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How German political leaders view the Euro currency and the European Union. German history and the need for fiscal discipline and the European Union. The constant between Chancellors Adenauer, Kohl and Merkel- a sense of European unity as part of the fabric of the new Germany. A desire to find a way through the sovereign debt crisis of 2010-2012, by introducing fiscal discipline into the structural framework and preserving the hard won gains for the Euro currency and the European Union.

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President Macron of France tests positive for coronavirus on the morning of Dec. 17. He will now self isolate for 7 days. Leaders who he has met recently are the prime ministers of Spain Pedro Sanchez and Portugal Antonio Costa. He was seen embracing Antonio Costa. Mr. Macron was part of the tough negotiations for the European trillion dollar stimulus, for a recent all night EU negotiation, and involved in Brexit talks. He met with Charles Michel of the European Council and Ursula Leyen, head of the European Union. All or most of these leaders will now have to self isolate. Mr. Macron wore a mask during the entire period and was careful not to shake hands. 

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The British parliament's petitions website crashed because of the high volume of petitions calling for revoking Article 50 and remaining in the European Union. In December the European Court of Justice ruled that UK can unilaterally revoke Article 50 the basis of leaving the UK, and decide to remain in the European Union. 

The petition currently has 700,000 signatures. Off to a slow start in first week, once it picked up the dam burst as frustrated Britons added their support. In January the petition calling for EU to revoke Article 50 got 371,000 signatures.

Liberal Democrat and Labour MP's joined in support till parliament's site crashed with overload on the system.

 

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Krugman sees Germany's Chancellor Angela Merkel and her Finance Minister Peer Steinbruck stalling an overall stimulus plan for the whole of the EU. Merkel told a political party meeting that Germany "wasn't going to participate in this senseless race for billions." And Steinbruck said Britian was engaging in "crass Keynesianism". True Germany has not been on the debt financed consumption binge that the UK has been in and does not have a housing bubble bursting like the UK, but says Krugman Germany is also facing a crisis like the rest of Europe. Ifo, German Research Insttitute points to the worsening crisis in Germany as the worst since the 1940's. Part of the reason is that Germany is abig exporter and its medium sized companies are big exporters and a large part of the economy. With the slowdown in China and the rest of Asia these exports have been hit hard. See the links to this. What happens without acoordinated response in the EU? Krugman warns that it would lead to leakages in which the advantages of the stimulus by the rest of the EU would not be as effective as with a coordinated response including Germany the biggest EU nation. He expects Merkel to wake up to the need for this once she sees the new numbers. ...

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What this Editorial board opinion in the Indian Express is saying is that India should concentrate its efforts on modernizing its economy on a scale that is similar or surpasses that of China because of its access to the latest technologies. Just as China capitalized on the opportunity presented by its entry in the World Trade Organization in 2001, through an economy wide effort to build a manufacturing and export logistics base. India is presented with the opportunity of building its own manufacturing and export logistics base as supply chains are being redesigned in 2023. This requires a longer term plan with clear thinking and concentrated effort with the entire resources of the nation. What looks like a small or gradual shift in supply chain with the US and EU adding India and Vietnam to their Chinese manufacturing base is going to change with every change in world events, as the US concentration of manufacturing in China becomes a situation that is impossible to to maintain. The only logical way for the US and following the US the EU to create a proper balance in its political relationship with China is to change fully its lopsided concentration of manufacturing in China. Biden is only making the initial moves, the EU is only waking up to the need to make its own changes to reduce this concentration. How much distance does the US need to cover to reduce its concentration in China? By a large amount because the shift of manufacturing was excessive and ill advised done as companies in the US raced in a competition to shift outside over 2 decades and simply outdid themselves and performed a disservice to the workers and families of America whom they served. Just for the US to get workers and families to benefit from return of good manufacturing jobs to the US and restore its manufacturing base that has shriveled, it will have to be a massive enterprise, where day by day it becomes more evident that more and more needs to be and accomplished in an accelerated way. What this also means where appropriate to leave a progressively year after a year larger base in India, and also Vietnam, much larger than is envisaged today. This situation is even more acutely felt in Japan which to bring a proper balance in its political relationship with China needs to even more urgently reduce its concentration of manufacturing in China. It must be the task of the Modi government to have a clear view of the road ahead- build the needed logistical base for exports using the latest technologies and set higher and higher targets for manufacturing.  If you look at the map of Asia this is the Global South- India is 60-70% of the Global South with its population of 1.4 billion people mostly young with aspirations for a modern economy like that of the US and Germany. Add to that Indonesia and Vietnam, and other nations already in the redesigned supply chain in 2023 and you have 2 billion people in Asia. Concentrate on this for the next 2 decades for a complete transformation of India, that is what the younger generation demands of its government. ...

