Global News Journal

Europe can’t put out the blaze

If the world thought that Europe’s finance ministers were running in to put out the blaze spreading through Athens and Rome this week, it might come as a surprise to learn they still don’t agree on the size of the fire or how to deal with it.

Any training course will tell you that if a small fire isn’t tackled quickly, it could make things a lot worse. The Greek crisis is like a small electrical fire that has grown into a dangerous inferno now threatening to gut Italy.

But ministers meeting in Brussels have clearly not been on any fire extinguisher training courses lately — they don’t know their water from their foam and their dry powder. In fact, they appear to be pouring oil on the fire.

Belgium’s Finance Minister Didier Reynders says it is best to try to smother the blaze with a small cloth soaked in a chemical called a financial transaction tax, while Sweden’s Anders Borg and Austria’s Maria Fekter say they can’t spare any of their CO2 extinguishers.

“Italy can achieve a lot from its own doing,” Fekter told reporters who were watching the fire grow closer. Borg, Fekter and others are sure the Italians in the burning building down the street will be able to sort things out themselves.

Spain’s Elena Salgado is meanwhile clearly upset that the smoke from that fire is billowing into her garden, but France’s Francois Baroin says there was no need to reach for a fire hose: “Tout va bien” (Everything’s going well), he said, wiping his brow from the heat. A combustible mix of hot air and faulty wiring seem to be one assessment of the causes of the euro zone flames, which no one is really willing to consider. But as the sound of emergency sirens grows louder, it may be time to remove the safety pin from the extinguisher marked “European Central Bank” — it may be the only way to remove all the oxygen feeding the fire.

Half time at the euro zone cup final

Covering a summit of European leaders is a bit like covering a soccer match with no ticket for the stadium and no live TV broadcast to watch. The only way you have an idea of the scoreline is from the groans and cheers from inside the ground.

With EU leaders meeting on Brussels on Sunday and again on Wednesday to try to resolve the region’s debt crisis, the emergency back-to-back summits look like a game of two halves.

A European Commission spokeswoman said as much on Monday, trying to explain why there had been no major announcements so far on solving the debt crisis: leaders had gone in for half time.

So who is playing whom? “Euro zone versus financial markets” would seem to fit the bill, although mostly it feels it is France against Germany, with European Council President Herman Van Rompuy the referee, and French President Nicolas Sarkozy getting caught out by Germany’s off-side trap every time.

Even from outside the stadium, you can hear the adulation from the Finnish and Dutch fans when they see coach Angela Merkel on the touchline, although some Greeks are angry she won’t pay for more first aid for their injured players.

The euro team has become infamous for own goals of late and the pressure is on to avoid regulation.

So at the second half on Wednesday, the euro squad will come back out onto the field to an impatient crowd and needing to win 3-0 to be certain of victory.

from Reuters Investigates:

China’s rebalancing act puts consumer to the fore

Wal-Mart, the world's largest retailer, now has 189 stories in China, according to its website. Soon it will have many more.  The U.S. chain has announced plans to open a series of "compact hypermarkets", using a bare-bones model developed in Latin America, the Financial Times said.

Wal-Mart stores are a bit different than the one's you might find in, say, Little Rock Arkansas. They sell live toads and turtles for one thing, The Economist reported. But they also sell the appliances, gadgets, and housewares that Wal-Mart stores merchandise everywhere.

And business is booming. Third-quarters sales in China soared 15.2 percent from a year earlier, according to the Financial Times story, compared with a paltry 1.4 percent inthe United States.

China's consumption has been growing. Quite fast, in fact. Yet it still acounts for just a third of GDP, compared with around 60 percent in Europe and about 70 percentin the United States. But that is starting to fundamentally change. A Reuters Special Report by Alan Wheatley, "The Chinese Consumer Awakens" notes that wages are rising fast. People are moving into new cities in China's vast interior, and manufacturers and retailers are following them. Call it China's great rebalancing act, as the government tries to promote more consumption and rely less on cheap exports from "the workshop of the world" for future growth.

Timothy Geithner certainly hopes to see this. The U.S. Treasury Secretary is counting on hundreds of millions of Chinese to spend more and save less. That way, Chinese factories would produce more for domestic consumption and less for export, helping to narrow the trade imbalances that are destabilizing the global economy.

Photo caption: Chinese vegetable vendor sleeping in open air market in Changzhi, Shanxi province. REUTERS/stringer

from Tales from the Trail:

Green energy aspirations for Obama’s India visit

When Barack Obama heads for India next month, he'll be carrying a heavy policy agenda -- questions over the handling of nuclear material, the outsourcing of U.S. jobs and India's status as a growing economic power, along with regional relations with Pakistan and Afghanistan. But Rajendra Pachauri, the Nobel Peace laureate who heads the U.N. Intergovernmental Panel on Climate Change, hopes the U.S. president has time to focus on clean energy too.

Even as Pachauri and the U.N. panel evolve -- and as Pachauri himself weathers pressure from some quarters to resign -- he urged Obama to work on U.S.-India projects that he said would enhance global energy security.

