Debt, The EU, And Greece

I've heard the argument from Italians that 'Berlusconi has built credibility when it comes to small government'. Same rationalization as for the GOP

But still... he's such an immense scumbag in every way possible. He's homophobic , extremely sexist, has been actually convicted for corruption (and did a LOT more which he escaped by writing self-serving laws), is a statutory rapist, extremely rude (NSFW), ... Name ANY character flaw and Berlusconi has it.

He did enough to piss of social conservatives (adultery), liberals (sexism, homophobia), everyone (corruption) and he still gets 30% of the votes. I get on a cerebral level why homo sapiens sapiens are attracted to this 'alpha' (barf) male, but still: UGH!

/rant

edit: age of consent in Italy is 16, so he's not a statutory rapist after all. Yay for morality.

Just to point out that the Eurozone has far from imploded. Italian bond auctions went well on Wednesday, the Euro is rising against all currencies, the main European markets are all up during the week (not to mention over the last few months) and bond yields on us PIIGS have fallen substantially with Ireland leading the pack. The reasons for this are varied, its late here and I need to hit the hay, but I must throw them up as there has been quite a number of developments since the summer that have altered the game. Not that Italy's instability isn't a concern, its just things aren't anywhere near as fragile as they were.

Rule of thumb: Take a pinch of salt when reading British papers analysing non-UK European politics.

But back to Italy. On a political level, I suspect (as most seems to) that there will be a re-election and Grillo will get less of the vote and Bersani will acquire enough to gain control of both houses. Not majorities but controlling minorities as we are dealing with proportional representation here. Grillo's platform while entertaining is just not workable. He is calling for the abolition of the tax collection office, for example. The thinking is that this will be just like Greeks in that when faced with the stark choice they'll go back to the centre parties and Bersani and Monti should have enough between then.

On the Berlusconi issue, Palecon has the right of it. He reminds me of our CJ Haughey who was as corrupt as they come but to this day there are people that still think of him fondly and often because he was corrupt, not in spite of it. Again, as Paleocon says, they just happen to know who did the buttering of their bread for them at the expense of others. Of course owning all the media in Italy sure doesn't hurt either.

Edit:

dejanzie wrote:

I've heard the argument from Italians that 'Berlusconi has built credibility when it comes to small government'. Same rationalization as for the GOP

Berlusconi's (or any Italians for that matter) definition of small government is slightly different to the GOPs . I say this as a social democrat but its hard to see where Italy could have more government. Less seems the only direction it can go in.

Axon wrote:

Edit:

dejanzie wrote:

I've heard the argument from Italians that 'Berlusconi has built credibility when it comes to small government'. Same rationalization as for the GOP

Berlusconi's (or any Italians for that matter) definition of small government is slightly different to the GOPs . I say this as a social democrat but its hard to see where Italy could have more government. Less seems the only direction it can go in.

You'll hear no argument from me. By rationalization I meant that, as in the US or anywhere else, 'small government' is newspeak for 'I want to cut the programs that don't benefit me directly and keep the ones that do'.

And I would love, if you ever find the time, to read a more in-depth analysis on the EU financial situation from you. I can only speak for Belgium, but find it frustrating that we were only mentioned when we fit the 'EU SUCKS' narrative. Or over here on GWJ the 'CUT THE BUDGET' narrative. Now that our interest rates are among the lowest worldwide, and it's become clear that the uncertainty was due to our lack of government and not our 100%+ GNP debt we're conveniently left out.

Will do then, dejanizie. I'll try break this up over a few posts (perhaps days as I'm really time poor lately) as I realise reading back to where I left off that there are a couple of details that need clarifying so we are all singing of the same hymn sheet, as it were. First we need to understand all the different players and who holds what levers as this seems to be a little muddled.

EU and Eurozone governance bodies, who they consist of, roles and presidents.

