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OMG! Podemos is crashing and burning! (Not)

by rz Mon Jul 20th, 2015 at 10:50:03 AM EST

In recent days I have seen an uptick in comments in how the whole Greek thing is going to bring down Podemos. I think the fact that Syriza was unsuccessful will indeed be a drag on the performance of Podemos and right now it seems unlikely that they will take power in the next election.

Yet, confronted with the truly ugly side of Eurozone government, will people in the crisis countries simply back down?

Maybe, and people have been citing evidence for this on Twitter

So you see, Podemos is going down! Schäuble plan is working!

I found that somewhat difficult to believe.

And here we go: Opinion polling for the Spanish general election, 2015

The newest polls put Podemos at 19%. Which seems consistent with its previous results which indicate that Podemos has a ceiling at about 20%.

The Wikipedia page is actually pretty fantastic. They even provide a nice fit through all the data point which give you a feeling where things are heading.

So again: These are not earth shattering results and most likely some type of Great Coalition will govern Spain very soon, but Podemos will most likely have a decent showing in the Election.  

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The democractic insolvency

by rz Thu Jul 16th, 2015 at 05:14:36 AM EST

Disclaimer: I really want to write a few more diaries. But I do not have the time to got through the web and search for the references. So you have to trust me! Let me also credit 'some story written somewhere' with the idea for the title where the Following was pointed out.

The democratic deficit of the EU has turned into a democratic insolvency

Now the lack of democracy on the EU level has been discussed quite often. But I have always found this discussion to be to imprecise. Democracy can not mean 'my ideas should be implemented'. Very often it can absolutely mean the opposite. Now I want to try to point out several clearly undemocratic feature of the EU.

A lot could be said about this. For example the nature of the Eurogroup meeting, where ministers seam to meet to conspire against the democratic will of the European people. However all this is relatively ill defined. I want now to focus on two key features which make any change in actual policy basically impossible.  No matter how large the majorities.

The European Central Bank

Independent central Banks are all the rage toady. But the European central Bank is quite unique in the sense that its independence is protected by something akin to a constitution. In all other countries the independence of the central bank is established by law. Which means in principle independent central banking can be abolished by the normal majorities need to pass a law.

The question of the nature of our central Bank has today become  quite urgent. The central Bank has failed now for at least three years in a row to fulfill its inflation Mandate and the German representative on the ECB board openly advocates to abandon the inflation mandate as a means to force specific policy choices one the EU member nations.

In Cyprus and Greece the ECB went even a step further. While in principle its duty is 'to guarantee a functioning payment system' the Banks in Greece have now been closed for almost three Weeks. The destructive impact is massive. While the ECB tries to hide behind the problem of Greek banks holding Greek debts, this action is clearly unlawful. The ECB could wind down Greek bank if they are insolvent. But stopping the payment system completely is a very extreme act.

I already wrote a diary about the actions of the ECB in 2011, when they enforced a specific set of policies on Italy and similarly on Spain and other countries.

The ECB is the most powerful tool in the Hand of the EPP and its affiliates. While Draghi might not toe the line of the Christian Democrats in quite the way Trichet did, in the end the ECB Governing board see itself as a enforcer for the EPP.

Without getting the ECB under full control of the European Parliament including the ability to order direct Government financing the democratic decision making within the EU is highly constraint.

The inability to tax capital gains

You heard it all, the rich get richer, and they get richer by taking the surplus value of our work. In general the quota of the amount of GDP going to capital gains is extremely  high. Yet at the same the tax income from capital gains is low. Instead the IMF recommends to 'broaden the base' which means to make the effective tax system even more regressive by increasing VAT.

And there is no way out. The structure of the EU makes taxing capital gains on the level of a single nation basically impossible. At the same time taxing it EU wide is also impossible, since the there is no actual way to do this.

Therefore: Within the EU the possibility to tax capital gains has been abolished.

This is quite a crass situation for everybody who wants to create a somewhat fairer wealth distribution. The combination of not being able to print money and not being able to enforce tax laws makes every national democracy in the EU basically impotent against the power of moneyed interest. At the same time no supranational body exist which could actually do anything about it.

