http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_26/04/2013_496257
http://www.zerohedge.com/news/2013-04-28/one-month-later-what-cyprus-thinks-aftermath-its-bank-sector-collapseOne Month Later: What Cyprus Thinks In The Aftermath Of Its Bank Sector Collapse?
Curious what the Cypriot people think just over a month after the most dramatic European banking sector collapse in years, and subsequent first bank sector bail-in and depositor impairment ever? Courtesy of Bloomberg, which summarizes a poll conducted via Symmetron and posted in Kathimerini Cyprus we now have an idea of what the still stunned Cypriot population thinks.
The Cyprus financial crisis is fault of country’s political, economic and social systems, not foreign institutions such as troika, according to 84% of Cypriots in poll by Symmetron published today in Kathimerini Cyprus. Poll also showed:
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http://www.zerohedge.com/contributed/2013-04-27/few-bungas-moreA FeW BuNGaS MoRe
"[If] you miss you had better miss very well. Whoever double-crosses me and leaves me alive, he understands nothing about Tuco. Nothing!"
 http://www.zerohedge.com/news/2013-04-28/germanys-perspective-how-europes-crisis-countries-hide-their-wealthGermany's Perspective: "How Europe's Crisis Countries Hide their Wealth"
Much has been said about the relative disparity of wealth between Germany and the rest of Europe, with the conventional wisdom being that Germans are rich and everyone else poor. This assumption has been challenged to the core recently, with some studies even suggesting that median household wealth in places like Cyprus is far, far greater than that of Germany, contrary to previous assumptions. In turn, this helps to explain the lack of "eagerness" of the Germans to constantly "assist" with the bailouts of peripheral countries by directly funding or assuming debt guarantees, or otherwise be loaded with the primary burden of future inflation if and when the ECB's creeping monetization of European debt, both directly and indirectly via PIIG bank collateral, unleashes the Weimar flashback tsunami. In this context, it is easy why it was the Germans who were intent on demolishing not only Russian billionaire savings (which as the Spiegel article below demonstrates, Germans are convinced are largely ill-gotten and hidden), but also why the punishment should stretch to uninsured depositors.
After reading the Spiegel article below, which reveals so much about German thinking, it becomes very clear that not only is Cyprus the "benchmark", but that the second some other PIIG country runs into trouble again, and its soaring non-performing loans inevitably demand a liability resolution a la Cyprus, it will be Germany once again at the helm, demanding more of the same. As the following punchline from Spiegel summarizes, "It would be more sensible -- and fairer -- for the crisis-ridden countries to exercise their own power to reduce their debts, namely by reaching for the assets of their citizens more than they have so far. As the most recent ECB study shows, there is certainly enough money available to do this." And that is the crux of the wealth-disparity demand of the EuropeanDisunion.
The Poverty Lie: How Europe's Crisis Countries Hide their Wealth
The images we see from the capitals of Europe's crisis-ridden countries are confusing to say the least. In the Cypriot capital Nicosia, for example, thousands protested against the levy on bank deposits, carrying images of Hitler and anti-Merkel signs, one of which read: "Merkel, your Nazi money is bloodier than any laundered money."
German Chancellor Angela Merkel was greeted by a similar scene when she visited Athens in October 2012. An older man with a carefully trimmed moustache and pressed trousers stood in Syntagma Square. The words on the sign he was carrying sharply contrasted with his amiable appearance: "Get out of our country, bitch."
Despite these abuses, the protesters and all of Merkel's other critics in Rome, Madrid, Nicosia and Athens agree on one thing: Germany should pay for the euro bailout, as much as possible and certainly more than it has paid so far.
They argue that Germany is a rich country that has benefited more than all others from the introduction of the euro, and that it has flooded other European countries with its exports, becoming more prosperous at their expense.
Germans Own Less than Those Asking for Money
But there is also a second image of Germany, one that's based on numbers, not emotions. The figures were obtained by the European Central Bank (ECB) and released last week. This image depicts a country whose households own less on average than those that are asking for its money.
In this ranking of assets, Cyprus is in second place Europe-wide, while Germany ranks much lower, even lower than two other crisis-ridden countries, Spain and Italy.
