EU CAVES IN: Disaster-hit Spain and Portugal LET OFF shocking budget deficits

STRUGGLING Spain and Portugal will not be punished for breaking official budget rules, the European Commission (EC) has confirmed amid concerns of rising euroscepticism within the bloc.

By LANA CLEMENTS

PUBLISHED: 16:20, Thu, Nov 17, 2016 | UPDATED: 16:37, Thu, Nov 17, 2016

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Valdis Dombrovskis said Spain and Portugal were addressing budget issues

The two states failed to keep their budget deficits below three per cent last year, risking the wrath of Brussels policymakers.

After escaping stinging fines earlier this year, it was feared the two countries could have EU funds frozen as an alternative penalty.

Both governments are heavily reliant on EU aid and withholding support would have been a painful punishment to endure.

Yet the commission decided to show mercy and let both Spain and Portugal off the hook for their misdemeanours.

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Spain blew its budget targets

It's thought the policymakers want to avoid provoking any further backlash against Brussels.

But commission vice president Valdis Dombrovskis insisted it was not imposing penalties because the two governments were now doing enough to correct their budgets.

He said: "The event that required a proposal by the Commission to suspend parts of the European Structural and Investment Funds is no longer present and there will be no such proposal."

The stance is in contrast to the European Council's economic and finance group, which earlier this year said both Spain and Portugal's responses to deficit targets had been insufficient.

Portugal's deadline for correcting the deficit had already been extended by two years to 2015 when it recorded a deficit of 4.4 per cent.

Spain also had its deadline for making changes extended but the deficit still amounted to 5.1 per cent in 2015.

In further evidence the commission is now trying to appease member states, it has signalled that it will move away from austerity measures and towards 'looser' fiscal policies.

It comes amid growing anger in Italy and Greece over strict rules from the EU.

The change of direction is part of renewed efforts to boost the bloc's ailing economy.

The European Central Bank has been long been calling for politicians to play a stronger role in trying to boost Europe's sluggish economy, as its monetary efforts to revive growth hit a wall.

In a statement the EC said: "The Commission considers that there is a case for a significantly more positive fiscal stance for the euro area."

http://www.express.co.uk/finance/city/733494/EU-Spain-and-Portugal-LET-OFF-shocking-budget-deficits

Nobel laureate Stiglitz sees Italy, others leaving euro zone in coming years

Nobel Prize-winning economist Joseph Stiglitz predicted in a interview out on Wednesday that Italy and other countries would leave the euro zone in coming years, and he blamed ...

Thu Oct 6, 2016 | 3:11am BST


Nobel Prize-winning economist Joseph Stiglitz attends a keynote presentation during CLSA investors conference in Hong Kong, China September 19, 2016. REUTERS/Bobby Yip

Nobel Prize-winning economist Joseph Stiglitz predicted in a interview out on Wednesday that Italy and other countries would leave the euro zone in coming years, and he blamed the euro and German austerity policies for Europe's economic problems.

Europe lacks the decisiveness to undertake needed reforms such as the creation of a banking union involving joint bank deposit guarantees, and also lacks solidarity across national boundaries, Stiglitz was quoted as saying by Die Welt newspaper.

"There will still be a euro zone in 10 years, but the question is, what will it look like? It's very unlikely that it will still have 19 members. It's difficult to say who will still belong," the paper quoted Stiglitz as saying.

"The people in Italy are increasingly disappointed in the euro," Stiglitz was quoted as saying. "Italians are starting to realise that Italy doesn't work in the euro," he added.

He said Germany had already accepted that Greece would leave the euro zone, noting that he had advised both Greece and Portugal in the past to exit the single currency.

Concerns about the euro zone have escalated in Germany in recent months amid growing concern about a shift away from austerity in southern Europe, the loose money policies of the European Central Bank and the rise of the right-wing Alternative for Germany party.

Stiglitz told the paper the euro and austerity policies in Germany were at fault for Europe's economic malaise. The break-up of the single currency or the division into a north euro and a south euro were the only realistic options for reviving Europe's stalled economy, the paper quoted him as saying.

The former chief economist of the World Bank said Europe and the United States had similar economies, resources and labour pools, but the U.S. economy had recovered from the global financial crisis while the European economy had not.

"The big difference is the euro," he said, noting that the single currency was weighing on the overall European economy.

The euro reached a three-week high against the yen on Wednesday, a day after a Bloomberg article cited sources as saying the European Central Bank would probably wind down its bond buying gradually before ending quantitative easing.

http://uk.reuters.com/article/uk-eu-euro-economist-idUKKCN12602C?

