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Wall Street Journal Original article ›
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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....
New York Times Original article ›
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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. ...
New York Times Original article ›
Wall Street Journal Original article ›
Wall Street Journal Original article ›
New York Times Original article ›
Wall Street Journal Original article ›
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An account by Journal reporters based on over 25 interviews with eurozone policymakers shows how the central players in the eurozone drama acted to defend their national interests during the period April to July 2011. On one side France's president Sarkozy, Frenchman Claude Trichet at the European Central Bank, arguing in favor of the banks not to take bondholder losses or haircuts on loans made to Greece. On the other side the Bundesbanks Axel Weber, and Jens Weidman, Jurgen Stark and German Finance Minister Schauble. The Germans argued strongly for bondholder losses to take responsibility for bad loan decisions by French and German banks. French banks had committed more loans to Greece than German banks and had more at stake. German public opinion was strongly against German taxpayers paying for the losses, making German politicians insistent that European banks take losses on their bad loan decisions, or Germany would not support additional loans to Greece. Throughout April to July the two sides were locked in an impasse. The French feared losses for their banks and a Lehman Brothers bankruptcy style situation. The Germans at the Bundesbank and the Finance Ministry were equally insistent. A July 2011 summit meeting did not settle the issue. The events not covered here from the July to the December summit of eurozone leaders resulted in bondholders taking 50% haircut on loans to Greece, reducing the debt burden in Greece after austerity measures led to popular protests. The French pushed hard for the ECB or the EFSF to be allowed to make large purchases of bonds of troubled eurozone countries in an effort to protect Spain and Italy from contagion through higher bond yields. The Netherlands and Finland supported Germany's position. German bankers Weber, Weidman at the Bundesbank and Finance Minister Schauble opposed large scale buying by the ECB of Italy's and Spain's bonds and Chancellor Merkel said about a common eurobond that "this is not going to happen." Governments changed in Greece, Italy, and Spain by Dec. 2011, which committed to austerity programs and spending cuts. Italian Mario Draghi was appointed with German support as new head of the ECB. In late December 2011 Draghi launched the Long Term Financing Operation for lending unlimited amounts at 1% for three year loans to European banks and relaxing the terms to accept government bonds and other debt as collateral for loans. The effect of this was to provide a large infusion of liquidity into the banking system in Europe and drastically bring down the yields on bonds issued by Italy and Spain....
New York Times Original article ›
LyrArc Article Gist
Francois Hollande, Socialist candidate for president in France, has led the Socialist party for many years. He started his career as a junior politician in the Mitterand government, and regards Mitterand his mentor. Another mentor is Jacques Delours, who was president of the European Commission. He has many years of training, and has persevered thorughout with a certain sense of humility in the midst of colleagues and politicians in France with larger egos. That inner strength and courage has emerged in the recent campaign appearances and the final debate with Sarkozy in April 2012. He has shown this in the recent campaign by not overstating expectations as he looks at the long term, and at the same time not understating when courage demanded a stronger statement. He has taken timely and effective positions in the current debate of austerity vs growth, or growth coupled with restraint in fiscal spending vs austerity, that is raging in Europe. He was quick to call the situation in Greece, a failure of governance in Europe, as well as a failure of governance in Greece. With the new voices of Premier Monti in Italy and ECB president Draghi from Italy, pushing for growth coupled with fiscal responsibility, a president Hollande in France, would add another voice to European aspirations for growth in the debate with Angela Merkel's Christian Democrats in Germany. ...