And this Cyprus, with its affluent households, is now supposed to receive €10 billion ($13.1 billion) from the European Stability Mechanism (ESM), the Euro Group's permanent bailout fund, and the International Monetary Fund (IMF), at least according to the decisions reached after dramatic negotiations, which the German parliament, the Bundestag, is expected to approve this week. But a new question is arising: Why exactly are we doing this? Isn't Cyprus rich enough to help itself?
In light of the new ECB study, a new discussion of the Euro Group's bailout strategy is indeed necessary. So far taxpayers have born the risks of this strategy, by guaranteeing all loans the ESM has paid out to needy countries. Greece, Ireland, Portugal and Spain are already part of this group, and now Cyprus has been added to the mix.
Germany is already guaranteeing about €100 billion in loans. If even more countries request aid and can then no longer serve as donors, the amount of money guaranteed by the Germans could rise to €509 billion, according to an estimate by the German Taxpayers' Association. This figure doesn't even include the latent risks in the balance sheet of the European Central Bank (ECB).
One-Sided Burdens
In addition, interest rates are very low, because the ECB is flooding the euro zone with money to stabilize the system. People who save their money are currently getting the short end of the stick, as they are stealthily being dispossessed. On the other hand, those with enough money to invest in stocks and real estate are benefiting from the boom triggered by the flood of funds coming from the ECB. In other words, taxpayers and ordinary savers are paying for the euro rescue efforts, which are primarily benefiting the rich in Europe's most troubled economies. Their assets remain largely untouched, while the assets of their rescuers are melting away.
In the past, the affluent have only been expected to participate in the rescue twice. In the case of Greece, owners of government bonds had to relinquish a portion of their claims, and in the case of Cyprus, bank deposits of more than €100,000 were either partially or fully lost.
Both cases mark a turning point, indicating that government donors are no longer willing to bear all the risks without the private beneficiaries of the euro rescue paying part of the bill.
But this could be only the beginning. The current strategy is not only unfair, because it distributes the burden one-sidedly. It is also economically dangerous, because it could put too much of a burden on the donor countries. And if they began to falter, the monetary union would inevitably break apart.
Besides, the aid programs to date have only replaced old loans with new ones, so that the borrower countries will never shed their heavy debt burdens. On the contrary, the necessary austerity measures are stifling and shrinking the economy in Greece and other Southern European countries.
Crisis Countries Should Seize Assets
It would be more sensible -- and fairer -- for the crisis-ridden countries to exercise their own power to reduce their debts, namely by reaching for the assets of their citizens more than they have so far. As the most recent ECB study shows, there is certainly enough money available to do this.
The numbers are potentially explosive. For instance, the average German household has assets of €195,000, almost €100,000 less than the average Spanish household. The average net wealth of households in Cyprus is €671,000, more than three times the German value. Italian and French households are also significantly wealthier than their German counterparts.
The differences are even more pronounced when it comes to median net wealth, which is the level that the lower half of the population just reaches and the upper half exceeds. On this measure, Germany, at €51,400, is actually in last place in the euro zone. The corresponding value for Cyprus is five times as high. Median net wealth is even higher in crisis-rattled Portugal than in Germany.
The conclusions of the ECB study had hardly been published before various efforts to relativize and whitewash the figures began. The results were apparently embarrassing to the ECB itself, but also to the German government.
ECB Downplays Report's Significance
When politicians with the center-right Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU), perused the confusing figures at a breakfast meeting last Wednesday and turned to the finance minister with a questioning look in their eyes, Wolfgang Schäuble responded by shrugging his shoulders.
Schäuble was unwilling to offer a clear interpretation. He eventually commented that the figures were not as clear as they appeared, and there were no further questions.
Schäuble had reached his objective, given his fears that the material would be welcome ammunition for critics of the current rescue policy. Even the ECB, apparently feeling uneasy about its own numbers, came up with all kinds of footnotes to downplay the statistics' significance.
The ECB noted, for instance, that the average Cypriot household consists of three individuals, while the average German household has only two members. This is true, and yet a difference of 50 percent in household size cannot explain a difference of 200 percent in average wealth.
More convincing was the note that the differences in wealth were mainly attributable to property ownership habits in the various countries. Whereas just over 80 percent of households own their own homes in Spain (83 percent) and Slovenia (81.6), and even 90 percent in Slovakia, this is true of only 44 percent of Germans.
