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The Animal Spirits Page: How monetary policy drives foreign policy

The Animal Spirits Page: How monetary policy drives foreign policy.

It should now be evident that America’s foreign policy is to an extent being driven by our banking mess. Again and again, we see Washington, including Wall Street’s handmaiden, the Fed, exporting monetary chaos implicitely in order to weaken the status of potentially competing reserve currencies:

  • Wall Street sent a tsunami of bad AAA-rated mortgage debt to Europe, much to Germany, the locus of power for the Euro (and again, implicit admission of guilt is seen in the apparent fronting of billions of bailout dollars to the European banks by the Fed after the crisis);
  • Washington has apparently fomented or supported a coup in the Ukraine that increases the likelihood of war in Europe dramatically therefore sending the gigantic pools of liquid financial assets in the world scurrying into the greenback and US Treasuries, which the Chinese have stopped gobbling up;
  • the other factor is that the military-industrial complex needs war to get its funding, and when drone-bombing rag-heads can’t provoke a serious attack, destabilizing a former Eastern bloc nation and provoking a somewhat justifiably paranoid Russian leader into military action guarantees at least a shot in the arm of crisis funding.

Russia has repeatedly stated over the past decades that an EU move on the Ukraine crosses a red line. The EU ignored the warning, and with the US’s help and the ire of Ukrainians sick of a corrupt government crossed Putin’s red line. What the Ukrainians want is democracy and relief from their corrupt plutocrats (see previous post’s article by Paul Craig Roberts).

The US has no compelling strategic interest in the Ukraine, or in the Crimea remaining part of the Ukraine. Yes, the Ukraine has been looted by its oligarchs, just as Russia was, and just as the US is being looted by its oligarchs right now; incomes of a majority of American households are falling so the banks can collect on bad debts. It would be nice for people everywhere if they could break the grip of the plutocrats over their livelihoods. In the Ukraine, to substitute debt servitude to Western banks for the domination of the oligarchs would only accelerate the collapse of the EU. And it’s not clear the EU, if it offers help, won’t be ripped off by the oligarchs as well. The new government in the Ukraine has already increased the power of the oligarchs by giving them provinces to rule, so it’s not clear the Western “rescuers” are even able to help solve the fundamental problem at all, and might end up losing their shirts again, as they have in Greece, Portugal, et al.

Until democratic governments around the world become strong enough to counteract the power of the plutocratsby taxing them, both their income and their wealth (as Sweden does) the revolving looting of sovereign governments and demolition of middle classes by the plutocrats and their corporations will continue.

A couple of posts ago I said the scariest thing I’ve heard recently was Catherine Anne Fitts saying what the world needs now is a global debt for equity swap. I should say I generally like Ms. Fitts’ analysis and suspect she may even have misspoken when she made this comment. Such a move would concentrate ownership of the world’s assets sufficiently to create even more of a Plantation Earth than we have currently.

She identified the problem, but not the solution. What the world needs now is a global jubilee, debt forgiveness. The debt that the Fed is shoving under the carpet via QE is what is known in banking circles as “bad debt.” It is loans that never should have been made because they will never be repaid. In honest not crony capitalism such debts come out of the profits (as losses) of the banks that made them. In crony capitalism, with a central bank controlled by the banks, such debts are “paid back” by being monetized and put on the backs of the taxpayers either directly or through inflation.

The austerity programs Europe has put in place so that Wall Street and European banks can be paid back bad debts have destroyed more than one economy and more are probably yet to fall. (The idea promoted ten plus years ago of “convergence” of interest rates in the EU between periphery and core caused me to gag at the time.) Debt slavery to Western banks is not the answer. (China is apparently making similar mistakes; it will be interesting to see what they do with the bad debt. I suspect their strong central government will tell the bankers to go stuff it.) Ms. Fitts suggests that sooner or later the plutocrats will destroy the banks in order to buy them cheap and collect the rents themselves, canny suggestion indeed.

Chaos in the world = a strong dollar. Until it doesn’t. Chaos has a way of being unpredictable.

Capitalism has killed democracy. “Free” markets dominated by monopolies and oligopolies are not what Adam Smith had in mind. It’s time for democracy to be reborn. There are degrees of economic inequality that are simply immoral and destructive and humankind has the right to reject them. When the top 85 families own as much as the bottom 3.5 billion people, as recently reported, we have reached such a point.

Joseph E. Stiglitz argues that bad policies in rich countries, not economic inevitability, have caused most people’s standard of living to decline. – Project Syndicate

Joseph E. Stiglitz argues that bad policies in rich countries, not economic inevitability, have caused most people’s standard of living to decline. – Project Syndicate.