Eurozone is 'utterly unsustainable', blasts former Greek finance minister

THE eurozone is doomed to fail amid structural failings within the bloc, former Greek finance minister Yanis Varoufakis has warned.

By LANA CLEMENTS

PUBLISHED: 16:10, Wed, Sep 28, 2016 | UPDATED: 16:14, Wed, Sep 28, 2016

Yanis Varoufakis fears Germany could force Greek out of the eurozone

The outspoke politician said he fears Germany could force Greece or Portugal out of the bloc in a bid to strengthen the currency union. 

But Mr Varoufakis warned such a move could release “demonic forces” and blow the entire union apart. 

He told the Institute of Directors’ annual convention: “The eurozone is utterly unsustainable, the problem is structural, the architecture of the eurozone is simply not capable of sustaining itself.”

He added: “My great fear is that at the moment there are very powerful centrifugal forces within the eurozone, including the Bundesbank as part of a campaign to reconfigure the eurozone. 

"They think they can control its fragmentation by having Greece or Portugal eased out in the next five years, but I believe they would be unleashing demonic forces which they would not be able to control.”

In the future it could mean a split between northern and southern Europe, said Mr Varoufakis.

He added: “If this happens, we are facing a post-modern version of the 1930s.”

The far-left academic who served last year under current prime minister Alexis Tsipras said Britain could also find leaving the European Union a difficult prospect. 

He said: “My message to Brexiteers has always been the Hotel California – you think you can check out but you cannot really leave such a mess behind.

http://www.express.co.uk/finance/city/715420/Eurozone-is-utterly-unsustainable-blasts-former-Greek-finance-minister

Catastrophic Portuguese economy hits new low as toxic combination to BRING DOWN eurozone

PORTUGAL'S economy is coming closer to a catastrophic derailment which could trigger a eurozone meltdown, amid a toxic combination of rising bankruptcies, falling numbers of new businesses and high Government debt.

By LANA CLEMENTS

PUBLISHED: 11:02, Wed, Sep 21, 2016 | UPDATED: 13:09, Wed, Sep 21, 2016

The number of bankruptcies in Portugal is rising

The number of companies going bust in the European nation has soared by 49.5 per cent in the first eight months of the year, with 2,474 companies being declared insolvent - 819 more than in the same period last year - according to data from the Ignios Business Centre.

Last month insolvent companies jumped by nine per cent from August last year - equivalent to 20 more companies in difficulties every day.

The catalyst for the trouble appears to be a plunge in exports. 

Antonio Monteiro, chief executive of Ignios, said: "Exports, the main engine of economic growth in recent years, reveal a slowdown in recent figures released by the Institute of National Statistics.

"This will predictably have consequences for companies in the traditionally exporting districts, that until now have shown better numbers than the areas most dependent on domestic demand."

At the same time, the number of new businesses has tumbled by 3.5 per cent.

In the first eight months of the year there were 25,457 records of enterprises created, but this is almost 1,000 fewer companies over the same period last year. 

It comes as Portugal continues to struggle to get a grip on its budget deficit, while the economy is weighed down by debt at GDP ratio of 129 per cent.

Eurozone finance ministers recently ordered Lisbon to tackle spending and income to bring the deficit below three per cent.

Portugal was recently let off a fine for budget failures by European policymakers The two countries were recently let off fines for budget failures, amid fears the punishment could fuel anti-euro sentiment among the populations.

http://www.express.co.uk/finance/city/712590/Eurozone-facing-MELTDOWN-as-wrecked-Portuguese-economy-hits-new-low

Italy and Europe's demographic death spiral

Germany has just overtaken Japan as having the lowest long-term fertility among the world's biggest powers. But it is Italy which has shown the biggest decline in recent years. There used to be children everywhere. Europe is in a demographic death spiral

Too few babies

Tim Hedges

On 17 September 2016 13:04

There is a little joke I have every year on 1st May. I ask an Italian what he is doing and he says ‘nothing, it is the festa del lavoro, the festival of work’.

The Festival of Work is the one day you can’t get anyone to do any work at all (though for the rest of the year Italians are harder working than their reputation suggests).

So I was a little confused when the government announced a festival of fertility and then the Minister of Health, Beatrice Lorenzin, said it was really a festival of infertility. What was an Italian supposed to do on this day (it is on 22nd September)?

