EU-DIGEST

France hopes a deal that could lay the foundation for a new contract will emerge on the sidelines of a European Union defense ministers' meeting in Spain on Wednesday, spokesman Laurent Teisseire said. Spain, which is hosting the regularly scheduled EU defense ministers meeting in its current role as EU president, has final say whether a meeting of A400M customer states occurs in Majorca, Teisseire said.

Governments had made proposals to EADS on Monday, and EADS responded two days later, German officials said Wednesday. Teisseire said France believed the responses "go in a favorable direction." EADS and the seven governments that ordered the four-propeller Airbus plane have been haggling over who will pay for 5.2 billion in cost overruns and technical problems that have put the program almost four years behind schedule.

Labels: Airbus, Aircraft Industry, EU Economy, France, Military Aircraft

Labels: EU Economy, Greece, US Banking System

Labels: China, EU Economy, US Economy

The Islam Democrats (ID), represented by a single delegate in The Hague’s city council since 2006, wanted desperately to avoid a swift implosion, as has been the fate of some other young Dutch political parties in recent memory. They failed. The party fell prey to infighting and is now divided into two feuding camps. The party’s plans to participate in the upcoming municipal elections in Rotterdam, Utrecht, and other Dutch cities, have been put on hold.

For the complete report: nrc.nl - International - In spite of numbers, Dutch Muslims are political non-entity

Labels: EU Economy, Netherlands

Labels: EU, EU Economy, Netherlands, Soccer

"The crisis has revealed our weaknesses," the former Belgian prime minister says in a statement entitled "A European strategy for growth and jobs" prepared for an EU summit in Brussels on Thursday. At present individual European nations "are responsible for the economic strategy of their government. They should do the same at EU level," Van Rompuy argues in his statement, obtained by AFP on Monday.

"Whether it is called coordination of policies or economic government," only the European nations working are "capable of delivering and sustaining a common European strategy for more growth and more jobs," he underlined.

Labels: EU Economy

Labels: EU Economy, Spain

The Markit iTraxx SovX Western Europe Index of credit- default swaps on the debt of 15 governments rose 12.5 basis points to 106.5, according to Deutsche Bank AG. Swaps on Portugal soared 31 basis points to 227, according to CMA DataVision, while contracts on Greece jumped 32.5 basis points to 430 and Spain increased 13 to 165.

Labels: EU Economy

Labels: Banking Industry, Davos, Economic World Order, EU Economy, The Financial Meltdown

For more: eGov monitor - A Policy Dialogue Platform | Promoting Better Governance

Labels: EU Economy

European rates set to stay at record lows - by Pan Pylas

Europe's two leading central banks are expected to keep interest rates unchanged Thursday and damp down any talk that borrowing costs will soon rise in the wake of a surprise rate hike by Australia's central bank to lift rates. Analysts say the European Central Bank, which controls monetary policy for the 16 countries that use the euro, and Britain's Bank of England will keep benchmark interest rates unchanged at historic lows of 1 percent and 0.5 percent. Unlike Australia, the eurozone and British economies remain in recession, though upcoming figures may show a modest pickup in growth over the final months of 2009.

Labels: EU Economy

Europe sets deadline to tackle national debts

Europe set a deadline on Thursday to end economic pump priming with a pledge to tackle member states' bloated deficits in 2011, the keystone of exit strategies. "We think that exit strategies, which must be prepared from today, can be applied during 2011," said Luxembourg Prime Minister Jean-Claude Juncker, who heads up the group of 16 countries that use the euro single currency. Juncker's timetable was conditional on further improvement in economic data, which has already lifted France and Germany out of recession, with the 16 also expecting to record notional growth in the quarter that ended on Wednesday.

Labels: EU Economy

OECD expects 25 million unemployed by 2010

The economic downturn is likely to cost as many as 25 million people their jobs by the end of 2010 as the unemployment rate nears a record 10% in the OECD group of countries, according to a report released on Wednesday (16 September).The Organisation for Economic Cooperation and Development said 15 million jobs were lost between the end of 2007 and July 2009 and 10 million more could go by the end of next year despite signs the economy is picking up.pAccording to official figures in the UK, one of Europe's youngest populations, youth unemployment has hit an all time low since 1997 with one in five young people now jobless.

Labels: EU Economy, US Economy

Euro-Zone Inflation Falls 0.2% in August - by Lawrence Newman

Consumer prices in the 16 countries that use the euro fell 0.2% in August from a year-earlier, the European Union's statistics arm Eurostat reported Wednesday. August's price fall -- unrevised from the preliminary estimate -- represents a less sharp decline than the 0.7% drop on the year in July but is the third straight month of annual deflation. Economists had expected a 0.2% decline in August. Consumer prices rose 0.3% in August from a month earlier, also in line with the preliminary estimate and economist forecasts. The monthly increase was the strongest since April.

The European Central Bank expects prices to rise again on an annual basis within a few months, due largely to the fact that the extraordinarily high level of energy prices in the period before the 2008 financial crisis will no longer be included in the statistical base.

Labels: EU Economy

Norway PM defends strong state as election starts<

Norway's prime minister defended on Sunday his government's cautious tactics in steering the economy through crisis, as early voting began in a closely fought parliamentary election. Polls show Prime Minister Jens Stoltenberg's centre-left coalition neck-and-neck with the right-of-centre opposition in a race set to determine whether the affluent Nordic country opens new Arctic regions for oil and gas exploration and how it spends its vast oil windfall. One new opinion poll on Sunday showed the government taking 85 seats in the 169-member parliament, just enough to be returned to power. That would be only the first time in 16 years that Norwegians have voted back the incumbents.

Labels: Banking Industry, EU Economy, Norway, World Economy

No firm recovery for European economy says EU President Jose Manuel Barroso

Europe's economy has not made a "firm recovery" from the crisis and the situation remains "very volatile" despite some encouraging signs, EU Commission chief Jose Manuel Barroso said on Tuesday. "The impact of the financial and economic crisis is still tangible in Europe and we have much still to do," he said at a joint press conference with Lithuanian President Dalia Grybauskaite. Lithuania is suffering the worst recession in the European Union. "Several European countries are seeing encouraging signs of recovery but firm recovery is not here yet," Barroso cautioned.

While Germany and France have pulled out of recession and have nearly managed to bring the rest of the eurozone with them, analysts say much of the recovery is due to massive government stimulus measures for businesses. Unemployment is also rising as companies struggle to stay viable.

Labels: EU, EU Economy

More positive economic outlook in EU - by Vanessa Macdonald

In July, the Economic Sentiment Indicator for the EU and the euro area improved further, registering the 4th consecutive increase in both series since the trough in March. However, in both areas, the level is still far below the long-term average. The ESI increased by 3.9 points in the EU, and by 2.8 points in the euro area, to 75.0 and 76.0 respectively, the European Commission said. Recovery of the industrial confidence indicator continued, backed by a further improvement in production expectations and normalization in the level of stocks. After a more than year-long slide, manufacturers' order books finally showed some improvement. Still, both stocks of finished goods and production expectations remain below their long-term averages; more importantly, industrial activity remains weak,as manifested by the all-time low level of capacity utilization.

The majority of the member states registered an improvement - including Malta. Among the largest member states, the UK(+5.0 points), Spain (+3.9), Italy (+3.5) and Germany(+3.2) recorded significant increases in sentiment, while the rise was marginal in France (+0.3), the Netherlands (+0.2) and Poland (+0.1).