The following comparison shows what a significant role property ownership plays in wealth statistics: While the median wealth of a German household that owns its own house or condominium is €216,000, it's only €10,300 for renters.
It is also clear that homeowners in Spain and Cyprus are not nearly as wealthy as the ECB study suggests. The data for most EU countries are from 2010, while some of the information for Spain is even from 2008. In both countries, the value of many houses and condominiums has declined sharply. Spain alone has seen a decline of 36 percent in the meantime.
Two World Wars and a Partition
Nevertheless, some attempts to downplay differences in wealth within the euro zone are reminiscent of card tricks. One argument holds that the Germans are portrayed as being too poor, because their figures do not account for their claims against the government pension system. In other countries, people provide for their retirement by buying property, which Germans don't have to do because they have government pension insurance.
But this is a spurious argument. Claims against a government pension fund do not constitute the asset accumulation in the classic sense, but rather a promise that could quite possibly not be kept. The current working generation pays for the pensions of retirees, which is precisely why pension claims cannot be reflected in the wealth calculation. They are offset by the younger generation's obligation, which is essentially a liability to vouch for the claims.
There are in fact understandable reasons why the Germans even lag behind such crisis-ridden countries as Greece, Cyprus and France when it comes to asset accumulation. In the last 100 years, Germans have been the victims of several events with the traits of expropriation. The hyperinflation of the 1920s, a consequence of World War I, destroyed the wealth of a middle class that had seen its fortunes consistently improve during the German Empire.
The monetary reform of 1948 eliminated the Reichsmark, which had become worthless after Germany's defeat in World War II, and wiped out the savings of an entire nation. In East Germany, 40 years of socialism destroyed the last vestiges of wealth and property. In the less than 23 years since German reunification, residents of the former East German states have not yet managed to attain the same levels of affluence as their fellow Germans in the west.
Most countries in the euro zone were spared such disasters. Either they emerged victorious from the two world wars, like France, or they remained neutral, like Spain. Either way, their citizens were able to build wealth over generations.
It is also not surprising that the Germans, despite high incomes, accumulate much less wealth than their fellow Europeans. Wealth consists of savings from the past. But German citizens tend to spend their money on consumption. They have no objection to renting expensive city apartments. They also like to go on vacation two or three times a year. In other words, those who spend their money lack funds to accumulate assets.
'A Devastatingly Shoddy Piece of Work'
The news that they are supposedly so much more affluent than the Germans was the source of astonishment -- and, in some places, outrage -- in Europe's debt-ridden countries.
Nikos Trimikliniotis is sitting in his garden in a modest suburb of Nicosia. The 44-year-old has a stack of documents spread out in front of him: academic studies, newspaper articles and notes. Trimikliniotis, a professor of law and sociology, is one of the leftist academics in Cyprus whose opinion carries some weight. In his opinion, the ECB study on the wealth of private households in the euro zone is "a devastatingly shoddy piece of work," and "completely misleading and dangerous."
Although the Cypriots are at the top of the ECB table in terms of their assets, "these are average values," says Trimikliniotis, "and they are from 2009 and 2010. And why aren't the different standards of living, the different social insurance systems and infrastructure in our countries compared at the same time? Why does the study fail to mention that social services like childcare are not subsidized in our country?"
He has other figures on hand, figures that do not appear in the ECB statistics. "They show that one in four Cypriots is threatened with the poverty of old age," he says. "One in two Cypriot retirees already lives on a pension of less than €4,000 -- a year. And now, with the austerity measures and sharp decline of the gross domestic product, old-age poverty will only get worse."
When the European press has addressed the ECB study at all in the southern countries, it has tried to downplay the numbers, citing the usual arguments, like property ownership, which has also declined sharply in value, and household size. Most of all, the press has warned against drawing the wrong conclusions from the statistics.
Italy Swimming in Poverty, not Money
The numbers, Italy's leading business newspaper Il Sole 24 Ore wrote, seem to suggest that "la Bundesbank" were trying to say to us: "You're the rich ones, and if you have problems, kindly solve them on your own."
Italy isn't swimming "in money, but in poverty," the paper argued, noting that 16.5 percent of Italians are considered poor while only 13.4 percent of Germans fall below the poverty line. The Italian central bank prepared its own report, which emphasized that Italy has more poverty and a lower average income, but also more wealth and less private debt.