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In which I defend Wolfgang Schäuble

by rz Wed Jul 15th, 2015 at 03:29:40 AM EST

Wolfgang Schäuble, or Dr. Schäuble as many people have started to call him, is without a doubt a total dick. He has basically zero idea of macro economics. He professes to believe in rules, but only those that he likes. Without any doubt he is one of the key figures who is to blame for the current disastrous state of Eurozone politics and economics.

Yet... somehow in recent attacks on Dr. Schäuble I detected a somewhat contradictory set of arguments. Lets call it Euro Schizophrenia.  

Basically it is my opinion that the Euro is beyond redemption. While I am not convinced that the Euro is fundamentally unworkable, at present the Eurozone in economically and politically at a stage were I see little.

From this I conclude that it is a good idea to leave the Euro. Now it seems that Schäuble wanted to convince Varoufakis and Tsipras to leave the Euro from the very start of the negotiations. Lets be clear here: This is one of the most reasonable things Schäuble has done recently.

Of course the 'temporary exit' thing was total bullshit, and the way it was leaked was unacceptable. Yet the general idea to help Greece leave the Euro is a good one.  

Varoufakis and Tsipras should have taken the offer.

Comments >> (24 comments)

LQD: A beginner's guide to Euroscepticism

by rz Tue Jul 14th, 2015 at 07:11:44 AM EST

Since we are all turning totally against the EU I thought I excerpt this relatively funny piece from the  Spectator:

As a long-time Eurosceptic, I should be happy about the Johnny-Come-Latelys now swelling the sceptic ranks. Following Euro-institutions' wicked treatment of Greece, many European liberals have finally realised that Brussels might not be the hotbed of liberalism, internationalism and bunny rabbits they thought it was.

So far so standard.

But similar to the author I have recently also started to reflect on the whole referenda thing on the European constitution:

Where the hell were you guys in 2001, when the Irish people rejected the Nice Treaty and were subjected to a tirade of abuse from EU officials before being made to vote again? Where were you in 2005, when the Dutch and French peoples were libelled by EU officials as racists and xenophobes and `the generally pissed off' for having the temerity to reject the EU Constitution?

Especially the rejection of the European Constitution by French voters seems today quite different then how I perceived it back then. I remember that there were discussion here the the Eurotrib regarding this whole affair, but this was a little before my time.

Another point to consider

The second reason I'm not rolling out the red carpet for these people coming around to a way of thinking they once branded a phobia is because they're doing it wrong. They aren't genuinely opposed to the EU; they're just really angry with Germany.

This is mostly direct at British criticism of recent event in the Eurozone.

This Germany-mauling guff is grating for two reasons. Firstly because it's so goddamn lazy of Brits to fall back on the caricatured view of Germany as a machine-like, monstrous nation always itching to take over Europe. Seriously, guys, the war ended 70 years ago -- stop refighting it. And secondly, this Germany-bashing misses the true, profound problem with the EU. Which is not that one nation wants to run the show. It's that all nations, all political elites, including ours, and including Greece's, have pooled their sovereignty into Brussels in order to allow them to do politics in a more technocratic, far-from-the-madding-crowd fashion.


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First they came for Berlusconi and I said nothing

by rz Tue Jul 7th, 2015 at 03:49:32 PM EST

From   Wikipedia  (my emphasis):

On 12 November 2011, after a final meeting with his cabinet, Berlusconi met Italian President Giorgio Napolitano at the Palazzo del Quirinale to tend his resignation. As he arrived at the presidential residence, a hostile crowd gathered with banners shouting insults at Berlusconi and throwing coins at the car. After his resignation, the booing and jeering continued as he left in his convoy, with the public shouting words such as "buffoon", "dictator" and "mafioso". Following Berlusconi's resignation, Mario Monti formed a new government that would remain in office until the next scheduled elections in 2013. On 16 November, Monti announced that he had formed a Cabinet and was sworn in as Prime Minister of Italy, also appointing himself as Minister of Economy and Finances.
This was after he failed to pass an austerity budget. All this happened after increasing interest rates on Italian debt had created an unsustainable situation.