WSJ Original article ›
LyrArc Article Gist
Much of what is written here about Xi Jinping pursuing Chinese socialist vision was known since he became president in 2013 when China's Communist party was losing its appeal, and efforts were made to seize power within the communist party by a leader in the western province of Chongqing. Bo Xi Lai attempted to take advantage of the situation with appeals to the working class and without any genuine commitment beyond a power grab. It was well known that Xi Jinping is a son of one of the veterans of the Communist party under Mao, Xi Zhongxun, unlike leaders who followed premier Deng Xiaoping such as Jiang Zemin. Zemin was a relatively unknown figure who was in university during the crucial period of 1947-49 when Mao came to power in mainland China. It would not be correct to say that little was known about Xi's own ideas about socialism as the long term answer to China's problems. Xi also came in as president at a time when the Communist party was losing its appeal to working class people after three administrations that followed premier Den Xiaoping. These three administrations followed a form of state capitalism that allowed companies to pollute the environment, compete without any regulations, and allowed to operate without any controls as long as they pursued growth aggressively and expanded the economy.There was an effort by Communist party regional leader in western Chinese province of Chongqing, Bo Xi Lai, to use this as an opportunity to grab power in China. During his first year as president Xi had to resolve this issue by having a court trial after revelations of corruption and misuse of power by Bo Xi Lai.  Xi's father Zhongxun's role in the revolutionary movement offers clues to Xi's own convictions and faith in the party. Zhongxun was a communist soldier who set up the revolutionary base areas in Shanxi-Gansu northwest border region of China that provided a refuge for Mao's army following the Long March. Other clues come from Zhongxun's role as head of propaganda during the period after 1944 and in 1952. Xi's family background particularly on his mother's side shows a fervent commitment to Chinese socialist vision during the chaotic years when the Japanese invaded China and Chiang Kai-Shek's nationalist forces failed to defend China's sovereignty. One reason Xi has been less understood is that little attention is paid to Xi's mother, Qi Xin who was highly educated and fervently believed in Chinese socialism and nationalist spirit during the Japanese invasion in 1938. In fact Qi Xin had to leave middle school after the Japanese took over Beijing. She joined the Counter Japanese Political and Military University to continue education and in 1941 attended the Central Party school. She met Xi's father Zhongxun in 1944. In 1953 she enrolled in the Marx School of Communism, and it was her position at the school that offered her husband added protection during the Cultural Revolution that affected Deng Xiaoping and others. With such a history in the 1930's, 1940's, and 1950's it is likely that Xi was profoundly influenced by his father's role in the revolutionary movement, and his mother's faith in socialism with national spirit as the way to protect against the foreign invasions. It would now appear that by the time Xi joined the Politburo in 2003 there was no question about the future course China would take given the role of his parents, and the events of 1938 the fall of Beijing, his mother having to flee, and the events that followed. Xi showed resilience during the period of the Great Proletarian Revolution when he was sent to the villages at a time when he would be studying in school and college. He was sent to an agricultural commune in largely rural Shanxi province where he worked as a manual laborer alongside other people and developed a relationship with the local farmers. Unlike other leaders during that period which could even be said about premier Deng Xiaoping in 1989, Xi took a different lesson from this experience largely because his father and mother were committed to the socialist vision for the long run. His father was still not fully rehabilitated by premier Chou en-lai when Xi was allowed to enter Beijing's Tsinghua University in 1975. He studied chemical engineering at Tsinghua graduating in 1979. Upon graduation he worked as a assistant for 3 years to a vice premier who was minister of defense. He then left Beijing for Hebei province to work as a deputy secretary of the provincial CCP. He was made Mayor of Xiamen, then governor of Fujian province in 1999 where he tackled environmental conservation before moving to Zheziang province. His father passed away in 2002 and it would appear that he was carefully trained in different provinces instead of staying in Beijing, for a position of national leadership. Xi got his break in 2007 when the upper leadership of Shanghai city was tainted in a wide ranging pension fund scheme. He was made party secretary for Shanghai. This was the position Jiang Zemin had held before he succeeded premier Deng Xiaoping. In only a few months in October 2007 Xi was made one of the 8 Politburo members, ready to succeed Hu Jintao as president. Xi's perception of being sent to the villages and making it to university education was that it was part of the long run socialist struggle, with pain that his father had also endured as simply a phase in which things would be right in the end. Xi's mother comes across as a resilient figure and one who had herself gone through the struggles of the 1930's and aided her husband on one occasion. Some of this resilience could have been passed on to the son. Xi's wife is a zealous participant in Chinese dance and music performances that created enthusiasm for the Chinese socialist revolution from the 1930's period. In his conversations  with colleagues in the party, in culture and temperament, Xi has been forthright about this background and his style of work.  