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France has made the health pass for coronavirus mandatory for leisure and cultural venues starting July 21. The health pass will be mandatory for having a coffee, eating at a restaurant, or shopping in a mall from the beginning of August. The health pass is already in use in some form in many European Union countries. Denmark and Austria are using it for 2 months. Germany and Portugal are using it regionally depending on where the epidemic is severe. Greece which has a surge of tourism in summer from other EU countries is making it mandatory starting July 16 for entry into shops and restaurants. It was the absence of  any form of constraints on behavior in places such as Croatia with high tourism in summer that increased the surge in Germany and Austria last summer. Italy and Ireland are planning to make vaccination mandatory following France as the number of cases from the variants increase. Establishments that are violators of the mandatory rule in France will be fined 45,000 euros and persons responsible having to spend 1 year in prison. The mandatory rule has significantly increased the number of people seeking vaccination in France.      ...

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French president Macron is skipping attending the Swiss Davos conference in 2019, as he attends to pressing problems at home. A year ago after attending Davos Macron appeared as a champion of globalization and took some risky actions in the euphoria over his win- stripping job protections at a sensitive time of rising inequality, and abolishing a decades old wealth tax. The election showed a regional and urban-rural divide in France even though Macron gained a large majority in the Assembly. The yellow vested protestors showed no particular allegiance to parties, only showing a sense of dissatisfaction with neglect of working class struggling to make a living. All that is changed now after yellow vested protestors rioted week after week over neglect of working class issues.Macron has resisted pressure to reinstate the wealth tax. He has suspended plans to increase fuel taxes and introduced 10 billion euro worth measures to boost purchasing power of working class French people, a major demand of the yellow vests. A series of town hall meetings are planned for Macron to listen to the voices he has not paid enough attention to before in his aloof style of governing. ...

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Landon Thomas Jr. looks at the situation in Spain and finds it hard not to conclude that austerity policies are not working in the absence of economic growth, and increasing unemployment. Unemployment in Spain is at 24% and growing. Deficit reduction is likely to take longer with the deteriorating economic outlook. Spain's economy minister, Luis de Guindos has announced Spain plans to increase consumer taxes in 2013, including the VAT, which is currently at 18%. This would further depress consumer spending. Bondholders sense dangers from lack of economic growth and competitiveness, as much as they sense dangers from uncontrolled regional spending. As a result investors are leaving Spain. According to analysts at Credit Agricole Cheuvreux in Madrid, 100 billion euros (132 billion) have left Spain, including distress sales- coming from insurance companies, pension and sovereign wealth funds reducing holdings of Spanish bonds.

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Brexit is now seen as based on some mistaken ideas that were presented to the public without much thought or seriousness. One of these ideas is that Britain would simply be free to sign its own trade deals with other countries. One such deal would be with a 1.3 billion people rapidly expanding economy like India. Yet India - Britain trade is very small today and is vastly overshadowed by EU - India trade relations. In fact the European Union is India's largest trade partner. By removing non tariff barriers and tariffs India's economy would expand by 1.3 % annually adding $25 billion to India's GDP each year, Ifo research shows. The EU would see 0.14% growth in GDP, a gain of 21 billion euros annually. Germany would boost its automotive and machine tools industries, and India its textile and services industries.  Many British companies manufacture in India and are not exporters. This situation is not likely to suddenly change with Britain able to strike its own trade deals. ...

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Spain's deficit as a percentage of GDP is expected to be 6.0 percent for 2011. The target set by the Rajoy government is for the deficit to be lowered to 4.4% in 2012. Newly elected prime minister, Mariano Rajoy, told parliament that the "outlook could not be darker," with the economy expected to contract in the fourth quarter and in 2012. Rajoy, plans to introduce emergency budget measures on Dec. 30, 2011, labor market changes in the first quarter of 2012, and a banking sector cleanup in the first half of 2012. Savings of 16.5 billion euros will be needed to meet the 4.4% of GDP deficit target for 2012. Rajoy is studying the situation before announcing budget cuts. He affirmed that pensions which were frozen in 2011, will be raised in 2012 in line with inflation. He enjoys the support of France's president Sarkozy and German chancellor Merkel, as all three leaders are heads of conservative parties in Europe, and has excellent rapport with them going back to the period when Rajoy led the opposition party in Spain....

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After taking the recent writedowns Bankia should have setu provisions for losses on real estate bad loans equal to 48.9% of its real estate portfolio. The Spanish government said on May 25, 2012 that it would inject 19 billion euros to recapitalize Bankia. Yet this raises more questions about the rest of the banking system and the need to set aside adequate reserves for bad real estate loans. Extrapolating from the writedowns at Bankia for real estate losses, about 45 billion euros would be needed for the other Spanish banks, according to UBS. And this raises the question of how the government would raise the money to recapitalize the banking system, as Spain's borrowing rate on its 10 year bonds has increased to 6.45% in May 2012. If Spain provides government bonds to banks the markdown on the bonds would still need to be shown separately, and a large figure would be a sign of increasing riskiness to bond investors.