  • European Council, heads of national governments, proposes legislation and Herman Van Rumpoy (there is also a rotating presidency that Ireland currently holds
  • European Commission, proposed by governments and ratified by the EU parliament, crafts legislation and José Manuel Barroso.
  • European Parliament, elected by the people, ratifies and proposes legislation and Martin Schulz.
  • European Central Bank, representatives of the national banks and board elected by the European Council, maintain the stability of the euro area and Mario Draghi.

Just to clarify things a little, president in European terms really means Chairman. They are the top individuals of each body but they don't have executive powers at all. The real power is in the European Council and what the heads of state decide. Well, Draghi has more than the others but is still kept in check by the board that is made up of the national bank representatives.

Good image from wikipedia explains the process well.
IMAGE(http://upload.wikimedia.org/wikipedia/commons/thumb/a/ac/Political_System_of_the_European_Union.svg/1000px-Political_System_of_the_European_Union.svg.png)

One last explanation. The Council of Ministers is basically the same as the European Council but the heads of state are swapped out for the relevant minister (Finance, Trade, Agriculture, Labour what have you). I think the Courts of Auditors and Justice are fairly self explanatory?

Ok, the other issue was over the construction of the EFSF/ESM (the bailout fund as it is known). It's a potential fund that uses the current EU budget as leverage and is then guaranteed by all the members of the Eurozone. If the EFSF/ESM needs funds it goes out into the market and acquires it itself at extremely low rates due to its triple A rating. It is not a large lump of cash all the members have borrowed and put into a bank account somewhere.

Right, moving on.

Next up is the identification of the causes of the euro debt crisis and the lack of proper procedures to deal with the crisis. Very simply, when the Euro was created there were three major flaws in its construction

  1. Fiscal transfers were a no go so therefore national governments who overspent weren't going to be bailed out (explicitly stated in the Maastricht Treaty) and to avoid this the Growth and Stability Pact forbid excessive overspending. Problem is it was a paper tiger.
  2. Banking regulation was done at a national level with absolutely no European oversight.
  3. Finally, and perhaps crucially, there was no agreed mechanism to deal with financial problems be they banks or Member States.

And the rest, as they say, is history. You can scroll back over this thread for the ins and outs of that.

The options on the table were to go with a federal route, similar to the US, or create something different. A quick glance at any poll will tell you that the latter was the easier sell and to be frank the conspiracy theory that the Euro was designed in order to force the federal option never really held up as it meant national governments ceding power they clearly never intended giving up in the first place.

So From 2008 to 2011 there was stagnation due to failure of leadership and fire fighting at Greece, Ireland and Portugal. However there were a couple of agreements in the European Council and changes of the guard that laid the foundations for the larger developments. The first was the Euro Pact Plus in March of 2011 which lead to the Sixpack in December of that year. These are the initial attempt at having pan-eurozone surveillance of banks and budgets but they suffered from being aspirational and having no real teeth (again) or solid dates on when they would be implemented. What made them important was they signaled that Europe was moving to integrate further around the single currency and they also signaled where the alliances were going to be.

The other, and arguably far more important, was the changing of leaders in Italy and Spain. While there were elections elsewhere, Ireland and Greece for example, these were two much bigger players. Where as before these countries were led by rather ineffective individuals for two distinct reasons, Rajoy and Monti were generally received as serious politicians.

The first major development was in the night of a European Council meeting on the 9th of December 2011, when apparently Mario Monti got so furious with the lack of decision making he thumped the table. I'll put the politics of that night to one side but what came out of it was the start of the turn around. For the bailed out and anti-austerity countries a more powerful ESM was agreed upon that importantly would step in an recapitalise failing financial institutions and be able to buy sovereign bonds on the secondary market.