Labels: EU Economy

Europe Defies The Skeptics: Why Europe Is Stronger Than Ever - By Andrew Moravcsik

Just six months ago, the media were rife with predictions about the collapse of the European Union and its currency in the wake of the economic crisis. Credit agencies issued downgrades or downgrade warnings for countries like Spain, Portugal, Ireland, and Greece. Even more serious debt crises were expected in Central and Eastern Europe.

Today, it's clear that the crisis has renewed European solidarity and seriousness of purpose. Europe is stronger than ever. What explains the quiet turnaround? The leading nations of Europe did not lose their nerve, and they did not work only to protect themselves, as many pundits predicted. Instead, they rushed to save their neighbors. In monetary policy, small nations realized that they lack the capacity to act as a credible lender of last resort for domestic banking systems that conduct many of their transactions in foreign currencies. Large nations, Germany in particular, realized that their banks, investors, and exporters would take a catastrophic hit if smaller neighbors went belly up. So the European Central Bank responded by pouring money into euro-zone banking systems. The Stability and Growth Pact, which restricts public spending, was relaxed to permit governments to recapitalize their banks. And in an unheralded and entirely informal expansion of EU responsibility, perhaps the largest since the 1999 launch of the euro, the central bank accepted responsibility for stabilizing EU countries outside the euro zone—those that still use their own currencies. It extended guarantees and swaps to assist efforts to stabilize financial systems that otherwise might have been forced to impose a punishing interest-rate hike or devaluation. The most striking example was the bailout of Latvia, managed jointly by the IMF and the EU. The turnaround in trade is no less spectacular. In March, European leaders made a collective commitment to avoid further protectionist measures, and they stuck to it. The core of Europe's single market—a ban on tariffs, quotas, and subsidies, protected by the Schengen Agreement prohibiting border controls and competition policy—seems to be holding firm.

Note EU-Digest: Unity is the only way forward for our EU. As the saying goes: "United we stand, divided we fall".

Labels: Constitutional Reform, EU, EU Economy, euro, European Unity, Political

Top European and U.S. Stocks: Who Will Lead Who?

While the two economies may take different paths, I wanted to see how the markets in Europe and the US are reacting to the various stimulus programs being implemented. I used the Dow Jones Index as the sample index for the US market and the DJ Euro Stoxx 50 Index for Europe. The DJ Stoxx 50 was not used since it includes the UK and I wanted to exclude the UK as it is facing similar problems to those of the US. Like the Dow Jones index, the DJ Euro Stoxx 50 Index is comprised of fifty of the largest companies in continental Europe.

The fact of the matter is that Europe's largest stocks ran much higher than the US's. And after March lows, the European stocks have rebounded and are leading US stocks again. On a 6-months basis, the DJ Euro Stoxx Index is slightly ahead of the Dow Jones Industrial Average as well. Overall these two indices closely track each other.

Labels: EU, EU Economy, Stock Market, US, US Economy

Tough decisions on financial supervision remain for summit - by Andrew Willis

Finance ministers meeting in Luxembourg on Tuesday (9 June) made progress on a new financial supervisory framework for the European Union but failed to reach an agreement on several of its most contentious issues. Division over who should chair a new body designed to monitor overall risk levels in the European financial system mean EU leaders will be left to make the tough decisions when they meet in Brussels on 18-19 June.At stake is the chairmanship of the proposed European Systemic Risk Council, with the European Commission last month suggesting the position should be filled by the president of the European Central Bank.

The UK and a number of other member states outside the Eurozone however, fear their interests will not be represented sufficiently if this is the case, with wrangling now likely to continue all the way up to the next European summit in just over one week.Note EU-Digest: Non members of the Eurozone should be happy there is a euro fall-back position to pick up on where they went wrong. Most EU member states reflected the hope of economy commissioner Joaquin Almunia when he said: "I am fully sure that the European Council [of EU leaders] will adopt the commission position."

Labels: EU Economy

IMF tells Europe to come clean on bank losses - by Ambrose Evans-Pritchard

"To restore confidence, you need total disclosure of possible losses," said Dominique Strauss-Kahn, the IMF's managing director. "Not only losses which are linked to the original sub-prime crisis, but also the losses linked to the slowdown in the economy, and impaired assets. There are lots of things that still have to be disclosed," he said, adding that credit mechanism remained jammed. The latest IMF report said the chance to raise fresh bank equity while optimism lasts should be "seized without delay" and demanded a "comprehensive review to assess capital needs and viability."

Note EU-Digest: As one reads this article it is interesting to see how the Telegraph (a mouthpiece of the UK's Conservative party) in their comments on the IMF statement bad-mouthes the EU, the Germany and the euro, creating a perception that nothing is working in the EU. One has to recognize this is not objective reporting, just EU bashing.

Labels: Britain, EU Economy, Polls: Perceptions, Press

Tentative signs of eurozone recovery - by Andrew Willis

Although the 16-member euro area is still very much in the throws of its worst recession since World War II, some positive data suggest the end may be in sight. The purchasing managers' index – an indication of future activity in the areas of services and manufacturing – jumped from 38.3 to 40.5 points in March, giving rise to hope that the green shoots of recovery seen elsewhere in the world may be spreading to Europe. The new figures, compiled by research group Markit and released on Thursday (23 April), are still well below the 50-point threshold that marks an increase in economic activity. But the new data for March show the rate of economic decline has slowed to the lowest level seen in the last six months and exceed economists' prior predictions of a rise to 39 points. Analysts responded positively to the news.

Labels: EU Economy

Europe’s Solution: Take More Time Off

While many European companies have long turned to shorter workweeks and mandatory time off in economic downturns, the idea has never really caught on in the United States. Despite reports of unpaid furloughs and wage cuts, American companies continue to rely heavily on layoffs to control labor costs. Much of this has to do with cultural differences as well as the social safety net that many European governments offer. For American employers, is one approach — layoffs versus shorter workweeks and wage cuts — better for the economy? Could it be true — as the Germans argue — that keeping more workers on the job is a good way to stimulate the economy in a recession?

Labels: EU, EU Economy, Labor market, recession

Eastern European banks given €24.5bn aid - by David Charter

A €24.5 billion (£21.8 billion) bailout of Eastern European banks was announced yesterday as efforts were stepped up to prevent the economic downturn causing a damaging East-West split on the Continent. The funds will come from the European Bank of Reconstruction and Development (EBRD), the World Bank and the European Investment Bank (EIB). The EBRD, set up to help former Iron Curtain countries to make the transition from communist rule, will be providing up to €6 billion for the financial sector in 2009-10. The EIB will commit €11 billion and the World Bank €7.5 billion.

The move came as European leaders prepared for a summit tomorrow called by the Czech Republic, which holds the rotating presidency of the European Union.

Labels: Banking system, Eastern Europe, EU Economy

Trim Euro MP expenses - "and control lobbyists influence"

Bankers may currently occupy the prime slot as the public's hate figures, but revelations that EU parliament MEPs could add euro 1.2 m to their family income over a five-year term suggest that we are strong challengers for the role. It doesn't have to be like this. An MEP's salaries budget (euro 150,000 annually) can be used entirely to pay the salaries of staff. The office budget (euro 40,000) can be used entirely to pay the expenses of running an office.

With no executive body to insist upon a line to be followed, and with the freedom to forge cross-party alliances, individual MEPs can have a great deal more legislative influence than their counterparts at Westminster. Their actions can change the law of the land in 27 countries, not just one, and the lobbyists know this very well indeed.

