EU-DIGEST

Labels: Economy, EU, Germany, Greece, IMF

It may be tempting to ditch European stocks. After all, Europe is expected to be one of the slowest-growing areas of the world in the next several years. (Its economy is expected to grow just 1 percent in 2010, compared with 3 percent for that of the United States.)

Moreover, stock markets in that region have become highly correlated with the Standard & Poor’s 500-stock index, thanks to the increasingly interconnected global economy. That means European stocks aren’t likely to zig when domestic stocks zag.

Nevertheless, many market strategists warn that jettisoning stocks from such a big chunk of the world, which represents more than a quarter of global stock market value, would be a big mistake.

Labels: Economy, EU, Stock Market

A few days ago on Curious Capitalist, I asked whether China was headed for trouble due to the potential damage done to its banking system by the government's giant stimulus program. One of our readers, identified as tanboontee, was kind enough to write a very interesting comment. Here's an excerpt:

Excessive debts in the west support lavish lifestyles, not necessarily so in China. Do not forget that capitalism is already malfunctioning. What's wrong with introducing a new paradigm?

This has become a common view, not just out here in Asia, but around the world. Many observers believe China has developed a “new paradigm,” a superior economic model that challenges the dominance of Western ideas about economies. But I have a question for tanboontee, and for anyone else who wants to jump in on this discussion – what exactly is this “new paradigm?” From what I can tell, China is employing economic tools that many other countries have tried in the past, with both good and bad results.

But what we've learned from historic examples is that the state-led aspects of "mixed" economies can create as much harm as good. Bureaucratic meddling was a key factor behind Japan's Lost Decade(s) and the Asian financial crisis of 1997. The sickest part of the “mixed” economies in Europe and India was state-controlled industry. And you can make the case that the same is true in China today. The major troubles facing the Chinese economy right now – ballooning property prices and a looming bad loan problem – are a result of bureaucrats thinking they can turn on and off the banking sector like a desk lamp.

Labels: China, Economy

European governments are pushing forward with a proposal to limit credit default swaps (CDS) on sovereign debt, but it remains to be seen if financial institutions will push back on the measure.

The European Commission summoned representatives from banks, hedge funds, crediting rating agencies and regulatory bodies to a meeting in Brussels Friday, to discuss the measures needed to rein in speculation in the derivatives markets.

"A ban on sovereign debt CDS may not be a panacea in putting an end to speculative bets against the external debt of a country, but it can be a helpful step in cooling the current strong negative sentiment against the most heavily indebted Eurozone countries," according to Anthony Karydakis, an economics professor at NYU's Stern Business School.

Note EU-Digest: Its high time something gets done to put some clarity into the nebulous financial markets.

Labels: Economy, EU

The original plan for the 2010 budget foresaw 85.8 billion euros in net debt, but assumed economic growth of just 1.2 percent, and higher jobless numbers. The budget that passed calculated 1.4 percent growth and fewer jobless. Altogether, Berlin has set its sights on spending 319.5 billion euros in 2010, with 28.3 billion of it going to new investment.

Labels: Economy, EU, Germany

Labels: Economy, EU

Labels: Economy, EU, Germany

Labels: Economy, EU, Greece

Labels: Economy, EU

Labels: Economy, EMU, EU, Italy

The Feb. 11 summit, the first since Van Rompuy became the bloc’s full-time president in January, will also discuss “some aspects of the present economic situation,” according to a letter sent to EU leaders today.

Note EU-Digest: Wall Street and the financial community better understand that they are not the ones who are going toset the agenda for the EU.

Labels: Economy, EU, Greece

Labels: Economy, EU, Greece

Labels: China, Economy

Wolfgang Schaeuble also said the European Union would make sure that Greece, one of the countries with a big fiscal problem, would stick to its belt-tightening pledges.

"The EU has imposed heavy measures on Greece, like an austerity and savings program, and it will watch closely that Greece acts according to that," the minister said.

Labels: Economy, EU

Labels: Economy, USA

Labels: Economy, EU

Labels: Economy, EU, USA

Germany has raised its 2010 growth forecast to 1.4 per cent from a previous estimate of 1.2 per cent, the economy Ministry said on today, boosting hopes that recovery in Europe's largest economy is gathering pace.

Labels: Economy, EU, Germany

Labels: Economy, EU, Greece

How can a nation being $12.3 trillion in debt be the richest on Earth? Is the measure based on the US trade system? The US trade deficit hit $36 billion in November. Despite economists' suggestions, it's a sign of a recovering economy. How long can the US spend more than they have and still be afloat? Could the US status as the richest maybe be based on personal wealth? Various estimates put average consumer debt in the US at $8,000 to $20,000, and that doesn't include home mortgages, which also would not be a good measure of its wealth.

When President Bush left the political scene the US had accumulated a national debt of about $10.5 trillion. It's now 20 percent higher just a year later. Of the $12.3 trillion, more than $7.5 trillion of it — representing 54 percent of the nation's GDP — was borrowed from foreign nations and private investors. And the U.S. Senate plans to raise the debt ceiling to $14.3 trillion, which essentially represents the entire U.S. economy.