FEB 6, 2014 6

Stagnation by Design

NEW YORK – Soon after the global financial crisis erupted in 2008, I warned that unless the right policies were adopted, Japanese-style malaise – slow growth and near-stagnant incomes for years to come – could set in. While leaders on both sides of the Atlantic claimed that they had learned the lessons of Japan, they promptly proceeded to repeat some of the same mistakes. Now, even a key former United States official, the economist Larry Summers, is warning of secular stagnation.

The basic point that I raised a half-decade ago was that, in a fundamental sense, the US economy was sick even before the crisis: it was only an asset-price bubble, created through lax regulation and low interest rates, that had made the economy seem robust. Beneath the surface, numerous problems were festering: growing inequality; an unmet need for structural reform (moving from a manufacturing-based economy to services and adapting to changing global comparative advantages); persistent global imbalances; and a financial system more attuned to speculating than to making investments that would create jobs, increase productivity, and redeploy surpluses to maximize social returns.

Policymakers’ response to the crisis failed to address these issues; worse, it exacerbated some of them and created new ones – and not just in the US. The result has been increased indebtedness in many countries, as the collapse of GDP undermined government revenues. Moreover, underinvestment in both the public and private sector has created a generation of young people who have spent years idle and increasingly alienated at a point in their lives when they should have been honing their skills and increasing their productivity.

On both sides of the Atlantic, GDP is likely to grow considerably faster this year than in 2013. But, before leaders who embraced austerity policies open the champagne and toast themselves, they should examine where we are and consider the near-irreparable damage that these policies have caused.

Every downturn eventually comes to an end. The mark of a good policy is that it succeeds in making the downturn shallower and shorter than it otherwise would have been. The mark of the austerity policies that many governments embraced is that they made the downturn far deeper and longer than was necessary, with long-lasting consequences.

Real (inflation-adjusted) GDP per capita is lower in most of the North Atlantic than it was in 2007; in Greece, the economy has shrunk by an estimated 23%. Germany, the top-performing European country, has recorded miserly 0.7% average annual growth over the last six years. The US economy is still roughly 15% smaller than it would have been had growth continued even on the moderate pre-crisis trajectory.

But even these numbers do not tell the full story of how bad things are, because GDP is not a good measure of success. Far more relevant is what is happening to household incomes. Median real income in the US is below its level in 1989, a quarter-century ago; median income for full-time male workers is lower now than it was more than 40 years ago.

Some, like the economist Robert Gordon, have suggested that we should adjust to a new reality in which long-term productivity growth will be significantly below what it has been over the past century. Given economists’ miserable record – reflected in the run-up to the crisis – for even three-year predictions, no one should have much confidence in a crystal ball that forecasts decades into the future. But this much seems clear: unless government policies change, we are in for a long period of disappointment.

Markets are not self-correcting. The underlying fundamental problems that I outlined earlier could get worse – and many are. Inequality leads to weak demand; widening inequality weakens demand even more; and, in most countries, including the US, the crisis has only worsened inequality.

The trade surpluses of northern Europe have increased, even as China’s have moderated. Most important, markets have never been very good at achieving structural transformations quickly on their own; the transition from agriculture to manufacturing, for example, was anything but smooth; on the contrary, it was accompanied by significant social dislocation and the Great Depression.

This time is no different, but in some ways it could be worse: the sectors that should be growing, reflecting the needs and desires of citizens, are services like education and health, which traditionally have been publicly financed, and for good reason. But, rather than government facilitating the transition, austerity is inhibiting it.

Malaise is better than a recession, and a recession is better than a depression. But the difficulties that we are facing now are not the result of the inexorable laws of economics, to which we simply must adjust, as we would to a natural disaster, like an earthquake or tsunami. They are not even a kind of penance that we have to pay for past sins – though, to be sure, the neoliberal policies that have prevailed for the past three decades have much to do with our current predicament.

Instead, our current difficulties are the result of flawed policies. There are alternatives. But we will not find them in the self-satisfied complacency of the elites, whose incomes and stock portfolios are once again soaring. Only some people, it seems, must adjust to a permanently lower standard of living. Unfortunately, those people happen to be most people.

Read more at http://www.project-syndicate.org/commentary/joseph-e–stiglitz-argues-that-bad-policies-in-rich-countries–not-economic-inevitability–have-caused-most-people-s-standard-of-living-to-decline#huJ4BlicZg9e2A6X.99

Greece Is Still Bankrupt |

Greece Is Still Bankrupt |.

