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The Ifo Institute monthly business confidence survey shows a reading of 104.7 for November, up from 103.2 in October 2014.

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Thomas Sargent of New York University, the 2012 Nobel prize winner in economics, says the EU leaders can learn from the way the federal government in the U.S. handled the issue of state's debt when it came up in the 1790's and in 1840. In 1790 the federal government- under the leadership of Washington and Hamilton- saw the need to honor state's debt because of the contribution made by states in the war of independence and the U.S. assumed state's debt. In 1840 the U.S. refused to assume state's debt and states went into default. The result was beneficial because state's passed balanced budget rules and restrained reckless spending. Another benefit was that this preserved state rights to manage their finances and the federal structure setup under the constitution.

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Higher inflation in Germany could help rebalance the German economy by increasing imports. German inflation has averaged 1.6% since 1999, compared to 2.0 % for the eurozone. It was 2.3% in December. And after years of wage restraint German unions are increasing the wage demands. IG Metall is looking for a 6.5% wage increase. And interest rates at 1% are quite low for Germany where unemployment is down to 5.5%, according to Eurostat, and employers have to meet higher wage demands. The ECB is aiming at 2% inflation and Germany has a 26% weighting in the calculation of the rate. But as Italy, France and Spain see inflation decline there is room for addditional inflation in Germany before the eurozone goes well above the 2% inflation rate. By freezing wages and improving price competitiveness with German products, other countries could increase exports. Yet the prospects of this making a large difference is limited because German companies are likely to push for wage restraint. The Bundesbank predicts wage increases of 2.4% in 2012. Over time the wage restraint in other eurozone countries and even slightly higher wages in Germany would reverse the trend since 1999 of Germany having much lower inflation, and this could be one of the factors helping in rebalancing....

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The Netherlands government of prime minister Mark Rutte collapsed on April 22, 2012, after the Freedom party of Geert Wilders said it would not support futher budget cuts. Mr. Wilders said: "We don't want our pensioners to bleed just to meet the dictates coming from Brussels." Government forecasts had predicted the Netherlands deficit at 4.6% of GDP in 2012, above the 3% goal set by the European Union. And negotiations that collapsed were about making $18 billion in budget cuts to help meet the deficit goal. Rutte will now lead a caretaker government till elections in September or October 2012. Credit agencies may lower the Netherlands credit ratings from AAA and this would raise Netherlands borrowing costs in coming months. The result would be to increase the deficit even further. The Netherlands government was a strong supporter of Germany to introduce strict austerity measures and budget cuts in the eurozone during the debt crisis in EU countries in 2010-2011. With the elections in France and the defeat of French president Sarkozy in the first phase of elections by Socialist candidate Francois Hollande, the austerity programs in Europe appear to be unravelling. The deeper Europe goes into a recession in 2012-2013, the more likely new measures will be needed to address competitiveness, growth, interest rates and overvalued currencies as opposed to largely fiscal and budget measures alone....

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The opposition of parties from the far-right in the Netherlands and France, and other parts of Europe, to austerity measures imposed by the EU under the leadership of Germany's Angela Merkel. Geert Wilders, leads this far right opposition in the Netherlands and Marie Le Pen in France. The far right parties are gaining influence with high unemployment and economic recession in Europe, making spending cuts painful for pensioners, and the middle class.

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Mario Monti, Italy's prime minister, tells Alessandra Galloni of the WSJ, "Germany will never let France go." French economist Sorman says Americans do not realize that the EU and the Euro were created for political, not economic reasons, and the idea was to bring peace to Europe and especially between France and Germany. He sees the EU countries staying through this crisis together, and France emerging more competitive from this experience.

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Yields on France's government bonds turned negative on July 9, 2012. As the pool of bonds from haven countries such as Holland and Germany is shrinking, France with its deep and sizable debt market is benefitting. France was able to sell 3.9 billion euros of 13 week Treasury bills at a yield of -0.005 and 2 billion euros of 24 week bills at an average yield of -0.006.

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S&P downgrades France's credit rating from AA+ to AA. Government spending at 56% of GDP remains at the second highest level in the EU, second to Denmark. President Hollande has reduced the deficit mainly by raising taxes which is seen as having reached its limit. The French economic growth was at 0.5% for the second quarter of 2013 compared to the first quarter, unemployment is high at 11.1%.

