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Under the rules for the European currency and the European Union there is no mechanism or process of fines or other sanctions to promote compliance to debt and deficit rules. In the case of Greece, an examination of budget reports shows that Greece never met the deficit rule of 3% for any year except 2006 and it has never been within 30 percentage points of the debt ceiling. Greece's statistics are faulty and deficit figures are continually being revised upwards. Several times the figures were quadruple what was initially reported in late 2009, for instance the deficit figure was 3.7% of GDP, then revised to 13% of GDP, setting off the current crisis for the Euro and the European Union. In 2001 Greece failed to reflect $2.2 billon in military expenses. According to Eurostat, the EU statistics authority this was 10 times what was saved from the derivatives swap arranged by Goldman Sachs to trim Greece's deficit. That transaction trimmed the deficit by one tenth of a percentage point.

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An internal IMF document that estimates Europe's banks are short of capital by $273 billion. IMF managing director, Christine Lagarde, tries to downplay the report by saying this is not from a stress test that the IMF conducts. In August, Lagarde, called for an "urgent recapitalization" of European banks. As France's finance minister, Lagarde, steadfastly insisted French banks were well capitalized. France worked hard to prevent requirements for significant capital reserves under the Basel III rules. The higher capital requirements were supported by the U.S.. Simon Johnson said in his blog, that as long as European banks had inadequate capital to act as a buffer against losses, European countries had no safe route for restructuring their debts.

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The US vaccination drive appears to be stalling when it comes to getting younger people vaccinated. On a recent day 1.13 million persons were vaccinated. About 150 million Americans are fully vaccinated or about 47% of the population. About 53% of the population have one dose. This still leaves the rest of the population close to one half unvaccinated as the US is opening up fully and removing the social distancing and mask mandates that existed before. The problem is that the coronavirus delta variant is about twice as transmissible than the original coronavirus of March 2020. Vaccination is uneven across the US. Large parts of the southern states and the western states lag behind. In these areas as well as areas with large urban concentrations of population, the densely populated cities where social distancing and mask mandates are being lifted as if the coronavirus crisis is over, are at risk of seeing a more powerful virus spread quickly before gene sequencing catches up with new variants- making the response lag behind in terms of weeks. That lag in response could lead to another wave in the US. Consider also that tourism is opening up in Europe with removal of mask mandates, that gene sequencing to track variants is tiny in even countries such as Italy and France. A WSJ report on June 22 shows gene sequencing to track variants at 1% of positive tests in Italy, and virologists in Italy saying they feel as if they are flying blind. This report in the Washington Post says surveys show as many as one third of Americans have no immediate plans to get vaccinated. This is showing up in the low numbers for the vaccination drive, of around 1 million a day at this time in June 2021. In April this was 3 million vaccine doses adminstered on a single day on average. India where the new delta variant has had the most serious impact has stepped up its response with the federal government taking complete responsibility for vaccine supplies and vaccination drives. It is now vaccinating aggressively in the range of 6 million to 8 million doses a day during the last 7 days with a plan to ensure enough vaccine supplies for 1.2 billion people to get vaccinated by December 31.  The European Union and the US have  vaccinated just over 50% of their population for a variant that is more than twice as transmissible than the original virus. This leaves the unvaccinated at real risk because all the social distancing and mask mandates that existed earlier are being removed- in the US, in France, in Italy, and other countries. Soccer stadiums are filling up in Europe, the kind of sports events that later hit Bergamo, Italy, in March 2020. Summer tourism is back in Portugal and Greece. The best intentions will not be enough. Are mask and social distancing protocols being lifted too quickly especially in tourist locations reminiscent of last summer in Europe and elsewhere. Germany and Britain are holding on to them a bit longer. Will this be enough to tackle a new variant. ...

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Nocera points out that in a larger sense pay czar Feinberg hasn't accomplished his goal- to change the ethos of the pay culture at banks and companies. $200 million to be paid out at AIG is in contracts for March 2010, and 14 of the highest Citigroup executives still will make $5 million to $9 million each, and Ken Lewis wil still get $70 million in retirement pay, and nothing that Feinberg can do about it. A lot of it has been shoved under the rug. As far as shifting compensation to stock instead of salary, Goldman and Morgan Stanley have already done that and that is a change that is already happening at these banks. But executive compensation will nevertheless be out of proportion and the public angry. Nell Minnow, the co-founder of the Corporate Library, says the only way is to throw the bums out, meaning the board members on the compensation committees. But this is up to shareholders and the job maybe to make it possible for shareholders to do so easily.

