Europe - Economic Data & News 13 (Dec 16 - Aug 20)

Italy

Postby behappyalways » Sat Jul 13, 2019 9:56 am

(Without EU, Italy would not definitely not be able to borrow at present rates. Would have been bankrupt by now)

The most dangerous man in Europe
How to defuse the threat that Matteo Salvini poses to the euro
There needs to be a deal between the European Commission and Italy


ON JULY 8TH euro-zone watchers breathed a sigh of relief. The zone’s 19 finance ministers backed the European Commission’s decision that Italy should not be penalised for allowing its public-debt burden to rise in 2018 in violation of the EU’s fiscal rules.

Thanks to savings of 0.4% of GDP for the current year, cobbled together by Italy’s governing coalition, a damaging confrontation seems to have been resolved.

In truth, however, it has merely been postponed. The grim reality of Italy’s public finances remains unchanged. Its deficit is on course to exceed the EU’s threshold of 3% of GDP in 2020, its debt is sky high and, worst of all, it is plagued by a persistent absence of growth. If Italy is to dispel the ever-present air of crisis, a much more far-sighted deal will be needed.

Since the euro was introduced, over 20 years ago, Italy has steadily fallen behind the rest of Europe. The average citizen in Germany, France and Spain is a fifth better off, in real terms, than in 1999; incomes in eastern Europe have more than doubled. But the average Italian is no richer.

Dissatisfaction at this record has been skilfully converted into votes by Italy’s government, an unwieldy coalition between the Northern League and the Five Star Movement. The League’s leader, Matteo Salvini, has been able to whip up anger against two main enemies: the EU, which he says is a “gulag” that imposes wretchedness, and the inflow of migrants from Libya, which he also blames in part on the EU.

Six years ago the League managed only 4% at the ballot box; today it is the country’s most popular party. Thus Mr Salvini has used the politics of grievance to make himself the most powerful man in Italy (see article). He is not yet prime minister, but he surely intends to be.

This is a recipe for continual confrontation with Brussels. And that, in turn, is the EU’s most alarming problem. Italy’s public debt is a colossal €2.3trn ($2.6trn), or 132% of GDP. The country is too big to bail out. Its failure to grow makes its finances—and the banks exposed to them—fragile. A row over its budget last year unsettled markets before the coalition made hasty concessions. The latest uneasy truce is unlikely to last.

The Italian coalition says the EU’s fiscal rules choke off demand-led growth. Mr Salvini has promised huge tax cuts. Luigi Di Maio, his coalition partner, wants more welfare. Brussels says the problem is structural; anyhow, it has already granted Italy over €30bn of extra fiscal space since 2015, nearly 2% of annual GDP. This vexes northerners, who want the rules enforced.

Neither side is entirely in the right. Italy’s economy, hit by slowing global trade, is unlikely to be as near its potential as the commission reckons. But the coalition’s attempt at stimulus last year backfired when markets took fright.

Though interest rates have since come down, Italy’s borrowing costs, once near those of Spain, are now within spitting distance of Greek yields, which have fallen with the prospect of a new centre-right government.

Many of the reasons for Italy’s bleak growth prospects date back decades. Courts operate at a glacial pace; bureaucracy is labyrinthine. The services sector is sheltered from competition. Countrywide pay agreements keep wages too high in the south, discouraging formal employment there.

Far from tackling these ingrained problems, the government has ignored them and instead undone unpopular but necessary reforms to the pensions system. In light of all this, last-minute concessions to the EU’s fiscal rules solve nothing. Confrontation is merely deferred until the next time the commission reviews Italy’s books. The threat of an accidental bond crisis never fully recedes.

Instead of haggling over tenths of a percentage point, the commission should enter negotiations over next year’s budget aiming for a more ambitious agreement. It should be flexible over public spending, on the condition that Italy enacts growth-enhancing reforms. Those reforms are more likely to work if their implementation is supported by fiscal easing. The public-debt ratio would then fall more quickly.