Maybe the potential of its economy still makes the US feel supreme. After all a well-run government spending money wisely could do great things, are the best and the richest. Or could the question on this issue of be naïve? It doesn't seem so. While U.S. GDP may suggest the US is still No. 1, about 54 percent of the title is credited to other nations and investors.

EU-Digest

Labels: Economy, GDP, US

“Let me be very clear on this: Never again will we accept budget figures that do not reflect the facts,” Trichet said in an interview with Germany’s Focus magazine, the text of which was published by the ECB today. “Appropriate auditing must always be possible. As early as next month the European Commission will make proposals that will dramatically improve the relevant framework.”

Trichet also said Greece, whose deficit has ballooned to almost 13 percent of gross domestic product, has not respected the Stability and Growth Pact, which calls on members to limit budget shortfalls to 3 percent of GDP.

Greece and other euro- area countries “must do everything they can to put their national finances in order,” he said.

Labels: Economy, EMU, EU, Greece, Jean-Claude Trichet

Labels: China, Economy

The Greek government “is going to do all what is necessary” to reduce its budget shortfall, Spanish Finance Minister Elena Salgado told reporters today in Brussels before leading a meeting of European Union counterparts. While Greece’s deficit-cutting proposals “are a step in the right direction, we’ll have to see whether they’re enough,” Luxembourg’s Jean- Claude Juncker said late yesterday.

The Greek government’s latest proposals call for about 10 billion euros ($14.4 billion) of spending cuts and revenue increases this year to cut the deficit from 12.7 percent of GDP to 8.7 percent by year end. The plan includes 2.5 billion euros in state asset sales this year. Dutch Finance Minister Wouter Bos said in Brussels that the Greek program “leans heavily on one-time measures” and “needs to be more substantial.”

Greek officials have already pledged to provide more- reliable statistics after the EU earlier this month complained of “severe irregularities” in the country’s economic data.

Labels: Economy, EU, Greece

Labels: Economy, EU, Greece

Labels: Economy, EU, Greece

Venezuela's President Hugo Chavez last week devalued the bolivar by 50% in a bid to safeguard the government's depleted oil income and address some of the symptoms of stagflation in the economy.

Labels: Economy, EU

The 16-nation eurozone's trade surplus with the rest of the world dropped 0.4 per cent month-on-month to 4.8 billion euros ($6.9 billion) in November from the October level of 6.6 billion euros ($9.5 billion), official figures showed yesterday.

After seasonal adjustment, imports increased by 1.5 per cent, the European Union's (EU) statistics arm Eurostat said.

Across all 27 countries that make up the EU (EU27), trade deficit for November rose to 5.8 billion euros, from 4.8 billion euros in October. In November 2008, the deficit was 24.4 billion euros.

Labels: Economy, EU

Labels: deficit, Economy, EU, Euro Zone, Greece

Labels: Economy, employment, US

Labels: Economy, Iceland

Manufacturing activity in the euro zone expanded at its fastest rate in 21 months in December, in line with the flash estimate published last month, but new orders growth slowed slightly, a survey showed today.

The final Market Eurozone Manufacturing Purchasing Managers' Index for December rose to 51.6 from 51.2 in November, its highest level since March 2008. That marked the third consecutive month the reading has been above the 50.0 level that divides growth from contraction. Market said investment and consumer goods production across the euro zone accelerated in December, while production of intermediate goods slowed.

Overall manufacturing activity in Germany expanded at its fastest pace since May 2008, although slower than previously expected, while France and Italy also saw activity tick up from November.

Labels: Economy, EU, Euro Zone

Labels: Economy

Ólafur Ragnar Grímsson refused to sign off legislation passed by the Icelandic parliament for the first time in decades last week, after around 60,000 (a quarter of Iceland's voters) signed a petition urging him not to approve the bill.

"If the president doesn't make any comments today then I believe [the prime minister] will contact him tonight and urge him to complete the matter, one way or another," said Bjorn Valur Gislason, deputy chairman of the budget committee.

If the president were to reject the Icesave bill, the legislation would go to an unprecedented referendum, where it would face with strong opposition from Icelandic taxpayers who argue they should not be made to pay for the failure of the online bank.

Labels: Economy, EU

Labels: Economy, EU

Labels: Economy, World Economy

But if anyone was grateful to Greece, whose profound fiscal problems are being blamed for this hoped-for currency reversal, they weren't announcing it.

Indeed, it is probably not praise that is ringing in the ears of the Greek finance minister, George Papaconstantinou, as he travels Europe this week to drum up support for his government's tepidly received plan to bring its budget deficit under control.

Georges Ugeux, chairman and chief executive of Galileo Global Advisors, a New York boutique financial advisory firm, says repeated failure of European efforts to force Athens to put its house in order and deal with corruption, a big parallel economy, and fiscal fraud is starting to have important consequences.