It isn't this supposed wealth but growing poverty that has Italians upset these days. And it isn't the lives of the rich that shape the headlines, but the fates of people like Anna Maria Sopranzi, 68, and Romeo Dionisi, 62. Dionisi was a self-employed craftsman from Civitanova Marche in central Italy.
Sopranzi and Dionisi hung themselves from a heating pipe in their basement. A farewell note was stuck to the windshield of their neighbor's car. "Forgive us," they had written. Deeply in debt and impoverished, they had had no income for months but plenty of delinquent customers. Right up until the end, they hadn't shown any signs of despair or asked for help, neither from relatives nor the church.
They died of shame, and of the burden of the demands imposed by Equitalia, a government-owned company that collects taxes for the tax authorities.
People commit suicide every day in Italy. This was also the case before the crisis, but the deaths of Sopranzi and Dionisi were suicides committed out of despair, a warning sign that shook the entire country. The newly elected president of the parliament, Laura Boldrini, a former spokeswoman for the United Nations High Commissioner for Refugees, attended the funeral. "This is government murder," people said in the church. "To you we are just numbers." The archbishop appealed to politicians, saying: "It must become clear to you that we can no longer manage."
Plunging into Poverty
The crisis has plunged many people into poverty in Southern Europe, people who no longer know how they will make ends meet. Unemployment has risen to record level, and there are no new jobs in sight.
In Spain, a third of residents have taken out mortgages on their homes. With more than 4 million people losing their jobs in the years of crisis since 2007, many have been unable to continue servicing their loans with banks and savings banks.
There were 30,000 foreclosures last year alone, and most of them were primary residences. In most cases, the downgraded price paid at auction isn't sufficient to cover the entire outstanding debt, so that the mortgage holder is forced to continue paying high penalty interest and pay off the remaining debt in installments.
The foreclosure victims have formed self-help groups in recent months, and they have collected signatures to achieve a change in mortgage laws the European Court of Justice has ruled illegal and make personal bankruptcies possible.
In response to the government's neglect of the plight of thousands of families, protesters marched a week ago Tuesday in front of the offices of the governing party, Partido Popular (PP), in Barcelona and many other cities. They blew whistles and waved cardboard signs with the words "Stop desahucios!" ("Stop the evictions").
A Culture of Shirking Taxes
But even people who are considered affluent by the numbers do not consider themselves rich. They too feel that they are victims of the crisis, and they are worse off today than in the past. But does this mean they cannot be expected to bear a greater burden to save their country?
Take, for example, Dimitris, a resident of Crete (not his real name). He's a post office employee, his wife works in university administration, and both have been public servants for decades, which gives them secure incomes and small pension claims, although those benefits have been cut substantially since the debt crisis hit Greece.
Dimitris, his wife Maria and their two teenage sons live in a condominium in the administrative capital Heraklion. They also own a building in the southern part of the island with a small owner's apartment and 12 guest rooms that are rented out, a small but clean building with a view of the water, directly on the beach. The mother lives in a small house that she owns in the nearby village. The road to the village passes Dimitris's olive groves and fields of orange trees.
Now that he is close to retirement, Dimitris devotes most of his time -- including his working hours -- to the trees, which he grows organically. Dimitris and Maria are not doing well, subjectively at least. "Our costs are too high," he complains, after maneuvering one of his three cars into a parking space at the beach. "Just imagine. Now we have to pay taxes on all three properties and the cars."
The world doesn't make sense to Dimitris anymore. "Twenty-five percent," he says. He now loses a quarter of his earnings to taxes. "I don't know how I'll manage it."
In the past, life for Greek civil servants was often a different one. Their income taxes were taken directly out of their wages, but the tax authorities could traditionally be easily circumvented when it came to side earnings from things like olive oil sales or renting rooms to tourists.
Lois Labrianidis, a 59-year-old economist and professor at the University of Macedonia in the northern Greek city of Thessaloniki, attributes the lack of acceptance of tax payments and a tax liability to a sort of north-south gradient in the general consciousness, as well as an absence of public spirit. "We lack the parameters," he says. He is referring, for example, to the recognition that paying taxes to the government also enhance a citizen's personal social security and provisions for old age.