Such a deal offers something to both sides. Italy’s populists may ignore reprimands from Eurocrats, but they do worry about the markets. If they were to accept some curbs on their spending, they would regain some of their credibility with investors, and bank the electoral benefits of higher economic growth to boot.

For Brussels, a deal along these lines would defuse the long-term threat that Italy poses to European financial stability. Eurocrats should remember that, as Italy falls further behind, the resentment that has fuelled Mr Salvini’s alarming rise will only grow.

Source: The Economist
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Re: Europe - Economic Data & News 13 (Dec 16 - Dec 19)

Postby behappyalways » Mon Jul 15, 2019 3:39 pm

2019.07.13【文茜世界周報】德國震撼影片 模擬溺斃難民死前最後一刻
https://www.youtube.com/watch?v=1Buf7Ao ... AU&index=7
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Re: Europe - Economic Data & News 13 (Dec 16 - Dec 19)

Postby behappyalways » Sun Jul 21, 2019 9:30 am

2019.07.14【文茜世界財經週報】希臘變天!傳統建制派重返執政舞台矢言改革
https://www.youtube.com/watch?v=jtadhsz ... xu&index=3
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Re: Europe - Economic Data & News 13 (Dec 16 - Dec 19)

Postby behappyalways » Wed Jul 24, 2019 5:48 pm

Eurozone manufacturing activity worst in almost seven years — PMI
https://www.google.com/amp/s/mobile.reu ... SL8N24P274
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Re: Europe - Economic Data & News 13 (Dec 16 - Dec 19)

Postby behappyalways » Fri Aug 09, 2019 5:28 pm

Italy government: Salvini calls for snap election
https://www.bbc.com/news/world-europe-49287219
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Re: Europe - Economic Data & News 13 (Dec 16 - Dec 19)

Postby winston » Tue Aug 13, 2019 7:33 am

The temperature is rising on the populist movement in Europe

The new U.K. leader has already put a hard deadline of October 31 for the U.K. to leave the EU--putting the EU under the gun to make concessions on a deal or take the risk of a "no-deal" Brexit, which could entice European Monetary Union constituents to leave.

On that note, the Italian government (the second biggest debtor in Europe) is crumbling, with the prospect that new anti-EU leadership could be coming. That would reintroduce the risk of Italy leaving the euro and inflating away its debt load.

Source: Forbes
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Re: Europe - Economic Data & News 13 (Dec 16 - Dec 19)

Postby behappyalways » Sun Aug 18, 2019 1:26 pm

Becalmed
Germany’s economy is now shrinking
Will the government open the spending taps? Probably not.

THE MOOD music had grown so ominous that the shock was somewhat muted. After weeks of dismal survey and industrial-output numbers, it was little surprise to learn on August 14th that Germany’s GDP had contracted by 0.1% in the second quarter of 2019 compared with the previous three months.

The economy has been essentially flat over the past year. Household spending, bolstered by wage growth in a tight labour market, has held up but the slump in manufacturing, which represents over one-fifth of output, is deepening. Companies are cutting work hours and issuing profit warnings. Many analysts think Germany is heading for outright recession.

This has triggered two debates. First, are Germany’s woes home-made or imported? A year-on-year 8% slump in exports appears to be the main driver of the slowdown. The uncertainty spawned by the US-China trade spat and the prospect of a no-deal Brexit are largely out of the hands of Angela Merkel’s government.

Demand for German products in China is slowing. Germany will be badly hurt if Donald Trump follows through on his threat to whack tariffs on car imports later this year.

Yet this is only half the story. Analysts have long urged Germany to wean itself off its export-dependence. Despite a mild rebalancing, the current-account surplus still stands at a whopping 7.4% of GDP in the world’s fourth-largest economy.

Coddled by government, the automotive industry, which runs a larger trade surplus than any other export sector, has been slow to adjust to the rise of electric and autonomous cars.