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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.

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The Journal profiles the small company of Dell'Orco & Villani in Prato, in the Tuscany region of Italy, in the context of the eurozone financial crisis in Greece, Italy and Spain. The Italian economy is dominated by such companies that have remained small and decided not to grow because of the difficulties facing them in the form of red tape, the slowness of courts in enforcing contracts, and labor laws that make it harder to hire employees and retrench in a recession. Today Italy's economy is only 3% larger than 10 years ago. Companies with less than 20 workers dominate the economies of southern European countries, employing 60% of the workforce in Italy and Greece, and half the workforce in Spain and Portugal. This compares with 30% in Germany and 20% in the U.S., according to the O.E.C.D. Businesses face an average of 258 days to get permits to open a new warehouse in Italy, compared to 26 in the U.S., according to the World Bank. Enforcing a contract in court could take as long as 1210 days in Italy compared to 300 days in France and the U.S. Italy's postwar economic recovery was based on these small firms around cities like Turin, or textile locations such as Prato. But building economies of scale has eluded these firms, and businessman from that period such as the elder Dell'Orco are content with remaining small. The Dell'Orco family firm makes machines that recycle plastics, rubber and other junk into fibers that can be used for carpets or clothing. The firm has trouble making a decision to hire a new younger worker to do work after four older workers retired. The company makes the machine that only does the first stage of the processing, referring customers to another firm in Prato for the second machine. Most decisions including a tiny showroom are made in excruciatingly slow fashion because they go through the family patriarch, the 91 year old founder. The son and granddaughter defer to him in all decisions. An unsold machine costing 400,000 euros sits in the factory after one buyer decided to delay the purchase, making it risky to grow. During the pre-euro period of the last two decades Italian businesses could take advantage of the regular devaluations of the lira to price below their competitors in Germany and other countries. During the last two decades competition from emerging market economies S.Korea, China and India have added to problems competing in global markets, without the advantages of scale. The inability to hire younger workers hurts unemployment for the young- youth unemployment in Italy is 29% in 2011....

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German leadership in the eurozone and the EU- with the strong stand for eurozone countries to do their economic homework and restore fiscal balance, and the action taken to bring the EU countries together on Russian intervention in Ukraine- is leading to questions about the dominant role played by Germany. Chancellor Merkel has played a leadership role partly because of the absence of other leaders with strong support in their home base who could provide such leadership. Merkel's poll rating in Germany actually shot up during the eurozone crisis from 40% in 2010 to 70% in 2013, and steady at 67% in June 2015, as German taxpayers and voters see Merkel as preventing debt ridden countries in the eurozone passing on higher costs in the debt crisis to Germany. With German wages kept low for the last decade to ensure a economic recovery and lower unemployment, Germans see no reason to support other eurozone countries when a low wage sector exists inside Germany, except under conditions that ensure fiscal balance. In a Harris poll taken in France June 30-July 1, 2015, Chancellor Merkel is rated higher at 43% expressing approval compared to 36% saying they approve of French premier Hollande's handling of the Greece and eurozone crisis. Over 50% of people in Spain and in France disapprove of Merkel's handling of the eurozone crisis, yet two thirds of France's main centre right party support Merkel's handling of the eurozone crisis. In the Harris poll when asked how Merkel, IMF, Hollande and Tsipras handled the Greece crisis people polled in France gave 43% approval to the IMF and Merkel compared to 36% for Hollande and Tsipras of Greece, and 60% disapprove of Hollande and Tsipras handling of the crisis compared to 53% disapproval for the IMF and Merkel. The Christian Democrats party in Germany has dominant leaders in its tradition starting with Konrad Adenauer in the early postwar years, through the Kohl years during reunification and Merkel in the eurozone crisis. By contrast the Social Democrats from the period under Wily Brandt, through the Schmidt years and Schroeder have operated under more of a consensus leadership. Under Sigmar Gabriel or some other Social Democratic leader Germany is likely to have a different style of leadership in the future, especially because the German public does not favor Germany playing this kind of dominant role. At different points in the eurozone crisis Merkel's leadership was needed for decisionmaking- making banks take a 50% writedown on their loans in negotiation with Charles Dallara in Brussels, calling for Italy's president to bring in a new government (led by Mario Monti) when premier Berlusconi failed to make needed changes, and providing flexibility for spending rules for Spain, Italy and France. Merkel has actually moved to the centre to maintain popular support inside Germany, especially since the new coalition government was formed with Social Democrat leader Sigmar Gabriel. On the other major issue of immigration Merkel has provided decisive leadership to prevent the rise of anti-immigrant parties in Germany. Herfried Munkler, author of "Power in the Middle," about why Germany is playing this role may provide clues to Germany's role- by representing different aspects of German public opinion Merkel has prevented the rise of right wing populist or nationalist parties in Germany, which would distort the German narrative about what it sees as its role in keeping Europe together after three wars. ...

