LyrArc Article Gist
The Greens party will not be represented in the Saarland parliament as its performance declined in last weeks election. The Greens Party polls less than 8 percent in Germany, and less than 6 percent in North Rhine Westphalia elections for May 2017. The improving prospects of Martin Schulz the SPD candidate for chancellor have hurt the Greens. Even as the climate change issue becomes prominent the Greens are seeing the focus shift to the SPD and the CDU in 2017. The issues after the election of Trump following Brexit vote have shifted attention to what happens to the European Union, and the need for strong leadership in Germany and for the European Union. This does not help the Greens Party or other smaller parties. The AfD also has suffered as Germans take a second look at the parties, and think long and hard about what kind of future they want to see and the best way forward. 

LyrArc Article Gist
Italy's new prime minister Mario Monti, was frank in his views about depending on austerity alone to meet the debt crisis, views also shared by President Sarkozy of France. Monti told an interviewer from the German newspaper Die Welt, before meeting German chancellor Merkel in Berlin: In the absence of specific help "a protest against Europe will develop in Italy, also against Germany, which is viewed as the ringleader of E.U. intolerance, and against the European Central Bank." He went on to say-"I cannot have success with my policies if the E.U.'s policies don't change." He pointed out that economic difficulties could drive Italy to "flee into the arms of populists."

LyrArc Article Gist
Merkel expresses her support for Portugal during a meeting with prime minister Pedro Passos Coelho of Portugal in Lisbon on Nov. 11, 2012. In a news conference which was live on German television Merkel said: " I feel a great sense of determination here in Portugal to overcome this difficult phase." Recognizing the cost of austerity measures and spending cuts, the 16% unemployment rate, Merkel added: " I know that its very hard for some people. Unemployment is high, especially among young people. Consequently, Germany in particular wants to support Portugal through professional training for young people." The German chancellor is travelling with a German business delegation which is meeting with Portuguese executives to determine areas for German cooperation with Portugal to generate growth in the economy.

LyrArc Article Gist
 Mayor Reiter of Munich, Christian Kern, head of Austrian railway OBB, say here that the actions of Viktor Orban of Hungary gave the German government very little time, only a few hours, to act. The first motivation was to act in a humanitarian way, which is what happened. The German government had asked Orban to register and handle immigrants in an orderly way. In the end with the failure of Orban to do this, the immigrants who would have come north anyway, streamed into Germany and Austria in buses and trains. Clearly Hungary and Germany could have handled this better. The German public provided support with a large number of volunteers helping. One German minister is cited here as saying that if Orban wanted to build a fence he should have done it in a quiet way, as there are fences between Bulgaria and Turkey, and Turkey and Greece and it has not bothered anyone.

LyrArc Article Gist
Individual investors reacted strongly to declining prospects for emerging markets with slowing growth, depreciating currencies, corruption and political uncertainty in 2013. As of the beginning of June, retail investors pulled $18.1 billion from emerging market bond funds, about one third of the amount that went in to emerging markets since the financial crisis in 2007, according to fund tracker EPFR Global. Institutional investors have pulled out less, about $9.3 billion, or 10% of their investments in emerging markets bonds since 2007. A similiar pattern is seen for investment in the stock markets of emerging market countries. The U.S. Federal Reserve's monetary expansion helped pull more money into emerging markets such as India, Indonesia, Brazil and Turkey. As the Fed shifts away from these policies in 2013 emerging market countries have large current account deficits and less money to finance imports and debt.

LyrArc Article Gist
Capital inflows into banks in Cyprus in the form of demand deposits accelerated in 2008 after it appeared that the banking system in Ireland was having serious problems. About $40.7 billion of capital inflows went into Cyprus in the form of loans and demand deposits in 2008, 161% of the GDP of the country, according to the McKinsey Global Institute. Cyprus became the place for hot money from other countries because of the higher interest rates on euros and the lax banking laws.

