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Reuters blog archive
from John Lloyd:
The European Union’s unending quandary
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.
Those who have been most enthusiastic for the union now proclaim that it is in grave danger. In an interview earlier this month the financier and philanthropist George Soros said European leaders, in trying to find exit routes from the crisis, have “generated political dynamics that are leading toward the EU’s disintegration.”
“Euro-skepticism” – Euro-fury is more like it – has grown. A survey by the pro-EU European Council on Foreign Relations (ECFR) shows that:
from John Lloyd:
The Italians have caste their lot
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:
Beppe Grillo’s anti-disappointment party
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:
The Cyprus takeaway: More phony crises to come
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:
The black swan sequester
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.
from John Lloyd:
Italy elects the impossible
In a parliamentary election this week, a majority of Italian voters – some 60 percent – chose parties that even a cursory glance could tell had no coherent idea of how to run an advanced and complex state (let alone Italy). Forty percent voted for two groups that have a recognizably sensible approach to governance, the largest of which is mainly made up of the Democratic Party, heirs to the former Communist Party of Italy. In one of the smaller ironies of the election, these heirs of an anti-capitalist, anti parliamentary revolutionary ideology were regarded, especially by investors, bankers and politicians of both the center-right and center-left, as Italy’s greatest hope for constitutional and market stability.
Just under 30 percent of the vote went to the coalition put together by Silvio Berlusconi, a man not exactly proven at being able to govern Italy well. He is yesterday’s but also tomorrow’s man, who saw his run for office – once regarded as something of a joke – embraced as he promised to return, in cash, citizens’ payments of a property tax for which his party had voted; asked a young woman how often she climaxed; and remarked, on Holocaust Remembrance Day, that former dictator Benito Mussolini, whose racial laws condemned thousands of Italian Jews to concentration camps and death, had done some good things in his time. He didn't win, but nearly did; which means he remains a major power in the land.
from The Edgy Optimist:
Another ill-advised rush towards Euro-pessimism
After a pleasant lull over the past six months, panic over the fate of Europe has flared once again. Just weeks ago the elites of Davos exuded confidence that the crisis had passed; the events of the past weeks showed how ephemeral such certainty can be.
But the easy resumption of dark prognostications is just that: easy. The siren call of Euro-pessimism should be ignored. It was wrong in 2010, and it will be wrong now. Europe faces hard years with no clear path, but that is not the same as dissolution and chaos.
from John Lloyd:
The vulnerability of the European elite
Storms in the Mediterranean, calmed in the latter half of last year, now whip up again. Greece’s woes hardly surface in the rest of the world now, but they’re deep and the people remain restive. Seamen struck last week over unpaid wages and extended the strike this past Sunday. The strike cuts off the many islands around the country, and limits exports and imports. For a country so defined by the sea and shipping, it takes on an iconic quality. A 24-hour general strike has been called for Feb. 20: Golden Dawn, the far-right party that targets immigrants and that stands third in the polls, held a thousands-strong rally in Athens on Saturday. No one can say whether the lid will stay on until matters improve – or, indeed, if matters will improve.
Greece’s recent history makes its troubles largely discounted internationally. But along the world’s most famed stretch of water, from which both European and Middle Eastern civilizations drew their inspiration, is Spain, a much larger economy, a weightier state, one whose Spexit could not be contemplated, which is why its failing banks received special care and attention from the European Central Bank to stay in business.
from John Lloyd:
Britain: The annoying European
Truly, Britain is not just a bad European, but a very annoying one. David Cameron half-admitted as much in his speech in Davos Wednesday, when he quipped, “frustrated as [our European partners] no doubt are by Britain’s attitude.”
The U.K. joined the European Union late, spending more than a decade after the end of the World War II arrogantly believing that Europe was too small for it. When it did join under a Conservative government, the next Labour government under Harold Wilson demanded a renegotiation and a referendum on membership – which produced a fairly convincing yes.
from Anatole Kaletsky:
David Cameron pushes his EU luck
Editor's note: After this column was published, Cameron announced he would be delaying his speech in Amsterdam due to the hostage crisis in Algeria.
Some think the prospect impossible. Many think the outcome inevitable. Most think the question irrelevant.