Xi is unlike premier Deng and the presidents who succeeded him such as Hu Jintao mentored by a former mayor of Shanghai Jiang Zemin who came to power in 1989. Xi is more in line with the leaders around Mao like his father in his outlook and thinking, with a cautious temperament that comes from years going through ups and downs of political struggles. He is once said to have responded with dismay about being in a top position in the government knowing how precarious this had been for his father. The education at Tsinghua, his engineering background, and his easy familiarity with farmers in the provinces, mean that he understands China and its history well enough to have the confidence to shape Chinese policies in a way that none of his predecessors had except Mao, premier Chou-en-lai, Liu Shao Chi and a few veterans from that time in the 1930's. That Xi waited patiently for so long to gradually assert his ideas about socialist vision for China may be the surprising part of his behaviour till 2021.  It may be that he wanted to make the changes only after he could persuade party leaders and colleagues of his vision and long run goals. And because the Chinese economy had grown so large that it would take time to steer the ship in a different direction for the long term. In most of the negotiations with president Trump he cautiously let trade negotiators handle the situation, all the time learning about how to tackle problems of China's relationship with US and Europe. US president Biden also has a vision that is veering towards a socialist perspective in terms of bringing gains of progress to workers and families. So does Mr. Trump, Mr. Boris Johnson in UK, and Social Democrat's Scholz in Germany. It is both economic and political as Mr. Xi is quoted as saying in this WSJ report. The necessities of such action are both economic, social and politically driven as capitalism has veered way off course.  In this report it is mentioned that Soho China 40% stake was taken by a large capital markets firm in New York in the hope of large gains, as Soho China developer was a tycoon who wanted to leave China. Seeing it as not favorable to his company following events in Hong Kong. This behaviour of capital markets groups in New York and tech companies in Silicon Valley, driven by profits and not aware of the social and economic problems of working class American families is a problem in the US and in Europe. It is also what has driven so many large tech companies to expand manufacturing operations in China, that hurt US manufacturing capabilities and American workers jobs- an issue raised by president Trump and taken up by president Biden. Biden has already moved to make Intel Corporation change its plans and invest in American manufacturing technologies in a quietly implemented U turn. US president Biden is left with the unenviable job of solving this huge problem during the pandemic. He has also committed to a somewhat socialistic vision with a $3.5 trillion plan for workers and families, as has vice chancellor Scholz in Germany with his own version of programs, after the failures of unregulated forms of capitalism. Scholz goes so far as to say his mission is to show that there is really no such thing as a self-made man, that it is help from society, his fellow citizens, and government, that makes it possible for him to do his work. In a sense the world is shifting away from Reagan forms of capitalism without regulation after seeing disastrous results during the pandemic. Not just China. Some form of government guidance and regulations are now seen as essential in China, the US, UK, Germany and India for a better society and a better, healthier life, and for opportunity for all in each country.   ...
Wall Street Journal Original article ›
LyrArc Article Gist
France's deficit is at 4.3% of GDP in 2014, exceeding the EU target of 3% and putting at risk France's committment to reach this by 2015. Unemployment is at 11% in early 2014. President Hollande appoints a new prime minister, Manuel Valls, to tackle the economy after losing local elections in France.
Wall Street Journal Original article ›
Wall Street Journal Original article ›
Wall Street Journal Original article ›
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. ...
BusinessWeek Original article ›
LyrArc Article Gist
In Spain it is not the big banks like Banco Santander or BBVA that funneled a lot of the mortgage lending. Its the Cajas or non profit lending instituions that do more than half of all the loans. The Cajas had $330 billion in loans to developers in Sept. 2009, up from $50 billion in 2000. As home prices plunge the 45 Cajas are suffering losses, amounting to estimated $3.4 billion in 2010.
Wall Street Journal Original article ›
LyrArc Article Gist
Greece's economy is expected to shrink by 6% in 2012 by many private sector economists in Greece. This means Greece will have a deficit closer to 10% of GDP. Antonio Samaras, leader of the New Democracy Party, is expected to win the elections in Greece to be held by spring 2012. Opinion polls show his party getting 24% of the vote, and Papandreou's Socialists getting 15%, showing how little support any party can gather in Greece. Samaras told the Journal in an interview- the contagion is spreading rapidly, and what he fears is political and social contagion from high unemployment and austerity measures. Samaras says his government would continue with the spending cuts, but also reduce the tax burden on Greek households and businesses, which he views as having worsened the recession in Greece.