Labels: EU Economy, lobbyists

A EURO BOND TO SUPPLANT US TREASURIES

The chairman of the eurozone finance ministers, Jean-Claude Junker, has proposed that a common euro bond, backed by the cumulative economies of EU member nations, should be issued to attract foreign investors and provide inexpensive borrowing for smaller nations. As part of the plan, bonds would be issued to cover the first 40 percent of the overall eurozone government debt. “This would be senior debt, guaranteed by the whole euro area. Anything above the 40 percent would be junior debt that would be issued by individual governments,” according to Reuters. “If agreed on, common eurozone bonds would in a matter of a few years create a highly liquid bond market of some 4 trillion euros which could successfully compete with a similar size U.S. treasuries market for large investors like China” . So far, the movement has met resistance from Germany, which is afraid that its borrowing capacity would be burdened—weighed down by the other weaker European economies. One proposal currently being floated to bring the Germans on board, says Reuters, is to tilt the decision making on bond issuance “towards countries with the lowest spread on their debt”—a move that would be akin to “effectively putting Berlin in control” of how much gets borrowed and by whom.

The creation of a common European bond market would be a huge step forward for European integration but also have ramifications that reach far beyond Europe. The biggest casualty could be America.

America is currently home to the biggest debt market in the world. America borrows more than a billion dollars per day to cover government spending alone. America borrows further billions each day to cover the cost of imports that exceed its exports. This may be a big part of the scenario why Hillary Clinton chose China for her very first overseas trip as secretary of state. According to Agence France-Presse, while in Beijing on Sunday, “Clinton urged China … to keep buying U.S. debt.”

Labels: EU, EU Economy, Euro Bond

European Commission proposes bodies to oversee banking risk and financial regulators - by Philip Aldrick

EU policymakers are proposing that two new centralized bodies be created to oversee banking risk and financial stability across the continent. The recommendation is made in a report to the European Commission compiled by a group headed by former Bank of France Governor, Jacques de Larosiere, but stops short of calling for a sole European regulator. Mr de Larosiere suggests a new European Systemic Risk Council that would pool and analyse all information for financial stability across the continent. It would be chaired by the European Central Bank and have representation from banking, insurance and securities supervisors.

Labels: EU Economy, Financial Regulation

EU businesses, workers call for economy stimulus.

European businesses and trade unions called Wednesday for more action to increase credit flow to companies and help lift Europe out of recession. European Union governments have agreed to spend some €200 billion — or 1.5 percent of the bloc's gross domestic product — to stoke growth. Companies insist that this must be "fully and rapidly implemented," while workers say it may not be enough.Two business groups — BusinessEurope representing major companies and the UEAPME group speaking for smaller employers — called on the EU to boost lending to businesses. They said some viable companies were threatened with collapse because short-term loans are now harder to get and far more expensive. It also called on the Commission to criticize EU nations that don't stick to the stimulus program or launch protectionist programs that undermine the EU's single market.

Labels: EU, EU Economy

Sarkozy goes after US protectionism - by Elitsa Vucheva

French president Nicolas Sarkozy on Tuesday (24 February) called on the EU to protect its industry in the face of US protectionism, and said France and Italy would insist on this during a meeting of EU leaders in Brussels on Sunday. "There must be competition, but competition to build big European groups, not to make the totalities of our industries delocalize. France and Italy will as soon as Sunday [at an emergency EU summit] speak with one voice to ask Europe to take decisions, strong decisions," Mr Sarkozy told the press following a meeting with Italian prime minister Silvio Berlusconi in Rome.

The French president's comments come as the US earlier this month adopted a $787 billion (€617 billion) package to boost its economy. The bill contains "Buy American" provisions prohibiting foreign steel companies bidding for US infrastructure contracts financed by the plan. The European Commission has already raised concerns about the clause.

Labels: EU, EU Economy, Sarkozy, US

Recent weeks show how tough it may be for America to unite behind an economic fix-it plan. Some governors differ with the president, while in Congress, Republicans and Democrats bicker. In Europe, though, a financial crisis pits nation against nation, East against West. The crisis threatens a decades-long drive toward unity. Or does it? It may yet happen that the economic challenge in Europe becomes so acute that, in the end, the crucible of crisis actually forces stronger financial and political bonds between countries. French President Nicolas Sarkozy serves as Exhibit A.This week, he and other West European leaders endorsed a global doubling of contributions to the International Monetary Fund. The IMF can surely use the infusion as it tries to catch tumbling economies in Eastern Europe.While exposing divisions, the financial and economic crisis in Europe also reveals how connected and interdependent all of these countries are. It points to the need for pan-European solutions, not a retreat to nationalism.

Encouragingly, such solutions are starting to be voiced. The idea of a euro-bond has been raised as an economic burden-sharing tool to support weaker countries. Austria, whose banks have the largest exposure to Eastern Europe, is pushing for a broad effort to help the East. Now, crisis is tearing Europe apart by the seams. In the long run, it could stitch it closer together.

Labels: EU, EU Economy, Unity

Google backs Europe case against Microsoft browser

Google Inc. wants to help European regulators prove Microsoft Corp. has stifled competition and innovation by bundling its popular Web browser with the Windows operating system. The decision to back the European Commission, announced Tuesday, isn't a surprise because Google wants to lessen the dominance of Microsoft's Internet Explorer with a competing Web browser called Chrome.

Labels: Accident, Aircraft disaster, Amsterdam, EU, EU Economy, Google, Microsoft, Netherlands, Railways, Sarkozy, Transportation Logistics, Turkey, US

Narrow-minded leadership hurts Europe - by Wolfgang Munchau

European leaders have woefully underestimated the crisis and possibly still do. The European economy is now heading towards a depression, with German gross domestic product falling at an annualised rate of almost 9 per cent. The early misjudgment of the crisis resulted in stimulus packages with two defects. They were initially too small but, more importantly, they were not co-ordinated. One important aspect of the economic meltdown is the presence of strong cross-country spillovers, both globally and inside the EU. The policy response failed to take account of these spillovers.

When European leaders meet for their anti-protectionism summit on March 1, they will produce warm words to reaffirm their commitment to the single market. I suspect they will continue to misdiagnose the crisis. Protectionism is not the root of the problem. The protectionism we are experiencing now is caused by co-ordination failure. It is neither sudden, nor surprising.

Labels: Britain, EU Economy, EU SUMMIT

Europe acting together can face up to the economic crisis

Strong European leadership to tackle the current crisis of confidence and investing in environmental protection projects will help soften the effects of economic slowdown, according to MEPs and national MPs. MEPs and national parliamentarians from the 27 Member States and the candidate countries continued on Tuesday their two-day Joint Parliamentary Meeting, organised by the European Parliament and the Czech EU Presidency, to discuss “A New Deal for European Economic Recovery?” . Speaking at the conclusion of the two-day debate, EP President Hans-Gert Pöttering said EU must "act together and find common answers" to the crisis. Protectionism, he said, could annihilate the advantages of the Single Market and create "the foundations for a disaster". President Pöttering also expressed his support for the euro, without which, he said, the European economy would be in much greater trouble. "Everything we can do to maintain the stability of the European currency" has to be done, he said.

Note EU-Digest: the time of playing protectionist and nationalistic games is over. Its time to pass the Lisbon treaty and work together as one strong team. United we stand divided we will certainly fail.

Labels: EU, EU Economy, European Parliament, European Unity

Crisis EU economic summit to be held - by Jamie Smyth

Czech prime minister Mirek Topolanek announced the Brussels summit yesterday in response to French and German pressure for the EU to show more leadership in the face of the crisis. He also strongly criticized French president Nicolas Sarkozy, whose protectionist policies he said risked pushing the entire EU in a “beggar-thy-neighbour” direction.

