LyrArc Article Gist
Britain's David Cameron leads the successful effort to hold down spending in the European Union's next 7 year budget plan, supported by Germany and the Netherlands. The new 2014-2020 EU budget plan holds down government contributions to the budget to 959.99 billion euros. There is a 35 billion decrease from the last budget plan after adjusting for inflation, and less than the 1.03 trillion euros proposed by the European Commission, the EU's executive body. Actual spending is set at 908 billion euros compared to 943 billion euros for 2007-2013. Cuts were made in some areas- direct subsidies to farmers went down to 277 billion euros from 337 billion euros. EU funding to tackle high youth unemployment and build transnational infrastructure increased 37% to 126 billion euros. Funds allocated for investment projects in poorer regions slightly declined to 325 billion euros. Special rebates to the UK and the Netherlands remain- the Netherlands rebate is 1 billion euros. The mood of European leaders was summarized in the words of Britain's prime minister Cameron: "Frankly, the European Union should not be immune from the sorts of pressures that we have to reduce spending, find efficiencies and make sure that we spend money wisely that we are all having to do right across Europe."...

LyrArc Article Gist
Orlik cites a 2011 survey from China's South Western University of Finance and Economics, which surveyed 8000 households and found that 55% of Chinese households had little or no savings for that year. 10% of households control 86% of wealth and 56% of household income. Surveys in 1995 and 2002 showed 10% of households controlled 31% and 41% of wealth. In the U.S. top 10% of households control 74% of the wealth, according to the Federal Reserve figures. What this means, says Orlik, is that before China can shift to consumption based growth the low incomes of the majority of households have to go up, requiring a major policy shift. Under current policies and even with movement in the direction of the DRC/World Bank policy report for China for a gradual shift away from state owned enterprises, there is little prospect for rebalancing the world economy.

LyrArc Article Gist
An audit of Spain's banking system by the consulting firm Oliver Wyman, shows that Spanish banks would need 53.745 billion euros to be cleaned up if mergers and acquisitions underway are completed.The amount goes up to 59.3 billion euros if this does not happen. Bankia bank will need 24.7 billion euros to meet capital requirements. Three other nationalized banks need 21.5 billion euros, including 3.2 billion euros for Banco Popular. Of the 14 audited banks only 7 need capital infusions. The other banks considered healthy include BBVA, Santander and La Caixa. These findings are similiar to a preliminary finding by Oliver Wyman and estimates provided by Luis de Guindos, Spain's economy minister, that Spanish banks will need 51 billion to 62 billion euros of capital infusion. Spain's secretary of state for the economy, Fernando Jimenez Latorre, says Spain will soon request about 40 billion euros of the 100 billion euro bailout offer for banks negotiated by Spain in June with the EU. It is not clear whether the capital infusion will go directly to Spain's banks as Spain has argued, or go through the Spanish government. The audits were important to provide credibility through independent assessment of losses in Spain's banking system, and remove the fog of uncertainty that is pushing up Spain's borrowing rate in capital markets....

LyrArc Article Gist
In a shift from statements at earlier summits which focussed on fiscal restraint, the Camp David summit continued the "firm committment to fiscal consolidation," yet emphasized jobs and economic growth as "imperative." There is new flexibility to address needs for economic growth and no specific timetables for fiscal balance as in previous summits. Obama had many one to one encounters with the other leaders. He discussed the euro crisis with Cameron while working out on a treadmill, and watched the Champions League soccer final between Chelsea and Bayern Munich with Merkel and Cameron. Each leader of the G-8, Harper of Canada, Monti of Italy, Hollande of France, Medvedev of Russia, Cameron of Britain, Noda of Japan, Merkel of Germany, was assigned a cabin in the rustic wooded setting of Camp David's mountains. A special effort was made to see that Germany's Merkel did not feel isolated in the setting because of the growing sentiment that austerity policies pushed by Germany are not working. On Iran, Obama stated that he was "hopeful that we can resolve this issue in a peaceful fashion that recognizes their sovereignty, but also recognizes their responsibilities."...