Politicians, from Mrs Merkel down, have done too little to ready an ageing society for challenges like digitisation. Every euro-zone economy is buffeted by headwinds, but so far Germany’s is the only one to have contracted in the past quarter.

A second discussion is raging over the German government’s steadfast aversion to borrowing. The “debt brake”, enshrined in the constitution since 2009, rules out borrowing to finance the structural deficit beyond 0.35% of GDP.

A related political commitment, the schwarze Null (“black zero”), pledges a balanced budget for current spending. This has ensured low debt and, since 2014, a surplus that last year stood at 1.7% of GDP, or €58bn ($66bn).

Germany has thus been able to raise spending on infrastructure, social security and defence without extra borrowing. Yet as the euro zone’s largest economy grinds to a halt, the debate over whether to open the spigots further is gathering pace.

So far the government remains unmoved. But Sebastian Dullien, director of the IMK research institute in Düsseldorf, says the pressure will increase. Reuters recently reported that a climate-change package due next month might include a pledge to issue fresh debt.

This week Mrs Merkel said her commitment to a balanced budget remains intact, but added: “We will react depending on the situation.” Inside the finance ministry a lively debate has begun over how and whether to raise investment—although the minister himself, Olaf Scholz, remains cautious, to the disappointment of many in his Social Democratic Party (the junior coalition partner to Mrs Merkel’s Christian Democrats).

Outside government the Greens are urging a massive boost to investment in climate protection. The government’s budgetary rules are “voodoo fiscal policy”, said Robert Habeck, the party’s co-leader, this week.

A short-term bump in spending, as Mrs Merkel argues, would rub up against bottlenecks in areas like construction. Nor would it help remove the pall of uncertainty facing German firms. So some analysts want a credible, possibly cross-party, commitment to establish a fund that would disburse several hundred billion euros over the next decade.

Possible targets include transport infrastructure, broadband networks, house building and help for local governments struggling under debt loads. Other ideas include cutting taxes on Germany’s army of low-paid workers or its corporations, or introducing incentives for climate-friendly policies like retrofitting buildings and clean fuel.

There could hardly be a better time. Yields on 30-year government bonds are negative, meaning in effect that investors pay the government for the privilege of lending it money. Even if the European Central Bank cuts rates further next month, the monetary toolbox is nearly exhausted.

Tax cuts and, in time, investment in infrastructure would help rebalance the German economy from its exports-first approach. Mrs Merkel, now in the twilight of her chancellorship, has U-turned before, notes Mr Dullien. But the headwinds may need to blow a little harder first.

Source: The Economist
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Re: Europe - Economic Data & News 13 (Dec 16 - Dec 19)

Postby behappyalways » Tue Aug 20, 2019 6:00 pm

Italy's Di Maio signals imminent end of government, thanks Conte
https://www.reuters.com/article/us-ital ... VA0TE?il=0
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Re: Europe - Economic Data & News 13 (Dec 16 - Dec 19)

Postby behappyalways » Sat Aug 24, 2019 4:32 pm

2019.08.18【文茜世界財經週報】薩爾維尼海灘實境秀 引爆義大利倒閣危機
https://www.youtube.com/watch?v=zys32xZ ... xu&index=3

Salvini’s gamble

Matteo Salvini hopes elections will make him Italy’s prime minister
Opponents of the populist will try to form a coalition to stop him


IT SEEMS AT times that Italy’s role is to terrify the euro zone’s other member states. In 2011 the refusal of its then prime minister, Silvio Berlusconi, to tackle the euro crisis drove the single currency to the brink of collapse. Since then the country has had six governments and as many market-spooking crises.

Its latest government fell apart on August 20th, when Giuseppe Conte resigned as prime minister, ending a rickety 14-month coalition between two populist, Eurosceptic parties: the anti-establishment Five Star Movement (M5S) and the nativist Northern League.

The previous week Matteo Salvini, the League’s leader, had withdrawn confidence in the government. He wants the top job for himself. How alarmed should Italy’s partners be?