However the more crucial part of the deal was what Germany and its pro-austerity allies got. The Fiscal Compact Treaty. The headlines of this treaty are;

  1. A debt brake that kicks in at 60% debt to GDP
  2. Structural deficits of 0.5%. Not to be confused with plain deficits which can be 3%. The structural deficit is specifically to cover the Spainish and Irish scenario where they used comsumption taxes during a property boom to pay for day-to-day spending
  3. Automatic correction tools. Member States broke the Growth and Stability Pact several times because the European Council had to vote to apply the sanctions. This time you have to vote to avoid the sanctions. Much better
  4. The above rules have to be inserted into domestic law

There are other details and its worth reading the link to get more background but for the purposes of further discussion they are the important points. Well, appart from the most vital point. To gain access to the ESM and its funds you had to ratify the Fiscal Compact. To put it in very simple terms, if you want Germany's money you play by Germany's rules.

Suffice to say the treaty has been formally ratified and entered into force since January 1st. It had however been a done deal since the Summer of last year and it was under the cover of the Compact that the board of the ECB, more accurately the creditor countries representatives, finally gave it the go ahead to take the pressure of the sovereign bonds. The most spectacular was the Outright Monetary Transactions or OMTs which basically stated that any country under a ESM program will have unlimited support of the central bank. The ECB hasn't used the process yet but the threat of it has cause bond yields to fall all across the eurozone.

I'm leaving a lot of detail out (the Baltic Tigers is one I'd like to delve more into) but this basically outlines the reason why things aren't as fragile as they once were. The combination of the ESM, Fiscal Compact and OMTs has seemed to please everyone not to mention the markets. We are even beginning to see the turn in the jobs numbers, manufacturing output and quarterly reports as confidence slowly ebbs back into the system. I still think there is going to be a few shocks on the way, Greece is still a problem that will require a controlled default, but you feel there is now a floor under us again.

As for the banks, a newly created European Banking Authority, which was created from the ashes of the Committee of European Banking Supervisors in the Sixpack, is being developed further. This is still all being thrash out but the role of the Authority is going to be beefed up considerably and regulations on bank resolutions are ongoing. However in a move of highly political significance, the EU has agreed that bankers bonuses be limited on a 1:1 ratio with their salary. Window dressing but you get the feeling that they are going to enjoy regulating that industry.

As an aside, the Swiss, a non-EU member, voted to cap pay of all executives so the fears of a migration of talent to there is unfounded.

/Late here, I apologise if this is full of mistakes and points are unclear but I have to go to sleep.

If an EU member agrees to adding debt to GDP controls to their own national law isn't that a form of growing Federalism?

DSGamer wrote:

If an EU member agrees to adding debt to GDP controls to their own national law isn't that a form of growing Federalism?

Of course, that's why it was so difficult to enact.

dejanzie wrote:
DSGamer wrote:

If an EU member agrees to adding debt to GDP controls to their own national law isn't that a form of growing Federalism?

Of course, that's why it was so difficult to enact.

Sure. I was just responding to this quote by Axon.

axon wrote:

The options on the table were to go with a federal route, similar to the US, or create something different. A quick glance at any poll will tell you that the latter was the easier sell and to be frank the conspiracy theory that the Euro was designed in order to force the federal option never really held up as it meant national governments ceding power they clearly never intended giving up in the first place.

DSGamer wrote:
dejanzie wrote:
DSGamer wrote:

If an EU member agrees to adding debt to GDP controls to their own national law isn't that a form of growing Federalism?

Of course, that's why it was so difficult to enact.

Sure. I was just responding to this quote by Axon.

axon wrote:

The options on the table were to go with a federal route, similar to the US, or create something different. A quick glance at any poll will tell you that the latter was the easier sell and to be frank the conspiracy theory that the Euro was designed in order to force the federal option never really held up as it meant national governments ceding power they clearly never intended giving up in the first place.

Well in terms of debt-to-GDP controls its no more different to the Growth and Stability Pact. All that is practically changed is when you start to get punished for breaching the agreed rules. The controls can still be ignored if a majority of Member States agree that they can. Ultimately the executive power still resides with the Heads of State and the EU Commission is merely acting as a neutral party in this process.