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Paul de Grauwe, a economist at the London School of Economics points to two problems with the June 28, 2012 EU deal that allows the EU rescue fund to buy Spanish and Italian bonds and provide capital aid directly to Spanish banks. One is the limited funds of the rescue fund, European Financial Stability Facility or by its other name European Stability Mechanism. The EFSF or ESM lacks credibility because it lacks resources, it has only 248 billion euros, and has to first raise money in the bond markets. A better approach would be for the ECB to buy Spanish and Italian bonds aggressively, allowing a smaller spread between these bonds and the German bonds, says Grauewe. Germany is the largest shareholder at the ECB and opposes this move as a form of mutualizing of debt in the EU. Grauwe's recent paper shows that the depressed bond conditions for Spain and Italy are driven largely by a psychology of fear and not hard true economic numbers. Christopher Marks, global head of debt capital markets at BNP Paribas, says it is important to create the confidence to get longer term core investors such as pension funds, sovereign wealth funds and insurance companies back into this market for Spanish and Italian bonds by reducing volatility and yield. These longer term investors have left the market creating a severe problem. The shorter term investors, who came into this market in the last 1-2 years, are now the loudest voice saying Spain and Italy are likely to fail. These shorter term investors are either selling these bonds short or getting credit default swaps. A big problem coming out of the June 28, 2012 agreement, is that it is short on details. The details of how the rescue fund will operate, its funding, and the conditions for making making direct loans for stakes in banks or buying government bonds are still to be clarified. Germany's Constitutional Court also will rule on how this would be conducted and the Merkel government would continue tough negotiations on the details creating added uncertainty. ...

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The WSJ editorial points to the danger of the EU assuming the debts of Ireland, Greece and other countries in financial crisis. A better solution it points out is the restructuring of the debts of Ireland and Greece. Ireland made a serious mistake in guaranteeing all the debts of Ireland's banks, an open-ended guarantee to its banks. At this point the German move for a bailout is intended to help German and other banks holding Irish debt. But the EU cannot provide a similiar guarantee as Ireland has for all euro-sovereign debt. A better solution is a haircut for lenders. The euro currency it argues is a currency union, not a debt union, and the euro-zone cannot assume the debt of all its members, nor was the treaty that created it designed with that purpose in mind. The sooner the EU does this, the better for the euro and for the euro-zone.

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Greece's new Syriza government plans to put a bill through parliament on the minimum wage as one of its first steps. It will reverse plans to sell the government's 67% stake in the port of Piraeus, and a planned sale of the state controlled utility will be held back. Sigmar Gabriel, the Social Democratic leader in the coalition government in Germany says Germany is ready to show solidarity with the Greek people, and says the new government has the opportunity to take better action against corruption and tax evasion in Greece than previous governments. Previous governments including governments of the Pasok and New Democracy parties which make up the ruling political elite in Greece failed to make the serious changes in tax collection needed in Greece whereby the upper class in Greece pay the fair amount of taxes due. The IMF's Lagarde also emphasized the tax collection, and separated it from austerity issues where most of European and American opinion believes growth oriented policies are the right path....