Note EU-Digest: Sarkozy welcomed the initiative and in a joint letter with German Chancellor Angela Merkel said "it remains essential to pursue a coordinated approach to maximize the advantages for the whole EU.The solutions can vary from country to country," they wrote to Topolanek. But "the principles have to be approved together" so all 27 nations can cooperate on the measures they can take to get out of the deteriorating economic slump.

Labels: EU, EU Economy, EU SUMMIT

Sarkozy tells it as it is.

For the complete report from the Telegraph click on this link

French President Nicolas Sarkozy accuses Gordon Brown of ruining British economy(and criticizes US recovery plan)

Nicolas Sarkozy, the French President, has accused Gordon Brown of ruining the Britain's economy and vowed not to repeat his mistakes in a frank interview which has sparked a cross-channel diplomatic row. Said Sarkozy: "In France, we chose investment because when we put France into debt by taking money to invest, in return we have assets, infrastructure. When you put your country into debt to pay for operating costs, you have nothing in return for your debt and you ruin the country. If the English did that it's because they don't have any industry left. Gordon Brown cannot do what I am doing with car makers [giving them up to 6 billion euros... in construction and other industries, because they haven't got any left. In the US, bipartisan talks are underway to reduce the size of the American stimulus. There are Democrats as well as Republicans who think that the $920billion package contains a good deal of waste in it. When you examine some of the detail it's clear there is hundreds of billions of dollars worth of rubbish included which will not create recovery and only saddle the US with higher debt. A $1.5 billion package spent on broadband for rural areas? I bet that'll be efficiently spent. That's one of the items which will likely come out, and by the end the stimulus is expected to be at least $90billion smaller than originally envisaged."

Note EU-Digest: Mr. Sarkozy understands that in order to get an economy going again you need to get people working, not finance the culprits who caused the problem.

Labels: Britain, EU, EU Economy, France, Sarkozy

European Economy - Europe Services, Manufacturing Contracted in January

Europe’s manufacturing and service industries contracted for an eighth month in January as the global recession curbed demand for exports and damped spending. A composite index of both industries was at 38.5 compared with 38.2 in December, which was the lowest reading since the survey began in 1998. Economists forecast a decline to 37.4, according to the median of 15 estimates in a Bloomberg survey. The index is based on a survey of purchasing managers by Markit Economics and a reading below 50 indicates contraction. Companies are scaling back production and cutting jobs as global demand wanes. Europe’s gross domestic product will drop 1.9 percent this year, the European Commission forecasts.

While the rise in the purchasing managers’ index “provides a glimmer of hope that the rate of economic contraction may have peaked at the end of last year,” its level is “still consistent with a sharp drop in GDP,” said Chris Williamson, chief economist at Markit.

Labels: EU, EU Economy, manufacturing Industry

Greece - Debt Financing Outlook for 2009 and Beyond - by Georgios Zoumpoulidis

If macroeconomics is about understanding, microeconomics is mostly perception; and where financial markets are concerned, at times, even deception. Take Greece for example - a typical example of a peripheral, debt laden Euro economy. Its first crash test for 2009 will probably be on Jan 13, when its first bond auction for 2009 will take place. It is almost certain that the spread between Greek and German bonds will be more than 200 points. But what exactly does this spread tell us? Strictly technically speaking, in times of recession, debt laden economies behave more or less like highly leveraged stocks - the banks squeeze liquidity (shutting down lines of credit, for example) and then ask for added insurance and/or even partial/full repayment of debt. This course of action marks a turning point for the underlying company - management is forced to either wake up and turn around the company or prepare to file for bankruptcy (for a state, that would be something like asking the IMF for help!). But there is a crucial difference, if you are a member of EU: you can't really go into "turnaround" mode; you can't print your own money.

Note EU-Digest: Just imagine if we did not have the euro today in the EU. With the financial crises the world is facing it would have meant utter chaos on the European financial markets. Lets face it: together we are able to survive in Europe, divided we fall

Labels: Council of Europe, EU, EU Economy, Greece

Recession Bites Europe - by Lionel Laurent

European stocks suffered a predictably gloomy performance Thursday morning, as engine maker Rolls Royce unveiled job cuts and Air France-KLM's quarterly profits were virtually wiped out. Dutch retailer Royal Ahold beat expectations with its quarterly results, thanks to a long-term price reduction program. Shares gained 6.9%, to 8.55 euros ($10.70), in Amsterdam.

Labels: EU Economy

Europe Unifies Over Bank Deposit Guarantees - by Tom Gjelten

Europe Unifies Over Bank Deposit Guarantees - by Tom Gjelten

Against the background of the US financial crises, the European Union finance ministers who met in Luxembourg on Tuesday were able to reach one agreement: All EU countries now have to insure bank deposits up to 50,000 euros (about $68,000), and countries that want to can insure up to 100,000 euros. The finance ministers also agreed on "principles" EU governments should follow when providing new capital for their distressed banks. But the action falls short of the financial rescue plan adopted last week in the United States.

Labels: Bailout, Bank Deposit Guarantees, EU Economy

EUROPEAN ECONOMY - EU ON THE RIGHT COURSE - FOLLOWING US STYLE ECONOMIC REMEDIES NOT APPLICABLE

While EU Finance ministers are presently in Luxembourg hashing out a common economic policy encompassing the 27 member European Union, a potentially dangerous Global financial sector drama continues to unfold around the world.

The US financial sector supported in the US press mainly by the Wall Street Journal, CNBC, and Fox News, with hyped up, over-active, "testosterone induced" writers, commentators, and anchors, is not only very critical of the EU, but also keeps hammering on the fact that Europe is suffering the same financial problems as the US and should also use the same remedies. This basically is not correct. One can not compare the US financial problems with those of the EU. The US, apart from its collapsing financial market, also has a huge 13 trillion budget deficit, which if we ad to that the nebulous military budget and other hidden budget items it would probably come closer to 18 trillion. In comparison, the EU's deficit by agreement among the member states is not allowed to go beyond 3% of GDP. Another factor is that US financial sector is far more deregulated than Europe's. This fact, without a doubt, has proven to be one of the major causes of the present US economic meltdown. It comes therefore as no surprise that in the EU, most of the problematic banks and financial institutions are shown to be closely linked to the US sub-prime lending disaster.

Some of the EU countries presently experiencing financial problems, even though they are EU members, are not part of the euro zone - the 15 members and nine states and territories using the euro as their sole currency within the 27 member EU. Britain is one of those countries. The British mainly follow American style banking practices, with all the dire consequences this has recently brought with it.

Dealing with what can only be seen as a US imported problem, the overriding factor to guide EU politicians is to follow instructions spelled out in the EU Treaty of Rome (the basic and original EU governing guideline), which categorically states that "interests of the EU citizens override any other prerogative, including those of an economic nature". In other words, no EU blank check should be made available to the EU financial sector.

Some European politicians seem to have understood. Contrary to what the US is doing in trying to solve its financial crises, most EURO zone countries, rather than bailing out the whole financial system, have individually focused on saving those troubled banks which are still manageable and guaranteeing private citizens savings.

Looking towards the future, it is crucial for Europe to start plotting its own independent financial course if the US continues to put the interest of its financial sector above those of its citizens and seeks to shove this policy down its global partners throat. Once the US presidential election is behind us, Europe's first step should be to start negotiations with the new US Administration on these and other economic issues of vital importance, not only to the EU, but also for the restoration of a badly bruised Atlantic Alliance and the financially intertwined Global community.