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Joe Kaeser, CEO of Siemens AG, meets Russian president Putin in Moscow on March 26, 2014. He also had talks with Gazprom chief, Alexei Miller. Siemen's has invested 800 million dollars in Russia in the last 2 years. Siemens sales in Russia are 2.17 billion euros, 2.9% of the company's revenue. Germany's total trade with Russia is 56.3 billion euros for 2012. Eckhard Cordes, chairman of German industry group Ostausschuss, representing German companies with investments in Eastern Europe, met with Russian officials and Alexei Mordashov, CEO of Severstal metals group. He then briefed the German government on his talks. Chancellor Merkel says dialogue is also part of government policy: "Business contacts are still taking place and I am not interested in seeing the situation escalate, but rather am working towards a de-escalation." Exxon has major investments in Russia and deals with Russian oil companies and the Russian government for oil exploration. Exxon CEO Tillerson has taken a similiar approach....

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Greece gets strong demand for its bond offering in April 2014. A sale of 3 billion euros of bonds maturing in 2019 attracted 20 billion euros in demand. The yield on the 5 year bond was 4.95%. This is the first longer term bond sale since 2010. The yields on bonds issued during the depths of the eurozone crisis for investors had yields close to 20%. This is a huge turning point for Greece's recovery, and shows tangible progress for the efforts of the Samaras government to stabilize Greece's finances and restore growth. With yields on 10 year U.S. Treasury debt at record lows of 2.64% in April 2014, this brings Greek bond yields to within a little over 2 percentage points of U.S. Treasuries, something that would have been unthinkable only one year ago at this time. It also helps stabilize the entire eurozone, after years of turmoil and riots in Greece created the possibility of Greece's return to the drachma.

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Mervyn King, governor of the Bank of England, says growth is expected to be "sluggish" with higher inflation. Inflation increased to 2.7% in October from 2.2% in Sept. 2012, with rising costs of university fees. The growth of 1% in the third quarter he described as a one time situation because of the Olympics in Britain. The strength of the pound relative to the euro and the GDP decline in the eurozone also hurt Britain's exports. Economsts at IHS Insight expect the Bank of England to keep the benchmark interest rate at current level of 0.5% for at least 2 more years and increase asset purchases by 50-79 billion pounds in Jan-March 2013. Some economists see the need for other approaches because of tight bank lending. King says the central bank committee retains faith in asset purchases as a policy instrument.

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China Investment Corporation is completing a deal to take a 30% stake in GDF-Suez's exploration unit for 3 billion euros.

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In 2015 the new government of Antonio Costa took a U turn from austerity policies followed in return for a bailout from the European Union. This has helped Portugal achieve the highest growth in a decade coming back from a severe slump. Unemployment is cut in half with growth in the tourist industry, and investment in agriculture, construction, aerospace.  Traditional industries such as paper mills and textiles have invested in new technology resulting in a boom in exports. German companies Bosch, Mercedes Benz, and others have also invested in the country. Portugal has a good relationship with Germany and the European Union which has also helped attract foreign investment. Prime minister Antonio Costa says "too much austerity deepens a recession and leads to a vicious circle." Antonio Costa came to power in 2015 on promises to reverse cuts in income made by the previous government to reduce the deficit in exchange for a 78 billion euro international bailout. The government backed by left parties left out of government since 1974 with the collapse of the dictatorship, was able to increase public sector salaries, the minimum wage and pensions, over objections of the IMF and the German government. Incentives were given to small business in the form of tax incentives, development subsidies and funding. Budget balancing was achieved by cutting expenditure on infrastructure and other spending, cutting the budget deficit from 4.4% when Costa took office to 1%. A surplus is planned for 2020, ending a quarter century of budget deficits. ...

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Bondholders and the Greek government are stalled in talks and waiting for Germany and the IMF to come up with the 14.5 billion euros that is due on March 20, 2012. It may suit the bondholders holding out for a higher interest rate in the 4-5% range for the new bonds to be issued at 50% of face value with long term maturities, but is bad for Europe. This Journal editorial points out that this is bad for European taxpayers and points to other steps that can be taken which are being discussed in European circles. One step is for acollective action clause to be inserted for the existing Greek bonds under which all bondholders have to accept losses if two thirds of the bondholders agree to accept losses. To ensure the safety of the Greek banking system Greece would restructure the bonds held by Greek banks so that they continue to be acceptable as collateral with the ECB, and issue new bonds to the ECB with face values, interest rates and maturities matching existing holdings. The idea is to make it possible for Greece to reduce its total debt and its debt servicing costs- which is really the only way out of the crisis. The ECB and Greece would use the collective action clause to restructure the Greek debt to reduce interest and debt servicing costs on new bonds to be issued. The Journal editorial says it should also mean Greece and the ECB are not required to put up the 30 billion euros in up-front cash that was agreed to in a poorly devised agreement in 2011....

