J. C, Schalekamp s “Waarom de Politiek Teleurstelt” Wind Publishers 2012 een interview met Rob Zwetsloot Hoeksteen NL Verkiezingen 12 september 2012
PARIS — European leaders were facing increasing pressure on Thursday to respond to the euro crisis, as Spanish 10-year bond yields hit the 7 percent level that has served to trigger full international bailouts of other euro zone members, and Italian borrowing costs rose sharply at a debt auction.
Spain’s borrowing costs soared after Moody’s Investors Service downgraded the country’s bond rating late Wednesday, with the yield on the 10-year bond touching 7 percent for the first time in the euro era. In Rome, the national Treasury sold 4.5 billion euros, or $5.6 billion, of debt, including three-year bonds maturing priced to yield 5.30 percent, up from the 3.91 percent it paid to move similar securities last month.
Higher borrowing costs threaten the $125 billion “bailout lite” Madrid worked out with European officials to recapitalize its banking sector, as that deal was contingent on Spain being able to continue tapping the bond market for its regular financing needs. For both Spain and Italy, rising yields endanger hopes that the countries will be able to overcome their problems without full bailouts, because high interest rates make refinancing unsustainably expensive.
Portugal, Ireland and Greece all ended up seeking rescues from the European Union, the International Monetary Fund and the European Central Bank when they gave up hope of market funding. A full bailout of Spain would severely tax E.U. resources and turn the full glare of market scrutiny onto Italy, the third-largest economy in the euro zone, after Germany and France.
Still, Europe’s policy makers remain divided on how to deal with the crisis, just days before the crucial Greek election Sunday and a meeting with President Obama and other heads of state at the Group of 20 summit Monday in Mexico.
Chancellor Angela Merkel of Germany, the most important actor in the European drama, indicated Thursday in an address to the German Parliament that she would resist any outside attempts to force Germany to concede to what she called “simple” and “counterproductive” quick fixes. That, she said, includes a rejection of the jointly issued euro bonds and other forms of shared debt that some leaders, including the French president, François Hollande, have called for.
Only by solving the root of Europe’s problems, she said, by strengthening political unity, will the region be able to recover fully from the crisis. She cited the massive debt and the lack of competition in the weaker economies of the union.
“We will only be successful when every, and I stress every, member country of the European Union, the European and international institutions as well as the peoples in our individual countries are ready to recognize the facts and realistically sum up our powers and put them to use for the greater good,” Ms. Merkel said.
She called for more innovation, improved technologies and a strengthened European domestic market and more flexible job market and less bureaucracy as key elements needed in order to ease the problems in the long term.
“I know it is arduous, that it is painful, that is a drawn-out task,” Ms. Merkel said. “It is a Herculean task, but it is unavoidable.”
Ms. Merkel also warned against overtaxing Germany, saying: “Germany’s strength is not endless. Germany’s powers are not unlimited. Consequently, our special responsibility as the leading economy in Europe means we must be able to realistically size up our powers, so we can use them for Germany and Europe with full force.”
Ms. Merkel’s address, setting Germany’s position before the coming G-20 meeting, was expected to be answered by Mr. Hollande and Prime Minister Mario Monti of Italy, who were scheduled to hold a press conference later Thursday in Rome.
In afternoon trading, the yield on Spain’s 10-year government bond rose 19 basis points to 6.87 percent, having reached a euro-era record of 7.0 percent earlier. The Italian 10-year traded to yield 6.22 percent, up 3 basis points. A basis point is one-hundredth of a percent.
European officials, fighting to contain the euro crisis, fear Italy will become the next country to fall under market attack. Even as they work to prevent further contagion, the world’s eyes are turning to elections Sunday in Greece, where fractious parties are angling for supremacy in a contest that is being treated by many as a referendum on the country’s euro zoneMoody’s cut Spain’s sovereign bond rating by three notches, to Baa3 from A3, late Wednesday, citing the pressure on government finances from the bailout deal made over the weekend and Spain’s “growing dependence on its domestic banks as the primary purchasers of its new bond issues, who in turn obtain funding from” the European Central Bank.