Labels: Atlantic Alliance, EU, EU Economy, Financial Crises, NATO. US

Europe backs off of U.S.-style economic rescue plan

The leaders of Europe's largest economies on Saturday vowed to "respond with one voice" to the global financial crisis. But a one-day summit in Paris did not produce a $300 billion rescue plan, similar to the $700 billion US rescue plan, or any other far-reaching plans to reform Europe's struggling banking sector. Instead, they chose a much more cautious approach. France had suggested a multibillion-dollar European Union-wide government bailout plan, but backed off after Germany said banks must find their own way out. Leaders did agree to begin rewriting European accounting regulations later this month in an effort to reduce the financial losses that banks are currently forced to write off.

Labels: EU, EU Economy

GERMANY has made a blanket guarantee to cover all the country's bank savings

GERMANY has made a blanket guarantee to cover all the country's bank savings, piling pressure on other European governments to bolster financial defenses ahead of another week of predicted mayhem on global markets. Governments are also worrying about weak banks with BNP Paribas of France now taking over large chunks of troubled Belgian-Dutch institution Fortis. German Chancellor Angela Merkel made the promise to completely back all savings as a €50 billion ($89 billion) rescue for Hypo Real Estate (HRE), the country's fourth largest bank, was arranged. "Germany is Europe's economic superpower,'' Nick Clegg, leader of the Liberal Democrats, Britain's third party, said. "Where it leads, others are bound to follow. "Ireland's action last week to guarantee all deposits made a common European approach to deposit guarantees necessary. Germany's decision today makes it completely unavoidable.'' Over the next few days European Union finance ministers will seek to flesh out plans for restoring confidence in the crisis-struck banking system after weekend talks among Europe's biggest economic powers.French bank BNP Paribas is to take control of the ailing Fortis' operations in Belgium and Luxembourg in a deal reached late Sunday following intense negotiations through the weekend, a source close to the Luxembourg Government said. BNP Paribas confirmed that it had taken control of Fortis's arms in Belgium and Luxembourg to create the "leading European bank in terms of deposits.''

While officials in Berlin sought to reassure bank customers, one German minister could not resist an alarmist take on the gathering storm in the country. Interior Minister Wolfgang Schaeuble warned in a magazine interview to be published today that the global financial crisis could have political repercussions, noting that Adolf Hitler rose to power following the 1929 Wall Street crash.

Labels: EU Economy, European Bailout, Germany

IMF report says turmoil to hit U.S. harder than Europe

The International Monetary Fund anticipates a "sharp downturn in the U.S." while the eurozone faces nothing worse than an economic slowdown. The author of the IMF report making that prediction, Charles Collyns, said the size of the U.S. banking crisis will double or triple the severity of decline in the country. "When the banking system suffers major damage, as in the current episode, the likelihood of a severe and protracted downturn in activity increases," he said.

Labels: EU Economy, IMF, recession, US Economy

German bank Hypo Real Estate (HRE)announces collapse of 35 billion euro rescue

German bank Hypo Real Estate (HRE) said Saturday that a planned 35-billion-euro (48-billion-dollar) rescue had fallen through after the banking consortium involved pulled out of the deal. The rescue bid was the biggest in German history and came after HRE was sucked into the global financial turmoil through its inability to refinance debt, one of many high-profile European emergency cases in the past two weeks. HRE said in a statement that a consortium of German banks taking part in the rescue had "refused to provide liquidity lines" and that it was seeking new measures.

Labels: Bailout, EU, EU Economy, Germany, HRE

European leaders vow to fight financial storm

The leaders of Europe's four main economic powers vowed Saturday to protect fragile banks from the global financial crisis but insisted on sanctions against the chiefs of failed banks. France, Germany, Britain and Italy put on a united front, promising a more coordinated approach to dealing with credit crisis, but Germany's Chancellor Angela Merkel insisted that states would have to act individually. President Nicholas Sarkozy, who hosted Merkel and prime ministers Gordon Brown of Britain and Silvio Berlusconi of Italy, did not dispute this point, but said a new "doctrine" had been agreed.

Labels: EU Economy, US Economic Meltdown

Europe works to limit fallout from U.S. financial crisis

European officials promised Wednesday to move fast on approving bank bailouts and proposed tougher regulation on their big four economies — Britain, France, Germany and Italy — as the turmoil that has rocked the U.S. banking system spread to Europe.While the major banks in Europe, including Deutsche Bank, Barclays and Société Générale, appear to be weathering the financial storm fairly well, several others have been taken over through consolidations or nationalizations.The EU also laid out longer-term regulatory changes to curb practices that caused the crisis and improve supervision for banks that operate across national boundaries. For example, the European Commission proposed that sellers should hold at least 5 percent of the investment when they sell loans repackaged as securities.

European governments voluntarily banded together to inject cash into two banks that operate across borders, with Fortis NV getting a bailout from Belgium, the Netherlands and Luxembourg while France, Belgium and Luxembourg pumped money into lender Dexia. Germany organized a credit lifeline for Hypo Real Estate Holding AG.

Labels: EU Economy, US Economic Meltdown

Europe - Markets slump before US Congress bailout vote

Global stocks tumbled Monday as US Congress was to vote on a multi-billion-dollar bailout deal and as the ongoing financial crisis forced the rescue of three European banks, dealers said. In Europe, Belgian-Dutch banking and insurance group Fortis sealed a multinational bailout over the weekend, while the British government on Monday announced it would nationalise troubled mortgage lender Bradford & Bingley. Sentiment was also hit after German authorities provided 35 billion euros (50 billion dollars) in guarantees for an emergency credit line by a consortium of private banks to German bank Hypo Real Estate. A fourth European bank, Franco-Belgian group Dexia, could also be on the verge of a state rescue deal after the group saw almost one quarter of its stock market value wiped out on liquidity concerns.

In another sign of banking woes, Denmark's Roskilde Bank said it had been sold to Nordic bank Nordea and two regional Danish lenders, Arbejdernes Landsbank and Spar Nord Bank. Global central banks on Monday pumped extra cash into the financial system as part of continued efforts to keep credit flowing.

Labels: EU, EU Economy

Alternative Energy Investments - Wealthy investors turn to sustainable investments - by Madeleine Heffernan

Speaking at the International Responsible Investment Conference in Melbourne this week, Christensen says high net worth individuals tend to display “toe-dip” behaviour in relation to sustainable investments: once in, they tend to increase their allocations over time. Sixty-one per cent of high net worth individuals in the European Union have allocated up to 5% of their portfolios to sustainable investments; more than a quarter have 10% to 50%. Younger generations with more than $1 million in disposable assets (excluding their primary residence) are more likely than their parents to adopt sustainable investment, Christensen says. Older generations tend to take a more conservative approach, but younger people are more willing to seek market rate returns while engaging in sustainability issues. For the Asia-Pacific, Eurosif research shows 13% of high net worth individuals have allocated part of their portfolio to green technologies and alternative energy sources. The research shows high net worth individuals in the European Union have shown the greatest enthusiasm for thematic investment, particularly in clean technology and water; while those in North America have shown the least.

Labels: Alternative Energy, EU Economy, European Investments

Europe Govts Call For Global Financial Reform After US Plan

European governments on Monday called for a global solution for regulating financial markets in advance of a conference call among the finance ministers of the Group of Seven industrial countries. The U.S. is expected to solicit support for its $700 million rescue plan for Wall Street.

The U.S. plan, which ringfences bad debt lurking in the U.S. banking system, drew most support from London, where parliament is expected to begin debate on a banking reform bill in two weeks. U.K. Chancellor of the Exchequer Alistair Darling Monday pledged to do everything possible to bolster the financial system and said he expected there would be international cooperation on this.