LyrArc Article Gist
A decision reached at the G-2- meeting in Cannes requires Italy to allow the IMF to look at its books every 3 months to ensure that a $75 billion austerity package is being implemented. This comes as the general feeling is that prime minister Berlusconi's government lacks credibility on this issue. Chancellor Merkel of Germany disclosed that China and Russia do not want to commit funds to the rescue effort unless there is some assurance - such as the IMF overseeing the EFSF financing facility- that there will be no losses. Japanese government spokesman said Japan was also concerned about losses, especially if the EU would use the money to prop up insolvent banks. This comes as Italy's borrowing costs have increased to new highs in November 2011.

LyrArc Article Gist
The facts that guide one's understanding of what is happening in Greece relate to the size of the public sector for a small country like Greece, and the failure of people from all classes of society from cab drivers and civil servants to small business and the shipping industry, to pay taxes. These two twin facts and a splurge of spending during and after the 2004 Olympics without proper and correct account keeping, has brought Greece to its present situation. One estimate is that every Greek person would owe 27,000 dollars, that is how much the national debt has swollen to- a massive 300 billion euros debt for a small country. This is 115% of its GDP. And the public sector spending simply went unchecked by different governments trying to win votes. Estimates are that the public sector makes up 40% of Greece's GDP, and government workers are 15% of the active workforce. Not paying taxes has become a societal trait in Greece, as a result the government does not collect an estimated 25 billion euros a year in taxes each year. And this does not include the taxes that would be paid if owners in the Greek shipping industry were to not take advantage of an exemption from paying taxes granted by the government. The result- Greece's socialist government of Prime Minister Papandreou has accepted a $110 billion euro bailout from the European Union and the IMF which comes with cuts in public spending and austerity measures designed to reduce the deficit form 13.6% of GDP to 3% in 3 years. Its important to understand what is happening in Greece, because from Prime Minister Cameron in Britain (with his cuts in government department spending of 25% over 5 years), to Prime Minister Naoto Kan of Japan (with a planned doubling of the sales tax), the mood in Europe and Japan is shifting to austerity measures that would correct excessive government spending. In Greece Papandreou and his ministers are making serious efforts to change a culture of not paying taxes. See the groups and links for Papandreou and Greece....

LyrArc Article Gist
Jack Ewing of the NYT provides this exceptional account of how a solution can emerge in the Greece crisis based on debt sustainability relief. On this issue of debt sustainabilty relief without immediate haircuts but stretching the payments over an extended period with still lower rates, there is a consenus emerging with the IMF and France, putting forward the idea, and Germany showing awillingness to consider this. It would also restore some unity in the European Union with France and Germany moving in the same direction with a common goal.

LyrArc Article Gist
Amar Bhide touches on the unpredictable consequences of devaluations while commenting on the supposed benefit of a country having its own currency vs a currency such as the euro. The euro takes away the advatantage of devaluing the national currency as a way to regain competitiveness. Bhide points out that devaluations hurt the elderly on fixed incomes and low wage workers. Protections have to be put in place for the sections of the population that are badly affected. Large union negotiated wage increases can also reduce the benefits of devaluation in terms of regaining competitiveness.

LyrArc Article Gist
The IMF commmittment to troubled European economies is large, at $320 billion, 40% of its theoretical financing capacity, and exceeds its role in the 1997 Asian financial crisis. Concern that the IMF is now helping politicians protect the eurozone. And fears that the lack of the option of devaluing currency leaves too much of the burden on cutting spending in the midst of a recession. Deficit reduction in the current situation will take years to happen.

LyrArc Article Gist
Financial problems at Banca Monte dei Paschi di Siena and the Italian government's role has introduced an element of uncertainty in the upcoming election in Italy. This has helped former prime minister Silvio Berlusconi recover in the polls. In Spain the newspaper El Pais published information from the ruling Partido Popular financial records showing hidden payments of 25,200 euros a year between 1997-2008. The opposition leaders asked for Rajoy's resignation and Rajoy did not address the matter directly till a joint appearence with Merkel in Berlin, where he said: " I have exactly the same strength, the same courage, and I am just as determined to continue as prime minister to overcome one of the most difficult situations in Spain of the last 30 years." Rajoy has a solid majority in parliament, with his party firmly behind him. This is unlikely to affect the political situation in Spain.