Get to it, is the answer: Italy has a serious fertility problem and the government is hoping it can do something about it.

Italy is not the worst: Germany has just overtaken Japan as having the lowest long-term fertility rate among the major powers.

Levels in Portugal and Greece are even lower, but it is Italy which has shown the biggest absolute decline in recent years. There used to be children everywhere. The simplest explanation is that all animals produce fewer young when there is a lower prospect of food and shelter. Whilst this might not fully explain the problem in Germany, it is certainly the case in Italy. Everyone is worried about the economic future (not without good reason).

Italian women are, on average, having their first baby at nearly 31, the oldest in Europe.

The problem is not confined to Italy, of course. The Europe-wide figure used for fertility, known as total fertility, is 1.6 births per thousand women of childbearing age. The required level for replacement of population in an industrialised country (ie with a relatively low death rate) is 2.1.

In France the Total Fertlity rate is 2.01, Britain 1.81, Germany 1.47, Italy 1.37.

But why should we worry? Isn’t it just part of modern civilisation that women work, and that there is no pressure on them to have children if they don’t want to? Yes, but there are two problems.

The first is that with an ageing population, expensive healthcare and particularly pensions, without a continuing supply of young people there are fewer taxpayers supporting too many welfare recipients. in 1950s Italy there were ten people of working age for each pensioner. Now, there are only three to pay for them.

The second is the solution which dare not speak its name. Immigrants tend to be young, and you won’t have another crisis in 40 years’ time because they tend to produce lots of children. It will not have been far from the front of Angela Merkel’s mind, when she welcomed a million immigrants to Germany, that her country is scarcely economically viable without them. It is just that she couldn’t say that.

Concern about immigration is a leitmotif through European politics, in France, Britain, the Netherlands, Scandinavia. It was the principal feature of the recent regional elections in Germany which Merkel lost so badly, and it is a constant worry in Italy.

Giulio Meotti, Cultural Editor of Il Foglio writes that in one generation Europe will be unrecognisable.

The solution, in part, is for western countries to meet the replacement rate of their populations, and this is where Beatrice Lorenzin’s Fertility Day comes in. Unfortunately the way she has gone about it has been at best clumsy.

Adverts in the press have shown a woman clutching an hourglass and the caption ‘Beauty has no age. Fertility does.’ The website shows water dripping with the words ‘fertility is a common good’.

Some have likened the publicity to Mussolini’s attempt at growing the population. Feminists object, and there are mutterings of ‘what about the men, though?’ which doesn’t go well with the Italian man’s ‘latin lover’ image. The figures, doubtless wrongly, suggest the cold British man has a little more lead in the pencil.

But what else to do, other than this fecundity encomium? The immigrants arrive, and poor, infertile Europe has insufficient reason to turn them away. And we know where they are coming from.

As Giulio Meotti writes ‘the fatal meeting between Europe’s falling birthrate and the rise of Islam has already had significant consequences: Europe has turned into an incubator of terrorism; formed a new poisonous anti-Semitism…. Europeans are now importing young people in large numbers from the Middle East to compensate for their lifestyle choices.’

So perhaps two cheers for Beatrice Lorenzin’s Fertility Festival. At least she is doing something.

Tim Hedges, The Commentator's Italy Correspondent, had a career in corporate finance before moving to Rome where he works as a freelancewriter, novelist, and farmer. You can read more of his articles about Italy here

http://www.thecommentator.com/article/6406/italy_and_europe_s_demographic_death_spiral

The EU's Broken Budget Rules Need Changing

Rules are there to be broken -- and that's official. Spain and Portugal have just escaped punishment for breaking the European Union's budget-deficit limits.

Aug 12, 2016
Editorial Board

TIME TO CLEAN UP THE RULE BOOK.

PHOTOGRAPHER: MARCEL VAN HOORN/AFP/GETTY IMAGES

In the EU, such lapses without consequences are not exactly uncommon. In the case of the budget rules, that's a good thing, because the rules are widely acknowledged to be no good. But here's a radical thought: Bad rules that nobody has any intention of enforcing would be better scrapped.The debt-and-deficits rules, part of the 1997 Maastricht Treaty, were designed to assure Germany and other fiscally conservative euro-zone members that less disciplined governments wouldn't get a free ride. They've failed -- and in two distinct ways. Too much wasteful spending remains a problem in many countries. And the pressure to cut, such as it was, has fallen too heavily on public investment.

