into 2016 for the first time.

Read it all from Reuters.

Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, --European Sovereign Debt Crisis of 2010, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Globalization, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, The Banking System/Sector, Theology

France's credit rating cut by S&P to AA

Standard and Poor’s (S&P) has cut France’s credit rating to AA from AA+.

The moves comes almost two years after the country lost its top-rated AAA status….

S&P said in its statement: “We believe the French government’s reforms to taxation, as well as to product, services and labour markets, will not substantially raise France’s medium-term growth prospects and that ongoing high unemployment is weakening support for further significant fiscal and structural policy measures.”

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Posted in * Economics, Politics, * International News & Commentary, --European Sovereign Debt Crisis of 2010, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, France, Politics in General, The Banking System/Sector, Theology

(Reuters) Angela Merkel romps to victory but faces tough coalition choices

Angela Merkel won a landslide personal victory in Germany’s general election on Sunday, but her conservatives appeared just short of the votes needed to rule on their own and may have to convince leftist rivals to join a coalition government.

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Posted in * Economics, Politics, * International News & Commentary, --European Sovereign Debt Crisis of 2010, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Germany, Politics in General, The Banking System/Sector, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, Theology

The Economist on the German Election–One woman to rule them all

Ever since the euro crisis broke in late 2009 this newspaper has criticised the world’s most powerful woman. We disagreed with Angela Merkel’s needlessly austere medicine: the continent’s recession has been unnecessarily long and brutal as a result. We wanted the chancellor to shrug off her cautious incrementalism and the mantle of her country’s history””and to lead Europe more forcefully. She is largely to blame for the failure to create a full banking union for the euro zone, the first of many institutional changes it still needs. She has refused to lead public opinion, never spelling out to her voters how much Germany is to blame for the euro mess (nor how much its banks have been rescued by its bail-outs). We also worry that she has not done enough at home: in recent years no country in the European Union has made fewer structural reforms, and her energy policies have landed Germany with high subsidies for renewables and high electricity prices.

And yet we believe Mrs Merkel is the right person to lead her country and thus Europe. That is partly because of what she is: the world’s most politically gifted democrat and a far safer bet than her leftist opponents. It is also partly because of what we believe she could still become””the great leader Germany and Europe so desperately needs.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, --European Sovereign Debt Crisis of 2010, Credit Markets, Currency Markets, Economy, Euro, Europe, European Central Bank, Foreign Relations, Germany, Globalization, Politics in General, The Banking System/Sector, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--

(Der Spiegel) Almut M̦llerРMerkel 3.0: Stasis You Can Believe In

Since the euro crisis began, many governments across Europe have been swept from power. France last year saw a presidential campaign heavily focused on Europe, and calls for alternatives to austerity have grown ever louder. So why is it that Germany, the country key to solving the euro crisis, seems immune to this polarization of views on the future of economic and monetary union?

Partly it has to do with the Greens and the Social Democrats, two opposition parties struggling to differentiate their euro policies from Merkel’s government, a coalition of her conservatives and the business friendly Free Democrats (FDP). Both the Greens and the SPD have supported all major euro rescue measures thus far. Even the Left Party, a stronger critic of the government, recently confirmed its overall commitment to the common currency. There is currently no anti-euro party in Germany parliament, with newcomers such as the euro-skeptic Alternative for Germany, media attention notwithstanding, yet to demonstrate their potential at the ballot box.

One reason is that Germans are still not feeling the pinch of the crisis. On the contrary, they continue to hear good news about strong exports, lower unemployment and economic growth. With the election looming, it is no surprise that the Merkel administration is wary of spoiling this mood of complacency by addressing the downsides of the “German model” for fellow euro-zone member states.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, --European Sovereign Debt Crisis of 2010, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Euro, Europe, European Central Bank, Foreign Relations, Germany, Globalization, Politics in General

(Reuters) Portugal political crisis deepens as bond yields soar

Two more Portuguese ministers from the junior ruling coalition party were ready to resign on Wednesday, local media said, deepening turmoil that could trigger a snap election and derail Lisbon’s exit from an EU/IMF bailout.