However, the increasing interest rates were neither a coincidence nor a direct result of a particular alarming debt situation. The debt crisis happened directly after the ECB started to raise interest rates from 1% to 1.4% betwenn April and July 2011. The market reaction was drastic. The move of the ECB was obviously insane. At that point the Federal REserve had already started its second quantitative easing program.

When the ECB interest rates had reached 1.4% in July 2011, the interest rates for Italian bonds started a slow upwards trajectory. Also in July Draghi and Trichet send their now infamous letter.

 The letter is truly something to behold and I recommend that you should read it in full.

Berlusconi did not perform well. In October 2011 it had become clear that the ECB would not back Italian debt if necessary and interest rates started to explode. A self fulfilling prophecy was underway.

Om the 16th of November 2011 Mario Monti was sworn in.
from his Wikipedia page:

On 4 December 2011, Monti's government introduced emergency austerity measures intended to stem the worsening economic conditions in Italy and restore market confidence, especially after rising Italian government bond yields began to threaten Italy's financial stability. The austerity package called for increased taxes, pension reform and measures to fight tax evasion. Monti also announced that he would be giving up his own salary as part of the reforms.
After Mario Monty had implemented austerity, the ECB started a program of direct bond purchases. Interest rates fell rapidly to the level of early 2011. Of course it is not clear exactly who did what and exactly why. But in principle it is more or less clear that an explicit deal was in place that Mario Monti needed to become Prime Minister, and only then the ECB would start buying bonds. I can cite e.g.  Matthews Yglesis  who is certainly neither a raging lefty nor a rightwing conspiracy nut.

Nobody likes Silvio Berlusconi except for the Italian electorate, so the world largely shrugged when the European Central Bank and the government of Germany perpetrated a coup d'état last year and removed Italy's prime minister from office as a condition for not destroying the Italian economy.
The rest of this blog post is also quite good.

Under Mario Monti unemplyment rose from 8% percent when he entered office to 11% when he left. Today it is still around 13%. Throughout his whole tenure GDP kept falling. On top of all this the Debt to GDP ratio rose faster than under Berlusconi.

We all disliked and still dislike Berlusconi and for good reason. But looking at the situation in Greece and the actions of the ECB I feel that what happened around 2011 should be clearly remembered.

Update [2015-7-8 4:13:58 by rz]: I changed the title a little.

Comments >> (22 comments)

And the offer is: Nothing and worse

by rz Mon Jul 6th, 2015 at 03:08:14 PM EST

It is my impression that still many are assuming that somehow the Eurogroup or Germany are bluffing. This seams for me to be a huge miscalculation. We should consider a couple of important facts. Lets start with the general policy directions of all European leaders but those of Greece:

  1. All European leaders agree that a specific set of structural reforms are necessary to create a strong economy and reduce unemployment. Especially it needs to be easer to fire people.

  2. All European leaders agree that government spending needs to be reduced. On the speed of the reduction there are certainly differences, but in total there is agreement.

The fact that there is total agreement on this points certainly creates certainly a strong feedback loop which makes this an absolute truth.

Now what about the European people. Here we also might not have an anti-austerity majority in the Eurozone. Especially in eastern europe* it seams possible that large majorities support the current Eurozone actions. And while 5 Stars and Podemos are going strong, they are far away from being able to capture the governments of their respective countries.  

Now the results to the Oxi, is become more visible. Nothing. The European Central Bank has now imposed extra conditions for the collateral of Greek Banks, so the Banks are not going to open any time soon.

Hollande and Merkel have met and their message to Greece is clear: Nothing.

I am not sure where all this is going but it is not good.

Update [2015-7-7 3:33:19 by rz]:*: an informative take on the 'Central European' political situation from Dodo from another threat:

First my usual geographical sidenote: I assume you meant the part of Central Europe east of Germany (and shifted Russia to Asia :-)).