The growing federalism or creeping federalism charge is very hard to counter, on the other hand. Just about everything can be argued as approaching federalism if you are so inclined. As I said above, as long as the Member States retain all the executive powers its not a federal system as we currently understand it. From my viewpoint, and I would not be opposed to some form of federalism I may add, its very clear that the creation of the problems of the Euro are laid squarely at the feet of the Member States and their refusal to give the EU Commission or ECB any proper power to regulate the system. This time around they have ceded only enough to make the fiscal controls work and no more. If anything, its clear that the Member States for now will avoid a federal system as much as they can. Given human nature, I don't find that all surprising either.

Even if I accept its a form of growing federalism, and it could very well be, then dejanzie's point is accurate. Its taken us three (nearly four) bailed out countries, countless European Council meetings, billions poured into recapitalising banks, billions wiped of equity and an Italian Prime Minister loosing the plot all the while risking the entire EU project to get to stricter debt controls. If the plan was to use the crisis to force a federal system on the people of Europe, its been a pretty awful one. Imagine what it would take to instigate fiscal transfers using that mechanism.

Some good news today for Ireland on foot of the promissory deal*, the European Council has instructed that the Commission and the IMF come up with a process that will enable both Ireland and Portugal pay back the ESM/EFSF at much longer maturities. I'm not sure about Portugal but this is going to really improve our debt profile which should make us more attractive to the markets when we leave the program at the end of this year.

*This was €30 billion that was printed by the Irish Central Bank to bail out Anglo Irish Bank.

The UK is digging out Bonnie Tyler for Eurovision: http://www.bbc.co.uk/news/entertainm...

Scratched wrote:

The UK is digging out Bonnie Tyler for Eurovision: http://www.bbc.co.uk/news/entertainm...

Under Debt, the EU, and Greece? Is Greece going to secede if Tyler wins?

Y'all take Eurovision seriously.

It was the only Europe thread I could find (pesky American forum), and it seems every year politics gets attached to Eurovision anyway in the wider media.

I don't think anyone would mind if you created one.

Scratched wrote:

It was the only Europe thread I could find (pesky American forum), and it seems every year politics gets attached to Eurovision anyway in the wider media.

We've got a Russia thread and a Venezuela thread, I don't see why we can't have a UK thread. Matter of fact, I'd particularly like it.

Prederick wrote:
Scratched wrote:

It was the only Europe thread I could find (pesky American forum), and it seems every year politics gets attached to Eurovision anyway in the wider media.

We've got a Russia thread and a Venezuela thread, I don't see why we can't have a UK thread. Matter of fact, I'd particularly like it.

Would you? Would you really?!

Duoae wrote:
Prederick wrote:
Scratched wrote:

It was the only Europe thread I could find (pesky American forum), and it seems every year politics gets attached to Eurovision anyway in the wider media.

We've got a Russia thread and a Venezuela thread, I don't see why we can't have a UK thread. Matter of fact, I'd particularly like it.

Would you? Would you really?!

Yes. Because it's nice to be occasionally reminded that other countries have elected crazy people too.

Hehe, well I was thinking more about our collective sanities... It's not good to constantly see so much crap. At least imo. Vet's me down.

[Edit] stupid auto correct on this phone! : get's

Cypriot bailout agreed. This time around bondholders and depositors take a 10% hit. Speaking as a citizen of a country that guaranteed the main commercial banks, unilaterally I may add, it's going to be interesting to see how this plays out politically. Given that the choice was to essentially add so much debt to the country that it would have meant it would have pushed them into a Greek style situation, a write down was really on the cards. On the other hand the risks of a run on the banks, while small, are real and that may require some damping down. Lessen there is that no situation is without its pitfalls.

The details are still sketchy as this happen very early this morning but it would be interesting to see how close they came to the model that the Economist advocated last week. As it points out, Cyprus allowing its financial sector grow to over 800% the size of the economy is proof, as if it were needed, that a banking union with the ECB a central control is required. One issue the magazine doesn't cover is if they will be forced to legislate against money laundering. A bit of a bugbear in other eurozone capitals is the use of Cyprus bank by Russian oligarchs. That issue might have legs as well.

