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Bruni of the NYT interviews the new Mayor of Rome, a transplant surgeon who lived most of his life in Pennsylvania. The effort by expatriates like the new mayor Ignazio Marino to give Italy a new start following the Berlusconi era and the stagnation in Italy's political and economic system. Marino won with 64% of the vote. Many of the people Bruni talked to in Italy are deeply conscious of the difficulties facing Italy as it tries to put itself on a new path, making a transfer to a younger generation, ending the Berlusconi era, and puting aside the sclerotic ways of the past.

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As the trade problems with the U.S. escalate in tit for tat tariffs, China looks back at its history for parallels. The period of the "unequal treaties" imposed by the Western powers on China in the period 1850-1900, the Korean War of the 1950's, and other analogies that come up to people. Yet China's planners and leaders are looking at another situation the Plaza Accord of 1985 in which the western nations pressured Japan into accepting a significantly higher exchange rate to reduce its trade surplus and the Japanese yen appreciated by 50%. Japan cut interest rates from 5% to 2.5%, and introduced huge fiscal stimulus, banks opened up to lend vigorously. The result was a boom by 1990's followed by a bust that led to another decade of lending to loss making firms called "zombie" businesses, that led to a stagnant economy. This has persisted for three decades. This China sees as an unacceptable situation when China has still not achieved developed economy status in terms of per capita incomes. It fears getting into a middle income trap as the economic growth slows and the aging population makes a recovery more difficult.  The difference with Japan in the 1985-1990 period is that Mr. Trump lacks the kind of five nation economic coordination that put pressure on Japan. Today there are differing views on China in Europe and the U.S. and different policies. Mr. Trump is known for his style of deal making and could settle early, as feared by some Republican leaders in Congress who see in China a challenge to America's technological dominance. There are no calls to appreciate China's currency. Only calls for China to change its state subsidies model and put in writing and through laws that change the way of doing business that does not require American companies to hand over advanced technology. This is also a concern for Japan and the European Union countries such as Germany, and is something all nations try to protect in global competition. Japan is still facing the consequences in creating a new competitor in high speed train technology after building the first high speed trains in China and transfer of the high speed train technology by Kawasaki. The Household Survey by the Federal Reserve showing the financial fragility of 40% of American families shown on this page today shows how this situation is likely to evolve as working class families in the U.S. support a trade stance that protects American jobs and technology. Job losses over three decades and a $891 billion trade deficit in 2018 are seen as unacceptable to the U.S. in 2019. A stronger U.S. dollar helped increase the U.S. trade deficit by 10% in 2018, nullifying some benefits of Mr. Trump's trade actions. Mr. Robert Lighthizer was a negotiator in the trade dispute with Japan in 1985, and runs the negotiations with China with support from president Trump. This alone has kept the Japanese situation in 1985 uppermost in the minds of China's leaders as they try to come up with a way to settle the trade dispute with Mr. Trump.     ...

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Polls taken before the June 16 elections in Greece show the leading New Democracy party and the Syriza party running very close to each other. Both Tsipras of the Syriza party and Antonio Samaras of New Democracy are calling for renegotiating the agreements with the IMF, EU and the EC, referred to as the troika, so that austerity programs do not fall too hard on ordinary Greeks. Tsipras says the goal is to reach "a just and viable European solution." He added in a news conference in Athens that "We don't claim there is plenty of money. Greeks are not asking for money. They are asking for work and the ability to make a living." The troika imposed a 22% reduction in the monthly minimum wage of 751 euros, or $930. This is unpopular in Greece and both New Democracy and Syriza now support reversing this, and extending unemployment benefits. Syriza proposes a moratorium on debt payments till growth is restored, and stabilizing public spending at 43% of GDP, below the 46% that is the eurozone average and above the 37% demanded by creditors. Syriza says it will scale back the value added tax which falls largely on the poor, raise taxes on the wealthy, and reduce tax breaks....