If we look at the Eurogroup, you have

the Baltic states, all of which have gone through different levels of hardcore austerity, massive emigration and have US-groomed neoliberal elites who implemented radical policies like flat tax, and who think they actually preside over "reform" successes.

Slovakia, which has a left-populist government but one with hollow promises and no clue about truly leftist economics. The first(?) Greek bailout was close to election time, and this birthed an anti-Greece tone (coming both from the then opposition and the then right-wing government) based on the fact that most Slovakians are still poorer than Greeks, so the Northern European false story of "they spend our tax money" got the added flavour "to live better than us but then complain, the swindlers". During and after the last Eurogroup talks, Slovakia's finance minister was even more venomous than Schäuble. As I wrote earlier, here the Syriza government probably missed a chance: they focused on France & Italy, although the Slovakian government could have been reminded that public outrage about healthcare privatisation played a large part in their election victory.

I haven't read up about the position of the current Slovenian government.

However, I think Germany got the strongest support for the strict austerity policy in general not from Central Europe but Finland and the Netherlands. And against Greece, perversely, from the quisling governments of the other PIGS. And, while France and Italy make the most noises for a different approach, you can't underestimate the damage Hollande and Renzi did by joining Merkel & Gabriel's "this referendum is about staying in the Euro" regime change attempt.

All in all, the result is that the now completely nuts German political elite and its completely nuts domestic echo chamber get 100% support from other Eurozone elites minus Greece to maintain their parallel reality.

Comments >> (33 comments)

LQD: New election in Greece

by rz Mon Dec 29th, 2014 at 06:15:18 AM EST

I have not much to say here. But just now the election of the new president of Greece in the Greek parliament failed for the third time. This means there will be a snap election.

From Reuters

Greek lawmakers failed to elect a new president in a final round of voting on Monday, leaving the country facing an early election that could derail the international bailout program it needs to keep paying its bills.

Can Syzra win? Should it win?

I do not want to bore people again with stuff about the ECB, but I found this quite weird (from an article in the Telegraph from shortly before the vote in the parliament)

Gikas Hardouvelis, the Greek finance minister, warned on Sunday that the election of an anti-austerity party could lead to punitive European Central Bank economic sanctions against Greece.

"The ECB holds the key," he told Greece's To Vima newspaper. "This key can easily and abruptly turn off bank funding and strangle the Greek economy in a split second."

Has it come to this? It is basically matter of fact that the ECB can impose its political will?

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Once again the ECB disappoints

by rz Thu Dec 4th, 2014 at 09:18:44 AM EST

From the Guardian live stream I found this:

[The ECB] has cut its inflation forecasts in 2014 to just 0.5%, from 0.6%.

The figure for 2015 has been slashed to just 0.7%, from 1.1%. In 2016, it rises to 1.3%, down from 1.4% in the previous staff forecasts.

Think about this: By its own forcast, the ECB will now miss its target for at least four years in row. And this while Eurozone unemployment is at 12%.

Even better:

Draghi says the ECB's growth and inflation forecasts have been revised down substantially; and he admits that these forecasts do not include the latest slump in oil prices.

So probably inflation will be even lower, then the already terrible forecast predicts.

This is obviously fully in line with the overall behavior of the ECB. At the beginning of the year, when inflation was at 0.8% what did the ECB do: nothing! It took another 8 month or so, until the ECB started a program to extend its balance sheet.

And why: Because inflation expectations are well anchored. Already this was quite strange: The ECB has a Mandate to keep inflation at 2%, not 'inflation' expectations. Now, you could argue that inflation exceptions at 2% guarantee that in 'the medium term' inflation will run at 2%.

But how are you going to keep inflation exceptions  anchored if, by your own forecast, you are going to miss the inflation target for 4 years in a row (this was already the case in the beginning of the year). And on top of this the ECB is in now way committed to overshooting. Such a asymmetric target guarantees inflation below the mandated 2%.

How is that not an issue yet! Are all Europeans so scared of inflation that nobody notices that the ECB is not doing its job?