February 6, 2014 | Author 

A ‘Flood of Good News’

As der Spiegel recently reported, the Greek government is intent on smothering its reluctant creditors with good news (in order to be able to accumulate a reasonable amount of such, the last ‘troika’ assessment has apparently been subject to numerous delays):

“A SPIEGEL report that German Finance Minister Wolfgang Schäuble is considering a third rescue package for Greece has electrified the struggling nation. Athens wants to impress its creditors with a stream of good news. But it still has a long list of unkept promises. New loans are welcome, but don’t ask us for any new austerity measures. This pretty much sums up Athens’ reaction to Germany’s reported willingness to approve further loans to Greece to cover the country’s multi-billion euro projected financing gap in 2015-2016.

Although there was no official reaction to SPIEGEL’s report, published on Monday, government sources say that Berlin’s intentions were known to Prime Minister Antonis Samaras, adding that Germany will not pull the rug from under Greece’s feet, especially with the European election due in May.

But the Greek government has also made clear that it will not accept a new round of measures or a continuation of what are perceived by many in Greece as the asphyxiating and humiliating controls by the troika of European Commission, European Central Bank and International Monetary Fund.

Finance Minister Yannis Stournaras is preparing Greece’s position ahead of the troika’s arrival. With a fresh round of bargaining looming on the new loans, he promised an avalanche of “impressively good news” in the coming days to show that Greece doesn’t need any further belt-tightening. It only needs to press on with its structural reforms, he said.

According to a Greek Finance Ministry official, the good news will include the first increase of retail sales in 43 months, and the first rise in the purchasing managers’ index in 54 months. The “super-weapon” in Stournaras’ arsenal, however, is the hefty 2013 primary budget surplus, now estimated at €1.5 billion, well above the official budget forecast of €812 million.

The same official said the expected good news was the reason why Athens doesn’t want the troika to return earlier to conclude a much-delayed round of inspections that started in the autumn.Stournaras is expected to present Greece’s accomplishments to German officials when he visits Berlin later this week. The final details of his trip are still being worked out. Athens also plans a return to the markets by the end of 2014 in what it believes will be a definitive sign that the Greek economy is out of the woods.

With the leftist opposition alliance Syriza leading most opinion polls, some observers say the Greek government needs to be able to show success soon. Athens was therefore quick to react to the reports about new loans, telling the public it should not fear a new wave of measures.

(emphasis added)

By all accounts SYRIZA would indeed win elections if they were held today – by a solid margin of almost 8% over its nearest rival New Democracy, the party of current prime minister Antonis Samaras. Electoral support for his coalition partner PASOK – for a long time the ruling party in Greece – has all but disappeared. Even the Stalinist KKE is set to grab a bigger share of the vote.

The upcoming European as well as municipal elections in Greece are bound to see SYRIZA winning comfortably. Meanwhile, the coalition’s majority in parliament has shrunk to a mere three MPs. It won’t take much to topple it, hence all the frantic activity described above.

Greetings from Charles Ponzi

So what’s the problem if there are all those good news, including a ‘hefty primary surplus’? As an aside, said surplus is already greedily eyed by various Greek bureaucrats who have suffered salary cuts which they are currently challenging in court. As the WSJ recently reported, a few European finance ministers held a ‘private meeting’ over Greece recently, to which their Greek colleague wasn’t invited. The problem? The month of May:

“Top officials peeled away from colleagues after a gathering of euro-zone finance ministers in Brussels on Monday evening for a private meeting to discuss mounting concerns over Greece’s bailout. Greek Finance Minister Yiannis Stournaras, who was briefing the press in a building across the street at the time, wasn’t invited.

High-level officials from the International Monetary Fund, the European Commission, and the European Central Bank, as well as senior euro-zone officials and the German and French finance ministers were present.

The meeting reflects anxiety that Greece could yet disturb the relative calm in euro-zone financial markets. But the issue is unlikely to come to a head until May when Greece needs to repay some €11 billion ($14.85 billion) of maturing government bonds.

The private meeting, confirmed by several people with direct knowledge of the talks, comes as Athens struggles to meet some of the conditions set by its official creditors for further payouts from bailout funds. The Monday meeting was held to discuss how to press Athens to forge ahead with unpopular reforms to its labor and product markets, and how to scramble together extra cash to cover a shortfall in the country’s financing for the second half of the year that is estimated at €5 billion to €6 billion.The meeting was inconclusive, people familiar with the situation said.