Labels: EU, EU Economy

Little Crisis for Europe's Banks - by Carol Matlack

Suddenly, stodgy banks are looking smart. And with former Wall Street giants toppling almost daily, some European banks are starting to look especially wise. European banks are holding up pretty well amid the turmoil sweeping the industry. None of the Old World's biggest banks appears likely to fail or put itself on the block, analysts say. Indeed, the Europeans are more likely to be buying: London-based Barclays (BCS) on Sept. 17 inked a $1.75 billion cash deal to buy the investment banking and trading businesses of bankrupt Lehman Brothers.

Labels: Banking system, EU Economy

EU Ministers Vow Unified Approach to Downturn

Europe will not repeat the mistakes of the past and spend its way out of a recession, eurozone finance ministers said as they rejected calls for a US-style stimulus package to combat the continent's economic slowdown. Instead, attendees of an informal meeting of EU finance ministers in Nice on Friday, Sept. 12, vowed to stick to the rules limiting the size of their budget deficits and to fight inflation by avoiding unjustified public sector wage rises. "Governments have decided not to increase their (budget) deficits because of the crisis," said Jean-Claude Juncker, Luxembourg's Minister of Finance and current President of the European Council.

Labels: EU, EU Economy

EU says we won't copy US monetary policy

European policy makers signaled little intention of pursuing U.S.-style tax and interest-rate cuts to support their stumbling economy. Meeting for the first time since the 15-nation euro region's economy contracted in the second quarter, finance ministers and central bankers in Nice, France, said restraining inflation and budget deficits remained more important than stimulating expansion.

Spending taxpayers' funds on fiscal programs to spark growth would be ``like burning money,'' German Finance Minister Peer Steinbrueck told reporters. European Central Bank President Jean-Claude Trichet said inflation remains ``much higher than our definition of price stability.''

Labels: EU Economy, US

Nowotny says Europe not in recession

Europe may be facing a sharp slowing in economic growth but it is not in recession and still faces a serious inflation threat, European Central Bank Governing Council member Ewald Nowotny said on Friday. His comments, among the first he has made since joining the ECB Governing Council as head of the Austrian central bank last week, came as EU finance ministers and central bankers meeting in Nice, France, addressed the twin threat facing Europe from slowing growth and high inflation.ECB President Jean-Claude Trichet has said repeatedly in recent days that inflation, running at 3.8 percent in the euro zone in August, or twice the ECB's target rate, remains a menace despite recent signs of easing as oil and commodity prices.

Labels: ECB, EU, EU Economy

EU economic ministers risk nasty talks in Nice

The European Union's finance ministers are to hold informal talks in the sunny French Riviera on Friday and Saturday. The 'baddies': Britain's Alistair Darling, Italy's Giulio Tremonti and France's Christine Lagarde, whose sagging economies are dragging the rest of the EU into communal decline while ballooning budget deficits prevent them from doing much about it. The Nice gathering will come on the back of the latest economic forecasts of the European Commission, which on Wednesday predicted a lower-than-expected 2008 growth rate for the 27-member bloc of just 1.4 per cent.

Labels: EU, EU Economy

Economic squeeze in Europe has hit 'rock bottom': ECB's Trichet

The president of the European Central Bank said Saturday that the economic squeeze has "hit rock bottom," telling Italian television that he expects a "gradual revival" over the course of 2009. "Going by our calculations, just published, during the second and third quarters of this year, we hit rock bottom," Jean-Claude Trichet told RAI 1 on the sidelines of an economic forum attended by political leaders at Lake Como, Italy.

Labels: ECB, EU, EU Economy

Eurogroup Chairman Juncker Says Economy is Not on Brink of Recession

Speaking to reporters in a press conference in Luxembourg, EU President Jean-Claude Juncker said the EU's economy is not at the brink of a recession.

Labels: ECB, EU Economy

Europe Has `Urgent' Need for Bank-Failure Plan, Economists Say - by Scott Lanman

European officials have an ``urgent'' need of plans to cope with a failing bank, particularly in countries where lenders' assets exceed the size of the economy, according to a paper presented today at an annual Federal Reserve conference. Failure of a large bank in Belgium, Switzerland or a similar country would require cooperation across borders to avert broad economic damage, Franklin Allen of the University of Pennsylvania and the University of Frankfurt's Elena Carletti wrote in the paper.

Labels: Banking, EU, EU Economy

EU-Economy: Lower Euro improves foreign exports for Europe as Consumer goods firms and exporters lead rally in European stocks

European stocks rose Friday, led by consumer-goods companies, as falling commodity prices eased concern that inflation would force central banks to lift interest rates. Carrefour, Ryanair Holdings and Royal Bank of Scotland climbed after prices for oil, gold, copper and corn declined. European Aeronautic Defense & Space Company rallied 5.3 percent as the euro slipped to the lowest since February against the dollar, boosting the value of its overseas sales.

Labels: EU, EU Economy, euro, Export

Economic Malaise Threatens To Undermine European Unity - by Anthony Faiola

The fruits of Spain's economic transformation found their way to Maria Dolores Barroso's cafe. Fueled in large part by a massive building boom, the Spanish "miracle" brought new jobs to legions of construction industry workers -- many of whom would pack her cafe at sundown, dropping their euros on beer and savory tapas well into the madrileño night. But as Europe confronts its toughest economic test since the official creation of the European Union in 1993, Barroso has hung a "for sale" sign on her cafe door. Business has dried up -- falling 80 percent in six months -- as Spain has joined a growing list of European nations slouching toward recession. The abruptly weakening European economies caused a sharp sell-off of the euro last week that sent the dollar to its biggest gain in more than six years on Friday. Those gains continued yesterday.

Labels: EU, EU Economy

Bubbles, risk, crunch and war - by Cyrus Bina and Fernando Dachevsky

Cyrus Bina, distinguished research professor of economics at the University of Minnesota and author of The Economics of the Oil Crisis, discusses with Argentinean journalist Fernando Dachevsky the "unique and universal" economic crisis confronting the world, from its underlying causes to the "practical joke" solutions offered to the oil crisis by President George W Bush and Republican presidential candidate John McCain.

The fallacy of supply-side economics and the myth of self-correcting markets, therefore, culminated in idealism of benign neglect and the straight-jacket practice of neo-liberal ideology. The resultant speculative bubbles in the US real estate, mortgage institutions, collateralized debt market, asset-backed commercial paper market, and debt-obligation insurance market sequentially burst in the face of US authorities, before they hit the public and surpassed the boundaries of the United States - via the transnational channels.

The European Union is now trying to deal with the aftereffect of the US financial debacle. European banks attempted to write down more than US$200 billion of debt obligation, following the US mortgage defaults, thus revealing the tiny tip of the liquidity crisis in view of tight credit market. To date, the write-downs for a few major banks in Germany and Switzerland are some $23 billion, and they certainly will increase by the time the dust settles.

Labels: EU Economy, Supply Side Economics, US Economy

Consumer confidence across Europe fell in June - but business sentiment holding its own

Household confidence, strained by sky-high fuel prices, slid in many parts of Europe in June, including Germany, the Continent's recent juggernaut, economic surveys showed Tuesday.

France, Continental Europe's second-biggest economy behind Germany, showed some resistance with business sentiment holding its ground in June and consumer spending surging surprisingly. Spending held up in Britain, too, despite signs there of a potentially serious housing slump.