On the home fires front, Ireland is making strides towards exiting the bailout. We sold our first batch of 10 year bonds since 2010 this week and it was over so subscribed, €12 billion in offered, that the initial float of €3 billion was increased to €5 To be fair, given the ECB pronouncements, Irish debt looks to be a good risk-vs-reward bet.

Not to get to excited, my personal favourite columnist on these matters, Dan O'Brien, makes some very sombre points in his latest article. All the gains could unravel if we don't start too see some growth soon. You can feel the pressure coming from the less successful EU countries towards the others to loosen the purse strings in their own economies a little.

Axon wrote:

Not to get to excited, my personal favourite columnist on these matters, Dan O'Brien, makes some very sombre points in his latest article. All the gains could unravel if we don't start too see some growth soon. You can feel the pressure coming from the less successful EU countries towards the others to loosen the purse strings in their own economies a little.

What gains? Ireland selling more debt isn't a gain, it's simply an increased drag on future growth. France's economy is crashing due to insane government policies; Italy is in the grip of a political crisis brought on by crushing debt; Greece is a basket case of unemployment and unsustainable debt; Spain's economy is collapsing and they are also in a political crisis due to endemic corruption. Over the last year, unemployment across the Euro area has increased by more than 1%:

Eurostat[/url]]The euro area seasonally-adjusted unemployment rate was 11.9 % in January 2013, up from 11.8 % in December 2012; it was 10.8 % in January 2012. The EU-27 unemployment rate was 10.8 % in January 2013, up from 10.7 % in the previous month; it was 10.1 % in January 2012.

And that's the U-3-ish number that doesn't account for people dropping out of the workforce! Where is the growth going to come from? Estonia and Latvia, the only countries in the area with halfway sane economic policies over the last five years? Seems unlikely. Bailouts do not solve structural problems - they make them worse.

Axon wrote:

On the other hand the risks of a run on the banks, while small, are real and that may require some damping down. Lessen there is that no situation is without its pitfalls.

Small? The government just stole 7%-10% of people's money right out of the banks, with barely the pretense of a tax. I would be shocked if their banking sector lasts the month without a major crash and massive bank runs, and I'd be surprised if the government lasts out the rest of the year. The article itself points out that the Cypriot government is already blocking electronic transfers and shutting down banks on Monday. Do you think the Russians are going to sit idly by while their money is "levied"? Do you think the older voters who depend on their pensions for income are going to simply tolerate having 7% of it taken? I don't know Cypriot politics very well, but I sincerely doubt that the voters who just elected this government were intending to get robbed.

Aetius wrote:

What gains?

Bond yield falling, deficits decreasing across the eurozone, Euro rising against all other, European stock markets on a six month gain and steps towards proper central governance of the currency. Those gains.

Aetius wrote:

Ireland selling more debt isn't a gain, it's simply an increased drag on future growth.

Never said it was, what I said was it was making strides towards exiting the bailout. Servicing its own debt part of that process. And no, I'm not in favour of closing our deficit overnight and paying down all bonds as they mature with cash from our current account. I'm not interested in debating it for several pages either as its been done to death and we know your views.

Aetius wrote:

France's economy is crashing due to insane government policies;

Bond yields are down from the eurozone record of over 3% to around 2% and their deficit has been falling since 2010. Debt has certainly gone up but there is no concern about France be able to service it. Crashing? News to everyone over here.

Aetius wrote:

Italy is in the grip of a political crisis brought on by crushing debt;

Italy has had a high debt to GDP ratio forever. To claim that its the cause of a "political crisis" is not believable. Nope, what is causing the "political crisis" is Italy is being forced to reform is scoliotic labour laws and improve tax collection but I'm sure developing their massive black market further is a sound alternative to proper governance. Bring back Berlusconi?

Aetius wrote:

Greece is a basket case of unemployment and unsustainable debt;

I'm not sure anyone claimed otherwise.

Aetius wrote:

Spain's economy is collapsing and they are also in a political crisis due to endemic corruption.