Not very, thought investors. The following day, as President Sergio Mattarella began consulting party leaders on the way forward, the yield gap between Italian and German government bonds (an indicator of market concern) shrank to its narrowest since the end of July.

Bank shares rose, as did the Milan bourse as a whole. That reflected expectations that Mr Mattarella would not call an election, but would instead broker a coalition deal between the M5S and the centre-left Democratic Party (PD). With the support of some independents, they could muster slim majorities in both houses of parliament.

Nicola Zingaretti, the leader of the PD, fuelled the optimism. After weeks of apparent resistance to the idea of a coalition with the M5S, he said his party had given him a mandate to negotiate a deal.

Mr Zingaretti set five conditions: allegiance to the European Union; environmentally sustainable development; changing immigration policy to get Europe involved; more economic redistribution; and fully accepting parliamentary democracy. Curiously, only the last point is likely to be difficult for the Five Stars. The party was founded on a commitment to let citizens vote directly on legislation via the internet (though in practice it has let that idea slide).
Other issues may prove more troublesome.

The PD are economic Keynesians who favour big infrastructure schemes; the Five Stars often oppose them on environmental grounds. Mr Zingaretti’s demand for a clean break with the previous government may mean he would veto a cabinet post for the M5S’s leader, Luigi Di Maio, who served as deputy prime minister.

And there is suspicion that Mr Zingaretti may not work hard to avoid an election: the PD has won ground in the polls since the previous election and now leads the M5S.

The parties do not have much time. Italy is rather slow to dissolve a parliament and convene a new one; in 2018 it took almost three months. If an election is to be called this autumn, it must happen soon. Parliament needs to pass a budget by January. That will be especially tricky this year. At least €23bn ($25bn) in spending cuts or new taxes are needed to meet the EU’s fiscal rules and shrink the state’s immense debt, equivalent to 132% of GDP.

Otherwise. Italy will have to push ahead with plans to impose a whopping value-added-tax increase, which could kill off the feeble economic recovery.

Ironically, European Commission officials would prefer a coalition that includes Forza Italia, the centre-right party of Mr Berlusconi. The M5S favours higher welfare spending, and it is felt in Brussels that an “Ursula government” (so named because the PD, the M5S and Forza Italia all backed Ursula von der Leyen’s bid for the Commission presidency) would dilute its influence. But the anti-corruption M5S shuns Mr Berlusconi, a convicted tax fraudster.

For Eurocrats, as for markets, the most daunting scenario is an election. Control of the Italian parliament can be secured with around 40% of the vote. Polls suggest the League could take 37%. The Brothers of Italy, a party of former neo-fascists, might get 6%. That could yield an uncompromisingly right-wing, nativist, Eurosceptic government with Mr Salvini at its helm.

Although EU officials see the League’s economic policies as marginally better than those of the M5S, it is “considered worse for everything else”, says Mujtaba Rahman of the Eurasia Group, a consultancy. The League opposes humanitarian efforts to rescue migrants crossing the Mediterranean. It is close to Russia (one of Mr Salvini’s associates was recently caught on tape discussing funding from Kremlin-friendly oil interests). And it is opposed to the euro zone’s 3% cap on budget deficits.

Mr Salvini has promised that, if elected, he will introduce big tax cuts in an attempt to revive Italy’s stagnant growth. With Europe’s economy slowing, a no-deal Brexit looming and a new commission just entering office, a victory for the League could be a perfect storm for the EU. Markets may be sanguine, but Italy’s politics could yet wreak havoc in the euro zone

Source: The Economist
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Re: Europe - Economic Data & News 13 (Dec 16 - Dec 19)

Postby behappyalways » Sun Sep 01, 2019 2:39 pm

2019.08.25【文茜世界財經週報】衰退警訊瓦解德國迷思 歐元區冀望新領導
https://www.youtube.com/watch?v=xwg5eP7 ... xu&index=2
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