Spain's budget deficit was 5.1 percent of gross domestic product last year and Portugal's was 4.4 percent -- both in excess of agreed-upon targets. Breaching the EU's deficit targets without permission is supposed to be met with a fine of up to 0.2 percent of GDP. But the targets, based on a ceiling of 3 percent under normal circumstances, are too low. Under current conditions, it would be a mistake for some countries to be on the right side of that number. Europe has been suffering from a serious shortfall of demand, and fiscal stimulus was the right response.

Rule Breakers

European Union nations aren't sticklers for the deficit rules

Sources: Ifo Institute, Eurostat

*Deficit breaches are allowed in case of recession

Spain, moreover, has been a bold reformer in other ways. Its conservative government pushed through tax and labor-market reforms that helped to restore growth, now running at more than 3 percent. Its government deserves to be commended, not punished. Portugal is in worse shape, to be sure, with its high public debt, sluggish growth and dangerously fragile banks. Its government does need to undertake a fiscal correction -- but fining it for failing to do so would hardly have made that politically challenging task any easier. Again, therefore, Europe was right to withhold punishment.

Europe's leaders need to rethink. They call the budget rules the "cornerstone of the EU's economic governance." What nonsense. Rules too dumb to be enforced should be mended or scrapped.

https://www.bloomberg.com/view/articles/2016-08-12/the-eu-s-broken-budget-rules-need-changing

‘We’ve had ENOUGH Merkel’ Rest of Europe gangs up on Germany over crippling EU austerity

ANGELA Merkel cut an increasingly isolated figure in Europe tonight as the rest of the continent ganged up on Germany over its imposition of crippling austerity.

By NICK GUTTERIDGE

PUBLISHED: 18:51, Sat, Aug 6, 2016 | UPDATED: 20:00, Sat, Aug 6, 2016

Other European countries are forming an anti-austerity alliance against Angela Merkel

Major EU nations including France, Italy and Spain are clubbing together to form a new alliance with the aim of wrestling back economic power from the German leader. 

Mediterranean economies have been devastated by an EU-wide policy of austerity enforced from Berlin, which has led to massive youth unemployment and soaring poverty. 

Fiscally conservative Germany, which is the EU’s largest economy, is reluctant to loosen the purse strings and authorise the huge injection of cash many other member states need to kickstart their fortunes. 

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But policies which have benefited German industry and exports have caused economic oblivion in many parts of southern Europe, and now the rest of the continent seems to have had enough. 

The leaders of France, Italy, Spain, Portugal, Cyprus and Malta are planning to meet in Athens next month to forge a new anti-austerity alliance with the aim of wrestling back control of the European Central Back (ECB), which sets Eurozone fiscal policy, from Berlin. 

It is being headed up by Greek premier Alexis Tsipras, who has frequently clashed with both Mrs Merkel and Brussels over the crippling austerity which has brought his country to its knees. 

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The new group is being fronted by Greek PM Alexis Tsipras

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It has been prompted by huge economic stagnation in southern Europe

Preliminary discussions on how to outmanoeuvre the all-powerful German leader had already taken place, with Mr Tsipras and his Italian counterpart Matteo Renzi having held informal talks about the possibility of setting up an “Alliance of Europe’s South” on the sidelines of June’s EU summit. 

The leaders want the group to push for a pro-growth agenda and will now hold their first meeting in the Greek capital on September 9, according to the Athens News Agency. 

During the talks they will focus on the “common” challenges facing southern EU countries on an economic, political and institutional level and particularly on austerity, fiscal discipline and migration.

Mr Tsipras is looking to spearhead a relaxation of crippling austerity and the introduction of more “flexibility” into EU budget surplus requirements set by Brussels. 

The participation of France - traditionally seen as the EU’s second most powerful member - will lend huge weight to the project and may make it difficult for Mrs Merkel to continue to resist calls to loosen the purse strings. 

Countries such as France, Italy, Greece, Spain, and Portugal face similar challenges

French social democrat MEP Gilles Pargneaux

The French economy has been in the doldrums for years, suffering from sluggish production and growth, and president Francois Hollande has indicated he would like to see an end to EU austerity. 

But any move to unleash massive spending to kickstart southern European economies could prove very unpopular with German voters, who would ultimately be required to foot the bill. 

Pressure is now growing from across the continent though. In April, Mr Tsipras and the Portuguese premier Antonia Costa signed a joint declaration claiming that EU austerity-driven policies are “wrong”.

