Reuters blog archive
from John Lloyd:
Sixty years ago, pondering the question of an unruly populace, the German playwright Bertolt Brecht mused, “Would it not be easier / In that case, for the government / To dissolve the people / And elect another?”
It was a rare piece of ironic criticism of East Germany’s communist regime for Brecht, since he usually supported it. But after the regime’s suppression of a workers’ revolt in 1953, he spoke out. It’s one of his most famed observations, trotted out whenever a populace is ungrateful enough to vote “against their own good.”
European Union politicians can sympathize. They’ve labored for six decades to fashion a union that was supposed to end wars and greatly expand economic markets, not to mention bring former communist states into freedom.
Yet the European people, instead of gratitude, now strain against an institution over which they have little direct say. In one of several recent books that express pessimism over the future of the euro currency, The Fall of the Euro, Jens Nordvig, the head of currency strategy at Nomura Securities, puts it bluntly: “The economic need for further integration is clashing with public sentiment, increasingly opposed to handing over additional functions to European officials.” Nordvig’s pessimism derives from the view that the politicians cannot ensure the EU’s political support, not that the authorities can’t manage the mechanics of the euro.
from John Lloyd:
As we saw last week, Africans are desperately risking, and losing, their lives in the struggle to get into Europe. They come above all from the war-afflicted states of Eritrea, Somalia and Syria. They trek to Libya (itself now increasingly in bloody turmoil, a Spring long gone) or Tunisia, and from there seek a boat to the island of Lampedusa, the southernmost piece of Italian soil, nearer to the north African coast than it is to Sicily.
The emigrants pay up to 1,000 euros to traffickers, who sometimes take their money and disappear, sometimes pack hundreds of them into fishing boats, which might normally carry a dozen men. From there they set off to cover the 80 or so miles to the lovely island, a luxurious resort with some of the best beaches on the planet, and now the fevered hope of some of the world’s poorest.
from John Lloyd:
How much longer will the political center hold in Europe? Its erosion, years in the making, is only picking up speed. In Italy, the latest political crisis presages the collapse of the centrist left-right coalition. In Austria, a recent election barely gave a similar coalition enough votes to continue governing. The European Union nations are hurtling toward elections next spring for the European parliament, which will bring real debate and divide to what has been a largely consensual assembly. Not far separated from the yolk of the financial crisis, nationalism is the politics of the times.
While Europe’s economy is making a slow, small improvement (with exceptions in the south), its politics are becoming much more fragile. Most economists say that the crisis can only be fully remedied by taking more powers into a powerful Euro-center, one that’s fiscal, financial, macro-economic, and thus political. Brussels believes it must be done: but no national government, even Germany’s, believes it could deliver popular approval for the move. The crisis is already forcing integration, yet causing citizens to recoil from the EU. That’s the central contradiction of Europe, stark and grim.
from John Lloyd:
If every nation gets the leader it deserves, what would Angela Merkel’s smashing victory on Sunday say about Germany?
It would show that Germans are cautious, prefer consensus to confrontation in their politics, and dislike pizzazz in their politicians. They both want a united Europe and despise southern European states that can’t manage their finances. At least, that’s how they are for the moment. (European politics, even in Germany, are febrile these days.)
from Anatole Kaletsky:
On the way to my holiday in Italy this year, I had an epiphany about the state of the world economy. I stopped for lunch in the truly miraculous Piazza dei Miracoli in Pisa, where Galileo Galilei is said to have dropped cannon-balls from the Leaning Tower to test his theories of motion. A few years later, Galileo invented the telescope to amass the detailed astronomical observations that were needed to prove beyond reasonable doubt the heliocentric theory of the universe -- the idea that the earth revolves around the sun and not the other way round, as the Bible implied. Galileo was famously tried by the Inquisition for this heresy and decided to recant, presumably inspired by what happened to his fellow-mathematician Giordano Bruno, who was burnt at the stake for similar ideas. But after mechanically recanting, Galileo muttered under his breath the rebellious phrase for which he is still renowned: eppur si muove -- “and yet it moves."