(emphasis added)

An € 11 billion bond repayment and a shortfall of  € 5 to 6 billion? Oh well, that’s why it’s called a “primary surplus” instead of just a “surplus”. “Primary” means it’s not really a surplus – only that it would be one, if not for the debtberg Greece must service. However, if servicing said debtberg costs more than Greece’s government can actually bring in, then its entire debt edifice remains a Ponzi scheme. Only, contrary to other governments that are able to finance their own Ponzi debt schemes in the markets, Greece needs Ponzi financing from elsewhere, or to be precise, from unwilling tax cows residing elsewhere. That is currently the main difference. The problem for all the other States is that it is important that people don’t start thinking too much about the essential Ponzi nature of government debt. If they do, then there might be another debt crisis. After all, nearly the entire euro zone sports a lot more debt today (both absolute and relative to GDP) than at any time during the most severe crisis months. That fact in turn means that the current calm in the markets really hangs by the thinnest of threads, propped up by misplaced confidence alone. Meanwhile, the much-lamented ‘banks-sovereigns doom loop’ has become worse by almost an order of magnitude in countries like Italy and Spain.

On the other hand, selling yet another bailout of Greece to the voters in creditor countries is quite a tall order at this stage, with the eurocracy already being subject to much scorn and revulsion (all of it well deserved).

What to do?


trojan-horse-239x300Helloooo, ‘European partners’ … thinking about me lately?

(Image source: The Web / Author unknown)


Let Us ‘Stipulate For All Times to Come’

Ludwig von Mises once wrote with regard to the inexorably growing mountains of government debt around the world:

“The long-term public and semi-public credit is a foreign and disturbing element in the structure of a market society. Its establishment was a futile attempt to go beyond the limits of human action and to create an orbit of security and eternity removed from the transitoriness and instability of earthly affairs. What an arrogant presumption to borrow and to lend money for ever and ever, to make contracts for eternity, to stipulate for all times to come!”

In the case of Greece, the eurocrats seem to have precisely such an arrogant presumption in mind:

“The next handout to Greece may include extending the maturity on rescue loans to 50 years and cutting the interest rate on some previous aid by 50 basis points, according to two officials with knowledge of discussions being held by European authorities.

The plan, which will be considered by policy makers by May or June, may also include a loan for a package worth between 13 billion euros ($17.6 billion) and 15 billion euros, another official said.Greece, which got 240 billion euros in two bailouts, has previously had its terms eased by the euro zone and International Monetary Fund amid a six-year recession.

“What we can do is to ease debt, which is what we have done before through offering lower interest or extending the maturity of loans,” Dutch Finance Minister Jeroen Dijsselbloem, who heads the group of euro finance chiefs, said yesterday on broadcaster RTLZ. “Those type of measures are possible but under the agreement that commitments from Greece are met.”

(emphasis added)

Good luck with that last one boys. Greece is still the same over-bureaucratized corrupt swamp it was prior to the bailouts. There will be a deep freeze in hell before the ‘commitments are met’.

Since we mentioned the banks earlier, here is the next non-suprise:

“As Greece seeks to meet its aid conditions and unlock more money from its existing bailouts, it’s also looking for ways to make the most of 50 billion euros that was set aside for bank recapitalization. The country had hoped some money might be left over for other financing needs. That now looks less likely because the Greek banks will need more capital, according to an EU official close to the bailout process.”

(emphasis added)

You really couldn’t make this sh*t up.

Conclusion:

This is what happens when unsound debt is artificially propped up instead of being liquidated. Now there is a never-ending drama. Creditors keep throwing good money after bad, into what appears to be a kind of financial black hole – money falls inside, but it looks like it will never come back. Meanwhile, the population of Greece has been so thoroughly ground into the dirt by the crisis that it is prepared to rather vote for Nazis and communists than continue with the situation as is. What a great accomplishment!


broken-euroQuick, this thing still needs some more glue …

(Image source: The Web / Author unknown)

Davos 2014: Larry Summers attacks George Osborne’s austerity programme | Business | theguardian.com

Davos 2014: Larry Summers attacks George Osborne’s austerity programme | Business | theguardian.com.

Larry Summers and George Osborne

Larry Summers, Bank of Japan governor Haruhiko Kuroda and George Osborne. Photograph: Denis Balibouse/Reuters

George Osborne‘s handling of the economy was strongly attacked byLarry Summers as the former US Treasury secretary poured criticism on the UK’s austerity programme, its welfare cuts for poor people and its strategy for preventing a housing bubble.