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The historical allusions in the media in Greece, Italy and Germany, and cultural perceptions which have increased differences in the European Union. This comes at a time of austerity programs in the Southern tier of EU countries and pressure on Germany to fund the debt reduction in some EU countries.

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Wealth for top 7% of U.S. households averaged $3.2 million in 2011, compared to $133,817 for the other 93% of the population. Third quarter 2013 household net worth is 615% of after tax income, up from 570% in 2012. The uneven distribution of household wealth and the gains from the stock market recovery going disproportionately to wealthier investors, does not provide strong enough underpinnings for robust consumer spending.

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The Portuguese government asked the European Union for bailout loans. The aid the EU is providing to Portugal comes with conditions- asking Portugal to make additional austerity cuts even as new elections loom. The aid is essentially more loans at high interest rates, even if the rates are lower than the steep rates in financial markets for a country with a collapsing credit rating. There is serious concern about whether this formula applied by the EU is going to work because at this rate it may take a decade or more for Portugal to pay off all the loans. The major problem is that with severe spending cuts- a country that lacks competitiveness and cannot devalue its currency because of being the euro zone- it is that much harder to generate growth. Simon Tilford, chief economist for the Center for European Reform in London, says the EU leaders have failed to come to grips with the core of the problem for Ireland, Greece and now Portugal- which is how to restore the finances to some sustainability, and how this could ever be achieved by a policy of deeper and deeper spending cuts. Tilford points out that the other more fundamental problem EU leaders are not tackling, is that the problem is deep down the large amount of Portuguese, Irish and Greek debt held by German, French, British, Spanish and Dutch banks. If these countries default the governments of these countries would have to recapitalize their banks at the expense of the taxpayers of Germany, France, Britain, Netherlands. Political leaders of these countries want to avoid confronting angry taxpayers and lose political support. Germany has called for a bondholder haircut, something that banking interests do not support. Tilford says Portugal is not getting a bailout, because for a bailout there would need to be a default by Portugal. What it is getting along with Ireland and Greece, are loans at high interest rates, and an EU plan that simply stifles the ability to pay back accumulated debt, leaving the situation in limbo for some future resolution....

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According to Eurostat Spain's total tax revenue as a percentage of GDP was 32.1%, lower than the eurozone average, which is above 40%. The underground economy in Spain is estimated to be about 20-25% of GDP. Spain's tax agency has relied on computerized records to track tax revenue receipts. The focus is now shifting to in person visits and tracking of businesses in the underground economy to make certain these businesses are paying taxes.

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The current economic expansion in the U.S. in April 2014 is at 58 months from the beginning of recovery in 2009. In this exceptional account Josh Zombrun of WSJ compares the current expansion to previous expansions since 1950, with the views of experts such as Stan Hall of the NBER committee, which studies turning points. This expansion is forecast to go for 90 months into 2016 by the U.S. Federal Reserve, and 102 months into 2017 by the CBO. Sooner or later, says Stan Hall, some adverse unpredictable event takes place that ends the expansion. So far the expansion has been slow and protracted, as predicted by economists Reinhart and Rogoff from previous financial crises in the last century, giving it room to grow as corporate earnings continue to improve. Fed chairwoman's sense of slack in the economy also provides room for employment and incomes to grow in the later stages of the expansion. This is good news for the emerging market economies such as India and China, and for the European Union, faced with slowing growth. So how does this expansion compare with earlier ones. The expansion of the 1991-2001 of the tech boom was 120 months, 1961-1969 of the Sixties 106 months, 1982-1990 of the Reagan era 92 months. The controversial one on shaky foundations is the recent housing boom 2001-2007 of 73 months ending in a huge bust with the 2008 financial crisis. The shorter expansions are the 1975-1980 Post-Vietnam one for 58 months, and the 1970-1973 spurt before the OPEC price surge. Figures are from the NBER, CBO and the Federal Reserve's Summary of Economic Projections....

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Analysts point out that there is not much room for austerity cuts in Italy and Spain without cutting into muscle. This is because these countries have moved to make austerity cuts much earlier. Their budget deficits are actually less than what they were when they joined the euro currency zone. In the case of Italy the budget is actually in surplus, to the amount of 2% of GDP, when the financial position excludes interest on debt. And Italy has now moved to reduce the deficit to 3.9% of GDP in 2011. Under pressure from the ECB Italy has announced its aim of balancing the budget by 2013. Because both Italy and Spain have growth rates estimated at below 1% for 2011, analysts believe it is important to emphasize growth.