Underscoring a point made by many economists who say Europe’s austerity focus has gone too far, and that the emphasis now should be on reviving growth, Moody’s noted in its downgrade of Spain’s rating that the country’s stagnating economy “makes the government’s weakening financial strength and its increased vulnerability to a sudden stop in funding a much more serious concern than would be the case if there was a reasonable expectation of vigorous economic growth within the next few years.”
The Spanish government did not comment Thursday on the downgrade, which followed a similar move by Fitch Ratings on June 7.
The terms of Spain’s bailout are yet to be negotiated. Still, just days after the weekend deal, tensions are building up between Madrid and Brussels over what its consequences will be.
On Wednesday, Joaquín Almunia, Spain’s representative in the European Commission, told Reuters that Spain would be likely to have to liquidate one of three troubled banks in which the state has had to intervene and that have failed to find any buyers — Catalunya Caixa, Banco de Valencia and NovaCaixaGalicia. Luis de Guindos, Spain’s economy minister, however, repeated this week an earlier government pledge that the government did not plan to shut any financial institution.
Moody’s also cut its credit ratings for Cyprus’s government bonds, and put them on review for further possible downgrade. The cut, by two notches to Ba3 from Ba1, takes Cyprus’s debt rating more deeply into junk territory. Moody’s cited the increasing likelihood that Greece — to which Cypriot banks are heavily exposed — would exit the euro area, “and the resulting increase in the likely amount of support that the government may have to extend” to the banks.
Cyprus, a tiny Mediterranean island-nation, is expected to seek its own banking sector bailout this week.
The Euro Stoxx 50 index, a barometer of euro zone blue chips, fell 0.7 percent, while the FTSE 100 index in London fell 0.9 percent.
Trading in U.S. index futures suggested that Wall Street was headed for a flat opening. The Standard & Poor’s 500 index fell 0.5 percent on Wednesday.
The dollar was mixed against other major currencies. The euro fell to $1.2551 from $1.2557 late Wednesday in New York, while the British pound fell to $1.5491 from $1.5505. The dollar fell to 79.32 yen from 79.49 yen, and to 0.9565 Swiss francs from 0.9564 francs.
Asian shares were lower across the board. The Tokyo benchmark Nikkei 225 stock average fell 0.2 percent. The Sydney market index S.&P./ASX 200 fell 0.9 percent. In Hong Kong, the Hang Seng index fell 1.2 percent.
Eurozone countries on June 9 agreed to lend Spain up to 100 billion euros ($125 billion) to stabilize the Spanish banking system. Because the bailout dealt with Spain’s financial sector directly rather than involving the country’s sovereign debt, Madrid did not face the kind of demands for more onerous austerity measures in exchange for the loan that have led to political instability in countries such as Greece.
There are two important aspects to this. First, yet another European financial problem has emerged requiring concerted action. Second, unlike previous incidents, this bailout was not accompanied by much melodrama, infighting or politically destabilizing threats. The Europeans have not solved the underlying problems that have led to these periodic crises, but they have now calibrated their management of the situation to minimize drama and thereby limit political fallout. The Spanish request for help without conditions, and the willingness of the Europeans to provide it, moves the European process to a new level. In a sense, it is a capitulation to the crisis.
Read more at Stratfor.com
VENICE — Concerns grew on Monday that Italy could be the next victim of Europe’s financial infection, leading nervous investors to sell Italian stocks and bonds and damping euphoria over a weekend deal to bail out Spain’s banks.
Italian officials privately expressed concern that the 100 billion euros, or $125 billion, that Europe pledged to Spanish banks might not stop the troubles from spreading.
Italy’s main stock index was Europe’s worst performer on Monday, a day when United States stocks were also dragged down and investors flocked yet again to the safe harbor of American and German government bonds. Even the Italian prime minister, Mario Monti, a European technocrat who came to office after the euro crisis forced out Silvio Berlusconi last November, has begun to acknowledge the dangers posed to his country’s 1.56-trillion-euro economy ($1.95 trillion).
