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In a first at Davos World Economic Forum, China's president Xi Jinping uses the 2017 meeting to give a one hour long spirited defense of the world trading system, critical of U.S. president elect Trump's protectionist views without naming him. Xi pointed out that "no one will be winners in a trade war." And went on to add that restricting world trade was like "locking oneself in a dark room, keeping out wind and rain from outside but also light and air." For the first time Jinping stated that China would take the U.S. role of defending the world trading system from attack as needed. On climate change Xi defended the Paris accords, and gave China's commitment to pursue changes regardless of what the U.S. under president Trump does. This follows Chancellor Merkel of Germany's statements on the issue critical of the views of president elect Trump, and taking the lead to defend the world trading system. Xi also pointed out that many of the ills that led to voter discontent in the West were not really from the freeing up of trade but from the pursuit of excessive profit with the financial crisis of 2008.   ...

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Talks on June 28-29 in Rome between President Francois Hollande of France and Chancellor Angela Merkel of Germany. They will be joined by the Italian and Spanish prime ministers, Mario Monti and Mariano Rajoy. Hollande has invited the opposition Social Democrats in Germany for talks in Paris to win support for his approach to the eurozone crisis. The growth initiative proposed by Hollande is fairly modest and Merkel has expressed her support for this. The tougher issues revolve around some acceptable form of mutualizing of eurozone debt to tackle a loss of confidence in financial markets without a surrender of sovereignty by France and other eurozone nations- a particularly sensitive issue in France. More Europe, would mean more German influence in decisionmaking. Germany rejects eurobonds and direct aid to banks from the ECB. Centralized banking supervision and close regulation by a new European regulatory authority would be needed as part of a new eurozone financial architecture. The immediate issues are of some form of deposit insurance for the eurozone banking system so that there is no run on the banks in Spain and other countries....

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The basic architecture to support the euro currency is being proposed in a seven page report prepared by presidents of the EU Council, the ECB, the EC and the Eurogroup. This includes deposit insurance to protect against a run on banks, a European bank supervisor with possibly the ECB in that role, and the European Financial Stability Facility, the eurozone rescue fund, acting as a backup if deposit and resolution funds need support. Currently the European Banking Authority setup after the 2008 crisis works with central banks of the individual countries to regulate the banks. In contrast to sanctions imposed for overspending under prior EU agreements the report says new powers would be transferred to a European Authority on the fiscal side so that overspending can be controlled at the European level and budget deficits are set at the European level.

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As Britain goes to general elections in May 2015, one of the issues in the election will be new referendum on membership in the European Union promised by prime minister David Cameron. Cameron has said he will negotiate a better deal for Britain in the EU and hold a referendum by 2017. The last referendum was in 1975, in which two thirds of voters supported membership in the EU. British disapproval of the EU has increased with immigration from newer EU members since the 2008 financial crisis, and increasing unemployment. Some recent polls show 42% voting to stay in the EU, and 39% opting out, suggesting a close vote. Negotiations for better terms mean treaty change, which would be opposed by France. Germany's Merkel also opposes changes on the immigration rules that do not allow free movement of labor. Other EU leaders see Cameron's moves on the EU being an effort to counter the UK Independence Party's push for EU exit, as the UKIP could draw Conservative right wing voters in the 2015 general election. ...

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International Atomic Energy Agency (IAEA) chief, Yukiya Amano, answers questions in a closed door 90 minute meeting with the U.S. Senate Foreign Relations Committee. The IAEA chief says he cannot disclose details of his investigation into Iran's earlier weapons activities, or the agency's agreement with Iran for the inspection of nuclear facilities. Senator Corker who heads the committee said most senators left the meeting with greater concerns about the inspection process. The IAEA chief cited as reasons for the secrecy, independence of the agency, and what he called "a legal obligation" to protect confidential information. Senator Barroso described the process as one in which an NFL player or athlete is asked to mail in his own urine sample. Of particular concern to senators is the Parchin site where testing ocurred in the early 2000's, which Amano has said Iran is trying to sanitize, and which is not part of this agreement. Iran has not agreed to IAEA requests to interview a Iranian scientist Mr. Fakhrizadeh or other top Iranian military officers and nuclear scientists as part of its probe into past Iranian nuclear activities, Yukiya Amano told the WSJ in an intervew. ...

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Beppe Severgnini is a columnist for Italy's newspaper Corriere della Serra. Here he describes the rift between generations in Italy that is holding Italy back.