Labels: Economy, EU, Greece

Labels: Economy, EU, Germany

Business leaders piled into a conference hall in central Copenhagen early on Dec. 11 to talk climate change. A lot of big hitters were there. Coca-Cola (KO) Chief Executive Muhtar Kent, Duke Energy (DUK) Chairman James Rogers, and Unilever (UN) CEO Paul Polman were just a few to lay out the role of businesses in tackling global warming. Others, including trade associations, consultants, and industry analysts, were on hand to weigh in. "Business will have to innovate, become more efficient, and create better products," says Mark Spelman, global head of strategy at consultants Accenture (ACN), who spoke at the one-day event that took place on the sidelines of the U.N.Climate Change Conference. "But that can only be based on a political framework [to stop global warming]."

Labels: Copenhagen Climate Summit, Economy, EU, US

Florida will not be left out of this opportunity to find short- and long-term economic development for our sluggish economy and ailing business community. Two dozen Floridians — at their own expense — will make the trip with a mission to bring home ideas, business prospects, technology, relationships, financing and, most importantly, jobs for Florida.

Local delegates on the Green Jobs for Florida mission include: # Rob Szumowski of North Highland and Highland Worldwide. With a Tallahassee office of 25 employees and other offices in Florida, this strategic management and consulting firm is growing its business and navigating the new low-carbon economy for its clients. # Randy Hanna, managing partner of Bryant Miller Olive and the past chair of the Tallahassee Area Chamber of Commerce. He seeks to grow high-tech, low-carbon business and green jobs for Leon County and position the 40-year-old law firm for the economy of the future. # Olaf Roed from Green Circle Bio Energy, in Cottondale. Green Circle is the world's largest wood pellet plant. The pellets supply power generators for co-firing in coal fired power plants and reduce carbon emissions. The delegates will be able ambassadors for the Sunshine State.

Labels: Alternative Energy Resources, Economy, EU, Florida, US

U.S. homeowners have lost about $5.9 trillion in value since the housing market's peak in March 2006 as mounting foreclosures and the recession weighed on prices.Almost half a trillion dollars was wiped out this year through November as housing headed for a third-straight annual decline. New foreclosures and higher mortgage rates in 2010 may hinder a rebound, the property data service said Wednesday in a statement.

"A phenomenal amount of wealth has been erased since the housing bust," Stan Humphries, chief economist for Seattle-based Zillow, said Tuesday in an interview. "For many households, most of their wealth is tied up in real estate." The net worth of U.S. households at the end of June fell 19% from two years earlier to $53.1 trillion, according to Federal Reserve data.

Labels: Economy, Housing Market, US

This week European stock markets slumped by up to 6% when the Fitch credit rating agency downgraded Greece's creditworthiness to a 10-year low. With national debt approximating 125% of national output, the country's dramatic fiscal imbalance undermines the stability and unity of the eurozone.

Being part of the euro deprives Greece of the capacity to devalue its currency or to inflate its debt. If Athens deflates and adopts a draconian fiscal contraction, social unrest looms on a far greater scale than this week's street riots on the first anniversary of a police shooting that killed a student. If, on the other hand, Greece were to default on its debts, it might be forced to abandon its membership of the eurozone. The ensuing crisis could engulf Italy and other member countries, threatening to bring down the entire edifice and dealing a massive blow to Europe's global economic credibility.

Labels: Economy, EU, Greece

The challenge posed by the Defense Advanced Research Projects Agency asked people to find the coordinates of 10 red weather balloons floating above the U.S. in one day. Since no one individual could plot the location of all 10, participants had to figure out how to work with others to solve the puzzle. Team MIT's strategy was to build a Web site designed to attract more and more followers--people who might know the balloons' locations themselves and those could bring aboard others who knew the coordinates, essentially creating a chain effect. The five-member MIT Red Balloon Challenge Team consisted of group leader Crane and Manuel Cebrian, both post-doctoral research fellows at the Massachusetts Institute of Technology. Rounding off the team were three students--Galen Pickard, Wei Pan, and Anmol Madan.

MIT's Riley Crane only found out about DARPA's red balloon challenge a few days before it started. Yet his team went on to win the contest through its savvy use of the Internet.

Labels: Economy, Innovation, Internet

The USA non-institutionalized civilian population is a touch over 300,000,000 today. A tenth of 1% drop in the participation rate is 300,000 jobs. That is how many jobs were lost using this data source.Then how can the unemployment rate improve from 10.2% to 10%? It cannot logically without sleight of hand. The US population is larger. The amount of employed people is less. So the only way to say unemployment is less is to use a magic rabbit who says the employment pool is now smaller – this month they decided to shrink it by 98,000 people.

Labels: Economy, US

The European Central Bank is expected Thursday to announce steps to slowly absorb some of the hundreds of billions of euros it pumped into banks since the peak of the crisis, starting with an end to cheap one-year loans next year. That extraordinary lending program was aimed at countering the collapse of confidence in credit markets at the height of the crisis this year. ECB President Jean-Claude Trichet said recently that cheap loans from the central bank can only be temporary, and warned that European lenders should avoid "addiction" to central-bank aid. With inflation still low, officials are expected to proceed cautiously in ending monetary stimulus, because of worries over the recovery's durability and the euro's strength. Inflation remains far below the ECB's medium-term goal of just under 2%, suggesting officials won't raise their key lending rate, currently 1%, until well into 2010 at the earliest.

Labels: ECB, Economy, EU

Is the US Dollar in free fall?