Summers, a long-running critic of the coalition government, said the chancellor was wrong to blame the eurozone crisis for the weakness of business investment and that governments should be spending more on infrastructure to tackle the threat of “secular stagnation”.

“I see less need to impose cuts on people who are vulnerable in the US context than the chancellor sees in the European context”, Summers said in a session on the future of monetary policy at the World Economic Forum in Davos.

Making it clear that he believed Britain would have done better to follow the US approach in which tackling the budget deficit has been seen as less important than restoring growth, Summers said: “It’s several years since the US exceeded its peak GDP before the crisis – that still hasn’t happened in the UK.”

The chancellor put up a staunch defence of his approach, noting Britain was creating jobs, had sound economic policies and a new system for controlling the City that was the envy of the world. Osborne said businesses had been sitting on their cash while the euro was going through “a near-death experience” but predicted that investment spending was now about to start to rising.

The chancellor responded to Summers’s charge that Britain, unlike the US, had failed to raise national output above its pre-recession levels by saying that the UK had suffered a deeper slump and was more dependent on the financial sector for its growth.

“We did have a much bigger fall in GDP [than in the US], and the impact of the crisis was even harder because our banking sector was a larger share of the economy than in America.

“The great recession in the UK had an even greater effect – and we were one of the worse effected of any of the western economies.”

But Summers, the man once a front-runner to succeed Ben Bernanke at the Federal Reserve responded to Osborne’s claim that the Bank of England had tools to rein in the property market by pointedly rubbishing the initiative.

“I worry about macro-prudential complacency”, Summers said, a reference to the notion that central banks can head off problems before they arise by actions to restrain the animal spirits of lenders.

Noting that policymakers had failed to spot the stock market crash of 1987 and the sub-prime mortgage crisis, Summers said he was unclear about how macro-prudential policies would work and said tougher measures were needed to make markets safe from “ignorance and error”.

Osborne said he agreed with the need for more infrastructure spending, but added there was no “free lunch”. Governments needed to take tough decisions elsewhere in your budgets, in areas such as welfare spending.

“Without a credible fiscal policy, as many other countries learned in this crisis, you don’t have a credible monetary policy and your market rates go up.

“So while infrastructure spending is needed, you need to make hard choices as finance minister as how to pay for it.”

Summers rejected Osborne’s argument that high borrowing costs in troubled eurozone countries were the result of governments over-spending and losing the trust of financial markets.

He said high borrowing costs were due to the specific nature of the eurozone currency – the fixed exchange rate and the inability of individual countries to tailor their economic policies to their own needs.

Greece begins EU presidency by saying austerity policies are intolerable | World news | The Guardian

Greece begins EU presidency by saying austerity policies are intolerable | World news | The Guardian.

Greek EU Presidency

The start of Greece’s six-month European Union presidency reinforced the isolation of German chancellor Angela Merkel. Photograph: Alkis Konstantinidis/EPA

Greece kicked off six months in charge of the European Union on Wednesday declaring that the imposition of austerity, spending cuts and fiscal policy by Berlin and Brussels could no longer be tolerated.

Coinciding with a growing backlash across the EU against the austerity policies mainly scripted in Berlin, the start of Greece’s EU presidency reinforced the isolation of German chancellor Angela Merkel, who has dominated the policy response to the EU crisis for the past four years.

Following four years at the sharpest end of Europe‘s debt and currency crisis and €250bn in bailout funds, the Greek government declared enough was enough.

“Greece does not want to have any more fiscal conditionality,” the finance minister, Yannis Stournaras, said on Wednesday. “It is out of the question because it is already too tough.”

The cry of exhaustion from a country that went broke, sank into years of slump and mass unemployment, slashed labour costs, and saw incomes collapse by more than a third is finding an echo not only across southern Europe but in the prosperous north, too, as leaders fear for their career prospects.

They have had enough of austerity, leaving Merkel, the main architect of spending cuts as the cure to Europe’s malaise, isolated as seldom before in what is becoming less of a financial crisis and more of a political battle for Europe’s future direction.

“The acute phase of the financial crisis is now over,” the US financier, George Soros, said last week. “Future crises will be political in origin.” He foresaw a bleak period of Japanese-style stagnation worsened by constant bickering between EU national leaders.

“What was meant to be a voluntary association of equal states has now been transformed by the euro crisis into a relationship between creditor and debtor countries that is neither voluntary nor equal. Indeed, the euro could destroy the EU altogether.”