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The effects on Greece of a pullback in global financial markets in October 2014. Assurances that the Greek financial system and banking will be supported by the government and the EU. The pullback complicates the Samaras government's plan to exit the bailout program with the IMF early. There is also the prospect of new elections in early 2014 leading to a left of centre Syriza party government. Syriza's Tsipras says he would renegotiate the terms of the debt agreement to reduce debt owed to Germany and other countries in the EU.

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For 2 decades now Estonia has followed the principles of Milton Friedman in freeing up its economy to be completely open. Now the economic downturn has to lead to a shft in policy. The infusion of $3.4 billion euros from the EU from 2007 to 2013 as cohesion funds to even out disparities between rich and poor countries in EU should help and some business people say Estonia could emulate Luxembourg or Swizerland by looking for its own niche say in high end technologies and knowledge intensive production and in design.

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This WSJ editorial says Greek voters have made a choice in the referendum, and Europe is better off letting Greece exit the eurozone. That the referendum also means Greeks made the choice, and were not pushed out of the eurozone. The editorial points out that Tsipras's claim was that the vote was for further negotiations with the EU, yet taxpayers in Germany and other parts of the EU do not see it this way. In the long run it is better for the euro that Greece leaves if it chooses, says the Journal.

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Greece's problem says Carney, is that borrowed money simply financed the incomes of the large number of government employees- with one third of the workforce in the public sector- the unemployed and those on state pensions. It was not achieved by increasing productivity or increase in production. Nominal private sector labor costs went up by 62% in Greece from 2000 to 2008, when they increased by 15% in Germany. All this was done by using borrowed money after Greece joined the EU in 2001. And all this reckless borrowing was not visible to ordinary Greeks- worse it was being covered up till 2009 by the government till the IMF's Traa pointed this out. And Greeks still cannot come to terms with what happened.

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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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This WSJ editorial cites French president Macron on the provisions in the Biden Inflation Reduction Act that favor Make in the USA and how it affects foreign automobile manufacturers. WSJ also says the actions taken by Japanese, Chinese, Canadian and German governments favor their domestic industries. For decades Make in the USA was neglected hurting American workers, American communities, and creating serious even dangerous (for democracy) social gaps in society. The Biden administration is following a Make in the USA policy that is now being followed by the EU and Germany of bringing supply chains closer or back to home ground after the pandemic showed the serious shortcomings of shipping American or European manufacturing overseas. After the hollowing out of Detroit over two decades Detroit now gets a chance to come back with the rebuilding of the car industry in the renewables age.

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The failure of Merkel's and Macron's policies in Europe. The policies contained a contradiction says this WSJ report- doing little to address concerns of Russia over NATO expansion and yet opting to build better economic relations with Russia. Merkel and Macron failed to tackle the main issue of NATO expansion. Did NATO need to expand continuously and what could be done so that Eastern European countries could join the EU but not NATO as a defense alliance. Without some new framework on this issue that was determined between US, Russia and Germany, France, for post 1990 peaceful relations the relationship with Russia based purely on trade has collapsed.  

This WSJ report also brings up the issue of the US and Europe not having it both ways - continually expanding NATO in the interests of the smaller nations in Eastern Europe and yet hoping to build a better relationship with Russia.

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Mistakes under Merkel continue under the Greens and Social Democrats. Germany fails to invest in its solar industry even as the fight against climate change ramps up and the need for solar energy is growing rapidly. Manufacturers of solar cells in east Germany that remained under Merkel- surviving Chinese investment ramped up to overcome a German lead in solar- by pursuing niche markets, are still failing to get the federal government's attention and support. This NYT report shows the situation in Germany as Chinese imports of solar take up 97% of the market. China sends solar panels to Germany and the EU at below production costs this NYT report says, with the US having erected barriers to Chinese imports to build its own manufacturing capabilities with Biden's support. Product intended for America is now put in the European market pushing prices down even further. 