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Angela Merkel's call to the Greek president calling for a referendum vote on Greece's wishes to remain in the eurozone. This is denounced by Syriza and the centre left parties. Merkel denies she made the call, but Greece's president says the call was made.

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European Central Bank president, Mario Draghi, addressing the European Parliament in Brussels on April 25, 2012, supported both sides in the issues facing the eurozone, calling for continued vigilance on structural reforms to improve competitiveness of countries in the eurozone such as Spain and Italy, and at the same time saying it was imperative to generate economic growth. He told the European parliament: "The uncertainty about the present situation is very, very, high... Any exit strategy is premature given the current economic situation." Saying that the fiscal compact had been negotiated recently to control spending, yet what Europe needed was also a growth compact- "but my most present thought right now is to have a growth compact." He emphasized that it was now upto governments and banks to pick up the ball. The ECB's achievement was buying time with its 3 year loans to banks in Spain and Italy and other EU countries in Dec. 2011-March 2012, which he described as no ordinary achievement. Francois Hollande and Angela Merkel seized on Draghi's comments to show they were doing the right thing. Merkel conceded that growth was needed, saying sustainable initatives would be good for Europe, that what Germany was opposing was simply stimulus spending that would increase debt without the structural reforms to improve competitiveness. Hollande for his part said he would call for eurozone bonds to pay for industrial and infrastructure projects, and a financial transactions tax....

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Fact checking Apple CEO Tim Cook's statements on the EU Commission ruling for $13 billion in back taxes, shows that CEO Tim Cook's statement that "we never asked for, nor did we receive any special deals," is not true. Ireland let Apple determine what it would pay in tax, and Apple had the benefit of loopholes in Irish tax laws, the fact check by experts shows here. Apple's Cook also says it would hurt investment and jobs in Ireland. Another NYT article showed that the entire healthcare budget of Ireland would be covered by the $13 billion, and 66% of its budget for social support services to the public. Apple has 22,000 employees in Europe and 6000 in Ireland in 2016. Based on the $13 billion owed in taxes, for every job in Ireland the cost to Ireland is 2.17 million euros, and for every job in the EU the cost is 590,000 euros. Apple could turn around and locate in some other place, other than Ireland, in which case Ireland does not get the 6000 jobs. This is Ireland's incentive to give Apple tax benefits. Only if all EU countries had common tax laws would it be possible to avoid this situation, and generate much needed tax revenues at a time of cuts in public spending in healthcare, education, and social services, and invest in infrastructure, worker retraining. The alternative is for the EU to look at other remedies. This is what the EU Commissioner Vestager did when she announced that this was a state subsidy and illegal under EU rules. Because the appeal by Apple goes to the EU Courts the appeal is difficult say legal experts. The EU courts look at the legal aspects of the ruling, was it justified, not at the overall aspect of the ruling by Vestager, as EU Competition Commissioner. This may be why there is so much outcry from Apple, and other digital companies.  ...

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Greek leader Alexis Tsipras of the Syriza party, the Coalition of the Radical Left, talks to Angelos and Granitsas of the Journal. He says it is in the interests of the European Union to continue funding to Greece, but if the EU stops the funding Greece will stop paying its debt. It will then use the funds going to the debt burden for paying retirees and workers. And it will also tear up the loan agreements signed earlier, and scrap plans for layoff of 150,000 workers in the government services by 2015. He would also reverse measures to lower private sector wages. He also looks favorably on nationalizing banks to better channel lending to where its needed. In his view it will be difficult for Greece either way. Even with funding Greece's GDP is expected to fall 5-7% in 2012, following several years of declining GDP.