Comments >> (15 comments)

Leaving the Euro

by rz Sun Nov 30th, 2014 at 03:50:15 PM EST

I wrote a quite long comment in  Migerus Diary and I thought I should extend it even more and make a diary out of it.

In the comment section melo started a discussion about the Euro, in this case Germany leaving the Euro.

I posed the question to all participation in this thread

Would you recommend leaving the Euro? And: Would you vote for a party which recommends leaving the Euro?

The answers to this question I got could be divided into two groups:

Answer a)  Cyrille,  Migeru,  afew, (maybe melo):
We need a credible threat to leave the Euro, to change the European institutional setup. The exact nature of the changes has not been spelled out, but from our discussion on this blog it is quite clear that what would be needed is, i) changes to the 'Stability and Growth Pact', ii) The possibility for the ECB to directly finance gouvernments. iii) maybe a higher inflation target.

Migeru later specified:

Unless and until Article 123 of the Treaty on the Functioning of the European Union (Article 104 of Maastricht Treaty) is repealed, all the rest is cosmetic.

Which is basically my point ii). I completely agree that this is the most crucial point.

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Monetary policy in the Germany Media

by rz Thu Jun 5th, 2014 at 10:47:55 AM EST

As certainly everybody here knows inflation across Europe is running way below target. This month it has come in at only 0.5%. Now how did SPON (Spiegel Online) a big and influential news page react to this news? Well it gave us a report about Sparkassen-Präsident Georg Fahrenschon who demands higher interest rates...because currently the 'German Saver' is not high enough interests on his saving. And this is going to threaten peoples retirement savings.

Now, could it possible that low interest rates are a product of the collapsing European economy? Would it not be prudent focus on the amount of goos produced in Europe, instead of focusing on how much you get for your savings? Should we demand that you actually have to take some risk if you want to have a high interest rate?

Obviously, these are questions not asked in the German Media.

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Net Neutrality in danger in the EU

by rz Thu Jul 3rd, 2008 at 06:44:41 AM EST

Similar to the US telecommunication  companies across  Europe have been lobbying to undermine Net Neutrality.  According to the  NGO  Squaring the Net the European Parliament is moving to do just that:

European Internet users could be blocked from lawful activities by mandatory spyware, in the interests of their security. The right to use free software for internet access would therefore not be assured anymore. The neutrality of the Internet is also directly attacked, as is the principle that technical intermediaries have no obligation to prior surveillance of contents. Other amendments will de facto enable administrative authorities to obligate ISPs to work with content producers and rights-holders' private police, including the sending of intimidating messages, with no judicial or regulatory oversight.

These measure goes further than the French "graduated response" project, which has been subject to widespread opposition, including by the European Parliament on April 10th. That is undoubtedly why those amendments have turned up on early july, and why those drafting them use subtle rhetoric and crossed-references to make the overall text harder to understand (more than 800 amendements on 5 directives were tabled).

"The politicians who engage in these summer manoeuvres dishonour Europe and their mandate. They rely on the fact that nobody watches them a week before Parliamentary holiday, to divert the Telecoms package from its primary objectives of consumer protection. They pave the way for the monitoring and filtering of the Internet by private companies, exceptional courts and orwellian technical measures. It is inconceivable for freedom but also for European economic development. We call on all MEPs to oppose what they have already rejected." said Christophe Espern, co-founder of La Quadrature du Net (Squaring the Net).

These torpedo amendments are currently subject of a series of secret, back-room negotiations between a handful of MEPs who do not always understand all the implications of these issues. Accomplices of lobbyists who hold the pen are in every political party. Instructions for the plenary vote will be established this week for a vote in IMCO and ITRE committee on Monday, July 7th.

At this stage, citizens must act urgently and en masse, to make their MEPs understand, a year before the elections, the possible consequences of their actions.

I am not sure if the directive in question really is as concerning as Squaring the Net claims, but nonetheless I think it is an important issue. It seams also that several issues concerning Copyright and Intellectual Property have been packaged into this directive.