Southern Europe's Shadow Economies
Southern Europeans in a number of countries have traditionally paid no taxes on a good share of their income, which is one reason households with far smaller incomes have been able to accumulate substantially larger assets than German households.
Estimates by Friedrich Schneider, an economist in the Austrian city of Linz, reveal how horrifying the scope of the shadow economy is in the crisis-ridden countries of the euro zone. Among all the countries in the Organization for Economic Cooperation and Development (OECD), Greece, Italy, Portugal and Spain occupy the first four positions in the applicable negative ranking.
On the Iberian Peninsula and in Italy, the hidden economy makes up 20 percent of GDP, compared with almost 25 percent in Greece. By comparison, it only constitutes about 13 percent in Germany, and significantly less than 10 percent in other euro countries, like Austria and the Netherlands.
The greater the importance of moonlighting, the lower the tax revenues. The shadow economy deprives Spain, Italy and other countries of dozens of billions of euros in tax revenue each year, and has been doing so for decades.
Schneider's figures also show that in Greece, Spain and Portugal, the shadow economy plays an even greater role today than it did in the late 1980s. The scope of the shadow economy has declined in Italy, but only slightly. In other words, if attitudes toward taxation in Southern Europe were just as good as they are in the north, the debt-ridden countries would have solved their budget problems long ago.
All problems aside, Lars Feld, a member of the German Council of Economic Experts, also sees the ECB figures as good news. "They show that Germany, with its tough conditions for the euro bailout funds, is in the right."
After all, the debt-ridden countries are only eligible for the billions from bailout funds if they satisfy certain conditions in return. In addition to spending cuts and tax increases, they generally include the obligation to actually collect taxes. If tax laws not only appear on paper, but are also enforced, then "even Greece will be able to set aside doubts concerning the sustainability of its debts," says Feld.
Countries More Prosperous than Previously Thought
Despite the drawbacks and qualifications of the ECB's wealth figures, one realization remains: The countries of the south are far more prosperous than previously supposed.
For these countries' governments and the politicians in the partner countries dealing with bailouts, this can only lead to one conclusion: There is still plenty to be had. Cash-strapped countries that have already taken advantage of aid from the bailout funds should be required to increase their own contribution even further.
In fact, the ailing economies have already begun increasing taxes on their citizens, in some cases substantially. In this context, many governments are also taking aim at assets.
Last year, for example, Spain reintroduced a wealth tax that had been abolished five years earlier. It doesn't generate much in revenues, in fact, less than €1 billion. This is because of generous exemptions that can reach €1 million on properties used as primary residences.
The Socialist government in France introduced a special tax on assets last year, which generated €2.3 billion in revenues. The Greek government plans to tax the rich to an even greater extent. After the government drastically increased revenue goals for the wealth tax last year, it now expects revenues to increase from €1.2 billion to €2.7 billion.
The Fight against Tax Evaders
Economist Labrianidis also favors requiring the wealthy to play a stronger role in repaying the government debt. "The biggest problem is tax evasion and tax flight. And I'm not talking about the kiosk owner who doesn't give you a receipt for a pack of cigarettes," says the professor. He is referring to "the very rich," and he is calling for political will and a "wealth registry." Still, Labrianidis sees "no steps being taken in this direction. There is no political will to chase capital."
The average wealth of Greek households may seem high, but the country ranks near the bottom in Europe in terms of tax revenues. In 2011, tax revenues, including social security contributions, amounted to 35 percent of GDP, compared with an EU average of 40 percent.
Greek authorities are also making very little headway in their fight against tax evasion. Lists exist of delinquent doctors, wealthy people unwilling to pay their taxes and tax fugitives in Switzerland. There are also lists of undeclared swimming pools (which are subject to a tax) and proud owners of luxury yachts whose incomes are barely large enough to pay taxes. But the tax collectors continue to come up short. Last year, tax authorities were expected to drum up €2 billion in back taxes to help pay off the country's debt, at least under the conditions imposed by the troika consisting of the International Monetary Fund (IMF), the ECB and the European Commission. The actual figure was barely €1.1 billion.