The political frictions are visible, with leaders using vivid language to try to sway one another and win the argument. Merkel recently likened the situation to that of 1914, complaining of complacency and speaking of sleepwalking European leaders who led the continent into the first world war. She also evoked parallels with growing up under communism in East Germany, a rare public reference to her childhood experiences.

Describing the mood among most EU national leaders, a senior policymaker in Brussels said: “The worst of the crisis is over. So the pressure to take tough measures is off. We’ve had enough of discipline, enough of sanctions, we’re sufficiently unpopular already. The worst is over, so let’s stop now.”

Merkel, whose steering of the euro crisis propelled her to soaring popularity at home and a third term, has become increasingly resented among elites in other EU capitals, underlining the differences between Germany and the rest.

“The problem in Europe is that there is a government headed by one person,” a west European ambassador said in reference to Merkel. “That’s the issue and how to deal with it. All decisions are taken by one leader. This is what is happening now.”

If that has been a big part of the narrative for the past few years, however, the story went into reverse just before Christmas in the first week of Merkel’s new term. She went to a Brussels EU summit determined to push a new policy of compelling structural reforms on the economies of the eurozone. But she found herself supported by not one single other national leader, opposed not only by her foes, but also her friends such as the Dutch, Austrians and Finns.

“It was really a strange discussion,” said the policymaker, “difficult from the start, full of prejudice, ideology and fear.” Merkel was said to be disappointed. That much is clear from her private remarks to fellow leaders at the summit. A transcript of the exchange, obtained by Le Monde, highlighted her frustration.

She said: “Sooner or later the currency will explode without the necessary cohesion. If everyone behaves as they could under communism, then we are lost.”

Merkel’s plan was to empower the European commission in Brussels to police structural reforms in eurozone countries and to sweeten the pain of the changes by partially subsidising them. She denied that she was dictating anything, but said it was better to spend €3bn on the changes now than €10bn later.

She was supported by three European presidents, José Manuel Barroso of the commission, Herman Van Rompuy chairing the summit and Mario Draghi at the European Central Bank. None of the trio have to face the voter. All the other elected leaders were against and the plan was shelved.

One prime minister warned that the years of austerity had given rise to increasing populism. In Athens on Wednesday, the deputy Greek prime minister, Evangelos Venizelos, spoke of the growing appeal of neo-Nazis, racists and xenophobes. “In most of the EU we see a new wave of euro-scepticism.”

Soros went so far as to blame the German chancellor for this. “Angela Merkel’s policies are giving rise to extremist movements in the rest of Europe.”

The strength of the new anti-European movements on the far right and the hard left will be tested in the elections for the European parliament in May when they are expected to make gains at the expense of the centre and possibly win the poll outright in countries such as Britain, France, the Netherlands and Greece.

Fear of the impact of more extreme politics helps to explain the current aversion in most of Europe to the crisis solutions scripted in Berlin.

Chart Of The Day: Greek Poverty | Zero Hedge

Chart Of The Day: Greek Poverty | Zero Hedge.

And now, the saddest chart of the day: Greek poverty since the crisis, and in 2013, when the so-called “Grecovery” arrived.

Here is how Greek Kathimerini describes the fact that nearly half of all Greek incomes, some 44%, had an income below the poverty line in 2013 according to estimates by the Public Policy Analysis Group of the Athens University of Economics and Business (AUEB).

The poverty threshold is measured as 60 percent of the price-adjusted average income in 2009, or up to 665 euros per person per month and up to 1,397 for a couple supporting two underage children. The AUEB researchers also found that last year 14 percent of Greeks earned below the adequate living standards, compared with 2 percent of the population four years ago.

The blame, of course, was placed squarely on austerity, or the fact that Greece, whose epic socio-economic problems stem primarily from its massive overleveraging leading up to 2008, did notleverage some more to “fix” itself.

The group’s report, published last week, suggested that during the crisis instead of strengthening support to the unemployed – which is one of the most efficient methods to rekindle demand – the state was forced to reduce it.

Well, not all the blame: some was reserved for where it rightfully resides: an incompetent, corrupt, crony and quite criminal political system:

… besides the austerity policies of the last few year, the inability of the state to contain the collapse of social structures is due to the lack of targeted strategies and to the inefficient use of resources, problems that dogged Greece even before the onset of the crisis.

No mention that Greece was merely a pawn in the “political capital” invested in the failed Eurozone experiment, in which the main thing at stake is the vested interest of the legacy oligarchs and, of course, the bankers.

As for the Greece: don’t cry for it – it still has the euro – that symbol of successful European integration – so all is well.