Yep, things are going to be difficult for Spain.

Now, do the rest of the eurozone countries. I'll start you off; Germany, Holland, Finland....

Aetius wrote:

Over the last year, unemployment across the Euro area has increased by more than 1%:

Eurostat[/url]]The euro area seasonally-adjusted unemployment rate was 11.9 % in January 2013, up from 11.8 % in December 2012; it was 10.8 % in January 2012. The EU-27 unemployment rate was 10.8 % in January 2013, up from 10.7 % in the previous month; it was 10.1 % in January 2012.

And that's the U-3-ish number that doesn't account for people dropping out of the workforce!

No its not. As the site says: "In addition to the unemployment measures explained here, Eurostat publishes statistics of persons who fulfill only partially the definition of unemployment. These persons are not included in the official ILO unemployment concept and have a varying degree of attachment to the labour market.". U3 is based on the ILO definition and those stats include people not cover by that definition. I've read its closer to U5 than anywhere near U3. However, it is moot as the unemployment is very high in some countries, particularly Spain, Greece and Portugal. These countries do tend to have very rigid labour laws, I might add.

Aetius wrote:

Where is the growth going to come from? Estonia and Latvia, the only countries in the area with halfway sane economic policies over the last five years? Seems unlikely. Bailouts do not solve structural problems - they make them worse.

Only Estonia and Lativa have halfway sane economic policies? I couldn't disagree more. Again, are you honestly suggesting that Germany is some class of basket case? And of the other AAA rated members?

And you don't like bailouts. I got that several years ago. I'm hoping Ireland proves you wrong and like I said above, is on course to do so. Funnily enough after fixing a lot of structural problems at the behest of the troika. I may add that Latvia was bailed out in 2008 with the EU paying for the majority of it. Worked there as well, even by your yard stick.

I wonder if there will be bank runs throughout the Eurozone over the next week. The Cyprus 'bailout' sets a very dangerous precedent that could send the whole system spiraling out of control.

ZaneRockfist wrote:

I wonder if there will be bank runs throughout the Eurozone over the next week. The Cyprus 'bailout' sets a very dangerous precedent that could send the whole system spiraling out of control.

That isn't how bank runs work. There were several bank runs in both the US and Europe between 2007 and 2008 and they didn't result in spreading to other banks. There has be a good reason for people, en masse, to take their cash out of the bank. Thankfully we are still a long way from that.

Aetius wrote:

Small? The government just stole 7%-10% of people's money right out of the banks, with barely the pretense of a tax. I would be shocked if their banking sector lasts the month without a major crash and massive bank runs, and I'd be surprised if the government lasts out the rest of the year. The article itself points out that the Cypriot government is already blocking electronic transfers and shutting down banks on Monday. Do you think the Russians are going to sit idly by while their money is "levied"? Do you think the older voters who depend on their pensions for income are going to simply tolerate having 7% of it taken? I don't know Cypriot politics very well, but I sincerely doubt that the voters who just elected this government were intending to get robbed.

I'm confused. You don't like bailouts, and when banks don't get bailed out what do you think the alternatives are? Look, the money for those deposits are simply not there. So for people to get all their money back, people that include Russian oligarchs availing of lax money laundering laws, other people have to pay more tax. Now, we had similar here in Ireland and I can tell you it when down like a bag full of sick. However as I said, lets see how it plays out.

As for "the Russians"? Don't make me laugh. To answer your question, they will sit idly by as their money is levied, yes. You Americans really oversize their importance in the world.

It's not taking 7% of peoples pensions. What that man in the article did was sell his home and moved his life savings to a Cyproit bank in mid 2012. I'm sorry but as a libertarian you are defending a man who moved his money to a banking sector everyone knew was corrupt and about to fall over (for reasons that are beyond suspicion, I'm sure) and now your saying that he shouldn't face the consequences of his actions? And he is 54 so its not his pension.

And finally, the reason the bailout is happening now is because there were recent elections and the current leader pledged he was "committed to making all the necessary measures to steer our country out of the economic crisis." I'm sure there will be some backlash but I suspect given his mandate, Anastasiades will be fine.