The main fear is that Italy cannot grow its way out of arecession fast enough to pay a mountainous national debt. Other concerns include the fact that Italy, with the third-largest euro zone economy after those of Germany and France, will have to shoulder a large portion of the bailout bill even as it grapples with its own sharp economic downturn.
Because Italy does not have enough economic growth to generate the money itself, the government will probably have to borrow it at high interest rates, adding to an already heavy debt load.
“There is a permanent risk of contagion,” Mr. Monti told an economics conference near Venice over the weekend, speaking by telephone. “That is why strengthening the euro zone is of collective interest.”
Prices of Italy’s government bonds reached their lowest level in months. Investors apparently found little assurance that the euro currency union was any closer to solving its underlying problems — not with parliamentary elections in Greece this weekend that could determine whether the currency union is strong enough to retain its weakest members.
Investor euphoria in Europe over the Spanish bailout deal Monday morning was short-lived, giving way to an essentially flat day on many European stock markets. But Italy’s benchmark index was the Continent’s worst performer, ending down 2.8 percent.
Italian 10-year government bonds dropped in value for a fourth consecutive trading session. The yield — a measure of the government’s borrowing costs and of investors’ perception of risk — climbed 0.26 of a percentage point Monday to just over 6 percent. That is the highest level since January and a level that Italy could not afford for long.
The Spanish government’s 10-year bond yield also rose, closing up 0.30 of a percentage point, to 6.466 percent.
“There’s no doubt contagion will come to Italy,” Daniele Sottile, a managing partner at the financial advisers Vitale & Associati in Milan, said at the same conference, which was convened by the Council for the United States and Italy on an island near Venice. “It’s proof that the European mechanisms designed to stop the crisis are not working.”
Sergio Marchionne, the chief executive of both Fiat and Chrysler, was more blunt at the conference. “Somebody better do something before we get to the point of no return,” he said.
Although Mr. Monti, a former European commissioner, has a reputation as a skilled leader trusted by international officials, he faces a host of problems at home.
Few question Mr. Monti’s competence: Within the first six weeks of coming to power, he managed to pass more economic measures than Italy had in a decade, including increasing the retirement age, raising property taxes, simplifying the operation of government agencies and going after tax evaders. Still pending are economic changes meant to spur growth, including an effort to overhaul Italy’s inflexible labor rules.
But Mr. Monti’s government is also shackled by a legacy of political unwillingness to make painful changes.
As a result, “market attention looks set to shift to Italy,” Commerzbank analysts wrote Monday in a note to clients. Combined with weak growth, they said, the difficulties Mr. Monti faces in getting lawmakers to make economic changes mean “it may be just a matter of time before Italy also seeks help.”
Italy’s dominant political parties, the center-right People of Liberty and the center-left Democratic Party, are participating in Mr. Monti’s government but are averse to being too closely associated with the tough measures he has already put in place and the others he is still pushing for. Some opposition parties have been pressing for new elections to be held before Mr. Monti’s term ends in 2013.
Since Mr. Monti came to power, the Italian economy — like most of those in Europe — has grown weaker. It is expected to contract 1.5 percent this year and increase just 0.5 percent in 2013. Italian banks have sharply curtailed lending, pushing thousands of small and midsize Italian businesses into bankruptcy.
Italy’s unemployment rate has marched above 10 percent, well above Germany’s 5.4 percent, according to Eurostat, the European Union’s statistical agency.
Its government debt, already at 120 percent of gross domestic product, will almost certainly continue to rise, especially if Italy must pay a larger portion of the bill for shoring up the monetary union. In many respects, Italy is still better off than Spain and the three other bailout recipients — Greece, Ireland and Portugal. Its annual budget deficit has shrunk to 2.8 percent of G.D.P., which is down from 4.2 percent a year earlier and below the 3 percent level required by the euro union.