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The number of unemployed in Spain reaches 5.6 million people in April 2012. Finance Minister Guindos said the only bright spot was exports and a drop in the current account deficit which shows Spain's improving competitiveness: "This shows the Spanish economy is competitive, unlike some other European economies, thats the most important element of optimism for the future." The Spanish cabinet approved a Stability Program Report to be submitted to the European Union showing GDP growth of 0.2% in 2013 and 1.4% in 2014, following contraction of 1.7% in 2012, and unemployment falling slightly to 24.2% in 2013. Spain's government debt level is shown at 82.3% of GDP in 2013 declining to 81.5% in 2014.

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

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During the presidential debates Donald Trump was asked about his proposal for a 45% tariff on imports from China to the U.S.. Trump's response was "if they don't behave." he would use this as a negotiating tactic against China. Senator Ted Cruz of Texas responded by reminding viewers of the high tariffs under Smoot-Hawley legislation that were one of the factors that created the Great Depression in the 1930's. Economist and former Federal Reserve chairman Bernanke is a student of the Great Depression, and says "it was highly counterproductive, it lengthened and deepened the Great Depression." Economist Peter Petri of Brandeis University in his study cited in this article, says that the tit for tat that starts with such a move could eventually cost the U.S. 1 million jobs. It might fix one problem the one of imbalanced trade with China his figures show, and create another huge problem the loss of markets for U.S. goods all over the world. Overall a 45% tariff would reduce U.S. merchandise imports by $383 billion and reduce U.S. merchandise exports by $658 billion, says Petri. Gordon Hanson, economist at the University of California, San Diego, who has actually shown how trade has affected different counties in the U.S., leaving some dependent on government assistance. Hanson sees this tariff as counterproductive, it makes the U.S. more self-sufficient but hurts U.S. exporters, would significantly hurt the tech boom, and reduce America's standard of living. The problem is that everybody can get into this in a tit for tat. France did this even before the Smoot Harley Act of 1938 was passed in 1930 with 60% increase in tariff on individual items, by higher tariff legislation in 1928. Close allies Canada followed quickly after Smoot Hawley increasing its tariffs, so did Great Britain. Unemployment went up significantly after 1931, worsened by weak banks and lack of support from the Federal Reserve. Trade with Mexico would come to a halt Petri shows, and the result would be more Mexicans trying to cross the border turning a relatively non existent problem of immigration in 2015 -with Mexicans preferring to remain home and net immigration dropping significantly following the 2008 financial crisis and the strict Obama policy of deporting illegal immigrants- into a real one. Trump says its just a threat, but it is likely to lead to a tit for tat response by China, then by U.S. allies, other trading partners. Consider that president Herbert Hoover opposed the Smoot Hawley bill for raising tariffs on industrial goods, and only proposed adifferent legislation reducing tariffs on industrial goods and increasing the tariffs on agricultural goods to give relief to American farmers. Politics intervened as Smoot from Utah and Hawley from Oregon, from mountain and agricultural states with a lack of understanding of how the international trading system works but as heads of two influential commmittes, the Senate Finance Committee and the House Ways and Means Committee, let politics overrride and pushed their legislation through Congress. In 1932 Smoot and Hawley were defeated for reelection, but the damage had been done, and promises of better conditions for workers and farmers never kept. A significant reason for the U.S. standard of living is that it is a leader in the global trading system. Even in 1945 and the years following the end of the war tariffs were higher in Britain and other countries. In return for this leadership the U.S. enjoys the advantages of the dollar being the main global currency, and the advantages of a world leading technological sector that has large global markets. Hanson and Autor have pointed out how imbalanced trade has hurt some counties in the U.S. This is a very real problem for workers in the manufacturing sector, as shown by elections in the midwestern states, Michigan, Ohio, Illinois and other parts of the country. The problem is compounded by the tech sector looking out for itself, the financial sector looking out for itself, and forgetting that we are all in the same boat. And that includes the Chinese who are in the same boat. China is doing a major shift in policy towards a consumer driven economy, and this needs to be accelerated for the benefit of ordinary Chinese. This makes the policy of a 45% tariff by the U.S. doubly unproductive because it hopes to add urgency to the problem of the U.S. trade deficit and manufacturing workers, but takes an approach that risks ending up damaging the global trading system by setting in motion a process that no one controls or can foresee the destination....