Wall Street Journal Original article ›
Wall Street Journal Original article ›
LyrArc Article Gist
Imposing losses on senior bond holders is acceptable under EU law during a liquidation process, say experts. Having them take losses in a restructuring would require changes to European and national laws. The uncertainty this creates coud hurt Spain's larger banks such as Santander and BBVA, which have so far not been affected by the crisis. A new European banking supervisory authority could insist on losses for senior bond holders to reduce the amount needed from the EFSF or ESM rescue funds.
Wall Street Journal Original article ›
LyrArc Article Gist
The WSJ's Alessandra Galloni speaks with Mario Monti, the Italian premier, for in-depth interviews. Here Galloni and Walker provide an account of what happened during and after the June 28, 2012 summit of European leaders. Monti described the comments of ECB president Draghi in early August- about ECB buying of bonds of Italy and Spain being within the mandate of the ECB if monetary transmission channels were not working properly to reduce yields- as a bold effort following the agreement made at the June 28 summit to support Italy and Spain. Monti expressed the idea that Draghi should feel morally and politically justified if and when he makes the bold moves to rescue the euro. The only problem he says is whether one has to wait till the night before the euro is about to disintegrate for this to happen. This is the first time Monti has publicly expressed the possibility of this happening.
New York Times Original article ›
LyrArc Article Gist
Higgins cites the IMF and other experts on Greece's debt being unsustainable. He includes a long discussion with Charles Dallara who negotiated in the Brady Plan restructurings for Latin American debt, and for the European banks in 2010-2012 with the EU. Dallara says the issue has become politicized with national parliaments involved making it difficult to tackle the issue of debt reduction. Dallara points out that the Brady plan restructurings were possible because national parliaments were not involved.
Wall Street Journal Original article ›
LyrArc Article Gist
Antonis Samaras visits Bavaria and meets with Christian Social Union leader Horst Seehofer, who offers his support to Greece's recovery efforts and plans a return visit to Greece. After the meeting, Seehofer said "today, we've turned over a new leaf," and Samaras said "I've received a lot of appreciation for our efforts."
New York Times Original article ›
LyrArc Article Gist
The joint statement after the G-8 summit stated that "our imperative is to promote growth and jobs." It stated the budget deficits need to be addressed but said "spending cuts must "take into account countries' evolving economic conditions and underpin confidence and economy recovery." Germany's Merkel in her remarks said growth and deficit reduction supported each other, that "we have to work on both paths, and the participants have made clear, and I think this is great progress." Opposition Social Democrats in Germany say Ms. Merkel is adept at changing as the situation changes, and it appears Merkel is making the transition away from strict austerity policies she had championed earlier. Especially now with fresh elections in France, Netherlands and Greece, and the election of Francois Hollande on a pro-growth platform, the German position of strict austerity is being increasingly questioned on all sides. French president Hollande met U.S. president Obama at a pre-arranged meeting prior to the summit. Obama and Hollande see the need to reduce high unemployment in the U.S. and Europe by encouraging growth, creating a common interest....
Economist Original article ›
Wall Street Journal Original article ›
LyrArc Article Gist
The Muslim Brotherhood is thrust into a critical role as economic policymaker after winning the parliamentary elections in Egypt. The Muslim Brotherhood's foreign policy advisor, Essam El-Haddad, says it gave the IMF its tentative approval for a $3.2 billion loan to Egypt. Haddad says it was a very, very short time for the learning process to occur about the economic issues facing Egypt and the IMF. Foreign investment peaked in 2007 at $13.7 billion. It is now a small fraction of this and tourism earnings have declined to a third of what they were before. The Brotherhood cites the example of Turkey where the Islamist Justice and Development Party formed the government in 2002. At the time Turkish inflation was at 55%, the currency Turkish Lira had lost 51% of its value and GDP fell by 5.7%. Turkey has seen high economic growth in the last decade.
DW.COM Original article ›
New York Times Original article ›

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