Given India's red-hot economic growth rate -- 8 or 9 percent a year, Pachauri told reporters during a telephone briefing -- he said it makes sense for the United States to work with India to head off an expected soaring demand for fossil fuels.

Over the next two decades, Pachauri said, "If we continue on a business-as-usual path, India will be importing something like 750 million tons (that's about 5.25 million barrels) of oil a year ... and possibly over 1,000 million tons of coal. So I think India has to make some very radical shifts and bring about a movement towards cleaner energy technology."

While the two countries have launched a few initial programs in this area, Pachauri acknowledged that "nothing of great substance has been achieved so far." Obama's passage to India could change that, he said on the call, which was set up by the environmental group Natural Resources Defense Council.

Areas ripe for cooperation include collaborative research and development in new areas of energy technology, as well as "a much more liberal approach" to investments in clean energy technology, Pachauri said.

Low interest financing for Indian clean energy projects, including large-scale solar projects in the Indian states of Rajasthan and Gujarat, would also be welcome, he said.

from India Insight:

Going global in India’s chaotic way

India is globalising, but not the way much of the world wants.

That rather contradictory thought nagged at me one morning during the chaotic Commonwealth Games here in New Delhi.

On the road to the media venue's gate, I trudged past a squatter's family living in a tarpaulin. The mother was helping her son pee on my left. Rubbish, the smelly, sickly kind, lay to my right. My shoes sunk in mud from an unfinished pavement.

Hardly the stuff of a showcase international event meant to rival China. But after four years in India, the scene appeared normal. So was news during the Games that stocks had hit a near three-year high and that the Economist had predicted India's economy would soon outpace China.

For the umpteenth time, a centuries-old history bubbled under the surface of this emerging global power, a pressure cooker of India's own eccentricities and ills that seem to avoid blowing up, despite straining at the seams.

Indian history is littered with the mistaken predictions of sceptical foreign correspondents who have underestimated the ability of this country, with one sixth of humanity, to confound its critics despite massive social, communal and ethnic problems.

from Reuters Investigates:

In case you missed them

Just because it was summer, doesn't mean we weren't busy here at Reuters. Here are a few of our recent special reports that you might have missed.

Tracking Iran's nuclear money trail to Turkey. U.N. correspondent Lou Charbonneau -- who used to cover the IAEA for Reuters --  followed the money to Turkey where an Iranian bank under U.S. and EU sanctions is operating freely. Nice to see the New York Times follow up on this today, and the Washington Post also quizzed Turkey's president about it.

Blue-collar, unemployed and seeing red -- Chicago correspondent James Kelleher went on the road for this story about the long-term unemployed and what that means for Obama and the Democrats at November's midterm elections.

Even though he's been forced to move back in with his parents and has virtually no income, Stevenson opposes Obama's proposal to let some tax cuts for the wealthy, dating back to George W. Bush's presidency, expire at year's end in order to raise revenue and reduce the deficit. 

"How is more people, keeping more of the money they earn, bad for the economy?" he said. "The answer is -- it's not."   

Acronym soup swamps Malaysia reform drive

Malaysia’s Prime Minister Najib Razak says he has embarked on a series of radical economic reforms. In reality it feels as if he has unleashed a barrage of incomprehensible acronyms on the unsuspecting public of this Southeast Asian nation.

The charge for economic reform is being led by the snappily named PEMANDU. As well as being the Malay word for “driver” it stands for the government’s Performance Management and Delivery Unit.

PEMANDU is in charge of formulating and implementing NKRAs (National Key Result Areas), MKRAs (Ministerial Key Result Areas) and getting “Big Results Fast”, according to its website, although it singularly failed to win political backing for a radical revamp of Malaysia’s costly subsidy regime.

It is also helping to formulate the 10th Malaysia Plan, 10MP for those in the know, a communist-era sounding 5-year plan that aims to help lift this middle income country to developed nation status by 2020.

PEMANDU is part of the GTP, the Government Transformation Programme, which also involves the SITF (Special Implementation Task Force). Throw in the NKEAs (National Key Economic Areas), another thinktank known as the EPU (Economic Planning Unit) and you haven’t reached the end of the alphabet spaghetti dreamed up by Malaysia’s civil servants…. There’s still the ETP. the NEP (sometimes good, sometimes bad) and the NEM (New Economic Model).  

To be fair to Malaysia, it is not the only country in the world that is wallowing in economic acronyms, the U.S. gave the world TARP, a $700 billion bank bailout programme, and the even more mind-numbing ABCP MMMFLF   (don’t ask), but it is fair to ask what Malaysians have got from all of this.