LyrArc Article Gist
Five rules the editors of the WSJ say should be followed when working on cleaning up the banking system. A clear no, as Krugman and other experts point out is for the government to make the rather imprudent move to take on all the debts of the banks as in Ireland. A second rule is not to underestimate the size of the problem and delay action till the problem gets much worse, when its harder to deal with. ECB president, Mario Draghi, pointed out the problem at Spain's handling of Bankia bank as a clear example, telling the European parliament recently: "There is a first assessment, then a second, a third, a fourth. This is the worst possible wayof doing things. Everyone ends up doing the right thing, but at the highest cost." A third rule is to set clear rules about banks, who gets rescued and who gets closed and why- so that its not left upto the discretion of officials. On this rule Spain's outgoing Zapatero administration gets good marks from WSJ for settting clear rules to the cajas svings banks. A fourth rule applicable to Europe is to first setup the expertise and conditions for a European banking regulator before setting up a banking union and direct injection of funds by the EFSF into banks of individual countries. A fifth rule is to avoid creating even larger mega banks by consolidating failing banks with large banks, and continuing the government's implicit guarantee of the bank because it is "too big to fail" and creates systemic risk- this is the situation after action by the U.S. Federal Reserve, regulators and the U.S. Treasury....

LyrArc Article Gist
This article by General James Jones is the second from the highest ranks of the Obama administration, saying the entire Middle East policy of U.S. president Obama was flawed and could lead to dangerous consequences. Gen. Jones, former National Security Advisor to Obama 2009-2010, says the situation today is worse than in 1991 when the U.S. launched Operation Provide Comfort to protect Kurdish refugees in Northern Iraq from Saddam Hussein, with an engagement of about 5 years and 25,000 Allied troops. Jones says the crisis in Iraq and Syria is of an order several times worse than 1991 and at any time since the 2003 invasion, as it involves the setup of a terrorist ISIS state in the heart of the Middle East. What went wrong? Jones says all the warnings from other Middle East nations about Maliki's corrupt policy and sectarianism used to stay in power turned to be true. Even Maliki's own advisors and colleagues say in a separate report by Matt Bradley that Maliki battled not for the Iraqi state but only to preserve his own power. Jones calls the U.S. president's decision not to act in Syria when the "red line" of use of chemical weapons was crossed, the failure to maintain a limited military training presence in Iraq after 2011, and not insisting that Mr. Maliki arm the Kurds, as having gravely aggravated the problem in 2014. Jones calls for arming the Kurds directly with sufficient weaponry for defending their region and providing immediate expanded aid to the Abadi government, appointment of a special envoy to ensure direct and immediate communications with Baghdad and with Kurdish, Sunni and Shiite leaders. He calls also for close air support of Iraqi and Kurdish operations, and an aggressive diplomatic effort to unify the Middle Eastern nations to remove ISIS from the region. Jones says this is the right thing to do in the name of all the Iraqi people yearning for peace, for the U.S. service personnel who made sacrifices in Iraq for 23 years, and for U.S. national security....

LyrArc Article Gist
German chancellor, Angela Merkel, appeals to members of the Christian Democratic Party to support the European project at a party convention in Leipzig on November 14, 2011. "We live in times of epic change. Our political compass has not changed. But the context is constantly changing," said Merkel. The 2 day convention used the motto: "For Europe. For Germany." Her message was that it will take years of hard work to fix the crisis and yet this has created an opportunity to put the European project on a sounder footing. Finance Minister Schauble put it succintly as he supported Merkel's appeal: "We now need to build the political union in Europe we never managed to build in the 90's." This comes as changes are taking place in Europe with new unity governments being formed in Greece by Mario Monti, a former EU commissioner, and in Greece by Papdemos, another EU official. And it comes as a head of Italy's central bank, Mario Draghi, who had pushed for stricter controls on spending by the Italian government, is now the head of the European Central Bank. Merkel also hit on the theme of a stricter financial union, and the need for courage to change the treaty underlying the European monetary union to allow strong, automatic sanctions for violations of the treaty. She also emphasized that the government had ruled out issuance of eurobonds that makes the EU as a whole responsible for the debt of individual countries. On that point she said: "Everywhere we look we find behaviour that cannot go on for long. Everywhere people are living as if there is no tomorrow."...