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Michael Barnier leads the negotiating team for the EU as it begins negotiations with Britain on Brexit. He is a former foreign minister of France and former EU commissioner, giving him the necessary skills and experience. Yet as he meets with the Affairs of the European Committee in the German parliament, even Barnier is not clear how the negotiations will be conducted. Only that the issues relating to disentangling the closely interwoven economies of the EU and Britain relate to nationals of the EU and Britain in each others region, the common 20,000 legally binding regulations, and the price tag for Britain to pay of 60 billion euros. The leading German in the negotiating team is Gunther Oettinger, a former EU budget commissioner, and he tells Der Spiegel that the bill may be even higher than that number. The figure will be arrived at by taking into account the obligations of Britain and applying this to assets. The obligations include the money owed to the EU budget, share of medium term budget planning to 2020, share of pension payments to EU civil servants. The British take a different view and do not understand why they have to pay this amount when they are exiting. The British want to see their future relationship on trade and access to the EU markets discussed early, but the EU position is just the opposite, first exit negotiations to be completed by September 2018, then other discussions on trade. March 29, 2019 is the date set for Britain to be no longer a member of the EU. Yet even the sequence of issues has not been set and the sides could not be further apart than they are now. Each side looking at its situation domestically with elections in the EU in 2017, and May facing the added challenge of Scotland threatening to leave the UK. ...

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Martin Feldstein points out why the recent agreement for a "fiscal compact" is no more than an empty statement about fixing the eurozone's finances. In this respect it is no different than the Stability and Growth Pact it replaces, with serious weaknesses. Feldstein cites the weaknesses in the language of the agreement. Each eurozone country is required to limit its"cyclically adjusted" budget deficit to 0.5% of GDP and bring its debt down to 60% of GDP. Compliance will be performed by the European Court of Justice and fines imposed. In practice the questions loom large- for a country like Spain with a 23% unemployment rate, isn't all of the 6% budget deficit cyclical? Again the agreement says deficits are calculated "net of one-off and temporary measures." Under this provision a lot of the stimulus programs would be considered in the category of "one-off." Other language lets eurozone countries frame budgets based on "exceptional circumstances" and "periods of severe economic downturn." Italy has declining economic growth, does it make sense to have a large budget surplus in that situation to lower debt to GDP, and how does that goal relate to "exceptional circumstances."...

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This exceptional report from rural areas in France by Roger Cohen shows why the support is growing for the far right and the far left in rural areas and smaller towns outside the large cities which have suffered from high unemployment and neglected as technology and capital moved to other areas. Cohen talks to Nicholas Bay, secretary general of the National Front, who says this election is about patriotism, the nation state vs globalization, as the National Front tries to portray its opposition as being less pro-France, and less pro French culture. The centrist candidate Macron stands in front of a statue of Alexandre Dumas in Picardy, an hour northeast of Paris, and says he is for an "open patriotism" that embraces people of different origins and embraces refugees. Cohen attends a Le Pen rally in Metz, Lorraine, talks to a National Front mayor in Picardy and left party supporters in the town, talks to foreigners in the banlieu of Sevran. Cohen says a National Front victory is possible if enough voters who support the far left party of Melenchon do not vote for centrist candidate Macron, and enough voters of centre right Fillon supporting French culture and nationalism drift to Le Pen. As in the Dutch election with Moroccans derided by the far right the immigrant issue is a factor. Against this background is how events play out in the last weeks of the election. In March and April the events in the U.S. show a Trump administration moving to the centre, adopting a quieter and more constructive tone towards Mexico and immigrants. Relations with Russia have worsened after the U.S. response to the chemical attack in Syria, and the French public may now see this as a common threat to NATO and the European Union. As in the Dutch election a lot depends on the last weeks of the election and how well the centrist parties, the centre right and the centre left get their message across about what is to be gained by building anew on the foundations of the past without risking a lot on an uncertain path of referendums and exit from the European Union.   ...