In this wiki you can find people which should be contacted to let them now want to you think about this directive and that it should be rejected.

Comments >> (19 comments)

Irish concerns

by rz Sun Jun 22nd, 2008 at 08:58:56 AM EST

Sinn Fein has now presented a list of demands which have to be met in order to gain their support in a second referendum. This should be the list in full (taken from this article):

  • The retention of a permanent commissioner for all member states;
  • The retention of the Nice Treaty formulae [sic] for qualified majority voting;
  • The removal of all eight self-amending articles including the simplified revision procedure in Article 48;
  • The removal of Article 46a giving the EU a single legal personality;
  • A strengthened protocol on the role of member state parliaments;
  • A significantly expanded protocol on the principles of subsidiarity and proportionality including the aims and values of the EU;
  • Substantial amendments to aspects of the Common Foreign and Security Policy;
  • Substantial amendments to the section of Common Defence and Security Policy;
  • A new protocol on neutrality;
  • A strengthened social clause;
  • A substantially revised protocol on vital public services;
  • Amendments to articles dealing with public services and state aid;
  • The inclusion of the European Trade Union Confederation Social Progress Clause to protect workers' rights;
  • A protocol on Irish tax sovereignty;
  • Substantial amendments on Article 188 dealing with international trade agreements including a cast-iron veto on mixed World Trade Organisation agreements;
  • A new protocol ending Ireland's participation in the European Atomic Energy Community;
  • A series of amendments to Articles 10 and 188 promoting the needs of the developing world in the context of international trade.

If you look at the points "every country a commissioner", "keeping all veto rights", "Nice formula for qualified majority voting" it becomes clear that they reject the very substance of the Lisbon Treaty, and is unlikely that these demands can be met. I also wonder what the British Eurosceptics, who belive that they have super strong allies in the Irish no-campaign, think about "The inclusion of the European Trade Union Confederation Social Progress Clause".

A much shorter list on the major concerns of Irish voters has be presented by Taoiseach Brian Cowen:

  • World trade talks.
  • Suggestions of tax harmonisation.
  • Loss of a commissioner.
  • Change in Ireland's voting strength.
  • Lack of democratic accountability of the EU high representative and president of the council.
  • Possible European Court of Justice rulings on areas like abortion and euthanasia.
  • Insufficient workers' rights.
  • Defence policy.
A very good analysis of each of these points can be found at Jon Worths Euroblog.

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Using Nice to implement Lisbon

by rz Mon Jun 16th, 2008 at 07:09:11 PM EST

At the current moment it is completly unclear how and if the Lisbon Treaty can be salvaged. Many national governments are already discussing the 'nuclear' option of ratifying the treaty and leaving Ireland behind. In a legal sense this would mean that they will leave the EU as it exists right now and form a new one based on the Lisbon Treaty.

But this is a rather radical step and one should try to calmly look at all options we have to take Ireland's decision into account but still implement reforms contained in the Lisbon treaty. In this diary I want to focus on one of the reforms which I liked most, that is the creation of a more coherent Foreign Policy by creating a more powerful Foreign Policy Representative and  a diplomatic corps.

The Nice Treaty includes an Article (Article 43) which allows for several Nations to establish  "enhanced cooperation". On the page I have linked to is a lot of stuff which I do not fully  understand, but let me cite what I think is the important part when it comes to foreign policy:

Member States which intend to establish enhanced cooperation between themselves   shall address a request to the Council to that effect. Authorization shall be granted   by the Council, acting by a qualified majority on the opinion of the Commission and   after having informed the Parliament. However, Article 23 of the EU Treaty provides   that a Member State may request that the matter be referred to the European Council   for a decision by unanimity. Member States thus retain their right of veto in this area.

As one can see it is possible to establish enhanced coordination in the area of Foreign Policy but it could be vetoed by any member. However if all 26 signing Members agree to implement the Foreign Policy cooperation established in the Lisbon Treaty I think Ireland would not be in a position to veto this.

Maybe similar thing could be done in other areas as well.

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