The New Year brings back the sovereign debt question as the most urgent issue for the EU member States. Now that it is clear that Greece and Ireland have reached unsustainable levels of debt, all the attentions are moving to Portugal. On Wednesday next week, Lisbon will be again in the market to try to place Treasury paper. There is deep anxiety in Brussels and other capitals about the investors' response to that move.
The Portuguese government has shown they prefer to pay very high rates of interest to making use of the EU/IMF financial facility. This option is politically expedient in the short run. It delays the moment for hard decisions, particularly at a time when the presidential elections are around the corner, on 23 January, and the government's candidate is lagging behind in the polls. But, sooner or later, the moment of truth will come. The poor performance of the country's economy will then hit the wall.
Showing posts with label european blog. Show all posts
Showing posts with label european blog. Show all posts
Friday, 7 January 2011
Monday, 27 December 2010
The Berlaymont ghost
These days, there is a ghost walking the corridors of the Berlaymont building. People talk about him, give him a name, put a French accent in his voice, as they also put words and comments on his mouth, compare him with the present tenant, and feed the malaise.
The current tenant is the one that fears most this strange ghost. He gets very annoyed when he hears his name, and mad when people draw comparisons. He then asks his advisors to talk to the friendly media hacks. The point is to get a favourable press, to show that the ghost is from another time and circumstances. And that, in any case, when he was real, a few decades ago, he was no better then today's man.
The current tenant is the one that fears most this strange ghost. He gets very annoyed when he hears his name, and mad when people draw comparisons. He then asks his advisors to talk to the friendly media hacks. The point is to get a favourable press, to show that the ghost is from another time and circumstances. And that, in any case, when he was real, a few decades ago, he was no better then today's man.
Sunday, 19 December 2010
EU money matters
The mainstream media has largely ignored the EU budget discussions. There have been some brief references to the difference of views between the European Parliament and the member states, concerning the rate of growth of 2011 expenditures, as well as a few pieces about the British initiative to cap future allocations. But no detailed comment about the contents of the budget. Notwithstanding the fact that some funding decisions would be politically difficult to justify, if the public scrutiny was properly done.
What explains the media silence?
What explains the media silence?
Saturday, 18 December 2010
Shut up, the big boys are cutting the EU budget!
The UK Prime Minister has drafted a letter to state his government's position regarding the EU budgets for the next years. Basically, David Cameron would see the budgetary appropriations that finance the functioning of the European institutions and the solidarity funds being capped at the level of the 2013 budget. Even the inflation figures would not be fully taken into account.
The PM has convinced France and Germany to support his demarche.
One understands budgets are being cut all over Europe, in each member state. Therefore, there is no political excuse to let the EU allocations, in the years to come, to follow a different course. That's the bright side of this initiative. The darker side is that the cuts will take place, if the will of these three governments prevails in Brussels, in the wrong accounts. The Common Agricultural Policy, for instance, which is an archaic compensatory system that benefits above all the French, German and British owners of very large farms,will remain untouched. No reduction, there. On the other side of this story, the cohesion funds, that are supposed to bring poorer European regions closer to the Union's wealth average, will see significant cuts.
Tant pis, as President Sarkozy would say. Only the weaker states need such cohesion mechanisms. Their voice can somehow be ignored.
The PM has convinced France and Germany to support his demarche.
One understands budgets are being cut all over Europe, in each member state. Therefore, there is no political excuse to let the EU allocations, in the years to come, to follow a different course. That's the bright side of this initiative. The darker side is that the cuts will take place, if the will of these three governments prevails in Brussels, in the wrong accounts. The Common Agricultural Policy, for instance, which is an archaic compensatory system that benefits above all the French, German and British owners of very large farms,will remain untouched. No reduction, there. On the other side of this story, the cohesion funds, that are supposed to bring poorer European regions closer to the Union's wealth average, will see significant cuts.
Tant pis, as President Sarkozy would say. Only the weaker states need such cohesion mechanisms. Their voice can somehow be ignored.
Friday, 17 December 2010
The euro's value
The principle of a permanent stabilisation mechanism has been approved. The goal, as presented by the European leaders, is to save the euro as a currency. But was the euro under serious threat? Is it the euro as a currency that has been under attack, or something else? Or is it just the market playing with a currency that is overvalued?
Obviously overvalued, particularly if one takes into account the economic situation of some EU countries.
Wouldn't it be better for everyone, including for strong outlooking economies such as Germany, to have a currency that is closer to the value of the dollar?
Obviously overvalued, particularly if one takes into account the economic situation of some EU countries.
Wouldn't it be better for everyone, including for strong outlooking economies such as Germany, to have a currency that is closer to the value of the dollar?
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