A good reason might be having 7-10% taken from your account without any warning and for utterly preposterous reasons.

I'm curious, what do you think these utterly preposterous reason are?

Axon wrote:
Aetius wrote:

France's economy is crashing due to insane government policies;

Bond yields are down from the eurozone record of over 3% to around 2% and their deficit has been falling since 2010. Debt has certainly gone up but there is no concern about France be able to service it. Crashing? News to everyone over here.

Well yes, it's been in the news repeatedly. French manufacturing has been in a sharp contraction for the last year, they've been in recession for a year, and unemployment has been steadily increasing.

Axon wrote:

Italy has had a high debt to GDP ratio forever. To claim that its the cause of a "political crisis" is not believable. Nope, what is causing the "political crisis" is Italy is being forced to reform is scoliotic labour laws and improve tax collection but I'm sure developing their massive black market further is a sound alternative to proper governance. Bring back Berlusconi?

Beppe Grillo's Five Star Movement is now the largest political party in Italy by votes in the recent election. I think the success of "the most dangerous man in Europe" is a major sea change in Italian politics. While their platform is largely incomprehensible, they are anti-Euro - Grillo has actually said that Italy is already de-facto out of the eurozone.

Berlusconi is part of the problem, not part of the solution, and Grillo's proto-fascism is simply more problems. The fact that both of them are so popular says a lot of really bad things about Italian politics.

Axon wrote:

Now, do the rest of the eurozone countries. I'll start you off; Germany, Holland, Finland....

Sure. Germany - in recession in the last months of 2012, and certainly not a driver of growth for 2013, as they are bearing the brunt of the bailouts and their economy is dependent on exports ... to the European periphery. Holland: also in recession for the last half of 2012. Finland: industrial production is collapsing and unemployment is up.

Which of those countries is going to drive growth for the Eurozone? Who is Germany going to export to? Asia? The U.S.?

Aetius wrote:

Over the last year, unemployment across the Euro area has increased by more than 1%:

Axon wrote:

No its not. As the site says: "In addition to the unemployment measures explained here, Eurostat publishes statistics of persons who fulfill only partially the definition of unemployment. These persons are not included in the official ILO unemployment concept and have a varying degree of attachment to the labour market.". U3 is based on the ILO definition and those stats include people not cover by that definition. I've read its closer to U5 than anywhere near U3.

Yes, it is. From the same site:

An unemployed person is defined by Eurostat, according to the guidelines of the International Labour Organization, as someone aged 15 to 74 without work during the reference week who is available to start work within the next two weeks and who has actively sought employment at some time during the last four weeks. The unemployment rate is the number of people unemployed as a percentage of the labour force.

That's almost precisely the definition of U-3.

Axon wrote:

However, it is moot as the unemployment is very high in some countries, particularly Spain, Greece and Portugal. These countries do tend to have very rigid labour laws, I might add.

True - and until earlier this year, Hollande was still pushing his additional hiring restrictions in France while virtually no progress has been made elsewhere at removing those barriers.

Aetius wrote:

Where is the growth going to come from? Estonia and Latvia, the only countries in the area with halfway sane economic policies over the last five years? Seems unlikely. Bailouts do not solve structural problems - they make them worse.

Only Estonia and Lativa have halfway sane economic policies? I couldn't disagree more. Again, are you honestly suggesting that Germany is some class of basket case? And of the other AAA rated members?

Estonia and Latvia are pretty much the only two Euro-area countries posting any kind of significant growth. What exactly do you disagree with about that? Should they also be implementing restrictions on hiring and bailing out other countries? Germany isn't a basket case, but they have been dependent on exports to grow - and there's no longer a market for their exports.

I'm hoping Ireland proves you wrong and like I said above, is on course to do so. Funnily enough after fixing a lot of structural problems at the behest of the troika.