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Britain's prime minister David Cameron seeks a "better deal" for Britain before the planned referendum on Britain's membership in the union. Changes Britain is seeking are: restrictions on some social welfare benefits for European migrants for 4 years, guarantees that Britain and other countries using a currency other than the euro would not suffer economic discrimination, and more powers for national parliaments to block European laws. A less tangible change is one that relates to the preamble to the Treaty of Rome, signed in 1957, the founding treaty for the bloc, which says: "Ever closer union among the peoples of Europe." This is similiar to the preample to the American Constitution: "We the people of the United States in order to form a more perfect union." The euroskeptic wing of the Conservative Party objects to this term "ever closer union," and Cameron will seek a pledge to change the wording. Yet as experts point out the phrase was put in as a result of British requests from the John Major Conservative government in response to a stronger wording from the Dutch government suggesting a federal Europe. Veteran reporters and negotiators at the Maastricht talks, say it is strange that Britain is now objecting to the words. Stephen Wall, a British historian on Britain's relations with the European Union, and a former senior official in the British government, says Margaret Thatcher and other British prime ministers did not object to this. That this issue comes up now is a result says Wall, of Britain's sense of being on the sidelines, of being on the outside to a close partnership between the French and the Germans, and as a result of being outvoted on issues Britain considers important. The president of the European parliament, Martin Schulz, says the change would require the approval of all 28 EU members, and an alternative is for a declaration that states Britain is not included in the sense of the phrase....

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A health care practitioner says the real problem is the high cost of medical care in the U.S. when compared to other countries. She points out that the Obama bill in 2008 did not take effective steps to bring down the cost of health care before enacting legislation to cover the uninsured, leading to higher premiums for the middle class. The link between healthcare and profits is seen as the main problem. 

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Obama adminstration officials say Mr Obama did not call for the resignation of Mubarak because it feared creating a power vacuum at the top. The administration's fears include one about Egypt under a new government not honoring the 1979 treaty Egypt signed with Israel. In doing so- as Elliott Abrams, deputy national security advisor under President George Bush, points out in the Washington Post, the administration's attempt at denying liberty in the Arab world is "nothing short of a tragedy." Abrams points out that the protestors span all classes of society, from businessmen to housewives in Cairo and Tunis,, including moderates and human rights activists. It is a supreme irony of the times that the law school analytical processes of Obama have shunted out the very voices of the dispossessed and the oppressed that Obama claimed to hear in his first book, and of his sometimes poignant personal encounters in Africa. In doing so Obama has missed an historic opportunity to put America in a right standing with the people of the Arab world, and as Abrams points out made "engagement" ring hollow, as "engagement" not with the peoples of the Arab world and Africa, but engagement with dictators who have outlived their time and place. In a separate editorial the Wall Street Journal called into question the credibility of the US foreign policy establishment that was caught by surprise with the protests in Tunis and Cairo....

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This article in the Guardian points to the differences within Catalonia about the independence referendum planned for October 2017. The Spanish government says it will prevent a referendum from taking place. In a symbolic poll that took place 3 years ago in 2014, only 2.3 million of 5.4 million Catalan eligible voters took part. Sentiment is in favor of self-determination but only among less than half of Catalans, as most Catalans would not come out to vote. The Spanish government says the referendum would be a violation of the constitution.

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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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Germany benefits from the lower value of the euro in relation to other currencies. Germany's exports to the eurozone as a percentage of all exports increased from 38.4% in 2009 to 41.7% in 2011, according to the Germany Federal Statistical Office and the German Chambers of Industry and Commerce. Exports to China increased from 4.64% to 6.11%, and to Asia from 11.8% to 13.73%, and to the U.S. from 6.77% to 6.95%. This increases the gap between Germany and other eurozone countries with smaller exports. Ireland with its large export base and foreign investment is likely to benefit from the lower euro. German companies VW, BMW, Mercedes, Heidelberg Cement and EADS also benefit from the weaker euro. France's Peugeot with sales concentrated in Europe does not benefit from the weaker euro compared to German auto companies with higher sales overseas, especially in China.

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IMF forecasts for Greece's growth rate are proving too optimistic. The IMF forecast is for zero growth in 2013, and increases of 2.3% and 2.9% in 2014 and 2015. Even in its pessimistic projections the IMF forecasts a 1% downturn in 2013 and growth of 1.3% and 1.9% in 2014 and 2015. The government sector was a large part of the economy. Now that this is shrinking, the export sector which only represents 20% of GDP is too small to generate needed growth. Greece also lacks the competitiveness and the large foreign enterprises that operate in Ireland, making growth less likely. A major problem is also the 40 billion euros Greeks have withdrawn from their banks in recent years. Even the figure of 120% of GDP that is expected in 2020 under the March 2012, 130 billion euro bailout is a very hypothetical figure, having no sound basis. Landon Thomas cites a confidential study the IMF had circulated in February 2012, showing the long term prospect for Greek debt if growth does not materialize because of lack of competitiveness. It would increase the debt to GDP ratio to 178% by 2015, and leave it at the current level of 160% of GDP in 2020. Some experts say the whole debt sustainability analysis makes no sense, with the question being insolvency in the case of Greece, not illiquidity. And requiring a focus to bring debt to manageable level to create prospects for growth. The Wall Street Journal emphasizes this in its editorial on Feb. 29, 2012....