For the complete report from MoneyWeek click on this link

Ben Bernanke wants a strong dollar. No really. He does. The chief of the Federal Reserve said so yesterday. He reckons that the central bank's commitment to "maximum employment and price stability… together with the underlying strengths of the US economy, will help ensure that the dollar is strong and a source of global financial stability." Of course not. Bernanke's words sent the dollar to its lowest point in the past 15 months, while gold and stocks hit fresh highs. But how much further can the US currency fall? And what he's doing says that he's very much in favour of a weak dollar. Because while many investors are increasingly focusing on the threat of inflation and hopes of economic growth, the Fed chairman is keen to talk down any expectations that interest rates are going to rise in the near future.

Labels: Economy, US Dollar

European finance ministers said on Tuesday they saw only limited fallout from Dubai's debt troubles but that it showed the global financial crisis had yet to end. Ministers from the euro currency zone sounded cautiously confident about potential problems beyond the Gulf as financial markets recouped some of the losses incurred after Dubai World holding company said last week it could not pay its debts. Swedish Finance Minister Anders Borg, arriving for talks in Brussels on reducing deficits and tightening financial regulation following recession in Europe, said European bank exposure appeared so far to be "reasonable."

Labels: Dubai, Economy, EU

UPI - Unemployment in the euro area was unchanged in October, but rose in the 27-member European Union to 9.3 percent compared with 9.2 percent a month ago, Eurostat said Tuesday. Eurostat said 22.5 million workers were unemployed in the European Union. More than 15 million of those are in the euro area. The Netherlands has the lowest unemployment rate at 3.7 percent. The highest rate is in Latvia, where unemployment is at 20.9 percent. In Spain, unemployment is at 19.3 percent.

Labels: Economy, EU, Labor market

Brussels should join in belt tightening - by Patience Wheatcroft

Across Europe, governments are being forced to examine their budgets and see what might be cut. An age of austerity is being prescribed as the painful remedy for the debt-laden difficulties that now beset countries struggling to haul themselves out of recession. Ironically, it is only the government of Europe itself that determinedly eschews the new mood. The European Parliament has decided that every area of its budget needs to be increased, so it has set the draft budget for 2010 at €141 billion ($211 billion), against the current year's €136.8 billion. Making 2010 "the European Year for Combating Poverty and Social Exclusion" may be a noble objective but, with just €10.5 million of the funds destined for that project, total success seems unlikely. Nevertheless, the EU will be doing its bit to combat poverty among its own armies of staff, since a salary increase of 3.7% is being proposed for them—a figure well ahead of inflation numbers in most member states.

Managing the payroll for around 40,000 people is a hefty task, as was underlined by the European Commission, the EU's executive arm, recently. An advertisement for a new director of the "Office for Administration and Payment of Individual Entitlements" spelled out that the department had a budget of some €3.9 billion. "Its mission" explained this prime example of Eurocratic jargon 'is to determine, calculate and pay the financial entitlements and remuneration of staff in an inter-institutional perspective and with clear client orientation."

Labels: Economy, EU

Chinese statistics. They count GDP differently than we do - when budgeted or shipped, not spent or sold. Much of their apparent demand for commodities is stockpiling not production. It was not that hard to call the end of their secondary top last August. Maybe the problem lies in our fantasies about China, not our bitches about the US. Barry Ritzholz first laughed off the bogus Chinese stats, but now he is not so sure: “China expert Gordon G. Chang (author of The Coming Collapse of China) is more than skeptical — he has the data to question much of China’s growth miracle.” In sum, real stats like gasoline sales are flat, belying the claimed 8%+ growth.

The amount of stimulus by China is huge as a percent of GDP compared to the US, and they may not be getting that much for it. Those wistful Liberals may think it is ok to slosh around excess money, since it adds to an abstract “aggregate demand” and should help fill the gap of a drop in private consumption and investment. Where the excess ends up matters, however, especially if it lands in a whole passel of malinvestments, such as Ghost Cities being raised in China with nothing productive in them. Or, the US favorite for malinvestment, a horrific housing bubble, which may be emerging in China again. Eventually the piper has to be paid. Now the cracks have begun to form. The Bank of China is over-extended, giving it no safety net from a hiccup. The hangover from binge lending may apply to all the top Chinese banks. Their plans for bolstering their balance sheet sent Asian markets tumbling at the same time as Dubai defaulted. A continued weak Dollar would also undo the Chinese stimulus. Karl Denninger reports that a 10% drop in value of the dollar would reduce the value of reserves by 3x (Y1.5T) that China is spending on the stimulus (Y586B).

Labels: China, Economy, meltdown

Morgan Stanley Research Europe has just put out a note assessing the UK’s future prospects, and its findings are a timely addition to the hung parliament debate. One of its predictions for a surprise in 2010 is this: “UK becomes the first of the G10 to have a major fiscal crisis as elections lead to a hung parliament”. It goes on to explain: “The context is an ugly fiscal picture, relatively weak economic recovery, aggressive monetary stimulus and political uncertainty. Political opinion polls show a decline in the Conservative party’s lead to levels where possibly no clear winner would emerge in a general election.”