The two left-leaning leaders said that “austerity policies are keeping economies depressed and societies divided” as they upped their rhetoric against German fiscal conservatism. 

It is believed the recent Brexit vote has accelerated the plans for an alliance with French social democrat MEP Gilles Pargneaux saying it had made politicians “rethink the way we do things in Europe”. 

He told Euractiv: “Countries such as France, Italy, Greece, Spain, and Portugal face similar challenges - migration, security, proximity of an unstable neighborhood…issues that justify enhanced cooperation between them.” 

On France’s relationship with Germany he offered a coded rebuke to Berlin, saying that while it was “essential” Paris must also be prepared to “assume its contradictions where they exist”.

Italy’s economy has been in the doldrums from years and is the same size now as it was when the Euro was first introduced more than 15 years ago. 

The country is facing a resurgent far-right and a crippling banking crisis, with standards of living falling and unemployment rocketing. 

Meanwhile in Portugal and Spain joblessness amongst the young has reached epidemic levels with both countries backing anti-austerity parties in recent elections. 

Related articles

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•  Eurozone crisis: Unelected EU boss Juncker claims 'betrayal' over bailout deal vote
•  Europe in CRISIS? Portugal rejects austerity measures and ousts government
•  Merkel approves £9 BILLION Eurogroup bail-out for debt-ridden Greece

http://www.express.co.uk/news/world/697340/European-Union-Mediterranean-anti-austerity-alliance-Germany-Angela-Merkel-Brexit

Eurozone to EXPLODE: Demand for referendums after Brexit 'puts currency on the brink'

THE eurozone is set to be destroyed due to the poor economies of Greece and Italy, a leading economist has warned.

By KATIE MANSFIELD

PUBLISHED: 04:24, Thu, Jul 14, 2016

Economist Max Otte said the eurozone will explode

Max Otte also said the demand for referendums in the wake of Brexit threatens to destroy the eurozone as Brussels struggles to reform. 

The economist told German Magazine Focus southern countries who cannot afford reforms would be forced to leave the Euro as he said the anti-EU sentiment “cannot be avoided”. 

He said: “In France populist voices may get very strong. It would be highly likely though that the EU would be destroyed if France was to exit. Anything else, aside from Germany, the EU can take.

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It would be highly likely though that the EU would be destroyed if France was to exit.

Max Otte

“There would be an urgent need for reforms for the Euro as well. Southern countries who can't afford to would have to leave the eurozone.

"Instead we are doing the opposite, meaning, we are now also burdening the German banking system with a union based on joint liabilities only to drag on the insolvency of the south and to go into insolvency together one day.”

Economists are already fearing struggling Italian banks could spark a major financial crash as the European Central Bank deals with a struggling eurozone economy and debt-burdened Greece, Italy, Spain and Portugal.

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Fears have been raised the struggling Italian banks could spark a major financial crisis

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Max Otte said Brexit should lead to major reforms in the EU

EU bosses have told Italy to stop asking for a £3.4billion payout to save its banks as German finance chiefs warned Berlin cannot be expected to foot the bill. 

Mr Otte said at some point the eurozone will explode.

He said: “Today we know that the Euro has damaged and thrown back the EU immensely. I said in my presentation in April 1998 that the system will last for about ten years, before the difficulties would begin. 

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Mr Otte said the Euro has damaged the EU

“It lasted for about eleven years before the issues began. The issues are gigantic. The states in Europe have conspired to keep this art project alive. As long as I apply this constraint, as long as there are still reserves in the system this will continue. 

“I don't expect that the Euro will explode in the next years. At some point it has to explode because it's artificial and can't function in this form.”

In June it was decided the European Central Bank would be allowed to buy up debt and prop up the eurozone’s ailing economies, supported by Germany’s central bank.

At the height of the financial crisis, chief of the ECB Mario Draghi pledged to do "whatever it takes" to keep the eurozone's financial structure from imploding.

But Mr Otte said the crisis is ongoing when the EU needs to pull together. 

He said: “We have indeed entered a financial crisis in instalments. We're facing tough times - I can confirm that. I can't yet see the figurative light at the end of the tunnel.”

He added: “The Brexit can and has to be the impetus for a basic reformation of Europe.”

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•  Italy's deepening banking crisis 'could rip the eurozone apart'
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•  Out just in time? 'Extremely sick' Europe needs £128bn bailout

http://www.express.co.uk/finance/city/689272/Eurozone-to-explode-demand-for-referendums-post-Brexit-threaten-EU-Max-Otte?