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A 3 page July 14, 2015 update on the IMF's July 2015 debt sustainability analysis paper on Greece, points to severe damage to the Greek economy in the last year, especially under the uncertainty and closing of the banking system, making debt unsustainable without haircuts or extension of maturities and grace periods. About 85 billion euros is the additional financing needed as a result of the mismanagement under the Syriza government and closing of the banking system. It draws the conclusion that "haircuts could be avoided if instead there was a significant further extension of the maturities of the entire stock of European debt (GLF, EFSF) , in the form of doubling of grace and repayment periods, with similiar concessional terms on new financing." The paper adds that the maturity extension would have to be "very dramatic extension with grace periods of say, 30 years on the entire stock of European debt, including new assistance." One shocking part of the analysis is that within the space of one year from July 2014 to July 2015 the Greek economy went from reaching Debt to GDP ratio of 105% in 2022, to 170% after the closing of the banking system by July 12, 2015, according to the IMF. In 2014 it was at 177% of GDP....

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France is moving quickly with spending on the $37 billion stimulus. Public buildings, museums, cathedrals and historical sites are being renovated in 2009. About 50 chateaus, and 75 cathedrals are part of 100 million euros for cultural centres. About 75% of France's stimulus money will be spent in 2009, in contrast to the slow work in the USA.

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Italy's third largest bank, Banca Monte dei Paschi di Siena SpA received 2 billion euros of aid from the Italian government. The aid would be given through a bond buying program. Under a program setup earlier by Economy Minister Tremonti banks issued bonds that were bought by the Italian government and counted as regulatory capital of the banks.

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Spain's construction industry is hit hard and half of immigrants who make up 11% of the workforce have lost their jobs. Spain is hoping to give them alump sum payment to induce them to return home. Economic growth will be below 2% in 2008. Zapatero pledged to return 400 euro from the budget surplus and this helped him get reelected at a time in March when the economy was looking a lot better. Zapatero has no control over interest rates which the ECB raised on July 3, 2008 and no control over commodity prices, and the housing downturn in Spain will continue.

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During the Greek debt crisis in 2011 the ECB bought Greek bonds at a discount to face value to support the price of Greek bonds. It did so under the agreement that the bonds would be worth the full amount. Now as part of the negotiations between Greece and private bondholders (mostly French and German banks) about how much losses private bondholders will take- to make Greek debt serviceable as its economy shrinks and tax revenues decline- the ECB says it will take $11 billion in losses on these bonds as its contribution. The ECB will do this on the condition that Greece comes up with an agreement with private bondholders that makes debt serviceable. This could mean increasing private bondholder losses to 70%. from 50%. The central banks of EU countries hold $12 billion of Greek bonds. The ECB says this will not apply to these bonds. Negotiations are also underway between the EU and Greece for a 20% reduction in Greece's minimum wage and an additional 3 billion euros in government spending cuts, and pension cuts for retirees. The EU is asking for a written committment from the Greek government and from Antonio Samaras of the New Democracy party to the austerity program, as the measures are highly unpopular in Greece and are leading to continued street protests in Athens. ...

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Macron is keen on making this trip to Britain his first overseas after the pandemic. Earlier during the pandemic Macron on May 17 visited a battlefield in northern France for a battle in which De Gaulle took part. On this trip he will go to Clarence House, home of Prince Charles, to commemorate the June 18, 1940 speech given by De Gaulle, a moment which gave birth to the French resistance.

Macron is eager to associate his presidency with memories of De Gaulle, the resistance and France during wartime, as it recovers from the pandemic. This also coincides with his meeting with Merkel, the German chancellor, after Germany announced the 500 billion euros grants to small and medium sized businesses in Europe as a show of solidarity and faith in the vision for Europe.

 

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Weakness and lack of economic growth in the rest of Europe is having an impact on the growth rate in Germany. In the second and third quarters of 2011 combined, economic growth in Germany was 1.6%. The economic growth for France during that period was 0.6%. For the third quarter, acccording to Eurostat, the European statistical agency, Belgium had no growth, and the Netherlands reported a GDP decline. Spain showed no growth. Germany had higher growth rates during the early period of recovery after the 2009 financial crisis, and it now appears that this may be because German companies were better able to export, having held down labor costs, and the euro was weaker than what the rate for the deutsche mark would be. This shows a slowdown across the whole of Europe replacing the earlier situation where Germany far outpaced other European countries.

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Watson Pharmaceutical's acquisition of Swiss company Actavis in a 4.5 billion euros deal makes it the third largest generics manufacturer after Teva of Israel and Novartis AG's Sandoz unit. Actavis was owned by Icelandic billionaire Thor Bjorgolfsson's private equity firm and was taken over by Deusche Bank when the Icelandic bank Landsbanki Islands collapsed in 2008, leading to restructuring of debt.

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High youth unemployment at an estimated 40.5% for persons ages 15-24- which includes persons in school who cannot find jobs- is a priority for the Letta administration in Italy in 2013. The government is investing 1.5 billon euros in a program that would help about 200,000 young people gain jobs, and seeks additional funding from the EU to address this problem.