LyrArc Article Gist
Ms Aydintasbas of the Turkish daily Milliyet on the lack of support from the Obama administration for the government of prime minister Erdogan in Turkey to bring down the Assad regime in Syria. She points out that the movement for democracy in Syria as part of the democracy movement in the Middle East is only a normalization of history. She sees democracy finding its normal place in the hearts and minds of Muslims everywhere.

LyrArc Article Gist
MaC Group, a risk advisor to Spanish banks, says Spanish banks hold about 30 billion pounds of distressed real estate and unsellable land. Prices are down 28% from the peak in 2007, according to a report by the IESE Business School, and are expected to fall a further 15-20 percent in the next 2-3 years by some experts. Much of the bank owned land is far from city centers and there is no demand for this. One Madrid based consultant R.R. de Acuna Asociados, says 43% of bank owned land is poorly located and there may be no demand for unfinished residential units for decades. The new government of Mariano Rajoy plans to take action to cleanup the banking system. Louis de Guindos, director of PricewaterhouseCoopers and IE Business School Center of Finance is expected to become the new finance minister. Guindos says strict rules need to be implemented, with some banks able to handle this and others that won't. MaC Group's Cantos, a managing partner, says the gap is huge between prices offered by banks and what investors will pay- as much as 70%. Prime assets can be sold for 30% discount but the land, residential and commercial real estate will require discounts of 70%. Banks have made provisions for losses of 30%, and are now facing the prospect of another 40% in losses. As a result many of the medium and small sized banks which operate only inside Spain may have to be shut down or consolidated by the government of Mariano Rajoy. Only the larger banks like Banco Santander, Banco Bilbao, La Caxia, and Bankia are likely to surivive....

LyrArc Article Gist
The caretaker government of prime minister Mark Rutte in the Netherlands will commit to following austerity plans in its Stability Program report to the European Union. Elections are now set for September 12, 2012. The government was able to get the support of two smaller left-leaning parties to austerity plans. Opposition parties have questioned the policies and said they will reverse them if elected. Rutte's Liberal party and Jaeger's Christian Democrats, with the help of the Christenunie, D66, and Groenlinks, now hold a slim 2 seat majority in the 150 seat Dutch parliament. The Freedom party that had previously supported Rutte withdrew support for austerity policies that it said would hurt pensioners. The moves help avert a credit ratings drop by the credit ratings agencies leading to a loss of the Dutch triple A credit rating. The measures will increase the sales tax from 19% to 21%, make health care spending cuts and impose a pay freeze on civil servants. Savings achieved will be 11 billion euros. Rutte described his actions as: "the government's respose to the acute crisis in confidence in the financial markets." Earlier in the week Fitch Ratings had threatened to lower the Netherlands credit rating. The measures will reduce the Dutch deficit to 3% in 2013 from 4.5% in 2012 to meet EU fiscal compact rules. The changes to the health system are part of changes advocated by the OECD and the IMF because of surging health care costs for an aging Dutch population. There is concern about the sales tax increase because of its effect on consumer spending, and recent comments by S&P managing directors and others in financial markets emphasize the need for economic growth, as austerity measures by itself are inadequate solutions....