Prove me wrong about what? That throwing money at the problem and kicking the can down the road can work for a while but is ultimately unsustainable? Ireland's deficit this year was 7.3% of GDP and debt is set to reach 122% of GDP this year. There have been no structural changes and the only reason Ireland was even able to sell debt was because the ECB has promised to buy debt from everyone. Printing money to finance government debt is not a stability-inducing behavior.

I may add that Latvia was bailed out in 2008 with the EU paying for the majority of it.

Yep, that's true, but how many bailed-out countries do you know of that only needed half of the bailout? Or have been growing for the last year and are set to grow strongly this year? And I disagree that the bailout "worked" - Latvia would have been better off without it, as shown by Estonia next door, which did not receive a bailout, made massive government spending cuts in response to the crisis, has a debt of only 5.8% of GDP, and has been in strong economic growth since 2010.

Axon wrote:

I'm confused. You don't like bailouts, and when banks don't get bailed out what do you think the alternatives are?

There are plenty of alternatives, most of which include the banks going bankrupt. However, the alternatives should not include the government stealing from people in order to pay off their rich cronies.

Look, the money for those deposits are simply not there. So for people to get all their money back, people that include Russian oligarchs availing of lax money laundering laws, other people have to pay more tax.

Only because of government-backed deposit insurance - which, notably, is carefully being ignored in the levy process.

As for "the Russians"? Don't make me laugh. To answer your question, they will sit idly by as their money is levied, yes. You Americans really oversize their importance in the world.

I'm not talking about Russian importance in the world, I'm talking about the 25% or so of deposits in the Cypriot banking system that belong to Russians. You seem blithely confident that they will simply accept the Cypriot government taking their money - what is the basis of your confidence here? Why wouldn't they simply withdraw their money and move it to places that are less likely to steal it?

It's not taking 7% of peoples pensions. What that man in the article did was sell his home and moved his life savings to a Cyproit bank in mid 2012. I'm sorry but as a libertarian you are defending a man who moved his money to a banking sector everyone knew was corrupt and about to fall over (for reasons that are beyond suspicion, I'm sure) and now your saying that he shouldn't face the consequences of his actions? And he is 54 so its not his pension.

I wasn't talking about that particular person nor am I defending him; however, saying that the government stealing 10% of his money is a "consequence" of his actions is blaming the victim for a theft. He might have lost everything in a bankruptcy, but that's his problem, and his responsibility. The government simply taking his money - especially after promising to protect his money via deposit insurance - is despicable. He might have been a fool to trust the government but that doesn't excuse their actions any more than a mark being gullible excuses a con.

And finally, the reason the bailout is happening now is because there were recent elections and the current leader pledged he was "committed to making all the necessary measures to steer our country out of the economic crisis." I'm sure there will be some backlash but I suspect given his mandate, Anastasiades will be fine.

And, as I noted, I'm pretty sure the voters did not think that being outright robbed was going to be one of those measures - hence my doubts of his government's survivability.

Cyprus: panic as savings levy is imposed

The prospect of savings being so savagely docked sparked terror among the island's resident British community. At the Anglican Church's weekly Saturday thrift shop gathering in Nicosia, Cyprus's war-divided capital, ex-pats expressed alarm with many saying that they had also rushed to ATMs to withdraw money from their accounts. "There's a run on banks. A lot of us are really panicking. The big fear is that there soon won't be cash in ATMs," said Arlene Skillett, a resident in Nicosia. "People are worried that they're automatically going to lose ten present [of their savings] in deposit accounts. Anastasiades won elections saying he wouldn't allow this to happen."

She said a lot of elderly Britons had transferred savings to the island when they had decided to retire there. "Nobody can understand how they can do this – isn't it illegal? How can they just dock money from your account?" she asked.

The good news is that Cyprus may yet be able to avoid this insanity.

I think the concept of different people for different banks in different countries having bank runs because of Cyprus is ridiculous. Most eu countries are consumer unaware of happenings in Cyprus but even if they were the separation of these banking systems and their checks and balances means this sort of thing is negligible.