As I enjoyed my lunch in Pisa, Galileo’s defiantly optimistic words echoed through my mind. “And yet it moves” seemed perfectly to describe what I had felt about the world economy and financial markets since the crisis of 2008.
from John Lloyd:
The pace of European disintegration continues to quicken. Recession deepens in the 17-member euro zone; it is now the longest downturn since the currency was launched in 2000. In Italy, a new left-right government, launched on an anti-austerity program, finds the neighborhood more austere than it had hoped. In France, Maurice Levy, boss of the advertising giant Publicis, did a survey showing that northern Europeans – Poles, Germans, Brits – were moderately optimistic while southerners – Spaniards, Italians, Greeks and the French – were deeply pessimistic. France dipped into recession earlier this month, for the third time in four years. The union is pulling apart.
Nothing brings relief. In the Netherlands, a TV show persuaded the country’s deputy finance minister, Frans Weekers, to watch clips of Bulgarians boasting about how they had defrauded his country’s government of welfare benefits. Bulgarians and Romanians, the poorest members of the European Union, will be able to move to any state in the EU next year. What had been presented to the poor as a new freedom is now an imposition for the rich.
from John Lloyd:
Let’s begin with two glimpses of the workings of the Italian state.
First, it was announced last week that passengers would be required to mount a bus only at the door in the front, and pay the driver on entry. The present system, in which tickets are bought in cafes and other shops and stamped at machines on the bus after entry from any one of several doors, has resulted in such widespread evasion that it's calculated that only a minority of riders buy tickets on publicly owned buses. In Naples, three out of 10 play by the rules. The wonder is that three bother to pay.
Second, the ruins of Pompeii, buried by lava from the volcano Vesuvius in 79 AD and thus preserved as a Roman town, is one of the world's wonders. It is also among its worst-preserved wonders. The Italian authorities have taken such poor care of it that several buildings have collapsed, and much-needed European Union money has been withheld because of the bureaucratic chaos.
from John Lloyd:
Jim O’Neill, head of Goldman Sachs Asset Management, thinks Beppe Grillo and his Five Star Movement is a greater threat to Europe and the euro than the trials of little Cyprus. That’s because Grillo received more than a quarter of the votes in February’s election in Italy and has since gridlocked the political system by refusing any dealings with the established parties. A government can’t be formed.
O’Neill warned that if growth does not come soon to the euro zone’s third-largest economy, stalled for longer than any other in Europe, even more people will start to support Grillo’s movement and its call for a referendum on membership of the euro zone. What, he asked, does Grillo think? His response: “Does anyone really know?”
from Ian Bremmer:
Now that the crisis in Cyprus has passed, we can finally admit the obvious: The “crisis” it provoked did not deserve the attention it received. Cyprus makes up a fraction of one percent of the European Union’s GDP and it’s a backwater for sketchy Russian dealings. If Cyprus had drowned in a sea of Mediterranean debt, the Eurozone would not have gone under with it.
But what a story! The news was dominated by theatrics: a plane filled with 1 million Euros, last-minute deals in danger of falling apart, and failed emergency meetings in Moscow. But behind that global drama, all the Cypriot political parties supported staying in the Eurozone, and the German government remains committed to the sanctity of the monetary union. How was Cyprus going to deal the Eurozone an existential blow?
from The Edgy Optimist:
Everyday, we are treated to a new peril: Today we have sequestration, a word not much in anyone’s lexicon until recently. The mandated cuts to the federal budget, $85 billion by last count, will further stunt anemic economic growth, or so economists and the Congressional Budget Office guesstimate. The prognostications surrounding the sequester have been grim, with White House Chief of Staff Denis McDonough warning of a “devastating list of horribles,” ranging from severe travel snafus to the end of vital education programs.
In the political media, in Washington, and in the defense industry (which will see especially draconian cuts), all of this is Big News. But after months of buildup, the end-of-days drama is ending with a resounding thud. The meh reaction of financial markets of late is particularly telling (the Dow flirted with its all-time high this week). Markets are mood rings, and the mood now is one of boredom and fatigue. Even the New York Times led page 1 not with the sequester but with a studied picture of a nun saying goodbye to the retiring pope.