LyrArc Article Gist
Germany's social-affairs minister, Ursula von der Leyden, presents the "fourth poverty and wealth report," in March 2013. The issue of inequality is arousing public sentiment in Germany with this becoming an election issue along with the euro crisis and energy reform. The term Gerechtigkeit means "justice" in German and is associated with the idea of equality. The Social Democrats Party and the Greens talk about this in terms of "social scissors" opening wider. The Minder Initiative which passed in Switzerland enabling shareholders to restrict executive pay has led to public discussion in Germany for a similiar approach to be adopted by Germany. The ruling Christian Democratic Party (CDU) of Angela Merkel and the Bavarian Christian Social Union (CSU) party are different from other parties in Europe because of their Catholic and Lutheran roots which favor social solidarity. The FDP party in the ruling coalition supports free market principles but lacks popular support. The Economist cites the work of the German think tank DIW on inequality, which shows inequality showing sharp rise after German reunification around 1991, especially in East Germany. The situation moderates with improvements in inequality in East Germany and a slight improvement in West Germany after 2005. Both East and W. Germany have moved up overall in the Ginni coefficeint which measures inequality from about 0.4 in 1991 to about 0.5 in 2010, showing that the situation has stabilized at a higher level of inequality. Part of this could be because of the shift to temporary workers at lower wages about this time as German industry made efforts to keep wages down and improve competitiveness, even as overall conditions in the economy improved in the last decade. The Economist cites another study by the Initiative for a New Social Market Economy, a German think tank, which compares Germany with other members of the OECD. Germany ranks closer to Scandinavian countries in seventh place in this study, but does poorly in equal oportunities with 14th place. Germany lags behind other OECD and European countries in opportunities for women to work full time. Germany lacks enough daycare facilities for small children so that their mothers can work full time. There is a shortage of about 150,000 for preschool daycare openings in Germany, acccording to information cited by Deutsche Welle from government sources....

LyrArc Article Gist
The German government has taken notice of hate speech on social media and social bots. The Justice Ministry convened a task force on hate speech on internet. Justice Minister Heiko Maas promised legal action against social media like facebook and twitter if it violated laws of libel and inciting to violence. Chancellor Merkel is bringing in a data science expert Professor Simon Hegelich of the Technical University of Berlin for consultations in Dec. 2016. Only AfD of the main parties, with its anti-immigration stance, has not come out in favor of not using social bots or paid trolls in the 2017 elections. Hegelich in talk with DW.com says it is hard to legislate on this because the whole phenomenon has not been fully understood. Article 5 of the Constitution provides for free speech. Hegelich also says the state of technology moves faster than legislation, and being international sites like facebook, twitter and others pose additional issues. He does not say laws cannot be helpful but that its not clear how best to do this. Thomas Jarzombek is a CDU member of parliament and digital media expert. He says social bots are more likely controlled by foreign countries, and fake news sites are more of a domestic problem. Making this worse is the incentive for unemployed journalists to do blogging of the crude and aggressive type to make more money. Jarzombek sees the need for the press to do more in its role for the democratic process to function properly, by functioning in the role of "enlightenment" and "awareness."  Jenna Behrends, a law student and CDU local politician for Berlin-Mitte, says it is necessary for good bots to be used to fight bad bots, in an article in Der Spiegel. Major mainstream media would then have to launch social bots themselves to fulfill their role of providing the public with correct and fair information free of excessive bias and distortion of the bad bots. One example of this is shown explicitly here of German chancellor Merkel's picture with the words " Guilty of betraying the people," with links to "Drain the swamp," and "Brexit." A more complex question is one of how to let people vent out frustration about the mainstream media itself being biased in favor of the established views and not doing enough or giving enough space to reflect alternative views, so that these can be debated without inflammatory language and deliberate distortion. A whole range of tools and modifications of behaviour may be necessary ahead of next years elections in France and Germany, now that the phenomenon is better understood following a vote in the Anglo-Saxon countries.   ...

LyrArc Article Gist
BBC reporter Anrew Hosken reports on the origins of Islamic State (ISIS).