George Osborne warns of more cuts and austerity in ‘year of hard truths’ | Politics | theguardian.com

George Osborne warns of more cuts and austerity in ‘year of hard truths’ | Politics | theguardian.com.

George Osborne is making a speech today saying more cuts worth £2bn are needed.

George Osborne warns of more cuts to the welfare budget. Photograph: Reuters

George Osborne has warned of another £25bn of cuts after the next election, targeting housing benefit for the better-off and under-25s.

In a grim message to start the new year, the chancellor said Britain was facing a year of hard truths in 2014 as there were more cuts to make and the economy still had big underlying problems. He said he expected the bulk of the savings to come from welfare, as it would be an “odd choice” to leave this “enormous budget” untouched.

Benefits for the young and people of working age would be considered before any cuts to pensioner benefits such as free bus passes and television licences, he said.

He told BBC Radio 4’s Today programme: “If you were going to be looking for savings in welfare, pensioner benefits is not the place that I would first turn to. I would look at housing benefit for the under-25s, when there are many people listening to this programme who can’t afford to move out of their home but if you’re on benefits you can get housing benefit under the age of 25. There are people, for example, on incomes of £60,000 or £70,000 living in council homes – I’d look at that.”

Justifying his choice to target welfare again after around £83bn of previous cuts, the chancellor said: “I think we do have to look at the welfare budget because I think it would be an odd choice as a country to say, look we’ve got a high deficit and we’re going to deal with that by just cutting the schools budget or the science budget or something like that … and to leave untouched this enormous welfare budget. That ultimately is where you can find substantial savings.”

He said he did not know when people would start to feel the effects of recovery. “There’s a hard truth, which is this country is much poorer because of the economic collapse six or seven years ago, and families feel that. What is the answer? I can’t wave a magic wand and make the country richer. The way the country gets richer and families get richer is by being a competitive country that attracts jobs and investment.”

In a speech in the Midlands on Monday morning, Osborne said there was still a long way to go before recovery as he set out a five-point plan to help the economy. “We’ve got to make more cuts – £17bn this coming year, £20bn next year, and over £25bn further across the two years after. That’s more than £60bn in total.”

Osborne built on previous warnings about the need to intensify austerity, on top of billions of pounds of existing cuts, even though the economy appears to be turning a corner. In the speech, he said the job of fixing the economy was “not even half done”. “That’s why 2014 is the year of hard truths,” he said.

The chancellor’s negative outlook forms part of his argument that people should vote Conservative to let the party “finish the job”, rather than handing control back to Labour. However, Labour said more cuts were needed after 2015 because Osborne’s “failure on growth and living standards since 2010 has led to his failure to balance the books”.

“What we need is Labour’s plan to earn our way to higher living standards for all, tackle the cost-of-living crisis and get the deficit down in a fairer way,” said Chris Leslie, shadow chief secretary to the Treasury.

It comes after David Cameron on Sunday suggested that more cuts to housing benefit were on the way and refused to rule out reducing handouts for the elderly, which include free television licences, bus passes and winter fuel allowances.

With just 16 months to go before the next election, the prime minister gave his clearest hints yet about the Conservatives’ priorities for the 2015 manifesto, including more welfare cuts and higher state pensions every year for the rest of the decade. Speaking on the BBC’s Andrew Marr Show, Cameron promised the Conservatives would keep the so-called triple lock on pensions until at least 2020 if in power – which means increasing it annually by inflation, average earnings or 2.5%, whichever is highest.

He said this decision to protect the income of pensioners above other age groups at a time of austerity was “a choice based on values, based on my values”. He denied it was a move to woo the grey vote, even though eight in 10 over-60s vote, compared with just four in 10 in the 18-24 age group.

But Cameron did not rule out cuts to universal benefits for the elderly, stressing that his previous promise to keep these handouts only extended as far as the end of this parliament in 2015. He also criticised the level of housing benefit for being “frankly far too high”. “We’ve put a cap on housing benefit, but I still think there’s more we can do to reform our benefits system,” he added.

Cameron also signalled that he wants to cut taxes for the lowest paid before taxes for the rich. He did not rule out reducing the 45p top rate of tax further to 40p, saying such decisions had to be made on the basis of whether they would raise more revenue, but suggested it was not top of his priorities. His remarks are potentially a hint that the Tories could pledge to increase the level at which workers start paying income tax above £10,000 – even though 5 million of the lowest paid earn even less than that and would see no benefit.