Morgan Stanley Research Europe has just put out a note assessing the UK’s future prospects, and its findings are a timely addition to the hung parliament debate. One of its predictions for a surprise in 2010 is this: “UK becomes the first of the G10 to have a major fiscal crisis as elections lead to a hung parliament”. It goes on to explain: “The context is an ugly fiscal picture, relatively weak economic recovery, aggressive monetary stimulus and political uncertainty. Political opinion polls show a decline in the Conservative party’s lead to levels where possibly no clear winner would emerge in a general election.”

Labels: Economy, EU

Chinese Premier Wen Jiabao rejected “unfair” calls for the yuan to appreciate and European leaders acknowledged that they had failed to shift the nation’s stance on its currency. “Some countries are now calling for yuan appreciation while imposing trade protectionism on China, which is unfair and actually limits China’s development,” Wen said at a briefing in the Chinese city of Nanjing today. In the financial crisis, “a stable yuan is helpful to the development of the Chinese economy and the world’s economic recovery,” he added. European officials indicated yesterday that they failed to convince China to loosen controls on the yuan that shelter Chinese exporters from the U.S. currency’s slide and make euro- region goods relatively less competitive. The euro has surged about 20 percent versus the dollar since Feb. 18, undermining the region’s recovery from the worst slump since World II. The yuan is effectively pegged to the dollar.

Labels: China, Economy, yuan

Official figures show that consumer prices in the 16 countries that use the euro rose by 0.6 percent in the year to November. That is the first annual rise recorded by Eurostat, the EU's statistics office, since April. A return to positive territory had been anticipated in Monday's release as last year's falls in energy costs dropped out of the comparison. However, the increase is bigger than anticipated -- the consensus was for a 0.4 percent inflation rate.

Labels: Economy, EU

Reuters- German business morale rose in November to levels not seen since the collapse of U.S. investment bank Lehman Brothers last year, boosting hopes that a recovery in Europe's largest economy can gain momentum.The Ifo economic think tank's business climate index, based on a monthly poll of some 7,000 firms, rose to 93.9 from 92.0 in October, exceeding a consensus forecast for a 92.5 reading and bringing the survey to its highest level since August 2008. It was the eighth consecutive rise in the index and pushed the euro higher against the dollar and Bund futures lower.

Labels: Economy, EU

New York Times - “Stop the boat! Stop the boat now!” the captain of the Greek Coast Guard patrol vessel yelled over the bullhorn, turning a spotlight on the flimsy dinghy as it chugged toward this island in the Aegean Sea. As the dinghy sputtered to a halt, a crowd of frightened faces squinted up into the light. Squeezed onto the 6-meter, or 20-foot, vessel were 30 Afghan migrants — men, women, children including babies — and their smugglers: two Turkish boys. The interception occurred one Saturday night earlier this month. But the migrants, the smugglers and the coast guard officers are protagonists in a daily drama played out in this seven-kilometer-wide strait separating the island of Lesbos from the Turkish coast, one of the narrowest sea crossings between the two countries and a favored route for smuggling. Hampering European Union efforts to curb a relentless influx of desperate people seeking to enter the bloc through this slender channel are age-old tensions between the E.U. member Greece and the E.U.-hopeful Turkey and the ever inventive tactics of opportunists profiting from the situation.

Most of the human traffickers are Turks, age 16 and 17. “We’ve seen one kid three times,” a patrol boat captain said, noting that minors, who cannot be prosecuted under Greek law, were sent back to Turkey, but often tried to return to Greece a few weeks later. The captain asked not to be identified by name for security reasons.

Labels: Economy, EU, Greece, Illegal Immigration, Turkey

Standard Chartered Plc, Aletti Gestielle SGR, HSBC Holdings Plc and Scotia Capital Inc. say the dollar will depreciate as much as 6.4 percent versus the euro. About $12 trillion of fiscal and monetary stimulus, the world’s lowest borrowing costs and a record $4 trillion of government bond sales between 2009 and 2010 will weigh on the currency, they said. So will the nation’s 10.2 percent unemployment rate and signs that the economic recovery may falter, they said.

Labels: Economy, US

German officials denied Monday that they were trying to outbid other European nations in offering money to General Motors Co. to save local jobs.
GM's European executives are meeting with ministers from Germany, Britain, Belgium, Spain and Poland as well as European Union commissioners in Brussels to discuss how the company plans to cut capacity by 20 to 25 percent -- and likely shed thousands of jobs. Germany's deputy economy minister Jochen Homann said Germany "will not participate in a subsidy race" as other countries hint that they are willing to help the company pay the costs of restructuring the Adam Opel GmbH and Vauxhall units.

Labels: Automotive Industry, Economy, EU, Germany, GM, Opel

The main event this week in Europe was from the United Kingdom as their central bank released their minutes showing that the vote on the quantitative easing methods were split three ways, where one of the members wanted to leave it steady at 175 billion pounds, the other wanted to expand it to 215 billion pounds and the rest of the nine members of the MPC were extending it to 200 billion pounds. Regarding interest rates, it was unanimous.