Labels: EU, EU Economy

Asia, EU Can Weather Economic Slowdown, Officials Say - by Rainer Buergin and Sandrine Rastello

Asia and Europe are better placed than other regions to cope with the global economic slowdown, according to officials attending a meeting of finance ministers from the two continents in Jeju, South Korea. The two areas ``have good fundamentals to weather in better condition than others these difficulties,'' European Union Economic and Monetary Affairs Commissioner Joaquin Almunia said in an interview today. French Finance Minister Christine Lagarde said the regions ``were far more resilient than expected in the light of the international economic crisis.'' Still, Almunia said Asia and Europe face ``difficulties from an inflation point of view, because of oil prices, because of food prices.'' Financial-market turmoil is ``having some consequences in our real economies and growth forecasts have been reduced a little bit.'' Spanish Finance Minister Pedro Solbes said inflation over the medium to long term is ``the biggest danger'' for economic growth in Europe. At the same time, he added, governments must foster productivity growth and increase competitiveness.

In an interview, European Central Bank Vice President Lucas Papademos said last week's report that labor costs accelerated in the euro-area by their most since 2003 ``was indicative of intensifying domestic inflation pressures.''

Labels: EU, EU Economy

The Netherlands - IMF says Dutch economy likely to keep growing faster than EU average

The International Monetary Fund (IMF) said the Dutch economy is expected to weather the turmoil in global financial markets fairly well and will continue growing faster than the European Union average.

'Sizeable fiscal consolidation and stability-oriented macroeconomic policies, complemented by broad-based structural reforms, have underpinned an extended period of strong growth, outperforming the EU average, and have shielded the economy from the recent global financial turmoil,' it said in a report on the Dutch economy.

'Despite an expected deceleration in growth following the U.S. economic slowdown, near-term prospects remain favorable, with real GDP expected to continue expanding above the EU average,' it said.

Labels: EU, EU Economy, IMF, Netherlands

Europe on the right economic track says IMF

The International Monetary Fund raised its forecast for economic growth in the euro region and dropped its view that the European Central Bank has room to cut interest rates this year. Economic expansion in the economy of the 15 nations that use the euro will slow to about 1.75 percent this year, the IMF said in a statement today, compared with 1.4 percent forecast earlier. The economy will expand 1.25 percent next year and inflation will fall below the ECB's 2 percent limit by the end of 2009, the IMF added.

European policy makers face accelerating inflation stemming from record food and oil prices even as economic growth slows. Consumer prices rose 3.6 percent on the year in May, matching the fastest pace in 16 years.

The ECB is set to present revised forecasts for economic growth and inflation following its rate-setting meeting June 5. The central bank will likely cut its growth forecast, said Laurent Bilke, an economist at Lehman Brothers Holdings Inc. in London. The IMF said the European economy is still to feel the main impact from the global credit shortage. European lenders have posted $199.6 billion of writedowns and losses related to the collapse of the U.S. subprime mortgage market.

Labels: EU, EU Economy, IMF

Ten years later, the euro stands strong - by Carter Dougherty and Mark Landler

Paris, Lisbon, Madrid, Rome and Berlin - each, at some point, the political and economic capital of an empire, containing the power of New York and Washington combined - each surrendered a piece of sovereignty to a common currency, a foreign coin of the realm. "When you have to cope with the history enshrined in those capitals," Trichet said in an interview in the Eurotower, the European Central Bank's headquarters, in Frankfurt, "you are necessarily working on an original." That original, the euro, is the currency of 15 countries and 320 million people today. Trichet and top European leaders, including Chancellor Angela Merkel of Germany, will gather today in Frankfurt's elegant Old Opera to celebrate the accomplishment.

Labels: Economy, EU, EU Economy, euro

A special report on the credit card industry

EU-Digest Special Report: Credit Card Industry and Member Banks Sticking It To The Consumer

There are plastic time bombs sitting in your wallet - they are called credit cards. The "bargain" you bought at your favorite store with your credit card will increase in price by at least 28 percent, within a year, if you keep that purchase on your credit card by not paying off your credit card monthly.

The situation in the credit card industry is getting out of hand on both sides of the Atlantic. In Europe earlier this year the European Commission's antitrust regulator said in a draft summary it would possibly investigate banks and payment card providers for colluding on prices and using practices aimed at keeping competitors out of their markets. Also, according to the report, credit card fees and interest rates vary between countries, which indicate that there is limited cross-border competition.

In the US, this past Tuesday, the Merchants Payments Coalition, which groups about 30 associations, representing almost 2.7 million stores in America, applauded a congressional hearing on unfair credit card practices in the United States. The hearing, held by the US Senate Permanent Subcommittee on Investigations, is one of several meetings already held this year to investigate the allegedly unfair practices imposed on consumers and merchants by credit card companies and their member bank companies. "This hearing is another example of how serious the issue of credit card abusive practices is for everyone", said a Senator on the Subcommittee. "The credit card industry is profiting from outrageous fees". During the Tuesday Subcommittee meeting the discussion also focused on the so-called "interchange" fee, which represents a percentage of each transaction that American Express, Discover Visa, MasterCard and their member banks collect from retailers every single time a credit or debit card is used to pay for a purchase. The fee varies with the type of merchant, transaction, and card, but averages out to roughly 2% per transaction. This fee is the reason why some merchants require a minimum purchase of X amount before they will permit a customer to make their purchase using a credit or debit card. Unfortunately, the US Congress so far has only held discussions, but has done nothing to actually reduce or limit the exorbitant fees, sky-high penalties, and above normal interest rates being charged to cardholders. The need for action is becoming more and more pressing. Specially now the US Federal Reserve has cut benchmark interest rates. The credit card companies and their member bank companies have not followed suit after the interest rates were dropped and are still charging abnormally high interest rates and ridiculously bloated service fees.

In the US the five banks that issue most Visa and MasterCards include JPMorgan Chase, Bank of America, Citibank, Capital One, and HSBC. Surveys show all these banks have a poor reputation for making their Customers pay outrages fees for services and far higher than normal interest rates. The Household Bank MasterCard has a cash advance rate of 25.15 percent. Blue from American Express and Sun Trust’s Visa charge 23.34 percent. On top of that, there usually is a transaction fee of 3 percent or more. Someone using their Chase credit card to get a $1,500 cash advance will pay about $465 in interest and fees for this so-called "service" within the first year.

During the past months the Central Banks from all over the world have pumped billions of hard currency into the world-wide banking system to fight off liquidity problems, mainly the result of their own making and poor judgment. So far, the benefits of the Central Banks bailout have not trickled down to the US consumer, where household debt continues to rise, after it reached $14.2 trillion in the third quarter, or a record 138% of US household disposable income, up from 113% in 2002.

Therefore it seems that one of the areas which urgently needs to be looked at by governments world-wide is the unregulated credit card industry.

Figures today show that the average American owes about euro 6,872 ($9.900.00) in credit card debt, which amounts to a staggering total of euro 639bn ($920bn)for the whole US. In Europe, according to the BBC and the Credit Action Group the average European has about euro 2,185.00 ($ 3,147) of unsecured/credit card debt. One third of the total European credit card debt involves British credit card owners. Banks in Britain generally apply American credit card policies and standards.

Given these facts and the steady rise in the use of credit cards and consumer debt in the EU, the European Parliament would do EU consumers and the economy a service to also open an investigation into the practices of the credit card industry, but hopefully with better results than the US Senate Permanent Subcommittee on Investigations has achieved so far for American citizens.

Labels: Banking system, Credit Card Companies, EU Economy, Legislation, US Economy

Crédit Agricole to cut investment banking - by Adam Sage

Crédit Agricole will scale down its investment banking business after stunning investors with the announcement of a €5.9billion (£4.6billion) capital increase following a new round of sub-prime writedowns yesterday. The move came as Société Générale, the rival French bank, also declared huge writedowns as the credit crunch rumbled across Europe. With Crédit Agricole's share price tumbling in the wake of a fresh debacle, Marc Litzler, the chief executive of Calyon, its investment unit, is set to be pushed aside this week.