Multiple newspaper radio and television reports said Agriculture Minister Assuncao Cristas and Social Security Minister Pedro Mota Soares will follow their CDS-PP party leader Paulo Portas who tendered his resignation on Tuesday. Party officials were not available to comment as the party’s executive commission was in a meeting.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, --European Sovereign Debt Crisis of 2010, Credit Markets, Currency Markets, Economy, Euro, Europe, European Central Bank, Foreign Relations, Globalization, Politics in General, Portugal, Stock Market

(WSJ) Europe's Transaction-Tax Climbdown

European governments are figuring out that taxing financial transactions won’t be a magical money machine and that the proposed levy might even damage the European economy.

Reuters first reported Thursday that EU officials are scaling back a transaction tax proposal supported by 11 countries that is supposed to take effect in January. The levy could instead be introduced on a “staggered basis,” one official told the news agency. The first phase might only tax sales and purchases of shares, not bonds or derivatives transactions, and at 0.01% instead of 0.1% as currently proposed. A rate of zero is more appropriate.

Enthusiasm for the tax has been dimming for a while, including in governments that have previously backed it. Christian Noyer, the Governor of the Banque de France, said in Paris on Tuesday that the levy will raise “nothing at all.” One unnamed EU official told Reuters that a scaled-back transaction tax would reap revenue of less than €3.5 billion. The full-fledged levy, as proposed by the European Commission in February, was supposed to rake in €31 billion a year.

Read it all (if necessary another link may be found here.

Posted in * Economics, Politics, * International News & Commentary, --European Sovereign Debt Crisis of 2010, Credit Markets, Currency Markets, Economy, Euro, Europe, Politics in General, Stock Market, Taxes, The Banking System/Sector

(NY Times Op-Ed) Ross Douthat–Prisoners of the Euro

But right now, the E.U. project isn’t advancing democracy, liberalism and human rights. Instead, it is subjecting its weaker member states to an extraordinary test of their resilience, and conducting an increasingly perverse experiment in seeing how much stress liberal norms can bear.

That stress takes the form of mass unemployment unseen in the history of modern Europe, and mass youth unemployment that is worse still. In the Continent’s sick-man economies, the jobless rate for those under 25 now staggers the imagination: over 40 percent in Italy, over 50 percent in Spain, and over 60 percent in Greece.

For these countries, the euro zone is now essentially an economic prison, with Germany as the jailer and the common currency as the bars. No matter what happens, they face a future of stagnation ”” as aging societies with expensive welfare states whose young people will sit idle for years, unable to find work, build capital or start families.

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Posted in * Economics, Politics, * International News & Commentary, --European Sovereign Debt Crisis of 2010, Economy, Euro, Europe, Foreign Relations, Politics in General

Walter Russell Read–The Wreck of the Euro

We have no way of knowing how this all ends. One problem is that the smartest solution””having Germany and perhaps a handful of other northern countries leave the euro for a new currency (the Deutche Mark 2.0, or a “neuro” for northern Europe)””would make life easier in the south. The south based euro would fall in value, but since debts and contracts are denominated in that currency, the adjustment would be the same as in a normal devaluation. This course would likely lead quickly to a new burst of growth in the south, though inflation and other problems would take a toll over time.

But the euro’s break up day would cause a lot of problems for Germany and its northern friends….

So we’re in an interesting situation. The crisis is crippling the south, but the south has no power to resolve the crisis. The crisis isn’t comfortable for the north but still looks less painful than the solution. So the north, which has the ability to resolve the crisis, doesn’t have the will to do it and the south, which has the will, lacks the ability.

Read it all (and please note that the Financial Times article by Wolfgang Münchau which is mentioned, entitled “The riddle of Europe’s single currency with many values,” is indeed a must read as Mr. Read says).

Posted in * Economics, Politics, * International News & Commentary, --European Sovereign Debt Crisis of 2010, Consumer/consumer spending, Corporations/Corporate Life, Currency Markets, Economy, Euro, Europe, European Central Bank, Foreign Relations, Politics in General, The Banking System/Sector, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--