'No Great Sacrifice'
In all southern European countries, the rich show little inclination to help pay for the consequences of the crisis. One exception is Diego Della Valle, 59, the inventor of the driving shoe and the president and CEO of Italian leather goods company Tod's. He proposes that companies like his, which are doing well despite the crisis, invest 1 percent of their profits to help the weakest members of society: the local elderly and unemployed youth.
In the case of Tod's, that would amount to €1.5 million, and if other profitable, publicly traded companies follow suit, he hopes to raise €150 million. Della Valle, who plans to launch his voluntary welfare contribution campaign this week, notes that this is something he can afford, and that for him it is "no great sacrifice, nor is it populism."
As nice as that may sound, keeping the government's hands away from private assets is a very popular pastime in Italy. It's an approach embodied by Silvio Berlusconi. More than anyone else, the self-made billionaire and longstanding former prime minister personifies the notion of circumventing the law and living according to the motto: Taking is more sacred than giving.
Although Italy has a high income tax rate of up to 43 percent, the government loses an estimated €120 billion a year to tax evasion and tax flight. There have long been discussions of tax increases and capital levies, but as is so often the case, little has ever been implemented.
Some ideas that have been discussed are the reintroduction of the land tax, an increase in the value-added tax and a wealth tax. The IMU, a tax on real estate ownership, including primary residences, was finally introduced under former Prime Minister Mario Monti. His predecessor Berlusconi had pledged, if re-elected, to reimburse around €4 billion in money that had been paid under the IMU tax. There was also a levy on yachts 10 meters or longer.
Sinking Revenue
Greece is in a similar position. Tax revenues have decreased instead of going up in the crisis. The self-employed alone reportedly owe the government up to €30 billion, a study by American researchers found.
The regular tax on real estate planned by the Greek government is also not going to materialize for the time being. Instead, the special tax on real estate will continue to be collected through electricity bills. The Finance Ministry knows this is the only halfway reliable method for the government to get its money. Starting this year, Greeks who own property, which is almost everyone, are required to provide the number of their electricity meter on their tax return. At the same time, some 30,000 customers a month are having their power cut off. The state-owned electric utility, DEI, reports that 80 percent of electric bills are paid very late or not at all.
Spain is a little further along in this respect. The conservative government of Prime Minister Mariano Rajoy, which came into office in December 2011, felt compelled to increase the maximum income tax rate from 45 to 52 percent. Rajoy also limited the possibility of reducing corporate income tax with write-offs. Before, on average, companies paid a de facto rate of only 10 percent to the government, says Josep Oliver i Alonso, a professor of applied economics at the Autonomous University of Barcelona.
Rajoy also reinstated the inheritance tax abolished by the Socialists, which will now apply to medium-sized and large estates. But because the crisis-torn population is already suffering under the increased value-added tax of 21 percent, as well as prescription fees and increases in taxes on alcohol and tobacco, Spaniards are growing less tolerant of the rich who try to avoid paying taxes on their money. New scandals are uncovered almost daily.
A former treasurer with the governing party, the conservative People's Party, hid €38 million in Swiss bank accounts, while a son of the former head of the Catalan government reportedly moved €32 million to tax havens. Even the son-in-law of the Spanish king allegedly siphoned ill-gotten public funds abroad.
Too Little, Too Late?
But the measures introduced to date by governments in the debt-ridden countries, their tax increases and their attempts to improve the tax administration will not be enough to come to grips with the massive debt in the long term. "Without cutting spending and introducing new taxes, most of the crisis-ridden countries will not be able to turn things around," says Guntram Wolff of the Brussels think tank Bruegel.
In his view, the ECB statistics at least point the way to how governments should address the problems. Italy is a case in point, with government debt comprising a gigantic 130 percent of GDP, compared with 80 percent in Germany. But at €173,500, median household wealth is almost three times as high as it is in Germany.
Peter Bofinger, a member of the German Council of Economic Experts, which advises the federal government, also believes that the crisis-ridden countries should ask the wealthy to make a substantially larger contribution. To clean up government finances, he is even calling for a capital levy. "The rich would then, for example, be required to relinquish a portion of their assets within 10 years."
A model of this sort of capital levy is the so-called Equalization of Burdens program implemented in Germany after World War II. At the time, the wealthy were compelled to pay a special tax for a period of 30 years.