Labels: Economy, EU

Saab Automobile AB dealers in the U.S. are running out of new cars after the Swedish carmaker cut production to conserve cash and prepare for its first new model in seven years. “We have about 10 Saabs left, and they won’t last long,” said Ivan Goodwin, sales manager at Jim Ellis Saab in Atlanta. “It’s going to be a big problem, but there is nothing we can do about it.”

Saab, which General Motors Co. is selling to an investor group led by Swedish sports-car maker Koenigsegg Automotive AB, has slowed assembly to retool its Swedish factory to build the new 9-5 sedan starting next year, spokesman Eric Geers said. The company said last week it will eliminate more than a third of its U.S. dealers. Those that have received notice that they will remain open say they may be limited by a lack of inventory.

Labels: Automotive Industry, Economy, EU

At a time when rising poverty, widespread unemployment and other effects of the recession have been well documented, the report released Monday by the U.S. Department of Agriculture provides the government's first detailed portrait of the toll that the faltering economy has taken on Americans' access to food. Among Americans of all ages, more than 16 percent -- or 49 million people -- sometimes ran short of nutritious food, compared with about 12 percent the year before. The deterioration in access to food during 2008 among both children and adults far eclipses that of any other single year in the report's history. Around the Washington area, the data show, the extent of food shortages varies significantly. In the past three years, an average of 12.4 percent of households in the District had at least some problems getting enough food, slightly worse than the national average. In Maryland, the average was 9.6 percent, and in Virginia it was 8.6 percent.

n a briefing for reporters, Agriculture Secretary Tom Vilsack said, "These numbers are a wake-up call . . . for us to get very serious about food security and hunger, about nutrition and food safety in this country." Vilsack attributed the marked worsening in Americans' access to food primarily to the rise in unemployment, which now exceeds 10 percent, and in people who are underemployed. He acknowledged that "there could be additional increases" in the 2009 figures, due out a year from now, although he said it is not yet clear how much the problem might be eased by the measures the administration and Congress have taken this year to stimulate the economy.

Labels: Economy, US

Italy's gross domestic product posted quarterly growth of 0.6% in the third quarter, the Italian statistics agency Istat said Friday, in a preliminary estimate. The rise ended five consecutive quarters of shrinking GDP. Compared to the same period last year, GDP contracted by 4.6%, the agency said. The figures were largely in line with forecasts. Economists had predicted a 0.6% quarterly rise and a 4.7% year-on-year decline.

Labels: Economy, EU, Italy

Germany's Council of Economic Advisers on Friday criticized the new government's plan to cut taxes, saying policymakers should explain how they will fund the cuts and provide a more detailed plan to exit stimulus measures already put in place. The report was a rebuke to an agreement by German Chancellor Angela Merkel's Christian Democratic Union and its new coalition partner, the Free Democratic Party, to implement 24 billion euros ($37.2 billion) worth of tax cuts over the next four years. Long known as the "five wise men," though it now includes one woman, the government-appointed council's annual report said the coalition plan "lacks a comprehensive exit strategy." "Comprehensive steps to reduce structural deficits are missing. Instead, the new government proposes a mix of tax cuts and spending measures," the council said. "The agreement is silent on how to manage the balancing act between fiscal consolidation, tax reduction and public investment.

Labels: Economy, EU, Germany

Euro-zone industrial production rose for the fifth consecutive month in September, fueling expectations that the region's overall economy grew for the first time in more than a year in the third quarter. The European Union's Eurostat statistics agency reported Thursday that industrial output in the 16 countries which use the euro rose 0.3% from August and was 12.9% weaker than in September last year, marking the smallest annual percentage drop since December.

The report added weight to expectations that the euro zone returned to economic expansion in the last quarter. Eurostat is due to announce euro-zone gross domestic product figures early Friday.

Labels: Economy, Euro Zone

"Ireland's golden coin disappeared on public spending"

EU-Digest

The Irish government’s pre-budget report, to be published this week, will show that the general government balance - the measure used by the European Commission for evaluating a country’s finances - will balloon to a deficit of 14.5 per cent of GDP, or €24 billion, next year unless spending is cut. This would be by far the highest deficit in the eurozone, and far beyond the limits agreed between the EC and the Irish government. The simple fact is that the cost of providing public services in Ireland is too high and the case for pay cuts is now not only compelling but urgent. Public sector workers must accept that significant reductions in basic pay rates are required if the quality and variety of services is to remain in order to reduce costs. Secondly, and for basically similar reasons, social welfare payments would need to be reduced. This in line with wages, even though again in real terms there would in fact be no decline. Happy days could be back for Ireland in the future, but only if they put their economy on a more realistic footing.

Labels: Economy, EU, Ireland, Public spending

The directors of General Motors met for dinner last Monday in advance of an eagerly anticipated board meeting the following day. It was a chance for them to get to know one another. There wasn’t much time for chit-chat. New or not, the board had to make a historic decision — whether to cut GM’s ties with Europe, and its claim to be a global car company, by selling Opel and Vauxhall. Henderson made no firm recommendation. After all, the board had approved the deal in principle and was expected to give the green light. Except it didn’t. Immediately after the meeting, GM announced that it would keep Opel / Vauxhall, saying the business was now judged vital to product and technology development strategy. The decision provoked fury in Germany, where the Magna plan had been supported because it promised fewer job losses. Henderson had to call Angela Merkel, the German chancellor, with the news — she was in Washington to see President Barack Obama.