LyrArc Article Gist
Signs that the consumer credit boom in Turkey is reaching alarming proportions are evident from the surge in credit card use. Credit card debt has increased by 20% in 2011, after an increase of 23% in 2010. There are an estimated 3.7 million delinquent cardholders and 2.5 million cardholders who only make the monthly payments. The Turkish regulators are now requiring cardholders to payoff at least half of the balances before they can use ATM's for cash. Banks charge interest rates of about 29% and cardholders who are using credit cards for the first time -as more of the Turkish people are joining the middle class during the country's decade of high growth- do not understand the risks. Turkish banks, Garanti, Yapi Kredi, and Isbank, are in the list of top ten card issuers in Europe, according to Nilson Report. Card purchases average $3,500 per year, in a country with per capita income of $12,300. Turkish banks have pushed card use, with Garanti Bank's website giving users cash for frequent use of cards, and asking users to show the card even if they are buying an apple at the grocery store. The volume of personal consumer loans has doubled since 2009, because Turks use the consumer loans to pay off the high interest rate balances on credit card debt. Analysts at ING Group in London who follow Turkish banks say the delinquency rates will be above 9% in 2012. The IMF's Global Financial Stability Report of Sept. 2011 has identified the credit growth to GDP ratio as one of the key factors leading to an economic crisis. This was true for the U.S. before 2008, for Portugal and Ireland before the eurozone crisis. China's credit growth was up 29% in 2009 and Hong Kong's up 30% according to the IMF Report. Turkey and Vietnam also have high credit growth to GDP ratios according to the IMF. Turkey's high capital inflows can quickly reverse in a crisis increasing the risks facing the country....

LyrArc Article Gist
Signs that Turkey's economy is growing and consuming beyond its capacity. The current account deficit is now at 8%, and foreign credit is helping finance the boom. General purpose consumer loans are growing rapidly- at 42% in 2010, and at 61% on average from 2005 to 2008- according to Standard Unlu, an Istanbul based investment bank. Banks are known to send text messages to borrowers if they qualify, so that the money can be picked up at the bank branch. Turkey has gone through two boom bust cycles- in 1994 and in 2001. The central bank of Turkey has increased the level of interest free deposits banks must keep at the central bank, a move designed to reduce lending. However Turkey's younger generation of consumers are on a spending binge, and access to personal loans is easy. Signs of an asset bubble are easy to find. A 24 acre plot in Istanbul's city center sold for $33.3 million.

LyrArc Article Gist
Angela Merkel's Christian Democratic Union party suffered a major defeat in North Rhine-Westphalia. Exit polls show the SPD Social Democrats party winning 38.9% of the vote, increasing its vote by 4.4%. The CDU won only 26.3% of the vote, dropping 8.3% from the last election. The SPD state premier, Hannelore Kraft, proved to be a popular campaigner. Her opponent Mr Rottgen made debt-financed spending an issue and told voters this was a referendum on Merkel's policies for Europe. Ms. Kraft said after the win: "We made people the central focus again." This has overtones of the victory of Francois Hollande in France, a few days ago, and shows a fundamental shift in Europe. German media described it as debacle for the conservatives considering the size of the margin between SPD and CDU. The Greens secured 11.6% of the votes and this will enable Ms. Kraft to govern easily compared to an earlier minority government she led. This state is the largest in Germany, with one of every five Germans living here, with the capital in Dusseldorf. The Pirates party secured 7.8% of the vote, and the Free Democrats staging a recovery with 8.3% of the vote under a popular young leader Christian Lindner. Upto this point the SPD lacked an effective leader to challenge Merkel. The sense now is that Ms. Kraft will emerge as the SPD's challenger to Merkel in elections in 2013, or earlier. French president Hollande goes to Berlin on May 16, 2012, and the SPD win is expected to strengthen his position in negotiations....