“I want taxes that mean the rich pay not just a fair share, as it were, in taxes, but I actually want the rich to pay more in taxes,” he said. “So you ought to set tax rates that encourage people to earn, to set up businesses, to make money, and then to pay taxes. And actually what we’re finding with the 45p rate is I think it’s going to bring in a better percentage of money than the 50p rate is. So you should always look at how you set taxes in that way.

“But my priority if you like – the priority of this government and the Conservative party – the priority is to target tax reductions on the poorest people in our country … If I had money in the coffers I would target that money at the lowest paid.”

Labour said the prime minister’s words suggested he was still “paving the way for yet another cut to the top rate of tax, a further tax giveaway for millionaires and the top Tory donors who bankroll Cameron’s Conservative party”.

During the interview, Cameron also insisted a Conservative victory at the next election was achievable and that he would go all out for it even though the party is far behind Labour in the opinion polls and a new survey suggests a third of Tory voters have deserted the party since 2010.

“We’ve got 16 months to the next election. This year for me is a year about governing, it’s about delivering, it’s about putting in place the elements of that long-term plan. I’m content that the public will judge me and the government I run and the party I run in 2015,” he said.

Italy anti-austerity protests draw thousands to Rome – World – CBC News

Italy anti-austerity protests draw thousands to Rome – World – CBC News. (source)

Anti-austerity protesters in Rome threw eggs and firecrackers at the Finance Ministry during a march Saturday to oppose cuts to welfare programs and a shortage in low-income housing. Police said 11 people were detained.

More than 4,000 riot police were dispatched to maintain order as some 25,000 protesters marched through the capital on Saturday. There were moments of tension when demonstrators passed near the headquarters of an extreme-right group, but police intervened when a few bottles were thrown.

Later, demonstrators threw eggs, firecrackers and smoke bombs outside the Finance Ministry. Police reacted by dispersing the protesters, detaining 11 of the demonstrators. There were no reports of injuries.

Ahead of the march police detained some anarchists believed to pose a security threat.

The protests were accompanied Friday by a 24-hour nationwide strike that caused disruptions for travellers. Train service was guaranteed in most cities for morning and evening commutes, but airports in Rome, Naples, Milan and Bologna had to cancel some flights. Some school and health workers also went on strike.

The USB and COBAS unions organized Friday’s strike to protest austerity measures reducing transportation budgets. USB union co-ordinator Pierpaolo Leonardi accused the Italian government of imposing EU directives without concern for the impact on workers.

A smaller protest of about 600 workers was held in Milan.

 

Thousands protest austerity cuts in Portugal – Europe – Al Jazeera English

Thousands protest austerity cuts in Portugal – Europe – Al Jazeera English. (source)

Thousands of Portugese took the streets of Portugal’s two most populated cities to demonstrate against planned cuts of pensions and salaries.

Saturday’s demonstrations are a response to the government’s decision to extend austerity measures in the 2014 budget.

In Lisbon, hundreds of buses slowly crossed the April 25th bridge in a protest organised by Portugal’s main labor group, the General Confederation of Portuguese Workers. In the northern city of Porto, thousands gathered in the main square shouting anti-austerity slogans.

Portugal, currently engaged in an international aid programme, is focusing next year’s fiscal efforts on spending cuts, reducing state pensions and cutting public workers’ wages.

Unemployed teacher Sofia took part in the protest to ask for government resignation.

“I’m here to fight for more work and better wages and against this government’s austerity measures, so I want them to leave together with the Troika,” Sofia said referring to the trio of European Commission, International Monetary Fund and European Central Bank in charge of handling bailouts of distressed euro zone countries.

The budget includes wage cuts for public sector workers ranging from 2.5 percent to 12 percent on monthly salaries of over 600 euros. Pension cuts should bring savings of 728 million euros.

“I am a retired civil servant and I’m suffering from the cuts. I worked and studied to earn more than 2,500 euros without any government help and now they are cutting my pension,” pensioner Maria Barreto said.

The country’s 78-billion-euro bailout formally ends in mid-2014 when Portugal should return to financing itself normally in bond markets, which it stopped doing in 2011 when its debt crisis first hit.

Seeking a better future Ricardo Pereira travelled from Torres Novas to Lisbon: “I’m here to fight for a better future for me and for the next generation and against this government’s austerity measures.”

The budget aims to slash the budget deficit to 4 percent of GDP next year from 5.9 percent in 2013. It may still face challenges from the Constitutional Court that has previously rejected some government austerity measures.

In Canada, Austerity Rules | Nick Fillmore

In Canada, Austerity Rules | Nick Fillmore.

 

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