The workforce of Opel in Germany, some 25,000, took to the streets within 48 hours. “The strikes beginning in Germany will be repeated across Europe,” said Klaus Franz, head of the Opel works council in Germany. “The next move from General Motors will be to blackmail the governments and employees of Europe to finance their unworkable plans for restructuring Opel.” Others joined the attack. “This behaviour of General Motors shows the ugly face of unbridled capitalism,” said Jürgen Rüttgers, governor of North Rhine Westphalia and a leading figure in the German government. The Opel factory at Bochum, in his state, is high on the list of possible closures with the loss of 5,000 jobs. Germany’s bestselling newspaper, Bild Zeitung, described GM as “bullshitters”.

Note EU-Digest: Why doesn't the German Government nationalize Opel?TGm should not be able to get away with this.

Labels: Economy, EU, Germany, Opel

After more than a decade of lectures from Gordon Brown about the need to let markets rip, it is little wonder that the French are having the last laugh. As she relaxed in her room in the Dorchester in London ahead of Saturday's G20 meeting in Scotland, the French economy minister, Christine Lagarde, was quietly satisfied that the French economy is in better shape than Britain's. And if you suggest to her that working with the pro-City, anti-regulation Conservatives will be more of a struggle than the Labour government, the former head of a US law firm cannot help but burst out laughing: "But you had Gordon Brown for all those years!"

Lagarde insists that the interventionist policies of President Nicolas Sarkozy's government, along with France's famously more generous social safety net, have been crucial factors. "The welfare system that we have, on which we spend a lot more public money than the UK, that's an economic model that is slightly different; that has been a bit of a shock absorber." Instead of relying on exhortations to banks to lend, Lagarde has taken a more "dirigiste" approach, appointing a "credit mediator" to intervene. So far, 10,000 firms have been helped and banks that fail to extend credit lines to viable businesses are "named and shamed".

Labels: Economy, EU, France

Ford Motor Co. named the parent company of China's Geely Automobile Holdings as the preferred bidder for its Volvo car unit this week, paving the way for China's second possible acquisition of a major overseas automaker this year. A dozen China-centered auto deals have been proposed this year, underlining the growing international clout of the world's largest and strongest car market.

Click on this link for some questions and answers about how the shake-up in the global car market is playing out, and where it may be leading the auto industry.

Labels: Automotive Industry, China, Economy

Labels: Banking Industry, Economy

The slightly weaker US economic data, as well as worries about the stability of the US financial industry, prompted selling in risk correlated trades last week. In the FX market, high beta currencies were the biggest losers as falling equity and commodity prices renewed risk-aversion & spawned correction fears. Friday U.S. stocks tumbled the most since July after declines in personal spending and consumer confidence and the threat of a CIT bankruptcy raised concern over the durability of the economic recovery.

Labels: Banking Industry, CIT, Economy, EU

EBRD Eyes Flaws In East Europe Model

The flaws in Eastern Europe's model of growth have been exposed by the financial crisis and commodity-reliant countries like Russia must expand their industrial base to make them more resilient, the European Bank for Reconstruction and Development (EBRD) said in an annual report on Monday. The development bank, one of the biggest investors in a campaign to transform the region since the collapse of communism two decades ago, also said risks arising from financial integration must be better managed. It said countries had been over-reliant on foreign banks and inflows to drive growth in the boom years, leaving them highly vulnerable during the global credit crunch.

Labels: EBRD, Economy, EU

Global airline industry still in the red.

Demand for international air travel may have started to improve year-on-year in September, but the slump in the global airline industry has yet to end, the International Air Transport Association (IATA) said. In a statement, the industry group said passenger demand increased 0.3%, while cargo demand was 5.4% below September 2008 levels. On the other hand, load factors for passenger and cargo have returned to pre-crisis levels of 77.1% and 50.8%, respectively.

Labels: Airline Industry, Economy

Norway 1st in Europe to raise interest rates - by Ian MacDougall

Norway's central bank raised its key interest rate by a quarter percentage point to 1.5 percent Wednesday, making the oil-rich country the first European economy to boost rates since the height of the global financial crisis. Norges Bank said in a statement that its decision was due to a sharper-than-expected rise in inflation and lower unemployment. "The world economy is in a deep slump, but there are signs of new growth," said Svein Gjedrem, governor of Norges Bank. "The Norwegian economy has gotten moving again faster than anticipated."

Labels: Economy, Norway

Iran, Turkey seek to triple trade by 2014

Iranian First Vice President Mohammad-Reza Rahimi says Iran and Turkey have agreed to increase the level of their annual trade exchanges to euro 20 billion ($30 billion). "Following a proposal from Iran, the level of trade between Iran and Turkey will increase to euro 20 billion within the coming 4 to 5 years," IRNA quoted Rahimi as saying on Tuesday. "The level of trade ties between Iran and Turkey presently stands at about euro 8 billion ($11 billion), which is not satisfactory," he added.