LyrArc Article Gist
Krugman questions whether the assumptions behind the austerity policies are true- that they would inspire confidence in economic recovery, or that in the absence of austerity policies borrowing costs would go through the roof. The recent events in Holland with the collapse of the government in the Netherlands- when a party leader supporting the government said he did not want to hurt pensioners in the Netherlands just to satisfy German opinion- and the mood in France with economic anxiety vote going to Marie Le Pen and Francois Hollande in the first round of presidential elections, shows that very little confidence has been created. High unemployment and economic anxiety are leading to a reappraisal of austerity cuts that depress the economy and reduce tax revenues, but Krugman says no changes are taking place to correct these policies. This is true for Spain with its high unemployment, and Britain which now has two quarters of negative growth.

LyrArc Article Gist
Italy's prime minister, Mario Monti put it best when he said in a speech in Brussels in April 2012: "If a country becomes more productive and competitive, but there is no demand for its products domestically or around it, growth will not materialize." There is a new shift in opinion towards a balance of fiscal discipline with growth measures to get Europe back on track. The feeling in different parts of Europe is that the German view of austerity alone will not work for Europe. And the view is coming from the far right to the far left, from Marie Le Pen, far right presidential candidate in France, to the far right leader whose move to withdraw support to the government in Netherlands on the issue of austerity measures led to its collapse. Geert Wilders, leader of the Freedom Party in the Netherlands, said: "we don't want our pensioners to bleed just to meet the dictates from Brussels." The IMF has put out research that questions what is now called "the German hypothesis." The "German hypothesis," is based on the unique experience of Germany with the Hartz reforms under chancellor Schroeder which were based on wage restraint by workers, the German "kurzarbeit" program of government support for retaining workers with lower pay during cyclical downturns, improving competitiveness of German companies, and conservative budget practices. There appear to be two exceptions to this. One is that demand has to be strong outside or domestically for a country to reduce unemployment and improve productive capacity utlilization as it increases competitiveness. This was the case as Germany made the Hartz reforms under Schroeder. Wage restraint acts as a form of devaluing currency for reducing the cost of its products to improve exports. All leading parties and the unions are now in favor of wage restraint and lowering wages to preserve jobs to improve France's competitive position. Germany had the benefit of a decade to implement these reforms to reduce unemployment, because demand was not declining domestically or around it during its reforms. The situation is different in Spain where in all likelihood demand would shrink further with unemployment rising from 25% to higher levels, and higher sales taxes. This is why Francois Heisbourg, special advisor at the Paris based Foundation for Strategic Research, says about the current situation in Europe, that destroyiing Greece with strict austerity alone wasn't something the EU can look back at with the sense of having done the right thing, for Spain it appears misguided and lacking careful thought. The editors of the Wall Street Journal expressed the same sense when they described the March 2012 bailout of Greece as a tragic sideshow, because the main purpose was to buy time and insulate the other larger economies in the EU by giving the French, Spanish and German banks time to improve their financial position. The Journal called it bad for Greece leaving it with debt at 120% of GDP till 2020 and no economic growth, and bad for democracy as it was done against overwhelming Greek public opinion- The Tragic Greek Sideshow, Feb. 22, 2012. Volker Perthes, director of the German Institute for International and Security Affairs, a Berlin think tank, says the Germans have always viewed German leadership in Europe with discomfort, and would prefer a leadership where several states, France, Italy, Spain, and other countries in the EU coalesce around consensus positions. This is historically true for the German position since chancellor Adenauer. With the Free Democrats in decline, and the Social Democrats and the Pirate party doing well in recent German elections and favoring consensus in Europe, Merkel's Christian Democrats need to rethink their policy to give greater weight to economic growth for a consensus position in Europe. ...