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The effort by 90 German universities to provide education for free to the large number of refugees from North Africa and the Middle East that are being given a home in Germany in 2015-2016. In rural areas especially in former East Germany there is still uneasiness about the large number of refugees expected to come in 2015- but students and most people in urban areas are receptive. Yet the challenges remain as the university system is crowded with students and can accomodate only about a fourth of the refugges coming in 2015. The low unemployment rate and need for workers is helpful in absorbing such a large influx of people into the country. Volunteers and the German language classes will help better integrate the refugees into German society. Though there is a small minority of people opposed to immigration, Germany society remains largely open to taking in and helping the refugees, compared to the situation in Sweden and Denmark where recent elections showed parties with anti-immigration stance getting a larger share of the vote and becoming part of the government....

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The 3 week old government in Italy, led by former EU commissioner, Mario Monti, announced a three year plan of 30 billion euros in tax increases, spending cuts, reform of pension plans, and efforts to boost growth. Monti said at a news conference that "Italians are to blame for our public debt, and we risk compormising everything we've accomplished in the past 60 years." Under the new plan retirement age for women in the private sector would be increased from 60 to 66 years by 2018, bringing it in line with retirement ages for men. Italy's Labor minister, Elsa Fornero, broke down in tears as she described the change, saying it was necessary to avoid "collective impoverishment." Italy faces the difficult task of refinancing $400 billion in short term debt coming up for renewal in 2012, just as bond yields for Italy have spiked to over 7%. Because Italy lacks an extensive day care system, women helped raise grandchildren after early retirement at age 60. Other changes were to impose a 1.5% one time tax on money repatriated back to Italy under a tax amnesty scheme setup by former premier Berlusconi. Action was taken against widespread tax evasion by banning cash payments above 1000 euros. Stimulus measures of 10 billion euros are designed to boost small business and reduce high youth unemployment running at 29%. Companies get tax breaks of 2 billion euros if they hire young people....

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The new government of prime minister Enrico Letta takes office in Italy in April 2013 following the reelection of president Giorgio Napolitano. Letta is 46 years old and represents a new generation in Italian politics. He is a former Christian Democrat and member of the European parliament. Letta studied at the University of Pisa, and did graduate work in international affairs. In the 1990's he was president of the European Young Christian Democrats. He was associated with Beniamino Andreatta, a Christian Democrat economist and founder of research group Arel. Letta was his chief of staff when he became foreign minister in 1993. In 1998 Letta was minister for European Affairs, and the following year Industry minister. In 2009 Letta became deputy secretary of the Democratic party. The firm European connections, a good sense of how Italians feel about the economic changes, a connection with young people, and his grasp of the needs of business and labor in improving Italian competitiveness, make him an excellent choice after the inconclusive parliamentary elections in Italy. ...

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Mark Gilbert, a visiting associate professsor of European History at the John Hopkins School for Advanced International Studies in Bologna, describes the crisis of the political culture in Italy that goes deeper than the economic crisis and has lasted for most of the post war period. Gilbert says the political parties have avoided implementing financial discipline and opening up the economy for most of the last two decades, except for brief periods, and did not take the opportunity of joining the eurozone to make serious changes. Italy has many parties with the Democratic Party having 25-30% support in the polls and Berluconi's People of Liberty (PdL) having the support of 20-25% of voters. There is also the Northern League, the Third Pole of centrist Catholic parties, the Italy of Values party, and the Ecology Freedom party. Italy lacks a national consensus on making the changes. The risk is that Monti will not have enough time to make the changes, as new elections may be held by April 2013. His government was formed as a government of technocrats led by former EU commissioner Mario Monti, after President Napolitano forced the PdL, the PD, and the Third Pole to work together to support the new government. Changes are needed in the legal system, local government, the health sector, and in the university system. One factor favoring Monti is that 90% of Italians voters are dissatisfied with the political parties, according to Italian think tank ISPI. For Italy the EU crisis has in this sense a positive aspect as it has forced Italy to come to grips with economic and cultural changes under a leadership from outside the political system....