Bofinger is convinced that a wealth tax would be far more appropriate than imposing a levy on savers, as was recently the case in Cyprus. "Resourceful wealthy people from Southern Europe will simply move their money to banks in Northern Europe, thereby evading the levy."
For Brussels economist Wolff, the ECB statistics provide more than just an answer to the question of who should pay the bill for the crisis in Southern Europe. "It becomes clear, once again, how unfair wealth is distributed, in Germany and elsewhere."
What he means is that wealthy Germans should also be expected to cover the costs of the crisis. "The effort to rescue the euro would be completely absurd if, in the end, the relatively poor average German household helped the super-rich in Greece avoid paying higher taxes."
Translated from the German by Christopher Sultan
http://www.guardian.co.uk/world/2013/apr/27/french-minister-attacks-merkel-austerityFrench minister says Merkel's austerity drive has failed
Benoit Hamon says the German leader is the only one still backing the policy
Benoit Hamon says austerity measures have failed. Photograph: AFP/Getty Images
A French socialist minister has launched an impassioned attack on the "failing" austerity policies imposed on European economies, which he said were now only supported by the German chancellor, Angela Merkel, and a few others.
In outspoken comments that will fuel tensions between France andGermany, Benoit Hamon, the social and consumer affairs minister, told the Observer that it was "time to finish with the politics of austerity inEurope". He added: "Only Merkel, supported by a few northern countries, believes austerity is working … when it's clear there is no prospect of unemployment rates going down."
Figures released last week revealed that French unemployment had reached a record level, with more than 3.2 million people seeking work. As the economy stagnates, approval ratings for President François Hollande have plummeted to the lowest levels recorded since the fifth republic began in 1958. As a signatory to the European stability pact, which was strongly promoted by Germany last year, Hollande is committed to a programme designed to bring France's budget deficit below 3% of gross domestic product by the end of this year, although that target is almost certain to be missed.
On Saturday a leaked French Socialist party draft document accused Merkel of "selfish intransigence" as she continues to insist on austerity policies. Hamon said the French government needed to bite the bullet and accept that ending austerity would lead to a falling-out with Europe's biggest economic power. He said: "This will cause political tension with the Germans and cause political differences."
However, he added that as eurozone economies continued to stagnate and unemployment soared, particularly in southern Europe, the tide was turning against Merkel's emphasis on reducing debts at all costs. "The wave of opinion against austerity is in the majority now among leaders and economists," he said. "The only economy that is resisting, opposing, vetoing is Germany."
The deficit-cutting demands of the stability pact have been pushing eurozone governments to breaking point, as spending cuts and tax rises choke off economic growth. Last week Spain – which has a youth unemployment rate of more than 50% – said it would require two more years to hit its deficit targets.
Hamon's intervention also comes after a week in which the economics of austerity have come under scrutiny. Influential research on the effects of public debt by two American economists, Kenneth Rogoff and Carmen Reinhart, was attacked as fundamentally flawed. Their study, published in 2010, claimed that high levels of government debt lead to a sharp fall in economic growth, but the authors have been accused of basic errors in methodology.
http://www.cyprus-mail.com/cyprus/dirty-money-claims-were-just-excuse-bail/20130428‘Dirty money’ claims were just an excuse for bail-inhttp://www.zerohedge.com/news/2013-04-27/what-killing-europeWhat Is Killing Europe
From Mark Grant, author of Out Of The Box, a follow up to our "A Few Quick Reminders Why NOTHING Has Been Fixed In Europe (And Why LTRO 3 Is Not Coming)" from March 2012.
