Commentary on the economic , geopolitical and simply fascinating things going on. Served occasionally with a side of snark.
Sunday, April 6, 2014
EU watch April 6 , 2014 -- Europe in full recovery ? Tell that to France - Brussels Says "No" to France Proposal for Deficit Target Leniency , The European Commission told Manuel Valls, Hollande's new Prime Minister to "be more like Spain", and impose more austerity to meet deficit targets. The irony of course is that Spain has failed at least three times to meet repeatedly watered-down deficit targets. ...... As for Spain , Spain Misses 2013 Budget Deficit Target in Spite of Massive Tax Increases; So Much Pain for Virtually No Reward ....... Maybe France should be more like Greece ?
The socialists consider Valls as too pro-business. They want less austerity and a reduction in personal taxes, not corporate taxes. And they are against Hollande's "responsibility pact" proposal that would reduce labor costs and cut government spending.
Nearly a hundred of Socialist deputies signed a document calling for political change of course and threaten a vote of no confidence in the government on Tuesday. The members of parliament (MPs), groggy out of defeat in local elections, gain momentum to contest the elements of "pact of responsibility."
Jean-Marc Germain, leader of "rebuilders" and very close to the mayor of Lille Martine Aubry, warned Friday that 65 members wanted to get "insurance", including a stronger role for Parliament. Ranks have swelled with the release of a "contract of majority" launched by Pouria Amirshahi among others, Jean-Marc Germain or Laurence Dumont, Vice-President of the Assembly.
This text calls for the Government to consult further their majority and to reorient its policy and that of Europe to fight austerity, investing directly for employment and to favor a "demand shock" through measures favor of purchasing power.
President Francois Hollande promised on Jan. 14 to engage the responsibility of the Government to the pact of responsibility, which includes a reduction of labor costs by 10 billion euros. But the government reshuffle and increasingly hard criticism by the socialist majority have changed the situation.
The absence of policy change line has weighed heavily in the decision environmentalists and casts uncertainty over their vote Tuesday. François Hollande and his government are thus caught between two fires, the majority of which are increasingly demanding the end of austerity and that of the European Commission, for the moment, refuses to France a additional time to achieve its deficit reduction.
Demand Shock Spending Spree Not Coming
In light of the EC's rejection of Valls' request for more time to meet deficit reduction targets, its safe to say a French spending spree is not coming. It will be amusing to see what sleight of hand magic Hollande proposes in its next budget proposal to Brussels.
Francois Hollande's new government is of to a shaky start.
The European Commission told Manuel Valls, Hollande's new Prime Minister to "be more like Spain", and impose more austerity to meet deficit targets. The irony of course is that Spain has failed at least three times to meet repeatedly watered-down deficit targets.
The flamboyant French Prime Minister, Manuel Valls, asked the European Commission to grant him leniency on meeting deficit targets in exchange for reforms, cuts to public spending, and tax breaks. Valls received yesterday the Commission response: No. No way. There will be none of that.
German Finance Minister, Wolfgang Schäuble, suggested that France had been given leeway twice already, and a third time could be counterproductive. The vice president even Economic Affairs Commission Olli Rehn, yesterday got out the glove and categorically ruled out more time to Paris.
"An extension of the deficit targets for France would be justified only if there are negative surprises. And there is nothing like that on the horizon. The eurozone is in full recovery, "he told Reuters. That view is shared by President José Manuel Durão Barroso and Jean-Claude Juncker.
Rehn cited as models for France to countries that have made reforms, such as Germany and more recently, Ireland, Latvia and even Spain, although in three cases the results still leave much to be desired.
In April, Paris must send their tax plans to Brussels. And that's when the mess really starts.
Olli Rehn's notion that the eurozone is in full recovery is of course laughable. As for negative surprises, expect to see plenty of them.
Spain's budget deficit fell from 6.84% of GDP in 2012 to 6.62% of GDP last year.
The budget goal was far less ambitious than previous, but still did not met the commitment to Brussels. The Government has published today the first official public deficit figure for the end of 2013, there will be new reviews in the coming months and a year, but Spain has deviated from the intended target.
Specifically, the government recorded a hole of 6.62% of GDP in 2013 (67.755 billion euros), one tenth of a percentage point above the limit of 6.5% agreed with the European Commission, according to Finance Minister Cristobal Montoro, in a press conference after the Council of Ministers. However, the announced figure does not include the cost of financial aid reported last year (0.46%), so that the actual deficit stood at 7.08% of GDP.
Happy and content as a lark, Montoro proudly announcing that Spain "almost" met the deficit target.
The Spanish public deficit closed at 6.62% of GDP in 2013, slightly more than a tenth above the target of 6.5% agreed with the European Commission (well the first we agreed if I remember correctly was 4.5%)
Are you telling me that this is all we get for so much pain? Well, boys and girls, something has gone badly wrong.
I can tell you this: If I focus on the cold numbers, the deficit fell only 2 billion euros with a gap of almost 68 billion (excluding aid to banks). Please fired the CEO of this company.
All clear in Athens front. The Eurogroup finance ministers are content with the commitments and actions of the Greek government and decided to release the next bailout installment of 8.3 billion euro from the EFSF. However not all money will come at once as our partners and lenders seem to have some shortage of trust to Greek commitment. Therefore the 8.3 billion euro will be given in three tranches.
€6.3 billion end of April
€1 billion in June
€1 billion in July.
In August we all – the Eurogroup, the government & the citizens – will go and enjoy our summer vacations. Kidding…
After the April tranche, the Eurogroup lenders expect that the Greek government proceeds to full implementation of another series of the so-called “prior actions” like filling fiscal gaps, freeze public expenditure to levels of 2013, proceed with further OECD market liberalization reforms, speed up privatizations, twelve prior actions in total. Greece has time to fulfill these preconditions until the next review.
“The programme is fully financed for the next 12 months, including by drawing on temporary sources of financing such as deposits of general government subsectors. Euro area Member States recall their commitment to provide adequate support until Greece regains market access, provided Greece fully complies with the requirements and objectives of the adjustment programme. This will be further addressed in the context of the next review.’ (excerpt from the official Eurogroup statement in English)
the review process is expected to start July. EU Monetary Affairs Commissioner Olli Rehn expressed the hope that the review will conclude before Christmas. “Athens is beautiful at Christmas time but we hope we will conclude earlier,” Rehn said in an attempt of a kind of …humor.
The Eurogroup expects further that Greece return to markets and proceeds with fast pace in development and growth.
“Growth is the only solution to boost employment,” said Eurogroup chief and Dutch finance minister Jeroen Dijsselbloem adding that “the euro-zone will assist Greece in its growth strategy.”
The IMF is expected to give an additional tranche of €3.2 billion in May.
Greek Finance Minister Yiannis Stournaras could not say it more clearly. That top priority of the EU partners is to safe the banks. “We learned our lesson from the crisis. We do everything what is possible to ensure that the banking system is safe,” Stournaras said during a joint press conference with his ECOFIN partners this morning in Athens.
PS I hope they have also worked out emergency plans on what to do in case bank customers run out of money :p