Euro Zone Crisis: Looking For Mr. Euro?
Of course it was a holiday here in the US and financial markets were quieter than usual with Wall Street closed. Thursday the European Central Bank is meeting so they’ll be much to report — still, Wednesday saw plenty of activity.
Talk floated around (reported in French newspaper Le Figaro) that Germany is wanting to create a finance minister with their own fiscal powers (to raise taxes and control spending) for the euro zone (“Mr. Euro,” some have been calling such an official). But German Chancellor Angela Merkel’s spokesman has denied this.
The euro itself fell to a new daily low against the dollar, to $1.252.
Merkel and Monti Meet in Rome
For the first time since last week’s European Union summit meeting at which Italian Prime Minister Mario Monti won significant concessions from Merkel, the two met for talks in Rome in which the focus seemed to be “sticking together, despite it all.” Merkel praised the economic reforms Monti has introduced and said that Germany and Italy would face the euro zone problems “together.” Monti spoke of the need for individual countries needing to do their “homework” while emphasizing that “solutions at the European level” are necessary. (The Guardian posts a “spot the bailout” moment.)
Lagarde, Her Moods and Greece
Officials from the “troika,” the International Monetary Fund (IMF), the European Central Bank and the European commission started talks in Athens with officials in the new Greek government. IMF director Christine Lagarde has indicated that she is “not in the mood” to renegotiate the terms of Greece’s bailout agreement. As she said to CNBC: “I’m not in a negotiations or renegotiations mood at all. We are in a fact-finding mood. I’m sure they will have excellent numbers to show in various directions.”
Actually, the word is that the Greek government is behind in implementing the measures agreed upon in March (no word yet about how that might be affecting Lagarde’s mood).
In France, Austerity Socialist-Style
As part of President François Hollande’s plan to lower France’s deficit to 4.5 percent (from 5.2 percent in 2011), the French government announced 7.2 billion euros in new taxes, a “tax-based retrenchment.” Almost half of the revenue will come from taxes on large companies (1.1 billion euros on large banks and energy firms) and on those with incomes over 1.3 million euros (generating about 2.3 million euros).
It is a strategy to that can be described as “austerity with a strongly socialist flavour,” says Nicholas Spiro of Spiro Sovereign Strategy. The challenge for Hollande will be to put so much of the burden on large companies and the rich, especially as France’s public sector accounts for 56 percent of its gross domestic product.
Barcelona Bourse Protest; Bankia Fraud Case
In Spain, retirees protested at the Barcelona Stock Exchange, saying that the Spanish banking sector had tricked them into making risky investments, as Barbaby Phillips of Al-Jazeera tweeted. No wonder that public anger against the financial sector is growing in Spain: A fraud case has been opened against former executives at Bankia, which required a bailout in May.
Cyprus and Ireland: Of Bailouts and Joblessness
Representatives of the troika also visited Cyprus to discuss plans for a bailout. While it was originally thought that Cyprus would need a 10 billion euro bailout, there are now reports that it may need just that to repair its banks.
Unemployment is up in Ireland to 14.9 percent, way above the 11.1 percent average in the euro zone.
If you’ve read this far, you will not be surprised to hear that many analysts think the euro zone’s problems have simply become too great to solve. Nonetheless, in a report released on Tuesday, Standard’s & Poor’s said there could be some “relief” from the economic crisis in sight after the agreements reached on June 29th at the euro zone summit. We shall see.
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Photo by fotografar