Germany’s king of the ‘Sommerloch’ silly season

But now — with the big cats out of town — Bruederele has turned into mighty mouse. He has played the German media like a fiddle, floating one trial balloon after another with a near daily deluge of newspaper interviews. With little else to write about, German correspondents are filling their columns with Bruederle.   “Koenig des Sommerlochs” (King of the summer hole) was the headline in Stern magzine’s website on Monday after a fresh batch of Bruederle proposals over the weekend. “No one has jumped into the Sommerloch with as much vigour as Bruederle,” wrote Hans Peter Schuetz of Stern magazine. “But, let’s be honest about this, Bruederle is helping journalists like me get through the Sommerloch.”   Like with most Sommerloch proposals, Bruederle’s will likely not get anywhere close to becoming law. And Bruederle knows that. He also knows his ideas will only cause tensions in the ruling coalition anger Merkel and almost everyone else in her Christian Democrats — and many of her deputies have already rejected his suggestions. But he also knows the publicity could help him raise his profile a bit.   Bruederle first said the government should scrap its 2009 promise for a guaranteed minimum pension level, an idea widely picked up in the German media for a few hours one day last week. It was summarily rejected by Merkel’s party. Yet that didn’t stop Bruederle. A few days later, in another newspaper interview, he suggested relaxing rules to allow more foreigners into Germany to counter a looming labour shortage of skilled labour, comments that filled airwaves for a few more glorious hours.   And then Bruederle criticised Merkel’s party, the coalition partners, for not having enough enthusiasm about reforms — just a few weeks after party leaders had promised to stop that very same sort of sniping that had sent the government plunging to record low levels in opinion polls. On Monday, Bruederle was at it again with a new banking proposal.   “Bruederle is doing his best to fill the Sommerloch,” wrote Sascha Raabe in the Frankfurter Rundschau newspaper.  But he attacked Bruederle as a “colourless minister with an addiction to headlines”.  He pointed out, for instance, that Bruederle’s ideas on cutting pensions actually contradicted the position of his own ministry, which views the steady pension levels as an important pillar of economic growth. “If Bruederle had only read the position of his own ministry instead of frightening millions of pensioners,” Raabe wrote. “Maybe it’s time for Bruederle to retire himself.”

Angela Merkel’s “read my lips” moment

    Angela Merkel has already abandoned plans to pursue billions of euros in tax cuts next year — the central policy pledge of her 2009 election campaign and main plank of her 7-month-old coalition agreement with the Free Democrats.

    But now her uneasy government looks ready to go one step further and raise value-added tax on certain products which benefit from a reduced rate to help it consolidate the budget.

    This is what Merkel had to say about such a move in an interview with N24 television in June 2009, in the midst of the election campaign: “There is absolutely no need to worry about that, it won’t happen. In the midst of an economic crisis it is absurd to even discuss these questions.”

    She told top-selling daily Bild that same week: “With me, there will be no increase in the next legislative period, neither of the full, nor of the reduced rate of value-added tax.”

    If her government does decide to raise VAT rates — it will meet this weekend to try to forge a consensus on fiscal plans — Merkel can and will claim that underlying economic conditions have changed since she uttered those seemingly definitive words nearly a year ago.

    The Greek crisis has spooked leaders across the euro zone, and many are scrambling to consolidate their budgets to avoid suffering the same fate as Athens, which was forced to go cap in hand to the EU and IMF.

    But Merkel’s about-face is different and more serious, especially for a leader who came into office in 2005 vowing to put an end to the “false promises” of previous German governments.

Merkel’s 2nd term off to a bumpy start

After spending the last four years trapped in a loveless grand coalition with the centre-left Social Democrats, Germany’s conservative chancellor Angela Merkel is looking forward to happier, more productive days in a cosy new centre-right coalition with her preferred partners, the pro-business Free Democrats.

However, rather than smooth sailing with her new, more like-minded coalition partners, it’s turned out to be one turf battle after another between Merkel’s conservative Christian Democrats and their Bavarian sister party, the Christian Social Union, on the one side and the Free Democrats on the other.

Weeks of unseemly arguing over tax cuts, healthcare, conscription and other issues in coalition talks has earned the new coalition the nickname Fehlstart” (false start) in the German media.

That awkward beginning was confirmed in a most embarrassing fashion for Merkel on Wednesday when at least nine deputies in her own coalition withheld their support.

Merkel was easily re-elected chancellor with 323 votes in the 622-seat parliament, 11 more than she needed. The nine deputies who either abstained or voted against her in the secret ballot served as a tangible reminder that the CDU/CSU and FDP might not be the marriage made in heaven some had expected. It was a political kick in the shins that Merkel did not need.

Four years ago she got 397 of the 612 votes, 51 less than the CDU/CSU and SPD had together. That, however, was not surprising because the grand coalition had an enormous majority in parliament and because the two camps had long been such arch enemies. This time around it was nine deputies in her own preferred coalition who stabbed her in the back. Is that a harbinger of things to come?

“Let’s try forget about this,” said Volker Kauder, CDU parliamentary floor leader. Several conservatives are already picking holes in the coalition deal, which is only a few days old. Kauder said he was sure all the CDU/CSU deputies voted for Merkel. The FDP’s parliamentary floor leader, Birgit Homburger, said the same of her party.