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About $229 billion, three fourth of Greece's debt, is now held by the European Central Bank, the IMF and the European Commission. This is taxpayer money and the governments are making sure that they get back bailout loans in the form of interest payments. About two thirds of the $177 billion given to Greece as bailout loans since May 2010 actually came back to the ECB, IMF, and the EC, in the form of interest. The ECB is keen on recovering taxpayer money. The money route has been setup with an escrow account in Greece for bailout loans so that interest payments get paid, and this money cannot be used for any other purpose. Banking experts say this is a practice in risk management, and with Greece's poor record in finances the controls have been put in place to recover money the ECB invested in Greek bonds in an effort to calm nervous financial markets and now gets about 10% in annual interest payment. Under earlier debt restructuring for private creditors to Greece a haircut of over 50% on Greek bonds was taken, with the ECB insisting on receiving full payment. If Greece were to repudiate the loans under a new elected government losses would have to be taken by the ECB, IMF, and EC, and by private creditors. The ECB has Greek bonds in the range of $44 billion to $69 billion, and the European Financial Stability Facility $88 billion, by some estimates. Greece's exit from the euro would result in losses on these bonds .for the ECB and the EFSF, ultimately European taxpayers. It would also make the new bonds to private creditors under the restructuring of little value which is why European banks would not favor that outcome. Greece's tax receipts at some point, possibly 2013, would exceed basic operating expenses of the government, at which point a future Greek government might decide to exit the euro and stop interest payments on debt in its best interest....

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Chancellor Merkel visits Latvia in August 2014 and calls for a "persistent NATO presence" in the Baltic states. Merkel also visits Ukraine for talks with Ukrainian leaders. Germany is also mediating in the crisis and helped to arrange a meeting between Russian president Putin and Ukraine president Poroshenko in Belarus.

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ECB president, Mario Draghi, is interviewed at his office in Frankfurt by the Wall Street Journal's Blackstone, Karnitschnig, and Thomson. Draghi quotes economist Rudi Dornbusch, who told him in the old days that the Europeans were rich enough to afford paying for it if everybody didn't work. Draghi, was head of the Bank of Italy, before becoming president of the ECB. He is acutely aware of the problems faced by Italy and other countries like Spain which have let labor markets become rigid, with extensive job protections and generous benefits for the unemployed. The result is that employers are reluctant to hire and young people face high unemployment rates- as high as 50% in Spain. For this reason Draghi sees the old social model in Europe as obsolete and already out. Draghi's sees austerity measures and spending cuts with the structural changes underway in Spain, Italy and other countries as the only way to generate economic renewal. On the Long Term Financing Operation launched by the ECB in Dec. 2011, Draghi says there was agreement within the ECB and the decision was unanimous. He makes it one of his objectives to achieve as much consensus as he can, to do what is right for Europe and to do it together with his colleagues in the ECB and the EU. That financing operation, and the binding deficit controls achieved at a recent summit of European leaders, he sees as all part of the pathway to fiscal union. ...

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Schmemann ponders over the situation in Spain with Catalonia and Scotland with Britain, where national identity arouses pride and there is a strong sentiment for autonomy or independence. He says the situation in Slovakia which sought its own identity and separated from Czechoslovakia, but sought an otherwise peaceful status in the EU, should not be confused with the nationalism that has aroused conflicts in other regions and periods. He puts Scots interest in autonomy or independence in this light, as simply seeking its own future in the EU, with closer attention being paid to the local interests in Scotland.

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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.

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Shiller says policy is captured and communicated by metaphors, the most effective being belt tightening for a family. However what works for a family does not work for a country in the same way, especially if not accompanied by other measures and implemented in a strict manner without looking at the real situation. Better suggests Shiller, and more real is the metaphor of "winter on the family farm," where people work to do other chores than planting and harvesting, because a lot of other things need to be done and this is a good time to do it. This would include cleaning up the place, fixing the farm and the barn, fixing machinery, building fences. The farm's members pay a tax in terms of donated labor which goes to do all the work needed and helps the farm's productiveness as the weather changes. Similiarly the Salant-Paul Samuelson balanced budget theorem from the FDR days shows an increase in national output by the amount of a tax, such as the one proposed in France by president Hollande; that would then be invested in hiring more teachers (the labor) and investing in education infrastructure....