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Spain's prime minister agrees to use of Catalan, Galician and Basque languages in parliament in return for support of JxCat pro Catalan party to form a future government. Spain's parliament voted 178 in favor and 169 against for use of these languages. About 9 million people in the region around Barcelona speak Catalan, 2 million in Galicia in the northwest speak Galician, and three quarter million speak Basque in the north. These languages were banned since the Spanish Civil War and the dictatorship of General Franco. Pedro Sanchez's government is also seeking approval of these languages as official in the EU joining 24 official languages. For Spain this marks the beginning of a new period in which the Partido Popular whose leader Mr. Feijoo is from Galicia as was a former prime minister Mariano Rajoy from PP, and the governing Socialist Party, both approve the making of these languages official. 

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Surveys of American, European and Japanese companies show souring of outlook for China investment. And Biden administration new rules leading to investment of China profits in the US economy. About $110 billion moved out of yuan denominated China bonds since 2022. There is a sharp decline in the profits of US and EU companies in China that are reinvested in China after China's sporadic lockdowns in 2022 and increase in interest rates in the US. WSJ Analysis shows $170 billion profits reinvested in 2021 to net decline in third quarter 2023 outflows of capital over inflows declining by $11.8 billion, the first ever since 1998. Unlike in the past profits are being repatriated back out of the country so that investments can be made in the US economy or in other countries in the supply chain. This is a fundamental shift as risk of doing business in China increases. 

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Russian seaborne crude shipments are up 18% as of June 11 over the prior year, Iran's shipments up even more by 45%. The result is increased supplies even though the Saudis tried to increase oil prices by limiting production. China's economy is slowing and faces headwinds that will not go away anytime soon of debt close to 290% of GDP higher than US or Europe. And lower imports by the US and EU as they correct the mistakes of overconcentration in China. The European Union faces high inflation and a mild recession. This is cutting demand as supplies increase. It will help the Biden administration as it seeks to give all Americans a fair chance to improve their standard of living, by reducing the cost of living and investing in the economic potential of the country in a way no other adminstration has done in the last 40 years.

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There is serious lack of depth in leadership in the Tory party today. Names proposed in The Guardian for Tory leaders after the July 4 election should Rishi Sunak have to resign are clearly short of what Britain needs in leadership. It depends on which Tory MP can hold on to his seat. Suella Braverman, Priti Patel, Kim Badennoch, James Cleverly, Tom Tugendhat, Penny Mordaunt, all lack what is needed to lead the Conservatives on July 5, 2024. This has been true all through the last two decades.  David Cameron, Boris Johnson, Theresa May, Liz Truss who preceded Sunak for most of the last decade were also lacking in leadership. The decade wasted with Nigel Farage and David Cameron, Boris Johnson trying to get Britain out of the European Union has hurt Britain. Today most Britons want to go back to a Britain that is growing as part of the EU and Europe. 

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This editorial says the approach of France's Sarkozy and Germany's Angela Merkel to the Greece debt situation is not working and the crisis will only get worse. Sarkozy and Merkel are protecting French and German banks as Greece takes on additional austerity measures which will not lessen the chances of default.

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In the first quarter of 2012 European banks financing from corporate bonds exceeded that of financing from bank corporate loans, according to data from Dealogic. European companes borrowed $179.5 billion by selling bonds in the first quarter 2012, a 38% increase over the prior year, according to Dealogic. In comparison bank borrowing declined 45% to $112.9 billion in the first quarter. New capital regulations under Basel III make it harder for banks to increase corporate loans. European regulators are requiring banks to improve the quality of their assets and enlarge their capital during the eurozone crisis.

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Italy's premier Renzi's economic policy to generate 0.8% growth in 2014, and reduce deficits by achieving higher growth rates to meet EU targets.