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The pact of competitiveness is designed to bring a closer integration of the eurozone. It includes proposals for increasing the retirement age to 67, ending indexation of wages to inflation, and involvement of other eurozone countries in controlling out of control deficits in some countries. Germany sees this as necessary to convince the German public that financial responsibility is being exercized by countries in budget crises that get help from Germany. This may buy time but it does not come to terms with the reality of Greece being insolvent already, which may be true also for Ireland and Portugal. Some experts see the need for debt restructuring, and the need to start early, especially if Germany is unwilling to make large transfers to these countries.

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BBC's Europe Editor Katya Adler talks to EU officials and gives this assessment of how the situation in Britain after the elections looks from the European Union. The elections in France with pro-EU Macron winning with a large majority, the increasing support for Angela Merkel in Germany, the drubbing for the Five Star Movement in Italy, all point to increasing confidence in the EU, and willingness to let Britain sort its mess out while the EU focusses on more pressing issues. Adler calls the first day of talks on Brexit a Mad Hatters Tea Party, showing how Britain is seen in the EU as having a huge complicated mess to sort out. British politicians are seen from the outside as having ruffled up the electorate on migration, the European Court of Justice and other issues, just to make their own points and for their own ends, not necessarily having the best interests of Britain in mind.

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A report on the Status of German Unity from the German cabinet, says the eastern part of Germany, formerly the German Democratic Republic, suffers from a declining population and could have benefitted from the addition of young people as immigrants. As it stands the area with the lowest number of refugees or immigrants is where most of the xenophobia anti-immigrant sentiment exists.  It says the eastern part of the country including cities like Dresden need to develop a more receptive culture to attract young people for economic progress.

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In comments made to the editors of the New York Times, Mario Monti, the prime minister of Italy, says the European Union will endure because it was in the vital interests of Germany. Competitive devaluatations if a number of countries exited the eurozone would have an enormous harmful effect on Germany. Germany is an export dependent economy and sends two thirds of its exports to EU countries. In the unlikely event Greece leaves the eurozone, Monti says effective political policy responses can be expected to prevent this from affecting the rest of the eurozone. Monti is on a visit to the U.S. for talks with President Obama. He praised the effort by Greece's prime minister Papademos to meet the demands of international lenders in difficult conditions.

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The government of Theresa May and the EU appear to be on a collision course with the release of the EU draft legal agreement that says Northern Ireland must remain in the customs union and future arbitration or appeal would be under the European Court of Justice.

Ireland favors the EU draft and sees it as a default solution to avoiding a hard border with Northern Ireland if it becomes necessary. Theresa May and the DUP party of Ireland on whom the prime minister depends for her coalition government's thin majority support in parliament, both reject the EU solution. 

The Labor Party says it would solve the Irish border issue by entering into a new customs union with the EU, so that no checks are needed at the border for people and goods. The Labor party sees it as vital to prevent any effort to undermine the Good Friday Agreement that forms the basis of the peace in Northern Ireland.

 

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The parliamentary elections in Britain have changed the environment in which the first day of Brexit talks took place on June 19, 2017. There is a great deal of uncertainty as the government of Theresa May has only a thin majority in parliament. A debate is now taking place on how much support Brexit has after the parliamentary election, and what kind of Brexit should take place, what are the risks and uncertainties for Britain. As expected the European Union negotiator Michael Barnier emphasized that some issues have to be resolved first- that Britain owes the European Union between 40 to 60 billion euros over 5 years, the rights of EU citizens in Britain, for the beneficiaries of EU policies and for the impact on borders particularly in Ireland.  Only then would the EU discuss access to the EU market for Britain. Mr Barnier handed British negotiator David Davis a hiking stick, a way of saying this will be a long hike up the mountain. In Britain there is a growing sense that the talks cannot be completed by the current deadline in 2019, that it might take 5 years. Another hurdle- Britain cannot have access to the single market if it seeks to control immigration. For the European Union there is the additional problem of how to negotiate with a government that may not be there in a few months, say experts. For the European Union Brexit is now more of a distraction, as there are other issues that rank higher such as relations with the Trump administration, NATO and Russia, refugees and borders.       ...