Labels: Economy, Iran, Turkey

Financial Sector - Break Up Goldman Sachs - by Michael Maiello

If we agree on a few basic things that we all want, breaking up Goldman Sachs and most of the other big Wall Street banks makes a lot of sense. Let's start with the wants: The taxpayer should never again be asked to save the banks from the costs of their own investment decisions; American consumers and businesses should have access to financial products, credit and financing; bank shareholders deserve a chance to make some money. In his new book The Road To Financial Reformation, Henry Kaufman, former member of the Federal Reserve and as prescient a forecaster as you're likely to find, doubts the ability of executive suite denizens to effectively run massive financial institutions.Users of financial products would be better off with more choices and more competitive providers.

Labels: Banking Industry, Economy, Goldman Sachs, US

Inflation fears threaten US creditworthiness - by Korkut Erturk

The exceptional advantage the United States has in being able to issue its liabilities in its own currency has shielded it from the worst ravages of the financial crisis any other country would have experienced in its position. But fears that the United States might be forsaking this advantage are mounting. The issue isn't the imminent collapse of the dollar, but that the United States will be increasingly constrained in its fight against the economic downturn by concern over the sagging value of the dollar. In his visit to Beijing this past summer, US Treasury Secretary Timothy Geithner looked like a wastrel trying to appease his creditors, giving assurances to skeptical Chinese audiences. Increasingly, the Federal Reserve finds it has to assure investors of its "exit strategy" from extreme monetary easing. Yet, the only thing that can sustain aggregate demand, and thus income and employment, in the period to come is to keep up the fiscal stimulus.

Anything that poses a threat to the large budget deficits the Barack Obama administration is running, and will continue to in the coming years, is liable to worsen the economic slump. Whether warranted, inflation fears pose a threat.

Labels: Dollar, Economy, Inflation, US

Dollar Touches 14-Month Low as Recovery Signs Spur Risk Demand

The dollar reached a 14-month low versus the euro as stocks advanced around the world on confidence that the global economy is recovering, increasing demand for higher-yielding assets. Brazil’s real and Mexico’s peso were the biggest gainers versus the dollar among the 16 most-traded currencies tracked by Bloomberg. The South Korean won was the best performer among 10 emerging Asian currencies as the nation’s economy grew at the fastest pace in seven years. “Risk is a little bit positive, and that’s helping the dollar weaken,” said Sebastien Galy, a currency strategist at BNP Paribas SA in New York. “The overall theme of the dollar weakening versus Asia is continuing.” The dollar traded at $1.5016 per euro at 9:31 a.m. in New York, compared with $1.5008 on Oct. 23. It earlier declined to $1.5063, the weakest level since August 2008.

Labels: Dollar, Economy, Inflation, US

Netherlands: ING Bites the Bullet

One of the great debates among U.S. bank regulators is whether large, ailing firms should be broken up to pose less risk to the financial system. But in Europe, the debate already seems settled: just do it. At least that’s the message traders heard from ING.

The European Commission has cracked down harder on antitrust issues than regulators in the U.S., says Jaap Meijer, a bank analyst with Evolution Securities in London. “It’s all very drastic,” he says. But ING is “solving its weak capital base” by taking these steps. And other banks should ultimately emerge in a healthier state after they also raise capital and divest assets. Still, some bank analysts said ING’s settlement with regulators looks less favorable than they’d expected. And the news hit European bank stocks hard today, with ING falling over 7% in Amsterdam trading.

Note EU-Digest: Isn't it time for US Banks to do the same??

Labels: Banking Industry, Economy, EU, ING, Netherlands

Germany the Europe's biggest economy is growing better then expected

Germany's stronger-than-expected economic performance is helping to bolster EU economic confidence. Germany, Europe's biggest economy, is expected to lead the EU recovery. German investor confidence rose to the highest level in more than three years after the economic recovery gathered strength and stocks surged.

German business confidence rose to its highest level in more than a year adding to signs of recovery in Europe's biggest economy a key survey released Friday showed. Confidence index climbed from 91.3 in September to 91.9 points in October to record its seventh successive monthly increase.

Labels: Economy, EU, Germany

Business confidence soars to record high

A key survey published on Friday showed that German business confidence rose to a 13-month high in October, brightening the economic outlook in Europe's largest economy.

Labels: Economy, EU, Germany

UK economy remains in recession - by Jane Wardel

The British economy shrank 0.4 percent in the third quarter of the year, according to official statistics released Friday, dashing hopes that the country had emerged from recession. The fall in gross domestic product for the sixth consecutive quarter takes the total loss of output since the recession began last year to 5.9 percent, leaving Britain in the grip of the longest period of continuous decline since the Statistics Office began taking records in 1955.

Note EU-Digest: Britain which is not part of the EURO Zone follows the same economic policies as the US in trying to fight the problems of the economic meltdown last year. This includes massive support to banks and corporations and hoping for a positive trickle down effect. So far this has not materialized, neither in Britain nor in the US, even though the UK Government has been publishing more accurate figures on the results of their stimulus programs than the US.

Labels: Britain. EU, Economy