What is Killing Europe
The bigger the real-life problems, the greater the tendency for people to retreat into a reassuring fantasy-land of abstract theory and technical manipulation. Many people have little or no understanding of what is presently taking place in Europe. This is because it is reported nowhere, discussed in public by no one and carefully hidden in the data supplied by the European Central Bank. What I will discuss today is the prime mover, in my opinion, of the destabilization of the European economies and yet, like the debt to GDP ratios on the Continent; just because it isn’t counted does not mean that it does not exist. I will endeavor to explain it as simply as possible. A bank in some European country such as Spain lends money but the collateral, Real Estate or commercial loans, are going bad. The bank then securitizes a large pool of this collateral and pledges it at the ECB to receive cash. In many cases to take the pool the country has to guarantee the debt. So Spain, in my example, guarantees the loan package which is then pledged at the ECB and is a contingent liability and which is not reported in the debt to GDP ratio of the country but nowhere else that you will find either. “Hidden” would be the appropriate word. Then as time passes the loans get even worse so that the ECB demands cash or more collateral because they will not be taking the hit; thank you very much. The bank cannot afford to post more collateral so that the country, Spain, must post the collateral and add an additional guarantee for the new loan or they must post cash which is oftentimes the case. Consequently as time passes and more cash has been spent the country, Spain, begins to run out of capital and the 10.6% deficit figure, that Spain announced recently, is not anywhere close to the actual reality so that they will get forced to officially borrow more money from the ESM as the sovereign guarantee of bank debt becomes unsustainable. What is happening is then becoming clearer as the nations of Europe are running out of capital as they endeavor to support their banking institutions. The breadth and depth of this problem is nowhere to be found but the effect is unmistakable. The European nations are going bankrupt. The problem is that Europe pretends to be asleep. The difficulty then is that you cannot wake them up. The longer that time passes; the worse the situation. The countries cannot afford to pay their known bills. The banking crisis worsens. The debt at the ECB must get paid which worsens the finances of the sovereigns. It is a death spiral unless the economies pick-up and experience real growth which is just not happening. Soon the problems will become bad enough that they will hit the fan once again and this time; there will be real Hell to pay. You can expect this for Spain, Greece, Portugal, Cyprus, Slovenia, Ireland et al and in short order. I have used Spain as the example today because their stated 10.6% economic decline is only a fraction of their real issue. Again, what is not counted or what is not stated does not ease the burden of what must be paid. They may proclaim fantasy but they are living in reality. The famous windmills are becoming unhinged. I have no issue with myths. I just have difficulty when governments fly them as banners of truth France unemployment hits new high | ||||||||
About 3.2 million people were out of work in March, beating the previous all-time record set in 1997.
Last Modified: 25 Apr 2013 22:38
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| The number of unemployed people in France climbed to new record levels in March, according to official data. Around 3.2 million people were out of work in the country, an 11.5 percent annual increase, the labour ministry said on Thursday. With a wave of industrial layoffs taking effect, the March jobless figure beat the previous all-time record of 3.1 million set in January. 1997. The new figures are a symbolic blow to President Francois Hollande, whose approval ratings have sunk to the lowest of any modern French leader in recent months as jobless claims soared. Battling to make good on his promise to reverse the rise in unemployment by the end of this year, Hollande has launched subsidised youth-job schemes and pushed through a reform to make hiring and firing slightly easier. On Thursday Hollande reaffirmed his goal to reverse the rising trend, calling on his government to combine with industry and other players to use all means possible to create jobs. "Everything the government does, in every ministry, must be to continue to strengthen the battle for jobs," he told a news conference during a state visit to China. "I want all the French people to unite behind this one national priority." Factories threatened Al Jazeera's Jacky Rowland, reporting from Paris, said Hollande had predicted that by the end of 2013, fewer people will be out of work but that prediction seems very optimistic at this point. She added that more factories are being threatened to closure. "The French motor industry is finding it difficult to compete in the market and labour costs are a significant factor," our correspondent said. Auto-makers, once major job-providers, have announced thousands of staff cuts, with PSA Peugeot Citroen scrapping more than 10,000 domestic jobs and rival Renault aiming to cut 7,500 posts in France by 2016. The March data showed that the average time that job seekers spend on the jobless roster hit a new multi-year high of 485 days, up from a previous record of 482 in February, a level that was also reached in April 2000. The news of France's unemployment rate follows news out of Spain where more than six million peoplewere out of work in the first quarter of this year. The jobless rate rose to 27.2 percent from 26.02 percent in the previous quarter, the highest since records began in the 1970s. The number of unemployed climbed by 237,400 people to 6.2 million, the National Statistics Institute said on Thursday. Spain, once the motor of job creation in the 17-nation single currency area, is in a double dip recession, having yet to recover from the collapse of a property boom in 2008. The Spanish economy contracted by 1.37 percent last year, the second worst yearly slump since 1970, and the government forecasts it will shrink again by between 1.0 percent and 1.5 percent this year. | ||||||||
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