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A new poll from YouGov shows the Conservative Party getting 310 seats and Labor Party at 257 seats. Labor would gain 30 seats and Conservatives lose 20 seats under this prediction. Conservatives would fall short of the majority of 326 seats needed. Support for Theresa May is slipping especially after announcing older people would have to take on more burden for care, dubbed the dementia tax by media. A coalition of Labor party with the Scottish National party (SNP) with 50 seats and the Liberal Democrats with 10 seats is now a possibility.

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Of the 27 nations represented at the EU summit meeting on January 30, 2012, all except Britain and the Czech Republic agreed to the new measures for budgetary discipline. The new fiscal compact will come into effect after 12 eurozone countries have ratified the compact. This prevents one or two countries holding up the agreement. This provides the Merkel government in Germany an agreement on concrete measures for budgetary discipline- evidence of specific action to dissenters inside the Christian Democratic party and in German public opinion- which would enable it to support efforts by the ECB, the IMF and the EU to address the crisis, including the funding of the European Financial Stability Fund. The text of the fiscal compact makes it harder to block sanctions against countries that fail to impose budgetary discipline, while at the same time making allowance for countries with excessive debt such as Italy.

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This report by James McCauley of the Washington Post, points to the uncertainties in the French presidential election. About one third of French voters are undecided. Le Pen and a surprise candidate Jean-Luc Melenchon are pulling in voters on the far right and the far left. There are questions whether Macron's effort to pull together centre right and centre left voters will work in such an environment. McCauley says the gist of Macron's approach is summarized in a line in his 2016 book- removing "the obstacles on the road," making equality of opportunity a reality in a land of elite government and business running the country, and key being " renewal of ideas and men."  It is not exactly a way forward, more about renewal in French society. His opponents are pitching exiting the European Union and different visions of a protectionist welfare state. Macron is pitching continuity with renewal and changes to bring more opportunity to young people by investing in vocational education, recreate French schools, and expand health services, lower residency taxes. A lot depends on centrist voters coming out to vote as happened in the recent Dutch election, and undecided voters looking for renewal instead of the uncertainty of drastic changes. ...

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A Pew Center poll in Greece shows support for the Euro at 69% in 2013. The situation in Greece has improved in 2013 with the economy expected to decline by 4% in 2013 and return to growth in 2014. The current account deficit at 11% in 2008 is now close to zero. Unemployment is stabilizing and the competitiveness is being restored as labor costs per hour are down 30%, according to Alpha Bank. Ten year government bond yields are now below 8% in 2013, a dramatic improvement.

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The president of the U.S. Chamber of Commerce China Center says the White House has a supportive community when it comes to getting China to abide by fair rules relating to intellectual property. Mr. Bolton talking to the CEO Council was frank about the U.S. government's efforts to get China to to implement a broad set of reforms. He even called for a show of hands from executives who think its acceptable to live by the situation today which hurts the U.S. when it comes to intellectual property. No one showed their hand. U.S. executives once skeptical about the tariffs from president Trump on Chinese products are now shifting their views on the confrontational approach taken by president Trump on issues of U.S. technology transferred to companies in China that lead to the U.S. losing its technological advantage.

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The situation in small towns in East Germany such as Loecknitz on the Polish border. The economy is depressed with unemployment twice the level in West Germany, and young people moving away. The economy on the Polish side is much healthier and Poles are moving to the German side from the Polish city of Szczecin, a 30 minute drive. Poles are also buying depressed German real estate and starting businesses. This is adding to the local economy as young Germans have moved to the larger cities but there is the sense of being left behind among some Germans. It comes from the period of reunification when after investing $2 trillion to integrate the two economies the best that could be done was making cities like Leipzig and Dresden in the east prosper but leaving the coutnryside in East Germany in an abandoned state as young people sought opportunities elsewhere. This may be why Angela Merkel who grew up and studied in the former East Germany told the German parliament in June 2012, "Germany's strength is not infinite. Germany's powers, too, are not unlimited."...