Labels: Banking, Crédit Agricole, EU Economy

Euro Matters - by Arielle Fridson

Several factors underlie the current strength of the euro. One basis for the euro’s appreciation against the dollar is the contrast between Europe’s economic expansion and America’s stagnant growth, persistent budget deficits, and decline in the housing market. The Federal Reserve’s repeated interest rate cuts have also reduced the relative attractiveness of dollar-denominated fixed-income investments. But the euro’s continued strength faces obstacles as well, not least because the euro is freely traded while the exchange rates of several other major currencies are tightly controlled. China prevents the yuan from appreciating by buying tens of billions of dollars. The resulting pressure on the U.S. currency causes Europe to lose competitiveness against America as well as Asia. “The Europeans are fully justified in complaining that this isn’t a fair way of running an international financial system,” said Desmond Lachman of the American Policy Institute in an interview with the HPR. Robert Scott of the Economic Policy Institute also elaborated in an interview with the HPR that the “euro has probably overshot the equilibrium levels.”

Spain and Italy, whose economies have suffered from a housing bust and other domestic issues, will want higher interest rates and a weaker euro, but the European Central Bank is unlikely to respond to such demands. Instead, the ECB remains far more influenced by conditions in larger countries, such as France and Germany, creating tensions among countries in the euro zone. “It’s one of the very big political costs of having a central currency,” Lachman noted. “In the next year we are going to really be seeing [the viability of the euro] tested.”

Labels: China, EU, EU Economy, euro, US Economy

Eurozone inflation is expected to drop in April following German price falls

Eurozone inflation is expected to drop in April following Germany price data on Monday, which showed a sharp fall.De Statis, the Federal Statistical Office reported that the harmonised consumer price index for Germany, which is calculated for European purposes, is expected to rise by an annual 2.6% rate in April 2008, down from 3.3% in March. Compared with the previous month, the index is down by 0.3%. The consumer price index for Germany is expected to rise 2.4% in April 2008 on April 2007 (March 2008: +3.1%), according to results available from six Länder (states). Compared with the preceding month, the rate of change will be –0.2%

Labels: EU, EU Economy

Euro zone growth forecasts trimmed, but overall economy still looking good.

The European Commission trimmed its 2008 and 2009 growth forecasts for the euro zone and hiked its inflation outlook for the bloc. 'Economic growth is moderating in the EU and euro area and the current, imported inflationary pressures are a matter of concern,' economic and monetary affairs commissioner Joaquin Almunia said of the commission's latest set of economic forecasts. The European Union's executive arm is now expecting growth of 1.7 percent this year rather than the 1.8 percent it predicted in its interim forecasts published on Feb 21. For next year, it has cut its growth projection to 1.5 percent from the 2.1 percent given in its autumn forecasts published on Nov 9. The commission attributed the expected moderation in growth to persisting turmoil in the financial markets, the marked slowdown in the U.S. and soaring commodity prices. On the inflation front, it hiked its 2008 inflation forecast to 3.2 percent from the 2.6 percent expected in February.

Labels: EU, EU Economy

Map: be German to be rich, says Forbes - by Frank Lirzin

How do you become a billionaire exactly? Flee Europe: out of the 1125 billionaires registered by Forbes, barely 20% are of European origin. The others come mainly from the United States (42%), China, India and Russia. Having said this, if we remain in Europe, it is best to be German: there have been 49 billionaires in Germany since 2008, compared with 48 in the United Kingdom. And to be the richer of the richest, you still need to be German: Karl Albrecht is the richest European before Frenchman Bernard Arnault.

Note EU-Digest: Cafe Babel has included an interactive map in their report which shows you where and how many billionaires there are in each European country.

Labels: EU Economy, Germany

EU finance ministers say no to safety net in EU for banks paid by tax payers

After a decade of talking about how to react if banks operating in several European countries veer toward collapse, EU finance ministers on Friday agreed on some ground rules that could see governments share the cost of an unlikely rescue. European Central Bank President Jean-Claude Trichet made it very clear that many national central bank governors had emphasized the danger of giving banks any kind of potential safety net paid for by taxpayers. "The idea of sharing the burden at the international level is even considered by some as something which is far away from the present possibilities," he said.

The text of the EU finance ministers agreement says regulators do not aim to prevent bank failures.

The agreement also specified "The objective of crisis management is to protect the stability of the financial system ... and to minimize potential harmful economic impacts." - "The management of an ailing institution will be held accountable, shareholders will not be bailed out and creditors and uninsured depositors should expect to face losses," it said. This agreement comes less than a year after Northern Rock bank in Britain stumbled toward insolvency and went to the Bank of England for help. That led to the nation's first bank run in more than a century. European finance ministers said government assistance would always be a last resort and there was no guarantee of help. Private sector solutions will always come first, according to the document, and a government rescue "will only be considered to remedy a serious disturbance in the economy. "European banks are increasingly making cross-border acquisitions, deals that have been strongly encouraged by EU officials who say it will boost competition and reduce costs. Italy's UniCredit leapt into Europe's top 10 lenders by buying Germany's HVB three years ago, while Spanish bank Santander, Franco-Belgian counterpart Fortis and Royal Bank of Scotland recently won a joint bid for the Netherlands' ABN Amro. This wave of consolidation raises the risk of a failure big enough to ripple across two or more European nations, speeding up ten years of regulators' discussions.

"What's ten years in Europe-land?" the EU's top financial services official, Charlie McCreevy, told The Associated Press. "Financial turmoil has sharpened the focus. It's now time to do something".

Labels: Bailout, ECB, EU Economy

Euro Pumped By Strong German Data - by Lionel Laurent

The European economy still had the power to surprise on Wednesday, when Germany's business climate indicator showed an unexpected upswing from February. With the European Central Bank predicting above-target inflation for most of 2008, rate-cut hopes are starting to wither. The German Ifo business climate index showed a largely unexpected rise to 104.8 in March on Wednesday, up from 104.1, in February. The president of the Ifo institute said that companies were more optimistic about exports, despite the strong euro, and had clear plans to hire more workers.

Labels: EU Economy

Old Europe is fighting back. Last week’s hopes that the dollar had at last hit rock bottom foundered on Wednesday on the sheer weight of optimism coming from Europe. The Ifo survey of German business conditions found growing optimism about the outlook, with current conditions far more favourable than they had been for most of this decade. French business confidence also improved. The contrast with surveys of US sentiment, which suggest executives are about to head for the hills, is stark.

Labels: EU Economy, Europe

ECB Pumps Extra Funds Into Europe Bank System - by Nina Koeppen and Emese Bartha

The European Central Bank, responding to continued liquidity strains, pumped extra funds into the European banking system as part of a global effort to lift market confidence. The ECB allotted €216 billion ($333.12 billion) in seven-day funds in its regular weekly refinancing operation, or €50 billion more than the benchmark figure of €166 billion that the ECB thought was needed to help banks finance routine operations. The ECB also allocated $15 billion in dollar funding to European Banking system.

Labels: EU Economy

Average rate at ECB weekly tender hits 6-month high

Strong demand pushed the cost of loans at the European Central Bank's regular weekly auction up to a six-month high, despite the ECB lending out an extra 50 billion euros. Tenders for U.S. dollar funds by the ECB and the Swiss National Bank, part of the latest round of coordinated global liquidity injections, were also massively oversubscribed. "There's strong demand from Europe going into the turn of the quarter," BNP Paribas interest rate strategist Nathalie Fillet said."But central banks are providing extra liquidity to stabilize conditions and liquidity should be ample. I don't expect much more tension from the current level."

Labels: EU Economy