LyrArc Article Gist
In this Agenda column Simon Nixon takes on the U.S. Treasury's criticism of Germany for its current account surplus of 7% of GDP in 2012, and not doing enough for the economies of southern Europe. The German government called it "incomprehensible." Nixon says it is better for the German economy to remain strong and to boost competitiveness and consumer spending in Spain, Portugal, Italy and Greece. He says the low eurozone inflation of annualized 0.7% for September 2013, which prompted the ECB to cut rates by 0.25%, is healthy to the extent that consumer prices are declining to adjust to a decline in wages. The reduction in labor costs is a way to restore lost competitiveness, just as Germany did in the last decade. The criticism is considered by many economists to be misdirected, and seen as "incomprehensible" by Germans, as Germans ask what would the U.S. have them do- provide stimulus when the government debt to GDP ratio is currently 82%, increase wages and how would this help Southern Europeans. Focussing on Germany's current account surplus says Nixon, is obscuring the larger issues of increasing consumer and business confidence and spending in the eurozone, and increasing bank lending. The new ECB bank resolution arrangements and other changes including deposit insurance if done right should help the recapitalization and restructuring needed for restoring bank lending to support recovery. Spain is furthest along in regaining competitiveness, with changes in Portugal, Italy and Greece also supporting a gradual return to growth....

LyrArc Article Gist
Equity markets in Europe and the U.S. are likely to see some of the 62 trillion yen, or $630 billion, which the Bank of Japan plans to add to holdings of banks and households in two years 2013-2014. A senior advisor to Deutsche Bank, Thomas Mayer, says equities of Germany, France and Britain are likey to see interest from Japanese investors, as are bonds and equities of the U.S. Japanese companies such as Toyota and consumer product companies such as Sony and Panasonic will now be able to better compete on price against their S. Korean, American and European competitors.

LyrArc Article Gist
People from Denmark are known for fluency in English, and are some of the best non-native speakers of the English language. About 38 percent of courses at Danish universities are in English. Yet debate is shifting to the inflluence of immigrants in society as "pizza-Dansk" or "pizza-Danish" is spoken by Middle East immigrants at pizzerias. One Danish member of parliament from the DF Party is suggesting the government prevent the spread of "pizza-Dansk" and help preserve the Danish language spoken by 6 million people in the country. It is reflection of the anti-immigrant mood in Sweden, Denmark and other European countries, where parliamentary elections have given parties opposed to immigration a larger number of seats.

LyrArc Article Gist
Krugman points to the connection between the failure to achieve debt reduction through debt forgiveness and the sluggish economic growth in the eurozone and U.S., five years after the global banking and financial crisis of 2009 and four years after the beginning of the eurozone debt crisis in 2010. In the U.S. debt reduction for homeowners was delayed with a wave of foreclosures, and in Europe austerity budgets were the norm as Germany pushed hard for austerity policies. In 2014 small relaxation of austerity to give relief to voters took place in Greece, France, Italy and Spain, with austerity budgets still in place. Growth also slowed in Germany to slight contraction in the third quarter and no growth in the fourth quarter of 2014. This is leading to the formulation of new policy to address growth challenges in the eurozone. Debt to GDP is growing in eurozone countries and Britain because of lack of growth, even though spending cuts have been made, showing the need for rethinking policy. ...

LyrArc Article Gist
Reflecting the volatile nature of the global economy with systemic risks remaining, impact of sharp cuts in spending, and the danger of oil prices exceeding $150 with a mideast crisis, the IMF provided a wide range of possibilities around its basic forecast. The IMF says it expects the global economy to grow 3.5% in 2012, up 0.2% from a Jan. forecast, and a forecast of 4.1% for 2013. But the IMF says this depends on the eurozone crisis, which could take off 2% from global output and 3.5% from output in the eurozone if things went wrong in Europe. Higher oil prices above $165 with supply disruptions after Iranian sanctions are another danger. Its forecast for Europe is 0.3% contraction in 2012 and 0.9% growth in 2013. Because of the risks in the outlook the IMF cautions countries from cutting spending too quickly, and says the best approach is to reduce deficits gradually over the long term and not to move too fast in the short term. This word of caution applies to Spain, the UK, France and Germany. To maintain enough funding in a crisis the IMF plans to increase its lending capacity from $380 billion by an additional $280 billion, with pledges of $60 billion from Japan, $26 billion from the Nordic countries, and $200 from other eurozone countries. ...