Italy has Europe’s second-largest manufacturing and industrial base, after Germany’s, and is one of the biggest export-oriented economies in the euro zone. “Made in Italy” is still a valuable brand the world over, led by icons like Ferrari cars, Gucci handbags and Ducati motorcycles. The country is also filled with state-owned assets like power companies and the national postal service that could bring in billions of euros should the government manage to privatize them.
Despite recent downgrades by the ratings agency Moody’s Investors Service, Italian banks are relatively sound — at least compared with Spain’s — because they are not saddled with bad debts from a real estate bubble. And even though the Italian government issues more bonds than any other euro zone country, the Italian public owns about half that debt, meaning banks are less vulnerable to fluctuations in the bonds’ value than banks in Spain, which are heavily invested in their government’s risky bonds.
Even so, deposits have been fleeing Italian banks for havens in Switzerland, according to several bankers at the weekend conference, on concern that Mr. Monti will raise taxes for the wealthy and as a hedge if the euro zone economy takes a turn for the worst.
Contagion is as much about fear as economic fundamentals, which is why if Mr. Monti cannot muster the political backing soon to push through his changes, there is a widespread assumption that the crisis will quickly breach Italy’s borders.
“Monti has a good agenda, and has clear in his mind what should be done for Italy,” said Cinzia Alcidi, a research fellow at the Center for European Policy Studies in Brussels. But his approach is that of a technocrat, “and when it is confronted with political and social reality, that makes things more difficult.”
Across Italy’s political spectrum, support for Mr. Monti has been tepid. But many observers agree that any attempt to hold early elections would be disastrous, blocking Mr. Monti’s efforts at change and thrusting Italy back into political mayhem. It is unlikely that any other party or coalition would receive enough support to govern comfortably.
“The good news” said Sergio Fabbrini, director of the school of government at Luiss Guido Carli University in Rome, is that Italy has veered away from becoming a “failed state in Europe” because of Mr. Monti.
The bad news, he said, is that Italy’s embedded politicians have still not acknowledged the reasons for Italy’s problems. “And when the quality of the political elite is as low as it is in Italy, or in Greece, it is difficult to create the structural conditions for growth.”
Greece is where the West both begins and ends. The West — as a humanist ideal — began in ancient Athens where compassion for the individual began to replace the crushing brutality of the nearby civilizations of Egypt and Mesopotamia. The war that Herodotus chronicles between Greece and Persia in the 5th century B.C. established a contrast between West and East that has persisted for millennia. Greece is Christian, but it is also Eastern Orthodox, as spiritually close to Russia as it is to the West, and geographically equidistant between Brussels and Moscow. Greece may have invented the West with the democratic innovations of the Age of Pericles, but for more than a thousand years it was a child of Byzantine and Turkish despotism. And while Greece was the northwestern bastion of the anciently civilized Near East, ever since history moved north into colder climates following the collapse of Rome, the inhabitants of Peninsular Greece have found themselves at the poor, southeastern extremity of Europe.
Modern Greece in particular has struggled against this bifurcated legacy. In an early 20th century replay of the Greco-Persian Wars, Greece’s post-World War I military struggle with Turkey led to a signal Greek defeat and as a consequence, more than a million ethnic Greeks from Asia Minor escaped to Greece proper, further impoverishing the country. (This Greek diaspora in Asia Minor was a massive source of revenue until the Greeks were expelled.) Not only did World War I have a bloody and epic coda in Greece, so did World War II, which was followed by a civil war between rightists and communists. Greece’s ultimate escape from the Warsaw Pact was a rather close-run affair: again, the effect of Greece’s unstable geographical location between East and West.
Read more at Stratfor.com
BRUSSELS — In an apparent bid to raise pressure on Spain to accept a European bailout for its wobbly banks, the International Monetary Fund announced the banks would need nearly $50 billion in extra capital just to guard against a deepening of the country’s economic crisis.
The release of the estimate Friday night, several days early, came hours before finance ministers from the 17 euro zone countries were holding a conference call to try to persuade the Spanish government to swallow its pride and ask for help.
Officials have said the bailout being discussed was at least $100 billion, according to a person with knowledge of the negotiations, and is meant to provide enough of a cushion to reassure jittery markets. The I.M.F. estimate did not include costs associated with the need for banks to restructure, or to book losses on loans. Those costs would drive up the needed infusion of cash to as much as 100 billion euros, or about $125 billion, according to estimates by private firms.
Spain’s euro-zone partners have been pushing the government in Madrid to bolster the country’s fragile banking system ahead of elections in Greece next week — the outcome of which could further destabilize the shared currency. European officials hope an infusion of cash for Spain will strip some uncertainty from the markets, which will be roiled enough if the Greek election ushers in a government that upends the country’s bailout agreement.
In what some have seen as a game of brinkmanship, however, Prime Minister Mariano Rajoy of Spain has delayed seeking outside help, trying to use the fear of economic contagion to get financial aid under better terms than those that Greece, Ireland and Portugal received when they were bailed out.
Spanish officials had been saying they first wanted to review audit by the I.M.F., as well as ones by two independent consulting firms, whose first results are not due until June 21. Spain wants to avoid a repeat of the miscalculation of the problems at Bankia, a giant Spanish mortgage lender that was nationalized last month because of the growing number of bad loans on its books.
The I.M.F.’s early release of its report was a sign of the urgency felt in Europe. It estimated the banks would need to raise at least 37 billion euros, or about $46 billion.
“The extent and persistence of the economic deterioration may imply further bank losses,” Ceyla Pazarbasioglu, deputy director of the fund’s monetary and capital markets department, said in a statement. “Full implementation of reforms as well as establishing a credible public backstop are critical for preserving financial stability going forward.”
Spanish banks are struggling with significant losses in their real estate loan portfolios, and they have been hurt by the country’s broader economic malaise, which has helped push Spain’s borrowing costs close to record highs.
On Friday, President Obama urged European leaders to stabilize their financial sector and end their long-simmering sovereign debt crisis.
“These decisions are fundamentally in the hands of Europe’s leaders, and fortunately they understand the seriousness of the situation and the urgent need to act,” Mr. Obama said at a news conference. “They’ve got to stabilize their financial system. And part of that is taking clear action as soon as possible to inject capital into weak banks.”
The Obama administration is concerned continued upheaval in Europe will further destabilize the world economy, hurting the United States and the administration’s chances for re-election.
In a speech in New York on Friday, Christine Lagarde, the managing director of the I.M.F., warned that global economic conditions had again deteriorated, with growth and financial stability at stake. Tensions are “now threatening the very existence of the European project,” Ms. Lagarde said.
The person close to the talks among euro zone officials said on Friday that they wanted Madrid to ask for help “pre-emptively,” allowing Europe to contain the problem now, with details of the package to be worked out later.
Since the start of the euro debt crisis more than two years ago, three governments — in Greece, Ireland and Portugal — have had to request bailouts. And those came with stringent budget and spending conditions imposed by the European Commission, the European Central Bank and the International Monetary Fund. Those conditions have caused political upheaval in Greece, where the Coalition of the Radical Left, or Syriza, the party led by Alexis Tsipras, has vowed that if it comes to power it will refuse to live up to the nation’s bailout terms.
But Spain may be able to avoid the strict fiscal oversight that Greece had to accept. The euro zone’s bailout fund was empowered last year to make loans to governments for the specific purpose of recapitalizing banks, with the conditions and payback terms focused largely on the financial sector and not the government’s fiscal autonomy.
In another concession to make the move more palatable to Madrid, the I.M.F. would not be called in to help oversee the program, according to one of the people close to the discussions. Instead, the European Banking Authority would take its place, this person said. That, too, would give a bailout more of a bank focus, rather than the sort of broader jurisdiction over government finances that the I.M.F. typically demands.